<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Gladstone Resources, Inc.
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
376684-10-6
(CUSIP Number)
William L. Boeing
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
(214) 651-5553
(214) 651-5940 (fax)
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 1, 1998
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the Schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 376684-10-6 PAGE 2 OF 6 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (entities only)
EXCO Resources, Inc. / 74-1492779
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (see instructions)
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (see instructions)
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
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7 SOLE VOTING POWER
NUMBER OF
SHARES 2,963,000(1)(2)
BENEFICIALLY -----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 0
PERSON -----------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
2,963,000(1)(2)
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,963,000(1)(2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (see instructions) [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
69.8%
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14 TYPE OF REPORTING PERSON (see instructions)
CO
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(1) The Reporting Person has entered into a Stock Option Agreement with Mr.
E.B. Brooks, Jr. to acquire 1,910,000 of the shares of Common Stock
reported herein.
(2) The Reporting Person has entered into Shareholder Agreements with the
holders of 1,053,000 shares of Common Stock reported herein. Pursuant to
such agreements, the holders are required to vote such shares in favor of
the Merger Agreement entered into by EXCO Resources, Inc., on the one
hand, and Gladstone Resources, Inc., on the other.
<PAGE> 3
Item 1. Security and Issuer.
(a) Title of Class of
Equity Securities: Common Stock
(b) Name of Issuer: Gladstone Resources, Inc.
(c) Address of Issuer's
Principal Executive Offices: 5646 Milton, Suite 210
Dallas, Texas 75206
Item 2. Identity and Background.
(a) Name: EXCO Resources, Inc.
(b) State of
Organization: Texas
(c) Principal Business: Exploitation and development of
oil and natural gas
(d) Principal Business
and Office Address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
(e) Criminal Convictions during the past five years: None.
(f) Whether, during the past five years, it was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
See Appendix "A" for directors' and officers' information.
Item 3. Source and Amount of Funds or Other Consideration.
The exclusive and irrevocable option to purchase 1,910,000
shares of the Common Stock of Gladstone Resources, Inc., was
granted by Mr. E.B. Brooks, Jr., to the Reporting Person as an
inducement to the Reporting Person to consummate the
transactions contemplated by the Agreement and Plan of Merger
dated as of May 1, 1998 between EXCO Resources, Inc., on the
one hand, and Gladstone Resources, Inc., a Washington
corporation, on the other. In addition, the Reporting Person
paid $100,000 out of its working capital to Mr. E.B. Brooks,
Jr., for said option. The irrevocable proxies that were
granted to the Reporting Person pursuant to the Shareholder
Agreements were granted as an inducement to the Reporting
Person to consummate the transactions contemplated by the
Merger
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<PAGE> 4
Agreement and no funds were expended by the Reporting Person
with regard to the Shareholder Agreements.
Item 4. Purpose of the Transaction.
On May 1, 1998, the Reporting Person entered into an Agreement
and Plan of Merger, dated as of May 1, 1998 (the "Merger
Agreement") with Gladstone Resources, Inc. wherein the
Reporting Person has agreed, subject to certain conditions, to
purchase the stock of Gladstone Resources, Inc. for $.33 per
share. In contemplation of the consummation of the Merger
Agreement, the Reporting Person was granted an option by Mr.
E.B. Brooks, Jr., to purchase 1,910,000 of the shares of
Common Stock reported herein. The option must be exercised,
if at all, on or prior to September 1, 1998. In addition, the
Reporting Person was granted voting power over 1,053,000
shares pursuant to Shareholder Agreements dated May 1, 1998
between EXCO Resources, Inc., on the one hand, and each of Ms.
Deborah Brooks Garrett, Ms. Rebecca B. Feldt and Ms. Carol
Brady, respectively, on the other. If the Merger Agreement is
consummated, then it is currently anticipated that the
Reporting Person will be the surviving corporation.
Item 5. Interest in Securities of the Issuer.
(a) and (b): See Items 7 through 11 on the cover page of this Schedule 13D.
(c) Transactions effected during the past sixty days or since the
most recent filing on Schedule 13D: None.
(d) Rights of others known by the undersigned to receive or direct
the receipt of dividends from, or the proceeds from the sale
of, the securities: None.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
On May 1, 1998, the Reporting Person entered into an Agreement
and Plan of Merger dated as of May 1, 1998 by EXCO Resources,
Inc., on the one hand, and Gladstone Resources, Inc., on the
other, (the "Merger Agreement") wherein the Reporting Person
agrees to purchase, subject to certain conditions, the stock
of Gladstone Resources, Inc. for $.33 per share. If the
Merger Agreement is approved by the stockholders of Gladstone
Resources, Inc., then it is anticipated that Gladstone
Resources, Inc. will merge with and into the Reporting Person
with the Reporting Person surviving. On or about May 1, 1998,
the Reporting Person entered into an exclusive and irrevocable
Stock Option Agreement with Mr. E.B. Brooks, Jr. Said Stock
Option Agreement gives the Reporting Person the right to
acquire an aggregate of 1,910,000 shares of Common Stock at a
purchase price of $.33 per share at the Reporting Person's
sole election. If the Reporting Person exercises said option,
it is anticipated such transaction would close in the second
quarter of 1998. The Reporting Person also entered a
Shareholder Agreement with each of Ms. Rebecca B. Feldt, Ms.
Carol Brady and Ms. Deborah
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<PAGE> 5
Brooks Garrett wherein each agrees to vote her 351,000 shares
to approve the Merger Agreement. If the shares are not voted
as required under the Shareholder Agreements, then the
Reporting Person has an irrevocable proxy to vote the shares.
Item 7. Material to be Filed as Exhibits.
1. Stock Option Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Mr. E.B.
Brooks, Jr., on the other;
2. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Rebecca B.
Feldt, on the other.
3. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Carol
Brady, on the other.
4. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Deborah
Brooks Garrett, on the other.
5. The Merger Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Gladstone
Resources, Inc., on the other.
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<PAGE> 6
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 8, 1998
EXCO RESOURCES, INC.
By: /s/ T.W. EUBANK
--------------------------------------
Name: T.W. Eubank
Title: President
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<PAGE> 7
APPENDIX A
(a) Name: Douglas H. Miller
(b) Residence or business address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Chairman and Chief Executive Officer
of EXCO Resources, Inc., an oil and gas company.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: T.W. Eubank
(b) Residence or business address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: President and director of EXCO
Resources, Inc., an oil and gas company.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: J. Douglas Ramsey
(b) Residence or business address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
A-1
<PAGE> 8
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Chief Financial Officer and director
of EXCO Resources, Inc., an oil and gas company.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: Charles R. Evans
(b) Residence or business address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Vice President of EXCO Resources,
Inc., an oil and gas company.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: Richard E. Miller
(b) Residence or business address: 5735 Pineland Drive
Suite 235
Dallas, Texas 75231
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Secretary and General Counsel of
EXCO Resources, Inc., an oil and gas company.
(d) Criminal Convictions during the past five years: None.
A-2
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(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: Earl E. Ellis
(b) Residence or business address: Benjamin Jacobson & Sons
40 Wall Street
New York, New York 10005
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Director of EXCO Resources, Inc., an
oil and gas company, and a managing partner of Benjamin
Jacobson and Sons, specialists on the New York Stock Exchange.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: J. Michael Muckleroy
(b) Residence or business address: 8925 Memorial Drive
Houston, Texas 77024-5810
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Director of EXCO Resources, Inc., an
oil and gas company, and an independent oil and gas producer.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
A-3
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(a) Name: T. Boone Pickens
(b) Residence or business address: BP Capital, LLC
8117 Preston Road
Suite 260
Dallas, Texas 75225
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Director of EXCO Resources, Inc., an
oil and gas company, and chairman of the board of BP Capital,
LLC and Pickens Fuel Corp.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
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(a) Name: Stephen F. Smith
(b) Residence or business address: Energy Consolidation, Inc.
909 Fannin Street
Suite 3250 - Two Houston Center
Houston, Texas 77010
(c) Present principal occupation or employment and the name,
principal business address of any corporation in which such
employment is conducted: Director of EXCO Resources, Inc., an
oil and gas company, and president of Energy Consolidation,
Inc., a company interested in the acquisition of oil and
natural gas service companies.
(d) Criminal Convictions during the past five years: None.
(e) Whether, during the past five years, he was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject of a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to federal or state securities laws or finding any violation
with respect to such laws: None.
(f) United States
A-4
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1. Stock Option Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Mr. E.B.
Brooks, Jr., on the other;
2. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Rebecca B.
Feldt, on the other.
3. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Carol
Brady, on the other.
4. Shareholder Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Ms. Deborah
Brooks Garrett, on the other.
5. The Merger Agreement dated May 1, 1998, among EXCO
Resources, Inc., on the one hand, and Gladstone
Resources, Inc., on the other.
</TABLE>
<PAGE> 1
EXHIBIT 1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, (the "Agreement") is entered into as of
May 1, 1998, by and between EXCO Resources, Inc., a Texas corporation ("EXCO"),
and E. B. Brooks, Jr. ("Brooks"),
RECITALS
WHEREAS, Brooks is the owner at the date hereof of 1,910,000 shares of
the issued and outstanding capital stock of Gladstone Resources, Inc.
("Gladstone"), which are hereinafter referred to as the "Gladstone Stock"; and
WHEREAS, EXCO and Gladstone are entering into that certain Agreement
and Plan of Merger dated as of even date herewith (the "Merger Agreement"); and
WHEREAS, as both a condition to EXCO's execution of the Merger
Agreement and an inducement to EXCO to execute the Merger Agreement and
undertake the actions and incur the significant costs necessary to consummate
the transactions contemplated by the Merger Agreement, Brooks desires to grant
to EXCO the Option (as defined below).
AGREEMENT
NOW THEREFORE, in consideration of (i) the foregoing; (ii) the sum of
$100,000 paid by EXCO to Brooks; and (iii) the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, Exco and Brooks agree as follows:
1. Grant of Option.
Subject to the terms and conditions set forth herein, Brooks does
hereby grant to EXCO an exclusive and irrevocable option (the "Option") to
acquire the Gladstone Stock for the sum of $0.33 per share (or a total of
$630,300.00, which is hereinafter referred to as the "Exercise Price").
2. Exercise of Option
(a) Term. EXCO may exercise the Option at any time following the
execution hereof by Brooks and EXCO; provided that the right to exercise the
Option pursuant to this Section 2 shall expire and be of no further force and
effect at the earliest to occur of (i) 5:00 p.m., Dallas, Texas time, on the
40th business day following approval of the transactions contemplated by the
Merger Agreement by Gladstone's stockholders; or (ii) September 1, 1998.
(b) Written Notice. In the event EXCO wishes to exercise the Option,
it shall send to Brooks a written notice (the "Notice"; the date of such notice
being herein referred to as the "Notice Date") specifying (i) EXCO's desire to
exercise the Option and (ii) a place and date not
<PAGE> 2
earlier than seven business days nor later than 15 business days from the
Notice Date for the closing of such acquisition (the "Closing Date"); provided
that, if the closing of the acquisition pursuant to the exercise of the Option
(the "Closing") cannot be consummated within such time period by reason of any
applicable law, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of any
governmental or regulatory authority, agency, court or other entity (a
"Governmental Entity") is required in connection with such acquisition, EXCO
and Brooks hereby respectively covenant to one another at EXCO's expense to
promptly file the required notice or application for approval (and cooperate in
the preparation of the same) and shall expeditiously process the same, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be (i) any required
notification period has expired or been terminated or (ii) such approval has
been obtained, and in either event, any requisite waiting period has passed.
(c) Expiration. Notwithstanding Section 2(b), in no event shall
the Closing Date be more than 12 months after the related Notice Date, and if
the Closing Date shall not have occurred within 12 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired.
3. Payment and Delivery of Certificates
(a) Payment of Purchase Price. On the Closing Date, EXCO shall
pay to Brooks, in immediately available funds by certified check or by wire
transfer to a bank account designated by Brooks, an amount equal to the
Exercise Price.
(b) Delivery of Certificates. At such Closing, simultaneously
with the delivery of the consideration specified in Section 3(a), Brooks shall
deliver to EXCO a certificate or certificates representing the Gladstone Stock
(duly executed in blank or accompanied by duly executed stock powers if the
Gladstone Stock is delivered by Brooks), which Gladstone Stock shall be free
and clear of all Liens.
4. Representations and Warranties of Brooks.
Brooks hereby represents and warrants to EXCO that:
(a) Authorization and Validity of Agreement. Brooks has full
right, power, capacity and lawful authority to execute and deliver this
Agreement and to consummate and perform the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Brooks and,
assuming the due execution and delivery by EXCO, this Agreement constitutes the
legal, valid, and binding obligation of Brooks, enforceable against Brooks in
accordance with its terms.
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<PAGE> 3
(b) Good Title. The Gladstone Stock to be transferred to EXCO
upon due exercise of the Option, shall be validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, and the
delivery of the certificates representing the Gladstone Stock to EXCO pursuant
hereto will transfer to EXCO good and valid title to such Gladstone Stock free
and clear of all Liens.
(c) No Conflict. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the Articles of Incorporation or Bylaws of Gladstone,
or of any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to Gladstone, except as stated in the Merger
Agreement.
(c) No Consent. No authorization, consent or approval of, or any
filing with, any public body or authority is necessary for consummation by it
of the transactions contemplated by this Agreement.
5. Representations and Warranties of EXCO.
EXCO hereby represents and warrants to Brooks as follows:
(a) Authority. EXCO has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of EXCO. This
Agreement has been duly and validly executed and delivered by EXCO and,
assuming the due execution and delivery by Brooks, this Agreement constitutes a
valid and binding obligation of EXCO, enforceable against EXCO in accordance
with its terms.
6. Adjustment upon Share Issuances, Changes in Capitalization,
Etc.
(a) In the event of any change in Gladstone Stock by reason of,
without limitation, a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities to be delivered by Brooks shall be adjusted appropriately, and
proper provision shall be made in the agreements governing such transaction, so
that EXCO shall receive upon exercise of the Option the number and class of
shares or other securities or property that EXCO would have received if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.
(b) In the event that Gladstone shall enter into an agreement (i)
to consolidate with or merge into any person, other than EXCO or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than EXCO or one of
its subsidiaries, to merge into Gladstone and Gladstone shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of
-3-
<PAGE> 4
Gladstone Stock shall be changed into or exchanged for stock or other
securities of Gladstone or any other person or cash or any other property, or
the then outstanding shares of Gladstone Stock shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than EXCO or one of its subsidiaries, then,
and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth in this Agreement, be
converted into, or exchanged for, an option to acquire the same consideration
received by the holders of Gladstone Stock pursuant to such a transaction had
the Option been exercised in full prior to the consummation of such
transaction. The provisions of this Agreement, including Sections 1, 2 and 6,
shall apply with appropriate adjustments to any securities for which the Option
becomes exercisable pursuant to this Section 6.
7. Termination.
In the event the Merger is not consummated on or before September 1,
1998, Brooks shall be obligated to return to EXCO the $100,000.00 payment
referred to in the recital of consideration on page 1 hereof; provided,
however, Brooks shall be under no obligation to return such payment if the
failure to consummate the Merger is attributable to EXCO's failure to obtain
financing for the Merger.
8. Miscellaneous:
(a) Expenses.
Except as otherwise provided in the Merger Agreement, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own counsel.
(b) Waiver and Amendment.
Any provision of this Agreement may be waived at any time by the party
that is entitled to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement
(including other documents and instruments referred to herein or therein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. If any term,
provision, covenant or
-4-
<PAGE> 5
restriction of this Agreement is held by a court of competent jurisdiction or a
governmental entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(d) 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 conflicts of
law rules.
(e) Descriptive Headings; Gender.
The descriptive headings contained herein are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever required by the context of this Agreement, the
singular shall mean the plural, the male gender shall include the female gender
and the neuter, and vice versa.
(f) Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (with confirmation)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to EXCO: EXCO Resources, Inc.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
Attention: T.W. Eubank, President
Telephone: 214-368-2084
Facsimile: 214-368-2087
If to Brooks: Mr. E. B. Brooks, Jr.
210 Meadows Building
Dallas, Texas 75206
(g) Counterparts.
This Agreement and any amendments hereto may be executed in multiple
counterparts, each of which shall be considered one and the same agreement and
shall become effective when all counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
(h) Assignment.
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Neither this Agreement nor any of the rights, interests or obligations
hereunder or under the Option shall be assigned by Brooks or EXCO (whether by
operation of law or otherwise) without the prior written consent of the other
parties hereto; provided, however, EXCO may assign its rights, interests or
obligations under this Agreement or the Option to any wholly-owned subsidiary
of EXCO without the consent of Brooks. Subject to the first sentence of this
Section, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(i) Further Assurances.
In the event of any exercise of the Option by EXCO, Brooks and EXCO
shall execute and deliver all other documents and instruments and take all
other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
(j) Specific Performance.
The parties hereto agree that this Agreement may be enforced by either
party through specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such equitable
relief and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
EXCO Resources, Inc.
