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EXHIBIT 99.2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
FORCENERGY INC,
EDI ACQUISITION CORPORATION,
EDISTO RESOURCES CORPORATION
AND
CONVEST ENERGY CORPORATION
JULY 15, 1997
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TABLE OF CONTENTS
PAGE
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Section 1. Definitions....................................................... A-4
Section 2. The Mergers and the Dissolution................................... A-8
(a) Merger 1.................................................... A-8
(b) Effective Time of Merger 1.................................. A-8
(c) Dissolution................................................. A-8
(d) Effective Time of Dissolution............................... A-8
(e) Merger 2.................................................... A-8
(f) Effective Time of Merger 2.................................. A-8
(g) Consummation................................................ A-9
Section 3. The Surviving Corporations........................................ A-9
(a) Certificate of Incorporation; Articles of Incorporation..... A-9
(b) By-Laws..................................................... A-9
(c) Directors................................................... A-9
(d) Officers.................................................... A-9
Section 4. Conversion of shares; closing..................................... A-9
(a) Conversion of Sellers' Capital Stock........................ A-9
(b) Other Conversions........................................... A-10
(c) Sellers Options............................................. A-10
(d) Exchanges................................................... A-11
(e) No Fractional Securities.................................... A-13
(f) Closing..................................................... A-13
(g) Closing of Transfer Books................................... A-13
(h) Appraisal Rights............................................ A-13
Section 5. Representations and Warranties of the Sellers..................... A-14
(a) Organization, Qualification, and Corporate Power............ A-14
(b) Capitalization.............................................. A-14
(c) Authorization of Transaction................................ A-14
(d) Non-Contravention........................................... A-15
(e) Approvals................................................... A-15
(f) Reports and Financial Statements............................ A-16
(g) Absence of Undisclosed Liabilities.......................... A-16
(h) Absence of Certain Changes or Events........................ A-16
(i) Litigation.................................................. A-16
(j) Registration Statement and Information Statement............ A-16
(k) No Violation of Law......................................... A-17
(l) Compliance with Agreements.................................. A-17
(m) Taxes....................................................... A-17
(n) Employee Benefit Plans; ERISA............................... A-18
(o) Labor Controversies......................................... A-19
(p) Environmental Matters....................................... A-20
(q) Non-competition Agreements.................................. A-21
(r) Reserve Report and Exploration Project Information.......... A-21
(s) Title....................................................... A-21
(t) Insurance................................................... A-23
(u) Allowable Production Quotas................................. A-23
(v) Gas Payments; Balancing..................................... A-23
(w) No Prepayments Made or Refunds Owed......................... A-24
(x) Drilling Obligations........................................ A-24
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PAGE
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(y) Development Operations...................................... A-24
(z) Regulatory Authority........................................ A-24
(aa) Full Disclosure............................................. A-24
(bb) Certain Agreements.......................................... A-25
(cc) Shareholders Agreement...................................... A-25
(dd) Brokers and Finders......................................... A-25
(ee) Opinion of Financial Advisor................................ A-25
(ff) Edisto Cash Balance......................................... A-25
(gg) Affiliate Transactions...................................... A-25
(hh) WARN........................................................ A-25
(ii) Cumulative Representations.................................. A-25
Section 6. Representations and Warranties of Purchasers...................... A-26
(a) Organization, Qualification, and Corporate Power............ A-26
(b) Capitalization.............................................. A-26
(c) Authorization of Transaction................................ A-26
(d) Non-Contravention........................................... A-26
(e) Approvals................................................... A-26
(f) Reports and Financial Statements............................ A-27
(g) Absence of Undisclosed Liabilities.......................... A-27
(h) Absence of Certain Changes or Events........................ A-27
(i) Litigation.................................................. A-27
(j) Registration Statement and Proxy Statements................. A-27
(k) No Violation of Law......................................... A-28
(l) Compliance with Agreements.................................. A-28
(m) Taxes....................................................... A-28
(n) Employee Benefit Plans; ERISA............................... A-29
(o) Labor Controversies......................................... A-30
(p) Environmental Matters....................................... A-30
(q) Reserve Report and Exploration Project Information.......... A-30
(r) Title....................................................... A-31
(s) Insurance................................................... A-32
(t) Allowable Production Quotas................................. A-33
(u) Gas Payments; Balancing..................................... A-33
(v) No Prepayments Made or Refunds Owed......................... A-33
(w) Drilling Obligations........................................ A-33
(x) Development Operations...................................... A-34
(y) Regulatory Authority........................................ A-34
(z) Full Disclosure............................................. A-34
(aa) Affiliate Transactions...................................... A-34
(bb) Cumulative Representations.................................. A-34
Section 7. Conduct of Business Pending the Mergers........................... A-34
(a) Conduct of Business by the Sellers Pending the Mergers...... A-34
(b) Control of the Sellers' Operations.......................... A-35
(c) Acquisition Transactions.................................... A-35
(d) Subsidiaries................................................ A-36
Section 8. Additional Agreements............................................. A-36
(a) Access to Information....................................... A-36
(b) Registration Statement and Proxy Statements................. A-37
(c) Stockholders' Approvals..................................... A-37
(d) Employee Matters............................................ A-37
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PAGE
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(e) Quotation................................................... A-38
(f) Agreement to Cooperate...................................... A-38
(g) Public Statements........................................... A-39
(h) Notification of Certain Matters............................. A-38
(i) Corrections to the Joint Proxy Statements/Prospectus and
Registration Statement...................................... A-38
(j) Indemnification; Directors' and Officers' Insurance......... A-39
(k) Shareholders Agreement; Compliance with the Securities
Act......................................................... A-40
(l) Convest Shares.............................................. A-40
(m) Credit Agreement............................................ A-40
Section 9. Conditions........................................................ A-41
(a) Conditions to Each Party's Obligation to Effect the
Mergers..................................................... A-41
(b) Conditions to Obligation of the Sellers to Effect the
Mergers..................................................... A-41
(c) Conditions to Obligations of Purchasers to Effect the
Mergers..................................................... A-42
Section 10. Termination, Amendment and Waiver................................. A-43
(a) Termination................................................. A-43
(b) Expenses and Fees........................................... A-44
(c) Effect of Termination....................................... A-45
(d) Amendment................................................... A-45
(e) Waiver...................................................... A-45
Section 11. General Provisions................................................ A-45
(a) Non-Survival of Representations and Warranties.............. A-45
(b) Notices..................................................... A-45
(c) Interpretation.............................................. A-46
(d) Miscellaneous............................................... A-46
(e) Counterparts................................................ A-46
(f) Parties In Interest......................................... A-46
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger, dated as of July
15, 1997 (the "Agreement"), is entered into by and among Forcenergy Inc, a
Delaware corporation ("Parent"), EDI Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent ("EDI-Sub"), Edisto Resources
Corporation, a Delaware corporation ("Edisto"), and Convest Energy Corporation,
a Texas corporation ("Convest"). Parent and EDI-Sub are each sometimes referred
to herein as a "Purchaser" and collectively as the "Purchasers." Edisto and
Convest and their respective Subsidiaries are each sometimes referred to herein
as a "Seller" and collectively as the "Sellers." The Purchasers and the Sellers
are sometimes collectively referred to herein as the "Parties."
WHEREAS, previously the Boards of Directors of Parent, EDI-Sub, Edisto and
Convest have approved (i) the merger of EDI-Sub with and into Edisto ("Merger
1"), (ii) the merger of the surviving corporation of Merger 1 with and into
Parent ("Parent/Edisto Merger") and (iii) the merger of Convest with and into
Parent ("Merger 2") on the terms set forth in the Agreement and Plan of Merger,
dated as of June 19, 1997 (the "Merger Agreement");
WHEREAS, the Parties no longer wish to carry out the Parent/Edisto Merger
and, instead, Parent, as sole stockholder of Edisto immediately after Merger 1
will dissolve Edisto pursuant to Section 275(c) of the DGCL (the "Dissolution,"
and, collectively with Merger 1 and Merger 2, the "Mergers") with all assets of
Edisto being distributed upon the Dissolution to Parent;
WHEREAS, to reflect the above-mentioned changes, the Parties wish to amend
and restate the Merger Agreement in full;
WHEREAS, the Parties intend Merger 2 to qualify as a tax-free
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder;
WHEREAS, in connection with the Mergers and as an inducement to Parent to
enter into the Merger Agreement, (i) Parent, Edisto and a principal shareholder
of Edisto have executed a voting agreement in favor of Parent with respect to,
among other things, the voting of shares of capital stock of Edisto held or to
be held by such shareholder in favor of Merger 1, and (ii) Parent, Edisto and
Convest have executed a voting agreement in favor of Parent with respect to,
among other things, the voting of shares of capital stock of Convest held or to
be held by Edisto in favor of Merger 2.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the Parties hereto,
intending to be legally bound, hereby amend and restate the Merger Agreement as
follows:
SECTION 1. DEFINITIONS.
"Affiliate" of, or a person "affiliated" with, a specified person means a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified.
"Affiliate Agreement" has the meaning set forth in Section 8(k).
"Agreement" means this Agreement as executed as of the date first above
written or, if amended as provided herein, as amended.
"Claim" has the meaning set forth in Section 8(j).
"Closing" has the meaning set forth in Section 4(f).
"Closing Date" has the meaning set forth in Section 4(f).
"Code" means the Internal Revenue Code of 1986, as amended.
"Convest" has the meaning set forth in the first paragraph of this
Agreement.
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"Convest Certificates" has the meaning set forth in Section 4(d)(i).
"Convest Common Stock" means the common stock, par value $0.01 per share,
of Convest.
"Convest Option" has the meaning set forth in Section 4(c)(ii).
"Convest Stockholder" means any Person who or which holds any of the
Convest Common Stock.
"Default" has the meaning set forth in Section 10(a)(i)(F).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"Dissolution" has the meaning set forth in the second recital above.
"Dissolution Certificate" means the Certificate of Dissolution for the
Dissolution, in substantially the form as shall be agreed upon by the Parties.
"Dissolution Effective Time" has the meaning set forth in Section 2(d).
"Dissolution Filing" has the meaning set forth in Section 2(d).
"Dollar" or "$" shall mean one dollar of the currency of the United States
of America.
"Edisto" has the meaning set forth in the first paragraph of this
Agreement.
"Edisto Certificates" has the meaning set forth in Section 4(d)(i).
"Edisto Common Stock" means the common stock, par value $0.01 per share, of
Edisto.
"Edisto E&P" has the meaning set forth in Section 7(d).
"Edisto Option" has the meaning set forth in Section 4(c)(i).
"Edisto Stockholder" means any Person who or which holds any of the Edisto
Common Stock.
"EDI-Sub" has the meaning set forth in the first paragraph of this
Agreement.
"EDI-Sub Common Stock" means the Common Stock, par value $0.01 per share,
of EDI-Sub.
"Environmental Laws" has the meaning set forth in Section 5(p)(ii).
"ERISA" means the Employer Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means American Stock Transfer and Trust Company.
"Exchange Fund" has the meaning set forth in Section 4(d)(iii).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hazardous Substance" has the meaning set forth in Section 5(p)(iii).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Including" means "including, but not limited to."
"Indemnified Parties" has the meaning set forth in Section 8(j).
"IRS" means the Internal Revenue Service.
"Joint Proxy Statements/Prospectus" has the meaning set forth in Section
5(j).
"Knowledge" means the actual knowledge of the president or any vice
president of the affected entity.
"Material Adverse Change" means an adverse change in the business,
operations, assets, liabilities, properties, condition (financial or other) or
results of operations which (i), in the case of Sellers and their respective
Subsidiaries, taken as a whole, may result in an aggregate change or liability
of $2.0 million or
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greater or (ii), in the case of Parent and its Subsidiaries, taken as a whole,
may result in an aggregate change or liability of $15.0 million or greater.
"Material Adverse Effect" means an adverse effect on the business,
operations, assets, liabilities, properties, condition (financial or other), or
results of operations which (i), in the case of Sellers and their respective
Subsidiaries, taken as a whole, may result in an aggregate change or liability
of $2.0 million or greater or (ii), in the case of Parent and its Subsidiaries,
taken as a whole, may result in an aggregate change or liability of $15.0
million or greater.
"Merger Agreement" has the meaning set forth in the second recital above.
"Merger Certificates" means, collectively, the Merger 1 Certificate, Merger
2 Certificate and Merger 2 Articles.
"Merger 1 Certificate" means the Certificate of Merger for Merger 1, in
substantially the form as shall be agreed upon by the Parties.
"Merger 2 Certificate" means the Certificate of Merger for Merger 2, in
substantially the form as shall be agreed upon by the Parties.
"Merger 2 Articles" means the Articles of Merger for Merger 2, together
with the Plan of Merger attached as Annex A thereto, in substantially the form
attached hereto as Exhibit A.
"Merger Filings" has the meaning set forth in Section 2(f).
"Merger 1" has the meaning set forth in the first recital above.
"Merger 1 Cash Consideration" has the meaning set forth in Section
4(a)(i)(A).
"Merger 1 Consideration" has the meaning set forth in Section 4(a)(i)(A).
"Merger 1 Effective Time" has the meaning set forth in Section 2(b).
"Merger 1 Exchange Ratio" has the meaning set forth in Section 4(a)(i)(A).
"Merger 1 Filing" has the meaning set forth in Section 2(b).
"Merger 2" has the meaning set forth in the first recital above.
"Merger 2 Consideration" has the meaning set forth in Section 4(a)(ii)(A).
"Merger 2 Effective Time" has the meaning set forth in Section 2(f).
"Merger 2 Exchange Ratio" has the meaning set forth in Section 4(a)(ii)(A).
"Merger 2 Delaware Filing" has the meaning set forth in Section 2(f).
"Merger 2 Texas Filing" has the meaning set forth in Section 2(f).
"Mergers" has the meaning set forth in the second recital above.
"New Shares" has the meaning set forth in Section 8(l).
"NYSE" means The New York Stock Exchange, Inc.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent" has the meaning set forth in Section 4(b)(iii).
"Parent Common Stock" means the common stock, par value $0.01 per share, of
Parent.
"Parent/Edisto Merger" has the meaning set forth in the first recital
above.
"Parent Financial Statements" has the meaning set forth in Section 6(f).
"Parent Representatives" has the meaning set forth in Section 8(a)(i).
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"Parent SEC Reports" has the meaning set forth in Section 6(f).
"Parties" has the meaning set forth in the first paragraph of this
Agreement.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc.
"Proxy Statement" has the meaning set forth in Section 5(j).
"Purchaser" and "Purchasers" have the meanings set forth in the first
paragraph of this Agreement.
"Purchasers Plans" has the meaning set forth in Section 6(n).
"Purchasers Assets" has the meaning set forth in Section 6(r)(v).
"Purchasers Disclosure Schedule" means the disclosure schedule delivered by
the Purchasers concurrently with this Agreement, which shall specifically modify
the lettered and numbered paragraphs hereof to which it expressly refers.
"Purchasers Evaluated Properties" has the meaning set forth in Section
6(q).
"Purchasers Permits" has the meaning set forth in Section 6(k).
"Purchasers Petroleum Engineers" has the meaning set forth in Section
6(q)(i).
"Purchasers Project Information" has the meaning set forth in Section
6(q)(iii).
"Purchasers Projects" has the meaning set forth in Section 6(q)(iii).
"Purchasers Required Statutory Approvals" has the meaning set forth in
Section 6(e).
"Purchasers Reserve Reports" has the meaning set forth in Section 6(q)(i).
"▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇" means Rauscher, Pierce, Refsnes, Inc.
"Registration Statement" has the meaning set forth in Section 5(j).
"Requisite Stockholder Approvals" has the meaning set forth in Section
5(c)(ii).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" and "Sellers" have the meanings set forth in the first paragraph
of this Agreement.
"Seller Representatives" has the meaning set forth in Section 8(a)(i).
"Sellers Assets" has the meaning set forth in Section 5(s)(v).
"Sellers Disclosure Schedule" means the disclosure schedule delivered by
the Sellers concurrently with this Agreement, which shall specifically modify
the numbered paragraphs hereof to which it expressly refers.
"Sellers Evaluated Properties" has the meaning set forth in Section
5(r)(i).
"Sellers Financial Statements" has the meaning set forth in Section 5(f).
"Sellers Permits" has the meaning set forth in Section 5(k).
"Sellers Plans" has the meaning set forth in Section 5(n)(i).
"Sellers Project Information" has the meaning set forth in Section
5(r)(iii).
"Sellers Projects" has the meaning set forth in Section 5(r)(iii).
"Sellers Required Statutory Approvals" has the meaning set forth in Section
5(e).
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"Sellers Reserve Reports" has the meaning set forth in Section 5(r)(i).
"Sellers SEC Reports" has the meaning set forth in Section 5(f).
"Shareholders Agreement" has the meaning set forth in Section 5(cc).
"Shares" has the meaning set forth in Section 5(b)(i).
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation 1" has the meaning set forth in Section 2(a).
"Surviving Corporation 2" has the meaning set forth in Section 2(e).
"TBCA" means the Business Corporation Act of the State of Texas, as
amended.
"Tax Return" has the meaning set forth in Section 5(m)(iii).
"Taxes" has the meaning set forth in Section 5(m)(ii).
"WARN" means the Federal Worker Adjustment and Retraining Notification Act
of 1988.
"Weighted Average Trading Price" has the meaning set forth in Section
4(a)(iii).
SECTION 2. THE MERGERS AND THE DISSOLUTION.
