EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
ATHANOR RESOURCES INC.,
ATHANOR RESOURCES INC.'S STOCKHOLDERS,
ATHANOR B.V.,
NUEVO ENERGY COMPANY,
AND
NUEVO TEXAS INC.
SEPTEMBER 18, 2002
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of
September 18, 2002, is entered into by and among Athanor Resources Inc., a
Delaware corporation ("Company"), Athanor B.V., an entity organized under the
laws of the Netherlands ("ABV"), Nuevo Energy Company, a Delaware corporation
("Acquiror" or "Parent"), Nuevo Texas, Inc., a Delaware corporation and a wholly
owned subsidiary of Acquiror ("Merger Sub"), and each of the holders of Company
Common Stock, Series A Preferred Stock, and Series B Preferred Stock named on
this Agreement's signature pages (collectively, the "Stockholders") with
reference to the following facts (capitalized terms used but not otherwise
defined in this Agreement will have the meanings set forth in Article 8):
PREAMBLE
The respective Boards of Directors of Company, Acquiror, and Merger Sub
have determined that the Company will be merged with and into Merger Sub (the
"Merger") under the terms and conditions in this Agreement and have declared
this Agreement and the Merger to be advisable.
Prior to the Merger, ABV will acquire Athanor Management Services S.A.,
which is a corporation organized under the laws of Switzerland and a
wholly-owned subsidiary of ABV ("AMS", and together with ABV and Athanor Tunisia
B.V., a corporation organized under the laws of the Netherlands and a wholly
owned subsidiary of ABV ("Tunisia"), the "Spun-Off Subsidiaries"),
For federal income tax purposes, the parties intend that the Merger be
treated as a taxable purchase by Parent of the stock issued by Company as Merger
Sub is a transitory corporation formed for the sole and exclusive purpose of
consummating the Merger.
The parties intend that Acquiror will acquire only the Retained
Business and that, before the Effective Time, the Spun-Off Subsidiaries will
assume all liabilities relating to the Spun-Off Subsidiaries (other than those
liabilities reflected in the Company Financial Statements).
The parties agree as follows:
ARTICLE 1
THE MERGER
1.1 Merger; Effective Time of the Merger. Upon the terms and subject to
the conditions of this Agreement, at the Effective Time, the Merger Sub will be
merged with and into Company in accordance with the Delaware General Corporation
Law (the "DGCL"). At the closing of the Merger (the "Closing"), an appropriate
certificate of merger, prepared and executed in accordance with the relevant
provisions of the DGCL (a "Certificate of Merger") will be filed with the
Delaware Secretary of State. The Merger will become effective upon that filing
or later time on the Closing Date as is specified in the Certificate of Merger
pursuant to the Acquiror's and Company's mutual agreement (the "Effective
Time").
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1.2 Closing. The Closing will take place at 10:00 a.m., Dallas, Texas
time on the date of this Agreement, at the offices of Thompson & Knight LLP,
1700 Pacific Avenue, Suite 3300, Dallas, Texas 75201, unless another date or
place is agreed to in writing by the parties (as applicable, the "Closing
Date").
1.3 Effects of the Merger. At the Effective Time: (i) Merger Sub will
be merged with and into Company, the separate existence of Merger Sub will cease
and Company will continue as the surviving entity (Company, as the surviving
entity in the Merger, is referred to in this Agreement as the "Surviving
Entity"); (ii) the Surviving Entity's Certificate of Incorporation will be the
Company's Certificate of Incorporation in effect immediately before the
Effective Time; and (iii) the Surviving Entity's bylaws will be the Company's
bylaws as in effect immediately before the Effective Time. At the Effective
Time, Company's directors and officers immediately before the Effective Time
will become the Surviving Entity's directors and officers, and those directors
and officers will serve until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation, or removal in
accordance with the Surviving Entity's Certificate of Incorporation, bylaws, and
applicable Laws. The Merger will have the effects set forth in this Section 1.3
and the applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all rights and
obligations of Merger Sub and Company will vest in the Surviving Entity and all
debts and liabilities of Merger Sub and Company will become the Surviving
Entity's debts and liabilities.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
COMPANY; EXCHANGE OF CERTIFICATES
2.1 Effect of Merger on Capital Stock. At the Effective Time, by virtue
of the Merger, and without any party's action:
(a) Capital Stock of Company. As set forth on Exhibit 4.2
hereof (which Exhibit is incorporated herein by reference and made a part
hereof) and in accordance with the terms hereof, each Stockholder's shares of
capital stock of the Company shall be converted into (i) common stock of Parent
together with a right to purchase a fractional share of Parent's Series C
Preferred Stock pursuant to the Rights Agreement (each share of stock and
related right a "Parent Share" and collectively, the "Parent Shares") and/or
(ii) cash. Each share of Company Common Stock, Series A Preferred Stock, and
Series B Preferred Stock issued and outstanding immediately before the Effective
Time and held by an Accredited Investor Stockholder will be automatically
converted into the right to receive 0.35683706 of a Parent Share (the
"Conversion Ratio"); and (B) $11.009399445 in cash for each such share of
Company Common Stock, Series A Preferred Stock, and Series B Preferred Stock.
Each share of Company Common Stock issued and outstanding immediately before the
Effective Time and held by a Stockholder who is not an Accredited Investor will
be automatically converted into the right to receive an amount in cash of
$15.10622339 for each share of Company Common Stock. The aggregate number of
Parent Shares and the aggregate amount of cash to be issued to the Stockholders
in the Merger are referred to as the "Merger Consideration." Schedule 4.2 lists
each Stockholder's ownership of
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Company Common and Preferred Stock, and the respective Merger Consideration for
each Stockholder.
All shares of Company Common Stock, Series A Preferred Stock, and
Series B Preferred Stock (each a "Converted Security" and collectively, the
"Converted Securities"), when converted as provided in this Agreement, will no
longer be outstanding and will automatically be canceled and retired and will
cease to exist, and each holder of a certificate representing any Converted
Securities immediately before the Effective Time (each a "Company Certificate"
and collectively the "Company Certificates") will cease to have any rights with
respect thereto, except the right to receive the applicable Merger
Consideration, to be paid in consideration therefor upon surrender of that
Company Certificate in accordance with Section 2.2, without interest.
(b) Equity Interests in Merger Sub. All of the issued and
outstanding stock of Merger Sub will cease to have any rights with respect
thereto.
(c) Treasury Shares. All shares of capital stock that are
owned by the Company as treasury stock will be cancelled and returned and will
cease to exist and no consideration will be delivered in exchange therefor.
2.2 Exchange of Company Certificates; Escrow.
(a) Notwithstanding any provision of this Agreement to the
contrary, each Stockholder agrees that at the Closing, $3,673,654 in cash and
118,002 Parent Shares of the Merger Consideration to be received by the
Stockholders, in the aggregate, will, in lieu of being issued and/or paid to the
Stockholders, be deposited in an escrow account (in the aggregate, the "Escrow
Fund"), pursuant to an escrow agreement to be entered into in substantially the
form attached as Exhibit 2.2 to this Agreement (the "Escrow Agreement") among
Acquiror, the Stockholders, and the escrow agent named therein (the "Escrow
Agent").
(b) No fractional Parent Shares will be issued to any holder
of Converted Securities in the Merger. To the extent the application of the
applicable Conversion Ratio to all Converted Securities held by a Stockholder
receiving Parent Shares as Merger Consideration would result in a fractional
number of Parent Shares being issued to that Stockholder in the Merger, the
number of Parent Shares issuable to that Stockholder in respect of all those
shares in the Merger will be rounded up to the next whole number of Parent
Shares.
(c) At the Closing, each Stockholder will surrender to
Acquiror the Company Certificates owned by that Stockholder, duly endorsed in
blank or accompanied by duly executed stock powers, in exchange for the
applicable Merger Consideration (subject to the escrow provisions of
subparagraph (a) above). As of and after the Effective Time, no holder of any
Company Certificate that immediately before the Effective Time represented
shares of Converted Securities will have any rights as a holder of Converted
Securities other than to receive the portion of the applicable Merger
Consideration issuable to that holder in the Merger.
2.3 No Further Ownership Rights, Closing of Transfer Records. The
Merger Consideration paid upon the surrender of and in exchange for Converted
Securities in accordance with the terms of this Agreement will be payable in
full satisfaction of all rights pertaining to
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those Converted Securities, and after the Effective Time there will be no
further registration of transfers on the transfer books of Company of the
Converted Securities that were outstanding immediately before the Effective
Time.
2.4 Additional Agreements; Best Efforts. Subject to the terms and
conditions of this Agreement, each of the parties to this Agreement agrees to
use its commercially reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other parties, including providing information and making all necessary
filings with Governmental Entities. If at any time after the Effective Time any
further actions are necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Entity with full title to all properties,
assets, rights, approvals, immunities, and franchises of the Company and the
Retained Subsidiaries, the parties will take those necessary actions.
2.5 Restrictive Legend. (a) Each Stockholder acknowledges that each
certificate evidencing Parent Shares will be issued with a conspicuously stamped
or otherwise imprinted legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL (I)
THE OFFERING AND SALE OR OTHER TRANSFER HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, OR (II) THE HOLDER OF THIS SECURITY PROVIDES THE
CORPORATION WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL
AND OPINION (IN FORM AND SUBSTANCE) WILL BE REASONABLY SATISFACTORY TO
THE CORPORATION, TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS
SECURITY MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT,
OR (B) SUCH OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO THE
CORPORATION THAT THE PROPOSED TRANSFER OF THIS SECURITY MAY BE EFFECTED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT.
(b) Each certificate representing Parent Shares constituting a
portion of the Escrow Fund will be conspicuously stamped or otherwise imprinted
with a legend in substantially the following form:
THIS SECURITY IS SUBJECT TO CERTAIN TRANSFER RESTRICTIONS PURSUANT TO
AN AGREEMENT AND PLAN OF MERGER AMONG NUEVO ENERGY COMPANY, INC., NUEVO
TEXAS, INC., ATHANOR RESOURCES, INC., ATHANOR B.V., AND ATHANOR
RESOURCES INC.'S STOCKHOLDERS (THE "MERGER AGREEMENT"), AND MAY NOT BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNTIL
AFTER MARCH 17, 2003 AS SET FORTH IN THE
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MERGER AGREEMENT WITHOUT THE EXPRESS WRITTEN CONSENT OF NUEVO ENERGY
COMPANY.
2.6 Waiver of Dissenters Rights. Each Stockholder hereby waives any
dissenters rights of appraisal or similar rights to which they may be entitled
under the DGCL, including any notice required in connection therewith, and, to
the extent that waiver might be unenforceable, each Stockholder, intending to be
legally bound, hereby agrees with Acquiror not to exercise any of those rights
of appraisal or similar rights.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Subject to the applicable limitations herein (including Articles 6 and
7), Acquiror represents and warrants to Company and the Stockholders that the
statements contained in this Article 3 are true and correct as of the Effective
Time.
3.1 Organization, Standing, and Power. Each of Merger Sub and Acquiror
is a corporation duly organized, validly existing, and in good standing under
the laws of the state of Delaware and has all requisite power and authority to
own, lease, and operate its properties and to carry on its business as now being
conducted.
3.2 Authority; No Violations; Consents; and Approvals.
(a) Each of Merger Sub and Acquiror has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate actions and no other corporate
proceedings by Acquiror and Merger Sub are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, any stockholder approval required to consummate the Merger and
the filing of the Merger Certificate as required by the DGCL). This Agreement
has been duly and validly executed and delivered by Acquiror and Merger Sub and,
assuming this Agreement constitutes the valid and binding obligation of each of
the Company, the Spun-Off Subsidiaries, and the Stockholders, this Agreement
constitutes a valid and binding obligation of Acquiror and Merger Sub,
enforceable in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not, result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation, or acceleration of any material obligation
or the loss of a material benefit under, or give rise to a right of purchase
under, result in the creation of any Lien upon any material properties or assets
of Acquiror, other than those acquired in the transaction contemplated hereby,
under, or otherwise result in a material detriment to Acquiror under, any
provision of (i) the certificate of incorporation,
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bylaws, or other similar organizational documents of Merger Sub or Acquiror,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease, or
other agreement, instrument, permit, concession, franchise, or license
applicable to Merger Sub or Acquiror, (iii) any joint venture or other ownership
arrangement of Merger Sub or Acquiror or (iv) any judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Merger Sub or
Acquiror or any of their respective properties or assets, other than, in the
case of clause (ii) or (iii), any conflicts, violations, defaults, rights, or
Liens that, individually or in the aggregate would not have a Material Adverse
Effect on Acquiror.
(c) No consent, approval, order, or authorization of, or
registration, declaration of filing with, or permit from any court,
governmental, regulatory, or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (each, a
"Governmental Entity") or third party, is required by or with respect to Merger
Sub or Acquiror in connection with the execution and delivery of this Agreement
by Merger Sub or Acquiror or the consummation by Merger Sub or Acquiror of the
transactions contemplated hereby, except for: (i) filings and other compliance
with the Securities Exchange Act of 1934, as amended the ("Exchange Act"), and
the rules and regulations thereunder, and state securities and blue sky laws as
may be required in connection with this Agreement and the transactions
contemplated hereby; (ii) filings and other compliances with the New York Stock
Exchange rules and regulations; (iii) approvals that are ministerial in nature
and are customarily obtained after the Effective Time in connection with
transactions of the same nature as are contemplated hereby; (iv) the filing of
the Certificate of Merger with the Delaware Secretary of State; and (v) any
consent, approval, order, authorization, registration, declaration, filing, or
permit where failing to obtain or make it would not, individually or in the
aggregate, have a Material Adverse Effect on Acquiror.
3.3 No Default. Neither Merger Sub or Acquiror is in default or
violation (and no event has occurred which, with notice of the lapse of time or
both, would constitute a default or violation) of any term, condition, or
provision of (i) the certificate of incorporation, bylaws, or other similar
organizational documents of Merger Sub or Acquiror, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise, or license to which Merger Sub or
Acquiror is now a party or by which Merger Sub or Acquiror or any of its
properties or assets is bound, or (iii) any order, writ, injunction, decree,
statute, rule, or regulation applicable to Merger Sub or Acquiror except for
such defaults and violations, to which requisite waivers or consents have been
obtained or which do not materially impair the ability of Merger Sub or Acquiror
to perform its obligations under this Agreement.
3.4 Litigation. As of the date of this Agreement there is no suit,
action, or proceeding pending, or, to the knowledge of Acquiror, threatened
against or directly affecting Merger Sub or Acquiror that can be reasonably
expected to have a Material Adverse Effect on Acquiror, nor is there any
judgment, decree, injunction, rule, or order of any Governmental Entity or
arbitrator outstanding against Merger Sub or Acquiror that can be reasonably
expected to have a Material Adverse Effect on Acquiror.
3.5 Brokers. Before Closing, none of the Company, the Spun-Off
Subsidiaries, or the Stockholders will be obligated for any broker's, finder's,
or other similar fee or commission in
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connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror.
