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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LOMAK PETROLEUM, INC.,
DEC ACQUISITION, INC.
AND
DOMAIN ENERGY CORPORATION
Dated May 12, 1998
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger..................................................1
Section 1.2 Effective Time of the Merger................................1
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation................................2
Section 2.2 Bylaws......................................................2
Section 2.3 Directors and Officers......................................2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Capital Stock.................................2
Section 3.2 Surrender and Payment.......................................3
Section 3.3 Company Stock Options.......................................5
Section 3.4 No Fractional Shares........................................7
Section 3.5 Closing.....................................................7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification..............................7
Section 4.2 Capitalization..............................................8
Section 4.3 Authority...................................................9
Section 4.4 Consents and Approvals; No Violation.......................10
Section 4.5 Company SEC Reports........................................11
Section 4.6 Financial Statements.......................................11
Section 4.7 Absence of Undisclosed Liabilities.........................11
Section 4.8 Absence of Certain Changes.................................11
Section 4.9 Taxes......................................................12
Section 4.10 Litigation.................................................13
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Section 4.11 Employee Benefit Plans; ERISA...............................13
Section 4.12 Environmental Liability.....................................14
Section 4.13 Compliance with Applicable Laws.............................15
Section 4.14 Insurance...................................................16
Section 4.15 Labor Matters; Employees....................................16
Section 4.16 Reserve Reports.............................................17
Section 4.17 Oil and Gas Reserves; Equipment.............................18
Section 4.18 Title to Oil and Gas Interests..............................19
Section 4.19 Title to Other Properties...................................21
Section 4.20 Permits.....................................................21
Section 4.21 Material Contracts..........................................21
Section 4.22 Required Stockholder Vote or Consent........................22
Section 4.23 Proxy Statement/Prospectus; Registration Statement..........22
Section 4.24 Intellectual Property.......................................23
Section 4.25 Hedging.....................................................23
Section 4.26 Brokers.....................................................23
Section 4.27 Opinion of Financial Advisor................................23
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOMAK AND MERGER SUB
Section 5.1 Organization and Qualification..............................24
Section 5.2 Capitalization..............................................25
Section 5.3 Authority...................................................25
Section 5.4 Consents and Approvals; No Violation........................26
Section 5.5 Lomak Financial Statements..................................27
Section 5.6 Absence of Undisclosed Liabilities..........................27
Section 5.7 Absence of Certain Changes..................................27
Section 5.8 Lomak SEC Reports...........................................28
Section 5.9 Taxes.......................................................28
Section 5.10 Litigation..................................................29
Section 5.11 Employee Benefit Plans; ERISA...............................29
Section 5.12 Environmental Liability.....................................30
Section 5.13 Compliance with Applicable Laws.............................31
Section 5.14 Insurance...................................................31
Section 5.15 Labor Matters...............................................32
Section 5.16 Reserve Reports.............................................32
Section 5.17 Oil and Gas Reserves; Equipment.............................33
Section 5.18 Title to Oil and Gas Interests..............................34
Section 5.19 Title to Other Properties...................................36
Section 5.20 Material Contracts..........................................36
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Section 5.21 Permits.....................................................37
Section 5.22 Required Stockholder Vote or Consent........................37
Section 5.23 Proxy Statement/Prospectus; Registration Statement..........37
Section 5.24 Intellectual Property.......................................38
Section 5.25 Hedging.....................................................38
Section 5.26 Brokers.....................................................38
Section 5.27 Merger Sub's Operations.....................................39
Section 5.28 Opinion of Financial Advisor................................39
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger.......39
Section 6.2 Conduct of Business by Lomak Pending the Merger.............41
Section 6.3 Conduct of Business of Merger Sub...........................43
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information......................................43
Section 7.2 Acquisition Proposals.......................................44
Section 7.3 Directors' and Officers' Indemnification....................44
Section 7.4 Further Assurances..........................................45
Section 7.5 Expenses....................................................46
Section 7.6 Cooperation.................................................46
Section 7.7 Publicity...................................................46
Section 7.8 Additional Actions..........................................46
Section 7.9 Filings.....................................................46
Section 7.10 Consents....................................................46
Section 7.11 Employee Matters; Benefit Plans.............................47
Section 7.12 Lomak Board.................................................47
Section 7.13 Stockholders Meetings.......................................47
Section 7.14 Preparation of the Proxy Statement/Prospectus and
Registration Statement......................................48
Section 7.15 Stock Exchange Listing......................................50
Section 7.16 Notice of Certain Events....................................50
Section 7.17 Site Inspections............................................50
Section 7.18 Chief Operating Officer.....................................50
Section 7.19 Charter Amendments; Name....................................50
Section 7.20 Voting Agreement............................................51
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to the Obligation of Each Party.................51
Section 8.2 Conditions to the Obligations of Lomak and Merger Sub......51
Section 8.3 Conditions to the Obligations of the Company...............52
ARTICLE IX
SURVIVAL
Section 9.1 Survival of Representations and Warranties.................52
Section 9.2 Survival of Covenants and Agreements.......................52
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination................................................53
Section 10.2 Effect of Termination......................................53
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices....................................................54
Section 11.2 Separability...............................................55
Section 11.3 Assignment.................................................55
Section 11.4 Interpretation.............................................55
Section 11.5 Counterparts...............................................55
Section 11.6 Entire Agreement...........................................55
Section 11.7 Governing Law..............................................55
Section 11.8 Attorneys' Fees............................................55
Section 11.9 No Third Party Beneficiaries...............................56
Section 11.10 Disclosure Schedules.......................................56
Section 11.11 Amendments, Waivers, Etc...................................56
Section 11.12 No Waiver..................................................56
Schedule 6.1(m) -- Company Employee Benefit Plan Amendments
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DEFINITIONS
-----------
DEFINED TERMS
Action...........................................................Section 7.3(a)
Affiliate........................................................Section 3.3(a)
Ancillary Agreements................................................Section 4.3
Assessment.........................................................Section 7.17
Audit............................................................Section 4.9(f)
Closing.............................................................Section 3.5
Closing Date........................................................Section 3.5
Closing Date Market Price........................................Section 3.1(a)
Code................................................................Section 1.3
Common Stock Certificate.........................................Section 3.1(a)
Company................................................................Preamble
Company Acquisition Proposal.....................................Section 7.2(b)
Company Benefit Plans...........................................Section 4.11(a)
Company Breach..................................................Section 10.1(d)
Company Classified Property.....................................Section 4.18(a)
Company Common Stock................................................Section 3.1
Company Designees..................................................Section 7.12
Company Disclosure Schedule......................................Section 4.1(a)
Company Engagement Letters ........................................Section 4.26
Company ERISA Affiliate.........................................Section 4.11(a)
Company Financial Statements........................................Section 4.6
Company Material Adverse Effect..................................Section 4.1(c)
Company Material Contracts......................................Section 4.21(a)
Company Permitted Encumbrances..................................Section 4.18(a)
Company Reserve Report..........................................Section 4.16(a)
Company SEC Reports.................................................Section 4.5
Company Special Meeting.........................................Section 7.13(a)
Company Stock Options............................................Section 3.3(a)
Company Stockholder Approval.......................................Section 4.22
Customary Post-Closing Consents.................................Section 4.18(a)
DGCL................................................................Section 1.1
D&O Insurance....................................................Section 7.3(b)
Effective Time......................................................Section 1.2
Enforceability Exception............................................Section 4.3
Environmental Laws..............................................Section 4.12(a)
ERISA...........................................................Section 4.11(a)
Exchange Act.....................................................Section 3.3(f)
Exchange Agent...................................................Section 3.2(a)
Exchange Fund....................................................Section 3.2(a)
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Exchange Ratio....................................................Section 3.1(a)
GAAP.................................................................Section 4.6
Governmental Authority............................................Section 4.4(b)
Hazardous Substances.............................................Section 4.12(b)
Hydrocarbons.....................................................Section 4.16(a)
Inspected Party.....................................................Section 7.17
Inspecting Party....................................................Section 7.17
Intellectual Property...............................................Section 4.24
Liens............................................................Section 4.18(a)
Lomak...................................................................Preamble
Lomak Benefit Plans..............................................Section 5.11(a)
Lomak Classified Property........................................Section 5.18(a)
Lomak Common Stock................................................Section 3.1(a)
Lomak Disclosure Schedule.........................................Section 5.1(a)
Lomak ERISA Affiliate............................................Section 5.11(a)
Lomak Engagement Letters............................................Section 5.26
Lomak Financial Statements...........................................Section 5.5
Lomak Material Adverse Effect.....................................Section 5.1(d)
Lomak Material Contracts.........................................Section 5.20(a)
Lomak Permitted Encumbrances.....................................Section 5.18(a)
Lomak Preferred Stock.............................................Section 5.2(a)
Lomak Reserve Report.............................................Section 5.16(a)
Lomak SEC Reports....................................................Section 5.8
Lomak Special Meeting............................................Section 7.13(b)
Lomak Stockholder Approval..........................................Section 5.22
Merger..................................................................Preamble
Merger Consideration..............................................Section 3.1(a)
Merger Sub..............................................................Preamble
NYSE..............................................................Section 3.1(a)
Oil and Gas Interests............................................Section 4.16(a)
PBGC.............................................................Section 4.11(b)
PCBs.............................................................Section 4.12(e)
Permits.............................................................Section 4.20
Person............................................................Section 3.2(d)
Principal Stockholder................................................Section 4.3
Proxy Statement/Prospectus..........................................Section 4.23
Registration Statement..............................................Section 4.23
SEC...............................................................Section 3.1(a)
Securities Act....................................................Section 4.4(b)
Stockholders.....................................................Section 10.1(c)
Stock Issuance.......................................................Section 5.3
Stock Purchase Agreement.............................................Section 4.3
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Subsidiary........................................................Section 4.1(c)
Surviving Corporation................................................Section 1.1
Tax Authority.....................................................Section 4.9(f)
Tax Returns.......................................................Section 4.9(f)
Taxes.............................................................Section 4.9(b)
Termination Fee......................................................Section 7.5
Trading Day.......................................................Section 3.1(a)
Voting Agreement.....................................................Section 4.3
WARN Act.........................................................Section 4.15(b)
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated May 12,
1998, by and among Lomak Petroleum, Inc., a Delaware corporation ("Lomak"), DEC
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Lomak
("Merger Sub"), and Domain Energy Corporation, a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Lomak, Merger Sub and
the Company deem it advisable and in the best interests of their respective
stockholders that Merger Sub merge (the "Merger") with and into the Company upon
the terms and subject to the conditions set forth herein, and such Boards of
Directors have approved the Merger; and
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2 hereof), Merger Sub
shall be merged with and into the Company in accordance with the applicable
provisions of the General Corporation Law of the State of Delaware (the "DGCL")
and the separate corporate existence of Merger Sub shall thereupon cease, and
the Company shall be the surviving corporation in the Merger (sometimes referred
to herein as the "Surviving Corporation"). The Merger shall have the effects set
forth in Section 259 of the DGCL, including without limitation, the Surviving
Corporation's succession to and assumption of all rights and obligations of the
Company.
Section 1.2 Effective Time of the Merger. The Merger shall become
effective (the "Effective Time") when a properly executed Certificate of Merger
is duly filed with the Secretary of State of the State of Delaware, which filing
shall be made as soon as practicable after the satisfaction or waiver of the
conditions set forth in Article VIII hereof.
Section 1.3 Tax Treatment. The parties acknowledge that the
transactions contemplated by this Agreement, taken together with the
transactions contemplated by the Stock Purchase Agreement (as defined below),
are not intended to be treated as a tax-free reorganization within the meaning
of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation at
and after the Effective Time.
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Section 2.2 Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation at
and after the Effective Time, and thereafter may be amended in accordance with
their terms and as provided by the Certificate of Incorporation of the Surviving
Corporation and the DGCL.
Section 2.3 Directors and Officers. At and after the Effective Time,
(a) the Board of Directors of Merger Sub immediately prior to the Effective Time
shall be the Board of Directors of the Surviving Corporation and (b) the
officers of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in the case of both clause (a) and (b)
until their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws and the
DGCL.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of the
Company's common stock, par value $.01 per share (the "Company Common Stock"):
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock, if any, held by Lomak, Merger Sub or any Subsidiary of Lomak) shall be
converted into a number of shares of common stock, par value $.01 per share, of
Lomak ("Lomak Common Stock") equal to the Exchange Ratio. The Exchange Ratio
shall be equal to the quotient of (i) $14.50 divided by (ii) the Closing Date
Market Price (rounded to four decimal places); provided, however, that in no
event shall the Exchange Ratio be greater than 1.2083 nor less than 0.8529. The
term "Closing Date Market Price" shall mean the average of the closing sales
price of Lomak Common Stock, rounded to four decimal places, as reported under
"NYSE Composite Transaction Reports" in The Wall Street Journal during the
period of the 15 most recent Trading Days ending on the third Business Day prior
to the Closing Date. For purposes of this Agreement, (1) "Trading Day" shall
mean a day on which the New York Stock Exchange (the "NYSE") is open for trading
and (2) "Business Day" shall mean a day on which the principal offices of the
Securities and Exchange Commission ("SEC") in Washington, D.C. are open to
accept filings, or in the case of determining a date on which any payment is
due, a day other than Saturday, Sunday or any day on which banks located in New
York City are authorized or obligated by law to close. All such Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and the holder of a
certificate ("Common Stock Certificate") that, immediately prior to the
Effective Time, represented outstanding shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such Common Stock Certificate, the number of shares of Lomak
Common Stock determined pursuant to this Section 3.1(a) (the "Merger
Consideration") and, if applicable, the right to receive cash pursuant to
Section 3.6 of this Agreement. Until surrendered as contemplated by this Section
3.1, each Common Stock Certificate
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shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration as contemplated by this
Section 3.1. Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Lomak Common Stock or
Company Common Stock shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
(b) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one share of common stock of the Surviving
Corporation.
(c) Each share of Lomak Common Stock, issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Lomak Common Stock, and shall not be affected by the Merger.
(d) Each share of Company Common Stock, if any, held by Lomak,
Merger Sub or any other Subsidiary of Lomak and each share of Company Common
Stock held by the Company or any Subsidiary of the Company as treasury stock
immediately prior to the Effective Time shall cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor, and shall
cease to exist.
(e) All Lomak Common Stock issued upon the surrender of Common
Stock Certificates in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Common Stock
Certificates and the Company Common Stock formerly represented thereby.
Section 3.2 Surrender and Payment.
(a) Prior to the Effective Time, Lomak shall appoint an agent
reasonably acceptable to the Company (the "Exchange Agent") for the purpose of
exchanging Common Stock Certificates formerly representing Company Common Stock.
At or prior to the Effective Time, Lomak shall deposit with the Exchange Agent
for the benefit of the holders of Company Common Stock (other than Lomak, Merger
Sub, any other Subsidiary of Lomak, the Company or any Subsidiary of the
Company), for exchange in accordance with this Section 3.2 through the Exchange
Agent, (i) as of the Effective Time, certificates representing the Merger
Consideration to be issued pursuant to Section 3.1(a) and (ii) from time to time
as necessary, cash to be paid in lieu of fractional shares pursuant to Section
3.4 (such certificates for the Merger Consideration and such cash being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Merger Consideration and any
cash in exchange for surrendered Common Stock Certificates formerly representing
Company Common Stock pursuant to Section 3.1 out of the Exchange Fund. Except as
contemplated by Section 3.2(f), the Exchange Fund shall not be used for any
other purpose.
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(b) Promptly after the Effective Time, but in any event not
later than five Business Days thereafter, Lomak will send, or will cause the
Exchange Agent to send, to each holder of a Common Stock Certificate or
Certificates that immediately prior to the Effective Time represented
outstanding Company Common Stock (other than Lomak, Merger Sub, any other
Subsidiary of Lomak or the Company or any Subsidiary of the Company) a letter of
transmittal and instructions for use in effecting the exchange of such Common
Stock Certificates for certificates representing the Merger Consideration and,
if applicable, cash in lieu of a fractional share. Provision also shall be made
for holders of Common Stock Certificates to procure in person immediately after
the Effective Time a letter of transmittal and instructions and to deliver in
person immediately after the Effective Time such letter of transmittal and
Common Stock Certificates in exchange for the Merger Consideration and, if
applicable, cash.
(c) After the Effective Time, Common Stock Certificates shall
represent the right, upon surrender thereof to the Exchange Agent, together with
a duly executed and properly completed letter of transmittal relating thereto,
to receive in exchange therefor that number of whole shares of Lomak Common
Stock, and, if applicable, cash that such holder has the right to receive
pursuant to Sections 3.1 and 3.4 after giving effect to any required tax
withholding, and the Common Stock Certificate or Certificates so surrendered
shall be canceled. No interest will be paid or will accrue on any cash amount
payable upon the surrender of any such Common Stock Certificates. Until so
surrendered, each such Common Stock Certificate shall, after the Effective Time,
represent for all purposes only the right to receive, upon such surrender, the
Merger Consolidation and, if applicable, cash as contemplated by this Article
III.
(d) If any shares of Lomak Common Stock are to be issued
and/or cash to be paid to a Person other than the registered holder of the
Common Stock Certificate or Certificates surrendered in exchange therefor, it
shall be a condition to such issuance that the Common Stock Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such issuance shall pay to the
Exchange Agent any transfer or other taxes required as a result of such issuance
to a Person other than the registered holder or establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable. For
purposes of this Agreement, "Person" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a governmental or political subdivision or any
agency or instrumentality thereof.
(e) After the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
of Company Common Stock outstanding prior to the Effective Time. If, at or after
the Effective Time, Common Stock Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided for, and in
accordance with the procedures set forth, in this Article III.