By:/s/ DOUGLAS H. MILLER
-------------------------------------
Douglas H. Miller
Chief Executive Officer
/s/ E. B. BROOKS, JR.
-------------------------------------
E. B. Brooks, Jr.
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EXHIBIT 2
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of May 1, 1998, by and between EXCO
Resources, Inc., a Texas corporation (the "Buyer"), and the shareholder listed
on the signature page hereof (the "Shareholder").
WHEREAS, the Shareholder, as of the date hereof, is the owner of the
respective number of shares of (i) Common Stock, par value $0.01 per share (the
"Gladstone Common Stock"), of Gladstone Resources, Inc., a Washington
corporation ("Gladstone"), (the "Gladstone Shares") set forth below the name of
the Shareholder on the signature page hereof;
WHEREAS, in reliance in part upon the execution and delivery of this
Agreement, the Buyer will enter into an Agreement and Plan of Merger, dated of
even date herewith, a copy of which has previously been delivered to Shareholder
and the receipt of which Shareholder hereby acknowledges (the "Merger
Agreement;" capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement), with Gladstone which provides that, among other
things, upon the terms and subject to the conditions thereof Gladstone will be
merged with and into Buyer (the "Merger"), as provided in the Merger Agreement;
WHEREAS, in reliance upon the execution and delivery of this Agreement,
the Buyer will enter into a Stock Option Agreement, dated as of the date hereof
(the "Stock Option Agreement"), with E. B. Brooks, Jr.("Brooks") pursuant to
which Brooks has granted to the Buyer an option to acquire shares of Gladstone;
and
WHEREAS, to induce the Buyer to enter into the Merger Agreement and the
Stock Option Agreement and to incur the obligations set forth therein, the
Shareholder is entering into this Agreement pursuant to which the Shareholder
agrees to vote in favor of the Merger and certain other matters as set forth
herein upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Voting of Shares; Irrevocable Proxy.
The Shareholder agrees that until the earlier of (a) the Effective Time
and (b) the termination of the Merger Agreement (the earliest of such dates
being hereinafter referred to as the "Expiration Date"), the Shareholder shall
vote all Gladstone Shares owned by the Shareholder at any meetings of
Gladstone's shareholders (whether annual or special and whether or not an
adjourned or postponed meeting), or, if applicable, take action by written
consent (x) for adoption of the Merger Agreement and in favor of the Merger and
any other transaction contemplated by the Merger Agreement, as such Merger
Agreement may be modified or amended from time to time (but not to reduce the
consideration to be received by the Shareholder for her shares of Gladstone
Common Stock, and (y) against any action, omission or agreement which would
impede or interfere with, or have the effect of discouraging, the Merger,
including, without limitation, any
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Acquisition Proposal (as hereinafter defined) other than the Merger. Any such
vote shall be cast or consent shall be given in accordance with such procedures
relating thereto as shall ensure that it is duly counted for purposes of
determining that a quorum is present and for purposes of recording the results
of such vote or consent.
In the event that the Shareholder shall fail to comply with the
provisions of this Section 1 (as determined by the Buyer in good faith), the
Shareholder hereby agrees that such failure shall result, without any further
action by the Shareholder, in the irrevocable appointment of the Buyer, until
the Expiration Date, as his attorney-in-fact and proxy, with full power of
substitution, to vote and otherwise act (by written consent or otherwise) with
respect to the Gladstone which the Shareholder is entitled to vote at any
meeting of shareholders (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on the matters and in the manner specified in Section 1 above. THE
SHAREHOLDER ACKNOWLEDGES THAT THIS PROXY IS COUPLED WITH AN INTEREST AND
CONSTITUTES, AMONG OTHER THINGS, AN INDUCEMENT FOR THE BUYER TO ENTER INTO THE
MERGER AGREEMENT, IS IRREVOCABLE AND SHALL NOT BE TERMINATED BY OPERATION OF LAW
UPON THE OCCURRENCE OF ANY EVENT, INCLUDING, WITHOUT LIMITATION, THE DEATH OR
INCAPACITY OF THE SHAREHOLDER.
Section 2. Covenants of the Shareholder.
The Shareholder covenants and agrees for the benefit of the Buyer that,
until the Expiration Date, she:
(a) will not sell, transfer, pledge, hypothecate, encumber,
assign, tender or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, encumbrance, assignment, tender or
other disposition of (any one or more of which, a "Transfer"), any of
the Gladstone Shares owned by her unless, in connection with such
Transfer, the transferee executes a counterpart of this Agreement
agreeing to be bound by the terms hereof;
(b) will, other than as expressly contemplated by this
Agreement, not grant any powers of attorney or proxies or consents in
respect of any of the Gladstone Shares owned by her, deposit any of the
Gladstone Shares owned by her into a voting trust, enter into a voting
agreement with respect to any of the Gladstone Shares owned by her or
otherwise restrict the ability of the holder of any of the Gladstone
Shares owned by her to freely exercise all voting rights with respect
thereto;
(c) will not cause Gladstone to take any action or (ii)
consent to Gladstone taking any action, prohibited by Section 7.1 of
the Merger Agreement;
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(d) will not knowingly take any action whatsoever that, based
on advice from the Buyer's auditors, would prevent the Merger from
qualifying for "pooling of interests" accounting treatment;
(e) will use her reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement;
(f) will not exercise any appraisal or dissenter's rights, if
any, with respect to the Gladstone Shares;
(g) will cooperate in all respects with Buyer in the
preparation of proxy materials to be filed with the Securities and
Exchange Commission (the "SEC") and any state securities authorities as
contemplated by the Merger Agreement, including, without limitation,
providing all data and information that Buyer shall deem necessary for
said filings and as shall be required by the Securities Act and the
Exchange Act. Any information supplied by Shareholder specifically for
use in the preparation of and inclusion in proxy materials shall not,
at the date such proxy materials (or any amendment thereof or
supplement thereto) are filed with the SEC, at the time of the
Gladstone Meeting and at the Effective Time, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event relating to Shareholder
should be discovered by Shareholder which renders the information
previously provided by Shareholder specifically for use in the
preparation of and inclusion in the proxy materials inaccurate in any
material respect, Shareholder shall promptly inform Buyer in writing;
(h) at Closing Shareholder shall deliver to Buyer: (i) a
release of all claims Shareholder may have against Buyer or Gladstone
(except for claims arising out of this Agreement, the Merger Agreement
and other agreements, certificates and documents entered into pursuant
to the Merger Agreement) and (ii) a certificate signed by Shareholder
confirming the accuracy of the representations made by Shareholder in
this Agreement as if such representations were made at the Closing
Date; and
Section 3. Covenants of the Buyer.
The Buyer covenants and agrees for the benefit of the Shareholder that
(a) immediately upon execution of this Agreement, the Buyer shall enter, and
cause Gladstone to enter, into the Merger Agreement, and (b) until the
Expiration Date, it shall use its reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement, consistent with the
terms and conditions of each such agreement.
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Section 4. Representations and Warranties of the Shareholder.
The Shareholder represents and warrants to the Buyer that: (a) the
execution, delivery and performance by the Shareholder of this Agreement will
not conflict with, require a consent, waiver or approval under, or result in a
breach or a default any contract, commitment or other obligations (written or
oral) to which the Shareholder is bound; (b) this Agreement has been duly
executed and delivered by the Shareholder and constitutes a valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except as may be limited by bankruptcy, insolvency and other
laws relating to and affecting creditors' rights generally and equitable
remedies; (c) other than as set forth herein; the Shareholder has not entered
into an irrevocable proxy with respect to the Gladstone Shares; (d) as of the
date hereof, she is, and at the Closing Date (as defined in the Merger
Agreement) she will be, the sole beneficial owner of the number of shares of
Gladstone Common Stock shown below her name on the signature page hereto; (e)
the Shareholder has the power, authority and legal capacity to execute and
deliver this Agreement and perform her obligations under this Agreement; and (f)
as of the date hereof, there are, and at the Closing Date there will be, no
actions, suits or proceedings pending or threatened involving the ownership by
her of her Gladstone Shares or her ability to execute and deliver this
Agreement.
The representations and warranties contained herein shall be made as of
the date hereof and as of the Closing Date (as defined in the Merger Agreement)
and Shareholder shall deliver a certificate to that effect at Closing.
Section 5. Adjustments; Additional Shares.
In the event (a) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of
Gladstone on, of or affecting the Gladstone Shares of the Shareholder, or (b)
the Shareholder shall acquire voting rights with respect to any additional
shares of Gladstone Common Stock or other securities of Gladstone, including any
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 1 hereof, then the terms of this Agreement
shall apply to the shares of capital stock held by the Shareholder immediately
following the effectiveness of the events described in clause (a) or the
Shareholder becoming the beneficial owner thereof, as described in clause (b),
as though they were Gladstone Shares hereunder. As soon as practicable after the
receipt of such other capital stock or securities, the Shareholder shall
surrender to Gladstone, as the case may be, all certificates or instruments
representing such for the purpose of affixing the legend set forth in Section 22
hereof.
Section 6. Actions After Closing Date.
Shareholders and Buyer shall cooperate with one another in good faith
in connection with the defense by either of any suit, action, claim or
proceeding, or in connection with an audit or request for information by any
taxing authority, arising out of or relating to the conduct of Gladstone's
business prior to or after the Closing. Such cooperation shall include, at the
expense of the requesting party, supplying such factual and technical
information as one party shall possess
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<PAGE> 5
and another may reasonably require in connection with any such defense, audit
or request for information or to respond to discovery proceedings in any such
suit, action, claim or proceeding. No party, however, shall be required to
cooperate if such cooperation would prejudice the rights of the party called
upon to provide information.
Section 7. Indemnities.
(a) Subject to the other provisions of this Section 7, the
Shareholder agrees to defend, indemnify, and hold Buyer, its successors
and assigns, and its respective officers, directors, shareholders,
agents and employees, harmless from and against, and promptly reimburse
them for any and all losses, expenses, damages, deficiencies,
liabilities, payments, penalties, litigation, demands, defenses,
judgments, proceedings, costs, obligations, settlement costs, and
attorneys', accountants' and other professional advisors' fees
(including costs of investigation and preparation) of any kind or
nature whatsoever (collectively, "Losses"), directly or indirectly
arising out of, resulting from, relating to or in connection with any
breach of, inaccuracy in, or nonperformance of, any representation,
warranty, covenant, or agreement of (i) Gladstone contained in the
Merger Agreement or (ii) Shareholder contained in this Agreement.
Shareholder is considered a direct indemnitor of Buyer and in no event
shall Buyer be required to pursue any indemnity claim hereby against
Gladstone or any other indemnitor.
(b) Subject to the other provisions of this Section 7, Buyer
agrees to defend, indemnify, and hold Shareholder, her heirs,
successors, assigns and agents, harmless from and against, and promptly
reimburse her for, any and all Losses directly or indirectly arising
out of, resulting from, relating to or in connection with any breach
of, inaccuracy in, or nonperformance of, any representation, warranty,
covenant, or agreement of Buyer contained in this Agreement or the
Merger Agreement.
(c) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Buyer by the Shareholder provided for in
subsection (a) of this Section 7: (i) as to the Shareholder together
with all of the other Gladstone shareholders executing an agreement
similar to this Agreement combined (collectively the "Gladstone
Shareholders"), the aggregate of all Losses that may be recovered
against the Gladstone Shareholders pursuant to Section 7(a), together
with all Losses that may be recovered against Gladstone under or
pursuant to the Merger Agreement, shall not exceed $1,400,000 and such
indemnity by the Gladstone Shareholders shall be applicable only to the
extent the aggregate of all Losses exceed the sum of $100,000 (ii) the
representations, warranties, covenants and agreements (other than those
in Section 6, 7 (to the extent only that a claim for indemnity has been
asserted by Buyer, by notice to the Shareholder prior to the first
anniversary of the Closing Date), 8 and 10 through 21) of the
Shareholder contained in this Agreement shall not survive past the
first anniversary of the Closing Date; and (iii) the indemnity provided
in subsection (a) of this Section 7, as hereinabove limited, shall be
the sole remedy of Buyer against the Shareholder with respect to any
breach, inaccuracy or nonperformance of any representation, warranty,
covenant or agreement of the Shareholder contained in this Agreement,
subject to Section 10 hereof.
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(d) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Shareholder by Buyer provided for in
subsection (b) of this Section 7: (i) as to all Gladstone Shareholders
the aggregate of all Losses that may be recovered by the Gladstone
Shareholders collectively pursuant to Section 7(b) shall not exceed
$1,400,000, together with all Losses that may be recovered against
Buyer under or pursuant to the Merger Agreement, and such indemnity by
Buyer shall be applicable only to the extent the aggregate of all
Losses exceed $100,000; (ii) the representations, warranties, covenants
and agreements (other than those in Sections 6, 7 (to the extent only
that a claim for indemnity has been asserted by a Shareholder, by
notice to Buyer prior to the first anniversary of the Closing Date), 8,
9 and 10 through 21), of Buyer contained in this Agreement shall not
survive past the first anniversary of the Closing Date; and (iii) the
indemnity provided in subsection (b) of this Section 7, as hereinabove
limited, shall be the sole remedy of Shareholder against Buyer with
respect to any breach, inaccuracy or nonperformance of any
representation, warranty, covenant or agreement of Buyer contained in
this Agreement, subject to Section 9 hereof.
(e) The defense of any indemnity claimed herein shall be
governed as follows:
(i) If any of the persons entitled to indemnification
hereunder (the "Indemnitee") receives notice of any claim or
commencement of any action or proceeding (an "Asserted
Liability") with respect to which another person (the
Indemnitor") is obligated to provide indemnification pursuant
to this Section 7, the Indemnitee shall promptly notify the
Indemnitor, describing the Asserted Liability in reasonable
detail and indicating the amount (which may be estimated) of
the loss, expense, damage, liability, or obligation that has
been or may be asserted by the Indemnitee against the
Indemnitor.
(ii) The failure of the Indemnitee to give such
notice shall not result in a loss of the Indemnitee's right to
indemnification under this Section 7 unless such failure
prejudices the Indemnitor's ability to defend against the
Asserted Liability.
(iii) No settlement or compromise of an Asserted
Liability may be made by the Indemnitee without the written
consent of the Indemnitor.
(iv) If the Indemnitor so elects, the Indemnitor, at
the Indemnitor's expense, shall assume the defense of the
Asserted Liability and shall have the right to settle or
compromise the same, except that if the Indemnitee (upon the
advice of counsel) reasonably objects to such assumption on
the ground that there may be legal defenses available to the
Indemnitee that are different from or in addition to those
available to the Indemnitor, then the Indemnitee shall have
the right to employ separate counsel approved by the
Indemnitor.
(v) If the Indemnitor assumes the defense of the
Asserted Liability, the Indemnitor shall not be liable for the
fees and expenses of the Indemnitee's counsel incurred
thereafter in connection with the Asserted Liability.
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(vi) In no event shall the Indemnitor be liable for
the fees and expenses of more than one counsel for any, some
or all Indemnities in any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, unless in the
reasonable opinion of such counsel, there is, under applicable
standards of professional conduct, a conflict on any
significant issue between the positions of any two
Indemnitees.
(f) THE INDEMNIFICATION PROVIDED IN THIS SECTION 7 SHALL BE
APPLICABLE WHETHER OR NOT ANY NEGLIGENCE OF THE INDEMNITEE IS ALLEGED
OR PROVEN. INDEMNITEE SHALL TAKE REASONABLE ACTIONS TO MITIGATE ANY
DAMAGES UPON BECOMING AWARE OF ANY EVENT GIVING RISE TO A BREACH ON THE
PART OF THE INDEMNITOR.
Section 8. Transfer of Claims.
Subject to and effective upon consummation of the Closing and the
receipt in full of the consideration paid to the Shareholder under Section 3.1
of the Merger Agreement, the Shareholder hereby transfers to Buyer by virtue of
her execution of this Agreement and without any further action or writing
required, any and all claims and causes of action, whether actual, absolute,
contingent or otherwise, the Shareholder might otherwise assert against
Gladstone or Gladstone's officers, directors or representatives based on events
occurring prior to the Closing Date, related directly or indirectly to Gladstone
or the Shareholder's investment in Gladstone; provided, however, that Buyer
hereby covenants not to sue upon, pursue or enforce any such claim or cause of
action so transferred to Buyer and agrees not to transfer any such claim or
cause of action.
Section 9. Specific Performance.
The Shareholder acknowledges that the agreements contained in this
Agreement are an integral part of the transactions contemplated by the Merger
Agreement and the Stock Option Agreement and that, without these agreements, the
Buyer, would not enter into the Merger Agreement or the Stock Option Agreement,
and acknowledges that damages may be an inadequate remedy for any breach by it
of the provisions of this Agreement. Accordingly, the Shareholder and the Buyer
each agree that the obligations of the parties hereunder shall be specifically
enforceable and neither party shall take any action to impede the other from
seeking to enforce such right of specific performance. Both parties further
agree (a) that specific performance shall be the sole remedy for a breach under
this Agreement for which damages are inadequate, and (b) to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provisions is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
Section 10. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be effective upon receipt (or refusal of receipt), shall be in
writing and shall be delivered in person, by telecopy (receipt confirmed),
overnight courier services (receipt confirmed), or by mail
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(registered or certified mail, postage prepaid, return receipt requested) to the
Shareholder at the address listed on the signature page hereof, and to the Buyer
at 5735 Pineland Drive, Suite 235, Dallas, Texas 75231, Attention: President,
facsimile number (214) 368-2087, or to such other address as any party may have
furnished to the other in writing in accordance herewith.
