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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Dated of earliest event reported) September 29, 1998
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Resource America, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-4408 72-0654145
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(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.)
1521 Locust Street, 4th Floor Philadelphia, PA 19102
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (215)546-5005
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Item 2. Acquisition or Disposition of Assets
On September 29, 1998, the Company acquired The Atlas Group, Inc.
("Atlas") through a merger (the "Merger") with the Company's wholly-owned
subsidiary, Atlas America, Inc. ("AAI"). The Merger was consummated pursuant to
an Agreement and Plan of Merger dated July 13, 1998, as amended by Amendment No.
1 thereto dated September 29, 1998 by and among the Company, AAI, Atlas and
certain shareholders of Atlas, (collectively, the "Agreement").
Terms of the Merger; Merger Consideration. The Merger consideration was
2,183,709 shares of the Company's Common Stock and cash of $6.9 million. Atlas
shareholders received certain "piggy-back" registration rights, effective during
the period from September 30, 1999 through September 29, 2000, with respect to
the shares of the Company's Common Stock received by them. Atlas shareholders
are also eligible to receive incentive compensation should Atlas'
post-acquisition earnings exceed a specified amount during the four years
following the Merger. The incentive compensation is equal to 10% of Atlas'
aggregate earnings in excess of that amount equal to an annual (but
uncompounded) return of 15% on $63 million (increased to include any amount paid
by the Company for any post-merger energy acquisitions). Incentive compensation
is payable, at the Company's option, in cash or in shares of the Company's
Common Stock, valued at the average closing price of the Company's Common Stock
for the ten trading days preceding September 30, 2003.
The Agreement requires AAI to indemnify the officers and directors of
Atlas until September 29, 2000 against claims based upon their service as
officers and directors of Atlas (except for claims based upon breach of the
Agreement or upon a failure to disclose information as required by the
Agreement) and against claims alleging wrongdoing by any of them outside the
scope of their employment with Atlas. The Agreement requires the principal Atlas
shareholders to indemnify the Company for losses resulting from a breach of any
representation or warranty given by Atlas. The maximum aggregate amount that the
shareholders are required to pay as a result of this indemnification is $10
million. The shareholders will have no indemnification obligation until the
aggregate loss (including expenses) exceeds $750,000 and then only to the extent
loss exceeds $250,000. As security for this indemnification, 698,651 shares of
the Common Stock issued in connection with the Merger are being held in escrow
until September 29, 2002.
The Merger consideration paid by the Company was based upon the
Company's valuation of Atlas' assets and the price of the Company's Common
Stock. There were no material relationships between the Company, its officers,
directors or affiliates, and Atlas or its officers, directors or affiliates,
prior to the Merger. The cash paid in connection with the Merger was derived
from the Company's working capital. It is anticipated that any cash required for
payment of incentive compensation will come from the earnings of Atlas from
which the incentive compensation has been derived.
Business of Atlas. Atlas currently owns interests in, operates or
manages more than 1,400 natural gas and oil wells and 650 miles of gas gathering
pipelines, located
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predominantly in Pennsylvania and Ohio. Atlas has undeveloped oil and gas leases
covering more than 155,000 acres and manages 28 energy-related partnerships and
joint ventures.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The financial statements required by Item 7(a) will be filed
by amendment pursuant to Item 7(a)(4).
(b) Pro Forma Financial Information
The pro forma financial statements required by Item 7(b) will
be filed by amendment pursuant to Item 7(b)(2).
(c) Exhibits
2.1 Agreement and Plan of Merger among Resource America,
Inc., Atlas America, Inc., The Atlas Group, Inc. and
certain shareholders of The Atlas Group, Inc.
2.2 Amendment No. 1 to Agreement and Plan of Merger
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 14, 1998
RESOURCE AMERICA, INC.
By: /s/ Daniel G. Cohen
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Daniel G. Cohen
President
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of this
13th day of July, 1998, is entered into by and among Resource America, Inc., a
Delaware corporation ("RAI"), Atlas America, Inc., a Pennsylvania corporation
and a wholly-owned subsidiary of RAI ("AAI"), The Atlas Group, Inc., a
Pennsylvania corporation ("Atlas") and the shareholders of Atlas as set forth on
Exhibit "A" hereto (the "Principal Shareholders").
WITNESSETH:
WHEREAS, Atlas is a Pennsylvania based company engaged through its
subsidiaries and other affiliates in the provision of investment programs in
energy, the management of energy assets for its own accounts and for investors
and in the acquisition, exploitation, exploration, development, production,
transportation and marketing of natural gas and oil; and
WHEREAS, RAI, AAI, Atlas and the Principal Shareholders of Atlas desire
to have Atlas merge into AAI on the terms and conditions herein set forth,
whereby Atlas will become a wholly-owned subsidiary of RAI (the "Merger").
NOW, THEREFORE, for the purpose of consummating the above transaction
and in consideration of the promises and mutual covenants herein contained, and
intending to be legally bound, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex I hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
ARTICLE 2
THE MERGER
2.1 Effective Date of the Merger. Subject to the provisions of this
Agreement, a Certificate of Merger (the "Certificate of Merger") in such form as
required by the relevant provisions of the Pennsylvania Business Corporation Law
(the "BCL") shall be duly prepared, executed and acknowledged by each of the
parties hereto and thereafter delivered to the Secretary of State of the
Commonwealth of Pennsylvania for filing, as provided in the BCL, on the Closing
Date. The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the Commonwealth of Pennsylvania or on
such date thereafter as is provided in the Certificate of Merger (the "Effective
Date").
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2.2 Closing. The closing of the Merger (the "Closing") will take place
at the offices of Ledgewood Law Firm, P.C., 1521 Locust Street, 8th Floor,
Philadelphia, PA at 10:00 a.m., prevailing time, on (i) the later of (A)
September 30, 1998 and (B) the first Business Day after the last of the
conditions set forth in Article 7 is satisfied or waived, or (ii) on such other
date as is specified by AAI and Atlas after all of the conditions to the Merger
set forth in Article 7 have been satisfied or waived, subject to the rights of
termination and abandonment hereinafter set forth (the "Closing Date"). It is
anticipated that the Closing Date and the Effective Date will be the same.
2.3 Effects of the Merger.
(a) On the Effective Date (i) the separate existence of Atlas
shall cease and Atlas shall be merged with and into AAI, (ii) the certificate of
incorporation of AAI shall be the certificate of incorporation of Atlas after
the merger (sometimes referred to herein as the "Continuing Corporation"), (iii)
the bylaws of AAI as in effect immediately prior to the Effective Date shall be
the bylaws of the Continuing Corporation, (iv) the directors of AAI at the
Effective Date, together with James O'Mara, Bruce Wolf and Tony Banks shall be
the directors of the Continuing Corporation and hold office as provided in the
bylaws of the Continuing Corporation; and (v) the officers of Atlas at the
Effective Date shall be the officers of the Continuing Corporation, provided
that the directors may elect such other officers as deemed appropriate.
(b) At and after the Effective Date, the Continuing
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of AAI and Atlas; and all singular rights,
privileges, powers and franchises of each of AAI and Atlas, and all property,
real, personal and mixed, and all debts due to either of AAI and Atlas on
whatever account and all other things in action or belonging to each of AAI and
Atlas, shall be vested in the Continuing Corporation; and the title to any real
estate vested by deed or otherwise, in either of AAI and Atlas, shall not revert
or be in any way impaired; but all rights of creditors and all liens upon any
property of either of AAI and Atlas shall be preserved unimpaired, and all
debts, liabilities and duties of AAI and Atlas shall thereafter attach to the
Continuing Corporation, and may be enforced against it to the same extent as if
such debts and liabilities had been incurred by it.
ARTICLE 3
MERGER CONSIDERATION
3.1 Outstanding AAI Common Stock. The shares of AAI capital stock
issued and outstanding immediately prior to the Merger shall, by virtue of and
after the Merger, remain issued and outstanding shares of the capital stock of
the Continuing Corporation.
3.2 Outstanding RAI Common Stock. The shares of common stock, par value
$.01 per share, of RAI ("RAI Common Stock") issued and outstanding immediately
prior to the Merger shall, on and after the Merger, remain issued and
outstanding shares of RAI Common Stock.
3.3 Outstanding Atlas Common Stock. The shares of Atlas Common Stock
issued and outstanding and owned by the shareholders of Atlas (the
"Shareholders") immediately
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prior to the Merger shall (such holdings on such date will be as set forth on
Exhibit "B" hereto), by virtue of the Merger, automatically and without any
action on the part of any holder thereof, become and be converted into that
number of shares of RAI Common Stock calculated by multiplying the number of
such shares of Atlas Common Stock owned by such Shareholder by the "Exchange
Ratio" determined as follows: divide (i) Seventy Million Dollars ($70,000,000),
plus (ii) the amount that would be required to be paid upon the exercise of all
then outstanding options to purchase Atlas Common Stock, whether or not
currently exercisable, plus or minus (iii) the adjustment required pursuant to
Section 6.8 hereof (the combination of (i), (ii) and (iii) being referred to
herein as the "Equity Consideration"), by the Index Price (as hereinafter
defined) and divide the quotient by the sum of the number of shares of Atlas
Common Stock that are issued and outstanding immediately prior to the Merger
plus the number of shares of Atlas Common Stock subject to outstanding options,
whether or not currently exercisable, immediately prior to the Merger. As used
in this Agreement, the term "Index Price" shall mean $24.025, which was the
average of the closing prices per share of RAI Common Stock as quoted on the
National Association of Securities Dealers, Inc. National Market System
("NASDAQNMS") for the ten (10) consecutive trading days up to and including June
22, 1998. Any shares of Atlas Common Stock owned by Atlas shall be cancelled and
retired upon the Effective Date and no consideration shall be issued in exchange
therefor.
By way of example, if, immediately prior to the Merger the
number of outstanding shares of Atlas Common Stock is 280,430, the number of
shares of Atlas Common Stock into which options are convertible is 10,752, the
amount that would be required to convert all of the options into Atlas Common
Stock is $10,752, the aggregate amount of the items set forth in clause (i) of
Section 6.8 is $25,000,000, the reduction required by clause (ii) of Section 6.8
is zero and the Index Price is $24,025, the Exchange Ratio would be:
$70,000,000 - $25,000,000 - 0 + $10,752
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280,430 + 10,752 =
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$24.025
$45,010,752
291,182 = 154.5794 = 6.4341
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$24.025 $ 24.025
On those facts, each Shareholder would be entitled to 6.4341 shares of RAI
Common Stock for each share of Atlas Common Stock owned by him, and each holder
of options to acquire shares of Atlas Common Stock would be entitled to options
to acquire that number of RAI Common Stock equal to 6.4341 times the number of
shares of Atlas Common Stock for which he held options at an exercise price of
$0.15542 per share of RAI Common Stock. The aggregate number of RAI shares
issuable upon the merger would be 1,804,315 (subject to reduction due to
fractional shares not being issued), and an additional 69,179 (subject to
reduction due to fractional shares not being issued) shares would be issuable
upon exercise of the options.
Subsequent to the Effective Date, certain former Shareholders
of Atlas who are officers, directors or employees of the Continuing Corporation
will have the right to exchange, within five (5) business days of the Effective
Date, shares of RAI Common Stock received in the Merger for up to Five Million
Dollars ($5,000,000) of cash from RAI. The list of persons entitled to such
exchange option shall be determined by Atlas management prior to the
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Effective Date, provided that no single individual shall be allocated more than
Three Million Dollars ($3,000,000) of such cash amounts. Such exchange will be
made at the Index Price.
3.4 Shareholder Rights; Stock Transfers. On the Effective Date, the
Shareholders shall cease to be, and shall have no rights as, shareholders of
Atlas, other than to receive the Merger consideration provided under Sections
3.3 above and 3.5 below. After the Effective Date, there shall be no transfers
on the stock transfer books of Atlas or AAI of the shares of Atlas Common Stock
which were issued and outstanding immediately prior to the Effective Date.
