1
EXHIBIT 10.13
AGREEMENT OF MERGER
AMONG
CABOT OIL & GAS CORPORATION,
COG ACQUISITION COMPANY,
WASHINGTON ENERGY RESOURCES COMPANY
AND
WASHINGTON ENERGY COMPANY
DATED FEBRUARY 25, 1994
2
TABLE OF CONTENTS
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Average Trading Price . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Guaranties . . . . . . . . . . . . . . . . . . . . . 2
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate of Merger . . . . . . . . . . . . . . . . . . . . 2
Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
COGC Common Stock . . . . . . . . . . . . . . . . . . . . . . 2
COGC Costs . . . . . . . . . . . . . . . . . . . . . . . . . 2
COGC Employees . . . . . . . . . . . . . . . . . . . . . . . 2
COGC Equity Securities . . . . . . . . . . . . . . . . . . . 3
COGC Financial Statements . . . . . . . . . . . . . . . . . . 3
COGC Notice . . . . . . . . . . . . . . . . . . . . . . . . . 3
COGC Preferred Stock . . . . . . . . . . . . . . . . . . . . 3
COGC SEC Documents . . . . . . . . . . . . . . . . . . . . . 3
COGC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 3
COGC Tax Claim . . . . . . . . . . . . . . . . . . . . . . . 3
Continuing WERCO Employees . . . . . . . . . . . . . . . . . 3
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defensible Title . . . . . . . . . . . . . . . . . . . . . . 3
Desired Assets . . . . . . . . . . . . . . . . . . . . . . . 4
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Easements . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Effective Time . . . . . . . . . . . . . . . . . . . . . . . 4
Election Notice . . . . . . . . . . . . . . . . . . . . . . . 4
Employee Benefit Arrangements . . . . . . . . . . . . . . . . 4
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 4
Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . 4
Environmental Defect . . . . . . . . . . . . . . . . . . . . 4
Environmental Laws . . . . . . . . . . . . . . . . . . . . . 4
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Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . 5
Final Determination . . . . . . . . . . . . . . . . . . . . . 5
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Governmental Body . . . . . . . . . . . . . . . . . . . . . . 5
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Hydrocarbons . . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnified COGC Parties . . . . . . . . . . . . . . . . . . 5
Indemnified WECO Parties . . . . . . . . . . . . . . . . . . 6
Indemnified WERCO Directors and Officers . . . . . . . . . . 6
Information . . . . . . . . . . . . . . . . . . . . . . . . . 6
Intercompany Debt . . . . . . . . . . . . . . . . . . . . . . 6
Interest Addition . . . . . . . . . . . . . . . . . . . . . . 6
Interest Addition Amount . . . . . . . . . . . . . . . . . . 6
Investment Interest . . . . . . . . . . . . . . . . . . . . . 6
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Joint Tax Claim . . . . . . . . . . . . . . . . . . . . . . . 6
Justice Department . . . . . . . . . . . . . . . . . . . . . 6
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Material Adverse Effect . . . . . . . . . . . . . . . . . . . 7
Material Claim . . . . . . . . . . . . . . . . . . . . . . . 7
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Merger Consideration . . . . . . . . . . . . . . . . . . . . 8
Minimum Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Net Revenue Interest . . . . . . . . . . . . . . . . . . . . 8
Net Title Defect Amount . . . . . . . . . . . . . . . . . . . 8
New Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Oil and Gas Contracts . . . . . . . . . . . . . . . . . . . . 8
Outside Date . . . . . . . . . . . . . . . . . . . . . . . . 8
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . 8
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . 10
Post-Closing Period . . . . . . . . . . . . . . . . . . . . . 10
Pre-Closing Period . . . . . . . . . . . . . . . . . . . . . 10
Production Burdens . . . . . . . . . . . . . . . . . . . . . 10
Properties . . . . . . . . . . . . . . . . . . . . . . . . . 10
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RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Registration Rights Agreement . . . . . . . . . . . . . . . . 10
Respective Representatives . . . . . . . . . . . . . . . . . 10
Rights Agreement Amendment . . . . . . . . . . . . . . . . . 10
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Securities Act . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Transferred Assets . . . . . . . . . . . . . . . . . 10
STLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Straddle Period . . . . . . . . . . . . . . . . . . . . . . . 10
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 11
Surviving Corporation . . . . . . . . . . . . . . . . . . . . 11
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Tax Claim Notice . . . . . . . . . . . . . . . . . . . . . . 11
Tax Indemnitee . . . . . . . . . . . . . . . . . . . . . . . 11
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 11
Title Defect . . . . . . . . . . . . . . . . . . . . . . . . 11
Title Defect Amount . . . . . . . . . . . . . . . . . . . . . 11
Title Defect Threshold Amount . . . . . . . . . . . . . . . . 11
Transferred Assets . . . . . . . . . . . . . . . . . . . . . 11
Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 11
Unit Agreement . . . . . . . . . . . . . . . . . . . . . . . 12
Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
WBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
WECO Affiliated Group . . . . . . . . . . . . . . . . . . . . 12
WECO Nominees . . . . . . . . . . . . . . . . . . . . . . . . 12
WECO Plans . . . . . . . . . . . . . . . . . . . . . . . . . 12
WECO SEC Documents . . . . . . . . . . . . . . . . . . . . . 12
WECO Severance Plans . . . . . . . . . . . . . . . . . . . . 12
WEEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Wells . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
WEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
WEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
WERCO Certificate . . . . . . . . . . . . . . . . . . . . . . 12
WERCO Common Stock . . . . . . . . . . . . . . . . . . . . . 12
WERCO Employees . . . . . . . . . . . . . . . . . . . . . . . 12
WERCO Financial Statements . . . . . . . . . . . . . . . . . 12
WERCO Group . . . . . . . . . . . . . . . . . . . . . . . . . 13
WERCO's Interest(s) . . . . . . . . . . . . . . . . . . . . . 13
WERCO Reserve Reports . . . . . . . . . . . . . . . . . . . . 13
WERCO Subsidiaries . . . . . . . . . . . . . . . . . . . . . 13
Working Interest . . . . . . . . . . . . . . . . . . . . . . 13
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2. THE MERGER; EFFECTIVE TIME; CLOSING; INTERCOMPANY DEBT . . . . 13
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . 13
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Post-Merger Events Occurring on the Closing Date . . . . 14
2.5 Closing Escrow . . . . . . . . . . . . . . . . . . . . . 14
3. TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Certificate of Incorporation . . . . . . . . . . . . . . 14
3.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Directors and Officers . . . . . . . . . . . . . . . . . 14
4. MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Share Consideration; Conversion or Cancellation of
Shares in the Merger . . . . . . . . . . . . . . . . . . 14
4.2 Payment for Shares in the Merger . . . . . . . . . . . . 15
4.3 No Transfer of Shares after the Day Prior to the
Date of this Agreement . . . . . . . . . . . . . . . . . 15
5. REPRESENTATIONS AND WARRANTIES OF WERCO AND WECO . . . . . . . 15
5.1 Organization and Qualification; Subsidiaries and
Investments . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Authorization . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Consents and Approvals; No Violation . . . . . . . . . . 17
5.5 Financial Statements; No Material Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Absence of Certain Changes or Events . . . . . . . . . . 18
5.7 Litigation; Orders . . . . . . . . . . . . . . . . . . . 19
5.8 Licenses; Approvals . . . . . . . . . . . . . . . . . . . 19
5.9 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 20
5.10 Compliance with Laws . . . . . . . . . . . . . . . . . . 20
5.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Material Contracts . . . . . . . . . . . . . . . . . . . 20
5.13 Title to Leases . . . . . . . . . . . . . . . . . . . . . 23
5.14 Title to Properties Other than Leases; Condition
of Facilities . . . . . . . . . . . . . . . . . . . . . . 23
5.15 Status and Operation of Oil and Gas Properties . . . . . 23
5.16 Environmental Matters . . . . . . . . . . . . . . . . . . 24
5.17 Condemnation . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . 27
5.20 Reserve Reports . . . . . . . . . . . . . . . . . . . . . 28
5.21 Brokerage Fees and Commissions . . . . . . . . . . . . . 28
5.22 Operations and Expenditures . . . . . . . . . . . . . . . 28
5.23 Tax Partnerships . . . . . . . . . . . . . . . . . . . . 29
5.24 Wells . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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5.25 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 29
5.26 Interest Additions . . . . . . . . . . . . . . . . . . . 29
6. REPRESENTATIONS AND WARRANTIES OF WECO . . . . . . . . . . . . 29
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Consents and Approvals; No Violation . . . . . . . . . . 30
6.4 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 30
6.5 Investment Intent . . . . . . . . . . . . . . . . . . . . 31
6.6 Restricted Securities . . . . . . . . . . . . . . . . . . 31
6.7 Legend . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.8 Residency . . . . . . . . . . . . . . . . . . . . . . . . 31
7. REPRESENTATIONS AND WARRANTIES OF COGC AND MERGER SUB . . . . . 32
7.1 Organization and Qualification . . . . . . . . . . . . . 32
7.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Authorization . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Consents and Approvals; No Violation . . . . . . . . . . 33
7.5 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Financial Statements; No Material Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . 34
7.7 Absence of Certain Changes or Events . . . . . . . . . . 34
7.8 Litigation; Orders . . . . . . . . . . . . . . . . . . . 34
7.9 Compliance with Laws . . . . . . . . . . . . . . . . . . 35
7.10 Title to Properties . . . . . . . . . . . . . . . . . . . 35
7.11 Financing . . . . . . . . . . . . . . . . . . . . . . . . 35
7.12 Ownership of Merger Sub; No Prior Activities . . . . . . 35
7.13 Brokerage Fees and Commissions . . . . . . . . . . . . . 36
7.14 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 36
8. TITLE MATTERS; ENVIRONMENTAL DEFECTS . . . . . . . . . . . . . 36
8.1 Title Defects . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Notice of Asserted Title Defects . . . . . . . . . . . . 36
8.3 Notice of Claimed Interest Additions . . . . . . . . . . 37
8.4 Counter-Notice . . . . . . . . . . . . . . . . . . . . . 37
8.5 Liability for Uncured Title Defects . . . . . . . . . . . 37
8.6 Calculation of Title Defect Amounts and Interest
Addition Amounts . . . . . . . . . . . . . . . . . . . . 38
8.7 Determination of Net Title Defect Amounts . . . . . . . . 40
8.8 Arbitration Procedures . . . . . . . . . . . . . . . . . 40
8.9 Payment in Respect of Uncured Title Defects . . . . . . . 41
8.10 Interaction of WERCO and WECO . . . . . . . . . . . . . . 41
8.11 Environmental Defects . . . . . . . . . . . . . . . . . . 42
9. ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . 42
9.1 Conduct of Business of WERCO and COGC . . . . . . . . . . 42
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9.2 Operation of Oil and Gas Properties . . . . . . . . . . . 44
9.3 Certain Covenants with Respect to Oil and
Gas Interests . . . . . . . . . . . . . . . . . . . . . . 45
9.4 No Other Bids . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Reasonable Efforts . . . . . . . . . . . . . . . . . . . 46
9.6 Access to Information During Due Diligence Period;
Notification of Breaches . . . . . . . . . . . . . . . . 46
9.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . 47
9.8 Public Announcements . . . . . . . . . . . . . . . . . . 48
9.9 Retention of WERCO Records . . . . . . . . . . . . . . . 48
9.10 Indemnification of Directors and Officers . . . . . . . . 48
9.11 Renaming of Merger Sub . . . . . . . . . . . . . . . . . 49
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . 49
9.13 Business Guaranties . . . . . . . . . . . . . . . . . . . 50
9.14 Performance of WERCO Obligations . . . . . . . . . . . . 50
9.15 Employment and Benefit Matters . . . . . . . . . . . . . 50
9.16 Insurance Matters . . . . . . . . . . . . . . . . . . . . 54
9.17 Regulatory Filing . . . . . . . . . . . . . . . . . . . . 54
9.18 WECO Representation on COGC's Board of Directors . . . . 55
9.19 Registration Rights Agreement . . . . . . . . . . . . . . 55
9.20 Certain Actions Prior to Closing . . . . . . . . . . . . 55
9.21 Rights Agreement Amendment . . . . . . . . . . . . . . . 57
9.22 Transition Services Agreement . . . . . . . . . . . . . . 57
9.23 Dissolution of STLP . . . . . . . . . . . . . . . . . . . 57
10. CONDITIONS TO THE OBLIGATIONS OF COGC AND MERGER SUB . . . . . 57
10.1 Representations, Warranties and Covenants of WERCO . . . 57
10.2 Representations, Warranties and Covenants of WECO . . . . 58
10.3 Waiting Period . . . . . . . . . . . . . . . . . . . . . 58
10.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . 58
10.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . 58
10.6 Opinions of Counsel for WERCO and WECO . . . . . . . . . 58
10.7 Material Change . . . . . . . . . . . . . . . . . . . . . 59
10.8 Authorization . . . . . . . . . . . . . . . . . . . . . . 59
10.9 Financial Statements . . . . . . . . . . . . . . . . . . 59
10.10 Assignment of Hedge Agreements . . . . . . . . . . . . . 59
11. CONDITIONS TO THE OBLIGATIONS OF WERCO AND WECO . . . . . . . . 59
11.1 Representations, Warranties and Covenants of COGC . . . . 59
11.2 Waiting Period . . . . . . . . . . . . . . . . . . . . . 60
11.3 No Injunction . . . . . . . . . . . . . . . . . . . . . . 60
11.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 Opinion of Counsel for COGC . . . . . . . . . . . . . . . 60
11.6 Material Change . . . . . . . . . . . . . . . . . . . . . 60
11.7 Execution of Registration Rights Agreement . . . . . . . 60
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11.8 Execution of Rights Agreement Amendment . . . . . . . . . 60
11.9 Deposit of Funds in Escrow . . . . . . . . . . . . . . . 61
11.10 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 61
11.11 Authorization . . . . . . . . . . . . . . . . . . . . . . 61
12. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.1 Reorganization . . . . . . . . . . . . . . . . . . . . . 61
12.2 WECO Tax Indemnity . . . . . . . . . . . . . . . . . . . 62
12.3 COGC Tax Indemnity . . . . . . . . . . . . . . . . . . . 63
12.4 Allocation of Certain Taxes . . . . . . . . . . . . . . . 64
12.5 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.6 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 66
12.7 Tax Contests . . . . . . . . . . . . . . . . . . . . . . 68
12.8 Payment of Taxes . . . . . . . . . . . . . . . . . . . . 70
12.9 Cooperation and Exchange of Information . . . . . . . . . 70
12.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 71
12.11 Thirty-Day Elections . . . . . . . . . . . . . . . . . . 71
12.12 Termination of Tax Sharing Agreements . . . . . . . . . . 71
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . 71
12.14 Conflict . . . . . . . . . . . . . . . . . . . . . . . . 72
13. SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 72
13.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . 72
13.2 Indemnification by COGC . . . . . . . . . . . . . . . . . 72
13.3 Indemnification by WECO . . . . . . . . . . . . . . . . . 72
13.4 Third-Party Claims . . . . . . . . . . . . . . . . . . . 73
13.5 Basis for Payment . . . . . . . . . . . . . . . . . . . . 74
14. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 74
14.1 Termination by Mutual Consent . . . . . . . . . . . . . . 74
14.2 Termination after June 30, 1994 . . . . . . . . . . . . . 74
14.3 Termination by WERCO or WECO . . . . . . . . . . . . . . 74
14.4 Procedure upon Termination . . . . . . . . . . . . . . . 74
14.5 Effect of Termination . . . . . . . . . . . . . . . . . . 75
15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . 75
15.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 75
15.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . 75
15.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 75
15.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.6 Successors and Assigns . . . . . . . . . . . . . . . . . 77
15.7 Headings; Definitions . . . . . . . . . . . . . . . . . . 77
15.8 Amendments and Waivers . . . . . . . . . . . . . . . . . 77
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15.9 Schedules and Exhibits . . . . . . . . . . . . . . . . . 77
15.10 Disclaimer of Warranties . . . . . . . . . . . . . . . . 77
15.11 Agreement for the Parties' Benefit . . . . . . . . . . . 77
15.12 Severability . . . . . . . . . . . . . . . . . . . . . . 77
15.13 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 78
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Exhibits
Exhibit A Agreement and Plan of Merger
Exhibit B Registration Rights Agreement
Exhibit C Certificate of Designation of 6% Convertible
Redeemable Preferred Stock
Exhibit D Amendment No. 1 to Rights Agreement
Schedules
Schedule 1(a) Key Executive Officers of WERCO and WECO
Schedule 1(b) Certain Personnel of WERCO
Schedule 1(c) Key Executive Officers of Cabot Oil & Gas Corporation
Schedule 1(d) Certain Personnel of Cabot Oil & Gas Corporation
Schedule 5.1(c) WERCO Investment Interests
Schedule 5.4 Consents and Approvals
Schedule 5.5(b) Undisclosed Liabilities
Schedule 5.6 Certain Changes or Events
Schedule 5.7 Litigation; Orders
Schedule 5.8 Licenses; Approvals
Schedule 5.9 Labor Matters
Schedule 5.11(a) Insurance
Schedule 5.11(b) Not Continuing Insurance
Schedule 5.12 Material Contracts
Schedule 5.12(e) Gas Sales, Purchases, Marketing, Processing and
Transportation Agreements containing Options, Calls,
or Dedication of Production
Schedule 5.12(j) Prospect Agreement Inventory
Schedule 5.12(k) Acquisitions over $1,500,000
Schedule 5.12(o) Business Guaranties
Schedule 5.13 Part I - Title to Leases, Wells and Units
Part II - Title to Prospect Acreage
Schedule 5.13A Lease Inventory
Schedule 5.14 Title to Properties Other Than "Leases"
Schedule 5.15 Status and Operation of Oil and Gas Properties
Schedule 5.16 Environmental Matters
Schedule 5.17 Condemnation
Schedule 5.18(a) Tax Matters
Schedule 5.18(d) Tax Elections
Schedule 5.18(n) Basis and Excess Loss Accounts in Subsidiaries
Schedule 5.19 Employee Benefit Plans
Schedule 5.20 Reserve Report Corrections and Clarifications
Schedule 5.22 Obligations in Excess of $50,000
Schedule 6.3 Consents and Approvals
Schedule 7.4 Consents and Approvals
Schedule 7.7 Certain Changes or Events
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Schedule 7.8 Litigation; Orders
Schedule 7.10 Title to Properties
Schedule 9.1 Conduct of Business of WERCO
Schedule 9.13 Business Guaranties
Schedule 9.15 Vacation Days
Schedule 9.20 Part I - Transferred Assets and Selected Transferred
Assets
Part II - Desired Assets
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AGREEMENT OF MERGER
This Agreement of Merger (this "Agreement") is made and entered into
as of the 25th day of February, 1994, among Cabot Oil & Gas Corporation, a
Delaware corporation ("COGC"), COG Acquisition Company, a Delaware corporation
and a wholly-owned subsidiary of COGC ("Merger Sub"), Washington Energy
Company, a Washington corporation ("WECO"), and Washington Energy Resources
Company, a Washington corporation and a wholly-owned subsidiary of WECO
("WERCO").
RECITALS
WHEREAS, COGC, Merger Sub, WERCO and WECO each have determined that it
is in their best interests for WERCO to merge with and into Merger Sub, upon
the terms and subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code; and
WHEREAS, COGC, Merger Sub, WERCO and WECO wish to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, COGC, Merger Sub, WERCO
and WECO hereby agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"ACTION" shall mean any actual or threatened action, suit,
arbitration, inquiry, proceeding or investigation by or before any court or
Governmental Body.
"AFE" shall have the meaning specified in Section 9.2(d).
"AFFILIATE" shall mean any Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with the Person specified.
"AMOUNT" shall have the meaning specified in Section 14.3(b).
"AVERAGE TRADING PRICE" shall have the meaning specified in
Section 14.3(b).
13
"BUSINESS" shall mean all oil and gas exploration, production
and related marketing business conducted by WERCO and the WERCO Subsidiaries
and their respective predecessors as the context may require, or by COGC and
the COGC Subsidiaries and their respective predecessors as the context may
require, and all operations and ownerships related to such business, including,
without limitation, (a) the acquisition, purchase, sale, development,
operation, ownership, maintenance, plugging and abandonment of Hydrocarbons and
mineral leases and related interests, (b) the drilling, production, purchase,
sale, marketing, transportation, storage, processing, treating, manufacture and
disposal of or for Hydrocarbons and associated byproducts, (c) the acquisition,
permitting, construction, installation, maintenance, operation, ownership,
removal and abandonment of related plants, platforms, pipelines, gathering
lines, compressors, facilities, storage facilities and equipment and (d) the
conduct of all related executive, administrative, accounting, legal and
managerial functions.
"BUSINESS GUARANTIES" shall have the meaning specified in
Section 9.13.
"CERCLA" shall have the meaning specified in Section 5.16.
"CERTIFICATE OF MERGER" shall mean the certificate of merger
with respect to the merger of WERCO with and into Merger Sub, containing the
provisions required by, and executed in accordance with, Section 252 of the
DGCL.
"CLAIM" shall have the meaning specified in Section 9.10(a).
"CLOSING" shall have the meaning specified in Section 2.3.
"CLOSING DATE" shall mean the date specified in Section 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"COGC COMMON STOCK" shall mean the Class A common stock, par
value ten cents ($.10) per share, of COGC.
"COGC COSTS" shall mean any and all reasonable and documented
costs and expenses incurred by any Tax Indemnitee and relating to any Tax, or
any matter related to any Tax, to which this Agreement relates, such costs and
expenses including, but not limited to (a) third party costs (including,
without limitation, reasonable attorneys', accountants' and experts' fees and
disbursements, settlement costs and court costs) and (b) direct costs and
expenses relating to any Tax Indemnitee's personnel and support.
"COGC EMPLOYEES" shall have the meaning specified in Section
9.15(a).
"COGC EQUITY SECURITIES" shall mean the COGC Common Stock and
the COGC Preferred Stock.
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"COGC FINANCIAL STATEMENTS" shall have the meaning specified
in Section 7.6(a).
"COGC NOTICE" shall have the meaning specified in Section
12.7(d).
"COGC PREFERRED STOCK" shall mean the 6% Convertible
Redeemable Preferred Stock, par value ten cents ($.10) per share, to be issued
pursuant to Section 4.1 of this Agreement. Such Preferred Stock shall have the
voting powers, designations and relative rights described in the Certificate of
Designation of 6% Convertible Redeemable Preferred Stock attached hereto as
Exhibit C.
"COGC SEC DOCUMENTS" shall have the meaning specified in
Section 7.5.
"COGC SUBSIDIARIES" shall mean Big Sandy Gas Company, a
Delaware corporation, Cabot Oil and Gas Marketing Corporation, a Delaware
corporation, Cabot Petroleum North Sea, Ltd., a Delaware corporation, COG
Acquisition Company, a Delaware corporation, Cranberry Pipeline Corporation, a
Delaware corporation, Franklin Brine Treatment Corporation, a Delaware
corporation and Industrial Gas Corporation, a Delaware corporation.
"COGC TAX CLAIM" shall have the meaning specified in Section
12.7(a).
"CONTINUING WERCO EMPLOYEES" shall have the meaning specified
in Section 9.15(e).
"CONTRACTS" shall have the meaning specified in Section 5.12.
"CURE PERIOD" shall mean (a) with respect to a Title Defect
for which a Title Defect Notice was given prior to or on the Closing Date, that
period of time from 5:00 p.m. on the Closing Date until 5:00 p.m. on the
sixtieth (60th) day following the Closing Date and (b) with respect to a Title
Defect for which a Title Defect Notice was given after the Closing Date, that
period of time from 5:00 p.m. on the date such Title Defect Notice was given
until 5:00 p.m. on the sixtieth (60th) day following the date such Title Defect
Notice was given.
"DEFENSIBLE TITLE" shall mean for each Lease, each Unit and
each Well, as the case may be, such record title (any element of a Net Revenue
Interest which is attributable to a non-consent or sole risk election shall be
deemed to be record title) that (a) entitles WERCO to receive throughout the
life of such Lease, Unit or Well a Net Revenue Interest in, to and from that
Lease, Unit or Well not less than the Net Revenue Interest for such Lease, Unit
or Well stated on Schedule 5.13, (b) obligates WERCO to pay and bear throughout
the life of such Lease, Unit or Well a share of the costs and risks of
exploring, developing, operating and abandoning that Lease, Unit or Well not
greater than the Working Interest for such Lease, Unit or Well stated on
Schedule 5.13, and (c) is free and clear of all Encumbrances, except Permitted
Encumbrances; Defensible Title for the Leases which are included in a prospect
identified in Part II of Schedule 5.13 shall mean record title in WERCO in and
to such Leases such that WERCO owns leasehold
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estates covering the net acreage set forth for such prospect on Part II of
Schedule 5.13 subject to no Encumbrances other than Permitted Encumbrances.
"DESIRED ASSETS" shall mean the assets and contracts so
identified on Schedule 9.20.
"DGCL" shall mean the Delaware General Corporation Law.
"EASEMENTS" shall mean surface and subsurface easements,
rights-of-way, leases, permits, licenses, franchises, servitudes, tenements,
appurtenances and other interests that pertain to the Leases, the Lands or the
Wells.
"EFFECTIVE TIME" shall have the meaning specified in Section
2.2.
"ELECTION NOTICE" shall have the meaning specified in Section
12.7(a).
"EMPLOYEE BENEFIT ARRANGEMENTS" shall have the meaning
specified in Section 9.15(c).
"EMPLOYEE BENEFIT PLANS" shall have the meaning specified in
Section 9.15(b).
"ENCUMBRANCE" shall mean any mortgage, lien (including unpaid
debts for which a statutory lien may be asserted if such debts remain unpaid
and become delinquent), security interest, pledge, charge, encumbrance, claim,
limitation, irregularity, burden or defect.
"ENVIRONMENTAL DEFECT" means any Action, any third-party
claim, any remediation or other required action under Environmental Laws, or
any environmental remediation work required by a Governmental Body or any other
condition, whether or not yet discovered, which could reasonably be expected to
result in any Loss to the Properties or COGC or Merger Sub under any
Environmental Law; but excludes any Environmental Defect (a) arising out of
facts, conditions and circumstances not in existence at the Effective Time or
(b) which may arise because of changes in Environmental Laws after the
Effective Time, provided, however, such Environmental Defect would not have
been an Environmental Defect under Environmental Laws in force as of the
Effective Time.
"ENVIRONMENTAL LAWS" shall have the meaning specified in
Section 5.16.
"EQUIPMENT" shall mean fixtures, equipment, tangible personal
property, goods, facilities, supplies, inventory, fixtures and improvements
that are located on the Lands or that are used or held for use for the
production, gathering, treatment, processing, storage, disposal or
transportation on or from the Lands or Hydrocarbons, water or other substances
produced with them, including all accessions, additions and attachments to
other Equipment. "Equipment" includes any and all camps, casing, chemicals,
Christmas trees, communications systems (including telephone, telegraph and
radio systems), derricks, flow lines, gas systems (including
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gathering, treatment and compression facilities and equipment), gathering
lines, gun barrels, loading docks and facilities, loading racks, pipelines
(including gathering lines, trunk lines and lateral lines), platforms, power
systems (including power plants, power lines, transformers, starters and
controllers), processing plants, pumping units, pumps, roads, rods, storage
yards and stored materials, tank farms, tanks, tools, tubing and tubular goods.
"ERISA" shall have the meaning specified in Section 5.19(b).
"ESCROW" shall have the meaning specified in Section 2.5.
"ESCROW AGENT" shall have the meaning specified in Section 2.5.
"EXCHANGE ACT" shall have the meaning specified in Section 6.4.
"FINAL DETERMINATION" shall mean (a)(i) a decision of the
United States Tax Court, which has become final and non-appealable, or (ii) a
judgment, decree or other order by another court or other tribunal with
appropriate jurisdiction, which has become final and non-appealable; (b) a
final and binding settlement or compromise with an administrative agency with
appropriate jurisdiction, including, but not limited to, a closing agreement
under Section 7121 of the Code; (c) any disallowance of a claim for refund or
credit in respect to an overpayment of Tax, but only at such time as the period
for timely filing of suit with respect to such disallowance has expired; or (d)
any final disposition by reason of the expiration of all applicable statutes of
limitations.
"FTC" shall have the meaning specified in Section 9.17.
"GOVERNMENTAL BODY" shall mean any federal, state, municipal,
political subdivision or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HYDROCARBONS" shall mean crude oil, natural gas, natural gas
liquids and other gaseous and liquid hydrocarbons or any combination thereof.
"INDEMNIFIED COGC PARTIES" shall have the meaning specified in
Section 13.3.
"INDEMNIFIED WECO PARTIES" shall have the meaning specified in
Section 13.2.
"INDEMNIFIED WERCO DIRECTORS AND OFFICERS" shall have the
meaning specified in Section 9.10(a).
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"INFORMATION" shall mean all information about the Properties,
including the following: instruments and agreements that constitute or create
Leases, Easements, Unit Agreements and Oil and Gas Contracts; title opinions,
abstracts of title and title files for the Leases, Wells and Units; drilling
reports, engineering data, formation tests, logs and maps for the Lands,
Leases, Wells and Units; and seismic, geophysical, geological, gravitational,
paleontological and chemical data, information and analyses for the Lands,
Leases, Wells and Units.
"INTERCOMPANY DEBT" shall mean the indebtedness of WERCO to
WECO in the principal amount of $69,100,000 at December 31, 1993 (together with
accrued interest thereon at the rate of 6% per annum from December 31, 1993),
through the Closing Date, plus any amounts advanced by WECO to WERCO after
December 31, 1993 (including any adjustments to such indebtedness to be made
pursuant to any tax sharing agreement(s) to which WECO, WERCO or the WERCO
Subsidiaries are parties), together with accrued interest thereon at the rate
of 6% per annum from the date of such advance, and prior to the Closing Date,
which advances will be made for expenditures by WERCO in the ordinary course of
its Business consistent with past practice and the payment of indebtedness of
STLP to Midland Bank Plc if STLP is dissolved prior to the Closing.
"INTEREST ADDITION" shall mean with respect to any Lease, Well
or Unit described on Schedule 5.13, (a) an increase in the Net Revenue Interest
in, to and from such particular Lease, Well or Unit above the Net Revenue
Interest identified for such Lease, Well or Unit on Schedule 5.13 as being
associated with such Lease, Well or Unit so long as the Working Interest
identified for such Lease, Well or Unit on Schedule 5.13 is not also increased,
or (b) a reduction in the Working Interest for a particular Lease, Well or Unit
below the Working Interest identified on Schedule 5.13 as being associated with
such Lease, Well or Unit so long as the Net Revenue Interest identified for
such Lease, Well or Unit on Schedule 5.13 is not also decreased.
