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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 28, 2000,
BY AND AMONG
STONE ENERGY CORPORATION
PARTNER ACQUISITION CORP.
AND
BASIN EXPLORATION, INC.
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TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER...................................................... 1
ARTICLE I. THE MERGER............................................................. 1
SECTION 1.01 Effective Time Of The Merger................................ 1
SECTION 1.02 Closing..................................................... 2
SECTION 1.03 Effects Of The Merger....................................... 2
SECTION 1.04 Directors And Officers...................................... 2
ARTICLE II. CONVERSION OF SECURITIES.............................................. 2
SECTION 2.01 Conversion Of Capital Stock................................. 2
SECTION 2.02 Exchange Of Certificates.................................... 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY............................ 6
SECTION 3.01 Organization Of Company..................................... 6
SECTION 3.02 Company Capital Structure................................... 6
SECTION 3.03 Authority; No Conflict; Required Filings And Consents....... 7
SECTION 3.04 SEC Filings; Financial Statements........................... 8
SECTION 3.05 No Undisclosed Liabilities; Suspense Accounts............... 9
SECTION 3.06 Absence Of Certain Changes Or Events........................ 9
SECTION 3.07 Taxes....................................................... 10
SECTION 3.08 Properties.................................................. 11
SECTION 3.09 Intellectual Property....................................... 12
SECTION 3.10 Contracts................................................... 12
SECTION 3.11 Investigations; Litigation.................................. 13
SECTION 3.12 Environmental Matters....................................... 13
SECTION 3.13 Employee Benefit Plans...................................... 14
SECTION 3.14 Compliance With Laws........................................ 16
SECTION 3.15 Tax Matters................................................. 16
SECTION 3.16 Labor Matters............................................... 16
SECTION 3.17 Insurance................................................... 17
SECTION 3.18 No Existing Discussions..................................... 17
SECTION 3.19 Opinion Of Financial Advisor................................ 17
SECTION 3.20 Section 203 Of The DGCL Not Applicable...................... 17
SECTION 3.21 Oil And Gas Reserves........................................ 17
SECTION 3.22 Take-Or-Pay Deliveries...................................... 18
SECTION 3.23 Hedging..................................................... 18
SECTION 3.24 Required Vote of Company Stockholders....................... 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARTNER............................. 18
SECTION 4.01 Organization Of Partner And Merger Sub...................... 18
SECTION 4.02 Partner Capital Structure................................... 19
SECTION 4.03 Authority; No Conflict; Required Filings And Consents....... 19
SECTION 4.04 SEC Filings; Financial Statements........................... 20
SECTION 4.05 No Undisclosed Liabilities; Suspense Accounts............... 21
SECTION 4.06 Absence Of Certain Changes Or Events........................ 21
SECTION 4.07 Taxes....................................................... 22
SECTION 4.08 Properties.................................................. 22
SECTION 4.09 Intellectual Property....................................... 23
SECTION 4.10 Contracts................................................... 23
SECTION 4.11 Investigations; Litigation.................................. 24
SECTION 4.12 Environmental Matters....................................... 24
SECTION 4.13 Employee Benefit Plans...................................... 25
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SECTION 4.14 Compliance With Laws........................................ 26
SECTION 4.15 Tax Matters................................................. 26
SECTION 4.16 Opinion Of Financial Advisor................................ 26
SECTION 4.17 Oil And Gas Reserves........................................ 26
SECTION 4.18 Take-Or-Pay Deliveries...................................... 27
SECTION 4.19 Hedging..................................................... 27
SECTION 4.20 Required Vote of Partner Stockholders....................... 27
ARTICLE V. CONDUCT OF BUSINESS.................................................... 27
SECTION 5.01 Covenants Of Company........................................ 27
SECTION 5.02 Covenants Of Partner........................................ 30
SECTION 5.03 Cooperation................................................. 30
ARTICLE VI. ADDITIONAL AGREEMENTS................................................. 30
SECTION 6.01 No Solicitation............................................. 30
SECTION 6.02 Joint Proxy Statement/Prospectus; Registration Statement.... 31
SECTION 6.03 Quotation On Stock Exchanges................................ 32
SECTION 6.04 Access To Information....................................... 32
SECTION 6.05 Stockholders Meetings....................................... 32
SECTION 6.06 Legal Conditions To Merger.................................. 33
SECTION 6.07 Public Disclosure........................................... 34
SECTION 6.08 Tax-Free Reorganization..................................... 34
SECTION 6.09 Affiliate Agreements........................................ 34
SECTION 6.10 New York Stock Exchange Quotation........................... 34
SECTION 6.11 Stock Plans................................................. 34
SECTION 6.12 Brokers Or Finders.......................................... 36
SECTION 6.13 Indemnification............................................. 36
SECTION 6.14 Benefit Matters............................................. 36
SECTION 6.15 Registration Statement; Joint Proxy Statement/Prospectus.... 38
SECTION 6.16 Pooling Accounting.......................................... 39
ARTICLE VII. CONDITIONS TO MERGER................................................. 39
SECTION 7.01 Conditions To Each Party's Obligation To Effect The
Merger...................................................... 39
SECTION 7.02 Additional Conditions To Obligations Of Partner And Merger
Sub......................................................... 40
SECTION 7.03 Additional Conditions To Obligations Of Company............. 40
ARTICLE VIII. TERMINATION AND AMENDMENT........................................... 41
SECTION 8.01 Termination................................................. 41
SECTION 8.02 Effect Of Termination....................................... 42
SECTION 8.03 Fees And Expenses........................................... 42
SECTION 8.04 Amendment................................................... 42
SECTION 8.05 Extension; Waiver........................................... 43
ARTICLE IX. MISCELLANEOUS......................................................... 43
SECTION 9.01 Nonsurvival Of Representations, Warranties And Agreements... 43
SECTION 9.02 Notices..................................................... 43
SECTION 9.03 Definitions................................................. 44
SECTION 9.04 Interpretation.............................................. 44
SECTION 9.05 Counterparts................................................ 45
SECTION 9.06 Entire Agreement; No Third Party Beneficiaries.............. 45
SECTION 9.07 Governing Law............................................... 45
SECTION 9.08 Assignment.................................................. 45
SECTION 9.09 Severability................................................ 45
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EXHIBITS AND APPENDIX
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Exhibit A-1......... Form of Company Voting Agreement
Exhibit A-2......... Form of Partner Voting Agreement
Appendix 1.04(c).... Non-Competition Term Sheet
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TABLES OF DEFINED TERMS
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CROSS-REFERENCE
TERMS IN AGREEMENT
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Acquisition Proposal........................................ Section 6.01
Affiliate................................................... Section 6.09
Affiliate Agreement......................................... Section 6.09
Agreement................................................... Preamble
Bankruptcy and Equity Exception............................. Section 3.03(a)
Certificate of Merger....................................... Section 1.01
Closing..................................................... Section 1.02
Closing Date................................................ Section 1.02
Company..................................................... Preamble
Company Balance Sheet....................................... Section 3.04(b)
Company Certificates........................................ Section 2.02(b)
Company Common Stock........................................ Section 2.01(b)
Company Disclosure Schedule................................. Article III
Company Employee Plans...................................... Section 3.13(a)
Company Material Adverse Effect............................. Section 9.03(a)
Company Material Contracts.................................. Section 3.10
Company Payout Balances..................................... Section 3.21
Company Preferred Stock..................................... Section 3.02(a)
Company Reserve Report...................................... Section 3.21
Company Stock Option........................................ Section 6.11(a)
Company SEC Reports......................................... Section 3.04(a)
Company Stockholders' Meeting............................... Section 6.15
Company Voting Agreements................................... Preamble
Confidentiality Agreement................................... Section 6.01
Continuing Employees........................................ Section 6.14(b)
Costs....................................................... Section 6.13(a)
Current Premium............................................. Section 6.13(b)
DGCL........................................................ Section 1.01
Effective Time.............................................. Section 1.01
Environmental Law........................................... Section 3.12(b)
ERISA....................................................... Section 3.13(a)
ERISA Affiliate............................................. Section 3.13(a)
Exchange Act................................................ Section 3.03(c)
Exchange Agent.............................................. Section 2.02(a)
Exchange Fund............................................... Section 2.02(a)
Exchange Ratio.............................................. Section 2.01(c)
Governmental Entity......................................... Section 3.03(c)
Hazardous Substance......................................... Section 3.12(c)
HSR Act..................................................... Section 3.03(c)
Incentive Plan.............................................. Section 3.02(a)
Indemnified Parties......................................... Section 6.13(a)
Internal Revenue Code....................................... Preamble
IRS......................................................... Section 3.07(b)
Joint Proxy Statement....................................... Section 6.15
Liens....................................................... Section 3.08
Litigation Matters.......................................... Section 3.11
Merger...................................................... Preamble
Order....................................................... Section 6.06(b)
Outside Date................................................ Section 8.01(b)
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CROSS-REFERENCE
TERMS IN AGREEMENT
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Partner..................................................... Preamble
Partner Acquisition Proposal................................ Section 9.03(c)
Partner Balance Sheet....................................... Section 4.04(b)
Partner Common Stock........................................ Section 2.01(b)
Partner Disclosure Schedule................................. Article IV
Partner Employee Plans...................................... Section 4.13(a)
Partner Material Adverse Effect............................. Section 9.03(b)
Partner Material Contracts.................................. Section 4.10
Partner Payout Balances..................................... Section 4.21
Partner Preferred Stock..................................... Section 4.02(a)
Partner Reserve Report...................................... Section 4.21
Partner SEC Reports......................................... Section 4.04(a)
Partner Stock Plans......................................... Section 4.02(a)
Partner Stockholders' Meeting............................... Section 6.15
Partner Voting Agreements................................... Preamble
Partner Voting Proposal..................................... Section 6.05
Performance Share Plan...................................... Section 3.02(a)
Permits..................................................... Section 3.14
Registration Statement...................................... Section 6.15
Retention Policy............................................ Section 3.06
Rights Agreement............................................ Section 3.02(a)
Rule 145.................................................... Section 6.09
SEC......................................................... Section 3.03(c)
Securities Act.............................................. Section 3.04(a)
Subsidiary.................................................. Section 3.01
Superior Proposal........................................... Section 6.01
Surviving Corporation....................................... Section 1.03
Tax......................................................... Section 3.07(a)
Taxes....................................................... Section 3.07(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 28,
2000, by and among Stone Energy Corporation, a Delaware corporation ("Partner"),
Partner Acquisition Corp., a Delaware corporation and a direct, wholly-owned
subsidiary of Partner ("Merger Sub"), and Basin Exploration, Inc., a Delaware
corporation ("Company").
WHEREAS, the Boards of Directors of Partner and Company deem it advisable
and in the best interests of each corporation and its respective stockholders
that Partner and Company combine in order to advance the long-term business
interests of Partner and Company and each Board of Directors has recommended
that its respective stockholders approve the transactions contemplated hereby;
WHEREAS, the combination of Partner and Company shall be effected by the
terms of this Agreement through a merger in which the stockholders of Company
will become stockholders of Partner (the "Merger");
WHEREAS, as soon as practicable after the execution of this Agreement, as a
condition to the willingness of Partner to enter into this Agreement, the
members of the Board of Directors of Company, in their capacity as stockholders,
are entering into a Voting Agreement, dated as of the date hereof, with Partner,
a copy of which is attached to this Agreement as Exhibit A-1 (the "Company
Voting Agreement"), providing for, among other things, the agreement of such
stockholders to vote their respective shares of capital stock of Company in
favor of the approval and adoption of this Agreement and the Merger at the
Company Stockholders' Meeting (as defined herein);
WHEREAS, as soon as practicable after the execution of this Agreement, as a
condition to the willingness of Company to enter into this Agreement, the
members of the Board of Directors of Partner, in their capacity as stockholders,
are entering into a Voting Agreement, dated as of the date hereof, with Company,
a copy of which is attached to this Agreement as Exhibit A-2 (the "Partner
Voting Agreement") providing for among other things, the agreement of such
stockholders to vote their respective shares of capital stock of Partner in
favor of any required amendment to Partner's certificate of incorporation and
the issuance of the shares of Partner Common Stock (as defined herein) in
connection with the Merger at the Partner Stockholders' Meeting (as defined
herein);
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.01 Effective Time of the Merger.
Subject to the provisions of this Agreement, a certificate of merger (the
"Certificate of Merger") in such form as is required by the relevant provisions
of the Delaware General Corporation Law (the "DGCL") shall be duly prepared,
executed and acknowledged by the Surviving Corporation (as defined in Section
1.03) and thereafter delivered to the Secretary of State of the State of
Delaware for filing, as provided in the DGCL, as early as practicable on the
Closing Date (as defined in Section 1.02). The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware (the "Effective Time").
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SECTION 1.02 Closing.
The closing of the Merger (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by Partner and Company, which shall be no
later than the second business day after satisfaction or waiver (as provided by
Section 8.05) of the latest to occur of the conditions set forth in Article
VII(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) (the
"Closing Date"), at the offices of Brobeck, Phleger & Harrison LLP, Broomfield,
Colorado, unless another date, place or time is agreed to in writing by Partner
and Company.
SECTION 1.03 Effects of the Merger.
At the Effective Time (i) the separate corporate existence of Merger Sub
shall cease and Merger Sub shall be merged with and into Company (Company
following the Merger is sometimes referred to below as the "Surviving
Corporation"), (ii) the Certificate of Incorporation of Merger Sub shall be
amended so that Article I of such Certificate of Incorporation reads in its
entirety as follows: "The name of the Corporation is Basin Exploration, Inc.,"
and, as so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation, and (iii) the Bylaws of Merger
Sub as in effect immediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation.
The Merger shall have the effects set forth in this Agreement and in the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation. As of the Effective Time, the Surviving Corporation shall be a
direct wholly-owned subsidiary of Partner.
SECTION 1.04 Directors and Officers.
(a) The directors and officers of Merger Sub, immediately prior to the
Effective Time, shall be the initial officers and directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
(b) Partner shall take such action so that, upon the Effective Time,
Michael S. Smith shall become a member of Partner's Board of Directors as a
Class II Director whose term shall expire in 2001 (whereupon he will be
renominated by Partner as a Class II director for another term). Without
limiting the foregoing, if necessary to comply with this Section 1.04, Partner
shall cause the number of directors that shall constitute the Partner Board of
Directors to be increased by resolution of the Partner Board of Directors.
(c) At or prior to the Effective Time, Partner shall, and Company shall use
its reasonable best efforts to cause Michael S. Smith to, enter into a
non-competition agreement, in form and substance reasonably satisfactory to
Partner and Michael S. Smith, reflecting the terms set forth on Appendix 1.04(c)
hereto, and which shall become effective as set forth therein.
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Capital Stock.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders of any shares of Company Common Stock (as defined in
Section 2.01(b)) or capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
the capital stock of Merger Sub shall be converted into and become one
validly issued, fully paid and nonassessable share of Common Stock, par
value $0.01 per share, of the Surviving Corporation.
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(b) Cancellation of Treasury Stock and Partner-Owned Stock. All
shares of Common Stock, par value $0.01 per share, of Company ("Company
Common Stock") that are owned by Company as treasury stock and any shares
of Company Common Stock owned by Partner, Merger Sub or any other
wholly-owned Subsidiary (as defined in Section 3.01) of Partner or of
Company shall be cancelled and retired and shall cease to exist and no
stock of Partner or other consideration shall be delivered in exchange
therefor. All shares of Common Stock, par value $0.01 per share, of Partner
("Partner Common Stock") owned by Company or any other holder thereof shall
be unaffected by the Merger.
(c) Exchange Ratio for Company Common Stock. (i) Subject to Section
2.02, each issued and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 2.01(b)) shall be
converted into the right to receive .3974 of a share of Partner Common
Stock (the "Exchange Ratio").
(i) As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate or certificates that immediately prior to the Effective Time
represented such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Partner Common Stock
and any cash in lieu of fractional shares of Partner Common Stock to be
issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 2.02, without interest.
(ii) If, between the date of this Agreement and the Effective Time,
the outstanding shares of Company Common Stock or Partner Common Stock
are changed into a different number or class of shares by reason of any
stock split, division or subdivision of shares, stock dividend, reverse
stock split, reclassification, recapitalization or other similar
transaction, then the Exchange Ratio shall be appropriately adjusted to
reflect the economic effects intended by this Section 2.01(c).
Section 2.02 Exchange of Certificates.