(a) Merger 1. Upon the terms and subject to the conditions of this
Agreement, at the Merger 1 Effective Time (as defined in Section 2(b)) in
accordance with the DGCL, EDI-Sub shall be merged with and into Edisto, the
separate existence of EDI-Sub shall thereupon cease, and Edisto shall be the
surviving corporation in Merger 1, hereinafter sometimes referred to as
"Surviving Corporation 1."
(b) Effective Time of Merger 1. Merger 1 shall become effective at such
time (the "Merger 1 Effective Time") as the Merger 1 Certificate is filed with
the Secretary of State of the State of Delaware in accordance with the DGCL (the
"Merger 1 Filing"). The Merger 1 Filing shall be made simultaneously with or as
soon as practicable after the Closing of the transactions contemplated by this
Agreement in accordance with Section 4(f).
(c) Dissolution. Upon the terms and subject to the conditions of this
Agreement, at the Dissolution Effective Time (as defined in Section 2(d)) in
accordance with the DGCL, Surviving Corporation 1 shall be dissolved and the
separate existence of Surviving Corporation 1 shall thereupon cease.
(d) Effective Time of the Dissolution. The Dissolution shall become
effective at such time (the "Dissolution Effective Time") as the Dissolution
Certificate is filed with the Secretary of State of the State of Delaware in
accordance with the DGCL (the "Dissolution Filing"). The Dissolution Filing
shall be made as soon as practicable following the Merger 1 Effective Time.
(e) Merger 2. Upon the terms and subject to the conditions of this
Agreement and the Merger 2 Articles, at the Merger 2 Effective Time (as defined
in Section 2(f)) in accordance with the DGCL and the TBCA, Convest shall be
merged with and into Parent, the separate existence of Convest shall thereupon
cease, and Parent shall be the surviving corporation in Merger 2 and is
hereinafter sometimes referred to as "Surviving Corporation 2."
(f) Effective Time of Merger 2. Merger 2 shall become effective at such
time (the "Merger 2 Effective Time") as is the later to occur of (i) the time
that the Merger 2 Certificate is filed with the Secretary of State of the State
of Delaware in accordance with the DGCL (the "Merger 2 Delaware Filing"), and
(ii) the time that the Merger 2 Articles are filed with the Secretary of State
of the State of Texas and a certificate of merger is issued thereby in
accordance with the TBCA (the "Merger 2 Texas Filing" and, together with the
Merger 2 Delaware Filing, the "Merger 2 Filings"). The Merger 2 Filings shall be
made as soon as practicable following
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the Dissolution Effective Time. The Merger 1 Filing, the Dissolution Filing and
the Merger 2 Filings are collectively referred to herein as the "Merger
Filings."
(g) Consummation. The Parties acknowledge that it is their mutual desire
and intent to consummate the Mergers as soon as practicable after the date
hereof. Accordingly, the parties shall, subject to the provisions hereof and to
the fiduciary duties of their respective boards of directors, use all reasonable
efforts to consummate, as soon as practicable, the transactions contemplated by
this Agreement in accordance with Section 4(d).
SECTION 3. THE SURVIVING CORPORATIONS.
(a) Certificate of Incorporation; Articles of Incorporation. The
Certificate of Incorporation of EDI-Sub as in effect immediately prior to the
Merger 1 Effective Time shall be the Certificate of Incorporation of Surviving
Corporation 1 after the Merger 1 Effective Time, and thereafter may be amended
in accordance with its terms and as provided in the DGCL. The Certificate of
Incorporation of Parent as in effect immediately prior to the Merger 2 Effective
Time shall be the Certificate of Incorporation of Surviving Corporation 2 after
the Merger 2 Effective Time, and thereafter may be amended in accordance with
its terms and as provided in the DGCL.
(b) By-Laws. The By-laws of EDI-Sub as in effect immediately prior to the
Merger 1 Effective Time shall be the By-laws of Surviving Corporation 1 after
the Merger 1 Effective Time, and thereafter may be amended in accordance with
their terms and as provided by the Certificate of Incorporation of Surviving
Corporation 1 and the DGCL. The By-laws of Parent as in effect immediately prior
to the Merger 2 Effective Time shall be the Bylaws of Surviving Corporation 2
after the Merger 2 Effective Time, and thereafter may be amended in accordance
with their terms and as provided by the Certificate of Incorporation of
Surviving Corporation 2 and the DGCL.
(c) Directors. The directors of EDI-Sub in office immediately prior to the
Merger 1 Effective Time shall be the directors of Surviving Corporation 1 after
the Merger 1 Effective Time, and such directors shall serve in accordance with
the By-laws of Surviving Corporation 1 until their respective successors are
duly elected or appointed and qualified. The directors of Parent in office
immediately prior to the Merger 2 Effective Time shall be the directors of
Surviving Corporation 2 after the Merger 2 Effective Time, and such directors
shall serve in accordance with the By-laws of Surviving Corporation 2 until
their respective successors are duly elected or appointed and qualified.
(d) Officers. The officers of EDI-Sub in office immediately prior to the
Merger 1 Effective Time shall be the officers of Surviving Corporation 1 after
the Merger 1 Effective Time, and such officers shall serve in accordance with
the By-laws of Surviving Corporation 1 until their respective successors are
duly elected or appointed and qualified. The officers of Parent in office
immediately prior to the Merger 2 Effective Time shall be the officers of
Surviving Corporation 2 after the Merger 2 Effective Time, and such officers
shall serve in accordance with the By-laws of Surviving Corporation 2 until
their respective successors are duly elected or appointed and qualified.
SECTION 4. CONVERSION OF SHARES; CLOSING.
(a) Conversion of Sellers' Capital Stock
(i) Conversion of Edisto Shares in Merger 1. At the Merger 1 Effective
Time, by virtue of Merger 1 and without any action on the part of any
holder of any capital stock of Parent or Edisto:
(A) each share of Edisto Common Stock shall, subject to Sections
4(c) and 4(d), be converted into the right to receive the following
(hereinafter referred to as the "Merger 1 Consideration"), without
interest: (x) a fractional interest in a share of Parent Common Stock
equal to $5.064 divided by the Weighted Average Trading Price (the
"Merger 1 Exchange Ratio"); provided, however, (i) if such Weighted
Average Trading Price exceeds $34.96, then the Merger 1 Exchange Ratio
shall be equal to $5.064 divided by $34.96 and (ii) if such Weighted
Average
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Trading Price is less than $28.96, then the Merger 1 Exchange Ratio
shall be equal to $5.064 divided by $28.96, and (y) $4.886 cash (the
"Merger 1 Cash Consideration"); and
(B) each share of capital stock of Edisto, if any, owned by Parent
or any Subsidiary of Parent or held in treasury by Edisto or any
Subsidiary of Edisto immediately prior to the Merger 1 Effective Time
shall be canceled and no consideration shall be paid in exchange
therefor and shall cease to exist from and after the Merger 1 Effective
Time.
(ii) Conversion of Convest Shares in Merger 2. At the Merger 2
Effective Time, by virtue of Merger 2 and without any action on the part of
any holder of any capital stock of Parent or Convest:
(A) each share of Convest Common Stock shall, subject to Sections
4(c) and 4(d), be converted into the right (hereinafter referred to as
the "Merger 2 Consideration") to receive, without interest, a fractional
interest in a share of Parent Common Stock equal to $8.88 divided by the
Weighted Average Trading Price (the "Merger 2 Exchange Ratio");
provided, however, (i) if such Weighted Average Trading Price exceeds
$34.96, then the Merger 2 Exchange Ratio shall be equal to $8.88 divided
by $34.96 and (ii) if such Weighted Average Trading Price is less then
$28.96, then the Merger 2 Exchange Ratio shall be equal to $8.88 divided
by $28.96; and
(B) each share of capital stock of Convest, if any, owned by Parent
or any Subsidiary of Parent or held in treasury by Convest or any
Subsidiary of Convest immediately prior to the Merger 2 Effective Time
shall be canceled and no consideration shall be paid in exchange
therefor and shall cease to exist from and after the Merger 2 Effective
Time.
(iii) The "Weighted Average Trading Price" of Parent Common Stock
shall be calculated by (a) making the following calculation for each of the
ten trading days ending on the day that is two trading days prior to the
Closing Date: (i) grouping together all shares of Parent Common Stock
traded on such day at the same trading price, (ii) multiplying the
aggregate number of shares in each price group by the trading price for
such group to calculate a product (the total sold shares value) for each
group, (iii) adding all of such products from each group and (iv) dividing
the resulting total by the aggregate number of shares traded on such
trading day, and (b) calculating the arithmetic mean of the resulting ten
amounts.
(b) Other Conversions.
(i) At the Merger 1 Effective Time, by virtue of Merger 1 and without
any action on the part of Parent as the sole stockholder of EDI-Sub, each
issued and outstanding share of EDI-Sub Common Stock shall be converted
into one share of common stock, par value $.01 per share, of Surviving
Corporation 1.
(ii) At the Dissolution Effective Time, by virtue of the Dissolution
and without any action on the part of Parent as the sole stockholder of
Surviving Corporation 1, each issued and outstanding share of the common
stock of Surviving Corporation 1 shall be retired and canceled.
(iii) Notwithstanding the provisions of paragraph (ii) hereof,
Surviving Corporation 1 shall continue, pursuant to Section 278 of the
DGCL, solely for the purposes of suit and winding up affairs and Parent
shall remain the sole stockholder of Surviving Corporation 1 entitled to
receive all distributions of assets made pursuant to Section 281 of the
DGCL.
(c) Sellers Options.
(i) Edisto Options. Each outstanding stock option or warrant granted
to employees and directors of Edisto and its Subsidiaries or to any other
Persons with respect to Edisto Common Stock (an "Edisto Option") shall be
either (A) redeemed by Edisto or (B) exercised or canceled in accordance
with its terms, in each case, prior to Merger 1. If any Edisto Option is
redeemed pursuant to this provision, such redemption shall be at a price no
greater than the amount (if any) by which $9.95 exceeds the exercise price
of such Edisto Option (unless otherwise consented to by Parent). The total
amount that may be expended to effect any such redemptions may not exceed
$1,500,000.
12
(ii) Convest Options. Each outstanding stock option or warrant granted
to employees and directors of Convest and its Subsidiaries or to any other
Persons with respect to Convest Common Stock (a "Convest Option") shall be
either (A) redeemed by Convest or (B) exercised or canceled in accordance
with its terms, in each case, prior to Merger 1. If any Convest Option is
redeemed pursuant to this provision, such redemption shall be at a price no
greater than the amount (if any) by which $8.88 exceeds the exercise price
of such Convest Option. The total amount that may be expended to effect any
such redemptions may not exceed $2,300,000.
(d) Exchanges.
(i) From and after the Merger 1 Effective Time, each holder of an
outstanding certificate which immediately prior to the Merger 1 Effective
Time represented shares of Edisto Common Stock (an "Edisto Certificate")
shall be entitled to receive in exchange therefor, upon surrender thereof
to the Exchange Agent, a certificate or certificates representing the
number of whole shares of Parent Common Stock to which such holder is
entitled pursuant to Section 4(a)(i)(A) and the amount of Merger 1 Cash
Consideration to which such holder is entitled. From and after the Merger 2
Effective Time, each holder of an outstanding certificate which immediately
prior to the Merger 2 Effective Time represented shares of Convest Common
Stock (a "Convest Certificate") shall be entitled to receive in exchange
therefor, upon surrender thereof to the Exchange Agent, a certificate or
certificates representing the number of whole shares of Parent Common Stock
to which such holder is entitled pursuant to Section 4(a)(ii)(A).
Notwithstanding any other provision of this Agreement, (A) until holders or
transferees of Edisto Certificates or Convest Certificates have surrendered
them for exchange as provided herein, no dividends shall be paid with
respect to any shares represented by such certificates and no payment for
fractional shares shall be made and (B) without regard to when such Edisto
Certificates or Convest Certificates are surrendered for exchange as
provided herein, no interest shall be paid on any dividends or any payment
for fractional shares. Upon surrender of an Edisto Certificate or a Convest
Certificate, respectively, there shall be paid to the holder of such
certificate the amount of any dividends which theretofore became payable,
but which were not paid by reason of the foregoing, with respect to the
number of whole shares of Parent Common Stock represented by the
certificate or certificates issued upon such surrender.
(ii) If any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the Edisto Certificate or Convest
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange shall
pay any applicable transfer or other taxes required by reason of such
issuance.
(iii) Promptly after the Merger 2 Effective Time, Parent shall make
available to the Exchange Agent (A) the certificates representing shares of
Parent Common Stock required to effect the exchanges referred to in
paragraphs (d)(i) and (ii) above and (B) funds sufficient for the payment
of the aggregate Merger 1 Cash Consideration required to effect the
exchange referred to in paragraph (i) above and for payment of any
fractional shares referred to in Section 4(e) (the "Exchange Fund"), it
being understood that any and all interest earned on funds made available
to the Exchange Agent pursuant to this Agreement shall be for the account
of, and shall remain the property of, Parent.
(iv) (A) Promptly after the Merger 2 Effective Time, but in no event
later than ten business days, the Exchange Agent shall mail to each holder
of record of an Edisto Certificate (x) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Edisto Certificates shall pass, only upon actual delivery of the Edisto
Certificates to the Exchange Agent) and (y) instructions for use in
effecting the surrender of the Edisto Certificates in exchange for
certificates representing shares of Parent Common Stock and Merger 1 Cash
Consideration. Upon surrender of Edisto Certificates for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal and
such other documents as the Exchange Agent shall reasonably require, the
holder of such Edisto Certificates shall be entitled to receive in exchange
therefor (1) a certificate representing that number of whole shares, if
any, of Parent Common Stock into which the shares of Edisto Common Stock
theretofore represented by the Edisto Certificates so surrendered shall
have been converted pursuant to the provisions of Section 4(a)(i)(A)(x),
and (2) the amount of Merger 1 Cash Consideration into
13
which the number of shares of Edisto Common Stock previously represented by
such Edisto Certificates so surrendered shall have been converted pursuant
to the provisions of Section 4(a)(i)(A)(y), and the Edisto Certificates so
surrendered shall be canceled. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares
of Edisto Common Stock for any shares of Parent Common Stock or dividends
or distributions thereon delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(B) Promptly after the Merger 2 Effective Time, but in no event later
than ten business days, the Exchange Agent shall mail to each holder of
record of a Convest Certificate (x) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Convest Certificates shall pass, only upon actual delivery of the Convest
Certificates to the Exchange Agent) and (y) instructions for use in
effecting the surrender of the Convest Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of
Convest Certificates for cancellation to the Exchange Agent, together with
a duly executed letter of transmittal and such other documents as the
Exchange Agent shall reasonably require, the holder of such Convest
Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares, if any, of Parent
Common Stock into which the shares of Convest Common Stock theretofore
represented by the Convest Certificates so surrendered shall have been
converted pursuant to the provisions of Section 4(a)(ii)(A), and the
Convest Certificates so surrendered shall be canceled. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of shares of Convest Common Stock for any shares of Parent
Common Stock or dividends or distributions thereon delivered to a public
official pursuant to applicable abandoned property, escheat or similar
laws.
(v) Promptly following the date which is one year after the Closing
Date, the Exchange Agent shall deliver to Parent all cash (including any
remaining balance in the Exchange Fund), certificates (including any Parent
Common Stock) and other documents in its possession relating to the
transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of an Edisto Certificate or a
Convest Certificate may surrender such certificate to Parent and (subject
to applicable abandoned property, escheat and similar laws) receive in
exchange therefor the Parent Common Stock and Merger 1 Cash Consideration
(if applicable), without any interest thereon. If outstanding Edisto
Certificates or Convest Certificates are not surrendered prior to six years
after the Merger 2 Effective Time (or, in any particular case, prior to
such earlier date on which any Merger 1 Consideration issuable in respect
of such Edisto Certificates or Merger 2 Consideration issued in respect of
such Convest Certificates or the dividends and other distributions, if any,
described below would otherwise escheat to or become the property of any
governmental unit or agency), the Merger 1 Consideration issuable in
respect of such Edisto Certificates or Merger 2 Consideration issuable in
respect of such Convest Certificates, and the amount of dividends and other
distributions, if any, which have become payable and which thereafter
become payable thereon as provided herein shall, to the extent permitted by
applicable law, become the property of Parent, free and clear of all claims
or interest of any Person previously entitled thereto. Notwithstanding the
foregoing, neither the Exchange Agent or the Parties shall be liable to a
holder of shares of Edisto Common Stock or Convest Common Stock for any
shares of Parent Common Stock or Merger 1 Cash Consideration delivered to a
public official pursuant to applicable abandoned property, escheat or
similar laws.
(vi) In the event any Edisto Certificate or Convest Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Edisto Certificate or Convest
Certificate to be lost, stolen or destroyed and, subject to the following
sentence, Surviving Corporation 2 shall issue in exchange for such lost,
stolen or destroyed Edisto Certificate or Convest Certificate the Merger 1
Consideration or Merger 2 Consideration, respectively, deliverable in
respect thereof determined in accordance with this Section 4. Surviving
Corporation 2 may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate to give such corporation such indemnity, bond or insurance as
it may reasonably direct as protection against any claim that may be made
against such corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
14
(e) No Fractional Securities. Notwithstanding any other provision of this
Agreement, no certificates or scrip for fractional shares of Parent Common Stock
shall be issued in the Mergers and no Parent Common Stock dividend, stock split
or interest shall relate to any fractional security, and such fractional
interests shall not entitle the owner thereof to vote or to any other rights of
a security holder. In lieu of any such fractional share, each holder of shares
of Edisto Common Stock or Convest Common Stock who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock upon surrender
of Edisto Certificates or Convest Certificates for exchange pursuant to this
Section 4 shall be entitled to receive from the Exchange Agent a cash payment
equal to such fraction multiplied by either (i) the Weighted Average Trading
Price, (ii) $34.96 or (iii) $28.96, depending on which of the foregoing prices
is used for the ratio calculations pursuant to Section 4(a).