(f) Any Merger Consideration and any cash in the Exchange Fund
that remain unclaimed by the holders of Company Common Stock six months after
the Effective Time shall be returned to Lomak, upon demand of Lomak, and any
such holder who has not exchanged such holder's Common Stock Certificates in
accordance with this Section 3.2 prior to that time shall thereafter look only
to Lomak, as general creditors thereof, to exchange such Common Stock
Certificates or to pay amounts to which they are entitled pursuant to Section
3.1 or 3.4. If
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outstanding Common Stock Certificates are not surrendered prior to two years
after the Effective Time (or, in any particular case, prior to such earlier date
on which any Merger Consideration issuable in respect of such Common Stock
Certificates or the dividends and other distributions, if any, described below
would otherwise escheat to or become the property of any governmental unit or
agency), the Merger Consideration issuable in respect of such Common Stock
Certificates, and the amount of dividends and other distributions, if any, which
have become payable and which thereafter become payable on the Merger
Consideration evidenced by such Common Stock Certificates as provided herein
shall, to the extent permitted by applicable law, become the property of Lomak,
free and clear of all claims or interest of any Person previously entitled
thereto. Notwithstanding the foregoing, none of Lomak, the Company or the
Surviving Corporation shall be liable to any holder of Common Stock Certificates
for any amount paid, or Merger Consideration, cash or dividends delivered, to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) No dividends or other distributions declared or made after
the Effective Time shall be paid to the holder of any unsurrendered Common Stock
Certificates with respect to the Merger Consideration represented thereby until
such Common Stock Certificates are surrendered as provided in this Section 3.2.
Subject to the effect of applicable laws (including, without limitation, escheat
and abandoned property laws), following surrender of any such Common Stock
Certificate, there shall be paid, without interest, to the Person in whose name
the certificates representing the Merger Consideration issued in exchange
therefor are registered, (i) promptly all dividends and other distributions paid
in respect of such Merger Consideration with a record date on or after the
Effective Time and theretofore paid, and (ii) at the appropriate date, all
dividends or other distributions in respect of such Merger Consideration with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender.
(h) If any Common Stock Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Common Stock Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as Lomak may direct as indemnity against any claim that
may be made against it with respect to such Common Stock Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed Common
Stock Certificate the Merger Consideration and, if applicable, cash and unpaid
dividends and other distributions on any Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
Section 3.3 Company Stock Options.
(a) At the Effective Time, automatically and without any
action on the part of the holder thereof, each outstanding stock option of the
Company outstanding at the Effective Time (the "Company Stock Options") under
the Second Amended and Restated 1996 Stock Purchase and Option Plan for Domain
Energy Corporation and its affiliates, as defined in Rule 12b-2 of the Exchange
Act ("Affiliates") (as proposed to be adopted by the stockholders of the Company
at their 1998 Annual Meeting (the "Company Employee Plan") and the Domain Energy
Corporation 1997 Stock Option Plan for Nonemployee Directors (the "Company
Director Plan") shall be assumed by Lomak and become an option to purchase that
number of shares of Lomak Common Stock obtained by multiplying the number of
shares of Company Common Stock issuable upon the exercise of such
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option by the Exchange Ratio at an exercise price per share equal to the per
share exercise price of such option divided by the Exchange Ratio and otherwise
upon the same terms and conditions as such outstanding options to purchase
Company Common Stock; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of the qualifications under Section
422 or 423 of such Code, the exercise price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall comply with Section 424(a) of the Code.
(b) At the Effective Time, automatically and without any
action by any Person, (i) each outstanding Company Stock Option that constitutes
a "Time Option" (as defined in the Company Employee Plan) then held by an
employee of the Company or any of its Subsidiaries and (ii) each outstanding
Company Stock Option issued under the Company Director Plan shall become
immediately exercisable. Further, at the Effective Time and giving effect to
consummation of the Merger, automatically and without any action by any Person,
Lomak acknowledges and agrees that the Investment Return Hurdle (as defined in
certain of the Amended and Restated Non-Qualified Stock Option Agreements
granted and executed pursuant to the Company Employee Plan) will be satisfied.
Prior to the Effective Time, the Company may amend all Amended and Restated
NonQualified Stock Option Agreements granted and executed pursuant to the
Company Employee Plan to provide that after the date hereof, if an optionee's
employment is terminated as a result of death or disability, or if the Company
or Lomak (as successor to the Company's obligations under such agreements, as
contemplated elsewhere herein) terminates the optionee's employment without
Cause (as defined in such agreements), or if the optionee terminates his or her
employment for Good Reason (as defined in such agreements), all "Performance
Options" granted thereunder, if not then exercisable, shall, upon such
termination of employment, automatically and without any action by any Person,
become immediately exercisable. Prior to the Effective Time, the Company may
also amend the Company Director Plan or take such other action in each case to
the extent necessary so that all stock options granted pursuant thereto shall
become fully exercisable.
(c) Lomak shall take all corporate actions necessary to
reserve for issuance a sufficient number of shares of Lomak Common Stock for
delivery upon exercise of Company Stock Options assumed by Lomak pursuant to
Section 3.3(a) above.
(d) As promptly as practicable after the Effective Time, Lomak
shall file a Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Lomak Common Stock subject to
Company Stock Options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(e) Except as provided herein or as otherwise agreed to by the
parties, each of the Company Employee Plan and the Company Director Plan and
related stock option grant agreements providing for the issuance or grant of
options in respect to the stock of the Company shall be assumed as of the
Effective Time by Lomak with such amendments thereto as are permitted hereunder
or as otherwise may be required (i) to give effect to the provisions of this
Agreement and (ii) to reflect the Merger.
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(f) In connection with the submission of the Proxy
Statement/Prospectus to its stockholders, Lomak shall seek such stockholder
approval as may be necessary so that grants of options and issuances of
securities pursuant to the exercise of such options under the Company stock
option plans assumed by it hereunder, as amended, and all other Company stock
option plans as in effect on the date hereof shall qualify for the exemption for
such issuances provided by Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Section 3.4 No Fractional Shares. No fractional shares of Lomak Common
Stock shall be issued in the Merger and fractional share interests shall not
entitle the owner thereof to vote or to any rights of a stockholder of Lomak.
All holders of fractional shares of Lomak Common Stock shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying the
fraction of a share of Lomak Common Stock to which such holder would otherwise
have been entitled by the Closing Date Market Price of Lomak Common Stock on the
NYSE.
Section 3.5 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas, or at such other location
as shall be mutually acceptable to Lomak and the Company, at 10:00 a.m., local
time, on the first day (the "Closing Date") on which all of the conditions set
forth in Article VIII hereof are satisfied or waived, or at such other date and
time as Lomak and the Company shall agree in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Lomak and Merger Sub as follows:
Section 4.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions set forth in Section 4.1(a) of the disclosure letter delivered to
Lomak and Merger Sub contemporaneously with the execution hereof (the "Company
Disclosure Schedule"), which include each jurisdiction in which the character of
the Company's properties or the nature of its business makes such qualification
necessary, except in jurisdictions, if any, where the failure to be so qualified
would not result in a Company Material Adverse Effect (as defined below). The
Company has all requisite corporate power and authority to own, use or lease its
properties and to carry on its business as it is now being conducted and as it
is now proposed to be conducted. The Company has made available to Lomak and
Merger Sub a complete and correct copy of its certificate of incorporation and
bylaws, each as amended to date, and the Company's certificate of incorporation
and bylaws as so delivered are in full force and effect. The Company is not in
default in any respect in the performance, observation or fulfillment of any
provision of its certificate of incorporation or bylaws.
(b) Section 4.1(b) of the Company Disclosure Schedule lists
the name and jurisdiction of organization of each Subsidiary of the Company and
the jurisdictions in which each
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such Subsidiary (as defined below) is qualified or holds licenses to do business
as a foreign corporation or other organization as of the date hereof. Each of
the Company's Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business as a foreign
corporation or other legal entity and is in good standing in the jurisdictions
listed in Section 4.1(b) of the Company Disclosure Schedule, which includes each
jurisdiction in which the character of such Subsidiary's properties or the
nature of its business makes such qualification necessary, except in
jurisdictions, if any, where the failure to be so qualified would not result in
a Company Material Adverse Effect. Each of the Company's Subsidiaries has the
requisite corporate or other power and authority to own, use or lease its
properties and to carry on its business as it is now being conducted and as it
is now proposed to be conducted. The Company has made available to Lomak and
Merger Sub a complete and correct copy of the certificate of incorporation and
bylaws (or similar organizational documents) of each of the Company's
Subsidiaries, each as amended to date, and the certificate of incorporation and
bylaws (or similar organizational documents) as so delivered are in full force
and effect. No Subsidiary of the Company is in default in any respect in the
performance, observation or fulfillment of any provision of its certificate of
incorporation or bylaws (or similar organizational documents). Other than the
Company's Subsidiaries, the Company does not own (beneficially or otherwise) or
control, directly or indirectly, 5% or more of any class of equity or similar
securities of any corporation or other organization, whether incorporated or
unincorporated.
(c) For purposes of this Agreement, (i) a "Company Material
Adverse Effect" shall mean any event, circumstance, condition, development or
occurrence (x) causing, resulting in or having (or with the passage of time
likely to cause, result in or have) a material adverse effect on the financial
condition, business, assets, properties, prospects or results of operations of
the Company and its Subsidiaries, taken as a whole, or (y) preventing or
delaying in any material respect the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement by the Company or any
of its Subsidiaries; provided, that such term shall not include effects that
result from market conditions generally in the oil and gas industry; and (ii)
"Subsidiary" shall mean, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (x) at least a
majority of the securities or other interests having by their terms voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly beneficially owned or controlled by such party or by any one or more
of its subsidiaries, or by such party and one or more of its subsidiaries, or
(y) such party or any Subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Company Common Stock. As of the date of this Agreement, (i)
15,107,719 shares of Company Common Stock were issued and outstanding and (ii)
stock options to acquire 962,527 shares of Company Common Stock were outstanding
under all stock option plans and agreements of the Company. All of the
outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable, and free of preemptive rights. Section 4.2(a) of the Company
Disclosure Schedule sets forth each optionee under the Company Stock Options and
the numbers of shares of Company Common Stock issuable upon exercise of such
Company Stock Options. Except as set
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forth in Section 4.2(a) of the Company Disclosure Schedule, there are no
outstanding subscriptions, options, rights, warrants, convertible securities,
stock appreciation rights, phantom equity, or other agreements or commitments
obligating the Company to issue, transfer, sell, redeem, repurchase or otherwise
acquire any shares of its capital stock of any class.
(b) Except as set forth in Section 4.2(b) of the Company
Disclosure Schedule and except as expressly contemplated by this Agreement, the
Company is, directly or indirectly, the record and beneficial owner of all of
the outstanding shares of capital stock of each Company Subsidiary, there are no
irrevocable proxies with respect to any such shares, and no equity securities of
any Company Subsidiary are or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock of any Company Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any Company Subsidiary is or may be bound to issue additional shares
of capital stock of any Company Subsidiary or securities convertible into or
exchangeable or exercisable for any such shares. All of such shares so owned by
the Company are validly issued, fully paid and nonassessable and, except as set
forth in Section 4.2(b) of the Company Disclosure Schedule, are owned by it free
and clear of all Liens.
Section 4.3 Authority. The Company has full corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby (the "Ancillary Agreements") to which the Company is or will
be a party and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to which the Company is or will be a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Company's Board of Directors, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the Ancillary Agreements to which the Company is or will be a party or to
consummate the transactions contemplated hereby or thereby, other than the
approval of this Agreement and the Merger by its stockholders as contemplated by
Section 7.13 hereof. This Agreement has been, and the Ancillary Agreements to
which the Company is or will be a party are, or upon execution will be, duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof and thereof by the other parties
hereto and thereto, constitute, or upon execution will constitute, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as such enforceability may be subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting the rights of creditors and of general principles of
equity (the "Enforceability Exception"). The Company has taken all actions
necessary to satisfy or render inapplicable the restrictions on business
combinations contained in Section 203 of the DGCL with respect to the
transactions contemplated hereby, including the Merger, as well as the execution
and delivery by Lomak and First Reserve Fund VII, Limited Partnership, a
Delaware limited partnership (the "Principal Stockholder"), of each of that
certain Stock Purchase Agreement dated of even date herewith (the "Stock
Purchase Agreement") and that certain Voting and Standstill Agreement dated of
even date herewith (the "Voting Agreement"), as well as the consummation of the
transactions contemplated by each such agreement. No other state takeover
statute or similar statute or regulation of the State of Delaware (and, to the
knowledge of the Company, of any other domestic state or jurisdiction) applies
or purports to apply to the Company or any of its Subsidiaries, or to this
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Agreement, the Merger, the Stock Purchase Agreement, the Voting Agreement or any
of the other transactions contemplated hereby or thereby.
Section 4.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the performance by the Company of its obligations hereunder will not:
(a) subject to the obtaining of any requisite approvals of the
Company's stockholders as contemplated by Section 7.13 hereof, conflict with any
provision of the Company's certificate of incorporation or bylaws or the
certificates of incorporation or bylaws (or other similar organizational
documents) of any of its Subsidiaries;
(b) require on the part of the Company or any of its
Subsidiaries or Affiliates any consent, waiver, approval, order, authorization
or permit of, or registration, filing with or notification to, (i) any
governmental or regulatory authority or agency (a "Governmental Authority"),
except for applicable requirements of the Securities Act of 1933, as amended
(the "Securities Act"), the Exchange Act, state laws relating to takeovers, if
applicable, state securities or blue sky laws and Customary Post-Closing
Consents (as defined below), (ii) filings by the Principal Stockholder under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or (iii) except as set forth in Section 4.4(b) of the Company Disclosure
Schedule, any third party other than a Governmental Authority, other than such
non-Governmental Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (A) result in a Company Material
Adverse Effect or (B) materially impair the ability of the Company or any of its
Subsidiaries, as the case may be, to perform its obligations under this
Agreement or any Ancillary Agreement;
(c) except as set forth in Section 4.4(c) of the Company
Disclosure Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any right
of termination, cancellation or acceleration or guaranteed payments or a loss of
a material benefit under, any of the terms, conditions or provisions of any
note, lease, mortgage, indenture, license, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties or assets may be bound, except for such violations, breaches,
defaults, or rights of termination, cancellation or acceleration, or losses as
to which requisite waivers or consents have been obtained or which, individually
or in the aggregate, would not (i) result in a Company Material Adverse Effect
or (ii) materially impair the ability of the Company or any of its Subsidiaries
to perform its obligations under this Agreement or any Ancillary Agreement;
(d) violate the provisions of any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to the Company or any
Subsidiary of the Company;
(e) result in the creation of any Lien upon any shares of
capital stock, properties or assets of the Company or any of its Subsidiaries
under any agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets may be bound; or
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(f) result in any holder of any securities of the Company
being entitled to appraisal, dissenters' or similar rights.
Section 4.5 Company SEC Reports. The Company has filed with the SEC,
and has heretofore made available to Lomak and Merger Sub true and complete
copies of, each form, registration statement, report, schedule, proxy or
information statement and other document (including exhibits and amendments
thereto), including without limitation its Annual Reports to Stockholders
incorporated by reference in certain of such reports, required to be filed with
the SEC since December 31, 1996 under the Securities Act or the Exchange Act
(collectively, the "Company SEC Reports"). As of the respective dates such
Company SEC Reports were filed or, if any such Company SEC Reports were amended,
as of the date such amendment was filed, each of the Company SEC Reports,
including without limitation any financial statements or schedules included
therein, (a) complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and (b) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.6 Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company (including any related notes and schedules) included (or
incorporated by reference) in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (collectively, the "Company Financial Statements") have
been prepared from, and are in accordance with, the books and records of the
Company and its consolidated Subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto and subject, in the case
of quarterly financial statements, to normal and recurring year-end adjustments
that are not material individually or in the aggregate) and fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its Subsidiaries as of the date thereof and the consolidated results of
operations and cash flows (and changes in financial position, if any) of the
Company and its Subsidiaries for the periods presented therein (subject to
normal year-end adjustments that are not material individually or in the
aggregate and the absence of financial footnotes in the case of any unaudited
interim financial statements).
Section 4.7 Absence of Undisclosed Liabilities. Except (a) as
specifically disclosed in the Company SEC Reports and (b) for liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice since December 31, 1997, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature
(contingent or otherwise) that would have a Company Material Adverse Effect or
would be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries or the notes thereto which is not so reflected.
Section 4.8 Absence of Certain Changes. Except as disclosed in the
Company SEC Reports or as expressly contemplated by this Agreement, since
December 31, 1997 (a) the Company
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and its Subsidiaries have conducted their business in all material respects in
the ordinary course consistent with past practices, (b) there has not been any
change or development, or combination of any of the foregoing that, individually
or in the aggregate, would have a Company Material Adverse Effect, (c) there has
not been any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its Subsidiaries, (d)
there has not been any amendment of any term of any outstanding security of the
Company or any of its Subsidiaries, and (e) there has not been any change in any
method of accounting or accounting practice by the Company or any of its
Subsidiaries, except for any such change required by reason of a concurrent
change in GAAP or to conform a Subsidiary's accounting policies and practices to
those of the Company.
Section 4.9 Taxes. Except as otherwise disclosed in Section 4.9 of the
Company Disclosure Schedule (and for matters that would have no adverse effect
on the Company):
(a) The Company and each of its Subsidiaries have timely filed
(or have had timely filed on their behalf) or will file or cause to be timely
filed, all material Tax Returns (as defined below) required by applicable law to
be filed by any of them prior to or as of the Closing Date. All such Tax Returns
and amendments thereto are or will be true, complete and correct in all material
respects.
(b) The Company and each of its Subsidiaries have paid (or
have had paid on their behalf), or where payment is not yet due, have
established (or have had established on their behalf and for their sole benefit
and recourse), or will establish or cause to be established on or before the
Closing Date, an adequate accrual for the payment of all material Taxes due with
respect to any period ending prior to or as of the Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with
respect to any Tax Returns filed by, or Taxes due from, the Company or any
Subsidiary of the Company. No issue has been raised by any Tax Authority in any
Audit of the Company or any of its Subsidiaries that if raised with respect to
any other period not so audited could be expected to result in a material
proposed deficiency for any period not so audited. No material deficiency or
adjustment for any Taxes has been threatened, proposed, asserted or assessed
against the Company or any of its Subsidiaries. There are no liens for Taxes
upon the assets of the Company or any of its Subsidiaries, except liens for
current Taxes not yet delinquent.
