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Exhibit 2.1
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
STONE ENERGY CORPORATION (PARENT)
STONE ENERGY OFFSHORE, L.L.C. (MERGER SUB)
and
BOIS D’ARC ENERGY, INC. (COMPANY)
dated as of
April 30, 2008
__________________________________________________
TABLE OF CONTENTS
ARTICLE I
THE MERGER
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF
CERTIFICATES
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(ii)
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
(iii)
ARTICLE V
COVENANTS
ARTICLE VI
CONDITIONS
ARTICLE VII
TERMINATION
ARTICLE VIII
MISCELLANEOUS
(iv)
TABLE OF DEFINED TERMS
(v)
(vi)
This
Agreement and Plan of Merger (this “ Agreement
”) dated April 30, 2008, by and among Stone Energy
Corporation, a Delaware corporation (“ Parent
”), Stone Energy Offshore, L.L.C., a Delaware limited
liability company and wholly owned Subsidiary of Parent
(“ Merger
Sub ”), and Bois d’Arc Energy, Inc., a
Nevada corporation (the “ Company
”). Certain capitalized terms not defined
herein are defined in Section 8.5 of this
Agreement.
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 the Company with and into
Merger Sub, upon the terms and subject to the conditions set
forth in this Agreement, and (ii) approved this
Agreement;
WHEREAS,
for U.S. federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions
of Section 368(a) of the U.S. Internal Revenue Code of 1986,
as amended (the “ Code
”); and
WHEREAS,
Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and to prescribe various conditions
to the Merger.
NOW,
THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants and
agreements contained in this Agreement, Parent, Merger Sub and
the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1
The Merger . Upon
the terms and subject to the satisfaction or (to the extent
permitted by applicable Law) waiver of the conditions set forth in
Article VI, at the Effective Time (as defined below), the Company
shall merge with and into Merger Sub (the “ Merger
”),
the separate existence of the Company shall thereupon cease and
Merger Sub shall be the surviving entity in the Merger (sometimes
referred to herein as the “ Surviving
Entity ”) as a wholly owned Subsidiary of
Parent. The Merger shall have the effects set forth in
the Delaware Limited Liability Company Act (the “
DLLCA ”) and the Nevada Revised Statutes (the “
NRS
”), including the Surviving Entity’s succession to and
assumption of all rights and obligations of Merger Sub and the
Company.
1.2
Effective Time of the Merger . Upon
the terms and subject to the provisions of this Agreement, at the
Closing, Parent, Merger Sub and the Company will cause (i) an
appropriate Certificate of Merger (the “ Certificate
of Merger ”) to be executed and filed with the
Secretary of State of the State of Delaware (the “
Delaware
Secretary of State ”) in such form and executed as
provided in the DLLCA and (ii) appropriate Articles of Merger (the
“ Articles
of Merger ”) to be executed and filed with the
Secretary of State of the State of Nevada (the “ Nevada
Secretary of State ”) in such form and executed as
provided in the NRS. The Merger shall become effective
(the “ Effective
Time ”) upon the later of (i) the date and time of
filing of a properly executed Certificate of Merger with the
Delaware Secretary of State in accordance with the DLLCA and
properly executed Articles of Merger with the Nevada Secretary of
State in accordance with the NRS, and (ii) such time as the parties
shall agree and as specified in the Certificate of Merger and
Articles of Merger. The filing of the Certificate of
Merger and Articles of Merger referred to above shall be made as
soon as practicable on the Closing Date set forth in Section
1.3.
1.3
Closing . The
closing (the “ Closing
”) of the transactions contemplated by this Agreement will
take place at 10:00 a.m. (local 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 Vinson & Elkins L.L.P., 1001 Fannin, Houston,
Texas 77002 unless another time, date or place is agreed to in
writing by the parties hereto (such date upon which the Closing
occurs, the “ Closing
Date ”).
1.4
Certificate of Formation . Pursuant
to the Merger, the Certificate of Formation of Merger Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Formation of the Surviving Entity until thereafter changed or
amended in accordance with the Limited Liability Company Agreement
of the Surviving Entity and the DLLCA.
1.5
Limited Liability Company Agreement . Pursuant
to the Merger, the Limited Liability Company Agreement of Merger
Sub in effect immediately prior to the Effective Time shall be the
Limited Liability Company Agreement of the Surviving Entity at and
after the Effective Time until thereafter amended in accordance
with the terms thereof and the DLLCA.
1.6
Directors and Officers . At
and after the Effective Time, the directors and officers of Merger
Sub shall be the directors and officers, respectively, of the
Surviving Entity until their respective successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving
Entity’s Limited Liability Company Agreement and the
DLLCA.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF
CERTIFICATES
2.1
Effect of the Merger . At
the Effective Time, by virtue of the Merger and without any action
on the part of any party or the holder of any of their
securities:
(a)
Membership Interests of Merger Sub . The issued
and outstanding membership interests of Merger Sub shall remain
issued and outstanding and unchanged, and the sole member shall
remain the sole member of Merger Sub.
(b)
Capital Stock of the Company . Subject to the
other provisions of this Article II, each share of common stock of
the Company, par value $0.01 per share (the “ Company
Common Stock ” ), issued and
outstanding immediately prior to the Effective Time (excluding any
shares of Company Common Stock described in Section 2.1(d)) shall
be converted into the right to receive (i) 0.165 shares of the
common stock of Parent, par value $0.01 per share (the “
Parent
Common Stock ”), together with the Parent Rights
associated therewith (the “ Per Share
Stock Consideration ”), and (ii) cash in an amount
equal to $13.65, without interest (the “ Per Share
Cash Consideration ;” the Per Share Cash Consideration
together with the Per Share Stock Consideration are herein referred
to as the “ Merger
Consideration ”).
2
(c)
Certificates . All such shares of Company Common
Stock, when so converted, shall cease to be outstanding and shall
automatically be canceled and cease to exist. Each
holder of a certificate (a “ Certificate
”) previously representing any such shares shall cease to
have any rights with respect thereto, except the right to receive
(i) the Merger Consideration, (ii) any dividends or other
distributions in accordance with Section 2.4, and (iii) any cash to
be paid in lieu of any fractional shares of Parent Common Stock in
accordance with Section 2.4, in each case to be issued or paid in
consideration therefor upon the surrender of such Certificates in
accordance with Section 2.4.
(d)
Treasury Stock . All shares of Company Common
Stock held by the Company as treasury shares or by Parent or Merger
Sub or by any Subsidiary of Parent, Merger Sub or the Company
immediately prior to the Effective Time shall automatically be
canceled and cease to exist as of the Effective Time and no
consideration shall be delivered or deliverable
therefor.
(e)
Impact of Stock Splits, Etc . If, between the
date of this Agreement and the Effective Time, the shares of Parent
Common Stock or Company Common Stock shall be changed or proposed
to be changed into a different number or class of shares by reason
of the occurrence of or record date with respect to any
reclassification, recapitalization, split-up, combination, exchange
of shares or similar readjustment, in any such case within such
period, or a stock dividend thereon shall be declared with a record
date within such period, appropriate adjustments shall be made to
the Per Share Stock Consideration, and only with respect to changes
in the outstanding shares of Company Common Stock, to the Per Share
Cash Consideration. Nothing in this Section 2.1(e) shall
be construed to permit any party to take any action that is
otherwise prohibited or restricted by any other provision of this
Agreement.
2.2
No Dissenters’ Rights . Pursuant
to Section 92A.390 of the NRS, no dissenters’ rights or
rights of appraisal will apply in connection with the
Merger.
2.3
Treatment of Stock Options; Restricted Stock .
(a)
Prior
to the Effective Time, the Company, the Company Board and the
Compensation Committee of the Company Board (the “
Committee
”) shall take all actions necessary under the Company’s
Amended and Restated Long-Term Incentive Plan (the “
Stock
Plan ”) to cause each option to purchase shares of
Company Common Stock granted under the Stock Plan that is
outstanding immediately prior to the Effective Time (a “
Company
Option ”) to be cancelled at the Effective Time by
virtue of the Merger and without any action on the part of the
holder thereof, the Company, Parent or Merger Sub. Each
Company Option shall be converted into the right to receive, from
the Surviving Entity, within two Business Days following the
Effective Time, an amount (the “ Option
Amount ”) (less any applicable withholding Taxes and
without interest) equal to the excess of (A) the number of shares
of Company Common Stock subject to such Company Option multiplied
by the Merger Consideration; provided however that for purposes of
this Section 2.3(a) only, the Per Share Stock Consideration portion
of the Merger Consideration shall be determined using the average
closing sales price of Parent Common Stock as reported by
The Wall
Street Journal for the five trading days
immediately preceding the two Business Days prior to the date on
which the Effective Time shall occur (such value, the “
Section
2.3 Parent Common Stock Value ”, over (B) the per
share exercise price of such Company Option multiplied by the
number of shares of Company Common Stock subject to such Company
Option. The Option Amount Cash Percentage of the Option
Amount shall be paid in cash. The Option Amount Stock
Percentage of the Option Amount shall be paid in the form of Parent
Common Stock utilizing the Section 2.3 Parent Common Stock
Value. The “ Option
Amount Cash Percentage ”shall be the quotient
(expressed as a percentage) of the Per Share Cash Consideration
divided by the sum of the Per Share Cash Consideration and the
Section 2.3 Parent Common Stock Value. The “
Option
Amount Stock Percentage ” shall equal 100% less the
Option Amount Cash Percentage. As of the Effective Time,
all Company Options shall automatically cease to exist, and each
holder of a Company Option shall cease to have any rights with
respect thereto, except, with respect to Company Options, the right
to receive payment of the Option Amount. Prior to the
Effective Time, the Company, the Company Board and the Committee
shall take all actions necessary under the Stock Plan, the award
agreements thereunder and otherwise to effectuate the provisions of
this Section 2.3(a), including providing notice to the holders of
Company Options of such provisions
3
(b)
Subject
to the terms and upon the conditions herein, as of the Effective
Time, the restrictions on each restricted share of Company Common
Stock (the “ Company
Restricted Stock ”) granted and then outstanding under
the Stock Plan shall, and without any action on the part of the
holder thereof, the Company, Parent or Merger Sub, lapse, and each
such share of Company Restricted Stock shall be fully vested in
each holder thereof at such time, and each such share of Company
Restricted Stock will be treated at the Effective Time the same as,
and have the same rights and be subject to the same conditions, as
each share of Company Common Stock not subject to any restrictions;
provided, that upon vesting the holder may satisfy the applicable
withholding Tax obligations by returning to the Surviving Entity or
Parent a sufficient number of shares of Company Common Stock equal
in value to such obligation. Prior to the Effective
Time, the Company, the Company Board and the Committee shall take
all actions necessary under the Stock Plan, the award agreements
thereunder and otherwise to effectuate this Section
2.3(a).
