EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 31, 2005
BY AND AMONG
CADENCE RESOURCES CORPORATION,
AURORA ACQUISITION CORP.,
AND
AURORA ENERGY, LTD.
Table of Contents
1. The Merger and Consideration; Certain Definitions......................1
1.1 The Merger.......................................................1
(a) Structure........................................................1
(b) The Closing......................................................1
(c) Actions at the Closing...........................................2
(d) Effect of Merger.................................................2
1.2 Merger Consideration.............................................3
(a) Purchase Price...................................................3
(b) Cancellation of Aurora Common Stock; Issuance of Aurora
Common Stock to Cadence......................................3
(c) Exchange of Certificates.........................................3
1.3 Certain Definitions..............................................5
1.4 Other Definitions...............................................11
2. Representations and Warranties of Aurora..............................13
2.1 Organization....................................................13
2.2 Capitalization..................................................13
2.3 Authorization; Validity of Agreement............................14
2.4 No Violations; Consents and Approvals...........................14
2.5 Financial Statements............................................14
2.6 Operation of Business...........................................15
2.7 Non-Oil and Gas Real Property...................................16
2.8 Non-Oil and Gas Fixtures and Equipment..........................16
2.9 Oil and Gas Interests...........................................17
2.10 No Undisclosed Liabilities......................................20
2.11 Litigation; Compliance with Law; Licenses and Permits...........21
2.12 Employee Benefit Plans; ERISA...................................21
2.13 Intellectual Property...........................................24
2.14 Material Contracts..............................................24
2.15 Taxes...........................................................25
2.16 Affiliated Party Transactions...................................28
2.17 Environmental Matters...........................................28
2.18 No Brokers......................................................29
2.19 Receivables.....................................................29
2.20 Assets Utilized in the Business.................................29
2.21 Insurance.......................................................29
2.22 Delivery of Documents; Corporate Records........................29
2.23 Labor and Employment Matters....................................29
2.24 Restrictive Covenants...........................................31
2.25 Bank Accounts...................................................31
2.26 Directors, Officers and Certain Employees.......................31
2.27 No Misstatements or Omissions...................................31
3. Representations and Warranties Cadence and Acquisition Sub............31
3.1 Organization and Good Standing..................................31
3.2 Authorization and Validity......................................32
3.3 No Conflicts or Violation.......................................32
3.4 The Shares......................................................32
3.5 SEC Filings; Disclosure.........................................33
3.6 Litigation; Compliance with Law; Licenses and Permits...........33
3.7 Accuracy of Information Furnished and Representations...........33
3.8 Information Supplied............................................34
3.9 Acquisition Sub.................................................34
3.10 Capitalization..................................................34
3.11 Financial Statements............................................35
3.12 Operation of Business...........................................35
3.13 Non-Oil And Gas Real Property...................................36
3.14 Non-Oil and Gas Cadence Fixtures and Equipment..................36
3.15 Oil and Gas Interests...........................................37
3.16 No Undisclosed Liabilities......................................40
3.17 Cadence Employee Benefit Plans; ERISA...........................41
3.18 Intellectual Property...........................................43
3.19 Material Contracts..............................................44
3.20 Taxes...........................................................45
3.21 Affiliated Party Transactions...................................47
3.22 Environmental Matters...........................................48
3.23 No Brokers......................................................48
3.24 Receivables.....................................................48
3.25 Assets Utilized in the Business.................................48
3.26 Insurance.......................................................48
3.27 Delivery of Documents; Corporate Records........................49
3.28 Labor and Employment Matters....................................49
3.29 Restrictive Covenants...........................................50
3.30 Bank Accounts...................................................50
3.31 Directors, Officers and Certain Employees.......................51
4. Conditions to Obligations of Aurora to Close..........................51
4.1 Correctness of Representations and Warranties...................51
4.2 Performance of Covenants and Agreements.........................51
4.3 Effectiveness of Registration Statement.........................51
4.4 Lock up Agreements..............................................51
4.5 Opinion of Counsel for Cadence..................................52
4.6 No New Proceedings..............................................52
4.7 Board of Directors Approvals....................................52
4.8 Cadence Warrants................................................53
4.9 Proxy...........................................................53
4.10 Voting Agreement................................................54
5. Conditions to Obligations of Cadence and Acquisition Sub to Close.....54
5.1 Correctness of Representations and Warranties...................54
5.2 Performance of Covenants and Agreements.........................54
5.3 Opinion of Counsel for Aurora...................................54
5.4 Shareholder Approval of Merger..................................54
5.5 Lock up Agreements..............................................54
5.6 No New Proceedings..............................................55
5.7 Consents Satisfied..............................................55
6. Conditions to the Obligations of All Parties to Close.................55
6.1 No Legal Bar....................................................55
6.2 Investment of Rubicon in Cadence and Aurora.....................55
7. Post Closing Covenant.................................................55
8. Pre-Closing Covenants.................................................55
8.1 General.........................................................55
8.2 Full Access.....................................................55
8.3 Notice of Developments..........................................56
8.4 Preparation of Registration Statement and Proxy Statement.......56
8.5 Regulatory and Other Approvals..................................56
8.6 Observer Rights.................................................56
9. Indemnification.......................................................57
9.1 Indemnification by Aurora.......................................57
9.2 Indemnification by Cadence......................................57
9.3 Limitations Period..............................................57
9.4 Procedures for Resolution and Payment of Claims for
Indemnification.............................................58
10. Confidential Information..............................................60
11. Termination...........................................................60
12. Miscellaneous Provisions..............................................60
12.1 Construction....................................................60
12.2 Notices.........................................................60
12.3 Assignment......................................................62
12.4 Amendments and Waivers..........................................62
12.5 Attorneys' Fees.................................................62
12.6 Binding Nature of Agreement.....................................62
12.7 Expenses........................................................63
12.8 Entire Agreement................................................63
12.9 Severability....................................................63
12.10 Counterparts; Signatures; Section Headings......................63
12.11 Public Announcements............................................63
12.12 No Third-Party Beneficiaries....................................63
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of January
31, 2005, by and among Cadence Resources Corporation, a Utah corporation
("Cadence"), Aurora Acquisition Corp., a Nevada corporation and wholly-owned
subsidiary of Cadence ("Acquisition Sub"), and Aurora Energy, Ltd., a Nevada
corporation ("Aurora"), Cadence, Acquisition Sub, and Aurora are each referred
to herein as a "Party" or collectively as the "Parties".
R E C I T A L S
This Agreement contemplates a transaction in which Cadence will acquire
one hundred percent (100%) of the outstanding common stock of Aurora through a
reverse merger (the "Merger") of Acquisition Sub with and into Aurora.
As a result of the Merger, Aurora will become a wholly-owned subsidiary of
Cadence and the stockholders of Aurora will become stockholders of Cadence.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, intending to be legally bound hereby, and in consideration of the
representations, warranties, and covenants herein contained, the Parties agree
as follows.
AGREEMENT
1. THE MERGER AND CONSIDERATION; CERTAIN DEFINITIONS.
1.1 THE MERGER.
(a) STRUCTURE. Subject to the terms and provisions of this
Agreement, and in accordance with Chapter 92A (Mergers and Exchanges of
Interest) of the Nevada Revised Statutes (the "NMEL") at the Effective Time,
Acquisition Sub shall be merged with and into Aurora. Aurora will be the
surviving corporation of the Merger (sometimes hereinafter called the "Surviving
Corporation") and will continue its corporate existence under the laws of the
State of Nevada as a subsidiary of Cadence. At the Effective Time, the separate
corporate existence of the Acquisition Sub shall cease. For federal income tax
purposes, the parties intend that the Merger shall qualify as a tax-free
reorganization under Section 351 and Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
(b) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Jenkens &
Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York 10174,
commencing at 10:00 a.m. local time on the later to occur of (a) the day
following the date on which all the conditions set forth in SECTIONS 4, 5 and 6
have been satisfied or waived (other than conditions with respect to actions the
respective Parties will take at the Closing itself); or (b) such other date as
the parties may mutually determine (the "Closing Date").
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(c) ACTIONS AT THE CLOSING. At the Closing, (i) Cadence and
Acquisition Sub will deliver to Aurora the various certificates, instruments,
and documents referred to in SECTION 4 below, (ii) Aurora will deliver to
Cadence the various certificates, instruments, and documents referred to in
SECTION 5 below, and (iii) the Surviving Corporation shall file with the
Secretary of State of the State of Nevada a properly executed Articles of
Merger.
(d) EFFECT OF MERGER.
(i) General. The Merger shall become effective at the
time (the "Effective Time") the Surviving Corporation files
the Articles of Merger with the Secretary of State of the
State of Nevada. The Merger shall have the effect set forth in
the NMEL.
(ii) Articles of Incorporation. The Articles of
Incorporation of the Surviving Corporation will be the
Articles of Incorporation of Acquisition Sub in effect
immediately prior to the Merger.
(iii) Bylaws. The Bylaws of the Surviving Corporation
will be the Bylaws of Acquisition Sub in effect immediately
prior to the Merger.
(iv) As of the Effective Time, the Boards of Directors
of Cadence and Surviving Corporation shall be reconstituted to
be comprised of the following seven members: William W.
Deneau, Earl Young, Gary Myles, John P. Ryan, a representative
of Rubicon Master Fund ("Rubicon") yet to be designated, and
two persons to be designated by William Deneau, at least one
of whom was a member of the Cadence Board of Directors
immediately prior to the Closing, and neither of whom has yet
been designated. All other directors of Cadence and Surviving
Corporation shall resign, effective as of the Effective Time.
(v) The Boards of Directors of Cadence and Surviving
Corporation shall each appoint the following corporate
officers, to be effective as of the Effective Time:
President: William W. Deneau
Vice President of Exploration
and Production John V. Miller, Jr.
Vice President of Land
and Development Thomas W. Tucker
Treasurer Lorraine King
Secretary Barbara J. Johnson
(vi) Conversion of Capital Stock of Acquisition Sub. At
and as of the Effective Time, each issued and outstanding
share of capital stock of Acquisition Sub shall be canceled
and neither shares of capital stock of the Surviving
Corporation nor any cash, property, rights, other securities
or obligations of the Surviving Corporation shall be issued
therefor, except as provided in SECTION 1.2 below.
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1.2 MERGER CONSIDERATION.
(a) PURCHASE PRICE. At the Closing, each issued and
outstanding share of Aurora's common stock, $.001 par value per share (the
"Aurora Common Stock") shall be converted into the right to receive two shares
of Cadence's common stock, $.01 par value per share (the "Cadence Common
Stock"). All shares of Aurora Common Stock converted in accordance with this
paragraph will no longer be outstanding and will automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares shall cease to have any rights with respect thereto, except the
right to receive the shares of Cadence Common Stock to be issued in
consideration therefor upon the surrender of such certificate in accordance with
SECTION 1.2(C), without interest. Any securities convertible into or exercisable
for shares of Aurora Common Stock (the "Aurora Convertible Securities")
immediately prior to the Effective Time will become, at the Effective Time,
securities convertible into or exercisable for such number of shares of Cadence
Common Stock as the holder of such securities would have received had such
holder converted such securities into Aurora Common Stock immediately prior to
the Effective Time. Appropriate adjustment will be made to any exercise or
conversion price of such securities.
(b) CANCELLATION OF AURORA COMMON STOCK; ISSUANCE OF AURORA
COMMON STOCK TO Cadence. At and as of the Effective Time, each outstanding share
of Aurora Common Stock, conversion rights, warrants and options to purchase any
share of Aurora Common Stock, and other equity interest issued and outstanding
or held in Aurora's treasury shall automatically be canceled and extinguished
and no payment shall be made in respect thereof except according to the
provisions of this Agreement. No share of Aurora Common Stock outstanding prior
to the Effective Time shall be deemed to be outstanding or to have any rights
after the Effective Time. After the Effective Time, there shall be no further
registration of transfers of Aurora Common Stock outstanding immediately prior
to the Effective Time on Aurora's stock transfer books. At the Effective Time,
Aurora shall issue a stock certificate to and in the name of Cadence for ten
shares of Aurora Common Stock.
(c) EXCHANGE OF CERTIFICATES.
(i) As of the Effective Time, Cadence shall enter into
an agreement (the terms of which shall be reasonably
satisfactory to Aurora) with such bank or trust company as may
be designated by Cadence (the "Exchange Agent"), which will
provide that Cadence shall deposit with the Exchange Agent as
of the Effective Time, for the benefit of the holders of
shares of Aurora Common Stock, for exchange in accordance with
this Section 1, through the Exchange Agent, certificates
representing the number of duly authorized whole shares of
Cadence Common Stock issuable in connection with the Merger
(such shares of Cadence Common Stock being referred to herein
as the "Exchange Fund").
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(ii) As soon as reasonably practicable after the
Effective Time, and in any event within ten business days
after the Effective Time, Cadence shall cause the Exchange
Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time
represented outstanding shares of Aurora Common Stock (the
"Certificates") whose shares are converted pursuant to SECTION
1.2(A) a letter of transmittal in customary form, and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing whole
shares of Cadence Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and completed in
accordance with its terms, the holder of such Certificate
shall be entitled to receive in exchange therefor a
certificate representing 90% of that number of shares of
Cadence Common Stock, which such holder has the right to
receive pursuant to the provisions of this Agreement and the
Certificate so surrendered shall forthwith be cancelled. The
remaining 10% of the certificates for shares of Cadence Common
Stock issuable in the exchange shall be held in the Exchange
Fund by the Exchange Agent described at SECTION 1.2(C)(IV)
below. The Exchange Agent shall have discretion to determine
and apply reasonable rules and procedures relating to the
surrender for exchange of a Certificate that is lost or
destroyed. In no event shall the holder of any Certificate be
entitled to receive any fractional shares or interest on any
funds to be received in the Merger.
(iii) Until surrendered as contemplated by this Section
1.2(C)(II), and subject to the rights of appraisal of any
stockholder, each Certificate shall be deemed at any time
after the Effective Time to represent ownership of the number
of shares of Cadence Common Stock (and any rights derivative
thereof) into which the number of shares of Aurora Common
Stock represented thereby have been converted as contemplated
by this Agreement.
(iv) Upon expiration of the Indemnification Period,
provided that no indemnification claim is outstanding and
unresolved, Exchange Agent shall distribute the balance of the
certificates of Cadence Common Stock held in the Exchange Fund
to the holders of the Certificates. If at the expiration of
the Indemnification Period a claim for indemnification is
outstanding and unresolved, Exchange Agent shall continue to
hold in escrow the balance of the certificates of Cadence
Common Stock until the indemnification claims are all
resolved, at which time the Exchange Agent shall distribute
the shares held in escrow as instructed by the Cadence Board
of Directors.
(v) No certificate or scrip representing fractional
shares of Cadence Common Stock will be issued in the Merger
upon the surrender for exchange of Certificates, and any such
fractional share interests will not entitle the owner thereof
to any rights of a shareholder of Cadence. Each holder of
Certificates who would otherwise have been entitled to a
fraction equal to one-half or more of a share of Cadence
Common Stock will receive a full share of Cadence Common
Stock, and fractional interests of less than one-half of a
share of Cadence Common Stock will be canceled.
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1.3 CERTAIN DEFINITIONS. As used in this Agreement:
(a) "Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control with the such
Person.
(b) "Appurtenant Rights" means, with respect to the
Properties, in each case, insofar as they may relate to the Properties, Aurora's
or Cadence's, as applicable, interest in (a) all presently existing and valid
unitization and pooling declarations, agreements, and/or orders relating to or
affecting the Properties and all rights in the Properties covered by the Units
created thereby; (b) all wells, well and leasehold equipment, pipelines,
platforms, facilities, improvements, goods and other personal property located
on or used in connection with the Properties, including but not limited to such
properties identified in SCHEDULE 2.9 and SCHEDULE 3.15; (c) all presently
existing production sales contracts, operating, pooling, unitization and other
contracts or agreements which relate to the Properties; and (d) all permits,
licenses, easements, rights-of-way, rights of use, and similar agreements
pertaining to the Properties.
(c) "Basic Documents" means all of the following documents and
instruments, including those that are recorded and unrecorded, which are
identified on SCHEDULE 2.9 with respect to Aurora and SCHEDULE 3.15 with respect
to Cadence (but including all such documents and instruments, even if not
specifically included on SCHEDULE 2.9 or SCHEDULE 3.15, as applicable, unless
specifically excluded in SCHEDULE 2.9, SCHEDULE 3.15 or elsewhere in this
Agreement):
(i) All material contracts and agreements comprising any
part of, or relating or pertaining to, the Interests,
including but not limited to farm-in agreements, farm-out
agreements, joint operating agreements, Unit agreements and
contracts by which the Interests were acquired;
(ii) All agreements or arrangements for the sale,
gathering, transportation, compression, treating, processing
or other marketing of a material volume of production from the
Interests (including calls on, or other rights to purchase,
production, whether or not the same are currently being
exercised), comprising any part of or otherwise relating or
pertaining to the Interests; and
(iii) All documents and instruments evidencing the
Interests.
(d) "Confidential Information" means (whether disclosed in
writing or orally) any and all non-public and/or proprietary information with
respect to the business, services, operations, assets, properties, financial
condition, plans and prospects of a Party and its subsidiaries and Affiliates
including, without limitation, Intellectual Property and information relating to
acquisition targets and acquisition strategies, pricing for acquisitions,
financial information or projections and other information concerning
acquisition targets and potential acquisition targets, proposed financing
arrangements, customers and vendors, business strategies, plans and prospects,
agreements, business records, information relating to intellectual property,
marketing and sales strategies, pricing strategies, programs, source codes,
object codes, algorithms and the related documentation, software designs (in
each case regardless of the medium in which it is maintained or stored),
internet strategies, URL designations and any other information which a Party
designates that it has received pursuant to a confidentiality obligation to
another person or entity, together with all derivative works, copies, reports,
summaries, studies, compilations and other documentation which contain or
otherwise reflect or are generated from any of the foregoing.
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(e) "Contract" means any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, lease, option, employment
agreement, contract, undertaking, understanding, covenant, agreement or other
instrument (collectively, the "Contracts").
(f) "Employee Benefit Plan" means (a) any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); (b) any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA); and (c) any other written or oral
plan, agreement, program, policy, practice, contract, understanding, or other
arrangement or commitment of any kind providing for, either directly or
indirectly, compensation, bonuses, vacation, termination pay, performance
awards, fringe benefits, insurance coverage, severance benefits, disability
benefits, deferred compensation, stock options, stock purchase, phantom stock,
stock appreciation or any type of stock-related awards, early retirement
benefits, welfare benefits, one or more Severance Plans (as defined below), any
other form of incentive compensation or post-retirement compensation or any
other employee benefit of any kind, whether formal or informal, funded or
unfunded, and whether or not legally binding, which currently is or has been
sponsored, maintained, contributed to, or required to be contributed to, by a
Party, any Subsidiary of a Party, or any ERISA Affiliate (as defined below), or
for which a Party, any Subsidiary of a Party, or any ERISA Affiliate has or has
had any obligation or any liability of any nature, contingent or otherwise, or
for which there is a reasonable expectation of such obligation or liability, on
or before the Closing for the benefit of any present or former employees,
retirees, directors or independent contractors (or their beneficiaries,
dependents or spouses) of a Party, any Subsidiary of a Party, or any ERISA
Affiliate.
(g) "Encumbrance" means a claim, lien, mortgage, encumbrance,
pledge or other security interest of any kind.
(h) "Environmental Laws" means any federal, state or local law
or ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 USC ss.ss.9601 et seq, the
Emergency Planning and Community Right-to-Know Act, 42 USC ss.ss. 11001 et seq,
and the Resource Conservation and Recovery Act, 42 USC ss.ss. 6901 et seq.