(d) Neither the Company nor any of its Subsidiaries has given
or been requested to give any waiver of statutes of limitations relating to the
payment of Taxes or has executed powers of attorney with respect to Tax matters
that will be outstanding as of the Closing Date.
(e) Prior to the date hereof, the Company and its Subsidiaries
have disclosed, and provided or made available true and complete copies to Lomak
of, all material Tax sharing, Tax indemnity, or similar agreements to which the
Company or any of its Subsidiaries is a party to, is bound by, or has any
obligation or liability for Taxes.
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(f) As used in this Agreement, (i) "Audit" shall mean any
audit, assessment of Taxes, other examination by any Tax Authority, proceeding
or appeal of such proceeding relating to Taxes; (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto; (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign Governmental Authority responsible for the administration of any Taxes;
and (iv) "Tax Returns" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
Section 4.10 Litigation. Except as disclosed in the Company SEC
Reports or Section 4.10 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the Company's
knowledge, threatened against or directly affecting the Company, any Subsidiary
of the Company or any of the directors or officers of the Company or any of its
Subsidiaries in their capacity as such, nor is there any reasonable basis
therefor that could reasonably be expected to have a Company Material Adverse
Effect, if adversely determined. Neither the Company nor any of its
Subsidiaries, nor any officer, director or employee of the Company or any of
its Subsidiaries, has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any other Governmental Authority from
engaging in or continuing any conduct or practice in connection with the
business, assets or properties of the Company or such Subsidiary nor, to the
knowledge of the Company, is the Company, any Subsidiary of the Company or any
officer, director or employee of the Company or its Subsidiaries under
investigation by any Governmental Authority. Except as disclosed in the Company
SEC Reports or Section 4.10 of the Company Disclosure Schedule, there is not in
existence any order, judgment or decree of any court or other tribunal or other
agency enjoining or requiring the Company or any of its Subsidiaries to take
any action of any kind with respect to its business, assets or properties.
Notwithstanding the foregoing, no representation or warranty in this Section
4.10 is made with respect to Environmental Laws, which are covered exclusively
by the provisions set forth in Section 4.12.
Section 4.11 Employee Benefit Plans; ERISA.
(a) Section 4.11(a) of the Company Disclosure Schedule
contains a true and complete list of the employee benefit plans or arrangements
of any type (including but not limited to plans described in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
sponsored, maintained or contributed to by the Company or any trade or business,
whether or not incorporated, which together with the Company would be deemed a
"single employer" within the meaning of Section 414(b), (c) or (m) of the Code
or section 4001(b)(1) of ERISA (a "Company ERISA Affiliate") within six years
prior to the Effective Time, which provide benefits to the Company's employees
("Company Benefit Plans").
(b) With respect to each Company Benefit Plan: (i) if intended
to qualify under Section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination letter
from the Internal Revenue Service with respect to its qualification, and its
related trust has been determined to be exempt from tax under Section 501(a) of
the Code and, to the knowledge of the Company, nothing has occurred since the
date of such letter to adversely affect such qualification or exemption; (ii)
each such plan has been administered in
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substantial compliance with its terms and applicable law; (iii) neither the
Company nor any Company ERISA Affiliate has engaged in, and the Company and each
Company ERISA Affiliate does not have any knowledge of any Person that has
engaged in, any transaction or acted or failed to act in any manner that would
subject the Company or any Company ERISA Affiliate to any liability for a breach
of fiduciary duty under ERISA that could reasonably be expected to result in a
Company Material Adverse Effect; (iv) no disputes are pending or, to the
knowledge of the Company or any Company ERISA Affiliate, threatened; (v) neither
the Company nor any Company ERISA Affiliate has engaged in, and the Company and
each Company ERISA Affiliate do not have any knowledge of any Person that has
engaged in, any transaction in violation of section 406(a) or (b) of ERISA for
which no exemption exists under Section 4975(c)(1) of the Code or Section
4975(d) of the Code that could reasonably be expected to result in a Company
Material Adverse Effect; (vi) there have been no "reportable events" within the
meaning of section 4043 of ERISA for which the 30 day notice requirement of
ERISA has not been waived by the Pension Benefit Guaranty Corporation (the
"PBGC"); (vii) all contributions due have been made on a timely basis (within,
where applicable, the time limit established under section 302 of ERISA or Code
Section 412); (viii) no notice of intent to terminate such plan has been given
under section 4041 of ERISA and no proceeding has been instituted under section
4042 of ERISA to terminate such plan; and (ix) except for defined benefit plans,
such plan may be terminated on a prospective basis without any continuing
liability for benefits other than benefits accrued to the date of such
termination. All contributions made or required to be made under any Company
Benefit Plan meet the requirements for deductibility under the Code, and all
contributions which are required and which have not been made have been properly
recorded on the books of the Company or a Company ERISA Affiliate.
(c) No Company Benefit Plan is a "multiemployer plan" (as
defined in section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of the Code). No event has occurred with respect
to the Company or a Company ERISA Affiliate in connection with which the Company
could be subject to any liability, lien or encumbrance with respect to any
Company Benefit Plan or any employee benefit plan described in section 3(3) of
ERISA maintained, sponsored or contributed to by a Company ERISA Affiliate under
ERISA or the Code.
(d) Except as set forth in Section 4.11(d) of the Company
Disclosure Schedule, no employees of the Company or any of its Subsidiaries are
covered by any severance plan or similar arrangement.
Section 4.12 Environmental Liability. Except as set forth in Section
4.12 of the Company Disclosure Schedule:
(a) The businesses of the Company and its Subsidiaries have
been and are operated in material compliance with all federal, state and local
environmental protection, health and safety or similar laws, statutes,
ordinances, restrictions, licenses, rules, regulations, permit conditions and
legal requirements, including without limitation the Federal Clean Water Act,
Safe Drinking Water Act, Resource Conservation & Recovery Act, Clean Air Act,
Comprehensive Environmental Response, Compensation and Liability Act, and
Emergency Planning and Community Right to Know, each as amended and currently in
effect (together, "Environmental Laws").
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(b) Neither the Company nor any of its Subsidiaries has caused
or allowed the generation, treatment, manufacture, processing, distribution,
use, storage, discharge, release, disposal, transport or handling of any
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum, petroleum products or any substance regulated under any
Environmental Law ("Hazardous Substances") at any of its properties or
facilities, except in material compliance with all Environmental Laws, and, to
the Company's knowledge, no generation, manufacture, processing, distribution,
use, treatment, handling, storage, discharge, release, disposal, transport or
handling of any Hazardous Substances has occurred at any property or facility
owned, leased or operated by the Company or any of its Subsidiaries except in
material compliance with all Environmental Laws.
(c) Neither the Company nor any of its Subsidiaries has
received any written notice from any Governmental Authority or, to the knowledge
of the Company, any other communication alleging or concerning any material
violation by the Company or any of its Subsidiaries of, or responsibility or
liability of the Company or any of its Subsidiaries under, any Environmental
Law. There are no pending, or to the knowledge of the Company, threatened,
claims, suits, actions, proceedings or investigations with respect to the
businesses or operations of the Company or any of its Subsidiaries alleging or
concerning any material violation of or responsibility or liability under any
Environmental Law that, if adversely determined, could reasonably be expected to
have a Company Material Adverse Effect, nor does the Company have any knowledge
of any fact or condition that could give rise to such a claim, suit, action,
proceeding or investigation.
(d) The Company and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities under all Environmental Laws
with respect to the operation of the businesses of the Company and its
Subsidiaries; there are no pending or, to the knowledge of the Company,
threatened, actions, proceedings or investigations seeking to modify, revoke or
deny renewal of any of such approvals, permits, licenses, registrations and
authorizations; and the Company does not have knowledge of any fact or condition
that is reasonably likely to give rise to any action, proceeding or
investigation to modify, revoke or deny renewal of any of such approvals,
permits, licenses, registrations and authorizations.
(e) Without in any way limiting the generality of the
foregoing, (i) all off-site locations where the Company or any of its
Subsidiaries has transported, released, discharged, stored, disposed or arranged
for the disposal of pollutants, contaminants, hazardous wastes or toxic
substances required by law to be disposed at a licensed disposal site are
identified in Section 4.12 of the Company Disclosure Schedule, (ii) to the
Company's knowledge, all underground storage tanks, and the operating status,
capacity and contents of such tanks, located on any property owned, leased or
operated by the Company or any of its Subsidiaries are identified in Section
4.12 of the Company Disclosure Schedule, (iii) to the knowledge of the Company,
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by the Company, and (iv) no
polychlorinated biphenyls ("PCBs") or PCB-containing items are used or stored at
any property owned, leased or operated by the Company or any of its
Subsidiaries.
Section 4.13 Compliance with Applicable Laws. The Company and each of
its Subsidiaries holds all material approvals, licenses, permits, registrations
and similar type authorizations necessary
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for the lawful conduct of its respective businesses, as now conducted, and such
businesses are not being, and neither the Company nor any of its Subsidiaries
has received any notice from any Governmental Authority or Person that any such
business has been or is being conducted in violation of any law, ordinance or
regulation, including without limitation any law, ordinance or regulation
relating to occupational health and safety, except for possible violations which
either individually or in the aggregate have not resulted and would not result
in a Company Material Adverse Effect; provided, however, notwithstanding the
foregoing, no representation or warranty in this Section 4.13 is made with
respect to Environmental Laws, which are covered exclusively by the provisions
set forth in Section 4.12.
Section 4.14 Insurance. Except as disclosed in Section 4.14 of the
Company Disclosure Schedule, the Company and each of its Subsidiaries is, and
has been continuously since January 1, 1997, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by the Company and its Subsidiaries during such time
period. Except as disclosed in Section 4.14 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy
thereof. All material insurance policies of the Company and its Subsidiaries are
valid and enforceable policies.
Section 4.15 Labor Matters; Employees.
(a) Except as set forth in Section 4.15 of the Company
Disclosure Schedule, (i) there is no labor strike, dispute, slowdown, work
stoppage or lockout actually pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries and,
during the past five years, there has not been any such action, (ii) none of the
Company or any of its Subsidiaries is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its Subsidiaries, (iii) none of
the employees of the Company or any of its Subsidiaries are represented by any
labor organization and none of the Company or any of its Subsidiaries have any
knowledge of any current union organizing activities among the employees of the
Company or any of its Subsidiaries nor does any question concerning
representation exist concerning such employees, (iv) the Company and its
Subsidiaries have each at all times been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation,
(v) there is no unfair labor practice charge or complaint against any of the
Company or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any similar state or
foreign agency, (vi) there is no grievance or arbitration proceeding arising out
of any collective bargaining agreement or other grievance procedure relating to
the Company or any of its Subsidiaries, and (vii) neither the Occupational
Safety and Health Administration nor any corresponding state agency has
threatened to file any citation, and there are no pending citations, relating to
the Company or any of its Subsidiaries.
(b) Since the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act"), none of the Company or any of
its Subsidiaries has effectuated (i) a
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"plant closing" (as defined in the WARN Act) affecting any site of employment or
one or more facilities or operating units within any site of employment or
facility of any of the Company or any of its Subsidiaries, or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries, nor has the Company or any
of its Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law, in each case that could reasonably be expected to
have a Company Material Adverse Effect.
Section 4.16 Reserve Reports.
(a) Except as set forth in Section 4.16(a) of the Company
Disclosure Schedule, all information supplied to Netherland, Sewell &
Associates, Inc. and DeGolyer & MacNaughton by or on behalf of the Company and
its Subsidiaries that was material to each such firm's estimates of proved oil
and gas reserves attributable to the Oil and Gas Interests of the Company and
its Subsidiaries in connection with the preparation of the proved oil and gas
reserve reports concerning the Oil and Gas Interests of the Company and its
Subsidiaries as of December 31, 1997 and prepared by Netherland, Sewell &
Associates, Inc. and DeGolyer & MacNaughton, respectively (such reserve reports,
the "Company Reserve Report"), was (at the time supplied or as modified or
amended prior to the issuance of the Company Reserve Report) true and correct in
all material respects and the Company has no knowledge of any material errors in
such information that existed at the time of such issuance. For purposes of this
Agreement, "Oil and Gas Interests" means 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, leasehold and
mineral interests and operating rights and royalties, overriding royalties,
production payments, net profit interests and other nonworking interests and
nonoperating interests; all interests in rights with respect to oil, condensate,
gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively,
"Hydrocarbons") and other minerals or revenues therefrom, all contracts in
connection therewith and claims and rights thereto (including all 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; all 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 all interests in equipment and
machinery (including wells, well equipment and machinery), oil and gas
production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing plants,
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing. Except
for changes (including changes in commodity prices) generally affecting the oil
and gas industry, there has been no change in respect of the matters addressed
in the Company Reserve Report that would have a Company Material Adverse Effect.
(b) Set forth in Section 4.16(b) of the Company Disclosure
Schedule is a list of all material Oil and Gas Interests that were included in
the Company Reserve Report that have been disposed of prior to the date of this
Agreement.
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Section 4.17 Oil and Gas Reserves; Equipment. Except as otherwise set
forth in Section 4.17 of the Company Disclosure Schedule:
(a) None of the wells included in the Oil and Gas Interests of
the Company and its Subsidiaries has been overproduced, except where such
overproduction individually, or in the aggregate with all other such
overproduction, would not have a Company Material Adverse Effect;
(b) There have been no material changes proposed in the
production allowables for any wells included in the Oil and Gas Interests of the
Company and its Subsidiaries;
(c) All wells included in the Oil and Gas Interests of the
Company and its Subsidiaries have been drilled and (if completed) completed,
operated, and produced in accordance with good oil and gas field practices and
in compliance in all respects with applicable oil and gas leases and applicable
laws, rules, and regulations, except where any failure or violation would not
have a Company Material Adverse Effect;
(d) Except as set forth in Section 4.17(d) of the Company
Disclosure Schedule, there are no wells included in the Oil and Gas Interests of
the Company and its Subsidiaries that:
(i) the Company or any of its Subsidiaries is
currently obligated by law or contract to plug and abandon or will be
obligated by law or contract to plug and abandon with the lapse of time
or notice or both because the well is not currently capable of
producing in commercial quantities, except for such wells that will not
individually, or in the aggregate with all other such wells, result in
the Company and its Subsidiaries incurring plugging and abandonment
costs (net of salvage value) in an amount in excess of $2,000,000;
(ii) are subject to exceptions to a requirement to
plug and abandon issued by a Governmental Authority having jurisdiction
over the wells; or
(iii) have been plugged and abandoned but have not
been plugged or reclaimed in accordance with all applicable
requirements of each Governmental Authority having jurisdiction over
such wells;
(e) Proceeds from the sale of Hydrocarbons produced from the
Oil and Gas Interests of the Company and its Subsidiaries are being received by
the Company and its Subsidiaries in a timely manner and are not being held by
third parties in suspense for any reason (except for amounts, individually or in
the aggregate, not in excess of $250,000 and held in suspense in the ordinary
course of business);
(f) No Person has any call on, option to purchase, or similar
rights with respect to the production of Hydrocarbons attributable to the Oil
and Gas Interests of the Company and its Subsidiaries, except where any call,
option or similar right would not have a Company Material Adverse Effect and
except for any such call, option or similar right at market prices, and upon
consummation of the transactions contemplated by this Agreement, the Company or
its Subsidiaries will have the right to market production from the Oil and Gas
Interests of the Company and its
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Subsidiaries on terms no less favorable than the terms upon which such
production is currently being marketed;
(g) Except for gas imbalances between the Company or any of
its Subsidiaries and any third party working interest owners or pipelines
relative to the Oil and Gas Interests of the Company or any of its Subsidiaries,
which gas imbalances (to the extent constituting overproduction or
underproduction from the wells in which the Company or any of its Subsidiaries
has an interest) are described in Section 4.17(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is obligated by any
gas prepayment arrangement or by any "take-or-pay" requirement to deliver any
gas at a future time without then or thereafter receiving payment therefor;
(h) To the knowledge of the Company, all equipment and
machinery currently in use and material to the operation of the Oil and Gas
Interests of the Company or any of its Subsidiaries as conducted prior to the
date hereof are in reasonable working condition, ordinary wear and tear
excepted; and
(i) With respect to Oil and Gas Interests of the Company and
its Subsidiaries that are not operated by the Company or any of its
Subsidiaries, the Company makes the foregoing representations and warranties set
forth in paragraphs (b), (c) and (d)(iii) of this Section 4.17 and those set
forth in Sections 4.12, 4.13 and 4.20 only to its knowledge.
Section 4.18 Title to Oil and Gas Interests.
