EXHIBIT 10.1
MERGER AGREEMENT
by and among
ALEXI HOLDINGS LIMITED,
ALEXI CORPORATION
and
GREKA ENERGY CORPORATION
May 27, 2003
MERGER AGREEMENT
This Merger Agreement ("Agreement") is made as of May 27, 2003, by and
among Alexi Holdings Limited, a Cayman Islands company ("Parent"), Alexi
Corporation, a Colorado corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), and Greka Energy Corporation, a Colorado corporation
("Company"). Certain capitalized terms used in this Agreement are defined in
Exhibit A.
PRELIMINARY STATEMENTS
A. Parent, Merger Sub and Company intend to effect a merger of Merger Sub
into Company in accordance with this Agreement and the Colorado Business
Corporation Act ("Merger"). Upon consummation of the Merger, Merger Sub will
cease to exist, and Company will become a wholly-owned Subsidiary of Parent.
B. The respective boards of directors of Parent, Merger Sub and Company
have approved this Agreement and the Merger.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
Article 1
DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO COMPANY
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into Company, and the separate existence of Merger Sub shall cease.
Following the Effective Time, Company shall continue as the surviving
corporation ("Surviving Corporation"). The name of Surviving Corporation shall
be Greka Energy Corporation.
1.2 EFFECT OF THE MERGER
The Merger shall have the effects set forth in this Agreement and in the
applicable provisions of the Colorado Business Corporation Act ("CBCA").
1.3 CLOSING; EFFECTIVE TIME
The consummation of the Contemplated Transactions ("Closing") shall take
place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 2001 ▇▇▇▇ Avenue, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ at 10:00 a.m. (or at such other place and time as the
parties may agree) on a date to be designated by Parent ("Closing Date"), which
shall be no later than the fifth business day after the satisfaction or waiver
of the last to be satisfied or waived of the conditions set forth in Articles 6,
7 and 8 (other than those conditions that by their nature are to be satisfied at
the Closing, but subject to the satisfaction or waiver of such conditions).
Subject to the provisions of this Agreement, articles of merger satisfying the
applicable requirements of the CBCA ("Articles of Merger") shall be duly
executed by Company and Merger Sub and, simultaneously with or as soon as
practicable following Closing, filed with the Secretary of State of the State of
Colorado ("Secretary of State"). The Merger shall become effective upon the
later of: (a) the date and time of the filing of the Articles of Merger with the
Secretary of State, or (b) such later date and time as may be specified in the
Articles of Merger with the prior written consent of Parent ("Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS
At the Effective Time:
(a) the Articles of Incorporation of Surviving Corporation shall be the
Articles of Incorporation of Company;
(b) the Bylaws of Surviving Corporation shall be the Bylaws of Company; and
(c) the directors and officers of Surviving Corporation immediately after
the Effective Time shall be the respective individuals who are directors and
officers of Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time whether or not subject to transfer restrictions or
rights of Company to reacquire such shares (other than (i) shares of Company
Common Stock held in Company's treasury or by any of Company's Subsidiaries,
(ii) shares of Company Common Stock held by Parent or Merger Sub and (iii)
Dissenting Shares) shall, by virtue of the Merger and without any action on the
part of Parent, Merger Sub, Company or the holder thereof, be cancelled and
extinguished and be converted into the right to receive, pursuant to Section
1.6, $6.25 per share ("Merger Consideration"), payable in cash to the holder
thereof, without interest thereon, upon the surrender of the Company Stock
Certificate formerly representing such shares of Company Common Stock, less any
required withholding of Taxes.
(b) Each share of Merger Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Parent, Merger Sub or Company, be converted
into and become one fully paid and nonassessable share of common stock, no par
value per share, of Surviving Corporation.
(c) Each share of Company Common Stock held in the treasury of Company or
by any of Company's Subsidiaries and each share of Company Common Stock held by
Parent or Merger Sub (or their respective Subsidiaries) immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Parent, Merger Sub, Company or the holder thereof, be cancelled, retired and
cease to exist and no payment shall be made with respect thereto.
2
(d) Immediately prior to the Effective Time, Company shall take all actions
necessary so that all warrants then outstanding to purchase shares of Company
Common Stock heretofore granted under any arrangement or agreement shall become
fully exercisable (whether or not currently exercisable) and, at the Effective
Time, each warrant not theretofore exercised shall be canceled. Subject to the
following sentence and Sections 1.5(f) and (g), each holder of a warrant that is
canceled pursuant to the preceding sentence shall, in respect of each such
warrant, be entitled to a cash payment by Surviving Corporation in an amount
equal to (i) the excess, if any, of (x) the Merger Consideration over (y) the
applicable exercise price per share of Company Common Stock subject to such
warrant, multiplied by (ii) the number of shares of Company Common Stock for
which such warrant was exercisable immediately prior to such cancellation,
provided that the foregoing shall not require any action that violates the
warrant. The foregoing cash payment shall be made by the Surviving Corporation
upon or as soon as practicable after (A) such holder's surrender of all warrants
held by such holder or (B) delivery by such holder of such holder's written
agreement or acknowledgement that all warrants held by such holder have been
cancelled as a result of the Merger in exchange for such cash payment; provided,
however, that if it is determined that compliance with this Section 1.5(d) would
cause any individual subject to Section 16 of the Exchange Act to become subject
to the profit recovery provisions thereof, any warrants held by such individual
will be cancelled or purchased as the case may be, as promptly thereafter as
possible so as not to subject such individual to any liability pursuant to
Section 16.
(e) Immediately prior to the Effective Time, Company shall take all actions
necessary so that all options then outstanding to purchase shares of Company
Common Stock ("Company Stock Options") heretofore granted under any plan,
arrangement or agreement (collectively, "Option Plans") shall become fully
vested and exercisable (whether or not currently exercisable) and, at the
Effective Time, each Company Stock Option not theretofore exercised shall be
canceled. Subject to the following sentence and Sections 1.5(f) and (g), each
holder of a Company Stock Option that is canceled pursuant to the preceding
sentence shall, in respect of each Company Stock Option, be entitled to a cash
payment by Surviving Corporation in an amount equal to (i) the excess, if any,
of (x) the Merger Consideration over (y) the applicable exercise price per share
of Company Common Stock subject to such Company Stock Option, multiplied by (ii)
the number of shares of Company Common Stock for which such Company Stock Option
was exercisable immediately prior to such cancellation, provided that the
foregoing shall not require any action that violates the Option Plans. The
foregoing cash payment shall be made by the Surviving Corporation upon or as
soon as practicable after (A) such holder's surrender of all Company Stock
Options held by such holder or (B) delivery by such holder of such holder's
written agreement or acknowledgement that all Company Stock Options held by such
holder have been cancelled as a result of the Merger in exchange for such cash
payment; provided, however, that if it is determined that compliance with this
Section 1.5(e) would cause any individual subject to Section 16 of the Exchange
Act to become subject to the profit recovery provisions thereof, any Company
Stock Options held by such individual will be cancelled or purchased as the case
may be, as promptly thereafter as possible so as not to subject such individual
to any liability pursuant to Section 16.
(f) The Surviving Corporation shall be entitled to deduct and withhold from
the amounts otherwise payable pursuant to this Section 1.5 to any holder of
Company Stock Options or of warrants to purchase Company Common Stock such
amounts as the Surviving Corporation is required to deduct and withhold with
3
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax Law. To the extent that amounts are so deducted and
withheld by the Surviving Corporation, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Company Stock Options in respect of which such deduction and withholding was
made by the Surviving Corporation.
(g) Except as provided herein or as otherwise agreed to by the parties, and
to the extent permitted by the Option Plans, (i) the Option Plans shall
terminate as of the Effective Time and the provisions in any other plan, program
or arrangement providing for the issuance or grant by Company or any of its
Subsidiaries of any interest in respect of the capital stock of the Company or
any of its Subsidiaries shall be deleted as of the Effective Time and (ii)
Company will use all reasonable efforts to ensure that following the Effective
Time no holder of Options or any participant in the Option Plans or any other
such plans, programs or arrangements shall have any right thereunder to acquire
any equity securities of Company, Surviving Corporation or any Subsidiary
thereof.
1.6 EXCHANGE OF CERTIFICATES
(a) On or prior to the Closing Date, Parent shall select a reputable bank
or trust company to act as exchange agent in connection with the Merger
("Exchange Agent"). Promptly after the Effective Time, Parent shall deposit with
the Exchange Agent the funds necessary to make the payments contemplated by
Section 1.5 ("Exchange Fund"). For purposes of determining the amount of the
Exchange Fund, Parent shall assume that no holder of shares of Company Common
Stock will perfect its right to appraisal (as described in Section 1.8).
(b) As soon as reasonably practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to the record holders of Company Stock
Certificates (i) a letter of transmittal in customary form and containing such
provisions as Parent may reasonably specify (including a provision confirming
that delivery of Company Stock Certificates shall be effected, and risk of loss
and title to Company Stock Certificates shall pass, only upon delivery of such
Company Stock Certificates to the Exchange Agent), and (ii) instructions for use
in effecting the surrender of Company Stock Certificates in exchange for payment
therefor. Upon surrender of a Company Stock Certificate to the Exchange Agent
for exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by the Exchange Agent or Parent, (x) the
holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor (as promptly as practicable) cash in an amount equal to the
product of the number of shares of Company Common Stock represented by such
Company Stock Certificate and the Merger Consideration, without interest
thereon, less the required withholding of Taxes, and (y) each Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.6, each Company Stock Certificate (other than Company Stock
Certificates representing Dissenting Shares and shares of Company Common Stock
canceled pursuant to Section 1.5(c)) shall be deemed, from and after the
Effective Time, to represent only the right to receive for each share of Company
Common Stock represented thereby the Merger Consideration provided for under
this Agreement, without any interest thereon. If any Company Stock Certificate
shall have been lost, stolen or destroyed, Surviving Corporation may, in its
discretion and as a condition precedent to the issuance of the Merger
Consideration, require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit and to deliver a bond (in such
sum as Surviving Corporation may reasonably direct) as indemnity against any
claim that may be made against the Exchange Agent, Parent or Surviving
Corporation with respect to such Company Stock Certificate.
4
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Surviving Corporation of the shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Company Stock Certificates are presented to Surviving
Corporation, they shall be cancelled and exchanged for the Merger Consideration
in accordance with the procedures set forth in this Section 1.6.
(d) From and after the Effective Time, the holders of Company Stock
Certificates evidencing ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock except as otherwise provided
herein or by applicable Law. Such holders shall have no rights, after the
Effective Time, with respect to such shares of Company Common Stock except to
surrender such certificates in exchange for the Merger Consideration pursuant to
this Agreement or to perfect any rights of appraisal as a holder of Dissenting
Shares that such holders may have pursuant to Section ▇-▇▇▇-▇▇▇ et seq. of the
CBCA.
(e) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains undistributed to holders of Company Stock
Certificates as of the date 180 days after the date on which the Effective Time
occurs shall be delivered to Parent upon demand, and any holders of Company
Stock Certificates who have not theretofore surrendered their Company Stock
Certificates in accordance with this Section 1.6 shall thereafter look only to
Parent for satisfaction of their claims for Merger Consideration.
(f) Each of the Exchange Agent, Parent and Surviving Corporation shall be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Common Stock such amounts as may be required to be deducted or withheld
therefrom under the Code or any provision of state, local or foreign Tax Law or
under any other applicable Law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(g) Notwithstanding anything to the contrary in this Section 1.6, none of
the Exchange Agent, Parent or Surviving Corporation shall be liable to a holder
of a Company Stock Certificate for any amount properly delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If Company Stock Certificates are not surrendered prior to two years after the
date on which the Effective Time occurs, unclaimed funds payable with respect to
such Company Stock Certificates shall, to the extent permitted by applicable
Law, become the property of Surviving Corporation, free and clear of all claims
or interest of any Person previously entitled thereto.
1.7 FURTHER ACTION
If, at any time after the Effective Time, any further action is determined
by Parent to be necessary or desirable to carry out the purposes of this
Agreement or to vest Surviving Corporation with full right, title and possession
of and to all rights and property of Merger Sub and Company, the officers and
directors of Surviving Corporation and Parent shall be fully authorized (in the
name of Merger Sub, in the name of Company or otherwise) to take such action.
5
1.8 APPRAISAL RIGHTS
Notwithstanding anything in this Agreement to the contrary, Company Common
Stock outstanding immediately prior to the Effective Time and held by a holder
who has delivered a written demand for appraisal of such shares in accordance
with Section ▇-▇▇▇-▇▇▇ et seq. of the CBCA, if such sections provide for
appraisal rights for such shares of Company Common Stock in the Merger
("Dissenting Shares"), shall not be converted as provided in Section 1.5 of this
Agreement, unless and until such holder fails to perfect or effectively
withdraws or loses his right to appraisal and payment under the CBCA. If, after
the Effective Time, any such holder fails to perfect or effectively withdraws or
loses his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to receive
the Merger Consideration as provided in Section 1.5 hereof, together with any
dividends or distributions payable thereon, and to which such holder is
entitled, without interest thereon. Company shall give Parent prompt notice of
any demands received by Company for appraisal of Company Common Stock, and prior
to the Effective Time, Parent shall have the right to participate in all
negotiations and Proceedings with respect to such demands. Prior to the
Effective Time, Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or offer to settle, any such demands.
Parent covenants and agrees that, in the event any cash payment is to be made
following the Effective Time in respect of Dissenting Shares (as a result of a
judgment, settlement or otherwise), Parent shall contribute to the capital of
Surviving Corporation an amount sufficient to make such payment, and no funds or
other assets of Surviving Corporation shall, directly or indirectly, be used for
such purpose.