3.5 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of RAI Common Stock, and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Merger. Instead, RAI
shall pay to each Shareholder, if such Shareholder would otherwise be entitled
to a fractional share, an amount in cash determined by multiplying such
fractional share by the Index Price.
3.6 Exchange Procedures. As promptly as practicable after the Effective
Date, RAI shall send or cause to be sent to each Shareholder transmittal
materials for use in exchanging such certificates of Atlas Common Stock for the
consideration set forth in Sections 3.3 and 3.5 above. Any fractional share
check which a Shareholder shall be entitled to receive in exchange for such
Shareholder's shares of Atlas Common Stock, and any dividends paid on any shares
of RAI Common Stock that a Shareholder shall be entitled to receive prior to the
delivery to American Stock Transfer & Trust Company (the "Exchange Agent") of
certificates representing all of such Shareholder's shares of Atlas Common
Stock, will be delivered to such Shareholder only upon delivery to the Exchange
Agent of the certificates representing all of such shares (or indemnity
satisfactory to RAI and the Exchange Agent, in their judgment, if any of the
certificates are lost, stolen or destroyed). No interest will be paid on any
such fractional share checks or dividends which any Shareholder shall be
entitled to receive. After the Effective Date, to the extent permitted by law,
each Shareholder shall be entitled to vote at any meeting of holders of RAI
Common Stock that number of whole shares of RAI Common Stock into which such
Shareholder's shares of Atlas Common Stock are converted, regardless of whether
such Shareholder has exchanged such Shareholder's certificates representing
Atlas Common Stock for certificates representing RAI Common Stock in accordance
with the provisions of this Agreement.
3.7 Options. Any valid option to purchase shares of Atlas Common Stock
(an "Atlas Option"), outstanding and unexercised immediately prior to the
Merger, shall, by virtue of the Merger, automatically and without any action on
the part of the holder thereof, become and be converted into an option to
purchase that number of shares of RAI Common Stock as shall equal the Exchange
Ratio multiplied by that number of shares of Atlas Common Stock which such Atlas
Option entitled the holder thereof to purchase, at an exercise price equal to
the exercise price per share of the Atlas Option divided by the Exchange Ratio
(hereinafter collectively referred to as the "RAI Options"). No fractional
shares of RAI Common Stock, and no certificate or scrip therefor, or other
evidence of ownership thereof, will be issued upon the exercise of any RAI
Option; instead, RAI shall pay to the holder of an exercised RAI Option, if he
would otherwise be entitled to a fractional share, an amount in cash determined
by multiplying such fractional share by the closing price per share of RAI
Common Stock as quoted on the NASDAQNMS on the day of the exercise of the RAI
Option. The maximum number of shares of Atlas Common Stock which are issuable
upon exercise of the Atlas Options, as of the date hereof, is set forth on
Schedule 4.2 hereto.
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3.8 Anti-Dilution Provisions. In the event RAI changes the number of
shares of RAI Common Stock issued and outstanding prior to the Effective Date as
a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding RAI Common Stock, and the record
date therefor shall be prior to the Effective Date, the Index Price shall be
proportionately adjusted.
3.9 Stock Received. The shares of RAI Common Stock received by the
Shareholders shall be duly authorized, validly issued, fully paid and
nonassessable and shall be legended and restricted as set forth in Section 4.28
hereof.
3.10 Tax-Free Reorganization. The parties intend that the Merger
qualify as a reorganization under Section 368(a)(2)(D) of the Internal Revenue
code of 1986, as amended (the "Code") and the regulations promulgated
thereunder, and that the transfer of shares of Atlas Common Stock and the Atlas
Options in exchange for shares of RAI Common Stock and RAI Options qualify as
tax-free. The parties acknowledge that each is relying on its own counsel in
evaluating the tax consequences of the Merger. RAI, AAI and the Continuing
Corporation covenant that they will comply with the requirements of Treas. Reg.
ss.1.368-3.
3.11 Incentive Payment.
(a) Incentive payment ("Incentive Payment") is payable
hereunder, subject to a maximum total amount of Fifteen Million Dollars
($15,000,000).
(b) Incentive Payment will be available to persons who are
selling shareholders of Atlas who will also be employees of the Continuing
Corporation.
(c) The percentage interest of each participant eligible for a
portion of Incentive Payment will be determined by the Board of Directors of the
Continuing Corporation promptly after the Closing Date.
(d) Incentive Payment will be due sixty days after the closing
of RAI's fiscal year ending September 30, 2003 (or, if RAI's fiscal year shall
change, the fiscal year ending after April 1, 2003 and on or before March 31,
2004). It will be payable, at RAI's option, in either cash or common stock of
RAI (or any successor thereto). If paid in common stock, and RAI (or any
successor thereto) has its stock traded on a public exchange, such stock will be
valued at the average closing price of the common stock of RAI (or any successor
thereto) for the ten trading days up to and including the last day of such
fiscal year. If RAI (or any successor thereto) does not have its stock traded on
a public exchange, such stock will be valued at net book value as of the last
day of the immediately preceding calendar year.
(e) Incentive Payment will be equal to ten percent (10%) of
the Continuing Corporation's earnings (before taxes but after all other items
including interest, depreciation and amortization) in excess of a fifteen
percent (15%) annualized (but not compounded) return on "RAI's Consideration."
The term "RAI's Consideration" shall mean $70,000,000, adjusted from time to
time to include consideration for any subsequent energy acquisitions, if any,
(including the acquisition of Resource Energy, Inc., which shall be treated for
the purpose of this paragraph as having been acquired at its book value
regardless of the form of the transaction or the consideration recited in the
transaction documents) by the Continuing Corporation. By way of example, if the
measuring period is exactly five years, RAI's
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consideration is $70,000,000 throughout the first year, and $100,000,000 for the
remaining four years, and the aggregate earnings before taxes for the five years
are $200,000,000 the Incentive Payment would be $12,950,000, calculated as
follows: (i) 15% on $70,000,000 = $10,500,000 and (ii) 15% on $100,000,000 =
$15,000,000 for each of four years, so the threshold is $70,500,000. Ten percent
of the excess of $200,000,000 over $70,500,000, or $129,500,000, is $12,950,000.
If, with RAI's Consideration unchanged, the earnings before taxes has been
$220,500,000 or more, the Incentive Payment would be $15,000,000.
(f) An individual's percentage interest in the Incentive
Payment will be available only to individuals who remain employed by the
Continuing Corporation for at least three years from the Effective Date, unless
such individual's employment is terminated by the Continuing Corporation other
than for cause. An eligible individual's share of the Incentive Payment will be
the total Incentive Payment (subject to the maximum amount set forth above)
multiplied by such individual percentage interest and multiplied by a fraction,
the numerator of which is the number of whole months the individual was employed
by the Continuing Corporation from the Effective Date to the close of the fiscal
year used to determine the Incentive Payment and the denominator of which shall
be the total number of whole months in such period.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ATLAS AND THE SHAREHOLDERS
Atlas and the Principal Shareholders hereby represent and warrant to
RAI and AAI as follows:
4.1 Organization and Good Standing. Atlas and each of its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of formation, and has full corporate power and
authority to carry on its business as it is now being conducted. Atlas and each
of its Subsidiaries is qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a significant adverse
effect.
4.2 Capitalization. The authorized capital stock of Atlas consists of
2,000,000 shares of common stock no par value (the "Atlas Common Stock"), of
which 280,430 shares are issued and outstanding as of the date of this
Agreement. All of the outstanding shares of Atlas Common Stock have been validly
issued and are fully paid and nonassessable. Except as described in Schedule
4.2, (i) no shares of Atlas Common Stock are held in treasury, (ii) there are no
other issued or outstanding equity securities of Atlas and (iii) there are no
other issued or outstanding securities of Atlas convertible at any time into
equity securities of Atlas. Except for outstanding stock options described in
Schedule 4.2, Atlas is not subject to any commitment or obligation that would
require the issuance or sale of additional shares of Atlas Common Stock at any
time under options, rights, warrants or any other obligations that require Atlas
to purchase or redeem any Atlas Common Stock or other securities convertible
into, exchangeable for or evidencing the right to subscribe for any capital
stock or other ownership right in Atlas.
4.3 Subsidiaries. Each of the Subsidiaries (direct and indirect) of
Atlas is listed on Schedule 4.3. All of the outstanding shares of capital stock
of each of Atlas's Subsidiaries
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are duly authorized, validly issued, fully paid and nonassessable and are owned
of record by Atlas and certain of its wholly-owned Subsidiaries. There are no
existing options, warrants, calls, commitments or agreements obligating any
Subsidiary to issue shares of capital stock of any Subsidiary to any person or
that require any of the Subsidiaries to purchase or redeem any common stock or
other securities convertible into, exchangeable for or evidencing the right to
subscribe for any capital stock or other ownership right in any Subsidiaries.
Except for the capital stock of Atlas's Subsidiaries and except as set forth on
Schedule 4.3, neither Atlas nor 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.
4.4 Authority; No Conflicts.
4.4.1 Atlas has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Atlas, subject only to the approval of this
Agreement and the Merger by the Shareholders. Pursuant to Section 6.1, the
Principal Shareholders who own approximately 99.1% of its Atlas Common Stock
have agreed to give their irrevocable proxies to RAI to vote in favor of the
Merger; provided, however, that the Irrevocable Proxy to be delivered by the
Trustee of The Atlas Energy Group, Inc. Employee Stock Ownership Plan (the
"ESOP") shall be for that number of shares of Atlas Common Stock which the
Trustee has been instructed by plan participants and the ESOP Committee to vote
in favor of the Merger. This Agreement has been duly executed and delivered by
Atlas and, assuming the due authorization, execution and delivery by RAI and
AAI, constitutes the valid and binding obligation of Atlas, enforceable in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally and (ii) the availability of
injunctive relief and other equitable remedies.
4.4.2 Except as described in Schedule 4.4, the execution and
delivery of this Agreement do not and the consummation of the transactions
contemplated hereby will not (i) conflict with or result in any violation or
breach of any provision of the certificate of incorporation or bylaws of Atlas,
or (ii) result in any violation or breach of, or constitute a default under, the
terms, conditions or provisions of any agreement, indenture, mortgage or
instrument to which Atlas or any of its Subsidiaries is a party or to which its
property is subject, or (iii) subject to obtaining the approval of the
Shareholders of the Merger and compliance with the requirements of Section 4.5
below, conflict with or result in any violation of any judgment, order, decree,
statute or law applicable to Atlas or any of its Subsidiaries or any of its or
their properties or assets.
4.5 Consents. Except (i) as set forth on Schedule 4.5 hereto or (ii)
for filings pursuant to the H-S-R Act (to the extent necessary), no filing,
consent, approval or authorization of any governmental authority or of any third
party on the part of the Companies is required in connection with the execution
and delivery of this Agreement by Atlas or the consummation of any of the
transactions contemplated hereby.
4.6 Title to Assets Generally. Subject to Section 4.7 and except for
Permitted Encumbrances and as set forth on Schedule 4.6, the Companies have
good, marketable and valid title in and to all of the assets purported to be
owned (but not leased) by each of them
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and reflected in the Companies' Financial Statements (as defined below), free
and clear of any mortgage, conditional sale agreement, security interest, lease,
pledge, hypothecation, lien or other encumbrance.
4.7 Ownership and Title to Oil and Gas Properties. Subject to the terms
and provisions of the Leases, agreements relating to the partnerships, joint
ventures and other entities (the "Partnerships") set forth on Schedule 4.3, and
assignments and farmout, operating, marketing, transportation and other
agreements relating to the Leases and the Wells and except for Permitted
Encumbrances and except as set forth on Schedule 4.6:
4.7.1 The Companies, either directly or indirectly through the
Partnerships, have good and marketable title to the net revenue interests in the
oil and gas wells set forth on Schedule 4.7 (the "Wells"), and the undeveloped
portions of the oil and gas leases set forth on Schedule 4.7 (the "Leases"), and
the pooled units, drilling units or proration units relating thereto (the
"Subject Interests"), free and clear of any claims by any person claiming by,
through or under the Companies, but not otherwise, and the Companies have not
created any liens, claims, security interests and encumbrances with respect to
the Subject Interests. None of the Companies is in default in any material
respect with any Lease or agreement related to the Subject Interests, nor has
any event occurred which, with the passage of time or giving of notice or both,
would constitute such a default.
