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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 27, 1996
THE PHOENIX RESOURCE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-547 95-1927105
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
6525 North Meridian Avenue
Oklahoma City, Oklahoma 73116-1491
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (405) 728-5100
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ITEM 5. OTHER EVENTS
On March 27, 1996, The Phoenix Resource Companies, Inc. ("Phoenix")
entered into an Agreement and Plan of Merger by and among Phoenix, Apache
Corporation ("Apache") and YPY Acquisitions, Inc., which is attached hereto as
Exhibit 99.1 and incorporated herein by reference, pursuant to which each of
Phoenix's outstanding shares of common stock will be converted into the right
to receive .75 shares of Apache common stock and $4.00 in cash. Phoenix issued
a press release dated March 28, 1996, which is attached hereto as Exhibit 99.2
and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
EXHIBIT DOCUMENT
------- --------
99.1 Agreement and Plan of Merger by and among Apache
Corporation, YPY Acquisitions, Inc. and The Phoenix
Resource Companies, Inc., dated March 27, 1996.
99.2 Press Release, dated March 28, 1996 (Phoenix to Merge
with Apache).
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE PHOENIX RESOURCE COMPANIES, INC.
Date: April 1, 1996 By: /s/ MARK W. ANSCHUTZ
-----------------------------------
Mark W. Anschutz
Vice President
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EXHIBIT INDEX
EXHIBIT DOCUMENT
------- --------
99.1 Agreement and Plan of Merger by and among Apache
Corporation, YPY Acquisitions, Inc. and The Phoenix
Resource Companies, Inc., dated March 27, 1996.
99.2 Press Release, dated March 28, 1996 (Phoenix to Merge
with Apache).
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Exhibit 99.1
===============================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
APACHE CORPORATION
(THE "PARENT"),
YPY ACQUISITIONS, INC.
(THE "MERGER SUB")
AND
THE PHOENIX RESOURCE COMPANIES, INC.
(THE "COMPANY"),
DATED AS OF MARCH 27, 1996
===============================================================================
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TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER
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1.1. The Merger...................................................... 2
1.2. Effective Time of the Merger.................................... 2
1.3. Closing......................................................... 2
1.4. Effects of the Merger........................................... 2
1.5. Officers and Directors.......................................... 3
1.6. Alternative Structure........................................... 3
1.7. Board of Directors of Parent.................................... 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. Effect on Capital Stock......................................... 4
(a) Capital Stock of the Merger Sub........................... 4
(b) Cancellation of Treasury Stock and Parent-Owned Stock..... 4
(c) Merger Consideration...................................... 4
2.2. Exchange of Certificates........................................ 4
(a) Exchange Agent............................................ 4
(b) Exchange Procedures....................................... 5
(c) Dividends and Distributions with Respect to
Unsurrendered Certificates.............................. 5
(d) No Further Ownership Rights in Company Common Stock ...... 5
(e) No Fractional Shares...................................... 6
(f) Termination of Exchange Agent............................. 6
(g) No Liability.............................................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company................... 7
(a) Organization, Standing and Power.......................... 7
(b) Capital Structure ........................................ 7
(c) Authority; Non-Contravention.............................. 8
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(d) SEC Documents............................................. 9
(e) Absence of Certain Changes or Events...................... 10
(f) Litigation................................................ 11
(g) Compliance with Applicable Laws........................... 11
(h) Advisors.................................................. 11
(i) Pension and Other Employee Plans and Agreements........... 12
(j) Certain Agreements........................................ 13
(k) Certain Business Practices................................ 13
(l) Insider Interests......................................... 13
(m) Intellectual Property..................................... 14
(n) Labor Matters............................................. 14
(o) Insurance................................................. 14
(p) Environmental Matters..................................... 14
(q) Condition of Assets....................................... 15
(r) Tax Matters............................................... 15
(s) No Excess Parachute Payments or Compensation.............. 17
(t) Opinion of Financial Advisor.............................. 17
(u) Takeover Defense Mechanisms............................... 17
(v) Vote Required............................................. 17
(w) Hedging................................................... 18
(x) Concession Agreements and Other Interests................. 18
(y) Egyptian Agreements....................................... 19
(z) Other Contracts........................................... 19
(aa) Internal Financial Report................................. 21
(ab) Reserve Report............................................ 21
(ac) Undisclosed Liabilities................................... 21
(ad) Information Supplied...................................... 21
(ae) Accounts Receivable....................................... 22
(af) Operating Companies....................................... 22
(ag) Tax Free Reorganization................................... 22
3.2. Representations and Warranties of the Parent....................... 24
(a) Organization, Standing and Power.......................... 24
(b) Capital Structure......................................... 24
(c) Authority; Non-Contravention.............................. 25
(d) SEC Documents............................................. 26
(e) Absence of Certain Changes or Events...................... 26
(f) Litigation................................................ 26
(g) Compliance with Applicable Laws........................... 26
(h) Advisors.................................................. 27
(i) Benefit Plans; ERISA Compliance........................... 27
(j) Director, Officer and Employee Agreements................. 30
(k) Certain Business Practices................................ 30
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(l) Insider Interests.......................................... 30
(m) Intellectual Property...................................... 30
(n) Labor Matters.............................................. 31
(o) Insurance.................................................. 31
(p) Environmental Matters...................................... 31
(q) Condition of Assets........................................ 32
(r) Tax Matters................................................ 32
(s) Undisclosed Liabilities.................................... 32
(t) No Stock Ownership in the Company.......................... 33
(u) Title...................................................... 33
(v) Advances From Gas Purchaser................................ 33
(w) Internal Financial Report.................................. 33
(x) Material Contracts......................................... 33
(y) Information Supplied....................................... 34
(z) Tax Free Reorganization.................................... 34
3.3. Representations and Warranties Regarding the Merger Sub........... 36
(a) Organization and Standing................................. 36
(b) Capital Structure......................................... 36
(c) Authority................................................. 36
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Conduct of Business by the Company and Parent Pending the Merger.. 36
4.2. No Solicitation................................................... 40
4.3. Tax-Free Reorganization........................................... 41
4.4. Notices of Certain Events......................................... 41
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Stockholders Meetings ........................................... 41
5.2. Preparation of Registration Statement and the Proxy Statement..... 42
5.3. Letter of the Company's Accountants............................... 42
5.4. Letter of the Parent's Accountants................................ 42
5.5. Access to Information............................................. 42
5.6. Legal Conditions to Merger........................................ 43
5.7. Stock Exchange Listing............................................ 43
5.8. Public Announcements.............................................. 43
5.9. Company Stock Plans............................................... 43
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5.10. Fees and Expenses................................................. 44
5.11. Brokers or Finders................................................ 45
5.12. Indemnification................................................... 46
5.13. Additional Agreements; Reasonable Efforts......................... 47
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger........ 48
(a) Stockholder Approval....................................... 48
(b) NYSE Listing............................................... 48
(c) Other Approvals............................................ 48
(d) Registration Statement..................................... 48
6.2. Conditions of Obligations of the Parent and the Merger Sub........ 48
(a) Representations and Warranties............................. 48
(b) Performance of Obligations of the Company.................. 48
(c) Opinion of U.S. Counsel.................................... 49
(d) Opinion of Egyptian Counsel................................ 50
(e) Consents Under Agreements.................................. 51
(f) No Amendments to Resolutions............................... 51
(g) Dissenting Stockholders.................................... 51
(h) No Injunctions or Restraints............................... 51
(i) Other Documents .......................................... 51
6.3. Conditions of Obligations of the Company........................... 51
(a) Representations and Warranties............................. 51
(b) Performance of Obligations of the Parent and
the Merger Sub........................................... 52
(c) Opinion of Counsel......................................... 52
(d) Consents Under Agreements.................................. 54
(e) No Amendments to Resolutions............................... 54
(f) No Injunctions or Restraints............................... 54
(g) Other Documents............................................ 54
(h) Tax Opinion................................................ 54
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination........................................................ 55
7.2. Effect of Termination.............................................. 56
7.3. Amendment.......................................................... 56
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7.4. Extension; Waiver.................................................. 57
ARTICLE VIII
GENERAL PROVISIONS
8.1. Nonsurvival of Representations and Warranties...................... 57
8.2. Notices............................................................ 57
8.3. Interpretation..................................................... 58
8.4. Counterparts....................................................... 58
8.5. Entire Agreement; No Third Party Beneficiaries..................... 58
8.6. Governing Law...................................................... 59
8.7. Assignment......................................................... 59
8.8. Severability....................................................... 59
8.9. Enforcement of this Agreement...................................... 59
Signatures................................................................ 60
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of March
27, 1996, among Apache Corporation, a Delaware corporation (the "Parent"), YPY
Acquisitions, Inc., a Delaware corporation and a wholly owned subsidiary of the
Parent (the "Merger Sub"), and The Phoenix Resource Companies, Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Parent, the Merger
Sub and the Company, and the Parent acting as the sole stockholder of the
Merger Sub, have approved the merger of the Merger Sub with and into the
Company (as described herein or as modified as contemplated under Section 1.6,
the "Merger"), pursuant and subject to the terms and conditions of this
Agreement, whereby each issued and outstanding share of Common Stock, par value
$0.01 per share, of the Company ("Company Common Stock") not owned by the
Company directly or through a wholly owned Subsidiary (as defined below) will
be converted into the right to receive Common Stock, par value $1.25 per share,
of the Parent ("Parent Common Stock"), and the Cash Consideration (as defined
below), all as provided herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and is in the best interests of the Company and its
stockholders and has adopted this Agreement and approved the Merger and the
other transactions contemplated hereby, and recommended approval and adoption
of this Agreement by the holders of the Company Common Stock;
WHEREAS, the Board of Directors of the Parent has determined that the
Merger is in furtherance of the long-term business strategy of the Parent, and
is consistent with and in the best interests of the Parent and its stockholders
and has adopted this Agreement and approved the Merger and the other
transactions contemplated hereby;
WHEREAS, as a condition to the willingness of the Parent and the
Merger Sub to enter into this Agreement, the Parent has required that the
executive officers and directors of the Company agree, and in order to induce
the Parent and the Merger Sub to enter into this Agreement such executive
officers and directors have agreed pursuant to that certain letter of even date
herewith, to vote in favor of the Merger as provided in such letter;
WHEREAS, the Boards of Directors of the Merger Sub and the Parent, as
the sole stockholder of the Merger Sub, have adopted this Agreement and
approved the Merger and the other transactions contemplated hereby;
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WHEREAS, for United States income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Parent, the Merger Sub and the Company desire to make
certain representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the consummation of the
Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), the Merger Sub shall be merged with and into the Company
at the Effective Time (as defined in Section 1.2).
1.2. Effective Time of the Merger. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.4) and thereafter delivered to the Secretary of State of
the State of Delaware, for filing, as provided in the DGCL, as soon as
practicable on or after the Closing Date (as defined in Section 1.3). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware or at such time thereafter as
is provided in the Certificate of Merger (the "Effective Time").
1.3. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the first business day after satisfaction of the latest to occur of
the conditions set forth in Sections 6.1 (provided that the other closing
conditions set forth in Article VI have been met or waived as provided in
Article VI at or prior to the Closing) (the "Closing Date"), at the principal
executive offices of the Parent, unless another date, time or place is agreed
to in writing by the parties hereto.
1.4. Effects of the Merger.
(a) At the Effective Time, (i) the separate existence of
the Merger Sub shall cease and the Merger Sub shall be merged with and into the
Company (the Merger Sub and the Company are sometimes referred to herein as the
"Constituent Corporations," and the Company is sometimes referred to herein as
the "Surviving Corporation"), (ii) the Certificate of Incorporation, as amended
to date, of the Merger Sub as in effect immediately
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prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, and (iii) the By- laws of the Merger Sub as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation.
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions and all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts and liabilities had been incurred by it.
1.5. Officers and Directors. The officers and directors of the
Merger Sub immediately prior to the Effective Time shall become the officers
and directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified, as the case may be.
1.6. Alternative Structure. Notwithstanding anything to the
contrary provided elsewhere in this Agreement, if at any time following the
execution and delivery of this Agreement the Parent determines that it is
necessary to restructure the Merger in order for the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code, the Merger
shall be restructured so that the Company merges with and into the Merger Sub
with the Merger Sub being the Surviving Corporation after the Effective Time.
The Parent shall notify the Company in writing promptly of such a determination
and the parties hereto shall take any and all actions as are necessary to
reflect and give effect to the foregoing changes to the structure of the
Merger. In the event that the Merger is restructured in accordance with this
Section 1.6, the "Surviving Corporation" referred to herein shall be deemed to
refer to the Merger Sub.
1.7. Board of Directors of Parent. Prior to the Effective Time,
the Board of Directors of Parent shall take all necessary action to designate a
present director of the Company, in Parent's sole discretion, to serve as an
additional director of Parent commencing at the Effective Time, provided that
such designee shall consent to such appointment. The Board of Directors of
Parent shall take all action necessary to cause such designee (provided that he
has consented to so serve) to be appointed or elected as a director of Parent
commencing at the Effective Time.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of the Merger Sub:
(a) Capital Stock of the Merger Sub. Each share of
capital stock of the Merger Sub issued and outstanding at the Effective Time,
shall remain outstanding and shall be unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding capital stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned
Stock. All shares of Company Common Stock that are owned by the Company as
treasury stock and any shares of Company Common Stock owned by the Parent, the
Merger Sub or any other wholly owned Subsidiary of the Parent or the Company
shall be canceled and retired and shall cease to exist and no stock of the
Parent or other consideration shall be delivered in exchange therefor.
(c) Merger Consideration. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into the
right to receive (i) .75 validly issued, fully paid and nonassessable shares of
Parent Common Stock; and (ii) $4.00 in cash (the "Cash Consideration") (such
shares of Parent Common Stock and Cash Consideration being referred to herein
collectively as the "Merger Consideration"); provided, however, that, in any
event, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall have
been changed into a different number of shares or different class by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the number of shares of Parent Common Stock
to be received shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares. All such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration upon the surrender of such certificate in accordance with
Section 2.2, without interest.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the Parent
shall deposit the aggregate amount of Merger Consideration required to be
exchanged in accordance with the terms of this Article II with Norwest Bank
Minnesota, N.A., or another commercial bank
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or trust company designated by the Parent which is reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
the Parent and the Company may reasonably specify), and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by the
Parent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration determined pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, the Merger Consideration may be paid to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration.
(c) Dividends and Distributions with Respect to
Unsurrendered Certificates. No dividends or other distributions made on or
after the Effective Time with respect to Parent Common Stock with a record date
on or after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable escheat laws, following surrender of any
such Certificate, the Parent shall pay or cause to be paid to the record holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date on or after the
Effective Time previously paid with respect to Parent Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date on or after the Effective Time and a payment date subsequent
to such surrender payable with respect to such whole shares of Parent Common
Stock.
(d) No Further Ownership Rights in Company Common Stock.
Payment of the Merger Consideration and any cash payments pursuant to Section
2.2(c) or 2.2(e) made upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof shall be deemed to have been
made in full satisfaction of all rights pertaining to such shares of Company
Common Stock; provided, however, that the Surviving
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Corporation shall remain obligated to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date hereof and
that remain unpaid at the Effective Time. From and after the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. Notwithstanding anything in
this Agreement to the contrary, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of the Parent. In
lieu of any such fractional shares, each holder of Company Common Stock who
would otherwise be entitled to a fraction of a share of Parent Common Stock
upon surrender of Certificates shall be entitled to receive from the Exchange
Agent a cash payment equal to such fraction multiplied by the closing price per
share of Parent Company Stock on The New York Stock Exchange, Inc. ("NYSE")
Composite Transactions Reporting System on the last trading day immediately
preceding the Effective Time. The Parent shall make available to the Exchange
Agent the amount of cash required to make any cash payments in lieu of
fractional shares.
