<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1998
---------------
HARCOR ENERGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-9300 33-0234380
- -------------------------------------------------------------------------------
(Commission File Number) (IRS Employer I.D. No.)
Five Post Oak Park, Suite 2220
4400 Post Oak Park
Houston, TX 77027-3416
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 961-1804
--------------
<PAGE> 2
Item 5. Other Events
On March 31, 1998 HarCor Energy, Inc. (the "Registrant" and the
"Company") announced that it had executed a definitive merger agreement with
Seneca Resources Corporation ("Seneca") for the sale of the Company to Seneca
for a total cash price of $32,536,000 or $2 per share of the Company common
stock. Under the terms of the Agreement, a subsidiary of Seneca will make a
tender offer for all the outstanding shares of Company common stock for a price
of $2.00 per share in cash. Flowing completion of the tender offer, the Seneca
subsidiary will merge with the Company, pursuant to which the remaining Company
stockholders will also receive $2.00 per share in cash. The purpose of this
Form 8-K Current Report is to file as exhibits, a copy of the joint news
release dated March 31, 1998 of Seneca and the Company announcing the execution
of the definitive agreement and a copy of the definitive agreement between the
Company and Seneca.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 News release dated March 31, 1998 announcing the execution
of the Agreement and Plan of Merger with Seneca Resources
Corporation for the sale of the Company to Seneca.
99.2 Agreement and Plan of Merger dated as of March 31, 1998
between the Company and Seneca Resources Corporation.
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<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HarCor Energy, Inc.
--------------------------
(Registrant)
Date: March 31, 1998
/s/ Gary S. Peck
---------------------------
Gary S. Peck
Vice President, Finance
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<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
MARCH 31, 1998
CONTACT: MARK HARRINGTON, CHAIRMAN
FRANCIS ROTH, PRESIDENT
FRAN REEDER, INVESTOR RELATIONS
SENECA RESOURCES CORPORATION AND
HARCOR ENERGY, INC. ANNOUNCE
EXECUTION OF MERGER AGREEMENT
Houston, Texas, March 31, 1998 -- Seneca Resources Corporation, the
exploration and production subsidiary of National Fuel Gas Company (NYSE:
NGF), and HarCor Energy, Inc. (NASDAQ NMS: HARC) today jointly announced that
the two companies have signed a definitive merger agreement for the acquisition
of HarCor by Seneca for a total price of approximately $32.5 million in cash.
Under the terms of the agreement, a subsidiary of Seneca will commence
a tender offer no later than April 6, 1998, to acquire all of the outstanding
shares of HarCor's Common Stock for $2.00 per share in cash. Following
completion of the tender offer, the Seneca subsidiary will merge with HarCor,
pursuant to which the remaining HarCor stockholders will also receive $2.00 per
share in cash.
Chase Mellon Shareholder Services, LLC will act as Information Agent
for the tender offer. SBC Warburg Dillon Read Inc. served as financial advisor
to HarCor and has provided a fairness opinion in connection with the
transaction.
HarCor is a Houston-based independent oil and gas company with
properties located primarily on the west side of the San Joaquin Basin in Kern
County, California. The properties produce gas and high gravity oil and
provide for additional drilling and development over the next four years.
According to James Beck, President of Seneca Resources, "The
acquisition of HarCor will establish Seneca as a significant independent
producer in California. These reserves, combined with our activity in the Gulf
of Mexico and Appalachian Basin, provide the groundwork for our future growth."
National Fuel Gas Company is an integrated energy company with
operations in all segments of the natural gas industry, including utility,
pipeline and storage, exploration and production, and marketing operations.
Seneca is headquartered in Houston and explores for and produces natural gas
and oil in the lower 48 States and the Gulf of Mexico.
The tender offer and merger are subject to customary conditions,
including the tender of a majority of HarCor's shares and the occurrence of no
material adverse change in HarCor prior to the closing. The tender offer will
be made pursuant to definitive documents to be filed with the Securities and
Exchange Commission.
Statements contained in this press release which are not historical
facts are forward-looking statements. Such forward-looking statements are
necessary estimates reflecting the best judgment of the party making such
statements based upon current information and involve a number of risk and
uncertainties. Forward-looking statements contained in this press release or
in other public statements of the parties should be considered in light of
those factors. There can be no assurance that such factors or other factors
will not affect the accuracy of such forward-looking statements.
<PAGE> 1
EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
among
HARCOR ENERGY, INC.
and
SENECA WEST CORP.
and
SENECA RESOURCES CORPORATION
Dated as of March 31, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE OFFER
<S> <C>
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Stockholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Consideration; Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Options and Other Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 Company Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.14 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 SEC Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Schedule 14D9; Offer Documents and Company Proxy Statement . . . . . . . . . . . . . . . . . . . . . 11
3.8 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Permits; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
<S> <C>
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 Offer Documents; Company Proxy Statement; Schedule 14D9 . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Financing; Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.8 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.9 Operations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
COVENANTS
5.1 Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Notice of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Company Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.10 D&O Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . . . . 31
6.2 Conditions Precedent to the Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . 31
6.3 Conditions Precedent to the Obligations of Parent and Purchaser . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
TERMINATION
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VIII
MISCELLANEOUS
<S> <C> <C>
8.1 No Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of March 31, 1998 by and among
HarCor Energy, Inc., a Delaware corporation (the "Company"), Seneca Resources
Corporation, a Pennsylvania corporation ("Parent"), and Seneca West Corp., a
Delaware corporation and wholly owned indirect subsidiary of Parent
("Purchaser").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Parent and
Purchaser have unanimously approved the acquisition of the Company by Parent,
upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished by
Purchaser commencing a cash tender offer for Shares (as defined in Section 1.1)
to be followed by a merger of Purchaser with and into the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days following the public announcement of the execution hereof),
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase
all of the Company's outstanding shares of common stock, par value $0.10 per
share (the "Shares"), at a price of $2.00 per Share, net to the seller in cash
(as such offer may be amended in accordance with the terms of this Agreement,
the "Offer"), subject to the conditions set forth in Annex A hereto. Purchaser
will not, without the prior written consent of the Company, (i) decrease or
change the form of the consideration payable in the Offer, (ii) decrease the
number of Shares sought pursuant to the Offer, (iii) impose additional
conditions to the Offer, (iv) change the conditions to the Offer, except that
Parent in its sole discretion may waive any of the conditions to the Offer
other than the condition set forth in clause (1) of Annex A, which may not be
waived without the Company's prior written consent, or (v) make any other
change in the terms or conditions of the Offer that is adverse to the holders
of Shares. Purchaser will, on the terms and subject to the prior satisfaction
or waiver of the conditions to the Offer, accept for payment and pay for all
Shares validly tendered and not withdrawn pursuant to the Offer promptly after
expiration of the Offer; provided that, Purchaser may extend the Offer up to
the tenth business day after the later of (i) the initial expiration date of
the Offer and (ii) the date on which all such conditions shall first have been
satisfied or waived. The Company agrees that no Shares held by the Company
will be tendered to Parent pursuant to the Offer; provided, that Shares held
beneficially or of record by any
<PAGE> 6
plan, program or arrangement sponsored or maintained for the benefit of
employees of the Company shall not be deemed to be held by the Company,
regardless of whether the Company has, directly or indirectly, the power to
vote or control the disposition of such Shares. The obligations of Purchaser
to commence the Offer and to accept for payment and to pay for Shares validly
tendered on or prior to the expiration of the Offer and not withdrawn shall be
subject only to the conditions set forth in Annex A hereto.
(b) On the date of commencement of the Offer, Parent and Purchaser
shall file or cause to be filed with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments thereto, the "Schedule 14D-1") with respect to the Offer, which
shall contain the offer to purchase and related letter of transmittal and other
ancillary offer documents and instruments pursuant to which the Offer will be
made (collectively, together with any supplements or amendments thereto, the
"Offer Documents"). Parent and Purchaser will disseminate the Offer Documents
to holders of Shares. Each of Parent, Purchaser and the Company will promptly
correct any information provided by it for use in the Offer Documents that
becomes false or misleading in any material respect and Parent and Purchaser
will take all steps necessary to cause the Offer Documents as so corrected to
be filed with the SEC and to be disseminated to holders of Shares, in each case
as and to the extent required by applicable law. The Company and its counsel
shall be given a reasonable opportunity to review and comment on the Offer
Documents prior to their filing with the SEC. Parent and Purchaser agree to
provide the Company with any comments that may be received from the SEC or its
staff with respect to the Offer Documents promptly after receipt thereof and to
further provide the Company with a reasonable opportunity to participate in all
substantive communications with the SEC and its staff relating to the Offer
Documents, the Offer or the transactions contemplated thereby.
1.2 Company Actions. The Company hereby consents to the Offer and
represents and warrants (i) that its Board of Directors (at meetings duly
called and held) (a) has unanimously determined as of the date hereof that the
Offer and the Merger are fair to and in the best interests of the stockholders
of the Company, (b) has unanimously approved this Agreement and resolved to
recommend acceptance of the Offer and approval and adoption of this Agreement
and the Merger by the stockholders of the Company, (ii) that such approval
constitutes approval of this Agreement and the transactions contemplated hereby
for purposes of Section 203 of the DGCL and (iii) that the Board of Directors
will not withdraw, amend or modify such recommendation unless it determines in
good faith, on the advice of outside counsel, that such action is necessary for
the Board of Directors to comply with its duties to the Company's stockholders
under applicable law. On the date of the commencement of the Offer, the
Company shall file or cause to be filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the unanimous recommendation of the Board of Directors in favor of
the Offer and the Merger and shall permit the inclusion in the Schedule 14D-1
of such recommendation, in each case subject to the fiduciary duties of the
Board of Directors of the Company. Each of the Company, Parent and Purchaser
will promptly correct any information provided by it for use in the Schedule
14D-9 that becomes false or misleading in any material respect and the Company
will take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable law. Parent and its counsel shall be
given a reasonable opportunity to review and comment on the Schedule 14D-9
prior to its filing with the SEC. The Company agrees to provide Parent with
any comments that may be
-2-
<PAGE> 7
received from the SEC or its staff with respect to the Schedule 14D-9 promptly
after receipt thereof and to further provide Parent with a reasonable
opportunity to participate in all substantive communications with the SEC and
its staff relating to the Schedule 14D-9, the Offer or the transactions
contemplated thereby.
1.3 Stockholder Lists. In connection with the Offer, the Company shall
promptly furnish or cause to be furnished to Purchaser mailing labels and
security position listings and any available listing or computer file
containing the names and addresses of the record holders of Shares as of a
recent date and shall furnish Purchaser with such information (including,
without limitation, updated lists of stockholders, mailing labels and lists of
securities positions) reasonably available to the Company and such assistance
as Parent or its agents may reasonably request in communicating the Offer to
the record and beneficial holders of Shares. Subject to the requirements of
applicable law and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer and
the Merger, Parent, Purchaser and their respective affiliates will hold in
confidence such listings and other information, shall use such information only
in connection with the Offer and the Merger and, if this Agreement is
terminated, shall, and shall cause their respective agents or other
representatives to, promptly deliver to the Company all copies of all such
information (and extracts or summaries thereof) then in their possession.