3.6 SEC Reports.
(a) Acquiror has delivered to the Company or its counsel
correct and complete copies of the following documents, including exhibits,
filed by Parent with the Securities and Exchange Commission ("SEC"): Annual
Report on Form 10-K for the year ended December 31, 2001; Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002; Current
Reports on Form 8-K filed on January 22, 2002, July 22, 2002, and August 16,
2002, and definitive Proxy Statement dated April 25, 2002 relating to Parent's
2002 Annual Meeting of Stockholders (collectively, the "Parent SEC Documents").
The Parent SEC Documents are all the material documents (other than preliminary
material) that Parent was required to file with the SEC on or after January 1,
2002 pursuant to the Exchange Act. As of their respective dates, none of the
Parent SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) 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. The Parent SEC Documents complied,
when filed, as to form in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
(b) The audited consolidated financial statements, dated as of
and for the period ended, December 31, 2001, and the unaudited consolidated
financial statements, dated as of and for the period ending March 31, 2002 and
June 30, 2002, of Parent and its consolidated Subsidiaries contained in the
Parent SEC Documents (the "Parent Financial Statements") complied as to form in
all material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto), and fairly
present (subject, in the case of the unaudited statements, to normal year-end
audit adjustments, the absence of financial footnotes, and as otherwise
permitted by the rules of the SEC for interim financial statements, in the case
of unaudited interim financial statements) the consolidated financial position
of Parent and its consolidated Subsidiaries as at the respective dates thereof
and the consolidated results of its operations and cash flows for the respective
periods then ended. Acquiror has no liabilities or obligations of any nature
(matured or unmatured, fixed or contingent) that are, individually or in the
aggregate, of a nature required to be disclosed on the face of a consolidated
balance sheet for Acquiror and its consolidated subsidiaries and that are
material to Acquiror's business, except for such liabilities or obligations as
(i) were accrued or were provided for in the consolidated balance sheet dated
June 30, 2002 included in the Parent Financial Statements as of the date
thereof, (ii) are of a normally recurring nature and were incurred after such
date in the ordinary course of business consistent with past practice or in
transactions in compliance with this Agreement, (iii) were incurred in the
ordinary course of business and not required by the rules of the SEC to be set
forth in the June 30, 2002 consolidated balance sheet, or (iv) were incurred
pursuant to a sale of assets by Parent or its consolidated subsidiaries which
has been disclosed in writing to the Company.
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3.7 Absence of Certain Changes. Except as disclosed in the Parent SEC
Documents filed and publicly available prior to the date hereof, since June 30,
2002, there has not been any Material Adverse Effect with respect to Parent, nor
is Parent aware of any event that reasonably could be expected to result in a
Material Adverse Effect with respect to Parent.
3.8 Merger Sub. Merger Sub is, and as of the Effective Time will be, a
direct and wholly-owned, newly-formed subsidiary of Parent.
3.9 Acquiror Notification. To the extent that Acquiror (through its
employees, agents, representatives, or otherwise, who are listed on Schedule 3.9
of the Company Disclosure Schedule) has actual knowledge (including, without
limitation, obtained from Acquiror's due diligence examination of the Company
and its business) that any of the representations, warranties, or other
statements of the Company, any Stockholder or any subsidiary of the Company is
inaccurate, (i) Acquiror acknowledges that it may not use such inaccuracy as a
basis for any claim against the Company, any Stockholder, or any subsidiary of
the Company (including, without limitation, against the Escrow Fund) and (ii)
Acquiror has notified the Company in writing of such knowledge.
3.10 Parent Shares. Acquiror currently has (i) 50,000,000 authorized
shares of Common Stock, of which 17,104,417 are issued or outstanding, (ii)
stock options to acquire 2,821,379 Parent Shares are outstanding under all stock
option plans and agreements, and (iii) no warrants to purchase any Parent Shares
were outstanding under any agreement. The issuance of the Parent Shares pursuant
to this Agreement has been duly authorized and upon consummation of the Merger,
the Parent Shares will have been validly issued, fully paid, non-assessable, and
issued without application of preemptive rights, have the rights, preferences,
and privileges specified in the Parent Certificate of Incorporation, and will be
free and clear of all Liens and restrictions, other than the restrictions
imposed by this Agreement and the Securities Act and state securities and blue
sky laws. Except as set forth above, there are outstanding: (i) no securities of
Parent convertible into or exchangeable for shares of Parent Shares, and (ii) no
options, warrants, calls, rights (including preemptive rights), commitments, or
agreements to which Parent is a party or by which it is bound, in any case
obligating Parent to issue, deliver, sell, purchase, redeem, or acquire, or
cause to be issued, delivered, sold, purchased, redeemed, or acquired, any
shares of Parent Shares or obligating Parent to grant, extend or enter into any
such option, warrant, call, right, commitment, or agreement.
3.11 Rights Agreement. No Stockholder will be deemed to be an Acquiring
Person (as such term is defined in the Rights Agreement) and a Distribution Date
(as defined in the Rights Agreement) will not be deemed to occur and the Rights
(as defined in the Rights Agreement) will not become exercisable, as a result of
entering into this Agreement or consummating the Merger and/or the other
transactions contemplated hereby or thereby. Acquiror has taken all necessary
action with respect to all of the outstanding Rights so that, as of immediately
prior to the Effective Time, as a result of entering into this Agreement or
consummating the Merger and/or the other transactions contemplated by this
Agreement, (i) neither Acquiror nor the Surviving Entity will have any
obligations under the Rights or the Rights Agreement and (ii) the holders of the
Rights will have no rights under the Rights or the Rights Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
AND THE STOCKHOLDERS
Subject to the applicable limitations herein (including in Articles 6
and 7), each of the Company and the Stockholders hereby jointly and severally
represent and warrant to Acquiror that the statements contained in this Article
4 are true and correct at and as of the Effective Time (except that the
Stockholders' representations and warranties set forth in Sections 4.1, 4.2,
4.3, and 4.5 relating to matters specific to each Stockholder are made by each
Stockholder only with respect to itself and not regarding any other party or its
affairs). The disclosure schedule delivered by the Company to the Acquiror on or
before the date of this Agreement (the "Company Disclosure Schedule") is
arranged corresponding to the sections contained in this Agreement and each item
set forth in the Company Disclosure Schedule constitutes disclosure or
qualification with respect to any other section in this Agreement to which that
item corresponds.
4.1 Capacity and Consents. Each Stockholder has full right, power, and
legal capacity and authority to enter into and perform that Stockholder's
obligations under this Agreement and the Additional Transaction Documents to
which such Stockholder is a party and to consummate the transactions
contemplated hereby and thereby, and has obtained all requisite consents or
approvals applicable to that Stockholder to do so. This Agreement, the
Additional Transaction Documents to which such Stockholder is a party, and each
of the other agreements to be executed pursuant to this Agreement have been duly
executed and delivered by each Stockholder and constitute the valid and binding
obligations of that Stockholder enforceable in accordance with its terms
subject, as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium, and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The execution and
delivery of this Agreement and the Additional Transaction Documents to which
such Stockholder is a party, by each such Stockholder does not, and the
consummation of the transactions contemplated hereby and thereby and compliance
by such Stockholder with the provisions of this Agreement and the Additional
Transaction Documents to which such Stockholder is a party, will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or otherwise result in a material detriment to such
Stockholder under, any provision of the governing or organizational documents of
such Stockholder, if applicable, or any loan or credit agreement, note, bond,
mortgage, indenture, lease, joint venture agreement, partnership agreement, or
other agreement, instrument, permit, concession, franchise, or license, or any
judgment, order, decree, statute, law, ordinance, rule, or regulation applicable
to such Stockholder or any of its respective properties or assets.
4.2 Title to Company Stock. Each Stockholder is the record and
beneficial owner of the number of shares of Company Common Stock, Series A
Preferred Stock, and Series B Preferred Stock set forth opposite that
Stockholder's name in Section 4.2 of the Company Disclosure Schedule, and has
full authority to vote all of those shares as contemplated by this Agreement,
and those shares are owned by that Stockholder free and clear of all Liens
(except pursuant to applicable securities laws), including, without limitation,
voting trusts or stockholders agreements. Except as set forth in Section 4.2 of
the Company Disclosure Schedule, each Stockholder has full authority to transfer
pursuant to the Merger all of the shares of Company Common Stock, Series A
Preferred Stock, and Series B Preferred Stock owned by
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that Stockholder free and clear of all Liens (except pursuant to applicable
securities laws), including, without limitation, voting trusts or stockholders
agreements. Except as set forth in Section 4.2 of the Disclosure Schedule, each
Stockholder hereby represents and warrants that it does not own or purport to
own any (i) shares of capital stock, voting debt, or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of capital stock or other voting securities of the Company, or (iii)
any options, warrants, calls, rights (including preemptive rights), commitments,
or agreements to which the Company is a party or by which it is bound, in any
case obligating Company to issue, deliver, sell, purchase, redeem, or acquire,
or cause to be issued, delivered, sold, purchased, redeemed, or acquired,
additional shares of capital stock or any other securities of Company or
obligating Company to grant, extend, or enter into any option, warrant, call,
right, commitment, or agreement.
4.3 Investment Representations.
(a) Each Stockholder receiving Parent Shares has substantial
experience in evaluating and investing in private placement transactions so that
that Stockholder is capable of evaluating the merits and risks of his/its
investment in Parent Shares. Each Stockholder receiving Parent Shares, by reason
of that Stockholder's business or financial experience has the capacity to
protect that Stockholder's own interests in connection with the acquisition of
Parent Shares hereunder. Each Stockholder receiving Parent Shares is an
"Accredited Investor" as defined in Rule 501 of Regulation D promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters that he/it is capable of evaluating the merits and risks of the
transactions contemplated by this Agreement. Each Stockholder receiving Parent
Shares is taking Parent Shares for that Stockholder's own account and not with a
view to or for sale in connection with any distribution of any Parent Shares.
Each Stockholder receiving Parent Shares has reviewed the Parent SEC Documents.
Each Stockholder receiving Parent Shares is familiar with Parent's business and
financial condition, properties, operations, and prospects and has had an
opportunity to satisfy itself/himself regarding that Stockholder's investment in
Parent; provided, however, that the foregoing portion of this sentence will not
modify any of Acquiror's representations or warranties in this Agreement and
will not modify any Stockholder's ability to rely on those representations and
warranties.
(b) Each Stockholder receiving Parent Shares understands that
(i) the Parent Shares constituting a portion of the Merger Consideration will be
issued as "restricted securities" under the applicable federal and state
securities laws, (ii) the Securities Act and the rules of the SEC provide in
substance that that Stockholder may only dispose of those Parent Shares pursuant
to an effective registration statement under the Securities Act or in a
transaction exempt from the registration requirements of the Securities Act, and
(iii) except as contemplated by the Registration Rights Agreement attached
hereto as Exhibit 5.9, Parent has no obligation or intention to register the
sale of those Parent Shares pursuant to the Securities Act, and, accordingly,
that Stockholder may be required to bear the economic risk of the investment in
those Parent Shares for a substantial period of time.
4.4 Organization, Standing, and Power.
-11-
(a) Each of Company and each corporate Company Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its organization, and has all requisite power and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the business it is conducting, or the
operation, ownership, or leasing of its properties, makes that qualification
necessary (except for cases where the failure to so qualify could not reasonably
be expected to have a material adverse effect on such entity). Company has
previously delivered to Acquiror complete and correct copies of the Company
Certificate of Incorporation, Company Bylaws, and Preferred Stock Designations,
each as amended to date, the certificate of incorporation and bylaws of each
corporate Retained Subsidiary, and the minute books of all stockholder and
director meetings and consents of the Company and the Retained Subsidiaries.
Section 4.4 of the Company Disclosure Schedule contains a complete list of all
Company Subsidiaries, including their respective jurisdictions of organization.
(a) Athanor Limited Partnership is a Texas limited partnership duly formed and
validly existing under the laws of the State of Texas, and has full power and
authority to own, lease, and operate its properties and to carry on its business
as now conducted. The Company has previously made available to Acquiror a true
and complete copy of the limited partnership agreement of Athanor Limited
Partnership, as amended to date.
4.5 Capital Structure.
(a) The issued and outstanding capital stock of Company
consists of:
<Table>
<Caption>
Class of Security Number of Shares
----------------- ----------------
Company Common Stock 480,000
Series A Preferred Stock 4,560,119
Series B Preferred Stock 1,782,738
=========
Total Shares Outstanding 6,822,857
</Table>
and are held of record by those Persons listed in Section 4.2 of the Company
Disclosure Schedule in the amounts set forth opposite their respective names
except as set forth in Section 4.2 of the Company Disclosure Schedule. The
authorized capital stock of the Company consists of 7,500,000 shares of Company
Common Stock, 4,560,119 shares of Series A Preferred Stock, and 1,782,738 shares
of Series B Preferred Stock. All outstanding shares of capital stock of Company
are validly issued, fully paid, and non-assessable. Except as set forth in this
Section 4.5(a) or in Section 4.2 of the Company Disclosure Schedule, there are
outstanding: (i) no shares of capital stock, voting debt, or other voting
securities of the Company; (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock, or other voting securities of the
Company; and (iii) no options, warrants, calls, rights (including subscription,
purchase, and preemptive rights), stock appreciation rights, phantom equity
commitments, or agreements to which the Company is a party or by which it is
bound, in any case obligating Company to issue, deliver, sell, purchase, redeem,
or acquire, or cause to be issued, delivered, sold, purchased,
-12-
redeemed, or acquired, additional shares of capital stock or any or other
securities of either Company or any other Person or obligating Company to grant,
extend accelerate the vesting of, change the price of, or otherwise amend or
enter into any option, warrant, call, right, stock appreciation rights, phantom
equity commitment, or agreement, other than the terms of conversion of the
Series A Preferred Stock and the Series B Preferred Stock as set forth in the
Company's Certificate of Incorporation. As of the Effective Time, no dividends
or other distributions will be accrued on Series A Preferred Stock or Series B
Preferred Stock. There are no shares of capital stock held in treasury. Except
as set forth in Section 4.5 of the Company Disclosure Schedule, there are not,
as of the Effective Time, any stockholder agreements, voting trusts, or other
agreements or understandings to which Company or any of its securityholders is a
party or by which it is bound relating to the voting of any shares of capital
stock of Company from, or the casting of votes by, the Stockholders with respect
to the Merger.
(b) Each option, warrant, stock appreciation right, or other
right to subscribe for or acquire any capital stock of the Company or any
security exchangeable for or convertible into capital stock of the Company,
other than the Series A Preferred Stock and the Series B Preferred Stock (each a
"Company Stock Right"), outstanding immediately prior to the Effective Time was
canceled, with the holder thereof becoming entitled to receive from the Company
the amount of cash and shares of ABV disclosed in Section 4.5(b) of the Company
Disclosure Schedule. The cancellation of each Company Stock Right in exchange
for the cash payment and shares of ABV described in Section 4.5(b) of the
Company Disclosure Schedule constituted a release of any and all rights the
holder of such Company Stock Right had or may have had in respect thereof.
Following the Effective Time, no Person, on account of a Company Stock Right,
will have any right thereunder to acquire any capital stock (or, in the case of
any stock appreciation right, the economic benefit of any increase in the value
thereof) of the Company or the Surviving Entity.