4.7.2 The Companies' title to the Subject Interests (a)
entitles the Companies to receive not less than the net revenue interests for
all oil and gas produced, saved and marketed from or attributable to the Wells
as set forth on Schedule 4.7, and (b) obligates the Companies to bear the costs
and expenses relating to the maintenance, development and operation of the Wells
in an amount not greater than the working interests of the Companies for the
Wells as set forth on Schedule 4.7 unless the Companies' net revenue interest
therein is proportionately increased.
4.8 Condition of Assets. All of the assets (whether real or personal,
owned or leased) used by the Companies in their business have been maintained in
accordance with normal equipment maintenance practices and are in normal
operating condition, having due regard to the age and use to which such
equipment has been put, and such assets and their uses conform in all material
respects to all applicable laws.
4.9 Accounts Receivable. The accounts receivable reflected on the books
of the Companies as of the Closing Date (less an allowance for doubtful accounts
of Three Hundred Ninety-Six Thousand ($396,000) for all such receivables) will
be fully collectible in accordance with their terms or, if already due, within
ninety (90) days after the Closing Date in the ordinary course of business using
reasonable business methods in light of the nature of the business. Any
receivable due to any of the Companies, from any Shareholder or employee of any
of the Companies, shall be paid in full in cash on or prior to the Closing Date.
4.10 Accounts Payable. The accounts payable reflected on the books of
the Companies as of the Closing Date reflect normal and ordinary payables
incurred in the ordinary course of business which have accrued in a manner fully
consistent with the Companies' past business practices. Any payable due from the
Companies to any Shareholder or employee of any of the Companies shall be waived
or paid prior to the Closing Date.
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4.11 Inventories. All of the items comprising inventory of the
Companies which were reflected in the inventory accounts on the Companies'
Financial Statements were, as of the date thereof, and will be at the Closing
Date, not obsolete and, based upon past practices, capable of being sold, used
or consumed by the Companies in the ordinary course of business as heretofore
conducted.
4.12 Insurance. Attached hereto as Schedule 4.12 is a list and an
accurate description of all policies of insurance that are held or maintained by
or for the benefit of the Companies as of the date hereof (including policy
numbers, nature of coverage, limits, deductibles, carriers, premiums and
effective and termination dates). The Companies have complied with each of such
policies and have not failed to give any notice or present any known claim
thereunder. The Companies have not received, and no event or omission within the
control of the Companies has occurred which may cause any of them to receive,
notice that any such policies will be canceled or will be reduced in amount or
scope. True and complete copies of all such policies have been delivered to AAI.
4.13 Employee Agreements. Attached hereto as Schedule 4.13 and Schedule
4.15 is a true, correct and complete list of all employee benefit plans,
contracts and arrangements, oral or written, including, but not limited to,
union contracts, employee benefit plans and severance plans, whereunder the
Companies have any obligation (other than the obligation to make current wage or
salary payments terminable on notice of 30 days or less or normal policies
concerning holidays, vacations and salary continuation during short absence for
illness or other reasons) to or on behalf of their officers, employees or their
beneficiaries or whereunder any of such persons owes money to any of the
Companies.
4.14 Employee Relations. The Companies have not engaged in any unfair
labor practice, unlawful employment practice or unlawful discriminatory practice
in the conduct of its business. The Companies have complied in all material
respects with all applicable laws, rules and regulations relating to wages,
hours and collective bargaining and have withheld all amounts required to be
withheld from the wages or salaries of employees, None of the Companies is a
party to or, to the best of the knowledge of Atlas, threatened with, or in
danger of being a party to, any labor dispute which would materially interfere
with the conduct of their businesses. Set forth on Schedule 4.14 and Schedule
4.15 hereto is the name of, and total annual compensation (including bonuses)
paid by the Companies to current, active employees during the year ended
December 31, 1997 and the annual compensation payable for 1998.
4.15 Benefit Plans. Schedule 4.15 contains a list of any "employee
pension benefit plan" or "employee welfare benefit plan" within the meaning of
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act of 1974,
as amended, ("ERISA") established or maintained by the Companies to which the
any of the Companies has made any contributions in 1996 or 1997 (collectively
the "Employee Benefit Plans"). None of the Companies is required, or was
required within the immediately preceding five years, to make any contribution
to any "multiemployer plan" within the meaning of Section 3(7) of ERISA. None of
the Companies has any unpaid liability in respect of any employee pension
benefit plans established or maintained and to which contributions are or were
made by it to the Pension Benefit Guaranty Corporation ("PBGC").
Schedule 4.15 also lists each deferred compensation plan,
bonus plan, stock option plan, employee stock purchase plan and any other
employee benefit plan, agreement,
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arrangement or commitment not required under the preceding paragraph to be
listed on Schedule 4.15 (other than normal policies concerning holidays,
vacations and salary continuation during short absences for illness or other
reasons) maintained by any of the Companies.
Except as set forth on Schedule 4.15, (a) no employee pension
benefit plan maintained or contributed to by any of the Companies or in respect
of which any of the Companies is considered an "employer" under Section 414 of
the Code, (i) has incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code (whether or not waived), or (ii) has incurred any
liability to the PBGC, and (b) none of the Companies has breached any of the
responsibilities, obligations or duties imposed on it by ERISA or the Code with
respect to any employee pension benefit plan or employee welfare benefit plan
maintained by it, which breach has given rise to, or may in the future give rise
to, an obligation to pay money, including the obligation to make any required
contribution to any employee pension benefit plan for any plan year ending prior
to the Closing Date. There is no contribution due for any pension plan for the
year in which the Closing occurs. Except as set forth on Schedule 4.15, none of
the Companies or any of their affiliates or any "party in interest," as defined
in Section 3(14) of ERISA, in respect of any such plan has engaged in any
non-exempted prohibited transaction described in Sections 406 and 408 of ERISA
or Section 4975 of the Code which would have a significant adverse effect.
Except as set forth on Schedule 4.15, no reportable event, as defined in Section
4043 of ERISA, has occurred with respect to any employee pension benefit plan
maintained or contributed to by any of the Companies or in respect of which any
of the Companies is an employer under Section 414 of the Code; and none of such
plans has been terminated by the plan administrator thereof or by the PBGC. None
of the Companies has incurred any unpaid liability for any pension plan covered
under ERISA.
Except as set forth on Schedule 4.15, with respect to any
employee pension benefit plan or employee welfare benefit plan maintained by any
of the Companies, no action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of the plan (other than the
routine claims for benefits made in the ordinary course of plan administration
for which plan administrative review procedures have not been exhausted) are
pending, threatened or imminent against or with respect to the plan, any of the
Companies, or fiduciary (as defined in ERISA ss.3(21)) of the plan (including
any action, suit, grievance, arbitration or other manner of litigation, or claim
regarding conduct which allegedly interferes with the attainment of rights under
the plan), and Atlas has no knowledge of any facts which would give rise to or
could give rise to any action, suit, grievance, arbitration or other manner of
litigation, or claim.
None of the Companies has communicated to any Employee any
intention or commitment to modify any Employee Benefit Plan or to establish or
implement any other employee or retiree benefit or compensation arrangement;
provided, however, the Companies shall, prior to the Closing, communicate to its
Employees the Companies' intention to freeze benefits under, and, eventually
terminate its ESOP.
Except as disclosed in Schedule 4.15, none of the Companies
(i) maintains or contributes to any Employee Benefit Plan which provides, or has
any liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the Code; or (ii) has
ever represented, promised, or contracted (whether in oral or written form)
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to any Employee (either individually or to Employees as a group) that such
employee(s) would be provided with life insurance, medical, severance or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by Section 4980B of the Code.
The execution of, and the performance by the Companies of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Employee Benefit Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of the
Companies to amend or terminate any Employee Benefit Plan and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will or
may be made by the Companies with respect to an Employee will be characterized
as an "excess parachute payment," within the meaning of Section 280G(b)(1) of
the Code.
No Employee Benefit Plan nor Employee Agreement is funded by a
trust described in Section 501(c)(9) of the Code.
Except for the severance and short-term disability plans
disclosed on Schedule 4.13, with respect to each Employee Benefit Plan that is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA,
all claims incurred (including claims incurred but not reported) by Employees
thereunder for which the Companies are, or will become, liable are (i) insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims; (ii) covered under a contract with an
insurer pursuant to which the insurer bears the liability for such claims; or
(iii) will be reflected as a liability or accrued for on the financial
statements of the Companies.
None of the Companies has any liability, contingent or
otherwise, to, or with respect to any benefit plan (other than the Employee
Benefit Plans and Employee Agreements that are completely and accurately listed
on Schedule 4.15), which is now or previously has been sponsored, maintained,
contributed to, or required to be contributed to, by any of the Companies.
The Companies have provided, or will have provided prior to
the Closing, to individuals entitled thereto all required notices and coverage
pursuant to Section 4980B of the Code and the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to any
"qualifying event" (as defined in Section 4980B(f)(3) of the Code) occurring
prior to and including the Closing Date, and no tax payable on account of
Section 4980B of the Code has been incurred with respect to any current or
former employees (or their beneficiaries).
Notwithstanding the disclosure on Schedule 4.15, Atlas and the
Principal Shareholders acknowledge and agree that the cost or expense associated
with the exceptions noted on Schedule 4.15 (but without reference to Schedule
4.13), if any, shall be considered as a "Loss" or "Expense" for purposes of
Section 10.2 hereof.
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4.16 Conflicts; Sensitive Payments. There are (a) no material
situations involving the interests of any of the Shareholders or any officer or
director of Atlas which may be generally characterized as a "conflict of
interest," including but not limited to, the leasing of property to or from
Atlas or significant direct or indirect interests in the business of
competitors, suppliers or customers of Atlas, except as set forth on Schedule
4.16; and (b) no situations involving illegal payments or payments of doubtful
legality from corporate funds of Atlas since January 1, 1993 to governmental
officials or others which may be generally characterized as a "sensitive
payment."
4.17 Discrimination, Occupational Safety and Other Statutes and
Regulations. No persons or parties (including but not limited to, governmental
agencies of any kind) have asserted to Atlas any valid and enforceable claim, or
any valid and enforceable action or proceeding against any of the Companies
arising out of any breach or violation of any statute, ordinance or regulation
relating to discrimination in employment or employment practices or occupational
safety and health standards (including without limitation, the Occupational
Safety and Health Act, the Fair Labor Standards Act, Title VII of the Civil
Rights Act of 1964, or the Age Discrimination in Employment Act of 1967).
4.18 Patents, Trade Names, Trademarks. The term "Intellectual Property"
includes all patents and patent applications, trade names, trademarks, tradename
and trademark registrations (and pending applications therefor) and copyrights.
Schedule 4.18 is a list of all Intellectual Property owned or licensed by the
Companies. Except as may be provided in any Contract (as defined below), the
Companies have the right to use all of their Intellectual Property whenever
employed by them in connection with their businesses.
4.19 Financial Statements. Atlas has delivered to RAI audited financial
statements of the Companies for the years ended July 31, 1995, 1996 and 1997 and
unaudited financial statements for the nine months ended April 30, 1998
(collectively, the "Companies' Financial Statements"). The Companies' Financial
Statements (i) are complete in all material respects as of the date and for the
period above stated, (ii) are in accordance with the books and records of the
Companies, (iii) have been prepared in accordance with GAAP consistently applied
as of the dates and for the periods stated above, and (iv) fairly present the
financial operations and changes in financial position for the periods indicated
in accordance with GAAP consistently applied.