Section 11. Binding Effect.
Upon execution and delivery of this Agreement by the Buyer and upon
execution and delivery of agreements virtually identical in form and substance
to this Agreement by the Buyer , this Agreement shall become effective as to the
Shareholder at the time the Shareholder executes and delivers this Agreement.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
Section 12. Assignment.
The Buyer may, without the consent of the Shareholder, assign its
rights hereunder to any direct or indirect wholly owned subsidiary of the Buyer,
provided that any such assignment shall not affect the obligations of the Buyer
hereunder.
Section 13. Governing Law.
THIS AGREEMENT IS MADE PURSUANT TO, WILL BE CONSTRUED UNDER, AND WILL
BE CONCLUSIVELY DEEMED FOR ALL PURPOSES TO HAVE BEEN EXECUTED AND DELIVERED
UNDER, THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF THE LAW, EXCEPT TO THE EXTENT THAT WASHINGTON GENERAL
CORPORATION LAW SHALL GOVERN THE INTERNAL AFFAIRS OF GLADSTONE. THE OBLIGATIONS
AND UNDERTAKINGS OF EACH OF THE PARTIES TO THIS AGREEMENT SHALL BE PERFORMABLE
IN DALLAS COUNTY, TEXAS.
Section 14. Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same agreement.
Section 15. Effect of Headings.
The section headings are for convenience only and shall not affect the
construction hereof.
Section 16. Additional Agreements; Further Assurance.
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action 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. The Shareholder will provide the Buyer with all documents
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which may reasonably be requested by the Buyer and will take reasonable steps to
enable the Buyer to obtain all rights and benefits it hereunder.
Section 17. Amendment; Waiver.
No amendment or waiver of any provision of this Agreement or consent to
departure therefrom shall be effective unless in writing and signed by the Buyer
and the Shareholder, in the case of an amendment, or by the party which is the
beneficiary of any such provision, in the case of waiver or a consent to
departure therefrom.
Section 18. Gender.
Whenever required by the context of this Agreement, the singular shall
include the plural, the male gender shall include the female gender and the
neuter, and vice versa.
Section 19. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
Section 20. Entire Agreement.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
Section 21. Choice of Forum; Consent to Service of Process.
The parties hereto agree that any suit, action or proceeding arising
out of or relating to this Agreement or any agreement or obligation delivered in
connection with this Agreement or any judgment entered by any court in respect
thereof shall be brought in the Courts of the State of Texas, County of Dallas
or in the United States District Court for the Northern District of Texas and
each such party hereby submits to the exclusive jurisdiction of such courts for
the purpose of any such suit, action or proceeding relating to this Agreement or
any related agreement or obligation. The Shareholder hereby agrees that until
the 2nd anniversary of the Closing Date of the Merger Agreement, service of all
writs, process and summonses in any such suit, action or proceeding brought in
the United State may be made upon CT Corporation System at its offices located
at 350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address of
CT
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Corporation System), and Shareholder hereby irrevocably appoints CT Corporation
System his true and lawful attorney-in-fact in his name, place and stead to
accept such service of any and all writs, process and summonses, and agrees that
the failure of CT Corporation System to give to Shareholder any notice of any
such service of process shall not impair or affect the validity of such service
or of any judgment based thereon. Contemporaneously with any service upon CT
Corporation System hereby, Buyer shall mail by certified or registered United
States Mail, postage prepaid with return receipt requested, a copy of such writ,
process or summons to Shareholder at the address shown on the signature page (or
any other address provided by Shareholder to Buyer in writing). Buyer hereby
agrees that notwithstanding any Federal or state rule of civil procedure to the
contrary, any response of Shareholder to the initiation of such proceeding shall
not be due prior to the 40th day following service upon CT Corporation System.
Each party hereto hereby irrevocably waives any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any agreement or obligation
delivered in connection with this Agreement, brought in the Courts of the State
of Texas, County of Dallas or the United States District Court for the Northern
District of Texas, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 22. Legend.
As soon as practicable following the execution of this Agreement by
Shareholder, Shareholder shall deliver to Gladstone, as the case may be, the
Gladstone Shares held by Shareholder. Gladstone shall affix to each certificate
the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A SHAREHOLDER AGREEMENT (THE "SHAREHOLDER AGREEMENT") AND A STOCK OPTION
AGREEMENT, EACH DATED May 1, 1998, BETWEEN THE HOLDER OF THESE SHARES AND EXCO
RESOURCES, INC. A COPY OF THE SHAREHOLDER AGREEMENT IS ON FILE WITH THE
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES AND MAY BE OBTAINED BY REQUESTING
SAME FROM THE CORPORATION'S SECRETARY AT 210 MEADOWS BUILDING < DALLAS, TEXAS
75206. THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, ASSIGNED, TENDERED OR
OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE WITH THE SHAREHOLDER AGREEMENT.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT OF AN
IRREVOCABLE PROXY, COUPLED WITH AN INTEREST, GRANTED TO EXCO RESOURCES, INC.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto all as of the day and year first above written.
EXCO Resources, INC.
By: /s/ DOUGLAS H. MILLER
-----------------------------------
Douglas H. Miller
Chief Executive Officer
Shareholder:
/s/ CAROL BRADY
- -----------------------------------
Carol Brady
Address: 9703 Fitzroy Cir.
Dallas, Tx 75238
Number of Gladstone Shares: 351,000
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Carol Brady, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me under oath that
he/she executed the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND and the seal of my office in Dallas County, Texas,
this the 30th day of April, 1998.
/s/ BARBARA MCCARLEY
--------------------------------------------
Notary Public in and for the State of Texas
My commission expires: 1/06/02
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[Notary Public Seal]
11
<PAGE> 1
EXHIBIT 3
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of May 1, 1998, by and between EXCO
Resources, Inc., a Texas corporation (the "Buyer"), and the shareholder listed
on the signature page hereof (the "Shareholder").
WHEREAS, the Shareholder, as of the date hereof, is the owner of the
respective number of shares of (i) Common Stock, par value $0.01 per share (the
"Gladstone Common Stock"), of Gladstone Resources, Inc., a Washington
corporation ("Gladstone"), (the "Gladstone Shares") set forth below the name of
the Shareholder on the signature page hereof;
WHEREAS, in reliance in part upon the execution and delivery of this
Agreement, the Buyer will enter into an Agreement and Plan of Merger, dated of
even date herewith, a copy of which has previously been delivered to Shareholder
and the receipt of which Shareholder hereby acknowledges (the "Merger
Agreement;" capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement), with Gladstone which provides that, among other
things, upon the terms and subject to the conditions thereof Gladstone will be
merged with and into Buyer (the "Merger"), as provided in the Merger Agreement;
WHEREAS, in reliance upon the execution and delivery of this Agreement,
the Buyer will enter into a Stock Option Agreement, dated as of the date hereof
(the "Stock Option Agreement"), with E. B. Brooks, Jr.("Brooks") pursuant to
which Brooks has granted to the Buyer an option to acquire shares of Gladstone;
and
WHEREAS, to induce the Buyer to enter into the Merger Agreement and the
Stock Option Agreement and to incur the obligations set forth therein, the
Shareholder is entering into this Agreement pursuant to which the Shareholder
agrees to vote in favor of the Merger and certain other matters as set forth
herein upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Voting of Shares; Irrevocable Proxy.
The Shareholder agrees that until the earlier of (a) the Effective Time
and (b) the termination of the Merger Agreement (the earliest of such dates
being hereinafter referred to as the "Expiration Date"), the Shareholder shall
vote all Gladstone Shares owned by the Shareholder at any meetings of
Gladstone's shareholders (whether annual or special and whether or not an
adjourned or postponed meeting), or, if applicable, take action by written
consent (x) for adoption of the Merger Agreement and in favor of the Merger and
any other transaction contemplated by the Merger Agreement, as such Merger
Agreement may be modified or amended from time to time (but not to reduce the
consideration to be received by the Shareholder for her shares of Gladstone
Common Stock, and (y) against any action, omission or agreement which would
impede or interfere with, or have the effect of discouraging, the Merger,
including, without limitation, any
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Acquisition Proposal (as hereinafter defined) other than the Merger. Any such
vote shall be cast or consent shall be given in accordance with such procedures
relating thereto as shall ensure that it is duly counted for purposes of
determining that a quorum is present and for purposes of recording the results
of such vote or consent.
In the event that the Shareholder shall fail to comply with the
provisions of this Section 1 (as determined by the Buyer in good faith), the
Shareholder hereby agrees that such failure shall result, without any further
action by the Shareholder, in the irrevocable appointment of the Buyer, until
the Expiration Date, as his attorney-in-fact and proxy, with full power of
substitution, to vote and otherwise act (by written consent or otherwise) with
respect to the Gladstone which the Shareholder is entitled to vote at any
meeting of shareholders (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on the matters and in the manner specified in Section 1 above. THE
SHAREHOLDER ACKNOWLEDGES THAT THIS PROXY IS COUPLED WITH AN INTEREST AND
CONSTITUTES, AMONG OTHER THINGS, AN INDUCEMENT FOR THE BUYER TO ENTER INTO THE
MERGER AGREEMENT, IS IRREVOCABLE AND SHALL NOT BE TERMINATED BY OPERATION OF LAW
UPON THE OCCURRENCE OF ANY EVENT, INCLUDING, WITHOUT LIMITATION, THE DEATH OR
INCAPACITY OF THE SHAREHOLDER.
Section 2. Covenants of the Shareholder.
The Shareholder covenants and agrees for the benefit of the Buyer that,
until the Expiration Date, she:
(a) will not sell, transfer, pledge, hypothecate, encumber,
assign, tender or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, encumbrance, assignment, tender or
other disposition of (any one or more of which, a "Transfer"), any of
the Gladstone Shares owned by her unless, in connection with such
Transfer, the transferee executes a counterpart of this Agreement
agreeing to be bound by the terms hereof;
(b) will, other than as expressly contemplated by this
Agreement, not grant any powers of attorney or proxies or consents in
respect of any of the Gladstone Shares owned by her, deposit any of the
Gladstone Shares owned by her into a voting trust, enter into a voting
agreement with respect to any of the Gladstone Shares owned by her or
otherwise restrict the ability of the holder of any of the Gladstone
Shares owned by her to freely exercise all voting rights with respect
thereto;
(c) will not cause Gladstone to take any action or (ii)
consent to Gladstone taking any action, prohibited by Section 7.1 of
the Merger Agreement;
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<PAGE> 3
(d) will not knowingly take any action whatsoever that, based
on advice from the Buyer's auditors, would prevent the Merger from
qualifying for "pooling of interests" accounting treatment;
(e) will use her reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement;
(f) will not exercise any appraisal or dissenter's rights, if
any, with respect to the Gladstone Shares;
(g) will cooperate in all respects with Buyer in the
preparation of proxy materials to be filed with the Securities and
Exchange Commission (the "SEC") and any state securities authorities as
contemplated by the Merger Agreement, including, without limitation,
providing all data and information that Buyer shall deem necessary for
said filings and as shall be required by the Securities Act and the
Exchange Act. Any information supplied by Shareholder specifically for
use in the preparation of and inclusion in proxy materials shall not,
at the date such proxy materials (or any amendment thereof or
supplement thereto) are filed with the SEC, at the time of the
Gladstone Meeting and at the Effective Time, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event relating to Shareholder
should be discovered by Shareholder which renders the information
previously provided by Shareholder specifically for use in the
preparation of and inclusion in the proxy materials inaccurate in any
material respect, Shareholder shall promptly inform Buyer in writing;
(h) at Closing Shareholder shall deliver to Buyer: (i) a
release of all claims Shareholder may have against Buyer or Gladstone
(except for claims arising out of this Agreement, the Merger Agreement
and other agreements, certificates and documents entered into pursuant
to the Merger Agreement) and (ii) a certificate signed by Shareholder
confirming the accuracy of the representations made by Shareholder in
this Agreement as if such representations were made at the Closing
Date; and
Section 3. Covenants of the Buyer.
The Buyer covenants and agrees for the benefit of the Shareholder that
(a) immediately upon execution of this Agreement, the Buyer shall enter, and
cause Gladstone to enter, into the Merger Agreement, and (b) until the
Expiration Date, it shall use its reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement, consistent with the
terms and conditions of each such agreement.
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<PAGE> 4
Section 4. Representations and Warranties of the Shareholder.
The Shareholder represents and warrants to the Buyer that: (a) the
execution, delivery and performance by the Shareholder of this Agreement will
not conflict with, require a consent, waiver or approval under, or result in a
breach or a default any contract, commitment or other obligations (written or
oral) to which the Shareholder is bound; (b) this Agreement has been duly
executed and delivered by the Shareholder and constitutes a valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except as may be limited by bankruptcy, insolvency and other
laws relating to and affecting creditors' rights generally and equitable
remedies; (c) other than as set forth herein; the Shareholder has not entered
into an irrevocable proxy with respect to the Gladstone Shares; (d) as of the
date hereof, she is, and at the Closing Date (as defined in the Merger
Agreement) she will be, the sole beneficial owner of the number of shares of
Gladstone Common Stock shown below her name on the signature page hereto; (e)
the Shareholder has the power, authority and legal capacity to execute and
deliver this Agreement and perform her obligations under this Agreement; and (f)
as of the date hereof, there are, and at the Closing Date there will be, no
actions, suits or proceedings pending or threatened involving the ownership by
her of her Gladstone Shares or her ability to execute and deliver this
Agreement.
The representations and warranties contained herein shall be made as of
the date hereof and as of the Closing Date (as defined in the Merger Agreement)
and Shareholder shall deliver a certificate to that effect at Closing.
Section 5. Adjustments; Additional Shares.
In the event (a) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of
Gladstone on, of or affecting the Gladstone Shares of the Shareholder, or (b)
the Shareholder shall acquire voting rights with respect to any additional
shares of Gladstone Common Stock or other securities of Gladstone, including any
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 1 hereof, then the terms of this Agreement
shall apply to the shares of capital stock held by the Shareholder immediately
following the effectiveness of the events described in clause (a) or the
Shareholder becoming the beneficial owner thereof, as described in clause (b),
as though they were Gladstone Shares hereunder. As soon as practicable after the
receipt of such other capital stock or securities, the Shareholder shall
surrender to Gladstone, as the case may be, all certificates or instruments
representing such for the purpose of affixing the legend set forth in Section 22
hereof.
Section 6. Actions After Closing Date.
Shareholders and Buyer shall cooperate with one another in good faith
in connection with the defense by either of any suit, action, claim or
proceeding, or in connection with an audit or request for information by any
taxing authority, arising out of or relating to the conduct of Gladstone's
business prior to or after the Closing. Such cooperation shall include, at the
expense of the requesting party, supplying such factual and technical
information as one party shall possess
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<PAGE> 5
and another may reasonably require in connection with any such defense, audit or
request for information or to respond to discovery proceedings in any such suit,
action, claim or proceeding. No party, however, shall be required to cooperate
if such cooperation would prejudice the rights of the party called upon to
provide information.
Section 7. Indemnities.
(a) Subject to the other provisions of this Section 7, the
Shareholder agrees to defend, indemnify, and hold Buyer, its successors
and assigns, and its respective officers, directors, shareholders,
agents and employees, harmless from and against, and promptly reimburse
them for any and all losses, expenses, damages, deficiencies,
liabilities, payments, penalties, litigation, demands, defenses,
judgments, proceedings, costs, obligations, settlement costs, and
attorneys', accountants' and other professional advisors' fees
(including costs of investigation and preparation) of any kind or
nature whatsoever (collectively, "Losses"), directly or indirectly
arising out of, resulting from, relating to or in connection with any
breach of, inaccuracy in, or nonperformance of, any representation,
warranty, covenant, or agreement of (i) Gladstone contained in the
Merger Agreement or (ii) Shareholder contained in this Agreement.
Shareholder is considered a direct indemnitor of Buyer and in no event
shall Buyer be required to pursue any indemnity claim hereby against
Gladstone or any other indemnitor.
(b) Subject to the other provisions of this Section 7, Buyer
agrees to defend, indemnify, and hold Shareholder, her heirs,
successors, assigns and agents, harmless from and against, and promptly
reimburse her for, any and all Losses directly or indirectly arising
out of, resulting from, relating to or in connection with any breach
of, inaccuracy in, or nonperformance of, any representation, warranty,
covenant, or agreement of Buyer contained in this Agreement or the
Merger Agreement.