"INTEREST ADDITION AMOUNT" shall mean the amount attributable
to each Interest Addition, as determined pursuant to Section 8.6.
"INVESTMENT INTEREST" shall have the meaning specified in
Section 5.1(c).
"IRS" shall have the meaning specified in Section 5.18(a).
"JOINT TAX CLAIM" shall have the meaning specified in Section
12.7(e).
"JUSTICE DEPARTMENT" shall have the meaning specified in
Section 9.17.
"KNOWLEDGE" when used in relation to WERCO or any of its
Affiliates shall mean the actual knowledge of one or more of the Persons listed
on Schedule 1(a), provided such Persons shall, prior to the Closing, conduct a
reasonable inquiry of certain employees of WERCO as listed on Schedule 1(b)
with respect to the representations and warranties of WERCO made in this
Agreement. "KNOWLEDGE" when used in relation to COGC or any of its Affiliates
shall
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mean the actual knowledge of one or more of the Persons listed on Schedule
1(c), provided such Persons shall, prior to the Closing, conduct a reasonable
inquiry of certain employees of COGC as listed on Schedule 1(d) with respect to
the representations and warranties of COGC made in this Agreement.
"LANDS" shall mean the lands described or referred to on
Schedule 5.13 or covered by any Lease, and the lands pooled or unitized with
such lands.
"LEASES" shall mean oil, gas and/or mineral leases, mineral
interests, royalty interests, net profits interests, licenses, concessions,
permits, reversionary interests and other interests in Hydrocarbons in which
WERCO claims an interest, as identified on Schedule 5.13A or otherwise owned by
WERCO or any WERCO Affiliate.
"LICENSES" shall have the meaning specified in Section 5.8.
"LOSSES" shall mean any and all losses, liabilities, claims,
damages, (including, without limitation, those arising out of any demand,
assessment, settlement, judgment or compromise relating to any Action), costs
and expenses (including, without limitation, any reasonable attorneys' fees and
any and all reasonable expenses whatsoever incurred in investigating, preparing
or defending any Action, including any fees incurred on appeal).
"MATERIAL ADVERSE EFFECT" shall mean any actual or prospective
change, development or effect (individually or in the aggregate), which has or
would have an adverse effect on the general affairs, management, Business,
properties, results of operations, prospects, condition (financial or
otherwise), assets or liabilities of WERCO and the WERCO Subsidiaries, taken as
a whole, or of COGC or the COGC Subsidiaries, taken as a whole, that (after
taking into consideration insurance recoveries in respect thereof) is material
to WERCO and the WERCO Subsidiaries, taken as a whole, or to COGC and the COGC
Subsidiaries, taken as a whole; provided, however, that any actual or
prospective change or changes relating to or resulting from any change or
changes in the prices of Hydrocarbons, natural declines in well performance,
general economic conditions or local, regional, national or international
industry conditions (including, without limitation, changes in applicable laws
or regulations, and changes in financial or market conditions) shall be deemed
not to constitute a Material Adverse Effect.
"MATERIAL CLAIM" shall mean any claim, event or occurrence
which would result in a cost, expense, impairment or diminution in value with
respect to the affected asset or the Business of WERCO and the WERCO
Subsidiaries in excess of $250,000 or COGC and the COGC Subsidiaries in excess
of $500,000 (after taking into consideration insurance recoveries in respect
thereof); provided, however, that any actual or prospective change or changes
relating to or resulting from any change or changes in the prices of
Hydrocarbons, natural declines in well performance, general economic conditions
or local, regional, national or international industry conditions (including,
without limitation, changes in applicable laws or regulations, and changes in
financial or market conditions) shall be deemed not to constitute a Material
Claim. "Material Claim" is used in this Agreement only with respect to
disclosure standards in certain
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representations and warranties set forth in this Agreement, and shall not be
construed as any indication of what would constitute a Material Adverse Effect.
"MAXIMUM AMOUNT" shall have the meaning specified in Section
13.2.
"MERGER" shall mean the merger of WERCO with and into Merger
Sub as contemplated by Section 2.1.
"MERGER CONSIDERATION" shall have the meaning specified in
Section 4.1(b).
"MINIMUM AMOUNT" shall have the meaning specified in Section
13.2.
"NET REVENUE INTEREST" shall mean an interest (expressed as a
percentage) in and to Hydrocarbons produced and saved from or allocated to a
Lease, a Well or a Unit after deducting all applicable Production Burdens.
"NET TITLE DEFECT AMOUNT" shall have the meaning specified in
Section 8.7.
"NEW SUB" shall have the meaning specified in Section 9.20.
"OIL AND GAS CONTRACTS" shall mean contracts that affect or
relate to the Leases, the Lands, the Units, the Wells, the Equipment or the
Hydrocarbons, including amendments to and claims under Oil and Gas Contracts.
"Oil and Gas Contracts" includes acreage-contribution agreements, advance
payment agreements, bottom-hole agreements, division orders, drilling
contracts, dry-hole agreements, exploration agreements, farm-in and farmout
agreements, gas-balancing agreements (including claims to recover natural gas
or money under gas-balancing agreements for WERCO's underproduction before the
Effective Time), natural gas and oil sales, exchange, treating and processing
contracts, operating agreements, participation agreements, storage agreements,
support agreements, transfer orders, transportation agreements and water rights
agreements.
"OUTSIDE DATE" shall have the meaning specified in Section
14.2.
"PERMITTED ENCUMBRANCES" shall mean any:
(a) Encumbrances that arise under Oil and Gas Contracts
or under Unit Agreements, and that are of a type and nature customary
in the oil and gas industry to secure the payment of amounts that are
not yet delinquent or, if delinquent, are being contested in good
faith in the ordinary course of business;
(b) Encumbrances securing payments to mechanics and
materialmen and encumbrances securing payment of taxes or assessments
that are, in either case, not yet delinquent or, if delinquent, are
being contested in good faith in the ordinary course of business;
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(c) consents to assignment by Governmental Bodies (i)
that are obtained on or prior to the Closing Date or (ii) that are
customarily obtained after the consummation of transactions of the
nature contemplated by this Agreement;
(d) conventional rights of reassignment obligating WERCO
to reassign its interest in any portion of the Leases, Lands, Units or
Wells to a third party in the event it intends to release or abandon
such interest prior to the expiration of the primary term or other
termination of such interest;
(e) easements, rights-of-way, servitudes, permits,
surface leases, surface use restrictions and other surface uses and
impediments on, over or in respect of any Lease, Lands or Unit that
are not such as to interfere materially with the operation, value or
use of the portion of the Properties burdened or affected thereby;
(f) such written covenants, conditions and other written
terms subject to which the Leases were acquired by WERCO and which
were provided to COGC or Merger Sub;
(g) such Title Defects as COGC or Merger Sub has
expressly waived in writing;
(h) rights reserved to or vested in any Governmental Body
to control or regulate any of the Leases in any manner, and all
applicable laws, rules and orders of any Governmental Body so long as
there currently exists no noncompliance with any such laws, rules and
orders;
(i) consents to assignment and preferential rights to
purchase any or all of the Leases, Wells and Units other than any such
consents or rights which (A) are applicable to the transactions
contemplated by this Agreement or (B) were applicable to a previous
transaction involving the transfer of all or any portion of the
Properties but were not complied with at the time of the consummation
of such transaction; and
(j) such Encumbrances affecting all or any portion of any
Property that a reasonable, prudent operator with knowledge of such
Encumbrances and an appreciation of the legal significance would
consider immaterial and waive as a title defect without any reduction
in the value allocated to such Property inSchedule 5.13.
"PERSON" shall mean an individual, group, partnership,
corporation, trust or other entity.
"PLAN OF MERGER" shall mean the Agreement and Plan of Merger
in the form attached as Exhibit A.
"POST-CLOSING PERIOD" shall have the meaning specified in
Section 12.3.
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"PRE-CLOSING PERIOD" shall have the meaning specified in
Section 12.2.
"PRODUCTION BURDENS" shall mean all royalty interests,
overriding royalty interests, production payments, net profits interests or
other similar interests that constitute a burden on, are measured by or are
payable out of the production of, Hydrocarbons or the proceeds realized from
the sale or other disposition thereof.
"PROPERTIES" shall mean the Leases, the Lands, the Wells, the
Equipment, the Units, the Easements, the Oil and Gas Contracts, the
Hydrocarbons and the Information. "Property" shall mean a specific and
identifiable subset of the Properties, such as a Unit and the Leases, Lands,
Wells, Equipment, Easements, Oil and Gas Contracts, Hydrocarbons and
Information associated with that Unit.
"RCRA" shall have the meaning specified in Section 5.16.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement in the form attached as Exhibit B.
"RESPECTIVE REPRESENTATIVES" shall have the meaning specified
in Section 9.6(a).
"RIGHTS AGREEMENT AMENDMENT" shall mean Amendment No. 1 to
Rights Agreement in the form attached as Exhibit D.
"SEC" shall have the meaning specified in Section 6.4.
"SECURITIES ACT" shall have the meaning specified in Section
6.4.
"SELECTED TRANSFERRED ASSETS" shall mean those Transferred
Assets so identified on Schedule 9.20.
"STLP" shall have the meaning specified in Section 5.1(b).
"STRADDLE PERIOD" shall have the meaning specified in Section
12.2.
"SUBSIDIARY" shall mean any corporation, partnership, joint
venture, business trust or other legal entity in which a corporation either
directly or indirectly owns or holds beneficial or record ownership of more
than 50% of the outstanding voting interests.
"SURVIVING CORPORATION" shall mean the surviving corporation
in the Merger.
"TAXES" shall mean all federal, state, local, foreign and
other taxes, charges, fees, duties, levies, imposts or other assessments of any
kind whatsoever, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit
share, license, lease, service, service use, value added, withholding, payroll,
employment,
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excise, estimated, severance, petroleum revenue, production, stamp, occupation,
premium, property, windfall profits or other taxes, charges, fees, duties,
levies, imposts or other assessments, together with any interest, penalties,
additions to tax, fines or other additional amounts imposed thereon or related
thereto, and the term "Tax" means any one of the foregoing Taxes.
"TAX CLAIM NOTICE" shall have the meaning specified in Section
12.7.
"TAX INDEMNITEE" shall have the meaning specified in Section
12.2.
"TAX RETURNS" shall mean all returns, declarations, reports,
statements and other documents required to be filed in respect of any and all
Taxes, and the term "Tax Return" means any one of the foregoing Tax Returns.
"TITLE DEFECT" shall mean any Encumbrance other than a
Permitted Encumbrance which could cause title to any Lease, Lands, Unit or Well
not to be Defensible Title or any claim or threat of an Encumbrance other than
a Permitted Encumbrance which could cause title to any Lease, Lands, Unit or
Well not to be Defensible Title which is of such significance that a reasonably
prudent operator with knowledge of the facts and an appreciation of their legal
significance would be unwilling to accept title to such Property without a
reduction in the value allocated to such Property on Schedule 5.13.
"TITLE DEFECT AMOUNT" shall mean the amount attributable to
each Title Defect as determined pursuant to Section 8.6.
"TITLE DEFECT THRESHOLD AMOUNT" shall mean $800,000.00.
"TRANSFERRED ASSETS" shall mean the assets and contracts so
identified on Schedule 9.20.
"UNDISCLOSED LIABILITIES" shall have the meaning specified in
Section 5.5(b).
"UNIT AGREEMENT" shall mean an agreement, declaration or order
that creates or governs any Unit.
"UNITS" shall mean oil-and-gas pools, units and communitized
lands and depths that include any Lands, including pools, units and
communitized areas formed by any Governmental Body or under any order,
regulation, rule, approval, decision or order of any Governmental Body.
"WBCA" shall mean the Washington Business Corporation Act.
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"WECO AFFILIATED GROUP" shall mean the "affiliated group" (as
such term is defined in Section 1504(a) of the Code) of corporations of which
WECO is the "common parent" (within the meaning of Section 1504(a) of the
Code).
"WECO NOMINEES" shall have the meaning specified in Section
9.18(b).
"WECO PLANS" shall have the meaning specified in Section
9.15(d).
"WECO SEC DOCUMENTS" shall have the meaning specified in
Section 6.4.
"WECO SEVERANCE PLANS" shall have the meaning specified in
Section 5.19(e).
"WEEX" shall have the meaning specified in Section 5.1(b).
"WELLS" shall mean oil wells, condensate wells, disposal
wells, natural gas wells, water source wells, injection wells (for injection of
water, recycling of natural gas, injection of substances used in secondary and
tertiary recovery operations, and injection of other substances), and other
wells located (in each case) on the Lands, whether producing, operating, shut
in or temporarily abandoned.
"WEM" shall have the meaning specified in Section 5.1(b).
"WEO" shall have the meaning specified in Section 5.1(b).
"WERCO CERTIFICATE" shall have the meaning specified in
Section 4.1(b).
"WERCO COMMON STOCK" shall mean the common stock, par value
ten dollars ($10.00) per share, of WERCO.
"WERCO EMPLOYEES" shall have the meaning specified in Section
9.15(a).
"WERCO FINANCIAL STATEMENTS" shall have the meaning specified
in Section 5.5(a).
"WERCO GROUP" shall mean WERCO, WEEX, WEM and WEO.
"WERCO'S INTEREST(S)" in a Lease, Well, Unit or other unit of
Property shall mean all of WERCO's rights, titles and interests in and to, and
that may be derived from, that Lease, Well, Unit or other unit of Property.
"WERCO RESERVE REPORTS" shall mean the reserve report for the
STLP interests in the Leases, Wells and Units dated December 31, 1993, as
adjusted by letter dated February 3, 1994, and the reserve report for WERCO's
Interest and the interest of the WERCO Subsidiaries
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(other than STLP) in the Leases, Wells and Units dated January 1, 1994, as
corrected in Schedule 5.20, each prepared by Ryder Scott Company Petroleum
Engineers.
"WERCO SUBSIDIARIES" shall have the meaning specified in
Section 5.1(b).
"WORKING INTEREST" shall mean a percentage of all costs and
expenses associated with the exploration, development, operation and
abandonment of a Lease, Unit or Well.
2. THE MERGER; EFFECTIVE TIME; CLOSING; INTERCOMPANY DEBT
2.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, WERCO will be merged with and into Merger Sub
in accordance with the provisions of the DGCL and the WBCA and with the effect
provided in Section 252 of the DGCL and Section 23B.11.060 of the WBCA. The
separate corporate existence of WERCO shall thereupon cease and Merger Sub
shall be the Surviving Corporation and shall continue to be governed by the
laws of the State of Delaware.
2.2 EFFECTIVE TIME. The Merger shall become effective on such
date and at such time (the "Effective Time") as (a) the Articles of Merger,
including the Agreement and Plan of Merger in the form of attached Exhibit A
(the "Plan of Merger"), shall have been accepted for filing by the Secretary of
State of the State of Washington and the Certificate of Merger shall have been
accepted for filing with the Secretary of State of the State of Delaware, or
(b) such later date and time as may be specified in the Articles or Certificate
of Merger, as appropriate.
2.3 CLOSING. Subject to the fulfillment or waiver of the
conditions set forth in Sections 10 and 11, the closing (the "Closing") shall
take place (a) at the offices of Baker & Botts, L.L.P., 910 Louisiana, Houston,
Texas at 10:00 a.m. on the third business day after the date on which all
conditions specified in Sections 10 and 11 of this Agreement shall be satisfied
or (b) at such other place or time or on such other date as COGC and WECO may
agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Sections 10 and 11 (such date being the "Closing
Date"). The Effective Time shall occur on the Closing Date.
2.4 POST-MERGER EVENTS OCCURRING ON THE CLOSING DATE. Immediately
after the Effective Time and following the consummation of the Merger, pursuant
to the provisions of the Escrow provided in Section 2.5, the Surviving
Corporation shall repay in full to WECO the entire balance of the Intercompany
Debt as of the Closing Date; and COGC shall contribute to the capital of the
Surviving Corporation immediately following the Effective Time such funds as
shall be necessary to enable the Surviving Corporation to repay the
Intercompany Debt. Any indebtedness of WERCO or any WERCO Subsidiary to WECO,
other than the Intercompany Debt, shall be deemed to be a contribution to the
capital of WERCO and cancelled at the Effective Time.
2.5 CLOSING ESCROW. To facilitate the Closing and to ensure that
the Surviving Corporation and COGC satisfy their post-merger obligations
specified in Section 2.4, the parties
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shall establish an escrow ("Escrow") with a bank, trust company or other escrow
company mutually satisfactory to WECO and COGC ("Escrow Agent"); and COGC shall
deposit with said Escrow Agent prior to the Effective Time all funds necessary
to enable the Surviving Corporation to repay in full the Intercompany Debt
immediately after the Effective Time, all pursuant to irrevocable escrow
instructions entered into by WECO, COGC and the Escrow Agent and approved by
their respective counsel.
3. TERMS OF MERGER
3.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation,
until duly amended in accordance with the terms thereof and of the laws of the
State of Delaware.
3.2 BYLAWS. The Bylaws of Merger Sub in effect at the Effective
Time shall be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Certificate of Incorporation of the
Surviving Corporation and of the laws of the State of Delaware.
3.3 DIRECTORS AND OFFICERS. The directors and officers of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation, Bylaws of the Surviving Corporation and the laws of the State of
Delaware.
4. MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE
MERGER
4.1 SHARE CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN
THE MERGER. At the Effective Time, by virtue of the Merger and without any
action by holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) The shares of WERCO Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into the right to receive (i) 2,133,000 fully paid and nonassessable
shares of COGC Common Stock and (ii) 1,134,000 fully paid and
nonassessable shares of COGC Preferred Stock.
(b) All shares of WERCO Common Stock to be converted into
the right to receive shares of COGC Equity Securities, pursuant to
this Section 4.1, shall cease to be outstanding, shall be canceled and
retired and shall cease to exist, and the holder of the certificate
representing such shares of WERCO Common Stock (the "WERCO
Certificate") shall thereafter cease to have any rights with respect
to such shares of WERCO Common Stock, except the right to receive,
upon the surrender of the WERCO
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Certificate in accordance with Section 4.2, that number of shares of
COGC Equity Securities specified above (the "Merger Consideration").
(c) Each share of Common Stock, par value $.10 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall continue to be outstanding and shall continue as
a share of Common Stock of the Surviving Corporation.
4.2 PAYMENT FOR SHARES IN THE MERGER. Following the Effective
Time, upon surrender of the WERCO Certificate for cancellation to COGC, WECO
shall receive for the shares of WERCO Common Stock represented by the WERCO
Certificate, the Merger Consideration and the WERCO Certificate so surrendered
shall forthwith be canceled. Until surrendered, the WERCO Certificate shall,
upon and after the Effective Time, be deemed canceled and for all purposes to
evidence ownership of the number of shares of COGC Equity Securities into which
the shares of WERCO Common Stock have been converted pursuant to Section 4.1.
4.3 NO TRANSFER OF SHARES AFTER THE DAY PRIOR TO THE DATE OF THIS
AGREEMENT. No transfers of shares of WERCO Common Stock will be made on the
stock transfer books of WERCO after the close of business on the day prior to
the date of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF WERCO AND WECO
WERCO and WECO, jointly and severally, hereby represent and warrant to
COGC and Merger Sub as follows:
5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES AND INVESTMENTS.
(a) Each of WERCO and the WERCO Subsidiaries which are
corporations is duly organized, validly existing and in good standing
under the laws of the state of its incorporation and has the requisite
power to carry on its business as it is now being conducted. Each of
WERCO and each WERCO Subsidiary which is a corporation is duly
qualified to conduct business as a foreign corporation in every state
of the United States in which its ownership or lease of property or
conduct of its business and operations makes such qualification
necessary, except for such states in which WERCO's or the WERCO
Subsidiary's failure to be so qualified would not, individually or in
the aggregate, constitute a Material Claim.
(b) The only Subsidiaries of WERCO are Washington Energy
Exploration, Inc., a Washington corporation ("WEEX"), Washington
Energy Marketing, Inc., a Washington corporation ("WEM"), Washington
Energy Oil, Inc., a Washington corporation ("WEO"), and South Texas
Limited Partnership, a Texas limited partnership ("STLP")
(collectively, the "WERCO Subsidiaries").
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(c) Schedule 5.1(c) contains a true, correct and complete
list of each corporation, partnership or joint venture in which WERCO,
directly or indirectly, owns beneficially or of record any
partnership, joint venture or other equity interest which is equal to
or less than a 50% ownership interest (any such partnership, joint
venture or other equity interest being referred to in this Agreement
as an "Investment Interest") and sets forth (i) the jurisdiction of
organization of each such entity and (ii) the type and amount of
Investment Interest in each such entity owned, directly or indirectly,
by WERCO (and if owned indirectly, the name of the entity or entities
owning such Investment Interest). For purposes of this Section 5.1,
WERCO's ownership of a working interest in and to oil and gas
properties pursuant to joint operating agreements, tax partnership
agreements and other industry standard agreements that do not involve
formally-constituted joint venture or partnership arrangements
relating to such oil and gas properties shall not be treated as a
partnership, joint venture or other relevant entity.
(d) STLP is a partnership duly organized, validly
existing and in good standing under the laws of the State of Texas and
has the requisite power to carry on its business as it is now being
conducted. STLP is duly qualified to conduct business as a foreign
partnership in each state of the United States in which its ownership
or lease of property or conduct of its business and operations makes
such qualification necessary, except for such states in which STLP's
failure to be so qualified would not, individually or in the
aggregate, constitute a Material Claim.
5.2 CAPITAL STOCK. The authorized capital stock of WERCO consists
of 1,000,000 shares of Common Stock, ten dollar ($10.00) par value, of which
1,000 shares are outstanding as of the date of this Agreement and will be
outstanding immediately prior to the Effective Time. All outstanding shares of
WERCO Common Stock are owned by WECO. All outstanding shares of WERCO Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and no class of capital stock of WERCO is entitled to preemptive
or cumulative voting rights. All outstanding shares of capital stock of each
of the WERCO Subsidiaries which are corporations are owned by WERCO free and
clear of any Encumbrances and have been duly authorized and validly issued and
are fully paid and nonassessable, and no class of capital stock is entitled to
preemptive or cumulative voting rights. There are not outstanding on the date
of this Agreement any options, warrants or other rights obligating WERCO or any
WERCO Subsidiary to issue any additional shares of capital stock of WERCO or
any WERCO Subsidiary or any other securities convertible into or evidencing the
right to subscribe for any such shares. Except as contemplated in Section
9.20, neither WERCO nor any WERCO Subsidiary has declared, and no person has
any accrued right to receive, any distribution with respect to shares of
capital stock of WERCO or any WERCO Subsidiary. All partnership interests in
STLP owned by WERCO are owned by WERCO free and clear of any Encumbrances
(other than the line of credit agreement with Midland Bank).
5.3 AUTHORIZATION. Upon the approval of this Agreement by the
Board of Directors and the sole shareholder of WERCO, this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
authorized by all necessary corporate action on the part
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of WERCO. Upon such approval, this Agreement shall have been duly executed and
delivered by a duly authorized officer of WERCO and shall constitute a valid
and binding agreement of WERCO, enforceable against WERCO in accordance with
its terms, subject to (a) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application with respect to
creditors, (b) general principles of equity, and (c) the power of a court to
deny enforcement of remedies generally based upon public policy. Before the
Closing Date, WERCO shall have delivered to COGC true and correct copies of any
resolutions duly adopted by the Board of Directors and the sole shareholder of
WERCO approving this Agreement and the transactions contemplated hereby.
5.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by WERCO nor the consummation of the
transactions contemplated hereby will (a) conflict with or constitute a breach
of any provision of the respective articles of incorporation or bylaws of WERCO
or any WERCO Subsidiary; (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Body or other
Person except (i) in connection with the HSR Act, or (ii) any regulatory
approvals or governmental consents normally acquired after the consummation of
transactions such as transactions of the nature contemplated by this Agreement,
where the failure to obtain such consent, approval, authorization or permit or
to make such filing or notification would not prevent or delay in any material
respect the consummation of the transactions contemplated hereby (except as
provided in Section 9.20); (c) result in a default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which WERCO or any WERCO
Subsidiary is a party or by which WERCO or any WERCO Subsidiary or any of their
respective properties or assets may be bound (except as provided in Section
9.20); or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to WERCO, any WERCO Subsidiary or any of their respective
properties or assets, except (i) as set forth on Schedule 5.4, and (ii) for
such defaults (or breaches, rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
will be obtained prior to the Closing Date or which, in the aggregate, would
not have a Material Adverse Effect with respect to WERCO or prevent or delay in
any material respect the consummation of the transactions contemplated hereby.
5.5 FINANCIAL STATEMENTS; NO MATERIAL UNDISCLOSED LIABILITIES.
(a) WERCO has provided to COGC true and correct copies of
(i) its unaudited consolidated balance sheets as of September 30, 1993
and 1992, and the related consolidated statements of operations,
stockholder's equity and cash flows for each of the three years in the
period ended September 30, 1993 and (ii) its unaudited consolidated
balance sheet as of December 31, 1993 and the related consolidated
statements of operations, stockholder's equity and cash flows for the
quarter then ended (collectively, including the related notes, "WERCO
Financial Statements"). Each of the WERCO Financial Statements
presents fairly the consolidated financial position of WERCO and the
WERCO Subsidiaries as of the respective dates thereof and the
consolidated results
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of their operations for the respective periods ended on such dates,
all in conformity with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise
noted therein and subject to normal year-end adjustments and any other
adjustments described therein.
(b) Except as disclosed in the WERCO Financial Statements
or as set forth on Schedule 5.5(b) and except for Environmental
Defects, which are covered by Section 5.16 and Section 8.11, neither
WERCO nor any of the WERCO Subsidiaries has, nor are any of its or
their respective assets subject to, any liability, commitment,
indebtedness or obligation (of any kind whatsoever whether absolute,
accrued, contingent, known, unknown, matured or unmatured)
("Undisclosed Liabilities"), except for Undisclosed Liabilities that
would not have a Material Adverse Effect with respect to WERCO.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the WERCO Financial Statements, the WERCO Reserve Reports or as set forth on
Schedule 5.6 (and except for the acquisition of an additional 12.625% interest
in STLP), since December 31, 1993, WERCO has conducted its Business only in the
ordinary course consistent with past practice and there has not been (a) any
actual or prospective change, development or effect which constitutes a
Material Adverse Effect with respect to WERCO, (b) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to any of WERCO's capital stock, (c) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (d) (i) any
increases in employee compensation expense, other than any such increase that
is in an amount such that, after giving effect thereto, aggregate employee
compensation expense (considered on an annualized basis) does not exceed 110%
of the aggregate previous employee compensation expense reflected in the WERCO
Financial Statements for the most recent fiscal year, (ii) any granting by
WERCO or any of the WERCO Subsidiaries to any officer or other employee of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements as disclosed on Schedule 5.6 or
(iii) any entry by WERCO or any of the WERCO Subsidiaries into any employment,
severance, deferred compensation or termination agreement with any such officer
or other employee, except as disclosed on Schedule 5.6, (e) any change in
accounting methods, principles or practices by WERCO materially affecting the
reported amounts of its assets, liabilities or Business, except insofar as may
have been required by a change in generally accepted accounting principles, (f)
any liability by WERCO or any WERCO Subsidiary with respect to money borrowed
or purchase money indebtedness incurred or any other material liability or
obligation (direct or contingent), except current liabilities in the ordinary
course, (g) any material increase in any bonus, profit sharing, insurance or
other employee benefit plans, (h) any sale, lease or other disposition of
WERCO's Interests in the Properties or any other properties or assets of WERCO,
other than the sale of Hydrocarbons in the ordinary course of business, (i) any
waiver of any right of substantial value or (j) any contract or commitment to
do any of the foregoing.
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5.7 LITIGATION; ORDERS. Except as set forth on Schedule 5.7,
there are no Actions pending or, to WERCO's Knowledge, threatened against WERCO
or any WERCO Subsidiary in which, individually or in the aggregate, an adverse
determination would constitute a Material Claim or that would prevent or delay
in any material respect the consummation of the transactions contemplated
hereby. Except as set forth on Schedule 5.7, there are no judgments or
outstanding orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against WERCO
or any WERCO Subsidiary that, individually or in the aggregate, would (a)
result in a material interference with or the prevention of the continuing
conduct of WERCO's or a WERCO Subsidiary's business substantially in the manner
in which it is presently conducted, or (b) prevent or delay in any material
respect the consummation of the transactions contemplated hereby.
5.8 LICENSES; APPROVALS. Except as set forth on Schedule 5.8,
WERCO and the WERCO Subsidiaries possess all governmental licenses, permits,
franchises and other authorizations of any Governmental Body (the "Licenses")
which are necessary to the ownership or operation of the Business as currently
conducted, and all such Licenses are in full force and effect except where the
failure to possess any License or the failure to be in such force and effect
would not, individually or in the aggregate, constitute a Material Claim.
Except as set forth on Schedule 5.8, no proceeding is pending or, to WERCO's
Knowledge, threatened, seeking the revocation or limitation of any such License
other than proceedings which would not, individually or in the aggregate,
constitute a Material Claim.
5.9 LABOR MATTERS. There are no agreements with labor unions or
associations representing employees of WERCO or any WERCO Subsidiary. No work
stoppage against WERCO or any WERCO Subsidiary is pending or, to WERCO's
Knowledge, threatened. Except as set forth on Schedule 5.9, neither WERCO nor
any WERCO Subsidiary is involved in or, to WERCO's Knowledge, threatened with
any labor dispute, arbitration, lawsuit or administrative proceeding relating
to labor matters involving the employees of WERCO or any WERCO Subsidiary
(excluding routine workers' compensation claims) other than disputes,
arbitrations, lawsuits and proceedings which, individually or in the aggregate,
would not constitute a Material Claim.
5.10 COMPLIANCE WITH LAWS. The conduct of the Business by WERCO
and the WERCO Subsidiaries complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders and decrees of any Governmental Body
applicable thereto, except for (a) violations or failures so to comply, if any,
that would not constitute a Material Claim and (b) compliance with
Environmental Laws, which is covered by Section 5.16 and Section 8.11.
5.11 INSURANCE. Schedule 5.11(a) sets forth a list of all
insurance policies issued in favor of WERCO and the WERCO Subsidiaries that are
currently in force and effect as of the date of this Agreement. Except as set
forth on Schedule 5.11(b), each policy listed on Schedule 5.11(a) will remain
in force and effect until the Effective Date.
