Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of June 22, 2006
among
ANADARKO PETROLEUM CORPORATION,
APC MERGER SUB, INC.
and
WESTERN GAS RESOURCES, INC.
Table of Contents
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Page
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ARTICLE 1 THE MERGER
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Section 1.1.
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The Merger
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1
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Section 1.2.
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Effective Time; Closing
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2
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Section 1.3.
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Effect of the Merger
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2
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Section 1.4.
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Certificate of Incorporation; Bylaws
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2
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Section 1.5.
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Directors and Officers
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2
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Section 1.6.
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Effect on Capital Stock
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3
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Section 1.7.
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Exchange of Company Certificates
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4
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Section 1.8.
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Options
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6
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ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 2.1.
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Organization
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8
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Section 2.2.
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Capitalization
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9
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Section 2.3.
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Authorization; No Conflict
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10
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Section 2.4.
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Subsidiaries
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11
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Section 2.5.
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SEC Reports and Financial Statements
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12
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Section 2.6.
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Absence of Material Adverse Changes, etc.
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14
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Section 2.7.
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Litigation
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14
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Section 2.8.
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Information Supplied
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14
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Section 2.9.
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Brokers or Finders Fees
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15
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Section 2.10.
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Employee Plans
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15
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Section 2.11.
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Board Recommendation; Company Action; Requisite Vote of the Companys Stockholders
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17
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Section 2.12.
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Taxes
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17
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Section 2.13.
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Environmental Matters
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19
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Section 2.14.
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Compliance with Laws
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20
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Section 2.15.
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Employment Matters
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20
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Section 2.16.
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Regulatory Matters
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21
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Section 2.17.
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Reserve Reports
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21
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Section 2.18.
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Hedging
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22
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Section 2.19.
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Properties
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22
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Section 2.20.
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Insurance
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23
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Section 2.21.
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Certain Contracts and Arrangements
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23
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Section 2.22.
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Section 203 of the DGCL; Rights Agreement
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24
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Section 2.23.
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FCPA
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24
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Section 2.24.
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Bylaws
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25
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Section 2.25.
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No Other Representation or Warranties
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25
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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Section 3.1.
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Organization
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25
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i
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Page
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Section 3.2.
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Authorization; No Conflict
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26
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Section 3.3.
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Information Supplied
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27
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Section 3.4.
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Brokers or Finders Fees
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27
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Section 3.5.
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Financing
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28
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Section 3.6.
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No Prior Activities
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28
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Section 3.7.
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No Other Representation or Warranties
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28
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ARTICLE 4 CONDUCT OF BUSINESS PENDING THE MERGER
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Section 4.1.
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Conduct of Business by the Company Pending the Merger
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28
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Section 4.2.
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Conduct of Business by Parent
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32
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ARTICLE 5 ADDITIONAL AGREEMENTS
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Section 5.1.
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Preparation of Proxy Statement; Stockholders Meetings
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32
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Section 5.2.
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Employee Benefit Matters
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35
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Section 5.3.
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Consents and Approvals
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36
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Section 5.4.
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Public Statements
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37
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Section 5.5.
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Further Assurances
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37
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Section 5.6.
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Notification of Certain Matters
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38
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Section 5.7.
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Access to Information; Confidentiality
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38
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Section 5.8.
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No Solicitation
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39
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Section 5.9.
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Indemnification and Insurance
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42
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Section 5.10.
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State Takeover Laws
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44
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Section 5.11.
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Expenses
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44
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ARTICLE 6 CONDITIONS
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Section 6.1.
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Conditions to Each Partys Obligation To Effect the Merger
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44
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Section 6.2.
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Conditions to Obligations of Parent and Merger Sub
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45
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Section 6.3.
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Conditions to Obligation of the Company
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45
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ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER
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Section 7.1.
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Termination
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46
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Section 7.2.
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Effect of Termination
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48
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Section 7.3.
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Fees and Expenses
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48
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Section 7.4.
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Amendment
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50
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Section 7.5.
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Waiver
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50
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ARTICLE 8 GENERAL PROVISIONS
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Section 8.1.
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Notices
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50
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Section 8.2.
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Representations and Warranties
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51
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Section 8.3.
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Interpretations
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51
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Section 8.4.
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Governing Law; Jurisdiction
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52
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Section 8.5.
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Counterparts; Facsimile Transmission of Signatures
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52
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ii
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Page
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Section 8.6.
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Assignment; No Third Party Beneficiaries
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52
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Section 8.7.
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Severability
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52
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Section 8.8.
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Entire Agreement
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53
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Section 8.9.
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Enforcement
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53
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iii
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger
(this
Agreement
), dated as of June 22, 2006, among
Anadarko Petroleum Corporation
, a Delaware corporation (
Parent
),
Apc Merger Sub,
Inc.
, a Delaware corporation and wholly-owned subsidiary of Parent (
Merger Sub
), and
Western Gas Resources, Inc.
, a Delaware corporation (the
Company
).
INTRODUCTION
WHEREAS
, the respective Boards of Directors of each of Parent, Merger Sub and the Company have
unanimously (i) approved and declared advisable the merger of Merger Sub with and into the Company
(the
Merger
), upon the terms and subject to the conditions set forth in this Agreement and (ii)
approved this Agreement.
WHEREAS
, as a result of the Merger, and in accordance with the General Corporation Law of the
State of Delaware (the
DGCL
), each issued and outstanding share of common stock, par value $.10
per share of the Company (the
Company Common Stock
) (other than shares of Company Common Stock
owned by the Company, Parent, Merger Sub or any wholly-owned Subsidiary (as defined in
Section
2.4(a)
) of the Company or Parent immediately prior to the Effective Time (as defined in
Section 1.2
) and Dissenting Shares (as defined in
Section 1.6(d)
), will, upon the
terms and subject to the conditions set forth herein, be converted into the right to receive the
Merger Consideration (as defined in
Section 1.6(b)
).
WHEREAS
, as a condition and inducement to Parent to enter into this Agreement and incur the
obligations set forth herein, concurrently with the execution and delivery of this Agreement, the
Board of Directors of the Company has approved and Parent is entering into Voting Agreements with
certain stockholders of the Company named therein, substantially in the form of
Exhibit A
attached to this Agreement (the
Company Voting Agreements
), pursuant to which, among other
things, such stockholders have agreed to vote the shares of Company Common Stock held by such
stockholders in favor of the adoption of this Agreement and the approval of the Merger provided for
herein, on the terms and subject to the conditions set forth in the Company Voting Agreements.
In consideration of the foregoing and of the mutual covenants contained in this Agreement, the
Company Voting Agreements and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1.
The Merger.
Upon the terms and subject to the satisfaction or waiver of the conditions
hereof, and in accordance with the applicable provisions of this Agreement and the DGCL, at the
Effective Time, Merger Sub shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the
Surviving Corporation
).
1
SECTION 1.2.
Effective Time; Closing
(a) The closing of the Merger (the
Closing
) shall take place at 10:00 a.m. (Central time) on
a date to be specified by the parties, which shall be no later than the second Business Day after
satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in
Article 6 (other than any such conditions which by their nature cannot be satisfied until the
Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable
law) waived on the Closing Date), at the offices of Akin Gump Strauss Hauer & Feld LLP, 1111
Louisiana Street, 44th Floor, Houston, Texas 77002 unless another date, time or place is agreed to
in writing between Parent and the Company. The date on which the Closing occurs is referred to in
this Agreement as the
Closing Date
. As used in this Agreement,
Business Day
means any day that
is not a Saturday, Sunday or other day on which banks are required or authorized by law to be
closed in New York, New York.
(b) On the Closing Date or as promptly as practicable thereafter, the Company hereto shall
cause the Merger to be consummated by filing a certificate of merger, in accordance with the DGCL,
with the Secretary of State of the State of Delaware in such form as required by, and executed in
accordance with the relevant provisions of the DGCL (the
Certificate of Merger
) (the time of such
filing (or such later time as is specified in such Certificate of Merger as agreed in writing
between Parent and the Company) being the
Effective Time
).
SECTION 1.3.
Effect of the Merger
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of the DGCL (except as provided herein). Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and the Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 1.4.
Certificate of Incorporation; Bylaws
At the Effective Time, the certificate of
incorporation of the Company as in effect immediately prior to the Effective Time shall be amended
to read in its entirety in the form of
Exhibit B
hereto, and, as so amended shall be the
certificate of incorporation of the Surviving Corporation. At the Effective Time, the bylaws of
the Company as in effect immediately prior to the Effective Time shall be amended to read in its
entirety in the form of
Exhibit C
hereto, and, as so amended shall be the bylaws of the
Surviving Corporation.
SECTION 1.5.
Directors and Officers
.
(a) The directors of Merger Sub immediately prior to the Effective time shall be the directors
of the Surviving Corporation until the earlier of their resignation or removal or the election of
their successors. The Company shall cause all directors of the Company to resign effective as of
the Effective Time.
(b) The officers of Merger Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation until the earlier of their resignation or removal or the election of
their successors.
2
SECTION 1.6.
Effect on Capital Stock
. As of the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company or any other holder of any shares of capital
stock of Company Common Stock:
(a)
Capital Stock of Merger Sub
. Each share of capital stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of common stock of the
Surviving Corporation, par value $0.001 per share, and such shares of common stock issued upon
conversion of the capital stock of Merger Sub shall represent all of the outstanding shares of the
Surviving Corporation.
(b)
Conversion of Company Common Stock
. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenting Shares and any shares to
be canceled pursuant to
Section 1.6(c)
) shall be canceled and shall be converted
automatically by virtue of the Merger into the right to receive $61.00 in cash payable to the
holder thereof (the
Merger Consideration
). As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to
exist, and, subject to
Section 1.6(d)
, each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration.
(c)
Cancellation of Treasury Stock and Parent-Owned Stock
. Each share of Company
Common Stock held in the treasury of the Company and each share of Company Common Stock owned by
Merger Sub, Parent or any wholly-owned Subsidiary of Parent or of the Company immediately prior to
the Effective Time shall be canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(d)
Shares of Company Common Stock of Dissenting Stockholders
.
(i) Notwithstanding any provision of this Agreement to the contrary, all of the shares
of Company Common Stock that are outstanding immediately prior to the Effective Time and
which are held by holders of Company Common Stock who shall
have not voted in favor of the Merger or consented thereto in writing and who shall
have demanded properly in writing an appraisal of the fair value of such Company Common
Stock in accordance with Section 262 of the DGCL (collectively, the
Dissenting Shares
)
shall be cancelled and terminated and shall cease to have any rights with respect to
Dissenting Shares other than such rights as are granted pursuant to Section 262 of the DGCL,
except that all Dissenting Shares held by holders of Company Common Stock who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights for an
appraisal of such shares under the DGCL shall thereupon be deemed to have been cancelled and
terminated, as of the Effective Time, and shall represent solely the right to receive the
Merger Consideration as provided in
Section 1.6(b)
, upon surrender in the manner
provided in
Section 1.7
, of the certificate or certificates that formerly evidenced
such shares of Company Common Stock.
(ii) The Company shall give to Parent prompt written notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other instruments
served pursuant to Section 262 of the DGCL and received by the
3
Company in connection
therewith. The Company and Parent shall jointly direct all negotiations and proceedings
with respect to demands for payment of fair market value under the DGCL. The Company shall
not, except with the prior written consent of Parent, voluntarily make any payment with
respect to any such demands, or offer to settle, or settle, any such demands. Any amount
payable to any holder of Company Common Stock exercising appraisal rights shall be paid in
accordance with the DGCL solely by the Surviving Corporation out of its own funds.
SECTION 1.7.
Exchange of Company Certificates
.
(a)
Paying Agent
. Prior to the Effective Time, Parent shall designate a bank or trust
company reasonably satisfactory to the Company to act as agent for the holders of Company Common
Stock in connection with the Merger (the
Paying Agent
) to receive in trust the funds to which
they shall become entitled pursuant to
Section 1.6(b)
or
Section 1.8
. From time to
time, Parent shall make available, or cause the Surviving Corporation to make available, to the
Paying Agent or the Surviving Corporation (as the case may be) cash in amounts and at times
necessary for the prompt payment of the Merger Consideration or other cash amount (as the case may
be) as provided in
Section 1.6(b)
or
Section 1.8
, in the case of the Company Common
Stock, upon surrender of certificates representing the shares of Company Common Stock as provided
herein or, in the case of Options if applicable, upon surrender of the written acknowledgements
contemplated by
Section 1.8
. All interest earned on such funds shall be paid to Parent.
(b)
Exchange Procedure
. As soon as reasonably practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented shares of Company Common Stock (the
Company
Certificates
), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company Certificates shall pass,
only upon delivery of the Company Certificates to the Paying Agent and shall be in a form and have
such other provisions as Parent and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Company Certificates in exchange for the Merger Consideration
as provided in
Section 1.6(b)
. Parent will use its reasonable efforts to cause provision
to be made for holders of Company Certificates to procure in person immediately after the Effective
Time a letter of transmittal and instructions and to deliver in person immediately after the
Effective Time such letter of transmittal and Company Certificates in exchange for the Merger
Consideration. Upon surrender of a Company Certificate for cancellation to the Paying Agent or to
such other agent or agents as may be appointed by Parent (reasonably satisfactory to the Company),
together with such letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Paying Agent, the holder of such Company Certificate shall be entitled to
receive in exchange therefor the Merger Consideration, and the Company 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, payment may be made to a Person other
than the Person in whose name the Company Certificate so surrendered is registered, if such Company
Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person
requesting such payment shall pay any transfer or other taxes required by reason of the payment to
a Person other than the registered holder of such
4
Company Certificate or establish to the
reasonable satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 1.7(b)
, each Company
Certificate shall be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration pursuant to
Section 1.6(b)
. No
interest will be paid or will accrue on the cash payable upon the surrender of any Company
Certificate.
(c)
No Further Ownership Rights in Company Common Stock; Transfer Books
. All cash
paid upon the surrender of Company Certificates in accordance with the terms of this
Article
1
shall be deemed to have been paid in full satisfaction of all rights pertaining to the
Company Common Stock theretofore represented by such Company Certificates. At the Effective Time,
the stock transfer books of the Company shall be closed, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of Company Common Stock that
were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged for cash as provided in this
Article 1
.
(d)
Termination of Fund; No Liability
. At any time following twelve months after the
Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had been made
available to the Paying Agent and which have not been disbursed to holders of Company Certificates,
and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors thereof with respect
to the Merger Consideration, payable upon due surrender of their Company
Certificates, without any interest thereon. Notwithstanding the foregoing, none of Parent,
Merger Sub, the Company or the Paying Agent shall be liable to any Person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property, escheat or similar
law. If any Company Certificates shall not have been surrendered immediately prior to such date on
which any payment pursuant to this
Article 1
would otherwise escheat to or become the
property of any Governmental Authority, the Merger Consideration in respect of such Company
Certificate shall, to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any Person previously entitled thereto.
As used in this Agreement,
Governmental Authority
shall mean the United States federal, state,
local or any foreign government, governmental, regulatory or administrative authority, agency, or
commission or any court, tribunal, or judicial or arbitral body or entity.
(e)
Lost, Stolen or Destroyed Certificates
. In the event any Company Certificates
evidencing Company Common Stock shall have been lost, stolen or destroyed, the Paying Agent shall
pay to such holder the Merger Consideration required pursuant to
Section 1.6(b)
, in
exchange for such lost, stolen or destroyed Company Certificates, upon the making of an affidavit,
which shall include indemnities and the posting of a bond which are reasonably acceptable to
Parent, of that fact by the holder thereof with such assurances as the Paying Agent, in its
discretion and as a condition precedent to the payment of the Merger Consideration may reasonably
require of the holder of such lost, stolen or destroyed Company Certificates.
5
(f)
Withholding Taxes
. Parent and Merger Sub shall be entitled to deduct and
withhold, or cause the Paying Agent to deduct and withhold, from the consideration otherwise
payable to a holder of Company Common Stock pursuant to the Merger any stock transfer taxes and
such amounts as are required to be withheld or deducted under the Internal Revenue Code of 1986, as
amended (the
Code
), or any applicable provisions of state, local or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of Company Common Stock in respect of which such
deduction and withholding were made.
SECTION 1.8.
Options
.
(a) At the Effective Time, by virtue of the Merger and without any action on the part of any
holder of any outstanding Option (hereinafter defined), whether vested or unvested, exercisable or
unexercisable, each Option that is outstanding and unexercised immediately prior thereto shall
immediately and fully vest, and subject to the terms and conditions set forth below in this
Section 1.8
, each such Option shall terminate and be cancelled at the Effective Time and
each holder of an Option will be entitled to receive from Parent, and shall receive, in settlement
of each Option a Cash Amount. The
Cash Amount
shall be equal to the net amount of (A) the
product of (i) the excess, if any, of the Merger Consideration over the exercise price per share of
such Option, multiplied by (ii) the number of shares subject to such Option, less (B) any
applicable withholdings for Taxes. If the exercise price per share of any Option equals or exceeds
the Merger Consideration, the Cash Amount therefor shall be zero.
Notwithstanding the foregoing, in the case of the top 20 holders of Options (based on the
aggregate spread value of such Options), payment of the Cash Amount is subject to written
acknowledgement, in the form of
Exhibit D
attached to this Agreement, that no further
payment is due to such holder on account of any Option and all of such holders rights under such
Options have terminated. As used in this Agreement,
Option
means any option granted, and not
exercised, expired or terminated, to a current or former employee, director or independent
contractor of the Company or any of the Company Subsidiaries or any predecessor thereof or any
other Person to purchase shares of Company Common Stock pursuant to: 1997 Stock Option Plan, 1999
Stock Option Plan, 1999 Non-Employee Directors Stock Option Plan, Employment Agreement, dated
October 15, 2001, and the Stock Option Agreement, dated as of November 1, 2001, between the Company
and Peter A. Dea, 2002 Non-Employee Directors Stock Option Plan, 2002 Stock Incentive Plan, 2005
Stock Incentive Plan, or any other stock option, stock bonus, stock award, or stock purchase plan,
program, or arrangement of the Company or any of the Company Subsidiaries or any predecessor
thereof (
Company Stock Plans
) or any other contract or agreement entered into by the Company or
any of the Company Subsidiaries.
(b) At the Effective Time, all restrictions on the then outstanding shares of Restricted Stock
(as defined below) shall immediately lapse, and subject to the terms and conditions set forth
below, each holder of Restricted Stock will be entitled to receive from Parent, and shall receive,
in settlement of each share of Restricted Stock, the Merger Consideration less any applicable
withholdings for Taxes. As used in this Agreement,
Restricted Stock
means any outstanding award
of restricted Company Common Stock with respect to which the restrictions have not lapsed, and
which award shall not have previously expired or terminated, to a current or former employee,
director or independent contractor of the
6
Company or any of the Company Subsidiaries or any
predecessor thereof or any other Person pursuant to any applicable Company Stock Plan or any other
contract or agreement entered into by the Company or any of the Company Subsidiaries.
(c) At the Effective Time, all stock appreciation rights, restricted stock units or other
phantom equity based awards (
Other Equity Awards
) granted under any Company Stock Plan shall be
cancelled by the Company and shall no longer be outstanding thereafter. In consideration for such
cancellation, the holder thereof shall thereupon be entitled to receive, at the Effective Time, a
cash payment from Parent in respect of such cancellation in an amount (if any) equal to the net
amount of (i) product of (A) the excess, if any, of the Merger Consideration over the exercise
price, if any, per share of Company Common Stock subject to such equity based awards and (B) the
number of shares subject to such equity based awards less (ii) any applicable withholding for
Taxes. Notwithstanding the foregoing, the cash payment is subject to written acknowledgement, in
the form of
Exhibit E
attached to this Agreement, that no further payment is due to the
holder on account of any Other Equity Award and all of such holders rights under any such Other
Equity Award have terminated.
(d) As of the Effective Time, except as provided in this
Section 1.8
, all rights under
any Option and any provision of the Company Stock Plans providing for the issuance or grant of any
other interest in respect of the capital stock of the Company (collectively,
Company Equity
Awards
) shall be cancelled. The Company shall use its reasonable best efforts to ensure that, as
of and after the Effective Time, except as provided in this
Section 1.8
, no Person shall
have any rights under the Company Stock Plans or any other plan, program or
arrangement with respect to securities of the Company, the Surviving Corporation or any
subsidiary thereof.
(e) Parent and the Company agree that, in order to most effectively compensate and retain
Company Insiders (as defined below) in connection with the Merger, both prior to and after the
Effective Time, it is desirable that Company Insiders not be subject to a risk of liability under
Section 16(b) of the Exchange Act (as defined in
Section 2.3(c)
), to the fullest extent
permitted by applicable law in connection with the cancellation of shares of Company Common Stock
and Company Equity Awards in the Merger, and for that compensatory and retentive purpose agree to
the provisions of this
Section 1.8(e)
. The Board of Directors of the Company, or a
committee of Non-Employee Directors (as such term is defined for purposes of Rule 16b-3(d) under
the Exchange Act) thereof, shall adopt a resolution providing that the disposition by Company
Insiders of Company Common Stock and Company Equity Awards, in each case pursuant to the
transactions contemplated by this Agreement, are intended to be exempt from liability pursuant to
Section 16(b) under the Exchange Act.
Company Insiders
shall mean those officers and directors
of the Company who are subject to the reporting requirements of Section 16(a) of the Exchange Act.
(f) At or before the Effective Time, the Company shall use its reasonable best efforts to
cause to be effected any necessary amendments to the Company Stock Plans and any other resolutions,
consents or notices, in such form reasonably acceptable to Parent, required under the Company Stock
Plans or any Options to give effect to the foregoing provisions of this
Section 1.8
and to
use its reasonable best efforts to obtain the acknowledgements required under
Section
1.8(a)
and
(c)
.
7
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as publicly disclosed by the Company in the Company SEC Reports (as defined in
Section 2.5(a)
) filed with the SEC prior to the date of this Agreement (to the extent the
qualifying nature of such disclosure is readily apparent on its face) and except as set forth on
the disclosure letter (each section of which qualifies the correspondingly numbered representation
and warranty or covenant to the extent specified therein, provided that any disclosure set forth
with respect to any particular section shall be deemed to be disclosed in reference to all other
applicable sections of this Agreement if the disclosure in respect of the particular section is
sufficient on its face without further inquiry reasonably to inform Parent of the information
required to be disclosed in respect of the other sections to avoid a breach under the
representation and warranty or covenant corresponding to such other sections) previously delivered
by the Company to Parent (the
Company Disclosure Letter
), the Company hereby represents and
warrants to Parent and Merger Sub as follows:
SECTION 2.1.
Organization
. The Company and each of the Subsidiaries of the Company (the
Company Subsidiaries
) is a
corporation, limited liability company or partnership duly organized, validly existing and in good
standing (with respect to jurisdictions that recognize the concept of good standing) under the laws
of the jurisdiction of its organization and has all requisite entity power and authority to own,
operate and lease its properties and to carry on its business as now conducted. The Company and
each of the Company Subsidiaries is duly qualified and/or licensed, as may be required, and in good
standing (with respect to jurisdictions that recognize the concept of good standing) in each of the
jurisdictions in which the nature of the business conducted by it or the character of the property
owned, leased or used by it makes such qualification and/or licensing necessary, except in such
jurisdictions where the failure to be so qualified and/or licensed, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company Material Adverse
Effect. A
Company Material Adverse Effect
means a material adverse effect on (i) the business,
operations, assets, liabilities, condition (financial or otherwise) or results of operations of the
Company and the Company Subsidiaries considered as a single enterprise or (ii) the ability of the
Company to perform its obligations under this Agreement or to consummate the transactions
contemplated by this Agreement;
provided, however
, that any event, condition, change, occurrence or
development of a state of circumstances which (A) adversely affects the oil and gas exploration and
development or gas processing and transportation or Hydrocarbon (as defined in Section 2.17)
marketing industries generally (including changes in commodity prices or markets, general market
prices and legal or regulatory changes) (and in each case does not disproportionately affect the
Company and the Company Subsidiaries considered as a single enterprise as compared to similarly
situated Persons), (B) arises out of general economic or industry conditions (and in each case does
not disproportionately affect the Company and the Company Subsidiaries considered as a single
enterprise as compared to similarly situated Persons), (C) arises out of any change in generally
accepted accounting principles (
GAAP
) (which does not disproportionately affect the Company and
the Company Subsidiaries considered as a single enterprise as compared to similarly situated
Persons), or (D) (other than with respect to
Section 2.3
) arises out of, results from or
relates to the transactions contemplated by this Agreement or the announcement thereof, shall not
be considered in determining whether a Company Material
8
Adverse Effect has occurred. The copies of
the certificate of incorporation and bylaws of the Company which are incorporated by reference as
exhibits to the Companys Annual Report on Form 10-K for the year ended December 31, 2005 are
complete and correct copies of such documents and contain all amendments thereto as in effect on
the date of this Agreement. The copies of the certificate or articles of incorporation and bylaws
of the Company Subsidiaries which were made available to Parent prior to the date of this Agreement
are complete and correct copies of such documents and contain all amendments thereto as in effect
on the date of this Agreement.
SECTION 2.2.
Capitalization
.
(a) As of the date of this Agreement, the authorized capital stock of the Company consists of
(i) 100,000,000 shares of Company Common Stock, 76,100,462 of which are issued and outstanding and
(ii) 10,000,000 shares of preferred stock, par value $.10 per share,
issuable in series (
Company Preferred Stock
), of which 500,000 have been designated as
Series A Junior Participating Preferred Stock. As of the date of this Agreement, no shares of
Company Preferred Stock were issued and outstanding and 500,000 shares of Series A Junior
Participating Preferred Stock were reserved for issuance upon exercise of the rights (
Company
Rights
) distributed to the holders of Company Common Stock pursuant to the Rights Agreement, dated
as of March 22, 2001 (the
Rights Agreement
), between the Company and Computershare Trust Company,
N.A. (successor-in-interest to Fleet National Bank (f/k/a Bank Boston, N.A.)), as amended, and
50,032 shares of Company Common Stock were held by the Company in its treasury. Since January 1,
2006, the amount of the dividend paid quarterly on Company Common Stock is $0.075 per share (the
Quarterly Dividend
). Except for the Quarterly Dividend, since January 1, 2006, the Company has
not, declared or paid any dividend, or declared or made any distribution on, or authorized the
creation or issuance of, or issued, or authorized or effected any split-up or any other
recapitalization of, any of its capital stock, or directly or indirectly redeemed, purchased or
otherwise acquired any of its outstanding capital stock. Such issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued, fully paid and nonassessable,
and free of preemptive rights. There are no outstanding contractual obligations of the Company of
any kind to redeem, purchase or otherwise acquire any outstanding shares of capital stock of the
Company. There are no outstanding bonds, debentures, notes or other indebtedness or warrants or
other securities of the Company having the right to vote (or, other than any outstanding options to
purchase Company Common Stock, convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote.
(b) As of the date that is three business days prior to the date of this Agreement, 3,002
shares of Company Common Stock were subject to outstanding Options under the 1997 Stock Option Plan
(with a weighted average exercise price of $5.82), 427,979 shares of Company Common Stock were
subject to outstanding Options under the 1999 Stock Option Plan (with a weighted average exercise
price of $19.8484), 2,600 shares of Company Common Stock were subject to outstanding Options under
the 1999 Non-Employee Directors Stock Option Plan (with a weighted average exercise price of
$2.76), 450,000 shares of Company Common Stock were subject to outstanding Options under the
Employment Agreement, dated October 15, 2001, and the Stock Option Agreement, dated as of November
1, 2001, between the Company and
9
Peter A. Dea (with a weighted average exercise price of $12.505),
168,000 shares of Company Common Stock were subject to outstanding Options under the 2002
Non-Employee Directors Stock Option Plan (with a weighted average exercise price of $33.1427),
1,502,003 shares of Company Common Stock were subject to outstanding Options under the 2002 Stock
Incentive Plan (with a weighted average exercise price of $25.0448), 1,333,428 shares of Company
Common Stock were subject to outstanding Options under the 2005 Stock Incentive Plan (with a
weighted average exercise price of $37.45), and 2,857,632 additional shares of Company Common Stock
were reserved for issuance pursuant to the Company Stock Plans. There are no stock appreciation
rights issued under the Company Stock Plans. Except as set forth above in this
Section 2.2
and Section 2.2(b) of the Company Disclosure Letter, no shares of capital stock or other voting
securities of the Company are issued, reserved for issuance or outstanding, and there are no
outstanding securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of the Company
Subsidiaries is a party or by which any of them is bound obligating the Company or any of the
Company Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Company or of any of the
Company Subsidiaries or obligating the Company or any of the Company Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
SECTION 2.3.
Authorization; No Conflict
.
(a) The Company has the requisite corporate power and authority to enter into and deliver this
Agreement and to carry out its obligations hereunder and thereunder. The execution and delivery of
this Agreement by the Company, the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby have been duly authorized by
the Board of Directors of the Company. No other corporate proceedings on the part of the Company
or any of the Company Subsidiaries are necessary to authorize the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and the consummation by the
Company of the transactions contemplated hereby, except for the adoption of this Agreement by the
Required Company Stockholder Vote (as defined in
Section 2.11(b)
), if required by
applicable law. This Agreement has been duly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization or other laws affecting the enforcement of creditors rights generally or
by general equitable principles.
(b) Neither the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby nor compliance by the Company with any of
the provisions herein will (i) result in a violation or breach of or conflict with the (x)
certificate or articles of incorporation or bylaws of the Company or any Company Subsidiary that is
a corporation or (y) the articles or certificate of formation or the limited liability company
agreement of any Company Subsidiary that is a limited liability company, (ii) result in a violation
or breach of or conflict with any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
10
under, or result in the termination,
cancellation of, or give rise to a right of purchase under, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the creation of any
Lien (as defined in
Section 2.4(b)
) upon any of the properties or assets owned or operated
by the Company or any Company Subsidiaries under, or result in being declared void, voidable, or
without further binding effect, under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, lease, agreement or other instrument or
obligation of any kind to which the Company or any of the Company Subsidiaries is a party or by
which the Company or any of the Company Subsidiaries or any of their respective properties or
assets is bound or (iii) subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and filings referred
to in paragraph (c) below and the Required Company Stockholder Vote, violate any judgment, ruling,
order, writ, injunction, decree, statute, law (including the common law), rule or regulation
applicable to the Company or any of the Company Subsidiaries or any of their respective properties
or assets, other than any such event described in items (ii) or (iii) which, individually or in the
aggregate, would not reasonably be expected to have or result in a Company Material Adverse Effect.
(c) Except for the consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any Governmental Authority set forth in Section 2.3 of the Company
Disclosure Letter (the
Required Approvals
), no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is necessary to be obtained or
made by the Company or any Company Subsidiary in connection with the Companys execution, delivery
and performance of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except for (i) compliance with the DGCL, with respect to the filing of the
Certificate of Merger, (ii) compliance with the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the rules and regulations promulgated thereunder (the
HSR Act
) and the
Competition Act (Canada) (the
Competition Act
), and other applicable foreign competition or
antitrust laws, if any, (iii) the filing with the SEC of (A) a proxy statement relating to the
Company Stockholders Meeting (as defined in
Section 5.1(b)
) (such proxy statement, as
amended or supplemented from time to time, the
Proxy Statement
), and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the
Exchange Act
), as may be required in connection
with this Agreement and the transactions contemplated hereby and thereby, (iv) compliance with the
rules of the NYSE, (v) such governmental or tribal consents, qualifications or filings as are
customarily obtained or made following the transfer of interests in oil and gas properties
(
Customary Post Closing Consents
), (vi) compliance with the blue sky laws of various states,
and (vii) such other consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any Governmental Authority where the failure to obtain or take such
action, individually or in the aggregate, would not reasonably be expected to have or result in a
Company Material Adverse Effect.
SECTION 2.4.
Subsidiaries
.
(a) Section 2.4(a) of the Company Disclosure Letter sets forth the name and jurisdiction of
organization of each (i) Company Subsidiary; and (ii) entity in which the
11
Company (other than the
Company Subsidiaries) or any Company Subsidiary owns any interest. As used in this Agreement, (i)
Subsidiary
means with respect to any Person, another Person, an amount of the voting securities
or other voting ownership interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such voting interests, 50% or more
of the equity interests of which) is owned directly or indirectly by such first Person; and (ii)
Person
means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization, limited liability company or governmental or
other entity.
(b) All of the outstanding shares of capital stock or other equity securities of, or other
ownership interests in, each Company Subsidiary are duly authorized, validly issued, fully paid and
nonassessable, and such shares, securities or interests are owned by the Company or by a Company
Subsidiary free and clear of any Liens or limitations on voting rights. There are no
subscriptions, options, warrants, calls, rights, convertible securities or other agreements or
commitments of any character relating to the issuance, transfer, sales, delivery, voting or
redemption (including any rights of conversion or exchange under any outstanding security or other
instrument) for any of the capital stock or other equity interests of, or other ownership interests
in, any Company Subsidiaries. There are no agreements requiring the Company or any Company
Subsidiary to make contributions to the capital of, or lend or advance funds to, any Company
Subsidiary. As used in this Agreement,
Lien
means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset.