1.4 Directors. Promptly upon the purchase by Purchaser pursuant to the
Offer of such number of Shares as represents at least a majority of the
outstanding Shares and from time to time thereafter, Parent shall be entitled
to designate all members of the Board of Directors of the Company. The current
directors of the Company have indicated to the Parent that they intend to
resign as directors of the Company as soon as reasonably practicable upon the
Purchaser purchasing at least a majority of the outstanding Shares pursuant to
the Offer, and the Company shall exercise reasonable efforts to secure the
resignations of all directors to enable such Parent designees to be so elected
or appointed. Such designees will abstain from any action proposed to be taken
by the Company to amend or terminate this Agreement or waive any action by
Parent or Purchaser. The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act. At
the request of Parent, the Company shall take all action reasonably necessary
to effect any such election or appointment, including mailing to its
stockholders the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, unless such information previously has been
provided to the Company's stockholders in the Schedule 14D-9. Parent and
Purchaser will supply to the Company, and will be solely responsible for, all
information with respect to themselves and their officers, directors and
affiliates required by such Section and Rule.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), at the Effective Time (as defined below), Purchaser
shall be merged with and into the Company (the "Merger"). As a result of the
Merger, the separate corporate existence of Purchaser shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
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<PAGE> 8
2.2 Closing. Unless this Agreement shall have been terminated pursuant to
Article VII and subject to the satisfaction or, if permissible, waiver of the
conditions set forth in Article VI, the consummation of the Merger and the
other transactions contemplated hereby (the "Closing") shall take place at the
offices of Vinson & Elkins, L.L.P., 1001 Fannin St., Houston, Texas 77002-6760
as promptly as practicable (and in any event within two business days)
following the satisfaction or, if permissible, waiver of the conditions set
forth in Article VI, unless another place, date or time is agreed to in writing
by Parent and the Company.
2.3 Effective Time. As promptly as practicable after the Closing, the
parties hereto will cause a certificate of merger (the "Certificate of Merger")
to be executed, acknowledged and filed with the Delaware Secretary of State in
accordance with the DGCL. The Merger shall become effective at such time as
the Certificate of Merger is filed with the Delaware Secretary of State in
accordance with the DGCL, or at such later time as may be agreed to by Parent
and the Company and specified in the Certificate of Merger in accordance with
applicable law. The date and time when the Merger shall become effective is
referred to herein as the "Effective Time."
2.4 Effect of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all properties, rights,
privileges, powers and franchises of the Company and Purchaser shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
2.5 Certificate of Incorporation and Bylaws. At the Effective Time, the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and the Amended and Restated Bylaws (the "Bylaws") of the
Company, in each case as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation and the Bylaws of the Surviving
Corporation until thereafter amended as provided by law.
2.6 Directors and Officers. At the Effective Time, the officers and
directors of Purchaser immediately prior to the Effective Time shall become the
officers and directors of the Surviving Corporation, each to hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation and applicable law. The
Company shall use commercially reasonable efforts to cause each executive
officer and director of the Company to tender his or her resignation effective
at or before the Effective Time.
2.7 Consideration; Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto
or the holders of any of the following securities:
(a) Each Share that is issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to Section
2.7(b) and any Dissenting Shares, as defined in Section 2.11) shall be changed
and converted into and represent the right to receive $2.00 in cash, or any
higher price paid per Share in the Offer (the "Per Share Merger
Consideration"). All such Shares shall no longer be outstanding and shall
automatically be cancelled and extinguished and shall cease to exist, and each
certificate which immediately prior to the Effective Time
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evidenced any such Shares (other than Shares to be cancelled pursuant to
Section 2.7(b) and any Dissenting Shares) shall thereafter represent the right
to receive (without interest and less any applicable withholding of taxes),
upon surrender of such certificate in accordance with the provisions of Section
2.8, the Per Share Merger Consideration multiplied by the number of Shares
evidenced by such certificate (the "Merger Consideration"). The holders of
certificates previously evidencing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect thereto (including,
without limitation, any rights to vote or to receive dividends and
distributions in respect of such Shares), except as otherwise provided herein
or by law.
(b) All Shares, which immediately prior to the Effective Time are
owned by Parent, Purchaser or their respective affiliates or held by the
Company in its treasury, shall be cancelled and extinguished and shall cease to
exist and no consideration shall be delivered with respect thereto.
(c) Each share of capital stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
2.8 Exchange of Certificates.
(a) Paying Agent. As of the Effective Time, Parent shall,
pursuant to an agreement with its paying agent (the "Paying Agent"), deposit,
or cause to be deposited, with or for the account of the Paying Agent in trust
for the benefit of the holders of Shares (other than Shares to be cancelled
pursuant to Section 2.7(b) and any Dissenting Shares) for exchange through the
Paying Agent in accordance with this Article II, cash in the aggregate amount
required to be exchanged for Shares pursuant to Section 2.7 (the "Payment
Fund"). The Paying Agent shall, pursuant to irrevocable instructions, deliver
the Merger Consideration out of the Payment Fund to holders of Shares. The
Payment Fund shall not be used for any other purpose. The Paying Agent shall
invest funds in the Payment Fund only in short-term securities issued or
guaranteed by the United States government or certificates of deposit of
commercial banks that have consolidated total assets of not less than
$5,000,000,000 and are "well capitalized" within the meaning of the applicable
federal bank regulations. Any interest or other income earned on the
investment of funds in the Payment Fund shall be for the account of and payable
to the Surviving Corporation. Parent shall replace any monies lost through any
investment made pursuant to this Section 2.8.
(b) Payment Procedure. Promptly after the Effective Time, Parent
will cause the Paying Agent to mail to each holder of record of a certificate
or certificates that immediately prior to the Effective Time evidenced
outstanding Shares (other than Shares to be cancelled pursuant to Section
2.7(b) and any Dissenting Shares) ("Certificates"), (i) a notice of the
effectiveness of the Merger, (ii) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent
and shall be in such customary form and have such other provisions as Parent
may reasonably specify in accordance with the terms of this Agreement) and
(iii) instructions to effect the surrender of the Certificates in exchange for
the Merger Consideration. Upon surrender of a Certificate for cancellation to
the Paying Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration and the
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Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, the Merger Consideration may be paid or issued to the
transferee if the Certificate representing such Shares is presented to the
Paying Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. In the event that any Certificate shall have been lost, stolen or
destroyed, the Paying Agent shall issue in exchange therefor, upon the making
of an affidavit of that fact by the holder thereof and such bond, security or
indemnity as Parent may reasonably require, the Merger Consideration that such
holder has the right to receive pursuant to the provisions of this Article II.
Until surrendered as contemplated by this Section 2.8, each Certificate shall
be deemed at any time after the Effective Time to evidence only the right to
receive upon such surrender the Merger Consideration applicable to the Shares
evidenced by such Certificate.
(c) Termination of Payment Fund. Any portion of the Payment Fund
that remains undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to Parent upon demand, and any holders of
Shares who have not theretofore complied with this Article II shall thereafter
look, subject to Section 2.8(d), only to Parent or the Surviving Corporation
for the Merger Consideration to which they are entitled pursuant to this
Article II.
(d) Abandoned Property Laws. Neither the Surviving Corporation
nor the Paying Agent nor the Company, the Parent or any of their respective
affiliates shall be liable to any holder of a Certificate for any cash from the
Payment Fund properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Transfer Taxes. Except as provided in paragraph (b) above,
Parent shall pay or cause to be paid any real property transfer, gains or
similar real property taxes imposed in connection with or as a result of the
Merger.
2.9 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of Shares thereafter on the records of the Company other than to
reflect transfers of Shares effected on or prior to the date on which and the
time at which the Effective Time occurs. At and after the Effective Time, any
Certificates presented to the Paying Agent or the Surviving Corporation for any
reason shall be converted into the Merger Consideration applicable to the
Shares evidenced thereby.
2.10 Options and Other Purchase Rights.
(a) The Company represents and warrants to the Purchaser and
Parent that it has taken all action necessary so that all outstanding options
and other rights to acquire Shares granted to directors, employees or others
under any stock option or purchase plan, program or similar arrangement of the
Company (each, as amended, an "Option Plan" and, such options and other rights,
"Stock Options"), whether or not then exercisable or vested, will be cancelled
by the Company upon consummation of the Offer. The holders thereof shall be
entitled to receive, for each Share subject to such Stock Option, in settlement
and cancellation thereof, an amount in cash equal to the positive difference,
if any, between the Per Share Merger Consideration and the exercise price per
share of such Stock Option, which amount shall be paid at the time the Stock
Option or is
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cancelled; provided, that, with respect to any person subject to Section 16 of
the Exchange Act, any such amount shall be paid as soon as practicable after
the first date payment can be made without liability to such person under
Section 16(b) of the Exchange Act. All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby shall be deducted from the amounts payable under this Section 2.10 and
all such taxes attributable to the cancellation of Stock Options shall be
withheld from the proceeds received in connection with the cancellation
thereof.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, the Option Plans shall
terminate as of or prior to the Effective Time and any rights under the Stock
Options granted under the Stock Option Plans shall be cancelled as of or prior
to the Effective Time.
(c) The Company represents and warrants to the Purchaser and
Parent that all outstanding warrants to purchase Shares will, upon the
Effective Time, be converted into the right to receive $2.00 cash instead of
each Share which would otherwise be purchasable by the holder of the warrant
upon the exercise thereof and payment of the warrant exercise price thereunder
(which in each case is greater than $2.00 per Share). The Company will provide
Purchaser with evidence of the foregoing or, with respect to any specific
warrant, evidence of cancellation of such warrant satisfactory to Purchaser
prior to the acceptance by Purchaser for payment of any Shares tendered under
the Offer.
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and that are held by stockholders who shall have perfected dissenters' rights
in accordance with Section 262 of the DGCL (the "Dissenting Shares") shall not
be converted into or represent the right to receive the Merger Consideration
(but instead shall be converted into the right to receive payment from the
Surviving Corporation with respect to such Dissenting Shares in accordance with
the DGCL), unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost such holder's rights to appraisal under the
DGCL. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such holder's rights to appraisal of such Shares
under the DGCL, such holder's shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive, upon surrender as provided above, the Merger Consideration
for the Certificate or Certificates that formerly evidenced such Shares.
2.12 Company Stockholders' Meeting. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.13 hereof,
and subject to applicable law, the Company, acting through its Board of
Directors, shall, in accordance with the DGCL, its Certificate of Incorporation
and its Bylaws, (a) duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as reasonably practicable following the
consummation of the Offer for the purpose of considering and taking action upon
this Agreement and the approval of the Merger Agreement (the "Company
Stockholders' Meeting"), (b) include in the proxy statement or information
statement prepared by the Company for distribution to stockholders of the
Company in advance of the Company Stockholders' Meeting in accordance with
Regulation 14A or Regulation 14C promulgated under the Exchange Act (the
"Company Proxy Statement") the recommendation of its Board of Directors
referred to in Section 1.2 hereof and (c) use all reasonable
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efforts (A) to obtain and furnish the information required to be included by it
in the Company Proxy Statement and, after consultation with the Parent and the
Purchaser, respond promptly to any comments made by the Commission with respect
to the Company Proxy Statement and any preliminary version thereof and cause
the Company Proxy Statement to be mailed to its stockholders at the earliest
practicable time following the expiration or termination of the Offer and (B)
to obtain the necessary approvals by its stockholders of the Merger Agreement
and the transactions contemplated thereby. Parent will provide the Company
with the information concerning Parent and Purchaser required to be included in
the Company Proxy Statement, and will vote, or cause to be voted, all Shares
owned by it or its affiliates in favor of approval and adoption of this
Agreement and the Merger.