(f) Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at a location mutually agreeable to Parent,
Edisto and Convest as promptly as practicable following the date on which the
last of the conditions set forth in Section 9 is fulfilled or waived, or at such
other time and place as Parent, Edisto and Convest shall agree. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
(g) Closing of Transfer Books.
(i) Edisto. At and after the Merger 1 Effective Time, holders of
Edisto Certificates shall cease to have any rights as stockholders of
Edisto, except for the right to receive shares of Parent Common Stock and
Merger 1 Cash Consideration pursuant to Section 4(a)(i) and the right to
receive cash for payment of fractional shares pursuant to Section 4(e). At
the Merger 1 Effective Time, the stock transfer books of Edisto shall be
closed and no transfer of shares of Edisto Common Stock which were
outstanding immediately prior to the Merger 1 Effective Time shall
thereafter be made. If, after the Merger 1 Effective Time, subject to the
terms and conditions of this Agreement, Edisto Certificates formerly
representing shares of Edisto Common Stock are presented to Parent, they
shall be canceled and exchanged for shares of Parent Common Stock in
accordance with this Section 4.
(ii) Convest. At and after the Merger 2 Effective Time, holders of
Convest Certificates shall cease to have any rights as stockholders of
Convest, except for the right to receive shares of Parent Common Stock
pursuant to Section 4(a)(ii) and the right to receive cash for payment of
fractional shares pursuant to Section 4(e). At the Merger 2 Effective Time,
the stock transfer books of Convest shall be closed and no transfer of
shares of Convest Common Stock which were outstanding immediately prior to
the Dissolution Effective Time shall thereafter be made. If, after the
Merger 2 Effective Time, subject to the terms and conditions of this
Agreement, Convest Certificates formerly representing shares of Convest
Common Stock are presented to Parent, they shall be canceled and exchanged
for shares of Parent Common Stock in accordance with this Section 4.
(h) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, in the event that appraisal rights are available in connection with
Merger 1 pursuant to Section 262 of the DGCL, shares of Edisto Common Stock that
are issued and outstanding immediately prior to the Merger 1 Effective Time and
that are held by Edisto Stockholders who did not vote in favor of Merger 1 and
who comply with all of the relevant provisions of Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger 1 Consideration, unless and until such Edisto
Stockholders shall have failed to perfect or shall have effectively withdrawn or
lost such right, and such Edisto Stockholders' shares of Edisto Common Stock
shall thereupon be deemed to have been converted into and to have become
exchangeable for the right to receive, as of the Merger 1 Effective Time, the
Merger 1 Consideration without any interest thereon. Edisto shall give Parent
(i) prompt notice of any written demands for appraisal of shares of Edisto
Common Stock received by Edisto and (ii) the opportunity to direct all
negotiations and proceedings with respect to any such demands. Edisto shall not,
without the prior consent of Parent, voluntarily make any payment with respect
to, or settle or offer to settle, any such demands.
15
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
Except for those matters included in the Sellers Disclosure Schedule, which
inclusion will not be deemed an admission by Sellers that any such matter is
material or has or would have a Material Adverse Effect or represents a Material
Adverse Change, each Seller represents and warrants to the Purchaser as follows:
(a) Organization, Qualification, and Corporate Power. Each of the Sellers
and their respective Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Set forth on the Sellers Disclosure Schedule is a list of all
Subsidiaries of each Seller, and a list of those jurisdictions where each of the
Sellers and their respective Subsidiaries are qualified to conduct business.
Each of the Sellers and its respective Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except for failures that would not have a
Material Adverse Effect. The Sellers Disclosure Schedule correctly sets forth
the name of each Subsidiary of each Seller, the jurisdiction of its
incorporation and the Persons owning its outstanding capital stock.
(b) Capitalization.
(i) (x) The entire authorized capital stock of Edisto consisted of
50,000,000 shares of Edisto Common Stock and 10,000,000 shares of preferred
stock, of which 14,138,274 shares (excluding treasury shares) of Edisto
Common Stock and no shares of preferred stock were issued and outstanding
as of June 16, 1997, and (y) the entire authorized capital stock of Convest
consisted of 20,000,000 shares of Convest Common Stock and 5,000,000 shares
of preferred stock, of which 10,544,411 shares (excluding treasury shares)
of Convest Common Stock and no shares of preferred stock were issued and
outstanding as of June 16, 1997. Edisto is the beneficial owner of
7,598,771 shares of Convest Common Stock (the "Shares"), free and clear of
any liens, claims, options, charges or other encumbrances.
(ii) Except for employee and director stock options disclosed on
Sellers Disclosure Schedule, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
either Seller to issue, sell, or otherwise cause to become outstanding any
of its capital stock or any other securities convertible into or evidencing
the right to subscribe for any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to either Seller. At and as
of the Closing, neither Seller will be a party to any agreement relating to
the registration under the Securities Act of shares of capital stock of
such Seller or any successor entity. The Sellers Disclosure Schedule shall
indicate, by holder, the shares of capital stock of each Seller subject to
any options, warrants or similar rights, and the exercise price, expiration
date and vesting period thereof.
(c) Authorization of Transaction.
(i) Each Seller has corporate power and authority to execute and
deliver this Agreement, and, subject to the Requisite Stockholder
Approvals, to consummate the transactions contemplated hereby. The Board of
Directors of Edisto, has approved this Agreement and Merger 1 in accordance
with the applicable provisions of the DGCL and (A) recommended approval of
this Agreement and Merger 1 by the Edisto Stockholders, and (B) duly and
validly authorized the execution and delivery of this Agreement by Edisto
and the consummation by Edisto of the transactions contemplated hereby. The
Board of Directors of Convest has approved this Agreement and Merger 2 in
accordance with the applicable provisions of the TBCA and (A) recommended
approval of this Agreement and Merger 2 by the Convest Stockholders, and
(B) duly and validly authorized the execution and delivery of this
Agreement by Convest and the consummation by Convest of the transactions
contemplated hereby. Except for the Requisite Stockholder Approvals, no
other corporate proceedings on the part of either Seller are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly executed and delivered on behalf of each
Seller and, subject to the Requisite Stockholder Approvals, constitutes the
valid and legally binding obligation of each Seller, enforceable against
each Seller in accordance with its terms and conditions, except that (A)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws
16
now or hereafter in effect relating to creditors' rights generally and (B)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(ii) The only votes of Edisto Stockholders required to adopt the
Agreement and approve Merger 1 are the affirmative vote of the holders of a
majority of Edisto Common Stock pursuant to Section 216 of the DGCL,
Edisto's Restated Certificate of Incorporation, as amended, and Section 5
of Edisto's By-laws, represented in person or by proxy, at a stockholder
meeting called by Edisto for the purpose of considering and voting upon the
Agreement and Merger 1 or by written consent in lieu of a meeting pursuant
to Section 228 of the DGCL and in accordance with Edisto's Restated
Certificate of Incorporation, as amended; the only votes of Convest
Stockholders required to adopt the Agreement and approve Merger 2 are the
affirmative vote of the holders of two-thirds of the outstanding shares of
Convest Common Stock pursuant to Article XII.A. of Convest's Articles of
Incorporation and Article 5.03 of the TBCA, represented in person or by
proxy, at a stockholder meeting called by Convest for the purpose of
considering and voting upon the Agreement and Merger 2 or by written
consent in lieu of a meeting pursuant to Article XII.B. of Convest's
Articles of Incorporation and Article 9.10.A. of the TBCA (collectively,
the "Requisite Stockholder Approvals"). The Convest Stockholders will not
have any appraisal or dissenter's rights under the TBCA as a result of the
transactions contemplated by this Agreement.
(d) Non-Contravention. The execution and delivery of this Agreement by each
Seller do not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge, encumbrance or preferential right to purchase upon any of the properties
or assets of either Seller or any of its respective Subsidiaries under any of
the terms, conditions or provisions of (i) the respective charters or by-laws of
either Seller or any of its respective Subsidiaries, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any court or governmental authority applicable to either Seller or
any of its respective Subsidiaries or any of their respective properties or
assets or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which either Seller or any of its respective
Subsidiaries is now a party or by which either Seller or any of its respective
Subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by the Sellers of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or creation of liens or preferential right to purchase under any of
the terms, conditions or provisions described in clauses (i) through (iii) of
the preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the Merger 1
Effective Time) the Requisite Stockholder Approvals and (y) in the case of the
terms, conditions or provisions described in clause (iii) above, to obtaining
(prior to the Merger 1 Effective Time) consents required from commercial
lenders, lessors or other third parties as specified on the Sellers Disclosure
Schedule. Excluded from the foregoing sentences of this paragraph (d), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (d), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a Material Adverse Effect.
(e) Approvals. Except for (i) the filing of the Joint Proxy
Statement/Prospectus with the SEC pursuant to the Exchange Act and the
Securities Act, and the declaration of the effectiveness thereof by the SEC and
any filings with various state blue sky authorities and, (ii) the making of the
Merger Filings with the Secretaries of State of the States of Delaware and Texas
in connection with the Mergers (the filings and approvals referred to in clauses
(i) and (ii) are collectively referred to as the "Sellers Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
either Seller or the consummation by either Seller of the transactions
contemplated hereby, including pursuant to the HSR Act, other than such
declarations, filings, registrations, notices, authorizations, consents
17
or approvals which, if not made or obtained, as the case may be, would not, in
the aggregate, have a Material Adverse Effect.
(f) Reports and Financial Statements. Each Seller has filed with the SEC
all forms, statements, reports and documents (including all exhibits,
post-effective amendments and supplements thereto) required to be filed by it
under each of the Securities Act, the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied when
filed in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. Each Seller has
previously delivered to Parent copies (including all exhibits, post-effective
amendments and supplements thereto) of its (a) Annual Reports on Form 10-K for
the fiscal year ended December 31, 1996 and for the two immediately preceding
fiscal years, as filed with the SEC, (b) proxy and information statements
relating to (i) all meetings of its stockholders (whether annual or special) and
(ii) actions by written consent in lieu of a stockholders' meeting from January
1, 1994, until the date hereof, and (c) all other reports and registration
statements filed by each Seller with the SEC since January 1, 1994 (the
documents referred to in clauses (a), (b) and (c) filed prior to the date hereof
are collectively referred to as the "Sellers SEC Reports"). The Sellers SEC
Reports are identified on the Sellers Disclosure Schedule. As of their
respective dates, the Sellers SEC Reports 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 the light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of each Seller included in such reports (collectively, the "Sellers
Financial Statements") have been prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of each Seller and their respective
Subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
(g) Absence of Undisclosed Liabilities. Except as disclosed in the Sellers
SEC Reports or the Sellers Disclosure Schedule, neither Seller nor any of their
respective Subsidiaries had at December 31, 1996, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except liabilities, obligations or contingencies
which: (i) are accrued or reserved against in the Sellers Financial Statements
or reflected in the notes thereto, (ii) would not, in the aggregate, have a
Material Adverse Effect, (iii) have been discharged or paid in full prior to the
date hereof, or (iv) are of a nature not required to be reflected in the
consolidated financial statements of either Seller and their respective
Subsidiaries prepared in accordance with GAAP consistently applied and which
were incurred in the Ordinary Course of Business.
(h) Absence of Certain Changes or Events. Since the date of the most recent
Sellers SEC Report for each Seller that contains consolidated financial
statements of such Seller, there has not been any Material Adverse Change.
(i) Litigation. Except as disclosed in the Sellers SEC Reports or in the
Sellers Disclosure Schedule, there are no claims, suits, actions or proceedings
pending or, to the knowledge of either Seller, threatened against, relating to
or affecting either Seller or any of its respective Subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain or enjoin the consummation of
any of the Mergers or which if decided adversely to either Seller or its
respective Subsidiary could, either alone or in the aggregate with all such
claims, actions or proceedings, have a Material Adverse Effect. Except as set
forth in the Sellers SEC Reports, neither Seller nor any of its Subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or which if decided adversely to either Seller or its
respective Subsidiary could, either individually or in the aggregate, have a
Material Adverse Effect.
(j) Registration Statement and Information Statement. None of the
information to be supplied by either Seller or its Subsidiaries for inclusion in
(a) the Registration Statement on Form S-4 to be filed under the Securities Act
with the SEC by Parent in connection with the Mergers for the purpose of
registering the
18
shares of Parent Common Stock to be issued in the Mergers (the "Registration
Statement") or (b) the proxy statements to be distributed in connection with the
approval of this Agreement and the transactions contemplated hereby by the
stockholders of the respective Sellers (the "Proxy Statements" and, together
with the prospectus included in the Registration Statement, the "Joint Proxy
Statements/Prospectus") will, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
any action by the stockholders of the respective Sellers in connection with the
transactions contemplated by this Agreement, or, in the case of the Registration
Statement, as amended or supplemented, at the time it becomes effective and at
the time of such action by the stockholders of the respective Sellers, 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 the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statements/Prospectus will, as of its mailing date,
comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
either Seller with respect to information supplied by any Purchaser for
inclusion therein.
(k) No Violation of Law. Except as disclosed in the Sellers SEC Reports or
in the Sellers Disclosure Schedule, neither Seller nor any of its respective
Subsidiaries is in violation of, or has been given notice or been charged with
any violation of, any law, statute, order, rule, regulation, ordinance, or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which, in the aggregate, could not have a Material Adverse
Effect. Except as disclosed in the Sellers SEC Reports or in the Sellers
Disclosure Schedule, as of the date of this Agreement, to the knowledge of
either Seller, no investigation or review by any governmental or regulatory body
or authority is pending or threatened, nor has any governmental or regulatory
body or authority indicated an intention to conduct the same, other than, in
each case, those the outcome of which, either individually or in the aggregate,
will not have a Material Adverse Effect. Each Seller and its respective
Subsidiaries has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct its businesses as presently conducted (collectively, the "Sellers
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or in
the aggregate, would not have a Material Adverse Effect. Each Seller and its
respective Subsidiaries is not in violation of the terms of any Sellers Permit,
except for delays in filing reports or violations which, alone or in the
aggregate, would not have a Material Adverse Effect.
(l) Compliance with Agreements. Except as disclosed in the Sellers SEC
Reports, neither Seller nor any of its respective Subsidiaries is in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under (i) the respective charter, by-laws
or other similar organizational instruments of either Seller or any of its
Subsidiaries or (ii) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which either Seller or any of its Subsidiaries is a party or by which any of
them is bound or to which any of their property is subject, other than, in the
case of clause (ii) of this paragraph (l), breaches, violations and defaults
which would not have, either individually or in the aggregate, a Material
Adverse Effect.
(m) Taxes.
(i) Each Seller and its respective Subsidiaries have (A) duly filed
with the appropriate governmental authorities all Tax Returns required to
be filed by them for all periods ending on or prior to the Merger 1
Effective Time, other than those Tax Returns the failure of which to file
would not, either individually or in the aggregate, have a Material Adverse
Effect, and such Tax Returns are true, correct and complete in all material
respects and (B) duly paid in full or made adequate provision for the
payment of all Taxes for all past and current periods, except for those
Taxes, the failure to have paid would not, either individually or in the
aggregate, have a Material Adverse Effect. The liabilities and reserves for
Taxes reflected in each Seller's balance sheet included in such Seller's
latest Sellers SEC Reports are adequate to cover all Taxes for all periods
ending at or prior to the date of such balance sheet and there is no
liability for Taxes for any period beginning after such date other than
Taxes arising in the
19
Ordinary Course of Business. There are no material liens for Taxes upon any
property or assets of either Seller or any Subsidiary thereof, except for
liens for Taxes not yet due. Except as set forth on the Sellers Disclosure
Schedule, neither Seller nor its respective Subsidiaries has received
notice of an audit from any taxation authority There are no unresolved
issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing
authority with respect to Taxes of either Seller or any of its Subsidiaries
which, if decided adversely, singly or in the aggregate, would have a
Material Adverse Effect. Neither Seller nor its respective Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency other than
waivers and extensions which are no longer in effect. Neither Seller nor
any of its respective Subsidiaries is a party to any agreement providing
for the allocation or sharing of Taxes with any entity that is not,
directly or indirectly, a wholly owned corporate Subsidiary of such Seller
other than agreements the consequences of which are fully and adequately
reserved for in the Sellers Financial Statements. Neither Seller nor any of
its respective corporate Subsidiaries has, with regard to any assets or
property held, acquired or to be acquired by any of them, filed a consent
to the application of Section 341(f) of the Code.
(ii) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, occupation, use, service,
license, payroll, franchise, transfer and recording taxes, fees and
charges, windfall profits, severance, customs, import, export, employment
or similar taxes, charges, fees, levies or other assessments imposed by the
United States, or any state, local or foreign government or subdivision or
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis, and such term shall include any interest,
fines, penalties or additional amounts and any interest in respect of any
additions, fines or penalties attributable or imposed or with respect to
any such taxes, charges, fees, levies or other assessments.
(iii) For purposes of this Agreement, the term "Tax Return" shall mean
any return, report or other document or information required to be supplied
to a taxing authority in connection with Taxes.
(n) Employee Benefit Plans; ERISA.
