1
EXHIBIT 2.1
AGREEMENT
AND
PLAN OF MERGER
AMONG
VISTA ENERGY RESOURCES, INC. ("PARENT"),
PEC ACQUISITION CORP. ("MERGER SUB")
AND
PRIZE ENERGY CORP. ("PRIZE")
OCTOBER 8, 1999
2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS............................................................................................-2-
1.1 Defined Terms..........................................................................................-2-
1.2 References and Titles.................................................................................-12-
ARTICLE 2
THE MERGER............................................................................................-12-
2.1 The Merger............................................................................................-12-
2.2 Effect of the Merger..................................................................................-12-
2.3 Governing Instruments, Directors and Officers of the Surviving Corporation............................-12-
2.4 Effect on Securities..................................................................................-13-
2.5 Exchange of Certificates..............................................................................-15-
2.6 Closing...............................................................................................-16-
2.7 Effective Time of the Merger..........................................................................-16-
2.8 Taking of Necessary Action; Further Action............................................................-16-
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PRIZE...............................................................-16-
3.1 Organization..........................................................................................-16-
3.2 Other Equity Interests................................................................................-17-
3.3 Authority and Enforceability..........................................................................-17-
3.4 No Violations.........................................................................................-17-
3.5 Consents and Approvals................................................................................-17-
3.6 Financial Statements..................................................................................-18-
3.7 Capital Structure.....................................................................................-18-
3.8 No Undisclosed Liabilities............................................................................-19-
3.9 Indemnification.......................................................................................-19-
3.10 Absence of Certain Changes or Events..................................................................-19-
3.11 Compliance with Laws, Material Agreements and Permits.................................................-22-
3.12 Governmental Regulation...............................................................................-22-
3.13 Litigation............................................................................................-22-
3.14 No Restrictions.......................................................................................-22-
3.15 Audits and Settlements................................................................................-23-
3.16 Taxes.................................................................................................-23-
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3.17 Employment Benefit Plans..............................................................................-25-
3.18 Employment Contracts and Benefits.....................................................................-27-
3.19 Labor Matters.........................................................................................-27-
3.20 Accounts Receivable...................................................................................-27-
3.21 Insurance.............................................................................................-28-
3.22 Intangible Property...................................................................................-28-
3.23 Title to Assets. .....................................................................................-28-
3.24 Oil and Gas Operations................................................................................-28-
3.25 Financial and Commodity Hedging.......................................................................-29-
3.26 Environmental Matters.................................................................................-29-
3.27 Books and Records.....................................................................................-30-
3.28 Brokers...............................................................................................-31-
3.29 Year 2000 Compliance..................................................................................-31-
3.30 Powers of Attorney; Authorized Signatories............................................................-31-
3.31 Vote Required.........................................................................................-31-
3.32 Gas Imbalances........................................................................................-31-
3.33 Royalties.............................................................................................-31-
3.34 Prepayments...........................................................................................-32-
3.35 Disclosure and Investigation..........................................................................-32-
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................-32-
4.1 Organization..........................................................................................-32-
4.2 Other Equity Interests................................................................................-32-
4.3 Authority and Enforceability..........................................................................-32-
4.4 No Violations.........................................................................................-33-
4.5 Consents and Approvals................................................................................-33-
4.6 SEC Documents.........................................................................................-34-
4.7 Financial Statements..................................................................................-34-
4.8 Capital Structure.....................................................................................-34-
4.9 No Undisclosed Liabilities............................................................................-36-
4.10 Indemnification.......................................................................................-36-
4.11 Absence of Certain Changes or Events..................................................................-36-
4.12 Compliance with Laws, Material Agreements and Permits.................................................-38-
4.13 Governmental Regulation...............................................................................-39-
4.14 Litigation............................................................................................-39-
4.15 Interim Operations of Merger Sub......................................................................-39-
4.16 No Restrictions.......................................................................................-39-
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4.17 Audits and Settlements................................................................................-40-
4.18 Taxes.................................................................................................-40-
4.19 Employee Benefit Plans................................................................................-41-
4.20 Employment Contracts and Benefits.....................................................................-43-
4.21 Labor Matters.........................................................................................-44-
4.22 Accounts Receivable...................................................................................-44-
4.23 Insurance.............................................................................................-44-
4.24 Intangible Property...................................................................................-45-
4.25 Title to Assets. .....................................................................................-45-
4.26 Oil and Gas Operations................................................................................-45-
4.27 Financial and Commodity Hedging.......................................................................-46-
4.28 Environmental Matters.................................................................................-46-
4.29 Books and Records.....................................................................................-47-
4.30 Brokers...............................................................................................-48-
4.31 Year 2000 Compliance..................................................................................-48-
4.32 Powers of Attorney; Authorized Signatories............................................................-48-
4.33 Vote Required.........................................................................................-48-
4.34 Gas Imbalances........................................................................................-48-
4.35 Royalties.............................................................................................-48-
4.36 Prepayments...........................................................................................-49-
4.37 Disclosure and Investigation..........................................................................-49-
ARTICLE 5
COVENANTS.............................................................................................-49-
5.1 Conduct of Business by Parent Pending Closing.........................................................-49-
5.2 Conduct of Business by Prize Pending Closing..........................................................-51-
5.3 Access to Assets, Personnel and Information...........................................................-54-
5.4 No Solicitation.......................................................................................-56-
5.5 Prize Stockholders Meeting. ..........................................................................-57-
5.6 Parent Stockholders Meeting...........................................................................-58-
5.7 Registration Statement and Proxy Statement/Prospectus.................................................-59-
5.8 Stock Exchange Listing................................................................................-60-
5.9 Additional Arrangements...............................................................................-60-
5.10 Agreements of Affiliates..............................................................................-61-
5.11 Public Announcements..................................................................................-61-
5.12 Notification of Certain Matters.......................................................................-61-
5.13 Payment of Expenses...................................................................................-61-
5.14 Registration Rights...................................................................................-62-
5.15 Indemnification and Insurance.........................................................................-62-
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5.16 Severance Plan........................................................................................-64-
5.17 Amendment of Parent Certificate of Incorporation......................................................-64-
5.18 Authorization of Parent Preferred Stock...............................................................-64-
5.19 Joint Participation Agreement.........................................................................-64-
5.20 Voting and Shareholders Agreement.....................................................................-64-
5.21 Bylaws................................................................................................-65-
5.22 Pioneer Voting Agreement..............................................................................-65-
ARTICLE 6
CONDITIONS............................................................................................-65-
6.1 Conditions to Each Party's Obligation to Effect the Merger............................................-65-
6.2 Conditions to Obligations of Parent and Merger Sub....................................................-66-
6.3 Conditions to Obligation of Prize.....................................................................-67-
ARTICLE 7
TERMINATION...........................................................................................-68-
7.1 Termination Rights....................................................................................-68-
7.2 Effect of Termination.................................................................................-70-
7.3 Fees and Expenses.....................................................................................-70-
ARTICLE 8
MISCELLANEOUS.........................................................................................-70-
8.1 Nonsurvival of Representations and Warranties.........................................................-70-
8.2 Amendment.............................................................................................-70-
8.3 Notices...............................................................................................-70-
8.4 Counterparts..........................................................................................-71-
8.5 Severability..........................................................................................-71-
8.6 Entire Agreement; No Third Party Beneficiaries........................................................-71-
8.7 Applicable Law........................................................................................-71-
8.8 No Remedy in Certain Circumstances....................................................................-71-
8.9 Assignment............................................................................................-72-
8.10 Waivers...............................................................................................-72-
8.11 Confidentiality Agreement.............................................................................-72-
8.12 Section 2.03..........................................................................................-72-
8.13 Incorporation.........................................................................................-73-
SCHEDULES
Parent Disclosure Schedule
Prize Disclosure Schedule
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EXHIBITS
5.10 - Form of Affiliate Letter
5.14 - Form of Restated Registration Rights Agreement
5.16 - Vista Energy Resources, Inc. Severance Benefit Plan
5.18 - Parent Preferred Stock Designation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of the 8th day of October, 1999, by and among VISTA ENERGY
RESOURCES, INC. , a Delaware corporation ("PARENT"); PEC ACQUISITION CORP., a
Delaware corporation ("MERGER SUB"); and PRIZE ENERGY CORP., a Delaware
corporation ("PRIZE").
Recitals
A. Parent and Prize desire to effect a merger of Merger Sub with and
into Prize (the "MERGER").
B. The board of directors of Parent has appointed a special committee
of one independent director (the "SPECIAL COMMITTEE") to consider the Merger.
C. The Special Committee, with the advice and assistance of Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated ("DAIN RAUSCHER
WESSELS"), and independent legal counsel, has recommended (subject to the
satisfaction of the conditions precedent set forth herein) that the board of
directors of Parent approve this Agreement and the transactions contemplated
hereby.
D. The board of directors of Parent has determined it advisable and in
the best interests of Parent's stockholders to consummate the Merger, upon the
terms and subject to the conditions set forth herein.
E. The boards of directors of Merger Sub and Prize have determined it
advisable and in the best interests of Merger Sub's and Prize's stockholders,
respectively, to consummate the Merger, upon the terms and subject to the
conditions set forth herein.
F. For federal income tax purposes, it is intended that the Merger
qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
G. Parent, Merger Sub and Prize (the "PARTIES") desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, for and in consideration of the Recitals and the mutual
covenants and agreements set forth in this Agreement, the Parties hereby agree
as follows:
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ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, each of the following
terms has the meaning given in this Section 1.1 or in the Section referred to
below:
"AFFILIATE" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person. The
term "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") means the possession, directly or indirectly, of the actual power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of stock, by contract, credit arrangement or otherwise.
"AGREEMENT" means this Agreement and Plan of Merger, as amended,
supplemented and/or modified from time to time.
"ALTERNATIVE PROPOSAL" has the meaning specified in Section 5.4(b).
"AMEX" means The American Stock Exchange.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any successor federal and state
statutes and any regulations promulgated thereunder, and any foreign statutes
and regulations modeled thereon.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List.
"CERTIFICATE OF MERGER" means the certificate of merger, prepared and
executed in accordance with the applicable provisions of the DGCL, filed with
the Secretary of State of the State of Delaware to effect the Merger.
"CLOSING" means the closing of the Merger and the consummation of the
other transactions contemplated by this Agreement.
"CLOSING DATE" means the date on which the Closing occurs, which date
shall be the first business day following the day on which all of the conditions
provided for in Article 6 have been satisfied or waived as provided therein (or
such later date as is agreed upon by the Parties).
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means the letter agreement dated September
14, 1999, between Prize and Parent relating to Prize's furnishing of information
to Parent and Parent's
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furnishing of information to Prize in connection with Parent's and Prize's
evaluation of the possibility of the Merger.
"DGCL" means the Delaware General Corporation Law, as amended.
"DAIN RAUSCHER WESSELS" has the meaning specified in the Recitals of
this Agreement.
"DEFENSIBLE TITLE" means such right, title and interest that is (a)
evidenced by an instrument or instruments filed of record in accordance with the
conveyance and recording laws of the applicable jurisdiction to the extent
necessary to prevail against competing claims of bona fide purchasers for value
without notice, and (b) subject to Permitted Encumbrances, free and clear of all
Liens, claims, infringements, burdens and other defects.
"DISCLOSURE SCHEDULE" means, as applicable, the Prize Disclosure
Schedule or the Parent Disclosure Schedule.
"DISSENTING STOCKHOLDER" means a holder of Prize Common Stock or Prize
Preferred Stock who has validly perfected appraisal rights under Section 262 of
the DGCL.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EFFECTIVE TIME" has the meaning specified in Section 2.7.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, common law, injunction or other
authorization in effect on the date hereof, at the Closing Date, or at a
previous time applicable to the operations of the Prize Companies or the Parent
Companies, as applicable: (a) relating to emissions, discharges, releases or
threatened releases of Hazardous Materials into the natural environment,
including into ambient air, soil, sediments, land surface or subsurface,
buildings or facilities, surface water, groundwater, publicly-owned treatment
works, septic systems or land; (b) relating to the generation, treatment,
storage, disposal, use, handling, manufacturing, recycling, transportation or
shipment of Hazardous Materials; (c) relating to occupational health and safety;
or (d) otherwise relating to the pollution of the environment, solid waste
handling treatment or disposal, operation or reclamation of oil and gas
operations or mines, reclamation or remediation activities, or protection of
environmentally sensitive areas.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles, as recognized by
the U.S. Financial Accounting Standards Board (or any generally recognized
successor).
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"GOVERNMENTAL ACTION" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over any of the Prize Companies or the Parent
Companies or any of their respective properties or assets.
"HAZARDOUS MATERIAL" means (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
RCRA; (c) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any Environmental Law; (d) any
radioactive material, including any naturally occurring radioactive material,
and any source, special or byproduct material as defined in 42 U.S.C. 2011 et
seq. and any amendments or authorizations thereof; (e) any asbestos-containing
materials in any form or condition; (f) any polychlorinated biphenyls in any
form or condition; or (g) petroleum, petroleum hydrocarbons or any fraction or
byproducts thereof.
"HYDROCARBONS" means oil, condensate, gas, casinghead gas and other
liquid or gaseous hydrocarbons.
"INDEMNIFIED PARTIES" has the meaning specified in Section 5.15.
"JOINT PARTICIPATION AGREEMENT" means that certain Joint Participation
Agreement dated as of June 29, 1999, between Prize and Pioneer, as the same may
be amended from time to time in accordance with its terms.
"LIEN" means any lien, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, encumbrance, rights of a vendor under
any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto.
"MATERIAL ADVERSE EFFECT" means: (a) when used with respect to Prize, a
result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of the Prize
Companies (taken as a whole) or the aggregate value of their assets, would
materially impair the ability of the Prize Companies (taken as a whole) to own,
hold, develop and operate their assets, or would impair Prize's ability to
perform its obligations hereunder or consummate the transactions contemplated
hereby; and (b) when used with respect to Parent, a result or consequence that
would materially adversely affect the condition (financial or otherwise),
results of operations or business of the Parent Companies (taken as a whole) or
the aggregate value of their assets, would materially impair the ability of the
Parent Companies (taken as a whole) to own, hold, develop and operate their
assets, or would impair Parent's or Merger Sub's ability to perform its
respective obligations hereunder or consummate the transactions contemplated
hereby.
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"MERGER" has the meaning specified in the Recitals to this Agreement.
"MERGER CONSIDERATION" means the shares of Parent Common Stock and
Parent Preferred Stock to be issued in connection with the Merger.
"MERGER SUB" has the meaning specified in the introductory paragraph of
this Agreement.
"MERGER SUB COMMON STOCK" means the common stock, par value $.01 per
share, of Merger Sub.
"OIL AND GAS INTEREST(S)" means: (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties and assets
of any kind and nature, direct or indirect, including working, royalty and
overriding royalty interests, production payments, operating rights, net profits
interests, other non-working interests and non-operating interests; (b)
interests in and rights with respect to Hydrocarbons and other minerals or
revenues therefrom and contracts in connection therewith and claims and rights
thereto (including oil and gas leases, operating agreements, unitization and
pooling agreements and orders, division orders, transfer orders, mineral deeds,
royalty deeds, oil and gas sales, exchange and processing contracts and
agreements and, in each case, interests thereunder), surface interests, fee
interests, reversionary interests, reservations and concessions; (c) easements,
rights of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (d)
interests in equipment and machinery (including well equipment and machinery),
oil and gas production, gathering, transmission, compression, treating,
processing and storage facilities (including tanks, tank batteries, pipelines
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing. References in this Agreement to the "OIL AND GAS INTERESTS OF PRIZE"
or "PRIZE'S OIL AND GAS INTERESTS" mean the collective Oil and Gas Interests of
the Prize Companies. References in this Agreement to the "OIL AND GAS INTERESTS
OF PARENT" or "PARENT'S OIL AND GAS INTERESTS" mean the collective Oil and Gas
Interests of the Parent Companies.
"OWNERSHIP INTERESTS" means, as applicable: (a) the ownership interests
of Prize in its assets, as set forth in the reserve report dated July 1, 1999,
prepared by Prize; or (b) the ownership interests of Parent in its assets, as
set forth in the reserve report dated July 1, 1999, prepared by Parent.
"PARENT" has the meaning specified in the introductory paragraph of
this Agreement.
"PARENT BANK CREDIT AGREEMENT" means the Credit Agreement, dated
December 18, 1998, between Parent, as borrower, BankBoston, N.A., as
administrative agent, certain other agents, and various banks, as lenders (as
amended and supplemented).
"PARENT CERTIFICATE" means a certificate representing shares of Parent
Common Stock.
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"PARENT COMMON STOCK" means the common stock, par value $.01 per share,
of Parent.
"PARENT COMPANIES" means Parent and each of the Parent Subsidiaries.
"PARENT DISCLOSURE SCHEDULE" means the Parent Disclosure Schedule
attached hereto and any documents listed on such Parent Disclosure Schedule and
expressly incorporated therein by reference.
"PARENT EMPLOYEE BENEFIT PLANS" has the meaning specified in Section
4.19(a).
"PARENT FINANCIAL STATEMENTS" means the audited and unaudited
consolidated financial statements of Parent and its subsidiaries (including the
related notes) included (or incorporated by reference) in Parent's Annual Report
on Form 10-K for the year ended December 31, 1998, and Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, in each case as filed with the SEC.
"PARENT MATERIAL AGREEMENT(S)" means (a) the Parent Bank Credit
Agreement, (b) any agreement or contract, written or oral, between any of the
Parent Companies and Natural Gas Partners II, L.P. and/or Natural Gas Partners
III, L.P. or any Affiliate thereof, (c) any hedging agreement to which any of
the Parent Companies is a party or by which any of its assets is bound, (d) any
agreement, contract, commitment or understanding, written or oral, granting any
Person registration, purchase or sale rights with respect to any security of any
Parent Company, (e) any agreement, contract, commitment or understanding,
written or oral, granting any Person a right of indemnification and/or
contribution by any Parent Company, (f) any voting agreement relating to any
security of any Parent Company, and/or (g) any other written or oral agreement,
contract, commitment or understanding to which any of the Parent Companies is a
party, by which any of the Parent Companies is directly or indirectly bound, or
to which any asset of any of the Parent Companies may be subject, outside the
ordinary course of business of the Parent Companies, in each case as amended or
supplemented.
"PARENT MEETING" means the meeting of the stockholders of Parent called
for the purpose of voting on the Prize Proposal, or any adjournment thereof.
"PARENT PERMITS" has the meaning specified in Section 4.12.
"PARENT PREFERRED STOCK" means the Series A 6% Convertible Preferred
Stock, par value $.01, of Parent, to be authorized as described in Section 5.18.
"PARENT PREFERRED STOCK DESIGNATION" means the Certificate of
Designation with respect to the Parent Preferred Stock referred to in Section
5.18.
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"PARENT REPRESENTATIVE" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of any of the Parent Companies.
"PARENT SEC DOCUMENTS" has the meaning specified in Section 4.6.
"PARENT SUBSIDIARY(IES)" means those entities identified as
subsidiaries of Parent on the PARENT DISCLOSURE SCHEDULE.
"PARENT WARRANTS" means the common stock purchase warrants (issued and
outstanding on the date hereof) described in the Parent Disclosure Schedule,
each currently representing the right to purchase one share of Parent Common
Stock at the exercise price described in the Parent Disclosure Schedule.
"PARTIES" has the meaning specified in the Recitals to this Agreement.
"PERMITTED ENCUMBRANCES" means: (a) Liens for Taxes, assessments or
other governmental charges or levies if the same shall not at the particular
time in question be due and delinquent or (if foreclosure, distraint, sale or
other similar proceedings shall not have been commenced or, if commenced, shall
have been stayed) are being contested in good faith by appropriate proceedings
and if any of the Prize Companies or the Parent Companies, as applicable, shall
have set aside on its books such reserves (segregated to the extent required by
sound accounting practices) as may be required by or consistent with GAAP and,
whether reserves are set aside or not, are listed on the applicable DISCLOSURE
SCHEDULE; (b) Liens of carriers, warehousemen, mechanics, laborers, materialmen,
landlords, vendors, workmen and operators arising by operation of law in the
ordinary course of business or by a written agreement existing as of the date
hereof and necessary or incident to the exploration, development, operation and
maintenance of Hydrocarbon properties and related facilities and assets for sums
not yet due or being contested in good faith by appropriate proceedings, if any
of the Prize Companies or the Parent Companies, as applicable, shall have set
aside on its books such reserves (segregated to the extent required by sound
accounting practices) as may be required by or consistent with GAAP and, whether
reserves are set aside or not, are listed on the applicable DISCLOSURE SCHEDULE,
to the extent that such are in existence as of the date hereof; (c) Liens
incurred in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security legislation
(other than ERISA) which would not and will not, individually or in the
aggregate, result in a Material Adverse Effect on the Prize Companies or the
Parent Companies, as applicable; (d) Liens incurred in the ordinary course of
business to secure the performance of bids, tenders, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance and repayment bonds
and other obligations of a like nature which would not and will not,
individually or in the aggregate, result in a Material Adverse Effect on the
Prize Companies or the Parent Companies, as applicable; (e) Liens, easements,
rights-of-way, restrictions, servitudes, permits, conditions, covenants,
exceptions, reservations and other similar encumbrances incurred in the ordinary
course of business or existing on property and not materially impairing the
value of the assets of any of the Prize Companies or any of the Parent
Companies, as applicable, or
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interfering with the ordinary conduct of the business of any of the Prize
Companies or any of the Parent Companies, as applicable, or rights to any of
their assets; (f) Liens arising pursuant to Section 9.319 of the Texas Business
and Commerce Code and all other similar Liens created or arising by operation of
law to secure a party's obligations as a purchaser of oil and gas; (g) all
rights to consent by, required notices to, filings with, or other actions by
Governmental Authorities to the extent customarily obtained subsequent to
closing; (h) farmout, carried working interest, joint operating, unitization,
royalty, overriding royalty, sales and similar agreements relating to the
exploration or development of, or production from, Hydrocarbon properties
entered into in the ordinary course of business and not in violation of Section
5.1(b), provided the effect thereof of any of such in existence as of the date
hereof on the working and net revenue interest of the Prize Companies or the
Parent Companies, as applicable, has been properly reflected in its respective
Ownership Interests; (i) any defects, irregularities or deficiencies in title to
easements, rights-of-way or other surface use agreements that do not materially
adversely affect the value of any asset of any of the Prize Companies or any of
the Parent Companies, as applicable, by an amount in excess of $50,000; (j)
Liens arising under or created pursuant to the Parent Bank Credit Agreement or
the Prize Bank Credit Agreement, as applicable; and (k) Liens described on the
applicable DISCLOSURE SCHEDULE.
