EXHIBIT 2
AGREEMENT
AND
PLAN OF MERGER
Among
Cortez Oil & Gas, Inc. ("Parent"),
Cortez Acquisition Company ("Merger Sub")
And
Home-Stake Oil & Gas Company ("Company")
October 3, 2000
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS.................................................................2
1.1 Defined Terms......................................................2
1.2 References and Titles.............................................10
ARTICLE 2
THE MERGER.................................................................11
2.1 The Merger........................................................11
2.2 Effect of the Merger..............................................11
2.3 Governing Instruments, Directors and Officers of the
Surviving Corporation...........................................11
2.4 Effect on Securities..............................................11
2.5 Exchange of Certificates/Option Agreements/Severance
and Bonus Payments..............................................13
2.6 Closing...........................................................15
2.7 Effective Time of the Merger......................................15
2.8 Taking of Necessary Action; Further Action........................15
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................15
3.1 Organization......................................................15
3.2 Other Equity Interests............................................16
3.3 Authority and Enforceability......................................16
3.4 No Violations.....................................................16
3.5 Consents and Approvals............................................17
3.6 SEC Documents.....................................................17
3.7 Capital Structure.................................................18
3.8 No Undisclosed Liabilities........................................18
3.9 Indemnification...................................................19
3.10 Absence of Certain Changes or Events..............................19
3.11 Compliance with Laws, Material Agreements and Permits.............21
3.12 Governmental Regulation ..........................................21
3.13 Litigation........................................................22
3.14 No Restrictions...................................................22
3.15 Audits and Settlements............................................22
3.16 Taxes.............................................................23
3.17 Employment Benefit Plans..........................................24
3.18 Company Material Agreements.......................................26
3.19 Labor and Employment Matters......................................26
3.20 Accounts Receivable...............................................27
3.21 Insurance.........................................................27
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3.22 Intangible Property...............................................28
3.23 Title to Assets ..................................................28
3.24 Company Engineering Report........................................28
3.25 Oil and Gas Operations............................................28
3.26 Hydrocarbon Sales and Purchase Agreements.........................29
3.27 Financial and Commodity Hedging...................................30
3.28 Environmental Matters.............................................30
3.29 Books and Records.................................................32
3.30 Brokers...........................................................32
3.31 Powers of Attorney; Authorized Signatories........................32
3.32 Vote Required.....................................................32
3.33 Fairness Opinion..................................................33
3.34 Disclosure and Investigation......................................33
3.35 Real Property.....................................................33
3.36 Expiring Acreage..................................................33
3.37 Other Fees........................................................33
3.38 Key Employee Incentive Bonus Plan.................................33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....................33
4.1 Organization......................................................33
4.2 Authority and Enforceability......................................34
4.3 No Violations.....................................................34
4.4 Consents and Approvals............................................34
4.5 Interim Operations of Merger Sub..................................35
4.6 Financing.........................................................35
4.7 Brokers...........................................................35
4.8 Disclosure and Investigation......................................35
ARTICLE 5
COVENANTS..................................................................36
5.1 Conduct of Business by the Company Pending Closing................36
5.2 Access to Assets, Personnel and Information.......................38
5.3 No Solicitation...................................................40
5.4 Third-Party Standstill Agreements ................................40
5.5 Shareholders Meeting..............................................41
5.6 Proxy Statement...................................................41
5.7 Additional Arrangements...........................................42
5.8 Public Announcements..............................................42
5.9 Notification of Certain Matters...................................42
5.10 Payment of Expenses...............................................43
5.11 Indemnification and Insurance.....................................43
5.12 Shareholder Litigation............................................45
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5.13 Opinion of Financial Advisor......................................45
5.14 Resignations of Officers and Directors of the Company.............45
5.15 Other Agreements..................................................45
5.16 Option Surrender Agreements.......................................45
5.17 Financing.........................................................45
5.18 Separation Agreements.............................................46
5.19 Retirement Agreement..............................................46
5.20 Deferred Compensation Agreements..................................46
ARTICLE 6
CONDITIONS.................................................................46
6.1 Conditions to Each Party's Obligation to Effect the Merger........46
6.2 Conditions to Obligations of Parent and Merger Sub. ..............47
6.3 Conditions to Obligation of the Company...........................48
ARTICLE 7
TERMINATION................................................................48
7.1 Termination Rights................................................48
7.2 Effect of Termination.............................................49
7.3 Fees and Expenses.................................................50
ARTICLE 8
MISCELLANEOUS..............................................................50
8.1 Nonsurvival of Representations and Warranties. ...................50
8.2 Amendment. .......................................................50
8.3 Notices...........................................................50
8.4 Counterparts. ....................................................51
8.5 Severability......................................................52
8.6 Entire Agreement; No Third Party Beneficiaries....................52
8.7 Applicable Law. ..................................................52
8.8 No Remedy in Certain Circumstances. ..............................52
8.9 Assignment........................................................52
8.10 Waivers...........................................................52
8.11 Confidentiality Agreement.........................................53
8.12 No Recourse Against Others........................................53
8.13 Incorporation.....................................................53
8.14 Specific Performance..............................................53
8.15 Section 1090.3....................................................53
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EXHIBIT A -- Form of Stock Voting Agreement
EXHIBIT B-1 -- Form of Separation Agreement for Robert C. Simpson
EXHIBIT B-2 -- Form of Separation Agreement for Chris K. Corcoran
EXHIBIT C -- Form of Rights Agreement Amendment
EXHIBIT D -- Supplemental Summary Pages of Company Engineering Report*
EXHIBIT E -- Company Hedging Program*
SCHEDULES
Parent Disclosure Schedule*
Company Disclosure Schedule*
* Omitted. The Registrant agrees to furnish supplementally a copy of any such
omitted schedules or exhibits to the Securities and Exchange Commission upon its
request.
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 3rd day of October, 2000, by and among Cortez Oil & Gas,
Inc., a Delaware corporation ("Parent"); Cortez Acquisition Company, an Oklahoma
corporation ("Merger Sub"); and Home-Stake Oil & Gas Company, an Oklahoma
corporation (the "Company").
RECITALS
A. Parent and the Company desire to effect a merger of Merger Sub with and
into the Company (the "Merger").
B. The board of directors of the Company has determined it advisable and in
the best interests of the Company's shareholders to consummate the Merger, upon
the terms and subject to the conditions set forth herein.
C. The boards of directors of Parent and Merger Sub have determined it
advisable and in the best interests of Parent's and Merger Sub's shareholders,
respectively, to consummate the Merger, upon the terms and subject to the
conditions set forth herein.
D. As a condition and an inducement to Parent and Merger Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, certain officers and directors of
the Company, who own an aggregate of approximately 21.1% of the outstanding
shares of Company Common Stock, are entering into separate Stock Voting
Agreements (the "Stock Voting Agreements") with Parent in the form of Exhibit A.
E. As a condition and an inducement to Parent and Merger Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, each of Robert C. Simpson and
Chris K. Corcoran of the Company are entering into separate Separation
Agreements (the "Separation Agreements") with the Company in the form of Exhibit
B-1 and Exhibit B-2, respectively.
F. As a condition and an inducement to Parent and Merger Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, the Company is entering into an
amendment (the "Rights Agreement Amendment") to the Rights Agreement, dated as
of January 3, 2000, by and between the Company and UMB Bank, N.A., as rights
agent (the "Rights Agreement"), with Parent in the form of Exhibit C.
G. Parent, Merger Sub and the Company (the "Parties") 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, for and in consideration of the Recitals and the mutual
covenants and agreements set forth in this Agreement, the Parties hereby agree
as follows:
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ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, each of the following terms
has the meaning given in this Section 1.1 or in the Section referred to below:
"Affiliate" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person. The
term "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the actual power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of stock, by contract, credit arrangement or otherwise.
"Agreement" means this Agreement and Plan of Merger, as amended,
supplemented and/or modified from time to time.
"Acquisition Proposal" has the meaning specified in Section 5.3(b).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any successor federal and state statutes
and any regulations promulgated thereunder, and any foreign statutes and
regulations modeled thereon.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List.
"Certificate of Merger" means the certificate of merger, prepared and
executed in accordance with the applicable provisions of the OGCA, filed with
the Secretary of State of the State of Oklahoma to effect the Merger.
"Claim" has the meaning specified in Section 5.11(b).
"Closing" means the closing of the Merger and the consummation of the other
transactions contemplated by this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the introductory paragraph hereof.
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"Company Bank Credit Agreement" means the Special Loan Agreement, dated
November 8, 1999, between the Company, as borrower, and Bank of Oklahoma, N.A.,
as lender (as amended and supplemented).
"Company Benefit Program or Agreement" has the meaning specified in Section
3.17(a).
"Company Certificate" means a certificate representing shares of the
Company Common Stock.
"Company Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Company Disclosure Schedule" means the Company Disclosure Schedule
attached hereto and any documents listed on such Company Disclosure Schedule and
expressly incorporated therein by reference.
"Company Employee Benefit Plans" has the meaning specified in Section
3.17(a).
"Company Engineering Report" means the reserve report effective as of
January 1, 2000, covering the Ownership Interests and prepared by the Company as
set forth originally in the data books provided to Parent via Stephens Inc. on
or about May 8, 2000, and as updated in the supplemental data books provided to
Parent on or about July 14, 2000, a copy of the most recent summary pages of
which is attached hereto as Exhibit D.
"Company ERISA Affiliate" has the meaning specified in Section 3.17(a).
"Company Financial Statements" has the meaning specified in Section 3.6.
"Company Material Agreement(s)" means (a) the Company Bank Credit Agreement
and any other agreement with respect to indebtedness of the Company; (b) any
agreement or contract, written or oral, between the Company and any Affiliate
thereof; (c) any hedging agreement to which the Company is a party or by which
any of its assets is bound; (d) any agreement, contract, commitment or
understanding, written or oral, granting any Person registration, purchase or
sale rights with respect to any security of the Company; (e) any agreement,
contract, commitment or understanding, written or oral, granting any Person a
right of indemnification and/or contribution by the Company; (f) any voting or
other agreement relating to any security of the Company; (g) any employment,
severance, retention, termination or consulting agreement between the Company
and any other Person; (h) any office leases to which the Company is a party; (i)
any operating bonds and letters of credit with respect to which the Company is
liable or contingently liable; (j) any agreements with investment bankers or
financial advisors to which the Company is a party; (k) any indemnification
agreements between the Company and its employees, officers or directors; (l) any
insurance policy, binder, or other agreement to which the Company is a party;
(m) any guaranties pursuant to which the Company is obligated; or (n) any
agreement that would be required by Item 601 of Regulation S-B to be filed with
the SEC as an exhibit to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999.
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"Company Meeting" means the meeting of the shareholders of the Company
called for the purpose of voting on the Company Proposal or any adjournment
thereof.
"Company Option" means an option (issued and outstanding immediately prior
to the Effective Time) to acquire shares of Company Common Stock granted
pursuant to the Company's 1997 Incentive Stock Plan, as amended.
"Company Permits" has the meaning specified in Section 3.11.
"Company Plan" has the meaning specified in Section 3.17(a).
"Company Preferred Stock" means the preferred stock, par value $1.00 per
share, of the Company.
"Company Proposal" means the proposal to approve this Agreement and the
Merger, which proposal is to be presented to the shareholders of the Company in
the Proxy Statement.
"Company Representative" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of the Company.
"Company SEC Documents" has the meaning specified in Section 3.6.
"Company Stock Equivalents" means all rights, warrants, options (including
the Company Options), convertible securities or indebtedness, exchangeable
securities or other instruments, or other rights that are outstanding and
exercisable for or convertible or exchangeable into, directly or indirectly,
shares of Company Common Stock at the time of issuance or upon the passage of
time or occurrence of some future event.
"Confidentiality Agreement" means the letter agreement dated April 27,
2000, between the Company and Parent relating to the Company's furnishing of
information to Parent in connection with Parent's evaluation of the possibility
of the Merger.
"Debt Commitments" has the meaning specified in Section 4.6.
"Defensible Title" means such right, title and interest that is (a)
evidenced by an instrument or instruments filed of record in accordance with the
conveyance and recording laws of the applicable jurisdiction to the extent
necessary to prevail against competing claims of bona fide purchasers for value
without notice, and (b) subject to Permitted Encumbrances, free and clear of all
Liens, claims, infringements, burdens and other defects.
"Disclosure Schedule" means, as applicable, the Company Disclosure Schedule
or the Parent Disclosure Schedule.
"Dissenting Shareholder" means a holder of Company Common Stock who has
validly perfected appraisal rights under Section 1091 of the OGCA.
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"Effective Time" has the meaning specified in Section 2.7.
"Environmental Law" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, common law, injunction or other
authorization in effect on the date hereof, at the Closing Date, or at a
previous time applicable to the operations of the Company: (a) relating to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the natural environment, including into ambient air, soil, sediments, land
surface or subsurface, buildings or facilities, surface water, groundwater,
publicly-owned treatment works, septic systems or land; (b) relating to the
generation, treatment, storage, disposal, use, handling, manufacturing,
recycling, transportation or shipment of Hazardous Materials; (c) relating to
occupational health and safety; or (d) otherwise relating to the pollution of
the environment, solid waste handling treatment or disposal, operation or
reclamation of oil and gas operations or mines, reclamation or remediation
activities, or protection of environmentally sensitive areas.
"Equity Commitments" has the meaning specified in Section 4.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning specified in Section 2.5(a).
"Exchange Fund" has the meaning specified in Section 2.5(a).
"Financing" has the meaning specified in Section 4.6.
"Financing Commitments" has the meaning specified in Section 4.6.
"Financing Termination Notice" has the meaning specified in Section 5.17.
"GAAP" means generally accepted accounting principles, as recognized by the
U.S. Financial Accounting Standards Board (or any generally recognized
successor).
"Governmental Action" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
"Governmental Authority" means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over the Company or the Parent Companies or any
of their respective properties or assets.
"Hazardous Material" means: (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
the Resource Conservation and Recovery Act, as amended, and any successor
federal and state statutes and any regulations promulgated thereunder, and any
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foreign statutes and regulations modeled thereon; (c) any solid, hazardous,
dangerous or toxic chemical, material, waste or substance, within the meaning of
and regulated by any Environmental Law; (d) any radioactive material, including
any naturally occurring radioactive material, and any source, special or
byproduct material as defined in 42 U.S.C. 2011 et seq. and any amendments or
authorizations thereof; (e) any asbestos-containing materials in any form or
condition; (f) any polychlorinated biphenyls in any form or condition; or (g)
petroleum, petroleum hydrocarbons or any fraction or byproducts thereof.
"Hydrocarbons" means oil, condensate, gas, casinghead gas and other liquid
or gaseous hydrocarbons.
"Hydrocarbon Agreement" means any of the Hydrocarbon Sales Agreements and
Hydrocarbon Purchase Agreements.
"Hydrocarbon Purchase Agreement" means any material sales agreement,
purchase contract, or marketing agreement that is currently in effect and under
which the Company is a buyer of Hydrocarbons for resale (other than purchase
agreements entered into in the ordinary course of business with a term of three
months or less, terminable without penalty on 30 days' notice or less, which
provide for a price not greater than the market value price that would be paid
pursuant to an arm's-length contract for the same term with an unaffiliated
third-party seller, and which do not obligate the purchaser to take any
specified quantity of Hydrocarbons or to pay for any deficiencies in quantities
of Hydrocarbons not taken).
"Hydrocarbon Sales Agreement" means any material sales agreement, purchase
contract, or marketing agreement that is currently in effect and under which the
Company is a seller of Hydrocarbons (other than "spot" sales agreements entered
into in the ordinary course of business with a term of three months or less,
terminable without penalty on 30 days' notice or less, and which provide for a
price not less than the market value price that would be received pursuant to an
arm's-length contract for the same term with an unaffiliated third party
purchaser).
"Indemnified Parties" has the meaning specified in Section 5.11(b).
"Lien" means any lien, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, encumbrance, right of purchase, rights
of a vendor under any title retention or conditional sale agreement, or lease or
other arrangement substantially equivalent thereto.
"Material Adverse Effect" means: (a) when used with respect to the Company,
a result or consequence that (i) would reasonably be expected to materially
adversely affect the condition (financial or otherwise), prospects, results of
operations or business of the Company or the aggregate value of its assets, (ii)
would reasonably be expected to materially impair the ability of the Company to
own, hold, develop and operate its assets, or (iii) would reasonably be expected
to impair the Company's ability to perform its obligations hereunder or
consummate the transactions contemplated hereby; and (b) when used with respect
to Parent, a result or consequence that (i) would reasonably be expected to
materially adversely affect the condition (financial or otherwise), prospects,
results of operations or business of the Parent Companies (taken as a whole) or
the aggregate value of their assets, (ii) would reasonably be expected to
materially impair the ability of the Parent Companies (taken as a whole) to own,
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hold, develop and operate their assets, or (iii) would reasonably be expected to
impair Parent's or Merger Sub's ability to perform its respective obligations
hereunder or consummate the transactions contemplated hereby; provided, however,
that if the Company's representations contained in Section 3.27 are true and
correct in all respects, then "Material Adverse Effect" shall not include
results or consequences from changes or trends, including changes or trends in
commodity prices, generally prevalent in or affecting the oil and gas industry.
"Material Representations" means the representations and warranties
contained in Sections 3.8 (the last sentence therein), 3.17(g), 3.27, 3.30,
3.33, 3.37 and 3.38 of this Agreement.
"Merger" has the meaning specified in the Recitals to this Agreement.
"Merger Consideration" means the per share cash consideration to be issued
in connection with the Merger.
"Merger Sub" has the meaning specified in the introductory paragraph of
this Agreement.
"Merger Sub Common Stock" means the common stock, par value $.01 per share,
of Merger Sub.
"NASDAQ" means the Nasdaq Small Cap Market.
"OGCA" means the Oklahoma General Corporation Act, as amended.
"Oil and Gas Interest(s)" means: (a) direct and indirect interests in and
rights with respect to oil, gas, mineral and related properties and assets of
any kind and nature, direct or indirect, including, without limitation, working,
royalty and overriding royalty interests, mineral interests, leasehold
interests, production payments, operating rights, net profits interests, other
non-working interests and non-operating interests; (b) interests in and rights
with respect to Hydrocarbons and other minerals or revenues therefrom and
contracts in connection therewith and claims and rights thereto (including 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, reversionary interests,
reservations and concessions; (c) 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 (d) interests in equipment and
machinery (including well equipment and machinery), oil and gas production,
gathering, transmission, compression, 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.
"Option Surrender Agreement" has the meaning specified in Section 2.5(f).
"Ownership Interests" means the ownership interests of the Company in the
Oil and Gas Interests of the Company, as set forth in the Company Engineering
Report.
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"Parent" has the meaning specified in the introductory paragraph of this
Agreement.
"Parent Affiliate" has the meaning specified in Section 8.12.
"Parent Companies" means Parent and Merger Sub.
"Parent Disclosure Schedule" means the Parent Disclosure Schedule attached
hereto and any documents listed on such Parent Disclosure Schedule and expressly
incorporated therein by reference.
"Parent Representative" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of any of the Parent Companies and any potential provider of debt
or equity financing to any of the Parent Companies.
"Parties" has the meaning specified in the Recitals to this Agreement.
"Permitted Encumbrances" means: (a) Liens for Taxes, assessments or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent or (if foreclosure, distraint, sale or other
similar proceedings shall not have been commenced or, if commenced, shall have
been stayed) are being contested in good faith by appropriate proceedings and if
the Company shall have set aside on its books such reserves (segregated to the
extent required by sound accounting practices) as may be required by or
consistent with GAAP and, whether reserves are set aside or not, are listed on
the applicable Disclosure Schedule; (b) Liens of carriers, warehousemen,
mechanics, laborers, materialmen, landlords, vendors, workmen and operators
arising by operation of law in the ordinary course of business or by a written
agreement existing as of the date hereof and necessary or incident to the
exploration, development, operation and maintenance of Hydrocarbon properties
and related facilities and assets for sums not yet due or being contested in
good faith by appropriate proceedings, if the Company shall have set aside on
its books such reserves (segregated to the extent required by sound accounting
practices) as may be required by or consistent with GAAP and, whether reserves
are set aside or not, are listed on the applicable Disclosure Schedule, to the
extent that such are in existence as of the date hereof; (c) Liens incurred in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other social security legislation (other than ERISA)
which would not and will not, individually or in the aggregate, result in a
Material Adverse Effect on the Company; (d) Liens incurred in the ordinary
course of business to secure the performance of bids, tenders, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance and
repayment bonds and other obligations of a like nature which would not and will
not, individually or in the aggregate, result in a Material Adverse Effect on
the Company; (e) Liens, easements, rights-of-way, restrictions, servitudes,
permits, conditions, covenants, exceptions, reservations and other similar
encumbrances incurred in the ordinary course of business or existing on property
and not materially impairing the value of the assets of the Company, or
interfering with the ordinary conduct of the business of the Company, or rights
to any of its assets; (f) Liens arising pursuant to Section 9.319 of the Texas
Business and Commerce Code and all other similar Liens created or arising by
operation of law to secure a party's obligations as a purchaser of oil and gas,
(g) all rights to consent by, required notices to, filings with, or other
actions by Governmental Authorities to the extent customarily obtained
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subsequent to closing; (h) farm-out, carried working interest, joint operating,
unitization, royalty, overriding royalty, sales and similar agreements relating
to the exploration or development of, or production from, Hydrocarbon properties
entered into in the ordinary course of business and not in violation of Section
5.1, provided the effect thereof of any of such agreements in existence as of
the date hereof on the working and net revenue interest of the Company, has been
properly reflected in its Ownership Interests; (i) any defects, irregularities
or deficiencies in title to easements, rights-of-way or other surface use
agreements that do not materially adversely affect the value of any asset of the
Company by an amount in excess of $100,000; (j) Liens arising under or created
pursuant to the Company Bank Credit Agreement; and (k) Liens described in
Section 3.16(c) of the Company Disclosure Schedule.
"Person" means any natural person, corporation, company, limited or general
partnership, joint stock company, joint venture, association, limited liability
company, trust, bank, trust company, land trust, business trust or other entity
or organization, whether or not a Governmental Authority.
"Proxy Statement" means a proxy statement in definitive form relating to
the Company Meeting and the Company Proposal.
"Reserve Data Value" means the 10% discounted present value (before tax) of
the proved reserves contained in the Company's Oil and Gas Interests as shown on
the Company Engineering Report.
"Responsible Officer" means, with respect to any corporation, the
President, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, or any Vice President or other member of executive management
of such corporation.
"Rights Agreement" has the meaning specified in the Recitals to this
Agreement.
"Rights Agreement Amendment" has the meaning specified in the Recitals to
this Agreement.
"Seal Agreement" has the meaning specified in Section 5.19.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Agreements" has the meaning specified in the Recitals to this
Agreement.
"Stock Action" has the meaning specified in Section 2.4(b)(ii).
"Stock Voting Agreements" has the meaning specified in the Recitals to this
Agreement.
"Strother Agreements" has the meaning specified in Section 5.20.
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"Subsidiary" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (a) such Person
or any other Subsidiary of such Person is a general partner or (b) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and any one or more of its Subsidiaries.
"Surviving Corporation" has the meaning specified in Section 2.2.
"Tax Returns" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" means taxes of any kind, levies or other like assessments, customs,
duties, imposts, charges or fees, including income, gross receipts, ad valorem,
value added, excise, real or personal property, asset, sales, use, federal
royalty, license, payroll, transaction, capital, net worth and franchise taxes,
estimated taxes, withholding, employment, social security, workers'
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes and other
governmental taxes imposed or payable to the United States or any state, local
or foreign governmental subdivision or agency thereof, and in each instance such
term shall include any interest, penalties or additions to tax attributable to
any such tax, including penalties for the failure to file any Tax Return or
report.
"Third-Party Consent" means the consent or approval of any Person other
than any Governmental Authority.