Article 2
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub that, except as
set forth in the Company Disclosure Schedule:
2.1 ORGANIZATION AND GOOD STANDING
(a) Company and each of its Subsidiaries (collectively, "Acquired
Companies") are corporations or limited partnerships duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization, with full corporate power and authority to conduct their
respective businesses as now being conducted, to own or use the respective
properties and assets that they purport to own or use and to perform all their
respective obligations under Company Contracts, except where the failure to have
such power or authority could not reasonably be expected to, individually or in
the aggregate, result in a Company Material Adverse Effect. Each of the Acquired
Companies is duly qualified to do business as a foreign corporation or limited
partnership and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to, individually or in the aggregate, result in a Company Material
Adverse Effect.
6
(b) Exhibit 21.1 of the Company's Annual Report on Form 10-K for the year
ended December 31, 2002 lists all Acquired Companies and indicates as to each
its jurisdiction of organization and, except in the case of Company, its
shareholders or partners. Company has delivered to Parent copies of the
Governing Documents of each of the Acquired Companies, as currently in effect.
(c) Company has delivered to Parent copies of the charters of each
committee of Company's board of directors and any code of conduct or similar
policy adopted by Company.
2.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT
(a) Company has all necessary corporate power and authority to execute and
deliver this Agreement and the other agreements referred to in this Agreement,
to perform its obligations hereunder and thereunder and to consummate the
Contemplated Transactions. The execution and delivery of this Agreement by
Company and the consummation by Company of the Contemplated Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Company are necessary to authorize this
Agreement or to consummate the Contemplated Transactions (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the then outstanding shares of Company Common Stock
("Required Company Shareholder Vote") and the filing of appropriate merger
documents as required by the CBCA). The affirmative vote of a majority of the
shares of Company Common Stock outstanding as of the record date for the Company
Shareholders' Meeting is the only vote of the holders of any class or series of
the Company's securities necessary to approve this Agreement and the
Contemplated Transactions. This Agreement has been duly and validly executed and
delivered by Company and constitutes the legal, valid and binding obligation of
Company, enforceable against Company in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation of any of the Contemplated Transactions do or will, directly or
indirectly (with or without notice or lapse of time or both), (i) Contravene,
conflict with or result in a violation of (A) any provision of the Governing
Documents of any of the Acquired Companies, or (B) any resolution adopted by the
board of directors, shareholders or partners of any of the Acquired Companies;
(ii) Contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Law or
Order to which any of the Acquired Companies, or any of the assets owned or used
by any of the Acquired Companies, is or may be subject; (iii) Contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by any of the
Acquired Companies, or that otherwise relates to the business of, or any of the
assets owned or used by, any of the Acquired Companies; (iv) cause any of the
7
Acquired Companies to become subject to, or to become liable for the payment of,
any Tax; (v) cause any of the assets owned by any of the Acquired Companies to
be reassessed or revalued by any Governmental Body; (vi) Contravene, conflict
with or result in a violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under, accelerate the
maturity or performance of or cancel, terminate or modify, any Company Contract;
(vii) require a Consent from any Person; or (viii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by any of the Acquired Companies, except, in the case of clauses (ii),
(iii), (iv), (v), (vi), (vii) and (viii), for any such Contravention, conflict
or violation that could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
(c) The execution and delivery of this Agreement by Company does not, and
the performance of this Agreement and the consummation of the Contemplated
Transactions by Company will not, require any Consent of, or filing with or
notification to, any Governmental Body, except (i) for (A) applicable
requirements, if any, of the Exchange Act, the Securities Act and state
securities or "blue sky" laws, (B) the filing of Articles of Merger as required
by the CBCA and (ii) where failure to obtain such Consents, or to make such
filings or notifications, would not result in a Company Material Adverse Effect.
2.3 CAPITALIZATION
The authorized capital stock of Company consists of 50,000,000 shares of
Company Common Stock and 50,000,000 shares of Company Preferred Stock. As of the
date hereof, (a) 4,951,451 shares of Company Common Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, (b) 1,506,000 shares of Company Common Stock are reserved for
issuance upon the exercise of outstanding Company Stock Options, (c) 230,000
shares of Company Common Stock are reserved for issuance upon exercise of
outstanding warrants of Company, (d) no shares of Company Common Stock are held
in the treasury of Company, (e) 77,000 shares of Company Common Stock are
reserved for issuance pursuant to the Company Stock Options not yet granted, and
(f) 4,951,451 shares of Company Common Stock are reserved for issuance upon
exercise of the Rights issued pursuant to the Rights Agreement, dated November
3, 1999, between Company and American Securities Transfer & Trust, Inc., as
Rights Agent ("Company Rights Agreement"). No shares of Company Preferred Stock
are outstanding and no series of Company Preferred Stock has been designated.
Other than the financing arrangements that have been specifically disclosed in
or filed as Exhibits to the Company SEC Reports, there are not any bonds,
debentures, notes or other indebtedness or securities of Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which Company's shareholders may vote. Except
as set forth in this Section 2.3, as of the date hereof no shares of capital
stock or other voting securities of Company are issued, reserved for issuance or
outstanding, and no shares of capital stock or other voting securities of
Company will be issued or become outstanding after the date hereof other than
upon exercise of the Company Stock Options outstanding as of the date hereof.
Except as set forth in this Section 2.3, there are no options, stock
appreciation rights, warrants or other rights, Contracts, arrangements or
commitments of any character ("Options") relating to the issued or unissued
capital stock of any of the Acquired Companies, or obligating any of the
Acquired Companies to issue, grant or sell any shares of capital stock of, or
other equity interests in, or securities convertible into equity interests in,
8
Company or any of its Subsidiaries. Since December 31, 2002, Company has not
issued any shares of its capital stock or Options in respect thereof, except
upon the conversion of the securities or the exercise of the options and
warrants referred to above. All shares of Company Common Stock subject to
issuance as described above will, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, be duly
authorized, validly issued, fully paid and nonassessable. Other than the
financing arrangements that have been specifically disclosed in or filed as
Exhibits to the Company SEC Reports: (i) none of the Acquired Companies has any
Contract or other obligation to repurchase, redeem or otherwise acquire any
shares of Company Common Stock or any capital stock of any of Company's
Subsidiaries, or make any investment (in the form of a loan, capital
contribution or otherwise) in any of Company's Subsidiaries or any other Person;
(ii) each outstanding share of capital stock of each of Company's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable and each such
share owned by any of the Acquired Companies is free and clear of all
Encumbrances; (iii) none of the outstanding equity securities or other
securities of any of the Acquired Companies was issued in violation of the
Securities Act or any other Law; and (iv) none of the Acquired Companies owns,
or has any Contract or other obligation to acquire, any equity securities or
other securities of any Person (other than Subsidiaries of Company) or any
direct or indirect equity or ownership interest in any other business. None of
the Acquired Companies is a general partner of any general or limited
partnership of which all of the partnership interests are not held by the
Company or Subsidiary.
2.4 SEC FILINGS; FINANCIAL STATEMENTS
Company has on a timely basis filed all forms, reports and documents
required to be filed by it with the SEC since August 15, 2002. The Company SEC
Reports (i) were or will be prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (ii) did not at the time they were filed with the
SEC, or will not at the time they are filed with the SEC, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Certifications are each true and correct. No Subsidiary of Company is or has
been required to file any form, report, registration statement or other document
with the SEC. The Acquired Companies maintain disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act, and such disclosure
controls and procedures are effective to ensure that all material information
concerning the Acquired Companies is made known on a timely basis to the
individuals responsible for the preparation of Company's filings with the SEC
and other public disclosure documents. Company has delivered to Parent copies of
all written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures. Company is in compliance
with the applicable listing rules of the NASDAQ National Market and has not
since August 2002 received any notice from the NASDAQ National Market asserting
any non-compliance with such rules. As used in this Section 2.4, the term "file"
shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the SEC.
2.5 FINANCIAL STATEMENTS
The financial statements and notes contained or incorporated by reference
in the Company SEC Reports fairly present the financial condition and the
results of operations, changes in shareholders' equity and cash flow of the
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP and Regulation S-X of
the SEC, subject, in the case of interim financial statements, to normal
9
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the omission of notes to the extent
permitted by Regulation S-X of the SEC (that, if presented, would not differ
materially from notes to the financial statements found in the Company's Report
on Form 10-Q for the period ended March 31, 2003 included in the Company SEC
Reports (the consolidated balance sheet included in such Quarterly Report is the
"Balance Sheet")); the financial statements referred to in this Section 2.5
reflect the consistent application of such accounting principles throughout the
periods involved, except as disclosed in the notes to such financial statements.
No financial statements of any Person other than the Acquired Companies are
required by GAAP to be included in the consolidated financial statements of
Company. The Company's auditors have not performed any non-audit services for
the Acquired Companies since the beginning of the immediately preceding fiscal
year of Company. The Acquired Companies maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (a) transactions are
executed in accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (c)
access to assets is permitted only in accordance with management's general or
specific authorization and (d) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Company has delivered to Parent copies
of all written descriptions of, and all policies, manuals and other documents
promulgating, such internal accounting controls. The Company does not have any
Off-Balance Sheet Arrangements.
2.6 NO UNDISCLOSED LIABILITES
The Acquired Companies have no Liabilities or obligations of any nature
(whether absolute, accrued, contingent, ▇▇▇▇▇▇ or inchoate or otherwise), except
for Liabilities or obligations reflected or reserved against in the Balance
Sheet, current liabilities incurred in the Ordinary Course of Business and not
in violation of this Agreement since the date thereof (assuming for this purpose
that this Agreement had been in effect since the date of the Balance Sheet) and
contingent or inchoate liabilities that could not reasonably be expected to have
a Company Material Adverse Effect.
2.7 ABSENCE OF CERTAIN CHANGES AND EVENTS
Since the date of the Balance Sheet, the Acquired Companies have conducted
their businesses only in the Ordinary Course of Business, there has not been any
Company Material Adverse Effect, no event has occurred or circumstance exists
that may result in a Company Material Adverse Effect and there has not been:
(a) any material loss, damage or destruction to, or any material
interruption in the use of, any of the assets of any of the Acquired Companies
(whether or not covered by insurance) that has had or could reasonably be
expected to have a Company Material Adverse Effect;
(b) (i) any declaration, accrual, set aside or payment of any dividend or
any other distribution in respect of any shares of capital stock of any Acquired
Company, or (ii) any repurchase, redemption or other acquisition by any Acquired
Company of any shares of capital stock or other securities;
10
(c) any sale, issuance or grant, or authorization of the issuance of, (i)
any capital stock or other security of any Acquired Company (except for Company
Common Stock issued upon the valid exercise of outstanding Company Stock
Options), (ii) any option, warrant or right to acquire any capital stock or
other security of any Acquired Company (except for Company Stock Options) or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security of any Acquired Company;
(d) any amendment or waiver of any of the rights of any Acquired Company
under, or acceleration of vesting under, (i) any provision of any of Company's
employee stock option plans, (ii) any provision of any Contract evidencing any
outstanding Company Stock Option, (iii) any provision on any Company warrant or
(iv) any restricted stock purchase agreement;
(e) any amendment to any Governing Document of any of the Acquired
Companies or any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction involving any Acquired Company;
(f) any receipt by the Acquired Companies of any Acquisition Proposal;
(g) any creation of any Subsidiary of an Acquired Company or acquisition by
any Acquired Company of any equity or other interest in any other Person;
(h) except in the Ordinary Course of Business, any capital expenditure by
any Acquired Company which, when added to all other capital expenditures made by
or on behalf of the Acquired Companies since the date of the Balance Sheet,
exceeds $50,000 in the aggregate;
(i) except in the Ordinary Course of Business, any action by the Acquired
Companies to (i) enter into, or suffer any of the assets owned or used by it to
become bound by, any material Contract, or (ii) amend or terminate, or waive any
material right or remedy under, any material Contract;
(j) any (i) acquisition, lease or license by any Acquired Company of any
material right or other material asset from any other Person, (ii) sale or other
disposal or lease or license by any Acquired Company of any material right or
other material asset to any other Person or (iii) waiver or relinquishment by
any Acquired Company of any right, except for rights or other assets acquired,
leased, licensed or disposed of in the Ordinary Course of Business and
consistent with past practices;
(k) any write-off as uncollectible of, or establishment of any
extraordinary reserve with respect to, any account receivable or other
indebtedness of an Acquired Company;
(l) any pledge of any assets of, or sufferance of any of the assets of, an
Acquired Company to become subject to any Encumbrance, except for pledges or
sufferances of immaterial assets made in the Ordinary Course of Business and
consistent with past practices;
11
(m) other than loans and/or guarantees made between one or more of the
Acquired Companies for the benefit of another Acquired Company, any (i) loan by
an Acquired Company to any Person, or (ii) incurrence or guarantee by an
Acquired Company of any indebtedness for borrowed money;
(n) any (i) adoption, establishment, entry into or amendment by an Acquired
Company of any stock option plan or (ii) payment of any bonus or any profit
sharing or similar payment to, or material increase in the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of the directors, officers or employees of any Acquired Company;
(o) any change of the methods of accounting or accounting practices of any
Acquired Company in any material respect;
(p) any material Tax election by any Acquired Company;
(q) any commencement or settlement of any Proceeding by any Acquired
Company that would have a Company Material Adverse Effect; or
(r) any agreement or commitment to take any of the actions referred to in
clauses (c) through (q) above.
2.8 LEGAL PROCEEDINGS
(a) Except as disclosed in the Company SEC Reports, there is no pending
Proceeding (i) that has been commenced by or against any of the Acquired
Companies or that otherwise relates to or may affect the business of, or any of
the assets owned or used by, any of the Acquired Companies, except for such
Proceedings as are normally incident to the business carried on by the Acquired
Companies and could not reasonably be expected to, individually or in the
aggregate, result in a Company Material Adverse Effect, (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Contemplated Transactions or (iii) against any
director or officer of any of the Acquired Companies pursuant to Section 8A or
20(b) of the Securities Act or Section 21(d) or 21C of the Exchange Act.