(c) Except as set forth in Section 4.5(c) of the Company
Disclosure Schedule, Company beneficially owns, directly or indirectly, all the
outstanding capital stock or other equity interests of the companies listed in
Section 4.5(c) of the Company Disclosure Schedule, which constitute the only
Subsidiaries of Company free and clean of any Liens, other than the restrictions
imposed by this Agreement and the Securities Act and state securities and blue
sky laws. No capital stock or other equity interests of any of the Retained
Subsidiaries are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls, commitments, or agreements of
any character whatsoever. There are no outstanding securities or rights
convertible into, or exchangeable for any capital shares or other equity
interests of any Retained Subsidiary. All such shares of the Retained
Subsidiaries owned by the Company are validly issued, fully paid, and
nonassessable and are owned by it free and clear of any Liens, other than the
restrictions imposed by this Agreement and the Securities Act and state
securities and blue sky laws, and except as set forth in Section 4.5(c) of the
Company Disclosure Schedule.
4.6 Authority; No Violations, Consents, and Approvals.
(a) The Board of Directors of Company has approved the Merger,
this Agreement, the Additional Transaction Documents to which it is a party and
has declared the Merger, this Agreement, the Additional Transaction Documents to
which it is a party to be
-13-
advisable and in the best interests of the Stockholders. The Company and the
Spun-Off Subsidiaries have the requisite corporate power and authority to enter
into this Agreement and the Additional Transaction Documents, and this Agreement
and the Additional Transaction Documents have been duly executed and delivered
by Company and the Spun-Off Subsidiaries and constitute valid and binding
obligations of Company and the Spun-Off Subsidiaries, enforceable in accordance
with their respective terms, subject as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium, and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
(b) Except as set forth on Section 4.6(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement and the
Additional Transaction Documents to which it is a party does not, and the
consummation of the transactions contemplated hereby (including, without
limitation, the Spin-Off) and compliance with the provisions of this Agreement
and the Additional Transaction Documents to which it is a party will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any Lien upon any of the properties or assets
of Company or any Company Subsidiary under, or otherwise result in a material
detriment to Company or any Company Subsidiary under, any provision of (i) the
Company Certificate of Incorporation, Preferred Stock Designations, or Company
Bylaws, or a similar organizational document of any Company Subsidiary, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease, or other
agreement, instrument, permit, concession, franchise, or license applicable to
Company or any Company Subsidiary, (iii) any joint venture or other ownership
arrangement or (iv) any judgment, order, decree, statute, law, ordinance, rule,
or regulation applicable to Company or any Company Subsidiary or any of their
respective properties or assets except, in the case of clause (iv), for any such
conflicts, violations, defaults, terminations, cancellations, accelerations,
liens, or other matters that would not have a Material Adverse Effect on the
Company.
(c) No consent approval, order, or authorization of, or
registration, declaration or filing with, or permit from, any Governmental
Entity or third party is required by or with respect to Company or any Company
Subsidiary in connection with the execution and delivery of this Agreement and
the Additional Transaction Documents to which it is a party or the consummation
of the transactions contemplated hereby or thereby, including the Spin-Off,
except for the filing of a Certificate of Merger with the Delaware Secretary of
State.
4.7 Financial Statements. Company has provided to Acquiror (i) audited
financial statements of Company and the Company Subsidiaries, including balance
sheets, income statements and statements of cash flows, as of and for the years
ended December 31, 1999, December 31, 2000, and December 31, 2001 and (ii)
unaudited consolidated and consolidating balance sheets, income statements, and
statements of cash flows of the Company and the Company Subsidiaries as of and
for the six months ended June 30, 2002 statement (collectively, the "Company
Financial Statements"). The Company Financial Statements fairly present the
financial position of Company as at the dates thereof and the results of its
operations and cash flows for the periods covered thereby. The Company Financial
Statements were prepared in accordance with GAAP, consistently applied. True,
correct, and complete copies of the Company Financial Statements are included in
Section 4.7 of the Company Disclosure Schedule. Except as set forth on the
Company Disclosure Schedule, there have been no transfers of cash or
-14-
other assets in excess of $10,000 from the Retained Business to the Spun-Off
Subsidiaries since June 30, 2002.
4.8 Absence of Certain Changes or Events. Except (i) as disclosed in
Section 4.8 of the Company Disclosure Schedule or in the Company Financial
Statements, (ii) for effects relating to the economy in general, changes in oil,
gas, or other hydrocarbon commodity prices, or other changes affecting the oil
and gas industry generally, (iii) the transactions contemplated hereby, and (iv)
as contemplated by this Agreement since December 31, 2001, there has not been,
with respect to the Company or any Retained Subsidiary:
(a) any adverse change or, to the knowledge of the Company,
any threatened action that could lead to an adverse change, in the condition
(financial or otherwise) or in the properties, assets, or liabilities or
business or prospects of the Company or any Retained Subsidiary;
(b) any change in the accounting methods or practices or
change in the depletion, depreciation, or amortization policies or rates
theretofore adopted, or any financial practice or operating activity or any
revaluation by Company of any of its or its subsidiaries' assets;
(c) any incurrence of any debts, obligations, or liabilities,
absolute, accrued, contingent, or otherwise, whether due or to become due, that
exceeds, in the aggregate, $10,000, other than (i) liabilities incurred in the
ordinary course of business consistent with past practice or (ii) in connection
with the transactions contemplated hereby;
(d) any discharge or satisfaction of any Liens or payment of
any obligation or liability, including the settlement of any lawsuit or other
claims, other than in the usual and ordinary course of business consistent with
past practice;
(e) any Lien on any assets, tangible or intangible, other than
Permitted Encumbrances;
(f) other than the Spin-Off, any sale, transfer, or lease
(whether that lease is an operating or capital lease) as lessor or sublessor of
any assets, other than in the usual and ordinary course of business consistent
with past practice, in an aggregate amount in excess of $10,000;
(g) any cancellation, compromise, or release of any debt or
claim that exceeds $10,000;
(h) any physical damage, restriction or loss (whether or not
covered by insurance) that adversely affects any properties, business, or
prospects that exceeds $10,000;
(i) any declaration or payment of any dividends or other
distributions with respect to its outstanding capital stock, other than the
Spin-Off;
(j) any acquisition of, merger or consolidation with, or
purchase of any equity interest in or the assets of, or by any other manner, any
business or any corporation, partnership,
-15-
association, or other business organization or division thereof, except for
acquisitions of interests in Oil and Gas Properties made in the ordinary course
of business, consistent with past practice, and as to which the aggregate
acquisition or purchase price, including the assumption of any indebtedness in
connection therewith, does not exceed $10,000;
(k) any capital expenditures or any commitment to make any
capital expenditures that exceed, in the aggregate, $100,000;
(l) (i) any increases in the compensation of any of its
directors, officers, or employees or (ii) any payment of, or any agreement to
pay, any pension, retirement allowance, or other employee benefit not required
or contemplated by any of the Company Plans, in each case as in effect on
December 31, 2001, to any director, officer, or employee, whether past or
present;
(m) any material contract entered into by the Company or any
Company Subsidiary or any amendment or termination of or default under any
contract that the Company or any Company Subsidiary is a party or by which it is
bound;
(n) any amendment or change made or authorized to the
certificate of incorporation or bylaws of the Company or similar organizational
or operating documents of any Company Subsidiary;
(o) any of the following between the Company and the Retained
Subsidiaries, on the one hand, and the Spun-Off Subsidiaries, on the other: (i)
entering into of any agreement, written or oral, (ii) termination of any
agreement entered into prior to December 31, 2001, (iii) any advance, loan,
capital contribution, loan or advance repayment, dividend, distribution or other
transfer of funds, (iv) any transfer of any tangible or intangible property or
other asset, or any liability, or (v) any material change in an business
practice or policy in place prior to December 31, 2001;
(p) to the knowledge of the Company and the Company
Subsidiaries, any other transaction, commitment, claim, dispute, or other event
or condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) that has materially and adversely affected or is
reasonably expected to materially and adversely affect the financial condition,
operation, or business of the Company or any Retained Subsidiary; or
(q) any agreement or commitment of the Company or any Company
Subsidiary to do any of the foregoing.
4.9 No Undisclosed Liabilities. Except as set forth in Section 4.9 of
the Company Disclosure Schedule or as otherwise arise in the ordinary course of
business, neither the Company nor any Retained Subsidiary has any liabilities of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable, or otherwise. The amount of the following unpaid liabilities of
the Company as of the Closing Date will not exceed the amounts on Section 4.9 of
the Company Disclosure Schedule: (i) attorneys' fees; (ii) stock option cash
settlements, (iii) stock option employer Taxes, (iv) severance payments, (v)
severance employer Taxes, and (vi) the Petrie Parkman fee.
-16-
4.10 No Default. Except as set forth in Section 4.10 of the Company
Disclosure Schedule, neither the Company nor any Retained Subsidiary is in
default or violation (and no event has occurred that, with notice or the lapse
of time or both, would constitute a default or violation) of any term,
condition, or provision of (i) the Company Certificate of Incorporation, the
Preferred Stock Designations, or Company Bylaws or any similar organizational
document of any Retained Subsidiary; (ii) any loan or credit agreement, note,
bond, mortgage, or contract, or, to Company's knowledge, any permit, franchise,
or license, to which Company or any Retained Subsidiary is now a party or by
which Company or any Retained Subsidiary or any of their respective properties
or assets are bound; or (iii) any order, writ, injunction, decree, statute,
rule, or regulation applicable to Company or any Retained Subsidiary.
4.11 Compliance with Applicable Laws. Company and each Retained
Subsidiary holds all material permits, licenses, variances, exemptions, orders,
franchises, and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses, and are in material compliance with the
terms of each of the foregoing. Except as disclosed in Section 4.11 of the
Company Disclosure Schedule, the business of Company or any Retained Subsidiary
is not being and has not been conducted in violation of any Law that would have
a Material Adverse Effect on the Company (including without limitation the
Foreign Corrupt Practices Act of 1977, as amended). Except as disclosed in
Section 4.11 of the Company Disclosure Schedule, as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Company or any Retained Subsidiary is pending or, to the knowledge of Company,
threatened.
4.12 Litigation. Except as disclosed in Section 4.12 of the Company
Disclosure Schedule, as of the date of this Agreement there is no suit, action,
claim, or proceeding pending, or, to the knowledge of Company, threatened
against or affecting Company or any Retained Subsidiary, nor is there any
judgment, decree, injunction, rule, or order of any Governmental Entity or
arbitrator outstanding against Company or any Retained Subsidiary. Section 4.12
of the Company Disclosure Schedule contains an accurate and complete list of all
material claims, suits, actions, and proceedings pending or, to the knowledge of
Company, threatened against or affecting Company or any Retained Subsidiary as
of the date of this Agreement.
4.13 Employee Benefit Plans. (a) All employee compensation, benefit
plans, programs, and arrangements, written or oral, including by example and not
by limitation, any employee benefit plan as defined in Section 3(3) of ERISA
(including without limitation any employee pension benefit plan or employee
welfare benefit plan), cafeteria plans, stock option or stock award plans,
salary deferral, incentive compensation and bonus plans, vacation, paid time
off, sick leave, severance, change of control, or termination plans or
agreements, employment agreements, or any other plan, program, arrangement, or
agreement that provides benefit of any kind whatsoever maintained or previously
maintained for the benefit of any current or former employee, officer, or
director of Company or any Company Subsidiary are described in Section 4.13 of
the Company Disclosure Schedule (collectively, the "Company Plans"). Except as
disclosed in the Company Disclosure Schedule: (i) the Company has no liability
or obligations of any kind relating to any employee benefit plan maintained by
the Company or any ERISA Affiliate for the 6 year period ending at the Effective
Time; (ii) neither the Company nor any of the Company Plans has any obligation
to provide or promises or provides medical, life insurance, or other welfare
benefits to any Person, whether retired or a former or active employee,
-17-
following retirement or termination of employment except as is required under
Section 4980B of the Code or Section 601 et. seq. of ERISA; (iii) each Company
Plan that is intended to be qualified under Section 401(a) of the Code is so
qualified, has received a currently effective favorable determination letter
from the IRS that it is so qualified, is within the remedial amendment period to
file for such a letter, or is a standardized prototype plan; (iv) all
contributions due and payable on or before the Effective Time in respect of any
Company Plan have been made in full, or adequate accruals have been provided for
in the Company Financial Statements for all other contributions or amounts in
respect of the Company Plans for periods ending on or before the Effective Time;
(v) each Company Plan has been operated in all material respects in accordance
with its terms and the requirements of applicable law, and no statement,
announcement, agreement, or proposal, whether written or oral, has been made
with regard to any Company Plan that is not in accordance with the terms of such
Company Plan; and (vi) there are no claims against any of the Company Plans
other than claims for benefits provided in the ordinary course of operation of
the Company Plans.
(b) The Company has made available to Acquiror true and
complete copies of the following documents, as they have been amended to the
date hereof, relating to the Company Plans: (i) all documents that set forth the
terms of each Company Plan and any related trust, including any summary plan
descriptions related thereto and summary descriptions of any such plans not
otherwise in writing; (ii) the three most recently completed actuarial
valuations, if any, for each Company Plan; (iii) the Form 5500, 5500-C or
5500-R, if any, for each Company Plan for the three most recent plan years; (iv)
with respect to any Company Plan that is intended to be qualified under Section
401(a) of the Code ("Qualified Plan"), a copy of the most recent Internal
Revenue Service ("IRS") determination letter, if any, for such Company Plan; (v)
all insurance policies which were purchased by or to provide benefits under any
Company Plan currently in force or for which the Company currently has any
liability (contingent or otherwise); (vi) all contracts with third party
administrators, investment managers, consultants, and other independent
contractors that relate to any Company Plan currently in force or for which the
Company currently has any liability (contingent or otherwise); (vii) all
reports, including all discrimination testing reports submitted within the four
(4) years preceding the date hereof by third party administrators, investment
managers, consultants, or other independent contractors with respect to any
Company Plan currently in force or for which the Company currently has any
liability (contingent or otherwise); (viii) a copy of all forms of notifications
given within the four (4) years preceding the date hereof to employees of their
rights under Section 601 et seq. of ERISA, Section 4980B of the Code, Section
9801 et seq. of the Code, and under all other applicable federal and state laws
regulating the notice requirements of Group Health Plans (as defined in Section
607(1) of ERISA); (ix) all notices or reports relating to a Company Plan that
were given by the Company or any Company Plan to the Internal Revenue Service or
the Department of Labor, pursuant to statute, within the four (4) years
preceding the date hereof, including notices that are expressly mentioned
elsewhere in this Section 4.13; and (x) all notices relating to a Company Plan
that were given by the Internal Revenue Service or the Department of Labor to
the Company or any Company Plan within the four (4) years preceding the date
hereof.
(c) Except as set forth in Schedule 4.13(c) of the Company's
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the
-18-
transactions contemplated hereby will (either alone or in conjunction with any
other event, such as termination of employment) (i) result in any payment
(including, without limitation, severance, unemployment, bonus, compensation,
golden parachute or otherwise) becoming due to any shareholder, director, or any
employee of the Company or any affiliate of the Company from the Company or any
Company Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any Company Benefit Plan or (iii) result in any acceleration of the time
of payment or vesting of any benefits. Neither the Company or any of the Company
Subsidiaries is a party to any contract, plan, or arrangement under which it is
obligated to make or to provide, or could become obligated to make or to
provide, a payment or benefit that would be nondeductible by virtue of Section
162(m).