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5.12 MATERIAL CONTRACTS. Except as set forth on Schedule 5.12, as
of the date of this Agreement, neither WERCO nor any WERCO Subsidiary is a
party to or bound by any lease, agreement or other contract or legally binding
contractual right or obligation (collectively, "Contracts") of a type described
below:
(a) Any employment or consulting Contract that is not
terminable at will without penalty by WERCO or any WERCO Subsidiary;
(b) Any collective bargaining agreement with any labor
union covering the employees of WERCO or any WERCO Subsidiary;
(c) Any Contract for capital expenditures or the
acquisition or construction of fixed assets which requires aggregate
future payments in excess of $50,000.00, net to WERCO's Interest for
any single project;
(d) Any indenture, mortgage, loan, credit, sale-leaseback
or similar Contract (excluding the Intercompany Debt) under which
WERCO or any of the WERCO Subsidiaries has borrowed any money or
issued any note, bond, indenture or other evidence of indebtedness for
borrowed money, sold and leased back assets, or guaranteed
indebtedness for money borrowed by others (including hedge, swap,
exchange or similar contracts entered into in the ordinary course of
business) in excess of $100,000.00, whether or not reflected in the
WERCO Financial Statements;
(e) Any Hydrocarbons sales agreement, purchase contract,
marketing agreement, processing agreement, transportation agreement or
any other agreement containing options, calls on or dedication of
production under which WERCO or any WERCO Subsidiary is a party which
is not terminable without penalty on thirty (30) or fewer days'
notice;
(f) Any Contract for, or that contemplates, the sale,
lease, farmout or other disposition of any of WERCO's Interests in
Leases, Lands, Wells or Units;
(g) Any Contract for the sale of any asset (other than
sales of Hydrocarbons production in the ordinary course of Business)
of WERCO or any WERCO Subsidiary requiring payments in excess of
$100,000;
(h) Any Contract which constitutes a lease (other than a
Lease or an interest therein), under which WERCO or any WERCO
Subsidiary is the lessor or lessee of real or personal property which
lease (i) cannot be terminated by WERCO or any WERCO Subsidiary
without penalty upon not more than thirty (30) calendar days' notice,
and (ii) involves an annual base rental in excess of $50,000;
(i) Any other Contract which (i) involves future payment
by or to WERCO or any WERCO Subsidiary in excess of $25,000, and (ii)
is not entered into in the
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ordinary course of the conduct of the Business or is not a Lease under
which WERCO or any WERCO Subsidiary is lessor or lessee;
(j) Any farmout agreement, participation agreement or
other Oil and Gas Contract that will or reasonably may increase or
decrease WERCO's or any WERCO Subsidiary's Working Interest or Net
Revenue Interest in any Lease, Lands, Unit or Well, including any such
increase or decrease resulting from any reversion, "back-in,"
"carried" interest arrangement, nonconsent arrangement, conversion
option or other similar provision;
(k) Any (i) exploration agreements, (ii) participation
agreements, (iii) area of mutual interest agreements and (iv)
agreements for the purchase of producing properties having a purchase
price of more than $1,500,000;
(l) Any surety, performance or maintenance bond in excess
of $100,000.00;
(m) Any plan, contract or arrangement providing for
bonuses, pensions, deferred compensation, retirement plan payments,
profit sharing, incentive pay or any other employee right or benefit;
(n) Any Contract that restricts the right of WERCO or any
WERCO Affiliate to engage in any line of business; or
(o) Any Contract, other than those relating to insurance
policies set forth on Schedule 5.11(a), to which WECO or any of its
Affiliates (other than WERCO and the WERCO Subsidiaries) is a party
and to which WERCO or any WERCO Subsidiary is obligated, or is the
beneficiary (which benefit will terminate at the Effective Time), and
the amount of such obligation or benefit net to WERCO or any WERCO
Subsidiary is in excess of $100,000.00.
Except as set forth on Schedule 5.12, each Contract listed or
described on Schedule 5.12 is valid and in full force and effect. Except as
set forth on Schedule 5.12, WERCO and each WERCO Subsidiary has performed all
material obligations required to be performed through the date of this
Agreement under the Contracts so listed or described and has not breached and
is not in default thereunder (and to WERCO's Knowledge no event or occurrence
exists which would, with or without the lapse of time, or the giving of notice,
or both, constitute a breach or default thereunder) and to WERCO's Knowledge
the other parties have not breached and are not in default thereunder (and no
event or occurrence exists which would, with or without the lapse of time, or
the giving of notice, or both, constitute such a breach or default thereunder),
except in any such case for such breaches or defaults which would not result in
the cancellation or termination of any such contract or in the acceleration of
any payment due thereunder or otherwise constitute a Material Claim.
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Except as set forth on Schedule 5.12 and to the Knowledge of WERCO, no
purchaser under any gas sales or transportation agreement has notified WERCO or
any WERCO Subsidiary or Affiliate (or, to any such entity's knowledge, the
operator of any property), of its intent to cancel, terminate or renegotiate
any Hydrocarbons sales agreement or otherwise to fail and refuse to take-or-pay
for gas in the quantities and at the price set out in any gas sales agreement,
whether such failure or refusal was pursuant to any force majeure, market-out
or similar provisions contained in the gas sales agreement, or otherwise.
Except as set forth on Schedule 5.12, neither WERCO nor any WERCO Subsidiary is
obligated in any gas sales or transportation agreement or other Oil and Gas
Contract by virtue of (a) any prepayment arrangement, (b) a take-or-pay or
similar provision, (c) any demand charge, or (d) a production payment, or any
other arrangements to deliver Hydrocarbons produced from the properties of
WERCO at some future time without then or thereafter receiving the contract
price therefor. Payments for Hydrocarbons sold under each gas sales agreement
or other Oil and Gas Contract are current and in accordance with the applicable
contractual pricing provisions, subject to adjustment in accordance with the
terms of the agreement or other Oil and Gas Contract; and except as disclosed
in Schedule 5.12, neither WERCO nor any WERCO Subsidiary is obligated under any
gas-balancing agreement, operating agreement, transportation agreement,
gathering agreement, prepayment agreement, other Oil and Gas Contract,
common-law principles of cotenancy or otherwise, to deliver any volumes of
natural gas, or to permit any other party to take any volumes of natural gas,
produced from or attributable to WERCO's Interests in Properties without then
or thereafter receiving full payment for such natural gas.
5.13 TITLE TO LEASES. WERCO has Defensible Title to the Working
Interests and Net Revenue Interests described on Schedule 5.13 in and to the
corresponding Leases, Lands, Wells and Units set forth on Schedule 5.13. The
exclusive remedy of COGC and Merger Sub for any breach of the warranty set
forth in the immediately preceding sentence shall be the remedy provided for in
Section 8.
5.14 TITLE TO PROPERTIES OTHER THAN LEASES; CONDITION OF
FACILITIES. Except as set forth on Schedule 5.14, WERCO and the WERCO
Subsidiaries have good and marketable title to all of the properties and assets
necessary to conduct their Business, including the properties and assets
reflected in the WERCO consolidated balance sheet as at December 31, 1993
(other than properties and assets disposed of after that date in the ordinary
course of business) other than the Leases (which are addressed in other
sections of the Agreement), free and clear of all Encumbrances except Permitted
Encumbrances. All leases (other than the Leases (which are addressed in other
sections of the Agreement)) necessary in any material respect for the conduct
of the respective businesses of WERCO and the WERCO Subsidiaries are valid and
subsisting and are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any
existing default or event which with the notice or lapse of time or both would
become a default other than defaults under such leases which in the aggregate
would not constitute a Material Claim with respect to WERCO. The facilities
and equipment owned or leased by WERCO or any of the WERCO Subsidiaries which
are used by WERCO or such WERCO Subsidiary in the operation of their respective
businesses are in good operating condition and repair, normal wear and tear
excepted, other than (a) any items of Equipment
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having a value of less than $100,000.00 in the aggregate and which is not
material to the operation of the business of WERCO or any of the WERCO
Subsidiaries and (b) Equipment scheduled for replacement in the ordinary course
of Business.
5.15 STATUS AND OPERATION OF OIL AND GAS PROPERTIES. Except as set
forth on Schedule 5.15:
(a) the Leases and other Oil and Gas Contracts are in
full force and effect in accordance with their respective terms;
(b) to WERCO's Knowledge, all payments, including
royalties, delay rentals and shut-in royalties, due under the Leases
and other Oil and Gas Contracts, have been made;
(c) to WERCO's Knowledge, there is no breach or default
by WERCO or any other party, nor any event, fact or circumstance that
with the lapse of time, the giving of notice or both would constitute
such a breach or default, under any Lease or other Oil and Gas
Contract;
(d) neither WERCO nor any WERCO Affiliate has received or
given any notice to terminate, cancel, rescind or procure a judicial
reformation of any Lease; and
(e) to WERCO's Knowledge, there are no provisions in any
Lease, or other Oil and Gas Contract which would decrease the Net
Revenue Interest of WERCO with respect to such Lease, Well or Unit as
shown on Schedule 5.13 or increase the Working Interest of WERCO with
respect to any Lease, Well or Unit above that shown onSchedule 5.13;
except where the inaccuracy of any such representations in this Section 5.15
would be immaterial.
5.16 ENVIRONMENTAL MATTERS. To WERCO's Knowledge and except as set
forth on Schedule 5.16, the Business of WERCO and the WERCO Subsidiaries has
been conducted in compliance with all applicable Environmental Laws. Without
limitation of the foregoing, there are no existing, pending, or to WERCO's
Knowledge, threatened, actions, suits, investigations, inquiries, proceedings,
notices of violation, liabilities or clean-up obligations by or to any
Governmental Body or third party relating to any substances or matters
regulated under any Environmental Laws with respect to the Business, the
properties or the assets of WERCO and the WERCO Subsidiaries, other than as set
forth on Schedule 5.16; and all material notices, permits and similar
authorizations, if any, required to be obtained or filed in connection with the
conduct of the Business, including, without limitation, notices, permits and
authorizations related to the treatment, storage, disposal, release or
threatened release of hazardous wastes or substances or solid wastes into the
environment, have been duly obtained or filed. The term "release" has the
meaning specified in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), and the term "disposal" (or "disposed")
has the meaning specified
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in the Resource Conservation and Recovery Act, as amended ("RCRA"). For the
purposes hereof, "Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, agreements or determinations of any
Governmental Body pertaining to noise or to air, water or land pollution or
other environmental protection matters or to human health matters in any and
all jurisdictions in which the assets are operated, including, without
limitation, the Clean Air Act, as amended, CERCLA, the Federal Water Pollution
Control Act, as amended, RCRA, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, comparable state and local laws and
other similar laws. The exclusive remedy of COGC and Merger Sub for any breach
of the representations set forth in this Section 5.16 is set forth in Section
8.11.
5.17 CONDEMNATION. Except as set forth on Schedule 5.17, there are
no pending or, to WERCO's Knowledge, threatened condemnation or eminent domain
proceedings, or contemplated sales in lieu thereof, involving partial or total
taking of any Lease or other real property interests of the WERCO Business
other than proceedings or sales in lieu thereof that, individually or in the
aggregate, would not constitute a Material Claim.
5.18 TAXES.
(a) Except as set forth on Schedule 5.18(a), all federal,
state, local and foreign income tax returns required to be filed with
respect to WERCO, the WERCO Subsidiaries or any affiliated group
(within the meaning of Section 1504(a) of the Code) of corporations,
or "combined group" for state tax purposes, of which WERCO was a
member for the period to which any such returns relate (the "WERCO
Groups"), have been filed in a timely manner (taking into account all
extensions of due dates), such returns accurately reflect the facts
regarding the income, business, assets, operations, activities, status
or other matters of WERCO and all members of the WERCO Groups (in
their role as members of the WERCO Groups, the "WERCO Affiliates") and
any other matters required to be shown thereon and all income taxes,
including interest and penalties, shown as due thereon have been paid.
Except as set forth on Schedule 5.18(a) (which taxes are being
contested in good faith by appropriate proceedings and for which
adequate reserves have been provided), neither WERCO nor any WERCO
Affiliate has received any written notice of any deficiencies for any
income taxes in respect of WERCO and the WERCO Affiliates for any
period for which such WERCO Affiliate was a member of a WERCO Group
which remain unpaid and which individually or in the aggregate would
constitute a Material Claim. The federal income tax returns of or
with respect to WERCO or any WERCO Affiliate have been audited and the
statute of limitations has expired for all taxable periods up to and
including the taxable year ended September 30, 1989. Except as set
forth onSchedule 5.18(a), neither WERCO nor any WERCO Affiliate has
executed any waiver of any statute of limitations on the assessment or
collection of any income tax or executed or filed with the Internal
Revenue Service ("IRS") any agreement now in effect extending the
period for assessment or collection of any income taxes against WERCO
or any WERCO Affiliate for any period for which such WERCO Affiliate
was a member of a WERCO Group.
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(b) Except as set forth on Schedule 5.18(a) (which taxes
are being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided), and excluding taxes based
upon product reallocations incurred in the ordinary course of
Business, all ad valorem, property, production, severance and similar
taxes which have become due and payable and assessments based on or
measured by the ownership of property or the production of
Hydrocarbons or the receipt of proceeds therefrom on WERCO's interest
or the interest of any WERCO Affiliate for all periods (excluding
income taxes) which have become due and payable have been paid by or
on behalf of WERCO, provided that no breach of this representation
shall be deemed to have occurred by the nonpayment of such taxes if
such nonpayment would not result in any payment by WERCO or any WERCO
Subsidiary in excess of $50,000, or if such taxes may have been
assessed or given rise to an Encumbrance, but have not yet become due
and payable.
(c) Except as set forth on Schedule 5.18(a) and except
for the WECO Affiliated Group or any predecessor group, WERCO has
never been a member of an affiliated group of corporations, within the
meaning of Section 1504(a) of the Code, other than as a common parent
corporation, and none of the WERCO Group has ever been a member of an
affiliated group of corporations, within the meaning of Section
1504(a) of the Code, other than where WERCO was the common parent
corporation of such affiliated group.
(d) All material elections with respect to Taxes
affecting WERCO or the WERCO Subsidiaries as of the date hereof are
set forth onSchedule 5.18(d). After the date hereof, no material
election with respect to Taxes will be made without the written
consent of COGC.
(e) WECO has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or
any corresponding provision of state, local or foreign income tax law)
or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income tax law) apply to any
disposition of any asset owned by it.
(f) None of the assets of WERCO or the WERCO Subsidiaries
is property that is required to be treated as being owned by any other
person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(g) None of the assets of WERCO or the WERCO Subsidiaries
directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code.
(h) None of the assets of WERCO or the WERCO Subsidiaries
is "tax-exempt use property" within the meaning of Section 168(h) of
the Code.
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(i) Neither WECO nor WERCO has made or will make a deemed
dividend election under Regulations Section 1.1502-32(f)(2) or a
consent dividend election under Section 565 of the Code.
(j) None of WERCO or any of the WERCO Subsidiaries has
agreed to make nor is required to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or
otherwise.
(k) None of WERCO or any of the WERCO Subsidiaries has
participated in nor will participate in an international boycott
within the meaning of Section 999 of the Code.
(l) None of WERCO or any of the WERCO Subsidiaries is a
party to any agreement, contract, arrangement or plan that resulted or
would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the
Code.
(m) WECO is not a person other than a United States
person for purposes of Section 1445 of the Code.
(n) WERCO's estimated basis and estimated excess loss
account, if any, in each WERCO Subsidiary (other than STLP) is set
forth onSchedule 5.18(n).
5.19 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.19 lists all Employee Benefit Plans and
Employee Benefit Arrangements covering employees of WERCO or the WERCO
Subsidiaries. True and complete copies thereof, where in writing,
have previously been or will be delivered to COGC along with the most
recent IRS determination letter issued with respect to any such plan.
(b) With respect to each of such Employee Benefit Plans
intended to qualify under Section 401(a) of the Code, except as set
forth on Schedule 5.19, (i) a favorable determination letter has been
issued by the IRS and (ii) there have been no prohibited transactions
(within the meaning of Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the
Code), for which no exemption exists under Section 408 of ERISA or
Section 4795 of the Code and for which there has been or could be any
liability or civil penalty assessed pursuant to Section 502(i) of
ERISA or taxes imposed by Section 4975 of the Code.
(c) Except as set forth on Schedule 5.19, (i) such
Employee Benefit Plans and Employee Benefit Arrangements have been
maintained in accordance with their terms and all provisions of
applicable law, (ii) WECO, WERCO and the WERCO Subsidiaries are not
subject to any penalties, liens, taxes or other liabilities under
ERISA or the Code
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relating to any Employee Benefit Plans and Employee Benefit
Arrangements and WECO Plans and (iii) no Employee Benefit Plan,
Employee Benefit Arrangement or WECO Plan provides retiree medical
benefits except to the extent required by Section 4980B of the Code.
(d) Neither WERCO nor the WERCO subsidiaries sponsor or
maintain any employee benefit plan as defined in Section 3(3) of
ERISA. No WECO Plan is a multiemployer plan as defined in ERISA and
no multiemployer plan as defined in ERISA is maintained in the WECO
controlled group as defined in Section 414 of the Code. The only
employee benefit plan as defined in Section 3(2) of ERISA maintained
in the WECO controlled group (as defined in Section 414 of the Code)
that is subject to Title IV of ERISA is the Retirement Plan for
Employees of Washington Natural Gas.
(e) The parties agree that COGC, the Surviving
Corporation and its Subsidiaries shall not assume the obligations,
responsibilities and liabilities, and shall not be the Resulting
Entity under the Washington Energy Resources Company Retention Plan
Definitions and Administration Guidelines of Retention For Vice
Presidents, as amended, and the Washington Energy Resources Company
Retention Plan Definitions and Administration Guidelines of Retention
Benefits, as amended (collectively, the "WECO Severance Plans"), and
that COGC, the Surviving Corporation and its Subsidiaries shall have
no obligation for any severance pay, medical benefits or any other
benefit to any WERCO Employee, except to the extent a WERCO Employee
becomes a Continuing WERCO Employee and qualifies for benefits under
the COGC Benefit Plans, and that WECO agrees to assume all
responsibilities, obligations and liabilities and shall be the
Resulting Entity under the Severance Plans. Furthermore, the parties
specifically agree that WECO shall assume all obligations,
responsibilities and liabilities under (i) the Annual Incentive Plan
for Washington Energy Resources, (ii) the Employment and Change in
Control Agreement for Keith E. Anderson and (iii) all early
termination cost benefits under all Professional Service Agreements
set forth onSchedule 5.12, and that COGC, the Surviving Corporation
and its Subsidiaries shall have no such obligations, responsibilities
and liabilities.
5.20 RESERVE REPORTS. WERCO and WECO make no warranty or
representation as to quantity, quality, value or recoverability of the
Hydrocarbon reserves attributable to the Properties, except that WERCO and WECO
warrant and represent that (a) the production history data, data on operating
history, data on payout account status, seismic data and well logs (excluding
any opinion, interpretation, analysis, evaluation or other similar work
product) that WERCO, the WERCO Subsidiaries or WECO provided to Ryder Scott
Company Petroleum Engineers to prepare the WERCO Reserve Reports are true and
correct in all material respects, (b) since the respective dates of the WERCO
Reserve Reports, there have been no changes to the reserves reflected therein,
except for production in the ordinary course of business, and (c) all Wells
which are identified in the WERCO Reserve Reports as being producing, shut-in
or behind pipe were in fact and continue to be producing, shut-in or behind
pipe.
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5.21 BROKERAGE FEES AND COMMISSIONS. No broker, finder or
investment banker other than Lehman Brothers Inc. is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby as the result of arrangements made by or on behalf of
WERCO, and neither COGC nor the Surviving Corporation will incur any liability
therefor.
5.22 OPERATIONS AND EXPENDITURES. Except as disclosed on Schedule
5.22, there are no outstanding calls or payments under AFE's for any single
expenditure to be made by WERCO or any WERCO Affiliate in excess of $75,000
which are past due.
5.23 TAX PARTNERSHIPS. Except as disclosed on Schedule 5.1(c), no
Property is subject to a tax partnership.
5.24 WELLS. All Wells have been drilled and completed on the Lands
or within the limits otherwise permitted by an Oil and Gas Contract or Unit
Agreement. All drilling and completion, and plugging and abandonment, of such
Wells, and all development and operations on the Lands have been conducted in
compliance in all material respects with all applicable laws, ordinances,
rules, regulations, permits, judgments, orders and decrees of Governmental
Bodies with jurisdiction. No Well is subject to penalty or reduced allowables
because of any overproduction or other violation of applicable laws,
ordinances, rules, regulations, permits, judgments, orders or decrees of
Governmental Bodies with jurisdiction that would prevent such Well from being
entitled to its full legal and regular allowable.
5.25 FULL DISCLOSURE. The representations and warranties by WERCO
or WECO in this Agreement, the schedules and exhibits to this Agreement, and in
any certificate or document furnished or to be furnished by WECO or WERCO on
the Closing Date, when considered as a whole, do not contain or will not
contain any untrue statement of a material fact, or omit or will omit to state
a material fact necessary to make the statements contained herein or therein
not misleading. There are no implied representations or warranties on the part
of WECO and WERCO, or either of them.
5.26 INTEREST ADDITIONS. Neither WERCO nor WECO has any Knowledge
of the existence of any Interest Additions as of the date hereof.
6. REPRESENTATIONS AND WARRANTIES OF WECO
WECO hereby represents and warrants to COGC and Merger Sub as follows:
6.1 ORGANIZATION. WECO is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
is not required to qualify to do business in any other state and has the
requisite power to carry on its business as it is now being conducted.
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6.2 AUTHORIZATION. Upon the approval of this Agreement by the
Board of Directors of WECO, this Agreement and the consummation of the
transactions contemplated hereby shall have been duly authorized by all
necessary corporate action on the part of WECO. Upon such approval, this
Agreement shall have been executed and delivered by a duly authorized officer
of WECO and shall constitute a valid and binding agreement of WECO, enforceable
against WECO in accordance with its terms, subject to (a) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application with respect to creditors, (b) general principles of equity
and (c) the power of a court to deny enforcement of remedies generally based
upon public policy. By the Closing Date, WECO shall have delivered to COGC
true and correct copies of any resolutions duly adopted by the Board of
Directors of WECO approving this Agreement and the transactions contemplated
hereby.
6.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by WECO nor the consummation of the transactions
contemplated hereby will (a) conflict with or constitute a breach of any
provision of the restated articles of incorporation or bylaws of WECO; (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Body or other Person, except (i) in
connection with the HSR Act or (ii) any regulatory approvals or governmental
consents normally acquired after the consummation of transactions such as
transactions of the nature contemplated by this Agreement, where the failure to
obtain such consent, approval, authorization or permit or to make such filing
or notification would not prevent or delay in any material respect the
consummation of the transactions contemplated hereby; (c) result in a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which WECO
is a party or by which WECO or any of its properties or assets may be bound; or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to WECO or any of its properties or assets, except (i) as set forth
on Schedule 6.3 and (ii) for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or will be obtained prior to the Closing Date or which, in the
aggregate, would not have a Material Adverse Effect with respect to WECO or
prevent or delay in any material respect the consummation of the transactions
contemplated hereby.
6.4 SEC DOCUMENTS. Since September 30, 1993 WECO has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Act of 1933, as amended ("Securities Act"), the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and the respective rules and
regulations promulgated by the SEC thereunder (the "WECO SEC Documents"), all
of which, when filed, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be.
As of their respective dates, with respect to all information contained therein
relating to WERCO and WERCO Subsidiaries, none of the WECO SEC Documents
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. With respect to all information contained therein relating to
WERCO and the
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WERCO Subsidiaries and, except to the extent that information contained in any
WECO SEC Document has been revised or superseded by a later filed WECO SEC
Document, none of the WECO SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.5 INVESTMENT INTENT. WECO hereby confirms that the COGC Equity
Securities which it will receive in the Merger will be acquired for investment
for WECO's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that WECO has no present
intention of selling, granting any participation in or otherwise distributing
the COGC Equity Securities. By executing this Agreement, WECO further
represents that it has no present intention of selling, granting any
participation in or otherwise distributing the same in a manner contrary to the
Securities Act or applicable state law.
6.6 RESTRICTED SECURITIES. WECO understands that the shares of
COGC Equity Securities that it will receive in the Merger are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from COGC in a transaction not involving a public offering and
that under such laws and applicable regulations such shares of COGC Equity
Securities may be resold without registration under the Securities Act only in
certain limited circumstances and in accordance with the terms and conditions
set forth in the legend described in Section 6.7. In this connection, WECO
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
6.7 LEGEND. To the extent applicable, each certificate evidencing
any of the shares of the COGC Equity Securities issued to WECO shall be
endorsed with a legend in substantially the form set forth below, and WECO
covenants that, except to the extent such restrictions are waived by COGC, WECO
shall not transfer the shares represented by any such certificate without
complying with the restrictions on transfer described in the legend endorsed on
such certificate:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE LAW, AND NO INTEREST THEREIN
MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID
SECURITIES, OR (ii) THIS CORPORATION RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY
TO THIS CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
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6.8 RESIDENCY. For purposes of the application of state
securities laws, WECO hereby confirms that it is a resident of the State of
Washington.
7. REPRESENTATIONS AND WARRANTIES OF COGC AND MERGER SUB
Each of COGC and Merger Sub hereby represents and warrants to WERCO
and WECO as follows:
7.1 ORGANIZATION AND QUALIFICATION. Each of COGC and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has the requisite power to carry on its business
as it is now being conducted. Each of COGC and Merger Sub is duly qualified to
conduct business as a foreign corporation in every state of the United States
in which its ownership or lease of property or conduct of its business and
operations makes such qualification necessary, except for such states in which
COGC's or Merger Sub's failure to be so qualified would not, individually or in
the aggregate, constitute a Material Claim.
7.2 CAPITAL STOCK. The authorized capital stock of COGC consists
of 40,000,000 shares of Class A Common Stock, par value $.10 per share, of
which 20,583,220 shares are outstanding as of the date of this Agreement,
800,000 shares of Class B Common Stock, par value $.10 per share, of which no
shares are outstanding on the date of this Agreement, and 5,000,000 shares of
Preferred Stock, par value $.10 per share, of which 692,439 shares of a $3.125
Convertible Preferred Stock are outstanding on the date of this Agreement. All
outstanding shares of COGC Common Stock and $3.125 Convertible Preferred Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, and no class of capital stock of COGC is entitled to preemptive
or cumulative voting rights.
7.3 AUTHORIZATION. This Agreement and the consummation of the
transactions contemplated hereby have been approved by the respective Boards of
Directors of COGC and Merger Sub and have been duly authorized by all other
necessary corporate action on the part of COGC and Merger Sub; provided,
however, if the approval by the shareholders of COGC is required under the laws
of the state of incorporation of COGC to authorize COGC Equity Securities to be
issued to WECO in the Merger or if approval of the Merger is required under the
rules and regulations of the exchange on which the COGC Common Stock is traded,
such COGC shareholder approval prior to closing will have been obtained. The
COGC Equity Securities to be issued pursuant to Section 4 will, when issued, be
duly authorized, validly issued, fully paid and nonassessable, and no
shareholder of COGC will have any preemptive right of subscription or purchase
in respect thereof. This Agreement has been duly executed and delivered by a
duly authorized officer of each of COGC and Merger Sub and constitutes a valid
and binding agreement of COGC and Merger Sub, enforceable against COGC and
Merger Sub in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application with respect to creditors, (b) general principles of equity and (c)
the power of a court to deny enforcement of remedies generally based upon
public policy. COGC and Merger Sub have delivered to WECO and WERCO true and
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correct copies of resolutions duly adopted by the Board of Directors of each of
COGC and Merger Sub approving this Agreement.
7.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by COGC or by Merger Sub nor the consummation of
the transactions contemplated hereby will (a) conflict with or constitute a
breach of any provision of the respective certificate of incorporation or
bylaws of COGC or Merger Sub; (b) require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Body or other
Person, except (i) in connection with the HSR Act or (ii) any regulatory
approvals or governmental consents normally acquired after the consummation of
transactions such as transactions of the nature contemplated by this Agreement,
where the failure to obtain such consent, approval, authorization or permit or
to make such filing or notification, would not prevent or delay in any material
respect the consummation of the transactions contemplated hereby; (c) result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which COGC or any COGC Subsidiaries, including but not limited to Merger
Sub, is a party or by which COGC or any of the COGC Subsidiaries, including but
not limited to Merger Sub, or any of their respective properties or assets may
be bound; (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to COGC, any of the COGC Subsidiaries, including but not
limited to Merger Sub, or any of their respective properties or assets; or (e)
constitute a "Triggering Event" pursuant to the Rights Agreement dated as of
March 28, 1991, as amended, between COGC and The First National Bank of Boston,
as rights agent except (i) as set forth on Schedule 7.4, and (ii) for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or will be obtained prior to
the Closing Date or which, in the aggregate, would not have a Material Adverse
Effect with respect to COGC or prevent or delay in any material respect the
consummation of the transactions contemplated hereby.
7.5 SEC DOCUMENTS. COGC has delivered (or within fifteen (15)
business days of the date hereof will deliver) to WECO and to WERCO true and
complete copies of the following documents (collectively, the "COGC SEC
Documents"):
(a) COGC's annual report on Form 10-K, for the years
ended December 31, 1992 (without exhibits) and
December 31, 1993 (with exhibits);
(b) COGC's quarterly reports on Form 10-Q (with exhibits)
for the quarters ended March 31, 1993, June 30, 1993
and September 30, 1993; and
(c) COGC's definitive proxy statement relating to COGC's
1993 annual meeting of stockholders.
All of the COGC SEC Documents, when filed, complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act, as
the case may be. As of their respective dates, none of the COGC SEC Documents
contained or will contain any untrue
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statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any COGC SEC
Document has been revised or superseded by a later filed COGC SEC Document,
none of the COGC SEC Documents contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
7.6 FINANCIAL STATEMENTS; NO MATERIAL UNDISCLOSED LIABILITIES.
(a) COGC has delivered (or within fifteen (15) business
days will deliver) to WERCO true and correct copies of its audited
consolidated balance sheets as of December 31, 1993 and 1992, and the
related consolidated statements of operations, stockholders' equity
and cash flows for each of the three (3) years in the period ended
December 31, 1993 (collectively, including the related notes, "COGC
Financial Statements"). Each of the COGC Financial Statements
presents fairly the consolidated financial position of COGC and the
COGC Subsidiaries as of the respective dates thereof, and the
consolidated results of their operations for the respective periods
ended on such dates, all in conformity with generally accepted
accounting principles consistently applied during the periods
involved, except as otherwise noted therein and any other adjustments
described therein.
(b) Except as disclosed in the COGC SEC Documents,
neither COGC nor any of the COGC Subsidiaries has, nor are any of its
or their respective assets subject to, any Undisclosed Liabilities,
except for Undisclosed Liabilities that would not have a Material
Adverse Effect with respect to COGC.