(c) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Buyer by the Shareholder provided for in
subsection (a) of this Section 7: (i) as to the Shareholder together
with all of the other Gladstone shareholders executing an agreement
similar to this Agreement combined (collectively the "Gladstone
Shareholders"), the aggregate of all Losses that may be recovered
against the Gladstone Shareholders pursuant to Section 7(a), together
with all Losses that may be recovered against Gladstone under or
pursuant to the Merger Agreement, shall not exceed $1,400,000 and such
indemnity by the Gladstone Shareholders shall be applicable only to the
extent the aggregate of all Losses exceed the sum of $100,000 (ii) the
representations, warranties, covenants and agreements (other than those
in Section 6, 7 (to the extent only that a claim for indemnity has been
asserted by Buyer, by notice to the Shareholder prior to the first
anniversary of the Closing Date), 8 and 10 through 21) of the
Shareholder contained in this Agreement shall not survive past the
first anniversary of the Closing Date; and (iii) the indemnity provided
in subsection (a) of this Section 7, as hereinabove limited, shall be
the sole remedy of Buyer against the Shareholder with respect to any
breach, inaccuracy or nonperformance of any representation, warranty,
covenant or agreement of the Shareholder contained in this Agreement,
subject to Section 10 hereof.
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<PAGE> 6
(d) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Shareholder by Buyer provided for in
subsection (b) of this Section 7: (i) as to all Gladstone Shareholders
the aggregate of all Losses that may be recovered by the Gladstone
Shareholders collectively pursuant to Section 7(b) shall not exceed
$1,400,000, together with all Losses that may be recovered against
Buyer under or pursuant to the Merger Agreement, and such indemnity by
Buyer shall be applicable only to the extent the aggregate of all
Losses exceed $100,000; (ii) the representations, warranties, covenants
and agreements (other than those in Sections 6, 7 (to the extent only
that a claim for indemnity has been asserted by a Shareholder, by
notice to Buyer prior to the first anniversary of the Closing Date), 8,
9 and 10 through 21), of Buyer contained in this Agreement shall not
survive past the first anniversary of the Closing Date; and (iii) the
indemnity provided in subsection (b) of this Section 7, as hereinabove
limited, shall be the sole remedy of Shareholder against Buyer with
respect to any breach, inaccuracy or nonperformance of any
representation, warranty, covenant or agreement of Buyer contained in
this Agreement, subject to Section 9 hereof.
(e) The defense of any indemnity claimed herein shall be
governed as follows:
(i) If any of the persons entitled to indemnification
hereunder (the "Indemnitee") receives notice of any claim or
commencement of any action or proceeding (an "Asserted
Liability") with respect to which another person (the
Indemnitor") is obligated to provide indemnification pursuant
to this Section 7, the Indemnitee shall promptly notify the
Indemnitor, describing the Asserted Liability in reasonable
detail and indicating the amount (which may be estimated) of
the loss, expense, damage, liability, or obligation that has
been or may be asserted by the Indemnitee against the
Indemnitor.
(ii) The failure of the Indemnitee to give such
notice shall not result in a loss of the Indemnitee's right to
indemnification under this Section 7 unless such failure
prejudices the Indemnitor's ability to defend against the
Asserted Liability.
(iii) No settlement or compromise of an Asserted
Liability may be made by the Indemnitee without the written
consent of the Indemnitor.
(iv) If the Indemnitor so elects, the Indemnitor, at
the Indemnitor's expense, shall assume the defense of the
Asserted Liability and shall have the right to settle or
compromise the same, except that if the Indemnitee (upon the
advice of counsel) reasonably objects to such assumption on
the ground that there may be legal defenses available to the
Indemnitee that are different from or in addition to those
available to the Indemnitor, then the Indemnitee shall have
the right to employ separate counsel approved by the
Indemnitor.
(v) If the Indemnitor assumes the defense of the
Asserted Liability, the Indemnitor shall not be liable for the
fees and expenses of the Indemnitee's counsel incurred
thereafter in connection with the Asserted Liability.
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(vi) In no event shall the Indemnitor be liable for
the fees and expenses of more than one counsel for any, some
or all Indemnities in any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, unless in the
reasonable opinion of such counsel, there is, under applicable
standards of professional conduct, a conflict on any
significant issue between the positions of any two
Indemnitees.
(f) THE INDEMNIFICATION PROVIDED IN THIS SECTION 7 SHALL BE
APPLICABLE WHETHER OR NOT ANY NEGLIGENCE OF THE INDEMNITEE IS ALLEGED
OR PROVEN. INDEMNITEE SHALL TAKE REASONABLE ACTIONS TO MITIGATE ANY
DAMAGES UPON BECOMING AWARE OF ANY EVENT GIVING RISE TO A BREACH ON THE
PART OF THE INDEMNITOR.
Section 8. Transfer of Claims.
Subject to and effective upon consummation of the Closing and the
receipt in full of the consideration paid to the Shareholder under Section 3.1
of the Merger Agreement, the Shareholder hereby transfers to Buyer by virtue of
her execution of this Agreement and without any further action or writing
required, any and all claims and causes of action, whether actual, absolute,
contingent or otherwise, the Shareholder might otherwise assert against
Gladstone or Gladstone's officers, directors or representatives based on events
occurring prior to the Closing Date, related directly or indirectly to Gladstone
or the Shareholder's investment in Gladstone; provided, however, that Buyer
hereby covenants not to sue upon, pursue or enforce any such claim or cause of
action so transferred to Buyer and agrees not to transfer any such claim or
cause of action.
Section 9. Specific Performance.
The Shareholder acknowledges that the agreements contained in this
Agreement are an integral part of the transactions contemplated by the Merger
Agreement and the Stock Option Agreement and that, without these agreements, the
Buyer, would not enter into the Merger Agreement or the Stock Option Agreement,
and acknowledges that damages may be an inadequate remedy for any breach by it
of the provisions of this Agreement. Accordingly, the Shareholder and the Buyer
each agree that the obligations of the parties hereunder shall be specifically
enforceable and neither party shall take any action to impede the other from
seeking to enforce such right of specific performance. Both parties further
agree (a) that specific performance shall be the sole remedy for a breach under
this Agreement for which damages are inadequate, and (b) to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provisions is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
Section 10. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be effective upon receipt (or refusal of receipt), shall be in
writing and shall be delivered in person, by telecopy (receipt confirmed),
overnight courier services (receipt confirmed), or by mail
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<PAGE> 8
(registered or certified mail, postage prepaid, return receipt requested) to the
Shareholder at the address listed on the signature page hereof, and to the Buyer
at 5735 Pineland Drive, Suite 235, Dallas, Texas 75231, Attention: President,
facsimile number (214) 368-2087, or to such other address as any party may have
furnished to the other in writing in accordance herewith.
Section 11. Binding Effect.
Upon execution and delivery of this Agreement by the Buyer and upon
execution and delivery of agreements virtually identical in form and substance
to this Agreement by the Buyer , this Agreement shall become effective as to the
Shareholder at the time the Shareholder executes and delivers this Agreement.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
Section 12. Assignment.
The Buyer may, without the consent of the Shareholder, assign its
rights hereunder to any direct or indirect wholly owned subsidiary of the Buyer,
provided that any such assignment shall not affect the obligations of the Buyer
hereunder.
Section 13. Governing Law.
THIS AGREEMENT IS MADE PURSUANT TO, WILL BE CONSTRUED UNDER, AND WILL
BE CONCLUSIVELY DEEMED FOR ALL PURPOSES TO HAVE BEEN EXECUTED AND DELIVERED
UNDER, THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF THE LAW, EXCEPT TO THE EXTENT THAT WASHINGTON GENERAL
CORPORATION LAW SHALL GOVERN THE INTERNAL AFFAIRS OF GLADSTONE. THE OBLIGATIONS
AND UNDERTAKINGS OF EACH OF THE PARTIES TO THIS AGREEMENT SHALL BE PERFORMABLE
IN DALLAS COUNTY, TEXAS.
Section 14. Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same agreement.
Section 15. Effect of Headings.
The section headings are for convenience only and shall not affect the
construction hereof.
Section 16. Additional Agreements; Further Assurance.
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action 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. The Shareholder will provide the Buyer with all documents
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<PAGE> 9
which may reasonably be requested by the Buyer and will take reasonable steps to
enable the Buyer to obtain all rights and benefits it hereunder.
Section 17. Amendment; Waiver.
No amendment or waiver of any provision of this Agreement or consent to
departure therefrom shall be effective unless in writing and signed by the Buyer
and the Shareholder, in the case of an amendment, or by the party which is the
beneficiary of any such provision, in the case of waiver or a consent to
departure therefrom.
Section 18. Gender.
Whenever required by the context of this Agreement, the singular shall
include the plural, the male gender shall include the female gender and the
neuter, and vice versa.
Section 19. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
Section 20. Entire Agreement.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
Section 21. Choice of Forum; Consent to Service of Process.
The parties hereto agree that any suit, action or proceeding arising
out of or relating to this Agreement or any agreement or obligation delivered in
connection with this Agreement or any judgment entered by any court in respect
thereof shall be brought in the Courts of the State of Texas, County of Dallas
or in the United States District Court for the Northern District of Texas and
each such party hereby submits to the exclusive jurisdiction of such courts for
the purpose of any such suit, action or proceeding relating to this Agreement or
any related agreement or obligation. The Shareholder hereby agrees that until
the 2nd anniversary of the Closing Date of the Merger Agreement, service of all
writs, process and summonses in any such suit, action or proceeding brought in
the United State may be made upon CT Corporation System at its offices located
at 350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address of
CT
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Corporation System), and Shareholder hereby irrevocably appoints CT Corporation
System his true and lawful attorney-in-fact in his name, place and stead to
accept such service of any and all writs, process and summonses, and agrees that
the failure of CT Corporation System to give to Shareholder any notice of any
such service of process shall not impair or affect the validity of such service
or of any judgment based thereon. Contemporaneously with any service upon CT
Corporation System hereby, Buyer shall mail by certified or registered United
States Mail, postage prepaid with return receipt requested, a copy of such writ,
process or summons to Shareholder at the address shown on the signature page (or
any other address provided by Shareholder to Buyer in writing). Buyer hereby
agrees that notwithstanding any Federal or state rule of civil procedure to the
contrary, any response of Shareholder to the initiation of such proceeding shall
not be due prior to the 40th day following service upon CT Corporation System.
Each party hereto hereby irrevocably waives any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any agreement or obligation
delivered in connection with this Agreement, brought in the Courts of the State
of Texas, County of Dallas or the United States District Court for the Northern
District of Texas, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 22. Legend.
As soon as practicable following the execution of this Agreement by
Shareholder, Shareholder shall deliver to Gladstone, as the case may be, the
Gladstone Shares held by Shareholder. Gladstone shall affix to each certificate
the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A SHAREHOLDER AGREEMENT (THE "SHAREHOLDER AGREEMENT") AND A STOCK OPTION
AGREEMENT, EACH DATED May 1, 1998, BETWEEN THE HOLDER OF THESE SHARES AND EXCO
RESOURCES, INC. A COPY OF THE SHAREHOLDER AGREEMENT IS ON FILE WITH THE
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES AND MAY BE OBTAINED BY REQUESTING
SAME FROM THE CORPORATION'S SECRETARY AT 210 MEADOWS BUILDING< DALLAS, TEXAS
75206. THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, ASSIGNED, TENDERED OR
OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE WITH THE SHAREHOLDER AGREEMENT.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT OF AN
IRREVOCABLE PROXY, COUPLED WITH AN INTEREST, GRANTED TO EXCO RESOURCES, INC.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto all as of the day and year first above written.
EXCO Resources, INC.
By: /s/ DOUGLAS H. MILLER
--------------------------------------
Douglas H. Miller
Chief Executive Officer
Shareholder:
/s/ DEBORAH BROOKS GARRETT
- --------------------------------------
Deborah Brooks Garrett
Address: 4205 Normandy
Dallas, Tx. 75205
Number of Gladstone Shares: 351,000
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Deborah Brooks Garrett, known to me to be the person whose
name is subscribed to the foregoing instrument and acknowledged to me under oath
that he/she executed the same for the purposes and consideration therein
expressed.
GIVEN UNDER MY HAND and the seal of my office in Dallas County, Texas,
this the 30th day of April, 1998.
/s/ BARBARA MCCARLEY
-------------------------------------------
Notary Public in and for the State of Texas
My commission expires: 1/06/02
-------
[Notary Public Seal]
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EXHIBIT 4
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of May 1, 1998, by and between EXCO
Resources, Inc., a Texas corporation (the "Buyer"), and the shareholder listed
on the signature page hereof (the "Shareholder").
WHEREAS, the Shareholder, as of the date hereof, is the owner of the
respective number of shares of (i) Common Stock, par value $1.00 per share (the
"Gladstone Common Stock"), of Gladstone Resources, Inc., a Washington
corporation ("Gladstone"), (the "Gladstone Shares") set forth below the name of
the Shareholder on the signature page hereof;
WHEREAS, in reliance in part upon the execution and delivery of this
Agreement, the Buyer will enter into an Agreement and Plan of Merger, dated of
even date herewith, a copy of which has previously been delivered to Shareholder
and the receipt of which Shareholder hereby acknowledges (the "Merger
Agreement;" capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement), with Gladstone which provides that, among other
things, upon the terms and subject to the conditions thereof Gladstone will be
merged with and into Buyer (the "Merger"), as provided in the Merger Agreement;
WHEREAS, in reliance upon the execution and delivery of this Agreement,
the Buyer will enter into a Stock Option Agreement, dated as of the date hereof
(the "Stock Option Agreement"), with E. B. Brooks, Jr.("Brooks") pursuant to
which Brooks has granted to the Buyer an option to acquire shares of Gladstone;
and
WHEREAS, to induce the Buyer to enter into the Merger Agreement and the
Stock Option Agreement and to incur the obligations set forth therein, the
Shareholder is entering into this Agreement pursuant to which the Shareholder
agrees to vote in favor of the Merger and certain other matters as set forth
herein upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Voting of Shares; Irrevocable Proxy.
The Shareholder agrees that until the earlier of (a) the Effective Time
and (b) the termination of the Merger Agreement (the earliest of such dates
being hereinafter referred to as the "Expiration Date"), the Shareholder shall
vote all Gladstone Shares owned by the Shareholder at any meetings of
Gladstone's shareholders (whether annual or special and whether or not an
adjourned or postponed meeting), or, if applicable, take action by written
consent (x) for adoption of the Merger Agreement and in favor of the Merger and
any other transaction contemplated by the Merger Agreement, as such Merger
Agreement may be modified or amended from time to time (but not to reduce the
consideration to be received by the Shareholder for her shares of Gladstone
Common Stock, and (y) against any action, omission or agreement which would
impede or interfere with, or have the effect of discouraging, the Merger,
including, without limitation, any
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Acquisition Proposal (as hereinafter defined) other than the Merger. Any such
vote shall be cast or consent shall be given in accordance with such procedures
relating thereto as shall ensure that it is duly counted for purposes of
determining that a quorum is present and for purposes of recording the results
of such vote or consent.
In the event that the Shareholder shall fail to comply with the
provisions of this Section 1 (as determined by the Buyer in good faith), the
Shareholder hereby agrees that such failure shall result, without any further
action by the Shareholder, in the irrevocable appointment of the Buyer, until
the Expiration Date, as his attorney-in-fact and proxy, with full power of
substitution, to vote and otherwise act (by written consent or otherwise) with
respect to the Gladstone which the Shareholder is entitled to vote at any
meeting of shareholders (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on the matters and in the manner specified in Section 1 above. THE
SHAREHOLDER ACKNOWLEDGES THAT THIS PROXY IS COUPLED WITH AN INTEREST AND
CONSTITUTES, AMONG OTHER THINGS, AN INDUCEMENT FOR THE BUYER TO ENTER INTO THE
MERGER AGREEMENT, IS IRREVOCABLE AND SHALL NOT BE TERMINATED BY OPERATION OF LAW
UPON THE OCCURRENCE OF ANY EVENT, INCLUDING, WITHOUT LIMITATION, THE DEATH OR
INCAPACITY OF THE SHAREHOLDER.
Section 2. Covenants of the Shareholder.