2.13 Merger Without Meeting of Stockholders. Notwithstanding anything to
the contrary in this Agreement, if Parent, Purchaser or their respective
affiliates shall acquire at least 90% of the outstanding Shares, each of
Parent, Purchaser and the Company shall take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the consummation of the Offer, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
2.14 Withholding Taxes. Except as otherwise provided in Section 2.8(e),
Parent and Purchaser shall be entitled to deduct and withhold, or cause the
Paying Agent to deduct and withhold, from the consideration otherwise payable
to a holder of Shares pursuant to the Offer or the Merger any stock transfer
taxes and such amounts as are required under the Internal Revenue Code of 1986,
as amended (the "Code"), or any applicable provision of state, local or foreign
tax law, as specified in the Offer Documents. To the extent that amounts are
so withheld by Parent or Purchaser, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made by Parent or
Purchaser, in the circumstances described in the Offer Documents, and Parent
shall provide, or cause the Paying Agent to provide, to the holders of such
Certificates written notice of the amounts so deducted or withheld.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
3.1 Organization and Qualification. The Company (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) has all requisite corporate power to carry on its business
as it is now being conducted, and (c) is in good standing and duly qualified to
do business in each jurisdiction in which the transaction of its business makes
such qualification necessary, except where the failure to be in good standing
or so qualified would not have a Material Adverse Effect (as defined in Section
8.3(c) below) on the Company. True and complete copies of the Certificate of
Incorporation and the Bylaws, as amended to date, of the Company have been made
available to Parent. The Company does not own any subsidiaries or have any
equity or partnership or joint venture interests other than as reflected on
Section 3.1 of the Company Disclosure Schedule.
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3.2 Capitalization of the Company. The authorized capital stock of the
Company consists of 25,000,000 Shares and 1,500,000 shares of preferred stock,
$0.01 par value (the "Company Preferred Stock"). As of the date hereof,
16,268,387 Shares are issued and outstanding and no shares of Company Preferred
Stock are outstanding. All outstanding Shares are validly issued and are fully
paid and nonassessable. Except as disclosed in the Company SEC Documents (as
defined in Section 3.6) or in Section 3.2 of the Company's disclosure schedule
delivered to Parent in connection with this Agreement (the "Company Disclosure
Schedule") there are no outstanding subscriptions, options, warrants, calls,
rights, commitments or any other agreement to which the Company is a party or
by which the Company is bound that, directly or indirectly, obligate the
Company to issue, deliver or sell or cause to be issued, delivered or sold any
additional Shares or any other capital stock of the Company or any other
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any such Shares or other capital stock of the
Company. As reflected on Section 3.2 of the Company Disclosure Schedule, the
exercise prices for all outstanding options, warrants or other rights to
acquire capital stock of the Company are at prices in excess of the Offer
price.
3.3 Authorization and Validity of Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof (subject to the approval and adoption of this Agreement and the Merger
by the holders of a majority of the outstanding Shares, if required by
applicable law). All members of the Company's Board of Directors (the "Company
Board") have duly authorized the execution, delivery and performance of this
Agreement by the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the transactions
contemplated hereby (other than the approval and adoption of this Agreement and
the Merger by the holders of a majority of the outstanding Shares, if required
by applicable law). This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the legal, valid and binding
obligation of Parent and Purchaser, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
3.4 Consents and Approvals.
(a) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority by
reason of the Company's status or operations, except (i) pursuant to the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, and
the Exchange Act, and the rules and regulations promulgated thereunder, and
state securities or "blue sky" laws and state takeover laws, (ii) the filing
and recordation of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in which
the Company is authorized to do business, (iii) as set forth in Section 3.4 of
the Company Disclosure Schedule or (iv) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect on the
Company.
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(b) Each member of the Company Board has approved this Agreement
and the transactions contemplated hereby for purposes of Section 203 of the
DGCL so that Section 203 of the DGCL is not applicable to the transactions
provided for in this Agreement. Unless the Merger is otherwise consummated as
contemplated by Section 2.13 hereof, the affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of capital
stock of the Company necessary to approve the Merger.
3.5 No Violation. Except as set forth in Section 3.5 of the Company
Disclosure Schedule, assuming the Merger has been duly approved by the holders
of a majority of the outstanding Shares or the Merger is consummated as
contemplated by Section 2.13 hereof, neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will conflict with or violate the Certificate
of Incorporation or Bylaws of the Company, result in a violation or breach of,
constitute a default under, give rise to any right of termination, cancellation
or acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any material assets or property of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license or other
instrument or obligation to which the Company is a party or by which the
Company or any of its assets or properties may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) as to which requisite
waivers or consents have been obtained or which in the aggregate would not have
a Material Adverse Effect on the Company or assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
3.4 and this Section 3.5 are duly and timely obtained or made and the approval
of the Merger by the holders of a majority of the outstanding Shares has been
obtained or the Merger is consummated as contemplated by Section 2.13 hereof,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its assets and properties, except for such
violations which would not in the aggregate have a Material Adverse Effect on
the Company.
3.6 SEC Reports; Financial Statements.
(a) Except as set forth in Section 3.6 of the Company Disclosure
Schedule, since January 1, 1997, the Company has filed with the SEC all forms,
reports, schedules, statements and other documents required to be filed by it
with the SEC pursuant to the Exchange Act, the Securities Act and the SEC's
rules and regulations thereunder (all such forms, reports and other documents,
including any such reports filed prior to the Effective Time, collectively, the
"Company SEC Documents"). The Company SEC Documents, including, without
limitation, any financial statements or schedules included therein, at the time
filed (or, if amended, at the time of such amended filing), or in the case of
registration statements on their respective effective dates, complied in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder and did not at the time they were filed (or, if amended, at
the time of such amended filing and, in the case of registration statements, at
the time of effectiveness), 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 light of the circumstances under
which they were made, not misleading.
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(b) Each of the consolidated financial statements of the Company
(including any related notes thereto) included in the Company SEC Documents
(excluding the Company SEC Documents described in Section 3.7 hereof) comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the period involved (except as may be
indicated in such financial statements or in the notes thereto or, in the case
of unaudited financial statements, as permitted by the requirements of Form
10-Q) and fairly present (subject, in the case of the unaudited statements, to
normal year-end adjustments and the absence of footnotes) the consolidated
financial position of the Company as of the dates thereof and the consolidated
results of the Company's operations and cash flows for the periods presented
therein.
3.7 Schedule 14D-9; Offer Documents and Company Proxy Statement. None of
the Schedule 14D-9, the Company Proxy Statement nor any information supplied by
the Company specifically for inclusion in the Offer Documents will, at the
respective times filed with the SEC or first published, sent or given to
stockholders, as the case may be, or, in the case of the Company Proxy
Statement, at the date mailed to the Company stockholders and at the time of
the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Schedule 14D-9
and the Company Proxy Statement will, when filed by the Company with the SEC,
comply as to form in all material respects with the applicable provisions of
the Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to the
statements made in any of the foregoing documents based on information supplied
by or on behalf of Parent or Purchaser or any of their respective affiliates
specifically for inclusion therein.
3.8 Compliance with Law. The Company is not in violation of any
applicable law, rule, regulation, decree or order of any governmental or
regulatory authority applicable to the Company, except for violations which in
the aggregate do not have a Material Adverse Effect on the Company. The
Company holds all permits, licenses, exemptions, orders and approvals of all
governmental and regulatory authorities necessary for the lawful conduct of its
businesses, except where the failures to hold permits, licenses, exemptions,
orders and approvals do not in the aggregate have a Material Adverse Effect on
the Company.
3.9 Absence of Certain Changes. Except as disclosed in the Company SEC
Documents filed with the SEC prior to the date hereof or in Section 3.9 of the
Company Disclosure Schedule, since December 31, 1996, the Company has conducted
its business only in the ordinary course of such business and there has not
been (a) any Material Adverse Effect on the Company; (b) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the Company's capital stock; or (c) any material change in the Company's
accounting principles, practices or methods.
3.10 Litigation. Except as disclosed in the Company SEC Documents or in
Section 3.10 of the Company Disclosure Schedule, there are no claims, actions,
proceedings or governmental investigations pending or, to the knowledge of the
Company, threatened against the Company, by or before any court or other
governmental or regulatory body, which, if adversely determined, would
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have a Material Adverse Effect on the Company. As of the date hereof, to the
knowledge of the executive officers of the Company, no action or proceeding has
been instituted or threatened before any court or other governmental or
regulatory body by any Person (as defined in Section 8.3) seeking to restrain
or prohibit the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.11 Employee Benefit Matters. All employee benefit plans and other
benefit and compensation arrangements covering employees of the Company are
listed in Section 3.11 of the Company Disclosure Schedule (the "Company Benefit
Plans"). True and complete copies of the Company Benefit Plans, their related
trust and summary plan descriptions, and any reports, forms and documents
required to be filed or distributed for the preceding three years relating to
the Company Benefit Plans have been delivered to Parent. To the extent
applicable, the Company Benefit Plans comply, in all material respects, with
the requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code, and any Company Benefit Plan and its related
trust intended to be qualified under Sections 401(a) and 501(a) of the Code
comply in form and in operation with Sections 401(a) and 501(a) of the Code.
No Company Benefit Plan is covered by Title IV of ERISA or Section 412 of the
Code. There has been no transaction involving any Company Benefit Plan that
has resulted or would result in any liability or penalty under Section 4975 of
the Code or Section 502(i) of ERISA. Each Company Benefit Plan has been
maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto. There are
no pending or anticipated material claims against or otherwise involving any of
the Company Benefit Plans and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Company Benefit Plan
activities) has been brought against or with respect to any such Company
Benefit Plan, except for any of the foregoing that would not have a Material
Adverse Effect on the Company. All contributions required to be made as of the
date hereof to the Company Benefit Plans have been made or provided for.
Neither the Company nor any entity under "common control" with the Company
within the meaning of Section 4001 of ERISA has contributed to or ever
maintained, or been required to contribute to or maintain, any employee pension
plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA or
Section 412 of the Code or to any "multi-employer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA). Except as disclosed in Section 3.11 of the
Company Disclosure Schedule, the Company does not maintain or contribute to any
plan or arrangement that provides or has any liability to provide life
insurance, medical or other employee welfare benefits to any employee or former
employee upon his retirement or termination of employment, except as required
by Section 4980B of the Code, and the Company has never represented, promised
or contracted (whether in oral or written form) to any employee or former
employee that such benefits would be provided. All insurance premiums have
been paid in full, subject only to normal retrospective adjustments in the
ordinary course, with regard to Company Benefit Plans for policy years or other
applicable policy periods ending before the closing and have been paid as
required under the policies for policy years or other applicable policy periods
beginning on or before the closing. All expenses and liabilities relating to
all of Company Benefit Plans have been, and will on the Closing Date be, fully
and properly accrued on the Company's books and records and disclosed in
accordance with generally accepted accounting principles and in the Employee
Benefit Plan financial statements. The Company does not have any agreement,
arrangement, commitments or understanding to create any additional plan which
would constitute an Employee Benefit Plan or to increase the rate of benefit
accrual or contribution requirements under any of the Employee
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Benefit Plans or to modify, change or terminate in any respect any existing
Employee Benefit Plan. None of the Employee Benefit Plans is currently under
investigation, audit, or review by the Department of Labor, the Internal
Revenue Service or any other federal or state agency, and no violations of the
Code or ERISA have been alleged by any such agency with respect to such
Employee Benefit Plans. The Employee Benefit Plans may be amended or
terminated at any time. Except as disclosed in Section 3.11 of the Company
Disclosure Schedule, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any benefit
plan, policy, arrangement or agreement or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any employee. The consummation of
the transactions contemplated by this Agreement, either alone or in combination
with another event, has not resulted in and will not result in payments to
"disqualified individuals" (as defined in Section 280G(c) of the Code) of the
Company which, individually or in the aggregate, will constitute "excess
parachute payments" (as defined in Section 280G(b) of the Code) resulting in
the imposition of excise tax under Section 4999 of the Code or will result in
the disallowance of deductions under Sections 162 (m) or 280G of the Code.
3.12 Taxes.
(a) Each of the Company and any affiliated, combined, or
unitary group of which any such corporation is or was a member (collectively,
the "Tax Affiliates") has timely filed all Tax Returns that are required to be
filed by it. The Company does not currently have any Tax Affiliate. All such
Tax Returns were accurate and complete and correctly reflected the facts
regarding the income, business, assets, operations, activities and stocks of
the Company.