7.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the COGC SEC Documents, the COGC Financial Statements or as set forth on
Schedule 7.7, since December 31, 1993, COGC has conducted its Business only in
the ordinary course consistent with past practice and there has not been (a)
any actual or prospective change, development or effect which constitutes a
Material Adverse Effect with respect to COGC, (b) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to any of COGC's capital stock, (c) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (d) any change
in accounting methods, principles or practices by COGC materially affecting the
reported amounts of its assets, liabilities or Business, except insofar as may
have been required by a change in generally accepted accounting principles.
7.8 LITIGATION; ORDERS. As of the date hereof, except as set
forth on Schedule 7.8, there are no Actions pending or, to the Knowledge of
COGC, threatened against COGC or any COGC Subsidiary in which individually, or
in the aggregate, an adverse determination would constitute a Material Claim or
that would prevent or delay in any material respect the
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consummation of the transactions contemplated hereby. Except as set forth on
Schedule 7.8, there are no judgments or outstanding orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against COGC or any COGC Subsidiary that
individually, or in the aggregate, would (i) result in a material interference
with or the prevention of the continued conduct of COGC's Business
substantially in the manner in which it is presently conducted or (ii) prevent
or delay in any material respect the consummation of the transactions
contemplated hereby.
7.9 COMPLIANCE WITH LAWS. The conduct of the Business by COGC and
the COGC Subsidiaries complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto, except for
violations or failures so to comply, if any, that would not constitute a
Material Claim.
7.10 TITLE TO PROPERTIES. Except as described in the COGC SEC
Documents or as set forth on Schedule 7.10, COGC and the COGC Subsidiaries have
good and defensible title to all of the properties and assets necessary to
conduct their Business, including the properties and assets reflected in the
COGC consolidated balance sheet as at December 31, 1993 (other than properties
and assets disposed of in the ordinary course of business), free and clear of
all Encumbrances except Encumbrances, if any, which, individually or in the
aggregate, do not constitute a Material Adverse Effect with respect to COGC.
All leases necessary in any material respect for the conduct of the respective
businesses of COGC and the COGC Subsidiaries are valid and subsisting and are
in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or
event which with the notice or lapse of time or both would become a default
other than defaults under such leases which in the aggregate would not result
in a Material Adverse Effect with respect to COGC.
7.11 FINANCING. COGC or Merger Sub has cash on hand or financing
commitments, copies of which have been provided to WERCO, that are sufficient
to satisfy all of its, Merger Sub's or the Surviving Corporation's obligations
under this Agreement to be performed at Closing, including, but not limited to,
the obligation of the Surviving Corporation described in Section 2.4. COGC is
not aware of any event or occurrence which would result in any of the
conditions to its right to funds under such financing commitments not to be
satisfied, and COGC will provide to WERCO such documentation as WERCO may
reasonably request to confirm COGC's financial capacity.
7.12 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES.
(a) Merger Sub was formed by COGC solely for the purpose
of engaging in the transactions contemplated hereby.
(b) As of the Effective Time, 100% of the capital stock
of Merger Sub will be owned directly by COGC. Further, there are not
as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights,
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commitments or any other agreements of any character which Merger Sub
is a party to, or may be bound by, requiring it to issue, transfer,
sell, purchase, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire any shares of capital stock of
Merger Sub.
(c) As of the date hereof and the Effective Time, except
for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated
thereby and hereby, Merger Sub has not and will not have incurred,
directly or indirectly, any obligations or liabilities or engaged in
any business or activities of any type or kind whatsoever or entered
into any agreements or arrangements with any Person or entity.
7.13 BROKERAGE FEES AND COMMISSIONS. No broker, finder or
investment banker other than Merrill Lynch & Co. is entitled to any brokerage,
finder's fee or other fee or commission in connection with the transactions
contemplated hereby as the result of arrangements made by or on behalf of COGC,
and neither WERCO nor WECO will incur any liability therefor.
7.14 FULL DISCLOSURE. The representations and warranties by COGC
and Merger Sub in this Agreement, the schedules and exhibits to this Agreement,
and in any certificate or document furnished or to be furnished by COGC or
Merger Sub on the Closing Date, when considered as a whole, do not contain or
will not contain any untrue statement of a material fact, or omit or will omit
to state a material fact necessary to make the statements contained herein or
therein not misleading. There are no implied representations or warranties on
the part of COGC or Merger Sub, or either of them.
8. TITLE MATTERS; ENVIRONMENTAL DEFECTS.
8.1 TITLE DEFECTS. COGC's and Merger Sub's exclusive remedy for
any breach of the representation and warranty as specified in Section 5.13
shall be as provided in this Section 8.
8.2 NOTICE OF ASSERTED TITLE DEFECTS. To assert a claim with
respect to any Title Defect, COGC or Merger Sub must, not later than ninety
(90) days after the Closing Date, furnish WECO with written notice (a "Title
Defect Notice") specifying in reasonable detail each Title Defect asserted by
COGC or Merger Sub to exist, the Lease, Well or Unit that each such Title
Defect affects, the curative matters requested by COGC and Merger Sub to cure
such Title Defect and the estimated Title Defect Amount for such asserted Title
Defect. Any Title Defects about which COGC or Merger Sub do not notify WECO
within such ninety (90) day period shall conclusively be deemed to be Permitted
Encumbrances. Notwithstanding anything herein provided to the contrary, WECO
and WERCO do hereby acknowledge and agree that the expiration or other
termination on or before the first anniversary of the Closing Date of any (1)
Lease covering any acreage which is contained within (or when drilled will be
contained within) any Unit (including any spacing unit) for any Well whose
Reserve Class is noted in Schedule 5.13 as a "PUD," or (2) Lease covering or
included in any prospect described in Part II
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of Schedule 5.13 shall constitute a Title Defect with respect to any Lease,
Well or Unit affected thereby.
8.3 NOTICE OF CLAIMED INTEREST ADDITIONS. WECO shall have the
right within sixty (60) days after the date of this Agreement, to furnish COGC
and Merger Sub with a written list of specific Interest Additions claimed by
WECO, specifying in reasonable detail the basis of each such claimed Interest
Addition, the Lease, Well or Unit that each such claimed Interest Addition
affects and the Interest Addition Amount estimated by WECO for such Interest
Addition. If the parties are unable to agree as to Interest Additions and
Interest Addition Amounts, the matter shall be submitted to arbitration in
accordance with Section 8.8.
8.4 COUNTER-NOTICE. Upon being notified by COGC or Merger Sub
pursuant to Section 8.2 of any asserted Title Defect, WECO shall give written
counter-notice within ten (10) days to COGC and Merger Sub that either (a) it
intends to cure such asserted Title Defect, (b) that it disagrees that there is
a Title Defect, (c) that it disagrees with the Title Defect Amount estimated by
COGC or Merger Sub for such Title Defect or (d) takes any combination of the
foregoing positions. If WECO disagrees with COGC's or Merger Sub's assertion
of the existence of a Title Defect or the Title Defect Amount with respect
thereto, WECO's counter-notice shall also specify in reasonable detail WECO's
grounds for such disagreement, the Title Defect Amount estimated by WECO
therefor, or both, as the case may be. If WECO gives counter-notice of intent
to cure an asserted Title Defect, it shall then have the Cure Period to cure
such asserted Title Defect at its own expense. If WECO gives counter-notice
that it disagrees there is a Title Defect or disagrees with the Title Defect
Amount estimated by COGC or Merger Sub, then the matter shall be submitted to
arbitration pursuant to Section 8.8. The failure of WECO to deliver written
counter-notice timely shall be deemed to be an admission of the existence of
such Title Defect, acceptance of COGC's or Merger Sub's estimate of the Title
Defect Amount with respect thereto, and a waiver of its right to cure such
Title Defect or seek arbitration of the Title Defect.
8.5 LIABILITY FOR UNCURED TITLE DEFECTS.
(a) WECO shall be liable to COGC and Merger Sub as
determined pursuant to Section 8.7 for asserted Title Defects not
cured during the applicable Cure Period; provided, however, that if
WECO attempts to cure such asserted Title Defect within the applicable
Cure Period and the parties disagree as to whether such cure is
successful, then the matter shall be submitted to arbitration as set
forth in Section 8.8. The amount of WECO's liability shall be
limited, however, to the amount by which the Net Title Defect Amount
exceeds the Title Defect Threshold Amount. The Net Title Defect
Amount in excess of the Title Defect Threshold Amount shall be paid to
COGC and Merger Sub as set forth in Section 8.9. It is expressly
agreed and understood that the resolution of matters relating to Title
Defects pursuant to this Section 8 shall not constitute a condition to
Closing.
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(b) If a Title Defect is determined to exist (either by
agreement of the parties or as determined by arbitration pursuant to
Section 8.8) and such Title Defect results in a complete failure of
title to the entirety of all or an identifiable portion of a Lease,
Well or Unit and such Title Defect is not timely cured by WECO, then,
unless such Title Defect is waived by COGC or Merger Sub, promptly
following the receipt by COGC of the amount payable by WECO with
respect to such Title Defect pursuant to Section 8.9 and a written
request therefor, Merger Sub shall assign to WECO (without any
warranty or representation, express or implied, as to title, condition
or other matter) all of Merger Sub's right, title and interest, if
any, in and to all or such identifiable portion, as the case may be,
of such Lease, Well or Unit.
8.6 CALCULATION OF TITLE DEFECT AMOUNTS AND INTEREST ADDITION
AMOUNTS.
(a) The Title Defect Amount for each asserted Title
Defect shall be determined as follows:
(i) If the Title Defect results from WERCO having
a lesser Net Revenue Interest in a Lease, Well or Unit than
the Net Revenue Interest specified therefor on Schedule 5.13,
the Title Defect Amount shall be equal to the product obtained
by multiplying the value allocated to such Lease, Well or Unit
on Schedule 5.13 by a fraction, the numerator of which is the
reduction in the Net Revenue Interest and the denominator of
which is the Net Revenue Interest specified for such Lease,
Well or Unit on Schedule 5.13.
(ii) If the Title Defect results from WERCO having
a greater Working Interest in a Lease, Well or Unit than the
Working Interest specified therefor on Schedule 5.13, the
Title Defect Amount shall be equal to the present value
(discounted at 10% compounded annually) of the increase in the
costs and expenses forecasted in the applicable WERCO Reserve
Report with respect to such Lease, Well or Unit for the period
from and after the Closing Date which is attributable to such
increase in WERCO's Working Interest.
(iii) If the Title Defect results from the
existence of a lien, security interest, pledge or collateral
assignment, the Title Defect Amount shall be an amount
sufficient to fully discharge such lien, security interest,
pledge or collateral assignment.
(iv) If the Title Defect results from any matter
not described in paragraphs (i), (ii) or (iii) above, the
Title Defect Amount shall be an amount equal to the difference
between the value of the Lease, Well or Unit affected by such
Title Defect with such Title Defect and the value of such
Lease, Well or Unit without such Title Defect (taking into
account the portion of the value allocated on Schedule 5.13 to
such Lease, Well or Unit).
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(v) If a Title Defect is not effective or does
not affect a Lease, Well or Unit throughout the entire
productive life of such Lease, Well or Unit, such fact shall
be taken into account in determining the Title Defect Amount.
(6) The Title Defect Amount with respect to a
Lease, Well or Unit shall be determined without duplication of
any costs or losses included in another Title Defect Amount
hereunder. For example, but without limitation, if a lien
affects more than one Lease, Well or Unit, the amount
necessary to discharge such lien shall only be included in the
Title Defect Amount for one Lease, Well or Unit.
(vii) If a Title Defect affects only a portion of a
Lease, Well or Unit (as contrasted with an undivided interest
in the entirety of such Lease, Well or Unit) and a value has
not been allocated specifically to such portion of a Lease,
Well or Unit on Schedule 5.13, then for purposes of computing
the Title Defect Amount, the value allocated to such Lease,
Well or Unit shall be further allocated among the portions of
such Lease, Well or Unit in accordance with the share of
reserves, if any, allocated to the portions of such Lease,
Well or Unit in the applicable WERCO Reserve Report, but
consistent with the allocations on Schedule 5.13. If the
applicable WERCO Reserve Report does not allocate reserves
within or as to portions of such Lease, Well or Unit or if the
applicable WERCO Reserve Report does not allocate any reserves
to such Lease, Well or Unit, then for purposes of computing
the Title Defect Amount, the value allocated to such Lease,
Well or Unit shall be further allocated among the portions of
such Lease, Well or Unit by COGC or Merger Sub using the
methodology used by COGC in assigning value to such Lease,
Well or Unit.
(viii) No Title Defect Amount shall be allowed on
account of and to the extent that an increase in WERCO's
Working Interest in a Lease, Well or Unit has the effect of
proportionately increasing WERCO's Net Revenue Interest in
such Lease, Well or Unit.
(b) The Interest Addition Amount for each claimed
Interest Addition shall be determined as follows:
(i) If the Interest Addition results from WERCO
having a greater Net Revenue Interest in a Lease, Well or Unit
than the Net Revenue Interest specified therefor on Schedule
5.13, the Interest Addition Amount shall be equal to the
product obtained by multiplying the value allocated to such
Lease, Well or Unit on Schedule 5.13 by a fraction, the
numerator of which is the increase in the Net Revenue Interest
and the denominator of which is the Net Revenue Interest
specified for such Lease, Well or Unit on Schedule 5.13.
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(ii) If the Interest Addition results from WERCO
having a lesser Working Interest in a Lease, Well or Unit than
the Working Interest specified therefor on Schedule 5.13, the
Interest Addition Amount shall be equal to the present value
(discounted at 10% compounded annually) of the decrease in the
costs and expenses forecasted in the applicable WERCO Reserve
Report with respect to such Lease, Well or Unit for the period
from and after the Closing Date which is attributable to such
decrease in WERCO's Working Interest.
8.7 DETERMINATION OF NET TITLE DEFECT AMOUNTS. The Net Title
Defect Amount shall be the sum of all Title Defect Amounts less the sum of all
Interest Addition Amounts; provided, however, that in no event shall the Net
Title Defect Amount be a negative number.
8.8 ARBITRATION PROCEDURES. If any matter is required by any
provision of this Section 8 to be arbitrated, such arbitration shall be
conducted as set forth in this Section 8.8.
(a) Upon the request of WECO or COGC, WECO and COGC shall
promptly jointly select three (3) persons as arbitrators under this
Agreement using the American Arbitration Association's current method
of striking all but three (3) from a panel of knowledgeable oil and
gas industry arbitrators proposed by the parties. If such selection
shall fail for any reason, then either WECO or COGC may in writing
request the judge of the United States District Court for the Southern
District of Texas senior in term of service (but not on senior status)
to appoint qualified arbitrators.
(b) Any arbitration hearing shall be held at a place in
Houston, Texas acceptable to the arbitrators.
(c) The arbitrators shall settle disputes regarding Title
Defects, Interest Additions and WECO's attempts to cure any Title
Defects in accordance with the Commercial Rules of the American
Arbitration Association, to the extent such rules do not conflict with
the terms hereof. Such arbitrators shall hear all arbitration matters
arising under this Section 8. The decision of the arbitrators shall
be reduced to writing and shall be binding upon the parties and may be
enforced in any court of competent jurisdiction. WECO and COGC,
respectively, shall bear their own legal fees and other costs incurred
in presenting their respective cases. The charges and expenses of the
arbitrators shall be shared equally by WECO and COGC.
(d) The arbitration shall commence within ten (10) days
after the arbitrators are selected as set forth in Section 8.8(a). In
fulfilling any of their arbitration duties, the arbitrators may
consider such other matters as in the opinion of the arbitrators are
necessary or helpful to make a proper evaluation. Additionally, the
arbitrators may consult with and engage disinterested third parties,
including, without limitation, petroleum engineers, attorneys and
consultants, to advise the arbitrators; however, the arbitrators shall
be bound by the factors set forth in Section 8.6 above.
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(e) No party subject to these arbitration procedures will
commence or prosecute any suit or action against another party subject
to these arbitration procedures relating to the disputed issues, other
than as may be necessary to compel arbitration under these arbitration
procedures or to enforce the award of the board of arbitration.
(f) The board of arbitration may in all matters act
through a majority of its members on each matter if unanimity is not
attained. It shall not be necessary that the same majority agree on
each and every item; that is, the parties will be bound by majority
rulings on each disputed issue even though the majority is not the
same as to each disputed issue.
8.9 PAYMENT IN RESPECT OF UNCURED TITLE DEFECTS. Within ten (10)
business days after the latest of (a) the end of the applicable Cure Period or
(b) if any asserted Title Defect is submitted to arbitration, the completion of
arbitration with respect to all disputed Title Defect Amounts, WECO shall pay
to COGC in immediately available funds any amount owing and unpaid by WECO
pursuant to Section 8.5 together with interest thereon from the Closing Date
until paid at the rate of 6% per annum.
8.10 INTERACTION OF WERCO AND WECO. After the Effective Time and
prior to the expiration of any applicable Cure Period, WECO shall have
available to it such reasonable number of business hours of Continuing WERCO
Employees from time to time employed by WERCO and such records of WERCO in the
possession of the Surviving Corporation as is reasonably necessary to permit
WECO, with the assistance of Continuing WERCO Employees, to take all reasonably
appropriate actions under this Section 8, all at no cost to WECO for such use
except for reimbursement of out-of-pocket third party expenses so long as any
such use does not unreasonably interfere with the (a) ability of such employees
to perform their other day-to-day responsibilities during business hours or (b)
day-to-day operations of the Surviving Corporation. Before the Effective Time,
whenever notices are to be given to WECO pursuant to this Section 8, COGC and
Merger Sub agree to give copies of all such notices to WERCO, and WERCO shall
take all actions appropriate for WECO and WERCO under this Section 8.
8.11 ENVIRONMENTAL DEFECTS. COGC's and Merger Sub's exclusive
remedy for any Environmental Defect shall be as provided in this Section 8.11.
If within three (3) years after the Effective Time COGC notifies WECO in
writing of facts, conditions and circumstances which constitute an
Environmental Defect with respect to the Properties or the Business, and such
Environmental Defect results in COGC and Merger Sub having aggregate Losses
from Environmental Defects in excess of one million dollars ($1,000,000), then,
with respect to such excess only and subject to the further limitations set
forth in this Section 8.11, WECO shall indemnify COGC and Merger Sub. WERCO's
liability under this Section 8.11 shall be limited to the first $10,000,000 in
excess of $1,000,000 aggregate Losses, plus fifty percent (50%) of Losses in
excess of such $10,000,000 up to $20,000,000 in excess of $1,000,000 aggregate
Losses; thus, WERCO's liability under this Section 8.11 shall in no event
exceed $15,000,000.
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9. ADDITIONAL COVENANTS AND AGREEMENTS
9.1 CONDUCT OF BUSINESS OF WERCO AND COGC. Except as contemplated
by this Agreement, during the period from the date of this Agreement to the
Effective Time, (x) WERCO and each WERCO Subsidiary and COGC and each COGC
Subsidiary will conduct its operations according to its ordinary course of
business consistent with past practices, (y) WERCO and each WERCO Subsidiary
and COGC and each COGC Subsidiary will not enter into any material transaction
other than in the ordinary course of business consistent with past practice and
(z) to the extent consistent with the Agreement, WERCO and each WERCO
Subsidiary and COGC and each COGC Subsidiary will seek to preserve intact its
current business organizations, keep available the service of its current
officers and employees and preserve its relationships with others having
business dealings with it with the objective that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as set forth on Schedule 9.1 or as
otherwise permitted in this Agreement, prior to the Effective Time, neither
WERCO and each WERCO Subsidiary, without the prior written consent of COGC, nor
COGC and each COGC Subsidiary, without the prior written consent of WERCO,
will:
(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale,
disposition or pledge or other encumbrance of, (i) any additional
shares of its capital stock of any class, or any securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of its capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or
any securities or rights convertible into, exchangeable for or
evidencing the right to subscribe for any shares of its capital stock,
except any such shares, securities or rights issued in the ordinary
course of business by COGC or any COGC Subsidiary (other than Merger
Sub) or pursuant to any agreement, arrangement or understanding to
which COGC or any COGC Subsidiary (other than Merger Sub) is a party
on the date of this Agreement or (ii) any other securities in respect
of, in lieu of, or in substitution for shares of WERCO Common Stock or
common stock of any of the WERCO Subsidiaries outstanding on the date
hereof;
(b) redeem, purchase or otherwise acquire any of its
outstanding securities;
(c) split, combine, subdivide or reclassify any shares of
its capital stock or declare, set aside for payment or pay any
dividend (except in the ordinary course of business of COGC), or make
any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to its
shareholder or shareholders, as the case may be, in its capacity as
such;
(d) with respect to WERCO, (i) grant any material
increases in the compensation expense, other than any such increase
that is in an amount such that, after giving effect thereto, aggregate
employee compensation expense (considered on an
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unaudited basis) does not exceed 110% of the aggregate previous
employee compensation expense reflected in the WERCO Financial
Statements for the most recent fiscal year, (ii) pay or agree to pay
any pension, retirement allowance or other material employee benefit
not required or contemplated by any Employee Benefit Plan or Employee
Benefit Arrangement as in effect on the date hereof to any such
director, officer or key employee, whether past or present, (iii)
enter into any new or materially amend any existing employment
agreement with any such director, officer or key employee, (iv) enter
into any new or materially amend any existing severance agreement with
any such director, officer or key employee or (v) except as may be
required to comply with applicable law, amend any existing, or become
obligated under any new, Employee Benefit Plan or Employee Benefit
Arrangement;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of itself or any Subsidiary (other than the
Merger);
(f) make any acquisition, by means of merger,
consolidation or otherwise, of (i) any direct or indirect ownership
interest in or assets comprising any business enterprise or operation
or (ii) except in the ordinary course and consistent with past
practice, any other assets;
(g) adopt any amendments to its articles of incorporation
or bylaws;
(h) with respect to WERCO, other than borrowing under
existing credit facilities or other borrowings in the ordinary course
consistent with past practice (including Intercompany Debt), incur any
indebtedness for borrowed money or guarantee any such indebtedness or,
except in the ordinary course consistent with past practice, make any
loans, advances or capital contributions to, or investments in, any
other Person;
(i) engage in the conduct of any business the nature of
which is materially different than the business in which it or any of
its Subsidiaries is currently engaged;
(j) enter into any agreement providing for acceleration
of payment or performance or other consequence as a result of a change
of control of it or any of its Subsidiaries;
(k) with respect to WERCO, enter into any contract,
arrangement or understanding requiring the purchase of equipment,
materials, supplies or services over a period greater than twelve (12)
months and for the expenditure of greater than $50,000 per year, which
is not cancelable without penalty on thirty (30) or fewer days'
notice, except in the ordinary course of business; or
(l) with respect to WERCO, (i) sell, transfer or
otherwise dispose of any of its assets in excess of $50,000, excluding
the sale of Hydrocarbons in the ordinary course
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of business, (ii) create or permit to exist any new Encumbrance on its
assets other than in the ordinary course of business, (iii) enter into
any joint venture, partnership or other similar arrangement or form
any other new arrangement for the conduct of the Business, in each
case other than in the ordinary course of business, (iv) purchase any
assets of any Person in excess of $50,000 other than in accordance
with the transactions contemplated hereby or (v) acquire any
securities of any Person.
9.2 OPERATION OF OIL AND GAS PROPERTIES. Except as may be
expressly permitted hereunder or as set forth in any Schedule hereto, from the
date hereof until the Closing Date, without first obtaining the written consent
of COGC (which consent will not be unreasonably withheld), WERCO will not:
(a) waive any right of material value relating to any of
the Properties;
(b) release or abandon any material part of any of the
Properties (except the abandonment of Leases on the expiration of
their respective primary terms);
(c) convey, farm out, encumber, mortgage, pledge or
dispose of WERCO's Interest in the Properties;
(d) commence or consent to any material operations on any
Property that WERCO has not previously committed to and that may be
expected to cost WERCO in excess of $75,000 net to WERCO's Interest
without first forwarding to COGC, an authorization for expenditures
("AFE") for such operations, and receiving approval for such AFE from
COGC, but if no response is obtained within ten (10) days of receipt
of such AFE, such approval shall be deemed to have been granted
(except for emergency operations, in which case WERCO shall promptly
notify COGC and from the date of COGC's response to such notice WERCO
shall once again be subject to the limitations contained in this
Section 9.2(d);
(e) enter into, assign, modify, amend or terminate any
Oil and Gas Contract including an Oil and Gas Contract with an
Affiliate;
(f) purchase, lease or otherwise acquire any property of
any kind whatsoever without the prior written consent of COGC, or, if
the expenditure is less than $50,000 individually or $100,000 in the
aggregate, other than in the ordinary course of Business; or
(g) commit itself to do any of the foregoing;
provided, however, that nothing contained in this Section 9 or elsewhere in
this Agreement shall limit the rights of WERCO to produce, consume and sell
Hydrocarbons from its Properties in the ordinary course of its Business and
consistent with past practices.
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9.3 CERTAIN COVENANTS WITH RESPECT TO OIL AND GAS INTERESTS.
Except as may otherwise be expressly provided herein, WERCO will, from the date
hereof to the Closing Date, unless otherwise consented to in writing by COGC
(which consent will not be unreasonably withheld):
(a) promptly notify COGC of the receipt of any notice or
written claim or written threat of notice or claim of which WERCO
becomes aware relating to any default or breach by WERCO under, or of
any termination or cancellation or written threat of termination or
cancellation of, any of the Leases or other Oil and Gas Contracts;
(b) promptly notify COGC of any loss of or damage to any
portion of WERCO's Interest in the Properties known to WERCO and
exceeding $100,000 in amount;
(c) as to Properties operated by WERCO, cause to be paid
all rentals, shut-in royalties, minimum royalties, royalties and other
payments that are necessary to maintain in force its rights in and to
such Properties, and pay timely all costs and expenses incurred by it
in connection with such Properties, except such costs and expenses as
are being contested in good faith; and
(d) as to Properties operated by WERCO, to maintain and
operate such Properties in accordance with all applicable laws and
regulations and in accordance with the Leases and other Oil and Gas
Contracts relating thereto.
9.4 NO OTHER BIDS. WERCO and WECO shall not, nor shall they
authorize or knowingly permit any officer, director or employee of, or any
investment banker, attorney, accountant or other representative retained by,
WECO or by WERCO or any WERCO Subsidiary to, solicit or initiate any inquiries
or the making of any proposal that may reasonably be expected to lead to any
merger proposal. WECO and WERCO shall immediately advise COGC of any inquiries
or proposals received or renewed after the date hereof. Notwithstanding the
foregoing, WECO and WERCO may furnish information concerning WERCO's Business,
properties or assets to a person or group and may negotiate with such person or
group if the Board of Directors of WECO concludes in good faith and upon the
advice of counsel that the failure to provide such information or to
participate in such negotiations would constitute a breach by the members of
the Board of Directors of WECO of their fiduciary duties. For this purpose,
"merger proposal" means any proposal for a merger or other business combination
involving WERCO or any WERCO Subsidiary or for the acquisition of an equity
interest in WERCO or any WERCO Subsidiary or any assets of WERCO or any WERCO
Subsidiary, in each case other than the transactions contemplated by this
Agreement.
9.5 REASONABLE EFFORTS. COGC and WERCO each shall:
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(a) promptly make all filings and seek to obtain all
consents, approvals or authorizations required under all applicable
laws with respect to the Merger and the other transactions
contemplated hereby and will cooperate with each other with respect
thereto;
(b) use all reasonable efforts to promptly take, or cause
to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate to satisfy the conditions set
forth in Section 10 and Section 11 and to consummate and make
effective the transactions contemplated by this Agreement on the terms
and conditions set forth herein as soon as practicable (including
seeking to remove promptly any injunction or other legal barrier that
may prevent such consummation); and
(c) not to take any action which might reasonably be
expected to impair the ability of the parties to consummate the Merger
at the earliest possible time (regardless of whether such action would
otherwise be permitted or not prohibited hereunder).
9.6 ACCESS TO INFORMATION DURING DUE DILIGENCE PERIOD;
NOTIFICATION OF BREACHES.
(a) Subject to currently existing contractual and legal
restrictions applicable to COGC (which COGC represents and warrants
are not material) or to WERCO (which WERCO represents and warrants are
not material), and upon reasonable notice, each of COGC and WERCO
shall afford to officers, employees, counsel, accountants and other
authorized representatives of the other party (the "Respective
Representatives") access, during normal business hours throughout the
period prior to the Effective Time or until this Agreement is
terminated, to its properties, books and records (including, without
limitation, the work papers of independent accountants) and, during
such period, shall furnish promptly to the Respective Representatives
all information concerning its business, properties (including legal,
land, lease records, financial information, title and all other
information relating to the assets of the Business) and personnel as
may reasonably be requested; provided, however, that no investigation
pursuant to this Section 9.6 shall affect or be deemed to modify any
of the respective representations or warranties made by COGC or WERCO
and; provided further, however, that such investigation shall not
unreasonably disrupt the personnel and operations of WERCO or COGC,
the WERCO Subsidiaries or the COGC Subsidiaries or any of their
Affiliates. Any disruptions resulting from such access shall not
constitute a breach under any of the covenants in Section 9.1.
(b) If, in the course of any investigation pursuant to
Section 9.6(a), COGC, WERCO or WECO discovers any breach of any
representation or warranty contained in this Agreement or any
circumstance or condition that upon Closing would in its opinion
constitute a breach, each of COGC, WERCO and WECO covenants that it
will inform the other parties promptly in writing.
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9.7 CONFIDENTIALITY.
(a) Any information provided by WERCO or WECO or any of
their Affiliates to COGC or its Respective Representatives pursuant to
or in connection with this Agreement shall be held by COGC and its
Respective Representatives in accordance with, and shall be subject
to, the terms of the Confidentiality Agreement dated December 1, 1993
by and between WERCO, WECO and COGC, which agreement remains in full
force and effect and shall be deemed to be a part of this Agreement as
though fully set forth herein. Any information provided by COGC or
any of its Affiliates to WECO and WERCO or their Respective
Representatives pursuant to this Agreement shall be held by WECO or
WERCO and their Respective Representatives in accordance with, and
shall be subject to, the terms of the Confidentiality Agreement, dated
February 17, 1994, which agreement remains in full force and effect
and shall be deemed to be a part of this Agreement as though fully set
forth herein.