(c)
Except
as contemplated by clauses (a) and (b) above, the Surviving Entity
and Parent shall be entitled to deduct and withhold, or cause the
Exchange Agent to deduct and withhold, from the consideration
otherwise payable pursuant to this Section 2.3 to any holders of
Company Options or Company Restricted Stock such amounts as it may
be required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or
foreign Tax Law. To the extent that amounts are so
withheld by the Surviving Entity, Parent or the Exchange Agent, as
the case may be, the withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holders of
Company Options or Company Restricted Stock, as applicable, in
respect of which the deduction and withholding was made by the
Surviving Entity, Parent or the Exchange Agent, as the case may be.
The Surviving Entity and Parent agree that no wage withholding
shall be made with respect to Restricted Stock with respect to
which a valid and timely election has been made under Section 83(b)
of the Code unless required by applicable Law.
4
2.4
Exchange of Certificates .
(a)
Exchange Agent . Prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with the
Company’s transfer agent or a bank or trust company
designated by Parent and reasonably satisfactory to the Company
(the “ Exchange
Agent ”), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, sufficient cash and Parent Common
Stock to make pursuant to this Article II all deliveries of cash
and Parent Common Stock as required by this Article
II. Parent agrees to make available to the Exchange
Agent, from time to time as needed, cash sufficient to pay any
dividends and other distributions pursuant to Section 2.4(c) and to
make payments in lieu of fractional shares pursuant to Section
2.4(e). Any cash and Parent Common Stock deposited with
the Exchange Agent (including as payment for fractional shares in
accordance with Section 2.4(e) and any dividends or other
distributions in accordance with Section 2.4(c)) shall hereinafter
be referred to as the “ Exchange
Fund .” The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration
contemplated to be paid for shares of Company Common Stock pursuant
to this Agreement out of the Exchange Fund. Except as
contemplated by Sections 2.4(c) and 2.4(e) hereof, the Exchange
Fund shall not be used for any other purpose.
(b)
Exchange Procedures . Promptly after the
Effective Time, Parent shall instruct the Exchange Agent to mail to
each record holder, as of the Effective Time, of an outstanding
Certificate that immediately prior to the Effective Time
represented shares of Company Common Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent, and
shall be in customary form and agreed to by Parent and the Company
prior to the Effective Time) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the
Merger Consideration payable in respect of the shares of Company
Common Stock represented by such Certificates. Promptly
after the Effective Time, upon surrender of Certificates for
cancellation to the Exchange Agent together with such letters of
transmittal, properly completed and duly executed, and such other
documents as may be required pursuant to such instructions, the
holders of such Certificates shall be entitled to receive in
exchange therefor (A) shares of Parent Common Stock representing,
in the aggregate, the whole number of shares of Parent Common Stock
that such holder has the right to receive pursuant to Section 2.1
(after taking into account all shares of Company Common Stock then
held by such holder) and (B) a check in the amount equal to the
aggregate amount of cash that such holder has the right to receive
pursuant to Section 2.1 and this Article II, including cash payable
in lieu of any fractional shares of Parent Common Stock pursuant to
Section 2.4(e) and dividends and other distributions pursuant to
Section 2.4(c). No interest shall be paid or accrued on
any Merger Consideration, cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of
Certificates. In the event of a transfer of ownership of
shares of Company Common Stock which is not registered in the
transfer records of the Company, the Merger Consideration payable
in respect of such shares of Company Common Stock may be paid to a
transferee if the Certificate representing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and the
Person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other Taxes required by reason of the
delivery of the Merger Consideration in any name other than that of
the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such Taxes
have been paid or are not payable. Until surrendered as
contemplated by this Section 2.4, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration payable in
respect of the shares of Company Common Stock represented by such
Certificate, cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.4(e)
and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.4(c).
5
(c)
Distributions with Respect to Unexchanged Parent Common
Stock . No dividends or other distributions
declared or made with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Parent Common Stock
that such holder would be entitled to receive upon surrender of
such Certificate and no cash payment in lieu of fractional shares
of Parent Common Stock shall be paid to any such holder until such
holder shall surrender such Certificate in accordance with this
Section 2.4. Subject to applicable Law, following
surrender of any such Certificate, there shall be paid to such
holder of Parent Common Stock issuable in exchange therefor,
without interest, (i) promptly after the time of such surrender,
the amount of any cash due pursuant to Section 2.1 and cash payable
in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.4(e) and the amount of
dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to the Parent Common
Stock and payable with respect to such Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such
surrender payable with respect to such Parent Common
Stock.
(d)
Further Rights in Company Common Shares
. The Merger Consideration issued upon conversion of a
share of Company Common Stock in accordance with the terms hereof
(including any cash paid pursuant to Section 2.4(c) or Section
2.4(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such share of Company Common
Stock.
(e)
Fractional Shares . No certificates or scrip or
Parent Common Stock representing fractional shares of Parent Common
Stock or book entry credit of the same shall be issued upon the
surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to have any
rights as a holder of any Parent Common
Stock. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock exchanged
in the Merger who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into
account all Certificates delivered by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to the
product of (i) the average of the closing sale prices of Parent
Common Stock on the NYSE as reported by The Wall Street
Journal for the five trading days immediately preceding the
two Business Days prior to the date on which the Effective Time
shall occur and (ii) the fraction of a share of Parent Common Stock
that such holder would otherwise be entitled to receive pursuant to
Section 2.1 hereof. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders
of fractional interests, the Exchange Agent shall so notify Parent,
and Parent shall, or shall cause the Surviving Entity to, deposit
such amount with the Exchange Agent and shall cause the Exchange
Agent to forward payments to such holders of fractional interests
subject to and in accordance with the terms
hereof.
6
(f)
Termination of Exchange Fund . Any portion of the
Exchange Fund which remains undistributed to the holders of Company
Common Stock after 180 days following
the Effective Time occurs shall be delivered to Parent
upon demand and, from and after such delivery to Parent, any former
holders of Company Common Stock who have not theretofore complied
with this Article II shall thereafter look only to Parent for the
Merger Consideration payable in respect of such shares of Company
Common Stock, any cash in lieu of fractional shares of Parent
Common Stock to which they are entitled pursuant to Section 2.4(e)
and any dividends or other distributions with respect to Parent
Common Stock to which they are entitled pursuant to Section 2.4(c),
in each case, without any interest thereon. Any amounts
remaining unclaimed by holders of shares of Company Common Stock
immediately prior to such time as such amounts would otherwise
escheat to or become the property of any governmental entity shall,
to the extent permitted by applicable Law, become the property of
Parent free and clear of any Liens, claims or interest of any
Person previously entitled thereto.
(g)
No Liability . Neither Parent nor the Surviving
Entity shall be liable to any holder of shares of Company Common
Stock for any such shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
(h)
Lost Certificates . If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such
Person of a bond, in such reasonable amount as Parent may direct,
as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall pay in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration payable in respect of the shares of Company Common
Stock represented by such Certificate, any cash in lieu
of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 2.4(e) and any dividends
or other distributions to which the holders thereof are entitled
pursuant to Section 2.4(c), in each case, without any interest
thereon.
(i)
Withholding . Each of Parent, the Surviving
Entity and the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as
Parent, the Surviving Entity or the Exchange Agent is required to
deduct and withhold under the Code or any provision of state,
local, or foreign Tax Law, with respect to the making of such
payment. To the extent that amounts are so withheld by
Parent, the Surviving Entity or the Exchange Agent, 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 whom such deduction and withholding was made by Parent, the
Surviving Entity or the Exchange Agent, as the case may
be.
7
(j)
Book Entry . All shares of Parent Common Stock to
be issued in the Merger shall be issued in book entry form, without
physical certificates.
2.5
Stock Transfer Books . At
the close of business on the date on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of
shares of Company Common Stock theretofore outstanding on the
records of the Company. From and after the close of
business on the date on which the Effective Time occurs, any
Certificates presented to the Exchange Agent, Parent or the
Surviving Entity for any reason shall be converted into the Merger
Consideration payable in respect of the shares of Company Common
Stock represented by such Certificates, any cash in lieu
of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 2.4(e) and any dividends
or other distributions to which the holders thereof are entitled
pursuant to Section 2.4(c), in each case, without any interest
thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as set forth in the disclosure letter delivered by the Company
to Parent at or prior to the execution and delivery of this
Agreement (the “ Company
Disclosure Letter ”) (each section of which
qualifies the correspondingly numbered representation,
warranty or covenant to the extent specified therein and such
other representations, warranties or covenants to the extent a
matter in such section is disclosed in such a way as to make
its relevance to such other representation, warranty or
covenant reasonably apparent), the Company represents and
warrants to Parent as follows:
3.1
Organization .
(a)
Each
of the Company and its Subsidiaries is a corporation or other
entity duly organized, validly existing, and in good standing (to
the extent such concept exists in such jurisdiction) under the Laws
of the jurisdiction of its incorporation or organization, and has
all requisite corporate or other power and authority to own, lease,
use and operate its properties and to carry on its business as it
is now being conducted.
(b)
Each
of the Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each
jurisdiction (to the extent such concepts exist in such
jurisdictions) where the character of the property owned, operated
or leased by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed or to be in good standing would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
(c)
The
Company has previously made available to Parent a complete, true
and correct copy of each of its articles of incorporation and
bylaws, in each case as amended (if so amended) to the date of this
Agreement, and has made available the certificate of incorporation,
bylaws or other organizational documents of each of its
Subsidiaries, in each case as amended (if so amended) to the date
of this Agreement. Neither the Company nor any of its
Subsidiaries is in violation of its articles or certificate of
incorporation, bylaws or other organizational
documents.
8
(d)
Section
3.1(d) of the Company Disclosure Letter sets forth a complete, true
and correct list of all of the Subsidiaries of the Company,
together with the jurisdiction of incorporation or organization of
each Subsidiary, the percentage of outstanding capital stock or
other equity interest of each Subsidiary held by the Company or any
other subsidiary and the names of the directors, managers and
officers of each Subsidiary. Except as disclosed in
Section 3.1(d) of the Company Disclosure Letter, the Company
does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable
for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or
entity. The respective certificates or articles of
incorporation and bylaws or other organizational documents of the
Subsidiaries of the Company do not contain any provision limiting
or otherwise restricting the ability of the Company to control its
Subsidiaries in any material respect.
