EXHIBIT (d)(1)
--------------
Execution Copy
AGREEMENT AND PLAN OF MERGER
Dated as of April 23, 2007
among
SAMSON INVESTMENT COMPANY,
SAMSON ACQUISITION CORP.
and
PYR ENERGY CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I THE OFFER..........................................................2
Section 1.1 The Offer..................................................2
Section 1.2 Company Actions............................................4
Section 1.3 Directors of the Company...................................5
Section 1.4 Stockholder Meeting........................................7
Section 1.5 Option to Acquire Additional Shares........................8
Section 1.6 Offer Documents; Schedule 14D-9; Proxy Statement...........8
ARTICLE II THE MERGER.........................................................8
Section 2.1 The Merger.................................................8
Section 2.2 Closing....................................................9
Section 2.3 Effective Time.............................................9
Section 2.4 Effects of the Merger......................................9
Section 2.5 Articles of Incorporation and Bylaws of the Surviving
Corporation................................................9
Section 2.6 Directors and Officers of the Surviving Corporation........9
Section 2.7 Conversion of Securities..................................10
Section 2.8 Exchange of Certificates..................................10
Section 2.9 Appraisal Rights..........................................12
Section 2.10 Company Stock Options.....................................13
Section 2.11 Warrants..................................................14
Section 2.12 Other Actions.............................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................14
Section 3.1 Organization, Standing and Corporate Power................14
Section 3.2 Capitalization............................................16
Section 3.3 Authority; Noncontravention; Voting Requirements..........17
Section 3.4 Governmental Approvals....................................18
Section 3.5 Company SEC Documents; Undisclosed Liabilities............19
Section 3.6 Absence of Certain Changes or Events......................21
Section 3.7 Legal Proceedings.........................................21
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.8 Compliance With Laws; Permits.............................21
Section 3.9 Information Supplied......................................22
Section 3.10 Tax Matters...............................................22
Section 3.11 Employee Benefits and Labor Matters.......................24
Section 3.12 Environmental Matters.....................................26
Section 3.13 Contracts.................................................27
Section 3.14 Properties................................................29
Section 3.15 Reserve Reports; Hedging..................................30
Section 3.16 Insurance.................................................31
Section 3.17 Opinion of Financial Advisor..............................32
Section 3.18 Brokers and Other Advisors................................32
Section 3.19 State Takeover Statutes...................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER............32
Section 4.1 Organization..............................................32
Section 4.2 Authority; Noncontravention...............................32
Section 4.3 Governmental Approvals....................................33
Section 4.4 Information Supplied......................................33
Section 4.5 Ownership and Operations of Purchaser.....................34
Section 4.6 Financing.................................................34
Section 4.7 Brokers and Other Advisors................................34
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS...............................34
Section 5.1 Conduct of Business.......................................34
Section 5.2 No Solicitation by the Company; Etc.......................38
Section 5.3 Reasonable Best Efforts...................................42
Section 5.4 Public Announcements......................................42
Section 5.5 Access to Information.....................................43
Section 5.6 Notification of Certain Matters...........................43
Section 5.7 Indemnification and Insurance.............................43
Section 5.8 Securityholder Litigation.................................45
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 5.9 Fees and Expenses.........................................45
ARTICLE VI CONDITIONS TO THE MERGER..........................................45
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger....................................................45
ARTICLE VII TERMINATION.......................................................45
Section 7.1 Termination...............................................45
Section 7.2 Effect of Termination.....................................47
Section 7.3 Termination Fee...........................................48
ARTICLE VIII MISCELLANEOUS.....................................................49
Section 8.1 No Survival, Etc..........................................49
Section 8.2 Amendment or Supplement...................................49
Section 8.3 Extension of Time, Waiver, Etc............................50
Section 8.4 Assignment................................................50
Section 8.5 Counterparts..............................................50
Section 8.6 Entire Agreement; No Third-Party Beneficiaries............50
Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.........50
Section 8.8 Specific Enforcement......................................51
Section 8.9 Notices...................................................51
Section 8.10 Severability..............................................52
Section 8.11 Definitions...............................................52
Section 8.12 Interpretation............................................58
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of April 23, 2007 (this
"Agreement"), is among Samson Investment Company, a Nevada corporation
("Parent"), Samson Acquisition Corp., a Maryland corporation and wholly owned
Subsidiary of Parent ("Purchaser"), and PYR Energy Corporation, a Maryland
corporation (the "Company"). Certain terms used in this Agreement are used as
defined in Section 8.11.
WHEREAS, the respective Boards of Directors of Parent, Purchaser and
the Company each deems it advisable that Parent acquire the Company on the terms
and subject to the conditions provided for in this Agreement;
WHEREAS, Parent and Purchaser have previously commenced a tender
offer (the "Pending Offer") to purchase all of the issued and outstanding shares
of common stock, par value $0.001 per share of the Company, including the
associated Series A Junior Participating Preferred Stock purchase rights
(collectively, the "Company Common Stock") for a price of $1.21 per share of
Company Common Stock, subject to any required withholding of Taxes, net to the
seller in cash, subject to the terms and conditions set forth in the Offer to
Purchase dated March 28, 2007, and in the related letter of transmittal;
WHEREAS, after negotiations between representatives of the parties,
Parent and Purchaser have agreed (a) to amend the Pending Offer to provide for
the purchase of all of the shares of Company Common Stock (as the Pending Offer
is so amended, the "Offer") issued and outstanding (each, a "Share" and
collectively, the "Shares") at a price of $1.30 per Share (such amount or any
greater amount per Share paid pursuant to the Offer, the "Offer Price"), subject
to any required withholding of Taxes, net to the seller in cash, and on the
terms and subject to the conditions set forth in this Agreement and (b)
following consummation of the Offer, to cause the merger of Purchaser with and
into the Company with the Company being the surviving corporation, in accordance
with the Maryland General Corporation Law (the "MGCL"), pursuant to which the
Shares (other than certain shares as provided in paragraphs (a) and (b) of
Section 2.7) will be converted into the right to receive the Offer Price,
subject to any required withholding of Taxes, net to the seller in cash, and on
the terms and subject to the conditions set forth in this Agreement (the
"Merger");
WHEREAS, the respective Boards of Directors of Parent (on its own
behalf and as the sole stockholder of Purchaser), Purchaser and the Company have
each approved this Agreement, the Offer and the Merger; and
WHEREAS, the Board of Directors of the Company has resolved and
agreed to recommend that holders of Shares tender their Shares pursuant to the
Offer.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
The Offer
---------
SECTION 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1, as promptly as practicable following the date
hereof and in any event within five (5) Business Days following the date of this
Agreement (or such other later date as the parties may mutually agree in
writing), Parent and Purchaser (i) shall amend the Offer to reflect the
execution of this Agreement and the terms hereof, (ii) shall file an amendment
to their tender offer statement on Schedule TO with respect to the Offer
(together with all amendments and supplements thereto and including exhibits
thereto, the "Schedule TO") that was originally filed on March 28, 2007, which
amendment shall include an amended offer to purchase, form of transmittal
letter, form of notice of guaranteed delivery and all other necessary documents
and exhibits with the Securities and Exchange Commission (the "SEC") reflecting
the terms and conditions of this Agreement, and make all deliveries, filings,
publications, mailings and telephonic notices required to be made in connection
with the Offer under the federal securities Laws, including Regulations 14D and
14E of the Securities Exchange Act of 1934, as amended (including the rules and
regulations promulgated thereunder, the "Exchange Act") (such documents filed or
required to be filed with the SEC and such other filings, deliveries, mailings
and notices, collectively and together with any amendments, exhibits or
supplements thereto, the "Offer Documents") and (iii) shall use their reasonable
best efforts to consummate the Offer. The obligations of Purchaser to, and
Parent to cause Purchaser to, accept for payment and pay for any Shares tendered
pursuant to the Offer are subject only to the conditions that (i) there shall be
validly tendered and not withdrawn prior to the expiration of the Offer such
number of shares of Company Common Stock that, when added to the shares of
Company Common Stock already owned by Parent, Purchaser and their Subsidiaries,
would constitute at least a two-thirds of the shares of Company Common Stock
outstanding determined on a fully diluted basis (on a "fully diluted basis"
meaning the number of Shares then issued and outstanding plus all shares of
Company Common Stock which are issuable upon the exercise of any options, rights
and warrants and upon conversion of convertible notes (excluding those Shares
underlying the Notes) or similar obligations then outstanding, whether or not
vested or exercisable) immediately prior to the date of expiration of the Offer
(the "Minimum Condition") and (ii) the other conditions set forth in Annex A
hereto (collectively with the Minimum Condition, the "Tender Offer Conditions")
have been satisfied or waived in writing by Parent.
(b) Without the prior written consent of the Company, Parent and
Purchaser shall not decrease the Offer Price or change the form of consideration
payable in the Offer, decrease the number of shares of Company Common Stock
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sought to be purchased in the Offer, waive or change the Minimum Condition,
impose additional conditions to the Offer, modify any condition set forth in
Annex A or amend any other term of the Offer, in each case, in a manner that is
materially adverse to the holders of Shares, except as provided in this
Agreement. The initial expiration date of the Offer shall be May 24, 2007 (the
"Expiration Date," unless the period of time for which the Offer is open shall
be extended in accordance with the immediately following sentence, in which
event the term "Expiration Date" shall mean the latest time and date as the
Offer, as so extended, may expire); provided, however, that Parent and Purchaser
may provide for a subsequent offering period (the "Subsequent Offering
Period")after the Expiration Date, in accordance with Rule 14d-11 under the
Exchange Act (including the obligations that Purchaser accept and pay for all
Shares validly tendered and not withdrawn as promptly as practicable after the
expiration of the initial offering period, and accept and pay for any Shares
validly tendered during such subsequent offering period promptly following the
valid tender thereof). Notwithstanding the foregoing,
(i) Parent and Purchaser (A) shall extend the Offer (x) from
time to time, for a period not to exceed five (5) Business Days on each
occasion, if at the scheduled or extended expiration date of the Offer the
Minimum Condition shall not have been satisfied, until such time as such
condition is satisfied or waived or this Agreement is terminated or (y) from
time to time for a period not to exceed five (5) Business Days at a time (or
such other period as the Company shall approve) if condition (a) set forth in
Annex A shall not have been satisfied at the scheduled or any extended
expiration date of the Offer, until such time as such condition is satisfied or
waived or this Agreement is terminated, and (B) may, without the consent of the
Company, from time to time, in their sole discretion, extend the Expiration Date
for such period (not to exceed ten (10) Business Days on any single occasion) as
Parent and Purchaser may determine, to a date that is no later than July 31,
2007 (x) if immediately prior to the scheduled or any extended expiration date
any of the other Tender Offer Conditions are not satisfied or waived by Parent
or (y) for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer or any period
required by applicable Law; and
(ii) Parent and Purchaser may increase the Offer Price and
extend the Expiration Date to the extent required by applicable Law in
connection with such price increase. Parent and Purchaser shall not terminate
the Offer prior to any scheduled Expiration Date without the written consent of
the Company except in the event that this Agreement is terminated pursuant to
Section 7.1.
(c) Subject to the terms of the Offer and this Agreement and the
satisfaction or waiver of the Tender Offer Conditions as of any Expiration Date,
including the Minimum Condition, Parent will cause Purchaser to accept for
payment and pay for any and all shares of Company Common Stock validly tendered
and not validly withdrawn pursuant to the Offer promptly after such Expiration
Date (such date as Purchaser shall be obligated to accept for payment any and
all shares of Company Common Stock validly tendered and not validly withdrawn
pursuant to the Offer, the "Acceptance Date"). For the avoidance of doubt, and
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notwithstanding anything in this Agreement to the contrary, Purchaser shall not
(and Parent shall cause Purchaser not to) accept for payment any Shares tendered
pursuant to the Offer unless the Minimum Condition shall have been satisfied.
(d) Each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, agrees to correct promptly any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false or misleading in any material respect and Purchaser further agrees
to take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to stockholders of the Company, in
each case, as and to the extent required by applicable federal securities Laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on the Offer Documents in advance of their filing with the SEC and
dissemination to stockholders of the Company. Parent and Purchaser shall provide
to the Company and its counsel copies in writing of any comments and shall
inform the Company of any oral comments that Parent, Purchaser or their counsel
may receive from the SEC or its staff with respect to the Offer Documents
promptly after receipt of such comments and consult with the Company and its
counsel prior to responding to any such comments. The Company and its counsel
shall be given a reasonable opportunity to review any such written and oral
comments and proposed responses.
(e) Parent shall provide or cause to be provided to Purchaser on a
timely basis the funds necessary to purchase any Shares that Purchaser becomes
obligated to purchase pursuant to the Offer.
SECTION 1.2 Company Actions.
(a) The Company hereby consents to the Offer and represents and
warrants that the Company's Board of Directors, at a meeting duly called and
held, has unanimously (i) determined that this Agreement and the Transactions,
including the Offer and the Merger, are in the best interests of the Company's
stockholders, (ii) approved and adopted this Agreement and the Transactions in
accordance with the MGCL, including for purposes of Section 3-105 thereof, and
(iii) subject to Section 5.2(c), resolved to recommend acceptance of the Offer
and approval and adoption of this Agreement and the Merger by its stockholders
The Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company's Board of Directors described above. The Company
hereby further represents and warrants that (A) the Board of Directors of the
Company has received the opinion of C.K. Cooper & Company, dated the date of
this Agreement, to the effect that, as of such date, and subject to the various
assumptions and qualifications set forth therein, the consideration to be
received by the Company's stockholders in the Offer and the Merger is fair to
such holders from a financial point of view (the "Fairness Opinion") and (B) the
Company has been authorized by C.K. Cooper & Company to permit the inclusion of
the Fairness Opinion and/or references thereto in the Offer Documents, the
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Schedule 14D-9 and any Proxy Statement, subject to prior review and consent by
C.K. Cooper & Company (such consent not to be unreasonably withheld or delayed).
(b) The Company shall, after affording Parent and its counsel
reasonable opportunity to review and comment thereon, file with the SEC, as
promptly as practicable on the date of the filing by Parent and Purchaser of the
Offer Documents, an amendment to its Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments, supplements and exhibits thereto,
the "Schedule 14D-9") originally filed on April 11, 2007, with respect to the
Offer, reflecting the recommendation of the Board of Directors of the Company
described in Section 1.2(a). The Company shall cause the Schedule 14D-9 to be
disseminated to holders of the Shares as and to the extent required by
applicable federal securities laws. The Company, on the one hand, and each of
Parent and Purchaser, on the other hand, shall promptly correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
be or shall have become false or misleading in any material respect, and the
Company shall cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to holders of the Shares, in each case, as and to the extent
required by applicable federal securities laws. The Company agrees to provide
Parent and its counsel with any comments, whether written or oral, that the
Company or its counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments,
to consult with Parent and its counsel prior to responding to any such comments
and to provide Parent with copies of all such responses, whether written or
oral.
(c) The Company shall promptly furnish Purchaser with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including updated listings and computer files of
shareholders, mailing labels and security position listings, and such other
assistance as Parent, Purchaser or their agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares.
SECTION 1.3 Directors of the Company.
(a) Upon the purchase of Shares pursuant to the Offer and for so
long thereafter as Parent and its Subsidiaries directly or indirectly own in the
aggregate more than two-thirds of the outstanding Shares, Parent shall be
entitled to designate for appointment or election to the Company's Board of
Directors, upon written notice to the Company, such number of directors, rounded
up to the next whole number, as is equal to the product obtained by multiplying
the total number of directors on such Board (after giving effect to the
directors designated by Parent pursuant to this sentence) by the percentage that
the number of Shares so owned by Parent and its Subsidiaries bears to the total
number of Shares then outstanding. In furtherance thereof, the Company shall,
upon request of Parent, promptly cause Parent's designees (and any replacement
designees in the event that any designee shall no longer be on such Board of
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Directors) to be so appointed or elected to the Company's Board of Directors
and, in furtherance thereof, to the extent necessary, increase the size of such
Board of Directors or obtain the resignation of such number of its directors as
is necessary to give effect to the foregoing provision. At such time as such
designees constitute a majority of the Board (the "Control Date"), the Company
shall also, upon the request of Parent, cause such persons designated by Parent
to constitute at least the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the Company's
Board of Directors, subject to compliance with applicable securities laws and
the rules of The American Stock Exchange (the "AMEX"), and (ii) each board of
directors (or similar body) of each Subsidiary of the Company and each committee
of each such board (or similar body). Notwithstanding the foregoing, until the
Effective Time, the Board of Directors of the Company shall have at least one
director who is (A) a director of the Company on the date of this Agreement and
(B) Qualified Persons (as defined below) ("Independent Director"); provided,
however, that if there is no Independent Director for any reason whatsoever, the
other directors shall be required to designate a Qualified Person to fill such
vacancy, and such persons shall be deemed to be Independent Director for
purposes of this Agreement; and provided further, however, that notwithstanding
the foregoing, in no event shall the requirement to have an Independent Director
as provided in this Section result in Parent's designees constituting less than
a majority of the directors on the Company's Board of Directors unless Parent
shall have failed to designate a sufficient number of persons to constitute at
least a majority. As used herein, a "Qualified Person" means an individual who
(1) is not an officer of the Company or any of its Subsidiaries, (2) qualifies
as an "independent director" as defined in Section 121 of the AMEX Company Guide
and (3) is eligible to serve on the Company's audit committee under applicable
Exchange Act and AMEX rules.