6
(i) "ERISA Affiliate" means any entity which with respect to a
Party or Subsidiary of a Party is or was a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code); (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code);
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code), any of which includes
or included a Party or any Subsidiary of a Party.
(j) "Fixtures and Equipment" means the tangible personal
property, equipment, improvements, fixtures, and other personal property and
appurtenances that are used by a Party or a Party's Subsidiary.
(k) "GAAP" means United States generally accepted accounting
principles, consistently applied.
(l) "Good and Defensible Title" means, as to the Interest in
question, (i) title to such Interest by virtue of which a Party can successfully
defend against a claim to the contrary made by a third party, based upon
industry standards in the acquisition of oil and gas properties, and in the
exercise of reasonable judgment and in good faith; and, (ii) in the case of the
Wells, title that entitles the Party to receive not less than the Net Revenue
Interest for each of the Wells as set forth in SCHEDULE 2.9 or SCHEDULE 3.15,
and obligates the Party to bear not more than the Working Interest for each of
the Wells set forth on SCHEDULE 2.9 or SCHEDULE 3.15 (unless there is a
corresponding increase in the Net Revenue Interest for a respective Well); and
(iii) such Interest is subject to no liens, encumbrances, obligations or
defects.
(m) "Governmental Authorizations" means any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Entity or
pursuant to any Legal Requirement.
(n) "Governmental Entity" means any:
(i) nation, state, county, city, town, village,
district, or other political jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
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(o) "Hazardous Substance" means asbestos, polychlorinated
biphenyls, ureaformaldehyde, and any other materials classified as hazardous or
toxic under any Environmental Laws.
(p) "Intellectual Property" means with respect to any Party
and its Subsidiaries, collectively (a) all rights to service customer accounts;
(b) trademarks, trade names, service marks, service names, domain names, uniform
resource locators (URLs), keywords, designs, logos and assumed names; (c)
copyrights and other rights in original works of authorship, (d) patents and
industrial design registrations or applications (including any continuations,
divisionals, continuations-in-part, renewals, reissues, and applications for any
of the foregoing); (e) computer software programs or applications (in both
source and object code versions), including any related technical documentation;
(f) trade secrets and invention disclosures, that are owned by such Party, its
Subsidiaries or any other Person and that have been or are used by such Party or
its Subsidiaries in the operation of their respective businesses, or that are
used in or necessary for the conduct of the respective businesses of such Party
or its Subsidiaries as currently conducted or contemplated to be conducted; and
(g) know-how and general intangibles of like nature, together with all goodwill,
registrations and applications related to any of the foregoing whether or not
protectable as a matter of law.
(q) "Interests" means the Properties and the Appurtenant
Rights of a Party.
(r) "Legal Requirement" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
(s) "License" means a license, permit, certification,
qualification, or franchise issued by any Governmental Entity.
(t) "Material Adverse Effect" means a material adverse effect
(financial or otherwise) on the business, assets, liabilities, financial
condition, property, prospects, or results of operations of a Party.
(u) "Net Revenue Interest" means a share, expressed as a
decimal, of the oil, gas and other minerals (or the proceeds of sale thereof)
produced and saved from or otherwise attributable to an Interest and the zones,
horizons and reservoirs produced therefrom, after the deduction of all
royalties, overriding royalties and other burdens on production.
(v) "OFCCP" means the Office of Federal Contract Compliance
Programs.
(w) "Over-produced" means to have taken more production from
an Interest (or the Units in which the Interest participates) or any product
thereof, than the ownership of the Party and the Party's predecessors in the
Interest would entitle the Party and/or the Party's predecessors (absent any
balancing agreement or arrangement) to receive.
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(x) "Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Entity.
(y) "Preferential Right" means any preferential right or
option to purchase or otherwise to acquire an Interest or any interest therein,
held by another party to a Basic Document, which arises as a result of the
transactions contemplated by this Agreement.
(z) "Proceeding" means a claim, suit, action, investigation or
proceeding.
(aa) "Properties" means all of a Party's rights, titles and
interests in and to the following oil and gas and/or mineral properties,
including those identified on SCHEDULE 2.9 with respect to Aurora, and SCHEDULE
3.15 with respect to Cadence, but excluding those properties identified as
excluded on SCHEDULE 2.9 or SCHEDULE 3.15:
(i) All oil, gas and/or mineral leases and other mineral
interests, including, but not limited to, all of the Party's
operating rights, record title interests, working interests,
and overriding royalty interests, without depth or other
restrictions or exclusions unless set forth in SCHEDULE 2.9 or
SCHEDULE 3.15;
(ii) All surface leases, rights-of-way, easements,
servitudes and other rights-of-use (whether surface,
subsurface or subsea); and
(iii) All licenses and servitudes.
(bb) "Required Consents" means the consents, approvals,
orders, authorizations, notifications, notices, estoppel certificates, releases,
registrations, ratifications, declarations, filings, waivers, exemptions or
variances (each a "Consent") with respect to any License or Legal Requirement or
otherwise as are set forth on SCHEDULE 2.4 hereof with respect to Aurora, and
SCHEDULE 3.3 with respect to Cadence.
(cc) "Routine Governmental Approvals" means Governmental
Authorizations required to be obtained from any Governmental Entity that are
customarily obtained after consummation of a transaction.
(dd) "SEC" means the United States Securities and Exchange
Commission.
(ee) "Severance Plans" means (i) each agreement with any
present or former employee, retiree, director or independent contractor (or
their beneficiaries, dependents or spouses) of a Party or a Subsidiary of a
Party (A) the benefits of which are contingent, or terms of which are altered,
upon the occurrence of a transaction involving the Party, any Subsidiary of a
Party, or an ERISA Affiliate of a Party of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee, or (C) providing severance benefits or other benefits
after the termination of employment of such person; (ii) each agreement, plan or
arrangement under which any person may receive payments from a Party, any
Subsidiary of a Party, or any ERISA Affiliate of a Party that has subjected or
could subject the Party or any Subsidiary of a Party, to the Taxes imposed by
Section 4999 of the Code or included in the determination of such person's
parachute payment under Section 280G of the Code; and (iii) each agreement, plan
or arrangement, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan or severance
benefit plan which has subjected or could subject a Party or any Subsidiary of a
Party, to any liability or obligation.
9
(ff) "Subsidiary" means, with respect to Aurora, each entity
listed on SCHEDULE 2.1 of this Agreement and with respect to Cadence, each
entity listed on SCHEDULE 3.1 of this Agreement. Such entities may collectively
be referred to as the Aurora Subsidiaries or "Cadence Subsidiaries",
respectively.
(gg) "Tax" means any tax (including any income tax, capital
gains tax, value-added tax, sales tax, property tax, gift tax, or estate tax,
but excluding any tax based on or measured by ownership or operation of, or
production from, the Interests), levy, assessment, tariff, duty (including any
customs duty), deficiency, or other fee, and any related charge or amount
(including any fine, penalty, interest, or addition to tax), imposed, assessed,
or collected by or under the authority of any Governmental Entity or payable
pursuant to any tax-sharing agreement.
(hh) "Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Entity in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
(ii) "Transaction Documents" means this Agreement and each
other agreement, instrument, document, and certificate to be executed and
delivered by the Parties pursuant to this Agreement.
(jj) "Under-produced" means to have taken less production from
an Interest (or the Units in which the Interest participates) or any product
thereof, than the ownership of the Party and the Party's predecessors in the
Interest would entitle the Party and/or the Party's predecessors (absent any
balancing agreement or arrangement) to receive.
(kk) "Units" means oil, gas and other mineral production,
proration, or other types of units, and any ownership interests therein.
(ll) "WARN" means the Worker Adjustment and Retraining
Notification Act of 1988.
(mm) "Well" or "Wells" means all of a Party's (and the Party's
Subsidiaries') oil, gas and condensate wells, (whether producing, not producing
or abandoned or temporarily abandoned), including but not limited to the wells
described in SCHEDULE 2.9 with respect to Aurora, and SCHEDULE 3.15 with respect
to Cadence.
10
(nn) "Working Interest" means a share, expressed as a decimal,
of the costs of exploring, drilling, developing and operating an Interest and
producing oil, gas and other minerals from the zones, horizons and reservoirs
therein and thereunder.
1.4 OTHER DEFINITIONS. The definitions of other terms used in this
Agreement may be found as follows:
(a) "Acquisition Sub" is defined in the introductory
paragraph.
(b) "Agreed Claims" is defined at Section 9.4(c).
(c) "Agreement" is defined in the introductory paragraph.
(d) "Aurora" is defined in the introductory paragraph.
(e) "Aurora Common Stock" is defined at Section 1.2(a).
(f) "Aurora Convertible Securities" is defined at Section
1.2(a).
(g) "Aurora Fixtures and Equipment" is defined at Section 2.8.
(h) "Aurora Material Contracts" is defined at Section 2.14(a).
(i) "Cadence" is defined in the introductory paragraph.
(j) "Cadence Common Stock" is defined at Section 1.2(a).
(k) "Cadence Disclosure Documents" is defined in Section 3.5.
(l) "Cadence Fixtures and Equipment is defined at Section
3.14.
(m) "Cadence Material Contracts" is defined at Section
3.19(a).
(n) "Certificates" is defined at Section 1.2(c)(ii).
(o) "Closing" is defined at Section 1.1(b).
(p) "Closing Date" is defined at Section 1.1(b).
(q) "COBRA" is defined at Section 2.12(l).
(r) "Code" is defined at Section 1.1(a).
(s) "Consent" is defined at Section 1.3(bb).
11
(t) "Costs" is defined at Section 9.1.
(u) "Effective Time" is defined at Section 1.1(d)(i).
(v) "ERISA" is defined at Section 1.3(f).
(w) "Exchange Agent" is defined at Section 1.2(c)(i).
(x) "Exchange Fund" is defined at Section 1.2(c)(i).
(y) "Indemnification Cap" is defined at Section 9.4(f).
(z) "Indemnification Period" is defined at Section 9.3.
(aa) "Indemnitee" is defined at Section 9.4(a).
(bb) "Indemnitor" is defined at Section 9.4(a).
(cc) "Indemnity Certificate" is defined at Section 9.4(a).
(dd) "Interim Aurora Financial Statements" is defined at
Section 2.5(a).
(ee) "IRS" is defined at Section 2.12(e).
(ff) "Latest Aurora Balance Sheet" is defined at Section
2.5(a).
(gg) "Merger" is defined in the Recitals.
(hh) "NMEL" is defined at Section 1.1(a).
(ii) "Party" or "Parties" is defined in the introductory
paragraph.
(jj) "Registration Statement" is defined at Section 3.8.
(kk) "Regular Aurora Financial Statements" is defined at
Section 2.5(a).
(ll) "Regular Cadence Financial Statements" is defined at
Section 3.11(a).
(mm) "Representative" or "Representatives" is defined at
Section 10.
(nn) "Rubicon" is defined at Section 1.1(d)(iv).
(oo) "Schedule 2.7 Property" is defined at Section 2.7.
12
(pp) "Schedule 3.13 Property" is defined at Section 3.13.
(qq) "Surviving Corporation" is defined at Section 1.1(a).
(rr) "1933 Act" is defined at Section 3.5.
(ss) "1934 Act" is defined at Section 3.5.
2. REPRESENTATIONS AND WARRANTIES OF AURORA . Aurora represents and
warrants to Cadence and Acquisition Sub that each of the following statements is
true and correct as of the date hereof:
2.1 ORGANIZATION. SCHEDULE 2.1 lists each direct and indirect
Subsidiary of Aurora. Aurora and each Aurora Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Aurora and each Aurora Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business conducted by it makes such qualification or
licensing necessary. Aurora has delivered to Cadence true, correct and complete
copies of the Articles of Incorporation and Bylaws and other organizational
documents, as currently in effect, of Aurora and each Aurora Subsidiary.
2.2 CAPITALIZATION.
(a) The authorized capital stock of Aurora and each corporate
Aurora Subsidiary, the issued and outstanding capital stock of Aurora and each
corporate Aurora Subsidiary and the record and beneficial ownership of the
capital stock of Aurora and each corporate Aurora Subsidiary is set forth on
SCHEDULE 2.2. With respect to each Aurora subsidiary that is a limited liability
company, a list of the members and their respective percentage interests or
sharing ratios is set forth on SCHEDULE 2.2. The shares of Aurora Common Stock
are duly authorized, validly issued, fully paid and non-assessable. Except as
contemplated by this Agreement or set forth on SCHEDULE 2.2, there are no (i)
options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character obligating,
now or in the future, Aurora or any Aurora Subsidiary to issue, transfer or sell
any shares of capital stock, options, warrants, calls or other equity interest
of any kind whatsoever in Aurora or any Aurora Subsidiary or securities
convertible into or exchangeable for such shares or equity interests, (ii)
contractual obligations of Aurora to repurchase, redeem or otherwise acquire any
capital stock or equity interest of Aurora or any Aurora Subsidiary or (iii)
voting trusts, proxies or similar agreements to which Aurora or an Aurora
Subsidiary is a party with respect to the voting of the capital stock or voting
memberships of Aurora or any Aurora Subsidiary.
(b) Except for the common stock or membership interests of the
Aurora Subsidiaries and temporary investments of cash in marketable securities,
Aurora does not own any outstanding shares of capital stock (or other equity
interests of entities other than corporations) of any partnership, joint
venture, trust, corporation, limited liability company or other entity.
13
2.3 AUTHORIZATION; VALIDITY OF AGREEMENT. Aurora has the requisite
power and authority to execute, deliver and perform this Agreement and each of
the other Transaction Documents to be executed and delivered by Aurora pursuant
to this Agreement, and to assume and perform any obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
Each of this Agreement and the other Transaction Documents to be executed and
delivered by Aurora pursuant to this Agreement have been duly authorized,
executed and delivered by Aurora and are valid and binding obligations of
Aurora, enforceable against it in accordance with their respective terms.
2.4 NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) Except as set forth on SCHEDULE 2.4, the execution,
delivery and performance of each of this Agreement and the other Transaction
Documents by Aurora do not, and the consummation by it of the transactions
contemplated hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation, Bylaws or other organizational documents of Aurora or
any Aurora Subsidiary, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any Contract, to which Aurora or any
Aurora Subsidiary is a party or by which any of its properties or assets may be
bound or otherwise subject, except for any Required Consents, or (iii) violate
any Legal Requirement applicable to Aurora or the Aurora Subsidiaries or any of
their respective properties or assets.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any legislative or executive agency or
department or other regulatory service, authority or agency or any court,
arbitration panel or other tribunal or judicial authority of any Governmental
Entity or Person, is required in connection with the execution, delivery and
performance of this Agreement or any of the other Transaction Documents by
Aurora or the consummation by Aurora of the transactions contemplated hereby and
thereby, except the Required Consents set forth on SCHEDULE 2.4 hereof.
2.5 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 2.5 is the unaudited consolidated
balance sheet of Aurora as of September 30, 2004 (the "Latest Aurora Balance
Sheet"), together with the related unaudited consolidated statements of income
for the quarter ending on September 30, 2004 ("Interim Aurora Financial
Statements") and the audited consolidated balance sheet of Aurora as of December
31, 2003, together with the related audited consolidated statement of income
(including the related notes and reports of independent auditors, if any) for
the fiscal year then ended (together, with the Latest Aurora Balance Sheet and
the Interim Aurora Financial Statements, the "Regular Aurora Financial
Statements").
(b) The Regular Aurora Financial Statements have been prepared
by Aurora and have been derived from, and agree with, the books and records of
Aurora and fairly present the financial position of Aurora as of the respective
dates thereof and the results of operations of Aurora for the respective periods
set forth therein. The Regular Aurora Financial Statements have been prepared in
accordance with GAAP as of the dates and for the periods involved, subject to
the absence of notes and, in the case of the Latest Aurora Balance Sheet and the
related statements of operations for the interim period, to normal fiscal
year-end adjustments in the ordinary course (none of which, individually or in
the aggregate, will be material to the business or the operations of Aurora).
14
(c) Aurora maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain assets accountability, and
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, except for any controls the absence of which would
not result in a Material Adverse Effect.
2.6 OPERATION OF BUSINESS.
(a) Since the date of the Latest Aurora Balance Sheet, Aurora
and each Aurora Subsidiary has continued to operate its business in a manner and
system of operation employed immediately prior to the date of the Latest Aurora
Balance Sheet, and Aurora has used its best efforts to prevent harm or damage to
the reputation of Aurora or the Aurora Subsidiaries or reduction of existing
customer accounts.
(b) Except as specifically contemplated by this Agreement or
as set forth on SCHEDULE 2.6, since the date of the Latest Aurora Balance Sheet
neither Aurora nor any Aurora Subsidiary has (i) incurred any liabilities,
except in the ordinary course of business consistent with past practice; (ii)
paid any obligation or liability, or discharged or satisfied any Encumbrance
other than those securing current liabilities, in each case in the ordinary
course of business; (iii) mortgaged, pledged or subjected to any Encumbrance any
of its assets, tangible or intangible, except in the ordinary course of
business; (iv) sold, transferred or leased any of its assets except the sale of
inventory in the ordinary course of business; (v) suffered any material physical
damage, destruction or loss (whether or not covered by insurance) affecting its
properties, business or prospects; (vi) entered into any transaction other than
in the ordinary course of business; (vii) encountered any labor difficulties or
labor union organizing activities; (viii) issued or sold any shares of capital
stock or other securities or granted any options, warrants, or other purchase
rights with respect thereto other than pursuant to this Agreement; (ix) made any
acquisition or disposition of any assets or become involved in any other
material transaction, including, without any limitation, any merger or
consolidation with, purchase of all or part of the assets of, or acquisition of
any business of any proprietorship, firm, association, corporation or other
business organization or division thereof; (x) increased the compensation
payable, or to become payable, to any of its directors or employees or increased
the scope or nature of any fringe benefits provided for its employees or
directors, other than as Aurora has separately informed Cadence; (xi) made any
capital investment in, any loan to or any acquisition of the securities or
assets of any other Person; (xii) canceled, compromised, waived or released any
material right or claim; (xiii) made any change in employment terms for any of
its officers or employees; (xiv) made or pledged to make any charitable
contribution or other capital contribution outside the ordinary course of
business; (xv) violated any Legal Requirement, if such violation could have
resulted in a Material Adverse Effect on Aurora or any Aurora Subsidiary, or
failed to maintain all governmental licenses and approvals required to operate
its business as it is currently being conducted; or (xvi) agreed or committed,
whether in writing or otherwise, to do any of the foregoing other than pursuant
to the Transaction Documents and the transactions contemplated hereby and
thereby. In addition, since the date of the Latest Aurora Balance Sheet neither
Aurora nor any Aurora Subsidiary has accelerated, terminated, modified or
canceled any material agreement, contract, lease or license to which it is a
party or by which it or its assets are bound.
15
(c) Since the date of the Latest Aurora Balance Sheet, no
event, condition or circumstance (including an event, condition or circumstance
that has a general adverse effect on the economy as a whole) has occurred that
could, or could be reasonably likely to, have a Material Adverse Effect on
Aurora or any Aurora Subsidiary.