The Shareholder covenants and agrees for the benefit of the Buyer that,
until the Expiration Date, she:
(a) will not sell, transfer, pledge, hypothecate, encumber,
assign, tender or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, encumbrance, assignment, tender or
other disposition of (any one or more of which, a "Transfer"), any of
the Gladstone Shares owned by her unless, in connection with such
Transfer, the transferee executes a counterpart of this Agreement
agreeing to be bound by the terms hereof;
(b) will, other than as expressly contemplated by this
Agreement, not grant any powers of attorney or proxies or consents in
respect of any of the Gladstone Shares owned by her, deposit any of the
Gladstone Shares owned by her into a voting trust, enter into a voting
agreement with respect to any of the Gladstone Shares owned by her or
otherwise restrict the ability of the holder of any of the Gladstone
Shares owned by her to freely exercise all voting rights with respect
thereto;
(c) will not cause Gladstone to take any action or (ii)
consent to Gladstone taking any action, prohibited by Section 7.1 of
the Merger Agreement;
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<PAGE> 3
(d) will not knowingly take any action whatsoever that, based
on advice from the Buyer's auditors, would prevent the Merger from
qualifying for "pooling of interests" accounting treatment;
(e) will use her reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement;
(f) will not exercise any appraisal or dissenter's rights, if
any, with respect to the Gladstone Shares;
(g) will cooperate in all respects with Buyer in the
preparation of proxy materials to be filed with the Securities and
Exchange Commission (the "SEC") and any state securities authorities as
contemplated by the Merger Agreement, including, without limitation,
providing all data and information that Buyer shall deem necessary for
said filings and as shall be required by the Securities Act and the
Exchange Act. Any information supplied by Shareholder specifically for
use in the preparation of and inclusion in proxy materials shall not,
at the date such proxy materials (or any amendment thereof or
supplement thereto) are filed with the SEC, at the time of the
Gladstone Meeting and at the Effective Time, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event relating to Shareholder
should be discovered by Shareholder which renders the information
previously provided by Shareholder specifically for use in the
preparation of and inclusion in the proxy materials inaccurate in any
material respect, Shareholder shall promptly inform Buyer in writing;
(h) at Closing Shareholder shall deliver to Buyer: (i) a
release of all claims Shareholder may have against Buyer or Gladstone
(except for claims arising out of this Agreement, the Merger Agreement
and other agreements, certificates and documents entered into pursuant
to the Merger Agreement) and (ii) a certificate signed by Shareholder
confirming the accuracy of the representations made by Shareholder in
this Agreement as if such representations were made at the Closing
Date; and
Section 3. Covenants of the Buyer.
The Buyer covenants and agrees for the benefit of the Shareholder that
(a) immediately upon execution of this Agreement, the Buyer shall enter, and
cause Gladstone to enter, into the Merger Agreement, and (b) until the
Expiration Date, it shall use its reasonable best efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement, consistent with the
terms and conditions of each such agreement.
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<PAGE> 4
Section 4. Representations and Warranties of the Shareholder.
The Shareholder represents and warrants to the Buyer that: (a) the
execution, delivery and performance by the Shareholder of this Agreement will
not conflict with, require a consent, waiver or approval under, or result in a
breach or a default any contract, commitment or other obligations (written or
oral) to which the Shareholder is bound; (b) this Agreement has been duly
executed and delivered by the Shareholder and constitutes a valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except as may be limited by bankruptcy, insolvency and other
laws relating to and affecting creditors' rights generally and equitable
remedies; (c) other than as set forth herein; the Shareholder has not entered
into an irrevocable proxy with respect to the Gladstone Shares; (d) as of the
date hereof, she is, and at the Closing Date (as defined in the Merger
Agreement) she will be, the sole beneficial owner of the number of shares of
Gladstone Common Stock shown below her name on the signature page hereto; (e)
the Shareholder has the power, authority and legal capacity to execute and
deliver this Agreement and perform her obligations under this Agreement; and (f)
as of the date hereof, there are, and at the Closing Date there will be, no
actions, suits or proceedings pending or threatened involving the ownership by
her of her Gladstone Shares or her ability to execute and deliver this
Agreement.
The representations and warranties contained herein shall be made as of
the date hereof and as of the Closing Date (as defined in the Merger Agreement)
and Shareholder shall deliver a certificate to that effect at Closing.
Section 5. Adjustments; Additional Shares.
In the event (a) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of
Gladstone on, of or affecting the Gladstone Shares of the Shareholder, or (b)
the Shareholder shall acquire voting rights with respect to any additional
shares of Gladstone Common Stock or other securities of Gladstone, including any
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 1 hereof, then the terms of this Agreement
shall apply to the shares of capital stock held by the Shareholder immediately
following the effectiveness of the events described in clause (a) or the
Shareholder becoming the beneficial owner thereof, as described in clause (b),
as though they were Gladstone Shares hereunder. As soon as practicable after the
receipt of such other capital stock or securities, the Shareholder shall
surrender to Gladstone, as the case may be, all certificates or instruments
representing such for the purpose of affixing the legend set forth in Section 22
hereof.
Section 6. Actions After Closing Date.
Shareholders and Buyer shall cooperate with one another in good faith
in connection with the defense by either of any suit, action, claim or
proceeding, or in connection with an audit or request for information by any
taxing authority, arising out of or relating to the conduct of Gladstone's
business prior to or after the Closing. Such cooperation shall include, at the
expense of the requesting party, supplying such factual and technical
information as one party shall possess
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<PAGE> 5
and another may reasonably require in connection with any such defense, audit or
request for information or to respond to discovery proceedings in any such suit,
action, claim or proceeding. No party, however, shall be required to cooperate
if such cooperation would prejudice the rights of the party called upon to
provide information.
Section 7. Indemnities.
(a) Subject to the other provisions of this Section 7, the
Shareholder agrees to defend, indemnify, and hold Buyer, its successors
and assigns, and its respective officers, directors, shareholders,
agents and employees, harmless from and against, and promptly reimburse
them for any and all losses, expenses, damages, deficiencies,
liabilities, payments, penalties, litigation, demands, defenses,
judgments, proceedings, costs, obligations, settlement costs, and
attorneys', accountants' and other professional advisors' fees
(including costs of investigation and preparation) of any kind or
nature whatsoever (collectively, "Losses"), directly or indirectly
arising out of, resulting from, relating to or in connection with any
breach of, inaccuracy in, or nonperformance of, any representation,
warranty, covenant, or agreement of (i) Gladstone contained in the
Merger Agreement or (ii) Shareholder contained in this Agreement.
Shareholder is considered a direct indemnitor of Buyer and in no event
shall Buyer be required to pursue any indemnity claim hereby against
Gladstone or any other indemnitor.
(b) Subject to the other provisions of this Section 7, Buyer
agrees to defend, indemnify, and hold Shareholder, her heirs,
successors, assigns and agents, harmless from and against, and promptly
reimburse her for, any and all Losses directly or indirectly arising
out of, resulting from, relating to or in connection with any breach
of, inaccuracy in, or nonperformance of, any representation, warranty,
covenant, or agreement of Buyer contained in this Agreement or the
Merger Agreement.
(c) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Buyer by the Shareholder provided for in
subsection (a) of this Section 7: (i) as to the Shareholder together
with all of the other Gladstone shareholders executing an agreement
similar to this Agreement combined (collectively the "Gladstone
Shareholders"), the aggregate of all Losses that may be recovered
against the Gladstone Shareholders pursuant to Section 7(a), together
with all Losses that may be recovered against Gladstone under or
pursuant to the Merger Agreement, shall not exceed $1,400,000 and such
indemnity by the Gladstone Shareholders shall be applicable only to the
extent the aggregate of all Losses exceed the sum of $100,000 (ii) the
representations, warranties, covenants and agreements (other than those
in Section 6, 7 (to the extent only that a claim for indemnity has been
asserted by Buyer, by notice to the Shareholder prior to the first
anniversary of the Closing Date), 8 and 10 through 21) of the
Shareholder contained in this Agreement shall not survive past the
first anniversary of the Closing Date; and (iii) the indemnity provided
in subsection (a) of this Section 7, as hereinabove limited, shall be
the sole remedy of Buyer against the Shareholder with respect to any
breach, inaccuracy or nonperformance of any representation, warranty,
covenant or agreement of the Shareholder contained in this Agreement,
subject to Section 10 hereof.
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<PAGE> 6
(d) Anything herein to the contrary notwithstanding, for
purposes of the indemnity of Shareholder by Buyer provided for in
subsection (b) of this Section 7: (i) as to all Gladstone Shareholders
the aggregate of all Losses that may be recovered by the Gladstone
Shareholders collectively pursuant to Section 7(b) shall not exceed
$1,400,000, together with all Losses that may be recovered against
Buyer under or pursuant to the Merger Agreement, and such indemnity by
Buyer shall be applicable only to the extent the aggregate of all
Losses exceed $100,000; (ii) the representations, warranties, covenants
and agreements (other than those in Sections 6, 7 (to the extent only
that a claim for indemnity has been asserted by a Shareholder, by
notice to Buyer prior to the first anniversary of the Closing Date), 8,
9 and 10 through 21), of Buyer contained in this Agreement shall not
survive past the first anniversary of the Closing Date; and (iii) the
indemnity provided in subsection (b) of this Section 7, as hereinabove
limited, shall be the sole remedy of Shareholder against Buyer with
respect to any breach, inaccuracy or nonperformance of any
representation, warranty, covenant or agreement of Buyer contained in
this Agreement, subject to Section 9 hereof.
(e) The defense of any indemnity claimed herein shall be
governed as follows:
(i) If any of the persons entitled to indemnification
hereunder (the "Indemnitee") receives notice of any claim or
commencement of any action or proceeding (an "Asserted
Liability") with respect to which another person (the
Indemnitor") is obligated to provide indemnification pursuant
to this Section 7, the Indemnitee shall promptly notify the
Indemnitor, describing the Asserted Liability in reasonable
detail and indicating the amount (which may be estimated) of
the loss, expense, damage, liability, or obligation that has
been or may be asserted by the Indemnitee against the
Indemnitor.
(ii) The failure of the Indemnitee to give such
notice shall not result in a loss of the Indemnitee's right to
indemnification under this Section 7 unless such failure
prejudices the Indemnitor's ability to defend against the
Asserted Liability.
(iii) No settlement or compromise of an Asserted
Liability may be made by the Indemnitee without the written
consent of the Indemnitor.
(iv) If the Indemnitor so elects, the Indemnitor, at
the Indemnitor's expense, shall assume the defense of the
Asserted Liability and shall have the right to settle or
compromise the same, except that if the Indemnitee (upon the
advice of counsel) reasonably objects to such assumption on
the ground that there may be legal defenses available to the
Indemnitee that are different from or in addition to those
available to the Indemnitor, then the Indemnitee shall have
the right to employ separate counsel approved by the
Indemnitor.
(v) If the Indemnitor assumes the defense of the
Asserted Liability, the Indemnitor shall not be liable for the
fees and expenses of the Indemnitee's counsel incurred
thereafter in connection with the Asserted Liability.
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(vi) In no event shall the Indemnitor be liable for
the fees and expenses of more than one counsel for any, some
or all Indemnities in any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, unless in the
reasonable opinion of such counsel, there is, under applicable
standards of professional conduct, a conflict on any
significant issue between the positions of any two
Indemnitees.
(f) THE INDEMNIFICATION PROVIDED IN THIS SECTION 7 SHALL BE
APPLICABLE WHETHER OR NOT ANY NEGLIGENCE OF THE INDEMNITEE IS ALLEGED
OR PROVEN. INDEMNITEE SHALL TAKE REASONABLE ACTIONS TO MITIGATE ANY
DAMAGES UPON BECOMING AWARE OF ANY EVENT GIVING RISE TO A BREACH ON THE
PART OF THE INDEMNITOR.
Section 8. Transfer of Claims.
Subject to and effective upon consummation of the Closing and the
receipt in full of the consideration paid to the Shareholder under Section 3.1
of the Merger Agreement, the Shareholder hereby transfers to Buyer by virtue of
her execution of this Agreement and without any further action or writing
required, any and all claims and causes of action, whether actual, absolute,
contingent or otherwise, the Shareholder might otherwise assert against
Gladstone or Gladstone's officers, directors or representatives based on events
occurring prior to the Closing Date, related directly or indirectly to Gladstone
or the Shareholder's investment in Gladstone; provided, however, that Buyer
hereby covenants not to sue upon, pursue or enforce any such claim or cause of
action so transferred to Buyer and agrees not to transfer any such claim or
cause of action.
Section 9. Specific Performance.
The Shareholder acknowledges that the agreements contained in this
Agreement are an integral part of the transactions contemplated by the Merger
Agreement and the Stock Option Agreement and that, without these agreements, the
Buyer, would not enter into the Merger Agreement or the Stock Option Agreement,
and acknowledges that damages may be an inadequate remedy for any breach by it
of the provisions of this Agreement. Accordingly, the Shareholder and the Buyer
each agree that the obligations of the parties hereunder shall be specifically
enforceable and neither party shall take any action to impede the other from
seeking to enforce such right of specific performance. Both parties further
agree (a) that specific performance shall be the sole remedy for a breach under
this Agreement for which damages are inadequate, and (b) to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provisions is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
Section 10. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be effective upon receipt (or refusal of receipt), shall be in
writing and shall be delivered in person, by telecopy (receipt confirmed),
overnight courier services (receipt confirmed), or by mail
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(registered or certified mail, postage prepaid, return receipt requested) to the
Shareholder at the address listed on the signature page hereof, and to the Buyer
at 5735 Pineland Drive, Suite 235, Dallas, Texas 75231, Attention: President,
facsimile number (214) 368-2087, or to such other address as any party may have
furnished to the other in writing in accordance herewith.
Section 11. Binding Effect.
Upon execution and delivery of this Agreement by the Buyer and upon
execution and delivery of agreements virtually identical in form and substance
to this Agreement by the Buyer , this Agreement shall become effective as to the
Shareholder at the time the Shareholder executes and delivers this Agreement.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
Section 12. Assignment.
The Buyer may, without the consent of the Shareholder, assign its
rights hereunder to any direct or indirect wholly owned subsidiary of the Buyer,
provided that any such assignment shall not affect the obligations of the Buyer
hereunder.
Section 13. Governing Law.
THIS AGREEMENT IS MADE PURSUANT TO, WILL BE CONSTRUED UNDER, AND WILL
BE CONCLUSIVELY DEEMED FOR ALL PURPOSES TO HAVE BEEN EXECUTED AND DELIVERED
UNDER, THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF THE LAW, EXCEPT TO THE EXTENT THAT WASHINGTON GENERAL
CORPORATION LAW SHALL GOVERN THE INTERNAL AFFAIRS OF GLADSTONE. THE OBLIGATIONS
AND UNDERTAKINGS OF EACH OF THE PARTIES TO THIS AGREEMENT SHALL BE PERFORMABLE
IN DALLAS COUNTY, TEXAS.
Section 14. Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same agreement.
Section 15. Effect of Headings.
The section headings are for convenience only and shall not affect the
construction hereof.
Section 16. Additional Agreements; Further Assurance.
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action 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. The Shareholder will provide the Buyer with all documents
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<PAGE> 9
which may reasonably be requested by the Buyer and will take reasonable steps to
enable the Buyer to obtain all rights and benefits it hereunder.
Section 17. Amendment; Waiver.
No amendment or waiver of any provision of this Agreement or consent to
departure therefrom shall be effective unless in writing and signed by the Buyer
and the Shareholder, in the case of an amendment, or by the party which is the
beneficiary of any such provision, in the case of waiver or a consent to
departure therefrom.
Section 18. Gender.
Whenever required by the context of this Agreement, the singular shall
include the plural, the male gender shall include the female gender and the
neuter, and vice versa.
Section 19. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
Section 20. Entire Agreement.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
Section 21. Choice of Forum; Consent to Service of Process.
The parties hereto agree that any suit, action or proceeding arising
out of or relating to this Agreement or any agreement or obligation delivered in
connection with this Agreement or any judgment entered by any court in respect
thereof shall be brought in the Courts of the State of Texas, County of Dallas
or in the United States District Court for the Northern District of Texas and
each such party hereby submits to the exclusive jurisdiction of such courts for
the purpose of any such suit, action or proceeding relating to this Agreement or
any related agreement or obligation. The Shareholder hereby agrees that until
the 2nd anniversary of the Closing Date of the Merger Agreement, service of all
writs, process and summonses in any such suit, action or proceeding brought in
the United State may be made upon CT Corporation System at its offices located
at 350 North St. Paul Street, Dallas, Texas 75201 (or any subsequent address of
CT
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Corporation System), and Shareholder hereby irrevocably appoints CT Corporation
System his true and lawful attorney-in-fact in his name, place and stead to
accept such service of any and all writs, process and summonses, and agrees that
the failure of CT Corporation System to give to Shareholder any notice of any
such service of process shall not impair or affect the validity of such service
or of any judgment based thereon. Contemporaneously with any service upon CT
Corporation System hereby, Buyer shall mail by certified or registered United
States Mail, postage prepaid with return receipt requested, a copy of such writ,
process or summons to Shareholder at the address shown on the signature page (or
any other address provided by Shareholder to Buyer in writing). Buyer hereby
agrees that notwithstanding any Federal or state rule of civil procedure to the
contrary, any response of Shareholder to the initiation of such proceeding shall
not be due prior to the 40th day following service upon CT Corporation System.
Each party hereto hereby irrevocably waives any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any agreement or obligation
delivered in connection with this Agreement, brought in the Courts of the State
of Texas, County of Dallas or the United States District Court for the Northern
District of Texas, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 22. Legend.