(b) The Company shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 1.3(a), including mailing to the
Company's stockholders the information required by such Section 14(f) and Rule
14f-1 (which the Company shall mail together with the Schedule 14D-9 if it
receives from Parent and Purchaser the information below on a basis timely to
permit such mailing) as is necessary to fulfill the Company's obligations under
Section 1.3(a). Parent and Purchaser shall timely supply the Company in writing
and be solely responsible for such information with respect to Parent and
Purchaser and their nominees, officers, directors and Affiliates required by
such Section 14(f) and Rule 14f-1 as is necessary in connection with the
appointment of any of Parent's designees under Section 1.3(a). The provisions of
Section 1.3(a) are in addition to and shall not limit any rights that Purchaser,
Parent or any of their Affiliates may have as a holder or beneficial owner of
Shares as a matter of Law with respect to the election of directors or
otherwise.
(c) Following the election or appointment of Parent's designees
pursuant to Section 1.3(a) and prior to the Effective Time, the approval by
affirmative vote or written consent of a majority of the Independent Directors
then in office (the "Independent Director Approval") shall be required to
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authorize (and such authorization shall constitute the authorization of the
Board of Directors and no other action on the part of the Company, including any
action by any other director of the Company, shall be required to authorize) (i)
any amendment or termination of this Agreement by the Company, (ii) any
extension by the Company of time for performance of any obligation or action
under this Agreement by Parent or Purchaser, (iii) any waiver, exercise or
enforcement of any of the Company's rights under this Agreement or (iv) any
amendment of the articles of incorporation or bylaws of the Company (the
"Company Charter Documents") in a manner that adversely affects holders of
Company Common Stock (other than Parent or Purchaser).
SECTION 1.4 Stockholder Meeting.
(a) As promptly as practicable following the purchase of Shares
pursuant to the Offer, if a vote of stockholders is required by applicable Law
in order to consummate the Merger, the Company, acting through its Board of
Directors, shall, in accordance with applicable Law and the Company Charter
Documents:
(i) duly call, give notice of, convene and hold an annual or
special meeting of the Company's stockholders for the purposes of considering
and taking action to approve the Merger (the "Company Stockholders Meeting");
and
(ii) in consultation with Parent, prepare and file with the
SEC a preliminary proxy or information statement relating to the Merger and this
Agreement and obtain and furnish the information required by the SEC to be
included therein and, after consultation with Parent, respond promptly to any
comments made by the SEC with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement (together with
all amendments, supplements and exhibits thereto, the "Proxy Statement") to be
mailed to the Company's stockholders at the earliest practicable date; provided
that no amendments or supplements to the Proxy Statement shall be made by the
Company without consultation with Parent. Parent shall provide the Company in
writing and be solely responsible for such information with respect to Parent
and its Affiliates as shall be required to be included in the Proxy Statement.
(b) Notwithstanding the provisions of Section 1.4(a), in the event
that Parent, Purchaser and any of Parent's other Subsidiaries shall acquire in
the aggregate at least 90% of the outstanding Shares pursuant to the Offer or
otherwise (including pursuant to Section 1.5), the parties hereto shall, subject
to Article VI hereof, take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section
3-106 of the MGCL.
(c) Parent shall vote, or cause to be voted, all of the Shares
acquired in the Offer or otherwise then owned by it, Purchaser and any of
Parent's other Subsidiaries in favor of the adoption of this Agreement.
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SECTION 1.5 Option to Acquire Additional Shares. The Company hereby grants
to Purchaser an option (the "Purchaser Option"), exercisable in accordance with
this Section 1.5, to purchase up to that number of newly issued shares of
Company Common Stock (the "Purchaser Option Shares") equal to the number of
shares that, when added to the number of Shares owned by Parent and its
Subsidiaries immediately following consummation of the Offer, shall constitute
one share more than 90% of the Shares then outstanding (after giving effect to
the issuance of the Purchaser Option Shares) for a cash purchase price per
Purchaser Option Share equal to the Offer Price; provided, however, that the
number of Purchased Option Shares shall not exceed that number equal to 19.9% of
the Shares outstanding on the date of this Agreement. The Purchaser Option may
be exercised by Purchaser at any time within five Business Days after
Purchaser's acceptance of and payment for Shares pursuant to the Offer,
including the Subsequent Offering Period, in accordance with the terms of this
Agreement. If Purchaser wishes to so exercise the Purchaser Option, Purchaser
shall give the Company written notice within such five-Business Day period
specifying the number of shares of Company Common Stock that Purchaser wishes to
purchase pursuant to the Purchaser Option and a place and a time (which shall be
at least two, but not more than five, Business Days after the date of delivery
of such written notice) for the closing of such purchase. At such closing, (i)
the purchase price in respect of such exercise of the Purchaser Option (which
shall equal the product of (x) the number of shares of Company Common Stock
being purchased pursuant to the Purchaser Option and (y) the Offer Price) shall
be paid to the Company in immediately available funds by wire transfer to an
account designated by the Company, and (ii) the Company shall deliver to
Purchaser a certificate or certificates representing the number of shares of
Company Common Stock so purchased, which certificates may include any legends
required by applicable securities laws. The Company agrees that it shall reserve
(and maintain free from preemptive rights) sufficient authorized but unissued
shares of Company Common Stock so that the Purchaser Option may be exercised
without additional authorization of shares of Common Stock (after giving effect
to all other options, warrants, convertible securities and other rights to
purchase shares of Company Common Stock).
SECTION 1.6 Offer Documents; Schedule 14D-9; Proxy Statement. Without
limiting any other provision of this Agreement, whenever any party hereto
becomes aware of any event or change which is required to be set forth in an
amendment or supplement to the Offer Documents, the Schedule 14D-9 and/or the
Proxy Statement, such party shall promptly inform the other parties thereof and
each of the parties shall cooperate in the preparation, filing with the SEC and
(as and to the extent required by applicable federal securities laws)
dissemination to the Company's stockholders of such amendment or supplement.
ARTICLE II
The Merger
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SECTION 2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the MGCL, at the Effective Time
8
Purchaser shall be merged with and into the Company, and the separate corporate
existence of Purchaser shall thereupon cease, and the Company shall be the
surviving corporation in the Merger (the "Surviving Corporation").
SECTION 2.2 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. (New York City time) on a date to be specified by the
parties (the "Closing Date"), which date shall be no later than the second
Business Day after satisfaction or waiver of the conditions set forth in Article
VI (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices of Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite
300, Dallas, Texas 75201, unless another time, date or place is agreed to in
writing by the parties hereto.
SECTION 2.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date the parties shall file with
Maryland's State Department of Assessments and Taxation (the "Department") the
articles of merger executed in accordance with the relevant provisions of the
MGCL (the "Articles of Merger"). The Merger shall become effective upon the
filing of the Articles of Merger or at such later time as is agreed to by the
parties hereto and specified in the Articles of Merger (the time at which the
Merger becomes effective is herein referred to as the "Effective Time").
SECTION 2.4 Effects of the Merger. The Merger shall have the effects set
forth in the MGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges and
powers of the Company and Purchaser shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5 Articles of Incorporation and Bylaws of the Surviving
Corporation.
(a) The articles of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Corporation until thereafter amended as provided therein or by
applicable Law.
(b) The bylaws of the Company, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable Law.
SECTION 2.6 Directors and Officers of the Surviving Corporation.
(a) Each of the parties hereto shall take all necessary action to
cause the directors of Purchaser immediately prior to the Effective Time to be
the directors of the Surviving Corporation immediately following the Effective
Time, until their respective successors are duly elected or appointed and
9
qualified or their earlier death, resignation or removal in accordance with the
articles of incorporation and bylaws of the Surviving Corporation.
(b) The officers of Purchaser immediately prior to the Effective
Time shall be the officers of the Surviving Corporation until their respective
successors are duly appointed and qualified or their earlier death, resignation
or removal in accordance with the articles of incorporation and bylaws of the
Surviving Corporation.
SECTION 2.7 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any securities
of Purchaser or the Company:
(a) Each issued and outstanding share of capital stock of
Purchaser shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.
(b) Any Shares owned by Parent or Purchaser shall be automatically
canceled and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) Shares to be canceled in accordance with Section
2.7(b) and (ii) any Dissenting Shares), shall be converted into the right to
receive an amount of cash equal to the Offer Price payable to the holder thereof
upon surrender, in the manner provided in this Agreement, of the certificate
formerly representing such Share, without interest (the "Merger Consideration").
All such Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented any such
Shares shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such certificate
in accordance with this Agreement, without interest.
SECTION 2.8 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as agent for the holders of Shares in
connection with the Merger (the "Paying Agent") to receive, for the benefit of
holders of Shares, the aggregate Merger Consideration to which all holders of
Shares shall become entitled pursuant to Section 2.7(c). On the Closing Date,
Parent shall deposit such aggregate Merger Consideration with the Paying Agent.
Such aggregate Merger Consideration deposited with the Paying Agent shall,
pending its disbursement to such holders, be invested by the Paying Agent as
directed by Parent. Any net profit resulting from, or interest or income
produced by, such amounts on deposit with the Paying Agent will be payable to
Parent or as Parent otherwise directs.
10
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Paying Agent to mail to each holder of record of a certificate
or certificates (or evidence of shares in book-entry form), which immediately
prior to the Effective Time represented outstanding Shares (the "Certificates"),
whose shares were converted pursuant to Section 2.7 into the right to receive
the Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent, and which
shall be in such form and shall have such other provisions (including customary
provisions with respect to delivery of an "agent's message" with respect to
shares held in book-entry form) as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions or receipt of
an "agent's message" (and such other customary documents as may reasonably be
required by the Paying Agent), the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration, without interest, for
each Share formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be canceled. If payment of the Merger Consideration
is to be made to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that (x) the
Certificate so surrendered shall be properly endorsed or shall otherwise be in
proper form for transfer and (y) the Person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of such
Certificate surrendered or shall have established to the reasonable satisfaction
of the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.8, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration as contemplated by this
Article II, without interest.
(c) Transfer Books; No Further Ownership Rights in Company Stock.
The Merger Consideration paid in respect of Shares upon the surrender for
exchange of Certificates in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock previously represented by such Certificates, and
at the close of business on the day 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 on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. From and after the
Effective Time, the holders of Certificates that evidenced ownership of Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise provided for herein or
by applicable Law. Subject to the last sentence of Section 2.8(e), if, at any
time after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article II.
11
(d) Lost, Stolen or Destroyed 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 the Surviving Corporation, 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 Paying Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the applicable Merger Consideration to be paid in respect of the
Shares formerly represented by such Certificate, as contemplated by this Article
II.
(e) Termination of Fund. At any time following 180 days after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) that had been made available to the Paying Agent and which have
not been disbursed to holders of Certificates, and thereafter such holders shall
be entitled to look only to Parent and the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) as general creditors thereof
with respect to the payment of any Merger Consideration that may be payable upon
surrender of any Certificates held by such holders, as determined pursuant to
this Agreement, without any interest thereon. Any amounts remaining unclaimed by
such holders at such time at which such amounts would otherwise escheat to or
become property of any Governmental Authority shall become, to the extent
permitted by applicable Law, the property of Parent free and clear of all claims
or interest of any Person previously entitled thereto.
(f) No Liability. Notwithstanding any provision of this Agreement
to the contrary, none of the parties hereto, the Surviving Corporation or the
Paying Agent shall be liable to any Person for Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) Withholding Taxes. Parent, Purchaser, the Surviving
Corporation and the Paying Agent shall be entitled to deduct and withhold from
the consideration otherwise payable to a holder of Shares pursuant to the Offer
or Merger such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder (the "Code"),
or under any provision of state, local or foreign tax Law. To the extent amounts
are so withheld and paid over to the appropriate taxing authority, the withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made.
SECTION 2.9 Appraisal Rights. Notwithstanding anything in this Agreement
to the contrary and unless an exemption is available under Section 3-202(c) of
the MGCL or otherwise, Shares that are issued and outstanding immediately prior
to the Effective Time and which are held by a stockholder who did not vote in
favor of the Merger (or consent thereto in writing) and who is entitled to
demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, the provisions of Section 3-203 of the MGCL (the
"Dissenting Stockholders"), shall not be converted into or be exchangeable for
12
the right to receive the Merger Consideration (the "Dissenting Shares"), but
instead such holder shall be entitled to payment of the fair value of such
shares in accordance with the provisions under Title 3, Subtitle 2 of the MGCL
(and at the Effective Time, such Dissenting Shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
such holder shall cease to have any rights with respect thereto, except the
right to receive the fair value of such Dissenting Shares in accordance with the
provisions under Title 3, Subtitle 2 of the MGCL), unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost rights
to appraisal under the MGCL. If any Dissenting Stockholder shall have failed to
perfect or shall have effectively withdrawn or lost such right, to the extent an
exemption is not available, such holder's Shares shall thereupon be treated as
if they had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration for each such Share,
in accordance with Section 2.7, without any interest thereon. The Company shall
give Parent (i) prompt notice of any written demands for appraisal of any
Shares, attempted withdrawals of such demands and any other instruments served
pursuant to the MGCL and received by the Company relating to stockholders'
rights of appraisal, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for appraisal under the MGCL. The
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to, or settle, or offer or agree to settle, any
such demand for payment. Any portion of the Merger Consideration made available
to the Paying Agent pursuant to Section 2.8 to pay for Shares for which
appraisal rights have been perfected shall be returned to Parent upon demand.
SECTION 2.10 Company Stock Options. Prior to and effective as of the
Effective Time, the Company shall have taken all such action as is necessary to
terminate, subject to compliance with this Section 2.10, the Company Stock Plans
and shall have provided written notice to each holder of a then-outstanding PYR
Energy Option (whether or not such PYR Energy Option is then vested or
exercisable), that such PYR Energy Option shall be, as of the date of such
notice, exercisable in full, that such PYR Energy Option shall terminate at the
Effective Time and that, if such PYR Energy Option is not exercised or otherwise
terminated on or before the Effective Time, such holder shall be entitled to
receive in cancellation of such PYR Energy Option the Option Consideration (as
defined below) at the Closing. The Company shall use its reasonable best efforts
to obtain the written acknowledgement of each holder of a then-outstanding PYR
Energy Option with regard to the cancellation of such PYR Energy Option. Except
as otherwise provided below, the Option Consideration shall be paid as soon
after the Closing Date as shall be practicable. Notwithstanding the foregoing,
Parent and the Surviving Corporation shall be entitled to deduct and withhold
from the Option Consideration otherwise payable such amounts as may be required
to be deducted and withheld with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax Law. For purposes of this
Agreement, "Option Consideration" means, with respect to any share of Company
Common Stock issuable under a particular PYR Energy Option, an amount equal to
the excess, if any, of (i) the Merger Consideration per Share over (ii) the
exercise price payable in respect of such share of Company Common Stock issuable
13
under such PYR Energy Option. For purposes of this Agreement, (i) "Company Stock
Plans" shall mean the following plans of the Company: 1997 Stock Option Plan;
2000 Stock Option Plan, as amended; and 2006 Stock Inventive Plan and (ii) "PYR
Energy Option" shall mean each option issued and outstanding under the Company
Stock Plans.
SECTION 2.11 Warrants. Prior to the Effective Time, the Company shall have
taken all action necessary to provide that each Warrant outstanding immediately
prior to the Effective Time shall have been terminated and converted at the
Effective Time into the right to receive a cash amount equal to the Warrant
Consideration. Except as otherwise provided below, the Warrant Consideration
shall be paid as soon after the Closing Date as shall be practicable.