(b) To the Knowledge of Company, (i) no Proceeding that if pending would be
required to be disclosed under the preceding paragraph has been threatened and
(ii) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any such Proceeding.
2.9 RECOMMENDATION OF SPECIAL COMMITTEE AND COMPANY BOARD; OPINION OF FINANCIAL
ADVISOR
(a) The Special Committee, at a meeting duly called and held, unanimously
(i) determined that this Agreement and the transactions contemplated by this
Agreement are fair to, and in the best interests of, the shareholders of the
Company, and (ii) resolved to recommend approval and adoption of this Agreement
and the Merger by the Board of the Directors of Company.
12
(b) The Board of Directors of Company, at a meeting duly called and held
and acting on the unanimous recommendation of the Special Committee, (i)
determined that this Agreement and the Contemplated Transactions are fair to,
and in the best interests of, the shareholders of the Company, (ii) approved
this Agreement and transactions contemplated hereby, and (iii) resolved to
recommend approval and adoption of this Agreement and the Merger by the
shareholders of the Company.
(c) CIBC World Markets Corp. ("CIBC") has rendered to the Special Committee
its opinion to the effect that, as of the date of this Agreement and subject to
the assumptions and limitations specifically described by CIBC to the Special
Committee, the Merger Consideration to be received by the shareholders of the
Company is fair from a financial point of view to such holders, other than the
holders of Excluded Shares (as defined in such opinion). A complete and correct
written copy of CIBC's engagement letter has been delivered to Parent and a
complete and correct written copy of CIBC's opinion letter will be delivered to
Parent promptly after the date of this Agreement. Company has received the
approval of CIBC to permit the inclusion of a copy of its written opinion, when
delivered, in its entirety in the Proxy Statement, subject to CIBC's review of
the Proxy Statement.
2.10 RIGHTS PLAN
Company has delivered to Parent a copy of the Company Rights Agreement as
currently in effect. Company has amended the Company Rights Agreement to provide
that (a) neither Parent nor Merger Sub nor any of their respective Affiliates
shall be deemed to be an Acquiring Person (as such term is defined in the
Company Rights Agreement), (b) neither a Distribution Date nor a Shares
Acquisition Date (as each such term is defined in the Company Rights Agreement)
shall be deemed to occur, and the Rights will not detach from the Company Common
Stock or become non-redeemable, as a result of the execution, delivery or
performance of this Agreement or the consummation of the Merger or the other
Contemplated Transactions and (c) the Rights shall terminate immediately prior
to the Effective Time.
2.11 ENVIRONMENTAL MATTERS
Except as disclosed in the Company SEC Reports, each of the Acquired
Companies is, and at all times has been, in substantial compliance with, and has
not been and is not in material violation of or subject to any material
liability under, any Environmental Law. None of the Acquired Companies has any
basis to expect, nor has any of them or any other Person for whose conduct they
are or may be held to be responsible received, any actual or threatened order,
notice, or other communication from (a) any Governmental Body or private citizen
acting in the public interest, or (b) the current or prior owner or operator of
any Facilities, of any actual or potential material violation of or failure to
comply with any Environmental Law, or of any actual or threatened material
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any of the Acquired
Companies has or has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by any of the Acquired
Companies or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
13
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS
Company has not breached or defaulted (nor has any event occurred which,
with passage of time or giving of notice would constitute a default), or
received in writing any claim or notice that it has breached or defaulted under,
any of the terms or conditions of any agreement, contract or commitment filed as
an exhibit to the Company SEC Reports ("Company Material Contracts") in such a
manner as, individually or in the aggregate, are reasonably likely to have a
Company Material Adverse Effect. Each Company Material Contract that has not
expired by its terms is in full force and effect.
2.13 COMPLIANCE WITH LAWS; PERMITS
Each of the Acquired Companies has complied with, is not in violation of,
and has not received any notices of violation with respect to, any applicable
Law with respect to the conduct of its business, or the ownership or operation
of its business, except for failures to comply or violations which, individually
or in the aggregate, have not had and are not reasonably likely to have a
Company Material Adverse Effect. Each of the Acquired Companies has all permits,
licenses, easements, variations, exemptions, consents, certificates approvals,
authorizations and registrations (collectively, "Permits") with and under all
federal, state and local Laws, and from all Governmental Bodies required by it
to carry on its respective business as currently conducted, except where the
failure to have such Permits would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
2.14 TAKEOVER STATUTES NOT APPLICABLE
The Board of Directors of Company has taken all actions so that no
restrictive provision of any "fair price," "moratorium," "business combination,"
"control share acquisition," "interested shareholder," or other similar
anti-takeover Law, or restrictive provision of any applicable anti-takeover
provision in the Governing Documents of any of the Acquired Companies is, or at
the Effective Time will be, applicable to Company, Parent, Merger Sub or the
Surviving Corporation, the shares of Company Common Stock (including shares
acquired in the Merger), the Merger or the other Contemplated Transactions.
2.15 BROKERS; FINDERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Contemplated
Transactions based upon arrangements made by or on behalf of Company, except for
the fees payable to CIBC.
2.16 FULL DISCLOSURE
(a) This Agreement (including the Company Disclosure Schedule) does not (i)
contain any representation, warranty or information that is false or misleading
with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained herein (in the light of the circumstances under which such
representations, warranties and information were made or provided) not false or
misleading.
14
(b) None of the information supplied or to be supplied by or on behalf of
Company for inclusion or incorporation by reference in the Proxy Statement will,
at the time the Proxy Statement is mailed to the holders of Company Common Stock
or at the time of the Company Shareholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The Proxy
Statement and Schedule 13E-3 will each comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
Article 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company severally, but not
jointly, that:
3.1 ORGANIZATION AND GOOD STANDING
Each of Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization.
3.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT
(a) Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and the other agreements
referred to in this Agreement, to perform its obligations hereunder and
thereunder and to consummate the Contemplated Transactions. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the Contemplated Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the Contemplated Transactions (other than the filing
of appropriate merger documents as required by the CBCA). The Boards of
Directors of each of Parent and Merger Sub, at meetings duly called and held,
(i) determined that this Agreement and the Contemplated Transactions are fair
to, and in the best interests of, the shareholders of Parent and Merger Sub, and
(ii) approved this Agreement and the Contemplated Transactions. This Agreement
has been duly and validly executed and delivered by each of Parent and Merger
Sub and constitutes the legal, valid and binding obligation of each of Parent
and Merger Sub, enforceable against each of Parent and Merger Sub in accordance
with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation of any of the Contemplated Transactions do or will, directly or
indirectly (with or without notice or lapse of time or both), (i) Contravene,
conflict with or result in a violation of (A) any provision of the Governing
Documents of either Parent or Merger Sub or (B) any resolution adopted by the
board of directors of Parent or Merger Sub; (ii) Contravene, conflict with or
result in a violation of, or give any Governmental Body or other Person the
15
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Law or Order to which Parent or Merger
Sub is or may be subject; or (iii) require a Consent from any Person, except, in
the case of clauses (ii) and (iii), for any such Contravention, conflict or
violation that could not reasonably be expected, individually or in the
aggregate, to have a Parent Material Adverse Effect.
(c) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement and the consummation of the
Contemplated Transactions by Parent and Merger Sub will not, require any Consent
of, or filing with or notification to, any Governmental Body, except (i) for (A)
applicable requirements, if any, of the Exchange Act, the Securities Act and
state securities or "blue sky" laws and (B) the filing of the Articles of Merger
as required by the CBCA and (ii) where failure to obtain such Consents, or to
make such filings or notifications, would not result in a Parent Material
Adverse Effect.
3.3 CAPITALIZATION
(a) The authorized capital stock of Parent consists of 5,000,000 shares of
Parent Common Stock. As of the date hereof, one share of Parent Common Stock is
issued and outstanding, which is duly authorized, validly issued, fully paid and
nonassessable. There are no Options relating to the issued or unissued capital
stock of Parent, or obligating Parent to issue, grant or sell any shares of
capital stock of, or other equity interests in, or securities convertible into
equity interests in, Parent. Parent has no Contract or other obligation to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of
Merger Sub Common Stock. As of the date hereof, 100 shares of Merger Sub Common
Stock are issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable and held by Parent.
3.4 NO PRIOR ACTIVITIES
Except for obligations incurred in connection with its incorporation or the
negotiation and consummation of this Agreement and the Contemplated
Transactions, neither Parent or Merger Sub has incurred any obligation or
Liability nor engaged in any business or activity of any type or kind
whatsoever, or entered into any agreement or arrangement with any Person.
3.5 BROKERS; FINDERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Contemplated
Transactions based upon arrangements made by or on behalf of Parent or Merger
Sub.
3.6 FULL DISCLOSURE
(a) This Agreement does not, and the certificate referred to in Section 8.4
will not, (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in the light of
the circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
16
(b) None of the information supplied or to be supplied by or on behalf of
Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement will, at the time the Proxy Statement is mailed to the holders of
Company Common Stock or at the time of the Company Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
3.7 DUE DILIGENCE
Parent and Merger Sub have had, to their Knowledge, full access to (a) the
Company and its records, assets and properties and (b) the Company's auditors,
accountants, legal counsel and tax advisors. Without waiving any of its rights
to terminate this Agreement as provided herein, Parent and Merger Sub do not
have Knowledge that, as of the date of this Agreement, any of Company's
representations and warranties in Article 2 are false, incomplete, or untrue.
Article 4
CERTAIN COVENANTS OF COMPANY AND PARENT
4.1 ACCESS AND INVESTIGATION BY PARENT
During the period from the date of this Agreement through the Effective
Time (the "Pre-Closing Period"), Company shall, and shall cause the respective
Representatives of the Acquired Companies to: (a) provide Parent and Parent's
Representatives with reasonable access to the Acquired Companies'
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Companies; and (b) provide Parent and Parent's Representatives with
such copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to the Acquired Companies, and with such
additional financial, operating and other data and information regarding the
Acquired Companies, as Parent may reasonably request. Without limiting the
generality of the foregoing, during the Pre-Closing Period, Company shall
promptly provide Parent with copies of: (i) all material operating and financial
reports prepared by the Acquired Companies for Company's senior management, (ii)
any notice, report or other document filed with or sent to any Governmental Body
in connection with the Merger or any of the Contemplated Transactions; and (iii)
any material notice, report or other document received by any of the Acquired
Companies from any Governmental Body.
4.2 OPERATION OF COMPANY'S BUSINESS
(a) During the Pre-Closing Period, except as provided in this Agreement:
(i) Company shall ensure that each of the Acquired Companies conducts its
business and operations (A) in the Ordinary Course of Business and in accordance
with past practices and (B) in compliance with all applicable Laws and the
requirements of all material Company Contracts; (ii) Company shall use its
reasonable best efforts to ensure that each of the Acquired Companies preserves
intact its current business organization, keeps available the services of its
current directors, officers and employees and maintains its relations and
17
goodwill with all suppliers, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business relationships with the
respective Acquired Companies; (iii) Company shall not and shall not permit any
of the other Acquired Companies to take, without the prior Consent of Parent,
any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events in Section 2.7 would
be likely to occur; (iv) Company shall promptly notify Parent of (A) any notice
or other communication from any Person alleging that the Consent of such Person
is or may be required in connection with the Contemplated Transactions, and (B)
any Proceeding commenced or, to the best of its Knowledge threatened against,
relating to or involving or otherwise affecting any of the Acquired Companies
that relates to the consummation of the Contemplated Transactions; (v) Company
shall not enter into any Contract providing for a hedging or derivative
transaction of a nature described in Financial Accounting Standards Board
Release No. 133; (vi) Company shall (to the extent requested by Parent) cause
its officers to report regularly to Parent concerning the status of Company's
business; and (vii) Company shall not grant any options to purchase or otherwise
acquire Options.
(b) During the Pre-Closing Period, each Party shall promptly notify the
other Parties in writing of: (i) the discovery by a Party of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Company in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by Company in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of any of the Acquired Companies; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Articles 6, 7 and 8 impossible or unlikely or
that has had or could reasonably be expected to have a Company Material Adverse
Effect. Without limiting the generality of the foregoing, Company shall promptly
advise Parent in writing of any Proceeding or claim threatened, commenced or
asserted against or with respect to any of the Acquired Companies, except where
such Proceeding or claim would not be reasonably likely to have a Company
Material Adverse Effect. No notification given to Parent pursuant to this
Section 4.2(b) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of Company contained in this Agreement.
4.3 NO SOLICITATION
(a) Company shall not directly or indirectly, and shall not authorize or
permit any of the other Acquired Companies or any Representative of any of the
Acquired Companies directly or indirectly to, (i) solicit, initiate, encourage,
induce or facilitate the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to lead to an
Acquisition Proposal, (ii) furnish any information regarding any of the Acquired
Companies to any Person in connection with or in response to an Acquisition
Proposal or an inquiry or indication of interest that could reasonably be
expected to lead to an Acquisition Proposal, (iii) engage in discussions or
18
negotiations with any Person with respect to any Acquisition Proposal, (iv)
approve, endorse or recommend any Acquisition Proposal (except pursuant to
Section 5.2(c)) or (v) enter into any letter of intent or similar document or
any Contract contemplating or otherwise relating to any Acquisition Transaction;
provided, however, that prior to the mailing of the Proxy Statement to the
holders of Company Common Stock, this Section 4.3(a) shall not prohibit Company
from furnishing nonpublic information regarding the Acquired Companies to, or
entering into discussions with, any Person in response to a Significant Proposal
that is submitted to Company by such Person (and not withdrawn) if (A) neither
Company nor any Representative of any of the Acquired Companies shall have
violated any of the restrictions set forth in this Section 4.3, (B) Company
promptly gives Parent written notice of the identity of such Person and of
Company's intention to furnish nonpublic information to, or enter into
discussions with, such Person, and Company receives from such Person an executed
confidentiality agreement in substantially the form attached as Exhibit B and
(C) Company promptly furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by Company
to Parent). Without limiting the generality of the foregoing, Company
acknowledges and agrees that any violation of or the taking of any action
inconsistent with any of the restrictions set forth in the preceding sentence by
any Representative of any of the Acquired Companies, whether or not such
Representative is purporting to act on behalf of any of the Acquired Companies,
shall be deemed to constitute a breach of this Section 4.3 by Company.
