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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
TEXOIL, INC.
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(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction apples:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$24,032.64
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(2) Form, Schedule or Registration Statement No.:
Schedule TO, File No. 5-37792
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(3) Filing Party: OEI Acquisition Corp.; Ocean Energy, Inc.
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(4) Date Filed: January 24, 2001
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TEXOIL, INC.
110 CYPRESS STATION DRIVE
SUITE 220
HOUSTON, TEXAS 77090
FEBRUARY ___, 2001
Dear Stockholders:
As previously announced, Texoil, Inc. ("Texoil") entered into an
Agreement and Plan of Merger on January 18, 2001 (the "Merger Agreement") by and
among Texoil, Ocean Energy, Inc., a Texas corporation ("Parent"), and OEI
Acquisition Corp., a Nevada corporation and wholly-owned subsidiary of Parent
("OEI"), which provides for the acquisition of Texoil by Parent in two steps.
The first step was a cash tender offer by OEI to acquire (1) all the outstanding
shares of common stock of Texoil, par value $.01 per share (the "Common
Shares"), at a purchase price of $8.25 per share, net to the seller, in cash,
without interest, and (2) all the outstanding shares of Series A Convertible
Preferred Stock of Texoil, par value $.01 per share (the "Preferred Shares"), at
a purchase price of $18.04 per share, net to the seller, in cash, without
interest. The tender offer was completed on February ___, 2001 and OEI purchased
[________] Common Shares, or approximately [___%] of Texoil's issued and
outstanding Common Shares, and 2,991,465 Preferred Shares, or 100% of Texoil's
issued and outstanding Preferred Shares, pursuant to the tender offer.
The merger of OEI and Texoil (the "Merger"), in which Texoil will be
the surviving corporation, is the second and final step in the acquisition of
Texoil by Parent and is intended to complete the acquisition of any Common
Shares of Texoil not acquired by OEI pursuant to the tender offer. As a result
of the Merger, Texoil will become a wholly-owned subsidiary of Parent. In the
Merger, each outstanding Common Share of Texoil, other than shares owned by
Parent, OEI or shares held in the treasury of Texoil, and other than shares as
to which the holder has properly exercised dissenters' rights, will be converted
into the right to receive $8.25 in cash, without interest, all as more fully set
forth and described in the accompanying Information Statement and the Merger
Agreement, a copy of which is attached as Annex A to the Information Statement.
Our Board of Directors has determined that the Merger and the Merger
Agreement are fair to and in the best interests of Texoil's stockholders. In its
evaluation of the Merger, among other considerations, the Board considered the
opinion of Dain Rauscher Wessels, its financial advisor, to the effect that, as
of the date of Dain Rauscher Wessels' opinion, which was given on January 17,
2001, the aggregate consideration to be received in the Merger by Texoil's
stockholders as a group pursuant to the Merger Agreement is fair, from a
financial point of view, to such stockholders. Dain Rauscher Wessels' opinion is
subject to the assumptions, limitations and qualifications set forth in its
written opinion, which is attached as Annex B to the Information Statement.
Please read the accompanying Information Statement for information
about the Merger and the related transactions. The proposed Merger requires
approval of the Merger Agreement by holders of a majority of the votes entitled
to be cast by holders of (1) the Common Shares and the Preferred Shares, voting
together as a single class, with each Preferred Share entitling the holder
thereof to the number of votes equal to the full number of Common Shares into
which such Preferred Share is convertible, (2) the Common Shares, voting as a
single class, and (3) the Preferred Shares, voting as a single class. We are not
asking you to vote on the Merger or the Merger Agreement. OEI, which owns
approximately [___%] of the outstanding Common Shares and 100% of the
outstanding Preferred Shares of Texoil, has agreed to act by written consent and
vote its shares of Texoil stock in favor of the adoption of the Merger Agreement
and approval of the Merger, twenty one days after the date of mailing of the
Information
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Statement. This action by OEI will be sufficient for the stockholders of Texoil
to adopt the Merger Agreement and approve the Merger without the vote of any
other stockholder of Texoil. Accordingly, your approval is not required and is
not being sought.
Please do not send in your share certificates at this time. Promptly
after the Merger is completed, you will receive a letter of transmittal for that
purpose. We appreciate your support.
Sincerely,
Frank A. Lodzinski
President and Chief Executive Officer
Information Statement dated February __, 2001 and first mailed to stockholders
on or about February __, 2001.
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TEXOIL, INC.
110 CYPRESS STATION DRIVE
SUITE 220
HOUSTON, TEXAS 77090
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INFORMATION STATEMENT
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WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished to the holders of common
stock, par value $0.01 per share, of Texoil, Inc. ("Texoil") in connection with
the proposed acquisition of Texoil by OEI Acquisition Corp. ("OEI"). The
acquisition will be effected by the merger of OEI, a wholly-owned subsidiary of
Ocean Energy, Inc. ("Parent"), with Texoil (the "Merger") pursuant to an
Agreement and Plan of Merger dated as of January 18, 2001 among Texoil, Parent
and OEI (the "Merger Agreement"), which provides for the acquisition of Texoil
by Parent in two steps. The first step was a cash tender offer by OEI to acquire
(1) all the outstanding shares of common stock of Texoil, par value $.01 per
share (the "Common Shares"), at a purchase price of $8.25 per share, net to the
seller, in cash, without interest, and (2) all the outstanding shares of Series
A Convertible Preferred Stock of Texoil, par value $.01 per share (the
"Preferred Shares," and together with the Common Shares, the "Shares"), at a
purchase price of $18.04 per share, net to the seller, in cash, without
interest. The tender offer (the "Offer") was completed on February ___, 2001 and
OEI purchased [________] Common Shares, or approximately [___%] of Texoil's
issued and outstanding Common Shares, and 2,991,465 Preferred Shares, or 100% of
Texoil's issued and outstanding Preferred Shares, pursuant to the Offer.
The Merger of OEI with and into Texoil, in which Texoil will be the
surviving corporation, is the second and final step in the acquisition of Texoil
by Parent and is intended to complete the acquisition of any Common Shares of
Texoil not acquired by OEI pursuant to the Offer. As a result of the Merger,
Texoil will become a wholly-owned subsidiary of Parent. In the Merger, each
outstanding Common Share of Texoil (other than shares owned by Parent, OEI or
shares held in the treasury of Texoil, and other than shares as to which the
holder has properly exercised dissenters' rights) will be converted into the
right to receive $8.25 in cash, without interest, all as more fully set forth
and described in this Information Statement and the Merger Agreement, a copy of
which is attached as Annex A to this Information Statement.
The proposed Merger requires approval of the Merger Agreement by
holders of a majority of the votes entitled to be cast by holders of (1) the
Common Shares and the Preferred Shares, voting together as a single class, with
each Preferred Share entitling the holder thereof to the number of votes equal
to the full number of Common Shares into which such Preferred Share is
convertible, (2) the Common Shares, voting as a single class, and (3) the
Preferred Shares, voting as a single class. We are not asking you to vote on the
Merger or the Merger Agreement. OEI, which owns approximately [__%] of the
outstanding Common Shares and 100% of the outstanding Preferred Shares of
Texoil, has agreed to act by written consent and vote its shares of Texoil stock
in favor of the adoption of the Merger Agreement and approval
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of the Merger, 21 days after the date of mailing of this Information Statement.
This action by OEI will be sufficient to ensure that a majority of the
stockholders of Texoil adopt the Merger Agreement and approve the Merger without
the vote of any other stockholder of Texoil. Accordingly, your approval is not
required and is not being sought.
If the Merger is completed, then you will have certain rights under
Nevada law to dissent and demand appraisal of, and payment in cash of the fair
value of, your shares. See "Dissenters' Rights" on page 35 of this Information
Statement for more information.
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TABLE OF CONTENTS
Page
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SUMMARY TERM SHEET FOR THE MERGER.................................................................................7
THE MERGER.......................................................................................................10
General.......................................................................................................10
Background of the Transaction.................................................................................10
Texoil's Reasons for the Merger; Recommendation of the Texoil Board...........................................14
Opinion of Dain Rauscher Wessels..............................................................................15
Fee Arrangements..............................................................................................19
Vote Required to Approve Merger...............................................................................20
Conditions to the Merger......................................................................................20
Effective Time................................................................................................21
Payment for the Shares........................................................................................21
Dissenters' Rights............................................................................................21
Purpose of the Merger.........................................................................................21
Regulatory Matters............................................................................................22
Certain Potential Conflicts of Interest.......................................................................22
THE MERGER AGREEMENT AND RELATED AGREEMENTS......................................................................26
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...........................................................36
DISSENTERS' RIGHTS...............................................................................................36
INFORMATION CONCERNING TEXOIL....................................................................................39
OWNERSHIP OF SHARES BY DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS............................................42
INFORMATION CONCERNING PARENT AND OEI............................................................................43
WHERE YOU CAN FIND MORE INFORMATION..............................................................................44
ANNEX A AGREEMENT AND PLAN OF MERGER...........................................................................A-1
ANNEX B FAIRNESS OPINION OF FINANCIAL ADVISOR..................................................................B-1
ANNEX C SECTION 92A.300 THROUGH 92A.500 OF
THE NEVADA REVISED STATUTES............................................................................C-1
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SUMMARY TERM SHEET FOR THE MERGER
This summary term sheet for the merger highlights information from this
information statement regarding the merger and the merger agreement. This
summary term sheet does not contain all of the information that may be important
to you. Accordingly, we encourage you to carefully read this entire information
statement and the documents to which we have referred you.
WHAT TRANSACTION IS BEING PROPOSED?
The merger of OEI Acquisition Corp. with Texoil, Inc. As a result of
the merger, Texoil, Inc. will be a wholly owned subsidiary of Ocean Energy, Inc.
WHAT CONSIDERATION WILL I RECEIVE IF THE MERGER IS APPROVED?
Upon completion of the merger, you will be entitled to receive $8.25 in
cash for each share of Texoil, Inc. common stock that you hold.
WHO ARE THE PARTIES TO THE MERGER?
o Texoil, Inc. Texoil, a Nevada corporation, is an independent
oil and gas company engaged in the acquisition of oil and gas
reserves through a program that includes purchases of
reserves, reengineering, development and exploration
activities currently focused in Texas and Louisiana. The
principal executive offices of Texoil are located at 110
Cypress Station Drive, Suite 220, Houston, Texas 77090 and the
telephone number at such offices is (281) 537-9920.
o OEI Acquisition Corp. OEI is a newly incorporated Nevada
corporation organized in connection with Ocean Energy, Inc.'s
acquisition of Texoil and has not carried on any activities
other than in connection with the acquisition. The principal
offices of OEI are located at c/o Ocean Energy, Inc., 1001
Fannin Street, Suite 1600, Houston, Texas 77002 and its
telephone number is (713) 265-6000. OEI is a wholly owned
subsidiary of Ocean Energy, Inc.
o Ocean Energy, Inc. Ocean Energy, Inc. is a Texas corporation.
Its principal offices are located at 1001 Fannin Street, Suite
1600, Houston, Texas 77002 and its phone number at such
address is (713) 265-6000. Ocean is an independent energy
company engaged in the exploration, development, production
and acquisition of crude oil and natural gas. North American
operations are focused in the shelf and deepwater areas of the
Gulf of Mexico, the Peruvian Basin, Mid-continent and Rocky
Mountain regions. Internationally, Ocean holds a leading
position among U.S. independents in West Africa with oil and
gas activities in Equatorial Guinea, Cote d'Ivoire and Angola.
Ocean also conducts operations in the republics of Egypt,
Tatarstan, Pakistan and Indonesia.
WHAT DOES THE BOARD OF DIRECTORS OF TEXOIL, INC. RECOMMEND WITH RESPECT TO THE
MERGER?
The merger is the second and final step in the acquisition of Texoil,
Inc. by Ocean Energy, Inc. On January 17, 2001, the board of directors of
Texoil, Inc., by unanimous vote of the directors present:
o determined that each of the merger agreement and the merger
are fair to, and in the best interests of, you and the other
Texoil stockholders,
o approved the merger agreement and the transactions
contemplated by it,
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o declared the merger agreement advisable, and
o recommended that you and the other stockholders of Texoil
approve the merger.
The merger agreement required the board of directors of Texoil, Inc. to
recommend that the stockholders approve the merger.
WHAT DID OUR FINANCIAL ADVISORS SAY WITH RESPECT TO THE FAIRNESS OF THE MERGER
TO THE STOCKHOLDERS?
On January 17, 2001, Dain Rauscher Wessels, our financial advisor,
delivered its written opinion to the board of directors of Texoil, Inc. that, as
of the date of the opinion, the aggregate consideration to be received in the
merger by Texoil's stockholders, as a group, pursuant to the merger agreement is
fair, from a financial point of view, to such stockholders. The opinion is
attached as Annex D to this information statement. We urge you to read the
opinion in its entirety.
WILL A SPECIAL MEETING OF STOCKHOLDERS BE HELD?
No. OEI Acquisition Corp., the majority stockholder of Texoil, Inc.,
will approve the merger by written consent twenty one days following the mailing
of this information statement.
HOW MANY VOTES ARE REQUIRED TO APPROVE THE MERGER?
The proposed merger requires approval of the merger agreement by
holders of a majority of the votes entitled to be cast by holders of:
o the common shares and the preferred shares, voting together as
a single class, with each preferred share entitling the holder
of such shares to the number of votes equal to the full number
of common shares into which each preferred share is
convertible,
o the common shares, voting as a single class, and
o the preferred shares, voting as a single class.
OEI Acquisition Corp. owns and has the right to vote _________ common
shares, or approximately ___% of the outstanding common shares, and 2,991,465
preferred shares, or 100% of the outstanding preferred shares, and therefore can
cause the merger to be approved without the affirmative vote of any other
stockholder.
DOES OEI ACQUISITION CORP. HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT FOR ALL
SHARES OF COMMON STOCK UPON COMPLETION OF THE MERGER?
Yes. There are no financing conditions to the merger and OEI
Acquisition Corp. has sufficient funds on hand to pay for all remaining shares
of common stock upon completion of the merger.
HOW WILL THE MERGER WORK?
Upon the terms and conditions of the merger agreement and approval of
the stockholders, OEI Acquisition Corp., the wholly owned subsidiary of Ocean
Energy, Inc., will merge with and into Texoil, Inc. Texoil, Inc. will remain in
existence as a wholly-owned subsidiary of Ocean Energy, Inc. At the time the
merger becomes effective, each outstanding share of common stock of Texoil,
Inc., other than shares owned by Ocean Energy, Inc., OEI Acquisition Corp. or
shares held in the treasury of Texoil, and other than shares as to which the
holder has properly exercised dissenters' rights, will automatically be
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converted into the right to receive $8.25 in cash, net to the seller, without
interest, and holders of those shares will have no further equity interest in
Texoil, Inc. upon completion of the merger.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES TO ME OF THE MERGER?
The merger will be a taxable transaction to you. For United States
federal income tax purposes, you will generally recognize gain or loss in the
merger in an amount determined by the difference between the cash you receive
and the tax basis in your shares of the common stock of Texoil, Inc. The merger
may also be a taxable transaction for state, local and other purposes. Because
determining the tax consequences of the merger can be complicated, you should
consult your own tax advisor in order to understand fully how the merger will
affect you. See "Material United States Federal Income Tax Consequences" on page
35 of this information statement.
WILL I HAVE APPRAISAL RIGHTS?
Yes. If the merger is completed, then you will have certain rights
under Nevada law to dissent from the merger and demand appraisal of, and payment
in cash of the fair value of, your shares. See "Dissenters' Rights" on page 35
of this information statement.
HOW WILL I GET PAYMENT FOR MY SHARES OF COMMON STOCK IN THE MERGER?
Promptly after completion of the merger, a transmittal letter and
instructions for surrendering certificates formerly representing shares of
common stock of Texoil, Inc. will be mailed to each stockholder of record of
Texoil, Inc. at the effective time of the merger. OEI Acquisition Corp. has
appointed EquiServe Trust Company, N.A. to act as the paying agent for the
merger. Please do not send your stock certificates in at this time.
WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
We expect the merger to be completed promptly after OEI executes and
delivers to us its written consent voting all shares of Texoil that it owns in
favor of the merger.
WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE MERGER?
If you have any questions, require assistance, or need additional
copies of this information statement or other related materials, please call
[Georgeson Shareholder Communications, Inc.] at [(800) 223-2064 (toll free)].
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THE MERGER
GENERAL
The Board of Directors of Texoil (the "Texoil Board") is using this
information statement (this "Information Statement") to inform Texoil's
stockholders about the proposed acquisition of Texoil by OEI. The Texoil Board
has approved the Merger and the Merger Agreement and the transactions
contemplated thereby.
The proposed acquisition will occur pursuant to the Agreement and Plan
of Merger dated as of January 18, 2001, by and among Texoil, Parent and OEI.
Under the Merger Agreement, Texoil will merge with OEI and all outstanding
Common Shares, other than those as to which dissenters' rights have been
properly exercised, will at the completion of the Merger be converted into the
right to receive $8.25 in cash per share. The separate existence of OEI will
cease and Texoil will become a wholly-owned subsidiary of Parent.
OEI has agreed to act by written consent and vote its shares in favor
of the adoption of the Merger Agreement and approval of the Merger 21 days after
the date of mailing of this Information Statement. This action by OEI will be
sufficient to ensure that a majority of the stockholders of Texoil adopt the
Merger Agreement and approve the Merger without the vote of any other
stockholder of Texoil. Therefore, your vote is not required and is not being
sought.
BACKGROUND OF THE TRANSACTION
On November 10, 1999, Texoil completed the sale of $22.0 million of
Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred
Shares," and together with the Common Shares, the "Shares"), to several entities
and persons, including Quantum Energy Partners, LP ("Quantum"). Texoil completed
the Preferred Share offering in order to redeem certain subordinated notes that
had a December 31, 1999 maturity date, reduce bank debt and for other corporate
purposes. Texoil continued to pursue its business strategy for growth through
asset acquisitions and development and exploration activities. In addition,
Texoil expanded its efforts to pursue corporate acquisitions or other business
combinations, with Texoil as the surviving corporation, as an additional means
of growth. In March 2000, Texoil with the assistance of Windrock Capital, Ltd.
("Windrock"), an affiliate of Quantum, initiated activities intended to solicit
proposals from selected parties for the acquisition of or merger with Texoil.
Between March and October 2000, Texoil and Windrock identified and
contacted numerous companies known in the energy industry to be candidates for
the acquisition of, or merger with, Texoil. In addition, Texoil independently
contacted several possible acquisition candidates that would consider a
transaction where Texoil would be the surviving entity. Texoil was also
contacted by several investment bankers and independent oil and gas companies to
consider business combinations. Pursuant to the terms of confidentiality
agreements with certain of these companies, Texoil provided extensive financial,
operational, and reserve data to the candidates to facilitate their evaluations.
As a result of these contacts Texoil entered into discussions and due
diligence reviews with four companies, not including Parent. One company
terminated discussions because it did not believe that Texoil's assets were a
proper fit for its growth strategy. One company rejected Texoil's acquisition
offer and the Texoil Board rejected the remaining two possible transactions
because of a combination of factors, including the insufficiency of the cash
consideration contemplated, concerns about the value of non-cash consideration
being contemplated and concerns about the possible offers being contingent upon
the purchaser's ability to obtain financing for the possible transaction.
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During the period of March through September 2000, Texoil's management
maintained close contact with members of the Texoil Board and at the Texoil
Board's regular meeting on October 4, 2000, Texoil's management apprised the
Texoil Board of its results of operations, status of acquisition and divestiture
activities and progress related to corporate acquisitions, mergers or the
acquisition of Texoil. The Texoil Board also discussed the criteria that it
believed should be met in analyzing any potential merger transaction.
During the course of the late summer and fall of 2000, Texoil's
management discussed strategic alternatives with several reputable independent
investment banking firms, as well as other firms with expertise in the industry.
On September 14, 2000, at a charity event held in Houston, Texas, Mr.
John D. Schiller, Jr., Parent's executive vice president of operations, Mr.
William L. Transier, Parent's executive vice president and chief financial
officer, and Mr. Thomas A. Reiser, a member of the Texoil Board, had initial
discussions regarding the possibilities of Parent's acquisition of Texoil. On
October 20, 2000, an initial meeting was held at Mr. Schiller's office to
further discuss such acquisition possibilities. Attendees at the meeting
included Mr. Schiller, Mr. Jerry M. Crews, an executive vice president of
Texoil, and Mr. Reiser. The attendees agreed that the process of evaluation
should begin by means of a limited due diligence review of Texoil by Parent's
representatives.
On or about October 26, 2000, Texoil contacted Parent by telephone to
discuss the possible acquisition of, or merger with, Texoil. Parent responded by
telephone indicating an interest. On October 30, 2000, Parent and Texoil
executed a confidentiality agreement pursuant to which Texoil agreed to supply
certain financial, reserve and other information to Parent and Parent agreed to
treat such information as confidential and to use such information solely in
connection with the evaluation of a possible transaction with Texoil.
On November 6, 2000, Parent's technical team of exploration, land,
legal and business development personnel reviewed data concerning Texoil's
assets with certain members of Texoil's management, including Mr. Frank A.
Lodzinski, Texoil's President and Chief Executive Officer, Mr. Crews, Mr. Thomas
S. Campbell, Texoil's acquisitions manger, and Mr. Francis M. Mury, an executive
vice president of Texoil. The review of data provided by Texoil continued for
several days. On November 14, 2000, an initial internal presentation was made by
Parent's technical team to Mr. Schiller regarding the information provided by
Texoil.
On November 20, 2000, Messrs. Schiller, Transier, Mr. John H. Campbell,
Jr., vice president of exploitation -- North America of Parent, and Mr. Alan L.
Smith, manager of business development -- North America of Parent, met with
Messrs. Lodzinski, Crews and Reiser at Parent's office in Houston, Texas to
discuss potential valuation and projects. On November 28, 2000, Parent's
technical team reviewed Texoil's major fields with representatives of Texoil and
W. D. VonGonten & Co., consulting petroleum reservoir engineers for Texoil. On
November 28, 2000, Mr. Lodzinski, Ms. Adrienne Bond, Texoil's counsel, Mr.
Robert K. Reeves, Parent's general counsel, Mr. Transier and Mr. Andrew J. Sheu,
Parent's vice president of tax, met at Parent's offices to discuss the potential
deal structure, tax issues, and the due diligence process.
On December 11, 2000, Parent's technical team completed asset
evaluations of Texoil and its operations and made an internal presentation to
Parent's senior management, which in turn decided to recommend to Parent's Board
of Directors that Parent pursue a possible transaction with Texoil. On December
13, 2000, senior management of Parent communicated its findings to the Parent's
Board of Directors, and the Parent's Board of Directors gave its approval to
proceed with a possible transaction with Texoil. On December 13, 2000, Parent
and Texoil exchanged bullet-point outlines of certain
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proposed terms of the transaction. As proposed by Parent, the transaction was to
be structured as a merger in which a newly-formed subsidiary of Parent would be
merged with Texoil and Texoil's stockholders would receive in exchange for their
shares aggregate consideration of $115 million ($8.25 per Common Share)
consisting of 50% stock of Parent and 50% cash, with the receipt of Parent stock
to be tax-free to Texoil's stockholders. Other terms included the cash-out of
options and warrants at the closing of the Merger, a requirement that
management, directors and significant stockholders of Texoil agree to vote in
favor of the Merger, and certain other terms and conditions.
On December 18, 2000, Parent and Texoil executed an additional
confidentiality agreement pursuant to which Parent agreed to supply certain
information to Texoil and Texoil agreed to treat such information as
confidential and to use such information solely in connection with the
evaluation of a possible transaction with Parent.
On December 18, 2000, Parent's outside counsel distributed to the
parties for review and comment a preliminary draft of a merger agreement. On
December 26 and 27, 2000 and January 2 and 3, 2001, representatives of Parent
made field visits to certain Texoil's operated oil and gas fields.
On December 19, 2000, Texoil engaged the law firm of Jenkens &
Gilchrist, a Professional Corporation, to serve as special counsel to Texoil in
connection with the negotiation of the Merger Agreement, the Offer and the
Merger.
Management kept the Texoil Board apprised of contacts with several
companies, including Parent, through numerous telephone conversations and
written correspondence, including correspondence dated September 8, 2000,
October 2, 2000, October 24, 2000 and December 15, 2000. These discussions and
correspondence included discussions about opportunities for growth (or lack
thereof) in the absence of a merger or similar transaction with Parent and
strategies to pursue these opportunities, tax considerations of a possible
merger with Parent, comparisons of the Parent's offer to prior indications of
interest, stockholders' cost basis, and market considerations. The
correspondence dated December 15, 2000 focused specifically on Parent, provided
a detailed financial analysis of the proposed transaction with Parent and
recommended that management proceed with negotiations with Parent. The Texoil
Board responded favorably to this recommendation.
Beginning on or about December 19, 2000, representatives of Parent
visited Texoil's offices and conducted an extensive due diligence review of
Texoil's records. On January 3, 2001, Parent's outside counsel, Mr. Transier and
Mr. Reeves and Mr. Lodzinski, Mr. S. Wil VanLoh, Jr., President of Quantum
Energy Management LLC, Quantum's general partner and Mr. Michael P. Dalton,
Associate of Quantum, met at Parent's offices to discuss the purchase price for
the Common Shares and Preferred Shares, various alternative structures for the
acquisition, including a possible all cash transaction or a combination of cash
and Parent stock, the timing of the transaction and various other agreement
terms. At this meeting, Parent indicated that it would be willing to do an all
cash acquisition if the transaction was structured as a tender offer and merger
and a majority of stockholders committed to tender their shares and vote for the
transaction pursuant to the Tender Agreements and Tender and Voting Agreements
(as defined below). The offer generally was conditioned upon negotiation of a
definitive agreement including provisions with respect to, among other things, a
breakup fee and other compensation to Parent in the event that Texoil
subsequently accepted a superior offer. From January 8 through January 18, 2001,
Parent's due diligence review continued and the Merger Agreement was negotiated
and finalized.
On January 4, 2001, Mr. VanLoh met with Mr. Reeves at Parent's offices
to further discuss potential structure and share price. On January 7, 2001,
revised agreements reflecting an all-cash tender offer and merger were
distributed to Parent, Texoil and their respective representatives.
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Between January 7 and January 16, 2001, there were various telephone
conferences between Mr. Reeves, Mr. Lodzinski and outside counsel to negotiate
provisions of the Merger Agreement, the Tender and Voting Agreement and the
Tender Agreement, and additional due diligence was conducted by Parent's outside
counsel.
On January 10, 2000, the Board held a special informational meeting at
which a majority of the directors were present in person or by telephone at
which its members reviewed the status of the terms of the Offer, the Merger and
the Merger Agreement. The Texoil Board also received and participated in a
presentation by its legal advisors concerning the Texoil Board's duties in
considering the proposed transaction. The terms of the proposed transaction were
reviewed with Texoil's management and the Texoil Board received and participated
in a presentation by its legal advisors with respect to the terms of the
proposed transaction.
On January 10, 2000, Texoil engaged the services of Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated ("Dain Rauscher Wessels"), to
analyze the Merger Agreement to determine if the aggregate consideration payable
to holders of Common Shares and Preferred Shares, as a group, in the Offer and
the Merger was fair, from a financial point of view, to such holders.
On January 17, 2001, the Texoil Board held a telephonic special meeting
at which eight of the nine directors were present by telephone. At this meeting,
the Texoil Board considered the final terms of the Offer, the Merger, the Merger
Agreement, the Tender and Voting Agreement and the Tender Agreement. Texoil's
legal advisors summarized the final terms of the proposed transaction. The
Texoil Board also received and participated in a presentation by Dain Rauscher
Wessels with respect to the aggregate consideration payable to holders of Common
Shares and Preferred Shares in the proposed transaction.
At the conclusion of its presentation, the representative of Dain
Rauscher Wessels delivered the oral opinion of Dain Rauscher Wessels to the
Texoil Board that, as of such date, the aggregate consideration payable to
holders of Common Shares and Preferred Shares, as a group, in the Offer, the
Merger and pursuant to the Merger Agreement, was fair, from a financial point of
view, to such stockholders. Dain Rauscher Wessels subsequently confirmed its
oral opinion by letter dated January 17, 2001. Dain Rauscher Wessels' written
opinion is attached hereto as Annex B and is incorporated herein by reference.
After such discussions, the Texoil Board, by the unanimous vote of the directors
present (1) determined that each of the Merger Agreement, the Offer and the
Merger are fair to, and in the best interests of, Texoil's stockholders; (2)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer, the Tender and Voting Agreement, the Tender Agreement and
the Merger; (3) declared the Merger Agreement advisable; and (4) recommended
that Texoil's stockholders accept the Offer, tender their shares of Common
Shares or Preferred Shares pursuant to the Offer and approve the Merger
Agreement, the Tender and Voting Agreement, the Tender Agreement and the Merger.
On January 18, 2001, the respective parties to the Merger Agreement,
the Tender and Voting Agreement and the Tender Agreement executed and delivered
such agreements and Parent and Texoil issued a joint press release announcing
the signing of the Merger Agreement.
On January 24, 2001, Parent and OEI commenced the Offer. At midnight,
New York City time, on February __, 2001, the Offer expired. Shortly after such
time, OEI accepted for payment all Shares validly tendered and not withdrawn in
the Offer, consisting of ______ Common Shares, or approximately _____% of the
outstanding Common Shares, and 2,991,465 Preferred Shares, or 100% of the
outstanding Preferred Shares. OEI promptly paid for such Shares.
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TEXOIL'S REASONS FOR THE MERGER; RECOMMENDATION OF THE TEXOIL BOARD
The Texoil Board, at a meeting held on January 17, 2001, determined
that the Merger and the Merger Agreement are fair to, and in the best interests
of, Texoil's stockholders. The Texoil Board has approved and adopted the Merger
and the Merger Agreement.
In the course of determining that the Merger and the Merger Agreement
are fair to, and in the best interest of, Texoil's stockholders, the Texoil
Board consulted with Texoil's management, as well as its financial and legal
advisors, and based its determination to recommend the Offer and the Merger to
Texoil stockholders on the following factors:
o Texoil's financial condition, results of operations and
business and strategic objectives, as well as the risks
involved in achieving those objectives;
o Current conditions and trends in the petroleum industry and
the effect of those conditions and trends on Texoil;
o The significant competition and consolidation in the industry
and market in which Texoil operates and, the relative size of
other participants in the oil and gas industry;
o A review of the possible alternatives to the transactions
contemplated by the Merger Agreement, including the
possibilities of securing a significant investment in Texoil
to augment its equity capitalization, continuing to operate
Texoil as an independent entity, a strategic acquisition of
another company, a strategic merger with another company in
the same industry and a sale or partial sale of Texoil through
a merger or by other means, and, in respect of each
alternative, the timing and the likelihood of actually
accomplishing the alternative;
o The results of the efforts undertaken by Texoil's management
to solicit indications of interest in making an investment in
or the possible acquisition of Texoil from third parties other
than Parent and OEI;
o The financial and valuation analyses presented to the Texoil
Board by Dain Rauscher Wessels, including market prices and
financial data relating to other companies engaged in
businesses considered comparable to Texoil and the prices and
premiums paid in recent selected acquisitions of companies
engaged in businesses considered comparable to those of
Texoil;
o The likelihood that the Offer and the Merger would be
consummated, including Parent's experience, reputation,
financial condition and support, as well as the risks to
Texoil if the Offer and the Merger were not consummated;
o The fact that the structure of the transaction, which provides
for all cash consideration, was not subject to any financing
contingency and was designed, among other things, to result in
the holders of the Common Shares and Preferred Shares
receiving, at the earliest practicable time, the consideration
paid in the Offer and the Merger;
o The fact that the offer of all cash consideration provided an
immediate return on investment and liquidity for substantially
all stockholders, that the consideration offered in the Offer
and the Merger was in excess of the historical market price at
which Texoil's Common Shares had traded for the majority of
1999 and 2000 and that the consideration was also in excess of
the net book value per share of Texoil Common Shares at
September 30, 2000 of $3.27 per share;
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o The absence of any better firm offer and that prior
indications of interest were limited, were for less
consideration and were contingent upon the potential buyer
obtaining financing for the transaction;
o The difficulty and uncertainty, due to market conditions, that
Texoil's management could continue replace production and
reserve quantities, without a significant increase to its
historical finding and development costs, and therefore
increase stockholder value through its fundamental business
strategy and strategic acquisitions of assets or corporate
entities;
o The difficulty and uncertainty of Texoil's ability to effect a
business combination, with Texoil remaining as the surviving
entity, without considerably increasing its debt or strategic
risk profile;
o The likely reduction in discretionary cash flow in 2001 due to
several factors including increasing costs, required
operations and maintenance expenditures and significant
projected tax obligations; and
o The potential impact on Texoil's market price, resulting from
anticipated Common Share sales of large non-management
stockholders.
The Texoil Board did not attach specific weight to any one of these
factors, but the Texoil Board placed weight on the amount of the consideration
relative to historical market values and book values of Texoil, the favorable
terms of the Merger Agreement, the financial ability of Parent and OEI to
complete the transaction and Dain Rauscher Wessels' fairness opinion in reaching
its determination to recommend the Offer, the Merger Agreement and the Merger to
Texoil stockholders.