(f) Termination of Exchange Agent. Any Merger
Consideration or cash in lieu of fractional shares that remains undistributed
to the stockholders of the Company for six months after the Effective Time
shall be delivered by the Exchange Agent to the Parent, upon demand, and any
stockholders of the Company who have not theretofore complied with this Article
II shall thereafter look only to the Parent for payment of their claim for
Merger Consideration and any cash in lieu of fractional shares of Parent Common
Stock. Thereafter, subject to Section 2.1(g), the Parent shall have the same
obligations as the Exchange Agent to distribute the Merger Consideration and
cash in lieu of fractional shares of Parent Common Stock in accordance with the
provisions of this Agreement.
(g) No Liability. Neither the Parent nor the Company
shall be liable to any holder of shares of Company Common Stock for any Merger
Consideration or other amounts properly delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. Except as set
forth on the schedule of disclosures made by the Company to the Parent that has
been delivered simultaneously with the execution of this Agreement ("Company
Disclosure Schedule") or the Company SEC Documents (hereinafter defined), the
Company represents and warrants to the Parent and the Merger Sub as follows:
(a) Organization, Standing and Power. Each of the
Company and its Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its state of incorporation, has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect on the Company or its
Significant Subsidiaries (as hereinafter defined) individually. For purposes
of this Agreement, (i) "Material Adverse Change" or "Material Adverse Effect"
means, when used with respect to the Parent or the Company, any change or
effect that is or, so far as can reasonably be determined, may be materially
adverse to the assets, liabilities, business, condition (financial or
otherwise) or cash flows from operating activities of the Parent and its
Subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole, as the case may be (unless the context specifies that such change or
effect shall be taken individually), and (ii) "Subsidiary" means any
corporation, partnership, joint venture (exclusive of any joint operating
agreement) or other legal entity of which the Parent or the Company, as the
case may be (either alone or through or together with any other Subsidiary),
(A) owns, directly or indirectly, 50% or more of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity, or (B) is a general partner. All of the Company's Subsidiaries
are listed on Schedule 3.1(a) of the Company Disclosure Schedule. None of the
Company's Subsidiaries is a partnership.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of the Company consists of 20,000,000 shares of
Company Common Stock and 5,000,000 shares of Preferred Stock, par value $0.01
per share of the Company ("Company Preferred Stock"). At the close of business
on March 27, 1996, (i) 16,097,756 shares of Company Common Stock were
outstanding, 1,276,057 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding stock options issued pursuant to the
Company's 1990 Employee Stock Option Plan or 1990 Nonemployee Director Stock
Option Plan, or were reserved for issuance pursuant to the Nonemployee Director
Compensation Plan (such stock, stock option and compensation plans,
collectively, the "Company Stock Plans"), (ii) 864,164 shares of Company Common
Stock were held by the Company in its treasury, or by its wholly owned
Subsidiaries, (iii) no shares of Company Preferred Stock were outstanding and
none were held by the Company or any Subsidiary in its treasury and
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(iv) no bonds, debentures, notes or other indebtedness having the right to vote
(or convertible into securities having the right to vote) on any matters on
which stockholders may vote ("Voting Debt"), were issued or outstanding.
Except as set forth in Schedule 3.1(b) of the Company Disclosure Schedule, all
of the outstanding shares of capital stock of each corporate Subsidiary of the
Company, and all of the equity interests in each non-corporate Subsidiary of
the Company, are owned beneficially and of record by the Company or another
Subsidiary of the Company, free and clear of all liens, pledges, adverse
claims, charges, security interests or other encumbrances of any kind. All
outstanding shares of the Company's capital stock are validly issued, fully
paid and nonassessable and not subject to preemptive rights. All the
outstanding shares of capital stock of the Subsidiaries of the Company that are
corporations and all of the Company's direct or indirect ownership interest in
the Company's Subsidiaries that are not corporations are validly issued, fully
paid and nonassessable and not issued subject to any preemptive rights. As of
the date of this Agreement, except pursuant to the Company Stock Plans, there
are no options, warrants, calls, rights, or agreements to which the Company or
any Subsidiary of the Company is a party or by which it is bound obligating the
Company or any Subsidiary of the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or any Voting
Debt of the Company or of any Subsidiary of the Company or obligating the
Company or any Subsidiary of the Company to grant, extend or enter into any
such option, warrant, call, right or agreement. After the Effective Time,
there will be no option, warrant, call, right or agreement obligating the
Company or any Subsidiary of the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, any shares of capital stock or any Voting Debt of
the Company or any Subsidiary of the Company, or obligating the Company or any
Subsidiary of the Company to grant, extend or enter into any such option,
warrant, call, right or agreement. Except as disclosed in the Company SEC
Documents, and except for the capital stock and ownership interests of its
Subsidiaries, the Company does not own, directly or indirectly, any capital
stock, equity interest or other ownership interest in any corporation,
partnership, association, joint venture (exclusive of any joint operating
agreement), limited liability company or other entity.
(c) Authority; Non-Contravention. The Company has all
requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the stockholders of the Company, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to such approval of this
Agreement by the stockholders of the Company. The board of directors of the
Company at a meeting duly called and held on March 27, 1996, unanimously
determined that the Merger is fair to and in the best interests of the Company
and its stockholders, approved this Agreement, resolved to recommend approval
by the Company's stockholders of this Agreement, and directed that this
Agreement be submitted to the Company's stockholders for their approval. This
Agreement has been duly executed and delivered by the Company and, subject to
such approval of this Agreement by the stockholders of the Company and assuming
the valid authorization, execution and delivery of this Agreement by the Parent
and the Merger Sub, constitutes a valid and binding obligation of the Company
8
<PAGE> 15
enforceable against the Company in accordance with its terms. The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or 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, pledge, security
interest, adverse claim, charge, or other encumbrance upon any of the
properties or assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation") of
the Company or any of its Subsidiaries pursuant to any provision of (i) the
Certificate of Incorporation, as amended, or By-laws of the Company (true and
complete copies of which as of the date hereof have been delivered to the
Parent) or any provision of the comparable charter or organization documents of
any of its Subsidiaries, (ii) any contract, agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease, Plan (as defined in Section
3.1(i)) or other agreement, obligation, instrument, permit, concession,
franchise, or license applicable to the Company or any of its Subsidiaries, or
(iii) any judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets, and with respect to clauses (ii) and (iii),
other than (a) a Violation which would not have a Material Adverse Effect on
the Company (other than with respect to the Egyptian Agreements (as defined in
Section 3.1(x)) and with respect to the Egyptian Agreements, would not affect
adversely any material rights thereunder, (b) Plans (including employment
agreements) in accordance with the terms thereof and as summarized in the
Company SEC Documents and (c) cancellations, terminations or accelerations
under the Non-Employee Director Compensation Plan of the Company in accordance
with its terms. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for (i) the filing of a premerger
notification report by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing with the
Securities and Exchange Commission ("SEC") of (A) a proxy statement/prospectus
in definitive form relating to the meeting of the Company's stockholders to be
held in connection with the Merger (the "Proxy Statement"), and (B) such
reports under Sections 13(a), 13(d) and 16(a) of the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, and (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the corporation, takeover, "Blue Sky" or securities laws of
various states of the United States.
(d) SEC Documents. The Company has made available to the
Parent a true and complete copy of each report, schedule, registration
statement and definitive proxy
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<PAGE> 16
statement, including the exhibits thereto, filed by the Company with the SEC
since January 1, 1993 (as such documents have since the time of their filing
been amended, the "Company SEC Documents") which are all the documents (other
than preliminary material) that the Company was required to file with the SEC
since such date. As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act
of 1933, as amended, together with the rules and regulations thereunder (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, as of their respective dates, 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 under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows (or changes in financial position prior to
the approval of Statement of Financial Accounting Standards Number 95 ("FASB
95")) for the periods then ended.
(e) Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date
hereof, from January 1, 1996 through the date hereof, the Company has conducted
its business only in the ordinary course consistent with past practice, and
there has not been (i) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock or any securities of a Subsidiary not wholly-owned
directly or indirectly by the Company or any redemption, purchase or other
acquisition by the Company of any of its securities or any securities of a
Subsidiary not wholly-owned directly or indirectly by the Company, except for
the declaration and payment of the Company's quarterly cash dividend in the
amount of $.03 per share declared in March 1996, and to be paid on March 29,
1996 (ii) any damage, destruction or loss (whether or not covered by insurance)
to any material asset of the Company or its Subsidiaries, except for any damage,
destruction or loss that did not have a Material Adverse Effect on the Company,
(iii) other than in the ordinary course of business, any expenditure or loan of
funds, contractual commitment or governmental order to expend or liability or
obligation incurred by the Company involving an amount in excess of $200,000, or
any series thereof of similar type or nature aggregating to an amount in excess
of $200,000, (iv) any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles, (v) except as contemplated in this Agreement, any revaluation by the
Company of any of its assets, including the writing down or off of notes or
accounts receivable or any election relating to taxes or settlement or
compromise of any tax liability, other than in the ordinary
10
<PAGE> 17
course of business and consistent with past practices and, in the case of
notes or accounts receivable and elections, settlements or compromises with
respect to taxes, not in excess of $200,000 in the aggregate, or (vi) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Company or give
rise to a Material Adverse Change with respect to the Company (other than
changes in general economic conditions that affect the oil and natural gas
industry generally, including, without limitation, the supply of, demand for
and prices for, oil and natural gas). As of the date of this Agreement the
Company is not engaged in any discussions with any third party regarding any
possible Acquisition Transaction (as hereinafter defined).
(f) Litigation. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, there is no suit, action,
or proceeding pending, or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary of the Company that is reasonably
likely to have a Material Adverse Effect on the Company or any of its
Significant Subsidiaries taken individually, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Subsidiary of the Company having, or which, insofar
as reasonably can be foreseen, in the future could have, any such effect.
(g) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all required, necessary or applicable permits, licenses,
grants, authorizations, easements, variances, exemptions, certificates, orders,
franchises and approvals (collectively, "Permits") necessary to own, lease and
operate their material properties and to carry on their material business as
now being conducted (the "Company Permits"), except where the failure to have
any Permits would not have Material Adverse Effect on the Company, and there is
no action, proceeding or investigation pending or, to the knowledge of the
Company, threatened regarding the suspension or cancellation of any of the
Company Permits. The Company and its Subsidiaries are in compliance with the
terms of the Company Permits except where the failure to so comply would not
have a Material Adverse Effect on the Company. To the knowledge of the Company,
neither the Company nor any of its Subsidiaries has violated or failed to
comply with any statute, law, ordinance, regulation, rule or order of any
Governmental Entity, any arbitration award or any judgment, decree or order of
any court or other Governmental Entity, applicable to the Company or any of its
Subsidiaries or their respective business, assets or operations, except such
violations or failures that in the aggregate would not have a Material Adverse
Effect on the Company (other than with respect to the Egyptian business,
operations and properties and the Egyptian Agreements) and with respect to such
Egyptian matters and agreements, such violations or failures that would not
materially affect adversely such business, operations or properties or any
material rights under the Egyptian Agreements or could reasonably result in
prosecution for criminal acts of the Company, any of its Subsidiaries or any of
their respective officers, directors or stockholders.
(h) Advisors. No broker, investment banker, financial
advisor or other person, other than Petrie Parkman & Co. ("Petrie Parkman") the
fees and expenses of which will be paid by the Company on the terms set forth
in the engagement letter, as amended as
11
<PAGE> 18
of the date hereof, copies of which have been furnished to the Parent, is
entitled to any broker's, finders, advisory or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
(i) Pension and Other Employee Plans and Agreements.
(i) Except for Plans (as defined herein) that are
either (a) described in or attached as exhibits to the Company SEC
Documents, and (b) Plans that may be terminated by the Company or any
ERISA Affiliate within 30 days without material liability to the
Company, as of the date of this Agreement, the Company and its
Subsidiaries have no pension, profit sharing, stock option, stock
purchase, incentive, bonus, life, health, disability or accident
plans, deferred compensation plans, Section 125 cafeteria plan and
other employee compensation or benefit plans, agreements, practices,
policies, contracts, arrangements or commitments, including severance
agreements, change in control agreements, or other similar matters and
labor union agreements relating to present and former employees and/or
independent contractors (including beneficiaries thereof) of the
Company and all entities that are treated as being one employer with
the Company under Code Section 414 (the "ERISA Affiliates"), with
respect to which the Company has or may have any material liability
(collectively the "Plans" and individually a "Plan").
(ii) With respect to each Plan of the Company or
any Subsidiary, the Company and its ERISA Affiliates have complied in
all material respects with, and each Plan conforms to in all material
respects, and has from its inception been operated in all material
respects in compliance with, all applicable laws and regulations
including ERISA and the Code to the extent applicable, and each Plan
has been administered in all material respects in accordance with its
terms. Neither the Company nor any ERISA Affiliate has any commitment
or has taken any action to adopt or establish any additional Plans or
to materially increase the benefits under any Plan. Except for
immaterial amounts and payments, all contributions required to and
payments under or with respect to any Plan and all premiums for
insurance coverage for each fiscal year of each Plan ended before the
date of this Agreement and for any portion of a fiscal year ending on
the Effective Time have been paid and all material payments to be made
but not yet due have been properly accrued and recorded in the most
recent financial statements included in the Company SEC Documents. No
Plan of the Company or any Subsidiary is subject to Title IV of ERISA
or Section 412 of the Code. There is no pending or, to the knowledge
of the Company, threatened or anticipated litigation, arbitration,
proceeding, claim (other than an undisputed claim for payment of
benefits in accordance with the terms thereof), demand, grievance, or
allegation of unfair labor practice (or any basis therefor) involving
any of the Plans of the Company or any Subsidiary or any
investigation, proceeding, administrative review, audit or other
administrative agency process, which in any case could result in
imposition on the Company or any ERISA
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<PAGE> 19
Affiliate of any material penalty, assessment or liability in
connection with any of the Plans, individually or collectively.
(iii) The Company or an ERISA Affiliate can
unilaterally terminate each Plan at any time without material
liability to any person other than (a) such liability, if any, accrued
and recorded in the most recent financial statements included in the
Company SEC Documents as of the Closing, or (b) obligations that arise
from cancellations, terminations or accelerations under Plans or
employment agreements in accordance with the terms thereof.
(j) Certain Agreements. Except as filed as an exhibit to the
Company SEC Documents filed prior to the date of this Agreement and except for
compensation arrangements summarized in the Company's definitive proxy
materials included in the Company SEC Documents, there exist no (i) material
employment, consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or any of its Subsidiaries
and any officer, director or key employee of the Company or any of its
Subsidiaries, (ii) agreements with any executive officer or other key employee
of the Company or any Significant Subsidiary (as defined hereinafter) of the
Company the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement, or (iii) agreements or plans,
including any stock option plans, stock appreciation right plans, restricted
stock plans or stock purchase plans, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(k) Certain Business Practices. There are no situations with
respect to the Company or any of its Subsidiaries that involved or involves (i)
the use of any corporate funds or unlawful contributions, gifts or
entertainment or other unlawful expenses related to political activity, (ii)
the making of any direct or indirect unlawful payments to government officials
or others from corporate funds or the establishment or maintenance of any
unlawful or unrecorded funds, (iii) the violation of any of the provisions of
the United States Foreign Corrupt Practices Act of 1977, or any rules or
regulations promulgated thereunder, or (iv) the receipt of any illegal
discounts or rebates or any other violation of the antitrust laws, except for
situations which do not presently, or could not after the passage of time
reasonably be expected to, result in a Material Adverse Effect on the Company
(other than with respect to the Egyptian business, operations and properties)
and, with respect to such Egyptian matters, situations that would not
materially and adversely affect such business, operations or properties.