"PERSON" means any natural person, corporation, company, limited or
general partnership, joint stock company, joint venture, association, limited
liability company, trust, bank, trust company, land trust, business trust or
other entity or organization, whether or not a Governmental Authority.
"PIONEER" means Pioneer Natural Resources USA, Inc., a Delaware
corporation.
"PRIZE" has the meaning set forth in the introductory paragraph hereof.
"PRIZE ADJUSTED OUTSTANDING SHARES" means the sum of (a) the number of
shares of Prize Common Stock outstanding immediately before the Effective Time,
plus (b) the Prize Preferred Conversion Shares.
"PRIZE BANK CREDIT AGREEMENT" means the Senior Credit Agreement, dated
as of June 29, 1999, between Prize Energy Resources, L.P., a Prize Subsidiary,
as borrower, and BankBoston, N.A., as administrative agent, certain other
agents, and various banks, as lenders (as amended and supplemented).
"PRIZE CERTIFICATE" means a certificate representing shares of Prize
Common Stock or Prize Preferred Stock.
"PRIZE COMMON STOCK" means the common stock, par value $.01 per share,
of Prize.
"PRIZE COMPANIES" means Prize and each of the Prize Subsidiaries.
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"PRIZE CONVERSION AMOUNT" means the number (rounded to the eighth
decimal place) equal to the product of (a) the number of shares of Parent Common
Stock outstanding immediately before the Effective Time (excluding shares issued
between the date of this Agreement and the Effective Time as a result of the
exercise of Parent Warrants), after giving effect to the reverse stock split
contemplated in Section 5.17, times (b) 5.25.
"PRIZE DISCLOSURE SCHEDULE" means the Prize Disclosure Schedule
attached hereto and any documents listed on such Prize Disclosure Schedule and
expressly incorporated therein by reference.
"PRIZE EMPLOYEE BENEFIT PLANS" has the meaning specified in Section
3.17(a).
"PRIZE FINANCIAL STATEMENTS" means the draft statements of revenues and
direct operating expenses of producing properties acquired by Prize from Pioneer
and its affiliate for the years ended December 31, 1996, 1997 and 1998 and for
the six months ended June 30, 1998 and 1999, as attached to that certain letter
from Prize to Parent dated the date of this Agreement.
"PRIZE MATERIAL AGREEMENT(S)" means (a) the Prize Bank Credit
Agreement, (b) any agreement or contract, written or oral, between any of the
Prize Companies and Natural Gas Partners V, L.P. or any Affiliate thereof, (c)
any hedging agreement to which any of the Prize Companies is a party or by which
any of its assets is bound, (d) any agreement or contract between Pioneer and
any Prize Company, (e) any agreement, contract, commitment or understanding,
written or oral, granting any Person registration, purchase or sale rights with
respect to any security of any Prize Company, (f) any agreement, contract,
commitment or understanding, written or oral, granting any Person a right of
indemnification and/or contribution by any Prize Company, (g) any voting
agreement relating to any security of any Parent Company, and/or (h) any other
written or oral agreement, contract, commitment or understanding to which any of
the Prize Companies is a party, by which any of the Prize Companies is directly
or indirectly bound, or to which any asset of any of the Prize Companies may be
subject, outside the ordinary course of business of any of the Prize Companies,
in each case as amended and supplemented as of the date hereof.
"PRIZE MEETING" means the meeting of the stockholders of Prize called
for the purpose of voting on the Prize Proposal or any adjournment thereof.
"PRIZE PERMITS" has the meaning specified in Section 3.11.
"PRIZE PREFERRED CONVERSION SHARES" means the number of shares of Prize
Common Stock that the holders of the Prize Preferred Stock would be entitled to
acquire, assuming conversion of all outstanding shares of Prize Preferred Stock
immediately before the Effective Time.
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"PRIZE PREFERRED STATED VALUE" means the Stated Value of each share of
Parent Preferred Stock as of the Effective Date, which shall be equal to (a)
$13,000, divided by (b) the Prize Stock Conversion Number (rounded to the
nearest one-hundredth of a cent).
"PRIZE PREFERRED STOCK" means the Series A 6% Convertible Preferred
Stock, par value $.01 per share, of Prize.
"PRIZE PROPOSAL" means: (a) as to Parent and Prize, the proposal to
approve this Agreement and the Merger, which proposal is to be presented to the
stockholders of Prize and Parent in the Proxy Statement/Prospectus, and (b) as
to Parent only, the proposal to approve amendments to the certificate of
incorporation of Parent, and other matters, as required under Section 5.17,
which proposal is to be presented to the stockholders of Parent in the Proxy
Statement/Prospectus.
"PRIZE REPRESENTATIVE" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of any of the Prize Companies.
"PRIZE STOCK CONVERSION NUMBER" means such number of shares of Parent
Common Stock or Parent Preferred Stock, as applicable (rounded to the eighth
decimal place), that is equal to (a) the Prize Conversion Amount, divided by (b)
the Prize Adjusted Outstanding Shares.
"PRIZE STOCK OPTION" means an option (issued and outstanding
immediately prior to the Effective Time) to acquire shares of Prize Common Stock
granted pursuant to the Prize Energy Corp. Amended and Restated Option Plan
effective as of June 29, 1999.
"PRIZE SUBSIDIARY(IES)" means those entities identified as subsidiaries
of Prize on the PRIZE DISCLOSURE SCHEDULE.
"PROXY STATEMENT/PROSPECTUS" means a joint proxy statement in
definitive form relating to the Prize Meeting and the Parent Meeting, which
proxy statement will be included as a prospectus in the Registration Statement.
"PRIZE VOTING AND SHAREHOLDERS AGREEMENT" means that certain Amended
and Restated Voting and Shareholders Agreement dated as of June 29, 1999, among
Prize and its stockholders, as the same may be amended from time to time in
accordance with its terms.
"RCRA" means the Resource Conservation and Recovery Act, as amended,
and any successor federal and state statutes and any regulations promulgated
thereunder, and any foreign statutes and regulations modeled thereon.
"REGISTRATION RIGHTS AGREEMENT" means a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit 5.14, to be entered into at
the Closing among Parent, the
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holders of shares of Prize Common Stock, the holders of shares of Prize
Preferred Stock and certain holders of shares of Parent Common Stock and Parent
Warrants.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-4
to be filed by Parent in connection with the issuance of Parent Common Stock and
Parent Preferred Stock pursuant to the Merger.
"RESERVE DATA VALUE" means the 10% present value of the proved reserves
contained in Parent's Oil and Gas Interests, as shown on the July 1, 1999,
reserve report of Parent.
"RESPONSIBLE OFFICER" means, with respect to any entity, the Chairman,
Chief Executive Officer, President or Chief Operating Officer of such entity.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COMMITTEE" has the meaning specified in the Recitals to this
Agreement.
"SUPERIOR PROPOSAL" has the meaning specified in Section 5.4(c).
"SURVIVING CORPORATION" has the meaning specified in Section 2.2.
"TAX RETURNS" has the meaning specified in Section 3.16(a).
"TAXES" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, including income, gross receipts, ad
valorem, value added, excise, real or personal property, asset, sales, use,
federal royalty, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers'
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes and other
governmental taxes imposed or payable to the United States or any state, local
or foreign governmental subdivision or agency thereof, and in each instance such
term shall include any interest, penalties or additions to tax attributable to
any such tax, including penalties for the failure to file any Tax Return or
report.
"THIRD-PARTY CONSENT" means the consent or approval of any Person other
than any of the Prize Companies, any of the Parent Companies or any Governmental
Authority.
"YEAR 2000 COMPLIANCE" means that (a) no value for current date will
cause any interruption in operation; (b) date-based functionality will behave
consistently for dates prior to, during and after year 2000; (c) in all
interfaces and data storage, the first two digits in the year of any date are
specified either explicitly or by unambiguous algorithms; (d) year 2000 will be
recognized as a leap year; and (e) the year "00" will be read and correctly
interpreted as the year "2000."
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1.2 REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections
and other subdivisions of or to this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any Articles, Sections,
subsections or other subdivisions of this Agreement are for convenience only, do
not constitute any part of this Agreement, and shall be disregarded in
construing the language hereof. The words "THIS AGREEMENT," "HEREIN," "HEREBY,"
"HEREUNDER" and "HEREOF," and words of similar import, refer to this Agreement
as a whole and not to any particular subdivision unless expressly so limited.
The words "THIS ARTICLE," "THIS SECTION" and "THIS SUBSECTION," and words of
similar import, refer only to the Article, Section or subsection hereof in which
such words occur. The word "OR" is not exclusive, and the word "INCLUDING" (in
its various forms) means including without limitation. Pronouns in masculine,
feminine or neuter genders shall be construed to state and include any other
gender, and words, terms and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.
As used in the representations and warranties contained in this
Agreement, the phrase "TO THE KNOWLEDGE" of the representing Party shall mean
that Responsible Officers of such Party, individually or collectively, either
(a) know that the matter being represented and warranted is true and accurate or
(b) have no reason, after reasonable inquiry, to believe that the matter being
represented and warranted is not true and accurate.
ARTICLE 2
THE MERGER
2.1 THE MERGER. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Merger Sub shall be merged with and into Prize
in accordance with the provisions of this Agreement.
2.2 EFFECT OF THE MERGER. Upon the effectiveness of the Merger, the
separate existence of Merger Sub shall cease, and Prize, as the surviving
corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its
corporate existence under the laws of the State of Delaware. The Merger shall
have the effects specified in this Agreement and the DGCL.
2.3 GOVERNING INSTRUMENTS, DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION.
(a) The certificate of incorporation of Prize, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until duly amended in accordance with
its terms and applicable law.
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(b) The bylaws of Prize, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until duly
amended in accordance with their terms and applicable law.
(c) The directors and officers of Prize at the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
from the Effective Time until their respective successors have been duly elected
or appointed in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation and applicable law.
2.4 EFFECT ON SECURITIES.
(a) MERGER SUB COMMON STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, each
share of Merger Sub Common Stock issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and shall continue as one
share of common stock of the Surviving Corporation and each certificate
evidencing ownership of any such shares shall continue to evidence ownership of
the same number of shares of the capital stock of the Surviving Corporation.
(b) PARENT COMMON STOCK AND WARRANTS. At the Effective Time,
each share of Parent Common Stock and each Parent Warrant then issued and
outstanding shall remain issued, outstanding and unchanged.
(c) PRIZE SECURITIES.
(i) PRIZE COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder
thereof, each share of Prize Common Stock that is issued and
outstanding immediately prior to the Effective Time (other than shares
of Prize Common Stock held by Dissenting Stockholders) shall be
converted into the right to receive shares of validly issued, fully
paid and nonassessable Parent Common Stock, with each such share of
Prize Common Stock being converted into that number of shares of
validly issued, fully paid and nonassessable Parent Common Stock equal
to the Prize Stock Conversion Number. Each share of Prize Common Stock,
when so converted, shall automatically be canceled and retired, shall
cease to exist and shall no longer be outstanding; and the holder of
any Prize Certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares
of Parent Common Stock to be issued in exchange therefor, upon the
surrender of such Prize Certificate.
(ii) PRIZE PREFERRED STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder
thereof, each share of Prize Preferred Stock that is issued and
outstanding at the Effective Time (other than shares of Prize Preferred
Stock held by Dissenting Stockholders) shall be converted into the
right to receive a number of shares of validly issued, fully paid and
nonassessable Parent
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Preferred Stock equal to the Prize Stock Conversion Number. Each share
of Prize Preferred Stock, when so converted, shall automatically be
canceled and retired, shall cease to exist and shall no longer be
outstanding; and the holder of any Prize Certificate representing such
shares shall cease to have any rights with respect thereto, except the
right to receive the shares of Parent Preferred Stock to be exchanged
therefor, upon surrender of such Prize Certificate.
(iii) PRIZE STOCK OPTIONS. All Prize Stock Options
shall remain outstanding following the Effective Time. At the Effective
Time, by virtue of the Merger and without any action on the part of
Prize, Parent or any holder of a Prize Stock Option, each Prize Stock
Option shall be assumed by Parent in such manner that Parent is a
corporation assuming a stock option in a transaction to which Section
424(a) of the Code applies within the meaning of Section 424 of the
Code or, to the extent that Section 424 of the Code does not apply to
any Prize Stock Option, would be such a corporation were said Section
424 applicable to such option. Each Prize Stock Option assumed by
Parent shall be exercisable on the same terms and conditions as apply
immediately prior to the Effective Time, except that each Prize Stock
Option shall be exercisable for that number of shares of Parent Common
Stock (rounded to the nearest whole share) into which the number of
shares of Prize Common Stock subject to such Prize Stock Option
immediately prior to the Effective Time would be converted under
paragraph (i) of this Section 2.4(c) and the option price per share of
Parent Common Stock shall be an amount equal to the option price per
share of Prize Common Stock subject to such Prize Stock Option in
effect immediately prior to the Effective Time divided by the Prize
Stock Conversion Number (the option price per share, as so determined,
being rounded to the nearest full cent). No payment shall be made for
fractional interests.
(iv) SHARES OF DISSENTING STOCKHOLDERS. Any issued
and outstanding shares of Prize Common Stock and Prize Preferred Stock
held by a Dissenting Stockholder shall be converted into the right to
receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the DGCL; provided, however, shares
of Prize Common Stock and Prize Preferred Stock outstanding at the
Effective Time and held by a Dissenting Stockholder who shall, after
the Effective Time, withdraw his, her or its demand for appraisal or
lose his, her or its right of appraisal as provided in the DGCL, shall
be deemed to be converted, as of the Effective Time, into the right to
receive the shares of Parent Common Stock or Parent Preferred Stock, as
applicable, in accordance with the procedures specified in Section
2.5(b). Prize shall give Parent (A) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to the DGCL received by Prize, and
(B) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. Prize will not
voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of Parent, settle
or offer to settle any such demands.
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(v) OTHER. Except as provided in this Section 2.4(c)
or as otherwise agreed to by the Parties: (A) the provisions of any
other plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the Prize
Companies shall become null and void at the Effective Time, and (B) the
Prize Companies shall use all reasonable efforts to ensure that,
following the Effective Time, no holder of options or rights or any
participant in any plan, program or arrangement shall have any right
thereunder to acquire any equity securities of the Prize Companies,
Merger Sub, Parent or any direct or indirect subsidiary thereof.
2.5 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE OF CERTIFICATES. At or following the Closing,
each holder of shares of Prize Common Stock or of Prize Preferred Stock shall
exchange the Prize Certificates representing such shares for certificates
representing that number of shares of Parent Common Stock or Parent Preferred
Stock which such holder is entitled to receive as a result of the Merger.
(b) NO FURTHER OWNERSHIP RIGHTS IN PRIZE COMMON STOCK OR PRIZE
PREFERRED STOCK. All shares of Parent Common Stock issued upon the surrender for
exchange of shares of Prize Common Stock or Prize Preferred Stock in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Prize Common Stock and Prize
Preferred Stock. After the Effective Time, there shall be no further
registration of transfers on the Surviving Corporation's stock transfer books of
the shares of Prize Common Stock or Prize Preferred Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, a Prize
Certificate is presented to the Surviving Corporation for any reason, it shall
be canceled and exchanged for shares of Parent Common Stock or Parent Preferred
Stock, as applicable, into which such shares were converted at the Effective
Time.
(c) TREATMENT OF FRACTIONAL SHARES. No Parent Certificates or
scrip representing fractional shares of Parent Common Stock or Parent Preferred
Stock shall be issued in the Merger. In lieu of any fractional share of Parent
Common Stock or Parent Preferred Stock to which a holder of Prize Common Stock
or Prize Preferred Stock would otherwise be entitled, such holder, upon
surrender of a Prize Certificate as described in this Section 2.5, shall receive
one whole share of Parent Common Stock or Parent Preferred Stock, as applicable.
(d) LOST, STOLEN, OR DESTROYED PRIZE CERTIFICATES. If any
Prize Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Prize Certificate to be
lost, stolen or destroyed and, if required by Parent, the posting by such Person
of a bond, in such reasonable amount as Parent may direct, as indemnity against
any claim that may be made against it with respect to such Prize Certificate,
Parent shall issue in exchange for such lost, stolen or destroyed Prize
Certificate the shares of Parent Common Stock deliverable with respect thereto
pursuant to this Agreement.
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2.6 CLOSING. The Closing shall take place on the Closing Date at such
time and place as is agreed upon by Parent and Prize.
2.7 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
immediately when the Certificate of Merger is accepted for filing by the
Secretary of State of Delaware or at such time thereafter as is provided in the
Certificate of Merger (the "EFFECTIVE TIME"). The Certificate of Merger shall be
filed, and the Effective Time shall occur, on the Closing Date; provided,
however, that the Certificate of Merger may be filed prior to the Closing Date
or prior to the Closing so long as it provides for an effective time that occurs
on the Closing Date immediately after the Closing.
2.8 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent, Merger
Sub, and Prize shall use all reasonable efforts to take all such actions as may
be necessary or appropriate in order to effectuate the Merger under the DGCL as
promptly as commercially practicable. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
both Merger Sub and Prize, the officers and directors of the Surviving
Corporation are fully authorized, in the name of the Surviving Corporation or
otherwise to take, and shall take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PRIZE
Prize hereby represents and warrants to Parent and Merger Sub as
follows:
3.1 ORGANIZATION. Each of the Prize Companies: (a) is a corporation or,
as applicable, a limited partnership or limited liability company, duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation; (b) has the requisite power and authority to own,
lease and operate its properties and to conduct its business as it is presently
being conducted; and (c) is duly qualified to do business as a foreign
corporation, limited partnership or limited liability company, as applicable,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation, limited partnership or limited liability company or to be
in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on Prize). Accurate and complete copies of the certificate of
incorporation, bylaws, minute books and/or other organizational documents of
each of the Prize Companies have heretofore been delivered to Parent. Prize has
no corporate or other subsidiaries other than the Prize Subsidiaries.
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3.2 OTHER EQUITY INTERESTS. None of the Prize Companies owns any equity
interest in any general or limited partnership, corporation or limited liability
company other than as set forth on the PRIZE DISCLOSURE SCHEDULE (other than
joint venture, joint operating, other ownership arrangements and tax
partnerships entered into in the ordinary course of business that, individually
or in the aggregate, are not material to the operations or business of the Prize
Companies, taken as a whole).
3.3 AUTHORITY AND ENFORCEABILITY. Prize has the requisite corporate
power and authority to enter into and deliver this Agreement and (with respect
to consummation of the Merger, subject to the valid approval of the Prize
Proposal by the stockholders of Prize) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and (with
respect to consummation of the Merger, subject to the valid approval of the
Prize Proposal by the stockholders of Prize) the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Prize, including approval by the board
of directors of Prize, and no other corporate proceedings on the part of Prize
are necessary to authorize the execution or delivery of this Agreement or (with
respect to consummation of the Merger, subject to the valid approval of the
Prize Proposal by the stockholders of Prize) to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Prize and (with respect to the Merger, subject to the valid
approval of the Prize Proposal by the stockholders of Prize and assuming that
this Agreement constitutes a valid and binding obligation of Parent and Merger
Sub) constitutes a valid and binding obligation of Prize, enforceable against
Prize in accordance with its terms.
3.4 NO VIOLATIONS. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance by
Prize with the provisions hereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of any of the Prize Companies
under, any provision of (a) the certificate of incorporation, bylaws or any
other organizational documents of any of the Prize Companies, (b) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other agreement or instrument applicable to any of the
Prize Companies (other than any such conflict, violation, default, right, loss
or Lien that may arise under the Prize Bank Credit Agreement), or (c) assuming
the consents, approvals, authorizations, permits, filings and notifications
referred to in Section 3.5 are duly and timely obtained or made, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to any of
the Prize Companies or any of their respective properties or assets, other than,
in the case of clause (b) or (c) above, any such conflict, violation, default,
right, loss or Lien that, individually or in the aggregate, would not have a
Material Adverse Effect on Prize.