"Transaction Documents" has the meaning specified in Section 3.3.
1.2 References and Titles. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of this Agreement, and shall be disregarded in construing the language
hereof. The words "this Agreement," "herein," "hereby," "hereunder" and
"hereof," and words of similar import, refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The words "this
Article," "this Section" and "this subsection," and words of similar import,
refer only to the Article, Section or subsection hereof in which such words
occur. The word "or" is not exclusive, and the word "including" (in its various
forms) means including without limitation. Pronouns in masculine, feminine or
neuter genders shall be construed to state and include any other gender, and
words, terms and titles (including terms defined herein) in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires.
As used in the representations and warranties contained in this Agreement,
the phrase "to the knowledge" of the representing Party shall mean that
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Responsible Officers of such Party, individually or collectively, either (a)
know that the matter being represented and warranted is true and accurate or (b)
have no reason, after reasonable inquiry, to believe that the matter being
represented and warranted is not true and accurate.
ARTICLE 2
THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company in accordance with the provisions of this Agreement.
2.2 Effect of the Merger. Upon the effectiveness of the Merger, the
separate existence of Merger Sub shall cease, and the Company, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Oklahoma. The Merger shall
have the effects specified in this Agreement and the OGCA.
2.3 Governing Instruments, Directors and Officers of the Surviving
Corporation.
(a) The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until duly amended in accordance
with its terms and applicable law.
(b) The bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until duly
amended in accordance with their terms and applicable law.
(c) The directors and officers of Merger Sub at the Effective Time
shall be the directors and officers, respectively, of the Surviving
Corporation from the Effective Time until their respective successors have
been duly elected or appointed in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation and applicable law.
2.4 Effect on Securities.
(a) Merger Sub Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share
of Merger Sub Common Stock issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and shall continue as
one share of common stock of the Surviving Corporation and each certificate
evidencing ownership of any such shares shall continue to evidence
ownership of the same number of shares of the capital stock of the
Surviving Corporation.
(b) Company Securities.
(i) Company Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof, each
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share of the Company Common Stock that is issued and outstanding
immediately prior to the Effective Time (other than shares of Company
Common Stock held by Dissenting Shareholders, by the Company as
treasury shares or by Parent or Merger Sub) shall be converted into
the right to receive $11.00 per share. Each share of the Company
Common Stock, when so converted, shall automatically be canceled and
retired, shall cease to exist and shall no longer be outstanding; and
the holder of any Company Certificate representing any such shares
shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration to be issued in exchange therefor,
upon the surrender of such Company Certificate. All shares of Company
Common Stock held by the Company as treasury shares or by Parent or
Merger Sub shall automatically be canceled and retired and shall cease
to exist as of the Effective Time and no consideration shall be
delivered or deliverable in exchange therefor.
(ii) Recapitalization. If between the date of this Agreement and
the Effective Time, the Company shall split, combine or otherwise
reclassify the Company Common Stock, or pay a stock dividend or other
stock distribution in Company Common Stock, or otherwise change the
Company Common Stock into other securities, or make any other such
stock dividend or distribution in capital stock of the Company in
respect of the Company Common Stock (collectively a "Stock Action"),
the per share Merger Consideration shall be correspondingly adjusted
to reflect such Stock Action.
(iii) Company Stock Options. Prior to the Effective Time, the
Company shall take such action as may be necessary for all Company
Options to be exercisable in full as of immediately prior to the
Effective Time. At the Effective Time, Parent will cause the Surviving
Corporation to acquire each outstanding Company Option pursuant to the
provisions of Section 10 of the Company's 1997 Incentive Stock Plan,
as amended, such that, at the Effective Time, all Company Options held
by each particular holder shall be canceled and such holder shall be
entitled to receive from the Surviving Corporation, in respect of each
share of Company Common Stock otherwise issuable upon exercise of each
Company Option, cash (subject to all applicable withholding taxes) in
an amount equal to the difference of (i) the per share Merger
Consideration, and (ii) the per share exercise price of such Company
Option. From and after the Effective Time, each Company Option shall
only represent the right to receive the cash payment provided in this
Section 2.4(b)(iii).
(iv) Shares of Dissenting Shareholders. Any issued and
outstanding shares of Company Common Stock held by a Dissenting
Shareholder shall be converted into the right to receive such
consideration as may be determined to be due to such Dissenting
Shareholder pursuant to the OGCA; provided, however, shares of Company
Common Stock outstanding at the Effective Time and held by a
Dissenting Shareholder who shall, after the Effective Time, withdraw
his, her or its demand for appraisal or lose his, her or its right of
appraisal as provided in the OGCA, shall be deemed to be converted, as
of the Effective Time, into the right to receive the Merger
Consideration, in accordance with the procedures specified in this
Article 2. Prior to the Effective Time, the Company shall give Parent
(A) prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant to the
OGCA relating to appraisal rights received by the Company, and (B) the
opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the OGCA. Prior to the Effective Time, the
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Company will not voluntarily make any payment with respect to any
demands for appraisal and will not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
(v) Other. Except as provided in this Section 2.4 or as otherwise
agreed to by the Parties (A) the provisions of any other plan, program
or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company shall become
null and void at the Effective Time, and (B) the Company shall use all
reasonable best efforts to ensure that, following the Effective Time,
no holder of Company Stock Equivalents or rights or any participant in
any plan, program or arrangement shall have any right thereunder to
acquire any equity securities of the Company, Merger Sub, Parent or
any direct or indirect subsidiary thereof.
2.5 Exchange of Certificates/Option Agreements/Severance and Bonus
Payments.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company, reasonably acceptable to the
Company, to act as Exchange Agent hereunder (the "Exchange Agent"). At
the Effective Time, Parent shall deliver, in trust, to the Exchange
Agent, for the benefit of the holders of Company Common Stock, for
exchange in accordance with this Section 2.5 through the Exchange
Agent, cash in the aggregate amount necessary to promptly make all
cash payments due under Section 2.4 in exchange for outstanding shares
of Company Common Stock. The cash delivered to the Exchange Agent
pursuant to this Section 2.5 and comprising the Merger Consideration
shall be hereinafter referred to as the "Exchange Fund." The Exchange
Fund shall not be used for any other purpose; provided, the Exchange
Agent shall invest any cash included in the Exchange Fund in one or
more bank accounts or in high-quality, short-term investments, as
directed by Parent, on a daily basis. Any interest and other income
resulting from such investments will be paid to Parent.
(b) Letters of Transmittal. As soon as practicable after the
Effective Time, but in no event more than three business days
thereafter, Parent shall cause the Exchange Agent to mail to each
holder of record of Company Certificates (i) a customary form of
letter of transmittal, reasonably acceptable to the Company,
specifying that delivery shall be effected, and risk of loss and title
to the Company Certificates shall pass, only upon proper delivery of
the Company Certificates to the Exchange Agent, and (ii) instructions
for use in surrendering such Company Certificates in exchange for the
Merger Consideration. Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Company Certificate
shall be entitled to promptly receive in exchange therefor payment by
check of an amount equal to the product of the Merger Consideration
multiplied by the number of shares of Company Common Stock formerly
represented by the surrendered Company Certificate, after giving
effect to any required tax withholding, and the Company Certificate so
surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 2.5(b), each Company Certificate shall be
deemed from and after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration. In no event
shall the holder of any such surrendered Company Certificate be
entitled to receive interest on any cash to be received in the Merger.
(c) Lost Certificate. If any Company Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Company Certificate to be lost,
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stolen or destroyed and, if required by Parent, the posting by such
person of a bond, in such reasonable and customary amount as Parent
may direct, as indemnity against any claim that may be made against it
with respect to such Company Certificate, the Exchange Agent will
promptly issue in exchange for such lost, stolen or destroyed Company
Certificate the Merger Consideration.
(d) No Transfer. After the Effective Time, there shall be no
further registration of transfers on the Surviving Corporation's stock
transfer books of the shares of the Company Common Stock that were
outstanding immediately prior to the Effective Time.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund held by the Exchange Agent in accordance with the terms of this
Section 2.5 that remains unclaimed by the former shareholders of the
Company for a period of one year following the Effective Time shall be
delivered to Parent, upon demand. Thereafter, any former shareholders
of the Company who have not theretofore complied with the provisions
of this Section 2.5 shall look only to Parent for payment of their
claim for Merger Consideration (all without interest).
(f) Option Surrender Agreements. Within 20 days after the date of
this Agreement, the Company shall distribute an option surrender
agreement (an "Option Surrender Agreement"), in the form delivered to
the Company immediately prior to execution of this Agreement, to each
holder of a Company Option. After the Effective Time, Parent shall
cause the Surviving Corporation to pay the amount of cash due to each
holder of a Company Option under Section 2.4(b)(iii), with such
payment being made (i) on the Closing Date as to each particular
holder of Company Options who has delivered to the Company an executed
Option Surrender Agreement at least five business days prior to the
Closing Date or (ii) if clause (i) above is not applicable, within
three business days after the date that each particular holder of
Company Options has delivered to the Company an executed Option
Surrender Agreement.
(g) Severance and Bonus Payments. At the Effective Time, Parent
shall pay (subject to all applicable withholding taxes and in
accordance with and to the extent then due and payable under the terms
of the Separation Agreements and the Company's Amended and Restated
Change in Control Severance Pay Plan, as such may be applicable) all
severance, bonus and other amounts set forth in Section 3.17(g) of the
Company Disclosure Schedule.
(h) No Liability. None of Parent, the Surviving Corporation, the
Exchange Agent, or any other Person shall be liable to any former
holder of shares of Company Common Stock or Company Options for any
amount properly delivered to any public official pursuant to any
applicable abandoned property, escheat, or similar law. Any amounts
remaining unclaimed by former holders of shares of Company Common
Stock or Company Options after a period of three years following the
Effective Time (or such earlier date immediately prior to the time at
which such amounts would otherwise escheat to or become property of
any governmental entity) shall, to the extent permitted by applicable
law, become the property of Parent free and clear of any claims or
interest of any such holders or their successors, assigns, or personal
representative previously entitled thereto.
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2.6 Closing. Subject to the terms and conditions of this Agreement,
the Closing shall take place at the offices of Vinson & Elkins L.L.P., 2001
Ross Avenue, Suite 3700, Dallas, Texas 75201, at 10:00 a.m., local time, on
the first business day after the conditions set forth in Article 6 have
been satisfied or waived or on such other date and at such other time and
place as Parent and the Company shall agree; provided, however, that the
Closing shall occur no earlier than December 1, 2000; provided further,
however, that if the Company breaches its representation in Section 3.27
hereof, then the Closing shall occur on the first business day after the
conditions set forth in Article 6 have been satisfied or waived.
2.7 Effective Time of the Merger. The Merger shall become effective
immediately when the Certificate of Merger is accepted for filing by the
Secretary of State of the State of Oklahoma or at such time thereafter as
is provided in the Certificate of Merger (the "Effective Time"). The
Certificate of Merger shall be filed, and the Effective Time shall occur,
on the Closing Date; provided, however, that the Certificate of Merger may
be filed prior to the Closing Date or prior to the Closing so long as it
provides for an Effective Time that occurs on the Closing Date immediately
after the Closing.
2.8 Taking of Necessary Action; Further Action. Each of Parent, Merger
Sub, and the Company shall use all reasonable efforts to take all such
actions as may be necessary or appropriate in order to effectuate the
Merger under the OGCA as promptly as commercially practicable. If, at any
time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of both Merger Sub and the
Company, the officers and directors of the Surviving Corporation are fully
authorized, in the name of the Surviving Corporation or otherwise to take,
and shall take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows (such representations and warranties being deemed to be made on a
continuous basis until the Effective Time):
3.1 Organization. The Company: (a) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation or
formation; (b) has the requisite power and authority to own, lease and operate
its properties and to conduct its business as it is presently being conducted;
and (c) is duly qualified to do business as a foreign corporation and is in good
standing, in each jurisdiction where the character of the properties owned or
leased by it or the nature of its activities makes such qualification necessary
(except where any failure to be so qualified as a foreign corporation or to be
in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company). Accurate and complete copies of the certificate
or articles of incorporation, bylaws, minute books and/or other organizational
documents of the Company have heretofore been delivered, or in the case of
minute books, been made available, to Parent. The Company has no Subsidiaries.
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3.2 Other Equity Interests. The Company does not own any equity interest in
any general or limited partnership, corporation, limited liability company or
other entity other than as set forth in Section 3.2 of the Company Disclosure
Schedule (other than joint venture, joint operating, other ownership
arrangements and tax partnerships entered into in the ordinary course of
business that, individually or in the aggregate, are not material to the
operations or business of the Company). The Company has terminated and dissolved
H-S Royalty, Ltd., of which it served as general partner, in accordance with the
terms of the partnership agreement of H-S Royalty, Ltd. and applicable law.
3.3 Authority and Enforceability. The Company has the requisite corporate
power and authority to enter into and deliver this Agreement and the other
agreements and documents entered into by the Company in connection with this
Agreement, including without limitation the Stock Voting Agreements, the
Separation Agreements and the Rights Agreement Amendment (collectively with this
Agreement, the "Transaction Documents") and (with respect to consummation of the
transactions included in the Company Proposal, subject to the valid approval of
the Company Proposal by the shareholders of the Company) to consummate the
transactions contemplated hereby and thereby. The execution and delivery of the
Transaction Documents and (with respect to consummation of the transactions
included in the Company Proposal, subject to the valid approval of the Company
Proposal by the shareholders of the Company) the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company,
including approval by the board of directors of the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution or delivery of the Transaction Documents or (with respect to
consummation of the transactions included in the Company Proposal, subject to
the valid approval of the Company Proposal by the shareholders of Company) to
consummate the transactions contemplated hereby and thereby. The Transaction
Documents have been duly and validly executed and delivered by the Company and
(with respect to consummation of the transactions included in the Company
Proposal, subject to the valid approval of the Company Proposal by the
shareholders of Company, and assuming that the Transaction Documents constitute
valid and binding obligations of Parent, Merger Sub and the other Persons party
to the Transaction Documents (other than the Company)) constitute valid and
binding obligations of the Company, enforceable against it in accordance with
their terms.
3.4 No Violations. The execution and delivery of each Transaction Document
does not, and the consummation of the transactions contemplated hereby and
thereby and compliance by the Company with the provisions hereof or thereof will
not, conflict with, result in any violation of or default (with or without
notice or lapse of time or both) under, give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien on any of the properties or
assets of the Company under, any provision of: (a) the certificate of
incorporation, bylaws or any other organizational documents of the Company; (b)
any Company Material Agreement including any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or
other agreement or instrument applicable to the Company; or (c) assuming the
consents, approvals, authorizations, permits, filings and notifications referred
to in Section 3.5 are duly and timely obtained or made, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its properties or assets, other than, in the case of clause (b) or (c)
above, any such conflict, violation, default, right, loss or Lien that,
individually or in the aggregate, would not have a Material Adverse Effect on
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the Company. Neither the provisions of Article Eleven of the Company's Restated
and Amended Certificate of Incorporation nor Sections 1145 through 1155 of the
OGCA are applicable to the transactions contemplated by the Transaction
Documents.
3.5 Consents and Approvals. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to the Company in connection with the
execution and delivery of the Transaction Documents by the Company or the
consummation by the Company of the transactions contemplated hereby and thereby,
except for the following: (a) any such consent, approval, order, authorization,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (b) the filing of the Certificate of Merger with the Secretary of
State of the State of Oklahoma pursuant to the provisions of the OGCA; (c) the
filing with the SEC of the Proxy Statement (in preliminary and definitive form)
and such reports under Section 13(a) of the Exchange Act and such other
compliance with the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder as may be required in connection with the
Transaction Documents and the transactions contemplated hereby and thereby and
the obtaining from the SEC of such orders as may be so required; (d) such
filings as may be required by NASDAQ; and (e) such filings and approvals as may
be required by any applicable state takeover laws or Environmental Laws. No
Third-Party Consent is required by or with respect to the Company in connection
with the execution and delivery of the Transaction Documents or the consummation
of the transactions contemplated hereby or thereby, except for (x) any such
Third-Party Consent which the failure to obtain would not, individually or in
the aggregate, have a Material Adverse Effect on the Company and (y) the valid
approval of the Company Proposal by the shareholders of the Company.
3.6 SEC Documents. 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, 1996 and
prior to or on the date of this Agreement (the "Company SEC Documents"), which
are all the documents (other than preliminary material) that the Company was
required to file with the SEC between December 31, 1996 and the date of this
Agreement. As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents (the "Company Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule 10-01
of Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material) the consolidated
financial position of the Company as of their respective dates and the
consolidated results of operations and the consolidated cash flows of the
Company for the periods presented therein. Section 3.6 of the Company Disclosure
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Schedule describes all agreements, arrangements, or understandings between the
Company and any party who is (any time after December 31, 1996) an Affiliate of
the Company that are required to be disclosed in the Company SEC Documents.
3.7 Capital Structure.
(a) The authorized capital stock of the Company consists of 12,000,000
shares of Company Common Stock and 2,000,000 shares of Company Preferred
Stock.
(b) As of the date hereof, (i) there are issued and outstanding
4,353,827 shares of Company Common Stock and (ii) 243,536 shares of Company
Common Stock are held by the Company as treasury stock. As of the date
hereof, 371,736 shares of Company Common Stock are issuable upon exercise
of outstanding Company Options (whether or not currently exercisable). As
of the date hereof, there are no shares of Company Preferred Stock issued
and outstanding. As of the date hereof, 4,353,827 rights are issued and
outstanding under the Rights Agreement.
(c) Except as set forth in Section 3.7(b), there are outstanding (i)
no shares of capital stock or other voting securities of the Company, (ii)
no securities of the Company or any other Person convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of the Company, and (iii) no Company Stock Equivalents or other
options issued or outstanding or any other subscriptions, options,
warrants, calls, rights (including preemptive rights), commitments,
understandings or agreements to which the Company is a party or by which it
is bound obligating the Company to issue, deliver, sell, purchase, redeem
or acquire shares of capital stock or other voting securities of the
Company (or securities convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of the Company) or
obligating the Company to grant, extend or enter into any such
subscription, option, warrant, call, right, commitment, understanding or
agreement.
(d) Other than the Stock Voting Agreements, there are not any
shareholder agreements, voting trusts or other agreements or understandings
to which the Company is a party or by which it is bound relating to the
voting of any shares of the capital stock of the Company that will limit in
any way the solicitation of proxies by or on behalf of the Company, or the
casting of votes by the shareholders of the Company with respect to the
Merger. Other than the Stock Voting Agreements, there are no agreements or
understandings to which the Company is a party or by which it is bound
relating to registration rights or transfer of securities of the Company.
The exercise price or conversion price of each of the outstanding Company
Options, the holder thereof and when each Company Option became or will
become exercisable is set forth in Section 3.7(b) of the Company Disclosure
Schedule.
3.8 No Undisclosed Liabilities. There are no liabilities of the Company of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that would, individually or in the aggregate, have a
Material Adverse Effect on the Company, other than (a) liabilities adequately
provided for in the Company Financial Statements, (b) liabilities incurred in
the ordinary course of business subsequent to December 31, 1999, (c) liabilities
under this Agreement, and (d) liabilities set forth in Section 3.8 of the
Company Disclosure Schedule. As of the date hereof, the Company has no
indebtedness for borrowed money.
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3.9 Indemnification. Except as set forth in Section 3.9 of the Company
Disclosure Schedule, the Company does not have any presently effective
indemnification obligation (whether or not a claim has been asserted thereunder)
to any Person other than its present or former directors, officers, employees or
agents as provided in the organizational documents of the Company, as permitted
by the OGCA, and pursuant to indemnification agreements with any of the
Company's employees, officers and directors.
3.10 Absence of Certain Changes or Events. Except as otherwise set forth in
Section 3.10 of the Company Disclosure Schedule or as specifically contemplated
by the Transaction Documents, since December 31, 1999, the Company has not done
any of the following: (a)......Discharged or satisfied any Lien or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of business and consistent with past
practices;
(b) Paid, declared or set aside any dividends or distributions
(whether payable in cash, property or securities), purchased, cancelled,
redeemed, acquired or retired any indebtedness, stock or other securities
from its shareholders or other securityholders, made any loans, advances or
capital contributions or guaranteed any loans or advances to, or
investments in, any Person (other than loans, advances or guaranties made
in the ordinary course of business and consistent with past practices), or
otherwise incurred or suffered to exist any liabilities (other than current
liabilities incurred in the ordinary course of business and consistent with
past practices);
(c) Except for Permitted Encumbrances, suffered or permitted any Lien
to arise or be granted or created against or upon any of its assets;
(d) Canceled, waived or released any rights or claims against, or
indebtedness owed by, third parties;
(e) Amended its certificate or articles of incorporation, bylaws or
other organizational documents;
(f) Made or permitted any amendment, supplement, modification or
termination of, or any acceleration under, any Company Material Agreement;
(g) Sold, leased, transferred, assigned, farmed out or otherwise
disposed of or mortgaged, pledged or otherwise encumbered (i) any Oil and
Gas Interests of the Company that, individually or in the aggregate, were
assigned a value in the Reserve Data Value of $25,000 or more, (ii) any
mineral interests or undeveloped leasehold interests or any other Oil and
Gas Interests not reflected in the Company Engineering Report, or (iii) any
other assets that, individually or in the aggregate, had a value at the
time of such lease, transfer, assignment or disposition of $25,000 or more
(and, in each case where a sale, lease, transfer, assignment or other
disposition was made, it was made for fair consideration in the ordinary
course of business); provided, however, that this Section 3.10(g) shall not
apply to the sale of Hydrocarbons in the ordinary course of business and
the execution of oil and gas leases with respect to mineral interests in
the ordinary course of business;
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(h) Made any investment in or contribution, payment, advance or loan
to any Person (other than investments, contributions, payments or advances,
or commitments with respect thereto, less than $10,000 in the aggregate,
made in the ordinary course of business and consistent with past
practices);
(i) Paid, loaned or advanced (other than the payment, advancement or
reimbursement of expenses in the ordinary course of business) any amounts
to, or sold, transferred or leased any of its assets to, or entered into
any other transaction with, any of its Affiliates;
(j) Made any material change in any of the accounting principles
followed by it or the method of applying such principles;
(k) Entered into any material transaction (other than the Transaction
Documents) except in the ordinary course of business and consistent with
past practices;
(l) Increased benefits or benefit plan costs or changed bonus,
insurance, pension, severance, compensation or any other benefit plan or
arrangement or granted or entered into any agreement providing for any
severance, termination or retention plan or agreement or any bonus or
increase in wages, salary or other compensation or made any other change in
employment terms to any officer, director or employee of the Company;
(m) Issued any note or other debt security or created, incurred,
assumed or guaranteed any indebtedness for borrowed money or capitalized
lease obligation involving more than $10,000 in the aggregate (other than
pursuant to the Company Bank Credit Agreement);
(n) Delayed or postponed the payment of accounts payable or other
liabilities (except in the ordinary course of business);
(o) Canceled, compromised, waived or released any right or claim (or
series of related rights and claims) involving more than $100,000;
(p) Issued, sold, or otherwise disposed of any of its capital stock or
other equity interest or granted any option, warrant, or other right to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock or other equity interest;
(q) Made any loan to, or entered into any other transaction with, any
of its directors, officers or employees;
(r) Made or pledged to make any charitable or other capital
contribution;
(s) Made or committed to make any single (or series of related)
capital expenditure in excess of $100,000;
(t) Made any change in any material Tax election or the manner Taxes
are reported;
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(u) Entered into any swap, hedging or similar arrangement which
remains open;
(v) Accelerated the vesting period of any outstanding option or
warrant;
(w) Otherwise been involved in any other material occurrence, event,
incident, action, failure to act, or transaction involving the Company
(except in the ordinary course of business);
(x) Agreed, whether in writing or otherwise, to do any of the
foregoing;
(y) Suffered any material damage, destruction, or loss, whether or not
covered by insurance, affecting its assets or prospects;
(z) Suffered any material labor trouble or any material controversies
with any of its employees or collective bargaining association representing
any of its employees;
(aa) Taken any of the actions referred to in Sections 5.1(a)(ii),
5.1(b)(ix), 5.1(c)(v) and 5.1(e) except as would have been permitted or
required thereby had such Sections been applicable at the time of such
action; or
(bb) Suffered any Material Adverse Effect.