(l) Insider Interests. Except as disclosed in the Company SEC
Documents filed with the SEC prior to the date hereof, no affiliate, officer or
director of the Company or any of its Subsidiaries has any agreement with the
Company or any of its Subsidiaries or any interest in any property, real or
personal, tangible or intangible, of the Company or any
13
<PAGE> 20
of its Subsidiaries except for the normal rights as a stockholder or an
employee and except for such other matters which, under the rules of the SEC,
are not required to be disclosed.
(m) Intellectual Property. The Company and its Subsidiaries
own, or are licensed or otherwise have the right to use, all patents, patent
rights, trademarks, rights, trade names, trade name rights, service marks,
service mark rights, copyrights, technology, know-how, processes and other
proprietary intellectual property rights and computer programs ("Company
Intellectual Property") currently used in the conduct of the business and
operations of the Company and its Subsidiaries, except where the failure to so
own or otherwise have the right to use such Company Intellectual Property would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The use of such Company Intellectual Property by the Company and its
Subsidiaries does not infringe on the rights of any person, subject to such
claims and infringements as do not, individually or in the aggregate, give rise
to any liability on the part of the Company and its Subsidiaries which could
have a Material Adverse Effect on the Company, and no person is infringing on
any right of the Company or any of its Subsidiaries with respect to any such
Company Intellectual Property in a manner which would have a Material Adverse
Effect on the Company. No claims are pending or, to the Company's knowledge,
threatened that the Company or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any person with regard to any
Company Intellectual Property.
(n) Labor Matters. There are no collective bargaining
agreements or other labor union agreements or understandings to which the
Company or any of its Subsidiaries is a party or by which any of them is bound,
nor is the Company or any of its Subsidiaries the subject of any proceeding
asserting that the Company or any Subsidiary has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions. Since December 31, 1995, neither the Company nor any of
its Subsidiaries has encountered any labor union organizing activity, or had
any actual or, to the Company's knowledge, threatened employee strikes, work
stoppages, slowdowns or lockouts.
(o) Insurance. The Company has delivered to Parent a schedule
which is a true and correct copy of a summary of the amount and scope of
insurance as to which the Company or any of its Subsidiaries has insurance
contracts. All of the Company's insurance policies or contracts of insurance
are sufficient for compliance with all requirements of law and of all
agreements to which the Company or any of its Subsidiaries is a party, except
for violations that would not have a Material Adverse Effect on the Company.
All insurance policies pursuant to which any such insurance is provided are in
full force and effect, no notice of cancellation or termination has been given
to the Company or any of its Subsidiaries by the carrier, and all premiums
required to be paid have been paid in full.
(p) Environmental Matters. Except to the extent that would
not have a Material Adverse Effect on the Company or any of its Significant
Subsidiaries taken individually: (a) the Company and its Subsidiaries have not
received notice of any violation of or investigation relating to any United
States, Egyptian or other federal, state, provincial
14
<PAGE> 21
or local environmental or pollution law, regulation, or ordinance with respect
to assets now or previously owned or operated by the Company or any of its
Subsidiaries that has not been fully and finally resolved; (b) all permits,
licenses and other authorizations that are required under United States,
Egyptian or other federal, state, provincial and local laws with respect to
pollution or protection of the environment ("Environmental Laws") relating to
assets now owned or operated by the Company or any of its Subsidiaries,
including Environmental Laws relating to actual or threatened emissions,
discharges or releases of pollutants, contaminants or hazardous or toxic
materials or wastes ("Pollutants"), have been obtained and are effective, and,
with respect to assets previously owned or operated by the Company or any of
its Subsidiaries, were obtained and were effective during the time of the
Company's or any Subsidiaries' operation; (c) no conditions exist on, in or
about the properties now or previously owned or operated by the Company or any
of its Subsidiaries or any third-party properties to which any Pollutants
generated by the Company or any of its Subsidiaries were sent or released that
could give rise on the part of the Company or any of its Subsidiaries to
liability under any Environmental Laws, claims by third parties under
Environmental Laws or under common law or the incurrence of costs to avoid any
such liability or claim (collectively, "Environmental Liabilities"); and (d)
all operators of the Company's or any of its Subsidiaries' assets are in
compliance with all terms and conditions of such Environmental Laws, permits,
licenses and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder, relating to the Company's
or any of its Subsidiaries' assets.
(q) Condition of Assets. The physical assets owned or leased
by the Company and each of its respective Subsidiaries which are used in the
operation of their respective businesses have been maintained in all material
respects in a state of repair so as to be adequate for normal operations.
(r) Tax Matters.
(i) "Company Group" shall mean any "affiliated group"
(as defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that includes the
Company. "Company Subsidiaries" shall mean the corporations that are
set forth on Exhibit 21 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 included in the Company SEC Documents
and which the Company owns, directly or indirectly, 80% or more of the
stock. "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean any United States, Egyptian, or other federal, state,
provincial, local or foreign income, gross receipts, property, sales,
goods and services use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority. "Tax
Return" shall mean any return, report or similar statement required to
be filed with respect to any Tax (including any
15
<PAGE> 22
attached schedules), including, without limitation, any information
return, claim or refund, amended return and declaration of estimated
Tax.
(ii) With respect to each of the Company, the Company
Group and each Company Subsidiary: (A) all Tax Returns required to be
filed relating to federal income taxes or Egyptian taxes, or all other
Tax Returns where the failure to file such returns or pay the related
Taxes would have a Material Adverse Effect on the Company, have been
timely filed with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; (B)
all Taxes shown to be due on the Tax Returns referred to in clause (A)
have been paid, except for any Taxes that are not material in amount;
(C) no material claim is pending before any Governmental Entity in a
jurisdiction in which the Company, the Company Group or any Company
Subsidiary does not file Tax Returns that the Company, the Company Group
or any Company Subsidiary is or may be subject to taxation by that
jurisdiction; (D) the Company, the Company Group, each Company
Subsidiary, and any affiliated group as defined in Section 1504 of the
Code other than the Company Group of which the Company or any member of
the Company Group has ever been a member has paid (or accrued in its
most recent financial statements filed with Company SEC Documents) all
Taxes attributable to all periods or portions thereof ending on or
before the Closing Date, except for any Taxes that are not material in
amount; (E) there are no liens for Taxes, except for any Taxes that are
not material in amount, upon any asset of the Company, the Company Group
or any Company Subsidiary except for liens for current Taxes not yet
due; (F) no material deficiency in respect of Taxes which have been
assessed against the Company, the Company Group or any Company
Subsidiary remains unpaid and there are no audits or investigations
pending against the Company, the Company Group or any Company Subsidiary
with respect to any Taxes, except for any Taxes that are not material in
amount; (G) there are no material claims, assessments, levies,
administrative proceedings or lawsuits pending or, to the knowledge of
the Company, threatened against the Company, the Company Group or any
Company Subsidiary, to the knowledge of the Company, by any tax
authority; (H) none of the Company, the Company Group or any Company
Subsidiary has any material liability for penalties with respect to the
Tax Returns described in clause (A); (I) the Company has set up an
adequate reserve for the payment of all Taxes required to be paid as
shown on the most recent tax returns of the Company Group; and (J) the
most recent financial statements contained in the Company SEC Documents
reflect an adequate reserve for all Taxes payable by the Company and its
Subsidiaries through the date of such financial statements.
(iii) The Company has not been notified or advised that
Egyptian General Petroleum Corporation has taken a tax credit under
Egyptian tax laws and regulations for Egyptian taxes paid on behalf of
the Company pursuant to any Concession Agreement, as hereinafter
defined.
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<PAGE> 23
(iv) International Boycott. The Company has not
participated in and will not participate in an international boycott
within the meaning of Section 999 of the Code.
(v) Existing Partnerships. The Company is not a party
to any joint venture, partnership, or other arrangement or contract that
could be treated as a partnership for federal income tax purposes.
(s) No Excess Parachute Payments or Compensation. Except as
disclosed to Parent in a written summary, a true and correct copy of which has
been delivered to Parent:
(i) no deduction will be disallowed in excess of
$100,000 in the aggregate under Section 280G(a) of the Code for any
amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated
by this Agreement by any employee, officer or director of the Company or
any of its Subsidiaries who is a "disqualified individual" (as such term
is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Plan currently in effect;
(ii) no deduction for employee remuneration paid or
payable (including any remuneration payable as a result of the Merger)
to any covered employee (as defined in Section 162(m)(3) of the Code) of
the Company or any of its Subsidiaries has been or will be disallowed in
excess of $100,000 in the aggregate under Section 162(m) of the Code.
(t) Opinion of Financial Advisor. The Company has received
the opinion of Petrie Parkman dated the date hereof to the effect that, as of
the date hereof, the consideration to be received in the Merger by the
Company's stockholders is fair to the Company's stockholders from a financial
point of view, a copy of which opinion has been delivered to the Parent.
(u) Takeover Defense Mechanisms. The Company has taken all
action to assure that Section 203 of the DGCL shall not apply to prevent the
Merger or any of the other transactions contemplated hereby (including prior
approval by the Board of Directors of the Company of any "transaction which
resulted in" Parent "becoming an interested stockholder" within the meaning of
Section 203 of the DGCL).
(v) Vote Required. The affirmative vote of a majority of the
votes that holders of the outstanding shares of Company Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Company capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
17
<PAGE> 24
(w) Hedging. Except as set forth in the Company SEC Documents
and except for obligations that would not have a Material Adverse Effect on the
Company, the Company and its Subsidiaries have no obligations as of the date of
this Agreement for the delivery of hydrocarbons attributable to any of the
Company's or any of its Subsidiaries' properties in the future on account of
prepayment, advance payment, take-or-pay or similar obligations without then or
thereafter being entitled to receive full value therefor. Neither the Company
nor any of its Subsidiaries is bound by futures, hedge, swap, collar, put,
call, floor, cap, option or other contracts which are intended to benefit from
or reduce or eliminate the risk of fluctuations in the price of commodities,
including hydrocarbons or securities.
(x) Concession Agreements and Other Interests.
(i) The Company SEC Documents accurately summarize the
material rights and obligations of the Company and its Subsidiaries in
the Khalda Concession Agreement and Qarun Concession Agreement, as
amended, (the "Concession Agreements") and any applicable related
material agreements (such material agreements together with the
Concession Agreements are herein referred to as the "Egyptian
Agreements"), and true and correct copies of the Egyptian Agreements
have previously been delivered to Parent. The Company's Subsidiaries
have legal and beneficial title and ownership to such rights, free and
clear of all liens, security interests, mortgages, pledges, claims,
charges, or other encumbrances, except for the security interests and
encumbrances created in connection with the loan to the Company and its
Subsidiaries by the International Finance Corporation (the "IFC Loan
Agreement") and except for "Permitted Liens" as defined in the IFC Loan
Agreement.
(ii) The descriptions contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, accurately
summarize for each of the Egyptian Agreements, including an adjustment
for the effect of the Khalda Farmout Agreement, the following: (A) the
cost-bearing percentage interest of cost to be borne by the Company or
its applicable Subsidiary in connection with expenditures for operations
on the lands subject to each Concession Agreement, (B) the percentage of
profit oil and excess cost recovery oil to which the Company or its
applicable Subsidiary is entitled to receive from the production of
hydrocarbons from the lands subject to each Concession Agreement, (C)
the amount of capital expenditures incurred from inception of the grant
of each Concession Agreement through December 31, 1995 and recoverable
from production from the Lands subject to each Concession Agreement, and
(D) the Company's share of such unrecovered capital expenditures under
the Khalda Concession Agreement, as of December 31, 1995.
(iii) The Company has furnished Parent with a true and
correct copy of the joint account statements as of December 31, 1995 for
each of the Concession Agreements, and the most recently available joint
account statements under the Concession Agreements.
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(iv) To the knowledge of the Company, neither the
Company nor any of its Subsidiaries owns any cost-bearing interest in
hydrocarbons or in hydrocarbon leases, royalties, overriding royalties,
production payments, net profits interests, fee minerals, or other
mineral interests wherever located except the Concession Agreements,
except for such interests which require the Company to bear its share of
costs not exceeding $200,000 in the aggregate.
(y) Egyptian Agreements. Neither the Company nor any of its
Subsidiaries is in breach or default in the performance, observation or
fulfillment of any of the obligations, covenants or conditions contained in any
Egyptian Agreement, nor would there be any such breach or default (i) which
would be reasonably likely to occur following the passage of time based solely
upon present facts, conditions, or circumstances known to the Company or any of
its Subsidiaries, or (ii) which would be caused by the execution of this
Agreement or the consummation of the transactions contemplated hereby without
having first satisfied all of the conditions thereto set forth herein, and
which in any case would have an adverse effect on the material rights of the
Company and its Subsidiaries under the Egyptian Agreements. Neither the Merger
nor any of the transactions contemplated by this Agreement will give rise to
any preferential rights to purchase any of the assets of the Company or its
Subsidiaries or any similar rights of first refusal under any Egyptian
Agreement. All material rights and interests of the Company and its
Subsidiaries under or deriving from the Egyptian Agreements are in full force
and effect and no act or omission of the Company or its Subsidiaries, or of any
other person has occurred which would or might entitle the Arab Republic of
Egypt to revoke, modify, cancel or requisition the concessions and interests
granted thereunder, and no notice has been given to the Company, any of its
Subsidiaries or, as far as the Company or its Subsidiaries are aware, to any
other person by the Arab Republic of Egypt or representative thereof, of any
intention to revoke or requisition any of the Egyptian Agreements and there are
no other grounds for rescission, cancellation, avoidance, revocation,
repudiation or termination of the Concession Agreements.
(z) Other Contracts. Except for those agreements filed as an
exhibit to the Company's SEC Documents, the Egyptian Agreements, and the IFC
Loan Agreement, the Company and its Subsidiaries have no contracts, agreements,
leases or similar arrangements to which the Company or any of its Subsidiaries
is a party or by which any of the assets of the Company or any of its
Subsidiaries are bound and which:
(i) is an agreement for the sale or purchase,
transportation, treatment, marketing, or option or call on production of
any hydrocarbons, except those agreements which by the terms of such
agreement expire within three months or can be terminated by the Company
or its Subsidiary, as applicable, upon not more than three months notice
without penalty and except as summarized in the Company SEC Documents;
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(ii) creates any area of mutual interest with respect to
the acquisition by the Company or any of its Subsidiaries or any of
their respective assigns of any interest in any hydrocarbons, lands or
other assets;
(iii) is a farmout, farmin or operating agreement
relating to any interests in oil and gas production or a related
concession;
(iv) evidences a lease or rental of any land, building,
or other improvements or portion thereof for a price in excess of
$100,000 per year;
(v) creates or evidences a mortgage, indenture,
guarantee, note, loan agreement, pledge agreement, installment
obligation, or other instrument for or relating to any borrowing of more
than $100,000, except for inter-company borrowings between or among the
Company and its Subsidiaries and a letter of credit in the amount of
approximately $1,300,000 for the purchase of tubular products in
connection with operations on the Qarun Concession;
(vi) creates or evidences an asset purchase or sale
agreement or an agreement providing for the payment of a deferred
purchase price for property or services in excess of $200,000;
(vii) creates or evidences an obligation to be or remain
liable for any Environmental Liabilities, excluding joint operating
agreements entered into in the ordinary course of business;
(viii) is not described in items (i) through (vii) above
and involves expenditures or receipts of $200,000 or more in any
calendar year; or
(ix) is not described in items (i) through (viii) above
and the breach or loss of which would have a Material Adverse Effect on
the Company.