OPINION OF DAIN RAUSCHER WESSELS
On January 10, 2001, the Texoil Board retained Dain Rauscher Wessels to
render an opinion to the Texoil Board relating to the fairness, from a financial
point of view, of the aggregate consideration payable to the existing holders of
Common Shares and Preferred Shares, as a group, as set forth in the Merger
Agreement.
On January 17, 2001, Dain Rauscher Wessels delivered to the Texoil
Board an oral opinion (subsequently confirmed in writing) that, as of such date
and based upon and subject to the factors and assumptions set forth therein, the
aggregate consideration payable to the existing holders of Common Shares and
Preferred Shares, as a group, in the Offer and Merger, pursuant to the Merger
Agreement, was fair, from a financial point of view, to such holders. THE FULL
TEXT OF THE DAIN RAUSCHER WESSELS OPINION IS ATTACHED TO THIS INFORMATION SHEET
AS ANNEX B AND IS INCORPORATED INTO THIS DOCUMENT BY REFERENCE. SHAREHOLDERS OF
TEXOIL ARE URGED TO CAREFULLY READ SUCH OPINION.
Dain Rauscher Wessels' opinion does not address the merits of the
underlying decision by Texoil to engage in the transaction, or the relative
merits of the transaction compared to any alternative business strategy or
transaction in which Texoil might engage. Dain Rauscher Wessels was not
authorized to solicit, and did not solicit, other potential parties with respect
to a business combination with Texoil. Dain Rauscher Wessels' opinion does not
constitute a recommendation to any stockholder regarding whether to tender
shares of Texoil stock in the Offer or as to how such holder should vote on the
approval and adoption of the Merger Agreement or any matter related thereto.
Dain Rauscher Wessels did not express any opinion as to the prices at which
Texoil stock has traded or will trade following the announcement of the
transaction.
The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application
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of those methods to the particular circumstances. Therefore, such an opinion is
not readily susceptible to partial analysis or summary description. In arriving
at its opinion, Dain Rauscher Wessels did not attribute any particular weight to
any analysis or factor considered by it, or make any conclusion as to how the
results of any given analysis, taken alone, supported its opinion. Accordingly,
Dain Rauscher Wessels believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all of the factors and analyses, would create a misleading
view of the processes underlying Dain Rauscher Wessels' opinion. In addition, in
certain of its analyses Dain Rauscher Wessels compared Texoil and the
transaction with Parent and OEI to public companies and to other transactions
that Dain Rauscher Wessels deemed comparable. No public company or transaction
utilized by Dain Rauscher Wessels as a comparison is identical to Texoil or to
the transaction with Parent and OEI. An analysis of the results of such
comparisons is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and transactions and other factors that could affect
the public trading value of the comparable companies or enterprise value of the
comparable transactions to which Texoil and the transaction with Parent and OEI
were being compared.
In performing its analyses, Dain Rauscher Wessels made certain
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Dain Rauscher Wessels, Texoil, Parent and OEI. Any estimates
contained in the analyses performed by Dain Rauscher Wessels are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, estimates of
the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which such businesses or securities might actually be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. The Dain Rauscher Wessels opinion and Dain Rauscher
Wessels' presentation to the Texoil Board were among several factors taken into
consideration by the Texoil Board in making its determination to approve the
Merger Agreement. Consequently, the Dain Rauscher Wessels analyses described
below should not be viewed as determinative of the decision of the Texoil Board
or Texoil's executive management to engage in the transaction.
In arriving at its opinion, Dain Rauscher Wessels:
o reviewed a draft of the Merger Agreement dated January 13,
2001 and related documents;
o reviewed the Annual Report on Form 10-KSB for the year ended
December 31, 1999 and the Quarterly Reports on Form 10-QSB and
related unaudited financial information for certain interim
periods, including the nine months ended September 30, 2000,
of Texoil;
o reviewed the Proxy Statement filed on Schedule 14A dated
October 18, 2000, of Texoil;
o reviewed Texoil's proved oil and gas reserves and the
standardized measure of discounted future net cash flows
relating to proved oil and gas reserves as of December 31,
1999, estimated by W.D. Von Gonten & Co., independent
petroleum engineers, and adjusted by Texoil management to
December 31, 2000;
o reviewed certain operating and financial information of
Texoil, including projections and operating assumptions,
provided by Texoil relating to its business and prospects;
o reviewed historical market prices and trading volumes for
Texoil's Common Shares;
o reviewed publicly available financial data and stock market
performance data of publicly held companies that Dain Rauscher
Wessels deemed generally comparable to Texoil;
o reviewed the financial terms of certain business combinations
of comparable exploration and production companies;
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o met with certain members of Texoil's senior management to
discuss Texoil's operations, historical financial statements
and future prospects; and
o met with certain representatives of Parent's senior management
to discuss their views related to the transaction.
In connection with its review, Dain Rauscher Wessels did not
independently verify any of the foregoing information, and relied upon such
information as being complete and accurate in all material respects. Dain
Rauscher Wessels assumed, with Texoil's consent, that the financial forecasts
provided to, and discussed with Dain Rauscher Wessels, were reasonably prepared
on a basis reflecting the best currently available estimates and judgments of
the senior management and key personnel of Texoil. In addition, Dain Rauscher
Wessels did not conduct a physical inspection or make an independent evaluation
or appraisal of the assets of Texoil, nor was Dain Rauscher Wessels furnished
with any such evaluation or appraisal. Dain Rauscher Wessels' opinion relates to
Texoil as a going concern and, accordingly, Dain Rauscher Wessels expressed no
opinion regarding Texoil's liquidation value.
Dain Rauscher Wessels' opinion was based on circumstances as they
existed and could be evaluated on, and the information made available to it at,
the date of such opinion and was without regard to any market, economic,
financial, legal or other circumstances or event of any kind or nature which may
have existed or occurred after such date. Dain Rauscher Wessels has not
undertaken to reaffirm or revise its opinion or otherwise comment upon any
events occurring after the date thereof and does not have any obligation to
update, revise or reaffirm the opinion. In addition, Dain Rauscher Wessels
considered such other information and conducted such other analyses and
investigations as it deemed appropriate under the circumstances.
Dain Rauscher Wessels' opinion addressed solely the fairness of the
aggregate consideration payable in the transaction to holders of Common Shares
and Preferred Shares as a group and not the allocation thereof among the holders
of any class or series of Texoil stock. Dain Rauscher Wessels' opinion addressed
solely the aggregate consideration payable in the transaction and did not
address any other terms or agreement relating to the transaction.
The following is a brief summary of the material analyses performed by
Dain Rauscher Wessels in preparing its opinion to the Texoil Board.
Comparable Company Analysis. Dain Rauscher Wessels used publicly
available information to compare the enterprise value of Texoil expressed as a
multiple of latest twelve months ended September 30, 2000 EBITDA and projected
EBITDA for calendar years 2000 and 2001, to the same multiple of enterprise
values of a group of companies, which in Dain Rauscher Wessels' judgment, were
comparable to Texoil for purposes of this analysis. Enterprise value is defined
as market value of equity plus book value of debt and liquidation value of
preferred stock, less excess cash and cash equivalents. EBITDA is defined as
earnings before interest expense, taxes and depreciation, depletion and
amortization. Dain Rauscher Wessels compared market price per share to cash flow
per share and earnings per share for the latest twelve months ended September
30, 2000, and projected calendar years 2000 and 2001 for Texoil and the
comparable companies. Dain Rauscher Wessels also compared market price per share
to net asset value per share for the comparable companies and Texoil.
Dain Rauscher Wessels considered a number of factors in selecting
companies for comparison including size, financial condition and geographic
scope of operations. The group of comparable companies used in the comparison
included:
o Abraxas Petroleum Corporation;
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o Bellwether Exploration Company;
o Clayton Williams Energy, Inc.;
o Comstock Resources, Inc.; o Goodrich Petroleum Corporation; o
Hallwood Energy Corporation;
o Maynard Oil Company; and
o Petrocorp Incorporated.
The mean and median results for the comparable companies are compared
to the current and implied acquisition multiples of Texoil below.
Comparable
Companies Texoil
------------------------------ ------------------------------
Enterprise Value to EBITDA Mean Median Current Acquisition
------------- ------------- ------------- -------------
Latest Twelve Months 5.1x 4.3x 4.4x 5.0x
December 31, 2000 4.8x 4.3x 3.8x 4.3x
December 31, 2001 4.2x 4.2x 3.2x 3.6x
Price to Cash Flow per Share
Latest Twelve Months 3.5x 3.6x 4.3x 4.8x
December 31, 2000 3.1x 3.1x 3.7x 4.1x
December 31, 2001 2.5x 2.6x 3.9x 4.4x
Price to Earnings per Share
Latest Twelve Months 8.4x 8.6x 8.3x 9.4x
December 31, 2000 7.1x 6.5x 6.9x 7.8x
December 31, 2001 6.2x 6.4x 5.9x 6.7x
Price to Net Asset Value per Share 104.8% 96.2% 71.1% 81.7%
Comparable Transactions Analysis. Dain Rauscher Wessels conducted a
comparable transactions analysis by examining the terms of selected publicly
disclosed acquisitions of businesses related to the exploration and production
industry from 1997 through 2000, having transaction enterprise values of less
than $500 million, which Dain Rauscher Wessels considered reasonably comparable
to the Merger.
Dain Rauscher Wessels compared transaction enterprise value to latest
twelve months EBITDA relating to the acquisition of Texoil with those of
the comparable target companies. Transaction enterprise value is defined as
transaction equity value plus book value of debt and liquidation or market value
of preferred stock, less excess cash and cash equivalents.
In addition, Dain Rauscher Wessels compared adjusted transaction
enterprise value to proved reserve volume and the standardized measure of
discounted cash flow value for the target companies. Adjusted transaction
enterprise value is defined as transaction enterprise value less book value of
non-oil and gas assets and undeveloped acreage, valued, based on industry
practice, at $50.00 per domestic onshore acre and $100.00 per domestic offshore
acre. The standardized measure of discounted cash flow is the value of future
net cash flows from proved reserves before taxes discounted at 10%. Reserve
volume for Texoil is based on management estimates. The mean and median results
for the comparable transactions are compared to the implied acquisition
multiples of Texoil below.
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Comparable
Transactions
------------------------------
Adjusted Transaction Enterprise Value to: Mean Median Texoil
------------- ------------- -------------
Proved Reserve Volume (MMBOE) $ 5.74 $ 5.72 $ 5.37
Standardized Measure of Discounted Cash Flow Value 102.3% 99.7% 86.1%
Transaction Enterprise Value to:
Latest Twelve Months EBITDA 7.5 x 6.8 x 4.9 x
Comparable Merger Premiums Analysis. Dain Rauscher Wessels conducted a
comparable merger premiums analysis by examining the terms of selected publicly
disclosed acquisitions of businesses related to the exploration and production
industry from 1997 through 2000, having transaction enterprise values of less
than $500 million, which Dain Rauscher Wessels considered reasonably comparable
to the transaction.
Dain Rauscher Wessels compared the transaction enterprise value per
share to the stock price one day prior, one week prior and four weeks prior to
public announcement. The mean and median results for the comparable transactions
are compared to the implied premium of Texoil (based on an assumed announcement
date of January 16, 2001) below.
Comparable
Premiums
------------------------------
Transaction Enterprise Value per Share to: Mean Median Texoil
------------- ------------- -------------
1 Day Prior to Announcement 6.1% 7.7% 8.2%
1 Week Prior to Announcement 9.4% 8.4% 10.0%
4 Weeks Prior to Announcement 12.8% 11.9% 20.0%
Historical Stock Trading Analysis. Dain Rauscher Wessels reviewed the
daily historical closing prices of Texoil during the period from the beginning
of calendar 1998 to January 12, 2001. Dain Rauscher Wessels noted that the
average stock price over this period was $5.55. Dain Rauscher Wessels noted that
the average stock price from the beginning of calendar 2000 to January 12, 2001
was $6.44. The implied premium of the acquisition price to these average prices
was 48.7% and 28.1% respectively.
Dain Rauscher Wessels also presented selected price and volume
distribution data and illustrated the stock price performance of Texoil against
the S&P 500 Index, the S&P E&P Index and the group of comparable companies
listed above in the Comparable Company Analysis.
FEE ARRANGEMENTS
Fairness Opinion. Dain Rauscher Wessels was retained to render its
opinion on the basis of its experience with mergers and acquisitions in the
energy industry in general, and on the basis of its experience with companies in
the exploration and production sector of the energy industry. Dain Rauscher
Wessels is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of its
business, Dain Rauscher Wessels and its affiliates may actively trade the equity
securities of Texoil and Parent for their
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own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Pursuant to the terms of the engagement of Dain Rauscher Wessels,
Texoil has agreed to pay Dain Rauscher Wessels a fee of $250,000, plus
reasonable out-of-pocket expenses. No portion of Dain Rauscher Wessels' fee was
contingent upon the closing of the transaction or whether Dain Rauscher Wessels
delivered a favorable opinion with respect to the proposed transaction. Texoil
also has agreed to reimburse Dain Rauscher Wessels for reasonable expenses and
to indemnify Dain Rauscher Wessels and related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of their engagement.
Payment of Fees to Windrock. Pursuant to an oral agreement ratified by
the Texoil Board, Texoil has agreed to pay Windrock, an investment banking firm
with which Mr. S. Wil VanLoh Jr., a director of Texoil, is associated, a fee of
$325,000 for investment banking and financial advisory services provided during
2000 and in connection with this transaction.
Neither Texoil nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
VOTE REQUIRED TO APPROVE MERGER
As of January 26, 2001, Texoil had outstanding 7,410,225 Common Shares
and 2,991,465 Preferred Shares. Consummation of the Merger requires approval of
the Merger Agreement by holders of a majority of the votes entitled to be cast
by holders of (i) the Common Shares and the Preferred Shares, voting together as
a single class, with each Preferred Share entitling the holder of such shares to
the number of votes equal to the full number of Common Shares into which such
Preferred Share is convertible, (ii) the Common Shares, voting as a single
class, and (iii) the Preferred Shares, voting as a single class.
A holder of Common Shares is entitled to one vote for each Common Share
owned by such holder for all matters requiring a stockholder vote. Each
Preferred Share entitles the holder thereof to the number of votes per share
equal to the full number of Common Shares into which each Preferred Share is
convertible. Each Preferred Share is currently convertible into two Common
Shares.
CONDITIONS TO THE MERGER
The obligations of Texoil, Parent and OEI to consummate the Merger are
subject to the satisfaction or waiver, in whole or in part (where permissible by
applicable law), at or prior to the closing of the Merger, of each of the
following conditions: (a) no governmental authority or court of competent
jurisdiction located or having jurisdiction in the United States shall have
enacted, issued, promulgated, enforced or entered any laws or governmental order
which is then in effect making the consummation of the Merger illegal or
otherwise prohibit the consummation of the Merger; (b) the required stockholder
vote approving the Merger shall have been obtained; (c) Parent, OEI or their
affiliates shall have purchased Shares pursuant to the Offer; and (d) all
approvals of governmental authorities necessary to consummate the Merger and
other transactions contemplated therein shall have been received and shall be in
effect at the Effective Time. The conditions set forth in clauses (c) and (d)
above have been satisfied and Texoil is not aware of the occurrence of any
events described in clause (a) above.
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EFFECTIVE TIME
The Merger will become effective as of the date and time (the
"Effective Time") that the Articles of Merger are filed with the Nevada
Secretary of State, which is expected to occur as soon as practicable after OEI
executes and delivers to Texoil a written consent voting all Shares held by it
in favor of the Merger.
PAYMENT FOR THE SHARES
As soon as reasonably practicable after the consummation of the Merger,
EquiServe Trust Company, N.A., in its capacity as paying agent, will send a
transmittal letter and instructions to each person that was a record holder of
Common Shares immediately prior to the Effective Time advising such holder of
the procedure for surrendering his or her certificate or certificates in
exchange for $8.25 in cash for each formerly outstanding Common Share. To
receive the payment to which they are entitled pursuant to the terms of the
Merger Agreement, stockholders must carefully comply with the instructions on
such transmittal letter and return it, along with their certificates, to the
paying agent pursuant to the terms described in the transmittal letter. Do not
send in stock certificates at this time. Interest will not be paid on the
amounts payable upon surrender of certificates which formerly represented the
Common Shares. If the cash price of $8.25 per Common Share is to be paid to any
person other than the registered holder of such Common Shares, it will be a
condition to the payment by the paying agent that the surrendered certificate is
properly endorsed for transfer and the person requesting delivery of the cash
price will pay to the paying agent any transfer or other taxes as a result of
the payment to a person other than the registered holder unless such person can
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not payable. None of the paying agent, Parent, OEI or Texoil
shall be liable to a holder of Common Shares for any cash delivered pursuant to
the Merger Agreement to any public official pursuant to applicable abandoned
property, escheat and similar laws.
At any time following six months after consummation of the Merger, the
Surviving Corporation shall be entitled to require the paying agent to deliver
to it any funds (including any interest received with respect thereto) not
theretofore disbursed to holders of certificates formerly representing Common
Shares, and thereafter the holders of such certificates shall be entitled to
look to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) for any cash payments due as a result of the merger for the
Common Shares formerly represented by such certificates.
DISSENTERS' RIGHTS
Stockholders who do not consent to the Merger will be entitled to
exercise dissenters' rights in connection with the Merger. Stockholders desiring
to exercise such rights must follow the procedures set forth in Sections
92A.300-92A.500 of the Nevada Revised Statutes, the full text of which is
attached to this Information Statement as Annex C. For additional information,
see "Dissenters' Rights" on page 35 of this Information Statement.
PURPOSE OF THE MERGER
The purpose of the Offer was to enable Parent to acquire as many
outstanding Shares as possible as a first step in acquiring the entire equity
interest in Texoil. The purpose of the Merger is for Parent to acquire all
remaining Shares not purchased pursuant to the Offer. Upon consummation of the
Merger, Texoil will become a wholly owned subsidiary of Parent.
Subject to certain matters described below, Parent and OEI expect that,
initially following the Merger, the business and operations of Texoil will,
except as described in this Information Statement, be
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continued substantially as they are currently being conducted. Parent will
continue to evaluate the business and operations of Texoil after the
consummation of the Merger and will take such actions as it deems appropriate
under the circumstances then existing. Parent intends to review such information
as part of a comprehensive review of Texoil's business, assets, operations,
capitalization, dividend policy, management and personnel, with a view to
optimizing development of Texoil's potential in conjunction with Parent's
current and future business.
The Common Shares are currently traded on the Nasdaq Small Cap Market.
They are also traded on the Boston Stock Exchange. Following consummation of the
Merger, the Common Shares will no longer be listed on Nasdaq or the Boston Stock
Exchange and the registration of the Common Shares under the Exchange Act will
be terminated. Accordingly, after the Merger, there will be no publicly traded
equity securities of Texoil outstanding and Texoil will no longer be required to
file periodic reports with the Securities and Exchange Commission (the
"Commission").
Texoil has caused the Texoil Board to be reconstituted pursuant to the
Merger Agreement. On February __, 2001, T.W. Hoehn, III, Robert E. LaJoie,
Thomas Reiser, Michael A. Vlasic, S. Wil VanLoh, Jr., Toby R. Neugebauer and
Jeffery A. Jones resigned from the Board on that date and James T. Hackett,
William L. Transier, Robert K. Reeves, John D. Schiller, Jr., William S. Flores,
Jr., Scott A. Griffiths and Stephen A. Thorington were appointed to serve as
directors of Texoil until their successors are duly qualified and appointed or
elected. Frank A. Lodzinski and Jerry M. Crews have remained on the Texoil Board
pursuant to the Merger Agreement to ensure compliance with applicable provisions
of the Merger Agreement. Following the election or appointment of OEI's
designees and prior to the Effective Time, any amendment or termination of the
Merger Agreement by Texoil, any extension of time for performance of any of the
obligations of Parent or OEI under the Merger Agreement, any waiver of any
condition or any of Texoil's rights thereunder or other action by Texoil
adversely affecting the rights of the stockholders of Texoil (other than OEI or
its affiliates), requires the concurrence of the Independent Directors.
REGULATORY MATTERS
There are no federal or state regulatory requirements which remain to
be complied with in order to consummate the Merger (other than the filing of the
Articles of Merger with the Nevada Secretary of State).
CERTAIN POTENTIAL CONFLICTS OF INTEREST
You should be aware that the executive officers and directors of Texoil
have interests in the Merger that are different from, or in addition to, their
interests as stockholders of Texoil generally. The Texoil Board was aware of
these interests and considered them, among other matters, in approving the
Merger, the Merger Agreement and the transactions contemplated thereby.
Tender of Shares. Executive officers and directors of Texoil who
tendered their Shares in the Offer received the same offer price on the same
terms as all other stockholders of Texoil. As of February ___, 2001, the
directors and executive officers of the Company owed an aggregate of _____
Common Shares and _____ Preferred Shares, and received in the Offer an aggregate
of $_______.
Employment Agreements. In connection with the issuance of the Preferred
Shares in 1999, Messrs. Lodzinski, Crews, Mury and Ms. Simpson entered into
employment agreements with Texoil that generally provide for a competitive base
salary, subject to annual adjustment, and certain benefits and expense
reimbursements consistent with established policies of the Company. The base
annual salaries specified in the employment agreements for Messrs. Lodzinski,
Crews, Mury and Ms. Simpson are $120,000, $110,000, $110,000 and $75,000,
respectively. The term of the agreements expires upon the earliest of (a) the
first date the holders of Preferred Shares cease to own Preferred Shares or
conversion shares, (b) the effective date of any sale transaction (as defined by
the preferred stock agreement) or
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(c) the resignation or termination of the employee. Should the employee resign
or be terminated, such employee is contractually restricted from certain
activities as provided by non-compete provisions of the employment agreement.
These agreements were terminated by their terms when OEI acquired all the
Preferred Shares pursuant to the Offer.
Convertible Preferred Stock. In November 1999 Texoil closed a private
placement of the Preferred Shares. Certain officers, directors and shareholders
participated in the offering as follows:
o The V&C Energy Limited Partnership ("V&C") purchased 456,250
Preferred Shares. Mr. Frank A. Lodzinski, a director and former Chief Executive
Officer of Texoil, is the general partner of V&C through a wholly-owned Texas
corporation. Mr. Michael A. Vlasic, a former director, has interests in V&C
through Vlasic Investments, L.L.C.
o Certain affiliates of EnCap Investments, L.L.C. who are shareholders
of Texoil purchased 375,000 Preferred Shares.
o Mr. Jerry M. Crews, a director and former Executive Vice President of
Texoil, purchased 6,250 Preferred Shares.
o Mr. Thomas A Reiser, a former director, purchased 6,250 shares of the
Preferred Stock.
All investments by related parties were made on the same terms and
conditions as third-party non-affiliated investors.
Cliffwood Acquisition 1996 Limited Partnership. In May 1998 Texoil
acquired certain properties from the Cliffwood Acquisition 1996 Limited
Partnership, an affiliated partnership, in which Texoil owned a 10% interest.
Proceeds to Limited Partners were $4.5 million cash and 149,667 shares of common
stock.
Technical Risks, Inc. As a normal part of its business, Texoil
purchases various performance bonds and insurance, including but not limited to
general liability insurance, automobile insurance, well control insurance,
pollution liability insurance, and directors and officers liability insurance.
Texoil purchases these coverages on a competitive basis. Technical Risks, Inc.
has been in the past, and may be in the future, the broker used by Texoil for
these purchases. Mr. Thomas A. Reiser, a former director of Texoil, is Chairman
and President of Technical Risks, Inc.
Amendment to Preferred Stock Purchase Agreement. On January 18, 2001,
Texoil and the other parties to the Preferred Stock Purchase Agreement, dated
October 12, 1999 (the "Purchase Agreement"), entered into an amendment (the
"Amendment") to the Purchase Agreement to clarify that the holders of the
Preferred Shares are entitled to dividends as if such holders had held the
Preferred Shares through December 31, 2001 in the event of the occurrence of a
sale transaction prior to that date.
Tender and Voting Agreement and Tender Agreement. Certain executive
officers and directors of Texoil entered into a Tender and Voting Agreement or
Tender Agreement with OEI. See page 33 of this Information Statement for a
description of the Tender and Voting Agreement and the Tender Agreement.
Effect of the Merger on Election of Directors. The Merger Agreement
provides that promptly upon the payment by OEI for Shares pursuant to the Offer
and from time to time thereafter (provided, however, that OEI shall not be
entitled to designate any members to the Board without owning a majority of the
Common Shares and a majority of the Preferred Shares), OEI shall be entitled to
designate (1) such number of Class A directors, rounded up to the next whole
number, as is equal to the product of the total
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number of Class A directors on the Board multiplied by the percentage that the
aggregate number of shares of Common Shares and Preferred Shares beneficially
owned by Parent or its affiliates bears to the total number of shares of Common
Shares and Preferred Shares then outstanding (calculated on an as converted
basis), and (2) such number of Class B directors, rounded up to the next whole
number, as is equal to the product of the total number of Class B directors
multiplied by the percentage that the aggregate number of shares of Preferred
Shares beneficially owned by Parent or its affiliates bears to the total number
of shares of Preferred Shares then outstanding. Texoil shall, upon OEI's
request, promptly take all actions necessary to cause OEI's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors, increasing the number of authorized directors or amending
its bylaws; provided, however, that until the effective time of the Merger, the
Board shall have at least two members who were directors of Texoil on the date
of the Merger Agreement and not employees of Texoil (the "Independent
Directors"), provided that if no Independent Directors remain, the other
directors shall designate one person to fill one of the vacancies who shall be
neither an employee of Texoil nor an affiliate of Parent and such person shall
be deemed to be an Independent Director for purposes of the Merger Agreement.
Upon OEI's written request, Texoil shall cause OEI's designees to constitute the
same percentage of representation as is on the Board after giving effect to (1)
and (2) above on: (i) each committee of the Board; (ii) the board of directors
of each Texoil subsidiary; and (iii) each committee of each such board of
directors. Following the election or appointment of Parent's designees and prior
to the effective time of the Merger, any amendment or termination of the Merger
Agreement by Texoil, any extension of time for performance of any of the
obligations of Parent or OEI under the Merger Agreement, any waiver of any
condition or any of Texoil's rights thereunder or other action by Texoil
adversely affecting the rights of Texoil's stockholders (other than OEI or its
affiliates), requires the concurrence of the Independent Directors.
Effect of the Merger on Indemnification. The Merger Agreement provides
that for six years after the effective time of the Merger, Parent and the
Surviving Corporation shall indemnify, defend and hold harmless each person who
is as of the date of the Merger Agreement, or has been at any time prior to such
date, or who becomes prior to the Effective Time, an officer or director of
Texoil or any Texoil subsidiary (each, an "Indemnified Party") against all
losses, claims, damages, liabilities, fees and expenses (including reasonable
fees and disbursements of counsel and judgments, fines, losses, claims,
liabilities and amounts paid in settlement (provided that any such settlement is
effected with the prior written consent of the Surviving Corporation, which
consent will not be unreasonably withheld)) arising in whole or in part out of
actions or omissions in their capacity as such occurring at or prior to the
Effective Time to the fullest extent permitted under Nevada law and the
Surviving Corporation's Articles of Incorporation and Bylaws and Texoil's
written indemnification agreements in effect at the time of the Merger and
including provisions therein relating to the advancement of expenses incurred in
the defense of any action or suit; provided, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims, provided that in no event shall the
liability of Parent and the Surviving Corporation in the aggregate exceed
$115,000,000.
Parent shall cause the Surviving Corporation to maintain Texoil's
existing officers' and directors' liability insurance policy ("D&O Insurance")
for a period of not less than six years after the Effective Time, but only to
the extent related to actions or omissions prior to the Effective Time;
provided, that the Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers, provided further, that the annual amount
of premiums to be paid with respect to the maintenance of such D&O Insurance
during such six-year period shall not exceed 200% of the premium paid for such
insurance by Texoil for the year ended December 31, 2000.
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The Articles of Incorporation and Bylaws of the Surviving Corporation
and each subsidiary thereof shall contain provisions no less favorable with
respect to indemnification than are currently set forth in the Bylaws of Texoil
and any subsidiary of Texoil, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who, at
or prior to the Effective Time, were Indemnified Parties, unless such
modification shall be required by law. The Surviving Corporation shall not be
obligated to maintain the provisions of Texoil's and Texoil's subsidiaries'
Bylaws and Articles of Incorporation that provide for indemnification of
directors and officers in their capacities as stockholders.
Texoil has entered into indemnification agreements with each of its
directors. The indemnification agreements provide that Texoil shall indemnify
and hold harmless the director from and against any claims, damages, expenses
(including attorneys' fees), judgments, fines (including excise taxes assessed
with respect to an employee benefit plan) and amounts paid in settlement
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of Texoil) and to which the director
was or is a party or is threatened to be made a party by reason of the fact that
the director is or was a director, officer, stockholder, employee or agent of
Texoil, or is or was serving at the request of Texoil as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, or by reason of
anything done or not done by the director in any such capacity or capacities,
provided that the director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of Texoil, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The director who serves as a director or officer of a
subsidiary of Texoil is deemed to be serving at the request of Texoil and the
director is considered to be serving an employee benefit plan at Texoil's
request if his duties to Texoil also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
Payment of Fees to Windrock. Pursuant to an oral agreement ratified by
the Texoil Board, Texoil has agreed to pay Windrock, an investment banking firm
with which Mr. S. Wil VanLoh Jr., a director of Texoil, is associated, a fee of
$325,000 for investment banking and financial advisory services provided in 2000
and in connection with this transaction.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a summary of certain material provisions of the Merger
Agreement, the Tender and Voting Agreement, and the Tender Agreement. A copy of
the Merger Agreement is attached as Annex A to this Information Statement. This
summary does not purport to be complete and is qualified in its entirety by
reference to the text of the respective agreements. Capitalized terms used in
this Section and not otherwise defined in this Information Statement shall have
the meanings set forth in the Merger Agreement. Texoil is sometimes referred to
herein as "the Company".
MERGER AGREEMENT
The Offer. The Merger Agreement provided for the commencement of the
Offer as soon as practicable after the date of the Merger Agreement. The Offer
commenced on January 24, 2001 and was consummated on February ___, 2001.
Board Representation. The Merger Agreement provides that, promptly upon
the payment by OEI for the Shares pursuant to the Offer and from time to time
thereafter (provided, however, that OEI shall not be entitled to designate any
members to the Board of Directors of Texoil without owning a majority of the
Common Shares and a majority of the Preferred Shares), OEI will be entitled to
designate (i) such number of Class A directors, rounded up to the next whole
number, as is equal to the product of the total number of Class A directors on
the Texoil Board (determined after giving effect to the directors elected
pursuant to this provision) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Parent or its Affiliates (calculated on
an as converted basis) bears to the total number of Shares then outstanding
(calculated on an as converted basis), and (ii) such number of Class B
directors, rounded up to the next whole number, on the Texoil Board as is equal
to the product of the total number of Class B directors on the Texoil Board
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Preferred
Shares beneficially owned by Parent or its Affiliates bears to the total number
of Preferred Shares then outstanding, and Texoil shall, upon OEI's request,
promptly take all actions necessary to cause OEI's designees to be so elected,
including, if necessary, seeking the resignations of one or more existing
directors, increasing the number of authorized directors or amending Texoil's
bylaws; provided, however, that until the Effective Time, the Texoil Board shall
have at least two members who were directors of Texoil on the date of the Merger
Agreement and not employees of Texoil (the "Independent Directors"), provided
that if no Independent Directors remain, the other directors shall designate one
person to fill one of the vacancies who shall be neither an employee of Texoil
nor an Affiliate of Parent and such person shall be deemed to be an Independent
Director for purposes of the Merger Agreement. Upon OEI's written request,
Texoil shall cause OEI's designees to constitute the same percentage of
representation as is on the Texoil Board after giving effect to this provision
on (i) each committee of the Texoil Board; (ii) the Board of Directors of each
Company Subsidiary (defined in the Merger Agreement as any and all corporations,
partnerships, joint ventures, associations, limited liability companies and
other entities controlled by Texoil, directly or indirectly through one or more
intermediaries); and (iii) each committee of each such board. These provisions
shall not limit any rights that OEI, Parent or any of their Affiliates may have
as a holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
Texoil has caused the Texoil Board to be reconstituted pursuant to the
Merger Agreement. On February __, 2001, T.W. Hoehn, III, Robert E. LaJoie,
Thomas Reiser, Michael A. Vlasic, S. Wil VanLoh, Jr., Toby R. Neugebauer and
Jeffery A. Jones resigned from the Board on that date and James T. Hackett,
William L. Transier, Robert K. Reeves, John D. Schiller, Jr., William S. Flores,
Jr., Scott A. Griffiths and Stephen A. Thorington were appointed to serve as
directors of Texoil until their successors are duly qualified and appointed or
elected. Frank A. Lodzinski and Jerry M. Crews have remained on the Texoil Board
pursuant to the Merger Agreement to ensure compliance with applicable provisions
of the Merger Agreement. Following the election or appointment of OEI's
designees and prior to the Effective Time, any amendment or termination of the
Merger Agreement by Texoil, any extension of time for performance of any of the
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obligations of Parent or OEI under the Merger Agreement, any waiver of any
condition or any of Texoil's rights thereunder or other action by Texoil
adversely affecting the rights of the stockholders of Texoil (other than OEI or
its affiliates), requires the concurrence of the Independent Directors.