3.5 CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to any of the Prize
Companies in connection with the execution and delivery
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of this Agreement by Prize or the consummation by Prize of the transactions
contemplated hereby, except for the following: (a) any such consent, approval,
order, authorization, registration, declaration, filing or permit which the
failure to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on Prize or Parent; (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware pursuant to the
provisions of the DGCL; and (c) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws or Environmental
Laws. No Third-Party Consent is required by or with respect to any of the Prize
Companies in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (x) any such
Third-Party Consent which the failure to obtain would not, individually or in
the aggregate, have a Material Adverse Effect on Prize or Parent, (y) the valid
approval of the Prize Proposal by the stockholders of Prize, and (z) any
consent, approval or waiver required by the terms of the Prize Bank Credit
Agreement.
3.6 FINANCIAL STATEMENTS. The Prize Financial Statements were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, for the absence of notes) and fairly present, in
accordance with applicable requirements of GAAP (in the case of the unaudited
statements, subject to normal, recurring adjustments), the revenues and direct
operating expenses of the properties acquired by Prize from Pioneer and its
affiliate for the periods presented therein.
3.7 CAPITAL STRUCTURE.
(a) The authorized capital stock of Prize consists of 20,000
shares of Prize Common Stock and 5,000 shares of Prize Preferred Stock.
(b) There are issued and outstanding (i) 4,979.201 shares of
Prize Common Stock, (ii) 2,342.308 shares of Prize Preferred Stock, and (iii)
Prize Stock Options relating to 1,285.922 shares of Prize Common Stock. No
shares of Prize Common Stock are held by Prize as treasury stock.
(c) Except as set forth in Section 3.7(b), there are
outstanding (i) no shares of capital stock or other voting securities of Prize,
(ii) no securities of Prize or any other Person convertible into or exchangeable
or exercisable for shares of capital stock or other voting securities of Prize,
and (iii) no subscriptions, options, warrants, calls, rights (including
preemptive rights), commitments, understandings or agreements to which any of
the Prize Companies is a party or by which it is bound obligating Prize to
issue, deliver, sell, purchase, redeem or acquire shares of capital stock or
other voting securities of Prize (or securities convertible into or exchangeable
or exercisable for shares of capital stock or other voting securities of Prize)
or obligating Prize to grant, extend or enter into any such subscription,
option, warrant, call, right, commitment, understanding or agreement.
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(d) All outstanding shares of Prize capital stock are validly
issued, fully paid and nonassessable and not subject to any preemptive right.
(e) All outstanding shares of capital stock and other voting
securities of each of the corporate Prize Subsidiaries are (i) validly issued,
fully paid and nonassessable and not subject to any preemptive right, and (ii)
owned by the Prize Companies, free and clear of all Liens, claims and options of
any nature (except for Permitted Encumbrances). There are outstanding (y) no
securities of any Prize Subsidiary or any other Person convertible into or
exchangeable or exercisable for shares of capital stock, other voting securities
or other equity interests of such Prize Subsidiary, and (z) no subscriptions,
options, warrants, calls, rights (including preemptive rights), commitments,
understandings or agreements to which any Prize Subsidiary is a party or by
which it is bound obligating such Prize Subsidiary to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock, other voting securities or
other equity interests of such Prize Subsidiary (or securities convertible into
or exchangeable or exercisable for shares of capital stock, other voting
securities or other equity interests of such Prize Subsidiary) or obligating any
Prize Subsidiary to grant, extend or enter into any such subscription, option,
warrant, call, right, commitment, understanding or agreement.
(f) Except as set forth in the PRIZE DISCLOSURE SCHEDULE,
there is no stockholder agreement, voting trust or other agreement or
understanding to which Prize is a party or by which it is bound relating to the
voting of any shares of the capital stock of any of the Prize Companies.
3.8 NO UNDISCLOSED LIABILITIES. There are no liabilities of any of the
Prize Companies of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that are reasonably likely to have a
Material Adverse Effect on Prize, other than (a) liabilities adequately provided
for in the Prize Financial Statements, (b) liabilities incurred in the ordinary
course of business subsequent to June 30, 1999, (c) liabilities under this
Agreement, and (d) liabilities set forth on the PRIZE DISCLOSURE SCHEDULE.
3.9 INDEMNIFICATION. Except as set forth in the Prize Disclosure
Schedule, none of the Prize Companies has any presently effective
indemnification obligation (whether or not a claim has been asserted thereunder)
to any Person other than its present or former directors, officers, employees or
agents, as permitted by Section 145 of the DGCL, or in the ordinary course of
business.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
PRIZE DISCLOSURE SCHEDULE or as specifically contemplated by this Agreement,
since June 30, 1999, none of the Prize Companies has done any of the following:
(a) Discharged or satisfied any Lien or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business and consistent with past practices;
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(b) Paid or declared any dividends or distributions,
purchased, redeemed, acquired or retired any indebtedness, stock or other
securities from its stockholders or other securityholders, made any loans or
advances or guaranteed any loans or advances to any Person (other than loans,
advances or guaranties made in the ordinary course of business and consistent
with past practices), or otherwise incurred or suffered to exist any liabilities
(other than current liabilities incurred in the ordinary course of business and
consistent with past practices);
(c) Except for Permitted Encumbrances, suffered or permitted
any Lien to arise or be granted or created against or upon any of its assets;
(d) Canceled, waived or released any rights or claims against,
or indebtedness owed by, third parties;
(e) Amended its certificate of incorporation, bylaws or other
organizational documents;
(f) Made or permitted any amendment, supplement, modification
or termination of, or any acceleration under, any Prize Material Agreement;
(g) Sold, leased, transferred, assigned or otherwise disposed
of (i) any Oil and Gas Interests of Prize that, individually or in the
aggregate, had a value of $500,000 or more, or (ii) any other assets that,
individually or in the aggregate, had a value at the time of such lease,
transfer, assignment or disposition of $500,000 or more (and, in each case where
a sale, lease, transfer, assignment or other disposition was made, it was made
for fair consideration in the ordinary course of business); provided, however,
that this Section 3.10(g) shall not apply to the sale of Hydrocarbons in the
ordinary course of business;
(h) Made any investment in or contribution, payment, advance
or loan to any Person (other than investments, contributions, payments or
advances, or commitments with respect thereto, less than $500,000 in the
aggregate, made in the ordinary course of business and consistent with past
practices);
(i) Paid, loaned or advanced (other than the payment, advance
or reimbursement of expenses in the ordinary course of business) any amounts to,
or sold, transferred or leased any of its assets to, or entered into any other
transaction with, any of its Affiliates other than the Prize Companies;
(j) Made any material change in any of the accounting
principles followed by it or the method of applying such principles;
(k) Entered into any material transaction (other than this
Agreement) except in the ordinary course of business and consistent with past
practices;
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(l) Increased benefits or benefit plan costs or changed bonus,
insurance, pension, compensation or other benefit plan or arrangement or granted
any bonus or increase in wages, salary or other compensation or made any other
change in employment terms to any officer, director or employee of any of the
Prize Companies (except in the ordinary course of business);
(m) Issued any note, bond or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation involving more than $500,000 in the aggregate
(other than pursuant to the Prize Bank Credit Agreement);
(n) Delayed or postponed the payment of accounts payable or
other liabilities (except in the ordinary course of business);
(o) Canceled, compromised, waived or released any right or
claim (or series of related rights and claims) involving more than $500,000
(except in the ordinary course of business);
(p) Issued, sold, or otherwise disposed of any of its capital
stock or other equity interest or granted any option, warrant, or other right to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock or other equity interest;
(q) Made any loan to, or entered into any other transaction
with, any of its directors, officers or employees (except in the ordinary course
of business);
(r) Made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(s) Made or committed to make capital expenditures in excess
of $20,000,000 in the aggregate;
(t) Made any change in any material Tax election or the manner
Taxes are reported;
(u) Entered into any swap, hedging or similar arrangement
which remains open;
(v) Accelerated the vesting period of any outstanding option
or warrant;
(w) Otherwise been involved in any other material occurrence,
event, incident, action, failure to act, or transaction involving any of the
Prize Companies (except in the ordinary course of business);
(x) Agreed, whether in writing or otherwise, to do any of the
foregoing; or
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(y) Suffered any Material Adverse Effect (other than changes
or trends, including changes or trends in commodity prices, generally prevalent
in or affecting the oil and gas industry).
3.11 COMPLIANCE WITH LAWS, MATERIAL AGREEMENTS AND PERMITS. None of the
Prize Companies is in violation of, or in default in any material respect under,
and no event has occurred that (with notice or the lapse of time or both) would
constitute a violation of or default under: (a) its certificate of
incorporation, bylaws or other organizational documents, (b) any applicable law,
rule, regulation, ordinance, order, writ, decree or judgment of any Governmental
Authority, or (c) any Prize Material Agreement, except (in the case of clause
(b) or (c) above) for any violation or default that would not, individually or
in the aggregate, have a Material Adverse Effect on Prize. Each of the Prize
Companies has obtained and holds all permits, licenses, variances, exemptions,
orders, franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of its business and the lawful ownership, use
and operation of its assets ("PRIZE PERMITS"), except for Prize Permits which
the failure to obtain or hold would not, individually or in the aggregate, have
a Material Adverse Effect on Prize. None of the Prize Permits will be adversely
affected by the consummation of the transactions contemplated under this
Agreement or requires any filing or consent in connection therewith. Each of the
Prize Companies is in compliance with the terms of its Prize Permits, except
where the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect on Prize. No investigation or review by any Governmental
Authority with respect to any of the Prize Companies is pending or, to the
knowledge of Prize, threatened, other than those the outcome of which would not,
individually or in the aggregate, have a Material Adverse Effect on Prize. To
the knowledge of Prize, no other party to any Prize Material Agreement is in
material breach of the terms, provisions or conditions of such Prize Material
Agreement.
3.12 GOVERNMENTAL REGULATION. No Prize Company is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 or any state public
utilities laws.
3.13 LITIGATION. Except as set forth in the PRIZE DISCLOSURE SCHEDULE:
(a) no litigation, arbitration, investigation or other proceeding of any
Governmental Authority is pending or, to the knowledge of Prize, threatened
against any of the Prize Companies or their respective assets which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on Prize; and (b) no Prize Company is subject to any outstanding
injunction, judgment, order, decree or ruling (other than routine oil and gas
field regulatory orders). There is no litigation, proceeding or investigation
pending or, to the knowledge of Prize, threatened against or affecting any of
the Prize Companies that questions the validity or enforceability of this
Agreement or any other document, instrument or agreement to be executed and
delivered by Prize in connection with the transactions contemplated hereby.
3.14 NO RESTRICTIONS. Except as set forth in the PRIZE DISCLOSURE
SCHEDULE, none of the Prize Companies is a party to: (a) any agreement,
indenture or other instrument that contains
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restrictions with respect to the payment of dividends or other distributions
with respect to its capital, other than the Prize Bank Credit Agreement; (b) any
financial arrangement with respect to or creating any indebtedness to any Person
(other than indebtedness (i) reflected in the Prize Financial Statements, (ii)
under the Prize Bank Credit Agreement, or (iii) incurred in the ordinary course
of business since June 30, 1999), unless such indebtedness would not and will
not, individually or in the aggregate, result in a Material Adverse Effect on
the Prize Companies; (c) any agreement, contract or commitment relating to the
making of any advance to, or investment in, any Person (other than restrictions
under the Prize Bank Credit Agreement and advances in the ordinary course of
business); (d) any guaranty or other contingent liability with respect to any
indebtedness or obligation of any Person (other than (i) guaranties pursuant to
the Prize Bank Credit Agreement, (ii) guaranties undertaken in the ordinary
course of business, and (iii) the endorsement of negotiable instruments for
collection in the ordinary course of business); or (e) any agreement, contract
or commitment limiting in any respect its ability to compete with any Person or
otherwise conduct business of any line or nature.
3.15 AUDITS AND SETTLEMENTS. Except as set forth in the PRIZE
DISCLOSURE SCHEDULE, none of the Prize Companies is a party or subject to any
(a) unresolved or incomplete Tax audit or settlement or (b) other audit
conducted by any other Person (other than Ernst & Young LLP, independent
accountants of Prize) pursuant to a contractual or legal right.
3.16 TAXES.
(a) Each of the Prize Companies and any affiliated, combined
or unitary group of which any such entity is or was a member has (i) timely
filed all federal, state, local and foreign returns, declarations, reports,
estimates, information returns and statements ("TAX RETURNS") required to be
filed by it with respect to any Taxes; (ii) timely paid all Taxes that are due
and payable (except for Taxes that are being contested in good faith by
appropriate proceedings and for which sufficient reserves have been established)
for which any of the Prize Companies may be liable; (iii) complied with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes; and (iv) timely withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over.
(b) Except as set forth in the PRIZE DISCLOSURE SCHEDULE: (i)
no audits or other administrative or court proceedings are presently pending
with regard to any federal, state or local income or franchise Taxes for which
any of the Prize Companies would be liable; and (ii) there are no pending
requests for rulings from any taxing authority, no outstanding subpoenas or
requests for information by any taxing authority with respect to any Taxes, no
proposed reassessments by any taxing authority of any property owned or leased,
and no agreements in effect to extend the time to file any Tax Return or the
period of limitations for the assessment or collection of any Taxes for which
any of the Prize Companies would be liable.
(c) Except as set forth in the PRIZE DISCLOSURE SCHEDULE: (i)
there are no Liens on any of the assets of the Prize Companies for unpaid Taxes,
other than Liens for Taxes not yet
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due and payable; (ii) no Prize Company has any liability under Treasury
Regulation Section 1.1502-6 or any analogous state, local or foreign law by
reason of having been a member of any consolidated, combined or unitary group,
other than the affiliated group of which Prize is the common parent corporation;
(iii) no Prize Company has ever been included in an affiliated group of
corporations within the meaning of Section 1504 of the Code other than the
current affiliated group of which Prize is the common parent corporation; and
(iv) no Prize Company is or has been a party to any Tax sharing agreement
between related corporations.
(d) The amount of liability for unpaid Taxes of the Prize
Companies does not, in the aggregate, materially exceed the amount of the
liability accruals for Taxes reflected on the Prize Financial Statements.
(e) Prize has not filed or been required to file any Tax
Returns.
(f) Except as set forth in the PRIZE DISCLOSURE SCHEDULE: (i)
no Prize Company is required to treat any of its assets as owned by another
person for federal income tax purposes or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168 of the Code; (ii)
no Prize Company has entered into any compensatory agreement which would result
in a nondeductible expense pursuant to Section 280G of the Code; (iii) no
election has been made under Section 338 of the Code and no events have occurred
which would result in a deemed election under Section 338 of the Code with
respect to any Prize Company; (iv) no election has been made under Section
341(f) of the Code with respect to any Prize Company; (v) no Prize Company has
participated in any international boycott as defined in Code Section 999; (vi)
there are no outstanding balances of deferred gain or loss accounts with respect
to any Prize Company under Treas. Reg. Sections 1.1502-13 or 1.1502-13T; (vii)
no Prize Company has made or will make any election under Treas. Reg. Section
1.502-20(g)(1) with respect to the reattribution of net operating losses; (viii)
no Prize Company is subject to any arrangement treated as a partnership for
federal income tax purposes; and (ix) no Prize Company has or has ever conducted
branch operations in any foreign country within the meaning of Treas. Reg.
Section 1.367(a)-6T.
(g) The books and records of Prize contain accurate and
complete information with respect to: (i) all material Tax elections in effect
with respect to the Prize Companies; (ii) the current Tax basis of the assets of
the Prize Companies; (iii) any excess loss accounts of any Prize Company; (iv)
the current and accumulated earnings and profits of Prize; (v) the net operating
losses and net capital losses of the Prize Companies, the years that such net
operating and net capital losses expire, and any restrictions to which such net
operating and net capital losses are subject under any provision of the Code or
consolidated return regulations; (vi) Tax credit carryovers of the Prize
Companies; and (vii) any overall foreign losses to the Prize Companies under
Section 904(f) of the Code.
(h) No shareholder of Prize that is a foreign corporation or a
nonresident alien individual has owned as much as five percent of the
outstanding stock of Prize at any time during the five year period ending on the
date hereof.
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3.17 EMPLOYEE BENEFIT PLANS.
(a) The PRIZE DISCLOSURE SCHEDULE sets forth a complete and
accurate list of each of the following which is or has been sponsored,
maintained or contributed to by Prize or any trade or business, whether or not
incorporated (a "PRIZE ERISA AFFILIATE"), or in which any employee or
co-employee of any of the Prize Companies participates or is covered, that
together with Prize would be considered affiliated with Prize under Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA for the
benefit of any person who, as of the Closing, is a current or former employee or
subcontractor of Prize or any Prize ERISA Affiliate: (i) each "employee benefit
plan," as such term is defined in Section 3(3) of ERISA (each, a "PRIZE PLAN");
and (ii) each personnel policy, stock option plan, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy, severance pay plan,
policy, program or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, retiree benefit plan
or arrangement, fringe benefit program or practice (whether or not taxable),
employee loan, consulting agreement, employment agreement and each other
employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.17(a)(i) (each, a "PRIZE
BENEFIT PROGRAM OR AGREEMENT") (such Prize Plans and Prize Benefit Programs or
Agreements are sometimes collectively referred to in this Agreement as the
"PRIZE EMPLOYEE BENEFIT PLANS").
(b) True, correct and complete copies of each of the Prize
Plans and related trusts, if applicable, including all amendments thereto, have
been furnished or made available to Parent. There has also been furnished or
made available to Parent, with respect to each Prize Plan required to file such
report and description, the report on Form 5500 for the past three years, to the
extent applicable, and the most recent summary plan description. True, correct
and complete copies or descriptions of all Prize Benefit Programs or Agreements
have also been furnished or made available to Parent.
(c) Except as otherwise set forth on the Prize Disclosure
Schedule: (i) neither Prize nor any Prize ERISA Affiliate contributes to or has
an obligation to contribute to, nor has at any time contributed to or had an
obligation to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA or any other plan subject to Title IV of ERISA; (ii) each of
Prize and the Prize ERISA Affiliates has performed all obligations, whether
arising by operation of law or by contract, including ERISA and the Code,
required to be performed by it in connection with the Prize Employee Benefit
Plans, and, to the knowledge of Prize, there have been no defaults or violations
by any other party to the Prize Employee Benefit Plans; (iii) all reports,
returns, notices, disclosures and other documents relating to the Prize Plans
required to be filed with or furnished to governmental entities, plan
participants or plan beneficiaries have been timely filed or furnished in
accordance with applicable law, and each Prize Employee Benefit Plan has been
administered in compliance with its governing written documents; (iv) each of
the Prize Plans intended to be qualified under Section 401 of the Code satisfies
the requirements of such Section and has received a favorable determination
letter from the Internal Revenue Service (the "IRS") regarding such qualified
status and has not been amended, operated or administered in a
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way which would adversely affect such qualified status; (v) there are no
actions, suits or claims pending (other than routine claims for benefits) or, to
the knowledge of Prize, contemplated or threatened against, or with respect to,
any of the Prize Employee Benefit Plans or their assets; (vi) each trust
maintained in connection with each Prize Plan, which is qualified under Section
401 of the Code, is tax exempt under Section 501 of the Code; (vii) all
contributions required to be made to the Prize Employee Benefit Plans have been
made timely; (viii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and there has been no termination or partial termination of any Prize
Plan within the meaning of Section 411(d)(3) of the Code; (ix) no act, omission
or transaction has occurred which could result in imposition on Prize or any
Prize ERISA Affiliate of (A) breach of fiduciary duty liability damages under
Section 409 of ERISA, (B) a civil penalty assessed pursuant to subsections (c),
(i) or (1) of Section 502 of ERISA or (C) a tax imposed pursuant to Chapter 43
of Subtitle D of the Code; (x) to the knowledge of Prize, there is no matter
pending with respect to any of the Prize Plans before the IRS, the Department of
Labor or the Pension Benefit Guaranty Corporation (the "PBGC"); (xi) each of the
Prize Employee Benefit Plans complies, in form and operation, with the
applicable provisions of the Code and ERISA; (xii) each Prize Employee Benefit
Plan may be unilaterally amended or terminated in its entirety without any
liability or other obligation; (xiii) Prize and the Prize ERISA Affiliates have
no liabilities or other obligations, whether actual or contingent, under any
Prize Employee Benefit Plan for post-employment benefits of any nature (other
than COBRA continuation coverage); and (xiv) neither Prize nor any of the Prize
ERISA Affiliates or any present or former director, officer, employee or other
agent of Prize or any of the Prize ERISA Affiliates has made any written or oral
representations or promises to any present or former director, officer, employee
or other agent concerning his or her terms, conditions or benefits of
employment, including the tenure of any such employment or the conditions under
which such employment may be terminated by Prize, any of the Prize ERISA
Affiliates or Parent which will be binding upon or enforceable against Parent or
Prize after the Effective Time.
(d) Except as otherwise set forth on the Prize Disclosure
Schedule, no employee is currently on a leave of absence due to sickness or
disability and no claim is pending or expected to be made by an employee, former
employee or independent contractor for workers' compensation benefits.