(b) Except as set forth in Section 3.12 of the Company
Disclosure Schedule, the Company and each Tax Affiliate has timely paid all
Taxes that are due and payable (except for taxes that are being contested in
good faith by appropriate proceedings and for which reserves, which are
adequate under generally accepted accounting principles, have been
established).
(c) Each Tax Affiliate has properly accrued or made
provision, which are adequate under generally accepted accounting principles,
for all Taxes for any periods subsequent to the periods covered by the Tax
Returns described in Section 3.12, above.
(d) Each Tax Affiliate has complied with all applicable
laws, rules and regulations relating to the withholding and payment of Taxes
and has timely withheld and paid to the proper governmental authorities all
amounts required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor or stockholder.
(e) Except as set forth in Section 3.12 of the Company
Disclosure Schedule:
(i) no audits or other administrative or court
proceedings are presently pending with regard to any Taxes for which a
Tax Affiliate could be liable,
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(ii) no dispute or claim concerning any Taxes for
which a Tax Affiliate could be liable has been either:
(A) claimed or raised by any authority in
writing, or
(B) as to which employees responsible for
Tax matters, directors and officers of a Tax Affiliate after
due inquiry have knowledge;
(iii) with respect to each Tax Affiliate, there are
no pending requests for rulings from any taxing authority with respect
to any Taxes. If a Tax Affiliate has filed for a ruling request from
any taxing authority with respect to any Taxes within the previous
three years, copies of the ruling requests and related correspondence
have been delivered to the Purchaser;
(iv) with respect to each Tax Affiliate, there are no
proposed reassessments by any taxing authority of any property owned
or leased;
(v) with respect to each Tax Affiliate there are no
agreements in effect to extend the time to file any Tax Return or to
extend or waive the period of limitations for the assessment or
collection of any Taxes for which a Tax Affiliate may be liable;
(vi) to the knowledge of each Tax Affiliate, no
claim has been made by any authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be, subject to
taxation by that jurisdiction; and
(f) None of the Tax Affiliates has made any payments, is
obligated to make any payments or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G or under Code Section 162(m).
(g) Each of the Tax Affiliates has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning of Code
Section 6662;
(h) No Tax Affiliate (a) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return other than the
groups of which the Company is the parent and (b) has liability for the Taxes
of any person (other than members of the groups described in (a) above) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(i) All elections with respect to Taxes affecting the Tax
Affiliates as of the date hereof are set forth in the Company Disclosure
Schedules and after the date hereof, no election with respect to Taxes will be
made without the written consent of the Purchaser other than those elections
which would have no material adverse effect and which are consistent with past
practices of the Company;
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(j) None of the Tax Affiliates has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the
Code (or any corresponding provisions of state, local or foreign income tax
law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local, or foreign income tax law) apply to any disposition
of any asset owned by it:
(k) None of the assets of the Tax Affiliates is property that
the Tax Affiliates are required to treat as being owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of
the Code;
(l) The Tax Affiliates do not have, and have not had, a
permanent establishment in any foreign country, as defined in any applicable
tax treaty or convention between the United States ad such foreign country;
(m) Except as set forth in Section 3.12 of the Company
Disclosure Schedule, none of the Tax Affiliates were a party to any Tax
allocation or Tax sharing agreement. The Tax Affiliates have delivered an
accurate and complete copy of any Tax sharing or allocation agreement or
arrangement involving a Tax Affiliate and an accurate and complete description
of any such unwritten or informal agreement or arrangement;
(n) None of the Tax Affiliates:
(i) has or is projected to have any amount
includible in its income for the current taxable year under Section
951 of the Code,
(ii) has been a passive foreign investment company
within the meaning of Section 1296 of the Code, or
(iii) has an unrecaptured overall foreign loss
within the meaning of Section 904(f) of the Code.
(o) None of the Tax Affiliates has any:
(i) income reportable for a period ending after the
Closing Date but attributable to a transaction (e.g., installment
sale) or a change in accounting method occurring in or made for a
period ending on or prior to the Closing Date which resulted in a
deferred reporting on income from such transaction or from such change
in accounting method (other than a deferred intercompany transaction),
or
(ii) a deferred gain or loss rising out of any
deferred intercompany transaction.
(p) The Company's tax net operating loss carry forwards and a
schedule of their expirations are set forth on the Company Disclosure
Schedules.
(q) For purposes of this Agreement:
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"Tax" (including, with correlative meaning, the terms
"Taxes" and "Taxable") means (i) any net income, gross income, gross
receipts, sales, use, ad valorem, transfer, transfer gains, franchise,
profits, license, withholding, payroll, employment, social security
(or similar), unemployment, disability, excise, severance, stamp,
rent, recording, registration, occupation, premium, real or personal
property, intangibles, environmental (including taxes under Code
Section 59A) or windfall profits tax, alternative or add-on minimum
tax, capital stock, customs duty or other tax, fee, duty, levy,
impost, assessment or charge of any kind whatsoever (including but not
limited to taxes assessed to real property and water and sewer rents
relating thereto), together with any interest and any fine, penalty,
addition to tax or additional amount or deductions imposed by any
governmental body (domestic or foreign) (a "Tax Authority")
responsible for the imposition of any such tax, whether disputed or
not, including any liability arising under any tax sharing agreement,
with respect to a Tax Affiliate; (ii) any liability for the payment of
any amount of the type described in the immediately preceding clause
(i) as a result of the Tax Affiliate being a member of an affiliated
or combined group with any other corporation at any time on or prior
to the Closing Date; and (iii) any liability of the Tax Affiliate for
the payment of any amounts of the type described in the immediately
preceding clause (i) as a result of a contractual obligation to
indemnify any other person; and
"Tax Return" means any return, declaration,
report, claim for refund, or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
3.13 Insurance. True and complete copies of all existing insurance
policies purchased by the Company have been delivered to Parent. Such policies
provide coverage for the operations of the Company in amounts and covering such
risks as the Company believes is necessary to conduct its business. The
Company has not received notice that any such policy is invalid or
unenforceable.
3.14 Employment Agreements. Except as disclosed in the Company SEC
Documents or as set forth in Section 3.14 of the Company Disclosure Schedule,
there are no (a) employment, consulting, noncompetition, severance or
indemnification agreements between the Company and any current or former
officer or director of the Company, (b) employment, consulting or severance
agreements between the Company and any other Person providing for payments in
excess of $50,000 in the aggregate and (c) noncompetition or indemnification
agreements between the Company and any other Person.
3.15 Brokers and Finders. No broker, finder or investment bank has acted
directly or indirectly for the Company, nor has the Company incurred any
obligation to pay any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby, other than SBC Warburg
Dillon Read Inc. ("Dillon Read"), Rauscher Pierce Refsnes, Inc. ("RPR"),
Jefferies & Company, Inc. ("Jefferies") and Griffiths McBurney ("GMB"), the
fees and expenses of which shall be borne by the Company. Section 3.15 of the
Company Disclosure Schedule sets forth the fees payable to Dillon Read, RPR,
Jefferies and GMB pursuant to the Company's engagement letters with Dillon
Read, RPR, Jefferies and GMB (copies of which have been provided to Parent).
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<PAGE> 21
3.16 Opinion of Financial Advisor. Dillon Read has delivered its opinion,
dated the date of this Agreement, to the Board of Directors of the Company for
the benefit of its stockholders to the effect that, as of the date of this
Agreement, the cash consideration to be received by the holders of Shares
(other than Parent and its affiliates) in the Offer and the Merger is fair,
from a financial point of view, to such holders.
3.17 Certain Business Practices. None of the Company or, to the Company's
knowledge, any directors, officers, agents or employees of the Company (in
their capacities as such) has (a) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(b) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c)
made any other unlawful payment, in all cases except where the impact from such
contributions, gifts, entertainment, payments, violations, agreements,
arrangements, actions or payments would not in the aggregate have a Material
Adverse Effect on the Company.
3.18 Permits; Compliance. Except as disclosed in Section 3.18(a) of the
Company Disclosure Schedule, the Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, identification and registration numbers, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "Company Permits"),
except where the failure to possess such Company Permits could not reasonably
be expected to have a Material Adverse Effect on the Company. Section 3.18(a)
of the Company Disclosure Schedule sets forth, as of the date of this
Agreement, all actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company that could reasonably
be expected to result in (i) the loss or revocation of a Company Permit or (ii)
the suspension or cancellation of any other Company Permit, except any such
Company Permit where such loss, revocation, suspension or cancellation could
not reasonably be expected to have a Material Adverse Effect on the Company.
Except as set forth in Section 3.18(a) of the Company Disclosure Schedule, the
Company is not in conflict with, or in default or violation of (a) any law
applicable to the Company or by or to which any of its properties is bound or
subject or (b) any of the Company Permits, except for any such conflicts,
defaults or violations that could not reasonably be expected to have a Material
Adverse Effect on the Company. Except as set forth in Section 3.18(a) of the
Company Disclosure Schedule, since December 31, 1996, the Company has not
received from any Governmental Entity (as defined in Section 5.7) any written
notification with respect to possible conflicts, defaults or violations of
laws, except for written notices relating to possible conflicts, defaults or
violations of laws that could not reasonably be expected to have a Material
Adverse Effect on the Company.
3.19 Certain Agreements. Section 3.19 of the Company Disclosure Schedule
sets forth a complete and accurate list in all material respects of all (i)
real property leases, (ii) agreements with respect to indebtedness for borrowed
money (including capital leases) with a principal amount in excess of $50,000
and (iii) acquisition agreements providing for the payment in the future of
contingent consideration in an amount in excess of $50,000, in each case to
which the Company is a party on the date hereof.
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<PAGE> 22
3.20 Environmental Matters. Notwithstanding any other warranty or
representation in Article III of this Agreement:
(a) Except as set forth in Section 3.20 of the Company Disclosure
Schedule, (i) the Company has obtained all Environmental Permits (as
hereinafter defined) that are required in connection with the business,
operations and properties of the Company, (ii) the Company has been, and the
Company is, in compliance in all material respects with all terms and
conditions of all applicable requirements of Environmental Law (as hereinafter
defined) and Environmental Permits, (iii) the Company has received no written
notice from a governmental authority of any violation, alleged violation, or
liability arising under any requirements of Environmental Law or Environmental
Permits, (iv) no Environmental Claims (as hereinafter defined) have ever been
threatened or asserted or are presently pending against the Company
attributable to present or past operations on premises owned, leased or
operated by the Company, and (v) no condition or set of facts or circumstances
exists that could reasonably be expected to give rise to an Environmental Claim
against the Company.
(b) Except as set forth in Section 3.20 of the Company Disclosure
Schedule, the Company has not disposed, treated, or arranged for the disposal
or treatment of any toxic or hazardous waste, materials or substances at a site
or location, or has leased, used, operated or owned a site or location which
(i) has been placed on the National Priorities List or its state equivalent
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended ("CERCLA"), or similar foreign, territorial or state
law, (ii) the Environmental Protection Agency or relevant foreign, territorial
or state authority has proposed, or is proposing, to place on the National
Priorities List or foreign, territorial or state equivalent, (iii) is subject
to a lien, administrative order or other demand either to take response or
other action under CERCLA or other Environmental Law, or to develop or
implement a "Corrective Action Plan" or "Compliance Plan," as each is defined
in regulations promulgated pursuant to the Resource Conservation and Recovery
Act, as amended ("RCRA"), or to reimburse any person who has taken response or
other action in connection with that site, (iv) is on any Comprehensive
Environmental Response Compensation Liability Information System List, or (v)
has been the site of any Release (as hereinafter defined) from present or past
operations of the Company (or any of its predecessors) which would be either
reportable under any requirements of Environmental Law or which has caused at
such site or any third party site any condition that has resulted in or could
reasonably be expected to result in a claim against the Company under
Environmental Law.