3.11 Compliance with Laws, Material Agreements and Permits. The Company is
not in violation of, or in default in any material respect under, and no event
has occurred that (with notice or the lapse of time or both) would constitute a
violation of or default under (a) its certificate or articles of incorporation,
bylaws or other organizational documents, (b) any applicable law, rule,
regulation, ordinance, order, writ, decree or judgment of any Governmental
Authority, or (c) any Company Material Agreement, except (in the case of clause
(b) or (c) above) for any violation or default that would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. The Company has
obtained and holds all permits, licenses, variances, exemptions, orders,
franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of its business and the lawful ownership, use
and operation of its assets ("Company Permits"), except for Company Permits
which the failure to obtain or hold would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. None of the Company Permits will
be adversely affected by the consummation of the transactions contemplated under
any of the Transaction Documents or requires any filing or consent in connection
therewith. The Company is in compliance with the terms of its Company Permits,
except where the failure to comply would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. No investigation or review by any
Governmental Authority with respect to the Company is pending or, to the
knowledge of the Company, threatened, other than those the outcome of which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. To the knowledge of the Company, no other party to any Company
Material Agreement is in material breach of the terms, provisions or conditions
of such Company Material Agreement.
3.12 Governmental Regulation. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
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Interstate Commerce Act, the Investment Company Act of 1940 or any state public
utilities laws.
3.13 Litigation. Except as set forth in Section 3.13 of the Company
Disclosure Schedule: (a) no litigation, arbitration, investigation or other
proceeding of any Governmental Authority is pending or, to the knowledge of the
Company, threatened against the Company or its assets which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on the Company; (b) the Company is not subject to any outstanding
injunction, judgment, order, decree, settlement agreement, conciliation
agreement, letter of commitment, deficiency letter or ruling (other than routine
oil and gas field regulatory orders); and (c) the Company is not subject to any
settlement agreement, conciliation agreement, letter of commitment, deficiency
letter or consent decree with any present or former employee of the Company or
applicant for employment with the Company, labor union or other employee
representative, or any Governmental Authority relating to claims of unfair labor
practices, employment discrimination, or other claims with respect to employment
and labor practices and policies, and no Governmental Authority has issued a
judgment, order, decree, injunction, decision, award or finding with respect to
the employment and labor practices or policies of the Company which has any
present material effect (or could have any future material effect) on the
Company or the employment and labor practices and policies of the Company. There
is no litigation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company that questions the
validity or enforceability of this Agreement or any other document, instrument
or agreement to be executed and delivered by the Company in connection with the
transactions contemplated hereby. Section 3.13 of the Company Disclosure
Schedule contains an accurate and complete list of all suits, actions and
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company as of the date hereof.
3.14 No Restrictions. Except as set forth in Section 3.14 of the Company
Disclosure Schedule, the Company is not a party to: (a) any agreement, indenture
or other instrument that contains restrictions with respect to the payment of
dividends or other distributions with respect to its capital; (b) any financial
arrangement with respect to or creating any indebtedness to any Person; (c) any
agreement, contract or commitment relating to the making of any advance to, or
investment in, any Person (other than advances in the ordinary course of
business); (d) any guaranty or other contingent liability with respect to any
indebtedness or obligation of any Person (other than (i) guaranties pursuant to
the Company Bank Credit Agreement, (ii) guaranties undertaken in the ordinary
course of business, and (iii) the endorsement of negotiable instruments for
collection in the ordinary course of business); (e) any management, service,
consulting, or other contract of a similar nature that cannot be terminated by
the Company, upon written notice of 30 days or less and without penalty or other
obligation; or (f) any agreement, contract or commitment limiting in any respect
its ability to compete with any Person or otherwise conduct business of any line
or nature.
3.15 Audits and Settlements. Except as set forth in Section 3.15 of the
Company Disclosure Schedule, the Company is not a party or subject to any (a)
unresolved or incomplete Tax audit or settlement or (b) other audit conducted by
any other Person pursuant to a contractual or legal right.
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3.16 Taxes.
(a) The Company and any affiliated, combined or unitary group of which
the Company is or was a member has: (i) timely filed all Tax Returns
required to be filed by it with respect to any Taxes, which Tax Returns are
true, correct and complete in all material respects; (ii) timely paid all
Taxes that are due and payable (except for Taxes that are being contested
in good faith by appropriate proceedings and for which sufficient reserves
have been established) for which the Company may be liable; (iii) complied
with all applicable laws, rules and regulations relating to the reporting,
payment and withholding of Taxes; and (iv) timely withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(b) Except as set forth in Section 3.16(b) of the Company Disclosure
Schedule: (i) no audits or other administrative or court proceedings are
presently pending or, to the knowledge of the Company, threatened, with
regard to any federal, state or local Taxes for which the Company would be
liable; and (ii) there are no pending requests for rulings from any taxing
authority, no outstanding subpoenas or requests for information by any
taxing authority with respect to any Taxes, no proposed reassessments by
any taxing authority of any property owned or leased, and no agreements in
effect to extend the time to file any Tax Return or the period of
limitations for the assessment or collection of any Taxes for which the
Company would be liable.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule: (i) there are no Liens on any of the assets of the Company for
unpaid Taxes, other than inchoate Liens for Taxes not yet due and payable;
(ii) the Company has no liability under Treasury Regulation ss.1.1502-6 or
any analogous state, local or foreign law by reason of having been a member
of any consolidated, combined or unitary group; (iii) the Company has never
been included in an affiliated group of corporations within the meaning of
Section 1504 of the Code; and (iv) the Company neither is nor has been a
party to any Tax sharing or allocation agreement between related
corporations.
(d) The total amounts reflected as liabilities for current and
deferred Taxes in the Company Financial Statements are sufficient to cover
the payment of all Taxes, whether or not assessed or disputed, which are,
or are hereafter found to be, or to have been, due by or with respect to
the Company up to and through the periods ending on the dates thereof.
(e) The Company has made available to Parent complete copies of all
Tax Returns filed by the Company with respect to any Taxes and all Tax
audit reports, work papers, statements of deficiencies, and closing or
other agreements with respect thereto with respect to Tax years 1997, 1998
and 1999.
(f) Except as set forth in Section 3.16(f) of the Company Disclosure
Schedule: (i) the Company is not required to treat any of its assets as
owned by another person for federal income tax purposes or as tax-exempt
bond financed property or tax-exempt use property within the meaning of
Section 168 of the Code; (ii) the Company has not entered into any
compensatory agreement which under certain circumstances could result in a
limited deductible expense or a nondeductible expense pursuant to Section
280G or Section 162(m) of the Code; (iii) no election has been made under
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Section 338 of the Code and no events have occurred which would result in a
deemed election under Section 338 of the Code with respect to the Company;
(iv) no election has been made under Section 341(f) of the Code with
respect to the Company; (v) the Company has not participated in any
international boycott as defined in Code Section 999; (vi) there are no
outstanding balances of deferred gain or loss accounts with respect to the
Company under Treas. Reg. ss.ss. 1.1502-13 or 1.1502-13T; (vii) the Company
has not made nor will it make any election under Treas. Reg.
ss.1.502-20(g)(1) with respect to the reattribution of net operating
losses; (viii) the Company is not subject to any arrangement treated as a
partnership subject to the provisions of subchapter K of the Code; and (ix)
the Company has never conducted branch operations in any foreign country
within the meaning of Treas. Reg. ss.1.367(a)-6T.
(g) The books and records of the Company contain accurate and complete
information with respect to: (i) all material Tax elections in effect with
respect to the Company; (ii) the current Tax basis of the assets of the
Company; (iii) any excess loss accounts of the Company; (iv) the current
and accumulated earnings and profits of the Company; (v) the net operating
losses and net capital losses of the Company, the years that such net
operating and net capital losses expire, and any restrictions to which such
net operating and net capital losses are subject under any provision of the
Code or consolidated return regulations; (vi) Tax credit carryovers of the
Company; and (vii) any overall foreign losses to the Company under Section
904(f) of the Code.
(h) No shareholder of the Company that is a foreign corporation or a
nonresident alien individual has owned as much as five percent of the
outstanding stock of the Company at any time during the five-year period
ending on the date hereof.
3.17 Employee Benefit Plans.
(a) Section 3.17(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of each of the following (whether oral or in
writing) which is or has been sponsored, maintained or contributed to since
January 1, 1994, by the Company or any trade or business, whether or not
incorporated (a "Company ERISA Affiliate"), that together with the Company
would be considered affiliated with the Company or any Company ERISA
Affiliate under Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA for the benefit of any person who, as of the Closing,
is a current or former employee or subcontractor of the Company: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA
(each, a "Company Plan"); and (ii) each personnel policy, stock option
plan, bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy, program or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, retiree benefit plan or arrangement,
fringe benefit program or practice (whether or not taxable), employee loan,
consulting agreement, employment agreement, severance agreement and each
other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.17(a)(i) (each, a
"Company Benefit Program or Agreement") (such Company Plans and Company
Benefit Programs or Agreements are sometimes collectively referred to in
this Agreement as the "Company Employee Benefit Plans").
(b) True, correct and complete copies of each of the Company Plans and
related trusts, if applicable, including all amendments thereto, have been
furnished or made available to Parent. There has also been furnished or
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made available to Parent, with respect to each Company Plan required to
file such report and description, the report on Form 5500 for the past
three years, to the extent applicable, and the most recent summary plan
description. True, correct and complete copies or descriptions of all
Company Benefit Programs or Agreements have also been furnished or made
available to Parent.
(c) Except as otherwise set forth in Section 3.17(c) of the Company
Disclosure Schedule: (i) neither the Company nor any Company ERISA
Affiliate contributes to or has an obligation to contribute to, nor has at
any time since January 1, 1994, contributed to or had an obligation to
contribute to, a multiemployer plan within the meaning of Section 3(37) of
ERISA or any other plan subject to Title IV of ERISA; (ii) each of the
Company and the Company ERISA Affiliates has performed all obligations,
whether arising by operation of law or by contract, including ERISA and the
Code, required to be performed by it in connection with the Company
Employee Benefit Plans, and, to the knowledge of the Company, there have
been no defaults or violations by any other party to the Company Employee
Benefit Plans; (iii) all reports, returns, notices, disclosures and other
documents relating to the Company Plans required to be filed with or
furnished to governmental entities, plan participants or plan beneficiaries
have been timely filed or furnished in accordance with applicable law, and
each Company Employee Benefit Plan has been administered in compliance with
its governing written documents; (iv) each of the Company Plans intended to
be qualified under Section 401 of the Code satisfies the requirements of
such Section and has received a favorable determination letter from the IRS
regarding such qualified status and has not been amended, operated or
administered in a way which would adversely affect such qualified status;
(v) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of the Company, contemplated or
threatened against, or with respect to, any of the Company Employee Benefit
Plans or their assets; (vi) each trust maintained in connection with each
Company Plan, which is qualified under Section 401 of the Code, is tax
exempt under Section 501 of the Code; (vii) all contributions required to
be made to the Company Employee Benefit Plans have been made timely; (viii)
no accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and there has been no termination or partial termination of any
Company Plan within the meaning of Section 411(d)(3) of the Code; (ix) no
act, omission or transaction has occurred which could result in imposition
on the Company or any Company ERISA Affiliate of (A) breach of fiduciary
duty liability damages under Section 409 of ERISA, (B) a civil penalty
assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA or
(C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (x) to
the knowledge of the Company, there is no matter pending with respect to
any of the Company Plans before the IRS, the Department of Labor or the
PBGC; (xi) each of the Company Employee Benefit Plans complies, in form and
operation, with the applicable provisions of the Code and ERISA; (xii) each
Company Employee Benefit Plan may be unilaterally amended or terminated in
its entirety without any liability or other obligation; (xiii) the Company
and the Company ERISA Affiliates have no liabilities or other obligations,
whether actual or contingent, under any Company Employee Benefit Plan for
post-employment benefits of any nature (other than COBRA continuation
coverage and severance benefits under the Company's Amended and Restated
Change in Control Severance Pay Plan); and (xiv) neither the Company nor
any of the Company ERISA Affiliates or any present or former director,
officer, employee or other agent of the Company or any of the Company ERISA
Affiliates has made any written or oral representations or promises to any
present or former director, officer, employee or other agent concerning his
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or her terms, conditions or benefits of employment, including the tenure of
any such employment or the conditions under which such employment may be
terminated by the Company, any of the Company ERISA Affiliates which will
be binding upon or enforceable against Parent or the Surviving Corporation
after the Effective Time.
(d) Except as otherwise set forth in Section 3.17(d) of the Company
Disclosure Schedule, no employee is currently on a leave of absence due to
sickness or disability and no claim is pending or expected to be made by an
employee, former employee or independent contractor for workers'
compensation benefits.
(e) Except as set forth in Section 3.17(e) of the Company Disclosure
Schedule: (i) with respect to the Company Employee Benefit Plans, there
exists no condition or set of circumstances that would, individually or in
the aggregate, have a Material Adverse Effect on the Company, and (ii) with
respect to the Company Employee Benefit Plans, individually and in the
aggregate, there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance
with GAAP, on the financial statements of the Company, which obligations
would, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(f) Except as set forth in Section 3.17(f) of the Company Disclosure
Schedule, neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment becoming due to any employee or group of employees of the Company.
(g) Except as set forth in Section 3.17(g) of the Company Disclosure
Schedule, there will be no payments due to any employee of the Company (i)
by virtue of the termination of such employment relationship without cause
immediately after the Effective Time or (ii) that become due as a result of
the occurrence of the Effective Time, whether severance, bonus, accrued
vacation or tax indemnification obligations, excluding accrued salary
through the date of such termination. Section 3.17(g) of the Company
Disclosure Schedule sets forth the name of each employee of the Company to
whom such payments may become due and separately sets forth for each
employee the amounts of severance, bonus, accrued vacation, tax
indemnification obligation and any other similar payments that may become
due to each such employee.
(h) Except as set forth in Section 3.17(h) of the Company Disclosure
Schedule, no employee of the Company or any other Person owns, or has any
right granted by the Company to acquire, any interest in any of the assets
or business of the Company.
3.18 Company Material Agreements. Except as set forth in Section 3.18 of
the Company Disclosure Schedule, there are no Company Material Agreements.
3.19 Labor and Employment Matters.
(a) No employees of the Company are represented by any labor
organization. No labor organization or group of employees of the Company
has, at any time, made a demand for recognition or certification as the
exclusive bargaining representative of any of the employees of the Company,
and there are no representation or certification proceedings or petitions
26
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seeking such representation or certification proceeding presently pending
or threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority. There
are no organizing activities involving employees of the Company.
(b) The Company is in material compliance with all laws, rules,
regulations and orders relating to labor and employment, including without
limitation all such laws, rules, regulations and orders relating to wages
and other compensation, employee benefits, hours of work, collective
bargaining, discrimination, civil rights, affirmative action, safety and
health, workers' compensation, plant closing and mass layoff, unemployment,
disability, whistleblowing, and the collection and payment of income Tax
withholding, Social Security Taxes, Medicare Taxes and similar Taxes,
except where the failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) The Company does not have, and has not had since December 31,
1999, any charges, complaints or proceedings before the Equal Employment
Opportunity Commission, Department of Labor or any other Governmental
Authority responsible for regulating labor or employment practices, pending
or, to the Company's knowledge, threatened against the Company.
3.20 Accounts Receivable. Except as set forth in Section 3.20 of the
Company Disclosure Schedule: (a) all of the accounts, notes and loans receivable
that have been recorded on the books of the Company are bona fide and represent
accounts, notes and loans receivable validly due for goods sold or services
rendered and are reasonably expected to be collected in full within 90 days
after the applicable invoice or note maturity date (other than such accounts,
notes and loans receivable that, individually or in the aggregate, do not have a
book value as of the date hereof in excess of $10,000); (b) except for Permitted
Encumbrances, all of such accounts, notes and loans receivable are free and
clear of any and all Liens and other adverse claims and charges, and none of
such accounts, notes or loans receivable is subject to any offset or claim of
offset; and (c) none of the obligors on such accounts, notes or loans receivable
has given notice to the Company that it will or may refuse to pay the full
amount or any portion thereof.
3.21 Insurance. Set forth in Section 3.21(i) of the Company Disclosure
Schedule is an accurate listing of the Company's insurance schedule of
directors' and officers' liability insurance, primary and excess casualty
insurance policies providing coverage for bodily injury and property damage to
third parties, including any products liability and completed operations
coverage, and workers compensation, in effect as of the date hereof. The Company
maintains insurance with reputable insurers (or pursuant to prudent
self-insurance programs) in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to that of the Company and owning properties in the same general area in
which the Company conducts its business. The Company may terminate each of its
insurance policies or binders at or after the Closing and will incur no
penalties or other material costs in doing so. None of such insurance coverage
was obtained through the use of false or misleading information or the failure
to provide the insurer with all information requested in order to evaluate the
liabilities and risks insured. There is no material default with respect to any
provision contained in any such policy or binder, and the Company has not failed
to give any notice or present any claim under any such policy or binder in due
and timely fashion. There are no billed but unpaid premiums past due under any
such policy or binder. Except as set forth in Section 3.21(ii) of the Company
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Disclosure Schedule: (a) there are no outstanding claims under any such policies
or binders and, to the knowledge of the Company, there has not occurred any
event that might reasonably form the basis of any claim against or relating to
the Company that is not covered by any of such policies or binders; (b) no
notice of cancellation or non-renewal of any such policies or binders has been
received; and (c) there are no performance bonds outstanding with respect to the
Company.
3.22 Intangible Property. There are no material trademarks, trade names,
patents, service marks, brand names, computer programs, databases, industrial
designs, copyrights or other intangible property that are necessary for the
operation, or continued operation, of the business of the Company, or for the
ownership and operation, or continued ownership and operation, of any of its
assets, for which the Company does not hold valid and continuing authority in
connection with the use thereof.
3.23 Title to Assets. The Company has Defensible Title to all of its Oil
and Gas Interests. Each Oil and Gas Interest included or reflected in the
Ownership Interests entitles the Company to receive not less than the undivided
interest set forth in (or derived from) the Ownership Interests of all
Hydrocarbons produced, saved and sold from or attributable to such Oil and Gas
Interest, and the portion of the costs and expenses of operation and development
of such Oil and Gas Interest that is borne or to be borne by the Company is not
greater than the undivided interest set forth in (or derived from) the Ownership
Interests. Except for Permitted Encumbrances, the Company has good, marketable,
and defensible title to its assets (other than the Oil and Gas Interests of the
Company). All leases pursuant to which the Company leases any assets are in full
force and effect, and the Company has not received any notice of default under
any such lease.
3.24 Company Engineering Report. All information supplied to Parent by or
on behalf of the Company that was material to Parent's evaluation of the
Company's Oil and Gas Interests in connection with the preparation of 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, 1999 and except for changes (including changes in commodity
prices) generally affecting the oil and gas industry, there has been no material
adverse change with respect to the matters addressed in the Company Engineering
Report.
3.25 Oil and Gas Operations. Except as set forth in Section 3.25 of the
Company Disclosure Schedule, to the knowledge of the Company, as to wells not
operated by the Company, and without qualification as to knowledge, as to wells
operated by the Company:
(a) Except as reflected in Section 3.25 of the Company Disclosure
Schedule, as of the respective dates reflected thereon, (i) none of the
wells included in the Oil and Gas Interests of the Company has been
overproduced such that it is subject or liable to being shut-in or to any
overproduction penalty, (ii) the Company has not received any deficiency
payment under any gas contract for which any Person has a right to take
deficiency gas from the Company, and (iii) the Company has not received any
payment for production which is subject to refund or recoupment out of
future production;
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(b) There have been no changes proposed in the production allowables
for any wells included in the Oil and Gas Interests of the Company that
could reasonably be expected to have a Material Adverse Effect on the
Company;
(c) All wells included in the Oil and Gas Interests of the Company
have been drilled and (if completed) completed, operated, and produced in
accordance with good oil and gas field practices and in compliance in all
material respects with applicable oil and gas leases and applicable laws,
rules, and regulations, except where any failure or violation could not
reasonably be expected to have a Material Adverse Effect on the Company;
(d) The Company has neither agreed to nor is it now obligated to
abandon any well operated by it and included in the Oil and Gas Interests
of the Company that is or will not be abandoned and reclaimed in accordance
with applicable laws, rules, and regulations and good oil and gas industry
practices;
(e) Proceeds from the sale of Hydrocarbons produced from and
attributable to the Company's Oil and Gas Interests are being received by
the Company in a timely manner and are not being held in suspense for any
reason (except for amounts, individually or in the aggregate, not in excess
of $20,000 and held in suspense in the ordinary course of business);
(f) No Person has any call on, option to purchase, or similar rights
with respect to the Company's Oil and Gas Interests or to the production
attributable thereto, and upon consummation of the transactions
contemplated by this Agreement, the Company will have the right to market
production from the Company's Oil and Gas Interests on terms no less
favorable than the terms upon which such company is currently marketing
such production; and
(g) All royalties, overriding royalties, compensatory royalties and
other payments due from or in respect of production with respect to the
Company's Oil and Gas Interests, have been or will be, prior to the
Effective Time, properly and correctly paid or provided for in all material
respects, except for those for which the Company has a valid right to
suspend.
3.26 Hydrocarbon Sales and Purchase Agreements. Except as otherwise
disclosed in Section 3.26 of the Company Disclosure Schedule:
(a) None of the Hydrocarbon Sales Agreements of the Company or
Hydrocarbon Purchase Agreements of the Company has required since December
31, 1999, or will require as of or after the Closing Date, the Company (i)
to have sold or delivered, or to sell or deliver, Hydrocarbons for a price
materially less than the market value price that would have been, or would
be, received pursuant to any arm's-length contract for a term of one month
with an unaffiliated third-party purchaser or (ii) to have purchased or
received, or to purchase or receive, Hydrocarbons for a price materially
greater than the market value price that would have been, or would be, paid
pursuant to an arm's-length contract for a term of one month with an
unaffiliated third-party seller;
(b) Each of the Hydrocarbon Agreements of the Company is valid,
binding, and in full force and effect, and no party is in material breach
or default of any Hydrocarbon Agreement of the Company, and to the
knowledge of the Company, no event has occurred that with notice or lapse
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of time (or both) would constitute a material breach or default or permit
termination, modification, or acceleration under any Hydrocarbon Agreement
of the Company;
(c) There have been no claims from any third party for any price
reduction or increase or volume reduction or increase under any of the
Hydrocarbon Agreements of the Company, and the Company has not made any
claims for any price reduction or increase or volume reduction or increase
under any of the Hydrocarbon Agreements of the Company;
(d) Payments for Hydrocarbons sold pursuant to each Hydrocarbon Sales
Agreement of the Company have been made (subject to adjustment in
accordance with such Hydrocarbon Sales Agreements) materially in accordance
with prices or price-setting mechanisms set forth in such Hydrocarbon Sales
Agreements;
(e) No purchaser under any Hydrocarbon Sales Agreement of the Company
has notified the Company (or, to the knowledge of the Company, the operator
of any property) of its intent to cancel, terminate, or renegotiate any
Hydrocarbon Sales Agreement of the Company or otherwise to fail and refuse
to take and pay for Hydrocarbons in the quantities and at the price set out
in any Hydrocarbon Sales Agreement, whether such failure or refusal was
pursuant to any force majeure, market out, or similar provisions contained
in such Hydrocarbon Sales Agreement or otherwise;
(f) The Company is not obligated in any Hydrocarbon Sales Agreement by
virtue of any prepayment arrangement, a "take-or-pay" or similar provision,
a production payment, or any other arrangements to deliver Hydrocarbons
produced from an Oil and Gas Interest of the Company at some future time
without then or thereafter receiving payment therefor;
(g) Section 3.26(g) of the Company Disclosure Schedule contains a true
and correct calculation of the Company's gas balancing positions as of the
dates shown therein.