(b) Company shall promptly (and in no event later than 24 hours after
receipt of any Acquisition Proposal, any inquiry or indication of interest that
could lead to an Acquisition Proposal or any request for nonpublic information)
advise Parent orally and in writing of any Acquisition Proposal, any inquiry or
indication of interest that could lead to an Acquisition Proposal or any request
for nonpublic information relating to any of the Acquired Companies (including
the identity of the Person making or submitting such Acquisition Proposal,
inquiry, indication of interest or request, and the terms thereof) that is made
or submitted by any Person during the Pre-Closing Period. Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal, inquiry, indication of interest or request and any modification or
proposed modification thereto.
(c) On the date of this Agreement, Company shall immediately cease and
cause to be terminated any existing discussions with any Person that relate to
any Acquisition Proposal.
(d) Company agrees not to release or permit the release of any Person from,
or to waive or permit the waiver of any provision of, any confidentiality,
"standstill" or similar agreement to which any of the Acquired Companies is a
party, and will use its reasonable best efforts to enforce or cause to be
enforced each such agreement at the request of Parent. Company also will
promptly request each Person that has executed, within 12 months prior to the
date of this Agreement, a confidentiality agreement in connection with its
consideration of a possible Acquisition Transaction or equity investment to
return all confidential information heretofore furnished to such Person by or on
behalf of any of the Acquired Companies.
19
Article 5
ADDITIONAL COVENANTS OF THE PARTIES
5.1 PROXY STATEMENT AND SCHEDULE 13E-3
(a) As promptly as practicable after the date of this Agreement, Company
shall prepare and cause to be filed with the SEC the Proxy Statement, and use
commercially reasonable efforts to have the Proxy Statement cleared by the SEC.
Parent, Merger Sub and Company shall cooperate with each other in the
preparation of the Proxy Statement, and Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information, and shall provide to Parent reasonably promptly, copies
of all correspondence between Company or any Representative of Company and the
SEC. Company shall give Parent and its counsel the opportunity to review and
comment on the Proxy Statement and any other documents filed with the SEC or
mailed to Company's shareholders prior to their being filed with, or sent to,
the SEC or mailed to Company's shareholders and shall give Parent and its
counsel the opportunity to review and comment on all amendments and supplements
to the Proxy Statement and any other documents filed with, or sent to, the SEC
or mailed to Company's shareholders and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC or mailed to Company's shareholders. Each of Company, Parent and Merger
Sub agrees to use its commercially reasonable efforts to respond promptly to all
such comments of and requests by the SEC. As promptly as practicable after the
Proxy Statement has been cleared by the SEC, Company shall mail the Proxy
Statement to Company's shareholders. Prior to the date of approval of the Merger
by Company's shareholders, each of Company, Parent and Merger Sub shall correct
promptly any information provided by it and used in the Proxy Statement that
shall have become false or misleading in any material respect, and Company shall
take all steps necessary to file with the SEC and have cleared by the SEC any
amendment or supplement to the Proxy Statement to correct the same and to cause
the Proxy Statement as so corrected to be disseminated to Company's
shareholders, in each case to the extent required by applicable Law.
(b) Promptly following the date of this Agreement, Parent, Merger Sub and
Company shall file with the SEC, and shall use all commercially reasonable
efforts to cause any of their respective Affiliates engaging in this transaction
to file with the SEC, a Schedule 13E-3 with respect to the Merger. Each of the
parties hereto agrees to use all commercially reasonable efforts to cooperate
and to provide each other with such information as any of such parties may
reasonably request in connection with the preparation of the Proxy Statement and
the Schedule 13E-3. The Schedule 13E-3 shall be filed with the SEC concurrently
with the filing of the Proxy Statement. Each of Company, Parent and Merger Sub
agrees to use its commercially reasonable efforts to respond promptly to all
comments of and requests by the SEC. Each party hereto agrees to promptly
supplement, update and correct any information provided by it for use in the
Schedule 13E-3 if and to the extent that such information is or shall have
become incomplete, false or, in light of the circumstances, misleading.
20
5.2 COMPANY SHAREHOLDERS' MEETING
(a) Company shall, subject to Company's right to terminate this Agreement
pursuant to Section 9.1(j), take all action necessary under all applicable Laws
to call, give notice of and hold a meeting of the holders of Company Common
Stock to vote on a proposal to adopt this Agreement ("Company Shareholders'
Meeting"). The Company Shareholders' Meeting shall be held on a date selected by
Company in consultation with Parent as promptly as practicable after the Proxy
Statement is cleared by the SEC; provided, the Company shall be permitted to
delay and reschedule the date of the Company Shareholders Meeting in the event
the condition set forth in Section 8.5 has not been satisfied. Company shall
ensure that all proxies solicited in connection with the Company Shareholders'
Meeting are solicited in compliance with all applicable Laws.
(b) Subject to Section 5.2(c), (i) the Proxy Statement shall include a
statement to the effect that the board of directors of Company recommends that
Company's shareholders vote to adopt this Agreement at the Company Shareholders'
Meeting (the recommendation of Company's board of directors that Company's
shareholders vote to adopt this Agreement being referred to as the "Company
Board Recommendation"); and (ii) the Company Board Recommendation shall not be
withdrawn or modified in a manner adverse to Parent, and no resolution by the
board of directors of Company or any committee thereof to withdraw or modify the
Company Board Recommendation in a manner adverse to Parent shall be adopted or
proposed.
(c) Notwithstanding anything to the contrary contained in Section 5.2(b),
at any time prior to the adoption of this Agreement by the Required Company
Shareholder Vote the Company Board Recommendation may be withdrawn or modified
in a manner adverse to Parent if: (i) a proposal to acquire (by merger or
otherwise) all of the outstanding shares of Company Common Stock (other than
Company Common Stock owned by the Person making the Proposal) is made to Company
and is not withdrawn; (ii) Company provides Parent with at least five business
days prior notice of any meeting of Company's board of directors at which such
board of directors will consider and determine whether such offer is a Superior
Proposal; (iii) Company's board of directors determines in good faith (based
upon a written opinion of an independent financial advisor of nationally
recognized reputation) that such offer constitutes a Superior Proposal; (iv)
Company's board of directors determines in good faith, after having taken into
account the written advice of Company's outside legal counsel, that, in light of
such Superior Proposal, the withdrawal or modification of the Company Board
Recommendation is required in order for Company's board of directors to comply
with its fiduciary obligations to Company's shareholders under applicable Law;
and (v) none of the Acquired Companies nor any of their Representatives shall
have violated any of the restrictions set forth in Section 4.3. In making any
determination to withdraw or modify the Company Board Recommendation, Company
may consider any revised offer by Parent made prior to any determination to make
such withdrawal or modification.
5.3 REASONABLE BEST EFFORTS TO CLOSE
(a) Subject to Section 5.3(b), Parent and Company shall use their
reasonable best efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the Contemplated Transactions. Without
limiting the generality of the foregoing, but subject to Section 5.3(b) and
21
Company's right to terminate this Agreement pursuant to Section 9.1(j), Parent
and Company (i) shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with the Merger and
the Contemplated Transactions and to submit promptly any additional information
requested in connection with such filings and notices, (ii) shall use their
reasonable best efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Laws or Contract, or otherwise) by such party in
connection with the Merger or any of the Contemplated Transactions and (iii)
shall use its reasonable best efforts to lift any restraint, injunction or other
legal bar to the Merger. Company shall promptly deliver to Parent a copy of each
such filing made, each such notice given and each such Consent obtained by
Company during the Pre-Closing Period.
(b) At the request of Parent, Company shall agree to divest, sell, dispose
of, hold, separate or otherwise take or commit to take any action that limits
its freedom of action with respect to its or its Subsidiaries' ability to
retain, any of the businesses, product lines or assets of Company or any of its
Subsidiaries, provided that any such action is conditioned upon the consummation
of the Merger.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Parent shall not have any obligation under this Agreement to: (i) dispose or
transfer or cause any of the Acquired Companies to dispose of or transfer any
assets, or to commit to cause any of the Acquired Companies to dispose of any
assets; (ii) discontinue or cause any of Acquired Companies to discontinue
offering any product or service, or to commit to cause any of the Acquired
Companies to discontinue offering any product or service; (iii) hold separate or
cause any of the Acquired Companies to hold separate any assets or operations
(either before or after the Closing Date); or to commit to cause any of the
Acquired Companies to hold separate any assets or operations; (iv) make or cause
any of the Acquired Companies to make any commitment (to any Governmental Body
or otherwise) regarding its future operations or the future operations of any of
the Acquired Companies; or (v) contest any Proceeding relating to the Merger if
Parent determines in good faith that contesting such Proceeding might not be
advisable.
5.4 DISCLOSURE
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
any of the other Contemplated Transactions. Without limiting the generality of
the foregoing, Company shall not, and shall not permit any of its
Representatives to, make any disclosure regarding the Merger or any of the other
Contemplated Transactions unless (a) Parent shall have approved such disclosure
or (b) Company shall have been advised in writing by its outside legal counsel
that such disclosure is required by applicable Law.
5.5 RIGHTS AGREEMENT
If applicable, Company shall not amend or grant any waiver under the
Company Rights Agreement following the date of this Agreement except as
requested by the Parent in connection with the Contemplated Transaction.
22
Article 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
The obligation of each party to effect the Merger and otherwise consummate
the Contemplated Transactions is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions:
6.1 COMPANY SHAREHOLDER APPROVAL
This Agreement shall have been duly adopted, and the Merger shall have been
duly approved, by the Required Company Shareholder Vote.
6.2 NO RESTRAINTS
No temporary restraining Order, preliminary or permanent injunction or
other Order preventing the consummation of the Merger shall have been issued by
any court of competent jurisdiction or any other Governmental Body and shall
remain in effect, and there shall not be any Law enacted, adopted or deemed
applicable to the Merger that prohibits, retrains, enjoins, restricts or makes
consummation of the Merger illegal.
Article 7
CONDITIONS PRECEDENT TO PARENT'S AND MERGER SUB'S
OBLIGATION TO CLOSE
The obligation of Parent and Merger Sub to effect the Merger and to take
the other actions required to be taken by Parent and Merger Sub at Closing is
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions (any of which may be waived by Parent and Merger Sub, in
whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Company contained in this Agreement
(a) that are qualified as to materiality or a Company Material Adverse Effect
shall be true and correct in all respects as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case as of such earlier date), and (b) that are not so qualified shall
be true and correct in all respects as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case as of such earlier date), except for such breaches of representations
and inaccuracies in warranties in this clause (b) that do not have, and are not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
7.2 COMPANY'S PERFORMANCE
Company shall have performed, in all material respects, its covenants and
agreements contained in this Agreement required to be performed on or prior to
the Closing Date.
23
7.3 CONSENTS
Each of the Governmental Authorizations and Consents identified in Section
2.2 must have been obtained and must be in full force and effect without
limitation or condition that has, or would be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
7.4 NO MATERIAL ADVERSE EFFECT
At any time after the date of this Agreement, there shall not have been any
event or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate with all other
events or occurrences since the date of this Agreement, a Company Material
Adverse Effect.
7.5 NO PROCEEDINGS
There shall not be pending or threatened any Proceeding: (a) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
Contemplated Transactions; (b) relating to the Merger and seeking to obtain from
Parent or any of its Subsidiaries any damages that may be material to Parent;
(c) seeking to prohibit or limit in any material respect Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership rights
with respect to any of the Acquired Companies; (d) which would materially and
adversely affect the right of Surviving Corporation to own the assets or operate
the business of the Acquired Companies; (e) seeking to compel any Acquired
Company, Parent or any Subsidiary of Parent to dispose of or hold separate any
material assets, as a result of the Merger or any of the Contemplated
Transactions; or (f) which, if adversely determined, could have a Company
Material Adverse Effect or a Parent Material Adverse Effect.
7.6 SUCCESSFUL COMPLETION OF PARENT FINANCING
Parent will have on hand an amount in cash and/or have available borrowings
under credit facilities that are sufficient to provide the Exchange Agent
immediately after the Effective Time the funds necessary to consummate the
Merger and the Contemplated Transactions, to pay (i) the aggregate Merger
Consideration to the holders of Company Common Stock on terms which are
acceptable to Parent and (ii) to either refinance all indebtedness of the
Company on terms which are acceptable to Parent or obtain from each of
Guggenheim Investment Management, LLC and GMAC Commercial Credit LLC, the
Company's principal lenders, a consent to the change in control that will be
effected by the Merger, or an amendment or supplement to the Company's credit
agreements on terms which are acceptable to Parent.
7.7 OFFICER'S CERTIFICATE
Company shall have delivered to Parent and Merger Sub a certificate,
executed on behalf of Company by an authorized executive officer of Company, and
dated as of the Closing Date that the conditions set forth in Sections 7.1, 7.2,
7.3 and 7.5 have been duly satisfied.
24
7.8 DISSENTING SHARES
The number of Dissenting Shares (if any) with respect to which the holders
thereof shall have properly demanded appraisal in accordance with the CBCA
before the taking of a vote on the Merger at the Company Shareholder's Meeting
or any adjournment thereof, the holders of which shall not have withdrawn such
demand as of the Closing Date, shall not exceed five percent of the issued and
outstanding Company Common Stock entitled to vote thereon.
