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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 17, 1997
(Date of Earliest Reported Event)
AMERAC ENERGY CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
COMMISSION FILE NUMBER 1-9933 75-2181442
(I.R.S. Employer
Identification No.)
1201 LOUISIANA, SUITE 3350
HOUSTON, TEXAS 77002-5609
(Address of Principal Executive Offices)
(713) 308-5250
(Issuer's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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AMERAC ENERGY CORPORATION
ITEM 5. OTHER EVENTS.
On November 17, 1997, Amerac Energy Corporation ("Amerac") and Southern
Mineral Corporation ("Southern Mineral") issued a press release announcing that
they had signed a definitive agreement for the merger of Amerac with a
subsidiary of Southern Mineral. Such press release and such agreement are filed
herewith.
FORWARD-LOOKING STATEMENTS
When included in this report, the words "expects," "intends," "plans,"
"anticipates," "estimates," and analogous expressions are intended to identify
forward-looking statements. Such statements inherently are subject to a variety
of risks and uncertainties that could cause actual results to differ materially
from those projected. Such risks and uncertainties include, among others,
general economic and business conditions, changes in foreign and domestic oil
and gas exploration and production activity, information regarding oil and gas
reserves, future drilling and operations, future production of oil and gas,
future net cash flows, competition, changes in foreign, political, social and
economic conditions, regulatory initiatives and compliance with governmental
regulations, and various other matters, many of which are beyond the Company's
control. These forward-looking statements speak only as of the date of this
report. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any changes in the Company's expectations with
regard thereto or any changes in events, conditions or circumstances on which
any such statement is based.
Without limiting the foregoing, there are numerous uncertainties inherent
in estimating natural gas and oil reserves and their estimated values, including
many factors beyond the control of the Company. The reserve data set forth in
this report represents only estimates. Reservoir engineering is a subjective
process of estimating underground accumulations of natural gas and oil that
cannot be measured in an exact manner. The accuracy of any reserve estimate is
a function of the quality of available data and of engineering and geologic
interpretation and judgment. As a result, estimates of different engineers,
including those used by the Company, may vary. In addition, estimates of
reserves are subject to revision based upon actual production, results of future
development and exploration activities, prevailing natural gas and oil prices,
operating costs and other factors. The revisions may be material. Accordingly,
reserve estimates are often different from the quantities of natural gas and oil
that are ultimately recovered and are highly dependent upon the accuracy of the
assumptions upon which they are based.
Estimates with respect to proved reserves that may be developed and
produced in the future are often based upon volumetric calculations and upon
analogy to similar types of reserves rather than actual production history.
Estimates based on these methods are generally less reliable than those based on
actual production history. Subsequent evaluation of the same reserves based
upon production history will result in variations in the estimated reserves that
may be substantial.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Merger, dated as of November
17, 1997, by and among Amerac, AEC Acquisition
Corp. and Southern Mineral.
20.1 Press Release of November 17, 1997.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
AMERAC ENERGY CORPORATION
(Registrant)
By:/s/ Jeffrey B. Robinson
-----------------------
Date: November 17, 1997 Jeffrey B. Robinson
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Agreement and Plan of Merger, dated as of November 17, 1997, by
and among Amerac, AEC Acquisition Corp. and Southern Mineral
(Schedules 5.2(A) and 5.2(B) are omitted).
20.1 Press Release of November 11, 1997.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
SOUTHERN MINERAL CORPORATION,
AEC ACQUISITION CORP.
and
AMERAC ENERGY CORPORATION
November 17, 1997
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TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER................................................. 2
1.1 The Merger................................................. 2
1.2 Effective Time............................................. 2
1.3 Effects of the Merger...................................... 2
1.4 Certificate of Incorporation and By-laws................... 2
1.5 Directors and Officers..................................... 2
1.6 Additional Actions......................................... 2
ARTICLE II CONVERSION OF SECURITIES................................... 3
2.1 Conversion of Capital Stock................................ 3
2.2 Exchange Ratio, Fractional Shares.......................... 3
2.3 Exchange of Certificates................................... 4
(a) Exchange Agent....................................... 4
(b) Exchange Procedures.................................. 4
(c) Distributions with Respect to Unexchanged Shares..... 5
(d) No Further Ownership Rights in Company Common Stock.. 5
(e) Termination of Exchange Fund......................... 5
(f) No Liability......................................... 6
(g) Investment of Exchange Fund.......................... 6
2.4 Treatment of Stock Options and Warrants.................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........... 7
3.1 Organization and Standing.................................. 7
3.2 Subsidiaries............................................... 8
3.3 Corporate Power and Authority.............................. 8
3.4 Capitalization of Parent................................... 9
3.5 Conflicts, Consents and Approvals.......................... 9
3.6 Absence of Certain Changes................................. 10
3.7 Parent SEC Documents....................................... 10
3.8 Taxes...................................................... 11
3.9 Compliance with Law........................................ 12
3.10 Registration Statement..................................... 12
3.11 Litigation................................................. 12
3.12 Brokerage and Finder's Fees................................ 13
3.13 Tax-Free Reorganization.................................... 13
3.14 Contracts.................................................. 13
3.15 Labor Relations............................................ 13
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3.16 Permits........................................................13
3.17 Environmental Matters..........................................14
3.18 Company Stock Ownership........................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................15
4.1 Organization and Standing......................................15
4.2 Subsidiaries...................................................15
4.3 Corporate Power and Authority..................................15
4.4 Capitalization of the Company and its Subsidiaries.............16
4.5 Conflicts; Consents and Approvals..............................16
4.6 Absence of Certain Changes.....................................17
4.7 Company SEC Documents..........................................17
4.8 Taxes..........................................................18
4.9 Compliance with Law............................................19
4.10 Registration Statement.........................................19
4.11 Litigation.....................................................19
4.12 Brokerage and Finder's Fees....................................19
4.13 Opinion of Financial Advisor...................................20
4.14 Tax-Free Reorganization........................................20
4.15 Employee Benefit Plans.........................................20
4.16 Contracts......................................................22
4.17 Labor Relations................................................22
4.18 Permits........................................................22
4.19 Environmental Matters..........................................23
4.20 Parent Stock Ownership.........................................23
4.21 DGCL Section 203 and State Takeover Laws.......................23
ARTICLE V COVENANTS OF THE PARTIES.......................................23
5.1 Mutual Covenants...............................................24
(a) General...................................................24
(b) Governmental Matters......................................24
(c) Tax-Free Treatment........................................24
(d) Public Announcements......................................24
(e) Access....................................................24
(f) Stockholders Meetings.....................................25
(g) Preparation of Proxy Statement and Registration Statement.25
(h) Notification of Certain Matters...........................25
(i) Pooling of Interests......................................25
5.2 Covenants of Parent............................................26
(a) Conduct of Parent's Operations............................26
(b) Indemnification; Insurance................................27
(c) Listing Application.......................................28
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(d) Directors of Parent.......................................28
5.3 Covenants of the Company.......................................28
(a) Conduct of the Company's and the Subsidiaries' Operations.28
(b) No Solicitation...........................................30
(c) Directors, Officers and Employees.........................31
(d) Agreements of Affiliates..................................31
ARTICLE VI CONDITIONS.....................................................32
6.1 Mutual Conditions..............................................32
6.2 Conditions to Obligations of the Company.......................33
6.3 Conditions to Obligations of Parent and Sub....................33
ARTICLE VII TERMINATION AND AMENDMENT......................................34
7.1 Termination....................................................34
7.2 Effect of Termination..........................................35
7.3 Amendment......................................................38
7.4 Extension; Waiver..............................................38
ARTICLE VIII MISCELLANEOUS..................................................38
8.1 Survival of Representations and Warranties.....................38
8.2 Notices........................................................38
8.3 Interpretation.................................................39
8.4 Counterparts...................................................39
8.5 Entire Agreement...............................................39
8.6 Third Party Beneficiaries......................................40
8.7 Governing Law..................................................40
8.8 Specific Performance...........................................40
8.9 Assignment.....................................................40
8.10 Expenses.......................................................40
8.11 Incorporation of Disclosure Schedules..........................40
8.12 Severability...................................................40
8.13 Subsidiaries and Affiliates....................................40
SCHEDULES
- ---------
Schedule 5.2(A)
Schedule 5.2(B)
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("this Agreement") is made and entered
into as of the 17th day of November, 1997, by and among Southern Mineral
Corporation, a Nevada corporation ("Parent"), AEC Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Amerac Energy
Corporation, a Delaware corporation (the "Company").
PRELIMINARY STATEMENTS
A. Parent desires to combine its business and operations with the business
and operations of the Company through the merger (the "Merger") of Sub with and
into the Company, with the Company as the surviving corporation, pursuant to
which each share of Company Common Stock (as defined in Section 4.4) outstanding
at the Effective Time (as defined in Section 1.2) will be converted into the
right to receive shares of Parent Common Stock (as defined in Section 3.4) as
more fully provided herein.
B. The Company desires to combine its business and operations with the
business and operations of Parent and to become a wholly owned subsidiary of
Parent and for the holders of shares of Company Common Stock ("Company
Stockholders") to have a continuing equity interest in the combined businesses
of Parent and the Company.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
D. The parties intend that the Merger be accounted for under the purchase
method of accounting.
E. The respective Boards of Directors of Parent, Sub and the Company have
determined that the Merger in the manner contemplated herein is fair to and in
the best interests of their respective stockholders and, by duly adopted
resolutions, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the provisions of the Delaware General Corporation Law
(the "DGCL"), Sub shall be merged with and into the Company as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Article VI, but in no event later than two business days thereafter (the date of
such merger being referred to herein as the "Closing Date"). Following the
Merger, the separate corporate existence of Sub shall cease and the Company
shall continue its existence under the laws of the State of Delaware. The
Company, in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation".
1.2 Effective Time. The Merger shall be consummated by filing with
the Secretary of State of the State of Delaware (the "Delaware Secretary of
State") a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the DGCL. The Merger shall become
effective (the "Effective Time") when the Certificate of Merger has been filed
with the Delaware Secretary of State or at such later time as may be agreed by
Parent and the Company and specified in the Certificate of Merger. Prior to the
filing referred to in this Section 1.2, a closing (the "Closing") shall be held
at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P. at 711 Louisiana,
Suite 1900, Houston, Texas 77002, or such other place as the parties may agree.