(e)
All
names by which the Company previously conducted business or was
known are as listed in Section 3.1(e) of the Company
Disclosure Letter.
3.2
Capitalization .
(a)
The
authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share (the “ Company
Preferred Stock ”). As of April 29, 2008,
66,449,000 shares of Company Common Stock were issued and
outstanding (including 650,000 shares of unvested Company
Restricted Stock issued under the Stock Plan). As of the
date of this Agreement, (i) there are no shares of Company
Preferred Stock issued and outstanding or held in the treasury of
the Company, and (ii) 1,632,890 shares of Company Common Stock
are reserved for issuance in respect of future grants under the
Stock Plan. As of April 15, 2008, there are outstanding
Company Options to purchase an aggregate of 3,250,000 shares of
Company Common Stock. Since April 15, 2008, (i) no
shares of Company Common Stock have been issued, except pursuant to
Company Options outstanding on April 15, 2008, and (ii) no Company
Options have been granted. Neither the Company nor any
of its Subsidiaries directly or indirectly owns any shares of
Company Common Stock. No bonds, debentures, notes or
other indebtedness having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any
matters on which stockholders of the Company may vote are issued or
outstanding. All issued and outstanding shares of the
Company’s capital stock are, and all shares that may be
issued or granted pursuant to the exercise of Company Options will
be, when issued or granted in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The
issuance and sale of all of the shares of capital stock described
in this Section 3.2 have been in compliance with United States
federal and state securities Laws. Neither the Company
nor any of its Subsidiaries has agreed to register any securities
under the Securities Act of 1933, as amended (together with the
rules and regulations thereunder, the “ Securities
Act ”), or under any state securities Law or granted
registration rights to any individual or entity. Except
for the Company Options, as of the date of this Agreement, there
are no outstanding or authorized (x) options, warrants, preemptive
rights, subscriptions, calls or other rights, convertible
securities, agreements, claims or commitments of any character
obligating the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock or other equity
interest in the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity
interests, (y) contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any capital
stock of the Company or any of its Subsidiaries or any such
securities or agreements listed in clause (x) of this sentence, or
(z) voting trusts or similar agreements to which the Company
or any of its Subsidiaries is a party with respect to the voting of
the capital stock of the Company or any of its
Subsidiaries. The Company has previously provided to
Parent true and correct information with respect to each Company
Option outstanding as of the date of this Agreement including:
(i) the name of the holder; (ii) the particular plan pursuant
to which the Company Option was granted; (iii) the number of
shares of Company Common Stock subject to such Company Option; (iv)
with respect to each Company Option, the exercise price per share
of Company Common Stock; (v) the date on which such Company
Option was granted or issued; (vi) the applicable vesting
schedule; (vii) the date on which such Company Option expires;
and (viii) whether the exercisability of such Company Option
will be accelerated in any way by the transactions contemplated by
this Agreement. Immediately after the consummation of
the Merger, there will not be any outstanding subscriptions,
options, warrants, calls, preemptive rights, subscriptions, or
other rights, convertible or exchangeable securities, agreements,
claims or commitments of any character by which the Company or any
of its Subsidiaries will be bound calling for the purchase or
issuance of any shares of the capital stock of the Company or any
of its Subsidiaries or securities convertible into or exchangeable
for such shares or any other such securities or
agreements.
9
(b)
(i)
All of the issued and outstanding shares of capital stock (or
equivalent equity interests of entities other than corporations) of
each of the Company’s Subsidiaries are owned, directly or
indirectly, by the Company free and clear of any Liens, other than
(x) statutory Liens for Taxes not yet due and payable,
(y) such restrictions as may exist under applicable Law, and
(z) Liens granted pursuant to the Company’s Credit
Agreement, dated May 11, 2005, as amended, among the Company
and each of the lenders party thereto (the “ Company
Credit Agreement ”), and all such shares or other
ownership interests have been duly authorized, validly issued and
are fully paid and non-assessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof, and
(ii) neither the Company nor any of its Subsidiaries owns any
shares of capital stock or other securities of, or interest in, any
other Person, except for the securities of the Subsidiaries of the
Company, or is obligated to make any capital contribution to or
other investment in any other Person.
(c)
Except
for the Company Credit Agreement, no indebtedness of the Company or
any of its Subsidiaries contains any restriction (other than
customary notice provisions) upon (i) the prepayment of any
indebtedness of the Company or any of its Subsidiaries, (ii) the
incurrence of indebtedness by the Company or any of its
Subsidiaries, or (iii) the ability of the Company or any of its
Subsidiaries to grant any Lien on the properties or assets of the
Company or any of its Subsidiaries.
3.3
Authorization; Validity of Agreement . The
Company has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby, subject to approval of this Agreement by the
Company Required Vote. The adoption of this Agreement,
the approval of the Merger, the execution, delivery and performance
by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company (the
“ Company
Board ”). The Company Board has directed
that this Agreement and the transactions contemplated hereby be
submitted to the Company’s stockholders for approval at a
meeting of such stockholders and has recommended that the
stockholders of the Company approve this
Agreement. Except for the Company Required Vote, no
other corporate proceedings on the part of the Company are
necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation of the
transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and,
assuming due authorization, execution and delivery of this
Agreement by Parent and Merger Sub, constitutes a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforcement may be
subject to or limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other Laws, now or hereafter in
effect, affecting creditors’ rights generally and (ii) the
effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity). The Company Board has taken all action
necessary to render the provisions of Sections 78.411 to 78.444,
inclusive, of the NRS, that would prohibit the Merger or any other
“combination” (as defined in NRS 78.416), inapplicable
to this Agreement, the Merger and the other transactions
contemplated by this Agreement, and the Stockholder
Agreements.
10
3.4
No Violations; Consents and Approvals .
(a)
Except
as set forth in Section 3.4(a) of the Company Disclosure Letter,
neither the execution, delivery and performance of this Agreement
by the Company, nor the consummation by the Company of the Merger
or any other transactions contemplated hereby, will (i) violate or
conflict with any provision of the articles of incorporation or the
bylaws of the Company, or the articles or certificate of
incorporation, bylaws or similar governing documents of any of the
Company’s Subsidiaries, (ii) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of or a right of termination, cancellation,
modification or amendment under, accelerate the performance
required by, or result in the creation of any Lien upon any of the
respective properties or assets of the Company or any of its
Subsidiaries under, or result in the acceleration or trigger of any
payment, time of payment, vesting or increase in the amount of any
compensation or benefit payable pursuant to, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license,
contract, collective bargaining agreement, agreement or other
instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their
respective assets or properties may be bound, or (iii) assuming the
consents, approvals, orders, authorizations, registrations, filings
or permits referred to in Section 3.4(b) are duly and timely
obtained or made and the Company Required Vote has been obtained,
conflict with or violate any federal, state, provincial, local or
foreign order, writ, injunction, judgment, settlement, award,
decree, statute, law, rule or regulation (collectively, “
Laws
”) applicable to the Company, any of its Subsidiaries or any
of their respective properties or assets; except in the case of
clauses (ii) and (iii), for (A) the Company Credit Agreement, (B)
certain seismic license agreements and (C) such conflicts,
violations, breaches, defaults, losses, obligations, payments,
rights (if exercised) or Liens which individually or in the
aggregate have not had, and would not be reasonably likely to have
or result in, a Material Adverse Effect on the
Company.
11
(b)
No
material filing or registration with, declaration or notification
to, or order, authorization, consent or approval of, any federal,
state, provincial, local or foreign court, arbitral, legislative,
administrative, executive or regulatory authority or agency (a
“ Governmental
Entity ”) or any other Person is required to be
obtained or made by the Company or any of its Subsidiaries in
connection with the execution, delivery and performance of this
Agreement by the Company or the consummation by the Company of the
Merger or any other transactions contemplated hereby, except for
(i) compliance with any applicable requirements of the Exchange
Act, (ii) compliance with any applicable requirements of the
Securities Act, (iii) compliance with any applicable state
securities or “blue sky” or takeover Laws,
(iv) the adoption of this Agreement by the Company Required Vote,
(v) such filings, authorizations or approvals, or expiration or
termination of applicable waiting periods, as may be required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the “
HSR
Act ”), (vi) the filing of the Certificate of Merger
with the Delaware Secretary of State and the Articles of Merger
with the Nevada Secretary of State, (vii) compliance with any
applicable requirements under stock exchange rules, (viii) consents
or approvals of any Governmental Entity, which are normally
obtained after the consummation of this type of transaction, and
(ix) any such filing, registration, declaration, notification,
order, authorization, consent or approval that the failure to
obtain or make individually or in the aggregate would not be
reasonably likely to have or result in a Material Adverse Effect on
the Company.
3.5
SEC Reports and Financial Statements .
(a)
The
Company has timely filed with the Securities and Exchange
Commission (the “ SEC
”) all forms and documents required to be filed by it since
May 10, 2005 under the Securities Exchange Act of 1934, as
amended (the “ Exchange
Act ”), including (A) its Annual Reports on Form 10-K,
(B) its Quarterly Reports on Form 10-Q, (C) all proxy statements
relating to meetings of stockholders of the Company (in the form
mailed to stockholders), and (D) all other forms, reports and
registration statements required to be filed by the Company with
the SEC since May 10, 2005. The documents described
in clauses (A)-(D) above, in each case as amended (whether filed
prior to, on or after the date of this Agreement), are referred to
in this Agreement collectively as the “ Company
SEC Documents .” As of their respective
dates or, if amended and publicly available prior to the date of
this Agreement, as of the date of such amendment with respect to
those disclosures that are amended, the Company SEC Documents,
including the financial statements and schedules provided therein
or incorporated by reference therein, (x) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading and (y) complied in all material
respects with the applicable requirements of the Exchange Act, the
Securities Act, the Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley
Act ”) and other applicable Laws, as the case may be,
and the applicable rules and regulations of the SEC
thereunder. None of the Subsidiaries of the Company is
subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the
SEC, the NYSE, any stock exchange or any other comparable
Governmental Entity.