7.9 EXTENSION
Company shall have used its best efforts to obtain, from the holders of all
puts to sell Company Common Stock to the Company, an extension of time such that
all such puts may be exercisable until the earlier of the Effective Time or the
termination of this Agreement.
Article 8
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE
Company's obligation to effect the Merger and to take the other actions
required to be taken by Company at the Closing is subject to the satisfaction,
on or before the Closing Date, of each of the following conditions (any of which
may be waived by Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Parent and Merger Sub contained in
this Agreement (a) that are qualified as to materiality or a Parent Material
Adverse Effect shall be true and correct in all respects as of the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case as of such earlier date), and (b) that are not so
qualified shall be true and correct in all respects as of the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case as of such earlier date), except for such breaches
of representations and inaccuracies in warranties in this clause (b) that do not
have, and are not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
8.2 PARENT'S AND MERGER SUB'S PERFORMANCE
Parent and Merger Sub shall have performed, in all material respects, their
respective covenants and agreements contained in this Agreement required to be
performed on or prior to the Closing Date.
8.3 CONSENTS
Each of the Governmental Authorizations and Consents identified in Section
3.2(c) must have been obtained and must be in full force and effect without
limitation or condition that has, or would be reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
25
8.4 OFFICER'S CERTIFICATE
Parent shall have delivered to Company a certificate, executed on behalf of
Parent and Merger Sub by an authorized executive officer of Parent, and dated as
of the Closing Date that the conditions set forth in Sections 7.6, 8.1, 8.2 and
8.3 have been duly satisfied.
8.5 CONFIRMATION OF AVAILABILITY OF FINANCING
Parent shall have delivered to Company at least 24 hours prior to the date
of the Company Shareholders' Meeting, confirmation reasonably satisfactory to
the Board of Directors of the availability of financing described in Section
7.6; provided, however that the failure to provide such confirmation shall not
effect a waiver by Parent of the conditions required pursuant to Section 7.6.
8.6 FEES AND EXPENSES
At Closing, all reasonable fees and expenses of the Special Committee and
its advisors, including all reasonable attorneys' and other professional fees
shall be paid in full.
Article 9
TERMINATION
9.1 TERMINATION
This Agreement may be terminated prior to the Effective Time (whether
before or after adoption of this Agreement by Company's shareholders):
(a) by mutual written consent of Parent and Company;
(b) by either Parent or Company if the Merger shall not have been
consummated by June 30, 2004 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(c) by Parent if there is pending or threatened any Proceeding: (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the Contemplated Transactions; (ii) relating to the Merger and seeking to
obtain from Parent or any of its Subsidiaries any damages that may be material
to Parent; (iii) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to any of the Acquired Companies; (iv) which would
materially and adversely affect the right of Surviving Corporation to own the
assets or operate the business of the Acquired Companies; (v) seeking to compel
any Acquired Company, Parent or any Subsidiary of Parent to dispose of or hold
separate any material assets, as a result of the Merger or any of the
Contemplated Transactions; or (vi) which, if adversely determined, could have a
Company Material Adverse Effect or a Parent Material Adverse Effect.;
26
(d) by either Parent or Company if (i) the Company Shareholders' Meeting
(including any adjournments and postponements thereof) shall have been held and
completed and Company's shareholders shall have voted on a proposal to adopt
this Agreement, and (ii) this Agreement shall not have been adopted at such
meeting (and shall not have been adopted at any adjournment or postponement
thereof) by the Required Company Shareholder Vote; provided, however, that (A) a
party shall not be permitted to terminate this Agreement pursuant to this
Section 9.1(d) if the failure to obtain such shareholder approval is
attributable to a failure on the part of such party to perform any material
obligation required to be performed by such party at or prior to the Effective
Time, and (B) Company shall not be permitted to terminate this Agreement
pursuant to this Section 9.1(d) unless Company shall have made the payment(s)
required to be made to Parent pursuant to Section 9.3(a) and, if applicable,
pursuant to Section 9.3(b) or Section 9.3(d);
(e) by Parent (at any time prior to the adoption of this Agreement by the
Required Company Shareholder Vote) if a Company Triggering Event shall have
occurred;
(f) by Parent (i) if any of Company's representations and warranties shall
have been inaccurate as of the date of this Agreement, such that the condition
set forth in Section 7.1 would not be satisfied, or (ii) if (A) any of Company's
representations and warranties shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 7.1 would not be satisfied, and (B)
such inaccuracy has not been cured by Company within 5 business days after its
receipt of written notice thereof and remains uncured at the time notice of
termination is given, or (iii) if any of Company's covenants contained in this
Agreement shall have been breached, such that the condition set forth in Section
7.2 would not be satisfied;
(g) by Company (i) if any of Parent's representations and warranties shall
have been inaccurate as of the date of this Agreement, such that the condition
set forth in Section 8.1 would not be satisfied, or (ii) if (A) any of Parent's
representations and warranties shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 8.1 would not be satisfied and (B)
such inaccuracy has not been cured by Parent within 5 business days after its
receipt of written notice thereof and remains uncured at the time notice of
termination is given, or (iii) if any of Parent's covenants contained in this
Agreement shall have been breached, such that the condition set forth in Section
8.2 would not be satisfied;
(h) by Parent if, since the date of this Agreement, there shall have
occurred any Company Material Adverse Effect, or there shall have occurred any
event or circumstance that, in combination with any other events or
circumstances, could reasonably be expected to have a Company Material Adverse
Effect, such that the condition set forth in Section 7.4 would not be satisfied;
(i) by Parent if the satisfaction of any condition in Article 7 is or
becomes impractical and Parent has not waived such condition; or
(j) by Company if, prior to the adoption of this Agreement by the Required
Company Shareholder Vote, (i) the board of directors of Company has received a
Superior Proposal, (ii) in light of such Superior Proposal, the board of
27
directors of Company shall have determined in good faith, after consultation
with its outside legal advisors, that termination of this Agreement is required
in order for the board of directors of Company to comply with its fiduciary
obligations to Company's shareholders under applicable Law, (iii) Company has
complied in all material respects with Section 4.3, (iv) Company pays the
termination fee provided for under Section 9.3(d) and expenses provided for
under Section 9.3(a) prior to termination, and (v) the board of directors of
Company concurrently approves, and Company concurrently enters into, a binding
definitive written agreement providing for the implementation of such Superior
Proposal; provided that Company may not effect such termination pursuant to this
Section 9.1(j) unless and until (i) Parent receives at least three business
days' prior written notice from Company of its intention to effect such
termination pursuant to this Section 9.1(j); and (ii) during such three business
day period, Company shall, and shall cause its advisors to, consider any
adjustments in the terms and conditions of this Agreement that Parent may
propose.
9.2 EFFECT OF TERMINATION
If this Agreement is terminated as provided in Section 9.1, this Agreement
shall be of no further force or effect; provided, however, that (a) this Section
9.2 and Section 9.3 and Article 10 shall survive the termination of this
Agreement and shall remain in full force and effect, and (b) the termination of
this Agreement shall not relieve any party from any Liability for any material
inaccuracy in or breach of any representation or any material breach of any
warranty, covenant or other provision contained in this Agreement.
9.3 EXPENSES; TERMINATION FEES
(a) Except as set forth in this Section 9.3, all fees and expenses incurred
in connection with this Agreement and the Contemplated Transactions shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated; provided, however, that if this Agreement is terminated by Parent
pursuant to Section 9.1(b), (c), (d), (e), (f) or (h) or by Company pursuant to
Section 9.1(b), (d) or (j), then (without limiting any obligation of Company to
pay any fee payable pursuant to Section 9.3(b) or Section 9.3(d)) Company shall
make a nonrefundable cash payment to Parent, at the time specified in Section
9.3(c), in an amount equal to the aggregate amount of all fees and expenses
(including all attorneys' fees, accountants' fees, financial advisory fees and
filing fees) that have been paid or that may become payable by or on behalf of
Parent in connection with the preparation and negotiation of this Agreement and
otherwise in connection with the Merger or any other Contemplated Transaction;
further provided, however, that the amount of the nonrefundable cash fee payable
to Parent may not exceed $500,000, exclusive of fees and expenses (including
reasonable attorneys' fees) that Parent incurs in connection with any Proceeding
challenging or seeking to restrain or prohibit the Merger or any of the
Contemplated Transactions.
(b) If this Agreement is terminated by Parent or Company pursuant to
Section 9.1(d), then (unless Parent is then entitled to receive a fee pursuant
to Section 9.3(d)) Company shall pay to Parent, in cash at the time specified in
Section 9.3(c) (and in addition to the amounts payable by Company pursuant to
Section 9.3(a)), a nonrefundable fee in an amount equal to $1,050,000.
28
(c) In the case of termination of this Agreement by Company pursuant to
Section 9.1(b), (d) or (j), any nonrefundable payment required to be made
pursuant to the proviso to Section 9.3(a) shall be made, and any fee payable
pursuant to Section 9.3(b) shall be paid, by Company prior to the time of such
termination; and in the case of termination of this Agreement by Parent pursuant
to Section 9.1(b), (c), (d), (e), (f) or (h), any nonrefundable payment required
to be made pursuant to the proviso to Section 9.3(a) shall be made, and any fee
payable pursuant to Section 9.3(b) shall be paid, by Company within two business
days after such termination.
(d) If this Agreement is terminated by (i) Parent or Company pursuant to
Section 9.1(b) or (d) and at or prior to the time of the termination of this
Agreement an Acquisition Proposal shall have been disclosed, announced,
commenced, submitted or made, and the transaction described in such Acquisition
Proposal is consummated within 12 months following such termination, (ii) Parent
pursuant to Section 9.1(e), or (iii) Company pursuant to Section 9.1(j), then
Company shall pay to Parent, in cash at the time specified in the next sentence
(and in addition to the amounts payable pursuant to Section 9.3(a)), a
nonrefundable fee in the amount equal to $1,750,000; provided, however, that if
Company (A) receives a Significant Proposal within 30 days of the date of this
Agreement and (B) terminates the Agreement pursuant to Section 9.1(j) before the
earlier of (y) 45 days from the date of this Agreement or (z) the date of
mailing of the proxy statement contemplated pursuant to Section 5.1 in
connection with entering into a written agreement that constitutes a Superior
Proposal and contains terms and conditions that are not materially different
than the terms and conditions of the Significant Proposal, the nonrefundable fee
payable to Parent pursuant to this Section 9.1(d) shall be $1,000,000. In the
case of termination of this Agreement by Company pursuant to Section 9.1(b), (d)
or (j), the fee referred to in the preceding sentence shall be paid by Company
prior to the time of such termination, except that in the case of termination by
Company pursuant to Section 9.1(b) or (d), any termination fee payable pursuant
to Section 9.3(d)(i) shall be paid by Company on the date of consummation of the
acquisition described in such Acquisition Proposal, provided such consummation
occurs within 12 months from the date of termination. In the case of termination
of this Agreement by Parent pursuant to Section 9.1(b), (d) or (e), the fee
referred to in the preceding sentence shall be paid by Company within two
business days after such termination.
(e) If Company fails to pay when due any amount payable under this Section
9.3, then (i) Company shall reimburse Parent for all costs and expenses
(including fees and disbursements of counsel) incurred in connection with the
collection of such overdue amount and the enforcement by Parent of its rights
under this Section 9.3, and (ii) Company shall pay to Parent interest on such
overdue amount (for the period commencing as of the date such overdue amount was
originally required to be paid and ending on the date such overdue amount is
actually paid to Parent in full) at a rate per annum equal to the greater of (i)
4% over the "prime rate" (as published in the Wall Street Journal) in effect on
the date such overdue amount was originally required to be paid or (ii) 8.25%.
29
Article 10
GENERAL PROVISIONS
10.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Company:
Greka Energy Corporation
▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail Address: ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail Address: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
If to Parent or Merger Sub:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇▇-▇▇▇▇
E-mail Address: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
with a copy (which will not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail Address: ▇▇▇▇▇▇.▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
30
10.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement and the Contemplated Transactions.
10.3 INCORPORATION OF SCHEDULES AND EXHIBITS
The Schedules and Exhibits identified in this Agreement, including the
Company Disclosure Schedule and any supplements thereto, are incorporated herein
by reference and made a part of this Agreement.
10.4 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may be amended with the approval of the respective boards of
directors of Company and Parent at any time (whether before or after adoption of
this Agreement by Company's shareholders); provided, however, that after any
such adoption of this Agreement by Company's shareholders, no amendment shall be
made which by Law requires further approval of Company's shareholders without
the further approval of such shareholders. This Agreement may not be amended,
supplemented or otherwise modified except in a written document executed by all
of the parties to this Agreement.
10.5 DISCLOSURE SCHEDULES
The Company Disclosure Schedule will be arranged in Parts corresponding to
the numbered and lettered Sections of Articles 2 and 3, as applicable. Nothing
in the Disclosure Schedules will be adequate to disclose an exception to any
representation or warranty made in Article 2 or Article 3 unless it identifies
the exception with reasonable particularity and describes the facts relating to
such exception in reasonable detail. Without limiting the generality of the
foregoing, the listing or inclusion of a copy of a document or other item will
not be adequate to disclose an exception to any representation or warranty made
in this Agreement unless the representation or warranty relates to the existence
of the document or item itself.
31
10.6 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
10.7 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
10.8 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
10.9 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties;
provided, however, Parent can assign all of its rights and obligations under
this Agreement to any Affiliate of Parent. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon and inure to the
benefit of each party's successors and permitted assigns. Nothing expressed or
referred to in this Agreement will be construed to give any Person, other than
the parties to this Agreement, any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement
except such rights as may inure to a successor or permitted assignee under this
Section and for the provisions of Article 1 (collectively, "Third-Party
Provisions"). The Third-Party Provisions may be enforced by the beneficiaries
thereof.