As soon as practicable following the execution of this Agreement by
Shareholder, Shareholder shall deliver to Gladstone, as the case may be, the
Gladstone Shares held by Shareholder. Gladstone shall affix to each certificate
the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A SHAREHOLDER AGREEMENT (THE "SHAREHOLDER AGREEMENT") AND A STOCK OPTION
AGREEMENT, EACH DATED May 1, 1998, BETWEEN THE HOLDER OF THESE SHARES AND EXCO
RESOURCES, INC. A COPY OF THE SHAREHOLDER AGREEMENT IS ON FILE WITH THE
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES AND MAY BE OBTAINED BY REQUESTING
SAME FROM THE CORPORATION'S SECRETARY AT 210 MEADOWS BUILDING< DALLAS, TEXAS
75206. THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, ASSIGNED, TENDERED OR
OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE WITH THE SHAREHOLDER AGREEMENT.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT OF AN
IRREVOCABLE PROXY, COUPLED WITH AN INTEREST, GRANTED TO EXCO RESOURCES, INC.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto all as of the day and year first above written.
EXCO Resources, INC.
By: /s/ DOUGLAS H. MILLER
-------------------------------------
Douglas H. Miller
Chief Executive Officer
Shareholder:
/s/ REBECCA B. FELDT
- -----------------------------------
Rebecca B. Feldt
Address: 4136 Shenandoah
Dallas, Tx. 75205
Number of Gladstone Shares: 351,000
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, a Notary Public in and for the State of Texas, on this day
personally appeared Rebecca B. Feldt, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me under oath that
he/she executed the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND and the seal of my office in Dallas County, Texas,
this the 30th day of April, 1998.
/s/ BARBARA MCCARLEY
-------------------------------------------
Notary Public in and for the State of Texas
My commission expires: 1/06/02
--------
[Notary Public Seal]
11
<PAGE> 1
EXHIBIT 5
AGREEMENT
AND
PLAN OF MERGER
BY AND BETWEEN
EXCO RESOURCES, INC.,
AND
GLADSTONE RESOURCES, INC.
DATED AS OF MAY 1, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of May 1, 1998, by and between EXCO Resources, Inc., a Texas corporation (the
"Company")and Gladstone Resources, Inc., a Washington corporation ("Gladstone").
W I T N E S S E T H:
WHEREAS, Gladstone and the Company desire to effect a merger of
Gladstone with and into the Company (the "Merger");
WHEREAS, the Company has unanimously recommended (subject to the
satisfaction of the conditions precedent set forth herein) that the Board of
Directors of the Company approve this Agreement and the transactions
contemplated hereby;
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interests of the Company's stockholders to consummate
the Merger, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of Gladstone has determined it
advisable and in the best interests of Gladstone's stockholders to consummate
the Merger, upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the laws of the State of
Texas, at the Effective Time (as hereinafter defined), Gladstone shall be merged
with and into the Company and the separate corporate existence of Gladstone
shall thereupon cease, and the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall by virtue of the Merger continue its
corporate existence in accordance with Texas law.
Section 1.2 Effective Time of the Merger. The Merger shall become
effective at the date and time (the "Effective Time") when a properly executed
certificate of merger, in such form as is required by and executed in accordance
with the Texas law, is duly filed with the Secretary of State of the State of
Texas or at such later time as the parties hereto shall have provided in such
certificate. The parties hereto shall cause such filing to occur as soon as
practicable on or after the Closing Date (as hereinafter defined).
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Effects of Merger. The Merger shall have the effects set
forth in Section 5.06 of the Texas Business Corporation Act ("TBCA"). The
corporate existence of the Company, with all its purposes, powers and objects,
shall continue unaffected and unimpaired by the Merger and, as the
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Surviving Corporation, it shall be governed by the laws of the State of Texas
and shall succeed to all rights, assets, liabilities, properties, privileges,
powers, franchises and obligations of the Company in accordance with the Texas
law.
ARTICLE III
CONVERSION OF SECURITIES
Section 3.1 Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Gladstone, the Company or their
respective stockholders (other than the filing of the certificate of merger
referred to in Section 1.2 hereof) (a) each share (a "Share") of common stock,
par value $0.01 per share, of Gladstone ("Gladstone Common Stock") issued and
outstanding immediately prior to the Effective Time (other than (i) Shares held
in the treasury of Gladstone or owned by any subsidiary of Gladstone and (ii)
Dissenting Shares (as hereinafter defined) in respect of which appraisal rights
are properly exercised and perfected) shall be canceled and extinguished and be
converted automatically into the right to receive, pursuant to Section 3.2
hereof, $0.33 per Share in cash, without interest thereon (the "Merger
Consideration"), less any required withholding of taxes, which Merger
Consideration shall be payable upon surrender of the certificate formerly
representing such Share (a "Certificate") in the manner provided in Section
3.2(b), (b) each Share then held in the treasury of Gladstone and each Share
owned by any subsidiary of Gladstone shall be canceled and retired without
conversion thereof and without payment of any consideration and shall cease to
exist, and (c) each Share owned beneficially or of record by Gladstone
immediately prior to the Effective Time shall be canceled and retired without
conversion thereof and without payment of any consideration and shall cease to
exist.
Section 3.2 Paying Agent and Surrender of Certificates. (a) Prior to
the Effective Time, the Company and Gladstone shall appoint a bank reasonably
acceptable to the Company, and having a place of business in Dallas, Texas as
paying agent (the "Paying Agent") for the holders of Shares in connection with
the Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 3.1. At Closing, the Company shall cause to be deposited in
trust with the Paying Agent, cash in the aggregate amount equal to the product
of (A) the number of Shares outstanding immediately prior to the Effective Time
(other than Shares held by Gladstone) and (B) the Merger Consideration. Such
funds shall be invested by the Paying Agent as directed by the Company, provided
that such investments shall be in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, in commercial paper obligations rated
A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit or
banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $100 million (based on the most
recent financial statements of such bank which are then publicly available at
the Commission (as hereinafter defined) or otherwise); provided, however, that
no loss on any investment made pursuant to this Section 3.2(a) shall relieve the
Company or the Surviving Corporation of its obligation to pay the Merger
Consideration for each Share outstanding immediately prior to the Effective
Time. The Company shall promptly replace, or cause to be replaced, any monies
lost through any investment made pursuant to this Section 3.2(a).
(b) As soon as practicable after the Effective Time, the Company shall
cause the Surviving Corporation to mail to each person who was a record holder
of Shares immediately prior to the Effective Time (other than holders of
Dissenting Shares, Gladstone, the Company and the Company's subsidiaries), a
form of letter of transmittal and instructions for use in effecting the
surrender for payment of Certificates that immediately prior to the Effective
Time represented Shares. Upon surrender of a Certificate to the
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Paying Agent, together with a duly executed and completed letter of transmittal
and any other required documents, the holder of the Certificate shall receive in
exchange , and the Paying Agent will pay (via U.S. mail, postage prepaid) as
soon as practicable to such holder, cash in an amount equal to the product of
the number of Shares represented by the Certificate or Certificates surrendered
and the Merger Consideration, without any interest thereon and less any required
withholding of taxes, and such Certificate(s) shall forthwith be canceled. If
the payment is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition of payment that
(x) the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that (y) the person requesting such payment shall
either pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation or the Paying Agent
that such tax has been paid or is not applicable. The Surviving Corporation
shall pay all charges and expenses (except those taxes described in the
immediately preceding sentence and expenses incurred by the holders of
Certificates in tendering their Certificates), including those of the Paying
Agent, in connection with the distribution of the Merger Consideration. After
the Effective Time, until surrendered in accordance with the provisions of this
Section 3.2(b), a Certificate shall represent only the right to receive the
Merger Consideration in cash multiplied by the number of Shares evidenced by
such Certificate, without any interest thereon. On or after the one-hundred
eightieth day following the Effective Time, the Surviving Corporation may by
written request require the Paying Agent to pay to the Surviving Corporation
that portion of the funds deposited with the Paying Agent pursuant to this
Section 3.2(b) (and any income earned thereon) that has not been disbursed
pursuant to this Section 3.2(b), and holders of Certificates shall thereafter
look only to the Surviving Corporation for any payment to be made pursuant to
this Section 3.2(b). Notwithstanding anything to the contrary, none of the
Paying Agent, the Surviving Corporation or any party hereto shall be liable to a
holder of a Certificate for any amount delivered to a public official pursuant
to applicable abandoned property, escheat or similar law.
Section 3.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who have properly
exercised appraisal rights with respect thereto under Section 5.12 of the TBCA
(the "Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration as provided in Sections 3.1 and 3.2, but the
holders of Dissenting Shares shall be entitled to receive such payment of the
appraised value of such Shares held by them from the Surviving Corporation (or
the Paying Agent, if applicable) as shall be determined pursuant to Section 5.12
of the TBCA; provided, however, that if any such holder shall have failed to
perfect or shall withdraw or lose the right to appraisal and payment under the
TBCA, each such holder's Shares shall thereupon be deemed to have been converted
as of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon and less any required withholding of taxes as
provided in Section 3.1, and upon surrender of the Certificate(s) representing
such Shares, in the manner provided in Section 3.2, such Shares shall no longer
be Dissenting Shares.
Section 3.4 Stockholders to Have No Further Rights. At and after the
Effective Time, the holder of a Certificate shall cease to have any rights as a
stockholder of Gladstone, except for (i) the right to surrender such Certificate
in exchange for the amount of Merger Consideration to which such holder is
entitled under this Agreement, or (ii) the rights available under the TBCA for
Dissenting Shares.
Section 3.5 Stockholders' Meeting. Gladstone, acting through its Board
of Directors, shall take all action necessary, in accordance with applicable law
and its Certificate of Incorporation and By-laws, to convene a special meeting
of the holders of Gladstone Common Stock (the "Gladstone Meeting") as promptly
as practicable for the purpose of considering and taking action to authorize
this Agreement and the Merger pursuant to the TBCA. Subject to its fiduciary
duties under applicable law as advised by
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outside counsel, the Board of Directors of Gladstone will recommend that holders
of Gladstone Common Stock vote in favor of and approve the Merger and the
adoption of this Agreement at the Gladstone Meeting.
Section 3.6 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall be made thereafter. In the event that, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration as provided in Sections 3.1 and 3.2.
Section 3.7 Closing. Unless this Agreement is terminated and the
transactions contemplated herein abandoned pursuant to Section 11.1 and subject
to the satisfaction or, if permissible, waiver of the conditions set forth in
Article X, the consummation of the Merger and the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place (i) at the
offices of the Company at 11:00 A.M. local time on a date to be specified by
Gladstone and the Company, but as soon as practicable (and in any event within
two business days) after the day on which the last of the conditions set forth
in Article X is fulfilled (other than deliveries of instruments to be made at
Closing) or, if permissible, waived by the relevant party or (ii) at such other
time and place as Gladstone and the Company shall agree upon in writing. The
date on which the Closing occurs is referred to herein as the "Closing Date."
ARTICLE IV
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Agreement"shall have the meaning set forth in the opening paragraph.
"CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
"Certificate" shall have the meaning set forth in Section 3.1.
"Closing" shall have the meaning set forth in Section 3.7.
"Closing Date" shall have the meaning set forth in Section 3.7.
"Commission" shall have the meaning set forth in Section 6.5.
.
"Company" shall have the meaning set forth in the opening paragraph.
"Gladstone Common Stock" shall have the meaning set forth in Section
3.1.
"Gladstone Material Adverse Effect" shall have the meaning set forth in
Section 6.1.
"Gladstone Meeting" shall have the meaning set forth in Section 3.5.
"Gladstone SEC Reports" shall have the meaning set forth in Section
6.5.
"Gladstone Voting Debt" shall have the meaning set forth in Section
6.2.
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"Defensible Title" shall mean, subject to and except for the Permitted
Encumbrances, (i) the title of Gladstone to such assets is free and
clear of all liens, encumbrances and defects of any kind whatsoever,
and (ii) as to those wells for which a "Working Interest" and a "Net
Revenue Interest" are set forth in the Gladstone Engineering Report,
Gladstone are entitled to receive the percentage of all Hydrocarbons
produced, saved and marketed from such wells in an amount not less than
the Net Revenue Interest set forth in the such engineering report,
without reduction, suspension or termination throughout the duration of
the productive life of such wells (except as set forth in such report),
and such party is obligated to bear the percentage of costs and
expenses related to the maintenance, development and operation of such
wells in an amount not greater than the Working Interest set forth in
such engineering report, without increase throughout the productive
life of such wells, except increases that also result in a
proportionate increase in Net Revenue Interest and as set forth in such
report.
"Dissenting Shares" shall have the meaning set forth in Section 3.3.
"TBCA" shall have the meaning set forth in Section 2.1.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, or orders of any Governmental Entity pertaining to
health or the environment currently in effect in any or all
jurisdictions in which the Company and its Subsidiaries own property or
conduct business, including without limitation, the Clean Air Act, as
amended, CERCLA, the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act of 1970, as amended, RCRA, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act,
as amended, the Hazardous & Solid Waste Amendments Act of 1984, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, the
Oil Pollution Act of 1990 ("OPA"), any state laws implementing the
foregoing federal laws, any state laws pertaining to the handling of
oil and gas exploration and production wastes or the use, maintenance,
and closure of pits and impoundments, and all other environmental
conservation or protection laws.
"Exchange Act" shall have the meaning set forth in Section 5.2.
"Fixed Price Contracts" means any contracts, commitments or agreements
for the purchase or sale of Hydrocarbons (i) having, as of the date
hereof, a remaining term of two months or more, wherein the purchase or
sales price thereunder throughout all or part of the life of such
contract, commitment or agreement is a fixed amount or an amount that
is otherwise reasonably determinable as of the date hereof pursuant to
the terms of such contract, commitment or agreement, or (ii) which
Gladstone has hedged with futures contracts or otherwise; provided,
that the term Fixed Price Contracts will not include any contract,
commitment or agreement wherein the purchase or sales price thereunder
throughout all of the life of the contract, commitment or agreement is
based on a market responsive reference price for a Hydrocarbon.
"GAAP" shall have the meaning set forth in Section 6.5.
"Governmental Entity" shall have the meaning set forth in Section 6.9.
"HSR Act" shall have the meaning set forth in Section 5.2.
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"Hydrocarbons" means oil, gas, condensate, casinghead gas, helium,
carbon dioxide, mineral and other liquid or gaseous hydrocarbons.
"Indebtedness" means any liability in respect of (A) borrowed money,
(B) capitalized lease obligations, (C) the deferred purchase price of
property or services (other than trade payables in the ordinary course
of business) and (D) guarantees of any of the foregoing.
"Leases" shall have the meaning set forth in Section 6.12(e).
"Loss" shall have the meaning set forth in Section 8.2(a).
"Material Gladstone Assets" shall have the meaning set forth in Section
6.13.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall have the meaning set forth in Section 3.1.
"Oil and Gas Interests" means, when used with respect to Gladstone,
direct and indirect interests in and rights with respect to
Hydrocarbons and related properties and assets of any kind and nature,
direct or indirect, including working, royalty, and overriding royalty
interests, production payments, operating rights, net profits
interests, other nonworking interests, and nonoperating interests; and
all revenues therefrom and all contracts in connection therewith and
claims and rights thereto (including all oil and gas leases, operating
agreements, unitization and pooling agreements and orders, divisions
orders, transfer orders, mineral deeds, royalty deeds, oil and gas
sales, exchange and processing contracts and agreements, and in each
case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; all easements,
rights of way, licenses, permits, leases and other interests associated
with, appurtenant to, or necessary for the operation of any of the
foregoing; and all interests in equipment and machinery (including
tanks, batteries, pipelines, and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries
and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing.
"Paying Agent" shall have the meaning set forth in Section 3.2.
"Permitted Encumbrances" shall mean any of the following: (i) any liens
for taxes and assessments not yet delinquent or, if delinquent, that
are being contested in good faith in the ordinary course of business;
(ii) any obligations or duties to any municipality or public authority
with respect to any franchise, grant, certificate, license or permit,
and all applicable laws; (iii) any easements, rights-of-way,
servitudes, permits and other rights in respect of surface operations,
pipelines or the like, and easements for pipelines, power lines and
other similar rights-of-way, and encroachments, on, over or in respect
of any property or lands of Gladstone or over which such party owns
rights-of-way, easements, permits or licenses, that do not unreasonably
or materially interfere with the operation of any property or lands for
exploration and production of hydrocarbon or related operations; (iv)
all royalties, overriding royalties, net profits interests, production
payments, carried interests, reversionary interests, calls on
production and other burdens on or deductions from the proceeds of
production that do not operate to (A) reduce the Net Revenue Interest
below that set forth in the Gladstone Engineering Report, or (B)
increase the Working Interest of Gladstone above that set forth in the
engineering report without a proportionate increase in the Net
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Revenue Interest of such party; (v) the terms and conditions of all
leases, servitudes, production sales contracts, division orders,
contracts for sale, purchase, exchange, refining or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of development,
area of mutual interest agreements, farmout agreements, gas balancing
or deferred production agreements, processing agreements, plant
agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, carbon dioxide
purchase or sale agreements, salt water or other disposal agreements,
seismic or geophysical permits or agreements, and other agreements, to
the extent that such contracts and agreements do not (A) reduce the Net
Revenue Interest below that set forth in the Gladstone Engineering
Report, or (B) increase the Working Interest above that set forth in
the Gladstone Engineering Report, as applicable, without a
proportionate increase in the Net Revenue Interest of the applicable
party; (vi) conventional rights of reassignment prior to abandonment;
(vii) materialmen's, mechanics', repairmen's, employees', contractors',
operators', tax and other similar liens or charges arising in the
ordinary course of business incidental to construction, maintenance or
operation of any of the assets (A) if they have not been filed pursuant
to law, (B) if filed, they have not yet become due and payable or
payment is being withheld as provided by law or (C) if their validity
is being contested in good faith in the ordinary course of business by
appropriate action; and (viii) any other encumbrances that (A) do not
secure an obligation in respect of borrowed money or (B) do not
interfere materially with the operation, value or use of assets of the
Company or its Subsidiaries.