The procedures for exchanging outstanding shares of Company Common Stock
for Partner Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Partner shall deposit
with a bank or trust company designated by Partner and Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Section 2.02, through
the Exchange Agent, certificates representing the shares of Partner Common
Stock (such shares of Partner Common Stock, together with any cash
necessary to pay dividends or distributions with respect thereto and to
make payments in lieu of any fractional shares as provided below, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Company
Certificates") whose shares were converted pursuant to Section 2.01 into
the right to receive shares of Partner Common Stock plus cash in lieu of
fractional shares, if any, of Partner Common Stock as provided below, (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Company Certificates shall pass, only
upon delivery of the Company Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Partner and Company may
reasonably specify) and (ii) instructions for effecting the surrender of
the Company Certificates in exchange for certificates representing shares
of Partner Common Stock (plus cash in lieu of fractional shares, if any, of
Partner Common Stock as provided below). Upon surrender of a Company
Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by Partner, together with such letter of
transmittal, duly executed, the holder of such Company Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Partner Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II and
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cash in lieu of any fractional share of Partner Common Stock as provided
below, and the Company Certificate so surrendered shall immediately be
cancelled. In the event of a transfer of ownership of Company Common Stock
that is not registered in the transfer records of Company, a certificate
representing the proper number of shares of Partner Common Stock may be
issued to a transferee if the Company Certificate representing such Company
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.02, each Company Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Partner
Common Stock and cash, if any, in lieu of any fractional shares of Partner
Common Stock as contemplated by this Section 2.02. No interest will be
paid or will accrue on any cash payable to holders of Company Certificates
pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Partner Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Certificate with respect
to the shares of Partner Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder
pursuant to subsection (e) below until the holder of record of such Company
Certificate shall surrender such Company Certificate. Subject to the effect
of escheat or similar laws, following surrender of any such Company
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Partner Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of any cash payable in lieu of a fractional share of Partner Common Stock
to which such holder is entitled pursuant to subsection (e) below and the
amount of dividends or other distributions with a record date after the
Effective Time previously paid with respect to such whole shares of Partner
Common Stock, and (ii) at the appropriate payment date, 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 Partner Common Stock. Partner
shall make available to the Exchange Agent, as needed, cash for these
purposes.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Partner Common Stock issued upon the surrender for exchange of Company
Certificates in accordance with the terms hereof (including any cash paid
pursuant to subsection (c) or subsection (e) of this Section 2.02) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Company on such shares of Company Common Stock in
accordance with the terms of this Agreement (to the extent permitted under
Section 5.01) prior to the date hereof and which remain unpaid at the
Effective Time. At the Effective Time, holders of Company Certificates
shall cease to have any rights as stockholders of Company, the stock
transfer books of Company shall be closed with respect to all shares of
Company Common Stock outstanding immediately prior to the Effective Time
and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Company Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section
2.02.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Partner Common Stock shall be issued upon the
surrender for exchange of Company Certificates, no dividend or distribution
of Partner shall relate to such fractional share interests, and such
fractional share interests will not entitle the owner thereof to vote or to
any other rights of a stockholder of Partner. Notwithstanding any other
provision of this Agreement, each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Partner Common Stock (after taking into
account all Company Certificates delivered by such
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holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Partner Common Stock
multiplied by the average of the last reported sales prices of Partner
Common Stock, as reported on the New York Stock Exchange Transaction Tape
(as reported in The Wall Street Journal, or if not reported thereby, any
other authoritative source) on each of the ten (10) trading days
immediately preceding the date of the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Certificates for one
hundred eighty (180) days after the Effective Time shall be delivered to
Partner, upon demand, and any stockholders of Company who have not
previously complied with this Section 2.02 shall thereafter look only to
Partner for payment of their claim for Partner Common Stock, any cash in
lieu of fractional shares of Partner Common Stock and any dividends or
distributions with respect to Partner Common Stock.
(g) No Liability. None of Partner, Company, Merger Sub or the
Exchange Agent shall be liable to any person in respect of any shares of
Partner Common Stock or Company Common Stock, as the case may be, for such
shares (or dividends or distributions with respect thereto) or cash from
the Exchange Fund in each case delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Company
Certificate shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which the
shares of Partner Common Stock represented by such Company Certificate
would otherwise escheat to or become the property of any governmental body
or authority), any such shares of Partner Common Stock, or cash, dividends
or distributions in respect of such Company Certificate shall, to the
extent permitted by applicable law, become the property of Partner, free
and clear of all claims or interest of any person previously entitled
thereto.
(h) Withholding Rights. Each of Partner and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code and
the rules and regulations promulgated thereunder, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by the Surviving Corporation or Partner, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation
or Partner, as the case may be.
(i) Lost Company Certificates. If any Company Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Company Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by
such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made
against it with respect to such Company Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Company
Certificate the shares of Partner Common Stock and any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of
Partner Common Stock deliverable in respect thereof pursuant to this
Agreement.
(j) Affiliates. Notwithstanding anything herein to the contrary,
Company Certificates surrendered for exchange by any Affiliate (as defined
in Section 6.09) of Company shall not be exchanged until Partner has
received an Affiliate Agreement (as defined in Section 6.09) from such
Affiliate.
(k) Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. The parties to this Agreement hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
(l) Accounting Treatment. For accounting purposes, the Merger is
intended to be treated as a pooling of interests.
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(m) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Partner, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Partner.
(n) Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute
and deliver, in the name and on behalf of Company or Merger Sub, any deeds,
bills or sale, assignments or assurances and to take and do, in the name
and on behalf of Company or Merger Sub, any other actions and things
reasonably required to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all rights, title and interest in, to and
under any of the rights, properties or assets acquired or to be acquired by
the Surviving Corporation as a result of or in connection with, the Merger.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Partner that the statements contained in
this Article III are true and correct, except as set forth herein or in the
disclosure schedule delivered by Company to Partner and Merger Sub on or before
the date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered sections contained in this Agreement and the disclosure in
any paragraph shall qualify other sections in this Agreement only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other sections.
SECTION 3.01 Organization of Company.
Each of Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Company Material Adverse Effect (as defined in
Section 9.03(a)). The copies of Company's certificate of incorporation and
by-laws attached to the Company Disclosure Schedule are complete and correct and
in full force and effect on the date hereof. Neither Company nor any of its
Subsidiaries is in violation of any of the provisions of its organizational
documents. Except as set forth in the Company SEC Reports (as defined in Section
3.04(a)) filed prior to the date hereof, neither Company nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
Company and comprising less than five percent (5%) of the outstanding stock of
such company and any interests owned by Company in oil and gas properties
pursuant to joint operating, participation or similar type agreements. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) 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 to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
SECTION 3.02 Company Capital Structure.
(a) The authorized capital stock of Company consists of 50,000,000 shares
of Common Stock, $0.01 par value, and 10,000,000 shares of Preferred Stock,
$0.01 par value ("Company Preferred Stock"). As of October 6, 2000, (i)
18,516,390 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid, nonassessable and not subject to any
statutory or contractual preemptive rights
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(which total includes all shares of Company Common Stock issued as restricted
shares pursuant to the Incentive Plan described below or pursuant to outstanding
share awards under Company's Performance Share Plan described below) and (ii) no
shares of Company Common Stock were held in the treasury of Company or by its
Subsidiaries. The Company Disclosure Schedule shows the number of shares of
Company Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of October 6, 2000 under Company's Equity Incentive
Plan (the "Incentive Plan"), including the name of the holder of each option,
the number of shares of Company Common Stock subject to each such option, the
vesting schedule and exercise price per share and the maximum term of that
option. The Company Disclosure Schedule also indicates the number of shares of
Company Common Stock issued as restricted stock or pursuant to outstanding share
awards under Company's Performance Share Plan (the "Performance Share Plan") and
the applicable service requirements or performance milestones for earning those
shares. No material change in such capitalization has occurred between October
6, 2000 and the date of this Agreement. As of the date of this Agreement, none
of the shares of Company Preferred Stock is issued and outstanding. All shares
of Company Common Stock subject to issuance as specified above are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued, fully
paid and nonassessable. Except as set forth in the Incentive Plan or in the
Rights Agreement dated February 24, 1996, as amended (the "Rights Agreement"),
or, with respect to events occurring after the date hereof, to the extent
permitted by Section 5.01, there are no obligations, contingent or otherwise, of
Company or any Subsidiary to issue, transfer, sell, repurchase, redeem or
otherwise acquire any shares of capital stock or other voting security of
Company or the capital stock of any Subsidiary or to provide funds to or make
any material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees of
bank obligations of Subsidiaries entered into in the ordinary course of
business. All of the outstanding shares of, capital stock of, or other ownership
interests in, each of Company's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and all such shares are owned by Company
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in Company's voting rights, charges or other encumbrances of any
nature.
(b) Except as set forth in this Section 3.02 or as reserved for future
grants of options under the Incentive Plan, or, with respect to events occurring
after the date hereof, to the extent permitted by Section 5.01, there are no
equity securities of any class of Company or any of its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth in this Section 3.02
or the Incentive Plan, or, with respect to events occurring after the date
hereof, to the extent permitted by Section 5.01, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, stock
appreciation rights, phantom equity, calls, rights, commitments or agreements of
any character to which Company or any of its Subsidiaries is a party or by which
it is bound obligating Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Company or any of its Subsidiaries or obligating Company or any its
Subsidiaries to grant, extend, accelerate the vesting of or enter into or make
payment with respect to any such subscription, option, right, warrant,
convertible security, stock appreciation right, phantom equity, call, right,
commitment or agreement. To the best knowledge of Company, there are no voting
trusts, proxies or other voting agreements or understandings with respect to the
shares of capital stock of Company.
SECTION 3.03 Authority; No Conflict; Required Filings and Consents.
(a) Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement by Company have been duly and
validly authorized by all necessary corporate action on the part of Company,
subject only to the approval of the Merger by Company's stockholders under the
DGCL. This Agreement has been duly executed and delivered by Company and
constitutes a valid and binding obligation of Company, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general principles of equity (the
"Bankruptcy and Equity Exception").
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(b) The execution and delivery of this Agreement by Company does not, and
the consummation of the transactions contemplated by this Agreement will not,
(i) conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Company, (ii) assuming that those of
the consents contemplated by Section 3.03(c) of this Agreement, the failure of
which to obtain, individually or in the aggregate, would not have a Company
Material Adverse Effect, are obtained, result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a penalty or right of termination, cancellation or acceleration
of any obligation or loss of any material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person or
entity under (including the receipt of any consideration), or require a consent
or waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract (including, without limitation, any Company
Material Contract) or other agreement, instrument or obligation to which Company
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) assuming the consents contemplated
by Section 3.03(c) of this Agreement are obtained, conflict with or violate any
Permit (as defined in Section 3.14 below), judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations that, individually or in the
aggregate, would not be reasonably likely to have a Company Material Adverse
Effect. Section 3.03(b) of the Company Disclosure Schedule sets forth a correct
and complete list of the Company Material Contracts (as defined in Section 3.10)
under which consents, waivers or notifications are required prior to the
consummation of the transactions contemplated by this Agreement, which have not
previously been obtained.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign,
("Governmental Entity") is required by or with respect to Company in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended ("HSR Act"), (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement
(as defined in Section 6.15 below) with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the laws of any foreign country, (v) such governmental
or tribal consents, qualifications or filings as are customarily obtained or
made following the transfer of interests in oil and gas property interests and
(vi) such other consents, authorizations, filings, approvals and registrations
that, if not obtained or made, would not be reasonably likely to have a Company
Material Adverse Effect.
SECTION 3.04 SEC Filings; Financial Statements.
(a) Company has made available to Partner true and complete copies of each
registration statement (other than registration statements on Form S-8), report,
proxy statement or information statement (other than preliminary materials)
filed by Company with the SEC since December 31, 1998, each in the form
(including exhibits and any amendments thereto) filed with the SEC prior to the
date hereof (collectively, the "Company SEC Reports"), and Company has timely
filed all forms, reports and documents required to be filed by it with the SEC
pursuant to relevant securities statutes, regulations, policies and rules since
such time. The Company SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act, and the rules and
regulations thereunder, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then as and on the date so amended or superseded) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Company SEC Reports or necessary in order to make the statements
in such Company SEC Reports, in the light of the circumstances under which they
were made, not misleading. None of Company's Subsidiaries is subject to the
periodic reporting requirements of the Exchange Act or is otherwise required to
file any forms, reports or other documents with the SEC.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Company SEC Reports complied as to form in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly presented the consolidated financial position of Company and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements are subject to normal and recurring year-end adjustments.
The unaudited balance sheet of Company as of June 30, 2000 is referred to herein
as the "Company Balance Sheet."
SECTION 3.05 No Undisclosed Liabilities; Suspense Accounts.
Except as disclosed in the Company SEC Reports filed and publicly available
prior to the date hereof and except for abandonment obligations related to
Company's oil and gas properties which are estimated in the Reserve Report
(described in Section 3.21), Company and its Subsidiaries do not have any
obligations or liabilities, whether or not accrued, contingent or otherwise,
that individually or in the aggregate would reasonably be likely to have a
Company Material Adverse Effect. The Company Balance Sheet reflects all suspense
accounts owed by Company as of the date hereof, except as would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 3.06 Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Reports filed and publicly available
prior to the date hereof, since December 31, 1999, Company and its Subsidiaries
have conducted their businesses in all material respects only in the ordinary
course and in a manner consistent with past practice, and, since such date,
there has not been (i) any material change by Company and its Subsidiaries, when
taken as a whole, in their accounting methods, principles or practices to which
Partner has not previously consented in writing; (ii) any declaration, setting
aside, or payment of any dividend or other distribution in respect of the
capital stock of Company; (iii) any split, combination or reclassification of
any of Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company's capital stock (other than under the Incentive Plan or
the Performance Share Plan); (iv) any event, occurrence, development or state of
circumstances or facts that has had, or would be reasonably likely to have, a
Company Material Adverse Effect; provided, however, that for purposes of this
Section 3.06(iv), the effects of (A) any aggregate decrease during any period of
20 consecutive days in the average daily quantity of oil, gas and other gaseous
and liquid hydrocarbons ("Hydrocarbons") being produced by Company and its
Subsidiaries, taken as a whole, that is less than 30% of the average of the net
daily production of such Hydrocarbons by the Company and its Subsidiaries, taken
as a whole, during the 20-day period ending with the date of this Agreement or
that is caused by mechanical difficulties, surface equipment, pipeline
curtailments or events of force majeure, and (B) any aggregate net decrease in
the proved Hydrocarbon reserves of Company and its Subsidiaries, taken as a
whole (excluding, for the purpose of determining the amount of any such
decrease, any decrease due to depletion resulting from production or due to
changes in oil and gas prices, and including any increase due to discoveries or
additions) that is less than 20% of the amount of the Company's proved reserves
set forth in the Company Reserve Report, shall not be considered in determining
whether a Company Material Adverse Effect has occurred or is reasonably likely
to occur, provided further, that any disagreement over the extent of any such
reserve decrease shall be resolved by prompt submittal to an independent
reservoir engineer reasonably acceptable to both parties whose decision shall be
binding and shall be delivered no later than five business days following
submittal; (v) (A) any granting by Company or any of its Subsidiaries to any
current or former director, executive officer or other employee of Company or
its Subsidiaries of any increase in compensation, bonus or other benefits,
except for, with respect to any events occurring prior to the date hereof,
normal increases in base compensation or bonuses in the ordinary course of
business consistent with past practice and set forth on Section 3.06 of the
Company Disclosure Schedule and, with respect to events occurring after the date
hereof, as permitted by Section 5.01 or as was required under any employment
agreements in effect as of the date of the most recent
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audited financial statements included in the Company SEC Reports filed and
publicly available prior to the date hereof, (B) any granting by Company or any
of its Subsidiaries to any such current or former director, executive officer or
employee of any increase in severance or termination pay, (C) any entry by
Company or any of its Subsidiaries into, or any amendments of, any employment,
deferred compensation, consulting, severance, termination or indemnification
agreement with any current or former director, executive officer or employee, or
(D) any amendment to, or modification of, any Company stock option or Company
warrant; (vi) any tax election or any settlement of any income tax liability or
tax attributes that individually or in the aggregate is reasonably likely to
adversely affect the tax liability or tax attributes of Company or any of its
Subsidiaries in any material respect or any settlement or compromise of any
material income tax liability; (vii) any incurrence of indebtedness for money
borrowed by Company or any of its Subsidiaries other than debt incurred in the
ordinary course of business in a manner consistent with past practice; (viii)
any creation of a material lien, security interest or any other encumbrance,
howsoever arising, in respect of or over any of the material assets of Company
or any of its Subsidiaries; (ix) other than, with respect to acquisitions or
dispositions occurring after the date hereof, as would be permitted by Section
5.01, any material acquisition or disposition of assets by Company or any of its
Subsidiaries, including the sale, lease, farm-out, license or other disposition
of any material properties or assets, except for (A) sales of Hydrocarbons in
the ordinary course of business, (B) acquisitions or dispositions set forth in
Section 3.06 of the Company Disclosure Schedule, (C) dispositions of interests
in exploratory prospects in exchange for interests in other prospects from third
parties which Company in good faith believes to have an equivalent value,
consistent with past practices, (D) sales of equipment and/or replacements
thereof in the ordinary course of business, and (E) acquisitions of leases at
the Central Gulf of Mexico lease sale in March 2000, provided, however, that the
exceptions set forth in clauses (A) through (E) above shall not be applicable to
any acquisitions of assets from, or dispositions of assets to, any third parties
in which, to Company's knowledge, any officer or director of Company has,
directly or indirectly, any existing or prospective equity or other ownership
interest or any other arrangement or understanding having the same economic
effect, other than with respect to any company that is publicly traded on a
national securities market or exchange, to the extent such ownership interest is
less than two percent (2%) of such publicly traded company; (x) any
modification, assignment, termination or relinquishment of rights under any
Company Material Contract by Company or any of its Subsidiaries other than such
modification, assignment, termination or relinquishment in the ordinary course
of business consistent with past practice; (xi) any damage, destruction or
casualty loss, whether or not covered by insurance, that individually or in the
aggregate would be reasonably likely to have a Company Material Adverse Effect
(it being understood that the availability of any insurance coverage shall be
taken into account in determining whether such damage, destruction or loss would
be reasonably likely to have a Company Material Adverse Effect); or (xii) any
making of a loan or an advance by Company or any of its Subsidiaries not in the
ordinary course of business.
SECTION 3.07 Taxes.