The Merger. The Merger Agreement provides that at the Effective Time,
OEI shall be merged with and into Texoil. As a result of the Merger, OEI's
separate corporate existence shall cease and Texoil shall continue as the
Surviving Corporation and shall succeed to and assume all of OEI's rights and
obligations in accordance with the Nevada Revised Statutes.
At the Effective Time, the Articles of Incorporation and Bylaws of the
Surviving Corporation shall be amended to be identical to OEI's Articles of
Incorporation and Bylaws as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation shall be "OEI Resources,
Inc."), in each case until duly amended in accordance with applicable law. OEI's
directors and officers shall become the directors and officers of the Surviving
Corporation at the Effective Time.
Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Shares, each
Share that is issued and outstanding (other than Shares owned by Texoil as
treasury stock, and any Shares owned by Parent, OEI, or any other wholly-owned
subsidiary of Parent, which shall be cancelled, and Shares held by stockholders
who have properly exercised dissenters' rights under the Nevada Revised
Statutes, if any) shall be cancelled and terminated and shall represent solely
the right to receive from the Surviving Corporation in cash, without interest,
$8.25 per share with respect to the Common Shares and $18.04 per share with
respect to the Preferred Shares. Each share of OEI stock issued and outstanding
immediately prior to the Effective Time shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any of OEI's
shares, be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.
Shares of Dissenting Stockholders. Notwithstanding any provision of the
Merger Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by holders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have demanded
properly in writing payment of the fair market value of such Shares in
accordance with the Nevada Revised Statutes (collectively, the "Dissenting
Shares") shall be cancelled and terminated and shall represent solely the right
to receive payment from the Surviving Corporation of the fair market value of
such Shares held by them in accordance with the provisions of the Nevada Revised
Statutes, except that all Dissenting Shares held by holders of Shares who shall
have failed to perfect or who effectively shall have withdrawn or lost their
dissenters' rights in connection with such Shares under the Nevada Revised
Statutes shall thereupon be deemed to have been cancelled and terminated, as of
the Effective Time, and shall represent solely the right to receive from the
Surviving Corporation in cash, without interest, $8.25 per share, with respect
to the Common Shares and $18.04 per share with respect to the Preferred Shares,
upon surrender in the manner provided in Section 3.07 of the Merger Agreement of
the certificate or certificates that formerly evidenced such Shares.
Texoil shall give to Parent (i) prompt notice of any demands for
dissenters' rights received by Texoil, withdrawals of such demands, and any
other instruments served pursuant to the Nevada Revised Statutes and received by
Texoil and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for payment of fair market value under the Nevada Revised
Statutes. Texoil shall not, except with the prior written consent of Parent,
make any payment with respect to any such demands, or offer to settle, or
settle, any such demands. Any amount payable to any holder of Shares exercising
dissenters' rights shall be paid solely by the Surviving Corporation out of its
own funds.
See page 36 of this Information Statement for additional information
regarding dissenters' rights.
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Stock Options. Each outstanding and unexercised option to purchase
Common Shares ("Company Option") pursuant to each stock option and incentive
plan of or sponsored by Texoil (the "Company Option Plans"), that is fully
vested and exercisable as of the consummation of the Offer shall be converted
into an obligation of Texoil to pay, and a right of the holder thereof to
receive in full satisfaction of such Company Option, an amount in cash equal to
the product of (i) the excess, if any, of the Common Share Offer Price over the
exercise price thereof and (ii) the number of Common Shares subject to such
Company Option (such payment to be net of withholding taxes) (the "Company
Option Payments"). Texoil shall take all actions necessary to cause Texoil's
employees and directors to consent, to the extent required, to the transactions
contemplated by this provision no later than immediately prior to the time OEI
accepts Shares for payment pursuant to the Offer. Except as may be otherwise
agreed to by Parent or OEI and Texoil, as of the Effective Time, (A) the Company
Option Plans shall terminate, (B) the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of Texoil or any of Texoil's subsidiaries shall be deleted
and (C) no holder of Company Options or any participant in the Company Option
Plans or any other plans, programs or arrangements shall have any rights
thereunder to acquire any equity securities of Texoil, the Surviving Corporation
or any subsidiary thereof. Texoil and Parent agree that the Company Option
Payments are the sole payments that will be made with respect to or in relation
to the Company Options.
With respect to each Company Option granted pursuant to the terms of a
Company Option Plan that is not vested and exercisable as of the consummation of
the Offer, Texoil or the Surviving Corporation, as applicable, shall make the
payment of the amount determined above at the time each such unvested Company
Option would otherwise have become vested and exercisable subject to the
satisfaction of the terms and conditions set forth in the applicable option
award agreement and Texoil Option Plan pursuant to which such Company Option was
granted, or at such earlier date as may be determined by Parent in its sole and
absolute discretion.
Warrants. At the Effective Time, each warrant to purchase Common Shares
that is then outstanding and exercisable (each a "Company Warrant"), shall be
cancelled and converted into the right to receive cash in an amount equal to the
product of (i) the excess, if any, of the Common Share Offer Price over the
exercise price of such Company Warrant and (ii) the number of Common Shares
previously subject to such Company Warrant immediately prior to its cancellation
(such payment to be net of withholding taxes) (the "Company Warrant Payments").
Texoil shall take all actions necessary to cause the holders of Texoil Warrants
to consent, to the extent required, to the transactions contemplated by this
provision no later than immediately prior to the time OEI accepts Shares for
payment pursuant to the Offer. Texoil and Parent agree that the Company Warrant
Payments are the sole payments that will be made with respect to or in relation
to Company Warrants.
Required Stockholder Vote or Consent. Texoil has represented to OEI
that the only vote of the holders of any class or series of Texoil's capital
stock that will be necessary or required under the Merger Agreement, Nevada
Revised Statutes or under applicable law to consummate the Merger and the other
transactions contemplated by the Merger Agreement is the approval and adoption
of the Merger Agreement by the holders of a majority of the votes entitled to be
cast by holders of (a) the Common Shares and the Preferred Shares, voting
together as a single class, with each Preferred Share entitling the holder
thereof to the number of votes equal to the full number of Common Shares into
which such Preferred Share is convertible on the record date for such vote, (b)
the Common Shares, voting as a single class, and (c) the Preferred Shares,
voting as a single class (the "Company Stockholders' Approval"). In the Merger
Agreement, Texoil also agreed that within four business days of the date of the
Merger Agreement it would by action of its Board of Directors amend its bylaws
such that Texoil elects not to be subject to Sections 78.378 through 78.3793 of
the NRS (which relate to "control shares").
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Stockholder Action. Following consummation of the Offer, if required by
applicable law in order to consummate the Merger, Texoil shall, in accordance
with applicable law, give notice of, convene and hold a special meeting of its
stockholders (the "Company Stockholders' Meeting") for the purpose of securing
Texoil Stockholders' Approval. The date of any Company Stockholders' Meeting
shall be set by the Board of Directors of Texoil after consultation with, and on
a date approved by, Parent, whose approval shall not be unreasonably withheld.
The Board of Directors of Texoil shall (i) distribute to its stockholders a
proxy statement pursuant to Regulation 14A under the Exchange Act or, if
applicable law and regulations do not so require, an information statement
pursuant to Regulation 14C under the Exchange Act (the "Proxy Statement") in
accordance with applicable federal and state law and with its Articles of
Incorporation and Bylaws, which Proxy Statement shall contain (A) the
recommendation of the Board of Directors of Texoil that its stockholders approve
the Merger and adopt the Merger Agreement and the transactions contemplated
hereby if proxies are solicited by Texoil with respect to such vote and (B) the
written opinion of Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, that the consideration to be received for the Shares pursuant to
the Offer and the Merger is fair to Texoil's stockholders from a financial point
of view, (ii) cause Texoil to use all reasonable efforts to solicit from its
stockholders proxies in favor of the approval of the Merger and adoption of the
Merger Agreement and the transactions contemplated hereby and to secure Texoil
Stockholders' Approval, unless, in accordance with applicable law and the
regulations of the Nasdaq Small Cap Market, such solicitation is not required to
achieve approval of the Merger, (iii) take all other action in their judgment
necessary and appropriate to secure Texoil Stockholders' Approval, and (iv)
cooperate and consult with Parent with respect to each of the foregoing matters,
all subject to the right of the Board of Directors of Texoil to modify or
withdraw its recommendation in the exercise of its fiduciary duties to Texoil
and its stockholders. Parent agrees that it will vote, or cause to be voted, all
of the Shares then owned by it, OEI or any of Parent's other subsidiaries in
favor of the approval of the Merger and of the Merger Agreement.
Covenants Relating to the Conduct of Business. During the period from
the date of the Merger Agreement until the time of the closing of the Merger
(except as provided in the Disclosure Letter or otherwise contemplated by the
Merger Agreement), Texoil has agreed that the businesses of Texoil and Texoil
Subsidiaries will be conducted only in, and Texoil and Texoil Subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice, and shall use reasonable efforts to preserve
substantially intact their current business organization, keep available the
services of their current employees and preserve their relationships with
customers, contractholders and other persons having significant business
relationships with Texoil or any Company Subsidiary. Texoil has also agreed
that, except as otherwise expressly contemplated by the Merger Agreement or as
reflected in the Disclosure Letter, during such period, Texoil or any Company
Subsidiary will not directly or indirectly do, or propose to do, any of the
following, without the prior written consent of Parent:
(i) amend, propose to amend, or otherwise change its Articles
of Incorporation or Bylaws or similar organizational documents;
(ii) issue, sell, pledge, dispose of, grant, encumber, amend
the terms of, or authorize the issuance, sale, pledge, disposition,
grant or encumbrance of (A) any shares of capital stock of Texoil or
any Company Subsidiary of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest) of Texoil or any
Company Subsidiary except the sale of capital stock of Texoil in
connection with the exercise of outstanding options or warrants or (B)
any assets or properties of Texoil or any Company Subsidiary, except
the sales of Hydrocarbons in the ordinary course of business and in a
manner consistent with past practice;
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(iii) declare, set aside, make or pay any dividend or other
distribution payable in cash, stock, property or otherwise, with
respect to any of its capital stock except for Preferred Shares to be
issued and cash to be paid as dividends on the Preferred Shares in
accordance with Texoil's Articles of Incorporation and Section 4.17 of
the Preferred Stock Purchase Agreement;
(iv) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(v) (A) acquire or sell, lease, license, surrender, relinquish
or otherwise dispose of (including, without limitation, by merger,
consolidation or acquisition or disposition of stock or assets) any
interest in any corporation, partnership, other business organization
or any division thereof or any assets, other than sales of Hydrocarbons
in the ordinary course of business, consistent with past practice, and
any other acquisitions for consideration which is not, in the
aggregate, in excess of $250,000; (B) incur any Indebtedness for
borrowed money, incur any trade debt, or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any individual, partnership,
corporation, limited liability company, trust, incorporated or
unincorporated organization or other legal entity of any kind (a
"Person") (other than Texoil or a wholly owned Company Subsidiary),
except for Indebtedness incurred in the ordinary course of business,
consistent with past practice, in amounts not in excess of $250,000 in
the aggregate; (C) make any loans or advances to any Person other than
Texoil or a wholly owned Company Subsidiary; (D) authorize or commit to
any capital expenditure in excess of $250,000 in the aggregate per
month, other than pursuant to any commitment as of January 18, 2001
disclosed in the Disclosure Letter; or (E) enter into or amend any
contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this subsection (v);
(vi) enter a new line of business or commence business
operations in any country outside the United States;
(vii) increase the compensation payable or to become payable
to its officers or employees, except in the ordinary course of business
and consistent with past practice, or grant any severance or
termination pay to, or modify or enter into any employment or severance
agreement with, any director, officer, employee or former employee of
Texoil or any Company Subsidiary, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
(viii) change any method of accounting or accounting practice
by Texoil or any Company Subsidiary, except for any such change
required by U.S. GAAP;
(ix) pay, discharge or satisfy any material claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the consolidated balance
sheet of Texoil, dated as of September 30, 2000, included in the
Financial Statements, or subsequently incurred in the ordinary course
of business and consistent with past practice or in accordance with
this provision, provided however, that in no event shall payments under
this provision exceed individually, or in the aggregate, $250,000
without the express written consent of Parent.
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(x) settle any material Audit, make or change any material Tax
election or file any material amended Tax Return;
(xi) take any action that would give rise to a claim under the
WARN Act or any similar state law or regulation because of a "plant
closing" or "mass layoff" (each as defined in the WARN Act);
(xii) enter into any futures, hedge, swap, collar, put, call,
floor, cap, option or other contracts that are intended to benefit from
or reduce or eliminate the risk of fluctuations in the price of
commodities, including Hydrocarbons, or securities;
(xiii) enter into any fixed price commodity sales agreements
with a duration of more than three months;
(xiv) take, or agree or commit to take, any action that would
make any representation and warranty of Texoil or any Company
Subsidiary hereunder inaccurate in any respect at, or as of any time
prior to, the closing of the Merger, or omit, or agree or commit to
omit, to take any action necessary to prevent any such representation
or warranty from being inaccurate in any respect at any time;
(xv) (A) engage in any transaction (either acting alone or in
conjunction with any Employee Plan or trust created thereunder) in
connection with which Texoil or any Company Subsidiary could be
subjected (directly or indirectly) to either a civil penalty assessed
pursuant to subsections (c), (i) or (1) of Section 502 of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code, (B)
terminate any Employee Plan in a manner, or take any other action with
respect to any Employee Plan, that could result in the liability of
Texoil or any Company Subsidiary to any person, (C) take any action
that could adversely affect the qualification of any Employee Plan or
its compliance with the applicable requirements of ERISA, (D) fail to
make full payment when due of all amounts which, under the provisions
of any Employee Plan, any agreement relating thereto or applicable law,
Texoil or any Company Subsidiary are required to pay as contributions
thereto or (E) fail to file, on a timely basis, all reports and forms
required by federal regulations with respect to any Employee Plan; or
(xvi) other than the consummation of the Merger, take any
action that would cause adjustment to the conversion price of the
Preferred Shares.
Indemnification. For six years after the Effective Time, Parent and the
Surviving Corporation shall indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof, or who becomes prior
to the Effective Time, an officer or director of Texoil or any Company
Subsidiary (each, an "Indemnified Party") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the prior written
consent of the Surviving Corporation, which consent will not be unreasonably
withheld)) arising in whole or in part out of actions or omissions in their
capacity as such occurring at or prior to the Effective Time to the fullest
extent permitted under Nevada law and the Surviving Corporation's Articles of
Incorporation and Bylaws and Texoil's written indemnification agreements in
effect on the date of the Merger Agreement and listed in the Disclosure Letter,
including provisions therein relating to the advancement of expenses incurred in
the defense of any action or suit; provided, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims, provided that in no
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event shall the liability of Parent and the Surviving Corporation in the
aggregate under this provision exceed $115 million.
The Surviving Corporation shall also maintain Texoil's existing
officers' and directors' liability insurance policy ("D&O Insurance") for a
period of not less than six years after the Effective Time, but only to the
extent related to actions or omissions prior to the Effective Time. The
Surviving Corporation has the option to substitute for the existing D&O
Insurance policies of substantially similar coverage and amounts containing
terms no less advantageous to such former directors or officers, provided that
the annual premiums to be paid with respect to the maintenance of such D&O
Insurance during such six-year period shall not exceed two hundred percent
(200%) of the premium paid by Texoil for such D&O Insurance during the year
ended December 31, 2000, it being agreed and understood that if such policies
cannot be obtained at such cost, Parent shall cause the Surviving Corporation to
obtain as much of such policies as can be obtained at a cost equal to such
amount.
The Articles of Incorporation and Bylaws of the Surviving Corporation
and its subsidiaries shall contain provisions no less favorable with respect to
indemnification than are currently set forth in the Bylaws of Texoil and any
Company Subsidiary, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who, at or prior to
the Effective Time, were Indemnified Parties, unless such modification shall be
required by Law. Notwithstanding the foregoing, the Surviving Corporation shall
not be obligated to maintain the provisions of Texoil's and Texoil's
Subsidiaries' Bylaws and Articles of Incorporation that provide for
indemnification of directors and officers in their capacities as stockholders.
Conditions Precedent. The obligations of Texoil, Parent and OEI to
consummate the Merger are subject to the satisfaction or waiver, in whole or in
part (where permissible by applicable law), at or prior to the closing of the
Merger, of each of the following conditions: (a) no Governmental Authority or
court of competent jurisdiction located or having jurisdiction in the United
States shall have enacted, issued, promulgated, enforced or entered any Laws or
Governmental Order which is then in effect making the consummation of the Merger
illegal or otherwise prohibit the consummation of the Merger; (b) if required by
applicable law in order to consummate the Merger Texoil Stockholders' Approval
shall have been obtained, (c) Parent, OEI or their Affiliates shall have
purchased Shares pursuant to the Offer; and (d) all approvals of Governmental
Authorities necessary to consummate the Merger and other transactions
contemplated therein shall have been received and shall be in effect at the
Effective Time. The conditions set forth in clauses (c) and (d) above have been
satisfied and Texoil is not aware of the occurrence of any events described in
clause (a) above.
Termination. The Merger Agreement provides that it may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval by Texoil's stockholders:
(i) by the mutual written consent of Parent and Texoil;
(ii) by either Parent or Texoil if the Effective Time shall
not have occurred on or before May 31, 2001; provided that the party
seeking to terminate the Merger Agreement shall not have breached in
any material respect its obligations under the Merger Agreement in any
manner that shall have proximately contributed to the failure to
consummate the Merger on or before May 31, 2001;
(iii) by Texoil if there has been a material breach by OEI or
Parent of any representation, warranty, covenant or agreement set forth
in the Merger Agreement which breach
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(if susceptible to cure) has not been cured in all material respects
within five business days following receipt by OEI or Parent of notice
of such breach;
(iv) by either Parent or Texoil if any court of competent
jurisdiction or other Governmental Authority shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, the Common Shares or Preferred Shares
pursuant to the Offer or the Merger and such order, decree or ruling or
other action shall have become final and nonappealable, provided that
the party seeking to terminate the Merger Agreement shall have used its
reasonable best efforts to remove or lift such order, decree or ruling;
(v) by Parent, if (i) the Board of Directors of Texoil (A)
withdraws, modifies or changes (including by amendment of the Schedule
14D-9) its recommendation of the Offer, the Merger Agreement or the
Merger in a manner adverse to Parent or shall have resolved to do any
of the foregoing, (B) shall have recommended to the stockholders of
Texoil any Acquisition Proposal or resolved to do so or (C) shall have
failed to reaffirm publicly and unconditionally its recommendation to
Texoil's stockholders that they tender their Shares in the Offer, which
public reaffirmation must be made within five days after Parent's
written request to do so; or (ii) the Minimum Condition shall not have
been satisfied by the Expiration Date and (A) a third party shall have
made or caused to be made an Acquisition Proposal, or (B) any "group"
(as defined in Section 13(d)(3) of the Exchange Act) or Person
(including Texoil or any of its Affiliates), other than Parent or any
of its Affiliates, shall have become the beneficial owner of more than
50% of the Common Shares or 50% of the Preferred Shares; provided,
however, the current ownership of Shares by Texoil's stockholders who
are party to either the Tender Agreement or the Tender and Voting
Agreement shall not be deemed to trigger this clause (B);
(vi) by Texoil, if, prior to the acceptance of and payment for
the Shares pursuant to the Offer, Texoil's Board of Directors shall
have determined to recommend a Superior Proposal and Texoil makes the
payment of the Termination Fee and Expense Fee (each as defined below)
as required under the Merger Agreement. For purposes of the Merger
Agreement, "Superior Proposal" means an unsolicited bona fide proposal
made by a third party relating to an Acquisition Proposal on terms that
the Board of Directors of Texoil determines it cannot reject in favor
of the Offer and the Merger, based on applicable fiduciary duties and
after consultation with Texoil's outside counsel (taking into account
among other things the legal, financial, regulatory and other aspects
of the Acquisition Proposal, the Person making such Acquisition
Proposal, the likelihood of consummation and the time required to
complete such transaction); provided, however, that Texoil shall not be
permitted to terminate the Merger Agreement pursuant to this provision
unless it has complied with Section 6.08 of the Merger Agreement
(relating to non-solicitation) and used all reasonable efforts to
provide Parent with two business days prior written notice of its
intent to so terminate the Merger Agreement together with a detailed
summary of the terms and conditions of such Acquisition Proposal;
provided further, that prior to any such termination, Texoil shall, and
shall cause its respective financial and legal advisors to, negotiate
in good faith with Parent to make such adjustments in the terms and
conditions of the Merger Agreement as would enable Texoil to proceed
with the transactions contemplated herein, and it is acknowledged by
Parent that such negotiations with Parent shall be conducted in a
manner consistent with the fiduciary duties of Texoil's Board of
Directors;
(vii) by Texoil if (i) OEI fails to commence the Offer in
violation of the Merger Agreement (relating to the Offer), provided,
however, that Texoil may not terminate the Merger Agreement pursuant to
this provision if Texoil has materially breached the Merger Agreement,
or
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(ii) OEI fails to purchase validly tendered Shares in violation of the
terms of the Merger Agreement;
(viii) by Parent or Texoil if the Offer is terminated or
withdrawn or shall have expired pursuant to its terms without any
Shares being purchased thereunder; provided, however, that neither
Parent nor Texoil may terminate the Merger Agreement pursuant to this
provision if such party (or in the case of Parent, OEI) shall have
materially breached the Agreement; or
(ix) by Parent if Texoil shall have breached any of its
representations or warranties in the Merger Agreement which breach
would give rise to the failure of the condition set forth in clause (e)
of the conditions of the Offer to be satisfied or if, prior to
consummation of the Offer, Texoil shall have failed to perform its
covenants or other agreements contained in the Merger Agreement which
failure to perform would give rise to the failure of the condition set
forth in clause (e) of the conditions of the Offer to be satisfied,
which breach or failure to perform is incapable of being cured or has
not been cured by the date that is five business days following written
notice thereof to Texoil from Parent.
Effect of Termination; Termination Fee. In the event of termination of
the Merger Agreement pursuant to the above provisions, all obligations of the
parties shall terminate, except the obligations of the parties pursuant to
certain provisions of the Merger Agreement, provided that nothing shall relieve
any party from liability for any breaches of the Merger Agreement. In the event
that the Merger Agreement is terminated pursuant to clause (v)(i) under
"Termination" above (other than clause (v)(i)(A) if no Acquisition Proposal
shall have been publicly announced or disclosed) or clause (vi) under
"Termination" above, then Texoil shall promptly (and in any event within one
Business Day after such termination or, in the case of any such termination by
Texoil, prior to such termination) pay Parent an amount equal to (i) a
termination fee of $5,200,000 (the "Termination Fee"), provided, however, that
in no event shall more than one Termination Fee be payable by Texoil plus (ii)
Parent's aggregate Expenses up to $500,000 (the "Expense Fee"). In the event
that the Merger Agreement is terminated pursuant to clause (v)(i)(A) under
"Termination" above (if no Acquisition Proposal shall have been publicly
announced or disclosed) and within 12 months of the date of termination of the
Merger Agreement a transaction constituting an Acquisition Proposal is
consummated, Texoil shall, prior to or simultaneously with the consummation of
such transaction, pay Parent the Termination Fee and the Expense Fee. In the
event that the Merger Agreement is terminated pursuant to clause (v)(ii) hereof
and within 12 months of the date of termination of the Merger Agreement either
(A) a transaction constituting an Acquisition Proposal is consummated or (B) any
"group" (as defined in Section 13(d)(3) of the Exchange Act) or Person
(including Texoil or any of its Affiliates), other than Parent or any of its
Affiliates, shall have become the beneficial owner of more than 50% of the
Common Shares or 50% of the Preferred Shares, Texoil shall, prior to or
simultaneously with the consummation of such transaction or the acquisition of
such Common Shares or Preferred Shares, pay Parent the Termination Fee and the
Expense Fee; provided, however, the current ownership of Shares by Texoil's
stockholders who are party to either the Tender Agreement or the Tender and
Voting Agreement shall not be deemed to trigger this clause (B); and provided
further that the acquisition of additional Preferred Shares by any of the
current holders of Preferred Shares by virtue of a transfer or purchase of such
Preferred Shares from another current holder of Preferred Shares shall not be
deemed to trigger this clause (B). In no event shall Texoil be obligated to pay
more than one Termination Fee and Expense Fee pursuant to this provision of the
Merger Agreement.
TENDER AND VOTING AGREEMENT AND TENDER AGREEMENT
As a condition of OEI's and Parent's willingness to enter into the
Merger Agreement, OEI and Parent required that certain stockholders of Texoil
set forth therein ("Selling Stockholders") enter into the Tender and Voting
Agreement (the "Tender and Voting Agreement"). Such Selling Stockholders
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beneficially owned as of January 18, 2001 an aggregate of 3,386,796 outstanding
Common Shares and 2,801,055 outstanding Preferred Shares (representing
approximately 42.2% of the Common Shares and 93.6% of the Preferred Shares
outstanding on January 18, 2001, on a fully diluted basis). Such Selling
Stockholders also owned, as of such date, Company Options and Company Warrants
exercisable for an aggregate of 757,529 Common Shares. The following Selling
Stockholders, together with their respective numbers of outstanding Shares
subject thereto, are the parties to the Tender and Voting Agreement: V&C Energy
Limited Partnership -- 1,378,050 Common Shares and 456,250 Preferred Shares;
Quantum Energy Partners, LP -- 2,075,663 Preferred Shares; Jerry M. Crews --
279,903 Common Shares and 6,250 Preferred Shares; Francis M. Mury -- 110,582
Common Shares; Robert E. LaJoie -- 140,417 Common Shares; Richard J. Glover --
158,584 Common Shares; The Lincoln National Life Insurance Co. -- 516,942 Common
Shares; EnCap Equity 1996 Limited Partnership -- 320,904 Common Shares and
159,059 Preferred Shares; Energy Capital Investment Company PLC -- 106,968
Common Shares and 103,783 Preferred Shares; and First Union Capital Partners,
Inc. -- 374,446 Common Shares. In addition, as of January 18, 2001, Mr. Crews
held Company Options exercisable for 121,000 Common Shares, Mr. Mury held
Company Options exercisable for 121,100 Common Shares and Mr. LaJoie held
Company Options exercisable for 33,700 Common Shares. Also as of such date, The
Lincoln National Life Insurance Co. held Company Warrants exercisable for
293,471 Common Shares and First Union Capital Partners, Inc. held Company
Warrants exercisable for 188,158 Common Shares. As of the date of the Tender and
Voting Agreement, Mr. Crews was an executive vice president, secretary and
director of Texoil, Mr. Mury was an executive vice president of Texoil, and Mr.
LaJoie was a director of Texoil.
As a condition of OEI's willingness to enter into the Merger Agreement,
OEI and Parent also required that certain other Selling Stockholders set forth
therein enter into the Tender Agreement (the "Tender Agreement"). Such Selling
Stockholders beneficially owned as of January 18, 2001 an aggregate of 300,779
outstanding Common Shares and 190,460 outstanding Preferred Shares (representing
approximately 3.7% of the Common Shares and 6.4% of the Preferred Shares
outstanding on January 18, 2001, on a fully diluted basis). In addition, as of
January 18, 2001, such Selling Stockholders owned Company Options exercisable
for an aggregate of 242,200 Common Shares. The following Selling Stockholders,
together with their respective numbers of outstanding Shares subject thereto,
are parties to the Tender Agreement: El Paso Capital Investment Company LLC --
152,291 Preferred Shares; Thomas A. Reiser -- 48,304 Common Shares and 6,919
Preferred Shares; Paul B. David -- 57,257 Common Shares and 18,750 Preferred
Shares; Peggy C. Simpson -- 50,646 Common Shares; Frank A. Lodzinski -- 40,000
Common Shares; T.W. Hoehn, III -- 104,572 Common Shares; and Arthur L. Smith --
12,500 Preferred Shares. In addition, as of January 18, 2001, Mr. Reiser holds
Company Options for 28,083 Common Shares, Mr. David holds Company Options for
22,467 Common Shares, Ms. Simpson holds Company Options for 59,317 Common Shares
and Mr. Lodzinski holds Company Options for 132,333 Common Shares. As of the
date of the Tender Agreement, Mr. Reiser was a director of the Company, Mr.
Lodzinski was President, Chief Executive Officer and a director of the Company,
and Mr. Hoehn was a director of the Company.
Under the terms of the Tender and Voting Agreement and the Tender
Agreement, each Selling Stockholder agreed (severally and not jointly) to
validly tender as soon as practicable after commencement of the Offer but in no
event later than ten business days after the date of commencement of the Offer,
the Common Shares and Preferred Shares then legally and beneficially owned by
such Selling Stockholder, together with any Shares acquired after January 18,
2001 and prior to the termination of the Offer, whether upon the exercise of
Company Options, Company Warrants, conversion of convertible securities or
otherwise (the "Tender Shares"). The Selling Stockholders agreed not to withdraw
such Tender Shares, except following termination of the Offer pursuant to its
terms.
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The Selling Stockholders tendered their Tender Shares pursuant to the
Tender and Voting Agreement and Tender Agreement and OEI accepted such Shares
for payment shortly after 12:00 midnight on February ___, 2001.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax
consequences of the Merger to holders whose Shares are converted into the right
to receive cash in the Merger (whether upon receipt of the Offer Price or
pursuant to the proper exercise of dissenters' rights). The discussion applies
only to holders of Shares in whose hands Shares are capital assets, and may not
apply to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of Shares who are not citizens or
residents of the United States of America.
THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND IS BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES
MAY DIFFER, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED TO YOU AND THE PARTICULAR TAX EFFECTS OF
THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND OTHER TAX LAWS.
The receipt of cash pursuant to the Merger (whether as the merger
consideration or pursuant to the proper exercise of dissenters' rights) will be
a taxable transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares converted to cash in the Merger and the amount of cash received therefor.
Gain or loss must be determined separately for each block of Shares (i.e.,
Shares acquired at the same cost in a single transaction) converted to cash in
the Merger. Gain or loss will be capital gain or loss. Individual holders will
be subject to tax on the net amount of their gain at a maximum rate of 20%,
provided the Shares were held for more than 12 months. Special rules (and
generally lower maximum rates) apply to individuals in lower tax brackets. The
deduction of capital losses is subject to certain limitations, generally
limiting usable losses in any year to an amount equal to capital gains
recognized that year plus $3,000. The balance of unused capital losses generally
may be carried forward to subsequent tax years. Stockholders should consult
their own tax advisors in this regard.
Payments in connection with the Merger may be subject to backup
withholding at a 31% rate. Backup withholding generally applies if a stockholder
(i) fails to furnish his, her or its social security number or taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails
properly to report interest or dividends or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is the stockholder's correct number and that the stockholder is
not subject to backup withholding. Backup withholding is not an additional tax
but merely an advance payment, which may be refunded to the extent it results in
an overpayment of tax. Certain persons, including corporations and financial
institutions generally, are exempt from backup withholding. Penalties may apply
for failure to furnish correct information and for failure to include the
reportable payments in income. Each stockholder should consult with its own tax
advisor as to the stockholder's qualifications for exemption from withholding
and the procedure for obtaining an exemption.
DISSENTERS' RIGHTS
Pursuant to the terms of the Merger Agreement, Shares outstanding
immediately prior to the time the Articles of Merger are filed with the Nevada
Secretary of State in such form as required by, and executed in accordance with
the relevant provisions of, the Nevada Revised Statutes (the "Effective Time")
and which are (i) held by holders of Shares who shall have not voted in favor of
the Merger or consented to the Merger in writing and (ii) who shall have
demanded properly in writing payment of the fair market value of such Shares in
accordance with Section 92A.420 of the Nevada Revised Statutes (collectively,
the "Dissenting Shares") shall be cancelled and terminated and shall represent
solely the right to receive payment from the Surviving Corporation of the fair
market value of such Shares held by them in accordance with the provisions of
the Nevada Revised Statutes. Such rights to dissent, if the statutory procedures
are complied with, could lead to a judicial determination of the fair value of
the Dissenting Shares immediately before the effectuation of the Merger
(excluding any appreciation or depreciation in anticipation of the Merger unless
exclusion would be inequitable), required to be paid in cash to such dissenting
holders for their Shares. In addition, such dissenting stockholders would be
entitled to receive payment of interest from the date of consummation of the
Merger on the amount determined to be the fair value of their Dissenting Shares
at the average rate currently paid by Texoil on its principal bank loans or, if
it has no bank loans, at the rate that is fair and equitable under all of the
circumstances.
However, holders of Shares who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights for an appraisal of such
shares under the Nevada Revised Statutes shall thereupon have such shares be
deemed to have been cancelled and terminated, as of the Effective Time, and
shall represent solely the right to receive $8.25 per Common Share as provided
in Section 3.06 of the Merger Agreement, as applicable, upon surrender of the
certificate or certificates that formerly evidenced such Shares in the manner
provided in Section 3.07 of the Merger Agreement.
Chapter 92A of the Nevada Revised Statutes sets forth the required
procedure a stockholder requesting dissenters' rights must follow. Making sure
that you actually perfect your dissenters' rights can be complicated. The
procedural rules are specific and must be followed completely. Failure to
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comply with the procedure may cause a termination of your dissenters' rights. We
are providing you with only a summary of your rights and the procedures. The
following information is qualified in its entirety by the provisions of Chapter
92A of the Nevada Revised Statutes, which are attached to this Information
Statement as Annex C. Parent, OEI and Texoil will not give you notice other than
what is described in this Information Statement and as required by the Nevada
Revised Statutes.