(e) With respect to the Prize Employee Benefit Plans, there
exists no condition or set of circumstances in connection with any of the Prize
Companies that could be expected to result in liability reasonably likely to
have a Material Adverse Effect on Prize under ERISA, the Code or any other
applicable law. With respect to the Prize Employee Benefit Plans, individually
and in the aggregate, there are no unfunded benefit obligations which have not
been accounted for by reserves, or otherwise properly footnoted in accordance
with GAAP, on the financial statements of the Prize Companies, which obligations
are reasonably likely to have a Material Adverse Effect on Prize.
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(f) Except as set forth in the PRIZE DISCLOSURE SCHEDULE,
neither the execution or delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any payment becoming due to any
employee or group of employees of any of the Prize Companies.
3.18 EMPLOYMENT CONTRACTS AND BENEFITS. Except as set forth in the
PRIZE DISCLOSURE SCHEDULE or otherwise provided for in any Prize Employee
Benefit Plan: (a) none of the Prize Companies is subject to or obligated under
any consulting, employment, severance, termination or similar arrangement, any
employee benefit, incentive or deferred compensation plan with respect to any
Person, or any bonus, profit sharing, pension, stock option, stock purchase or
similar plan or other arrangement or other fringe benefit plan entered into or
maintained for the benefit of employees of any of the Prize Companies or any
other Person; and (b) no employee of any of the Prize Companies or any other
Person owns, or has any right granted by any of the Prize Companies to acquire,
any interest in any of the assets or business of any of the Prize Companies.
3.19 LABOR MATTERS.
(a) No employees of any of the Prize Companies are represented
by any labor organization. No labor organization or group of employees of any of
the Prize Companies has made a demand for recognition or certification as a
union or other labor organization, and there are no representation or
certification proceedings or petitions seeking a representation or certification
proceeding presently pending or threatened in writing to be brought or filed
with the National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities involving any of the Prize
Companies pending with any labor organization or group of employees of any of
the Prize Companies.
(b) Each of the Prize Companies is in material compliance with
all laws, rules, regulations and orders relating to the employment of labor,
including all such laws, rules, regulations and orders relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of income Tax withholding, Social
Security Taxes, Medicare Taxes and similar Taxes, except where the failure to
comply would not, individually or in the aggregate, have a Material Adverse
Effect on Prize.
3.20 ACCOUNTS RECEIVABLE. Except as set forth in the PRIZE DISCLOSURE
SCHEDULE: (a) all of the accounts, notes and loans receivable that have been
recorded on the books of the Prize Companies are bona fide and represent
accounts, notes and loans receivable validly due for goods sold or services
rendered and are reasonably expected to be collected in full within 90 days
after the applicable invoice or note maturity date (other than such accounts,
notes and loans receivable that, individually or in the aggregate, do not have a
book value as of the date hereof in excess of $500,000); (b) except for
Permitted Encumbrances, all of such accounts, notes and loans receivable are
free and clear of any and all Liens and other adverse claims and charges, and
none of such accounts, notes or loans receivable is subject to any offset or
claim of offset; and (c) none
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of the obligors on such accounts, notes or loans receivable has given notice to
any of the Prize Companies that it will or may refuse to pay the full amount or
any portion thereof.
3.21 INSURANCE. Each of the Prize Companies maintains, and through the
Closing Date will maintain, insurance with reputable insurers (or pursuant to
prudent self-insurance programs) in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to those of the Prize Companies and owning properties in the same
general area in which the Prize Companies conduct their businesses. None of such
insurance coverage was obtained through the use of false or misleading
information or the failure to provide the insurer with all information requested
in order to evaluate the liabilities and risks insured. There is no material
default with respect to any provision contained in any such policy or binder,
and none of the Prize Companies has failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. There are no
billed but unpaid premiums past due under any such policy or binder. Except as
set forth in the PRIZE DISCLOSURE SCHEDULE: (a) there are no outstanding claims
under any such policies or binders and, to the knowledge of Prize, there has not
occurred any event that might reasonably form the basis of any claim against or
relating to any of the Prize Companies that is not covered by any of such
policies or binders; (b) no notice of cancellation or non-renewal of any such
policies or binders has been received; and (c) there are no performance bonds
outstanding with respect to any of the Prize Companies.
3.22 INTANGIBLE PROPERTY. There are no material trademarks, trade
names, patents, service marks, brand names, computer programs, databases,
industrial designs, copyrights or other intangible property that are necessary
for the operation, or continued operation, of the business of any of the Prize
Companies or for the ownership and operation, or continued ownership and
operation, of any of their assets, for which the Prize Companies do not hold
valid and continuing authority in connection with the use thereof.
3.23 TITLE TO ASSETS. The Prize Companies (individually or
collectively) have Defensible Title to all Oil and Gas Interests of Prize
included or reflected in Prize's Ownership Interests and all of their other
assets. Each Oil and Gas Interest included or reflected in Prize's Ownership
Interests entitles the Prize Companies (individually or collectively) to receive
not less than the undivided interest set forth in (or derived from) the
Ownership Interests of Prize of all Hydrocarbons produced, saved and sold from
or attributable to such Oil and Gas Interest, and the portion of the costs and
expenses of operation and development of such Oil and Gas Interest that is borne
or to be borne by the Prize Companies (individually or collectively) is not
greater than the undivided interest set forth in (or derived from) Prize's
Ownership Interests.
3.24 OIL AND GAS OPERATIONS. Except as set forth in the PRIZE
DISCLOSURE SCHEDULE:
(a) All wells included in the Oil and Gas Interests of Prize
have been drilled and (if completed) completed, operated and produced in
accordance with generally accepted oil and gas field practices and in compliance
in all material respects with applicable oil and gas leases and
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applicable laws, rules and regulations, except where any failure or violation
could not reasonably be expected to have a Material Adverse Effect on Prize; and
(b) Proceeds from the sale of Hydrocarbons produced from
Prize's Oil and Gas Interests are being received by the Prize Companies in a
timely manner and are not being held in suspense for any reason (except in the
ordinary course of business).
3.25 FINANCIAL AND COMMODITY HEDGING. The PRIZE DISCLOSURE SCHEDULE
accurately summarizes as of the date hereof the outstanding Hydrocarbon and
financial hedging positions of the Prize Companies (including fixed price
controls, collars, swaps, caps, hedges and puts).
3.26 ENVIRONMENTAL MATTERS. Except as set forth in the PRIZE DISCLOSURE
SCHEDULE:
(a) Each of the Prize Companies has conducted its business and
operated its assets, and is conducting its business and operating its assets, in
material compliance with all Environmental Laws;
(b) None of the Prize Companies has been notified by any
Governmental Authority or other third party that any of the operations or assets
of any of the Prize Companies is the subject of any investigation or inquiry by
any Governmental Authority or other third party evaluating whether any material
remedial action is needed to respond to a release or threatened release of any
Hazardous Material or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Material;
(c) None of the Prize Companies and, to Prize's knowledge, no
other Person has filed any notice under any federal, state or local law
indicating that (i) any of the Prize Companies is responsible for the improper
release into the environment, or the improper storage or disposal, of any
Hazardous Material, or (ii) any Hazardous Material is improperly stored or
disposed of upon any property of any of the Prize Companies or any property
formerly owned, leased or operated by any of the Prize Companies;
(d) None of the Prize Companies has any material contingent
liability in connection with (i) the release or threatened release into the
environment at, beneath or on any property now or previously owned, leased or
operated by any of the Prize Companies, or (ii) the storage or disposal of any
Hazardous Material;
(e) None of the Prize Companies has received any claim,
complaint, notice, inquiry or request for information involving any matter which
remains unresolved as of the date hereof with respect to any alleged violation
of any Environmental Law or regarding potential liability under any
Environmental Law relating to or in connection with operations or conditions of
any facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or formerly
owned, leased or operated by any of the Prize Companies;
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(f) No property now or previously owned, leased or operated by
any of the Prize Companies is listed on the National Priorities List pursuant to
CERCLA or on the CERCLIS or on any other federal or state list as sites
requiring investigation or cleanup;
(g) All underground storage tanks and solid waste storage,
treatment and/or disposal facilities owned or operated by any of the Prize
Companies are used and operated in material compliance with Environmental Laws;
(h) None of the Prize Companies is transporting, has
transported, or is arranging or has arranged for the transportation of any
Hazardous Material to any location which is listed on the National Priorities
List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state list
or which is the subject of federal, state or local enforcement actions or other
investigations that may lead to material claims against any of the Prize
Companies for removal or remedial work, contribution for removal or remedial
work, damage to natural resources or personal injury, including claims under
CERCLA;
(i) The Prize Companies have obtained all material permits,
licenses, approvals and other authorizations that are required with respect to
the operation of the Prize Companies' properties and assets under the
Environmental Laws and are in material compliance with all terms and conditions
of such required permits, licenses, approvals and authorizations;
(j) There are no polychlorinated biphenyls or asbestos located
in, at, on or under any facility or real property owned, leased or operated by
any of the Prize Companies that require removal, decontamination or abatement
pursuant to Environmental Laws;
(k) There are no past or present events, conditions,
circumstances, activities, practices, incidents or actions that could reasonably
be expected to interfere with or prevent material compliance by any of the Prize
Companies with any Environmental Law, or that could reasonably be expected to
give rise to any material liability under the Environmental Laws;
(l) No Lien has been recorded against any property, facility
or assets currently owned by any of the Prize Companies under any Environmental
Law; and
(m) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not affect the
validity or require the transfer of any permits, licenses or approvals held by
any of the Prize Companies under any Environmental Law, and will not require any
notification, disclosure, registration, reporting, filing, investigation or
remediation under any Environmental law.
3.27 BOOKS AND RECORDS. All books, records and files of the Prize
Companies (including those pertaining to Prize's Oil and Gas Interests, wells
and other assets, those pertaining to the production, gathering, transportation
and sale of Hydrocarbons, and corporate, accounting, financial and employee
records): (a) have been prepared, assembled and maintained in accordance
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with usual and customary policies and procedures; and (b) fairly and accurately
reflect the ownership, use, enjoyment and operation by the Prize Companies of
their respective assets. Each of the Prize Companies maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(x) transactions are accurately and promptly recorded; (y) transactions are
executed in accordance with management's specific or general authorization; and
(z) access to its books, records and assets is permitted only in accordance with
management's general or specific authorization.
3.28 BROKERS. No broker, finder, investment banker or other Person is
or will be, in connection with the transactions contemplated by this Agreement,
entitled to any brokerage, finder's or other fee or compensation based on any
arrangement or agreement made by or on behalf of Prize and for which Parent or
any of the Prize Companies will have any obligation or liability.
3.29 YEAR 2000 COMPLIANCE. None of the Prize Companies will suffer a
Material Adverse Effect attributable to a lack of Year 2000 Compliance in any
system, process or equipment owned or utilized by any of the Prize Companies, or
any other aspect of their businesses or operations, or any system, process or
equipment of any of their material customers, suppliers or vendors.
3.30 POWERS OF ATTORNEY; AUTHORIZED SIGNATORIES. The PRIZE DISCLOSURE
SCHEDULE lists: (a) the names and addresses of all Persons holding powers of
attorney on behalf of any of the Prize Companies; and (b) the names of all banks
and other financial institutions in which any of the Prize Companies currently
have one or more bank accounts or safe deposit boxes, along with the account
numbers and the names of all persons authorized to draw on such accounts or to
have access to such safe deposit boxes.
3.31 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of each of the Prize Common Stock and the Prize
Preferred Stock is a sufficient vote of the holders of any class or series of
Prize capital stock or other voting securities to approve this Agreement, the
Merger and the transactions contemplated hereby.
3.32 GAS IMBALANCES. Except as set forth on the PRIZE DISCLOSURE
SCHEDULE, none of the Prize Companies has received any deficiency payment under
any gas contract for which any Person has a right to take deficiency gas from
any Prize Company, nor have any of the Prize Companies received any payment for
production which is subject to refund or recoupment out of future production.
3.33 ROYALTIES. To the knowledge of Prize, as to wells not operated by
a Prize Company, and without qualification as to knowledge, as to all wells
operated by a Prize Company, all royalties, overriding royalties, compensatory
royalties and other payments due from or in respect of production with respect
to Prize's Oil and Gas Interests, have been or will be, prior to
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the Effective Time, properly and correctly paid or provided for in all material
respects, except for those for which a Prize Company has a valid right to
suspend.
3.34 PREPAYMENTS. Except as set forth in the PRIZE DISCLOSURE SCHEDULE,
no prepayment for Hydrocarbon sales has been received by any of the Prize
Companies for Hydrocarbons which have not been delivered.
3.35 DISCLOSURE AND INVESTIGATION. No representation or warranty of
Prize set forth in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to Prize as follows:
4.1 ORGANIZATION. Each of the Parent Companies: (a) is a corporation
or, as applicable, a limited partnership or limited liability company, duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation; (b) has the requisite power and authority to own,
lease and operate its properties and to conduct its business as it is presently
being conducted; and (c) is duly qualified to do business as a foreign
corporation, limited partnership or limited liability company, as applicable,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation, limited partnership or limited liability company or to be
in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on Parent). Accurate and complete copies of the certificate or
articles of incorporation, bylaws, minute books and/or other organizational
documents of each of the Parent Companies have heretofore been delivered to
Prize. Parent has no corporate or other subsidiaries other than the Parent
Subsidiaries.
4.2 OTHER EQUITY INTERESTS. None of the Parent Companies owns any
equity interest in any general or limited partnership, corporation or limited
liability company other than as set forth on the PARENT DISCLOSURE SCHEDULE
(other than joint venture, joint operating, other ownership arrangements and tax
partnerships entered into in the ordinary course of business that, individually
or in the aggregate, are not material to the operations or business of the
Parent Companies, taken as a whole).
4.3 AUTHORITY AND ENFORCEABILITY. Each of Parent and Merger Sub has the
requisite corporate power and authority to enter into and deliver this Agreement
and (with respect to consummation of the transactions included in the Prize
Proposal, subject to the valid approval of
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the Prize Proposal by the stockholders of Parent) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and (with
respect to consummation of the transactions included in the Prize Proposal,
subject to the valid approval of the Prize Proposal by the stockholders of
Parent) the consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Parent
and Merger Sub, including approval by the board of directors of Parent and the
board of directors and the sole stockholder of Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the execution or delivery of this Agreement or (with respect to
consummation of the transactions included in the Prize Proposal, subject to the
valid approval of the Prize Proposal by the stockholders of Parent) to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub and (with respect to
consummation of the transactions included in the Prize Proposal, subject to the
valid approval of the Prize Proposal by the stockholders of Parent, and assuming
that this Agreement constitutes a valid and binding obligation of Prize)
constitutes a valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of them in accordance with its terms.
4.4 NO VIOLATIONS. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance by
Parent and Merger Sub with the provisions hereof will not, conflict with, result
in any violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of any of the Parent Companies
under, any provision of (a) the certificate of incorporation, bylaws or any
other organizational documents of any of the Parent Companies, (b) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other agreement or instrument applicable to any of the
Parent Companies (other than any such conflict, violation, default, right, loss
or Lien that may arise under the Parent Bank Credit Agreement), or (c) assuming
the consents, approvals, authorizations, permits, filings and notifications
referred to in Section 4.5 are duly and timely obtained or made, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to any of
the Parent Companies or any of their respective properties or assets, other
than, in the case of clause (b) or (c) above, any such conflict, violation,
default, right, loss or Lien that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent.
4.5 CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to any Parent Company in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except for the following: (a) any such consent, approval,
order, authorization, registration, declaration, filing or permit which the
failure to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or Prize; (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware pursuant to the
provisions of the DGCL; (c) the filing with the SEC of the Registration
Statement and such
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reports under Section 13(a) of the Exchange Act and such other compliance with
the Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from the SEC of such orders
as may be so required; (d) the filing with the AMEX of a listing application
relating to the shares of Parent Common Stock to be issued pursuant to the
Merger, upon conversion of the Parent Preferred Stock, and upon exercise of the
Prize Stock Options, and the obtaining from the AMEX of its approval thereof;
and (e) such filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws or Environmental Laws. No Third-Party
Consent is required by or with respect to any of the Parent Companies in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (x) any such Third-Party
Consent which the failure to obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Parent or Prize, (y) the valid approval of the
Prize Proposal by the stockholders of Parent, and (z) any consent, approval or
waiver required by the terms of the Parent Bank Credit Agreement.
4.6 SEC DOCUMENTS. Parent has provided to Prize a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC since December 31, 1998 (the "PARENT SEC
DOCUMENTS"), which are all the documents (other than preliminary material) that
Parent filed or was required to file with the SEC since such date. As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.7 FINANCIAL STATEMENTS. The Parent Financial Statements were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present, in accordance with applicable requirements of GAAP (in the
case of the unaudited statements, subject to normal, recurring adjustments), the
consolidated financial position of Parent and the Parent Subsidiaries as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of Parent and the Parent Subsidiaries for the periods
presented therein.
4.8 CAPITAL STRUCTURE.
(a) The authorized capital stock of Parent consists of
50,000,000 shares of Parent Common Stock. The authorized capital stock of Merger
Sub consists of 1,000 shares of Merger Sub Common Stock.
(b) There are issued and outstanding 16,367,328 shares of
Parent Common Stock. Twelve million six thousand seventy-three (12,006,073)
shares of Parent Common Stock
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are issuable upon exercise of outstanding Parent Warrants. Six thousand three
hundred (6,300) shares of Parent Common Stock are held by Parent as treasury
stock.
(c) Except as set forth in Section 4.8(b) and except for the
Parent Warrants described in the PARENT DISCLOSURE SCHEDULE, there are
outstanding (i) no shares of capital stock or other voting securities of Parent,
(ii) no securities of Parent or any other Person convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of Parent, and (iii) no options issued or outstanding under the
Parent Key Employees Stock Option Plan or any other subscriptions, options,
warrants, calls, rights (including preemptive rights), commitments,
understandings or agreements to which any of the Parent Companies is a party or
by which it is bound obligating Parent to issue, deliver, sell, purchase, redeem
or acquire shares of capital stock or other voting securities of Parent (or
securities convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities of Parent) or obligating Parent to grant,
extend or enter into any such subscription, option, warrant, call, right,
commitment, understanding or agreement.
(d) All outstanding shares of Parent capital stock are, and
(when issued) the shares of Parent Common Stock to be issued pursuant to the
Merger, upon the conversion of shares of Parent Preferred Stock to be issued in
the Merger, and upon exercise of the Prize Options (following consummation of
the Merger) will be, validly issued, fully paid and nonassessable and not
subject to any preemptive right.
(e) One thousand (1,000) shares of Merger Sub Common Stock are
issued and outstanding, all of which are owned by Parent. All outstanding shares
of capital stock and other voting securities of Merger Sub and of each of the
other corporate Parent Subsidiaries are (i) validly issued, fully paid and
nonassessable and not subject to any preemptive right, and (ii) owned by the
Parent Companies, free and clear of all Liens, claims and options of any nature
(except Permitted Encumbrances). There are outstanding (y) no securities of any
Parent Subsidiary or any other Person convertible into or exchangeable or
exercisable for shares of capital stock, other voting securities or other equity
interests of such Parent Subsidiary, and (z) no subscriptions, options,
warrants, calls, rights (including preemptive rights), commitments,
understandings or agreements to which any Parent Subsidiary is a party or by
which it is bound obligating such Parent Subsidiary to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock, other voting securities or
other equity interests of such Parent Subsidiary (or securities convertible into
or exchangeable or exercisable for shares of capital stock, other voting
securities or other equity interests of such Parent Subsidiary) or obligating
any Parent Subsidiary to grant, extend or enter into any such subscription,
option, warrant, call, right, commitment, understanding or agreement.
(f) Except as set forth in the PARENT DISCLOSURE SCHEDULE,
there is no stockholder agreement, voting trust or other agreement or
understanding to which Parent is a party or by which it is bound relating to the
voting of any shares of the capital stock of any of the Parent Companies.
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4.9 NO UNDISCLOSED LIABILITIES. There are no liabilities of any of the
Parent Companies of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that are reasonably likely to have a
Material Adverse Effect on Parent, other than (a) liabilities adequately
provided for in the Parent Financial Statements, (b) liabilities incurred in the
ordinary course of business subsequent to June 30, 1999, (c) liabilities under
this Agreement, and (d) liabilities set forth on the PARENT DISCLOSURE SCHEDULE.
4.10 INDEMNIFICATION. Except as set forth in the Parent Disclosure
Schedule, none of the Parent Companies has any presently effective
indemnification obligation (whether or not a claim has been asserted thereunder)
to any Person other than its present or former directors, officers, employees or
agents, as permitted by Section 145 of the DGCL, or in the ordinary course of
business.