As to all such contracts, agreements, leases and arrangements listed as an
exhibit in the Company SEC Documents (including the Egyptian Agreements) and
the IFC Loan Agreement (A) such contracts, agreements, leases and arrangements
are in full force and effect; (B) except to the extent that they are
non-monetary and not material, there are no violations or breaches thereof, or
existing facts or circumstances which upon notice or the passage of time or
both will constitute a violation or breach thereof by the Company or any of its
Subsidiaries or by any other party thereto; (C) no notice of the exercise or
attempted exercise of premature termination, price reduction, market-out,
curtailment or force majeure has been received by the Company or any of its
Subsidiaries with respect thereto; (D) no notice has been received by the
Company that any party thereto intends not to honor its material obligations
thereunder; and (E) except with regard to contracts as to which such delivery
or access would violate the terms of such contract or any other agreement, true
and correct copies thereof have been made available to Parent by the Company
and the Company will, or will cause its applicable Subsidiaries to, promptly
make requests of the parties for
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<PAGE> 27
which delivery or access is so restricted and use reasonable best efforts to
obtain or afford Parent access to such contracts.
(aa) Internal Financial Report. The report of cash flows for
the period ended February 29, 1996 prepared for the internal use of the
Company's management (a true and correct copy of which has been furnished to
Parent) was prepared in accordance with and consistent with past practice.
(ab) Reserve Report. The Company has delivered to the Parent a
true and correct copy of the reserve report of Netherland & Sewell, the
Company's independent petroleum engineers, dated January 1, 1996 (the "Reserve
Report"), relating to the proved and proved plus probable hydrocarbon reserves
of certain leasehold and royalty interests owned by the Company and its
Subsidiaries as of such date. As of the date of such report, the proved oil
and gas quantities included in the Reserve Report fairly represent the
estimated quantities of oil and gas recoverable from the interests of the
Company and its Subsidiaries from the properties covered by the Reserve Report,
as stated therein. Such estimated quantities are based in whole or in part on
studies performed by independent engineers. The Company made available to such
engineers all information within its possession, and to its knowledge such
information was true and correct. Since the date of such report, there have
been (i) no adverse changes in the information provided to the engineers or
(ii) any adverse changes or developments that would cause or be likely to cause
a material revision to the estimates of aggregate oil and gas quantities
reflected in such report or the estimated future net cash flows to be received
from such quantities as reflected in the Reserve Report, except for production
of oil, gas, and other hydrocarbons in the ordinary course of business and
changes in general economic conditions that affect the international oil and
natural gas industry generally, excluding any Egyptian governmental action, but
including, the supply of, demand for and prices of, oil and natural gas.
(ac) Undisclosed Liabilities. Except as set forth in the
Company SEC Documents filed with the SEC prior to the date hereof, at the date
of the most recent audited financial statements of the Company included in the
Company SEC Documents, neither the Company nor any of its Subsidiaries had, and
since such date neither the Company nor any of such Subsidiaries has incurred,
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles
to be set forth on a financial statement or in the notes thereto or that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.
(ad) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) the Registration Statement on Form S-4 to be filed with the SEC by the
Parent in connection with the issuance of shares of Parent Common Stock in the
Merger (together with any amendments or supplements thereto, the "Registration
Statement") will, at the time the Registration Statement is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (ii) the Proxy
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Statement will, at the date mailed to the Company's stockholders and at the
time of the meeting of the Company's stockholders to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provision of the Exchange Act and the rules and
regulations thereunder.
(ae) Accounts Receivable. Neither the Company nor any of its
Subsidiaries has any account receivable which exceeds $200,000 and (i) is more
than ninety days past due as of February 29, 1996, (ii) is reasonably likely
not to be collected by the Company or its applicable Subsidiary and (iii) as to
which no specific reserve amount has been provided for and reflected on the
Company's balance sheet as of December 31, 1995 previously provided to Parent.
(af) Operating Companies. The Company and its Subsidiaries
have full legal and beneficial title to 20% of the outstanding shares of stock
of Khalda Petroleum Company and 25% of the outstanding shares of stock of Qarun
Petroleum Company formed under the Egyptian Agreements (the "Operating
Companies"). The stock in the Operating Companies owned by the Company and its
Subsidiaries is free and clear of all liens, security interests, mortgages,
pledges, claims, charges or other encumbrances except for the security
interests and encumbrances created in connection with the IFC Loan Agreement.
To the knowledge of the Company, the Operating Companies are in compliance with
their respective organizational documents. The transactions contemplated by
this Agreement shall not adversely affect the rights of the Company and its
Subsidiaries with respect to its ownership interest in the Operating Companies.
(ag) Tax Free Reorganization. With respect to the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code:
(i) The fair market value of the Parent Common Stock
and other consideration received by each Company stockholder will be
approximately equal to the fair market value of the Company Common Stock
surrendered in the exchange.
(ii) To the knowledge of the Company's management, there
is no plan or intention on the part of the stockholders of the Company
to sell, exchange or otherwise dispose of a number of shares of Parent
Common Stock received in the Merger which would reduce the Company
stockholders' ownership of such Parent Common Stock to a number of
shares having a value, as of the Closing Date, of less than fifty
percent of the value of all of the formerly outstanding stock of the
Company as of the same date. (For purposes of this representation,
shares of Company Common Stock exchanged for cash or other property or
exchanged for cash in lieu of fractional shares of Parent Common Stock
are treated as outstanding Company Common Stock on the Closing Date.
Additionally, shares of Company Common Stock and shares of Parent Common
Stock held by Company stockholders, if any, and otherwise sold,
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<PAGE> 29
redeemed, or disposed of prior or subsequent to the Merger were
considered in making this representation.)
(iii) Immediately following the Merger, the Surviving
Corporation will hold at least 90 percent of the fair market value of
its net assets and at least 70 percent of the fair market value of the
Company's gross assets and at least 90 percent of the fair market value
of Merger Sub's net assets and at least 70 percent of the fair market
value of Merger Sub's gross assets held immediately prior to the Closing
Date. (For purposes of this representation, amounts paid by the Company
or Merger Sub to dissenters, amounts paid by the Company or Merger Sub
to stockholders of the Company who receive cash or other property,
amounts used by the Company or Merger Sub to pay reorganization
expenses, and all redemptions and distributions (except for regular,
normal dividends, if any) made by the Company are included as assets of
the Company or Merger Sub, respectively, immediately prior to the
Merger.)
(iv) The Company has no plan or intention to issue
additional shares of its stock that would result in Parent losing
control of the Company within the meaning of Section 368(c) of the Code.
(v) Following the Merger, the Surviving Corporation
intends to continue its historic business or use a significant portion
of its historic business assets in a business.
(vi) Except as set forth in Section 5.10, (a) the
Company and the stockholders of the Company will each pay their
respective expenses, if any, incurred in connection with the Merger and
(b) neither the Company nor its stockholders will pay any Parent or
Merger Sub expenses incurred in connection with the Merger.
(vii) There is no intercorporate indebtedness existing
between Parent and the Company or between Merger Sub and the Company
that was issued, acquired or will be settled at a discount.
(viii) At the time of the Merger, the Company will not
have outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock in
the Company that, if exercised or converted, would affect Parent's
acquisition or retention of control of the Company.
(ix) The Company is not an investment company within the
meaning of Section 368(a)(2)(F) of the Code.
(x) On the Closing Date, the fair market value of the
assets of the Company will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which its assets are subject.
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<PAGE> 30
(xi) The Company is not under the jurisdiction of a
court in a case under Title 11 of the United States Code, or a
receivership, foreclosure, or similar proceeding in a federal or state
court.
(xii) None of the compensation received by any
stockholder-employees of the Company will be separate consideration for,
or allocable to, any of their shares of Company Common Stock.
3.2. Representations and Warranties of the Parent. Except as set
forth in the Parent SEC Documents (as hereinafter defined), the Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Power. The Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. The Parent and each
of its Significant Subsidiaries (as defined below) is duly qualified to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on the
Parent. As used in this Agreement, (i) a "Significant Subsidiary" means any
Subsidiary of the Company or the Parent, as the case may be, that would
constitute a Significant Subsidiary of such party within the meaning of Rule
1-02 of Regulation S-X of the SEC, and (ii) any reference to any event, change
or effect being material with respect to any entity means an event, change or
effect related to the condition (financial or otherwise), properties, assets,
liabilities, businesses or operations of such entity.
(b) Capital Structure. The authorized capital stock of the
Parent consists of 215,000,000 shares of Parent Common Stock, and 5,000,000
shares of Preferred Stock, no par value ("Parent Preferred Stock"), of which
25,000 shares of Parent Preferred Stock have been designated Series A Junior
Participating Preferred Stock ("Series A Preferred") and authorized for
issuance pursuant to a Rights Agreement dated January 31, 1996 ("Parent Rights
Agreement"). At the close of business on January 31, 1996 (i) 77,382,133
shares of Parent Common Stock were validly issued and outstanding, fully paid
and nonassessable and free of preemptive rights, (ii) 16,632,573 shares of
Parent Common Stock were reserved for issuance upon conversion of 3.93%
convertible notes due 1997 and 6% convertible subordinated debentures due 2002
of the Parent, in connection with the Parent's program of asset acquisitions
for Parent Common Stock, and in respect of the Parent's stock option, 401(k)
and dividend reinvestment plans, (iii) 1,119,991 shares of Parent Common Stock
were held by the Parent in its treasury, (iv) no shares of Parent Preferred
Stock were issued and outstanding, and (v) 9,401 shares of Series A Preferred
Stock were reserved for issuance upon the exercise of certain rights that
currently trade with Parent Common Stock ("Parent Rights") issued pursuant to
the Parent Rights Agreement. The shares of Parent Common Stock issuable in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and
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<PAGE> 31
nonassessable and free of preemptive rights, and the issuance of the shares
will be registered under the Securities Act.
(c) Authority; Non-Contravention. The Parent has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Parent and the consummation by the Parent of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Parent, and no approval of this Agreement
by the stockholders of the Parent is required pursuant to the rules of the NYSE
or the Chicago Stock Exchange, the Certificate of Incorporation or Bylaws of
the Parent, or the DGCL. The board of directors of the Parent at a meeting
duly called and held on March 27, 1996, unanimously approved this Agreement and
the transactions contemplated herein, including the issuance of the Parent
Common Stock as provided in this Agreement. This Agreement has been duly
executed and delivered by the Parent and assuming the valid authorization,
execution and delivery of this Agreement by the Company, constitutes a valid
and binding obligation of the Parent enforceable against it in accordance with
its terms. The issuance of shares of Parent Common Stock pursuant to this
Agreement and the filing of the Registration Statement with the SEC have been
duly authorized by the Parent's Board of Directors. The execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not constitute a
Violation by the Parent or any of its Subsidiaries pursuant to any provision of
(i) the Certificate of Incorporation or By-laws of the Parent or the Merger Sub
(true and complete copies of which as of the date hereof have been delivered to
the Company) or any provision of the comparable charter or organization
documents of any of its Subsidiaries, (ii) any contract, agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease, Benefit Plan (as
defined in Section 3.1(i)), or other agreement, instrument, permit, concession,
franchise, or license applicable to the Parent or any of its Subsidiaries, or
(iii) any judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to the Parent or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such Violations that would impair the ability of the Parent to
perform its obligations hereunder or would prevent the consummation of any of
the transactions contemplated hereby or would otherwise have a Material Adverse
Effect on the Parent. No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to the Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Parent or the consummation by
the Parent of the transactions contemplated hereby, except for (i) the filing
of a premerger notification report by the Parent under the HSR Act, (ii)
filings under the Securities Act and the Exchange Act, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, and (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the corporation, takeover, "Blue Sky" or securities laws of
various states of the United States.
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<PAGE> 32
(d) SEC Documents. The Parent has timely filed with the SEC
all required documents since January 1, 1993, and will timely file all required
Parent SEC Documents between the date hereof and the Effective Time (all such
documents, the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied or will comply in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and, as of their respective dates, none of the Parent SEC Documents contained
or will contain any untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Parent included
or to be included in the Parent SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position of the Parent and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and statements of cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year- end audit adjustments and to any other adjustments described
therein).
(e) Absence of Certain Changes or Events. Except as disclosed
in the Parent SEC Documents filed with the SEC prior to the date hereof (all of
which since December 31, 1995, have been furnished to the Company), there has
not been (i) any condition, event or occurrence which, individually or in the
aggregate, could reasonably be respected to prevent, hinder or materially delay
the ability of the Parent to consummate the transactions contemplated by this
Agreement, or (ii) any Material Adverse Change with respect to the Parent
(other than changes in general economic conditions that affect the oil and
natural gas industry generally, including, without limitation, the supply of,
demand for and prices for, oil and natural gas).
(f) Litigation. Except as disclosed in the Parent SEC
Documents filed with the SEC prior to the date hereof, there are no
investigations, claims, actions, suits, or proceedings pending or, to the
knowledge of the Parent, threatened, before or by any court or government
agency which (i) will, or can reasonably be expected to, have a Material
Adverse Effect on the Parent, or (ii) could have a material adverse effect on
the transactions contemplated hereby or the performance of the Parent's
obligations hereunder.
(g) Compliance with Applicable Laws. The Parent and its
Subsidiaries hold all required, necessary or applicable permits, licenses,
grants, authorizations, easements, variances, exemptions, certificates, orders,
franchises and approvals necessary to own, lease and operate its material
properties and to carry on its material business as now being conducted (the
"Parent Permits") and there is no action, proceeding or investigation pending
or, to the knowledge of the Parent, threatened regarding the suspension or
cancellation of any of the Parent Permits. The Parent and its Subsidiaries are
in compliance in all material
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<PAGE> 33
respects with the terms of the Parent Permits except where the failure to so
comply would prevent the Parent from carrying on its principal business as
currently being conducted. To the knowledge of the Parent, neither the Parent
nor any of its Subsidiaries has violated or failed to comply with any statute,
law, ordinance, regulation, rule or order of any Governmental Entity, any
arbitration award or any judgment, decree or order of any court or other
Governmental Entity, applicable to the Parent or any of its Subsidiaries or
their respective business, assets or operations, except such violations or
failures that in the aggregate would not have a Material Adverse Effect on the
Parent.
(h) Advisors. No broker, investment banker or advisor or
other person, other than Merrill Lynch & Co. ("Merrill Lynch"), the fees and
expenses of which will be paid by the Parent on the terms set forth in the
engagement letter, a copy of which has been furnished to the Company, is
entitled to any broker's, finder's, advisory or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Parent or the Merger Sub.
(i) Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the Parent SEC Documents
filed with the SEC prior to the date hereof, since December 31, 1994,
there has not been any adoption or material amendment by the Parent or
any of its Subsidiaries of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, dependent care, cafeteria, employee
assistance, scholarship or other plan, program, arrangement or
understanding (whether or not legally binding) maintained in whole or in
part, contributed to, or required to be contributed to by the Parent or
any of its Subsidiaries for the benefit of any present or former
officer, employee or director of the Parent or any of its Subsidiaries
(collectively, and including all amendments thereto, for purposes of
this Section 3.2(i), "Benefit Plans").
(ii) Each "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) currently maintained in whole or in part,
contributed to or required to be contributed to, by the Parent or any of
its Subsidiaries for the benefit of any present or former officer,
employee or director of the Parent or any of its Subsidiaries ("Pension
Plan") and each former pension plan that is or was intended to be
qualified under Section 401(a) of the Code has been the subject of a
determination letter from the IRS to the effect that such plan is
qualified under Section 401(a) of the Code or can still be submitted in
a timely manner to the IRS for such a letter, and no such determination
letter has been revoked nor, to the knowledge of the Parent, has
revocation of any such letter been threatened, nor has any such plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs, and nothing has occurred
or failed to occur which would cause the loss of such qualification, and
all amendments required to be adopted before the Effective Time
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<PAGE> 34
for any such Pension Plan to continue to be so qualified have been or
will be duly and timely adopted, except that this sentence does not
apply to any multiemployer plans; provided, however, that to the extent
that this representation applies to terminated pension plans, this
representation refers to the qualified status of any such plan through
the time of its termination.