(b) In addition to the obligations described in Section
9.7(a), each party hereto shall take all reasonable precautions to
maintain the confidentiality of any information concerning any other
party provided to or discovered by it or its Respective
Representatives and shall not disclose such information to anyone
other than (i) those people directly involved in the investigation and
negotiations pertaining to the transactions contemplated hereby,
including, without limitation, attorneys, accountants and similar
agents and (ii) such persons, entities or Governmental Bodies whose
consent may be necessary to permit consummation of the transactions
contemplated hereby. Each party further agrees that in the event that
the transactions contemplated by the Agreement shall not be
consummated, it will return all documents and records obtained by it,
its Respective Representatives or agents from any other party during
the course of its investigation or negotiations pertaining to the
transactions contemplated hereby, and all copies thereof, and will use
its best efforts to cause all information with respect to such other
party and its businesses which it obtained pursuant to this Agreement
or preliminary thereto to be kept confidential (unless or until the
source is in the public domain or unless required by law). Each
party, except as reasonably necessary to complete the transaction and
except as otherwise permitted by this Section 9.7, shall take all
reasonable precautions to maintain the confidentiality of the terms
and conditions of the Agreement and the transactions contemplated
hereby.
9.8 PUBLIC ANNOUNCEMENTS. COGC and WERCO will agree upon the
timing and content of any press releases to be issued describing the
transactions contemplated by this Agreement, and will not make any public
announcements thereof prior to reaching such agreement unless required to do so
by applicable law or regulation. To the extent reasonably requested by either
party, each party will consult with and provide reasonable cooperation to the
other in connection with the issuance of press releases or other public
documents describing the transactions contemplated by this Agreement.
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9.9 RETENTION OF WERCO RECORDS. COGC and the Surviving
Corporation agree (a) to hold all of the books and records of WERCO and the
WERCO Subsidiaries existing on the Closing Date and not to destroy or dispose
of any thereof for a period of five (5) years from the Closing Date or such
longer time as may be required by law and if, thereafter, for a period of two
(2) years either COGC or the Surviving Corporation desires to destroy or
dispose of such books and records, first to offer in writing at least sixty
(60) days prior to such destruction or disposition to surrender them to WECO,
and (b) following the Closing Date to afford WECO, its accountants and counsel,
during normal business hours, upon reasonable request, at any time, full access
to such books, records and other data and to the employees of the Surviving
Corporation and its Subsidiaries to the extent that such access may be
reasonably requested for any legitimate purpose at no cost to COGC or the
Surviving Corporation (other than for reasonable out-of-pocket expenses);
provided, however, that nothing herein shall limit any of WECO's rights of
discovery. COGC shall have the same rights, and WECO the same obligations, as
set forth above in this Section 9.9 with respect to any records of WECO (i)
prepared or on behalf of, and (ii) pertaining to, WERCO, that are retained by
WECO.
9.10 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, COGC shall, and
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former officers, directors and employees of
WERCO, whether any such Person is or was an officer, director,
employee or agent of WERCO, or is or was serving at the request of
WERCO as an officer, director or employee or agent of another Person
(collectively, the "Indemnified WERCO Directors and Officers"),
against all losses, expenses, claims, damages or liabilities arising
out of actions or omissions occurring on or prior to the Effective
Time, except for any transactions contemplated by this Agreement, to
the fullest extent permitted or required under Section 145 of the DGCL
(and shall also advance expenses as incurred to the fullest extent
permitted under Section 145 of the DGCL, provided that the Person to
whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not
entitled to indemnification), other than losses, expenses, claims,
damages or liabilities arising out of or connected with claims or
actions made or brought by WECO or any Affiliate of WECO. COGC and
the Surviving Corporation agree that all rights to indemnification,
including provisions relating to advances of expenses incurred in
defense of any action, suit or proceeding, whether civil, criminal,
administrative or investigative (each, a "Claim"), existing in favor
of the Indemnified WERCO Directors and Officers as provided in the
articles of incorporation or bylaws of WERCO, as in effect as of the
date hereof, with respect to matters occurring through the Effective
Time, shall survive the Merger and shall continue in full force and
effect for a period of not less than three (3) years from the
Effective Time; provided, however, that all rights to indemnification
in respect of any Claim asserted, made or commenced within such period
shall continue until the final disposition of such Claim.
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(b) As part of the obligations of COGC and the Surviving
Corporation under Section 9.10(a), COGC shall, and shall cause the
Surviving Corporation to, maintain in full force and effect such
directors' and officers' liability insurance, for the benefit of the
officers and directors of WERCO who are Indemnified WERCO Directors
and Officers as COGC currently maintains for the directors and
officers of the COGC Subsidiaries for a period of not less than six
(6) years from the Effective Date.
(c) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by
this Agreement is commenced, whether before or after the Closing, the
parties hereto agree to cooperate and use their respective reasonable
efforts to vigorously defend against the above and respond thereto.
(d) This Section 9.10 is intended to benefit the
Indemnified WERCO Directors and Officers and shall be binding on all
successors and assigns of COGC, Merger Sub, WERCO and the Surviving
Corporation.
9.11 RENAMING OF MERGER SUB. COGC and the Surviving Corporation
agree, and agree to take all steps necessary to ensure, that the name of the
Surviving Corporation after the Effective Time shall not contain the words
"Washington Energy."
9.12 FURTHER ASSURANCES. WERCO, the Surviving Corporation and COGC
agree that, from time to time, whether before, at or after the Closing Date,
each of them will execute and deliver such further instruments and take such
other action as may be reasonably necessary to carry out the purposes and
intent of this Agreement.
9.13 BUSINESS GUARANTIES. COGC shall cause itself or one or more
of its Affiliates to be substituted in all respects for WECO or any Affiliate
of WECO (other than WERCO or a WERCO Subsidiary or the Surviving Corporation),
effective as of the Closing (or within thirty (30) days following Closing
provided the indemnification from COGC referenced herein has been put into
place at Closing), in respect of all obligations of WECO or any such Affiliate
of WECO under each of the guaranties, letters of credit, letters of comfort and
performance or surety bonds outstanding and in force and effect as of the
Closing obtained by WECO or any of such Affiliates for the benefit of WERCO or
any WERCO Subsidiary, which guaranties, letters of credit, letters of comfort
and performance and surety bonds or other facilities are set forth on Schedule
9.13 (the "Business Guaranties"). If COGC is unable to effect such a
substitution with respect to any Business Guaranty after using its best efforts
to do so, COGC shall indemnify and hold harmless WECO and such Affiliates from
and against any and all liabilities resulting from such Business Guaranties. As
a result of the substitution contemplated by the first sentence of this Section
9.13, WECO and such Affiliates shall from and after the Closing cease to have
any obligation whatsoever arising from or in connection with the Business
Guaranties except for obligations, if any, for which WECO or the appropriate
Affiliate will be fully indemnified by COGC.
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9.14 PERFORMANCE OF WERCO OBLIGATIONS. COGC agrees from and after
the Closing Date to cause the Surviving Corporation to perform and fulfill all
obligations and commitments of WERCO existing as of or arising after the
Effective Time.
9.15 EMPLOYMENT AND BENEFIT MATTERS.
(a) The term "WERCO Employees" shall mean all current
employees (including all those on layoff, disability or leave of
absence, whether paid or unpaid), former employees and retired
employees of WERCO and the WERCO Subsidiaries, and the term "WERCO
Employee" shall mean any of the WERCO Employees. The term "COGC
Employees" shall mean all current employees (including those on
lay-off, disability or leave of absence, whether paid or unpaid),
former employees and retired employees of COGC and the COGC
Subsidiaries, and the term "COGC Employee" shall mean any of the COGC
Employees.
(b) The term "Employee Benefit Plans" shall mean each and
all "employee benefit plans," as defined in Section 3(3) of ERISA,
contributed to by WERCO or any WERCO Subsidiary or in which WERCO or
any WERCO Subsidiary participates or participated and which provides
benefits to WERCO Employees, including (i) any such plans that are
"employee welfare benefit plans" as defined in Section 3(l) of ERISA
and (ii) any such plans that are "employee pension benefit plans" as
defined in Section 3(2) of ERISA.
(c) The term "Employee Benefit Arrangements" shall mean
each and all pension, supplemental pension, accidental death and
dismemberment, life and health insurance and benefits (including
medical, dental, vision and hospitalization), short and long-term
disability, savings, bonus, deferred compensation, incentive
compensation, holiday, stock option, stock purchase, vacation,
severance pay, salary continuation, sick pay, sick leave, tuition
refund, service award, company car, scholarship, relocation, patent
award, fringe benefit, flexible spending account programs and other
employee benefit arrangements, plans, contracts (including individual
employment, consulting or severance contracts), policies or practices
providing employee or executive compensation or benefits to WERCO
Employees, other than the Employee Benefit Plans.
(d) The term "WECO Plans" shall mean each and all
Employee Benefit Plans and Employee Benefit Arrangements set forth on
Schedule 5.19, including, without limitation, the Retirement Plan for
Employees of Washington Natural Gas Company, the Washington Natural
Gas Company Salary Investment Plan and each and every other Employee
Benefit Plan and Employee Benefit Arrangement sponsored or maintained
by WECO or Washington Natural Gas or a WECO Affiliate under which any
WERCO Employee participates or is entitled to receive benefits.
(e) By the Closing Date, COGC shall cause the Surviving
Corporation and its Subsidiaries to employ such WERCO Employees as it
shall determine under such
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conditions and terms as it shall determine (the "Continuing WERCO
Employees"). Nothing in this Agreement shall be construed as limiting
in any way the right of COGC, the Surviving Corporation or its
Subsidiaries at any time and from time to time on and after the
Closing Date to terminate the employment, or to change the salary,
wage, position or title of any Continuing WERCO Employee.
(f) At the Effective Time, WERCO and the WERCO
Subsidiaries shall terminate the employment of all WERCO Employees and
WERCO and the WERCO Subsidiaries shall cease to be a participating
employer under all WECO Plans, and WECO shall cause each Continuing
WERCO Employee to be fully vested as of the Closing Date in all WECO
Plans and benefits thereunder except the Retirement Plan for Employees
of Washington Natural Gas. Except as provided in subparagraph (g)
below, WECO shall retain or assume, as the case may be, (i) all
obligations and liabilities of WECO, WERCO and any WERCO Subsidiary
arising under, based upon or related to any WECO Plans, whether
contingent, accrued, inchoate, unknown or otherwise, and including all
post termination of employment benefits of the WERCO Employees and
their beneficiaries, dependents or alternate payees or recipients and
including the Washington Energy Resources Company Retention Plan
Definitions and Administration Guidelines of Retention Benefits For
Vice Presidents, as amended, and the Washington Energy Resources
Company Retention Plan Definitions and Administration Guidelines of
Retention Benefits, as amended, the Annual Incentive Plan for
Washington Energy Resources, and the Employment and Change in Control
Agreement for Keith E. Anderson, and all early termination cost
benefits under all Professional Service Agreements set forth
onSchedule 5.12, and (ii) all employment-related liabilities and
obligations of WECO, WERCO and any WERCO Subsidiary (including but not
limited to obligations arising under the Employee Benefit Plans and
the Employee Benefit Arrangements) relating to each WERCO Employee.
The Surviving Corporation or its Subsidiaries, as the case may be,
shall provide, to each Continuing WERCO Employee effective as of the
Closing Date, employee benefit plans and programs that are provided to
regular full time employees of COGC (the employee benefit plans and
programs to be so provided to the Continuing WERCO Employees being
hereinafter referred to as the "COGC Benefit Plans") except that no
Continuing WERCO Employee shall be entitled to any COGC Benefit Plan
that provides severance pay until 12 months following the Closing
Date. With respect to any COGC Benefit Plans that are intended to
qualify under Section 401(a) of the Code, COGC shall, and shall cause
the Surviving Corporation and its Subsidiaries to, grant all
Continuing WERCO Employees as of the Closing Date credit for
eligibility and vesting purposes (but not for benefit accrual
purposes) for all service with WECO and its Affiliates (including
WERCO and the WERCO Subsidiaries) and their respective predecessors
prior to the Closing Date that count for the same purpose under the
corresponding plan qualified under Section 401(a) of the Code
maintained by WECO and its Affiliates (including WERCO and WERCO
Subsidiaries) immediately prior to the Closing Date, to the extent
such credit under the COGC Benefit Plans is permitted under the terms
of the COGC Benefit Plans, applicable laws and regulations. To the
extent the COGC Benefit Plans provide medical or dental benefits after
the Closing Date, the
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Continuing WERCO Employees shall be eligible for such plans to the
same extent that any new hire of COGC would be entitled to participate
in those plans, except that the COGC Benefit Plan shall waive any
pre-existing condition limitation under the COGC Benefit Plan but only
to the extent the particular pre-existing condition did not also
preclude coverage for the applicable continuing WERCO Employee under
any WECO Plan and to the extent such pre-existing condition is not of
a type of condition precluded from coverage under a COGC Benefit Plan.
The COGC Benefit Plans shall provide that any expenses incurred on or
before the Closing Date by a Continuing WERCO Employee shall be taken
into account under such COGC Benefit Plans for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket
provisions for the remainder of the current plan year.
(g) Without limiting in any way the generality of
Sections 9.15(e) and (f), COGC agrees to cause the Surviving
Corporation and its Subsidiaries to honor any obligations WERCO and
the WERCO Subsidiaries have with respect to current vacation accruals
and frozen past vacation liability for Continuing WERCO Employees as
of the Closing Date in accordance with WERCO's vacation policy as
furnished to COGC prior to the date of this Agreement and as is set
forth onSchedule 9.15. Such Schedule must set forth which WERCO
Employees are entitled to any vacation benefits and the dollar amount
of such benefit.
(h) COGC and WECO acknowledge that there shall be no
transfer of assets or liabilities from any of the WECO Plans to any
COGC Benefit Plan unless agreed to by the parties, and COGC and WECO
acknowledge and agree that the Surviving Corporation, its Subsidiaries
and COGC and its Affiliates shall have no right, title or interest in
respect of the assets of, or liabilities with respect to, any of the
WECO Plans and that COGC, the Surviving Corporation and its
Subsidiaries shall not assume the sponsorship of or the
responsibilities for contributions to and liabilities of any WECO
Plan.
(i) COGC, the Surviving Corporation and its Subsidiaries
shall have no obligation or liabilities for any post retirement
medical, life insurance or severance benefits payable under any WECO
Plan and to the extent there is any obligation or liability, WECO
shall assume such obligation or liability.
(j) WECO shall indemnify COGC and its Affiliates
(including the Surviving Corporation and each of its Subsidiaries) and
hold each of them harmless from and against any and all liabilities,
penalties, taxes and liens, FAS 106 and FAS 112 liabilities, claims,
expenses, losses and damages arising, and if based upon or related to,
any Controlled Group Plan (as hereinafter defined). For purposes of
this Section 9.15(j), the term "Controlled Group Plan" shall mean any
WECO Plan and any other employee benefit plan, including any
multiemployer plan, which was or is maintained or contributed to
(including any obligation to contribute) by WECO, Washington Natural
Gas, WERCO, any WERCO Subsidiary, or by any entity, trade or business
deemed to be a "single employer" with WECO within the meaning of
Section 414 of the Code at any time prior
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to the Closing Date. WECO shall indemnify COGC and its Affiliates
(including the Surviving Corporation and each of its Subsidiaries)
from and against any loss, claim, penalty, tax, lien, demand or
expense arising out of, or relating to, directly or indirectly any
action brought under Title VIII, the Americans with Disabilities Act,
Civil Rights Act of 1866 and 1991, Workers' Compensation Act, the
Equal Pay Act, Fair Labor Standards Act, ERISA, WARN, OWPA, ADEA,
contract, tort or any other state or federal statutory or common law
by any WERCO Employee.
(k) WECO agrees that it shall be liable for any
continuation coverage (including any penalties, excise taxes or
interest resulting from the failure to provide continuation coverage)
required by Section 4980B of the Code due to qualifying events which
occur on or before the Closing Date.
(l) All claims under all WECO Plans, including workers'
compensation plans, incurred by a WERCO Employee on or prior to the
Closing Date, whether or not reported to WECO, WERCO, or Washington
Natural Gas or the WERCO Subsidiaries on or after the Closing Date,
shall be the responsibility of the WECO Plans, WECO and Washington
Natural Gas.
9.16 INSURANCE MATTERS. COGC acknowledges that certain of the
insurance coverages relating to the Business are maintained by WECO or its
Affiliates under blanket policies relating to WERCO and other affiliated
entities and, with respect to WERCO, such coverages so maintained will
automatically cease and terminate at the Effective Time except with respect to
(a) policies that COGC has requested WECO or WECO's Affiliates to maintain in
force through the Closing Date and (b) legitimate claims that have been or will
be made or otherwise specifically covered prior to the Closing Date. All
return premiums or prepaid insurance will be for the account of the Surviving
Corporation to the extent such prepaid insurance is reflected as an asset on
the WERCO Financial Statements. WECO will use its best efforts to cooperate
with COGC and the Surviving Corporation to invoke, at the expense of the
Surviving Corporation, any available extended claims reporting period or
discovery period under any "claims made" liability policies covering the
Surviving Corporation and its Subsidiaries and Affiliates, reasonably requested
by COGC.
9.17 REGULATORY FILING.
(a) Within ten (10) business days after the date hereof,
COGC and WERCO will make such filings as may be required by the HSR
Act with respect to the consummation of the transactions contemplated
by this Agreement and will use all reasonable efforts to obtain early
termination of any waiting period under the HSR Act. COGC and WERCO
will file or cause to be filed as promptly as practicable with the
United States Federal Trade Commission ("FTC") and the United States
Department of Justice ("Justice Department") any supplemental
information which may be requested pursuant to the HSR Act. All
filings referred to in this Section 9.17 will comply in all
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material respects with the requirements of the respective laws
pursuant to which they are made.
(b) Without limiting the generality or effect of Section
9.17(a) and notwithstanding any provision herein to the contrary, each
of the parties will (i) use reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental
Bodies for additional information and documents pursuant to the HSR
Act, (ii) not (A) extend any waiting period under the HSR Act or (B)
enter into any voluntary agreement with any Governmental Body not to
consummate the transactions contemplated by this Agreement, in each
case except with the prior consent of the other and (iii) cooperate
with each other and use reasonable efforts to obtain the requisite
approval of the FTC and Justice Department, including without
limitation (A) the removal, dissolution, stay or dismissal of any
temporary restraining order, preliminary injunction or other judicial
or administrative order which prevents the consummation of the
transactions contemplated hereby or requires as a condition thereto
that all or any part of the Business to be held separate or (B) the
pursuit of necessary litigation or administrative proceedings
(including, if necessary, participation in proceedings through the
trial court level).
9.18 WECO REPRESENTATION ON COGC'S BOARD OF DIRECTORS.
(a) As soon as practicable following the Effective Time,
the Board of Directors of COGC shall take such action as is necessary
to increase its size from ten to twelve directors.
(b) Concurrently with the expansion of the size of the
COGC Board of Directors described in Section 9.18(a), the Board of
Directors shall appoint William P. Vititoe and one other person
designated by WECO (the "WECO Nominees") to fill the director
positions created pursuant to Section 9.18(a); provided, however, that
WECO shall confer with COGC prior to designating the WECO Nominee
other than William P. Vititoe and that such other designee shall meet
the criteria set forth in the COGC Criteria for Board of Directors'
Membership, a copy of which has been previously provided to WECO. Mr.
Vititoe shall be appointed to the class of directors whose term
expires in 1996 and the other such director shall be appointed to the
class of directors whose term expires in 1995.
(c) COGC will take such action as is necessary to
accomplish the director appointments and other actions described in
this Section 9.18, including, without limitation, adopting any
necessary amendments to COGC's Bylaws.
(d) COGC shall cause the WECO Nominees elected to COGC's
Board of Directors to be appointed to committees of COGC's Board of
Directors as follows: at least one of the WECO Nominees shall be
appointed to the Audit Committee and at least one of the WECO Nominees
shall be appointed to the Compensation Committee.
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(e) During the period between the Effective Time and the
time at which the appointments referred to in Section 9.18(b) shall
become effective, COGC and its Board of Directors shall not take any
action that, if such action had been taken prior to the Effective
Time, would have caused any representation or warranty of COGC set
forth in this Agreement to be untrue, or would have constituted a
breach of any agreement of COGC set forth in this Agreement.
9.19 REGISTRATION RIGHTS AGREEMENT. At Closing, COGC and WECO
shall enter into a Registration Rights Agreement in substantially the form of
attached Exhibit B.
9.20 CERTAIN ACTIONS PRIOR TO CLOSING. Prior to the Closing:
(a) COGC will loan WERCO the Amount.
(b) WECO and WERCO will
(i) Contribute the Amount to WEM by
means of a capital contribution and
not a loan;
(ii) Form a wholly-owned subsidiary of
WEM ("New Sub") as a Washington
corporation;
(iii) Cause WEM to contribute the Amount
to New Sub by means of a capital
contribution and not a loan;
(iv) Cause WEM to transfer the
Transferred Assets to New Sub in
accordance with the terms of the
Transferred Assets and without
adversely affecting any of the other
assets of WEM, WERCO or any other
WERCO Subsidiary; and
(v) Cause WEM to transfer, directly or
indirectly, all of the stock of New
Sub to WECO.
(c) If on or before thirty (30) days after the
date of execution of this Agreement WEM has been unable to
transfer the Transferred Assets to New Sub because of a
failure to obtain one or more third party consents, the
parties hereto will negotiate in good faith to conclude
alternative arrangements the effect of which is to provide
after the Effective Time to COGC, through WERCO's ownership of
a subsidiary or otherwise, the economic benefits of the
Desired Assets to the same extent as if the transactions
contemplated above had been effected and to leave WECO,
through ownership of a subsidiary or otherwise, all of the
rights and obligations of WEM under and with respect to the
Transferred Assets and the Amount; provided, however, if the
only Transferred Assets which WEM has been unable to transfer
to New Sub are Selected Transferred Assets,
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WECO shall have the option to conclude the transactions
contemplated by Section 9.20(b), and WECO will indemnify and
hold COGC harmless from and against all Losses resulting from
or arising from consents not having been obtained with respect
to the transfer of such Selected Transferred Assets to New
Sub.
(d) It is recognized that as of the date of
execution of this Agreement WECO is the guarantor of WEM's
obligations with respect to that certain Gas Purchase
Agreement between Encogen Northwest, L.P. and WEM dated
November 27, 1991, as amended, which contract (or its economic
benefits) shall be transferred to COGC at the Closing if the
transactions contemplated by Section 9.20(b) or (c) are
effected. In the event that WECO is unable to terminate
WECO's guarantee prior to the Closing Date or thereafter, then
it shall be an express condition to WECO's obligation to go
forward with Closing, that COGC shall provide to WECO in
writing its indemnification of WECO for all Losses associated
with the WECO guarantee defaults of WEM (or its successor, if
any) occurring after the Closing Date.
(e) WECO shall cause New Sub not to dispose of
the Amount other than in exchange for full consideration for
the one-year period following the Merger. COGC shall
indemnify and hold WECO and its Affiliates harmless from and
against any income Taxes paid by reason of the transfers
described in or contemplated by this Section 9.20 of or with
respect to the Amount; provided, however, that the maximum
indemnification hereunder shall not exceed taxes equal to 35%
of the Amount, plus any applicable interest, penalties,
additions to tax or other additional amounts imposed thereon
or related thereto.
9.21 RIGHTS AGREEMENT AMENDMENT. Prior to Closing, COGC and The
First National Bank of Boston shall enter into the Rights Agreement Amendment
in substantially the form of attached Exhibit D.
9.22 TRANSITION SERVICES AGREEMENT. Prior to Closing, COGC and
WECO shall use their best efforts to negotiate a Transition Services Agreement
mutually agreeable to both parties.
9.23 DISSOLUTION OF STLP. WERCO shall use its best efforts to
cause STLP to be dissolved before the Closing Date.
10. CONDITIONS TO THE OBLIGATIONS OF COGC AND MERGER SUB
The respective obligations of COGC and Merger Sub to consummate the
transactions contemplated hereby shall be subject to the satisfaction or waiver
on or prior to the Closing Date of all of the following conditions.
10.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF WERCO. The (a)
representations and warranties of WERCO contained in Section 5 of this
Agreement (except
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for those contained in Section 5.1(d) if STLP has been dissolved) shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except for
any variations from such representations and warranties related to the conduct
of the Business between the date hereof and the Closing Date in the manner
permitted by this Agreement and except for representations and warranties that
speak as of a specific date or time other than the date of this Agreement,
which need only be true and correct as of such date or time, and (b) covenants
and agreements of WERCO contained in this Agreement to be performed on or
before the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects; and COGC shall have received at the Closing
a certificate from an executive officer of WERCO, dated the Closing Date and
validly executed on behalf of WERCO, to the effect that the conditions set
forth in (a) and (b) above have been so satisfied. Notwithstanding the
foregoing, this condition shall be deemed to have been met despite the untruth
or inaccuracy of any representation or warranty or failure of any covenant
unless the aggregate effect of all such untruths, inaccuracies and failures,
taken together, would give rise to a Material Adverse Effect with respect to
WERCO.
10.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF WECO. The (a)
representations and warranties of WECO contained in Sections 5 and 6 of this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except for representations and warranties that speak as of a
specific date or time other than the date of this Agreement, which need only be
true and correct as of such date or time and (b) covenants and agreements of
WECO contained in this Agreement to be performed on or before the Closing Date
in accordance with this Agreement shall have been duly performed in all
material respects; and COGC shall have received at the Closing a certificate
from an executive officer of WECO, dated the Closing Date and validly executed
on behalf of WECO, to the effect that the conditions set forth in (a) and (b)
above have been so satisfied.
10.3 WAITING PERIOD. The waiting period under the HSR Act
applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated.
10.4 NO INJUNCTION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated
hereby.
10.5 CONSENTS. All consents and approvals of all Persons required
to permit the consummation of the transactions contemplated hereby and which
consents or approvals if not received would, individually or in the aggregate,
constitute a Material Adverse Effect on WERCO and the WERCO Subsidiaries or
their ownership or operation of the assets of the Business shall have been
obtained.
10.6 OPINIONS OF COUNSEL FOR WERCO AND WECO. COGC shall have
received from Riddell, Williams, Bullitt & Walkinshaw, counsel for WERCO and
WECO, opinions, dated the
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Closing Date with respect to (a) due incorporation, valid existence and good
standing, (b) corporate power, (c) authorized and issued stock, (d)
noncontravention of articles of incorporation or bylaws of WERCO or WECO by
this Agreement, (e) no conflicts with material contracts, (f) due authorization
and enforceability of this Agreement and (g) such other matters as the parties
may agree.
10.7 MATERIAL CHANGE. Between December 31, 1993 and the Closing
Date, there shall not have been any actual or prospective change, development
or effect that constitutes a Material Adverse Effect with respect to WERCO.
10.8 AUTHORIZATION. By February 28, 1994, the Boards of Directors
of WERCO and WECO and the sole shareholder of WERCO shall have approved this
Agreement and the consummation of the transactions contemplated hereby, and
shall have duly authorized all other corporate action on the part of WECO and
WERCO necessary to execute and deliver this Agreement and consummate the
transactions contemplated hereby. By the Closing Date, WERCO shall have
delivered to COGC true and correct copies of resolutions duly adopted by the
Board of Directors of WERCO and WECO and the sole shareholder of WERCO
approving this Agreement and the transactions contemplated hereby.
10.9 FINANCIAL STATEMENTS. Before the Closing Date WERCO shall
deliver to COGC a true and correct copy of its audited consolidated balance
sheet as of September 30, 1993 and 1992, and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended September 30, 1993 which has been certified by
Arthur Andersen & Co., independent certified public accountants, including the
report thereon by Arthur Andersen & Co.
10.10 ASSIGNMENT OF HEDGE AGREEMENTS. All hedge agreements to which
WEM is or has been a party since December 31, 1993, including, without
limitation, the Master Energy Price Swap Agreements between WEM and AIG
Corporation, between WEM and Lehman Bros. Commercial Corporation and between
WEM and First National Bank Chicago, all transactions thereunder, and all
obligations of WEM under the foregoing shall have been assigned to WECO
effective January 1, 1994; provided, however, that the hedge transactions
related to volumes associated with the Participation Agreement between WEM and
Boeing Equipment Holding Company, dated September 27, 1993, and the gas sales
agreement between WEM and STLP shall not be assigned to WECO.
11. CONDITIONS TO THE OBLIGATIONS OF WERCO AND WECO
The obligations of WERCO and WECO to consummate the transactions
contemplated hereby is subject to the satisfaction or waiver on or prior to the
Closing Date of all following conditions:
11.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF COGC. The (a)
representations and warranties of COGC contained in Section 7 of this Agreement
shall be true and correct in
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all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date, except for any variations from such representations and warranties
related to the conduct of the Business between the date hereof and the Closing
Date in the manner permitted by this Agreement and except for representations
and warranties that speak as of a specific date or time other than the date of
this Agreement, which need only be true and correct as of such date or time and
(b) covenants and agreements of COGC contained in this Agreement to be
performed on or before the Closing Date in accordance with this Agreement shall
have been duly performed in all material respects; and WERCO shall have
received at the Closing a certificate from an executive officer of COGC, dated
the Closing Date and validly executed on behalf of COGC, to the effect that the
conditions set forth in (a) and (b) above have been so satisfied.
Notwithstanding the foregoing, this condition shall be deemed to have been met
despite the untruth or inaccuracy of any representation or warranty, or failure
of any covenant unless the aggregate effect of all such untruths, inaccuracies
and failures, taken together, would give rise to a Material Adverse Effect on
COGC and the COGC Subsidiaries taken as a whole.
11.2 WAITING PERIOD. The waiting period under the HSR Act
applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated.
11.3 NO INJUNCTION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated
hereby.
11.4 CONSENTS. All consents and approvals of all Persons required
to permit the consummation of the transactions contemplated hereby and which
consents or approvals if not received would have a Material Adverse Effect
shall have been obtained.
11.5 OPINION OF COUNSEL FOR COGC. WERCO shall have received from
Fulbright & Jaworski L.L.P., counsel for COGC and Merger Sub, opinions dated
the Closing Date, with respect to (a) due incorporation, valid existence and
good standing, (b) corporate power, (c) authorized and issued stock, (d)
noncontravention of articles of incorporation or bylaws of COGC or Merger Sub
by this Agreement, (e) no conflicts with material contracts, (f) due
authorization and enforceability of this Agreement and (g) such other matters
as the parties may agree.
11.6 MATERIAL CHANGE. Between December 31, 1993 and the Closing
Date, there shall not have been any actual or prospective change, development
or effect that constitutes a Material Adverse Effect with respect to COGC.
11.7 EXECUTION OF REGISTRATION RIGHTS AGREEMENT. COGC and WECO
shall have entered into the Registration Rights Agreement in substantially the
form of attached Exhibit B.
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11.8 EXECUTION OF RIGHTS AGREEMENT AMENDMENT. COGC and The First
National Bank of Boston shall have entered into the Rights Agreement Amendment
in substantially the form of attached Exhibit D.