(c) Except as set forth in Section 3.20 of the Company Disclosure
Schedule, (i) the Company has not ever owned or operated any underground
storage tanks ("USTs") containing petroleum products or wastes or other
substances regulated by 40 CFR Part 280 or other applicable requirements of
Environmental Law, and has not owned or operated any real estate having any
USTs, (ii) there are no polychlorinated biphenyls or asbestos in or on premises
currently owned, leased or operated by the Company, the presence of which would
cause a material violation of any Environmental Law, and (iii) no entities or
sites owned or operated by third parties have been used by the Company in
connection with the treatment, storage, disposal or transportation of Hazardous
Substances (as hereinafter defined), except in compliance with applicable
Environmental Law and except for such violations that have been remedied.
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<PAGE> 23
(d) Except as set forth in Section 3.20 of the Company Disclosure
Schedule, the plants, structures, equipment and other properties currently
owned or used by the Company are adequate and sufficient for the current
operations of the Company in substantial conformance with all applicable
requirements of Environmental Law.
(e) When used in this Agreement, the following terms shall have
the following respective meanings:
(i) "Environmental Claims," as referred to herein, shall
mean any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or other adversarial proceedings relating to any Environmental
Law or Environmental Permit including, without limitation (i) any and all
claims by governmental, territorial or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other similar actions or damages
pursuant to any applicable Environmental Law and (ii) any and all claims by a
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Substances or
arising from alleged injury or threat of injury to human health, property, or
the environment resulting from exposures to or releases of Hazardous
Substances. An "Environmental Claim" includes, but is not limited to, a common
law action, as well as a proceeding to issue, modify, terminate or enforce the
provisions of an Environmental Permit or requirement of Environmental Law, or
to adopt or amend a regulation to the extent that such a proceeding attempts to
redress violations or alleged violations of the applicable permit, license, or
regulation.
(ii) "Environmental Law," as referred to herein, shall
mean any federal, state, territorial, local or foreign statute, law, rule,
regulation, ordinance, code, policy (compliance with which is required by law
or if the failure to comply therewith would be reasonably foreseeable to result
in adverse administrative action) or rule of common law in effect and in each
case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment or Hazardous Substances, including, without
limitation to the extent applicable under the circumstances, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section
9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Toxic
Substance Control Act, 15 U.S.C. Section 2601 et seq.; the Oil Pollution Act
of 1990, 33 U.S.C. Section 2701 et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section 5101 et seq.; the Atomic
Energy Act, as amended, 42 U.S.C. Section 2011 et seq.; any laws regulating
the use of biological agents or substances including medical or infectious
wastes; and the corresponding foreign, territorial or state laws, regulations
and local ordinances, which may be applicable, as any such acts may be amended.
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<PAGE> 24
(iii) "Environmental Permits" as referred to herein, shall
mean all permits, approvals, identification numbers, licenses and other
authorizations required under any applicable Environmental Law.
(iv) "Hazardous Substances" as referred to herein, shall
mean (i) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "hazardous air pollutants," "pollutants," "contaminants," "toxic
chemicals," "toxics," "hazardous chemicals," "extremely hazardous substances,"
"regulated substances" or "pesticides" as defined as such in any applicable
Environmental Law, (ii) any radioactive materials, asbestos-containing
materials; urea formaldehyde foam insulation, and radon in harmful quantities
or concentration that are regulated by any governmental authority having
jurisdiction in the location of such materials and (iii) any other chemical,
material or substances, exposure to which is prohibited, limited or regulated
by any governmental authority having jurisdiction in the location of such
substances on the basis of potential hazards.
(v) "Release," as referred to herein, shall mean any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration of any Hazardous Substance into the
environment or into or out of any property, including the movement of any
Hazardous Substance through or in the air, soil, surface water, groundwater or
property.
3.21 Title.
(a) The Company has Marketable Title to all of its Oil and Gas
Properties.
For the purposes of this subsection 3.21(a), "Marketable
Title" shall mean, with respect to any well identified on Schedule 3.21(a)
("Well"), such title as (i) will enable the Company to receive a percentage of
the oil and gas produced and saved from such Well (subject to any depth
restrictions noted in Schedule 3.21(a)) that is not less than the "Net Revenue
Interest" shown for such well on Schedule 3.21(a), without reduction,
suspension or termination throughout the productive life of such Well, except
for any reduction, suspension or termination (a) caused by the Company, any of
its affiliates, successors in title or assigns arising out of transactions or
actions occurring after the Closing, (b) caused by orders of the appropriate
regulatory agency having jurisdiction over such Well that are promulgated after
the date hereof and that concern pooling, unitization, communitization or
spacing matters affecting such Well, (c) caused by any Contract containing a
sliding-scale royalty clause or other similar clause with respect to a
production burden associated with a particular Well, or (d) otherwise set forth
in Schedule 3.21(a); (ii) will not obligate the Company to bear and pay a
portion of the costs and expenses of operating such Well (subject to any depth
restrictions noted in Schedule 3.21(a)) that is not greater than the "Working
Interest" shown for such Well on Schedule 3.21(a), without increase throughout
the productive life of such Well, except for any increase (a) caused by the
Company, any of its affiliates, successors in title or assigns arising out of
transactions or actions occurring after the Closing, (b) that also results in
the Net Revenue Interest associated with such Well being proportionately
increased, (c) caused by contribution requirements provided for under
provisions similar to those contained in Article VII.B. of the A.A.P.L. Form
610-1982 Model Form Operating Agreement, (d) caused by orders of the
appropriate regulatory agency having jurisdiction over an Oil and Gas Property
that are promulgated
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after the date hereof and that concern pooling, unitization, communitization or
spacing matters affecting a particular Oil and Gas Property, or (e) otherwise
set forth in Schedule 3.21(a); and with respect to all Oil and Gas Properties
(iii) is free and clear of all encumbrances, liens, claims, easements, rights,
agreements, instruments, obligations, burdens or defects (collectively "Liens")
except for Permitted Encumbrances. No overriding interest or similar burden on
any Oil and Gas Property has been granted or has been contracted to be granted
by the Company which is not disclosed on Schedule 3.21(a) or accounted for in
the Net Revenue Interests indicated on Schedule 3.21(a).
(ii) For the purposes of this subsection 3.21(a),
"Permitted Encumbrances" shall mean (i) liens for taxes not yet delinquent,
(ii) lessors' royalties, overriding royalties, division orders, reversionary
interests, and similar burdens that do not operate to reduce the Net Revenue
Interest of the Company in any of the Oil and Gas Properties to less than the
amount set forth therefor on Schedule 3.21(a), (iii) the consents and rights
described in Schedule 3.21(a), and (iv) Contracts insofar as the Contracts do
not operate to increase the Working Interest of the Company set forth on
Schedule 3.21(a) for any of the Oil and Gas Properties or decrease the Net
Revenue Interest of the Company set forth on Schedule 3.21(a) for any of the
Oil and Gas Properties.
(iii) For purposes of this subsection 3.21(a), "Contracts"
means contracts, commitments, agreements, and arrangements that in any way
relate to either the Wells or the Oil and Gas Properties, including the
production, storage, treatment, transportation, processing, purchase, sale or
other disposal of substances therefrom or in connection therewith and any and
all amendments, ratifications or extensions of the foregoing, together with (i)
all rights, privileges, and benefits of the Company thereunder arising on or
after January 1, 1998, (ii) all rights of the Company thereunder to audit the
records of any party thereto and receive refunds of any nature thereunder,
whether relating to periods before or after January 1, 1998, and (iii) rights
of subrogation under any insurance policy held by or on behalf of the Company
in connection with the properties described in Section 1.1, inclusive for any
claim that arises from January 1, 1998, through the Closing Date in connection
with either the Wells or the Oil and Gas Properties.
(iv) For purposes of this subsection 3.21(a), "Oil and Gas
Properties" means such properties in the nature of fee interests, leasehold
interests, working interests, farmout rights, royalty, overriding royalty or
other non-working or carried interests, operating rights or other mineral
rights of every nature and any rights that arise by operation of law or
otherwise in all properties and lands pooled, unitized, communitized or
consolidated with such properties.
(b) The Company has indefeasible title to all of its properties
other than the Oil and Gas Properties.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant, jointly and
severally, to the Company as follows:
4.1 Organization and Qualification. Each of Parent and Purchaser (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has all requisite corporate power to
carry on its business as it is now being conducted and (c) is in good standing
and duly qualified to do business in each jurisdiction in which the transaction
of its business makes such qualification necessary, except where the failure to
be in good standing or so qualified would not have a Material Adverse Effect on
Parent and Purchaser taken as a whole.
4.2 Authorization and Validity of Agreement. Each of Parent and Purchaser
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby in accordance
with the terms hereof. The Boards of Directors of Parent and Purchaser,
respectively, and Parent, as the sole stockholder of Purchaser, have duly
authorized the execution, delivery and performance of this Agreement by each of
Parent and Purchaser, and no other corporate proceedings on the part of either
Parent or Purchaser are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Purchaser and, assuming this Agreement
constitutes the legal, valid and binding obligation of the Company, constitutes
the legal, valid and binding obligation of each of Parent and Purchaser,
enforceable against each of Parent and Purchaser in accordance with its terms,
except as may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Consents and Approvals. Neither the execution and delivery of this
Agreement by Parent and Purchaser nor the consummation by Parent and Purchaser
of the transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority by reason of Parent's or Purchaser's status or (as
applicable) operations, except (a) pursuant to the applicable requirements of
the Securities Act, the Public Utility Holding Company Act of 1935, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
and state securities or "blue sky" laws and state takeover laws, (b) the filing
and recordation of the Certificate of Merger pursuant to the DGCL, (c) except
as may be required in connection with the Financing (as defined in Section 4.7
below), which consents have been duly obtained or (d) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not in the aggregate have a Material Adverse Effect on
Parent and Purchaser taken as a whole or prevent the consummation of the
transactions contemplated hereby.
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4.4 No Violation. Neither the execution and delivery of this Agreement by
Parent and Purchaser nor the consummation by Parent and Purchaser of the
transactions contemplated hereby will conflict with or violate the Certificate
of Incorporation or Bylaws of Parent or Purchaser, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, give rise to any right of termination, cancellation or
acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any material assets or property of either of Parent or Purchaser
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument or obligation to which either of Parent or
Purchaser is a party or by which either of Parent or Purchaser or any of their
respective assets or properties are bound, except for such violations, breaches
and defaults (or rights of termination, cancellation or acceleration or lien or
other charge or encumbrance) as to which consents have been obtained or which
in the aggregate would not have a Material Adverse Effect on Parent and
Purchaser taken as a whole or prevent the consummation of the transactions
contemplated hereby or assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 4.3 are duly and
timely obtained or made, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to either of Parent or Purchaser or any of their
respective assets or properties, except for such violations which would not in
the aggregate have a Material Adverse Effect on Parent and Purchaser taken as a
whole or prevent the consummation of the transactions contemplated hereby.