(a) For the purposes of this Agreement, the terms "Tax" and, collectively,
"Taxes" mean any and all material federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, gains,
franchise, withholding, payroll, recapture, employment, excise, unemployment
insurance, social security, business license, occupation, business organization,
stamp and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) Except as would not be reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect, (i) Company and each of
its Subsidiaries have, or prior to the Closing Date will have, (A) filed all
federal, state, local and foreign tax returns and reports required to be filed
by them prior to the date of this Agreement (taking into account extensions),
(B) paid or accrued all Taxes due and payable with respect to the periods
covered by such tax returns and reports or otherwise due and payable on or prior
to the Closing Date and (C) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings), (ii) neither the
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Internal Revenue Service (the "IRS") nor any other taxing authority has asserted
or proposed in writing any claim or adjustment relating to Taxes, or to the
actual knowledge of the executive officers of Company, is threatening to assert
any claims for Taxes, (iii) Company and each of its Subsidiaries have withheld
or collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by law to be withheld or
collected, and (iv) there are no liens for Taxes upon the assets of Company or
any of its Subsidiaries (other than liens for Taxes that are not yet due or that
are being contested in good faith by appropriate proceedings).
(c) To Company's knowledge, there exists no claim by a Tax authority in a
jurisdiction where any of Company and its Subsidiaries does not file Tax returns
that it is or may be subject to taxation in that jurisdiction. There are no Tax
allocation or sharing agreements or arrangements affecting any of Company and
its Subsidiaries. No payments are due or will become due by any of Company and
its Subsidiaries pursuant to any such agreement or arrangement or any tax
indemnification agreement. Neither Company nor any of its Subsidiaries will be
required to include any amount in income for any taxable period beginning after
December 31, 1999 as a result of a change in accounting or pursuant to any
agreement with any Tax authority with respect to any prior taxable period.
Neither Company nor any of its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax return (other than a
group the common parent of which was Company) or (ii) has any liability for the
Taxes of any person or entity (other than any of Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
Neither Company nor any of its Subsidiaries have entered into any agreement or
arrangement with any Tax authority that requires any of Company and its
Subsidiaries to take any action or to refrain from taking any action.
SECTION 3.08 Properties.
(a) Except for goods and other property sold, used or otherwise disposed of
since June 30, 2000 in the ordinary course of business, Company and its
Subsidiaries have Good and Marketable Title (as defined below), for oil and gas
purposes, in and to all federal leases covering acreage offshore in the Gulf of
Mexico and to all the proved reserves reflected in the Company Reserve Report
(as defined in Section 3.21) as owned by Company and its Subsidiaries, and
defensible title for oil and gas purposes to all other properties, interests in
properties and assets, real and personal, reflected in the Company Balance Sheet
as owned by Company and its Subsidiaries, free and clear of any liens, security
interests, charges, mortgages or other encumbrances of any kind (collectively
"Liens"), except: (i) Liens associated with obligations reflected in the Company
Reserve Report or the Company Balance Sheet; (ii) Liens for current taxes not
yet due and payable, (iii) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, and other similar liens, charges or encumbrances
arising in the ordinary course of business (A) if they have not been perfected
pursuant to law, (B) if perfected, they have not yet become due and payable or
payment is being withheld as provided by law, or (C) if their validity is being
contested in good faith by appropriate action, (iv) all rights to consent by,
required notices to, filings with, or other actions by governmental entities in
connection with the sale or conveyance of oil and gas leases or interests if
they are customarily obtained subsequent to the sale or conveyance, and (v) such
imperfections of title, easements and Liens as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
All leases and other agreements pursuant to which Company or any of its
Subsidiaries leases or otherwise acquires or obtains operating rights affecting
any real or personal property are in good standing, valid and effective and all
royalties, rentals and other payments due by the Company to any lessor of any
such oil and gas leases have been paid, except in each case, as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. All major items of operating equipment of Company and
its Subsidiaries are in good operating condition and in a state of reasonable
maintenance and repair, ordinary wear and tear excepted, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(b) The term "Good and Marketable Title" shall, for purposes of this
Section 3.08, with respect to Company and its Subsidiaries, mean such title
that: (1) is deducible of record (from the records of the applicable parish or
county or (A) in the case of federal leases, from the records of the applicable
office of the
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Minerals Management Service or Bureau of Land Management, (B) in the case of
Indian leases, from the applicable office of the Bureau of Indian Affairs, (C)
in the case of state leases, from the records of the applicable state land
office) or is assignable to Company or its Subsidiaries out of an interest of
record (as so defined) by reason of the performance by Company or its
Subsidiaries of all operations required to earn an enforceable right to such
assignment; (2) is free from reasonable doubt to the end that a prudent
purchaser engaged in the business of the ownership, development and operation of
producing oil and gas properties with knowledge of all of the facts and their
legal bearing would be willing to accept and pay full value for the same and a
prudent lender would be willing to lend against it as collateral without
discount for title matters; (3) entitles Company or its Subsidiaries to receive
not less than the interest set forth in the Company Reserve Report with respect
to each proved property evaluated therein under the caption "Net Revenue
Interest" or "NRI" without reduction during the life of such property except as
stated in the Company Reserve Report; (4) obligates Company or its Subsidiaries
to pay costs and expenses relating to each such proved property in an amount not
greater than the interest set forth under the caption "Working Interest" or "WI"
in the Company Reserve Report with respect to such property without increase
over the life of such property except as shown on the Company Reserve Report;
and (5) does not restrict the ability of Company or its Subsidiaries to utilize
the properties as currently intended.
SECTION 3.09 Intellectual Property.
Each of Company and its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all trademarks, trade names,
patents, service marks, copyrights, and any applications for such trademarks,
trade names, patents, service marks and copyrights, know-how, computer software
programs or applications and tangible or intangible proprietary information or
material ("Intellectual Property") that are necessary to conduct the business of
Company and its Subsidiaries as currently conducted, including without
limitation, any seismic data or information used by Company and its
Subsidiaries, subject to such exceptions that, individually or in the aggregate,
would not be reasonably likely to have a Company Material Adverse Effect.
Section 3.09 of the Company Disclosure Schedule sets forth a list of each
material agreement pursuant to which Company or its Subsidiaries licenses or has
the right to use or acquire Intellectual Property (including, without
limitation, seismic data or information). No person or entity has notified
either Company or any of its Subsidiaries that their use of the Intellectual
Property infringes on the rights of any person or entity, subject to such claims
and infringements as do not, individually or in the aggregate, give rise to any
liability on the part of Company and its Subsidiaries that would be reasonably
likely to have a Company Material Adverse Effect, and to Company's knowledge, no
person is infringing on any right of Company or any of its Subsidiaries with
respect to any such Intellectual Property. No claims are pending or, to
Company's knowledge, threatened that Company or any of its Subsidiaries is
infringing upon the rights of any person or entity with regard to any
Intellectual Property that, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect.
SECTION 3.10 Contracts.
(a) Set forth in Section 3.10 of the Company Disclosure Schedule is a list
of each contract, lease, indenture, agreement, arrangement or understanding to
which Company or any of its Subsidiaries is a party or subject that would be
required to be included as an exhibit to a Form S-1 Registration Statement
pursuant to the rules and regulations of the SEC if such a registration
statement were to be filed by the Company on the date hereof and no previous
filings had been made (collectively, the "Company Material Contracts").
(b) Except for such matters that, individually or in the aggregate, would
not be reasonably expected to have a Company Material Adverse Effect, with
respect to the Company Material Contracts, (A) all Company Material Contracts
are in full force and effect and are the valid and legally binding obligations
of Company or the Subsidiary party thereto, and to Company's knowledge, the
legally binding obligations of the other parties thereto, and are enforceable in
accordance with their respective terms, subject to the Bankruptcy and Equity
Exception; (B) Company or the Subsidiary party thereto is not in breach or
default (nor does there exist any condition which upon the passage of time or
the giving of notice or both would reasonably be expected to cause such a breach
or default) with respect to, and to the knowledge of Company, no other party to
any
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Company Material Contract is in breach or default with respect to, its
obligations thereunder, including with respect to payments or otherwise; and (C)
no party to any Company Material Contract has given written notice to Company or
the Subsidiary party thereto of any action to terminate, cancel, rescind or
procure a judicial reformation thereof.
SECTION 3.11 Investigations; Litigation.
Section 3.11 of the Company Disclosure Schedule sets forth a list of all
pending Litigation Matters (as defined below). Except as described in the
Company SEC Reports filed prior to the date hereof or pursuant to the pre-merger
notification process under the HSR Act with respect to this transaction (i) no
investigation or review by any Governmental Entity with respect to Company or
any of its Subsidiaries or any of the transactions contemplated by this
Agreement is pending, nor to Company's knowledge has any Governmental Entity
(foreign or domestic) indicated an intention to conduct the same, (ii) there is
no action, suit or proceeding, claim, arbitration or investigation ("Litigation
Matter") against Company or any of its Subsidiaries pending or, to Company's
knowledge, threatened, and (iii) there are no outstanding orders, rulings,
injunctions, awards, decrees, judgments or stipulations by or with any court or
administrative agency or by arbitration, that in the case of each of (i), (ii)
and (iii) above, individually or in the aggregate, if determined adversely to
Company or any of its Subsidiaries, would have a Company Material Adverse Effect
or would materially impair or delay the ability of Company to consummate the
transactions contemplated by this Agreement.
SECTION 3.12 Environmental Matters.
(a) Except as disclosed in the Company SEC Reports filed and publicly
available prior to the date hereof and, in case of clauses (i)-(iv) and
(viii)-(ix) and (xi), except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect:
(i) Company and its Subsidiaries have complied with all applicable Environmental
Laws (as defined in Section 3.12(b)) and, to the knowledge of Company, there are
no facts or circumstances that could reasonably be expected to prevent or
preclude future compliance with all applicable Environmental Laws; (ii) the
properties currently owned or operated by Company and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances (as defined in Section 3.12(c));
(iii) to the knowledge of Company, the properties formerly owned or operated by
Company or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by Company or any of its
Subsidiaries; (iv) Company's and its Subsidiaries' properties have been used by
Company and its Subsidiaries solely for oil and gas exploration, production,
processing, transportation and related operations and to its knowledge have not
been used, whether by Company, its Subsidiaries or any other person or entity,
for the generation, storage or disposal of a Hazardous Substance (other than
those substances lawfully used and contained in oil and gas operations) or as a
landfill or other waste disposal site; (v) neither Company nor any of its
Subsidiaries, within the five years immediately preceding the date hereof, has
received any written notice, demand, letter, claim or request for information
alleging that Company or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (vi) neither Company nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or (except for indemnities under
purchase and sale agreements, operating agreements, farm-out agreements or other
similar agreements, whereby Company or any of its Subsidiaries has acquired,
disposed of, or operated oil and gas properties, as to which (A) no existing
claim is pending or to its knowledge threatened against Company or any of its
Subsidiaries and (B) Company is not aware of any facts or circumstances that
could reasonably be expected to form the basis for a claim) is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances, including without
limitation any arrangements that require any change in the present condition or
operation of any of its properties in order to comply with conditions or
restrictions that relate to the protection of the environment; (vii) there are
no actions, suits, claims or proceedings seeking money damages, injunctive
relief, remedial action or other remedy pending or, to Company's knowledge,
threatened against Company or its Subsidiaries relating to the violation of, or
noncompliance with, an Environmental Law; the disposal, discharge, or release of
any Hazardous Substance; or the exposure of any person to any other solid waste,
pollutant, chemical
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substance, noise or vibration; (viii) each of Company and its Subsidiaries has
obtained all permits, licenses and other authorizations which are required under
Environmental Laws for the conduct of its existing drilling and development
operations and is in compliance with all terms and conditions of such permits,
licenses and authorizations; (ix) all necessary applications, inspection
reports, certificates and other instruments pertaining to Environmental Laws on
properties operated by Company or any of its Subsidiaries have been filed with
the appropriate Governmental Entity; (x) neither the execution of this Agreement
nor the consummation of the transactions contemplated by this Agreement will
violate any Environmental Law or require the consent or approval of any agency
charged with enforcing any Environmental Law, which violation or the failure to
obtain such consent or approval would materially impair or delay the ability of
Company to consummate the transactions contemplated by this Agreement; and (xi)
there are no circumstances or conditions involving Company or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Company pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (i) the protection, investigation
or restoration of the environment, health and safety, or natural resources, (ii)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property, including, but not
limited to, the federal Comprehensive Environmental Response, Compensation, and
Liability Act, the Resource Conservation and Recovery Act, the Clean Water Act,
the Clean Air Act, the Safe Drinking Water Act, the Toxic Substance Control Act,
the Hazardous Materials Transportation Act, the Hazardous Materials
Transportation Act, the Oil Pollution Act of 1990, and all state statutes
serving similar or related purposes.
(c) As used herein, the term "Hazardous Substance" means any substance that
is: (i) listed, classified or regulated as a "hazardous substance," "toxic
substance," "hazardous material," or "solid waste" pursuant to any Environmental
Law; (ii) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; (iii) any chemical substance, (A) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Entity, (B) the
presence of which at any property owned by a party causes a nuisance upon such
location or to adjacent properties or poses a hazard to the health or safety of
persons at or about such property, or (C) the presence of which on adjacent
properties constitutes a trespass by a party's business; or (iv) any other
substance which is the subject of regulatory action by any Governmental Entity
pursuant to any Environmental Law or the presence of which requires
investigation or remediation thereunder. Hazardous Substances does not include
Naturally Occurring Radioactive Material which may be found in Company's oil and
gas wells and related well equipment. The term "Hazardous Substance" shall not
include crude oil or drilling mud or drilling fluids used in the exploration,
development or production of oil or natural gas.
SECTION 3.13 Employee Benefit Plans.
(a) Company has listed in Section 3.13(a) of the Company Disclosure
Schedule, and has provided to Partner complete and correct copies of, all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance, and other similar employee benefit plans (including, without
limitation, the retention and severance plan and program thereunder adopted by
Company for its non-executive officer employees (the "Retention Policy")),
written or otherwise, for the benefit of, or relating to, any current or former
employee or other service provider of Company, any Subsidiary of Company or any
trade or business (whether or not incorporated) which is treated as a single
employer with Company or any Subsidiary of Company (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code
(together, the "Company Employee Plans").
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(b) With respect to each Company Employee Plan, Company has made available
to Partner, a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS for each Company Employee Plan with respect to which
such report is required to be filed, (ii) each trust agreement and group annuity
contract or insurance policy, if any, relating to such Company Employee Plan,
(iii) the most current favorable determination letter received from the IRS as
to the qualified status under the Internal Revenue Code of each Company Employee
Plan subject to Section 401 of the Internal Revenue Code, and (iv) the most
recent summary plan description for each Company Employee Plan required to have
such a summary plan description. None of Company, any Subsidiary of Company or
any ERISA Affiliate sponsors, maintains or contributes to, nor has any such
entity at any time within six years preceding the date of this Agreement
sponsored, maintained or contributed to, any plan that is subject to Title IV of
ERISA (including without limitation a multiemployer plan within the meaning of
Section 3(37) of ERISA), Section 302 of ERISA or Section 412 of the Internal
Revenue Code. Each Company Employee Plan intended to be qualified under Section
401 of the Internal Revenue Code has been administered and maintained in all
material respects in accordance with its terms and all applicable laws,
including ERISA and the Internal Revenue Code, and, except as set forth in
Section 3.13(b) of the Company Disclosure Schedule, each such plan has received
a favorable determination letter from the Internal Revenue Service regarding
such qualified status. Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, there has been no termination or partial termination of any
such plan within the meaning of Section 411(d)(3) of the Internal Revenue Code.
Affected participants were fully vested in their plan accounts as required under
Section 411(d)(3) of the Internal Revenue Code in connection with the partial
termination described in Section 3.13(b) of the Company Disclosure Schedule.
There are no actions, suits or claims pending (other than routine claims for
benefits) or, to Company's knowledge, threatened against, or with respect to,
any of the Company Employee Plans or their assets. There is no matter pending
(other than routine qualification determination filings) with respect to any of
the Company Employee Plans before any Governmental Entity.
(c) With respect to the Company Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Company, there exists
no condition or set of circumstances in connection with which Company could be
subject to any material liability under ERISA, the Internal Revenue Code or any
other applicable law.
(d) With respect to the Company Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Company, which obligations are reasonably likely to have a Company
Material Adverse Effect.
(e) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement, and except as provided for in this Agreement, neither Company
nor any of its Subsidiaries is a party to any oral or written (i) agreement with
any officer or other key employee of Company or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Company of the nature
contemplated by this Agreement, (ii) agreement with any officer of Company
providing any term of employment or compensation guarantee, or (iii) agreement
or plan, including any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(f) Except as set forth in Section 3.13(f) of the Company Disclosure
Schedule, and based on the assumptions set forth therein (which assumptions
represent the best currently available estimates of Company after consultation
with its accountants as to the matters covered thereby, it being understood that
the actual calculation may differ from the assumed amounts), in connection with
the consummation of the transactions contemplated by this Agreement, no payments
of money or other property, acceleration of benefits, or provisions of other
rights have or will be made hereunder, under any agreement contemplated herein,
under any agreement described in Section 3.13(e) or Section 3.16(e)(determined
without regard to whether such agreement is terminable by Company, without
material cost to Company, with no more than 30 days notice)
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or under the Company Employee Plans that would be reasonably likely to result in
imposition of the sanctions imposed under Sections 280G and 4999 of the Internal
Revenue Code, whether or not some other subsequent action or event would be
required to cause such payment, acceleration, or provision to be triggered.
Partner represents and warrants that nothing has come to Partner's attention as
of the date hereof that causes Partner to believe that Section 3.13(f) of the
Company Disclosure Schedule is incorrect.
SECTION 3.14 Compliance With Laws.