Notwithstanding the foregoing, Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the Warrant Consideration otherwise payable
such amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax Law. For purposes of this Agreement, "Warrant Consideration" means,
with respect to any share of Company Common Stock issuable under a particular
Warrant, an amount equal to the excess, if any, of (i) the Merger Consideration
per Share over (ii) the exercise price payable in respect of such share of
Company Common Stock issuable under such Warrant.
SECTION 2.12 Other Actions. Without limiting the foregoing, the Company
shall take all actions necessary to ensure that the Company will not at the
Effective Time be bound by any options, SARs, warrants or other rights or
agreements which would entitle any Person, other than Parent and its
Subsidiaries, to own any capital stock of the Surviving Corporation or to
receive any payment in respect thereof.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Purchaser that except as
set forth in the disclosure schedule (with specific reference to the Section or
subsection of this Agreement to which the information stated in such disclosure
relates) delivered by the Company to Parent simultaneously with the execution of
this Agreement (the "Company Disclosure Schedule"):
SECTION 3.1 Organization, Standing and Corporate Power.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is incorporated and has all requisite corporate power
and authority necessary to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and as currently proposed by
its management to be conducted. Except as disclosed in Section 3.1(a) of the
Company Disclosure Schedule, each of the Company and its Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
14
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing, individually or in the aggregate, has
not had and could not reasonably be expected to have a Material Adverse Effect
(as defined below) on the Company ("Company Material Adverse Effect"). For
purposes of this Agreement, "Material Adverse Effect" shall mean, with respect
to any party, any material adverse effect on, or any change, event, occurrence
or state of facts materially adverse to, (i) the business, properties, assets,
liabilities (contingent or otherwise), results of operations or condition
(financial or otherwise) of such party and its Subsidiaries taken as a whole, or
(ii) such party's ability to, in a timely manner, perform its obligations under
this Agreement or consummate the Transactions.
(b) Section 3.1(b) of the Company Disclosure Schedule lists all
Subsidiaries of the Company together with the jurisdiction of organization of
each such Subsidiary. All the outstanding shares of capital stock of, or other
equity interests in, each Subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable and are owned directly
or indirectly by the Company free and clear of all liens, pledges, charges,
mortgages, encumbrances, adverse rights or claims and security interests of any
kind or nature whatsoever (including any restriction on the right to vote or
transfer the same, except for such transfer restrictions of general
applicability as may be provided under the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act"), and
the "blue sky" laws of the various States of the United States) (collectively,
"Liens"). Except as set forth in Section 3.1(b) of the Company Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock,
voting securities or equity interests in any Person.
(c) The copies of the Company Charter Documents that are
incorporated by reference as exhibits to the Company's Annual Report on Form
10-KSB for the year ended August 31, 2006 are complete and correct copies of
such documents and contain all amendments thereto as in effect on the date of
this Agreement. The Company has delivered to Parent complete and correct copies
of the articles of incorporation and bylaws (or comparable organizational
documents) of each of its Subsidiaries (the "Subsidiary Documents"), as amended
to the date of this Agreement. All such Company Charter Documents and Subsidiary
Documents are in full force and effect and neither the Company nor any of its
Subsidiaries is in violation of any of their respective provisions. The Company
will make available to Parent and its representatives within five Business Days
from the execution of this Agreement its corporate record books, including
copies of the minutes (or, in the case of minutes that have not yet been
finalized, drafts thereof) of meetings of stockholders, the Board of Directors
and committees of the Board of Directors of the Company and each of its
Subsidiaries held since January 1, 2005.
15
SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
75,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock, par value $0.001 per share ("Company Preferred Stock"). At the close of
business on April 17, 2007, (i) 38,010,258 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 7,250,000 shares of Company Common Stock were
reserved for issuance under the Company Stock Plans (of which 1,990,764 shares
of Company Common Stock were subject to outstanding PYR Energy Options granted
under the Company Stock Plans), (iv) 627,500 shares of Company Common Stock were
reserved for issuance upon exercise of the warrants referred to in Section
3.2(a) of the Company Disclosure Schedule (correct and complete copies of which
have been delivered to Parent by the Company) ("Warrants"), (v) 5,810,001 shares
of Company Common Stock were reserved for issuance upon conversion of the
Company's convertible securities referred to in Section 3.2(a) of the Company
Disclosure Schedule (correct and complete copies of which have been delivered to
Parent by the Company) ("Convertible Securities"), (vi) no shares of Company
Preferred Stock were issued or outstanding and (vii) no shares of Company Common
Stock are held by any Subsidiary of the Company. All Shares have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Included in Section 3.2(a) of the Company Disclosure Schedule
is a correct and complete list, as of April 17, 2007, of all outstanding options
or other rights to purchase or receive shares of Company Common Stock granted
under the Company Stock Plans or otherwise, and, for each such option or other
right, the number of shares of Company Common Stock subject thereto, the terms
of vesting, the grant and expiration dates and exercise price thereof and the
name of the holder thereof. All PYR Energy Options have an exercise price equal
to no less than the fair market value of the underlying shares of Company Common
Stock on the date of grant. Since April 17, 2007, the Company has not issued any
shares of its capital stock, voting securities or equity interests, or any
securities convertible into or exchangeable or exercisable for any shares of its
capital stock, voting securities or equity interests, other than pursuant to the
outstanding options, Warrants and Convertible Securities, in each case, referred
to above in this Section 3.2(a). Except (A) as set forth above in this Section
3.2(a) or (B) as otherwise expressly permitted by Section 5.1 hereof, as of the
date of this Agreement there are not, and as of the Effective Time there will
not be, any shares of capital stock, voting securities or equity interests of
the Company issued and outstanding or any subscriptions, options, warrants,
calls, convertible or exchangeable securities, rights, commitments or agreements
of any character providing for the issuance of any shares of capital stock,
voting securities or equity interests of the Company, including any representing
the right to purchase or otherwise receive any Company Common Stock.
(b) None of the Company or any of its Subsidiaries has issued or
is bound by any outstanding subscriptions, options, warrants, calls, convertible
or exchangeable securities, rights, commitments or agreements of any character
providing for the issuance or disposition of any shares of capital stock, voting
securities or equity interests of any Subsidiary of the Company. There are no
16
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock, voting securities or
equity interests (or any options, warrants or other rights to acquire any shares
of capital stock, voting securities or equity interests) of the Company or any
of its Subsidiaries.
SECTION 3.3 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the approval of its
stockholders to the adoption of this Agreement as contemplated by Section 1.4
(to the extent required by the MGCL) (the "Company Stockholder Approval"), to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the Transactions, have been duly authorized and approved
by its Board of Directors (including exempting the Offer, the Merger, this
Agreement and the Transactions from the Maryland Business Combination Act and
the Maryland Control Share Acquisition Act (as defined in Section 3-605 and
Section 3-710 of the MGCL, respectively)), and except for obtaining the Company
Stockholder Approval, no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance by the Company of
this Agreement and the consummation by it of the Transactions. This Agreement
has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery hereof by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws of general
application affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (the "Bankruptcy and Equity
Exception").
(b) The Company's Board of Directors, at a meeting duly called and
held, has unanimously (i) approved and declared advisable this Agreement and the
Transactions, including the Offer and the Merger (such approval having been made
in accordance with the MGCL, including for purposes of Section 3-105 thereof)
and (ii) recommended that the stockholders of the Company accept the Offer,
tender their Shares to Purchaser pursuant thereto and approve the Merger.
(c) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the Transactions, nor compliance
by the Company with any of the terms or provisions hereof, will (i) conflict
with or violate any provision of the Company Charter Documents or any of the
Subsidiary Documents or (ii) assuming that the authorizations, consents and
approvals referred to in Section 3.4 and the Company Stockholder Approval are
obtained and the filings referred to in Section 3.4 are made, (x) violate any
Law, judgment, writ or injunction of any Governmental Authority applicable to
the Company or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in the loss of any benefit under,
17
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 or cancellation 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, any of the terms,
conditions or provisions of any loan or credit agreement, debenture, note, bond,
mortgage, indenture, deed of trust, license, lease, contract or other agreement,
instrument or obligation (each, a "Contract") or Permit, to which the Company or
any of its Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected except, in the case of clause (y),
for such violations, conflicts, losses, defaults, terminations, cancellations,
accelerations or Liens as, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
(d) The affirmative vote (in person or by proxy) of the holders of
two-thirds of the outstanding shares of Company Common Stock in favor of the
adoption of this Agreement is the only vote or approval of the holders of any
class or series of capital stock of the Company or any of its Subsidiaries which
is necessary to adopt this Agreement and approve the Transactions.
(e) The Company has made available to Parent a complete and
correct copy of all current and proposed amendments and exhibits to the Rights
Agreement, dated January 31, 2007, between the Company and U.S. Stock Transfer
Corporation, as Rights Agent, which is available in the Filed Company SEC
Documents. The Company's Board of Directors has approved an amendment (the
"Rights Amendment") to the Rights Agreement to provide that: (i) a Distribution
Date shall not occur, the Rights shall not separate (to the extent the Rights
Agreement otherwise provides for such separation) or become exercisable, neither
Parent nor Purchaser, nor any Affiliate or Associate of Parent or Purchaser,
shall become an Acquiring Person, and the Shares Acquisition Date shall not be
deemed to occur as a result of the execution, delivery or performance of this
Agreement or any other transactions contemplated by this Agreement, the public
announcement of such execution and delivery or, the public announcement or the
commencement of the Offer or the consummation of the Offer and (ii) the Rights
Agreement shall expire, and no Person shall have any rights pursuant to the
Rights Agreement, after the consummation of the Offer in accordance with the
terms thereof and the terms and conditions hereof, including the acceptance for
payment of, and the payment for all shares of Company Common Stock tendered
pursuant to the Offer. The Company shall, within one (1) day of the date of this
Agreement, deliver a certificate to the Rights Agent that the Rights Amendment
satisfies the terms of Section 27 of the Rights Agreement and the Rights Agent
shall, and the Company shall cause the Rights Agent to, within one (1) day of
the date of this Agreement, duly execute and deliver the Rights Amendment.
Solely for purposes of this Section 3.4(c), the terms "Rights Agent,"
"Distribution Date," "Rights," "Affiliates," "Associates," "Shares Acquisition
Date" and "Acquiring Person" shall have the meaning ascribed to them in the
Rights Agreement.
SECTION 3.4 Governmental Approvals. Except for (i) the filing with the SEC
of the Schedule 14D-9 and, if necessary, of a Proxy Statement in definitive form
18
relating to the Company Stockholders Meeting, and other filings required under,
and compliance with other applicable requirements of, the Exchange Act and the
rules of AMEX and (ii) the filing of the Articles of Merger with the Department
pursuant to the MGCL, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Authority are necessary for the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the Transactions, other than such other consents, approvals,
filings, declarations or registrations that, if not obtained, made or given,
could not, individually or in the aggregate, reasonably be expected to impair in
any material respect the ability of the Company to perform its obligations
hereunder, or prevent or materially impede, interfere with, hinder or delay the
consummation of the Transactions.
SECTION 3.5 Company SEC Documents; Undisclosed Liabilities.
(a) The Company has filed and furnished all required reports,
schedules, forms, certifications, prospectuses, and registration, proxy and
other statements with the SEC since September 1, 2003 (collectively and together
with all documents filed on a voluntary basis on Form 8-K, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the "Company SEC Documents"). None of the Company's
Subsidiaries is required to file periodic reports with the SEC pursuant to the
Exchange Act. As of their respective effective dates (in the case of Company SEC
Documents that are registration statements filed pursuant to the requirements of
the Securities Act) and as of their respective SEC filing dates (in the case of
all other Company SEC Documents), the Company SEC Documents complied in all
material respects with the requirements of the Exchange Act, the Securities Act
and the Sarbanes-Oxley Act, as the case may be, applicable to such Company SEC
Documents, and none of the Company SEC Documents as of such respective dates
contained any untrue statement of a material fact or omitted 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. As of the date of this Agreement, there are no outstanding or
unresolved comments received from the SEC staff with respect to the Company SEC
Documents. To the Knowledge of the Company, none of the Company SEC Documents is
the subject of ongoing SEC review or investigation.
(b) The consolidated financial statements of the Company included
in the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited quarterly statements, as indicated in the
notes thereto) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments, none of
19
which has been or will be, individually or in the aggregate, material to the
Company and its Subsidiaries taken as a whole).
(c) The Company has established and maintains internal control
over financial reporting and disclosure controls and procedures (as such terms
are defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries,
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company's
principal executive officer and its principal financial officer to allow timely
decisions regarding required disclosure; and such disclosure controls and
procedures are effective to ensure that information 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 SEC rules and forms. The Company's principal executive officer and its
principal financial officer have disclosed, based on their most recent
evaluation, to the Company's auditors and the audit committee of the Board of
Directors of the Company (x) all significant deficiencies in the design or
operation of internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and have
identified for the Company's auditors any material weaknesses in internal
controls and (y) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal controls.
The principal executive officer and the principal financial officer of the
Company have made all certifications required by the Sarbanes-Oxley Act, the
Exchange Act and any related rules and regulations promulgated by the SEC with
respect to the Company SEC Documents, and the statements contained in such
certifications are complete and correct.
(d) The Company is in compliance in all material respects with the
provisions of Section 13(b) of the Exchange Act.
(e) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise, whether known or unknown) whether or not required, if known, to be
reflected or reserved against on a consolidated balance sheet of the Company
prepared in accordance with GAAP or the notes thereto, except liabilities (i) as
and to the extent reflected or reserved against on the audited balance sheet of
the Company and its Subsidiaries as of August 31, 2006 (the "Balance Sheet
Date") (including the notes thereto) included in the Company SEC Documents filed
by the Company and publicly available prior to the date of this Agreement (the
"Filed Company SEC Documents") or (ii) incurred after the Balance Sheet Date in
the ordinary course of business consistent with past practice that, individually
or in the aggregate, have not had and could not reasonably be expected to have a
Company Material Adverse Effect.
(f) Neither the Company nor any of its Subsidiaries is a party to,
or has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract or arrangement
relating to any transaction or relationship between or among the Company and any
20
of its Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited purpose entity or
Person, on the other hand or any "off-balance sheet arrangements" (as defined in
Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or effect
of such Contract is to avoid disclosure of any material transaction involving,
or material liabilities of, the Company or any of its Subsidiaries in the
Company's or such Subsidiary's published financial statements or any Company SEC
Documents.
SECTION 3.6 Absence of Certain Changes or Events. Since the Balance Sheet
Date there have not been any events, changes, occurrences or state of facts
that, individually or in the aggregate, have had or could reasonably be expected
to have a Company Material Adverse Effect. Except as disclosed in the Filed
Company SEC Documents, since the Balance Sheet Date (a) the Company and its
Subsidiaries have carried on and operated their respective businesses in all
material respects in the ordinary course of business consistent with past
practice and (b) neither the Company nor any of its Subsidiaries has taken any
action described in Section 5.1 that if taken after the date hereof and prior to
the Effective Time without the prior written consent of Parent would violate
such provision. Without limiting the foregoing, except as disclosed in the Filed
Company SEC Documents, since the Balance Sheet Date there has not occurred any
damage, destruction or loss (whether or not covered by insurance) of any
material asset of the Company or any of its Subsidiaries which materially
affects the use thereof.
SECTION 3.7 Legal Proceedings. Except as disclosed in the Filed Company
SEC Documents and Section 3.7 of the Company Disclosure Schedule, there is no
pending or, to the Knowledge of the Company, threatened, material legal,
administrative, arbitral or other proceeding, claim, suit or action against, or
governmental or regulatory investigation of, the Company or any of its
Subsidiaries, nor is there any injunction, order, judgment, ruling or decree
imposed (or, to the Knowledge of the Company, threatened to be imposed) upon the
Company, any of its Subsidiaries or the assets of the Company or any of its
Subsidiaries, by or before any Governmental Authority.
SECTION 3.8 Compliance With Laws; Permits. The Company and its
Subsidiaries are (and since September 1, 2003 have been) in compliance in all
material respects with all laws, statutes, ordinances, codes, rules,
regulations, decrees and orders of Governmental Authorities (collectively,
"Laws") applicable to the Company or any of its Subsidiaries, any of their
properties or other assets or any of their businesses or operations. The Company
and its Subsidiaries hold all material licenses, franchises, permits,
certificates, approvals and authorizations from Governmental Authorities, or
required by Governmental Authorities to be obtained, in each case necessary for
the lawful conduct of their respective businesses (collectively, "Permits"). The
Company and its Subsidiaries are (and since September 1, 2003 have been) in
compliance in all material respects with the terms of all Permits. Since
September 1, 2003, neither the Company nor any of its Subsidiaries has received
written notice to the effect that a Governmental Authority (a) claimed or
alleged that the Company or any of its Subsidiaries was not in compliance with
all Laws applicable to the Company or any of its Subsidiaries, any of their
21
properties or other assets or any of their businesses or operations or (b) was
considering the amendment, termination, revocation or cancellation of any
Permit. To the Company's Knowledge, the consummation of the Merger, in and of
itself, will not cause the revocation or cancellation of any Permit.