(h) The Hydrocarbon Agreements of the Company are of the type
generally found in the oil and gas industry, do not, individually or in the
aggregate, contain unusual or unduly burdensome provisions that would,
individually or in the aggregate, have a Material Adverse Effect on the
Company, and are in form and substance considered normal within the oil and
gas industry.
3.27 Financial and Commodity Hedging. Other than the hedging program set
forth in Exhibit E, the Company has no currently outstanding Hydrocarbon or
financial hedging positions (including fixed price controls, collars, swaps,
caps, hedges or puts). Prior to the date hereof, the Company instituted the
hedging program set forth in Exhibit E and such hedging program is in effect in
accordance with its terms.
3.28 Environmental Matters. Except as set forth in Section 3.28 of the
Company Disclosure Schedule:
(a) The Company has conducted its business and operated its assets,
and is conducting its business and operating its assets, in material
compliance with all Environmental Laws;
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(b) The Company has not been notified by any Governmental Authority or
other third party that any of the operations or assets of the Company is
the subject of any investigation or inquiry by any Governmental Authority
or other third party evaluating whether any material remedial action is
needed to respond to a release or threatened release of any Hazardous
Material or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Material;
(c) Neither the Company nor, to the Company's knowledge, any other
Person has filed any notice under any federal, state or local law
indicating that (i) the Company is responsible for the improper release
into the environment, or the improper storage or disposal, of any Hazardous
Material, or (ii) any Hazardous Material is improperly stored or disposed
of upon any property of the Company or any property formerly owned, leased
or operated by the Company;
(d) The Company has no material contingent liability in connection
with (i) the release or threatened release into the environment at, beneath
or on any property now or previously owned, leased or operated by the
Company, or (ii) the storage or disposal of any Hazardous Material;
(e) The Company has not received any claim, complaint, notice, inquiry
or request for information involving any matter which remains unresolved as
of the date hereof with respect to any alleged violation of any
Environmental Law or regarding potential liability under any Environmental
Law relating to or in connection with operations or conditions of any
facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or formerly
owned, leased or operated by the Company;
(f) No property now or previously owned, leased or operated by the
Company is listed on the National Priorities List pursuant to CERCLA or on
the CERCLIS or on any other federal or state list as sites requiring
investigation or cleanup;
(g) All underground storage tanks and solid waste storage, treatment
and/or disposal facilities owned or operated by the Company are used and
operated in material compliance with Environmental Laws;
(h) The Company is not transporting, has not transported, is not
arranging or has not arranged for the transportation of any Hazardous
Material to any location which is listed on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar federal or state list
or which is the subject of federal, state or local enforcement actions or
other investigations that may lead to material claims against the Company
for removal or remedial work, contribution for removal or remedial work,
damage to natural resources or personal injury, including claims under
CERCLA;
(i) The Company has obtained all material permits, licenses, approvals
and other authorizations that are required with respect to the operation of
the Company's properties and assets under the Environmental Laws and are in
material compliance with all terms and conditions of such required permits,
licenses, approvals and authorizations;
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(j) There are no polychlorinated biphenyls or asbestos located in, at,
on or under any facility or real property owned, leased or operated by the
Company that require removal, decontamination or abatement pursuant to
Environmental Laws;
(k) There are no past or present events, conditions, circumstances,
activities, practices, incidents or actions that could reasonably be
expected to interfere with or prevent material compliance by the Company
with any Environmental Law, or that could reasonably be expected to give
rise to any material liability under the Environmental Laws;
(l) No Lien has been recorded against any property, facility or assets
currently owned by the Company under any Environmental Law; and
(m) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not affect the
validity or require the transfer of any permits, licenses or approvals held
by the Company under any Environmental Law, and will not require any
notification, disclosure, registration, reporting, filing, investigation or
remediation under any Environmental law.
3.29 Books and Records. All books, records and files of the Company
(including those pertaining to the Company's Oil and Gas Interests, wells and
other assets, those pertaining to the production, gathering, transportation and
sale of Hydrocarbons, and corporate, accounting, financial and employee
records): (a) have been prepared, assembled and maintained in accordance with
usual and customary policies and procedures; and (b) fairly and accurately
reflect the ownership, use, enjoyment and operation by the Company of its
assets. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (x) transactions are accurately
and promptly recorded; (y) transactions are executed in accordance with
management's specific or general authorization; and (z) access to its books,
records and assets is permitted only in accordance with management's general or
specific authorization.
3.30 Brokers. Except as disclosed in Section 3.30 of the Company Disclosure
Schedule, no broker, finder, investment banker or other Person is or will be, in
connection with the transactions contemplated by this Agreement, entitled to any
brokerage, finder's or other fee or compensation based on any arrangement or
agreement made by or on behalf of the Company and for which the Surviving
Corporation or the Company will have any obligation or liability.
3.31 Powers of Attorney; Authorized Signatories. Section 3.31 of the
Company Disclosure Schedule lists: (a) the names and addresses of all Persons
holding powers of attorney on behalf of the Company; (b) the names of all banks
and other financial institutions in which the Company currently has one or more
bank accounts or safe deposit boxes, along with the account numbers and the
names of all persons authorized to draw on such accounts or to have access to
such safe deposit boxes.
3.32 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of Company capital stock or other voting securities
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby.
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3.33 Fairness Opinion. The Company has received the written opinion of
Stephens Inc. to the effect that the Merger is fair to the Company and its
shareholders from a financial point of view, and as of the date of this
Agreement such opinion has not been withdrawn, revoked or modified. In
connection with this Agreement and any of the other Transaction Documents and
the transactions contemplated herein and therein, the entire amount of fees due
and payable to Stephens Inc. shall not exceed $826,000, and the entire amount of
reimbursable expenses due and payable to Stephens Inc. shall not exceed $1,500.
3.34 Disclosure and Investigation. No representation or warranty of the
Company set forth in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein not misleading.
3.35 Real Property. Section 3.35 of the Company Disclosure Schedule (i)
sets forth a complete and accurate list of all real property, other than Oil and
Gas Interests, that is owned or leased by the Company and (ii) indicates whether
such real property contains structures, improvements or fixtures thereon.
3.36 Expiring Acreage. Section 3.36 of the Company Disclosure Schedule sets
forth a complete and accurate list of all leasehold acreage of the Company that
under the terms thereof would expire before March 31, 2001, without action by
the Company.
3.37 Other Fees. In connection with this Agreement and any of the other
Transaction Documents and the transactions contemplated herein and therein, the
entire amount of fees and reimbursable expenses due and payable by the Company
to its (a) legal counsel shall not exceed $250,000 and (b) independent
accountants shall not exceed $10,000, except, in the case of the independent
accountants, as set forth in that certain letter agreement dated September 25,
2000, between such independent accountants and the Company.
3.38 Key Employee Incentive Bonus Plan. The Company's Key Employee
Incentive Bonus Plan has been suspended and all amounts that are due and payable
or that may become due and payable thereunder have been paid.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows (such representations and warranties being deemed to be
made on a continuous basis until the Effective Time):
4.1 Organization. Each of the Parent Companies: (a) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation; (b) has the requisite power and authority to own,
lease and operate its properties and to conduct its business as it is presently
being conducted; and (c) is duly qualified to do business as a foreign
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corporation, and is in good standing, in each jurisdiction where the character
of the properties owned or leased by it or the nature of its activities makes
such qualification necessary (except where any failure to be so qualified as a
foreign corporation or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent). Accurate and complete
copies of the certificate or articles of incorporation, bylaws, minute books
and/or other organizational documents of each of the Parent Companies have
heretofore been delivered to the Company.
4.2 Authority and Enforceability. Each of Parent and Merger Sub has the
requisite corporate power and authority to enter into and deliver the
Transaction Documents and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of Parent
and Merger Sub, including approval by the board of directors of Parent and the
board of directors and the sole shareholder of Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the execution or delivery of the Transaction Documents or to
consummate the transactions contemplated hereby and thereby. The Transaction
Documents have been duly and validly executed and delivered by Parent and Merger
Sub and constitute valid and binding obligations of each of Parent and Merger
Sub, enforceable against each of them in accordance with their terms.
4.3 No Violations. The execution and delivery of each of the Transaction
Documents does not, and the consummation of the transactions contemplated hereby
and thereby and compliance by Parent and Merger Sub with the provisions hereof
and thereof will not, conflict with, result in any violation of or default (with
or without notice or lapse of time or both) under, give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any Lien on any of the
properties or assets of Parent or Merger Sub under, any provision of (a) the
certificate of incorporation, bylaws or any other organizational documents of
any of the Parent Companies, (b) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or other
agreement or instrument applicable to Parent or Merger Sub, or (c) assuming the
consents, approvals, authorizations, permits, filings and notifications referred
to in Section 4.4 are duly and timely obtained or made, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to any of the
Parent Companies or any of their respective properties or assets, other than, in
the case of clause (b) or (c) above, any such conflict, violation, default,
right, loss or Lien that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
4.4 Consents and Approvals. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to any Parent Company in connection
with the execution and delivery of the Transaction Documents by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby and thereby, except for the following: (a) any such consent,
approval, order, authorization, registration, declaration, filing or permit
which the failure to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect on Parent; (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Oklahoma pursuant to the
provisions of the OGCA; (c) the filing with the SEC of the Proxy Statement (in
preliminary and definitive form) and such reports under Section 13(a) of the
Exchange Act and such other compliance with the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder as may be required in
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connection with the Transaction Documents and the transactions contemplated
hereby and thereby and the obtaining from the SEC of such orders as may be so
required; (d) filings with the NASDAQ; and (e) such filings and approvals as may
be required by any applicable state takeover laws or Environmental Laws. No
Third-Party Consent is required by or with respect to any of the Parent
Companies in connection with the execution and delivery of the Transaction
Documents or the consummation of the transactions contemplated hereby and
thereby, except for (x) any such Third-Party Consent which the failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent and (y) the valid approval of the Company Proposal by the shareholders of
the Company.
4.5 Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and has
not engaged in any business or activity (or conducted any operations) of any
kind, entered into any agreement or arrangement with any person or entity, or
incurred, directly or indirectly, any liabilities or obligations, except in
connection with its incorporation, the negotiation of this Agreement, the Merger
and the transactions contemplated hereby.
4.6 Financing. Parent has delivered to the Company a true and complete copy
of (i) a letter of commitment obtained by Parent from Fleet National Bank and
First Union National Bank to provide debt financing for the transactions
contemplated hereby (collectively, the "Debt Commitments") and (ii) a
subscription agreement from each of Natural Gas Partners V, L.P., C. Randall
Hill, R. Cory Richards and David C. Myers to provide certain equity financing
(collectively, the "Equity Commitments" and, together with the Debt Commitments,
the "Financing Commitments"). Executed copies of the Financing Commitments are
included as Section 4.6 of the Parent Disclosure Schedule. Assuming that the
financing contemplated by the Financing Commitments is consummated in accordance
with the terms thereof, the funds to be borrowed and/or provided thereunder will
provide sufficient funds to pay the Merger Consideration, all other amounts due
under Section 2.5 of this Agreement and all related fees and expenses (the
"Financing"). As of the date of this Agreement, Parent is not aware of any facts
or circumstances that create a reasonable basis for Parent to believe that
Parent will not be able to obtain the Financing in accordance with the terms of
the Financing Commitments.
4.7 Brokers. Except as disclosed in Section 4.7 of the Parent Disclosure
Schedule, no broker, finder, investment banker or other Person is or will be, in
connection with the transactions contemplated by this Agreement, entitled to any
brokerage, finder's or other fee or compensation based on any arrangement or
agreement made by or on behalf of Parent or Merger Sub and for which Parent,
Merger Sub or the Company will have any obligation or liability.
4.8 Disclosure and Investigation. No representation or warranty of Parent
or Merger Sub set forth in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein not misleading.
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ARTICLE 5
COVENANTS
5.1 Conduct of Business by the Company Pending Closing. The Company
covenants and agrees with Parent that, from the date of this Agreement until the
Effective Time, the Company will conduct its business only in the ordinary and
usual course consistent with past practices. Notwithstanding the preceding
sentence, the Company covenants and agrees with Parent that, except as
specifically contemplated in this Agreement, from the date of this Agreement
until the Effective Time, without the prior written consent of Parent:
(a) The Company will not: (i) amend its certificate or articles of
incorporation, bylaws or other organizational documents; (ii) split,
combine or reclassify any of its outstanding capital stock; (iii) declare,
set aside or pay any dividends or other distributions (whether payable in
cash, property or securities) with respect to its capital stock; (iv)
issue, sell or agree to issue or sell any securities or other equity
interests, including its capital stock (including shares of capital stock
held as treasury shares), any rights, options or warrants to acquire its
capital stock, or securities convertible into or exchangeable or
exercisable for its capital stock (other than shares of Company Common
Stock issued pursuant to the exercise of any Company Option outstanding on
the date of this Agreement); (v) purchase, cancel, retire, redeem or
otherwise acquire any of its outstanding capital stock or other securities
or other equity interests; (vi) merge or consolidate with, or transfer all
or substantially all of its assets to, any other Person; (vii) liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution); or (viii)
enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing.
(b) The Company will not: (i) acquire any corporation, partnership or
other business entity or any interest therein; (ii) sell, lease or
sublease, transfer, farm out or otherwise dispose of or mortgage, pledge or
otherwise encumber any Oil and Gas Interests of the Company that were
assigned a Reserve Data Value in excess of $25,000 in the aggregate,
(except that this clause shall not apply to the sale of Hydrocarbons in the
ordinary course of business pursuant to existing arrangements and contracts
or to encumbrances under the Company Bank Credit Agreement); (iii) acquire
any Oil and Gas Interests or any other assets that have a value at the time
of such acquisition in excess of $25,000 in the aggregate (except that
other assets with an aggregate purchase price of no more than $25,000 may
be acquired that are incidental to the business of the Company and acquired
in the ordinary course of the business of the Company consistent with past
practices); (iv) enter into any hedging or derivative contracts (financial,
commodity or otherwise) other than the hedging program set forth in Exhibit
E; (v) sell, transfer or otherwise dispose of or mortgage, pledge or
otherwise encumber any securities of any other Person; (vi) make any loans,
advances or capital contributions to, or investments in, any Person; (vii)
enter into any agreement (including the proposal for or approval of any
authority for expenditure) or series of related agreements or authorities
for expenditure that would cause the Company to spend more than $5,000 or
any other agreement not terminable by the Company upon notice of 30 days or
less and without penalty or other obligation; (viii) agree with any Person
to limit or otherwise restrict in any manner the ability of the Company to
compete or otherwise conduct its business, or (ix) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing.
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(c) The Company will not: (i) incur any indebtedness for borrowed
money; (ii) incur any cost or expense for leasehold or geophysical items
including acquisition, processing, reprocessing or interpretation; (iii)
incur any other obligation or liability (other than liabilities incurred in
the ordinary course of business consistent with past practices); (iv) make
a capital expenditure or series of related capital expenditures in excess
of $5,000 except in connection with those authorities for expenditures set
forth in Section 5.1(c) of the Company Disclosure Schedule (provided,
however, that nothing herein shall prohibit the Company from paying or
prepaying any indebtedness under the Company Bank Credit Agreement); (v)
assume, endorse (other than endorsements of negotiable instruments in the
ordinary course of business), guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
liabilities or obligations of any other Person; or (vi) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing.
(d) The Company will operate, maintain and otherwise deal with the Oil
and Gas Interests of the Company in accordance with good and prudent oil
and gas field practices and in accordance with all applicable oil and gas
leases and other contracts and agreements and all applicable laws, rules
and regulations.
(e) The Company will not resign, transfer or otherwise voluntarily
relinquish any right it has as of the date of this Agreement, as operator
of any Oil and Gas Interest of the Company.
(f) The Company will not: (i) enter into, or otherwise become liable
or obligated under or pursuant to, (1) any employee benefit, pension or
other plan (whether or not subject to ERISA), (2) any other stock option,
stock purchase, incentive or deferred compensation plan or arrangement or
other fringe benefit plan, (3) any consulting, employment, severance,
bonus, termination or similar agreement with any Person, or (4) any
amendment or extension of any such plan, arrangement or agreement; (ii)
except for payments made pursuant to any existing Company Employee Benefit
Plan or any other plan, agreement or arrangement described in Section
3.17(a) of the Company Disclosure Schedule, grant, or otherwise become
liable for or obligated to pay, any severance or termination payment, bonus
or increase in compensation or benefits to, or forgive any indebtedness of,
any employee or consultant of the Company; (iii) enter into or amend any
Company Material Agreements or (iv) enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(g) The Company will not create, incur, assume or permit to exist any
Lien on any of its assets, except for Permitted Encumbrances.
(h) The Company will: (i) keep and maintain accurate books, records
and accounts; (ii) maintain in full force and effect the policies or
binders of insurance described in Section 3.21; (iii) pay all Taxes,
assessments and other governmental charges imposed upon any of its assets
or with respect to its franchises, business, income or assets before any
penalty or interest accrues thereon; (iv) pay all claims and expenses
(including claims and expenses for labor, services, materials and supplies)
when they become due and payable in accordance with their terms; and (v)
comply in all material respects with the requirements of all applicable
laws, rules, regulations and orders of any Governmental Authority, obtain
or take all Governmental Actions necessary in the operation of its
business, and comply with and enforce the provisions of all Company
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Material Agreements, including paying when due all indebtedness, payables,
rentals, royalties, expenses and other liabilities relating to its business
or assets.
(i) The Company will at all times preserve and keep in full force and
effect its corporate existence and rights and franchises material to its
performance under this Agreement.
(j) The Company will not engage in any practice, take any action or
permit by inaction any of the representations and warranties contained in
Article 3 to become untrue.
(k) The Company shall carry on its businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore
conducted and shall use all commercially reasonable efforts to preserve
intact its present business organizations, keep available the services of
its current officers and employees (provided, however, that the Company
will not hire any additional employees) and endeavor to preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect at the Effective Time.
(l) The Company will not engage in any line of business in which it is
not engaged as of the date hereof.
(m) The Company will not, directly or indirectly, enter into or permit
to exist any transaction (including the purchase, sale, lease, or exchange
of any assets, unless otherwise permitted hereby, or the rendering of any
service) with any Affiliate of the Company, other than pursuant to the
Company Employee Benefit Plans in effect as of the date hereof and business
expense advancements or reimbursements in the ordinary course of business.
(n) Other than the Stock Voting Agreements, the Company will not enter
into, or otherwise be a party to, any agreement or understanding relating
to the voting, registration or transfer of any shares of its capital stock
or other securities.
5.2 Access to Assets, Personnel and Information.
(a) From the date hereof until the Effective Time, the Company shall:
(i) afford to Parent and the Parent Representatives, at Parent's sole risk
and expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents and facilities of the
Company; (ii) provide to Parent all information which pertains to matters
requiring Parent's approval under Section 5.1 and cooperate with Parent to
institute procedures and practices to facilitate the joint approval by
Parent and the Company of such matters; (iii) upon request, furnish
promptly to Parent (at Parent's expense) a copy of any file, book, record,
contract, permit, correspondence, or other written information, document or
data concerning the Company (or any of its assets) that is within the
possession or control of the Company; and (iv) consent to its independent
auditors to make available their work papers to Parent and the Parent
Representatives as permitted by the applicable AICPA Professional
Standards.
(b) Parent and the Parent Representatives shall, at Parent's sole risk
and expense, have the right to make an environmental and physical
assessment of the assets of the Company and, in connection therewith, shall
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have the right to enter and inspect such assets and all buildings and
improvements thereon, conduct soil and water tests and borings and
generally conduct such tests, examinations, investigations and studies as
Parent deems necessary, desirable or appropriate for the preparation of
engineering or other reports relating to such assets, their condition and
the presence of Hazardous Materials and compliance with Environmental Laws.
The Company shall be provided not less than 24 hours' prior notice of such
activities, and the Company Representatives shall have the right to witness
all such tests and investigations. Parent shall (and shall cause the Parent
Representatives to) keep any data or information acquired by any such
examinations and the results of any analyses of such data and information
strictly confidential and will not (and will cause the Parent
Representatives not to) disclose any of such data, information or results
to any Person unless otherwise required by law or regulation and then only
after written notice to the Company of the determination of the need for
disclosure. Parent shall indemnify, defend and hold the Company and the
Company Representatives harmless from and against any and all claims to the
extent arising out of or as a result of the activities of Parent and the
Parent Representatives on the assets of the Company in connection with
conducting such environmental and physical assessment, except to the extent
of and limited by the negligence or willful misconduct of the Company or
any Company Representative.
(c) From the date hereof until the Effective Time, the Company will
fully and accurately disclose to Parent and the Parent Representatives all
information that is (i) reasonably requested by Parent or any of the Parent
Representatives, (ii) known to the Company, and (iii) relevant in any
manner or degree to the value, ownership, use, operation, development or
transferability of the assets of the Company or financing of the Merger by
Parent.
(d) From the date hereof until the Effective Time, the Company shall:
(i) furnish to Parent, promptly upon receipt or filing (as the case may
be), a copy of each communication between the Company and the SEC after the
date hereof relating to the Merger or the Proxy Statement and each report,
schedule, proxy statement or other document filed by the Company with the
SEC after the date hereof relating to the Merger or the Proxy Statement;
and (ii) promptly advise Parent of the substance of any oral communications
with the SEC relating to the Merger or the Proxy Statement.
(e) The Company will (and will cause the Company Representatives to)
fully cooperate in all reasonable respects with Parent and the Parent
Representatives in connection with Parent's examinations, evaluations and
investigations described in this Section 5.2.
(f) Parent will not (and will cause Merger Sub and the Parent
Representatives not to) use any information obtained pursuant to this
Section 5.2 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement.
(g) Notwithstanding anything in this Section 5.2 to the contrary, the
Company shall not be obligated under the terms of this Section 5.2 to
disclose to Parent or the Parent Representatives, or grant Parent or the
Parent Representatives access to, information that is within the possession
or control of the Company but subject to a valid and binding
confidentiality agreement with a third party without first obtaining the
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consent of such third party, and the Company, to the extent reasonably
requested by Parent, will use its reasonable best efforts to obtain any
such consent.
5.3 No Solicitation.
(a) From and after the date hereof, the Company will not, and will not
authorize or permit any of the Company Representatives to, directly or
indirectly, solicit or encourage (including by way of providing
information) any prospective acquiror or the invitation or submission of
any inquiries, proposals or offers or any other efforts or attempts that
constitute, or may reasonably be expected to lead to, any Acquisition
Proposal (as hereinafter defined) from any Person or engage in any
discussions or negotiations with respect thereto or otherwise cooperate
with or assist or participate in, or facilitate any such proposal;
provided, however, that notwithstanding any other provision of this
Agreement, (i) the Company's Board of Directors may take and disclose to
the shareholders of the Company a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act and (ii) to the extent that the Board of
Directors of the Company determines in good faith, after considering the
advice of its legal counsel, that such action is required in order for the
Board of Directors of the Company to act in a manner consistent with its
fiduciary duties under applicable law and solely for purposes of
determining whether or not to rescind or modify the recommendation of the
Board of Directors of the Company contemplated by Section 5.5, the Company
and the Company Representatives, in response to an unsolicited Acquisition
Proposal, may enter into discussions or negotiations with the Person
presenting such Acquisition Proposal and provide information to such
Person; provided that prior to entering into such discussions or
negotiations or providing any such information the Company shall enter into
a customary confidentiality agreement with such Person containing terms no
more favorable to such Person than contained in the Confidentiality
Agreement. The Company shall immediately cease and cause to be terminated
any existing solicitation, initiation, encouragement, activity, discussion
or negotiation with any parties conducted heretofore by the Company or any
of the Company's Representatives with respect to any Acquisition Proposal.