4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise set
forth in the PARENT DISCLOSURE SCHEDULE or as specifically contemplated by this
Agreement, since June 30, 1999, none of the Parent Companies has done any of the
following:
(a) Discharged or satisfied any Lien or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business and consistent with past practices;
(b) Paid or declared any dividends or distributions,
purchased, redeemed, acquired or retired any indebtedness, stock or other
securities from its stockholders or other securityholders, made any loans or
advances or guaranteed any loans or advances to any Person (other than loans,
advances or guaranties made in the ordinary course of business and consistent
with past practices), or otherwise incurred or suffered to exist any liabilities
(other than current liabilities incurred in the ordinary course of business and
consistent with past practices);
(c) Except for Permitted Encumbrances, suffered or permitted
any Lien to arise or be granted or created against or upon any of its assets;
(d) Canceled, waived or released any rights or claims against,
or indebtedness owed by, third parties;
(e) Amended its certificate or articles of incorporation,
bylaws or other organizational documents;
(f) Made or permitted any amendment, supplement, modification
or termination of, or any acceleration under, any Parent Material Agreement;
(g) Sold, leased, transferred, assigned or otherwise disposed
of (i) any Oil and Gas Interests of Parent that, individually or in the
aggregate, were assigned a value in the Reserve Data Value of $100,000 or more,
or (ii) any other assets that, individually or in the aggregate, had
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a value at the time of such lease, transfer, assignment or disposition of
$100,000 or more (and, in each case where a sale, lease, transfer, assignment or
other disposition was made, it was made for fair consideration in the ordinary
course of business); provided, however, that this Section 4.11(g) shall not
apply to the sale of Hydrocarbons in the ordinary course of business;
(h) Made any investment in or contribution, payment, advance
or loan to any Person (other than investments, contributions, payments or
advances, or commitments with respect thereto, less than $100,000 in the
aggregate, made in the ordinary course of business and consistent with past
practices);
(i) Paid, loaned or advanced (other than the payment, advance
or reimbursement of expenses in the ordinary course of business) any amounts to,
or sold, transferred or leased any of its assets to, or entered into any other
transaction with, any of its Affiliates other than the Parent Companies;
(j) Made any material change in any of the accounting
principles followed by it or the method of applying such principles;
(k) Entered into any material transaction (other than this
Agreement) except in the ordinary course of business and consistent with past
practices;
(l) Increased benefits or benefit plan costs or changed bonus,
insurance, pension, compensation or other benefit plan or arrangement or granted
any bonus or increase in wages, salary or other compensation or made any other
change in employment terms to any officer, director or employee of any of the
Parent Companies (except in the ordinary course of business);
(m) Issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed money or
capitalized lease obligation involving more than $100,000 in the aggregate
(other than pursuant to the Parent Bank Credit Agreement);
(n) Delayed or postponed the payment of accounts payable or
other liabilities (except in the ordinary course of business);
(o) Canceled, compromised, waived or released any right or
claim (or series of related rights and claims) involving more than $100,000
(except in the ordinary course of business);
(p) Issued, sold, or otherwise disposed of any of its capital
stock or other equity interest or granted any option, warrant, or other right to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock or other equity interest;
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(q) Made any loan to, or entered into any other transaction
with, any of its directors, officers or employees (except in the ordinary course
of business);
(r) Made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(s) Made or committed to make capital expenditures in excess
of $4,000,000 in the aggregate;
(t) Made any change in any material Tax election or the manner
Taxes are reported;
(u) Entered into any swap, hedging or similar arrangement
which remains open;
(v) Accelerated the vesting period of any outstanding option
or warrant;
(w) Otherwise been involved in any other material occurrence,
event, incident, action, failure to act, or transaction involving any of the
Parent Companies (except in the ordinary course of business);
(x) Agreed, whether in writing or otherwise, to do any of the
foregoing; or
(y) Suffered any Material Adverse Effect (other than changes
or trends, including changes or trends in commodity prices, generally prevalent
in or affecting the oil and gas industry).
4.12 COMPLIANCE WITH LAWS, MATERIAL AGREEMENTS AND PERMITS. None of the
Parent Companies is in violation of, or in default in any material respect
under, and no event has occurred that (with notice or the lapse of time or both)
would constitute a violation of or default under: (a) its certificate or
articles of incorporation, bylaws or other organizational documents, (b) any
applicable law, rule, regulation, ordinance, order, writ, decree or judgment of
any Governmental Authority, or (c) any Parent Material Agreement, except (in the
case of clause (b) or (c) above) for any violation or default that would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Each
of the Parent Companies has obtained and holds all permits, licenses, variances,
exemptions, orders, franchises, approvals and authorizations of all Governmental
Authorities necessary for the lawful conduct of its business and the lawful
ownership, use and operation of its assets ("PARENT PERMITS"), except for Parent
Permits which the failure to obtain or hold would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. None of the Parent Permits
will be adversely affected by the consummation of the transactions contemplated
under this Agreement or requires any filing or consent in connection therewith.
Each of the Parent Companies is in compliance with the terms of its Parent
Permits, except where the failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. No investigation or review
by any Governmental Authority with
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respect to any of the Parent Companies is pending or, to the knowledge of
Parent, threatened, other than those the outcome of which would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. To
the knowledge of Parent, no other party to any Parent Material Agreement is in
material breach of the terms, provisions or conditions of such Parent Material
Agreement.
4.13 GOVERNMENTAL REGULATION. No Parent Company is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any state public utilities laws.
4.14 LITIGATION. Except as set forth in the PARENT DISCLOSURE SCHEDULE:
(a) no litigation, arbitration, investigation or other proceeding of any
Governmental Authority is pending or, to the knowledge of Parent, threatened
against any of the Parent Companies or their respective assets which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on Parent; and (b) no Parent Company is subject to any outstanding
injunction, judgment, order, decree or ruling (other than routine oil and gas
field regulatory orders). There is no litigation, proceeding or investigation
pending or, to the knowledge of Parent, threatened against or affecting any of
the Parent Companies that questions the validity or enforceability of this
Agreement or any other document, instrument or agreement to be executed and
delivered by Parent in connection with the transactions contemplated hereby.
4.15 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business or activity (or conducted any operations) of any
kind, entered into any agreement or arrangement with any person or entity, or
incurred, directly or indirectly, any liabilities or obligations, except in
connection with its incorporation, the negotiation of this Agreement, the Merger
and the transactions contemplated hereby.
4.16 NO RESTRICTIONS. Except as set forth in the PARENT DISCLOSURE
SCHEDULE, none of the Parent Companies is a party to: (a) any agreement,
indenture or other instrument that contains restrictions with respect to the
payment of dividends or other distributions with respect to its capital, other
than the Parent Bank Credit Agreement and antidilution adjustments under the
Parent Warrants; (b) any financial arrangement with respect to or creating any
indebtedness to any Person (other than indebtedness (i) reflected in the Parent
Financial Statements, (ii) under the Parent Bank Credit Agreement, or (iii)
incurred in the ordinary course of business since June 30, 1999) unless such
indebtedness would not and will not, individually or in the aggregate, result in
a Material Adverse Effect on the Parent Companies; (c) any agreement, contract
or commitment relating to the making of any advance to, or investment in, any
Person (other than restrictions under the Parent Bank Credit Agreement and
advances in the ordinary course of business); (d) any guaranty or other
contingent liability with respect to any indebtedness or obligation of any
Person (other than (i) guaranties pursuant to the Parent Bank Credit Agreement,
(ii) guaranties undertaken in the ordinary course of business, and (iii) the
endorsement of negotiable instruments for collection in
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the ordinary course of business); or (e) any agreement, contract or commitment
limiting in any respect its ability to compete with any Person or otherwise
conduct business of any line or nature.
4.17 AUDITS AND SETTLEMENTS. Except as set forth in the PARENT
DISCLOSURE SCHEDULE, none of the Parent Companies is a party or subject to any
(a) unresolved or incomplete Tax audit or settlement or (b) other audit
conducted by any other Person (other than Arthur Andersen LLP, independent
accountants of Parent) pursuant to a contractual or legal right.
4.18 TAXES.
(a) Each of the Parent Companies and any affiliated, combined
or unitary group of which any such entity is or was a member has: (i) timely
filed all Tax Returns required to be filed by it with respect to any Taxes; (ii)
timely paid all Taxes that are due and payable (except for Taxes that are being
contested in good faith by appropriate proceedings and for which sufficient
reserves have been established) for which any of the Parent Companies may be
liable; (iii) complied with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes; and (iv) timely withheld from employee
wages and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over.
(b) Except as set forth in the PARENT DISCLOSURE SCHEDULE: (i)
no audits or other administrative or court proceedings are presently pending
with regard to any federal, state or local income or franchise Taxes for which
any of the Parent Companies would be liable; and (ii) there are no pending
requests for rulings from any taxing authority, no outstanding subpoenas or
requests for information by any taxing authority with respect to any Taxes, no
proposed reassessments by any taxing authority of any property owned or leased,
and no agreements in effect to extend the time to file any Tax Return or the
period of limitations for the assessment or collection of any Taxes for which
any of the Parent Companies would be liable.
(c) Except as set forth in the PARENT DISCLOSURE SCHEDULE: (i)
there are no Liens on any of the assets of the Parent Companies for unpaid
Taxes, other than Liens for Taxes not yet due and payable; (ii) no Parent
Company has any liability under Treasury Regulation Section 1.1502-6 or any
analogous state, local or foreign law by reason of having been a member of any
consolidated, combined or unitary group, other than the affiliated group of
which Parent is the common parent corporation; (iii) no Parent Company has ever
been included in an affiliated group of corporations within the meaning of
Section 1504 of the Code other than the current affiliated group of which Parent
is the common parent corporation; and (iv) no Parent Company is or has been a
party to any Tax sharing agreement between related corporations.
(d) The amount of liability for unpaid Taxes of the Parent
Companies does not, in the aggregate, materially exceed the amount of the
liability accruals for Taxes reflected on the Parent Financial Statements.
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(e) Parent has made available to Prize complete copies of all
Tax Returns filed by the Parent Companies with respect to any Taxes and all Tax
audit reports, work papers, statements of deficiencies, and closing or other
agreements with respect thereto with respect to Tax years 1997 and 1998.
(f) Except as set forth in the PARENT DISCLOSURE SCHEDULE: (i)
no Parent Company is required to treat any of its assets as owned by another
person for federal income tax purposes or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168 of the Code; (ii)
no Parent Company has entered into any compensatory agreement which would result
in a nondeductible expense pursuant to Section 280G of the Code; (iii) no
election has been made under Section 338 of the Code and no events have occurred
which would result in a deemed election under Section 338 of the Code with
respect to any Parent Company; (iv) no election has been made under Section
341(f) of the Code with respect to any Parent Company; (v) no Parent Company has
participated in any international boycott as defined in Code Section 999; (vi)
there are no outstanding balances of deferred gain or loss accounts with respect
to any Parent Company under Treas. Reg. Sections 1.1502-13 or 1.1502-13T; (vii)
no Parent Company has made or will make any election under Treas. Reg. Section
1.502-20(g)(1) with respect to the reattribution of net operating losses; (viii)
no Parent Company is subject to any arrangement treated as a partnership for
federal income tax purposes; and (ix) no Parent Company has or has ever
conducted branch operations in any foreign country within the meaning of Treas.
Reg. Section 1.367(a)-6T.
(g) The books and records of Parent contain accurate and
complete information with respect to: (i) all material Tax elections in effect
with respect to the Parent Companies; (ii) the current Tax basis of the assets
of the Parent Companies; (iii) any excess loss accounts of any Parent Company;
(iv) the current and accumulated earnings and profits of Parent; (v) the net
operating losses and net capital losses of the Parent Companies, the years that
such net operating and net capital losses expire, and any restrictions to which
such net operating and net capital losses are subject under any provision of the
Code or consolidated return regulations; (vi) Tax credit carryovers of the
Parent Companies; and (vii) any overall foreign losses to the Parent Companies
under Section 904(f) of the Code.
(h) No shareholder of Parent that is a foreign corporation or
a nonresident alien individual has owned as much as five percent of the
outstanding stock of Parent at any time during the five year period ending on
the date hereof.
4.19 EMPLOYEE BENEFIT PLANS.
(a) The PARENT DISCLOSURE SCHEDULE sets forth a complete and
accurate list of each of the following which is or has been sponsored,
maintained or contributed to by Parent or any trade or business, whether or not
incorporated (a "PARENT ERISA AFFILIATE"), that together with Parent would be
considered affiliated with Parent or any Parent ERISA Affiliate under Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA for the
benefit of any
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person who, as of the Closing, is a current or former employee or subcontractor
of Parent: (i) each "employee benefit plan," as such term is defined in Section
3(3) of ERISA (each, a "PARENT PLAN"); and (ii) each personnel policy, stock
option plan, bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy, program or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, retiree benefit plan or arrangement, fringe benefit program
or practice (whether or not taxable), employee loan, consulting agreement,
employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding which is not described in
Section 4.19(a)(i) (each, a "PARENT BENEFIT PROGRAM OR AGREEMENT") (such Parent
Plans and Parent Benefit Programs or Agreements are sometimes collectively
referred to in this Agreement as the "PARENT EMPLOYEE BENEFIT PLANS").
(b) True, correct and complete copies of each of the Parent
Plans and related trusts, if applicable, including all amendments thereto, have
been furnished or made available to Prize. There has also been furnished or made
available to Prize, with respect to each Parent Plan required to file such
report and description, the report on Form 5500 for the past three years, to the
extent applicable, and the most recent summary plan description. True, correct
and complete copies or descriptions of all Parent Benefit Programs or Agreements
have also been furnished or made available to Prize.
(c) Except as otherwise set forth on the Parent Disclosure
Schedule: (i) neither Parent nor any Parent ERISA Affiliate contributes to or
has an obligation to contribute to, nor has at any time contributed to or had an
obligation to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA or any other plan subject to Title IV of ERISA; (ii) each of
Parent and the Parent ERISA Affiliates has performed all obligations, whether
arising by operation of law or by contract, including ERISA and the Code,
required to be performed by it in connection with the Parent Employee Benefit
Plans, and, to the knowledge of Parent, there have been no defaults or
violations by any other party to the Parent Employee Benefit Plans; (iii) all
reports, returns, notices, disclosures and other documents relating to the
Parent Plans required to be filed with or furnished to governmental entities,
plan participants or plan beneficiaries have been timely filed or furnished in
accordance with applicable law, and each Parent Employee Benefit Plan has been
administered in compliance with its governing written documents; (iv) each of
the Parent Plans intended to be qualified under Section 401 of the Code
satisfies the requirements of such Section and has received a favorable
determination letter from the IRS regarding such qualified status and has not
been amended, operated or administered in a way which would adversely affect
such qualified status; (v) there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of Parent, contemplated
or threatened against, or with respect to, any of the Parent Employee Benefit
Plans or their assets; (vi) each trust maintained in connection with each Parent
Plan, which is qualified under Section 401 of the Code, is tax exempt under
Section 501 of the Code; (vii) all contributions required to be made to the
Parent Employee Benefit Plans have been made timely; (viii) no accumulated
funding deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Section 412 of the Code has been incurred, and there has been no
termination or partial termination of any Parent Plan within the
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meaning of Section 411(d)(3) of the Code; (ix) no act, omission or transaction
has occurred which could result in imposition on Parent or any Parent ERISA
Affiliate of (A) breach of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i) or (1) of
Section 502 of ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle D
of the Code; (x) to the knowledge of Parent, there is no matter pending with
respect to any of the Parent Plans before the IRS, the Department of Labor or
the PBGC; (xi) each of the Parent Employee Benefit Plans complies, in form and
operation, with the applicable provisions of the Code and ERISA; (xii) each
Parent Employee Benefit Plan may be unilaterally amended or terminated in its
entirety without any liability or other obligation; (xiii) Parent and the Parent
ERISA Affiliates have no liabilities or other obligations, whether actual or
contingent, under any Parent Employee Benefit Plan for post- employment benefits
of any nature (other than COBRA continuation coverage and severance benefits
under Parent's Severance Benefit Plan referred to in Section 5.16); and (xiv)
neither Parent nor any of the Parent ERISA Affiliates or any present or former
director, officer, employee or other agent of Parent or any of the Parent ERISA
Affiliates has made any written or oral representations or promises to any
present or former director, officer, employee or other agent concerning his or
her terms, conditions or benefits of employment, including the tenure of any
such employment or the conditions under which such employment may be terminated
by Parent, any of the Parent ERISA Affiliates or Prize which will be binding
upon or enforceable against Parent or Prize after the Effective Time.
(d) Except as otherwise set forth on the Parent Disclosure
Schedule, no employee is currently on a leave of absence due to sickness or
disability and no claim is pending or expected to be made by an employee, former
employee or independent contractor for workers' compensation benefits.
(e) Except as set forth in the Parent Disclosure Schedule: (i)
with respect to the Parent Employee Benefit Plans, there exists no condition or
set of circumstances in connection with any of the Parent Companies that could
be expected to result in liability reasonably likely to have a Material Adverse
Effect on Parent under ERISA, the Code or any other applicable law; and (ii)
with respect to the Parent Employee Benefit Plans, individually and in the
aggregate, there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
GAAP, on the financial statements of the Parent Companies, which obligations are
reasonably likely to have a Material Adverse Effect on Parent.
(f) Except as set forth in the PARENT DISCLOSURE SCHEDULE,
neither the execution or delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any payment becoming due to any
employee or group of employees of any of the Parent Companies.
4.20 EMPLOYMENT CONTRACTS AND BENEFITS. Except as set forth in the
PARENT DISCLOSURE SCHEDULE or otherwise provided for in any Parent Employee
Benefit Plan: (a) none of the Parent Companies is subject to or obligated under
any consulting, employment, severance, termination or similar arrangement, any
employee benefit, incentive or deferred compensation plan
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with respect to any Person, or any bonus, profit sharing, pension, stock option,
stock purchase or similar plan or other arrangement or other fringe benefit plan
entered into or maintained for the benefit of employees of any of the Parent
Companies or any other Person; and (b) no employee of any of the Parent
Companies or any other Person owns, or has any right granted by any of the
Parent Companies to acquire, any interest in any of the assets or business of
any of the Parent Companies.
4.21 LABOR MATTERS.
(a) No employees of any of the Parent Companies are
represented by any labor organization. No labor organization or group of
employees of any of the Parent Companies has made a demand for recognition or
certification as a union or other labor organization, and there are no
representation or certification proceedings or petitions seeking a
representation or certification proceeding presently pending or threatened in
writing to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority. There are no organizing activities
involving any of the Parent Companies pending with any labor organization or
group of employees of any of the Parent Companies.
(b) Each of the Parent Companies is in material compliance
with all laws, rules, regulations and orders relating to the employment of
labor, including all such laws, rules, regulations and orders relating to wages,
hours, collective bargaining, discrimination, civil rights, safety and health,
workers' compensation and the collection and payment of income Tax withholding,
Social Security Taxes, Medicare Taxes and similar Taxes, except where the
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
4.22 ACCOUNTS RECEIVABLE. Except as set forth in the PARENT DISCLOSURE
SCHEDULE: (a) all of the accounts, notes and loans receivable that have been
recorded on the books of the Parent Companies are bona fide and represent
accounts, notes and loans receivable validly due for goods sold or services
rendered and are reasonably expected to be collected in full within 90 days
after the applicable invoice or note maturity date (other than such accounts,
notes and loans receivable that, individually or in the aggregate, do not have a
book value as of the date hereof in excess of $200,000); (b) except for
Permitted Encumbrances, all of such accounts, notes and loans receivable are
free and clear of any and all Liens and other adverse claims and charges, and
none of such accounts, notes or loans receivable is subject to any offset or
claim of offset; and (c) none of the obligors on such accounts, notes or loans
receivable has given notice to any of the Parent Companies that it will or may
refuse to pay the full amount or any portion thereof.
4.23 INSURANCE. Each of the Parent Companies maintains, and through the
Closing Date will maintain, insurance with reputable insurers (or pursuant to
prudent self-insurance programs) in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to those of the Parent Companies and owning properties in the same
general area in which the Parent Companies conduct their businesses. Each of the
Parent Companies may terminate each of its insurance policies or binders at or
after the Closing
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and will incur no penalties or other material costs in doing so. None of such
insurance coverage was obtained through the use of false or misleading
information or the failure to provide the insurer with all information requested
in order to evaluate the liabilities and risks insured. There is no material
default with respect to any provision contained in any such policy or binder,
and none of the Parent Companies has failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. There are no
billed but unpaid premiums past due under any such policy or binder. Except as
set forth in the PARENT DISCLOSURE SCHEDULE: (a) there are no outstanding claims
under any such policies or binders and, to the knowledge of Parent, there has
not occurred any event that might reasonably form the basis of any claim against
or relating to any of the Parent Companies that is not covered by any of such
policies or binders; (b) no notice of cancellation or non-renewal of any such
policies or binders has been received; and (c) there are no performance bonds
outstanding with respect to any of the Parent Companies.
4.24 INTANGIBLE PROPERTY. There are no material trademarks, trade
names, patents, service marks, brand names, computer programs, databases,
industrial designs, copyrights or other intangible property that are necessary
for the operation, or continued operation, of the business of any of the Parent
Companies, or for the ownership and operation, or continued ownership and
operation, of any of their assets, for which the Parent Companies do not hold
valid and continuing authority in connection with the use thereof.
4.25 TITLE TO ASSETS. The Parent Companies (individually or
collectively) have Defensible Title to all Oil and Gas Interests of Parent
included or reflected in Parent's Ownership Interests and all of their other
assets. Each Oil and Gas Interest included or reflected in the Parent's
Ownership Interests entitles the Parent Companies (individually or collectively)
to receive not less than the undivided interest set forth in (or derived from)
Parent's Ownership Interests of all Hydrocarbons produced, saved and sold from
or attributable to such Oil and Gas Interest, and the portion of the costs and
expenses of operation and development of such Oil and Gas Interest that is borne
or to be borne by Parent Companies (individually or collectively) is not greater
than the undivided interest set forth in (or derived from) Parent's Ownership
Interests.