11.9 DEPOSIT OF FUNDS IN ESCROW. COGC shall have deposited with
the Escrow Agent pursuant to Section 2.5 the funds necessary to enable the
Surviving Corporation to repay the Intercompany Debt, in accordance with
irrevocable escrow instructions executed by the parties, on the Closing Date
immediately following the Effective Time.
11.10 SEC DOCUMENTS. Before the Closing Date, COGC shall deliver to
WECO and WERCO a true and complete copy of COGC's annual report on Form 10-K
for the year ended December 31, 1993 (with exhibits).
11.11 AUTHORIZATION. By February 28, 1994, the Boards of Directors
of WERCO and WECO and the sole shareholder of WERCO shall have approved this
Agreement and the consummation of the transactions contemplated hereby, and
shall have duly authorized all other corporate action on the part of WECO and
WERCO necessary to execute and deliver this Agreement and consummate the
transactions contemplated hereby.
12. TAX MATTERS
12.1 REORGANIZATION.
(a) Each party agrees to use its best efforts, and to
cause its Affiliates, agents and employees to use their best efforts,
whether before, on or after the Closing Date, to cause the Merger to
qualify as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code (and any comparable provisions of applicable
state law) and to report the Merger on all Tax Returns and other
filings as such a reorganization.
(b) In regard to Section 12.1(a) above, the parties
hereto make the following representations, warranties and covenants:
(i) WECO hereby represents, warrants and
covenants to COGC as follows:
(A) Merger Sub will acquire at least 90%
of the fair market value of the net assets and at
least 70% of the fair market value of the gross
assets held by WERCO immediately prior to the Merger.
(B) WECO has no plan or intention to
sell, exchange or otherwise dispose of a number of
shares of COGC Equity Securities received in the
Merger that would reduce WECO's ownership of shares
of COGC Equity Securities to a number of shares
having a value, as of the
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Closing Date, of less than 50% of the value of all of
the formerly outstanding stock of WERCO as of the
same date.
(C) The liabilities of WERCO assumed by
Merger Sub and the liabilities to which the
transferred assets of WERCO are subject were incurred
by WERCO in the ordinary course of business.
(ii) COGC hereby represents, warrants and
covenants to WECO as follows:
(A) COGC has no plan or intention to
redeem or otherwise reacquire any of its stock issued
in the Merger.
(B) COGC has no plan or intention to
liquidate the Surviving Corporation; to merge the
Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the
stock of the Surviving Corporation, or cause the
Surviving Corporation to issue additional shares of
its stock, thereby resulting in COGC losing control
of the Surviving Corporation within the meaning of
Section 368(c) of the Code; or to cause the Surviving
Corporation to dispose of, in transactions for which
full consideration is not received, more than 20% of
the assets of WERCO acquired in the Merger, except
for transfers of assets to a corporation controlled
(within the meaning of Section 368(c) of the Code) by
the Surviving Corporation; and hereby covenants not
to take any such actions during the one-year period
immediately following the Merger.
(C) Following the Merger, the Surviving
Corporation will continue the historic business of
WERCO or use a significant portion of the historic
business assets of WERCO in a business.
12.2 WECO TAX INDEMNITY.
(a) WECO shall be responsible for, shall pay or cause to
be paid, and shall indemnify, defend and hold harmless COGC, the WERCO
Group and their respective Affiliates (all of such Persons indemnified
by WECO under this Section 12.2 being collectively referred to herein
as the "Tax Indemnitees" and individually referred to herein as a "Tax
Indemnitee") from and against:
(i) any and all Taxes imposed on any of the WERCO
Group with respect to the income, assets or operations of any
Person (other than any of the WERCO Group) relating to any
consolidated federal income Tax Return of any "affiliated
group" (as such term is defined in Section 1504(a) of the
Code) of corporations which includes or included any of the
WERCO Group (or relating to any consolidated, combined,
affiliated or unitary income or franchise Tax Return
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of any foreign, state or local taxing jurisdiction that
permits consolidated, combined, affiliated or unitary income
or franchise Tax Returns of any affiliated group or groups of
corporations which includes or included any of the WERCO
Group) for any and all periods or portions thereof ending on
or before the Closing Date (including, without limitation, any
such Taxes for which any of the WERCO Group is or may be or
become severally liable under Treasury Regulation Section
1.1502-6 or 1.1502-78(b)(2) or any similar provision under any
applicable foreign, state or local law); and
(ii) any and all Taxes not otherwise described in,
and covered by, Section 12.2(a)(i) or (iii) of or imposed on
any of the WERCO Group with respect to any taxable period or
portion thereof that ends on or before the Closing Date (a
"Pre-Closing Period"), excluding (x) any such Taxes arising
from any event occurring on the Closing Date, but after the
Effective Time, which is outside the ordinary course of the
businesses of any of the WERCO Group and is not described in
or contemplated by this Agreement and (y) any such Taxes
caused by or resulting from the failure of the Merger to
qualify as a reorganization described in Section 368(a) of the
Code (or any comparable provisions of applicable state law) if
such failure resulted solely from an action of COGC or, after
the Effective Time, any Affiliate thereof that is not
described in or contemplated by this Agreement; and
(iii) any and all Taxes arising as a result of the
purchase, acquisition, termination, liquidation or dissolution
of STLP.
(b) In the case of any Tax described in Section
12.2(a)(ii) above that pertains to any taxable period of any of the
WERCO Group that begins on or before the Closing Date but does not end
on or before the Closing Date (a "Straddle Period"), the portion of
such Tax of the WERCO Group for the Pre-Closing Period of such
Straddle Period shall be determined in accordance with Section 12.4
hereof. The parties acknowledge and agree that the term "Straddle
Period" does not include any period or portion thereof of any Tax
Return described in Section 12.2(a)(i), which periods or portions
thereof shall be deemed to be Pre-Closing Periods.
12.3 COGC TAX INDEMNITY.
(a) COGC shall be responsible for, shall pay or cause to
be paid, and shall indemnify, defend and hold harmless WECO and its
Affiliates from and against:
(i) any and all Taxes of or imposed on any of the
WERCO Group for any taxable period or portion thereof that
begins and ends after the Closing Date (a "Post-Closing
Period"); and
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(ii) any and all Taxes of or imposed on any of the
WERCO Group arising from any event occurring on the Closing
Date, but after the Effective Time, which is outside the
ordinary course of the businesses of any of the WERCO Group
and is not described in or contemplated by this Agreement; and
(iii) any and all Taxes of or imposed on any of the
WERCO Group caused by or resulting from the failure of the
Merger to qualify as a reorganization described in Section
368(a) of the Code (or any comparable provisions of applicable
state law), to the extent such Taxes exceed those Taxes that
would have been imposed on WECO and its Affiliates (other than
the WERCO Group) had the Merger qualified as such a
reorganization, if such failure resulted solely from an action
of COGC or, after the Effective Time, any Affiliate thereof
that is not described in or contemplated by this Agreement.
(b) In the case of any Tax described in Section
12.3(a)(i) above that pertains to any taxable period of any of the
WERCO Group with respect to any Straddle Period, the portion of such
Tax of the WERCO Group for the Post-Closing Period of such Straddle
Period shall be the portion of such Tax that is not allocated to the
Pre-Closing Period of such Straddle Period under Section 12.4 hereof.
12.4 ALLOCATION OF CERTAIN TAXES.
(a) WECO and COGC will, to the extent permitted
by applicable law, elect with the appropriate taxing authorities to
close the taxable periods of any of the WERCO Group as of and
including the entirety of the Closing Date, and the parties shall take
all steps and actions as are reasonably necessary to cause any such
taxable period to end as of and including the entirety of the Closing
Date. In any case where applicable law does not permit such a taxable
period of any of the WERCO Group to be closed as of and including the
entirety of the Closing Date, any Tax pertaining to such Straddle
Period shall be determined in accordance with the applicable
provisions of Section 12.4(b), (c), (d) or (e) hereof.
(b) In the case of any Tax pertaining to a Straddle
Period (except for any Taxes covered by Section 12.4(c), (d) or (e)
hereof), the portion of such Tax pertaining or attributable to the
WERCO Group for the Pre-Closing Period of such Straddle Period shall
be determined on the basis of an interim closing of the books of any
of the WERCO Group (and any tax partnerships in which any of the WERCO
Group has an interest) as of and including the entirety of the Closing
Date in accordance with this Section 12.4(b). For purposes of this
Section 12.4(b), the liability for such Tax with respect to the
Pre-Closing Period of a Straddle Period shall be the product of (i)
such Tax for the entirety of such Straddle Period, multiplied by (ii)
a fraction, the numerator of which is the hypothetical Tax for such
Pre-Closing Period (determined on the basis of such interim closing of
the books, without annualization) and the denominator of which is the
sum of such numerator plus the hypothetical Tax for the Post-Closing
Period of such Straddle
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Period (determined on the basis of such interim closing of the books,
without annualization). The hypothetical Tax for any period shall in
no case be less than zero.
(c) In the case of any franchise Tax (which is not
measured by, or based upon, net income) imposed on WERCO, the portion
of such Tax pertaining or attributable to the Pre-Closing Period of
such Straddle Period shall be deemed to be the amount of such Tax for
the entirety of such Straddle Period.
(d) In the case of any ad valorem Tax (which is not
measured by, or based upon, actual production) or any franchise Tax
(which is not measured by, or based upon, net income and is not
described in Section 12.4(c) above) that pertains to a Straddle
Period, the portion of such Tax pertaining or attributable to the
Pre-Closing Period of such Straddle Period shall be the amount of such
Tax for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days in the Pre-Closing Period of
such Straddle Period and the denominator of which is the number of
days in the entire Straddle Period.
(e) In the case of any ad valorem Tax that is measured
by, or based upon, actual production and pertains to a Straddle
Period, the portion of such Tax pertaining or attributable to the
Pre-Closing Period of such Straddle Period shall be the amount of such
Tax for the entire Straddle Period multiplied by a fraction, the
numerator of which is the actual production in the Pre-Closing Period
of such Straddle Period and the denominator of which is the actual
production in the entire Straddle Period.
12.5 REFUNDS.
(a) If after the Closing Date, any Tax Indemnitee
receives a refund (whether by payment, credit, offset or otherwise) of
any Tax for which WECO is liable under Section 12.2 hereof, COGC shall
cause to be paid to WECO (within 15 calendar days after such receipt)
the amount of such refund. If there is an adjustment to any such
refund, any payment or payments theretofore made between the parties
hereto with respect to such refund pursuant to this Section 12.5(a)
shall be appropriately adjusted by means of a payment from WECO to
COGC or COGC to WECO, as the case may be, within 15 calendar days
after such adjustment.
(b) Any refund (whether by payment, credit, offset or
otherwise) of Taxes pertaining to the WERCO Group for which COGC is
liable under Section 12.3 hereof shall be the property of the WERCO
Group and COGC and shall be retained by the WERCO Group and COGC (or,
if applicable, paid or caused to be paid by WECO to COGC within 15
calendar days after receipt of such refund by WECO or any of its
Affiliates). If there is an adjustment to any such refund, any
payment or payments theretofore made between the parties hereto with
respect to such refund pursuant to this Section 12.5(b) shall be
appropriately adjusted by means of a payment from WECO to
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COGC or COGC to WECO, as the case may be, within 15 calendar days
after such adjustment.
(c) In applying the provisions of Section 12.5(a) and (b)
hereof, any refund of Taxes for a Straddle Period of the WERCO Group
shall be allocated between the Pre-Closing Period, on the one hand,
and the Post-Closing Period, on the other hand, in a manner consistent
with the provisions of Section 12.4 hereof.
(d) If reasonably requested by WECO, COGC shall, or, if
appropriate, shall cause the WERCO Group to, take all steps required
to file a claim for refund of any Tax for which WECO is liable under
Section 12.2 hereof, provided that WECO shall prepare, handle and
prosecute any such claim (but shall keep COGC fully informed of any
developments with respect to such claim) and WECO shall bear any and
all reasonable costs and expenses associated with filing and pursuing
any such claim (including, without limitation, any COGC Costs, but
only to the extent such COGC Costs result from a request or requests
by WECO that COGC or its Affiliates assist, or cooperate with, WECO in
the preparation, handling or prosecution of such claim). Any Tax
claim resulting from the filing or pursuit of such a claim for refund
shall be governed by the provisions of Section 12.7 hereof.
(e) COGC and WECO shall jointly agree to file any claim
for refund, and shall jointly prosecute any such claim for refund by
suit or otherwise, of any Tax described in both Section 12.2(a)(ii)
hereof and Section 12.3(a)(i) hereof and pertaining to any Straddle
Period of any of the WERCO Group, provided, however, that COGC and
WECO shall first attempt to separate such claim for refund into two
claims, one involving the Pre-Closing Period (which claim for refund
shall be governed by Section 12.5(d)), and the other involving the
Post-Closing Period (which claim for refund shall be subject to the
exclusive control of COGC). If COGC and WECO are not successful in
separating such claim, COGC and WECO shall cooperate in good faith
with each other in defending or prosecuting such joint claim for
refund and shall not compromise or settle such claim without the
other's written consent. If COGC and WECO cannot agree with respect
to any matter involving any such joint claim for refund, COGC and WECO
shall jointly engage an independent accounting firm that is mutually
acceptable to COGC and WECO to make its decision with respect to such
matter, which decision shall be final and binding on COGC and WECO.
COGC shall bear and pay one-half of the fees and other costs charged
by such firm and WECO shall bear and pay one-half of the fees and
other costs charged by such firm.
12.6 TAX RETURNS.
(a) WECO will cause the WERCO Group to be included in the
consolidated federal income Tax Returns of the WECO Affiliated Group
(and will cause the appropriate members of the WERCO Group to be
included in the consolidated, combined, affiliated or unitary income
and/or franchise Tax Returns of any foreign, state or local
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taxing jurisdiction that requires or permits consolidated, combined,
affiliated or unitary income and/or franchise Tax Returns of an
applicable group or groups of corporations which includes or include
any of the WERCO Group and one or more members of the WECO Affiliated
Group (other than any of the WERCO Group), if, in the case of such a
Tax Return that is not required to be filed in such form, it had been
so included for the prior taxable period) for all taxable periods or
portions thereof ending on or before the Closing Date, including,
without limitation, the period from October 1, 1993, through and
including the Closing Date. WECO shall also cause to be prepared any
and all other Tax Returns which are required to be filed for, by, on
behalf of or with respect to any of the WERCO Group on or before the
Closing Date. WECO will cause each Tax Return described in the first
two sentences of this Section 12.6(a) to be filed with the appropriate
taxing authority and will cause to be fully paid to the appropriate
taxing authority the amount of Taxes shown to be due on such Tax
Return. WECO shall not, unless otherwise required by law, rule or
regulation, adopt a Tax treatment of any material item included
therein that is inconsistent with the past treatment of similar items
of the WERCO Group in Tax Returns for prior taxable periods without
the consent of COGC.
(b) COGC will cause to be prepared each Tax Return (other
than any Tax Return described in, and covered by, Section 12.6(a)
hereof) covering a taxable period ending on or before the Closing Date
(including, without limitation, any short taxable period Tax Return
required or permitted to be filed for a short taxable period ending on
the Closing Date) which is required to be filed for, by, on behalf of
or with respect to any of the WERCO Group after the Closing Date and
shall deliver a copy of such Tax Return to WECO and allow WECO a
thirty-day period in which to review and comment upon such Tax Return.
(c) With respect to each Tax Return (other than any Tax
Return described in the first sentence of Section 12.6(a) hereof)
covering a Straddle Period which is required to be filed for, by, on
behalf of or with respect to any of the WERCO Group after the Closing
Date, COGC (i) shall cause to be prepared each such Tax Return, and
(ii) shall determine the respective portions of the Taxes shown as due
on such Tax Return that are the responsibility of WECO under Section
12.2 hereof and of COGC under Section 12.3 hereof, which determination
shall be set forth in a statement ("Statement") prepared by COGC.
COGC shall deliver a copy of such Tax Return and the Statement related
thereto to WECO and allow WECO a thirty-day period in which to review
and comment upon such Tax Return and Statement.
12.7 TAX CONTESTS.
(a) If a party hereto or any of its Affiliates receives
any written or oral communication with respect to any question,
adjustment, assessment or pending or threatened audit, examination,
investigation, or administrative, court or other proceeding which, if
pursued successfully, could result in or give rise to a claim for
indemnification of any Tax Indemnitee by WECO with respect to any Tax
for which WECO could be
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liable under Section 12.2 hereof ("COGC Tax Claim"), then such party
shall promptly notify the other party hereto in writing ("Tax Claim
Notice") of such COGC Tax Claim. As to any such Taxes for which WECO
is or may be liable under Section 12.2 hereof and subject to the
provisions of Section 12.7(e), WECO shall have the sole and exclusive
right (at its sole risk, cost and expense) to control or settle the
conduct of such audit, examination, investigation or administrative,
court or other proceeding, provided that:
(i) WECO notifies COGC in writing (the "Election
Notice") that it desires to control such contest within 30
calendar days after WECO receives or delivers, as the case may
be, the Tax Claim Notice relating to such COGC Tax Claim; and
(ii) if COGC is requested by WECO to pay or cause
to be paid the Tax claimed and sue for a refund, WECO shall
have advanced to COGC on an interest-free basis the total
amount of the Tax claimed; and
(iii) WECO shall reimburse COGC for any COGC Costs
resulting from any such request by WECO, but only to the
extent such COGC Costs result from a request or requests by
WECO that COGC assist, or cooperate with, WECO in the
preparation, handling, defense or prosecution of such COGC Tax
Claim.
(b) The parties shall cooperate with each other and with
their respective Affiliates in the negotiation and settlement of any
proceeding described in Section 12.7(a) above. COGC will provide, or
cause to be provided, to WECO any information reasonably requested by
WECO that relates to the COGC Tax Claim, including, without
limitation, necessary powers of attorney or other authorizations to
control any proceeding which WECO is entitled to control pursuant to
Section 12.7(a) hereof. WECO shall keep COGC informed of all
developments and events relating to any such COGC Tax Claim. Only one
Election Notice shall be required with respect to any pending Tax
audit or assessment.
(c) If, after actual receipt by COGC of the total amount
of a Tax claimed (pursuant to a COGC Tax Claim) that has been advanced
by WECO pursuant to Section 12.7(a)(ii) hereof, the extent of the
liability of WECO hereunder with respect to such Tax claimed has been
established by a Final Determination, COGC shall promptly pay or cause
to be paid to WECO any refund actually received by or actually
credited to any Tax Indemnitee with respect to such Tax (together with
any interest paid or credited thereon by the taxing authority and any
recovery of legal fees from such taxing authority related thereto).
(d) With respect to any COGC Tax Claim, if WECO fails to
deliver an Election Notice to COGC within the period provided in
Section 12.7(a)(i) hereof or fails to comply with the provisions of
Section 12.7(a)(ii) or (iii) hereof, COGC shall have the right (but
not the obligation), at its election and in its sole and absolute
discretion, to
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defend or prosecute, at COGC's sole cost and expense, such COGC Tax
Claim provided COGC notifies WECO in writing (the "COGC Notice") that
it desires to control such contest within thirty calendar days after
the expiration of the period provided in Section 12.7(a)(i) hereof
with respect to such COGC Tax Claim. Within fifteen days after the
receipt by WECO of the COGC Notice, WECO shall pay to COGC the full
amount of all Taxes claimed by the taxing authority with respect to
such COGC Tax Claim. COGC shall have full control of the defense or
prosecution of such proceedings, including any settlement or
compromise thereof. If requested by COGC, WECO shall cooperate, and
shall cause its Affiliates to cooperate, in good faith with COGC and
their authorized representatives in order to contest effectively such
COGC Tax Claim.
(e) If a party hereto or any of its Affiliates receives
any written or oral communication with respect to any question,
adjustment, assessment or pending or threatened audit, examination,
investigation, or administrative, court or other proceeding which, if
pursued successfully, could result in or give rise to both a COGC Tax
Claim and a claim for indemnification of WECO by COGC with respect to
any Tax for which COGC could be liable under Section 12.3 hereof
("Joint Tax Claim"), then such party shall promptly notify the other
party hereto in writing of such Joint Tax Claim. COGC and WECO shall
first attempt to separate such Joint Tax Claim into two, one involving
the Pre-Closing Period (which shall be governed by Section 12.7(a)
through (d)), and the other involving the Post-Closing Period (which
shall be subject to the exclusive control of COGC). If COGC and WECO
are not successful in accomplishing such separation, COGC and WECO
shall cooperate in good faith with each other in controlling such
audit, examination, investigation, or administrative, court, or other
proceeding, shall not compromise or settle such Joint Tax Claim
without the other's written consent, and shall share the costs
associated with such Joint Tax Claim on such basis as the parties
shall mutually agree. If COGC and WECO cannot agree with respect to
any matter involving any such Joint Tax Claim, COGC and WECO shall
jointly engage independent tax counsel that is mutually acceptable to
COGC and WECO to make its decision with respect to such matter, which
decision shall be final and binding on COGC and WECO. COGC shall bear
and pay one-half of the fees and other costs charged by such firm and
WECO shall bear and pay one-half of the fees and other costs charged
by such firm.
12.8 PAYMENT OF TAXES. All Taxes of or with respect to any of the
WERCO Group shall be paid to the appropriate taxing authority by the party that
is responsible therefor under the applicable tax law. Except as otherwise
provided in this Section 12, any amount to which a party is entitled under this
Section 12 shall be promptly paid to such party by the party obligated to make
such payment following written notice to the party so obligated stating that
the Taxes to which such amount relates are due and providing details supporting
the calculation of such amount.
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12.9 COOPERATION AND EXCHANGE OF INFORMATION.
(a) COGC and its Affiliates will not, unless otherwise
required by law, rule or regulation or unless doing so would have no
effect on any Taxes for which WECO is or may be liable under Section
12.2 hereof, adopt a Tax treatment of any material item that is
inconsistent with the past treatment of similar items of the WERCO
Group in any previously filed Tax Return. COGC and WECO will provide,
or cause to be provided, to each other copies of all correspondence
received from any taxing authority by COGC or WECO, as the case may
be, or any of its Affiliates in connection with the liability for
Taxes of or with respect to the WERCO Group for any taxable period for
which WECO or COGC, as the case may be, is or may be liable under
Section 12.2 or 12.3 hereof. The parties will provide each other with
such cooperation and information as they may reasonably request of
each other in preparing or filing any return, amended return, or claim
for refund, in determining a liability or a right to refund or in
conducting any audit or other proceeding in respect of Taxes imposed
on the parties or their respective Affiliates.
(b) WECO shall (i) grant or cause to be granted to COGC
or COGC's representatives access upon reasonable notice and at
reasonable times to all of the information, books and records relating
to the WERCO Group within their possession or control (including,
without limitation, Tax work papers, Tax Returns and correspondence
with Tax authorities), including the right to make copies thereof at
COGC's expense, to the extent reasonably necessary in connection with
Taxes to which this Section 12 applies and shall furnish the
assistance and cooperation of such personnel of WECO and its
Affiliates as COGC may reasonably request in connection therewith and
(ii) gather and furnish to COGC such additional Tax and other
information and documents relating to Taxes of the WERCO Group as COGC
may from time to time reasonably request.
(c) COGC shall (i) grant or cause to be granted to WECO
or WECO's representatives access upon reasonable notice and at
reasonable times to all of the information, books and records relating
to the WERCO Group within its possession or control (including,
without limitation, Tax work papers, Tax Returns and correspondence
with Tax authorities), including the right to make copies thereof at
the expense of WECO, to the extent reasonably necessary in connection
with Taxes to which this Section 12 applies and shall furnish the
assistance and cooperation of such personnel of the WERCO Group as
WECO may reasonably request in connection therewith and (ii) gather
and furnish to WECO such additional Tax and other information and
documents relating to Taxes of the WERCO Group as WECO may from time
to time reasonably request.
(d) Any information obtained by a party hereto or its
Affiliates from another party hereto or its Affiliates in connection
with any Tax matters to which this Agreement applies shall be kept
confidential, except as may be otherwise necessary in connection with
the filing of Tax Returns or claims for refund or in conducting an
audit or other proceeding. Except as expressly provided otherwise in
this Section 12, each of WECO
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and COGC shall bear and pay its own costs and expenses incurred in
connection with performing its obligations under this Section 12.
(e) Neither WECO nor COGC, or any of their respective
Affiliates, shall destroy or allow the destruction of any books,
records, or other documents relating to the WERCO Group without having
offered in writing to deliver same to the other.
12.10 TRANSFER TAXES. Notwithstanding any other provision of this
Section 12, COGC and WECO each shall bear one-half of the cost of any
documentary, stamp, sales, use, real property transfer or gain, stock transfer
or similar transfer Taxes payable with respect to the transaction described in
this Agreement.
12.11 THIRTY-DAY ELECTIONS. WECO and COGC agree not to cause any
election provided under Treasury Regulation Section 1.1502-76(b)(5) (or any
similar election under applicable foreign, state or local law) to be made with
respect to the WERCO Group in connection with the Merger.
12.12 TERMINATION OF TAX SHARING AGREEMENTS. Except as expressly
provided in this Agreement, effective as of the Effective Time, any and all
liabilities and obligations under Tax allocation agreements, Tax sharing
agreements or other agreements or arrangements between any of the WERCO Group
on one hand and WECO and/or any of WECO's Affiliates (other than any of the
WERCO Group) on the other hand and relating to any Tax matters shall be
terminated with respect to the WERCO Group, and any liabilities or rights
existing under any such agreement or arrangement shall cease to exist and no
longer be enforceable.
12.13 SURVIVAL. Anything to the contrary in this Agreement
notwithstanding, the parties' representations, warranties, covenants,
agreements, rights and obligations with respect to any Tax covered by this
Section 12 shall survive the Closing and shall not terminate until 20 calendar
days after the expiration of all statutes of limitations (including any and all
extensions thereof) applicable to such Tax, or the assessment thereof;
provided, however, that any right to receive indemnity in respect of any Tax as
to which notice thereof has been delivered or received prior to the termination
of any representation, warranty, covenant, agreement or obligation relating to
such Tax shall survive such termination.
12.14 CONFLICT. In the event of a conflict between the provisions
of this Section 12 and the other provisions of this Agreement, the provisions
of this Section 12 shall control. In particular, the provisions of Sections
13.2 through 13.5 of this Agreement shall not apply to any amounts for which
any party is liable under this Section 12. Notwithstanding the foregoing, the
provisions of this Section 12 shall not override the provisions of Section
9.20(e).
13. SURVIVAL; INDEMNIFICATION
13.1 SURVIVAL. Except as provided in the immediately following
sentence, the representations, warranties, covenants, indemnities and
agreements set forth in this Agreement
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and in any certificate or instrument delivered in connection herewith shall be
continuing and shall survive the Closing for any claim for which notice is
given pursuant to the Agreement for a period of one (1) year from the Effective
Date (except with respect to the representations and warranties set forth in
Sections 5.13 and 5.16 which shall survive as provided in Section 8). Those
covenants that expressly contemplate or may involve actions to be taken or
obligations in effect after the Closing, and including but not limited to
Sections 9.7, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16 and 9.18 and the
obligations of COGC and WECO contained in Sections 8, 12, 13.2, 13.3, 13.4 and
13.5 shall survive in accordance with their terms.
13.2 INDEMNIFICATION BY COGC. In addition to its obligations set
forth in Section 9.10(a) and Section 12, from and after the Effective Time,
COGC shall indemnify and hold harmless WECO and its Affiliates, each of their
respective present and former directors, officers, employees and agents, and
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Indemnified WECO Parties") from and against any and all
Losses incurred by or asserted against any of the Indemnified WECO Parties in
connection with, resulting from or arising from any inaccuracy in any
representation of COGC contained in this Agreement in any respect, or any
breach or non-fulfillment of any covenant or other obligation of COGC under
this Agreement; provided, however, that COGC shall have no liability under this
Section 13.2 unless and until the aggregate of all Losses recoverable by the
Indemnified WECO Parties exceeds $250,000 (the "Minimum Amount"), in which
event COGC shall be liable for all such Losses in excess of the Minimum Amount,
but not to exceed $7,500,000 (the "Maximum Amount"). The Surviving Corporation
and its Subsidiaries shall be jointly and severally liable with COGC for COGC's
indemnification obligations pursuant to this Agreement, including, without
limitation, pursuant to this Section 13.2, and COGC shall, if so requested by
WECO, sign and shall cause the Surviving Corporation and its Subsidiaries to
sign such instruments evidencing the foregoing obligations as WECO may
reasonably request.
13.3 INDEMNIFICATION BY WECO. In addition to its obligations set
forth in Section 12, and except for matters relating to Title Defects and
Environmental Defects covered by Section 8, from and after the Effective Time,
WECO shall indemnify and hold harmless COGC and its Affiliates, each of their
respective present and former directors, officers, employees and agents, and
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Indemnified COGC Parties") from and against any and all
Losses incurred by or asserted against any of the Indemnified COGC Parties in
connection with, resulting from or arising from any inaccuracy in any
representation of WECO or WERCO contained in this Agreement in any respect, or
any breach or non-fulfillment of any covenant or other obligation of WECO or
WERCO under this Agreement; provided, however, that WECO shall have no
liability under this Section 13.3 unless and until the aggregate of all Losses
recoverable by the Indemnified COGC Parties exceeds the Minimum Amount, in
which event WECO shall be liable for all such Losses in excess of the Minimum
Amount, but not to exceed the Maximum Amount, provided further, however, that
Losses in connection with, resulting from or arising from any inaccuracy in any
representation contained in Section 5.2 shall not be subject to the Minimum
Amount and the Maximum Amount.
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13.4 THIRD-PARTY CLAIMS. Promptly after service of notice of any
claim or of process on a party hereto by any third person in any matter in
respect of which indemnity may be sought from the other party pursuant to this
Agreement, the party so served shall notify the indemnifying party of the
receipt thereof. The indemnifying party shall have the right to participate
in, or assume, at its own expense, the defense of any such claim or process or
settlement thereof. If the indemnifying party does not, within thirty (30)
days of the receipt of a notice of claim, acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the
terms of its indemnitee hereunder in connection with such claim, the
indemnified party may (but shall be under no obligation to) contest any such
lawsuit or other proceeding forming the basis for such claim and the
indemnifying party shall be bound by the result obtained with respect thereto
by the indemnified party. After notice from the indemnifying party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to the indemnified party for any legal or other expense subsequently
incurred in connection with such defense. Such defense shall be conducted
expeditiously (but with due regard for obtaining the most favorable outcome
reasonably likely under the circumstances, taking into account costs and
expenditures) and the indemnified party shall be advised promptly of all
significant developments and shall be furnished with such other information as
it shall reasonably request. The indemnified party shall have the right to
employ separate counsel in any claim or process the defense of which has been
assumed by the indemnifying party and to participate in the defense thereof,
but the fees and expense of such counsel shall be the expenses of such
indemnified party. With respect to any matter which is the subject of any such
claim and as to which the indemnified party fails to give the other party such
notice as aforesaid, and such failure adversely affects the ability of the
indemnifying party to defend such claim or materially increases the amount of
indemnification which the indemnifying party is obligated to pay hereunder, the
amount of indemnification which the indemnified party shall be entitled to
receive shall be reduced to an amount which the indemnified party would have
been entitled to receive had such notice been timely given. No settlement of
any such claim as to which the indemnifying party has not elected to assume the
defense thereof shall be made without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld. The
indemnifying party may not settle any such claim without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld, unless such settlement contains an unconditional release of such
indemnified party and such settlement involves monetary damages only.