2.7 NON-OIL AND GAS REAL PROPERTY. SCHEDULE 2.7 contains a complete
and accurate list of all real property, leases in real property, or other
interests in real property owned or held by Aurora or any Aurora Subsidiary (
the "Schedule 2.7 Property"), except that the SCHEDULE 2.7 Property does not
include any property included in the Aurora Interests (as enumerated in SCHEDULE
2.9). Aurora has delivered or made available to Cadence copies of the deeds and
other instruments (as recorded) by which Aurora or any Aurora Subsidiary
acquired the SCHEDULE 2.7 Property which it owns, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of Aurora
or any Aurora Subsidiary and relating to the SCHEDULE 2.7 Property which it
owns. Aurora and each Aurora Subsidiary holds good title to all SCHEDULE 2.7
Property owned by Aurora or an Aurora Subsidiary, as applicable. The SCHEDULE
2.7 Property is, or effective simultaneously with the Closing will be, free and
clear of all Encumbrances and is not subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except for (a) matters disclosed in SCHEDULE 2.7, (b) liens for current taxes
not yet due, and (c) zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
2.8 NON-OIL AND GAS AURORA FIXTURES AND EQUIPMENT. Except as set
forth on SCHEDULE 2.8, Aurora and each Aurora Subsidiary, as applicable, has
good title to, or a valid leasehold interest in, the Fixtures and Equipment that
are used by Aurora or any Aurora Subsidiary in connection with the conduct of
its business (the "Aurora Fixtures and Equipment"), except that the Aurora
Fixtures and Equipment do not include any property included in the Aurora
Interests. The Aurora Fixtures and Equipment are structurally sound, are in good
operating condition and repair, are adequate for the uses to which they are
being put, are not in need of maintenance or repairs except for ordinary,
routine maintenance and repairs and are sufficient for the conduct of Aurora's
businesses in the manner as conducted prior to the Closing. Aurora owns, or
effective simultaneously with the Closing will own, all of the Aurora Fixtures
and Equipment free and clear of all Encumbrances except for (a) matters
disclosed in SCHEDULE 2.8, (b) liens for current taxes not yet due, and (c)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
16
2.9 OIL AND GAS INTERESTS.
(a) Except as set forth in SCHEDULE 2.9, Aurora holds Good and
Defensible Title to the Aurora Interests.
(b) SCHEDULE 2.9 sets forth all platforms and pipelines, and
the equipment, facilities and personal property related to such platforms and
pipelines, comprising part of the Aurora Appurtenant Rights.
(c) SCHEDULE 2.9 sets forth Aurora's Working Interest and Net
Revenue Interest in each Aurora Well.
(d) The Aurora Basic Documents are in full force and effect
and constitute valid and binding obligations of the parties thereto, and
(i) Aurora is not in material breach or default (and no
situation exists which with the passing of time or giving of
notice would give rise to such a breach or default) of its
obligations under any of the Aurora Basic Documents, and no
breach or default by any other party to an Aurora Basic
Document (or situation which with the passage of time or
giving of notice would give rise to such a breach or default)
exists, to the extent such breach or default (whether by
Aurora or another party to an Aurora Basic Document) could
adversely affect any of the Aurora Interests.
(ii) Except as set forth in SCHEDULE 2.9, all payments
(including, without limitation, all delay rentals, royalties,
excess royalties, minimum royalties, overriding royalty
interests, shut-in royalties and valid calls for payment or
prepayment under operating agreements) owing under the Aurora
Basic Documents have been and are being made timely and
properly, and before the same became delinquent (by Aurora
where the non-payment of same by another party to an Aurora
Basic Document could adversely affect any of the Aurora
Interests) have been and are being made by such other party in
all material respects.
(iii) All conditions necessary to maintain the Aurora
Basic Documents in force have been duly performed.
(iv) No non-consent operations exist with respect to any
of the Aurora Interests that have resulted or will result in a
temporary or permanent increase or decrease in either Aurora's
Net Revenue Interest or Working Interest in such Aurora
Interest.
(v) Except as disclosed on SCHEDULE 2.9, Aurora is not
obligated to incur any expenses, and has not made commitments
to make expenditures (capital or otherwise), or to apply
revenues from a Well's production in connection with any
Aurora Interests (and no other similar obligations or
liabilities have been incurred) with respect to the ownership
or operation of Aurora Interests. Except as provided in
SCHEDULE 2.9, Aurora will not incur or commit to any such
expense in excess of $250,000 except to the extent that
Cadence has been given seven days prior written notice and has
consented thereto in writing. Except as disclosed in SCHEDULE
2.9, all expenses payable under the terms of the Aurora Basic
Documents have been properly and timely paid except for such
expenses as are being currently paid or will be paid prior to
delinquency. Except for budgeted capital expenditures as set
forth in SCHEDULE 2.9, no proposals calling for expenditures
in excess of $250,000 for any one project are currently
outstanding (whether made by Aurora, an Aurora Subsidiary, or
by any other party) to drill additional wells, or to deepen,
plug back, sidetrack, abandon, or rework existing Wells, or to
conduct other operations for which consent is required under
the applicable operating agreement, or to conduct any other
operations, other than normal operation of existing Wells on
Aurora Interests.
17
(vi) No agreements or arrangements exist for the sale,
gathering, transportation, compression, treating, processing
or other marketing of a material volume of production from the
Aurora Interests (including without limitation, calls on, or
other rights to purchase, production, whether or not the same
are currently being exercised) other than the agreements set
forth in SCHEDULE 2.9.
(vii) Except as set forth in SCHEDULE 2.9, Aurora has
not received prepayments (including, but not limited to,
payments for oil and gas not taken pursuant to "take-or-pay"
arrangements) for any oil or gas produced from the Aurora
Interests as a result of which the obligation does (or may)
exist (i) to deliver oil or gas produced from the Aurora
Interests beginning on the Effective Date without then
receiving payment therefor, or (ii) to make repayments in
cash. For each Aurora Interest listed in SCHEDULE 2.9, such
Schedule also sets forth as to each such Aurora Interest (i)
the total amount of prepayment received prior to the Effective
Date, and (ii) whether or not a cash payment can be required
in the event recoupment out of production proves to be
inadequate. Except as set forth in SCHEDULE 2.9, there is no
Aurora Interest with respect to which Aurora has taken an
Over-Produced or Under-Produced position to the extent such
Over-produced or Under-produced position has not, as of the
day immediately preceding the Effective Date been fully made
up or otherwise extinguished. For each Aurora Interest listed
in SCHEDULE 2.9, such Schedule also sets forth, on a
Well-by-Well or any other basis as may be dictated by any
applicable balancing agreement, (i) whether Aurora is in an
Over-produced or Under-produced position, (ii) the amount of
such Over-production or Under-production, (iii) a description
of the written balancing agreement (if any) pertaining to such
Aurora Interest (or a statement that no such agreement exists)
and (iv) a statement as to whether royalties, overriding
royalties or other burdens against the Aurora's Net Revenue
Interest in the affected Aurora Interests were, during the
period the subject imbalance accrued, paid based upon receipts
or entitlements. Except as set forth in SCHEDULE 2.9, no
pipeline imbalances have arisen and remain outstanding due to
the failure of nominations made by Aurora to match actual
deliveries of production from any one or more Aurora
Interests. Except as set forth in SCHEDULE 2.9, none of the
purchasers under any production sales contracts relating to an
Aurora Interest has (i) exercised any economic out provision;
(ii) curtailed its takes of natural gas in violation of such
contracts; or (iii) given notice that it desires to amend the
production sales contracts with respect to price or quantity
of deliveries under take-or-pay provisions or otherwise.
18
(viii) To Aurora's knowledge, no delinquent unpaid bills
or past due charges exist for any labor and materials incurred
by or on behalf of Aurora related to the exploration,
development or operation of the Aurora Interests.
(ix) Except as set forth in SCHEDULE 2.9 or as may be
provided for by an Aurora Basic Document, neither Aurora nor
any Aurora Interest is subject to (i) any area of mutual
interest agreements, (ii) any farm-out or farm-in agreement
under which any party thereto is entitled to receive
assignments of any Aurora Interest or any interest therein not
yet made, or could earn additional assignments of any Aurora
Interest or any interest therein after the date hereof, (iii)
any tax partnership or (iv) any agreement, contract or
commitment relating to the disposition or acquisition of the
assets of, or any interest in, any other entity.
(x) All severance, production, ad valorem and other
similar taxes based on or measured by ownership or operation
of, or production from, the Aurora Interests have been, and
are being, paid (properly and timely, and before the same
become delinquent) by Aurora in all respects.
(xi) Except as set forth in SCHEDULE 2.9, the (i)
ownership and operation of the Aurora Interests has, to the
extent that non-conformance could adversely affect the Aurora
Interests, been conducted in conformity with all applicable
material Legal Requirements of all Governmental Entities
having jurisdiction over the Aurora Interests or Aurora, and
(ii) Aurora has not received any notice of noncompliance with
regard to any material Legal Requirement of any Governmental
Entity having jurisdiction over the Aurora Interests or
Aurora.
(xii) Except as set forth in SCHEDULE 2.9, there are no
Preferential Rights or Consents, other than Routine
Governmental Approvals that affect any Aurora Interests and
that will be triggered by the transactions contemplated by the
Transaction Documents. SCHEDULE 2.9 sets forth the allocated
value of each Aurora Interest that is subject to a
Preferential Right.
19
(xiii) Except as set forth in SCHEDULE 2.9, there exist
no agreements or other arrangements under which Aurora
undertakes to perform gathering, transportation, processing or
other marketing services for any other party for a fee or
other consideration that is now, or may hereafter be,
unrepresentative of commercial rates being received by other
parties in comparable, arm's length transactions.
(xiv) Except as disclosed in SCHEDULE 2.9, there are no
Wells located on the Aurora Interests that (i) Aurora is
currently obligated by law or contract to currently plug and
abandon, (ii) Aurora 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 severed
crude oil, natural gas, casinghead gas, drip gasoline, natural
gasoline, petroleum, natural gas liquids, condensate,
products, liquids, other hydrocarbons or other minerals or
materials in paying quantities or otherwise currently being
used in normal operations, (iii) are subject to exceptions to
a requirement to plug and abandon issued by a Governmental
Entity, or (iv) to Aurora's knowledge, have been plugged and
abandoned, but have not been plugged in accordance in all
material respects with all applicable requirements of any
Governmental Entity.
(xv) No suit, action or proceeding (including, without
limitation, tax or environmental demands proceedings) is
pending or threatened, which might result in material
impairment or loss of title to any of the Aurora Interests or
the material value thereof.
(xvi) Except as set forth in SCHEDULE 2.9, all proceeds
from the sale of hydrocarbons produced from Aurora's
proportionate share of the Aurora Interests are currently
being paid to Aurora in all material respects, and no portion
of such proceeds is currently being held in suspense by any
purchaser thereof or any other party by whom proceeds are paid
except for immaterial amounts.
2.10 NO UNDISCLOSED LIABILITIES.
(a) Except as set forth on SCHEDULE 2.10, neither Aurora nor
any Aurora Subsidiary has any liabilities (whether accrued, contingent, known,
or otherwise) other than those that (i) are set forth or reserved against on the
Latest Aurora Balance Sheet; or (ii) were incurred in the ordinary course of
business.
(b) The accounts payable of each of Aurora and the Aurora
Subsidiaries are set forth on SCHEDULE 2.10. All such accounts payable are the
result of bona fide transactions in the ordinary course of business.
20
2.11 LITIGATION; COMPLIANCE WITH LAW; LICENSES AND PERMITS.
(a) Except as set forth on SCHEDULE 2.11, There is no
Proceeding pending, nor is there any Proceeding threatened, that involves or
affects either of Aurora or any Aurora Subsidiary, by or before any Governmental
Entity, court, arbitration panel or any other Person.
(b) Since January 1, 2000, Aurora and each Aurora Subsidiary
has complied with all applicable Legal Requirements, including but not limited
to Legal Requirements relating to Taxes, zoning, building codes, antitrust,
occupational safety and health, industrial hygiene, environmental protection,
water, ground or air pollution, the generation, handling, treatment, storage or
disposal of Hazardous Substances, consumer product safety, product liability,
hiring, wages, hours, employee benefit plans and programs, collective bargaining
and the payment of withholding and social security Taxes. Except as set forth on
SCHEDULE 2.11, since January 1, 2000, neither Aurora nor any Aurora Subsidiary
has received any notice of any violation or alleged violation of any Legal
Requirement from a Governmental Entity or others.
(c) Except as set forth on SCHEDULE 2.11, Aurora and each
Aurora Subsidiary has every License and every Consent by or on behalf of any
person required for them to conduct their respective businesses as presently
conducted. All such Licenses and Consents are in full force and effect and
neither Aurora nor any Aurora Subsidiary has received notice of any pending
cancellation or suspension of any thereof nor is any cancellation or suspension
thereof threatened. The applicability and validity of each such License and
Consent will not be adversely affected by the consummation of the transactions
contemplated by this Agreement or any other Transaction Document.
2.12 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 2.12 contains a complete and accurate list of all
Employee Benefit Plans of Aurora, Aurora's Subsidiaries and Aurora's ERISA
Affiliates ("Aurora Employee Benefit Plan").
(b) Each and all Aurora Employee Benefit Plans have been
administered in all respects in accordance with their respective terms and in
compliance with all applicable Legal Requirements, including, without
limitation, ERISA and the Code, and each of Aurora, the Aurora Subsidiaries and
any ERISA Affiliate of Aurora (as the case may be) has met its obligations under
applicable provisions of ERISA and the Code and the regulations thereunder, and
other applicable Legal Requirements with respect to such Employee Benefit Plans.
(c) Complete and accurate copies of the following documents
for each Aurora Employee Benefit Plan listed on SCHEDULE 2.12 have been
delivered to Cadence: (i) the plan texts or other agreements adopted or entered
into in connection with any Aurora Employee Benefit Plan which has been reduced
to writing, and any related amendments; (ii) a written summary of any unwritten
Aurora Employee Benefit Plan; (iii) any related trust agreement, insurance
contract, annuity contract or other funding agreement (including all amendments
thereto) and any summary plan description required under ERISA, including any
modification communicated to or required to be communicated to any participant;
and (iv) any communication to any participant relating to any Aurora Employee
Benefit Plan in connection with any amendment, termination, establishment,
increase or decrease in benefits, acceleration or deceleration of payments,
vesting schedules or other events which would result in any liability by or to
Aurora, any Aurora Subsidiary or any ERISA Affiliate of Aurora. Since the date
such documents described in this SECTION 2.12(C) were supplied, no amendments or
changes to the documents described in this SECTION 2.12(C) have been made, and
no such amendments or changes shall be adopted or made prior to the Closing
Date.
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(d) There are no termination proceedings with respect to any
of the Aurora Employee Benefit Plans.
(e) None of the Aurora Employee Benefit Plans is currently, or
has ever been, under investigation, audit or review by the Department of Labor,
the Internal Revenue Service (the "IRS") or any other federal or state
Governmental Entity, and no such investigation, audit or review is pending or
anticipated. None of the Aurora Employee Benefit Plans is liable, or ever has
been liable, for any federal, state, local or foreign Taxes except as may be due
in the ordinary course of administration of such Aurora Employee Benefit Plan,
and no such Tax is anticipated and no basis for such Tax exists. There is no
transaction nor has there ever been any transaction, act or omission in
connection with Aurora, the Aurora Subsidiaries, any ERISA Affiliate of Aurora
or any fiduciary of any Aurora Employee Benefit Plan which could subject Aurora
or an Aurora Subsidiary to a fine, civil penalty Tax or other liability.
(f) There are no pending or threatened claims, actions, suits,
grievances, audits, investigations, or other proceedings, involving, directly or
indirectly, any Aurora Employee Benefit Plan, any fiduciary thereof, or any
rights or benefits thereunder (except claims for benefits payable in the normal
operation of the Aurora Employee Benefit Plan and proceedings with respect to
qualified domestic relations orders), and no basis for any such proceeding
exists.
(g) No written or oral representations have been made to any
employee, former employee, retiree, director or independent contractor (or their
beneficiaries, dependents or spouses) of Aurora or the Aurora Subsidiaries
promising or guaranteeing any employer payment or funding for the continuation
of medical, dental or disability coverage after termination of employment or
services, as applicable, beyond that legally required.
(h) No action or omission of Aurora, any Aurora Subsidiary,
any ERISA Affiliate of Aurora or any director, officer, employee, or agent
thereof, and no plan documentation or agreement, summary plan description or
other written communication distributed generally to employees, in any way
restricts, impairs or prohibits (whether legally binding or not) Aurora, the
Aurora Subsidiaries, any ERISA Affiliate of Aurora, Cadence or Acquisition Sub
or any successor thereof from amending, merging, terminating or otherwise
discontinuing any Aurora Employee Benefit Plan in accordance with the express
terms of any such plan and applicable Legal Requirement at or after Closing, and
any such amendment, merger, termination or discontinuance may occur without any
liability to any of Aurora, the Aurora Subsidiaries, any ERISA Affiliate of
Aurora, Cadence or Acquisition Sub. No agreement, arrangement, commitment,
understanding or plan documentation or other written communication distributed
generally to employees exists to create any additional Aurora Employee Benefit
Plan not listed on SCHEDULE 2.12.
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(i) SCHEDULE 2.12 sets forth a reasonable estimate of each of
Aurora's and the Aurora Subsidiaries' accrued liability for vacation, sickness
and disability expenses through and including the Closing Date. No Aurora
Employee Benefit Plans are or have ever been subject to COBRA.
(j) On and after the Closing Date, neither Aurora, the Aurora
Subsidiaries, Cadence nor the Cadence Subsidiaries will have any liability or be
under any obligation with respect to any Aurora Employee Benefit Plan which is
not disclosed.
(k) Full payment has or will have, prior to the Closing, been
made of all amounts which Aurora, the Aurora Subsidiaries or any ERISA Affiliate
of Aurora is directly or indirectly required, under applicable Legal
Requirements, the terms of any Aurora Employee Benefit Plan or any agreement
relating to any Aurora Employee Benefit Plan to have paid as a contribution,
premium or other remittance thereto or benefit thereunder if such payment has a
deadline on or before the Closing Date. There will be no change on or before the
Closing Date in the operation of any Aurora Employee Benefit Plan or any
documents with respect thereto which will result in an increase in any benefit
under any such Aurora Employee Benefit Plan, except as may be required by Legal
Requirement. Each Aurora Employee Benefit Plan can be terminated within thirty
(30) days of the Closing Date, without payment of any additional contribution or
amount other than for benefits accrued thereunder and without creating any
unfunded or unaccrued liability or the vesting or acceleration of any benefits
promised by such plan.
(l) All Aurora Employee Benefit Plans that are welfare plans
comply with and have been administered in material compliance to the extent
applicable with the requirements of the: (i) Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"); (ii) Heath Insurance
Portability and Accountability Act of 1996, as amended; (iii) Mental Health
Parity Act of 1996; (iv) Newborns' and Mothers' Health Protection Act; and (v)
Women's Health and Cancer Rights Act.
(m) The execution of this Agreement and the consummation of
the transactions contemplated hereby and thereby will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event under
any Aurora Employee Benefit Plan, employee agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee. None of the Severance
Plans of Aurora or any Subsidiary of Aurora provide that any of the benefits
under such Severance Plans of Aurora or any Subsidiary of Aurora will be
increased, nor will the vesting of the benefits under such Severance Plans be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement nor will the value of any of the benefits under such Severance Plans
of Aurora or any Subsidiary of Aurora be calculated on the basis of any of the
transactions contemplated by this Agreement and no payments under any such
Severance Plans of Aurora or any Subsidiary of Aurora or other agreement will be
parachute payments under Section 280G of the Code that are non-deductible to
Aurora, Aurora Subsidiaries, Cadence or Cadence Subsidiaries or subject to Taxes
under Section 4999 of the Code.