4.20 Absence of Undisclosed Liabilities. Except to the extent
disclosed, reflected or reserved against in the Companies' Financial Statements
or in the notes or reports thereto, the Companies have no liabilities or
obligations, secured or unsecured, whether accrued, absolute, contingent or
otherwise except those incurred since April 30, 1998 in the ordinary course of
business and of a nature and in amounts consistent with past practice, except as
disclosed on the Schedules hereto, including Schedule 4.20, and except for
liabilities that may be incurred in connection with the redemption of certain
shares of Atlas Common Stock of Charles T. Koval and Joseph R. Sadowski as
described in Section 6.4.6.
4.21 Taxes. The Companies have timely filed or will timely file all tax
returns, schedules, declarations, and tax-related documents (collectively,
"Returns") required to be filed in any jurisdictions to which the Companies are
or have been subject, (ii) timely paid in full any interest and penalties with
respect thereto, subject to audit by the taxing authorities of such
jurisdictions, (iii) fully accrued on the Companies' books an amount sufficient
to pay all taxes for any completed taxable period which is not yet due, (iv)
made timely payments of the
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taxes required to be deducted and withheld from the wages paid to the Companies'
employees, and (v) otherwise satisfied, in all material respects, all legal
requirements applicable to each with respect to all aforementioned obligations
to taxing jurisdictions. All tax returns filed or to be filed by the Companies
correctly reflect in all material respects their income, are otherwise accurate
and complete in all material respects and have not been amended. Atlas has no
knowledge that an audit of any of the federal income tax returns of the
Companies is in progress and no reason to believe that any such audit is
contemplated. There are no other pending material questions relating to, or
claims asserted for (or to the knowledge of Atlas any basis therefor), taxes or
assessments of the Companies. For purposes of this Section, "tax" and "taxes"
(when not modified by other words such as "income" or "franchise") shall include
all income, gross receipts, franchise, single business excise, real and personal
property, and other taxes imposed by any federal, state, municipal, local, or
other governmental agency, including assessments in the nature of taxes.
4.22 Litigation. Except as disclosed on Schedule 4.22, none of the
Companies is engaged in or a party to, or has a reasonable basis to anticipate,
any legal action, investigation, arbitration or other proceeding before any
court, administrative agency or arbitrator relating to the businesses of the
Companies. None of the Companies has been charged with, nor to the knowledge of
Atlas is under investigation with respect to, and Atlas has no reasonable basis
to anticipate any charge or investigation with respect to, any violation of any
provisions of federal, state or other applicable law or administrative
regulation. There is no litigation, proceeding or governmental investigation
pending (or which Atlas has any reasonable basis to anticipate) which relates to
any of the transactions contemplated by this Agreement.
Notwithstanding the disclosure on Schedule 4.22, Atlas and the
Principal Shareholders acknowledge and agree that the cost or expense associated
with the disclosed exceptions, if any, shall be considered as a "Loss" or
"Expense" for purposes of Section 10.2 hereof, provided, however, that any net
recoveries with respect to any matter disclosed on Schedule 4.22 shall serve as
an offset to any Loss or Expense relating to any other matter disclosed on
Schedule 4.22.
4.23 Absence of Material Adverse Changes. Except as set forth on
Schedule 4.23, since April 30, 1998, there has been no material adverse change
in or to the business of the Companies or to the operations, earnings, marketing
or sales efforts, liabilities, balance sheet or relationship with suppliers,
distributors or customers of the Companies. Atlas has no reasonable basis to
anticipate that any material adverse change will occur to the oil and gas
syndication business of the Companies in the foreseeable future.
4.24 Contracts. Except for contracts and commitments (i) which are
terminable, without penalty payable by the Companies, at will or upon no more
than thirty (30) days' notice or (ii) which require expenditures by the
Companies of no more than Twenty-Five Thousand Dollars ($25,000) in any fiscal
year of Atlas or (iii) which relate to "spot" sales or purchases of oil and gas,
all material contracts and commitments (the "Contracts") to which the Companies
are parties are disclosed on the Schedules hereto, including Schedule 4.24, and
the Companies' Financial Statements, and copies of the Contracts have been
provided or made available to RAI. Each of the Contracts is in full force and
effect and constitutes a legal, valid and binding obligation of the parties
thereto and is enforceable in accordance with its terms except as enforcement of
the Contracts may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors'
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rights generally and (ii) the availability of injunctive relief and other
equitable remedies. There is no material default with respect to any such
Contract. There are no Contracts outside of the ordinary course of business as
conducted by the Companies, whether written or oral, that have been entered into
by any of the Companies and which have not been disclosed to RAI.
4.25 Product Liability and Workers' Compensation Claims. Atlas has no
notice or knowledge of any outstanding uninsured claims against the Companies
with respect to (i) product liability and/or (ii) workers' compensation.
4.26 No Violation of Environmental Laws. The businesses of the
Companies as currently being conducted directly by them do not violate any
applicable law or regulation relating to air, water, or noise pollution, or the
production, storage, labeling or disposition of wastes or hazardous or toxic
substances. Without limiting the generality of the foregoing, the Companies have
either themselves directly transported and/or disposed of effluent chemical,
waste, sewage and other waste materials in accordance with all applicable
federal, state and local environmental laws and regulations or have utilized
disposal and treatment contractors and facilities permitted or authorized to
handle such substances by the government agency with jurisdiction thereof. No
wastes generated by the Companies during the Companies' period of ownership of
the Subject Interests or other wells previously owned or operated by any of the
Companies have ever been sent or are being sent, directly or indirectly, to any
site listed on the National Priority List promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or to any site listed on any other federal or state governmental list of
hazardous substance sites requiring investigation or clean up. Except as set
forth on Schedule 4.26, there are no underground tanks used to store any
hazardous substance, petroleum or brine located upon the real property on which
the Subject Interests are located or upon any other real estate owned or leased
by the Companies, or in which the Companies hold an interest, in connection with
the Subject Interests. Except as set forth on Schedule 4.26, no real estate or
improvements owned or leased by the Companies, or in which the Companies hold an
interest, in connection with the Subject Interests, or any ground water located
thereunder, is contaminated with any chemical, petroleum product, toxic or
hazardous waste or substances in quantities exceeding levels permitted
applicable laws and regulations. Except as set forth on Schedule 4.26, no brine,
hazardous, toxic or polluting substances have been released, discharged or
disposed of on the real property on which the Subject Interests are located. The
Companies have not received any notice, nor, except as set forth on Schedule
4.26, are they subject to any liability under RCRA, CERCLA, SARA, the Federal
Safe Drinking Water Act, the Oil Pollution and Control Act, the Federal Clean
Water Act or the Federal Clean Air Act, Pennsylvania environmental laws or any
other law or regulation whether federal, state or local, nor, except as set
forth on Schedule 4.26, subject to any material investigations, inspections or
citations under any applicable laws, rules or regulations. Except as set forth
on Schedule 4.26 the Companies have not received any notice of violation that is
now pending and unresolved of any such applicable law, ordinance, regulation,
order or requirement relating to the Subject Interest.
4.27 Investment Programs - Compliance with Securities Laws. Each of the
investment programs offered or sponsored by Atlas, or of which Atlas is an
affiliate, is set forth on Schedule 4.27 (the "Programs"). The offering of
interests in each of the Programs complied with all applicable federal and state
securities laws in all material respects.
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4.28 Securities Laws.
(a) Each of the Principal Shareholders acknowledges receipt of
copies of the 1997 Annual Report, the 1997 Form 10-K and the Form 10-Q for the
calendar quarter ending December 31, 1997 and March 31, 1998 of RAI.
(b) Each Principal Shareholder acknowledges that any shares of
RAI Common Stock received by him pursuant to this Agreement (the "Shares") will
be delivered to him pursuant to an exemption from the registration requirements
of the Securities Act of 1933, as amended (the "1933 Act") and may not be resold
or otherwise transferred unless registered under the 1933 Act or unless an
exemption from the registration requirements of the 1933 Act is available. Rule
144 under the 1933 Act permits sales or other transfer of unregistered
securities by a holder after a period of one (1) year from the Effective Date,
subject to compliance with restrictions regarding amounts which may be sold, the
manner of sale and the other terms and conditions of Rule 144.
(c) Each Principal Shareholder acknowledges that:
(i) the Shares acquired by him will be for his own
account, for investment and without a view to the distribution or resale
thereof;
(ii) he has had access to all information concerning
RAI, its business and the exchange transaction contemplated by this Agreement
that he deems necessary to make the determination to acquire the Shares; he has
had access to any additional information deemed necessary by him to verify the
accuracy of any information given to him; and he has received all information
which he has requested;
(iii) he has such knowledge and experience in
financial matters that he is capable of evaluating the risks of the Shares and
making an informed business decision with respect thereto and/or has been
advised by a person having such knowledge, experience and capability;
(iv) for a period of two years from the Effective
Date, RAI may instruct any transfer agent for its Common Stock not to permit
transfer of the Shares to be made unless registered under the 1933 Act or unless
an exemption from the registration requirements of the 1933 Act is available;
and
(v) the certificates for the Shares will be legended
to reflect the restrictions on the transferability of the Shares.
4.29 Rights of Way, Licenses and Permits.
The Companies have all easements or rights of ways and
licenses, permits, qualifications, consents and other authorizations necessary
for the lawful operation of the Companies' business, all of which are in full
force and effect.
4.30 Public Utility Status.
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None of the Companies are currently or have been threatened to
be deemed a public utility under applicable state or federal law including,
without limitation, the Public Utility Holding Company Act of 1935, as amended.
4.31 Gas Marketing/Trading.
Except as set forth on Schedule 4.31 hereto, the Companies
have not received and do not expect to receive any prepayment for natural gas
which would require delivery of the gas after the Effective Date. There are no
refunds for overpayments of natural gas delivered to any customer prior to the
Effective Date. The Companies have received no notice that there are
imbalance-related penalties due or to be due or imposed or to be imposed by any
utility delivering gas to any of the Companies' customers prior to the Effective
Date. The net effect of the Companies' natural gas physical and financial
trading positions with respect to the Companies' natural gas marketing business
is now and will be, for any twelve-month period during the term of the
Companies' existing contracts, positive and will not for any twelve-month period
during the term of such contracts result in a gross margin loss to the
Companies.
4.32 No Brokers. Neither Atlas, nor anyone acting on its behalf, has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement, other than Atlas's engagement of Principal Financial Securities,
Inc. as financial advisor to Atlas.
4.33 No Omissions. None of the representations or warranties herein and
none of the information contained in the Schedules referred to in this Article 4
is false or misleading in any material respect or, omits to state a fact
necessary to make the statements herein or therein in the circumstances in which
they were made not misleading in any material respect.
4.34 Schedules and Exhibits. Any fact or item disclosed in any Schedule
or Exhibit hereto shall be deemed to have been disclosed in all other Schedules
or Exhibits requiring such disclosure and for purposes of all other
representations and warranties made herein.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF RAI AND AAI
RAI and AAI hereby jointly and severally represent and warrant to Atlas
and the Shareholders as follows:
5.1 Organization and Good Standing. Each of RAI and AAI is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, and has full corporate power and authority
to carry on its business as it is now being conducted. Each of RAI and AAI is
qualified as a foreign corporation and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a significant adverse effect.
5.2 Execution and Effect of Agreement. Each of RAI and AAI has all
requisite corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation
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of the transactions contemplated hereby has been duly authorized by all
necessary corporate action on the part of RAI and AAI. This Agreement has been
duly executed and delivered by RAI and AAI and, assuming the due authorization,
execution and delivery by Atlas, constitutes the legal, valid and binding
obligation of RAI and AAI, enforceable against RAI and AAI in accordance with
its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally and (iii) the availability of injunctive
and other equitable remedies.
