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UNITED STATES
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 (Date of earliest event reported): JULY 3, 1997
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in charter)
TEXAS 001-10671 76-0319553
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
15995 N. BARKER'S LANDING, SUITE 300
HOUSTON, TEXAS 77079
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 558-8080
TEXAS MERIDIAN RESOURCES CORPORATION
(Former name or former address, if changed since last report.)
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Exhibit Index Appears on Page 5
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ITEM 5. OTHER EVENTS.
On July 3, 1997, The Meridian Resource Corporation, a Texas
corporation (the "Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with a wholly owned subsidiary of the Company ("Sub") and
Cairn Energy USA, Inc., a Delaware corporation ("Cairn"), providing for the
acquisition by the Company of Cairn pursuant to an expected tax free merger
(the "Merger") in which the stockholders of Cairn will receive 1.08 shares of
the Company's common stock, $.01 par value ("Company Common Stock"), in
exchange for each outstanding share of Cairn common stock, $.01 par value
("Cairn Common Stock"). Based on the number of shares of Cairn Common Stock
outstanding as of June 30, 1997, a total of approximately 18.9 million shares of
Company Common Stock would be issued in the Merger.
The Merger is subject to various conditions, including the receipt of
all required regulatory approvals and the expiration or termination of all
waiting periods (and extensions thereof) under the Hart-Scott-Rodino Act.
Although there can be no assurance that the Merger will close, the Company
currently anticipates that the acquisition will be consummated shortly after
the receipt of such regulatory approvals and the approval of the Merger by the
stockholders of the Company and Cairn.
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The description of the terms and provisions of the Merger Agreement in
this report are qualified in their entirety by reference to the Merger
Agreement that is filed as an exhibit hereto and is hereby incorporated herein
by reference. A copy of the press release announcing the signing of the Merger
Agreement is filed as Exhibit 99.1 and is hereby incorporated herein by
reference.
In addition, on June 19, 1997, the Company's shareholders approved an
amendment to the Company's Second Amended and Restated Articles of
Incorporation changing the name of the Company from "Texas Meridian Resources
Corporation" to "The Meridian Resource Corporation".
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
2.1 - Agreement and Plan of Merger dated as of July 3, 1997, by
and among The Meridian Resource Corporation, C Acquisition
Corp. and Cairn Energy USA, Inc.
99.1 - Press Release of the Company dated June 7, 1997,
announcing the signing of the Merger Agreement.
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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.
THE MERIDIAN RESOURCE CORPORATION
Dated: July 7, 1997 /s/ Lloyd V. Delano
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Lloyd V. Delano
Vice President
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INDEX TO EXHIBITS
Number Exhibit
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2.1 Agreement and Plan of Merger dated as of July 3,
1997, by and among The Meridian Resource Corporation,
C Acquisition Corp. and Cairn Energy USA, Inc.
99.1 Press Release of the Company dated July 7, 1997,
announcing the signing of the Merger Agreement.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July, 1997 (this
"Agreement"), by and among The Meridian Resource Corporation, a corporation
formed under the laws of the State of Texas ("Parent"), C Acquisition Corp, a
corporation formed under the laws of the State of Delaware and a wholly-owned
subsidiary of Parent ("Sub"), and Cairn Energy USA, Inc., a corporation formed
under the laws of the State of Delaware (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved, and the Company has declared advisable and in the best
interests of its stockholders, the merger of Sub with and into the Company (the
"Merger"), pursuant to the terms and conditions set forth in this Agreement;
WHEREAS, pursuant to the Merger, each issued and outstanding share of
common stock, par value $0.01 per share, of the Company ("Company Common
Stock") not owned directly or indirectly by Parent or the Company, will be
converted into the right to receive 1.08 shares of common stock, par value
$0.01 per share, of Parent ("Parent Common Stock");
WHEREAS, for federal income or tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the parties intend to cause the Merger to be accounted for as
a pooling of interests pursuant to APB Opinion No. 16, Staff Accounting Series
Releases 130, 135 and 146 and Staff Accounting Bulletins Topic Two; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained in this
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Certificate of Merger" shall have the meaning set forth in Section
2.2.
"Certificates" shall have the meaning set forth in Section 3.2(b).
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"Closing" and "Closing Date" shall have the meaning set forth in
Section 4.1.
"Company Benefit Plan" shall have the meaning set forth in Section
6.10(a).
"Company Common Stock" shall mean the common stock, par value $0.01
per share, of the Company.
"Company DISCLOSURE SCHEDULE" shall have the meaning set forth in the
introductory sentence of Article VI.
"Company Financial Statements" shall have the meaning set forth in
Section 6.5(d).
"Company Material Adverse Change" or "Company Material Adverse Effect"
shall mean any change or effect that is or, so far as can reasonably
determined, is likely to be materially adverse to the business, operations,
properties, assets, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this Agreement; provided,
however, that the terms "Company Material Adverse Change" and "Company Material
Adverse Effect" shall not include economic, political or legal changes
affecting the oil and gas industry as a whole, general changes in oil or gas
prices or results of drilling of any undeveloped or unevaluated leaseholds or
horizons now owned or hereafter acquired.
"Company Preferred Stock" shall mean the preferred stock, par value
$0.01 per share, of the Company.
"Company Required Consents" shall mean all required third-party
consents or other approvals set forth in the Company DISCLOSURE SCHEDULE.
"Company Required Statutory Approvals" shall have the meaning set
forth in Section 6.4(c).
"Company SEC Reports" shall have the meaning set forth in Section
6.5(b).
"Company Special Committee" shall mean the Special Committee of the
Board of Directors of the Company appointed by the Board of Directors of the
Company.
"Company Special Meeting" shall have the meaning set forth in Section
9.4(b)(i).
"Company Stockholders' Approval" shall have the meaning set forth in
Section 6.13.
"Confidentiality Agreements" shall have the meaning set forth in
Section 9.1(b).
"Conversion Ratio" shall have the meaning set forth in Section 3.1(b).
"Converted Shares" shall have the meaning set forth in Section 3.2(b).
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"Defensible Title" shall mean such good and indefeasible title to the
Major Oil and Gas Interests which (a) entitles or will entitle the Company or
Parent, as the case may be, to receive and retain, without suspension,
reduction or termination not less than the Net Revenue Interests set forth in
Exhibit A-1 or A-2 (as the case may be), through plugging, abandonment and
salvage of all wells comprising or included in such Major Oil and Gas Interests
and all wells now or hereafter producing from or attributable to such Major Oil
and Gas Interests, of all Hydrocarbons produced from or attributable to the
parties' respective Major Oil and Gas Interests, (b) obligates or will obligate
the parties, as the case may be, to bear costs and expenses relating to the
maintenance, development, and operations of their respective Major Oil and Gas
Interests, through plugging, abandonment and salvage of all wells comprising or
included in such Major Oil and Gas Interests and all wells now or hereafter
producing from or attributable to such Major Oil and Gas Interests, not greater
than the Working Interests set forth in Exhibit A-1 or A-2 (as the case may
be), and (c) except for Permitted Encumbrances, is free and clear of all liens,
security interests, pledges, collateral assignments, charges, Hydrocarbon sales
or processing contracts or options, options or calls on production,
preferential purchase rights or options, restrictions, conditions,
reservations, encumbrances, encroachments, defaults, irregularities,
deficiencies and defects.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"DISCLOSURE SCHEDULEs" shall mean the Parent DISCLOSURE SCHEDULE and
the Company, collectively.
"DLJ" shall have the meaning set forth in Section 6.14.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Claims" shall mean, with respect to any person, (A) any
and all administrative, regulatory, or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation in writing by or from any person or entity,
(including any Governmental Authority), or (B) any oral information provided by
a Governmental Authority that written action of the type described in the
foregoing clause is in process, which (in case of either (A) or (B)) alleges
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Materials at any location, whether or not owned, operated, leased or
managed by Parent or any of its Subsidiaries or Joint Ventures (for purposes of
Section 5.11) or by the Company or any of its Subsidiaries or Joint Ventures
(for purposes of Section 6.11), (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law or (c) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
"Environmental Laws" shall mean all federal, state and local laws,
rules, regulations and guidances relating to pollution or protection of human
health or the environment (including,
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without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Environmental Permits" shall have the meaning set forth in Section
5.11.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 3.2(a).
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean any court, governmental or
regulatory body (including a stock exchange or other self-regulatory body) or
authority, domestic or foreign.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls, (b) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
Environmental Law and (c) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which Parent or any of its Subsidiaries
or Joint Ventures operates (for purposes of Section 5.11) or in which the
Company or any of its Subsidiaries or Joint Ventures operates (for purposes of
Section 6.11).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hydrocarbons" shall have the meaning set forth in Section 5.12.
"Joint Proxy Statement" shall have the meaning set forth in Section
5.8(a)(ii).
"Joint Proxy/Registration Statement" shall have the meaning set forth
in Section 9.2(a)(i).
"Joint Venture" shall mean, with respect to any person, any
corporation or other entity (including partnerships and other business
associations and joint ventures) in which such person or one or more of its
Subsidiaries owns an equity interest that is less than a majority of any class
of the outstanding voting securities or equity, other than equity interests
held for passive investment purposes that are less than 5% of any class of the
outstanding voting securities or equity; provided, however, that the term
"Joint Venture" shall not include operating agreements,
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exploration alliances or other similar arrangements relating to or associated
with exploration and development of Oil and Gas Interests not involving the
sharing of equity in a legal entity.
"Major Oil and Gas Interests" shall mean those Oil and Gas Interests
owned by the Company and its Subsidiaries or Parent and its Subsidiaries, as
the case may be, which are set out and described in Exhibit A-1 or A-2,
respectively, hereto.
"Net Revenue Interest" shall mean the decimal interest in and to all
Hydrocarbons produced, saved and sold from or attributable to any Oil and Gas
Interest after giving effect to all valid lessors' royalties, overriding
royalties and/or other non-expense bearing burdens against production.
"Oil and Gas Interests" shall have the meaning set forth in Section
5.12.
"Out-of-Pocket Expenses" shall have the meaning set forth in Section
11.3(a).
"Parent Benefit Plan" shall have the meaning set forth in Section
5.10(a).
"Parent Common Stock" shall mean the common stock, par value $0.01 per
share, of Parent.
"Parent DISCLOSURE SCHEDULE" shall have the meaning set forth in the
introductory sentence of Article V.
"Parent Financial Statements" shall have the meaning set forth in
Section 5.5(d).
"Parent Material Adverse Change" or "Parent Material Adverse Effect"
shall mean any change or effect that is or, so far as can reasonably
determined, is likely to be materially adverse to the business, operations,
properties, assets, condition (financial or otherwise), or results of
operations of Parent and its Subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this Agreement; provided,
however, that the terms "Parent Material Adverse Change" and "Parent Material
Adverse Effect" shall not include economic, political or legal changes
affecting the oil and gas industry as a whole, general changes in oil or gas
prices or results of drilling of any undeveloped or unevaluated leaseholds or
horizons now owned or hereafter acquired.
"Parent Preferred Stock" shall have the meaning set forth in Section
5.3(a).
"Parent Required Consents" shall mean all required third-party
consents or other approvals set forth in the Parent DISCLOSURE SCHEDULE.
"Parent SEC Reports" shall have the meaning set forth in Section
5.5(b).
"Parent Special Meeting" shall have the meaning set forth in Section
9.4(a)(i).
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"Parent Stockholders' Approval" shall have the meaning set forth in
Section 5.13.
"Permitted Encumbrances" shall mean: with respect to the Company, the
Parent or any of their respective Subsidiaries, as the case may be, (a) liens
arising under operating agreements securing payments of amounts not yet
delinquent and of a type and nature customary in the oil and gas industry; (b)
liens arising as a result of pooling and unitization agreements, declarations,
orders or laws securing payments of amounts not yet delinquent; (c) liens
securing payments to mechanics and materialmen, not yet delinquent, and liens
securing payment of taxes and assessments not yet delinquent or, if delinquent,
that are being contested in good faith in the normal course of business; (d)
conventional rights of reassignment obligating the Company or the Parent, as
the case may be, to reassign its interest in any portion of the Major Oil and
Gas Interests to a third party in the event it intends to release or abandon
such interest prior to the expiration of the primary term or other termination
of such interest; (e) easements, rights-of-way, servitudes, permits, surface
leases, surface use restrictions, shipping fairways, and other rights in
respect of surface operations, and pipelines, grazing, logging, canals,
ditches, reservoirs, streets, alleys, highways, telephone lines, power lines,
railways and other surface uses and impediments on, over or in respect of any
of the Major Oil and Gas Interests that are not such as to interfere materially
with the operation, value or use of any of such Major Oil and Gas Interests;
(f) calls on or preferential rights to purchase production at not less than
prevailing prices; (g) covenants, conditions and other terms which the Major
Oil and Gas Interests were subject to when acquired by the Company, the Parent,
or any of their respective Subsidiaries, as the case may be, that are not such
as to interfere materially with the operation, value, or use of such Major Oil
and Gas Interests; (h) such title defects as the Company or the Parent, as the
case may be, has expressly waived in writing; (i) liens, encumbrances and
claims to be released at the Closing or which are described in the DISCLOSURE
SCHEDULEs; (j) rights reserved to or vested in any federal, municipality or
governmental, tribal, statutory or public authority to control or regulate any
of the Major Oil and Gas Interests in any manner, and all applicable laws,
rules and orders of any federal, municipality or governmental or tribal
authority; (k) existing terms and provisions of Leases; (l) all other liens,
charges, encumbrances, limitations, obligations, defects and irregularities
affecting any portion of the Major Oil and Gas Interests ("Encumbrances") which
would not have a material adverse effect on the operation, value or use of such
Major Oil and Gas Interests and (m) lessors' royalties or net profit shares,
overriding royalties, and division orders and sales contracts covering the
Hydrocarbons, reversionary interests and similar burdens which do not operate
to reduce the Net Revenue Interest of any Major Oil and Gas Interest below the
net revenue interest set out in Exhibit A-1 or A-2 (as the case may be), and
which do not have a Company Material Adverse Effect or a Parent Material
Adverse Effect, as the case may be, on the operation, value, or use of any such
Major Oil and Gas Interest.
"Registration Statement" shall have the meaning set forth in Section
5.8(a)(i).
"Release" shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or mitigation into the
atmosphere, soil, subsurface, surface water, groundwater or property.
"Representatives" shall have the meaning set forth in Section 9.1.
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"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Plan" shall have the meaning set forth in Section 9.10.
"Sub Material Adverse Effect" shall mean any change or effect that is
or, so far as can reasonably determined, is likely to be materially adverse to
the business, operations, properties, assets, condition (financial or
otherwise), or results of operations of Sub taken as a whole or on the
consummation of the transactions contemplated by this Agreement; provided,
however, that the term "Sub Material Adverse Effect" shall not include
economic, political or legal changes affecting the oil and gas industry as a
whole, changes in oil or gas prices or results of drilling of any undeveloped
or unevaluated leaseholds or horizons now owned or hereafter acquired.