13.5 BASIS FOR PAYMENT. All amounts an indemnified party is
entitled to receive pursuant to Section 13.2, 13.3 or 13.4 shall be net of any
insurance recovery respecting such claim by such party.
14. TERMINATION
14.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by WECO or COGC, by the mutual written
consent of the Boards of Directors of COGC and WECO.
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14.2 TERMINATION AFTER JUNE 30, 1994. By either COGC or WERCO if
the Effective Time shall not have occurred on or before June 30, 1994 (the
"Outside Date"), or such later date as may be agreed to in writing by COGC and
WERCO, unless the absence of such occurrence shall be due to the failure of the
party seeking to terminate this Agreement or its Affiliates to perform in all
material respects each of its obligations under this Agreement required to be
performed by it at or prior to the Effective Time.
14.3 TERMINATION BY WERCO OR WECO. (a) By WECO if the Board of
Directors of WECO concludes in good faith and upon the advice of
counsel that not terminating the Agreement would constitute a breach
by the members of the Board of Directors of WECO of their fiduciary
duties; or
(b) By WERCO and WECO if the average of the closing price
per share of COGC Common Stock on the New York Stock Exchange for the
ten most recent trading days ended on the third business day preceding
the Closing Date, as reported by the New York Stock Exchange Composite
Index (the "Average Trading Price"), is below $19.00 (such price to be
equitably and proportionately adjusted in the event of a stock split,
stock dividend or similar event); provided, however, that WERCO and
WECO shall not have the right to terminate this Agreement or abandon
the Merger if (i) the product (the "Amount") of (A) the amount, if
any, by which $19.00 (such price to be equitably and proportionately
adjusted in the event of a stock split, stock dividend or similar
event) exceeds the Average Trading Price, and (B) 2,133,000 is less
than $10 million and (ii) COGC, prior to Closing, lends WERCO an
amount of money equal to the Amount in accordance with Section 9.20.
14.4 PROCEDURE UPON TERMINATION. In the event of termination of
this Agreement by COGC, WERCO or WECO pursuant to Section 14.2 or 14.3 written
notice thereof shall promptly be given to the other parties hereto and, subject
to Section 14.5, this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned without further action by any party.
14.5 EFFECT OF TERMINATION. (a) In the event of the termination of
this Agreement as provided in Section 14.1, 14.2 or 14.3, this Agreement shall
forthwith become null and void, and there shall be no liability or obligation
on the part of any party, or any of their respective officers, directors,
employees, agents or stockholders, except (a) for fraud or for willful breach
of this Agreement and (b) as set forth in Sections 9.7 and 9.8. The
termination of this Agreement pursuant to Section 14.2 or 14.3 shall become
effective when the required notice is given by the terminating party; and no
such termination shall constitute a breach of this Agreement. The termination
of this Agreement shall not cause or constitute a termination of the
confidentiality agreements described in Section 9.7.
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15. MISCELLANEOUS
15.1 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
15.2 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to principles of conflict of laws.
15.3 ENTIRE AGREEMENT. This Agreement and the schedules and
exhibits contain the entire agreement between the parties with respect to the
subject matter hereof, and there are no agreements, understandings,
representations or warranties between the parties other than those set forth or
referred to herein.
15.4 EXPENSES. COGC shall pay the costs and expenses of COGC and
Merger Sub relating to this Agreement and the transactions contemplated hereby,
except as otherwise provided herein. WECO shall pay the costs and expenses of
WECO, WERCO and the WERCO Subsidiaries relating to (a) this Agreement, (b) the
transactions contemplated hereby and (c) all other strategic planning costs and
expenses related to WERCO, including the initial public stock offering
contemplated prior to the signing of this Agreement, except as otherwise
provided herein.
15.5 NOTICES. All notices hereunder shall be sufficient upon
receipt for all purposes hereunder if in writing and delivered personally, sent
by documented overnight delivery service or, to the extent receipt is
confirmed, telecopy, telefax or other electronic transmission service to the
appropriate address or number as set forth below. Notices to WERCO shall be
addressed to:
Washington Energy Resources Company
601 Union Street, Suite 2200
Seattle, Washington 98101
Attention: Keith E. Anderson
Facsimile: (206) 521-5070
with a copy to:
Riddell Williams Bullitt & Walkinshaw
1001 Fourth Avenue Plaza, Suite 4400
Seattle, Washington 98154
Attention: Marion V. Larson
Facsimile: (206) 389-1708
or at such other address and to the attention of such other person as WERCO may
designate by written notice to the other parties.
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Notices to WECO shall be addressed to:
Washington Energy Company
815 Mercer Street
Seattle, Washington 98109
Attention: James P. Torgerson,
Senior Vice President--Finance
Facsimile: (206) 382-7875
with a copy to:
Riddell Williams Bullitt & Walkinshaw
1001 Fourth Avenue Plaza, Suite 4400
Seattle, Washington 98154
Attention: Marion V. Larson
Facsimile: (206) 389-1708
or at such other address and to the attention of such other person as WECO may
designate by written notice to the other parties.
Notices to COGC shall be addressed to:
Cabot Oil & Gas Corporation
15375 Memorial Drive
Houston, Texas 77079
Attention: John U. Clarke - Executive Vice President
Facsimile: 713-589-4653
or at such other address and to the attention of such other person as COGC may
designate by written notice to the other parties.
15.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto which consent will not be unreasonably
withheld.
15.7 HEADINGS; DEFINITIONS. The section headings contained in this
Agreement are inserted for convenience of reference only and will not affect
the meaning or interpretation of this Agreement. All references to sections
contained herein mean sections of this Agreement unless otherwise stated. All
capitalized terms defined herein are equally applicable to both the singular
and plural forms of such terms.
15.8 AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement
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of any such modification or amendment is sought. Any party hereto may, only by
an instrument in writing, waive compliance by any other party hereto with any
term or provision of this Agreement on the part of such other party hereto to
be performed or complied with. The waiver by any party hereto of a breach of
any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach.
15.9 SCHEDULES AND EXHIBITS. Disclosure of any fact or item in any
schedule or exhibit hereto referenced by a particular section in this
Agreement, should the existence of the fact or item or its contents be relevant
to any other section, shall not be deemed to be disclosed with respect to that
other section unless an explicit cross-reference appears.
15.10 DISCLAIMER OF WARRANTIES. NOTWITHSTANDING ANYTHING CONTAINED
IN ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH
PARTY HERETO THAT NO PARTY IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT.
15.11 AGREEMENT FOR THE PARTIES' BENEFIT. Except for Sections 8.11,
9.10, 13.2 and 13.3 which are intended to benefit and be enforceable by the
Indemnified WERCO Directors and Officers, the Indemnified WECO Parties and the
Indemnified COGC Parties, respectively, this Agreement is not intended to
confer upon any Person not a party hereto any rights to remedies hereunder, and
no Person other than the parties hereto or such Persons described above is
entitled to rely on any representation, warranty or covenant contained herein.
15.12 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
15.13 ATTORNEYS' FEES. If any action at law or equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled, including any
such fees, costs and necessary disbursements incurred in any appellate
proceeding.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
WASHINGTON ENERGY RESOURCES COMPANY
By __________________________
Its: ________________________
CABOT OIL & GAS CORPORATION
By __________________________
Its: ________________________
COG ACQUISITION COMPANY
By __________________________
Its: ________________________
WASHINGTON ENERGY COMPANY
By __________________________
Its: ________________________
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EXHIBIT A
TO
AGREEMENT OF MERGER
Agreement and Plan of Merger
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into as of
this ____ day of February, 1994, between Washington Energy Resources Company, a
Washington corporation ("WERCO"), and COG Acquisition Company, a Delaware
corporation ("Merger Sub"). WERCO and Merger Sub are sometimes collectively
referred to in this Agreement as the "Constituent Corporations."
RECITALS
1. WERCO is a corporation organized and existing under the laws
of the State of Washington.
2. Merger Sub is a corporation organized and existing under the
laws of the State of Delaware.
3. WERCO and Merger Sub have, together with Cabot Oil & Gas
Corporation, a Delaware corporation and the sole shareholder of Merger Sub
("COGC"), and Washington Energy Company, a Washington corporation and the sole
shareholder of WERCO ("WECO"), entered into an Agreement of Merger dated
February __, 1994 (the "Merger Agreement"), and have deemed it advisable and in
the best interests of WERCO and Merger Sub, respectively, and their respective
shareholders, that WERCO be merged with and into Merger Sub (the "Merger") as
authorized by the laws of the States of Delaware and Washington and pursuant to
the terms and conditions of the Merger Agreement.
AGREEMENT
In consideration of the foregoing recitals, the covenants and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
(a) MERGER; EFFECTIVENESS. WERCO shall be merged with and into
Merger Sub (hereinafter sometimes called the "Surviving Corporation") pursuant
to the applicable provisions of the Delaware General Corporation Law and
Washington Business Corporation Act and in accordance with the terms and
conditions of this Agreement and the Merger Agreement. The Merger shall become
effective on such date and at such time as the Articles of Merger, including
this Agreement and Plan of Merger (the "Plan of Merger") shall have been
accepted for filing by the Secretary of State of Washington, and the
Certificate of Merger shall have been accepted for filing by the Secretary of
State of the State of Delaware (or such later date and time as may be specified
in the Articles or Certificate of Merger, as appropriate), which shall occur on
the Closing Date as defined in the Merger Agreement.
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(b) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of Merger Sub in effect at the Effective Time until the same
shall be further altered, amended or repealed as therein provided.
(c) BYLAWS. The Bylaws of the Surviving Corporation shall be the
Bylaws of Merger Sub in effect at the Effective Time.
(d) DIRECTORS AND OFFICERS. The directors and officers of Merger
Sub in office at the Effective Time shall, at the Effective Time, become the
directors and officers, respectively, of the Surviving Corporation and shall
hold such offices in accordance with and subject to the Certificate of
Incorporation and Bylaws of the Surviving Corporation, as in effect immediately
after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law.
(e) CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of
capital stock of Merger Sub or of WERCO, all shares of Common Stock of WERCO
outstanding immediately prior to the Effective Time shall automatically and
without any action on the part of the holder thereof, be converted into the
right to receive (i) 2,133,000 fully paid and nonassessable shares of COGC
Common Stock and (ii) 1,134,000 fully paid and nonassessable shares of COGC
Preferred Stock.
(f) RIGHTS, DUTIES, POWERS, LIABILITIES, ETC. At the Effective
Time, the separate existence of WERCO shall cease, and WERCO shall be merged,
in accordance with the provisions of this Agreement and the Merger Agreement,
with and into the Surviving Corporation, and the Surviving Corporation shall
continue its corporate existence under the laws of the State of Delaware and
thereupon and thereafter all the rights, privileges, properties and franchises
of each of the Constituent Corporations shall vest in the Surviving
Corporation, the Surviving Corporation shall be responsible and liable for all
liabilities and obligations of the Constituent Corporations, and all other
effects of the Merger specified in Delaware shall result therefrom.
(g) IMPLEMENTATION. Each of the Constituent Corporations shall,
subject to the terms of the Merger Agreement, take or cause to be taken, all
action or do or cause to be done all steps necessary or advisable under the
laws of the States of Delaware and Washington to consummate and make effective
the Merger.
(h) TERMINATION. This Agreement may be terminated for any reason
at any time before the Effective Date by the mutual written consent of the
Boards of Directors of COGC and WECO.
(i) AMENDMENT. This Agreement may, to the extent permitted by
law, be amended, supplemented or interpreted at any time by action taken by the
Board of Directors of both of the Constituent Corporations; provided, however,
that this Agreement may not be amended or supplemented after having been
approved by the shareholders of a Constituent Corporation except
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by a vote or consent of the shareholders of the Constituent Corporations in
accordance with applicable law.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this AGREEMENT AND PLAN OF MERGER as of the date first set forth
above.
WASHINGTON ENERGY RESOURCES
COMPANY, a Washington corporation
By __________________________
Its: ________________________
COG ACQUISITION COMPANY,
a Delaware corporation
By __________________________
Its: ________________________
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EXHIBIT 10.13
EXHIBIT C TO AGREEMENT OF MERGER
CABOT OIL & GAS CORPORATION
CERTIFICATE OF DESIGNATION OF
6% CONVERTIBLE REDEEMABLE PREFERRED STOCK
PURSUANT TO SECTION 151
OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
CABOT OIL & GAS CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify that, pursuant to the authority conferred on the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation and in accordance with Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation adopted the
following resolution establishing a series of 1,134,000 shares of Preferred
Stock of the Corporation designated as "6% Convertible Redeemable Preferred
Stock":
RESOLVED, that pursuant to the authority conferred on the
Board of Directors of this Corporation by the Certificate of
Incorporation, a series of Preferred Stock, par value $.10 per share,
of the Corporation be and hereby is established and created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
6% CONVERTIBLE REDEEMABLE PREFERRED STOCK
1. Designation and Amount. There shall be a series of
Preferred Stock designated as "6% Convertible Redeemable Preferred Stock", and
the number of shares constituting such series shall be 1,134,000. Such series
is referred to herein as the "Convertible Preferred Stock".
2. Stated Capital. The amount to be represented in
stated capital at all times for each share of Convertible Preferred Stock shall
be $50.
3. Rank. All shares of Convertible Preferred Stock
shall rank prior to (i) all of the Corporation's Class A Common Stock, par
value $.10 per share, and Class B Common Stock, par value $.10 per share
(collectively, the "Common Stock"), now or hereafter issued and (ii) all of the
Corporation's Series A Junior Participating Preferred Stock hereafter issued,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary. All shares of Convertible Preferred Stock shall rank on a parity
with all of the Corporation's $3.125 Convertible Preferred Stock, par value
$.10 per share, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
4. Dividends. The holders of Convertible Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds at the time legally available therefor, dividends at the
rate of $3.00 per annum per share, and no more, which shall be fully
cumulative, shall accrue in all events without interest from the date of first
issuance of any shares of
93
Convertible Preferred Stock and shall be payable in cash quarterly in arrears
on February 28, May 31, August 31 and November 30 of each year commencing the
first such date after issuance of the Convertible Preferred Stock (except that
if any such date is a Saturday, Sunday or legal holiday then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 nor less than 10 days
preceding the payment dates for such dividends, as are fixed by the Board of
Directors, provided that if the date of issuance of the Convertible Preferred
Stock is during the month of a regular dividend payment date, the record date
for the initial dividend shall be such date of issuance. For purposes hereof,
the term "legal holiday" shall mean any day on which banking institutions are
authorized to close in The City of New York, New York or in Houston, Texas.
Subject to the next paragraph of this Section 4, dividends on account of
arrears for any past dividend period may be declared and paid at any time,
without reference to any regular dividend payment date. The amount of
dividends payable per share of Convertible Preferred Stock for each quarterly
dividend period shall be computed by dividing the annual dividend amount by
four. The amount of dividends payable for the initial dividend period and any
period shorter than a full quarterly dividend period shall be computed on the
basis of a 360-day year of twelve 30-day months.
No dividends or other distributions, other than dividends
payable solely in shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends and as to liquidation rights to the
Convertible Preferred Stock (or rights to purchase Common Stock or any other
such capital stock), shall be declared, paid or set apart for payment on, and
no purchase, redemption or other acquisition shall be made by the Corporation
of, any shares of Common Stock or other capital stock of the Corporation
ranking junior as to dividends to the Convertible Preferred Stock (the "Junior
Dividend Stock") unless and until all accrued and unpaid dividends on the
Convertible Preferred Stock then due shall have been paid or declared and set
apart for payment.
If at any time any dividend on any capital stock of the
Corporation ranking senior as to dividends to the Convertible Preferred Stock
(the "Senior Dividend Stock") shall be in default, in whole or in part, then
(except to the extent allowed by the terms of such Senior Dividend Stock) no
dividend shall be paid or declared and set apart for payment on the Convertible
Preferred Stock unless and until all accrued and unpaid dividends with respect
to the Senior Dividend Stock then due shall have been paid or declared and set
apart for payment. No full dividends shall be paid or declared and set apart
for payment on any class or series of the Corporation's capital stock ranking,
as to dividends, on a parity with the Convertible Preferred Stock (the "Parity
Dividend Stock") for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Convertible Preferred Stock for all dividend payment periods terminating on or
prior to the date of payment of such full cumulative dividends. No full
dividends shall be paid or declared and set apart for payment on the
Convertible Preferred Stock for any period unless full cumulative dividends
have been, or contemporaneously are, paid or declared and set apart for payment
on the Parity Dividend Stock for all dividend periods terminating on or prior
to the date of payment of such full cumulative dividends. When dividends are
not paid in full upon the Convertible Preferred Stock and the Parity Dividend
Stock, all dividends paid or declared and set aside for payment upon shares of
Convertible Preferred Stock and the Parity Dividend Stock shall be paid or
declared and set aside for payment pro rata so that the amount of dividends
paid or declared and set aside for payment per share on the Convertible
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Convertible Preferred Stock and the Parity Dividend Stock bear to each
other.
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Any reference to "distribution" contained in this Section 4
shall not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
5. Liquidation Preference. In the event of a
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Convertible Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for distribution,
whether such assets are stated capital or surplus of any nature, an amount
equal to the dividends accrued and unpaid thereon to the date of final
distribution to such holders, whether or not declared, without interest, and a
sum equal to $50 per share, and no more, before any payment shall be made or
any assets distributed to the holders of Common Stock or any other class or
series of the Corporation's capital stock ranking junior as to liquidation
rights to the Convertible Preferred Stock (the "Junior Liquidation Stock");
provided, however, that such rights shall accrue to the holders of Convertible
Preferred Stock only in the event that the Corporation's payments with respect
to the liquidation preferences of the holders of capital stock of the
Corporation ranking senior as to liquidation rights to the Convertible
Preferred Stock (the "Senior Liquidation Stock") are fully met. The entire
assets of the Corporation available for distribution after the liquidation
preferences of the Senior Liquidation Stock are fully met shall be distributed
ratably among the holders of the Convertible Preferred Stock and any other
class or series of the Corporation's capital stock which may hereafter be
created having parity as to liquidation rights with the Convertible Preferred
Stock in proportion to the respective preferential amounts to which each is
entitled (but only to the extent of such preferential amounts). Neither a
consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities or
other property will be considered a liquidation, dissolution or winding up of
the Corporation.
6. Redemption at Option of the Corporation. Prior to
the fourth anniversary of the date of the issuance of the Convertible Preferred
Stock, the Corporation shall not and may not redeem the Convertible Preferred
Stock. On or after the fourth anniversary and prior to the fifth anniversary
of the date of the issuance of the Convertible Preferred Stock, the
Corporation, at its option, may redeem shares of Convertible Preferred Stock,
in whole or in part, from time to time at the redemption price per share of $50
payable in shares of Class A Common Stock at the current market price per share
(determined as provided in Section 7(c)(iv)) of the Class A Common Stock on the
date fixed for redemption, plus an amount in cash equal to any and all
accumulated dividends that are accrued and unpaid thereon to and including the
date fixed for the redemption. On or after the fifth anniversary of the date
of the issuance of the Convertible Preferred Stock, the Corporation, at its
option, may redeem shares of Convertible Preferred Stock, in whole or in part,
from time to time at the redemption price per share of $50 payable in cash,
plus an amount in cash equal to any and all accumulated dividends that are
accrued and unpaid thereon to and including the date fixed for the redemption.
The redemption price per share as determined in this paragraph of this Section
6 shall be hereinafter referred to as the "Redemption Price".
In case of the redemption of less than all of the then
outstanding Convertible Preferred Stock, the Corporation shall designate by
lot, or in such other manner as the Board of Directors may determine, the
shares to be redeemed, or shall effect such redemption pro rata (as nearly as
may be). Notwithstanding the foregoing, the Corporation shall not redeem less
than all of the Convertible Preferred Stock at any time outstanding until all
dividends accrued and in arrears upon all Convertible Preferred Stock then
outstanding shall have been paid for all past dividend periods.
Not more than 60 nor less than 20 days prior to the redemption
date, notice by first class mail, postage prepaid, shall be given to the
holders of record of the Convertible Preferred Stock to be
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redeemed, addressed to such stockholders at their last addresses as shown on
the books of the Corporation. Each such notice of redemption shall specify the
date fixed for redemption, the Redemption Price, the place or places of
payment, that payment will be made upon presentation and surrender of the
shares of Convertible Preferred Stock, that on and after the redemption date,
dividends will cease to accumulate on such shares, the then-effective
conversion price pursuant to Section 7 and that the right of holders to convert
shall terminate at the close of business on the fifth business day prior to the
redemption date.
Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Convertible Preferred Stock receives such notice; and failure properly to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Convertible Preferred Stock. On or after
the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less than
all the shares represented by any such surrendered certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares. If, on the
date fixed for redemption, funds necessary for the redemption shall be
available therefor and shall have been irrevocably deposited or set aside,
then, notwithstanding that the certificates evidencing any shares properly
called for redemption shall not have been surrendered, the dividends with
respect to the shares so called shall cease to accrue after the date fixed for
redemption, the shares shall no longer be deemed outstanding, the holders
thereof shall cease to be stockholders, and all rights whatsoever with respect
to the shares so called for redemption (except the right of the holders to
receive the Redemption Price without interest upon surrender of their
certificates therefor) shall terminate.
The shares of Convertible Preferred Stock shall not be subject
to the operation of any purchase, retirement or sinking fund.
7. Conversion Privilege.
(a) Right of Conversion. Each share of Convertible
Preferred Stock shall be convertible at the option of the holder thereof, at
any time prior to the close of business on the fifth business day prior to date
fixed for redemption of such share as herein provided, into the number of fully
paid and nonassessable shares of Common Stock equal to $50 divided by the
conversion price (as defined in Section 7(c)) in effect from time to time.
For the purpose of this Section 7, the term "Common Stock"
shall initially mean the class designated as Class A Common Stock, par value
$.10 per share, of the Corporation, as of January 31, 1994, subject to
adjustment as hereinafter provided.
(b) Conversion Procedures. Any holder of shares of
Convertible Preferred Stock desiring to convert such shares into Common Stock
shall surrender the certificate or certificates for such shares of Convertible
Preferred Stock at the office of the transfer agent for the Convertible
Preferred Stock, which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank, or accompanied
by proper instruments of transfer to the Corporation or in blank, accompanied
by irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Convertible Preferred Stock and specifying the name or
names (with address) in which a certificate or certificates for Common Stock
are to be issued.
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Upon the conversion of any shares of Convertible Preferred
Stock, the Corporation shall pay the holder surrendering such shares cash in an
amount equal to any accrued but unpaid dividends to the date of conversion on
such shares of Convertible Preferred Stock; provided, however, that if such
date of conversion is after a record date for a dividend on the Convertible
Preferred Stock, such dividend shall be payable to the holder of record of such
shares on such record date and not pursuant to this sentence.
The Corporation will, as soon as practicable (but in no event
later than ten business days) after such deposit of certificates for
Convertible Preferred Stock accompanied by the written notice and compliance
with any other conditions herein contained, deliver at such office of such
transfer agent to the person for whose account such shares of Convertible
Preferred Stock were so surrendered, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment of any fraction of a
share as hereinafter provided. Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Convertible Preferred Stock to be converted,
and the person or persons entitled to receive the Common Stock deliverable upon
conversion of such Convertible Preferred Stock shall be treated for all
purposes as the record holder or holders of such Common Stock on such date;
provided, however, that the Corporation shall not be required to convert any
shares of Convertible Preferred Stock while the stock transfer books of the
Corporation are closed for any purpose, but the surrender of Convertible
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books as if the surrender had been made on the date of such reopening, and the
conversion shall be at the conversion price in effect on such date.
(c) Conversion Price. The conversion price for
determining the number of shares of Common Stock deliverable upon conversion
(the "conversion price") shall initially be $28.75 per share of Common Stock.
The conversion price shall be subject to adjustment from time to time as
follows:
(i) In case the Corporation shall (1) pay a dividend or
make a distribution on its Common Stock that is paid or made (A) in
other shares of stock of the Corporation or (B) in rights to purchase
stock or other securities if such rights are not separable from the
Common Stock except upon the occurrence of a contingency, (2)
subdivide its outstanding shares of Common Stock into a greater number
of shares or (3) combine its outstanding shares of Common Stock into a
smaller number of shares, then in each such case the conversion price
in effect immediately prior thereto and the securities issuable shall
be adjusted retroactively as provided below so that the holder of any
shares of Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock of the Corporation and other shares and rights to purchase stock
or other securities which such holder would have owned or have been
entitled to receive after the happening of any of the events described
above had such shares of Convertible Preferred Stock been converted
immediately prior to the happening of such event. In the event of the
redemption of any shares or rights referred to clause (1), such holder
shall have the right to receive, in lieu of any such shares or rights,
any cash, property or securities paid in respect of such redemption;
provided, however, that if the value of such cash, property or
securities is less than $.10 per share of Common Stock, such holder
shall not be entitled to such cash, property or securities. An
adjustment made pursuant to this subparagraph (i) shall become
effective immediately after the record date in the case of a dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
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(ii) In case the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for a
period expiring within 45 days after the date fixed for determination
mentioned below) to subscribe for or purchase shares of Common Stock
at a price per share less than the current market price per share
(determined as provided below) of the Common Stock on the date fixed
for the determination of stockholders entitled to receive such rights
or warrants, then the conversion price in effect at the opening of
business on the day following the date fixed for such determination
shall be reduced by multiplying such conversion price by a fraction of
which the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase and the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such current market price, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination; provided, however, in
the event that all the shares of Common Stock offered for subscription
or purchase are not delivered upon the exercise of such rights or
warrants, upon the expiration of such rights or warrants the
conversion price shall be readjusted to the conversion price which
would have been in effect had the denominator and the numerator of the
foregoing fraction and the resulting adjustment been made based upon
the number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants rather than upon the number of
shares of Common Stock offered for subscription or purchase. For the
purposes of this subparagraph (ii), the number of shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the Corporation.
(iii) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidences of
its indebtedness, cash (excluding regular quarterly cash dividends in
a per share amount (appropriately adjusted for stock splits and stock
dividends) not in excess of 200% of the amount most recently paid
("Regular Cash Dividends")), other assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
subparagraphs (i) and (ii) above), then in each such case the
conversion price shall be adjusted retroactively so that the same
shall equal the price determined by multiplying the conversion price
in effect immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the
current market price per share (determined as provided below) of the
Common Stock on the date fixed for such determination and the
numerator shall be such current market price per share of the Common
Stock less the amount of cash and the then fair market value (as
determined by the Board of Directors in good faith, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of the portion of the assets, rights or evidences
of indebtedness so distributed applicable to one share of Common
Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(iv) For the purpose of any computation under
subparagraphs (ii) and (iii) or Section 6, the current market price
per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices for the 30 consecutive trading
days commencing with the 45th trading day before the day in question.
The closing price for each day shall be the reported last sales price
regular way or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices regular way,
in either case on the New York Stock
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Exchange or, if the Common Stock is not listed or admitted to trading
on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading (based on the
aggregate dollar value of all securities listed or admitted to
trading) or, if not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market System or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on the NASDAQ National Market System,
the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by the Corporation for that
purpose, or, if such prices are not available, the fair market value
set by, or in a manner established by, the Board of Directors of the
Corporation in good faith. "Trading day" shall mean a day on which
the national securities exchange or the NASDAQ National Market System
used to determine the closing price is open for the transaction of
business or the reporting of trades or, if the closing price is not so
determined, a day on which the New York Stock Exchange is open for the
transaction of business.
(v) No adjustment in the conversion price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that the Corporation
may make any such adjustment at its election; and provided, further,
that any adjustments which by reason of this subparagraph (v) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 7
shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(vi) Whenever the conversion price is adjusted as provided
in any provision of this Section 7:
(1) the Corporation shall compute the adjusted
conversion price in accordance with this Section 7 and shall
prepare a certificate signed by the principal financial
officer of the Corporation setting forth the adjusted
conversion price and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate
shall forthwith be filed with the transfer agent of the
Convertible Preferred Stock; and
(2) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Corporation
to all record holders of Convertible Preferred Stock at their
last addresses as they shall appear in the stock transfer
books of the Corporation.
(vii) In the event that at any time, as a result of any
adjustment made pursuant to this Section 7, the holder of any shares
of Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of the Corporation other
than shares of Common Stock or to receive any other securities, the
number of such other shares or securities so receivable upon
conversion of any share of Convertible Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions contained in this
Section 7 with respect to the Common Stock.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Convertible Preferred Stock. If more than one certificate representing
shares of Convertible Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed
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on the basis of the aggregate number of shares of Convertible Preferred Stock
so surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any shares of Convertible Preferred
Stock, the Corporation will pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the closing price per share
of Common Stock (determined in accordance with subparagraph (c)(iv)) at the
close of business on the day of conversion.