4.14 Taxes.
(a) All Tax Returns required to be filed on or before the
Closing Date by or on behalf of the Company and the Company Subsidiaries have
been filed within the time and in the manner prescribed by applicable law and
such Tax Returns were correct and complete in all material respects. All Taxes
owed by the Company and Company Subsidiaries for periods ending on or before
June 30, 2002, whether or not shown on any Tax Return, have been timely paid.
Other than the Company's 2001 federal income tax return, neither the Company nor
any of the Company Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Company or any of the Company Subsidiaries
does not file Tax Returns that the Company or Company Subsidiaries is or may be
subject to taxation by that jurisdiction.
(b) There is no dispute or claim concerning any Tax liability
of the Company or any of the Company Subsidiaries, and no Tax Authority or
agency, domestic or foreign, is now asserting or, to the best knowledge of the
Company, threatening to assert against the Company or a Company Subsidiary any
adjustment, deficiency, or claim for additional taxes or interest thereon or
penalties in connection therewith.
(c) Neither the Company, nor any Company Subsidiary, has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any federal, state, county,
municipal, or foreign tax.
(d) Each of the Company and the Company Subsidiaries has
withheld and paid all Taxes (other than current Taxes not yet due and payable)
required to have been withheld and paid in connection with amounts paid or owing
to any shareholder, employee, creditor, independent contractor, or other third
party.
(e) Neither the Company nor the Company Subsidiaries are, and
have never been, a party to any agreement providing for the allocation or
sharing of Taxes.
(f) There are no Liens relating to Taxes upon the assets of
the Company or the Company Subsidiaries other than Liens relating to Taxes not
yet due and payable.
(g) Neither the Company nor the Company Subsidiaries have made
an election under Section 341(f) of the Code.
-19-
(h) No Stockholder or director or officer of the Company and
the Company Subsidiaries expects any Tax Authority to assess any additional
Taxes for any period for which Tax Returns have been filed. Neither the Company
nor any of the Company Subsidiaries is currently subject to an audit by any Tax
Authority.
(i) The unpaid Taxes of the Company and Retained Subsidiaries
did not, as of June 30, 2002, exceed the reserve for Taxes (not including any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the Company Financial Statements.
(j) Neither the Company nor the Company Subsidiaries will be
liable for Taxes as a result of the Spin-Off or the transactions related
thereto.
(k) Neither the Company nor any of the Company Subsidiaries
has made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code section 280G. Neither the
Company nor any of the Company Subsidiaries has reported or failed to report any
item that may result in the imposition of penalties under the Code pursuant to
Code section 6662 or Code section 6663. Each of the Company and Company
Subsidiaries has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code section 6662. Neither the Company nor any of the
Company Subsidiaries has engaged or participated in any investment or
transaction that has been (or is the same or substantially similar to any
transaction) identified by the Internal Revenue Service as a tax avoidance
transaction under Code section 6111. Neither the Company nor any of the Company
Subsidiaries (i) has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company), or (ii) has any liability for the Taxes of any Person (other than the
Company and any of the Company Subsidiaries) under Treasury Regulations section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
4.15 Labor Matters. Except as set forth on Schedule 4.15 of the Company
Disclosure Schedule:
(a) Neither Company nor any Company Subsidiary is a party to
any collective bargaining agreement or other current labor agreement with any
labor union or organization, nor does Company know of any bargaining unit
petition before the National Labor Relations Board or other activity or
proceeding of any labor organization (or representative thereof) or employee
group (or representative thereof) to organize any employees of Company or any
Company Subsidiary into a collective bargaining unit;
(b) as of the date of this Agreement, there is no unfair labor
practice charge before the National Labor Relations Board or grievance arising
out of a collective bargaining agreement or other grievance procedure against
Company or any Company Subsidiary pending, or to the knowledge of Company,
threatened;
-20-
(c) as of the date of this Agreement, there is no complaint,
lawsuit, or proceeding in any administrative or judicial forum by or on behalf
of any present or former employee, any applicant for employment, or any classes
of the foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful, or tortious conduct in connection
with the employment relationship against Company or any Company Subsidiary
pending, or, to the knowledge of Company, threatened;
(d) there is no strike, dispute, slowdown, work stoppage, or
lockout pending, or threatened, against or involving Company or any Company
Subsidiary;
(e) Company and each Company Subsidiary are in material
compliance with all applicable Laws respecting employment and employment
practices, terms, and conditions of employment, wages, hours of work, and
occupational safety and health;
(f) The transactions contemplated by this Agreement do not
trigger any notification, severance, or other reduction in force benefits under
WARN or any applicable state law and, to the extent that any notification or
severance or other benefits are so triggered, such notification or liability
will remain the responsibility of the party employing the relevant employee as
of the Effective Time, including as contemplated by the Additional Transaction
Documents; and
(g) as of the date of this Agreement, there is no material
proceeding, claim, suit, action, or governmental investigation pending or, to
the knowledge of Company, threatened, in respect to which any current or former
director, officer, employee, or agent of Company or any Company Subsidiary is or
may be entitled to claim indemnification from Company or any Company Subsidiary.
4.16 Title. Each of the Company and each Retained Subsidiary has good
and defensible title to each of its Oil and Gas Properties and all other assets
and property (real or personal) owned by the Company or any Retained Subsidiary,
subject only to Permitted Encumbrances and other matters described in Section
4.16 of the Company Disclosure Schedule. Each of the Company and each Retained
Subsidiary has a valid leasehold interest in all assets or properties (real or
personal) not owned by the Company or any Retained Subsidiary that are used by
them, located on their premises, or are located on the Oil and Gas Properties.
All properties used in the operations of the Company and the Retained
Subsidiaries are reflected in the June 30, 2002 balance sheet of the Company to
the extent required by GAAP. All pipelines, wells, gas processing plants,
platforms, and other material improvements, fixtures, and equipment owned in
whole or part by the Company or any Retained Subsidiary are being maintained in
a state of adequate repair to conduct normal operations consistent with past
practices. The assets of the Company and of the Retained Subsidiaries consists
solely of reserves of oil and gas, rights to reserves of oil and gas, and
associated exploration and production assets. For the purposes of this Section
4.16, "associated exploration and production assets" shall have the meaning
ascribed thereto in the rules promulgated pursuant to the Hart-Scott-Rodino
antitrust Improvements Act of 1976.
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4.17 Prepayments; Hedging; Calls. Except as set forth in Section 4.17
of the Company Disclosure Schedule:
(a) neither the Company nor any Retained Subsidiary has any
outstanding obligations for the delivery of hydrocarbons attributable to any of
the Oil and Gas Properties in the future on account of prepayment, advance
payment, take-or-pay, or similar obligations without then or thereafter being
entitled to receive full value therefor;
(b) neither the Company nor any Retained Subsidiary is bound
by any futures, hedge, swap, collar, put, call, floor, cap, option, or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, including hydrocarbons,
interest rates, currencies, or securities; and
(c) no Person has any call upon, option to purchase, or
similar right to purchase any portion of the hydrocarbons from the Oil and Gas
Properties.
4.18 Production and Pipeline Imbalances. Section 4.18 of the Disclosure
Schedule sets forth the Company's best estimate of the Company's and each
Retained Subsidiary's pipeline and production imbalances and penalties as of
June 30, 2002 with respect to the Oil and Gas Properties based upon the gas
transportation and sales imbalances reflected in the Company's or any Retained
Subsidiary's records and files with respect to Leases and wells included in the
Oil and Gas Properties operated by the Company or any Retained Subsidiary and
balancing information provided by third party operators as to Leases and wells
included in the Oil and Gas Properties not operated by the Company or any
Retained Subsidiary.
4.19 Certain Contracts. Part A of Section 4.19 of the Company
Disclosure Schedule sets forth a description of all material participation
agreements, area of mutual interest agreements, farm-outs, farm-ins, term
assignments, or other agreements to which Company or any Retained Subsidiary is
a party and that relate to the Oil and Gas Properties and that have one or more
obligations that are not fulfilled thereunder. Part B of Section 4.19 of the
Company Disclosure Schedule sets forth a list of all employment contracts for
field personnel, landmen, brokers, geologists, or other consultants who are
employed on or with respect to the Oil and Gas Properties that are not
terminable upon 30 days' notice or less or which provide for severance benefits
or payments. Part C of Section 4.19 of the Company Disclosure Schedule sets
forth a list of all field office leases, compressor leases, and other surface
leases (other than pipeline, road, or right of way easements) to which Company
or any Retained Subsidiary is a party and that relate to the Oil and Gas
Properties. Part D of Section 4.19 of Company Disclosure Schedule sets forth a
list of all sales and transportation contracts that cannot be terminated by the
Company on notice of 60 days or less; third party service contracts, accounting
contracts, and operation contracts; seismic licenses and contracts; and
agreements to purchase or sell goods or services in excess of $50,000. All
contracts described in Section 4.19 of the Company Disclosure Schedule are in
full force and effect; neither the Company nor any Company Subsidiary has
received any notice of termination of any of those contracts; and neither the
Company nor any Company Subsidiary, nor to the Company's knowledge any other
party, is in default of any material provision under any of those contracts.
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4.20 Certain Joint Operating Agreement Matters. Except as set forth in
Section 4.20 of the Company Disclosure Schedule, all non-operators that are
parties to joint operating agreements under which the Company or any Company
Subsidiary is the operator and that relate to the Oil and Gas Properties have
timely paid all joint interest billings, and there are no outstanding joint
interest billings that are overdue. Neither the Company nor any Company
Subsidiary has received any notice from any non-operator demanding that Company
or any Company Subsidiary resign as operator, and no resignation by Company or
any Company Subsidiary as operator is currently pending. No audit under any
joint operating agreement encumbering the Oil and Gas Properties is currently
pending nor has Company or any Company Subsidiary received any notice of an
audit; all audit exceptions from prior audits have been resolved and are closed.
All joint operating agreements to which the Company or any Retained Subsidiary
is a party are in full force and effect; neither the Company nor any Company
Subsidiary has received any notice of termination, breach, or default of any
joint operating agreement, and to the Company's knowledge no other party is in
default of a material provision of any joint operating agreements.
4.21 Environmental Matters.
(a) Except as set forth in Section 4.21(a) of the Company
Disclosure Schedule, as set forth in the Phase I Environmental Report dated June
30, 2001 conducted on behalf of the Company by E. Vironment or as would not have
an adverse impact on the Company or any Retained Subsidiary, neither the conduct
or operation of Company or any Company Subsidiary, the condition of any Oil and
Gas Property owned, leased, or operated by Company or any Company Subsidiary (or
leased or owned but not operated by Company or any Company Subsidiary), nor the
sale, use, or disposal of any substance produced therefrom, transported thereto,
or transported therefrom by or on behalf of Company or any Company Subsidiary
(i) violates applicable Environmental Laws; (ii) gives rise to any third-party
claim; or (iii) with notice or the passage of time, or both, would constitute a
violation requiring action by Company or any Company Subsidiary to remedy,
stabilize, treat, clean up, or otherwise alter the environmental condition of
any property. Neither the Company nor any Company Subsidiary has received any
notice from any Governmental Entity or any other Person that the operation of
any facilities or any property owned, leased, or operated by it, is or was in
violation of any Environmental Laws or that Company or any Company Subsidiary is
responsible (or potentially responsible) for remedying, stabilizing, treating,
or cleaning up any (x) pollutants, contaminants, or hazardous or toxic waste,
substances or materials at, on, or beneath any property, or (y) any pollutants,
contaminants, or hazardous or toxic waste, substances, or materials disposed of
off-site at, on, or beneath any other property. Company has furnished to
Acquiror a copy of the Phase I Environmental Report dated June 30, 2001,
conducted on behalf of the Company by E. Vironment.
(b) Except as set forth in Section 4.21(b) of the Company
Disclosure Schedule, Company and each Company Subsidiary has obtained or applied
for all material permits necessary for the construction of its facilities and
the operation of its business, as presently conducted for the use, storage,
treatment, transportation, release, emission, and disposal of raw materials,
by-products, wastes, hazardous substances, hazardous wastes, and other
substances or materials used or produced by or otherwise relating to its
business, including without limitation the Oil and Gas Properties, and all those
permits are in good standing and in
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all material respects in full force and effect or, where applicable, a renewal
application has been timely filed, and agency approval is expected to be
obtained, and Company and each Company Subsidiary is in compliance in all
material respects with all terms and conditions of all those permits.
4.22 Insurance and Surety Bonds. At and prior to the Effective Time,
Company and each Retained Subsidiary has insurance in force and effect and
maintains surety bonds as set forth in Section 4.22 of the Disclosure Schedule.
To the extent applicable, that insurance and those surety bonds constitute all
of the policies that are required in connection with the operation of the
businesses of the Company and the Retained Subsidiaries and comply with the
applicable terms of the joint operating agreements. With respect to the
insurance policies and surety bonds, (i) neither the Company nor any Retained
Subsidiary is in breach or default thereunder (including with respect to the
payment of premiums or the giving of notices), and the Company does not know of
any event that (with notice or lapse of time or both) would constitute a breach
or default, permit termination, or result in a material increase in premium and
no claims are pending as to which coverage has been questioned, denied, or
disputed by underwriters.
4.23 Vote. Company has obtained the affirmative vote of the holders of
the outstanding shares of Company Common Stock, Series A Preferred Stock, and
Series B Preferred Stock for the approval of the Merger and has delivered to
Acquiror a unanimous written consent of the Stockholders evidencing that
affirmative vote, duly executed by each of the Stockholders to be in accordance
with the applicable provisions of the DGCL. There are no other approvals
(including approvals required by DGCL and the organizational documents of
Company) required of the holders of any class or series of securities of
Company.
4.24 Brokers. Except for fees and expenses of Petrie Parkman, no
broker, investment banker, or other Person is entitled to any broker's,
finder's, or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Company, any Company Subsidiary, or any Stockholder.
4.25 Agreements, Contracts, and Commitments. Company has listed in
Section 4.25 of the Company Disclosure Schedule all material leases, contracts,
agreements, and instruments to which it or any Retained Subsidiary is a party or
under which it has liabilities or obligations or under which its assets are
bound as of the date hereof, other than (a) any contracts, plans, or other
agreements described in Section 4.13 of the Company Disclosure Schedule and (b)
any contracts or agreements set forth in Section 4.20 of the Company Disclosure
Schedule (true and correct copies of each such document have been previously
made available to Acquiror and a written description of each oral arrangement so
listed). Except as set forth in Section 4.25 of the Company Disclosure Schedule,
with respect to the Company or any Retained Subsidiary, there is not (i) any
agreement of guarantee or indemnification running to any Person, (ii) any
agreement, indenture, or other instrument for borrowed money or any agreement or
other instrument which contains restrictions with respect to payment of
dividends or any other distribution in respect of Converted Securities or any
other outstanding securities, (iii) any agreement, contract or commitment
containing any covenant limiting the freedom of Company or any Retained
Subsidiary to engage in any line of business or compete with any Person, (iv)
any agreement, contract, or commitment relating to the acquisition or sale of
assets or capital stock of any business enterprise, (v) any agreement, contract,
commitment, or arrangement between the Company or
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any Retained Subsidiary and any Affiliate thereof, (vi) any contract relating to
real property (other than Company's Oil and Gas Properties), or (vii) any
agreement, contract, or commitment not made in the ordinary course of business.