4.5 Litigation. Except as set forth in the Parent SEC Documents, there
are no claims, actions, proceedings or governmental investigations pending or,
to the knowledge of Parent and Purchaser, threatened against either of Parent
or Purchaser or any of their respective subsidiaries before any court or other
governmental or regulatory body, which, if adversely determined, would impair,
interfere with, or otherwise adversely affect the ability of Parent or
Purchaser to consummate the transactions contemplated hereby in any material
respect. As of the date hereof, no action or proceeding has been instituted or,
to the knowledge of Parent or Purchaser, threatened before any court or other
governmental or regulatory body by any Person seeking to restrain or prohibit
or to obtain damages with respect to the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
4.6 Offer Documents; Company Proxy Statement; Schedule 14D-9. Neither the
Offer Documents nor any other document filed or to be filed by or on behalf of
Parent or Purchaser with the SEC or any other governmental entity in connection
with the transactions contemplated by this Agreement nor any information
supplied by or on behalf of Parent or Purchaser specifically for inclusion in
the Schedule 14D-9 or Company Proxy Statement will, at the respective times
filed with the SEC or other governmental entity, or at any time thereafter when
the information included therein is required to be updated pursuant to
applicable law, or, in the case of the Company Proxy Statement, at the date
mailed to the Company's stockholders and at the time of the Company
Stockholders' 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 made therein, in light of the circumstances under which
they were made, not misleading. The Offer Documents will, when filed by Parent
or Purchaser with the SEC or other governmental entity, comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, Parent and Purchaser
make no representation or warranty with respect to the statements made in the
foregoing documents based on information supplied by or on behalf of the
Company or any of its affiliates specifically for inclusion therein.
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4.7 Financing; Sufficient Funds. Parent and Purchaser have no knowledge
of any facts or circumstances, nor will Parent or Purchaser take any action or
omit to take any action, that could be expected to result in the inability of
Parent or Purchaser to obtain and use the funds available to them for
consummation of the Offer and the transactions contemplated thereby. Parent
and Purchaser will have available to them and will utilize, upon consummation
of the Offer and at the Effective Time, all immediately available funds
necessary to consummate the transactions contemplated by this Agreement and to
pay all related fees and expenses for which Parent or Purchaser will be
responsible.
4.8 Brokers and Finders. No broker, finder or investment bank has acted
directly or indirectly for either of Parent or Purchaser, nor has either of
Parent or Purchaser incurred any obligation to pay any brokerage, finder's or
other fee or commission in connection with the transactions contemplated
hereby.
4.9 Operations of Purchaser. Purchaser has been formed solely for the
purpose of engaging in the transactions contemplated hereby and prior to the
Effective Time will have engaged in no other business activities, will have
incurred no other liabilities or obligations other than as contemplated herein,
will have no subsidiaries and will have conducted its operations only as
contemplated hereby.
ARTICLE V
COVENANTS
5.1 Conduct of Business Pending the Merger. From the date hereof until
the Effective Time, except as otherwise required or contemplated hereunder or
as required by applicable law, without the prior written consent of the
Purchaser, the Company shall:
(a) use all commercially reasonable efforts to conduct its
business in all material respects only in the ordinary course of business and
consistent with past practice;
(b) not amend its certificate of incorporation or bylaws or
declare, set aside or pay any dividend or other distribution or payment in
cash, stock or property in respect of its capital stock; or acquire, directly
or indirectly, any of its capital stock;
(c) not issue, grant, sell or pledge or agree or authorize the
issuance, grant, sale or pledge of any shares of, or rights of any kind to
acquire any shares of, its capital stock other than Shares issuable upon the
exercise of stock options;
(d) not acquire, sell, transfer or lease any assets except in the
ordinary course of business and consistent with past practice or encumber any
assets of the Company;
(e) use all commercially reasonable efforts to preserve intact its
business organizations and to keep available the services of its present key
officers and employees; provided, however, that to satisfy the foregoing
obligation, the Company shall not be required to make any payments other than
those disclosed in Sections 3.11 or 3.14 of the Company Disclosure Schedule or
enter into or amend any contractual arrangements or understandings, except in
the ordinary course of business and consistent with past practice;
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(f) not adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company;
(g) not grant any severance or termination pay (otherwise than
pursuant to policies or contracts in effect on the date hereof, as disclosed in
Sections 3.11 and 3.14 of the Company Disclosure Schedule) to, or enter into
any employment agreement with, any of its executive officers or directors;
(h) not increase the compensation payable or to become payable to
its officers or employees, enter into any contract or other binding commitment
in respect of any such increase with any of its directors, officers or other
employees, and not establish, adopt, enter into, make any new grants or awards
under or amend, any collective bargaining agreement or Company Benefit Plan,
except as required by applicable law, including any obligation to engage in
good faith collective bargaining, to maintain tax-qualified status or as may be
required by any Company Benefit Plan as the date hereof;
(i) not settle or compromise any material claims or litigation or,
except in the ordinary course of business, modify, amend or terminate any of
its material contracts or waive, release or assign any material rights or
claims, or make any payment, direct or indirect, of any material liability
before the same becomes due and payable in accordance with its terms;
(j) not take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice with
respect to accounting policies or procedures (including tax accounting policies
and procedures), except as may be required by the SEC or the Financial
Accounting Standards Board;
(k) not make any material tax election or permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated without notice to Parent, except in the ordinary course
of business;
(l) confer at such times as Parent may reasonably request with one
or more representatives of Parent to report material operational matters and
the general status of ongoing operations (in each case to the extent Parent
reasonably requires such information) and to consult with Parent regarding
material operational decisions;
(m) not (i) enter into any loan or credit agreement, or incur any
indebtedness (other than borrowings under its existing credit agreement for the
purpose of paying fees and severance payments disclosed in Sections 3.11, 3.14
and 3.15 of the Company Disclosure Schedule and expenses incurred in connection
with the transactions contemplated hereunder) or guarantee any indebtedness or
amend any existing loan or credit agreement, (ii) make or enter into any
agreement or contract for capital expenditures, except for (y) capital
expenditures in the ordinary course of business required to be made by the
Company under the Company's existing joint operating agreements, and (z) other
expenditures in the ordinary course of business on the Company's existing
properties of up to $25,000 per expenditure or $100,000 in the aggregate or
(iii) enter into any agreement or contract outside the ordinary course of
business of the Company;
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(n) not adjust, split, combine or reclassify its capital stock;
(o) not enter into any agreement, understanding or arrangement
with respect to the sale or voting of its capital stock;
(p) not enter into derivative instruments;
(q) not create or acquire any subsidiaries; and
(r) not authorize or enter into an agreement to do any of the
foregoing.
5.2 Access; Confidentiality.
(a) From the date of this Agreement until the Effective Time, upon
reasonable prior notice to the Company, the Company shall give Parent and its
authorized representatives reasonable access during normal business hours to
its executive officers and such other officers or other representatives of the
Company approved in advance by the Company (which approval shall not be
unreasonably withheld or delayed), properties, books and records, and shall
furnish Parent and its authorized representatives with such financial and
operating data and other information concerning the business and properties of
the Company as Parent may from time to time reasonably request.
(b) Parent and Purchaser will hold and treat, and will cause their
respective affiliates, agents and other representatives to hold and treat, all
documents and information concerning the Company furnished to Parent, Purchaser
or their respective representatives in connection with the transactions
contemplated by this Agreement confidential in accordance with the
Confidentiality Agreement dated March 17, 1997, between Dillon Read and Parent,
which Confidentiality Agreement shall remain in full force and effect until the
termination of this Agreement or otherwise in accordance with its terms.
5.3 Further Actions. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall act in good faith toward and use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable, and
consult and fully cooperate with and provide reasonable assistance to each
other party, in order to consummate and make effective the transactions
contemplated by this Agreement as soon as practicable hereafter, including,
without limitation, (a) using all commercially reasonable efforts to obtain all
consents, approvals, authorizations or permits of governmental or regulatory
authorities or other Persons as are necessary for the consummation of the
transactions contemplated hereby, (b) taking such actions and doing such things
as any other party hereto may reasonably request in order to cause any of the
conditions specified in Article VI to such other party's obligation to
consummate such transactions to be fully satisfied, and (c) in the event and to
the extent required, amending this Agreement so that this Agreement and the
Merger comply with the DGCL. Prior to making any application to or filing
with any governmental or regulatory authority or other Person in connection
with this Agreement, the Company, on the one hand, and Parent and Purchaser, on
the other hand, shall provide the other with drafts thereof and afford the
other a reasonable opportunity to comment on such drafts.
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5.4 Notice of Certain Matters. The Company shall give prompt notice to
Parent, and Parent and Purchaser shall give prompt notice to the Company, of
(a) the occurrence or nonoccurrence of any event that would be likely to cause
(i) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all
material respects and (b) any failure of the Company or of Parent or Purchaser,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder in any material
respect. The Company shall give prompt notice to Parent of the Company's
receipt of any authority for expenditure with respect to the Company's Oil and
Gas Properties ("AFE") requiring a payment by the Company in excess of $25,000,
and Parent shall advise the Company in writing as promptly as practicable
thereafter whether Parent consents to the payment by the Company requested
under such AFE. If the Company does not receive a response from Parent by the
close of business on the sixth business day immediately preceding the deadline
for the Company's response under such AFE, Parent shall be deemed to have
consented to such payment by the Company.
5.5 Company Proxy Statement. Unless the Merger is consummated as
contemplated in Section 2.13 hereof, the Company shall, as soon as reasonably
practicable after the consummation of the Offer, prepare a preliminary form of
the Company Proxy Statement (the "Company Preliminary Proxy Statement"). The
Company shall (a) file the Company Preliminary Proxy Statement with the SEC
promptly after it has been prepared in a form reasonably satisfactory to the
Company and Parent and (b) use commercially reasonable efforts to promptly
prepare any amendments to the Company Preliminary Proxy Statement required in
response to comments of the SEC or its staff or that the Company with the
advice of counsel deems necessary or advisable and to cause the Company Proxy
Statement to be mailed to the Company's stockholders as soon as reasonably
practicable after the Company Preliminary Proxy Statement, as so amended, is
cleared by the SEC.
5.6 State Takeover Statutes. The Company, Parent and Purchaser will
cooperate to take reasonable steps to (a) exempt the Offer and the Merger from
the requirements of any applicable state takeover law and (b) assist in any
challenge by any of the parties to the validity or applicability to the Offer
or the Merger of any state takeover law.
5.7 Cooperation. Subject to the terms and conditions of this Agreement
and applicable law, each of the parties shall act in good faith and use
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement as soon as
practicable, including such actions or things as any other party may reasonably
request in order to cause any of the conditions to such other party's
obligation to consummate the transactions contemplated by this Agreement to be
fully satisfied. Without limiting the foregoing, the parties shall (and shall
cause their respective subsidiaries, and use reasonable efforts to cause their
respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide assistance to each other in (a) the preparation and filing with the SEC
of the Offer Documents, the Schedule 14D-9, the Company Preliminary Proxy
Statement and the Company Proxy Statement, and any necessary amendments or
supplements thereto; (b) seeking to have the Company Preliminary Proxy
Statement cleared by the SEC as soon as reasonably practicable after filing;
(c) obtaining all necessary consents, approvals, waivers, licenses, permits,
authorizations, registrations, qualifications, or other permissions or actions
by, and giving all
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necessary notices to and making all necessary filings with and applications and
submissions to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic (federal, state or local)
or foreign (collectively, "Governmental Entity") or other Person as soon as
reasonably practicable after filing; (d) providing all such information
concerning such party, its subsidiaries and its officers, directors, partners
and affiliates and making all applications and filings as may be necessary or
reasonably requested in connection with any of the foregoing; (e) in general,
consummating and making effective the transactions contemplated hereby; and (f)
in the event and to the extent required, amending this Agreement so that this
Agreement and the Offer and the Merger comply with the DGCL. The parties shall
(and shall cause their respective affiliates, directors, officers, employees,
agents, attorneys, accountants and representatives to) use their reasonable
efforts to cause the lifting of any permanent or preliminary injunction or
restraining order or other similar order issued or entered by any court or
other Governmental Entity preventing or restricting consummation of the
transactions contemplated hereby in the manner provided for herein. Prior to
making any application to or filing with any Governmental Entity or other
Person in connection with this Agreement, each party shall provide the other
party with drafts thereof and afford the other party a reasonable opportunity
to comment on such drafts.