"Potential Acquirer" shall have the meaning set forth in Section 8.6.
"Proxy Statement" shall have the meaning set forth in Section 5.3.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended.
"Securities Act" shall have the meaning set forth in Section 6.5.
"Share" shall have the meaning set forth in Section 3.1.
"Surviving Corporation" shall have the meaning set forth in Section
1.1.
"Tax" shall mean all federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties and assessments of any nature
whatsoever together with all interest, penalties and additions imposed with
respect to such amounts.
"Tax Return" shall mean any return, declaration, report, estimate,
claim for refund, information return, statement, request for extension, or other
similar document relating to any tax, including any schedule or attachment
thereto, and including any amendment thereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Gladstone as follows:
Section 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power to carry on its business as it
is now being conducted. The Company is duly qualified as a foreign corporation
and is in good standing in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a direct or indirect
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or operations of the Company or the Company's ability to
consummate the Merger (a "Company Material Adverse Effect"). Complete and
correct copies as of the date hereof of the Certificate of Incorporation and
By-laws of the Company have been delivered to Gladstone.
Section 5.2 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby by the Company have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Gladstone, this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of the Company or (ii)
result in any breach or constitute a default (with or without notice or lapse of
time, or both) or give rise in others of any rights of termination, cancellation
or acceleration under any indenture, contract, license, franchise, permit,
order, decree, concession, lease, instrument, judgment, statute, law, ordinance,
rule or regulation applicable to Sub or its assets, other than, in the case of
clause (ii) only, breaches, defaults, violations and losses of rights that would
not have a Company Material Adverse Effect. Except as referred to herein, or in
connection or in compliance with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the filing and
recordation of the certificate of merger pursuant to the TBCA, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
The Company of the Merger or the other transactions contemplated by this
Agreement, except where the failure to make any such filing or registration or
to obtain such authorization, consent or approval would not prevent consummation
of the Merger or have a Company Material Adverse Effect.
Section 5.3 Information in Proxy Statement. None of the information
supplied by the Company for inclusion in the preliminary and definitive proxy
statement of Gladstone and any amendments or supplements thereto (collectively
the "Proxy Statement") to be mailed to the stockholders of Gladstone in
connection with the Merger will, at the time of the mailing thereof or at the
time of the Gladstone Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 5.4 Capitalization of the Company. The authorized capital stock
of the Company consists of ten million shares of common stock, par value $0.02
per share, 508,900 of which shares, as of the date of this Agreement, are
validly issued and outstanding, fully paid and nonassessable and are free and
clear of all liens, claims and encumbrances.
Section 5.5 Financing. The Company has or will have available to it at
the time the Company is required to pay for the Shares pursuant to Article III
hereof sufficient funds to permit it to (i) pay for all of the outstanding
shares of Gladstone Common Stock and pay amounts due to stockholders of
Gladstone who have perfected dissenters' rights in accordance with the TBCA.
Section 5.6 Review of Company. Without in any way affecting the
importance of, or impacting its reliance on, any other provision of this
Agreement, the Company acknowledges that it has had a full opportunity to
request from Gladstone and its representatives, and has received and reviewed,
all oral and written information concerning Gladstone that the Company deems
relevant to its decision to enter into this Agreement and to consummate the
transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GLADSTONE
Gladstone hereby represents and warrants to the Company as follows:
Section 6.1 Organization and Qualification. Gladstone is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington and has the corporate power to carry on its business as it
is now being conducted. Gladstone is duly qualified as a foreign corporation and
is in good standing in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a direct or indirect
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or operations of Gladstone and its Subsidiaries (as
hereinafter defined) taken as a whole or its ability to consummate the Merger (a
"Gladstone Material Adverse Effect"). Complete and correct copies of the charter
and by-laws of Gladstone as of the date hereof have been previously provided to
the Company.
Section 6.2 Capitalization. The authorized capital stock of Gladstone
consists of 6,000,000 shares of Gladstone Common Stock, par value $0.01 per
share. As of the date of this Agreement, 4,244,060 shares of Gladstone Common
Stock were outstanding, no shares of Gladstone Common Stock were held in the
treasury of Gladstone, no shares were held by Subsidiaries of Gladstone and no
shares of preferred stock were outstanding. All the outstanding shares of
Gladstone Common Stock are validly issued, fully paid and non-assessable and
were issued free of preemptive rights. As of the date hereof, there are no
bonds, debentures, notes or other evidences of indebtedness having the right to
vote on any matters on which Gladstone's stockholders may vote ("Gladstone
Voting Debt") issued or outstanding. There are no options, warrants, calls or
other rights, agreements or commitments outstanding obligating Gladstone to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Gladstone to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
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Section 6.3 Authority Relative to this Agreement. Gladstone has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the holders of a majority of the
outstanding shares of the Gladstone Common Stock, the corporate power and
authority to carry out its obligations hereunder. The execution and delivery of
this Agreement by Gladstone and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Gladstone (except for the approval of the holders of a majority
of the outstanding shares of Gladstone Common Stock). This Agreement has been
duly executed and delivered by Gladstone and, assuming the due authorization,
execution and delivery of this Agreement by the Company, this Agreement
constitutes a legal, valid and binding obligation of Gladstone enforceable in
accordance with its terms except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of Gladstone, or (ii)
result in any breach or constitute a default (with or without notice or lapse of
time, or both) under, or give rise in others to any rights of termination,
cancellation or acceleration under, any indenture, contract, loan agreement,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to Gladstone or
its assets, other than, in the case of clause (ii) only, such breaches,
defaults, violations and losses of rights that would not, individually or in the
aggregate, have a Gladstone Material Adverse Effect. Except in connection or in
compliance with the provisions of the HSR Act, the Exchange Act and the filing
and recordation of the Certificate of Merger pursuant to the TBCA, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
Gladstone of the Merger or the other transactions contemplated hereby, except
where failure to make such filing or registration or obtain such authorization,
consent or approval would not, individually or in the aggregate, prevent
consummation of the Merger or have a Gladstone Material Adverse Effect.
Section 6.4 Reports and Financial Statements. Gladstone has furnished
the Company with true and complete copies of the Company's (i) Annual Reports on
Form 10-K for the fiscal years ended December 31, 1996 and December 31, 1997, as
filed with the Securities and Exchange Commission (the "Commission"), (ii)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30,
1995, September 30, 1995, March 31, 1996, June 30, 1996, September 30, 1996,
March 31, 1997, June 30, 1997, and September 30, 1997 as filed with the
Commission, (iii) proxy statements related to all meetings of its stockholders
(whether annual or special) held since January 1, 1995 and (iv) all other
reports on Form 8-K and registration statements declared effective by the
Commission since December 31, 1994, which are all the documents (other than
preliminary material) that Gladstone was required to file with the Commission
since January 1, 1995 (all items in clauses (i) through (iv) being referred to
herein collectively as the "Gladstone SEC Reports"). As of their respective
dates, the Gladstone SEC Reports complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Gladstone SEC Reports. As of their
respective dates, the Gladstone SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the audited consolidated financial statements and unaudited interim
financial statements of Gladstone included in the Gladstone SEC Reports complied
in all material respects with applicable accounting requirements of the
Securities Act and
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the Exchange Act, and with the published rules and regulations of the Commission
with respect thereto. The financial statements included in the Gladstone SEC
Reports (i) have been prepared in accordance with GAAP during the periods
presented (except as may be indicated therein or in the notes thereto or, in the
case of the unaudited statements, subject to normal year-end audit adjustments
and except for the fact that such unaudited statements do not contain all notes
required by GAAP), (ii) present fairly, in all material respects, the financial
position of Gladstone as of the dates thereof and (iii) are, in all material
respects, in accordance with the books of account and records of Gladstone.
Gladstone has no liability and is not subject to any loss contingency material
to Gladstone other than as reflected or disclosed in the financial statements or
notes thereto included in the Gladstone SEC Reports filed prior to the date
hereof. Any reports or other material filed by Gladstone with the Commission
after the date hereof and prior to the Effective Time (other than preliminary
material) shall be deemed to be included in the defined term "Gladstone SEC
Reports" for purposes of this Agreement and Gladstone shall be deemed to have
made the representations set forth in this Section 7.5 in respect of such
reports or other material and any financial statements set forth therein.
Section 6.5 Litigation. Except as disclosed in Gladstone's Annual
Report on Form 10-K for the year ended December 31, 1997, there is no claim,
suit, action or proceeding pending or, to the knowledge of the officers of
Gladstone, overtly threatened, against or affecting Gladstone, either
individually or in the aggregate, which could reasonably be expected to have a
Gladstone Material Adverse Effect, nor, as of the date of this Agreement, is
there any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Gladstone.
Section 6.6 Information in Disclosure Documents. None of the
information with respect to Gladstone included or incorporated by reference in
the Proxy Statement will, at the time of the mailing thereof and at the time of
the Gladstone Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading; provided, however, that this provision shall not apply
to, and no representation or warranty is made by Gladstone with respect to,
statements or omissions in the Proxy Statement based upon information furnished
by or on behalf of the Company for use therein. The Proxy Statement will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder. No representation or warranty made by Gladstone
contained in this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
Section 6.7 Environmental Matters. Gladstone and the properties and
operations of Gladstone are not subject to any existing, pending or, to the
knowledge of Gladstone, overtly threatened action, suit, investigation, inquiry
or proceeding by or before any Governmental Entity under any Environmental Law.
Except for matters that would not result, individually or in the aggregate, in a
Gladstone Material Adverse Effect, (i) the properties, operations and activities
of Gladstone are in compliance with all applicable Environmental Laws; (ii) all
notices, permits, licenses, or similar authorizations, if any, required to be
obtained or filed by Gladstone under any Environmental Law in connection with
any aspect of the business of Gladstone, including without limitation those
relating to the treatment, storage, disposal or release of a hazardous
substance, have been duly obtained or filed and will remain valid and in effect
after the Merger, and Gladstone is in compliance with the terms and conditions
of all such notices, permits, licenses and similar authorizations; (iii) there
are no physical or environmental conditions existing on any property of
Gladstone or resulting from Gladstone's operations or activities, past or
present, at any location, that would give rise to any on-site or off-site
remedial obligations imposed on Gladstone under any Environmental Laws; (iv) to
Gladstone's knowledge, since the effective date of the relevant requirements
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of applicable Environmental Laws and to the extent required by such applicable
Environmental Laws, all hazardous substances generated by Gladstone have been
transported only by carriers authorized under Environmental Laws to transport
such substances and wastes, and disposed of only at treatment, storage, and
disposal facilities authorized under Environmental Laws to treat, store or
dispose of such substances and wastes; (v) there has neither been any exposure
of any person or property to hazardous substances or any pollutant or
contaminant released by Gladstone, nor has there been any release of hazardous
substances, or any pollutant or contaminant into the environment by Gladstone or
in connection with their properties or operations that could reasonably be
expected to give rise to any claim against Gladstone for damages or
compensation; and (vi) Gladstone has made available to the Company all internal
and external environmental audits and studies and all correspondence on
substantial environmental matters in the possession of Gladstone relating to any
of the current or former properties or operations of Gladstone. For purposes of
this Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA, and the term "disposal" has the meaning specified in RCRA;
provided, however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance," "release," or
"disposal" that is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
Section 6.8 Public Utility Holding Company Act. Gladstone is not
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, and the rules and regulations thereunder.
Section 6.9 Compliance with Applicable Laws. Except as disclosed in
the Gladstone SEC Reports filed prior to the date of this Agreement, Gladstone
is not in violation of any law, ordinance, regulation, order or writ of any
courts, administrative agencies or commissions or other governmental
authorities or instrumentalities, domestic or foreign (each a "Governmental
Entity") applicable to Gladstone or by which it may be bound, except for
violations that would not, individually or in the aggregate, have a Gladstone
Material Adverse Effect. Gladstone has not received notice of violation of any
law, ordinance, regulation, order or writ, or is in default with respect to any
order, writ, judgment, award injunction or decree of any Governmental Entity,
except for such notices or defaults which would not, individually or in the
aggregate, reasonably be expected to have a Gladstone Material Adverse Effect.
Section 6.10 Taxes. Gladstone has timely filed when due (taking into
account permitted extensions) all material federal, state and local income and
franchise Tax Returns and all other Tax Returns required to be filed and has
paid all Taxes required to be paid in respect of the periods covered by such Tax
Returns. The information contained in such Tax Returns is true, complete and
accurate in all material respects. Gladstone is not delinquent in the payment of
any Tax, assessment or governmental charge. No deficiencies for any Taxes have
been proposed, asserted or assessed against Gladstone, or to the knowledge of
the officers of Gladstone, that have not been finally settled or paid in full,
and no requests for waivers of the time to assess any such Tax are pending.
Section 6.11 Certain Agreements.
Gladstone is not a party to any oral or written (i) agreements,
contracts, indentures or other instruments relating to Indebtedness which, when
aggregated with all such other agreements, contracts, indentures or instruments,
exceeds an amount of $500,000, (ii) confidentiality or standstill agreements or
other material contract or agreement which, after giving effect to the
transactions contemplated by this Agreement, purports to restrict or bind the
Company (iii) collective bargaining agreement, (iv) contract, agreement or
commitment not entered into in the ordinary course of business consistent with
past practice and for which Gladstone could become liable for payments in excess
of $500,000 (in respect of all such contracts, agreements or commitments,
collectively), or (v) any contract or agreement granting a
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preferential right of purchase or similar right to any person or entity with
respect to any Material Gladstone Asset (as hereinafter defined).
Section 6.12 Oil and Gas Reserve Information. Except for exceptions
that would not, and could not reasonably be expected to, individually or in the
aggregate, have a Gladstone Material Adverse Effect:
(a) To the knowledge of Gladstone's officers, none of the wells
included in the Oil and Gas Interests of Gladstone has been overproduced such
that it is subject or liable to being shut-in or to any other overproduction
penalty (including cash payments);
(b) There are no wells included in the Oil and Gas Interests of
Gladstone that: (i) Gladstone or any of its Subsidiaries are currently obligated
by law or contract to plug and abandon; (ii) are subject to exceptions to a
requirement to plug and abandon issued by a regulatory authority having
jurisdiction over such Oil and Gas Interests; or (iii) to the knowledge of
Gladstone, have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of each regulatory
authority having jurisdiction over such Oil and Gas Interests;
(c) No person has any call on, option to purchase, or similar rights
with respect to the Oil and Gas Interests of Gladstone (including without
limitation the production attributable thereto) and upon consummation of the
transactions contemplated by this Agreement, the Company and its Subsidiaries
will have the right to market production from the Oil and Gas Interests of
Gladstone on terms no less favorable than the terms upon which such Gladstone is
currently marketing such production;
(d) To the knowledge of Gladstone's officers, all royalties, overriding
royalties, compensatory royalties and other payments due with respect to the Oil
and Gas Interests of Gladstone (excluding those held in suspense in accordance
with past operating practices or in connection with post-closing adjustments in
respect of acquired properties) have been properly and timely paid; and
(e) To the knowledge of Gladstone's officers, with respect to those
assets of that are oil and gas leases ("Leases"), there has not occurred any
event, fact or circumstance which with the lapse of time or the giving of
notice, or both, would constitute a breach or default on behalf of Gladstone and
its Subsidiaries or, to the knowledge of Gladstone and its Subsidiaries, with
respect to any other parties under the Leases.
Section 6.13 Title to Property. Gladstone has Defensible Title to all
of the material assets reflected on the consolidated financial statements of
Gladstone included in the Gladstone SEC Reports as being owned by it (including
Oil and Gas Interests of Gladstone) and all of the material assets thereafter
acquired by it (except to the extent that such assets have thereafter been
disposed of in the ordinary course of business consistent with past practice)
(collectively, the "Material Gladstone Assets"). All material payments of any
kind required to be made by Gladstone to third parties under any contract or
agreement relating to the Material Gladstone Assets have been or will be
properly and timely paid or provided for.