SECTION 2.5.
SEC Reports and Financial Statements
.
(a) Since January 1, 2003, the Company has filed with the SEC all forms, reports, schedules,
registration statements, definitive proxy statements and other documents (collectively, including
all exhibits thereto, the
Company SEC Reports
) required to be filed by the Company with the SEC.
As of their respective dates, and giving effect to any amendments or supplements thereto filed
prior to the date of this Agreement, the Company SEC Reports complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the
Securities Act
) and the Exchange
Act, and the respective rules and regulations of the SEC promulgated thereunder applicable to the
Company SEC Reports, and none of the Company SEC Reports contained any untrue statement of a
material fact or omitted 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 were made, not
misleading. Since March 31, 2006, no event has occurred with respect to the Company or any of
Company Subsidiaries that requires the filing of a current report on Form 8-K with respect to such
event for which such Form 8-K has not otherwise been filed (including situations in which the Form
8-K with respect to such event is not due as of the date hereof). None of the Company Subsidiaries
is required to file any forms, reports or other documents with the SEC pursuant to Section 13 or 15
of the Exchange Act.
(b) The consolidated balance sheets and the related consolidated statements of operations,
consolidated statements of stockholders equity and consolidated statements of cash flows
(including, in each case, any related notes and schedules thereto) (collectively, the
Company
Financial Statements
) of the Company contained in the Company SEC Reports have been prepared from
the books and records of the Company and the Company Subsidiaries,
12
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
conformity with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved (except as otherwise noted
therein, including the notes thereto) and present fairly, in all material respects, the
consolidated financial position and the consolidated results of operations and cash flows of the
Company and the Company Subsidiaries as of the dates or for the periods presented therein (subject,
in the case of unaudited statements, to normal and recurring year-end adjustments in the ordinary
course of business). Except as reflected or reserved against in the Company Financial Statements,
as of the date hereof, neither the Company nor any of the Company Subsidiaries has any material
liabilities or material obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its consolidated subsidiaries (including the notes thereto), other than liabilities or
obligations incurred in the ordinary course of business consistent with past practice since
December 31, 2005.
(c) Since January 1, 2003, the Company has not received written notice from the SEC or any
other Governmental Authority that any of its accounting policies or practices are or may be the
subject of any review, inquiry, investigation or challenge by the SEC or other Governmental
Authority. Since January 1, 2003, the Companys independent public accounting firm has not
informed Company that it has any material questions, challenges or disagreements that were required
to be disclosed in the SEC Reports regarding or pertaining to Companys accounting policies or
practices. Since the effectiveness of the Sarbanes-Oxley Act of 2002 (
Sarbanes-Oxley Act
),
neither the Company nor any of the Company Subsidiaries has arranged any outstanding extensions of
credit to directors or executive officers within the meaning of Section 402 of the Sarbanes-Oxley
Act. Set forth in Section 2.5(c) of the Company Disclosure Letter is a list of all off-balance
sheet special purpose entities and financing arrangements of the Company and the Company
Subsidiaries.
(d) With respect to each annual report on Form 10-K, each quarterly report on Form 10-Q and
each amendment of any such report included in the Company SEC Reports, the chief executive officer
and chief financial officer of the Company have made all certifications pursuant to the
Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the NYSE, and
the statements contained in any such certifications are complete and correct. Neither the Company
nor its officers has received notice from any Governmental Authority questioning or challenging the
accuracy, completeness, form or manner of filing or submission of such certificates.
(e) The Company has established and maintains disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act); such disclosure controls and
procedures are designed to ensure that material information relating to Company required to be
disclosed in the Companys Exchange Act reports, including its consolidated Company Subsidiaries,
is made known to the Companys principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared. The Company has disclosed, based on its most
recent evaluation of internal control over financial
13
reporting (as defined in Rule 13a-15(f) of the
Exchange Act), to the Companys independent
public accounting firm and the audit committee of the Board of Directors of the Company (i)
all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Companys ability to
record, process, summarize and report financial information and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant role in the Companys
internal control over financial reporting.
(f) The Company is in compliance in all material respects with all current listing and
corporate governance requirements of the NYSE, and is in compliance in all material respects and
will continue to remain in compliance in all material respects from the date hereof until
immediately after the Effective Time, with all rules, regulations and requirements of the Sarbanes
Oxley Act.
SECTION 2.6.
Absence of Material Adverse Changes, etc
. Since December 31, 2005, the Company and the
Company Subsidiaries have conducted their business in the ordinary course of business consistent
with past practice and there has not been or occurred:
(a) any event, condition, change, occurrence or development of a state of circumstances which,
individually or in the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect;
(b) any material damage, destruction or other casualty loss (in the case of such damage,
destruction or loss occurring prior to the date hereof, whether or not covered by insurance, and in
the case of such damage, destruction or loss occurring following the date hereof, not covered by
insurance) affecting the business or assets owned or operated by the Company and the Company
Subsidiaries; or
(c) any event, condition, action or occurrence that, if taken during the period from the date
of this Agreement through the Effective Time, would constitute a breach of Section 4.1(b)(i)-(vi),
(viii)-(xvii), (xix)-(xxi), (xxiii) and (xxvii)-(xxix).
SECTION 2.7.
Litigation
. There are no suits, actions or legal, administrative, arbitration or other
proceedings or governmental investigations pending or, to the knowledge of the Company, threatened,
to which the Company or any of the Company Subsidiaries is a party which, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
There are no judgments, decrees, injunctions, awards or orders of any Governmental Authority
outstanding against the Company or any of the Company Subsidiaries which, individually or in the
aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.8.
Information Supplied
. None of the information supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first mailed to the
Companys stockholders or at the time of the Company Stockholders Meeting 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 portions of the Proxy
14
Statement supplied by the Company will comply
as to form in all material respects with the requirements of the Exchange Act. No representation or
warranty is made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
SECTION 2.9.
Brokers or Finders Fees
. Except for Petrie Parkman & Co., Inc. and Morgan Stanley & Co.
Incorporated (the
Company Financial Advisors
), no agent, broker, Person or firm acting on behalf
of the Company or any Company Subsidiary or under the Companys or any Company Subsidiarys
authority is or will be entitled to any financial advisory, brokers or finders fee or similar
commission from any of the parties hereto in connection with any of the transactions contemplated
hereby. The Company has furnished to Parent a true and complete copy of the Companys agreement
with the Company Financial Advisors pursuant to which the Company Financial Advisors are entitled
to a fee in connection with the transactions contemplated hereby.
SECTION 2.10.
Employee Plans
.
(a) There are no material Company Employee Benefit Plans currently or in the past that have been
established, maintained, adopted, participated in, sponsored, contributed to or required to be
contributed to, by the Company or any entity with which the Company is considered a single employer
under Section 414(b), (c) or (m) of the Code (
Company ERISA Affiliates
). As used in this
Agreement,
Company Employee Benefit Plan
means any plan, program, policy, practice, agreement or
other arrangement providing compensation or benefits in any form to any current or former employee,
independent contractor, officer or director of the Company or any of the Company Subsidiaries or
any beneficiary or dependent thereof, whether written or unwritten, formal or informal, including
without limitation any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
(
Company Employee Welfare Benefit Plan
), any employee pension benefit plan within the meaning
of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) (
Company Employee Pension
Benefit Plan
) and any other pension, profit-sharing, bonus, incentive compensation, deferred
compensation, vacation, sick pay, stock purchase, stock option, phantom equity, severance,
employment, consulting, unemployment, hospitalization or other medical, life, or other insurance,
long- or short-term disability, change of control, fringe benefit, or any other plan, program or
policy. With respect to each material Company Employee Benefit Plan, the Company has made available
to Parent, to the extent requested by Parent, a true, correct and complete copy of: (i) each
writing constituting a part of such Company Employee Benefit Plan and all amendments thereto; (ii)
the most recent Annual Report (Form 5500 Series) including all applicable schedules, if required;
(iii) the current summary plan description and any material modifications thereto, if required to
be furnished under ERISA, or any written summary provided to participants with respect to any plan
for which no summary plan description exists; and (iv) the most recent determination letter (or if
applicable, advisory or opinion letter) from the Internal Revenue Service, if any, or if an
application for a determination letter is pending, the application with all attachments. (c) Each
Company Employee Benefit Plan that is intended to be qualified within the meaning of Section
401(a), 401(f), or 403(a) of the Code and, to the extent applicable, Section 401(k) of the Code
(
Qualified Company Employee Benefit Plan
), has
15
received a favorable determination letter from the
Internal Revenue Service that has not been revoked and covers GUST as defined in footnote 2 of
IRS Notice 2003-49, and no event has occurred and no condition exists that could reasonably be
expected to adversely affect the qualified status of any such Company Employee Benefit Plan.
(d) Each Company Employee Benefit Plan has been operated and administered in all material
respects in accordance with its provisions.
(e) The Company and the Company Subsidiaries have complied, and are now in compliance, in all
material respects, with all provisions of ERISA, the Code and all laws and regulations applicable
to the Company Employee Benefit Plans. Neither the Company nor any Company Subsidiary has engaged
in any prohibited transaction, within the meaning of Section 4975 of the Code or Section 406 of
ERISA, as a fiduciary or party in interest with respect to any Company Employee Benefit Plan, and,
to the knowledge of the Company or any Company Subsidiary, (x) no prohibited transaction has
occurred with respect to any Company Employee Benefit Plan and (y) no fiduciary has any liability
for breach of fiduciary duty or any other failure to act or comply in connection with the
administration or investment of assets of any Company Employee Benefit Plan.
(f) Neither the Company nor any Company ERISA Affiliate has ever established, maintained,
contributed to, or had an obligation to contribute to, any Company Employee Benefit Plan that is a
multiemployer plan, as that term is defined in Section 3(37) of ERISA, or is subject to Title IV
of ERISA, and no liability under Title IV of ERISA (including a liability to pay premiums to the
Pension Benefit Guaranty Corporation) has been or is expected to be incurred by the Company or any
of the Company Subsidiaries.
(g) The Company and the Company Subsidiaries have not offered to provide life, health or
medical benefits or insurance coverage to any individual, or to the family members of any
individual, for any period extending beyond the termination of the individuals employment, except
to the extent required by the COBRA provisions in ERISA and the Code or similar provisions of state
law.
(h) The consummation of the transactions contemplated by this Agreement will not, either alone
or in connection with termination of employment, (i) entitle any current or former employee,
independent contractor, director, or officer of the Company or the Company Subsidiaries to
severance pay, any change in control payment, or any other material payment, except as expressly
provided in this Agreement, (ii) accelerate the time of payment or vesting, change the form or
method of payment, or increase the amount of compensation due, any such employee, independent
contractor, director, or officer, or (iii) make any payments (whether in cash or property,
including shares of capital stock) non-deductible under Section 280G of the Code or subject to the
excise tax under Section 4999, or (iv) entitle any such employee, independent contractor, director
or officer to any gross-up or similar material payment in respect of the excise tax described in
Section 4999 of the Code.
(i) There are no suits, ongoing audits, actions, proceedings, claims or orders pending or, to
the knowledge of the Company, threatened against the Company, any Company Subsidiary or any Company
Employee Benefit Plan related to any Company Employee Benefit
16
Plan (other than claims in the
ordinary course of business), and the Company has no knowledge of any investigations regarding any
Company Employee Benefit Plan. No Company Employee Benefit Plan is the subject of any pending
application for administrative relief under any voluntary compliance program or closing agreement
program of the Internal Revenue Service or the Department of Labor.
(j) As used in this Agreement
ERISA
means the Employee Retirement Income Securities Act of
1974, as amended, and the rules and regulations promulgated thereunder.
(k) All arrangements that could be deemed nonqualified deferred compensation arrangements
under Section 409A of the Code (
Section 409A
) are, to the Companys reasonable knowledge,
compliant with Section 409A, and no employee is entitled to a tax gross-up or similar payment for
any excise tax that may be due under Section 409A.
SECTION 2.11.
Board Recommendation; Company Action; Requisite Vote of the Companys Stockholders
.
(a) The Board of Directors of the Company has, by resolutions duly adopted by the requisite
vote of the directors present at a meeting of such board duly called and held on June 22, 2006 and
not subsequently rescinded or modified in any way, unanimously (i) determined that this Agreement,
the Merger, in accordance with the terms of this Agreement, and the other transactions contemplated
hereby are advisable and in the best interests of the Company and its stockholders, (ii) approved
and adopted this Agreement and approved the Merger and the other transactions contemplated hereby,
(iii) directed that this Agreement be submitted for consideration by the stockholders of the
Company and recommended that the stockholders of the Company adopt this Agreement (provided that
any change in or modification or rescission of such recommendation by the Board of Directors of the
Company in accordance with
Section 5.8
shall not be a breach of the representation in this clause (iii)) (collectively, the
Company
Recommendation
). The Board of Directors of the Company has received from each of the Company
Financial Advisors an opinion, a written copy of which has been provided to Parent, solely for
informational purposes, to the effect that, as of the date of the opinion, the consideration to be
received in the Merger by holders of Company Common Stock is fair from a financial point of view.
(b) The affirmative vote of stockholders of the Company required for adoption of this
Agreement and the Merger is and will be no greater than a majority in voting power of the issued
and outstanding shares of Company Common Stock (the
Required Company Stockholder Vote
).
SECTION
2.12.
Taxes
.
(a) Each of the Company and each Company Subsidiary has timely filed all material Tax Returns
required to be filed by it and all such Tax Returns are true, complete and correct in all material
respects. All Taxes shown as due on such Tax Returns have been paid in full and the Company and
each Company Subsidiary has made adequate provision (or adequate provision has been made on its
behalf) for all material accrued Taxes not yet due. The accruals
17
and reserves for Taxes reflected
in the Companys Form 10-K for the fiscal year ended December 31, 2005 are adequate to cover all
material Taxes accruing through such date. The Company and the Company Subsidiaries have withheld
and paid over all material Taxes required to have been withheld and paid over, and complied in all
material respects with all information reporting and backup withholding requirements in connection
with amounts paid or owing to any employee, creditor, independent contractor or other third party.
Neither the Company nor any Company Subsidiary has received a written notice of any material Liens
on any of the assets, rights or properties of the Company or any Company Subsidiary with respect to
Taxes, other than Liens for Taxes not yet due and payable or for Taxes that the Company or a
Company Subsidiary is contesting in good faith through appropriate proceedings.
(b) As of the date of this Agreement, no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with regard to any material
Taxes or material Tax Returns of the Company or any Company Subsidiary, and neither the Company nor
any Company Subsidiary has received a written notice of any material pending or proposed claims,
audits or proceedings with respect to Taxes. Each material deficiency resulting from any audit or
examination relating to Taxes of the Company or any Company Subsidiary by any taxing authority has
been paid or is being contested in good faith and in accordance with law and is adequately reserved
for on the balance sheets contained in the Company Financial Statements in accordance with GAAP.
No material claim is pending and no claim has ever been made that has not been resolved by an
authority in a jurisdiction where the Company or any of the Company Subsidiaries does not file Tax
Returns that the Company or any Company Subsidiary, as the case may be, is or may be subject to Tax
in that jurisdiction. Neither the Company nor any Company Subsidiary has received any material
private letter ruling
of the Internal Revenue Service or comparable material rulings of other tax authorities that
will be binding on the Company or any Company Subsidiary with respect to any period following the
Closing Date.
(c) Neither the Company nor any Company Subsidiary has requested any extension of time within
which to file any material Tax Return which Tax Return has not yet been filed. There are no
agreements, waivers of statutes of limitations, or other arrangements providing for extensions of
time in respect of the assessment or collection of any material unpaid Taxes against the Company or
any Company Subsidiary. Neither the Company nor any Company Subsidiary has been a party to a
listed transaction within the meaning of Treas. Reg. Sec. 1.6011-4(b).
(d) Neither the Company nor any Company Subsidiary is a party to any Tax sharing agreement,
Tax indemnity obligation or similar agreement, arrangement or practice with respect to material
Taxes (including any advance pricing agreement, closing agreement or other agreement relating to
Taxes with any taxing authority) that will be binding on the Company or any Company Subsidiary with
respect to any period following the Closing Date.
(e) Neither the Company nor any Company Subsidiary has constituted either a distributing
corporation or a controlled corporation (within the meaning of Section 355 (a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code
(A) in the two years prior to the date of this Agreement, or (B) in a distribution
18
that could otherwise constitute part of a plan or series of related transactions (within the meaning of
Section 355 (e) of the Code) in conjunction with the Merger.
(f) Neither the Company nor any Company Subsidiary has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common parent of which was
the Company.
(g) To the knowledge of the Company, none of the Company or any Company Subsidiary will be
required to include any material item of income in, or exclude any material item of deduction from,
taxable income for any taxable period (or portion thereof) ending after the Closing Date, as a
result of any: (i) change in method of accounting for a taxable period ending on or prior to the
Closing Date; (ii) closing agreement as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local, or foreign income Tax law) executed on or prior
to the Closing Date; or (iii) open transaction disposition made on or prior to the Closing Date.
(h) As used in this Agreement
Taxes
means (i) all taxes, levies or other like assessments,
charges or fees (including estimated taxes, charges and fees), including income, franchise,
profits, corporations, advance corporation, gross receipts, transfer, excise, property, sales, use,
value-added, ad valorem, license, capital, wage, employment, payroll, withholding, social security,
severance, occupation, import, custom, stamp, alternative, add-on minimum, environmental or other
governmental taxes or charges, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof, including any interest, penalties or additions to tax
applicable or related thereto; and (ii) all liability for the payment of any amounts of the type
described in clause (i) as the result of being a member of an affiliated, consolidated, combined or
unitary group. As used in this Agreement,
Tax Return
means any report, return, statement,
declaration or other written information required to be supplied to a taxing or other Governmental
Authority in connection with Taxes including any schedules or attachments thereto, including any
amendments thereto, and including any information returns.
SECTION 2.13.
Environmental Matters
. Except as, individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect:
(a) To the knowledge of the Company, there are no conditions existing on any real property
currently or formerly owned, leased or operated by the Company or any Company Subsidiary that give
rise to any or would reasonably be expected to constitute a violation of or result in any liability
under any Environmental Law (as defined below).
(b) The Company and the Company Subsidiaries have been and are in compliance with all
applicable Environmental Laws (as defined below). There are no pending actions, suits,
proceedings, demands, claims, information requests or notices of non-compliance or violation, nor,
to the knowledge of the Company, are any such matters threatened or under investigation, against,
regarding, or otherwise affecting the Company or any Company Subsidiary relating to any liability
under any Environmental Law.
(c) All permits, notices, approvals and authorizations, if any, required to be obtained or
filed in connection with the operation of the Companys and the Company
19
Subsidiaries businesses and the operation or use of any real property owned, leased or operated by the Company or any
Company Subsidiary, pursuant to any applicable Environmental Law, have been duly obtained or filed,
are currently in effect, and the Company and the Company Subsidiaries are in compliance with the
terms and conditions of all such permits, notices, approvals and authorizations.
(d) None of the Company and the Company Subsidiaries is subject to or has otherwise assumed
any pending or, to the knowledge of Company, threatened, claim related to Environmental Law.
(e) The representations and warranties set forth in
Section 2.13
are the Companys
sole and exclusive representations and warranties related to environmental matters.
(f) As used in this Agreement, (i)
Environmental Laws
means any federal, foreign, state and
local law or legal requirement, including regulations, orders, permits, licenses, approvals,
ordinances, directives and the common law, pertaining to pollution, the environment, the protection
of the environment or human health and safety, including the Clean Air Act, the Clean Water Act,
the Resource Conservation and Recovery Act (
RCRA
), the Comprehensive Environmental Response,
Compensation, and Liability Act (
CERCLA
), the Toxic Substances Control Act, the Atomic Energy
Act, the Hazardous Materials Transportation Act, the Safe Drinking Water Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Emergency Planning and Community Right-to-Know Act
and any similar federal, foreign, state or local law.
SECTION 2.14.
Compliance with Laws
. Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries are in
compliance with all applicable laws, rules or regulations of any United States federal, state or
local or foreign government or agency thereof that materially affect the business, properties or
assets owned or leased by the Company and the Company Subsidiaries, and no notice, charge, claim,
action or assertion has been received by the Company or any Company Subsidiary has been filed,
commenced or, to the knowledge of the Company, threatened against the Company or any Company
Subsidiary alleging any such non-compliance. All licenses, permits and approvals required under
such laws, rules and regulations are in full force and effect, except where the failure to be in
full force and effect, individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Notwithstanding the
foregoing, no representation or warranty in this
Section 2.14
is made with respect to
permits issued under or matters relating to Environmental Laws, which are covered exclusively by
the provisions set forth in
Section 2.13
.
SECTION 2.15.
Employment Matters
.
(a) Neither the Company nor any Company Subsidiary: (i) is a party to or otherwise bound by any
collective bargaining agreement, labor contract or other labor agreement or understanding with a
labor union or labor organization, nor is any such contract or agreement presently being
negotiated, nor, to the knowledge of the Company, is there, nor has there been in the last five
years, a representation campaign respecting any of the employees of the Company or any of the
Company Subsidiaries, and, to the knowledge of the Company, there are no campaigns being conducted
to solicit cards from employees of the Company or any of the
20
Company Subsidiaries to authorize
representation by any labor organization; (ii) is a party to, or bound by, any consent decree with,
or citation by, any Governmental Authority relating to employees or employment practices, not
including any consent decree which has expired more than ten years prior to the date hereof, which,
individually or in the aggregate, would reasonably be expected to have a Company Material Adverse
Effect; or (iii) is the subject of any pending proceeding before any Governmental Authority
asserting that it has committed an unfair labor practice or, to the knowledge of the Company, is
seeking to compel it to bargain with any labor union or labor organization nor, as of the date of
this Agreement, is there pending or, to the knowledge of the Company, threatened, any labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving the Company or any of the Company
Subsidiaries which, with respect to any event described in this clause (iii), individually or in
the aggregate, would reasonably be expected to have a Company Material Adverse Effect.(b) In the
90-day period preceding the date of this Agreement, neither the Company nor any of the Company
Subsidiaries has effectuated (i) a plant closing (as defined in the WARN Act), affecting any site
of employment or one or more facilities or operating units within any site of employment or
facility of the Company or any of the Company Subsidiaries, or (ii) a mass layoff (as defined in
the WARN Act) affecting any site of employment or facility of the Company or any of the Company
Subsidiaries; nor in such 90-day period has the Company or any of the Company Subsidiaries been
affected by any transaction or engaged in layoffs or employment terminations sufficient in number
to trigger application of any state, local or foreign law or regulation similar to the WARN Act.
The Company and the Company Subsidiaries have, during the five-year period prior to the date
hereof, in all material respects properly classified each of their respective employees as
employees, each of their respective leased employees (within the meaning of Section 414(n) of the
Code) as leased employees, and each of its independent contractors as independent contractors, as
applicable. As used in the Agreement,
WARN Act
means the Workers Adjustment and Retraining
Notification Act of 1989, as amended.
SECTION 2.16.
Regulatory Matters
. Neither the Company nor any of the Company Subsidiaries is (i) an investment company or a
company controlled by an investment company within the meaning of the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder, or (ii) a holding
company, a subsidiary company of a holding company, an affiliate of a holding company, or
a public utility, as each such term is defined in the Public Utility Holding Company Act of 2005.
Except as set forth on Section 2.16 of the Company Disclosure Letter, all pipeline systems and
related facilities constituting the Companys and Company Subsidiaries properties are (i)
gathering facilities that are exempt from regulation by the Federal Energy Regulatory Commission
(
FERC
) under the Natural Gas Act of 1938, as amended, and (ii) not subject to rate regulation or
comprehensive nondiscriminatory access regulation under the laws of any state or other local
jurisdiction.
SECTION 2.17.
Reserve Reports
. The Company has delivered to Parent true and correct copies of all
proved oil and gas reserve reports prepared by the engineering firm Netherland, Sewell &
Associates, Inc. concerning the Oil and Gas Interests of the Company and the Company Subsidiaries
as of December 31, 2005 (the
Company Reserve Report
). The factual, non-interpretative data on
which the Company Reserve Report was based for purposes of estimating the oil and gas reserves set
forth in the Company Reserve Report was accurate in all material
21
respects, and the Company has no
knowledge of any material errors in the assumptions and estimates provided to the Netherland,
Sewell & Associates, Inc. in connection with their preparation of the Company Reserve Report. To
the knowledge of the Company, the estimates of proved oil and gas reserves in the Company Reserve
Report were prepared in accordance with the definitions contained in Rule 4-10(a) of Regulation S-X
promulgated by the SEC. For purposes of this Agreement,
Oil and Gas Interests
means interests in
and rights with respect to oil, gas, mineral, and related properties and assets of any kind and
nature, direct or indirect, including working, leasehold and mineral interests and operating rights
and royalties, overriding royalties, production payments, net profit interests and other
non-working interests and non-operating interests; Hydrocarbons and other minerals or revenues
therefrom, all contracts in connection therewith and claims and rights thereto (including all oil
and gas leases, operating agreements, unitization and pooling agreements and orders, division
orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements, and in each case, interests thereunder), surface interests, fee
interests, reversionary interests, reservations, and concessions; all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for
the operation of any of the foregoing; and all interests in equipment and machinery (including
wells, well equipment and machinery), oil and gas production, gathering, transmission, treating,
processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and
other tangible personal property and fixtures associated with, appurtenant to, or necessary for the
operation of any of the foregoing. For purposes of this Agreement,
Hydrocarbons
means, with
respect to any Person, crude oil, natural gas, casinghead gas, condensate, sulphur, natural gas
liquids, plant products and other liquid or gaseous hydrocarbons produced in association therewith
(including coalbed gas and carbon
dioxide), and all other minerals of every kind and character which may be covered by or
included in or attributable to any of the properties of such Person or any of such Persons
Subsidiaries.
SECTION 2.18.
Hedging
. Except as set forth in Section 2.18 of the Company Disclosure Letter, the Company
SEC Reports accurately summarize the outstanding Hydrocarbon and financial Hedging positions
attributable to the production and marketing of the Company and the Company Subsidiaries as of the
date reflected therein, and there have been no material changes since the date thereof to the date
hereof. For purposes of this Agreement, a
Hedge
means a derivative transaction within the
coverage of SFAS No. 133, including any swap transaction, option, warrant, forward purchase or sale
transaction, futures transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans, interest rates,
credit-related events or conditions or any indexes, or any other similar transaction (including any
option with respect to any of these transactions) or combination of any of these transactions,
including collateralized mortgage obligations or other similar instruments or any debt or equity
instruments evidencing or embedding any such types of transactions, and any related credit support,
collateral, transportation or other similar arrangements related to such transactions.
SECTION 2.19.
Properties
. All major items of operating equipment owned or leased by the Company or any
of the Company Subsidiaries (i) are, in the aggregate, in a state of repair so as to be adequate in
all material respects for reasonably prudent operations in the areas in which
22
they are operated and
(ii) are adequate, together with all other properties of the Company and the Company Subsidiaries,
to comply in all material respects with the requirements of all applicable contracts, including
sales contracts. Except for goods and other property sold, used or otherwise disposed of since
December 31, 2005 in the ordinary course of business, as of the date hereof, the Company has good
and defensible title (as defined below) for oil and gas properties forming the basis for the
reserves reflected in the Companys December 31, 2005 financial statements included in the Company
SEC Reports, and pipelines and gas gathering and processing systems, free and clear of any Lien,
except: (a) Liens reflected in the balance sheet of the Company as of December 31, 2005 included
in the Company SEC Reports; (b) Liens for current taxes not yet due and payable or for taxes that
the Company or any Company Subsidiary is contesting in good faith through appropriate proceedings
and for which adequate reserves have been established in accordance with GAAP; (c) Liens associated
with obligations reflected in the Company Reserve Report and (d) such imperfections of title,
easements and Liens that would not have or reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. All leases and other agreements pursuant to which
the Company or any of the Company Subsidiaries leases or otherwise acquires or obtains operating
rights affecting any real or personal property are valid and effective, except where the failure to
be valid or effective would not have or reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect; and there is not, under any such leases, any existing
or prospective default or event of default or event which with notice or lapse of time, or both, would constitute
a default by the Company or any of the Company Subsidiaries that would have or reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company
has not received any material advance, take-or-pay or other similar payments that entitle
purchasers of production to receive deliveries of Hydrocarbons without paying therefor, and, to the
knowledge of the Company, on a net, company-wide basis, the Company is neither underproduced nor
overproduced, in either case to any material extent, under gas balancing or similar arrangements.
For purposes of this Agreement,
good and defensible title
means title that is free from
reasonable doubt to the end that a prudent person engaged in the business of purchasing and owning,
developing, and operating producing oil and gas properties in the geographical areas in which they
are located, with knowledge of all of the facts and their legal bearing, would be willing to accept
the same.
SECTION 2.20.
Insurance
. Section 2.20 of the Company Disclosure Letter contains a true and complete list
of all insurance policies held by either the Company or any of the Company Subsidiaries. To the
knowledge of the Company, the Company and the Company Subsidiaries maintain insurance (including
self-insurance) coverage customary in the industry for the operation of their respective businesses
(taking into account the cost and availability of such insurance). All such insurance policies
from third party providers are in full force and effect and neither the Company nor any Company
Subsidiary has received any notice of termination or cancellation with respect to any such policy
SECTION 2.21.
Certain Contracts and Arrangements
. Neither the Company nor any of the Company
Subsidiaries is a party to or bound by any agreement or other arrangement that materially limits or
otherwise restricts the Company or any of its Subsidiaries or any successor thereto, or that would,
after the Effective Time, to the knowledge of the Company, materially limit or restrict Parent, the
Surviving Corporation or any of their subsidiaries or any successor
23
thereto, from engaging or competing in its business in any significant geographic area, except for joint ventures, area of
mutual interest agreements and non-competition agreements (substantially all of which, in the case
of such non-competition agreements, are set forth in Section 2.21 of the Company Disclosure Letter)
entered into in connection with prospect reviews and similar arrangements entered into in the
ordinary course of business. Except as would not reasonably be expected to have a Company Material
Adverse Effect, neither the Company nor any Company Subsidiary is in breach or default under any
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to which the Company
or any Company Subsidiary is a party or any contract set forth in Section 2.21 of the Company
Disclosure Letter (which includes each material joint venture Hydrocarbon exploratory agreement to
which the Company or any Company Subsidiary is a party) (collectively, the
Company Contracts
)
nor, to the knowledge of the Company, is any other party to any such Company Contract in material
breach or material default thereunder.
SECTION 2.22.
Section 203 of the DGCL; Rights Agreement
. The Board of Directors of the Company has taken all action necessary to exempt under or not make
subject to (a) the prohibitions on business combinations under Section 203 of the DGCL, (b) any
other state takeover law or state law that purports to limit or restrict business combinations or
the ability to acquire or vote shares or (c) any provision of the Companys certificate of
incorporation or bylaws that would require any corporate approval other than that otherwise
required by Section 251 of the DGCL, in each case, before the execution of this Agreement and the
Company Voting Agreements: (i) the execution of this Agreement, (ii) the Merger, (iii) the
execution of the Company Voting Agreements and (iv) the transactions contemplated by this Agreement
and the Merger. The Company has amended the Rights Agreement so that (a) none of Parent or Merger
Sub nor any affiliate or associate thereof (as defined in the Rights Agreement) is an
Acquiring Person, and no Stock Acquisition Date or Distribution Date (as such terms are
defined in the Rights Agreement) or event to which Section 11(a)(ii) or Section 13 thereof would
otherwise be applicable will occur as a result of the execution or delivery of this Agreement, the
Company Voting Agreements or the consummation of the Merger and the other transactions contemplated
by this Agreement and the Company Voting Agreements and (b) the Rights Agreement will terminate and
the Company Rights will expire immediately prior to the Effective Time. The Rights Agreement, as
so amended, has not been further amended or modified. True and complete copies of the Rights
Agreement and all such amendments have been filed with the SEC, or, if not, provided to Parent.
SECTION 2.23.