(a) Except as set forth in Section 4.18 of the Company
Disclosure Schedule, the Company or its Subsidiaries has defensible title to all
of the Oil and Gas Interests classified as proved developed producing, proved
developed nonproducing and proved undeveloped in the Company Reserve Report
(each, a "Company Classified Property") except to the extent that such interests
have thereafter been disposed of in the ordinary course of business consistent
with past practice. For the purposes of this Agreement, "defensible title"
means, with respect to any Company Classified Property, such record and
beneficial title that (x) entitles the party named to receive, from its
ownership of such interest, a percentage of all Hydrocarbons produced, saved,
and marketed from each well or property included in the Company Classified
Properties not less than the net revenue interest set forth in the Company
Reserve Report for such well or property, without reduction, suspension, or
termination for the productive life of such well or property, except as a result
of elections not to participate in an operation under an applicable operating,
unit or other agreement, or readjustments of interest provided for under the
terms of the applicable operating, unit or other agreement, in each case, after
the date hereof; (y) obligates the party named to bear a percentage of the costs
and expenses relating to operations on, and the maintenance and production of,
such well or property, not greater than the working or operating interest set
forth in the Company Reserve Report without increase for the productive life of
such well or property, except as a result of an election of other parties not to
participate in an operation under an applicable operating, unit or other
agreement, contribution requirements with respect to defaulting co-owners, or
readjustments of interest provided for under the terms of the applicable
operating or unit agreement, in each case, after the date hereof; and (z) is
free and clear of any liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind (collectively, "Liens") except the
Company Permitted Encumbrances. For the purposes of this Agreement, "Company
Permitted Encumbrances" means
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(i) royalties, overriding royalties, reversionary interests and similar burdens
if the cumulative effect of such burdens does not and will not reduce the net
revenue interest with respect to a well or property below the net revenue
interest shown therefor in the Company Reserve Report or increase the working
interest with respect to such well or property above the working interest shown
therefor in the Company Reserve Report; (ii) the terms and conditions of all
leases, servitudes, production sales contracts, division orders, contracts for
sale, purchase, exchange, refining or processing of Hydrocarbons, unitization
and pooling designations, declarations, orders and agreements, operating
agreements, agreements of development, area of mutual interest agreements,
farmout agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements
including, without limitation, the terms and conditions of any and all contracts
and agreements set forth in the Company Reserve Report covering production sales
contracts and all other contracts and agreements disclosed in such Company
Disclosure Schedule, to the extent that such contracts and agreements do not and
will not reduce the net revenue interest of any well or property included in the
Company Classified Properties below the net revenue interest shown therefor in
the Company Reserve Report or increase the working interest with respect to such
well or property above the working interest shown therefor in the Company
Reserve Report without a proportionate increase in the net revenue interest with
respect to such well or property; (iii) easements, rights of way, servitudes,
permits, surface leases and other rights with respect to surface obligations,
pipelines, grazing, canals, ditches, reservoirs, or the like, conditions,
covenants or other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements and rights
of way on, over or in respect of any of the Company Classified Properties, so
long as they are not such that would have a Company Material Adverse Effect;
(iv) any preferential purchase rights, required third party consents to
assignment and similar agreements and obligations not applicable to the
transactions contemplated hereby, or if applicable to the transactions
contemplated hereby, with respect to which prior to the Effective Time (A)
waivers or consents have been obtained from the appropriate Person, or (B) the
applicable period of time for asserting such rights has expired without any
exercise of such rights; (v) liens for Taxes or assessments not yet delinquent;
(vi) materialmen's, mechanic's, repairman's, employee's, contractor's,
operator's, and other similar liens or charges arising in the ordinary course of
business (A) if they have not been filed pursuant to law, (B) if filed, they
have not yet become due and payable or payment is being withheld as provided by
law or (C) if their validity is being contested in good faith in the ordinary
course of business by appropriate action; (vii) approvals that are ministerial
in nature and are customarily obtained from Governmental Authorities after the
Effective Time in connection with transactions of the same nature as are
contemplated hereby ("Customary Post-Closing Consents"); (viii) conventional
rights of reassignment arising in respect of abandonment, cessation of
production or expiration of leases; (ix) all rights reserved to or vested in any
Governmental Authority to control or regulate any of the Company Classified
Properties in any manner, and all applicable laws, rules and orders of
Governmental Authorities; and (x) any other liens, charges, encumbrances,
contracts, agreements, instruments, obligations, defects or irregularities of
any kind whatsoever that would not have a Company Material Adverse Effect or
that are set forth in Section 4.18(a) of the Company Disclosure Schedule.
Notwithstanding the foregoing, title to the Company Classified Properties is of
a type and nature customarily acceptable to the reasonably prudent oil and gas
operator of oil and gas interests.
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(b) Except as set forth in Section 4.18(b) of the Company
Disclosure Schedule, (i) each oil and gas lease included in the Oil and Gas
Interests of the Company and its Subsidiaries is valid, binding and enforceable
in accordance with its terms, except for the Enforceability Exception, and (ii)
neither the Company nor the Company Subsidiary that is party to each such lease,
nor, to the knowledge of the Company, any other party to any such lease, is in
breach or default thereunder in any material respect, no notice of default or
termination thereunder has been given or received by the Company or any of its
Subsidiaries, and no event has occurred which would, with the giving of notice
or passage of time or both, constitute a breach or default thereunder or permit
termination, modification or acceleration thereunder that could reasonably be
expected to result in a Company Material Adverse Effect.
Section 4.19 Title to Other Properties. Except as set forth in
Section 4.19 of the Company Disclosure Schedule, the Company or its
Subsidiaries owns, of record (to the extent applicable) and beneficially, all
material personal property and all real property (other than oil and gas
leasehold interests included in the Company Classified Properties) in each
case, as reflected on the consolidated financial statements of the Company
included in the Company SEC Documents as being owned by it or any of its
Subsidiaries and all such property thereafter acquired by it or any of its
Subsidiaries (except to the extent that such properties have thereafter been
disposed of in the ordinary course of business consistent with past practice
or after the date hereof in compliance with Section 6.1(d)), free and clear of
any Liens except the Company Permitted Encumbrances.
Section 4.20 Permits. The Company holds all of the permits, licenses,
certificates, consents, approvals, entitlements, plans, surveys, relocation
plans, environmental impact reports and other authorizations of Governmental
Authorities ("Permits") required or necessary to construct, own, operate, use
and/or maintain its properties and conduct its operations as presently
conducted, except for such Permits, the lack of which, individually or in the
aggregate, would not have a Company Material Adverse Effect; provided,
however, that notwithstanding the foregoing, no representation or warranty in
this Section 4.20 is made with respect to Permits issued pursuant to
Environmental Laws, which are covered exclusively by the provisions set forth
in Section 4.12.
Section 4.21 Material Contracts.
(a) Set forth in Section 4.21(a) of the Company Disclosure
Schedule is a list of each contract, lease, indenture, agreement, arrangement or
understanding to which the Company or any of its Subsidiaries is a party or to
which any of the assets or operations of the Company or any of its Subsidiaries
is subject that is of a type that would be required to be included as an exhibit
to a Form S-1 Registration Statement pursuant to the rules and regulations of
the SEC if such a registration statement was filed by the Company or is
otherwise, in the judgment of the Company, deemed material to the business of
the Company and its Subsidiaries, taken as a whole (collectively, the "Company
Material Contracts").
(b) Except as set forth in Section 4.21(a) or 4.21(b) of the
Company Disclosure Schedule, the Company Oil and Gas Interests are not subject
to (i) any instrument or agreement evi dencing or related to indebtedness for
borrowed money, whether directly or indirectly, or (ii) any agreement not
entered into in the ordinary course of business in which the amount involved is
in excess of $250,000. With respect to the Company Oil and Gas Interests, (A)
all Company Material
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Contracts are in full force and effect and are the valid and legally binding
obligations of the parties thereto and are enforceable in accordance with their
respective terms; (B) the Company is not in material breach or default with
respect to its obligations under any Company Material Contract and, to the
knowledge of the Company, no other party to any Company Material Contract is in
material breach or default with respect to its obligations thereunder, including
with respect to payments or otherwise; (C) no party to any Company Material
Contract has given notice of any action to terminate, cancel, rescind or procure
a judicial reformation thereof; and (D) no Company Material Contract contains
any provision that prevents the Company or any of its Subsidiaries from owning,
managing and operating the Company Oil and Gas Interests substantially in
accordance with histori cal practices.
(c) As of the date of this Agreement, except as set forth in
Section 4.21(c) of the Company Disclosure Schedule, with respect to
authorizations for expenditure executed on or after January 1, 1998, (i) there
are no material outstanding calls for payments that are due or that the Company
or its Subsidiaries are committed to make that have not been made; (ii) there
are no material operations with respect to which the Company or its Subsidiaries
have become a nonconsenting party; and (iii) there are no commitments for the
material expenditure of funds for drilling or other capital projects other than
projects with respect to which the operator is not required under the applicable
operating agreement to seek consent.
(d) Except as set forth in Section 4.21(d) of the Company
Disclosure Schedule, (i) there are no express contractual obligations to engage
in continuous development operations in order to maintain any producing Company
Oil and Gas Interest in force and effect; (ii) there are no provisions
applicable to the Company Oil and Gas Interests that increase the royalty
percentage of the lessor thereunder; and (iii) none of the Company Oil and Gas
Interests are limited by terms fixed by a certain number of years (other than
primary terms under oil and gas leases).
Section 4.22 Required Stockholder Vote or Consent. The only vote of
the holders of any class or series of the Company's capital stock that will be
necessary to consummate the Merger and the other transactions contemplated by
this Agreement is the approval of the Merger by the holders of a majority of
the votes cast by holders of Company Common Stock entitled to vote (the
"Company Stockholder Approval").
Section 4.23 Proxy Statement/Prospectus; Registration Statement. None
of the information to be supplied by the Company for inclusion in (a) the
proxy statement relating to the Company Special Meeting and the Lomak Special
Meeting (also constituting the prospectus in respect of Lomak Common Stock
into which shares of Company Common Stock will be converted) (the "Proxy
Statement/Prospectus"), to be filed by the Company and Lomak with the SEC, and
any amendments or supplements thereto, or (b) the Registration Statement on
Form S-4 (the "Registration Statement") to be filed by Lomak with the SEC in
connection with the Merger, and any amendments or supplements thereto, will,
(i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading or (ii) in the case of the Proxy
Statement/Prospectus, at the time of the mailing of the Proxy
Statement/Prospectus and at the time of the Company Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or
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necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any of
its Subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement/Prospectus or the Registration
Statement, the Company shall notify Lomak thereof by reference to this Section
4.23 and such event shall be so described to Lomak.
Section 4.24 Intellectual Property. The Company and its Subsidiaries
own, or are licensed or otherwise have the right to use, all patents, patent
rights, trademarks, rights, trade names, trade name rights, service marks,
service mark rights, copyrights, technology, know-how, processes and other
proprietary intellectual property rights and computer programs ("Intellectual
Property") currently used in the conduct of the business and operations of the
Company and its Subsidiaries, except where the failure to so own or otherwise
have the right to use such intellectual property would not, individually or in
the aggregate, have a Company Material Adverse Effect. No Person has notified
either the Company or any of its Subsidiaries that their use of the
Intellectual Property infringes on the rights of any Person, subject to such
claims and infringements as do not, individually or in the aggregate, give
rise to any liability on the part of the Company and its Subsidiaries that
could have a Company Material Adverse Effect, and, to the Company's knowledge,
no Person is infringing on any right of the Company or any of its Subsidiaries
with respect to any such Intellectual Property. No claims are pending or, to
the Company's knowledge, threatened that the Company or any of its
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to any Intellectual Property.
Section 4.25 Hedging. Section 4.25 of the Company Disclosure Schedule
sets forth for the periods shown obligations of the Company and each of its
Subsidiaries for the delivery of Hydrocarbons attributable to any of the
properties of the Company or any of its Subsidiaries in the future on account
of prepayment, advance payment, take-or-pay or similar obligations without
then or thereafter being entitled to receive full value therefor. Except as
set forth in Section 4.25 of the Company Disclosure Schedule and except for
fixed price gas contracts entered into by the Company in the ordinary course
of business, as of the date of this Agreement, neither the Company nor any of
its Subsidiaries is bound by futures, hedge, swap, collar, put, call, floor,
cap, option or other contracts that are intended to benefit from or reduce or
eliminate the risk of fluctuations in the price of com modities, including
Hydrocarbons, or securities.
Section 4.26 Brokers. No broker, finder or investment banker (other
than Credit Suisse First Boston Corporation, the fees and expenses of which
will be paid by the Company and will not exceed the fee currently set forth in
the Company Engagement Letter described below, plus reimbursement of
reasonable out of pocket expenses) is entitled to any brokerage, finder's fee
or other fee or commission payable by the Company or any of its Subsidiaries
in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company or any of its Subsidiaries.
True and correct copies of all agreements and engagement letters currently in
effect with Credit Suisse First Boston Corporation (the "Company Engagement
Letters") have been provided to Lomak.
Section 4.27 Opinion of Financial Advisor. Credit Suisse First Boston
Corporation has delivered to the Board of Directors of the Company its oral
opinion, to be confirmed in writing, to
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the effect that, as of the date of this Agreement, the Exchange Ratio was fair,
from a financial point of view, to the holders of the Company Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOMAK AND MERGER SUB
Lomak and Merger Sub jointly and severally represent and warrant to the
Company as follows:
Section 5.1 Organization and Qualification.
(a) Lomak is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, is duly qualified
to do business as a foreign corporation and is in good standing in the
jurisdictions set forth in Section 5.1(a) of the disclosure letter delivered to
the Company contemporaneously with the execution hereof (the "Lomak Disclosure
Schedule"), which include each jurisdiction in which the character of Lomak's
properties or the nature of its business makes such qualification necessary,
except in jurisdictions, if any, where the failure to be so qualified would not
result in a Lomak Material Adverse Effect. Lomak has all requisite corporate
power and authority to own, use or lease its properties and to carry on its
business as it is now being conducted. Lomak has made available to the Company a
complete and correct copy of its certificate of incorporation and bylaws, each
as amended to date, and Lomak's certificate of incorporation and bylaws as so
delivered are in full force and effect. Lomak is not in default in any respect
in the performance, observation or fulfillment of any provision of its
certificate of incorporation or bylaws.
(b) Section 5.1(b) of the Lomak Disclosure Schedule lists the
name and jurisdiction of organization of each Subsidiary of Lomak and the
jurisdictions in which each such Subsidiary is qualified or holds licenses to do
business as a foreign corporation or other organization as of the date hereof.
Each of Lomak's Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, is duly qualified to do business as a foreign
corporation or other legal entity and is in good standing in the jurisdictions
set forth in Section 5.1(b) of the Lomak Disclosure Schedule, which includes
each jurisdiction in which the character of such Subsidiary's properties or the
nature of its business makes such qualification necessary, except in
jurisdictions, if any, where the failure to be so qualified would not result in
a Lomak Material Adverse Effect. Each of Lomak's Subsidiaries has all requisite
corporate or other power and authority to own, use or lease its properties and
to carry on its business as it is now being conducted and as it is now proposed
to be conducted. Lomak has made available to the Company a complete and correct
copy of the certificate of incorporation and bylaws (or similar organizational
documents) of each of Lomak's Subsidiaries, each as amended to date, and the
certificate of incorporation and bylaws (or similar organizational documents) as
so delivered are in full force and effect. No Subsidiary of Lomak is in default
in any respect in the performance, observation or fulfillment of any provision
of its certificate of incorporation or bylaws (or similar organizational
documents). Other than Lomak's Subsidiaries, Lomak does not own
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(beneficially or otherwise) or control, directly or indirectly, 5% or more of
any class of equity or similar securities of any corporation or other
organization, whether incorporated or unincorporated.
(c) Merger Sub has no Subsidiaries.
(d) For purposes of this Agreement, a "Lomak Material Adverse
Effect" shall mean any event, circumstance, condition, development or occurrence
(i) causing, resulting in or having (or with the passage of time likely to
cause, result in or have) a material adverse effect on the financial condition,
business, assets, properties, prospects or results of operations of Lomak and
its Subsidiaries, taken as a whole or (ii) preventing or delaying in any
material respect the consummation of the transactions contemplated by this
Agreement or any Ancillary Agreement by Lomak or any of its Subsidiaries;
provided, that such term shall not include effects that result from market
conditions generally in the oil and gas industry.
Section 5.2 Capitalization.
(a) The authorized capital stock of Lomak consists of
50,000,000 shares of Lomak Common Stock, and 10,000,000 shares of preferred
stock of Lomak, par value $1.00 per share, of which 1,150,000 shares have been
designated as $2.03 Convertible Preferred Stock. As of the date of this
Agreement, Lomak has (i) 21,193,742 shares of Lomak Common Stock issued and
outstanding, (ii) 1,149,840 shares of preferred stock outstanding (all of which
is designated $2.03 Convertible Preferred Stock) and (iii) outstanding stock
options to acquire 2,076,092 shares of Lomak Common Stock under all stock option
plans and agreements of Lomak. All such shares have been validly issued, are
fully paid and nonassessable, and are free of preemptive rights. Except as set
forth in Section 5.2(a) of the Lomak Disclosure Schedule, and other than this
Agreement, there are no outstanding subscriptions, options, rights, warrants,
convertible securities, stock appreciation rights, phantom equity, or other
agreements or commitments obligating Lomak to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock of any class.
(b) Except as set forth in Section 5.2(b) of the Lomak
Disclosure Schedule, Lomak is, directly or indirectly, the record and beneficial
owner of all of the outstanding shares of capital stock of each Lomak
Subsidiary, there are no irrevocable proxies with respect to any such shares,
and no equity securities of any Lomak Subsidiary are or may become required to
be issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of any capital stock
of any Lomak Subsidiary, and there are no contracts, commitments, understandings
or arrangements by which Lomak or any Lomak Subsidiary is or may be bound to
issue additional shares of capital stock of any Lomak Subsidiary or securities
convertible into or exchangeable or exercisable for any such shares. All of such
shares so owned by Lomak are validly issued, fully paid and nonassessable and
are owned by it free and clear of all Liens.
Section 5.3 Authority. Each of Lomak and Merger Sub has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is or will be a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Ancillary Agreements to which it is or
will be a party and the consummation of the transactions contemplated hereby
and thereby have been duly
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and validly authorized by the Board of Directors of each of Lomak and Merger
Sub, and no other corporate proceedings on the part of Lomak or Merger Sub are
necessary to authorize this Agreement or the Ancillary Agreements to which any
of them are or will be a party or to consummate the transactions contemplated
hereby or thereby, other than the approval of the issuance of such number of
shares required to effect the Merger in accordance with the rules of the New
York Stock Exchange, Inc. (the "Stock Issuance") by Lomak's stockholders as
contemplated by Section 7.13 hereof. This Agreement has been, and the Ancillary
Agreements to which Lomak or Merger Sub are or will be a party are, or upon
execution will be, duly and validly executed and delivered by each of Lomak and
Merger Sub and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, constitute or upon
execution will constitute, valid and binding obligations of each of Lomak and
Merger Sub enforceable against each of Lomak and Merger Sub in accordance with
their respective terms, except for the Enforceability Exception.