4.26 OIL AND GAS OPERATIONS. Except as set forth in the PARENT
DISCLOSURE SCHEDULE:
(a) All wells included in the Oil and Gas Interests of Parent
have been drilled and (if completed) completed, operated and produced in
accordance with generally accepted oil and gas field practices and in compliance
in all material respects with applicable oil and gas leases and applicable laws,
rules and regulations, except where any failure or violation could not
reasonably be expected to have a Material Adverse Effect on Parent; and
(b) Proceeds from the sale of Hydrocarbons produced from
Parent's Oil and Gas Interests are being received by the Parent Companies in a
timely manner and are not being held in suspense for any reason (except in the
ordinary course of business).
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4.27 FINANCIAL AND COMMODITY HEDGING. The PARENT DISCLOSURE SCHEDULE
accurately summarizes the currently outstanding Hydrocarbon and financial
hedging positions of the Parent Companies (including fixed price controls,
collars, swaps, caps, hedges and puts).
4.28 ENVIRONMENTAL MATTERS. Except as set forth in the PARENT
DISCLOSURE SCHEDULE:
(a) Each of the Parent Companies has conducted its business
and operated its assets, and is conducting its business and operating its
assets, in material compliance with all Environmental Laws;
(b) None of the Parent Companies has been notified by any
Governmental Authority or other third party that any of the operations or assets
of any of the Parent Companies is the subject of any investigation or inquiry by
any Governmental Authority or other third party evaluating whether any material
remedial action is needed to respond to a release or threatened release of any
Hazardous Material or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Material;
(c) None of the Parent Companies and, to Parent's knowledge,
no other Person has filed any notice under any federal, state or local law
indicating that (i) any of the Parent Companies is responsible for the improper
release into the environment, or the improper storage or disposal, of any
Hazardous Material; or (ii) any Hazardous Material is improperly stored or
disposed of upon any property of any of the Parent Companies or any property
formerly owned, leased or operated by any of the Parent Companies;
(d) None of the Parent Companies has any material contingent
liability in connection with (i) the release or threatened release into the
environment at, beneath or on any property now or previously owned, leased or
operated by any of the Parent Companies, or (ii) the storage or disposal of any
Hazardous Material;
(e) None of the Parent Companies has received any claim,
complaint, notice, inquiry or request for information involving any matter which
remains unresolved as of the date hereof with respect to any alleged violation
of any Environmental Law or regarding potential liability under any
Environmental Law relating to or in connection with operations or conditions of
any facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or formerly
owned, leased or operated by any of the Parent Companies;
(f) No property now or previously owned, leased or operated by
any of the Parent Companies is listed on the National Priorities List pursuant
to CERCLA or on the CERCLIS or on any other federal or state list as sites
requiring investigation or cleanup;
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(g) All underground storage tanks and solid waste storage,
treatment and/or disposal facilities owned or operated by any of the Parent
Companies are used and operated in material compliance with Environmental Laws;
(h) None of the Parent Companies is transporting, has
transported, is arranging or has arranged for the transportation of any
Hazardous Material to any location which is listed on the National Priorities
List pursuant to CERCLA, on the CERCLIS, or on any similar federal or state list
or which is the subject of federal, state or local enforcement actions or other
investigations that may lead to material claims against any of the Parent
Companies for removal or remedial work, contribution for removal or remedial
work, damage to natural resources or personal injury, including claims under
CERCLA;
(i) The Parent Companies have obtained all material permits,
licenses, approvals and other authorizations that are required with respect to
the operation of the Parent Companies' properties and assets under the
Environmental Laws and are in material compliance with all terms and conditions
of such required permits, licenses, approvals and authorizations;
(j) There are no polychlorinated biphenyls or asbestos located
in, at, on or under any facility or real property owned, leased or operated by
any of the Parent Companies that require removal, decontamination or abatement
pursuant to Environmental Laws;
(k) There are no past or present events, conditions,
circumstances, activities, practices, incidents or actions that could reasonably
be expected to interfere with or prevent material compliance by any of the
Parent Companies with any Environmental Law, or that could reasonably be
expected to give rise to any material liability under the Environmental Laws;
(l) No Lien has been recorded against any property, facility
or assets currently owned by any of the Parent Companies under any Environmental
Law; and
(m) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not affect the
validity or require the transfer of any permits, licenses or approvals held by
any of the Parent Companies under any Environmental Law, and will not require
any notification, disclosure, registration, reporting, filing, investigation or
remediation under any Environmental law.
4.29 BOOKS AND RECORDS. All books, records and files of the Parent
Companies (including those pertaining to Parent's Oil and Gas Interests, wells
and other assets, those pertaining to the production, gathering, transportation
and sale of Hydrocarbons, and corporate, accounting, financial and employee
records): (a) have been prepared, assembled and maintained in accordance with
usual and customary policies and procedures; and (b) fairly and accurately
reflect the ownership, use, enjoyment and operation by the Parent Companies of
their respective assets. Each of the Parent Companies maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(x) transactions are accurately and promptly recorded;
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(y) transactions are executed in accordance with management's specific or
general authorization; and (z) access to its books, records and assets is
permitted only in accordance with management's general or specific
authorization.
4.30 BROKERS. Except for Dain Rauscher Wessels, which has been retained
by the Special Committee and whose fees will be paid by Parent, no broker,
finder, investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage, finder's
or other fee or compensation based on any arrangement or agreement made by or on
behalf of Parent and for which Parent or any of the Parent Companies will have
any obligation or liability.
4.31 YEAR 2000 COMPLIANCE. None of the Parent Companies will suffer a
Material Adverse Effect attributable to a lack of Year 2000 Compliance in any
system, process or equipment owned or utilized by any of the Parent Companies,
or any other aspect of their businesses or operations, or any system, process or
equipment of any of their material customers, suppliers or vendors.
4.32 POWERS OF ATTORNEY; AUTHORIZED SIGNATORIES. The PARENT DISCLOSURE
SCHEDULE lists: (a) the names and addresses of all Persons holding powers of
attorney on behalf of any of the Parent Companies; and (b) the names of all
banks and other financial institutions in which any of the Parent Companies
currently have one or more bank accounts or safe deposit boxes, along with the
account numbers and the names of all persons authorized to draw on such accounts
or to have access to such safe deposit boxes.
4.33 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Parent Common Stock is the only vote of the holders
of any class or series of Parent capital stock or other voting securities
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby.
4.34 GAS IMBALANCES. Except as set forth on the PARENT DISCLOSURE
SCHEDULE, none of the Parent Companies has received any deficiency payment under
any gas contract for which any Person has a right to take deficiency gas from
any Parent Company, nor have any of the Parent Companies received any payment
for production which is subject to refund or recoupment out of future
production.
4.35 ROYALTIES. To the knowledge of Parent, as to wells not operated by
a Parent Company, and without qualification as to knowledge, as to all wells
operated by a Parent Company, all royalties, overriding royalties, compensatory
royalties and other payments due from or in respect of production with respect
to Parent's Oil and Gas Interests, have been or will be, prior to the Effective
Time, properly and correctly paid or provided for in all material respects,
except for those for which a Parent Company has a valid right to suspend.
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4.36 PREPAYMENTS. Except as set forth in the PARENT DISCLOSURE
SCHEDULE, no prepayment for Hydrocarbon sales has been received by any of the
Parent Companies for Hydrocarbons which have not been delivered.
4.37 DISCLOSURE AND INVESTIGATION. No representation or warranty of
Parent or Merger Sub set forth in this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein not misleading.
ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS BY PARENT PENDING CLOSING. Parent covenants and
agrees with Prize that, from the date of this Agreement until the Effective
Time, each of the Parent Companies will conduct its business only in the
ordinary and usual course consistent with past practices. Notwithstanding the
preceding sentence, Parent covenants and agrees with Prize that, except as
specifically contemplated in this Agreement, from the date of this Agreement
until the Effective Time, without the prior written consent of Prize:
(a) None of the Parent Companies will (i) amend its
certificate or articles of incorporation, bylaws or other organizational
documents; (ii) split, combine or reclassify any of its outstanding capital
stock; (iii) declare, set aside or pay any dividends or other distributions
(whether payable in cash, property or securities) with respect to its capital
stock; (iv) issue, sell or agree to issue or sell any securities or other equity
interests, including its capital stock, any rights, options or warrants to
acquire its capital stock, or securities convertible into or exchangeable or
exercisable for its capital stock (other than shares of Parent Common Stock
issued pursuant to the exercise of any Parent Warrant outstanding on the date of
this Agreement); (v) purchase, cancel, retire, redeem or otherwise acquire any
of its outstanding capital stock or other securities or other equity interests;
(vi) merge or consolidate with, or transfer all or substantially all of its
assets to, any other Person; (vii) liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution); or (viii) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing.
(b) None of the Parent Companies will (i) acquire any
corporation, partnership or other business entity or any interest therein (other
than interests in joint ventures, joint operation or ownership arrangements or
tax partnerships acquired in the ordinary course of business); (ii) sell, lease
or sublease, transfer or otherwise dispose of or mortgage, pledge or otherwise
encumber any Oil and Gas Interests of Parent that were assigned a value in the
Reserve Data Value in excess of $100,000, individually, or any other assets that
have a value at the time of such sale, lease, sublease, transfer or disposition
in excess of $100,000, individually (except that this clause shall not apply to
the sale of Hydrocarbons in the ordinary course of business or to encumbrances
under the Parent Bank Credit Agreement); (iii) farm-out any Oil and Gas Interest
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of Parent or interest therein; (iv) sell, transfer or otherwise dispose of or
mortgage, pledge or otherwise encumber any securities of any other Person
(including any capital stock or other securities or equity interest in any
Parent Subsidiary); (v) make any material loans, advances or capital
contributions to, or investments in, any Person (other than loans or advances in
the ordinary course of business); (vi) enter into any Parent Material Agreement
or any other agreement not terminable by any of the Parent Companies upon notice
of 30 days or less and without penalty or other obligation; or (vii) enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing.
(c) None of the Parent Companies will (i) permit to be
outstanding at any time under the Parent Bank Credit Agreement indebtedness for
borrowed money in excess of $55,000,000; (ii) incur any indebtedness for
borrowed money other than under the Parent Bank Credit Agreement; (iii) incur
any other obligation or liability (other than liabilities incurred in the
ordinary course of business); (iv) assume, endorse (other than endorsements of
negotiable instruments in the ordinary course of business), guarantee or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the liabilities or obligations of any other Person; or (v) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing.
(d) The Parent Companies will operate, maintain and otherwise
deal with the Oil and Gas Interests of Parent in accordance with good and
prudent oil and gas field practices and in accordance with all applicable oil
and gas leases and other contracts and agreements and all applicable laws, rules
and regulations.
(e) None of the Parent Companies shall resign, transfer or
otherwise voluntarily relinquish any right it has as of the date of this
Agreement, as operator of any Oil and Gas Interest of Parent.
(f) None of the Parent Companies will (i) enter into, or
otherwise become liable or obligated under or pursuant to (1) any employee
benefit, pension or other plan (whether or not subject to ERISA), (2) any other
stock option, stock purchase, incentive or deferred compensation plan or
arrangement or other fringe benefit plan, or (3) any consulting, employment,
severance, termination or similar agreement with any Person, or amend or extend
any such plan, arrangement or agreement; (ii) except for payments made pursuant
to any Parent Employee Benefit Plan or any other plan, agreement or arrangement
described in the PARENT DISCLOSURE SCHEDULE, grant, or otherwise become liable
for or obligated to pay, any severance or termination payment, bonus or increase
in compensation or benefits (other than payments, bonuses or increases that are
mandated by the terms of agreements existing as of the date hereof or that are
paid in the ordinary course of business, consistent with past practices, and not
individually or in the aggregate material in amount) to, or forgive any
indebtedness of, any employee or consultant of any of the Parent Companies; or
(iii) enter into any contract, agreement, commitment or arrangement to do any of
the foregoing.
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(g) None of the Parent Companies will create, incur, assume or
permit to exist any Lien on any of its assets, except for Permitted
Encumbrances.
(h) The Parent Companies will (i) keep and maintain accurate
books, records and accounts; (ii) maintain in full force and effect the policies
or binders of insurance described in Section 4.23; (iii) pay all Taxes,
assessments and other governmental charges imposed upon any of their assets or
with respect to their franchises, business, income or assets before any penalty
or interest accrues thereon; (iv) pay all claims (including claims for labor,
services, materials and supplies) that have become due and payable and which by
law have or may become a Lien upon any of their assets prior to the time when
any penalty or fine shall be incurred with respect thereto or any such Lien
shall be imposed thereon; and (v) comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, obtain or take all Governmental Actions necessary in the
operation of their businesses, and comply with and enforce the provisions of all
Parent Material Agreements, including paying when due all rentals, royalties,
expenses and other liabilities relating to their businesses or assets; provided,
however, Parent will not be in violation of this Section 5.1(h) if any of the
Parent Companies incurs obligations for penalties and interest in connection
with gross production tax reporting in the ordinary course of business; and
provided further, that the Parent Companies may contest the imposition of any
such Taxes, assessments and other governmental charges, any such claim, or the
requirements of any applicable law, rule, regulation or order or any Parent
Material Agreement if done so in good faith by appropriate proceedings and if
adequate reserves are established in accordance with GAAP.
(i) The Parent Companies will at all times preserve and keep
in full force and effect their corporate existence and rights and franchises
material to their performance under this Agreement, except where the failure to
do so would not have a Material Adverse Effect on Parent.
(j) None of the Parent Companies will engage in any practice,
take any action or permit by inaction any of the representations and warranties
contained in Article 4 to become untrue, except: (i) the Parent Companies may
make or commit to make capital expenditures as described in the PARENT
DISCLOSURE SCHEDULE, not to exceed $5,000,000 in the aggregate; and (ii) the
Parent Companies may enter into fully covered commodity swap, hedging and
similar arrangements.
5.2 CONDUCT OF BUSINESS BY PRIZE PENDING CLOSING. Prize covenants and
agrees with Parent and Merger Sub that, from the date of this Agreement until
the Effective Time, each of the Prize Companies will conduct its business only
in the ordinary and usual course consistent with past practices. Notwithstanding
the preceding sentence, Prize covenants and agrees with Parent and Merger Sub
that, except as specifically contemplated in this Agreement, from the date of
this Agreement until the Effective Time, without the prior written consent of
Parent:
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(a) None of the Prize Companies will: (i) amend its
certificate of incorporation or bylaws; (ii) split, combine or reclassify any of
its outstanding capital stock; (iii) declare, set aside or pay any dividends or
other distributions (whether payable in cash, property or securities) with
respect to its capital stock (other than dividends payable in kind on the Prize
Preferred Stock, with the final dividend payment being made immediately before
the Closing); (iv) issue, sell or agree to issue or sell any securities or other
equity interests, including its capital stock, any rights, options or warrants
to acquire its capital stock, or securities convertible into or exchangeable or
exercisable for its capital stock (other than shares of Prize Common Stock
issued pursuant to the exercise of any Prize Stock Option or the conversion of
any shares of Prize Preferred Stock and shares of Prize Preferred Stock issued
as dividends on the Prize Preferred Stock); (v) purchase, cancel, retire, redeem
or otherwise acquire any of its outstanding capital stock or other securities or
other equity interests; (vi) merge or consolidate with, or transfer all or
substantially all of its assets to, any other Person; (vii) liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution); or (viii) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing.
(b) None of the Prize Companies will (i) acquire any
corporation, partnership or other business entity or any interest therein (other
than interests in joint ventures, joint operation or ownership arrangements or
tax partnerships acquired in the ordinary course of business) having an
acquisition price in excess of $500,000; (ii) sell, lease or sublease, transfer
or otherwise dispose of or mortgage, pledge or otherwise encumber any Oil and
Gas Interests of Prize that have a value in excess of $500,000, individually, or
any other assets that have a value at the time of such sale, lease, sublease,
transfer or disposition in excess of $500,000, individually (except that this
clause shall not apply to (A) the sale of Hydrocarbons in the ordinary course of
business, (B) transfers under the Exploration Agreement entered into or to be
entered into with Costilla Energy, Inc. ("COSTILLA"), or (C) encumbrances under
the Prize Bank Credit Agreement); (iii) farm-out any Oil and Gas Interest of
Prize having a value in excess of $500,000 or interest therein (other than
pursuant to the Exploration Agreement with Costilla); (iv) sell, transfer or
otherwise dispose of or mortgage, pledge or otherwise encumber any securities of
any other Person (including any capital stock or other securities or equity
interest in any Prize Subsidiary, but excluding the Costilla common stock held
by the Prize Companies); (v) make any material loans, advances or capital
contributions to, or investments in, any Person (other than loans or advances in
the ordinary course of business) in an aggregate amount in excess of $500,000;
(vi) enter into any Prize Material Agreement; or (vii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing.
(c) None of the Prize Companies will (i) permit to be
outstanding at any time under the Prize Bank Credit Agreement indebtedness for
borrowed money in excess of $150,000,000; (ii) incur any indebtedness for
borrowed money other than under the Prize Bank Credit Agreement; (iii) incur any
other obligation or liability (other than liabilities incurred in the ordinary
course of business); (iv) assume, endorse (other than endorsements of negotiable
instruments in the ordinary course of business), guarantee or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
liabilities or obligations of any
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other Person in an amount in excess of $500,000; or (v) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing.
(d) The Prize Companies will operate, maintain and otherwise
deal with the Oil and Gas Interests of Prize in accordance with good and prudent
oil and gas field practices and in accordance with all applicable oil and gas
leases and other contracts and agreements and all applicable laws, rules and
regulations.
(e) None of the Prize Companies shall voluntarily resign,
transfer or otherwise relinquish any right it has as of the date of this
Agreement, as operator of any Oil and Gas Interest of Prize, except as required
by law, regulation or contract.
(f) None of the Prize Companies will (i) enter into, or
otherwise become liable or obligated under or pursuant to: (1) any employee
benefit, pension or other plan (whether or not subject to ERISA), (2) any other
stock option, stock purchase, incentive or deferred compensation plan or
arrangement or other fringe benefit plan, or (3) any consulting, employment,
severance, termination or similar agreement with any Person, or amend or extend
any such plan, arrangement or agreement; (ii) except for payments made pursuant
to any Prize Employee Benefit Plan or any other plan, agreement or arrangement
described in the PRIZE DISCLOSURE SCHEDULE, grant, or otherwise become liable
for or obligated to pay, any severance or termination payment, bonus or increase
in compensation or benefits (other than payments, bonuses or increases that are
mandated by the terms of agreements existing as of the date hereof or that are
paid in the ordinary course of business, consistent with past practices, and not
individually or in the aggregate material in amount) to, or forgive any
indebtedness of, any employee or consultant; or (iii) enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
(g) None of the Prize Companies will create, incur, assume or
permit to exist any Lien on any of its assets, except for Permitted
Encumbrances.
(h) The Prize Companies will (i) keep and maintain accurate
books, records and accounts; (ii) maintain in full force and effect the policies
or binders of insurance described in Section 3.21; (iii) pay all Taxes,
assessments and other governmental charges imposed upon any of their assets or
with respect to their franchises, business, income or assets before any penalty
or interest accrues thereon; (iv) pay all claims (including claims for labor,
services, materials and supplies) that have become due and payable and which by
law have or may become a Lien upon any of their assets prior to the time when
any penalty or fine shall be incurred with respect thereto or any such Lien
shall be imposed thereon; and (v) comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, obtain or take all Governmental Actions necessary in the
operation of their businesses, and comply with and enforce the provisions of all
Prize Material Agreements, including paying when due all rentals, royalties,
expenses and other liabilities relating to their businesses or assets; provided,
however, Prize will not be in violation of this Section 5.2(h) if any of the
Prize Companies incurs obligations for penalties and interest in connection with
gross production tax reporting in the
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ordinary course of business; and provided further, that the Prize Companies may
contest the imposition of any such Taxes, assessments and other governmental
charges, any such claim, or the requirements of any applicable law, rule,
regulation or order or any Prize Material Agreement if done so in good faith by
appropriate proceedings and if adequate reserves are established in accordance
with GAAP.
(i) The Prize Companies will at all times preserve and keep in
full force and effect their corporate existence and rights and franchises
material to their performance under this Agreement, except where the failure to
do so would not have a Material Adverse Effect on Prize.
(j) None of the Prize Companies will engage in any practice,
take any action or permit by inaction any of the representations and warranties
contained in Article 3 to become untrue, except: (i) the Prize Companies may
make or commit to make capital expenditures as described in the PRIZE DISCLOSURE
SCHEDULE, not to exceed $20,000,000 in the aggregate; and (ii) the Prize
Companies may enter into fully covered commodity swap, hedging and similar
arrangements.