1.3 Effects of the Merger. The Merger shall have the effects set forth
in the DGCL.
1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the initial Certificate of Incorporation of the Surviving Corporation.
The By-laws of Sub, as in effect immediately prior to the Effective Time, shall
be the initial By-laws of the Surviving Corporation.
1.5 Directors and Officers. From and after the Effective Time, the
officers and the directors of Sub shall be the officers and the directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified.
1.6 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
carry out the provisions of this Agreement, the proper officers and directors
of Parent and the Company shall take all such necessary action.
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ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Sub or the Company:
(a) Each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation. Such shares shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) For purposes of this Agreement, "Aggregate Consideration" shall
mean that number of shares (rounded to the nearest whole share) of common stock,
$.01 par value per share, of Parent ("Parent Common Stock") determined by
dividing (i) $22,500,000.00 (the "Purchase Price") by (ii) the average closing
sale price of a share of Parent Common Stock as quoted on the Nasdaq Stock
Market ("Nasdaq") for the twenty consecutive trading days which precede the
third trading day which is immediately prior to the Closing, as reported (absent
manifest error in the printing thereof) by The Wall Street Journal (the "Average
Closing Sale Price"); provided, however, that if the Aggregate Consideration as
calculated pursuant to the foregoing would be (X) less than 2,727,272 shares of
Parent Common Stock, then the Aggregate Consideration shall be deemed to be
2,727,272 shares of Parent Common Stock or (Y) more than 3,333,333 shares of
Parent Common Stock, then the Aggregate Consideration shall be deemed to be
3,333,333 shares of Parent Common Stock. Each share of Company Common Stock
(other than shares to be canceled in accordance with Section 2.1(c)) issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive that number of shares of Parent Common Stock calculated by
dividing the Aggregate Consideration by the total number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time (the
"Exchange Ratio").
(c) Each share of capital stock of the Company held in the treasury of
the Company or held by Parent or any of its subsidiaries shall be canceled and
retired and no payment shall be made in respect thereof.
2.2 Exchange Ratio, Fractional Shares. No certificates for
fractional shares of Parent Common Stock shall be issued as a result of the
conversion provided for in Section 2.1(b). To the extent that an outstanding
share of Company Common Stock would otherwise have become a fractional share of
Parent Common Stock, the holder thereof, upon presentation of such fractional
interest represented by an appropriate certificate for Company Common Stock to
the Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the last reported sales price of Parent Common Stock on Nasdaq on the last full
trading day immediately prior to the Effective Time) of such fractional
interest. Such payment with respect to fractional shares is merely
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intended to provide a mechanical rounding off of, and is not a separately
bargained for, consideration. If more than one certificate representing shares
of Company Common Stock shall be surrendered for the account of the same holder,
the number of shares of Parent Common Stock for which certificates have been
surrendered shall be computed on the basis of the aggregate number of shares
represented by the certificates so surrendered. In the event that prior to the
Effective Time Parent or the Company shall declare a stock dividend or other
distribution payable in shares of its common stock or securities convertible
into shares of its common stock, or effect a stock split, reclassification,
combination or other change with respect to its common stock, the Exchange Ratio
shall be adjusted to reflect such dividend, distribution, stock split,
reclassification, combination or other change.
2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall make
available to an exchange agent designated by Parent and reasonably acceptable to
the Company (the "Exchange Agent"), for the benefit of Company Stockholders, for
exchange in accordance with this Section 2.3, certificates representing shares
of Parent Common Stock issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock and shall from time to time deposit
cash in an amount reasonably expected to be paid pursuant to Section 2.2 (such
shares of Parent Common Stock and cash, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock whose shares were
converted into the right to receive shares of Parent Common Stock pursuant to
Section 2.1(b) hereof (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
a duly executed letter of transmittal, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing that
number of shares of Parent Common Stock which such holder has the right to
receive pursuant to Section 2.1 and (y) a check representing the amount of cash
in lieu of fractional shares, if any, and unpaid dividends and distributions, if
any, which such holder has the right to receive pursuant to the provisions of
this Article II, after giving effect to any required withholding tax, and the
shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, payable to
holders of shares of Company Common Stock. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered on the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock, together with a
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check for the cash to be paid in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, may be issued to such transferee if the
Certificate representing such shares of Company Common Stock held by such
transferee is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock and cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, as
provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to shares of Parent
Common Stock having a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Law (as defined in Section 3.9), following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Parent Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon, and (ii)
at the appropriate payment date subsequent to surrender, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock, less the amount of any withholding
taxes which may be required thereon.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon surrender of Certificates in accordance with
the terms hereof (including any cash paid pursuant to this Article II) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock represented thereby, and from and after the
Effective Time there shall be no further registration of transfers on the stock
transfer books of the Company of shares of Company Common Stock. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to Company Stockholders for six months after the
Effective Time shall be delivered to Parent or the Surviving Corporation, upon
demand thereby, and holders of shares of Company Common Stock who have not
theretofore complied with this Section 2.3 shall thereafter look only to Parent
for payment of any claim to shares of Parent Common Stock, cash in lieu of
fractional shares thereof, or dividends or distributions, if any, in respect
thereof.
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(f) No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of Company
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any cash, any cash in lieu of
fractional shares or any dividends or distributions with respect to whole shares
of Company Common Stock in respect of such Certificate would otherwise escheat
to or become the property of any Governmental Authority (as defined in Section
3.5)), any such cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by Applicable Law, become the property of Parent,
free and clear of all claims or interest of any person previously entitled
thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent. In the event the Exchange Fund shall realize a loss on any such
investment, Parent shall promptly thereafter deposit, or cause to be deposited,
in such Exchange Fund on behalf of the Surviving Corporation cash in an amount
equal to such loss.
2.4 Treatment of Stock Options and Warrants.
(a) Prior to the Effective Time, Parent and the Company shall take all
such actions as may be necessary to cause each unexpired and unexercised option
or right to purchase shares of Company Common Stock granted (or subject to being
granted on a contingent basis) under the Company's various stock option plans in
effect on the date hereof to current or former directors, officers, employees,
consultants or independent contractors of the Company (each, a "Company Option")
to cease to represent the right to purchase Company Common Stock and to be
adjusted at the Effective Time to represent the right (an "Adjusted Option") to
purchase that number of shares of Parent Common Stock equal to the number of
shares of Company Common Stock issuable immediately prior to the Effective Time
upon exercise of the Company Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exercise price equal
to the exercise price which existed under the corresponding Company Option
divided by the Exchange Ratio, and with other terms and conditions that are the
same as the terms and conditions of such Company Option immediately before the
Effective Time. In connection with the issuance of Adjusted Options, Parent
shall (i) reserve for issuance the number of shares of Parent Common Stock that
will become subject to Adjusted Options pursuant to this Section 2.4 and (ii)
from and after the Effective Time, upon exercise of Adjusted Options, make
available for issuance all shares of Parent Common Stock covered thereby,
subject to the terms and conditions applicable thereto.
(b) Parent agrees to file with the Securities and Exchange Commission
(the "Commission") as soon as reasonably practicable after the Closing Date a
registration statement
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on Form S-8 or other appropriate form under the Securities Act of 1933, as
amended (together with the rules and regulations thereunder, the "Securities
Act"), to register shares of Parent Common Stock issuable upon exercise of the
Adjusted Options and use its reasonable efforts to cause such registration
statement to remain effective until the exercise or expiration of such options.
(c) Prior to the Effective Time, Parent and the Company shall take all
such actions as may be necessary to cause each unexpired and unexercised warrant
to purchase shares of Company Common Stock granted (or subject to being granted
on a contingent basis) under the Company's various warrant agreements in effect
on the date hereof (each, a "Company Warrant") to cease to represent the right
to purchase Company Common Stock and to be adjusted at the Effective Time to
represent the right (an "Adjusted Warrant") to purchase that number of shares of
Parent Common Stock equal to the number of shares of Company Common Stock
issuable immediately prior to the Effective Time upon exercise of the Company
Warrant (without regard to actual restrictions on exercisability) multiplied by
the Exchange Ratio, with an exercise price equal to the exercise price which
existed under the corresponding Company Warrant divided by the Exchange Ratio,
and with other terms and conditions that are the same as the terms and
conditions of such Company Warrant immediately before the Effective Time. In
connection with the issuance of Adjusted Warrants, Parent shall (i) reserve for
issuance the number of shares of Parent Common Stock that will become subject to
Adjusted Warrants pursuant to this Section 2.4; (ii) from and after the
Effective Time, upon exercise of Adjusted Warrants, make available for issuance
all shares of Parent Common Stock covered thereby, subject to the terms and
conditions applicable thereto; (iii) comply, and cause the Surviving Corporation
to comply, with the terms and conditions set forth in the Company Warrants; and
(iv) deliver to the holders of Adjusted Warrants such shares of Parent Common
Stock that such holders are entitled to purchase upon the exercise of Adjusted
Warrants. To the extent required by the respective Company Warrants, prior to
the Effective Time, Parent shall deliver its undertaking to assume, as of the
Effective Time, the obligation to deliver to the holders of warrants under such
Company Warrants the shares of Parent Common Stock that such holders are
entitled to purchase upon the exercise of Adjusted Warrants by written
instrument executed and delivered to each Warrant Agent, as such term is defined
in the respective Company Warrants.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement, Parent
and Sub hereby make the following representations and warranties to the Company:
3.1 Organization and Standing. Each of Parent and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with
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full power and authority to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used, operated and
conducted. Each of Parent and its subsidiaries is duly qualified to do business
and in good standing in each jurisdiction in which the nature of the business
conducted by it or the property it owns, leases or operates makes such
qualification necessary, except where the failure to be so qualified or in good
standing in such jurisdiction would not have a material adverse effect on
Parent.