(i) Except as disclosed in the Sellers SEC Reports or Sellers
Disclosure Schedule, at the date hereof, Sellers and their Subsidiaries do
not maintain or contribute to or have any obligation or liability to or
with respect to any material employee benefit plans, including employee
benefit plans within the meaning set forth in Section 3(3) of ERISA,
programs, arrangements, practices or other similar material arrangements
for the provision of benefits (such plans, programs, arrangements or
practices of Sellers and their Subsidiaries being referred to as the
"Sellers Plans"), but excluding any "Multiemployer Plan" within the meaning
of Section 3(37) of ERISA or a "Multiple Employer Plan" within the meaning
of Section 413(c) of the Code. The Sellers Disclosure Schedule lists all
Multiemployer Plans to which any of them makes contributions or has any
obligation or liability to make contributions. Neither Seller nor any of
its respective Subsidiaries maintains or has any liability with respect to
any Multiple Employer Plan, which, individually or in the aggregate, could
have a Material Adverse Effect. Neither Seller nor any of its respective
Subsidiaries has any obligation to create or contribute to any additional
such plan, program, arrangement or practice or to amend any such plan,
program, arrangement or practice so as to increase benefits or
contributions thereunder, except as required under the terms of the Sellers
Plans or to comply with applicable law.
(ii) Except as disclosed in the Sellers SEC Reports or Sellers
Disclosure Schedule, (A) there have been no prohibited transactions within
the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with
respect to any of the Sellers Plans that could result in penalties, taxes
or liabilities which, singly or in the aggregate, could have a Material
Adverse Effect, (B) except for premiums due, there is no outstanding
material liability, whether measured alone or in the aggregate, under Title
IV of ERISA with respect to any of the Sellers Plans, (C) neither the
Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Sellers Plans subject to
Title IV of
20
ERISA other than in a "standard termination" described in Section 4041(b)
of ERISA, (D) none of the Sellers Plans has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the Sellers Plans ended prior to the date of this
Agreement, (E) the current present value of all projected benefit
obligations under each of the Sellers Plans which is subject to Title IV of
ERISA did not, as of its latest valuation date, exceed the then current
value of the assets of such plan allocable to such benefit liabilities by
more than the amount, if any, disclosed in the Sellers SEC Reports as of
March 31, 1997, based upon reasonable actuarial assumptions currently
utilized for such Sellers Plan, (F) each of the Sellers Plans has been
operated and administered in all material respects in accordance with
applicable laws during the period of time covered by the applicable statute
of limitations, (G) each of the Sellers Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified and such determination has not
been modified, revoked or limited by failure to satisfy any condition
thereof or by a subsequent amendment thereto or a failure to amend, except
that it may be necessary to make additional amendments retroactively to
maintain the "qualified" status of such Sellers Plans, and the period for
making any such necessary retroactive amendments has not expired, (H) with
respect to Multiemployer Plans, neither Seller nor any of its respective
Subsidiaries has made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203, 4204
and 4205 of ERISA and, to the best knowledge of each Seller and its
respective Subsidiaries, no event has occurred or is expected to occur
which presents a material risk of a complete or partial withdrawal under
said Sections 4203, 4204 and 4205, (I) to the best knowledge of each Seller
and its respective Subsidiaries, there are no material pending, threatened
or anticipated claims involving any of the Sellers Plans other than claims
for benefits in the ordinary course, (J) each Seller and its respective
Subsidiaries have no current material liability under Title IV of ERISA,
and each Seller and its respective Subsidiaries do not reasonably
anticipate that any such liability will be asserted against either Seller
or any of its Subsidiaries, and (K) no act, omission or transaction
(individually or in the aggregate) has occurred with respect to any Sellers
Plan that has resulted or could result in any material liability (direct or
indirect) of either Seller or any respective Subsidiary under Sections 409
or 502(c)(i) or (l) of ERISA or Chapter 43 of Subtitle (A) of the Code.
None of the Sellers Plans has an "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code) or is required
to provide security to a Sellers Plan pursuant to Section 401(a)(29) of the
Code. Each Sellers Plan can be unilaterally terminated by a Seller or a
Subsidiary at any time without material liability, other than for amounts
previously reflected in the financial statements (or notes thereto)
included in the Sellers SEC Reports.
(iii) The Sellers SEC Reports or the Sellers Disclosure Schedule
contain a true and complete summary or list of or otherwise describe all
material employment contracts and other employee benefit arrangements with
"change of control" or similar provisions and all severance agreements with
executive officers (including, in each case, the amount of any payments
which may be due as a result of the transactions contemplated by this
Agreement). Section 5(n)(iii) of the Sellers Disclosure Schedule sets forth
in reasonable detail all severance pay, vacation pay, stay bonuses or other
payments arising out of or otherwise relating or due to the termination or
resignation of any officers, directors or employees of either Seller or
their Subsidiaries or otherwise arising out of or relating or due to the
transactions contemplated by this Agreement. Any payments described in the
foregoing sentence have been approved by all necessary corporate action by
the Board of Directors of each Seller.
(iv) Except as set forth in the Sellers Disclosure Schedule, there are
no agreements which will or may provide payments to any officer, employee,
stockholder, or highly compensated individual which will be "parachute
payments" under Code Section 280G that are nondeductible to the Sellers or
subject to tax under Code Section 4999 for which a Seller or any ERISA
Affiliate would have withholding liability.
(o) Labor Controversies. Except as disclosed in the Sellers SEC Reports,
(i) there are no significant controversies pending or, to the knowledge of
either Seller, threatened between either Seller or its Subsidiaries and any
representatives of any of their employees and (ii) to the knowledge of either
Seller, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of
21
either Seller and its Subsidiaries except for such controversies and
organizational efforts which, singly or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
(p) Environmental Matters.
(i) Except as disclosed in the Sellers SEC Reports or the Sellers
Disclosure Schedule, (A) each Seller and its respective Subsidiaries have
conducted their respective businesses in compliance with all applicable
Environmental Laws, including, without limitation, having all permits,
licenses and other approvals and authorizations necessary for the operation
of their respective businesses as presently conducted, (B) none of the
properties owned by either Seller or any of its respective Subsidiaries
contain any Hazardous Substance as a result of any activity of either
Seller or any of its respective Subsidiaries in amounts exceeding the
levels permitted by applicable Environmental Laws, (C) neither Seller nor
any of its respective Subsidiaries has received any notices, demand letters
or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that either Seller or any of
its respective Subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, (D) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or
threatened, against either Seller or any of its respective Subsidiaries
relating to any violation, or alleged violation, of any Environmental Law,
(E) no reports have been filed, or are required to be filed, by either
Seller or any of its respective Subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any
Environmental Law, (F) no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental Law
from any properties owned by either Seller or any of its respective
Subsidiaries as a result of any activity of either Seller or any of its
respective Subsidiaries during the time such properties were owned, leased
or operated by either Seller or any of its respective Subsidiaries, (G)
there have been no environmental investigations, studies, audits, tests,
reviews by or which are in the possession of either Seller or its
respective Subsidiaries relating to the activities of a Seller or its
respective Subsidiaries which have not been delivered to Parent prior to
the date hereof, (H) there are no underground storage tanks on, in or under
any properties owned by either Seller or any of its respective Subsidiaries
and no underground storage tanks have been closed or removed from any of
such properties during the time such properties were owned, leased or
operated by either Seller or any of its respective Subsidiaries, (I) there
is no asbestos or asbestos containing material present in any of the
properties owned by either Seller and its respective Subsidiaries, and no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by such Seller or any of its
respective Subsidiaries, and (J) neither Seller, its respective
Subsidiaries nor any of their respective properties are subject to any
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except
for violations of the foregoing clauses (A) through (J) that, singly or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(ii) As used herein, "Environmental Law" means any Federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental entity
relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances, in each case as amended and as
in effect on the Closing Date. The term "Environmental Law" includes,
without limitation, (A) the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid
Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide
and Rodenticide Act, and the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and
22
(B) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass
and strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of, effects
of or exposure to any Hazardous Substance.
(iii) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under
any Environmental Law. Hazardous Substance includes any substance to which
exposure is regulated by any government authority or any Environmental Law
including, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos, or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
(q) Non-competition Agreements. Except as disclosed in the Sellers
Disclosure Schedule, neither Seller nor any respective Subsidiary thereof is a
party to any agreement which purports to restrict or prohibit in any material
respect any of them from, directly or indirectly, engaging in any material
business currently engaged in by either Seller or Parent, or any corporations
affiliated with either of them. None of the Sellers' officers, directors or key
employees is a party to any agreement which, by virtue of such person's
relationship with a Seller, restricts in any material respect either Seller or
any respective Subsidiary thereof from, directly or indirectly, engaging in any
of the businesses described above.
(r) Reserve Report and Exploration Project Information.
(i) The Sellers have made available to the Purchasers certain reports
dated February 25, 1997 prepared by the independent petroleum engineering
firm of ▇▇▇▇▇ ▇▇▇▇▇ Company (with respect to offshore properties of Convest
as of December 31, 1996) and dated February 24, 1997 by the independent
petroleum engineering firm of Netherland ▇▇▇▇▇▇ & Associates, Inc. (with
respect to onshore properties of Convest as of January 1, 1997), true and
correct copies of which have been previously provided to the Parent
(together, the "Sellers Reserve Reports"). The Sellers Reserve Reports are
the latest reserve reports available to the Sellers relating to their and
their Subsidiaries' reserves of oil and gas. The oil and gas properties
evaluated in the Sellers Reserve Reports are referred to herein as the
"Sellers Evaluated Properties." The Sellers have provided no false or
misleading information to and have not withheld any material information
from ▇▇▇▇▇ ▇▇▇▇▇ Company or Netherland ▇▇▇▇▇▇ and Associates, with respect
to the preparation of the Sellers Reserve Reports.
(ii) Except as set forth on Sellers Disclosure Schedule, the Sellers
are not aware of any facts or circumstances that should reasonably cause
the Sellers to conclude that any of the information that was supplied by
the Sellers to ▇▇▇▇▇ ▇▇▇▇▇ Company or Netherland ▇▇▇▇▇▇ and Associates, in
connection with their preparation of the Sellers Reserve Reports is not
currently correct in all material respects (other than normal depletion by
production in the ordinary course), and to the Sellers' knowledge the
information utilized in preparing the Sellers Reserve Reports is correct in
all material respects.
(iii) The Sellers have made available to Parent certain information
(the "Sellers Project Information") with respect to exploration projects in
which the Sellers are currently engaged (the "Sellers Projects"), which
information and Sellers Projects are set forth on the Sellers Disclosure
Schedule. The Sellers Project Information provided by the Sellers does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading.
(s) Title.
(i) The leasehold, royalty, mineral and similar interests owned by
each Seller and their respective Subsidiaries entitle it to receive not
less than the interest set forth in the Sellers Reserve Reports as the Net
Revenue Interest from all oil and gas and associated minerals produced,
saved and marketed in respect of each Sellers Evaluated Property listed in
the Sellers Reserve Reports, and obligate it to bear costs and expenses
relating to the maintenance and development of, and the operations with
respect to, each such Sellers Evaluated Property in an amount not greater
than the Working Interest set forth in the
23
Sellers Reserve Reports (unless there is a corresponding increase in the
Net Revenue Interest), except for such deficiencies which, individually or
in the aggregate, would not have a Material Adverse Effect. Except as noted
in the Sellers Reserve Reports, the Net Revenue Interest and the Working
Interest with respect to each such Sellers Evaluated Property are not
subject to change or adjustment upon the occurrence of payout or any
similar or other event.
(ii) The Sellers and their Subsidiaries have, and on the Closing Date
will have, good and valid title to all of their leasehold, royalty, mineral
and similar interests in the Sellers Evaluated Properties, other than the
properties disposed of since January 1, 1997 as disclosed on the Sellers
Disclosure Schedule or since the date hereof with the written consent of
the Parent, free and clear of all encumbrances and title defects except for
(A) the encumbrances and title defects specifically described in the
Sellers Disclosure Schedule, (B) statutory liens not yet delinquent, (C)
imperfections of title, easements, liens (including operator's liens) and
encumbrances, the character, amount or extent of which, individually or in
the aggregate, would not have a Material Adverse Effect, (D) contracts and
agreements for the sale of oil and gas entered into in the Ordinary Course
of Business, (E) lessor's royalties, overriding royalties, and division
orders, reversionary interests and similar burdens and all existing
operating agreements and unit agreements, if the net cumulative effect of
the same does not operate to reduce the Net Revenue Interests of the
Sellers Evaluated Properties to less than the Net Revenue Interests set
forth in the Sellers Reserve Report or increase the Working Interests of
the Sellers Evaluated Properties to more than the Working Interests set
forth in the Sellers Reserve Report (unless there is a corresponding
increase in the Net Revenue Interests); (F) any and all federal and state
regulatory orders and rules to which the Sellers Evaluated Properties are
presently subject; (G) preferential rights to purchase and required
third-party consents to assignments and similar agreements (none of which
arise or are required in connection with the transactions contemplated by
this Agreement); (H) liens for Taxes not due or not delinquent at the time
of Closing or the validity of which are being contested in good faith by
appropriate actions; (I) all rights to consent by, required notices to,
filings with, or other actions by governmental entities in connection with
the sale or conveyance of oil, gas and mineral leases or interests therein
if the same are customarily obtained after such sale or conveyance; (J)
easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like; and easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the Sellers
Evaluated Properties; (K) liens of operators relating to obligations not
yet due or not delinquent; and (L) title deficiencies commonly encountered
in the oil and gas business which would not be considered material by a
reasonable and prudent person engaged in the business of the ownership,
development and operating of oil and gas properties with knowledge of all
the facts and appreciation of their legal significance.
(iii) Except where the failure would not have a Material Adverse
Effect, (A) neither Seller nor its respective Subsidiaries are dependent
with respect to the Sellers Evaluated Properties on the right to use the
properties of others, except under valid and enforceable leases, contracts,
pooling or unitization agreements, rights or other arrangements, (B) the
Sellers and their respective Subsidiaries own, or have the right to use
under valid and enforceable leases, contracts, rights or other
arrangements, all gas processing facilities necessary for the current
operations of the Sellers and their respective Subsidiaries, (C) all
buildings, machinery and equipment currently used in the operations related
to the Sellers Evaluated Properties are adequate for their normal operation
consistent with industry practice, are in good working order and conform
with all applicable Environmental Laws and (D) there is no pending or
threatened condemnation or expropriation of any part of the Sellers
Evaluated Properties.
(iv) Except where the failure would not have a Material Adverse
Effect, the Sellers Evaluated Properties are being developed, operated and
maintained in compliance in all material respects with all leases,
contracts and commitments to which either Seller or any respective
Subsidiary is a party or by which either Seller or any respective
Subsidiary or any of the Sellers Evaluated Properties is bound.
(v) The Sellers and the Subsidiaries have good and valid title to all
the properties and assets of every kind, character and description (real,
personal or mixed, tangible and intangible), including, without limitation,
all parcels of real property, pipelines, rights-of-way and easements and
other
24
incidental rights and permits, but excluding the Sellers Evaluated
Properties, reflected in the Sellers Financial Statements or which would
have been reflected in the Sellers Financial Statements if acquired prior
to March 31, 1997, (the "Sellers Assets") free and clear of all
encumbrances of any nature except for (A) the encumbrances and title
defects specifically described in the Sellers Disclosure Schedule; (B)
mortgages and encumbrances which secure indebtedness or obligations which
are properly reflected in the Sellers Financial Statements; (C) liens for
Taxes not yet payable or any Taxes being contested in good faith; (D) liens
arising as a matter of law in the ordinary course of business, provided
that the obligations secured by such liens are not delinquent or are being
contested in good faith; (E) such imperfections of title and encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect; (F) any and all federal and state regulatory orders and rules to
which the Sellers Assets are presently subject; (G) preferential rights to
purchase and required third-party consents to assignments and similar
agreements, none of which arise or are required in connection with the
transactions contemplated by this Agreement; (H) statutory liens not yet
delinquent; (I) all rights to consent by, required notices to, filings
with, or other actions by governmental entities in connection with the sale
or conveyance of oil, gas and mineral leases or interests therein if the
same are customarily obtained after such sale or conveyance; (J) easements,
rights-of-way, servitude, permits, surface leases and other rights in
respect of surface operations, pipelines, grazing, logging, canals,
ditches, reservoirs or the like; and easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the Sellers
Assets; (K) liens of operators relating to obligations not yet due or not
delinquent; and (L) title deficiencies commonly encountered in the oil and
gas business which will not have a Material Adverse Effect. The Sellers and
the Subsidiaries have valid leasehold interests in all leases reflected as
capital leases in the Sellers Financial Statements and, to the knowledge of
the Sellers, generally have the right to use all other property and assets
as to which they do not have title but which are currently being used in
the conduct of each Seller's business, except any rights of use the loss of
which would not have a Material Adverse Effect.
(t) Insurance. The Sellers Disclosure Schedule lists all material insurance
policies covering the Sellers Assets, the Sellers Evaluated Properties,
employees and operations of the Sellers and their respective Subsidiaries as of
the date hereof (other than insurance owned or held by operators for those
Sellers Assets or Sellers Evaluated Properties where a party other than a Seller
or one of its Subsidiaries is the operator). Such policies are in full force and
effect, there are no defaults thereunder. Except for claims previously made, to
the knowledge of either Seller or its respective Subsidiaries, there is no basis
for any action or claim nor any facts which would reasonably be anticipated to
give rise to such action or claim. To the knowledge of either Seller or its
respective Subsidiaries, there does not exist any event that, with the giving of
notice or the lapse of time or both, would constitute such a default. Neither
Seller nor any of its respective Subsidiaries is a co-insurer under any such
policies of insurance except to the extent of the amount of the deductible,
self-retention or similar amounts applicable to such policies.