12
(b)
The
December 31, 2007 consolidated balance sheet of the Company (the
“ Company
Balance Sheet ”) and the related consolidated
statements of operations, changes in stockholders’ equity and
cash flows (including, in each case, the related notes, where
applicable), as reported in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 filed with
the SEC under the Exchange Act, fairly present (within the meaning
of the Sarbanes-Oxley Act), and the financial statements to be
filed by the Company with the SEC after the date of this Agreement
will fairly present (subject, in the case of unaudited statements,
to recurring audit adjustments normal in nature and amount), in all
material respects, the consolidated financial position and the
consolidated results of operations, cash flows and changes in
stockholders’ equity of the Company and its Subsidiaries as
of the respective dates or for the respective fiscal periods
therein set forth; each of such statements (including the related
notes, where applicable) complies, and the financial statements to
be filed by the Company with the SEC after the date of this
Agreement will comply, with applicable accounting requirements and
with the published rules and regulations of the SEC with respect
thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be
filed by the Company with the SEC after the date of this Agreement
will be, prepared in accordance with United States generally
accepted accounting principles (“ GAAP
”) consistently applied during the periods involved, except
as indicated in the notes thereto. The books and records
of the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and any other applicable legal
and accounting requirements and reflect only actual
transactions. Ernst & Young LLP is an independent
public accounting firm with respect to the Company and has not
resigned or been dismissed as independent public accountants of the
Company. Ernst & Young LLP has not indicated to the
Company that it has any material disagreements with the
Company’s accounting policies.
(c)
The
Company has not received any notice from the SEC that its
accounting policies are subject to review or investigation, except
for those comments previously issued by the SEC that have already
been resolved.
(d) Since
May 10, 2005, (A) the exercise price of each Company
Option has been no less than the Fair Market Value (as
defined under the terms of the respective Stock Plan under
which such Company Option was granted) of a share of Company
Common Stock as determined on the date of grant of such
Company Option, and (B) all grants of Company Options were
validly issued and properly approved by the Company Board (or
a duly authorized committee or subcommittee thereof) in
material compliance with applicable Law and recorded in the
Company’s financial statements referred to in Section
3.5(b) in accordance with GAAP, and no such grants involved
any “back dating,” “forward dating”
or similar practices with respect to the effective date of
grant.
3.6
Oil and Gas .
(a)
The
Company has furnished to Parent a reserve report prepared
by Lee Keeling and Associates, Inc. containing estimates of
the oil and gas reserves that are owned by the Company and its
Subsidiaries as of December 31, 2007 (the “ Company
Reserve Report ”). The factual,
non-interpretive data relating to the Oil and Gas Interests of
the Company and its Subsidiaries on which the Company Reserve
Report was based for purposes of estimating the oil and gas
reserves set forth therein, to the knowledge of the Company, was
accurate in all material respects at the time such data was
provided to the reserve engineers for the Company Reserve
Report. The Company Reserve Report conforms to the
guidelines with respect thereto of the SEC. Except for
changes (including changes in Hydrocarbon commodity prices)
generally affecting the oil and gas industry and normal depletion
by production, there has been no change in respect of the matters
addressed in the Company Reserve Report that would reasonably be
expected to have a Material Adverse Effect on the
Company. Since January 1, 2005, all of the
Company’s and its Subsidiaries’ wells have been drilled
and (if completed) completed, operated and produced in compliance
in all respects with applicable oil and gas leases and applicable
Laws, except where any noncompliance would not reasonably be
expected to have a Material Adverse Effect on the
Company. To the Company’s knowledge, neither the
Company nor any of its Subsidiaries is in violation of any
applicable Law or contract requiring the Company or such Subsidiary
to plug and abandon any well because the well is not currently
capable of producing in commercial quantities or for any other
reasons. With respect to any Oil and Gas Interests of
the Company and its Subsidiaries that are not operated by the
Company or any of its Subsidiaries, the Company makes the
representations and warranties set forth in this Section 3.6 only to its actual knowledge without
having made specific inquiry of the operators with respect
hereto.
13
(b)
For
purposes of this Agreement, “ Oil and
Gas Interests ” means direct and indirect interests in
and rights with respect to oil, gas or minerals, 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; all
interests in rights with respect to oil, condensate, gas,
casinghead gas and other liquid or gaseous hydrocarbons
(collectively, “ 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.
(c)
Set
forth in Section 3.6(c) of the Company Disclosure Letter is a list
of all material Oil and Gas Interests that were included in the
Company Reserve Report that have been disposed of prior to the date
hereof.
(d)
Except
as set forth in Section 3.6(d) of the Company Disclosure Letter,
proceeds from the sale of Hydrocarbons produced from the
Company’s Oil and Gas Interests are being received by the
Company and the Subsidiaries in a timely manner and are not being
held in suspense for any reason (except in the ordinary course of
business or which would not reasonably be expected to have a
Material Adverse Effect).
14
(e)
Except
as set forth in Section 3.6(e) of the Company Disclosure Letter,
none of the Company or its Subsidiaries has received any material
deficiency payment under any gas contract for which any Person has
a right to take deficiency gas from the Company or any of its
Subsidiaries, nor has the Company or any of its Subsidiaries
received any material payment for production which is subject to
refund or recoupment out of future production.
(f)
The
Company has previously provided or made available to Parent true
and complete copies of all Company Oil and Gas Agreements, together
with all amendments, extensions and other modifications
thereof. To the knowledge of the Company, all Company
Oil and Gas Agreements are in good standing, valid and effective
and all royalties, rentals and other payment due by the Company to
any lessor of any such oil and gas leases have been paid, except in
each case, as has not had, and would not reasonably be expected to
have, a Material Adverse Effect. For purposes of this
Agreement, “ Company
Oil and
Gas Agreements ” means the following types of
agreements or contracts to which the Company or any of its
Subsidiaries is a party, whether as an original party, by
succession or assignment or otherwise: oil and gas
leases, farm-in and farm-out agreements, agreements providing for
an overriding royalty interest, agreements providing for a royalty
interest, agreements providing for a net profits interest, crude
oil or natural gas sales or purchase contracts, joint operating
agreements, unit operating agreements, unit agreements, field
equipment leases, and agreements restricting the Company or any of
its Subsidiaries’ ability to operate, obtain, explore for or
develop interests in a particular geographic area. Set
forth in Section 3.6(f) of the Company Disclosure Letter is a list
of all Company Oil and Gas Agreements that contain restrictions on
the Company’s or any of its Subsidiaries’ ability to
operate, obtain, explore for or develop interests in a particular
geographic area.
(g)
The
Oil and Gas Interests of the Company and its Subsidiaries are not
subject to (i) any instrument or agreement evidencing or related to
indebtedness for borrowed money, whether directly or indirectly,
except for the Company Credit Agreement and Permitted Liens, or
(ii) any agreement not entered into in the ordinary course of
business (other than the Overriding Royalty Interest Incentive
Plan) in which the amount involved is in excess of $1
million. In addition, except as set forth in the Company
SEC Documents filed and publicly available prior to the date
hereof, no Company Material Contract contains any provision that
prevents the Company or any of its Subsidiaries from owning,
managing and operating the Oil and Gas Interests of the Company and
its Subsidiaries in accordance with historical
practices.
(h)
Except
as set forth in Section 3.6(h) of the Company Disclosure Letter, as
of March 31, 2008, (i) there are no outstanding calls for payments
in excess of $1 million that are due or
that the Company or its Subsidiaries are committed to make that
have not been made; (ii) there are no material operations with
respect to which the Company or its Subsidiaries have become a
non-consenting party; and (iii) there are no commitments for the
material expenditure of funds for drilling or other capital
projects other than projects with respect to which the operator is
not required under the applicable operating agreement to seek
consent.
(i)
Except
as set forth in Section 3.6(i) of the Company Disclosure Letter,
there are no provisions applicable to the material Oil and Gas
Interests reflected in the Company Reserve Report that increase the
royalty percentage of the lessor thereunder in a manner that is not
accounted for in such Company Reserve Report; and none of the Oil
and Gas Interests of the Company and its Subsidiaries are limited
by terms fixed by a certain number of years (other than primary
terms under oil and gas leases).
15
(j)
Except
as set forth in Section 3.6(j) of the Company Disclosure Letter,
there are no calls (exclusive of market calls) on the
Company’s oil or natural gas production, and the Company has
no obligation to deliver oil or natural gas pursuant to any
take-or-pay, prepayment or similar arrangement without receiving
full payment therefor, excluding gas imbalances disclosed in
Section 3.6(e) of the Company Disclosure Letter.
3.7
Absence of Certain Changes .
(a)
Since
December 31, 2007, (i) the Company and its Subsidiaries have
conducted their respective business only in the ordinary course
consistent with past practice in all material respects, and (ii)
there has not occurred or continued to exist any event, change,
occurrence, effect, fact, circumstance or condition which,
individually or in the aggregate, has had, or is reasonably likely
to have or result in, a Material Adverse Effect on the
Company.
(b)
Since
December 31, 2007 to the date of this Agreement, neither the
Company nor any of its Subsidiaries has (i) (A) increased or agreed
to increase the wages, salaries, compensation, pension, or other
fringe benefits or perquisites payable to any officer, employee or
director from the amount thereof in effect as of December 31, 2007
other than in the ordinary course of business consistent with past
practices, (B) except as set forth in Section 3.7(b) of the Company
Disclosure Letter, granted any severance or termination pay or
entered into any contract to make or grant any severance or
termination pay (other than in the ordinary course of business
substantially consistent with past practices or pursuant to
pre-existing plans or arrangements), (C) entered into or made any
loans to any of its officers, directors or employees or made any
change in its borrowing or lending arrangements for or on behalf of
any of such Persons whether pursuant to an employee benefit plan or
otherwise (except for loans pursuant to the terms of the
Company’s or its affiliates’ retirement plans and
routine travel advances), or (D) adopted or amended any
new or existing Company Benefit Plan, (ii) declared, set aside or
paid any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company’s capital stock,
(iii) effected or authorized any split, combination or
reclassification of any of the Company’s capital stock or any
issuance thereof or issued any other securities in respect of, in
lieu of or in substitution for shares of the Company’s
capital stock, except for issuances of Company Common Stock (1)
upon the exercise of Company Options or vesting of Company Awards,
in each case in accordance with their terms at the time of exercise
or (2) in connection with recruitment activities in the ordinary
course of business consistent with past practice, (iv) changed in
any material respect, or has knowledge of any reason that would
have required or would require changing in any material respect,
any accounting methods (or underlying assumptions), principles or
practices of the Company or its Subsidiaries, including any
material reserving, renewal or residual method, practice or policy,
except as required by GAAP or by applicable Law, (v)
made any material Tax election or settled or compromised any
material income Tax liability, (vi) made any material change in the
policies and procedures of the Company or its Subsidiaries in
connection with trading activities, (vii) sold, leased, exchanged,
transferred or otherwise disposed of any material Company Asset
other than in the ordinary course of business consistent with past
practices, (viii) revalued, or has knowledge of any reason that
would have required or would require revaluing, any of the Company
Assets in any material respect, including writing down the value of
any of the Company Assets or writing off notes or accounts
receivable other than in the ordinary course of business consistent
with past practices, or (ix) made any agreement or commitment
(contingent or otherwise) to do any of the foregoing.