Section 5.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the performance by each of Lomak and Merger Sub of its obligations
hereunder will not:
(a) conflict with any provision of the certificate of
incorporation or bylaws of either Lomak or Merger Sub; provided, however, that
it is acknowledged that the Name Change (as defined below) would require
approval of the holders of at least a majority of the outstanding shares of
Lomak Common Stock;
(b) subject to obtaining of the approval of Lomak's
stockholders of the Stock Issuance as contemplated by Section 7.13 hereof,
require on the part of Lomak or any of its Subsidiaries or Affiliates, any
consent, waiver, approval, order, authorization or permit of, or registration,
filing with or notification to, (i) any Governmental Authority, except for
applicable requirements of the Securities Act, the Exchange Act, state laws
relating to takeovers, if applicable, state securities or blue sky laws and
Customary Post-Closing Consents, (ii) filings by Lomak under the HSR Act in
connection with the acquisition of shares of Lomak Common Stock pursuant to the
Merger or (iii) except as set forth in Section 5.4(b) of the Lomak Disclosure
Schedule, any third party other than a Governmental Authority, other than such
non-Governmental Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (A) result in a Lomak Material Adverse
Effect or (B) materially impair the ability of Lomak or Merger Sub or any other
Subsidiaries of Lomak to perform its obligations under this Agreement or any
Ancillary Agreement; provided, however, that it is acknowledged that the Name
Change (as defined below) would require approval of the holders of at least a
majority of the outstanding shares of Lomak Common Stock;
(c) except as set forth in Section 5.4(c) of the Lomak
Disclosure Schedule, result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any right
of termination, cancellation or acceleration or guaranteed payments or a loss of
a material benefit under, any of the terms, conditions or provisions of any
note, lease, mortgage, indenture, license, agreement or other instrument or
obligation to which Lomak or any of its Subsidiaries is a party or by which
Lomak or any of its Subsidiaries or any of their respective properties or assets
may be bound, except for such violations, breaches, defaults, or rights of
termination, cancellation or acceleration, or losses as to which requisite
waivers or consents have been obtained or which, individually or in the
aggregate, would not (i) result in a Lomak Material
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Adverse Effect or (ii) materially impair the ability of Lomak or Merger Sub or
any other Subsidiaries to perform its obligations under this Agreement or any
Ancillary Agreement;
(d) violate the provisions of any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to Lomak or any
Subsidiary of Lomak; or
(e) result in the creation of any Lien upon any material
assets or on any shares of capital stock, properties or assets of Lomak or its
Subsidiaries under any agreement or instrument to which Lomak or any of its
Subsidiaries is a party or by which Lomak or any of its Subsidiaries or any of
their properties or assets is bound.
Section 5.5 Lomak Financial Statements. Each of the audited
consolidated financial statements and unaudited consolidated interim financial
statements of Lomak (including any related notes and schedules) included (or
incorporated by reference) in its Annual Reports on Form 10-K for each of the
three fiscal years ended December 31, 1995, 1996 and 1997 (collectively, the
"Lomak Financial Statements") have been prepared from, and are in accordance
with, the books and records of Lomak and its consolidated Subsidiaries, comply
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto and subject, in the case of quarterly
financial statements, to normal and recurring year-end adjustments that are
not material individually or in the aggregate) and fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Lomak and its
Subsidiaries as of the date thereof and the consolidated results of operations
and cash flows (and changes in financial position, if any) of Lomak and its
Subsidiaries for the periods presented therein (subject to normal year-end
adjustments that are not material individually or in the aggregate and the
absence of financial footnotes in the case of any unaudited interim financial
statements).
Section 5.6 Absence of Undisclosed Liabilities. Except (a) as
specifically disclosed in the Lomak SEC Reports (as defined below) and (b) for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice, since December 31, 1997, neither Lomak nor any
of its Subsidiaries has incurred any liabilities or obligations of any nature
(contingent or otherwise) that would have a Lomak Material Adverse Effect or
would be required by GAAP to be reflected on a consolidated balance sheet of
Lomak and its Subsidiaries or the notes thereto which is not so reflected.
Section 5.7 Absence of Certain Changes. Except as expressly
contemplated by this Agreement or disclosed in the Lomak SEC Reports, since
December 31, 1997 (a) Lomak and its Subsidiaries have conducted their business
in all material respects in the ordinary course consistent with past
practices, (b) there has not been any change or development, or combination of
any of the foregoing that, individually or in the aggregate, would have a
Lomak Material Adverse Effect, (c) there has not been any declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of Lomak or Merger Sub or any repurchase, redemption
or other acquisition by Lomak or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests
in, Lomak or Merger Sub, (d) there has not been any amendment of any term of
any outstanding security of Lomak or Merger Sub, and (e) there has
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not been any change in any method of accounting or accounting practice by Lomak
or Merger Sub, except for any such change required by reason of a concurrent
change in GAAP or to conform Merger Sub's accounting policies and practices to
those of Lomak.
Section 5.8 Lomak SEC Reports. Lomak has filed with the SEC, and has
heretofore made available to the Company true and complete copies of, each
form, registration statement, report, schedule, proxy or information statement
and other document (including exhibits and amendments thereto), including
without limitation its Annual Reports to Stockholders incorporated by
reference in certain of such reports, required to be filed with the SEC since
December 31, 1995 under the Securities Act or the Exchange Act (collectively,
the "Lomak SEC Reports"). As of the respective dates such Lomak SEC Reports
were filed or, if any such Lomak SEC Reports were amended, as of the date such
amendment was filed, each of the Lomak SEC Reports, including without
limitation any financial statements or schedules included therein, (a)
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the applicable
rules and regulations promulgated thereunder, and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 5.9 Taxes. Except as otherwise disclosed in Section 5.9 of
the Lomak Disclosure Schedule and for matters that would have no adverse
effect on Lomak or Merger Sub:
(a) Lomak and each of its Subsidiaries have timely filed (or
have had timely filed on their behalf) or will file or cause to be timely filed,
all material Tax Returns required by applicable law to be filed by any of them
prior to or as of the Closing Date. All such Tax Returns and amendments thereto
are or will be true, complete and correct in all material respects.
(b) Lomak and each of its Subsidiaries have paid (or have had
paid on their behalf), or where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and recourse),
or will establish or cause to be established on or before the Closing Date, an
adequate accrual for the payment of all material Taxes due with respect to any
period ending prior to or as of the Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with
respect to any Tax Returns filed by, or Taxes due from, Lomak or any Subsidiary
of Lomak. No issue has been raised by any Tax Authority in any Audit of Lomak or
any of its Subsidiaries that if raised with respect to any other period not so
audited could be expected to result in a material proposed deficiency for any
period not so audited. No material deficiency or adjustment for any Taxes has
been threatened, proposed, asserted or assessed against Lomak or any of its
Subsidiaries. There are no liens for Taxes upon the assets of Lomak or any of
its Subsidiaries, except liens for current Taxes not yet delinquent.
(d) Neither Lomak nor any of its Subsidiaries has given or
been requested to give any waiver of statutes of limitations relating to the
payment of Taxes or has executed powers of attorney with respect to Tax matters
that will be outstanding as of the Closing Date.
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(e) Prior to the date hereof, Lomak and its Subsidiaries have
disclosed, and provided or made available true and complete copies to the
Company of, all material Tax sharing, Tax indemnity, or similar agreements to
which Lomak or any of its Subsidiaries is a party to, is bound by, or has any
obligation or liability for Taxes.
Section 5.10 Litigation. Except as disclosed in the Lomak SEC Reports
or Section 5.10 of the Lomak Disclosure Schedule and for matters that would
not have a Lomak Material Adverse Effect, there is no suit, claim, action,
proceeding or investigation pending or, to Lomak's knowledge, threatened
against or directly affecting Lomak, any Subsidiary of Lomak or any of the
directors or officers of Lomak or any of its Subsidiaries in their capacity as
such, nor is there any reasonable basis therefor that could reasonably be
expected to have a Lomak Material Adverse Effect, if adversely determined.
Neither Lomak nor any of its Subsidiaries, nor any officer, director or
employee of Lomak or any of its Subsidiaries, has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any
other Governmental Authority from engaging in or continuing any conduct or
practice in connection with the business, assets or properties of Lomak or
such Subsidiary, nor, to the knowledge of Lomak, is Lomak, any Subsidiary of
Lomak or any officer, director or employee of Lomak or its Subsidiaries under
investigation by any Governmental Authority. Except as disclosed in the Lomak
SEC Reports or Section 5.10 of the Lomak Disclosure Schedule, there is not in
existence any order, judgment or decree of any court or other tribunal or
other agency enjoining or requiring Lomak or any of its Subsidiaries to take
any action of any kind with respect to its business, assets or properties.
Notwithstanding the foregoing, no representation or warranty in this Section
5.10 is made with respect to Environmental Laws, which are covered exclusively
by the provisions set forth in Section 5.12.
Section 5.11 Employee Benefit Plans; ERISA.
(a) Section 5.11 of the Lomak Disclosure Schedule contains a
true and complete list of the employee benefit plans or arrangements of any type
(including but not limited to plans described in section 3(3) of ERISA),
sponsored, maintained or contributed to by Lomak or any trade or business,
whether or not incorporated, which together with Lomak would be deemed a "single
employer" within the meaning of Section 414(b), (c) or (m) of the Code or
section 4001(b)(1) of ERISA (a "Lomak ERISA Affiliate") within six years prior
to the Effective Time, which provide benefits to Lomak's employees ("Lomak
Benefit Plans").
(b) With respect to each Lomak Benefit Plan: (i) if intended
to qualify under Section 401(a) or 401(k) of the Code, such plan satisfies the
requirements of such sections, has received a favorable determination letter
from the Internal Revenue Service with respect to its qualification, and its
related trust has been determined to be exempt from tax under Section 501(a) of
the Code and, to the knowledge of Lomak, nothing has occurred since the date of
such letter to adversely affect such qualification or exemption; (ii) each such
plan has been administered in substantial compliance with its terms and
applicable law; (iii) neither Lomak nor any Lomak ERISA Affiliate has engaged
in, and Lomak and each Lomak ERISA Affiliate do not have any knowledge of any
Person that has engaged in, any transaction or acted or failed to act in any
manner that would subject Lomak or any Lomak ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA that could reasonably be expected to
result in a Lomak Material Adverse Effect; (iv) no disputes are pending, or, to
the knowledge of Lomak or any Lomak ERISA Affiliate, threatened; (v)
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neither Lomak nor any Lomak ERISA Affiliate has engaged in, and Lomak and each
Lomak ERISA Affiliate do not have any knowledge of any Person that has engaged
in, any transaction in violation of Section 406(a) or (b) of ERISA for which no
exemption exists under Section 4975(c)(1) of the Code or Section 4975(d) of the
Code that could reasonably be expected to result in a Lomak Material Adverse
Effect; (vi) there have been no "reportable events" within the meaning of
section 4043 of ERISA for which the 30 day notice requirement of ERISA has not
been waived by the PBGC; (vii) all contributions due have been made on a timely
basis (within, where applicable, the time limit established under section 302 of
ERISA or Code Section 412); (viii) no notice of intent to terminate such plan
has been given under section 4041 of ERISA and no proceeding has been instituted
under section 4042 of ERISA to terminate such plan; and (ix) such plan may be
terminated on a prospective basis without any continuing liability for benefits
other than benefits accrued to the date of such termination. All contributions
made or required to be made under any Lomak Benefit Plan meet the requirements
for deductibility under the Code, and all contributions which are required and
which have not been made have been properly recorded on the books of Lomak or a
Lomak ERISA Affiliate.
(c) No Lomak Benefit Plan is a "multiemployer plan" (as
defined in section 4001(a)(3) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of the Code). No event has occurred with respect
to Lomak or a Lomak ERISA Affiliate in connection with which Lomak could be
subject to any liability, lien or encumbrance with respect to any Lomak Benefit
Plan or any employee benefit plan described in section 3(3) of ERISA maintained,
sponsored or contributed to by a Lomak ERISA Affiliate under ERISA or the Code.
Section 5.12 Environmental Liability. Except as set forth in Section
5.12 of the Lomak Disclosure Schedule:
(a) The businesses of Lomak and its Subsidiaries have been and
are operated in material compliance with all Environmental Laws.
(b) Neither Lomak nor any of its Subsidiaries has caused or
allowed the generation, treatment, manufacture, processing, distribution, use,
storage, discharge, release, disposal, transport or handling of any Hazardous
Substances at any of its properties or facilities except in material compliance
with all Environmental Laws, and, to Lomak's knowledge, no generation,
manufacture, processing, distribution, use, treatment, handling, storage,
discharge, release, disposal, transport or handling of any Hazardous Substances
has occurred at any property or facility owned, leased or operated by Lomak or
any of its Subsidiaries except in material compliance with all Environmental
Laws.
(c) Neither Lomak nor any of its Subsidiaries has received any
written notice from any Governmental Authority or, to the knowledge of Lomak,
any other communication alleging or concerning any material violation by Lomak
or any of its Subsidiaries of, or responsibility or liability of Lomak or any of
its Subsidiaries under, any Environmental Law. There are no pending, or to the
knowledge of Lomak, threatened, claims, suits, actions, proceedings or
investigations with respect to the businesses or operations of Lomak or any of
its Subsidiaries alleging or concerning any material violation of or
responsibility or liability under any Environmental Law that, if adversely
determined, could reasonably be expected to have a Lomak Material Adverse
Effect, nor does Lomak
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have any knowledge of any fact or condition that could give rise to such a
claim, suit, action, proceeding or investigation.
(d) Lomak and its Subsidiaries are in possession of all
material approvals, permits, licenses, registrations and similar type
authorizations from all Governmental Authorities under all Environmental Laws
with respect to the operation of the businesses of Lomak and its Subsidiaries;
there are no pending or, to the knowledge of Lomak, threatened, actions,
proceedings or investigations seeking to modify, revoke or deny renewal of any
of such approvals, permits, licenses, registrations and authorizations; and
Lomak does not have knowledge of any fact or condition that is reasonably likely
to give rise to any action, proceeding or investigation to modify, revoke or
deny renewal of any of such approvals, permits, licenses, registrations and
authorizations.
(e) Without in any way limiting the generality of the
foregoing, (i) all off-site locations where Lomak or any of its Subsidiaries has
transported, released, discharged, stored, disposed or arranged for the disposal
of pollutants, contaminants, hazardous wastes or toxic substances required by
law to be disposed at a licensed disposal site are identified in Section 5.12 of
Lomak Disclosure Schedule, (ii) to Lomak's knowledge, all underground storage
tanks, and the operating status, capacity and contents of such tanks, located on
any property owned, leased or operated by Lomak or any of its Subsidiaries are
identified in Section 5.12 of the Lomak Disclosure Schedule, (iii) to the
knowledge of Lomak, there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or leased by Lomak
and (iv) no PCBs or PCB-containing items are used or stored at any property
owned, leased or operated by Lomak or any of its Subsidiaries.
Section 5.13 Compliance with Applicable Laws. Lomak and each of its
Subsidiaries holds all material approvals, licenses, permits, registrations
and similar type authorizations necessary for the lawful conduct of its
respective businesses, as now conducted, and such businesses are not being,
and neither Lomak nor any of its Subsidiaries has received any notice from any
Governmental Authority or Person that any such business has been or is being
conducted in violation of any law, ordinance or regulation, including without
limitation any law, ordinance or regulation relating to occupational health
and safety, except for possible violations which either individually or in the
aggregate have not resulted and would not result in a Lomak Material Adverse
Effect; provided, however, notwithstanding the foregoing, no representation or
warranty in this Section 5.13 is made with respect to Environmental Laws,
which are covered exclusively by the provisions set forth in Section 5.12.
Section 5.14 Insurance. Except as disclosed in Section 5.14 of the
Lomak Disclosure Schedule, Lomak and each of its Subsidiaries is, and has been
continuously since January 1, 1997, insured in such amounts and against such
risks and losses as are customary for companies conducting the respective
businesses conducted by Lomak and its Subsidiaries during such time period.
Except as disclosed in Section 5.14 of the Lomak Disclosure Schedule, neither
Lomak nor any of its Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy thereof. All
material insurance policies of Lomak and its Subsidiaries are valid and
enforceable policies.
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Section 5.15 Labor Matters; Employees.
(a) Except as set forth in Section 5.15 of the Lomak
Disclosure Schedule, (i) there is no labor strike, dispute, slowdown, work
stoppage or lockout actually pending or, to the knowledge of Lomak, threatened
against or affecting Lomak or any of its Subsidiaries and, during the past five
years, there has not been any such action, (ii) none of Lomak or any of its
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of Lomak
or any of its Subsidiaries, (iii) none of the employees of Lomak or any of its
Subsidiaries are represented by any labor organization and none of Lomak or any
of its Subsidiaries has any knowledge of any current union organizing activities
among the employees of Lomak or any of its Subsidiaries nor does any question
concerning representation exist concerning such employees, (iv) Lomak and its
Subsidiaries have each at all times been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation,
(v) there is no unfair labor practice charge or complaint against any of Lomak
or any of its Subsidiaries pending or, to the knowledge of Lomak, threatened
before the National Labor Relations Board or any similar state or foreign
agency, (vi) there is no grievance or arbitration proceeding arising out of any
collective bargaining agreement or other grievance procedure relating to Lomak
or any of its Subsidiaries, and (vii) neither the Occupational Safety and Health
Administration nor any corresponding state agency has threatened to file any
citation, and there are no pending citations, relating to Lomak or any of its
Subsidiaries.
(b) Since the enactment of the WARN Act, none of Lomak or any
of its Subsidiaries has effectuated (i) a "plant closing" (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of Lomak or any
of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of Lomak or any of its
Subsidiaries, nor has Lomak or any of its Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law, in each case
that could reasonably be expected to have a Lomak Material Adverse Effect.
Section 5.16 Reserve Reports.
(a) All information supplied to Netherland, Sewell &
Associates, Inc., Wright & Company, Inc., H.J. Gruy and Associates, Inc.,
Huddleston & Co., Inc. and Clay, Holt & Klammer by or on behalf of Lomak and its
Subsidiaries that was material to each such firm's estimates of proved oil and
gas reserves attributable to the Oil and Gas Interests of Lomak and its
Subsidiaries in connection with the preparation of the proved oil and gas
reserve report concerning the Oil and Gas Interests of Lomak and its
Subsidiaries as of December 31, 1997 by such firms (the "Lomak Reserve Report")
was (at the time supplied or as modified or amended prior to the issuance of the
Lomak Reserve Report) true and correct in all material respects and Lomak has no
knowledge of any material errors in such information that existed at the time of
such issuance. Except for changes (including changes in commodity prices)
generally affecting the oil and gas industry, there has been
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no change in respect of the matters addressed in the Lomak Reserve Report that
would have a Lomak Material Adverse Effect.