5.3 No Conflicts. Except as described in Schedule 5.3, the execution
and delivery of this Agreement do not and the consummation of the transactions
contemplated hereby will not (i) conflict with or result in any violation or
breach of any provision of the certificate of incorporation or bylaws of RAI or
AAI, or (ii) result in any violation or breach of, or constitute a default
under, the terms, conditions or provisions of any agreement, indenture, mortgage
or instrument to which RAI or AAI is a party or to which its property is
subject, or (iii) subject to compliance with the requirements of Section 5.4
below, conflict with or result in any violation of any judgment, order, decree,
statute or law applicable to RAI or AAI or any of its or their properties or
assets.
5.4 Consents. Except for filings pursuant to the H-S-R Act (to the
extent necessary), no filing, consent, approval or authorization of any
governmental authority or of any third party on the part of RAI or AAI is
required in connection with the execution and delivery of this Agreement by RAI
or AAI or the consummation of any of the transactions contemplated hereby.
5.5 No Brokers. Neither RAI or AAI, nor anyone acting on their behalf,
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
5.6 Absence of Material Adverse Change. Since March 31, 1998, there has
been no material adverse change in or to the business of RAI or to the
operations, earnings, marketing or sales efforts, liabilities, balance sheet or
relationship with suppliers, distributors or customers of RAI.
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ARTICLE 6
ADDITIONAL COVENANTS AND UNDERTAKINGS
6.1 Shareholder Approval. As soon as reasonably practicable following
the date of this Agreement, Atlas shall take all action necessary, in accordance
with the laws of the Commonwealth of Pennsylvania and its certificate of
incorporation and bylaws, to call, give notice of and convene a meeting (the
"Meeting") of the Shareholders to consider and vote upon the approval and
adoption of this Agreement and the Merger and for such other purposes as may be
necessary or desirable. The Board of Directors of Atlas shall, subject to its
fiduciary duties, recommend that the Shareholders vote to approve and adopt this
Agreement and the Merger and any other matters to be submitted to the
Shareholders in connection therewith. The Board of Directors of Atlas shall,
subject to its fiduciary duties, use its reasonable best efforts to solicit and
secure from the Shareholders such approval and adoption, which efforts include
without limitation causing Atlas to solicit proxies therefor and to advise AAI
upon its request from time to time as to the status of the vote then tabulated.
Simultaneously with the execution of this Agreement, each of the Principal
Shareholders will enter into an Irrevocable Proxy with RAI in the form of
Exhibit "E."
6.2 Further Assurances and Assistance. The parties agree that each will
execute and deliver to the other any and all documents, in addition to those
expressly provided for herein, that may be necessary or appropriate to implement
the provisions of this Agreement, whether before, at or after the Closing. The
parties agree to cooperate with each other to any extent reasonably required in
order to accomplish fully the transactions herein contemplated.
6.3 Access to Information.
6.3.1 Atlas from and after the date of this Agreement and
until the Closing Date, shall give AAI and its employees and counsel full and
complete access, upon reasonable notice during normal business hours, to all
officers, employees, offices, independent contractors, business associates,
brokerage and similar contacts, properties, agreements, records and affairs of
the Companies or otherwise relating to the businesses of the Companies, will
provide AAI with all regularly prepared financial statements of the Companies,
and will provide copies of such information concerning the Companies and the
businesses of the Companies as AAI may reasonably request; provided, however,
that the foregoing shall not permit AAI or any agent thereof to (i) disrupt the
businesses of the Companies or (ii) contact any employee of the Companies
without providing reasonable prior notice to Atlas and allowing a representative
of Atlas to be present.
6.3.2 To the extent not completed prior to the date of this
Agreement, Atlas shall make a good faith effort to obtain for AAI, or AAI's
authorized representatives, upon adequate notice to Atlas, physical access to
the Companies' properties for the purpose of inspecting same. AAI recognizes
that some of the properties are operated by parties other than the Companies and
that Atlas's ability to obtain access to such properties, and the manner and
extent of such access, is subject to the consent of such third parties. AAI
agrees to comply fully with the rules, regulations and instructions issued by
the Companies (and, where properties are operated by other parties, such other
parties) regarding the actions of AAI while upon, entering or leaving the
properties. If AAI exercises rights of access under this Section or otherwise,
or conducts examinations or inspections under this Section or otherwise, then
(a) such access, examination and inspection shall be at AAI's sole
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risk, cost and expense and RAI and AAI waive and release all claims against the
Companies (and their affiliates and the directors, officers, employees,
attorneys, contractors and agents of the Companies and such affiliates) arising
in any way therefrom or in any way connected therewith or arising in connection
with the conduct of its directors, officers, employees, attorneys, contractors
and agents in connection therewith and (b) RAI and AAI shall indemnify, defend
and hold harmless the Companies (and their affiliates and the officers,
directors, employees, attorneys, contractors and agents of the Companies and
such affiliates) from any and all claims, actions, causes of action,
liabilities, damages, losses, costs or expenses (including, without limitation,
court costs and attorney's fees), or liens or encumbrances for labor or
materials, arising out of or in any way connected with utilization of the
foregoing rights of access. THE FOREGOING RELEASE AND INDEMNIFICATION SHALL
APPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES,
DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE
NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE) OF ANY INDEMNIFIED
PARTY, OR (ii) STRICT LIABILITY.
6.3.3 Confidentiality. All information provided to, or
otherwise acquired by, RAI or AAI and its employees and counsel relating to the
Companies and the transactions contemplated hereby shall be subject to the terms
and provisions of that certain confidentiality agreement (the "Confidentiality
Agreement") dated December 18, 1997 with RAI and shall be disposed of as
provided in the Confidentiality Agreement if this Agreement is terminated
pursuant to Article 9 hereof.
6.4 Conduct of Business Prior to Closing. Except as contemplated by
this Agreement, from and after the date hereof the businesses of the Companies
shall be conducted in the ordinary course consistent with past practice. Except
as contemplated by this Agreement or as consented to by AAI (which consent shall
not unreasonably be withheld), from and after the date hereof Atlas shall act,
and shall cause each of its Subsidiaries to act, as follows:
6.4.1 Without the approval of RAI, and only in accordance with
GAAP,none of the Companies will adopt any material change in any method of
accounting or accounting practice, except as required by GAAP;
6.4.2 None of the Companies will amend its charter or by-laws;
6.4.3 Except (i) for the sale of oil and gas, the use or
disposition of inventory and the disposition of obsolete equipment, all in the
ordinary course of business, or (ii) as set forth on Schedule 6.4 hereto, none
of the Companies will sell, mortgage, pledge or otherwise dispose of any
material assets or properties owned or used in the operation of its business or
discontinue any business;
6.4.4 Subject to the provisions of Section 6.6 hereof, none of
the Companies will merge or consolidate with, or agree to merge or consolidate
with, or purchase or agree to purchase all or substantially all of the assets
of, or otherwise acquire, any other business or entity;
6.4.5 Except in connection with the exercise of any
outstanding stock options, rights and warrants described in Schedule 4.2, Atlas
shall not, and shall not permit any of the
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Subsidiaries to, issue, pledge or sell any shares of capital stock or any other
securities of any of them or issue options, warrants or rights of any kind to
acquire, or any securities convertible into, exchangeable for or representing a
right to purchase or receive, or enter into any contract, understanding or
arrangement with respect to the issuance of, any shares of capital stock or any
other securities of any of them, or enter into any arrangement or contract with
respect to the purchase or voting of shares of their capital stock, or adjust,
split, combine or reclassify any of their securities, or make any other changes
in their capital structures;
6.4.6 The Companies shall not declare, set aside, pay or make
any dividend or other distribution or payment (whether in cash, stock or
property) with respect to, or purchase or redeem, any shares of the capital
stock of any of them provided, however, that Atlas may accelerate the redemption
of shares of Atlas Common Stock owned by Charles T. Koval and Joseph R. Sadowski
as authorized by the Board of Directors of Atlas on August 29, 1997. The
promissory notes issued in that redemption, together with notes issued in a
prior redemption of shares owned by Messrs. Koval and Sadowski, shall be paid in
full at Closing, subject to the discount as permitted in those notes;
6.4.7 Atlas shall use its reasonable efforts to preserve
intact the business organization of Atlas and each of its Subsidiaries, to keep
available the services of its and their present officers and key employees, and
to preserve the good will of those having business relationships with it and its
Subsidiaries;
6.4.8 None of the Companies will incur, or agree to incur, any
debt for borrowed money other than borrowings under the Companies' existing
revolving credit facility;
6.4.9 The Companies shall not enter into any employment
contracts with, increase the rate of compensation of (except in accordance with
existing policy consistent with past practice), or pay or agree to pay any bonus
to, any of their directors, officers or employees, except in accordance with
plans or agreements existing, as set forth in Schedules 4.13 and 4.15, and as in
effect on the date hereof;
6.4.10 Except as set forth on Schedule 6.4, Atlas shall not
enter into or modify (except as may be required by applicable law) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance, or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that accelerates (i)
the vesting of exercise of any benefits payable thereunder, or (ii) the right to
exercise any employee stock options outstanding; and
6.4.11 Atlas shall not, and shall not permit any of its
Subsidiaries to, agree to take any of the foregoing actions.
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6.5 H-S-R Act. Each of RAI, AAI and Atlas shall, within ten (10)
Business Days following the date hereof, file, if necessary, duly completed and
executed Pre-Merger Notification and Report Forms as required under the H-S-R
Act and shall otherwise use their respective best efforts (without requiring any
of RAI, AAI or Atlas to incur material costs or expenses) to comply promptly
with any requests made by the Federal Trade Commission or the Department of
Justice pursuant to the H-S-R Act or the regulations promulgated thereunder. All
filing fees and other payments in connection with the H-S-R Act shall be paid by
AAI.
6.6 Inquiries and Negotiations. Atlas shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
Person conducted heretofore in respect of the acquisition of all or any
substantial part of the business and properties of Atlas and its Subsidiaries,
whether by sale of assets or shares of capital stock of Atlas, or by merger,
consolidation, recapitalization, liquidation or similar transaction (each, an
"Acquisition Transaction"). Atlas shall not, and shall not permit its officers,
employees, representatives or agents to, directly or indirectly, (i) solicit or
initiate discussions or negotiations with, or provide any non-public information
to, any Person other than AAI or its affiliates concerning an Acquisition
Transaction, or (ii) otherwise solicit, initiate or encourage inquiries or the
submissions or any proposal contemplating an Acquisition Transaction. Atlas
shall promptly communicate to AAI the terms of any inquiry or proposal which it
may receive in respect of an Acquisition Transaction, or has received or
solicited, directly or indirectly since June 1, 1998. Atlas's notification under
this Section shall include the identity of the Person making such proposal or
any other such information with respect thereto as AAI may reasonably request.
Nothing contained in this Agreement shall be construed to prohibit Atlas from
(a) if advised in writing by counsel to be required by fiduciary obligations
under applicable law, providing non-public information to, and participating in
negotiations with, a Person who has made a bona fide offer to effect an
Acquisition Transaction for a purchase price in excess of the Equity
Consideration and (b) accepting an offer for an Acquisition Transaction which
the Board of Directors of Atlas, on the advice in writing of its financial
advisor, believes is more favorable to the Shareholders than the Merger
contemplated hereby. If another offer is accepted pursuant to clause (b) above,
Atlas shall immediately upon acceptance of such offer pay to RAI Seven Million
Dollars ($7,000,000) as liquidated damages. THE PARTIES HEREBY ACKNOWLEDGE THAT
THE EXTENT OF DAMAGES TO RAI AND AAI OCCASIONED BY THE FAILURE OF THIS
TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO
ASCERTAIN AND THAT SEVEN MILLION DOLLARS ($7,000,000) IS A FAIR AND REASONABLE
ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A
PENALTY.