(u) Allowable Production Quotas. To the knowledge of either Seller, no
production from any of the Sellers Evaluated Properties prior to the date hereof
was in excess of allowable production quotas allowed or permitted by any
governmental body having jurisdiction thereover so as to subject any production
from such Sellers Evaluated Property on or after the date hereof to restrictions
or penalties except as will not have a Material Adverse Effect.
(v) Gas Payments; Balancing. (i) There are no material claims asserted or
material disputes evidenced in writing under any contract to which either Seller
or any Subsidiary thereof is a party regarding payments for natural gas not
taken pursuant to any "take or pay" or similar arrangement; (ii) the Sellers and
their respective Subsidiaries have not received any material quantity of natural
gas or liquids to be paid for thereafter other than in the normal cycle of
billing or received prepayments, advance payments or loans which will require a
Seller or any of its respective Subsidiaries to perform services or deliver
hydrocarbons under such contracts on or after the Closing Date without being
currently paid therefor; (iii) no sales contract obligates either Seller or any
Subsidiary thereof to deliver specific minimum volumes of gas; (iv) no contract
obligates either Seller or any Subsidiary thereof to sell gas at prices
substantially lower than the prevailing
25
market prices or to purchase gas at prices substantially higher than prevailing
market prices; (v) the Sellers and their respective Subsidiaries have made or
will, prior to the Closing Date, make all payments due to producers or others
for all gas and liquids delivered into any of their respective plants for which
payment for same is due prior to the Closing Date, including, without
limitation, all payments due for the purchase of gas and liquids under any
contract; (vi) to the knowledge of either Seller or any of its respective
Subsidiaries, all gas delivered into any of the plants has been purchased, and
all residue gas from the plants has been sold, in compliance with the Natural
Gas Policy Act of 1978, all orders, rules and regulations of the Federal Energy
Regulatory Commission and all other applicable laws, orders, rules and
regulations; (vii) to the knowledge of either Seller or any of its respective
Subsidiaries, there exists no material claim or dispute with respect to the
purchase, or the failure to purchase, or pay for whether or not purchased, gas
under any gas purchase contracts to which either Seller or any Subsidiary
thereof is a party or the applicable price to be paid for gas delivered, or
residue gas or liquids or products sold from the plants; and (viii) none of the
Sellers Evaluated Properties or the Sellers Assets is subject to requirements to
make Btu adjustments or affect gas or liquids balancing in favor of third
parties which would result in either Seller or any Subsidiary thereof being
required to deliver material volumes of gas or liquids after the Closing Date or
otherwise to compensate a third party for gas or liquids receipts into, or
deliveries from, the plants which occurred prior to the Closing Date. The
Sellers Disclosure Schedule sets forth an estimate of the amount of any net
imbalances and is within ten percent (10%) of the actual amount.
(w) No Prepayments Made or Refunds Owed. Sellers and their respective
Subsidiaries have not received any prepayment, advance payment, deposits or
similar payments, and have no refund obligation, other than obligations in the
aggregate of less than $250,000 incurred in the Ordinary Course of Business,
with respect to any gas or products purchased, sold, gathered, processed or
marketed through their plants. The Sellers and their respective Subsidiaries
have not received any compensation for gathering or processing services relating
to the plants which would be subject to any refund or create any repayment
obligation, other than obligations of less than $250,000 incurred in the
Ordinary Course of Business, either by or to the Sellers and their respective
Subsidiaries, and the Sellers and their respective Subsidiaries are not aware of
any basis for a claim that a refund is due.
(x) Drilling Obligations. The Sellers and their respective Subsidiaries do
not have any material drilling obligations or other development commitments that
are not terminable at will by the Seller or the Subsidiary party thereto without
penalty, other than commitments and obligations that arose in the Ordinary
Course of Business where the sole consequence to the Seller or the Subsidiary
party thereto for a failure to participate is to suffer a "non-consent" penalty
or forfeit an interest in the undeveloped lands subject to the commitment or
obligation.
(y) Development Operations. To the knowledge of either Seller or its
respective Subsidiaries, there are in existence no facts or circumstances that
should reasonably cause a Seller or a Subsidiary to conclude that any
development operations on the Sellers Evaluated Properties that are contemplated
by the Sellers Reserve Report will not be permitted under applicable laws and
governmental rules and regulations or that any third party may have a reasonable
basis to cause any court or governmental agency with jurisdiction over such
operations to cause the suspension or termination of such operations.
(z) Regulatory Authority. As of the date hereof, neither Seller nor any of
its respective Subsidiaries is subject to regulation as (a) a "holding company,"
an "affiliate" of a "holding company" or a "subsidiary company" of a "holding
company" or a "public utility," as each of such terms is defined in the Public
Utility Holding Company Act of 1935, as amended, and the rules and regulations
thereunder; (b) a gas utility or utility under applicable state law; and (c) an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(aa) Full Disclosure. To the knowledge of either Seller, the
representations, warranties or other statements by the Sellers in this Agreement
or in the Sellers Disclosure Schedule or Exhibits hereto or any documents
distributed generally to the Edisto Stockholders or the Convest Stockholders,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained therein not
misleading. There is, to the knowledge of either Seller, no fact pertaining
26
particularly to Sellers Evaluated Properties or the Sellers Assets (as opposed
to public information concerning general industry or economic conditions or
governmental policies) which has a Material Adverse Effect on or in the future
would be reasonably expected to have a Material Adverse Effect on the Sellers
Evaluated Properties or the Sellers Assets or the ownership, operation or
maintenance of any of the Sellers Evaluated Properties or the Sellers Assets
that has not been disclosed to the Purchaser.
(bb) Certain Agreements. There are no contracts, agreements, arrangements
or understandings to which either Seller or any of their Subsidiaries is a party
which create, govern or purport to govern the right of another party (other than
Purchasers) to acquire either Seller or any of their Subsidiaries.
(cc) Shareholders Agreement. Set forth on the Form 10-K/A of each Seller,
as filed with the SEC on April 30, 1997, is a list of the officers, directors
and owners of 5% or more of the capital stock of the respective Sellers. Edisto
has obtained from The TCW Group, Inc. and its affiliates and delivered to Parent
(i) a written agreement (a "Shareholders Agreement") to the effect that such
person will vote shares of Edisto Common Stock and Convest Common Stock
beneficially owned by such person in favor of the Mergers, and (ii) an Affiliate
Agreement.
(dd) Brokers and Finders. Except for the fees and expenses payable to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which fees are reflected in their agreements
with Sellers (a copy of which has been delivered to the Parent), Sellers have
not entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of either Seller to pay any finder's
fees, brokerage or agent commissions or other like payments in connection with
the transactions contemplated hereby. Except for the fees and expenses paid or
payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, there is no claim for payment
by either Seller of any investment banking fees, finder's fees, brokerage or
agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
(ee) Opinion of Financial Advisor. The financial advisor of Edisto,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, has rendered a written opinion to the Board of Directors of
Edisto to the effect that the Merger 1 Consideration is fair from a financial
point of view to the Edisto Stockholders. The financial advisor of Convest,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, has rendered a written opinion to the Board of Directors of
Convest to the effect that the Merger 2 Consideration is fair from a financial
point of view to the Convest Stockholders.
(ff) Edisto Cash Balance. As of the date of this Agreement and as of the
Closing Date, Edisto will have at least $68.0 million in cash on hand (the
"Edisto Cash Balance"); provided, however, that (i) the Edisto Cash Balance may
be reduced by an amount not to exceed an aggregate of $1,500,000 in order to
effect the redemption or cancellation of any Edisto Option prior to Merger 1 in
accordance with the terms of Section 4(c)(i), and (ii) Edisto and Convest may
collectively expend an amount not to exceed an aggregate of $2,300,000 in order
to effect the severance payments set forth in Section 5(n)(iii) of the Sellers
Disclosure Schedule. The Edisto Cash Balance is not, and at the Closing Date
will not be, subject to any pledge, encumbrance, lien or other limitation
prohibiting its free use or distribution by Edisto or its successors.
(gg) Affiliate Transactions. To Sellers knowledge there are no transactions
between (i) the Sellers or any of their Subsidiaries and (ii) any of their
Affiliates, which are required to be disclosed in the Sellers SEC Reports which
are not disclosed.
(hh) WARN. Sellers Disclosure Schedule sets forth the total number of
employees of the Sellers and their Subsidiaries and independent contractors as
determined in accordance with WARN or any similar applicable law. The
obligations of Sellers and their Subsidiaries under this Agreement, including,
without limitation, Section 8(d), will not give rise to any notice requirement
or payment obligation or liability under WARN on the part of Sellers or
Purchasers or their respective Subsidiaries.
(ii) Cumulative Representations. To the extent the representations and
warranties of Sellers set forth herein are modified by the terms Material
Adverse Change or Material Adverse Effect or similar terms, the effect of the
occurrence of all such effects or changes would not in the aggregate cause a
Material Adverse Change or Material Adverse Effect on Sellers and their
respective Subsidiaries taken as a whole.
27
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASERS.
Except for those matters included in the Purchasers Disclosure Schedule,
which inclusion will not be deemed an admission by Purchasers that any such
matter is material or has or would have a Material Adverse Effect or represents
a Material Adverse Change, each Purchaser represents and warrants to the Sellers
as follows:
(a) Organization, Qualification, and Corporate Power. Each of the
Purchasers is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Purchasers is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required, except for
failures that would not have a Material Adverse Effect, and has not received
notice of an audit from any state taxation authority.
(b) Capitalization. The entire authorized capital stock of Parent consisted
of 50,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred
stock, of which 22,673,749 shares of Parent Common Stock and no shares of
preferred stock were issued and outstanding as of May 31, 1997. The shares of
Parent Common Stock to be issued pursuant to this Agreement will, when issued,
be duly authorized, validly issued, fully paid and nonassessable.
(c) Authorization of Transaction. Each Purchaser has corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. No other corporate proceedings on the part of
the Purchasers are necessary to authorize this Agreement or to consummate the
transactions so contemplated. The Parent, as sole shareholder of Edisto, will
take the necessary action to effect the Dissolution immediately following the
Merger 1 Effective Time. This Agreement has been duly executed and delivered on
behalf of each Purchaser and constitutes the valid and legally binding
obligation of each Purchaser, enforceable against each Purchaser in accordance
with its terms and conditions, except that (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(d) Non-Contravention. Except as disclosed in the Purchasers Disclosure
Schedule, the execution and delivery of this Agreement by each Purchaser do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge,
encumbrance or preferential right to purchase upon any of the properties or
assets of either Purchaser under any of the terms, conditions or provisions of
(i) the respective charters or by-laws of either Purchaser, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to either
Purchaser or any of their respective properties or assets or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which either Purchaser is now a party or by which either Purchaser or
any of their respective properties or assets may be bound or affected. Except as
disclosed in the Purchasers Disclosure Schedule, the consummation by the
Purchasers of the transactions contemplated hereby will not result in any
violation, conflict, breach, termination, acceleration or creation of liens or
preferential right to purchase under any of the terms, conditions or provisions
described in clauses (i) through (iii) of the preceding sentence. Excluded from
the foregoing sentences of this paragraph (d), insofar as they apply to the
terms, conditions or provisions described in clauses (ii) and (iii) of the first
sentence of this paragraph (d), are such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Material
Adverse Effect.
(e) Approvals. Except for (i) the filing of the Joint Proxy
Statements/Prospectus with the SEC pursuant to the Exchange Act and the
Securities Act, and the declaration of the effectiveness thereof by the SEC and
filings with various state blue sky authorities, and (ii) the making of the
Merger Filings with the Secretaries of State of the States of Delaware and Texas
in connection with the Mergers (the filings and
28
approvals referred to in clauses (i) and (ii) are collectively referred to as
the "Purchasers Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by either Purchaser or the consummation by either
Purchaser of the transactions contemplated hereby, including pursuant to the HSR
Act, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, would not, in the aggregate, have a Material Adverse Effect.
(f) Reports and Financial Statements. Since August 2, 1995, Parent has
filed with the SEC all forms, statements, reports and documents (including all
exhibits, post-effective amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder (collectively the "Parent SEC
Reports"), all of which, as amended if applicable, complied when filed in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. As of their respective dates, the Parent
SEC Reports 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 the light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in such
reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
each Seller and their respective Subsidiaries as of the dates thereof and the
results of their operations and changes in financial position for the periods
then ended, subject, in the case of the unaudited interim financial statements,
to normal year-end and audit adjustments and any other adjustments described
therein.
(g) Absence of Undisclosed Liabilities. Except as disclosed in the Parent
SEC Reports or the Purchasers Disclosure Schedule, neither Purchaser had at
December 31, 1996, or has incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except liabilities, obligations or contingencies which (i) are accrued or
reserved against in the Purchasers Financial Statements or reflected in the
notes thereto, (ii) would not, in the aggregate, have a Material Adverse Effect,
(iii) have been discharged or paid in full prior to the date hereof, or (iv) are
of a nature not required to be reflected in the consolidated financial
statements of Parent prepared in accordance with GAAP consistently applied and
which were incurred in the Ordinary Course of Business.
(h) Absence of Certain Changes or Events. Since the date of the most recent
Parent SEC Report that contains consolidated financial statements, there has not
been any Material Adverse Change.
(i) Litigation. Except as disclosed in the Parent SEC Reports or in the
Purchasers Disclosure Schedule, there are no claims, suits, actions or
proceedings pending or, to the knowledge of either Purchaser, threatened
against, relating to or affecting either Purchaser, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seek to restrain or enjoin the consummation of any of the
Mergers or which if decided adversely to such Purchaser could, either alone or
in the aggregate with all such claims, actions or proceedings, have a Material
Adverse Effect. Except as set forth in the Parent SEC Reports, neither Purchaser
is subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or which if decided adversely to such Purchaser could,
either individually or in the aggregate, have a Material Adverse Effect.
(j) Registration Statement and Proxy Statements. None of the information to
be supplied by either Purchaser for inclusion in (a) the Registration Statement
or (b) the Proxy Statements will, in the case of the Proxy Statements or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statements and any amendments or supplements thereto, and at the time of
any action by the stockholders of the respective Sellers in connection with the
transactions contemplated by this Agreement, or, in the case of the Registration
Statement, as amended or supplemented, at the time it becomes effective and at
the time of such action by the stockholders of the respective Sellers, 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
29
therein, in the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statements/Prospectus will, as of its mailing date,
comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
either Purchaser with respect to information supplied by any Seller or the
stockholders of any Seller for inclusion therein.
(k) No Violation of Law. Except as disclosed in the Parent SEC Reports or
in the Purchasers Disclosure Schedule, neither Purchaser is in violation of, or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not have a Material Adverse Effect. Except as disclosed in the Parent SEC
Reports or in the Purchasers Disclosure Schedule, as of the date of this
Agreement, to the knowledge of either Purchaser, no investigation or review by
any governmental or regulatory body or authority is pending or threatened, nor
has any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, either
individually or in the aggregate, will not have a Material Adverse Effect. Each
Purchaser has all permits, licenses, franchises, variances, exemptions, orders
and other governmental authorizations, consents and approvals necessary to
conduct its businesses as presently conducted (collectively, the "Purchasers
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or in
the aggregate, would not have a Material Adverse Effect. Each Purchaser is not
in violation of the terms of any Purchasers Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a
Material Adverse Effect.
(l) Compliance with Agreements. Except as disclosed in the Parent SEC
Reports, neither Purchaser is in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could result in a default
under (i) the respective charter, by-laws or other similar organizational
instruments of either Purchaser or (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which either Purchaser is a party or by which any of them is
bound or to which any of their property is subject, other than, in the case of
clause (ii) of this paragraph (l), breaches, violations and defaults which would
not have, either individually or in the aggregate, a Material Adverse Effect.
(m) Taxes. Each Purchaser has (A) duly filed with the appropriate
governmental authorities all Tax Returns required to be filed by them for all
periods ending on or prior to the Merger 1 Effective Time, other than those Tax
Returns the failure of which to file would not, either individually or in the
aggregate, have a Material Adverse Effect, and such Tax Returns are true,
correct and complete in all material respects and (B) duly paid in full or made
adequate provision for the payment of all Taxes for all past and current
periods, except for those Taxes, the failure to have paid would not, either
individually or in the aggregate, have a Material Adverse Effect. The
liabilities and reserves for Taxes reflected in Parent's balance sheet included
in the latest Parent SEC Reports are adequate to cover all Taxes for all periods
ending at or prior to the date of such balance sheet and there is no liability
for Taxes for any period beginning after such date other than Taxes arising in
the Ordinary Course of Business. There are no material liens for Taxes upon any
property or assets of either Purchaser, except for liens for Taxes not yet due.
Except as set forth on the Purchasers Disclosure Schedule, neither Purchaser nor
its respective Subsidiaries has received notice of an audit from any taxation
authority which could reasonably be expected to have a Material Adverse Change.
There are no unresolved issues of law or fact arising out of a notice of
deficiency, proposed deficiency or assessment from the IRS or any other
governmental taxing authority with respect to Taxes of either Purchaser which,
if decided adversely, singly or in the aggregate, would have a Material Adverse
Effect. Neither Purchaser has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency other than waivers and extensions which are no longer in effect.