16
3.8
Absence of Undisclosed Liabilities . Since
December 31, 2007, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations (accrued, contingent or
otherwise), except for (i) liabilities incurred in the ordinary
course of business consistent with past practice that individually
or in the aggregate have not had, and would not be reasonably
likely to have or result in, a Material Adverse Effect on the
Company, (ii) liabilities in respect of Litigation (which are the
subject of Section 3.11(a)), and (iii) liabilities under
Environmental Laws (which are the subject of Section
3.15). Neither the Company nor any of its Subsidiaries
is in default in respect of the terms and conditions of any
indebtedness or other agreement which individually or in the
aggregate has had, or would be reasonably likely to have or result
in, a Material Adverse Effect on the Company.
3.9
Disclosure Documents . None
of the information to be supplied by the Company for inclusion in
(i) the joint proxy statement relating to the Company Special
Meeting and the Parent Special Meeting (in each case,
as defined below) (also constituting the prospectus in respect of
Parent Common Stock into which the Company Common Stock will be
converted) (together with any amendments or supplements thereto,
the “ Proxy
Statement ”), to be filed by the Company and Parent
with the SEC, and any amendments or supplements thereto, or (ii)
the Registration Statement on Form S-4 (together with any
amendments or supplements thereto, the “ S-4
”) to be filed by Parent with the SEC in connection with the
Merger, and any amendments or supplements thereto, will, at the
respective times such documents are filed, and, in the case of the
Proxy Statement, at the time the Proxy Statement or any amendment
or supplement thereto is first mailed to the Company stockholders
and Parent stockholders, at the time of the Company Special Meeting
and the Parent Special Meeting and at the Effective Time, and, in
the case of the S-4, when it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to
state any material fact required to be made therein or necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not
misleading. The Proxy Statement will comply in all
material respects with the provisions of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations
thereunder, except that no representation or warranty is made by
the Company with respect to information provided by Parent or
Merger Sub for inclusion in the Proxy Statement.
3.10
Employee Benefit Plans; ERISA .
(a)
Section
3.10(a)(1) of the Company Disclosure Letter contains a true and
complete list of all the individual or group employee benefit and
compensation plans or arrangements of any type (including, without
limitation, all bonus, equity-based, change of control, incentive
and plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ ERISA
”)), sponsored, maintained or contributed to by the Company
or any trade or business, whether or not incorporated, which
together with the Company would be deemed a “single
employer” within the meaning of Section 414(b), (c) or (m) of
the Code or Section 4001(b)(1) of ERISA (a “ Company
ERISA Affiliate ”) or with respect to which any
Company ERISA Affiliate has any obligations or liability (“
Company
Benefit Plans ”), and Section 3.10(a)(2) of the
Company Disclosure Letter lists each material individual
employment, severance or similar agreement with respect to which
the Company or any Company ERISA Affiliate has any current or
future obligation or liability (“ Company
Employee Agreement ”). With respect to each
Company Benefit Plan, the Company has made available to Parent a
true, correct and complete copy of such Company Benefit Plan, and,
to the extent applicable, trust agreements, insurance contracts and
other funding vehicles, the most recent Annual Reports (Form 5500
Series) and accompanying schedules, summary plan descriptions, and
the most recent determination letter from the Internal Revenue
Service. The Company has made available to Parent a
true, correct and complete copy of each Company Employee
Agreement.
17
(b)
With
respect to each Company Benefit Plan: (i) if intended to qualify
under Section 401(a) or 401(k) of the Code, such Company Benefit
Plan satisfies the requirements of such sections and its prototype
sponsor has received an opinion letter from the Internal Revenue
Service with respect to its qualification, and its related trust
has been determined to be exempt from tax under Section 501(a) of
the Code and, to the knowledge of the Company, nothing has occurred
since the date of such letter to adversely affect such
qualification or exemption; (ii) each Company Benefit Plan has been
administered in substantial compliance with its terms and
applicable Law; (iii) neither the Company nor any Company ERISA
Affiliate has engaged in, and the Company and each Company ERISA
Affiliate do not have any knowledge of any Person that has engaged
in, any transaction or acted or failed to act in any manner that
would subject the Company or any Company ERISA Affiliate to any
liability for a breach of fiduciary duty under ERISA; (iv) no
disputes are pending or, to the knowledge of the Company or any
Company ERISA Affiliate, threatened other than ordinary claims for
benefits; (v) neither the Company nor any Company ERISA Affiliate
has engaged in, and the Company and each Company ERISA Affiliate do
not have any knowledge of any Person that has engaged in, any
transaction in violation of Section 406(a) or (b) of ERISA or
Section 4975 of the Code for which no exemption exists under
Section 408 of ERISA or Section 4975(c) of the Code or Section
4975(d) of the Code; (vi) all contributions and premiums due have
been made on a timely basis; and (vii) each Company Benefit Plan
may be amended or terminated unilaterally by the Company at any
time without any continuing liability for benefits other than
benefits accrued to the date of such amendment or
termination. All contributions made or required to be
made under any Company Benefit Plan meet the requirements for
deductibility under the Code, and all contributions and premiums
which are required and which have not been made have been properly
recorded on the books of the Company or a Company ERISA
Affiliate.
(c)
No
Company Benefit Plan is (i) a “multiemployer plan” (as
defined in Section 4001(a)(3) of ERISA), (ii) a “multiple
employer plan” (within the meaning of Section 413(c) of the
Code), (iii) subject to Title IV or Section 302 of ERISA or Section
412 of the Code or (iv) a multiple employer welfare arrangement,
under Section 3(40) of ERISA. No event has occurred with
respect to the Company or a Company ERISA Affiliate in connection
with which the Company could be subject to any liability (except
for regular contributions and benefit payments in the ordinary
course of plan business) or Lien with respect to any Company
Benefit Plan.
(d)
Except
as set forth in Section 3.10(d) of the Company Disclosure Letter,
(i) no present or former employees of the Company or any of
its Subsidiaries are covered by any Company Employee Agreements or
Company Benefit Plans that provide or will provide any severance
pay, post-termination health or life insurance benefits (except as
required pursuant to Section 4980B of the Code or Part 6 of
Title I of ERISA) or any similar benefits, (ii) neither
the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement shall cause any
payments or benefits to any employee, officer or director of the
Company or any of its Subsidiaries to be either subject to an
excise Tax or non-deductible to the Company under Sections 4999 and
280G of the Code, respectively, whether or not some other
subsequent action or event would be required to cause such payment
or benefit to be triggered, and (iii) neither the execution of
this Agreement nor the consummation of the transactions
contemplated by this Agreement shall result in, cause the
accelerated vesting or delivery of, or increase the amount or value
of, any payment or benefit to any employee, officer or director of
the Company or any of its Subsidiaries, whether or not some other
subsequent action or event would be required to cause such payment
or benefit to be triggered, accelerated, delivered or
increased.
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(e)
None
of the Company Benefit Plans is subject to the laws of any country
other than the United States.
(f)
There
are no Company equity-based grants, options or awards outstanding
other than those granted under the Company Stock Plan.
3.11
Litigation; Compliance with Law .
(a)
Except
for such Litigation that individually or in the aggregate has not
had, and would not be reasonably likely to have or result in, a
Material Adverse Effect on the Company, (i) there is no Litigation
pending or, to the knowledge of the Company, threatened in writing
against, relating to or naming as a party thereto the Company or
any of its Subsidiaries, any of their respective properties or
assets or any of the Company’s officers or directors (in
their capacities as such), (ii) there is no order, judgment,
decree, injunction or award of any Governmental Entity against
and/or binding upon the Company, any of its Subsidiaries or any of
the Company’s officers or directors (in their capacities as
such), and (iii) there is no Litigation that the Company or any of
its Subsidiaries has pending against other parties, where such
Litigation is intended to enforce or preserve material rights of
the Company or any of its Subsidiaries.
(b)
Except
as individually or in the aggregate has not had, and would not be
reasonably likely to have or result in, a Material Adverse Effect
on the Company, each of the Company and its Subsidiaries has
complied, and is in compliance with, all Laws and Company Permits
that affect the respective businesses of the Company or any of its
Subsidiaries, the Company Real Property and/or the Company Assets,
and the Company and its Subsidiaries have not been and are not in
violation of any such Law or Company Permit; nor has any notice,
charge, Claim or action been received in writing by the Company or
any of its Subsidiaries or been filed, commenced, or to the
knowledge of the Company, threatened against the Company or any of
its Subsidiaries alleging any violation of the foregoing, except
for such violations or allegations of violations as individually or
in the aggregate have not had, and would not be reasonably likely
to have or result in, a Material Adverse Effect on the
Company.
19
(c)
Without
limiting the generality of clause (b) above and mindful of the
principles of the United States Foreign Corrupt Practices Act and
other similar applicable foreign Laws, neither the Company nor any
of its Subsidiaries, nor, in any such case, any of their respective
Representatives has (i) made, offered or authorized any payment or
given or offered anything of value directly or indirectly
(including through a friend or family member with personal
relationships with government officials) to an official of any
government for the purpose of influencing an act or decision in his
official capacity or inducing him to use his influence with that
government with respect to the Company or any of its Subsidiaries
in violation of the United States Foreign Corrupt Practices Act or
other similar applicable foreign Laws, (ii) made, offered or
authorized any payment to any Governmental Entity, political party
or political candidate for the purpose of influencing any official
act or decision, or inducing such Person to use any influence with
that government with respect to the Company or any of its
Subsidiaries in violation of the United States Foreign Corrupt
Practices Act or other similar applicable foreign Laws or (iii)
taken any action that would be reasonably likely to subject the
Company or any of its Subsidiaries to any material liability or
penalty under any and all Laws of any Governmental
Entity.