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(n) No Aurora Employee Benefit Plan is or has been subject to
Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. None of
Aurora, any Subsidiary of Aurora or any ERISA Affiliate of Aurora has or has
ever had any liability or obligation under Section 302 of ERISA, Section 412 of
the Code or Title IV of ERISA. No contributions have ever been made or been
owing to an Aurora Employee Benefit Plan pursuant to or under a collective
bargaining agreement between employee representatives and Aurora, any Subsidiary
of Aurora or any ERISA Affiliate of Aurora.
2.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.13 lists all Intellectual Property of each of
Aurora and the Aurora Subsidiaries, including all United States and foreign (i)
patents and patent applications; (ii) trademark registrations and applications
therefor and material, unregistered trademarks; (iii) copyright registrations
and applications therefor; and (iv) other filings and formal actions made or
taken pursuant to federal, state, local and foreign Legal Requirements by Aurora
or the Aurora Subsidiaries to protect its or their interests in Intellectual
Property.
(b) To Aurora's best knowledge, the conduct of the respective
businesses of Aurora and the Aurora Subsidiaries as conducted in the past did
not infringe (when conducted) and as currently conducted or contemplated to be
conducted does not infringe (either directly or indirectly, such as through
contributory infringement) any Intellectual Property right owned or controlled
by any third party. There is no pending or threatened Proceeding before any
court, agency, arbitral tribunal, or registration authority in any jurisdiction,
whether against Aurora or any Aurora Subsidiary or any third party (i) involving
any Intellectual Property owned by Aurora or any Aurora Subsidiary; (ii)
alleging that the activities or the conduct of the business of Aurora or any
Aurora Subsidiary, or the use of any Intellectual Property by any customer or
other licensee of Aurora or any Aurora Subsidiary, does or will infringe upon,
violate or constitute the unauthorized use of the Intellectual Property rights
of any third party; or (iii) challenging the ownership, use, validity,
enforceability or registrability of any Intellectual Property, nor is there any
reasonable basis for any such Proceeding.
(c) There are no royalties, fees, honoraria or other payments
payable by Aurora or any Aurora Subsidiary to any Person by reason of the
ownership, development, use, license, sale or disposition of any Intellectual
Property, other than salaries and sales commissions paid to employees and sales
agents in the ordinary course of business.
2.14 MATERIAL CONTRACTS.
(A) SCHEDULE 2.14 sets forth a true, complete and correct list
of every Contract currently in effect to which Aurora or any Aurora Subsidiary
is a party that: (i) provides or provided for aggregate future payments by
Aurora or any Aurora Subsidiary or to Aurora or any Aurora Subsidiary of more
than $25,000; (ii) was entered into by Aurora or any Aurora Subsidiary with an
officer, director, key employee or Affiliate of Aurora or any Aurora Subsidiary;
(iii) guarantees or indemnifies or otherwise causes or caused Aurora or any
Aurora Subsidiary to be liable or otherwise responsible for the obligations or
liabilities of another or provides or provided for a charitable contribution by
Aurora or any Subsidiary; (iv) involves or involved an agreement with any bank,
finance company or similar organization; (v) restricts or restricted Aurora or
any Aurora Subsidiary from engaging in any business or activity anywhere in the
world; (vi) is or was an employment agreement, consulting agreement, independent
sales representative agreement or similar arrangement; (vii) is or was a lease;
or (viii) is or was otherwise material to the rights, properties, assets,
business or operations of Aurora or any Aurora Subsidiary (the foregoing,
collectively, "Aurora Material Contracts"). Aurora has heretofore made available
true, complete and correct copies of all Aurora Material Contracts to Cadence.
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(b) Each of the Aurora Material Contracts is in full force and
effect and there is not now and there has not been claimed or alleged by any
Person with respect to any Aurora Material Contract, any existing default, or
event that with notice or lapse of time or both would constitute a default or
event of default, on the part of Aurora or any Aurora Subsidiary or on the part
of any other party thereto; no Consent from, or notice to, any Governmental
Entity or other Person is required in order to maintain in full force and effect
any of the Aurora Material Contracts, other than such Consents that have been
obtained and are in full force and effect and such notices that have been duly
given and, in each case copies of such Consents and notices have been delivered
to Cadence and Acquisition Sub.
2.15 TAXES.
(a) Except as set forth in SCHEDULE 2.15:
(i) Aurora and each Aurora Subsidiary has (A) duly and
timely filed or caused to be filed each Tax Return that is
required to be filed by or on behalf of Aurora or such Aurora
Subsidiary or that includes or relates to Aurora and such
Aurora Subsidiary, their respective income, sales, assets or
businesses, and such Tax Returns are true, correct and
complete; (B) duly and timely paid in full, or caused to be
paid in full, all Taxes due and payable on or prior to the
Closing Date, and (C) properly accrued all Taxes on the books
and records of Aurora and such Aurora Subsidiary, as
applicable, in accordance with GAAP and with a provision for
the payment of all Taxes due or claimed to be due or for which
Aurora and such Aurora Subsidiary, as applicable, otherwise is
liable, in each case with respect to Aurora's or such Aurora
Subsidiary's respective income, sales, assets or businesses;
(ii) Neither Aurora nor any Aurora Subsidiary has
requested or is the beneficiary of an extension of time within
which to file any Tax Return in respect of any Tax period that
has not since been filed;
(iii) Aurora and each Aurora Subsidiary has complied in
all respects with all applicable Legal Requirements relating
to the payment, collection or withholding of any Tax, and the
remittance thereof, including, but not limited to, Code
Section 3402;
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(iv) There is no Encumbrance for Taxes upon any asset or
property of Aurora or any Aurora Subsidiary (except for any
statutory Encumbrance for any Tax not yet due);
(v) All Taxes assessed or for which Aurora or any Aurora
Subsidiary is liable with respect to Aurora's or such Aurora
Subsidiary's respective income, sales, assets or businesses
have been paid or accrued;
(vi) Any assessment, deficiency or adjustment related to
or in connection with any Tax for which Aurora or any Aurora
Subsidiary is liable or with respect to Aurora's or such
Aurora Subsidiaries', as applicable, income, sales, assets or
business that is or was required to be reported to any
Governmental Entity has been so reported, and any additional
Taxes owed with respect thereto have been paid;
(vii) There is no outstanding subpoena or summons from
any Governmental Entity with respect to any Tax for which
Aurora or any Aurora Subsidiary is or may be liable or with
respect to Aurora's or such Aurora Subsidiary's, as
applicable, income, sales, assets or business;
(viii) Neither Aurora nor any Aurora Subsidiary is a
party to any agreement with any Governmental Entity
(including, but not limited to, any closing agreement within
the meaning of Code Section 7121 or any analogous Legal
Requirement) or has requested or received a private letter or
other ruling from any Governmental Entity relating to any Tax
for which Aurora or such Aurora Subsidiary is or may be liable
or with respect to Aurora's or such Aurora Subsidiary's, as
applicable, income, sales, assets or business;
(ix) Neither Aurora nor any Aurora Subsidiary has any
"tax-exempt use property," within the meaning of Code Section
168(h) or any similar provision of applicable law with respect
to Aurora, each Aurora Subsidiary, or their respective income,
sales, assets or businesses;
(x) No asset of Aurora or any Aurora Subsidiary is
required to be treated as being owned by any other Person
pursuant to any provision of applicable law, including, but
not limited to, the "safe harbor" leasing provisions of Code
Section 168(f)(8) as in effect prior to the repeal of those
"safe harbor" leasing provisions;
(xi) Neither Aurora nor any Aurora Subsidiary is, nor
has any of them ever been, a "United States real property
holding corporation" within the meaning of Code Section
897(c)(2) at any time during the applicable period referred to
in Code Section 897(c)(l)(A)(ii);
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(xii) No jurisdiction where Aurora or any Aurora
Subsidiary does not file a Tax Return has made or threatened
to make a claim that Aurora or such Aurora Subsidiary is
required to file a Tax Return for such jurisdiction or is
subject to Tax in such jurisdiction;
(xiii) Neither Aurora nor any Aurora Subsidiary has
distributed stock of another Person or has had its stock
distributed by another Person in a transaction that was
purported or intended to be governed by Code Section 355 or
Code Section 361;
(xiv) Neither Aurora nor any Aurora Subsidiary will be
required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or
portion thereof) ending after Aurora's acquisition of
Acquisition Sub as a result of (1) a change in method of
accounting; (2) any intercompany transaction (as described in
Treasury Regulation Section 1.1502-13) or any excess loss
account (as described in Treasury Regulation Section
1.1502-19) (or any corresponding or similar provision of
state, local or foreign Tax law); (3) any installment sale or
open transaction made on or prior to the date Acquisition Sub
was acquired by Aurora; or (4) as a result of any prepaid
amount received on or prior to the date Aurora acquires
Acquisition Sub;
(xv) The statute of limitations for any Tax proceeding
or the assessment or collection of any Tax for which Aurora or
any Aurora Subsidiary is or may be liable or with respect to
its income, sales, assets or business has never been extended
or waived;
(xvi) Neither Aurora nor any Aurora Subsidiary (1) has
been a member of an affiliated group filing a consolidated
federal income Tax Return or (2) has any liability for the
Taxes of any Person (other than Aurora or any Aurora
Subsidiary) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Legal
Requirement), as a transferee or successor, by contract or
otherwise.
(b) SCHEDULE 2.15 sets forth a list of all jurisdictions
(foreign and domestic) in which any Tax Returns have been filed by or on behalf
of Aurora or any Aurora Subsidiary, or with respect to Aurora's or the Aurora
Subsidiary's respective income, assets or businesses within the three-year
period ending on the Closing Date and a description of each such Tax Return and
the period for which it was filed.
(c) SCHEDULE 2.15 sets forth a list of all jurisdictions
(foreign and domestic) in which income, franchise and other Tax Returns of
Aurora or an Aurora Subsidiary have been the subject of Tax proceedings and a
description of each such Tax Return and the period for which it was filed.
(d) Aurora has provided to Cadence and Acquisition Sub all
audit reports, closing agreements, letter rulings, or technical advice memoranda
relating to any Taxes for which Aurora or any Aurora Subsidiary is or may be
liable with respect to Aurora's or such Aurora Subsidiary's respective income,
sales, assets or businesses.
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2.16 AFFILIATED PARTY TRANSACTIONS.
(a) Except as listed on SCHEDULE 2.16(A) and except for
obligations arising under the Transaction Documents, neither Aurora, the Aurora
Subsidiaries, nor any of their respective Affiliates has, directly or
indirectly, any obligation to or cause of action or claim against Aurora or any
Aurora Subsidiary.
(b) Except as listed on SCHEDULE 2.16(B) neither Aurora nor
any Aurora Subsidiary has any loan or advance in excess of $1,000 outstanding to
any stockholder, officer, director or employee thereof and no officer or
director of Aurora or any Aurora Subsidiary or any Affiliate of Aurora or any
Aurora Subsidiary has, either directly or indirectly:
(i) an equity interest of five percent (5%) or more in
any Person that purchases from or sells or furnishes to Aurora
or any Aurora Subsidiary any goods or otherwise does business
with Aurora or any Aurora Subsidiary; or
(ii) a beneficial interest in any contract, commitment
or agreement to which Aurora or any Aurora Subsidiary is a
party or under which Aurora or such Aurora Subsidiary is
obligated or bound or to which the property of Aurora or such
Aurora Subsidiary may be subject, other than contracts,
commitments or agreements between Aurora or such Aurora
Subsidiary and such Persons in their capacities as employees,
officers or directors of Aurora or a Aurora Subsidiary;
provided, however, that such representation and warranty shall
not apply to the ownership, as a passive investment, by any
such officer or Affiliate of less than one percent (1%) of a
class of securities listed for trading on a national
securities exchange or publicly traded in the over-the-counter
market.
2.17 ENVIRONMENTAL MATTERS. Aurora has not caused or allowed, or
contracted with any party for, the generation, use, transportation, treatment,
storage or disposal of any Hazardous Substances in connection with the operation
of its business or otherwise. Except as set forth in SCHEDULE 2.17, Aurora, the
operation of its business, and the Aurora Interests are in compliance with all
applicable Environmental Laws and orders or directives of any Governmental
Entity having jurisdiction under such Environmental Laws, including, without
limitation, any Environmental Laws or orders or directives with respect to any
cleanup or remediation of any release or threat of release of Hazardous
Substances, and no actions are presently required to comply with any such
applicable Environmental Laws. Aurora has not received any citation, directive,
letter or other communication, written or oral, or any notice of any proceeding,
claim or lawsuit arising out of or relating to any Environmental Laws, from any
Person arising out of the ownership of the Aurora Interests or the conduct of
its operations, and Aurora is not aware of any basis therefor. Aurora has
obtained and is maintaining in full force and effect all permits, licenses and
approvals required by all Environmental Laws applicable to the Aurora Interests
and the business operations conducted thereon and is in compliance with all such
permits, licenses and approvals. Aurora has not caused or allowed a release, or
a threat of release, of any Hazardous Substance onto, at or near the Aurora
Interests.
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2.18 NO BROKERS. Neither Aurora nor any Affiliate of Aurora has
employed, or otherwise engaged, any broker or finder or incurred any liability
for any brokerage or investment banking fees, commissions, finders' fees or
other similar fees in connection with the transactions contemplated by this
Agreement.
2.19 RECEIVABLES. All of the accounts receivable of Aurora and the
Aurora Subsidiaries have arisen from bona fide transactions in the ordinary
course of Aurora's or the Aurora Subsidiaries' respective businesses, consistent
with past practice and are fully collectible within one hundred twenty (120)
days of the Closing Date.
2.20 ASSETS UTILIZED IN THE BUSINESS. The assets, properties and
rights owned, leased or licensed by Aurora and the Aurora Subsidiaries and used
in connection with their respective businesses and all the agreements to which
Aurora or any Aurora Subsidiary is a party relating to the businesses,
constitute all of the assets, properties, rights and agreements required in
connection with the operation and conduct by Aurora and the Aurora Subsidiaries
of their respective businesses as presently conducted.
2.21 INSURANCE. Set forth in SCHEDULE 2.21 is a list of all
insurance policies of any kind covering Aurora and the Aurora Subsidiaries.
Cadence and Acquisition Sub have been provided copies of all such policies. Each
of these insurance policies (a) are with insurance companies that are
financially sound and reputable and are in full force and effect; (b) are
sufficient for compliance with all material Legal Requirements and of all
applicable Aurora Material Contracts; and (c) are valid, outstanding and
enforceable policies. Since January 1, 2000, neither Aurora nor any Aurora
Subsidiary has been denied any insurance coverage which it has requested.
2.22 DELIVERY OF DOCUMENTS; CORPORATE RECORDS. Cadence and
Acquisition Sub have heretofore received true, correct and complete copies of
all documents, instruments, agreements and records referred to in SECTION 2 of
this Agreement and copies of the minute and stock record books of Aurora and
each Aurora Subsidiary. The minute and stock record books of each of Aurora and
the Aurora Subsidiaries contain true, correct and complete copies of the records
of all meetings and consents in lieu of meetings of Aurora's or the Aurora
Subsidiaries', as applicable, boards of directors (and all committees thereof)
and the shareholders and members of Aurora and the Aurora Subsidiaries since the
respective dates of their incorporation or organization.
2.23 LABOR AND EMPLOYMENT MATTERS.
(a) Set forth on SCHEDULE 2.23 is a list of all employees of
Aurora and the Aurora Subsidiaries as of the date hereof and their respective
positions and hire dates.
(b) (i) Neither Aurora nor any Aurora Subsidiary is party to
or bound by any collective bargaining agreement 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 Aurora or the
Aurora Subsidiaries; (ii) none of the employees of Aurora or any Aurora
Subsidiary are represented by any labor organization and there are no
organizational campaigns, demands, petitions or proceedings pending or
threatened by any labor organization or group of employees seeking recognition
or certification as collective bargaining representative of any group of
employees of Aurora or the Aurora Subsidiaries; (iii) there are no union claims
to represent the employees of Aurora or any Aurora Subsidiary; and (iv) there
are no strikes, controversies, slowdowns, work stoppages, lockouts or labor
disputes pending or threatened against or affecting Aurora or any Aurora
Subsidiary, and there have not been any such actions during the past five (5)
years.
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(c) Aurora and each Aurora Subsidiary is, and has at all times
during at least the last three (3) years been, in compliance with all applicable
Legal Requirements respecting immigration, employment and employment practices,
and the terms and conditions of employment, including, without limitation,
employment standards, equal employment opportunity, family and medical leave,
wages, hours of work and occupational health and safety, and is not engaged in
any unfair labor practices as defined in the National Labor Relations Act or any
other applicable Legal Requirement. There are no employment contracts, severance
agreements or retention agreements, oral or written, with any employees of
Aurora or any Aurora Subsidiary and no written personnel policies, rules or
procedures applicable to employees of Aurora or any Aurora Subsidiary, other
than those listed in SCHEDULE 2.23, true and correct copies of which have
heretofore been made available to Cadence and Acquisition Sub. Except as set
forth in SCHEDULE 2.23, (i) there are no Proceedings related to Aurora or any
Aurora Subsidiary pending, or threatened, in any court or with any agency
responsible for the enforcement of federal, state, local or foreign labor or
employment laws regarding breach of any express or implied contract of
employment, any Legal Requirement or regulation governing employment or the
termination thereof or other illegal, discriminatory, wrongful or tortious
conduct in connection with the employment relationship, the terms and conditions
of employment, or applications for employment with Aurora or any Aurora
Subsidiary; and (ii) to Aurora's knowledge, no federal, state, local or foreign
Governmental Entity responsible for the enforcement of immigration, labor, equal
employment opportunity, family and medical leave, wages, hours of work,
occupational health and safety or any other employment laws intends to conduct
or is conducting an investigation with respect to or relating to Aurora or any
Aurora Subsidiary.
(d) Since January 1, 2000, neither Aurora nor any Aurora
Subsidiary has effectuated (i) a "plant closing" as defined in WARN affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of Aurora or the Aurora Subsidiaries; or (ii) a
"mass layoff" as defined in WARN affecting any site of employment or facility of
Aurora or any Aurora Subsidiary; nor has Aurora or any Aurora Subsidiary 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.
None of the employees of Aurora or any Aurora Subsidiary has suffered an
"employment loss," as defined in WARN, since January 1, 2001. Aurora and the
Aurora Subsidiaries shall be solely and exclusively liable to provide such WARN
or other plant closing or mass layoff notices as may be necessary in connection
with any loss of employment by any employee of Aurora or the Aurora Subsidiaries
through and including the Closing Date.
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(e) SCHEDULE 2.23 sets forth a complete list of all foreign
national employees on whose behalf Aurora or any Aurora Subsidiary has submitted
applications and petitions to the U.S. Department of Labor, U.S. Immigration and
Naturalization Service, or U.S. Department of State for immigration employment
and visa benefits; and Aurora and each Aurora Subsidiary has provided Cadence
and Acquisition Sub with copies of all such applications and petitions and all
government notices regarding adjudication of such applications and petitions.
SCHEDULE 2.23 identifies and describes any pending or threatened actions against
Aurora or the Aurora Subsidiaries for violations under the Immigration Reform
and Control Act of 1986 respecting such employees of Aurora and such Aurora
Subsidiary.
(f) SCHEDULE 2.23 sets forth a complete list of all business
and/or assets of Aurora and the Aurora Subsidiaries involving federal contracts
giving rise to any reporting or filing obligations with OFCCP and Aurora and
each Aurora Subsidiary has complied in all material respects with all hiring and
employment obligations applicable under OFCCP rules and regulations.