FCPA
. Neither the Company, nor any Company Subsidiary or affiliate, has committed any act
or made any omission prohibited by the Foreign Corrupt Practices Act (15 U.S.C. §§ 78m, 78dd-1, -2
and -3) (
FCPA
) or applicable anti-bribery laws of any other country during the past (3) three
years. Except as otherwise permissible under the FCPA (but not inconsistent with other applicable
law), during the past (3) three years, none of the Company, any Company Subsidiary or affiliate, or
any representative thereof has offered or given anything of value to: (i) any foreign official, any
foreign political party or official thereof or any candidate for political office; or (ii) any
Person, while knowing that all or a portion of such thing of value will be offered, given, or
promised, directly or indirectly, to any foreign official, to any foreign political party or
official thereof, or to any candidate for foreign political office for the purpose of the
following: (a) influencing any act or decision of such foreign official, political party, party
24
official, or candidate in his or its official capacity, inducing such foreign official, political
party, party official, or candidate to do or omit to do any act in violation of the lawful duty of
such foreign official, political party, party official, or candidate, or securing any improper
advantage or (b) inducing such foreign official, political party, party official, or candidate to
use his or its influence with a foreign government or instrumentality thereof to affect or
influence any act or decision of such government or instrumentality, in order to assist the
Company, any Company Subsidiary, or any of their respective affiliates, officers or directors, in
obtaining or retaining business for or with, or directing business to, any Person. For purposes of
this Section 2.23,
knowledge
means knowing or knowledge as such terms are defined in 15
U.S.C. §§ 78m, 78dd-1, -2 and -3.
SECTION 2.24.
Bylaws
. The Company has amended its Bylaws so that the stockholders of the Company are not entitled,
under any circumstances, to call a special meeting of the stockholders.
SECTION 2.25.
No Other Representation or Warranties
. Neither the Company nor any other Person makes any
other express or implied representation or warranty on behalf of the Company or the Company
Subsidiaries other than as expressly set forth in this Article 2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that:
SECTION 3.1.
Organization
. Parent and each of the Subsidiaries of Parent (including Merger Sub) (the
Parent Subsidiaries
) is a corporation, limited liability company or partnership duly organized,
validly existing and in good standing (with respect to jurisdictions that recognize the concept of
good standing) under the laws of the jurisdiction of its organization and has all requisite power
and authority to own, operate and lease its properties and to carry on its business as now
conducted. Parent and each of the Parent Subsidiaries is duly qualified and/or licensed, as may be
required, and in good standing in each of the jurisdictions (with respect to jurisdictions that
recognize the concept of good standing) in which the nature of the business conducted by it or the
character of the property owned, leased or used by it makes such qualification and/or licensing
necessary, except in such jurisdictions where the failure to be so qualified and/or licensed,
individually or in the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect. A
Parent Material Adverse Effect
means a material adverse effect
on (i) the business, operations, assets, liabilities, condition (financial or otherwise) or
results of operations of Parent and the Parent Subsidiaries considered as a single enterprise or
(ii) the ability of Parent or Merger Sub to perform their obligations under this Agreement or to
consummate the transactions contemplated by this Agreement;
provided, however
, that any event,
condition, change, occurrence or development of a state of circumstances which (A) adversely
affects the oil and gas exploration and development industry generally (including changes in
commodity prices, general market prices and legal or regulatory changes) (and in each case does not
disproportionately affect Parent and the Parent Subsidiaries considered as a
25
single enterprise as
compared to similarly situated Persons), (B) arises out of general economic or industry conditions
(and in each case does not disproportionately affect Parent and the Parent Subsidiaries considered
as a single enterprise as compared to similarly situated Persons), (C) arises out of any change in
GAAP (which does not disproportionately affect the Parent and the Parent Subsidiaries considered as
a single enterprise as compared to similarly situated Persons) or (D) (other than with respect to
Section 3.2
) arise out of, result from or relate to the transactions contemplated by
this Agreement or the announcement thereof, shall not be considered in determining whether a Parent
Material Adverse Effect has occurred. The copies of the certificate of incorporation and bylaws of
Parent which are incorporated by reference as exhibits to Parents Annual Report on Form 10-K for
the year ended December 31, 2005 are complete and correct copies of such documents and contain all
amendments thereto as in effect on the date of this Agreement.
SECTION 3.2.
Authorization; No Conflict
.
(a) Each of Parent and Merger Sub has the requisite corporate power and authority to enter
into and deliver this Agreement and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement by Parent and Merger Sub, the performance by Parent and
Merger Sub of their respective obligations hereunder and the consummation by Parent and Merger Sub
of the transactions contemplated hereby have been duly authorized by the respective Boards of
Directors of each of Parent and Merger Sub, and no other corporate proceedings on the part of
Parent, Merger Sub or any of the Parent Subsidiaries are necessary to authorize the execution and
delivery of this Agreement, the performance by Parent and Merger Sub of their respective
obligations hereunder and the consummation by Parent and Merger Sub of the transactions
contemplated hereby other than the adoption of this Agreement by Parent as the sole stockholder of
Merger Sub. This Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes a valid and binding obligation of Parent and Merger Sub, enforceable in accordance with
its terms, except to the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization or other laws affecting the enforcement of
creditors rights generally or by general equitable principles.
(b) The Board of Directors of Parent has, by resolutions duly adopted by the requisite vote of
the directors present at a meeting of such board duly called and held on June 22, 2006 and not
subsequently rescinded or modified in any way, unanimously (i) approved this Agreement, the Merger
and (ii) determined that this Agreement and Merger are in the best interest of Parents
stockholders. No vote of the holders of Parent common stock, par value $.10 per share, or other
securities of Parent is necessary to consummate the Merger.
(c) Neither the execution and delivery of this Agreement by Parent or Merger Sub, nor the
consummation by Parent or Merger Sub of the transactions contemplated hereby nor compliance by
Parent or Merger Sub with any of the provisions herein will (i) result in a violation or breach of
or conflict with the certificate or articles of incorporation or bylaws of Parent or any of the
Parent Subsidiaries, (ii) result in a violation or breach of or conflict with any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination, cancellation of, or give rise to a right of purchase
under, or accelerate the performance required by, or result in a right of
26
termination or acceleration under, or result in the creation of any Lien upon any of the properties or assets
owned or operated by Parent or any of the Parent Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, or otherwise result in a detriment to
Parent or any Parent Subsidiary under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, lease, agreement or other instrument
or obligation of any kind to which Parent or any of the Parent Subsidiaries is a party or by which
Parent or any of the Parent Subsidiaries or any of their respective properties or assets may be
bound or (iii) subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (d) below, violate any judgment,
ruling, order, writ, injunction, decree, statute, law (including the common law), rule or
regulation applicable to Parent or any of the Parent Subsidiaries or any of their respective
properties or assets other than any such event described in items (ii) or (iii) which, individually
or in the aggregate, would not reasonably be expected to have or result in a Parent Material
Adverse Effect.
(d) No consent, approval, order or authorization of, or registration, declaration or filing
with, any Governmental Authority is necessary to be obtained or made by Parent, any Parent
Subsidiary or Merger Sub in connection with Parents or Merger Subs execution, delivery and
performance of this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, except for (i) compliance with the DGCL, with respect to the filing of the
Certificate of Merger, (ii) compliance with the HSR Act, the Competition Act, and applicable
foreign competition and antitrust laws, if any, (iii) the filing with the SEC of the Proxy
Statement and such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated hereby, (iv)
compliance with the rules of the NYSE, (v) Customary Post Closing Consents, and (vi) such other
consents, approvals, orders or authorizations of, or registrations, declarations or filings with,
any Governmental Authority where the failure to obtain or take such action, individually or in the
aggregate, would not reasonably be expected to have or result in a Parent Material Adverse Effect.
SECTION 3.3.
Information Supplied
. None of the information supplied or to be supplied by Parent
specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date
it is first mailed to the Companys stockholders or at the time of the Company Stockholders Meeting
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. No representation or warranty is made by Parent with
respect to statements made or incorporated by reference therein based on information supplied by
the Company specifically for inclusion or incorporation by reference in the Proxy Statement.
SECTION 3.4.
Brokers or Finders Fees
. Except for UBS Securities LLC, Credit Suisse Securities (USA)
LLC, Citigroup Global Markets Inc. and Goldman, Sachs & Co., no agent, broker, Person or firm
acting on behalf of Parent or any Parent Subsidiary or under Parents or any Parent Subsidiarys
authority is or will be entitled to any financial advisory, brokers or finders fee or similar
commission from any of the parties hereto in connection with any of the transactions contemplated
hereby.
27
SECTION 3.5.
Financing
. Parent has or will have funds available to it sufficient to consummate the
Merger in accordance with the terms of this Agreement.
SECTION 3.6.
No Prior Activities
. Except for obligations incurred in connection with its incorporation
or organization or the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Merger Sub has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any agreement or arrangement
with any Person.
SECTION 3.7.
No Other Representation or Warranties
. None of Parent, Merger Sub or any other Person
makes any other express or implied representation or warranty on behalf of Parent or Merger Sub
other than as expressly set forth in this Article 3.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1.
Conduct of Business by the Company Pending the Merger
. The Company covenants and agrees
that, prior to the Effective Time, unless Parent shall otherwise consent in writing (which consent
shall not be unreasonably withheld or delayed) or except as expressly permitted or required
pursuant to this Agreement:
(a) The businesses of the Company and the Company Subsidiaries shall be conducted only in the
ordinary and usual course of business and consistent with past practices, and the Company and the
Company Subsidiaries shall use all commercially reasonable efforts to maintain and preserve intact
their respective business organizations and to maintain significant beneficial business
relationships with suppliers, contractors, distributors, customers, licensors, licensees and others
having business relationships with them to keep available the services of their current key
officers and employees; and
(b) Without limiting the generality of the foregoing
Section 4.1(a)
, except as set
forth in Section 4.1 of the Company Disclosure Letter, the Company shall not, and shall not permit
any of the Company Subsidiaries to, do any of the following:
(i) except pursuant to existing contracts or commitments, sell, lease, transfer or
dispose of any assets, rights or securities that are material to the Company and the Company
Subsidiaries or terminate, cancel, materially modify or enter into any material commitment,
transaction or line of business, in each case outside of the ordinary course of business consistent with past practice or, in the case of sales, leases,
transfers or dispositions, in excess of $20 million in the aggregate;
(ii) acquire by merging or consolidating with or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner, any business,
corporation, partnership, association or other business organization or division thereof;
28
(iii) amend or propose to amend its certificate of incorporation or bylaws or, in the
case of the Company Subsidiaries, their respective constituent documents;
(iv) except for the Quarterly Dividend, and other than in the case of direct or
indirect wholly owned Company Subsidiaries, declare, set aside or pay any dividend or other
distribution payable in cash, capital stock, property or otherwise with respect to any
shares of its capital stock;
(v) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise
acquire, any shares of its capital stock, other equity securities, other ownership interests
or any options, warrants or rights to acquire any such stock, securities or interests, other
than other than repurchases, redemptions or acquisitions in connection with the
relinquishment of shares by employees and directors of the Company or as may be required by
or in connection with the terms of any Company Stock Plan in effect as of the date hereof;
(vi) split, combine or reclassify any outstanding shares of its capital stock;
(vii) except for the Company Common Stock issuable upon exercise of options outstanding
on the date hereof (or granted after the date hereof as permitted by this Agreement) and the
vesting of restricted stock awards granted prior to the execution of this Agreement, issue,
sell, dispose of or authorize, propose or agree to the issuance, sale or disposition by the
Company or any of the Company Subsidiaries of, any shares of, or any options, warrants or
rights of any kind to acquire any shares of, or any securities convertible into or
exchangeable for any shares of, its capital stock of any class, or any other securities in
respect of, in lieu of, or in substitution for any class of its capital stock outstanding on
the date hereof;
(viii) modify in any material respect the terms of any existing indebtedness for
borrowed money or security issued by the Company or any Company Subsidiary, provided that no
such modifications may be made with respect to maturity, payment schedule, or prepayment
penalties;
(ix) incur any indebtedness for borrowed money, except indebtedness incurred in the
ordinary course of business and letters of credit required under the
Companys hedging agreements in order to satisfy margin requirements and other
indebtedness of the Company (determined in accordance with GAAP) that does not exceed $5
million;
(x) assume, guarantee, endorse or otherwise as an accommodation become responsible for,
the indebtedness for borrowed money of any other Person other than in the ordinary course of
business, or make any loans or advances, except (A) to or for the benefit of the Company
Subsidiaries or customary loans or advances to employees or otherwise in the ordinary course
of business or (B) for those not in excess of $5 million in the aggregate;
29
(xi) create or assume any Lien on any material asset that would reasonably be expected
to have a Company Material Adverse Effect;
(xii) (A) take any action with respect to the grant of or increase in any severance or
termination pay to any current or former director, executive officer or employee of the
Company or any Company Subsidiary, except as may be required in any existing agreements with
employees or consultants of the Company or any Company Subsidiary, or as required by any
collective bargaining agreement, (B) execute any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any such director,
executive officer or employee of the Company or any Company Subsidiary, (C) increase the
benefits payable under any existing severance or termination pay policies or employment
agreements, (D) increase the compensation, bonus or other benefits of current or former
directors, executive officers or employees of the Company or any Company Subsidiary, (E)
adopt or establish any new employee benefit plan or amend in any material respect any
existing employee benefit plan, or (F) take any action that is likely to result in any plan,
program or agreement becoming non-compliant with Section 409A or provide any employee
entitlement to a tax gross-up or similar payment for any excise tax that may be due under
Section 409A;
(xiii) execute or amend (other than as required by existing employee benefit plans or
employment agreements or by applicable law) in any material respect any employment,
consulting, severance or indemnification agreement between the Company or any of the Company
Subsidiaries and any of their respective directors, officers, agents, consultants or
employees, or any collective bargaining agreement or other obligation to any labor
organization or employee incurred or entered into by the Company or any of the Company
Subsidiaries (other than as required by existing employee benefit plans or employment
agreements or by applicable law and other than the entry into agreements with consultants in
the ordinary course of business cancelable on 60 days notice (or less) and requiring total
payments in the aggregate of less than $2 million);
(xiv) make any changes in its reporting for taxes or accounting methods other than as
required by GAAP or applicable law; make or rescind any material Tax
election or file any material amended Tax return; make any material change to its
method or reporting income, deductions, or other Tax items for Tax purposes; settle or
compromise any material Tax liability or enter into any transaction with an affiliate
outside the ordinary course of business if such transaction would give rise to a tax
liability;
(xv) settle, compromise or otherwise resolve any pending litigation or other legal
proceedings involving a payment of more than $500,000 in any one case by or to the Company
or any of the Company Subsidiaries;
(xvi) other than in the ordinary course of business, pay or discharge any claims, Liens
or liabilities involving more than $5 million individually or $10 million in
30
the aggregate,
which are not reserved for or reflected on the balance sheets included in the Company
Financial Statements;
(xvii) write off any accounts or notes receivable in excess of $10 million;
(xviii) except pursuant to existing contracts or commitments, make or commit to make
capital expenditures in excess of 110% of the aggregate budgeted amount set forth in the
Companys fiscal 2006 capital expenditure plan previously provided to Parent, except as may
be required to (A) continue operations on the drilling, completion or plugging of any well
or any well operations for which the Company has consented to participate and is required to
continue to participate pursuant to applicable agreements or (B) conduct emergency
operations on any well pipeline or other facility;
(xix) make or assume any Hedges intended to benefit from or reduce or eliminate the
risk of fluctuations in the price of commodities, including Hydrocarbons or securities,
other than in the ordinary course of the Companys marketing business in accordance with the
Companys current policies;
(xx) enter into new contracts to sell Hydrocarbons other than in the ordinary course of
business at market pricing, but in no event any having a duration longer than nine months;
(xxi) fail to timely meet its royalty payment obligations in connection with its oil
and gas leases to the extent such failure has or would reasonably be expected to have a
Company Material Adverse Effect;
(xxii) enter into any agreement, arrangement or commitment that materially limits or
otherwise restricts the Company or any Company Subsidiary, or that would reasonably be
expected to, after the Effective Time, materially limit or restrict Parent or any of its
Subsidiaries or any of their respective affiliates or any successor thereto, from engaging
or competing in any line of business in which it is currently engaged or in any geographic
area material to the business or operations of Parent or any of its Subsidiaries;
(xxiii) terminate, amend, modify or waive, including the release of any third party
from, any provision of any confidentiality or standstill agreement to which it is a party,
and the Company and Company Subsidiaries shall enforce any such provisions contained in such
agreements, including by obtaining injunctions to prevent any breaches of such agreement;
(xxiv) take any action that would constitute a plant closing or mass layoff (each
as defined in the WARN Act or any similar state law or regulation) without in good faith
attempting to comply with the notice requirements of the WARN Act or similar state law or
regulation;
(xxv) organize or acquire any Person that could become a Subsidiary;
31
(xxvi) enter into any commitment or agreement to license or purchase seismic data that
will cost in excess of $2,000,000, other than pursuant to agreements or commitments existing
on the date hereof;
(xxvii) amend, modify or waive any provision of the Rights Agreement or take any action
to redeem the Company Rights or render the Company Rights inapplicable to any transaction
other than the Merger unless, and only to the extent that, the Company is required to do so
by order of a court of competent jurisdiction or other Governmental Authority;
(xxviii) grant approval for purposes of Section 203 of the DGCL of any business
combination or any acquisition of voting stock of the Company, each as defined in Section
203 of the DGCL;
(xxix) adopt a plan of complete or partial liquidation, dissolution, or reorganization;
(xxx) except as permitted by
Section 5.8
, knowingly take, or agree to commit to
take, any action that would or would reasonably be expected to result in the failure of the
conditions set forth in
Section 6.2
at, or as of any time prior to, the Effective
Time; or
(xxxi) take or agree in writing or otherwise to take any of the actions precluded by
Sections 4.1(a)
or
(b)
.
SECTION 4.2.
Conduct of Business by Parent
. Except as expressly permitted or required by this
Agreement, prior to the Effective Time, neither Parent nor any of its Subsidiaries, without the
prior written consent of the Company, shall:
(a) adopt a plan of complete or partial liquidation or dissolution of Parent;
(b) knowingly take, or agree to commit to take, any action that would or would reasonably be
expected to result in the failure of a condition set forth in
Section 6.3(a)
or
(b)
at, or as of any time prior to, the Effective Time; or
(c) take or agree in writing or otherwise to take any of the actions precluded by
Section
4.2(a)
or
(b)
.
ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.1.
Preparation of Proxy Statement; Stockholders Meetings
.
(a) As soon as practicable following the date of this Agreement, the Company shall prepare and
use its reasonable best efforts to, by July 7, 2006, in any event by July 10, 2007, file with the
SEC the Proxy Statement. Parent, Merger Sub and the Company will cooperate with each other in the
preparation of the Proxy Statement; without limiting the
32
generality of the foregoing, Parent and
Merger Sub, on the one hand, and the Company, on the other hand, will furnish to each other the
information relating to the party furnishing such information required by the Exchange Act to be
set forth in the Proxy Statement, and Company and its counsel shall be given the opportunity to
review and comment on the Proxy Statement prior to the filing thereof with the SEC. The Company
agrees to use its reasonable best efforts, after consultation with the other parties hereto, to
respond promptly to any comments made by the SEC with respect to the Proxy Statement. The Company
will use its reasonable best efforts to cause the Proxy Statement to be mailed to its stockholders
as promptly as practicable. No filing of, or amendment or supplement (including by incorporation
by reference) to, or correspondence to the SEC or its staff with respect to the Proxy Statement
will be made by the Company, without the approval of Parent, which approval shall not be
unreasonably withheld or delayed;
provided
that with respect to documents filed by a party which
are incorporated by reference in the Proxy Statement, this right of approval shall apply only with
respect to information relating to the other party or its business, financial condition or results
of operations, or this Agreement or the transactions contemplated hereby;
provided
,
further
, that
the Company, in connection with a Change in the Company Recommendation (as defined in
Section
5.8(a)
) or a Non-Takeover-Related Change of Recommendation (as defined in
Section
5.1(d)
), may amend or supplement the Proxy Statement (including by incorporation by reference)
pursuant to a
Qualifying Amendment (as defined below) to disclose such a change, and in such event, this
right of approval shall apply only with respect to information relating to this Agreement, the
transactions contemplated hereby, or the other party or its business, financial condition or
results of operations. A
Qualifying Amendment
means an amendment or supplement to the Proxy
Statement (including by incorporation by reference) to the extent it contains (i) a Change in the
Company Recommendation or a Non-Takeover-Related Change of Recommendation, (ii) a statement of the
reasons of the Board of Directors of the Company for making such Change in the Company
Recommendation or Non-Takeover-Related Change of Recommendation and (iii) additional information
reasonably related to the foregoing. The Company will advise Parent promptly after it receives
notice of any request by the SEC for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent which should be
set forth in an amendment or supplement to the Proxy Statement, so that any of such documents would
not include any misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading, the party which discovers such information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing such information shall be promptly
filed with the SEC and, to the extent required by law, disseminated to the stockholders of the
Company.
(b) The Company shall, as soon as practicable after the date hereof, and in accordance with
the Companys certificate of incorporation and bylaws and applicable law, establish a record date
(which will be as soon as practicable after the date hereof) for, duly call, give notice of,
convene and hold a meeting of its stockholders (the
Company Stockholders Meeting
) solely for the
purpose of considering and taking action upon this Agreement regardless of whether the Board of
Directors of the Company determines at any time that this Agreement or the Merger is no longer
advisable or recommends that the stockholders of the
33
Company reject this Agreement or the Merger.
Once the Company Stockholders Meeting has been called and noticed, the Company shall not postpone
or adjourn the Company Stockholders Meeting without the consent of Parent, which shall not be
unreasonably withheld or delayed (other than (i) for the absence of a quorum or (ii) to allow
reasonable additional time for the filing and mailing of any supplemental or amended disclosure
which it believes in good faith is necessary under applicable law and for such supplemental or
amended disclosure to be disseminated and reviewed by the Companys stockholders prior to the
Company Stockholders Meeting);
provided
that if the Company Stockholders Meeting is delayed to a
date after the Termination Date (as defined in
Section 7.1(b)
) as a result of either (i) or
(ii) above, then the Termination Date shall be extended to the fifth Business Day after such date.
The Board of Directors of the Company shall declare that this Agreement and the Merger are
advisable and in the best interests of the Company and recommend that this Agreement be adopted by
the stockholders of the Company and include in the Proxy Statement a copy of such recommendations;
provided
that the Board of Directors of the Company may withdraw, modify or change such
recommendation if but only if (i) it has complied with all of its obligations under
Section
5.8
and believes in good faith, taking into account all relevant factors, including those set
forth in the definition of Superior Proposal in
Section 5.8(b)
, and after receiving the
advice of the Companys financial advisors and outside counsel, that a Superior Proposal has been
made and (ii) it has determined in good faith, after consultation with outside counsel, that
withdrawal, modification or change of such recommendation is required by the Board of Directors to
comply with its fiduciary duties under applicable law. The Company shall use its reasonable best
efforts to solicit from stockholders of the Company proxies in favor of the adoption of this
Agreement and shall take all other action necessary or advisable to secure the vote or consent of
stockholders required by applicable law to effect the Merger.
(c) Notwithstanding anything contained in this
Section 5.1
to the contrary, the
Company agrees that its obligations pursuant to this
Section 5.1
shall not be affected by
the commencement, public proposal or communication to the Company of any Takeover Proposal.
Notwithstanding the receipt by the Company of a Superior Proposal, unless Parent terminates this
Agreement under
Section 7.1(f)
, then prior to the termination of this Agreement taking
effect under
Section 7.1(f)
, the Company shall be obligated to comply with
Section
5.1(b)
and the other terms of this Agreement, including by holding the Company Stockholders
Meeting, except that the Company shall not be required to hold the Company Stockholders Meeting if
the Company has terminated this Agreement under
Section 7.1(g)
and paid to Parent the
Termination Fee contemplated thereby. If (x) a Takeover Proposal shall have been made or shall
have otherwise become publicly known or any Person shall have publicly announced an intention
(whether or not conditional) to make a Takeover Proposal, (y) the Companys Board of Directors
withdraws, modifies or changes its recommendation of this Agreement or the Merger in a manner
adverse to Parent or resolves to do any of the foregoing or the Companys Board of Directors
recommends to the Companys stockholders any Takeover Proposal or resolves to do so, and (z) the
Required Company Stockholder Vote is not secured at such meeting, then at such time this Agreement
shall be deemed to be terminated by the Company under
Section 7.1(f)
. The Company shall
pay to Parent the Termination Fee as provided in
Section 7.3
.
(d) Nothing contained in this Agreement shall prohibit the Companys Board of Directors from
failing to make, or from withdrawing or modifying, its recommendation that
34
this Agreement be
adopted by the Companys stockholders in circumstances where no Takeover Proposal is or has been
outstanding (a
Non-Takeover-Related Change of Recommendation
) if the Companys Board of Directors
determines in its good faith judgment, after consultation with its outside legal counsel, that it
is required to take such action in order to comply with its fiduciary duties under applicable law.
(e) The Company acknowledges and agrees that Parent would be damaged irreparably if any
provision of this
Section 5.1
is not performed in accordance with its specific terms or is
otherwise breached. Accordingly, the Company agrees that Parent will be entitled to an injunction
or injunctions to prevent breaches of this
Section 5.1
and to enforce specifically this
Agreement and its terms and provisions in any action or proceeding instituted in the Delaware Court
of Chancery in accordance with
Section 8.4
, in addition to any other remedy to which Parent
may be entitled, at law or in equity.
SECTION 5.2.
Employee Benefit Matters
. From and after the Effective Time, Parent and the
Surviving Corporation shall have the rights and obligations described in this
Section 5.2
regarding the individuals who were employees of the Company immediately prior to the Effective Time
(
Acquired Employees
).
(a)
Employment
. All Acquired Employees shall be employed solely on an at will
basis, except to the extent required by the provisions of written employment contracts or as
required by applicable law. An Acquired Employee whose employment is terminated ceases immediately
to be an Acquired Employee for purposes of this Agreement.
(b)
Benefit Plans
. The Surviving Corporation shall assume the Company Employee
Benefit Plans as of the Effective Time and operate such plans in accordance with their respective
terms, and the Company shall take any steps necessary to permit such assumption. Subject to the
obligations set forth in
Section 5.2(d)
, Acquired Employees shall continue after the
Effective Time to participate in such assumed Company Employee Benefit Plans and at such time as
determined by Parent or the Surviving Corporation with Parents approval, Acquired Employees shall
participate in Parents compensation, severance, bonus, stock option and other incentive plans for
which they are eligible pursuant to the terms and conditions of such plans, or in similar plans
maintained by the Surviving Corporation, in each case consistent with the participation offered to
Parents employees holding similar positions
.
Each such plan shall grant credit to each Acquired
Employee for all service prior to the Effective Time with the Company (including any predecessors)
to the same extent recognized by the Company immediately prior to the Effective Time for purposes
of vesting and eligibility (including eligibility for participation and levels of benefits) but,
except as explicitly set forth in the terms of any Parent or Surviving Corporation plan, not for
(i) purposes of benefit accrual under any defined benefit pension plan as defined in ERISA
section 3(2) (including nonqualified defined benefit pension plans) or (ii) benefits under retiree
medical plans. No Acquired Employee shall be simultaneously covered under similar employee benefit
plans of Parent or the Surviving Corporation and of the Company. Nothing in this
Section
5.2
shall restrict in any manner the right of Parent or the Surviving Corporation to amend or
terminate any assumed Company Employee Benefit Plan or to modify any compensation arrangement of
any Acquired Employee for any reason at any time (in each case subject to the provisions of any
Company Employee Benefit Plan).
35
(c)
Group Health Plans
. On and after the Effective Time occurs, any group health plan
established or maintained by Parent or the Surviving Corporation shall, with respect to any
eligible Acquired Employee or, as applicable, a family member of an eligible Acquired Employee, (i)
waive any waiting period, (ii) waive any exclusion or limitation for preexisting conditions which
were covered under any group health plan maintained by the Company prior to the Effective Time,
(iii) grant credit (for purposes of annual deductibles, co-payments and out-of-pocket limits) for
any covered claims incurred or payments made prior to the Effective Time, and (iv) accept rollovers
of the health flexible spending account and dependent care accounts of eligible Acquired Employees.
(d)
Compensation
. During the one-year period following the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, provide to each Acquired Employee for so long
as the Acquired Employee remains so employed, compensation and employee benefits that, with respect
to each employee, are substantially as favorable in the aggregate to the compensation and benefits
provided to such employee under the Company Employee Benefit Plans immediately prior to the
Effective Time (including payment by the Parent or the Surviving Corporation of bonuses in respect
of 2006 performance that are substantially as favorable as the
bonuses that would have been paid to the Acquired Employee under the applicable Company
Employee Benefit Plan).
(e)
Severance
. During the one year period following the Effective Time, Parent shall
provide, or shall cause the Surviving Corporation to provide each Acquired Employee with severance
payments and severance benefits, if any, contemplated by Schedule 5.2(e).
SECTION 5.3.
Consents and Approvals
.
(a) Subject to the requirements of applicable antitrust laws, the Company, Parent and Merger
Sub shall each, as promptly as practicable after the date of this Agreement, file or cause to be
filed with (i) the Federal Trade Commission and the United States Department of Justice any
notifications required to be filed under the HSR Act and any supplemental information which may be
required in connection therewith; and (ii) the Competition Bureau any notifications required to be
filed under the Competition Act with respect to the transactions contemplated by this Agreement and
any supplemental information which may be required in connection therewith; and (iii) the
Investment Review Division of Industry Canada an application for review required to be filed under
the Investment Canada Act and any supplemental information which may be required in connection
therewith]. The parties shall use reasonable best efforts to respond promptly to any requests for
additional information made by either of such agencies, and to cause the waiting periods under the
HSR Act and the Competition Act to terminate or expire at the earliest possible date after the date
of filing. No party shall agree to participate in any meeting with any Governmental Authority in
respect of any such filings, investigation or other inquiries unless it consults with the other
party in advance, and to the extent permitted by such Governmental Authority, gives the other party
the opportunity to attend and participate thereat.
(b) Subject to the requirements of applicable antitrust laws, except with respect to the
actions and filings described in clause (a) above, the Company, Parent and Merger
36
Sub shall
cooperate with each other to (i) promptly prepare and file all necessary documentation, (ii) effect
all necessary applications, notices, petitions and filings, (iii) use all their reasonable best
efforts, in each case, to obtain all permits, consents, approvals and authorizations of all
Governmental Authorities necessary to consummate the transactions contemplated by this Agreement.
Subject to the requirements of applicable antitrust laws, the Company, Parent and Merger Sub shall
use their respective commercially reasonable efforts to obtain all necessary consents, approvals
and authorizations of all other parties necessary to consummate the transactions contemplated by
this Agreement or required by the terms of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument to which the Company,
Merger Sub, Parent or any of their respective Subsidiaries is a party or by which any of them is
bound;
provided
,
however
, that no note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument shall be amended or modified to
increase in any material respect the amount payable thereunder or to be otherwise more burdensome,
or less favorable, in each case in any material respect, to the Company and the Company
Subsidiaries considered as one enterprise in order to obtain any
permit, consent, approval or authorization without first obtaining the written consent of
Parent, which consent shall not be unreasonably withheld or delayed. The Company shall have the
right to review and approve in advance all characterizations of the information relating to the
Company; Parent shall have the right to review and approve in advance all characterizations of the
information relating to Parent or Merger Sub such approval not to be unreasonably withheld or
delayed; and each of the Company and Parent shall have the right to review and approve in advance
all characterizations of the information relating to the transactions contemplated by this
Agreement, in each case which appear in any material filing (including the Proxy Statement) made in
connection with the transactions contemplated hereby. The Company, Parent and Merger Sub agree
that they will consult with each other with respect to the obtaining of all such necessary Permits,
consents, approvals and authorizations of all third parties and Governmental Authorities.
SECTION 5.4.
Public Statements
. The Company, Parent and Merger Sub shall consult with each
other prior to issuing, and provide each other with the opportunity to review and comment upon, any
public announcement, statement or other disclosure with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such public announcement or statement
prior to such consultation, except as may be required by law or any listing agreement with a
national securities exchange or trading market.
SECTION 5.5.
Further Assurances
. Subject to the terms and conditions provided herein, each
of the Company, Parent and Merger Sub agrees to use all commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including obtaining all consents, approvals and
authorizations required for or in connection with the consummation by the parties hereto of the
transactions contemplated by this Agreement, and, only if Parent and the Company mutually agree,
contesting and resisting of any action, including any legislative, administrative or judicial
action, and seeking to have vacated, lifted, reversed or overturned, any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent) that restricts, prevents or
prohibits the consummation of the transactions contemplated by this Agreement. In
37
the event any
litigation is commenced by any Person involving the Company or its directors and relating to the
transactions contemplated by this Agreement, including any other Takeover Proposal (as defined in
Section 5.8(b)
), Parent shall have the right, at its own expense, to participate therein.
In addition, in connection with filings made by Parent with the SEC in connection with financings
associated with the transactions contemplated by this Agreement, the Company hereby consents to the
inclusion of its financial statements to the extent reasonably necessary in such filings, agrees to
reasonably assist Parent in connection with the preparation of any related required pro forma
financial statements and will use its reasonable best efforts to cause the Companys independent
public accountants to provide a consent to the inclusion of their report to such financial
statements in such filings and to provide Parent a comfort letter dated a date within two
Business Days before the date on which such filings shall become effective and addressed to Parent,
in form and
substance reasonably satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with any such filings.
SECTION 5.6.