SECTION 3.9 Information Supplied. Subject to the accuracy of the
representations and warranties of Parent and Purchaser set forth in Section 4.4,
neither the Schedule 14D-9 nor any information supplied (or to be supplied) in
writing by or on behalf of the Company specifically for inclusion or
incorporation by reference in the Offer Documents will, at the respective times
the Schedule 14D-9, the Offer Documents, or any amendments or supplements
thereto, are filed with the SEC or at the time they are first published, sent or
given to stockholders of the Company, or at the expiration of the Offer, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement (if any) will not, on the date it is
first mailed to stockholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and will not, at the
time of the Company Stockholders Meeting (if such a meeting is held), omit to
state any material fact necessary to correct any statement in any earlier
communication from the Company with respect to the solicitation of proxies for
the Company Stockholders Meeting which shall have become false or misleading in
any material respect. The Proxy Statement (if any) and the Schedule 14D-9 will
comply as to form in all material respects with the applicable requirements of
the Exchange Act. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to information supplied by or on behalf
of Parent or Purchaser for inclusion or incorporation by reference in any of the
foregoing documents.
SECTION 3.10 Tax Matters.
(a) Each of the Company and its Subsidiaries has timely filed, or
has caused to be timely filed on its behalf (taking into account any extension
of time within which to file), all material Tax Returns required to be filed by
it, and all such filed Tax Returns are correct and complete in all material
respects. All Taxes shown to be due on such filed Tax Returns, or otherwise
required to be paid by the Company or any of its Subsidiaries, have been timely
paid.
(b) The most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all Taxes payable by the
Company and its Subsidiaries for all taxable periods (including any portion
thereof) through the date of such financial statements. No deficiency with
respect to Taxes has been proposed, asserted or assessed against the Company or
any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
22
stock qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.
(d) Except as set forth in Section 3.10(d) of the Company
Disclosure Schedule, no audit or other administrative or court proceeding
relating to Taxes is pending with or threatened by any Governmental Authority
with respect to Taxes of the Company or any of its Subsidiaries and no written
notice thereof has been received.
(e) Except as set forth in Section 3.10(e) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any contract, agreement, plan or other arrangement that, individually or
collectively, could give rise to the payment of any amount which would not be
deductible by reason of Section 162(m) or Section 280G of the Code or would be
subject to withholding under Section 4999 of the Code.
(f) The Company will make available to Parent within five Business
Days from the execution of this Agreement correct and complete copies of (i) all
income and franchise Tax Returns of the Company and its Subsidiaries for the
preceding three taxable years and (ii) any audit report issued within the last
three years (or otherwise with respect to any audit or proceeding in progress)
relating to income and franchise Taxes of the Company or any of its
Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated, combined or unitary Tax
Return (other than a group the common parent of which was the Company), (B)
engaged in any "reportable transaction" within the meaning of Treasury
Regulation ss. 1.6011-4(b), nor (C) waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, nor has any request been made in writing for any such extension or
waiver. The Company and its Subsidiaries have timely withheld, collected,
deposited or paid all Taxes required to have been withheld, collected, deposited
or paid, as the case may be, in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other party.
(h) For purposes of this Agreement: (x) "Taxes" shall mean (A) all
federal, state, local or foreign taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (B) all interest,
penalties, fines, additions to tax or additional amounts imposed by any
Governmental Authority in connection with any item described in clause (A), and
(C) any liability in respect of any items described in clauses (A) and/or (B)
payable by reason of contract, assumption, transferee liability, operation of
Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof of any analogous or similar provision under Law) or otherwise, and (y)
"Tax Returns" shall mean any return, report, claim for refund, estimate,
23
information return or statement or other similar document relating to or
required to be filed with any Governmental Authority with respect to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
SECTION 3.11 Employee Benefits and Labor Matters.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth
a correct and complete list of: (i) all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) all other employee benefit plans, policies, agreements or
arrangements, and (iii) all payroll practices, including employment, consulting
or other compensation agreements, or bonus or other incentive compensation,
stock purchase, equity or equity-based compensation, deferred compensation,
change in control, severance, sick leave, vacation, loans, salary continuation,
health, life insurance and educational assistance plan, policies, agreements or
arrangements with respect to which the Company or any of its Subsidiaries has
any obligation or liability, contingent or otherwise, for current or former
employees, consultants or directors of the Company or any of its Subsidiaries
(collectively, the "Company Plans"). The negotiation, execution, delivery and
performance of the Employee Severance Agreements (as defined in Section 3.10(e)
of the Company Disclosure Schedule) have been duly approved by the compensation
committee of the board of directors of the Company in accordance with Rule
14d-10 of the Exchange Act.
(b) Correct and complete copies of the following documents with
respect to each of the Company Plans will be delivered to Parent by the Company
within five Business Days from the execution of this Agreement to the extent
applicable: (i) any plans and related trust documents, insurance contracts or
other funding arrangements, and all amendments thereto; (ii) the most recent
Forms 5500 and all schedules thereto, (iii) the most recent IRS determination
letter; (iv) the most recent summary plan descriptions; and (v) written
summaries of all non-written Company Plans.
(c) The Company Plans have been maintained, in all material
respects, in accordance with their terms and with all applicable provisions of
ERISA, the Code and other Laws.
(d) The Company Plans intended to qualify under Section 401 or
other tax-favored treatment under of Subchapter B of Chapter 1 of Subtitle A of
the Code are so qualified, and any trusts intended to be exempt from federal
income taxation under the Code are so exempt. To the Company's Knowledge,
nothing has occurred with respect to the operation of the Company Plans that
could cause the loss of such qualification or exemption, or the imposition of
any liability, penalty or tax under ERISA or the Code.
(e) Parent will not have any obligation to make any contribution
or other payment to any "multiemployer plan," as defined in Section 3(37) of
ERISA (a "Multiemployer Plan") which it would not have had but for the
consummation of the Transactions.
24
(f) None of the Company Plans has been subject to Title IV of
ERISA or is a Multiemployer Plan or is or has been subject to Sections 4063 or
4064 of ERISA.
(g) There are no pending actions, claims or lawsuits arising from
or relating to the Company Plans, (other than routine benefit claims), nor does
the Company have any Knowledge of facts that could form the basis for any such
claim or lawsuit.
(h) All amendments and actions required to bring the Company Plans
into conformity in all material respects with all of the applicable provisions
of the Code, ERISA and other applicable Laws have been made or taken, except to
the extent that such amendments or actions are not required by law to be made or
taken until a date after the Closing Date.
(i) Except as set forth in Section 3.11(i) of the Company
Disclosure Schedule, none of the Company Plans provide for post-employment life
or health coverage for any participant or any beneficiary of a participant,
except as may be required under Part 6 of the Subtitle B of Title I of ERISA and
at the expense of the participant or the participant's beneficiary.
(j) Except as set forth in Section 3.11(j) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the Transactions will (i) result in any payment becoming due
to any employee, (ii) increase any benefits otherwise payable under any Company
Plan, (iii) result in the acceleration of the time of payment or vesting of any
such benefits under any such plan, or (iv) require any contributions or payments
to fund any obligations under any Company Plan.
(k) Any individual who performs services for the Company or any of
its Subsidiaries (other than through a contract with an organization other than
such individual) and who is not treated as an employee of the Company or any of
its Subsidiaries for federal income tax purposes by the Company is not an
employee for such purposes.
(l) None of the employees of the Company or its Subsidiaries is
represented in his or her capacity as an employee of the Company or any of its
Subsidiaries by any labor organization. Neither the Company nor any of its
Subsidiaries has recognized any labor organization, nor has any labor
organization been elected as the collective bargaining agent of any employees,
nor has the Company or any of its Subsidiaries entered into any collective
bargaining agreement or union contract recognizing any labor organization as the
bargaining agent of any employees. There is no union organization activity
involving any of the employees of the Company or any of its Subsidiaries pending
or, to the Knowledge of the Company, threatened, nor has there ever been union
representation involving any of the employees of the Company or any of its
Subsidiaries. There is no picketing pending or, to the Knowledge of the Company,
threatened, and there are no strikes, slowdowns, work stoppages, other job
actions, lockouts, arbitrations, grievances or other labor disputes involving
any of the employees of the Company or any of its Subsidiaries pending or, to
25
the Knowledge of the Company, threatened. There are no complaints, charges or
claims against the Company or any of its Subsidiaries pending or, to the
Knowledge of the Company, threatened that could be brought or filed with any
Governmental Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment or
failure to employ by the Company or any of its Subsidiaries, of any individual.
The Company and its Subsidiaries are in compliance with all Laws relating to the
employment of labor, including all such Laws relating to wages, hours, the
Worker Adjustment and Retraining Notification Act and any similar state or local
"mass layoff" or "plant closing" law ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar tax, except for immaterial non-compliance. There has been no "mass
layoff" or "plant closing" (as defined by WARN) with respect to the Company or
any of its Subsidiaries since January 1, 2005.
SECTION 3.12 Environmental Matters.
(a) Except for those matters that, individually or in the
aggregate, have not had and could not reasonably be expected to be material to
the Company and its Subsidiaries, taken as a whole, (A) each of the Company and
its Subsidiaries is, and has been, in compliance with all applicable
Environmental Laws, (B) there is no investigation, suit, claim, action or
proceeding relating to or arising under Environmental Laws that is pending or,
to the Knowledge of the Company, threatened against or affecting the Company or
any of its Subsidiaries or any real property currently or, to the Knowledge of
the Company, formerly owned, operated or leased by the Company or any of its
Subsidiaries, (C) neither the Company nor any of its Subsidiaries has received
any notice of or entered into or assumed by Contract or operation of Law or
otherwise, any obligation, liability, order, settlement, judgment, injunction or
decree relating to or arising under Environmental Laws, and (D) no facts,
circumstances or conditions exist with respect to the Company or any of its
Subsidiaries or any property currently (or, to the Knowledge of the Company,
formerly) owned, operated or leased by the Company or any of its Subsidiaries or
any property to or at which the Company or any of its Subsidiaries transported
or arranged for the disposal or treatment of Hazardous Materials that could
reasonably be expected to result in the Company and its Subsidiaries incurring
Environmental Liabilities.
(b) For purposes of this Agreement:
(i) "Environmental Laws" means all Laws relating in any way
to the environment, preservation or reclamation of natural resources, the
presence, management or Release of, or exposure to, Hazardous Materials, or to
human health and safety, including the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 5101 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act
(33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.),
the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), the Toxic Substances
26
Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.), each of their state and local
counterparts or equivalents. each of their foreign and international
equivalents, and any transfer of ownership notification or approval statute
(including the Industrial Site Recovery Act (N.J. Stat. Ann. ss. 13:1K-6 et
seq.), as each has been amended and the regulations promulgated pursuant
thereto.
(ii) "Environmental Liabilities" means, with respect to any
Person, all liabilities, obligations, responsibilities, remedial actions,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of
counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim or demand by any other Person or in response to any violation of
Environmental Law, whether known or unknown, accrued or contingent, whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute, to the extent based upon, related to, or arising under or
pursuant to any Environmental Law, environmental permit, order or agreement with
any Governmental Authority or other Person, which relates to any environmental,
health or safety condition, violation of Environmental Law or a Release or
threatened Release of Hazardous Materials.
(iii) "Hazardous Materials" means any material, substance of
waste that is regulated, classified, or otherwise characterized under or
pursuant to any Environmental Law as "hazardous", "toxic", a "pollutant", a
"contaminant", "radioactive" or words of similar meaning or effect, including
petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold,
urea formaldehyde insulation, chlorofluorocarbons and all other ozone-depleting
substances.
(iv) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing of or migrating into or through the environment or any natural or
man-made structure.
SECTION 3.13 Contracts.
(a) Set forth in Section 3.13(a) of the Company Disclosure
Schedule is a list of the following contracts to which the Company or any of its
Subsidiaries is a party (other than contracts filed as exhibits to the Filed
Company SEC Documents and those with a value or which involve an obligation of
the Company in an amount less than $25,000): (A) Contract that purports to
limit, curtail or restrict the ability of the Company or any of its existing or
future Subsidiaries or Affiliates to compete in any geographic area or line of
business or restrict the Persons to whom the Company or any of its existing or
future Subsidiaries or Affiliates may sell products or deliver services , (B)
partnership or joint venture agreement, (C) Contract for the acquisition, sale
or lease of material properties or assets (by merger, purchase or sale of stock
or assets or otherwise) entered into since September 1, 2003, (D) Contract with
any (x) Governmental Authority or (y) director or officer of the Company or any
of its Subsidiaries or any Affiliate of the Company, (E) loan or credit
27
agreement, mortgage, indenture, note or other Contract or instrument evidencing
indebtedness for borrowed money by the Company or any of its Subsidiaries or any
Contract or instrument pursuant to which indebtedness for borrowed money may be
incurred or is guaranteed by the Company or any of its Subsidiaries, (F)
financial derivatives master agreement or confirmation, or futures account
opening agreements and/or brokerage statements, evidencing financial hedging or
similar trading activities, (G) voting agreement or registration rights
agreement, (H) mortgage, pledge, security agreement, deed of trust or other
Contract granting a Lien on any material property or assets of the Company or
any of its Subsidiaries, (I) customer or supply Contract that involves total
consideration in excess of $10,000, (J) collective bargaining agreement, (K)
"standstill" or similar agreement, (L) Contract that restricts or otherwise
limits the payment of dividends or other distributions on equity securities, (M)
to the extent material to the business or financial condition of the Company and
its Subsidiaries, taken as a whole, (1) lease or rental Contract, (2) product
design or development Contract, (3) consulting Contract, (4) indemnification
Contract, (5) license or royalty Contract, (6) merchandising, sales
representative or distribution Contract or (7) Contract granting a right of
first refusal or first negotiation, (N) Contract for the sale of Hydrocarbons
produced from or attributable to the Oil and Gas Interests, except those sales
contracts that can be terminated by Seller and its assigns upon not more than 90
days without penalty or detriment to the Company and its assigns, (O) Contract
that creates any area of mutual interest with respect to the acquisition by
Parent or its assigns of any Oil and Gas Interests, and (P) commitment or
agreement to enter into any of the foregoing (the Contracts and other documents
required to be listed on Section 3.13(a) of the Company Disclosure Schedule and
those filed as material contracts in exhibits to the Filed Company SEC
Documents, together with any and all other Contracts of such type entered into
in accordance with Section 5.2(a), each a "Material Contract"). The Company will
make available to Parent within five Business Days from the execution of this
Agreement correct and complete copies of each Material Contract in existence as
of the date hereof, together with any and all amendments and supplements thereto
and material "side letters" and similar documentation relating thereto.
(b) Each of the Material Contracts is valid, binding and in full
force and effect and is enforceable in accordance with its terms by the Company
and its Subsidiaries party thereto, subject to the Bankruptcy and Equity
Exception. Except as separately identified in Section 3.13(b) of the Company
Disclosure Schedule, no approval, consent or waiver of any Person is needed in
order that any Material Contract continue in full force and effect following the
consummation of the Transactions. Neither the Company nor any of its
Subsidiaries is in default under any Material Contract or other Contract to
which the Company or any of its Subsidiaries is a party (collectively, the
"Company Contracts"), nor does any condition exist that, with notice or lapse of
time or both, would constitute a default thereunder by the Company and its
Subsidiaries party thereto, except for such defaults as, individually or in the
aggregate, have not had and could not reasonably be expected to be material to
the Company and its Subsidiaries taken as a whole. To the Knowledge of the
Company, no other party to any Company Contract is in default thereunder, nor
28
does any condition exist that with notice or lapse of time or both would
constitute a default by any such other party thereunder, except for such
defaults as, individually or in the aggregate, have not had and could not
reasonably be expected to be material to the Company and its Subsidiaries taken
as a whole. Neither the Company nor any of its Subsidiaries has received any
notice of termination or cancellation under any Material Contract, received any
notice of breach or default in any material respect under any Material Contract.
The Company has fully complied with all of its obligations under Section 7 of
the Amexco Agreement.
SECTION 3.14 Properties.
(a) The Company owns no real property other than the Oil and Gas
Interests.