"Subsidiary" shall mean, with respect to any person, any corporation
or other entity (including partnerships and other business associations) in
which a person directly or indirectly owns at least a majority of the
outstanding voting securities or other equity interests having the power, under
ordinary circumstances, to elect a majority of the directors, or otherwise to
direct the management and policies, of such corporation or other entity;
provided, however, that the term "subsidiary" shall not include any corporation
or other entity the assets of which have a book or fair value less than
$100,000.
"Superior Takeover Proposal" with respect to a party means any bona
fide Takeover Proposal to acquire, directly or indirectly, for consideration
consisting of cash, securities or a combination thereof, all of the common
stock of that party then outstanding or all or substantially all of the assets
of that party on terms that the Board of Directors of that party determines in
its good faith reasonable judgment (after consultation with a financial advisor
of nationally recognized reputation) to be more favorable to that party's
stockholders than the Merger.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Takeover Proposal," with respect to a party, shall mean (i) any
tender or exchange offer, proposal for a merger, consolidation or other
business combination involving such party or any of its material Subsidiaries,
(ii) any proposal or offer to acquire from a party in any manner, directly or
indirectly, any equity or voting securities of that party in excess of 15% of
the equity voting securities of that party or any Subsidiary thereof or a
material amount of the assets of that party and its Subsidiaries, taken as a
whole, or (iii) any proposal or offer to acquire from the stockholders of that
party by tender offer, exchange offer or otherwise more than 15% of the
outstanding common stock of that party; provided, however, that a "Takeover
Proposal" shall not mean the Merger or any alternative transaction between the
Company and Parent that may be proposed as contemplated hereby.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts,
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capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any governmental entity, and includes any interest
and penalties (civil or criminal) on or additions to any such taxes, charges,
fees, levies or other assessments, and any expenses incurred in connection with
the determination, settlement or litigation of any liability for any of the
foregoing.
"Tax Return" shall mean any report, return or other information
required to be supplied to a governmental entity with respect to Taxes,
including, where permitted or required, combined or consolidated returns for
any group of entities that includes Parent or any of its Subsidiaries on the
one hand, or the Company or any of its Subsidiaries on the other hand.
"Violation" shall have the meaning set forth in Section 5.4(b).
"Working Interest" shall mean the decimal interest in the full and
entire leasehold estate in any Oil and Gas Interest and all rights and
obligations of every kind and character pertinent thereto or arising therefrom,
without regard to any valid lessor royalties, overriding royalties and/or other
burdens against production, insofar as the interest in said leasehold is
burdened with the obligation to bear and pay the cost of exploration,
development and operation.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
thereupon cease, and the Company shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights
and obligations of Sub in accordance with the DGCL.
SECTION 2.2 Effective Time of the Merger. The parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof. Accordingly, the parties shall
use all reasonable efforts to bring about the satisfaction as soon as
practicable of all the conditions specified in Article X and otherwise to
effect the consummation of the Merger as soon as practicable. Subject to the
terms hereof, as soon as practicable after all of the conditions set forth in
Article X shall have been satisfied or waived, the parties hereto will (i) file
a certificate of merger (the "Certificate of Merger") executed in accordance
with the relevant provisions of the DGCL and (ii) make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State of
Delaware or at such other time as Parent and the Company shall agree shall be
specified in the Certificate of Merger (the "Effective Time").
SECTION 2.3 Certificate of Incorporation. The Certificate of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of the
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Surviving Corporation following the Effective Time, until duly amended, except
that Article I of such Certificate shall be deemed to be amended at the
Effective Time to read as follows: "The name of the Corporation is Cairn Energy
USA, Inc."
SECTION 2.4 Bylaws. The Bylaws of Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
following the Effective Time, until duly amended.
SECTION 2.5 Directors of the Surviving Corporation. The
individuals listed as such in Exhibit B attached hereto shall be the directors
of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the
case may be.
SECTION 2.6 Officers of the Surviving Corporation. The
individuals listed as such in Exhibit C shall be the officers of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 2.7 Effects of Merger. The Merger shall have the effects
set forth in the DGCL, including Section 259 thereof.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Effect Of Merger on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company, Parent or Sub:
(a) Cancellation of Certain Company Common Stock. Each share of
Company Common Stock, if any, that is owned by Parent or Sub or any Subsidiary
of Parent or held in the treasury of the Company shall be canceled and cease to
exist and no capital stock of Parent or other consideration shall be delivered
in exchange therefor.
(b) Conversion of Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares of Company Common
Stock canceled pursuant to Section 3.1(a)) shall be converted into 1.08 shares
(the "Conversion Ratio") of duly authorized, validly issued, fully paid and
nonassessable common stock, par value $.01 per share, of the Parent ("Parent
Common Stock"). Upon such conversion, all such shares of Company Common Stock
shall be canceled and cease to exist, and the holder of a certificate
representing such shares shall cease to have any rights with respect thereto,
except the right to receive the number of whole shares of Parent Common Stock
to be issued in consideration therefor and any cash in lieu of fractional
shares of Parent Common Stock upon the surrender of such certificate in
accordance with Section 3.2.
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(c) Treatment of Common Stock of Sub. Each issued and outstanding
share of common stock, par value $.01 per share, of Sub shall be converted into
one fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
SECTION 3.2 Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, Parent shall deposit with a bank or trust company mutually
agreeable to Parent and the Company (the "Exchange Agent") certificates
representing shares of Parent Common Stock required to effect the conversions
referred to in Section 3.1(b).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that, immediately prior to the Effective Time,
represented outstanding shares of Company Common Stock (the "Certificates")
that were converted (collectively, the "Converted Shares") into shares of
Parent Common Stock pursuant to Section 3.1(b), (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to any Certificate shall pass, only upon actual delivery of such
Certificate to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate to the Exchange Agent
(or to such other agent or agents as may be appointed by agreement of Parent
and the Company), together with a duly executed letter of transmittal and such
other documents as the Exchange Agent shall require, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock that such holder
has the right to receive pursuant to the provisions of this Article III. In
the event of a transfer of ownership of Converted Shares that is not registered
in the transfer records of the Company, a certificate representing the proper
number of shares of Parent Common Stock may be issued to the transferee if the
Certificate representing such Converted Shares is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence satisfactory to the Exchange Agent that any applicable
stock transfer taxes have been paid. If any Certificate shall have been lost,
stolen, mislaid or destroyed, then upon receipt of (x) an affidavit of that
fact from the holder claiming such Certificate to be lost, mislaid, stolen or
destroyed, (y) such bond, security or indemnity, as Parent or the Exchange
Agent may reasonably require, and (z) any other documentation necessary to
evidence and effect the bona fide exchange thereof, the Exchange Agent shall
issue to such holder a certificate representing the number of shares of Parent
Common Stock into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender a certificate representing shares of Parent Common Stock and cash in
lieu of any fractional shares of Parent Common Stock as contemplated by this
Section 3.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby, and no cash payment in
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lieu of fractional shares shall be made to any such holder pursuant to Section
3.2(d), until the holder of record of such Certificate shall surrender such
Certificate as contemplated by Section 3.2(b). Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender or as soon thereafter as
may be practicable, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 3.2(d) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
number of shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole number of shares of Parent Common
Stock.
(d) No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. In lieu of any such fractional shares, each holder of shares of
Company Common Stock who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all
shares of Company Common Stock then held of record by such holder) shall
receive cash (without interest) in an amount equal to the product of such
fractional part multiplied by the average of the daily closing price of Parent
Common Stock, rounded to four decimal places, as reported under New York Stock
Exchange in The Wall Street Journal for each of the first 20 consecutive days
on which the New York Stock Exchange is open for trading in the period
commencing 20 trading days prior to the Closing Date.
(e) Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of any
Company Common Stock shall thereafter be made. If after the Effective Time any
certificates evidencing shares of Company Common Stock are presented to the
Parent's transfer agent for registration of transfer, they shall be canceled
and exchanged for certificates representing the number of whole shares of
Parent Common Stock and the cash amount, if any, determined in accordance with
this Article III.
(f) Termination of Duties of Exchange Agent. Any certificates
representing Parent Common Stock deposited with the Exchange Agent pursuant to
Section 3.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 3.2 shall be returned by the Exchange Agent to Parent,
which shall thereafter act as Exchange Agent. All funds held by the Exchange
Agent for payment to the holders of unsurrendered Certificates and unclaimed at
the end of one year from the Effective Time shall be returned to Parent
whereupon any holder of unsurrendered Certificates shall look as a general
unsecured creditor only to Parent for payment of any funds to which such holder
may be entitled, subject to applicable law. None of Parent, the Company or the
Surviving Corporation shall be liable to any person for such shares or funds
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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SECTION 3.3 Adjustments to Prevent Dilution. Subject to the
requirements of Article VIII hereof, in the event that prior to the Effective
Time there is a change in the number of issued and outstanding shares of Parent
Common Stock or Company Common Stock, as the case may be, as a result of a
reclassification, subdivision, recapitalization, combination, exchange, stock
split (including reverse stock split), stock dividend or distribution or other
similar transaction, the Conversion Ratio shall be equitably adjusted to
eliminate the effects of such event, and all references to the Conversion Ratio
in this Agreement shall be deemed to be to the Conversion Ratio as so adjusted.
SECTION 3.4 Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Sub, any other actions and things to vest,
perfect or conform of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE IV
THE CLOSING
SECTION 4.1 Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Jenkens & Gilchrist, a Professional
Corporation, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202 at 10:00 a.m.,
local time, on the second business day immediately following the date on which
the last of the conditions set forth in Article X is fulfilled or waived, or at
such other time and date and place as Parent and the Company shall mutually
agree (the "Closing Date").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent DISCLOSURE SCHEDULE attached hereto
as Exhibit D (the "Parent DISCLOSURE SCHEDULE"), Parent represents and warrants
to the Company as follows:
SECTION 5.1 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, and each of Parent's Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and its Subsidiaries has all
requisite corporate power and authority, and is duly authorized by all
necessary regulatory approvals and orders, to own, lease and operate its assets
and Properties and to carry on its business as it is now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its assets and
properties makes such
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qualification necessary, other than such failures which, individually or in the
aggregate, will not have a Parent Material Adverse Effect.
SECTION 5.2 Subsidiaries.
(a) Section 5.2 of the Parent DISCLOSURE SCHEDULE sets forth a
list as of the date hereof of all Subsidiaries and Joint Ventures of Parent,
including the name of each such entity and the state or jurisdiction of its
incorporation.
(b) All of the issued and outstanding shares of capital stock of
each Subsidiary of Parent are validly issued, fully paid, nonassessable and
free of preemptive rights and are owned directly or indirectly by Parent free
and clear of any liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever, and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such Subsidiary to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of its
capital stock or obligating it to grant, extend or enter into any such
agreement or commitment.
SECTION 5.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 25,000,000 shares of
preferred stock, par value $1.00 per share ("Parent Preferred Stock").
(b) As of the close of business on June 30, 1997, 14,393,308
shares of Parent Common Stock and no shares of Parent Preferred Stock were
issued and outstanding. As of the close of business on June 30, 1997, 60,000
shares of Parent Common Stock were held by Parent in its treasury.
(c) All of the issued and outstanding shares of the capital stock
of Parent are validly issued, fully paid, nonassessable and free of preemptive
rights.
(d) At the close of business on June 30, 1997, (i) 1,187,867
shares of Parent Common Stock were reserved for issuance pursuant to
outstanding options and awards under Parent's employee and director stock plans
as described in the Parent Disclosure Schedule, (ii) 1,769,522 shares of Parent
Common Stock were reserved for issuance upon exercise of Parent's outstanding
warrants as described in the Parent Disclosure Schedule and (iii) 961,158
shares of Parent Common Stock were reserved for future awards under Parent's
1995 Long Term Incentive Plan and 1997 Long Term Incentive Plan.
(e) There are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, to which Parent or any of its Subsidiaries is a party or by which
any of them is bound
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obligating Parent or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock
of Parent or any of its Subsidiaries or other voting securities of Parent or
any of its Subsidiaries obligating Parent or any of its Subsidiaries to grant,
extend or enter into any such agreement or commitment.
SECTION 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority.
(i) The Board of Directors of Parent has approved the
Merger Agreement. Parent has all requisite power and authority to
enter into this Agreement and, subject to the approval of the issuance
of shares of Parent Common Stock pursuant to the Merger (the "Share
Issuance") by the stockholders of Parent and Parent Required Statutory
Approvals, to consummate the Merger and the other transactions
contemplated hereby.
(ii) The execution and delivery of this Agreement and the
consummation by Parent of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Parent, subject to approval of the Share Issuance by the Stockholders
of Parent.
(iii) This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and
delivery hereof by the Company, constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with
its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before
which any proceedings may be brought.
(b) Non-Contravention. The execution and delivery of this
Agreement by Parent do not, and the consummation of the transactions
contemplated hereby and thereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (with or without notice or
lapse of time or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets (any such violation, conflict, breach,
default, right of termination, cancellation or acceleration, loss or creation,
a "Violation") of, Parent or any of its Subsidiaries or, to the knowledge of
Parent, its Joint Ventures, under any provisions of:
(i) the articles of incorporation, bylaws or similar
governing documents of Parent or any of its Subsidiaries or Joint
Ventures;
(ii) subject to obtaining the Parent Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order or injunction of any
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Governmental Authority applicable to Parent or any of its Subsidiaries
or Joint Ventures or any of their respective properties or assets or
business as presently conducted;
(iii) any Major Oil and Gas Interest of Parent and its
Subsidiaries; or
(iv) subject to obtaining the Parent Required Consents,
any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which Parent or any of its
Subsidiaries or Joint Ventures is now a party or by which it or any of
its properties or assets may be bound or affected;
excluding from the foregoing clauses (ii), (iii) and (iv) such Violations as
would not, in the aggregate, have a Parent Material Adverse Effect.
(c) Statutory Approvals. Except for (i) filing by Parent of a
pre-merger notification report form under the HSR Act, (ii) the filing with the
SEC of (A) the Joint Proxy Statement, (B) the Registration Statement and (C)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby and
(iii) the filing of the Certificate of Merger with the Delaware Secretary of
State with respect to the Merger as provided in the DGCL and appropriate
documents with the relevant authorities in other states in which Parent is
qualified to do business, no declaration, filing, or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, the failure to
obtain, make or give which would have a Parent Material Adverse Effect (the
"Parent Required Statutory Approvals"), it being understood that references in
this Agreement to "obtaining" such Parent Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such notice,
obtaining such consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law.
(d) Compliance.
(i) Except as disclosed in the Parent SEC Reports,
neither Parent nor any of its Subsidiaries nor, to the knowledge of
Parent, any of its Joint Ventures is in violation of or under
investigation with respect to, or has been given notice or been
charged with any violation of any law, statute, order, rule,
regulation, ordinance or judgment (including without limitation, any
applicable environmental law, ordinance or regulation) of any
Governmental Authority, except for violations that do not have, and
would not have, a Parent Material Adverse Effect.
(ii) The Parent, its Subsidiaries and, to the knowledge of
Parent, its Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted, except
those the failure to obtain which would not have a Parent Material
Adverse Effect.