The Company will promptly notify in writing Parent of any receipt by the
Company or any of the Company Representatives of a request from a third
party for information concerning the Company and its business, properties
and assets or the receipt of any Acquisition Proposal, including the
identity of the person or group requesting such information or making such
Acquisition Proposal, and the material terms and conditions of any
Acquisition Proposal.
(b) As used in this agreement, "Acquisition Proposal" means any
proposal or offer, other than a proposal or offer by Parent or any of its
Affiliates, for, or that could be reasonably expected to lead to, a tender
or exchange offer, a merger, consolidation or other business combination
involving the Company or any proposal to acquire in any manner a
substantial equity interest in, or any substantial portion of the assets
of, the Company.
(c) Nothing in this Section 5.3 shall permit the Company to terminate
this Agreement except as specifically provided in Section 7.1.
5.4 Third-Party Standstill Agreements. During the period from the date
hereof through the Effective Time, the Company shall not terminate, amend,
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modify or waive any provision of the Rights Agreement or of any confidentiality
or standstill agreement to which the Company is a party, except for the Rights
Agreement Amendment.
5.5 Shareholders Meeting. The Company shall take all action necessary in
accordance with applicable law and its certificate of incorporation and bylaws
to convene a meeting of its shareholders as promptly as practicable after the
date hereof for the purpose of voting on the Company Proposal. Subject to the
fiduciary duties of the Board of Directors of the Company and Section 5.3, the
Company will (through its Board of Directors) recommend to its shareholders
approval of the Company Proposal and not rescind or modify such recommendation
and shall use its reasonable best efforts to obtain approval and adoption of the
Company Proposal by its shareholders. If, however, the Board of Directors of the
Company rescinds or modifies such recommendation pursuant to the first clause of
the immediately preceding sentence, the Company Proposal shall be submitted to
the Company's shareholders.
5.6 Proxy Statement.
(a) The Company and Parent shall cooperate and the Company shall
promptly prepare the Proxy Statement to enable the Company to file the
Proxy Statement with the SEC, as preliminary proxy material, as soon as
practicable after the date hereof and in any event not later than 20 days
after the date hereof. The Company shall use all reasonable best efforts,
and Parent shall cooperate with the Company (including furnishing all
information concerning Parent as may be reasonably requested by the
Company), to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing and to mail the Proxy Statement to the
Company's shareholders as soon as possible thereafter. The Company shall
use all reasonable best efforts, and Parent shall cooperate with the
Company, to obtain any necessary state anti-takeover approvals in
connection with the Merger.
(b) The Company will cause the Proxy Statement, at the time it is
first mailed to shareholders of the Company, to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC thereunder.
(c) The Company hereby covenants and agrees with Parent that the Proxy
Statement (at the time it is first mailed to shareholders of the Company
and at the time of the Company Meeting) will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading
(provided, however, that this clause (c) shall apply only to information
contained in the Proxy Statement that was supplied by the Company for
inclusion therein). If, at any time prior to the Company Meeting, any event
with respect to the Company, or with respect to other information supplied
by the Company for inclusion in the Proxy Statement, occurs and such event
is required to be described in a supplement to the Proxy Statement, the
Company shall promptly notify Parent of such occurrence and shall promptly
prepare, file and disseminate such supplement.
(d) Parent hereby covenants and agrees with the Company that the Proxy
Statement (at the time it is first mailed to shareholders of the Company
and at the time of the Company Meeting) will not contain an untrue
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statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading
(provided, however, that this clause (d) shall not apply to information
contained in the Proxy Statement that was supplied by the Company for
inclusion therein). If, at any time prior to the Company Meeting, any event
with respect to Parent, or with respect to other information supplied by
Parent for inclusion in the Proxy Statement, occurs and such event is
required to be described in a supplement to the Proxy Statement, Parent
shall promptly notify the Company of such occurrence and shall cooperate
with the Company in the preparation, filing and dissemination of such
supplement.
(e) Neither the Proxy Statement nor any amendment or supplement
thereto will be filed or disseminated to the shareholders of the Company
without the approval of both Parent and the Company. The Company shall
advise Parent, promptly after it receives notice thereof, of the time when
the Proxy Statement has been cleared by the SEC, or any comments or
requests for additional information received from the SEC, whether orally
or in writing, with respect to the Proxy Statement.
5.7 Additional Arrangements. Subject to the terms and conditions herein
provided, each of the Company and Parent shall take, or cause to be taken, all
action and shall do, or cause to be done, all things necessary, appropriate or
desirable under any applicable laws and regulations or under applicable
governing agreements to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts to obtain
all necessary waivers, consents and approvals and effecting all necessary
registrations and filings. Each of the Company and Parent shall take, or cause
to be taken, all action or shall do, or cause to be done, all things necessary,
appropriate or desirable to cause the covenants and conditions applicable to the
transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Authority shall have issued any
order, decree, ruling or injunction, or taken any other action that would have
the effect of restraining, enjoining or otherwise prohibiting or preventing the
consummation of the transactions contemplated hereby, each of the Company and
Parent shall use its reasonable best efforts to have such order, decree, ruling
or injunction or other action declared ineffective as soon as practicable.
5.8 Public Announcements. Prior to the Closing, the Company and Parent will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this Agreement
and shall not issue any such press release or make any such public statement
prior to obtaining the approval of the other Party, which approval shall not be
unreasonably withheld; provided, however, that such approval shall not be
required where such release or announcement is required by applicable law or
exchange or NASDAQ rule or regulation; and provided further, that either the
Company or Parent may respond to inquiries by the press or others regarding the
transactions contemplated by this Agreement, so long as such responses are
consistent with such Party's previously issued press releases.
5.9 Notification of Certain Matters. The Company shall give prompt notice
to Parent of any of the following: (a) any representation or warranty contained
in Article 3 being untrue or inaccurate when made; (b) the occurrence of any
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event or development that would cause (or could reasonably be expected to cause)
any representation or warranty contained in Article 3 to be untrue or inaccurate
on the Closing Date; and (c) any failure of the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. Parent shall give prompt notice to the Company of any of the
following: (x) any representation or warranty contained in Article 4 being
untrue or inaccurate when made; (y) the occurrence of any event or development
that would cause (or could reasonably be expected to cause) any representation
or warranty contained in Article 4 to be untrue or inaccurate on the Closing
Date; and (z) any failure of Parent to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
5.10 Payment of Expenses. Each Party shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Merger
shall be consummated. The Company shall bear and pay: (a) the fee for filing the
Proxy Statement with the SEC and the costs and expenses associated with printing
the Proxy Statement and complying with any applicable state securities or "blue
sky" laws; and (b) the costs and expenses associated with mailing the Proxy
Statement to the shareholders of the Company, and soliciting the votes of the
shareholders of the Company.
5.11 Indemnification and Insurance.
(a) Parent and the Company agree that all rights to indemnification
now existing in favor of any officers, directors, employees, controlling
shareholders or agents of the Company, as provided in its charters or
bylaws (or similar organizational documents), and any existing
indemnification agreements or arrangements of the Company, shall survive
the Merger and shall continue in full force and effect for a period of not
less than six years from the Effective Time (or such longer period as may
be provided in any existing indemnification agreement between the Company,
and any current or former officer or director thereof); provided, that, in
the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(b) From and after the Effective Time, the Surviving Corporation
shall, for a period of six years after the Effective Time, indemnify,
defend and hold harmless each person who is now, or has been at any time
prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer, director, employee, controlling shareholder or agent of
the Company (collectively, the "Indemnified Parties") against all losses,
expenses (including attorneys' fees), claims, damages, liabilities and
amounts that are paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of, or otherwise
in connection with, any threatened or actual claim, action, suit,
proceeding or investigation (a "Claim"), based in whole or in part on or
arising in whole or in part out of the fact that the Indemnified Party (or
the person controlled by the Indemnified Party) is or was a director,
officer, employee, controlling shareholder or agent of the Company
(including a trustee or fiduciary of any Company Employee Benefit Plan) and
pertaining to any matter existing or arising out of actions or omissions
occurring at or prior to the Effective Time (including any Claim arising
out of this Agreement or any of the transactions contemplated hereby),
whether asserted or claimed prior to, at or after the Effective Time, in
each case to the fullest extent permitted under Oklahoma law, and shall pay
any expenses, as incurred, in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent
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permitted under Oklahoma law. In determining whether an Indemnified Party
is entitled to indemnification under this Section 5.11, if requested by
such Indemnified Party, such determination shall be made by special,
independent counsel selected by the Surviving Corporation and approved by
the Indemnified Party (which approval shall not be unreasonably withheld),
and who has not otherwise performed services for the Surviving Corporation
or any of its Affiliates within the last three years (other than in
connection with such matters). Without limiting the foregoing, in the event
any such Claim is brought against any Indemnified Party or Parties (whether
arising before or after the Effective Time): (i) such Indemnified Party or
Parties may retain the Surviving Corporation's regularly engaged
independent legal counsel or counsel satisfactory to them and reasonably
satisfactory to the Surviving Corporation, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Party or Parties as promptly as statements therefor are
received; and (ii) the Surviving Corporation will use all reasonable best
efforts to assist in the vigorous defense of any such matter, provided that
the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent, which consent shall not unreasonably be
withheld. In the event of any Claim, any Indemnified Party wishing to claim
indemnification will promptly notify the Surviving Corporation thereof
(provided, that failure to so notify the Surviving Corporation will not
affect the obligations of the Surviving Corporation except to the extent
that the Surviving Corporation shall have been prejudiced as a result of
such failure) and shall deliver to the Surviving Corporation the
undertaking contemplated by Section 1031 of the OGCA, but without any
requirement for the posting of a bond. Without limiting the foregoing, in
the event any such Claim is brought against any of the Indemnified Parties,
such Indemnified Party or Parties may retain only one law firm (plus one
local counsel, if necessary) to represent them with respect to each such
matter unless the use of counsel chosen to represent the Indemnified
Parties would present such counsel with a conflict of interest, or the
representation of all of the Indemnified Parties by the same counsel would
be inappropriate due to actual or potential differing interests between
them, in which case such additional counsel as may be required (as shall be
reasonably determined by the Indemnified Parties and the Surviving
Corporation) may be retained by the Indemnified Parties at the cost and
expense of the Surviving Corporation and the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for such Indemnified
Parties. The Surviving Corporation shall use such counsel for such
Indemnified Parties. The Surviving Corporation shall use all reasonable
best efforts to assist in the vigorous defense of any such Claim; provided,
that the Surviving Corporation shall not be liable for any settlement
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Notwithstanding the foregoing, nothing contained in
this Section 5.11 shall be deemed to grant any right to any Indemnified
Party which is not permitted to be granted to an officer, director,
employee, controlling shareholder or agent of the Company under Oklahoma
law, assuming for such purposes that the Surviving Corporation's
certificate of incorporation and bylaws provide for the maximum
indemnification permitted by law.
(c) From and after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect for not less than six years from the
Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company; provided, that: (i) the
Surviving Corporation may substitute therefor policies of at least the same
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coverage containing terms and conditions which are no less advantageous;
(ii) such substitution shall not result in gaps or lapses in coverage with
respect to matters occurring prior to the Effective Time; and (iii) the
Surviving Corporation shall not be required to pay an annual premium in
excess of 200% of the last annual premium paid by the Company prior to the
date hereof and if the Surviving Corporation is unable to obtain the
insurance required by this Section 5.11(c) it shall obtain as much
comparable insurance as possible for an annual premium equal to such
maximum amount.
(d) Following the Merger, if the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person or Persons, then, and in
each such case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation and any of their successors and
assigns, assume the obligations of the Parties and the Surviving
Corporation set forth in this Section 5.11.
(e) This Section 5.11 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Surviving Corporation and
the Indemnified Parties and their respective heirs and representatives
(each of whom may enforce the provisions of this Section 5.11) and shall be
binding on the successors and assigns of the Surviving Corporation.
5.12 Shareholder Litigation. The Company shall give Parent the reasonable
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement, and no such settlement shall be agreed to
without Parent's written consent, which shall not be unreasonably withheld or
delayed.
5.13 Opinion of Financial Advisor. A true, correct and complete copy of the
written opinion delivered by Stephens Inc. as set forth in Section 3.33, which
opinion shall be included in the Proxy Statement, has been delivered to Parent
by the Company.
5.14 Resignations of Officers and Directors of the Company. As requested by
Parent, prior to the Closing Date, the Company shall obtain written resignations
from each of its officers and directors under which such persons shall resign as
an officer and/or director of the Company effective as of the Effective Time.
5.15 Other Agreements. Concurrently with the execution of this Agreement,
the Company is delivering to Parent executed copies of the Stock Voting
Agreements, the Separation Agreements and the Rights Agreement Amendment.
5.16 Option Surrender Agreements. The Company shall use its reasonable best
efforts to cause each holder of a Company Option to execute an Option Surrender
Agreement prior to the Effective Time.
5.17 Financing. Parent shall immediately notify the Company (a) should any
of the Financing Commitments be terminated by any party thereto, (b) should any
party purport to terminate any of the Financing Commitments or (c) should any
other event occur which causes Parent to reasonably believe that it will not be
able to obtain the Financing, (a "Financing Termination Notice").
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5.18 Separation Agreements. The Company shall not amend, terminate or
otherwise modify the Separation Agreements without the prior written consent of
Parent.
5.19 Retirement Agreement. Within 30 days after the date hereof, the
Company shall either provide Parent with a copy of the filing originally made
with the Department of Labor for the May 31, 1989 Agreement with William G. Seal
(the "Seal Agreement"), as required by Department of Labor Regulation Section
2520.104-23 or, if no such filing was originally made, the Company shall comply
with the Pension and Welfare Benefits Administration's Delinquent Filer
Voluntary Compliance Program with respect to the Seal Agreement (including, but
not limited to, making all filings and paying all applicable penalties under
such program), and shall provide Parent with a copy of all documents filed in
connection with such program.
5.20 Deferred Compensation Agreements. Within 30 days after the date
hereof, the Company shall either provide Parent with a copy of the filings
originally made with the Department of Labor for the Deferred Compensation
Agreements with O. Strother Simpson for the years 1980 through 1989 (the
"Strother Agreements"), as required by Department of Labor Regulation Section
2520.104-23 or, if no such filings were originally made, the Company shall
comply with the Pension and Welfare Benefits Administration's Delinquent Filer
Voluntary Compliance Program with respect to the Strother Agreements (including,
but not limited to, making all filings and paying all applicable penalties under
such program), and shall provide Parent with a copy of all documents filed in
connection with such program.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each Party to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions,
any or all of which may be waived in whole or in part by both Parent and the
Company:
(a) Shareholder Approval. The Company Proposal shall have been duly
and validly approved and adopted by a vote of a majority of the outstanding
shares of Company Common Stock.
(b) Other Approvals. All consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from any
Governmental Authority or other Person in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Company, Parent and Merger Sub shall have been
made or obtained (as the case may be), except where the failure to obtain
such consents, approvals, permits and authorizations would not be
reasonably likely to result in a Material Adverse Effect on Parent or the
Company or to materially adversely affect the consummation of the Merger.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
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competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that,
prior to invoking this condition, the invoking Party shall have complied
fully with its obligations under Section 5.7 and, in addition, shall use
all reasonable best efforts to have any such decree, ruling, injunction or
order vacated.
6.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Parent and Merger Sub:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects (provided that any representation or warranty contained
herein that is qualified by a materiality standard or a Material Adverse
Effect qualification shall not be further qualified hereby) as of the
Closing Date (except to the extent such representation or warranty speaks
as of an earlier date), and Parent shall have received a certificate signed
by a Responsible Officer of the Company to such effect.
(b) Performance of Covenants and Agreements by the Company. The
Company shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior
to the Closing Date, and Parent shall have received a certificate signed by
a Responsible Officer of the Company to such effect.
(c) No Material Adverse Effect. Since June 30, 2000, the Company shall
not have suffered or incurred any Material Adverse Effect.
(d) Dissenters' Rights. The aggregate number of shares of Company
Common Stock, which are entitled to vote at the Company Meeting and are
held of record by a Person or Persons who exercise their appraisal right
under the OGCA to dissent from the proposed Merger, shall not exceed five
percent (5%) of the total number of issued and outstanding shares of
Company Common Stock held of record as of the record date for the Company
Meeting and entitled to vote on the proposed Merger at such meeting.
(e) Debt Commitment Condition. The closing conditions set forth in the
penultimate sentence of the fourth paragraph, insofar as they relate to
title of oil and gas interests of the Company and environmental matters
with respect thereto, of the Fleet National Bank commitment letter, dated
September 7, 2000, which letter is included in the Debt Commitments, shall
have been fulfilled as provided for in the Debt Commitments.
(f) Material Representations. Each of the Material Representations is
true and correct in all respects as of the Closing Date (except to the
extent such representation or warranty speaks as of an earlier date) and
Parent shall have a certificate signed by a Responsible Officer of the
Company to such effect.
(g) Resignations of Officers and Directors of the Company. Parent
shall have received the written resignations contemplated by Section 5.14.
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6.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct in all material respects (provided that any representation or
warranty contained herein that is qualified by a materiality standard or a
Material Adverse Effect qualification shall not be further qualified
hereby) as of the Closing Date (except to the extent such representation or
warranty speaks as of an earlier date), and the Company shall have received
a certificate signed by a Responsible Officer of Parent to such effect.
(b) Performance of Covenants and Agreements by Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed by a Responsible Officer of Parent to such
effect.
ARTICLE 7
TERMINATION
7.1 Termination Rights. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the Company Proposal by the shareholders of the Company:
(a) By mutual written consent of Parent and the Company;
(b) By either the Company or Parent if: (i) the Merger has not been
consummated by February 28, 2001 (provided, however, that the right to
terminate this Agreement pursuant to this clause (i) shall not be available
to any Party whose breach of any representation or warranty or failure to
perform any covenant or agreement under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such
date); (ii) any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable (provided, however, that
the right to terminate this Agreement pursuant to this clause (ii) shall
not be available to any Party until such Party has used all reasonable best
efforts to remove such injunction, order or decree); or (iii) the Company
Proposal shall not have been approved by the required vote of the Company
shareholders at the Company Meeting.
(c) By Parent if: (i) there has been a breach in any material respect
of the representations and warranties made by the Company in Article 3
(provided, however, that any representation or warranty contained therein
that is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby, and provided, further,
that Parent shall not be entitled to terminate this Agreement pursuant to
this clause (i) unless Parent has given the Company notice of such breach
and the Company has failed to cure such breach within 10 days following
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such notice, but in any event not later than February 28, 2001), and the
condition described in Section 6.2(a), other than the provision thereof
relating to the certificate signed by a Responsible Officer of the Company,
would not be satisfied if the Closing were to occur on the day on which
Parent gives the Company notice of such termination; or (ii) the Company
has failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement and such failure has not been, or
cannot be, cured within 10 days after notice and demand for cure thereof,
but in any event not later than February 28, 2001; provided, however, that
there shall not be any cure period with respect to a breach of Section 5.1;
(d) By the Company if: (i) there has been a breach in any material
respect of the representations and warranties made by Parent and Merger Sub
in Article 4 (provided, however, that any representation or warranty
contained therein that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified hereby, and
provided, further, that the Company shall not be entitled to terminate this
Agreement pursuant to this clause (i) unless the Company has given Parent
notice of such breach and Parent has failed to cure such breach within 10
days following such notice, but in any event not later than February 28,
2001), and the condition described in Section 6.3(a), other than the
provision thereof relating to the certificate signed by a Responsible
Officer of Parent, would not be satisfied if the Closing were to occur on
the day on which the Company gives Parent notice of such termination; or
(ii) Parent or Merger Sub has failed to comply in any material respect with
any of its respective covenants or agreements contained in this Agreement,
and, in either such case, such failure has not been, or cannot be, cured
within 10 days after notice and demand for cure thereof, but in any event
not later than February 28, 2001;
(e) By Parent if (i) the Board of Directors of the Company shall have
failed to recommend adoption of the Company Proposal at the time the Proxy
Statement is first mailed to shareholders of the Company or shall have
amended or withdrawn any such recommendation and such recommendation is not
reinstated in its prior form within two business days after such amendment
or withdrawal or (ii) the Company Meeting does not occur for any reason
(other than as a result of a breach of this Agreement by Parent) prior to
February 26, 2001 or is adjourned beyond such date;
(f) By Parent if from and after June 30, 2000, the Company should
suffer or incur any Material Adverse Effect; or
(g) By the Company upon receipt of a Financing Termination Notice if
Parent is unable to obtain replacement Financing within ten business days
thereafter (but in any event not later than February 24, 2001) on terms
that provide for no greater conditions than those contained in the original
Financing Commitments; provided, however, that such right to terminate this
Agreement must be exercised by the Company within five business days after
the expiration of the above-referenced 10-business-day period.
7.2 Effect of Termination. If this Agreement is terminated by either the
Company or Parent pursuant to the provisions of Section 7.1, this Agreement
shall forthwith become void except for, and there shall be no further obligation
on the part of any party hereto or its respective Affiliates, directors,
officers or shareholders except that, the provisions of Sections 5.2 (but only
to the extent of the confidentiality and indemnification provisions contained
therein), 5.6(c), 5.6(d), 5.8, 5.10, 7.3, Article 8 and the Confidentiality
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Agreement shall survive any such termination and shall continue pursuant to
their terms; provided, however, that a termination of this Agreement shall not
relieve any Party hereto from any liability for damages incurred as a result of
a breach by such Party of its representations, warranties, covenants, agreements
or other obligations hereunder occurring prior to such termination; provided
further, that in the event of a termination of this Agreement by the Company
pursuant to Section 7.1(g), Parent and Merger Sub shall be deemed to have
committed a material breach of this Agreement unless the cause of the Financing
Termination Notice and Parent's inability to obtain replacement Financing as
contemplated by Section 7.1(g) is due to a failure to fulfill the condition set
forth in Section 6.2(e).
7.3 Fees and Expenses. If this Agreement is terminated pursuant to Section
7.1(e) or clause (iii) of Section 7.1(b), the Company shall promptly, but in no
event later than one business day after termination of this Agreement, pay to
Parent an amount equal to $2,000,000 in same day funds and upon making such
payment the Company shall be fully released and discharged from any liability or
obligation resulting from or under this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the consummation of the
Merger.
8.2 Amendment. This Agreement may be amended by the Parties at any time
before or after approval of the Company Proposal by the shareholders of the
Company; provided, however, that, after any such approval, no amendment shall be
made that by law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by a written
instrument signed by an authorized representative of each of the Parties.
8.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally (effective upon
delivery), by facsimile transmission (effective on the next day after
transmission), by recognized overnight delivery service (effective on the next
day after delivery to the service), or by registered or certified mail, postage
prepaid and return receipt requested (effective on the fifth business day after
the date of mailing), at the following addresses or facsimile transmission
numbers (or at such other address(es) or facsimile transmission number(s) for a
Party as shall be specified by like notice):
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If to Parent or Merger Sub, to:
Cortez Oil & Gas, Inc.