ARTICLE VII
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 7.1 Conduct of Business by Gladstone. Following the date hereof
and prior to the Effective Time, except as otherwise contemplated by this
Agreement or unless the Company shall otherwise consent in writing:
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(a) subject to the limitations contained in or transactions
contemplated by this Agreement, Gladstone shall carry on its operations in the
usual and ordinary course consistent with past practice, and shall use its
reasonable best efforts to preserve substantially intact its present business
organization, keep available the services of its present officers and employees,
maintain and keep its material assets in as good repair and condition as of the
date hereof, ordinary wear and tear and damage due to casualty excepted, and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and on-going businesses shall be
materially unimpaired at the Effective Time;
(b) Gladstone shall not, nor shall it propose to, except as required by
this Agreement, (i) amend its Certificate of Incorporation or By-laws, (ii)
split, combine or reclassify its outstanding capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the capital stock, or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or (iii)
directly or indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of its capital stock;
(c) Gladstone shall not, without the consent of the Company: (i) except
as required or contemplated by this Agreement, issue, deliver or sell or agree
to issue, deliver or sell any additional shares of, or stock appreciation rights
or rights of any kind to acquire any shares of, its capital stock of any class,
any Gladstone Voting Debt, or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock, (ii) acquire or lease or
agree to acquire or lease any material capital asset or assets, or make any
other capital expenditures, (iii) dispose or agree to dispose of capital assets
or any other assets other than in the ordinary course, (iv) (A) create, incur,
assume or permit additional material indebtedness (including obligations in
respect of capital leases), (B) assume, guarantee, endorse or otherwise become
liable or responsible for the obligations of any other person in an amount in
excess of $10,000, (C) encumber or grant a security interest in any Material
Gladstone Asset, or (D) make any loans or advances to any other person, enter
into any agreement or instrument relating to the borrowing of money or the
extension of credit or enter into any other material transaction, other than in
each case in the ordinary course of business consistent with past practice,(v)
enter into or renew any material agreements, contracts or other commitments that
are not expected to be fully performed within thirty days after the Effective
Time excluding oil and gas leases, farmout agreements, gas sales or purchase
contracts, joint operating agreements, unit operating agreements and unit
agreements entered into in the ordinary course of business, or (vi) adopt, enter
into, amend or terminate any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Gladstone shall not, except as required to comply with applicable
law: (i) adopt, enter into, terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any current or former director,
officer or employee, (ii) increase in any manner the compensation or fringe
benefits of any director (other than the adoption of any special compensation
for the members of the Special Committee), executive officer or employee, (iii)
pay any benefit not provided under any existing plan or arrangement, (iv) grant
any awards under any other bonus, incentive, performance or other compensation
plan or arrangement or plan (including, without limitation, the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Plans or agreements or awards made thereunder), (v) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Plan, other than in the
ordinary course of business consistent with past practice, or (vi) adopt, enter
into, amend or terminate any contract, agreement, commitment or arrangement to
do any of the foregoing;
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(e) Gladstone shall not, make any change in its accounting policies or
procedures, except as required under GAAP;
(f) Gladstone shall use its reasonable best efforts to refrain from
taking any action that would, or reasonably might be expected to, result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect as of the Effective Time, or in any of
the conditions to the Merger set forth in Article IX not being satisfied, or
(unless such action is required by applicable law) that would adversely affect
the ability of Gladstone to obtain any of the regulatory approvals required to
consummate the Merger, as contemplated hereby;
(g) Gladstone shall not settle or compromise any claim for dissenters'
rights in respect of the Merger;
(h) Gladstone shall maintain in full force and effect all of its
policies of insurance in existence as of the date hereof or insurance comparable
to the coverage afforded by such policies; and
(i) Gladstone shall not enter into any natural gas or other future or
options trading or be a party to any price swaps, hedges, futures or similar
instruments without first obtaining the consent of the Company, which consent
shall not be unreasonably withheld.
Section 7.2 Obligations of the Company. The Company shall use its
reasonable best efforts to refrain from taking any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect as of the Effective Time, or in any of the conditions to the Merger set
forth in Article IX not being satisfied, or (unless such action is required by
applicable law) that would adversely affect the ability of the Company to obtain
any of the regulatory approvals required to consummate the Merger, as
contemplated hereby.
Section 7.3 Notice of Breach. Each party shall promptly give written
notice to the other party upon becoming aware of the occurrence or, to its
knowledge, impending or threatened occurrence, of any event that would cause any
of the representations and warranties to be untrue on the Effective Time or
cause a breach of any covenant contained or referenced in this Agreement and
will use its reasonable best efforts to prevent or promptly remedy the same.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Upon reasonable notice, Gladstone
shall afford to the Company and its accountants, lenders, counsel and other
representatives full access, during normal business hours (and at such other
times as the parties may mutually agree) and in a manner so as not to materially
interfere with the normal business operations of Gladstone throughout the period
prior to the Effective Time, to all of their properties (which shall include the
right to conduct an environmental assessment thereof), books, contracts,
commitments, records and personnel. During such period Gladstone shall furnish
promptly to the Company (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as the Company may reasonably request. The Company
shall hold all such information in confidence. During the period prior to the
Effective Time, Gladstone shall make its accountants, counsel, lenders and other
representatives available to the Company and its accountants, lenders, counsel
and other representatives at reasonable times.
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Section 8.2 Proxy Statement. (a) As promptly as reasonably practicable
after the execution of this Agreement, Gladstone shall prepare and file with the
Commission preliminary proxy materials with respect to the actions to be taken
at the Gladstone Meeting, which shall be in form and substance reasonably
satisfactory to the Company. As promptly as reasonably practicable after
comments are received from the Commission with respect to such preliminary proxy
materials, Gladstone shall use its reasonable best efforts to respond to the
comments of the Commission. The Company shall provide Gladstone with such
information as may be required to be included in the proxy statement or as may
be reasonably required to respond to any comment of the Commission. After all
the comments received from the Commission have been cleared by the Commission
staff and all information required to be contained in the proxy statement has
been included therein by Gladstone, Gladstone shall file with the Commission the
Proxy Statement and Gladstone shall use its reasonable best efforts to have the
Proxy Statement cleared by the Commission as soon thereafter as practicable.
Gladstone shall cause the Proxy Statement to be mailed to its stockholders of
record as promptly as reasonably practicable after clearance by the Commission.
Unless Gladstone is advised by outside counsel that such a recommendation is no
longer consistent with the discharge of applicable fiduciary duties of directors
of Gladstone, the Proxy Statement shall include the recommendation of the Board
of Directors of Gladstone in favor of the Merger. If requested by the Company,
Gladstone shall use its reasonable best efforts to obtain an "SAS No. 71 letter"
from Gladstone's independent public accountants addressed to Gladstone, in form
and substance reasonably satisfactory to the Company, with respect to interim
financial statements included in the Proxy Statement.
(b) Gladstone shall retain the services of a proxy soliciting firm
reasonably acceptable to the Company for the purpose of communicating to
Gladstone's stockholders the recommendation of Gladstone's Board of Directors
and of seeking to ensure that sufficient votes are cast to satisfy the
requirements of applicable law for the completion of the Merger.
(c) Gladstone and the Company shall make all necessary filings with
respect to the Merger under the Exchange Act and the rules and regulations
thereunder and shall use their reasonable best efforts to obtain required
clearances with respect thereto.
Section 8.3 Indemnification. (a) The Certificate of Incorporation of
the Surviving Corporation shall contain provisions that acknowledge and agree
that, to the fullest extent permitted by law, the provisions relating to
limitation on liability that are set forth in the Articles of Incorporation of
Gladstone as of the date of this Agreement, shall remain effective for a period
of six years from the Effective Time with respect to individuals who at any time
from and after the date of this Agreement and to and including the Effective
Time were directors, officers, employees, fiduciaries or agents of Gladstone in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the matters contemplated by this Agreement), and
the Surviving Corporation shall not amend (in any manner that would diminish the
effect of such provisions) or repeal such provisions for a period of six years
from the Effective Time.
(b) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 8.3.
(c) The obligations of the Surviving Corporation under this Section 8.3
shall not be terminated or modified in such a manner as to adversely affect any
director, officer, employee, fiduciary and agent to whom this Section 8.3
applies without the consent of each affected director, officer, employee,
fiduciary
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and agent (it being expressly agreed that the directors, officers, employees,
fiduciaries and agents to whom this Section 8.3 applies shall be third-party
beneficiaries of this Section 8.3).
Section 8.4 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to cooperate
with each other and to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, in each case consistent with
the fiduciary duties of their respective Boards of Directors, all things
necessary, proper or advisable (i) under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings and
(ii) to lift any injunction or other legal bar to the Merger as soon as
reasonably practicable (and, in such case, to proceed with the Merger as
expeditiously as possible); provided, however, that nothing in this Section or
elsewhere in this Agreement shall require any party hereto to incur expenses in
connection with the transactions contemplated hereby which are not reasonable
under the circumstances in relation to the size of the transaction contemplated
hereby or to require any party or any affiliate of any party to hold separate or
make any divestiture of a significant asset or otherwise agree to any material
restriction on the operations of any party in order to obtain any waiver,
consent or approval required by this Agreement.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Surviving Corporation shall take all such necessary action.
(c) If at any time prior to the Effective Time any information, event
or circumstance shall be discovered that should be set forth in a supplement to
the Proxy Statement, the discovering party shall promptly inform the other party
of such information, event or circumstance, and the Company shall as soon as
practicable prepare a supplement to the Proxy Statement, which shall be in form
and substance reasonably satisfactory to the Company, and mail such supplement
to its stockholders.
Section 8.5 No Solicitation. Prior to the Effective Time, Gladstone
shall not, nor shall it authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it to, directly or indirectly, initiate,
solicit, negotiate or encourage (including by way of furnishing information), or
take any other action to facilitate or entertain, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
proposal or offer to acquire all or substantially all of the business of
Gladstone or all or substantially all of the capital stock of Gladstone, whether
by merger, purchase of assets, tender offer, exchange offer or otherwise,
whether for cash, securities or any other consideration or combination thereof
(any such transaction being referred to herein as an "Other Acquisition
Transaction") or agree to endorse or recommend any such Other Acquisition
Transaction or enter into an agreement relating to an Other Acquisition
Transaction; provided, however, that Gladstone may negotiate with a corporation,
partnership, person or other entity or group (a "Potential Acquirer") if, based
upon the advice of counsel to Gladstone (notice of which advice has been
communicated to the Company), Gladstone's Board of Directors determines in good
faith that there is a significant risk that the failure to negotiate with the
Potential Acquirer could constitute a breach of the Board's fiduciary duty to
the stockholders of Gladstone.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective
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Time of the following conditions, any one or more of which may be waived in a
writing executed by Gladstone and the Company subject to and in accordance with
Section 10.4 hereof:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of the Gladstone Common Stock.
(b) There shall not be pending any action, proceeding or investigation
brought by any person or entity before any Governmental Entity challenging,
affecting, or seeking material damages in connection with, the transactions
contemplated by this Agreement.
Section 9.2 Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject to
approval by its Board of directors and the fulfillment at or prior to the
Effective Time of the following additional conditions, unless waived by the
Company in writing.
(a) Gladstone shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of Gladstone contained
in this Agreement which are qualified with respect to materiality shall be true
and correct in all respects, and such representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case when made and on and at the Effective Time as if made at such time (except
to the extent they expressly relate to the date of this Agreement or any other
particular date), and the Company shall have received a certificate signed on
behalf of Gladstone by its President or Chief Executive Officer, dated the
Closing Date, to that effect. Notwithstanding anything to the contrary herein,
with respect to any representation or warranty in this Agreement which refers to
a Gladstone Material Adverse Effect, a Gladstone Material Adverse Effect shall
mean adverse effects resulting in an aggregate Loss in excess of $100,000.
"Loss" shall mean the amount that would be required to be contributed to the
Surviving Corporation at the Effective Time so that the owners of the Surviving
Corporation would be in the same economic position as they would have been if
such adverse effects had not occurred and would not occur.
(b) The net working capital (current assets less current liabilities)
at the Effective Time shall be greater than or equal to the difference between
$219,000 and the cost of drilling and completion (if necessary) of the following
four wells:
(i) Carroll No. 2 well, Madison County, Texas (estimated
drilling and completion costs of $55,547.05 to
Gladstone's 1/8 working interest);
(ii) Shoemaker No. 2 Rework, Madison County, Texas
(estimated drilling and completion costs of
$35,946.07 to Gladstone's undivided 14.0086%; working
interest)
(iii) Murphree No. 1 well, Stonewall County, Texas
(estimated drilling and completion costs of
$50,069.00 to Gladstone's 20% working interest); and
(iv) Villines No. 1 well, Stonewall County, Texas
(estimated drilling and completion costs of
$54,109.00 to Gladstone's 20% working interest).
(c) The number of Dissenting Shares shall not exceed 10% of the number
of outstanding shares of Company Common Stock.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of Gladstone:
(a) by mutual consent of the Board of Directors of Gladstone and the
Board of Directors of the Company;
(b) by either Gladstone or the Company if the Merger shall not have
been consummated on or before September 1, 1998 (unless, such circumstance is
the result of a breach of the terms hereof by the party exercising the
termination right);
(c) by the Company if there has been a material breach on the part of
Gladstone, or by Gladstone if there has been a material breach on the part of
the Company, of any representation, warranty, covenant or agreement set forth in
this Agreement, which breach has not been cured within fifteen business days
following receipt by the breaching party of written notice of such breach;
(d) by either Gladstone or the Company upon written notice to the other
party if any Governmental Entity of competent jurisdiction shall have issued (i)
a final permanent order enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement, and in any such case the
time for appeal or petition for reconsideration of such order shall have expired
without such appeal or petition being granted, or (ii) any order or directive
that does not directly enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, but that would, if Gladstone or the
Company were to comply with such order or directive as a condition to
consummating the transactions contemplated hereby, have a material adverse
effect on the business, operations or financial condition of the Surviving
Corporation;
(e) by either Gladstone or the Company if the required approval of
Gladstone's stockholders is not received in a vote duly taken at the Gladstone
Meeting contemplated by Section 3.5 hereof;
(f) by the Company if the Board of Directors of Gladstone or any
committee thereof (i) shall have amended, modified, rescinded or repealed the
recommendation of the Gladstone's Board of Directors to the stockholders of
Gladstone to approve the Merger and the adoption of this Agreement, or (ii)
shall have adopted any other resolution in connection with this Agreement and
the transactions contemplated hereby inconsistent with such recommendation of
the consummation of the transactions contemplated hereby;
Section 10.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 10.1, no party hereto shall have any obligation or
liability to any other party hereto except as set forth herein, nothing herein
and no termination pursuant hereto will relieve any party from liability for any
breach of this Agreement.
Section 10.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval hereof by the stockholders of Gladstone,
but, after such approval, no amendment shall be made that under applicable law
requires further approval of such stockholders without such further approval.
This
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Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 10.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any documents delivered pursuant hereto by any other party and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Non-Survival of Representations and Warranties. All
representations, warranties, agreements and covenants set forth in this
Agreement shall terminate at the Effective Time or upon termination of this
Agreement pursuant to Section 10.1, as the case may be, except that (i) the
agreements set forth in Sections 8.3, 8.4(b) and Articles III and XII shall
survive the Effective Time indefinitely
Section 11.2 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile transmission
(with a hard copy delivered by overnight delivery service) or by overnight
delivery service, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Company:
EXCO Resources, Inc.
5735 Pineland Drive, Suite 235
Dallas, Texas 75231
Attention: General Counsel
Telecopy No.: (214) 368-2084
With a copy to:
Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: William L. Boeing
Telecopy No.: (214) 651-5940
If to Gladstone:
Gladstone Resources, Inc.
210 Meadows Building
Dallas, Texas 75206
Telecopy No.: (214) 363-3432
Telephone No.: (214)
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or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 11.2.
Section 11.3 Expenses; Termination Fees.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
herein shall be paid by the party incurring such expenses.
Section 11.4 Publicity. So long as this Agreement is in effect, neither
Gladstone or the Company shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated by this Agreement
without the consent of the other, which consent shall not be unreasonably
withheld, unless such press release or public statement is required by law,
regulation or rules of any applicable market or exchange, in which case such
press release or public statement may be made after providing the other parties
hereto a reasonable opportunity to comment thereon.
Section 11.5 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated to the
fullest extent possible.
Section 11.7 Miscellaneous. This Agreement: (i) constitutes the entire
agreement and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (ii) is not intended to confer upon any other person any rights
or remedies hereunder and shall be binding upon and inure to the benefit solely
of each party hereto, and their respective successors and assigns, (iii) shall
not be assigned by operation of law or otherwise, and (iv) shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Texas with respect to all matters (without giving effect to the
provisions thereof relating to conflicts of law). This Agreement may be executed
in any number of counterparts which together shall constitute a single
agreement.
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IN WITNESS WHEREOF, Gladstone and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
EXCO RESOURCES, INC.
By: /s/ DOUGLAS H. MILLER
----------------------------
Douglas H. Miller
Chief Executive Officer
GLADSTONE RESOURCES, INC.
By: /s/ E.B. BROOKS, JR.
-----------------------------
E. B. Brooks, Jr.
President