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SECTION 5.5 Reports and Financial Statements.
(a) Since December 31, 1993, the filings required to be made by
Parent and its Subsidiaries under the Securities Act or the Exchange Act have
been filed with the SEC as required by each such law or regulation, including
all forms, statements, reports, agreements and all documents, exhibits,
amendments and supplements appertaining thereto, and Parent and its
Subsidiaries have complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
(b) Parent has made available to the Company a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Parent or any of its Subsidiaries with the SEC since
December 31, 1993 (such documents as filed, and any and all amendments thereto,
the "Parent SEC Reports").
(c) The Parent SEC Reports, including without limitation any
financial statements or schedules included therein, at the time filed, and all
forms, reports or other documents filed by Parent with the SEC after the date
hereof, did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were or will be made, not misleading.
(d) The audited consolidated financial statements and unaudited
interim financial statements of Parent included in the Parent SEC Reports
(collectively, the "Parent Financial Statements") have been prepared, and the
audited consolidated financial statements and unaudited interim financial
statements of Parent included in all forms, reports, or other documents filed
by Parent with the SEC after the date hereof will be prepared, in accordance
with GAAP applied on a consistent basis (except as may be indicated therein or
in the notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q) and fairly present in all material respects the
financial position of Parent as of the respective dates thereof or the results
of operations and cash flows for the respective periods then ended, as the case
may be, subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments.
(e) True, accurate and complete copies of the Articles of
Incorporation and Bylaws of Parent, as in effect on the date hereof, have been
delivered to the Company.
SECTION 5.6 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.
(a) Except as set forth in the Parent SEC Reports, from December
31, 1996 through the date hereof Parent and each of its Subsidiaries has
conducted its business only in the ordinary course of business consistent with
past practice and there has not been (i) any declaration, setting aside or
payment of any dividend (whether in cash, stock or property) with respect to
any of Parent's capital stock, (ii) (A) any granting by Parent or any of its
Subsidiaries to any executive officer of Parent or any of its Subsidiaries of
any increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment agreements
in effect as of December 31, 1996, (B) any granting by Parent or any of its
Subsidiaries to any
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such executive officer of any increase in severance or termination pay, except
as was required under employment, severance or termination agreements in effect
as of December 31, 1996, or (C) any entry by Parent or any of its Subsidiaries
into any employment, severance or termination agreement with any such executive
officer, (iii) any damage, destruction or loss, whether or not covered by
insurance, that would have a Parent Material Adverse Effect or (iv) the
occurrence or existence of any other fact or condition that would have a Parent
Material Adverse Effect.
(b) Neither Parent nor any of its Subsidiaries has any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies (i) that are accrued or
reserved against in the consolidated financial statements of Parent or
reflected in the notes thereto for the year ended December 31, 1996, or (ii)
that were incurred after December 31, 1996 in the ordinary course of business
and would not have a Parent Material Adverse Effect.
SECTION 5.7 Litigation. Except as set forth in the Parent SEC
Reports, there are no claims, suits, actions or proceedings, pending or, to the
knowledge of Parent, threatened, nor are there, to the knowledge of Parent, any
investigations or reviews pending or threatened against, relating to or
affecting Parent or any of its Subsidiaries or Joint Ventures, or judgments,
decrees, injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable
to Parent or any of its Subsidiaries or Joint Ventures, that would have a
Parent Material Adverse Effect.
SECTION 5.8 Registration Statement and Joint Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of shares of
capital stock of Parent in the Merger (the "Registration Statement")
will, at the time the Registration Statement becomes effective under
the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact with
respect to Parent or its Subsidiaries required to be stated therein or
necessary to make the statements therein with respect to Parent or its
Subsidiaries not misleading, and
(ii) the joint proxy statement, at the date mailed to such
stockholders and, as the same may be amended or supplemented, at the
time of such meetings, in definitive form relating to the meetings of
the stockholders of the Company and Parent, respectively, to be held
in connection with the Merger and the prospectus relating to the
Parent Common Stock to be issued in the Merger (the "Joint Proxy
Statement"), will contain any untrue statement of a material fact or
omit to state any material fact with respect to Parent and its
Subsidiaries necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
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(b) Each of the Registration Statement and the Joint Proxy
Statement, as of such respective dates, will comply (with respect to Parent and
its Subsidiaries) as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
SECTION 5.9 Tax Matters.
(a) Parent and each of its Subsidiaries has filed (i) within the
time and in the manner prescribed by law, all required Tax Returns calculated
on or with reference to income, profits, earnings or gross receipts and all
other Tax Returns required to be filed that would report a material amount of
Tax, and (ii) paid all Taxes that are shown on such Tax Returns as due and
payable within the time and in the manner prescribed by law except for those
being contested in good faith and for which adequate reserves have been
established.
(b) As of the date hereof there are no claims, assessments, audits
or administrative or court proceedings pending against Parent or any of its
Subsidiaries for any alleged deficiency in Tax, and none of Parent or any of
its Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(c) Parent has established adequate accruals for Taxes and for any
liability for deferred Taxes in the Parent Financial Statements in accordance
with GAAP.
SECTION 5.10 Employee Matters.
(a) Benefit Plans. With respect to all the employee benefit plans
and arrangements maintained for the benefit of any current or former employee,
officer or director of Parent or any of its Subsidiaries (collectively, the
"Parent Benefit Plans"), except as set forth in the Parent SEC Reports and
except, in the case of clauses (iii), (iv) and (v), as would not, individually
or in the aggregate, have a Parent Material Adverse Effect: (i) none of the
Parent Benefit Plans is a "multi-employer plan" within the meaning of ERISA;
(ii) none of the Parent Benefit Plans promises or provides retiree medical or
life insurance benefits to any person, except as otherwise required by law;
(iii) each Parent Benefit Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service that it is so qualified and nothing has occurred since the date
of such letter that could reasonably be expected to affect the qualified status
of such Parent Benefit Plan; (iv) each Parent Benefit Plan has been operated in
all respects in accordance with its terms and the requirements of applicable
law; and (v) neither Parent nor any of its Subsidiaries has incurred any direct
or indirect liability under, arising out of or by operation of Title IV of
ERISA in connection with the termination of, or withdrawal from, any Parent
Benefit Plan or other retirement plan or arrangement, and no fact or event
exists that could reasonably be expected to give rise to any such liability.
The aggregate accumulated benefit obligations of any Parent Benefit Plan
subject to Title IV of ERISA do not exceed the fair market value of the assets
of such Parent Benefit Plan. Except as set forth in Schedule 5.10(a) of the
Parent DISCLOSURE SCHEDULE, neither Parent nor any of its Subsidiaries has any
Parent Benefit Plan or any employment or severance agreement with any of its
employees.
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(b) Labor Matters. (i) Neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or other
material contract or agreement with any labor organization or other
representative of employees nor is any such contract being negotiated; (ii)
there is no material unfair labor practice charge or complaint pending nor, to
the knowledge of the executive officers of Parent, threatened, with regard to
employees of Parent or any of its Subsidiaries; (iii) there is no labor strike,
slowdown, work stoppage or other labor controversy in effect, or, to the
knowledge of the executive officers of Parent, threatened against or
involving Parent or any of its Subsidiaries that has, or would be reasonably
likely to have, a Parent Material Adverse Effect; (iv) as of the date hereof,
no representation question exists, nor to the knowledge of the executive
officers of Parent, are there any campaigns being conducted to solicit cards
from the employees of Parent or any of its Subsidiaries to authorize
representation by any labor organization; (v) neither Parent nor any of its
Subsidiaries is a party to, or is otherwise bound by, any consent decree with
any governmental authority relating to employees or employment practices of
Parent or any of its Subsidiaries; (vi) Parent and its Subsidiaries have not
incurred any liability under, and have complied in all respects with, the
Worker Adjustment Retraining Notification Act, and no fact or event exists that
could give rise to liability under such Act; and (vii) Parent and its
Subsidiaries are in compliance with all applicable agreements, contracts and
policies relating to employment, employment practices, wages, hours and terms
and conditions of employment of the employees, except where the failure to be
in compliance with each such agreement, contract and policy would not, either
individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 5.11 Environmental Protection. Except as disclosed in the
Parent SEC Reports and except as would not, individually or in the aggregate,
be reasonably expected to result in a Parent Material Adverse Effect, (i)
Parent and each of its Subsidiaries is in compliance with all applicable
Environmental Laws and the terms and conditions of all applicable
environmental, health and safety permits and authorizations (collectively,
"Environmental Permits"); (ii) there are no Environmental Claims against Parent
or any of its Subsidiaries; and (iii) no Hazardous Materials have been
released, discharged or disposed of on any of the properties owned or occupied
by Parent or its Subsidiaries in any manner or quantity which requires
investigation, assessment, monitoring, remediation or cleanup under currently
applicable Environmental Laws.
SECTION 5.12 Engineering Reports. All information supplied to
Ryder Scott Petroleum Engineers, an independent petroleum engineer, by or on
behalf of Parent and its Subsidiaries that was material to such engineer's
review of Parent's estimates of oil and gas reserves attributable to the Oil
and Gas Interests (as hereinafter defined) of Parent and its Subsidiaries in
connection with the preparation of the oil and gas reserve engineering report
concerning the Oil and Gas Interests of Parent and its Subsidiaries as of
December 31, 1996 reviewed by Ryder Scott Petroleum Engineers (the "Parent
Engineering Report") was (at the time supplied or as modified or amended prior
to the issuance of the Parent Engineering Report) true and correct in all
material respects. For purposes of this Agreement "Oil and Gas Interests"
means, when used with respect to Parent and each of its Subsidiaries or the
Company, as the case may be, direct and indirect interests in and rights with
respect to oil, gas, helium, carbon dioxide, mineral, and related properties
and assets of any kind and nature, direct or indirect, including leasehold,
working, royalty and overriding royalty interests, production payments,
operating rights, net profit interests,
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other nonworking interests, and nonoperating interests; all interests in and
rights with respect to oil, condensate, gas, casinghead gas, helium, carbon
dioxide and other liquid or gaseous hydrocarbons (collectively, "Hydrocarbons")
and other minerals or revenues therefrom and all contracts in connection
therewith and claims and rights thereto (including all oil and gas leases,
operating agreements, unitization and pooling agreements and orders, division
orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales,
exchange and processing contracts and agreements, and in each case, interests
thereunder), surface interests, fee interests, revisionary interests,
reservations, and concessions; all easements, rights of way, licenses, permits,
leases, and other interests associated with, appurtenant to, or necessary for
the operation of any of the foregoing; and all interests in equipment and
machinery (including well equipment and machinery), oil and gas production,
gathering, transmissions, treating, processing, and storage facilities
(including tanks, tank batteries, pipelines, and gathering systems), pumps,
water plants, electric plants, gasoline and gas processing plants, refineries,
and other tangible personal property and fixtures associated with, appurtenant
to, or necessary for the operation of any of the foregoing. Except for changes
in classification or values of oil and gas reserve or property interests that
occurred in the ordinary course of business since December 31, 1996, and except
for changes (including changes in commodity prices) generally affecting the oil
and gas industry on a nationwide basis, there has been no Parent Material
Adverse Change regarding the matters addressed in the Parent Engineering
Report.
SECTION 5.13 No Vote Required. The approval of the Share Issuance
by the affirmative vote of holders of a majority of the shares of Parent Common
Stock entitled to vote on such matter at the Parent Special Meeting (the
"Parent Stockholders' Approval") is the only vote of the holders of any class
or series of the capital stock of Parent required to approve this Agreement,
the Merger and the other transactions contemplated hereby.
SECTION 5.14 Insurance. Parent and each of its Subsidiaries is,
and has been continuously since December 31, 1995, insured in such amounts and
against such risks and losses as are customary for companies conducting the
respective businesses conducted by Parent and its Subsidiaries during such time
period. Neither Parent nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy
thereof. All material insurance policies of Parent and its Subsidiaries are
valid and enforceable policies.
SECTION 5.15 Ownership of Company Common Stock. Parent does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of Company Common Stock.
SECTION 5.16 No Loss of Title to Interests. No suit, action or
other proceeding (including, without limitation, tax, environmental or
development demands proceedings) is pending, or to the best of Parent's
knowledge threatened, which might result in loss of title to any of Parent's
Major Oil and Gas Interests. Parent shall promptly notify the Company of any
such proceeding which may arise or be threatened prior to the Closing. No
action, suit or proceeding is currently pending to which Parent is a party or
to which any of Parent's assets are subject which relates to the ownership or
operations of Parent's Major Oil and Gas Interests.
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SECTION 5.17 Title to Major Oil and Gas Interests.
(a) Parent has, or will have as of the Closing Date, Defensible
Title to all of Parent's and Parent's Subsidiaries will have as of The Closing
Date, Defensible Title to all of Parent's Subsidiaries', Major Oil and Gas
Interests except for such defects in Parent's and its Subsidiaries' Defensible
Title that will not, individually or in the aggregate, affect the aggregate
value of such Major Oil and Gas Interests by an amount in excess of $1 million.
(b) All royalties, rentals, Pugh clause payments, shut-in gas
payments and other payments due with respect to Parent's and its Subsidiaries'
Major Oil and Gas Interests have been properly and timely paid, except (i) for
payments held in suspense for title or other reasons which are customary in the
industry and which will not result in grounds for cancellation of Parent's or
its Subsidiaries' rights in such Major Oil and Gas Interests and (ii) such
failures as would not have a Parent Material Adverse Effect.
(c) Except for such defaults that would not result in a Parent
Material Adverse Effect, neither Parent nor any of its Subsidiaries is in
default (and there exists no event or circumstance which with notice or the
passage of time or both could constitute a default by Parent or its
Subsidiaries) under the terms of any leases, farmout agreements or other
contracts or agreements respecting Parent's or its Subsidiaries' Major Oil and
Gas Interests which could (i) interfere in any material respect with the
operation or use thereof, (ii) prevent Parent or its Subsidiaries from
receiving the proceeds of production attributable to their interest therein,
(iii) result in a cancellation of Parent's or Subsidiaries' interest therein,
or (iv) impair the value of parent's or Subsidiaries' interest therein.
SECTION 5.18 Material Contracts and Agreements.
(a) All material contracts of Parent or its Subsidiaries have been
included in the Parent SEC Reports, except for those contracts not required to
be filed pursuant to the rules and regulations of the SEC.
(b) Section 5.18 of the Parent Disclosure Schedule sets forth a
list of all written or oral contracts, agreements or arrangements to which
Parent or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets is bound which would be required
to be filed as exhibits to Parent's Annual Report on Form 10-K for the year
ending December 31, 1997 and which have not previously been included as
exhibits in the Parent SEC Reports.
SECTION 5.19 Opinion of Financial Advisor. Parent has received
the written opinion (the "Merrill Lynch Opinion") of Merrill Lynch & Co.
("Merrill Lynch"), on the date hereof, to the effect that, as of the date
hereof, the Conversion Ratio is fair from a financial point of view to the
Parent.