Parkway Center II
2805 North Dallas Parkway, Suite 100
Plano, Texas 75093
Attention: C. Randall Hill
Telephone: (972) 781-6595
Telecopier: (972) 781-6505
with copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: A. Winston Oxley
Telephone: (214) 220-7700
Telecopier: (214) 220-7716
If to the Company, to:
Home-Stake Oil & Gas Company
2800 First Place Tower
15 E. 5th Street
Tulsa, Oklahoma 74103-4311
Attention: Robert C. Simpson
Telephone: (918) 583-0178
Telecopier: (918) 583-0237
with a copy to:
Conner & Winters
A Professional Corporation
3700 First Place Tower
15 E. 5th Street
Tulsa, Oklahoma 74103-4344
Attention: Robert J. Melgaard
Telephone: (918) 586-5711
Telecopier: (918) 586-8548
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
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<PAGE>
8.5 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement, each exhibit hereto (including
without limitation each Transaction Document), the Parent Disclosure Schedule
and the Company Disclosure Schedule) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the Parties with respect to the subject matter hereof and thereof; and (b)
except as provided in Article 2 and Section 5.11, is solely for the benefit of
the Parties and their respective successors, legal representatives and assigns
and does not confer on any other Person any rights or remedies hereunder.
8.7 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Oklahoma regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
8.8 No Remedy in Certain Circumstances. Each Party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any Party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take any action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article 7.
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
8.10 Waivers. At any time prior to the Effective Time, the Parties may, to
the extent legally allowed (a) extend the time for the performance of any of the
obligations or other acts of the other Parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive performance of any of the covenants or
agreements, or satisfaction of any of the conditions, contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in a written instrument signed by an authorized representative
of such Party. Except as provided in this Agreement, no action taken pursuant to
this Agreement, including any investigation by or on behalf of any Party, shall
be deemed to constitute a waiver by the Party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
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Agreement. The waiver by any Party of a breach of any provision hereof shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provisions hereof.
8.11 Confidentiality Agreement. The Confidentiality Agreement shall remain
in full force and effect following the execution of this Agreement; provided,
however, that any standstill provisions contained therein are hereby waived to
the extent necessary for the Parties to consummate the Merger in accordance with
the terms of this Agreement.
8.12 No Recourse Against Others. Each of the following is herein referred
to as a "Parent Affiliate": (a) any direct or indirect holder of any equity
interests or securities in Parent (whether limited or general partners, members,
shareholders, or otherwise), (b) any Affiliate of Parent, and (c) any director,
officer, employee, representative or agent of (i) the Parent of Merger Sub, (ii)
any Affiliate of Parent or Merger Sub, or (iii) any such holder of equity
interests or securities referred to in clause (a) above. Except to the extent
that a Parent Affiliate is an express signatory party hereto, no Parent
Affiliate shall have any liability or obligation of any nature whatsoever in
connection with or under this Agreement or the transactions contemplated hereby,
and the Company hereby waives and releases all claims of any such liability and
obligation.
8.13 Incorporation. Exhibits and Schedules referred to herein are attached
hereto and by this reference incorporated herein for all purposes.
8.14 Specific Performance. The parties recognize that in the event the
Company should refuse to perform under the provisions of this Agreement,
monetary damages alone will not be adequate. Parent and Merger Sub shall
therefore be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically,
the Company hereby waives the defense that there is an adequate remedy at law.
8.15 Section 1090.3. The Parties acknowledge and represent that the board
of directors of each Party has approved the terms of this Agreement and the
other Transaction Documents and the consummation of the transactions
contemplated herein and therein and that such approval is sufficient to render
the restrictions on business combinations set forth in Section 1090.3 of the
OGCA inapplicable to the transactions contemplated by the Transaction Documents.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives, on the date first written
above.
CORTEZ OIL & GAS, INC.
By: /s/ C. Randall Hill
---------------------------------------------
Name: C. Randall Hill
Title: Chief Executive Officer and President
CORTEZ ACQUISTION COMPANY
By: /s/ C. Randall Hill
---------------------------------------------
Name: C. Randall Hill
Title: President
HOME-STAKE OIL & GAS COMPANY
By: /s/ Robert C. Simipson
---------------------------------------------
Name: Robert C. Simpson
Title: Chief Executive Officer and President
[SIGNATURE PAGE TO MERGER AGREEMENT]
<PAGE>
Exhibit A
STOCK VOTING AGREEMENT
STOCK VOTING AGREEMENT (this "Agreement"), dated as of October __,
2000, by and between the undersigned stockholder (the "Stockholder") and Cortez
Oil & Gas, Inc., a Delaware corporation ("Parent"), and Home-Stake Oil & Gas
Company, an Oklahoma corporation (the "Company").
WHEREAS, concurrently herewith, Parent, Cortez Acquisition Company, an
Oklahoma corporation and a wholly owned subsidiary of Parent (the "Parent Sub"),
and the Company are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which the Parent Sub will merge
with and into the Company (the "Merger"). Each capitalized term used herein, and
not otherwise defined herein, shall have the meaning set forth in the Merger
Agreement; and
WHEREAS, the Stockholder owns, as of the date hereof, the number of
shares of common stock, $.01 par value per share, of the Company ("Company
Common Stock") (such shares of Company Common Stock owned by the Stockholder on
the date hereof, together with any shares of Company Common Stock acquired by
the Stockholder after the date hereof and prior to the termination hereof,
hereinafter collectively referred to as the "Shares") set forth on Exhibit A;
and
WHEREAS, the Board of Directors of the Company has approved this
Agreement and the transactions contemplated hereby in accordance with Section
1090.3 of the Oklahoma General Corporation Act; and
WHEREAS, Parent and Parent Sub are entering into the Merger Agreement
in reliance on and in consideration of the Stockholder's representations,
warranties, covenants and agreements hereunder.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, and intending to be
legally bound hereby, it is agreed as follows:
1. Agreement to Vote. The Stockholder hereby revokes any and all
previous proxies with respect to such Stockholder's Shares and irrevocably
agrees to vote and otherwise act (including pursuant to written consent) with
respect to all of such Shares: (i) for the adoption of the Merger Agreement, as
the same may be amended from time to time, all actions required in furtherance
thereof, and all agreements related to the Merger and any actions related
thereto, at any meeting or meetings of the stockholders of the Company, and at
any adjournment, postponement or continuation thereof, at which the Merger
Agreement and other related agreements (or any amended version or versions
thereof) are submitted for the consideration and vote of the stockholders of the
Company; (ii) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation of the Company under the Merger Agreement; and
(iii) against (a) any extraordinary corporate transaction, such as a merger,
rights offering, issuance of securities, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries other than the
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Merger, (b) a sale or transfer (other than to a subsidiary of the Company) of
assets of the Company or any of its material subsidiaries comprising more than
15% of the assets of the Company on a consolidated basis, or (c) any action that
is reasonably likely to materially impede, interfere with, delay, postpone or
adversely affect in any material respect the Merger and the transactions
contemplated by the Merger Agreement. The obligations of the Stockholder under
this Section 1 shall remain in effect with respect to the Shares until, and
shall terminate upon, the earlier to occur of the Effective Time and the
termination of the Merger Agreement in accordance with its terms.
2. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to Parent as follows:
2.1 Onwership of Shares. On the date hereof, the Shares are all of
the Shares currently owned by the Stockholder. Except, as to a
Stockholder that is an individual, as set forth in Schedule
2.1 and as contemplated by Section 3.1, the Stockholder
currently has, and at Closing will have, good, valid and
marketable title to the Shares, free and clear of all liens,
encumbrances, and security interests (other than the
encumbrances created by this Agreement and other than
restrictions on transfer under applicable Federal and State
securities laws) and free of other restrictions, options,
rights to purchase or other claims that would adversely affect
the ability of the Stockholder to perform its obligations
hereunder or pursuant to which the Stockholder could be
required to sell, assign or otherwise transfer the Shares.
2.2 Authority; Binding Agreement. The Stockholder has the full
legal right, power and authority to enter into and perform all
of its obligations under this Agreement. This Agreement has
been duly executed and delivered by the Stockholder and
constitutes a legal, valid and binding agreement of the
Stockholder, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws, now
or hereafter in effect affecting creditors rights and remedies
generally or general principles of equity. Neither the
execution and delivery of this Agreement nor the consummation
by the Stockholder of the transactions contemplated hereby
will (i) violate, or require any consent, approval or notice
under, any provision of any judgment, order, decree, statute,
law, rule or regulation applicable to the Stockholder or the
Shares except for filings under the Securities Exchange Act of
1934, as amended, or (ii) constitute a violation of, conflict
with or constitute a default under, any contract, commitment,
agreement, understanding, arrangement or other restriction of
any kind to which the Stockholder is a party or by which the
Stockholder is bound, in each case the effect of which would
adversely affect the ability of the Stockholder to perform his
obligations hereunder.
2.3 Reliance on Agreement. The Stockholder understands and
acknowledges that Parent is entering into the Merger Agreement
in reliance upon the Stockholder's execution and delivery of
this Agreement. The Stockholder acknowledges that the
agreement set forth in Section 1 is granted in consideration
for the execution and delivery of the Merger Agreement by
Parent.
2
<PAGE>
3. Certain Covenants of the Stockholder. Except in accordance with the
provisions of this Agreement, the Stockholder agrees with, and covenants to,
Parent as follows:
3.1 Transfer. The Stockholder shall not, other than, in the case
of a Stockholder that is an individual, as a result of the
death of the Stockholder, (i) transfer (which term shall
include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge, assignment, encumbrance or
other disposition), whether directly or indirectly (including
by operation of law), or consent to any transfer of, any or
all of the Shares or any interest therein, except pursuant to
the Merger, (ii) grant any proxies with respect to the Shares,
deposit the Shares into a voting trust or enter into a voting
agreement or similar arrangement with respect to the Shares,
or (iii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all such
Shares or any interest therein or take any other action with
respect thereto, in either case, in a manner that would
prevent the Stockholder from performing its obligations under
this Agreement.
3.2 Stop Transfer. The Stockholder hereby agrees with, and
covenants to, each other party hereto that such Stockholder
shall not request that the Company register the transfer (book
entry or otherwise) of any certificate or uncertificated
interest representing any of its Shares, unless such transfer
is made in compliance with this Agreement. The Company agrees
with, and covenants to, each other party hereto that the
Company shall not register the transfer (book entry or
otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made
in compliance with this Agreement.
3.3 Solicitation. Prior to the Effective Time, the Stockholder
agrees in his capacity as the Stockholder that it shall not
directly or indirectly (including through representatives,
advisors, agents or any other intermediaries) solicit or
encourage (including by way of providing information) any
prospective acquiror or the invitation or submission of any
inquiries, proposals or offers or any other efforts or
attempts that constitute, or may reasonably be expected to
lead to, any Acquisition Proposal from any person or engage in
any discussions or negotiations with respect thereto or
otherwise cooperate with or assist or participate in, or
facilitate any such proposal; provided, however, that the
Stockholder may act as an advisor or representative of the
Company in connection with actions taken by the Company that
are permitted pursuant to Section 5.3 of the Merger Agreement.
3.4 Notifications. The Stockholder shall, while this Agreement is
in effect, notify Parent promptly, but in no event later than
two business days, of the number of any shares of Company
Common Stock acquired by the Stockholder after the date
hereof.
3.5 Waiver. The Stockholder agrees to waive any rights such
Stockholder may have against the Company under Section 7 of
the Indemnification Agreement, dated May 14, 1996, by and
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<PAGE>
between the Company and the Stockholder with respect to the
payment of $150 per hour as contemplated therein.
4. Effect of Purported Transfer. The parties hereto agree that any
transfer of the Shares made other than in compliance with this Agreement shall
be null and void. Any such transfer shall convey no interest in any of the
Shares purported to be transferred, and the transferee shall not be deemed to be
a stockholder of the Company nor entitled to receive a new share certificate or
any rights, dividends or other distributions on or with respect to such Shares.
5. Termination. This Agreement shall terminate on the earlier of (i)
the Effective Time and (ii) upon the termination of the Merger Agreement in
accordance with its terms.
6. Action in the Stockholder's Capacity Only. The Stockholder does not
make any agreement or understanding herein as director or officer of the
Company. The Stockholder signs solely in his capacity as a recordholder and
beneficial owner of the Shares, and nothing herein shall in any way restrict or
limit the Stockholder from taking any action in his capacity as an officer or
director of the Company or otherwise fulfilling his fiduciary obligations as a
director or officer of the Company.
7. Miscellaneous.
7.1 Notices. All notices, requests, claims, demand and other
communications under this Agreement shall be in writing and
shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the
addresses specified below (or at such other address for a
party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied or one day
after delivery to a courier for next-day delivery.
4
<PAGE>
If to Parent:
Cortez Oil & Gas, Inc.
Parkway Center II
2805 North Dallas Parkway, Suite 100
Plano, Texas 75093
Attention: C. Randall Hill
Telephone: (972) 781-6595
Telecopier: (972) 781-6505
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: A. Winston Oxley
Telephone: (214) 220-7700
Telecopier: (214) 220-7716
If to Stockholder: at the address set forth on Exhibit A.
If to the Company:
Home-Stake Oil & Gas Company
2800 First Place Tower
15 E. 5th Street
Tulsa, Oklahoma 74103-4311
Attention: Robert C. Simpson
Telephone: (918) 583-0178
Telecopier: (918) 583-0237
with a copy to:
Conner & Winters
A Professional Corporation
3700 First Place Tower
15 E. 5th Street
Tulsa, Oklahoma 74103-4344
Attention: Robert J. Melgaard
Telephone: (918) 586-5711
Telecopier: (918) 586-8548
7.2 Entire Agreement. This Agreement, together with the documents
expressly referred to herein, constitute the entire agreement
and supersede all other prior agreements and understandings,
5
<PAGE>
both written and oral, among the parties or any of them, with
respect to the subject matter contained herein.
7.3 Amendments. This Agreement may not be modified amended,
altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties
hereto.
7.4 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective
successors, assigns and personal representatives, but neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties without the
prior written consent of the other parties.
7.5 Governing Law. This Agreement, and all matters relating
hereto, shall be governed by, and construed in accordance with
the laws of the State of Oklahoma without giving effect to the
principles of conflicts of laws thereof.
7.6 Injunctive Relief. The Stockholder and the Company agree that
irreparable damage would occur and that Parent would not have
any adequate remedy at law 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 Parent shall be entitled to an
injunction or injunctions to prevent breaches by the
Stockholder or the Company of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any
court of competent jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
and all of which together shall constitute one and the same
document.
7.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms
or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only
so broad as is enforceable.
[Signature Page Follows]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.
CORTEZ OIL & GAS, INC.
By:
--------------------------------------------------
Name: C. Randall Hill
Title: Chief Executive Officer and President
HOME-STAKE OIL & GAS COMPANY
By:
--------------------------------------------------
Name: Robert C. Simpson
Title: Chief Executive Officer and President
STOCKHOLDER
[SIGNATURE PAGE TO STOCK VOTING AGREEMENT]
<PAGE>
EXHIBIT A
A-1
<PAGE>
Exhibit B-1
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement") is made and entered into
on October __, 2000 between Robert C. Simpson ("Executive") and Home-Stake Oil &
Gas Company, an Oklahoma corporation (the "Company").
WHEREAS, Executive and the Company are parties to an Employment
Agreement, dated October 23, 1991, and effective as of November 15, 1991,
pursuant to which the Company has employed Executive (the "Original Employment
Agreement");
WHEREAS, effective February 5, 1998, Executive and the Company amended
and restated the Original Employment Agreement;
WHEREAS, effective November 4, 1999, Executive and the Company further
amended and again restated the Original Employment Agreement (the "Employment
Agreement");
WHEREAS, concurrently with the execution of this Agreement, Cortez Oil
& Gas, Inc., a Delaware corporation ("Parent"), Cortez Acquisition Company, an
Oklahoma corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
the Company have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into the Company,
and the Company will become a wholly-owned subsidiary of Parent (the "Merger");
and
WHEREAS, the Merger constitutes a Change in Control (as defined in the
Employment Agreement) and Executive and the Company have mutually agreed to
terminate the Employment Agreement and Executive's employment with the Company
without further obligation of either party under the Employment Agreement,
effective as of the effective time of the Merger (the "Effective Time").
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, and promises set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Executive and the Company hereby agree as follows:
1. Termination. The parties hereby represent and warrant that prior to
the Effective Time, Executive's employment relationship with the Company was
pursuant to and governed solely by the Employment Agreement. Executive's
employment with the Company is hereby terminated as of the Effective Time.
Executive further agrees to and does hereby resign effective as of the Effective
Time from any other appointments or positions which he may hold with the
Company, including, without limitation, his position as a director and/or
officer of the Company. Executive agrees to execute all further documents which
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<PAGE>
Parent or the Company may reasonably request of him to effectuate such
resignations.
2. Termination Consideration.
(a) Cash Payments. In connection with such termination of
employment and the execution of this Agreement, the Company shall cause to be
paid to Executive a one-time cash payment of $____________ (such amount being
comprised of severance in the amount of $___________ and a transaction bonus of
$___________) (the "Severance Payment"). In addition, in full and complete
satisfaction of the Company's obligation to indemnify (however arising)
Executive from and against any taxes imposed on Executive by Section 4999 of the
Internal Revenue Code of 1986, as amended, the Company shall cause to be paid to
Executive a cash payment of $__________ (collectively with the Severance
Payment, the "Termination Payment") at the Effective Time. Delivery of the
Termination Payment to Executive is conditioned upon the delivery and execution
by Executive of (i) this Agreement on the date the Merger Agreement is fully
executed by all parties thereto; and (ii) the Addendum to this Agreement
attached hereto as Exhibit A (the "Addendum") at the Closing (as defined in the
Merger Agreement). The Company shall make the Termination Payment at the
Effective Time, but Executive shall not be entitled to receive the Termination
Payment unless and until the Company receives each document described in this
paragraph 2 duly executed by Executive.
(b) Automobile. During the period beginning on the date of
this Agreement and ending at 5:00 p.m. Dallas, Texas time on the date of the
Effective Time (the "Payment Deadline"), Executive shall be entitled to purchase
from the Company the Company automobile described on Exhibit B hereto (the
"Automobile") for a cash purchase price equal to the lesser of (i) its then book
value after depreciation as shown on the books and records of the Company or
(ii) its fair market value as set forth in Kelley Blue Book Used Car Guide,
Consumer Edition, 1985-1999 Used Car and Truck Retail Values. If Executive
elects to purchase the Automobile, he must deliver full payment for the
Automobile as determined pursuant to the immediately preceding sentence to the
Company's principal office by the Payment Deadline. If Executive elects to
purchase the Automobile, Executive and the Company will use commercially
reasonable efforts to execute and deliver to each other all necessary
agreements, documents and instruments, and to finalize the sale of the
Automobile to Executive as soon as practicable. If Executive does not deliver
full payment for the Automobile to the Company by the Payment Deadline,
Executive must return the Automobile to the Company's principal office no later
than the Payment Deadline.
3. Taxes. The termination consideration set forth in paragraph 2(a) of
this Agreement shall be subject to applicable federal, state and local
withholding taxes. Executive agrees that, to the extent that any individual
federal, state or local income or excise taxes of any kind may be due as a
result of any such payment to Executive, Executive shall be solely responsible
for such taxes and will indemnify, defend, and hold harmless the Company in the
event there is any claim against the Company for such taxes.
4. General Release and Covenant Not to Sue. EFFECTIVE AT THE EFFECTIVE
TIME, EXECUTIVE, ON BEHALF OF HIMSELF, AND TO THE EXTENT HE HAS THE POWER OR
AUTHORITY TO DO SO, HIS FAMILY, ATTORNEYS, HEIRS, ESTATE, AGENTS, EXECUTORS,
2
<PAGE>
REPRESENTATIVES, ADMINISTRATORS AND EACH OF THEIR RESPECTIVE SUCCESSORS
AND ASSIGNS (TOGETHER, THE "EXECUTIVE PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES, THE COMPANY, PARENT, MERGER SUB, AND THEIR RESPECTIVE
PREDECESSORS, SUCCESSORS, ASSIGNS, PARENTS, SUBSIDIARIES AND AFFILIATES AND EACH
OF THE FOREGOING ENTITIES' RESPECTIVE PAST, PRESENT AND FUTURE SHAREHOLDERS,
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, PRINCIPALS, INSURERS,
ATTORNEYS, EMPLOYEE BENEFIT PROGRAMS (AND THE TRUSTEES, ADMINISTRATORS,
FIDUCIARIES, REPRESENTATIVES, COMMITTEES AND INSURERS OF SUCH PROGRAMS) IN THEIR
RESPECTIVE CAPACITIES AS SUCH, AND ANY PERSON ACTING BY, THROUGH, UNDER OR IN
CONCERT WITH ANY OF THE FOREGOING ENTITIES (TOGETHER THE "COMPANY PARTIES") FROM
ANY AND ALL CLAIMS, COMPLAINTS, CHARGES, DEMANDS, LIABILITIES, SUITS, DAMAGES,
LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF ACTION (COLLECTIVELY
"CLAIMS"), KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND WHETHER
OR NOT ACCRUED OR MATURED, WHICH ANY OF THEM MAY HAVE, ARISING OUT OF OR
RELATING TO EXECUTIVE'S EMPLOYMENT BY THE COMPANY OR INVESTMENT IN, OR
RELATIONSHIP OR DEALING WITH, THE COMPANY OR EXECUTIVE'S SERVICES AS AN OFFICER,
DIRECTOR OR EMPLOYEE OF THE COMPANY OR OTHERWISE RELATING TO THE TERMINATION OF
SUCH EMPLOYMENT OR SERVICES, AT ANY TIME PRIOR TO AND INCLUDING THE EFFECTIVE
TIME. THIS RELEASE INCLUDES BUT IS NOT LIMITED TO ANY CLAIMS AGAINST ANY OF THE
COMPANY PARTIES BASED ON, RELATING TO OR ARISING UNDER WRONGFUL DISCHARGE,
RETALIATION, BREACH OF CONTRACT (WHETHER ORAL OR WRITTEN), TORT, FRAUD,
DEFAMATION, SLANDER, BREACH OF PRIVACY, VIOLATION OF PUBLIC POLICY, NEGLIGENCE,
PROMISSORY ESTOPPEL, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT, THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT, OR ANY OTHER FEDERAL, COMMON, STATE OR
LOCAL LAW RELATING TO EMPLOYMENT (OR UNEMPLOYMENT), THE PAYMENT OF WAGES, SALARY
OR OTHER COMPENSATION, CIVIL OR HUMAN RIGHTS, OR DISCRIMINATION IN EMPLOYMENT
(BASED ON AGE OR ANY OTHER FACTOR) IN ALL CASES ARISING OUT OF OR RELATING TO
EXECUTIVE'S EMPLOYMENT BY THE COMPANY OR INVESTMENT IN THE COMPANY OR HIS
SERVICES AS AN OFFICER, DIRECTOR OR EMPLOYEE OF THE COMPANY, OR OTHERWISE
RELATING TO THE TERMINATION OF SUCH EMPLOYMENT OR SERVICES; PROVIDED, HOWEVER,
THAT THIS GENERAL RELEASE WILL NOT LIMIT OR RELEASE (I) EXECUTIVE'S RIGHTS UNDER
THIS AGREEMENT, (II) EXECUTIVE'S RIGHTS TO INDEMNIFICATION FROM THE COMPANY IN
RESPECT OF HIS SERVICES AS A DIRECTOR, OFFICER OR EMPLOYEE OF THE COMPANY AS
PROVIDED BY HIS INDEMNIFICATION AGREEMENT WITH THE COMPANY, BY PROVISIONS OF THE
MERGER AGREEMENT, BY LAW, OR BY THE CERTIFICATE OF INCORPORATION OR BY- LAWS (OR
LIKE CONSTITUTIVE DOCUMENTS) OF THE COMPANY, INCLUDING WITHOUT LIMITATION
EXECUTIVE'S RIGHTS TO, AND COVERAGE UNDER, DIRECTORS' AND OFFICERS' LIABILITY
INSURANCE MAINTAINED BY THE COMPANY, (III) EXECUTIVE'S RIGHT TO RECEIVE
CONSIDERATION IN CONNECTION WITH THE MERGER AS PROVIDED IN ARTICLE 2 OF THE
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MERGER AGREEMENT, OR (IV) EXECUTIVE'S ENTITLEMENT, IF ANY, TO CONTINUED MEDICAL
AND DENTAL INSURANCE COVERAGE UNDER AND PURSUANT TO THE CONSOLIDATED OMNIBUS
BUDGET RECONCILIATION ACT OF 1985. IN FURTHERANCE OF THIS RELEASE, EXECUTIVE, ON
BEHALF OF HIMSELF AND, TO THE EXTENT HE HAS THE POWER OR AUTHORITY TO DO SO, THE
EXECUTIVE PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT, FILE, PROSECUTE,
COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION
WITH THE FOREGOING), ANY CLAIMS, BEFORE OR WITH ANY COURT OR ANY ARBITRAL OR
ADMINISTRATIVE AUTHORITY, AGAINST ANY OF THE COMPANY PARTIES, AND REPRESENTS AND
WARRANTS THAT NO OTHER PERSON OR ENTITY HAS INITIATED OR, TO THE EXTENT WITHIN
HIS CONTROL, WILL INITIATE ANY SUCH CLAIMS ON HIS BEHALF, AND THAT IF SUCH A
CLAIM IS INITIATED, EXECUTIVE SHALL ACCEPT NO BENEFIT THEREFROM.