Except as set forth in Section 4.25 of the Company Disclosure Schedule, (i)
neither Company nor any Company Subsidiary has breached, nor to Company's
knowledge is there any claim or any legal basis for a claim that any party has
breached, any of the material terms or conditions of any agreement, contract, or
commitment set forth in the Company Disclosure Schedule or of any other
agreement, contract, or commitment applicable to the Company or any Retained
Subsidiary, (ii) to Company's knowledge, no event has occurred that with notice
or lapse of time would constitute a default or breach or permit termination or
modification of any agreement, contract, or commitment set forth in the Company
Disclosure Schedule, and (iii) none of the agreements, contracts, or commitments
set forth in the Company Disclosure Schedule contain a provision that prevents
the Company from owning, managing, or operating the Oil and Gas Properties in
accordance with historical practices.
4.26 Spin-Off Assets. Company has listed in Section 4.26 of the Company
Disclosure Schedule all property, real or personal, tangible or intangible, and
all other assets and contract rights (the "Spin-Off Assets") as well as all
liabilities that the Company or any Retained Subsidiary transferred to any
Spun-Off Subsidiaries since June 30, 2002 or concurrently with the Spin-Off.
Immediately after the Effective Time the Surviving Entity and the Retained
Subsidiaries will have all properties, real or personal, tangible or intangible,
and other assets so as to allow the Surviving Entity and the Retained
Subsidiaries to conduct their business and operations as of immediately prior to
the Effective Time but after giving effect to the Spin-Off (the "Retained
Business").
4.27 Other Employee Matters. Except as reflected on the Company
Financial Statements or contemplated by this Agreement or the Additional
Transaction Documents, as of the Effective Time, (i) all the employees of the
Company and the Retained Subsidiaries ("Company Employees") have either been
discharged or have had their employment transferred to ABV, (ii) ABV, or an
Affiliate of ABV, has assumed, with respect to the Company Employees and all
prior employees of the Company ("Past Employees"), all liabilities that arise at
any time at or before the Effective Time with respect to the Company Employees
and Past Employees, including without limitation all such liabilities relating
to any Company Plan, (iii) ABV, or an Affiliate of ABV, has executed all
agreements reasonably necessary to evidence its assumption of these liabilities,
(iv) ABV, or an Affiliate of ABV, has become the successor sponsor to Company of
the Company Plans and has assumed sole responsibility and liability for all
liabilities, obligations, duties, payments, and benefits that exist or
subsequently arise under the Company Plans or under any Laws with respect to
Company Plans (including, but not limited to, any liabilities, duties, payments,
and benefit obligations that may, by operation of law, continue with, or accrue
to, the Acquiror, Company, and/or any Retained Subsidiary), (v) Company has
ceased to be a participating employer in the Company Plans, and (vi) Company's
1998 Stock Option Plan and Company's 2000 Stock Option Plan have been
terminated.
4.28 Reserve Reports
(a) All information supplied to Netherland Sewell &
Associates, Inc. by or on behalf of Company and the Retained Subsidiaries in
connection with the preparation of the proved oil and gas reserve reports
concerning the Oil and Gas Properties of Company and the
-25-
Retained Subsidiaries as of May 1, 2001 (the "Netherland Reserve Report") and
all information in the reserve report dated December 31, 2001 prepared by
Company and audited by Cawley Gillespie & Associates (the "Cawley Reserve
Report" and together with the Netherland Reserve Report, the "Company Reserve
Report") was (at the time supplied or as modified or amended prior to the
issuance of the Company Reserve Report) true and correct in all material
respects and Company has no knowledge of any material errors in such information
that existed at the time of such issuance.
(b) Set forth in Section 4.28 of the Company Disclosure
Schedule is a list of all material Oil and Gas Properties that were included in
the Company Reserve Report that have been disposed of prior to the date of this
Agreement.
4.29 Permits. Immediately prior to the Effective Time, Company and the
Retained Subsidiaries will hold all of the permits, licenses, certificates,
consents, approvals, entitlements, plans, surveys, relocation plans,
environmental impact reports and other authorizations of any Governmental Entity
required or necessary to construct, own, operate, use and/or maintain their
respective properties and conduct their operations as currently conducted,
except where the failure to obtain such authorizations would not have a Material
Adverse Effect on the Company.
4.30 Payroll. The Company and the Retained Subsidiaries have paid all
salaries and bonuses to the Former Employees accrued up to the Effective Time.
4.31 Intellectual Property. The Company and the Retained Subsidiaries
either own or have valid licenses or other rights to use all patents,
copyrights, trademarks, software, databases, geological data, geophysical data,
engineering data, maps, interpretations, and other technical information used in
their businesses as presently conducted, subject to the limitations contained in
the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of oil,
gas, condensate, and other hydrocarbons, with such exceptions as would not
result in a Material Adverse Effect on the Company. There are no limitations
contained in the agreements of the type described in the immediately preceding
sentence which, upon consummation of the transactions contemplated by this
Agreement, will alter or impair any such rights, breach any such agreement with
any third party vendor, or require payments of additional sums thereunder,
except any such limitations that would not have a Material Adverse Effect on the
Company. The Company and the Retained Subsidiaries are in compliance in all
material respects with such licenses and agreements and there are no pending or,
to the best knowledge of the Company, threatened Proceedings challenging or
questioning the validity or effectiveness of any license or agreement relating
to such property or the right of the Company or any Retained Subsidiary to use,
copy, modify, or distribute the same. Included on Schedule 4.31 of the Company
Disclosure Schedule are some, but not all, of the intellectual property assets
of the Company that will be retained by the Company.
4.32 Related Party Transactions. No officer, director, stockholder, any
member of any of their immediate families, or any affiliate of the Company or
any Company Subsidiary, owns, directly or indirectly, or has an ownership
interest, either of record, beneficially or equitably, in any business,
corporate or otherwise, which is a party to, or in any property or assets which
is the
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subject of, any material business arrangements or relationships of any kind with
the Company and the Retained Subsidiaries.
4.33 Spin-Off. Attached hereto as Section 4.33 of Company Disclosure
Schedule is a true and correct copy of the Redemption Agreement, together with
any exhibits or schedules thereto, if any, and such agreement is in full force
and effect on the date hereof. Prior to Closing, each of the transactions
contemplated by the Redemption Agreement has taken effect and is enforceable
under applicable Laws.
4.34 Limitation And Disclaimer Of Implied Representations And
Warranties Of Company. The express representations and warranties of Company and
the Stockholders contained in this Agreement are exclusive and are in lieu of
all other representations and warranties, express, implied, statutory, or
otherwise. At or prior to Closing, Acquiror shall have conducted such
inspections of Company and its assets as Acquiror deems necessary and shall have
satisfied itself as to the condition of Company and its assets. Except as
otherwise provided in the representations and warranties set forth in this
Agreement, Company and the Stockholders make no warranty or representation,
express, implied, statutory or otherwise, as to the accuracy or completeness of
any data, reports, records, projections, information, or materials now,
heretofore, or hereafter furnished or made available to Acquiror or its
representatives by Company or by Company's agents or representatives; any and
all such data, records, reports, projections, information, and other materials
furnished by Company or by Company's agents or representatives or otherwise made
available to Acquiror or Acquiror's representatives are provided to or for the
benefit of Acquiror as a convenience, and shall not create or give rise to any
liability of or against Company or Company's agents or representatives or any
Stockholders; and any reliance on or use of the same shall be at Acquiror's sole
risk. If the Company or any Stockholder determines or becomes aware that a
representation or warranty made by the Company or the Stockholders contains at
the time of delivery any untrue statement of a material fact, or omits to state
any material fact necessary in order to make the statement contained therein not
misleading, the Company or each such Stockholder will promptly notify Acquiror.
ARTICLE 5
COVENANTS AND AGREEMENTS
5.1 Access to Information.
(a) At Closing, all tax records of Company and Retained
Subsidiaries will be transferred to Acquiror with Company. Spun-Off Subsidiaries
will retain a copy of all tax records as Stockholders deem necessary. Upon
reasonable prior notice, the Spun-Off Subsidiaries will afford, during normal
business hours and at Acquiror's expense, to Acquiror's officers, employees,
accountants, counsel, and other representatives access, to all their books,
contracts, files, and records, as well as to their officers and employees, as
reasonably required to allow Acquiror to properly prepare its tax returns, to
adequately respond to and defend any tax disputes arising from those returns,
and otherwise to operate the Retained Business. The Spun-Off Subsidiaries agree
to maintain their books, contracts, files, and records until the expiration of
all applicable statutes of limitations. Acquiror agrees that it will not, and
will cause its respective
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representatives not to, use any information obtained pursuant to this Section
5.1(a) for any other purpose.
(b) Upon reasonable prior notice, Acquiror, the Surviving
Entity, and the Retained Subsidiaries will afford, during normal business hours
and at the requesting party's expense, to the Stockholders and the Spun-Off
Subsidiaries (including, as applicable, their officers, employees, accountants,
counsel, and other representatives) access, to all books, contracts, files, and
records pertaining the Company and the Retained Subsidiaries, as well as to
their officers and employees, as reasonably required to allow the Stockholders
and the Spun-Off Subsidiaries (i) to properly prepare their tax returns and to
adequately respond to and defend any tax disputes arising from those returns, or
(ii) to defend any claim against any Spun-Off Subsidiaries or any director,
officer, or employee of Company or any Company Subsidiary prior to the Effective
Time, or (iii) to the extent necessary in connection with any arbitration
proceeding pursuant to Section 7.13. Acquiror, the Surviving Entity, and the
Retained Subsidiaries agree to maintain such books, contracts, files, and
records until the expiration of all applicable statutes of limitations. The
Stockholders and the Spun-Off Subsidiaries agree that they will not, and will
cause their respective representatives not to, use any information obtained
pursuant to this Section 5.1(b) for any other purpose.
5.2 Regulatory Approvals. Each party to this Agreement will cooperate
and use its commercially reasonable efforts to promptly prepare and file all
necessary documentation to effect all necessary applications, notices,
petitions, filings, and other documents, and use all commercially reasonable
efforts to obtain (and will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order, or approval of, and any exemption or
non-opposition by, any Governmental Entity required to be obtained or made by
Company or Acquiror or any of their respective Subsidiaries in connection with
the Merger or the taking of any action contemplated by this Agreement.
5.3 Employee Matters. As of the Effective Time, the Spun-Off
Subsidiaries agree that (i) all Company Employees will either be discharged or
will have their employment transferred, (ii) Acquiror will have no obligation to
offer employment to any of the Company Employees (provided, however, that
Acquiror will be permitted to offer employment to any or all Company Employees
following the Effective Time), (iii) ABV will assume all liabilities in any way
relating to Former Employees it employs, including without limitation all
liabilities relating to such hired employees, (iv) ABV will execute all
agreements reasonably necessary to evidence its assumption of these liabilities,
copies of which are in Section 5.3 of the Company Disclosure Schedule, (v) ABV
will assume and be solely responsible and liable for all liabilities,
obligations, duties, payments, and benefits that exist or subsequently arise
under the Company Plans or under any Laws relating to Former Employees it
employs with respect to such Company Plans, (vi) Company will cease to be a
participating employer in the Company Plans, and (vii) Company's 1998 Stock
Option Plan and Company's 2000 Stock Option Plan will be terminated and all
options will be cancelled.
5.4 Public Announcements. The parties to this Agreement will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement, and
will not issue any press release or make any public statement relating to this
Agreement without the consent of the other parties, except
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as may be required by applicable Law or by obligations pursuant to any listing
agreement with any securities exchange or transaction reporting system, provided
that if any party is required to make any such public statement the disclosing
party shall make prompt notification of such statement to the non-disclosing
party.
5.5 Stockholder Loans. Each Stockholder has either (i) repaid in full
all of its promissory notes or other indebtedness in favor of the Company or any
Retained Subsidiary at or before the Effective Time or (ii) has received only
the amount of Merger Consideration in excess of any such promissory notes or
other indebtedness and no such Stockholder will assert any claim against
Acquiror, the Company, the Surviving Entity, or any Retained Subsidiary
regarding any such promissory notes or other indebtedness.
5.6 Release and Waiver.
(a) As of the Effective Time, each Stockholder and each
Spun-Off Subsidiary does hereby for itself or its heirs, executors,
administrators, and legal representatives remise, release, acquit, and forever
discharge the Company, the Surviving Entity, and each Retained Subsidiary of and
from any and all claims, demands, liabilities, responsibilities, disputes,
causes of action, and obligations of every nature whatsoever, liquidated or
unliquidated, known or unknown, matured or unmatured, fixed or contingent, that
each Stockholder and each Spun-Off Subsidiary now has, owns or holds or has at
any time previously had, owned, or held against the Company and each Retained
Subsidiary, including without limitation, all liabilities created as a result of
the negligence, gross negligence, and willful acts of the Company and each
Retained Subsidiary and its employees and agents, existing as of the Effective
Time or relating to any matter that occurred on or before the Effective Time;
provided, however, that any claims, liabilities, debts, or causes of action that
may arise in the connection with the failure of Acquiror or Merger Sub to
perform any of their respective obligations hereunder (including their indemnity
obligations in Section 5.8) or under any other agreement relating to the
transactions contemplated hereby or from any breaches by any of them of any
representations or warranties in this Agreement or in connection with any of
those other agreements will not be released or discharged pursuant to this
Agreement.
(b) Each Stockholder and each Spun-Off Subsidiary hereby
represents and warrants that it/he has not previously assigned or transferred,
or purported to assign or transfer, to any Person whatsoever all or any part of
the claims, demands, liabilities, responsibilities, disputes, causes of action,
or obligations released in this Agreement. Each Stockholder and each Spun-Off
Subsidiary hereby covenants and agrees that it/he will not assign or transfer to
any Person whatsoever all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action, or obligations released in this
Agreement. Each Stockholder and each Spun-Off Subsidiary hereby represents and
warrants that it/he has read and understands all of the provisions of this
Section 5.6 and that Acquiror it/he has been represented by legal counsel of
its/his own choosing in connection with the negotiation, execution, and delivery
of this Agreement.
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5.7 Tax Matters.
(a) Taxable Periods After the Closing Date. Acquiror shall prepare, or
cause to be prepared, and file, or cause to be filed, all Tax Returns (and shall
remit Taxes due thereon) required to be filed by the Acquiror, the Company, and
the Retained Subsidiaries after the Closing Date, other than the Company's and
the Retained Subsidiaries' federal income Tax Returns for the taxable year 2001.
The Stockholders shall prepare, or cause to be prepared, and file, or cause to
be filed, the Company's and the Retained Subsidiaries' federal income Tax
Returns for the taxable year 2001 and shall remit the Taxes due thereon, which
shall be paid by the Company and the Retained Subsidiaries unless such Taxes are
indemnified by the Stockholders pursuant to the terms of this Agreement. To the
extent that Acquiror determines before filing such Tax Returns that any Taxes
shown as due thereon are indemnifiable pursuant to this Agreement, Acquiror
shall provide the Indemnifying Party or their authorized representatives with
copies of each such Tax Return at least forty-five (45) days prior to its filing
and the Indemnifying Party shall have the right to review and approve (which
approval shall not be unreasonably withheld) such Tax Returns prior to the
filing thereof. Acquiror and the Indemnifying Party shall agree to consult and
attempt to resolve in good faith any issue arising as a result of the review of
such Tax Returns and mutually to consent to the filing as promptly as possible
of such Tax Returns. Upon the Indemnifying Party's approval of such Tax Return,
the Indemnifying Party shall pay to Acquiror an amount equal to its share of the
Taxes due on such Tax Return not later than two business days before the due
date (including any extensions thereof) for payment of Taxes with respect to
such Tax Return. The Acquiror shall prepare, or cause to be prepared, each Tax
Return that relates to a period (or portion thereof) prior to the Closing Date
of the Company and the Company Subsidiaries on a basis consistent with prior
practice of such entity unless otherwise required by applicable law.