(iii) Neither the Parent nor any of its Subsidiaries
sponsors or maintains any defined benefit plan described in Section
3(35) of ERISA, or Section 414(j) of the Code, other than any such plan
which is a "multiemployer plan" as such term is defined in Section
4001(a)(3) of ERISA, and no such plan has been terminated in a manner
that resulted in any liability of the Parent and/or any Subsidiary to
the PBGC. No entity, whether or not incorporated, which is deemed to be
under common control (as defined in Section 414 of the Code) with the
Parent and/or any of its Subsidiaries sponsors or maintains any such
defined benefit plan.
(iv) Each of the Benefit Plans sponsored by, and each of
the benefit plans formerly sponsored by, the Parent or any of its
Subsidiaries: (A) has been in substantial compliance with all reporting
and disclosure requirements of (I) Part 1 or Subtitle B of Title I of
ERISA, if applicable, or (II) other applicable law, (B) has had the
appropriate required Form 5500 (or equivalent annual report) filed,
timely, with the appropriate Governmental Entity for each year of its
existence, (C) has at all times complied with the bonding requirements
of (I) Section 412 of ERISA, if applicable, or (II) other applicable
law, (D) has no issue pending (other than the payment of benefits in the
normal course) nor any issue resolved adversely to the Parent or any of
its Subsidiaries which may subject the Parent or any of its Subsidiaries
to the payment of a material penalty, interest, tax or other obligation,
nor is there any basis for any imposition of any such liability, and (E)
has been maintained in all respects in compliance with the applicable
requirements of ERISA, the Code and other applicable law (including all
rules and regulations issued thereunder) not otherwise covered hereunder
so as not to give rise to any material liabilities to the Parent or its
Subsidiaries.
(v) All voluntary employee benefit associations, if
any, maintained by the Parent or any of its Subsidiaries and intended to
be exempt from federal income tax under Section 501(c)(9) of the Code
have been submitted to and approved as exempt from federal income tax
under Section 501(c)(9) of the Code by the IRS, and nothing has occurred
or failed to occur which would cause the loss of such exemption.
(vi) The execution of this Agreement or the consummation
of the transactions contemplated by this Agreement will not give rise to
any, or trigger any, change of control, severance or other similar
provisions in any Benefit Plan.
(vii) Neither the Parent nor any of its Subsidiaries
provides material post-retirement medical, health, disability or death
protection coverage or contributes to or maintains any employee welfare
benefit plan which provides for medical, health,
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disability or death benefit coverage following termination of employment
by any officer, director or employee except as is required by Section
4980B(f) of the Code or other applicable statute, nor has it made any
representations, agreements, covenants or commitments to provide that
coverage.
(viii) None of the Parent, any of its Subsidiaries, any
officer of the Parent or any of its Subsidiaries or any of the Benefit
Plans or prior benefit plans (including the Pension Plans and prior
pension plans) which are subject to ERISA, or any trusts created
thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407 or
408 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the Parent, any of its
Subsidiaries or any officer of the Parent or any of its Subsidiaries to
the tax or penalty on prohibited transactions imposed by such Section
4975 or to any liability under Section 502(i) or (l) of ERISA which
would have a Material Adverse Effect on the Parent. Neither the Parent
nor any of its Subsidiaries has suffered a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Section 4203 and
Section 4205, respectively, of ERISA) since the effective date of such
Sections 4203 and 4205 for which the Parent has any material liability
outstanding.
(ix) With respect to any Benefit Plan that is an
employee welfare benefit plan, (A) each such Benefit Plan that is a
group health plan, as such term is defined in Section 5000(b)(l) of the
Code, complies in all material respects with any applicable requirements
of Part 6 of Title I of ERISA and Section 4980B(f) of the Code and (B)
each such Benefit Plan (including any such plan covering retirees or
other former employees) may be amended or terminated with respect to
health benefits without material liability to the Parent or any of its
Subsidiaries on or at any time after the consummation of the Merger.
(x) All contributions required by law or by a
collective bargaining or other agreement to be made under the Benefit
Plan with respect to all periods through the Effective Date including a
pro rata share of contributions due for the current plan year, will have
been made by such date or provided for by adequate reserves by the
Parent and/or each Subsidiary. No changes in contribution rates or
benefit levels have been implemented or negotiated (but not yet
implemented), with respect to any Benefit Plan since the date on which
the information provided in the attached schedule has been provided, and
no such changes are scheduled to occur.
(xi) Neither the Parent nor any Subsidiary has or will
have any material liability or obligation for taxes, penalties,
contributions, losses, claims, damages, judgments, settlement costs,
expenses, costs, or any other liability or liabilities of any nature
whatsoever arising out of or in any manner relating to any Benefit Plan
or former benefit plan (including but not limited to employee benefit
plans such as foreign plans which are not subject to ERISA), that has
been, or is, contributed to by
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any entity, whether or not incorporated, which is deemed to be under
common control (as defined in Section 414 of the Code), with the Parent
or any Subsidiary.
(xii) Neither the Parent nor any Subsidiary has incurred
a liability for payment of premiums to the United Mine Workers of
America Combined Benefit Fund pursuant to Section 9704 of the Code,
which liability has not been satisfied in full.
(j) Director, Officer and Employee Agreements. Except as
disclosed in the Parent SEC Documents filed with the SEC prior to the date
hereof, there exist no material employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings between the
Parent or any of its Subsidiaries and any officer, director or key employee of
the Parent or any of its Subsidiaries.
(k) Certain Business Practices. There are no situations with
respect to the Parent or any of its Subsidiaries which involved or involves (i)
the use of any corporate funds or unlawful contributions, gifts or
entertainment or other unlawful expenses related to political activity, (ii)
the making of any direct or indirect unlawful payments to government officials
or others from corporate funds or the establishment or maintenance of any
unlawful or unrecorded funds, (iii) the violation of any of the provisions of
the United States Foreign Corrupt Practices Act of 1977, or any rules or
regulations promulgated thereunder or (iv) the receipt of any illegal discounts
or rebates or any other violation of the antitrust laws, except for situations
which do not presently, or could not after the passage of time reasonably be
expected to, have a Material Adverse Effect on the Parent.
(l) Insider Interests. Except as disclosed in the Parent SEC
Documents filed with the SEC prior to the date hereof, no affiliate, officer or
director of the Parent or any of its Subsidiaries has any agreement with the
Parent or any of its Subsidiaries or any interest in any property, real or
personal, tangible or intangible, of the Parent or any of its Subsidiaries
except for the normal rights as a stockholder or an employee and except for
such other matters which, under the rules of the SEC, are not required to be
disclosed.
(m) Intellectual Property. The Parent and its Subsidiaries
own, or are licensed or otherwise have the right to use, all patents, patent
rights, trademarks, rights, trade names, trade name rights, service marks,
service mark rights, copyrights, technology, know-how, processes and other
proprietary intellectual property rights and computer programs ("Parent
Intellectual Property") currently used in the conduct of the business and
operations of the Parent and its Subsidiaries, except where the failure to so
own or otherwise have the right to use such Intellectual Property would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent.
The use of such Parent Intellectual Property by the Parent and its Subsidiaries
does not infringe on the rights of any person, subject to such claims and
infringements as do not, individually or in the aggregate, give rise to any
liability on the part of the Parent and its Subsidiaries that could have a
Material Adverse Effect on the Parent, and no person is infringing on any right
of the Parent or any of its Subsidiaries with respect to any such Intellectual
Property. No claims are pending or, to the knowledge of the Parent,
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threatened that the Parent or, to the knowledge of the Parent, any of its
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Parent Intellectual Property.
(n) Labor Matters. Other than in Australia, there are no
collective bargaining agreements or other labor union agreements or
understandings to which the Parent or any of its Subsidiaries is a party or by
which any of them is bound. Neither the Parent nor any of its Subsidiaries is
the subject of any proceeding asserting that the Parent or any Subsidiary has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions. Since September 30, 1994 neither
the Parent nor any of its Subsidiaries has encountered any labor union
organizing activity, or had any actual or, to the knowledge of the Parent,
threatened employee strikes, work stoppages, slowdowns or lockouts.
(o) Insurance. All of the Parent's and its Subsidiaries'
insurance policies or contracts of insurance are sufficient for compliance with
all requirements of law and of all agreements to which the Parent or any of its
Subsidiaries is a party. All insurance policies pursuant to which any such
insurance is provided are in full force and effect, no notice of cancellation
or termination has been given to the Parent or any of its Subsidiaries by the
carrier, and all premiums required to be paid have been paid in full.
(p) Environmental Matters. Except to the extent, if any, that
would not have a Material Adverse Effect on the Parent: (i) the Parent and its
Subsidiaries have not received notice of any violation of or investigation
relating to any U.S., Egyptian, or other federal, state, provincial or local
environmental or pollution law, regulation, or ordinance with respect to assets
now or previously owned or operated by the Parent or any of its Subsidiaries
that has not been fully and finally resolved; (ii) all permits, licenses and
other authorizations that are required under Environmental Laws relating to
assets now owned or operated by the Parent or any of its Subsidiaries,
including Environmental Laws relating to actual or threatened emissions,
discharges or releases of Pollutants, have been obtained and are effective,
and, with respect to assets previously owned or operated by the Parent or any
of its Subsidiaries, were obtained and were effective during the time of the
Parent's or any Subsidiaries' operation; (ii) no conditions exist on, in or
about the properties now or previously owned or operated by the Parent or any
of its Subsidiaries or any third-party properties to which any Pollutants
generated by the Parent or any of its Subsidiaries were sent or released that
could give rise on the part of the Parent or any of its Subsidiaries to
liability under any Environmental Laws, claims by third parties under
Environmental Laws or under common law or the incurrence of costs to avoid any
such liability or claim; and (iv) all operators of the Parent's or any of its
Subsidiaries' assets are in compliance with all terms and conditions of such
Environmental Laws, permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder,
relating to the Parent's or any of its Subsidiaries' assets.
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(q) Condition of Assets. The property, plant and equipment
owned or leased by the Parent and each of its respective Subsidiaries which are
used in the operation of their respective businesses have been maintained in
all material respects in a state of repair so as to be adequate for normal
operations.
(r) Tax Matters.
(i) "Parent Group" shall mean any "affiliated group"
(as defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that includes the
Parent. "Parent Subsidiaries" shall mean the Subsidiaries of which the
Parent owns, directly or indirectly, 80% or more of the stock.
(ii) With respect to each of the Parent, the Parent
Group and each Parent Subsidiary: (A) all Tax Returns required to be
filed in respect of federal income Taxes, or all other Tax Returns where
the failure to file such returns or pay the related Taxes would have a
Material Adverse Effect on Parent, have been timely filed with the
appropriate Governmental Entities in all jurisdictions in which such Tax
Returns are required to be filed; (B) all Taxes shown to be due on the
Tax Returns referred to in clause (A) have been paid, except for any
taxes that are not material in amount; (C) no material claim is pending
before any Governmental Entity in a jurisdiction in which the Parent,
the Parent Group or any Parent Subsidiary does not file Tax Returns that
the Parent, the Parent Group or any Parent Subsidiary is or may be
subject to taxation by that jurisdiction; (D) the Parent, the Parent
Group, each Parent Subsidiary, and any affiliated group as defined in
Section 1504 of the Code other than the Parent Group of which the Parent
or any member of the Parent Group has ever been a Member has paid (or
accrued in its most recent financial statements filed with the Parent
SEC Documents) all Taxes attributable to all periods or portions thereof
ending on or before the Closing Date, except for any Taxes which are not
material in amount; (E) there are no liens for Taxes, except for any
Taxes that are not material in amount upon any asset of the Parent, the
Parent Group or any Parent Subsidiary except for liens for current Taxes
not yet due; (F) no material deficiency in respect of Taxes which have
been assessed against the Parent, the Parent Group or any Parent
Subsidiary remains unpaid and there are no audits or investigations
pending against the Parent, the Parent Group or any Parent Subsidiary
with respect to any Taxes, except for any Taxes that are not material in
amount; (G) there are no material claims, assessments, levies,
administrative proceedings or lawsuits pending or, to the knowledge of
the Parent, threatened against the Parent, the Parent Group or any
Parent Subsidiary by any tax authority; and (H) none of the Parent, the
Parent Group or any Parent Subsidiary has any material liability for
penalties with respect to the Tax Returns described in clause (A).
(s) Undisclosed Liabilities. Except as set forth in the
Parent SEC Documents filed with the SEC prior to the date hereof, at the date
of the most recent audited financial statements of the Parent included in the
Parent SEC Documents, neither the Parent nor any
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of its Subsidiaries had, and since such date neither the Parent nor any of such
Subsidiaries has incurred, any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a financial statement or in
the notes thereto or that, individually or in the aggregate, would have a
Material Adverse Effect on the Parent.
(t) No Stock Ownership in the Company. Neither the Parent nor
any of its affiliates as of the date hereof beneficially own any Company
Common Stock.
(u) Title. The Parent and its Subsidiaries have valid and
defensible title to their respective interests in oil and gas leases, free and
clear of any security interests, mortgages, pledges, liens, encumbrances or
charges of any kind, other than (A) those described in the Parent SEC
Documents, (B) obligations or duties under applicable laws, ordinances, rules,
regulations and orders of tribal or governmental authority, (C) liens and
encumbrances under operating agreements, unitization and pooling agreements,
production sales contracts, farm-out agreements and other oil and gas
exploration and production agreements, in each case that secure payment of
amounts not yet due and payable or the performance of other inchoate
obligations and are of a scope and nature customary in connection with similar
drilling and producing operations, and (D) those that do not have a Materially
Adverse Effect on the Parent.
(v) Advances From Gas Purchaser. Note 6 to the consolidated
financial statements of Parent contained in the Annual Report on Form 10-K for
the year ended December 31, 1995 sets forth the obligations of Parent and its
Subsidiaries for the delivery of hydrocarbons, attributable to any of the
Parent's or its Subsidiaries' properties in the future on the account of
prepayment, advance payment or similar obligations without then or thereafter
being entitled to receive full value therefore.
(w) Internal Financial Report. The statement of consolidated
income for the period ended February 29, 1996 prepared for the internal use of
Parent's management (a true and correct copy of which has been furnished to the
Company) was prepared in accordance with and consistent with past practice.
(x) Material Contracts. Each contract, agreement or
arrangement to which the Parent or any of its Subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Parent or any of its Subsidiaries is subject, which is material to the
condition, financial or otherwise, or the results of operations or business
affairs of the Parent and its Subsidiaries considered as one enterprise has
been duly and validly authorized, executed and delivered and is in full force
and effect in accordance with its terms; and, to the knowledge of the Parent,
neither the Parent nor any of its Subsidiaries is in breach or default of any
such agreements, which breach or default could have a Material Adverse Effect
on the Parent.
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(y) Information Supplied. None of the information supplied or
to be supplied by the Parent for inclusion or incorporation by reference in (i)
the Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Proxy Statement will, at the date mailed
to the Company's stockholders and at the time of the meeting of the Company's
stockholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
(z) Tax Free Reorganization. With respect to the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code:
(i) Immediately following the Merger, the Surviving
Corporation will hold at least 90 percent of the fair market value of
the Merger Sub's net assets and at least 70 percent of the fair market
value of the Merger Sub's gross assets held immediately prior to the
Effective Time, provided that amounts used by the Merger Sub to pay
reorganization expenses will be included as assets of the Merger Sub
immediately prior to the Merger.
(ii) The fair market value of the Parent Common Stock
and other consideration received by each Company Stockholder will be
approximately equal to the fair market value of the Company Common Stock
surrendered in the exchange.
(iii) Prior to the Merger, the Parent will be in control
of the Merger Sub within the meaning of Section 368(c) of the Code.