NEVADA DISSENTERS' RIGHTS PROCEDURES
Under the Nevada Revised Statutes, if a merger is authorized by a
written consent of the stockholders, the corporation shall notify in writing all
stockholders entitled to assert dissenters' rights that the action was taken and
shall send them no later than 10 days after the effectuation of the corporate
action a dissenters' notice that must:
o state where the demand for payment must be sent and where and
when certificates, if any, for shares must be deposited;
o supply a form for demanding payment that includes the date of
the first announcement to news media or to the stockholders of
the terms of the proposed action and requires that the person
asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
o set a date by which the Surviving Corporation must receive the
demand for payment, which may be not less than 30 nor more
than 60 days after the notice is delivered; and
o be accompanied by a copy of NRS 92A.300 to 92A.500.
Following receipt of such notice, if you wish to exercise your dissenters'
rights you must:
o demand payment;
o certify whether you acquired beneficial ownership of the
shares before the date required to be set forth in the
dissenters' notice for this certification; and
o deposit your certificates, if any, in accordance with the
terms of the notice.
If you do not demand payment or deposit your certificates where
required, each by the date set forth in the dissenters' notice, you will not be
entitled to payment for your shares. Within 30 days after receipt of a demand
for payment the Surviving Corporation shall pay each dissenter who complied with
the above requirements the amount the Surviving Corporation estimates to be the
fair value of his or her shares, plus accrued interest.
The payment must be accompanied by:
o Texoil's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, a
statement of income for that year, a statement of changes in
the stockholders' equity for that year and the latest
available interim financial statements, if any;
o a statement of Texoil's estimate of the fair value of the
shares;
o an explanation of how the interest was calculated;
o a statement of the dissenters' rights to demand payment under
NRS 92A.480; and
o a copy of NRS 92A.300 to 92A.500.
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The Surviving Corporation may elect to withhold payment from a
dissenter unless he was the beneficial owner of the shares before the date
specified in the dissenters' notice as the date of the first announcement to the
news media or to the stockholders of the terms of the proposed action. To the
extent the Surviving Corporation elects to withhold payment, after taking the
proposed action, it shall estimate the fair value of the shares, plus accrued
interest, and shall offer to pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The Surviving Corporation shall
send with its offer a statement of its estimate of the fair value of the shares,
an explanation of how the interest was calculated, and a statement of the
dissenters' right to demand payment pursuant to NRS 92A.480.
A dissenter may notify the Surviving Corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid or offered is
less than the fair value of his shares or that the interest due is incorrectly
calculated. Failure to demand payment in writing within 30 days after the
Surviving Corporation has made or offered payment for his shares constitutes a
waiver of a dissenters' right to demand payment.
If a demand for payment remains unsettled, the Surviving Corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the Surviving Corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
The Surviving Corporation shall commence the proceeding in the district
court of Washoe County, the county where its registered office is located. The
Surviving Corporation shall make all dissenters, whether or not residents of
Nevada, whose demands remain unsettled, parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law. Each dissenter who is made a party to the
proceeding is entitled to a judgment (a) for the amount, if any, by which the
court finds the fair value of his shares, plus interest, exceeds the amount paid
by the Surviving Corporation, or (b) for the fair value, plus accrued interest,
of his after-acquired shares for which the Surviving Corporation elected to
withhold payment pursuant to NRS 92A.470.
The court in a proceeding to determine fair value shall determine all
of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the Surviving Corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenter acted arbitrarily, vexatiously or not
in good faith in demanding payment. The court may also assess the fees and
expenses of the counsel and experts for the respective parties, in amounts the
court finds equitable, against the Surviving Corporation and in favor of all
dissenters if the court finds the Surviving Corporation did not substantially
comply with the requirements of NRS 92A.300 to 92A.500, inclusive, or against
either the Surviving Corporation or a dissenter in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously or not in good faith with respect to the rights
provided by NRS 92A.300 to 92A.500, inclusive. If the court finds that the
services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated, and that the fees for those services should not
be assessed against the Surviving Corporation, the court may award to those
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefited.
In a proceeding commenced pursuant to NRS 92A.460, the court may assess
the costs against the Surviving Corporation, except that the court may assess
costs against all or some of the dissenters who
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are parties to the proceeding, in amounts the court finds equitable, to the
extent the court finds that such parties did not act in good faith in
instituting the proceeding.
A dissenting stockholder may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
INFORMATION CONCERNING TEXOIL
TEXOIL
Texoil is a Nevada corporation with its principal executive offices
located at 110 Cypress Station Drive, Suite 220, Houston, Texas. Texoil is an
independent oil and gas company engaged in the acquisition of oil and gas
reserves through a program that includes purchases of reserves, reengineering,
development and exploration activities currently focused in Texas and Louisiana.
Texoil is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission relating to Texoil's business, financial
condition and other matters. Texoil is required to disclose in such proxy
statements certain information, as of particular dates, concerning Texoil's
directors and officers, their remuneration, stock options granted to them, the
principal holders of Texoil's securities and any material interests of such
persons in transactions with Texoil. Such reports, proxy statements and other
information may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street (Suite 400), Chicago, Illinois 60661. Copies of such material may also be
obtained by mail, at prescribed rates, from the Commission's principal office at
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
World Wide Web site on the internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. Such material should also be available for inspection at the offices
of Nasdaq, 1735 K Street, N.W., Washington D.C. 20006. Nothing contained in any
website is incorporated by reference herein.
GENERAL
The Texoil Board is currently comprised of nine members, six of whom
serve as Class A directors and three of whom serve as Class B directors.
Pursuant to Texoil's Amended and Restated Certificate of Incorporation, Class A
directors are elected for staggered three year terms, and Class B directors are
elected annually. All directors of Texoil hold office until the election and
qualification of their successors.
DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for
payment of, and payment OEI in accordance with the Offer for Shares representing
not less than a majority of the outstanding Shares pursuant to the Offer, OEI
was entitled to designate to the Texoil Board (1) such number of Class A
directors, rounded up to the next whole number, as is equal to the product of
the total number of Class A directors on the Texoil Board multiplied by the
percentage that the aggregate number of shares of Common Shares and Preferred
Shares beneficially owned by Parent or its affiliates bears to the total number
of shares of Common Shares and Preferred Shares then outstanding (calculated on
an as converted basis), and (2) such number of Class B directors, rounded up to
the next whole number, as is equal to the product of the total number of Class B
directors multiplied by the percentage that the
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aggregate number of shares of Preferred Shares beneficially owned by Parent or
its affiliates bears to the total number of shares of Preferred Shares then
outstanding; provided, however, that until the effective time of the Merger, the
Board shall have at least two members who were directors of Texoil on the date
of the Merger Agreement and not employees of Texoil (the "Independent
Directors).
On February __, 2001, T.W. Hoehn, III, Robert E. LaJoie, Thomas Reiser,
Michael A. Vlasic, S. Wil VanLoh, Jr., Toby R. Neugebauer and Jeffery A. Jones
resigned from the Board on that date and James T. Hackett, William L. Transier,
Robert K. Reeves, John D. Schiller, Jr., William S. Flores, Jr., Scott A.
Griffiths and Stephen A. Thorington were appointed to serve as directors of the
Company until their successors are duly qualified and appointed or elected.
Frank A. Lodzinski and Jerry M. Crews have remained on the Texoil Board pursuant
to the Merger Agreement to ensure compliance with applicable provisions of the
Merger Agreement.
DIRECTORS AND OFFICERS OF TEXOIL
Set forth below, for each director and officer of Texoil, is
information regarding their age as of February __, 2001, position(s) with
Texoil, the period they have served as an officer or director, any family
relationship with any other director or executive officer of Texoil, the
directorships currently held by them in corporations whose shares are publicly
registered and their principal occupations and employment during the past five
years.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
James T. Hackett.................................... 47 Chairman of the Board, Director, President and
Chief Executive Officer
William L. Transier................................. 46 Executive Vice President, Chief Financial
Officer and Director
Robert K. Reeves.................................... 43 Executive Vice President, General Counsel,
Secretary and Director
John D. Schiller, Jr. .............................. 41 Executive Vice President--Operations and Director
William S. Flores, Jr. ............................. 44 Director
Scott A. Griffiths.................................. 47 Director
Stephen A. Thorington............................... 46 Director
Frank A. Lodzinski.................................. 51 Director
Jerry M. Crews...................................... 50 Director
JAMES T. HACKETT (age 47), has been the Chairman of the Board,
President and Chief Executive Officer of Texoil since February 2001. Mr. Hackett
has been a Director of Parent since 1998, President and Chief Executive Officer
of Parent since March 1999 and Chairman of the Board of Directors of Parent
since January 2000. Mr. Hackett is also a Director of New Jersey Resources
Corporation, Kaiser Aluminum Corp. and Temple-Inland Corp. Mr. Hackett was
President and Chief Executive Officer of Parent's predecessor from September
1998 and Chairman of the Board of Parent's predecessor from January 1999 to
March 1999. He was also Group President of Duke Energy's unregulated operations
and Executive Vice President of Panenergy from January 1996 to September 1998.
Prior to joining Duke Energy, he was Senior Vice President of NGC Corporation
(formerly Natural Gas Clearinghouse) and President of NGC's gathering,
processing and liquids marketing division. He became Executive Vice President,
partner and a member of the management committee of Natural Gas Clearinghouse in
1993.
WILLIAM L. TRANSIER (age 46), has been the Executive Vice President,
Chief Financial Officer and Director of Texoil since February 2001. Mr. Transier
is also a director of Cal Dive International, Inc. and Metals USA, Inc. Mr.
Transier has also been the Executive Vice President and Chief Financial Officer
of Parent since March 1999. He previously served as the Executive
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Vice President and Chief Financial Officer of Parent's predecessor from
September 1998 to March 1999, and was Senior Vice President and Chief Financial
Officer of Parent's predecessor from May 1996 to September 1998. For the
previous 20 years, he held a variety of positions at KPMG LLP including partner
from July 1986 until April 1996.
ROBERT K. REEVES (age 43), has been the Executive Vice President,
General Counsel, Secretary and Director of Texoil since February 2001. Mr.
Reeves has also served as the Executive Vice President, General Counsel and
Secretary of Parent since March 1999, and served as Executive Vice President,
General Counsel and Secretary of Parent's predecessor from June 1997 to March
1999. Mr. Reeves was Senior Vice President, General Counsel and Secretary of
Parent's predecessor from May 1994 to June 1997.
JOHN D. SCHILLER, JR. (age 41), has been the Executive Vice President,
Operations and Director of Texoil since February 2001. He has also been the
Executive Vice President, Operations of Parent since March 2000. Mr. Schiller
served as Senior Vice President, North America Onshore and International
Operations from March 1999 to March 2000, and served as Senior Vice President,
Operations of Parent's predecessor from September 1998 to March 1999. Mr.
Schiller was Production Manager - Gulf Coast Division of Burlington Resources
from October 1997 to August 1998, and Engineering Manager - Offshore Division of
Burlington Resources from April 1994 to September 1997.
WILLIAM S. FLORES (age 44), has been a Director of Texoil since
February 2001. He has been the Senior Vice President, Drilling of Parent since
March 1999, Vice President, Drilling of Parent's predecessor from March 1998 to
Mach 1999, and Vice President, Operations of Parent's predecessor from August
1993 to March 1998.
SCOTT A. GRIFFITHS (age 47), has been a Director of Texoil since
February 2001. He has been the Senior Vice President of International
Exploration of Parent since March 1999. Mr. Griffiths served as Senior Vice
President Domestic Exploration of Parent from September 1998 to March 1999; Vice
President Domestic Exploration of Parent from May 1997 to September 1998; Vice
President of Domestic Exploration of Parent from October 1996 to May 1997; and
Vice President of Exploration of Global Natural Resources from 1992 to October
1996.
STEPHEN A. THORINGTON (age 46), has been a Director of Texoil since
February 2001. He has been the Senior Vice President, Finance, Treasury and
Corporate Development of Parent since March 1999, and Vice President, Finance
and Treasurer of Parent from May 1996 to March 1999. Mr. Thorington served as
Managing Director of Chase Securities Inc. from April 1994 to May 1996.
FRANK A. LODZINSKI (age 51), has been a Director of the Company since
December 31, 1997. He served as Chairman of the Board, President and Chief
Executive Officer of the Company from December 31, 1997 until his resignation on
February __, 2001. He has been President and a Director of Cliffwood since he
founded the predecessor entity and commenced operations in 1996. From 1992 to
1995 he served as President and a Director of Hampton Resources Corporation, a
public corporation which he co-founded. From 1995, when Hampton was sold to
Bellwether Exploration Company, to 1996, he was self-employed and was a
consultant to Bellwether Exploration Company. From 1984 to 1992, Mr. Lodzinski
was engaged in the oil and natural gas business through Energy Resource
Associates, Inc., a closely held Texas corporation which he owned and
controlled. Prior to 1984, he was employed in public accounting with Arthur
Andersen LLP and in various capacities with independent oil and gas companies.
He is a Certified Public Accountant and holds a BSBA degree from Wayne State
University.
JERRY M. CREWS (age 50), has been a Director of Texoil since December
31, 1997. He was Executive Vice President and Secretary of Texoil from December
31, 1997 until his resignation on
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February __, 2001. He has also been an Officer and Director of Cliffwood since
1996. For the preceding 12 years he was an Officer of Citation Oil & Gas Corp.
and was responsible for all production operations. His experience includes
acquisitions, drilling and development operations in most of the producing
basins of the United States. Prior experience was with Conoco and Lear
Petroleum. He is a registered Professional Engineer in the state of Texas and
holds a B.S. in Petroleum Engineering from Texas A&M University.
OWNERSHIP OF SHARES BY DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of February
[___], 2001, regarding the beneficial ownership of Texoil common stock by each
director of Texoil, by each of the five most highly compensated executive
officers of Texoil (as required by Commission rules) and by all directors and
executive officers of Texoil as a group. Certain of these individuals own
options to acquire additional Common Shares, as described under "Certain
Potential Conflicts of Interest." These officers and directors have agreed, as
required by the Merger Agreement, that such options shall at the consummation of
the Offer be converted into the obligation of Texoil to pay such holders the
Company Option Payments, and that the Company Option Payments are the sole
payments that will be made with respect to or in relation to such options.
Otherwise, except as noted, the persons named in the table below do not own,
beneficially or of record, any other securities of Texoil or its subsidiaries
and have sole voting and investment power over all securities for which they are
shown as beneficial owner. As of the date of this Information Statement, OEI
owns 2,991,465 Preferred Shares representing 100% of Texoil's issued and
outstanding Preferred Shares.
NAME OF BENEFICIAL OWNER COMMON SHARES
(ADDRESS INDICATED IF NOT A BENEFICIALLY PERCENT OF
DIRECTOR OR AN OFFICER) OWNED CLASS
--------------------------- ------------- ----------
OEI Acquisition Corp.
c/o Ocean Energy, Inc.
1001 Fannin Street
Suite 1600
Houston, Texas 77002........................................ [_________](1) [___]%
James T. Hackett, Director, Chairman of
the Board, President and Chief Executive Officer............ 0 0%
William L. Transier, Director, Executive Vice
President and Chief Financial Officer....................... 0 0%
Robert K. Reeves, Director, Executive Vice
President, General Counsel and Secretary.................... 0 0%
John D. Schiller, Jr., Director and Executive
Vice President--Operations.................................. 0 0%
William S. Flores, Jr., Director............................ 0 0%
Scott A. Griffiths, Director................................ 0 0%
Stephen A. Thorington, Director............................. 0 0%
Frank A. Lodzinski, Director................................ 0 0%
Jerry M. Crews, Director.................................... 0 0%
All Directors and Executive Officers
as a group (9 persons)..................................... 0 0%
- ----------
(1) OEI Acquisition Corp. is a direct wholly owned subsidiary of Ocean
Energy, Inc. Excludes Common Shares issuable upon conversion of
Preferred Shares.
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INFORMATION CONCERNING PARENT AND OEI
OEI is a Nevada corporation that was formed as an acquisition vehicle
in connection with the Merger and the other transactions contemplated by the
Merger Agreement and OEI will be merged with and into Texoil pursuant to the
Merger. OEI is a wholly-owned subsidiary of Parent.
Parent is an independent energy company engaged in the exploration,
development, production and acquisition of crude oil and natural gas. North
American operations are focused in the shelf and deepwater areas of the Gulf of
Mexico, the Permian Basin, Mid-continent and Rocky Mountain regions.
Internationally, Parent holds a leading position among U.S. independents in West
Africa with oil and gas activities in Equatorial Guinea, Cote d'Ivoire and
Angola. Parent also conducts operations in the republics of Egypt, Tatarstan,
Pakistan and Indonesia.
FINANCING THE MERGER
There are no financing conditions to the Merger. Parent made an
intercompany loan to OEI in an amount sufficient to purchase all of the Common
Shares and Preferred Shares of Texoil that were tendered in the Offer and that
will be converted and paid for in the Merger. Parent has obtained such funds
from borrowings under its $500 million Revolving Credit Agreement (the "Credit
Facility"), dated as of March 30, 1999, among Parent, Chase Bank of Texas,
National Association, The Chase Manhattan Bank, Bank of America National Trust
and Savings Association, Bank One Texas, N. A., Societe Generale, Southwest
Agency, the Bank of Montreal, and the other Banks signatory thereto. The Credit
Facility, which is unsecured, has a five-year term and bears interest, at
Parent's option, at a competitive bid or LIBOR or prime rates plus applicable
margins ranging from zero to 1.7% or at a competitive bid. Parent expects to use
funds generated from its operations to repay its borrowings under the Credit
Facility.
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WHERE YOU CAN FIND MORE INFORMATION
Texoil files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information Texoil files at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Texoil's Commission filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the Commission at "http://www.sec.gov."
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS INFORMATION STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
INFORMATION STATEMENT. THIS INFORMATION STATEMENT IS DATED FEBRUARY [__], 2001.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE INFORMATION
STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND THE MAILING OF
THIS INFORMATION STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO
THE CONTRARY.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
OCEAN ENERGY, INC.,
OEI ACQUISITION CORP.,
AND
TEXOIL, INC.
DATED AS OF JANUARY 18, 2001
46
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS..........................................................................................A-2
SECTION 1.01. CERTAIN DEFINED TERMS................................................................A-2
ARTICLE II. THE OFFER..........................................................................................A-12
SECTION 2.01. THE OFFER...........................................................................A-12
SECTION 2.02. COMPANY ACTIONS.....................................................................A-14
SECTION 2.03. DIRECTORS...........................................................................A-15
ARTICLE III. THE MERGER........................................................................................A-17
SECTION 3.01. THE MERGER..........................................................................A-17
SECTION 3.02. EFFECTIVE TIME; CLOSING.............................................................A-17
SECTION 3.03. EFFECT OF THE MERGER................................................................A-17
SECTION 3.04. ARTICLES OF INCORPORATION; BYLAWS...................................................A-17
SECTION 3.05. DIRECTORS AND OFFICERS..............................................................A-18
SECTION 3.06. EFFECT ON CAPITAL STOCK.............................................................A-18
SECTION 3.07. EXCHANGE OF COMPANY CERTIFICATES....................................................A-19
SECTION 3.08. STOCK OPTIONS AND WARRANTS..........................................................A-21
SECTION 3.09. SUBSEQUENT ACTIONS..................................................................A-22
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................A-23
SECTION 4.01. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY............................A-23
SECTION 4.02. CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES...............................A-23
SECTION 4.03. COMPANY SUBSIDIARIES................................................................A-24
SECTION 4.04. CORPORATE BOOKS AND RECORDS.........................................................A-25
SECTION 4.05. NO CONFLICT.........................................................................A-25
SECTION 4.06. GOVERNMENTAL CONSENTS AND APPROVALS.................................................A-26
SECTION 4.07. SEC REPORTS, FINANCIAL INFORMATION, BOOKS AND RECORDS...............................A-26
SECTION 4.08. NO UNDISCLOSED LIABILITIES..........................................................A-27
SECTION 4.09. ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS...................................A-27
SECTION 4.10. LITIGATION..........................................................................A-27
SECTION 4.11. COMPLIANCE WITH LAWS................................................................A-28
SECTION 4.12. MATERIAL CONTRACTS..................................................................A-28
SECTION 4.13. TITLE TO PROPERTY...................................................................A-29
SECTION 4.14. INTELLECTUAL PROPERTY...............................................................A-31
SECTION 4.15. EMPLOYEE BENEFIT MATTERS............................................................A-31
SECTION 4.16. ENVIRONMENTAL MATTERS...............................................................A-35
SECTION 4.17. HEDGING.............................................................................A-36
SECTION 4.18. TAXES...............................................................................A-36
SECTION 4.19. INSURANCE...........................................................................A-38
SECTION 4.20. BROKERS.............................................................................A-38
SECTION 4.21. PRODUCTION AND PIPELINE IMBALANCES..................................................A-39
SECTION 4.22. OIL AND GAS OPERATIONS..............................................................A-39
SECTION 4.23. WELLS AND EQUIPMENT.................................................................A-39
SECTION 4.24. PROXY STATEMENT.....................................................................A-40
SECTION 4.25. GAS IMBALANCES; PREFERENTIAL RIGHTS.................................................A-40
SECTION 4.26. REQUIRED STOCKHOLDER VOTE OR CONSENT................................................A-41
SECTION 4.27. FAIRNESS OPINION....................................................................A-41
SECTION 4.28. TAKEOVER RESTRICTIONS...............................................................A-41
SECTION 4.29. INDEMNIFICATION OBLIGATIONS.........................................................A-41
SECTION 4.30. BANKRUPTCY..........................................................................A-42
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER..............................................A-42
SECTION 5.01. ORGANIZATION AND AUTHORITY OF PARENT AND PURCHASER..................................A-42
SECTION 5.02. NO CONFLICT.........................................................................A-42
SECTION 5.03. GOVERNMENTAL CONSENTS AND APPROVALS.................................................A-43
SECTION 5.04. OFFER DOCUMENTS; PROXY STATEMENT....................................................A-43
SECTION 5.05. BROKERS.............................................................................A-43
SECTION 5.06. FINANCING ARRANGEMENTS..............................................................A-44
ARTICLE VI. ADDITIONAL AGREEMENTS..............................................................................A-44
SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING............................................A-44
SECTION 6.02. ACCESS TO INFORMATION...............................................................A-47
SECTION 6.03. CONFIDENTIALITY.....................................................................A-47
SECTION 6.04. STOCKHOLDER ACTION..................................................................A-47
SECTION 6.05. PREPARATION OF THE PROXY STATEMENT..................................................A-48
SECTION 6.06. REGULATORY AND OTHER AUTHORIZATIONS; NOTICES AND CONSENTS...........................A-48
SECTION 6.07. NOTICE OF CERTAIN MATTERS...........................................................A-49
SECTION 6.08. NO SOLICITATION OF TRANSACTION......................................................A-49
SECTION 6.09. EXPENSES............................................................................A-50
SECTION 6.10. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE..............................A-50
SECTION 6.11. COOPERATION AND FILINGS.............................................................A-51
SECTION 6.12. PUBLICITY...........................................................................A-51
SECTION 6.13. ADDITIONAL ACTIONS..................................................................A-52
SECTION 6.14. CONSENTS............................................................................A-52
SECTION 6.15. STOCKHOLDER LITIGATION..............................................................A-52
SECTION 6.16. AMENDMENT TO BYLAWS.................................................................A-52
ARTICLE VII. CONDITIONS TO CLOSING.............................................................................A-52
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.........................................A-52
ARTICLE VIII. TERMINATION AND WAIVER...........................................................................A-53
SECTION 8.01. TERMINATION.........................................................................A-53
SECTION 8.02. EFFECT OF TERMINATION...............................................................A-54
ARTICLE IX. GENERAL PROVISIONS.................................................................................A-55
SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS...............................A-55
SECTION 9.02. NOTICES.............................................................................A-55
SECTION 9.03. ENTIRE AGREEMENT....................................................................A-57
SECTION 9.04. HEADINGS............................................................................A-57
SECTION 9.05. SEPARABILITY........................................................................A-57
SECTION 9.06. ASSIGNMENT..........................................................................A-57
SECTION 9.07. AMENDMENT...........................................................................A-57
SECTION 9.08. GOVERNING LAW; FORUM................................................................A-57
SECTION 9.09. COUNTERPARTS........................................................................A-57
SECTION 9.10. SPECIFIC PERFORMANCE................................................................A-58
SECTION 9.11. WAIVER OF JURY TRIAL................................................................A-58
SECTION 9.12. ATTORNEY'S FEES.....................................................................A-58
SECTION 9.13. EXTENSIONS, WAIVERS, ETC............................................................A-58
Annex I Conditions to the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 18, 2001, among Ocean
Energy, Inc., a Texas corporation ("PARENT"), OEI Acquisition Corp., a Nevada
corporation and a direct, wholly owned subsidiary of Parent ("PURCHASER"), and
Texoil, Inc., a Nevada corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective companies and stockholders to consummate, the acquisition of the
Company by Parent and Purchaser upon the terms and subject to the conditions set
forth herein;
WHEREAS, pursuant to this Agreement, Purchaser has agreed to commence a
tender offer (the "OFFER") to purchase (i) all of the outstanding shares (the
"COMMON SHARES") of the Company's common stock, par value $0.01 per share
("COMPANY COMMON STOCK"), at a price per Common Share of $8.25 (such price or
such higher price as may be paid for Common Shares in the Offer, the "OFFER
PRICE") net to the seller in cash and (ii) all of the outstanding shares (the
"PREFERRED SHARES") of the Company's Series A Convertible Preferred Stock, par
value $0.01 per share ("COMPANY PREFERRED STOCK"), at a price per Preferred
Share of $18.04 (such price or such higher price as may be paid for Preferred
Shares in the Offer, the "PREFERRED OFFER PRICE") net to the seller in cash;
WHEREAS, the Board of Directors of the Company has (i) approved the
Offer and (ii) approved and adopted this Agreement, declared its advisability
and is recommending that the Company's stockholders accept the Offer, tender
their Shares to Purchaser and approve the Merger (hereinafter defined) and adopt
this Agreement;
WHEREAS, the respective Boards of Directors of Purchaser and the
Company, and Parent as sole stockholder of Purchaser, have approved and adopted
the merger of Purchaser with and into the Company, as set forth below (the
"MERGER"), in accordance with the Nevada Revised Statutes (the "NRS") upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has approved the terms
of and transactions contemplated by the (i) Tender Agreement (the "TENDER
AGREEMENT") to be executed and delivered by Parent, Purchaser and the
stockholders of the Company named therein and (ii) Tender and Voting Agreement
(the "TENDER AND VOTING Agreement") to be executed and delivered by Parent,
Purchaser and the stockholders of the Company named therein;
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger, and
49
WHEREAS, there are no prior agreements, arrangements or understandings
with respect to the subject matter hereof or the Tender Agreement or the Tender
and Voting Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ACQUISITION PROPOSAL" means any offer or proposal for, or any
indication of interest in, a merger or other business combination directly or
indirectly involving the Company or any Company Subsidiary or the acquisition of
a substantial equity interest in, or a substantial portion of the assets of, any
such party, other than the transactions contemplated by this Agreement.
"ACTION" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"AGREEMENT" or "THIS AGREEMENT" means this Agreement, dated as of
January 18, 2001, among the Company, Parent and Purchaser (including the
Exhibits hereto and the Disclosure Letter) and all amendments hereto made in
accordance with the provisions of Section 9.07.
"ALLOCATED VALUE SCHEDULE" means Schedule A attached to the Disclosure
Letter.
"ARTICLES OF MERGER" has the meaning specified in Section 3.02(b).
"AUDIT" means any audit, assessment of Taxes, other examination by any
Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance
or other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
restricted stock, phantom stock, stock appreciation rights, stock purchases or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(ii) is (or was within the six-year period ending on the Closing Date) entered
into, maintained, contributed to or required to be contributed to, as the case
may be, by
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the Company or any ERISA Affiliate, and (iii) covers any current or former
employee, director, or consultant of the Company or any ERISA Affiliate (with
respect to their relationship with such entities).
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York.
"CLASS B COMPANY COMMON STOCK" has the meaning specified in Section
4.02.
"CLOSING" has the meaning specified in Section 3.02(a).
"CLOSING DATE" has the meaning specified in Section 3.02(a).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, and the Regulations promulgated thereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the Regulations promulgated thereunder.
"COMMON SHARES" has the meaning specified in the recitals to this
Agreement.
"COMPANY" has the meaning specified in the recitals to this Agreement.
"COMPANY CERTIFICATES" has the meaning specified in Section 3.07(b).
"COMPANY COMMON STOCK" has the meaning specified in the recitals to
this Agreement.
"COMPANY OPTION" has the meaning specified in Section 3.08(a).
"COMPANY OPTION PAYMENTS" has the meaning specified in Section 3.08(a).
"COMPANY OPTION PLANS" has the meaning specified in Section 3.08(a).
"COMPANY PREFERRED STOCK" has the meaning specified in the recitals to
this Agreement.
"COMPANY SEC REPORTS" has the meaning specified in Section 4.07(a).
"COMPANY STOCKHOLDERS' APPROVAL" has the meaning specified in Section
4.26.
"COMPANY STOCKHOLDERS' MEETING" has the meaning specified in Section
6.04.
"COMPANY SUBSIDIARY" means any and all corporations, partnerships,
joint ventures, associations, limited liability companies and other entities
controlled by the Company, directly or indirectly through one or more
intermediaries.
"COMPANY WARRANT" has the meaning specified in Section 3.08(b).
"COMPANY WARRANT PAYMENTS" has the meaning specified in Section
3.08(b).
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"CONFIDENTIALITY AGREEMENTS" has the meaning specified in Section 6.03.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"COURT" shall mean any court, tribunal, or other judicial or arbitral
panel of the United States, any foreign country, or any domestic or foreign
state, and any political subdivision or agency thereof.
"DAIN RAUSCHER" means Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated.
"DEBT RELIEF ACTIONS" has the meaning specified in Section 4.30.
"DEFENSIBLE TITLE" has the meanings specified in Section 4.13(b).
"DISCLOSURE LETTER" means the disclosure letter delivered by the
Company to Parent simultaneously with the execution of this Agreement.
"D&O INSURANCE" has the meaning specified in Section 6.10(b).
"DISSENTING SHARES" has the meaning specified in Section 3.06(e).
"EASEMENTS" means all easements, rights-of-way, licenses, permits,
servitudes, surface leases, and similar assets, rights and interests in any way
appertaining, belonging, affixed, incidental or applicable to, or used in
connection with, the ownership of the Leases, the Wells, Fee Mineral Interests
or Other Real Property or the Operations of the Company or any Company
Subsidiary, including, without limitation, those described in Section 4.13(c) of
the Disclosure Letter.
"EFFECTIVE TIME" has the meaning specified in Section 3.02(b).
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"ENVIRONMENTAL LAWS" means any Law in effect on the date of this
Agreement relating to pollution or protection of the environment, health, safety
or natural resources, including, but
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not limited to, Laws pertaining to the use, handling, transportation, storage,
disposal, release or discharge of Hazardous Materials.
"EQUIPMENT" means all equipment, fixtures, physical facilities, tank
batteries, surface and subsurface machinery, inventory, spare parts, supplies,
tools, and other tangible personal property owned or leased by the Company or
any Company Subsidiary and other personal property of any kind on or associated
with the Operations of the Company or any Company Subsidiary on the date hereof,
including, without limitation, casing, tubing, tubular goods, rods, pumping
units and engines, Christmas trees, derricks, platforms, separators,
compressors, gun barrels, gathering lines, pipelines, flow lines, tanks,
wellheads, production units, platforms, related plants, valves, meters, heaters,
dehydrators, and communications systems and equipment, which are located on or
connected with the Leases, the Easements or the Operations of the Company or any
Company Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the Regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with the Company as
such terms are defined in Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXPENSE FEE" has the meaning specified in Section 8.02(b).
"EXPENSES" has the meaning specified in Section 6.09(b).
"EXPIRATION DATE" has the meaning specified in Section 2.01(b).
"FEE MINERAL INTERESTS" means all of the record and beneficial right,
title and interest of the Company and any Company Subsidiary in and to the oil,
gas and other minerals in and under the land described in Section 4.13(d) of the
Disclosure Letter.
"FINANCIAL STATEMENTS" has the meaning specified in Section 4.07(b).
"GOVERNMENTAL AUTHORITY" means any United States federal, state, local
or any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"HAZARDOUS MATERIALS" means (i) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (ii) other chemicals, materials or
substances defined or regulated as toxic or hazardous or as pollutants,
contaminants or waste under any applicable Environmental Law.
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"HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other liquid or
gaseous hydrocarbons produced in association therewith, including, without
limitation, coalbed methane and gas and CO(2), and all other minerals of every
kind and character which may be covered by or included in the Property, except
Fee Mineral Interests, with respect to which "HYDROCARBONS" means all of the
foregoing subject to the terms of any Lease existing at the Effective Time.
"INDEBTEDNESS" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables), (c) all obligations of such Person
evidenced by notes, bonds, debentures, repurchase and reverse repurchase
agreements or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement, in the event of default, are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with U.S. GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, and (g)
all Indebtedness of others referred to in clauses (a) through (f) above
guaranteed by such Person.
"INDEMNIFICATION OBLIGATIONS" has the meaning set forth in Section
4.29.
"INDEMNIFIED PARTIES" has the meaning set forth in Section 6.10(a).