Neither Purchaser is a party to any agreement providing for the allocation or
sharing of Taxes with any entity that is not, directly or indirectly, a wholly
owned corporate Subsidiary of such Purchaser other than agreements the
consequences of which are fully and adequately reserved for in the Parent
Financial Statements. Neither Purchaser has, with regard to
30
any assets or property held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Code.
(n) Employee Benefit Plans; ERISA.
(i) Except as disclosed in the Parent SEC Reports or Purchasers
Disclosure Schedule, at the date hereof, Purchasers do not maintain or
contribute to or have any obligation or liability to or with respect to any
material employee benefit plans, including employee benefit plans within
the meaning set forth in Section 3(3) of ERISA, programs, arrangements,
practices or other similar material arrangements for the provision of
benefits (such plans, programs, arrangements or practices of Purchasers
being referred to as the "Purchasers Plans"), but excluding any
"Multiemployer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code.
The Purchasers Disclosure Schedule lists all Multiemployer Plans to which
any of them makes contributions or has any obligation or liability to make
contributions. Neither Purchaser maintains or has any liability with
respect to any Multiple Employer Plan, which, individually or in the
aggregate, could have a Material Adverse Effect. Neither Purchaser has any
obligation to create or contribute to any additional such plan, program,
arrangement or practice or to amend any such plan, program, arrangement or
practice so as to increase benefits or contributions thereunder, except as
required under the terms of the Purchasers Plans, under existing collective
bargaining agreements or to comply with applicable law.
(ii) Except as disclosed in the Parent SEC Reports or Purchasers
Disclosure Schedule, (A) there have been no prohibited transactions within
the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with
respect to any of the Purchasers Plans that could result in penalties,
taxes or liabilities which, singly or in the aggregate, could have a
Material Adverse Effect, (B) except for premiums due, there is no
outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Purchasers Plans, (C)
neither the Pension Benefit Guaranty Corporation nor any plan administrator
has instituted proceedings to terminate any of the Purchasers Plans subject
to Title IV of ERISA other than in a "standard termination" described in
Section 4041(b) of ERISA, (D) none of the Purchasers Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each of the Purchasers Plans ended prior to the
date of this Agreement, (E) the current present value of all projected
benefit obligations under each of the Purchasers Plans which is subject to
Title IV of ERISA did not, as of its latest valuation date, exceed the then
current value of the assets of such plan allocable to such benefit
liabilities by more than the amount, if any, disclosed in the Parent SEC
Reports as of March 31, 1997, based upon reasonable actuarial assumptions
currently utilized for such Purchasers Plan, (F) each of the Purchasers
Plans has been operated and administered in all material respects in
accordance with applicable laws during the period of time covered by the
applicable statute of limitations, (G) each of the Purchasers Plans which
is intended to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified and such
determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such
Purchasers Plans, and the period for making any such necessary retroactive
amendments has not expired, (H) with respect to Multi-employer Plans,
neither Purchaser has made or suffered a "complete withdrawal" or a
"partial withdrawal," as such terms are respectively defined in Sections
4203, 4204 and 4205 of ERISA and, to the best knowledge of each Purchaser,
no event has occurred or is expected to occur which presents a material
risk of a complete or partial withdrawal under said Sections 4203, 4204 and
4205, (I) to the best knowledge of each Purchaser, there are no material
pending, threatened or anticipated claims involving any of the Purchasers
Plans other than claims for benefits in the ordinary course, (J) each
Seller and its Subsidiaries have no current material liability under Title
IV of ERISA, and Purchasers do not reasonably anticipate that any such
liability will be asserted against either Purchaser, and (K) no act,
omission or transaction (individually or in the aggregate) has occurred
with respect to any Purchasers Plan that has resulted or could result in
any material liability (direct or indirect) of either Purchaser under
Sections 409 or 502(c)(i) or (l) of ERISA or Chapter 43 of Subtitle
31
(A) of the Code. None of the Purchasers Plans has an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code) or is required to provide security to a Purchasers Plan pursuant to
Section 401(a)(29) of the Code. Each Purchasers Plan can be unilaterally
terminated by a Purchaser at any time without material liability, other
than for amounts previously reflected in the financial statements (or notes
thereto) included in the Parent SEC Reports.
(iii) The Parent SEC Reports or the Purchasers Disclosure Schedule
contain a true and complete summary or list of or otherwise describe all
employment contracts and other employee benefit arrangements with "change
of control" or similar provisions and all severance agreements with
directors, executive officers or employees.
(o) Labor Controversies. Except as disclosed in the Parent SEC Reports or
the Purchasers Disclosure Schedule, (i) there are no significant controversies
pending or, to the knowledge of either Purchaser, threatened between either
Purchaser and any representatives of any of their employees and (ii) to the
knowledge of either Purchaser, there are no material organizational efforts
presently being made involving any of the presently unorganized employees of
either Purchaser except for such controversies and organizational efforts which,
singly or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(p) Environmental Matters. Except as disclosed in the Parent SEC Reports or
in the Purchasers Disclosure Schedule, (A) each Purchaser has conducted its
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted, (B) none of the properties owned by Purchasers contain any
Hazardous Substance as a result of any activity of either Purchaser in amounts
exceeding the levels permitted by applicable Environmental Laws, (C) neither
Purchaser has received any notices, demand letters or requests for information
from any Federal, state, local or foreign governmental entity or third party
indicating that either Purchaser may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, (D) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened,
against either Purchaser relating to any violation, or alleged violation, of any
Environmental Law, (E) no reports have been filed, or are required to be filed,
by either Purchaser concerning the release of any Hazardous Substance or the
threatened or actual violation of any Environmental Law, (F) no Hazardous
Substance has been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned by either Purchaser as a
result of any activity of either Purchaser during the time such properties were
owned, leased or operated by either Purchaser, (G) there have been no
environmental investigations, studies, audits, tests, reviews by or which are in
the possession of either Purchaser relating to the activities of a Purchaser
which have not been delivered to Sellers prior to the date hereof, (H) there are
no underground storage tanks on, in or under any properties owned by either
Purchaser and no underground storage tanks have been closed or removed from any
of such properties during the time such properties were owned, leased or
operated by either Purchaser, (I) there is no asbestos or asbestos containing
material present in any of the properties owned by either Purchaser, and no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by Purchasers, and (J) neither
Purchaser nor any of their respective properties are subject to any liabilities
or expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (A) through (J) that, singly or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
(q) Reserve Report and Exploration Project Information.
(i) The Purchasers have made available to the Sellers certain reports
dated March 3, 1997, prepared by the independent petroleum engineering firm
of Netherland, ▇▇▇▇▇▇ & Associates, Inc., with respect to onshore
properties, and dated February 7, 1997, prepared by the independent
petroleum engineering firm of Collarini Engineering Inc., with respect to
offshore properties (collectively, the "Purchasers Petroleum Engineers")
true and correct copies of which have been previously provided to the
Sellers (together, the "Purchasers Reserve Reports"). The Purchasers
Reserve Reports are the latest
32
reserve reports available to the Purchasers relating to their and their
Subsidiaries reserves of oil and gas. The oil and gas properties evaluated
in the Purchasers Reserve Reports are referred to herein as the "Purchasers
Evaluated Properties." The Purchasers have provided no materially false or
misleading information to and have not withheld any material information
from the Purchasers Petroleum Engineers, with respect to the preparation of
the Purchasers Reserve Reports.
(ii) Except as set forth on the Purchasers Disclosure Schedule, the
Purchasers are not aware of any facts or circumstances that should
reasonably cause the Purchasers to conclude that any of the information
that was supplied by the Purchasers to the Purchasers Petroleum Engineers,
in connection with their preparation of the Purchasers Reserve Reports is
not currently correct in all material respects (other than normal depletion
by production in the ordinary course), and to the Purchasers' knowledge the
information utilized in preparing the Reserve Reports is correct in all
material respects.
(iii) The Purchasers have made available to Sellers certain
information (the "Purchasers Project Information") with respect to certain
exploration projects in which the Purchasers are currently engaged (the
"Purchasers Projects"), which information and Purchasers Projects are set
forth on the Purchasers Disclosure Schedule. The Purchasers Project
Information provided by the Purchasers does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained therein not misleading.
(r) Title.
(i) The leasehold, royalty, mineral and similar interests owned by the
Purchasers and their respective Subsidiaries entitle them to receive not
less than the interest set forth in the Purchasers Reserve Reports as the
Net Revenue Interest from all oil and gas and associated minerals produced,
saved and marketed in respect of each Purchasers Evaluated Property listed
in the Purchasers Reserve Reports, and obligate it to bear costs and
expenses relating to the maintenance and development of, and the operations
with respect to, each such Purchasers Evaluated Property in an amount not
greater than the Working Interest set forth in the Purchasers Reserve
Reports (unless there is a corresponding increase in the Net Revenue
Interest), except for such deficiencies which, individually or in the
aggregate, would not have a Material Adverse Effect. Except as noted in the
Purchasers Reserve Reports, the Net Revenue Interest and the Working
Interest with respect to each such Purchasers Evaluated Property are not
subject to change or adjustment upon the occurrence of payout or any
similar or other event.
(ii) The Purchasers have, and on the Closing Date will have, good and
valid title to all of their leasehold, royalty, mineral and similar
interests in the Purchasers Evaluated Properties, other than the properties
disposed of since the date hereof, free and clear of all encumbrances and
title defects except for (A) the encumbrances and title defects
specifically described in the Parent Financial Statements or Purchasers
Disclosure Schedule, (B) statutory liens not yet delinquent, (C)
imperfections of title, easements, liens (including operator's liens) and
encumbrances, the character, amount or extent of which, individually or in
the aggregate, would not have a Material Adverse Effect, (D) contracts and
agreements for the sale of oil and gas entered into in the Ordinary Course
of Business, (E) lessor's royalties, overriding royalties, and division
orders, reversionary interests and similar burdens and all existing
operating agreements and unit agreements, if the net cumulative effect of
the same does not operate to reduce the Net Revenue Interests of the
Purchasers Evaluated Properties to less than the Net Revenue Interests set
forth in Purchasers Reserve Report or increase the Working Interests of the
Purchasers Evaluated Properties to more than the Working Interests set
forth in the Purchasers Reserve Report (unless there is a corresponding
increase in the Net Revenue Interests); (F) any and all federal and state
regulatory orders and rules to which the Purchasers Evaluated Properties
are presently subject; (G) preferential rights to purchase and required
third-party consents to assignments and similar agreements; (H) liens for
Taxes not due or not delinquent at the time of Closing or the validity of
which are being contested in good faith by appropriate actions; (I) all
rights to consent by, required notices to, filings with, or other actions
by governmental entities in connection with the sale or conveyance of oil,
gas and mineral leases or interests therein if the same are customarily
obtained after such sale or conveyance;
33
(J) easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like; and easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
Purchasers Evaluated Properties; (K) liens of operators relating to
obligations not yet due or not delinquent; and (L) title deficiencies
commonly encountered in the oil and gas business which would not be
considered material by a reasonable and prudent person engaged in the
business of the ownership, development and operating of oil and gas
properties with knowledge of all the facts and appreciation of their legal
significance.
(iii) Except where the failure would not have a Material Adverse
Effect, (A) neither Purchaser is dependent with respect to the Purchasers
Evaluated Properties on the right to use the properties of others, except
under valid and enforceable leases, contracts, pooling or unitization
agreements, rights or other arrangements, (B) the Purchasers own, or have
the right to use under valid and enforceable leases, contracts, rights or
other arrangements, all gas processing facilities necessary for the current
operations of the Purchasers, (C) all buildings, machinery and equipment
currently used in the operations related to the Purchasers Evaluated
Properties are adequate for their normal operation consistent with industry
practice, are in good working order and substantially conform with all
applicable Environmental Laws and (D) to the knowledge of either Purchaser
there is no pending or threatened condemnation or expropriation of any part
of the Purchasers Evaluated Properties.
(iv) Except where the failure would not have a Material Adverse
Effect, the Purchasers Evaluated Properties are being developed, operated
and maintained in compliance in all material respects with all leases,
contracts and commitments to which either Purchaser is a party or by which
either Purchaser or any of the Purchasers Evaluated Properties is bound.
(v) The Purchasers have good and valid title to all the properties and
assets of every kind, character and description (real, personal or mixed,
tangible and intangible), including, without limitation, all parcels of
real property, pipelines, rights-of-way and easements and other incidental
rights and permits, but excluding the Purchasers Evaluated Properties,
reflected in the Parent Financial Statements or which would have been
reflected in the Parent Financial Statements if acquired prior to March 31,
1997, (the "Purchasers Assets") free and clear of all encumbrances of any
nature except for (A) the encumbrances and title defects specifically
described in the Purchasers Disclosure Schedule; (B) mortgages and
encumbrances which secure indebtedness or obligations which are properly
reflected in the Parent Financial Statements; (C) liens for Taxes not yet
payable or any Taxes being contested in good faith; (D) liens arising as a
matter of law in the ordinary course of business, provided that the
obligations secured by such liens are not delinquent or are being contested
in good faith; (E) such imperfections of title and encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect;
(F) any and all federal and state regulatory orders and rules to which the
Purchasers Assets are presently subject; (G) preferential rights to
purchase and required third-party consents to assignments and similar
agreements; (H) statutory liens not yet delinquent; (I) all rights to
consent by, required notices to, filings with, or other actions by
governmental entities in connection with the sale or conveyance of oil, gas
and mineral leases or interests therein if the same are customarily
obtained after such sale or conveyance; (J) easements, rights-of-way,
servitude, permits, surface leases and other rights in respect of surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like; and easements for streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other easements and rights-of-way, on,
over or in respect of any of the Purchasers Assets; (K) liens of operators
relating to obligations not yet due or not delinquent; and (L) title
deficiencies commonly encountered in the oil and gas business which will
not have a Material Adverse Effect. The Purchasers have valid leasehold
interests in all leases reflected as capital leases in the Parent Financial
Statements and, to the knowledge of the Purchasers, generally have the
right to use all other property and assets as to which they do not have
title but which are currently being used in the conduct of the Purchasers'
business, except any rights of use the loss of which would not have a
Material Adverse Effect.
(s) Insurance. The Purchasers Disclosure Schedule lists all material
insurance policies covering the Purchasers Assets, the Purchasers Evaluated
Properties, employees and operations of the Purchasers as of the
34
date hereof (other than insurance owned or held by operators for those
Purchasers Assets or Purchasers Evaluated Properties where a party other than a
Purchaser is the operator). Such policies are in full force and effect, there
are no defaults thereunder. Except for claims previously made, to the knowledge
of either Purchaser there is no basis for any action or claim nor any facts
which would reasonably be anticipated to give rise to such action or claim. To
the knowledge of either Purchaser, there does not exist any event that, with the
giving of notice or the lapse of time or both, would constitute such a default.
Neither Purchaser is a co-insurer under any such policies of insurance except to
the extent of the amount of the deductible, self-retention or similar amounts
applicable to such policies.
(t) Allowable Production Quotas. To the knowledge of either Purchaser, no
production from any of the Purchasers Evaluated Properties prior to the date
hereof was in excess of allowable production quotas allowed or permitted by any
governmental body having jurisdiction thereover so as to subject any production
from such Purchasers Evaluated Property on or after the date hereof to
restrictions or penalties except as will not have a Material Adverse Effect.
(u) Gas Payments; Balancing. (i) There are no material claims asserted or
material disputes evidenced in writing under any contract to which either
Purchaser is a party regarding payments for natural gas not taken pursuant to
any "take or pay" or similar arrangement; (ii) the Purchasers have not received
any material quantity of natural gas or liquids to be paid for thereafter other
than in the normal cycle of billing or received prepayments, advance payments or
loans which will require a Purchaser to perform services or deliver hydrocarbons
under such contracts on or after the Closing Date without being currently paid
therefor; (iii) no sales contract obligates either Purchaser to deliver specific
minimum volumes of gas; (iv) no contract obligates either Purchaser to sell gas
at prices substantially lower than the prevailing market prices or to purchase
gas at prices substantially higher than prevailing market prices; (v) the
Purchasers have made or will, prior to the Closing Date, make all payments due
to producers or others for all gas and liquids delivered into any of their
respective plants for which payment for same is due prior to the Closing Date,
including, without limitation, all payments due for the purchase of gas and
liquids under any contract; (vi) to the knowledge of either Purchaser, all gas
delivered into any of the plants has been purchased, and all residue gas from
the plants has been sold, in compliance with the Natural Gas Policy Act of 1978,
all orders, rules and regulations of the Federal Energy Regulatory Commission
and all other applicable laws, orders, rules and regulations; (vii) to the
knowledge of either Purchaser, there exists no material claim or dispute with
respect to the purchase, or the failure to purchase, or pay for whether or not
purchased, gas under any gas purchase contracts to which either Purchaser is a
party or the applicable price to be paid for gas delivered, or residue gas or
liquids or products sold from the plants; and (viii) none of the Purchasers
Evaluated Properties or the Purchaser Assets is subject to requirements to make
Btu adjustments or affect gas or liquids balancing in favor of third parties
which would result in either Purchaser being required to deliver material
volumes of gas or liquids after the Closing Date or otherwise to compensate a
third party for gas or liquids receipts into, or deliveries from, the plants
which occurred prior to the Closing Date. The Purchasers Disclosure Schedule
sets forth an estimate of the amount of any material net imbalances and is
within ten percent (10%) of the actual amount.