3.2 Subsidiaries. As of the date hereof, other than immaterial
interests, Parent does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except as set forth in Section 3.2 to the disclosure
schedule (the "Parent Disclosure Schedule") delivered by Parent to the Company
and dated the date hereof. Except as set forth in Section 3.2 to the Parent
Disclosure Schedule, each of the outstanding shares of capital stock of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Parent free and clear of
all liens, pledges, security interests, claims or other encumbrances, other than
the pledge of such shares under Parent's credit agreement with Compass Bank and
liens imposed by law which could not reasonably be expected to have, in the
aggregate, a material adverse effect on Parent. All of the outstanding shares
of the capital stock of Sub will be directly owned by Parent. Other than as set
forth in Section 3.2 to the Parent Disclosure Schedule, there are no outstanding
shares of capital stock or subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
relating to the issuance, sale or transfer of any securities of any subsidiary
of Parent, nor are there outstanding any securities which are convertible into
or exchangeable for any shares of capital stock of any subsidiary of Parent; and
no subsidiary of Parent has any obligation of any kind to issue any additional
securities or to pay for securities of any subsidiary of Parent or any
predecessor thereof. As used in this Section 3.2, "capital stock" shall include
capital stock or other ownership interests having by their terms ordinary voting
power to elect directors or others performing similar functions with respect to
such entity.
3.3 Corporate Power and Authority.
(a) Parent has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
subject to the approval of the Share Issuance (as defined below) by the
requisite votes of the stockholders of Parent (the "Parent Stockholders") in
accordance with the rules of Nasdaq and this Agreement. The execution and
delivery of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Parent. The Board of Directors of Parent has directed
that the issuance of Parent Common Stock pursuant hereto (the "Share Issuance")
be submitted to the Parent Stockholders for approval at a stockholders meeting
and, except for the approval of the Share Issuance by the Parent Stockholders in
accordance with the rules of Nasdaq, no other corporate proceedings on the part
of Parent are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by
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Parent and constitutes a valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms.
(b) At or prior to Closing, Sub will have 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
by Sub and the consummation by Sub of the transactions contemplated hereby will
have been duly and validly approved by the Board of Directors of Sub and by
Parent as the sole stockholder of Sub at or prior to Closing, and no other
corporate proceedings on the part of Sub will be necessary to consummate the
transactions contemplated hereby. This Agreement will have been duly and
validly executed and delivered by Sub and will constitute a valid and binding
obligation of Sub, enforceable against Sub in accordance with its terms.
3.4 Capitalization of Parent. Parent's authorized capital stock
consists solely of (a) 20,000,000 shares of Parent Common Stock. As of October
31, 1997, (i) 9,120,741 shares of Parent Common Stock were issued and
outstanding, (ii) 1,810,000 shares of Parent Common Stock were issuable upon the
exercise of options or warrants and 5,012,107 shares of Parent Common Stock were
issuable upon conversion of convertible securities granted or issuable by
Parent. Except as set forth on Section 3.4 of the Parent Disclosure Schedule,
since October 31, 1997, Parent has not issued any shares of its capital stock
except upon the exercise of such options, warrants or convertible securities.
Each outstanding share of Parent capital stock is, and all shares of Parent
Common Stock to be issued in connection with the Merger will be, duly authorized
and validly issued, fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, other than as set forth above, in the Parent SEC
Documents (as defined in Section 3.7) or in Section 3.4 to the Parent Disclosure
Schedule, there are no outstanding shares of capital stock or subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale or transfer by
Parent of any securities of Parent, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
Parent; and Parent has no obligation of any kind to issue any additional
securities or to pay for securities of Parent or any predecessor. Parent has no
outstanding bonds, debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Parent Common Stock.
3.5 Conflicts, Consents and Approvals. Neither the execution and
delivery of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of Parent
or any subsidiary of Parent;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or
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otherwise, would constitute a default) under, or entitle any party (with
the giving of notice, the passage of time or otherwise) to terminate,
accelerate, modify or call a default under, or result in the termination,
acceleration or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other instrument
or obligation to which Parent or any of its subsidiaries is a party or by
which any of their respective properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Parent or any of its subsidiaries or their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Parent or any of its affiliates with any third
party or any court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory body, agency, instrumentality or
authority (a "Governmental Authority"), other than (i) approval of the
Share Issuance by Parent Stockholders, (ii) actions required, if any, by
the Hart-Scott-Rodino Antitrust Improvements act of 1976, as amended (the
"HSR Act"), (iii) approval of the quotation of the shares of Parent Common
Stock to be issued in the Merger on NASDAQ, subject to official notice of
issuance, and (iv) registrations or other actions required under federal
and state securities laws as are contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 3.5 to the Parent Disclosure Schedule or, in the case of (b), (c)
and (d), for any of the foregoing that would neither, in the aggregate, have a
material adverse effect on Parent nor prevent the consummation of the
transactions contemplated hereby.
3.6 Absence of Certain Changes. Except as set forth in the Parent SEC
Documents filed with the Commission as of the date hereof, since January 1,
1997, (i) each of Parent and its subsidiaries has conducted its business in the
ordinary course, consistent with past practice, (ii) no event, fact or
development has occurred or exists which has or which would reasonably be
expected to have, in the aggregate, a material adverse effect on Parent (but,
excluding for such purposes, events that are generally applicable in the oil and
gas exploration and production industry and the United States, Canada and Latin
America economies), and (iii) neither Parent nor any of its subsidiaries has
taken any action which would be prohibited by Section 5.2(a).
3.7 Parent SEC Documents. Each of Parent and its subsidiaries has timely
filed with the Commission all forms, reports, schedules, statements, exhibits
and other documents required to be filed by it since January 1, 1995 under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), or the Securities Act (such
documents, as supplemented and amended since the time of filing, collectively,
the
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"Parent SEC Documents"). The Parent SEC Documents, including, without
limitation, any financial statements or schedules included therein, at the time
filed (and, in the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively) (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be.
The financial statements (including the related notes) of Parent included in the
Parent SEC Documents were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present (subject
in the case of unaudited statements to normal, recurring and year-end audit
adjustments) in all material respects the consolidated financial position of
Parent as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended.
3.8 Taxes. Except as set forth in the Parent SEC Documents or in Section
3.8 to the Parent Disclosure Schedule, (i) each of Parent and its subsidiaries
has duly filed all federal and state income tax returns and all other material
tax returns (including, but not limited to, those filed on a consolidated,
combined or unitary basis) required to have been filed by Parent or any of its
subsidiaries prior to the date hereof and will file, on or before the Effective
Time, all such returns which are required to be filed after the date hereof and
on or before the Effective Time, (ii) all of the foregoing returns and reports
are true and correct in all material respects, and each of Parent and its
subsidiaries has paid or, prior to the Effective Time, will pay all taxes
required to be paid in respect of the periods covered by such returns or reports
to any federal, state, foreign, local or other taxing authority, (iii) each of
Parent and its subsidiaries has paid or made adequate provision (in accordance
with generally accepted accounting principles) in the financial statements of
Parent included in the Parent SEC Documents for all taxes payable in respect of
all periods ending on or prior to September 30, 1997, (iv) neither Parent nor
any of its subsidiaries will have any material liability for any taxes in excess
of the amounts so paid or reserves so established and neither Parent nor any of
its subsidiaries is delinquent in the payment of any material tax, assessment or
governmental charge and none of them has requested any extension of time within
which to file any returns in respect of any fiscal year which have not since
been filed, (v) no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed in writing (tentatively or definitely),
in each case, by any taxing authority, against Parent or any of its subsidiaries
for which there are not adequate reserves in its financial statements (in
accordance with generally accepted accounting principles), (vi) as of the date
of this Agreement, there are no extensions or waivers or pending requests for
extensions or waivers of the time to assess or collect any such tax, (vii) since
the tax year 1989 and except with respect to the tax years 1990 and 1993, the
federal income tax returns of Parent have not been audited by the Internal
Revenue Service, Department of the Treasury ("IRS"), and the federal income tax
returns of its subsidiaries have not been audited by the IRS, (viii) neither
Parent nor any of its subsidiaries is or has been a party to any tax sharing
agreement with any corporation which is not currently a member of the affiliated
group of
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which Parent is currently a member, (ix) there are no liens for taxes on any
assets of Parent or any of its subsidiaries (other than statutory liens for
taxes not yet due or liens for which adequate reserves have been established in
its financial statements in accordance with generally accepted accounting
principles), (x) Parent and its subsidiaries have withheld and paid (and until
the Effective Time will withhold and pay) all income, social security,
unemployment, and all other material payroll taxes required to be withheld
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign law) and paid in connection with amounts
paid to any employee, independent contractor, stockholder, creditor or other
third party, and (xi) Parent has not filed an election under Section 341(f) of
the Code to be treated as a consenting corporation. For purposes of this
Agreement, the term "tax" shall include all federal, state, local and foreign
taxes including interest and penalties thereon and additions to tax. In
addition, the term "tax return" shall mean any return, declaration, statement,
report, schedule, certificate, form information return, or any other document
(including any related or supporting information) required to be supplied to, or
filed with, a taxing authority (foreign or domestic) in connection with taxes.
3.9 Compliance with Law. Each of Parent and its subsidiaries is in
compliance with, and at all times since January 1, 1995 has been in compliance
with, all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered, by any
Governmental Authority (collectively, "Applicable Law") relating to it or its
business or properties, except for any such failures to be in compliance
therewith which, in the aggregate, would not have a material adverse effect on
Parent.
3.10 Registration Statement. None of the information provided by Parent
or any of its subsidiaries for inclusion in the registration statement on Form
S-4 to be filed with the Commission by Parent under the Securities Act,
including the prospectus (as amended, supplemented or modified, the
"Prospectus") relating to shares of Parent Common Stock to be issued in the
Merger and the joint proxy statement and form of proxies relating to the vote of
Company Stockholders with respect to the Merger and the Parent Stockholders with
respect to the Share Issuance (collectively with the Prospectus and as amended,
supplemented or modified, the "Proxy Statement") contained therein (such
registration statement as amended, supplemented or modified, the "Registration
Statement"), at the time the Registration Statement becomes effective or, in the
case of the Proxy Statement, at the date of mailing, will 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. Each of the
Registration Statement and Proxy Statement, except for such portions thereof
that relate only to the Company and its subsidiaries, will comply in all
material respects with the provisions of the Securities Act and the Exchange
Act.