(b) Taxable Periods Beginning Before and Ending After June 30, 2002. In
the case of Taxes due for any Taxable year or Taxable period beginning before
and ending after June 30, 2002 (a "Straddle Period"), Taxes will be apportioned
between the period before and after June 30, 2002 based on a closing of the
books and records of the Company and the Company Subsidiaries as of June 30,
2002, provided that depreciation, amortization, and depletion for any Straddle
Period will be apportioned on a daily pro rata basis. Ad valorem or property
Taxes will be apportioned on a daily pro rata basis.
(c) Cooperation. The Stockholders agree to provide the Acquiror and the
Acquiror agrees to provide the Stockholders with such cooperation and
information as the other shall reasonably request in connection with the
preparation or filing of any Tax Return and any audit, litigation, or other
proceeding with respect to Taxes.
(d) Contests.
(i) The Acquiror shall promptly notify the Indemnifying Party
of the commencement of any demand, claim, audit, examination, action,
or other proposed change or adjustment by any Tax Authority ("Tax
Claim") concerning any Tax that is indemnifiable under this Agreement.
Such notice shall contain factual information describing the asserted
Tax Claim in reasonable detail and shall include copies of any notice
or other document received from any Tax Authority in respect of any
such asserted Tax Claim.
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(ii) The Indemnifying Party, at its own expense, shall have
the sole right to represent its interests in any claim relating to any
Taxable period ending on or before June 30, 2002 (a "Pre-Closing Tax
Period") and employ counsel of their choice. The Indemnifying Party
shall not, however, consent to any settlement without the Acquiror's
consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall keep the Acquiror informed of the progress and
disposition of any such Tax Claim.
(iii) With respect to any Straddle Period, the Acquiror shall
control, and the Indemnifying Party, at its own expense, shall have the
right to participate in the defense and settlement of any claim and
each party shall cooperate with the other party and there shall be no
settlement or closing or other agreement with respect thereto without
the consent of the other party, which consent shall not be unreasonably
withheld.
(iv) Whenever any notice is required to be given to, or any
action is to be taken by, the Stockholders under this Section 5.8(d),
that notice will be given to, and that action will be taken by, the
Stockholder Agent acting on behalf of all of the Stockholders.
(e) Return of Refund or Credit. If a Acquiror receives a refund or
credit or other reimbursement with respect to Taxes for which it has been
indemnified and received payment from an Indemnifying Party under this
Agreement, the Acquiror shall pay over such refund or credit or other
reimbursement to the Indemnifying Party.
(f) Tax Elections. Acquiror shall not, and shall cause the Company and
the Retained Subsidiaries not to, amend or revoke any Tax election that was made
before and is effective June 30, 2002 if such action would adversely affect the
Stockholders or the Spun-Off Subsidiaries with respect to any Pre-Closing Tax
Period or for the portion of any Straddle Period ending on June 30, 2002 or any
Tax refund with respect thereto.
(g) Amendment to Pre-Closing Tax Returns. From and after the Closing
Date, Acquiror and its affiliates (including the Company and the Company
Subsidiaries) shall not file any amended Tax Return, carryback claim, or other
adjustment request with respect to the Company or the Company Subsidiaries for
any Tax period that includes or ends on or before June 30, 2002 unless the
Stockholders consent in writing; provided, however, that with respect to any
Straddle Period, such consent shall not be unreasonably withheld, delayed, or
conditioned provided Acquiror has made arrangements to the reasonable
satisfaction of the Stockholders to make the Stockholders whole for any
detriment or cost incurred (or to be incurred) by the Stockholders or the
Spun-Off Companies as a result of such amended Tax Return, carryback claim, or
other adjustment request.
(h) Value of ABV. In filing Tax Returns of the Company and the Company
Subsidiaries for the period in which the Spin-Off occurs, the parties agree to
take the position for all Tax purposes that the fair market value of ABV is
$22,256,382.
5.8 Indemnity of Company Officers and Directors.
(a) From and after the Effective Time, Acquiror agrees to and
will indemnify, defend, and hold harmless each Person who is now, or has been at
any time prior to the date hereof or becomes prior to the Effective Time, an
officer or director of Company (each, a
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"Former Executive") to the fullest extent provided by (i) the Company
Certificate of Incorporation or Company Bylaws immediately prior to the
Effective Time and (ii) the DGCL.
(b) If, within six years after the Effective Time, Acquiror or
any of its successors or assigns either (i) consolidates with or merges into any
other Person and will not be the continuing or surviving corporation or entity
of that consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, in each such case, Acquiror will
require that its the successors and assigns unconditionally assume the
obligations set forth in this Section 5.8 or in the case clause (ii) applies,
Acquiror will not liquidate within such six year period. The provisions of this
Section 5.8 are intended to be for the benefit of, and will be enforceable by,
the parties hereto and each Former Executive entitled to indemnification
pursuant to this Section 5.8 and each person's heirs, personal representatives,
successors, and assigns.
5.9 Registration Rights. Concurrently with the Closing, Parent has
entered into a registration rights agreement with the Stockholders in the form
attached as Exhibit 5.9 (the "Registration Rights Agreement"), which
registration rights agreement evidences the obligation of Parent to register the
Parent Shares for resale.
5.10 Intentionally Omitted.
5.11 Change of Company Name. Each of Acquiror and the Company
undertakes and agrees that promptly after the Effective Time, it will take all
actions necessary to change the name of Company and all Retained Subsidiaries to
delete the use of the name "Athanor" and/or any derivative thereof, and Acquiror
shall transfer the rights to such names to ABV within 12 months after the
Effective Time.
5.12 Insurance and Surety Bonds. Notwithstanding any other provision in
this Agreement, as of the Effective Time (i) Acquiror will have recourse to the
insurance policies identified in Section 4.22 of the Disclosure Schedule (and
any other insurance policies covering the operations of Company and each
Retained Subsidiary) for any claim or cause of action arising from an insured
event or occurrence related to the Company's operations before the Effective
Time and (ii) each surety bond established for the benefit of the Company and
the Retained Subsidiaries will be in force in accordance with its terms.
5.13 Tax Status of Stockholders. A Stockholder who is a United States
person within the meaning of Code Section 7701(a)(30) (a "United States Person")
shall deliver to the Company and to Acquiror on or before the Effective Time an
executed certificate of non-foreign status in the form attached hereto as
Exhibit 5.13 (the "Certificate of Non-Foreign Status"). If the Company or a
Stockholder provides Acquiror a properly completed Certificate of Non-Foreign
Status within two days before the Closing Date, the Acquiror will not withhold
pursuant to Section 5.14 of this Agreement. A Stockholder who is not a United
States Person shall deliver to the Company and to Acquiror on or before the
Effective Time an executed Internal Revenue Service Form W-8BEN, W-8ECI, or
W-8IMY, as appropriate.
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5.14 Withholding.
(a) Company's Withholding Obligation. The Company shall withhold and
pay over to the Internal Revenue Service the United States Taxes with respect to
the Spin-Off in accordance with Code Sections 1441, 1442, and 1445 and the
Treasury Regulations promulgated thereunder by complying with this Section
5.14(a). In particular, a Stockholder who has not delivered, prior to the
Effective Time, a properly completed Certificate of Non-Foreign Status pursuant
to Section 5.13 shall deliver to the Company cash in the amount of 30% of the
fair market value (determined as of the Effective Time) of the Stockholder's
allocable share of the Spun-Off Subsidiaries; provided, however, if the
Stockholder has provided, at or before the distribution of the Spun-Off
Subsidiaries, an executed Internal Revenue Service Form W-8BEN, claiming,
pursuant to the terms of an income tax treaty to which the United States is a
party, a reduction in the United States tax (but not to less than 10%) on such
distribution, then the Stockholder shall deliver to the Company cash in the
amount of the reduced treaty rate multiplied by the fair market value of the
Stockholder's allocable share of the Spun-Off Subsidiaries. Upon receipt of such
cash, the Company shall deliver to such Stockholder the shares of stock of the
Spun-Off Subsidiaries to which the Stockholder is entitled. If the Stockholder
fails to deliver the cash on or before the Effective Time, the Company shall
deliver to such Stockholder the number of shares of stock of the Spun-Off
Subsidiaries to which the Stockholder is entitled reduced by 30%, or such lower
percentage (but not less than 10%) if the Stockholder has delivered at or before
the distribution of the Spun-Off Subsidiaries an executed Internal Revenue
Service Form W-8BEN, claiming pursuant to the terms of an income tax treaty to
which the United States is a party a reduction in the United States tax on such
distribution.
(b) Acquiror's Withholding Obligation. Acquiror shall withhold and pay
over to the Internal Revenue Service the United States Taxes with respect to the
Merger in accordance with Code Section 1445 and the Treasury Regulations
promulgated thereunder by complying with this Section 5.14(b). In particular,
Acquiror shall retain cash in the amount of 10% of the fair market value of the
Merger Consideration deliverable to each Stockholder who has not delivered a
properly completed Certificate of Non-Foreign Status pursuant to Section 5.13
and shall deliver the balance of the Merger Consideration in accordance with
Article 2 of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by Stockholders and ABV.
(a) Stockholders. Except as otherwise provided in this Article
6 and in Article 4 and Article 7, each Stockholder will, jointly and severally,
indemnify and hold harmless Acquiror, the Surviving Entity, the Retained
Subsidiaries, and their respective Affiliates, directors, officers, employees,
agents, and their successors and assigns (collectively, the "Acquiror
Indemnitees") in respect of any and all claims, losses, damages, liabilities,
demands, assessments, judgments, costs, and expenses, including, without
limitation, settlement costs and any reasonable legal or other expenses for
investigating, bringing, or defending any actions or threatened actions
(collectively, "Losses") reasonably incurred by an Acquiror Indemnitee in
connection with the following:
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(i) any inaccuracy or breach of any warranty or
representation made by the Company or any Stockholder in this Agreement
or in any schedule, exhibit, certificate, or other instrument
contemplated by this Agreement except for the warranties and
representations contained in Sections 4.16, 4.20, and 4.21 (and the
corresponding schedules to each of those sections); provided, however,
that each Stockholder's representations and warranties in Sections 4.1,
4.2, 4.3, and 4.5 of this Agreement are specific to that Stockholder
individually (and do not regard any other party or its affairs) and
thus that Stockholder's indemnification obligation for inaccuracy or
breach of Section 4.1, 4.2, 4.3, or 4.5 of this Agreement will be an
indemnification obligation pertaining only to a breach by such
Stockholder of its representations and warranties in Sections 4.1, 4.2,
4.3, and 4.5 of this Agreement;
(ii) the breach of any covenant, agreement, or
obligation of the Company or any Stockholder contained in this
Agreement or any schedule, exhibit, certificate, or other instrument
contemplated by this Agreement;
(iii) other than as shown on the Company Financial
Statements or disclosed in this Agreement, any claim by any Person for
brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by any
Person with the Company or any Stockholder (or any persons acting on
their behalf) in connection with any of the transactions contemplated
by this Agreement;
(b) ABV. Except as otherwise provided in this Article 6 (but
not subject to the limitations in Section 6.5) and in Article 4 and Article 7,
ABV will indemnify and hold harmless the Acquiror Indemnitees in respect of all
Losses reasonably incurred by an Acquiror Indemnitee arising from, related to,
or in any connection with the following prior to, at, or after the Effective
Time:
(i) any claim related to the Spin-Off, including,
without limitation, any tax liabilities in connection therewith;
(ii) the business or operations of Tunisia and AMS,
in each case whether occurring at, before, or after the Effective Time.
6.2 Indemnification By Acquiror.
Acquiror will indemnify and hold harmless Stockholders, ABV, and their
respective Affiliates, directors, officers, employees, agents, and their
successors and assigns (collectively, the "Stockholder Indemnitees" and together
with the Acquiror Indemnitees, the "Indemnified Persons"), and will pay to the
Stockholder Indemnitees the monetary value of any Losses arising, directly or
indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Acquiror in this Agreement or in any schedule, exhibit, certificate, or document
delivered by Acquiror pursuant to this Agreement; and
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(b) any breach by Acquiror of any covenant, agreement or
obligation in this Agreement or in any schedule, exhibit, certificate, or
document delivered by Acquiror pursuant to this Agreement.
6.3 Claims for Indemnification.
(a) Whenever any claim for indemnification arises under this
Article 6 (a "Claim"), the Indemnified Person will describe that claim in a
written notice ("Notice of Claim") to either the Stockholders, ABV, or Acquiror
depending upon the specific claim for indemnification as identified in Section
6.1(a), 6.1(b), or 6.2 (the "Indemnifying Party") and, when known, specify the
facts constituting the basis for that claim and the amount or an estimate of the
amount of that claim. Each Notice of Claim will (i) contain a description of the
claim, (ii) specify the amount of that claim, and (iii) state that that Notice
of Claim is valid under the terms of Article 6 of this Agreement.
(b) If the Claim described in a Notice of Claim is, or is
expected to be, made by a third party (a "Third-Party Claim"), the Indemnifying
Party will undertake the defense of that Third-Party Claim by counsel reasonably
satisfactory to Acquiror and the Indemnifying Party. The Indemnifying Party,
without Acquiror's written consent, will not settle or compromise any
Third-Party Claim or consent to entry of any judgment that does not include, as
an unconditional term thereof, the giving by the claimant or the plaintiff to
Acquiror and/or Acquiror's Subsidiary or Subsidiaries, or Affiliate or
Affiliates, as the case may be, an unconditional release from all liability in
respect of that Third-Party Claim. Acquiror will have the right at its own
expense to participate in any defense of a Third-Party Claim with advisory
counsel of its own choosing. In the event the Indemnifying Party, within ten
days after notice of any Third-Party Claim, fails to agree in writing to defend,
and does not begin defending the Third-Party Claim to the Indemnified Person's
reasonable satisfaction, the Indemnified Person or Acquiror will have the right
to undertake the defense, compromise, or settlement of that Third-Party Claim on
behalf of, and for the account of, the Indemnified Person, at the expense and
risk of the Indemnifying Party. Notwithstanding any provision in this Agreement
to the contrary, failure of Acquiror to give any notice of any Third-Party Claim
required by this Article 6 will not constitute a waiver of the Indemnified
Person's or Acquiror's right to indemnification or a defense to any claim by
Acquiror hereunder except to the extent the Indemnifying Party demonstrates that
the defense of that claim is materially prejudiced by that failure.