(b) Set forth in Section 5.16(b) of the Lomak Disclosure
Schedule is a list of all material Oil and Gas Interests that were included in
the Lomak Reserve Report that have been disposed of prior to the date of this
Agreement.
Section 5.17 Oil and Gas Reserves; Equipment. Except as otherwise set
forth in Section 5.17 of the Lomak Disclosure Schedule:
(a) None of the wells included in the Oil and Gas Interests of
Lomak and its Subsidiaries has been overproduced, except where such
overproduction individually, or in the aggregate with all other such
overproduction, would not have a Lomak Material Adverse Effect;
(b) There have been no material changes proposed in the
production allowables for any wells included in the Oil and Gas Interests of
Lomak and its Subsidiaries;
(c) All wells included in the Oil and Gas Interests of Lomak
and its Subsidiaries have been drilled and (if completed) completed, operated,
and produced in accordance with good oil and gas field practices and in
compliance in all respects with applicable oil and gas leases and applicable
laws, rules, and regulations, except where any failure or violation would not
have a Lomak Material Adverse Effect;
(d) Except as set forth in Section 5.17(d) of the Lomak
Disclosure Schedule, there are no wells included in the Oil and Gas Interests of
Lomak and its Subsidiaries that:
(i) Lomak or any of its Subsidiaries is currently
obligated by law or contract to plug and abandon or will be obligated
by law or contract to plug and abandon with the lapse of time or notice
or both because the well is not currently capable of producing in
commercial quantities, except for such wells that will not
individually, or in the aggregate with all other such wells, result in
Lomak and its Subsidiaries incurring plugging and abandonment costs
(net of salvage value) in an amount in excess of $2,000,000 in addition
to any plugging and abandonment costs that have been provided for in
the Lomak Financial Statements;
(ii) are subject to exceptions to a requirement to
plug and abandon issued by a Governmental Authority having jurisdiction
over the wells; or
(iii) have been plugged and abandoned but have not
been plugged or reclaimed in accordance with all applicable
requirements of each Governmental Authority having jurisdiction over
such wells;
(e) Proceeds from the sale of Hydrocarbons produced from the
Oil and Gas Interests of Lomak and its Subsidiaries are being received by Lomak
and its Subsidiaries in a timely manner and are not being held by third parties
in suspense for any reason (except for amounts,
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individually or in the aggregate, not in excess of $250,000 and held in
suspense in the ordinary course of business);
(f) No Person has any call on, option to purchase, or similar
rights with respect to the production of Hydrocarbons attributable to the Oil
and Gas Interests of Lomak and its Subsidiaries, except where any call, option
or similar right would not have a Lomak Material Adverse Effect and except for
any such call, option or similar right at market prices, and upon consummation
of the transactions contemplated by this Agreement, Lomak or its Subsidiaries
will have the right to market production from the Oil and Gas Interests of Lomak
and its Subsidiaries on terms no less favorable than the terms upon which such
production is currently being marketed;
(g) Except for gas imbalances between Lomak or any of its
Subsidiaries and any third party working interest owners or pipelines relative
to the Oil and Gas Interests of Lomak or any of its Subsidiaries, which gas
imbalances (to the extent constituting overproduction or underproduction from
the wells in which Lomak or any of its Subsidiaries has an interest) are
described in Section 5.17(g) of the Lomak Disclosure Schedule, neither Lomak nor
any of its Subsidiaries is obligated by any gas prepayment arrangement or by any
"take-or-pay" requirement to deliver any gas at a future time without then or
thereafter receiving payment therefor;
(h) To the knowledge of Lomak, all equipment and machinery
currently in use and material to the operation of the Oil and Gas Interests of
Lomak or any of its Subsidiaries as conducted prior to the date hereof are in
reasonable working condition, ordinary wear and tear excepted; and
(i) With respect to wells in which the only Oil and Gas
Interests of Lomak and its Subsidiaries that are not operated by Lomak or any of
its Subsidiaries, Lomak makes the foregoing representations and warranties set
forth in paragraphs (b), (c) and (d)(iii) of this Section 5.17 and those set
forth in Sections 5.12, 5.13 and 5.20 only to its knowledge.
Section 5.18 Title to Oil and Gas Interests.
(a) Except as set forth in Section 5.18(a) of the Lomak
Disclosure Schedule, Lomak or its Subsidiaries has defensible title to all of
the real property included in the Oil and Gas Interests classified as proved
developed producing, proved developed nonproducing and proved undeveloped in the
Lomak Reserve Report (each, a "Lomak Classified Property") except to the extent
that such interests have thereafter been disposed of in the ordinary course of
business consistent with past practice. For the purposes of this Agreement,
"defensible title" means, with respect to any Lomak Classified Property, such
record and beneficial title that (x) entitles the party named to receive, from
its ownership of such interest, a percentage of all Hydrocarbons produced,
saved, and marketed from each well or property included in the Lomak Classified
Properties, not less than the net revenue interest set forth in the Lomak
Reserve Report for such well or property, without reduction, suspension, or
termination for the productive life of such well or property, except as a result
of elections not to participate in an operation under an applicable operating,
unit or other agreement, or readjustments of interest provided for under the
terms of the applicable operating, unit or other agreement, in each case, after
the date hereof; (y) obligates the party named to bear a percentage of the costs
and expenses relating to operations on, and the maintenance and production
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of, such well or property, not greater than the working or operating interest
set forth in the Lomak Reserve Report without increase for the productive life
of such well or property, except as a result of an election of other parties not
to participate in an operation under an applicable operating, unit or other
agreement, contribution requirements with respect to defaulting co-owners, or
readjustments of interest provided for under the terms of the applicable
operating or unit agreement, in each case, after the date hereof; and (z) is
free and clear of any Liens except the Lomak Permitted Encumbrances. For the
purposes of this Agreement, "Lomak Permitted Encumbrances" means (i) royalties,
overriding royalties, reversionary interests and similar burdens if the
cumulative effect of such burdens does not and will not reduce the net revenue
interest with respect to a well or property below the net revenue interest shown
therefor in the Lomak Reserve Report or increase the working interest with
respect to such well or property above the working interest shown therefor in
the Lomak Reserve Report; (ii) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for sale,
purchase, exchange, refining or processing of Hydrocarbons, unitization and
pooling designations, declarations, orders and agreements, operating agreements,
agreements of development, area of mutual interest agreements, farmout
agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements, and other agreements
including, without limitation, the terms and conditions of any and all contracts
and agreements set forth in the Lomak Reserve Report covering production sales
contracts and all other contracts and agreements disclosed in such Lomak
Disclosure Schedule, to the extent that such contracts and agreements do not and
will not reduce the net revenue interest of any well or property included in the
Lomak Classified Properties below the net revenue interest shown therefor in the
Lomak Reserve Report or increase the working interest of such well above the
working interest shown therefor in the Lomak Reserve Report without a
proportionate increase in the net revenue interest of such well or property;
(iii) easements, rights of way, servitudes, permits, surface leases and other
rights with respect to surface obligations, pipelines, grazing, canals, ditches,
reservoirs, or the like, conditions, covenants or other restrictions, and
easements of streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect of any of
the Lomak Classified Properties, so long as they are not such that would have a
Lomak Material Adverse Effect; (iv) any preferential purchase rights, required
third party consents to assignment and similar agreements and obligations not
applicable to the transactions contemplated hereby, or if applicable to the
transactions contemplated hereby, with respect to which prior to the Effective
Time (A) waivers or consents have been obtained from the appropriate Person, or
(B) the applicable period of time for asserting such rights has expired without
any exercise of such rights; (v) liens for Taxes or assessments not yet
delinquent; (vi) materialmen's, mechanic's, repairman's, employee's,
contractor's, operator's, and other similar liens or charges arising in the
ordinary course of business (A) if they have not been filed pursuant to law, (B)
if filed, they have not yet become due and payable or payment is being withheld
as provided by law or (C) if their validity is being contested in good faith in
the ordinary course of business by appropriate action; (vii) Customary
Post-Closing Consents; (viii) conventional rights of reassignment arising in
respect of abandonment, cessation of production or expiration of leases; (ix)
all rights reserved to or vested in any Governmental Authority to control or
regulate any of the Lomak Classified Properties in any manner, and all
applicable laws, rules and orders of Governmental Authorities; (x) any other
liens, charges, encumbrances, contracts, agreements, instruments, obligations,
defects or irregularities of any kind whatsoever that would not have a Lomak
Material Adverse Effect or that are set forth in Section 5.18(a) of the Lomak
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Disclosure Schedule. Notwithstanding the foregoing, title to the Lomak
Classified Properties is of a type and nature customarily acceptable to the
reasonably prudent oil and gas operator of oil and gas interests.
(b) Except as set forth in Section 5.18(b) of the Lomak
Disclosure Schedule, (i) each oil and gas lease included in the Lomak Classified
Properties is valid, binding and enforceable in accordance with its terms,
except for the Enforceability Exception (to the extent applicable), and (ii)
neither Lomak nor the Lomak Subsidiary that is party to each such lease, nor, to
the knowledge of Lomak, any other party to any such lease, is in breach or
default thereunder in any material respect, no notice of default or termination
thereunder has been given or received by Lomak or any of its Subsidiaries, and
no event has occurred which would, with the giving of notice or passage of time
or both, constitute a breach or default thereunder or permit termination,
modification or acceleration thereunder that could reasonably be expected to
result in a Lomak Material Adverse Effect.
Section 5.19 Title to Other Properties. Except as set forth in Section
5.19 of the Lomak Disclosure Schedule, Lomak or its Subsidiaries owns, of record
(to the extent applicable) and beneficially, all material personal property and
all real property (other than oil and gas leasehold interests included in the
Lomak Classified Properties), purported to be owned by Lomak or its Subsidiaries
(except to the extent that such properties have thereafter been disposed of in
the ordinary course of business consistent with past practice or after the date
hereof in compliance with Section 6.2(d)), free and clear of any Liens except
Lomak Permitted Encumbrances.
Section 5.20 Material Contracts.
(a) Set forth in Section 5.20(a) of the Lomak Disclosure
Schedule is a list of each contract, lease, indenture, agreement, arrangement or
understanding to which Lomak or any of its Subsidiaries is subject that is of a
type that would be required to be included as an exhibit to a Form S-1
Registration Statement pursuant to the rules and regulations of the SEC if such
a registration was filed by Lomak or is otherwise, in the judgment of Lomak,
deemed material to the business of Lomak and its Subsidiaries, taken as a whole
(the "Lomak Material Contracts").
(b) Except as set forth in Section 5.20(a) or 5.20(b) of the
Lomak Disclosure Schedule, the Oil and Gas Interests of Lomak and its
Subsidiaries are not subject to (i) any instrument or agreement evidencing or
related to indebtedness for borrowed money, whether directly or indirectly, or
(ii) any agreement not entered into in the ordinary course of business in which
the amount involved is in excess of $250,000. With respect to the Oil and Gas
Interests of Lomak and its Subsidiaries, (A) all Lomak Material Contracts are in
full force and effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their respective terms;
(B) Lomak is not in material breach or default with respect to the obligations
under any Lomak Material Contract and, to the knowledge of Lomak, no party to
any Lomak Material Con tract is in material breach or default with respect to
its obligations thereunder, including with respect to payments or otherwise; (C)
no party to any Lomak Material Contract has given notice of any action to
terminate, cancel, rescind or procure a judicial reformation thereof; and (D) no
Lomak Material Contract contains any provision that prevents Lomak or any of its
Subsidiaries from own-
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ing, managing and operating the Oil and Gas Interests of Lomak and its
Subsidiaries substantially in accordance with historical practices.
(c) As of the date of this Agreement, except as set forth in
Section 5.20(c) of the Lomak Disclosure Schedule, with respect to authorizations
for expenditure executed on or after January 1, 1998, (i) there are no material
outstanding calls for payments that are due or which Lomak or its Subsidiaries
are committed to make that have not been made; (ii) there are no material
operations with respect to which Lomak or its Subsidiaries have become a
non-consenting party; and (iii) there are no commitments for the material
expenditure of funds for drilling or other capital pro jects other than projects
with respect to which the operator is not required under the applicable
operating agreement to seek consent.
(d) Except as set forth in Section 5.20(d) of the Lomak
Disclosure Schedule, (i) there are no express contractual obligations to engage
in continuous development operations in order to maintain any producing Oil and
Gas Interest of Lomak or its Subsidiaries in force and effect; (ii) there are no
provisions applicable to the Oil and Gas Interests of Lomak and its Subsidiaries
that increase the royalty percentage of the lessor thereunder; and (iii) none of
the Oil and Gas Interests of Lomak and its Subsidiaries are limited by terms
fixed by a certain number of years (other than primary terms under oil and gas
leases).
Section 5.21 Permits. Immediately prior to the Effective Time and
except for Customary Post-Closing Consents, Lomak or its Subsidiaries will hold
all of the Permits required or necessary to construct, own, operate, use and/or
maintain their properties and conduct their operations as presently conducted,
except for such Permits, the lack of which, individually or in the aggregate,
would not have a Lomak Material Adverse Effect; provided, however, that
notwithstanding the foregoing, no representation or warranty in this Section
5.21 is made with respect to Permits issued pursuant to Environmental Laws,
which are covered exclusively by the provisions set forth in Section 5.12.
Section 5.22 Required Stockholder Vote or Consent. The only vote of
the holders of any class or series of Lomak's capital stock that will be
necessary to consummate the Merger and the other transactions contemplated by
this Agreement is the approval of the Stock Issuance by the holders of a
majority of the shares of Lomak Voting Stock represented in person or by proxy
and voting with respect thereto (the "Lomak Stockholder Approval"); provided,
however, that it is acknowledged that the Name Change (as defined below) would
require approval of the holders of at least a majority of the outstanding
shares of Lomak Common Stock. The "Lomak Voting Stock" shall include the
outstanding shares of Lomak Common Stock (on the basis of one vote per share)
and the outstanding shares of $2.03 Convertible Preferred Stock (on the basis
of one vote per share).
Section 5.23 Proxy Statement/Prospectus; Registration Statement. None
of the information to be supplied by Lomak or Merger Sub for inclusion in (a)
the Proxy Statement/Prospectus to be filed by the Company and Lomak with the
SEC, and any amendments or supplements thereto, or (b) the Registration
Statement to be filed by Lomak with the SEC in connection with the Merger, and
any amendments and supplements thereto, will, (i) in the case of the
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
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misleading or (ii) in the case of the Proxy Statement/Prospectus, at the time of
the mailing of the Proxy Statement/Prospectus and at the time of the Lomak
Special Meeting, contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading; provided, however, that Lomak makes no representation with
respect to information supplied in writing by the Company for inclusion in the
Registration Statement or the Proxy Statement/Prospectus. If at any time prior
to the Effective Time any event with respect to Lomak, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Proxy Statement/Prospectus or the Registration Statement, such
event shall be so described, and an amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
Lomak and such amendment or supplement shall comply with all provisions of
applicable law. The Registration Statement will, at the time it becomes
effective, comply as to form in all material respects with the provisions of the
Securities Act.
Section 5.24 Intellectual Property. Lomak and its Subsidiaries own,
or are licensed or otherwise have the right to use all Intellectual Property
currently used in the conduct of the business of Lomak and its Subsidiaries,
except where the failure to so own or otherwise have the right to use such
intellectual property would not, individually or in the aggregate, have a
Lomak Material Adverse Effect. No Person has notified either Lomak or any of
its Subsidiaries that their use of the Intellectual Property infringes on the
rights of any Person, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of
Lomak and its Subsidiaries that could have a Lomak Material Adverse Effect,
and, to Lomak's knowledge, no Person is infringing on any right of Lomak or
any of its Subsidiaries with respect to any such Intellectual Property. No
claims are pending or, to Lomak's knowledge, threatened that Lomak or any of
its Subsidiaries is infringing or otherwise adversely affecting the rights of
any Person with regard to any Intellectual Property.
Section 5.25 Hedging. Section 5.25 of the Lomak Disclosure Schedule
sets forth for the periods shown obligations of Lomak and each of its
Subsidiaries for the delivery of Hydrocarbons attributable to any of the
properties of Lomak or any of its Subsidiaries in the future on account of
prepayment, advance payment, take-or-pay or similar obligations without then
or thereafter being entitled to receive full value therefor. Except as set
forth in Section 5.25 of the Lomak Disclosure Schedule and except for fixed
price gas contracts entered into in the ordinary course of business, as of the
date of this Agreement, neither Lomak nor any of its Subsidiaries is bound by
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons or
securities.
Section 5.26 Brokers. No broker, finder or investment banker (other
than PaineWebber Incorporated, the fees and expenses of which will be paid by
Lomak and will not exceed the fee currently set forth in the Lomak Engagement
Letter described below, plus reimbursement of reasonable out of pocket
expenses) is entitled to any brokerage, finder's fee or other fee or
commission payable by Lomak or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of Lomak or any of its Subsidiaries. True and correct copies of
all agreements and engagement letters currently in
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effect with PaineWebber Incorporated (the "Lomak Engagement Letters") have been
provided to the Company.
Section 5.27 Merger Sub's Operations. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby and has
not engaged in any business activities or conducted any operations other than
in connection with the transactions contemplated hereby.
Section 5.28 Opinion of Financial Advisor. PaineWebber Incorporated
has delivered to the Board of Directors of Lomak its written opinion to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair to
Lomak from a financial point of view.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger.