"INDEPENDENT DIRECTORS" has the meaning set forth in Section 2.03(a).
"INTELLECTUAL PROPERTY" has the meaning specified in Section 4.14.
"INTERIM FINANCIAL STATEMENTS" has the meaning specified in Section
4.07(b).
"IRS" means the Internal Revenue Service of the United States.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter; (b) such individual should be aware of such fact or
matter; or (c) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
comprehensive investigation concerning the existence of such fact or other
matter. A Person other than an individual will be deemed to have "Knowledge" of
a particular fact or other matter if any individual who is currently serving as
an officer of such Person or a subsidiary of such Person (or in each case any
similar capacity), has, or at any time had, Knowledge of such fact or other
matter.
"LAWS" shall mean all laws, statutes, ordinances, rulings and
Regulations of the United States, any foreign country, or any domestic or
foreign state, and any political subdivision or agency thereof, including all
decisions of Courts having the effect of law in each such jurisdiction.
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"LEASES" means the fee mineral interests other than Fee Mineral
Interests as that term is defined herein, oil, gas and mineral leasehold
interests and other leasehold interests, subleases, mineral servitudes,
licenses, concessions, working interests, farm-out or farm-in rights, royalty,
overriding royalty or other non-working or carried interests, operating rights
or other rights and interests described or referred to in Section 4.13(b) of the
Disclosure Letter (other than Permitted Encumbrances), including, without
limitation, all right, title, and interest of the Company and any Company
Subsidiary in all pooled or unitized areas in which the Leases are included, to
the extent that such rights and interests arise from and are associated with the
Leases or Wells, and all right, title and interest owned by the Company and any
Company Subsidiary in, under or derived from all or any presently existing
unitization, pooling, operating, communitization or other agreements, whether
voluntary or involuntary, or formed under orders, regulations, rules or
declaration or other official acts of any governmental or regulatory authority.
"LIABILITIES" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured, or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order, and those arising under any contract or
agreement.
"LOSS" means any and all Liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' fees and expenses) actually suffered or incurred by a
Person.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, condition,
development or occurrence causing, resulting in or having (or with the passage
of time likely to cause, result in or have) a material adverse effect on the
financial condition, business, assets, properties or results of operations of
the Company and the Company Subsidiaries taken as a whole; provided, that such
term shall not include (i) changes in the market price and trading volume of the
Company's securities or (ii) effects that are not applicable primarily to the
Company resulting from market conditions generally in the oil and gas industry
(including without limitation changes in commodities prices).
"MATERIAL CONTRACTS" has the meaning specified in Section 4.12(a).
"MATERIAL TITLE FAILURE" means Title Failures having a value in excess
of Six Million dollars ($6,000,000.00).
"MERGER" has the meaning specified in the recitals to this Agreement.
"MINIMUM CONDITION" has the meaning specified in Annex I attached
hereto.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined in
Sections 3(37) or 4001(a)(3) of ERISA, which (i) is (or was within the six-year
period ending on the Closing Date) entered into, maintained, administered,
contributed to or required to be contributed to, as the case may be, by the
Company or any ERISA Affiliate and (ii) covers or covered any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
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"NET REVENUE INTEREST" means an overall share of Hydrocarbons
throughout the duration of the estate produced (including the proceeds
attributable thereto) from or attributable to the Fee Mineral Interests, Leases
and Wells, after deducting all lessors' royalties, overriding royalties,
production payments, and other interests or burdens on Hydrocarbons produced
therefrom.
"NRS" has the meaning specified in the recitals to this Agreement.
"OFFER" has the meaning specified in the recitals to this Agreement.
"OFFER DOCUMENTS" has the meaning specified in Section 2.01(a).
"OFFER PRICE" has the meaning specified in the recitals to this
Agreement.
"OTHER REAL PROPERTY" means the real property described and identified
in Section 4.13(e) of the Disclosure Letter.
"OPERATIONS" means all Hydrocarbon exploration, development,
production, treatment and marketing and all operations related thereto,
including, without limitation, (a) the acquisition, purchase, sale, development,
operation, maintenance or remediation and abandonment of oil, gas and mineral
leases, lands and related interests, (b) the drilling, reworking, production,
purchase, sale, gathering, transportation, storage, processing, treating,
manufacture and disposal of, or for, Hydrocarbon, and associated by-products and
wastes, and (c) the acquisition, construction, installation, maintenance or
remediation and operation of related plants, platforms, pipelines, gathering
lines, compressors, facilities, storage facilities and equipment.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PARENT" has the meaning specified in the recitals to this Agreement.
"PARENT MATERIAL ADVERSE EFFECT" means any event, circumstance,
condition, development or occurrence causing, resulting in or having (or with
the passage of time likely to cause, result in or have) a material adverse
effect on the financial condition, business, assets, properties, or results of
operations of Parent and Parent's subsidiaries taken as a whole; provided, that
such term shall not include effects that are not applicable primarily to Parent
resulting from market conditions generally in the oil and gas industry
(including without limitation changes in commodities prices).
"PAYING AGENT" has the meaning specified in Section 3.07(a).
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (i) is
(or was within the six-year period ending on the Closing Date) entered into,
maintained, administered, contributed to or required to be contributed to, as
the case may be, by the Company or any ERISA Affiliate and (ii) which covers or
covered any current or former employee, director, or consultant of the Company
or any ERISA Affiliate (with respect to their relationship with such entities).
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"PERMITTED ENCUMBRANCES" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by Law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business; (c) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that do not, individually or in the aggregate, materially
adversely affect the value or use of property subject thereto for its current
and anticipated purposes; (e) lessor's royalties, overriding royalties,
nonparticipating royalties, net profits interests, carried interests, production
payments, reversionary interests, and other burdens, if the net cumulative
effect of such burdens does not operate to reduce the Net Revenue Interest of
the Company or the Company Subsidiary, as applicable, in any Property to an
amount less than the Net Revenue Interest for such Property set forth on Section
4.13(b) of the Disclosure Letter; (f) easements, rights-of-way, servitudes,
permits, licenses, surface leases, and other rights in respect of surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like; conditions covenants or other restrictions, and easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways, and other
easements and rights-of-way on, over, or in respect of any Property which will
not materially interfere with the value, operation or use of any of the affected
Properties; (g) farmout and farmin agreements, participation agreements, joint
operating agreements, division orders, pooling agreements, unitization orders or
agreements, if the net cumulative effect thereof (A) do not operate to reduce
the Net Revenue Interest of the Company or the Company Subsidiary, as
applicable, in any Property to an amount less than the Net Revenue Interest for
such Property set forth on Section 4.13(b) of the Disclosure Letter, or (B) do
not obligate the Company or the Company Subsidiary to bear costs and expenses
relating to the maintenance, development, and operation of any Properties in an
amount greater than the Working Interest of the Company or Company Subsidiary,
as applicable, for such Property as set forth on Section 4.13(b) of the
Disclosure Letter (unless the actual Net Revenue Interest for such Property is
greater than the Net Revenue Interest set forth on Section 4.13(b) of the
Disclosure Letter in the same proportion as any increase in such Working
Interest); (h) Hydrocarbon sales agreements entered into in the ordinary course
of business and, with respect to those Hydrocarbon sales agreements that were
entered into prior to the date of the Reserve Report, that do not adversely
affect the assumptions made in the Reserve Report; (i) rights reserved to or
vested in any Governmental Authority to control or regulate any Property in any
manner, and (j) any defect, irregularity, deficiencies in title, or other matter
that a reasonable and prudent operator, experienced and knowledgeable in the
domestic oil and gas business, would not consider a material impairment of the
Company's or the Company Subsidiary's title in such Property.
"PERSON" means any individual, partnership, corporation, limited
liability company, trust, incorporated or unincorporated organization or other
legal entity of any kind.
"PREFERRED OFFER PRICE" has the meaning specified in the recitals to
this Agreement.
"PREFERRED SHARE" has the meaning specified in the recitals to this
Agreement.
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"PREFERRED STOCK PURCHASE AGREEMENT" means the Preferred Stock Purchase
Agreement dated October 12, 1999 by and among the Company, Quantum Energy
Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital Investment
Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B. David,
Thomas A. Reiser and Jerry M. Crews, as amended to the date hereof.
"PROPERTY" or "PROPERTIES" mean the Leases, Wells, Easements,
Equipment, Other Real Property and Fee Mineral Interests.
"PROXY STATEMENT" has the meaning specified in Section 6.05.
"PURCHASER" has the meaning specified in the recitals to this
Agreement.
"REFERENCE BALANCE SHEET" means the consolidated balance sheet of the
Company, dated as of September 30, 2000, included in the Financial Statements.
"REGULATION" shall mean any rule or regulation of any governmental
authority having the effect of law.
"REPRESENTATIVES" has the meaning specified in Section 6.02.
"RESERVE REPORT" means the oil and gas reserve report for the Company
prepared by the Company and reviewed by W.D. Von Gonten & Co. as of January 1,
2000.
"SCHEDULE TO" has the meaning specified in Section 2.01(a).
"SCHEDULE 14D-9" has the meaning specified in Section 2.02(a).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHARES" refers collectively to the shares of Company Common Stock and
shares of Company Preferred Stock.
"SUPERIOR PROPOSAL" has the meaning specified in Section 8.01(f).
"SURVIVING CORPORATION" has the meaning specified in Section 3.01.
"TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or
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gains taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"TAX AUTHORITY" means the IRS and any other domestic or foreign
Governmental Authority responsible for the administration of Taxes.
"TENDER AGREEMENT" has the meaning specified in the recitals to this
Agreement.
"TENDER AND VOTING AGREEMENT" has the meaning specified in the recitals
to this Agreement.
"TENDER OFFER CONDITIONS" has the meaning specified in Section 2.01(a).
"TERMINATION DATE" has the meaning specified in Section 8.01(b).
"TERMINATION FEE" has the meaning specified in Section 8.02(b).
"THIRD PARTY PROVISIONS" has the meaning specified in Section 9.06.
"TITLE FAILURE" means the occurrence or existence of any of the
following conditions: (a) the Company does not have Defensible Title to a Lease
or Well; (b) any royalties, rentals, pugh clause payments, shut-in gas payments
and other payments due with respect to a Lease have not been properly and timely
paid by or on behalf of the Company, except for payments held in suspense for
title or other reasons which are customary in the industry and which will not
result in grounds for cancellation of the Company's rights in such Lease; (c)
the Company is in default under the material terms of any Leases, farm-out
agreements or other contracts or agreements respecting a Lease or Well which
could (A) prevent the Company from receiving the proceeds of production
attributable to its interest therein, or (B) result in cancellation of the
Company's interest therein; or (d) the Company is not receiving on a current
basis the proceeds of production attributable to its Net Revenue Interest, or if
so, is required to post a bond or provide indemnity to receive such payments.
The value of any Title Failure shall be determined as follows:
(1) If the Title Failure results from the failure to have Defensible
Title, the value of the Title Failure shall equal the difference between the
Allocated Value for the affected Lease or Well and the Adjusted Allocated Value.
For purposes hereof, the Adjusted Allocated Value for a Lease or Well means the
product obtained by multiplying (x) the Allocated Value for such Lease or Well,
times (y) one (1) minus the Adjustment Ratio. For purposes hereof, the
Adjustment Ratio with respect to a Lease or Well means the ratio of: (i) the
actual Net Revenue Interest and/or Working Interest, as applicable, to which the
Company has Defensible Title, to (ii) the Net Revenue Interest and/or Working
Interest, as applicable, set forth for such Lease or Well in the Allocated Value
Schedule.
(2) If the Title Failure results from a lien, encumbrance or other
charge that is uncontested and liquidated in amount, then the value of the Title
Failure shall equal the lesser of the Allocated Value for the affected Lease or
Well and the sum necessary to be paid to the obligee to remove the Title
Failure.
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(3) If the Title Failure results from other than those described in (1)
or (2) above, the value of the Title Failure shall equal an amount determined in
good faith by Parent and Company, taking into account the Allocated Value of the
affected Lease or Well, the legal effect of the Title Failure and the probable
economic effect of the Title Failure over the life of such Lease or Well.
For purposes of the foregoing, the Allocated Value shall be the 10% discounted
present value specified in the Allocated Value Schedule for the relevant Lease
or Well.
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (i) is (or was within the six-year
period ending on the Closing Date) entered into, maintained, administered,
contributed to or required to be contributed to, as the case may be, by the
Company or any ERISA Affiliate and (ii) which covers or covered any current or
former employee, director, or consultant of the Company or any ERISA Affiliate
(with respect to their relationship with such entities).
"WELLS" means those oil, condensate or natural gas wells or wells
producing any combination thereof (whether producing, not producing, abandoned
or temporarily abandoned), water source wells, and water and other types of
injection or disposal wells and systems located on the Leases, including,
without limitation, the wells described and identified in Section 4.13(b) of the
Disclosure Letter.
"WINDROCK" means Windrock Capital, Ltd.
"WORKING INTERESTS" means that share of all of the costs, expenses,
burdens and obligations of any type or nature attributable to the Company's or
the Company Subsidiaries throughout the duration of the estates, as applicable,
interest in any Lease or Well.
ARTICLE II.
THE OFFER
SECTION 2.01. The Offer.
(a) Provided that this Agreement shall not have been terminated in accordance
with Article VIII hereof and none of the events set forth in Annex I hereto
shall have occurred or be existing (and shall not have been waived by
Purchaser), as promptly as practicable but in no event later than the fifth
Business Day following the public announcement by Parent and the Company of the
execution of this Agreement, Purchaser shall commence (within the meaning of
Rule 14d-2 under the Exchange Act) the Offer to purchase all outstanding Common
Shares at the Offer Price and all outstanding Preferred Shares at the Preferred
Offer Price. Any Shares acquired pursuant to the Offer will include, by way of
amplification and not limitation, all rights associated with such Shares,
including but not limited to all cash and non-cash dividends, distributions,
rights, other Shares or other securities issued, paid or distributed or
issuable, payable or distributable in respect thereof on or after the date of
this Agreement (including,
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without limitation, with respect to the Preferred Shares, rights to dividends
pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). As promptly
as practicable on the date of commencement of the Offer, Purchaser shall file
with the SEC a Tender Offer Statement on Schedule TO (together with all
amendments and supplements thereto, the "SCHEDULE TO") with respect to the
Offer. The Schedule TO shall contain or incorporate by reference an offer to
purchase and forms of the related letters of transmittal and other ancillary
offer documents (collectively, together with all supplements and amendments
thereto, being referred to as the "OFFER DOCUMENTS") and otherwise shall comply
in all material respects with the Exchange Act. Purchaser shall disseminate to
holders of Shares the Offer Documents to the extent required by law. The
obligation of Purchaser to accept for payment and pay for any Shares tendered
pursuant thereto will be subject only to the satisfaction of the conditions set
forth in Annex I hereto (the "TENDER OFFER CONDITIONS"). The Offer Price and the
Preferred Offer Price shall be net to the seller in cash, without interest,
subject to reduction only for any applicable withholding taxes or stock transfer
taxes payable by the seller. The Company agrees that no Shares held by the
Company or any of its subsidiaries will be tendered in the Offer.
(b) Purchaser specifically reserves the right to waive any condition of
the Offer, to increase the Offer Price and the Preferred Offer Price and to make
any other changes in the terms and conditions of the Offer; provided that
without the prior written consent of the Company, Purchaser shall not decrease
the Offer Price or the Preferred Offer Price or change the form of consideration
payable in the Offer, decrease the number of Shares sought to be purchased in
the Offer, impose additional conditions to the Offer or amend any other term of
the Offer in any manner materially adverse to the holders of Shares or reduce
the time period during which the Offer shall remain open. Subject to the terms
of the Offer and this Agreement and the satisfaction or waiver of all the Tender
Offer Conditions as of any Expiration Date, Purchaser will accept for payment
and pay for all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after such Expiration Date of the Offer. Notwithstanding
the foregoing, Purchaser shall be entitled to extend the Offer, without the
consent of the Company if at the initial expiration of the Offer, which will be
12:00 midnight eastern standard time on the twentieth Business Day following
commencement of the Offer (such date and time, as extended in accordance with
the term hereof, the "EXPIRATION DATE"), or any extension thereof, any condition
to the Offer is not satisfied or waived, and Purchaser agrees to extend the
Offer from time to time until the Termination Date if at the then scheduled
Expiration Date all of the Tender Offer Conditions have not been satisfied or
waived as permitted by this Agreement; provided, however, that Purchaser shall
not be required to extend the Offer as provided in this sentence unless, in
Parent's reasonable judgment, (i) each such condition is reasonably capable of
being satisfied; (ii) the Company is in material compliance with all of its
covenants in this Agreement; and (iii) the failure of such condition to be
satisfied shall not result from a breach by the Company of any of its covenants
and agreements contained in this Agreement. Any extension of the Offer pursuant
to this Section 2.01 shall not, without the written consent of the Company,
exceed the number of days that Purchaser reasonably believes will be necessary
so that the Tender Offer Conditions will be satisfied. In addition, Purchaser
may, without the consent of the Company, extend any then scheduled Expiration
Date of the Offer for any period required by applicable rules, regulations,
interpretations or positions of the SEC or the staff thereof applicable to the
Offer or for any period required by applicable law. If the Minimum Condition (as
defined in Annex I hereto) has been satisfied and all other conditions to the
Offer have been satisfied or waived but fewer than 90% of the Shares have been
validly tendered and not
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withdrawn as of any Expiration Date, Purchaser shall accept and purchase all of
the Shares tendered in the initial offer period and may provide for a subsequent
offering period (as contemplated by Rule 14d-11 under the Exchange Act) as long
as providing for the subsequent offering period does not require the extension
of the initial offer period under applicable rules and regulations of the SEC,
which subsequent offering period shall not exceed 20 Business Days. In addition,
the Offer Price and the Preferred Offer Price may be increased and the Offer may
be extended to the extent required by law in connection with such increase in
each case without the consent of the Company. On or prior to the dates that
Purchaser becomes obligated to accept for payment and pay for Shares pursuant to
the Offer, Parent shall provide or cause to be provided to Purchaser the funds
necessary to pay for all Shares that Purchaser becomes so obligated to accept
for payment and pay for pursuant to the Offer.
(c) Parent and Purchaser represent that the Offer Documents will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's stockholders, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Purchaser with respect to information
supplied by the Company for inclusion in the Offer Documents. The Company and
its counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents and any amendments thereto prior to the filing thereof with the
SEC. Each of Parent and Purchaser, on the one hand, and the Company, on the
other hand, agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that it shall have become false or
misleading in any material respect and Purchaser further agrees to take all
steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to stockholders of the Company, in each case, as
and to the extent required by applicable federal securities laws. Parent and
Purchaser will provide the Company and its counsel with a copy of any written
comments or telephonic notification of any oral comments Parent or Purchaser
receives from the SEC or its staff with respect to the Offer Documents promptly
after receipt thereof and will provide the Company and its counsel with a copy
of any written responses and telephonic notification of any oral responses of
Parent, Purchaser or their counsel.
SECTION 2.02. Company Actions.
(a) The Company shall file with the SEC and mail to the holders of
Shares, on the date of the filing by Parent and Purchaser of the Offer
Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any amendments or supplements thereto, the "SCHEDULE 14D-9") reflecting the
recommendation of the Board of Directors of the Company that holders of Shares
tender their Shares pursuant to the Offer, and shall disseminate the Schedule
14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule
14D-9 will set forth, and the Company hereby represents, that the Board of
Directors of the Company, at a meeting duly called and held, has unanimously, by
vote of the directors attending such meeting, (i) determined by vote of its
directors present at the meeting at which this Agreement was approved that the
transactions contemplated hereby, including each of the Offer, the Merger, the
Tender Agreement and the Tender and Voting Agreement, are fair to and in the
best interests of the Company and its stockholders,
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(ii) approved the Offer and approved and adopted this Agreement and declared its
advisability in accordance with the NRS, and (iii) recommended acceptance of the
Offer and approval of this Agreement by the Company's stockholders (if such
approval is required by applicable law). The Company further represents that,
prior to the execution hereof, Dain Rauscher has delivered to the Board of
Directors of the Company its written opinion that the consideration to be
received for the Shares pursuant to the Offer and the Merger is fair to the
Company's stockholders from a financial point of view. The Company further
represents and warrants that it has been authorized by Dain Rauscher to permit,
subject to prior review and consent by Dain Rauscher (such consent not to be
unreasonably withheld), the inclusion of the fairness opinion (or a reference
thereto) in the Offer Documents and in the Schedule 14D-9. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Board of Directors of the Company described in this Section 2.02(a).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Purchaser for inclusion in the Schedule 14D-9. Parent and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC. Each
of the Company, on the one hand, and Parent and Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 to the extent that it shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to the stockholders of the Company, in each case, as and
to the extent required by applicable federal securities law. The Company will
provide Parent, Purchaser and their counsel with a copy of any written comments
or telephonic notification of any oral comments the Company may receive from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
thereof and will provide Parent, Purchaser and their counsel with a copy of any
written responses and telephonic notification of any oral responses of the
Company or its counsel.
(c) In connection with the Offer, the Company will promptly furnish
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listing or computer list containing the
names and addresses of the record holders of the Shares as of the most recent
practicable date and shall furnish Purchaser with such additional information
(including updated lists of holders of Shares and their addresses, mailing
labels and lists of security positions and non-objecting beneficial owner lists)
and such other assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial stockholders.
SECTION 2.03. Directors.
(a) Subject to compliance with applicable law, promptly upon the
payment by Purchaser for the Shares pursuant to the Offer and from time to time
thereafter (provided,
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however, that Purchaser shall not be entitled to designate any members to the
Board of Directors of the Company without owning a majority of the Common Shares
and a majority of the Preferred Shares), Purchaser shall be entitled to
designate (i) such number of Class A directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of Class A directors on the Board of Directors of the Company
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its Affiliates (calculated on an as converted
basis) bears to the total number of Shares then outstanding (calculated on an as
converted basis), and (ii) such number of Class B directors, rounded up to the
next whole number, on the Board of Directors of the Company as is equal to the
product of the total number of Class B directors on the Board of Directors of
the Company (determined after giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of
Preferred Shares beneficially owned by Parent or its Affiliates bears to the
total number of Preferred Shares then outstanding, and the Company shall, upon
request of Purchaser, promptly take all actions necessary to cause Purchaser's
designees to be so elected, including, if necessary, seeking the resignations of
one or more existing directors, increasing the number of authorized directors or
amending its bylaws; provided, however, that prior to the Effective Time, the
Board of Directors of the Company shall have at least two members who are
directors of the Company on the date hereof and are not employees of the Company
(such members, the "INDEPENDENT DIRECTORS"), provided, however, that if no
Independent Directors remain, the other directors shall designate one person to
fill one of the vacancies who shall be neither an employee of the Company nor an
Affiliate of Parent and such person shall be deemed to be an Independent
Director for purposes of this Agreement. Upon written request of Purchaser, the
Company shall cause the designees of Purchaser to constitute the same percentage
of representation as is on the Board of Directors of the Company after giving
effect to this Section 2.03 on (i) each committee of the Board of Directors of
the Company; (ii) the Board of Directors of each Company Subsidiary; and (iii)
each committee of each such board. The provisions of this Section 2.03 shall not
limit any rights that Purchaser, Parent or any of their Affiliates may have as a
holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
(b) The Company's obligations to appoint Purchaser's designees to the
Board of Directors of the Company shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 2.03 and shall include in the Schedule 14D-9
mailed to stockholders promptly after the commencement of the Offer (or an
amendment thereof or an information statement pursuant to Rule 14f-1 if
Purchaser has not theretofore designated directors or timely provided the
requisite information) such information with respect to the Company and its
officers and directors as is required under such Section and Rule in order to
fulfill its obligations under this Section 2.03. Parent and Purchaser will
supply any information with respect to itself and its officers, directors and
Affiliates required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 2.03 and prior to the Effective Time, any amendment or
termination of this Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or Purchaser hereunder, any
waiver of any condition or any of the Company's rights hereunder or
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other action by the Company hereunder adversely affecting the rights of the
stockholders of the Company other than Purchaser and its Affiliates, will
require the concurrence of the Independent Directors.
ARTICLE III.
THE MERGER
SECTION 3.01. The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the NRS, at the Effective Time,
Purchaser shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation (sometimes referred to herein as the
"SURVIVING CORPORATION").
SECTION 3.02. Effective Time; Closing.
(a) The closing of the Merger (the "CLOSING") shall take place at 10:00
a.m. on the second Business Day after satisfaction or waiver of the conditions
set forth in Article VII, at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1900 Pennzoil Place, South Tower, 711 Louisiana Street, Houston, Texas
77002, unless another date, time or place is agreed to in writing between Parent
and the Company. The date on which the Closing occurs is referred to in this
Agreement as the "CLOSING DATE."
(b) On the Closing Date or as promptly as practicable thereafter, the
parties hereto shall cause the Merger to be consummated by filing Articles of
Merger, in accordance with Section 92A.200 of the NRS, with the Nevada Secretary
of State in such form as required by, and executed in accordance with the
relevant provisions of the NRS (the "ARTICLES OF MERGER") (the time of such
filing (or such later time as is specified in such Articles of Merger as agreed
between Parent and the Company) being the "EFFECTIVE TIME").
SECTION 3.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the NRS
(except as provided herein). Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of the Company and Purchaser shall become the
debts, liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.
SECTION 3.04. Articles of Incorporation; Bylaws. At the Effective Time,
the Articles of Incorporation and Bylaws of the Surviving Corporation shall be
amended to be identical to the Articles of Incorporation and Bylaws,
respectively, of Purchaser as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation shall be "OEI Resources,
Inc."), in each case until duly amended in accordance with applicable law.
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SECTION 3.05. Directors and Officers.
(a) The directors of Purchaser immediately prior to the Effective Time
shall be the directors of the Surviving Corporation at the Effective Time, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation until his or her respective successor is duly elected
or appointed and qualified.
(b) The officers of Purchaser immediately prior to the Effective Time
shall be the officers of the Surviving Corporation at the Effective Time, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation until his or her respective successor is duly elected
or appointed and qualified.
SECTION 3.06. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or any shares of capital stock of Purchaser:
(a) Capital Stock of Purchaser. Each issued and outstanding share of
capital stock of Purchaser shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each Share
that is owned by the Company or by any wholly-owned Subsidiary of the Company
and each Share that is owned by Parent, Purchaser or any other wholly-owned
Subsidiary of Parent shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 3.06(e),
each issued and outstanding share of Company Common Stock (other than such
shares to be canceled in accordance with Section 3.06(b)) shall be cancelled and
terminated and shall represent solely the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price. As of the Effective
Time, all such Shares shall no longer be outstanding and shall be automatically
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Offer Price, without interest.
(d) Conversion of Company Preferred Stock. Subject to Section 3.06(e),
each issued and outstanding share of Company Preferred Stock (other than such
shares to be canceled in accordance with Section 3.06(b)) shall be cancelled and
terminated and shall represent solely the right to receive from the Surviving
Corporation in cash, without interest, an amount equal to the Preferred Offer
Price. As of the Effective Time, all such Shares shall no longer be outstanding
and shall be automatically canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Preferred Offer
Price, without interest.
(e) Shares of Dissenting Stockholders.
(i) Notwithstanding any provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the
Effective Time and which are
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held by holders of Shares who shall have not voted in favor of
the Merger or consented thereto in writing and who shall have
demanded properly in writing payment of the fair market value
of such Shares in accordance with Section 92A.420 of the NRS
(collectively, the "DISSENTING SHARES") shall be cancelled and
terminated and shall represent solely the right to receive
payment from the Surviving Corporation of the fair market
value of such Shares held by them in accordance with the
provisions of the NRS, except that all Dissenting Shares held
by holders of Shares who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights for an
appraisal of such shares under the NRS shall thereupon be
deemed to have been cancelled and terminated, as of the
Effective Time, and shall represent solely the right to
receive the Offer Price as provided in Section 3.06(c) or the
Preferred Offer Price as provided in 3.06(d), as applicable,
upon surrender in the manner provided in Section 3.07, of the
certificate or certificates that formerly evidenced such
Shares.
(ii) The Company shall give to Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of
such demands, and any other instruments served pursuant to the
NRS and received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to
demands for payment of fair market value under the NRS. The
Company shall not, except with the prior written consent of
Parent, make any payment with respect to any such demands, or
offer to settle, or settle, any such demands. Any amount
payable to any holder of Shares exercising dissenters' rights
shall be paid solely by the Surviving Corporation out of its
own funds.
SECTION 3.07. Exchange of Company Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as agent for the holders of the Shares in
connection with the Merger (the "PAYING AGENT") to receive in trust the funds to
which holders of the Shares shall become entitled pursuant to Sections 3.06(c)
and 3.06(d). From time to time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent cash in amounts and
at times necessary for the prompt payment of the Offer Price as provided in
Section 3.06(c) and the Preferred Offer Price as provided in Section 3.06(d)
upon surrender of certificates representing Shares as provided herein. All
interest earned on such funds shall be paid to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "COMPANY CERTIFICATES"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Company Certificates shall pass, only upon delivery of the Company
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for the Offer
Price as provided in Section 3.06(c) or the Preferred Offer Price as provided in
Section 3.06(d), as the case may be. Upon surrender of a Company Certificate for
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cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Company Certificate shall be entitled to receive in exchange
therefor the amount of cash into which the Shares theretofore represented by
such Company Certificate shall have been converted pursuant to Sections 3.06(c)
or 3.06(d), as the case may be, and the Company Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that is
not registered in the transfer records of the Company, payment may be made to a
Person other than the Person in whose name the Company Certificate so
surrendered is registered, if such Company Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the Person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of such Company Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.07, each Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore represented
by such Company Certificate shall have been converted pursuant to Sections
3.06(c) or 3.06(d), as the case may be. No interest will be paid or will accrue
on the cash payable upon the surrender of any Company Certificate.
(c) No Further Ownership Rights in Shares; Transfer Books. All cash
paid upon the surrender of Company Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Company
Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Company Certificates are presented to the Surviving Corporation or the
Paying Agent for any reason, they shall be canceled and exchanged as provided in
this Article III.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Company Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Offer Price or the Preferred Offer Price, as
applicable, payable upon due surrender of their Company Certificates, without
any interest thereon. Notwithstanding the foregoing, none of Parent, Purchaser,
the Company or the Paying Agent shall be liable to any Person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Company Certificates shall not have
been surrendered immediately prior to such date on which any payment pursuant to
this Article III would otherwise escheat to or become the property of any
Governmental Authority, the cash payment in respect of such Company Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any Person
previously entitled thereto.
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(e) Lost, Stolen or Destroyed Certificates. In the event any Company
Certificates evidencing Shares shall have been lost, stolen or destroyed, the
Paying Agent shall pay to such holder the Offer Price required pursuant to
Section 3.06(c) or the Preferred Offer Price required pursuant to Section
3.06(d), as applicable, in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit, which shall include indemnities
which are acceptable to Parent, of that fact by the holder thereof with such
assurances as the Paying Agent, in its discretion and as a condition precedent
to the payment of the Offer Price or the Preferred Offer Price, as applicable,
may reasonably require of the holder of such lost, stolen or destroyed Company
Certificates.
(f) Withholding Taxes. Parent and Purchaser shall be entitled to deduct
and withhold, or cause the Paying Agent to deduct and withhold, from the
consideration otherwise payable to a holder of Shares pursuant to the Offer or
the Merger any stock transfer taxes and such amounts as are required under the
Code, or any applicable provisions of state, local or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding were made.
SECTION 3.08. Stock Options and Warrants.
(a) Options.
(i) Each outstanding and unexercised option to purchase shares of
Company Common Stock ("COMPANY OPTION") pursuant to each stock
option and incentive plan of or sponsored by the Company (the
"COMPANY OPTION PLANS"), that is fully vested and exercisable
as of the consummation of the Offer shall be converted into an
obligation of the Company to pay, and a right of the holder
thereof to receive in full satisfaction of such Option, cash
in an amount in respect thereof equal to the product of (A)
the excess, if any, of the Offer Price over the exercise price
thereof and (B) the number of shares of Company Common Stock
subject to such Company Option (such payment to be net of
withholding taxes) (the "COMPANY OPTION PAYMENTS"). The
Company shall take all actions necessary to cause the
Company's employees and directors to consent, to the extent
required, to the transactions contemplated by this Section
3.08(a) no later than immediately prior to the time Purchaser
accepts Shares for payment pursuant to the Offer. Except as
may be otherwise agreed to by Parent or Purchaser and the
Company, as of the Effective Time, (A) the Company Option
Plans shall terminate, (B) the provisions in any other plan,
program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the
Company or any of the Company Subsidiaries shall be deleted
and (C) no holder of Company Options or any participant in the
Company Option Plans or any other plans, programs or
arrangements shall have any rights thereunder to acquire any
equity securities of the Company, the Surviving Corporation or
any subsidiary thereof. All Company Options outstanding as of
the date of this Agreement, the price at which they are
exercisable and the vesting schedule therefore are listed on
Section 3.08(a) of the Disclosure Letter. The Company and
Parent agree that the
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Company Option Payments are the sole payments that will be
made with respect to or in relation to the Company Options.
(ii) With respect to each Company Option granted pursuant to the
terms of a Company Option Plan that is not vested and
exercisable as of the consummation of the Offer, the Company
or the Surviving Corporation, as applicable, shall make the
payment of the amount determined pursuant to Section
3.08(a)(i) above at the time each such unvested Company Option
would otherwise have become vested and exercisable subject to
the satisfaction of the terms and conditions set forth in the
applicable option award agreement and the Company Option Plan
pursuant to which such Company Option was granted, or at such
earlier date as may be determined by Parent in its sole and
absolute discretion.