6.7 Indemnification. For a period of two (2) years after the Effective
Date, the Continuing Corporation shall indemnify and hold harmless (and shall
also advance expenses as incurred to the fullest extent permitted under
applicable law) each person who is now, or has been prior to the date hereof or
who becomes prior to the Effective Date, an officer or director of Atlas or any
of its Subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses (including without limitation counsel fees and
expenses), settlement payments or liabilities arising out of, or in connection
with, any claim, demand, action, suit, proceeding or investigations based (i) in
whole or in part on, or arising in whole or in part out of, the fact that such
person is or was an officer or director of Atlas or any of its Subsidiaries
whether or not pertaining to any matter existing or occurring at or prior to the
Effective Date and whether or not asserted or claimed prior to or at or after
the Effective
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Date, except for claims, demands, actions, suits, proceedings or investigations
(a) based in whole or in part on, or arising in whole or in part out of, the
breach of any representation, warranty or covenant set forth herein or the
failure to disclose any information that Atlas has an obligation to disclose
pursuant hereto, or (b) based on a claim alleging a wrongdoing by such
Indemnified Person outside the scope of his employment with Atlas or any of its
subsidiaries ("Indemnified Liabilities") and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement, any Related Agreement or the transactions
contemplated hereby or thereby, in each case to the fullest extent required or
permitted under applicable law or under the Continuing Corporation's certificate
of incorporation or bylaws. Any determination required to be made with respect
to whether an Indemnified Party is entitled to indemnification hereunder shall
be made by independent counsel mutually acceptable to the Continuing Corporation
and the Indemnified Party. The cost of such independent counsel shall be borne
equally by the Continuing Corporation and the Indemnified Party. The Continuing
Corporation's certificate of incorporation and bylaws shall not be amended in a
manner that adversely affects the rights of any Indemnified Party thereunder or
under this Section unless otherwise required by applicable law. Each Indemnified
Party is intended to be a third party beneficiary of this Section and may
specifically enforce its terms. This Section shall not limit or otherwise
adversely affect any rights any Indemnified Party may have under any agreement
with the Companies or under the Companies' certificates of incorporation or
bylaws (but only to the extent disclosed in writing to AAI prior to the
execution of this Agreement).
Any Indemnified Party wishing to claim indemnification
hereunder, upon learning of any such claim, demand, action, suit, proceeding or
investigation, shall promptly notify the Continuing Corporation thereof, but the
failure to so notify shall not relieve the Continuing Corporation of any
liability it may have hereunder to such Indemnified Party if such failure does
not materially prejudice the Continuing Corporation. In the event of any such
claim, demand, action, suit, proceeding or investigation, (i) the Continuing
Corporation shall have the right to assume the defense thereof with counsel
reasonably acceptable to the Indemnified Party and the Continuing Corporation
shall not be liable to such Indemnified Party for any legal expenses of other
counsel subsequently incurred by such Indemnified Party in connection with the
defense thereof, except that if the Continuing Corporation does not elect to
assume such defense within a reasonable time, the Indemnified Party may retain
counsel satisfactory to such Indemnified Party, and the Continuing Corporation
shall remain responsible for the reasonable fees and expenses of such counsel,
provided, however, that the Continuing Corporation shall be obligated pursuant
hereto to pay for only one firm of counsel for all Indemnified Parties in any
one jurisdiction with respect to any given claim, demand, action, suit,
proceeding or investigation, unless such counsel is of the opinion that its
representation of all Indemnified Parties is a conflict of interest, in which
event each Indemnified Party may retain counsel satisfactory to such Indemnified
Party and the Continuing Corporation shall remain responsible for the reasonable
fees and expenses of each such counsel; (ii) the Indemnified Party will
reasonably cooperate in the defense of any such matter; and (iii) the Continuing
Corporation shall not be liable for any settlement effected by an Indemnified
Party without the Continuing Corporation's prior written consent, not to be
unreasonably withheld.
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6.8 Financial Statements. Atlas shall deliver prior to Closing to AAI
unaudited financial statements of the Companies for the nine months ended April
30, 1998 (the "Interim Financial Statements"). The Interim Financial Statements
shall (i) be complete in all material respects as of the date and for the period
above stated, (ii) be in accordance with the books and records of the Companies,
(iii) have been prepared in accordance with the GAAP consistently applied as of
the date and for the period stated above, and (iv) fairly present the financial
operations and changes in financial position for the period indicated in
accordance with GAAP consistently applied. In addition, Atlas shall deliver to
AAI an audited balance sheet of the Companies as of June 30, 1998 ("June 30,
1998 Balance Sheet"), and a related audited statement of income and retained
earnings of the Companies for the period from the close of the last fiscal year
to June 30, 1998. Such audited financial statements shall be complete in all
material respects, in accordance with the books and records of the Companies and
shall fairly present the financial condition and results of operations of the
Companies as of the date thereof and for the period then ended.
The Equity Consideration set forth in Section 3.3 hereof shall
be adjusted as follows: (i) add the sum of any Long-Term Debt and Current
Maturities of Long-Term Debt reflected on the June 30, 1998 Balance Sheet, the
amounts payable to Charles T. Koval and Joseph R. Sadowski pursuant to the
redemption permitted under Section 6.4.6 hereof, the unpaid fees and expenses of
Principal Financial Securities, Inc. and Two Million Dollars ($2,000,000) to
reflect the payments to be made as set forth in items 7 and 11 on Schedule 4.13
and subtract the resulting number from the Equity Consideration, (ii) and reduce
(but not increase), the Equity Consideration by the amount, if any, by which
Three Million Dollars ($3,000,000) exceeds the Working Capital as calculated
from the June 30, 1998 Balance Sheet.
6.9 Books and Records. Following the Closing, the Continuing
Corporation shall permit the present directors and officers of Atlas (i) to have
reasonable access to the books and records of the Continuing Corporation and
those retained or maintained by the other Companies relating to the operation of
their businesses prior to the Closing or after the Closing to the extent related
to transactions or events occurring prior to the Closing and (ii) to have
reasonable access to employees of the Continuing Corporation and the other
Companies to obtain information relating to such matters. The Continuing
Corporation shall maintain, or caused to be maintained, such books and records
for a period of five (5) years following the Closing.
6.10 Ongoing SEC Filings. RAI agrees to prepare and file on an ongoing
basis, with the Securities and Exchange Commission ("SEC"), after the Merger
Closing Date, such reports and documents to be filed by RAI as a registrant
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
pursuant to the Exchange Act and Rule 463 under the Exchange Act and agrees to
file all other reports and documents, and to take or cause to be taken all other
action (including the removal of any stock legends), to permit the Shareholders
to dispose of their shares of RAI Common Stock under exemptions provided by Rule
144 of the SEC, and other available exemptions, from the registration provisions
of the federal securities law.
6.11 Piggyback Registration Right.
(a) If at any time after one year following the Effective Date
and prior to two years following the Effective Date, RAI proposes to register
RAI Common Stock under
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the Securities Act in connection with the public offering of such RAI Common
Stock solely for cash (other than a registration relating solely to (i) the sale
of securities to participants in an RAI stock option plan, stock purchase plan,
savings or similar plan, (ii) the sale of securities as part of an acquisition,
merger or exchange of stock or (iii) a registration on any form which does not
include substantially the same information as would be included in a
registration statement covering the sale of the Shares), RAI shall, at such
time, promptly give the Shareholders written notice of such registration. Upon
the written request of any such Shareholder given within twenty (20) days after
mailing of such notice by RAI, RAI shall use its best efforts to cause to be
registered under the Securities Act all of the Shares that each Shareholder (a
"Participating Shareholder") has requested to be registered; provided that each
Participating Shareholder shall furnish to RAI such information as shall be
required to effect registration; and provided further that RAI shall have the
right to postpone or withdraw any registration effected pursuant to this Section
6.11 (a) without obligation to any Shareholder.
(b) RAI is obligated to effect only two (2) such registrations
under this Section 6.11.
(c) The Participating Shareholders shall bear an equitable
portion of all expenses incurred in connection with any registration, filing or
qualification of their Shares including, without limitation, all registration,
filing, and qualification fees, printing and accounting fees relating or
apportionable thereto, disbursements of counsel and underwriting discounts and
commissions relating thereto.
(d) In connection with any underwritten offering, RAI shall
not be required to include any of the Shares in such underwriting unless the
Participating Shareholders accept the terms of the underwriting as agreed upon
between RAI and the underwriters selected by RAI, and then only in such quantity
as the underwriters determine in their sole discretion will not jeopardize the
success of the offering by RAI.
6.12 Delay of Registration. No Shareholder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of Section 6.11.
6.13 Benefits of Continuing Employees. The present employees of the
Companies who continue as employees of the Continuing Corporation shall be
entitled to participate in all employee benefit plans offered generally by RAI
to its employees. For purposes of determining the level of benefits to which the
Companies' employees are entitled, and for purposes of determining the vesting
of such benefits, all of the years of service of such employees while in the
employ of the Companies shall be counted.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
7.1 Conditions Precedent to the Obligation of RAI and AAI. The
obligation of RAI and AAI to consummate the Closing is subject to the
fulfillment or waiver, on or prior to the Closing Date, of each of the following
conditions precedent:
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7.1.1 Atlas shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Atlas contained herein shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and RAI
and AAI shall have received an officer's certificate of Atlas, dated as of the
Closing Date, certifying as to the fulfillment of the condition set forth in
this subsection.
7.1.2 No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits RAI or AAI
from consummating the transactions contemplated hereby and no proceeding seeking
such an order shall have been instituted or threatened.
7.1.3 RAI shall have completed, to its satisfaction, its due
diligence review of AAI's syndication activities.
7.1.4 All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
7.1.5 All consents identified on Schedule 4.5 shall have been
received; provided, however, that obtaining the consent of PNC Bank shall not be
a condition precedent to the obligation of RAI and AAI to consummate the
Closing.
7.1.6 This Agreement and the Merger shall have been approved
and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of the Atlas Common Stock.
7.1.7 Each of Charles T. Koval, James O'Mara, Bruce Wolf, J.
Robert Gourlay, Bruce Bundy and Eric Koval shall have executed and delivered to
the Continuing Corporation a Non-Competition and Confidentiality Agreement
substantially in the form of Exhibits "C-1" (as to Charles T. Koval, James
O'Mara and Bruce Wolf) and "C-2" (as to J. Robert Gourlay, Bruce Bundy and Eric
Koval) hereto. The Non-Competition and Confidentiality Agreements for Messrs.
Charles T. Koval, James O'Mara and Bruce Wolf shall be executed and delivered
simultaneously with execution of this Agreement.
7.1.8 RAI and AAI shall have received an opinion of Atlas's
counsel, dated as of the Closing Date, in substantially the form of Exhibit "D"
hereto.
7.1.9 AAI and James O'Mara shall have entered into an
Employment Agreement substantially in the form agreed to on the date hereof.
7.1.10 Each of the parties to the Escrow Agreement shall have
executed and delivered the Escrow Agreement in substantially the form attached
hereto as Exhibit "F".
7.2 Conditions Precedent to the Obligation of Atlas. The obligation of
Atlas to consummate the Closing is subject to the fulfillment or waiver, on or
prior to the Closing Date, of each of the following conditions precedent:
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7.2.1 Each of RAI and AAI shall have complied in all material
respects with its agreements and covenants contained herein to be performed at
or prior to the Closing, and the representations and warranties of RAI and AAI
contained herein shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date, except that representations and warranties that were made as of a
specified date shall continue on the Closing Date to have been true as of the
specified date, and Atlas shall have received officer's certificates of RAI and
AAI, dated as of the Closing Date, certifying as to the fulfillment of the
condition set forth in this subsection.
7.2.2 No statute, rule, or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Atlas from
consummating the transactions contemplated hereby and no proceeding seeking such
an order shall have been instituted or threatened.
7.2.3 All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
7.2.4 Each of the parties to the Escrow Agreement shall have
executed and delivered the Escrow Agreement in substantially the form attached
hereto as Exhibit "F".