From the date hereof until the Effective Time, unless Lomak shall otherwise
agree in writing, or except as set forth in the Company Disclosure Schedule or
as otherwise contemplated by this Agreement, the Company and its Subsidiaries
shall conduct their business in the ordinary course consistent with past
practice and shall use all reasonable efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and key employees, subject to
the terms of this Agreement. Except as set forth in the Company Disclosure
Schedule or as otherwise contemplated by or provided in this Agreement, and
without limiting the generality of the foregoing, from the date hereof until
the Effective Time, without the written consent of Lomak, which consent shall
not be unreasonably withheld:
(a) Neither the Company nor its Subsidiaries will adopt or
propose any change to its Certificate of Incorporation or Bylaws;
(b) The Company will not, and will not permit any of its
Subsidiaries to (i) declare, set aside or pay any dividend or other distribution
with respect to any shares of capital stock of the Company or its Subsidiaries
or (ii) repurchase, redeem or otherwise acquire any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company or any of its Subsidiaries, other than intercompany acquisitions of
stock;
(c) The Company will not, and will not permit any of its
Subsidiaries to, merge or consolidate with any other Person or acquire assets
having an individual purchase price of more than $2.5 million or aggregate
purchase prices of more than $10 million;
(d) Except as set forth in Section 6.1(d) of the Company
Disclosure Schedule, the Company will not, and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or properties with an individual fair market value
exceeding $1 million or an aggregate fair market value exceeding $5 million;
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(e) The Company will not settle any material Audit, make or
change any material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement, the
Company will not issue any securities (except pursuant to existing obligations
disclosed in the Company SEC Reports or the Company Disclosure Schedule), enter
into any amendment of any term of any outstanding security of the Company or of
any of its Subsidiaries, incur any indebtedness except trade debt in the
ordinary course of business or pursuant to existing credit facilities or
arrangements, fail to make any required contribution to any Company ERISA Plan,
increase compensation, bonus (except as set forth in Section 6.1(f) of the
Company Disclosure Schedule) or other benefits payable to any executive officer
or former employee or enter into any settlement or consent with respect to any
pending litigation;
(g) The Company will not change any method of accounting or
accounting practice by the Company or any of its Subsidiaries, except for any
such change required by GAAP;
(h) The Company will not take any action that would give rise
to a claim under the WARN Act or any similar state law or regulation because of
a "plant closing" or "mass layoff" (each as defined in the WARN Act);
(i) The Company will not amend or otherwise change the terms
of the Company Engagement Letters, except to the extent that any such amendment
or change would result in terms more favorable to the Company;
(j) Neither the Company nor any of its Subsidiaries will
become bound or obligated to participate in any operation, or consent to
participate in any operation, with respect to any Oil and Gas Interests that
will individually cost in excess of $2.5 million unless the operation is a
currently existing obligation of the Company or any of its Subsidiaries or
necessary to extend, preserve or maintain an Oil and Gas Interest;
(k) Neither the Company nor any of its Subsidiaries will enter
into any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons, or securities,
other than in the ordinary course of business in accordance with the Company's
current policies;
(l) The Company will not, and will not permit any of its
Subsidiaries to (i) take, or agree or commit to take, any action that would make
any representation and warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or (ii)
omit, or agree or commit to omit, to take any action necessary to prevent any
such representation or warranty from being materially inaccurate in any respect
at any such time;
(m) Neither the Company nor any of its Subsidiaries shall (i)
adopt, amend (other than amendments that reduce the amounts payable by the
Company or any Subsidiary, or amendments required by law to preserve the
qualified status of a Company Benefit Plan) or assume an obligation to
contribute to any employee benefit plan or arrangement of any type or collective
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bargaining agreement or, except as described in Schedule 6.1(m) attached hereto,
enter into any employment, severance or similar contract with any Person
(including, without limitation, contracts with management of the Company or any
Subsidiaries that might require that payments be made upon the consummation of
the transactions contemplated hereby) or amend any such existing contracts to
increase any amounts payable thereunder or benefits provided thereunder, (ii)
engage in any transaction (either acting alone or in conjunction with any
Company Benefit Plan or trust created thereunder) in connection with which the
Company or any Subsidiary could be subjected (directly or indirectly) to either
a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502
of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code,
(iii) terminate any Company Benefit Plan in a manner, or take any other action
with respect to any Company Benefit Plan, that could result in the liability of
the Company or any Subsidiary to any Person, (iv) take any action that could
adversely affect the qualification of any Company Benefit Plan or its compliance
with the applicable requirements of ERISA, (v) fail to make full payment when
due of all amounts which, under the provisions of any Company Benefit Plan, any
agreement relating thereto or applicable law, the Company or any Subsidiary are
required to pay as contributions thereto or (vi) fail to file, on a timely
basis, all reports and forms required by federal regulations with respect to any
Company Benefit Plan; and
(n) The Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
Section 6.2 Conduct of Business by Lomak Pending the Merger. From the
date hereof until the Effective Time, unless the Company shall otherwise agree
in writing, or except as set forth in the Lomak Disclosure Schedule or as
otherwise contemplated by this Agreement, Lomak shall conduct, and shall cause
its Subsidiaries to conduct, its business in the ordinary course consistent
with past practice and shall use, and shall cause its each of its Subsidiaries
to use, all reasonable efforts to preserve intact its business organizations
and relationships with third parties and to keep available the services of its
key employees, subject to the terms of this Agreement. Except as set forth in
the Lomak Disclosure Schedule or as otherwise contemplated by or provided in
this Agreement, and without limiting the generality of the foregoing, from the
date hereof until the Effective Time, without the written consent of the
Company, which consent shall not be unreasonably withheld:
(a) Neither Lomak nor Merger Sub will adopt or propose any
change to its Certificate of Incorporation or Bylaws;
(b) Lomak will not, and will not permit any of its
Subsidiaries to (i) declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock of Lomak or its
Subsidiaries other than regular quarterly dividends not in excess of 150% of
the per share dividends currently paid or (ii) repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other securities of, or
other ownership interests in, Lomak or any of its Subsidiaries, other than
intercompany acquisitions of stock;
(c) Neither Lomak nor Merger Sub will merge or consolidate
with any other Person or acquire assets having an individual purchase price of
more than $5 million or aggregate purchase prices of more than $20 million;
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(d) Except as set forth in Section 6.2(d) of the Lomak
Disclosure Schedule, neither Lomak nor any of its Subsidiaries will sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties with an individual fair market value exceeding $2 million or an
aggregate fair market value exceeding $10 million;
(e) Lomak will not settle any material Audit, make or change
any material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement, Lomak
will not issue any securities (except pursuant to existing obligations disclosed
in the Lomak SEC Reports or the Lomak Disclosure Schedule), enter into any
amendment of any term of any outstanding security of Lomak or of any of its
Subsidiaries, incur any indebtedness except trade debt in the ordinary course of
business or pursuant to existing credit facilities or arrangements, fail to make
any required contribution to any Lomak ERISA Plan, increase compensation, bonus
(except as set forth in Section 6.2(f) of the Lomak Disclosure Schedule) or
other benefits payable to any executive officer or former employee or enter into
any settlement or consent with respect to any pending litigation;
(g) Lomak will not change any method of accounting or
accounting practice, except for any such change required by GAAP;
(h) Lomak will not amend or otherwise change the terms of the
Lomak Engagement Letters, except to the extent that any such amendment or change
would result in terms more favorable to Lomak;
(i) Neither Lomak nor any of its Subsidiaries will become
bound or obligated to participate in any operation, or consent to participate in
any operation, with respect to any Oil and Gas Interest that will individually
cost in excess of $2.5 million unless the operation is a currently existing
obligation of Lomak or any of its Subsidiaries or necessary to extend, preserve
or maintain an Oil and Gas Interest;
(j) Neither Lomak nor any of its Subsidiaries will enter into
any futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons, or securities,
other than in the ordinary course of business in accordance with Lomak's current
policies;
(k) Lomak will not, and will not permit any of its
Subsidiaries to (i) take, or agree or commit to take, any action that would make
any representation and warranty of Lomak or Merger Sub hereunder inaccurate in
any material respect at, or as of any time prior to, the Effective Time or (ii)
omit, or agree or commit to omit, to take any action necessary to prevent any
such representation or warranty from being materially inaccurate in any respect
at any such time;
(l) Neither Lomak nor any of its Subsidiaries shall (i) adopt,
amend (other than amendments that reduce the amounts payable by Lomak or any
Subsidiary, or amendments required by law to preserve the qualified status of a
Lomak Benefit Plan) or assume an obligation to contribute to any employee
benefit plan or arrangement of any type or collective bargaining agreement or
enter into any employment, severance or similar contract with any Person
(including,
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without limitation, contracts with management of Lomak or any Subsidiaries that
might require that payments be made upon consummation of the transactions
contemplated hereby) or amend any such existing contracts to increase any
amounts payable thereunder or benefits provided thereunder, (ii) engage in any
transaction (either acting alone or in conjunction with any Lomak Benefit Plan
or trust created thereunder) in connection with which Lomak or any Subsidiary
could be subjected (directly or indirectly) to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code, (iii) terminate any Lomak
Benefit Plan in a manner, or take any other action with respect to any Lomak
Benefit Plan, that could result in the liability of Lomak or any Subsidiary to
any Person, (iv) take any action that could adversely affect the qualification
of any Lomak Benefit Plan or its compliance with the applicable requirements or
ERISA, (v) fail to make full payment when due of all amounts which, under the
provisions of any Lomak Benefit Plan, any agreement relating thereto or
applicable law, Lomak or any Subsidiary are required to pay as contributions
thereto or (vi) fail to file, on a timely basis, all reports and forms required
by federal regulations with respect to any Lomak Benefit Plan; and
(m) Lomak will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
Section 6.3 Conduct of Business of Merger Sub. From the date hereof
to the Effective Time, Merger Sub shall not engage in any activities of any
nature except as provided in or contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. The parties shall each afford to
the other and to the other's financial advisors, legal counsel, accountants,
consultants, financing sources and other authorized representatives access
during normal business hours throughout the period prior to the Effective Time
to all of its books, records, properties, contracts, leases, plants and
personnel and, during such period, each shall furnish promptly to the other (a)
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities laws, and (b) all
other information as such other party reasonably may request, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Each party shall hold in confidence all
non-public information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Notwithstanding the foregoing, the Confidentiality Agreement
dated March 31, 1998 between Lomak and the Company shall survive the execution
and delivery of this Agreement.
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Section 7.2 Acquisition Proposals.
(a) From the date hereof until the termination hereof, the
Company and its Subsidiaries will not, and will cause their respective officers,
directors, employees or other agents not to, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Company Acquisition Proposal or
(ii) engage in negotiations with, or disclose any nonpublic information relating
to the Company or its Subsidiaries, respectively, or afford access to their
respective properties, books or records to any Person that may be considering
making, or has made, a Company Acquisition Proposal. Nothing contained in this
Section 7.2 shall prohibit the Company and its Board of Directors from taking
and disclosing a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated by the SEC under the Exchange
Act.
(b) The term "Company Acquisition Proposal" as used herein
means any offer or proposal for, or any indication of interest in, a merger or
other business combination directly or indirectly involving the Company or any
Company Subsidiary or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, any such party, other than the
transactions contemplated by this Agreement.
Section 7.3 Directors' and Officers' Indemnification.
(a) For six years after the Effective Time, Lomak shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company and its Subsidiaries (each an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Lomak, which shall not
be unreasonably withheld)) in connection with any claim, action, suit,
proceeding or investigation (an "Action") arising out of actions or omissions in
their capacity as such occurring at or prior to the Effective Time to the full
extent permitted under the DGCL or the Company's Certificate of Incorporation,
Bylaws or written indemnification agreements in effect at the date hereof,
including provisions therein relating to the advancement of expenses incurred in
the defense of any action or suit; provided, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims; and provided, further, that any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under the DGCL, the Company's
Certificate of Incorporation or Bylaws or such agreements, as the case may be,
shall be made by independent counsel mutually acceptable to Lomak and the
Indemnified Party; and provided, further, that nothing herein shall impair any
rights or obligations of any present or former directors or officers of the
Company. In the event of any Action, any Indemnified Party wishing to claim
indemnification will promptly notify Lomak thereof (provided that failure to so
notify Lomak will not affect the obligations of Lomak to provide indemnification
except to the extent that Lomak shall have been prejudiced as a result of such
failure). With respect to any Action for which indemnification is requested,
Lomak will be entitled to participate therein at its own expense and, except as
otherwise provided below, to the extent that it may wish, Lomak may assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party.
After notice from Lomak to the Indemnified Party of its election to assume the
defense of an Action, Lomak will not be liable to the Indemnified Party in
connection with the
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defense thereof, other than as provided below. Lomak will not settle any Action
without the Indemnified Party's written consent (which consent will not be
unreasonably withheld). The Indemnified Party will have the right to employ
counsel in any Action, but the fees and expenses of such counsel incurred after
notice from Lomak of its assumption of the defense thereof will be at the
expense of the Indemnified Party, unless (i) the employment of counsel by the
Indemnified Party has been authorized by Lomak, (ii) the Indemnified Party will
have reasonably concluded upon the advice of counsel that there may be a
conflict of interest between the Indemnified Party and Lomak in the conduct of
the defense of an action, or (iii) Lomak shall not in fact have employed counsel
to assume the defense of an Action, in each of which cases the reasonable fees
and expenses of counsel selected by the Indemnified Party will be at the expense
of Lomak. Notwithstanding the foregoing, Lomak will not be liable for any
settlement effected without its written consent (which shall not be unreasonably
withheld) and Lomak will not be obligated pursuant to this Section 7.3(a) to pay
the fees and disbursements of more than one counsel for all Indemnified Parties
in any single Action, except to the extent two or more of such Indemnified
Parties have conflicting interests in the outcome of such action.
(b) Lomak shall maintain the Company's existing officers' and
directors' liability insurance policy ("D&O Insurance") for a period of not less
than six years after the Effective Time, but only to the extent related to
actions or omissions prior to the Effective Time; provided, that Lomak may
substitute therefor policies of substantially similar coverage and amounts with
a comparably rated underwriter containing terms no less advantageous in any
material respect to such former directors or officers; provided further, that
the aggregate amount of premiums to be paid with respect to the maintenance of
such D&O Insurance for such six year period shall not exceed $600,000.
(c) Lomak will cause the Surviving Corporation to keep in
effect provisions in its certificate of incorporation and bylaws providing for
exculpation of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under the DGCL, which
provisions will not be amended except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification.
(d) The provisions of this Section 7.3 will survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
Section 7.4 Further Assurances. Each party hereto agrees to use all
reasonable efforts to obtain all consents and approvals and to do all other
things necessary for the consummation of the transactions contemplated by this
Agreement. The parties agree to take such further action to deliver or cause to
be delivered to each other at the Closing and at such other times thereafter as
shall be reasonably agreed such additional agreements or instruments as any of
them may reasonably request for the purpose of carrying out this Agreement and
agreements and transactions contemplated hereby and thereby.
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Section 7.5 Expenses.
(a) All Expenses (as defined below) incurred in connection
with this Agreement and the transactions contemplated hereby will be paid by the
party incurring such expenses except as expressly provided herein and except
that both (i) the filing fee in connection with the filing of the Registration
Statement or Proxy Statement/Prospectus with the SEC and (ii) the expenses
incurred in connection with printing and mailing the Registration Statement and
the Proxy Statement/Prospectus will be shared equally by the Company and Lomak.
(b) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including, without limitation, all reasonable
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement, the Proxy
Statement/Prospectus, the solicitation of stockholder approvals and all other
matters related to the consummation of the transactions contemplated hereby.
Section 7.6 Cooperation. Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of the parties hereto
shall confer on a regular and frequent basis with one or more representatives
of the other parties to report operational matters of materiality and the
general status of ongoing operations and shall promptly provide the other
party or its counsel with copies of all filings made by such party with any
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby.
Section 7.7 Publicity. Neither the Company, Lomak nor any of their
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange. The parties agree to respond promptly to any press
release or other announcement submitted for comment pursuant to this Section
7.7.
Section 7.8 Additional Actions. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement, subject, however, to the appropriate vote of
stockholders of the Company and Lomak required so to vote.
Section 7.9 Filings. Each party hereto shall make all filings
required to be made by such party in connection herewith or desirable to
achieve the purposes contemplated hereby, and shall cooperate as needed with
respect to any such filing by any other party hereto.
Section 7.10 Consents. Each of Lomak, Merger Sub and the Company
shall use all reasonable efforts to obtain all consents necessary or advisable
in connection with its obligations hereunder.
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Section 7.11 Employee Matters; Benefit Plans. After the Effective
Time, Lomak will provide to any employees of the Company who are employed by
the Company as of the Effective Time (the "Retained Employees") the same base
salary or wages provided to such employees prior to the Effective Time. From
and after the Effective Time until January 1, 1999, Lomak will provide, or
cause to be provided to, the Retained Employees employee plans that are
comparable to the employee plans that Lomak provides to its similarly situated
employees or provide coverage under existing Lomak benefit plans provided to
similarly situated employees. Further, Lomak shall (i) waive, or cause to be
waived, any preexisting condition limitations applicable to the Retained
Employees under any group medical plan to the extent that a Retained
Employee's condition would not have operated as a preexisting condition
limitation under the Company's group medical plan, (ii) cause any employee
pension benefit plan (as such term is defined in section 3(2) of ERISA) which
is intended to be qualified under Section 401 of the Code to be amended to
provide that the Retained Employees shall receive credit for participation and
vesting purposes under such plan for their period of employment with the
Company and its predecessors to the extent such predecessor employment was
recognized by the Company, and (iii) credit the Retained Employees under each
other employee benefit plan or policy which is not described in clause (ii)
above for their period of employment with the Company or its predecessors to
the extent such predecessor employment was recognized by the Company, but not
in excess of the maximum credit available to Lomak's employees under such plan
or policy. At the Effective Time, Lomak shall assume, and shall, and shall
cause the Surviving Corporation to, honor and perform all obligations of the
Company under (i) the employment arrangements described in Schedule 6.1(m),
(ii) the Company's employment agreements with each of Michael V. Ronca and
Michael L. Harvey, as in effect on the date hereof and as may be amended in
the manner described in Schedule 6.1(m), (iii) the Company Employee Plan and
all Amended and Restated Non-Qualified Stock Option Agreements executed
thereunder, as same may be amended as contemplated by Section 3.3 hereof and
(iv) the Company Director Plan and all stock option grant agreements executed
thereunder, as the same may be amended as contemplated by Section 3.3 hereof.