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SECTION 5.20 Accounting Matters. To the best of Parent's
knowledge, neither the Parent nor any of its Affiliates has through the date of
this Agreement taken or agreed to take any action that (without giving effect
to any action taken or agreed to be taken by the Company or any of its
affiliates) would prevent the Parent from accounting for the business
combination to be effected by the Merger as a pooling of interest.
SECTION 5.21 State Takeover Statutes; Absence of Supermajority
Provision. Parent has taken all action to assure that no state takeover
statute or similar statute or regulation, shall apply to the Merger or any of
the other transactions contemplated hereby. Except for Parent Stockholders'
Approval, no other stockholder action on the part of Parent is required for
approval of the Merger, this Agreement and the transactions contemplated
hereby. No provisions of Parent's Articles of Incorporation or By-laws or
other governing instruments of its subsidiaries or the terms of any rights plan
or other takeover defense mechanism of Parent would, directly or indirectly,
restrict or impair the ability of the Parent or the Company to consummate the
Merger nor will any such provisions restrict or impair the ability of the
stockholders of the Company to exercise the same rights to vote or otherwise
exercise the same rights as the other stockholders of Parent in the event that
the stockholders of the Company were to acquire securities of Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company DISCLOSURE SCHEDULE attached hereto
as Exhibit E (the "Company DISCLOSURE SCHEDULE"), the Company represents and
warrants to Parent as follows:
SECTION 6.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing, under the
laws of the State of Delaware, and each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing, under the
laws of its jurisdiction of incorporation. Each of the Company and its
Subsidiaries has all requisite corporate power and authority, and is duly
authorized by all necessary regulators approvals and orders, to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary, other
than such failure which, individually or in the aggregate, will not have a
Company Material Adverse Effect.
SECTION 6.2 Subsidiaries.
(a) Section 6.2 of the Company DISCLOSURE SCHEDULE sets forth a
description as of the date hereof of all Subsidiaries and Joint Ventures of the
Company, including the name of each such entity, the state or jurisdiction of
its incorporation, a brief description of the principal line or lines of
business conducted by each such entity and the Company's interest therein.
(b) All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company are validly issued, fully paid, nonassessable
and free of preemptive rights and are owned
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directly or indirectly by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
SECTION 6.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 30,000,000 shares of Company Common Stock and 5,000,000
shares of Company Preferred Stock.
(b) As of the close of business on June 30, 1997, 17,566,356
shares of Company Common Stock were issued and outstanding and no shares of
Company Preferred Stock were issued and outstanding. As of the close of
business on June 30, 1997, no shares of Company Common Stock or Company
Preferred Stock are held by the Company in its treasury or owned by any of the
Company's Subsidiaries.
(c) All of the issued and outstanding shares of the capital stock
of the Company are validly issued, fully paid, nonassessable and free of
preemptive rights.
(d) At the close of business on June 30, 1997, (i) 908,167 shares
of Company Common Stock were reserved for issuance pursuant to outstanding
options under the employee and director stock plans as described in the Company
Disclosure Schedule, and (ii) 484,833 shares of Company Common Stock were
reserved for future awards under the Company's employee and director stock
option plans as described in the Company Disclosure Schedule.
(e) There are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company or obligating the Company
to grant, extend or enter into any such agreement or commitment.
SECTION 6.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority.
(i) The Board of Directors of the Company has declared
the Merger fair to and advisable and in the best interests of the
stockholders of the Company. The Company has all requisite power and
authority to enter into this Agreement and, subject to Company
Stockholders' Approval and the Company Required Statutory Approvals,
to consummate the transactions contemplated hereby.
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(ii) The execution and delivery of this Agreement and,
subject to obtaining the Company Stockholders' Approval, the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of the Company.
(iii) This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Parent and Sub, constitutes the valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as would be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other
similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including
specific performance, may be subject to the discretion of any court
before which any proceeding therefor may be brought.
(b) Non-Contravention. The execution and delivery of this
Agreement by the Company do not, and the consummation of the transactions
contemplated hereby and thereby will not, result in any Violation by the
Company or any of its Subsidiaries or, to the knowledge of the Company, any of
its Joint Ventures, under any provisions of
(i) the certificate of incorporation, bylaws or similar
governing documents of the Company or any of its Subsidiaries or Joint
Ventures;
(ii) subject to obtaining the Company Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order or injunction of any Governmental Authority applicable
to the Company or any of its Subsidiaries or Joint Ventures or any of
their respective properties or assets;
(iii) any Major Oil and Gas Interest of the Company or its
Subsidiaries; or
(iv) subject to obtaining the Company Required Consents,
any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which the Company or any of its
Subsidiaries or Joint Ventures is now a party or by which it or any of
its properties or assets may be bound or affected;
excluding from the foregoing clauses (ii), (iii) and (iv) such Violations as
would not, in the aggregate, reasonably likely have a Company Material Adverse
Effect.
(c) Statutory Approvals. Except for (i) filing by the Company of
a pre-merger Notification Report form under the HSR Act, (ii) the filing with
the SEC of (A) the Joint Proxy Statement and (B) such reports under Section
13(a) of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated hereby and (iii) the filing of the
Certificate of Merger with the Delaware Secretary of State with respect to the
Merger as provided in the DGCL and appropriate documents with the relevant
authorities in other states in which the Company is qualified to do business,
no declaration, filing or registration with, or notice to or
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authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, the
failure to obtain, make or give which would reasonably likely have a Company
Material Adverse Effect (the "Company Required Statutory Approvals"), it being
understood that references in this Agreement to "obtaining" such Company
Required Statutory Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of
law.
(d) Compliance.
(i) Except as disclosed in the Company SEC Reports,
neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, any of its Joint Ventures, is in violation of or under
investigation with respect to, or has been given notice or been
charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any
Governmental Authority, except for violations that do not have, and,
would not reasonably likely have, a Company Material Adverse Effect.
(ii) The Company, its Subsidiaries and, to the knowledge
of the Company, its Joint Ventures have all permits, licenses,
franchises and other governmental authorizations, consents and
approvals necessary, to conduct their respective businesses as
currently conducted, except those the failure to obtain which would
not reasonably likely have a Company Material Adverse Effect.
SECTION 6.5 Reports and Financial Statements.
(a) Since December 31, 1993, the filings required to be made by
the Company and its Subsidiaries under the Securities Act or the Exchange Act
have been filed with the SEC as required by each such law or regulation,
including all forms, statements, reports, agreements and all documents,
exhibits, amendments and supplements appertaining thereto, and the Company and
its Subsidiaries have complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
(b) The Company has made available to Parent a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since December 31, 1993, (such
documents as filed, and any and all amendments thereto, the "Company SEC
Reports").
(c) The Company SEC Reports, including without limitation any
financial statements or schedules included therein, at the time filed, and all
forms, reports or other documents filed by the Company with the SEC after the
date hereof, did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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(d) The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC Reports
(collectively, the "Company Financial Statements") have been prepared, and the
audited consolidated financial statements and unaudited interim financial
statements of the Company as included in all forms, reports or other documents
filed with the SEC after the date hereof will be prepared in accordance with
GAAP applied on a consistent basis (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as permitted
by Form 10-Q) and fairly present in all material respects the financial
position of the Company as of the respective dates thereof or the results of
operations and cash flows for the respective periods then ended, as the case
may be, subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments.
(e) True, accurate and complete copies of the Certificate of
Incorporation and Bylaws of the Company, as in effect on the date hereof, have
been delivered to Parent.
SECTION 6.6 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.
(a) Except as set forth in the Company SEC Reports, from December
31, 1996 through the date hereof the Company and each of its Subsidiaries has
conducted its business only in the ordinary course of business consistent with
past practice and there has not been (i) any declaration, setting aside or
payment of any dividend (whether in cash, stock or property) with respect to
any of the Company's capital stock, (ii) (A) any granting by the Company or any
of its Subsidiaries to any executive officer of the Company or any of its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of December 31, 1996, (B) any granting by the Company
or any of its Subsidiaries to any such executive officer of any increase in
severance or termination pay, except as was required under employment,
severance or termination agreements in effect as of December 31, 1996, or (C)
any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive officer, (iii) any
damage, destruction or loss, whether or not covered by insurance, that would
have a Company Material Adverse Effect or (iv) any other fact or condition
exists that would reasonably likely have a Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a consolidated corporate
balance sheet, except liabilities, obligations or contingencies (i) that are
accrued or reserved against in the consolidated financial statements of the
Company or reflected in the notes thereto for the year ended December 31, 1996,
or (ii) that were incurred after December 31, 1996 in the ordinary course of
business and would not reasonably likely have a Company Material Adverse
Effect.
SECTION 6.7 Litigation. Except as set forth in the Company SEC
Reports, there are no claims, suits, actions or proceedings, pending or, to the
knowledge of the Company, threatened, nor are there, to the knowledge of the
Company, any investigations or reviews pending or threatened against, relating
to or affecting the Company or any of its Subsidiaries or Joint Ventures, or
judgments, decrees, injunctions, rules or orders of any court, governmental
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department, commission, agency, instrumentality or authority or any arbitrator
applicable to the Company or any of its Subsidiaries or Joint Ventures, that
would have, or would reasonable likely have, a Company Material Adverse Effect.
SECTION 6.8 Registration Statement and Joint Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities Act and
at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
(ii) the Joint Proxy Statement will, at the date the Joint
Proxy Statement is mailed to the stockholders of the Company and
Parent and, as the same may be amended or supplemented, at the time of
the meetings of such stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to
state any material fact with respect to the Company or its
Subsidiaries necessary in order to make the statements therein with
respect to the Company or its Subsidiaries, in light of the
circumstances under which they are made, not misleading.
(b) Each of the Registration Statement and the Joint Proxy
Statement, as of such respective dates, will comply (with respect to the
Company and its Subsidiaries) as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder.
SECTION 6.9 Tax Matters.
(a) The Company and each of its Subsidiaries has filed (i) within
the time and in the manner prescribed by law, all required Tax Returns
calculated on or with reference to income, profits, earnings or gross receipts
and all other Tax Returns required to be filed that would report a material
amount of Tax, and (ii) paid all Taxes that are shown on such Tax Returns as
due and payable within the time and in the manner prescribed by law except for
those being contested in good faith and for which adequate reserves have been
established.
(b) As of the date hereof there are no claims, assessments, audits
or administrative or court proceedings pending against the Company or any of
its Subsidiaries for any alleged deficiency in Tax, and none of the Company or
any of its Subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect
to any Taxes or Tax Returns.
(c) The Company has established adequate accruals for Taxes and
for any liability for deferred Taxes in the Company Financial Statements in
accordance with GAAP.
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SECTION 6.10 Employee Matters.
(a) Benefit Plans. With respect to all the employee benefit plans
and arrangements maintained for the benefit of any current or former employee,
officer or director of the Company or any of its Subsidiaries (collectively,
the "Company Benefit Plans"), except as set forth in the Company SEC Reports
and except, in the case of clauses (iii), (iv) and (v), as would not,
individually or in the aggregate, have a Company Material Adverse Effect: (i)
none of the Company Benefit Plans is a "multi-employer plan" within the meaning
of ERISA; (ii) none of the Company Benefit Plans promises or provides retiree
medical or life insurance benefits to any person, except as otherwise required
by law; (iii) each Company Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service that it is so qualified and nothing has occurred since
the date of such letter that could reasonably be expected to affect the
qualified status of such Company Benefit Plan; (iv) each Company Benefit Plan
has been operated in all respects in accordance with its terms and the
requirements of applicable law; and (v) neither the Company nor any of its
Subsidiaries has incurred any direct or indirect liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination of,
or withdrawal from, any Company Benefit Plan or other retirement plan or
arrangement, and no fact or event exists that could reasonably be expected to
give rise to any such liability. The aggregate accumulated benefit obligations
of any Company Benefit Plan subject to Title IV of ERISA do not exceed the
fair market value of the assets of such Company Benefit Plan. Except as set
forth in Schedule 6.10(a) of the Company DISCLOSURE SCHEDULE, neither the
Company nor any of its Subsidiaries has any Company Benefit Plan or any
employment or severance agreement with any of its employees.
(b) Labor Matters. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other
material contract or agreement with any labor organization or other
representative of employees nor is any such contract being negotiated; (ii)
there is no material unfair labor practice charge or complaint pending nor, to
the knowledge of the executive officers of the Company, threatened, with regard
to employees of the Company or any of its Subsidiaries; (iii) there is no labor
strike, slowdown, work stoppage or other labor controversy in effect, or, to
the knowledge of the executive officers of the Company, threatened against or
involving the Company or any of its Subsidiaries that has, or would be
reasonably likely to have, a Company Material Adverse Effect; (iv) as of the
date hereof, no representation question exists, nor to the knowledge of the
executive officers of the Company, are there any campaigns being conducted to
solicit cards from the employees of the Company or any of its Subsidiaries to
authorize representation by any labor organization; (v) neither the Company nor
any of its Subsidiaries is a party to, or is otherwise bound by, any consent
decree with any governmental authority relating to employees or employment
practices of the Company or any of its Subsidiaries; (vi) the Company and its
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act, and no fact
or event exists that could give rise to liability under such Act; and (vii) the
Company and its Subsidiaries are in compliance with all applicable agreements,
contracts and policies relating to employment, employment practices, wages,
hours and terms and conditions of employment of the employees, except where the
failure to be in compliance with each such agreement, contract and
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policy would not, either individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 6.11 Environmental Matters. Except as disclosed in the
Company SEC Reports and except as would not, individually or in the aggregate,
be reasonably expected to result in a Company Material Adverse Effect, (i) the
Company and each of its Subsidiaries are in compliance with all applicable
Environmental Laws and the terms and conditions of all applicable Environmental
Permits, (ii) there are no Environmental Claims against the Company or any of
its Subsidiaries, and (iii) no Hazardous Materials have been released,
discharged or disposed of on any of the properties owned or occupied by the
Company or its Subsidiaries in any manner or quantity which requires
investigation, assessment, monitoring, remediation or cleanup under currently
applicable Environmental Laws.
SECTION 6.12 Engineering Reports. All information supplied to
Ryder Scott Company, an independent petroleum engineering firm, by or on behalf
of the Company that was material to such firm's review of the Company's
estimates of oil and gas reserves attributable to the Oil and Gas Interests of
the Company in connection with the preparation of the oil and gas reserve
engineering report concerning the Oil and Gas Interests of the Company as of
December 31, 1996 (the "Company Engineering Report"), was (at the time
supplied or as modified or amended prior to the issuance of the Company
Engineering Report) true and correct in all material respects. Except for
changes in classification or values of oil and gas reserve or property
interests that occurred in the ordinary course of business since December 31,
1996, and except for changes (including changes in commodity prices) generally
affecting the oil and gas industry on a nationwide basis, there has been no
Company Material Adverse Change regarding the matters addressed in the Company
Engineering Report.
SECTION 6.13 Vote Required. The approval of this Agreement by the
holders of at least a majority of the outstanding shares of Company Common
Stock (the "Company Stockholders' Approval") is the only vote of holders of
any class or series of the capital stock of the Company required to approve
this Agreement, the Merger and the other transactions contemplated hereby.