6.4 Manner of Indemnification. All Claims against a Stockholder for
indemnification pursuant to this Agreement shall be satisfied by commencing the
procedures set forth in Section 7.13 within 5 days after the expiration of 180
days from the Effective Time (the "Indemnification Settlement Date"). Any Claim
Notice delivered on or prior to such 180-day period shall be deemed to be the
notice required by the second sentence of Section 7.13(a). An Indemnified Person
(or Acquiror on that Indemnified Person's behalf) will first seek indemnity
under this Agreement by following the procedures stated in Section 7.13 and the
Escrow Agreement with respect to Claims based on Section 6.1(a) with any and all
distributions to an Indemnified Person from the Escrow Fund to be drawn
according to the Escrow Agreement. With respect to Claims pursuant to Section
6.1(b) asserted by an Indemnified Person (or Acquiror on that Indemnified
Person's behalf), the Indemnified Person will first seek indemnity under this
Agreement by following the procedures stated in Section 7.13. The Indemnifying
Person shall satisfy any
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amounts owed pursuant to a request for indemnity based on the preceding
sentence, subject to the applicable limitations in Articles 6 and 7 hereof, by
wire transfer, payment of cash, or delivery of a certified or cashier's check to
Acquiror. If Acquiror becomes liable to pay any amount under this Agreement
pursuant to Section 6.2, Acquiror has the right (but not the obligation) to set
off that amount against any amounts that it may be entitled to under this
Article 6, otherwise such amounts shall be payable by wire transfer, payment of
cash, or delivery of a certified or cashier's check to the Indemnified Person.
The indemnification rights provided by Article 6 of this Agreement shall be the
sole and exclusive remedy to the Indemnified Persons for breaches of this
Agreement and for other matters pertaining to this Agreement and the
transactions contemplated hereby.
6.5 Limitations to Indemnification.
(a) The Stockholders will not have any liability with respect
to an Indemnified Person's Claim under Section 6.1(a) unless:
(i) the Claim Notice made with respect to such Claim
is made on or before 180 days after the Effective Time, and
(ii) except for a Claim relating to the
representations and warranties contained in Sections 4.2 or 4.5, the
aggregate dollar amount of all Indemnified Persons' Claims exceeds
$100,000,
in which case the Stockholders will indemnify the Indemnified Persons
only for the amount of those Claims that exceed $100,000.
(iii) Notwithstanding anything to the contrary in
this Agreement, no Stockholder will have any liability, to an
Indemnified Person or otherwise, with respect to a Claim (A) regarding
any Claim with respect to which a Claim Notice is not made on or before
the 180th day following the Effective Time or (B) in excess of that
Stockholder's Escrow Fund Contribution (except in the case of fraud or
intentional misrepresentation by such Stockholder).
6.6 Net of Insurance and Tax Recoveries. The amount of any Loss
required to be paid pursuant to this Article 6 to any Indemnified Person shall
be reduced (i) by any amounts actually received by such Indemnified Person after
the Closing Date pursuant to the terms of any insurance policies covering such
Loss and (ii) by the amount of any net tax benefit arising from the Loss that
results in a reduction of a tax liability that otherwise must be paid by the
Indemnified Person (or an Affiliate of the Indemnified Person) for the tax year
in which the Loss is incurred. The creation of tax attributes that do not result
in a reduction of a tax liability that otherwise must be paid by the Indemnified
Person (or an Affiliate of the Indemnified Person) for the tax year in which the
Loss is incurred will not be taken into consideration for purposes of this
Section 6.6.
6.7 Stockholder Agents. Whenever any notice is required to be given to,
or any action is to be taken by, the Stockholders under this Article 6, that
notice will be given to, and that action will be taken by, the Stockholder
Agents acting on behalf of all of the Stockholders.
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ARTICLE 7
GENERAL PROVISIONS
7.1 Payment of Expenses. The Acquiror, on the one hand, and (except to
the extent shown on the Company Financial Statements) each Stockholder and each
Spun-Off Subsidiary, on the other hand, each will pay its own expenses incident
to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby (including without
limitation any expenses in any way related to the Spin-Off), whether or not the
Merger is consummated.
7.2 Survival of Representations and Warranties.
(a) Except for the representations and warranties that have
longer survival periods as described in Section 7.2(b), (i) all of the
representations and warranties contained in Article IV will not expire at the
Effective Time, but rather will survive the Effective Time and will terminate at
11:59 p.m., Central Time, on the 180th day following the Effective Time, and
(ii) all of the representations and warranties contained in Article III will not
expire at the Effective Time, but rather will expire 30 days after the filing of
Acquiror's report on Form 10-K for the year ended December 31, 2002. If any
Claims for indemnification related to a breach of these representations and
warranties have not been fully satisfied before that expiration date, those
representations and warranties will survive until all those Claims are fully
satisfied.
(b) Claims for indemnification pursuant to Section 6.1(b)(i)
will not expire at the Effective Time, but rather will survive until the
expiration of the applicable statute of limitations for such Claim. Claims for
indemnification pursuant to Section 6.1(b)(ii) will not expire at the Effect
Time, but rather will terminate at 11:59 p.m., Central Time, on the second
anniversary of the Effective Time.
(c) Notwithstanding anything in this Agreement to the
contrary, a Claim that relates to the Company's, the Spun-Off Subsidiaries', or
the Stockholders' fraud or intentional misrepresentation will survive until the
expiration of the applicable statute of limitations for such Claim.
7.3 Notices. Any notice or communication required or permitted
hereunder will be in writing and either delivered personally, telegraphed or
telecopied, or sent by certified or registered mail, postage prepaid, and will
be deemed to be given, dated, and received (i) when so delivered personally,
(ii) upon receipt of an appropriate electronic confirmation when so delivered by
telegraph or telecopy (to that number specified below or another number or
numbers as that Person may subsequently designate by notice given hereunder), or
(iii) five business days after the date of mailing to the following address or
to that other address or addresses as that Person may subsequently designate by
notice given hereunder, if so delivered by mail:
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if to Acquiror or Merger Sub to:
Nuevo Energy Company
--------------------------------
--------------------------------
Attention:
----------------------
Fax No.: ( ) -
--- --- -----
with copy to:
[ ]
[ ]
[ ]
[ ]
Attention: [ ]
Fax No.: [ ]
if to the Spun-Off Subsidiaries, to:
Athanor Management Services, S.A.
Av. Ernest-Pictet, 31
1203 Geneva
Switzerland
Attention: Charles de Mestral, President
Fax No.: (011) 41-22-949-1049
if to Stockholders, to:
c/o J. Ross Craft and Charles de Mestral
6300 Ridglea Place
Suite 1107
Fort Worth, Texas 76116
Attention: J. Ross Craft
Fax No.: (817) 989-9001
and
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Athanor Management Services, S.A.
Av. Ernest-Pictet, 31
1203 Geneva
Switzerland
Attention: Charles de Mestral, President
Fax No.: (011) 41-22-949-1049
with copies (not constituting notice) to:
Bill F. Bogle
Harris, Finley & Bogle, P.C.
Suite 3600
777 Main Street
Fort Worth, Texas 76102
Fax No.: (817) 333-1189
and
Thompson & Knight LLP
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Fax No.: (214) 969-1751
Attn: Jeffrey A. Zlotky
7.4 Interpretation. When a reference is made in this Agreement to
Sections or Articles, that reference will be to a Section or Article of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation of this Agreement. Whenever the word
"include," "includes," or "including" are used in this Agreement, they will be
deemed to be followed by the words "without limitation." Unless the context
otherwise requires, "or" is disjunctive but not necessarily exclusive, and words
in the singular include the plural and in the plural include the singular.
7.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
7.6 Entire Agreement. This Agreement (together with the Confidentiality
Agreement and any other documents and instruments referred to in this Agreement)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement.
7.7 Governing Law; Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW REQUIRING THE APPLICATION OF THE LAW OF
ANOTHER STATE, EXCEPT TO THE EXTENT
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THE DGCL EXPRESSLY APPLIES TO A PARTICULAR MATTER. SUBJECT TO SECTION 7.13
BELOW, EACH OF THE COMPANY, ACQUIROR, MERGER SUB, SPUN-OFF SUBSIDIARIES, AND
STOCKHOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED
STATES OF AMERICA LOCATED IN FORT WORTH (THE "TEXAS COURTS"), FOR ANY LITIGATION
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN
SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
IN THE TEXAS COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY TEXAS COURT THAT
SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
7.8 Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part of this
Agreement to be null, void, or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality, and enforceability of the remaining
provisions and obligations contained or set forth in this Agreement will not in
any way be affected or impaired thereby.
7.9 Appointment of Stockholder Agents. Each Stockholder hereby
irrevocably constitutes and appoints J. Ross Craft and Charles A. de Mestral
(the "Stockholder Agents") as that Stockholder's true and lawful agents and
attorneys-in-fact, with full power of substitution, to act in the name and on
behalf of that Stockholder:
(a) to amend or supplement this Agreement and to grant
waivers, consents and extensions under this Agreement; provided, however, that
any amendment of or supplement to this Agreement which discriminates against or
adversely affects any one Stockholder, or any group of less than all
Stockholders, will require the written approval of the adversely affected
Stockholder or a majority in interest of the adversely affected Stockholders;
(b) to execute and deliver the Escrow Agreement and to
thereafter execute and deliver any amendments or supplements to, and to grant
any waivers and consents under, the Escrow Agreement as the Stockholder Agents
in their exclusive discretion will deem advisable;
(c) in connection with any Claim made by the Indemnified
Persons under Article 6, to take any and all actions required or authorized to
be taken by that Stockholder pursuant to Article 6.
(d) to receive all notices and other communications required
or permitted to be given to that Stockholder under this Agreement and the Escrow
Agreement, including all notice under Article 6 relating to any Third-Party
Claim;
(e) to receive and document for all amounts that may be
distributable from the funds held in escrow pursuant to the Escrow Agreement for
the account of that Stockholder;
(f) to employ legal counsel to represent that Stockholder in
connection with any indemnity matter arising under Article 6 of this Agreement;
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(g) to defend, compromise, or settle any claim for
indemnification made by any Indemnified Person or the Company against funds held
in escrow pursuant to the Escrow Agreement, or, in accordance with Article 6,
any Third-Party Claim that has given rise to any claim for indemnification;
(h) to authorize and instruct the Escrow Agent to act in any
manner under the Escrow Agreement and with respect to the funds held pursuant
thereto; and
(i) to execute and deliver the Registration Rights Agreement,
to thereafter execute and deliver any amendments thereto and thereafter to give
and receive all notices and documents required or permitted to be given
thereunder.
The powers and authority granted in this Section 7.9 will be
irrevocable, will not be terminated by any act of a Stockholder and will survive
the death or incompetency of a Stockholder to the fullest extent permitted by
law. The Stockholder Agents will incur no liability for, and the Stockholders
hereby waive and release the Stockholder Agents from, any action taken by the
Stockholder Agents, or any omission to take action, in good faith and in
accordance with this Section 7.9, and will be indemnified by the Stockholders
from and against any Losses incurred by the Stockholder Agents in the
performance of their duties as that in the absence of bad faith, gross
negligence, or willful misconduct on the part of the Stockholder Agents.
7.10 Distribution by Stockholder Agents. By its execution of this
Agreement, the Stockholder Agents agree, for the benefit of the Stockholders,
that upon their receipt of any distributions under this Agreement, the
Stockholder Agents will promptly redistribute those proceeds to the Stockholders
on a pro-rata basis according to the Escrow Agreement.
7.11 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of Acquiror and the Stockholder Agents.
7.12 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder will be assigned by any of the parties to
this Agreement (whether by operation of law or otherwise) without the prior
written consent of the Stockholders Agents and the Spun-Off Subsidiaries except
that (i) Acquiror may assign, in its sole discretion (but in form and substance
reasonably acceptable to the Stockholder Agents and the Spun-Off Subsidiaries),
any or all of its rights, interests, and obligations hereunder to any wholly
owned Subsidiary of Acquiror provided, that, Acquiror will cause that Subsidiary
to fulfill all agreements, obligations, and assumptions of Acquiror hereunder
and will remain fully and unconditionally obligated hereunder in the event of
any failure hereunder by that Subsidiary the same as if no assignment had been
made. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns; (ii) any Stockholder that is a limited partnership may
distribute Parent Shares to any of its limited partners who is an Accredited
Investor; and (iii) any Stockholder that is a corporation may distribute Parent
Shares to its stockholders.
7.13 Dispute Resolution.
(a) Negotiation. The parties shall attempt to resolve any dispute
arising out of or relating to this Agreement or the termination, breach, or
validity of this Agreement, promptly by
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good faith negotiation among executives who have authority to resolve the
controversy. Acquiror and Merger Sub, on the one hand, and the Stockholder
Agents or any Spun-Off Subsidiary, on the other hand, may give the other parties
written notice of any dispute not resolved in the normal course of business.
Within 10 days after delivery of the notice, the receiving party shall submit to
the other party a written response. The notice and the response shall include
(i) a statement of the party's concerns and perspectives on the issues in
dispute, (ii) a summary of supporting facts and circumstances, and (iii) the
identity of the executive or executives who will represent such party and of any
other person who will accompany the executive. Within 15 days after delivery of
the original notice, the executives of the parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All negotiations pursuant to this
Section 7.13 are confidential and shall be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence.
(b) Mediation. If the dispute has not been resolved by negotiation
within 20 days of the disputing party's notice, or if the parties have failed to
meet within 15 days of such notice, the parties shall try in good faith to
resolve the dispute by mediation. The parties will attempt to agree upon a
mediator, but if an agreement is not reached within 15 days of the disputing
party's notice, the parties agree to proceed to mediation under the then current
Commercial Mediation Rules of the American Arbitration Association before
resorting to arbitration.
(c) Binding Arbitration.
(i) Any dispute arising out of or relating to this Agreement
or the breach, termination, or validity of the Agreement that has not
been resolved by mediation within 20 days of the initiation of such
procedure or that has not been resolved prior to the termination of
mediation, shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in
effect on the date of this Agreement. If a party to a dispute fails to
participate in mediation, the others may initiate arbitration before
expiration of the above period. If the amount of the claim asserted by
the claimant in the arbitration exceeds $1,000,000, the parties agree
that the American Arbitration Association Optional Procedures for
Large, Complex Commercial Disputes will be applied to the dispute.
(ii) Arbitration shall be before a sole arbitrator if the
disputing Parties agree on the selection of a sole arbitrator. If not,
arbitration shall be before three independent and impartial
arbitrators, all of whom shall be appointed by the American Arbitration
Association in accordance with its rules.
(iii) The place of arbitration shall be Fort Worth, Texas.
(iv) Notwithstanding any other provision in this Agreement to
the contrary, the parties expressly agree that the arbitrators shall
have absolutely no authority to award consequential, incidental,
special, treble, exemplary or punitive damages of any type under any
circumstances regardless of whether such damages may be available under
Texas law, or any other laws, or under the Commercial Arbitration Rules
or otherwise,
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unless such damages are a part of a third party claim for which a party
is entitled to indemnification hereunder.
(v) The decision of, including the award (or lack thereof)
granted by, the arbitrator(s) shall be either (i) the granting of the
request of one party and the denial of the request of the other party,
or (ii) vice versa; otherwise, the arbitrator(s) shall not be free to
fashion their own award or other remedies. The arbitrators shall decide
the dispute in compliance with the applicable substantive law and
consistent with the provisions of the Agreement, including limits on
damages. The award rendered by the arbitrator(s) shall be final and
binding, and judgment upon the award may be entered by any court having
jurisdiction thereof.
(vi) All matters relating to the enforceability of this
arbitration agreement and any award rendered pursuant to this agreement
shall be governed by the Federal Arbitration Act, 9 U.S.C. Section
1-16. The arbitrator(s) shall apply the substantive law of the State of
Texas, exclusive of any conflict of law rules.