Notification of Certain Matters
. The Company agrees to give prompt notice to
Parent and Merger Sub of the occurrence or failure to occur, or the impending occurrence or failure
to occur, of any event which occurrence or failure to occur would be reasonably likely to cause the
failure of any of the conditions set forth in
Section 6.2
;
provided
,
however
, that the
delivery of any notice pursuant to this
Section 5.6
shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice. Each of Parent and Merger Sub
agrees to give prompt notice to the Company of the occurrence or failure to occur, or the impending
occurrence or failure to occur, of any event which occurrence or failure to occur would be
reasonably likely to cause the failure of any of the conditions set forth in
Section 6.3
;
provided
,
however
, that the delivery of any notice pursuant to this
Section 5.6
shall not
limit or otherwise affect the remedies available hereunder to the party receiving such notice.
SECTION 5.7.
Access to Information; Confidentiality
.
(a) Subject to the Companys reasonable determination regarding limitations required by
applicable law or contractual arrangements, the Company shall, and shall cause the Company
Subsidiaries and the officers, directors, employees and agents of the Company and the Company
Subsidiaries, to, afford the officers, employees and agents of Parent and Merger Sub, at their sole
cost and risk, reasonable access at all reasonable times during normal business hours from the date
hereof through the Effective Time to its officers, employees, agents, properties, facilities,
books, records, contracts and other assets and shall furnish Parent and Merger Sub all financial,
operating and other data and information as Parent and Merger Sub through their officers, employees
or agents, may reasonably request. Parent and Merger Sub, at their sole cost and risk, may make
such due diligence investigations as Parent and Merger Sub shall deem necessary or reasonable, upon
reasonable notice to the Company and without disruption or damage to Companys operations or
properties;
provided
,
however,
that the Company shall not be required to provide any such
information if the provision of such information would be reasonably likely to cause a waiver of an
attorney-client privilege. No additional investigations or disclosures shall affect the Companys
representations and warranties contained herein, or limit or otherwise affect the remedies
available to Parent and Merger Sub pursuant to this Agreement.
38
(b) The provisions of the Confidentiality Agreement, dated May 22, 2006 between Parent and the
Company (the
Company Confidentiality Agreement
) shall remain in full force and effect in
accordance with its terms.
SECTION 5.8.
No Solicitation
.
(a) The Company agrees that from the date of this Agreement until the Effective Time or, if
earlier, the termination of this Agreement in accordance with its terms, the Company shall not, and
the Company shall cause its Company Subsidiaries and its and their respective officers, directors,
investment bankers, attorneys and other advisors and representatives not to (i) solicit, initiate,
or encourage the submission of, any Takeover Proposal (as hereinafter defined), (ii) approve or
recommend any Takeover Proposal, enter into any agreement, agreement-in-principle or letter of
intent with respect to or accept any Takeover Proposal (or resolve to or publicly propose to do any
of the foregoing), or (iii) participate or engage in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or knowingly take any action to facilitate
any inquiries or the making of any proposal that constitutes, or would reasonably be expected to
lead to, any Takeover Proposal;
provided
,
however
, that
(x) nothing contained in subclauses (i) or (ii) above shall prohibit the
Company or its Board of Directors from disclosing to the Companys stockholders a
position with respect to a tender or exchange offer by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act or from making any similar
disclosure, if, in the good faith judgment of the Board of Directors of the Company
(after consultation with outside counsel) failure so to disclose would violate its
obligations under applicable law;
provided
,
however
, that any such disclosure
relating to a Takeover Proposal (other than a stop-look-and-listen communication
to the Companys stockholders pursuant to Rule 14d-9(f) promulgated under the
Exchange Act) shall be deemed to be a Change in the Company Recommendation (defined
below) unless the Board of Directors of the Company reaffirms the Company
Recommendation in such disclosure, and provided further that the Board of Directors
of the Company shall not recommend that the stockholders of the Company tender their
Company Common Stock in connection with any such tender or exchange offer unless the
Board of Directors of the Company determines in good faith (after consultation with
its financial advisor and outside legal counsel) that such Takeover Proposal is a
Superior Proposal and shall have complied with all of its obligations under
Section 5.8
;
(y) if (under circumstances in which the Company has complied with all of its
obligations under this
Section 5.8(a)
), prior to this Agreement having been
adopted by the Required Company Stockholder Vote, the Company receives an
unsolicited written Takeover Proposal from a third party that the Board of Directors
of the Company determines in good faith (after consultation with its financial
advisor and outside legal counsel) is, or is reasonably likely to result in, a
Superior Proposal, the Company and its representatives may conduct such additional
discussions and provide such information as the Board of Directors of the Company
shall determine, but only if, prior to such provision of such
39
information or conduct
of such additional discussions (A) such third party shall have entered into a
confidentiality agreement in customary form that is no less favorable to the
Company, including any standstill provisions included therein, and no less
restrictive as the Company Confidentiality Agreement (and containing additional
provisions that expressly permit the Company to comply with the
provisions of this
Section 5.8
)), and (B) the Board of Directors of the
Company determines in its good faith judgment, after consultation with outside legal
counsel, that it is required to do so in order to comply with its fiduciary duties
under applicable law; and
(z) at any time prior to this Agreement having been approved by the Required
Company Stockholder Vote, and subject to the Companys compliance with its
obligations under this
Section 5.8(a),
the Companys Board of Directors may
(i) withdraw, amend, modify or qualify, or publicly propose to withdraw, amend,
modify or qualify the recommendation, approval, adoption or declaration of
advisability by the Companys Board of Directors of this Agreement, the Merger or
the Company Recommendation (collectively, a
Change in the Company Recommendation
)
(which shall not include a Non-Takeover-Related Change of Recommendation) and
recommend, or publicly propose to recommend any Takeover Proposal, or (ii) to the
extent permitted pursuant to and in compliance with
Section 7.1(f)
or
Section 7.1(g)
, authorize the Company to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal, in the case
of either subclause (i) or (ii) of this clause (z) only after the Board of Directors
of the Company determines (A) in good faith (after receiving the advice of its
financial advisor and outside legal counsel) that such Takeover Proposal is a
Superior Proposal and (B) in its good faith judgment, after consultation with
outside legal counsel, that it is required to do so in order to comply with its
fiduciary duties under applicable law.
The Company shall immediately cease and cause to be terminated and shall cause its affiliates and
the Company Subsidiaries and its or their respective officers, directors, employees,
representatives and agents, to terminate all existing discussions or negotiations, if any, with any
Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, a
Takeover Proposal and will cause any such parties (and their agents or advisors) in possession of
confidential information regarding the Company or any of the Company Subsidiaries to return or
destroy such information.
(b) For purposes of this Agreement, (i)
Takeover Proposal
shall mean any inquiry, proposal
or offer from any Person (other than Parent, Merger Sub or any of their affiliates) relating to (A)
any acquisition, merger, consolidation, reorganization, share exchange, recapitalization,
liquidation, direct or indirect business combination, asset acquisition or other similar
transaction involving the Company or any Company Subsidiary of (x) assets or businesses that
constitute or represent 10% or more of the total revenue, operating income, EBITDAX or assets of
the Company and its Subsidiaries, taken as a whole immediately prior to such transaction, or (y)
10% or more of the outstanding shares of Company Common Stock or any other class of capital stock
of the Company or capital stock of, or other equity or voting
40
interests in, any of the Companys
Subsidiaries whose business constitutes 10% or more of the total revenue, operating income, EBITDAX
or assets of the Company and its Subsidiaries taken as a whole immediately prior to such
transaction in each case other than the transactions contemplated by this Agreement or (B) any
purchase or sale of, or tender offer or exchange offer for, capital stock of the Company or any
Company Subsidiary that if consummated would result
in any Person beneficially owning 10% or more of any class of capital stock of the Company or
any Company Subsidiary whose business constitutes 10% or more of the total revenue, operating
income, EBITDAX or assets of the Company and its Subsidiaries taken as a whole immediately prior to
such transaction, (ii) the term
Bona Fide Takeover Proposal
means any
bona fide
Takeover Proposal
containing price and other material terms and conditions that is either written or publicly
disclosed by the Company, (iii) the term
Superior Proposal
means any
bona fide
written Takeover
Proposal to effect a merger, consolidation, reorganization, share exchange, tender offer,
recapitalization, liquidation, direct or indirect business combination, or other similar
transaction as a result of which the Companys stockholders (in their former capacities as Company
stockholders) cease to own at least 80% of the voting securities of the ultimate parent entity
resulting from such transaction or sale of all or substantially all of the assets of the Company,
which in any such case is on terms that the Board of Directors of the Company determines in its
good faith judgment (after consultation with its financial advisor and outside counsel), taking
into account all relevant factors, including any conditions to such Takeover Proposal, the timing
of the closing thereof, the risk of nonconsummation, any required governmental or other consents,
filings and approvals, (A) would, if consummated, result in a transaction that is more favorable to
the Companys stockholders from a financial point of view than the transactions contemplated by
this Agreement (including the terms of any proposal by Parent to modify the terms of the
transactions contemplated by this Agreement) and (B) is reasonably likely to be financed and
otherwise completed without undue delay and (iv) the term
Cash Superior Proposal
means any
Superior Proposal in which the consideration payable to the Companys stockholders or the Company,
as the case may be, is 100% cash.
(c) Except as expressly permitted by
Section 5.1
or
Section 5.8(a)
, neither
the Board of Directors of the Company nor any committee thereof shall effect any Change in the
Company Recommendation, or approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal. For purposes of this Agreement, a Change in the Company Recommendation shall
include any approval or recommendation (or public proposal to approve or recommend) by the Board of
Directors of the Company of a Takeover Proposal. The term
Recommendation Against a Takeover
Proposal
means, subsequent to the making of a Bona Fide Takeover Proposal and within ten Business
Days following a request by Parent to do so, (i) a public and unconditional reaffirmation by the
Board of Directors of the Company of its recommendation in favor of this Agreement and the Merger
to the Companys stockholders and (ii) a public recommendation by the Board of Directors of the
Company against such Bona Fide Takeover Proposal, except that (A) with respect to any Bona Fide
Takeover Proposal made by a person, entity or group that has already made a Bona Fide Takeover
Proposal, such Recommendation Against a Takeover Proposal must be made within two calendar days of
such request, and (B) with respect to any Bona Fide Takeover Proposal made within ten Business Days
(but more than five calendar days) of the planned date of the Company Stockholder Meeting, such
Recommendation Against a Takeover Proposal must be made within the greater of (1) four calendar
days of such request or (2) one-half of the number of calendar days between
41
such request and the
planned date of the Company Stockholder Meeting, with half calendar days being rounded down;
provided
,
however
, that, with respect to any Bona Fide Takeover Proposal made within four calendar
days (or, with respect to a Bona Fide Takeover Proposal described in clause (A) above, one calendar
day) of the planned date of the Company Stockholder Meeting,
the Companys Board of Directors will be deemed to have made a Recommendation Against a
Takeover Proposal for all purposes under this Agreement (including Section 7.3(c)).
(d) In addition to the other obligations of the Company set forth in this
Section 5.8
,
the Company shall promptly (and in any event, within 24 hours) advise Parent orally and in writing
of any Takeover Proposal, any request for information with respect to any Takeover Proposal, or any
inquiry with respect to or which could result in a Takeover Proposal, the material terms and
conditions of such request, Takeover Proposal or inquiry, and the identity of the Person making the
same and shall promptly provide Parent with a copy of any written request or Takeover Proposal or
other document relating to a Takeover Proposal. The Company will keep Parent promptly and fully
informed of the status and details (including amendments) of any such request, Takeover Proposal or
inquiry and shall promptly provide Parent with a copy of any non-public information furnished to
the Person making such request, Takeover Proposal or inquiry. Notwithstanding the foregoing, the
Company shall not be required to provide any confidential information to Parent (i) with respect to
the business, assets or operations of the person, entity or group making the Takeover Proposal, or
(ii) to the extent the Board of Directors of the Company determines in its good faith judgment,
after consultation with its outside legal counsel, that it may not provide all or part of such
confidential information in order to comply with its fiduciary duties under applicable law,
provided that the Companys Board of Directors may not claim that a condition in a Takeover
Proposal that such confidential information not be provided to Parent is a basis for refusing to
provide such information because doing so would breach such fiduciary standard.
SECTION 5.9.
Indemnification and Insurance
.
(a) Parent and Merger Sub agree that all rights to indemnification by the Company now existing
in favor of 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, employee or agent of the Company or any Company
Subsidiary or who acts as a fiduciary under any of the Company Employee Benefit Plans (each an
Indemnified Party
) as provided in the Companys certificate of incorporation or bylaws, in each
case as in effect on the date of this Agreement, or pursuant to any other agreements in effect on
the date hereof, copies of which have been provided to Parent, including provisions relating to the
advancement of expenses incurred in the defense of any action or suit, shall survive the Merger and
shall remain in full force and effect in accordance with their terms.
(b) For ten years after the Effective Time (subject to the last sentence of this
Section
5.9(b)
), to the fullest extent permitted under applicable law, Parent shall, and shall cause
the Surviving Corporation to, and the Surviving Corporation shall, indemnify, defend and hold
harmless each Indemnified Party who on or prior to the Effective Time were officers or directors of
the Company or the Company Subsidiaries (collectively, the
D&O Indemnitees
) against all losses,
claims, damages, liabilities, fees, expenses, judgments and fines arising in whole or in part out
of actions or omissions in their capacity as such occurring at or prior to the Effective
42
Time, and
will reimburse each D&O Indemnitee to the fullest extent permitted under applicable law for any
legal or other expenses reasonably incurred by such D&O Indemnitee in connection
with investigating or defending any such losses, claims, damages, liabilities, fees, expenses,
judgments and fines as such expenses are incurred;
provided
that nothing herein shall impair any
rights to indemnification of any Indemnified Party referred to in clause (a) above. Such rights
shall not be amended, or otherwise modified in any manner that would adversely affect the rights of
the D&O Indemnitees, unless such modification is required by law. In the event notice of any claim
for indemnification or reimbursement of expenses under this
Section 5.9(b)
shall have been
made within the ten-year period referred to the first sentence of this
Section 5.9(b)
and
such claim has not been finally resolved by the expiration of such ten-year period, the obligations
set forth in this
Section 5.9(b)
shall survive until such claim is finally resolved.
(c) Parent shall cause the Surviving Corporation to maintain the Companys officers and
directors liability insurance policies, in effect on the date of this Agreement (the
D&O
Insurance
), for a period of not less than six years after the Effective Time, with no less
coverage and amounts and containing terms no less advantageous to the Companys directors and
officers currently covered by policies in effect on the date hereof, but only to the extent related
to actions or omissions at or prior to the Effective Time (
provided
,
however
, that, if the D&O
Insurance expires, is terminated or is canceled during such six-year period, Parent shall, or shall
cause the Surviving Corporation to, obtain officers and directors liability insurance covering
such acts or omissions with respect to each such Person of at least the same coverage and amounts
and containing terms no less advantageous to the Companys directors and officers currently covered
by the D&O Insurance);
provided
, that (i) the Surviving Corporation may substitute therefor
policies for the exclusive benefit of those Persons who are currently covered by the D&O Insurance
from a financially sound and nationally reputable carrier of at least the same coverage and amounts
containing terms no less advantageous to such Persons and (ii) such substitution shall not result
in gaps or lapses of coverage with respect to matters occurring at or prior to the Effective Time;
provided
,
further
, that in no event shall Parent or the Surviving Corporation be required to expend
more than an amount per year equal to 200% of current annual premiums paid by the Company for such
insurance (the
Maximum Amount
) to maintain or procure insurance coverage pursuant hereto;
provided
,
further
, that if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Parent and the Surviving Corporation shall procure
and maintain for such six-year period as much coverage as reasonably practicable for the Maximum
Amount. Parent shall have the right to cause coverage to be extended under the Companys D&O
Insurance by obtaining and causing to be maintained a six-year tail policy of at least the same
coverage and amounts and containing terms no less advantageous to the Companys directors and
officers currently covered by the D&O Insurance than the Companys existing D&O Insurance, and such
tail policy shall satisfy the provisions of this
Section 5.9(c)
for so long as it remains
in effect for such six-year period.
(d) The obligations of Parent and the Surviving Corporation under this
Section 5.9
shall survive the consummation of the Merger and shall not be terminated or modified in such a
manner as to adversely affect any D&O Indemnitee to whom this
Section 5.9
applies without
the consent of such affected D&O Indemnitee (it being expressly agreed that the
43
D&O Indemnitees to
whom this
Section 5.9
applies shall be third party beneficiaries of this
Section
5.9
, each of whom may enforce the provisions of this
Section 5.9
).
(e) If Parent or the Surviving Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Parent or the Surviving Corporation, as the case may, be
shall assume the obligations set forth in this
Section 5.9
.
SECTION 5.10.
State Takeover Laws
. If any fair price, moratorium, control share
acquisition, business combination or other takeover statute or similar statute or regulation,
applies or purports to apply to this Agreement, the Merger and the Company Voting Agreements or the
other transactions contemplated by this Agreement, each of Parent, Merger Sub and the Company shall
(a) take all reasonable action to ensure that such transactions may be consummated as promptly as
practicable upon the terms and subject to the conditions set forth in this Agreement and the
Company Voting Agreements and (b) otherwise act to eliminate the effects of such takeover statute,
law or regulation.
SECTION 5.11.
Expenses
. Each party shall bear solely and entirely all expenses incurred by
such party or on its behalf in connection with this Agreement and the transactions contemplated
hereby.
ARTICLE 6
CONDITIONS
SECTION 6.1.
Conditions to Each Partys Obligation To Effect the Merger
. The respective
obligations of each party to effect the Merger are subject to the satisfaction or, to the extent
permitted by applicable law, waiver on or prior to the Closing Date of each of the following
conditions:
(a)
Stockholder Approval
. This Agreement shall have been adopted by the Required
Company Stockholder Vote.
(b)
HSR Act and Competition Act
. The waiting period (and any extension thereof)
applicable to the Merger and the other transactions contemplated by this Agreement under the HSR
Act and Competition Act shall have been terminated or shall have expired.
(c)
No Injunctions or Restraints
. No preliminary injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a Governmental Authority, nor any statute,
rule, regulation or executive order promulgated or enacted by any Governmental Authority, shall be
in effect that would make the Merger illegal or otherwise prevent the consummation thereof.
(d)
Required Approvals
. The Required Approvals shall have been obtained at or prior
to the Effective Time, such approvals shall have become Final Orders (as defined below) and such
Final Orders shall not impose terms or conditions that, individually or in the aggregate,
44
would reasonably be expected to have a Company Material Adverse Effect or a Parent Material
Adverse Effect. A
Final Order
means action by the relevant Governmental Authority that has not
been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any
waiting period prescribed by law before the transactions contemplated hereby may be consummated has
expired, and as to which all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
SECTION 6.2.
Conditions to Obligations of Parent and Merger Sub
. The obligations of Parent
and Merger Sub to effect the Merger are further subject to the satisfaction or, to the extent
permitted by applicable law, the waiver of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the
Company set forth herein shall be true and correct as of the date hereof and as of the Closing
Date, with the same effect as if made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect to any threshold or
any limitation or qualifier as to materiality or Company Material Adverse Effect or words of
similar import set forth therein) does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and Parent shall have received
a certificate signed on behalf of the Company by the chief executive officer and 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, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of the Company to such
effect.
(c)
Resignations of Directors
. Each of the directors of the Company shall have
resigned as of the Effective Date and such resignations shall have been delivered to Parent.
SECTION 6.3.
Conditions to Obligation of the Company
. The obligations of the Company to
effect the Merger are further subject to the satisfaction or, to the extent permitted by applicable
law, the waiver of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Parent set
forth herein shall be true and correct as of the date hereof and as of the Closing Date, with the
same effect as if made at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any threshold or any limitation or
qualifier as to materiality or Parent Material Adverse Effect or words of similar import set
forth therein) does not have, and would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, and the Company shall have received a certificate
signed on behalf of each of Parent and Merger Sub by the respective chief executive officer and the
chief financial officer of each such entity to such effect.
45
(b)
Performance of Obligations of Parent and Merger Sub
. Each of Parent and Merger
Sub shall have performed in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of each of Parent and Merger Sub by the respective chief executive
officer and the chief financial officer of each such entity to such effect.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1.
Termination
. This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time, whether before or after this Agreement has been adopted by
the Required Company Stockholder Vote:
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by either the Company or Parent, if the Merger has not been consummated by December 31,
2006, or such other date, if any, as the Company and Parent shall agree upon or as is provided in
Section 5.1(b)
(the
Termination Date
);
provided
,
however
, that the right to terminate
this Agreement under this
Section 7.1(b)
shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure
of the Effective Time to occur on or before such date;
(c) by either the Company or Parent, if any judgment, order, decree, statute, law, ordinance,
rule, regulation or other legal restraint or prohibition having the effects set forth in
Section 6.1(c)
shall be in effect and shall have become final and nonappealable;
(d) by either the Company or Parent, if at the Company Stockholders Meeting (including any
adjournment or postponement thereof), the Required Company Stockholder Vote shall not have been
obtained in circumstances other than where a Non-Takeover-Related Change of Recommendation has
occurred;
(e) by Parent, if
(i) the Board of Directors of the Company shall have withdrawn, modified, amended or
changed in any respect adverse to Parent its adoption of or recommendation in favor of this
Agreement or the Merger,
(ii) the Board of Directors of the Company shall have recommended to the stockholders
of the Company any Takeover Proposal or shall have resolved to, or publicly announced an
intention to, do so,
(iii) the Company shall have breached
Section 5.8
in a manner which has a
material adverse effect on the ability of Parent to consummate the transactions contemplated
by this Agreement, or
46
(iv) the Company shall have breached or failed to perform in any material respect any
of its representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise to the failure of a
condition set forth in
Section 6.2(a)
or
(b)
, and (B) is incapable of being
cured or has not been cured by the Company within 20 calendar days after written notice has
been given by Parent to the Company of such breach or failure to perform (
Company Breach
);
(f) by Parent, or, following the Company Stockholders Meeting at which the Required Company
Stockholder Vote is not obtained and subject to
Section 5.1
, the Company, if
(i) with respect to such termination by the Company, the Company shall not have
breached
Section 5.8
in a manner which has a material adverse effect on the ability
of Parent to consummate the transactions contemplated by this Agreement,
(ii) the Board of Directors of the Company (A) recommends to the stockholders of the
Company any Takeover Proposal or resolves to, or publicly announces an intention to, do so
or (B) authorizes the Company, subject to complying with the terms of
Section 5.8
and this
Section 7.1(f)
, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal that is not a Cash Superior Proposal and
the Company notifies Parent in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice,
(iii) Parent does not make, within five Business Days of receipt of the Companys
written notification of its intention to enter into such agreement, an offer that the Board
of Directors of the Company determines, in its good faith judgment (after consultation with
its financial advisor and outside legal counsel) is at least as favorable to the Companys
stockholders from a financial point of view as such Superior Proposal (it being understood
and agreed that any amendment to the price or any other material term of such Superior
Proposal will require a new notification from the Company to Parent and a new five Business
Day period), and
(iv) the Company concurrently with such termination pays to Parent in immediately
available funds the Termination Fee pursuant to
Section 7.3
;
(g) by Parent or the Company, if
(i) with respect to such termination by the Company, the Company shall not have
breached
Section 5.8
in a manner which has a material adverse effect on the ability
of Parent to consummate the transactions contemplated by this Agreement,
(ii) the Board of Directors of the Company authorizes the Company, subject to complying
with the terms of
Section 5.8
and this
Section 7.1(g)
, to enter into a
binding written agreement concerning a transaction that constitutes a Cash Superior
Proposal and the Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice,
47
(iii) Parent does not make, within five Business Days of receipt of the Companys
written notification of its intention to enter into such agreement, an offer that the Board
of Directors of the Company determines, in its good faith judgment (after consultation with
its financial advisor and outside legal counsel) is at least as favorable to the Companys
stockholders from a financial point of view as such Cash Superior Proposal (it being
understood and agreed that any amendment to the price or any other material term of such
Cash Superior Proposal will require a new notification from the Company to Parent and a new
five Business Day period), and
(iv) the Company concurrently with such termination pays to Parent in immediately
available funds the Termination Fee pursuant to
Section 7.3
;
(h) by Parent, or, following the Company Stockholders Meeting at which the Required Company
Stockholder Vote is not obtained and subject to
Section 5.1(b)
, the Company, if the
Companys Board of Directors shall have made a Non-Takeover-Related Change of Recommendation; or
(i) by the Company, if Parent shall have breached or failed to perform in any material respect
any of its representations, warranties, covenants or other agreements contained in this Agreement,
which breach or failure to perform (A) would give rise to the failure of a condition set forth in
Section 6.3(a)
or
(b)
, and (B) is incapable of being cured or has not been cured by
Parent within 20 calendar days after written notice has been given by the Company to Parent of such
breach or failure to perform.
The party desiring to terminate this Agreement shall give written notice of such termination
to the other party.
SECTION 7.2.
Effect of Termination
.Upon the termination of this Agreement pursuant to and
in accordance with
Section 7.1
, this Agreement shall forthwith become null and void except
as set forth in
Section 7.3
and for the provisions in
Article 8
, which shall
survive such termination;
provided
that nothing herein shall relieve any party from liability for
any intentional breach of a covenant or representation of warranty in this Agreement prior to such
termination. In addition, the Company Confidentiality Agreement shall not be affected by the
termination of this Agreement.
SECTION 7.3.
Fees and Expenses
.(a) If this Agreement is terminated pursuant to
Section 7.1(e)(i)
,
Section 7.1(e)(ii)
,
Section 7.1(e)(iii)
or, following
the failure of the Board of Directors of the Company to Recommend Against a Takeover Proposal,
Section 7.1(d)
, the Company shall promptly, but in no event later than one Business Day
after termination of this Agreement, pay Parent a fee in immediately available funds of $154.0
million (the
Termination Fee
). If this Agreement is
terminated pursuant to
Section 7.1(f)
or
Section 7.1(g)
, the Company shall pay
such Termination Fee concurrently with such termination.
(b) If (A) a Bona Fide Takeover Proposal (assuming for purposes of this
Section 7.3(b)
that the references to 10% in the definition of Takeover Proposal are 50%) in respect of the
Company is publicly announced or is proposed or offered or made to the Company or the Companys
stockholders prior to this Agreement having been approved by the Required
48
Company Stockholder Vote,
(B) this Agreement is terminated by either party, as applicable, pursuant to
Section 7.1(b)
and (C) within 12 months following such termination the Company shall consummate or enter into,
directly or indirectly, an agreement with respect to a transaction constituting a Takeover Proposal
(assuming for purposes of this
Section 7.3(b)
that the references to 10% in the definition
of Takeover Proposal are 50%) that is subsequently consummated, the Company shall promptly after
such consummation, but in no event later than one Business Day after such consummation, pay Parent
the Termination Fee.
(c) If (A) a Bona Fide Takeover Proposal (assuming for purposes of this
Section 7.3(c)
that the references to 10% in the definition of Takeover Proposal are 50%) in respect of the
Company is publicly announced or is proposed or offered or made to the Company or the Companys
stockholders prior to this Agreement having been approved by the Required Company Stockholder Vote
and the Companys Board of Directors shall have made or shall have deemed to have made a
Recommendation Against a Takeover Proposal, (B) this Agreement is terminated by either party, as
applicable, pursuant to
Section 7.1(d)
and (C) within 12 months following such termination
the Company shall consummate or enter into, directly or indirectly, an agreement with respect to a
transaction constituting a Takeover Proposal (assuming for purposes of this
Section 7.3(c)
that the references to 10% in the definition of Takeover Proposal are 50%) that is subsequently
consummated, the Company shall promptly after such consummation, but in no event later than one
Business Day after such consummation, pay Parent a fee in immediately available funds of $104.0
million;
provided
that when
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(1)
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Parent terminates this Agreement pursuant to
Section 7.1(d)
, the Company shall promptly, but in no event
later than one Business Day after such termination pay Parent a fee in
immediately available funds of $50.0 million in addition (if it should
become payable thereafter) to the fee of $104.0 million contemplated
above, and
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(2)
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the Company terminates this Agreement pursuant
to
Section 7.1(d)
, the Company shall concurrently with such
termination, pay Parent a fee in immediately available funds of $50.0
million in addition (if it should become payable thereafter) to the fee
of $104.0 million contemplated above.
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(d) If (A) Parent terminates this Agreement under
Section 7.1(e)(iv)
or
Section
7.1(b)
at a time that a Company Breach exists and (B) within 12 months following such
termination the Company shall consummate or enter into, directly or indirectly, an agreement with
respect to a transaction constituting a Takeover Proposal (assuming for purposes of this
Section 7.3(d)
that the references to 10% in the definition of Takeover Proposal are 50%)
that is subsequently consummated, then the Company shall promptly after such consummation, but in no
event later than one Business Day after such consummation, pay Parent the Termination Fee.
(e) If (A) Non-Takeover-Related Change of Recommendation is made and (B) (1) Parent terminates
this Agreement pursuant to
Section 7.1(h)
, the Company shall promptly, but in no event
later than one Business Day after such termination pay Parent the Termination Fee, or (2) the
Company terminates this Agreement pursuant to
Section 7.1(h)
, the Company shall
concurrently with such termination, pay Parent the Termination Fee.
49
(f) Notwithstanding anything to the contrary contained herein, receipt by Parent of a
Termination Fee under
Section 7.3
(or the $50.0 million fee and, if applicable, the $104.0
million fee, in the case of
Section 7.3(c)
) shall constitute full settlement of any and all
liabilities of the Company for damages under this Agreement in respect of a termination of this
Agreement.
SECTION 7.4.
Amendment
. This Agreement may be amended by the parties hereto, at any time
before or after approval of this Agreement and the transactions contemplated hereby by action by or
on behalf of the respective Boards of Directors of the parties hereto or the stockholders of the
Company;
provided
,
however
, that after any such approval by the stockholders of the Company, no
amendment shall be made that in any 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.
SECTION 7.5.
Waiver
. Any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived at any time prior to the Effective Time by
any of the parties entitled to the benefit thereof only by a written instrument signed by each such
party granting such waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement or condition shall not operate as a
waiver of or estoppel with respect to, any subsequent or other failure.
ARTICLE 8
GENERAL PROVISIONS
SECTION 8.1.
Notices
. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, mailed by certified mail
(return receipt requested) or sent by overnight courier or by telecopier (upon confirmation of
receipt) to the parties at the following addresses or at such other addresses as shall be specified
by the parties by like notice:
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(a)
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if to Parent or Merger Sub:
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Anadarko Petroleum Corporation
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1201 Lake Robbins Drive
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The Woodlands, Texas 77380-1046
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Attention: Robert K. Reeves
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Charlene A. Ripley
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Fax: (832) 636-1000
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50
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with a copy to:
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Akin Gump Strauss Hauer & Feld LLP
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1111 Louisiana Street, 44
th
Floor
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Dallas, Texas 77002-5200
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Attention: Michael E. Dillard, P.C.
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Julien R. Smythe, Esq.
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Fax: (713) 236-0822
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(b)
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if to the Company:
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Western Gas Resources, Inc.
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1099 18
th
Street, Suite 1200
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Denver, Colorado 80202
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Attention: John Walter and Fiona Arnold
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Fax: (303) 457-8482
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with a copy to:
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Skadden, Arps, Slate, Meagher & Flom LLP
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Four Times Square
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New York, NY 10036
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Attention: Peter Allan Atkins, Esq.
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Sheldon S. Adler, Esq.
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Fax: (212) 735-2000
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Notice so given shall (in the case of notice so given by mail) be deemed to be given when
received and (in the case of notice so given by cable, telegram, telecopier, telex or personal
delivery) on the date of actual transmission or (as the case may be) personal delivery.
SECTION 8.2.
Representations and Warranties
. The representations and warranties contained
in this Agreement shall not survive the Merger.
SECTION 8.3.
Interpretations
. When a reference is made in this Agreement to an Article,
Section or Exhibit, such reference shall be to an Article, Section or Exhibit to this Agreement
unless otherwise indicated. The
words include, includes and including when used herein shall be deemed in each case to be
followed by the words without limitation. Any references in this Agreement to the date hereof
refers to the date of execution of this Agreement. 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. The words hereof, herein and hereunder and words of
similar import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time
51
amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted successors and assigns. Any
reference to the Companys Board of Directors shall be deemed to include any committee thereof.
SECTION 8.4.
Governing Law; Jurisdiction
.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.
(b) Each of the parties hereto (i) consents to submit itself to the personal jurisdiction of
the Delaware Court of Chancery in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees
that it will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the Delaware Court of Chancery, and (iv)
waives any right to trial by jury with respect to any action related to or arising out of this
Agreement or any of the transactions contemplated hereby.
SECTION 8.5.
Counterparts; Facsimile Transmission of Signatures
. This Agreement may be
executed in any number of counterparts and by different parties hereto in separate counterparts,
and 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
one and the same agreement.