(d)
The
Company and its Subsidiaries hold all licenses, permits,
certifications, variances, consents, authorizations, waivers,
grants, franchises, concessions, exemptions, orders, registrations
and approvals of Governmental Entities or other Persons necessary
for the ownership, leasing, operation, occupancy and use of the
Company Real Property, the Company Assets, and the conduct of their
respective businesses as currently conducted (“ Company
Permits ”), except where the failure to hold such
Company Permits individually or in the aggregate has not had, and
would not be reasonably likely to have or result in, a Material
Adverse Effect on the Company. Neither the Company nor
any of its Subsidiaries has received notice that any Company Permit
will be terminated or modified or cannot be renewed in the ordinary
course of business, and the Company has no knowledge of any
reasonable basis for any such termination, modification or
nonrenewal, in each case except for such terminations,
modifications or nonrenewals that individually or in the aggregate
have not had, and would not be reasonably likely to have or result
in, a Material Adverse Effect on the Company. The
execution, delivery and performance of this Agreement and the
consummation of the Merger or any other transactions contemplated
hereby do not and will not violate any Company Permit, or result in
any termination, modification or nonrenewal thereof, except in each
case for such violations, terminations, modifications or
nonrenewals that individually or in the aggregate have not had, and
would not be reasonably likely to have or result in, a Material
Adverse Effect on the Company.
(e)
This
Section 3.11 does not relate to matters with respect to (i) Company
Benefit Plans, ERISA and other employee benefit matters (which are
the subject of Section 3.10), (ii) Tax Laws and other Tax matters
(which are the subject of Section 3.14), (iii) Environmental
Laws (which are the subject of Section 3.15), and (iv) labor
matters (which are the subject of Section 3.18).
3.12
Intellectual Property .
(a)
For
purposes of this Agreement, the term “ Intellectual
Property ” means any and all (i) seismic data,
trademarks, service marks, brand names, Internet domain names,
logos, symbols, trade dress, trade names, trade secrets, know-how,
and other proprietary rights and information, including, but not
limited to, all geologic and geographical data and interpretations
thereof, including geologic maps, isopachs, structure maps and any
other maps, and other indicia of source of origin, all applications
and registrations for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all renewals of the
same; (ii) inventions and discoveries, whether patentable or not,
and all patents, registrations, invention disclosures and
applications therefor, including divisions, continuations,
continuations-in-part and renewal applications, and including
renewals, extensions and reissues; and (iii) copyrights in and to
published and unpublished works of authorship, whether
copyrightable or not (including software), and registrations and
applications therefor, and all renewals, extensions, restorations
and reversions thereof; and in each of cases (i) to (iii)
inclusive, whether registered, unregistered or capable of
registration.
20
(b)
Except
as set forth in Section 3.12(b) of the Company Disclosure Letter or
as individually or in the aggregate would not be reasonably likely
to have or result in, a Material Adverse Effect on the
Company:
(i)
the
Company, or one of its Subsidiaries, is the sole and
exclusive owner of, or possesses adequate licenses or other
rights to use, all Intellectual Property used in the present
conduct of the businesses of the Company and its Subsidiaries
(“ Company
IP Rights ”), free and clear of all security
interests (except Permitted Liens) including but not limited
to liens, charges, mortgages, title retention agreements or
title defects;
(ii)
to
the Company’s knowledge, no consent, co-existence or
settlement agreements, judgments, or court orders limit or
restrict the Company’s or any of its
Subsidiaries’ ownership rights in and to any
Intellectual Property owned by them;
(iii)
the
conduct of the business of the Company and its Subsidiaries
as presently conducted does not, to the knowledge of the
Company, infringe or misappropriate any third Person’s
Intellectual Property; or
(iv)
to
the knowledge of the Company, no third Person is infringing
or misappropriating any Intellectual Property
owned by the Company or its Subsidiaries, and to the
knowledge of the Company there is no litigation pending or
threatened in writing by or against the Company or any of its
Subsidiaries, nor, to the knowledge of the Company, has the
Company or any of its Subsidiaries received any written
charge, claim, complaint, demand, letter or notice, that
asserts a claim (a) alleging that any or all of the Company
IP Rights infringe or misappropriate any third party’s
Intellectual Property, or (b) challenging the ownership, use,
validity, or enforceability of any Company IP
Right.
(c)
All
Intellectual Property owned by the Company or its Subsidiaries that
is the subject of an application for registration or a registration
(“ Registered
Company IP ”) is to the knowledge of the Company, in
force, and all application, renewal and maintenance fees in
relation to all Registered Company IP have been paid to date,
except for any Registered Company IP that the Company has
abandoned, not renewed or allowed to expire.
21
(d)
Except
for such matters as individually or in the aggregate have not had
and would not be reasonably likely to have or result in a Material
Adverse Effect on the Company, to the Company’s knowledge (i)
there does not exist, nor has the Company or any of its
Subsidiaries received written notice of, any breach of or violation
or default under, any of the terms, conditions or provisions of any
material contracts related to Company IP Rights, and (ii) neither
the Company nor any of its Subsidiaries has received written notice
of the desire of the other party or parties to any such material
contracts relating to Company IP Rights to exercise any rights such
party or parties have to cancel, terminate or repudiate such
material contract relating to Company IP Rights or exercise
remedies thereunder.
3.13
Material Contracts .
(a)
Except
for such agreements or arrangements listed in Section 3.13(a) of
the Company Disclosure Letter or that are included as exhibits to
the Company SEC Documents filed and publicly available prior to the
date of this Agreement, and except for this Agreement, as of the
date of this Agreement, neither the Company nor any of its
Subsidiaries is a party to or bound by any material contract,
arrangement, commitment or understanding (whether written or oral)
(i) which is an employment agreement between the Company, on the
one hand, and its officers and key employees, on the other hand,
(ii) which, upon the consummation of the Merger or any other
transaction contemplated by this Agreement, will (either alone or
upon the occurrence of any additional acts or events, including the
passage of time) result in any material payment or benefit (whether
of severance pay or otherwise) becoming due, or the acceleration or
vesting of any right to any material payment or benefits, from
Parent, Merger Sub, the Company or the Surviving Entity or any of
their respective Subsidiaries to any officer, director, consultant
or employee of any of the foregoing, (iii) which is a material
contract (as defined in Item 601(b)(10)(i) or 601(b)(10)(ii) of
Regulation S-K of the SEC) to be performed after the date of this
Agreement, (iv) which expressly limits the ability of the Company
or any Subsidiary of the Company, or would limit the ability of the
Surviving Entity (or any of its affiliates) after the Effective
Time, to compete in or conduct any line of business or compete with
any Person or in any geographic area or during any period of time,
in each case, if such limitation is or is reasonably likely to be
material to the Company and its Subsidiaries, taken as a whole, or,
following the Effective Time, to the Surviving Entity and its
affiliates, taken as a whole, (v) which is a material joint venture
agreement, joint operating agreement, partnership agreement or
other similar contract or agreement involving a sharing of profits
and expenses with one or more third Persons, (vi) the benefits of
which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock
purchase plan) or (vii) which is a stockholder rights agreement or
which otherwise provides for the issuance of any securities in
respect of this Agreement or the Merger. Each contract,
arrangement, commitment or understanding (A) included as an exhibit
to the Company SEC Documents filed and publicly available prior to
the date of this Agreement, or (B) listed in Section 3.13(a) of the
Company Disclosure Letter described in this Section 3.13(a),
whether or not included as an exhibit to the Company SEC Documents,
is referred to herein as a “ Company
Material Contract ,” and for purposes of Section
5.1(t) and the bringdown of Section 3.13(b) pursuant to Section
6.3(a), “Company Material Contract” shall include as of
the date entered into any such contract, arrangement, commitment or
understanding that is entered into after the date of this
Agreement. The Company has previously made available to
Parent true, complete and correct copies of each Company Material
Contract that is not included as an exhibit to the Company SEC
Documents. For the avoidance of doubt, the
Company’s charter constitutes a Company Material
Contract.
22
(b)
Each
Company Material Contract is valid and binding and in full force
and effect and the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date
under each Company Material Contract, except where such failure to
be valid and binding or in full force and effect or such failure to
perform individually or in the aggregate has not had and would not
be reasonably likely to have or result in a Material Adverse Effect
on the Company. Except for such matters as individually
or in the aggregate have not had and would not be reasonably likely
to have or result in a Material Adverse Effect on the Company, to
the Company’s knowledge, (i) there does not exist, nor has
the Company or any of its Subsidiaries received written notice of,
any breach of or violation or default under, any of the terms,
conditions or provisions of any Company Material Contract and (ii)
neither the Company nor any of its Subsidiaries has received
written notice of the desire of the other party or parties to any
such Company Material Contract to exercise any rights such party
has to cancel, terminate or repudiate such Company Material
Contract or exercise remedies thereunder. Each Company
Material Contract is enforceable by the Company or a Subsidiary of
the Company in accordance with its terms, except as such
enforcement may be subject to or limited by (x) bankruptcy,
insolvency, reorganization, moratorium or other Laws, now or
hereafter in effect, affecting creditors’ rights generally
and (y) the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity) or except where such unenforceability individually or in
the aggregate has not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the
Company.
3.14
Taxes .
(a)
(i)
All material Returns required to be filed by or with respect to the
Company and its Subsidiaries have been filed in accordance with all
applicable Laws and all such Returns are true, correct and complete
in all material respects, (ii) the Company and its Subsidiaries
have timely paid all material Taxes due or claimed to be due,
except for those Taxes being contested in good faith and for which
adequate reserves have been established in the financial statements
of the Company, (iii) all material Employment and Withholding Taxes
and any other material amounts required to be withheld by the
Company or any of its Subsidiaries with respect to Taxes have been
withheld and either duly and timely paid to the proper Governmental
Entity or properly set aside in accounts for such purpose in
accordance with applicable Laws, (iv) all material sales or
transfer Taxes required to be collected by the Company or any of
its Subsidiaries have been duly and timely collected, or caused to
be collected, and either duly and timely remitted to the proper
Governmental Entity or properly set aside in accounts for such
purpose in accordance with applicable Laws, (v) the charges,
accruals and reserves for Taxes with respect to the Company and its
Subsidiaries reflected in the Company Balance Sheet are adequate
under GAAP to cover Tax liabilities accruing through the date
thereof, (vi) no deficiencies for any material Taxes have been
asserted or assessed, or, to the knowledge of the Company,
proposed, against the Company or any of its Subsidiaries that have
not been paid in full, except for those Taxes being contested in
good faith and for which adequate reserves have been established in
the financial statements of the Company, and (vii) there is no
action, suit, proceeding, investigation, audit or claim underway,
pending or, to the knowledge of the Company, threatened or
scheduled to commence, against or with respect to the Company or
any of its Subsidiaries in respect of any material Tax, except as
set forth in Section 3.14(a)(vii) of the Company Disclosure
Letter.