(b) Warrants. At the Effective Time, each warrant to purchase shares of
Company Common Stock, that is then outstanding and exercisable (each a "COMPANY
WARRANT"), shall be cancelled and converted into the right to receive cash in an
amount equal to the product of (A) the excess, if any, of the Offer Price over
the exercise price of such Company Warrant and (B) the number of Shares
previously subject to such Company Warrant immediately prior to its cancellation
(such payment to be net of withholding taxes) (the "COMPANY WARRANT PAYMENTS").
The Company shall take all actions necessary to cause the holders of the Company
Warrants to consent, to the extent required, to the transactions contemplated by
this Section 3.08(b) no later than immediately prior to the time Purchaser
accepts Shares for payment pursuant to the Offer. All Company Warrants
outstanding as of the date of this Agreement, the date or dates when they become
exercisable if not exercisable on the date of this Agreement and the price at
which they are exercisable are listed on Section 3.08(b) of the Disclosure
Letter. The Company and Parent agree that the Company Warrant Payments are the
sole payments that will be made with respect to or in relation to the Company
Warrants.
SECTION 3.09. Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
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ARTICLE
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that:
SECTION 4.01. Organization, Authority and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it is currently conducted and as
it is now proposed to be conducted. The Company has all necessary power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The Company is duly
licensed or qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary,
except for such failures to be so licensed or qualified and in good standing
that would not have a Material Adverse Effect. Complete and correct copies of
the Articles of Incorporation and Bylaws of the Company, each as in effect on
the date hereof, have been made available by the Company to Parent. The Company
is not in default in any respect in the performance, observation or fulfillment
of any provision of its Articles of Incorporation or Bylaws. The execution and
delivery of this Agreement by the Company, the performance by the Company of its
obligations hereunder and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby (other than, with respect to the Merger,
obtaining approval of the Company's stockholders and the filing and recordation
of appropriate merger documents as required by the NRS). The Company hereby
represents that the Board of Directors of the Company, at a meeting duly called
and held, has unanimously, by vote of the directors attending such meeting, (i)
determined by vote of its directors present at the meeting at which this
Agreement was approved that the transactions contemplated hereby, including each
of the Offer, the Merger, the Tender Agreement and the Tender and Voting
Agreement are fair to and in the best interests of the Company and its
stockholders, (ii) approved the Offer and approved and adopted this Agreement
and declared its advisability in accordance with the NRS, and (iii) recommended
acceptance of the Offer and approval of this Agreement by the Company's
stockholders (if such approval is required by applicable law). This Agreement
has been duly executed and delivered by the Company, and (assuming due
authorization, execution and delivery by Parent and Purchaser) this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
SECTION 4.02. Capital Stock of the Company; Ownership of the Shares.
The authorized capital stock of the Company consists of 25,000,000 shares of
Company Common Stock, 10,000,000 shares of Class B common stock, par value $.01
per share ("CLASS B COMPANY COMMON STOCK") and 10,000,000 shares of preferred
stock, par value $.01 per share, of which 5,000,000 shares have been designated
and issued as Company Preferred Stock. As of the date of this Agreement, (i)
6,724,939 shares of Company Common Stock, (ii) no shares of Company Class B
Common Stock, and (iii) 2,991,465 shares of Company Preferred Stock are issued
and outstanding, all of which (a) are duly authorized, validly issued, fully
paid and nonassessable and
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(b) were issued in compliance with all applicable state and federal securities
laws. No shares of the Company's capital stock are held in the treasury of the
Company. None of the issued and outstanding shares of the Company's capital
stock were issued in violation of any preemptive rights. Except as set forth in
Section 4.02 of the Disclosure Letter and except for the dividends to be issued
on the Company Preferred Stock that are payable in shares of Company Preferred
Stock pursuant to the Company's Articles of Incorporation and Section 4.17 of
the Preferred Stock Purchase Agreement, there are no (i) options, warrants,
convertible securities, subscriptions or other rights, agreements, arrangements
or commitments of any character relating to the capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or any
other interest in, the Company, (ii) outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of the Company's
capital stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person or (iii)
outstanding contractual obligations to register any shares of the Company's
capital stock or instruments convertible or exchangeable into shares of the
Company's capital stock. Section 4.02 of the Disclosure Letter sets forth all
voting trusts, stockholder agreements, proxies or other agreements in effect
with respect to the voting or transfer of any shares of the Company's capital
stock binding upon the Company or to which the Company is a party, except those
contemplated or required by this Agreement, and to the Knowledge of the Company
no such other voting trusts, stockholder agreements, proxies or other agreements
with respect to the voting or transfer of any shares of the Company's capital
stock are in effect.
SECTION 4.03.Company Subsidiaries.
(a) Section 4.03 of the Disclosure Letter sets forth a list of all
Company Subsidiaries, listing for each Company Subsidiary its name, type of
entity, the jurisdiction and date of its incorporation or organization, its
authorized capital stock, partnership capital or equivalent, the number and type
of its issued and outstanding shares of capital stock, partnership interests or
similar ownership interests and the current ownership of such shares,
partnership interests or similar ownership interests.
(b) Other than the Company Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or other entities in
which the Company owns, of record or beneficially, any direct or indirect equity
or other interest, or any right (contingent or otherwise) to acquire the same.
Other than Company Subsidiaries, there are no partnerships or joint venture
agreements or other business entities in which the Company or any Company
Subsidiary owns any equity interest.
(c) Each Company Subsidiary that is a corporation: (i) is a corporation
duly organized and validly existing under the laws of its jurisdiction of
incorporation, (ii) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by such Company
Subsidiary and to carry on its business as it is currently conducted and as it
is now proposed to be conducted by such Company Subsidiary and (iii) is duly
licensed or qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary,
except for such failures to be so licensed or qualified and in good standing
that would not have a Material Adverse Effect. Each Company Subsidiary that is
not a
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corporation: (i) is duly organized and validly existing under the laws of its
jurisdiction of organization, (ii) has all necessary power and authority to own,
operate or lease the properties and assets owned, operated or leased by such
Company Subsidiary and to carry on its business as it is currently conducted and
as it is now proposed to be conducted by such Company Subsidiary and (iii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except for such
failures to be so licensed or qualified and in good standing that would not have
a Material Adverse Effect. No Company Subsidiary is in default in any respect in
the performance, observation or fulfillment of any provision of its Articles of
Incorporation or Bylaws (or similar organizational documents).
(d) Except as set forth in Section 4.03 of the Disclosure Letter, all
the outstanding shares of capital stock of each Company Subsidiary are validly
issued, fully paid and nonassessable and are owned by the Company, whether
directly or indirectly, free and clear of all Encumbrances, except Permitted
Encumbrances.
(e) There are no (i) options, warrants, convertible securities,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the capital stock of any Company Subsidiary or obligating
the Company or any Company Subsidiary to issue or sell any shares of capital
stock of, or any other interest in, any Company Subsidiary nor (ii) outstanding
contractual obligations of any Company Subsidiary to repurchase, redeem or
otherwise acquire Common Stock or any shares of outstanding capital stock of the
Company or any Company Subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any other Person.
(f) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of, or any other interests in, any
Company Subsidiary.
(g) True and complete copies of the charter and by-laws (or similar
organizational documents), in each case as in effect on the date hereof, of each
Company Subsidiary have been made available by the Company to Parent.
SECTION 4.04. Corporate Books and Records. The minute books of the
Company and the Company Subsidiaries that are corporations contain accurate
records of all meetings and accurately reflect all other actions taken by the
shareholders, Boards of Directors and all committees of the Boards of Directors
of the Company and the Company Subsidiaries. Complete and accurate copies of all
such minute books of the Company and each Company Subsidiary have been made
available by the Company to Parent.
SECTION 4.05. No Conflict. Except as disclosed in Section 4.05 of the
Disclosure Letter, assuming that all consents, approvals, authorizations and
other actions described in Section 4.06 have been obtained and all filings,
approvals and notifications listed in Section 4.06 of the Disclosure Letter have
been made or obtained, the execution, delivery and performance of this Agreement
by the Company do not and will not (a) violate or conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws or similar
organizational documents of the Company or any Company Subsidiary, (b) violate
or conflict with any Law or
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Governmental Order applicable to the Company or any Company Subsidiary or any of
their respective assets and properties, or (c) conflict with, result in any
violation or breach of or constitute a default (or an event which, with the
giving of notice or lapse of time, or both, would become a default) under,
require any notice or consent under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in any loss
of any benefit, the triggering of any payment by, or the increase in any other
obligation of, the Company or any Company Subsidiary or the creation of any
Encumbrance on any assets or properties of the Company or any Company Subsidiary
pursuant to any Material Contract (as defined in Section 4.12) or any other
material license, permit, franchise or other instrument or arrangement to which
the Company or any Company Subsidiary is a party or by which any of them, the
Company Common Stock or any of such assets or properties is bound or affected,
except for such conflicts, violations, breaches, defaults or other occurrences
which would not (i) have a Material Adverse Effect, (ii) impair, in any material
respect, the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or materially delay the consummation of any of the
transactions contemplated hereby.
SECTION 4.06. Governmental Consents and Approvals. Except as disclosed
in Section 4.06 of the Disclosure Letter, the execution, delivery and
performance of this Agreement by the Company and compliance by the Company with
any of the provisions hereof do not and will not require any consent, waiver,
approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except (a) the requirements of the
Securities Act, the Exchange Act, state securities or blue sky laws, (b) the
filing and recordation of appropriate merger documents as required by the NRS,
(c) any other consent, approval, authorization, filing or notice the failure of
which to make or obtain would not (i) have a Material Adverse Effect, (ii)
impair, in any material respect, the ability of the Company to perform its
obligations under this Agreement, or (iii) prevent or materially delay the
consummation of any of the transactions contemplated hereby and (d) any consent,
approval, authorization, filing or notice required as a result of the identity
of Parent.
SECTION 4.07. SEC Reports, Financial Information, Books and Records.
(a) The Company has filed with the SEC and has heretofore made
available to Parent true and complete copies of, each form, registration
statement, report, schedule, proxy or information statement and other
information statement and other document (including Exhibits and amendments
thereto), including without limitation its Annual Reports to Stockholders
incorporated by reference in certain of such reports, required to be filed by it
or its predecessors with the SEC since December 31, 1996 under the Securities
Act or the Exchange Act (collectively, the "COMPANY SEC REPORTS"). As of the
respective dates such Company SEC Reports were filed or, if any such Company SEC
Reports were amended, as of the date such amendment was filed, each of the
Company SEC Reports, including without limitation any financial statements or
schedules included therein, (a) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the applicable rules and regulations promulgated thereunder, and (b)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(b) Each of the audited consolidated balance sheets of the Company for
each of the three fiscal years ended as of December 31, 1997, December 31, 1998
and December 31, 1999, and the related audited consolidated statements of
operations and cash flows of the Company, together with all related notes and
schedules thereto, accompanied by the reports thereon of the Company's
accountants (collectively referred to herein as the "FINANCIAL Statements")
included in the Company SEC Reports and (ii) the unaudited consolidated balance
sheet of the Company as of September 30, 2000, and the related consolidated
statement of operations, together with all related notes and schedules thereto
(collectively referred to herein as the "INTERIM FINANCIAL STATEMENTS") included
in the Company SEC Reports (i) were prepared from, and are in accordance with,
the books of account and other financial records of the Company, (ii) present
fairly the consolidated financial position of the Company and the Company
Subsidiaries as of the dates thereof and the consolidated results of operations
and cash flows of the Company and the Company Subsidiaries for the periods
covered thereby, subject, in the case of unaudited financial statements, to
normal year-end adjustments, (iii) have been prepared in accordance with U.S.
GAAP applied on a basis consistent with the past practices of the Company and
(iv) comply in all material respect with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto.
(c) The books of account and other financial records of the Company and
the Company Subsidiaries (i) are complete and correct, and do not contain or
reflect any material inaccuracies or discrepancies and (ii) have been maintained
in accordance with good business and accounting practices and in accordance with
U.S. GAAP.
SECTION 4.08. No Undisclosed Liabilities. There are no Liabilities of
the Company or any Company Subsidiary other than Liabilities (a) reflected or
reserved against on the Reference Balance Sheet or reflected in the notes
thereto or (b) incurred since the date of the Reference Balance Sheet in the
ordinary course of the business, consistent with past practice, of the Company
and the Company Subsidiaries, which in the aggregate do not exceed
$2,000,000.00. The Company and the Company Subsidiaries have no Knowledge of any
basis for the assertion of any other claims or liabilities of any material
nature or in any material amount.
SECTION 4.09. Absence of Certain Changes, Events and Conditions. Since
the date of the Reference Balance Sheet, the business of the Company and the
Company Subsidiaries has been conducted in all material respects in the ordinary
course, consistent with past practice, and, since such date, there has not been
(a) individually or in the aggregate, any Material Adverse Effect, (b) any
material change by the Company or any Company Subsidiary in its accounting
methods, principles or practices, (c) any declaration, setting aside or payment
of any dividend or distribution in respect of the Company Common Stock or any
redemption, purchase or other acquisition of any of its securities, (d) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the ordinary course of business
consistent with past practice or (e) the occurrence of the other events set
forth in Section 6.01(b).
SECTION 4.10. Litigation. Except as disclosed in Section 4.10 of the
Disclosure Letter, there is no material Action pending or, to the Knowledge of
the Company, threatened against or directly affecting the Company, any Company
Subsidiary or any Property of the
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Company or any Company Subsidiary or any of the directors or officers of the
Company or any Company Subsidiary in their capacity as such, before any
Governmental Authority. There are no outstanding Governmental Orders against the
Company or any Company Subsidiary or any Property of the Company or any Company
Subsidiary that would reasonably be expected to (a) have a Material Adverse
Effect, (b) impair, in any material respect, the ability of the Company to
perform its obligations under this Agreement, or (c) prevent or materially delay
the consummation of the transactions contemplated hereby. Neither the Company
nor any Company Subsidiary is aware of any facts or circumstances which would
give rise to any Action or right to initiate any Action. Neither the Company nor
any Company Subsidiary is subject to any outstanding Governmental Order.
SECTION 4.11. Compliance with Laws. Each of the Company and the Company
Subsidiaries holds all material approvals, licenses, permits, registrations and
similar type authorizations necessary for the lawful conduct of their respective
businesses, as now conducted, and such businesses are not being, and neither the
Company nor any Company Subsidiary has received any notice from any Governmental
Authority or Person that any such business has been or is being conducted in
violation of any law, ordinance or regulation, including without limitation any
law, ordinance or regulation relating to occupational health and safety, and
have conducted and continues to conduct their businesses in compliance in all
material respects with all Laws and Governmental Orders applicable to the
Company or any Company Subsidiary.
SECTION 4.12. Material Contracts.
(a) As of the date hereof, Section 4.12(a) of the Disclosure Letter
lists each contract, lease, indenture, agreement, arrangement or understanding
to which the Company or any of the Company Subsidiaries is subject that is of a
type that would be required to be included as an Exhibit to a Registration
Statement on Form S-1 pursuant to the rules and regulations of the SEC if such
registration statement was filed by the Company (collectively, the "MATERIAL
CONTRACTS").
(b) Each of the Material Contracts listed on Section 4.12(a) of the
Disclosure Letter (i) are in full force and effect and are the valid and legally
binding obligations of the parties thereto and are enforceable in accordance
with their respective terms; (ii) neither the Company nor any such Company
Subsidiary nor, to the Knowledge of the Company, any other party to such
Material Contract is in violation, breach or default of any material provision
thereof, including with respect to payments or otherwise; (iii) no party to any
Material Contract has given notice of any action to terminate, cancel, rescind
or procure a judicial reformation thereof; and (iv) no Material Contract
contains any provision that prevents the Company or any Company Subsidiary from
owning, managing and operating the Leases of the Company or any Company
Subsidiary in accordance with historical practices.
(c) As of the date of this Agreement, (i) there are no material
outstanding calls for payment that are due or that the Company or any Company
Subsidiary are committed to make that have not been made; (ii) there are no
material operations with respect to which the Company or any Company Subsidiary
have become a non-consenting party; and (iii) there are no commitments for the
material expenditure of funds for drilling or other capital projects other than
projects with respect to which the operator is not required under the applicable
operating agreement to seek consent.
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SECTION 4.13. Title to Property.
(a) Except as would not have a Material Adverse Effect or except as to
those matters set forth in Section 4.13(a) of the Disclosure Letter, the Company
or a Company Subsidiary, as the case may be, has Defensible Title to the
Property, free and clear of Encumbrances, other than Permitted Encumbrances.
(b) Section 4.13(b) of the Disclosure Letter sets forth a brief
description of all Leases and Wells. With respect to any Lease or Well,
"DEFENSIBLE TITLE" shall mean:
(i) such record and beneficial right, title and interest
in and to such Lease or Well that:
(A) entitles the Company or the Company
Subsidiary, as applicable, to receive a Net
Revenue Interest in such Lease or Well that
is equal to or greater than the Net Revenue
Interest set forth in Section 4.13(b) of the
Disclosure Letter therefor, without
reduction, suspension or diminution
throughout the duration of the estate
constituting such Property, except (x) as
shown in Section 4.13(b) of the Disclosure
Letter or as provided in any Lease or other
agreement filed as public record as of the
date hereof, (y) as permitted or required by
Section 6.01, changes or adjustments that
result from the establishment of units, the
entry into of pooling or unitization
agreements after the date hereof, changes in
existing units (or the participating areas
therein) made after the date hereof
voluntarily or by order of the appropriate
regulatory agency having jurisdiction, or
(z) that result from or are incidental to
Operations conducted as permitted or
required by Section 6.01;
(B) obligates or subjects the Company or the
Company Subsidiary, as applicable, to bear a
Working Interest in such Well or Lease that
is no greater than the Working Interest set
forth in Section 4.13(b) of the Disclosure
Letter therefor, without increase throughout
the duration of the estate constituting such
Property, except (w) as shown in Section
4.13(b) of the Disclosure Letter or as
provided in any Lease or other agreement
filed as public record as of the date
hereof, (x) for any changes or adjustments
that are caused by contribution requirements
provided for under provisions similar to
those contained in an operating agreement,
(y) as permitted or required by Section
6.01, changes or adjustments that result
from the establishment of units, the entry
into of pooling or unitization agreements
after the date hereof, changes in existing
units (or the participating areas therein)
made after the date hereof voluntarily or by
order of the appropriate regulatory agency
having jurisdiction, after the date hereof
or (z) that result from or are incidental to
Operations conducted as permitted or
required by Section 6.01; and
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(ii) (A) the Leases are valid and enforceable and
grant the rights purported to be granted
thereby and all rights necessary thereunder
for the current Operations of the Company or
the Company Subsidiary, as applicable, (B)
neither the Company nor the Company
Subsidiary that is party to each such Lease,
nor, to the Knowledge of the Company, any
other party to any such Lease, is in breach
or default thereunder in any material
respect, no notice of default to termination
thereunder has been given or received by the
Company or any Company Subsidiaries, and no
event has occurred which would, with the
giving of notice or passage of time or both,
constitute a breach or default thereunder or
permit termination, modification or
acceleration thereunder that could
reasonably be expected to result in a
Material Adverse Effect, and (C) (i) there
are no express contractual obligations to
engage in continuous development operations
in order to maintain any producing Property
in force and effect; (ii) there are no
provisions applicable to the Properties that
increase the royalty percentage of the
lessor thereunder; and (iii) none of the
Properties are limited by terms fixed by a
certain number of years (other than primary
terms under Leases).
(c) Section 4.13(c) of the Disclosure Letter contains a description of
the Easements. With respect to Easements and related Equipment, Defensible Title
shall mean record or beneficial right, title and interest in the applicable
Easement sufficient to enable the Company or any Company Subsidiary to conduct
its Operations as currently conducted with respect thereto, without material
interference by any other Person, and, to the Knowledge of the Company or the
Company Subsidiary, as applicable, all material Easements are valid and
enforceable and grant the rights purported to be granted thereby and all rights
necessary for the current Operations of such business without material
interference by any other Person.
(d) Section 4.13(d) of the Disclosure Letter sets forth a brief
description of each parcel of real property comprising the Fee Mineral
Interests. With respect to Fee Mineral Interests, Defensible Title means all the
record and beneficial right, title and interest in and to each such parcel of
land, respectively, that was conveyed or granted to the Company or any Company
Subsidiary, or their respective predecessors-in-title, in the instrument of
conveyance referred to and described by volume or book and page in Section
4.13(d) of the Disclosure Letter, as each instrument of conveyance is recorded
in the county or parish where the land is located.
(e) Section 4.13(e) of the Disclosure Letter sets forth a brief
description of each parcel of Other Real Property. With respect to Other Real
Property, Defensible Title shall mean the right of quiet enjoyment of all such
real property, whether leased or fee, for the term of any applicable agreement
relating thereto, and all such interests in Other Real Property are valid and
enforceable and grant the rights purported to be granted thereby and all rights
necessary thereunder for the current Operations of such business without
material interference.
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(f) In evaluating the significance of any fact, circumstance or
condition for purposes of determining Defensible Title, due consideration shall
be given to the length of time that the particular Property has been producing
Hydrocarbons and whether such fact, circumstance or condition is of the type
expected to be encountered in the area involved and is usual and customarily
acceptable to reasonable and prudent operators, interest owners, and/or
purchasers engaged in the business of the ownership, development and operation
of oil and gas properties with knowledge of such facts and appreciation of their
legal significance.
SECTION 4.14. Intellectual Property. The Company and the Company
Subsidiaries own the entire right, title and interest, free and clear of any
Encumbrance, in and to, or are licensed to use, or otherwise have the right to
use, all patents and patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights, trade dress, logos,
domain names, corporate names and goodwill associated therewith; and copyrights,
technology, trade secrets know-how, processes, confidential business
information, seismic rights and other proprietary intellectual property rights
and computer software ("INTELLECTUAL PROPERTY") currently used in the conduct of
the business of the Company and the Company Subsidiaries, except where the
failure to so own, be licensed or otherwise have the right to use such
Intellectual Property would not, individually or in the aggregate, have a
Material Adverse Effect. No Person has notified either the Company or any
Company Subsidiary that their use of the Intellectual Property infringes on the
rights of any Person, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of the
Company and the Company Subsidiaries that could have a Material Adverse Effect,
and, to the Company's Knowledge, no Person is infringing on any right of the
Company or any Company Subsidiary with respect to and no action is pending or
threatened which challenges and neither the Company nor the Company's
Subsidiaries are aware of any fact which, individually or in the aggregate,
could reasonably be argued to detrimentally affect the validity, enforceability,
use or ownership of any such Intellectual Property. No claims are pending or, to
the Company's Knowledge, threatened that any activity of the Company or any
Company Subsidiary now conducted or presently contemplated to be conducted,
infringes, violates or otherwise adversely affects the intellectual property or
other proprietary rights of any Person. The consummation of the transactions
contemplated by this Agreement will not have a Material Adverse Effect on any
right to or the use of the any Intellectual Property.
SECTION 4.15. Employee Benefit Matters.
(a) Pension Plans.
(i) No "accumulated funding deficiency" (for which an
excise tax is due or would be due in the absence of a
waiver) as defined in Section 412 of the Code or as
defined in Section 302(a)(2) of ERISA, whichever may
apply, has been incurred with respect to any Pension
Plan with respect to any plan year, whether or not
waived. Neither the Company nor any ERISA Affiliate
has failed to pay when due any "required
installment," within the meaning of Section 412(m) of
the Code and Section 302(e) of ERISA, whichever may
apply, with respect to any Pension Plan. Neither the
Company nor any ERISA Affiliate is subject to any
lien imposed under Section 412(n) of the Code or
Section 302(f) or 4068 of ERISA,
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whichever may apply, with respect to any Pension
Plan. All "benefit liabilities" within the meaning of
Section 4001(a)(16) of ERISA, are fully funded as of
the Closing Date with respect to each Pension Plan as
determined on a termination basis using the assumed
interest rate set forth in each Pension Plan or
otherwise required by ERISA or the Code. Neither the
Company nor any ERISA Affiliate is required to
provide security to a Pension Plan under Section
401(a)(29) of the Code.
(ii) No Pension Plan is "top heavy" within the meaning of
Section 416 of the Code.
(iii) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which is
intended to be qualified and tax exempt under the
provisions of Code Sections 401(a) and 501(a) or 408,
as applicable, is so qualified and, except for
Pension Plans which are qualified under Code Section
408, each such plan has been so determined by the
Internal Revenue Service pursuant to a favorable
determination letter considering the Tax Reform Act
of 1986, as amended, or application for such
determination has been made within the applicable
remedial amendment period and is currently pending.
(iv) Each Pension Plan, related trust agreement, annuity
contract or other funding instrument is in material
compliance with its terms and, both as to form and in
operation, with the requirements prescribed by any
and all Laws which are applicable to such Pension
Plan, including without limitation ERISA and the
Code.
(v) The Company or an ERISA Affiliate has paid all
premiums (and interest charges and penalties for late
payment, if applicable) due to the PBGC with respect
to each Pension Plan which is covered by Title IV of
ERISA for each plan year thereof for which such
premiums are required. Neither the Company nor any
ERISA Affiliate has engaged in, or is a successor or
affiliate of an entity that has engaged in, a
transaction which is described in Section 4069 or
Section 4212(c) of ERISA. There has been no
unreported "reportable event" (as defined in Section
4043(b) of ERISA and the PBGC regulations under such
Section) requiring notice to the PBGC with respect to
any Pension Plan. No filing has been made by the
Company or any ERISA Affiliate with the PBGC, and no
proceeding has been commenced by the PBGC, to
terminate any Pension Plan. No condition exists and
no event has occurred that could constitute grounds
for the termination of any Pension Plan by the PBGC,
or which could reasonably be expected to result in
liability of the Company or any ERISA Affiliate to
the PBGC with respect to any Pension Plan, other than
liabilities for premium payments. Neither the Company
nor any ERISA Affiliate has, at any time, (1) ceased
operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (2)
withdrawn as a substantial employer so as to become
subject to the
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provisions of Section 4063 of ERISA, (3) ceased
making contributions on or before the Closing Date to
any Pension Plan subject to Section 4064(a) of ERISA
to which the Company or any ERISA Affiliate made
contributions during the six years prior to the
Closing Date, or (4) otherwise incurred any liability
to the PBGC, including the creation of a lien against
any property of the Company or any ERISA Affiliate
pursuant to Section 4068 of ERISA.
(b) Multiemployer Plans. There are no Multiemployer Plans, and neither
the Company nor any ERISA Affiliate has ever maintained, contributed to, or
participated or agreed to participate in any Multiemployer Plan. Neither the
Company nor any ERISA Affiliate has ever withdrawn, partially or completely, or
instituted steps to withdraw, whether partially or completely, from any
Multiemployer Plan, nor has any event occurred which could enable a
Multiemployer Plan to give notice of and demand payment of any withdrawal
liability with respect to the Company or any ERISA Affiliate.
(c) Welfare Plans.
(i) Each Welfare Plan is in material compliance with its
terms and, both as to form and operation, with the
requirements prescribed by any and all Laws which are
applicable to such Welfare Plan, including without
limitation ERISA and the Code.
(ii) An estimate of the liabilities of the Company and any
ERISA Affiliates for providing retiree life and
medical benefits coverage to active and retired
employees of the Company and any ERISA Affiliates has
been made and is reflected on the appropriate balance
sheet and books and records according to Statement of
Financial Accounting Standards No. 106. The Company
or any ERISA Affiliate has the right to modify or
terminate each Welfare Plan that provides coverage or
benefits for either or both retired and active
employees and/or their beneficiaries.
(iii) Each Welfare Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated
in material compliance with provisions of Part 6 and
7 of Title I, Subtitle B of ERISA and Sections 4980B,
9801-9803, 9811, 9812, and 9831-9833 of the Code at
all times.
(iv) No Welfare Plans are self-insured "multiple employer
welfare arrangements" as such term is defined in
Section 3(40) of ERISA.
(d) Benefit Arrangements. Each Benefit Arrangement is in material
compliance with its terms and with the requirements prescribed by any and all
Laws which are applicable to such Benefit Arrangement, including without
limitation the Code.
(e) Fiduciary Duties and Prohibited Transactions. Neither the Company
nor any ERISA Affiliate has any liability with respect to any transaction which
relates to any Pension Plan or any Welfare Plan and which is in violation of
Sections 404 or 406 of ERISA or constitutes a "prohibited transaction," as
defined in Section 4975(c)(1) of the Code, and for
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which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code. To the Knowledge of the Company, neither it nor any ERISA
Affiliate has participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Welfare Plan or Pension Plan or has any
unpaid civil penalty under Section 502(1) of ERISA.
(f) Litigation. There is no material action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation (including, without limitation, any
such audit or investigation by the Internal Revenue Service, Department of
Labor, or PBGC) relating to or seeking benefits under any Employee Plan that is
pending or, to the Knowledge of the Company, threatened or anticipated against
the Company or any ERISA Affiliate other than routine claims for benefits. To
the best of the Company's Knowledge, no Employee has any material claim against
the Company (whether under federal or state law, any employment agreement, or
otherwise) on account of or for (i) overtime pay, other than overtime pay for
the current payroll period; (ii) wages or salary for any period other than the
current payroll period; (iii) vacation, time off, sick time or pay in lieu of
any of the foregoing, other than that earned in respect of the current fiscal
year of the Company; or (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work. To the best of
the Company's Knowledge, no Employee has any material claim, or basis for any
material action or proceeding against the Company, arising under any statute,
ordinance or regulation relating to discrimination in employment or employment
practices, occupational safety and health standards or workers' compensation.
(g) Unpaid Contributions. Neither the Company nor any ERISA Affiliate
has any liability for unpaid contributions with respect to any Employee Plan.
The Company and all ERISA Affiliates have made all required contributions and
paid all accrued liabilities under each Employee Plan for all periods through
and including the Closing Date. For purposes of the preceding sentence, accrued
liability shall include a pro rata contribution to each Employee Plan for that
portion of a plan year or other applicable period which precedes the Closing
Date, and accrued liabilities for any portion of a plan year or other applicable
period shall be determined by multiplying the liability for the entire such year
or period by a fraction, the numerator of which is the number of days preceding
the Closing Date in such year or period, and the denominator of which is the
number of days in such year or period, as the case may be. No event has occurred
or circumstance exists that could result in a material increase in the premium
or other benefit cost of any Employee Plan.
(h) Amendment and Termination. Each Employee Plan may be amended or
terminated at any time by the Company or an ERISA Affiliate.
(i) Change of Control Payments and Compensation Deduction Limitations.
The execution of this Agreement and the consummation of the transactions
contemplated hereby will not result in any payment (whether of separation pay or
otherwise), cancellation of indebtedness, or other obligation becoming due from
the Company or any ERISA Affiliate to any current or former employee, director,
or consultant, or result in the vesting, acceleration of payment or increase in
the amount of any benefit payable to or in respect of any such current or former
employee, director, or consultant of the Company or any ERISA Affiliate. There
is no contract, agreement, plan or arrangement covering any current or former
employee, director, or consultant of the Company or any ERISA Affiliate that,
individually or collectively, could give rise to the
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payment of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1), 162(m), and/or 280G of the Code or would require the payment
of an excise tax imposed by Section 4999 of the Code or of any "gross up" of any
such excise tax.
(j) Copies of Documentation. The Company has made available to Parent
(i) copies of all employment agreements with officers of the Company or any
Company Subsidiary; (ii) copies of all severance agreements, programs and
policies of the Company or any Company Subsidiary with or relating to its
employees; and (iii) copies of all plans, programs, agreements and other
arrangements of the Company or any Company Subsidiary with or relating to its
employees which contain change of control provisions.
(k) Labor. As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against the Company or any Company Subsidiary, pending
or threatened in writing, which may interfere with the respective business
activities of the Company or any Company Subsidiary. As of the date of this
Agreement, to the Knowledge of the Company, neither the Company nor any Company
Subsidiary, nor their representatives or employees, has committed any unfair
labor practices in connection with the operation of the respective businesses of
the Company or any Company Subsidiary, and there is no charge or complaint
against the Company by the National Labor Relations Board or any comparable
state agency pending or threatened. Neither the Company nor any Company
Subsidiary (i) is a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strikes, grievances, claims or unfair labor
practices, or other collective bargaining disputes; (ii) has committed any
unfair labor practice; or (iii) has any Knowledge of any organizational effort
currently being made or threatened by or on behalf of any labor union with
respect to employees of the Company or any Company Subsidiary.