Neither Company nor any of its Subsidiaries is in violation or default of,
or has received any notices of violation or default with respect to, any
applicable federal, state, local or foreign statute, law, rule, order, decree or
regulation, including without limitation, any filing or reporting requirement
thereunder with respect to the conduct of its business, or the ownership or
operation of its business, except for violations or defaults that, individually
or in the aggregate, are not reasonably likely to have a Company Material
Adverse Effect. Each of Company and its Subsidiaries has all licenses,
franchises, permits, authorizations, approvals, plans, surveys and environmental
impact reports ("Permits") legally required to enable it to carry on its
business as currently carried on and such Permits are all in full force and
effect and no proceeding is pending and neither Company nor any of its
Subsidiaries has received any written notice of any action seeking the
revocation or limitation of or is in default or violation of, any such Permit,
except in each case as would not reasonably be expected to have a Company
Material Adverse Effect; provided, however, that notwithstanding the foregoing,
no representation or warranty in this Section 3.14 is made with respect to
Permits issued pursuant to Environmental Laws, which are covered exclusively by
the provisions set forth in Section 3.12, or with respect to Permits to conduct
exploratory operations which have not been commenced as of the date of this
Agreement.
SECTION 3.15 Tax Matters.
To its knowledge, after consulting with its Tax counsel, neither Company
nor any of its Affiliates (as defined in Section 6.09) has taken or agreed to
take any action that would prevent the Merger from constituting a transaction
qualifying as a reorganization under Section 368(a) of the Internal Revenue
Code.
SECTION 3.16 Labor Matters.
(a) Neither Company nor any of its Subsidiaries is a party to or otherwise
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor, as of the date
hereof, is Company or any of its Subsidiaries the subject of any material
proceeding asserting that Company or any of its Subsidiaries has committed an
unfair labor practice or is seeking to compel it to bargain with any labor union
or labor organization nor, as of the date of this Agreement, is there pending
or, to the knowledge of the executive officers of Company, threatened, any
material labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving Company or any of its Subsidiaries.
(b) Neither Company nor any of its Subsidiaries has any knowledge of any
current union organizing activities among the employees of Company or any of its
Subsidiaries, nor does any question concerning representation exist concerning
such employees.
(c) Company and its Subsidiaries are and have been in compliance with all
applicable laws respecting employment and employment practices (including
without limitation with respect to discrimination and harassment) and all laws,
ordinances and regulations respecting the terms and conditions of employment,
except as would not reasonably be expected to have a Company Material Adverse
Effect.
(d) Neither the Company nor any of its Subsidiaries is in violation of the
Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act"), or
any similar state or local law, in each case that would reasonably be expected
to have a Company Material Adverse Effect.
(e) Company has listed in Section 3.16 of the Company Disclosure Schedule,
and has provided to Partner complete and correct copies of, all employment and
consulting agreements with any current or former employees or consultants
currently in effect to which Company or any of its Subsidiaries is a party and
that are
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not terminable in Company's sole discretion, without material cost to Company,
with no more than 30 days notice.
SECTION 3.17 Insurance.
Company and its Subsidiaries maintain insurance coverage with reputable
companies, reasonably adequate for the operation of their business and
consistent in all material respects with industry practice, including without
limitation, as to amounts and types of coverage.
SECTION 3.18 No Existing Discussions.
As of the date of this Agreement, Company has ceased, and has instructed
its directors, officers, financial advisors, representatives, employees and
agents to cease, all direct and indirect discussions and negotiations with any
other party that were ongoing immediately prior to the date hereof with respect
to an Acquisition Proposal (as defined in Section 6.01).
SECTION 3.19 Opinion of Financial Advisor.
The financial advisor of Company, Goldman, Sachs & Co., has delivered to
Company an opinion dated the date of this Agreement to the effect that, based
upon and subject to the matters set forth therein, the Exchange Ratio is fair to
the holders of Company Common Stock from a financial point of view. Company has
delivered, or will deliver promptly after receipt of such written opinion, a
copy of such written opinion to Partner.
SECTION 3.20 Section 203 of the DGCL Not Applicable.
Company and its Board of Directors have each taken all action required to
be taken by it in order to exempt the execution, delivery or performance of this
Agreement by Company, the consummation of the Merger by Company and the
transactions contemplated hereby from, and this Agreement, the Merger and the
transactions contemplated hereby are exempt from, the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203). No other "fair price," "moratorium," "control share acquisition"
or other similar anti-takeover statute or regulation is applicable to Company or
(by reason of Company's participation therein) the Merger or the other
transactions contemplated by this Agreement. Company and its Board of Directors
have each taken all action required to be taken by it in order to exempt Partner
from the status of an "Acquiring Person" under the Rights Plan and to ensure
that no stock acquisition date, distribution date or triggering event shall
occur by reason of the execution of this Agreement or the consummation of the
Merger.
SECTION 3.21 Oil and Gas Reserves.
Company has furnished Partner the Company's estimates of Company's and its
Subsidiaries' oil and gas reserves as of June 30, 2000 in a report as described
in Section 3.21 of the Company Disclosure Schedule (the "Company Reserve
Report"). Except as would not reasonably be expected to have a Company Material
Adverse Effect, the factual, non-interpretive data on which the Company Reserve
Report was based for purposes of estimating the oil and gas reserves set forth
in the Company Reserve Report and in any supplement thereto or update thereof
furnished to Partner was accurate and incorporates the following: the interests
owned by Company and its Subsidiaries at the time the Company Reserve Report was
prepared, the cost of operating the properties, all production and cost data
adjusted for all oil and/or gas imbalances due, all tests and operations on
Company's and its Subsidiaries' properties of which Company was aware at the
time the Company Reserve Report was prepared and all capital costs reasonably
expected by Company at such time to be necessary to operate, develop and plug
and abandon the properties described therein. To the best knowledge of Company,
and based on the information given to Company by third-party operators for all
wells not operated by Company, the Company Payout Balances (as defined below)
for each of the wells as used in the Company Reserve Report were accurate as of
the dates to which Company had calculated them, except as would not reasonably
be expected to have a Company Material Adverse Effect. "Company Payout Balances"
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means the status, as of the dates of Company's calculations, of the recovery by
Company or a third party of a cost amount specified in the contract relating to
a well out of the revenue from such well where the net revenue interest of
Company therein will be reduced or increased when such amount has been
recovered.
SECTION 3.22 Take-or-Pay Deliveries.
Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, there are no calls
(exclusive of market calls) on Company's oil or gas production and Company has
no obligation to deliver oil or gas pursuant to any take-or-pay, prepayment or
similar arrangement without receiving full payment therefor. Section 3.22 of the
Company Disclosure Schedule sets forth the Company's estimates of its imbalances
in gas production as of September 30, 2000. The Company does not have any other
imbalances in gas production that, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect.
SECTION 3.23 Hedging.
Company has set forth in Section 3.23 of the Company Disclosure Schedule a
summary of Company's position with respect to its futures, hedge, swap, collar,
put, call, floor, cap, option or other contracts that are intended to benefit
from, relate to or reduce or eliminate the risk of fluctuations in the price of
commodities, including Hydrocarbons, or securities (collectively, "Hedges") as
of the date hereof. Except as set forth in Section 3.23 of the Company
Disclosure Schedule, neither Company nor any of its Subsidiaries is bound by any
Hedges as of the date hereof.
SECTION 3.24 Required Vote of Company Stockholders.
The affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock is required to approve the Merger. No other vote of the
stockholders of Company is required by law, the certificate of incorporation or
by-laws of Company or otherwise in order for Company to consummate the Merger
and the transactions contemplated thereby.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARTNER
Partner represents and warrants to Company that the statements contained in
this Article IV are true and correct, except as set forth in the disclosure
schedule delivered by Partner to Company and Merger Sub on or before the date of
this Agreement (the "Partner Disclosure Schedule"). The Partner Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered sections contained in this Agreement and the disclosure in any
paragraph shall qualify other sections in this Agreement only to the extent that
it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other sections.
SECTION 4.01 Organization of Partner and Merger Sub.
Each of Partner and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Partner Material Adverse Effect (as defined in
Section 9.03(b)). The copies of Partner's certificate of incorporation and
by-laws attached to the Partner Disclosure Schedule are complete and correct and
in full force and effect on the date hereof. Neither Partner nor any of its
Subsidiaries is in violation of any of the provisions of its organizational
documents. Except as set forth in the Partner SEC Reports (as defined in Section
4.04(a)) filed prior to the date hereof, neither Partner nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other
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business association or entity, excluding securities in any publicly traded
company held for investment by Partner and comprising less than five percent
(5%) of the outstanding stock of such company and any interests owned by Partner
in oil and gas properties pursuant to joint operating, participation or similar
type agreements.
SECTION 4.02 Partner Capital Structure.
(a) The authorized capital stock of Partner consists of 25,000,000 shares
of Common Stock, $0.01 par value, and 5,000,000 shares of Preferred Stock, $0.01
par value ("Partner Preferred Stock"). As of October 27, 2000, (i) 18,515,725
shares of Partner Common Stock were issued and outstanding, all of which are
validly issued, fully paid, nonassessable and not subject to any statutory or
contractual preemptive rights and (ii) no shares of Partner Common Stock were
held in the treasury of Partner or by its Subsidiaries. The Partner Disclosure
Schedule shows the number of shares of Partner Common Stock reserved for future
issuance pursuant to stock options granted and outstanding as of October 27,
2000, under Partner's 2000 Amended and Restated Stock Option Plan and Partner's
1993 Non-employee Directors Stock Option Plan (collectively, the "Partner Stock
Plans"), and the plans under which such options were granted. No material change
in such capitalization has occurred between October 27, 2000 and the date of
this Agreement. As of the date of this Agreement, none of the shares of Partner
Preferred Stock is issued and outstanding. All shares of Partner Common Stock
subject to issuance as specified above are duly authorized and, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be validly issued, fully paid and nonassessable. Except as set
forth in the Partner Stock Plans or in the Rights Agreement dated October 15,
1998 (the "Rights Agreement"), or, with respect to events occurring after the
date hereof, to the extent permitted by Section 5.02, there are no obligations,
contingent or otherwise, of Partner or any Subsidiary to issue, transfer, sell,
repurchase, redeem or otherwise acquire any shares of capital stock or other
voting security of Partner or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. All of the outstanding shares of, capital stock of, or other
ownership interests in, each of Partner's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and all such shares are owned by
Partner free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Partner's voting rights, charges or other
encumbrances of any nature.
(b) Except as set forth in this Section 4.02 or as reserved for future
grants of options under the Partner Stock Plans, or, with respect to events
occurring after the date hereof, to the extent permitted by Section 5.02, there
are no equity securities of any class of Partner or any of its Subsidiaries, or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth in this
Section 4.02, the Partner Stock Plans, awards granted under the Partner Stock
Plans, and Partner's 401(k) Profit Sharing Plan, as of the date hereof, there
are no outstanding subscriptions, options, rights, warrants, convertible
securities, stock appreciation rights, phantom equity, calls, rights,
commitments or agreements of any character to which Partner or any of its
Subsidiaries is a party or by which it is bound obligating Partner or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Partner or any of its Subsidiaries
or obligating Partner or any its Subsidiaries to grant, extend, accelerate the
vesting of or enter into or make payment with respect to any such subscription,
option, right, warrant, convertible security, stock appreciation right, phantom
equity, call, right, commitment or agreement. To the best knowledge of Partner,
there are no voting trusts, proxies or other voting agreements or understandings
with respect to the shares of capital stock of Partner.
SECTION 4.03 Authority; No Conflict; Required Filings and Consents.
(a) Each of Partner and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement by Partner
and Merger Sub have been duly and validly authorized by all necessary corporate
action on the part of each of Partner and Merger Sub (including the approval of
the Merger by Partner as the sole stockholder of Merger Sub), subject only to
the approval of the Partner Voting Proposal (as defined in Section 6.05) by
Partner's
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stockholders. This Agreement has been duly executed and delivered by each of
Partner and Merger Sub and constitutes a valid and binding obligation of each of
Partner and Merger Sub, enforceable in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by Partner and Merger Sub
does not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Partner or Merger
Sub, (ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default under, or give rise to a penalty or
right of termination, cancellation or acceleration of any obligation or loss of
any material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person or entity under (including the
receipt of any consideration), or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract (including, without limitation, any Partner Material Contract) or other
agreement, instrument or obligation to which Partner or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iii) assuming the consents contemplated by Section 4.03(c) of this
Agreement are obtained, conflict with or violate any Permit, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Partner or any
of its Subsidiaries or any of its or their properties or assets, except in the
case of (ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations that, individually or in the
aggregate, would not be reasonably likely to have a Partner Material Adverse
Effect. Section 4.03(b) of the Partner Disclosure Schedule sets forth a correct
and complete list of the Partner Material Contracts (as defined in Section 4.10)
under which consents, waivers or notifications are required prior to the
consummation of the transactions contemplated by this Agreement, which have not
previously been obtained.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Partner in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the pre-merger notification report under the HSR Act, (ii)
the filing of the Certificate of Merger with the Delaware Secretary of State,
(iii) the filing of the Registration Statement (as defined in Section 6.15
below) with the SEC in accordance with the Securities Act, (iv) the filing of
the Joint Proxy Statement with the SEC in accordance with the Exchange Act, (v)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws and the
laws of any foreign country, (vi) such governmental or tribal consents,
qualifications or filings as are customarily obtained or made following the
transfer of interests in oil and gas property interests and (vii) such other
consents, authorizations, filings, approvals and registrations that, if not
obtained or made, would not be reasonably likely to have a Partner Material
Adverse Effect.
SECTION 4.04 SEC Filings; Financial Statements.
(a) Partner has made available to Company true and complete copies of each
registration statement (other than registration statements on Form S-8), report,
proxy statement or information statement (other than preliminary materials)
filed by Partner with the SEC since December 31, 1998, each in the form
(including exhibits and any amendments thereto) filed with the SEC prior to the
date hereof (collectively, the "Partner SEC Reports"), and Partner has timely
filed all forms, reports and documents required to be filed by it with the SEC
pursuant to relevant securities statutes, regulations, policies and rules since
such time. The Partner SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations thereunder, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then as and on the date so amended
or superseded) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Partner SEC Reports or necessary
in order to make the statements in such Partner SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of Partner's
Subsidiaries is subject to the periodic reporting requirements of the Exchange
Act or is otherwise required to file any forms, reports or other documents with
the SEC.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Partner SEC Reports complied as to form in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly presented the consolidated financial position of Partner and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements are subject to normal and recurring year-end adjustments.
The unaudited balance sheet of Partner as of June 30, 2000 is referred to herein
as the "Partner Balance Sheet."
SECTION 4.05 No Undisclosed Liabilities; Suspense Accounts.
Except as disclosed in the Partner SEC Reports filed and publicly available
prior to the date hereof and except for abandonment obligations related to
Partner's oil and gas properties that are estimated in the Partner Reserve
Report (described in Section 4.17), Partner and its Subsidiaries do not have any
obligations or liabilities, whether or not accrued, contingent or otherwise,
that individually or in the aggregate would reasonably be likely to have a
Partner Material Adverse Effect. The Partner Balance Sheet reflects all suspense
accounts and gas balancing obligations owed by Partner as of the date hereof,
except as would not reasonably be expected to have a Partner Material Adverse
Effect.
SECTION 4.06 Absence Of Certain Changes Or Events.
Except as disclosed in the Partner SEC Reports filed and publicly available
prior to the date hereof, since December 31, 1999, Partner and its Subsidiaries
have conducted their businesses in all material respects only in the ordinary
course and in a manner consistent with past practice, and, since such date,
there has not been (i) any material change by Partner and its Subsidiaries, when
taken as a whole, in their accounting methods, principles or practices to which
Company has not previously consented in writing; (ii) any declaration, setting
aside, or payment of any dividend or other distribution in respect of the
capital stock of Partner; (iii) any split, combination or reclassification of
any of Partner's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Partner's capital stock; (iv) any event, occurrence, development
or state of circumstances or facts that has had, or would be reasonably likely
to have, a Partner Material Adverse Effect; provided, however, that for purposes
of this Section 4.06(iv), the effects of (A) any aggregate decrease during any
period of 20 consecutive days in the average daily quantity of oil, gas and
other gaseous and liquid hydrocarbons ("Hydrocarbons") being produced by Partner
and its Subsidiaries, taken as a whole, that is less than 30% of the average of
the net daily production of such Hydrocarbons by the Partner and its
Subsidiaries, taken as a whole, during the 20-day period ending with the date of
this Agreement or that is caused by mechanical difficulties, surface equipment,
pipeline curtailments or events of force majeure, and (B) any aggregate net
decrease in the proved Hydrocarbon reserves of Partner and its Subsidiaries,
taken as a whole (excluding, for the purpose of determining the amount of any
such decrease, any decrease due to depletion resulting from production or due to
changes in oil and gas prices and any increase due to discoveries or additions)
that is less than 20% of the amount of the Partner's proved reserves set forth
in the Partner Reserve Report, shall not be considered in determining whether a
Partner Material Adverse Effect has occurred or is reasonably likely to occur,
provided, further, that any disagreement over the extent of any such reserve
decrease shall be resolved by prompt submittal to an independent reservoir
engineer reasonably acceptable to both parties whose decision shall be binding
and shall be delivered no later than five business days following submittal; (v)
any tax election or any settlement of any income tax liability or tax attributes
that individually or in the aggregate is reasonably likely to adversely affect
the tax liability or tax attributes of Partner or any of its Subsidiaries in any
material respect or any settlement or compromise of any material income tax
liability; (vi) any modification, assignment, termination or relinquishment of
rights under any Partner Material Contract by Partner or any of its Subsidiaries
other than such modification, assignment, termination or relinquishment in the
ordinary course of business consistent with past practice; or (vii) any damage,
destruction or casualty loss, whether or not covered by insurance, that
individually or in the aggregate would be reasonably likely to have a Partner
Material Adverse Effect (it being understood that the availability of any
insurance coverage shall be taken into
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account in determining whether such damage, destruction or loss would be
reasonably likely to have a Partner Material Adverse Effect).