2.24 RESTRICTIVE COVENANTS. Except as set forth on SCHEDULE 2.24,
neither Aurora nor any Aurora Subsidiary is subject to any covenant that would
restrict Aurora or the Aurora Subsidiaries from engaging in their respective
businesses.
2.25 BANK ACCOUNTS. SCHEDULE 2.25 sets forth the names and locations
of all banks, depositories and other financial institutions in which Aurora or
any Aurora Subsidiary has an account or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto.
2.26 DIRECTORS, OFFICERS AND CERTAIN EMPLOYEES. SCHEDULE 2.26 sets
forth a complete and correct list of the names and title, for each director and
officer of Aurora and each Aurora Subsidiary, who received compensation during
Aurora's and such Aurora Subsidiary's, as applicable, most recently ended fiscal
year. Cadence has been provided current annual salary and bonus information for
all Aurora employees, officers and directors. Aurora is not aware of any
employee who intends to terminate his or her employment relationship with Aurora
or any Aurora Subsidiary, as a result of the transactions contemplated hereby or
otherwise.
2.27 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty by
Aurora contained in this Agreement or in any certificate, list, Schedule,
Exhibit or other instrument specified or referred to in this Agreement, whether
heretofore furnished to Cadence or Acquisition Sub or hereafter furnished to
Cadence or Acquisition Sub pursuant to this Agreement on the part of Aurora,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES CADENCE AND ACQUISITION SUB. Cadence and
Acquisition Sub represent and warrant to Aurora that each of the following
statements is true and correct as of the date hereof:
3.1 ORGANIZATION AND GOOD STANDING. SCHEDULE 3.1 lists each direct
and indirect Subsidiary of Cadence. Each of Acquisition Sub, Cadence and any
other Cadence Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Except as set forth
in SCHEDULE 3.1, each of Acquisition Sub, Cadence and any other Cadence
Subsidiary is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing necessary. Cadence has
delivered to Aurora true, correct and complete copies of the Articles of
Incorporation and Bylaws and other organizational documents, as currently in
effect of Cadence and each Cadence Subsidiary.
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3.2 AUTHORIZATION AND VALIDITY. Each of Acquisition Sub and Cadence
has the requisite power and authority to execute, deliver and perform this
Agreement and each of the other Transaction Documents to be executed and
delivered by Acquisition Sub or Cadence, as appropriate, pursuant to this
Agreement, and to assume and perform any obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby. Each of this
Agreement and the other Transaction Documents to be executed and delivered by
Acquisition Sub or Cadence pursuant to this Agreement have been duly authorized,
executed and delivered by Acquisition Sub or Cadence, as appropriate, and are
valid and binding obligations of Acquisition Sub or Cadence, as appropriate,
enforceable against each such entity in accordance with their respective terms.
3.3 NO CONFLICTS OR VIOLATION.
(a) The execution, delivery and performance of each of this
Agreement and the other Transaction Documents by Acquisition Sub and Cadence do
not, and the consummation by it of the transactions contemplated hereby and
thereby will not: (i) violate any provision of the Articles of Incorporation,
Bylaws or other organizational documents of either Acquisition Sub or Cadence,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any Contract to which Acquisition Sub or Cadence is
a party or by which any of their respective properties or assets may be bound or
otherwise subject, except for any Required Consents, or (iii) violate any Legal
Requirement applicable to Acquisition Sub or Cadence or any of their respective
properties or assets.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any legislative or executive agency or
department or other regulatory service, authority or agency or any court,
arbitration panel or other tribunal or judicial authority of any Governmental
Entity or Person, is required in connection with the execution, delivery and
performance of this Agreement or any of the other Transaction Documents by
Acquisition Sub or Cadence or the consummation by Acquisition Sub or Cadence of
the transactions contemplated hereby and thereby, except for the Required
Consents set forth on SCHEDULE 3.3 hereof.
3.4 THE SHARES. The shares of Cadence Common Stock to be issued to
Aurora's stockholders pursuant to this Agreement, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully paid
and non-assessable. The issuance of the Cadence Common stock pursuant to this
Agreement will transfer to Aurora's stockholders valid title to such shares,
free and clear of all liens, encumbrances and claims of every kind.
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3.5 SEC FILINGS; DISCLOSURE. Cadence has filed with the SEC all
forms, statements, reports and documents required to be filed by it for the
fiscal year ended September 30, 2004 under each of the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the respective rules and regulations thereunder, (the
"Cadence Disclosure Documents") all of which, as amended, if applicable,
complied when filed in all material respects with the applicable requirements of
the appropriate Act and the rules and regulations thereunder. As of the filing
date of each, the Cadence Disclosure Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.6 LITIGATION; COMPLIANCE WITH LAW; LICENSES AND PERMITS.
(a) There is no Proceeding pending, nor is there any
Proceeding threatened, that involves or affects either of Cadence, Acquisition
Sub, or any Cadence Subsidiary by or before any Governmental Entity, court,
arbitration panel or any other Person.
(b) Since January 1, 2000, Cadence and each Cadence Subsidiary
has, and since its formation Acquisition Sub has, complied with all applicable
Legal Requirements, including but not limited to Legal Requirements relating to
Taxes, zoning, building codes, antitrust, occupational safety and health,
industrial hygiene, environmental protection, water, ground or air pollution,
the generation, handling, treatment, storage or disposal of Hazardous
Substances, consumer product safety, product liability, hiring, wages, hours,
employee benefit plans and programs, collective bargaining and the payment of
withholding and social security Taxes. Except as set forth on SCHEDULE 3.6,
since January 1, 2000, neither Cadence, any Cadence Subsidiary nor Acquisition
Sub has received any notice of any violation of any Legal Requirement from a
Governmental Entity or others.
(c) Except as set forth on SCHEDULE 3.6, Cadence, Acquisition
Sub and each Cadence Subsidiary have every License issued by any Governmental
Entity, and every Consent by or on behalf of any person required for them to
conduct their respective businesses as presently conducted. All such Licenses
and Consents are in full force and effect and neither Cadence, Acquisition Sub
nor any other Cadence Subsidiary has received notice of any pending cancellation
or suspension of any thereof nor is any cancellation or suspension thereof
threatened. The applicability and validity of each such License and Consent will
not be adversely affected by the consummation of the transactions contemplated
by this Agreement or any other Transaction Document.
3.7 ACCURACY OF INFORMATION FURNISHED AND REPRESENTATIONS. All
information furnished to Aurora by Acquisition Sub or Cadence herein or in any
Schedule or Exhibit hereto, or in any certificate, list or other instrument
specified or referred to in this Agreement is, and as supplemented after the
date of this Agreement by any and all filings with the SEC and any and all
publicly disclosed information, including but not limited to any and all press
releases, as of the Closing Date will be, true, correct and complete in all
material respects, and such information states all material facts required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, true, correct and complete
in all material respects.
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3.8 INFORMATION SUPPLIED. The registration statement on Form S-4 to
be filed with the SEC by Cadence in connection with the issuance of shares of
Cadence Common Stock (including shares of Cadence Common Stock issuable upon
exercise or conversion of the Aurora Convertible Securities) in the Merger, as
amended or supplemented from time to time (as so amended and supplemented, the
"Registration Statement"), and any other documents to be filed by Cadence with
the SEC or any other Governmental Entity in connection with the Transaction
Documents and the transactions contemplated thereby will (in the case of the
Registration Statement and any such other documents filed with the SEC under the
1933 Act or the 1934 Act) comply as to form in all material respects with the
requirements of the 1933 Act and the 1934 Act, and will not, on the date of its
filing or, in the case of the Registration Statement, at the time it becomes
effective under the 1933 Act 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, in light of the circumstances under which
they are made, not misleading, except that no representation is made by Cadence
with respect to information supplied in writing by or on behalf of Aurora
expressly for inclusion therein.
3.9 ACQUISITION SUB. Acquisition Sub is a newly-formed wholly-owned
subsidiary of Cadence that has not engaged in any operations through the Closing
Date.
3.10 CAPITALIZATION.
(a) The authorized capital stock of Cadence and each Cadence
Subsidiary, the issued and outstanding capital stock of Cadence and each Cadence
Subsidiary and the record and beneficial ownership of the capital stock of
Cadence and each Cadence Subsidiary is set forth on SCHEDULE 3.10 or in the
Cadence Disclosure Documents. The shares of Cadence Common Stock are duly
authorized, validly issued, fully paid and non-assessable. Except as
contemplated by this Agreement or as set forth on SCHEDULE 3.10, there are no
(i) options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character obligating,
now or in the future, Cadence or any Cadence Subsidiary to issue, transfer or
sell any shares of capital stock, options, warrants, calls or other equity
interest of any kind whatsoever in Cadence or any Cadence Subsidiary or
securities convertible into or exchangeable for such shares or equity interests,
(ii) contractual obligations of Cadence to repurchase, redeem or otherwise
acquire any capital stock or equity interest of Cadence or any Cadence
Subsidiary or (iii) voting trusts, proxies or similar agreements to which
Cadence or a Cadence Subsidiary is a party with respect to the voting of the
capital stock of Cadence or any Cadence Subsidiary.
(b) Except as set forth on Schedule 3.10 and except for the
common stock of the Cadence Subsidiaries and temporary investments of cash in
marketable securities, Cadence does not own any outstanding shares of capital
stock (or other equity interests of entities other than corporations) of any
partnership, joint venture, trust, corporation, limited liability company or
other entity.
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3.11 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 3.11 is the audited consolidated
balance sheet of Cadence as of September 30, 2004 together with the related
audited consolidated statement of income (including the related notes and
reports of independent auditors, if any) for the fiscal year then ended
(together, with the Latest Cadence Balance Sheet and the Interim Cadence
Financial Statements, the "Regular Cadence Financial Statements").
(b) The Regular Cadence Financial Statements have been
prepared by Cadence and have been derived from, and agree with, the books and
records of Cadence and fairly present the financial position of Cadence as of
the respective dates thereof and the results of operations of Cadence for the
respective periods set forth therein. The Regular Cadence Financial Statements
have been prepared in accordance with GAAP as of the dates and for the periods
involved, subject to the absence of notes and, in the case of the Latest Cadence
Balance Sheet and the related statements of operations for the interim period,
to normal fiscal year-end adjustments in the ordinary course (none of which,
individually or in the aggregate, will be material to the business or the
operations of Cadence).
(c) Cadence maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain assets accountability, and
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, except for any controls the absence of which would
not result in a Material Adverse Effect.
3.12 OPERATION OF BUSINESS.
(a) Since the date of the Regular Cadence Financial
Statements, Cadence and each Cadence Subsidiary has continued to operate its
business in a manner and system of operation employed immediately prior to the
date of the Regular Cadence Financial Statements, and Cadence has used its best
efforts to prevent harm or damage to the reputation of Cadence or the Cadence
Subsidiaries or reduction of existing customer accounts.
(b) Except as specifically contemplated by this Agreement or
as set forth on SCHEDULE 3.12, since the date of the Regular Cadence Financial
Statements neither Cadence nor any Cadence Subsidiary has (i) incurred any
liabilities, except in the ordinary course of business consistent with past
practice; (ii) paid any obligation or liability, or discharged or satisfied any
Encumbrance other than those securing current liabilities, in each case in the
ordinary course of business; (iii) mortgaged, pledged or subjected to any
Encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business; (iv) sold, transferred or leased any of its assets except
the sale of inventory in the ordinary course of business; (v) suffered any
material physical damage, destruction or loss (whether or not covered by
insurance) affecting its properties, business or prospects; (vi) entered into
any transaction other than in the ordinary course of business; (vii) encountered
any labor difficulties or labor union organizing activities; (viii) issued or
sold any shares of capital stock or other securities or granted any options,
warrants, or other purchase rights with respect thereto other than pursuant to
this Agreement; (ix) made any acquisition or disposition of any assets or become
involved in any other material transaction, including, without any limitation,
any merger or consolidation with, purchase of all or part of the assets of, or
acquisition of any business of any proprietorship, firm, association,
corporation or other business organization or division thereof; (x) increased
the compensation payable, or to become payable, to any of its directors or
employees, or increased the scope or nature of any fringe benefits provided for
its employees or directors, other than as Cadence has separately informed
Aurora; (xi) made any capital investment in, any loan to or any acquisition of
the securities or assets of any other Person; (xii) canceled, compromised,
waived or released any material right or claim; (xiii) made any change in
employment terms for any of its officers or employees; (xiv) made or pledged to
make any charitable contribution or other capital contribution outside the
ordinary course of business; (xv) violated any Legal Requirement, if such
violation could have resulted in a Material Adverse Effect on Cadence or any
Cadence Subsidiary, or failed to maintain all governmental licenses and
approvals required to operate its business as it is currently being conducted;
or (xvi) agreed or committed, whether in writing or otherwise, to do any of the
foregoing other than pursuant to the Transaction Documents and the transactions
contemplated hereby and thereby. In addition, since the date of the Regular
Cadence Financial Statements neither Cadence nor any Cadence Subsidiary has
accelerated, terminated, modified or canceled any material agreement, contract,
lease or license to which it is a party or by which it or its assets are bound.
35
(c) Since the date of the Regular Cadence Financial
Statements, no event, condition or circumstance (including an event, condition
or circumstance that has a general adverse effect on the economy as a whole) has
occurred that could, or could be reasonably likely to, have a Material Adverse
Effect on Cadence or any Cadence Subsidiary.
3.13 NON-OIL AND GAS REAL PROPERTY. SCHEDULE 3.13 contains a
complete and accurate list of all real property, leases in real property, or
other interests in real property owned or held by Cadence or any Cadence
Subsidiary ( the "Schedule 3.13 Property"), except that the SCHEDULE 3.13
Property does not include any property included in the Cadence Interests (as
enumerated in SCHEDULE 3.15). Cadence has delivered or made available to Aurora
copies of the deeds and other instruments (as recorded) by which Cadence or any
Cadence Subsidiary acquired the SCHEDULE 3.13 Property which it owns, and copies
of all title insurance policies, opinions, abstracts, and surveys in the
possession of Cadence or any Cadence Subsidiary and relating to the SCHEDULE
3.13 Property which it owns. Cadence and each Cadence Subsidiary holds good
title to all SCHEDULE 3.13 Property owned by Cadence or a Cadence Subsidiary, as
applicable. The SCHEDULE 3.13 Property is, or effective simultaneously with the
Closing will be, free and clear of all Encumbrances and is not subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except for (a) matters disclosed in SCHEDULE 3.13,
(b) liens for current taxes not yet due, and (c) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
3.14 NON-OIL AND GAS CADENCE FIXTURES AND EQUIPMENT. Except as set
forth on SCHEDULE 3.14, Cadence and each Cadence Subsidiary, as applicable, has
good title to, or a valid leasehold interest in, the Fixtures and Equipment that
are used by Cadence or any Cadence Subsidiary in connection with the conduct of
its business (the "Cadence Fixtures and Equipment"), except that the Cadence
Fixtures and Equipment do not include any property included in the Cadence
Interests. The Cadence Fixtures and Equipment are structurally sound, are in
good operating condition and repair, are adequate for the uses to which they are
being put, are not in need of maintenance or repairs except for ordinary,
routine maintenance and repairs and are sufficient for the conduct of Cadence's
businesses in the manner as conducted prior to the Closing. Cadence owns, or
effective simultaneously with the Closing will own, all of the Cadence Fixtures
and Equipment free and clear of all Encumbrances except for (a) matters
disclosed in SCHEDULE 3.14, (b) liens for current taxes not yet due, and (c)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.
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3.15 OIL AND GAS INTERESTS.
(a) Except as set forth on SCHEDULE 3.15, Cadence holds Good
and Defensible Title to the Cadence Interests.
(b) SCHEDULE 3.15 sets forth all platforms and pipelines, and
the equipment, facilities and personal property related to such platforms and
pipelines, comprising part of the Cadence Appurtenant Rights.
(c) SCHEDULE 3.15 sets forth Cadence's Working Interest and
Net Revenue Interest in each Cadence Well.
(d) The Cadence Basic Documents are in full force and effect
and constitute valid and binding obligations of the parties thereto, and
(i) Cadence is not in material breach or default (and no
situation exists which with the passing of time or giving of
notice would give rise to such a breach or default) of its
obligations under any of the Cadence Basic Documents, and no
breach or default by any other party to a Cadence Basic
Document (or situation which with the passage of time or
giving of notice would give rise to such a breach or default)
exists, to the extent such breach or default (whether by
Cadence or another party to a Cadence Basic Document) could
adversely affect any of the Cadence Interests.
(ii) Except as set forth in SCHEDULE 3.15, all payments
(including, without limitation, all delay rentals, royalties,
excess royalties, minimum royalties, overriding royalty
interests, shut-in royalties and valid calls for payment or
prepayment under operating agreements) owing under the Cadence
Basic Documents have been and are being made timely and
properly, and before the same became delinquent (by Cadence
where the non-payment of same by another party to a Cadence
Basic Document could adversely affect any of the Cadence
Interests) have been and are being made by such other party in
all material respects.
(iii) All conditions necessary to maintain the Cadence
Basic Documents in force have been duly performed.
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(iv) No non-consent operations exist with respect to any
of the Cadence Interests that have resulted or will result in
a temporary or permanent increase or decrease in either
Cadence's Net Revenue Interest or Working Interest in such
Cadence Interest.
(v) Except as disclosed on SCHEDULE 3.15, Cadence is not
obligated to incur any expenses, and has not made commitments
to make expenditures (capital or otherwise), or to apply
revenues from a Well's production in connection with any
Cadence Interests (and no other similar obligations or
liabilities have been incurred) with respect to the ownership
or operation of Cadence Interests. Except as provided in
SCHEDULE 3.15, Cadence will not incur or commit to any such
expense in excess of $250,000 except to the extent that Aurora
has been given seven days prior written notice and has
consented thereto in writing. Except as disclosed in SCHEDULE
3.15, all expenses payable under the terms of the Cadence
Basic Documents have been properly and timely paid except for
such expenses as are being currently paid or will be paid
prior to delinquency. Except for budgeted capital expenditures
as set forth in SCHEDULE 3.15, no proposals calling for
expenditures in excess of $250,000 for any one project are
currently outstanding (whether made by Cadence, a Cadence
Subsidiary, or by any other party) to drill additional Cadence
wells, or to deepen, plug back, sidetrack, abandon, or rework
existing Wells, or to conduct other operations for which
consent is required under the applicable operating agreement,
or to conduct any other operations, other than normal
operation of existing Wells on Cadence Interests.
(vi) No agreements or arrangements exist for the sale,
gathering, transportation, compression, treating, processing
or other marketing of a material volume of production from the
Cadence Interests (including without limitation, calls on, or
other rights to purchase, production, whether or not the same
are currently being exercised) other than the agreements set
forth in SCHEDULE 3.15.