10.10 ENFORCEMENT OF AGREEMENT
Each Party acknowledges and agrees that the other Party could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with the specific terms and that any breach of this Agreement by
Company could not be adequately compensated in all cases by monetary damages
alone. Accordingly, each Party agrees that, in addition to any other right or
remedy to which the other Party may be entitled, at Law or in equity, the other
Party will be entitled to enforce any provision of this Agreement by a decree of
specific performance and to temporary, preliminary and permanent injunctive
relief to prevent breaches or threatened breaches of any of the provisions of
this Agreement, without posting any bond or other undertaking.
10.11 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
32
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
10.12 GOVERNING LAW
This Agreement will be governed by and construed under the laws of Colorado
without regard to conflicts of laws principles that would require the
application of any other law.
10.13 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or Proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Colorado, County of Denver, or, if it has or can acquire jurisdiction,
in the United States District Court for the District of Colorado. Each of the
parties irrevocably submits to the exclusive jurisdiction of each such court in
any such Proceeding and waives any objection it may now or hereafter have to
venue or to convenience of forum. The parties agree that any or all of them may
file a copy of this Section with any court as written evidence of the knowing,
voluntary and bargained agreement between the parties irrevocably to waive any
objections to venue or to convenience of forum. Process in any Proceeding
referred to in this Section may be served on any party anywhere in the world.
10.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same Agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
[The remainder of this page intentionally left blank]
33
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ALEXI HOLDINGS LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Director
ALEXI CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Authorized Officer
GREKA ENERGY CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Vice President -- Asset Management and
Secretary
34
TABLE OF CONTENTS
Page
Article 1 DESCRIPTION OF TRANSACTION...................................1
1.1 MERGER OF MERGER SUB INTO COMPANY............................1
1.2 EFFECT OF THE MERGER.........................................1
1.3 CLOSING; EFFECTIVE TIME......................................1
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS
AND OFFICERS.................................................2
1.5 CONVERSION OF SHARES.........................................2
1.6 EXCHANGE OF CERTIFICATES.....................................4
1.7 FURTHER ACTION...............................................5
1.8 APPRAISAL RIGHTS.............................................6
Article 2 REPRESENTATIONS AND WARRANTIES OF COMPANY....................6
2.1 ORGANIZATION AND GOOD STANDING...............................6
2.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT.......................7
2.3 CAPITALIZATION...............................................8
2.4 SEC FILINGS; FINANCIAL STATEMENTS............................9
2.5 FINANCIAL STATEMENTS.........................................9
2.6 NO UNDISCLOSED LIABILITES...................................10
2.7 ABSENCE OF CERTAIN CHANGES AND EVENTS.......................10
2.8 LEGAL PROCEEDINGS...........................................12
2.9 RECOMMENDATION OF SPECIAL COMMITTEE AND COMPANY BOARD;
OPINION OF FINANCIAL ADVISOR................................12
2.10 RIGHTS PLAN.................................................13
2.11 ENVIRONMENTAL MATTERS.......................................13
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS.......................14
2.13 COMPLIANCE WITH LAWS; PERMITS...............................14
2.14 TAKEOVER STATUTES NOT APPLICABLE............................14
2.15 BROKERS; FINDERS............................................14
2.16 FULL DISCLOSURE.............................................14
Article 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....15
3.1 ORGANIZATION AND GOOD STANDING..............................15
3.2 AUTHORITY; ENFORCEABILITY; NO CONFLICT......................15
3.3 CAPITALIZATION .............................................16
3.4 NO PRIOR ACTIVITIES.........................................16
3.5 BROKERS; FINDERS............................................16
3.6 FULL DISCLOSURE.............................................16
3.7 DUE DILIGENCE...............................................17
Article 4 CERTAIN COVENANTS OF COMPANY AND PARENT.....................17
4.1 ACCESS AND INVESTIGATION BY PARENT..........................17
4.2 OPERATION OF COMPANY'S BUSINESS.............................17
4.3 NO SOLICITATION.............................................18
i
Article 5 ADDITIONAL COVENANTS OF THE PARTIES.........................20
5.1 PROXY STATEMENT AND SCHEDULE 13E-3..........................20
5.2 COMPANY SHAREHOLDERS' MEETING...............................21
5.3 REASONABLE BEST EFFORTS TO CLOSE ...........................21
5.4 DISCLOSURE..................................................22
5.5 RIGHTS AGREEMENT............................................22
Article 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES..........23
6.1 COMPANY SHAREHOLDER APPROVAL................................23
6.2 NO RESTRAINTS...............................................23
Article 7 CONDITIONS PRECEDENT TO PARENT'S AND MERGER SUB'S
OBLIGATION TO CLOSE.........................................23
7.1 ACCURACY OF REPRESENTATIONS.................................23
7.2 COMPANY'S PERFORMANCE.......................................23
7.3 CONSENTS....................................................24
7.4 NO MATERIAL ADVERSE EFFECT..................................24
7.5 NO PROCEEDINGS..............................................24
7.6 SUCCESSFUL COMPLETION OF PARENT FINANCING...................24
7.7 OFFICER'S CERTIFICATE.......................................24
7.8 DISSENTING SHARES...........................................25
7.9 EXTENSION...................................................25
Article 8 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE.......25
8.1 ACCURACY OF REPRESENTATIONS.................................25
8.2 PARENT'S AND MERGER SUB'S PERFORMANCE.......................25
8.3 CONSENTS....................................................25
8.4 OFFICER'S CERTIFICATE.......................................26
8.5 CONFIRMATION OF AVAILABILITY OF FINANCING...................26
8.6 FEES AND EXPENSES...........................................26
Article 9 TERMINATION.................................................26
9.1 TERMINATION.................................................26
9.2 EFFECT OF TERMINATION.......................................28
9.3 EXPENSES; TERMINATION FEES..................................28
Article 10 GENERAL PROVISIONS..........................................30
10.1 NOTICES.....................................................30
10.2 FURTHER ACTIONS.............................................31
10.3 INCORPORATION OF SCHEDULES AND EXHIBITS.....................31
10.4 ENTIRE AGREEMENT AND MODIFICATION...........................31
10.5 DISCLOSURE SCHEDULES........................................31
10.6 TIME OF ESSENCE.............................................32
10.7 DRAFTING AND REPRESENTATION.................................32
10.8 SEVERABILITY................................................32
ii
10.9 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS...............32
10.10 ENFORCEMENT OF AGREEMENT....................................32
10.11 WAIVER......................................................32
10.12 GOVERNING LAW...............................................33
10.13 JURISDICTION; SERVICE OF PROCESS ...........................33
10.14 COUNTERPARTS................................................33
EXHIBIT A CONSTRUCTION AND DEFINITIONS
EXHIBIT B FORM OF CONFIDENTIALITY AGREEMENT
COMPANY DISCLOSURE SCHEDULE
ii
EXHIBIT A
CONSTRUCTION AND DEFINITIONS
1. CONSTRUCTION
Any reference in the Agreement (as defined below) to an "Article,"
"Section," "Exhibit" or "Schedule" refers to the corresponding Article, Section,
Exhibit or Schedule of or to the Agreement, unless the context indicates
otherwise. The headings of Articles and Sections are provided for convenience
only and should not affect the construction or interpretation of the Agreement.
All words used in the Agreement should be construed to be of such gender or
number as the circumstances require. The terms "include" and "including"
indicate examples of a foregoing general statement and not a limitation on that
general statement. Any reference to a statute refers to the statute, any
amendments or successor legislation and all regulations promulgated under or
implementing the statute, as in effect at the relevant time. Any reference to a
Contract or other document as of a given date means the Contract or other
document as amended, supplemented and modified from time to time through such
date.
2. DEFINITIONS
For the purposes of the Agreement, the following terms and variations on
them have the meanings specified in this Section:
"Acquired Companies" is defined in Section 2.1(a).
"Acquisition Proposal" means any offer, proposal, inquiry or indication of
interest (other than an offer, proposal, inquiry or indication of interest by
Parent) contemplating or otherwise relating to any Acquisition Transaction.
"Acquisition Transaction" means any transaction or series of transactions
involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which any of the Acquired Companies is a
constituent corporation, (ii) in which a Person or "group" (as defined in the
Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires beneficial or record ownership of securities representing
more than 9.9% of the outstanding securities of any class of voting securities
of any of the Acquired Companies, or (iii) in which any of the Acquired
Companies issues or sells securities representing more than 9.9% of the
outstanding securities of any class of voting securities of any of the Acquired
Companies; or
(b) any sale (other than sales of Inventory in the Ordinary Course of
Business), lease (other than in the Ordinary Course of Business), exchange,
transfer (other than sales of Inventory in the Ordinary Course of Business),
license (other than nonexclusive licenses in the Ordinary Course of Business),
acquisition or disposition of any business or businesses or assets that
constitute or account for 9.9% or more of the consolidated net revenues, net
income or assets of the Acquired Companies.
A-1
"Affiliate" of a specified Person means a Person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with, such specified Person.
"Agreement" is defined in the first paragraph of the Agreement.
"Articles of Merger" is defined in Section 1.3.
"Balance Sheet" is defined in Section 2.5.
"CBCA" is defined in Section 1.2.
"Certifications" means all certifications and statements required by (i)
the SEC's Order dated June 27, 2002 pursuant to Section 21(a)(1) of the Exchange
Act (File No. 4-460), (ii) Rule 13a-14 or 15d-14 under the Exchange Act, or
(iii) 18 U.S.C. ss.1350 (Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) with
respect to any report referred to in clause (a) or (b) of the definition of
Company SEC Reports.
"CIBC" is defined in Section 2.9(c).
"Closing" is defined in Section 1.3.
"Closing Date" is defined in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" is defined in the first paragraph of the Agreement.
"Company Board Recommendation" is defined in Section 5.2(b).
"Company Common Stock" means the common stock, no par value per share, of
Company.
"Company Contract" means any Contract (a) under which any Acquired Company
has or may acquire rights, (b) under which any Acquired Company is or may become
subject to Liability or (c) by which any Acquired Company or any of its assets
is or may become bound.
"Company Disclosure Schedule" means the Disclosure Schedule delivered
pursuant to Article 2 by Company to Parent concurrently with the execution and
delivery of the Agreement, together with any updates to it permitted by the
Agreement.
"Company Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that
would constitute exceptions to the representations and warranties set forth in
the Agreement but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) that has had or would reasonably be expected to
have a Material Adverse Effect on (a) the business, condition, capitalization,
assets, liabilities, operations or financial performance of the Acquired
Companies taken as a whole, (b) the ability of Company to consummate the Merger
A-2
or any of the Contemplated Transactions or to perform any of its obligations
under the Agreement or (c) Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
Surviving Corporation; provided, however, that the following shall not be deemed
to constitute, create or cause a Material Adverse Effect: any changes,
circumstances or effects (i) that affect generally the oil and gas industry, and
do not disproportionately affect such Persons, and that result from national,
regional, state or local economic conditions, from general developments or
conditions in the industry in which Company conducts business, from changes in
laws, rules or regulations applicable to such party or its subsidiaries or from
other general economic conditions, facts or circumstances that are not subject
to the control or such party, (ii) that result from the Contemplated
Transactions and public announcement thereof, (iii) that result from any change
in the trading prices or volumes of the capital stock of Company, (iv) that
result from the effects of conditions or events resulting from an outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war or the occurrence of any other
calamity or crisis, including the occurrence of a terrorist attack or (v) that
result from any change resulting from the actions of Parent.
"Company Material Contracts" is defined in Section 2.12.
"Company Rights Agreement" is defined in Section 2.3(f).
"Company SEC Reports" means (a) the Company's Annual Reports on Form 10-K
for each fiscal year of Company beginning since January 1, 2000, (b) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in
each of the fiscal years of Company referred to in clause (a) above, (c) all
proxy statements relating to Company's meetings of shareholders (whether annual
or special) held, and all information statements relating to shareholder
consents, since the beginning of the first fiscal year referred to in clause (a)
above, (d) its Current Reports on Form 8-K filed since the beginning of the
first fiscal year referred to in clause (a) above, and (e) all other forms,
reports, registration statements and other documents (other than preliminary
materials if the corresponding definitive materials have been provided to Parent
pursuant to Section 2.4) filed by Company with the SEC since the beginning of
the first fiscal year referred to in clause (a) above.
"Company Stock Certificate" means any validly issued certificate
representing shares of the Company Common Stock.
"Company Stock Options" is defined in Section 1.5(e).
"Company Shareholders' Meeting" is defined in Section 5.2(a).
"Company Triggering Event" means (a) approval, endorsement or
recommendation by the board of directors of Company of any Acquisition Proposal,
(b) the failure of Company to comply with Section 5.2, (c) the withdrawal or
modification of the Company Board Recommendation pursuant to Section 5.2(c), (d)
commencement of a tender or exchange offer relating to securities of Company and
the failure of Company to send to its security holders, within 10 business days
after the commencement of such tender or exchange offer, a statement disclosing
that the board of directors recommends rejection of such tender or exchange
offer, (e) the public announcement of an Acquisition Proposal, and the failure
A-3
of Company to issue a press release announcing its opposition to such
Acquisition Proposal within 10 business days after such Acquisition Proposal is
announced or (f) the breach of, or the taking of any action inconsistent with
any of the provisions set forth in, Section 4.3 by any of the Acquired Companies
or any Representative of any of the Acquired Companies.
"Consent" means any approval, consent, ratification, waiver or other
authorization.
"Contemplated Transactions" means all of the transactions to be carried out
in accordance with the Agreement, including the merger of Merger Sub with and
into Company, the performance by the parties of their other obligations under
the Agreement.