5.8 Public Announcements. No party hereto shall or shall permit any of
its subsidiaries to (and each party shall use commercially reasonable efforts
to cause its affiliates, directors, officers, employees, agents or
representatives not to) issue any press release or make any public statement
concerning this Agreement or any of the transactions contemplated hereby,
without the prior written consent of the other parties hereto; provided,
however, that a party may, without the prior written consent of the other party
hereto, issue such a press release or make such a public statement to the
extent required by applicable law or any listing agreement with a national
securities exchange by which such party is bound if it has used commercially
reasonable efforts to consult with the other parties and to obtain such
parties' consent but has been unable to do so in a timely manner.
5.9 Acquisition Proposals. Except as contemplated hereby, the Company
shall not (and shall use its best efforts to cause its officers, directors and
employees and any investment banker, financial advisor, attorney, accountant,
or other agent or representative retained by it not to) directly or indirectly,
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal relating to, or that may reasonably be expected to lead
to, the acquisition of all or a significant part of the business and properties
or capital stock of the Company, whether by merger, purchase of assets, tender
offer or otherwise with a third party other than Parent (an "Acquisition
Proposal"), or enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Acquisition Proposal, or agree to
or endorse any Acquisition Proposal, or authorize or permit any of the
officers, directors, employees or agents of the Company or any investment
banker, financial advisor, attorney, accountant or other representative
retained by the Company to take any such action. The Company shall as promptly
as practicable notify Parent of all relevant terms of any such inquiries or
proposals received by the Company and, if such inquiry or proposal is in
writing, the Company shall as promptly as practicable deliver or cause to be
delivered to Parent a copy of such inquiry or proposal. Notwithstanding the
foregoing, nothing shall prohibit the Company's Board of Directors from (a)
furnishing information to, or entering into discussions or negotiations with,
any persons or entity in connection with an unsolicited bona fide proposal in
connection with an Acquisition Proposal if, and only to the extent that (i)
such unsolicited bona fide proposal is on terms that the Company's
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Board of Directors determines it cannot reject, based on applicable fiduciary
duties and the advice of outside counsel (except with respect to furnishing
information) and for which financing, to the extent required, is then
committed, and (ii) prior to furnishing such information to or entering into
discussions or negotiations with, such person or entity the Company provides
written notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity; or (b)
complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
5.10 D&O Indemnification.
(a) From the Effective Time through the later of (i) the sixth
anniversary of the date on which the Effective Time occurs and (ii) the
expiration of any statute of limitations applicable to any claim, action, suit,
proceeding or investigation referred to below, the Surviving Corporation shall
indemnify and hold harmless each present and former director and officer of the
Company, determined as of the Effective Time (the "Indemnified Parties"),
against any claims, losses, liabilities, damages, judgments, fines, fees, costs
or expenses, including without limitation attorneys' fees and disbursements
(collectively, "Costs"), incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time (including, without limitation, the Merger, the
preparation, filing and mailing of the Proxy Statement and the other
transactions and actions contemplated by this Agreement), whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that
the Company would have been permitted, under applicable law, indemnification
agreements existing on the date hereof, the Certificate of Incorporation or
Bylaws of the Company in effect on the date hereof, to indemnify such Person
(and the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
this Section 5.10, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability or obligation it may have to such Indemnified Party except, and only
to the extent, that such failure materially prejudices the Surviving
Corporation. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time), the
Surviving Corporation shall have the right to assume the defense thereof and
the Surviving Corporation shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof, except that
if the Surviving Corporation elects not to assume such defense or counsel for
the Indemnified Parties advises that there are issues that raise conflicts of
interest between the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received. If such
indemnity is not available with respect to any Indemnified Party, then the
Surviving Corporation and the Indemnified Party shall contribute to the amount
payable in such proportion as is appropriate to reflect relative faults and
benefits. In the event that any claim or claims are asserted
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or made within the aforesaid six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until the final disposition
of any and all such claims.
(c) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any present or former director or officer
of the Company, on or prior to the sixth anniversary of the Effective Time, the
provisions of this Section 5.10 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or investigation.
(d) This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to law, contract or otherwise.
(e) To the extent that the Surviving Corporation fails to perform
any of its obligations pursuant to this Section 5.10, Parent shall assume the
obligations and rights of the Surviving Corporation under this Section 5.10.
5.11 Employee Matters.
(a) The Company will terminate all of its employees effective
immediately prior to the Closing Date, and the Company and the Surviving
Corporation shall pay all such terminated employees any and all benefits earned
under the Company Benefit Plans in accordance with their terms including any
amounts owing under any employment agreement or severance agreement, as
described in Section 3.11 of the Company Disclosure Schedule.
(b) Prior to the Closing Date, the Company shall take any and all
action necessary to terminate the HarCor Energy 401(k) Savings Plan ("HarCor
Savings Plan") with such termination to be effective immediately prior to the
Closing Date, and upon the termination of the HarCor Savings Plan, the Company
and the Surviving Corporation shall distribute to all HarCor Savings Plan
participants their account balances thereunder as soon as administratively
possible.
(c) Except for those Company Benefit Plans which the Parent
advises the Company in writing within 30 days following the date of this
Agreement that the Parent wishes to remain in effect following the Closing
Date, the Company shall take any and all action necessary to terminate all
Company Benefit Plans on or before the Closing Date.
(d) Notwithstanding the above, Parent shall be freely able to
contract with or employ, as the case may be, any terminated employee of the
Company without restriction or interference by the Company.
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ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party hereto to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Purchase of Shares. Parent will have accepted for payment and
purchased all Shares validly tendered and not withdrawn pursuant to the Offer.
(b) Stockholder Approval. Unless the Merger is consummated as
contemplated in Section 2.13 hereof, this Agreement shall have been adopted,
and the Merger shall have been approved, by a vote of the holders of a majority
of the outstanding Shares.
(c) No Injunction. No federal or state governmental or regulatory
body or court of competent jurisdiction shall have enacted, issued, promulgated
or enforced any statute, rule, regulation, executive order, decree, judgment,
preliminary or permanent injunction or other order that is in effect and that
prohibits, enjoins or otherwise restrains the consummation of the Merger;
provided, however, that the parties shall use all commercially reasonable
efforts to cause any such decree, judgment, injunction or order to be vacated
or lifted.
(d) Governmental and Regulatory Consents. All material filings
required to be made prior to the Effective Time with, and all material
consents, approvals, permits and authorizations required to be obtained prior
to the Effective Time from, governmental and regulatory authorities or third
parties in connection with the Merger and the consummation of the other
transactions contemplated hereby which are listed in Section 3.4 of the Company
Disclosure Schedule shall have been made or obtained, as the case may be.
6.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
additional conditions, unless waived by the Company:
(a) Accuracy of Representations and Warranties. All representations
and warranties made by Parent and Purchaser herein shall be true and correct in
all material respects on and as of the Effective Time, with the same force and
effect as though such representations and warranties had been made on and as of
the Effective Time, except for changes permitted or contemplated by this
Agreement and except for representations and warranties that are made as of a
specific date or time, which shall be true and correct in all material respects
only as of such specific date or time.
(b) Compliance with Covenants. Each of Parent and Purchaser shall
have performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants, contained in this
Agreement to be performed or complied with by it prior to or on the Effective
Time.
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6.3 Conditions Precedent to the Obligations of Parent and Purchaser. The
obligation of Parent and Purchaser to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
additional conditions, unless waived by either of Parent or Purchaser:
(a) Accuracy of Representations and Warranties. All representations
and warranties made by the Company herein shall be true and correct in all
material respects on and as of the Effective Time, with the same force and
effect as though such representations and warranties had been made on and as of
the Effective Time, except for changes permitted or contemplated by this
Agreement and except for representations and warranties that are made as of a
specific date or time, which shall be true and correct in all material respects
only as of such specific date or time.
(b) Compliance with Covenants. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Effective Time.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the stockholders of the Company, if required by applicable provisions of the
DGCL), prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Effective Time shall
not have occurred on or before 120 days from the date hereof; provided, that
the right to terminate this Agreement under this clause (b) shall not be
available to any party whose misrepresentation in this Agreement or whose
failure to perform any of its covenants and agreements or to satisfy any
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date;
(c) by either the Company or Parent, if any federal or state court
of competent jurisdiction or other federal or state governmental or regulatory
body shall have issued any judgment, injunction, order or decree prohibiting,
enjoining or otherwise restraining the transactions contemplated by this
Agreement and such judgment, injunction, order or decree shall have become
final and nonappealable (provided, however, that the party seeking to terminate
this Agreement pursuant to this clause (c) shall have used commercially
reasonable efforts to remove such judgment, injunction, order or decree) or if
any statute, rule, regulation or executive order promulgated or enacted by any
federal or state governmental authority after the date of this Agreement which
prohibits the consummation of the Offer or the Merger shall be in effect;
(d) by the Company, if (i) Purchaser fails to commence the Offer
as provided in Section 1.1, (ii) the Offer expires or is terminated without any
Shares being purchased thereunder or (iii) Parent fails to purchase validly
tendered Shares in violation of the terms and conditions of the Offer or this
Agreement;
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(e) by Parent, if (i) the Offer is not commenced as provided in
Section 1.1 directly as a result of actions or inaction by the Company or (ii)
the Offer is terminated or expires as a result of the failure of a condition
specified in Annex A hereto or on the expiration of the Offer without the
purchase of any Shares thereunder, unless such termination or expiration has
been caused by or resulted from the failure of Parent or Purchaser to perform
any covenants and agreements of Parent or Purchaser contained in this
Agreement;
(f) prior to the consummation of the Offer, by Parent, if the
Company Board withdraws or modifies in a manner materially adverse to Parent or
Purchaser its favorable recommendation of the Offer or the Merger or shall have
recommended any Acquisition Proposal with a party other than Parent or any of
its affiliates;
(g) by the Company, if this Agreement is not adopted or, unless
the Merger is consummated as contemplated in Section 2.13 hereof, the Merger is
not approved at the Company Stockholders' Meeting by the holders of a majority
of the outstanding Shares;
(h) by Parent, if there shall have been a material breach of any
representation, warranty or material covenant or agreement on the part of the
Company, which is incurable or which is not cured after thirty (30) days'
written notice by Parent to the Company;
(i) by the Company, if there shall have been a material breach of
any representation, warranty or material covenant or agreement on the part of
either of Parent or Purchaser, which is incurable or which is not cured after
thirty (30) days' written notice by the Company to Parent; or
(j) by the Company, if (i) pursuant to Section 5.9 hereof the
Company Board shall withdraw, modify or change its approval or recommendation
of the Offer or the Merger or shall have resolved to do any of the foregoing or
(ii) any Person or group of Persons shall have made an Acquisition Proposal the
acceptance of which the Company Board determines, after consultation with legal
counsel and after the Company Board has satisfied itself that the financing for
the Acquisition Proposal has been committed, is required to comply with its
fiduciary duties under applicable law.
7.2 Effect of Termination. In the event of any termination of this
Agreement pursuant to Section 7.1, this Agreement forthwith shall become void
and of no further force or effect, and no party hereto (or any of its
affiliates, directors, officers, agents or representatives) shall have any
liability or obligation hereunder, except in any such case (a) as provided in
Sections 5.2(b) (Confidentiality), 5.8 (Public Announcements), and 7.3 (Fees
and Expenses), which shall survive any such termination and (b) to the extent
such termination results from the breach by such party of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
7.3 Fees and Expenses.
(a) Whether or not the Offer or the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be
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borne by the party which incurs such cost or expense; provided, that if this
Agreement is terminated pursuant to Section 7.1 as a result of a material
misrepresentation by a party or a material breach by a party of any of its
covenants or arrangements set forth herein, such party shall pay the costs and
expenses incurred by the other party in connection with this Agreement; and
provided, further, that all costs and expenses related to the preparation,
printing, filing and mailing (as applicable) of the Company Proxy Statement and
all SEC and other regulatory filing fees incurred in connection with the
Company Proxy Statement shall be borne equally by the Company, on the one hand,
and Parent and Purchaser, on the other hand.