SECTION 8.6.
Assignment; No Third Party Beneficiaries
.
(a) This Agreement and all of the provisions hereto shall be binding upon and inure to the
benefit of, and be enforceable by, the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or obligations set forth
herein shall be assigned by any party hereto without the prior written consent of the other parties
hereto and any purported assignment without such consent shall be void.
(b) Nothing in this Agreement shall be construed as giving any Person, other than the parties
hereto and their heirs, successors, legal representatives and permitted assigns, any right, remedy
or claim under or in respect of this Agreement or any provision hereof, except that (i) each
Acquired Employee is intended to be a third party beneficiary of
Section 5.2
and may
specifically enforce its terms (provided that no right to employment is granted hereby) and (ii)
each Indemnified Party and D&O Indemnitee is intended to be a third party beneficiary of
Section 5.9
and may specifically enforce its terms.
SECTION 8.7.
Severability
. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable under any applicable law, then such contravention or invalidity shall not
invalidate the entire Agreement. Such provision shall be deemed to be modified to the extent
52
necessary to render it legal, valid and enforceable, and if no such modification shall render it
legal, valid and enforceable, then this Agreement shall be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
SECTION 8.8.
Entire Agreement
. This Agreement and the Company Confidentiality Agreement
contain all of the terms of the understandings of the parties hereto with respect to the subject
matter hereof.
SECTION 8.9.
Enforcement
. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
[
The remainder of this page is intentionally blank.
]
53
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be
executed as of the date first written above.
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ANADARKO PETROLEUM CORPORATION
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By:
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/s/ James T. Hackett
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Name:
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James T. Hackett
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Title:
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Chairman of the Board, President and
Chief Executive Officer
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WESTERN GAS RESOURCES, INC.
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By:
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/s/ Peter A. Dea
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Name:
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Peter A. Dea
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Title:
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President and Chief Executive Officer
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APC MERGER SUB, INC.
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By:
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/s/ James T. Hackett
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Name:
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James T. Hackett
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Title:
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Chairman of the Board, President and
Chief Executive Officer
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[Signature Page to Agreement and Plan of Merger]
Exhibit 2.2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of June 22, 2006
among
ANADARKO PETROLEUM CORPORATION
APC ACQUISITION SUB, INC.
and
KERR-MCGEE CORPORATION
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER
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1
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SECTION 1.1
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The Merger
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1
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SECTION 1.2
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Effective Time; Closing
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1
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SECTION 1.3
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Effect of the Merger
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2
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SECTION 1.4
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Certificate of Incorporation; Bylaws
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2
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SECTION 1.5
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Directors and Officers
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2
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SECTION 1.6
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Effect on Capital Stock
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2
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SECTION 1.7
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Payment for Shares, Paying Agent
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4
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SECTION 1.8
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Options and Restricted Stock
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6
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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7
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SECTION 2.1
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Organization
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8
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SECTION 2.2
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Capitalization
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8
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SECTION 2.3
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Authorization; No Conflict
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9
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SECTION 2.4
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Subsidiaries
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11
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SECTION 2.5
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SEC Reports and Financial Statements
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11
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SECTION 2.6
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Absence of Material Adverse Changes, etc.
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13
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SECTION 2.7
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Litigation
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13
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SECTION 2.8
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Information Supplied
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14
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SECTION 2.9
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Brokers or Finders Fees
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14
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SECTION 2.10
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Employee Plans
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14
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SECTION 2.11
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Board Recommendation; Company Action; Requisite Vote of the
Companys Stockholders
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17
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SECTION 2.12
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Taxes
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17
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SECTION 2.13
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Environmental Matters
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20
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SECTION 2.14
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Compliance with Laws
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21
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SECTION 2.15
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Employment Matters
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22
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SECTION 2.16
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Regulatory Matters
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22
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SECTION 2.17
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Reserve Reports
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23
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SECTION 2.18
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Hedging
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24
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SECTION 2.19
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Properties
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24
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SECTION 2.20
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Natural Gas Act
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24
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SECTION 2.21
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Insurance
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25
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SECTION 2.22
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Material Contracts
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25
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SECTION 2.23
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Section 203 of the DGCL; Rights Agreement
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25
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SECTION 2.24
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FCPA
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26
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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26
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SECTION 3.1
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Organization
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26
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SECTION 3.2
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Authorization; No Conflict
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26
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SECTION 3.3
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Information Supplied
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28
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i
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Page
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SECTION 3.4
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Brokers or Finders Fees
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28
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SECTION 3.5
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Financing
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28
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ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER
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29
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SECTION 4.1
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Conduct of Business by the Company Pending the Merger
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29
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SECTION 4.2
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Conduct of Business by Parent
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33
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ARTICLE V ADDITIONAL AGREEMENTS
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34
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SECTION 5.1
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Preparation of Proxy Statement; Stockholders Meetings
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34
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SECTION 5.2
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Employee Benefit Matters
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35
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SECTION 5.3
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Consents and Approvals
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37
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SECTION 5.4
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Public Statements
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39
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SECTION 5.5
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Further Assurances
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39
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SECTION 5.6
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Notification of Certain Matters
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40
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SECTION 5.7
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Access to Information; Confidentiality
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40
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SECTION 5.8
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No Solicitation
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41
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SECTION 5.9
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Indemnification and Insurance
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43
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SECTION 5.10
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State Takeover Laws
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44
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SECTION 5.11
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Expenses
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45
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SECTION 5.12
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Board Membership
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45
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ARTICLE VI CONDITIONS
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45
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SECTION 6.1
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Conditions to Each Partys Obligation To Effect the Merger
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45
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SECTION 6.2
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Conditions to Obligations of Parent and Merger Sub
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46
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SECTION 6.3
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Conditions to Obligation of the Company
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46
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ARTICLE VII TERMINATION, AMENDMENT AND WAIVER
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47
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SECTION 7.1
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Termination
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47
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SECTION 7.2
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Effect of Termination
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48
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SECTION 7.3
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Fees and Expenses
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48
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SECTION 7.4
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Amendment
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49
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SECTION 7.5
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Waiver
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49
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ARTICLE VIII GENERAL PROVISIONS
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50
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SECTION 8.1
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Notices
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50
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SECTION 8.2
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Representations and Warranties
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51
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SECTION 8.3
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Knowledge Qualifiers
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51
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SECTION 8.4
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Interpretations
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51
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SECTION 8.5
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Governing Law; Jurisdiction
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51
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SECTION 8.6
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Counterparts; Facsimile Transmission of Signatures
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52
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SECTION 8.7
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Assignment; No Third Party Beneficiaries
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52
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SECTION 8.8
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Severability
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52
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SECTION 8.9
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Entire Agreement
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52
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SECTION 8.10
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Enforcement
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ii
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger
(this
Agreement
), dated as of June 22, 2006, among
Anadarko Petroleum Corporation
, a Delaware corporation (
Parent
),
APC Acquisition Sub, Inc.
, a
Delaware corporation and wholly-owned subsidiary of Parent (
Merger Sub
), and
Kerr-McGee
Corporation
, a Delaware corporation (the
Company
).
INTRODUCTION
WHEREAS
, the respective Boards of Directors of each of Parent, Merger Sub and the Company have
unanimously (i) approved and declared advisable the merger of Merger Sub with and into the Company
(the
Merger
), upon the terms and subject to the conditions set forth in this Agreement and (ii)
approved this Agreement.
WHEREAS
, as a result of the Merger, and in accordance with the General Corporation Law of the
State of Delaware (the
DGCL
), each issued and outstanding share of common stock, par value $1.00
per share of the Company (the
Company Common Stock
) (other than shares of Company Common Stock
owned by the Company, Parent, Merger Sub or any wholly-owned Subsidiary (as defined in
Section
2.4(a)
) of the Company or Parent immediately prior to the Effective Time (as defined in
Section 1.2
) and Dissenting Shares (as defined in
Section 1.6(d)
), will, upon the
terms and subject to the conditions set forth herein, be converted into the right to receive the
Merger Consideration (as defined in
Section 1.6(b))
.
In consideration of the foregoing and of the representations, warranties and covenants
contained in this Agreement, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1
The Merger
.
Upon the terms and subject to the satisfaction or waiver of the conditions hereof, and in
accordance with the applicable provisions of this Agreement and the DGCL, at the Effective Time,
Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as the surviving
corporation (the
Surviving Corporation
).
SECTION 1.2
Effective Time; Closing
.
(a) The closing of the Merger (the
Closing
) shall take place at 10:00 a.m. (Central time) on
a date to be specified by the parties, which shall be no later than the second Business Day after
satisfaction or (to the extent permitted by applicable law) waiver of the conditions set
forth in
Article VI
(other than any such conditions which by their nature cannot be
satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent
permitted by applicable law) waived on the Closing Date), at the offices of Akin Gump Strauss Hauer
& Feld LLP, 1111 Louisiana Street, 44th Floor, Houston, Texas 77002 unless another date, time or
place
1
is agreed to in writing between Parent and the Company. The date on which the Closing occurs
is referred to in this Agreement as the
Closing Date
. As used in this Agreement,
Business Day
means any day that is not a Saturday, Sunday or other day on which banks are required or authorized
by law to be closed in New York, New York.
(b) On the Closing Date or as promptly as practicable thereafter, the Company hereto shall
cause the Merger to be consummated by filing a certificate of merger, in accordance with the DGCL,
with the Secretary of State of the State of Delaware in such form as required by, and executed in
accordance with the relevant provisions of the DGCL (the
Certificate of Merger
) (the time of such
filing (or such later time as is specified in such Certificate of Merger as agreed between Parent
and the Company) being the
Effective Time
).
SECTION 1.3
Effect of the Merger
.
At the Effective Time, the effect of the Merger shall be as provided in Section 259 of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of the Company and the Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.4
Certificate of Incorporation; Bylaws
.
At the Effective Time, the certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended to read in its entirety in the form of
Exhibit A hereto, and, as so amended shall be the certificate of incorporation of the Surviving
Corporation. At the Effective Time, the bylaws of the Company as in effect immediately prior to
the Effective Time shall be amended to read in their entirety in the form of Exhibit B hereto, and,
as so amended shall be the bylaws of the Surviving Corporation.
SECTION 1.5
Directors and Officers
.
(a) The directors of Merger Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation until the earlier of their resignation or removal or the election of
their successors. The Company shall cause all directors of the Company to resign immediately prior
to the Effective Time.
(b) The officers of Merger Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation until the earlier of their resignation or removal or the election of
their successors.
SECTION 1.6
Effect on Capital Stock
.
As of the Effective Time, by virtue of the Merger and without any action on the part of
Parent, Merger Sub, the Company or any other holder of any shares of capital stock of Merger Sub or
the Company:
2
(a)
Capital Stock of Merger Sub
. Each share of capital stock of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation, par value $1.00 per share, and such shares of common stock
issued upon conversion of the capital stock of Merger Sub shall represent all of the outstanding
shares of the Surviving Corporation.
(b)
Conversion of Company Common Stock
. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting Shares and any
shares to be cancelled pursuant to
Section 1.6(c)
) shall be cancelled and shall be
converted automatically into the right to receive $70.50 in cash payable to the holder thereof and
subject to increase as provided in the following sentence (the
Merger Consideration
).
Notwithstanding any other provision contained herein, if the Effective Time does not occur on or
prior to August 10, 2006, the Merger Consideration shall increase at a daily rate of $0.01255 for
each day subsequent thereto until the Effective Time occurs; provided however, that the Merger
Consideration shall not in any case exceed $71.0271 (after taking into effect the adjustments
contemplated by this sentence). As of the Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and,
subject to
Section 1.6(d)
, each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration.
(c)
Treatment of Treasury Stock and Parent-Owned Stock
. Each share of Company Common
Stock held in the treasury of the Company and each share of Company Common Stock owned by Merger
Sub, Parent or any wholly-owned Subsidiary of Parent immediately prior to the Effective Time shall
be cancelled without any conversion thereof and no payment or distribution shall be made with
respect thereto. Each share of Company Common Stock owned by any Subsidiary of Company shall not
be cancelled at the Effective Time and shall remain outstanding.
(d)
Shares of Company Common Stock of Dissenting Stockholders
.
(i) Notwithstanding any provision of this Agreement to the contrary, any shares of
Company Common Stock that are outstanding immediately prior to the Effective Time and which
are held by any person who is entitled to demand and properly demands in writing an
appraisal of the fair value of such shares of Company Common Stock in accordance with
Section 262 of the DGCL (
Dissenting Shares
) shall not be
converted into the right to receive Merger Consideration as provided in
Section
1.6(b)
, but rather the holders of Dissenting Shares shall be entitled to payment of the
fair market value of such Dissenting Shares in accordance with Section 262 of the DGCL;
provided, that, any Dissenting Shares held by holders of Company Common Stock who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights for an
appraisal of such shares under the DGCL shall thereupon be deemed to have been cancelled and
terminated, as of the Effective Time, and shall represent solely the right to receive the
Merger Consideration as provided in
Section 1.6(b)
, upon surrender in the manner
provided in
Section 1.7
, of the certificate or certificates that formerly evidenced
such shares of Company Common Stock.
3
(ii) The Company shall give to Parent (i) prompt notice of any demands for appraisal
received by the Company, withdrawals of such demands, and (ii) the Company and Parent shall
jointly direct all negotiations and proceedings with respect to demands for appraisal under
the DGCL. The Company shall not, without the prior written consent of Parent (which shall
not be unreasonably withheld or delayed), make any payment with respect to any such demands,
or offer to settle, or settle, any such demands. Any amount payable to any holder of
Company Common Stock exercising appraisal rights shall be paid solely by the Surviving
Corporation out of its own funds.
SECTION 1.7
Payment for Shares
.
(a)
Paying Agent
. Prior to the Effective Time, Parent shall designate a bank or trust
company reasonably satisfactory to the Company to act as agent for the holders of Company Common
Stock in connection with the Merger (the
Paying Agent
) to receive in trust the funds to which
holders of Company Common Stock shall become entitled pursuant to
Section 1.6(b)
. At the
Effective Time, Parent shall deposit, or cause the Surviving Corporation to deposit, with the
Paying Agent, for the benefit of the Companys stockholders, cash in an amount sufficient for the
payment of the Merger Consideration as provided in
Section 1.6(b)
upon surrender of
certificates representing the shares of Company Common Stock as provided herein (the
Exchange
Fund
). The Paying Agent shall invest the cash included in the Exchange Fund in obligations
guaranteed by the full faith and credit of the United States of America. All interest earned on
such funds shall be paid to Parent.
(b)
Exchange Procedure
. As soon as reasonably practicable after the Effective Time,
but in any event not later than five Business days thereafter, the Paying Agent shall mail to each
holder of record of (x) a certificate or certificates that immediately prior to the Effective Time
represented shares of Company Common Stock (the
Company Certificates
) and (y) any
non-certificated shares held by book entry (
Book Entry Shares
), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Company Certificates to the Paying Agent and shall be in a form and
have such other provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Company Certificates and Book Entry Shares in exchange for the
Merger Consideration as provided in
Section 1.6(b)
. Exchange of any Book Entry Shares
shall be effected in accordance with the Exchange Agents customary procedures with respect to
securities represented by book entry. Upon surrender of a Company Certificate or Book Entry
Share for cancellation to the Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Company Certificate or Book Entry
Share shall be entitled to receive in exchange therefor the Merger Consideration, and the Company
Certificate or Book Entry Share so surrendered shall forthwith be cancelled. Parent shall cause
the Paying Agent to make all payments required pursuant to the preceding sentence as soon as
practicable following the valid surrender of Company Certificates or Book Entry Shares. In the
event of a transfer of ownership of Company Common Stock that is not registered in the transfer
records of the Company, payment may be made to a Person other than the Person in whose name the
Company Certificate so surrendered is registered, if such Company Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall
pay any transfer or other taxes required by reason of
4
the payment to a Person other than the
registered holder of such Company Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by
this
Section 1.7(b)
, each Company Certificate and Book Entry Share shall be deemed at any
time after the Effective Time to represent only the right to receive upon such surrender the Merger
Consideration pursuant to
Section 1.6(b)
. No interest will be paid or will accrue on the
cash payable upon the surrender of any Company Certificate or Book Entry Share. All amounts
payable hereunder to a holder of Company Stock shall be rounded to the nearest cent.
(c)
No Further Ownership Rights in Company Common Stock; Transfer Books
. All cash
paid upon the surrender of Company Certificates and Book Entry Shares in accordance with the terms
of this
Article I
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Company Common Stock theretofore represented by such Company Certificates or Book
Entry Shares, subject, however, to the Surviving Corporations obligation 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 of this Agreement and which remain unpaid at the Effective
Time. At the Effective Time, the stock transfer books of the Company shall be closed, and there
shall be no further registration of transfers on the stock transfer books of the Surviving
Corporation of Company Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Company Certificates or Book Entry Shares are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be cancelled and exchanged for
cash as provided in this
Article I
.
(d)
Termination of Fund; No Liability
. At any time following six months after the
Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any portion of the Exchange Fund (including any interest received with respect thereto) which
has not been disbursed to holders of Company Certificates and Book Entry Shares, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to the Merger
Consideration, payable upon due surrender of their Company Certificates and Book Entry Shares,
without any interest thereon. Notwithstanding the foregoing, none of Parent, Merger Sub, the
Company or the Paying Agent shall be liable to any Person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Company Certificates or Book Entry Shares shall not have been surrendered
immediately prior to such date on which any payment pursuant to this
Article I
would
otherwise escheat to or become the property of any Governmental Authority, the Merger Consideration
in respect of such Company Certificate or Book Entry Share shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear of all claims or
interests of any Person previously entitled thereto. As used in this Agreement,
Governmental
Authority
shall mean any United States federal, state, local or any foreign government,
governmental, regulatory or administrative authority, agency, or commission or any court, tribunal,
or judicial or arbitral body or entity.
(e)
Lost, Stolen or Destroyed Certificates
. In the event any Company Certificates
evidencing Company Common Stock shall have been lost, stolen or destroyed, the Paying Agent shall
pay to such holder the Merger Consideration required pursuant to
Section 1.6(b)
, in
5
exchange for such lost, stolen or destroyed Company Certificates, upon the making of an affidavit,
which shall include indemnities and the posting of a bond which are acceptable to Parent, of that
fact by the holder thereof with such assurances as the Paying Agent, in its discretion and as a
condition precedent to the payment of the Merger Consideration may reasonably require of the holder
of such lost, stolen or destroyed Company Certificates.
(f)
Withholding Taxes
. Parent and Merger Sub shall be entitled to deduct and
withhold, or cause the Paying Agent to deduct and withhold, from the consideration otherwise
payable to a holder of Company Common Stock pursuant to this Agreement any stock transfer taxes and
such amounts as are required to be withheld or deducted under the Internal Revenue Code of 1986, as
amended (the
Code
), or any applicable provisions of state, local or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of Company Common Stock in respect of which such
deduction and withholding were made.
SECTION 1.8
Options and Restricted Stock
.
(a) At the Effective Time, by virtue of the Merger and without any action on the part of any
holder of any outstanding Option (hereinafter defined), whether vested or unvested, exercisable or
unexercisable, each Option that is outstanding and unexercised immediately prior thereto shall
immediately and fully vest, and subject to the terms and conditions set forth below in this
Section 1.8
, each such Option shall terminate and be cancelled at the Effective Time and
each holder of an Option will be entitled to receive from the Company, and shall receive as soon as
practicable following the Effective Time, in settlement of each Option a Cash Amount. The
Cash
Amount
shall be equal to the net amount of (A) the product of (i) the excess, if any, of the
Merger Consideration over the exercise price per share of such Option, multiplied by (ii) the
number of shares subject to such Option, less (B) any applicable withholdings for Taxes. If the
exercise price per share of any Option equals or exceeds the Merger Consideration, the Cash Amount
therefor shall be zero. Payment of the Cash Amount shall be communicated to each holder of
Option(s) in a written notice that has been approved by Parent from Target stating that, upon
acceptance of the Cash Amount, such holder understands that no further payment is due to such
holder on account of any Option and all of such holders rights under such Options have
terminated. As used in this Agreement,
Option
means any option granted, and not exercised,
expired or terminated, to a current or former employee, director or independent contractor of the
Company or any of the Company Subsidiaries or any predecessor thereof to purchase shares of Company
Common Stock pursuant to the plans set forth in Section 1.8(a) of the Company Disclosure Letter, or
any other stock option, stock bonus, stock award, or stock purchase plan, program, or arrangement
of the Company or any of the Company Subsidiaries or any predecessor thereof (
Company Stock
Plans
) or any other contract or agreement entered into by the Company or any of the Company
Subsidiaries. All amounts payable hereunder to a holder of an outstanding Option shall be rounded
to the nearest cent.
(b) All performance units will be terminated, and to the extent applicable, paid out in cash
as soon as practicable following the Effective Time in accordance with the terms of the plan under
which they were granted.
6
(c) The Board of Directors of the Company (or the appropriate committee thereof) shall adopt
such resolutions or take such other actions as shall be required to cause all restrictions on the
then outstanding shares of Restricted Stock (as defined below) to lapse as of immediately prior to
the Effective Time. Each holder of Restricted Stock shall be treated as a holder of Company Common
Stock issued and outstanding as of immediately prior to the Effective Time. As used in this
Agreement,
Restricted Stock
means any outstanding award of restricted Company Common Stock with
respect to which the restrictions have not lapsed, and which award shall not have previously
expired or terminated, to a current or former employee, director or independent contractor of the
Company or any of the Company Subsidiaries or any predecessor thereof or former subsidiary of the
Company or any other Person pursuant to any applicable Company Stock Plan or any other contract or
agreement entered into by the Company or any of the Company Subsidiaries.
(d) As of the Effective Time, except as provided in this
Section 1.8
, all rights under
any Option and any provision of the Company Stock Plans providing for the issuance or grant of any
other interest in respect of the capital stock of the Company shall be cancelled. The Company
shall use its reasonable best efforts to ensure that, as of and after the Effective Time, except as
provided in this
Section 1.8
, no person shall have any rights under the Company Stock Plans
or any other plan, program or arrangement with respect to securities of the Company, the Surviving
Corporation or any subsidiary thereof.
(e) Prior to the Effective Time, Parent, Merger Sub and the Company shall use all commercially
reasonable efforts to cause the transactions contemplated by this
Section 1.8
and any other
dispositions of equity securities of the Company (including derivative securities) in connection
with this Agreement by each individual who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 under the
Exchange Act.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as publicly disclosed or furnished with reasonable specificity by the Company in the
forms, reports, schedules, registration statements, definitive proxy statements and other
documents filed with or furnished to the SEC prior to the date of this Agreement
(collectively, the
Available SEC Reports
) and except as set forth on the disclosure letter (each
section of which qualifies the correspondingly numbered representation and warranty or covenant to
the extent specified therein, provided that any disclosure set forth with respect to any particular
section shall be deemed to be disclosed in reference to all other applicable sections of this
Agreement if the disclosure in respect of the particular section is sufficient on its face without
further inquiry reasonably to inform Parent of the information required to be disclosed in respect
of the other sections to avoid a breach under the representation and warranty or covenant
corresponding to such other sections) previously delivered by the Company to Parent (the
Company
Disclosure Letter
), the Company hereby represents and warrants to Parent and Merger Sub as
follows:
7
SECTION 2.1
Organization
.
The Company and each entity that is a Subsidiary of the Company as of the date hereof (the
Company Subsidiaries
) is a corporation, limited liability company or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization and
has all requisite entity power and authority to own, operate and lease its properties and to carry
on its business as now conducted. The Company and each of the Company Subsidiaries is duly
qualified and/or licensed, as may be required, and in good standing in each of the jurisdictions in
which the nature of the business conducted by it or the character of the property owned, leased or
used by it makes such qualification and/or licensing necessary, except in such jurisdictions where
the failure to be so qualified and/or licensed, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. A
Company Material
Adverse Effect
means a material adverse effect on (i) the business, operations, assets,
liabilities, condition (financial or other) or results of operations of the Company and the Company
Subsidiaries considered as a single enterprise or (ii) the ability of the Company to perform its
obligations under this Agreement or to consummate the transactions contemplated by this Agreement;
provided, however
, that any event, condition, change, occurrence or development of a state of
circumstances which (i) adversely affects the oil and gas exploration and development industry
generally (including changes in commodity prices, general market prices, interest rates and
regulatory changes), (ii) arises out of general political, economic or industry conditions (and in
each case does not disproportionately affect the Company and the Company Subsidiaries considered as
a single enterprise) (iii) results from or is caused by natural disasters (including hurricanes),
occurring after the date hereof (and in each case does not disproportionately affect the Company
and the Company Subsidiaries considered as a single enterprise) or (iv) (other than with respect to
Section 2.3(b)
) arise out of, result from or relate to the transactions contemplated by
this Agreement or the announcement thereof, shall not be considered in determining whether a
Company Material Adverse Effect has occurred. The copies of the certificate of incorporation and
bylaws of the Company which are incorporated by reference as exhibits to the Companys Annual
Report on Form 10-K for the year ended December 31, 2005 are complete and correct copies of such
documents and contain all amendments thereto as in effect on the date of this Agreement.
SECTION 2.2
Capitalization
.
(a) The authorized capital stock of the Company consists of (i) 500,000,000 shares of Company
Common Stock and (ii) 40,000,000 shares of preferred stock, no par value, issuable in series
(
Company Preferred Stock
), of which 1,000,000 shares have been designated Series B Junior
Participating Preferred Stock. As of June 21, 2006, (i) 229,338,430 shares of Company Common Stock
were issued and outstanding, of which 2,215,384 were held by Sun Pennsylvania Limited Partnership,
a wholly-owned subsidiary of the Company, (ii) no shares of Company Preferred Stock were issued and
outstanding, (iii) 1,000,000 shares of Series B Junior Participating Preferred Stock were reserved
for issuance upon exercise of the rights (
Company Rights
) distributed to the holders of Company
Common Stock pursuant to the Rights Agreement dated as of July 26, 2001 (the
Rights Agreement
),
between the Company and UMB Bank, as amended and (iv) as of June 21, 2006, 7,104,309 shares of
Company Common Stock were held by the Company in its treasury. The amount of the dividend paid
quarterly on
8
Company Common Stock is $0.03125 per share (the
Quarterly Dividend
). Since January
1, 2006, except for the Quarterly Dividend and the issuance and dividend on June 14, 2006, of one
share of Company Common Stock per issued and outstanding share of Company Common Stock to the
holders of record thereof on June 2, 2006 (the
Stock Split
), the Company has not, declared or
paid any dividend, or declared or made any distribution on, or authorized the creation or issuance
of, or issued, or authorized or effected any split-up or any other recapitalization of, any of its
capital stock, or directly or indirectly redeemed, purchased or otherwise acquired any of its
outstanding capital stock. Such issued and outstanding shares of Company Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable, and free of preemptive
rights and in compliance with all applicable state and federal securities laws. The Company has
not heretofore agreed to take any such action, and there are no outstanding contractual obligations
of the Company of any kind to redeem, purchase or otherwise acquire any outstanding shares of
capital stock of the Company. There are no outstanding bonds, debentures, notes or other
indebtedness or warrants or other securities of the Company having the right to vote (or, other
than any outstanding options to purchase Company Common Stock, convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders of the Company may
vote.
(b) As of June 21, 2006, there were outstanding Options to purchase 10,356,133 shares of
Company Common Stock, and the weighted average exercise price of all such Options was $30.2389.
There are no stock appreciation rights attached to the Options. Except as set forth in the
preceding sentence or above in this
Section 2.2
, (i) as of June 21, 2006, no shares of
capital stock or other voting securities of the Company are issued, reserved for issuance or
outstanding, and (ii) there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the Company or any of
the Company Subsidiaries is a party or by which any of them is bound obligating the Company or any
of the Company Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Company or of any of the
Company Subsidiaries or obligating the Company or any of the Company Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
(c) During the period from June 21, 2006 to the date of this Agreement (i) there have been no
issuances by the Company of shares of capital stock or other voting securities of the Company other
than issuances of Company Common Stock pursuant to the exercise of Options outstanding on June 21,
2006 and (ii) there have been no issuances of Options or other options, warrants or other rights to
acquire capital stock of the Company.
SECTION 2.3
Authorization; No Conflict
.
(a) The Company has the requisite corporate power and authority to enter into and deliver this
Agreement and all other agreements and documents contemplated hereby to which it is a party and to
carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement
by the Company, the performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company. No other corporate proceedings on the part of the Company or any of the
Company Subsidiaries are necessary to authorize the
9
execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the consummation by the Company of the
transactions contemplated hereby, except for the adoption of this Agreement by the Required Company
Stockholder Vote (as defined in
Section 2.11(b)
). This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby nor compliance by the Company with any of
the provisions herein will (i) result in a violation or breach of or conflict with the (x)
certificate or articles of incorporation or bylaws of the Company or any Company Subsidiary that is
a corporation, (y) the articles or certificate of formation or the limited liability company
agreement of any Company Subsidiary that is a limited liability company, or (z) the certificate of
limited partnership or partnership agreement of any Company Subsidiary that is a limited
partnership, or the organizational documents of any other Company Subsidiary, (ii) result in a
violation or breach of or conflict with any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under, or result in the
termination, cancellation of, or give rise to a right of purchase under, or accelerate the
performance required by, or result in a right of termination or acceleration under, or result in
the creation of any Lien (as defined in
Section 2.4(b)
) upon any of the properties or
assets owned or operated by the Company or any Company Subsidiaries under, or result in being
declared void, voidable, or without further binding effect, or otherwise result in a detriment to
the Company or any Company Subsidiary under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, lease, agreement or other instrument
or obligation of any kind to which the Company or any of the Company Subsidiaries is a party or by
which the Company or any of the Company Subsidiaries or any of their respective properties or
assets may be bound or (iii) subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in paragraph (c) below, violate
any judgment, ruling, order, writ, injunction, decree, statute, law (including the common law),
rule or regulation applicable to the Company or any of the Company Subsidiaries or any of their
respective properties or assets, other than any such event described in items (ii) or (iii)
which, individually or in the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration, declaration or filing
with, any Governmental Authority is necessary to be obtained or made by the Company or any Company
Subsidiary in connection with the Companys execution, delivery and performance of this Agreement
or the consummation by the Company of the transactions contemplated hereby, except for (i)
compliance with the DGCL, with respect to the filing of the Certificate of Merger, (ii) compliance
with the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the
HSR Act
) and if required, the Competition Act (Canada)
(the
Competition Act
), and other applicable foreign competition or antitrust laws, if any, (iii)
the filing with the SEC of (A) a proxy statement relating to the Company Stockholders Meeting (as
defined in
Section 5.1(b)
) (such proxy statement, as amended or supplemented from time to
time, the
Proxy Statement
), and (B) such reports under Sections 13(a), 13(d), 15(d) or 16(a) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the
Exchange Act
), as may
10
be required in connection with this Agreement and the
transactions contemplated hereby and thereby, (iv) compliance with the rules of the New York Stock
Exchange (
NYSE
), (v) such governmental or tribal consents, qualifications or filings as are
customarily obtained or made following the transfer of interests in oil and gas properties
(
Customary Post Closing Consents
), and (vi) compliance with the blue sky laws of various
states, and except in each case of clauses (i)-(vi) where the failure to obtain or take such
action, individually or in the aggregate, has not had and would not reasonably be expected to have
a Company Material Adverse Effect.
SECTION 2.4
Subsidiaries
.
(a) Section 2.4(a) of the Company Disclosure Letter sets forth the name and jurisdiction of
organization of each (i) Company Subsidiary; and (ii) entity in which the Company (other than the
Company Subsidiaries) or any Company Subsidiary owns any interest other than non-material interests
and interests in joint ventures or similar entities in the ordinary course of business consistent
with practices in the oil and gas industry. As used in this Agreement, (i)
Subsidiary
means with
respect to any Person, another Person, an amount of the voting securities or other voting ownership
interests of which is sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first Person; and (ii)
Person
means an individual,
corporation, partnership, joint venture, association, trust, unincorporated organization, limited
liability company or governmental or other entity.
(b) All of the outstanding shares of capital stock or other equity securities of, or other
ownership interests in, each Company Subsidiary that are owned directly or indirectly by the
Company are duly authorized, validly issued, fully paid and nonassessable, and such shares,
securities or interests are owned by the Company or by a Company Subsidiary free and clear of
any Liens or limitations on voting rights. There are no subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any character relating
to the issuance, transfer, sales, delivery, voting or redemption (including any rights of
conversion or exchange under any outstanding security or other instrument) for any of the capital
stock or other equity interests of, or other ownership interests in, any Company Subsidiaries.
There are no agreements requiring the Company or any Company Subsidiary to make contributions to
the capital of, or lend or advance funds to, any Company Subsidiary. As used in this Agreement,
Lien
means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
SECTION 2.5
SEC Reports and Financial Statements
.