(vii) Except as set forth in SCHEDULE 3.15, Cadence has
not received prepayments (including, but not limited to,
payments for oil and gas not taken pursuant to "take-or-pay"
arrangements) for any oil or gas produced from the Cadence
Interests as a result of which the obligation does (or may)
exist (i) to deliver oil or gas produced from the Cadence
Interests beginning on the Effective Date without then
receiving payment therefor, or (ii) to make repayments in
cash. For each Cadence Interest listed in SCHEDULE 3.15, such
Schedule also sets forth as to each such Cadence Interest (i)
the total amount of prepayment received prior to the Effective
Date, and (ii) whether or not a cash payment can be required
in the event recoupment out of production proves to be
inadequate. Except as set forth in SCHEDULE 3.15, there is no
Cadence Interest with respect to which Cadence has taken an
Over-Produced or Under-produced position to the extent such
Over-produced or Under-produced position has not, as of the
day immediately preceding the Effective Date, been fully made
up or otherwise extinguished. For each Cadence Interest listed
in SCHEDULE 3.15, such Schedule also sets forth, on a
Well-by-Well or any other basis as may be dictated by any
applicable balancing agreement, (i) whether Cadence is in an
Over-produced or Under-produced position, (ii) the amount of
such Over-production or Under-production, (iii) a description
of the written balancing agreement (if any) pertaining to such
Cadence Interest (or a statement that no such agreement
exists) and (iv) a statement as to whether royalties,
overriding royalties or other burdens against the Cadence's
Net Revenue Interest in the affected Cadence Interests were,
during the period the subject imbalance accrued, paid based
upon receipts or entitlements. Except as set forth in SCHEDULE
3.15, no pipeline imbalances have arisen and remain
outstanding due to the failure of nominations made by Cadence
to match actual deliveries of production from any one or more
Cadence Interests. Except as set forth in SCHEDULE 3.15, none
of the purchasers under any production sales contracts
relating to a Cadence Interest has (i) exercised any economic
out provision; (ii) curtailed its takes of natural gas in
violation of such contracts; or (iii) given notice that it
desires to amend the production sales contracts with respect
to price or quantity of deliveries under take-or-pay
provisions or otherwise.
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(viii) To Cadence's knowledge, no delinquent unpaid
bills or past due charges exist for any labor and materials
incurred by or on behalf of Cadence related to the
exploration, development or operation of the Cadence
Interests.
(ix) Except as set forth in SCHEDULE 3.15 or as may be
provided for by a Basic Document, neither Cadence nor any
Cadence Interest is subject to (i) any area of mutual interest
agreements, (ii) any farm-out or farm-in agreement under which
any party thereto is entitled to receive assignments of any
Cadence Interest or any interest therein not yet made, or
could earn additional assignments of any Cadence Interest or
any interest therein after the date hereof, (iii) any tax
partnership or (iv) any agreement, contract or commitment
relating to the disposition or acquisition of the assets of,
or any interest in, any other entity.
(x) All severance, production, ad valorem and other
similar taxes based on or measured by ownership or operation
of, or production from, the Cadence Interests have been, and
are being, paid (properly and timely, and before the same
become delinquent) by Cadence in all respects.
(xi) Except as set forth in SCHEDULE 3.15, the (i)
ownership and operation of the Cadence Interests has, to the
extent that non-conformance could adversely affect the Cadence
Interests, been conducted in conformity with all applicable
material Legal Requirements of all Governmental Entities
having jurisdiction over the Cadence Interests or Cadence, and
(ii) Cadence has not received any notice of noncompliance with
regard to any material Legal Requirement of any Governmental
Entity having jurisdiction over the Cadence Interests or
Cadence.
39
(xii) Except as set forth in SCHEDULE 3.15, there are no
Preferential Rights or Consents, other than Routine
Governmental Approvals that affect any Cadence Interests and
that will be triggered by the transactions contemplated by the
Transaction Documents. SCHEDULE 3.15 sets forth the allocated
value of each Cadence Interest that is subject to a
Preferential Right.
(xiii) Except as set forth in SCHEDULE 3.15, there exist
no agreements or other arrangements under which Cadence
undertakes to perform gathering, transportation, processing or
other marketing services for any other party for a fee or
other consideration that is now, or may hereafter be,
unrepresentative of commercial rates being received by other
parties in comparable, arm's length transactions.
(xiv) Except as disclosed in SCHEDULE 3.15, there are no
Wells located on the Cadence Interests that (i) Cadence is
currently obligated by law or contract to currently plug and
abandon, (ii) Cadence 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 severed
crude oil, natural gas, casinghead gas, drip gasoline, natural
gasoline, petroleum, natural gas liquids, condensate,
products, liquids, other hydrocarbons or other minerals or
materials in paying quantities or otherwise currently being
used in normal operations, (iii) are subject to exceptions to
a requirement to plug and abandon issued by a Governmental
Entity, or (iv) to Cadence's knowledge, have been plugged and
abandoned, but have not been plugged in accordance in all
material respects with all applicable requirements of any
Governmental Entity.
(xv) No suit, action or proceeding (including, without
limitation, tax or environmental demands proceedings) is
pending or threatened, which might result in material
impairment or loss of title to any of the Cadence Interests or
the material value thereof.
(xvi) Except as set forth in SCHEDULE 3.15, all proceeds
from the sale of hydrocarbons produced from Cadence's
proportionate share of the Cadence Interests are currently
being paid to Cadence in all material respects, and no portion
of such proceeds is currently being held in suspense by any
purchaser thereof or any other party by whom proceeds are paid
except for immaterial amounts.
3.16 NO UNDISCLOSED LIABILITIES.
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(a) Except as set forth on SCHEDULE 3.16, neither Cadence nor
any Cadence Subsidiary has any liabilities (whether accrued, contingent, known,
or otherwise) other than those that (i) are set forth or reserved against on the
Latest Cadence Balance Sheet; or (ii) were incurred in the ordinary course of
business.
(b) The accounts payable of each of Cadence and the Cadence
Subsidiaries are set forth on SCHEDULE 3.16. All such accounts payable are the
result of bona fide transactions in the ordinary course of business.
3.17 CADENCE EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.17 contains a complete and accurate list of all
Employee Benefit Plans of Cadence, Cadence's Subsidiaries and Cadence's ERISA
Affiliates ("Cadence Employee Benefit Plans").
(b) Each and all Cadence Employee Benefit Plans have been
administered in all respects in accordance with their respective terms and in
compliance with all applicable Legal Requirements, including, without
limitation, ERISA and the Code, and each of Cadence, the Cadence Subsidiaries
and any ERISA Affiliate of Cadence (as the case may be) has met its obligations
under applicable provisions of ERISA and the Code and the regulations
thereunder, and other applicable Legal Requirements with respect to such Cadence
Employee Benefit Plans.
(c) Complete and accurate copies of the following documents
for each Cadence Employee Benefit Plan listed on SCHEDULE 3.17 have been
delivered to Cadence: (i) the plan texts or other agreements adopted or entered
into in connection with any Cadence Employee Benefit Plan which has been reduced
to writing, and any related amendments; (ii) a written summary of any unwritten
Cadence Employee Benefit Plan; (iii) any related trust agreement, insurance
contract, annuity contract or other funding agreement (including all amendments
thereto) and any summary plan description required under ERISA, including any
modification communicated to or required to be communicated to any participant;
and (iv) any communication to any participant relating to any Cadence Employee
Benefit Plan in connection with any amendment, termination, establishment,
increase or decrease in benefits, acceleration or deceleration of payments,
vesting schedules or other events which would result in any liability by or to
Cadence, any Cadence Subsidiary or any ERISA Affiliate of Cadence. Since the
date such documents described in this SECTION 3.17(C) were supplied, no
amendments or changes to the documents described in this SECTION 3.17(C) have
been made, and no such amendments or changes shall be adopted or made prior to
the Closing Date.
(d) There are no termination proceedings with respect to any
of the Cadence Employee Benefit Plans.
(e) None of the Cadence Employee Benefit Plans is currently,
or has ever been, under investigation, audit or review by the Department of
Labor, the IRS or any other federal or state Governmental Entity, and no such
investigation, audit or review is pending or anticipated. None of the Cadence
Employee Benefit Plans is liable, or ever has been liable, for any federal,
state, local or foreign Taxes except as may be due in the ordinary course of
administration of such Cadence Employee Benefit Plan, and no such Tax is
anticipated and no basis for such Tax exists. There is no transaction, act or
omission, nor has there ever been any transaction, act or omission, in
connection with Cadence, the Cadence Subsidiaries, any ERISA Affiliate of
Cadence, or any fiduciary of any Cadence Employee Benefit Plan which could
subject Cadence or a Cadence Subsidiary to a fine, civil penalty Tax or other
liability.
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(f) There are no pending or threatened claims, actions, suits,
grievances, audits, investigations, or other proceedings, involving, directly or
indirectly, any Cadence Employee Benefit Plan, any fiduciary thereof, or any
rights or benefits thereunder (except claims for benefits payable in the normal
operation of the Cadence Employee Benefit Plan and proceedings with respect to
qualified domestic relations orders), and no basis for any such proceeding
exists.
(g) No written or oral representations have been made to any
employee, former employee, retiree, director or independent contractor (or their
beneficiaries, dependents or spouses) of Cadence or the Cadence Subsidiaries
promising or guaranteeing any employer payment or funding for the continuation
of medical, dental or disability coverage after termination of employment or
services, as applicable, beyond that legally required.
(h) No action or omission of Cadence, any Cadence Subsidiary,
any ERISA Affiliate of Cadence or any director, officer, employee, or agent
thereof, and no plan documentation or agreement, summary plan description or
other written communication distributed generally to employees, in any way
restricts, impairs or prohibits (whether legally binding or not) Cadence, the
Cadence Subsidiaries, any ERISA Affiliate of Cadence, or any successor thereof
from amending, merging, terminating or otherwise discontinuing any Cadence
Employee Benefit Plan in accordance with the express terms of any such plan and
applicable Legal Requirement at or after Closing, and any such amendment,
merger, termination or discontinuance may occur without any liability to any of
Aurora, the Aurora Subsidiaries, any ERISA Affiliate of Aurora, Cadence or
Acquisition Sub. No agreement, arrangement, commitment, understanding or plan
documentation or other written communication distributed generally to employees
exists to create any additional Cadence Employee Benefit Plan not listed on
SCHEDULE 3.17.
(i) SCHEDULE 3.17 sets forth a reasonable estimate of each of
Cadence's and the Cadence Subsidiaries' accrued liability for vacation, sickness
and disability expenses through and including the Closing Date.
(j) On and after the Closing Date, neither Cadence, the
Cadence Subsidiaries, Aurora, nor the Aurora Subsidiaries will have any
liability or be under any obligation with respect to any Cadence Employee
Benefit Plan which is not disclosed.
(k) Full payment has or will have, prior to the Closing, been
made of all amounts which Cadence, the Cadence Subsidiaries or any ERISA
Affiliate of Cadence is directly or indirectly required, under applicable Legal
Requirements, the terms of any Cadence Employee Benefit Plan or any agreement
relating to any Cadence Employee Benefit Plan to have paid as a contribution,
premium or other remittance thereto or benefit thereunder if such payment has a
deadline on or before the Closing Date. There will be no change on or before the
Closing Date in the operation of any Cadence Employee Benefit Plan or any
documents with respect thereto which will result in an increase in any benefit
under any such Cadence Employee Benefit Plan, except as may be required by Legal
Requirement. Each Cadence Employee Benefit Plan can be terminated within thirty
(30) days of the Closing Date, without payment of any additional contribution or
amount other than for benefits accrued thereunder and without creating any
unfunded or unaccrued liability or the vesting or acceleration of any benefits
promised by such plan. No
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(l) All Cadence Employee Benefit Plans that are welfare plans
comply with and have been administered in material compliance to the extent
applicable with the requirements of the: (i) COBRA; (ii) Heath Insurance
Portability and Accountability Act of 1996, as amended; (iii) Mental Health
Parity Act of 1996; (iv) Newborns' and Mothers' Health Protection Act; and (v)
Women's Health and Cancer Rights Act, to the extent applicable. Cadence Employee
Benefit Plans are or have been subject to COBRA.
(m) The execution of this Agreement and the consummation of
the transactions contemplated hereby and thereby will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event under
any Cadence Employee Benefit Plan, employee agreement, trust or loan that will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee. None of
the Severance Plans of Cadence or any Subsidiary of Cadence provide that any of
the benefits under such Severance Plans of Cadence or any Subsidiary of Cadence
will be increased, nor will the vesting of the benefits under such Severance
Plans of Cadence or any Subsidiary of Cadence be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement nor will the value of
any of the benefits under such Severance Plans of Cadence or any Subsidiary of
Cadence be calculated on the basis of any of the transactions contemplated by
this Agreement and no payments under any such Severance Plans of Cadence or any
Subsidiary of Cadence or other agreement will be parachute payments under
Section 280G of the Code that are non-deductible to Aurora, Aurora Subsidiaries,
Cadence or Cadence Subsidiaries or subject to Taxes under Section 4999 of the
Code.
(n) No Cadence Employee Benefit Plan is or has been subject to
Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. None of
Cadence, any Subsidiary of Cadence or any ERISA Affiliate of Cadence has or has
ever had any liability or obligation under Section 302 of ERISA, Section 412 of
the Code or Title IV of ERISA. No contributions have ever been made or been
owing to an Cadence Employee Benefit Plan pursuant to or under a collective
bargaining agreement between employee representatives and Cadence, any
Subsidiary of Cadence or any ERISA Affiliate of Cadence.
3.18 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.18 lists all Intellectual Property of each of
Cadence and the Cadence Subsidiaries, including all United States and foreign
(i) patents and patent applications; (ii) trademark registrations and
applications therefor and material, unregistered trademarks; (iii) copyright
registrations and applications therefor; and (iv) other filings and formal
actions made or taken pursuant to federal, state, local and foreign Legal
Requirements by Cadence or the Cadence Subsidiaries to protect its or their
interests in the Intellectual Property.
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(b) To Cadence's best knowledge, the conduct of the respective
businesses of Cadence and the Cadence Subsidiaries as conducted in the past did
not infringe (when conducted) and as currently conducted or contemplated to be
conducted does not infringe (either directly or indirectly, such as through
contributory infringement) any Intellectual Property right owned or controlled
by any third party. There is no Proceeding before any court, agency, arbitral
tribunal, or registration authority in any jurisdiction, whether against Cadence
or any Cadence Subsidiary or any third party (i) involving any Intellectual
Property owned by Cadence or any Cadence Subsidiary; (ii) alleging that the
activities or the conduct of the business of Cadence or any Cadence Subsidiary,
or the use of any Intellectual Property by any customer or other licensee of
Cadence or any Cadence Subsidiary, does or will infringe upon, violate or
constitute the unauthorized use of the Intellectual Property rights of any third
party; or (iii) challenging the ownership, use, validity, enforceability or
registrability of any Intellectual Property, nor is there any reasonable basis
for any such proceeding.
(c) There are no royalties, fees, honoraria or other payments
payable by Cadence or any Cadence Subsidiary to any Person by reason of the
ownership, development, use, license, sale or disposition of any Intellectual
Property, other than salaries and sales commissions paid to employees and sales
agents in the ordinary course of business.
3.19 MATERIAL CONTRACTS.
(a) Other than those documents filed with the SEC in
connection with the Cadence Disclosure Documents, SCHEDULE 3.19 sets forth a
true, complete and correct list of every Contract currently in effect to which
Cadence or any Cadence Subsidiary is a party that: (i) provides or provided for
aggregate future payments by Cadence or any Cadence Subsidiary or to Cadence or
any Subsidiary of more than $25,000; (ii) was entered into by Cadence or any
Cadence Subsidiary with an officer, director, key employee or Affiliate of
Cadence or any Cadence Subsidiary; (iii) guarantees or indemnifies or otherwise
causes or caused Cadence or any Cadence Subsidiary to be liable or otherwise
responsible for the obligations or liabilities of another or provides or
provided for a charitable contribution by Cadence or any Cadence Subsidiary;
(iv) involves or involved an agreement with any bank, finance company or similar
organization; (v) restricts or restricted Cadence or any Cadence Subsidiary from
engaging in any business or activity anywhere in the world; (vi) is or was an
employment agreement, consulting agreement, independent sales representative
agreement or similar arrangement; (vii) is or was a lease; or (viii) is or was
otherwise material to the rights, properties, assets, business or operations of
Cadence or any Cadence Subsidiary (the foregoing, collectively, "Cadence
Material Contracts"). Cadence has heretofore made available true, complete and
correct copies of all Cadence Material Contracts to Aurora.
(b) Each of the Cadence Material Contracts is in full force
and effect and there is not now and there has not been claimed or alleged by any
Person with respect to the Cadence Material Contracts, any existing default, or
event that with notice or lapse of time or both would constitute a default or
event of default, on the part of Cadence or any Cadence Subsidiary or on the
part of any other party thereto; no Consent from, or notice to, any Governmental
Entity or other Person is required in order to maintain in full force and effect
any of the current Cadence Material Contracts, other than such Consents that
have been obtained and are in full force and effect and such notices that have
been duly given and, in each case copies of such Consents and notices have been
delivered to Aurora.
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3.20 TAXES.
(a) Except as set forth in SCHEDULE 3.20:
(i) Cadence and each Cadence Subsidiary has (A) duly and
timely filed or caused to be filed each Tax Return that is
required to be filed by or on behalf of Cadence or such
Cadence Subsidiary or that includes or relates to Cadence and
such Cadence Subsidiary, their respective income, sales,
assets or businesses, and such Tax Returns are true, correct
and complete; (B) duly and timely paid in full, or caused to
be paid in full, all Taxes due and payable on or prior to the
Closing Date, and (C) properly accrued all Taxes on the books
and records of Cadence and such Cadence Subsidiary, as
applicable, in accordance with GAAP and with a provision for
the payment of all Taxes due or claimed to be due or for which
Cadence and such Cadence Subsidiary, as applicable, otherwise
is liable, in each case with respect to Cadence's or such
Cadence Subsidiary's respective income, sales, assets or
businesses;
(ii) Neither Cadence nor any Cadence Subsidiary has
requested or is the beneficiary of an extension of time within
which to file any Tax Return in respect of any Tax period that
has not since been filed;
(iii) Cadence and each Cadence Subsidiary has complied
in all respects with all applicable Legal Requirements
relating to the payment, collection or withholding of any Tax,
and the remittance thereof including, but not limited to, Code
Section 3402;
(iv) There is no Encumbrance for Taxes upon any asset or
property of Cadence or any Cadence Subsidiary (except for any
statutory Encumbrance for any Tax not yet due);
(v) All Taxes assessed or for which Cadence or any
Cadence Subsidiary is liable with respect to Cadence's or such
Cadence Subsidiary's respective income, sales, assets or
businesses have been paid or accrued;
(vi) Any assessment, deficiency or adjustment related to
or in connection with any Tax for which Cadence or any Cadence
Subsidiary is liable or with respect to Cadence's or such
Cadence Subsidiary's, as applicable, income, sales, assets or
business that is or was required to be reported to any
Governmental Entity has been so reported, and any additional
Taxes owed with respect thereto have been paid;
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(vii) There is no outstanding subpoena or summons from
any Governmental Entity with respect to any Tax for which
Cadence or any Cadence Subsidiary is or may be liable or with
respect to Cadence's or such Cadence Subsidiary's, as
applicable, income, sales, assets or business;
(viii) Neither Cadence nor any Cadence Subsidiary is a
party to any agreement with any Governmental Entity
(including, but not limited to, any closing agreement within
the meaning of Code Section 7121 or any analogous Legal
Requirement) or has requested or received a private letter or
other ruling from any Governmental Entity relating to any Tax
for which Cadence or such Cadence Subsidiary is or may be
liable or with respect to Cadence's or such Cadence
Subsidiary's, as applicable, income, sales, assets or
business;
(ix) Neither Cadence nor any Cadence Subsidiary has any
"tax-exempt use property," within the meaning of Code Section
168(h) or any similar provision of applicable law with respect
to Cadence, each Cadence Subsidiary, or their respective
income, sales, assets or businesses;
(x) No asset of Cadence or any Cadence Subsidiary is
required to be treated as being owned by any other Person
pursuant to any provision of applicable law, including, but
not limited to, the "safe harbor" leasing provisions of Code
Section 168(f)(8) as in effect prior to the repeal of those
"safe harbor" leasing provisions;
(xi) Neither Cadence nor any Cadence Subsidiary is, nor
has any of them ever been, a "United States real property
holding corporation" within the meaning of Code Section
897(c)(2) at any time during the applicable period referred to
in Code Section 897(c)(l)(A)(ii);
(xii) No jurisdiction where Cadence or any Cadence
Subsidiary does not file a Tax Return has made or threatened
to make a claim that Cadence or such Cadence Subsidiary is
required to file a Tax Return for such jurisdiction or is
subject to Tax in such jurisdiction;
(xiii) Neither Cadence nor any Cadence Subsidiary has
distributed stock of another Person or has had its stock
distributed by another Person in a transaction that was
purported or intended to be governed by Code Section 355 or
Code Section 361;
(xiv) The statute of limitations for any Tax proceeding
or the assessment or collection of any Tax for which Cadence
or any Cadence Subsidiary is or may be liable or with respect
to its income, sales, assets or business has never been
extended or waived; and
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(xv) Neither Cadence nor any Cadence Subsidiary (1) has
been a member of an affiliated group filing a consolidated
federal income Tax Return or (2) has any liability for the
Taxes of any Person (other than Cadence or any Cadence
Subsidiary) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Legal
Requirement), as a transferee or successor, by contract or
otherwise.