(e) Reclassification, Consolidation, Merger or Sale of
Assets. In case of any reclassification of the Common Stock, any consolidation
of the Corporation with, or merger of the Corporation into, any other person,
any merger of another person into the Corporation (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Corporation), any sale or transfer
of all or substantially all of the assets of the Corporation or any compulsory
share exchange pursuant to which share exchange the Common Stock is converted
into other securities, cash or other property, then lawful provision shall be
made as part of the terms of such transaction whereby the holder of each share
of Convertible Preferred Stock then outstanding shall have the right
thereafter, during the period such share shall be convertible hereunder, to
convert such share only into the kind and amount of securities, cash and other
property receivable upon such reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
of the Corporation into which such share of Convertible Preferred Stock might
have been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange assuming such holder of Common Stock
of the Corporation (i) is not a person with which the Corporation consolidated
or into which the Corporation merged or which merged into the Corporation, to
which such sale or transfer was made or a party to such share exchange, as the
case may be ("constituent person"), or an affiliate of a constituent person and
(ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange
(provided that if the kind or amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange is not the same for each share of Common Stock of the
Corporation held immediately prior to such consolidation, merger, sale or
transfer by other than a constituent person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then the kind and amount of securities, cash and other
property receivable upon such reclassification, consolidation, merger, sale,
transfer or share exchange by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). The Corporation, the person formed by such consolidation or resulting
from such merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 7. The above provisions shall
similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
(f) Reservation of Shares; Transfer Taxes; Etc. The
Corporation shall at all times reserve and keep available, out of its
authorized and unissued stock, solely for the purpose of effecting the
conversion of the Convertible Preferred Stock, such number of shares of its
Common Stock free of preemptive rights as shall from time to time be sufficient
to effect the conversion of all shares of Convertible Preferred Stock from time
to time outstanding. The Corporation shall from time to time, in accordance
with the laws of the State of Delaware, increase the authorized number of
shares of Common
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Stock if at any time the number of shares of Common Stock not outstanding shall
not be sufficient to permit the conversion of all the then-outstanding shares
of Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for
purposes of conversion of the Convertible Preferred Stock hereunder require
registration with or approval of any governmental authority under any Federal
or State law before such shares may be issued upon conversion, the Corporation
will in good faith and as expeditiously as possible endeavor to cause such
shares to be duly registered or approved, as the case may be. If the Common
Stock is listed on the New York Stock Exchange or any other national securities
exchange, the Corporation will, if permitted by the rules of such exchange,
list and keep listed on such exchange, upon official notice of issuance, all
shares of Common Stock issuable upon conversion of the Convertible Preferred
Stock.
The Corporation will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Convertible Preferred Stock. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of Convertible
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid.
Before taking any action which would cause an adjustment
reducing the conversion price to less than the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at the
conversion price as so adjusted.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or
any other distribution) on its Common Stock, other than (A) a
dividend payable in shares of Common Stock or (B) Regular Cash
Dividends or (2) declare or authorize a redemption or repurchase of in
excess of 20% of the then-outstanding shares of Common Stock; or
(ii) the Corporation shall authorize the granting to the
holders of Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or
warrants (other than any rights specified in paragraph (c)(i)(1)(B) of
this Section 7); or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation shall be required, or of the sale or transfer of all
or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
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then the Corporation shall cause to be filed with the transfer agent for the
Convertible Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible Preferred Stock, at their last address as they shall
appear upon the stock transfer books of the Corporation, at least 15 days prior
to the applicable record date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption or granting of rights or warrants or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(h) Other Changes in Conversion Price. The Corporation
from time to time may reduce the conversion price by any amount for any period
of time. Whenever the conversion price is so reduced, the Corporation shall
mail to holders of record of the Convertible Preferred Stock a notice of the
reduction at least 10 days before the date the reduced conversion price takes
effect, and such notice shall state the reduced conversion price and the period
it will be in effect.
The Corporation may make such reductions in the conversion
price, in addition to those required or allowed by this Section 7, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for income tax purposes.
8. Voting Rights.
(a) General. The holders of the issued and
outstanding shares of Convertible Preferred Stock shall have the right to vote
for the election of directors and for all other purposes, each holder of
Convertible Preferred Stock being entitled to 1.739 votes for each share of
Convertible Preferred Stock held. Except as otherwise required by law or as
set forth below, the holders of the issued and outstanding shares of
Convertible Preferred Stock shall not be entitled to vote as a class and shall
vote with the holders of the Common Stock as a class on all matters on which
the holders of Convertible Preferred Stock are entitled to vote.
(b) Default Voting Rights. Whenever dividends on
the Convertible Preferred Stock or any other class or series of Parity Dividend
Stock shall be in arrears in an amount equal to at least six quarterly
dividends (whether or not consecutive), (i) the number of members of the Board
of Directors of the Corporation shall be increased by two, effective as of the
time of election of such directors as hereinafter provided, and (ii) the
holders of the Convertible Preferred Stock (voting separately as a class with
all other affected classes or series of the Parity Dividend Stock upon which
like voting rights have been conferred and are exercisable) will have the
exclusive right to vote for and elect such additional directors of the
Corporation at any meeting of stockholders of the Corporation at which
directors are to be elected held during the period such dividends remain in
arrears. The right of the holders of the Convertible Preferred Stock and such
Parity Dividend Stock to vote for such additional directors shall terminate
when all accrued and unpaid dividends on the Convertible Preferred Stock have
been declared and paid or set apart for payment. The term of office of all
directors so elected shall
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terminate immediately upon the termination of the right of the holders of the
Convertible Preferred Stock and such Parity Dividend Stock to vote for such
additional directors.
The foregoing right of the holders of the Convertible
Preferred Stock and such Parity Dividend Stock with respect to the election of
two directors may be exercised at any annual meeting of stockholders or, at any
special meeting of stockholders held for such purpose. If the right to elect
two directors shall have accrued to the holders of the Convertible Preferred
Stock and such Parity Dividend Stock more than 90 days preceding the date
established for the next annual meeting of stockholders, the President of the
Corporation shall, within 20 days after the delivery to the Corporation at its
principal office of a written request for a special meeting signed by the
holders of at least 10% of the Convertible Preferred Stock and such Parity
Dividend Stock then outstanding, call a special meeting of the holders of the
Convertible Preferred Stock and such Parity Dividend Stock to be held within 60
days after the delivery of such request for the purpose of electing such
additional directors.
The holders of the Convertible Preferred Stock and any Parity
Dividend Stock referred to above voting as a class shall have the right to
remove without cause at any time and replace any director such holders have
elected pursuant to this Section 8.
(c) Class Voting Rights. So long as the Convertible
Preferred Stock is outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of a majority of all outstanding
Convertible Preferred Stock voting separately as a class, (i) amend, alter or
repeal (by merger or otherwise) any provision of the Certificate of
Incorporation or the By-Laws of the Corporation, as amended, so as adversely to
affect the relative rights, preferences, qualifications, limitations or
restrictions of the Convertible Preferred Stock, or (ii) authorize or issue any
additional Convertible Preferred Stock or any Senior Dividend Stock. A class
vote on the part of the Convertible Preferred Stock shall, without limitation,
specifically not be deemed to be required (except as otherwise required by law
or resolution of the Corporation's Board of Directors) in connection with: (a)
the authorization, issuance or increase in the authorized amount of any shares
of any other class or series of stock or (b) the authorization, issuance or
increase in the amount of any bonds, mortgages, debentures or other obligations
of the Corporation.
9. Outstanding Shares. Except as set forth in the next
sentence, for purposes of this Certificate of Designations, all shares of
Convertible Preferred Stock shall be deemed outstanding except (i) from the
date fixed for redemption pursuant to Section 6 hereof, all shares of
Convertible Preferred Stock that have been so called for redemption under
Section 6 if funds necessary for the redemption of such shares are available
and have been deposited in trust with a bank having a combined capital and
surplus in excess of $50,000,000, as trustee, for the benefit of the holders of
such shares to be redeemed for payment of the relevant redemption price; (ii)
from the date of surrender of certificates representing shares of Convertible
Preferred Stock, all shares of Convertible Preferred Stock converted into
Common Stock; and (iii) from the date of registration of transfer, all shares
of Convertible Preferred Stock held of record by the Corporation or any
subsidiary of the Corporation. For purposes of voting or consenting with
respect to any action shares called for redemption pursuant to Section 6 shall
not be treated as outstanding from and after the date of any such deposit of
the funds for redemption.
10. Status of Acquired Shares. Shares of Convertible
Preferred Stock redeemed by the Corporation, received upon conversion pursuant
to Section 7 or otherwise acquired by the Corporation will be restored to the
status of authorized but unissued shares of Preferred Stock, without
designation as to class, and may thereafter be issued.
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11. Preemptive Rights. The Convertible Preferred Stock
is not entitled to any preemptive or subscription rights in respect of any
securities of the Corporation.
12. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid
under applicable law.
13. Notices. If at the time of the giving of any notice
provided for in Section 6 there shall be fewer than ten holders of record of
the Convertible Preferred Stock, then such notice shall be given by registered
first class mail, postage prepaid, return receipt requested. Any notice shall
be given in such manner to the initial holder of the Convertible Preferred
Stock so long as it remains a holder of record of any Convertible Preferred
Stock.
IN WITNESS WHEREOF, Cabot Oil & Gas Corporation has caused
this certificate to be signed by the undersigned officer, and its corporate
seal to be hereunto affixed and attested, this _____ day of
________________________________, 1994.
CABOT OIL & GAS CORPORATION
By:___________________________________________
ATTEST:
__________________________
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EXHIBIT 10.13
EXHIBIT D TO AGREEMENT OF MERGER
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 (this "Amendment No. 1") to the Rights Agreement
dated as of March 28, 1991 (the "Rights Agreement"), between Cabot Oil & Gas
Corporation, a Delaware corporation (the "Company"), and The First National
Bank of Boston, a national banking association (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Rights Agent previously entered into the
Rights Agreement; and
WHEREAS, the Company and the Rights Agent have agreed to amend the
Rights Agreement as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Definitions of Terms. Terms contained in this Amendment No. 1
to the Rights Agreement that are defined in the Rights Agreement shall for all
purposes have the meanings ascribed to such terms in the Rights Agreement as
from time to time supplemented, modified or amended, unless the context
otherwise specifies or clearly requires.
2. Definition of Acquiring Person. The definition of "Acquiring
Person" contained in Section 1 of the Rights Agreement is hereby amended in its
entirety to read as follows:
"Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include any Exempt Person; provided that a
Person shall not become an Acquiring Person if such Person, together
with its Affiliates and Associates, shall become the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding solely
as a result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of Common Stock by the Company,
unless and until such time as such Person or any Affiliate or
Associate of such Person shall purchase or otherwise become the
Beneficial Owner of any additional shares of Common Stock or any other
Person who is the Beneficial Owner of any shares of Common Stock shall
become an Affiliate or Associate of such Person; and provided further,
that Washington Energy Company, a Washington corporation ("WECO"),
shall not be an Acquiring Person solely (i) as a result of the receipt
of 2,133,000 shares of Common Stock and 1,134,000 shares of 6%
Convertible Redeemable Preferred Stock ("6% Preferred Stock") of the
Company to be issued pursuant to the Agreement of Merger dated
February , 1994 (the
105
"WECO Merger Agreement"), among the Company, COG Acquisition Company,
a Delaware corporation and a wholly owned subsidiary of the Company,
Washington Energy Resources Company, a Washington corporation and a
wholly owned subsidiary of WECO, and WECO, (ii) as a result of the
conversion of the 6% Preferred Stock or the redemption of any shares
of the 6% Preferred Stock for Common Stock or (iii) as a result of the
purchase of a number of shares of Common Stock which will result in
WECO being the Beneficial Owner of 20% of the voting stock of the
Company (as determined in accordance with generally accepted
accounting principles) (or such lesser number of shares as would then
entitle WECO to equity accounting treatment with respect to its
investment in the Company), unless WECO shall sell or otherwise
dispose of any securities of the Company received by it pursuant to
the WECO Merger Agreement, at which time clause (iii) of this proviso
shall cease to have any effect, and WECO shall be deemed to be an
Acquiring Person if it, or any of its Affiliates or Associates,
thereafter becomes the Beneficial Owner of any additional shares of
Common Stock (other than pursuant to a stock split, stock dividend or
similar recapitalization) such that WECO, together with its Affiliates
and Associates, would be the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding.
3. No Modification. Except as otherwise provided herein, this
Amendment No. 1 to the Rights Agreement shall not alter or modify the terms of
the Rights Agreement.
4. Section and Paragraph Headings. The section and paragraph
headings in this Amendment No. 1 to the Rights Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Amendment No. 1 to the Rights Agreement.
5. Counterparts. This Amendment No. 1 to the Rights Agreement
may be executed in two counterparts, each of which shall be deemed an original,
but both of which together shall constitute one and the same instrument.
6. Governing Law. This Amendment No. 1 to the Rights Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to the Rights Agreement to be duly executed as of the 23rd day of February
1994.
CABOT OIL & GAS CORPORATION
By: /s/ JOHN V. CLARKE
____________________________
Name: John V. Clarke
Title: Executive Vice President
ATTEST:
/s/ LISA A. MACHESNEY
__________________________
Name: Lisa A. Machesney
Title: Secretary
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ JEANNE ROSS
_____________________________
Name: Jeanne Ross
Title: Administrative Manager
ATTEST:
/s/ ANDREW MARCH
__________________________
Name: Andrew March
Title: Account Manager
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EXHIBIT 10.13
EXHIBIT B TO AGREEMENT OF MERGER
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of
____________, 1994 among Cabot Oil & Gas Corporation, a Delaware corporation
(the "Company"), Washington Energy Company, a Washington corporation ("WECO"),
and any other persons who become parties hereto in accordance herewith.
W I T N E S S E T H:
WHEREAS, the Company and WECO are parties to that certain
Agreement of Merger (the "Agreement of Merger") dated as of February ___, 1994
pursuant to which, among other things, Washington Energy Resources Company, a
Washington corporation and a wholly owned subsidiary of WECO ("WERCO"), is
merging into a wholly owned subsidiary of the Company;
WHEREAS, pursuant to the Agreement of Merger the shares of
common stock of WERCO are being changed into the right to receive, among other
things, 2,133,000 shares of Common Stock and 1,134,000 shares of Convertible
Preferred Stock;
WHEREAS, as an inducement to enter into the Agreement of
Merger and to consummate the transactions contemplated thereby, the Company
agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) Terms used but not defined in this Agreement have the meanings
set forth in the Agreement of Merger, unless the context otherwise requires.
In addition, the following terms have the indicated meanings, unless the
context otherwise requires:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the class A common stock, par value $0.10 per
share, of the Company.
"Company Securities" means the shares of Merger Common Stock, the
shares of Convertible Preferred Stock and any shares of Converted Common Stock.
"Converted Common Stock" means the shares of Common Stock issued
pursuant to the conversion of the Convertible Preferred Stock.
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"Convertible Preferred Stock" means the 6% Convertible Redeemable
Preferred Stock, par value $.10 per share, of the Company received by WECO
pursuant to the Agreement of Merger.
"Disposition" means any sale, transfer, pledge, assignment,
hypothecation, mortgage or other encumbrance, or any other disposition of
Company Securities whatsoever, whether voluntary or involuntary.
"Holder" means WECO or any transferee thereof permitted hereby if such
transferee (i) is designated a Holder by WECO and (ii) has executed a
counterpart hereof at the time of the transfer to such transferee, unless the
Registrable Securities held by such person are acquired in (a) a public
distribution pursuant to a registration statement under the Securities Act or
(b) transactions exempt from registration under the Securities Act where
securities sold in such transaction may be resold without subsequent
registration under the Securities Act.
"Merger Common Stock" means the shares of Common Stock received by
WECO pursuant to the Agreement of Merger.
"Registrable Securities" means the Company Securities, provided that
with respect to Section 3, Registrable Securities does not include the
Convertible Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement.
(b) Registrable Securities. Any Registrable Security will cease
to be a Registrable Security when (i) a registration statement covering such
Registrable Security has been declared effective by the Commission and such
Registrable Security has been disposed of pursuant to such effective
registration statement, (ii) such Registrable Security is distributed pursuant
to Rule 144 (or any similar provision then in force) under the Securities Act,
(iii) such Registrable Security may be publicly resold without registration
under the Securities Act (and without limitations as to volume or manner of
sale or both) or (iv) such Registrable Security is no longer held by a Holder.
2. Demand Registration.
(a) At any time until the first time at which all Holders are
legally permitted to sell publicly all Registrable Securities owned by the
Holders without registration under the Securities Act (and without limitations
as to volume or manner of sale or both), any Holder or Holders of an aggregate
of at least 25% of the Registrable Securities (on an as-converted basis) may
make a written request for registration under the Securities Act of at least
(i) 200,000 shares of Convertible Preferred Stock constituting Registrable
Securities and/or (ii) 400,000 shares of Common Stock (including Converted
Common Stock) constituting Registrable Securities, in either case for sale in
an underwritten public offering (a "Demand Registration"); provided, that
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the Company need effect only two Demand Registrations, one of which must be for
Converted Common Stock ("Converted Stock Demand Registration"). Each such
request shall specify the aggregate number of shares of, and the class of, the
Registrable Securities proposed to be sold. Within 10 days after receipt of
such request, the Company will give written notice of such registration request
to all other Holders of Registrable Securities and include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the giving of such
notice. Each such request will also specify the aggregate number of shares of,
and class of, Registrable Securities to be registered.
(b) A registration will not count as a Demand Registration until
it becomes effective. Notwithstanding the foregoing, in the event the Company
has filed a registration statement pursuant to Section 2(a) hereof and the
Holders elect to withdraw from such registration prior to effectiveness of such
registration statement (such election being effective for all Holders upon the
vote of Holders of a majority of the Registrable Securities (on an a converted
basis) unless such Holders elect to withdraw because of a material adverse
change in the business, prospects, properties or condition (financial or
otherwise) of the Company, then such registration shall be treated as a
registration effected by the Company for purposes of Section 2(a) hereof.
(c) The Holders shall have the right to select an investment
banker or investment bankers reasonably satisfactory to the Company to
administer the offering pursuant to a Demand Registration.
3. Piggy-Back Registration.
(a) If at any time until the first time at which the Holders are
legally permitted to sell publicly all Registrable Securities (which for
purposes of this Section 3 shall not include any security other than the Merger
Common Stock and Converted Common Stock) without registration under the
Securities Act (and without limitations as to volume or manner of sale or
both), the Company proposes to file a registration statement under the
Securities Act with respect to a firm commitment underwritten offering of Common
Stock whether or not for sale for the Company's account (other than a
registration statement on Form S-4 or S-8 (or any substitute form for
comparable purposes that may be adopted by the Commission) or a registration
statement filed in connection with a business combination, an exchange offer or
an offering of securities to the Company's existing security holders or
employees), then the Company shall in each such case give written notice of
such proposed filing to each Holder of Registrable Securities as soon as
practicable (but in no event less than 10 days before the anticipated filing
date), and such notice shall offer such Holder the opportunity to register such
number of shares of Registrable Securities as such Holder may request
("Piggy-Back Registration").
(b) The Company shall use its reasonable efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in the registration
statement for such offering to be included on the same terms and conditions as
any Common Stock to be issued by the Company included therein. Notwithstanding
the foregoing, if the managing underwriter or underwriters of any offering
shall inform the Company and the Selling Holders that because of the size of
the offering which the Holders, the Company and other persons intend to make or
because of the inclusion of securities
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sold by selling security holders, the success of the offering would be
adversely affected by inclusion of the Registrable Securities requested to be
included, then the amount of securities to be offered for the account of the
Holders shall be reduced pro rata to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount such
managing underwriter or underwriters have advised the Company and the Selling
Holders can be sold in such offering; provided that if Common Stock is being
offered for the account of stockholders other than a Holder, then the
proportion by which the amount of Registrable Securities intended to be offered
by Holders is reduced shall not exceed the proportion by which the amount of
Common Stock intended to be offered by such other stockholders is reduced;
provided, further, that in any such event set forth above, the amount of
Registrable Securities of WECO (but not any transferee of WECO) shall not be
reduced to less than 30% of the total number of shares of Common Stock to be
offered by the Company, all Holders and any other stockholders. If the number
of shares of Merger Common Stock and Converted Common Stock owned by WECO is
less than the total number of shares of Merger Common Stock, Converted Common
Stock and shares of Common Stock then issuable on conversion of the Convertible
Preferred Stock then outstanding, the 30% figure in the preceding proviso shall
be reduced by multiplying 30% by a fraction, the numerator of which is the
number of shares of Merger Common Stock and Converted Common Stock owned by
WECO and the denominator of which is such total number of shares.
(c) Each Selling Holder must agree, in order to exercise its
rights under this Section 3, to be a party to the underwriting agreement
between the Company and such underwriters.
4. Restrictions on Public Sale by Holders of Registrable Securities.
When Registrable Securities are included in a registration statement,
or when the Company conducts a public offering of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock and securities
of any Holder are not included in such registration statement, each Holder
agrees, and the Company shall use its best efforts to cause its directors,
officers and affiliates to agree, not to effect any sale or distribution of any
Convertible Preferred Stock or Common Stock, or any securities convertible into
or exchangeable or exercisable for such securities, including a sale pursuant
to Rule 144 (or any similar provision) under the Securities Act, during the
fourteen days prior to, and during the 90-day period beginning on, the
effective date of such registration statement (except pursuant to such
registration), if and to the extent requested by the Company in the case of a
non-underwritten public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an underwritten public
offering.
5. Registration Procedures.
Whenever Holders have requested that any Registrable Securities be
included in a registration statement pursuant to Section 2 or 3 hereof, the
Company shall use its reasonable best efforts to effect the registration and
the sale of such Registrable Securities as contemplated by such Section as
promptly as practicable, and in connection with any such request, the Company
shall:
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(a) in connection with a request pursuant to Section 2 hereof,
prepare and file with the Commission, as promptly as possible and in no event
later than 60 days after receipt of such request, a registration statement on
any form (to be selected by the Company) for which the Company then qualifies
or which counsel for the Company shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such registration statement to become effective;
provided, however, that
(x) the Company shall not be obligated to file a registration
statement at any time during the six-month period immediately
following the effective date of another registration statement
subject to this Agreement (unless such effectiveness is
terminated pursuant to clause (y) below); and
(y) with respect to any registration statement filed or to be
filed pursuant to Section 2 of this Agreement, if the Board of
Directors of the Company or the President and Executive Vice
President of the Company shall determine in good faith that to
maintain the effectiveness of such registration statement or
to permit such registration statement to become effective (or,
if no registration statement has yet been filed, to file such
registration statement) would be significantly disadvantageous
(a "Disadvantageous Condition") to the Company or its
stockholders for any reason, including the existence, or in
reasonable anticipation, of any acquisition or financing
activity involving the Company or the unavailability of any
required financial statements, or any other event or condition
of similar significance to the Company, the Company may, for a
period not to exceed 60 days or, if earlier, until such
Disadvantageous Condition no longer exists, cause such
registration statement to be withdrawn and the effectiveness
of such registration statement to be terminated or, if no
registration statement has yet been filed, elect not to file
such registration statement; provided that (i) the Company
many take such action no more than two times in any calendar
year, and that the total duration during any calendar year of
any delays or suspensions pursuant to this clause (y) shall
not exceed 90 days and (ii) any such withdrawn registration
shall not be deemed a Demand Registration unless and until
reinstated;
(b) (i) prior to filing a registration statement or prospectus or
any amendments or supplements thereto, furnish to the Selling Holders and one
counsel selected by the Selling Holders of a majority in aggregate number of
shares of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, (ii) as soon as reasonably possible,
furnish to each Selling Holder such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
Selling Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Selling Holder, and (iii) after the
filing of the registration statement, promptly notify such Selling Holder of
any stop order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove it
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if entered;
(c) in connection with a registration pursuant to Section 2
hereof, prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
not less than 180 days or such shorter period which will terminate when all
Registrable Securities covered by such registration statement have been sold;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Selling Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Selling Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Selling Holder; provided that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction;
(e) immediately notify each Selling Holder, at any time when a
prospectus relating to the Registrable Securities is required to be delivered
under the Securities Act, of the occurrence of an event known to the Company
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and promptly make available to each
Selling Holder any such supplement or amendment;
(f) enter into or arrange for the furnishing of customary
agreements and documents (including an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities;
(g) make available for inspection by any Selling Holder, and any
attorney, accountant or other professional retained by any such Selling Holder
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company or its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's and its
subsidiaries' officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Each Inspector that actually reviews Records supplied by the
Company or its subsidiaries shall be required, prior to any such review, to
execute an agreement with the Company providing that such Inspector shall not
disclose any confidential information of the Company (other than to another
Inspector) unless such disclosure is required by applicable law or legal
process. Each Selling Holder agrees that it will not make any market
transaction in securities of the Company based on such confidential information
in violation of applicable securities laws. Each Selling Holder further agrees
that it will, upon learning that disclosure of confidential information is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate
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action to prevent disclosure of the confidential information. Each Selling
Holder also agrees that the due diligence investigation made by the Inspectors
shall be conducted in a manner which shall not unreasonably disrupt the
operations of the Company or the work performed by the Company's officers and
employees;
(h) use its reasonable best efforts to obtain (i) an opinion or
opinions of counsel to the Company and (ii) a comfort letter or comfort letters
from the Company's independent public accountants each in customary form and
covering such matters of the type customarily covered by such opinion and
comfort letters as the manage underwriter reasonably requests;
(i) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(j) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
The Company may require each Selling Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing and such other
information as may be legally required in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5(e)
hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(e) hereof, and, if
so directed by the Company, such Selling Holder will deliver to the Company all
copies, other than permanent file copies, then in such Selling Holder's
possession of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective (including the period referred to in
Section 5(c) hereof) by the number of days during the period from and including
the date of the giving of such notice pursuant to Section 5(e) hereof to and
including the date when each Selling Holder of Registrable Securities covered
by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 5(c) hereof. Each
Selling Holder also agrees to notify the Company if any event relating to such
Selling Holder occurs which would require the preparation of a supplement or
amendment to the prospectus so that such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
6. Registration Expenses.
All expenses incident to the Company's performance of or compliance
with this
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Agreement, including without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), rating agency fees, printing
expenses, messenger and delivery expenses, the fees and expenses occurred by it
in connection with the listing of the securities to be registered, fees and
disbursements of counsel for the Company and its independent certified public
accountants, and fees and expenses of other persons retained by the Company,
incurred in connection with each registration hereunder, will be borne by the
Company in the case of the Demand Registration other than the Converted Stock
Demand Registration. In the event of the Converted Stock Demand Registration,
the Selling Holders will bear their pro rata share of the expenses incident to
the Company's performance of or compliance with this Agreement, but not
including any allocated overhead expenses, costs related to an annual audit or
other expenses that the Company would have incurred in the absence of a
Converted Stock Demand Registration. In the case of any Piggy-Back
Registration (other than the first four Piggy-Back Registrations, the costs of
which shall be borne by the Company as if such registrations were Demand
Registrations), the Company shall pay all such expenses other than additional
or incremental registration and filing fees, printing expenses and other
expenses resulting from the inclusion of the Registrable Securities to such
registration. Any underwriting discounts and commissions attributable to the
sale of Registrable Securities and any expenses of counsel for the Selling
Holders will be borne by the Selling Holders.
7. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Selling Holder, its officers, directors,
partners and agents and each person, if any, who controls such Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages, liabilities and expenses
(including any reasonable legal or other costs of investigation) whatsoever
arising out of or based upon any untrue statement or alleged untrue statement
of a material Act contained in any registration statement or prospectus
relating to the Registrable Securities or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of, or are based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by such
Selling Holder or on such Selling Holder's behalf expressly for use therein;
provided, however, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this Section 7(a) shall not apply to the
extent that any such loss, claim, damage, liability or expense results from the
fact that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to
such person if it is determined that it was the responsibility of such Selling
Holder to provide such person with a current copy of the prospectus and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage, liability or expense. The Company also agrees to
indemnify any underwriters of the Registrable Securities, their officers and
directors and each person who controls such
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underwriters on substantially the same basis as that of the indemnification of
the Selling Holders provided in this Section 7(a).
(b) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Selling Holder (or its officers, directors, partners or
agents) or any person controlling any such Selling Holder in respect of which
indemnity may be sought from the Company, the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Selling Holder, and shall assume the payment of all fees and expenses. Such
Selling Holder or any controlling person thereof shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Selling Holder or such controlling person unless (i) the Company has agreed to
pay such fees and expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include both such Selling Holder
or such controlling person and the Company, and such Selling Holder or such
controlling person shall have been advised by counsel that there may be one or
more legal defenses available to such Selling Holder or such controlling person
which are different from or additional to those available to the Company, in
which case, if such Selling Holder or such controlling person notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Selling Holder or such controlling
person; it being understood, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all Selling Holders and such controlling persons, and
that all such fees and expenses shall be reimbursed as they are incurred. The
Company shall not be liable for any settlement of any such action or proceeding
effected without the Company's written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action
or proceeding, the Company agrees to indemnify and hold harmless such Selling
Holder and such controlling person from and against any loss or liability (to
the extent stated above) by reason of such settlement or judgment.
(c) Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its directors and officers who sign the registration
statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Selling
Holder, but only with respect to information concerning such Selling Holder
furnished in writing by such Selling Holder or on such Selling Holder's behalf
expressly for use in any registration statement or prospectus relating to the
Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus; provided, however, that such Selling Holder shall not
be liable to the Company with respect to any loss, claim, damage or liability
(or actions in respect thereof) arising out of or based on any untrue statement
or alleged untrue statement or omission or alleged omission to state a material
fact in any preliminary prospectus, which is correct in the prospectus if the
person asserting any such loss, claim, damage or liability purchased shares of
Common Stock from the underwriter thereof but was not sent or given a copy of
the prospectus
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at or prior to the written confirmation of the sale of such shares to such
person. In case any action or proceeding shall be brought against the Company
or its directors or officers, or any such controlling person, in respect of
which indemnity may be sought against such Selling Holder, such Selling Holder
shall have the rights and duties given to the Company, and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to such SellIng Holder, by the preceding paragraph. Each Selling
Holder also agrees to indemnify and hold harmless underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Company provided in this Section 7(c). Notwithstanding
anything to the contrary herein, in no event shall the amount paid or payable
by any Selling Holder under this Section 7(c) exceed the amount of proceeds
received by such Selling Holder from the offering of the Registrable
Securities.
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to any indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and the
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, relates to information supplied by such indemnified party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), (i) no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission and
(ii) no Selling Holder shall be required to contribute any amount in excess of
the amount by which the proceeds received by such Selling Holder from the
offering of the Registrable Securities exceeds the amount of any damages which
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such Selling Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7(a) and (c) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 7(d).
8. Participation in Registrations.
No Holder may participate in any registration hereunder unless it (a)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and this
Agreement.
9. Rule 144.
The Company covenants that it will file any reports required
to be filed by it under the Securities Act and the Securities Exchange Act of
1934, and that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) Binding Effect. Unless otherwise provided herein, the
provisions of this Agreement shall be binding upon and accrue to the benefit of
the parties hereto and their respective heirs, legal representatives, permitted
transferees, successors, and permitted assigns.
(b) Amendment. This Agreement may be amended or terminated only
by a written instrument signed by the Company and the Holders of a majority of
the shares of Registrable Securities (treating all Convertible Preferred Stock
as being converted into Common Stock for this purpose).
(c) Applicable Law. The internal laws of the State of Texas
(without regard to choice of law provisions thereof) shall govern the
interpretation, validity and performance of the terms of this Agreement.
(d) Notices. All notices provided for herein shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, postage
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prepaid, as set forth in Section 15.5 of the Agreement of Merger.
(e) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
CABOT OIL & GAS CORPORATION
By:_________________________________
Title:______________________________
WASHINGTON ENERGY COMPANY
By:_________________________________
Title:______________________________
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