SECTION 6.14 Opinion of Financial Advisor. The Company has
received the written opinion (the "DLJ Opinion") of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), on the date hereof, to the effect
that, as of the date hereof, the Conversion Ratio is fair from a financial
point of view to the holders of Company Common Stock.
SECTION 6.15 Insurance. The Company and each of its Subsidiaries
is, and has been continuously since December 31, 1995, insured in such amounts
and against such risks and losses as are customary for companies conducting the
respective businesses conducted by the Company and its Subsidiaries during such
time period. Neither the Company nor any of its Subsidiaries has received any
notice of cancellation or termination with respect to any material insurance
policy thereof. All material insurance policies of the Company and its
Subsidiaries are valid and enforceable policies.
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SECTION 6.16 Ownership of Parent Common Stock. The Company does
not "beneficially own" (as such term is defined in Rule 13d-3 under the
Exchange Act) any shares of Parent Common Stock.
SECTION 6.17 No Loss of Title to Interests. No suit, action or
other proceeding (including, without limitation, tax, environmental or
development demands proceedings) is pending, or to the best of the Company's
knowledge threatened, which might result in loss of title to any of the
Company's Major Oil and Gas Interests. The Company shall promptly notify
Parent of any such proceeding which may arise or be threatened prior to the
Closing. No action, suit or proceeding is currently pending to which the
Company is a party or to which any of the Company's assets are subject which
relates to the ownership or operations of the Company's Major Oil and Gas
Interests.
SECTION 6.18 Title to Major Oil and Gas Interests.
(a) The Company has, or will have as of the Closing Date,
Defensible Title to all of the Company's and its Subsidiaries' Major Oil and
Gas Interests, except for such defects in the Company's and its Subsidiaries'
Defensible Title that will not individually or in the aggregate, affect the
value of such Major Oil and Gas Interests by an amount in excess of $1 million.
(b) All royalties, rentals, Pugh clause payments, shut-in gas
payments and other payments due with respect to Company's and its Subsidiaries'
Major Oil and Gas Interests have been properly and timely paid, except (i) for
payments held in suspense for title or other reasons which are customary in the
industry and which will not result in grounds for cancellation of Company's or
its Subsidiaries' rights in such Major Oil and Gas Interests and (ii) such
failures as would not have a Company Material Adverse Effect.
(c) Except for such defaults that would not result in a Company
Material Adverse Effect, neither the Company nor any of its Subsidiaries is in
default (and there exists no event or circumstance which with notice or the
passage of time or both could constitute a default by the Company or its
Subsidiaries) under the terms of any lease, farmout agreements or other
contracts or agreements respecting the Company's or its Subsidiaries' Major Oil
and Gas Interests which could (i) interfere in any material respect with the
operation or use thereof, (ii) prevent the Company or its Subsidiaries from
receiving the proceeds of production attributable to their interest therein,
(iii) result in cancellation of the Company's interest therein, or (iv) impair
the value of the Company's or its Subsidiaries' interest therein.
SECTION 6.19 Material Contracts and Agreements.
(a) All material contracts of the Company or its Subsidiaries have
been included in the Company SEC Reports, except for those contracts not
required to be filed pursuant to the rules and regulations of the SEC.
(b) Section 6.19 of the Company Disclosure Schedule sets forth a
list of all written or oral contracts, agreements or arrangements to which the
Company or any of its Subsidiaries is a
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party or by which the Company or any of its Subsidiaries or any of their
respective assets is bound which would be required to be filed as exhibits to
the Company's Annual Report on Form 10-K for the year ending December 31, 1997,
and which have not previously been included as exhibits in the Company SEC
Reports.
SECTION 6.20 Accounting Matters. To the best of its knowledge,
neither the Company nor any of its affiliates, has through the date of this
Agreement taken or agreed to take any action that (without giving effect to any
action taken or agreed to be taken by Parent or any of its affiliates) would
present Parent from accounting for the business combination to be effected by
the Merger as a pooling of interests.
SECTION 6.21 State Takeover Statutes; Absence of Supermajority
Provision. The Company has taken all action to assure that no state takeover
statute or similar statute or regulation, including, without limitation Section
203 of the DGCL, shall apply to the Merger or any of the other transactions
contemplated hereby. Except for Company Stockholders' Approval, no other
stockholder action on the part of the Company is required for approval of the
Merger, this Agreement and the transactions contemplated hereby. No provisions
of the Company's Certificate of Incorporation or By-laws or other governing
instruments of its subsidiaries or the terms of any rights plan or other
takeover defense mechanism of the Company would, directly or indirectly,
restrict or impair the ability of Parent to vote, or otherwise to exercise the
rights of a stockholder with respect to, securities of the Company and its
subsidiaries that may be acquired or controlled by Parent or permit any
stockholder to acquire securities of the Company on a basis not available to
Parent in the event that Parent were to acquire securities of the Company.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 7.1 Organization and Standing. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub was organized solely for the purpose of acquiring the Company
and engaging in the transactions contemplated by this Agreement and has not
engaged in any business since it was incorporated which is not in connection
with the Merger and this Agreement.
SECTION 7.2 Capital Structure. The authorized capital stock of
Sub consists of 1,000 shares of common stock, par value $0.01 per share, all of
which are validly issued and outstanding, fully paid and nonassessable, free of
preemptive rights and are owned by Parent free and clear of all liens, claims
and encumbrances.
SECTION 7.3 Authority; Non-Contravention. Sub has all requisite
power and authority to enter into this Agreement and to consummate the Merger
and the other transactions contemplated hereby. The execution and delivery of
this Agreement by Sub, the performance by Sub of its obligations hereunder and
the consummation of the transactions contemplated hereby
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have been duly authorized by its Board of Directors and Parent as its sole
stockholder, and, except for the corporate filings required by state law, no
other corporate proceedings on the part of Sub are necessary to authorize this
Agreement and the Merger and the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Sub and, assuming
the due authorization, execution and delivery hereof by the Company,
constitutes a valid and binding obligation of Sub enforceable against Sub in
accordance with its terms, except to the extent enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceedings may be brought. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, violate, conflict with or
result in a breach of any provision of, or constitute a default (with or
without notice or lapse of time, or both) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Sub
under, any provisions of (i) the Certificate of Incorporation or Bylaws (true
and complete copies of which as of the date hereof have been delivered to the
Company) of Sub, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Sub or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Sub or any of its properties
or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, losses, liens, security interests,
charges or encumbrance that, individually or in the aggregate, would not have a
Sub Material Adverse Effect, materially impair the ability of Sub to perform
its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
ARTICLE VIII
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, Parent shall, and shall cause its Subsidiaries
to, and the Company shall, and shall cause its Subsidiaries to, comply with the
provisions of this Article VIII.
SECTION 8.1 Ordinary Course of Business. Parent shall, and shall
cause its Subsidiaries to, and the Company shall, and shall cause its
Subsidiaries to, conduct their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
use all commercially reasonable efforts to preserve their respective business
organizations and goodwill, preserve the goodwill and relationships with
customers, suppliers, distributors and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing programs
currently in force, keep available the services of their present officers and
employees.
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SECTION 8.2 Dividends. Parent shall not, nor shall it permit any
of its Subsidiaries to, and the Company shall not, nor shall it permit any of
its Subsidiaries to:
(a) declare or pay any dividends or make other distributions in
respect of any of their capital stock other than to Parent or its Subsidiaries
or to the Company or its Subsidiaries, as the case may be, and other than (i)
the declaration and payment, if desirable by Parent, of Parent Common Stock
purchase rights having terms substantially similar to those previously
described to the Company and provided further that in all events the Parent
Common Stock issued in the merger shall provide the holders thereof with the
same rights and benefits as the holders of Parent Common Stock as of the date
hereof.
(b) split, combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of their capital stock; or
(c) redeem, repurchase or otherwise acquire any shares of their
capital stock, other than
(i) intercompany acquisitions of capital stock, or
(ii) in connection with the administration of employee
benefit and dividend reinvestment plans as in effect on the date
hereof in the ordinary course of the operation of such plans.
SECTION 8.3 Issuance of Securities. Parent shall not, and shall
not permit any of its Subsidiaries to, and the Company shall not, and shall not
permit any of its Subsidiaries to, issue, agree to issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of their
capital stock or any class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities except for:
(a) the issuance of common stock or other securities by Parent or
the Company pursuant to the plans and arrangements listed in their respective
DISCLOSURE SCHEDULEs, in each case in the ordinary course of the operation of
such plans and arrangements in accordance with their current terms,
(b) existing outstanding securities and rights to acquire
securities of Parent and those permitted by Section 8.2, or
(c) issuances by a wholly owned Subsidiary of its capital stock to
Parent or the Company, as the case may be.
SECTION 8.4 Charter Documents. Parent and the Company shall not
amend or propose to amend their respective articles of incorporation or bylaws
in any way adverse to the other, except to the extent that any document setting
forth the terms of a series of preferred stock
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permitted to be issued in accordance with this Article VIII constitutes an
amendment to their respective articles of incorporation.
SECTION 8.5 No Acquisitions. Parent shall not, nor shall it
permit any of its Subsidiaries to, and the Company shall not, nor shall it
permit any of its Subsidiaries to, acquire, or publicly propose to acquire, or
agree to acquire, by merger or consolidation, by purchase or otherwise, any
assets of any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, in each case that involves a transaction exceeding
$15,000,000 in the aggregate, except with the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that Parent and the Company may acquire Oil and Gas Interests in the
ordinary course of business consistent with prior practice. Notwithstanding
the foregoing, except for acquisitions of Oil and Gas Interests in the
ordinary course of business consistent with prior practice, in no event shall
any acquisition, merger, consolidation or purchase of any assets or business
from an Affiliate of Parent or its subsidiaries, or the Company or the
subsidiaries (as applicable) be permitted without the consent of the other
party hereto.
SECTION 8.6 Capital Expenditures. Except as required by law,
Parent shall not, nor shall it permit any of its Subsidiaries to, and the
Company shall not, nor shall it permit any of its Subsidiaries to, make any
capital expenditures, except for normal extensions to or replacements of
properties and drilling of exploratory and development wells in the ordinary
course of business consistent with prior practice and the acquisition of
seismic data and processing and interpretation equipment in the ordinary course
of business consistent with prior practice.
SECTION 8.7 No Dispositions. Parent shall not, nor shall it
permit any of its Subsidiaries to, and the Company shall not, nor shall it
permit any of its Subsidiaries to, sell, lease, license, encumber or otherwise
dispose of any assets that are material, except for normal extensions to or
replacements of properties in the ordinary course of business consistent with
prior practice; provided, however, this Section shall not prohibit ordinary
course of business transfers of properties in connection with the establishment
of exploration arrangements, including farmouts and similar arrangements.
SECTION 8.8 Indebtedness. Parent shall not, nor shall it permit
any of its Subsidiaries to, and the Company shall not, nor shall it permit any
of its Subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed, including, without limitation, the
issuance of debt securities), except for:
(a) short-term indebtedness in the ordinary course of business
consistent with past practice,
(b) long-term indebtedness in connection with the refinancing of
existing indebtedness either at its stated maturity or at a lower cost of
funds, or
(c) borrowings under existing credit facilities.
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SECTION 8.9 Compensation, Benefits. Except as described in
Section 8.9 of the Parent Disclosure Schedule except as may be required by
applicable law or as contemplated by this Agreement, Parent shall not, nor
shall it permit any of its Subsidiaries to, and the Company shall not, nor
shall it permit any of its Subsidiaries to, enter into, adopt or amend or
increase the amount of or accelerate the payment or vesting of any benefit or
amount payable under any employee benefit plan or any other contract,
agreement, commitment, arrangement, plan or policy maintained by, contributed
to or entered into by Parent or the Company, as the case may be, or their
respective Subsidiaries, or increase, or enter into any contract, agreement,
commitment or arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement, employment
or any related rights of any director, officer or other employee of Parent or
the Company, as the case may be, or their respective Subsidiaries, except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to Parent or the Company, as the case may be,
or their respective Subsidiaries, or enter into or amend any employment,
severance, or special pay arrangement with respect to the termination of
employment or other similar contract, agreement or arrangement with any
director or officer or other employee other than in the ordinary course of
business consistent with past practice.
SECTION 8.10 Accounting. No party shall, nor shall any party
permit any of its Subsidiaries to make any changes in its or their accounting
methods, except as required by law, rule, regulation or GAAP or that would
adversely affect the ability of Parent to account for the Merger as a pooling
of interests.
SECTION 8.11 Tax-Free Status. No party shall knowingly, nor shall
any party knowingly permit any of its Subsidiaries to, take or fail to take any
action which action or failure to act would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368 of the Code.
SECTION 8.12 Insurance. Parent shall, and shall cause its
Subsidiaries to, and the Company shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies (or through
self-insurance not inconsistent with such party's past practice) insurance in
such amounts and against such risks and losses as are customary for companies
engaged in the same industry and such other businesses as conducted by such
party and its Subsidiaries.
SECTION 8.13 Cooperation, Notification. Each of Parent and the
Company shall and shall cause its Subsidiaries (directly or acting through its
parent company representative) to:
(a) confer on a regular and frequent basis with one or more
representatives of the other party to discuss material operational matters and
the general status of its ongoing operations,
(b) promptly notify the other party of any significant changes in
its business, properties, assets, condition (financial or otherwise), prospects
or results of operations,
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(c) advise the other party of any change or event that has had or,
to the knowledge of such party, would reasonably likely have a Parent Material
Adverse Effect, a Sub Material Adverse Effect or a Company Material Adverse
Effect, and
(d) consult with each other prior to making any filings with any
state or federal court, administrative agency, commission or other Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby, and promptly after each such filing provide the other with a copy
thereof.
SECTION 8.14 Third-Party Consents. Each of Parent and the Company
shall, and shall cause its Subsidiaries to, use all commercially reasonable
efforts to obtain all Parent Required Consents or Company Required Consents, as
the case may be. Each party shall promptly notify the other party of any
failure or prospective failure to obtain any such consents and, if requested by
the other party, shall provide to the other party copies of all Parent Required
Consents or Company Required Consents, as the case may be, obtained by such
party.
SECTION 8.15 Permits. Each of Parent and the Company shall use
commercially reasonable efforts to maintain in effect all existing material
permits pursuant to which such party operates.
ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.1 Access to Information.
(a) Upon reasonable notice, each of Parent and the Company shall,
and shall cause its Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors,
consultants and other representatives of the other (collectively,
"Representatives") reasonable access, during normal business hours throughout
the period prior to the Effective Time, to all of its properties, books,
contracts, commitments and records, including, but not limited to, Tax Returns,
but excluding (i) that information that is restricted by applicable
confidentiality and secrecy agreements, (ii) that information that a party may
be restricted from disclosing under applicable law, (iii) the corporate
proceedings of Parent or the Company (as the case may be) in considering the
Merger, and (iv) minutes of meetings of the Company's Special Committee, and,
during such period, each shall, and shall cause its Subsidiaries to, furnish
promptly to the other:
(i) a copy of each report, schedule and other document
filed by it or any of its Subsidiaries with the SEC and any other
document pertaining to the transactions contemplated hereby filed with
any Governmental Authority that is not filed as an exhibit to an SEC
filing or described in an SEC filing, and
(ii) all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such matters as may be
reasonably requested by the other party in
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connection with any filings, applications or approvals required or
contemplated by this Agreement.