(iv) The Parent has no plan or intention to cause the
Surviving Corporation, after the Merger, to issue additional shares of
Surviving Corporation Common Stock that would result in the parent
losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
(v) The Parent has no plan or intention to reacquire
any of the Parent Common Stock issued in the Merger.
(vi) The Parent has no plan or intention to liquidate
the Surviving Corporation, to merge the Surviving Corporation with or
into another corporation, to sell or otherwise dispose of its Surviving
Corporation Common Stock except for transfers of Surviving Corporation
Common Stock to corporations of which the Parent has control (within the
meaning of Section 368(c) of the Code) at the time of such transfer, or
to cause the Surviving Corporation to sell or otherwise dispose of any
of its assets or of any of the assets acquired in the Merger, except for
dispositions made
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in the ordinary course of business or transfers of assets to a
corporation of which the Surviving Corporation has control (within the
meaning of Section 368(c) of the Code) at the time of such transfer.
(vii) The liabilities of the Merger Sub assumed by the
Surviving Corporation and the liabilities to which the transferred
assets of the Merger Sub are subject were incurred by the Merger Sub in
the ordinary course of its business.
(viii) Following the Merger, the Surviving Corporation
will continue the Company's historic business or use a significant
portion of the Company's historic business assets in a business.
(ix) If the Merger is effected, the Parent and the
Merger Sub will pay their respective expenses, if any, incurred in
connection with the Merger.
(x) There is no intercorporate indebtedness existing
between the Parent and the Company or between the Merger Sub and the
Company that was issued, was acquired or will be settled at a discount.
(xi) The Parent Common Stock that will be exchanged in
the Merger is voting stock within the meaning of Section 368(a) of the
Code.
(xii) The Parent does not own, nor has it owned during
the past five years any Company Common Stock.
(xiii) The Parent and the Merger Sub are not investment
companies as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(xiv) The payment of cash in lieu of fractional shares of
Parent Common Stock is solely for the purpose of avoiding the expense
and inconvenience to the parent of issuing fractional shares and does
not represent separately bargained for consideration.
(xv) The total cash consideration that will be paid in
the Merger to the holders of Company Common Stock instead of issuing
fractional shares of Parent Common Stock will not exceed one percent of
the total consideration that will be issued in the Merger to the holders
of Company Common Stock in exchange for their Company Common Stock.
(xvi) None of the compensation received by any
shareholder employees of the Company will be separate consideration for,
or allocable to, any of their shares of Company Common Stock.
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(xvii) None of the Parent Common Stock received by any
shareholder employees of the Company will be separate consideration for,
or allocable to, any employment agreement.
(xviii) The compensation paid to any shareholder-employees
of the Company will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
(xix) Neither the Parent nor the Merger Sub is under the
jurisdiction of a court in a case under Title 11 of the United States
Code of a receivership, foreclosure or similar proceeding in a federal
or state court.
3.3. Representations and Warranties Regarding the Merger Sub. The
Parent and the Merger Sub jointly and severally represent and warrant to the
Company as follows:
(a) Organization and Standing. The Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
(b) Capital Structure. The authorized capital stock of the
Merger Sub consists of 5,000 shares of common stock, par value $1.00 per share,
1,000 of which are validly issued and outstanding, fully paid and nonassessable
and are owned by the Parent free and clear of all liens, claims and
encumbrances.
(c) Authority. The Merger Sub has the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by the Merger Sub of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by its Board
of Directors and the Parent as its sole stockholder, and, except for the
corporate filings required by state law, no other corporate proceedings on the
part of the Merger Sub are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Merger Sub and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes a valid and binding
obligation of the Merger Sub enforceable against the Merger Sub in accordance
with its terms.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Conduct of Business by the Company and Parent Pending the
Merger.
(a) During the period from the date of this Agreement
through the Effective Time, each of Parent and the Company shall, and shall
cause its Subsidiaries to, in all material respects carry on their respective
businesses in, and not enter into any material
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transaction other than in accordance with, the ordinary course of business and,
to the extent consistent therewith, use all reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them with a view
to retaining their goodwill and ongoing businesses unimpaired at the Effective
Time.
(b) Without limiting the generality of subparagraph (a),
and except (x) as otherwise expressly contemplated by this Agreement, (y) for
advances and expenditures for cash calls made by the operator of each of the
Concession Agreements in amounts consistent with the capital budgets of such
concession previously approved by the Company or (z) as set forth in the
Company Disclosure Schedule, the Company shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments
to stockholders of the Company in their capacity as such, other than
(1) ordinary quarterly cash dividends by the Company consistent with
past practice in an amount not in excess of $.03 per share of Company
Common Stock, and (2) dividends payable to the Company declared by any
of the Company's wholly-owned Subsidiaries, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than,
in the case of the Company, the issuance of Company Common Stock
during the period from the date of this Agreement through the
Effective Time upon the exercise of Company Stock Options outstanding
on the date of this Agreement);
(iii) amend its Certificate of Incorporation or
amend its By-laws;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing all or substantially all of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization
or division thereof;
(v) sell, lease or otherwise dispose of or agree
to sell, lease or otherwise dispose of, any of its assets except for
(A) sales of actual production in the ordinary course of business,
and (B) sales of assets (other than oil and gas properties
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or related plant, equipment, pipeline or gathering system assets or
real property) made in the ordinary course of business consistent with
past practice and not involving any asset with a value greater than
$200,000 or assets with an aggregate value greater than $200,000;
(vi) except in the ordinary course of business
consistent with past practice and limited to borrowings under the IFC
Loan Agreement or other transactions not exceeding an aggregate amount
equal to $200,000, (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities
or guarantee any debt securities of others, or (B) make any loans,
advances or capital contributions to, or investments in, any other
person, other than to or in the Company or any wholly-owned Subsidiary
of the Company;
(vii) alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any Subsidiary of the Company;
(viii) enter into, adopt or amend any severance
plan, agreement or arrangement, any employee benefit plan or any
employment or consulting agreement or hire any additional employees or
consultants, except for temporary staff hired in the ordinary course
of business;
(ix) make or incur any capital expenditures except
for amounts aggregating less than $200,000;
(x) make any election relating to taxes or settle
or compromise any tax liability, except for amounts aggregating less
than $200,000;
(xi) change any material accounting principle used
by it, except for any change required by generally accepted accounting
principles or by the rules of the SEC;
(xii) waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement
(except for any agreement with the Parent) to which the Company or any
Subsidiary is a party; or
(xiii) authorize any of, or commit or agree to take
any of, the foregoing actions.
(c) Without limiting the generality of subparagraph (a),
and, except as otherwise expressly contemplated by this Agreement or set forth
in the Parent Disclosure Schedule, the Parent shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of the Company:
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(i) (A) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments
to stockholders of the Parent in their capacity as such, other than
(1) ordinary quarterly cash dividends by the Parent consistent with
past practice in an amount not in excess of $.07 per share of Parent
Common Stock, (2) dividends declared prior to the date of this
Agreement, and (3) dividends payable to the Parent declared by any of
its Subsidiaries; (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock; or (C) purchase, redeem or otherwise acquire any shares of
capital stock of the Parent or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities.
(ii) amend its Certificate of Incorporation;
(iii) acquire or agree to acquire by merger or
consolidation with or into Parent, any corporation, partnership,
association or other business organization or division thereof other
than Subsidiaries of the Parent;
(iv) change any material accounting principle used
by it, except for any change required by generally accepted accounting
principles or by the rules of the SEC;
(v) engage in hedging transactions and other risk
management activities in any manner materially inconsistent with
Parent's Risk Policy Statement; a true and correct copy of which has
been delivered to the Company; or
(vi) authorize any of, or commit or agree to take
any of, the foregoing actions.
(d) No party shall, nor shall any party permit any of its
Subsidiaries to, take any action that would or is reasonably likely to result
in any of its representations and warranties set forth in this Agreement being
untrue as of the date made (to the extent so limited), or any of the conditions
to the Merger set forth in Article VI not being satisfied.
(e) Each party shall confer on a regular and frequent
basis with the other, report on operational matters and promptly advise the
other orally and in writing of any change or event having, or which, insofar as
can reasonably be foreseen, could have, a Material Adverse Effect on such
party. Each party shall promptly provide the other (or its counsel) copies of
all filings made by such party with any state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
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4.2. No Solicitation.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any of
its Subsidiaries, solicit or knowingly encourage the initiation of any
inquiries regarding any Acquisition Transactions or Acquisition Proposals (as
hereinafter defined). The Company shall promptly notify the Parent in writing
if any such proposal or offer, or any inquiry or contact with any person with
respect thereto, is made and shall, in any such notice to the Parent, indicate
in reasonable detail the identity of the offeror and the terms and conditions
of any proposal or offer, or any such inquiry or contact.
(b) If the Board of Directors of the Company receives a
request for confidential information from a potential bidder for the Company,
and the Board of Directors of the Company determines, after consultation with
independent counsel, that the Board of Directors of the Company has a fiduciary
obligation to provide such information to such potential bidder, then the
Company may, subject to customary confidentiality agreements, provide such
potential bidder with access to information regarding the Company. Without
limiting the foregoing, the Company agrees that any violation of the
restrictions set forth in this Section 4.2 by any officer of the Company or any
of its Subsidiaries or any investment banker or other advisor retained by the
Company, whether or not such person is purporting to act on behalf of the
Company or otherwise, will be deemed a breach by the Company of the provisions
of this Agreement. The Company agrees to use its reasonable best efforts to
ensure that the officers, directors and employees of the Company and its
Subsidiaries and any investment banker or other advisor or representative
retained by the Company are aware of the restrictions described in this Section
4.2. Subject to the applicable fiduciary duties of directors of the Company,
as determined by such directors after consultation with independent counsel,
the Company agrees not to release any third party from any confidentiality or
standstill agreement to which the Company is a party.
(c) The Company agrees that, subject to the fiduciary duties
of the directors of the Company, as determined by such directors after
consultation with independent counsel, neither the Board of Directors of the
Company nor any committee thereof will (i) withdraw or modify, or propose to
withdraw or modify, in any manner adverse to the Parent or the Merger Sub the
approval or recommendation by the Board of Directors of the Company of the
Merger or this Agreement, or (ii) approve or recommend, or propose to approve
or recommend, any Acquisition Transaction other than the Merger.
(d) Notwithstanding the foregoing, nothing contained in this
Agreement will prevent (i) the Board of Directors of the Company or any
committee thereof from approving or recommending to the Company's stockholders
any unsolicited tender offer or exchange offer by a third party pursuant to
Rules 14d-9 and 14e-2 under the Exchange Act (and, in connection therewith,
withdrawing or modifying the approval or recommendation of the Board of
Directors of the Company of the Merger or this Agreement) if required in the
exercise of their fiduciary duties, as determined by such directors after
consultation with independent counsel or (ii) the Board of Directors of the
Company in the exercise of their
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fiduciary duties and after consulting with independent counsel, from
considering, negotiating and approving another unsolicited bona fide proposal
or offer which the Board of Directors determines in good faith, after
consultation with its financial advisors, may result in a transaction more
favorable to the Company's stockholders from a financial point of view than the
transaction contemplated by this Agreement.
4.3. Tax-Free Reorganization. During the period from the date of this
Agreement through the Effective Time, unless the other parties shall otherwise
agree in writing, none of the Parent, the Merger Sub, any other Subsidiary of
the Parent, the Company or any Subsidiary of the Company shall knowingly take
or fail to take any action, which action or failure to act would jeopardize
qualification of the Merger as a reorganization with the meaning of Section
368(a) of the Code.
4.4. Notices of Certain Events. Each of the Company or the Parent, as
appropriate, shall promptly notify the other of receipt of:
(a) any notice or other communication from any person or
Governmental Entity alleging that the consent of such person is or may be
required in connection with, or that any rights or properties of the Company
may be lost or subjected to any preferential purchase or other similar rights
by reason of, the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement; and
(c) notice of the inception of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened,
against, relating to or involving or otherwise affecting the Company or the
Parent or any respective Subsidiary that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.1(f) or Section 3.2(f) or that relate to the consummation of the transactions
contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Stockholders Meetings. The Company shall call a meeting of its
stockholders to be held as promptly as practicable following the date that the
Registration Statement becomes effective for the purpose of voting upon the
Merger and related matters. The Company will, through its Board of Directors
and subject to Section 4.2, recommend to its stockholders approval of the
Merger. The Company and the Parent shall coordinate and cooperate with respect
to the timing of such meeting, and the Company shall use its reasonable best
efforts to hold such meeting as soon as practicable after the date hereof.
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5.2. Preparation of Registration Statement and the Proxy Statement.
The Company shall promptly prepare and file with the SEC the Proxy Statement
and the Parent shall promptly prepare and file with the SEC the Registration
Statement, in which the Proxy Statement will be included as a prospectus. The
Parent shall use its reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing. The Parent shall also take any action (other than qualifying to
do business in any jurisdiction in which it is now not so qualified) required
to be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and upon the cancellation of
Company Stock Options pursuant to Section 5.9(c), and the Company shall furnish
all information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with any such action.
5.3. Letter of the Company's Accountants. The Company shall use its
reasonable best efforts to cause to be delivered to the Parent a letter of
Arthur Andersen LLP, the Company's independent auditors, dated a date within
ten business days before the date on which the Registration Statement shall
become effective and addressed to the Parent, in form and substance reasonably
satisfactory to the Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
5.4. Letter of the Parent's Accountants. The Parent shall use its
reasonable best efforts to cause to be delivered to the Company a letter of
Arthur Andersen LLP, the Parent's independent auditors, dated a date within ten
business days before the date on which the Registration Statement shall become
effective and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
5.5. Access to Information. Upon reasonable notice, the Company and
the Parent shall each (and shall cause each of their respective Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all of its properties, books, contracts,
commitments and records and, during such period, each of the Company and the
Parent shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Unless otherwise required by law, the parties
will hold any such information that is nonpublic in accordance with the terms
of the Confidentiality Agreements described in Section 8.5, and in the event of
termination of this Agreement for any reason each party shall promptly return
all nonpublic documents obtained from any other party, and any copies made of
such documents, to such other party.
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5.6. Legal Conditions to Merger. Each of the Company, the Parent and
the Merger Sub will take all reasonable actions necessary to comply promptly
with all legal requirements that may be imposed on itself with respect to the
Merger (including furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of their
Subsidiaries in connection with the Merger. Each of the Company, the Parent
and the Merger Sub will, and will cause its Subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, waiver, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained or made by the Parent, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
5.7. Stock Exchange Listing. The Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
5.8 Public Announcements. The parties hereto shall consult with each
other concerning any proposed press release or public announcement pertaining
to the transactions contemplated by this Agreement and shall use their
reasonable best efforts to agree upon the text of any such press release or the
making of such public announcement prior to the public dissemination thereof
and prior to making any filings with any Governmental Entity or national
securities exchange with respect thereto.
5.9. Company Stock Plans.
(a) The Parent and the Company shall take such actions as
shall be necessary or required to permit the Parent to, and the Parent shall,
effective at the Effective Time, (A) assume each option to purchase shares of
Company Common Stock which is outstanding immediately prior to the Effective
Time pursuant to the Company's Stock Plans and which remains unexercised in
whole or in part as of the Effective Time and (B) substitute shares of Parent
Common Stock and cash (as provided hereinbelow) for the shares of Company
Common Stock purchasable under each such assumed option ("Assumed Option"),
which assumption and substitution shall be effected as follows:
(i) the Assumed Option shall not give the optionee
additional benefits which such optionee did not have under the Company
Stock Option before such assumption nor diminish the benefits which such
options did have, and shall be assumed on the same terms and conditions
as the Company Stock Option being assumed (including the applicable
provision for full vesting upon consummation of the Merger, as provided
in the terms of the applicable Company Stock Plans or any agreement
between the Company and the option holder entered into as of the date of
this Agreement), subject to clauses (ii) and (iii) below;
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(ii) the number of shares of Parent Common Stock
purchasable and cash receivable upon exercise of an Assumed Option in
accordance with its terms shall be equal to the number of shares of
Parent Common Stock (subject to adjustments in Parent Common Stock
effected following the Merger in accordance with the terms of the
Assumed Options) and the amount of cash that the holder of an Assumed
Option would have received upon consummation of the Merger had the
Assumed Option been exercised (without regard to any restrictions on
exercisability) in full for Company Common Stock immediately prior to
the Effective Time; and
(iii) the exercise price per Assumed Option after the
Effective Time shall remain unchanged, and shall be the same as the
exercise price per Assumed Option immediately prior to the Effective
Time.