"Contract" means any (i) contract, agreement, commitment, understanding,
lease, license, franchise, warranty, guaranty, mortgage, note, bond or other
instrument or consensual obligation (whether written or oral and whether express
or implied) that is legally binding or (ii) any letter of intent or expression
of interest that evidences an intent or desire to enter into an arrangement
described in clause (i).
"Contravene" or "Contravention" -- an act or omission would "Contravene"
something if, as the context requires:
(a) the act or omission would conflict with it, violate it, result in
a breach or violation of or failure to comply with it, or constitute a default
under it;
(b) the act or omission would give any Governmental Body or other
Person the right to challenge, revoke, withdraw, suspend, cancel, terminate or
modify it, to exercise any remedy or obtain any relief under it or to declare a
default or accelerate the maturity of any obligation under it; or
(c) the act or omission would result in the creation of an Encumbrance
on the stock or any of the assets of any of the Acquired Companies.
"Dissenting Shares" is defined in Section 1.8.
"Effective Time" is defined in Section 1.3.
"Encumbrance" means any charge, claim, mortgage, servitude, easement, right
of way, community or other marital property interest, covenant, equitable
interest, license, lease or other possessory interest, lien, option, pledge,
security interest, preference, priority, right of first refusal or similar
restriction; provided, however, that the term "Encumbrance" does not include (a)
mechanic's, materialman's or similar liens with respect to amounts arising or
incurred in the Ordinary Course of Business, (b) statutory liens for current
Taxes not yet delinquent or the amount or validity of which is being contested
in good faith by appropriate Proceedings, (c) liens securing rental payments
under capital lease arrangements, (d) defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance or zoning, entitlement and other land use and environmental
regulations by any Governmental Body and (e) such other imperfections in title,
charges, easements, restrictions and encumbrances which do not materially
detract from the value of or materially interfere with the present use of any
property subject thereto or affected thereby.
A-4
"Entity" means any corporation, general partnership, limited liability
company, limited partnership, limited liability partnership, joint venture,
estate, trust, company, firm, society or other enterprise, association or
organization.
"Environment" means the soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative Proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions required by applicable Environmental Law or Occupational Safety and
Health Law (whether or not such cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended.
"Environmental Law" means any Law that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
A-5
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" is defined in Section 1.6(a).
"Exchange Fund" is defined in Section 1.6(a).
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
"GAAP" means generally accepted accounting principles for financial
reporting in the United States.
"Governing Document" means any charter, articles, bylaws, certificate,
statement, statutes or similar document adopted, filed or registered in
connection with the creation, formation or organization of an Entity, and any
Contract among all equityholders, partners or members of an Entity.
"Governmental Authorization" means any Consent, license, permit or
registration issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Law.
"Governmental Body" means any (a) nation, region, state, county, city,
town, village, district or other jurisdiction, (b) federal, state, local,
municipal, foreign or other government, (c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department
or other Entity and any court or other tribunal), (d) multinational
organization, (e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, policy, regulatory or taxing authority or
power of any nature or (f) official of any of the foregoing.
A-6
"Hazardous Materials" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Knowledge" means, with respect to any Party, the actual knowledge after
reasonable investigation of any of such Party's directors or officers.
"Law" means any constitution, law, statute, treaty, rule, regulation,
ordinance, code, binding case law, principle of common law or notice of any
Governmental Body.
"Liabilities" includes liabilities or obligations of any nature, whether
known or unknown, whether absolute, accrued, contingent, ▇▇▇▇▇▇, inchoate or
otherwise, whether due or to become due, and whether or not required to be
reflected on a balance sheet prepared in accordance with GAAP.
"Merger" is defined in the Preliminary Statements.
"Merger Consideration" is defined in Section 1.5(a).
"Merger Sub" is defined in the first paragraph of the Agreement.
"Merger Sub Common Stock" means the common stock, no par value per share,
of Merger Sub.
"Occupational Safety and Health Law" means any Law designed to provide safe
and healthful working conditions and to reduce occupational safety and health
hazards, and any program, whether governmental or private (such as those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Off-Balance Sheet Arrangement" means with respect to any Person, any
securitization transaction to which that Person or its Subsidiaries is party and
any other transaction, agreement or other contractual arrangement to which an
entity unconsolidated with that Person is a party, under which that Person or
its Subsidiaries, whether or not a party to the arrangement, has, or in the
future may have: (a) any obligation under a direct or indirect guarantee or
similar arrangement; (b) a retained or contingent interest in assets transferred
to an unconsolidated entity or similar arrangement; (c) derivatives to the
extent that the fair value thereof is not fully reflected as a liability or
asset in the financial statements; or (d) any obligation or liability, including
a contingent obligation or liability, to the extent that it is not fully
reflected in the financial statements (excluding the footnotes thereto) (for
this purpose, obligations or liabilities that are not fully reflected in the
financial statements (excluding the footnotes thereto) include, without
limitation: obligations that are not classified as a liability according to
A-7
GAAP; contingent liabilities as to which, as of the date of the financial
statements, it is not probable that a loss has been incurred or, if probable, is
not reasonably estimable; or liabilities as to which the amount recognized in
the financial statements is less than the reasonably possible maximum exposure
to loss under the obligation as of the date of the financial statements, but
exclude contingent liabilities arising out of litigation, arbitration or
regulatory actions (not otherwise related to off-balance sheet arrangements)).
"Option Plans" is defined in Section 1.5(e).
"Options" is defined in Section 2.3.
"Order" means any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator, and any Contract
with any Governmental Body pertaining to compliance with Law.
"Ordinary Course of Business" refers to actions taken in Company's normal
operation, consistent with its past practice and having no Company Material
Adverse Effect.
"Parent" is defined in the first paragraph of the Agreement.
"Parent Common Stock" means the common stock, $0.01 par value per share, of
Parent.
"Parent Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that
would constitute exceptions to the representations and warranties set forth in
the Agreement but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) that has had or would reasonably be expected to
have a Material Adverse Effect on (a) the business, condition, capitalization,
assets, Liabilities, operations or financial performance of Parent and its
Subsidiaries taken as a whole, or (b) the ability of Parent to consummate the
Merger or any of the Contemplated Transactions or to perform any of its
obligations under the Agreement; provided, however, that the following shall not
be deemed to constitute, create or cause a Material Adverse Effect: any changes,
circumstances or effects (i) that affect generally the oil and gas industry, and
do not disproportionately affect such Persons, and that result from national,
regional, state or local economic conditions, from general developments or
conditions in the industry in which Parent conducts business, from changes in
laws, rules or regulations applicable to such party or its subsidiaries or from
other general economic conditions, facts or circumstances that are not subject
to the control or such party, (ii) that result from the Contemplated
Transactions and public announcement thereof, (iii) that result from any change
in the trading prices or volumes of the capital stock of Parent; (iv) that
result from the effects of conditions or events resulting from an outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war or the occurrence of any other
calamity or crisis, including the occurrence of a terrorist attack; or (v) that
result from any change resulting from the actions of Company.
"Party" means Company, Parent or Merger Sub.
"Permits" is defined in Section 2.13.
"Person" refers to an individual or an Entity.
A-8
"Pre-Closing Period" is defined in Section 4.1.
"Proceeding" means any action, arbitration, audit, examination,
investigation, hearing, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, and
whether public or private) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Proxy Statement" means the proxy statement to be sent to Company's
shareholders in connection with the Company Shareholders' Meeting.
"reasonable best efforts" means the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to achieve that result
as expeditiously as possible; provided, however, that a Person required to use
reasonable best efforts under the Agreement will not be required to make any
material change to its business, dispose of any material asset, expend material
funds, incur any material burden or take actions that would result in a material
adverse change in the benefits to such Person of the Agreement and the
Contemplated Transactions.
"Representative" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, legal counsel, accountant or
other representative of that Person.
"Required Company Shareholder Vote" means the affirmative vote in favor of
the Agreement and the Merger of a majority of the issued and outstanding shares
of Company Common Stock entitled to vote on the matter.
"Rights" means any outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of Company.
"SEC" means the United States Securities and Exchange Commission.
"Secretary of State" is defined in Section 1.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Schedule 13E-3" means the Statement on Schedule 13E-3 to be filed by
Company and Parent concurrently with the filing of the Proxy Statement pursuant
to the Exchange Act, together with any amendments or supplements thereto.
"Significant Proposal" means an unsolicited bona fide written proposal made
by a third party to purchase all of the outstanding Company Common Stock on
terms that the board of directors of Company determines, in its reasonable
judgment, (a) to be more favorable from a financial point of view to Company's
shareholders than the terms of the Merger, and (b) is reasonably capable of
being consummated.
A-9
"Special Committee" means that committee of independent directors
established by Company's Board of Directors to evaluate the fairness of the
Agreement and the Contemplated Transactions to Company's shareholders.
"Subsidiary" of any Entity means any Entity of which such Entity directly
or indirectly owns or has a right to acquire, beneficially or of record, (a) an
amount of voting securities of other interests in such Entity that is sufficient
to enable the Entity owning the securities to elect at least a majority of the
members of such Entity's board of directors or other governing body, or (b) at
least 50% of the outstanding equity or financial interests of such Entity.
"Superior Proposal" means an unsolicited, bona fide written offer made by a
third party to purchase all of the outstanding Company Common Stock not owned by
the third party on terms that the board of directors of Company (excluding
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇) determines, in its reasonable judgment, (a) after receipt of
a written opinion of an independent financial advisor of nationally recognized
reputation, to be more favorable from a financial point of view to Company's
shareholders than the terms of the Merger, taking into account, among other
things, financing requirements, timing of the closing of the proposed purchase,
and regulatory and other approvals, and (b) is reasonably capable of being
consummated; provided, however, that any such offer shall not be deemed to be a
"Superior Proposal" if any financing required to consummate the transaction
contemplated by such offer is not committed and is not reasonably capable of
being obtained by such third party.
"Surviving Corporation" is defined in Section 1.1.
"Tax" or "Taxes" means all federal, state, local, foreign and other taxes,
charges, fees, duties (including customs duties), levies or assessments,
including income, gross receipts, net proceeds, alternative or add-on minimum,
ad valorem, turnover, real and personal property (tangible and intangible),
sales, use, franchise, excise, value added, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational, interest equalization, windfall
profits, severance, license, payroll, environmental, capital stock, disability,
employee's income withholding, other withholding, unemployment and social
security taxes, that are imposed by any Governmental Body, and including any
interest, penalties or additions to tax attributable thereto.
"Tax Return" means any report, return or other information required to be
supplied to a Governmental Body in connection with any Taxes.
"Third-Party Provisions" is defined in Section 10.9.
A-10
EXHIBIT B
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the "Agreement") is dated ________ and is
by and between Greka Energy Corporation, a Colorado corporation (the "Company"),
and ___________________________, a _________corporation (the "Investigating
Party").
PRELIMINARY STATEMENT
The Investigating Party has requested access to certain information,
properties and personnel of the Company and its subsidiaries (collectively, the
"Disclosing Party") in connection with the negotiation of a possible transaction
(the "Transaction").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1 CONFIDENTIAL INFORMATION
1.1 "Confidential Information" means all non-public information of the
Disclosing Party disclosed or made available to the Investigating Party or
any of its directors, officers, employees, agents, consultants, advisors,
legal counsel or accountants (collectively, "Representatives"), regardless
of the form or manner of disclosure, including without limitation:
(a) all information relating to the Disclosing Party's trade secrets
(including all information that applicable law defines as "trade secrets");
(b) all information concerning products, product specifications, data,
formulae, compositions, designs, sketches, photographs, graphs, drawings,
samples, inventions, discoveries, ideas, know-how, past, current, and planned
research and development, current and planned methods and processes, client or
customer lists and files, current and anticipated client or customer
requirements, vendor and supplier lists and files, price lists, market studies,
business plans and business opportunities;
(c) all information concerning software that was developed or modified by
or for the Disclosing Party (including object and source codes), databases, data
modules or structures, algorithms and computer system architectures;
(d) all information concerning the Disclosing Party's business and affairs,
assets, liabilities, historical and current financial statements, financial
projections and budgets, historical, current and projected sales, capital
spending budgets, forecasts, strategic plans, marketing and advertising plans,
publications, agreements, the names and backgrounds of key personnel, personnel
training techniques and materials and the names, contact information and any
other information relating to an identified or identifiable natural person;
B-1
(e) all third-party confidential information in the possession of the
Disclosing Party; and
(f) all notes, analyses, compilations, studies, summaries, interpretations
and other material prepared by the Investigating Party or its Representatives to
the extent they contain, are based on or refer to any information described in
(i) through (v) above (collectively, "Notes").
1.2 The term Confidential Information does not include any portions of such
information:
(a) that become generally available to the public, other than as a result
of disclosure by the Investigating Party or any of its Representatives; or
(b) that becomes available to the Investigating Party on a non-confidential
basis from a source (other than the Disclosing Party or its Representatives)
which, to the Investigating Party's knowledge after due inquiry, is not
prohibited from disclosing such information to the Investigating Party by a
legal, contractual or fiduciary obligation to the Disclosing Party.
1.3 Any trade secrets of the Disclosing Party will also be entitled to all of
the protections and benefits under applicable trade secrets law and any
other applicable law. If any information that the Disclosing Party deems to
be a trade secret is found by a court of competent jurisdiction not to be a
trade secret for purposes of this Agreement, the information nonetheless
will be considered Confidential Information for purposes of this Agreement
unless it falls within the exception described in Section 1(b).