5.3 ACCESS TO ASSETS, PERSONNEL AND INFORMATION.
(a) From the date hereof until the Effective Time, Parent
shall: (i) afford to Prize and the Prize Representatives, at Prize's sole risk
and expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents and facilities of the Parent
Companies; and (ii) upon request, furnish promptly to Prize (at Prize's expense)
a copy of any file, book, record, contract, permit, correspondence, or other
written information, document or data concerning any of the Parent Companies (or
any of their respective assets) that is within the possession or control of any
of the Parent Companies.
(b) From the date hereof until the Effective Time, Prize
shall: (i) afford to Parent and the Parent Representatives, at Parent's sole
risk and expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents and facilities of the Prize
Companies; and (ii) upon request, furnish promptly to Parent (at Parent's
expense) a copy of any file, book, record, contract, permit, correspondence, or
other written information, document or data concerning any of the Prize
Companies (or any of their respective assets) that is within the possession or
control of any of the Prize Companies.
(c) Prize and the Prize Representatives shall, at Prize's sole
risk and expense, have the right to make an environmental and physical
assessment of the assets of the Parent Companies and, in connection therewith,
shall have the right to enter and inspect such assets and all buildings and
improvements thereon, conduct soil and water tests and borings and generally
conduct such tests, examinations, investigations and studies as Prize deems
necessary, desirable or appropriate for the preparation of engineering or other
reports relating to such assets, their condition and the presence of Hazardous
Materials and compliance with Environmental Laws. Parent shall be provided not
less than 24 hours prior notice of such activities, and Parent
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Representatives shall have the right to witness all such tests and
investigations. Prize shall (and shall cause the Prize Representatives to) keep
any data or information acquired by any such examinations and the results of any
analyses of such data and information strictly confidential and will not (and
will cause the Prize Representatives not to) disclose any of such data,
information or results to any Person unless otherwise required by law or
regulation and then only after written notice to Parent of the determination of
the need for disclosure. Prize shall indemnify, defend and hold the Parent
Companies and the Parent Representatives harmless from and against any and all
claims to the extent arising out of or as a result of the activities of Prize
and the Prize Representatives on the assets of the Parent Companies in
connection with conducting such environmental and physical assessment, except to
the extent of and limited by the negligence or willful misconduct of any of the
Parent Companies or any Parent Representative.
(d) Parent and the Parent Representatives shall, at Parent's
sole risk and expense, have the right to make an environmental and physical
assessment of the assets of the Prize Companies and, in connection therewith,
shall have the right to enter and inspect such assets and all buildings and
improvements thereon, conduct soil and water tests and borings and generally
conduct such tests, examinations, investigations and studies as Parent deems
necessary, desirable or appropriate for the preparation of engineering or other
reports relating to such assets, their condition and the presence of Hazardous
Materials and compliance with Environmental Laws. Prize shall be provided not
less than 24 hours prior notice of such activities, and Prize Representatives
shall have the right to witness all such tests and investigations. Parent shall
(and shall cause the Parent Representatives to) keep any data or information
acquired by any such examinations and the results of any analyses of such data
and information strictly confidential and will not (and will cause the Parent
Representatives not to) disclose any of such data, information or results to any
Person unless otherwise required by law or regulation and then only after
written notice to Prize of the determination of the need for disclosure. Parent
shall indemnify, defend and hold the Prize Companies and the Prize
Representatives harmless from and against any and all claims to the extent
arising out of or as a result of the activities of Parent and the Parent
Representatives on the assets of the Prize Companies in connection with
conducting such environmental and physical assessment, except to the extent of
and limited by the negligence or willful misconduct of any of the Prize
Companies or any Prize Representative.
(e) From the date hereof until the Effective Time, Parent will
fully and accurately disclose, and will cause each Parent Subsidiary to fully
and accurately disclose, to Prize and the Prize Representatives all information
that is (i) reasonably requested by Prize or any of the Prize Representatives,
(ii) known to any of the Parent Companies, and (iii) relevant in any manner or
degree to the value, ownership, use, operation, development or transferability
of the assets of any of the Parent Companies.
(f) From the date hereof until the Effective Time, Prize will
fully and accurately disclose, and will cause each Prize Subsidiary to fully and
accurately disclose, to Parent and the Parent Representatives all information
that is (i) reasonably requested by Parent or any of the Parent Representatives,
(ii) known to any of the Prize Companies, and (iii) relevant in any manner
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or degree to the value, ownership, use, operation, development or
transferability of the assets of any of the Prize Companies.
(g) From the date hereof until the Effective Time, each of
Parent and Prize shall: (i) furnish to the other, promptly upon receipt or
filing (as the case may be), a copy of each communication between such Party and
the SEC after the date hereof relating to the Merger or the Registration
Statement and each report, schedule, registration statement or other document
filed by such Party with the SEC after the date hereof relating to the Merger or
the Registration Statement; and (ii) promptly advise the other of the substance
of any oral communications between such Party and the SEC relating to the Merger
or the Registration Statement.
(h) Prize will (and will cause the Prize Subsidiaries and the
Prize Representatives to) fully cooperate in all reasonable respects with Parent
and the Parent Representatives in connection with Parent's examinations,
evaluations and investigations described in this Section 5.3. Parent will (and
will cause the Parent Subsidiaries and the Parent Representatives to) fully
cooperate in all reasonable respects with Prize and the Prize Representatives in
connection with Prize's examinations, evaluations and investigations described
in this Section 5.3.
(i) Prize will not (and will cause the Prize Subsidiaries and
the Prize Representatives not to), and Parent will not (and will cause the
Parent Subsidiaries and the Parent Representatives not to), use any information
obtained pursuant to this Section 5.3 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
(j) Notwithstanding anything in this Section 5.3 to the
contrary: (i) Prize shall not be obligated under the terms of this Section 5.3
to disclose to Parent or the Parent Representatives, or grant Parent or the
Parent Representatives access to, information that is within the possession or
control of any of the Prize Companies but subject to a valid and binding
confidentiality agreement with a third party without first obtaining the consent
of such third party, and Prize, to the extent reasonably requested by Parent,
will use its reasonable efforts to obtain any such consent; and (ii) Parent
shall not be obligated under the terms of this Section 5.3 to disclose to Prize
or the Prize Representatives, or grant Prize or the Prize Representatives access
to, information that is within the possession or control of any of the Parent
Companies but subject to a valid and binding confidentiality agreement with a
third party without first obtaining the consent of such third party, and Parent,
to the extent reasonably requested by Prize, will use its reasonable efforts to
obtain any such consent.
5.4 NO SOLICITATION.
(a) Immediately following the execution of this Agreement,
Parent will (and will direct and instruct each of the Parent Representatives to)
terminate any and all existing activities, discussions and negotiations with
third parties (other than Prize) with respect to any possible transaction
involving the acquisition of Parent Common Stock or any material portion of the
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assets, business or equity interests of any of the Parent Companies or the
merger or other business combination of any of the Parent Companies with or into
any such third party.
(b) Parent will not (and will direct and instruct the Parent
Representatives not to) solicit, initiate or knowingly encourage the submission
of, any offer or proposal to acquire all or any part of the Parent Common Stock
or all or any material portion of the assets or business of any of the Parent
Companies (other than the transactions contemplated by this Agreement), whether
by merger, purchase of assets, tender offer, exchange offer or otherwise (an
"ALTERNATIVE PROPOSAL"); provided, however, that: (i) if Parent or any Parent
Representative shall receive an Alternative Proposal, then Parent and the Parent
Representatives may enter into discussions or negotiations with respect to such
Alternative Proposal with the Person presenting such Alternative Proposal and
provide information to such Person if the board of directors of Parent
determines in good faith, after considering the advice of its legal counsel,
that such action is required in order for the board of directors of Parent to
act in a manner consistent with its fiduciary duties under applicable law, and
(ii) to the extent applicable, taking and disclosing to its stockholders a
position as contemplated by Rule 14e-2 promulgated under the Exchange Act or
from making any other disclosure to its stockholders with regard to an
Alternative Proposal, if the board of directors of Parent determines in good
faith, after considering the advice of its legal counsel, that such other
disclosure is required in order for the board of directors of Parent to act in a
manner consistent with its fiduciary duties under applicable law.
(c) If Parent or any Parent Representative receives an
Alternative Proposal and the board of directors of Parent determines in good
faith, after considering the advice of its legal counsel and financial advisor,
that the Alternative Proposal is a SUPERIOR PROPOSAL, then the board of
directors of Parent may approve and recommend such Superior Proposal and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement and the Merger. As used herein, a "SUPERIOR PROPOSAL" means an
Alternative Proposal which the board of directors of Parent determines in good
faith to be more favorable to Parent's stockholders from a financial point of
view than the Merger.
(d) Nothing in this Section 5.4 shall permit Parent to
terminate this Agreement except as specifically provided in Section 7.1.
5.5 PRIZE STOCKHOLDERS MEETING. Prize shall take all action necessary
in accordance with applicable law and its certificate of incorporation and
bylaws to convene a meeting of its stockholders as promptly as practicable after
the date hereof for the purpose of voting on the Prize Proposal. The board of
directors of Prize shall recommend approval of the Prize Proposal and shall take
all lawful action to solicit such approval, including timely mailing the Proxy
Statement/Prospectus to the stockholders of Prize. Notwithstanding the above,
however, the following shall be conditions to the mailing of the Proxy
Statement/Prospectus to the stockholders of Prize:
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(a) Prize shall have received an opinion (acceptable in form
and substance to Prize) from Conner & Winters, A Professional Corporation (or
such other firm as is reasonably acceptable to Prize), to the effect that (i)
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, (ii) each of Parent, Prize and
Merger Sub will be a party to such reorganization within the meaning of Section
368(b) of the Code, (iii) no gain or loss will be recognized by Parent, Prize or
Merger Sub as a result of the Merger, and (iv) no gain or loss will be
recognized by a stockholder of Prize as a result of the Merger with respect to
the shares of Prize Common Stock converted into shares of Parent Common Stock or
shares of Prize Preferred Stock converted into shares of Parent Preferred Stock
in the Merger, and such opinion shall not have been withdrawn, revoked or
modified. Such opinion may be based upon representations of the Parties and
stockholders of the Parties.
(b) Prize shall have received a letter from each of Arthur
Andersen LLP and Ernst & Young LLP, independent public accountants,
respectively, to Parent and Prize, addressed to Parent and Prize, dated as of
the date the Proxy Statement/Prospectus is first mailed to Prize's stockholders,
in form and substance reasonably satisfactory to Prize, in connection with such
accountants' review of certain financial and accounting matters contained in the
Proxy Statement/Prospectus and the Registration Statement.
5.6 PARENT STOCKHOLDERS MEETING. Parent shall take all action necessary
in accordance with applicable law and its certificate of incorporation and
bylaws to convene a meeting of its stockholders as promptly as practicable after
the date hereof for the purpose of voting on the Prize Proposal and any other
matters required to be approved by the stockholders of Parent in connection with
consummation of the Merger. Subject to its fiduciary duties and Section 5.4, the
board of directors of Parent shall recommend approval of the Prize Proposal and
other matters and shall take all lawful action to solicit such approval,
including timely mailing the Proxy Statement/Prospectus to the stockholders of
Parent. Notwithstanding the above, however, the following shall be conditions to
the mailing of the Proxy Statement/Prospectus to the stockholders of Parent:
(a) Parent shall have received an opinion from Dain Rauscher
Wessels or another firm of investment bankers or financial advisors selected by
the Special Committee (which opinion shall be reasonably acceptable in form and
substance to the Special Committee) to the effect that the Merger is fair to
Parent and its stockholders from a financial point of view, and such opinion
shall not have been withdrawn, revoked or modified.
(b) Parent shall have received a letter from each of Arthur
Andersen LLP and Ernst & Young LLP, independent public accountants,
respectively, to Parent and Prize, addressed to Parent and Prize, dated as of
the date the Proxy Statement/Prospectus is first mailed to Parent's
stockholders, in form and substance reasonably satisfactory to Parent, in
connection with such accountants' review of certain financial and accounting
matters contained in the Proxy Statement/Prospectus and the Registration
Statement.
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5.7 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS.
(a) Parent and Prize shall cooperate and promptly prepare the
Registration Statement to enable Parent to file the Registration Statement with
the SEC, as preliminary proxy material, as soon as practicable after the date
hereof and in any event not later than 45 days after the date hereof. Parent
shall use all reasonable efforts, and Prize shall cooperate with Parent
(including furnishing all information concerning Prize and the holders of Prize
Common Stock and Prize Preferred Stock as may be reasonably requested by
Parent), to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. Parent shall use
all reasonable efforts, and Prize shall cooperate with Parent, to obtain any
necessary state securities laws or "blue sky" permits, approvals and
registrations in connection with the issuance of Parent Common Stock and Parent
Preferred Stock pursuant to the Merger.
(b) Parent will cause the Registration Statement (including
the Proxy Statement/Prospectus), at the time it becomes effective under the
Securities Act, to comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder.
(c) Prize hereby covenants and agrees with Parent that: (i)
the Registration Statement (at the time it becomes effective under the
Securities Act and at the Effective Time) will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (provided,
however, that this clause (i) shall apply only to information contained in the
Registration Statement that was supplied by Prize for inclusion therein); and
(ii) the Proxy Statement/Prospectus (at the time it is first mailed to
stockholders of Prize and Parent, at the time of the Prize Meeting and the
Parent Meeting, and at the Effective Time) will not contain an 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 are made, not misleading (provided, however, that
this clause (ii) shall apply only to information contained in the Proxy
Statement/Prospectus that was supplied by Prize for inclusion therein). If, at
any time prior to the Effective Time, any event with respect to Prize, or with
respect to other information supplied by Prize for inclusion in the Registration
Statement, occurs and such event is required to be described in an amendment to
the Registration Statement, Prize shall promptly notify Parent of such
occurrence and shall cooperate with Parent in the preparation and filing of such
amendment. If, at any time prior to the Effective Time, any event with respect
to Prize, or with respect to other information included in the Proxy
Statement/Prospectus, occurs and such event is required to be described in a
supplement to the Proxy Statement/Prospectus, Prize shall promptly notify Parent
of such occurrence and shall cooperate with Parent in the preparation, filing
and dissemination of such supplement.
(d) Parent hereby covenants and agrees with Prize that: (i)
the Registration Statement (at the time it becomes effective under the
Securities Act and at the Effective Time) will not contain an untrue statement
of a material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein not misleading
(provided, however, that this clause (i) shall not apply to information
contained in the Registration Statement that was supplied by Prize for inclusion
therein); and (ii) the Proxy Statement/Prospectus (at the time it is first
mailed to stockholders of Prize and Parent, at the time of the Prize Meeting and
the Parent Meeting, and at the Effective Time) will not contain an 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 are made, not misleading (provided, however,
that this clause (ii) shall not apply to information contained in the Proxy
Statement/Prospectus that was supplied by Prize for inclusion therein). If, at
any time prior to the Effective Time, any event with respect to Parent, or with
respect to other information included in the Registration Statement, occurs and
such event is required to be described in an amendment to the Registration
Statement, such event shall be so described and such amendment shall be promptly
prepared and filed. If, at any time prior to the Effective Time, any event with
respect to Parent, or with respect to other information supplied by Parent for
inclusion in the Proxy Statement/Prospectus, occurs and such event is required
to be described in a supplement to the Proxy Statement/Prospectus, Parent shall
promptly notify Prize of such occurrence and shall cooperate with Prize in the
preparation, filing and dissemination of such supplement.
(e) Neither the Registration Statement nor the Proxy
Statement/Prospectus nor any amendment or supplement thereto will be filed or
disseminated to the stockholders of Prize or Parent without the approval of both
Parent and Prize. Parent shall advise Prize, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective under
the Securities Act, the issuance of any stop order with respect to the
Registration Statement, the suspension of the qualification of the Parent Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any comments or requests for additional information received
from the SEC, whether orally or in writing, with respect to the Registration
Statement.
5.8 STOCK EXCHANGE LISTING. Parent shall cause the shares of Parent
Common Stock to be issued in the Merger, upon conversion of the Parent Preferred
Stock to be issued in the Merger and upon exercise of the Prize Options to be
approved for listing on the AMEX, subject to official notice of issuance, prior
to the Closing Date.
5.9 ADDITIONAL ARRANGEMENTS. Subject to the terms and conditions herein
provided, each of Prize and Parent shall take, or cause to be taken, all action
and shall do, or cause to be done, all things necessary, appropriate or
desirable under any applicable laws and regulations or under applicable
governing agreements to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts to obtain
all necessary waivers, consents and approvals and effecting all necessary
registrations and filings. Each of Prize and Parent shall take, or cause to be
taken, all action or shall do, or cause to be done, all things necessary,
appropriate or desirable to cause the covenants and conditions applicable to the
transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Authority shall have issued any
order, decree, ruling or injunction, or taken
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any other action that would have the effect of restraining, enjoining or
otherwise prohibiting or preventing the consummation of the transactions
contemplated hereby, each of Prize and Parent shall use its reasonable efforts
to have such order, decree, ruling or injunction or other action declared
ineffective as soon as practicable.
5.10 AGREEMENTS OF AFFILIATES. At least 10 days prior to the Effective
Time, Prize shall cause to be prepared and delivered to Parent a list
identifying all Persons who, at the time of the Prize Meeting, may be deemed to
be "affiliates" of Prize as that term is used in paragraphs (c) and (d) of Rule
145 under the Securities Act. Prize shall use all reasonable efforts to cause
each Person who is identified as an Affiliate of Prize in such list to execute
and deliver to Parent, on or prior to the Closing Date, a written agreement, in
the form attached hereto as EXHIBIT 5.10. Parent shall be entitled to place
legends as specified in such agreements on the Parent Certificates representing
the Parent Common Stock or Parent Preferred Stock to be issued to such Persons
in the Merger.
5.11 PUBLIC ANNOUNCEMENTS. Prior to the Closing, Prize and Parent will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this Agreement
and shall not issue any press release or make any such public statement prior to
obtaining the approval of the other Party; provided, however, that such approval
shall not be required where such release or announcement is required by
applicable law or exchange rule or regulation; and provided further, that either
Prize or Parent may respond to inquiries by the press or others regarding the
transactions contemplated by this Agreement, so long as such responses are
consistent with such Party's previously issued press releases.
5.12 NOTIFICATION OF CERTAIN MATTERS. Prize shall give prompt notice to
Parent of any of the following: (a) any representation or warranty contained in
Article 3 being untrue or inaccurate when made; (b) the occurrence of any event
or development that would cause (or could reasonably be expected to cause) any
representation or warranty contained in Article 3 to be untrue or inaccurate on
the Closing Date; and (c) any failure of Prize to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. Parent shall give prompt notice to Prize of any of the following: (x)
any representation or warranty contained in Article 4 being untrue or inaccurate
when made; (y) the occurrence of any event or development that would cause (or
could reasonably be expected to cause) any representation or warranty contained
in Article 4 to be untrue or inaccurate on the Closing Date; and (z) any failure
of Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
5.13 PAYMENT OF EXPENSES. Each Party shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Merger
shall be consummated, except that: (a) the fee for filing the Registration
Statement with the SEC and the costs and expenses associated with printing the
Proxy Statement/Prospectus and complying with any applicable state securities or
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"blue sky" laws shall be borne by Parent; and (b) the costs and expenses
associated with mailing the Proxy Statement/Prospectus to the stockholders of
(i) Prize, and soliciting the votes of the stockholders of Prize, shall be borne
by Prize, and (ii) Parent, and soliciting the votes of the stockholders of
Parent, shall be borne by Parent.
5.14 REGISTRATION RIGHTS. At the Closing, Parent shall, and shall use
reasonable efforts to cause each of the parties to that certain Restated
Registration Rights Agreement for Vista Holders dated as of October 28, 1998, by
and among Parent and the security holders named therein to, execute and deliver
the Registration Rights Agreement. Prize shall use reasonable efforts to cause
each of the holders of Prize Common Stock and of Prize Preferred Stock to
execute and deliver the Registration Rights Agreement.
5.15 INDEMNIFICATION AND INSURANCE.
(a) Parent and Prize agree that all rights to indemnification
now existing in favor of any officers, directors, employees, controlling
stockholders or agents of any of the Parent Companies or any of the Prize
Companies, as provided in their respective charters or bylaws (or similar
organizational documents), and any existing indemnification agreements or
arrangements of any of the Parent Companies or any of the Prize Companies, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time (or such longer period as may be
provided in any existing indemnification agreement between any of the Parent
Companies or any of the Prize Companies, and any current or former officer or
director thereof); 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 final disposition of any and all
such claims.