ARTICLE 8
EXPENSES
Each party will pay its own fees, expenses, and disbursements and those
of its counsel in connection with the subject matter of this Agreement
(including the negotiations with respect hereto and the preparation of any
documents) and all other costs and expenses incurred by it in the performance
and compliance with all conditions and obligations to be performed by it
pursuant to this Agreement or as contemplated hereby. The June 30, 1998 Balance
Sheet and related statements of income and retained earnings shall reflect the
accrual of any fees and expenses described in this Article 8 of the Company
which the Principal Shareholders hereby represent and warrant shall not exceed
Fifty Thousand Dollars ($50,000). The unpaid fees and expenses of Principal
Financial Securities, Inc. shall be paid by Atlas on or prior to Closing.
ARTICLE 9
TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to Closing: (i) by mutual written
consent of Atlas and AAI; (ii) by the Board of Directors of Atlas if the Board
of Directors of Atlas shall have withdrawn or modified, in a manner adverse to
RAI or AAI, its approval or recommendation of the Merger in order to approve an
Acquisition Transaction with any third party, provided the payment required
under Section 6.6 is made; or (iii) by any corporate party to this Agreement,
upon written notice to the other parties, at any time after September 30, 1998
except that the right to terminate this Agreement pursuant to this Article 9
shall not be available to (A) Atlas, if the failure to consummate the Closing on
or before such date was caused by or resulted from Atlas's failure to fulfill
any of its obligations under this Agreement or, if any of its representations or
warranties set forth herein were, when made, or at any time prior to the
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Effective Date, incorrect in any material respect or (B) RAI or AAI, if the
failure to consummate the Closing on or before such date was caused by or
resulted from RAI's or AAI's failure to fulfill any of their obligations under
this Agreement or if any of its representations or warranties set forth herein
were, when made, or at any time prior to the Effective Date, incorrect in any
material respect. Upon such termination, except as provided in Section 6.6 and
the Confidentiality Agreement, all further obligations of the parties hereto
shall become null and void and no party shall have any liability to any other
party, unless the basis for such termination was the failure by such party to
fulfill its covenants and agreements set forth herein or a breach in any
material respect of its representations or warranties set forth herein.
ARTICLE 10
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION; LEGAL FEES
10.1 Survival of Obligations.
(a) All representations and warranties made herein by Atlas
and the Principal Shareholders, and the obligations to be performed by them
pursuant to the terms hereof, shall survive the Merger Closing Date and shall
terminate two (2) years after the Closing; provided, that representations and
warranties with respect to any dispute with the Internal Revenue Service or any
state or local taxing authority shall terminate upon the earlier to occur of the
following (x) such dispute's final resolution and the payment of all taxes,
interest and penalties arising therefrom and (y) the expiration of the
applicable statute of limitations.
(b) All representations and warranties made by RAI and AAI,
and the obligations to be performed by them and the Continuing Corporation
pursuant to the terms hereof, shall survive the Merger Closing Date and shall
terminate two (2) years thereafter.
10.2 Indemnification.
(a) If the Closing occurs, each Principal Shareholder agrees
to indemnify and hold harmless RAI, AAI, the Continuing Corporation and their
subsidiaries, affiliates, successors and assigns from and against any and all
(x) liabilities, losses, costs, deficiencies or damages and any and all amounts
paid in settlement ("Loss") and (y) reasonable attorneys' and accountants' fees
and expenses, court costs and all other reasonable out-of-pocket expenses
("Expense"), incurred by RAI or the Continuing Corporation, in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim asserted in good faith by any third party (in each case net of any
insurance received by RAI or the Continuing Corporation) in connection with or
arising from any breach of any warranty or the inaccuracy of any representation
of Atlas or such Principal Shareholder contained in this Agreement or in any
certificate signed and delivered by or on behalf of Atlas pursuant hereto.
(b) Each of RAI and the Continuing Corporation, jointly and
severally, agrees to indemnify and hold harmless the Shareholders and their
heirs, legal representatives, successors and assigns from and against any and
all Loss and Expense incurred by any Shareholder in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim asserted
in good faith by any third party (in each
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case net of any insurance received by such Shareholder) in connection with or
arising from (i) any breach by RAI or AAI of any of their covenants in, or any
failure of RAI or AAI to perform any of their obligations under, this Agreement
or (ii) any breach of any warranty or the inaccuracy of any representation of
RAI or AAI contained in this Agreement or in any certificate signed and
delivered by or on behalf of RAI or AAI pursuant hereto.
(c) If a party incurring a Loss or Expense (an "Indemnified
Person") has suffered or incurred any Loss or Expense, the Indemnified Person
shall so notify the party responsible therefor (the "Indemnifying Person")
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or any certificate delivered pursuant hereto in respect of which such
Loss or Expense shall have occurred. If any action at law or suit in equity is
instituted by or against a third party with respect to which an Indemnified
Person intends to claim any liability or expense as Loss or Expense under this
Section 10.2, such Indemnified Person shall promptly notify the Indemnifying
Person of such action or suit. If notice has been given pursuant to this
paragraph within the time periods set forth in Section 10.1, the Indemnifying
Person shall remain responsible notwithstanding that the determination of the
amount of Loss and Expense is not made until after such time periods. The
Principal Shareholders hereby acknowledge that they have received notice of
potential Loss or Expense arising from each of the matters disclosed on Schedule
4.15 and Schedule 4.22.
(d) An Indemnified Person shall have the right, but not the
obligation, to participate at its own expense in the defense of any third party
claim, action or suit with counsel of its own choosing, but the Indemnifying
Person shall be entitled to control the defense unless the Indemnified Person
has relieved the Indemnifying Person from liability with respect to the
particular matter. In the event that the Indemnifying Person shall fail timely
to defend, contest or otherwise protect against such claim, the Indemnified
Person shall have the right, but not the obligation, to defend, contest or
otherwise protect against the same or, on not less than thirty (30) days'
written notice to the Indemnifying Person, make any compromise or settlement
thereof, and such compromise or settlement shall be binding on the Indemnifying
Person for purposes of indemnification under this Section 10.2 unless the
Indemnifying Person objects thereto within the thirty (30) day period aforesaid.
(e) No Principal Shareholder shall be liable for any Loss or
Expense in excess of the amount of his percentage as set forth in Exhibit "B-1"
multiplied by the total Loss or Expense, and the Principal Shareholders shall
have no obligation under this Section 10.2 until the aggregate Loss and Expense
exceed Seven Hundred Fifty Thousand Dollars ($750,000) and then only to the
extent of the excess over Two Hundred Fifty Thousand Dollars ($250,000).
(f) Except as set forth in paragraph (g) and the Escrow
Agreement referred to therein, the Principal Shareholders' maximum aggregate
liability for all Loss and Expense shall be Ten Million Dollars ($10,000,000),
which amount will be reached when the total Loss and Expense equals or exceeds
Ten Million Two Hundred Fifty Thousand Dollars ($10,250,000).
(g) As security for this indemnification, Ten Million Dollars
($10,000,000) worth of RAI Stock valued at the Index Price (which, based on the
Index Price of $24.025 per share is Four Hundred Sixteen Thousand Two Hundred
Thirty-three (416,233) shares) will be
28
<PAGE>
delivered directly by the Exchange Agent to the Escrow Agent pursuant to the
Escrow Agreement that is set forth as Exhibit "F" hereto. Pursuant to the terms
of the Escrow Agreement, all shares of RAI Common Stock held in escrow, together
with the net cash proceeds of any permitted sale of such stock and certain
interest and dividends (all such stock, proceeds, interest and dividends shall
be referred to as the "Collateral") shall be available to reimburse an
Indemnified Person without regard to the Ten Million Dollar ($10,000,000)
limitation. An Indemnified Party shall look first to the Collateral before
seeking recovery from a Principal Shareholder, but the Principal Shareholders
shall be liable for Loss and Expense to the extent their liability for such Loss
and Expense (subject to the limitation of paragraph (f)) exceeds the value of
the Collateral at the time (and from time to time) that such Collateral is
delivered from the Escrow Agent to the Indemnified Party.
(h) The intended effects of paragraph (e), (f) and (g) may be
illustrated as follows: If RAI incurs a Loss of $500,000, no payment is
required. If RAI incurs a subsequent Loss of $500,000 it would be entitled to
$750,000 from the Escrow Account. Collateral of that value would be distributed
to it. If RAI suffers an additional subsequent Loss of $10,000,000, RAI would be
entitled to that amount if there is sufficient value of Collateral remaining. If
there is not such value remaining, RAI would be entitled to all of the remaining
Collateral and would be entitled to an additional amount from the Principal
Shareholders equal to $9,250,000 ($10,000,000 less $750,000 previously received)
less the value of the Collateral remaining. If there is any further Loss, RAI
would be entitled to additional Collateral, if any, but there would be no
additional claim against the Principal Shareholders.
ARTICLE 11
NOTICES
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as follows:
If to RAI or AAI to:
Resource America, Inc.
1521 Locust Street
Philadelphia, PA 19102
Attention: Michael Staines
and Steven Kessler
Fax: (215) 546-5388
with a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street; Suite 800
Philadelphia, PA 19102
Attention: Richard J. Abt, Esquire
Fax: (215) 735-2513
29
<PAGE>
If to Atlas to:
The Atlas Group, Inc.
311 Rouser Road
Coraopolis, PA 15108
Attention: James O'Mara, President
Fax: (412) 262-2820
with a copy to:
Donald P. Eriksen, Esquire
Tucker Arensberg, P.C.
1500 One PPG Place
Pittsburgh, PA 15222
Fax: (412) 594-5619
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or confirmed telecopying, or, if sent by Federal Express or such other
overnight delivery service, one Business Day after such sending.
ARTICLE 12
MISCELLANEOUS
12.1 Headings. The headings contained in this Agreement (including but
not limited to the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
12.2 Schedules and Exhibits. All Schedules and Exhibits attached to
this Agreement constitute an integral part of this Agreement as if fully
rewritten herein.
12.3 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document. For the purpose of
this paragraph, signatures transmitted by facsimile will be acceptable as
originals.
12.4 Entire Agreement. This Agreement, the Related Agreements, the
Confidentiality Agreement and the documents to be delivered hereunder and
thereunder constitute the entire understanding and agreement between the parties
hereto concerning the subject matter hereof. All negotiations and writings among
the parties hereto are merged into this Agreement, and there are no
representations, warranties, covenants, understandings or agreements, oral or
otherwise, in relation thereto among the parties other than those incorporated
herein or to be delivered hereunder.
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<PAGE>
12.5 Representations and Warranties. Except as specifically set forth
herein or in any Schedule hereto or in any certificate signed and delivered
pursuant hereto, no party has made, nor will be deemed to have made, any
representation or warranty with respect to the transactions contemplated hereby
and consummated hereunder.
THE REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN OR IN ANY
SCHEDULE HERETO OR IN ANY CERTIFICATE SIGNED AND DELIVERED PURSUANT HERETO ARE
EXCLUSIVE AND SUBJECT TO SECTION 4.33, ARE IN LIEU OF ALL OTHER REPRESENTATIONS
AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND THE PARTIES
EXPRESSLY DISCLAIM ANY AND ALL SUCH OTHER WARRANTIES. WITHOUT LIMITATION OF THE
FOREGOING, ATLAS SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER REPRESENTATION OR
WARRANTY, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, OR RELATING TO THE
TITLE, CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR FITNESS
FOR ANY PURPOSE, WITH RESPECT TO THE COMPANIES OR THEIR ASSETS.
12.6 Governing Law. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania without giving effect to conflict of laws principles.
12.7 Modification. This Agreement cannot be modified or amended except
in writing signed by each of the parties hereto. After approval of the Merger by
the stockholders of Atlas, no amendment may be made which decreases the Equity
Consideration or otherwise materially adversely affects the stockholders of
Atlas without the further approval of a majority of the votes cast by the
stockholders of Atlas.
12.8 Successors and Assigns. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto. In the event of such permitted assignment or other transfer, all of the
rights, obligations, liabilities, and other terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
and against, the respective heirs, legal representatives, successors and assigns
of the parties hereto, whether so expressed or not.