SECTION 4.16. Environmental Matters. Except as disclosed in Section
4.16 of the Disclosure Letter:
(a) the Company and the Company Subsidiaries currently are and have
been in compliance in all material respects with all applicable Environmental
Laws;
(b) there are no existing, pending or, to the Company's Knowledge,
threatened actions, suits, investigations, allegations, inquiries, proceedings
or clean-up obligations relating to any Environmental Laws with respect to the
Properties or any other properties adversely affected by the Properties or
activities thereon;
(c) there are no conditions or circumstances at the Properties creating
a cleanup obligation relating to any Environmental Laws or any other action,
suit, investigation, inquiry, or proceeding arising from such conditions or
circumstances;
(d) all material notices, permits, licenses, registrations, approvals
or authorizations required to be obtained or filed in connection with the
operation of the Properties by the Company or the Company Subsidiaries,
including, without limitation, treatment, storage, disposal or release of
hazardous substances or solid waste into the environment, have been duly
obtained or filed; their are no pending or, to the Knowledge of the Company or
the Company Subsidiaries, threatened or existing actions, proceedings, or
investigations seeking to modify,
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revoke, or deny renewal of any permits, licenses, registrations, approvals, or
other authorizations; and the Company and the Company Subsidiaries do not have
Knowledge of any fact or condition that could give rise to any action,
proceeding, or investigation to modify, revoke, or deny renewal of any such
permits, licenses, registrations, approvals, or other authorizations and all
notices or similar authorizations required for transfer of such permits,
licenses, registrations, approvals or authorizations have been duly obtained or
filed or will have been obtained or filed at or prior to the Closing Date;
(e) to the Knowledge of the Company and the Company Subsidiaries, all
off-site locations where the Company and the Company Subsidiaries has
transported, released, discharged, stored, disposed or arranged for the disposal
of pollutants, contaminants, hazardous wastes or toxic substances are licensed
and responsible disposal sites as required by Environmental Laws; or
(f) to the Knowledge of the Company and the Company Subsidiaries, all
underground storage tanks, and the operating status, capacity, and contents of
such tanks located on any property owned, leased or operated by the Company and
the Company Subsidiaries are identified in Section 4.16 of the Disclosure
Letter.
SECTION 4.17. Hedging.
(a) The Company and the Company Subsidiaries do not have any
outstanding obligations for the delivery of Hydrocarbons attributable to any of
the Properties of the Company or any Company Subsidiary in the future on account
of prepayment, advance payment, take-or-pay or similar obligations without then
or thereafter being entitled to receive full value therefor.
(b) Section 4.17(b) of the Disclosure Letter sets forth, as of the date
of this Agreement, all futures, hedge, swap, collar, put, call, floor, cap,
option or other contracts that are intended to benefit from, relate to or reduce
or eliminate the risk of fluctuations in the price of commodities, including
Hydrocarbons or securities, to which the Company or any Company Subsidiary is
bound and the current position of the parties thereto.
SECTION 4.18. Taxes. Except as set forth in Section 4.18 of the
Disclosure Letter, and except for matters that would not have a Material Adverse
Effect:
(a) Each of the Company and the Company Subsidiaries has timely filed
all Tax reports and returns that it was required to file. All such reports and
returns were correct and complete in all material respects.
(b) All Taxes owed by any of the Company and Company Subsidiaries
(whether or not shown on any report or return) have been timely paid.
(c) None of the Company and the Company Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax report or Tax
return.
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(d) No claim has been made by an authority in a jurisdiction where any
of the Company and the Company Subsidiaries does not file reports and returns
that it is or may be subject to taxation by that jurisdiction.
(e) There are no Encumbrances on any of the assets of any of the
Company and the Company Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any Tax.
(f) Each of the Company and the Company Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party.
(g) There is no dispute or claim concerning any Tax Liability of any of
the Company or the Company Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which the Company or the directors and
officers (and employees responsible for Tax matters) of the Company and the
Company Subsidiaries has Knowledge based upon personal contact with any agent of
such authority.
(h) Section 4.18 of the Disclosure Letter lists all federal, state,
local, and foreign income Tax returns filed with respect to any of the Company
and the Company Subsidiaries for taxable periods ended on or after December 31,
1999, indicates those returns that have been audited, and indicates those
returns that currently are subject of audit.
(i) The Company has delivered to Parent correct and complete copies of
all federal income tax returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and the Company
Subsidiaries since December 31, 1999.
(j) None of the Company and the Company Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(k) None of the Company and the Company Subsidiaries has filed a
consent under Code Sec. 341(f) concerning collapsible corporations.
(l) None of the Company and the Company Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible in whole or in part under Code Sec. 280G or Code Section 162(m).
(m) None of the Company and the Company Subsidiaries has been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
(n) Each of the Company and the Company Subsidiaries has disclosed on
its federal income Tax returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of Code
Sec. 6661.
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(o) Except as set forth in Section 4.18 of the Disclosure Letter, none
of the Company and the Company Subsidiaries is a party to any Tax allocation or
sharing agreement or policy.
(p) None of the Company and the Company Subsidiaries has any liability
under Treas. Reg. 1.1502-6 or any similar provision of any other tax law or by
agreement for unpaid taxes because it is or once was a member of an affiliated,
consolidated, or unitary group of corporations.
(q) Section 4.18 of the Disclosure Letter sets forth the following
information with respect to each of the Company and the Company Subsidiaries
(or, in the case of clause (B) below, with respect to each of the Company
Subsidiaries) as of the most recent practicable date: (A) the basis of the
Company or the Company Subsidiaries in its assets; (B) the basis of the
stockholder(s) of the Company Subsidiary in its stock (or the amount of any
Excess Loss Account); (C) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company and the Company Subsidiaries;
and (D) the amount of any deferred gain or loss allocable to the Company and the
Company Subsidiaries arising out of any deferred intercompany transaction.
SECTION 4.19. Insurance. The Company has all insurance policies that it
believes are required in connection with the operation of the business of the
Company and the Company Subsidiaries. Section 4.19 of the Disclosure Letter
lists each of the insurance polices relating to the Company or any Company
Subsidiary which are currently in effect and describes any self-insurance
arrangement affecting the Company or any Company Subsidiary. The Company has
made available to Parent true and correct summaries of each of the insurance
policies relating to the Company or the Company Subsidiaries that are currently
in effect. With respect to each such insurance policy, none of the Company, any
Company Subsidiary or, to the Knowledge of the Company, any other party to the
policy is in breach or default thereunder (including with respect to the payment
of premiums or the giving of notice) and the Company does not know of any
occurrence of any event which, with notice or the lapse of time or both, would
constitute such a breach or default or permit termination, modification or
acceleration under the policy, except for such breaches or defaults as would not
result in a Material Adverse Effect. Except as set forth on Section 4.19 of the
Disclosure Letter, to the Knowledge of the Company, there are no claims pending
with respect to any of such policies which are likely to exceed the amount of
coverage provided by the applicable policy. The Company has not received (A) any
written notice of cancellation of any such policy or refusal of coverage
thereunder, (B) any written notice that any issuer of such policy has filed for
protection under applicable bankruptcy or other insolvency laws or is otherwise
in the process of liquidating or has been liquidated, of (C) any other written
indication that such policies are no longer in full force or effect or that the
issuer of any such policy is no longer willing or able to perform its
obligations thereunder. All premiums and other payments relating to the
insurance have been paid for coverage through the date of this Agreement.
SECTION 4.20. Brokers. Except for Windrock and Dain Rauscher, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement, based upon arrangements made by or on behalf of the Company or the
Company Subsidiaries. True and correct copies of
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all agreements and engagement letters currently in effect with each of Windrock
and Dain Rauscher have been provided to Parent.
SECTION 4.21. Production and Pipeline Imbalances. Section 4.21 of the
Disclosure Letter sets forth all Company and Company Subsidiary pipeline, plant
and production imbalances and penalties as of September 30, 2000 with respect to
the Properties.
SECTION 4.22. Oil and Gas Operations. Except as set forth in Section
4.22 of the Disclosure Letter, as of the date of this Agreement, with respect to
authorizations for expenditure executed on or after September 30, 2000, (a)
there are no material outstanding calls for payments that are due or that the
Company or its Subsidiaries are committed to make that have not been made; (b)
there are no material operations with respect to which the Company or the
Company Subsidiaries have become a nonconsenting party; and (c) there are no
commitments for the material expenditure of funds for drilling or other capital
projects, other than projects with respect to which the operator is not required
under the applicable operating agreement to seek consent.
SECTION 4.23. Wells and Equipment. Except as otherwise set forth in
Section 4.23 of the Disclosure Letter:
(a) None of the Wells have overproduced, except where such
overproduction individually, or in the aggregate with all other such
overproduction, would not have a Material Adverse Effect;
(b) To the Knowledge of the Company, there have been no material
changes proposed in the production allowables for any Wells;
(c) All Wells have been drilled and (if completed) completed, operated,
and produced in accordance with good oil and gas field practices and in
compliance in all respects with applicable oil and gas leases and applicable
Laws, rules, and regulations, except where any failure or violation would not
have a Material Adverse Effect;
(d) There are no Wells that:
(i) Company or any of the Company Subsidiaries is currently
obligated by law or contract to plug and abandon or will be
obligated by Law or contract to plug and abandon with the
lapse of time or notice or both because the Well is not
currently capable of producing in commercial quantities,
except for such Wells that will not individually, or in the
aggregate with all other such Wells, result in Company and
the Company Subsidiaries incurring plugging and abandonment
costs (net of salvage value) in an amount in excess of
$2,000,000.00 in addition to any plugging and abandonment
costs that have been provided for in the Financial
Statements;
(ii) are subject to exceptions to a requirement to plug and
abandon issued by a Governmental Authority having
jurisdiction over the Wells;
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(iii) have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of
each Governmental Authority having jurisdiction over such
Wells; or
(iv) have not been plugged and abandoned and are located on lands
which have been sold to a third party but for which the
Company has been identified as the operator for such Wells
with the regulatory agency having jurisdiction over such
Wells;
(e) Proceeds from the sale of Hydrocarbons produced from the Properties
are being received by the Company and the Company Subsidiaries, as applicable,
in a timely manner and are not being held by third parties in suspense for any
reason (except for amounts individually or in the aggregate, not in excess of
$350,000.00 and held in suspense in the ordinary course of business);
(f) To the Knowledge of the Company and the Company Subsidiaries, all
equipment and machinery currently in use and material of the operation of the
Property as conduced prior to the date hereof are in reasonable working
condition, ordinary wear and tear excepted; and
(g) With respect to Wells that are not operated by the Company or any
of the Company Subsidiaries, the Company makes the foregoing representations and
warranties set forth in Paragraphs (a) through (d) of this Section 4.23 only to
its and the Company Subsidiaries' Knowledge.
SECTION 4.24. Proxy Statement. None of the information to be supplied
by the Company for inclusion in (a) the Proxy Statement to be filed by the
Company with the SEC, and any amendments or supplements thereto, or (b) the
Schedule TO to be filed by Parent with the SEC in connection with the Merger,
and any amendments or supplements thereto, will, at the respective times such
documents are filed, and, in the case of the Proxy Statement, at the time the
Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time such stockholders vote on approval and
adoption of this Agreement and at the Effective Time contain any untrue
statement of a material fact or omit to state any material fact required to be
made therein or necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company does not make any representation or warranty with
respect to statements made or incorporated by reference in any of the foregoing
documents based upon information that has been supplied by Parent or Purchaser
or their accountants, counsel or other authorized representatives for use in any
of the foregoing documents.
SECTION 4.25. Gas Imbalances; Preferential Rights. Section 4.25 to the
Disclosure Letter sets forth (a) an accurate description of all material
obligations (if any) of the Company to any third party under any contracts to
which the Company or by which its assets are bound and which includes "take or
pay" or similar provisions obligating the Company to deliver production from an
oil and gas property of the Company for which it has already received payment
(or obligating the Company to return any such payment) together with an accurate
and detailed listing of the amount of all such delivery obligations and (b) a
list of all instruments and agreements whereby any third party may claim a
preferential right or call to purchase a material
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portion of the production of the Company at a price other than the market price
prevailing from time to time where such properties are located, other than under
existing contracts for sale of production.
SECTION 4.26. Required Stockholder Vote or Consent. The only vote of
the holders of any class or series of the Company's capital stock that will be
necessary or required under this Agreement, the NRS or under applicable Law to
consummate the Merger and the other transactions contemplated by this Agreement
are the approval and adoption of this Agreement by the holders of a majority of
the votes entitled to be cast by holders of (a) the Company Common Stock and the
Company Preferred Stock, voting together as a single class, with each Preferred
Share entitling the holder thereof to the number of votes equal to the full
number of Common Shares into which such Preferred Share is convertible on the
record date for such vote, (b) the Company Common Stock, voting as a single
class, and (c) the Company Preferred Stock, voting as a single class
(collectively, the "COMPANY STOCKHOLDERS' APPROVAL").
SECTION 4.27. Fairness Opinion. The Board of Directors of the Company
has received the written opinion of Dain Rauscher to the effect that, as of the
date of such opinion, the consideration to be received in the Offer and the
Merger by the holders of Company Common Stock and Company Preferred Stock is
fair from a financial point of view to such holders. True and complete copies of
such opinions have been given to Parent.
SECTION 4.28. Takeover Restrictions.
(a) The Company and the Board of Directors of the Company have each
taken all action required to be taken by it in order to exempt the Offer
(including the purchase of Shares pursuant to the Offer), the Merger, this
Agreement, the Tender Agreement, the Tender and Voting Agreement and the
transactions contemplated hereby and thereby from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination," or other antitakeover laws and regulations of any state,
including, without limitation, the State of Nevada.
(b) No provision of the Articles of Incorporation or Bylaws of the
Company or comparable organizational documents of any of the Company
Subsidiaries would, directly or indirectly, restrict or impair the ability of
Purchaser or its Affiliates to vote, or otherwise to exercise the rights of a
stockholder with respect to, securities of the Company or any Company Subsidiary
that may be acquired or controlled by Purchaser or its Affiliates pursuant to
this Agreement, the Tender Agreement or the Tender and Voting Agreement or
permit any stockholder to acquire securities of the Company on a basis not
available to Purchaser in the event that Purchaser were to acquire securities of
the Company.
(c) There are no agreements, arrangements or commitments, including any
rights plan or rights agreement or similar arrangement, pursuant to which there
are outstanding or which obligates the Company to issue any rights to purchase
any series or class of the Company's securities.
SECTION 4.29. Indemnification Obligations. Except as contained in the
Leases and as set forth on Section 4.29 to the Disclosure Letter, there are no
Indemnification
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Obligations (as defined below) that the Company or any Company Subsidiary has to
any Person. "INDEMNIFICATION OBLIGATIONS" shall mean any obligations of the
Company to hold harmless or to indemnify any Person from any cost, expense,
liability, penalty, damage, deficiency, claim or loss arising from, resulting
from, based in any way on, relating to or attributable to a breach by the
Company of any portion of an agreement between the Company and such Person,
including but not limited to any breach of a representation, warranty, or
covenant under any such agreement.
SECTION 4.30. Bankruptcy. Neither the (i) Company, (ii) any predecessor
of the Company, nor (iii) any Company Subsidiary has (A) voluntarily sought,
consented to or acquiesced in the benefits of, or become party to or made the
subject of the Bankruptcy Code of the United States or any other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally (collectively,
"DEBT RELIEF ACTIONS") except as disclosed in Section 4.30 of the Disclosure
Letter or (B) any outstanding obligations to creditors in connection with a Debt
Relief Action or the resolution of a Debt Relief Action.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER
Parent and Purchaser hereby jointly and severally represent and warrant
to the Company as follows:
SECTION 5.01. Organization and Authority of Parent and Purchaser. Each
of Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation, and has
all necessary power and authority to carry on its business as it is currently
conducted. Parent and Purchaser have all necessary corporate power and authority
to enter into this Agreement, to carry out their obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Purchaser, the performance by each of
Parent and Purchaser of its obligations hereunder and the consummation by each
of Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of each of Parent and
Purchaser and no other corporate proceedings on the part of Parent or Purchaser
are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby (other than, with respect to the Merger, the
filing and recordation of appropriate merger documents as required by the NRS).
This Agreement has been duly executed and delivered by each of Parent and
Purchaser, and (assuming due authorization, execution and delivery by the
Company) this Agreement constitutes a legal, valid and binding obligation of
each of Parent and Purchaser enforceable against each in accordance with its
terms.
SECTION 5.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 5.05, except as may result from any facts or
circumstances relating solely to the Company, the execution, delivery and
performance of this Agreement by each of Parent and Purchaser do not and will
not (i) violate, conflict with or result in the breach of any provision of the
Articles of Incorporation or Bylaws of either Parent or Purchaser, (ii) conflict
with or violate any Law or
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Governmental Order applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or (iii) conflict with, result in any breach of
or constitute a default (or an event which, with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under, or
give to others any rights of termination, amendment or cancellation of, or
result in the creation of any Encumbrance on any of the assets or properties of
Parent or Purchaser pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or obligation to which Parent or Purchaser, respectively, is a party
or by which any of such assets or properties are bound or affected, except for,
in the case of clauses (i) and (iii), conflicts, violations, breaches or
defaults which would not prevent or materially delay the consummation of the
Offer and the Merger.
SECTION 5.03. Governmental Consents and Approvals. Except for (a)
applicable requirements, if any, of the Exchange Act, (b) the filing and
recordation of appropriate merger documents as required by the NRS, (c) filings
as may be required by any applicable "blue sky" laws, (d) any required
notifications or filings with any national securities exchange on which Parent's
securities are listed and (e) as would not prevent or materially delay the
consummation of the Offer and the Merger, neither Parent nor Purchaser is
required to submit any notice, report or other filing with any Governmental
Authority, in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby. No
waiver, consent, approval or authorization of any Governmental Authority, is
required to be obtained or made by either Parent or Purchaser in connection with
its execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby, except (i) where the failure to obtain
such waivers, consents, approvals or authorizations would not prevent or
materially delay the performance by Parent or Purchaser of their respective
obligations under this Agreement or (ii) in connection with any submission
required above.
SECTION 5.04. Offer Documents; Proxy Statement. None of the information
to be supplied by Parent for inclusion in (a) the Proxy Statement to be filed by
the Company with the SEC, and any amendments or supplements thereto, or (b) the
Schedule 14D-9 to be filed by the Company with the SEC in connection with the
Offer, and any amendments or supplements thereto, will, at the respective times
such documents are filed, and, in the case of the Proxy Statement, at the time
the Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time such stockholders vote on approval of
the Merger and adoption of this Agreement and at the Effective Time contain any
untrue statement of a material fact or omit to state any material fact required
to be made therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to statements made or incorporated by
reference in any of the foregoing documents based upon information that has been
supplied by the Company or their accountants, counsel or other authorized
representatives for use in any of the foregoing documents.
SECTION 5.05. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent.
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SECTION 5.06. Financing Arrangements. Parent has or will have funds
available to it sufficient to consummate the Offer and the Merger in accordance
with the terms of this Agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Closing.
(a) The Company covenants and agrees that, between the date of this
Agreement and the time of the Closing, except as set forth in Section 6.01(a) of
the Disclosure Letter or as contemplated by any other provision of this
Agreement, unless Parent shall otherwise consent in writing:
(i) the businesses of the Company and the Company Subsidiaries
shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with
past practice; and
(ii) the Company and the Company Subsidiaries shall use
reasonable efforts to preserve substantially intact their
business organization, to keep available the services of the
current employees of the Company and the Company
Subsidiaries and to preserve the current relationships of
the Company and the Company Subsidiaries with customers,
contractholders and other Persons with whom the Company or
any Company Subsidiary has significant business relations.
(b) By way of amplification and not limitation, except as contemplated
by this Agreement, or as reflected in Section 6.01(a) of the Disclosure Letter,
neither the Company nor any Company Subsidiary shall, between the date of this
Agreement and the Closing, directly or indirectly do, or propose to do, any of
the following, without the prior written consent of Parent:
(i) amend, propose to amend, or otherwise change its Articles of
Incorporation or Bylaws or similar organizational documents;
(ii) issue, sell, pledge, dispose of, grant, encumber, amend the
terms of, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of (A) any shares of
capital stock of the Company or any Company Subsidiary of
any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including,
without limitation, any phantom interest) of the Company or
any Company Subsidiary, except the sale of capital stock of
the Company in connection with the exercise of outstanding
options or warrants or (B) any assets or Properties of the
Company or any Company Subsidiary, except the sales of
Hydrocarbons in the ordinary course of business and in a
manner consistent with past practice;
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(iii) declare, set aside, make or pay any dividend or other
distribution payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for shares
of Company Preferred Stock to be issued and cash to be paid
as dividends on the Preferred Shares in accordance with the
Company's Articles of Incorporation and Section 4.17 of the
Preferred Stock Purchase Agreement;
(iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its
capital stock;
(v) (A) acquire or sell, lease, license, surrender, relinquish
or otherwise dispose of (including, without limitation, by
merger, consolidation or acquisition or disposition of stock
or assets) any interest in any corporation, partnership,
other business organization or any division thereof or any
assets, other than sales of Hydrocarbons in the ordinary
course of business, consistent with past practice, and any
other acquisitions for consideration which is not, in the
aggregate, in excess of $250,000.00; (B) incur any
Indebtedness for borrowed money, incur any trade debt, or
issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the
obligations of any Person (other than the Company or a
wholly owned Company Subsidiary), except for Indebtedness
incurred in the ordinary course of business, consistent with
past practice, in amounts not in excess of $250,000.00 in
the aggregate; (C) make any loans or advances to any Person
other than the Company or a wholly owned Company Subsidiary;
(D) authorize or commit to any capital expenditure in excess
of $250,000.00 in the aggregate per month, other than
pursuant to any commitment as of the date hereof disclosed
in Section 4.12(a) of the Disclosure Letter; or (E) enter
into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted
under this subsection (v);
(vi) enter a new line of business or commence business operations
in any country outside the United States;
(vii) increase the compensation payable or to become payable to
its officers or employees, except in the ordinary course of
business and consistent with past practice, or grant any
severance or termination pay to, or modify or enter into any
employment or severance agreement with, any director,
officer, employee or former employee of the Company or any
Company Subsidiary, or establish, adopt, enter into or amend
any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or
employee;
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(viii) change any method of accounting or accounting practice by
the Company or any Company Subsidiary, except for any such
change required by U.S. GAAP;
(ix) pay, discharge or satisfy any material claim, liability or
obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge
or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or
reserved against in the Reference Balance Sheet or
subsequently incurred in the ordinary course of business and
consistent with past practice or in accordance with the
provisions of this Section 6.01, provided however, that in
no event shall payments under this Section 6.01(b)(ix)
exceed individually, or in the aggregate, $250,000.00
without the express written consent of Parent.
(x) settle any material Audit, make or change any material Tax
election or file any material amended Tax return;
(xi) take any action that would give rise to a claim under the
WARN Act or any similar state law or regulation because of a
"plant closing" or "mass layoff" (each as defined in the
WARN Act);
(xii) enter into any futures, hedge, swap, collar, put, call,
floor, cap, option or other contracts that are intended to
benefit from or reduce or eliminate the risk of fluctuations
in the price of commodities, including Hydrocarbons, or
securities;
(xiii) enter into any fixed price commodity sales agreements with a
duration of more than three months;
(xiv) take, or agree or commit to take, any action that would make
any representation and warranty of the Company or any
Company Subsidiary hereunder inaccurate in any respect at,
or as of any time prior to, the Closing, or omit, or agree
or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in
any respect at any time;
(xv) (A) engage in any transaction (either acting alone or in
conjunction with any Plan or trust created thereunder) in
connection with which the Company or any Company Subsidiary
could be subjected (directly or indirectly) to either a
civil penalty assessed pursuant to subsections (c), (i) or
(1) of Section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code, (B) terminate any Plan
in a manner, or take any other action with respect to any
Plan, that could result in the liability of the Company or
any Company Subsidiary to any Person, (C) take any action
that could adversely affect the qualification of any Plan or
its compliance with the applicable requirements of ERISA,
(D) fail to make full payment
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when due of all amounts which, under the provisions of any
Plan, any agreement relating thereto or applicable law, the
Company or any Company Subsidiary are required to pay as
contributions thereto or (E) fail to file, on a timely
basis, all reports and forms required by federal regulations
with respect to any Plan; or
(xvi) other than the consummation of the Merger, take any action
that would cause adjustment to the conversion price of the
Preferred Shares.
SECTION 6.02. Access to Information. Except as required pursuant to any
confidentiality agreement or similar agreement or arrangement to which the
Company or any Company Subsidiary is a party or pursuant to applicable Law, from
the date hereof until the Closing, upon reasonable notice, the Company shall,
and shall cause each of the Company Subsidiaries and each of the Company's and
the Company Subsidiaries' officers, directors, employees, agents,
representatives, accountants and counsel to: (a) afford the officers, employees
and authorized agents, accountants, counsel and representatives of Parent
(collectively, "REPRESENTATIVES") full access, during normal business hours, to
the offices, premises, properties, oil and gas fields, other facilities, books
and records of the Company and each Company Subsidiary and to those officers,
directors, employees, agents, accountants and counsel of the Company and of each
Company Subsidiary who have any knowledge relating to the Company, any Company
Subsidiary or the business, (b) furnish to the Representatives such additional
financial and operating data and other information regarding the assets,
properties and goodwill of the Company and the Company Subsidiaries as Parent
may from time to time reasonably request; (c) provide Parent reasonable
assistance in searches of government records related to the assets of the
Company and the Company Subsidiaries; and (d) furnish copies, and allow for the
audit, of all such books and records, documents, and all financial, operating,
and other data and other information as Parent may request. No investigation
will affect any of the representations or warranties made herein or the
conditions to the obligations of the parties hereto to consummate the
transaction contemplated hereby.
SECTION 6.03. Confidentiality. Each party shall hold in confidence all
nonpublic information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Notwithstanding the foregoing, the Confidentiality Agreement
dated October 30, 2000 between the Company and Parent and the Confidentiality
Agreement dated December 18, 2000 between the Company and Parent (collectively,
the "CONFIDENTIALITY AGREEMENTS") shall survive the execution and delivery of
this Agreement.
SECTION 6.04. Stockholder Action.
(a) Following consummation of the Offer, if required by applicable law
in order to consummate the Merger, the Company shall, in accordance with
applicable law, give notice of, convene and hold a special meeting of its
stockholders (the "COMPANY STOCKHOLDERS' MEETING") for the purpose of securing
the Company Stockholders' Approval. The date of any Company Stockholders'
Meeting shall be set by the Board of Directors of the Company after consultation
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with, and on a date approved by, Parent, whose approval shall not be
unreasonably withheld. The Board of Directors of the Company shall (i)
distribute to its stockholders the Proxy Statement in accordance with applicable
federal and state law and with its Articles of Incorporation and Bylaws, which
Proxy Statement shall contain (A) the recommendation of the Board of Directors
of the Company that its stockholders approve the Merger and adopt this Agreement
and the transactions contemplated hereby if proxies are solicited by the Company
with respect to such vote and (B) the opinion of Dain Rauscher referred to in
Section 2.02(a), (ii) cause the Company to use all reasonable efforts to solicit
from its stockholders proxies in favor of the approval of the Merger and
adoption of this Agreement and the transactions contemplated hereby and to
secure the Company Stockholders' Approval, unless, in accordance with applicable
law and the regulations of the Nasdaq Small-Cap Market, such solicitation is not
required to achieve approval of the Merger, (iii) take all other action in their
judgment necessary and appropriate to secure the Company Stockholders' Approval,
and (iv) cooperate and consult with Parent with respect to each of the foregoing
matters, all subject to the right of the Board of Directors of the Company to
modify or withdraw its recommendation in the exercise of its fiduciary duties to
the Company and its stockholders.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of Parent's other subsidiaries in
favor of the approval of the Merger and of this Agreement.
SECTION 6.05. Preparation of the Proxy Statement. Following the
consummation of the Offer and if required by applicable law in order to
consummate the Merger, the Company shall promptly (i) prepare a preliminary
version of a proxy statement pursuant to Regulation 14A under the Exchange Act
or, if applicable law and regulations do not so require, an information
statement pursuant to Regulation 14C under the Exchange Act (the "PROXY
STATEMENT"), (ii) file with the SEC the Proxy Statement and use all reasonable
efforts to respond to the comments of the SEC in connection therewith and to
furnish all information required to prepare the definitive Proxy Statement, and
(iii) as promptly as practicable after responding to all such comments to the
satisfaction of the SEC, cause the definitive Proxy Statement to be mailed to
its respective stockholders, and if necessary, after the definitive Proxy
Statement shall have been mailed, promptly circulate amended, supplemented or
supplemental proxy materials and, if required in connection therewith, resolicit
proxies. The Company shall advise Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
Company Stockholders' Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its stockholders such an amendment or supplement.
The Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
SECTION 6.06. Regulatory and Other Authorizations; Notices and
Consents. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall (i) use its reasonable best efforts to take, or cause to be
taken, all appropriate action and do, or cause to be done, all things necessary,
proper or advisable under applicable Law or otherwise to consummate
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and make effective the Offer, the Merger and the other transactions contemplated
by this Agreement and (ii) use its reasonable best efforts to (A) take all
reasonable actions necessary to cause the Tender Offer Conditions to be
satisfied, and (B) obtain any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Offer, the
Merger and the other transactions contemplated by this Agreement and (iii) make
all necessary filings, and thereafter make any other required submissions with
respect to this Agreement, the Offer, the Merger and the other transactions
contemplated by this Agreement required under applicable Law. The parties hereto
shall cooperate with each other in connection with the making of all such
filings.
SECTION 6.07. Notice of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of
(a) the occurrence, or nonoccurrence, of any event the occurrence or
nonoccurrence of which would be likely to cause (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied, and (b) any failure of Parent or the Company, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. Each of the Company and Parent shall
promptly notify each other of any notice or other communication from any Person
alleging that the consent of such Person (or other Person) is or may be required
in connection with the transactions contemplated by this Agreement or any notice
or other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement.
SECTION 6.08. No Solicitation of Transaction. From the date of this
Agreement until the termination hereof, the Company and the Company Subsidiaries
will not, and will not authorize their respective officers, directors, employees
or other agents to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal or (ii) engage in negotiations
with, or disclose any nonpublic information relating to the Company or the
Company Subsidiaries, respectively, or afford access to their respective
properties, books or records to any Person that may be considering making, or
has made, an Acquisition Proposal. Nothing contained in this Section 6.08 shall
prohibit the Company and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated by the SEC under the Exchange Act, or (ii) furnishing
information, including without limitation nonpublic information to, or entering
into negotiations with any Person that has indicated its willingness to make an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A)
such unsolicited bona fide Acquisition Proposal is made by a third party that
the Board of Directors of the Company determines in good faith has the good
faith intent to proceed with negotiations or consider, and financial and other
capability to consummate, such Acquisition Proposal (taking into account among
other things the legal, financial, regulatory and other aspects of such
Acquisition Proposal and the Person making such Acquisition Proposal), (B) the
Board of Directors of the Company, after consultation with outside legal counsel
to the Company, determines in good faith that such action is required for the
Board of Directors of the Company to comply with its fiduciary duties to
stockholders imposed by applicable law, (C) contemporaneously with furnishing
such information to, or entering into discussions or negotiations with, such
Person, the Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or
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negotiations with, such Person and (D) the Company uses all reasonable efforts
to keep Parent informed in all material respects of the status and terms of any
such negotiations or discussions (including without limitation the identity of
the Person with whom such negotiations or discussions are being held) and
provides Parent copies of such written proposals and any amendments or revisions
thereto or correspondence related thereto. The Company, the Company
Subsidiaries, and their respective officers, directors, employees or other
agents shall immediately cease any existing discussions or negotiations, if any,
with any Persons conducted heretofore with respect to any Acquisition Proposal.
SECTION 6.09. Expenses.
(a) Except as provided in Section 8.02, all Expenses (as defined below)
incurred by the parties hereto shall be borne solely and entirely by the party
that has incurred such Expenses; provided, however, that if this Agreement is
terminated for any reason, then the allocable share of Parent and the Company
for all Expenses (including any fees and expenses of accountants, experts, and
consultants, but excluding the fees and expenses of legal counsel and investment
bankers) related to preparing, printing, filing and mailing the Offer Documents,
the Proxy Statement and all SEC and other regulatory filing fees incurred in
connection with the Offer Documents and the Proxy Statement shall be allocated
one-half each.
(b) "EXPENSES" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all reasonable fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its Affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the preparation, printing, filing
and mailing of the Offer Documents and the Proxy Statement, the solicitation of
stockholder approvals, requisite filings and all other matters related to the
consummation of the transactions contemplated hereby.
SECTION 6.10. Directors' and Officers' Indemnification and Insurance.
(a) For six years after the Effective Time, Parent and the Surviving
Corporation shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer or director of the Company or any Company Subsidiary
(each, an "INDEMNIFIED Party") against all losses, claims, damages, liabilities,
fees and expenses (including reasonable fees and disbursements of counsel and
judgments, fines losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the prior written consent of
Parent or the Surviving Corporation, which consent will not be unreasonably
withheld)) arising in whole or in part out of actions or omissions in their
capacity as such occurring at or prior to the Effective Time to the fullest
extent permitted under Nevada law and the Surviving Corporation's Articles of
Incorporation and Bylaws and the Company's written indemnification agreements in
effect at the date hereof and listed on Section 6.10 of the Disclosure Letter,
including provisions therein relating to the advancement of expenses incurred in
the defense of any action or suit; provided, that in the event any claim or
claims are asserted or made within such six year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and
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all such claims, provided that in no event shall the liability of Parent and the
Surviving Corporation in the aggregate under this Section 6.10(a) exceed
$115,000,000.00.
(b) Parent shall cause the Surviving Corporation to maintain the
Company's existing officers' and directors' liability insurance policy ("D&O
INSURANCE") for a period of not less than six years after the Effective Time,
but only to the extent related to actions or omissions prior to the Effective
Time; provided, that the Surviving Corporation may substitute therefor policies
of substantially similar coverage and amounts containing terms no less
advantageous to such former directors or officers; provided further, that the
annual premiums to be paid with respect to the maintenance of such D&O Insurance
during such six year period shall not exceed two hundred percent (200%) of the
premium paid by the Company for such D&O Insurance during the year ended
December 31, 2000, it being agreed and understood that if such policies cannot
be obtained at such cost, Parent shall cause the Surviving Corporation to obtain
as much of such policies as can be obtained at a cost equal to such amount.