23
(b)
Neither
the Company nor any of its Subsidiaries has been included in any
“consolidated,” “unitary” or
“combined” Return (other than Returns which include
only the Company and any Subsidiaries of the Company) provided for
under the Laws of the United States, any foreign jurisdiction or
any state or locality or could be liable for the Taxes of any other
Person as a successor or transferee.
(c)
There
are no Tax sharing, allocation, indemnification (other than
indemnification provisions included in agreements entered into in
the ordinary course of business) or similar agreements in effect as
between the Company or any of its Subsidiaries or any predecessor
or affiliate of any of them and any other party under which the
Company or any of its Subsidiaries could be liable for any Taxes of
any party other than the Company or any Subsidiary of the
Company.
(d)
Neither
the Company nor any of its Subsidiaries has, as of the Closing
Date, entered into an agreement or waiver extending any statute of
limitations relating to the payment or collection of material Taxes
or the time with respect to the filing of any Return relating to
any material Taxes.
(e)
There
are no Liens for material Taxes on any asset of the Company or its
Subsidiaries, except for Permitted Liens.
(f)
Neither
the Company nor any of its Subsidiaries has requested or is the
subject of or bound by any private letter ruling, technical advice
memorandum, closing agreement or similar ruling, memorandum or
agreement with any taxing authority with respect to any material
Taxes, nor is any such request outstanding.
(g)
Each
of the Company and its Subsidiaries has disclosed on its Returns
all positions taken therein that could give rise to a substantial
understatement of Tax within the meaning of Section 6662 of the
Code.
(h)
Neither
the Company nor any of its Subsidiaries has entered into, has any
liability in respect of, or has any filing obligations with respect
to, any transaction that constitutes a “reportable
transaction,” as defined in Section 1.6011-4(b)(1) of the
Treasury Regulations.
(i)
Neither
the Company nor any of its Subsidiaries 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 under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign Tax
Law) or (ii) “closing agreement” as described in
Section 7121 of the Code (or any corresponding or similar provision
of state, local or foreign Tax Law) executed on or prior to the
Closing Date.
24
(j)
Except
as set forth in Section 3.14(j) of the Company Disclosure Letter,
since January 1, 2005, none of the Company nor any of its
Subsidiaries has been a distributing corporation or a controlled
corporation for purposes of Section 355 of the Code.
(k)
The
Company has made available to Parent correct and complete copies of
(i) all U.S. federal Returns of the Company and its Subsidiaries
relating to taxable periods ending on or after May 11, 2005, filed
through the date hereof, (ii) any audit report (or notice of
proposed adjustment to the extent not included in an audit report)
within the last three years relating to any material Taxes due from
or with respect to the Company or any of its Subsidiaries and (iii)
any substantive and non-privileged correspondence and memoranda
relating to the matters described in clauses (i) and (ii) of this
Section 3.14(k).
3.15
Environmental Matters .
(a)
The
Company and each of its Subsidiaries is in compliance with all
applicable Environmental Laws except where failure to be in
compliance, individually or in the aggregate, would not be
reasonably likely to have or result in, a Material Adverse Effect
on the Company.
(b)
There
is no Environmental Claim pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries
or, to the knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by
operation of Law, except for any such Environmental Claims which,
individually or in the aggregate, would not be reasonably likely to
have or result in, a Material Adverse Effect on the
Company.
(c)
To
the knowledge of the Company, there are no past or present actions,
activities, circumstances, conditions, events or incidents,
including the Release of any Hazardous Material, which would be
reasonably likely to form the basis of any Environmental Claim
against the Company or any of its Subsidiaries or, to the knowledge
of the Company, against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries has
retained or assumed either contractually or by operation of law
which, individually or in the aggregate, would be reasonably likely
to have or result in, a Material Adverse Effect on the
Company.
(d)
There
is no Cleanup of Hazardous Materials being conducted or planned at
any property currently or, to the knowledge of the Company,
formerly owned or operated by the Company or any of its
Subsidiaries, except for such Cleanups which, individually or in
the aggregate, would not be reasonably likely to have or result in,
a Material Adverse Effect on the Company.
(e)
To
the knowledge of the Company, no Company Asset has been involved in
any Release or threatened Release of a Hazardous Material, except
for such Releases which individually or in the aggregate would not
be reasonably likely to have or result in a Material Adverse Effect
on the Company.
25
(f)
The
Company and its Subsidiaries have obtained and are in compliance
with all material approvals, permits, licenses, registrations and
similar authorizations from all Governmental Entities under all
Environmental Laws required for the operation of the businesses of
the Company and its Subsidiaries as currently conducted and, to the
knowledge of the Company, there are no pending or threatened,
actions or proceedings alleging violations of or seeking to modify,
revoke or deny renewal of any such material approvals, permits,
licenses, registrations and similar authorizations.
3.16
Company Assets . The
Company has good and defensible title to all oil and gas properties
forming the basis for the reserves reflected in the Company Reserve
Report as attributable to Oil and Gas Interests owned by the
Company and its Subsidiaries and has good and valid title
to, or valid leasehold interests or other contractual rights in,
all other tangible properties and assets (real, personal
or mixed) of the Company and its Subsidiaries (such oil and gas
properties and other properties and assets are herein referred to
as the “ Company
Assets ”), with respect to both the oil and gas
properties and all other Company Assets, free and clear of all
Liens except for (a) Permitted Liens and (b) Liens associated with
obligations reflected in the Company Reserve Report. The
Company and its Subsidiaries (as the case may be) have maintained
all of the Company Assets owned on the date hereof in working order
and operating condition, subject only to ordinary wear and
tear.
3.17
Insurance . Section
3.17 of the Company Disclosure Letter contains a true, complete and
correct list of all insurance policies maintained by or on behalf
of the Company and its Subsidiaries as of the date of this
Agreement. The Company has made available to Parent a
true, complete and correct copy of each such insurance policy or
the binder therefor. Such policies are, and at the
Closing policies or replacement policies having substantially
similar coverages will be, in full force and effect, and all
premiums due thereon have been or will be paid. The
Company and its Subsidiaries have complied in all material respects
with the terms and provisions of such policies. The
insurance policies listed in Section 3.17 of the Company Disclosure
Letter include all policies that are required in connection with
the operation of the businesses of the Company and its Subsidiaries
as currently conducted by applicable Laws and all agreements
relating to the Company and its Subsidiaries.
3.18
Labor Matters; Employees .
(a)
(i)
There is no labor strike, dispute, slowdown, work stoppage or
lockout actually pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries and, during the past five years, there has not been
any such action, (ii) none of the Company or any of its
Subsidiaries is a party to or bound by any collective bargaining or
similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee
association applicable to employees of the Company or
any of its Subsidiaries, (iii) none of the employees of the Company
or any of its Subsidiaries are represented by any labor
organization and none of the Company or any of its Subsidiaries
have any knowledge of any current union organizing activities among
the employees of the Company or any of its Subsidiaries nor does
any question concerning representation exist concerning such
employees, (iv) the Company and its Subsidiaries have each at all
times been in material compliance with all applicable Laws
respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational
safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other
applicable Law, ordinance or regulation, (v) there is no unfair
labor practice charge or complaint against the Company or any of
its Subsidiaries pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any similar
state or foreign agency, (vi) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or
other grievance procedure relating to the Company or any of its
Subsidiaries, (vii) neither the Occupational Safety and Health
Administration nor any other federal or state agency has threatened
to file any citation, and there are no pending citations, relating
to the Company or any of its Subsidiaries, and (viii) there is no
employee or governmental claim or investigation, including any
charges to the Equal Employment Opportunity Commission or state
employment practice agency, investigations regarding Fair Labor
Standards Act compliance, audits by the Office of Federal
Contractor Compliance Programs, Workers’ Compensation claims,
sexual harassment complaints or demand letters or threatened
claims.
26
(b)
Since
the enactment of the Worker Adjustment and Retraining Notification
Act of 1988 (“ WARN
Act ”), none of the Company or any of its 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
its 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 its
Subsidiaries, nor has the Company or any of its Subsidiaries been
affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any
similar state or local Law, in each case that could reasonably be
expected to have a Material Adverse Effect on the
Company.
(c)
Section
3.18(c) of the Company Disclosure Letter contains a complete and
correct list of the names of all directors and officers of the
Company as of the date of this Agreement, together with such
Person’s position or function. Section 3.18(c) of
the Company Disclosure Letter also contains each such
officer’s annual base salary or wages, incentive compensation
bonus in respect of 2007, target bonus percentage and amount for
2008, and currently estimated severance payment due as a result of
this Merger assuming such Person’s employment is terminated
in connection therewith.
3.19
Affiliate Transactions . Section
3.19 of the Company Disclosure Letter contains a complete and
correct list of all material agreements, contracts, transfers of
assets or liabilities or other commitments or transactions (other
than Company Benefit Plans described in Section 3.10 of the Company
Disclosure Letter), whether or not entered into in the ordinary
course of business, to or by which the Company or any of its
Subsidiaries, on the one hand, and any of their respective
affiliates (other than the Company or any of its direct or indirect
wholly owned Subsidiaries) on the other hand, are or have been a
party or otherwise bound or affected, and that (a) are currently
pending, in effect or have been in effect at any time since
December 31, 2005 or (b) involve continuing liabilities and
obligations that, individually or in the aggregate, have been, are
or will be material to the Company and its Subsidiaries taken as a
whole.
27
3.20
Derivative Transactions and Hedging . Section
3.20 of the Company Disclosure Letter contains a complete and
correct list of all Derivative Transactions (including each
outstanding commodity or financial hedging position) entered into
by the Company or any of its Subsidiaries or for the account of any
of its customers as of the date of this Agreement. All
such Derivative Transactions were, and any Derivative Transactions
entered into after the date of this Agreement will be, entered into
in accordance with applicable Laws, and in accordance with the
investment, securities, commodities, risk management and other
policies, practices and procedures employed by the Company and its
Subsidiaries, and were, and will be, entered into with
counterparties believed at the time and still believed to be
financially responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks of such
Derivative Transactions. The Company and each of its
Subsidiaries have, and will have, duly performed all of their
respective obligations under the Derivative Transactions to the
extent that such obligations to perform have accrued, and, to the
knowledge of the Company, there are and will be no breaches,
violations, collateral deficiencies, requests for collateral or
demands for payment, or defaults or allegations or assertions of
such by any party thereunder.