SECTION 4.07 Taxes.
(a) Except as would not be reasonably likely, individually or in the
aggregate, to have a Partner Material Adverse Effect, (i) Partner and each of
its Subsidiaries have, or prior to the Closing Date will have, (A) filed all
federal, state, local and foreign tax returns and reports required to be filed
by them prior to the date of this Agreement (taking into account extensions),
(B) paid or accrued all Taxes due and payable with respect to the periods
covered by such tax returns and reports or otherwise due and payable on or prior
to the Closing Date and (C) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings), (ii) neither the IRS nor any other
taxing authority has asserted or proposed in writing any claim or adjustment
relating to Taxes, or to the actual knowledge of the executive officers of
Partner, is threatening to assert any claims for Taxes, (iii) Partner and each
of its Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, and (iv) there are no liens for
Taxes upon the assets of Partner or any of its Subsidiaries (other than liens
for Taxes that are not yet due or that are being contested in good faith by
appropriate proceedings).
(b) To Partner's knowledge, there exists no claim by a Tax authority in a
jurisdiction where any of Partner and its Subsidiaries does not file Tax returns
that it is or may be subject to taxation in that jurisdiction. There are no Tax
allocation or sharing agreements or arrangements affecting any of Partner and
its Subsidiaries. No payments are due or will become due by any of Partner and
its Subsidiaries pursuant to any such agreement or arrangement or any tax
indemnification agreement. Neither Partner nor any of its Subsidiaries will be
required to include any amount in income for any taxable period beginning after
December 31, 1999 as a result of a change in accounting or pursuant to any
agreement with any Tax authority with respect to any prior taxable period.
Neither Partner nor any of its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax return (other than a
group the common parent of which was Partner) or (ii) has any liability for the
Taxes of any person or entity (other than any of Partner and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
Neither Partner nor any of its Subsidiaries have entered into any agreement or
arrangement with any Tax authority that requires any of Partner and its
Subsidiaries to take any action or to refrain from taking any action.
SECTION 4.08 Properties.
(a) Except for goods and other property sold, used or otherwise disposed of
since June 30, 2000 in the ordinary course of business, Partner and its
Subsidiaries have Good and Marketable Title (as defined below), for oil and gas
purposes, in and to all federal leases covering acreage offshore in the Gulf of
Mexico and to all the proved reserves reflected in the Partner Reserve Report
(as defined in Section 4.17) as owned by Partner and its Subsidiaries, and
defensible title for oil and gas purposes to all other properties, interests in
properties and assets, real and personal, reflected in the Partner Balance Sheet
as owned by Partner and its Subsidiaries, free and clear of any Liens, except:
(i) Liens associated with obligations reflected in the Partner Reserve Report or
the Partner Balance Sheet; (ii) Liens for current taxes not yet due and payable,
(iii) materialman's, mechanic's, repairman's, employee's, contractor's,
operator's, and other similar liens, charges or encumbrances arising in the
ordinary course of business (A) if they have not been perfected pursuant to law,
(B) if perfected, they have not yet become due and payable or payment is being
withheld as provided by law, or (C) if their validity is being contested in good
faith by appropriate action, (iv) all rights to consent by, required notices to,
filings with, or other actions by governmental entities in connection with the
sale or conveyance of oil and gas leases or interests if they are customarily
obtained subsequent to the sale or conveyance, and (v) such imperfections of
title, easements and Liens as would not reasonably be expected to have,
individually or in the aggregate, a Partner Material Adverse Effect. All leases
and other agreements pursuant to which Partner or any of its Subsidiaries leases
or otherwise acquires or obtains operating rights affecting any real or personal
property are in good standing, valid and effective and all royalties, rentals
and
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other payments due by the Partner to any lessor of any such oil and gas leases
have been paid, except in each case, as would not, individually or in the
aggregate, reasonably be expected to have a Partner Material Adverse Effect. All
major items of operating equipment of Partner and its Subsidiaries are in good
operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted, except as would not, individually or in the
aggregate, reasonably be expected to have a Partner Material Adverse Effect.
(b) The term "Good and Marketable Title" shall, for purposes of this
Section 4.08, with respect to Partner and its Subsidiaries, mean such title
that: (1) is deducible of record (from the records of the applicable parish or
county or (A) in the case of federal leases, from the records of the applicable
office of the Minerals Management Service or Bureau of Land Management, (B) in
the case of Indian leases, from the applicable office of the Bureau of Indian
Affairs, (C) in the case of state leases, from the records of the applicable
state land office) or is assignable to Partner or its Subsidiaries out of an
interest of record (as so defined) by reason of the performance by Partner or
its Subsidiaries of all operations required to earn an enforceable right to such
assignment; (2) is free from reasonable doubt to the end that a prudent
purchaser engaged in the business of the ownership, development and operation of
producing oil and gas properties with knowledge of all of the facts and their
legal bearing would be willing to accept and pay full value for the same and a
prudent lender would be willing to lend against it as collateral without
discount for title matters; (3) entitles Partner or its Subsidiaries to receive
not less than the interest set forth in the Partner Reserve Report with respect
to each proved property evaluated therein under the caption "Net Revenue
Interest" or "NRI" without reduction during the life of such property except as
stated in the Partner Reserve Report; (4) obligates Partner or its Subsidiaries
to pay costs and expenses relating to each such proved property in an amount not
greater than the interest set forth under the caption "Working Interest" or "WI"
in the Partner Reserve Report with respect to such property without increase
over the life of such property except as shown on the Partner Reserve Report;
and (5) does not restrict the ability of Partner or its Subsidiaries to utilize
the properties as currently intended.
SECTION 4.09 Intellectual Property.
Each of Partner and its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all Intellectual Property that is
necessary to conduct the business of Partner and its Subsidiaries as currently
conducted, including without limitation, any seismic data or information used by
Partner and its Subsidiaries, subject to such exceptions that, individually or
in the aggregate, would not be reasonably likely to have a Partner Material
Adverse Effect. No person or entity has notified either Partner or any of its
Subsidiaries that their use of the Intellectual Property infringes on the rights
of any person or entity, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of
Partner and its Subsidiaries that would be reasonably likely to have a Partner
Material Adverse Effect, and to Partner's knowledge, no person is infringing on
any right of Partner or any of its Subsidiaries with respect to any such
Intellectual Property. No claims are pending or, to Partner's knowledge,
threatened that Partner or any of its Subsidiaries is infringing upon the rights
of any person or entity with regard to any Intellectual Property that,
individually or in the aggregate, would be reasonably likely to have a Partner
Material Adverse Effect.
SECTION 4.10 Contracts.
(a) Set forth in Section 4.10 of the Partner Disclosure Schedule is a list
of each contract, lease, indenture, agreement, arrangement or understanding to
which Partner or any of its Subsidiaries is a party or subject that would be
required to be included as an exhibit to a Form S-1 Registration Statement
pursuant to the rules and regulations of the SEC if such a registration
statement were to be filed by the Partner on the date hereof and no previous
filings had been made (collectively, the "Partner Material Contracts").
(b) Except for such matters that, individually or in the aggregate, would
not be reasonably expected to have a Partner Material Adverse Effect, with
respect to the Partner Material Contracts, (A) all Partner Material Contracts
are in full force and effect and are the valid and legally binding obligations
of Partner or the Subsidiary party thereto, and to Partner's knowledge, the
legally binding obligations of the other parties thereto, and are enforceable in
accordance with their respective terms, subject to the Bankruptcy and Equity
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Exception; (B) Partner or the Subsidiary party thereto is not in breach or
default (nor does there exist any condition which upon the passage of time or
the giving of notice or both would reasonably be expected to cause such a breach
or default) with respect to, and to the knowledge of Partner, no other party to
any Partner Material Contract is in breach or default with respect to, its
obligations thereunder, including with respect to payments or otherwise; and (C)
no party to any Partner Material Contract has given written notice to Partner or
the Subsidiary party thereto of any action to terminate, cancel, rescind or
procure a judicial reformation thereof.
SECTION 4.11 Investigations; Litigation.
Section 4.11 of the Partner Disclosure Schedule sets forth a list of all
pending Litigation Matters. Except as described in the Partner SEC Reports filed
prior to the date hereof or pursuant to the pre-merger notification process
under the HSR Act with respect to this transaction (i) no investigation or
review by any Governmental Entity with respect to Partner or any of its
Subsidiaries or any of the transactions contemplated by this Agreement is
pending, nor to Partner's knowledge has any Governmental Entity (foreign or
domestic) indicated an intention to conduct the same, (ii) there is no
Litigation Matter against Partner or any of its Subsidiaries pending or, to
Partner's knowledge, threatened, and (iii) there are no outstanding orders,
rulings, injunctions, awards, decrees, judgments or stipulations by or with any
court or administrative agency or by arbitration, that in the case of each of
(i), (ii) and (iii) above, individually or in the aggregate, if determined
adversely to Partner or any of its Subsidiaries, would have a Partner Material
Adverse Effect or would materially impair or delay the ability of Partner to
consummate the transactions contemplated by this Agreement.
SECTION 4.12 Environmental Matters.
Except as disclosed in the Partner SEC Reports filed and publicly available
prior to the date hereof and, in case of clauses (i)-(iv) and (viii)-(ix) and
(xi), except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Partner Material Adverse Effect: (i) Partner and its
Subsidiaries have complied with all applicable Environmental Laws and, to the
knowledge of Partner, there are no facts or circumstances that could reasonably
be expected to prevent or preclude future compliance with all applicable
Environmental Laws; (ii) the properties currently owned or operated by Partner
and its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances; (iii) to
the knowledge of Partner, the properties formerly owned or operated by Partner
or any of its Subsidiaries were not contaminated with Hazardous Substances
during the period of ownership or operation by Partner or any of its
Subsidiaries; (iv) Partner's and its Subsidiaries' properties have been used by
Partner and its Subsidiaries solely for oil and gas exploration, production,
processing, transportation and related operations and to its knowledge have not
been used, whether by Partner, its Subsidiaries or any other person or entity,
for the generation, storage or disposal of a Hazardous Substance (other than
those substances lawfully used and contained in oil and gas operations) or as a
landfill or other waste disposal site; (v) neither Partner nor any of its
Subsidiaries, within the five years immediately preceding the date hereof, has
received any written notice, demand, letter, claim or request for information
alleging that Partner or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (vi) neither Partner nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or (except for indemnities under
purchase and sale agreements, operating agreements, farm-out agreements or other
similar agreements, whereby Partner or any of its Subsidiaries has acquired,
disposed of, or operated oil and gas properties, as to which (A) no existing
claim is pending or to its knowledge threatened against Partner or any of its
Subsidiaries and (B) Partner is not aware of any facts or circumstances that
could reasonably be expected to form the basis for a claim) is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances, including without
limitation any arrangements that require any change in the present condition or
operation of any of its properties in order to comply with conditions or
restrictions that relate to the protection of the environment; (vii) there are
no actions, suits, claims or proceedings seeking money damages, injunctive
relief, remedial action or other remedy pending or, to Partner's knowledge,
threatened against Partner or its Subsidiaries relating to the violation of, or
noncompliance with, an Environmental Law;
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the disposal, discharge, or release of any Hazardous Substance; or the exposure
of any person to any other solid waste, pollutant, chemical substance, noise or
vibration; (viii) each of Partner and its Subsidiaries has obtained all permits,
licenses and other authorizations which are required under Environmental Laws
for the conduct of its existing drilling and development operations and is in
compliance with all terms and conditions of such permits, licenses and
authorizations; (ix) all necessary applications, inspection reports,
certificates and other instruments pertaining to Environmental Laws on
properties operated by Partner or any of its Subsidiaries have been filed with
the appropriate Governmental Entity; (x) neither the execution of this Agreement
nor the consummation of the transactions contemplated by this Agreement will
violate any Environmental Law or require the consent or approval of any agency
charged with enforcing any Environmental Law, which violation or the failure to
obtain such consent or approval would materially impair or delay the ability of
Partner to consummate the transactions contemplated by this Agreement; and (xi)
there are no circumstances or conditions involving Partner or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Partner pursuant to any Environmental Law.
SECTION 4.13 Employee Benefit Plans.
(a) Partner has listed in Section 4.13(a) of the Partner Disclosure
Schedule, and has provided to Company complete and correct copies of, all
employee benefit plans (as defined in Section 3(3) of ERISA and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance, and other similar employee benefit plans, written or
otherwise, for the benefit of, or relating to, any current or former employee or
other service provider of Partner, any Subsidiary of Partner or any trade or
business (whether or not incorporated) which is treated as a single employer
with Partner or any Subsidiary of Partner (a "Partner ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code
(together, the "Partner Employee Plans").
(b) With respect to each Partner Employee Plan, Partner has made available
to Company, a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS for each Partner Employee Plan with respect to which
such report is required to be filed, (ii) each trust agreement and group annuity
contract or insurance policy, if any, relating to such Partner Employee Plan,
(iii) the most current favorable determination letter received from the IRS as
to the qualified status under the Internal Revenue Code of each Partner Employee
Plan subject to Section 401 of the Internal Revenue Code, and (iv) the most
recent summary plan description for each Partner Employee Plan required to have
such a summary plan description. None of Partner, any Subsidiary of Partner or
any Partner ERISA Affiliate sponsors, maintains or contributes to, nor has any
such entity at any time within six years preceding the date of this Agreement
sponsored, maintained or contributed to, any plan that is subject to Title IV of
ERISA (including without limitation a multiemployer plan within the meaning of
Section 3(37) of ERISA), Section 302 of ERISA or Section 412 of the Internal
Revenue Code. Each Partner Employee Plan intended to be qualified under Section
401 of the Internal Revenue Code has been administered and maintained in all
material respects in accordance with its terms and all applicable laws,
including ERISA and the Internal Revenue Code, and each such plan has received a
favorable determination letter from the Internal Revenue Service regarding such
qualified status. There has been no termination or partial termination of any
such plan within the meaning of Section 411(d)(3) of the Internal Revenue Code.
There are no actions, suits or claims pending (other than routine claims for
benefits) or, to Partner's knowledge, threatened against, or with respect to,
any of the Partner Employee Plans or their assets. There is no matter pending
(other than routine qualification determination filings) with respect to any of
the Partner Employee Plans before any Governmental Entity.
(c) With respect to the Partner Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Partner, there exists
no condition or set of circumstances in connection with which Partner could be
subject to any material liability under ERISA, the Internal Revenue Code or any
other applicable law.
(d) With respect to the Partner Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in
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accordance with generally accepted accounting principles, on the financial
statements of Partner, which obligations are reasonably likely to have a Partner
Material Adverse Effect.
(e) Except as disclosed in the Partner SEC Reports filed prior to the date
of this Agreement, and except as provided for in this Agreement, neither Partner
nor any of its Subsidiaries is a party to any oral or written (i) agreement with
any officer or other key employee of Partner or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Partner of the nature
contemplated by this Agreement, (ii) agreement with any officer of Partner
providing any term of employment or compensation guarantee, or (iii) agreement
or plan, including any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
SECTION 4.14 Compliance with Laws.
Neither Partner nor any of its Subsidiaries is in violation or default of,
or has received any notices of violation or default with respect to, any
applicable federal, state, local or foreign statute, law, rule, order, decree or
regulation, including without limitation, any filing or reporting requirement
thereunder with respect to the conduct of its business, or the ownership or
operation of its business, except for violations or defaults that, individually
or in the aggregate, are not reasonably likely to have a Partner Material
Adverse Effect. Each of Partner and its Subsidiaries has all Permits legally
required to enable it to carry on its business as currently carried on and such
Permits are all in full force and effect and no proceeding is pending and
neither Partner nor any of its Subsidiaries has received any written notice of
any action seeking the revocation or limitation of or is in default or violation
of, any such Permit, except in each case as would not reasonably be expected to
have a Partner Material Adverse Effect; provided, however, that notwithstanding
the foregoing, no representation or warranty in this Section 4.14 is made with
respect to Permits issued pursuant to Environmental Laws, which are covered
exclusively by the provisions set forth in Section 4.12, or with respect to
Permits to conduct exploratory operations which have not been commenced as of
the date of this Agreement.
Section 4.15 Tax Matters.
To its knowledge, after consulting with its Tax counsel, neither Partner
nor any of its Affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Internal Revenue Code.
Section 4.16 Opinion of Financial Advisor.
The financial advisor of Partner, Merrill Lynch & Co., has delivered to
Partner an opinion dated the date of this Agreement to the effect that, based
upon and subject to the matters set forth therein, the Exchange Ratio is fair to
Partner from a financial point of view. Partner has delivered, or will deliver
promptly after receipt of such written opinion, a copy of such written opinion
to Company.
Section 4.17 Oil and Gas Reserves.
Partner has furnished Company the Partner's estimates of Partner's and its
Subsidiaries' oil and gas reserves as of December 31, 1999 in a report as
described in Section 4.17 of the Partner Disclosure Schedule (the "Partner
Reserve Report"). Except as would not reasonably be expected to have a Partner
Material Adverse Effect, the factual, non-interpretive data on which the Partner
Reserve Report was based for purposes of estimating the oil and gas reserves set
forth in the Partner Reserve Report and in any supplement thereto or update
thereof furnished to Partner was accurate and incorporates the following: the
interests owned by Partner and its Subsidiaries at the time the Partner Reserve
Report was prepared, the cost of operating the properties, all production and
cost data adjusted for all oil and/or gas imbalances due, all tests and
operations on Partner's and its Subsidiaries' properties of which Partner was
aware at the time the Partner Reserve
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Report was prepared and all capital costs reasonably expected by Partner at such
time to be necessary to operate, develop and plug and abandon the properties
described therein. To the best knowledge of Partner, and based on the
information given to Partner by third-party operators for all wells not operated
by Partner, the Partner Payout Balances (as defined below) for each of the wells
as used in the Partner Reserve Report were accurate as of the dates to which
Partner had calculated them, except as would not reasonably be expected to have
a Partner Material Adverse Effect. "Partner Payout Balances" means the status,
as of the dates of Partner's calculations, of the recovery by Partner or a third
party of a cost amount specified in the contract relating to a well out of the
revenue from such well where the net revenue interest of Partner therein will be
reduced or increased when such amount has been recovered. Partner agrees that
Company will have access to the Partner Reserve Report in accordance with the
procedures set forth in Section 4.17 of the Partner Disclosure Schedule.