(b) Section 3.14(b) of the Company Disclosure Schedule contains a
complete and correct list of all real property leases and any and all amendments
thereto relating to the leased real property to which the Company and its
Subsidiaries are a party or are bound other than Leases related to Oil and Gas
Interests (the "Real Property Leases"). Except as disclosed in Section 3.14(b)
of the Company Disclosure Schedule, (i) each of the Real Property Leases is in
full force and effect, and, to the Company's Knowledge, is enforceable against
the landlord which is party thereto in accordance with its terms (subject to the
Bankruptcy and Equity Exception), (ii) there are no subleases under the Real
Property Leases and none of the Real Property Leases has been assigned, (iii) no
notices of default or notices of termination have been received by the Company
with respect to the Real Property Leases which have not been withdrawn or
cancelled and (iv) the Company and the Company's Subsidiaries are not, and to
the Company's Knowledge, no other party is, in default under any Real Property
Lease. There is no Company Knowledge of, nor has there been receipt of any
written notice of, a proceeding in eminent domain or other similar proceeding
affecting property listed on Section 3.14(b) of the Company Disclosure Schedule.
(c) Section 3.14(c) of the Company Disclosure Schedule sets forth
a description of all Oil and Gas Interests owned by the Company and its
Subsidiaries in the Principal Properties, including the Net Revenue Interests
and Working Interests of the Company or such Subsidiary therein. Except as set
forth in Section 3.14(c) of the Company Disclosure Schedule, each of the Company
and its Subsidiaries, as applicable, has Defensible Title to all of its
respective Oil and Gas Interests in the Principal Properties.
(d) All net profits interests, overriding royalties and other
similar interests held by third parties in the Oil and Gas Interests of the
Company and its Subsidiaries in the Principal Properties that have been created
or established by or through the Company or its Subsidiaries (inclusive of those
arising under that certain net profits agreement with the Venus Exploration
Trust) are (i) disclosed in the Filed Company SEC Documents or (ii) listed on
Section 3.14(d) of the Company Disclosure Schedule, and have been properly
accounted for.
29
(e) The Leases comprising the Oil and Gas Interests related to the
Principal Properties are in full force and effect, and to the Company's
Knowledge, all proceeds from the sale of the Company's and its Subsidiaries'
share of the Hydrocarbons being produced from such Oil and Gas Interests are
currently being paid in full to the Company or its Subsidiaries by the
purchasers thereof on a timely basis, and none of such proceeds are currently
being held in suspense by such purchaser or any other party, except as set forth
in Section 3.14(e) of the Company Disclosure Schedule. No person has any call
upon, option to purchase, or similar rights with respect to any portion of the
production from such Leases.
(f) Except for obligations incurred in the normal and ordinary
course of operating the Company's business, Section 3.14(f) of the Company
Disclosure Schedule sets forth the Company's and its Subsidiaries' obligations
to drill additional wells or conduct other material development operations.
(g) Except as disclosed in the Filed Company SEC Documents, to the
Company's Knowledge no wells located on the Oil and Gas Interests of the Company
and its Subsidiaries are shut-in or incapable of producing for which the Company
or any Company Subsidiary has or will have any liability to plug and abandon or
have been plugged and abandoned but have not been plugged in accordance with all
applicable requirements of each Governmental Authority having jurisdiction over
the Oil and Gas Interests.
(h) To the Company's Knowledge and other than as disclosed in
Section 3.14(h) of the Company Disclosure Schedule and the Nome Long #1 well as
disclosed in the Filed Company SEC Documents, there are no wellhead or pipeline
imbalances attributable to the Oil and Gas Interests of the Company and its
Subsidiaries.
(i) To the Company's Knowledge (i) all of the material Wells in
which the Company or any of its Subsidiaries has a material Oil and Gas Interest
have been drilled and completed within the boundaries of such property or within
the limits otherwise permitted by contract, pooling or unit agreement, and
applicable Law, and all drilling and completion of the material wells included
in each property and all development and operations on such property have been
conducted in compliance with all applicable Law, ordinances, rules, regulations
and Permits, and judgments, orders and decrees of any Governmental Authority and
(ii) no material well included on any property is subject to penalties on
allowables after the date hereof because of any overproduction or any other
violation of applicable Law, rules, regulations or Permits or judgments, orders
or decrees of any Governmental Authority which would prevent such well from
being entitled to its full legal and regular allowable from and after the date
hereof as prescribed by any Governmental Authority.
SECTION 3.15 Reserve Reports; Hedging.
(a) The reserve information of the Company and the Company
Subsidiaries contained in the Company's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 2006 is derived from a reserve report prepared by
30
Ryder Scott Company, L.P. (the "Reserve Report"). The factual, non-interpretive
data on which the Company's estimates of proved oil and gas reserves
attributable to the Oil and Gas Interests of the Company and the Company's
Subsidiaries were based in connection with the preparation by the Company of the
proved oil and gas reserve reports concerning the Oil and Gas Interests of the
Company and the Company's Subsidiaries as of August 31, 2006 were (at the time
included in, or as modified or amended prior to the issuance of, the Reserve
Report) accurate in all material respects. The estimates of proved oil and gas
reserves used by the Company and the present value of any future net cash flows
therefrom in the Reserve Report are in accordance with the definitions contained
in Rule 4-10(a) of Regulation S-X promulgated by the SEC. Except for changes
generally affecting the oil and gas industry (including changes in commodity
prices), there has been no material change with respect to the matters addressed
in the Reserve Report.
(b) The Company has not entered into any Hydrocarbon and financial
Hedging positions attributable to the production of the Company and the
Company's Subsidiaries. For purposes of this Agreement, a "Hedge" means a
derivative transaction within the coverage of SFAS No. 133, including any swap
transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, credit-related events or conditions or any indexes, or any other
similar transaction (including any option with respect to any of these
transactions) or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of transactions, and
any related credit support, collateral or transportation arrangements related to
such transactions.
SECTION 3.16 Insurance. Section 3.16 of the Company Disclosure Schedule
sets forth a correct and complete list of all insurance policies (including
information on the premiums payable in connection therewith and the scope and
amount of the coverage provided thereunder) maintained by the Company or any of
its Subsidiaries (the "Policies"). The Policies (i) have been issued by insurers
which, to the Knowledge of the Company, are reputable and financially sound,
(ii) provide coverage for the operations conducted by the Company and its
Subsidiaries of a scope and coverage consistent with customary practice in the
oil and gas industry and (iii) are in full force and effect. Neither the Company
nor any of its Subsidiaries is in material breach or default, and neither the
Company nor any of its Subsidiaries have taken any action or failed to take any
action which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination or modification, of any of the Policies. No
notice of cancellation or termination has been received by the Company with
respect to any of the Policies. The consummation of the Transactions will not,
in and of itself, cause the revocation, cancellation or termination of any
Policy.
SECTION 3.17 Opinion of Financial Advisor. The Board of Directors of the
Company has received the Fairness Opinion and the Company has delivered to
Parent a correct and complete copy of the Fairness Opinion.
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SECTION 3.18 Brokers and Other Advisors. Except for C.K. Cooper & Company,
the fees and expenses of which will be paid by the Company, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, or
the reimbursement of expenses, in connection with the Transactions based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries. The
Company has delivered to Parent a correct and complete copy of the Company's
engagement letters with C.K. Cooper & Company, which letter describes all fees
payable to C.K. Cooper & Company in connection with the Transactions, all
agreements under which any such fees or any expenses are payable and all
indemnification and other agreements related to the engagement of C.K. Cooper &
Company (the "Engagement Letters").
SECTION 3.19 State Takeover Statutes. No "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (with the exception of
the Maryland Business Combination Act and the Maryland Control Share Acquisition
Act) applicable to the Company is applicable to the Offer, the Merger or the
other Transactions. The Board of Directors of the Company has taken all acts
necessary to exempt the Offer, the Merger, this Agreement and the Transactions
from the Maryland Business Combination Act and the Maryland Control Share
Acquisition Act (as defined in Section 3-605 and 3-710 of the MGCL,
respectively).
ARTICLE IV
Representations and Warranties of Parent and Purchaser
------------------------------------------------------
Parent and Purchaser jointly and severally represent and warrant to the
Company:
SECTION 4.1 Organization. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is incorporated.
SECTION 4.2 Authority; Noncontravention.
(a) Each of Parent and Purchaser has all necessary corporate power
and authority to execute and deliver this Agreement, to perform their respective
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance by Parent and Purchaser of this Agreement, and the
consummation by Parent and Purchaser of the Transactions, have been duly
authorized and approved by their respective Boards of Directors (and has been
adopted by Parent as the sole stockholder of Purchaser), and no other corporate
action on the part of Parent and Purchaser is necessary to authorize the
execution, delivery and performance by Parent and Purchaser of this Agreement
and the consummation by them of the Transactions. This Agreement has been duly
executed and delivered by Parent and Purchaser and, assuming due authorization,
execution and delivery hereof by the Company, constitutes a legal, valid and
binding obligation of each of Parent and Purchaser, enforceable against each of
32
them in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) Neither the execution and delivery of this Agreement by Parent
and Purchaser, nor the consummation by Parent or Purchaser of the Transactions,
nor compliance by Parent or Purchaser with any of the terms or provisions
hereof, will (i) conflict with or violate any provision of the articles of
incorporation or bylaws of Parent or Purchaser or (ii) assuming that the
authorizations, consents and approvals referred to in Section 4.3 are obtained
and the filings referred to in Section 4.3 are made, (x) violate any Law,
judgment, writ or injunction of any Governmental Authority applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets, or
(y) violate, conflict with, result in 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 or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of, Parent or Purchaser or any of their respective Subsidiaries under,
any of the terms, conditions or provisions of any Contract to which Parent,
Purchaser or any of their respective Subsidiaries is a party, or by which they
or any of their respective properties or assets may be bound or affected except,
in the case of clause (y), for such violations, conflicts, losses, defaults,
terminations, cancellations, accelerations or Liens as, individually or in the
aggregate, could not reasonably be expected to prevent or materially impair the
ability of Parent or Purchaser to consummate the Transactions (a "Parent
Material Adverse Effect").
SECTION 4.3 Governmental Approvals. Except for (i) the filing with the SEC
of the Offer Documents and, if necessary, a Proxy Statement in definitive form
relating to the Company Stockholders Meeting, and other filings required under,
and compliance with other applicable requirements of, the Exchange Act and the
rules of The AMEX, and (ii) the filing of the Articles of Merger with the
Department pursuant to the MGCL, no consents or approvals of, or filings,
declarations or registrations with, any Governmental Authority are necessary for
the execution and delivery of this Agreement by Parent and Purchaser or the
consummation by Parent and Purchaser of the Transactions, other than such other
consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, could not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect.
SECTION 4.4 Information Supplied. Subject to the accuracy of the
representations and warranties of the Company set forth in Section 3.9, none of
the Schedule TO, the Offer Documents or any information supplied (or to be
supplied) in writing by or on behalf of Parent or Purchaser specifically for
inclusion or incorporation by reference in the Schedule 14D-9 will, at the
respective times the Schedule TO, the Offer Documents, the Schedule 14D-9, or
any amendments or supplements thereto, are filed with the SEC or at the time
they are first published, sent or given to stockholders of the Company, or at
the expiration of the Offer, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
33
circumstances under which they are made, not misleading. The information
supplied by Parent for inclusion in the Proxy Statement (if any) will not, on
the date it is first mailed to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, and will
not, at the time of the Company Stockholders Meeting (if such a meeting is
held), omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which shall have become false or misleading in any
material respect. The Schedule TO and the Offer Documents will comply as to form
in all material respects with the applicable requirements of the Exchange Act.
Notwithstanding the foregoing, Parent and Purchaser make no representation or
warranty with respect to any information supplied by or on behalf of the Company
for inclusion or incorporation by reference in any of the foregoing documents.
SECTION 4.5 Ownership and Operations of Purchaser. Parent owns
beneficially and of record all of the outstanding capital stock of Purchaser.
Purchaser was formed solely for the purpose of engaging in the Transactions, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
SECTION 4.6 Financing. Parent and Purchaser collectively have, and will
have at the dates that Purchaser becomes obligated to accept for payment and pay
for Shares pursuant to the Offer, during the Subsequent Offering Period and at
the Effective Time, sufficient cash resources available to pay for the Shares
that Purchaser becomes so obligated to accept for payment and pay for pursuant
to the Offer and to pay the aggregate Merger Consideration pursuant to the
Merger.
SECTION 4.7 Brokers and Other Advisors. No broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission from the Company in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries.
ARTICLE V
Additional Covenants and Agreements
-----------------------------------
SECTION 5.1 Conduct of Business. Except as expressly permitted by this
Agreement or as required by applicable Law, and unless Parent shall otherwise
agree in writing, during the period from the date of this Agreement until the
Control Date, the Company shall, and shall cause each of its Subsidiaries to,
(a) conduct its business in the ordinary course consistent with past practice,
(b) comply in all material respects with all applicable Laws and the
requirements of all Material Contracts, (c) use commercially reasonable efforts
to maintain and preserve intact its business organization and the goodwill of
those having business relationships with it and retain the services of its
present officers and key employees, in each case, to the end that its goodwill
and ongoing business shall be unimpaired at the Effective Time, (d) (i) instruct
34
all attorneys and legal counsel for the Company and its Subsidiaries to move to
stay or otherwise postpone the trial setting for Civil Action No.