(vii) Each party is required to continue to perform its
obligations under this contract pending final resolution of any dispute
arising out of or relating to this contract, unless to do so would be
impossible or impracticable under the circumstances.
(viii) Any claim by any party shall be time-barred unless the
asserting party commences an arbitration proceeding with respect to
such claim within one year after the claim arose. All issues relating
to the timeliness of claims shall be resolved by the arbitrator(s).
(d) Attorneys Fees and Expenses. The fees and expenses of the
arbitrators shall be borne equally by the parties. Each party shall pay its own
costs and expenses in connection with the resolution of any dispute pursuant to
this Agreement.
ARTICLE 8
CERTAIN DEFINITIONS
8.1 Certain Definitions. As used in this Agreement, each of the
following terms has the meaning given it in this Article 8 or in the section and
subsections referred to below:
"ABV" has the meaning specified in the first paragraph of this
Agreement.
"Accredited Investor" shall have the meaning as defined in Rule 501 of
Regulation D promulgated under the Securities Act.
"Acquiror" has the meaning specified in the first paragraph of this
Agreement.
"Acquiror Indemnitees" has the meaning specified in Section 6.1 of this
Agreement.
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"Additional Transaction Documents" means the Redemption Agreement, the
Bill of Sale, Assignment and Assumption Agreement, the Escrow Agreement, the
Registration Rights Agreement, and all other documents and instruments executed
in connection with this Agreement (including without limitation, pursuant to
Sections 5.3 and 5.5).
"Affiliate" has the meaning specified in Rule 12b-2 promulgated under
the Exchange Act.
"Agreement" has the meaning specified in the first paragraph of this
Agreement.
"AMS" has the meaning specified in the preamble of this Agreement.
"Bill of Sale, Assignment and Assumption Agreement" means that certain
Bill of Sale, Assignment and Assumption Agreement, dated of even date herewith
between Approach Resources Inc. and Athanor Resources Inc.
"Certificate of Merger" has the meaning specified in Section 1.1 of
this Agreement.
"Closing" has the meaning specified in Section 1.1 of this Agreement.
"Closing Date" has the meaning specified in Section 1.2 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Company Bylaws" means the bylaws of Company in effect on the date
hereof.
"Company Certificate of Incorporation" means Company's Certificate of
Incorporation as in effect on the date hereof.
"Company Common Stock" means all of the issued and outstanding shares
of common stock, $.01 par value, of Company.
"Company Disclosure Schedule" has the meaning specified in the preamble
of Article 4 of this Agreement.
"Company Financial Statements" has the meaning specified in Section 4.7
of this Agreement.
"Company Plans" has the meaning specified in Section 4.13 of this
Agreement.
"Company Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock.
"Company Reserve Report" has the meaning specified in Section 4.28 of
this Agreement.
"Company Subsidiary" means any Subsidiary of the Company immediately
before the Effective Time (specifically including the Spun-Off Subsidiaries).
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"Confidentiality Agreement" means that certain Confidentiality
Agreement dated May 9, 2002, between Company and Acquiror.
"Converted Securities" has the meaning specified in Section 2.1(a) of
this Agreement.
"Converted Security" has the meaning specified in Section 2.1(a) of
this Agreement.
"DGCL" has the meaning specified in Section 1.1 of this Agreement.
"Effective Time" has the meaning specified in Section 1.1 of this
Agreement.
"Environmental Laws" means all local, state and federal environmental,
health and safety laws, rules, ordinances and regulations in all jurisdictions
in which Acquiror or the Company has done business or owned property, including,
without limitation, the federal Resource Conservation and Recovery Act, the
federal Comprehensive Environmental Response, Compensation and Liability Act,
the federal Clean Water Act, the Federal Clean Air Act, and the federal
Occupational Safety and Health Act, as each is amended, and all statutes,
regulations, ordinances, orders, permits or common law relating to the
protection of employee and public health, welfare and the environment in
connection with (i) the storage, treatment, handling, use, and disposal of
chemicals and other hazardous materials and substances, (ii) the generation,
treatment storage, transportation, disposal or other management of waste
materials of any kind, and (iii) the protection of environmentally-sensitive
areas.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder as from time to time
in effect.
"ERISA Affiliate" means any Person (whether or not incorporated) that
is as of the Effective Time, or at any time within the six years preceding the
Effective Time, would have been treated as a "single employer" with the Company
under section 414(b), (c), (m), or (o) of the Code.
"Exchange Act" has the meaning specified in Section 3.2(c) of this
Agreement.
"Governmental Entity" has the meaning specified in Section 3.2(c) of
this Agreement.
"Indemnified Person" has the meaning specified in Section 6.2 of this
Agreement.
"Indemnifying Party" has the meaning specified in Section 6.3(a) of
this Agreement.
"Law" means any federal, state, local, or foreign law, statute,
ordinance, regulation, rule, code, decree, or other requirement or rule of law.
"Leases" means fee mineral interests, oil, gas, and mineral leasehold
interests and other leasehold interests, subleases, mineral servitudes,
licenses, concessions, working interests, farm-out or farm-in rights, royalty,
overriding royalty, and other non-working and carried interests, operating
rights and other similar rights and interests owned by the Company or any
Retained Subsidiary, including, without limitation, all right, title, and
interest of the Company or any Retained Subsidiary in all pooled or unitized
areas in which any of the above described interests
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are included, to the extent that such rights and interests arise from and are
associated with the above described interests or the wells associated with the
above described interests, and all right, title, and interest owned by the
Company or any Retained Subsidiary in, under or derived from all or any
presently existing unitization, pooling, operating, communitization, or other
agreements, whether voluntary or involuntary, or formed under any Law or order
of any Governmental Entity.
"Liens" means any liens, encumbrances, security interests, equities,
preemptive rights, voting trusts, stockholder agreements, and adverse claims
whatsoever.
"Material Adverse Effect" means as to Acquiror or Merger Sub, a
material adverse effect on (i) the business, operations, assets, condition
(financial or otherwise), or results of operations of such Person and its
Subsidiaries, taken as a whole, (ii) the ability of such Person to perform its
obligations under this Agreement or (iii) the ability of such Person to
consummate the Merger and the other transactions contemplated hereby and
thereby; provided, however, that effects relating to (a) the economy in general,
(b) changes in oil, gas, or other hydrocarbon commodity prices or other changes
affecting the oil and gas industry generally, or (c) the announcement of the
transactions contemplated hereby, will not be deemed to constitute a Material
Adverse Effect or be considered in determining whether a Material Adverse Effect
has occurred.
"Merger" has the meaning given in the preamble.
"Merger Consideration" has the meaning specified in Section 2.1 of this
Agreement.
"Merger Sub" has the meaning specified in the first paragraph of this
Agreement.
"Oil and Gas Properties" means the Leases and the other properties or
interests described in the Company Reserve Report, which includes all: (i) oil
and gas leases, oil, gas, and casinghead gas leases, oil, gas, and mineral
leases and other leaseholds, as well as any subleases of any of the foregoing,
fee or term mineral interests, royalty interests, overriding royalty interests,
net profit interests, carried interests, and other mineral properties and
interests and the lands and production covered thereby; and (ii) any pooled
units or units which include all or a part of any land referred to above,
including without limitation all right, title and interest in production from
any such unit, whether such unit production comes from wells located on or off
of the lands. The term "Oil and Gas Properties" will also mean and include: (a)
all oil, gas, water, or injection wells located on the properties described
above, (b) interests under or derived from all contracts, agreements, and
instruments applicable to the properties described above, including, but not
limited to, interests or rights created under or by virtue of operating
agreements, gathering agreements, marketing agreements, transportation
agreements, unitization, pooling and communitization agreements, declarations
and orders, joint venture agreements, and farmin and farmout agreements; (c)
easements, permits, licenses, servitudes, rights-of-way, surface leases, and
other surface rights appurtenant to, and used or held for use to the extent
applicable to the properties described above; (d) equipment, machinery,
fixtures, and other tangible personal property and improvements located on the
properties described above or maintained in yards or warehouses, and useful,
used, or obtained in connection for use with the production of hydrocarbons from
the properties described above; and (e) all software, communications hardware,
or other personal property owned (together with any and all
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associated licenses, agreements, and contracts permitting the use thereof), held
for use or otherwise used in the monitoring, transmission, or production of
hydrocarbons from the properties described above. The "net revenue interests"
and "working interests" described in the Company Reserve Report will be a part
of the definition of "Oil and Gas Properties."
"Parent" has the meaning specified in the first paragraph of this
Agreement.
"Parent Certificate of Incorporation" means Parent's Certificate of
Incorporation as in effect on the date hereof.
"Parent Shares" has the meaning specified in Section 2.1(a) of this
Agreement.
"Permitted Encumbrances" means (i) the matters described in Section
4.16 of the Company Disclosure Schedule, (ii) operators' liens and statutory
liens for taxes, assessments, labor, and materials, where payment is not due (or
that, if delinquent, are being contested in good faith); (iii) joint operating
agreements, unit agreements, unitization and pooling designations and
declarations, processing agreements, and gas, oil, and liquids purchase, sale,
and exchange agreements that are not terminable without penalty on 30 days or
less notice, in each case, if such agreements, designations, or declarations do
not operate (without regard to any non-consent penalties in respect of which the
Company or any Retained Subsidiary is the beneficiary) to increase the working
interests of the Company and the Retained Subsidiaries in the Oil and Gas
Properties above the working interests set forth in the Company Reserve Report
without a corresponding increase in net revenue interests or reduce the net
revenue interests of the Company and the Retained Subsidiaries in the Oil and
Gas Properties below the net revenue interests set forth in the Company Reserve
Report without a corresponding increase in the working interests; (iv) statutory
or regulatory authority of Governmental Entities; (v) easements, surface leases
and rights, plat restrictions, pipelines, grazing, logging, canals, ditches,
reservoirs, telephone lines, power lines, railways, and similar encumbrances
that do not interfere with the Company's or any Retained Subsidiary's operation;
(vi) consents to assignment and preferential purchase rights that are not
applicable to the transactions contemplated hereby or with respect to which
consents or waivers are obtained from the appropriate Person or the appropriate
time period for asserting the rights has expired without an exercise of such
rights; and (vii) irregularities in the chain of title that, because of
remoteness in or passage of time, statutory cure periods, or other similar
reasons, have not affected or interrupted, and are not reasonably expected to
affect or interrupt, the claimed ownership of the party or the receipt of
production revenues from the properties affected thereby.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock Designations" means, collectively, the Series A
Preferred Stock Designation and the Series B Preferred Stock Designation.
"Redemption Agreement" means that certain Redemption Agreement, dated
of even date herewith among ABV, AMS, the Company, and the Company's
Stockholders.
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"Registration Rights Agreement" has the meaning specified in Section
5.9 of this Agreement.
"Retained Subsidiary" means any Company Subsidiary as of the Effective
Time, other than a Spun-Off Subsidiary.
"Rights Agreement" means that certain agreement between Parent and Bank
of New York, as rights agent, dated March 5, 1997.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series A Preferred Stock" means Company's Series A Convertible
Preferred Stock containing the rights and preferences set forth in, and issued
pursuant to, the Series A Preferred Stock Designation.
"Series A Preferred Stock Designation" means the Amended and Restated
Certificate of the Designations, Powers, Preferences, and Rights of the Series A
Convertible Preferred Stock filed with the Delaware Secretary of State on or
about September 12, 2002, setting forth the rights and preferences of the Series
A Preferred Stock.
"Series B Preferred Stock" means Company's Series B Convertible
Preferred Stock containing the rights and preferences set forth in, and issued
pursuant to, the Series B Preferred Stock Designation.
"Series B Preferred Stock Designation" means the Amended and Restated
Certificate of the Designations, Powers, Preferences, and Rights of the Series B
Convertible Preferred Stock filed with the Delaware Secretary of State on or
about September 12, 2002, setting forth the rights and preferences of the Series
B Preferred Stock.
"Spin-Off" means the distribution by the Company of all the capital
stock of ABV to the Stockholders in redemption of Company Common Stock.
"Stockholder Indemnitees" has the meaning specified in Section 6.2 of
this Agreement.
"Spun-Off Subsidiaries" has the meaning specified in the preamble of
this Agreement.
"Stockholders" has the meaning specified in the first paragraph of this
Agreement.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by that Person and any Subsidiaries of that
Person. The term Subsidiary will include Subsidiaries of Subsidiaries (and so
on).
"Surviving Entity" has the meaning specified in Section 1.3 of this
Agreement.
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"Tax" or "Taxes" means all taxes, including income tax, provincial tax,
state tax, surtax, remittance tax, remittance tax, presumptive tax, net worth
tax, special contribution, production tax, pipeline transportation tax, value
added tax, capital gains tax, withholding tax and any gross receipts tax,
windfall profits tax, profits tax, severance tax, personal property tax, real
property tax, sales tax, goods and services tax, Transfer Tax, use tax, excise
tax, premium tax, customs duties, stamp tax, capital stock tax, franchise tax,
occupation tax, payroll tax, employment tax, social security, unemployment tax,
disability tax, alternative or add-on minimum tax, estimated tax, and any
similar tax imposed by any Tax Authority together with any interest, fine or
penalty, or addition thereto.
"Tax Authority" means the Internal Revenue Service of the United States
and any other federal, state, provincial, local, domestic or foreign
governmental authority responsible for the administration of any Taxes.
"Tax Return" means any return, form, declaration of estimated tax,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Third-Party Claims" has the meaning specified in Section 6.3(b) of
this Agreement.
"Title IV Plan" means a Plan subject to section 302 or Title IV of
ERISA or section 412 of the Code.
"Transfer Tax" means any liability, obligation or commitment for
transfer, documentary, sales, use, registration, value-added and other similar
taxes (including all applicable real estate transfer taxes and real property
transfer gains taxes) and related amounts (including any interest, fine or
penalty, or addition thereto).
"Treasury Regulations" means the regulations promulgated under the
Internal Revenue Code by the United States Department of the Treasury.
"Tunisia" has the meaning specified in the preamble of this Agreement.
"WARN" means the federal Worker Adjustment and Retraining Notification
Act, as amended and regulations promulgated thereunder or any similar applicable
state law.
[SIGNATURE PAGES FOLLOW]
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Executed as of the date first written above.
ACQUIROR:
NUEVO ENERGY COMPANY
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
MERGER SUB:
NUEVO TEXAS INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
COMPANY:
ATHANOR RESOURCES INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SPUN-OFF SUBSIDIARY:
ATHANOR B.V.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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STOCKHOLDERS:
Yorktown Energy Partners III, L.P.,
` By its General Partner,
Yorktown III Company LLC,
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Yorktown Energy Partners IV, L.P.
By its General Partner,
Yorktown IV Company LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Yorktown Partners LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SAFIC S.A.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-------------------------------------------
Charles de Mestral
-------------------------------------------
J. Ross Craft
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Montana Oil and Gas, Ltd.
By its General Partner,
Glendive Management, LLC
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-------------------------------------------
David A. Badley
-------------------------------------------
James S. Scott
-------------------------------------------
Glenn Reed
-------------------------------------------
Doug Allison
-------------------------------------------
Mohamed Yaich
Solely for the purposes of making the
representations, warranties and covenants
contained in Section 7.9 hereof:
STOCKHOLDER AGENT(s):
- -----------------------------------------
- -----------------------------------------
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