SECTION 4.18 Take-or-Pay Deliveries.
Except as provided in Partner SEC Reports or in Section 4.18 of the Partner
Disclosure Schedule, there are no calls (exclusive of market calls) on Partner's
oil or gas production and Partner has no obligation to deliver oil or gas
pursuant to any take-or-pay, prepayment or similar arrangement without receiving
full payment therefor.
SECTION 4.19 Hedging.
Partner has set forth in Section 4.19 of the Partner Disclosure Schedule a
summary of Partner's position with respect to its Hedges as of the date hereof.
Except as set forth in Section 4.19 of the Partner Disclosure Schedule, neither
Partner nor any of its Subsidiaries is bound by any Hedges as of the date
hereof.
SECTION 4.20 Required Vote of Partner Stockholders.
The affirmative vote of the holders of a majority of the outstanding shares
of Parent Common Stock is required to approve the amendment to Partner's
certificate of incorporation to increase its authorized capitalization. The
affirmative vote of a majority of the votes cast on the proposal, so long as the
total number of votes cast in favor of and against the proposal represents a
majority of the outstanding shares of Partner Common Stock, is required to
approve the issuance of Partner Common Stock pursuant to the Merger.
ARTICLE V.
CONDUCT OF BUSINESS
SECTION 5.01 Covenants of Company.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Company
agrees as to itself and each of its Subsidiaries (except to the extent that
Partner shall otherwise consent in writing), to carry on its operations in the
usual, regular and ordinary course of business in substantially the same manner
as previously conducted, to pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, to pay or perform its other obligations
when due, and, to the extent consistent with such business, use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business and its relationships with customers, suppliers and others with
whom Company deals in the ordinary course of its business. Company shall
promptly notify Partner of any material event or occurrence not in the ordinary
course of business of Company. Except as expressly contemplated by this
Agreement or as set forth in Section 5.01 of Company Disclosure Schedule,
subject to Section 6.01, Company shall not (and shall not permit any of its
Subsidiaries to), without the written consent of Partner:
(a) Accelerate, amend or change the period of exercisability of
options, restricted stock or other awards granted under any employee stock
plan (including, without limitation, the Incentive Plan and the Performance
Share Plan) of such party or authorize cash payments in exchange for any
options granted
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under any of such plans except as required by the terms of such plans or
any employment agreements or other related agreements in effect as of the
date of this Agreement and set forth in Sections 3.13 and 3.16 of the
Company Disclosure Schedule;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than (i) the issuance of shares of Company Common Stock
pursuant to the exercise of options outstanding on the date of this
Agreement and referred to in Section 3.02 in accordance with their current
terms or (ii) the issuance, earning or vesting of shares of Company Common
Stock pursuant to outstanding performance share awards under the
Performance Share Plan or other similar awards (including without
limitation restricted stock awards under the Incentive Plan) made prior to
the date of this Agreement in accordance with their current terms;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, except as set forth
in Section 5.01(k);
(e) Except in accordance with the Retention Policy or pursuant to the
current terms of Company's existing contracts, obligations or agreements
set forth in Section 3.13 or Section 3.16 of the Company Disclosure
Schedule or in connection with the payment of non-discretionary
contributions to Company's 401(k) Plan at a level of 3% of eligible
compensation and the payment of year-end bonuses (which year-end bonuses
will not exceed $1.8 million in the aggregate for all employees, including
officers, and are expected to be paid prior to the Effective Time or
December 31, 2000, whichever occurs first), (i) increase or agree to
increase the compensation payable or to become payable to its employees or
officers, (ii) grant any additional severance or termination pay to, or
enter into any employment or severance agreements with, any employees or
officers, (iii) enter into any collective bargaining agreement (other than
as required by law or extensions to existing agreements in the ordinary
course of business), (iv) amend any Company Employee Plan (other than any
amendment that does not increase Company's (or any successor's) obligations
under such Company Employee Plan or that does not provide additional
rights, including vesting rights, or benefits to any employee, except for
accelerated vesting in connection with any termination of the Company's
401(k) Plan as provided in Section 6.14(a)) or establish, adopt, enter into
or amend any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees, except to the
extent required by applicable law, or (v) pay any material benefit or
amount not required by a plan or arrangement as in effect on the date of
this Agreement to any person;
(f) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(g) Incur, assume, guarantee or prepay any indebtedness for borrowed
money, other than under Company's existing credit facility in the ordinary
course of business; provided that in the case of any such incurrence,
assumption, guarantee or prepayment that exceeds, individually or in the
aggregate, $500,000, such incurrence, assumption, guarantee or prepayment
is made after consultation with Partner;
(h) Modify or terminate any of the Company Material Contracts or waive
or relinquish any right thereunder, other than any amendment to Company's
credit facility to reflect a redetermination of
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Company's borrowing base thereunder and other than any modification,
termination, waiver or relinquishment that is not adverse to Company;
(i) Enter into any Hedges or fixed price commodity sales agreements;
(j) Make any material Tax election or settle or compromise any
material Tax liability;
(k) Except as permitted by Section 5.01(k) of the Company Disclosure
Schedule, (i) make any material capital expenditure, except as may be
required to (A) continue operations on the drilling, completion or plugging
of any well or any well operation for which Company has consented to
participate and is required to continue to participate pursuant to
applicable agreements or (B) conduct emergency operations on any well,
platform, pipeline or other production facility, (ii) enter into any sale,
lease, farm-out or similar disposition (except for the sale of Hydrocarbons
or personal property in the ordinary course of business) of any (A) proved
reserves described on the Company Reserve Report or (B) interests in
properties (other than proved reserves, which are addressed by the
preceding clause) without first granting Partner the option (to be
exercised within five days) to acquire such interests on the same terms as
they are being offered to a third party or industry, provided that Company
shall have the right to relinquish interests in such properties pursuant to
elections not to participate in operations proposed by third parties under
operating agreements or other applicable agreements so long as (to the
extent allowed under such agreements) in each such case Company has
promptly offered Partner the option to participate for, and thereby
acquire, Company's interest in such operation and Partner has either
affirmatively rejected such option or failed to respond in the manner
provided for in such agreement within one-half of the response time
required therein for Company to respond to the proposing party (provided
that in the event of a required response time of less than 48 hours,
Company shall use its reasonable best efforts to notify Partner at least 24
hours prior to the anticipated receipt of such notice), (iii) enter into
any material joint venture agreement, partnership agreement or similar
agreement not in conjunction with acquisitions or capital expenditures
contemplated in this Section 5.01(k) or Section 5.01(k)of the Company
Disclosure Schedule or (iv) acquire or agree to acquire any assets (other
than inventory, equipment and other similar items in the ordinary course of
business); provided, however, neither Company nor any of its Subsidiaries
shall be permitted to enter into any transaction with any third party in
which, to Company's knowledge, any officer or director of Company has,
directly or indirectly, any existing or prospective equity or other
ownership interest or any other arrangement or understanding having the
same economic effect, other than with respect to any company that is
publicly traded on a national securities market or exchange, to the extent
such ownership interest is less than two percent (2%) of such publicly
traded company; and provided, further, however, that the Company shall not
enter into any sale, lease, farmout, or other alienation or disposition of
any interest in those 11 prospects specified in Section 5.01(k) of the
Company Disclosure Schedule.
(l) Change any method of accounting or accounting practice by Company
or any of its Subsidiaries, except for any such change required by GAAP;
(m) Adopt a plan of complete or partial liquidation, dissolution, or
reorganization;
(n) Waive, release, assign, or settle any material rights, claims or
pending or threatened Litigation Matters;
(o) Enter into any contract, agreement, arrangement or understanding
that materially limits or otherwise materially restricts Company or any of
its Subsidiaries or any successor thereto, or that would, after the
Effective Time, limit or restrict the Surviving Corporation and its
Affiliates (including Partner) or any successor thereto, from engaging in
or competing in any line of business or in any geographic area (except for
confidentiality agreements relating to specific prospects); or
(p) Take, or agree in writing or otherwise to take, any of the actions
described in Section 5.01(a) through Section 5.01(o) above.
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SECTION 5.02 Covenants of Partner.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Partner
agrees as to itself and its Subsidiaries (except to the extent that Company
shall otherwise consent in writing), to carry on its operations in the usual,
regular and ordinary course of business in substantially the same manner as
previously conducted, to pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, to pay or perform its other obligations when
due, and, to the extent consistent with such business, use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business. Partner shall promptly notify Company of any material event or
occurrence not in the ordinary course of business of Partner. Except as
expressly contemplated by this Agreement or as set forth in Section 5.02 of the
Partner Disclosure Schedule, subject to Section 6.01, Partner shall not (and
shall not permit any of its Subsidiaries to), without the written consent of
Company:
(a) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock; provided, however, that
Partner shall be entitled to effect a stock split so long as an appropriate
adjustment is made to the Exchange Ratio;
(b) Issue shares of Partner Common Stock in connection with any
acquisition of equity interests or assets that could reasonably be expected
to adversely affect the ability of Partner to consummate or would
reasonably be expected to otherwise delay the Merger;
(c) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(d) Adopt a plan of complete or partial liquidation, dissolution, or
reorganization;
(e) Change any method of accounting or accounting practice by Partner
or any of its Subsidiaries, except for any such change required by GAAP; or
(f) Take, or agree in writing or otherwise to take, any of the actions
described in Section 5.02(a) through Section 5.02(e) above.
SECTION 5.03 Cooperation.
Subject to compliance with applicable law, from the date hereof until the
Effective Time, each of Partner and Company shall confer on a regular and
frequent basis with one or more representatives of the other party to report on
the general status of ongoing operations and shall promptly provide the other
party or its counsel with copies of all filings made by such party with any
Governmental Entity in connection with this Agreement, the Merger and the
transactions contemplated hereby and thereby. Each party further agrees to work
in good faith and use its reasonable best efforts to satisfy all of the closing
conditions set forth in Article VII hereof, but is under no obligation to waive
any of such conditions.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01 No Solicitation.
Company shall not, and nor will it authorize or knowingly permit, directly
or indirectly, any officer, director, financial advisor, representative,
employee or agent of Company to, (i) solicit, initiate, or encourage any
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, share
exchange, recapitalization, sale of all or substantially all of its assets, sale
of shares (other than pursuant to the Incentive Plan or Performance Share Plan)
of capital stock (including without limitation by way of a tender offer) or
similar transaction involving Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any of the foregoing proposals
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being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage
in negotiations regarding, or provide any non-public information to any person
or entity relating to, or take any other action intended to facilitate, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
Company, or its Board of Directors, prior to the date of the Company Stockholder
Meeting referred to in Section 6.05, from (A) furnishing non-public information
to, or entering into negotiations with, any person or entity in connection with
an unsolicited bona fide written Acquisition Proposal by such person or entity
or recommending an unsolicited bona fide written Acquisition Proposal to the
stockholders of Company, if and only to the extent that (1) such Acquisition
Proposal was not made by a person or entity with whom Company has actively
negotiated regarding an Acquisition Proposal within the three (3) month period
prior to the date of this Agreement, (2) Company's Board of Directors (after
consultation with its outside legal counsel) determines in good faith that such
action is legally advisable for the Board of Directors to comply with its
fiduciary duties to Company's stockholders under applicable law, (3) such
Acquisition Proposal is not subject to any financing contingencies or is, in the
good faith judgment of Company's Board of Directors (after consultation with its
financial advisor), reasonably capable of being financed by such other person or
entity, (4) Company's Board of Directors determines in good faith (after
consultation with its financial advisor) that such Acquisition Proposal is
reasonably capable, taking into account all legal, financial, regulatory and
other aspects of the proposal and the person or entity making the proposal, of
being completed and would, if consummated, result in a transaction more
favorable to Company's stockholders than the transaction contemplated by this
Agreement (any such more favorable Acquisition Proposal being referred to in
this Agreement as a "Superior Proposal"), and (5) prior to furnishing such
non-public information to, or entering into negotiations with, such person or
entity, Company's Board of Directors received from such person or entity an
executed confidentiality agreement with terms regarding confidentiality and
standstill provisions no less favorable to Company than those contained in the
existing Non-Disclosure Agreement between Partner and Company (the
"Confidentiality Agreement") and shall have notified Partner of any such
Acquisition Proposal, including the material terms and conditions thereof and
the identity of the person or entity making such proposal; or (B) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal.
SECTION 6.02 Joint Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
Company and Partner shall prepare and file with the SEC the Joint Proxy
Statement (it being understood and agreed that both parties will use their
reasonable best efforts to accomplish this preparation and filing within three
(3) weeks after the date hereof), and Partner shall prepare and file with the
SEC the Registration Statement, in which the Joint Proxy Statement will be
included as a prospectus, provided that Partner may delay the filing of the
Registration Statement until approval of the Joint Proxy Statement by the SEC.
Partner and Company shall use their reasonable best efforts to respond to the
comments of the SEC in connection with the Joint Proxy Statement and the
Registration Statement, to furnish all information required to prepare the Joint
Proxy Statement and the Registration Statement and to cause the Registration
Statement to become effective as soon after such filing as practicable. Company
will use its reasonable best efforts to cause the Joint Proxy Statement to be
mailed to Company's stockholders, and Partner will use its reasonable best
efforts to cause the Joint Proxy Statement to be mailed to Partner's
stockholders, in each case as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. The Joint Proxy
Statement shall include the recommendation of the Board of Directors of Company
in favor of this Agreement and the Merger and of the Board of Directors of
Partner (which original recommendation shall not be withdrawn or modified in a
manner adverse to Company) in favor of the issuance of Partner Shares pursuant
to the Merger and the amendment of Partner's certificate of incorporation to
increase its authorized capitalization; provided, however, that the Board of
Directors of Company may withdraw such recommendation under the circumstances
described in Section 6.01.
(b) Partner and Company shall make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
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(c) Notwithstanding anything to the contrary in this Agreement, no party
hereto shall be prohibited from making factual disclosures to such party's
stockholders to the extent such party is required to do so by applicable law.
SECTION 6.03 Quotation on Stock Exchanges.
Each of Company and Partner agrees to continue the quotation of Partner
Common Stock and Company Common Stock, respectively, on the New York Stock
Exchange and on the Nasdaq National Market System, during the term of this
Agreement.
SECTION 6.04 Access to Information.
Upon reasonable notice, Company and Partner shall each (and shall use their
reasonable best efforts to cause each of their respective Subsidiaries,
officers, employees, accountants, counsel, engineers, consultants and other
representative (including but not limited to external accountants, engineers and
consultants)) to afford to the officers, employees, accountants, counsel,
engineers, consultants and other representatives (including but not limited to
external accountants, engineers and consultants) of the other (at the risk and
expense of such inspecting party), subject to each such inspecting party's
agreement (which need not be in writing) to be bound by the terms of the
Confidentiality Agreement or other customary form of acknowledgement of the
confidential nature of the information, reasonable access for purposes
reasonably related to this Agreement and the consummation of the transactions
contemplated hereby, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, each of Company and Partner shall (and shall cause each
of their respective Subsidiaries to) furnish promptly to the other (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request for purposes
reasonably related to this Agreement and the consummation of the transactions
contemplated hereby. Unless otherwise required by law, the parties will hold any
such information which is nonpublic in confidence in accordance with the
Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.04 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
SECTION 6.05 Stockholders Meetings.
(a) Company and Partner each shall call a meeting of its respective
stockholders to be held as promptly as practicable for the purpose of voting, in
the case of Company, upon this Agreement and the Merger and, in the case of
Partner, upon the issuance of shares of Partner Common Stock pursuant to the
Merger and an amendment to Partner's certificate of incorporation to increase
its authorized capitalization (the "Partner Voting Proposal"). In accordance
with Section 251(c) of the DGCL, Company's obligation to call and hold its
stockholders meeting shall not be dependent on Company Board of Directors'
recommendation. Company and Partner shall coordinate and cooperate with respect
to the timing of such meetings and shall use their reasonable best efforts to
hold such meetings on the same day and as soon as practicable after the date
hereof. Except as otherwise permitted with respect to Company pursuant to
Section 6.01 of this Agreement, each party shall use its reasonable best efforts
to solicit from its stockholders proxies in favor of the matters set forth above
and obtain a sufficient vote in favor of such matters at its stockholders
meeting (or any postponement or adjournment thereof). Partner shall take such
action with respect to Merger Sub, and cause Merger Sub to take such action, as
may be required to consummate the Merger, including without limitation, voting
all shares of Merger Sub in favor of the Merger.
(b) Each of Partner and Company shall use its reasonable best efforts to
cause each of its directors to enter into the Partner Voting Agreement or the
Company Voting Agreement, as the case may be, with respect to the shares owned
by such director, as soon as practicable after the date hereof.
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SECTION 6.06 Legal Conditions to Merger.