(b) Without limiting the application of the Confidentiality
Agreement, dated June 24, 1997, between Parent and the Company (the "Company
Confidentiality Agreement") and the Confidentiality Agreement between Parent
and the Company (the "Parent Confidentiality Agreement" and together with the
Company Confidentiality Agreement, the "Confidentiality Agreements"), all
documents and information furnished pursuant to Section 9.1(a) (ii) shall be
subject to the Confidentiality Agreements.
SECTION 9.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing.
(i) As promptly as reasonably practicable after the date
hereof, the parties shall prepare and file with the SEC the
Registration Statement and the Joint Proxy Statement (together the
"Joint Proxy/Registration Statement").
(ii) The parties shall take such actions as may be
reasonably required to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after
such filing.
(iii) The parties shall also take such action as may be
reasonably required to cause the shares of Parent Common Stock
issuable in connection with the Merger to be registered or to obtain
an exemption from registration under applicable state "blue sky," or
securities laws; provided, however, that none of the Company, Parent
or Sub shall be required to resister or qualify as a foreign
corporation or to take any other action that would subject it to
general service of process in any jurisdiction in which it will not,
following the Merger, be so subject.
(iv) Each of the parties shall furnish all information
concerning itself that is required or customary for inclusion in the
Joint Proxy/Registration Statement.
(v) No representation, warranty, covenant or agreement
contained in this Agreement is made by any party hereto with respect
to information supplied by any other party hereto for inclusion in the
Joint Proxy/Registration Statement.
(vi) The Joint Proxy/Registration Statement shall comply
as to form in all material respects with the Securities Act, the
Exchange Act and the rules and regulations thereunder.
(vii) The parties shall take such action as may be
reasonably required to cause the shares of Parent Common Stock
issuable in the Merger to be approved for listing on the New York
Stock Exchange.
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(b) Letter of the Company's Accountants. Following receipt by
Ernest & Young, LLP, the Company's independent auditors, of an appropriate
request from Parent pursuant to SAS No. 72, the Company shall use its best
efforts to cause to be delivered to Parent a letter of Ernst & Young, LLP,
dated a date within two business days before the effective date of the
Registration Statement, and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Joint Proxy/Registration Statement.
(c) Letter of Parent's Accountants. Following receipt by Ernst &
Young, LLP, Parent's independent auditors, of an appropriate request from the
Company pursuant to SAS No. 72, Parent shall use its best efforts to cause to
be delivered to the Company a letter of Ernst & Young, LLP, dated a date within
two business days before the effective date of the Registration Statement, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Joint Proxy/Registration
Statement.
SECTION 9.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall, in cooperation with the
other, file or cause to be filed with the Federal Trade Commission and the
Department of Justice any notifications required to be filed by their
respective "ultimate parent" companies under the HSR Act, and the rules and
regulations promulgated thereunder with respect to the transactions
contemplated hereby. Each party hereto shall notify the other immediately upon
receiving any request for additional information from either of such agencies
with respect to such filings and shall respond promptly to any such requests.
(b) Other Regulatory Approvals.
(i) Each party hereto shall cooperate and use its
reasonable best efforts promptly to prepare and file all necessary
permits, consents, approvals and authorizations of all Governmental
Authorities and all other persons necessary or advisable to consummate
the transactions contemplated by this Agreement, including, without
limitation, the Company Required Statutory Approvals and the Parent
Required Statutory Approvals.
(ii) Parent shall have the right to review and approve in
advance all characterizations of the information relating to Parent,
on the one hand, and the Company shall have the right to review and
approve in advance all characterizations of the information relating
to the Company, on the other hand, in either case, which appear in any
filing made in connection with the transactions contemplated by this
Agreement or the Merger.
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(iii) The Company and Parent shall each consult with the
other with respect to the obtaining of all such necessary or advisable
permits, consents, approvals and authorizations of Governmental
Authorities.
SECTION 9.4 Stockholder Approval.
(a) Approval of Parent Stockholders. Parent shall, as promptly as
reasonably practicable after the date hereof
(i) take all steps reasonably necessary to duly call,
give notice of, convene and hold a special meeting of its stockholders
(the "Parent Special Meeting") for the purpose of securing the Parent
Stockholders' Approval,
(ii) distribute to its stockholders the Joint Proxy
Statement in accordance with applicable federal and state law, and its
Articles of Incorporation and Bylaws,
(iii) recommend to its stockholders the approval of the
Share Issuance, and
(iv) cooperate and consult with the Company with respect
to each of the foregoing matters, provided that nothing contained in
this Section 9.4(a) shall require the Board of Directors of Parent to
take any action or refrain from taking any action that such Board
determines in good faith after consultation with and based on the
advice of outside counsel could reasonably be expected to result in a
breach of its fiduciary duties under applicable law.
(b) Approval of the Company Stockholders. The Company shall, as
promptly as reasonably practicable after the date hereof,
(i) take all steps reasonably necessary to duly call,
give notice of, convene and hold a special meeting of its stockholders
(the "Company Special Meeting") for the purpose of securing the
Company Stockholders' Approval,
(ii) distribute to its stockholders the Joint Proxy
Statement in accordance with applicable federal and state laws, and
its Certificate of Incorporation and Bylaws,
(iii) recommend to its stockholders the approval of the
Merger, this Agreement and the transactions contemplated hereby, and
(iv) cooperate and consult with Parent with respect to
each of the foregoing matters, provided that nothing contained in this
Section 9.4(b) shall require the Board of Directors of the Company to
take any action or refrain from taking any action that such Board
determines in good faith after consultation with and based on the
advice of outside counsel could reasonably be expected to result in a
breach of its fiduciary duties under applicable law.
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SECTION 9.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the fullest extent not prohibited by law,
Parent agrees that for a period of six (6) years after the Effective Time, all
rights to indemnification existing as of the Effective Time in favor of the
current and former directors, officers and employees of the Company and its
Subsidiaries (at the Effective Time) (each an "Indemnified Party") as provided
for in their respective certificate of incorporation or bylaws shall continue
in full force and effect. After the Effective Time, Parent will consent to the
establishment by the Surviving Corporation and its Subsidiaries of such
additional indemnification arrangements in favor of the Surviving Corporation
and its Subsidiaries' directors and officers as may be necessary so that they
will have the benefit of the maximum indemnification arrangements available to
the directors and officers of Parent for all events or actions occurring
subsequent to the Effective Time.
(b) Successors. In the event that the Parent or any of its
successors or assigns
(i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or
(ii) transfers all or substantially all of its properties
and assets to any person,
then and in each such case, proper provision shall be made so that such
successors and assigns shall assume the obligations set forth in this Section
9.5.
(c) The provisions of this Section 9.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
SECTION 9.6 DISCLOSURE SCHEDULEs.
(a) On or prior to the date of this Agreement, the Company shall
have delivered to Parent the Company DISCLOSURE SCHEDULE and Parent shall have
delivered to the Company the Parent DISCLOSURE SCHEDULE.
(b) The DISCLOSURE SCHEDULEs, when so delivered, shall constitute
an integral part of this Agreement and shall modify or otherwise affect the
respective representations, warranties, covenants or agreements of the parties
hereto contained herein.
(c) Any and all statements, representations, warranties or
disclosures set forth in the DISCLOSURE SCHEDULEs shall be deemed to have been
made on and as of the date of this Agreement.
(d) Without limiting the application of the Confidentiality
Agreements, the parties shall use their best efforts to keep the DISCLOSURE
SCHEDULEs confidential.
SECTION 9.7 Public Announcements. The Company, on the one hand,
and Parent and Sub, on the other hand, shall cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of
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the transactions contemplated hereby and shall not issue any public
announcement or statement prior to consultation with the other party, except
that each party may respond to questions from stockholders and may respond to
inquiries from financial analysts and media representatives in a manner
consistent with its past practice and each party may make such disclosure as
may be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange or NASDAQ without prior
consultation to the extent such consultation is not reasonably practicable.
The parties agree that the initial press release or releases to be issued in
connection with the execution of this Agreement shall be mutually agreed upon
prior to the issuance thereof.
SECTION 9.8 Rule 145 Affiliates. Parent shall have received from
the Company a list of such Persons, if any, that Parent, after discussions with
counsel for the Company, believes may be "affiliates" of the Company, within
the meaning of Rule 145 of the SEC pursuant to the Securities Act
("Affiliates"). The Company shall use its reasonable efforts to deliver or
cause to be delivered to Parent on or prior to the Closing Date an undertaking
by each Affiliate in form satisfactory to Parent ("Affiliate Letters") that (i)
such Affiliate has no current plan or intention to sell, exchange or otherwise
dispose of the Parent Common Stock to be received by such Affiliate pursuant to
the Merger, (ii) no disposition will be made by such Affiliate of any Parent
Common Stock received or to be received pursuant to the Merger until such time
as final results of operations of Parent covering at least 30 days of combined
operations of Parent and the Company have been published, (iii) no Parent
Common Stock received or to be received by such Affiliate pursuant to the
Merger will be sold or disposed of except pursuant to an effective registration
statement under the Securities Act or in accordance with the provisions of
paragraph (d) of Rule 145 under the Securities Act or another exemption from
registration under the Securities Act and (iv) such Affiliate agrees that
appropriate legends shall be placed upon the certificates evidencing ownership
of Parent Common Stock that such person receives as a result of the merger.
SECTION 9.9 Employment Agreement Consultation. Parent and the
Company shall consult with each other prior to entering into, or amending, any
individual employment or severance agreements after the date hereof as
contemplated or permitted in accordance with Section 8.9. Each of Parent and
the Company shall promptly furnish to the other, upon reasonable request by the
other, detailed information, together with underlying documentation with
respect to all such existing or proposed individual employment or severance
agreements or amendments thereto.
SECTION 9.10 Stock Option and Bonus Plans.
The following provisions shall apply to each stock option plan, stock
bonus plan and similar plans of the Company under which the delivery of Company
Common Stock is required to be used for purposes of the payment of benefits,
grant of awards or exercise of options (each a "Stock Plan", and all of which
are described in Section 9.10 of the Company DISCLOSURE SCHEDULE):
(a) The Company shall take such action as may be necessary so that
from and after the date hereof, except as set forth in the Company DISCLOSURE
SCHEDULE, no further grants of stock,
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options, or other rights shall be made under any Stock Plan, and after the
Effective Time, outstanding options to purchase shares of Company Common Stock
shall be exercisable to purchase a number of shares of Parent Common Stock as
may be determined by applying the Conversion Ratio set forth in Article III
hereof.
(b) In the event after the Effective Time outstanding options are
exercisable in shares of Parent Common Stock as described in 9.10(a), Parent
shall
(i) to the extent required under applicable SEC rules,
take all corporate action necessary or appropriate to obtain
stockholder approval at an annual meeting selected by Parent with
respect to such Stock Plan to the extent such approval is required to
enable such Stock Plan to comply with Rule 16b-3 promulgated under the
Exchange Act,
(ii) reserve for issuance under such Stock Plan or
otherwise provide a sufficient number of shares of Parent Common Stock
for delivery upon exercise of options under such Stock Plan which are
outstanding on the date hereof,
(iii) as soon as practicable after the Effective Time, file
one or more registration statements under the Securities Act with
respect to the shares of Parent Common Stock issuable upon the
exercise of currently outstanding options under such Stock Plan to the
extent such filing is required under applicable law, and use its
reasonable best efforts to maintain the effectiveness of such
registration statement(s) (and the current status of the prospectuses
contained therein or related thereto) so long as such options remain
outstanding, and
(iv) take such action as may be reasonably required to
cause the shares of Parent Common Stock issuable upon the exercise of
currently outstanding options under such Stock Plan to be approved for
listing on the New York Stock Exchange.
SECTION 9.11 No Solicitations.
(a) No party hereto shall, and each such party shall cause its
Subsidiaries not to, permit any of its Representatives to, and shall use its
best efforts to cause such persons not to, directly or indirectly, initiate,
solicit or encourage, or take any action to facilitate the making of any offer
or proposal that constitutes or is reasonably likely to lead to any Takeover
Proposal, or, in the event of any unsolicited Takeover Proposal, engage in
negotiations or provide any confidential information or data to any person
relating to any Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any Representative of a party, whether or not such Person is
purporting to act on behalf of the Party or otherwise, shall be deemed to be a
material breach of this Agreement by that party.
(b) Parent and the Company shall notify the other orally and in
writing of any such inquiries, offers or Takeover Proposals (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it) within 24 hours of the receipt thereof.
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(c) Each party hereto shall immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any other
persons conducted heretofore with respect to any Takeover Proposal.
(d) Notwithstanding anything in this Section 9.11 to the contrary:
(i) The Company may, prior to the vote of the
stockholders of the Company for approval of the Merger (and not
thereafter if the Merger is approved thereby) in response to an
unsolicited request therefor, furnish information, including
non-public information, to any person or "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) pursuant to a confidentiality
agreement on substantially the same terms as provided in Section
9.1(b) hereof to the extent that the Board of Directors of the Company
determines in good faith after consultation with and based on the
advice of outside counsel that such action could reasonably be
required by their fiduciary duties under applicable law.
(ii) Parent may, prior to the vote of shareholders of the
Parent for the approval of the Merger (and not thereafter if the
Merger is approved thereby), in response to an unsolicited request
therefor, furnish information, including non-public information, to
any person or "group" (within the meaning of Section 13(d)(8) of the
Exchange Act) pursuant to a confidentiality agreement on substantially
the same terms as provided in Section 9.1(b) hereof to the extent that
the Board of Directors of Parent determines in good faith after
consultation with and based on the advice of outside counsel that such
action could reasonably be required by their fiduciary duties under
applicable law.
(iii) The Company may engage in discussions and
negotiations (but may not enter into any binding agreement regarding a
Takeover Proposal other than the confidentiality agreement referenced
in 9.11(d)(i) above) with any Person or group that has made an
unsolicited Takeover Proposal, among other things, to determine
whether such proposal (as opposed to any further negotiated proposal)
is a Superior Takeover Proposal and (ii) the Company may take and
disclose to its stockholders a position contemplated by Rule 14e-2(a)
following the Company's receipt of a Takeover Proposal that is in the
form of a tender offer under Section 14(e) of the Exchange Act.
(iv) Parent may engage in discussions and negotiations
(but may not enter into any binding agreement regarding a takeover
Proposal other than the confidentiality agreement referenced in
9.11(d)(ii) above) with any Person or group that has made an
unsolicited Takeover Proposal, among other things, to determine
whether such proposal (as opposed to any further negotiated proposal)
is a Superior Takeover Proposal and (ii) Parent may take and disclose
to its shareholders a position contemplated by Rule 14e-2(a) following
Parent's receipt of a Takeover Proposal that is in the form of a
tender offer under Section 14(e) of the Exchange Act.