(a) Since January 1, 2003, the Company has filed with the SEC all forms, reports, schedules,
registration statements, definitive proxy statements and other documents (collectively, including
all exhibits thereto, the
Company SEC Reports
) required to be filed by the Company with the SEC.
As of their respective dates, and giving effect to any amendments or supplements thereto filed
prior to the date of this Agreement, the Company SEC Reports complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the
Securities Act
) and the Exchange
Act, and the respective rules and regulations of the SEC
11
promulgated thereunder applicable to the
Company SEC Reports, and none of the Company SEC Reports contained any untrue statement of a
material fact or omitted 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 were made, not
misleading. As of the date hereof, except for any reports on Form 8 K required to be filed with
respect to this Agreement, the Merger and the transactions contemplated hereby, no event has
occurred with respect to the Company or any of Company Subsidiaries which the Company is, or after
the passage of time, will be, required to report by the filing with the SEC of a current report on
Form 8-K which has not been so reported by the Company by the filing of a current report on Form
8-K on or prior to the date hereof. None of the Company Subsidiaries is required to file any
forms, reports or other documents with the SEC pursuant to Section 13 or 15 of the Exchange Act.
(b) The consolidated balance sheets and the related consolidated statements of income,
consolidated statements of comprehensive income (loss) and stockholders equity and consolidated
statements of cash flows (including, in each case, any related notes and schedules thereto)
(collectively, the
Company Financial Statements
) of the Company contained in the Company SEC
Reports have been prepared from the books and records of the Company and the Company Subsidiaries,
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 conformity
with United States generally accepted accounting principles (
GAAP
) (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as otherwise noted therein) and present fairly the consolidated
financial position and the consolidated results of operations and cash flows of the Company and the
Company Subsidiaries as of the dates or for the periods presented therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments in the ordinary course of
business). Except as reflected in the Company Financial
Statements, neither the Company nor any of the Company Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise), required by GAAP to
be set forth on a consolidated balance sheet of the Company and the Company Subsidiaries or in the
notes thereto, other than any liabilities incurred since December 31, 2005 which, individually or
in the aggregate, have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(c) Other than any matters that do not to the Companys knowledge remain the subject of any
open or outstanding inquiry, (i) the Company has not received written notice from the SEC or any
other Governmental Authority that any of its accounting policies or practices are or may be the
subject of any review, inquiry, investigation or challenge by the SEC or other Governmental
Authority. Since January 1, 2003, the Companys independent public accounting firm has not
informed Company that it has any material questions, challenges or disagreements regarding or
pertaining to Companys accounting policies or practices. Since January 1, 2003, to the knowledge
of the Company, no current officer or director of the Company has received, or is entitled to
receive, any material compensation from any entity other than the Company or a Company Subsidiary
that has engaged in or is engaging in any material transaction with Company or any Company
Subsidiary.
(d) With respect to each annual report on Form 10-K, each quarterly report on Form 10-Q and
each amendment of any such report included in the Company SEC Reports, the chief
12
executive officer
and chief financial officer of the Company have made all certifications (without qualifications or
exceptions to the matters certified) required by the Sarbanes-Oxley Act of 2002 (
Sarbanes-Oxley
Act
) and any related rules and regulations promulgated by the SEC and the NYSE, and the statements
contained in any such certifications are complete and correct. Other than any matters that do not
to the Companys knowledge remain the subject of any open or outstanding inquiry, neither the
Company nor its officers has received notice from any Governmental Authority questioning or
challenging the accuracy, completeness, form or manner of filing or submission of such
certificates.
(e) The Company has established and maintains disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act); such disclosure controls and
procedures are designed to ensure that material information relating to Company and the Company
Subsidiaries required to be disclosed in the Companys reports required to be filed with the SEC
pursuant to the Exchange Act, is made known to the Companys principal executive officer and its
principal financial officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared; and, to the
knowledge of the Company, such disclosure controls and procedures are effective in timely alerting
the Companys principal executive officer and its principal financial officer to material
information required to be included in Companys periodic reports required under the Exchange Act.
(f) The Company is in compliance in all material respects with (i) all current listing and
corporate governance requirements of the NYSE and (ii) all rules, regulations and requirements of
the Sarbanes-Oxley Act and the SEC.
SECTION 2.6
Absence of Material Adverse Changes, etc.
Since December 31, 2005, the Company and the Company Subsidiaries have conducted their
business in the ordinary course of business consistent with past practice and there has not been or
occurred:
(a) any event, condition, change, occurrence or development of a state of circumstances which,
individually or in the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect;
(b) any material damage, destruction or other casualty loss (whether or not covered by
insurance) affecting the business or assets owned or operated by the Company and the Company
Subsidiaries; or
(c) other than the Stock Split, any event, condition, action or occurrence that, if taken
during the period from the date of this Agreement through the Effective Time, would constitute a
breach of
Section 4.1(b)
.
SECTION 2.7
Litigation
.
There are no suits, actions or legal, administrative, arbitration or other proceedings or
governmental investigations pending or, to the knowledge of the Company, threatened, to which the
Company or any of the Company Subsidiaries is a party which, individually or in the
13
aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect. There are no
judgments, decrees, injunctions, rules, awards or orders of any Governmental Authority outstanding
against the Company or any of the Company Subsidiaries which, individually or in the aggregate,
have had or would reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.8
Information Supplied
.
None of the information supplied or to be supplied by the Company specifically for inclusion
or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the
Companys stockholders or at the time of the Company Stockholders Meeting 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 portions of the Proxy Statement supplied by the Company will comply
as to form in all material respects with the requirements of the Exchange Act. No representation
or warranty is made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.
SECTION 2.9
Brokers or Finders Fees
.
Except for Lehman Brothers Inc. and JP Morgan Securities Inc. (the
Company Financial
Advisors
), no agent, broker, Person or firm acting on behalf of the Company or any Company
Subsidiary or under the Companys or any Company Subsidiarys authority is or will be entitled to
any advisory, commission or brokers or finders fee or commission from any of the parties hereto
in connection with any of the transactions contemplated hereby. The Company has furnished to
Parent a true and complete copy of the Companys agreements with each Company Financial Advisor
pursuant to which such Company Financial Advisor is entitled to a fee in connection with the
transactions contemplated hereby.
SECTION 2.10
Employee Plans
.
(a) There are no Company Employee Benefit Plans established by, maintained, adopted,
participated in, sponsored by, contributed to or required to be contributed to, provided, promised
to provide, or terminated by the Company or any entity with which the Company is considered a
single employer under Section 414(b), (c) or (m) of the Code (
Company ERISA Affiliates
) with
respect to which either the Company or any Company ERISA Affiliate could reasonably be expected to
have any material liability. As used in this Agreement,
Company Employee Benefit Plan
means any
plan, program, policy, practice, agreement or other arrangement providing compensation or benefits
in any form to any current or former employee, independent contractor, officer or director of the
Company or any of the Company Subsidiaries or any beneficiary or dependent thereof, whether written
or unwritten, formal or informal, including any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA (
Company Employee Welfare Benefit Plan
), any employee pension benefit
plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA)
(
Company Employee Pension Benefit Plan
) and any other pension, profit-sharing, bonus, incentive
compensation, deferred compensation, vacation, sick pay, stock purchase, stock option, phantom
14
equity, severance, employment, consulting, unemployment, hospitalization or other medical, life, or
other insurance, long- or short-term disability, change of control, fringe benefit, or any other
plan, program or policy providing benefits or compensation.
(b) As of June 21, 2006, there were 37,725,906 outstanding performance units which by their
terms and those plans under which they were granted may be paid out in cash.
(c) Each Company Employee Benefit Plan that is intended to be qualified within the meaning
of Section 401(a) of the Code (
Qualified Company Employee Benefit Plan
) has received or been the
subject of a favorable determination, advisory or opinion letter from the Internal Revenue Service
that has not been revoked, and, to the Companys knowledge, no event has occurred and no condition
exists that could reasonably be expected to adversely affect the qualified status of any such
Company Employee Benefit Plan.
(d) The Company has (i) filed or caused to be filed all returns and reports on the Company
Employee Benefit Plans that it and/or any such plan are required to file and (ii) paid or
made adequate provision for all fees, interest, penalties, assessments or deficiencies that
have become due pursuant to those returns or reports or pursuant to any assessment or adjustment
that has been made relating to those returns or reports.
(e) All Company Welfare Employee Benefit Plans required to comply with the health care
continuation coverage (
COBRA
) provisions of ERISA and the Code have complied with such
requirements in all material respects.
(f) Except as, individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect, (i) each Company Employee Benefit Plan has been
operated and administered in all material respects in accordance with its provisions and in
compliance with all provisions of ERISA, the Code and all laws and regulations applicable to the
Company Employee Benefit Plans; (ii) all contributions required to be made to any Company Employee
Benefit Plan (or to any person pursuant to the terms thereof) have been made or the amount of such
payment or contribution obligation has been reflected in the Available SEC Reports and (iii) all
such contributions representing participant contributions have been made within the time required
by Department of Labor regulation section 2510.3-102.
(g) Neither the Company nor any Company Subsidiary has engaged in any prohibited transaction,
within the meaning of Section 4975 of the Code or Section 406 of ERISA, as a fiduciary or party in
interest with respect to any Company Employee Benefit Plan, and, to the knowledge of the Company or
any Company Subsidiary, (x) no prohibited transaction has occurred with respect to any Company
Employee Benefit Plan and (y) no fiduciary has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or investment of assets of any
Company Employee Benefit Plan.
(h) During the past five years, neither the Company nor any Company ERISA Affiliate has
established, maintained, contributed to, or had an obligation to contribute to, any Company
Employee Benefit Plan that is a multiemployer plan, as that term is defined in Section 3(37) of
ERISA, or is subject to Title IV of ERISA, and no liability under Title IV of
15
ERISA (including a liability to pay premiums to the Pension Benefit Guaranty Corporation) has been or is expected to
be incurred by the Company or any of the Company Subsidiaries.
(i) The Company and the Company Subsidiaries have not offered to provide life, health or
medical benefits or insurance coverage to any individual, or to the family members of any
individual, for any period extending beyond the termination of the individuals employment, except
to the extent required by the COBRA provisions in ERISA and the Code or similar provisions of state
law.
(j) The consummation of the transactions contemplated by this Agreement will not, either alone
or in connection with termination of employment, (i) entitle any current or former employee,
independent contractor, director, or officer of the Company or the Company Subsidiaries to
severance pay, any change in control payment, or any other material payment, except as expressly
provided in this Agreement, (ii) accelerate the time of payment or vesting, change the form or
method of payment, or increase the amount of compensation due, any such employee, independent
contractor, director, or officer, or (iii) entitle any such employee, independent contractor,
director or officer to any gross-up or similar material payment in respect
of the excise tax described in Section 4999 of the Code. Neither the Company nor any Company
Subsidiary has taken any action that would result in its incurring any obligation for any payments
or benefits described in subsections (i), (ii) or (iii) of this
Section 2.10(j)
(without
regard to whether the transactions contemplated by this Agreement are consummated) except to the
extent required in a written contract or agreement in existence as of the date of this Agreement.
(k) There are no suits, actions, proceedings, investigations, claims or orders pending or, to
the knowledge of the Company, threatened against the Company, any Company Subsidiary or any Company
Employee Benefit Plan related to any Company Employee Benefit Plan (other than claims in the
ordinary course of business). No Employee Benefit Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of any Governmental Authority, and no Plan is the
subject of any pending application for administrative relief under any voluntary compliance program
or closing agreement program of the Internal Revenue Service or the Department of Labor.
(l) The Company has the right to amend or terminate each Company Employee Benefit Plan at any
time without incurring any liability other than with respect to benefits that have already accrued
under a Company Employee Pension Benefit Plan.
(m) As used in this Agreement
ERISA
means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
(n) All arrangements that could reasonably be deemed nonqualified deferred compensation
arrangements under Section 409A of the Code (
Section 409A
) are, to the Companys reasonable
knowledge, in good faith compliance with Section 409A, and no employee is entitled to a tax
gross-up or similar payment for any excise tax that may be due under Section 409A.
16
SECTION 2.11
Board Recommendation; Company Action; Requisite Vote of the Companys
Stockholders
.
(a) The Board of Directors of the Company has, by resolutions duly adopted by the requisite
vote of the directors present at a meeting of such board duly called and held on June 22, 2006 and
not subsequently rescinded or modified in any way, unanimously (i) determined that this Agreement,
the Merger, in accordance with the terms of this Agreement, and the other transactions contemplated
hereby are advisable and in the best interests of the Company and its stockholders, (ii) approved
and adopted this Agreement and approved the Merger and the other transactions contemplated hereby,
(iii) directed that this Agreement be submitted for consideration by the stockholders of the
Company and recommended that the stockholders of the Company adopt this Agreement (provided that
any change in or modification or rescission of such recommendation by the Board of Directors of the
Company in accordance with
Section 5.8
shall not be a breach of the representation in this
clause (iii)). The Board of Directors of the Company has received from each Company Financial
Advisor an opinion, a written copy of which will be provided to Parent as soon as practicable after
the date hereof, solely for informational purposes, to the effect that, as of the date of the
opinion, the Merger Consideration
to be received in the Merger by holders of Company Common Stock is fair to such holders from a
financial point of view. The Company has been authorized by each Company Financial Advisor to
include such opinion in its entirety in the Proxy Statement so long as such inclusion is in form
and substance reasonably satisfactory to such Company Financial Advisor and its counsel.
(b) The affirmative vote of stockholders of the Company required for adoption of this
Agreement and the Merger is and will be no greater than a majority in voting power of the issued
and outstanding shares of Company Common Stock (the
Required Company Stockholder Vote
).
SECTION 2.12
Taxes
.
(a) Each of the Company and each Company Subsidiary has timely filed all material federal,
state, local, and other Tax Returns required to be filed by it in the manner prescribed by
applicable law and all such Tax Returns are true, complete and correct in all material respects.
All Taxes shown as due on such Tax Returns have been paid in full and the Company and each Company
Subsidiary has made adequate provision (or adequate provision has been made on its behalf) for all
accrued Taxes not yet due. The accruals and reserves for Taxes reflected in the Companys Form
10-K for the fiscal year ended December 31, 2005 are adequate in accordance with GAAP to cover all
Taxes accruing through such date. The Company and the Company Subsidiaries have withheld and paid
over all material Taxes required to have been withheld and paid over, and complied in all material
respects with all information reporting and backup withholding requirements, including the
maintenance of required records with respect thereto, in connection with amounts paid or owing to
any employee, creditor, independent contractor or other third party. There are no material Liens
on any of the assets, rights or properties of the Company or any Company Subsidiary with respect to
Taxes, other than Liens for Taxes not yet due and payable or for Taxes that the Company or a
Company Subsidiary is contesting in good faith through appropriate proceedings. Except as has not,
and would not reasonably be expected to have, a Company Material Adverse Effect, all hedging
transactions entered into by the
17
Company or any of the Company Subsidiaries have been properly
identified for federal income tax purposes.
(b) As of the date of this Agreement, no material federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or any Company Subsidiary, and neither the Company nor any
Company Subsidiary has received a written notice of any material pending or proposed claims, audits
or proceedings with respect to Taxes. No material deficiencies have been asserted in writing
against the Company or any Company Subsidiary as a result of examinations by any state, local,
federal or foreign taxing authority and no material issue has been raised by any examination
conducted by any state, local, federal or foreign taxing authority that, by application of the same
principles, might result in a proposed deficiency for any other period not so examined which
deficiency (or deficiencies), in either case, is not (or are not) adequately reserved for in the
most recent Company Financial Statements in accordance with GAAP. Each material deficiency
resulting from any audit or examination relating to Taxes of the
Company or any Company Subsidiary by any taxing authority has been paid or is being contested
in good faith and in accordance with law and is adequately reserved for on the balance sheets
contained in the Company Financial Statements in accordance with GAAP. No claim is pending and no
claim has ever been made that has not been resolved by an authority in a jurisdiction where the
Company or any of the Company Subsidiaries does not file Tax Returns that the Company or any
Company Subsidiary, as the case may be, is or may be subject to Tax in that jurisdiction. Neither
the Company nor any Company Subsidiary is subject to any private letter ruling of the Internal
Revenue Service or comparable rulings of other tax authorities that will be binding on the Company
or any Company Subsidiary with respect to any period following the Closing Date. Neither the
Company nor any Company Subsidiary has granted any material power of attorney which is currently in
force with respect to any income, franchise or similar Taxes or any income, franchise or similar
Tax Returns.
(c) Neither the Company nor any Company Subsidiary has requested any extension of time within
which to file any material Tax Return which Tax Return has not yet been filed. There are no
agreements, waivers of statutes of limitations, or other arrangements providing for extensions of
time in respect of the assessment or collection of any unpaid Taxes against the Company or any
Company Subsidiary. The Company and each Company Subsidiary have disclosed on their federal income
tax returns all positions taken therein that could, if not so disclosed, give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code. Neither the Company nor any
Company Subsidiary has been a party to a listed transaction within the meaning of Treas. Reg.
Sec. 1.6011-4(b).
(d) Neither the Company nor any Company Subsidiary is a party to any Tax sharing agreement,
Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other agreement relating to Taxes
with any taxing authority).
(e) Except as set forth on Schedule 2.10(j) hereof, neither the Company nor any Company
Subsidiary is a party to any agreement, contract, or arrangement that, individually or
collectively, would give rise to the payment of any amount (whether in cash or property, including
shares of capital stock) that would not be deductible pursuant to the terms of Section
18
280G of the Code or would be subject to the excise tax under Section 4999 of the Code, or, to the knowledge of
the Company, that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m) or
162(n) of the Code.
(f) Neither the Company nor any affiliate of the Company has made with respect to the Company,
any Company Subsidiary, or any assets held by the Company or any Company Subsidiary any consent
under Section 341 of the Code.
(g) There was no agreement, understanding, arrangement or substantial negotiations (within
the meaning of Treasury Regulation Section 1.355-7(h)(1)) regarding the acquisition that is subject
to this Agreement or a similar acquisition (within the meaning of Treasury Regulation Section
1.355-7(h)(12)) at any time during the two-year period ending on the date of the distribution by
the Company of the Class B common stock of Tronox Incorporated to the shareholders of the Company.
(h) The statutes of limitations for the federal income Tax Returns of the Company and the
Company Subsidiaries have expired or otherwise have been closed for all taxable periods ending on
or before December 31, 1996.
(i) Neither the Company nor any Company Subsidiary is a party to any safe harbor lease within
the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by The Tax Equity and
Fiscal Responsibility Act of 1982. None of the property owned by the Company or a Company
Subsidiary is tax-exempt use property within the meaning of Section 168(h) of the Code. Neither
the Company nor any Company Subsidiary is required to make any adjustment under Code Section 481(a)
by reason of a change in accounting method or otherwise.
(j) Except as disclosed in Section 2.12(j) of the Company Disclosure Schedule, there have not
been, within two years of the date of this Agreement, any (i) redemptions by the Company or any
Company Subsidiary other than purchases of common stock of the Company pursuant to tender offers or
open market purchase, (ii) transfers or disposition of property by the Company or any Company
Subsidiary for which the Company or the Company Subsidiary did not receive adequate consideration,
or (iii) distributions to the holders of Company Common Stock with respect to their stock other
than distributions of cash in the ordinary course of business.
(k) Neither the Company nor any Company Subsidiary has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common parent of which was
the Company. To the knowledge of the Company, neither the Company nor any Company Subsidiary has
been notified in writing that it will be required to incur any material liability for Taxes of any
person (other than the Company or a Company Subsidiary) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law) with respect to any Tax claim that has
been made by a Taxing authority with respect to such other person as a transferee or successor, by
contract or otherwise.
(l) None of the Company or any Company Subsidiary will be required to include any material
item of income in, or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any: (i) change in
19
method of accounting for a taxable period ending on or prior to the Closing Date; (ii) closing agreement as
described in Section 7121 of the Code (or any corresponding or similar provision of state, local,
or foreign income Tax law) executed on or prior to the Closing Date; or (iii) open transaction
disposition made on or prior to the Closing Date.
(m) As used in this Agreement
Taxes
means (i) all taxes, levies or other like assessments,
charges or fees (including estimated taxes, charges and fees), including, without limitation,
income, franchise, profits, corporations, advance corporation, gross receipts, transfer, excise,
property, sales, use value-added, ad valorem, license, capital, wage, employment, payroll,
withholding, social security, severance, occupation, import, custom, stamp, alternative, add-on
minimum, environmental or other governmental taxes or charges, imposed by the United States or any
state, county, local or foreign government or subdivision or agency thereof, including any
interest, penalties or additions to tax applicable or related thereto; (ii) all liability for the
payment of any amounts of the type described in clause (i) as the result of being a member of an
affiliated, consolidated, combined or unitary group; and (iii) all liability for the payment of any
amounts as a result of an express or implied obligation to indemnify any other person with respect to the
payment of any amounts of the type described in clause (i) or clause (ii). As used in this
Agreement,
Tax Return
means any report, return, statement, declaration or other written
information required to be supplied to a taxing or other Governmental Authority in connection with
Taxes including any schedules or attachments thereto, including any amendments thereto, and
including any information returns.
SECTION 2.13
Environmental Matters
.
Except as, individually or in the aggregate, have not had and would not reasonably be expected
to have a Company Material Adverse Effect:
(a) To the Companys knowledge, there are no conditions existing on any real property owned,
leased or operated by the Company or any Company Subsidiary that give rise to any or would
reasonably be expected to constitute a violation of or result in any liability under any
Environmental Law (as defined below), and the Company and the Company Subsidiaries have been and
are otherwise in compliance in all material respects with all applicable Environmental Laws and
there are no pending or, to the knowledge of the Company, threatened demands, claims, information
requests or notices of non-compliance or violation regarding the Company or any Company Subsidiary
relating to any liability under any Environmental Law.
(b) Intentionally Omitted.
(c) Neither the Company, any Company Subsidiary nor any real property owned, leased or
operated by the Company or any Company Subsidiary, is subject to any pending or, to the knowledge
of the Company, threatened action, suit, investigation, inquiry, notice of non-compliance, request
for information or proceeding relating to any liability under any Environmental Laws.
(d) All permits, notices, approvals and authorizations, if any, required to be obtained or
filed in connection with the operation of the Companys and the Company Subsidiaries businesses
and the operation or use of any property or facility owned, leased or operated by the
20
Company or any Company Subsidiary, including all permits, notices, approvals and authorizations pertaining to
the past and present generation, treatment, storage, disposal or release of a Hazardous Substance,
have been duly obtained or filed, are currently in effect, and the Company and the Company
Subsidiaries are in compliance with the terms and conditions of all such permits, notices,
approvals and authorizations. The transactions contemplated by this Agreement will not result in
the non-renewal, revocation, expiration, withdrawal or termination of any such permits, notices,
approvals or authorizations.
(e) Other than acquisitions and divestitures in the ordinary course of business, none of the
Company and the Company Subsidiaries has assumed, contractually or, to the knowledge of the
Company, is reasonably expected to be responsible by operation of law, for any liabilities or
obligations of third parties under any Environmental Laws or any legal principle including
fraudulent conveyance and piercing the corporate veil.
(f) As used in this Agreement, (i)
Environmental Laws
means any federal, foreign, state and
local law or legal requirement, including regulations, orders, permits, licenses, approvals,
ordinances, directives and the common law, pertaining to pollution, the environment, the protection
of the environment or human health and safety, including the Clean Air Act, the Clean Water Act,
the Resource Conservation and Recovery Act (
RCRA
), the Comprehensive Environmental Response,
Compensation, and Liability Act (
CERCLA
), the Occupational Safety and Health Act, the Toxic
Substances Control Act, the Atomic Energy Act, the Hazardous Materials Transportation Act, the Safe
Drinking Water Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Emergency Planning
and Community Right-to-Know Act and any similar federal, foreign, state or local law and (ii)
Hazardous Substance
means (a) any hazardous substance, as defined by CERCLA, (b) any hazardous
waste, as defined by RCRA, and (c) any pollutant, contaminant, waste or hazardous, dangerous or
toxic chemical, material or substance, including asbestos, buried contaminants, regulated
chemicals, flammable explosives, radiation and radioactive materials, polychlorinated biphenyls,
petroleum and petroleum products and by-products, lead, pesticides, natural gas, and nuclear fuel,
all within the meaning of any applicable law of any applicable Governmental Authority relating to
or imposing liability or standards of conduct pertaining thereto, all as amended or hereafter
amended.
SECTION 2.14
Compliance with Laws
.
Except as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, the Company and the Company Subsidiaries are in compliance with
all applicable laws, rules or regulations of any United States federal, state or local or foreign
government or agency thereof that materially affect the business, properties or assets owned or
leased by the Company and the Company Subsidiaries, and no written notice, charge, claim, action or
assertion has been received by the Company or any Company Subsidiary or, to the Companys
knowledge, filed, commenced or threatened in writing against the Company or any Company Subsidiary
alleging any such non-compliance. All licenses, permits and approvals required under such laws,
rules and regulations are in full force and effect, except where the failure to be obtained or to
be in full force and effect, individually or in the aggregate, has not had and would not reasonably
be expected to have a Company Material Adverse Effect. Notwithstanding the foregoing, no
representation or warranty in this
Section 2.14
is made with
21
respect to permits issued under or matters relating to Environmental Laws, which are covered exclusively by the provisions
set forth in
Section 2.13
.
SECTION 2.15
Employment Matters
.
(a) Neither the Company nor any Company Subsidiary is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is any such contract or agreement presently being negotiated, nor, to the
knowledge of the Company, is there, nor has there been in the last five years, a representation
campaign respecting any of the employees of the Company or any of the Company Subsidiaries, and, to
the knowledge of the Company, there are no campaigns being
conducted to solicit cards from employees of the Company or any of the Company Subsidiaries to
authorize representation by any labor organization. Except as individually or in the aggregate,
has not had and would not reasonably be expected to have a Company Material Adverse Effect, neither
the Company nor any Company Subsidiary (i) is a party to, or bound by, any consent decree with, or
citation by, any Governmental Authority relating to employees or employment practices or (ii) is
the subject of any proceeding asserting that it has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor, as of the date of
this Agreement, is there pending or, to the knowledge of the Company, threatened, any labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving the Company or any of the Company
Subsidiaries.
(a) In the 90 day period preceding the date of this Agreement, neither the Company nor any of
the Company Subsidiaries has effectuated (i) a plant closing (as defined in the WARN Act),
affecting any site of employment or one or more facilities or operating units within any site of
employment or facility of the Company or any of the Company Subsidiaries, or (ii) a mass layoff
(as defined in the WARN Act) affecting any site of employment or facility of the Company or any of
the Company Subsidiaries; nor has the Company or any of the Company Subsidiaries been affected by
any transaction or engaged in layoffs or employment terminations sufficient in number to trigger
application of any state, local or foreign law or regulation similar to the WARN Act. Section
2.15(b) of the Company Disclosure Letter lists the number of the Companys or the Company
Subsidiaries employees who have suffered an employment loss (as defined in the WARN Act) in the
90 days prior to the date of this Agreement or had a reduction in hours of at least 50% in the 180
days prior to the date of this Agreement. To the knowledge of the Company, the Company and the
Company Subsidiaries have at all times properly classified each of their respective employees as
employees, each of their respective leased employees (within the meaning of Section 414(n) of the
Code) as leased employees, and each of its independent contractors as independent contractors, as
applicable. As used in the Agreement,
WARN Act
means the Workers Adjustment and Retraining
Notification Act. of 1989, as amended.
SECTION 2.16
Regulatory Matters
.
Neither the Company nor any of the Company Subsidiaries is (i) an investment company or a
company controlled by an investment company within the meaning of the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder, or (ii) a holding
company, a subsidiary company of a holding company, an
22
affiliate of a holding company, or
a public utility, as each such term is defined in the Public Utility Holding Company Act of 2005,
as amended.
SECTION 2.17
Reserve Reports
.
Except as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, the factual, non-interpretive data on which the Companys
estimates of proved oil and gas reserves attributable to the Oil and Gas Interests of the
Company were based in connection with the preparation by the Company of the proved oil and gas
reserve reports concerning the Oil and Gas Interests of the Company and the Company Subsidiaries as
of December 31, 2005 was (at the time included or as modified or amended prior to the issuance of
the Company Reserve Report) accurate. Netherland, Sewell & Associates, Inc. reviewed the
procedures and methods used by the Company to prepare the estimates of approximately 76% of the
Companys total proved reserves as of December 31, 2005. The estimates of proved oil and gas
reserves used by the Company and any information provided to Netherland, Sewell & Associates, Inc.
as part of their procedures and methods review by or on behalf of the Company and the Company
Subsidiaries in connection with such firms review of the Company Reserve Report are in accordance
with the definitions contained in Rule 4-10(a) of Regulation S-X promulgated by the SEC. For
purposes of this Agreement,
Oil and Gas Interests
means direct and indirect interests in and
rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature,
direct or indirect, including working, leasehold and mineral interests and operating rights and
royalties, overriding royalties, production payments, net profit interests and other non-working
interests and non-operating interests; Hydrocarbons and other minerals or revenues therefrom, all
contracts in connection therewith and claims and rights thereto (including all oil and gas leases,
operating agreements, unitization and pooling agreements and orders, division orders, transfer
orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and
agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary
interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases,
and other interests associated with, appurtenant to, or necessary for the operation of any of the
foregoing; and all interests in equipment and machinery (including wells, well equipment and
machinery), oil and gas production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries, and other tangible
personal property and fixtures associated with, appurtenant to, or necessary for the operation of
any of the foregoing. Except for changes generally affecting the oil and gas industry (including
changes in commodity prices), there has been no change in respect of the matters addressed in the
Company Reserve Report that would have a Company Material Adverse Effect. For purposes of this
Agreement,
Hydrocarbons
means, with respect to any Person, crude oil, natural gas, casinghead
gas, condensate, sulphur, natural gas liquids, plant products and other liquid or gaseous
hydrocarbons produced in association therewith (including coalbed gas and carbon dioxide), and all
other minerals of every kind and character which may be covered by or included in or attributable
to any of the properties of such Person or any of such Persons Subsidiaries.
23
SECTION 2.18
Hedging
.
The Company SEC Reports accurately summarize the outstanding Hydrocarbon and financial Hedging
positions attributable to the production of the Company and the Company Subsidiaries as of the date
reflected therein, and there have been no changes since the date thereof, except for changes in
financial Hedging positions occurring in the ordinary course of business and in accordance with the
Companys policies, such as derivative activity supporting third party marketing, the expiration of
contracts by their terms and valuation changes due to
market price fluctuations. For purposes of this Agreement, a
Hedge
mean a derivative
transaction within the coverage of SFAS No. 133, including any swap transaction, option, warrant,
forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or
collar transaction relating to one or more currencies, commodities, bonds, equity securities,
loans, interest rates, credit-related events or conditions or any indexes, or any other similar
transaction (including any option with respect to any of these transactions) or combination of any
of these transactions, including collateralized mortgage obligations or other similar instruments
or any debt or equity instruments evidencing or embedding any such types of transactions, and any
related credit support, collateral, transportation or other similar arrangements related to such
transactions.
SECTION 2.19
Properties
.
Except as, individually or in the aggregate, have not had and would not reasonably be expected
to have a Company Material Adverse Effect (i) except for goods and other property sold, used or
otherwise disposed of since December 31, 2005 in the ordinary course of business, as of the date
hereof, considered in the aggregate the Company has good and defensible title for oil and gas
purposes to all of the Oil and Gas Interests reflected in the Companys December 31, 2005 financial
statements included in the Company SEC Reports, and to all other properties, interests in
properties and assets, real and personal, free and clear of any Lien, except: (a) Liens reflected
in the balance sheet of the Company as of December 31, 2005 included in the Company SEC Reports;
(b) Liens for current taxes not yet due and payable; and (c) such imperfections of title,
easements, restrictive covenants and other Liens that do not interfere with the Companys ability
to conduct its business as currently conducted; (ii) all leases and other agreements pursuant to
which the Company or any of the Company Subsidiaries leases or otherwise acquires or obtains
operating rights affecting any real or personal property are in good standing, valid, and
effective; and there is not, under any such leases, any existing or prospective default or event of
default or event which with notice or lapse of time, or both, would constitute a default by the
Company or any of the Company Subsidiaries; and (iii) all significant operating equipment of the
Company and the Company Subsidiaries is in good operating condition, ordinary wear and tear
excepted.
SECTION 2.20
Natural Gas Act
.
Any gas gathering system constituting a part of the properties of the Company or the Company
Subsidiaries and material to the operations of the Company and the Company Subsidiaries considered
as a single enterprise has as its primary function the provision of natural gas gathering services,
as the term gathering is interpreted under Section 1(b) of the Natural Gas Act of 1938 (
NGA
);
none of the properties have been or are certificated by the Federal
24
Energy Regulatory Commission
(
FERC
) under Section 7(c) of the NGA or to the knowledge of the Company are now subject to FERC
jurisdiction under the NGA; and none of the properties have been or are providing service pursuant
to Section 311 of the NGA.