(c) The Articles of Incorporation and Bylaws of the Surviving
Corporation and each subsidiary thereof shall contain provisions no less
favorable with respect to indemnification than are currently set forth in the
Bylaws of the Company and any Company Subsidiary, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who, at or prior to the Effective Time, were Indemnified Parties,
unless such modification shall be required by Law. Notwithstanding the
foregoing, the Surviving Corporation shall not be obligated to maintain the
provisions of the Company's and Company Subsidiaries' Bylaws and Articles of
Incorporation that provide for indemnification of directors and officers in
their capacities as stockholders.
SECTION 6.11. Cooperation and Filings.
(a) Subject to compliance with applicable law, from the date hereof
until the Effective Time, each of the parties hereto shall confer on a regular
and frequent basis with one or more representatives of the other parties to
report operational matters of materiality and the general status of ongoing
operations.
(b) Each party hereto shall make all filings required to be made by
such party in connection herewith or desirable to achieve the purposes
contemplated hereby, shall cooperate as needed with respect to any such filing
by any other party hereto, and shall promptly provide the other party or its
counsel with copies of all filings made by such party with any Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby
SECTION 6.12. Publicity. Neither the Company, Parent nor any of their
respective Affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Offer, the Merger, this Agreement or
the other transactions contemplated hereby without a prior consultation of the
other party, except as may be required by Law or by any listing agreement with a
national securities exchange and will use reasonable efforts to provide copies
of such release or other announcement to the other party hereto, and give due
consideration to such comments as the other party may have, prior to such
release.
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SECTION 6.13. Additional Actions. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws, or to
remove any injunctions or other impediments or delays, to consummate and make
effective the Offer, the Merger and the other transactions contemplated by this
Agreement, subject, however, to the appropriate vote of stockholders of the
Company required to so vote.
SECTION 6.14. Consents. Each of Parent and the Company shall use all
reasonable efforts to obtain all consents necessary or advisable in connection
with its obligations hereunder.
SECTION 6.15. Stockholder Litigation. Each of Parent and the Company
shall give the other the reasonable opportunity to participate in the defense of
any litigation against Parent or the Company, as applicable, and its directors
relating to the transactions contemplated by this Agreement.
SECTION 6.16. Amendment to Bylaws. Within four Business Days of the
date of this Agreement, the Company shall by action of the Company's Board of
Directors cause the Company's Bylaws to be amended such that the Company elects
not to be governed by the provisions of Sections 78.378 through 78.3793,
inclusive, of the NRS.
ARTICLE VII.
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Purchaser to consummate the Merger are
subject to the satisfaction or waiver, in whole or in part, (where permissible
by applicable law), at or prior to the Closing, of each of the following
conditions:
(a) no Governmental Authority or court of competent jurisdiction
located or having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any Law or Governmental Order which is then in
effect making the consummation of the Merger illegal or otherwise prohibiting
the consummation of the Merger;
(b) if required by applicable law in order to consummate the Merger,
the Company Stockholders' Approval shall have been obtained;
(c) Parent, Purchaser or their Affiliates shall have purchased Shares
pursuant to the Offer; and
(d) all approvals of Governmental Authorities necessary to consummate
the Merger and other transactions contemplated hereby shall have been received
and shall be in effect at the Effective Time.
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ARTICLE VIII.
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval by the stockholders of the Company:
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not
have occurred on or before May 31, 2001 (the "TERMINATION DATE"); provided that
the party seeking to terminate this Agreement pursuant to this Section 8.01(b)
shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the failure
to consummate the Merger on or before the Terminated Date;
(c) by the Company if there has been a material breach by Parent or
Purchaser of any representation, warranty, covenant or agreement set forth in
this Agreement which breach (if susceptible to cure) has not been cured in all
material respects within five Business Days following receipt by Parent or
Purchaser of notice of such breach;
(d) by either Parent or the Company if any court of competent
jurisdiction or other Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, Common
Shares or Preferred Shares pursuant to the Offer or the Merger and such order,
decree or ruling or other action shall have become final and nonappealable,
provided that the party seeking to terminate this Agreement shall have used its
reasonable best efforts to remove or lift such order, decree or ruling;
(e) by Parent, if (i) the Board of Directors of the Company (A)
withdraws, modifies or changes (including by amendment of the Schedule 14D-9)
its recommendation of the Offer, this Agreement or the Merger in a manner
adverse to Parent or shall have resolved to do any of the foregoing, (B) shall
have recommended to the stockholders of the Company any Acquisition Proposal or
resolved to do so or (C) shall have failed to reaffirm publicly and
unconditionally its recommendation to the Company's stockholders that they
tender their Shares in the Offer, which public reaffirmation must be made within
five days after Parent's written request to do so; or (ii) the Minimum Condition
(as defined in Annex I) shall not have been satisfied by the Expiration Date and
(A) a third party shall have made or caused to be made an Acquisition Proposal
or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or
Person (including the Company or any of its Affiliates), other than Parent or
any of its Affiliates, shall have become the beneficial owner of more than 50%
of the Common Shares or 50% of the Preferred Shares; provided, however, the
current ownership of Shares by the Company's stockholders who are party to
either the Tender Agreement or the Tender and Voting Agreement shall not be
deemed to trigger this clause (B);
(f) by the Company, if, prior to the acceptance of and payment for the
Shares pursuant to the Offer, the Company's Board of Directors shall have
determined to recommend a Superior Proposal and the Company makes the payment of
the Termination Fee as required
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pursuant to Section 8.02 of this Agreement and of the Expense Fee for which the
Company is responsible under Section 8.02 of this Agreement. For purposes of
this Agreement, "SUPERIOR PROPOSAL" means an unsolicited bona fide proposal made
by a third party relating to an Acquisition Proposal on terms that the Board of
Directors of the Company determines it cannot reject in favor of the Offer and
the Merger, based on applicable fiduciary duties and after consultation with the
Company's outside counsel (taking into account among other things the legal,
financial, regulatory and other aspects of the Acquisition Proposal, the Person
making such Acquisition Proposal, the likelihood of consummation and the time
required to complete such transaction); provided, however, that the Company
shall not be permitted to terminate this Agreement pursuant to this Section
8.01(f) unless it has complied with Section 6.08 and used all reasonable efforts
to provide Parent with two Business Days prior written notice of its intent to
so terminate this Agreement together with a detailed summary of the terms and
conditions of such Acquisition Proposal; provided further, that prior to any
such termination, the Company shall, and shall cause its respective financial
and legal advisors to, negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein, and it is
acknowledged by Parent that such negotiations with Parent shall be conducted in
a manner consistent with the fiduciary duties of the Company's Board of
Directors.
(g) by the Company if (i) Purchaser fails to commence the Offer in
violation of Section 2.01 hereof, provided, however, that the Company may not
terminate this Agreement pursuant to this Section 8.01(g) if the Company has
materially breached this Agreement, or (ii) Purchaser fails to purchase validly
tendered Shares in violation of the terms of this Agreement;
(h) by Parent or the Company if the Offer is terminated or withdrawn or
shall have expired pursuant to its terms without any Shares being purchased
thereunder; provided, however, that neither Parent nor the Company may terminate
this Agreement pursuant to this Section 8.01(h) if such party (or in the case of
Parent, Purchaser) shall have materially breached this Agreement;
(i) by Parent if the Company shall have breached any of its
representations or warranties which breach would give rise to the failure of the
condition set forth in clause (e) of Annex I hereto to be satisfied or if, prior
to consummation of the Offer, the Company shall have failed to perform its
covenants or other agreements contained in this Agreement which failure to
perform would give rise to the failure of the condition set forth in clause (e)
of Annex I hereto to be satisfied, which breach or failure to perform is
incapable of being cured or has not been cured by the date that is five Business
Days following written notice thereof to the Company from Parent.
SECTION 8.02. Effect of Termination.
(a) In the event of termination of the Agreement pursuant to this
Article VIII, all obligations of the parties shall terminate, except the
obligations of the parties pursuant to this Section 8.02 and except for the
provisions of Sections 6.03, 6.09, 6.12, 9.01, 9.02, 9.03, 9.04, 9.05, 9.07,
9.08, 9.11, 9.12 and 9.13, provided that nothing herein shall relieve any party
from liability for any breaches hereof.
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(b) In the event that this Agreement is terminated pursuant to Section
8.01(e)(i) (other than Section 8.01(e)(i)(A) if no Acquisition Proposal shall
have been publicly announced or disclosed) or Section 8.01(f), then the Company
shall promptly (and in any event within one Business Day after such termination
or, in the case of any such termination by the Company, prior to such
termination) pay Parent an amount equal to (i) a termination fee of
$5,200,000.00 (the "TERMINATION FEE"), provided, however, that in no event shall
more than one Termination Fee be payable by the Company plus (ii) Parent's
aggregate Expenses up to $500,000.00 (the "EXPENSE FEE").
(c) In the event that this Agreement is terminated pursuant to (i)
Section 8.01(e)(i)(A) (if no Acquisition Proposal shall have been publicly
announced or disclosed) and within 12 months of the date of termination of this
Agreement a transaction constituting an Acquisition Proposal is consummated, the
Company shall, prior to or simultaneously with the consummation of such
transaction, pay Parent the Termination Fee and the Expense Fee or (ii) Section
8.01(e)(ii) hereof and within 12 months of the date of termination of this
Agreement either (A) a transaction constituting an Acquisition Proposal is
consummated or (B) any "group" (as defined in Section 13(d)(3) of the Exchange
Act) or Person (including the Company or any of its Affiliates), other than
Parent or any of its Affiliates, shall have become the beneficial owner of more
than 50% of the Common Shares or 50% of the Preferred Shares, the Company shall,
prior to or simultaneously with the consummation of such transaction or the
acquisition of such Common Shares or Preferred Shares, pay Parent the
Termination Fee and the Expense Fee; provided, however, the current ownership of
Shares by the Company's stockholders who are party to either the Tender
Agreement or the Tender and Voting Agreement shall not be deemed to trigger this
clause (B); and provided further that the acquisition of additional Preferred
Shares by any of the current holders of Preferred Shares by virtue of a transfer
or purchase of such Preferred Shares from another current holder of Preferred
Shares shall not be deemed to trigger this clause (B).
(d) In no event shall the Company be obligated to pay more than one
Termination Fee and Expense Fee pursuant to this Section 8.02.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the parties contained in this
Agreement shall not survive the Effective Time.
(b) The covenants and agreements of the parties to be performed after
the Effective Time contained in this Agreement shall survive the Effective Time.
SECTION 9.02. Notices. All notices or communications hereunder shall be
in writing (including facsimile or similar writing) addressed as follows:
To the Company:
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Texoil, Inc.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090
Telecopy: (281) 537-8324
Attention: Frank A. Lodzinski, President
with a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Telecopy: (214) 855-4300
Attention: Thomas G. Adler
To Parent or Purchaser:
Ocean Energy, Inc.
1001 Fannin, Suite 1600
Houston, Texas 77002
Telecopy: (713) 265-8840
Attention: James T. Hackett
Chairman of the Board, President
and Chief Executive Officer
with a copy to:
Ocean Energy, Inc.
1001 Fannin, Suite 1600
Houston, Texas 77002
Telecopy: (713) 265-8840
Attention: Robert K. Reeves, Esq.
Executive Vice President,
General Counsel and Secretary
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Telecopy: 214-969-4343
Attention: Michael E. Dillard, P.C.
Any such notice or communication shall be deemed given (i) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one
Business Day after being deposited with a next day courier, postage prepaid, or
(iii) three Business Days after being
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sent certified or registered mail, return receipt requested, postage prepaid, in
each case addressed as above (or to such other address as such party may
designate in writing from time to time).
SECTION 9.03. Entire Agreement. This Agreement and the confidentiality
obligations under the Confidentiality Agreements represent the entire agreement
of the parties with respect to the subject matter hereof and shall supersede any
and all previous contracts, arrangements or understandings between the parties
hereto with respect to the subject matter hereof.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.05. Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
SECTION 9.06. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by operation of law or
otherwise without the prior written consent of the parties hereto, which consent
may be granted or withheld in the sole discretion of the parties. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Article III and Section 6.10 (collectively, the "THIRD PARTY
PROVISIONS"), nothing in this Agreement, express or implied, is intended to
confer on any Person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement. The Third Party Provisions may be enforced by the
beneficiaries thereof.
SECTION 9.07. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by each of, or on behalf of each
of, the parties or (b) by a waiver in accordance with Section 9.13.
SECTION 9.08. Governing Law; Forum. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas applicable
to contracts executed in and to be performed in that state and without regard to
any applicable conflicts of law. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any Texas state or
federal court located in Houston, Texas. In connection with the foregoing, each
of the parties to this Agreement irrevocably (a) consents to submit itself to
the personal jurisdiction of the state and federal courts of competent
jurisdiction located in Houston, Texas, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court, and (c) hereby consents to service of process pursuant to
the notice provisions set forth in Section 9.02.
SECTION 9.09. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties
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hereto in separate counterparts, each of which when executed and delivered shall
be deemed to be an original, but all of which taken together shall constitute
one and the same agreement.
SECTION 9.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.11. Waiver of Jury Trial. Each of the parties hereto
irrevocably and unconditionally waives all right to trial by jury in any action,
proceeding or counterclaim (whether based in contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of the parties
hereto in the negotiation, administration, performance and enforcement thereof.
SECTION 9.12. Attorney's Fees. If any action at law or equity,
including an action for declaratory relief, is brought to enforce or interpret
any provision of this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees and expenses from the other party, which fees
and expenses shall be in addition to any other relief which may be awarded.
SECTION 9.13. Extensions, Waivers, Etc. At any time prior to the
Effective Time, either party may:
(a) extend the time for the performance of any of the obligations or
act of the other party;
(b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by Parent or the
Company in exercising any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Company, Parent and Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
TEXOIL, INC.
By: /s/ Frank A. Lodzinski
------------------------------------
Frank A. Lodzinski
Chairman of the Board, President
and Chief Executive Officer
OCEAN ENERGY, INC.
By: /s/ James T. Hackett
------------------------------------
James T. Hackett
Chairman of the Board, President
and Chief Executive Officer
OEI ACQUISITION CORP.
By: /s/ James T. Hackett
------------------------------------
James T. Hackett
Chairman of the Board, President
and Chief Executive Officer
107
ANNEX I
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "MERGER AGREEMENT" shall be deemed to refer to such
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange
Act, pay for any tendered Shares and, subject to the terms of the Merger
Agreement, may terminate or amend the Offer, if (i) there shall not be validly
tendered and not properly withdrawn prior to the Expiration Date for the Offer
(A) at least a majority of the total number of outstanding Common Shares on a
fully diluted basis on the date of purchase (excluding for this purpose Common
Shares issuable but not yet issued as of such date upon conversion of
outstanding Preferred Shares) and (B) at least a majority of the total number of
outstanding Preferred Shares on a fully diluted basis on the date of purchase
(clauses (A) and (B), collectively the "MINIMUM CONDITION"), (ii) any applicable
approvals or consents listed on Section 4.06 of the Disclosure Letter have not
been obtained (or waiting periods relating to any filings identified therein
have not expired or been terminated), or (iii) at any time on or after the date
of the Merger Agreement and prior to the time of payment for any Shares any of
the following conditions shall exist or be determined by Purchaser to have
occurred:
(a) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, ruling, judgment, order or injunction enacted,
enforced, promulgated, proposed, amended, issued or deemed applicable to the
Offer by any Governmental Authority that could reasonably be expected to
directly or indirectly: (1) make the acceptance for payment of, or payment for
or purchase of all or a substantial number of the Shares pursuant to the Offer,
illegal, or otherwise restrict or prohibit the making of the Offer or the
consummation of the Offer or the Merger, (2) result in a significant delay in or
restrict the ability of Purchaser to accept for payment, pay for or purchase all
or a substantial number of the Shares pursuant to the Offer or to effect the
Merger, (3) render Purchaser unable to accept for payment or pay for or purchase
all or a substantial number of the Shares pursuant to the Offer, (4) prohibit or
materially limit the ownership or operation by Parent or Purchaser of all or a
portion of the business or assets of the Company and the Company Subsidiaries or
compel Parent or Purchaser to dispose of or hold separately all or a portion of
the business or assets of Parent or any of its subsidiaries or Purchaser or the
Company and the Company subsidiaries, or seek to impose a limitation on the
ability of Parent, any of its subsidiaries or Purchaser to conduct its business
or own such assets, (5) impose a limitation on the ability of Parent or
Purchaser effectively to acquire, hold or exercise full rights of ownership of
the Shares, including the right to vote any Shares acquired or owned by
Purchaser or Parent on an equal basis with all other Shares on all matters
properly presented to the Company's stockholders, (6) require divestiture by
Parent or Purchaser of Shares, (7) impose any limitations on the ability of
Parent or Purchaser effectively to control the business or operations of the
Company and the Company subsidiaries or (8) which would otherwise reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or Parent Material Adverse Effect; or
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(b)(i) there shall be instituted or pending any action, proceeding or
counterclaim seeking any of the consequences referred to in clauses (1) through
(8) of paragraph (a) above, or (ii) there shall have been threatened any action,
proceeding or counterclaim seeking any of the consequences referred to in
clauses (1) through (8) of paragraph (a) above that, in the good faith judgment
of Parent, has a reasonable probability of success; or
(c)(i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph (c) as set forth in Rule 13d-3 promulgated under the Exchange Act) of
50% or more of the outstanding Common Shares or more than 50% of the outstanding
Preferred Shares has been acquired by any Person other than Parent and Purchaser
and except for any Person having such beneficial ownership as of the date of the
Merger Agreement, (ii) the Board of Directors of the Company (A) withdraws,
modifies or changes (including by amendment of the Schedule 14D-9) its
recommendation of the Offer, this Agreement or the Merger in a manner adverse to
Parent, (B) shall have recommended to the stockholders of the Company any
Acquisition Proposal, or (C) shall have failed to reaffirm publicly and
unconditionally its recommendation to the Company's stockholders that they
tender their Shares in the Offer, which public reaffirmation must be made within
five days after Parent's written request to do so, (iii) a third party shall
have entered into a definitive agreement or a written agreement in principle
with the Company with respect to an Acquisition Proposal, or (iv) the Board of
Directors of the Company or any committee thereof shall have resolved to do any
of the foregoing; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms, or the Company and Purchaser and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated; or
(e)(i) any of the representations and warranties of the Company set
forth in Sections 4.02 and 4.03 of the Merger Agreement shall not be true and
correct as if such representations and warranties were made at the time of such
determination (except as to any such representation or warranty that speaks as
of a specific date, which must be untrue or incorrect as of such date); (ii) the
representations and warranties of the Company set forth in Section 4.16 of the
Merger Agreement shall not be true and correct as if such representations and
warranties were made at the time of such determination and the cost of
correcting the breach of such representations and warranties shall be in excess
of $6,000,000.00 in the aggregate; (iii) any of the other representations and
warranties of the Company set forth in the Merger Agreement, when read without
any exception or qualification as to materiality or reference to Material
Adverse Effect, shall not be true and correct as if such representations and
warranties were made at the time of such determination (except as to any such
representation and warranty which speaks as of a specific date, which must be
untrue or incorrect as of such date) except where the failure to be so true and
correct would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect or (iv) the Company shall have breached or failed
to observe or perform in any material respect any of its material covenants
under the Merger Agreement, which breach has not been cured in all material
respects within five Business Days following receipt by the Company of written
notice of such breach; or
(f) any approvals or consents (other than the filing of a certificate
of merger or approval by the stockholders of the Company of the Merger if
required by the NRS) required to
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be filed, or obtained by the Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement, the Offer and the
consummation of the transactions contemplated by this Agreement shall not have
been filed or obtained except where the failure to obtain such approval or
consent would not reasonably be expected to have a Material Adverse Effect; or
(g) there shall have occurred, and continued to exist, (1) any general
suspension of, or limitation on prices for, trading in securities on the Nasdaq
Small-Cap Market, (2) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, or a material limitation
(whether or not mandatory) by any Governmental Authority on the extension of
credit by banks or other lending institutions, or (3) in the case of any of the
foregoing clauses existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(h) since the date of this Agreement there shall have occurred any
event, change, effect or development that, individually or when considered
together with any other event, change, effect or development, has had or would
have a Material Adverse Effect; or
(i) There shall exist any Material Title Failure.
The foregoing conditions (including those set forth in clauses (i),
(ii) and (iii) of the initial paragraph) are for the benefit of Parent and
Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such conditions and other than clauses (i) and
(ii) may be waived by Parent or Purchaser, in whole or in part, at any time and
from time to time in their reasonable discretion, in each case, subject to the
terms of the Merger Agreement. The conditions in clauses (i) and (ii) of the
initial paragraph may not be waived without the written consent of the Company.
The failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
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ANNEX B
[Letterhead of Dain Rauscher Wessels]
CONFIDENTIAL
Texoil, Inc. January 17, 2001
Board of Directors
110 Cypress Station Dr.
Suite 220
Houston, Texas 77090-1629
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the existing holders, as a group, collectively, referred to herein
as "Shareholders", of common stock, par value $0.01 per share ("Common Stock")
and Series A Convertible Preferred Stock, par value $0.01 per share ("Preferred
Stock" and together with the Common Stock, the "Texoil Stock") of Texoil, Inc.,
a Nevada corporation ("Texoil"), of the aggregate consideration to be received
as set forth in the draft of the Agreement and Plan of Merger, dated January 13,
2001 (the "Merger Agreement"), by and among Ocean Energy, Inc., a Texas
corporation ("Ocean"), OEI Acquisition Corp., a Nevada corporation and a direct,
wholly owned subsidiary of Ocean ("Purchaser") and Texoil. Pursuant to the
Merger Agreement, the Purchaser has agreed to commence a tender offer (the
"Offer") to purchase (i) all of the outstanding shares of Texoil's Common Stock
at a price per share of $8.25 net to the seller in cash and (ii) all of the
outstanding shares of Texoil's Preferred Stock at a price per share of $18.04
net to the seller in cash, which has been adjusted to reflect certain paid in
kind dividends pursuant to the terms of the Preferred Stock. The respective
prices payable in the Offer for shares of Texoil Stock are herein referred to as
the "Offer Price." The Merger Agreement also provides for the subsequent merger
(the "Merger") of the Purchaser into Texoil, pursuant to which each share of
Texoil Stock outstanding at the effective time of the Merger will be converted
into the right to receive cash equal to the respective Offer Price. The Offer
and the Merger are collectively referred to as the "Transaction." The terms and
conditions of the Transaction are set forth more fully in the Merger Agreement.
In connection with our review of the Transaction, and in arriving at our
opinion described below, we have reviewed business and financial information
relating to Texoil. We have, among other things: (i) reviewed the draft Merger
Agreement and related documents; (ii) reviewed the Annual Report on Form 10-KSB
for the year ended December 31, 1999 and the Quarterly Reports on Form 10-QSB
and related unaudited financial information for certain interim periods,
including nine months ended September 30, 2000, of Texoil; (iii) reviewed the
Proxy Statement filed on Schedule 14A dated October 18, 2000, of Texoil; (iv)
reviewed Texoil's proved oil and gas reserves and the standardized measure of
discounted future net cash flows relating to proved oil and gas reserves as of
December 31, 1999, estimated by W.D. Von Gonten & Co., independent petroleum
engineers, and adjusted by Texoil management to December 31, 2000; (v) met with
certain members of Texoil's senior management to discuss their operations,
historical financial statements and future prospects; (vi) reviewed certain
operating and financial information of Texoil, including projections and
operating assumptions, provided to us by Texoil relating to their business and
prospects; (vii) reviewed historical market prices and trading volumes for
Texoil's Common Stock; (viii) reviewed publicly available financial data and
stock market performance data of publicly held companies that we deemed
generally comparable to Texoil; (ix) reviewed the financial terms of certain
business combinations of comparable exploration and production companies; and
(x) met with certain representatives of Ocean's senior management to discuss
their views related to the Transaction. In addition, we have considered such
other information and have conducted such other analyses and investigations as
we deemed appropriate under the circumstances.
In connection with our review, we have not independently verified any of
the foregoing information, and we have relied upon such information being
complete and accurate in all material respects. We have assumed, with your
consent, that the financial forecasts provided to us and discussed with us have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the senior management and key personnel of Texoil. In
addition, we have not conducted a physical inspection or made an independent
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evaluation or appraisal of the assets of Texoil, nor have we been furnished with
any such evaluation or appraisal. Our opinion relates to Texoil as a going
concern and, accordingly, we express no opinion based on its liquidation value.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary regulatory and governmental approvals for the proposed Transaction, no
restriction will be imposed that will have a material adverse effect on the
contemplated benefits of the proposed Transaction. Our opinion is based on
circumstances as they exist and can be evaluated on, and the information made
available to us at, the date hereof and is without regard to any market,
economic, financial, legal or other circumstances or event of any kind of nature
which may exist or occur after such date. We have not undertaken to reaffirm or
revise this opinion or otherwise comment upon any events occurring after the
date hereof and do not have any obligation to update, revise or reaffirm this
opinion.
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. We will receive a fee for our
services in connection with rendering our opinion. In the ordinary course of our
business, we may actively trade the securities of Texoil or Ocean for our own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Texoil in connection with their consideration of the Transaction
and is not to be quoted or referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without Dain Rauscher Wessels' prior written
consent, which consent will not be unreasonably withheld. However,
notwithstanding the foregoing, we consent to the inclusion of this opinion in
the Schedule TO and Schedule 14D-9 relating to the Offer and proxy or
information statement (if any) relating to the Transaction.
Our opinion does not address the merits of the underlying decision by
Texoil to engage in the Transaction, or the relative merits of the Transaction
compared to any alternative business strategy or transaction in which Texoil
might engage. We were not authorized to solicit, and did not solicit, other
potential parties with respect to a business combination with Texoil. This
opinion is not intended to be and does not constitute a recommendation to any
Shareholder regarding whether to tender shares of Texoil Stock in the Offer or
as to how such holder should vote on the approval and adoption of the Merger
Agreement or any matter related thereto. We are not expressing any opinion
herein as to the prices at which Texoil Stock has traded or will trade following
the announcement of the Transaction.
Our opinion addresses solely the fairness of the aggregate Transaction
consideration payable in the Transaction to holders of Texoil Stock as a group
and not the allocation thereof among the holders of any class or series of
Texoil Stock. Our opinion addresses solely the aggregate Transaction
consideration and does not address any other terms or agreement relating to the
Transaction.
Based upon our experience as investment bankers and subject to the
foregoing, including the various assumptions and limitations set forth herein,
it is our opinion that as of the date hereof the aggregate consideration to be
received by the Shareholders of Texoil as a group in the Transaction pursuant to
the Merger Agreement is fair, from a financial point of view.
Very truly yours,
/s/ DAIN RAUSCHER WESSELS
------------------------------------
Dain Rauscher Wessels
a division of Dain Rauscher
Incorporated
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ANNEX C
RIGHTS OF DISSENTING OWNERS
NRS 92A.300 Definitions. As used in NRS 92A.300 to 92A.500, inclusive,
unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those
sections.
(Added to NRS by 1995, 2086)
NRS 92A.305 "Beneficial stockholder" defined. "Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or by
a nominee as the stockholder of record.
(Added to NRS by 1995, 2087)
NRS 92A.310 "Corporate action" defined. "Corporate action" means the
action of a domestic corporation. (Added to NRS by 1995, 2087)
NRS 92A.315 "Dissenter" defined. "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.400 to
92A.480, inclusive.
(Added to NRS by 1995, 2087; A 1999, 1631)
NRS 92A.320 "Fair value" defined. "Fair value," with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
(Added to NRS by 1995, 2087)
NRS 92A.325 "Stockholder" defined. "Stockholder" means a stockholder of
record or a beneficial stockholder of a domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.330 "Stockholder of record" defined. "Stockholder of record"
means the person in whose name shares are registered in the records of a
domestic corporation or the beneficial owner of shares to the extent of the
rights granted by a nominee's certificate on file with the domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.335 "Subject corporation" defined. "Subject corporation" means
the domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective. (Added to NRS by 1995, 2087)
NRS 92A.340 Computation of interest. Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.
(Added to NRS by 1995, 2087)
NRS 92A.350 Rights of dissenting partner of domestic limited
partnership. A partnership agreement of a domestic limited partnership or,
unless otherwise provided in the partnership agreement, an agreement of merger
or exchange, may provide that contractual rights with respect to the partnership
interest of a dissenting general or limited partner of a domestic limited
partnership are available for any
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class or group of partnership interests in connection with any merger or
exchange in which the domestic limited partnership is a constituent entity.
(Added to NRS by 1995, 2088)
NRS 92A.360 Rights of dissenting member of domestic limited-liability
company. The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
(Added to NRS by 1995, 2088)
NRS 92A.370 Rights of dissenting member of domestic nonprofit
corporation.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.
2. Unless otherwise provided in its articles of incorporation or
bylaws, no member of a domestic nonprofit corporation, including, but not
limited to, a cooperative corporation, which supplies services described in
chapter 704 of NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of the ownership
of an interest in real property, may resign and dissent pursuant to subsection
1.
(Added to NRS by 1995, 2088)
NRS 92A.380 Right of stockholder to dissent from certain corporate
actions and to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a
stockholder is entitled to dissent from, and obtain payment of the fair value of
his shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation
is a party:
(1) If approval by the stockholders is required for the merger
by NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation
and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged
with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests will
be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders
to the event that the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting stockholders are entitled
to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under
NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
(Added to NRS by 1995, 2087)
NRS 92A.390 Limitations on right of dissent: Stockholders of certain
classes or series; action of stockholders not required for plan of merger.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the record
date fixed to determine the stockholders entitled to
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receive notice of and to vote at the meeting at which the plan of merger or
exchange is to be acted on, were either listed on a national securities
exchange, included in the national market system by the National Association of
Securities Dealers, Inc., or held by at least 2,000 stockholders of record,
unless:
(a) The articles of incorporation of the corporation issuing the shares
provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the
plan of merger or exchange, were either listed on a national
securities exchange, included in the national market system by
the National Association of Securities Dealers, Inc., or held of
record by a least 2,000 holders of owner's interests of record;
or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph
(b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require action of
the stockholders of the surviving domestic corporation under NRS 92A.130. (Added
to NRS by 1995, 2088)
NRS 92A.400 Limitations on right of dissent: Assertion as to portions
only to shares registered to stockholder; assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter's rights as to fewer
than all of the shares registered in his name only if he dissents with respect
to all shares beneficially owned by any one person and notifies the subject
corporation in writing of the name and address of each person on whose behalf he
asserts dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he dissents and his other
shares were registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
(Added to NRS by 1995, 2089)
NRS 92A.410 Notification of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the meeting must
state that stockholders are or may be entitled to assert dissenters' rights
under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is taken by
written consent of the stockholders or without a vote of the stockholders, the
domestic corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430.
(Added to NRS by 1995, 2089; A 1997, 730)
NRS 92A.420 Prerequisites to demand for payment for shares.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who wishes to
assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
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(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1
and NRS 92A.400 is not entitled to payment for his shares under this chapter.
(Added to NRS by 1995, 2089; 1999, 1631)
NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to
assert rights; contents.
1. If a proposed corporate action creating dissenters' rights is
authorized at a stockholders' meeting, the subject corporation shall deliver a
written dissenter's notice to all stockholders who satisfied the requirements to
assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the demand for
payment is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the demand
for payment, which may not be less than 30 nor more than 60 days after the date
the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
(Added to NRS by 1995, 2089)
NRS 92A.440 Demand for payment and deposit of certificates; retention
of rights of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms of
the notice.
2. The stockholder who demands payment and deposits his certificates,
if any, before the proposed corporate action is taken retains all other rights
of a stockholder until those rights are canceled or modified by the taking of
the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
(Added to NRS by 1995, 2090; A 1997, 730)
NRS 92A.450 Uncertificated shares: Authority to restrict transfer after
demand for payment; retention of rights of stockholder.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
(Added to NRS by 1995, 2090)
NRS 92A.460 Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
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(a) Of the county where the corporation's registered office is located;
or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has its
registered office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, a statement of
income for that year, a statement of changes in the stockholders' equity for
that year and the latest available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair value
of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive. (Added to NRS by 1995,
2090)
NRS 92A.470 Payment for shares: Shares acquired on or after date of
dissenter's notice.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenters' right to demand payment pursuant to NRS 92A.480.
(Added to NRS by 1995, 2091)
NRS 92A.480 Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid pursuant to NRS
92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his
shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for his
shares. (Added to NRS by 1995, 2091)
NRS 92A.490 Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding within the
60-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must
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be served with a copy of the petition. Nonresidents may be served by registered
or certified mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or any amendment thereto. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to
a judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the subject corporation;
or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment pursuant to
NRS 92A.470.
(Added to NRS by 1995, 2091)
NRS 92A.500 Legal proceeding to determine fair value: Assessment of
costs and fees.
1. The court in a proceeding to determine fair value shall determine
all of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if
the court finds the subject corporation did not substantially comply with the
requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the subject corporation,
the court may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115. (Added to NRS by 1995, 2092)
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