1:05-CVB-530-ESH pending in the United States District Court for the Eastern
District of Texas, Beaumont Division, including all discovery and other
pre-trial proceedings and (ii) except to the extent necessary to carry out the
requirements of Section 5.01(d)(i) above, not to take any further action
regarding, or to incur any further costs or expenses related to, (1) any
existing litigation or proceeding, or (2) any litigation or proceeding arising
after the date hereof without prior consultation with Parent; provided that if
Parent, Purchaser or any of their Affiliates commences any litigation or
proceeding after the date hereof against the Company, then Section 5.1(d)(ii)
shall not apply with respect to such new litigation or proceeding; provided,
further, that if Purchaser has not purchased and acquired pursuant to the Offer
that number of Shares necessary to satisfy the Minimum Condition prior to July
31, 2007, then the provision of these Sections 5.1(d)(i) and 5.1(d)(ii) shall
expire and terminate, (e) submit to Parent all third party proposals for
drilling, reworking, deepening, plugging or abandonment operations
(collectively, "Third Party Proposals") received by the Company or its
Subsidiaries which involves an expenditure by Company or any of its Subsidiaries
in excess of $10,000 and, unless Parent shall otherwise agree in writing, shall
not and shall not permit any of its Subsidiaries to consent to participation or
non-participation in any Third Party Proposals, and (f) keep in full force and
effect all material insurance policies maintained by the Company and its
Subsidiaries, other than changes to such policies made in the ordinary course of
business. Without limiting the generality of the foregoing, except as expressly
permitted by this Agreement or as required by applicable Law, during the period
from the date of this Agreement to the Control Date, unless Parent shall
otherwise agree in writing, the Company shall not, and shall not permit any of
its Subsidiaries to:
(i) (A) issue, sell, grant, dispose of, pledge or otherwise
encumber any shares of its capital stock, voting securities or equity
interests, or any securities or rights convertible into, exchangeable or
exercisable for, or evidencing the right to subscribe for any shares of
its capital stock, voting securities or equity interests, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock, voting
securities or equity interests or any securities or rights convertible
into, exchangeable or exercisable for, or evidencing the right to
subscribe for, any shares of its capital stock, voting securities or
equity interests, provided that the Company may issue shares of Company
Common Stock upon (1) the exercise of options granted under the Company
Stock Plans and Warrants and (2) the conversion of Convertible Securities,
in each case, that are outstanding on the date of this Agreement and in
accordance with the terms thereof; (B) redeem, purchase or otherwise
acquire any of its outstanding shares of capital stock, voting securities
or equity interests, or any rights, warrants, options, calls, commitments
or any other agreements of any character to acquire any shares of its
capital stock, voting securities or equity interests; (C) declare, set
35
aside for payment or pay any dividend on, or make any other distribution
in respect of, any shares of its capital stock or otherwise make any
payments to its stockholders in their capacity as such (other than
dividends by a direct or indirect wholly owned Subsidiary of the Company
to its parent); (D) split, combine, subdivide or reclassify any shares of
its capital stock; or (E) amend (including by reducing an exercise price
or extending a term) or waive any of its rights under any provision of the
Company Stock Plans or any agreement evidencing any outstanding stock
option or other right to acquire capital stock of the Company or any
restricted stock purchase agreement or any similar or related contract;
(ii) incur or assume any indebtedness for borrowed money
(including any draws on existing credit facilities) or guarantee any
indebtedness (or enter into a "keep well" or similar agreement) or issue
or sell any debt securities or options, warrants, calls or other rights to
acquire any debt securities of the Company or any of its Subsidiaries;
(iii) sell, transfer, lease, mortgage, encumber or otherwise
dispose of or subject to any Lien (including pursuant to a sale-leaseback
transaction or an asset securitization transaction) any of its properties
or assets (including securities of Subsidiaries) to any Person, except (A)
sales of Hydrocarbons in the ordinary course of business consistent with
past practice or (B) pursuant to Contracts in force at the date of this
Agreement and listed on Section 5.1(iii) of the Company Disclosure
Schedule, correct and complete copies of which will be made available to
Parent within five Business Days from the execution of this Agreement;
(iv) make any material expenditure, except for any capital
expenditure already agreed or committed to by the Company as of the date
of this Agreement under any existing authority for expenditure, operating
agreement or similar contract (capital expenditures include, without
limitation, drilling, workover, completion and equipment costs directly
associated with Wells, but specifically excludes any legal fees,
consulting fees or fees for personal services of any nature);
(v) directly or indirectly acquire (A) by merging or
consolidating with, or by purchasing all of or a substantial equity
interest in, or by any other manner, any Person or division, business or
equity interest of any Person or, (B) except in the ordinary course of
business consistent with past practice, any assets;
(vi) make any investment (by contribution to capital,
property transfers, purchase of securities or otherwise) in, or loan or
advance (other than travel and similar advances to its employees in the
ordinary course of business consistent with past practice) to, any Person
36
other than a direct or indirect wholly owned Subsidiary of the Company in
the ordinary course of business;
(vii) (A) enter into, terminate or amend any Material
Contract, or, other than in the ordinary course of business consistent
with past practice, any other Contract that is material to the Company and
its Subsidiaries taken as a whole, (B) enter into or extend the term or
scope of any Contract that purports to restrict the Company, or any
existing or future Subsidiary or Affiliate of the Company, from engaging
in any line of business or in any geographic area, (C) amend or modify the
Engagement Letters, (D) enter into any Contract that would be breached by,
or require the consent of any third party in order to continue in full
force following, consummation of the Transactions, or (E) release any
Person from, or modify or waive any provision of, any confidentiality,
standstill or similar agreement;
(viii) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity (or
equity-based), pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement,
trust, fund or arrangement with, for or in respect of, any stockholder,
director, officer, other employee, consultant or Affiliate, other than
immaterial amendments that do not increase benefits or costs under such
plan, as required under this Agreement, pursuant to applicable Law or
pursuant to the terms of the agreements set forth on Section 5.1(viii) of
the Company Disclosure Schedule (correct and complete copies of which will
be made available to Parent within five Business Days from the date of
this Agreement);
(ix) make, change or rescind any material election concerning
Taxes or Tax Returns, file any amended Tax Return, enter into any closing
agreement with respect to Taxes, settle or compromise any material Tax
claim or assessment or surrender any right to claim a refund of Taxes or
obtain any Tax ruling;
(x) make any changes in financial or tax accounting methods,
principles or practices (or change an annual accounting period), except
insofar as may be required by a change in GAAP or applicable Law;
(xi) amend the Company Charter Documents or the Subsidiary
Documents;
(xii) adopt a plan or agreement of complete or partial
liquidation, dissolution, restructuring, recapitalization, merger,
37
consolidation or other reorganization (other than transactions exclusively
between wholly owned Subsidiaries of the Company);
(xiii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction in accordance with their terms of liabilities, claims or
obligations reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Filed Company SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(xiv) enter into any Hedging transactions;
(xv) non-consent or agree to non-consent with respect to any
Oil and Gas Interest;
(xvi) become bound or obligated to participate in any drilling
operation, or consent to participate in any drilling operation, with
respect to any direct and indirect interests in and rights with respect to
Oil and Gas Interests that requires a capital expenditure in each case in
excess of $10,000 net to the Company's or its Subsidiaries' interest
unless (i) the operation is currently an existing obligation of the
Company or its Subsidiaries or (ii) is a workover or similar operation
necessary to extend, preserve or maintain an Oil and Gas Interest;
(xvii) settle or compromise any litigation or proceeding
material to the Company and its Subsidiaries taken as a whole (this
covenant being in addition to the Company's agreement set forth in Section
5.8 hereof); or
(xviii) agree, in writing or otherwise, to take any of the
foregoing actions, or take any action or agree, in writing or otherwise,
to take any action which would (A) cause any of the representations or
warranties of the Company set forth in this Agreement (1) that are
qualified as to materiality or Material Adverse Effect to be untrue or (2)
that are not so qualified to be untrue in any material respect, or (B) in
any material respect impede or delay the ability of the parties to satisfy
any of the conditions to the Offer or the Merger set forth in this
Agreement (including Annex A hereto).
SECTION 5.2 No Solicitation by the Company; Etc.
(a) Subject to the terms of this Section 5.2(a), the Company
shall, and shall cause its Subsidiaries and the Company's and its Subsidiaries'
respective directors, officers, employees, investment bankers, financial
advisors, attorneys, accountants, agents and other representatives
(collectively, "Representatives") to, immediately cease and cause to be
38
terminated any discussions or negotiations with any Person conducted heretofore
with respect to a Takeover Proposal, and use best efforts to obtain the return
from all such Persons or cause the destruction of all copies of confidential
information previously provided to such parties by the Company, its Subsidiaries
or Representatives. The Company shall not, and shall cause its Subsidiaries and
Representatives not to, directly or indirectly (i) solicit, initiate, or
knowingly take any action to facilitate or encourage (including by way of
furnishing information) any inquiries or proposals that constitute, or may
reasonably be expected to lead to, any Takeover Proposal, (ii) participate in
any discussions or negotiations with any third party regarding any Takeover
Proposal or (iii) enter into any agreement related to any Takeover Proposal;
provided, however, that if after the date hereof the Board of Directors of the
Company receives an unsolicited, bona fide written Takeover Proposal made after
the date hereof in circumstances not involving a breach of this Agreement or any
standstill agreement, and the Board of Directors of the Company reasonably
believes in good faith that such Takeover Proposal will lead to a Superior
Proposal and with respect to which such Board determines in good faith, after
considering applicable provisions of state law and after consulting with and
receiving the advice of outside counsel, that the taking of such action is
necessary in order for such Board of Directors to comply with its duties as
directors under Section 2-405.1 of the MGCL, then the Company may at any time
prior to the Purchase Date (but in no event after the Purchase Date) and after
providing Parent not less than 24 hours written notice of its intention to take
such actions, directly or indirectly through advisors, agents or other
intermediaries (A) furnish information with respect to the Company and its
Subsidiaries to the Person making such Takeover Proposal, but only after such
Person enters into a customary confidentiality agreement with the Company,
provided that (1) such confidentiality agreement may not include any provision
calling for an exclusive right to negotiate with the Company and (2) the Company
advises Parent of all such non-public information delivered to such Person
concurrently with its delivery to such Person and concurrently with its delivery
to such Person the Company delivers to Parent all such information not
previously provided to Parent, and (B) participate in discussions and
negotiations with such Person regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the foregoing restrictions
by the Company's Subsidiaries or Representatives shall be deemed to be a breach
of this Section 5.2 by the Company. The Company shall provide Parent with a
correct and complete copy of any confidentiality agreement entered into pursuant
to this paragraph within 24 hours of the execution thereof.
(b) In addition to the other obligations of the Company set forth
in this Section 5.2, the Company shall promptly advise Parent, orally and in
writing, and in no event later than 24 hours after receipt, if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Company in respect of any Takeover Proposal, and shall, in any such
notice to Parent, indicate the identity of the Person making such proposal,
offer, inquiry or other contact and the terms and conditions of any proposals or
offers or the nature of any inquiries or contacts, and thereafter shall promptly
keep Parent fully informed of all material developments affecting the status and
39
terms of any such proposals, offers, inquiries or requests and of the status of
any such discussions or negotiations.
(c) Except as expressly permitted by this Section 5.2(c), neither
the Board of Directors of the Company nor any committee thereof shall (i)(A)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the recommendation by such Board of Directors that
stockholders of the Company accept the Offer, tender their Shares to Purchaser
pursuant thereto and adopt this Agreement (the "Company Recommendation") or the
approval or declaration of advisability by such Board of Directors of this
Agreement and the Transactions (including the Offer and the Merger) or (B)
approve or recommend, or propose publicly to approve or recommend, any Takeover
Proposal (any action described in this clause (i) being referred to as a
"Company Adverse Recommendation Change"), (ii) approve or recommend, or propose
publicly to approve or recommend, or cause or authorize the Company or any of
its Subsidiaries to enter into, any letter of intent, agreement in principle,
memorandum of understanding, merger, acquisition, purchase or joint venture
agreement or other agreement related to any Takeover Proposal (other than a
confidentiality agreement in accordance with Section 5.2(a)) (each, a "Company
Acquisition Agreement") or (iii) except as contemplated by this Agreement, amend
or waive the Rights Agreement, redeem the Rights or take any action which would
allow any Person other than Parent or Purchaser to acquire beneficial ownership
of 15% (or, if applicable, the Grandfathered Percentage, as such term is defined
in the Rights Agreement) or more of the shares of Company Common Stock without
causing a "Distribution Date," or the "Shares Acquisition Date" (each as defined
in the Rights Agreement) to occur. Notwithstanding the foregoing, (x) the Board
of Directors of the Company may withdraw or modify the Company Recommendation,
recommend a Takeover Proposal, or redeem the Rights, amend or waive the Rights
Agreement, if such Board determines in good faith, after reviewing applicable
provisions of state law and after consulting with outside counsel, that the
failure to make such withdrawal, modification, recommendation or redemption
would constitute a breach by the Board of Directors of the Company of its
fiduciary duties to the Company's stockholders under Maryland law, and (y) if
the Board of Directors of the Company receives after the date hereof an
unsolicited, bona fide written Takeover Proposal that was made in circumstances
not involving a breach of this Agreement and that such Board determines in good
faith constitutes a Superior Proposal, the Board of Directors of the Company
may, in response to such Superior Proposal and within 48 hours after the
expiration of the three business day period described below (but in no event
later than the Purchase Date), enter into a Company Acquisition Agreement with
respect to such Superior Proposal if the Company shall have concurrently with
entering into such Company Acquisition Agreement terminated this Agreement
pursuant to Section 7.1(c)(i) and prior thereto paid the Termination Fee
required pursuant to Section 7.3, but only after the third business day
following Parent's receipt of written notice from the Company advising Parent
that the Board of Directors of the Company is prepared to enter into a Company
Acquisition Agreement with respect to such Superior Proposal (which notice shall
include the most current versions of such agreement and proposal) and terminate
this Agreement, and only if, during such three business day period, the Company
40
and its representatives shall have negotiated in good faith with Parent and
Parent's representatives to make such adjustments in the terms of this Agreement
as would enable Parent to proceed with the transactions contemplated by this
Agreement on such adjusted terms and, at the end of such three business day
period, after taking into account any such adjusted terms as may have been
proposed by Parent since its receipt of such written notice, the Board of
Directors of the Company has again in good faith made the determination referred
to above in this clause (y).
(d) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer from any
Person or "group" (as defined in Section 13(d) of the Exchange Act), other than
Parent and its Subsidiaries, relating to any (A) direct or indirect acquisition
(whether in a single transaction or a series of related transactions) of assets
of the Company and its Subsidiaries (including securities of Subsidiaries) equal
to 15% or more of the Company's consolidated assets or to which 15% or more of
the Company's revenues or earnings on a consolidated basis are attributable, (B)
direct or indirect acquisition (whether in a single transaction or a series of
related transactions) of 15% or more of any class of equity securities of the
Company, (C) tender offer or exchange offer that if consummated would result in
any Person or "group" (as defined in Section 13(d) of the Exchange Act)
beneficially owning 15% or more of any class of equity securities of the Company
or (D) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries; in each case, other than the Transactions.
"Superior Proposal" means a bona fide written offer, obtained after
the date hereof and not in breach of this Agreement or any standstill agreement,
to acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the equity securities of the Company or all or substantially
all of the assets of the Company and its Subsidiaries on a consolidated basis,
made by a third party, which is not subject to a financing contingency and which
is otherwise on terms and conditions which the Board of Directors of the Company
determines in its good faith and reasonable judgment (after consultation with
outside counsel and its financial advisor) to be more favorable to the Company's
stockholders from a financial point of view than the Offer, the Merger and the
other Transactions, taking into account at the time of determination any changes
to the terms of this Agreement that as of that time had been proposed by Parent
in writing and the ability of the Person making such proposal to consummate the
transactions contemplated by such proposal (based upon, among other things, the
availability of financing and the expectation of obtaining required approvals).
(e) Nothing in this Section 5.2 shall prohibit the Board of
Directors of the Company from taking and disclosing to the Company's
stockholders a position contemplated by Rule 14e-2, Rule 14d-9 and Schedule
14D-9 if such Board determines in good faith, after consultation with outside
counsel, that failure to so disclose such position would constitute a violation
of applicable Law; provided, however, that in no event shall the Company or its
41
Board of Directors or any committee thereof take, or agree or resolve to take,
any action prohibited by Section 5.2(c).
SECTION 5.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement
(including Section 5.3(d)), each of the parties hereto shall cooperate with the
other parties and use (and shall cause their respective Subsidiaries to use)
their respective reasonable best efforts to promptly (i) take, or cause to be
taken, all actions, and do, or cause to be done, all things, necessary, proper
or advisable to cause the conditions to Closing to be satisfied as promptly as
practicable and to consummate and make effective, in the most expeditious manner
practicable, the Transactions, including preparing and filing promptly and fully
all documentation to effect all necessary filings, notices, petitions,
statements, registrations, submissions of information, applications and other
documents (including any required or recommended filings under applicable Laws),
and (ii) obtain all approvals, consents, registrations, permits, authorizations
and other confirmations from any Governmental Authority or third party
necessary, proper or advisable to consummate the Transactions.
(b) In furtherance and not in limitation of the foregoing, the
Company shall use its reasonable best efforts to (x) take all action necessary
to ensure that no state takeover statute or similar Law is or becomes applicable
to any of the Transactions and (y) if any state takeover statute or similar Law
becomes applicable to any of the Transactions, take all action necessary to
ensure that the Transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise minimize the effect of
such Law on the Transactions.
(c) Each of the parties hereto shall use its reasonable best
efforts to (i) cooperate in all respects with each other in connection with any
filing or submission with a Governmental Authority in connection with the
Transactions and in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions, including any
proceeding initiated by a private party, and (ii) keep the other party informed
in all material respects and on a reasonably timely basis of any material
communication received by such party from, or given by such party to, any
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the Transactions.
SECTION 5.4 Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release to be
reasonably agreed upon by Parent and the Company. Thereafter, neither the
Company nor Parent shall issue or cause the publication of any press release or
other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Offer, the Merger, this
Agreement or the other Transactions without the prior consent of the other party
(which consent shall not be unreasonably withheld or delayed), except as may be
required by Law or by any applicable listing agreement with a national
42
securities exchange as determined in the good faith judgment of the party
proposing to make such release.
SECTION 5.5 Access to Information. Subject to applicable Laws relating to
the exchange of information, the Company shall, and shall cause each of its
Subsidiaries to, afford to Parent and Parent's representatives reasonable access
during normal business hours to all of the Company's and its Subsidiaries'
offices, facilities, properties, commitments, books, Contracts, records and
correspondence (in each case, whether in physical or electronic form), officers,
employees, accountants, counsel, financial advisors and other Representatives
for reasonable purposes relating to this Agreement, the Transactions
contemplated hereby (including, without limitation, monitoring the Company's
compliance with Section 5.1 of this Agreement) and the Company shall furnish
promptly to Parent (i) a copy of each report, schedule and other document filed
or submitted by it pursuant to the requirements of Federal or state securities
Laws and a copy of any communication (including "comment letters") received by
the Company from the SEC concerning compliance with securities Laws and (ii) all
other information concerning its and its Subsidiaries' business, properties and
personnel as Parent may reasonably request. No investigation, or information
received, pursuant to this Section 5.5 will modify any of the representations
and warranties of the Company.