SECTION 2.21
Insurance
.
The Company has made available to Parent prior to the date hereof a complete schedule of all
insurance policies held by either the Company or any of the Company Subsidiaries. All such
insurance policies are in full force and effect and all related premiums have been paid to date.
SECTION 2.22
Material Contracts
.
Except for this Agreement, as of the date hereof, none of the Company or any of the Company
Subsidiaries is a party to or bound by any material contract (as such term is defined in item
601(b)(10) of Regulation S-K promulgated by the SEC) that is not filed as an exhibit to an
Available SEC Report. Except as would not reasonably be expected to have a Company Material
Adverse Effect, neither the Company nor any Company Subsidiary is in breach or default under any
material contract to which the Company or a Company Subsidiary is a party nor, to the knowledge
of the Company, is any other party to any such contract in breach or default thereunder.
SECTION 2.23
Section 203 of the DGCL; Rights Agreement
.
The Board of Directors of the Company has taken all action necessary to exempt under and not
make subject to (a) the prohibitions on business combinations under Section 203 of the DGCL, (b)
any other state takeover law or state law that purports to limit or restrict business combinations
or the ability to acquire or vote shares or (c) any provision of the Companys certificate of
incorporation or bylaws (including Article Thirteenth of the Companys Certificate of
Incorporation) that would require any corporate approval other than that otherwise required by
Section 251 of the DGCL: (i) the execution of this Agreement, (ii) the Merger, and (iii) the
transactions contemplated by this Agreement and the Merger. The Company has taken and as soon as
practicable after the date hereof (but in no event later than three Business Days after the date
hereof), the Rights Agent (as defined in the Rights Agreement) will take, all actions necessary or
appropriate to amend the Rights Agreement so that (a) the term
Final Expiration Date
(as defined
in the Rights Agreement) shall mean July 22, 2016, (b) none of Parent or Merger Sub nor any
affiliate or associate thereof (as defined in the Rights Agreement) is an
Acquiring Person
,
and no
Stock Acquisition Date
or
Distribution Date
(as such terms are defined in the Rights
Agreement) or event to which Section 11(a)(ii) or Section 13 thereof would otherwise be applicable
will occur as a result of the execution or delivery of this Agreement or the consummation of the
Merger and the other transactions contemplated by this Agreement and (c) the Rights Agreement will
terminate and the Company Rights will expire immediately prior to the Effective Time. The Rights
Agreement, as so amended, will not be further amended or modified. True and complete copies of the
Rights Agreement and all such proposed amendments have been previously provided to Parent.
25
SECTION 2.24
FCPA
.
To the Companys knowledge, during past five years, neither the Company, nor any Company
Subsidiary or officer, director, employee or agent of the Company or a Company Subsidiary, has
committed any act or made any omission prohibited by the Foreign Corrupt Practices Act (15 U.S.C.
§§ 78m, 78dd-1, -2 and -3) (
FCPA
) or applicable anti-bribery laws of any other country.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that:
SECTION 3.1
Organization
.
Parent and each of the Subsidiaries of Parent (including Merger Sub) (the
Parent
Subsidiaries
) is a corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization and has all
requisite entity power and authority to own, operate and lease its properties and to carry on its
business as now conducted. Parent and each of the Parent Subsidiaries is duly qualified and/or
licensed, as may be required, and in good standing in each of the jurisdictions in which the nature
of the business conducted by it or the character of the property owned, leased or used by it makes
such qualification and/or licensing necessary, except in such jurisdictions where the failure to be
so qualified and/or licensed, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect. A
Parent Material Adverse
Effect
means a material adverse effect on the ability of Parent or Merger Sub to perform their
obligations under this Agreement or to consummate the transactions contemplated by this Agreement.
The copies of the certificate of incorporation and bylaws of Parent which are incorporated by
reference as exhibits to Parents Annual Report on Form 10-K for the year ended December 31, 2005
are complete and correct copies of such documents and contain all amendments thereto as in effect
on the date of this Agreement.
SECTION 3.2
Authorization; No Conflict
.
(a) Each of Parent and Merger Sub has the requisite corporate power and authority to enter
into and deliver this Agreement and all other agreements and documents contemplated hereby to which
it is a party and to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement by Parent and Merger Sub, the performance by Parent and Merger Sub of
their respective obligations hereunder and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly authorized by the respective Boards of Directors of
each of Parent and Merger Sub, and no other corporate proceedings on the
part of Parent, Merger Sub or any of the Parent Subsidiaries (including any vote of any class
or series of outstanding capital stock) are necessary to authorize the execution and delivery of
this Agreement, the performance by Parent and Merger Sub of their respective obligations hereunder
and the consummation by Parent and Merger Sub of the transactions contemplated hereby other than
the adoption of this Agreement by Parent as the sole stockholder of Merger Sub. This
26
Agreement has
been duly executed and delivered by Parent and Merger Sub and constitutes a valid and binding
obligation of Parent and Merger Sub, enforceable in accordance with its terms.
(b) The Board of Directors of Parent has, by resolutions duly adopted by the requisite vote of
the directors present at a meeting of such board duly called and held on June 22, 2006 and not
subsequently rescinded or modified in any way, unanimously (i) approved this Agreement, the Merger
and (ii) determined that this Agreement and Merger are in the best interest of Parents
stockholders. No vote of the holders of Parent common stock, par value $.10 per share, or other
securities of Parent is necessary to consummate the Merger.
(c) Neither the execution and delivery of this Agreement by Parent or Merger Sub, nor the
consummation by Parent or Merger Sub of the transactions contemplated hereby nor compliance by
Parent or Merger Sub with any of the provisions herein will (i) result in a violation or breach of
or conflict with the certificate or articles of incorporation or bylaws of Parent or any of the
Parent Subsidiaries, (ii) result in a violation or breach of or conflict with any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination, cancellation of, or give rise to a right of purchase
under, or accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the properties or assets
owned or operated by Parent or any of the Parent Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, or otherwise result in a detriment to the Parent
or any Parent Subsidiary under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, lease, agreement or other instrument or
obligation of any kind to which Parent or any of the Parent Subsidiaries is a party or by which
Parent or any of the Parent Subsidiaries or any of their respective properties or assets may be
bound or (iii) subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (d) below, violate any judgment,
ruling, order, writ, injunction, decree, statute, law, rule or regulation applicable to Parent or
any of the Parent Subsidiaries or any of their respective properties or assets other than any such
event described in items (ii) or (iii) which, individually or in the aggregate, has not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
(d) No consent, approval, order or authorization of, or registration, declaration or filing
with, any Governmental Authority is necessary to be obtained or made by Parent, any Parent
Subsidiary or Merger Sub in connection with Parents or Merger Subs execution, delivery and
performance of this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, except for (i) compliance with the DGCL, with respect to the filing of the
Certificate of Merger, (ii) compliance with the HSR Act, the Competition Act, and applicable
foreign competition and antitrust laws, if any, (iii) the filing with the SEC of the Proxy
Statement and such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated hereby, (iv)
compliance with the rules of the NYSE, and (v) Customary Post Closing Consents, except
where the failure to obtain or take such action, individually or in the aggregate, has not had
and would not reasonably be expected to have a Parent Material Adverse Effect.
27
SECTION 3.3
Information Supplied
.
None of the information supplied or to be supplied by Parent specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first mailed to the
Companys stockholders or at the time of the Company Stockholders Meeting 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. No representation or warranty is made by Parent with respect to
statements made or incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Proxy Statement.
SECTION 3.4
Brokers or Finders Fees
.
Except for UBS Securities LLC, Credit Suisse Securities (USA) LLC and Goldman Sachs & Co.,
Inc. (the
Parent Financial Advisors
), no agent, broker, Person or firm acting on behalf of Parent
or any Parent Subsidiary or under Parents or any Parent Subsidiarys authority is or will be
entitled to any advisory, commission or brokers or finders fee or commission from any of the
parties hereto in connection with any of the transactions contemplated hereby.
SECTION 3.5
Financing
.
(a) The financing required to consummate the Merger, to refinance all existing indebtedness of
Parent, Merger Sub and the Company, in each to the extent required in order to consummate the
Merger and the other Transactions, and to pay related fees and expenses is collectively referred to
in this Agreement as the
Financing
. Parent and Merger Sub received a commitment letter dated
June 22, 2006 (the
Commitment Letter
), from UBS Securities LLC, UBS Loan Finance LLC, Credit
Suisse Securities (USA) LLC and Citigroup Global Markets, Inc. (the
Lenders
) relating to the
commitment of the Lenders to provide the Financing. Parent has provided the Company with a
complete and correct copy of such letter. As of the date of this Agreement, Parent and Merger Sub
have no reason to believe that any of the conditions to the Financing will not be satisfied or that
the funds for the Financing will not be available on a timely basis for the transactions
contemplated by this Agreement. At the Effective Time, Parent and Merger Sub will have available
all of the funds necessary for the acquisition of all shares of Common Stock pursuant to the Merger
and to perform their respective obligations under this Agreement.
(b) Immediately after the Effective Time and after giving effect to any change in the
Surviving Corporations assets and liabilities as a result of the Merger, the Surviving Corporation
will not (i) be insolvent (either because its financial condition is such that the sum of its debts
is
greater than the fair value of its assets or because the fair saleable value of its assets is
less than the amount required to pay its probable liability on existing debts as they mature), (ii)
have unreasonably small capital with which to engage in its business or (iii) have incurred
liabilities beyond its ability to pay as they become due. For purposes hereof, the Company will be
deemed to be
Insolvent
if any of the conditions described in clause (i), (ii) or (iii) above are
applicable to the Company prior to the Effective Time.
28
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1
Conduct of Business by the Company Pending the Merger
.
The Company covenants and agrees that, prior to the Effective Time, unless Parent shall
otherwise consent in writing (which consent shall not be unreasonably withheld or delayed) or
except as expressly permitted or required pursuant to this Agreement:
(a) The businesses of the Company and the Company Subsidiaries shall be conducted only in the
ordinary and usual course of business and consistent with past practices, and the Company and the
Company Subsidiaries shall use their reasonable best efforts to maintain and preserve intact their
respective business organizations, to maintain significant beneficial business relationships with
suppliers, contractors, distributors, customers, licensors, licensees and others having business
relationships with them and to keep available the services of their current key officers and
employees; and
(b) Without limiting the generality of the foregoing
Section 4.1(a)
, except as set
forth in Section 4.1 of the Company Disclosure Letter or as contemplated by this Agreement, the
Company shall not directly or indirectly, and shall not permit any of the Company Subsidiaries to,
do any of the following:
(i) acquire, sell, lease, transfer or dispose of any assets, rights or securities that
are material to the Company and the Company Subsidiaries considered as a single enterprise
or terminate, cancel, materially modify or enter into any material commitment, transaction,
line of business or other agreement, in each case outside of the ordinary course of business
consistent with past practice or, in the case of acquisitions of oil and gas properties or
interests therein, in excess of $50,000,000 in the aggregate;
(ii) acquire by merging or consolidating with or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner, any business,
corporation, partnership, association or other business organization or division thereof;
(iii) amend or propose to amend its certificate of incorporation or bylaws or, in the
case of the Company Subsidiaries, their respective constituent documents;
(iv) except for the Quarterly Dividend, declare, set aside or pay any dividend or other
distribution payable in cash, capital stock, property or otherwise
with respect to any shares of its capital stock;
(v) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise
acquire, any shares of its capital stock, other equity securities, other ownership interests
or any options, warrants or rights to acquire any such stock, securities or interests, other
than in connection with the relinquishment of shares by employees and directors of the
Company in payment of withholding tax upon the vesting of restricted stock or forfeiture of shares due to termination of employment;
29
(vi) split, combine or reclassify any outstanding shares of its capital stock;
(vii) except for the Company Common Stock issuable upon exercise of options outstanding
on the date hereof (or granted after the date hereof as permitted by this Agreement) and the
vesting of restricted stock awards granted prior to the execution of this Agreement issue,
sell, dispose of or authorize, propose or agree to the issuance, sale or disposition by the
Company or any of the Company Subsidiaries of, any shares of, or any options, warrants or
rights of any kind to acquire any shares of, or any securities convertible into or
exchangeable for any shares of, its capital stock of any class, or any other securities in
respect of, in lieu of, or in substitution for any class of its capital stock outstanding on
the date hereof;
(viii) modify the terms of any existing indebtedness for borrowed money or security
issued by the Company or any Company Subsidiary having an aggregate principal amount in
excess of $50,000,000 in any respect;
(ix) incur any indebtedness for borrowed money, except indebtedness incurred in the
ordinary course of business and letters of credit required under the Companys hedging
agreements in order to satisfy margin requirements, but only if the amount of such
indebtedness (not including such letters of credit), when added to all other indebtedness of
the Company then outstanding (determined in accordance with GAAP), does not exceed the
Companys indebtedness outstanding as of March 31, 2006 by more than $400,000,000;
(x) assume, guarantee, endorse or otherwise as an accommodation become responsible for,
the obligations of any other Person, or make any loans or advances, except (A) to or for the
benefit of the Company Subsidiaries or (B) for those not in excess of $50,000,000 in the
aggregate;
(xi) create or assume any material Lien on any material asset;
(xii) authorize, recommend or propose any material change in its capitalization;
(xiii) except in connection with the routine promotions of employees in Grades 28 and
below or to the extent required in a written contract or agreement (including any Company
Employee Benefit Plan) in existence as of the date of this Agreement, (A) take any action
with respect to the grant of or increase in any severance
or termination pay to any current or former director, executive officer or employee of
the Company or any Company Subsidiary, (B) execute any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with any such
director, executive officer or employee of the Company or any Company Subsidiary, (C)
increase the benefits payable under any existing severance or termination pay policies or
employment agreements, (D) increase the compensation, bonus or other benefits of current or
former directors, executive officers or employees of the Company or any Company Subsidiary,
(E) adopt or establish any new employee benefit plan or amend in any material respect any
existing employee benefit plan, (F) provide any material benefit to a current or former
director, executive officer or employee
30
of the Company or any Company Subsidiary not
required by any existing agreement or employee benefit plan, (G) take any action that would
result in its incurring any obligation for any payments or benefits described in subsections
(i), (ii) or (iii) of
Section 2.10(j)
(without regard to whether the transactions
contemplated by this Agreement are consummated) except to the extent required in a written
contract or agreement in existence as of the date of this Agreement, or (H) take any action
that would result in any plan, program or agreement violating Section 409A or provide any
employee entitlement to a tax gross-up or similar payment for any excise tax that may be due
under Section 409A;
(xiv) execute or amend (other than as required by existing employee benefit plans or
employment agreements or by applicable law) in any material respect any employment,
consulting, severance or indemnification agreement between the Company or any of the Company
Subsidiaries and any of their respective directors, officers, agents, consultants or
employees, or any collective bargaining agreement or other obligation to any labor
organization or employee incurred or entered into by the Company or any of the Company
Subsidiaries (other than as required by existing employee benefit plans or employment
agreements or by applicable law);
(xv) except in the ordinary course of business consistent with past practice, make any
changes in its reporting for taxes or accounting methods other than as required by GAAP or
applicable law; make or rescind any Tax election or file any material amended Tax return;
make any change to its method or reporting income, deductions, or other Tax items for Tax
purposes; settle or compromise any Tax liability or enter into any transaction with an
affiliate outside the ordinary course of business if such transaction would give rise to a
material tax liability;
(xvi) settle, compromise or otherwise resolve any litigation or other legal proceedings
except (A) in the ordinary course of business consistent with past practice and (B) only to
the extent that the aggregate of all such settlements or payments would not result in
liability to the Company and the Company Subsidiaries in excess of the amount reserved for
such litigation and legal proceedings so settled, compromised or resolved reflected on the
most recent balance sheet included in the Company Financial Statements plus $10,000,000;
(xvii) other than in the ordinary course of business, pay or discharge any claims,
Liens or liabilities involving more than $2,500,000 individually or $10,000,000 in the
aggregate, which are not reserved for or reflected on the balance sheets included in
the Company Financial Statements;
(xviii) write off any accounts or notes receivable in excess of $2,500,000;
(xix) make or commit to make capital expenditures in excess of the aggregate budgeted
amount set forth in the Companys fiscal 2006 capital expenditure plan previously provided
to Parent, except as may be required to (A) continue operations on the drilling, completion
or plugging of any well or any well operations for which the Company has consented to
participate and is required to continue to participate pursuant
31
to applicable agreements or
(B) conduct emergency operations on any well pipeline or other facility;
(xx) except for derivative activity supporting third party marketing, make or assume
any Hedges;
(xxi) enter into new contracts to sell Hydrocarbons other than in the ordinary course
of business at market pricing, but in no event any having a duration longer than six months;
(xxii) fail to timely meet its royalty payment obligations in connection with its oil
and gas leases to the extent such failure has or would reasonably be expected to have a
Company Material Adverse Effect;
(xxiii) enter into any agreement, arrangement or commitment that materially limits or
otherwise materially restricts the Company or any Company Subsidiary, or that would
reasonably be expected to, after the Effective Time, materially limit or restrict Parent or
any of its Subsidiaries or any of their respective affiliates or any successor thereto, from
engaging or competing in any line of business in which it is currently engaged or in any
geographic area material to the business or operations of Parent or any of its Subsidiaries;
(xxiv) except in the ordinary course of business, consistent with past practice,
terminate, amend, modify or waive any provision of any confidentiality or standstill
agreement to which it is a party;
(xxv) take any action that would give rise to a claim under the WARN Act or any similar
state law or regulation because of a plant closing or mass layoff (each as defined in
the WARN Act) without in good faith attempting to comply with the WARN Act;
(xxvi) organize or acquire any Person that would become a Subsidiary;
(xxvii) enter into any commitment or agreement to license or purchase seismic data that
will cost in excess of the aggregate budgeted amount set forth I the Companys fiscal 2006
plan previously provided to Parent, other than pursuant to agreements or commitments
existing on the date hereof;
(xxviii) except for the amendments described in
Section 2.23
, amend, modify or
waive any provision of the Rights Agreement or take any action to redeem the Company Rights
or render the Company Rights inapplicable to any transaction other than the Merger unless,
and only to the extent that, the Company is required to do so by order of a court of
competent jurisdiction;
(xxix) grant approval for purposes of Section 203 of the DGCL of any business
combination or any acquisition of voting stock of the Company, each as defined in Section
203 of the DGCL;
32
(xxx) adopt a plan of complete or partial liquidation, dissolution, or reorganization;
(xxxi) except as permitted by
Section 5.8
, knowingly take, or agree to commit
to take, any action that would or would reasonably be expected to result in the failure of a
condition set forth in
Section 6.2(a)
or
(b)
at, or as of any time prior to,
the Effective Time, or that would materially impair the ability of the Company, Parent,
Merger Sub or the holders of shares of Company Common Stock to consummate the Merger in
accordance with the terms hereof or materially delay such consummation;
(xxxii) release any third party from the confidentiality and standstill provisions of
any agreement to which the Company or any of the Company Subsidiaries is a party, and the
Company and Company Subsidiaries shall enforce any such provisions contained in such
agreements and not waive any of the provisions thereof; or
(xxxiii) take or agree in writing or otherwise to take any of the actions precluded by
Sections 4.1(a)
or
(b)
.
SECTION 4.2
Conduct of Business by Parent
. Except as expressly permitted or required by
this Agreement, prior to the Effective Time, neither Parent nor any of its Subsidiaries, without
the prior written consent of the Company, shall:
(a) acquire, by merging or consolidating with, or by purchasing an equity interest in or the
assets of or by any other manner, any business or corporation, partnership or other business
organization or division thereof, or otherwise acquire any assets of any other entity (other than
the purchase of assets from suppliers, clients or vendors in the ordinary course of business and
consistent with past practice) if such transaction would reasonably be expected to have a Parent
Material Adverse Effect or materially delay the consummation of the transactions contemplated by
this Agreement;
(b) adopt or propose to adopt any amendments to its charter documents which would reasonably
be expected to have a Parent Material Adverse Effect;
(c) adopt a plan of complete or partial liquidation or dissolution of Parent;
(d) knowingly take, or agree to commit to take, any action that would or would reasonably be
expected to result in the failure of a condition set forth in
Section 6.3(a)
or
(b)
at, or as of any time prior to, the Effective Time, or that would materially impair the ability of
the Company, Parent, Merger Sub or the holders of shares of Company Common Stock to consummate the
Merger in accordance with the terms hereof or materially delay such consummation; or
(e) take or agree in writing or otherwise to take any of the actions precluded by
Section
4.2(a)
through
Section 4.2(e)
.
33
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1
Preparation of Proxy Statement; Stockholders Meetings
.
(a) Within five Business Days of the date of this Agreement, the Company shall prepare and
file with the SEC the Proxy Statement in preliminary form. Parent, Merger Sub and the Company will
cooperate with each other in the preparation of the Proxy Statement; without limiting the
generality of the foregoing, Parent and Merger Sub, will furnish to the Company the information
relating to Parent and Merger Sub required by the Exchange Act to be set forth in the Proxy
Statement, and Parent and its counsel shall be given the opportunity to review and comment on the
Proxy Statement prior to the filing thereof with the SEC. The Company agrees to use its reasonable
best efforts, after consultation with the other parties hereto, to respond promptly to any comments
made by the SEC with respect to the Proxy Statement. The Company will use its reasonable best
efforts to cause the Proxy Statement to be mailed to its stockholders as promptly as practicable
following the filing thereof in definitive form with the SEC. The Company will advise Parent
promptly after it receives notice of any request by the SEC for amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional information. If at
any time prior to the Effective Time any information relating to the Company or Parent, or any of
their respective affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing such information shall be promptly
filed with the SEC and, to the extent required by law, disseminated to the stockholders of the
Company. The Company shall not mail any Proxy Statement, or any amendment or supplement thereto,
to which Parent reasonably objects.
(b) The Company shall, as soon as practicable after the date hereof, and in accordance with
the Companys certificate of incorporation and bylaws and applicable law, establish a record date
(which will be as soon as practicable after the date hereof) for, duly call, give notice of a
meeting of its stockholders (the
Company Stockholders Meeting
) solely for the purpose of
considering and taking action upon this Agreement regardless of whether the
Board of Directors of the Company determines at any time that this Agreement or the Merger is
no longer advisable or recommends that the stockholders of the Company reject this Agreement or the
Merger. Unless the Board of Directors of the Company has withdrawn its recommendation of this
Agreement, the Merger and the other transactions contemplated hereby in compliance with
Section
5.8
in circumstances where a Takeover Proposal is outstanding, (1) as soon as practicable
following the date on which the Proxy Statement is mailed to the Companys stockholders, the
Company shall convene and hold the Company Stockholders Meeting and (2) once the Company
Stockholders Meeting has been called and noticed, the Company shall not postpone or adjourn the
Company Stockholders Meeting without the consent of Parent, which shall not be unreasonably
withheld or delayed (other than (i) for the absence of a quorum or (ii) to allow reasonable
additional time for the filing and mailing of any supplemental or amended disclosure which it
believes in good faith is necessary under applicable law and for such
34
supplemental or amended
disclosure to be disseminated and reviewed by the Companys stockholders prior to the Company
Stockholders Meeting; provided that in the event that the Company Stockholders Meeting is delayed
to a date after the Termination Date (as defined in
Section 7.1(b)
) as a result of either
(i) or (ii) above, then the Termination Date shall be extended to the fifth Business Day after such
date). The Board of Directors of the Company shall declare that this Agreement and the Merger are
advisable and in the best interests of the Company and recommend that this Agreement be adopted by
the stockholders of the Company and include in the Proxy Statement a copy of such recommendations;
provided that the Board of Directors of the Company may withdraw, modify or change such
recommendation in compliance with
Section 5.8
. Unless the Board of Directors of the
Company has withdrawn its recommendations of this Agreement, the Merger and the other transactions
contemplated hereby in compliance with
Section 5.8
, the Company shall use its reasonable
best efforts to solicit from stockholders of the Company proxies in favor of the adoption of this
Agreement and shall take all other action necessary or advisable to secure the vote or consent of
stockholders required by applicable law to effect the Merger.
(c) Parent shall cause all shares of Company Common Stock owned by Parent, Merger Sub or any
Parent Subsidiary to be voted in favor of the adoption of the Agreement.
SECTION 5.2
Employee Benefit Matters
.
From and after the Effective Time, Parent and the Surviving Corporation shall have the rights
and obligations described in this Section 5.2 regarding the individuals who were employees of the
Company or a Company Subsidiary immediately prior to the Effective Time (
Acquired Employees
).
(a)
Employment
. All Acquired Employees shall be employed solely on an at will
basis, except to the extent required by the provisions of written employment contracts or as
required by applicable law.
(b)
Benefit Plans
. The Surviving Corporation shall assume the Company Employee
Benefit Plans as of the Effective Time and operate such plans in accordance with their respective
terms, and the Company shall take any steps necessary to permit such assumption. Acquired
Employees shall continue after the Effective Time to participate in such assumed Company
Employee Benefit Plans. At such time as determined by Parent or the Surviving Corporation with
Parents approval, Acquired Employees shall participate in Parents compensation, severance, bonus,
stock option and other incentive plans for which they are eligible pursuant to the terms and
conditions of such plans, or in similar plans maintained by the Surviving Corporation, in each case
consistent with the participation offered to Parents employees holding similar positions. Each
such plan shall grant credit to each Acquired Employee for all service prior to the Effective Time
with the Company (including any predecessors) for purposes of vesting, eligibility to participate,
and eligibility for early retirement subsidies and vacation time, but not for purposes of benefit
accrual, except as provided in
Section 5.2(d)
. No Acquired Employee shall be
simultaneously covered under similar employee benefit plans of Parent or the Surviving Corporation
and of the Company. Nothing in this
Section 5.2
shall restrict in any manner the right of
Parent or the Surviving Corporation to amend or terminate any assumed Company Employee Benefit Plan
or to modify any compensation arrangement of any Acquired
35
Employee for any reason at any time (in
each case subject to the provisions of any written employment contracts);
provided, however
, that
the post-retirement health benefits plans of the Company shall be continued unchanged (except as
required by law) at least until the earlier of the third anniversary of the Effective Time or the
date on which Parent terminates all post-retirement health benefits plan; and provided, further,
that the severance and retention benefit plans of the Company shall be continued unchanged (except
as required by law) at least until the first anniversary of the Effective Time.
(c)
Group Health Plans
. During the plan year in which the Effective Time occurs, any
group health plan established or maintained by Parent or the Surviving Corporation shall, with
respect to any eligible Acquired Employee or, as applicable, a family member of an eligible
Acquired Employee, (i) waive any waiting period, (ii) waive any exclusion or limitation for
preexisting conditions which were covered under any group health plan maintained by the Company
prior to the Effective Time, (iii) grant credit (for purposes of annual deductibles, co-payments
and out-of-pocket limits) for any covered claims incurred or payments made prior to the Effective
Time, and (iv) accept rollovers of the health flexible spending account and dependent care accounts
of eligible Acquired Employees.
(d)
Qualified Defined Benefit Plans
. If the current Qualified Company Employee
Benefit Plan that is subject to Title IV of ERISA (the
Company Defined Benefit Plan
) is merged
into the qualified defined benefit plan of Parent (the
Parent Defined Benefit Plan
) and the
Parent Defined Benefit Plan has not previously been terminated or frozen for purposes of future
benefit accruals, (i) all participants in the Company Defined Benefit Plan will participate in the
Parent Defined Benefit Plan and shall accrue benefits beginning immediately following the merger of
the plans to the same extent as similarly-situated participants in the Parent Defined Benefit Plan
who are not Acquired Employees and (ii) benefits for Acquired Employees under the merged plan shall
be determined using a two piece benefit formula, using for purposes of calculating the benefit
under both pieces the participants compensation at any time before or after the effective date of
the plan merger (the
Plan Merger
). The first piece of the benefit will be calculated using the
formula under the Company Defined Benefit Plan and shall use, for purposes of the calculation, all
service with the Company, Parent or its affiliates prior to the Plan Merger Date but no service
after the Plan Merger Date, and the second piece will be calculated using the formula under the
Parent Defined Benefit Plan that applies to similarly-
situated plan participants who are not Acquired Employees and shall use, for purposes of the
calculation, all service with the Company, Parent of any of their affiliates after the Plan Merger
Date, but no service prior to the Plan Merger Date. The formula used for calculating benefits
under the Company Defined Benefit Plan shall not be amended after the Effective Time, and the
Company Defined Benefit Plan shall not be terminated or frozen for purposes of future benefit
accruals before the effective date as of which Parent terminates or freezes all future accruals
under, as the case may be, all of its tax-qualified defined benefit retirement plans. For the
avoidance of doubt, no Acquired Employee shall accrue benefits under both the Company Defined
Benefit Plan and the Parent Defined Benefit Plan for the same period of service.
(e)
SCORE Compensation Program
. As soon as practicable following the Effective Time,
Parent or the Surviving Corporation shall calculate the compensation accrued under the SCORE
Compensation Program as of the Effective Time. The amount due under the SCORE Compensation Program
shall be paid to an Acquired Employee on the earliest to occur of (i) the
36
Acquired Employees
involuntary termination of employment other than for cause, (ii) the date that Parent or the
Surviving Corporation pay their 2006 annual incentive compensation, or (iii) March 15, 2007. If,
before December 31, 2006, an Acquired Employee terminates employment voluntarily (other than
through retirement within the meaning of the SCORE Compensation Program) or is terminated for
cause, no payment shall be made under the SCORE Compensation Program. The Acquired Employees who
remain employed by Parent or the Surviving Corporation through December 31, 2006, shall receive an
incentive bonus for the period between the Effective Time and December 31, 2006, equal to the
amount received by a similarly-situated employee of Parent multiplied by a fraction, the numerator
of which is the number of days between the Effective Time and December 31, 2006, and the
denominator of which is 365.
(f) Parent hereby assumes, absolutely and unconditionally, effective as of the Effective Time,
each of the Continuity Agreements identified on Section 5.2(f) of the Company Disclosure Letter.
SECTION 5.3
Consents and Approvals
.
(a) Subject to the requirements of applicable antitrust laws, the Company, Parent and Merger
Sub shall each, as promptly as practicable (and in any event within five Business days) after the
date of this Agreement, file or cause to be filed with (i) the Federal Trade Commission (the
FTC
)
and the United States Department of Justice (the
DOJ
) any notifications required to be filed
under the HSR Act; and (ii) the Competition Bureau any notifications required to be filed under the
Competition Act with respect to the transactions contemplated by this Agreement.
(b) Subject to the requirements of applicable antitrust laws, the Company, Parent and Merger
Sub shall cooperate with each other and (i) promptly prepare and file all necessary documentation,
(ii) effect all necessary applications, notices, petitions and filings and execute all agreements
and documents, (iii) use all reasonable efforts to obtain all necessary permits, consents,
approvals and authorizations of all Governmental Authorities and (iv) use all reasonable efforts to
obtain all necessary Permits, consents, approvals and authorizations of all other parties, in the
case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary to
consummate the transactions contemplated by this Agreement or required by the terms of any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument to which the Company, Merger Sub, Parent or any of their respective
Subsidiaries is a party or by which any of them is bound;
provided, however
, that no note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or
other instrument shall be amended or modified to increase in any material respect the amount
payable thereunder or to be otherwise more burdensome, or less favorable, in each case in any
material respect, to the Company and the Company Subsidiaries considered as one enterprise in order
to obtain any permit, consent, approval or authorization without first obtaining the written
consent of Parent, which consent shall not be unreasonably withheld or delayed. The Company shall
have the right to review and approve in advance all characterizations of the information relating
to the Company; Parent shall have the right to review and approve in advance all characterizations
of the information relating to Parent or Merger Sub; and each of the Company and Parent shall have
the right to review and approve in advance all characterizations of the information relating to the
transactions contemplated by this Agreement, in each case which appear in any material filing
(including the Proxy Statement) made in connection with the
37
transactions contemplated hereby. The
Company, Parent and Merger Sub agree that they will consult with each other with respect to the
obtaining of all such necessary Permits, consents, approvals and authorizations of all third
parties and Governmental Authorities.
(c) In furtherance of, and not in limitation of the foregoing or
Section 5.5
, the
parties shall use their respective best efforts to respond promptly to any requests for additional
information made by either the FTC or the DOJ, and to cause the waiting periods under the HSR Act
to terminate or expire at the earliest possible date after the date of filing. The parties hereto
agree not to extend directly or indirectly any waiting period under the HSR Act or enter into any
agreement with a Governmental Authority to delay or not to consummate the Merger and the other
Transactions, except with the prior written consent of the other parties hereto. Each of Parent
and Merger Sub and the Company will (x) promptly notify the other party of any written
communication to that party from any Governmental Authority and, subject to applicable Law, permit
the other party to review in advance any proposed written communication to any such Governmental
Authority and incorporate the other partys reasonable comments, (y) not agree to participate in
any substantive meeting or discussion with any such Governmental Authority in respect of any
filing, investigation or inquiry concerning this Agreement, the Merger or the other Transactions
unless it consults with the other party in advance and, to the extent permitted by such
Governmental Authority, gives the other party the opportunity to attend, and (z) furnish the other
party with copies of all correspondence, filings and written communications between them and their
affiliates and their respective representatives on one hand, and any such Governmental Authority or
its staff on the other hand, with respect to this Agreement, the Merger and the other Transactions.