(a) Each of Company and Partner shall use its reasonable best efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary and proper under applicable law to consummate and
make effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by it or any of its Subsidiaries in connection with the
authorization, execution and delivery by it of this Agreement and the
consummation by it of the transactions contemplated hereby including, without
limitation, the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws, (B)
subject to Section 6.06(b), the HSR Act and any related governmental request
thereunder and (C) any other applicable law. Company and Partner shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith. Company and Partner shall use
their reasonable best efforts to furnish to each other all information required
for any application or other filing to be made pursuant to the rules and
regulations of any applicable law (including all information required to be
included in the Joint Proxy Statement and the Registration Statement) in
connection with the transactions contemplated by this Agreement.
(b) Partner and Company agree, and shall cause each of their respective
Subsidiaries, to cooperate and to use their respective reasonable best efforts
to obtain any government clearances required for Closing (including through
compliance with the HSR Act and any applicable foreign government reporting
requirements), to respond to any government requests for information, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that restricts, prevents or prohibits the consummation of the Merger
or the transaction contemplated by this Agreement. Partner shall use its
reasonable best efforts to resolve such issues or objections, if any, as may be
asserted with respect to the consummation of the Merger or any other
transactions contemplated by this Agreement, including without limitation as may
arise under any antitrust, competition or trade regulatory laws, rules or
regulations of any domestic or foreign government or any governmental, judicial
or multinational authority. Notwithstanding the foregoing, nothing in this
Section 6.06 shall require, or be construed to require, Partner or Company, in
connection with the receipt of any regulatory approval, to proffer to or agree
to (A) sell or hold separate and agree to sell, divest or to discontinue or
limit, before or after the Effective Time, any assets, businesses, or interest
in any assets or businesses of Partner, Company or any of their respective
Affiliates (or to consent to any sale, or agreement to sell, or discontinuance
or limitation by Partner or Company, as the case may be, of any of its assets or
businesses), or (B) any conditions relating to, or changes or restrictions in,
the operations of any such assets or businesses which, in either case, could
reasonably be expected to result in a Partner Material Adverse Effect or a
Company Material Adverse Effect or to materially and adversely impact the
economic or business benefits to such party of the transactions contemplated by
this Agreement. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law.
(c) Each of Company and Partner shall give (or shall cause its Subsidiaries
to give) any notices to third parties required to be given by it, and use, and
cause its Subsidiaries to use, its reasonable best efforts to obtain any third
party consents related to or required in connection with the Merger required to
be obtained by it that are (i) necessary for it to consummate the transactions
contemplated hereby, (ii) disclosed or required to be disclosed in the Company
Disclosure Schedule or Section 3.03(c) of this Agreement or the Partner
Disclosure Schedule, as the case may be or (iii) required to prevent a Company
Material Adverse Effect or a Partner Material Adverse Effect from occurring
prior to or after the Effective Time.
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SECTION 6.07 Public Disclosure.
Partner and Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation and the express prior written
approval of the other party, except as may be required by law and any applicable
stock exchange rules. With respect to any other press release to be issued by
Partner or Company prior to the Effective Time or termination of this Agreement,
the party issuing the press release shall endeavor to provide the other party
with a copy of any such press release by the close of business on the business
day prior to the issuance of such press release or, if such notice is
impracticable to provide, as soon as practicable prior to such release.
SECTION 6.08 Tax-Free Reorganization.
Partner and Company shall each use their reasonable best efforts to cause
the Merger to be treated as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and shall not knowingly take any actions
which could prevent the Merger from being treated as described in this Section
6.08.
SECTION 6.09 Affiliate Agreements.
Upon the execution of this Agreement, Company will provide Partner with a
list of those persons who are, in Company's reasonable judgment, "affiliates" of
Company within the meaning of Rule 145 (each person who is an "affiliate" within
the meaning of Rule 145 is referred to as an "Affiliate") promulgated under the
Securities Act ("Rule 145"). Company shall use its reasonable best efforts to
deliver or cause to be delivered to Partner within 30 days after the date hereof
(and in any case prior to the Effective Time) from each of its Affiliates, an
executed Affiliate Agreement, in form and substance reasonably satisfactory to
Partner and Company, by which each Affiliate of Company agrees to comply with
the applicable requirements of Rule 145 and such requirements as may be
necessary for the Merger to be treated as a pooling of interests for accounting
purposes (an "Affiliate Agreement"). Partner shall be entitled to place
appropriate legends on the certificates evidencing any Partner Common Stock to
be received by such Affiliates of Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Partner Common Stock, consistent with the terms of the Affiliate
Agreements (provided that such legends or stop transfer instructions shall be
removed, two years after the Effective Date, upon the request of any stockholder
that is not then an Affiliate of Partner and that otherwise satisfies the resale
provisions of Rule 145(d)). Partner expressly agrees to cause the results of its
earnings for a period following consummation of the Merger that includes at
least 30 days of combined operations of Partner and Company to be publicly
released as soon as reasonably practicable (it being understood that Partner may
satisfy this obligation by filing its regularly prepared quarterly results on
Form 10-Q).
SECTION 6.10 New York Stock Exchange Quotation.
Partner shall use its reasonable best efforts to cause the shares of
Partner Common Stock to be issued in the Merger to be approved for listing on
the New York Stock Exchange, subject to official notice of issuance, prior to
the Closing Date.
SECTION 6.11 Stock Plans.
(a) At the Effective Time, each then outstanding option to purchase shares
of Company Common Stock (a "Company Stock Option") under the Incentive Plan,
whether vested or unvested (after giving effect to any applicable change in
control or similar type provisions), shall, together with the Incentive Plan, be
assumed by Partner and shall thereby be converted into an option to acquire, on
the same terms and conditions in effect for such Company Stock Option
immediately prior to the Closing Date, that number of shares of Partner Common
Stock determined by multiplying the number of shares of Company Common Stock
subject to that option immediately prior to the Closing Date by the Exchange
Ratio and rounding out to the next whole number of shares. The exercise price
per share of Partner Common Stock subject to each such assumed Company Stock
Option shall be equal to the amount determined by dividing the exercise price
per share of
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Company Common Stock in effect for that Company Stock Option immediately prior
to the Closing Date by the Exchange Ratio and rounding up to the nearest whole
cent. Subject to the effect of Section 422(d) of the Internal Revenue Code on
any Company Stock Option with respect to which vesting is accelerated in
connection with the transactions contemplated by this Agreement, it is the
intention of the parties that each Company Stock Option so assumed by Partner
shall continue to qualify, after the Closing Date, as an incentive stock option
under Section 422 of the Internal Revenue Code to the same extent that option
qualified as such an incentive stock option immediately prior to the Closing
Date.
(b) As soon as practicable after the Effective Time, Partner shall deliver
to the participants in the Incentive Plan, in form and substance reasonably
satisfactory to Company, an appropriate document evidencing the assumption of
each Company Stock Option in accordance with Section 6.11(a) of this Agreement.
(c) Partner shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Partner Common Stock for delivery upon
the exercise of the Company Stock Options assumed in accordance with this
Section 6.11. As soon as practicable and in no event more than thirty (30) days
after the Effective Time, Partner shall file a registration statement on Form
S-8 (or any successor or other appropriate forms) with respect to the shares of
Partner Common Stock subject to such options or on another appropriate form of
registration statement for any such shares of Partner Common Stock which are not
registrable on Form S-8 and shall use its commercially reasonable best efforts
to maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) The Board of Directors of Company (or duly appointed committee thereof
that is authorized to administer the Incentive Plan) shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of the Incentive Plan and the instruments evidencing the Company
Stock Options, to provide for the conversion of the Company Stock Options into
options to acquire Partner Common Stock in accordance with this Section 6.11.
(e) The shares of Company Common Stock currently subject to earn-out
schedules pursuant to the outstanding performance share awards under the
Performance Share Plan shall be earned or forfeited by the holders thereof at
the Effective Time in accordance with the change in control provisions of such
holders' share awards; provided, however, that any shares not earned based on
the most recently issued year-end financial statement prior to the Effective
Time shall be earned as determined prior to the Effective Time in good faith by
the Compensation and Incentive Committee under the Performance Share Plan (and
subject to the prior approval of Partner) based on the financial performance of
Company during the period beginning on the first day of the fiscal year in which
the Effective Time occurs and ending on the Closing Date. The earned shares
shall, at the Effective Time, be converted into shares of Partner Common Stock
in accordance with the Exchange Ratio.
(f) The Board of Directors of Company shall, prior to or as of the
Effective Time, take appropriate action to approve the deemed cancellation of
the Company Stock Options for purposes of Section 16(b) of the Exchange Act. The
Board of Directors of Partner shall, prior to or as of the Effective Time, take
appropriate action to approve the deemed grant of options to purchase Partner
Common Stock under the Company Stock Options (as converted pursuant to this
Section 6.11) for purposes of Section 16(b) of the Exchange Act. The disposition
of such shares of Company Common Stock and the issuance of such shares of Parent
Common Stock in the Merger shall also be included in the approval process of the
Boards of Directors of Company and Parent for purposes of Section 16(b) of the
Exchange Act. Similar action shall be taken by Company and Partner Boards of
Directors with respect to the shares of Company Common Stock outstanding under
the Performance Share Plan which are to be converted into shares of Partner
Common Stock in the Merger.
(g) If any shares of Company Common Stock are, immediately prior to the
Effective Time, unvested or subject to any other restrictions under the
Incentive Plan or any restricted stock purchase or stock issuance agreement to
which Company is a party and the vesting schedule or restrictions applicable to
those shares are not to vest or lapse on an accelerated basis in connection with
the Merger, then the shares of Partner Common Stock issued in exchange for such
shares of Company Common Stock in the Merger shall also be unvested
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and subject to the same vesting schedule in effect for the unvested shares of
Company Common Stock immediately prior to the Effective Time. The certificates
representing such shares of Partner Common Stock may accordingly bear the
appropriate restrictive legends.
SECTION 6.12 Brokers or Finders.
Each of Partner and Company represents, as to itself, its Subsidiaries and
its Affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Goldman, Sachs & Co., whose fees and
expenses will be paid by Company in accordance with Company's agreement with
such firm (copies of which have been delivered by Company to Partner prior to
the date of this Agreement), and Merrill Lynch & Co., whose fees and expenses
will be paid by Partner in accordance with Partner's agreement with such firm (a
copy of which has been delivered by Partner to Company prior to the date of this
Agreement). Each of Partner and Company agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any such fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or any of
its Affiliates.
SECTION 6.13 Indemnification.
(a) From and after the Effective Time, Partner agrees that it will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of Company (the "Indemnified Parties"),
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Company would have been
permitted under the DGCL and its Certificate of Incorporation or Bylaws in
effect on the date hereof to indemnify such Indemnified Party (and Partner and
the Surviving Corporation shall also advance any expenses as incurred to the
fullest extent permitted under applicable law; provided the Indemnified Party to
whom expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such Indemnified Party is not entitled to
indemnification).
(b) For a period of six (6) years after the Effective Time, Partner shall
cause the Surviving Corporation to maintain (to the extent available in the
market) in effect a directors' and officers' liability insurance policy covering
those persons who are covered as of the date hereof by Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Partner) with coverage in amount and scope at least as favorable as
Company's existing coverage; provided, that in no event shall Partner or the
Surviving Corporation be required to expend in excess of 200% of the annual
premium currently paid by Company for such coverage (currently approximately
$172,500) (the "Current Premium"); and if such premium would at any time exceed
200% of the Current Premium, then the Surviving Corporation shall maintain or
obtain as much of such insurance as can be so maintained or obtained at an
annual premium equal to 200% of the Current Premium.
(c) The provisions of this Section 6.13 are intended to be an addition to
the rights otherwise available to the current officers and directors of Company
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
SECTION 6.14 Benefit Matters.
(a) If Partner requests in writing, Company shall take all action necessary
to terminate, or cause to terminate, before the Effective Time, any employee
benefit plan that is a 401(k) plan. Partner shall provide the opportunity for
participants in Company's 401(k) Plan who are employed by Partner or Company on
the date that is 60 days after the Closing Date to "roll over" their account
balances into Partner's 401(k) plan.
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(b) At the Effective Time or following a reasonable transition period as
set forth below, continuing employees of Company ("Continuing Employees") shall
be eligible to participate in those Partner Employee Plans maintained for
similarly situated employees of Partner (or in substantially similar programs),
on the same terms applicable to similarly situated employees of Partner and to
the extent that such plans and programs provide the following benefits:
medical/dental/vision care, life insurance, disability income, sick pay, holiday
and vacation pay, 401(k) plan coverage, Internal Revenue Code Section 125
benefit arrangements, bonus, profit-sharing or other incentive plans, pension or
retirement programs, dependent care assistance, severance benefits, and employee
stock option and stock purchase plans. Each Continuing Employee shall be given
credit for any vacation and sick leave time accrued, but unused, as of the day
immediately preceding the Effective Time (or, if later, the time of the
transition of such employee from a Company Employee Plan to a Partner Employee
Plan). Notwithstanding the foregoing, in lieu of causing the Continuing
Employees to participate in Partner Employee Plans as of the Effective Time,
Partner may, in its sole discretion, as to any one or more of such benefits,
cause the Continuing Employees to continue to participate in a Company Employee
Plan providing the relevant benefit described in the first sentence of this
paragraph for a reasonable transition period after the Effective Time. Each
Continuing Employee shall be given credit, for purposes of any service
requirements for participation or vesting (but not benefit accrual for purposes
of any defined benefit pension plan), for his or her period of service with
Company credited under a similar plan prior to the Closing Date, subject to
appropriate break in service rules. Each such employee shall, with respect to
any Partner plans or programs which have co-payment, deductible or other
co-insurance features, receive credit for any amounts such individual has paid
to date in the plan year of the Effective Time (or, if later, the time of the
transition of such employee from a Company Employee Plan to a Partner Employee
Plan) under comparable plans or programs maintained by Company prior to the
Effective Time. Each Continuing Employee and eligible dependent who, at the
Effective Time (or, if later, the time of the transition of such employee from a
Company Employee Plan to a Partner Employee Plan), was participating in an
employee group health plan maintained by Company shall not be excluded from
Partner's employee group health plan or limited in coverage thereunder by reason
of any waiting period restriction or pre-existing condition limitation to the
extent such restriction or limitation did not apply to such Continuing Employee
as of the Effective Time (of, if later, the time of transition of such employee
from a Company Employee Plan to a Partner Employee Plan) under Company's group
health plan.
(c) Partner shall (or shall cause the Surviving Corporation to) make all
payments to be paid after the Effective Time pursuant to the provisions
contained in the Retention Policy applicable to all eligible employees of
Company. Without limiting Section 6.11, Partner shall recognize all vesting,
acceleration and other provisions under all written agreements containing change
in control type provisions applicable to Company's officers, employees or
directors in existence today and that have been made available to Partner and
that are listed on Section 6.14(c) of the Company Disclosure Schedule, and
Partner shall promptly make or cause to be made all payments to such individuals
required thereunder.
(d) Notwithstanding any provision in this Agreement to the contrary, but
only to the extent permissible under Section 6.16, Company may facilitate the
elimination of loss of deductions and excise taxes under Sections 280G and 4999
of the Internal Revenue Code with respect to severance payments and other
benefits to be provided to the persons who are party to the agreements described
in Section 3.13(e) of the Company Disclosure Schedule by advancing to such
persons, upon request, an amount equal to the amount such persons are required
to pay to Company to satisfy Company's withholding tax obligation arising from
such persons' exercise of non-statutory stock options during 2000 in order to
increase the amount of their respective "Total 280G Base" calculations shown in
Section 3.13(f) of the Company Disclosure Schedule. Any amount so advanced shall
be evidenced by a full recourse promissory note in a form reasonably
satisfactory to Company and Partner, shall bear interest at the rate of 8% per
annum and shall be payable in full no later than five days following the Closing
Date. The amount of any such advance, together with accrued interest, may be
setoff against, and deducted from, the amount of any payments made to the
persons receiving such advance pursuant to the agreements identified in Section
3.13(e) of the Company Disclosure Schedule. No advance to any person pursuant to
this Section 6.14(d) shall exceed the amount payable to such person pursuant to
the applicable agreements identified in Section 3.13(e) of the Company
Disclosure Schedule.
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(e) Notwithstanding any provision in this Agreement to the contrary,
Company shall cause (i) the aggregate amount of annual bonuses that are paid or
payable to all employees of Company and its Subsidiaries for calendar year 2000
to not exceed $1.8 million and to be allocated among employees in a proportion
that is not materially different from prior practice, (ii) the aggregate amount
of retention and severance benefits to be paid or payable to all employees of
Company and its Subsidiaries under the Retention Policy to not exceed $2.6
million and $1.1 million, respectively, assuming all employees qualify for such
payments, and (iii) the aggregate amount of cash severance payments to be paid
or payable to all employees of Company and its Subsidiaries (exclusive of any
severance payments attributable to the accelerated vesting of options or
restricted stock or performance share awards) pursuant to the agreements
described on Section 3.13(e) of the Company Disclosure Schedule to not exceed
$7.0 million. Company represents and warrants to Partner that, except for the
amounts contemplated in (i) through (iii) of the preceding sentence, there are
no cash amounts which will be payable by Company or any of its Subsidiaries in
connection with the termination of any employment or consulting agreement to
which Company or any of its Subsidiaries is a party or in connection with the
termination of the employment or consulting relationship under any such
agreement.