(b) The Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Assumed Options, and, as soon as practicable
after the Effective Time, the Parent shall file with the SEC a registration
statement on Form S-8 (or other appropriate form) with respect to the shares of
Parent Common Stock subject to the Assumed Options and use its reasonable
efforts to maintain the effectiveness of such registration statement for so
long as any of the Assumed Options remain outstanding.
(c) The Parent and the Company shall take such actions as
shall be necessary or required for the issuance of the Company Common Stock in
accordance with the terms of the Company's Non-Employee Director Compensation
Plan and pursuant to the applicable summary previously submitted by the Company
to Parent.
5.10. Fees and Expenses.
(a) If this Agreement is terminated pursuant to Sections
7.1(b), 7.1(c), 7.1(e) or 7.1(f), the party terminating this Agreement shall be
paid by the other party hereto, within five business days after written request
from time to time delivered, all out-of-pocket expenses and fees (including,
without limitation, fees and expenses payable to investment banking firms and
other financial advisors and their respective counsel, accountants, engineers,
outside counsel, experts and consultants) actually incurred by the terminating
party or its Subsidiaries on its or their behalf in connection with the
consummation of all transactions contemplated by this Agreement (the "Merger
Expenses"); provided, however, that the Merger Expenses paid under this Section
5.10(a) shall not exceed a maximum of $900,000.
(b) If this Agreement is terminated pursuant to Section
7.1(h)(ii) or (iii) or Section 7.1(i), and neither the Parent nor the Merger
Sub is in material breach of its representations, warranties, covenants and
agreements under this Agreement then the Company shall promptly, but in no
event later than five business days after written demand from the Parent, pay
the Parent a fee of $12,000,000, payable in same day funds. If either (i) (A)
an Acquisition Proposal is made prior to a meeting of Company stockholders held
for the purpose of approving this Agreement and the transactions contemplated
thereby and prior
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to termination of this Agreement by its terms, (B) this Agreement is terminated
pursuant to Section 7.1(b), 7.1(d)(i), 7.1(f), or 7.1(h)(i), (C) neither the
Parent nor Merger Sub is in material breach of its representations, warranties,
covenants and agreements under this Agreement, and (D) at any time prior to the
date which is nine months after the termination of the Agreement an
"Acquisition Transaction" is consummated or (ii) an Acquisition Transaction is
consummated prior to the termination of this Agreement and neither Parent nor
Merger Sub is in material breach of its representations, warranties, covenants
and agreements under this Agreement, then the Company shall promptly, but in no
event later than five business days after written demand of Parent, pay Parent
a fee of $12,000,000. For purposes of this Agreement, the term "Acquisition
Transaction" shall mean (i) the merger or consolidation of the Company or any
of its Significant Subsidiaries (within the meaning of Rule 1-02 of Regulation
S-X promulgated by the SEC) of the Company in a transaction which results in
the stockholders of the Company receiving securities, cash or other
consideration for their shares of Company Common Stock, (ii) the sale, lease or
other disposition of all or substantially all of the assets of the Company or
any of its Significant Subsidiaries or the sale by the Company of at least a
majority of the equity securities of any of its Significant Subsidiaries, (iii)
a tender or exchange offer for at least a majority of the equity securities of
the Company or any of its Significant Subsidiaries, (iv) any corporation,
partnership trust, association, entity or group (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent or Merger Sub, shall have acquired
beneficial ownership of 50% or more of the outstanding shares of Company Common
Stock, other than acquisitions for bona fide arbitrage purposes or (v) similar
transactions involving the Company or any of its Significant Subsidiaries, but
in each case excluding transactions solely among or between the Company and its
wholly owned Subsidiaries (any of the foregoing transactions being referred to
herein as an "Acquisition Transaction"). As used herein, "Acquisition
Proposal" shall mean any (i) publicly announced proposal, (ii) regulatory
application or notice (whether in draft or final form), (iii) agreement or
understanding, (iv) disclosure of an intention to make a proposal, or (v)
amendment to any of the foregoing, made or filed on or after the date of this
Agreement, in each case with respect to: (A) an Acquisition Transaction, or (B)
after the date of this Agreement, a purchase or other acquisition (including by
way of share exchange, tender offer or otherwise) by any corporation,
partnership, person, trust, association, entity, or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Parent or the Merger Sub,
of securities representing 20% or more of the voting power of the Company or
any Significant Subsidiary. Notwithstanding the foregoing, the fee paid
pursuant to this Section 5.10(b) shall be reduced by any payment made by the
Company to the Parent pursuant to Section 5.10(a).
(c) Except as set forth in Sections 5.10(a) and (b), all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except
that expenses incurred in connection with printing and mailing the Proxy
Statement and the Registration Statement shall be shared equally.
5.11. Brokers or Finders. Each of the Parent and the Company
represents, as to itself and its Subsidiaries, that no agent, broker,
investment banker, financial advisor or other firm
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or person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except Petrie Parkman, whose fees and expenses
will be paid by the Company in accordance with the Company's agreement with
such firm (a copy of which has been delivered by the Company to the Parent
prior to the date of this Agreement), and Merrill Lynch, whose fees and
expenses will be paid by the Parent in accordance with the Parent's agreement
with such firm (a copy of which has been delivered by the Parent to the Company
prior to the date of this Agreement), and each of the Parent and the Company,
respectively, agree to indemnify and hold the other harmless from and against
any and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
5.12. Indemnification.
(a) From and after the Effective Time, the Parent and the
Surviving Corporation shall, jointly and severally, to the fullest extent
permitted under applicable law, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of the Company or
any of its Subsidiaries (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of the Company or any Subsidiary, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, (and the Parent and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted by applicable law upon receipt of any undertaking
contemplated by Section 145(e) of the DGCL). Without limiting the foregoing,
in the event any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective Time), (i) the Indemnified Parties may retain counsel satisfactory to
them and the Company (or them and the Parent and the Surviving Corporation
after the Effective Time); (ii) the Company (or after the Effective Time, the
Parent and the Surviving Corporation) shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; and (iii) the Company (or after the Effective Time, the
Parent and the Surviving Corporation) will use all reasonable efforts to assist
in the vigorous defense of any such matter, provided that neither the Company,
the Parent nor the Surviving Corporation shall be liable for any settlement of
any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.12, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company, the
Parent, or the Surviving Corporation (but the
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failure so to notify an indemnified party shall not relieve it from any
liability that it may have under this Section 5.12 except to the extent such
failure materially prejudices such party), and shall deliver to the Company (or
after the Effective Time, the Parent and the Surviving Corporation) the
undertaking contemplated by Section 145(e) of the DGCL. With respect to any
claims, the Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict of any significant
issue between the positions of any two or more Indemnified Parties.
(b) Without limiting the provisions of Section 5.12(a), each
Indemnified Party shall continue to have all of the rights to indemnification
and reimbursement set forth in the Company's current Certificate of
Incorporation and Bylaws and the Parent and Surviving Corporation hereby assume
as of the Effective Time the indemnification and reimbursement obligations of
the Company set forth in the Company's current Certificate of Incorporation and
Bylaws. In the event that the provisions of Section 5.12(a) are less favorable
to an Indemnified Party than the provisions of the Company's current
Certificate of Incorporation or Bylaws, then the provisions of the Company's
current Certificate of Incorporation and Bylaws shall be applicable to the
Parent's and Surviving Corporation's indemnification and reimbursement
obligations to such Indemnified Party.
(c) The provisions of this Section 5.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and each
such Indemnified Party's heirs and representatives.
5.13. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts promptly to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be obligated to use its
reasonable efforts or to take any action (or omit to take any action) pursuant
to this Agreement, if the Board of Directors of the Company shall conclude,
after consultation with counsel, in good faith that such efforts, action or
omission would violate the fiduciary obligations of such Board of Directors
under applicable law. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of the Constituent
Corporations, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock as required by the DGCL and
applicable charter provisions.
(b) NYSE Listing. The shares of Parent Common Stock issuable
to the Company stockholders pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the NYSE subject to official notice of issuance.
(c) Other Approvals. Other than the filing provided for by
Section 1.2, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity the failure to obtain which would have a Material Adverse
Effect on the Parent shall have been filed, occurred or been obtained. The
Parent shall have received all state securities or "Blue Sky" permits and other
authorizations necessary to issue the Parent Common Stock in exchange for the
Company Common Stock and to consummate the Merger.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
6.2. Conditions of Obligations of the Parent and the Merger Sub. The
obligations of the Parent and the Merger Sub to effect the Merger are subject
to the satisfaction of the following conditions unless waived by the Parent and
the 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 as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and the Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer or
the President and by the Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, or upon
the consummation of the transactions contemplated hereby, and the Parent shall
have received a certificate signed on behalf of the
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Company by the Chief Executive Officer or the President and by the Chief
Financial Officer of the Company to such effect.
(c) Opinion of U.S. Counsel. Parent shall have received
an opinion of counsel from Baker & Botts, L.L.P., special United States counsel
to the Company, dated the Effective Time, substantially to the effect that:
(i) The incorporation, good standing and
capitalization of the Company are as stated in this Agreement; the
authorized shares of Company Common Stock are as stated in this
Agreement; all outstanding shares of Company Common Stock are duly and
validly authorized and issued, fully paid and non-assessable and have
not been issued in violation of any preemptive right of stockholders;
and, to the knowledge of such counsel, there is no existing option,
warrant, right, call, subscription or other agreement or commitment
obligating the Company to issue or sell, or to purchase or redeem, any
shares of its capital stock other than as stated in this Agreement.
(ii) The Company has corporate power and authority
to execute, deliver and perform this Agreement and this Agreement has
been duly authorized, executed and delivered by the Company, and
(assuming the due and valid authorization, execution and delivery by
Parent and Merger Sub) constitutes the legal, valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iii) To the knowledge of such counsel, there are
no actions, suits or proceedings, pending or threatened against or
affecting the Company or its Subsidiaries, at law or in equity or
before or by any court, governmental department, commission, board,
bureau, agency or instrumentality, or before any arbitrator of any
kind which seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement.
(iv) The execution and performance by the Company
of this Agreement will not violate the Certificate of Incorporation or
By-laws of the Company or the charter or By-laws of any of its
Subsidiaries, and, to the knowledge of such counsel, will not violate,
result in a breach of, or constitute a default under, any material
lease, mortgage, contract, agreement, instrument, law, rule,
regulation, judgment, order or decree to which the Company or any of
its Subsidiaries is a party or to which they or any of their
properties or assets may be bound.
(v) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency
or body which has not
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been obtained is required on behalf of the Company or any of its
Subsidiaries for consummation of the transactions contemplated by this
Agreement.
(vi) At the time the Registration Statement became
effective, the Registration Statement (other than the financial
statements, financial data, engineering data, statistical data and
supporting schedules included therein, and information relating to or
supplied by Parent or Merger Sub as to which such counsel expresses no
opinion) complied as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules
and regulations of the SEC thereunder.
In addition, there shall be a statement to the effect that in the
course of the preparation of the Registration Statement and the Proxy Statement
such counsel has considered the information set forth therein in light of the
matters required to be set forth therein, and has participated in conferences
with officers and representatives of the Company and Parent, including their
respective counsel and independent public accountants, during the course of
which the contents of the Registration Statement and the Proxy Statement and
related matters were discussed. Such counsel has not independently checked the
accuracy or completeness of, or otherwise verified, and accordingly is not
passing upon, and does not assume responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Proxy Statement; and such counsel has relied as to
materiality, to a large extent, upon the judgment of officers and
representatives of the Company and Parent. However, as a result of such
consideration and participation, nothing has come to such counsel's attention
which causes such counsel to believe that the Registration Statement (other
than the financial statements, financial data, engineering data, statistical
data and supporting schedules included therein, and information relating to or
supplied by Parent or Merger Sub, as to which such counsel expresses no
belief), at the time it became effective, 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 not misleading or that the Proxy
Statement (other than the financial statements, financial data, engineering
data, statistical data and supporting schedules included therein, and
information relating to or supplied by Parent or Merger Sub, as to which such
counsel expresses no belief), at the time the Registration Statement became
effective, included any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinion, counsel for the Company may rely as to
matters of fact upon the representations of officers of the Company and its
Subsidiaries contained in any certificate delivered to such counsel and
certificates of public officials which certificates should be attached to and
delivered with such opinion. Such opinion shall be limited to the General
Corporation Law of the State of Delaware and the laws of the United States of
America.
(d) Opinion of Egyptian Counsel. Parent shall have
received an opinion of counsel from Hashem, Ibrahim & Tawfik, Egyptian counsel
to the Company, dated the
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Effective Time, substantially to the effect that, (i) each Concession Agreement
is a duly authorized and valid agreement of the Arab Republic of Egypt and,
after due inquiry, is in full force and effect, (ii) no consent or approval by
any Egyptian Government Entity is required in connection with the consummation
of the Merger and the transaction contemplated by this Agreement, and (iii)
neither the Merger nor any of the other transactions contemplated by this
Agreement will conflict with or breach any of the terms or provisions of the
Concession Agreements.
(e) Consents Under Agreements. The Company shall have
obtained the consent or approval of each person (other than the Governmental
Entities referred to in Section 6.1(c)) whose consent or approval shall be
required in order to permit the succession by the Surviving Corporation
pursuant to the Merger to any obligation, right or interest of the Company or
any Subsidiary of the Company under any loan or credit agreement, note,
mortgage, indenture, lease, Plan (as defined in Section 3.1(i)), or other
agreement, obligation or instrument, except those for which failure to obtain
such consents and approvals would not, in the reasonable opinion of the Parent,
individually or in the aggregate, have a Material Adverse Effect on the
Company, or upon the consummation of the transactions contemplated hereby.
(f) No Amendments to Resolutions. Neither the Board of
Directors of the Company nor any committee thereof shall have amended,
modified, rescinded or repealed the resolutions, adopted by the Board of
Directors at a meeting duly called and held on March 27, 1996 (accurate and
complete copies of which have been provided to the Parent) and shall not have
adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions.
(g) Dissenting Stockholders. Holders of not more than 10%
of the outstanding shares of Company Common Stock shall have properly demanded
appraisal rights for their shares under the DGCL.
(h) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(i) Other Documents. The Company shall have furnished to the
Parent and Merger Sub at the Closing such other customary documents,
certificates or instruments as may be reasonably requested by the Parent and
Merger Sub.
6.3. Conditions of Obligations of the Company. The obligations of the
Company to effect the Merger is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of the Parent and the Merger Sub set forth in this Agreement shall
be true and correct in all
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material respects as of the date of this Agreement and (except to the extent
such representations speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement and except for inaccuracies which would not have a Material
Adverse Effect on the Parent, and the Company shall have received a
certificate signed on behalf of the Parent by the Chief Executive Officer or
the President and by the Chief Financial Officer of the Parent to such effect.