3.11 Litigation. Except as set forth in the Parent SEC Documents, there
is no suit, claim, action, proceeding or investigation (an "Action") pending or,
to the knowledge of Parent, threatened against Parent or any of its subsidiaries
which, in the aggregate, could reasonably be expected to have a material adverse
effect on Parent. Neither Parent nor any of its subsidiaries
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is subject to any outstanding order, writ, injunction or decree which, in the
aggregate, could reasonably be expected to have a material adverse effect on
Parent.
3.12 Brokerage and Finder's Fees. Parent has not incurred and will not
incur, directly or indirectly, any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement. Parent is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments from Parent in connection with the
negotiation of this Agreement or in connection with the transactions
contemplated hereby.
3.13 Tax-Free Reorganization. To the best knowledge of Parent, neither
Parent nor any of its subsidiaries has taken any action or failed to take any
action which action or failure would prevent the qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code.
3.14 Contracts. None of Parent, any of its subsidiaries, or, to the
knowledge of Parent, any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default by Parent
under, any contract, agreement, guarantee, lease or executory commitment (each a
"Contract") to which it is a party, except such violations or defaults under
such Contracts which, in the aggregate, would not have a material adverse effect
on Parent.
3.15 Labor Relations. There is no unfair labor practice complaint against
Parent or any of its subsidiaries pending before the National Labor Relations
Board ("NLRB") and there is no labor strike, dispute, slowdown or stoppage, or
any union organizing campaign, actually pending or, to the knowledge of Parent,
threatened against or involving Parent or any of its subsidiaries, except for
any such proceedings which would not have a material adverse effect on Parent.
Except as disclosed in the Parent SEC Documents, neither Parent nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. To the knowledge of Parent, there are no organizational efforts
with respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of Parent or any of its subsidiaries.
3.16 Permits. Each of Parent and its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders (collectively,
"Permits") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except for any such Permits the
failure of which to possess, in the aggregate, would not reasonably be expected
to have a material adverse effect on Parent.
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3.17 Environmental Matters.
(a) As used herein, the term "Environmental Laws" means all applicable
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all applicable authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder to the extent applicable to the specific operations of Parent or the
Company, as applicable.
(b) Except as set forth in the Parent SEC Documents filed with the
Commission as of the date hereof or in Section 3.17(a) of the Parent Disclosure
Schedule, there are, with respect to Parent, its subsidiaries or any predecessor
of the foregoing, no past or present violations of Environmental Laws, releases
of any materials into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
similar federal, state, local or foreign laws, other than those which, in the
aggregate, would not reasonably be expected to have a material adverse effect on
Parent, and none of Parent and its subsidiaries has received any notice with
respect to any of the foregoing, nor is any Action pending or, to the knowledge
of Parent, threatened, in connection with any of the foregoing that, if
adversely determined, could reasonably be expected to have a material adverse
effect on Parent.
(c) Except as set forth in the Parent SEC Documents filed with the
Commission as of the date hereof, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by Parent or any of its
subsidiaries and no Hazardous Materials were released on or about any real
property previously owned, leased or used by Parent or any of its subsidiaries
during the period the property was so owned, leased or used, other than those
which, in the aggregate, would not reasonably be expected to have a material
adverse effect on Parent.
3.18 Company Stock Ownership. Except as set forth in Section 3.18 to the
Parent Disclosure Schedule, neither Parent nor any of its "affiliates" or
"associates" "owns" (as each of such terms is defined in Section 203 of the
DGCL) any shares of Company Common Stock or other securities convertible into
Company Common Stock, except to the extent that entering into this Agreement
constitutes "ownership" of Company Common Stock pursuant to the foregoing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this Agreement, the
Company hereby makes the following representations and warranties to Parent and
Sub:
4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. The Company is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on the Company. The
copies of the Certificate of Incorporation and By-laws (or similar
organizational documents) of the Company, which have previously been made
available to Parent, are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
4.2 Subsidiaries. As of the date hereof, other than immaterial
interests, the Company does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except as set forth in Section 4.2 to the disclosure
schedule (the "Company Disclosure Schedule") delivered by the Company to Parent
and dated the date hereof. Each of the entities listed on Section 4.2 to the
Company Disclosure Schedule (individually a "Subsidiary" and collectively the
"Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation with full power
and authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each
Subsidiary is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates makes such qualification necessary, except where the
failure to be so qualified or in good standing in such jurisdiction would not
have a material adverse effect on the Company. The Company is the sole legal,
beneficial and record owner, directly or indirectly, of all outstanding capital
stock of the Subsidiaries, all of which are owned by the Company free and clear
of all liens, claims and encumbrances. The Subsidiaries have no assets or
liabilities, and are not parties to any agreements or contracts, other than
those which would not have a material adverse effect on the Company.
4.3 Corporate Power and Authority. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of the Merger and the
adoption and authorization of this Agreement by the stockholders of the Company
in accordance with the DGCL and this Agreement. The execution and delivery of
this Agreement by the Company and the
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consummation by the Company of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of the Company. The Board
of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the Company Stockholders for
adoption at a stockholders meeting and, except for the adoption of this
Agreement by the affirmative vote of the holders of a majority of shares of
Company Common Stock in accordance with the Applicable Law, no other corporate
proceedings on the part of the Company are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
4.4 Capitalization of the Company and its Subsidiaries. The
Company's authorized capital stock consists solely of (a) 20,000,000 shares of
common stock, $0.05 par value per share ("Company Common Stock"), and (b)
10,000,000 shares of preferred stock, $1.00 par value per share ("Company
Preferred Stock"). As of October 31, 1997, (i) 3,891,981 shares of Company
Common Stock were issued and outstanding, (ii) 201,385 shares of Company Common
Stock were issuable upon the exercise of outstanding options, an additional
230,749 shares of Company Common Stock were issuable upon the exercise of
options that are not currently outstanding but are reserved for issuance upon
the designation of optionees by the Board of Directors of the Company and
154,175 shares of Company Common Stock were issuable upon the exercise or
conversion of outstanding warrants or convertible securities granted or issuable
(on a contingent basis or otherwise) by the Company, and (iii) no shares of
Company Preferred Stock were issued and outstanding. Since October 31, 1997,
except as disclosed in Section 4.4 of the Company Disclosure Schedule, the
Company has not issued any shares of its capital stock except upon the exercise
of such options, warrants or convertible securities. Each outstanding share of
capital stock of the Company and each Subsidiary is duly authorized and validly
issued, fully paid and nonassessable and free of any preemptive rights. As of
the date hereof, other than as set forth above, in the Company SEC Documents (as
defined in Section 4.7) or in Section 4.4 to the Company Disclosure Schedule,
there are no outstanding shares of capital stock or subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer by the Company
or either Subsidiary of any securities of the Company or either Subsidiary, nor
are there outstanding any securities which are convertible into or exchangeable
for any shares of capital stock of the Company or either Subsidiary; and neither
the Company nor either Subsidiary has any obligation of any kind to issue any
additional securities or to pay for securities of the Company or either
Subsidiary or any predecessor. The Company has no outstanding bonds,
debentures, notes or other similar obligations the holders of which have the
right to vote generally with holders of Company Common Stock.
4.5 Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby will:
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(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of the Company
or either Subsidiary;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the
termination, acceleration or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Subsidiaries under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which the Company or any of the Subsidiaries is a party or by which any of its
properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its Subsidiaries or any of its
properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by the Company or its Subsidiaries or any of its
affiliates with any third party or any Governmental Authority, other than (i)
authorization of the Merger and the transactions contemplated hereby by Company
Stockholders, (ii) actions required, if any, by the HSR Act and (iii)
registrations or other actions required under federal and state securities laws
as are contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 4.5 of the Company Disclosure Schedule or, in the case of (b),
(c) and (d), for any of the foregoing that would neither, in the aggregate, have
a material adverse effect on the Company nor prevent the consummation of the
transactions contemplated hereby.
4.6 Absence of Certain Changes. Except as set forth in the Company
SEC Documents filed with the Commission as of the date hereof, since January 1,
1997, (i) each of the Company and its Subsidiaries has conducted its business in
the ordinary course, consistent with past practice, (ii) no event, fact or
development has occurred or exists which has or which would (A) reasonably be
expected to have, in the aggregate, a material adverse effect on the Company
(but excluding for such purposes events that are generally applicable in the oil
and gas exploration and production industry and the United States economy) or
(B) render materially inaccurate any of the factual data or assumptions utilized
by Ryder Scott in auditing the Company's reserve report dated July 1997, and
(iii) the Company has not taken any action which would be prohibited by Section
5.3(a).
4.7 Company SEC Documents. The Company has timely filed with the
Commission all forms, reports, schedules, statements, exhibits and other
documents required to be filed by it under the Exchange Act or the Securities
Act (such documents, as supplemented and amended
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since the time of filing, collectively, the "Company SEC Documents"). The
Company SEC Documents, including, without limitation, any financial statements
or schedules included therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. The financial statements (including the
related notes) of the Company included in the Company SEC Documents were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and fairly present (subject in the case of unaudited
statements to normal, recurring and year-end audit adjustments) in all material
respects the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended.