(v) No Prepayments Made or Refunds Owed. Purchasers have not received any
prepayment, advance payment, deposits or similar payments, and have no refund
obligation, other than obligations in the aggregate of less than $500,000
incurred in the Ordinary Course of Business, with respect to any gas or products
purchased, sold, gathered, processed or marketed through their plants. The
Purchasers have not received any compensation for gathering or processing
services relating to the plants which would be subject to any refund or create
any repayment obligation, other than obligations of less than $500,000 incurred
in the Ordinary Course of Business, either by or to the Purchasers, and the
Purchasers are not aware of any basis for a claim that a refund is due.
(w) Drilling Obligations. The Purchasers do not have any material drilling
obligations or other development commitments that are not terminable at will by
the Purchaser party thereto without penalty, other than commitments and
obligations that arose in the Ordinary Course of Business where the sole
consequence to the Purchaser party thereto for a failure to participate is to
suffer a "non-consent" penalty or forfeit an interest in the undeveloped lands
subject to the commitment or obligation.
35
(x) Development Operations. To the knowledge of either Purchaser, there are
in existence no facts or circumstances that should reasonably cause a Purchaser
to conclude that any development operations on the Purchasers Evaluated
Properties that are contemplated by the Purchasers Reserve Report will not be
permitted under applicable laws and governmental rules and regulations or that
any third party may have a reasonable basis to cause any court or governmental
agency with jurisdiction over such operations to cause the suspension or
termination of such operations.
(y) Regulatory Authority. As of the date hereof, neither Purchaser is
subject to regulation as (a) a "holding company," an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company" or a "public utility,"
as each of such terms is defined in the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations thereunder; (b) a gas utility or
utility under applicable state law; and (c) an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(z) Full Disclosure. To the knowledge of either Purchaser, the
representations, warranties or other statements by the Purchasers in this
Agreement or in the Purchasers Disclosure Schedule or Exhibits hereto or any
documents distributed generally to the Edisto Stockholders or the Convest
Stockholders, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading. There is, to the knowledge of either
Purchaser, no fact pertaining particularly to Purchasers Evaluated Properties or
the Purchasers Assets (as opposed to public information concerning general
industry or economic conditions or governmental policies) which has a Material
Adverse Effect on or in the future would be reasonably expected to have a
Material Adverse Effect on the Purchasers Evaluated Properties or the Purchasers
Assets or the ownership, operation or maintenance of any of the Purchasers
Evaluated Properties or the Purchasers Assets that has not been disclosed to the
Sellers.
(aa) Affiliate Transactions. To Purchasers knowledge there are no
transactions between (i) the Purchasers or any of their Subsidiaries and (ii)
any of their Affiliates which are required to be disclosed in the Parent SEC
Reports which are not disclosed.
(bb) Cumulative Representations. To the extent the representations and
warranties of Purchasers set forth herein are modified by the terms Material
Adverse Change or Material Adverse Effect or similar terms, the effect of the
occurrence of all such effects or changes would not in the aggregate cause a
Material Adverse Change or Material Adverse Effect on the Purchasers and their
respective Subsidiaries taken as a whole.
SECTION 7. CONDUCT OF BUSINESS PENDING THE MERGERS.
(a) Conduct of Business by the Sellers Pending the Mergers. Except as
otherwise contemplated by this Agreement or disclosed in the Sellers Disclosure
Schedule, after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Parent shall otherwise agree in writing,
each Seller shall, and shall cause its Subsidiaries to:
(i) conduct their respective businesses in the Ordinary Course of
Business;
(ii) not (A) amend or propose to amend their respective charter or
by-laws, (B) split, combine or reclassify their outstanding capital stock
or (C) declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise, except for the payment of dividends or
distributions by a wholly owned Subsidiary;
(iii) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that a Seller may issue shares upon conversion
of convertible securities and exercise of options and warrants outstanding
on the date hereof;
(iv) not (A) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (x) borrowings in the Ordinary
Course of Business or (y) borrowings to refinance
36
existing indebtedness on terms which are reasonably acceptable to Parent,
(B) except as contemplated by Section 4(c) hereof, redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or
any options, warrants or rights to acquire any of its capital stock or any
security convertible into or exchangeable for its capital stock, (C) take
or fail to take any action which action or failure to take action would
cause either Seller or its stockholders (except to the extent that any
stockholders receive cash) to recognize gain or loss for federal income tax
purposes as a result of the consummation of Merger 2 or would otherwise
cause Merger 2 not to qualify as a reorganization under Section 368 of the
Code, (D) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business, (E)
sell, pledge, dispose of or encumber any assets or businesses without the
approval of Parent or (F) enter into any binding contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(v) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(vi) subject to restrictions imposed by applicable law, confer on a
regular and frequent basis with one or more representatives of Parent to
report operational matters of materiality and the general status of ongoing
operations;
(vii) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or employees;
(viii) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law;
(ix) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice;
(x) not make, change or revoke any material Tax election or make any
material agreement or settlement regarding Taxes with any taxing authority;
(xi) not change any method of accounting or accounting practice,
except for any such change required by GAAP; and
(xii) not enter into any future, hedge, swap, collar, put, call,
floor, cap, option or other contracts that are intended to benefit from or
reduce or eliminate the risk of fluctuations in the price of commodities,
including hydrocarbons, or securities, other than such as are entered into
in the Ordinary Course of Business solely for the purpose of terminating an
existing hedge.
(b) Control of the Sellers' Operations. Nothing contained in this Agreement
shall give to Parent, directly or indirectly, rights to control or direct the
operations of Edisto or Convest or their respective Subsidiaries prior to the
Merger 1 Effective Time or the Merger 2 Effective Time, respectively. Prior to
such Effective Times, the Sellers shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of their
respective operations.
(c) Acquisition Transactions.
(i) After the date hereof and prior to the Merger 2 Effective Time or
earlier termination of this Agreement, the Sellers shall not, and shall not
permit any of their Subsidiaries to, initiate, solicit, negotiate,
encourage or provide confidential information to facilitate, and the
Sellers shall, and shall cause each of their Subsidiaries to, cause any
officer, director or employee of, or any attorney, accountant,
37
investment banker, financial advisor or other agent retained by them, not
to initiate, solicit, negotiate, encourage or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of either Seller
or any of their Subsidiaries or any capital stock of either Seller or any
of their Subsidiaries, whether by merger, purchase of assets, tender offer
or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions being referred to herein as an
"Acquisition Transaction").
(ii) Notwithstanding the provisions of subsection (i) above, (A)
either Seller may, in response to an unsolicited written proposal or
unsolicited written indication of interest with respect to a potential or
proposed Acquisition Transaction ("Acquisition Proposal"), furnish (subject
to the execution of a confidentiality agreement and standstill agreement in
substantially the form executed by Parent) confidential or non-public
information to a financially capable corporation, partnership, person or
other entity or group (a "Potential Acquirer") and negotiate with such
Potential Acquirer if the Board of Directors of such Seller after
consulting with its outside legal counsel, determines in good faith that
the failure to provide such confidential or non-public information to or
negotiate with such Potential Acquirer would constitute a breach of its
fiduciary duty to its stockholders and (B) such Seller's Board of Directors
may take and disclose to its stockholders a position contemplated by Rule
14e-2 under the Exchange Act. It is understood and agreed that negotiations
conducted in accordance with this subsection (ii) shall not constitute a
violation of subsection (i) of this Section 7(c).
(iii) The Sellers shall immediately notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to a
Seller or its Subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of a Seller or any
Subsidiary by any person or entity that informs the Board of Directors of a
Seller or such Subsidiary that it is considering making, or has made, an
Acquisition Proposal. Such notice to Parent shall be made orally and in
writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact. Seller
shall immediately provide Parent a copy of all information provided to a
third party.
(iv) Each Party (i) acknowledges that a breach of any of its covenants
contained in this Section 7(c) will result in irreparable harm to the other
Party which will not be compensable in money damages, and (ii) agrees that
such covenant shall be specifically enforceable and that specific
performance and injunctive relief shall be a remedy properly available to
the other Party for a breach of such covenant. In any event, if a Seller
enters into an Acquisition Transaction, it will immediately pay to Parent
the sums described in Section 10(b) below.
(d) Subsidiaries. Each Seller will, following direction from Parent,
dissolve all inactive Subsidiaries (other than MINT Holding Company) prior to
Merger 1. Prior to Merger 1, Sellers will cause the merger of Edisto Exploration
& Production Company ("Edisto E&P") into Convest.
SECTION 8. ADDITIONAL AGREEMENTS.
(a) Access to Information.
(i) The Sellers and their Subsidiaries shall afford to Purchasers and
their respective accountants, counsel, financial advisors and other
representatives (the "Parent Representatives") and Parent and its
Subsidiaries shall afford to the Sellers and their accountants, counsel,
financial advisors and other representatives (the "Seller Representatives")
full access during normal business hours throughout the period prior to the
Merger 1 Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, shall furnish promptly to one another (A)
a copy of each report, schedule and other document filed or received by any
of them pursuant to the requirements of federal or state securities laws or
filed by any of them with the SEC in connection with the transactions
contemplated by this Agreement and (B) such other information concerning
their respective businesses, properties and personnel as a Purchaser or
Seller, as the case may be, shall reasonably request; provided, however,
that no investigation pursuant to this Section 8(a) shall amend or modify
any representations or warranties made herein or the conditions to
38
the obligations of the respective parties to consummate the Mergers. Parent
and its Subsidiaries shall hold and shall use their reasonable best efforts
to cause the Parent Representatives to hold, and the Sellers and their
Subsidiaries shall hold and shall use their reasonable best efforts to
cause the Seller Representatives to hold, in strict confidence all
non-public documents and information furnished to a Purchaser or Seller, as
the case may be, in connection with the transactions contemplated by this
Agreement, except that (x) a Purchaser or Seller may disclose such
information as may be necessary in connection with seeking the Purchasers
Required Statutory Approvals, the Sellers Required Statutory Approvals and
the Requisite Stockholder Approvals and (y) a Purchaser or Seller may
disclose any information that it is required by law or judicial or
administrative order to disclose.
(ii) In the event that this Agreement is terminated in accordance with
its terms, each Party shall promptly redeliver to the other all non-public
written material provided pursuant to this Section 8(a) and shall not
retain any copies, extracts or other reproductions in whole or in part of
such written material. In such event, all documents, memoranda, notes and
other writings prepared by a Purchaser or Seller based on the information
in such material shall be destroyed (and Parent and the Sellers shall use
their respective reasonable best efforts to cause their advisors and
representatives to similarly destroy their documents, memoranda and notes),
and such destruction (and reasonable best efforts) shall be certified in
writing by an authorized officer supervising such destruction.
(iii) The Sellers shall promptly advise Parent and Parent shall
promptly advise the Sellers in writing of any change or the occurrence of
any event after the date of this Agreement having, or which, insofar as can
reasonably be foreseen, in the future may have, either individually or in
the aggregate, any Material Adverse Effect.
(b) Registration Statement and Proxy Statements. Parent and the Sellers
shall file with the SEC as soon as is reasonably practicable after the date
hereof the Joint Proxy Statements/Prospectus and shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable. Parent shall also take any action reasonably required
to be taken under applicable state blue sky or securities laws in connection
with the issuance of Parent Common Stock pursuant hereto. Parent and the Sellers
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by any of
them in connection with the preceding sentence. The information provided and to
be provided by Parent and the Sellers, respectively, for use in the Joint Proxy
Statements/Prospectus shall 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 the light of the circumstances under which they
were made, not misleading.
(c) Stockholders' Approvals. Each Seller shall, as promptly as practicable,
submit this Agreement and the transactions contemplated hereby for the approval
of its stockholders at a meeting of stockholders or by written consent and shall
use its best efforts to obtain the Requisite Stockholder Approvals and adoption
of this Agreement and the transactions contemplated hereby. Such meeting of
stockholders shall be held or written consent effected as soon as practicable
following the date upon which the Registration Statement becomes effective. The
Sellers shall, through their respective Boards of Directors, recommend to their
stockholders approval of the transactions contemplated by this Agreement. Each
Seller (i) acknowledges that a breach of its covenant contained in this Section
8(c) to convene a meeting of its stockholders and call for a vote thereat with
respect to the approval of this Agreement and the Mergers will result in
irreparable harm to Parent which will not be compensable in money damages and
(ii) agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly available
to Parent for a breach of such covenant.
(d) Employee Matters.
(i) Not less than five business days prior to the Closing Date each
Seller and their Subsidiaries shall provide Parent a current list of their
respective officers, directors and employees. Except as otherwise
designated by Parent, at least five business days prior to the Closing,
each Seller and their Subsidiaries shall obtain the resignation or shall
terminate each of their respective officers, directors and employees
effective not later than the Merger 2 Effective Time. At or immediately
prior to Closing, the Sellers shall
39
pay any severance pay, stay bonuses or similar payments required to be paid
pursuant to the terms of the agreements described on Section 5(n)(iii) of
the Sellers Disclosure Schedule. Without limiting the foregoing, this
provision will cause a termination of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ under the
employment agreement between him and Edisto, a copy of which has been
previously provided to the Purchasers.
(ii) Parent agrees that, following the Merger 2 Effective Time, it
will provide continuation coverage, as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), to be given to any employee of
Sellers or their respective Subsidiaries whose employment has been or will
be terminated. The parties understand that COBRA may require that such
continuation coverage be provided for a period of up to thirty-six months
as provided in Section 4980B of the Code at the qualified beneficiary's
expense.
(iii) Prior to the Merger 1 Effective Time, Edisto and Convest shall
have taken all steps, subject to Parent's approval, necessary or
appropriate so that the Convest Savings and Investment Plan and Trust, the
Edisto Savings and Investment Plan and Trust and any other Sellers Plan
that is or is intended to be a "qualified" plan under Section 401(a) of the
Code shall have been terminated.
(e) Quotation. Parent shall use its reasonable best efforts to effect, at
or before the Merger 1 Effective Time, authorization for listing on the NYSE or
such other exchange on which Parent Common Stock is then primarily traded, upon
official notice of issuance, of the shares of Parent Common Stock to be issued
pursuant to the Mergers.
(f) Agreement to Cooperate.
(i) Subject to the terms and conditions herein provided and subject to
the fiduciary duties of the respective boards of directors of the Parent
and the Sellers, each of the Parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
by this Agreement, including using its reasonable efforts to obtain all
necessary or appropriate waivers, consents or approvals of third parties
required in order to preserve material contractual relationships of the
Sellers and their respective Subsidiaries, all necessary or appropriate
waivers, consents and approvals and SEC "no-action" letters to effect all
necessary registrations, filings and submissions and to lift any injunction
or other legal bar to the Mergers (and, in such case, to proceed with the
Mergers as expeditiously as possible).
(ii) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense,
to participate therein, and the Sellers will not settle any such litigation
without the consent of Parent, which consent will not be unreasonably
withheld.
(g) Public Statements. The Parties shall consult with each other prior to
issuing any press release or any written public statement with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or written public statement prior to such consultation.
(h) Notification of Certain Matters. Each of the Purchasers and the Sellers
agrees to give prompt notice to each other of, and to use their respective
reasonable best efforts to prevent or promptly remedy, (A) the occurrence or
failure to occur or the impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Merger 1 Effective Time and (B) any material failure on its part to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Paragraph 8(h) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(i) Corrections to the Joint Proxy Statements/Prospectus and Registration
Statement. Prior to the date of approval of the Mergers by the Sellers'
respective stockholders, each of the Purchasers and Sellers shall correct
promptly any information provided by it to be used specifically in the Joint
Proxy Statements/
40
Prospectus and Registration Statement that shall have become false or misleading
in any material respect and shall take all steps necessary to file with the SEC
and have declared effective or cleared by the SEC any amendment or supplement to
the Joint Proxy Statements/Prospectus or the Registration Statement so as to
correct the same and to cause the Joint Proxy Statements/Prospectus as so
corrected to be disseminated to the stockholders of the Sellers, in each case to
the extent required by applicable law.
(j) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Merger 1 Effective Time, with respect to
Edisto, and the Merger 2 Effective Time, with respect to Convest, Parent
agrees that it will indemnify and hold harmless each present and former
director and/or officer of a Seller, determined as of such effective time
(the "Indemnified Parties"), that is made a party or threatened to be made
a party to any threatened, pending or completed, action, suit, proceeding
or claim, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she was a director or officer of a Seller or
any subsidiary of a Seller prior to such effective time and arising out of
actions or omissions of the Indemnified Party in any such capacity
occurring at or prior to such effective time (a "Claim") against any costs
or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities reasonably incurred in connection
with any Claim, whether asserted or claimed prior to, at or after such
effective time, to the fullest extent that such Seller would have been
permitted under Delaware law, the respective charters or by-laws of such
Seller or written indemnification agreements in effect at the date hereof,
including provisions therein relating to the advancement of expenses
incurred in the defense of any action or suit.