(b) Notwithstanding the foregoing, provided that neither Parent
nor Purchaser shall be in breach of their respective obligations under this
Agreement, if (i) prior to the consummation of the Offer, the Company Board
terminates this Agreement pursuant to Section 7.1(j) or Parent terminates this
Agreement pursuant to Section 7.1(f) and (ii) as a result thereof, Parent shall
have terminated the Offer, allowed the Offer to expire without purchasing any
Shares thereunder or failed to commence the Offer in accordance with the terms
hereof and (iii) the Company enters into a definitive agreement relating to an
Acquisition Proposal or a business combination or other transaction
contemplated by such Acquisition Proposal shall have been consummated within 12
months following such termination, then the Company shall thereupon pay to
Parent, as liquidated damages, a fee of $1,000,000 in cash, payable in same day
funds. The Company acknowledges that the provisions of this Section 7.3(b) are
an integral part of the transactions contemplated in this Agreement and that,
without such provisions, Parent and Purchaser would not enter into this
Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 No Survival. None of the representations, warranties, covenants or
agreements contained in this Agreement or in any certificate or other
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the covenants and agreements contained in Sections 5.10 (D&O
Indemnification and Insurance), 5.11 (Company Plans) and 5.12 (Severance
Agreements).
8.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) or sent by facsimile (with
immediate confirmation) or nationally recognized overnight courier service, as
follows:
(a) if to Parent or Purchaser, to:
Seneca Resources Corporation
1201 Louisiana, Suite 400
Houston, Texas 77002
Attn: John F. McKnight
Fax: (713) 654-2659
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with a copy (not required as notice) to:
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place, Suite
711 Louisiana
Houston, Texas 77002-2781
Attn: Gary W. Orloff
Fax: (713) 221-1212
(b) if to the Company, to:
HarCor Energy, Inc.
Five Post Oak Park
4400 Post Oak Parkway
Suite 2220
Houston, Texas 77027
Attn: Mark G. Harrington
Fax: (713) 961-9773
with a copy (not required as notice) to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attn: Michael P. Finch
Fax: (713) 615-5282
or to such other Person or address or facsimile number as any party shall
specify by like written notice to the other parties hereto (any such notice of
a change of address to be effective only upon actual receipt thereof).
8.3 Certain Definitions. The following terms, when used in this
Agreement, shall have the following respective meanings:
(a) "affiliate" shall have the meaning assigned to such term in
Section 12(b)-2 of the Exchange Act.
(b) "business day" shall have the meaning set forth in Rule
14d-1(c)(6) under the Exchange Act.
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(c) "Material Adverse Effect" means, with respect to any Person,
any change or effect that is materially adverse to the financial condition or
results of operations of such Person and its subsidiaries, taken as a whole,
excluding in all cases: (i) events or conditions generally affecting the
industry in which such Person and its subsidiaries operate or arising from
changes in general business or economic conditions; (ii) out-of-pocket fees and
expenses (including without limitation legal, accounting, investigatory, and
other fees and expenses) incurred in connection with the transactions
contemplated by this Agreement; (iii) in the case of the Company, the payment
by the Company of all amounts due to any officers or employees of the Company
under employment contracts or other employee benefit plans in effect as of the
date hereof and which have been listed in the Company Disclosure Schedule; (iv)
any effect resulting from any change in law or generally accepted accounting
principles, which affect generally entities such as such Person; and (v) any
effect resulting from compliance by such Person with the terms of this
Agreement.
(d) "Person" means any natural person, corporation, limited
liability company, partnership, unincorporated organization or other entity.
(e) "subsidiary" of any Person means any other corporation or
entity of which such Person owns, directly or indirectly, stock or other equity
interests having a majority of the votes entitled to be cast in the election of
directors of such corporation or entity under ordinary circumstances or of
which such Person owns a majority beneficial interest.
8.4 Entire Agreement. This Agreement (including the schedules, exhibits
and other documents referred to herein), together with the Confidentiality
Agreement referred to in Section 5.2(b), constitutes the entire agreement
between and among the parties hereto and supersedes all prior agreements and
understandings, oral and written, between or among any of the parties with
respect to the subject matter hereof.
8.5 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, benefits or obligations hereunder may be assigned, in whole or in part,
by any party (whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, other than rights conferred upon Indemnified Parties under Section
5.10.
8.6 Amendments. This Agreement may be amended by the parties at any time
prior to the Effective Time; provided, that, after approval of the Merger and
this Agreement by the stockholders of the Company if required under applicable
law, no amendment shall be made that by law requires further approval by the
stockholders of the Company, without such approval. This Agreement may not be
amended or modified except by an instrument in writing signed on behalf of each
of the parties hereto.
8.7 Waivers. At any time prior to the Effective Time, Parent (for Parent
and Purchaser), on the one hand, or the Company, on the other hand, may, to the
extent legally allowed, extend the time specified herein for the performance
of any of the obligations or other acts of the other, waive any
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<PAGE> 41
inaccuracies in the representations and warranties of the other contained
herein or in any document delivered pursuant hereto, or waive compliance by
the other with any of the agreements or covenants of such other party or
parties (as the case may be) contained herein. Any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
the party or parties to be bound thereby. No such extension or waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
breach or failure to strictly comply with the provisions of this Agreement.
The failure of any party to insist on strict compliance with this Agreement or
to assert any of its rights or remedies hereunder or with respect hereto shall
not constitute a waiver of such rights or remedies.
8.8 Captions. The Table of Contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
8.10 Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
8.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to any
applicable principles of conflicts of law, except to the extent that the DGCL
mandatorily applies to the Merger.
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<PAGE> 42
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the date first above written.
HARCOR ENERGY, INC.
By: /s/ MARK G. HARRINGTON
-----------------------------------
Mark G. Harrington
Chairman of the Board and
Chief Executive Officer
SENECA WEST CORP.
By: /s/ WILLIAM M. PETMECKY
------------------------------------
William M. Petmecky
President
SENECA RESOURCES CORPORATION
By: /s/ JAMES A. BECK
-----------------------------------
James A. Beck
President
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<PAGE> 43
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A shall have the meanings
assigned to them in the Agreement to which it is attached (the "Merger
Agreement").
Parent shall not be required to accept for payment, purchase or pay
for any Shares tendered and Parent may terminate or, subject to the terms and
conditions of the Merger Agreement, amend the Offer as to any Shares not then
accepted for payment, shall not be required to accept for payment or pay for
any Shares, or may delay the acceptance for payment of Shares tendered, if (1)
at the expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates, shall not constitute a majority of the outstanding Shares on a
fully diluted basis or (2) at any time after the date of execution of the
Merger Agreement and prior to the acceptance for payment of Shares, any of the
following events shall occur:
(a) there shall have been any action or proceeding
brought by any governmental authority before any federal or state
court, or any order or preliminary or permanent injunction entered in
any action or proceeding before any federal or state court or
governmental, administrative or regulatory authority or agency,
located or having jurisdiction within the United States, or any other
action taken, proposed or threatened, or statute, rule, regulation,
legislation, interpretation, judgment or order proposed, sought,
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to Purchaser, the Company or affiliate of Purchaser or the
Company or the Offer or the Merger, by any legislative body, court,
government or governmental, administrative or regulatory authority or
agency located or having jurisdiction within the United States, which
could reasonably be expected to have the effect of: (i) making
illegal, materially delaying or otherwise restraining or prohibiting
the Offer or the Merger or the acquisition by Parent or Purchaser of
any Shares; (ii) prohibiting or materially limiting the ownership or
operation by Parent, Purchaser or their respective affiliates of any
material portion of their business or assets or those of the Company
or compelling Parent or Purchaser to dispose of or hold separate all
or any material portion of their business or assets or those of the
Company, in each case as a result of the transactions contemplated by
the Merger Agreement; (iii) imposing material limitations on the
ability of Parent or any of its affiliates to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares purchased by them on all matters properly presented to
the stockholders of the Company; or (iv) preventing Parent or any of
its affiliates from acquiring, or to require divestiture by Parent or
any of its affiliates of, any Shares; or
(b) there shall have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) the declaration of any banking moratorium or any
suspension of payments in respect of banks or any limitation (whether
or not mandatory) on the extension of credit by lending institutions
in the United States, (iii) the commencement or any escalation of a
war, material armed hostilities or any other material international or
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national calamity involving the United States, or (iv) in the case of
any of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or
(c) any Person, entity or "group" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than Parent or any of
its affiliates shall have become the beneficial owner (as that term is
used in Rule 13d-3 under the Exchange Act) of more than 50% of the
outstanding Shares; or
(d) the Company shall have breached or failed to comply
in any material respect with any of its obligations under the Merger
Agreement (which breach, if curable, has not been cured within thirty
(30) days following receipt of written notice thereof by Parent
specifying in reasonable detail the basis of such alleged breach), or
any representation or warranty of the Company contained in the Merger
Agreement that is qualified as to materiality shall not have been true
and correct and any such representation and warranty that is not so
qualified shall not have been true and correct in any material
respect, except (i) for changes specifically permitted or contemplated
by the Merger Agreement and (ii) those representations and warranties
that address matters only as to a particular date which are true and
correct as of such date; or
(e) the Merger Agreement shall have been terminated
pursuant to its terms or amended pursuant to its terms to provide for
such termination or amendment of the Offer; or
(f) the Board of Directors of the Company shall have
modified or amended in any manner materially adverse to Parent or
Purchaser or shall have withdrawn its recommendation of the Offer or
the Merger, or shall have resolved to do any of the foregoing; or
(g) Parent shall not have received notice from the holder
or holders of more than 5%, on a fully diluted basis of the Shares
issued and outstanding on the record date for the determination of
stockholders entitled to vote on the Merger that such holders have
exercised or intend to exercise their appraisal rights under the DGCL;
or
(h) the Company shall not have received at least
$12,789,000 (including all material purchase price adjustments) in
immediately available funds from the sale of the Company's
non-California oil and gas assets and shall be entitled to receive an
additional amount in immediately available funds determined under the
Company's agreement with Penroc Oil Company ("Penroc") dated January
15, 1998 for the sale of the Beaurline No. 9 well, Beaurline/McAllen
Ranch Area, South Texas and its pooled or allocated producing unit
(the "Well") as follows: if the Well is restored by sidetrack or
redrill or associated operations, an agreed amount equal to the
present value of the future production from the Well discounted at
10%, as determined by Ryder Scott Company (the "New Reserve
Evaluation"), with payment to be made ten business days after Penroc's
receipt of the New Reserve Evaluation; or
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<PAGE> 45
(i) the Company shall not have retained the proceeds from
the sale of its non-California oil and gas assets or used such
proceeds to repay Company indebtedness or other liabilities incurred
by the Company in the ordinary course of business or pursuant to the
transactions contemplated by the Merger Agreement; or
(j) the Company shall have completed and delivered to
Parent an audit of the Company's financial statements for the fiscal
year ended December 31, 1997, to be performed by the accounting firm
of Arthur Andersen LLP, which reveals material adverse information not
previously disclosed in writing to Parent, or a material variance from
the written or printed disclosures furnished by the Company or its
representatives and used by Parent in its economic models; or
(k) there shall have occurred any event, change, effect
or development having a Material Adverse Effect on the Company;
which, in the good faith judgment of Parent makes it inadvisable to proceed
with the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may be asserted or waived by Parent or Purchaser in whole or in
part at any time or from time to time in its discretion subject to the terms
and conditions of the Merger Agreement. The failure of Parent or Purchaser at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
A-3