4.8 Taxes. Except as set forth in the Company SEC Documents or in
Section 4.8 to the Company Disclosure Schedule, (i) the Company and each
Subsidiary has duly filed all federal and state income tax returns and all other
material tax returns (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by it prior
to the date hereof and will file, on or before the Effective Time, all such
returns which are required to be filed after the date hereof and on or before
the Effective Time, (ii) all of the foregoing returns and reports are true and
correct in all material respects, and the Company and each Subsidiary has paid
or, prior to the Effective Time, will pay all taxes required to be paid in
respect of the periods covered by such returns or reports to any federal, state,
foreign, local or other taxing authority, (iii) the Company and each Subsidiary
has paid or made adequate provision (in accordance with generally accepted
accounting principles) in the financial statements of the Company and its
Subsidiaries included in the Company SEC Documents for all taxes payable in
respect of all periods ending on or prior to September 30, 1997, (iv) neither
the Company nor either Subsidiary will have any material liability for any taxes
in excess of the amounts so paid or reserves so established and neither the
Company nor either Subsidiary is delinquent in the payment of any material tax,
assessment or governmental charge and has not requested any extension of time
within which to file any returns in respect of any fiscal year which have not
since been filed, (v) no deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed in writing (tentatively or
definitely), in each case, by any taxing authority, against the Company or
either Subsidiary for which there are not adequate reserves in its financial
statements (in accordance with generally accepted accounting principles), (vi)
as of the date of this Agreement, there are no extensions or waivers or pending
requests for extensions or waivers of the time to assess or collect any such
tax, (vii) the federal income tax returns of the Company and its Subsidiaries
have not been audited by the IRS, (viii) neither the Company nor either
Subsidiary is or has been a party to any tax sharing agreement with any
corporation which is not currently a member of the affiliated group of which the
Company or either Subsidiary is currently a member, (ix) there are no liens for
taxes on any
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assets of the Company or either Subsidiary (other than statutory liens for taxes
not yet due or liens for which adequate reserves have been established in its
financial statements in accordance with generally accepted accounting
principles), (x) the Company and each Subsidiary has withheld and paid (and
until the Effective Time will withhold and pay) all income, social security,
unemployment, and all other material payroll taxes required to be withheld
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign law) and paid in connection with amounts
paid to any employee, independent contractor, stockholder, creditor or other
third party, and (xi) neither the Company nor either Subsidiary has filed an
election under Section 341(f) of the Code to be treated as a consenting
corporation.
4.9 Compliance with Law. The Company and each of its Subsidiaries is
in compliance with, and at all times since December 31, 1994 has been in
compliance with, all Applicable Law relating to it or its business or
properties, except for any such failures to be in compliance therewith which, in
the aggregate, would not have a material adverse effect on the Company.
4.10 Registration Statement. None of the information provided by the
Company for inclusion in the Registration Statement at the time it becomes
effective or, in the case of the Proxy Statement, at the date of mailing, will
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. Each of the Registration Statement and Proxy Statement, except for
such portions thereof that relate only to Parent and its subsidiaries, will
comply in all material respects with the provisions of the Securities Act and
the Exchange Act.
4.11 Litigation. Except as set forth in the Company SEC Documents,
there is no Action pending or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries which, in the aggregate, could
reasonably be expected to have a material adverse effect on the Company.
Neither the Company nor either of the Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, in the aggregate, could reasonably be
expected to have a material adverse effect on the Company.
4.12 Brokerage and Finder's Fees. Except for the Company's
obligation to McDonald & Company Securities, Inc. ("McDonald") and to Peak
Enernomics, Inc. ("Peak") (a copy of the written agreements relating to such
obligations having previously been provided to Parent), neither the Company nor
the Subsidiaries has incurred and will not incur, directly or indirectly, any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligations to
McDonald and Peak, the Company is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments from the
Company or the Subsidiaries in connection with the negotiation of this Agreement
or in connection with the transactions contemplated hereby.
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4.13 Opinion of Financial Advisor. The Company has received the oral
opinion of McDonald to the effect that, as of the date hereof, the Exchange
Ratio is fair to the Company Stockholders from a financial point of view.
4.14 Tax-Free Reorganization. To the best knowledge of the Company,
neither the Company nor the Subsidiaries has taken any action or failed to take
any action which action or failure would prevent the qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
4.15 Employee Benefit Plans.
For purposes of this Agreement, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of section 601 et seq. of
ERISA and section 4980B of the Code, and (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the Parent
Plans with respect to Parent, or Company Plans (as defined below) with respect
to the Company and its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
(a) For purposes of this Agreement, "Company Plans" means all employee
benefit plans, programs, policies, practices, and other arrangements providing
benefits to any employee or former employee or beneficiary or dependent thereof,
whether or not written, and whether covering one person or more than one person,
sponsored or maintained by the Company or to which the Company contributes or is
obligated to contribute. Without limiting the generality of the foregoing, the
term "Company Plans" includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) Section 4.15(b) to the Company Disclosure Schedule lists all
Company Plans. With respect to each Company Plan, the Company has made
available to Parent a true, correct and complete copy of: (i) each writing
constituting a part of such Company Plan, including, without limitation all plan
documents, benefit schedules, trust agreements, and
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insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial report,
if any; and (v) the most recent determination letter from the IRS, if any.
(c) The IRS has issued a favorable determination letter with respect
to each Company Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Company Plan") and there are
no existing circumstances nor any events that have occurred that could adversely
affect the qualified status of any Qualified Company Plan or the related trust.
(d) All contributions required to be made to any Company Plan by
Applicable Law or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Company
Plan, for any period through the date hereof have been timely made or paid in
full and through the Closing Date will be timely made or paid in full or, to the
extent not required to be made or paid on or before the date hereof or the
Closing Date, as applicable, have been or will be fully reflected in the
Company's financial statements contained in the Company SEC Documents.
(e) The Company has complied, and is now in compliance, in all
material respects, with all provisions of ERISA, the Code and all laws and
regulations applicable to the Company Plans. There is not now, and there are no
existing, circumstances that standing alone could give rise to, any requirement
for the posting of security with respect to a Company Plan or the imposition of
any lien on the assets of the Company or any of its subsidiaries under ERISA or
the Code.
(f) Except as set forth in Section 4.15(f) to the Company Disclosure
Schedule, no Company Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Company Plan is a Multiemployer Plan (as
defined in Section 3.16) or a Multiple Employer Plan (as defined in Section
3.16), nor has the Company or any of its ERISA Affiliates, at any time within
five years before the date hereof, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing, circumstances
that could result in any Controlled Group Liability that would be a liability of
the Company following the Closing, other than normal funding responsibilities.
Without limiting the generality of the foregoing, neither the Company nor any of
its ERISA Affiliates has engaged in any transaction described in Section 4069 or
Section 4204 of ERISA.
(h) Except as set forth in Section 4.15(h) to the Company Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, the Company has no liability
for life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
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(i) Except as set forth in Section 4.15(i) to the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee or director or former employee or former
director of the Company, pursuant to a "change in control" or "change of
control" or otherwise. Without limiting the generality of the foregoing and
except as set forth in Section 4.15(i) to the Company Disclosure Schedule, no
amount paid or payable by the Company in connection with the transactions
contemplated hereby either solely as a result thereof or as a result of such
transactions in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Company Plans, any fiduciaries thereof with
respect to their duties to the Company Plans or the assets of any of the trusts
under any of the Company Plans which could reasonably be expected to result in
any material liability of the Company to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of Labor or any
Multiemployer Plan.
4.16 Contracts. Except as set forth in Section 4.16 of the Company
Disclosure Schedule, none of the Company or its Subsidiaries or, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default by
the Company or its Subsidiaries under, any Contract to which any of them is a
party, except such violations or defaults under such Contracts which, in the
aggregate, would not have a material adverse effect on the Company.
4.17 Labor Relations. There is no unfair labor practice complaint
against the Company or any Subsidiaries pending before the NLRB and there is no
labor strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the knowledge of the Company, threatened against or
involving the Company or any Subsidiaries, except for any such proceedings which
would not have a material adverse effect on the Company. Except as disclosed in
the Company SEC Documents, neither the Company nor any Subsidiary is a party to,
or bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. To the knowledge of the
Company, there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any Subsidiary.
4.18 Permits. The Company and each Subsidiary is in possession of
all Permits necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except for any such Permits the
failure of which to possess, in the aggregate, would not reasonably be expected
to have a material adverse effect on the Company.
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4.19 Environmental Matters.
(a) Except as set forth in the Company SEC Documents filed with the
Commission as of the date hereof or in Section 4.19(a) of the Company Disclosure
Schedule, there are, with respect to the Company, each Subsidiary or any
predecessor thereof, no past or present violations of Environmental Laws,
releases of any materials into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or similar federal, state, local or foreign laws, other than
those which, in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company, and the Company has not received any
notice with respect to any of the foregoing, nor is any Action pending or
threatened in connection with any of the foregoing that, if adversely
determined, could reasonably be expected to have a material adverse effect on
the Company.
(b) Except as set forth in Section 4.19(b) to the Company Disclosure
Schedule or set forth in the Company SEC Documents filed with the Commission as
of the date hereof, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company and no Hazardous
Materials were released on or about any real property previously owned, leased
or used by the Company or either Subsidiary during the period the property was
so owned, leased or used, other than those which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the Company.
4.20 Parent Stock Ownership. Except as set forth in Section 4.20 to
the Company Disclosure Schedule, neither the Company nor any of its "affiliates"
or "associates" "owns" (as each of such terms is defined in Section 203 of the
DGCL) any shares of Parent Common Stock or other securities convertible into
Parent Common Stock.
4.21 DGCL Section 203 and State Takeover Laws. Assuming the accuracy
of the representations and warranties set forth in Section 3.18, prior to the
date hereof, the Board of Directors of the Company has taken all action
necessary to exempt under or make not subject to Section 203 of the DGCL: (i)
the execution of this Agreement, (ii) the Merger and (iii) the transactions
contemplated hereby.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from
and after the execution of this Agreement.
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5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable efforts to
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this Agreement as
promptly as possible (including, without limitation, using its reasonable
efforts to cause the conditions set forth in Article VI for which they are
responsible to be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably request).
(b) Governmental Matters. Each of the parties shall use its
reasonable efforts to take any action that may be necessary, proper or advisable
in connection with any other notices to, filings with, and authorizations,
consents and approvals of any Governmental Authority that it may be required to
give, make or obtain.
(c) Tax-Free Treatment. Each of the parties shall use its reasonable
efforts to cause the Merger to constitute a tax-free "reorganization" under
Section 368(a) of the Code and to permit Akin, Gump, Strauss, Hauer & Feld,
L.L.P. to issue its opinion provided for in Section 6.1(h).
(d) Public Announcements. At all times prior to the earlier of the
Effective Time or termination of this Agreement pursuant to Section 7.1, none of
Parent, the Company or any of their affiliates shall issue any press release or
make any other public statement or disclosure concerning this Agreement or the
Merger without first obtaining the written consent of Parent if the disclosure
is to be made by the Company or any of its affiliates, or of the Company if the
disclosure is to be made by Parent or any of its affiliates, as to the contents,
the manner of presentation and the publication thereof; provided, however, that
notwithstanding the foregoing, Parent, the Company, or any of their affiliates
may make any disclosure required by applicable law (as determined after
consultation with the disclosing party's outside counsel), provided that such
disclosing party shall use its reasonable best efforts to first notify the other
parties in writing of the proposed disclosure and provide the other parties with
reasonable opportunity to comment on such disclosure.