12.9 Waiver. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
12.10 Severability. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or
31
<PAGE>
unenforceable in its entirety or partially or as to any party, for any reason,
and if such provision cannot be changed consistent with the intent of the
parties hereto to make it fully legal, valid, binding and enforceable, then such
provisions shall be stricken from this Agreement, and the remaining provisions
of this Agreement shall not in any way be affected or impaired, but shall remain
in full force and effect.
12.11 Announcements. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent RAI from making any disclosure in connection
with the transactions contemplated by this Agreement if required by applicable
law or otherwise as a result of RAI being a public company, provided that prior
notice of such disclosure is given to the Atlas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
Resource America, Inc.
By:_____________________________
Title:__________________________
Atlas America, Inc.
By:_____________________________
Title:__________________________
The Atlas Group, Inc.
By:_____________________________
Title:__________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
PRINCIPAL SHAREHOLDERS:
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
33
<PAGE>
ANNEX I
DEFINITIONS
As used in the attached Agreement and Plan of Merger, the following
terms shall have the corresponding meaning set forth below:
a. "Business Day" means any day on which banks in Philadelphia,
Pennsylvania are open for business.
b. "Companies" means Atlas and each of its Subsidiaries.
c. "GAAP" means generally accepted accounting principles.
d. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
e. "Permitted Encumbrances" means (i) imperfections of title and
encumbrances (including easements, rights-of-way and other similar rights) that
are not material in character, amount or extent and do not materially detract
from the value, or materially interfere with the use of, the interests subject
thereto or otherwise materially impair the business or operations being
conducted or proposed to be conducted thereon, (ii) operator's liens, and
mechanic's, materialmen's, warehouseman's and other similar liens arising by
operation of law, in the ordinary course of business and not delinquent and
(iii) contracts for the sale of oil and gas entered into in the ordinary course
of business.
f. "Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government (or agency or political subdivision thereof).
g. "Related Agreement" means any document delivered at the Closing and
any contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement.
h. "Subsidiary," as it relates to any Person, means a corporation of
which such person or entity owns, directly or indirectly, more than 50% of the
issued and outstanding common stock.
i. "Working Capital" means current assets minus current liabilities.
Current assets and current liabilities shall be determined by taking the amounts
from the June 30, 1998 Balance Sheet and further adjusting those amounts as
follows:
A. Current assets shall be adjusted by adding:
1. The cash surrender value of executive life
insurance [convert to cash].
2. The fair market value of stock investments
in others [convert to cash].
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<PAGE>
3. The net increase in oil and gas assets since
12/31/97 attributable to acquisition and
development of such properties since that
date.
4. Accrued Revenue from partnership interest in
wells receivables [net of taxes] (revenue
currently recorded as received rather than
accruing as earned).
B. Current liabilities shall be adjusted by subtracting:
1. The current portion of subordinated notes
payable to stock holders.
2. The current portion of bank debt.
3. Profit included in billings in excess of
cost on uncompleted contracts [net of taxes]
(based on percent of completed contract
method for unfinished partnership wells).
35
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment")
dated as of the 29th day of September, 1998 is entered into by and among
Resource America, Inc., a Delaware corporation ("RAI"), Atlas America, Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of RAI ("AAI"), The Atlas
Group, Inc., a Pennsylvania corporation ("Atlas") and the shareholders of Atlas
identified on the signature pages hereto (the "Principal Shareholders").
WITNESSETH:
WHEREAS, the parties hereto are parties to an Agreement and Plan of
Merger dated as of July 13, 1998 (the "Agreement"); and
WHEREAS, the parties hereto want to amend the Agreement on the terms
and conditions of this Amendment;
NOW, THEREFORE, in consideration of the premises set forth above and
the considerations set forth below, and intending to be legally bound, the
parties hereby agree as follows:
1. Definitions. All capitalized terms not defined herein shall have the
meaning ascribed to them in the Agreement.
2. Amendment and Restatement of Section 3.3 of the Agreement. Section
3.3 of the Agreement is amended and restated to provide in full as follows:
"3.3 Outstanding Atlas Common Stock. The shares of Atlas
Common Stock issued and outstanding and owned by the
shareholders of Atlas (the "Shareholders") immediately prior
to the Merger shall (such holdings on such date will be as set
forth on Exhibit "B" hereto), by virtue of the Merger,
automatically and without any action on the part of any holder
thereof, become and be converted into that number of shares of
RAI Common Stock calculated by multiplying the number of such
shares of Atlas Common Stock owned by such Shareholder by the
"Exchange Ratio" determined as follows: divide (i) Sixty-
Three Million Dollars ($63,000,000), plus (ii) the amount that
would be required to be paid upon the exercise of all then
outstanding options to purchase Atlas Common Stock, whether or
not currently exercisable, plus or minus (iii) the adjustment
required pursuant to Section 6.8 hereof (the combination of
(i), (ii) and (iii) being referred to herein as the "Equity
Consideration"), by the Index Price (as hereinafter defined)
and divide the quotient by the sum of the number
<PAGE>
of shares of Atlas Common Stock that are issued and
outstanding immediately prior to the Merger plus the number of
shares of Atlas Common Stock subject to outstanding options,
whether or not currently exercisable, immediately prior to the
Merger. As used in this Agreement, the term "Index Price"
shall mean $14.3133. Any shares of Atlas Common Stock owned by
Atlas shall be cancelled and retired upon the Effective Date
and no consideration shall be issued in exchange therefor.
By way of example, if, immediately prior to the
Merger the number of outstanding shares of Atlas Common Stock
is 276,930, the number of shares of Atlas Common Stock into
which options are convertible is 14,652, the amount that would
be required to convert all of the options into Atlas Common
Stock is $14,652, the aggregate amount of the items set forth
in clause (i) of Section 6.8 is $25,000,000, the reduction
required by clause (ii) of Section 6.8 is zero and the Index
Price is $14.3133, the Exchange Ratio would be:
$ 63,000,000 - $25,000,000 - 0 + $14,652
-----------------------------------------
276,930 + 14,652 =
-----------------
$ 14.3133
$ 38,014,652
----------
291,582 = 130.3738 = 9.10858
------- --------
$ 14.3133 $ 14.3133
On those facts, each Shareholder would be entitled to
9.10858 shares of RAI Common Stock for each share of Atlas
Common Stock owned by him, and each holder of options to
acquire shares of Atlas Common Stock would be entitled to
options to acquire that number of RAI Common Stock equal to
9.10858 times the number of shares of Atlas Common Stock for
which he held options at an exercise price of $0.10979 per
share of RAI Common Stock. The aggregate number of RAI shares
issuable upon the merger would be 2,522,439 (subject to
reduction due to fractional shares not being issued), and an
additional 133,458 (subject to reduction due to fractional
shares not being issued) shares would be issuable upon
exercise of the options
Subsequent to the Effective Date, certain
Shareholders and option holders of Atlas will have the right
to exchange, within five (5) business days of the Effective
Date, shares of RAI Common Stock received in the Merger for an
amount of cash from RAI not to exceed twenty percent (20%) of
the difference between Sixty-Three Million Dollars
($63,000,000) and the adjustment required pursuant to Section
6.8 hereof. The list of persons entitled to such exchange
option shall be determined by Atlas management prior to the
Effective Date, provided that no single individual shall be
allocated more than Three Million Dollars ($3,000,000) of such
cash amounts. Such exchange will be made at the Index Price."
2
<PAGE>
3. Amendment of Section 3.7 of the Agreement. Section 3.7 of the
Agreement is hereby amended by deleting the reference to "NASDAQNMS" and
substituting therefor "National Association of Securities Dealers, Inc. National
Market System."
4. Amendment to Section 3.11(b) of the Agreement. Section 3.11(b) of
the Agreement is hereby amended by adding thereto the following "and to persons
who were formerly members of the syndication sales force of Atlas and become
members of the syndication sales force of the Continuing Corporation."
5. Amendment to Section 3.11(e) of the Agreement. Section 3.11(e) of
the Agreement is hereby amended by deleting the reference to "$70,000,000" on
line 4 and substituting therefor "$63,000,000."
6. Amendment to Section 4.2 of the Agreement. Section 4.2 of the
Agreement is hereby amended by deleting "280,430" on line 2 and substituting
"276,930."
7. No Material Adverse Change. RAI and AAI hereby waive any claim that
the June 30, 1998 Balance Sheet demonstrates a material adverse change from
April 30, 1998 within the meaning of Section 4.23 of the Agreement and hereby
waive any claim of a material adverse change from April 30, 1998 within the
meaning of Section 4.23 of the Agreement resulting from increased costs of
drilling and completing wells, from not increasing the price charged to third
parties for such drilling and completion and from declines in natural gas
prices. Atlas and the Principal shareholders hereby represent and warrant to RAI
and AAI that since June 30, 1998, there has been no material increase in Atlas'
cost of drilling and completing wells.
Atlas and the Principal Shareholders hereby waive any claim
that there has been a material adverse change with respect to RAI within the
meaning of Section 5.6 of the Agreement based on any accounting treatments or
affects of any challenge to such treatments.
8. Amendment and Restatement of Section 7.1.7 of the Agreement. Section
7.1.7 of the Agreement is hereby amended and restated to provide in full as
follows:
" 7.1.7 Each of Charles T. Koval, James O'Mara and Bruce Wolf
shall have executed and delivered to the Continuing
Corporation a Non-Competition and Confidentiality Agreement
substantially in the form of Exhibit "C-1" hereto. The
Non-Competition and Confidentiality Agreements for Messrs.
Charles T. Koval, James O'Mara and Bruce Wolf shall be
executed and delivered simultaneously with execution of this
Agreement.
Each of J. Robert Gourlay, Bruce Bundy and Eric Koval shall
have executed and delivered to the Continuing Corporation an
Employment Agreement substantially in the form of Exhibit
'C-2.' attached."
3
<PAGE>
9. Amendment to Section 10.2 (g) of the Agreement. On line 2 of Section
10.2(g), Change "$24.025" to "14.3133;" on line 3 of Section 10.2(g), change
"Four Hundred Sixteen Thousand Two Hundred Thirty-three (416,233)" to "Six
Hundred Ninety-Eight Thousand Six Hundred Fifty-one (698,651)." Delete the last
sentence that begins "An indemnified Party..." and substitute therefor the
following: "Notwithstanding anything to the contrary herein contained, upon
delivery to the Escrow Agent of a certificate for the number of shares of RAI
Common Stock set forth on Exhibit "G," attached hereto and made a part hereof,
registered in the name of a Principal Shareholder, such Principal Shareholder
shall have no personal responsibility, or be otherwise personally liable, for
any past or future Loss or Expense. RAI and each Principal Shareholder hereby
authorize and direct the Exchange Agent to deliver to the Escrow Agent as soon
as reasonably possible certificates for those numbers of shares of RAI Common
Stock set forth on Exhibit 'G' to be issued to each Principal Shareholder."
10. Amendment to Section 10.2(h) of the Agreement. Delete the last two
sentences beginning "If there is ..." and substitute for those two sentences the
following: "If there is any further loss RAI would be entitled to additional
Collateral if any."
11. Execution in Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. For the purpose of this
paragraph, signatures transmitted by facsimile will be acceptable as originals.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date and year first written above.
Resource America, Inc.
By:
----------------------------------
Title:
----------------------------------
Atlas America, Inc.
By:
----------------------------------
Title:
----------------------------------
The Atlas Group, Inc.
By:
----------------------------------
Title:
----------------------------------
4
<PAGE>
PRINCIPAL SHAREHOLDERS:
------------------------------------
Charles T. Koval
------------------------------------
Joseph R. Sadowski
------------------------------------
James R. O'Mara
------------------------------------
Bruce M. Wolf
------------------------------------
Donald P. Wagner
------------------------------------
James J. Kritzo
------------------------------------
Frank P. Carolas
------------------------------------
James M. Ogan
5
<PAGE>
------------------------------------
Barbara J. Krasnicki
------------------------------------
Michael G. Hartzell
------------------------------------
The Atlas Energy Group, Inc.
Employee Stock Ownership Plan,
James J. Kritzo, Trustee
6