(b) SCHEDULE 3.20 sets forth a list of all jurisdictions
(foreign and domestic) in which any Tax Returns have been filed by or on behalf
of Cadence or any Cadence Subsidiary, or with respect to Cadence's or the
Cadence Subsidiaries' respective income, assets or businesses within the
three-year period ending on the Closing Date and a description of each such Tax
Return and the period for which it was filed.
(c) SCHEDULE 3.20 sets forth a list of all jurisdictions
(foreign and domestic) in which income, franchise and other Tax Returns of
Cadence or a Cadence Subsidiary have been the subject of Tax proceedings and a
description of each such Tax Return and the period for which it was filed.
(d) Cadence has provided to Aurora all audit reports, closing
agreements, letter rulings, or technical advice memoranda relating to any Taxes
for which Cadence or any Cadence Subsidiary is or may be liable with respect to
Cadence's or such Cadence Subsidiary's respective income, sales, assets or
businesses.
3.21 AFFILIATED PARTY TRANSACTIONS.
(a) Except as listed on SCHEDULE 3.21(A) and except for
obligations arising under the Transaction Documents, neither Cadence, nor the
Cadence Subsidiaries nor any of their respective Affiliates has, directly or
indirectly, any obligation to or cause of action or claim against Cadence or any
Cadence Subsidiary.
(b) Except as listed on SCHEDULE 3.21(B) neither Cadence nor
any Cadence Subsidiary has any loan or advance in excess of $1,000 outstanding
to any stockholder, officer, director or employee thereof and no officer or
director of Cadence or any Cadence Subsidiary or any Affiliate of Cadence or any
Cadence Subsidiary has, either directly or indirectly:
(i) an equity interest of five percent (5%) or more in
any Person that purchases from or sells or furnishes to
Cadence or any Cadence Subsidiary any goods or otherwise does
business with Cadence or any Cadence Subsidiary; or
(ii) a beneficial interest in any contract, commitment
or agreement to which Cadence or any Cadence Subsidiary is a
party or under which Cadence or such Cadence Subsidiary is
obligated or bound or to which the property of Cadence or such
Cadence Subsidiary may be subject, other than contracts,
commitments or agreements between Cadence or such Cadence
Subsidiary and such Persons in their capacities as employees,
officers or directors of Cadence or a Cadence Subsidiary;
provided, however, that such representation and warranty shall
not apply to the ownership, as a passive investment, by any
such officer or Affiliate of less than one percent (1%) of a
class of securities listed for trading on a national
securities exchange or publicly traded in the over-the-counter
market.
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3.22 ENVIRONMENTAL MATTERS. Cadence has not caused or allowed, or
contracted with any party for, the generation, use, transportation, treatment,
storage or disposal of any Hazardous Substances in connection with the operation
of its business or otherwise. Except as set forth in SCHEDULE 3.22, Cadence, the
operation of its business, and the Cadence Interests are in compliance with all
applicable Environmental Laws and orders or directives of any Governmental
Entity having jurisdiction under such Environmental Laws, including, without
limitation, any Environmental Laws or orders or directives with respect to any
cleanup or remediation of any release or threat of release of Hazardous
Substances, and no actions are presently required to comply with any such
applicable Environmental Laws. Cadence has not received any citation, directive,
letter or other communication, written or oral, or any notice of any proceeding,
claim or lawsuit arising out of or relating to any Environmental Laws, from any
Person arising out of the ownership of the Cadence Interests or the conduct of
its operations, and Cadence is not aware of any basis therefor. Cadence has
obtained and is maintaining in full force and effect all permits, licenses and
approvals required by all Environmental Laws applicable to the Cadence Interests
and the business operations conducted thereon and is in compliance with all such
permits, licenses and approvals. Cadence has not caused or allowed a release, or
a threat of release, of any Hazardous Substance onto, at or near the Cadence
Interests.
3.23 NO BROKERS. Except as set forth on Schedule 3.23, neither
Cadence nor any Affiliate of Cadence has employed, or otherwise engaged any
broker or finder or incurred any liability for any brokerage or investment
banking fees, commissions, finders' fees or other similar fees in connection
with the transactions contemplated by this Agreement.
3.24 RECEIVABLES. All of the accounts receivable of Cadence and the
Cadence Subsidiaries have arisen from bona fide transactions in the ordinary
course of Cadence's or the Cadence Subsidiaries' respective businesses,
consistent with past practice and are fully collectible within one hundred
twenty (120) days of the Closing Date.
3.25 ASSETS UTILIZED IN THE BUSINESS. The assets, properties and
rights owned, leased or licensed by Cadence and the Cadence Subsidiaries and
used in connection with their respective businesses and all the agreements to
which Cadence or any Cadence Subsidiary is a party relating to the businesses,
constitute all of the assets, properties, rights and agreements required in
connection with the operation and conduct by Cadence and the Cadence
Subsidiaries of their respective businesses as presently conducted.
3.26 INSURANCE. Set forth in SCHEDULE 3.26 is a list of all
insurance policies of any kind covering Cadence and the Cadence Subsidiaries.
Each of these insurance policies (a) are with insurance companies that are
financially sound and reputable and are in full force and effect; (b) are
sufficient for compliance with all material Legal Requirements and of all
applicable Cadence Material Contracts; and (c) are valid, outstanding and
enforceable policies. Since January 1, 2000, neither Cadence nor any Cadence
Subsidiary has been denied any insurance coverage which it has requested. Aurora
has been provided copies of all such policies.
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3.27 DELIVERY OF DOCUMENTS; CORPORATE RECORDS. Aurora has heretofore
received true, correct and complete copies of all documents, instruments,
agreements and records referred to in Section 3 of this Agreement and copies of
the minute and stock record books of Cadence and each Cadence Subsidiary. The
minute and stock record books of each of Cadence and the Cadence Subsidiaries
contain true, correct and complete copies of the records of all meetings and
consents in lieu of meetings of Cadence's or the Cadence Subsidiaries', as
applicable, boards of directors (and all committees thereof) and the
shareholders of Cadence and the Cadence Subsidiaries since the respective dates
of their incorporation.
3.28 LABOR AND EMPLOYMENT MATTERS.
(a) Set forth on SCHEDULE 3.28 is a list of all employees of
Cadence and the Cadence Subsidiaries as of the date hereof and their respective
positions and hire dates.
(b) (i) Neither Cadence nor any Cadence Subsidiary is party to
or bound by any collective bargaining agreement 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 Cadence or the
Cadence Subsidiaries; (ii) none of the employees of Cadence or any Cadence
Subsidiary are represented by any labor organization and there are no
organizational campaigns, demands, petitions or proceedings pending or
threatened by any labor organization or group of employees seeking recognition
or certification as collective bargaining representative of any group of
employees of Cadence or the Cadence Subsidiaries; (iii) there are no union
claims to represent the employees of Cadence or any Cadence Subsidiary; and (iv)
there are no strikes, controversies, slowdowns, work stoppages, lockouts or
labor disputes pending or threatened against or affecting Cadence or any Cadence
Subsidiary, and there have not been any such actions during the past five (5)
years.
(c) Cadence and each Cadence Subsidiary is, and has at all
times during at least the last three (3) years been, in compliance with all
applicable Legal Requirements respecting immigration, employment and employment
practices, and the terms and conditions of employment, including, without
limitation, employment standards, equal employment opportunity, family and
medical leave, wages, hours of work and occupational health and safety, and is
not engaged in any unfair labor practices as defined in the National Labor
Relations Act or any other applicable Legal Requirement. There are no employment
contracts, severance agreements or retention agreements, oral or written, with
any employees of Cadence or any Cadence Subsidiary and no written personnel
policies, rules or procedures applicable to employees of Cadence or any Cadence
Subsidiary, other than those listed in SCHEDULE 3.28, true and correct copies of
which have heretofore been made available to Aurora. Except as set forth in
SCHEDULE 3.28, (i) there are no Proceedings related to Cadence or any Cadence
Subsidiary pending, or threatened, in any court or with any agency responsible
for the enforcement of federal, state, local or foreign labor or employment laws
regarding breach of any express or implied contract of employment, any Legal
Requirement or regulation governing employment or the termination thereof or
other illegal, discriminatory, wrongful or tortious conduct in connection with
the employment relationship, the terms and conditions of employment, or
applications for employment with Cadence or any Cadence Subsidiary; and (ii) to
Cadence's knowledge, no federal, state, local or foreign Governmental Entity
responsible for the enforcement of immigration, labor, equal employment
opportunity, family and medical leave, wages, hours of work, occupational health
and safety or any other employment laws intends to conduct or is conducting an
investigation with respect to or relating to Cadence or any Cadence Subsidiary.
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(d) Since January 1, 2000, neither Cadence nor any Cadence
Subsidiary has effectuated (i) a "plant closing" as defined in WARN affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of Cadence or the Cadence Subsidiaries; or (ii) a
"mass layoff" as defined in WARN affecting any site of employment or facility of
Cadence or any Cadence Subsidiary; nor has Cadence or any Cadence Subsidiary
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. None of the employees of Cadence or any Cadence Subsidiary has
suffered an "employment loss," as defined in WARN, since January 1, 2001.
Cadence and the Cadence Subsidiaries shall be solely and exclusively liable to
provide such WARN or other plant closing or mass layoff notices as may be
necessary in connection with any loss of employment by any employee of Cadence
or the Cadence Subsidiaries through and including the Closing Date.
(e) SCHEDULE 3.28 sets forth a complete list of all foreign
national employees on whose behalf Cadence or any Cadence Subsidiary has
submitted applications and petitions to the U.S. Department of Labor, U.S.
Immigration and Naturalization Service, or U.S. Department of State for
immigration employment and visa benefits; and Cadence and each Cadence
Subsidiary has provided Aurora with copies of all such applications and
petitions and all government notices regarding adjudication of such applications
and petitions. SCHEDULE 3.28 identifies and describes any pending or threatened
actions against Cadence or the Cadence Subsidiaries for violations under the
Immigration Reform and Control Act of 1986 respecting such employees of Cadence
and such Cadence Subsidiary.
(f) SCHEDULE 3.28 sets forth a complete list of all business
and/or assets of Cadence and the Cadence Subsidiaries involving federal
contracts giving rise to any reporting or filing obligations with OFCCP, and
Cadence and each Cadence Subsidiary has complied in all material respects with
all hiring and employment obligations applicable under OFCCP rules and
regulations.
3.29 RESTRICTIVE COVENANTS. Except as set forth on SCHEDULE 3.29,
neither Cadence nor any Cadence Subsidiary is subject to any covenant that would
restrict Cadence or the Cadence Subsidiaries from engaging in their respective
businesses.
3.30 BANK ACCOUNTS. SCHEDULE 3.30 sets forth the names and locations
of all banks, depositories and other financial institutions in which Cadence or
any Cadence Subsidiary has an account or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto.
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3.31 DIRECTORS, OFFICERS AND CERTAIN EMPLOYEES. SCHEDULE 3.31 sets
forth a complete and correct list of the names and title, for each director and
officer of Cadence and each Cadence Subsidiary, who received compensation during
Cadence's and such Cadence Subsidiary's, as applicable, most recently ended
fiscal year. Aurora has been provided current annual salary and bonus
information for all Cadence employees, officers and directors. Except as
disclosed on SCHEDULE 3.31, Cadence is not aware of any employee who intends to
terminate his or her employment relationship with Cadence or any Cadence
Subsidiary, as a result of the transactions contemplated hereby or otherwise.
4. CONDITIONS TO OBLIGATIONS OF AURORA TO CLOSE. The obligations of Aurora
to consummate the transactions contemplated hereby and to make the deliveries
contemplated at the Closing shall, in addition to the conditions set forth
elsewhere herein, be subject to satisfactory completion on or prior to the
Closing Date of each of the following conditions, any of which may be waived by
Aurora:
4.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Cadence and Acquisition Sub contained in this
Agreement shall have been true and correct on the date hereof and shall be true
and correct on the Closing Date with the same effect as if made on the Closing
Date, and Cadence shall have executed and delivered to Aurora at Closing a
certificate of an officer of Cadence to that effect.
4.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants
and agreements of Cadence and Acquisition Sub contained in this Agreement and
required to be performed by Cadence or Acquisition Sub before the Closing Date
shall have been performed in all respects, and Cadence and Acquisition Sub shall
each have executed and delivered to Aurora at Closing a certificate to that
effect.
4.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the staff of the SEC.
4.4 LOCK UP AGREEMENTS. Each of the following Cadence Shareholders
shall have executed a lock-up agreement, reasonably satisfactory to Aurora that
will prohibit each such person from selling more than 10% of their respective
holdings of Cadence Common Stock, measured immediately prior to the Effective
Time, for a period of thirty-six (36) months. The parties intend that any shares
of Cadence Common Stock received by the shareholders listed below in exchange
for Aurora shares as part of the Merger are not subject to the lock-up
agreement.
(a) Howard Crosby;
(b) Crosby Enterprises, Inc.;
(c) Dotson Exploration Company;
(d) John Ryan;
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(e) Nancy Martin Ryan;
(f) Nancy Martin Ryan as custodian for Karen Ryan;
(g) Nancy Martin Ryan as custodian for Patrick Ryan;
(h) J.P. Ryan Company, Inc.;
(i) Andover Capital Corporation;
(j) Nathan A. Low Roth IRA;
(k) Nathan A. Low;
(l) Nathan A. Low Family Trust;
(m) Shares owned by Nathan A. Low's wife for the benefit of
their minor children;
(n) Thomas Kaplan;
(o) Electrum Resources, LLC;
(p) Electrum Capital, LLC; and
(q) CGT Management, Ltd.
4.5 OPINION OF COUNSEL FOR CADENCE. Aurora shall have received an
opinion of counsel from Jenkins & Gilchrist Parker Chapin LLP, counsel for
Cadence, in form and substance reasonably satisfactory to Aurora and dated as of
the Closing Date. In rendering such opinion, counsel may rely upon certificates
of public officials and upon certificates of officers of Cadence as to factual
matters.
4.6 NO NEW PROCEEDINGS. Cadence shall not be named as a defendant or
respondent in any new Proceeding during the period between the execution of this
Agreement and the Closing alleging damages in excess of $100,000.
4.7 BOARD OF DIRECTORS APPROVALS. The Board of Directors of Cadence
shall have approved:
(a) A change in Cadence's fiscal year-end from September 30 to
December 31, to be effective as of the Effective Time; and
(b) An amendment to Cadence's Bylaws to: (i) eliminate the
reference to cumulative voting in Article II, Section 8; and (ii) modify Article
III, Section 1 to provide for a minimum of three and a maximum of ten directors.
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4.8 CADENCE WARRANTS. Holders of the warrants issued by Cadence in
April 2004 in connection with a debt financing, shall have agreed to waive their
price protection provided for in Section 2 of the Warrants such that the number
of shares subject to the warrants will remain unchanged from that stated on the
face of the warrant, in consideration for a reduction in the exercise price to
$1.25 per share from the initial $4.00 per share exercise price.
4.9 PROXY. Each of the following Cadence shareholders shall have
signed a proxy, reasonably satisfactory to Aurora, which grants to William W.
Deneau and Lorraine King, with power of substitution, the ability to vote all
shares owned by such shareholder on behalf of such shareholder with respect to
any matter on which holders of Cadence Common Stock are entitled to vote, for a
period of thirty-six (36) months after the Closing Date:
(a) Howard Crosby;
(b) Crosby Enterprises, Inc.;
(c) Dotson Exploration Company;
(d) John Ryan;
(e) Nancy Martin Ryan;
(f) Nancy Martin Ryan as custodian for Karen Ryan;
(g) Nancy Martin Ryan as custodian for Patrick Ryan;
(h) J.P. Ryan Company, Inc.;
(i) Andover Capital Corporation;
(j) Nathan A. Low Roth IRA;
(k) Nathan A. Low;
(l) Nathan A. Low Family Trust;
(m) Shares owned by Nathan A. Low's wife for the benefit of
their minor children;
(n) Thomas Kaplan;
(o) Electrum Resources, LLC;
(p) Electrum Capital, LLC; and
(q) CGT Management, Ltd.
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4.10 VOTING AGREEMENT. A Voting Agreement in a form reasonably
acceptable to all the parties hereto, relating to the election of the Cadence
directors, shall have been executed.
5. CONDITIONS TO OBLIGATIONS OF CADENCE AND ACQUISITION SUB TO CLOSE. The
obligations of Cadence and Acquisition Sub to consummate the transactions
contemplated hereby and to make the deliveries contemplated at the Closing
shall, in addition to conditions set forth elsewhere herein, be subject to the
satisfactory completion on or prior to the Closing Date of each of the following
conditions, any of which may be waived by Cadence and Acquisition Sub:
5.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Aurora contained in this Agreement shall have
been true and correct on the date hereof and shall be true and correct in all
respects on the Closing Date with the same effect as if made on the Closing
Date, and Aurora shall have executed and delivered to Cadence and Acquisition
Sub at Closing a certificate of an officer of Aurora to that effect.
5.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants
and agreements of Aurora contained in this Agreement and required to be
performed on or before the Closing Date shall have been performed in all
respects, and Aurora shall have delivered to Cadence and Acquisition Sub at
Closing a certificate of Aurora to that effect.
5.3 OPINION OF COUNSEL FOR AURORA. Cadence shall have received an
opinion of counsel from Fraser Trebilcock Davis & Dunlap, P.C., counsel for
Aurora, in form and substance reasonably satisfactory to Cadence and dated as of
the Closing Date. In rendering such opinion, counsel may rely upon certificates
of public officials and upon certificates of officers of Aurora as to factual
matters.
5.4 SHAREHOLDER APPROVAL OF MERGER. The shareholders of Aurora shall
have taken all corporate action required to approve the Merger, and Aurora shall
have delivered to Cadence and Acquisition Sub at Closing a certificate of
Aurora's corporate secretary to that effect.
5.5 LOCK UP AGREEMENTS. Each of the following individuals (including
any Affiliate of such person that owns Aurora stock) shall have executed a
lock-up agreement, reasonably satisfactory to Cadence, that will prohibit each
such person from selling more than 10% of their respective holdings of Cadence
Common Stock received as a part of the Merger, measured as of the Effective
Time, for a period of thirty-six (36) months:
(a) William W. Deneau,
(b) John V. Miller, and
(c) Thomas W. Tucker.
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5.6 NO NEW PROCEEDINGS. Aurora shall not be named as a defendant or
respondent in any new Proceedings during the period between the execution of
this Agreement and the Closing alleging damages in excess of $100,000.