ARTICLE 2 RESTRICTED USE AND NONDISCLOSURE
2.1 The Investigating Party agrees that the Investigating Party and its
Representatives (i) will keep the Confidential Information confidential and
(ii) without limiting the foregoing, will not disclose the Confidential
Information to any person (including current or prospective financing
sources) except with the specific prior written consent of ▇▇▇▇▇ ▇▇▇▇▇▇,
the Company's Vice President - Asset Management (the "Disclosing Party
Contact") or except as expressly otherwise permitted by the terms of this
Agreement or a Definitive Agreement (as defined in Section 9). It is
understood that the Investigating Party may disclose Confidential
Information only to those of the Investigating Party's Representatives who
require such material for the purpose of evaluating the Transaction (but to
the extent practicable, only the part that is so required and without
revealing the possible Transaction), and who are informed by the
Investigating Party of the confidential nature of the Confidential
Information and the obligations of this Agreement. The Investigating Party
and its Representatives will not use any of the Confidential Information
for any reason or purpose other than to evaluate and negotiate the
Transaction.
B-2
2.2 The Investigating Party will enforce the terms of this Agreement as to its
Representatives and will take all steps (including all action the
Investigating Party would take to protect its own trade secrets and
confidential information) necessary to cause them to comply with this
Agreement and thereby prevent their disclosure of the Confidential
Information, except as permitted by this Agreement. If an unauthorized use
or disclosure occurs, the Investigating Party will immediately notify the
Disclosing Party and take, at the Investigating Party's expense, all steps
(including available actions for seizure and injunctive relief) necessary
to recover the Confidential Information and prevent its subsequent
unauthorized use or dissemination. If the Investigating Party fails to take
these steps in a timely and adequate manner, the Disclosing Party may take
them in its own or in the Investigating Party's name and at the
Investigating Party's expense.
ARTICLE 3 NONDISCLOSURE OF TRANSACTION
Except as expressly permitted by a Definitive Agreement, neither the
Investigating Party nor its Representatives will, without prior written consent
of a Disclosing Party Contact, disclose to any person (including another
prospective purchaser who has been provided Confidential Information) the terms
or existence of this Agreement, the fact that the Confidential Information has
been made available to the Investigating Party or the Investigating Party's
Representatives, the fact that discussions or negotiations are taking place
concerning a Transaction, or any of the terms, conditions, or other facts with
respect thereto; provided, however, that the Investigating Party and its
Representatives may disclose such information to those of the Investigating
Party's Representatives who require such information for purposes of assisting
with the Transaction.
ARTICLE 4 LEGAL COMPULSION TO DISCLOSE CONFIDENTIAL INFORMATION
If the Investigating Party or any of its Representatives become legally
compelled (including pursuant to any rule or regulation promulgated by any
securities regulation authority or any securities exchange) to make any
disclosure that is prohibited or otherwise constrained by this Agreement, then
the Investigating Party or such Representative, as the case may be, will give
the Company immediate written notice of such requirement so that it may seek a
protective order or other appropriate relief, or waive compliance with the
nondisclosure provisions of this Agreement. Subject to the foregoing, the
B-3
Investigating Party or such Representative may make only such disclosure that,
in the written opinion of counsel reasonably acceptable to the Company, it is
legally compelled or otherwise required to make to avoid standing liable for
contempt or suffering other material censure or penalty; provided, however, that
the Investigating Party and its Representatives must use reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded any
Confidential Information so disclosed.
ARTICLE 5 DISCLOSING PARTY CONTACT
The Company will determine, in its sole discretion, what information,
properties and personnel it wishes to make available to the Investigating Party.
All requests by the Investigating Party or its Representatives for Confidential
Information, meetings with Disclosing Party personnel or Representatives,
inspections of Disclosing Party properties, and discussions or questions
regarding procedures will be made exclusively to the Disclosing Party Contact.
The Investigating Party and its Representatives will not initiate any
communications with any director, officer or employee of the Disclosing Party
(other than a Disclosing Party Contact) without the prior written consent of a
Disclosing Party Contact.
ARTICLE 6 EMPLOYEES
For a period of two years after the date of this Agreement, neither the
Investigating Party nor its Representatives will (a) induce or attempt to induce
any employee to leave the employ of the Disclosing Party, (b) hire, retain or
attempt to hire or retain any employee of the Disclosing Party or (c) in any way
interfere with the relationship between the Disclosing Party and any of its
employees. Notwithstanding the foregoing, this Section will not prohibit the
Investigating Party from making general employment solicitations not
specifically directed at the Disclosing Party's employees, or hiring them as a
result of such solicitations.
ARTICLE 7 RETURN OF CONFIDENTIAL INFORMATION
If either party notifies the other party that it does not wish to proceed
with the Transaction, then the Investigating Party will within five business
days of such notification (a) deliver to a Disclosing Party Contact all
documents and other materials constituting Confidential Information, other than
Notes, in the possession or under the control of the Investigating Party or the
Investigating Party's Representatives, and (b) destroy all Notes, without
retaining a copy of any such material. Alternatively, if a Disclosing Party
Contact so requests or gives prior written consent to the Investigating Party's
request, the Investigating Party will destroy all documents and other materials
constituting Confidential Information in the possession or under the control of
the Investigating Party or the Investigating Party's Representatives, including
all copies that are stored in an electronic or other medium and are retrievable
in perceivable form. An appropriate officer of the Investigating Party must
certify any such destruction to the Company in writing, and a list of the
destroyed documents and materials must accompany the certification.
ARTICLE 8 ATTORNEY WORK PRODUCT AND ATTORNEY-CLIENT PRIVILEGE
The Investigating Party acknowledges that the Disclosing Party may be
entitled to the protections of the attorney work-product doctrine,
attorney-client privilege or similar protections or privileges with respect to
certain of the Confidential Information. The Disclosing Party is not waiving,
and will not be deemed to have waived or diminished, any of its attorney
work-product protections, attorney-client privileges or similar protections or
B-4
privileges as a result of the disclosure of such Confidential Information to the
Investigating Party in connection with the Transaction. The parties (a) share a
common legal and commercial interest in such Confidential Information, (b) are
or may become joint defendants in proceedings to which such Confidential
Information relates, and (c) intend that such protections and privileges remain
intact should either party become subject to any actual or threatened proceeding
to which such Confidential Information relates. In furtherance of the foregoing,
the Investigating Party will not claim or contend, in proceedings involving
either party, that the Disclosing Party waived the protections of the attorney
work-product doctrine, attorney-client privilege or similar protections or
privileges as a result of the disclosure of Confidential Information to the
Investigating Party in connection with the Transaction.
ARTICLE 9 NO OBLIGATION TO NEGOTIATE DEFINITIVE AGREEMENT
The Company and its directors and shareholders reserve the right, in their
sole discretion, to reject any and all proposals made by the Investigating Party
or the Investigating Party's Representatives with regard to a Transaction and to
terminate discussions and negotiations with the Investigating Party and the
Investigating Party's Representatives at any time. No contract providing for a
Transaction will be deemed to exist unless and until a definitive agreement, if
any, with respect to a Transaction (a "Definitive Agreement") has been executed
and delivered, and the parties waive any claims (including breach of contract
claims, but excluding all claims directly or indirectly based on this Agreement)
in connection with a Transaction unless and until they or, in the case of the
Company, its shareholders enter into a Definitive Agreement. Neither the parties
to this Agreement nor their respective Representatives and shareholders have any
legal obligation of any kind with respect to a Transaction by virtue of this
Agreement, except to the extent explicitly set forth herein.
ARTICLE 10 NO REPRESENTATIONS OR WARRANTIES
Neither the Disclosing Party nor its Representatives make any
representation or warranty (express or implied) concerning the completeness or
accuracy of the Confidential Information, except pursuant to representations and
warranties that may be made to the Investigating Party in a Definitive Agreement
if, when, and as executed and subject to such limitations and restrictions as
may be specified therein. The Investigating Party also agrees that if the
Investigating Party determines to engage in a Transaction, the Investigating
Party's determination will be based solely on the terms of such Definitive
Agreement and on the Investigating Party's own investigation, analysis, and
assessment of the business to be acquired.
ARTICLE 11 COMPLIANCE WITH SECURITIES LAWS
The Investigating Party is aware, and its Representatives who are apprised
of the Transaction will be advised, that the securities laws of the United
States prohibit any person who has material, non-public information concerning
the Disclosing Party from purchasing or selling securities in reliance upon such
information or from communicating such information to any other person or entity
under circumstances in which it is reasonably foreseeable that such person or
entity is likely to purchase or sell such securities in reliance upon such
information.
B-5
ARTICLE 12 STANDSTILL
For a period of two years from the date of this Agreement, neither the
Investigating Party nor its Representatives or affiliates will in any manner,
directly or indirectly:
12.1 effect or seek, offer or propose (whether publicly or otherwise) to effect,
or cause, participate in or in any way assist any other person to effect or
seek, offer or propose (whether publicly or otherwise) to effect (i) any
acquisition of any securities (or beneficial ownership thereof) or assets
of the Disclosing Party or any of its affiliates; (ii) any tender or
exchange offer or merger or other business combination involving the
Disclosing Party or any of its affiliates; (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction
with respect to the Disclosing Party or any of its affiliates; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of
the United States Securities and Exchange Commission) or consents to vote
any voting securities of the Disclosing Party;
12.2 form, join or in any way participate in a "group" (as defined under the
Securities Exchange Act of 1934, as amended);
12.3 otherwise act, alone or in concert with others, to seek control of or
influence the management, board of directors or policies of the Disclosing
Party;
12.4 make any public announcements or take any action that might force the
Disclosing Party to make a public announcement regarding any of the types
of matters set forth above; or
12.5 enter into any discussions or arrangements with any third party with
respect to any of the foregoing;
unless the Investigating Party has been specifically invited to do so in writing
by the special committee of the board of directors of the Disclosing Party.
During such period, neither the Investigating Party nor its Representatives will
request, directly or indirectly, that the Disclosing Party (or its
Representatives) amend or waive any provision of this Section (including this
sentence).
ARTICLE 13 DATA PROTECTION AND PRIVACY RESTRICTIONS
The Investigating Party will inform itself about and observe all applicable
data protection and/or privacy requirements in any jurisdiction in which the
Confidential Information is located and any other relevant jurisdictions. The
B-6
Investigating Party will also implement and maintain all such technical and
organizational security measures as may be reasonably available (having regard
to technical developments at the time) and as are appropriate in the
circumstances to protect Confidential Information against unauthorized or
unlawful processing, accidental loss, distribution or damage. In addition, in
the event that any Confidential Information is located in a jurisdiction that
restricts the transfer of such information to other countries or locations, the
Investigating Party will maintain such information within that jurisdiction
only, and will not transfer it to any other country or location in a manner that
violates such restrictions. The Investigating Party will indemnify and hold the
Disclosing Party harmless for any damage or expense (including legal fees and
costs) resulting from the Investigating Party's contravention or other violation
of any applicable data protection and/or privacy laws.
ARTICLE 14 REMEDIES
The Investigating Party acknowledges that the Disclosing Party would be
damaged irreparably if any of the provisions of this Agreement are not performed
in accordance with the specific terms, that the Disclosing Party would encounter
extreme difficulty in attempting to prove the actual amount of damages suffered
by it as a result of the Investigating Party's breach and that any breach of
this Agreement by the Investigating Party would not be adequately compensated by
monetary damages alone. Accordingly, the Investigating Party agrees that, in
addition to any other right or remedy to which the Disclosing Party may be
entitled at law or in equity, the Disclosing Party will be entitled to enforce
any provision of this Agreement by a decree of specific performance and to
temporary, preliminary and permanent injunctive relief to prevent any breach or
threatened breach of this Agreement, without posting any bond or other security
and without the necessity of proving the amount of any actual damage to the
Disclosing Party resulting therefrom. In addition, the Investigating Party will
indemnify and hold the Disclosing Party and its stockholders harmless from any
damages, loss, cost or liability (including legal fees and the cost of enforcing
this indemnity) arising out of or resulting from the Investigating Party's
breach of the terms of this Agreement or any other unauthorized use or
disclosure by the Investigating Party or its Representatives of the Confidential
Information. The Company's subsidiaries and other affiliates constituting a
Disclosing Party have the right to enforce all indemnity obligations of
Investigating Party under this Agreement independently of the Company. The
rights and remedies of the parties to this Agreement are cumulative and not
alternative.
ARTICLE 15 NOTICE
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by a nationally recognized
overnight courier service (cost prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses or facsimile numbers and marked to the
attention of the individual (by name or title) designated below (or to such
other address, facsimile number or individual as a party may designate by notice
to the other parties):
B-7
Greka Energy Corporation
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail Address: ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
____________________
Attention:
Address:
Facsimile No.:
E-mail Address:
ARTICLE 16 ENTIRE AGREEMENT
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes a complete and exclusive statement
of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended, supplemented or otherwise modified
except by a written agreement executed by the party to be charged with the
modification.
ARTICLE 17 SEVERABILITY
If any court of competent jurisdiction holds any provision of this
Agreement invalid or unenforceable, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
ARTICLE 18 WAIVER
Neither any failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power or privilege.
ARTICLE 19 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS
19.1 This Agreement will be governed by and construed under the laws of the
State of Texas without regard to conflicts of law principles that would
require application of any other law.
19.2 Any action or proceeding arising out of or relating to this Agreement may
be brought in the courts of the State of Colorado, County of Denver or, if
it has or can acquire jurisdiction, in the United States District Court for
the District of Colorado, and each of the parties irrevocably submits to
the jurisdiction of each such court in any such action or proceeding and
waives any objection it may now or hereafter have to venue or convenience
of forum. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
B-8
ARTICLE 20 COSTS
Each party will bear its own expenses incurred in connection with pursuing
or consummating the Transaction, including any broker's or finder's fees and all
fees and expenses of its Representatives.
ARTICLE 21 COUNTERPARTS
This Agreement may be executed in two or more counterparts.
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence.
Greka Energy Corporation
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
B-9