(b) Performance of Obligations of the Parent and the Merger
Sub. The Parent and the Merger Sub shall have performed, in all material
respects, all obligations required to be performed by them under this Agreement
at or prior to the Closing Date, except for the breach or breaches of such
obligations the adverse consequences of which would not in the aggregate have a
Material Adverse Effect on the Parent, or upon the consummation of the
transactions contemplated hereby and the Company shall have received a
certificate signed on behalf of the Parent by the Chief Executive Officer or
the President and by the Chief Financial Officer of the Parent to such effect.
(c) Opinion of Counsel. The Company shall have received
opinions from Z.S. Kobiashvili, General Counsel of Parent, and Andrews & Kurth
L.L.P., dated the Effective Time covering, collectively and substantially, the
opinions expressed below:
(i) The incorporation and good standing of Parent and
Merger Sub are as stated in this Agreement; the authorized shares of
Parent and Merger Sub are as stated in this Agreement; all outstanding
shares of Parent Common Stock are duly and validly authorized and
issued, fully paid and nonassessable and have not been issued in
violation of any preemptive right of any stockholders; and, to the
knowledge of such counsel, there is no existing option, warrant, right,
call, subscription or other agreement or commitment obligating the
Parent to issue or sell, or to purchase or redeem, any shares of capital
stock other than as stated in this Agreement.
(ii) Each of Parent and Merger Sub has corporate power
and authority to execute, deliver and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by Parent or
Merger Sub, as the case may be, and (assuming due and valid
authorization, execution and delivery by the Company) constitutes the
legal, valid and binding agreement of Parent or Merger Sub enforceable
against Parent or Merger Sub in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(iii) The execution and performance by Parent and Merger
Sub of this Agreement will not violate the Certificates of Incorporation
or By-Laws of Parent and Merger Sub, respectively, and, to the knowledge
of such counsel, will not violate, result in a breach of or constitute a
default under any material lease, mortgage,
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contract, agreement, instrument, law, rule, regulation, judgment, order
or decree to which Parent and Merger Sub is a party or by which they or
any of their properties or assets may be bound.
(iv) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency or
body which has not been obtained is required on behalf of Parent and
Merger Sub for the consummation of the transactions contemplated by this
Agreement.
(v) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting Parent and Merger Sub, at law or in equity or before or by any
court, governmental department, commission, board, bureau, agency or
instrumentality, or before any arbitrator of any kind which seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
(vi) At the time the Registration Statement became
effective, the Registration Statement (other than the financial
statements, financial data, engineering data, statistical data and
supporting schedules included therein, and information relating to or
supplied by the Company as to which such counsel expresses no opinion)
complied as to form in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of
the SEC thereunder.
(vii) The shares of Parent Common Stock to be issued
pursuant to this Agreement will be, when so issued, duly authorized,
validly issued and outstanding, fully paid and nonassessable.
In addition, there shall be a statement to the effect that in the course
of the preparation of the Registration Statement and the Proxy Statement such
counsel has considered the information set forth therein in light of the
matters required to be set forth therein, and has participated in conferences
with officers and representatives of the Company and Parent, including their
respective counsel and independent public accountants, during the course of
which the contents of the Registration Statement and the Proxy Statement and
related matters were discussed. Such counsel has not independently checked the
accuracy or completeness of, or otherwise verified, and accordingly is not
passing upon, and does not assume responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Proxy Statement; and such counsel has relied as to
materiality, to a large extent, upon the judgment of officers and
representatives of the Company and Parent. However, as a result of such
consideration and participation, nothing has come to such counsel's attention
which causes such counsel to believe that the Registration Statement (other
than the financial statements, financial data, engineering data, statistical
data and supporting schedules included therein, and information relating to or
supplied by the Company as to which such counsel expresses no belief), at the
time it became effective, 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 not misleading or that the Proxy Statement (other
than the financial statements, financial data, engineering data,
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statistical data and supporting schedules included therein, and information
relating to or supplied by the Company, as to which such counsel expresses no
belief), at the time the Registration Statement became effective, included any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, counsel for Parent may rely as to matters of
fact upon the representations of officers of Parent or Merger Sub contained in
any certificate delivered to such counsel and certificates of public officials,
which certificates shall be attached to or delivered with such opinion. In
rendering the opinion set forth in Section 6.3(c)(i) with respect to Parent
Common Stock being fully paid and nonassessable and having not been issued in
violation of any preemptive right of any stockholders, counsel for Parent may
rely upon and assume the accuracy of prior opinions of counsel that the counsel
rendering the opinion called for by this Section 6.3(c) has no reason to
believe to be inaccurate in any relevant or material respect. The opinion
called for by this Section 6.3(c) shall be limited to the General Corporation
Law of the State of Delaware and the laws of the United States of America.
(d) Consents Under Agreements. The Parent shall have obtained
the consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(c)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, Plan (as defined in Section
3.1(i)), or other agreement or instrument, except those for which failure to
obtain such consents and approvals would not, in the reasonable opinion of the
Company, individually or in the aggregate, have a Material Adverse Effect on
the Parent, or upon the consummation of the transactions contemplated hereby.
(e) No Amendments to Resolutions. Neither the Board of
Directors of the Parent nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors at a
meeting duly called and held on March 27, 1996 (accurate and complete copies of
which have been provided to the Company) and shall not have adopted any other
resolutions in connection with this Agreement and the transactions contemplated
hereby inconsistent with such resolutions.
(f) No Injunctions or Restraints. No Injunction preventing
the consummation of the Merger shall be in effect.
(g) Other Documents. Each of the Parent and the Merger Sub
shall have furnished to the Company at the Closing such other customary
documents, certificates or instruments as may be reasonably requested by the
Company.
(h) Tax Opinion. The Company shall have received an opinion
of Andrews & Kurth L.L.P., special counsel to Parent, in form and substance
reasonably satisfactory to the Company, effective as of the Closing Date and
based on representations of the Company and Parent and certain assumptions
regarding continuity of interest of Company
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stockholders, to the effect that (i) the Merger of the Merger Sub with and into
the Company pursuant to the Merger Agreement and applicable state law will be
treated for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ii) the Parent, the Merger
Sub and the Company will each be a party to the reorganization within the
meaning of Section 368(b) of the Code; and (iii) the stockholders of the
Company will not recognize gain or loss as a result of the Merger, except to
the extent such stockholders receive Cash Consideration or cash in lieu of
fractional shares or pursuant to the exercise of dissenters' rights.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company or
the Parent:
(a) by mutual consent of the Parent and the Company;
(b) by the Parent if the Company shall have failed to comply
in any material respect with any of its covenants or agreements contained in
this Agreement required to be complied with by the Company prior to the date of
such termination, which failure to comply has not been cured within ten
business days following receipt by the Company of notice of such failure to
comply;
(c) by the Company if the Parent shall have failed to comply
in any material respect with any of its covenants or agreements contained in
this Agreement required to be complied with by the Parent prior to the date of
such termination, which failure to comply has not been cured within ten
business days following receipt by the Parent of notice of such failure to
comply;
(d) by either the Parent or the Company if (i) the Merger has
not been effected on or prior to the close of business on August 31, 1996;
provided, however, that the right to terminate this Agreement pursuant to this
clause shall not be available to any party whose failure to fulfill any
covenant or agreement contained in this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to the
aforesaid date; or (ii) any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
(e) by the Company if there has been a breach by the Parent
(which breach has not been cured within ten business days following receipt by
the Parent of notice of the breach) of one or more representations or
warranties (determined without regard to any
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qualification therein as to materiality) such that the adverse consequences of
such breach or breaches would in the aggregate have a Material Adverse Effect
on the Parent;
(f) by the Parent if there has been a breach by the Company
(which breach has not been cured within ten business days following receipt by
the Company of notice of the breach) of one or more representations or
warranties (determined without regard to any qualification therein as to
materiality) such that the adverse consequences of such breach or breaches
would in the aggregate have a Material Adverse Effect on the Company;
(g) by the Parent or the Company if the stockholders of the
Company shall have failed to approve the Merger at a duly held meeting of the
stockholders of the Company or at any adjournment thereof;
(h) by the Parent if (i) any corporation, partnership, person,
trust, association, entity, or group (as defined in Section 13(d)(3) of the
Exchange Act), other than the Parent or the Merger Sub, shall have acquired, or
shall have been granted the option or right, conditional or otherwise, to
acquire beneficial ownership of 50% or more of the outstanding shares of
Company Common Stock, other than acquisitions for bona fide arbitrage purposes,
(ii) the Company shall have entered into an agreement with a third party with
respect to any Acquisition Proposal or (iii) the board of directors of the
Company shall have (A) withdrawn, modified or amended in any manner adverse to
the Parent its approval of or recommendation in favor of the Merger, (B)
recommended to the stockholders or authorized, approved, or proposed any
Acquisition Proposal, or (C) resolved or publicly announced its intention to
take any of the actions described in clause (A) or (B) hereof; or
(i) by the Company if the Company or its shareholders receives
a proposal to enter into an Acquisition Transaction which the Board of
Directors of the Company determines in good faith, after consultation with its
financial advisors, is likely to result in a transaction more favorable to the
holders of Company Common Stock from a financial point of view than the
transaction contemplated by this Agreement, and the Board of Directors
determines in good faith, after consultation with outside counsel and
consideration of such advice, that the recommendation to Company stockholders
of the Merger proposal, or the failure to withdraw, modify or change its
recommendation, would constitute a breach of fiduciary duties of the directors
under applicable law.
In the event that Parent or the Company may terminate this Agreement pursuant
to more than one of the provisions set forth above, such party may terminate
this Agreement pursuant to all of such provisions and may seek reimbursement
and payments pursuant to Section 5.10 as such terminating party deems most
favorable.
7.2. Effect of Termination. In the event of termination of this
Agreement pursuant to Section 7.1, no party shall have any liability or
obligation to the other parties, except that (i) the last sentence of Section
5.5, and Sections 5.10 and 5.11 shall survive such termination and (ii) nothing
contained in this Section 7.2 shall relieve any party hereto from any liability
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for any wilful breach of this Agreement. Parent acknowledges and agrees that
it shall be liable to the Company for the breach of this Agreement by the
Merger Sub.
7.3. Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made that changes the form or reduces the amount of
consideration to be paid to the stockholders of the Company or that in any
other way materially adversely affects the rights of such stockholders (other
than a termination of this Agreement in accordance with the provisions hereof)
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the agreements or covenants or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements, covenants or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
8.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to the Parent or the Merger Sub, to:
Apache Corporation
2000 Post Oak Blvd., Suite 100
Houston, Texas 77056
Attention: President
Fax: (713) 296-6460
with copies to:
Apache Corporation
2000 Post Oak Blvd., Suite 100
Houston, Texas 77056
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Attention: General Counsel
Fax: (713) 296-6458
and
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: James M. Prince
Fax: (713) 220-4285
and
(b) if to the Company, to
The Phoenix Resource Companies, Inc.
6525 N. Meridian Avenue, Suite 102
Oklahoma City, Oklahoma 73116-1491
Attention: President
Fax: (405) 758-5259
with a copy to:
Baker & Botts, L.L.P.
2001 Ross Ave., 7th Floor
Dallas, Texas 75201
Attention: Michael A. Saslaw
Fax: (214) 953-6503
8.3. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available.
8.4. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties hereto in separate counterparts and may
be delivered by means of facsimile transmission or otherwise, each of which
when so executed and delivered shall be deemed to be an original and all of
which when taken together shall constitute but one and the same agreement. If
any party elects to execute and deliver a counterpart signature page by means
of facsimile transmission, it shall deliver an original of such counterpart to
each of the other party hereto within five days of the date hereof, but in no
event will the failure to do so affect on any way the validity of the facsimile
signature or its delivery.
8.5. Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties
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with respect to the subject matter hereof other than those two certain
Confidentiality Agreements dated July 14, 1995 by and between the Parent and
the Company, which shall remain in full force and effect subject to the last
two sentences of this Section 8.5, and (b) except as provided in Article II and
Sections 5.9 and 5.12, is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder. To the extent that any
provision of this Agreement is inconsistent with any provision of the
Confidentiality Agreements, the provisions of this Agreement shall control.
Without limiting the generality of the foregoing, (a) this Agreement and the
transactions contemplated hereby shall not constitute a violation of paragraph
11 of that certain Confidentiality Agreement in which the Parent agreed not to
disclose the confidential information of the Company, and (b) ordinary and
customary disclosure by the parties hereto to their shareholders, financial
analysts, the investment community, the press and the public (subject to
Section 5.8 hereof) regarding the parties hereto and the transactions
contemplated by this Agreement shall not constitute a violation of either of
the Confidentiality Agreements.
8.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
8.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Merger Sub may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to the Parent or to any direct or indirect wholly owned Subsidiary of the
Parent. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns.
8.8. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, under present or future laws, such provision
shall be fully severable; this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a part of
this Agreement; and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each illegal, invalid or unenforceable provision, there should be
added automatically as part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
8.9. Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the terms of provisions
of this Agreement were not performed in accordance with their specific wording
or were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent reaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court located in the State of Delaware, such remedy being in addition to
any other remedy to which any party may be entitled at law or in equity.
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IN WITNESS WHEREOF, the Parent, the Merger Sub and the Company have
caused this Agreement to be executed effective as of the date first written
above.
APACHE CORPORATION
By: /s/ Raymond Plank
--------------------------------------------
Raymond Plank
Chairman and Chief Executive Officer
YPY ACQUISITIONS, INC.
By: /s/ Raymond Plank
--------------------------------------------
Raymond Plank
Chairman
THE PHOENIX
RESOURCE COMPANIES, INC.
By: /s/ George D. Lawrence Jr.
--------------------------------------------
George D. Lawrence Jr.
President
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<PAGE> 1
EXHIBIT 99.2
[PHOENIX LOGO]
NEWS RELEASE
- --------------------------------------------------------------------------------
For Release at 5:30 am Central Time CONTACT: DEBORA BINGHAM
March 28, 1996 (405) 728-5100
PHOENIX TO MERGE WITH APACHE
Oklahoma City, March 28, 1996--The Phoenix Resource Companies, Inc.
(PHN) announced today that it has entered into a merger agreement with Apache
Corporation (APA) under which shareholders of Phoenix will receive .75 shares
of Apache common stock plus $4 cash in exchange for each share of Phoenix
stock. At Apache's closing price on Wednesday, March 27, the merger is valued
at approximately $25-3/8 per Phoenix share. This consideration represents a
28% premium to the closing price of Phoenix's common stock on March 27.
Phoenix has enjoyed a period of remarkable growth since it emerged
from reorganization in early 1990 and has accumulated a valuable portfolio of
Egyptian oil and gas projects. This merger provides an attractive offer to all
of Phoenix's shareholders, providing not only a handsome premium but also a
combination with a much larger entity that has a diversified base of operations
and a highly liquid security. Phoenix's valuable Egyptian properties will be
entrusted to an aggressive, successful U.S. independent that has been a partner
of Phoenix in Egypt and that has substantial financial and technical resources,
strong operating capabilities and an aggressive approach to capturing the
additional upside potential on the over four million acres in the Western
Desert in which Phoenix has an interest.
<PAGE> 2
Phoenix and Apache will file with the Securities and Exchange
Commission a combined proxy statement/prospectus which, among other things,
will provide for the registration of the Apache common stock to be issued in
connection with the merger. The offering will be made only by means of a
prospectus, which will be sent to the shareholders of Phoenix after the
registration statement is declared effective. The merger is subject to routine
government approvals and to an affirmative vote of Phoenix shareholders. The
merger agreement has been unanimously approved by the boards of directors of
both companies. Phoenix's officers and directors have agreed to vote in favor
of the merger. Closing is expected to occur around mid-year.
The Phoenix Resource Companies, Inc. is an oil and gas exploration and
production company headquartered in Oklahoma City with its principal assets
located in the Arab Republic of Egypt. Its shares are traded on the American
Stock Exchange under the ticker symbol PHN.
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