(f) Notwithstanding anything to the contrary contained in Sections 3.06,
3.08, and 5.01, until the Closing, Company may approve and assign overriding
royalty interests to its geoscientists pursuant to Company's existing Onshore
Geoscientist Overriding Royalty Interest Plan ("Onshore ORI Plan") and Gulf
Coast Geoscientist Overriding Royalty Interest Plan ("Offshore ORI Plan"). As
more particularly described in Section 5.01(k) of the Company Disclosure
Schedule, Company may expose up to $10 million in potential high bids at the
Central Gulf of Mexico Sale #178 ("Sale #178"), which is currently scheduled to
be held in March 2001. The Offshore ORI Plan shall apply to all leases acquired
by Company or Surviving Corporation, as the case may be, at Sale #178 regardless
of whether the sale is held prior to or after the Effective Time, provided that
notwithstanding anything to the contrary contained in this Agreement or in the
Offshore ORI Plan, Surviving Corporation shall not bear an overriding royalty
interest created by virtue of the Offshore ORI Plan that is greater than 2.5%,
proportionately reduced to Surviving Corporation's working interest in the
leases acquired pursuant to Sale #178. Company or Surviving Corporation, as the
case may be, shall convey the appropriate overriding royalty interests to those
geoscientists who qualify for such awards under the Offshore ORI Plan by virtue
of their continuing employment with Company or Surviving Corporation, as the
case may be, at the time of Sale #178 and who otherwise qualify for such awards
under the terms of the Offshore ORI Plan, it being understood that should any of
those geoscientists not be employed by Company or Surviving Corporation,
whichever is appropriate, as of the date of Sale #178, those that are not so
employed shall not be entitled to receive an overriding royalty interest in the
leases acquired pursuant to Sale #178. It is further agreed that until Sale #178
is concluded, only Company's Vice President of Gulf Coast Exploration shall have
the right to terminate the employment of any of Company's Gulf Coast
geoscientists for performance-based reasons, provided that he has received the
prior concurrence of the CEO of Partner. If the Closing occurs prior to Sale
#178, Surviving Corporation shall prepare and submit bids at Sale #178 in
accordance with Company's past practices, up to a total exposure of $10 million,
under the continuing supervision of Company's Vice President of Gulf Coast
Exploration and Vice President of Gulf Coast Operations, in consultation with
the CEO of Partner. Company shall offer to both of its Gulf Coast Vice
Presidents prior to the Effective Time an amendment to their respective
employment agreements or change-of-control employment agreements that extends
until the later of the time currently provided in such agreement or seven days
after the conclusion of Sale #178 the period in which such officer may elect to
terminate his employment and continue to qualify to receive compensation to
which he is entitled by reason of the occurrence of a Change of Control of
Company as defined in his respective agreement.
SECTION 6.15 Registration Statement; Joint Proxy Statement/Prospectus.
The information to be supplied by Company for inclusion in the registration
statement on Form S-4 pursuant to which shares of Partner Common Stock issued in
the Merger will be registered under the Securities Act (the "Registration
Statement"), shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement not
misleading. The information supplied by Company for inclusion in the joint proxy
statement/
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prospectus (the "Joint Proxy Statement") to be sent to the stockholders of
Partner and Company in connection with the meeting of Company's stockholders to
consider this Agreement and the Merger (the "Company Stockholders' Meeting") and
the meeting of Partner's stockholders to consider the Partner Voting Proposal
(the "Partner Stockholders' Meeting") shall not, on the date the Joint Proxy
Statement is first mailed to stockholders of Company or Partner, at the time of
the Company Stockholders' Meeting and the Partner Stockholders' Meeting, contain
any statement which, in light of the circumstances under which it shall be made,
is false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Joint Proxy
Statement not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders' Meeting or the Partner
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to Company or any of its Affiliates,
officers or directors should be discovered by Company which should be set forth
in an amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, Company shall promptly inform Partner. If at any time prior to the
Effective Time any event relating to Partner or any of its Affiliates, officers
or directors should be discovered by Partner which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, Partner shall promptly inform Company.
SECTION 6.16 Pooling Accounting.
From and after the date hereof and until the Effective Time, neither
Company nor Partner, nor any of their respective Subsidiaries, shall knowingly
take any action, or knowingly fail to take any action, that would jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes.
ARTICLE VII.
CONDITIONS TO MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to, or, with respect to
Section 7.01(e), at, the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of
Company as required by the DGCL and the Partner Voting Proposal shall have
been approved by the requisite vote of the stockholders of Partner as
required by the DGCL and the New York Stock Exchange.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Approvals. Other than the Certificate of Merger which shall be
filed in accordance with Section 1.01, all authorizations, consents, orders
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity the failure of which to file,
obtain or occur would have a Partner Material Adverse Effect or a Company
Material Adverse Effect shall have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have been
declared effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity or federal, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Order, or statute, rule, regulation
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(f) New York Stock Exchange Quotation. The shares of Partner Common
Stock to be issued in the Merger shall have been approved for listing on
the New York Stock Exchange.
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SECTION 7.02 Additional Conditions to Obligations of Partner and Merger Sub.
The obligations of Partner and Merger Sub to effect the Merger are subject
to the satisfaction of each of the following conditions, any of which may be
waived, in writing, exclusively by Partner and Merger Sub:
(a) Representations and Warranties. The representations and warranties
of Company set forth in this Agreement, disregarding any "materiality" or
Company Material Adverse Effect qualifications set forth therein, shall be
true and correct as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except (i) for
changes contemplated by this Agreement and (ii) where the failures to be
true and correct, individually or in the aggregate, do not have a Company
Material Adverse Effect, or a material adverse effect upon the consummation
of the transactions contemplated hereby.
(b) Performance of Obligations of Company. Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Partner
shall have received a certificate signed on behalf of Company by the chief
executive officer and the chief financial officer of Company to such
effect.
(c) Tax Opinion. Partner shall have received a written opinion from
Vinson & Elkins L.L.P., counsel to Partner, to the effect that the Merger
will be treated for Federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code; provided that if Vinson & Elkins L.L.P. does not render such opinion,
this condition shall nonetheless be deemed satisfied if Brobeck, Phleger &
Harrison LLP renders such opinion to Partner (it being agreed that Partner
and Company shall each provide reasonable cooperation to Vinson & Elkins
L.L.P. or Brobeck, Phleger & Harrison LLP, as the case may be, to enable
them to render such opinion).
(d) Pooling of Interests. Partner shall have received a written
opinion, dated as of the Closing Date, from Arthur Andersen LLP, in form
and substance reasonably satisfactory to Partner (the "Pooling Letter")
that, based in part on Arthur Andersen LLP's concurrent written opinion
(the "Pooling Entity Letter") that Company is a "poolable entity," the
Merger, for financial accounting purposes, is a pooling of interests;
provided, however, that the condition set forth in this Section 7.02(d)
shall not apply if Partner is precluded from accounting for the Merger in
accordance with the pooling of interests method of accounting solely by
reason of an action taken by Partner or any of its Affiliates subsequent to
the date of this Agreement other than any such action that is pursuant to
the terms of, or contemplated by, this Agreement.
SECTION 7.03 Additional Conditions to Obligations of Company.
The obligation of Company to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by Company:
(a) Representations and Warranties. The representations and warranties
of Partner and Merger Sub set forth in this Agreement, disregarding any
"materiality" or Partner Material Adverse Effect qualifications set forth
therein, shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except (i) for changes contemplated by this Agreement and
(ii) where the failures to be true and correct, individually or in the
aggregate, do not have a Partner Material Adverse Effect, or a material
adverse effect upon the consummation of the transactions contemplated
hereby.
(b) Performance of Obligations of Partner and Merger Sub. Partner and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and Company shall have received a certificate signed on
behalf of Partner by the chief executive officer and the chief financial
officer of Partner to such effect.
(c) Tax Opinion. Company shall have received the opinion of Brobeck,
Phleger & Harrison LLP, counsel to Company, to the effect that the Merger
will be treated for Federal income tax purposes as a
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tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; provided that if Brobeck, Phleger & Harrison LLP
does not render such opinion, this condition shall nonetheless be deemed
satisfied if Vinson & Elkins L.L.P. renders such opinion to Company (it
being agreed that Partner and Company shall each provide reasonable
cooperation to Brobeck, Phleger & Harrison LLP or Vinson & Elkins L.L.P.,
as the case may be, to enable them to render such opinion).
(d) Pooling of Interests. Company shall have received the Pooling
Letter, dated as of the Closing Date, from Arthur Andersen LLP that, based
in part on Arthur Andersen LLP's Pooling Entity Letter that Company is a
"poolable entity," the Merger, for financial accounting purposes, is a
pooling of interests; provided, however, that the condition set forth in
this Section 7.03(d) shall not apply if Partner is precluded from
accounting for the Merger in accordance with the pooling of interests
method of accounting solely by reason of an action taken by Company or any
of its Affiliates subsequent to the date of this Agreement other than any
such action that is pursuant to the terms of, or contemplated by, this
Agreement.
ARTICLE VIII.
TERMINATION AND AMENDMENT
SECTION 8.01 Termination.
This Agreement may be terminated at any time prior to the Effective Time
(with respect to Section 8.01(b) through Section 8.01(g), by written notice by
the terminating party to the other party), whether before or after approval of
the matters presented in connection with the Merger by the stockholders of
Company or Partner:
(a) by mutual written consent of Partner and Company; or
(b) by either Partner or Company if the Merger shall not have been
consummated by May 31, 2001 (the "Outside Date"); provided that the right
to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date; or
(c) by either Partner or Company if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each
case having the effect of permanently enjoining or otherwise permanently
prohibiting the Merger; or
(d) by Partner or Company, if, at the Company Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Company in favor of this Agreement and the Merger shall not
have been obtained, or if, at the Partner Stockholders' Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of
Partner in favor of the Partner Voting Proposal shall not have been
obtained; or
(e) by Partner, if (i) the Board of Directors of Company shall have
withdrawn or modified, in a manner adverse to Partner, its recommendation
of this Agreement or the Merger; (ii) the Board of Directors of Company
shall have recommended to the stockholders of Company a Superior Proposal;
or (iii) a tender offer or exchange offer for more than 35% of the
outstanding shares of capital stock of Company is commenced and the Board
of Directors of Company recommends in favor of the acceptance of such
offer; or
(f) by Company, if the Board of Directors of Partner shall have
withdrawn or modified, in a manner adverse to Company, its recommendation
of the Partner Voting Proposal; or
(g) by Partner or Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) would, if uncured at
Closing, cause the conditions set forth in Section 7.02(a) or Section
7.02(b) (in the case of
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termination by Partner) or Section 7.03(a) or Section 7.03(b) (in the case
of termination by Company) not to be satisfied, and (ii) shall not have
been cured within twenty (20) business days following receipt by the
breaching party of written notice of such breach from the other party.
SECTION 8.02 Effect of Termination.
In the event of termination of this Agreement as provided in Section 8.01,
this Agreement shall, except as provided herein, immediately become void;
provided, upon such termination (i) the provisions of Section 6.12, this Section
8.02, Section 8.03 and Article IX of this Agreement and the Confidentiality
Agreement shall remain in full force and effect and survive any termination of
this Agreement, (ii) except as set forth in Section 6.12, this Section 8.02 and
Section 8.03, there shall be no liability or obligation on the part of Company,
Partner, Merger Sub or their respective officers, directors, stockholders or
Affiliates. Nothing in this Agreement shall relieve any party from liability for
the willful and knowing material breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement. The rights and
remedies available to each party are expressly intended to be cumulative and may
be exercised singly or concurrently at such party's sole discretion.
SECTION 8.03 Fees and Expenses.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated, except that expenses incurred in connection with the
filing fee for the Joint Proxy Statement and printing and mailing the proxy
materials and the filing fee for the Merger under the HSR Act, if required,
shall be shared equally by Partner and Company.
(b) Company shall pay Partner a termination fee of $15,000,000 upon the
earliest to occur of the following events:
(i) the consummation by Company of, or the execution by Company of a
definitive agreement providing for, an Acquisition Proposal within twelve
(12) months after the termination of this Agreement by Partner or Company
pursuant to Section 8.01(b) or Section 8.01(d) (for failure to obtain
Company stockholder approval) if an Acquisition Proposal has been publicly
announced and not subsequently abandoned or withdrawn prior to the date of
termination, in the event of termination under Section 8.01(b), or the date
of the Company Stockholders' Meeting, in the event of termination under
Section 8.01(d); or
(ii) the termination of this Agreement by Partner pursuant to Section
8.01(e).
(c) Partner shall pay Company a termination fee of $15,000,000 if this
Agreement is terminated by Company or Partner pursuant to Section 8.01(b) or
Section 8.01(d) (for failure to obtain Partner stockholder approval) if (i) a
Partner Acquisition Proposal has been publicly announced and not subsequently
abandoned or withdrawn prior to the date of termination, in the event of
termination under Section 8.01(b), or the date of the Partner Stockholders
Meeting, in the event of termination under Section 8.01(d), and (ii) such
Partner Acquisition Proposal is consummated, or Partner executes a definitive
agreement providing for such Partner Acquisition Proposal, within 12 months
after such termination;
(d) The expenses and fees, if applicable, payable pursuant to Section
8.03(b) shall be paid by wire transfer within one business day after the first
to occur of the events described in Section 8.03(b)(i) or Section 8.03(b)(ii).
The expenses and fees, if applicable, payable pursuant to Section 8.03(c) shall
be paid by wire transfer within one business day after the consummation of the
Partner Acquisition Proposal referred to in Section 8.03(c)(ii).
SECTION 8.04 Amendment.
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the
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Merger by the stockholders of Company or of Partner, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.05 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Section 1.04, Article II,
Section 6.11, Section 6.12, Section 6.13, Section 6.14, and Article IX, and the
agreements of the Affiliates delivered pursuant to Section 6.09. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
SECTION 9.02 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Partner or Merger Sub, to
Stone Energy Corporation
625 East Kaliste Saloom Road
Lafayette, Louisiana 70508
with a copy to:
Vinson & Elkins L.L.P.
1325 Avenue of the Americas
New York, New York 10019
Attention: Alan P. Baden
Eric S. Shube
(b) if to Company, to
Basin Exploration, Inc.
1670 Broadway, Suite 2800
Denver, Colorado 80202
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with a copy to
Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard
Broomfield, Colorado 80021
Attention: Paul Hilton
SECTION 9.03 Definitions.
For purposes of this Agreement:
(a) "Company Material Adverse Effect" means any change, effect, event,
occurrence or state of facts that is or could reasonably be expected to be
materially adverse to the business, properties, results of operations or
condition (financial or otherwise) of Company and its Subsidiaries taken as
a whole or that could reasonably be expected to materially impair the
ability of Company to perform its obligations under this Agreement or to
consummate the Merger; provided that none of the following, alone or in
combination, shall constitute a Company Material Adverse Effect or be
considered in determining whether a Company Material Adverse Effect has
occurred or will occur: any change, effect, event, occurrence, state of
facts or development arising out of, resulting from or relating to (i) the
economy in general, (ii) the oil and gas exploration and production
industry in general or in the Gulf of Mexico (including, without
limitation, changes in commodity prices, general market prices and
regulatory changes) or (iii) the transactions contemplated by this
Agreement or the announcement thereof (provided, however, that with respect
to any loss of personnel, this clause (iii) shall only be operative if
management of Company provides Partner (if requested) with assurances
reasonably acceptable to Partner that management of Company will undertake
to furnish appropriate coverage for a reasonable transition period).
(b) "Partner Material Adverse Effect" means any change, effect, event,
occurrence or state of facts that is or could reasonably be expected to be
materially adverse to the business, properties, results of operations or
condition (financial or otherwise) of Partner and its Subsidiaries taken as
a whole or that could reasonably be expected to materially impair the
ability of Partner to perform its obligations under this Agreement or to
consummate the Merger; provided that none of the following, alone or in
combination, shall constitute a Partner Material Adverse Effect or be
considered in determining whether a Partner Material Adverse Effect has
occurred or will occur: any change, effect, event, occurrence, state of
facts or development arising out of, resulting from or relating to (i) the
economy in general or (ii) the oil and gas exploration and production
industry in general or in the Gulf of Mexico (including, without
limitation, changes in commodity prices, general market prices and
regulatory changes).
(c) "Partner Acquisition Proposal" shall mean any proposal or offer
from a third party involving an acquisition of Partner, whether in the form
of a tender offer for, or merger or other business combination with,
Partner.
SECTION 9.04 Interpretation.
When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to October 28, 2000.
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SECTION 9.05 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 9.06 Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.13 is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder; provided that the Confidentiality Agreement shall remain in
full force and effect until the Effective Time. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement and
its respective disclosure schedule, neither Company nor Partner makes any other
representations or warranties, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to the other or
the other's representatives of any documentation or other information with
respect to any one or more of the foregoing.
SECTION 9.07 Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware without regard to any applicable principles of
conflicts of law that would require the application of the laws of another
jurisdiction.
SECTION 9.08 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;
provided, however, that Merger Sub may assign, in its sole discretion, any of or
all its rights, interests and obligations under this Agreement to Partner or to
any direct or indirect wholly-owned Subsidiary of Partner, but no such
assignment shall relieve Partner or Merger Sub of its obligations hereunder if
its transferee does not perform such obligations. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 9.09 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or other applicable law, or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible;
provided, however, that nothing herein shall require any party to agree to any
modification that would affect the economic or legal substance of the
transactions contemplated hereby in any manner materially adverse to such party.
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IN WITNESS WHEREOF, Partner, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
<TABLE>
<S> <C>
STONE ENERGY CORPORATION PARTNER ACQUISITION CORP.
By: /s/ D. PETER CANTY By: /s/ D. PETER CANTY
---------------------------------------- ----------------------------------------
Title: President and Chief Operating Officer Title: President and Chief Operating Officer
------------------------------------- -------------------------------------
BASIN EXPLORATION, INC.
By: /s/ MICHAEL S. SMITH
----------------------------------------
Title: Chief Executive Officer
-------------------------------------
</TABLE>
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