5. Additional Agreement. Executive hereby agrees to sign and deliver to
Parent the Addendum at the Closing (as defined in the Merger Agreement).
6. Confidentiality Obligations.
(a) Executive hereby acknowledges that all trade secrets and
confidential or proprietary information of the Company (collectively referred to
herein as "Confidential Information") constitute valuable, special and unique
assets of the Company's business. Executive agrees that, for a period of one
year from and after the Effective Time, Executive will hold Confidential
Information in strict confidence and will not publish, disseminate or otherwise
disclose, directly or indirectly, to any person other than the Company and
Parent and their respective officers, directors and employees, any Confidential
Information or use any Confidential Information for Executive's own personal
benefit or for the benefit of anyone other than the Company and Parent.
(b) For purposes of this paragraph 6, it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by the Company relating to Business
Opportunities or Intellectual Property (as hereinafter defined) or other
geological, geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Company whether oral or in
written form, whether or not included in the Company's Business Records (as
hereinafter defined), but shall exclude any information which has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Executive in violation of this
Agreement or of Executive's obligations under applicable law) or has been
disclosed to any third parties on a non-confidential basis by the Company or any
of its representatives; provided, however, that this paragraph 6 shall not be
applicable to the extent Executive is required to testify in a judicial or
regulatory proceeding, or to produce documents, pursuant to the order of a judge
or administrative law judge after Executive has given the Company reasonable
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notice and opportunity to seek relief from such requirement. The term "Business
Opportunities" shall mean all business ideas, prospects, proposals and other
opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are
located, which have been:
(i) developed by Executive during the period that Executive
has been employed by the Company, or
(ii) originated by any third party and brought to the
attention of Executive during his employment with the Company.
The term "Intellectual Property" shall mean all ideas, inventions, discoveries,
processes, designs, methods, substances, articles, computer programs, and
improvements (including, without limitation, enhancements to, or further
interpretation or processing of, information that was in the possession of
Executive prior to his employment with the Company), whether or not patentable
or copyrightable, which do not fall within the definition of Business
Opportunities, which have been discovered, conceived, invented, created, or
developed by Executive, alone or with others, during the term of Executive's
employment with the Company if such discovery, conception, invention, creation,
or development (i) occurred in the course of Executive's employment with the
Company, or (ii) occurred with the use of any of the Company's time, materials,
or facilities, or (iii) in the reasonable opinion of the Board of Directors of
the Company, relates or pertains in any way to the Company's purposes,
activities, or affairs.
7. Non-Compete Obligations. The purpose of the provisions of this
paragraph 7 are to protect the Company from unfair loss of goodwill and business
advantage and to shield Executive from pressure to use or disclose Confidential
Information or to trade on the goodwill belonging to the Company. Accordingly,
during the Post Termination Non-Compete Term (as hereinafter defined), Executive
will not engage or participate in any manner, whether directly or indirectly
through any family member or as an employee, employer, consultant, agent,
principal, partner, shareholder, officer, director, licensor, lender, lessor or
in any other individual or representative capacity, in any business or activity
which is engaged in leasing, acquiring, exploring, producing, gathering or
marketing hydrocarbons and related products within the boundaries of, or within
a 20-mile radius of the boundaries of, any mineral property interest of the
Company (including, without limitation, interests under a mineral lease,
overriding royalty interest, production payment, net profits interest, mineral
fee interest, or option or right to acquire any of the foregoing, or an area of
mutual interest as designated pursuant to contractual agreements between the
Company and any third party) and located in any of Lea County, New Mexico;
Gaines County, Texas; Dawson County, Montana; or Latimer, Pittsburg, Canadian,
McClain or Grady Counties, Oklahoma; provided, however, that, this paragraph 7
shall not preclude Executive from (i) making personal investments in securities
of oil and gas companies, if the aggregate amount owned by Executive and all
family members and affiliates does not exceed 5% of such company's outstanding
equity securities, (ii) serving as a director of any company (and its
successors), if the aggregate amount of securities of such company owned by
Executive and all family members and affiliates does not exceed 5% of such
company's outstanding equity securities or (iii) leasing, exploring, producing,
gathering or marketing hydrocarbons and related products with respect to any
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mineral property interest wherever located owned by Executive on the date of
this Agreement in his own name or in the name of a living trust created by
Executive. The term "Post Termination Non-Compete Term" means the one- year
period following the Effective Time.
8. Business Records.
(a) Executive agrees to promptly deliver to the Company no later
than the Effective Time, all documents relating to the business of the Company,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electronic logs, core data,
pressure data, lease files, well files and records, land files, abstracts, title
opinions, title or curative matters, contract files, notes, records, drawings,
manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals and any
other documents relating to the business of the Company (collectively, the
"Company's Business Records"), and all copies thereof and therefrom.
(b) Executive confirms that all of the Company's Business Records
(and all copies thereof and therefrom) that are required to be delivered to the
Company pursuant to this paragraph 8 constitute the exclusive property of the
Company.
(c) The obligation of confidentiality set forth in paragraph 6 above
shall continue notwithstanding Executive's delivery of any such documents to the
Company.
9. Employment Agreements. Each of the Company and Executive represents
and warrants that the Employment Agreement and any amendments thereto are
attached as exhibits to this Agreement.
10. False Claims Representations/Cooperation. Executive represents that
he has disclosed to the Company and Parent any information he has concerning any
conduct involving the Company which he has any reason to believe may be unlawful
or to involve any false claims to any United States governmental agency. From
and after the Effective Time, Executive promises to cooperate fully in any
investigation Parent or the Company undertakes into matters occurring during his
employment with the Company. From and after the Effective Time, Executive
further agrees to cooperate with Parent and/or the Company as reasonably
requested by Parent and/or the Company by responding to questions, attending
depositions, administrative proceedings and court hearings, executing documents,
and cooperating with Parent and/or the Company and its accountants and legal
counsel with respect to business issues, and/or claims and litigation of which
he has personal or corporate knowledge. From and after the Effective Time,
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Executive further agrees, except as required by subpoena or other applicable
legal process (after Parent and/or the Company has been given reasonable notice
and opportunity to seek relief from such requirement), to maintain, in strict
confidence, any information of which he has knowledge regarding current and/or
future claims, administrative proceedings and litigation. From and after the
Effective Time, Executive agrees, except as required by subpoena or other
applicable legal process (after Parent and/or the Company has been given
reasonable notice and opportunity to seek relief from such requirement), not to
communicate with any party(ies), their legal counsel or others adverse to Parent
and/or the Company in any such claims, administrative proceedings or litigation
except through Parent's and/or the Company's designated legal counsel. From and
after the Effective Time, Executive also shall make himself available at
reasonable times and upon reasonable notice to answer questions or provide other
information within his possession and requested by Parent and/or the Company
relating to Parent and/or the Company and their subsidiaries and/or their
respective operations in order to facilitate the smooth transition of
Executive's duties to his successor; provided, however, Executive shall not be
required to spend any particular amount of time on behalf of Parent and/or the
Company. Parent and/or the Company shall reimburse Executive for any documented
out-of-pocket expenses, including but not limited to reasonable legal fees,
reasonably incurred by Executive in complying with this paragraph 10, and shall
pay Executive a per diem amount, calculated based on Executive's annual base
salary in effect immediately prior to the Effective Time, for any periods that
Executive makes himself available to Parent and/or the Company pursuant to the
foregoing provisions of this paragraph 10.
11. Mail. From and after the Effective Time, the Company may open and
answer, and authorize others to open and answer, all mail communications, and
other correspondence addressed to Executive relating to Parent, the Company,
Merger Sub, or any of their respective subsidiaries or to Executive's employment
with the Company, and Executive shall promptly refer to the Company all
inquiries, mail communications, and correspondence received by him relating to
Parent, the Company, Merger Sub, or any of their respective subsidiaries or to
Executive's employment with the Company. If any such mail, communications or
correspondence received by the Company includes any threat of any claim against
Executive personally, the Company shall promptly notify Executive thereof. The
Company will promptly forward to Executive any of Executive's personal mail,
communications or correspondence received by the Company, unopened to the extent
it is reasonably ascertained to be of a personal nature.
12. Notices. Any notice required or permitted by this Agreement shall
be in writing, sent by registered or certified mail, return receipt requested,
addressed to the Board of Directors of the Company at the Company's then
principal office, or to Executive at the address set forth on the signature page
hereof, as the case may be, or to such other address or addresses as any party
hereto may from time to time specify in writing for that purpose in a notice
given to the other party in compliance with this paragraph 12. Notices shall be
deemed given when received.
13. Certain Acknowledgements. Executive acknowledges that before
entering into this Agreement he has had the opportunity to consult with an
attorney or other advisor of his choice, and has done so, and has not relied in
connection herewith on legal counsel for the Company. Executive acknowledges
that he has entered into this Agreement of his own free will, and that no
promises or representations have been made to him by any person to induce him to
enter into this Agreement other than the terms expressly set forth herein.
14. Prior Agreements. This Agreement integrates the whole of all
agreements and understandings of any sort or character between the parties
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concerning the subject matter of this Agreement, and supersedes all prior
negotiations, discussions, or agreements of any sort whatsoever relating to the
subject matter hereof. Further, all prior employment contracts between the
parties are superseded by this Agreement. There are no unwritten oral or verbal
understandings, agreements, or representations, of any sort whatsoever, between
Executive and the Company relating to the subject matter hereof, it being
stipulated that the rights of the parties shall be governed exclusively by this
Agreement.
15. Modification. This Agreement may not be modified or amended except
in writing signed by the parties. No term or condition of this Agreement will be
deemed to have been waived except in writing by the party charged with waiver. A
waiver shall operate only as to the specific term or condition waived and will
not constitute a waiver for the future or act on anything other than that
specifically waived.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart of this Agreement
that has attached to it separate signature pages which together contain the
signatures of all parties hereto shall for all purposes be deemed a fully
executed original. Facsimile signatures shall constitute original signatures.
17. Successor and Assigns. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to the respective successors and permitted assigns. Neither this Agreement
nor any rights or obligations hereunder may be assigned by Executive, other than
by will or the laws of descent or distribution, or the Company.
18. Severability. All provisions of this Agreement are intended to be
severable. In the event any provision or restriction contained herein is held to
be invalid or unenforceable in any respect, in whole or in part, such finding
shall in no way affect the validity or enforceability of any other provision of
this Agreement. The parties hereto further agree that any such invalid or
unenforceable provision shall be deemed modified so that it shall be enforced to
the greatest extent permissible under law, and to the extent that any court or
arbitrator of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court or arbitrator may limit this Agreement
to render it reasonable in light of the circumstances in which it is entered
into and specifically enforce this Agreement as limited.
19. Indemnification. EXECUTIVE AGREES, WARRANTS, AND REPRESENTS TO THE
COMPANY, PARENT AND MERGER SUB THAT EXECUTIVE HAS FULL EXPRESS AUTHORITY TO
RELEASE AND SETTLE ALL CLAIMS THAT ARE THE SUBJECT OF PARAGRAPH 4 OF THIS
AGREEMENT AND THAT EXECUTIVE HAS NOT GIVEN OR MADE ANY ASSIGNMENT TO ANYONE,
INCLUDING, BUT NOT LIMITED TO, THE EXECUTIVE PARTIES, OF ANY CLAIMS AGAINST ANY
PERSON OR ENTITY ASSOCIATED WITH ANY COMPANY PARTIES. TO THE EXTENT THAT ANY
CLAIMS RELATED TO THIS AGREEMENT MAY BE BROUGHT BY PERSONS OR ENTITIES CLAIMING
BY, THROUGH OR UNDER EXECUTIVE, INCLUDING, BUT NOT LIMITED TO, THE EXECUTIVE
PARTIES, THEN EXECUTIVE FURTHER AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS
ANY COMPANY PARTY, ITS AGENTS, AND ITS SUCCESSORS FROM ANY LAWSUIT OR OTHER
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PROCEEDING, JUDGMENT, OR SETTLEMENT ARISING FROM SUCH CLAIMS. EXECUTIVE FURTHER
HEREBY ASSIGNS TO THE COMPANY ALL CLAIMS COVERED BY PARAGRAPH 4 HEREOF.
20. Injunction. Executive hereby expressly acknowledges that any breach
or threatened breach by him of any of his obligations set forth in paragraph 4
(General Release and Covenant Not to Sue), paragraph 6 (Confidentiality
Obligations) and paragraph 7 (Non-Compete Obligations) of this Agreement may
result in significant and continuing injury and irreparable harm to Parent and
the Company, the monetary value of which would be impossible to establish.
Therefore, Executive agrees that Parent and the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction with respect to such
provisions. Further, if Executive violates the covenants and restrictions herein
and the Company brings legal action for injunctive or other equitable relief,
Executive agrees that the Company shall not be deprived of the benefit of the
full period of the restrictive covenant, as a result of the time involved in
obtaining such relief. Accordingly, Executive agrees that the provisions in this
paragraph 20 shall have a duration determined pursuant to paragraph 7 above,
computed from the date the relief is granted. The parties further agree that
this provision is a material inducement to the Company to enter into this
Agreement.
21. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma (without giving effect to
principles of conflict of law) and, where applicable, the laws of the United
States.
22. No Right to Additional Compensation. Except as expressly provided
in this Agreement or as provided in the Merger Agreement, from and after the
Effective Time, neither Parent, the Company, Merger Sub, nor any of their
predecessors, successors, assigns or affiliates shall have any further
obligation to Executive in connection with the Employment Agreement or
Executive's employment by the Company, including, but not limited to, severance,
compensation (including, but not limited to, deferred compensation, employment
contracts, stock options, bonuses and commissions), health insurance, life
insurance, disability insurance, club dues, vehicle allowances, vacation pay,
sick pay and any similar obligations.
23. No Admission. The parties agree that by entering into this
Agreement, no party admits to having engaged in any unlawful, wrongful or
unconscionable conduct, any such conduct being expressly denied.
24. Construction. The parties agree that this Agreement was negotiated
by the parties and shall not be construed against any party. As used herein, the
term "affiliate" shall have the meaning given such term in Rule 405 promulgated
under the Securities Act of 1933.
25. Arbitration. Except with respect to the provisions of this
Agreement relating to injunctive and other equitable relief, the parties agree
to submit to binding arbitration administered by the American Arbitration
Association under its National Rules for Resolution of Employment Disputes (the
"Arbitration") any and all disputes relating to or arising from Executive's
employment with the Company, the termination thereof, the Employment Agreement
or this Agreement. The arbitrator shall be qualified to hear employment/labor
matters. Each party shall be responsible for its respective costs and attorneys'
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fees incurred in connection with the Arbitration, and the Arbitration fees shall
be divided equally between Executive, on the one hand, and the Company, on the
other hand. The decision of the Arbitrator shall be binding on the parties and
not subject to appeal. Except to the extent required by law, the Arbitration
result shall be kept confidential.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by an officer thereof thereunto duly authorized,
and Executive has hereunto set his hand, on the day and year first above
written.
HOME-STAKE OIL & GAS COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-------------------------------------------
ROBERT C. SIMPSON
Address:
--------------------------
--------------------------
--------------------------
[SIGNATURE PAGE TO SEPARATION AGREEMENT]
<PAGE>
EXHIBIT A
ADDENDUM TO SEPARATION AGREEMENT
This Addendum to Separation Agreement (this "Addendum") supplements the
Separation Agreement between Robert C. Simpson (the "Executive") and Home-Stake
Oil & Gas Company, an Oklahoma corporation (the "Company"), dated October __,
2000 (the "Separation Agreement"). All capitalized terms used herein that are
not defined herein but are defined in the Separation Agreement shall have the
meanings assigned to them in the Separation Agreement.
Executive hereby agrees that paragraph 4 (General Release and Covenant
Not to Sue) of the Separation Agreement applies with respect to all Claims,
known or unknown of any kind and every nature whatsoever, and whether or not
accrued or matured, which any of the Company Parties may have, arising out of or
relating to Executive's employment by the Company or investment in, or
relationship or dealing with, the Company or Executive's services as an officer,
director or employee of the Company or otherwise relating to the termination of
such employment or services, at any time prior to and including the Effective
Time.
Executive acknowledges that the provisions of this Addendum are in
addition to, and do not supercede, the provisions in the Separation Agreement.
IN WITNESS WHEREOF, Executive has hereunto set his hand, this ____ day
of __________, 2000.
-------------------------------
ROBERT C. SIMPSON
<PAGE>
Exhibit B-2
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement") is made and entered into
on October __, 2000 between Chris K. Corcoran ("Executive") and Home-Stake Oil &
Gas Company, an Oklahoma corporation (the "Company").
WHEREAS, Executive and the Company are parties to an Employment
Agreement, dated November 30, 1999, and effective as of November 4, 1999,
pursuant to which the Company has employed Executive (the "Employment
Agreement");
WHEREAS, concurrently with the execution of this Agreement, Cortez Oil
& Gas, Inc., a Delaware corporation ("Parent"), Cortez Acquisition Company, an
Oklahoma corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
the Company have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into the Company,
and the Company will become a wholly-owned subsidiary of Parent (the "Merger");
and
WHEREAS, the Merger constitutes a Change in Control (as defined in the
Employment Agreement) and Executive and the Company have mutually agreed to
terminate the Employment Agreement and Executive's employment with the Company
without further obligation of either party under the Employment Agreement,
effective as of the effective time of the Merger (the "Effective Time").
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, and promises set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Executive and the Company hereby agree as follows:
1. Termination. The parties hereby represent and warrant that prior to
the Effective Time, Executive's employment relationship with the Company was
pursuant to and governed solely by the Employment Agreement. Executive's
employment with the Company is hereby terminated as of the Effective Time.
Executive further agrees to and does hereby resign effective as of the Effective
Time from any other appointments or positions which he may hold with the
Company, including, without limitation, his position as a director and/or
officer of the Company. Executive agrees to execute all further documents which
Parent or the Company may reasonably request of him to effectuate such
resignations.
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2. Termination Consideration. In connection with such termination of
employment and the execution of this Agreement, the Company shall cause to be
paid to Executive a one- time cash payment of $__________ (such amount being
comprised of severance in the amount of $___________ and a transaction bonus of
$____________) (the "Severance Payment"). In addition, in full and complete
satisfaction of the Company's obligation to indemnify (however arising)
Executive from and against any taxes imposed on Executive by Section 4999 of the
Internal Revenue Code of 1986, as amended, the Company shall cause to be paid to
Executive a cash payment of $_____________ (collectively with the Severance
Payment, the "Termination Payment") at the Effective Time. Delivery of the
Termination Payment to Executive is conditioned upon the delivery and execution
by Executive of (i) this Agreement on the date the Merger Agreement is fully
executed by all parties thereto; and (ii) the Addendum to this Agreement
attached hereto as Exhibit A (the "Addendum") at the Closing (as defined in the
Merger Agreement). The Company shall make the Termination Payment at the
Effective Time, but Executive shall not be entitled to receive the Termination
Payment unless and until the Company receives each document described in this
paragraph 2 duly executed by Executive.
3. Taxes. The termination consideration set forth in paragraph 2 of
this Agreement shall be subject to applicable federal, state and local
withholding taxes. Executive agrees that, to the extent that any individual
federal, state or local income or excise taxes of any kind may be due as a
result of any such payment to Executive, Executive shall be solely responsible
for such taxes and will indemnify, defend, and hold harmless the Company in the
event there is any claim against the Company for such taxes.