(e) Access. Subject to Applicable Law, from and after the date of
this Agreement until the Effective Time (or the termination of this Agreement),
Parent and the Company shall permit representatives of the other to have
reasonable access to the other's officers, employees, premises, properties,
books, records, contracts, tax records and documents. Information obtained by
Parent and the Company pursuant to this Section 5.1(e) shall be subject to the
provisions of the confidentiality agreements between them dated September 25,
1997 and November 5, 1997 (the "Confidentiality Agreements"), which agreements
remain in full force and effect.
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(f) Stockholders Meetings. Each of Parent and the Company shall duly
call, give notice of, convene and hold a meeting of its stockholders (each a
"Stockholders Meeting"), to be held as promptly as practicable following the
date hereof for the purpose of obtaining the requisite stockholder approvals and
adoptions in connection with this Agreement, the Share Issuance and the Merger,
and each shall use reasonable efforts to cause such meetings to occur on the
same date. Subject to its fiduciary duties under Applicable Law as advised by
counsel, the Board of Directors of each of Parent and the Company will (i)
recommend that its stockholders approve such matters and (ii) use reasonable
efforts to obtain any necessary approvals by its stockholders.
(g) Preparation of Proxy Statement and Registration Statement. Each
of Parent and the Company shall cooperate to, and shall, as soon as is
reasonably practicable, prepare and file the Proxy Statement with the Commission
on a confidential basis. Each of Parent and the Company shall cooperate to
prepare and file, and Parent shall prepare and file, the Registration Statement
with the Commission as soon as is reasonably practicable following clearance of
the Proxy Statement by the Commission and each of Parent and the Company shall
cooperate to, and shall, use all reasonable efforts to have the Registration
Statement declared effective by the Commission as promptly as practicable and to
maintain the effectiveness of the Registration Statement through the Effective
Time. Parent shall advise the Company promptly after it receives notice of (i)
the Registration Statement being declared effective or any supplement or
amendment thereto being filed with the Commission, (ii) the issuance of any stop
order in respect of the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in respect of the
Registration Statement. If at any time prior to the Effective Time, any
information pertaining to the Company contained in or omitted from the
Registration Statement makes statements contained in the Registration Statement
false or misleading, the Company shall promptly so inform Parent and provide
Parent with the information necessary to make such statements contained therein
not false and misleading. Each of Parent and Company shall also cooperate to,
and shall, take such other reasonable actions (other than qualifying to do
business in any jurisdiction in which it is not so qualified) required to be
taken under any applicable state securities laws in connection with the Share
Issuance.
(h) Notification of Certain Matters. Each of Parent and the Company
shall give prompt notice to the other party of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would cause
any representation or warranty contained in this Agreement made by such party to
be untrue or inaccurate at or prior to the Effective Time and (ii) any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.1(i) shall not limit
or otherwise affect the remedies available hereunder to any party.
(i) Pooling of Interests. Notwithstanding anything herein to the
contrary, Parent and the Company agree to continue to evaluate whether the
Merger can or should be
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accounted for under the pooling-of-interests method of accounting, and if so, to
amend the relevant provisions of this Agreement so as to comply with pooling-of-
interest requirements.
5.2 Covenants of Parent.
(a) Conduct of Parent's Operations. During the period from the date
of this Agreement to the Effective Time, Parent shall, and shall cause its
subsidiaries to, conduct its operations in the ordinary course except as
expressly contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that their goodwill and
ongoing business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, Parent shall not, and with respect to clause
(ii) below, Sub shall not, and with respect to clauses (ii) and (iii) below,
Parent shall cause each of its subsidiaries to not, except as otherwise
expressly contemplated by this Agreement and the transactions contemplated
hereby, without the prior written consent of the Company:
(i) make or propose any change in its Certificate of
Incorporation, as amended, or By-laws, as amended, or other organizational
documents, except with respect to those changes described on Schedule 5.2A
hereto;
(ii) except with respect to the transaction described on
Schedule 5.2B hereto, and subject to the limitations of clause (iii) below,
merge or consolidate with any other person or acquire a material amount of
assets or capital stock of any other person, that would involve, in any
case, individually or in the aggregate, the issuance of more than 20% of
the outstanding Parent Common Stock on the date hereof, other than in
connection with this Agreement and the transactions contemplated hereby;
(iii) except with respect to that transaction described on
Schedule 5.2B hereto, conduct its business in a manner or take, or, subject
to its fiduciary duties under Applicable Law, cause to be taken, any other
action that would or might reasonably be expected to prevent or materially
delay Parent or Sub from consummating the transactions contemplated by this
Agreement (regardless of whether such action would otherwise be permitted
or not prohibited hereunder), including, without limitation, any action
that may materially limit or delay the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement as a result of
antitrust or securities laws or other regulatory concerns; or
(iv) agree to take any action prohibited by the foregoing.
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(b) Indemnification; Insurance.
(i) From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, indemnify and hold harmless to the
fullest extent permitted under Applicable Law each person who is now, or
has been at any time prior to the date hereof, an officer, director,
employee, trustee or agent of the Company (or any subsidiary or division
thereof), including, without limitation, each person controlling any of the
foregoing persons (individually, an "Indemnified Party" and collectively,
the "Indemnified Parties"), against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation (and shall pay expenses
for legal fees in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware law, provided that the Indemnified Party agrees that, in the event
that it is ultimately determined that such Indemnified Party is not
entitled to the payment of such expenses, for any reason, such Indemnified
Party shall reimburse Parent and the Surviving Corporation for such
expenses paid in advance) arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in their capacities as
such, whether commenced, asserted or claimed before the Effective Time and
including, without limitation, liabilities arising under the Securities
Act, the Exchange Act and state corporation laws in connection with the
Merger; provided that the Parent and the Surviving Corporation shall pay
for only one law firm (in addition to local counsel) for all Indemnified
Parties, unless the use of one law firm for all Indemnified Parties would
present such law firm with a conflict of interest. Parent shall cause the
Surviving Corporation to keep in effect the Company's current provisions in
its Certificate of Incorporation and By-laws providing for exculpation of
director and officer liability and indemnification of the Indemnified
Parties to the fullest extent permitted under the DGCL. In the event of
any actual or threatened claim, action, suit, proceeding or investigation
in respect of such acts or omissions, Parent shall, and shall cause the
Surviving Corporation to cooperate in the defense of any such matter;
provided, however, that the Parent and the Surviving Corporation shall not
be liable for any settlement effected without their written consent (which
consent shall not be unreasonably withheld).
(ii) From and after the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, maintain in effect for not less than 6
years, the current policies of directors' and officers' liability insurance
maintained by the Company; provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions that are no less advantageous in any material respect to the
Indemnified Parties; provided, however, that in no event shall the Parent
or the Surviving Corporation be required to expend pursuant to this Section
5.2(b)(ii) more than the current annual premiums paid by the Company for
such insurance and, in
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the event the cost of such coverage shall exceed that amount, the Parent or
the Surviving Corporation shall purchase as much coverage as possible for
such amount.
(c) Listing Application. Parent shall, as soon as practicable
following the date hereof, prepare and submit to NASDAQ a subsequent listing
application covering the shares of Parent Common Stock issuable in the Merger,
and shall use its reasonable efforts to obtain, prior to the Effective Time,
approval for the listing of such shares of Parent Common Stock, subject to
official notice of issuance.
(d) Directors of Parent. Immediately after the Effective Time, Parent
will take such action as may be necessary to create one additional seat on the
Board of Directors of Parent and to cause Jeffrey B. Robinson (such individual
being referred to herein as the "New Member") to be elected to the Board of
Directors of Parent, to serve until his successor is duly elected and qualified.
Parent shall take, or cause to be taken, all action necessary to nominate the
New Member for election to the Board of Directors of Parent at the 1998 Annual
Meeting of Parent Stockholders and, in accordance with its normal solicitation
efforts, solicit proxies for his election to such Board of Directors.
5.3 Covenants of the Company.
(a) Conduct of the Company's and the Subsidiaries' Operations. During
the period from the date of this Agreement to the Effective Time, the Company
shall conduct its and its Subsidiaries operations in the ordinary course except
as expressly contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, neither the Company nor the Subsidiaries
shall, except as otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby, without the prior written consent of Parent:
(i) take or effect any of the following actions with respect to
its securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire any of its securities
(except in connection with the use of shares of capital stock of the
Company to pay the exercise price or tax withholding in connection with
stock-based employee benefit plans of the Company), (C) grant any person
any right or option to acquire any of its securities, (D) issue, deliver or
sell or agree to issue, deliver or sell any additional securities (except
pursuant to the exercise of outstanding warrants or options to purchase
Company Common Stock) or amend the terms of any of its securities
(provided, however, that the Company may amend any option
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agreement(s) to which the Company is a party to provide that the
optionee(s) under such agreement(s) will have the right to exercise any or
all of such options, subject to the terms otherwise applicable under such
agreement(s), for a period of one year following the termination of the
employment of such optionee by the Company or any successor thereto, if, on
the date of this Agreement, the optionee is an employee of the Company, or
the termination of the optionee's membership on the Board of Directors of
the Company, if, on the date of this Agreement, the optionee is a member of
the Board of Directors of the Company), or (E) enter into any agreement,
understanding or arrangement with respect to the sale or voting of its
capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encumber or
otherwise dispose of any of its property or assets which are material, in
the aggregate, other than with respect to sales of oil and gas in the
ordinary course of business consistent with past practice;
(iii) make or propose any changes in its Certificate of
Incorporation, as amended, or its By-laws, as amended, or other
organizational documents;
(iv) merge or consolidate with any other person or acquire a
material amount of assets or capital stock of any other person or enter
into any confidentiality agreement with any person, other than in
connection with this Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable for
indebtedness for borrowed money, other than in the ordinary course of
business consistent with past practice, but in no event in excess of
$100,000, or assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for obligations of any other individual,
corporation or other entity, other than in the ordinary course of business
consistent with past practice;
(vi) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to, any officer,
director, consultant or employee other than salary increases and bonuses
granted to employees who are not officers or directors in the ordinary
course of business consistent with past practice, or otherwise increase the
compensation or benefits provided to any officer, director, consultant or
employee except as may be required by Applicable Law, this Agreement, any
applicable collective bargaining agreement or a binding written contract in
effect on the date of this Agreement, or adopt any new employee benefit
plan;
(vii) change its method of doing business or change any method
or principle of accounting in a manner that is inconsistent with past
practice;
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(viii) settle any Actions, whether now pending or hereafter
made or brought involving, in any Action or related series of Actions,
which individually or in the aggregate are in an amount in excess of
$100,000;
(ix) modify, amend or terminate, or waive, release or assign
any material rights or claims with respect to, any material Contract to
which it is a party or any confidentiality agreement to which it is a
party;
(x) incur or commit to any capital expenditures, obligations or
liabilities in respect thereof, other than in the ordinary course of
business consistent with past practice, but in no event in excess of
$50,000 individually or $250,000 in the aggregate;
(xi) conduct its business in a manner or take, or cause to be
taken, any other action that would or might reasonably be expected to
prevent or materially delay the Company from consummating the transactions
contemplated by this Agreement (regardless of whether such action would
otherwise be permitted or not prohibited hereunder), including, without
limitation, any action that may materially limit or delay the ability of
the Company to consummate the transactions contemplated by this Agreement
as a result of antitrust or securities laws or other regulatory concerns;
(xii) take any action to exempt under or make not subject to
Section 203 of the DGCL, any person or entity (other than Parent or its
subsidiaries) or any action taken thereby, which person, entity or action
would have otherwise been subject to the restrictive provisions thereof and
not exempt therefrom; or
(xiii) agree to take any action prohibited by the foregoing.