Section 7.12 Lomak Board. Lomak shall take action to cause the number
of directors on the Lomak Board immediately after the Effective Time to be
increased by two directors and shall cause the President of the Company and
Chairman of the Board of the Company elected to the Board of Directors
immediately after the Effective Time. Lomak agrees to nominate such newly
appointed directors for election by Lomak's stockholders at Lomak's 1999
Annual Meeting of Stockholders.
Section 7.13 Stockholders Meetings.
(a) Approval of the Company Stockholders. The Company shall,
as promptly as reasonably practicable after the date hereof (i) take all steps
reasonably necessary to call, give notice of, convene and hold a special meeting
of its stockholders (the "Company Special Meeting") for the purpose of securing
the Company Stockholder Approval, (ii) distribute to its stockholders the Proxy
Statement/Prospectus in accordance with applicable federal and state law and
with its certificate of incorporation and bylaws, which Proxy
Statement/Prospectus shall contain the recommendation of the Board of Directors
of the Company that its stockholders approve the Merger, this Agreement and the
transactions contemplated hereby, (iii) use all reasonable efforts to solicit
from its stockholders proxies in favor of the approval and adoption of the
Merger, this Agreement and the transactions contemplated hereby and to secure
the Company Stockholder Approval, and (iv) cooperate and
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consult with Lomak with respect to each of the foregoing matters. The parties
acknowledge that, in lieu of the Company Special Meeting, the Company
Stockholder Approval may be obtained by the execution of written stockholder
consents pursuant to Section 228 of the DGCL by the holders of at least a
majority of the outstanding shares of Company Common Stock, and that in such
event, the Registration Statement shall include an information statement with
respect to the holders of Company Common Stock pursuant to Section 14(c) under
the Exchange Act.
(b) Approval of Lomak Stockholders. Lomak shall, as promptly
as reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of its
stockholders (the "Lomak Special Meeting") for the purpose of securing the Lomak
Stockholder Approval, (ii) distribute to its stockholders the Proxy
Statement/Prospectus in accordance with applicable federal and state law and its
certificate of incorporation and bylaws, which Proxy Statement/Prospectus shall
contain the recommendation of the Lomak Board of Directors that its stockholders
approve the Stock Issuance and (iii) use all reasonable efforts to solicit from
its stockholders proxies in favor of the approval of the Stock Issuance and to
secure the Lomak Stockholder Approval, and (iv) cooperate and consult with the
Company with respect to each of the foregoing matters. Lomak, as the sole
stockholder of Merger Sub, has consented to the adoption of this Agreement by
Merger Sub and agrees that such consent shall be treated for all purposes as a
vote duly adopted at a meeting of the stockholders of Merger Sub held for this
purpose.
(c) Meeting Date. The Lomak Special Meeting and the Company
Special Meeting shall be held on the same day unless otherwise agreed by Lomak
and the Company.
Section 7.14 Preparation of the Proxy Statement/Prospectus and
Registration Statement.
(a) Lomak and the Company shall promptly prepare and file with
the SEC a preliminary version of the Proxy Statement/Prospectus and will use all
reasonable efforts to respond to the comments of the SEC in connection therewith
and to furnish all information required to prepare the definitive Proxy
Statement/Prospectus. Each of Lomak and the Company shall use all reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger. Lomak shall also take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified or filing a general
consent to service of process in any jurisdiction) required to be taken under
any applicable state securities laws in connection with the issuance of Lomak
Common Stock in the Merger and the Company shall furnish all information
concerning the Company and the holders of shares of the Company Common Stock as
may be reasonably requested in connection with any such action. The Company
authorizes Lomak to utilize in the Registration Statement the information
concerning the Company and its Subsidiaries provided to Lomak for the purpose of
inclusion in the Proxy Statement/Prospectus. The Company shall have the right to
review and comment on the form of proxy statement and prospectus included in the
Registration Statement. Promptly after the effectiveness of the Registration
Statement, each of Lomak and the Company shall cause the Proxy
Statement/Prospectus to be mailed to its respective stockholders, and if
necessary, after the definitive Proxy Statement/Prospectus shall have been
mailed, promptly circulate amended, supplemented or supplemental proxy materials
and, if required in connection therewith, resolicit proxies. Lomak shall advise
the Company and the
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Company shall advise Lomak, as applicable, promptly after it receives notice
thereof, of the time when the Registration Statement shall become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Lomak Common Stock for offering or sale
in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information. Prior to
the Effective Time or the termination of this Agreement, each party shall
consult with each other with respect to any material (other than the Proxy
Statement/Prospectus) that constitutes a "prospectus" relating to the Merger
within the meaning of the Securities Act. Lomak shall furnish such information
concerning Lomak as is necessary to cause the Proxy Statement/Prospectus,
insofar as it relates to Lomak, to be prepared in accordance with this Section
7.14. Lomak agrees promptly to advise the Company if at any time prior to the
Company Special Meeting (or in the case of the delivery of an information
statement pursuant to Section 14(c) under the Exchange Act, the date of mailing
thereof) any information provided by Lomak in the Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect, and to provide the
information needed to correct such inaccuracy or omission. The Company shall
furnish Lomak such information concerning the Company and its Subsidiaries as is
necessary to cause the Proxy Statement/Prospectus, insofar as it relates to the
Company and its Subsidiaries, to be prepared in accordance with this Section
7.14. The Company agrees promptly to advise Lomak if at any time prior to the
Lomak Special Meeting any information provided by the Company in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect,
and to provide the information needed to correct such inaccuracy or omission.
(b) Letter of Lomak's Accountants. Following receipt by Arthur
Andersen LLP, Lomak's independent auditors, of an appropriate request from the
Company pursuant to SAS No. 72, Lomak shall use all reasonable efforts to cause
to be delivered to the Company a letter of Arthur Andersen LLP, dated a date
within two business days before the effective date of the Registration
Statement, and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy
Statement/Prospectus. Lomak shall also use all reasonable efforts to obtain from
Arthur Andersen LLP any consents of such firm required in connection with the
filing of the Proxy Statement/Prospectus with the SEC.
(c) Letter of the Company's Accountants. Following receipt by
Deloitte & Touche LLP, the Company's independent auditors, of an appropriate
request from Lomak pursuant to SAS No. 72, the Company shall use all reasonable
efforts to cause to be delivered to Lomak a letter of Deloitte & Touche LLP,
dated a date within two business days before the effective date of the
Registration Statement, and addressed to Lomak, in form and substance
satisfactory to Lomak and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy
Statement/Prospectus. The Company shall also use all reasonable efforts to
obtain from Deloitte & Touche LLP any consents of such firm required in
connection with the filing of the Proxy Statement/Prospectus with the SEC.
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Section 7.15 Stock Exchange Listing. Lomak shall use all reasonable
efforts to cause the Lomak Common Stock to be issued in the Merger to be
approved for listing on the NYSE prior to the Effective Time, in each case,
subject to official notice of issuance.
Section 7.16 Notice of Certain Events. Each party to this Agreement
shall promptly as reasonably practicable notify the other parties hereto of:
(a) any notice or other communication from any Person alleging
that the consent of such Person (or other Person) is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting it or any of its Subsidiaries which, if pending
on the date of this Agreement, would have been required to have been disclosed
pursuant to Sections 4.10, 4.12, 5.10 or 5.12 or which relate to the
consummation of the transactions contemplated by this Agreement;
(d) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement, under any material agreement; and
(e) any Company Material Adverse Effect or Lomak Material
Adverse Effect or the occurrence of any event which is reasonably likely to
result in a Company Material Adverse Effect or a Lomak Material Adverse Effect,
as the case may be.
Section 7.17 Site Inspections. Subject to compliance with applicable
law (including applicable Environmental Laws), from the date hereof until the
Effective Time, each of the parties hereto may undertake (at that party's sole
cost and expense) an environmental assessment or assessments (an "Assessment")
of any other party's operations, business and/or properties that are the
subject of this Agreement. An Assessment may include, but not be limited to, a
review of permits, files and records, as well as visual and physical
inspections and testing. Before conducting an Assessment, the party intending
to conduct such Assessment (the "Inspecting Party") shall confer with the
party whose operations, business or property is the subject of such Assessment
(the "Inspected Party") regarding the nature, scope and scheduling of such
Assessment, and shall comply with such conditions as the Inspected Party may
reasonably impose to avoid interference with the Inspected Party's operations
or business. The Inspected Party shall cooperate in good faith with the
Inspecting Party's effort to conduct an Assessment.
Section 7.18 Chief Operating Officer. Immediately after the Effective
Time, Michael V. Ronca shall be elected by the Lomak Board of Directors as
Chief Operating Officer of Lomak.
Section 7.19 Charter Amendments; Name. At the Effective Time, the
name of Lomak shall be changed to "Range Resources Corporation" (the "Name
Change"), and Lomak shall use all
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reasonable efforts to take such actions as are necessary to amend the
Certificate of Incorporation of Lomak to reflect the Name Change; provided,
however, that obtaining the requisite stockholder approval to effect the Name
Change shall not constitute a condition to the obligations of either party to
consummate the transactions contemplated by this Agreement.
Section 7.20 Voting Agreement. Concurrently with the execution of
this Agreement, Lomak shall enter into the Voting Agreement with the Principal
Stockholder regarding, among other things, the voting of shares of Company
Common Stock. Concurrently with the execution of this Agreement, Lomak and the
Principal Stockholder shall enter into the Stock Purchase Agreement, pursuant
to which Lomak shall agree, on the terms and subject to the conditions set
forth therein, to acquire at least 3,250,000 of the outstanding shares of
Company Common Stock for $13.50 per share in cash.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to the Obligation of Each Party. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
any or all of which may be waived in whole or in part by the party being
benefitted thereby, to the extent permitted by applicable law:
(a) The Company Stockholder Approval and the Lomak Stockholder
Approval shall have been obtained.
(b) No action, suit or proceeding instituted by any
Governmental Authority shall be pending and no statute, rule or regulation and
no injunction, order, decree or judgment of any court or Governmental Authority
of competent jurisdiction shall be in effect which would prohibit, restrain,
enjoin or restrict the consummation of the Merger.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall be effective at
the Effective Time, and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceeding for such purpose
shall be pending before or threatened by the SEC.
(d) Each of the Company and Lomak shall have obtained such
permits, authorizations, consents, or approvals required to be obtained by such
party (or its Subsidiaries or Affiliates) to consummate the transactions
contemplated hereby.
(e) The shares of Lomak Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE subject to official
notice of issuance.
(f) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired.
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Section 8.2 Conditions to the Obligations of Lomak and Merger Sub.
The obligation of Lomak and Merger Sub to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived in whole or in part by Lomak and Merger Sub,
as the case may be, to the extent permitted by applicable law:
(a) The Company shall have performed in all material respects
its obligations under this Agreement required to be performed by it at or prior
to the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all respects, in each
case except for such failures to be so true and correct (without giving effect
for purposes of this Section 8.2(a) to the individual materiality standards
otherwise contained in Article IV hereof) which would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect,
in each case as of the date of this Agreement and at and as of the Effective
Time as if made at and as of such time, except as expressly contemplated by this
Agreement, and Lomak shall have received a certificate of the President and
Chief Executive Officer and Chief Financial Officer of the Company as to the
satisfaction of this condition.
(b) The transactions contemplated by the Stock Purchase
Agreement shall have been consummated on or prior to the Effective Time in
accordance with the terms thereof, and as a result of such transactions, Lomak
shall have acquired at least 3,250,000 shares of outstanding Company Common
Stock.
Section 8.3 Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived in whole or in part by the Company to the extent permitted
by applicable law:
(a) Each of Lomak and Merger Sub shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the Effective Time and the representations and warranties
of each of Lomak and Merger Sub contained in this Agreement, shall be true and
correct in all respects, in each case except for such failures to be so true and
correct (without giving effect for purposes of this Section 8.3(a) to the
individual materiality standards otherwise contained in Article V hereof) which
would not, individually or in the aggregate, reasonably be expected to have a
Lomak Material Adverse Effect, in each case as of the date of this Agreement and
at and as of the Effective Time as if made at and as of such time, except as
expressly contemplated by this Agreement, and the Company shall have received a
certificate of the President and Chief Executive Officer and Chief Financial
Officer of Lomak and an executive officer and the chief financial officer of
Merger Sub as to the satisfaction of this condition.
ARTICLE IX
SURVIVAL
Section 9.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement
shall not survive the Closing.
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Section 9.2 Survival of Covenants and Agreements. The covenants and
agreements of the parties to be performed after the Closing contained in this
Agreement shall survive the Closing.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
stockholders of Lomak and the Company:
(a) by the mutual written consent of the Boards of Directors
of Lomak and the Company;
(b) by either Lomak or the Company if the Effective Time shall
not have occurred on or before October 31, 1998 (provided that the right to
terminate this Agreement under this subsection (b) shall not be available to any
party who at the time of the proposed termination is in material breach of any
of its obligations under this Agreement);
(c) by the Company, if there has been a material breach by
Lomak or Merger Sub of any covenant or agreement set forth in this Agreement,
the Voting Agreement or the Stock Purchase Agreement or if there shall be a
breach by Lomak of any representation contained in Article V hereof that would
result in a failure to satisfy the conditions set forth in Section 8.3(a), in
each case which breach (if susceptible to cure) has not been cured in all
material respects within twenty business days following receipt by Lomak of
notice of such breach;
(d) by Lomak, if there has been a material breach by the
Company or the Principal Stockholder of any covenant or agreement set forth in
this Agreement, the Voting Agreement or the Stock Purchase Agreement, or if
there shall be a breach by the Company of any representation contained in
Article IV hereof that would result in a failure to satisfy the conditions set
forth in Section 8.2(a) or a material breach by the Principal Stockholder of the
Voting Agreement or Stock Purchase Agreement, in each case which breach (if
susceptible to cure) has not been cured in all material respects within twenty
business days following receipt by the Company or Principal Stockholder as
applicable, of notice of such breach (the "Company Breach");
(e) by either the Company or Lomak, if there shall be any
applicable domestic law, rule or regulation that makes consummation of the
Merger illegal or if any judgment, injunction, order or decree of a court or
other Governmental Authority of competent jurisdiction shall restrain or
prohibit the consummation of the Merger, and such judgment, injunction, order or
decree shall become final and nonappealable; or
(f) by either the Company or Lomak, if the stockholder
approvals referred to in Section 7.13 shall not have been obtained by reason of
the failure to obtain the requisite vote upon a vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof.
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Section 10.2 Effect of Termination. In the event of termination of
the Agreement and the abandonment of the Merger pursuant to this Article X,
all obligations of the parties shall terminate, except the obligations of the
parties pursuant to this Section 10.2 and except for the provisions of
Sections 7.5, 7.7 and 11.8 and the last two sentences of Section 7.1, provided
that nothing herein shall relieve any party from liability for any willful
breaches hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices or communications hereunder shall
be in writing (including facsimile or similar writing) addressed as follows:
To Lomak or Merger Sub:
Lomak Petroleum, Inc.
500 Throckmorton Street, Suite 1900
Fort Worth, Texas 76102
Attention: John H. Pinkerton
Facsimile No.: (817) 870-2316
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: J. Mark Metts
Facsimile No.: (713) 615-5605
To the Company:
Domain Energy Corporation
16801 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
Attention: Michael V. Ronca
Facsimile No.: (281) 618-1977
With copies to:
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Attention: James L. Rice III
Facsimile No.: (713) 224-9511
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and:
First Reserve Fund VII, Limited Partnership
c/o First Reserve Corporation
1801 California Street, Suite 4110
Denver, Colorado 80202
Attention: Thomas R. Denison
Facsimile No.: (303) 382-1275
Any such notice or communication shall be deemed given (a) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, (b) one
Business Day after being deposited with a next-day courier, postage prepaid, or
(c) three Business Days after being sent certified or registered mail, return
receipt requested, postage prepaid, in each case addressed as above (or to such
other address as such party may designate in writing from time to time).
Section 11.2 Separability. If any provision of this Agreement shall
be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full force and effect.
Section 11.3 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors, and assigns; provided, however, that neither this
Agreement nor any rights hereunder shall be assignable or otherwise subject to
hypothecation and any assignment in violation hereof shall be null and void.
Section 11.4 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.5 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 such counterparts have
been signed by each of the parties and delivered to each party.
Section 11.6 Entire Agreement. This Agreement (together with the
Company Disclosure Schedules and the Lomak Disclosure Schedules) represents
the entire Agreement of the parties with respect to the subject matter hereof
and shall supersede any and all previous contracts, arrangements or
understandings between the parties hereto with respect to the subject matter
hereof.
Section 11.7 Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of Delaware, without
reference to rules relating to conflicts of law.
Section 11.8 Attorneys' Fees. If any action at law or equity,
including an action for declaratory relief, is brought to enforce or interpret
any provision of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and expenses from the other party, which
fees and expenses shall be in addition to any other relief which may be
awarded.
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Section 11.9 No Third Party Beneficiaries. Except as provided in
Section 7.3, no Person or entity other than the parties hereto is an intended
beneficiary of this Agreement or any portion hereof.
Section 11.10 Disclosure Schedules. The disclosures made on any
disclosure schedule, including the Company Disclosure Schedule and the Lomak
Disclosure Schedule, with respect to any representation or warranty shall be
deemed to be made with respect to any other representation or warranty
requiring the same or similar disclosure to the extent that the relevance of
such disclosure to other representations and warranties is evident from the
face of the disclosure schedule. The inclusion of any matter on any disclosure
schedule will not be deemed an admission by any party that such listed matter
is material or that such listed matter has or would have a Company Material
Adverse Effect or a Lomak Material Adverse Effect, as applicable.
Section 11.11 Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified except by an
instrument in writing signed by all the parties hereto. This Agreement may be
amended by the parties hereto, by action taken by their respective Board of
Directors, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of Lomak, Merger Sub and the
Company, but after any such stockholder approval, no amendment shall be made
which by law requires the further approval of stockholders without obtaining
such further approval.
Section 11.12 No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance
by any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
LOMAK PETROLEUM, INC.
By:______________________________________
John H. Pinkerton
President and Chief Executive Officer
DEC ACQUISITION, INC.
By:_______________________________________
John H. Pinkerton
President
DOMAIN ENERGY CORPORATION
By:________________________________________
Michael V. Ronca
President and Chief Executive Officer
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