3.21
Natural Gas Act . Any
gas gathering system constituting a part of the properties of the
Company or its Subsidiaries 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 (the “ NGA
”); none of the properties have been or are certificated by
the Federal Energy Regulatory Commission (the “ 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.
3.22
Disclosure Controls and Procedures . The
Company has established and maintains “disclosure controls
and procedures” (as defined in Rules 13a-14(c) and 15d-14(c)
of the Exchange Act) that are reasonably designed to ensure that
all material information (both financial and non-financial)
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information is
accumulated and communicated to the Company’s management as
appropriate to allow timely decisions regarding required disclosure
and to make the certifications of the Chief Executive Officer and
Chief Financial Officer of the Company required under the Exchange
Act with respect to such reports. Neither the Company
nor its independent auditors have identified any “significant
deficiencies” or “material weaknesses” in the
Company’s or any of its Subsidiaries’ internal controls
as contemplated under Section 404 of the Sarbanes-Oxley
Act.
3.23
Investment Company . Neither
the Company nor any of its Subsidiaries is an “investment
company,” a company “controlled” by an
“investment company,” or an “investment
adviser” within the meaning of the Investment Company Act of
1940, as amended (the “ Investment
Company Act ”), or the Investment Advisers Act of
1940, as amended (the “ Advisers
Act ”).
3.24
No Rights Agreement . The
Company does not have any stockholder rights agreement or any
similar type of anti-takeover agreement.
28
3.25
Takeover Laws . Except
for Section 78.438 of the NRS (which has been rendered
inapplicable by action of the Company Board prior to the execution
hereof), no “moratorium,” “acquisition of
controlling interest,” “control share,”
“fair price,” “combinations with interested
stockholders,” “affiliate transaction,”
“business combination,” or other similar anti-takeover
statutes, laws or regulations of any state, including the State of
Nevada (and including the NRS), or any applicable anti-takeover
provision in the articles of incorporation or bylaws of the Company
is, or at the Effective Time will be, applicable to this Agreement,
the Merger, the other transactions contemplated by this Agreement
or the Stockholder Agreements.
3.26
Required Vote by Company Stockholders . The
affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock entitled to vote thereon (the
“ Company
Required Vote ”) to adopt this Agreement is the only
vote of the holders of capital stock of the Company required by the
NRS or the articles of incorporation or the bylaws of the Company
or otherwise to adopt this Agreement.
3.27
Recommendation of Company Board of Directors; Opinion of Financial
Advisor .
(a)
The
Company Board, at a meeting duly called and held, duly adopted
resolutions unanimously (i) determining that this Agreement and the
transactions contemplated hereby are advisable and in the best
interests of the Company and the stockholders of the Company, (ii)
approving and adopting this Agreement and transactions contemplated
hereby, (iii) recommending approval of this Agreement by the
stockholders of the Company and (iv) directing that the approval of
this Agreement be submitted to the stockholders of the Company for
consideration in accordance with this Agreement, which resolutions,
as of the date of this Agreement, have not been subsequently
rescinded, modified or withdrawn in any way.
(b)
The
Company Board has received an opinion of Raymond James &
Associates, Inc., to the effect that, as of the date of this
Agreement, the Merger Consideration to be received by the holders
of shares of Company Common Stock (other than Parent, the Company
or any of their Subsidiaries), in the aggregate, in the Merger is
fair, from a financial point of view, to such holders. A
true, complete and correct copy of such opinion will promptly be
delivered to Parent by the Company solely for informational
purposes after receipt thereof.
3.28
Brokers . Except
for Raymond James & Associates, Inc. and Scotia Waterous (USA),
Inc., no broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its
Subsidiaries. The Company is solely responsible for the
fees and expenses of Raymond James & Associates, Inc. and
Scotia Waterous (USA), Inc. as and to the extent set forth in the
engagement letters dated June 5, 2007 and June 8, 2007,
respectively, and the Company has previously provided to Parent a
true and correct copy of the engagement letters.
3.29
Reorganization . Neither
the Company nor, to the knowledge of the Company, any of its
affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a reorganization within the
meaning of Section 368(a) of the Code.
29
3.30
No Other Representations or Warranties . Except
for the representations and warranties contained in this Article
III, neither the Company nor any other Person makes any other
express or implied representation or warranty on behalf of the
Company or any of its affiliates in connection with this Agreement
or the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except
as set forth in the disclosure letter delivered by Parent to
the Company at or prior to the execution and delivery of this
Agreement (the “ Parent
Disclosure Letter ”) (each section of which
qualifies the correspondingly numbered representation,
warranty or covenant to the extent specified therein and such
other representations, warranties or covenants to the extent a
matter in such section is disclosed in such a way as to make
its relevance to such other representation, warranty or
covenant reasonably apparent), Parent and Merger Sub jointly
and severally represent and warrant to the Company as
follows:
4.1
Organization .
(a)
Each
of Parent, Merger Sub and Parent’s Subsidiaries is a
corporation or other entity duly organized, validly existing and in
good standing (to the extent such concept exists in such
jurisdiction or with respect to such other entities) under the Laws
of the jurisdiction of its incorporation or organization, and has
all requisite corporate or other power and authority to own, lease,
use and operate its properties and to carry on its business as it
is now being conducted.
(b)
Each
of Parent, Merger Sub and Parent’s Subsidiaries is duly
qualified or licensed to do business and is in good standing in
each jurisdiction (to the extent such concepts exist in such
jurisdictions) where the character of the property owned, operated
or leased by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed or to be in good standing would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. Since the date of its
formation, Merger Sub has not engaged in any activities other than
in connection with or as contemplated by this Agreement, and Merger
Sub does not have any Subsidiaries.
(c)
Parent
has previously made available to the Company a complete, true and
correct copy of each of its certificate of incorporation and bylaws
or other organizational documents of each of Parent’s
Subsidiaries, in each case as amended (if so amended) to the date
of this Agreement, and has made available the certificate of
incorporation, bylaws or other organizational documents of each of
Parent’s Subsidiaries, in each case as amended (if so
amended) to the date of this Agreement. Neither Parent
nor Merger Sub nor any of the Parent’s Subsidiaries is in
violation of its certificate of incorporation, bylaws or other
organizational documents.
(d)
Section
4.1(d) of the Parent Disclosure Letter sets forth a complete, true
and correct list of all of the Subsidiaries of Parent and their
respective jurisdictions of incorporation or
organization. The respective certificates or articles of
incorporation and bylaws or other organizational documents of the
Subsidiaries of Parent do not contain any provision limiting or
otherwise restricting the ability of Parent to control its
Subsidiaries in any material respect.
30
4.2
Capitalization .
(a)
The
authorized capital stock of Parent consists of 100,000,000 shares
of Parent Common Stock and 5,000,000 shares of preferred stock, par
value $0.01 per share, issuable in series (“ Parent
Preferred Stock ”), none of which are issued and
outstanding. As of April 25, 2008, 28,486,182 shares of
Parent Common Stock were issued and outstanding
(including 478,267 shares of unvested Parent restricted stock
and 16,582 shares of Parent Common Stock held in the treasury of
Parent). As of the date of this Agreement, 698,497
shares of Parent Common Stock are reserved for issuance under
Parent stock incentive plans. As of April 25, 2008,
there are outstanding stock options to acquire Parent Common Stock
(the “ Parent
Stock Options ”) covering an aggregate of 763,323
shares of Parent Common Stock. Since April 25, 2008, (i)
no shares of Parent Common Stock have been issued, except pursuant
to Parent Stock Options outstanding on April 25, 2008, and (ii) no
Parent Stock Options have been granted. No bonds,
debentures, notes or other indebtedness having the right to vote
(or convertible into or exchangeable for securities having the
right to vote) on any matters on which stockholders of Parent may
vote are issued or outstanding. All issued and
outstanding shares of Parent’s capital stock are, and all
shares that may be issued or granted pursuant to the exercise of
Parent Stock Options will be, when issued or granted in accordance
with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights, with
no personal liability attaching to the ownership
thereof. The issuance and sale of all of the shares of
capital stock described in this Section 4.2 have been in compliance
with United States federal and state securities
Laws. Except as may be provided in the Rights Agreement
dated as of October 15, 1998, between Parent and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (as amended, the
“ Parent
Rights Agreement ”), neither Parent nor any of its
Subsidiaries has agreed to register any securities under the
Securities Act, or under any state securities Law or granted
registration rights to any individual or entity. Except
for Parent Stock Options and the Junior Participating Preferred
Stock purchase rights (the “ Parent
Rights ”) issued pursuant to the Parent Rights
Agreement, as of the date of this Agreement, there are no
outstanding or authorized (x) options, warrants, preemptive rights,
subscriptions, calls or other rights, convertible securities,
agreements, claims or commitments of any character obligating
Parent or any of its Subsidiaries to issue, transfer or sell any
shares of capital stock or other equity interest in Parent or any
of its Subsidiaries or securities convertible into or exchangeable
for such shares or equity interests, (y) contractual obligations of
Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of Parent or any of its
Subsidiaries or any such securities or agreements listed in clause
(x) of this sentence, or (z) voting trusts or similar agreements to
which Parent or any of its Subsidiaries is a party with respect to
the voting of the capital stock of Parent or any of its
Subsidiaries. The Parent Common Stock issued pursuant to
the Merger, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued and fully paid
and non-assessable and not subject to preemptive rights, with no
personal liability attaching to the ownership
thereof. Such Parent Common Stock, where so issued, will
be issued free and clear of any Liens, other than (x) statutory
Liens for Taxes not yet done and payable and (y) such restrictions
as may expect under applicable Law.
31
(b)
(i)
All of the issued and outstanding shares of capital stock (or
equivalent equity interests of entities other than corporations) of
each of Parent’s Subsidiaries are owned, directly or
indirectly, by Parent free and clear of any Liens, other than (x)
statutory Liens for Taxes not yet due and payable, (y) such
restrictions as may exist under applicable Law, and (z) Liens
granted pursuant to Parent’s Credit Agreement, dated as of
November 1, 2007, among Parent and each of the lenders party
thereto (collectively, the “ Parent
Credit A
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