SECTION 5.6 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) any
notice or other communication received by such party from any Governmental
Authority in connection with the Transactions or from any Person alleging that
the consent of such Person is or may be required in connection with the
Transactions, if the subject matter of such communication or the failure of such
party to obtain such consent could be material to the Company, the Surviving
Corporation or Parent, (ii) any actions, suits, claims, investigations or
proceedings commenced or, to such party's Knowledge, threatened against,
relating to or involving or otherwise affecting such party or any of its
Subsidiaries which relate to the Transactions, (iii) the discovery of any fact
or circumstance that, or the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which, would cause any representation or
warranty made by such party contained in this Agreement (A) that is qualified as
to materiality or Material Adverse Effect to be untrue and (B) that is not so
qualified to be untrue in any material respect, and (iv) any material failure of
such party to comply with or satisfy any covenant or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.6 shall not (x) cure any breach of, or
non-compliance with, any other provision of this Agreement or (y) limit the
remedies available to the party receiving such notice.
SECTION 5.7 Indemnification and Insurance.
(a) From and after the Control Date, Parent shall, or shall cause
the Surviving Corporation to (i) indemnify the individuals who at or prior to
the Effective Time were directors or officers of the Company (collectively, the
"Indemnitees") with respect to all acts or omissions by them in their capacities
as such at any time prior to the Effective Time, to the fullest extent (A)
43
required by the Company Charter Documents as in effect on the date of this
Agreement and (B) permitted under applicable Law (including, without limitation,
the advancement of reasonable attorney's fees and disbursements, which shall be
paid, reimbursed or advanced by Parent or the Surviving Corporation prior to the
final disposition thereof without the requirement of any bond or other
security).
(b) Parent shall use its reasonable best efforts to cause the
Indemnitees to be covered for a period of six years from the Effective Time by
such directors' and officers' liability insurance policy currently maintained by
the Company (a correct and complete copy of which has been delivered to Parent
by the Company) (provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions that are not
less advantageous in any material respect than such policy) with respect to acts
or omissions occurring prior to the Effective Time that were committed by the
Indemnitees in their capacity as such; provided, that in no event shall Parent
be required to expend per year of coverage more than 150% of the amount
currently expended by the Company per year of coverage as of the date of this
Agreement (the "Maximum Amount") to maintain or procure insurance coverage
pursuant hereto. Alternatively, Parent may purchase "tail" insurance coverage
covering for a period of six years from the Effective Time, at a cost no greater
than the Maximum Amount, that provides coverage identical in all material
respects to the coverage described above. If notwithstanding the use of
reasonable best efforts to do so, Parent is unable to maintain or obtain the
insurance called for by this paragraph, Parent shall obtain as much comparable
insurance as available for the Maximum Amount. The Indemnitees may be required
to make reasonable application and provide reasonable and customary
representations and warranties to applicable insurance carriers for the purpose
of obtaining such insurance.
(c) If Parent, the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other Person and shall not
be the continuing corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.7.
(d) The rights of each Indemnitee under this Section 5.7 shall be
in addition to any rights such Person may have under the Company Charter
Documents or any of its Subsidiaries, under Maryland law or any other applicable
laws or under any agreement of any Indemnitee with the Company or any of its
Subsidiaries.
(e) The Indemnitees to whom this Section 5.7 applies shall be
third party beneficiaries of this Section 5.7. The provisions of this Section
5.7 are intended to be for the benefit of each Indemnitee and his or her heirs.
44
SECTION 5.8 Securityholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any securityholder
litigation against the Company and/or its directors relating to the
Transactions, and no such settlement shall be agreed to without Parent's prior
consent, which shall not be unreasonably withheld or delayed.
SECTION 5.9 Fees and Expenses. Except as provided in Section 7.3, all fees
and expenses incurred in connection with this Agreement and the Transactions
shall be paid by the party incurring such fees or expenses, whether or not the
Transactions are consummated. Other than any Taxes imposed upon a holder of
Shares or PYR Energy Options (which Taxes shall be borne by such holder as
provided herein), Parent shall pay all Taxes incident to preparing for, entering
into and carrying out this Agreement and the consummation of the Transactions
(including (i) transfer, stamp and documentary Taxes or fees and (ii) sales,
use, gains, real property transfer and other or similar Taxes or fees).
ARTICLE VI
Conditions to the Merger
------------------------
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party hereto to effect the Merger shall be
subject to the satisfaction (or waiver, if permissible under applicable Law) on
or prior to the Closing Date of the following conditions:
(a) The Merger shall have been duly approved by the requisite vote
of the holders of Company Common Stock, if, and to the extent required by,
applicable Law and the articles of incorporation of the Company;
(b) No Law, injunction, judgment or ruling enacted, promulgated,
issued, entered, amended or enforced by any Governmental Authority shall be in
effect enjoining, restraining, preventing or prohibiting consummation of the
Merger or making the consummation of the Merger illegal; and
(c) Purchaser shall have purchased Shares pursuant to the Offer
(provided that this shall not be a condition to Parent's and Purchaser's
obligations if Purchaser shall have failed to purchase Shares pursuant to the
Offer in violation of this Agreement).
ARTICLE VII
Termination
-----------
SECTION 7.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Effective Time, whether before
or after receipt of the Company Stockholder Approval:
45
(a) by the mutual written consent of the Company and Parent duly
authorized by the Board of Directors of the Company (including, from and after
the Purchase Date, the Independent Director Approval contemplated by Section
1.3) and the Board of Directors of Parent; or
(b) by either of the Company or Parent:
(i) if any Governmental Authority shall have enacted,
promulgated, issued, entered, amended or enforced (A) a Law prohibiting the
Offer or the Merger or making the Offer or the Merger illegal, or (B) an
injunction, judgment, order, decree or ruling, or taken any other action, in
each case, enjoining, restraining, preventing or prohibiting the Offer or the
Merger and such injunction, judgment, order, decree or ruling or other action
shall have become final and non-appealable; provided, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be available to
a party if the issuance of such final, non-appealable injunction, judgment,
order, decree or ruling was primarily due to the failure of such party to
perform any of its obligations under this Agreement;
(ii) if the Offer shall have expired pursuant to its terms
(and not have been extended in accordance with Section 1.1 hereof) without any
Shares being purchased therein, provided, that the right to terminate this
Agreement under this Section 7.1(b)(ii) shall not be available to any party
whose failure to perform any of its obligations under this Agreement resulted in
the failure of Purchaser to purchase Shares in the Offer; or
(iii) if no Shares shall have been purchased pursuant to the
Offer on or before the Walk-Away Date; provided, that the right to terminate
this Agreement under this Section 7.1(b)(iii) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
resulted in the failure of the Offer to be so consummated by the Walk-Away Date;
or
(c) by the Company:
(i) if concurrently it enters into a definitive Company
Acquisition Agreement providing for a Superior Proposal in accordance with
Section 5.2, provided that (x) prior thereto or simultaneously therewith the
Company shall have paid or caused to be paid the Termination Fee to Parent in
accordance with Section 7.3 (and such termination of this Agreement by the
Company shall not take effect unless and until the Termination Fee shall have
been paid to Parent) and (y) the Company shall also have complied with all the
other requirements of Section 5.2; provided further, however, that the Company
may only exercise this termination right prior to the Purchase Date; or
(ii) if (A) the representations and warranties of Parent or
Purchaser set forth in this Agreement that are qualified as to "materiality" or
"Material Adverse Effect" shall not be true and correct, or the representations
and warranties of Parent or Purchaser set forth in this Agreement that are not
so qualified shall not be true and correct in all material respects, in each
46
case, on and as of the date of this Agreement and on and as of the date of such
determination as if made on such date (other than those representations and
warranties that address matters only as of a particular date which are true and
correct as of such date), or (B) Parent or Purchaser shall have breached or
failed in any material respect to perform or comply with any obligation,
agreement or covenant required by this Agreement to be performed or complied
with by them, which inaccuracy, breach or failure (in each case under clauses
(A) and (B)) cannot be cured or has not been cured by the earlier of (I) the
next scheduled expiration date of the Offer pursuant to Section 1.1 and (II) ten
business days after Parent receives notice of such inaccuracy, breach or
failure; provided, however, that the Company may only exercise this termination
right prior to the Purchase Date; or
(d) by Parent:
(i) if a Company Adverse Recommendation Change shall have
occurred;
(ii) if (A) after the date of this Agreement there shall have
occurred any events or changes that, individually or in the aggregate, have had
or could reasonably be expected to have a Company Material Adverse Effect or
(B)(x) the representations and warranties of the Company set forth in this
Agreement that are qualified as to "materiality" or "Material Adverse Effect"
shall not be true and correct, or the representations and warranties of the
Company set forth in this Agreement that are not so qualified shall not be true
and correct in all material respects, in each case, on and as of the date of
this Agreement and on and as of the date of such determination as if made on
such date (other than those representations and warranties that address matters
only as of a particular date which are true and correct as of such date), or (y)
the Company shall have breached or failed in any material respect to perform or
comply with any obligation, agreement or covenant required by this Agreement to
be performed or complied with by it, which inaccuracy, breach or failure (in
each case under clauses (x) and (y)) cannot be cured or has not been cured by
the earlier of (I) the next scheduled expiration date of the Offer pursuant to
Section 1.1 and (II) ten business days after the Company receives notice of such
inaccuracy, breach or failure; provided, however, that Parent may only exercise
this termination right prior to the Purchase Date; or
(iii) if any of the events described in paragraph (d) of Annex
A shall have occurred; provided, however, that Parent may only exercise this
termination right prior to the Purchase Date.
SECTION 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall be given to
the other party or parties, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than Sections 5.7, 5.9, 7.2, 7.3, 8.7, 8.8 and the first sentence of
Section 3.18, all of which shall survive termination of this Agreement), and
there shall be no liability on the part of Parent or the Company or their
respective directors, officers and Affiliates, except (i) the Company may have
47
liability as provided in Section 7.3, and (ii) nothing shall relieve any party
from liability for fraud or any willful breach of this Agreement.
SECTION 7.3 Termination Fee.
(a) In the event that:
(i) (A) a Takeover Proposal shall have been made known to
the Company or shall have been made directly to its stockholders generally
or any Person shall have publicly announced an intention (whether or not
conditional or withdrawn) to make a Takeover Proposal and thereafter, (B)
this Agreement is terminated by the Company or Parent pursuant to Section
7.1(b)(ii) or Section 7.1(b)(iii), and (C) the Company enters into a
definitive agreement with respect to, or consummates, a transaction
contemplated by any Takeover Proposal within eighteen (18) months of the
date this Agreement is terminated;
(ii) (A) a Takeover Proposal shall have been made known to
the Company or shall have been made directly to its stockholders generally
or any Person shall have publicly announced an intention (whether or not
conditional or withdrawn) to make a Takeover Proposal and thereafter, (B)
this Agreement is terminated by Parent pursuant to Section 7.1(d)(ii)(B)
and the Company's breach or failure triggering such termination shall have
been willful, and (C) the Company enters into a definitive agreement with
respect to, or consummates, a transaction contemplated by any Takeover
Proposal within eighteen (18) months of the date this Agreement is
terminated;
(iii) this Agreement is terminated by Parent pursuant to
Section 7.1(d)(i); or
(iv) this Agreement is terminated by the Company pursuant to
Section 7.1(c)(i);
then in any such event under clause (i), (ii), (iii) or (iv) of this Section
7.3(a), the Company shall pay to Parent a termination fee of $3,000,000 in cash
(the "Termination Fee").
(b) Any payment required to be made pursuant to clause (i) or
clause (ii) of Section 7.3(a) shall be made to Parent promptly following the
earlier of the execution of a definitive agreement with respect to, or the
consummation of, any transaction contemplated by, a Takeover Proposal (and in
any event not later than two Business Days after delivery to the Company of
notice of demand for payment); any payment required to be made pursuant to
clause (iii) of Section 7.3(a) shall be made to Parent promptly following
termination of this Agreement by Parent pursuant to Section 7.1(d)(i) (and in
any event not later than two Business Days after delivery to the Company of
notice of demand for payment); any payment required to be made pursuant to
clause (iv) of Section 7.3(a) shall be made to Parent prior to or simultaneously
with (and as a condition to the effectiveness of) termination of this Agreement
48
by the Company pursuant to Section 7.1(c)(i). All such payments shall be made by
wire transfer of immediately available funds to an account to be designated by
Parent.
(c) In the event that the Company shall fail to pay the
Termination Fee required pursuant to this Section 7.3 when due, such fee shall
accrue interest for the period commencing on the date such fee became past due,
at a rate equal to the rate of interest publicly announced by Citibank, in the
City of New York from time to time during such period, as such bank's Prime
Lending Rate. In addition, if the Company shall fail to pay such fee when due,
the Company shall also pay to Parent all of Parent's costs and expenses
(including attorneys' fees) in connection with efforts to collect such fee. The
Company acknowledges that the fee and the other provisions of this Section 7.3
are an integral part of the Transactions and that, without these agreements,
Parent would not enter into this Agreement.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.1 No Survival, Etc. Except as otherwise provided in this
Agreement, the representations, warranties and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their officers, directors or
representatives, whether prior to or after the execution of this Agreement, and
no information provided or made available shall be deemed to be disclosed in
this Agreement or in the Company Disclosure Schedule, except to the extent
actually set forth herein or therein. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time or, except as
otherwise provided in Section 7.2, upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article II and Sections 5.7 and 5.9 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Sections 7.2, 7.3, 8.1,
8.7 and 8.8 shall survive termination indefinitely.
SECTION 8.2 Amendment or Supplement. At any time prior to the Effective
Time, this Agreement may be amended or supplemented in any and all respects,
whether before or after approval of any of the transactions contemplated hereby
by stockholders of the Company, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors (which in the case of the
Company after the Purchase Date shall include the Independent Director Approval
contemplated by Section 1.3); provided, however, that following approval of the
Transactions by the stockholders of the Company, there shall be no amendment or
change to the provisions hereof which by Law would require further approval by
the stockholders of the Company without such approval.
49
SECTION 8.3 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, any party may, subject to applicable Law, (a) waive any
inaccuracies in the representations and warranties of any other party hereto,
(b) extend the time for the performance of any of the obligations or acts of any
other party hereto or (c) waive compliance by the other party with any of the
agreements contained herein or, except as otherwise provided herein, waive any
of such party's conditions; provided, that, in the case of the Company following
the Purchase Date, the Independent Director Approval contemplated by Section 1.3
is obtained. Notwithstanding the foregoing, no failure or delay by the Company,
Parent or Purchaser in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right hereunder. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
SECTION 8.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise, by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and permitted assigns. Any
purported assignment not permitted under this Section shall be null and void.
SECTION 8.5 Counterparts. This Agreement may be executed in counterparts
(each of which shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement) and shall become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, together with Annex A hereto, and the Company Disclosure Schedule (a)
constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof and (b) except for the
provisions of Section 5.7, are not intended to and shall not confer upon any
Person other than the parties hereto any rights or remedies hereunder.
SECTION 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) The laws of the State of Maryland (without giving effect to
its conflicts of law principles) govern this Agreement and all matters arising
out of or relating to this Agreement and any of the transactions contemplated
hereby, including its negotiation, execution, validity, interpretation,
construction, performance and enforcement.
(b) The parties hereto hereby irrevocably submit to the exclusive
jurisdiction of the circuit court of Montgomery County (or any federal court
sitting in the State of Maryland) over any action or proceeding arising out of
50
or relating to this Agreement or any of the transactions contemplated hereby and
each party hereto hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such courts. The parties
hereto hereby irrevocably waive any objection which they may now or hereafter
have to the laying of venue of any action or proceeding brought in such court or
any claim that such action or proceeding brought in such court has been brought
in an inconvenient forum. Each of the parties hereto agrees that a judgment in
such action or proceeding may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law. Each of the parties hereto
hereby irrevocably consents to process being served by any party to this
Agreement in any action or proceeding by delivery of a copy thereof in
accordance with the provisions of Section 8.9.
(c) Each of the parties hereto hereby irrevocably waives any and
all rights to trial by jury in any legal proceeding arising out of or related to
this Agreement.
SECTION 8.8 Specific Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the circuit court of
Montgomery County or any federal court sitting in the State of Maryland ,
without bond or other security being required, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 8.9 Notices. All notices, requests and other communications to any
party hereunder shall be in writing and shall be deemed given if delivered
personally, facsimiled (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses:
If to Parent or Purchaser, to:
Samson Investment Company
Two West Second Street
Tulsa, Oklahoma 74103
Attention: Scott Rowland
Facsimile: (918) 591-1757
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: R. Scott Cohen
Facsimile: (214) 746-7777
51
If to the Company, to:
PYR Energy Corporation
1675 Broadway, Suite 2450
Denver, Colorado 80202
Attention: Kenneth R. Berry, Jr.