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SECTION 9.12 No Withdrawal of Recommendation.
(a) Neither the Board of Directors of the Company nor any
committee thereof shall, except in connection with the termination of this
Agreement pursuant to Sections 11.1(a), (b), (c), (d), or (h), (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or Sub
the approval or recommendation by the Board of Directors of the Company or any
such committee of this Agreement or the Merger or take any action having such
effect or (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal. Notwithstanding the foregoing, in the event the Board of
Directors of the Company receives a Takeover Proposal that, in the exercise of
its fiduciary obligations (as determined in good faith by the Board of
Directors after consultation with and based on the advice of outside counsel),
it determines to be a Superior Takeover Proposal, the Board of Directors of the
Company may withdraw or modify its approval or Recommendation of this Agreement
or the Merger.
(b) Neither the Board of Directors of Parent nor any committee
thereof shall, except in connection with the termination of this Agreement
pursuant to Sections 11.1(a), (b), (c), (d), or (g), (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to the Company the approval
or recommendation by the Board of Directors of Parent or any such committee of
this Agreement or the Merger or take any action having such effect or (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal. Notwithstanding the foregoing, in the event the Board of Directors
of Parent receives a Takeover proposal that, in the exercise of its fiduciary
obligations (as determined in good faith by the Board of Directors after
consultation with and based on the advice of outside counsel), it determines to
be a Superior Takeover Proposal, the Board of Directors of Parent may withdraw
or modify its approval or recommendation of this Agreement or the Merger.
SECTION 9.13 Expenses. Subject to Section 11.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing the Joint
Proxy/Registration Statement, as well as the filing fee relating thereto, shall
be shared equally, by the Company and Parent.
SECTION 9.14 Employee Benefit Matters. Following the Closing,
Parent shall maintain the level of benefits provided to the employees and all
former employees of the Company and its Subsidiaries that is in effect as of
the date hereof (other than benefits under any Stock Plans) until Parent shall
provide benefits to such employees and former employees on a basis consistent
with the provision of benefits provided otherwise to other employees and former
employees within the Parent system.
SECTION 9.15 Covenant to Satisfy Conditions.
(a) Each of Parent, Sub and the Company shall take all reasonable
actions necessary, to comply promptly with all legal requirements that may be
imposed on it with respect to this Agreement.
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(b) Subject to the terms and conditions hereof, and taking into
account the circumstances and giving due weight to the materiality of the
matter involved or the action required, Parent, Sub and the Company shall each
use their reasonable best efforts to take or cause to be taken all actions, and
to do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the other transactions contemplated hereby (subject to Parent Stockholders'
Approval and the Company Stockholders' Approval), including fully cooperating
with the other in obtaining the Parent Required Statutory Approvals, the
Company Required Statutory Approvals and all other approvals and authorizations
of any Governmental Authorities necessary or advisable to consummate the
transactions contemplated hereby.
SECTION 9.16 Accounting Matters. Neither the Company nor Parent
shall take or agree to take, nor shall they permit any of their respective
affiliates to take or agree to take, any action that would adversely affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests.
SECTION 9.17 Independent Director. Parent agrees that on or
before the ninetieth (90th) day after the Effective Time (the "Election Date")
it shall either (i) elect to its Board of Directors an independent director who
is not an Affiliate of the Parent nor a person whose business relationship with
the Parent during the preceding three years would require disclosure during any
year pursuant to Item 404 of Regulation S-K under the Securities Act of 1933
(an "Independent Director") or (ii) elect as a director of Parent a person to
be agreed upon by Company and Parent for a term from the Election Date until
the Parent's annual meeting to be held in 1998, and at such annual meeting
elect an Independent Director.
SECTION 9.18 Additional Agreements. Parent shall terminate (or
cause the Company to terminate) the employment contract by and between the
Company and each person listed on Schedule 9.18 (individually, an "Employee")
pursuant to section 5.3 of each such contract (termination without due cause),
and as a result of such termination, each Employee shall have the rights
provided in his contract, including without limitation section 6.3 and section
7 thereof. The termination of an Employee hereunder shall occur on the
ninetieth (90th) day after the Effective Time; provided, however, an Employee
and Parent may mutually agree to enter into an employment contract and waive
the requirements of this Section 9.18.
ARTICLE X
CONDITIONS
SECTION 10.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger or cause
the Merger to be effected shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions, except, to the extent permitted
by applicable law, that such conditions may be waived in writing pursuant to
Section 11.5:
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(a) Stockholder Approval. The Company Stockholders' Approval and
the Parent Stockholders' Approval shall have been obtained.
(b) No Injunction or Damages. No suit, action or other proceeding
shall be pending by any Governmental Authority in which it is sought to
restrain or prohibit the performance of or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby, and no
temporary restraining order or preliminary or permanent injunction or other
order by any federal or state court preventing consummation of the Merger or
ordering damages in connection therewith shall have been issued and continue in
effect, and the Merger and the other transactions contemplated hereby shall not
have been prohibited under any applicable federal or state law or regulation.
(c) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act, and
no stop order suspending such effectiveness shall have been issued and remain
in effect.
(d) Listing of Shares. The shares of Parent Common Stock issuable
in the Merger pursuant to Article III and Section 9.10 shall have been approved
for listing on the New York Stock Exchange upon official notice of issuance.
(e) Statutory Approvals. The Company Required Statutory Approvals,
the Parent Required Statutory Approvals and any clearance under the HSR Act or
matters related thereto shall have been obtained at or prior to the Effective
Time (or all applicable waiting periods (and any extensions thereof) under the
HSR Act shall have expired or otherwise been terminated), any such approvals
shall have become or resulted in Final Orders at or prior to the Effective
Time, and no such Final Order shall impose terms or conditions that would have,
or would be reasonably likely to have, a Parent Material Adverse Effect or a
Company Material Adverse Effect.
SECTION 10.2 Conditions to Obligation of Parent to Effect Merger.
The obligation of Parent to effect the Merger or cause the Merger to be
effected shall be further subject to the satisfaction, on or prior to the
Closing Date, of the following conditions, except as may be waived by Parent in
writing pursuant to Section 11.5:
(a) Performance of Obligations of the Company. The Company shall
have performed in all material respects its agreements and covenants contained
in or contemplated by this Agreement required to be performed by it at or prior
to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date hereof and as of the Closing Date as if
made on and as of the Closing Date, except as otherwise contemplated by this
Agreement.
(c) Closing Certificates. Parent shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer
of the Company, dated the Closing Date, to the
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effect that, to each such officer's knowledge, the conditions set forth in
Sections 10.2(a), (b) and (d) have been satisfied.
(d) Company Material Adverse Effect. No Company Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance that
would have, or would be reasonably likely to have, a Company Material Adverse
Effect.
(e) Tax Opinion. Parent shall have received an opinion of
Fulbright & Jaworski L.L.P., in form and substance satisfactory to Parent,
which opinion may be based on appropriate representations of Parent and the
Company, in form and substance reasonably satisfactory to such counsel, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization transaction described in Code Section 368.
(f) Opinion of Jenkens & Gilchrist, a Professional Corporation.
Parent shall have received an opinion of Jenkens & Gilchrist, a Professional
Corporation, in form and substance satisfactory to Parent, addressed to Parent
and dated the Closing Date, which opinion may be based on appropriate
representations of the Company.
(g) Company Required Consents. The Company Required Consents
shall have been obtained except those that in the aggregate would not result in
and would not reasonably be likely to result in a Company Material Adverse
Effect.
(h) Pooling Accounting. Parent and Company shall have received a
letter from Ernst & Young, LLP, in form and substance satisfactory to Parent
and Company, to the effect that the Merger should be accounted for as a pooling
of interests under generally accepted accounting principles and applicable
regulations of the SEC.
(i) Fairness Opinion. The Merrill Lynch Opinion shall not have
been withdrawn.
(j) Affiliate Letters. The Company shall have delivered to Parent
the Affiliate Letters.
SECTION 10.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger or cause the Merger
to be effected shall be further subject to the satisfaction, on or prior to the
Closing Date, of the following conditions, except as may be waived by the
Company in writing pursuant to Section 11.5.
(a) Performance of Obligations of Parent. Parent shall have
performed in all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior to
the Effective Time.
(b) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date as if
made on and as of the Closing Date, except as otherwise contemplated by this
Agreement.
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(c) Closing Certificates. The Company shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer
of Parent, dated the Closing Date, to the effect that, to each such officer's
knowledge, the conditions set forth in Sections 10.3(a), (b) and (d) have been
satisfied.
(d) Parent Material Adverse Effect. No Parent Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance that
would have, or would be reasonably likely to have, a Parent Material Adverse
Effect.
(e) Tax Opinion. The Company shall have received an opinion of
Jenkens & Gilchrist, a professional corporation, in form and substance
satisfactory to the Company, which opinion may be based on appropriate
representations of Parent and the Company, in form and substance reasonably
satisfactory to such counsel, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization transaction as described in
Code Section 368 and that the Company will recognize no gain or loss for
federal income tax purposes as a result of the consummation of the Merger.
(f) Opinion of Fulbright & Jaworski L.L.P. The Company shall have
received an opinion of Fulbright & Jaworski L.L.P. in form and substance
satisfactory to the Company, addressed to the Company and dated the Closing
Date, which opinion may be based on appropriate representations of Parent.
(g) Parent Required Consents. The Parent Required Consents shall
have been obtained except those that in the aggregate would not result in and
would not reasonably be likely to result in a Parent Material Adverse Effect.
(h) Fairness Opinion. The DLJ Opinion shall not have been
withdrawn.
(i) Pooling Accounting. Parent and Company shall have received a
letter from Ernst & Young, LLP, in form and substance satisfactory to Parent
and Company, to the effect that the Merger should be accounted for as a pooling
of interests under generally accepted accounting principles and applicable
regulations of the SEC.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 Termination. This Agreement may be terminated and
the Merger abandoned at any time prior to the Closing Date, whether before or
after approval by the stockholders of the respective parties hereto
contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of the
Company and Parent;
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(b) by the Company or Parent, by written notice to the other, if
the Effective Time shall not have occurred on or before December 31, 1997;
provided, however, that such date shall automatically be changed to February
28, 1998 if on December 31, 1997:
(i) (A) the conditions set forth in Section 10.1(e) have
not been satisfied or waived, (B) the other conditions to the
consummation of the transactions contemplated hereby are then capable
of being satisfied, and (C) any approvals required by Section 10.1(e)
that have not yet been obtained are being pursued with diligence,
provided, further, that the right to terminate this Agreement under
this Section 11.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or
before the termination date; or
(ii) the Company Stockholders' Approval shall not have
been obtained at a duly held Company Special Meeting, including any
adjournments thereof, or the Parent Stockholders' Approval shall not
have been obtained at a duly held Parent Special Meeting, including
any adjournments hereof;
(c) by the Company or Parent, by written notice to the other party
if the Company has failed to obtain the Company Stockholders' Approval at a
duly held Company Special Meeting, including any adjournments thereof; or if
the Parent Stockholders' Approval shall not have been obtained at a duly held
Parent Special Meeting, including any adjournments thereof;
(d) by the Company or Parent, if any state or federal law, order,
rule or regulation is adopted or issued, that has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting the
Merger, or by the Company or Parent, if any court of competent jurisdiction in
the United States or any State shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Merger, and
such order, judgment or decree shall have become final and nonappealable;
(e) by the Company, upon three (3) Business Days' prior notice to
the Parent, if as a result of a Takeover Proposal with respect to the Company
that the Board of Directors of the Company has determined to be a Superior
Takeover Proposal, and the Board of Directors of the Company determines in good
faith (after consultation with and based on the advice of its outside counsel)
that the acceptance of such Superior Takeover Proposal could reasonably be
required by the fiduciary obligations of such directors under applicable law;
provided, however, that prior to any such termination, the Company shall advise
Parent in writing of the determination by the Board of Directors of the Company
that the Board of Directors of the Company has determined that such Takeover
Proposal is a Superior Takeover Proposal, which notice will include a summary
of such Takeover Proposal. During such three (3) business day period Parent
may propose to the Company an alternative transaction, and the Company shall,
and shall cause its respective financial and legal advisors to, negotiate with
Parent in good faith with respect to such adjustments in the terms and
conditions of this Agreement so that such Takeover Proposal would not
constitute a Superior Takeover Proposal and thereby enable the Company to
proceed with the transactions contemplated herein;
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(f) by Parent, upon three (3) Business Days' prior notice to the
Company, if as a result of a Takeover Proposal with respect to Parent that the
Board of Directors of Parent has determined to be a Superior Takeover Proposal
and the Board of Directors of Parent determines in good faith (after
consultation with and based on the advice of its outside counsel) that the
acceptance of such Superior Takeover Proposal could reasonably be required by
the fiduciary obligations of such directors under applicable law; provided,
however, that prior to any such termination, Parent shall advise the Company in
writing of the determination by the Board of Directors of the Parent that the
Parent has determined that such Takeover Proposal is a Superior Takeover
Proposal, which notice will include a summary of such Takeover Proposal.
During such three (3) business day period, the Company may propose to the
Parent an alternative transaction, and the Parent shall, and shall cause its
respective financial and legal advisors to, negotiate with the Company in good
faith with respect to such adjustments in the terms and conditions of this
Agreement so that such Takeover Proposal would not constitute a Superior
Takeover Proposal and thereby enable Parent to proceed with the transactions
contemplated herein;
(g) by Parent, by written notice to the Company, if
(i) there shall have been any material breach of any
representation or warranty, or any material breach of any covenant or
agreement, of the Company hereunder, and such breach shall not have
been remedied within ten (10) business days after receipt by the
Company of notice in writing from Parent, specifying the nature of
such breach and requesting that it be remedied, or
(ii) the Board of Directors of the Company or any
committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent or Sub the approval or
recommendation by the Board of Directors of the Company of this
Agreement or the Merger or take any action having such effect or (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal with respect to the Company.
(h) by the Company, by written notice to Parent, if
(i) there shall have been any material breach of any
representation or warranty, or any material breach of any covenant or
agreement, of Parent hereunder, and such breach shall not have been
remedied within ten (10) business days after receipt by Parent of
notice in writing from the Company, specifying the nature of such
breach and requesting that it be remedied, or
(ii) if the Board of Directors of Parent or any committee
thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the Company the approval or
recommendation by the Board of Directors of Parent of this Agreement
or the Merger or take any action having such effect or (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal
with respect to Parent.
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SECTION 11.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent pursuant to Section 11.1,
there shall be no liability on the part of either the Company or Parent or
their respective officers or directors hereunder, except that
(a) Section 9.1(b), Section 9.6(d), Section 9.13, Section 11.3 and
Section 12.2 shall survive, and
(b) no such termination shall relieve any party from liability by
reason of any willful breach of any agreement, representation, warranty or
covenant contained in this Agreement.
SECTION 11.3 Certain Damages, Payments and Expenses.