(b) No Solicitation. The Company agrees that, during the term of this
Agreement, it will not negotiate with any person other than Parent with respect
to the acquisition of the Company or its Subsidiaries and it will not, and will
not permit any of its officers, directors, employees, affiliates, agents or
representatives (including, without limitation, investment bankers, attorneys
and accountants) to (a) initiate contact with, (b) make, solicit or encourage
any inquiries or proposals from, (c) enter into, or participate in, any
discussions or negotiations with, (d) disclose, directly or indirectly, any
information not customarily disclosed concerning the business and properties of
the Company or its Subsidiaries to or (e) afford any access to the Company's or
its Subsidiaries properties, books and records to any person (other than Parent,
Sub or their respective directors, officers, employees, agents and
representatives) in connection with any possible proposal relating to (i) the
disposition of its respective businesses or all or substantially all of its
assets (except for disposition of assets in the ordinary course of business
consistent with past practice), (ii) the acquisition of equity or debt
securities of the Company or its Subsidiaries (except in connection with the
exercise of options, as permitted in Section 5.3(a)) or (iii) the merger, share
exchange
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or business combination, or similar acquisition transaction of or involving the
Company or its Subsidiaries with any person other than Parent (each or any
combination of the foregoing a "Company Competing Transaction"); provided that
the Company may (x) furnish information (subject to a confidentiality agreement
in reasonably customary form) to, and negotiate or otherwise engage in
discussions with, any party who delivers a written proposal for a Company
Competing Transaction if and so long as the Board of Directors of the Company
determines in good faith, based upon the written opinion of its outside legal
counsel, that failing to take such action would reasonably be expected to
constitute a breach of the fiduciary duties of the Board and (y) take a position
with respect to the Merger or a Company Competing Transaction, or amend or
withdraw such position, in compliance with Rule 14d-9 or Rule 14e-2 promulgated
under the Exchange Act with regard to a Company Competing Transaction. From and
after the execution of this Agreement, the Company and each of its Subsidiaries
will immediately notify Parent orally, and subsequently confirm in writing, all
the relevant details relating to all inquiries and proposals which it may
receive relating to any such matters. Subject to the foregoing, the Company
will not, and will not permit any of its representatives or Subsidiaries to
enter, at any time, into or participate in any discussions or negotiations
regarding, or accept, any proposal for a Company Competing Transaction received
by them from a third party or that a third party expresses a desire to
communicate with them.
(c) Directors, Officers and Employees. The Company shall take any and
all action to cause all directors, officers and employees of the Company and the
Subsidiaries to resign and/or be terminated from all positions with the Company
and the Subsidiaries, including termination of any employment agreements, and to
terminate any and all Company Plans, effective prior to the Effective Time,
without cost or penalty to the Company, except with respect to the severance
benefits set forth in Section 4.15(h) and Section 4.15(i) to the Company
Disclosure Schedule.
(d) Agreements of Affiliates. The Company shall deliver to Parent,
prior to the date the Registration Statement becomes effective under the
Securities Act, a letter (the "Affiliate Letter") identifying all persons who
are, at the time of the Company Stockholders' Meeting, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall
use its best efforts to cause each person who is identified as an "affiliate" in
the Affiliate Letter to deliver to Parent, prior to the Effective Time, a
written agreement (an "Affiliate Agreement") providing that each such person
will agree not to sell, pledge, transfer or otherwise dispose of, the shares of
Parent Common Stock to be received by such person in the Merger except in
compliance with the applicable provisions of the Securities Act and the
applicable rules and regulations thereunder.
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ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the parties hereto to
consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Authority which
prevents the consummation of the Merger.
(b) All material consents, approvals, permits or authorizations
required to be obtained prior to the Effective Time from any Governmental
Authority in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby shall have
been obtained.
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the affirmative vote of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon, in
accordance with Applicable Law, at the Company's stockholders' meeting, and
the Share Issuance shall have been approved by the Parent Stockholders in
accordance with the rules of Nasdaq.
(d) The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of Parent or the
Company, threatened by the Commission or any other Governmental Entity.
(e) No Action shall be instituted by any Governmental Authority which
seeks to prevent consummation of the Merger or which seeks material damages
in connection with the transactions contemplated hereby which continues to
be outstanding.
(f) The shares of Parent Common Stock to be issued in the Merger shall
have been authorized for quotation on Nasdaq, subject to official notice of
issuance.
(g) All consents, waivers and approvals of third parties required in
connection with the transactions contemplated hereby shall have been
obtained, except where the failure to obtain such consents, waivers or
approvals, in the aggregate, would not reasonably be expected to result in
a material adverse effect on Parent or the Company, as the case may be,
provided that a party which has not used all reasonable efforts to obtain a
consent, approval or waiver may not assert this condition with respect to
such consent, approval or waiver.
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(h) Parent shall have received an opinion dated as of the Closing Date
of Akin, Gump, Strauss, Hauer & Feld, L.L.P., to the effect that (1) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and (2) no gain or loss will be recognized by Company
Stockholders with respect to shares of Parent Common Stock received in the
Merger in exchange for shares of Company Common Stock, except with respect
to cash received in lieu of fractional shares of Parent Common Stock. In
rendering such opinion, such counsel may require and rely on
representations contained in certificates of Parent, the Company, Sub and
others, as they deem reasonably appropriate.
6.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by the
Company:
(a) The representations and warranties of each of Parent and Sub shall
be true and correct on the date hereof and on and as of the Closing Date as
though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct only
as of the specified date), other than such breaches of representations and
warranties which would not have or which would not be reasonably expected
to have, in the aggregate, a material adverse effect on Parent.
(b) Each of Parent and Sub shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) McDonald shall have delivered an opinion to the Board of Directors
of the Company, in form reasonably satisfactory to the Company, confirming,
as of the date of the Proxy Statement, its opinion referred to in Section
4.13 hereof.
6.3 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to consummate the Merger and the other transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by each of Parent and Sub:
(a) The representations and warranties of the Company shall be true
and correct on the date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct only
as of the specified date), other than such breaches of representations and
warranties which would not have or which would not be reasonably expected
to have, in the aggregate, a material adverse effect on the Company.
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(b) The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it hereunder at or
prior to the Effective Time.
(c) Parent shall have received from each person who is identified in
the Affiliate Letter as an "affiliate" of the Company, an Affiliate
Agreement in form and substance satisfactory to Parent.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval and adoption of this
Agreement by Company Stockholders:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any permanent injunction or
other order or decree of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and non-
appealable;
(c) by either Parent or the Company if the Merger shall not have been
consummated (i) before April 30, 1998, provided that (ii) if the
Registration Statement was filed but has not been declared effective as of
such date, then on or before the date 60 days after the Registration
Statement is declared effective; unless extended by the Boards of Directors
of both Parent and the Company (provided that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party
whose failure to perform any material covenant or obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date);
(d) by Parent or the Company if at the meeting of Company Stockholders
held for such purpose (including any adjournment or postponement thereof)
the requisite vote of the Company Stockholders to approve the Merger and
the transactions contemplated hereby shall not have been obtained;
(e) by Parent or the Company if at the meeting of Parent Stockholders
held for such purpose (including any adjournment or postponement thereof)
the requisite vote of the Parent Stockholders to approve the Share Issuance
shall not have been obtained;
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(f) by Parent or the Company (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach is not cured within 30 days following written notice given by
the terminating party to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing, but only if such
breach would constitute a failure of a condition contained in Section 6.2
or Section 6.3, as applicable;
(g) by the Company if the Board of Directors of the Company shall
determine to engage in a Company Competing Transaction and the Company
shall have delivered to Parent a written notice of the determination by the
Company Board of Directors to terminate this Agreement pursuant to this
Section 7.1(g); provided, however, that the Company may not terminate this
Agreement pursuant to this clause (g) unless (w) five business days shall
have elapsed after delivery to Parent of the notice referred to above, (x)
at the end of such five business day period the Company Board of Directors
shall continue to believe that the failure to engage in such Company
Competing Transaction would reasonably be expected to be a breach of the
fiduciary duties of the Board of Directors of the Company (after giving
effect to any adjustment to the terms and conditions of such transactions
proposed by Parent in response to such Company Competing Transaction) and
(y) at the time of such termination, the Company shall have paid to Parent
the Termination Fee (as hereinafter defined);
(h) by Parent if the Board of Directors of the Company shall not have
recommended the Merger to the Company Stockholders, or shall have resolved
not to make such recommendation, or shall have materially modified or
rescinded its recommendation of the Merger to the Company Stockholders, or
shall have modified or rescinded its approval of this Agreement, or shall
have entered into an acquisition, merger or similar agreement to effect, or
shall have effected, a Company Competing Transaction, or shall have
resolved to do any of the foregoing; or
(i) by Parent or the Company if at the meeting of Parent Stockholders
held for such purpose (including any adjournment or postponement thereof)
the requisite vote of the Parent Stockholders to approve the Share Issuance
shall not have been obtained.