(ii) Any Indemnified Party wishing to claim indemnification under
paragraph (i) of this Section 8(j) upon learning of any such Claim, shall
promptly notify Parent thereof, but the failure to so notify shall not
relieve Parent of any liability it may have to such Indemnified Party if
such failure does not materially prejudice the indemnifying party. In the
event of any such Claim (whether arising before or after the Merger 1
Effective Time or the Merger 2 Effective Time, as the case may be), (A)
Parent shall have the right to assume the defense thereof and Parent shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Parent
elects not to assume such defense, the Indemnified Parties may retain
counsel reasonably satisfactory to Parent, and Parent shall pay reasonable
fees and expenses of such counsel for the Indemnified Parties; provided,
however, that Parent shall be obligated pursuant to this paragraph (ii) to
pay for only one firm or counsel for all Indemnified Parties unless the use
of one counsel for such Indemnified Parties would present such counsel with
a conflict of interest, (B) the Indemnified Parties will cooperate in the
defense of any such matter and (C) Parent shall not be liable for any
settlement effected without its prior written consent, which consent will
not be unreasonably withheld; and provided, further, however, that Parent
shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law. If such indemnity is not available with
respect to any Indemnified Party, then Parent and the Indemnified Party
shall contribute to the amount payable in such proportion as is appropriate
to reflect relative faults and benefits, with any respect of "fault"
otherwise allocable to a Seller being allocated to Parent.
(iii) For a period of six years after the Merger 1 Effective Time and
the Merger 2 Effective Time, respectively, Purchasers shall maintain the
Sellers' existing directors and officers liability insurance or equivalent
liability insurance, which will provide coverage for those persons who are
directors and officers of the Sellers as of such effective time, so long as
the annual premium therefor is not in excess of 150% of the last annual
premium paid by the Sellers prior to the date hereof.
(iv) In lieu of the insurance arrangement referred to in clause (iii)
of this Section 8(j), Purchasers may, on or before the Closing, enter into
alternative insurance arrangements, providing that such arrangements are
approved by each of the Sellers and are no less advantageous to the
Indemnified Parties so long as no lapse in coverage occurs as a result of
such substitution.
41
(v) The obligations of Purchasers under this Section 8(j) are intended
to benefit, and be enforceable against Purchasers directly by the
Indemnified Parties, and shall be binding on all respective successors of
Purchasers.
(k) Shareholders Agreement; Compliance with the Securities Act. Each Seller
shall each use their reasonable best efforts to cause each principal executive
officer, each director and each other person who is an Affiliate of either
Seller to deliver to Parent on or prior to the Merger 1 Effective Time (i) a
written agreement (an "Affiliate Agreement") to the effect that such person will
not offer to sell, sell or otherwise dispose of any shares of Parent Common
Stock issued in the Mergers, except, in each case, pursuant to an effective
registration statement or in compliance with Rule 145, as amended from time to
time, or in a transaction which, in the opinion of legal counsel satisfactory to
Parent, is exempt from the registration requirements of the Securities Act and
(ii) a Shareholders Agreement. Parent shall be entitled to place appropriate
legends on the certificates evidencing any Parent Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of the Affiliate Agreements.
(1) Convest Shares.
(i) Transfer and Encumbrance. Edisto agrees not to transfer, sell,
exchange, pledge or otherwise dispose of or encumber the Shares or any New
Shares (as hereinafter defined) or to make any offer or agreement relating
thereto, at any time prior to the Expiration Date. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (A) such date and time
as each of the Mergers shall have become effective in accordance with the
terms and provisions of the Merger Agreement, (B) the termination of this
Merger Agreement in accordance with its terms.
(ii) New Shares. Edisto agrees that any shares of capital stock of
Convest that Edisto purchases or with respect to which Edisto otherwise
acquires beneficial ownership after the date of this Agreement and prior to
the Expiration Date ("New Shares") shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted
Shares.
(iii) Agreement to Vote Shares. Unless this Merger Agreement is
terminated pursuant to its terms, at every meeting of the stockholders of
Convest held prior to the Merger 2 Effective Time called with respect to
any of the following, and at every adjournment thereof, and on every action
or approval by written consent of the stockholders of Convest with respect
to any of the following, Edisto shall vote the Shares and any New Shares:
(A) in favor of approval of this Agreement, the Merger 2 Articles and the
Mergers and any matter that could reasonably be expected to facilitate the
Mergers; and (B) against approval of any proposal made in opposition to the
consummation of the Mergers, this Agreement or the Merger 2 Articles,
against any merger, consolidation, sale of assets, reorganization or
recapitalization with any party other than Parent and its Affiliates and
against any liquidation or winding up of Convest (each of the foregoing is
referred to as an "Opposing Proposal"). To the extent inconsistent with the
provisions of this Agreement, Edisto hereby revokes any and all proxies
with respect to the Shares or any other voting securities of Convest.
(m) Credit Agreement. Sellers agree, if requested by Parent, to cooperate
with Parent to cause the termination of the Amended and Restated Secured
Revolving Credit Agreement, dated June 23, 1995, by and among Convest, Edisto
E&P, BankOne, Texas, National Association, as Agent, and Compass Bank -- Houston
and BankOne, Texas, National Association, as Banks, including the termination
and release of any security arrangements or other obligations of any nature
thereunder.
42
SECTION 9. CONDITIONS.
(a) Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligations of each party to effect the Mergers shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(i) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the Requisite Stockholder Approvals of the
Sellers under applicable law and applicable listing requirements;
(ii) the shares of Parent Common Stock issuable in the Mergers and
those to be reserved for issuance upon exercise of stock options or
warrants or the conversion of convertible securities shall have been
authorized for quotation on the NYSE, or such other exchange on which
Parent Common Stock is then primarily traded, upon official notice of
issuance;
(iii) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(iv) no preliminary or permanent injunction or other order or decree
by any federal or state court which prevents the consummation of any of the
Mergers shall have been issued and remain in effect (each party agreeing to
use its reasonable efforts to have any such injunction, order or decree
lifted);
(v) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of any of the Mergers or make the consummation of any of the
Mergers illegal;
(vi) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Mergers and the transactions
contemplated hereby, and all consents from lenders required to consummate
the Mergers, shall have been obtained and be in effect at the Merger 1
Effective Time, except where the failure to obtain the same would not be
reasonably likely to have a Material Adverse Effect following the Merger 1
Effective Time; and
(vii) the Sellers and Purchasers shall have received an opinion of
Coopers & ▇▇▇▇▇▇▇ L.L.P., in form and substance reasonably satisfactory to
the Sellers and Purchasers, dated the Closing Date, to the effect that (A)
Merger 2 will qualify as a reorganization under Section 368 of the Code and
(B) Parent and Convest will each be a "party to a reorganization" within
the meaning of 368(b) of the Code with respect to Merger 2.
(b) Conditions to Obligation of the Sellers to Effect the Mergers. Unless
waived by the Sellers, the obligation of the Sellers to effect the Mergers shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(i) Purchasers shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of Purchasers
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and (except to the extent that such
representations and warranties speak as of an earlier date) on and as of
the Closing Date as if made at and as of such date, and the Sellers shall
have received a certificate of the President or a Vice President of Parent
and of the President or a Vice President of EDI-Sub to that effect;
(ii) since the date hereof, there shall have been no changes that
constitute, and no event or events (including, without limitation,
litigation developments) shall have occurred which have resulted in or
constitute, either individually or in the aggregate, a Material Adverse
Change;
(iii) all governmental waivers, consents, orders, and approvals
legally required for the consummation of the Mergers and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date except for such waivers, consents, orders and approvals the
failure of which to have been
43
obtained would not have, either individually or in the aggregate, a
Material Adverse Effect, and no governmental authority shall have
promulgated after the date hereof any statute, rule or regulation which,
when taken together with all such promulgations, would cause a Material
Adverse Change; and
(iv) each Seller shall have received the bring-down opinion of its
respective financial advisor, dated as of the date of the definitive Joint
Proxy Statement/Prospectus, to the effect that the consideration to be
received in the Mergers by the respective holders of the Convest Common
Stock and the Edisto Common Stock is fair to such holders from a financial
point of view.
(c) Conditions to Obligation of Purchasers to Effect the Mergers. Unless
waived by Parent, the obligations of Purchasers to effect the Mergers shall be
subject to the fulfillment at or prior to the Merger 1 Effective Time of the
additional following conditions:
(i) the Sellers shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Sellers
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and Parent shall have received a Certificate
of the Chairman and Chief Executive Officer, President or of a Vice
President of each Seller to that effect;
(ii) the Affiliate Agreements and Shareholders Agreements required to
be delivered to Parent pursuant to Section 8(k) shall have been furnished
as required by Section 8(k);
(iii) each Edisto Option and each Convest Option shall have either
been redeemed, exercised or canceled in accordance with Section 4(c);
(iv) since the date hereof, there shall have been no changes that
constitute, and no event or events (including, without limitation,
litigation developments) shall have occurred which have resulted in or
constitute, either individually or in the aggregate, a Material Adverse
Change;
(v) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Mergers and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date except for such waivers, consents, orders and approvals the
failure of which to have been obtained would not have, either individually
or in the aggregate, a Material Adverse Effect, and no governmental
authority shall have promulgated after the date hereof any statute, rule or
regulation which, when taken together with all such promulgations, would
cause a Material Adverse Change;
(vi) the number of Dissenting Shares shall not exceed three percent of
the total number of shares of Edisto Common Stock outstanding on the date
hereof;
(vii) with respect to that certain letter agreement, dated May 1,
1995, among Convest, Edisto E&P and Coral Reserves Energy Corp. ("Coral"),
and the preferential purchase right of Coral contained therein, Sellers
shall have obtained (a) the written waiver of such right by Coral, or (b)
the exercise of such right by Coral in accordance with the terms of such
agreement for a price of $14,000,000; and
(viii) with respect to that certain Conveyance of Production Payment
dated February 4, 1992, between NRM Operating Company, L.P. and Enron
Reserve Acquisition Corp. ("ERAC"), Sellers shall have obtained the express
written consent of ERAC to (a) the transfer of the interest of Edisto E&P
in the subject property pursuant to this Agreement, and (b) the succession,
by Parent or by any Subsidiary of Parent selected from time to time by
Parent in its sole discretion, to Edisto E&P's interests and obligations
under such agreement; provided, however, that such successor shall not be
required to assume any obligations, other than those currently borne by
Edisto E&P, in order for Sellers to obtain such consent.
44
SECTION 10. TERMINATION, AMENDMENT AND WAIVER.
(a) Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the stockholders of the
Sellers, by the mutual written consent of the Parent and the Sellers or as
follows:
(i) The Sellers shall have the right to terminate this Agreement:
(A) if the representations and warranties of Purchasers shall fail
to be true and correct in all material respects on and as of the date
made or, except in the case of any such representations and warranties
made as of a specified date, on and as of any subsequent date as if made
at and as of such subsequent date and such failure shall not have been
cured in all material respects within 30 days after written notice of
such failure is given to Parent by the Sellers;
(B) if the Mergers are not completed by October 31, 1997 (unless
due to a delay or default on the part of a Seller);
(C) if any of the Mergers is enjoined by a final, unappealable
court order not entered at the request or with the support of a Seller
and if the Sellers shall have used reasonable efforts to prevent the
entry of such order;
(D) if (w) a Seller receives an offer or proposal from any
Potential Acquirer (excluding any Affiliate of a Seller or any group of
which any Affiliate of a Seller is a member) with respect to a merger,
sale of substantial assets or other business combination involving such
Seller, (x) such Seller's Board of Directors determines, in good faith
and after consultation with an independent financial advisor, that such
offer or proposal (if consummated pursuant to its terms) would result in
an Acquisition Transaction more favorable to such Seller's stockholders
from a financial point of view than the relevant Merger (any such offer
or proposal being referred to as a "Superior Proposal") and resolves to
accept such Superior Proposal, (y) the Board of Directors of the Seller
shall conclude in good faith after consultation with its legal counsel
that such action is necessary in order for the Board of Directors of the
Seller to act in a manner that is consistent with its fiduciary
obligations under applicable law and (z) the Seller shall have furnished
the Parent with a copy of the definitive agreement at least five
business days prior to its execution and Parent shall have failed within
such five business day period to offer to amend the terms of this
Agreement so that the Mergers would be, in the good faith determination
of the Board of Directors of the Seller, at least as favorable to the
Seller's stockholders from a financial point of view as the Acquisition
Transaction; provided, however, that such termination shall not be
effective until such time as the payment required by Section 10(b)(ii)
shall have been received by Parent;
(E) if (w) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any Affiliate of a Seller or any group of which any
Affiliate of a Seller is a member) for all outstanding shares of such
Seller's common stock, (x) such Seller's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves to
accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer, (y) the Board of
Directors of the Seller shall conclude in good faith after consultation
with its legal counsel that such action is necessary in order for the
Board of Directors of the Seller to act in a manner that is consistent
with its fiduciary obligations under applicable law and (z) the Seller
shall have furnished the Parent with a copy of the definitive agreement
at least five business days prior to its execution and Parent shall have
failed within such five business day period to offer to amend the terms
of this Agreement so that the Mergers would be, in the good faith
determination of the Board of Directors of the Seller, at least as
favorable to the Seller's stockholders from a financial point of view as
the Acquisition Transaction; provided, however, that such termination
shall not be effective until such time as the payment required by
Section 10(b)(ii) shall have been received by Parent; or
(F) if (x) Parent fails to perform in any material respect any of
its material covenants in this Agreement ("Default"), (y) Parent does
not cure such Default in all material respects within
45
30 days after notice of such Default is given to Parent by the Sellers
and (z) neither Seller is itself in Default.
(ii) Parent shall have the right to terminate this Agreement:
(A) if the representations and warranties of the Sellers shall fail
to be true and correct in all material respects on and as of the date
made or, except in the case of any such representations and warranties
made as of a specified date, on and as of any subsequent date as if made
at and as of such subsequent date and such failure shall not have been
cured in all material respects within 30 days after written notice of
such failure is given to the Sellers by Parent;
(B) if the Mergers are not completed by October 31, 1997 (unless
due to a delay or default on the part of Parent);
(C) if any of the Mergers is enjoined by a final, unappealable
court order not entered at the request or with the support of Parent and
if Parent shall have used reasonable efforts to prevent the entry of
such order;
(D) if the Board of Directors of a Seller shall have resolved to
accept a Superior Proposal or shall have recommended to the stockholders
of such Seller that they tender their shares in a tender or an exchange
offer commenced by a third party (excluding any Affiliate of Parent or
any group of which any Affiliate of Parent is a member);
(E) if (A) a Seller is in Default, (B) such Seller does not cure
such Default in all material respects within 30 days after notice of
such Default is given to such Seller by Parent, and (C) Parent is not
itself in Default; or
(F) if the Sellers fail to receive the Requisite Stockholder
Approvals.
(iii) As used in this Section 10(a) "group" has the meaning set forth
in Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(iv) Each party (i) acknowledges that a breach of any of its
requirements for a termination pursuant to Section 10(a)(i)(D) and
10(a)(i)(E) will result in irreparable harm to the other party which will
not be compensable in money damages, and (ii) agrees that such requirements
shall be specifically enforceable and that specific performance and
injunctive relief shall be a remedy properly available to the other party
for a breach of such requirements. In any event, if a Seller enters into an
Acquisition Transaction, it will immediately pay to Parent the sums
described in Section 10(b) below.
(b) Expenses and Fees.
(i) All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that those expenses incurred in connection
with printing and filing the Joint Proxy Statements/Prospectus shall be
shared equally by Parent and the Sellers.
(ii) The Sellers agree to immediately pay to Parent a fee equal to
$3,000,000, if:
(A) either Seller terminates this Agreement pursuant to clause (D)
or (E) of Section 10(a)(i);
(B) Parent terminates this Agreement pursuant to clause (D) of
Section 10(a)(ii); or
(C) Parent terminates this Agreement pursuant to clause (F) of
Section 10(a)(ii) as a result of a failure of Convest to receive the
Requisite Stockholder Approvals.
(iii) Parent agrees to pay to the Sellers, as liquidated damages and
as the sole remedy and payment for any damages, a fee equal to $3,000,000
if Sellers are not in breach or violation of this Agreement and Parent
terminates this Agreement for any reason other than pursuant to Section
10(a)(ii).
46
(c) Effect of Termination. In the event of termination of this Agreement by
either Parent or the Sellers pursuant to the provisions of Section 10(a), this
Agreement shall forthwith become void and there shall be no further obligation
on the part of any Party or their respective officers or directors (except as
set forth in this Section 10(c), in the second sentence of Section 8(a)(i) and
in Sections 8(a)(ii) and 10(b), all of which shall survive the termination).
Nothing in this Section 10(c) shall relieve any Party from liability for any
willful or intentional breach of this Agreement; provided, however, that any
termination of this Agreement in accordance with the procedures and payments set
forth in Section 10(b) shall relieve the terminating Party of any such
liability.
(d) Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto and in compliance with
applicable law. Such amendment may take place at any time prior to the Closing
Date, whether before or after approval by the stockholders of the Sellers.
(e) Waiver. At any time prior to the Merger 1 Effective Time, the
Dissolution Effective Time or Merger 2 Effective Time, as the case may be, the
Parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other Parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a Party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such Party.
SECTION 11. GENERAL PROVISIONS.
(a) Non-Survival of Representations and Warranties. No representations or
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Mergers. The covenants and agreements of the parties
to be performed after the Closing contained in this Agreement shall survive the
Closing.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, mailed by registered
or certified mail (return receipt requested) or sent via facsimile to the
parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
(i) If to Parent or EDI-Sub to:
Forcenergy Inc
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Sellers, to:
Edisto Resources Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
47
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
(d) Miscellaneous. This Agreement (including the documents and instruments
referred to herein) (i) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, (ii) is not
intended to confer upon any other person any rights or remedies hereunder and
(iii) shall not be assigned by operation of law or otherwise, except that
EDI-Sub may assign this Agreement to any other wholly owned subsidiary of
Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
(f) Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
48
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
FORCENERGY INC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
EDI ACQUISITION CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
EDISTO RESOURCES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
CONVEST ENERGY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