(a) Damages Payable Upon Termination for Breach or Withdrawal of
Approval. If this Agreement is terminated pursuant to Sections 11.1(g) or
Section 11.1(h), then the breaching party, or the Company if its board has
withdrawn its recommendation, shall promptly (but not later than five (5)
business days after receipt of notice that the amount is due from the other
party) pay to the other party, as liquidated damages, an amount in cash equal
to the of out-of-pocket expenses and fees incurred by the other party arising
out of, in connection with or related to the Merger or the transactions
contemplated by this Agreement not in excess of $1 million ("Out-of-Pocket
Expenses"), provided, however, that if this Agreement is terminated by a party
as a result of a willful breach of a representation, warranty, covenant or
agreement by the other party, the non-breaching party may pursue any remedies
available to it at law or in equity and shall, in addition to the amount of
Out-of-Pocket Expenses set forth above, be entitled to recover such additional
amounts as such non-breaching party may be entitled to receive at law or in
equity.
(b) Other Company Termination Payments. (i) If this Agreement is
terminated
(A) pursuant to Section 11.1(e) (fiduciary out),
(B) pursuant to Section 11.1(c) (failure to obtain
stockholder approval), following a failure of the stockholders of the
Company to grant the necessary approval described in Section 6.13 if
at the time prior to the Company Special Meeting there shall have been
a Takeover Proposal with respect to the Company and the Board of
Directors of the Company has withdrawn its recommendation of this
Agreement, or the Merger.
(C) as a result of a material breach of Section 9.4 by
the Company (approval of stockholders), or
(D) pursuant to Section 11.1(g)(ii) (board withdrawal of
approval),
and then the Company shall pay Parent a termination fee (the "Company
Termination Fee") equal to$6.5 million, provided that the sum of the Company
Termination Fee and the Out-of-Pocket Expenses paid to Parent pursuant to
Section 11.3(a) shall not exceed $7 million.
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(ii) In the event this Agreement is terminated pursuant to Section
11.1(c) because the Company has failed to obtain the Company Stockholders
Approval, the Company also agrees to pay to Parent a fee equal to the Company
Termination Fee, provided that the sum of the Company Termination Fee and the
Out-of-Pocket Expenses paid to Parent pursuant to Section 11.3(a) shall not
exceed $7 million, if (A) after the date hereof and before the Company Special
Meeting, a Takeover Proposal with respect to the Company shall have been made
by any Person or group of Persons (a "Company Acquiring Person"), (B) the
stockholders of the Company shall not have approved the Merger at the Company
Special Meeting and (C) at or prior to one (1) year after the date of
termination of this Agreement, the Company Acquiring Person or any affiliate of
the Company Acquiring Person shall have effected a Takeover Proposal (the
"Company Alternative Transaction"). The Company Termination Fee payable under
this Section 11.3(b)(ii) and the Out-of-Pocket Expenses shall be payable as a
condition to the consummation of the Company Alternative Transaction.
(c) Other Parent Termination Payments. (i) If this Agreement is
terminated
(A) pursuant to Section 11.1(f) (fiduciary out),
(B) pursuant to Section 11.1(c) (failure to obtain
stockholder approval), following a failure of the shareholders of the
Parent to grant the necessary approval described in Section 5.13 if at
the time prior to the Parent Special Meeting there shall have been a
Takeover Proposal with respect to the Parent and the Board of
Directors of the Parent has withdrawn its Recommendation of this
Agreement or the Merger.
(C) as a result of a material breach of Section 9.4 by
the Parent (approval of shareholders), or
(D) pursuant to Section 11.1(h)(ii) (board withdrawal of
approval),
then the Parent shall pay the Company a termination fee (the "Parent
Termination Fee") equal to $6.5 million, provided that the sum of the Parent
Termination Fee and the Out-of-Pocket Expenses paid to the Company pursuant to
Section 11.3(a) shall not exceed $7 million.
(ii) In the event this Agreement is terminated pursuant to Section
11.1(c) because the Parent has failed to obtain the Parent Stockholder
Approval, the Parent also agrees to pay to the Company a fee equal to the
Parent Termination Fee, provided that the sum of the Parent Termination Fee and
the Out-of-Pocket Expenses paid to the Company pursuant to Section 11.3(a)
shall not exceed $7 million, if (A) after the date hereof and before the Parent
Special Meeting, a Takeover Proposal with respect to the Parent shall have been
made by any Person or group of Persons (a "Parent Acquiring Person"), (B) the
stockholders of the Parent shall not have approved the Merger at the Parent
Special Meeting and (C) at or prior to one (1) year after the date of
termination of this Agreement, the Parent Acquiring Person or any affiliate of
the Parent Acquiring Person shall have effected a Takeover Proposal (the
"Parent Alternative Transaction"). The Parent Termination Fee payable under
this Section 11.3(c)(ii) and the Out-of-Pocket Expenses shall be payable as a
condition to the consummation of the Parent Alternative Transaction.
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(d) Expenses.
(i) The parties agree that the agreements contained in
this Section 11.3 are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and
not a penalty.
(ii) If one party fails to promptly pay to the other any
amounts due under this Section 11.3, such defaulting party shall pay
the costs and expenses (including reasonable legal fees and expenses)
in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee at the publicly announced prime rate
of Chase Manhattan Bank in effect from time to time from the date such
fee was required to be paid.
(e) Limitation of Company Fees. Notwithstanding anything herein
to the contrary, the aggregate amount payable by the Company and its affiliates
pursuant to Section 11.3(a) and Section 11.3(b) shall not exceed $7 million.
(f) Limitation of Parent Fees. Notwithstanding anything herein to
the contrary, the aggregate amount payable by the Parent and its affiliates
pursuant to Section 11.3(a) and Section 11.3(c) shall not exceed $7 million.
SECTION 11.4 Amendment.
(a) This Agreement may be amended by the parties hereto pursuant
to action of their respective Boards of Directors, at any time before or after
approval hereof by the stockholders of Parent or the Company and prior to the
Effective Time, but after such approvals, no such amendment shall
(i) alter or change the amount or kind of shares to be
received or exchanged for or on conversion of any class or series of
capital stock of either corporation as provided under Article II, or
(ii) alter or change any of the terms and conditions of
this Agreement if any of the alterations or changes, alone or in the
aggregate, would materially and adversely affect the rights of holders
of Company Common Stock or Parent Common Stock.
(b) This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 11.5 Waiver. At any time prior to the Effective Time, to
the extent permitted by applicable law, the parties hereto may (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement
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on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by a duly authorized
officer of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 Non-Survival of Representations, Warranties,
Covenants and Agreements. All representations, warranties, covenants and
agreements in this Agreement shall not survive the Merger, except the covenants
and agreements contained in this Section 12.1 and in Article III (Conversion of
Shares), Section 9.1(b) (Access to Information), Section 9.5 (Directors' and
Officers Indemnification), Section 9.10 (Incentive, Stock and Other Plans),
Section 9.14 (Employee Benefit Matters), Sections 11.2 and 11.3 (Certain
Damages, Payments and Expenses) and Section 12.7 (Parties In Interest), each of
which shall survive in accordance with its terms.
SECTION 12.2 Brokers.
(a) The Company represents and warrants that, except for DLJ, no
broker, finder or investment bank is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
(b) Parent represents and warrants that, except for Merrill Lynch
& Co and Chase Manhattan Bank, no broker, finder or investment bank is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
SECTION 12.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) if delivered
personally, or (b) if sent by overnight courier service (receipt confirmed in
writing), or (c) if delivered by facsimile transmission (with receipt
confirmed), or (d) five (5) days after being mailed by registered or certified
mail (return receipt requested) to the parties, in each case to the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to the Company:
Cairn Energy USA, Inc.
8115 Preston Road, Suite 500
Dallas, Texas 75225
Attention: Michael R. Gilbert, President and
Chief Executive Officer
Fax: (214) 369-2864
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with a copy to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: William P. Bowers, Esq.
Fax: (214) 855-4300
(ii) if to Parent or Sub:
The Meridian Resource Corporation
15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
Attention: Joseph A. Reeves, Jr., Chairman and
Chief Executive Officer
Fax: (281) 558-5595
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney Street, Suite 5100
Houston, Texas 77010
Attention: Curtis W. Huff
Fax: (713) 651-5246
SECTION 12.4 Miscellaneous.
(a) This Agreement, including the documents and instruments
referred to herein, (i) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof other than
the Confidentiality Agreement, (ii) shall not be assigned by operation of law
or otherwise, and (iii) shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts executed in and to be
fully performed in such State, without giving effect to its conflicts of laws
statutes, rules or principles.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. The
parties hereto shall negotiate in good faith to replace any provision of this
Agreement so held invalid or unenforceable with a valid provision that is as
similar as possible in substance to the invalid or unenforceable provision.
SECTION 12.5 Interpretation. When reference is made in this
Agreement to Articles, Sections or Exhibits, such reference shall be to an
Article, Section or Exhibit of this Agreement, as the case may be, unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the Words "include",
"includes" or "including" are
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used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Whenever "or" is used in this Agreement it shall be
construed in the nonexclusive sense.
SECTION 12.6 Counterparts; Effect. This Agreement may he executed
in one or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
SECTION 12.7 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and, except for
rights of Indemnified Parties and their heirs and representatives as set forth
in Section 9.5, nothing in this Agreement, express or implied, is intended to
confer upon any person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 12.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 12.9 Further Assurances. Each party hereto shall execute
such further documents and instruments and take such further actions as may
reasonably be requested by any other party hereto in order to consummate the
Merger in accordance with the terms hereof.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ JOSEPH A. REEVES, JR.
-------------------------------
Name: Joseph A. Reeves, Jr.
------------------------
Title: Chief Executive Officer
-----------------------
C ACQUISITION CORP
By: /s/ JOSEPH A. REEVES, JR.
------------------------------
Name: Joseph A. Reeves, Jr.
Title: Chief Executive Officer
CAIRN ENERGY USA, INC.
By: /s/ MICHAEL R. GILBERT
------------------------------
Name: Michael R. Gilbert
Title: President
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EXHIBIT 99.1
FOR MORE INFORMATION, CONTACT:
TMR; Joseph A. Reeves, Jr. or
Michael J. Mayell
(281)558-8080
CEUS; Michael R. Gilbert or
Robert P. Murphy
(214)369-0316
-FOR IMMEDIATE RELEASE-
THE MERIDIAN RESOURCE CORPORATION AND CAIRN ENERGY USA, INC.
ANNOUNCE PROPOSED MERGER
Houston, Texas - July 7, 1997 - The Meridian Resource Corporation
(NYSE: TMR) and Cairn Energy USA, Inc. (NASDAQ:CEUS) today announced that they
have entered into a definitive merger agreement pursuant to which Cairn would be
merged with a subsidiary of TMR.
The terms of the merger agreement provide for the exchange of 1.08
shares of TMR's Common Stock for each share of Cairn Common Stock in a
pooling-of-interests transaction that is expected to be tax free to both
companies. TMR would issue approximately 18.9 million shares of its common stock
having a value in excess of $234 million based on TMR's closing stock price of
$12 5/16 per share on July 3, 1997. The merger is expected to be accretive to
1997 per share cash flow and income, excluding one-time charges relating to
expenses associated with the merger.
On a combined basis, at year-end 1996, both companies had proved
reserves of approximately 164 Bcfe with a pre-tax present value of future net
cash flows discounted at 10% of approximately $395 million. The merger
combines TMR's experience in the application of 3-D seismic exploration in the
transition zone and onshore Gulf Coast region with Cairn's similar expertise and
attractive portfolio of offshore Gulf of Mexico drilling prospects.
Joseph A. Reeves, Jr., Chairman of the Board and Chief Executive Office
of TMR, said, "The merger of TMR and Cairn will provide the new company with a
greater critical mass and additional exploration prospects, which, in turn, will
afford excellent opportunities for the shareholders of the combined company.
TMR's market capitalization will increase twofold to over $425 million with
proved reserves increasing approximately threefold, and the combined company
maintains a strong balance sheet. The merger is the extension and expansion of
high potential exploration opportunities for two growth-minded companies who are
leaders among the independent oil and gas companies in the development of 3-D
seismic exploration projects, both with outstanding track records (over 70%
combined). This fit of exploration philosophies, highly skilled technical and
professional staffs, timing of projects and future exploration activities will
provide a unique opportunity for
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growth for the combined company. I sincerely believe that both companies'
shareholders will recognize the benefits of this merger."
Michael R. Gilbert, President and Chief Executive Officer of Cairn,
said, "The assets of Cairn and TMR are a natural strategic fit. Our shareholders
benefit from greater scale, increased financial strength and the participation
in a large pool of exciting exploration and development drilling opportunities."
In addition, the companies believe that the merger is expected to
provide the following additional strategic benefits:
* Increased cash flow and a strong balance sheet with the financial flexibility
to fund the combined company's 1998 and 1999 capital expenditures.
* Expansion of TMR's core area of operations from the Texas and Louisiana
onshore Gulf Coast and transition zones to the offshore Outer Continental Shelf
of the Gulf of Mexico.
* Provide the combined company with more than 200 prospect opportunities
covering approximately 150,000 acres in the Texas and Louisiana onshore Gulf
Coast and transition zones to the offshore Outer Continental Shelf of the Gulf
of Mexico.
* Combine two technical leaders in the area of 3-D seismic exploration in the
Gulf Coast onshore and offshore region with a combined three-year exploration
success ratio utilizing 3-D seismic in excess of 70%.
* Increase the inventory of 3-D seismic data of the combined company to over
2,200 square miles of information.
* Provide both companies' shareholders with greater liquidity in their stock, a
substantially larger market capitalization and shareholder base.
TMR is an independent oil and natural gas company engaged in the
exploration for and development of oil and natural gas properties utilizing 3-D
seismic technology, primarily in south Louisiana and southeast Texas. TMR is
headquartered in Houston, Texas.
Cairn is engaged in the exploration for and the development and
production of crude oil and natural gas, principally in the Outer Continental
Shelf of the Gulf of Mexico. Cairn also has interests in properties in
Pennsylvania, Texas and other onshore areas.
The merger is subject to certain conditions, including the approval of
the shareholders of both companies pursuant to a prospectus and joint proxy
statement to be filed with the Securities and Exchange Commission.
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Statements made in this press release that are forward-looking in
nature are intended to be "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements are intended to be identified by the words "believe", "expect",
"anticipate" and similar expressions. Although TMR and Cairn believe that the
expectations described in such forward-looking statements are reasonable, the
actual results of the combined company could differ materially from those
currently anticipated. Factors that could cause results to differ materially
include changes in industry conditions and demand and prices of oil and gas, the
timing of drilling of new prospects, the ability of TMR to successfully identify
and complete current prospects, variation in actual production results from that
estimated in existing reserve data, TMR's ability to achieve the strategic
benefits described above, the successful integration of Cairn's operations with
those of TMR, regulatory changes affecting exploration activities and higher
costs associated with drilling. These factors are more fully described in TMR's
and Cairn's filings under the Securities Exchange Act of 1934.