4. General Release and Covenant Not to Sue. EFFECTIVE AT THE EFFECTIVE
TIME, EXECUTIVE, ON BEHALF OF HIMSELF, AND TO THE EXTENT HE HAS THE POWER OR
AUTHORITY TO DO SO, HIS FAMILY, ATTORNEYS, HEIRS, ESTATE, AGENTS, EXECUTORS,
REPRESENTATIVES, ADMINISTRATORS AND EACH OF THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS (TOGETHER, THE "EXECUTIVE PARTIES"), HEREBY GENERALLY RELEASES AND
FOREVER DISCHARGES, THE COMPANY, PARENT, MERGER SUB, AND THEIR RESPECTIVE
PREDECESSORS, SUCCESSORS, ASSIGNS, PARENTS, SUBSIDIARIES AND AFFILIATES AND EACH
OF THE FOREGOING ENTITIES' RESPECTIVE PAST, PRESENT AND FUTURE SHAREHOLDERS,
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, PRINCIPALS, INSURERS,
ATTORNEYS, EMPLOYEE BENEFIT PROGRAMS (AND THE TRUSTEES, ADMINISTRATORS,
FIDUCIARIES, REPRESENTATIVES, COMMITTEES AND INSURERS OF SUCH PROGRAMS) IN THEIR
RESPECTIVE CAPACITIES AS SUCH, AND ANY PERSON ACTING BY, THROUGH, UNDER OR IN
CONCERT WITH ANY OF THE FOREGOING ENTITIES (TOGETHER THE "COMPANY PARTIES") FROM
ANY AND ALL CLAIMS, COMPLAINTS, CHARGES, DEMANDS, LIABILITIES, SUITS, DAMAGES,
LOSSES, EXPENSES, ATTORNEYS' FEES, OBLIGATIONS OR CAUSES OF ACTION (COLLECTIVELY
"CLAIMS"), KNOWN OR UNKNOWN OF ANY KIND AND EVERY NATURE WHATSOEVER, AND WHETHER
OR NOT ACCRUED OR MATURED, WHICH ANY OF THEM MAY HAVE, ARISING OUT OF OR
RELATING TO EXECUTIVE'S EMPLOYMENT BY THE COMPANY OR INVESTMENT IN, OR
RELATIONSHIP OR DEALING WITH, THE COMPANY OR EXECUTIVE'S SERVICES AS AN OFFICER,
DIRECTOR OR EMPLOYEE OF THE COMPANY OR OTHERWISE RELATING TO THE TERMINATION OF
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SUCH EMPLOYMENT OR SERVICES, AT ANY TIME PRIOR TO AND INCLUDING THE EFFECTIVE
TIME. THIS RELEASE INCLUDES BUT IS NOT LIMITED TO ANY CLAIMS AGAINST ANY OF THE
COMPANY PARTIES BASED ON, RELATING TO OR ARISING UNDER WRONGFUL DISCHARGE,
RETALIATION, BREACH OF CONTRACT (WHETHER ORAL OR WRITTEN), TORT, FRAUD,
DEFAMATION, SLANDER, BREACH OF PRIVACY, VIOLATION OF PUBLIC POLICY, NEGLIGENCE,
PROMISSORY ESTOPPEL, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT, THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT, OR ANY OTHER FEDERAL, COMMON, STATE OR
LOCAL LAW RELATING TO EMPLOYMENT (OR UNEMPLOYMENT), THE PAYMENT OF WAGES, SALARY
OR OTHER COMPENSATION, CIVIL OR HUMAN RIGHTS, OR DISCRIMINATION IN EMPLOYMENT
(BASED ON AGE OR ANY OTHER FACTOR) IN ALL CASES ARISING OUT OF OR RELATING TO
EXECUTIVE'S EMPLOYMENT BY THE COMPANY OR INVESTMENT IN THE COMPANY OR HIS
SERVICES AS AN OFFICER, DIRECTOR OR EMPLOYEE OF THE COMPANY, OR OTHERWISE
RELATING TO THE TERMINATION OF SUCH EMPLOYMENT OR SERVICES; PROVIDED, HOWEVER,
THAT THIS GENERAL RELEASE WILL NOT LIMIT OR RELEASE (I) EXECUTIVE'S RIGHTS UNDER
THIS AGREEMENT, (II) EXECUTIVE'S RIGHTS TO INDEMNIFICATION FROM THE COMPANY IN
RESPECT OF HIS SERVICES AS A DIRECTOR, OFFICER OR EMPLOYEE OF THE COMPANY AS
PROVIDED BY HIS INDEMNIFICATION AGREEMENT WITH THE COMPANY, BY PROVISIONS OF THE
MERGER AGREEMENT, BY LAW, OR BY THE CERTIFICATE OF INCORPORATION OR BY- LAWS (OR
LIKE CONSTITUTIVE DOCUMENTS) OF THE COMPANY, INCLUDING WITHOUT LIMITATION
EXECUTIVE'S RIGHTS TO, AND COVERAGE UNDER, DIRECTORS' AND OFFICERS' LIABILITY
INSURANCE MAINTAINED BY THE COMPANY, (III) EXECUTIVE'S RIGHT TO RECEIVE
CONSIDERATION IN CONNECTION WITH THE MERGER AS PROVIDED IN ARTICLE 2 OF THE
MERGER AGREEMENT, OR (IV) EXECUTIVE'S ENTITLEMENT, IF ANY, TO CONTINUED MEDICAL
AND DENTAL INSURANCE COVERAGE UNDER AND PURSUANT TO THE CONSOLIDATED OMNIBUS
BUDGET RECONCILIATION ACT OF 1985. IN FURTHERANCE OF THIS RELEASE, EXECUTIVE, ON
BEHALF OF HIMSELF AND, TO THE EXTENT HE HAS THE POWER OR AUTHORITY TO DO SO, THE
EXECUTIVE PARTIES, HEREBY COVENANTS FOREVER NOT TO ASSERT, FILE, PROSECUTE,
COMMENCE, INSTITUTE (OR SPONSOR OR PURPOSELY FACILITATE ANY PERSON IN CONNECTION
WITH THE FOREGOING), ANY CLAIMS, BEFORE OR WITH ANY COURT OR ANY ARBITRAL OR
ADMINISTRATIVE AUTHORITY, AGAINST ANY OF THE COMPANY PARTIES, AND REPRESENTS AND
WARRANTS THAT NO OTHER PERSON OR ENTITY HAS INITIATED OR, TO THE EXTENT WITHIN
HIS CONTROL, WILL INITIATE ANY SUCH CLAIMS ON HIS BEHALF, AND THAT IF SUCH A
CLAIM IS INITIATED, EXECUTIVE SHALL ACCEPT NO BENEFIT THEREFROM.
5. Additional Agreement. Executive hereby agrees to sign and deliver to
Parent the Addendum at the Closing (as defined in the Merger Agreement).
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6. Confidentiality Obligations.
(a) Executive hereby acknowledges that all trade secrets and
confidential or proprietary information of the Company (collectively referred to
herein as "Confidential Information") constitute valuable, special and unique
assets of the Company's business. Executive agrees that Executive will hold
Confidential Information in strict confidence and will not publish, disseminate
or otherwise disclose, directly or indirectly, to any person other than the
Company and Parent and their respective officers, directors and employees, any
Confidential Information or use any Confidential Information for Executive's own
personal benefit or for the benefit of anyone other than the Company and Parent.
(b) For purposes of this paragraph 6, it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by the Company relating to Business
Opportunities or Intellectual Property (as hereinafter defined) or other
geological, geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Company whether oral or in
written form, whether or not included in the Company's Business Records (as
hereinafter defined), but shall exclude any information which has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Executive in violation of this
Agreement or of Executive's obligations under applicable law) or has been
disclosed to any third parties on a non-confidential basis by the Company or any
of its representatives; provided, however, that this paragraph 6 shall not be
applicable to the extent Executive is required to testify in a judicial or
regulatory proceeding, or to produce documents, pursuant to the order of a judge
or administrative law judge after Executive has given the Company reasonable
notice and opportunity to seek relief from such requirement. The term "Business
Opportunities" shall mean all business ideas, prospects, proposals and other
opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are
located, which have been:
(i) developed by Executive during the period that Executive
has been employed by the Company, or
(ii) originated by any third party and brought to the
attention of Executive during his employment with the Company.
The term "Intellectual Property" shall mean all ideas, inventions, discoveries,
processes, designs, methods, substances, articles, computer programs, and
improvements (including, without limitation, enhancements to, or further
interpretation or processing of, information that was in the possession of
Executive prior to his employment with the Company), whether or not patentable
or copyrightable, which do not fall within the definition of Business
Opportunities, which have been discovered, conceived, invented, created, or
developed by Executive, alone or with others, during the term of Executive's
employment with the Company if such discovery, conception, invention, creation,
or development (i) occurred in the course of Executive's employment with the
Company, or (ii) occurred with the use of any of the Company's time, materials,
or facilities, or (iii) in the reasonable opinion of the Board of Directors of
the Company, relates or pertains in any way to the Company's purposes,
activities, or affairs.
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7. Non-Compete Obligations. The purpose of the provisions of this
paragraph 7 are to protect the Company from unfair loss of goodwill and business
advantage and to shield Executive from pressure to use or disclose Confidential
Information or to trade on the goodwill belonging to the Company. Accordingly,
during the Post Termination Non-Compete Term (as hereinafter defined), Executive
will not engage or participate in any manner, whether directly or indirectly
through any family member or as an employee, employer, consultant, agent,
principal, partner, shareholder, officer, director, licensor, lender, lessor or
in any other individual or representative capacity, in any business or activity
which is engaged in leasing, acquiring, exploring, producing, gathering or
marketing hydrocarbons and related products within the boundaries of, or within
a 20-mile radius of the boundaries of, any mineral property interest of the
Company (including, without limitation, interests under a mineral lease,
overriding royalty interest, production payment, net profits interest, mineral
fee interest, or option or right to acquire any of the foregoing, or an area of
mutual interest as designated pursuant to contractual agreements between the
Company and any third party) and located in any of Lea County, New Mexico;
Gaines County, Texas; Dawson County, Montana; or Latimer, Pittsburg, Canadian,
McClain or Grady Counties, Oklahoma; provided, however, that, this paragraph 7
shall not preclude Executive from (i) making personal investments in securities
of oil and gas companies if the aggregate amount owned by Executive and all
family members and affiliates does not exceed 5% of such company's outstanding
equity securities, or (ii) serving as a director, officer or employee of any
company (and its successors), if the aggregate amount of securities of such
company owned by Executive and all family members and affiliates does not exceed
5% of such company's outstanding equity securities. The term "Post Termination
Non-Compete Term" means the one-year period following the Effective Time.
8. Business Records.
(a) Executive agrees to promptly deliver to the Company no later
than the Effective Time, all documents relating to the business of the Company,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electronic logs, core data,
pressure data, lease files, well files and records, land files, abstracts, title
opinions, title or curative matters, contract files, notes, records, drawings,
manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals and any
other documents relating to the business of the Company (collectively, the
"Company's Business Records"), and all copies thereof and therefrom.
(b) Executive confirms that all of the Company's Business Records
(and all copies thereof and therefrom) that are required to be delivered to the
Company pursuant to this paragraph 8 constitute the exclusive property of the
Company.
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(c) The obligation of confidentiality set forth in paragraph 6 above
shall continue notwithstanding Executive's delivery of any such documents to the
Company.
9. Employment Agreements. Each of the Company and Executive represents
and warrants that the Employment Agreement and any amendments thereto are
attached as exhibits to this Agreement.
10. False Claims Representations/Cooperation. Executive represents that
he has disclosed to the Company and Parent any information he has concerning any
conduct involving the Company which he has any reason to believe may be unlawful
or to involve any false claims to any United States governmental agency. From
and after the Effective Time, Executive promises to cooperate fully in any
investigation Parent or the Company undertakes into matters occurring during his
employment with the Company. From and after the Effective Time, Executive
further agrees to cooperate with Parent and/or the Company as reasonably
requested by Parent and/or the Company by responding to questions, attending
depositions, administrative proceedings and court hearings, executing documents,
and cooperating with Parent and/or the Company and its accountants and legal
counsel with respect to business issues, and/or claims and litigation of which
he has personal or corporate knowledge. From and after the Effective Time,
Executive further agrees, except as required by subpoena or other applicable
legal process (after Parent and/or the Company has been given reasonable notice
and opportunity to seek relief from such requirement), to maintain, in strict
confidence, any information of which he has knowledge regarding current and/or
future claims, administrative proceedings and litigation. From and after the
Effective Time, Executive agrees, except as required by subpoena or other
applicable legal process (after Parent and/or the Company has been given
reasonable notice and opportunity to seek relief from such requirement), not to
communicate with any party(ies), their legal counsel or others adverse to Parent
and/or the Company in any such claims, administrative proceedings or litigation
except through Parent's and/or the Company's designated legal counsel. From and
after the Effective Time, Executive also shall make himself available at
reasonable times and upon reasonable notice to answer questions or provide other
information within his possession and requested by Parent and/or the Company
relating to Parent and/or the Company and their subsidiaries and/or their
respective operations in order to facilitate the smooth transition of
Executive's duties to his successor; provided, however, Executive shall not be
required to spend any particular amount of time on behalf of Parent and/or the
Company. Parent and/or the Company shall reimburse Executive for any documented
out-of-pocket expenses, including but not limited to reasonable legal fees,
reasonably incurred by Executive in complying with this paragraph 10, and shall
pay Executive a per diem amount, calculated based on Executive's annual base
salary in effect immediately prior to the Effective Time, for any periods that
Executive makes himself available to Parent and/or the Company pursuant to the
foregoing provisions of this paragraph 10.
11. Mail. From and after the Effective Time, the Company may open and
answer, and authorize others to open and answer, all mail communications, and
other correspondence addressed to Executive relating to Parent, the Company,
Merger Sub, or any of their respective subsidiaries or to Executive's employment
6
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with the Company, and Executive shall promptly refer to the Company all
inquiries, mail communications, and correspondence received by him relating to
Parent, the Company, Merger Sub, or any of their respective subsidiaries or to
Executive's employment with the Company. If any such mail, communications or
correspondence received by the Company includes any threat of any claim against
Executive personally, the Company shall promptly notify Executive thereof. The
Company will promptly forward to Executive any of Executive's personal mail,
communications or correspondence received by the Company, unopened to the extent
it is reasonably ascertained to be of a personal nature.
12. Notices. Any notice required or permitted by this Agreement shall
be in writing, sent by registered or certified mail, return receipt requested,
addressed to the Board of Directors of the Company at the Company's then
principal office, or to Executive at the address set forth on the signature page
hereof, as the case may be, or to such other address or addresses as any party
hereto may from time to time specify in writing for that purpose in a notice
given to the other party in compliance with this paragraph 12. Notices shall be
deemed given when received.
13. Certain Acknowledgements. Executive acknowledges that before
entering into this Agreement he has had the opportunity to consult with an
attorney or other advisor of his choice, and has done so, and has not relied in
connection herewith on legal counsel for the Company. Executive acknowledges
that he has entered into this Agreement of his own free will, and that no
promises or representations have been made to him by any person to induce him to
enter into this Agreement other than the terms expressly set forth herein.
14. Prior Agreements. This Agreement integrates the whole of all
agreements and understandings of any sort or character between the parties
concerning the subject matter of this Agreement, and supersedes all prior
negotiations, discussions, or agreements of any sort whatsoever relating to the
subject matter hereof. Further, all prior employment contracts between the
parties are superseded by this Agreement. There are no unwritten oral or verbal
understandings, agreements, or representations, of any sort whatsoever, between
Executive and the Company relating to the subject matter hereof, it being
stipulated that the rights of the parties shall be governed exclusively by this
Agreement.
15. Modification. This Agreement may not be modified or amended except
in writing signed by the parties. No term or condition of this Agreement will be
deemed to have been waived except in writing by the party charged with waiver. A
waiver shall operate only as to the specific term or condition waived and will
not constitute a waiver for the future or act on anything other than that
specifically waived.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart of this Agreement
that has attached to it separate signature pages which together contain the
signatures of all parties hereto shall for all purposes be deemed a fully
executed original. Facsimile signatures shall constitute original signatures.
17. Successor and Assigns. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to the respective successors and permitted assigns. Neither this Agreement
nor any rights or obligations hereunder may be assigned by Executive, other than
by will or the laws of descent or distribution, or the Company.
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18. Severability. All provisions of this Agreement are intended to be
severable. In the event any provision or restriction contained herein is held to
be invalid or unenforceable in any respect, in whole or in part, such finding
shall in no way affect the validity or enforceability of any other provision of
this Agreement. The parties hereto further agree that any such invalid or
unenforceable provision shall be deemed modified so that it shall be enforced to
the greatest extent permissible under law, and to the extent that any court or
arbitrator of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court or
arbitrator may limit this Agreement to render it reasonable in light of the
circumstances in which it is entered into and specifically enforce this
Agreement as limited.
19. Indemnification. EXECUTIVE AGREES, WARRANTS, AND REPRESENTS TO THE
COMPANY, PARENT AND MERGER SUB THAT EXECUTIVE HAS FULL EXPRESS AUTHORITY TO
RELEASE AND SETTLE ALL CLAIMS THAT ARE THE SUBJECT OF PARAGRAPH 4 OF THIS
AGREEMENT AND THAT EXECUTIVE HAS NOT GIVEN OR MADE ANY ASSIGNMENT TO ANYONE,
INCLUDING, BUT NOT LIMITED TO, THE EXECUTIVE PARTIES, OF ANY CLAIMS AGAINST ANY
PERSON OR ENTITY ASSOCIATED WITH ANY COMPANY PARTIES. TO THE EXTENT THAT ANY
CLAIMS RELATED TO THIS AGREEMENT MAY BE BROUGHT BY PERSONS OR ENTITIES CLAIMING
BY, THROUGH OR UNDER EXECUTIVE, INCLUDING, BUT NOT LIMITED TO, THE EXECUTIVE
PARTIES, THEN EXECUTIVE FURTHER AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS
ANY COMPANY PARTY, ITS AGENTS, AND ITS SUCCESSORS FROM ANY LAWSUIT OR OTHER
PROCEEDING, JUDGMENT, OR SETTLEMENT ARISING FROM SUCH CLAIMS. EXECUTIVE FURTHER
HEREBY ASSIGNS TO THE COMPANY ALL CLAIMS COVERED BY PARAGRAPH 4 HEREOF.
20. Injunction. Executive hereby expressly acknowledges that any breach
or threatened breach by him of any of his obligations set forth in paragraph 4
(General Release and Covenant Not to Sue), paragraph 6 (Confidentiality
Obligations) and paragraph 7 (Non-Compete Obligations) of this Agreement may
result in significant and continuing injury and irreparable harm to Parent and
the Company, the monetary value of which would be impossible to establish.
Therefore, Executive agrees that Parent and the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction with respect to such
provisions. Further, if Executive violates the covenants and restrictions herein
and the Company brings legal action for injunctive or other equitable relief,
Executive agrees that the Company shall not be deprived of the benefit of the
full period of the restrictive covenant, as a result of the time involved in
obtaining such relief. Accordingly, Executive agrees that the provisions in this
paragraph 20 shall have a duration determined pursuant to paragraph 7 above,
computed from the date the relief is granted. The parties further agree that
this provision is a material inducement to the Company to enter into this
Agreement.
21. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma (without giving effect to
principles of conflict of law) and, where applicable, the laws of the United
States.
22. No Right to Additional Compensation. Except as expressly provided
in this Agreement or as provided in the Merger Agreement, from and after the
Effective Time, neither Parent, the Company, Merger Sub, nor any of their
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predecessors, successors, assigns or affiliates shall have any further
obligation to Executive in connection with the Employment Agreement or
Executive's employment by the Company, including, but not limited to, severance,
compensation (including, but not limited to, deferred compensation, employment
contracts, stock options, bonuses and commissions), health insurance, life
insurance, disability insurance, club dues, vehicle allowances, vacation pay,
sick pay and any similar obligations.
23. No Admission. The parties agree that by entering into this
Agreement, no party admits to having engaged in any unlawful, wrongful or
unconscionable conduct, any such conduct being expressly denied.
24. Construction. The parties agree that this Agreement was negotiated
by the parties and shall not be construed against any party. As used herein, the
term "affiliate" shall have the meaning given such term in Rule 405 promulgated
under the Securities Act of 1933.
25. Arbitration. Except with respect to the provisions of this
Agreement relating to injunctive and other equitable relief, the parties agree
to submit to binding arbitration administered by the American Arbitration
Association under its National Rules for Resolution of Employment Disputes (the
"Arbitration") any and all disputes relating to or arising from Executive's
employment with the Company, the termination thereof, the Employment Agreement
or this Agreement. The arbitrator shall be qualified to hear employment/labor
matters. Each party shall be responsible for its respective costs and attorneys'
fees incurred in connection with the Arbitration, and the Arbitration fees shall
be divided equally between Executive, on the one hand, and the Company, on the
other hand. The decision of the Arbitrator shall be binding on the parties and
not subject to appeal. Except to the extent required by law, the Arbitration
result shall be kept confidential.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by an officer thereof thereunto duly authorized,
and Executive has hereunto set his hand on the day and year first above written.
HOME-STAKE OIL & GAS COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
CHRIS K. CORCORAN
Address:
------------------------------------
------------------------------------
------------------------------------
[SIGNATURE PAGE TO SEPARATION AGREEMENT]
<PAGE>
EXHIBIT A
ADDENDUM TO SEPARATION AGREEMENT
This Addendum to Separation Agreement (this "Addendum") supplements the
Separation Agreement between Chris K. Corcoran (the "Executive") and Home-Stake
Oil & Gas Company, an Oklahoma corporation (the "Company"), dated October __,
2000 (the "Separation Agreement"). All capitalized terms used herein that are
not defined herein but are defined in the Separation Agreement shall have the
meanings assigned to them in the Separation Agreement.
Executive hereby agrees that paragraph 4 (General Release and Covenant
Not to Sue) of the Separation Agreement applies with respect to all Claims,
known or unknown of any kind and every nature whatsoever, and whether or not
accrued or matured, which any of the Company Parties may have, arising out of or
relating to Executive's employment by the Company or investment in, or
relationship or dealing with, the Company or Executive's services as an officer,
director or employee of the Company or otherwise relating to the termination of
such employment or services, at any time prior to and including the Effective
Time.
Executive acknowledges that the provisions of this Addendum are in
addition to, and do not supercede, the provisions in the Separation Agreement.
IN WITNESS WHEREOF, Executive has hereunto set his hand, this ____ day
of _______________, 2000.
------------------------------
CHRIS K. CORCORAN
<PAGE>
Exhibit C
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 to Rights Agreement (this "Rights Agreement
Amendment"), dated as of October ___, 2000, is between Home-Stake Oil & Gas
Company, an Oklahoma corporation (the "Corporation), and UMB Bank, N.A., as
Rights Agent (the "Rights Agent").
RECITALS
WHEREAS, the Corporation and the Rights Agent are parties to a Rights
Agreement, dated as of January 3, 2000 (the "Rights Agreement"); and
WHEREAS, concurrently herewith, the Corporation, Cortez Oil & Gas,
Inc., a Delaware corporation ("Parent"), and Cortez Acquisition Company, an
Oklahoma corporation ("Parent Sub"), are entering into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which Parent
Sub will merge with and into the Corporation (the "Merger"); and
WHEREAS, Parent and Parent Sub are entering into the Merger Agreement
in reliance on and in consideration of the terms of this Rights Agreement
Amendment; and
WHEREAS, pursuant to Sections 27 and 28 of the Rights Agreement, the
Board of Directors of the Corporation has determined that an amendment to the
Rights Agreement as set forth herein is necessary and desirable in connection
with the foregoing and the Corporation and the Rights Agent desire to evidence
such amendment in writing.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, and intending to be
legally bound hereby, the Corporation hereby amends the Rights Agreement as
follows:
1. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, neither Parent nor Parent Sub shall be deemed to be an
Acquiring Person solely by virtue of (i) the consummation of the
Merger, (ii) the execution of the Merger Agreement, or (iii) the
execution of the Stock Voting Agreements."
2. Amendment of Section 1(v). Section 1(v) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, a Shares Acquisition Date shall not be deemed to have
occurred solely as the result of (i) the consummation of the Merger,
(ii) the execution of the Merger Agreement, or (iii) the execution of
the Stock Voting Agreements."
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3. Amendment of Section 1. Section 1 of the Rights Agreement is amended
to add the following at the end thereof:
(z) "Merger" shall mean the merger of the Corporation and
Parent Sub pursuant to the Merger Agreement.
(aa) "Merger Agreement" shall mean that certain Agreement
and Plan of Merger, dated as of October ___, 2000, by
and between the Corporation, Parent and Parent Sub.
(bb) "Parent" shall mean Cortez Oil & Gas, Inc., a
Delaware corporation.
(cc) "Parent Sub" shall mean Cortez Acquisition Company,
an Oklahoma corporation.
(dd) "Stock Voting Agreements" shall mean the separate
voting agreements, dated as of October ___, 2000,
entered into with Parent by certain of the officers
and directors of the Corporation in connection with
the Merger."
4. Amendment of Section 3(a). Section 3(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the
contrary, a Distribution Date shall not be deemed to have occurred
solely as the result of (i) the consummation of the Merger, (ii) the
execution of the Merger Agreement, or (iii) the execution of the Stock
Voting Agreements."
5. Addition of Section 35. The parties hereto hereby amend the Rights
Agreement by adding the following Section 35 to the Rights Agreement:
"Section 35. Termination. Simultaneously with the effective
time of the Merger, (i) the Rights Agreement shall be terminated and be
without any further force or effect, (ii) none of the parties to the
Rights Agreement will have any rights, obligations or liabilities
thereunder, provided, however, Section 18 of the Rights Agreement shall
survive termination of the Rights Agreement, and (iii) the holders of
the Rights shall not be entitled to any benefits, rights or other
interests under the Rights Agreement, including without limitation the
right to purchase or otherwise acquire shares of the Preferred Stock or
any other securities of the Corporation."
6. Effectiveness. This Rights Agreement Amendment shall be deemed
effective as of the date first written above. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
7. Severability. If any term, provision, covenant or restriction of
this Rights Agreement Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Rights Agreement Amendment
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shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
8. Governing Law. This Rights Agreement Amendment shall be deemed to be
a contract made under the laws of the State of Oklahoma and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State,
except that all provisions regarding the rights, duties and obligations of the
Rights Agent shall be governed by and construed in accordance with the law of
the State of Missouri applicable to contracts made and to be performed entirely
within such State.
9. Counterparts. This Rights Agreement Amendment may be executed in any
number of counterparts, each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement Amendment to be duly executed by their respective authorized officers,
all as of the day and year first above written.
HOME-STAKE OIL & GAS COMPANY
By:
-----------------------------------------
Name: Robert C. Simpson
Title: Chief Executive Officer
and President
UMB BANK, N.A.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[SIGNATURE PAGE TO RIGHTS AGREEMENT AMENDMENT]
<PAGE>