7.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement, except for the provisions of the last sentence of
Section 5.1(e) and the provisions of Sections 7.2 and 8.10, shall become void
and have no effect, without any liability on the part of any party or its
directors, officers, employees or stockholders.
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Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve any
party to this Agreement of liability for a breach of any provision of this
Agreement prior to such termination.
(b) If this Agreement is terminated
(i) by Parent or the Company pursuant to Section 7.1(d), if (A)
a Prior Event (as defined below) shall have occurred prior to such
termination and (B) either (x) the Company shall enter into a definitive
agreement with respect to a Company Competing Transaction within twelve
months following such termination and such Company Competing Transaction is
thereafter consummated or (y) a Company Competing Transaction is
consummated within twelve months following such termination; or
(ii) by the Company pursuant to Section 7.1(g) or by Parent
pursuant to Section 7.1(h);
then in any such case the Company will pay to Parent in cash by wire transfer in
immediately available funds to an account designated by Parent a termination fee
in an amount equal to $1,000,000; provided, however, that if this Agreement has
been terminated by Parent pursuant to Section 7.1(h) and the Board of Directors
of the Company has taken any of the actions referenced in Section 7.1(h) because
McDonald shall not have delivered its opinion referred to in Section 6.2(c),
then the amount to be paid by the Company shall be the amount of Parent's out-
of-pocket expenses incurred in connection with this transaction, up to a maximum
of $500,000. Such payment shall be made (a) in the case of clause (i) above,
within one business day following the consummation of such Company Competing
Transaction and (b) in the case of clause (ii), no later than immediately prior
to such termination.
(c) If this Agreement is terminated by Parent or the Company pursuant
to Section 7.1(i) and (A) a Parent Prior Event (as defined below) shall have
occurred prior to such termination, and (B) either (x) Parent shall enter into a
definitive agreement with respect to a Parent Competing Transaction (as defined
below) within twelve months following such termination and such Parent Competing
Transaction (as it may be amended) is thereafter consummated, or (y) a Parent
Competing Transaction is consummated within twelve months following such
termination, then Parent will pay to the Company in cash by wire transfer in
immediately available funds to an account designated by the Company a
termination fee in an amount equal to $1,000,000. Such payment shall be made
within one business day following the consummation of the Parent Competing
Transaction.
(d) As used herein, a "Prior Event" shall mean any of the following
events:
(i) any person (other than Parent or any of its subsidiaries)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall
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have filed a registration statement under the Securities Act, with respect
to, a tender offer or exchange offer to purchase any shares of Company
Common Stock such that, upon consummation of such offer, such person would
Beneficially Own (as defined below) or control 50% or more of the then
outstanding Company Common Stock;
(ii) the Company or any of its subsidiaries shall have entered
into, authorized, recommended, proposed or publicly announced an intention
to enter into, authorize, recommend, or propose, an agreement, arrangement
or understanding with any person (other than Parent or any of its
subsidiaries) to, or any person (other than Parent or any of its
subsidiaries) shall have announced a bona fide intention to, or the Company
shall have announced that any person (other than Parent or any of it
subsidiaries) has proposed or communicated its intention to, or the Company
shall have received a bona fide proposal or communication regarding an
intention to, (A) effect any Competing Transaction, (B) purchase, lease or
otherwise acquire 40% or more of the assets of the Company or (C) purchase
or otherwise acquire (including by way of merger, consolidation, tender or
exchange offer or similar transaction) Beneficial Ownership of securities
representing 30% or more of the voting power of the Company; or
(iii) any person (other than Parent or any subsidiary of
Parent) shall have acquired Beneficial Ownership of a number of shares of
Company Common Stock in addition to the number of shares of Company Common
Stock Beneficially Owned by such person on the date hereof equal to 30% or
more of the voting power of the Company.
(e) As used herein, the term "Parent Prior Event" shall have the same
meaning with respect to Parent as the term "Prior Event" has with respect to the
Company, with such changes in the definition thereof as are appropriate to
contemplate Parent in lieu of the Company.
(f) As used herein, the term "Parent Competing Transaction" shall mean
a transaction involving the acquisition of the businesses or all or
substantially all of the assets of Parent, or the merger, share exchange or
business combination, or similar acquisition transaction of or involving Parent
in which (A) persons who immediately prior to the consummation of such
transaction were serving as directors of Parent do not comprise a majority of
the directors of the acquiring or surviving entity immediately following the
consummation of such transaction and (B) the stockholders of Parent as of the
date hereof do not hold collectively a majority of the shares or equity
interests of the acquiring or surviving entity immediately following the
consummation of such transaction.
(g) As used herein, the terms "Beneficial Ownership" and "Beneficially
Own" shall have the meanings ascribed to them in Rule 13d-3 under the Exchange
Act. As
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used herein, "person" shall have the meaning specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
7.3 Amendment. This Agreement may be amended by the parties hereto, at
any time before or after adoption of this Agreement by Company Stockholders or
authorization of the Share Issuance by Parent Stockholders, but after such
approval or authorization, no amendment shall be made which by law requires
further approval or authorization by the Company Stockholders or Parent
Stockholders, as the case may be, without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, Parent
(with respect to the Company) and the Company (with respect to Parent and Sub)
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of such party, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) 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 only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. Notwithstanding the foregoing, this Section 8.1 shall not limit any
covenant or agreement of the parties hereto, which by its terms contemplates
performance after the Effective Time or the termination of this Agreement.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Southern Mineral Corporation
500 Dallas Street, Suite 2800
Houston, Texas 77002-4708
Attention: Steven H. Mikel
Telecopy No.: (713) 658-9447
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with a copy to
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
711 Louisiana, Suite 1900 - South Tower
Houston, Texas 77002
Attention: David S. Peterman
Telecopy No.: (713) 236-0822
(b) if to the Company:
Amerac Energy Corporation
1201 Louisiana, Suite 3350
Houston, Texas 77002-5609
Attention: Kenneth R. Peak
Telecopy No.: (713) 308-5285
with a copy to
James L. Rice III, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telecopy No.: (713) 224-9511
8.3 Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. For the purposes of
this Agreement, a "material adverse effect" shall mean, as to any party, a
material adverse effect on the assets, liabilities, results of operations,
business or financial condition of such party and its subsidiaries, taken as a
whole, or on such party's ability to consummate the transactions contemplated
hereby.
8.4 Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same agreement. The parties may execute
more than one copy of this Agreement, each of which shall constitute an
original.
8.5 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) and the Confidentiality Agreement constitute the
entire agreement among the parties and supersede all prior agreements and
understandings by or among the parties, written and oral, with respect to the
subject matter hereof.
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8.6 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries, except for the provisions of Section 5.2(b) which may be enforced
by the beneficiaries thereof.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas without regard to principles of
conflict of laws.
8.8 Specific Performance. The transactions contemplated by this Agreement
are unique and monetary damages would not be an adequate remedy for a breach
hereof. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided that such party
is not in material default hereunder.
8.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns.
8.10 Expenses. Parent and the Company shall pay their own costs and
expenses associated with the transactions contemplated by this Agreement, except
that the Company and Parent shall share equally (i) the filing fees in
connection with the filing of the Proxy Statement and Registration Statement
with the Commission and (ii) the expenses incurred in connection with printing
and mailing the Proxy Statement to the Company Stockholders and the Parent
Stockholders.
8.11 Incorporation of Disclosure Schedules. The Company Disclosure
Schedule and the Parent Disclosure Schedule are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13 Subsidiaries and Affiliates. As used in this Agreement, the word
"subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect
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to such corporation or other organization, or any organization of which such
party is a general partner, and unless otherwise specified, the word "affiliate"
has the meaning ascribed thereto in the Investment Company Act of 1940, as
amended.
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IN WITNESS WHEREOF, Parent, Sub and the Company have signed this Agreement
as of the date first written above.
SOUTHERN MINERAL CORPORATION
By: /s/ Steven H. Mikel
-------------------------------------
Steven H. Mikel
President and Chief Executive Officer
AEC ACQUISITION CORP.
By: /s/ Steven H. Mikel
------------------------------------
Steven H. Mikel
President
AMERAC ENERGY CORPORATION
By: /s/ Jeffrey B. Robinson
-----------------------------------
Jeffrey B. Robinson
President and Chief Executive Officer
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EXHIBIT 20.1
HOUSTON -- Southern Mineral Corporation (NASDAQ: SMIN) and Amerac Energy
Corporation (AMEX: AMC) today announced that they have signed a definitive
agreement for the merger of AMC into SMIN. The combined entities will have
reserves of approximately 80 Bcfe, with operations in Texas and Oklahoma and
properties primarily in Texas, Louisiana, Oklahoma, Canada and Ecuador. Under
the terms of the agreement, SMIN will exchange its common shares for all AMC
common shares based upon the average closing price of SMIN for a twenty-day
period preceding the closing of the merger. Under the terms of the agreement,
no less than 2.7 million nor more than 3.3 million shares of SMIN common stock
will be exchanged for AMC shares, based upon the average SMIN share price of
$8.25 to $6.75, respectively. As of October 31, 1997, AMC had 3,891,981 shares
of common stock outstanding. In addition, SMIN will assume AMC's indebtedness.
The merger is subject to approval of shareholders of both SMIN and AMC. The
merger is expected to be completed in early 1998.
Amerac is engaged in the acquisition, production and development of oil and gas
properties primarily in Texas and Oklahoma. Amerac's Common Stock is traded on
the American Stock Exchange under the symbol AMC.
Southern Mineral Corporation is an oil and gas acquisition, exploration and
production company that owns interests in oil and gas properties located along
the Gulf Coast, Canada and Ecuador. The Company is listed on the NASDAQ
National Market under the symbol SMIN.