5.7 CONSENTS SATISFIED. Aurora shall have obtained all required
consents, including, but not limited to, those listed on SCHEDULE 2.4 hereto.
6. CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES TO CLOSE. The obligations
of all Parties to consummate the transactions contemplated hereby and to make
the deliveries contemplated at the Closing shall, in addition to conditions set
forth elsewhere herein, be subject to the satisfactory completion on or prior to
the Closing Date of each of the following conditions, any of which may be waived
by all the Parties hereto:
6.1 NO LEGAL BAR.
(a) There shall not have been instituted or threatened any
legal Proceeding seeking to prohibit the consummation of the transactions
contemplated by this Agreement or to obtain substantial damages with respect
thereto.
(b) None of the Parties hereto shall be prohibited by any law,
order, writ, injunction or decree of any Governmental Entity of competent
jurisdiction from consummating the transactions contemplated by this Agreement,
and no Proceeding shall then be pending that questions the validity of this
Agreement, any of the transactions contemplated hereby or any action that has
been taken by any of the parties or any corporate entity, in connection
herewith, or in connection with any of the transactions contemplated hereby.
6.2 INVESTMENT OF RUBICON IN CADENCE AND AURORA. . Rubicon shall
have completed its contemplated investments in Cadence and Aurora to the
reasonable satisfaction of both Cadence and Aurora.
7. POST CLOSING COVENANT. Cadence covenants and agrees that no later than
90 days after the Closing, Cadence shall have a meeting of its shareholders to
vote on a proposal to change Cadence's corporate name to "Aurora Oil and Gas
Corporation".
8. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
8.1 GENERAL. Each of the Parties will use its commercially
reasonable efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in SECTION 4, SECTION 5 and SECTION 6).
8.2 FULL ACCESS. Each Party shall permit representatives of each
other Party to have full access to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
such Party.
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8.3 NOTICE OF DEVELOPMENTS. Aurora will give prompt written notice
to Cadence of any material adverse development causing a breach of any of the
representations and warranties of Aurora herein. Cadence and Acquisition Sub
will give prompt written notice to Aurora of any material adverse development
causing a breach of any of their respective representations and warranties. No
disclosure by any Party pursuant to this section, however, shall be deemed to
amend or supplement any Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
8.4 PREPARATION OF REGISTRATION STATEMENT AND PROXY STATEMENT.
Cadence shall prepare and file with the SEC, as soon as reasonably practicable
after the date hereof, the Registration Statement. Cadence and Aurora shall use
their best efforts to have the Registration Statement declared effective by the
SEC as promptly as practicable after such filing and Aurora will cooperate with
Cadence in the preparation of such Registration Statement. Cadence shall also
take any action (other than qualifying as a foreign corporation or taking any
action which would subject it to taxation or service of process in any
jurisdiction where Cadence is not now so qualified or subject) required to be
taken under applicable state blue sky or provincial or federal securities laws
in connection with the issuance of Cadence Common Stock in connection with the
Merger. If at any time prior to the Effective Time any event shall occur that
should be set forth in an amendment of or a supplement to the Registration
Statement, Cadence shall prepare and file with the SEC such amendment or
supplement as soon thereafter as is reasonably practicable. Cadence, Aurora and
Acquisition Sub shall cooperate with each other in the preparation of the
Registration Statement and any amendment or supplement thereto, and each shall
notify the other of the receipt of any comments of the SEC with respect to the
Registration Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information, and shall provide to the other
promptly copies of all correspondence between Cadence or Aurora, as the case may
be, or any of their respective Representatives and the SEC with respect to the
Registration Statement. Cadence shall give Aurora and its counsel the
opportunity to review the Registration Statement and all responses to requests
for additional information by and replies to comments of the SEC before their
being filed with, or sent to, the SEC. Each of Aurora, Cadence and Acquisition
Sub agrees to use its best efforts, after consultation with the other Parties,
to respond promptly to all such comments of and requests by the SEC and to cause
the Registration Statement to be declared effective by the SEC at the earliest
practicable time and to be kept effective as long as is necessary to consummate
the Merger.
8.5 REGULATORY AND OTHER APPROVALS. Subject to the terms and
conditions of this Agreement, each Party will proceed diligently and in good
faith to, as promptly as practicable, (a) obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental Entities
or any other public or private third parties required of a Party or any of their
subsidiaries to consummate the Merger and the other matters contemplated hereby,
and (b) provide such other information and communications to such Governmental
Entity or other public or private third parties as the other party or such
Governmental Entity or other public or private third parties may reasonably
request in connection therewith.
8.6 OBSERVER RIGHTS.
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(a) Cadence shall invite William W. Deneau or his designee, as
a representative of Aurora, to attend all meetings of the Cadence Board of
Directors, in person or by conference telephone or other means of remote
communication, in a nonvoting observer capacity. Cadence shall provide Mr.
Deneau copies of all notices, minutes, consents and other materials that it
provides to the Cadence directors. Notice of the meetings shall be provided to
Mr. Deneau at the same time and in the same manner as notice is provided to
Cadence's directors. Mr. Deneau or his designee may be excluded from any meeting
or portion of a meeting of the Cadence Board of Directors or Cadence may
withhold information from Mr. Deneau provided to the Cadence directors, if
attendance at the meeting or access to the information could adversely affect
the attorney-client privilege between Cadence and its counsel, or involve a
conflict of interest between Cadence and Aurora.
(b) Aurora shall invite Howard Crosby or his designee, as a
representative of Cadence, to attend all meetings of the Aurora Board of
Directors, in person or by conference telephone or other means of remote
communication, in a nonvoting observer capacity. Aurora shall provide Mr. Crosby
copies of all notices, minutes, consents and other materials that it provides to
the Aurora directors. Notice of the meetings shall be provided to Mr. Crosby at
the same time and in the same manner as notice is provided to Aurora's
directors. Mr. Crosby or his designee may be excluded from any meeting or
portion of a meeting of the Aurora Board of Directors or Aurora may withhold
information from Mr. Crosby provided to the Aurora directors, if attendance at
the meeting or access to the information could adversely affect the
attorney-client privilege between Aurora and its counsel, or involve a conflict
of interest between Aurora and Cadence.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY AURORA. Aurora shall indemnify and hold
harmless Cadence and Acquisition Sub, their respective officers, directors,
employees, attorneys and agents and controlling persons from any liability,
damage, deficiency, loss, penalty, cost or expense, including reasonable
attorneys fees and costs of investigating and defending against lawsuits,
complaints, actions or other pending or threatened litigation (being hereafter
referred to in this SECTION 9 as "Costs"), arising from or attributable to any
breach of any representation, warranty or agreement made by Aurora herein or in
any certificate delivered by Aurora in connection with the transaction
contemplated herein, subject to the Indemnification Cap described in SECTION
9.4(F).
9.2 INDEMNIFICATION BY CADENCE. Cadence shall indemnify and hold
harmless Aurora and its officers, directors, employees, attorneys, agents and
controlling persons from Costs arising from or attributable to any breach of any
representation, warranty or agreement made by Cadence or Acquisition Sub herein
or in any certificate delivered by Cadence or Acquisition Sub in connection with
the transaction contemplated herein, subject to the Indemnification Cap
described in SECTION 9.4(F).
9.3 LIMITATIONS PERIOD. The indemnification rights provided in
SECTIONS 9.1 and 9.2 apply only with respect to claims asserted by written
notice provided to the Party from whom indemnification is sought, no later than
six (6) months after the Effective Date (the "Indemnification Period"). This
limitations period is not intended to restrict the right of a director, officer,
employee, attorney or agent of a Party to seek indemnification from that Party,
consistent with the Party's bylaws or corporate policies.
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9.4 PROCEDURES FOR RESOLUTION AND PAYMENT OF CLAIMS FOR
INDEMNIFICATION.
(a) If a Person entitled to be indemnified under this SECTION
9 (the "Indemnitee") shall incur any Costs or determine that it is likely to
incur any Costs, including without limitation claims by third parties, and
believes that it is entitled to be indemnified against such Costs by a Party
hereunder (the "Indemnitor"), such Indemnitee shall deliver to the Indemnitor a
certificate (an "Indemnity Certificate") signed by the Indemnitee which
Indemnitee Certificate shall:
(i) state that the Indemnitee has paid or properly
accrued Costs, or anticipates that it will incur liability for
Costs for which such Indemnitee is entitled to indemnification
pursuant to this Agreement; and
(ii) specify in reasonable detail each individual item
of Cost included in the amount so stated, the date such item
was paid or properly accrued, the basis for any anticipated
liability and the nature of the misrepresentation, breach of
warranty or breach of covenant to which each such item is
related and the computation of the amount to which such
Indemnitee claims to be entitled hereunder.
(b) In case the Indemnitor shall object to the indemnification
of an Indemnitee in respect of any claim or claims specified in any Indemnity
Certificate, the Indemnitor shall within 30 days after receipt by the Indemnitor
of such Indemnity Certificate deliver to the Indemnitee a written notice to such
effect and the Indemnitor and the Indemnitee shall, within the 30-day period
beginning on the date of receipt by the Indemnitee of such written objection,
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims to which the Indemnitor shall have so objected.
If the Indemnitee and the Indemnitor shall succeed in reaching agreement on
their respective rights with respect to any of such claims, the Indemnitee and
the Indemnitor shall promptly prepare and sign a writing setting forth such
agreement.
(c) Claims for Costs specified in any Indemnity Certificate to
which an Indemnitor shall not object in writing, claims for Costs covered by a
written agreement of the nature described in SECTION 9.3(B) and claims for Costs
the validity and amount of which shall have been the subject of a final judicial
determination are hereinafter referred to, collectively, as "Agreed Claims".
58
(d) Promptly after the assertion by any third party of any
claim against any Indemnitee that, in the judgment of such Indemnitee, may
result in the incurrence by such Indemnitee of Costs for which such Indemnitee
would be entitled to indemnification pursuant to this Agreement, such Indemnitee
shall deliver to the Indemnitor a written notice describing in reasonable detail
such claim and such Indemnitor may, at its option, assume the defense of the
Indemnitee against such claim (including the employment of counsel, who shall be
satisfactory to such Indemnitee, and the payment of expenses), which assumption
shall not be deemed an admission of liability for indemnification. Any
Indemnitee shall have the right to employ separate counsel in any such action or
claim and to participate in the defense thereto, but the fees and expenses of
such counsel shall not be at the expense of the Indemnitor unless (i) the
Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such claim as provided in the
preceding sentence, to assume the defense of such claim, (ii) the employment of
such counsel has been specifically authorized by the Indemnitor, or (iii) the
named parties to any such action (including any impleaded parties) include both
such Indemnitee and the Indemnitor and such Indemnitee shall have been advised
in writing by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
Indemnitor. No Indemnitor shall be liable to indemnify any Indemnitee for any
settlement of any such action or claim effected without the consent of the
Indemnitor but if settled with the written consent of the Indemnitor, or if
there be a final judgment for the plaintiff in any such action, the Indemnitor
shall jointly and severally indemnify and hold harmless each Indemnitee from and
against any loss or liability by reason of such settlement or judgment. If an
Indemnitor assumes the defense of an Indemnitee against a claim asserted
hereunder, the Indemnitee shall give the Indemnitor access to the company's
books and records as necessary to conduct such defense and cooperate in such
defense.
(e) If a Party is required to provide an indemnification to
the other Party (Aurora to Cadence and/or Acquisition Sub or Cadence and/or
Acquisition Sub to Aurora), the indemnification shall be paid not with cash, but
solely by changing the exchange ratio in the Merger as follows. If the Costs
arising from or attributable to a breach of any representation, warranty or
agreement made by the Indemnitor are less than $3 million in the aggregate, no
adjustment to the exchange ratio shall be made. If the Costs arising from or
attributable to a breach of any representation, warranty, or agreement made by
the Indemnitor is equal to or more than $3 million in the aggregate, then for
each $3 million in aggregate Costs, the exchange ratio shall be modified by 0.15
share. By way of illustration, if Aurora is entitled to indemnification from
Cadence in the amount of $3 million, each Aurora shareholder shall receive the
equivalent of 2.15 shares of Cadence Common Stock for each share of Aurora
Common Stock; and if Cadence is entitled to indemnification from Aurora in the
amount of $3 million, each Aurora shareholder will be required to surrender a
..15 share of Cadence Common Stock for each share of Aurora Common Stock
exchanged, resulting in an effective conversion ratio of 1.85 shares of Cadence
Common Stock for each share of Aurora Common Stock. If Aurora shareholders are
required to surrender any shares, these shares to be surrendered will come from
the shares held by the Exchange Agent in the Exchange Fund for this purpose, and
the Exchange Agent shall surrender the required number of shares back to
Cadence.
(f) The parties agree that the maximum number of shares
subject to adjustment in payment of the parties' respective indemnification
obligations shall be 10% (the "Indemnification Cap"). Accordingly, in no event
shall Aurora's shareholders be required to surrender more than a 0.2 share of
Cadence Common Stock for each share of Aurora stock tendered for exchange
pursuant to this Section 9.4. Similarly, in no event shall Cadence be required
to issue more than 0.2 shares of Cadence Common Stock for each share of Aurora
stock tendered for exchange pursuant to this Section 9.4.
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10. CONFIDENTIAL INFORMATION. Each Party agrees that it will use the
Confidential Information that it receives solely for the purpose of evaluating
and implementing the transactions contemplated hereby and for no other purpose.
Each Party shall keep the Confidential Information strictly confidential, and
shall not disclose any of the Confidential Information to any person or entity
or use any of the Confidential Information for any other purpose; provided that
each Party may disclose the Confidential Information to its accountants and
attorneys (each a "Representative" and collectively the "Representatives") who
need to know such Confidential Information solely for purposes of assisting such
Party in evaluating the transactions contemplated hereby. As a condition
precedent to disclosing any Confidential Information to any such Representative,
the Party will inform such Representative of the confidential nature of the
Confidential Information and such Representative will agree to be bound to the
terms and provisions hereof, as if such Representative was a party hereto.
11. TERMINATION.
11.1 This Agreement shall terminate at any time prior to the Closing
as follows:
(a) By the mutual written consent of the Parties.
(b) By Cadence or Acquisition Sub, upon written notice to
Aurora that any of the conditions in SECTIONS 5 and 6 have not been fulfilled or
waived on or prior to August 1, 2005, or Aurora shall have failed to comply with
any material term or condition of this Agreement.
(c) By Aurora, upon written notice to Cadence that any of the
conditions in SECTIONS 4 and 6 have not been fulfilled or waived on or prior to
August 1, 2005, or Cadence or Acquisition Sub shall have failed to comply with
any material term or condition of this Agreement.
12. MISCELLANEOUS PROVISIONS.
12.1 CONSTRUCTION. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
12.2 NOTICES. All notices, consents, directions, approvals,
instructions, requests and other communications required or permitted by the
terms of this Agreement shall be in writing, and shall be sent to the applicable
Party at the following addresses or facsimile numbers, as applicable:
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If to Cadence:
Cadence Resources Corporation
6 East Rose Street
Walla Walla, Washington 99362
Attention: Howard Crosby
Fax: (509) 516-3491
With a copy to:
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Henry I. Rothman
Fax: 212-704-6288
If to Acquisition Sub:
Aurora Acquisition Corp.
c/o Cadence Resources Corporation
6 East Rose Street
Walla Walla, Washington 99362
Attention: Howard Crosby
Fax: (509) 516-3491
With a copy to:
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Henry I. Rothman
Fax: 212-704-6288
If to Aurora:
Aurora Energy, Ltd.
3760 North US 31 South
P. O. Box 961
Traverse City, Michigan 49685-0961
Attention: William W. Deneau
Fax: 231-933-0757
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With a copy to:
Fraser Trebilcock Davis & Dunlap, P.C.
124 West Allegan, Suite 1000
Lansing, Michigan 48933
Attention: Iris K. Linder
Fax: 517-482-0887
or to such other address or facsimile number as any Party may have furnished to
each other Party in writing in accordance herewith. All notices, consents,
directions, approvals, instructions, requests and other communications hereunder
shall be sent and effective as follows: (i) on the business day delivered, when
delivered personally; (ii) five (5) business days after mailing if mailed by
registered or certified mail, return receipt requested (postage prepaid); (iii)
on the next business day if sent by a nationally recognized overnight express
courier service with all costs prepaid and provided evidence of delivery is
available; or (iv) on the business day of a facsimile transmission if received
on a business day before 5:00 p.m., local time, or on the next business day if
received after that time, in each case provided that an automatic machine
confirmation indicating the time of receipt is generated.
12.3 ASSIGNMENT. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof nor any of the
documents executed in connection herewith may be assigned by any Party without
the consent of the other Parties. Nothing contained herein, express or implied,
is intended to confer upon any person or entity other than the Parties hereto
and their successors in interest and permitted assignees any rights or remedies
under or by reason of this Agreement unless so stated herein to the contrary.
12.4 AMENDMENTS AND WAIVERS. No breach of any covenant, agreement,
warranty or representation shall be deemed waived unless expressly waived in
writing by the Party who is entitled to assert such breach. No waiver of any
right hereunder shall operate as a waiver of any other right or of the same or a
similar right on another occasion. This Agreement and the Exhibits and Schedules
hereto may be modified only by a written instrument duly executed by the Parties
hereto.
12.5 ATTORNEYS' FEES. In the event that any action or proceeding,
including arbitration, is commenced by any Party hereto for the purpose of
enforcing any provision of this Agreement, the Parties to such action,
proceeding or arbitration may receive as part of any award, judgment, decision
or other resolution of such action, proceeding or arbitration their costs and
reasonable attorneys' fees as determined by the Person or body making such
award, judgment, decision or resolution. Should any claim hereunder be settled
short of the commencement of any such action or proceeding, including
arbitration, the Parties in such settlement shall be entitled to include as part
of the damages alleged to have been incurred reasonable costs of attorneys or
other professionals in investigation or counseling on such claim.
12.6 BINDING NATURE OF AGREEMENT. This Agreement includes each of
the Schedules and Exhibits that are referred to herein or attached hereto, all
of which are incorporated by reference herein. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective executors, heirs, legal representatives, successors
and assigns.
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12.7 EXPENSES. The costs and expenses and the professional fees and
disbursements incurred by Aurora in connection herewith shall be borne by
Aurora. The costs and expenses of Cadence and Acquisition Sub shall be borne by
Cadence and Acquisition Sub, respectively.
12.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior representations, agreements and understandings relating to
the subject matter hereof.
12.9 SEVERABILITY. Any provision of this Agreement that is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
12.10 COUNTERPARTS; SIGNATURES; SECTION HEADINGS. This Agreement may
be executed by the parties in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. A facsimile signature shall
bind the signatory in the same way that an original signature would bind the
signatory. The headings of each section, subsection or other subdivision of this
Agreement are for reference only and shall not limit or control the meaning
thereof.
12.11 PUBLIC ANNOUNCEMENTS. The Parties will consult with each other
before the issuance of any press release or otherwise making any public
statements with respect to this Agreement and no press release or public
statement shall be made by any Party hereto prior to an agreement among the
Parties as to the content of any such release, except as may be required by law.
12.12 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person or entity other than the Parties and
their respective successors and permitted assigns.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties
hereto as of the date first written above.
CADENCE RESOURCES CORPORATION
By: __________________________________________
Name:_________________________________________
Title:________________________________________
AURORA ACQUISITION CORP.
By: __________________________________________
Name:_________________________________________
Title:________________________________________
AURORA ENERGY, LTD.
By: __________________________________________
Name:_________________________________________
Title:________________________________________