(b) From and after the Effective Time, Parent shall, for a
period of six years after the Effective Time, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date of
this Agreement or who becomes prior to the Effective Time, an officer, director,
employee, controlling stockholder or agent of any of the Parent Companies or any
of the Prize Companies (collectively, the "INDEMNIFIED PARTIES") against all
losses, expenses (including attorneys' fees), claims, damages, liabilities and
amounts that are paid in settlement with the approval of the indemnifying party
(which approval shall not be unreasonably withheld) of, or otherwise in
connection with, any threatened or actual claim, action, suit, proceeding or
investigation (a "CLAIM"), based in whole or in part on or arising in whole or
in part out of the fact that the Indemnified Party (or the person controlled by
the Indemnified Party) is or was a director, officer, employee, controlling
stockholder or agent (including a trustee or fiduciary of any Parent Employee
Benefit Plan) and pertaining to any matter existing or arising out of actions or
omissions occurring at or prior to the Effective Time (including any Claim
arising out of this Agreement or any of the transactions contemplated hereby),
whether asserted or claimed prior to, at or after the Effective Time, in each
case to the fullest extent permitted under Delaware law, and shall pay any
expenses, as incurred, in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware law. In
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determining whether an Indemnified Party is entitled to indemnification under
this Section 5.15, if requested by such Indemnified Party, such determination
shall be made by special, independent counsel selected by Parent and approved by
the Indemnified Party (which approval shall not be unreasonably withheld), and
who has not otherwise performed services for Parent or any of its Affiliates
within the last three years (other than in connection with such matters).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party or Parties
(whether arising before or after the Effective Time): (i) such Indemnified Party
or Parties may retain Parent's regularly engaged independent legal counsel or
counsel satisfactory to them and reasonably satisfactory to Parent, and Parent
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Party or Parties as promptly as statements therefor are received; and (ii)
Parent will use all reasonable best efforts to assist in the vigorous defense of
any such matter, provided that Parent shall not be liable for any settlement
effected without its prior written consent, which consent shall not unreasonably
be withheld. In the event of any Claim, any Indemnified Party wishing to claim
indemnification will promptly notify Parent thereof (provided, that failure to
so notify Parent will not affect the obligations of Parent except to the extent
that Parent shall have been prejudiced as a result of such failure) and shall
deliver to Parent the undertaking contemplated by Section 145(e) of the DGCL,
but without any requirement for the posting of a bond. Without limiting the
foregoing, in the event any such Claim is brought against any of the Indemnified
Parties, such Indemnified Party or Parties may retain only one law firm (plus
one local counsel, if necessary) to represent them with respect to each such
matter unless the use of counsel chosen to represent the Indemnified Parties
would present such counsel with a conflict of interest, or the representation of
all of the Indemnified Parties by the same counsel would be inappropriate due to
actual or potential differing interests between them, in which case such
additional counsel as may be required (as shall be reasonably determined by the
Indemnified Parties and Parent) may be retained by the Indemnified Parties at
the cost and expense of Parent and Parent shall pay all reasonable fees and
expenses of such counsel for such Indemnified Parties. Parent shall use such
counsel for such Indemnified Parties. Parent shall use all reasonable best
efforts to assist in the vigorous defense of any such Claim; provided, that
Parent shall not be liable for any settlement effected without its written
consent, which consent, however, shall not be unreasonably withheld.
Notwithstanding the foregoing, nothing contained in this Section 5.15 shall be
deemed to grant any right to any Indemnified Party which is not permitted to be
granted to an officer, director, employee, controlling stockholder or agent of
Parent under Delaware law, assuming for such purposes that Parent's certificate
of incorporation and bylaws provide for the maximum indemnification permitted by
law.
(c) From and after the Effective Time, Parent shall cause to
be maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by Parent; provided, that (i) Parent may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous; (ii) such substitution shall not result in gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
(iii) Parent shall not be required to pay an annual premium in excess of 200% of
the last annual premium paid by Parent prior to the date
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hereof and if Parent is unable to obtain the insurance required by this Section
15(c) it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
(d) Following the Merger, if Parent or any of its successors
or assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person or Persons, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent and any of
their successors and assigns, assume the obligations of the Parties and Parent
set forth in this Section 5.15.
(e) This Section 5.15 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit Parent and the Indemnified
Parties (each of whom may enforce the provisions of this Section 5.15) and shall
be binding on the successors and assigns of Parent.
5.16 SEVERANCE PLAN. After the Closing, Parent shall take such action
as may be necessary to promptly pay the severance payments due under Parent's
Severance Plan, a copy of which is attached as EXHIBIT 5.16. The provisions of
this Section 5.16 are intended to be for the benefit of, and shall be
enforceable by, the Parties and each person entitled to receive a severance
payment pursuant to the terms of Parent's Benefit Severance Plan.
5.17 AMENDMENT OF PARENT CERTIFICATE OF INCORPORATION. Effective
immediately prior to the Closing, Parent shall amend its certificate of
incorporation to effect a one-for-seven reverse stock split of all issued and
outstanding shares of Parent Common Stock, an increase in the number of
authorized shares of Parent Common Stock to an aggregate of 40,000,000 shares
and otherwise as Parent and Prize may agree.
5.18 AUTHORIZATION OF PARENT PREFERRED STOCK. Prior to the Closing,
Parent shall take all such actions as may be required to authorize for issuance
the Parent Preferred Stock, including approval by the board of directors of
Parent of the Parent Preferred Stock Designation in substantially the form of
EXHIBIT 5.18 and the filing thereof in accordance with the DGCL.
5.19 JOINT PARTICIPATION AGREEMENT. At the Closing, Prize shall assign
to Parent all of the rights, and Parent shall assume all of the obligations, of
Prize under the Joint Participation Agreement.
5.20 VOTING AND SHAREHOLDERS AGREEMENT. At the Closing, the Prize
Voting and Shareholders Agreement shall be terminated and Parent shall execute
an agreement having substantially the same terms and conditions as the Prize
Voting and Shareholders Agreement in effect immediately prior to the Effective
Time with the holders of shares of the Prize Common Stock and the Prize
Preferred Stock which are being converted into shares of Parent Common
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Stock and Parent Preferred Stock, respectively, in the Merger, except revised to
reflect that the IPO (as defined in the Prize Voting and Shareholders Agreement)
has already occurred.
5.21 BYLAWS. At the Closing, Parent shall adopt a new set of bylaws
which are substantially the same as the bylaws of Prize as in effect immediately
prior to the Effective Time.
5.22 PIONEER VOTING AGREEMENT. The Parties acknowledge that Prize and
Pioneer are entering into an Agreement to Vote under which Pioneer is agreeing
to vote all of its shares of Prize Preferred Stock in favor of approval of the
Merger. Prize agrees that, at the request of Parent, Prize shall make reasonable
efforts to enforce its rights against Pioneer in the event of a breach of such
Agreement to Vote by Pioneer.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each Party to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions,
any or all of which may be waived in whole or in part by both Parent and Prize:
(a) STOCKHOLDER APPROVAL. The Prize Proposal shall have been
duly and validly approved and adopted by a vote of a majority of the shares of
Prize Common Stock and Prize Preferred Stock voting as separate classes and
otherwise as required by the DGCL and the certificate of incorporation and
bylaws of Prize. The Prize Proposal shall have been duly and validly approved
and adopted by the stockholders of Parent, all as required by the DGCL and the
certificate of incorporation and bylaws of Parent.
(b) OTHER APPROVALS. All consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from any
Governmental Authority or other Person in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by Prize, Parent and Merger Sub shall have been made or obtained (as the
case may be), except where the failure to obtain such consents, approvals,
permits and authorizations would not be reasonably likely to result in a
Material Adverse Effect on Parent or Prize or to materially adversely affect the
consummation of the Merger.
(c) SECURITIES LAW MATTERS. The Registration Statement shall
have been declared effective by the SEC under the Securities Act and shall be
effective at the Effective Time, and no stop order suspending such effectiveness
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend such effectiveness shall have been initiated and be continuing, and
all necessary approvals under state securities laws relating to the issuance or
trading of the shares of Parent Common Stock to be issued in the Merger shall
have been received.
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(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that, prior to
invoking this condition, each Party shall have complied fully with its
obligations under Section 5.9 and, in addition, shall use all reasonable efforts
to have any such decree, ruling, injunction or order vacated, except as
otherwise contemplated by this Agreement.
(e) ACCOUNTANTS' LETTER. Parent and Prize shall have received
a letter from Arthur Andersen LLP and Ernst & Young LLP, immediately prior to
the Effective Date, in form and substance reasonably satisfactory to each of
Parent and Prize, dated as of the Effective Date, which letter shall address
matters as are customary for transactions similar to those contemplated in this
Agreement.
(f) AMEX LISTING. The shares of Parent Common Stock to be
issued in the Merger, upon conversion of the Parent Preferred Stock to be issued
in the Merger, and upon exercise of the Prize Options shall have been authorized
for listing on the AMEX, subject to official notice of issuance.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Parent and Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Prize set forth in Article 3 shall be true and correct in all
material respects (provided that any representation or warranty contained
therein that is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) as of the date of this
Agreement and (except to the extent such representation or warranty speaks as of
an earlier date) as of the Closing Date as though made on and as of that time,
and Parent shall have received a certificate signed by a Responsible Officer of
Prize to such effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS BY PRIZE. Prize
shall have performed in all material respects all covenants and agreements
required to be performed by it under this Agreement at or prior to the Closing
Date, and Parent shall have received a certificate signed by a Responsible
Officer of Prize to such effect.
(c) LETTERS FROM PRIZE AFFILIATES. Parent shall have received
from each Person named in the list referred to in Section 5.10 an executed copy
of the agreement described in Section 5.10.
(d) NO MATERIAL ADVERSE CHANGE. From the date of this
Agreement through the Closing, there shall not have occurred any change in the
condition (financial or otherwise), operations or business of any of the Prize
Companies that would have or would be reasonably
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likely to have a Material Adverse Effect on Prize (other than changes, including
changes in commodity prices, generally affecting the oil and gas industry).
(e) FAIRNESS OPINION. The fairness opinion described in
Section 5.6(a) shall have been delivered and shall not have been withdrawn,
revoked or modified.
(f) LEGAL OPINION. Parent and Merger Sub shall have received
an opinion of Conner & Winters, A Professional Corporation, dated the Closing
Date, in form and substance reasonably acceptable to Parent, covering the
subjects set forth in Sections 3.1, 3.3, 3.4, 3.5 and 3.7.
6.3 CONDITIONS TO OBLIGATION OF PRIZE. The obligation of Prize to
effect the Merger is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by Prize:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub set forth in Article 4 shall be true and
correct in all material respects (provided that any representation or warranty
contained therein that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified hereby) as of the
date of this Agreement and (except to the extent such representation or warranty
speaks as of an earlier date) as of the Closing Date as though made on and as of
that time, and Prize shall have received a certificate signed by a Responsible
Officer of Parent to such effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS BY PARENT AND
MERGER SUB. Parent and Merger Sub shall have performed in all material respects
all covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing Date, and Prize shall have received a
certificate signed by a Responsible Officer of Parent to such effect.
(c) TAX OPINION. The tax opinion described in Section 5.5(a)
shall not have been withdrawn, revoked or modified.
(d) NO MATERIAL ADVERSE CHANGE. From the date of this
Agreement through the Closing, there shall not have occurred any change in the
condition (financial or otherwise), operations or business of any of the Parent
Companies that would have or would be reasonably likely to have a Material
Adverse Effect on Parent (other than changes, including changes in commodity
prices, generally affecting the oil and gas industry).
(e) RESIGNATIONS. Prize shall have received the written
resignations, effective the Closing Date, of all officers and members of the
boards of directors of each of the Parent Companies (except those designated by
Prize).
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(f) REGISTRATION RIGHTS AGREEMENT. Parent, Natural Gas
Partners II, L.P., Natural Gas Partners III, L.P. and the three most senior
executives of Parent shall have executed and delivered the Registration Rights
Agreement.
(g) DELIVERY OF TRANSFER INSTRUCTIONS. Parent shall have
delivered to its authorized transfer agent an irrevocable letter of instruction
in a form reasonably satisfactory to Prize authorizing and directing the
transfer to holders of shares of Prize Common Stock and/or of Prize Preferred
Stock one or more Parent Certificates representing those shares of Parent Common
Stock and/or of Parent Preferred Stock to be issued to such holders as Merger
Consideration upon surrender of such holders' certificates representing such
shares of Prize Common Stock and/or of Prize Preferred Stock.
(h) LEGAL OPINION. Prize shall have received an opinion of
Vinson & Elkins L.L.P., dated the Closing Date, in form and substance reasonably
acceptable to Prize, covering the subjects set forth in Sections 4.1, 4.3, 4.4,
4.5 and 4.8.
(i) JOINT PARTICIPATION AGREEMENT. Parent shall have assumed
the obligations of Prize under the Joint Participation Agreement as described in
Section 5.19.
(j) VOTING AND SHAREHOLDERS AGREEMENT. Parent shall have
executed and delivered the Voting and Shareholders Agreement as described in
Section 5.20.
(k) BYLAWS. Parent shall have adopted a new set of bylaws as
described in Section 5.21.
ARTICLE 7
TERMINATION
7.1 TERMINATION RIGHTS. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of the Prize Proposal by the stockholders of Prize and/or Parent,
respectively:
(a) By mutual written consent of Parent and Prize;
(b) By either Prize or Parent if (i) the Merger has not been
consummated by February 1, 2000 (provided, however, that the right to terminate
this Agreement pursuant to this clause (i) shall not be available to any Party
whose breach of any representation or warranty or failure to perform any
covenant or agreement under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date); (ii) any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other
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action shall have become final and nonappealable (provided, however, that the
right to terminate this Agreement pursuant to this clause (ii) shall not be
available to any Party until such Party has used all reasonable efforts to
remove such injunction, order or decree); (iii) the Prize Proposal shall not
have been approved by the required vote of the Prize stockholders at the Prize
Meeting; or (iv) the Prize Proposal shall not have been approved by the required
vote of the Parent stockholders at the Parent Meeting;
(c) By Parent if (i) there has been a breach in any material
respect of the representations and warranties made by Prize in Article 3
(provided, however, that any representation or warranty contained therein that
is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby, and provided, further, that
Parent shall not be entitled to terminate this Agreement pursuant to this clause
(i) unless Parent has given Prize notice of such breach and Prize has failed to
cure such breach within 10 days following such notice, but in any event not
later than February 1, 2000), and the condition described in Section 6.2(a),
other than the provision thereof relating to the certificate signed by a
Responsible Officer of Prize, would not be satisfied if the Closing were to
occur on the day on which Parent gives Prize notice of such termination; or (ii)
Prize has failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement and such failure has not been, or cannot
be, cured within 10 days after notice and demand for cure thereof, but in any
event not later than February 1, 2000;
(d) By Prize if (i) there has been a breach in any material
respect of the representations and warranties made by Parent and Merger Sub in
Article 4 (provided, however, that any representation or warranty contained
therein that is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby, and provided, further, that
Prize shall not be entitled to terminate this Agreement pursuant to this clause
(i) unless Prize has given Parent notice of such breach and Parent has failed to
cure such breach within 10 days following such notice, but in any event not
later than February 1, 2000), and the condition described in Section 6.3(a),
other than the provision thereof relating to the certificate signed by a
Responsible Officer of Parent, would not be satisfied if the Closing were to
occur on the day on which Prize gives Parent notice of such termination; or (ii)
Parent or Merger Sub has failed to comply in any material respect with any of
its respective covenants or agreements contained in this Agreement, and, in
either such case, such failure has not been, or cannot be, cured within 10 days
after notice and demand for cure thereof, but in any event not later than
February 1, 2000;
(e) By Parent if Parent is prepared to enter into a binding
definitive agreement to effect a Superior Proposal; or
(f) By Prize if the board of directors of Parent shall have
failed to recommend adoption of the Prize Proposal at the time the Proxy
Statement/Prospectus is first mailed to stockholders of Parent or shall have
amended or withdrawn any such recommendation and such recommendation is not
reinstated in its prior form within five business days after such amendment or
withdrawal.
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7.2 EFFECT OF TERMINATION. If this Agreement is terminated by either
Prize or Parent pursuant to the provisions of Section 7.1, this Agreement shall
forthwith become void except for, and there shall be no further obligation on
the part of any party hereto or its respective Affiliates, directors, officers
or stockholders except pursuant to, the provisions of Sections 5.3 (but only to
the extent of the confidentiality and indemnification provisions contained
therein), 5.7(c), 5.7(d), 5.11, 5.13 and 7.3, Article 8 and the Confidentiality
Agreement (which shall continue pursuant to their terms); provided, however,
that a termination of this Agreement shall not relieve any Party hereto from any
liability for damages incurred as a result of a breach by such Party of its
representations, warranties, covenants, agreements or other obligations
hereunder occurring prior to such termination.
7.3 FEES AND EXPENSES. If this Agreement is terminated pursuant to
Section 7.1(e), Parent shall promptly, but in no event later than one business
day after termination of this Agreement (a) pay to Prize, as a non-accountable
reimbursement to Prize and its Affiliates for all reasonable out-of-pocket fees,
costs and expenses incurred by any of them in connection with the transactions
contemplated by this Agreement an amount equal to $400,000, and (b) pay to Prize
an additional fee equal to $1,100,000, each such amount to be paid in same day
funds.
ARTICLE 8
MISCELLANEOUS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations or warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the consummation of the
Merger.
8.2 AMENDMENT. This Agreement may be amended by the Parties at any time
before or after approval of the Prize Proposal by the stockholders of Parent and
Prize; provided, however, that, after any such approval, no amendment shall be
made that by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by a written
instrument signed by an authorized representative of each of the Parties.
8.3 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally (effective upon
delivery), by facsimile transmission (effective on the next day after
transmission), by recognized overnight delivery service (effective on the next
day after delivery to the service), or by registered or certified mail, postage
prepaid and return receipt requested (effective on the fifth business day after
the date of mailing), at the following addresses or facsimile transmission
numbers (or at such other address(es) or facsimile transmission number(s) for a
Party as shall be specified by like notice):
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(a) If to Parent or Merger Sub: Vista Energy Resources, Inc.,
550 West Texas Avenue, Suite 700, Midland, Texas 79701, Attention: C. Randall
Hill, Chief Executive Officer (facsimile transmission number: (915) 688-0589),
with a copy (which shall not constitute notice) to Vinson & Elkins L.L.P., 2001
Ross Avenue, Suite 3700, Dallas, Texas 75201-2975 Attention:
A. Winston Oxley (facsimile transmission number: (214) 999-7891).
(b) If to Prize: Prize Energy Corp, 20 E. 5th Street, Suite
1400, Tulsa, Oklahoma 74103, Attention: Philip B. Smith, Chairman (facsimile
transmission number: 918-582-1547), with a copy (which shall not constitute
notice) to Robert A. Curry, Conner & Winters, 15 East 5th Street, Suite 3700,
Tulsa, Oklahoma 74103-4344 (facsimile transmission number: 918-586-8548).
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
8.5 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
8.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the Confidentiality Agreement and the documents and instruments
delivered by the Parties in connection with this Agreement) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the Parties with respect to the subject matter
hereof; and (b) except as provided in Article 2 and Sections 5.3(c), 5.3(d),
5.15 and 5.16, is solely for the benefit of the Parties and their respective
successors, legal representatives and assigns and does not confer on any other
Person any rights or remedies hereunder.
8.7 APPLICABLE LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
8.8 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each Party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any Party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby, unless the foregoing inconsistent action or the
failure to take any action
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constitutes a material breach of this Agreement or makes this Agreement
impossible to perform, in which case this Agreement shall terminate pursuant to
Article 7. Except as otherwise contemplated by this Agreement, to the extent
that a Party took an action inconsistent herewith or failed to take action
consistent herewith or required hereby pursuant to an order or judgment of a
court or other competent Governmental Authority, such Party shall not incur any
liability or obligation unless such Party breached its obligations under Section
5.9 or did not in good faith seek to resist or object to the imposition or
entering of such order or judgment.
8.9 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
8.10 WAIVERS. At any time prior to the Effective Time, the Parties may,
to the extent legally allowed: (a) extend the time for the performance of any of
the obligations or other acts of the other Parties, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive performance of any of the covenants or
agreements, or satisfaction of any of the conditions, contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in a written instrument signed by an authorized representative
of such Party. Except as provided in this Agreement, no action taken pursuant to
this Agreement, including any investigation by or on behalf of any Party, shall
be deemed to constitute a waiver by the Party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any Party of a breach of any provision hereof shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provisions hereof.
8.11 CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement shall
remain in full force and effect following the execution of this Agreement until
terminated as described in Section 7.2, is hereby incorporated herein by
reference and shall constitute a part of this Agreement for all purposes;
provided, however, that any standstill provisions contained therein will,
effective as of the Closing, be deemed to have been waived to the extent
necessary for the Parties to consummate the Merger in accordance with the terms
of this Agreement. Any and all information received by Parent and Prize pursuant
to the terms and provisions of this Agreement shall be governed by the
applicable terms and provisions of the Confidentiality Agreement.
8.12 SECTION 2.03. The Parties acknowledge and represent that the board
of directors of each Party has approved the terms of this Agreement and the
consummation of the transactions contemplated herein and that such approval is
sufficient to render the restrictions on business combinations set forth in
Section 2.03 of the DGCL inapplicable to the transactions contemplated herein.
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8.13 INCORPORATION. Exhibits and Schedules referred to herein are
attached to and by this reference incorporated herein for all purposes.
[This space is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives, on the date first written
above.
"Prize" "Parent"
PRIZE ENERGY CORP. VISTA ENERGY RESOURCES, INC.
By: /s/ PHILLIP B. SMITH By: /s/ C. RANDALL HILL
-------------------------------- ------------------------------------
Phillip B. Smith C. Randall Hill
Chairman and Chief Chairman and Chief
Executive Officer Executive Officer
"Merger Sub"
PEC ACQUISITION CORP.
By: /s/ C. RANDALL HILL
------------------------------------
C. Randall Hill
President
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