If any administrative or judicial action or proceeding is instituted (or threatened to be
instituted) challenging the Merger or the Transactions contemplated by this Agreement as violative
of any antitrust law, or if any judgment, ruling, order, writ, injunction, decree, statute, law,
rule or regulation applicable to the Company that would make the Merger or the other transactions
contemplated by this Agreement illegal or would otherwise prohibit or materially impair or delay
the consummation of the Merger or the other transactions contemplated by this Agreement, each of
Parent and Merger Sub shall use its best efforts, including selling, holding separate or otherwise
disposing of or conducting its business in a specified manner, or agreeing to sell, hold separate
or otherwise dispose of or conduct its business in a specified manner or
permitting the sale, holding separate or other disposition of, any assets of Parent and Merger
Sub or their respective subsidiaries, or after the Closing, the Company or the Company
Subsidiaries, or the conducting of its business in a specified manner, to contest and resist any
such action or proceeding and shall use its best efforts to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts consummation of the Merger
or the other Transactions and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so as to permit
consummation of the Merger and the other transactions contemplated by this Agreement. The Company
will cooperate with Parent and Merger Sub in all respects in Parents and Merger Subs
implementation of any of the measures described in the preceding sentence that is undertaken in
order to permit consummation of the Merger or the Transactions (including entering into agreements
or taking such other actions prior to the Closing as Parent and Merger Sub reasonably request to
dispose of assets of the Company and the Company Subsidiaries; provided, that neither the Company
nor any the Company Subsidiary shall be required pursuant to this
Section 5.3
to complete
any disposition of the assets of the Company or a Company Subsidiary
38
prior to the Closing or enter
into any agreement or other arrangement for a disposition of any assets of the Company or a Company
Subsidiary that does not expressly provide that the Companys obligation to complete such
disposition is subject to the prior or simultaneous occurrence of the Closing).
SECTION 5.4
Public Statements
.
The Company, Parent and Merger Sub shall consult with each other prior to issuing, and provide
each other with the opportunity to review and comment upon, any public announcement, statement or
other disclosure with respect to this Agreement or the transactions contemplated hereby and shall
not issue any such public announcement or statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange or trading market.
SECTION 5.5
Further Assurances
.
(a) Subject to the requirements of applicable antitrust laws, the Company, Parent and Merger
Sub shall cooperate with each other and (i) promptly prepare and file all necessary documentation,
(ii) effect all necessary applications, notices, petitions and filings and execute all agreements
and documents, (iii) use all commercially reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental Authorities and (iv) use all
commercially reasonable efforts to obtain all necessary Permits, consents, approvals and
authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii)
and (iv), necessary to consummate the Merger and the transactions contemplated by this Agreement.
Subject to the terms and conditions provided herein, each of the Company, Parent and Merger Sub
agrees to use their respective commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the Merger and the
other transactions contemplated by this Agreement as soon as practicable following the date hereof,
including (i) obtaining all consents, approvals, authorizations and actions or nonactions required
for or in connection with the consummation by the parties hereto of the Merger and the other
Transactions contemplated by this Agreement, (ii) the taking of all commercially reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, a
Governmental Authority, (iii) the obtaining of all necessary consents from third parties, (iv)
contesting and resisting of any action, including any legislative, administrative or judicial
action, and seeking to have vacated, lifted, reversed or overturned, any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent) that restricts, prevents or
prohibits the consummation of the Merger or the other transactions contemplated by this Agreement
and (v) the execution and delivery of any additional instruments necessary to consummate the Merger
and the other transactions contemplated by this Agreement and to fully carry out the purposes of
this Agreement. In addition, in connection with filings made by Parent with the SEC in connection
with financings associated with the transactions contemplated by this Agreement, the Company hereby
consents to the inclusion of its financial statements in such filings, agrees to assist Parent in
connection with the preparation of any related proforma financial statements and will use its
reasonable best efforts to cause the Companys independent public accountants to provide a consent
to the inclusion of their report to such financial statements in such filings and to provide Parent
a comfort letter dated a date within two
39
Business Days before the date on which such filings
shall become effective and addressed to Parent, in form and substance reasonably satisfactory to
Parent and customary in scope and substance for letters delivered by independent public accountants
in connection with any such filings.
(b) In furtherance of, and not in limitation of the foregoing, (i) neither Parent nor Merger
Sub will agree to amend, supplement, modify or waive any provisions of the Commitment Letter; (ii)
Parent and Merger Sub shall use their respective best efforts to (A) enter into definitive
agreements with respect to, and to obtain funding under, the Financing and (B) take any and all
commercially reasonable actions necessary to satisfy the conditions precedent set forth in such
definitive agreements; and (iii) in the event that any portion of the Financing becomes unavailable
pursuant to the Commitment Letter, Parent and Merger Sub shall obtain such portion from alternate
sources.
SECTION 5.6
Notification of Certain Matters
.
The Company agrees to give prompt notice to Parent and Merger Sub, and to use commercially
reasonable efforts to prevent or promptly remedy, the occurrence or failure to occur, or the
impending or threatened occurrence or failure to occur, of any event which occurrence or failure to
occur would be reasonably likely to cause the failure of any of the conditions set forth in
Section 6.2
;
provided, however
, that the delivery of any notice pursuant to this
Section 5.6
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice. Each of Parent and Merger Sub agrees to give prompt notice to the
Company, and to use commercially reasonable efforts to prevent or promptly remedy, the occurrence
or failure to occur, or the impending or threatened occurrence or failure to occur, of
any event which occurrence or failure to occur would be reasonably likely to cause the failure
of any of the conditions set forth in
Section 6.3
;
provided, however
, that the delivery of
any notice pursuant to this
Section 5.6
shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 5.7
Access to Information; Confidentiality
.
(a) The Company shall, and shall cause the Company Subsidiaries and the officers, directors,
employees and agents of the Company and the Company Subsidiaries, to, afford the officers,
employees and agents of Parent and Merger Sub, at their sole cost and risk, reasonable access at
all reasonable times from the date hereof through the Effective Time to its officers, employees,
agents, properties, facilities, books, records, contracts and other assets and shall furnish Parent
and Merger Sub all financial, operating and other data and information as Parent and Merger Sub
through their officers, employees or agents, may reasonably request. No additional investigations
or disclosures shall affect the Companys representations and warranties contained herein, or limit
or otherwise affect the remedies available to Parent and Merger Sub pursuant to this Agreement.
(b) The provisions of the Confidentiality Agreement, dated June 2, 2006, as amended, between
Parent and the Company (the
Company Confidentiality Agreement
) shall remain in full force and
effect in accordance with its terms.
40
SECTION 5.8
No Solicitation
.
(a) The Company agrees that from the date of this Agreement until the Effective Time or, if
earlier, the termination of this Agreement in accordance with its terms, the Company shall not, and
the Company shall cause its Company Subsidiaries and its and their respective officers, directors,
investment bankers, attorneys and other advisors and representatives not to (i) solicit, initiate,
or encourage the submission of, any Takeover Proposal (as hereinafter defined), (ii) approve or
recommend any Takeover Proposal, enter into any agreement, agreement-in-principle or letter of
intent with respect to or accept any Takeover Proposal (or resolve to or publicly propose to do any
of the foregoing), or (iii) participate or engage in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or knowingly take any action to facilitate
any inquiries or the making of any proposal that constitutes, or would reasonably be expected to
lead to, any Takeover Proposal;
provided, however
, that
(x) nothing contained in this
Section 5.8
shall prohibit the Company or its
Board of Directors from taking and disclosing to the Companys stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e 2
promulgated under the Exchange Act or from making any similar disclosure, if, in the good
faith judgment of the Board of Directors of the Company (after consultation with outside
counsel) failure so to disclose would violate its obligations under applicable law, and
provided further that the Board of Directors of the Company shall not recommend that the
stockholders of the Company tender their Company
Common Stock in connection with any such tender or exchange offer unless the Board of
Directors of the Company determines in good faith (after consultation with its financial
advisor and outside legal counsel) that such tender or exchange offer is a Superior
Proposal; and
(y) if, prior to this Agreement having been adopted by the Required Company Stockholder
Vote, the Company receives an unsolicited written Takeover Proposal from a third party that
the Board of Directors of the Company determines in good faith (after consultation with its
financial advisor and outside legal counsel) is, or is reasonably likely to result in, a
Superior Proposal, the Company and its representatives may conduct such additional
discussions (including solicitation of a revised Takeover Proposal) and provide such
information as the Board of Directors of the Company shall determine, but only if, prior to
such provision of such information or conduct of such additional discussions such third
party shall have entered into a confidentiality agreement in customary form that is no less
favorable to the Company, than the Company Confidentiality Agreement (except that such
confidentiality agreement need not contain any standstill or similar covenant and such
confidentiality agreement shall contain additional provisions that expressly permit the
Company to comply with the provisions of this
Section 5.8
); provided, that in the
event that the Company enters into a confidentiality agreement with a person making a
Takeover Proposal that does not include a standstill provision or contains a standstill
provision less favorable to the Company than the corresponding provision of the Company
Confidentiality Agreement, Parent and its affiliates shall, without further action by the
Company, be released from the standstill provision under Section 6 of the Company
Confidentiality Agreement to the extent necessary to render such standstill provision of
the Company Confidentiality
41
Agreement no more favorable to the Company than the
standstill, if any, applicable to the person making such Takeover Proposal.
(b) Notwithstanding any other provision of this Agreement, at any time prior to this Agreement
having been approved by the Required Company Stockholder Vote, the Board of Directors of the
Company (or the applicable committee thereof) may (i) (A) fail to make, withdraw (or amend or
modify in a manner adverse to Parent or Merger Sub), or publicly propose to withdraw (or amend or
modify in a manner adverse to Parent or Merger Sub), the recommendation or declaration of
advisability by the Company Board of this Agreement, the Merger or the other transactions
contemplated by this Agreement or (B) recommend, or publicly propose to recommend any Takeover
Proposal (any of the events in the foregoing clauses (A) and (B) being a
Change in the Company
Recommendation
), or (ii) to the extent permitted pursuant to and in compliance with
Section
7.1(f)
, allow the Company to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal, if in the case of any of the foregoing clauses (i) or (ii),
the Board of Directors of the Company determines in its good faith judgment, after consultation
with outside legal counsel it is required to do so in order to comply with its fiduciary duties
under applicable law.
(c) For purposes of this Agreement, (i)
Takeover Proposal
shall mean any inquiry, proposal
or offer from any Person (other than Parent, Merger Sub or any of their affiliates) relating to (A)
any acquisition, merger, consolidation, reorganization, share exchange, recapitalization,
liquidation, direct or indirect business combination, asset acquisition or other
similar transaction involving the Company or any Company Subsidiary of (x) assets or
businesses that constitute or represent 10% or more of the total revenue, operating income, EBITDAX
or assets of the Company and its Subsidiaries, taken as a whole immediately prior to such
transaction, or (y) 10% or more of the outstanding shares of Company Common Stock or any other
class of capital stock of the Company or capital stock of, or other equity or voting interests in,
any of the Companys Subsidiaries in each case other than the transactions contemplated by this
Agreement or (B) any purchase or sale of, or tender offer or exchange offer for, capital stock of
the Company or any Company Subsidiary that if consummated would result in any Person beneficially
owning 10% or more of any class of capital stock of the Company or any Company Subsidiary and (ii)
the term
Superior Proposal
means any bona fide written Takeover Proposal to effect a merger,
consolidation, reorganization, share exchange, tender offer, recapitalization, liquidation, direct
or indirect business combination, or other similar transaction as a result of which the Companys
stockholders cease to own at least 80% of the voting securities of the ultimate parent entity
resulting from such transaction or sale of all or substantially all of the assets of the Company,
which in any such case is on terms that the Board of Directors of the Company determines in its
good faith judgment (after consultation with its financial advisor and outside counsel), taking
into account all relevant factors, including any conditions to such Takeover Proposal, the timing
of the closing thereof, the risk of nonconsummation, the ability of the Person making the Takeover
Proposal to finance the transaction contemplated thereby, any required governmental or other
consents, filings and approvals, (A) would, if consummated, result in a transaction that is more
favorable to the Companys stockholders from a financial point of view than the transactions
contemplated by this Agreement (including the terms of any proposal by Parent to modify the terms
of the transactions contemplated by this Agreement) and (B) is reasonably likely to be financed and
otherwise completed without undue delay.
42
(d) Except as expressly permitted by
Section 5.8(a)
or
Section 5.8(b)
, neither
the Board of Directors of the Company nor any committee thereof shall effect any Change in the
Company Recommendation.
(e) In addition to the other obligations of the Company set forth in this
Section 5.8
,
the Company shall promptly (and in any event, within 48 hours) advise Parent orally and in writing
of any Takeover Proposal, any request for information with respect to any Takeover Proposal, or any
inquiry with respect to or which could result in a Takeover Proposal, the material terms and
conditions of such request, Takeover Proposal or inquiry, and the identity of the Person making the
same and shall at the time of such advice provide Parent with a copy of any written request or
Takeover Proposal or other document relating to a Takeover Proposal. The Company will keep Parent
promptly and fully informed of the status and details (including amendments) of any such request,
Takeover Proposal or inquiry and shall promptly provide Parent with a copy of any non-public
information furnished to the Person making such request, Takeover Proposal or inquiry.
(f) The Company shall immediately cease and cause to be terminated and shall cause its
affiliates and the Company Subsidiaries and its or their respective officers, directors, employees,
representatives and agents, to terminate all existing discussions or negotiations, if any, with any
Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, a
Takeover Proposal and will cause any such parties (and their agents or advisors) in
possession of confidential information regarding the Company or any of the Company
Subsidiaries to return or destroy such information.
SECTION 5.9
Indemnification and Insurance
.
(a) Parent and Merger Sub agree that all rights to indemnification by the Company now existing
in favor of 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 or director of the Company or any Company Subsidiary or an
employee of the Company or any Company Subsidiary who acts as a fiduciary under any of the Company
Employee Benefit Plans (each an
Indemnified Party
) as provided in the Companys certificate of
incorporation or bylaws, in each case as in effect on the date of this Agreement, or pursuant to
any other agreements in effect on the date hereof, copies of which have been provided to Parent,
including provisions relating to the advancement of expenses incurred in the defense of any action
or suit, shall survive the Merger and shall remain in full force and effect. From and after the
Effective Time, Parent and the Surviving Corporation shall be jointly and severally liable to pay
and perform in a timely manner such indemnification obligations.
(b) For six years after the Effective Time, to the full extent permitted under applicable law,
Parent and the Surviving Corporation (the
Indemnifying Parties
) shall jointly and severally
indemnify, defend and hold harmless each Indemnified Party against all losses, claims, damages,
liabilities, fees, expenses, judgments and fines arising in whole or in part out of actions or
omissions in their capacity as such occurring at or prior to the Effective Time (including in
respect of this Agreement), and will reimburse each Indemnified Party for any legal or other
expenses reasonably incurred by such Indemnified Party in connection with investigating or
defending any such losses, claims, damages, liabilities, fees, expenses,
43
judgments and fines as
such expenses are incurred; provided that nothing herein shall impair any rights to indemnification
of any Indemnified Party referred to in clause (a) above.
(c) Parent shall cause the Surviving Corporation to maintain the Companys officers and
directors liability insurance policies, in effect on the date of this Agreement (the
D&O
Insurance
), for a period of not less than six years after the Effective Time, but only to the
extent related to actions or omissions prior to the Effective Time; provided, that (i) the
Surviving Corporation may substitute therefor policies of at least the same coverage and amounts
containing terms no less advantageous to such former directors or officers and (ii) such
substitution shall not result in gaps or lapses of coverage with respect to matters occurring prior
to the Effective Time; provided, further, that in no event shall Parent or the Surviving
Corporation be required to expend more than an amount per year equal to 200% of current annual
premiums paid by the Company for such insurance (the
Maximum Amount
) to maintain or procure
insurance coverage pursuant hereto; provided, further, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation shall procure and maintain for such six-year period as much coverage as
reasonably practicable for the Maximum Amount. Parent shall have the right to cause coverage to be
extended under the Companys D&O Insurance by obtaining a six-year tail policy on terms and
conditions no less advantageous than the
Companys existing D&O Insurance, and such tail policy shall satisfy the provisions of this
Section 5.9(c)
.
(d) The obligations of Parent and the Surviving Corporation under this
Section 5.9
shall survive the consummation of the Merger and shall not be terminated or modified in such a
manner as to adversely affect any Indemnified Party to whom this
Section 5.9
applies
without the consent of such affected Indemnified Party (it being expressly agreed that the
Indemnified Parties to whom this
Section 5.9
applies shall be third party beneficiaries of
this
Section 5.9
, each of whom may enforce the provisions of this
Section 5.9
).
(e) If Parent or the Surviving Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other Person and shall not be the continuing or Surviving
Corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Parent or the Surviving Corporation, as the case may, be
shall assume the obligations set forth in this
Section 5.9
.
SECTION 5.10
State Takeover Laws
.
If any fair price, moratorium, control share acquisition, business combination or
other takeover statute or similar statute or regulation, applies or purports to apply to this
Agreement and the Merger or the other transactions contemplated by this Agreement, each of Parent,
Merger Sub and the Company shall (a) take all reasonable action to ensure that such transactions
may be consummated as promptly as practicable upon the terms and subject to the conditions set
forth in this Agreement and (b) otherwise act to eliminate the effects of such takeover statute,
law or regulation.
44
SECTION 5.11
Expenses
.
Subject to Section 7.3, each party shall bear solely and entirely, all Expenses (as defined
below) that they incur;
provided, however
, that if this Agreement is terminated and the Termination
Fee is payable as a result thereof, then the allocable share of the Company and Parent for all
Expenses related to preparing, printing, filing and mailing the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Proxy Statement, the HSR Act and the
Competition Act shall be allocated one-half each. As used in this Agreement, the term
Expenses
means all reasonable out-of-pocket expenses (including all reasonable fees and expenses of outside
counsel, accountants, financing sources, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection with or related to
the due diligence, authorization, preparation, negotiation, execution and performance of this
Agreement, the preparation, printing, filing and mailing of the Proxy Statement, the solicitation
of the Required Company Stockholder Vote, and all other matters related to the consummation of the
Merger (subject to reasonable documentation).
SECTION 5.12
Board Membership
.
Subject to the approval of the Nominating and Corporate Governance Committee of Parents Board
of Directors in accordance with Parents governance practices and procedures, Parent shall take
such action as is necessary to cause Luke R. Corbett to be appointed to the Board of Directors of
Parent effective as of or promptly after the Effective Time, to serve until the earlier of such
individuals resignation or removal or until his successor is duly elected and qualified in
accordance with the certificate of incorporation and bylaws of Parent. Mr. Corbett shall be
designated to the class of directors of Parent whose term expires at Parents 2008 Annual
Stockholders Meeting.
ARTICLE VI
CONDITIONS
Section 6.1
Conditions to Each Partys Obligation To Effect the Merger
.
The respective obligations of each party to effect the Merger are subject to the satisfaction
or, to the extent permitted by applicable law, waiver on or prior to the Closing Date of each of
the following conditions:
(a)
Stockholder Approval
. This Agreement shall have been adopted by the Required
Company Stockholder Vote.
(b)
HSR Act and Competition Act
. The waiting period (and any extension thereof)
applicable to the Merger and the other transactions contemplated by this Agreement under the HSR
Act and, if required, the Competition Act shall have been terminated or shall have expired.
(c)
No Injunctions or Restraints
. No preliminary injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a Governmental Authority, nor any statute,
rule, regulation or executive order promulgated or enacted by any Governmental Authority, shall be
in effect that would make the Merger illegal or otherwise prevent the consummation thereof.
45
SECTION 6.2
Conditions to Obligations of Parent and Merger Sub
.
The obligations of Parent and Merger Sub to effect the Merger are further subject to the
satisfaction or, to the extent permitted by applicable law, the waiver of each of the following
conditions:
(a)
Representations and Warranties
. The representations and warranties of the Company
set forth herein shall be true and correct as of the date hereof and as of the Closing Date, with
the same effect as if made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect to any threshold or
any limitation or qualifier as to materiality or Company Material Adverse Effect or words of
similar import set forth therein) does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and Parent shall have received
a certificate signed on behalf of the Company by the chief executive officer and 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, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of the Company to such
effect.
(c)
Resignations of Directors
. Each of the directors of the Company shall have
resigned as of the Effective Time and such resignations shall have been delivered to Parent.
SECTION 6.3
Conditions to Obligation of the Company
.
The obligations of the Company to effect the Merger are further subject to the satisfaction
or, to the extent permitted by applicable law, the waiver of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Parent set
forth herein shall be true and correct as of the date hereof and as of the Closing Date, with the
same effect as if made at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any threshold or any limitation or
qualifier as to materiality or Parent Material Adverse Effect or words of similar import set
forth therein) does not have, and would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, and the Company shall have received a certificate
signed on behalf of each of Parent and Merger Sub by the respective chief executive officer and the
chief financial officer of each such entity to such effect.
(b)
Performance of Obligations of Parent and Merger Sub
. Each of Parent and Merger
Sub shall have performed in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of each of Parent and Merger Sub by the respective chief executive
officer and the chief financial officer of each such entity to such effect.
46
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1
Termination
.
This Agreement may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after this Agreement has been adopted by the Required Company
Stockholder Vote:
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by either the Company or Parent, if the Merger has not been consummated by the first
Business Day in 2007, or such later date, if any, as is provided in
Section 5.1(b)
hereof
(the
Termination Date
);
provided, however
, that the right to terminate this Agreement under this
Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) by either the Company or Parent, if any judgment, order, decree, statute, law, ordinance,
rule, regulation or other legal restraint or prohibition having the effects set forth in
Section 6.1(c)
shall be in effect and shall have become final and nonappealable; provided,
that the party seeking to terminate this Agreement pursuant to this clause 7.1(c) shall have used
those efforts required hereunder to resist, lift or resolve such judgment, order, decree, statute,
law, ordinance, rule, regulation or other legal restraint or prohibition;
(d) by either the Company or Parent, if upon a vote at a duly held Company Stockholders
Meeting, the Required Company Stockholder Vote shall not have been obtained; provided, that Parent
may not terminate this Agreement pursuant to this Section 7.1(d) if Parent or Merger Sub is in
breach of its obligations pursuant to
Section 5.1(c)
;
(e) by Parent, if at any time prior to this Agreement having been approved by the Required
Company Stockholder Vote, the Board of Directors of the Company shall have effected a Change in the
Company Recommendation;
(f) by the Company, if at any time prior to this Agreement having been approved by the
Required Company Stockholder Vote:
(i) the Company shall not have breached
Section 5.8
,
(ii) the Board of Directors of the Company has received a Superior Proposal, and
authorizes the Company to enter into a binding written agreement concerning such transaction
that constitutes such Superior Proposal and the Company notifies Parent in writing that it
intends to enter into such an agreement, attaching the most current version of such
agreement to such notice,
(iii) Parent does not make, within 72 hours of receipt of the Companys written
notification of its intention to enter into such agreement, an offer that the Board of
Directors of the Company determines, in its good faith judgment (after consultation with
47
its
financial advisor and outside legal counsel) is at least as favorable to the Companys
stockholders from a financial point of view as the Superior Proposal (it being understood
and agreed that any amendment to the price or any other material term of a Superior Proposal
will require a new notification from the Company to Parent and a new 72 hour period), and
(iv) the Company concurrently with such termination pays to Parent in immediately
available funds the Termination Fee and the Expense Fee pursuant to
Section 7.3
;
(g) by Parent, if the Company shall have breached or failed to perform in any material respect
any of its representations, warranties, covenants or other agreements contained in this Agreement,
which breach or failure to perform (A) would give rise to the failure of a condition set forth in
Section 6.2(a)
or
Section 6.2(b)
), and (B) is incapable of being cured or has not
been cured by the Company within 30 calendar days after written notice has been given by Parent to
the Company of such breach or failure to perform (
Company Breach
); or
(h) by the Company, if Parent shall have breached or failed to perform in any material respect
any of its representations, warranties, covenants or other agreements contained in this Agreement,
which breach or failure to perform (A) would give rise to the failure of a condition set forth in
Section 6.3(a)
or
Section 6.3(b)
, and (B) is incapable of being cured or has not
been cured by the Parent within 30 calendar days after written notice has been given by the Company
to Parent of such breach or failure to perform.
The party desiring to terminate this Agreement shall give written notice of such termination
to the other party.
SECTION 7.2
Effect of Termination
.
Upon the termination of this Agreement pursuant to and in accordance with
Section 7.1
,
this Agreement shall forthwith become null and void except for the provisions of (i)
Section
7.3
, (ii) the last sentence of
Section 5.6
, and (iii)
Article VIII
, which shall
survive such termination; provided that nothing herein shall relieve any party from liability for
any intentional breach of a covenant or representation or warranty in this Agreement prior to such
termination. In addition, the provisions of the Company Confidentiality Agreement remain in full
force and effect in accordance with its terms and shall not be affected by the termination of this
Agreement.
SECTION 7.3
Fees and Expenses
.
(a) If this Agreement is terminated pursuant to
Section 7.1(e)
, the Company shall
promptly, but in no event later than one Business Day after termination of this Agreement, pay
Parent a fee in immediately available funds of $493,000,000 (the
Termination Fee
).
(b) If this Agreement is terminated pursuant to
Section 7.1(f)
, the Company shall pay
such Termination Fee concurrently with such termination.
(c) If (A) a Takeover Proposal in respect of the Company is publicly announced or is proposed
or offered or made to the Company or the Companys stockholders prior to this
48
Agreement having been
approved by the Required Company Stockholder Vote, (B) this Agreement is terminated by either
party, as applicable, pursuant to
Section 7.1(b)
or
Section 7.1(d)
and (C) within 12 months following such termination the Company shall
consummate or enter into, directly or indirectly, an agreement with respect to a transaction
constituting a Takeover Proposal, the Company shall promptly, but in no event later than one
Business Day after such consummation or, if earlier, entry into such agreement, pay Parent the
Termination Fee. For purposes of this
Section 7.3(c)
, such reference to 10% in the
definition of Takeover Proposal shall be replaced with a reference to 50%.
(d) If (A) Parent terminates this Agreement under
Section 7.1(g)
or
Section
7.1(b)
at a time that a Company Breach exists and (B) within 12 months following such
termination the Company shall consummate or enter into, directly or indirectly, an agreement with
respect to a transaction constituting a Takeover Proposal, then the Company shall promptly, but in
no event later than one Business Day after such consummation or, if earlier, entry into such
agreement, pay Parent the Termination Fee. For purposes of this
Section 7.3(d)
, each
reference to 10% in the definition of Takeover Proposal shall be replaced with a reference to
50%.
(e) Except as set forth in this
Section 7.3
and
Section 5.11
, all Expenses
incurred in connection with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expenses, whether or not the Merger is consummated; provided that if
this Agreement is terminated and the Termination Fee is payable as a result thereof, in addition to
the payment of the Termination Fee, the Company shall reimburse Parent for, all Expenses in
connection with this Agreement and the transactions contemplated hereby, upon to a maximum of
$10,000,000 incurred by Parent (the
Expense Fee
) which Expense Fee shall be payable at the same
time as the Termination Fee.
(f) Notwithstanding anything to the contrary contained herein, receipt by Parent of a
Termination Fee and required Expense Fee under
Section 7.3
shall constitute full settlement
of any and all liabilities of the Company for damages under this Agreement in respect of a
termination of this Agreement.
SECTION 7.4
Amendment
.
This Agreement may be amended by the parties hereto, at any time before or after approval of
this Agreement and the transactions contemplated hereby by action by or on behalf of the respective
Boards of Directors of the parties hereto or the stockholders of the Company;
provided, however
,
that after any such approval by the stockholders of the Company, no amendment shall be made that in
any 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.
SECTION 7.5
Waiver
.
Any failure of any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived at any time prior to the Effective Time by any of the parties
entitled to the benefit thereof only by a written instrument signed by each such party
granting
49
such waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement or condition shall not operate as a
waiver of or estoppel with respect to, any subsequent or other failure.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1
Notices
.
All notices and other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, mailed by certified mail (return receipt requested) or
sent by overnight courier or by telecopier (upon confirmation of receipt) to the parties at the
following addresses or at such other addresses as shall be specified by the parties by like notice:
(a) if to Parent or Merger Sub:
Anadarko Petroleum Corporation
1201 Lake Robbins Drive
The Woodlands, Texas 77380
Attention: Robert K. Reeves
Fax: (832) 636-3214
with a copy to:
Akin Gump Strauss Hauer & Feld LLP
1111 Louisiana Street, 44th Floor
Houston, Texas 77002-5200
Attention: Michael E. Dillard, P.C.
Julien R. Smythe, Esq.
Fax: (713) 236-0822
(b) if to the Company:
Kerr-McGee Corporation
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102
Attention: General Counsel
Fax: (405) 270-3649
with a copy to:
Covington & Burling
1330 Avenue of the Americas
New York, New York 10019
50
Attention: Scott F. Smith, Esq.
Fax: (212) 841-1010
Notice so given shall (in the case of notice so given by mail) be deemed to be given when
received and (in the case of notice so given by cable, telegram, telecopier, telex or personal
delivery) on the date of actual transmission or (as the case may be) personal delivery.
SECTION 8.2
Representations and Warranties
.
The representations and warranties contained in this Agreement shall not survive the Merger.
SECTION 8.3
Knowledge Qualifiers
.
To the knowledge of the Company and similar phrases mean the actual knowledge of the
individuals described in
Section 8.3
of the Company Disclosure Letter.
SECTION 8.4
Interpretations
.
When a reference is made in this Agreement to an Article, Section or Exhibit, such reference
shall be to an Article, Section or Exhibit to this Agreement unless otherwise indicated. The words
include, includes and including when used herein shall be deemed in each case to be followed
by the words without limitation. Any references in this Agreement to the date hereof refers to
the date of execution of this Agreement. 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.
SECTION 8.5
Governing Law; Jurisdiction
(a)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF. EXCEPT THAT THE CONSUMMATION AND EFFECTIVENESS OF THE MERGER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
(b) Each of the parties hereto (i) consents to submit itself to the personal jurisdiction of
the Delaware Court of Chancery in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees
that it will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the Delaware Court of Chancery, and (iv)
waives any right to trial by jury with respect to any action related to or arising out of this
Agreement or any of the transactions contemplated hereby.
51
SECTION 8.6
Counterparts; Facsimile Transmission of Signatures
.
This Agreement may be executed in any number of counterparts and by different parties hereto
in separate counterparts, and 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 one and the same agreement.
SECTION 8.7
Assignment; No Third Party Beneficiaries
.
(a) This Agreement and all of the provisions hereto shall be binding upon and inure to the
benefit of, and be enforceable by, the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or obligations set forth
herein shall be assigned by any party hereto without the prior written consent of the other parties
hereto and any purported assignment without such consent shall be void.
(b) Nothing in this Agreement shall be construed as giving any Person, other than the parties
hereto and their heirs, successors, legal representatives and permitted assigns, any right, remedy
or claim under or in respect of this Agreement or any provision hereof, except that after the
Effective Time, (i) each holder of an Option, Performance Unit or Restricted Stock is intended to
be a third party beneficiary of
Section 1.8
only and may specifically enforce its terms and
(ii) each Indemnified Party is intended to be a third party beneficiary of
Section 5.9
and
may specifically enforce its terms.
SECTION 8.8
Severability
.
If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under
any applicable law, then such contravention or invalidity shall not invalidate the entire
Agreement. Such provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and enforced accordingly.
SECTION 8.9
Entire Agreement
.
This Agreement and the Company Confidentiality Agreement contain all of the terms of the
understandings of the parties hereto with respect to the subject matter hereof.
SECTION 8.10
Enforcement
.
The parties agree that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in addition to any other remedy to which they are entitled.
[The remainder of this page is intentionally blank.]
52
IN WITNESS WHEREOF
, Parent, Merger Sub and the Company have caused this Agreement to be
executed as of the date first written above.
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ANADARKO PETROLEUM CORPORATION
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By:
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/s/ James T. Hackett
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Name:
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James T. Hackett
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Title:
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Chairman of the Board, President and
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Chief Executive Officer
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KERR-MCGEE CORPORATION
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By:
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/s/ Luke R. Corbett
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Name:
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Luke R. Corbett
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Title:
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Chairman and Chief Executive Officer
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APC ACQUISITION SUB, INC.
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By:
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/s/ James T. Hackett
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Name:
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James T. Hackett
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Title:
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Chairman of the Board, President and
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Chief Executive Officer
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