Facsimile: (303) 825-3768
with a copy (which shall not constitute notice) to:
Patton Boggs LLP
1660 Lincoln Street, #1900
Denver Colorado 80264
Attention: Alan Talesnick
Facsimile: (303) 894-9239
or such other address or facsimile number as such party may hereafter specify by
like notice to the other parties hereto. All such notices, requests and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5 P.M. in the place of receipt and such day is a
Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
SECTION 8.10 Severability. If any term or other provision of this
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other terms, provisions and conditions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.11 Definitions.
(a) As used in this Agreement, the following terms have the
meanings ascribed thereto below:
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, or is controlled by, or is under common
control with, such Person. For this purpose, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.
52
"Amexco Agreement" shall mean the Confidentiality and
Indemnification Agreement, dated March 26, 2007, between Amexco, LLC, Venus Oil
Company, Venus Exploration, Inc., John Y Ames, Bonnie R. Weise, Thomas E. Ewing
and the Company.
"Business Day" shall mean a day except a Saturday, a Sunday or other
day on which the SEC or banks in the City of New York are authorized or required
by Law to be closed.
"Defensible Title" shall mean, subject to matters constituting or
covered by Permissible Defects, such right, title and interest that (a) record
title evidenced by an instrument or instruments filed of record in accordance
with the conveyance and recording laws of the applicable jurisdiction (i)
entitles the Company to receive not less than the applicable Net Revenue
Interest as specified for such Oil and Gas Interest set forth in Section 3.14(c)
of the Company Disclosure Schedule throughout the economic life of the Oil and
Gas Interest, except for decreases disclosed in Section 3.14(c) of the Company
Disclosure Schedule and (ii) obligates the Company to bear costs and expenses
attributable to the maintenance, development and operation of such Oil and Gas
Interest in an amount not greater than the applicable Working Interest as
specified for such Oil and Gas Interest set forth in Section 3.14(c) of the
Company Disclosure Schedule throughout the economic life of such Oil and Gas
Interest, other than increases (X) accompanied by at least a proportionate
interest in the applicable Net Revenue Interest, (Y) resulting from contribution
requirements with respect to defaulting co-owners under applicable operating
agreements that are accompanied by at least a proportionate increase in the
applicable Net Revenue Interest or (Z) increases resulting from elections to
decrease or convert existing interests at payout pursuant to contracts and
agreements in force and effect as of the date of this Agreement and (b) is free
and clear of all Liens, claims, infringements, and other burdens, other than
Permitted Liens. Notwithstanding the foregoing, the existence of a Permissible
Defect shall not constitute a failure of Defensible Title.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Authority" shall mean any government, court,
arbitrator, regulatory or administrative agency, commission or authority or
other governmental instrumentality, federal, state or local, domestic, foreign
or multinational.
"Hydrocarbons" shall mean, with respect to any Person, crude oil,
natural gas, casinghead gas, associated gas, condensate, sulphur, natural gas
liquids, plant products and other liquid or gaseous hydrocarbons produced in
association therewith (including coalbed gas and carbon dioxide), and all other
minerals of every kind and character which may be covered by or included in or
attributable to any of the properties of such Person or any of such Person's
Subsidiaries.
"Knowledge" of any Person that is not an individual shall mean, with
respect to any matter in question, the knowledge after due inquiry of such
53
Person's directors and executive officers, and all other officers and managers
having responsibility relating to the applicable matter.
"Net Revenue Interest" shall mean an interest (expressed as a
percentage or decimal fraction) in and to all oil, gas and other Hydrocarbons
produced and saved from or attributable to an Oil and Gas Interest.
"Notes" shall mean the Company's 4.99% Convertible Promissory Notes
due May 24, 2009.
"Oil and Gas Interests" shall mean direct and indirect interests in
and rights with respect to oil and gas properties and assets of any kind and
nature, direct or indirect, including working, leasehold and mineral fee
interests under oil and gas leases, subleases, licenses, development licenses,
exploration licenses, concessions and other leaseholds; operating rights and
non-operating interests, and royalties, overriding royalties, production
payments, net profit interests, other non-working interests, carried interests
and other properties and interests (collectively, the "Leases") and the lands
covered thereby (collectively, the "Land(s)"); any and all Hydrocarbon, water or
injection wells on or applicable to any of the foregoing thereon or applicable
thereto (the "Wells"); any pools or units which include all or a part of any
Land or include any Well (the "Units") and including without limitation all
right, title and interest in Hydrocarbon produced from any such Unit and
revenues from the sale thereof, whether such Unit production comes from wells
located on or off of the Lands, and all tenements, hereditaments and
appurtenances belonging to, used or useful in connection with the Leases, Lands
and Units; interests under or derived from all Contracts applicable to or by
which the Leases, Lands, Wells or Units are bound or created, to the extent
applicable to such properties, including operating agreements, marketing
agreements (including commodity swap, collar and/or similar derivative
agreements), transportation agreements, seismic data and interpretations and
other licensed or owned intellectual property with respect thereto, geological
and geophysical agreements, unitization, pooling and communitization agreements,
joint venture agreements and farmin and farmout agreements, and orders; division
orders, transfer orders and letters in lieu thereof; mineral deeds and 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,
servitudes, rights of way, Permits, leases, licenses, surface rights and other
interests associated with, appurtenant to, used or held for use or necessary for
the operation of Leases, Lands, Wells or Units; 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, located on, used or obtained in connection with or necessary for
the operation of the Leases, Lands, Wells or Units.
54
"Permissible Defect" shall mean:
(a) defects or irregularities arising out of lack of corporate
authorization or a variation in corporate name of record 10 years or more,
unless Parent provides affirmative evidence that such corporate action was not
authorized and results in another person's superior claim of title to the
relevant Oil and Gas Interest;
(b) defects or irregularities that have been cured or remedied by
applicable statutes of limitation or statutes for prescription;
(c) defects or irregularities in the chain of title of record 10
years or more consisting of the failure to recite marital status in documents or
omissions of heirship proceedings;
(d) defects or irregularities in title which for a period of 5
years or more have not delayed or prevented Company or its Subsidiaries (or such
Person's predecessor, if owned by the Company or the its Subsidiaries less than
5 years) from receiving its share of the proceeds of production or causes it to
bear a share of expenses and costs greater than its Working Interest share from
any Unit or Well;
(e) defects or irregularities resulting from or related to probate
proceedings or the lack thereof which defects or irregularities have been
outstanding for 10 years or more;
(f) conventional rights of reassignment normally actuated by an
intent to abandon or release a lease and requiring notice to the holders of such
rights;
(g) any minor defect or irregularity in title as would normally be
waived by prudent persons engaged in the oil and gas business when purchasing
producing properties;
(h) all rights to consent by, required notices to, filings with,
or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein if they are routinely
obtained subsequent to the sale or conveyance;
(i) easements, rights-of-way, servitudes, permits, surface leases
and other rights in respect of surface operations that do not materially
interfere with the oil and gas operations to be conducted on any Well or Lease;
and
(j) all rights reserved to or vested in any Governmental Authority
to control or regulate any of the Oil and Gas Interests in any manner, and all
applicable laws, rules and orders of governmental authority.
"Permitted Liens" shall mean (i) statutory liens for current Taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings,
provided an appropriate reserve has been established therefor in the most recent
55
financial statements contained in the Filed Company SEC Documents in accordance
with GAAP; (ii) mechanics', carriers', workers', and repairers' Liens arising or
incurred in the ordinary course of business that are not material to the
business, operations and financial condition of the Company Property so
encumbered and that are not resulting from a breach, default or violation by the
Company or any of its Subsidiaries of any Contract or Law; and (iii) zoning,
entitlement and other land use and environmental regulations by any Governmental
Authority, provided that such regulations have not been violated.
"Person" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity,
including a Governmental Authority.
"Principal Properties" shall mean the following Company projects,
prospects and properties: Mallard Project; North Stockyard Project; Hansford
Project; Scharff Wells; and the Jefferson County Properties (all as more fully
described in Section 3.14(c) of the Company Disclosure Schedule).
"Purchase Date" shall mean the first date on which Purchaser accepts
for payment Shares tendered and not withdrawn pursuant to the Offer.
"Subsidiary" when used with respect to any party, shall mean any
corporation, limited liability company, partnership, association, trust or other
entity the accounts of which would be consolidated with those of such party in
such party's consolidated financial statements if such financial statements were
prepared in accordance with GAAP, as well as any other corporation, limited
liability company, partnership, association, trust or other entity of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power (or, in the case of a partnership,
more than 50% of the general partnership interests) are, as of such date, owned
by such party or one or more Subsidiaries of such party or by such party and one
or more Subsidiaries of such party.
"Transactions" refers collectively to this Agreement and the
transactions contemplated hereby, including the Offer and the Merger.
"Walk-Away Date" shall mean July 31, 2007.
"Working Interest" shall mean the percentage of costs and expenses
attributable to the maintenance, development, operation, plugging and
abandonment and remediation of Oil and Gas Interests.
The following terms are defined in the section of this Agreement set
forth after such term below:
Acceptance Date........................4 AMEX...................................6
Agreement..............................1 Articles of Merger.....................9
56
Balance Sheet Date....................20 Leases................................54
Bankruptcy and Equity Exception.......17 Liens.................................15
Certificates..........................11 Material Adverse Effect...............15
Closing................................9 Material Contract.....................28
Closing Date...........................9 Maximum Amount........................44
Code..................................12 Merger.................................1
Company................................1 Merger Consideration..................10
Company Acquisition Agreement.........40 MGCL...................................1
Company Adverse Recommendation Minimum Condition......................2
Change..............................40 Offer..................................1
Company Charter Documents..............7 Offer Documents........................2
Company Common Stock...................1 Offer Price............................1
Company Contracts.....................28 Option Consideration..................13
Company Disclosure Schedule...........14 Parent.................................1
Company Material Adverse Effect.......15 Parent Material Adverse Effect........34
Company Plans.........................24 Paying Agent..........................10
Company Preferred Stockholder.........16 Pending Offer..........................1
Company Recommendation................40 Permits...............................21
Company SEC Documents.................19 Policies..............................32
Company Stock Plans...................14 Proxy Statement........................7
Company Stockholder Approval..........17 Purchaser..............................1
Company Stockholders Meeting...........7 Purchaser Option.......................8
Contract..............................18 Purchaser Option Shares................8
Control Date...........................6 PYR Energy Option.....................14
Convertible Securities................16 Qualified Person.......................6
Department.............................9 Real Property Leases..................29
Dissenting Shares.....................13 Release...............................27
Dissenting Stockholders...............12 Representatives.......................39
Effective Time.........................9 Reserve Report........................31
Engagement Letters....................32 Rights Amendment......................18
Environmental Laws....................26 Schedule 14D-9.........................5
Environmental Liabilities.............27 Schedule TO............................2
ERISA.................................24 SEC....................................2
Exchange Act...........................2 Securities Act........................15
Expiration Date........................3 Shares.................................1
Fairness Opinion.......................4 Subsequent Offering Period.............3
Filed Company SEC Documents...........20 Subsidiary Documents..................15
fully diluted basis....................2 Superior Proposal.....................42
Hazardous Materials...................27 Surviving Corporation..................9
Hedge.................................31 Takeover Proposal.....................41
Indemnitees...........................44 Taxes.................................23
Independent Director...................6 Tender Offer Conditions................2
Independent Director Approval..........7 Termination Fee.......................49
Land..................................54 Third Party Proposals.................35
Laws..................................21 Units.................................54
57
WARN..................................26
Warrant Consideration.................14
Warrants..............................16
Wells.................................54
SECTION 8.12 Interpretation.
(a) When a reference is made in this Agreement to an Article, a
Section, Annex or Schedule, such reference shall be to an Article of, a Section
of, or an Annex or Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
(b) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
[signature page follows]
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
SAMSON INVESTMENT COMPANY
By: /s/ C. Philip Tholen
--------------------------------
Name: C. Philip Tholen
Title: Executive Vice President
SAMSON ACQUISITION CORP.
By: /s/ C. Philip Tholen
--------------------------------
Name: C. Philip Tholen
Title: President
PYR ENERGY CORPORATION
By: /s/ Kenneth R. Berry, Jr.
--------------------------------
Name: Kenneth R. Berry, Jr.
Title: President and CEO
Signature Page to the Agreement and Plan of Merger
59
ANNEX A
-------
Conditions to the Offer
-----------------------
The capitalized terms used in this Annex A but not otherwise defined
herein have the meanings assigned to such terms in the Agreement and Plan of
Merger (this "Agreement") of which Annex A is a part.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and (subject to the provisions of the Agreement) may
terminate the Offer and not accept for payment any tendered shares if (i) the
Minimum Condition shall not have been satisfied at the expiration of the Offer
or (ii) at any time on or after the date of the Agreement and prior to the
expiration of the Offer, any of the following conditions shall exist and be
continuing:
(a) there shall be any injunction, judgment, ruling, order, decree,
action, proceeding or litigation instituted, issued, entered, commenced, pending
or threatened by or before any Governmental Authority that would or that seeks
or is reasonably likely to (i) restrain, enjoin, prevent, prohibit or make
illegal the acceptance for payment, payment for or purchase of some or all of
the Shares by Purchaser or Parent or the consummation of the Transactions, (ii)
impose limitations on the ability of Purchaser, Parent or any of their
Affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by them on
all matters properly presented to the Company's stockholders on an equal basis
with all other stockholders (including, without limitation, the adoption of the
Agreement and approval of the Transactions), (iii) restrain, enjoin, prevent,
prohibit or make illegal, or impose material limitations on, Parent's,
Purchaser's or any of their Affiliates' ownership or operation of all or any
material portion of the businesses and assets of the Company and its
Subsidiaries, taken as a whole, or, as a result of the Transactions, of Parent
and its Subsidiaries, taken as a whole, (iv) compel Parent, Purchaser or any of
their Affiliates to dispose of any Shares or, as a result of the Transactions,
compel Parent, Purchaser or any of their Affiliates to dispose of or hold
separate any material portion of the businesses or assets of the Company and its
Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a
whole, or (v) impose damages on Parent, the Company or any of their respective
Subsidiaries as a result of the Transactions;
(b) there shall be any Law enacted, issued, promulgated, amended or
enforced by any Governmental Authority applicable to (i) Parent, the Company or
any of their respective Affiliates or (ii) the Transactions that results, or
that seeks or is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in paragraph (a) above;
A-1
(c) (i) there shall have occurred any events or changes that,
individually or in the aggregate, have had or could reasonably be expected to
have a Company Material Adverse Effect or (ii) (A) the representations and
warranties of the Company set forth in the Agreement that are qualified as to
"materiality" or "Material Adverse Effect" shall not be true and correct, or the
representations and warranties of the Company set forth in the Agreement that
are not so qualified shall not be true and correct in all material respects, in
each case, at and as of the date of such determination as if made on such date
(other than those representations and warranties that address matters only as of
a particular date which are true and correct as of such date), or (B) the
Company shall have breached or failed in any material respect to perform or
comply with any obligation, agreement or covenant required by the Agreement to
be performed or complied with by it, which inaccuracy, breach or failure has not
been cured prior to the expiration of the Offer;
(d) any Person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their Affiliates or any group of
which any of them is a member, shall have acquired or announced its intention to
acquire beneficial ownership (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of 15% or more of the outstanding shares of Company
Common Stock;
(e) a Company Adverse Recommendation Change shall have occurred;
(f) there shall have occurred (1) any general suspension of trading in
securities on the New York Stock Exchange, the American Stock Exchange or in the
Nasdaq National Market System, for a period in excess of three hours (excluding
suspensions or limitations resulting solely from physical damage or interference
with such exchanges not related to market conditions), (2) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (3) any limitation or proposed
limitation (whether or not mandatory) by any United States Governmental
Authority that has a material adverse effect generally on the extension of
credit by banks or other financial institutions, (4) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States or (5) in the case of any of the
situations in clauses (1) through (4) of this paragraph existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof; or
(g) the Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of the Company.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by either of them regardless or the circumstances giving
rise to such conditions or may be waived by Parent or Purchaser, in whole or in
part at any time and from time to time in the sole discretion of Parent or
Purchaser (except for any conditions which, pursuant to Section 1.1 of the
Agreement, may only be waived with the Company's consent). The failure by Parent
or Purchaser at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right, the waiver of such right with respect to any
A-2
particular facts or circumstances shall not be deemed a waiver with respect to
any other facts or circumstances, and each right will be deemed an ongoing right
which may be asserted at any time and from time to time.
(zz) If the Offer is terminated, all tendered Shares not theretofore accepted
for payment shall forthwith be returned to the tendering stockholders.
A-3