AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
By and Among
QUICKSILVER RESOURCES INC.
and
MSR EXPLORATION LTD.
Dated as of September 1, 1998
TABLE OF CONTENTS
ARTICLE I - THE MERGER............................................................................................2
Section 1.01. The Merger............................................................2
Section 1.02. The Closing...........................................................2
Section 1.03. Effective Time........................................................2
Section 1.04. Effect of the Merger..................................................2
Section 1.05. Certificate of Incorporation..........................................2
Section 1.06. Bylaws................................................................2
Section 1.07. Directors and Officers................................................3
Section 1.08. Tax Consequences......................................................3
ARTICLE II - CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..................................................3
Section 2.01. Merger Consideration: Conversion and Cancellation
of Securities.........................................................3
Section 2.02. Exchange Agency; Surrender of Certificates............................4
Section 2.03. Stock Transfer Books..................................................6
Section 2.04. Dissenters' Rights....................................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................8
Section 3.01. Organization and Qualification: Subsidiaries..........................8
Section 3.02. Certificate of Incorporation and Bylaws...............................8
Section 3.03. Capitalization........................................................8
Section 3.04. Authority............................................................10
Section 3.05. No Conflict: Required Filings and Consents...........................10
Section 3.06. Permits; Compliance..................................................11
Section 3.07. Reports; Financial Statements; Undisclosed Liabilities...............12
Section 3.08. Absence of Certain Changes or Events.................................13
Section 3.09. Absence of Litigation................................................13
Section 3.10. Employee Benefit Plans; Labor Matters................................14
Section 3.11. Taxes................................................................16
Section 3.12. Affiliates. ........................................................17
Section 3.13. Environmental Matters................................................17
Section 3.14. Properties. .........................................................18
Section 3.15. Real Property. ......................................................23
Section 3.16. Insider Interests; Transactions with Management......................23
Section 3.17. Contracts and Agreements.............................................24
Section 3.18. Vote Required........................................................24
Section 3.19. Brokers..............................................................24
Section 3.20. Opinion of Financial Advisor.........................................24
Section 3.21. Special Committee Recommendations. .................................24
Section 3.22. Disclosure...........................................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF QRI...............................................................25
Section 4.01. Organization and Qualification. ....................................25
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Section 4.02. Certificate of Incorporation and Bylaws; Formation Documents.........25
Section 4.03. Capitalization.......................................................25
Section 4.04. Authority............................................................26
Section 4.05. No Conflict; Required Filings and Consents...........................27
Section 4.06. Permits; Compliance..................................................27
Section 4.07. Reports; Financial Statements........................................28
Section 4.08. Absence of Certain Changes or Events.................................28
Section 4.09. Absence of Litigation................................................28
Section 4.10. Employee Benefit Plans; Labor Matters................................29
Section 4.11. Taxes................................................................31
Section 4.12. Environmental Matters................................................32
Section 4.13. Properties. ........................................................33
Section 4.14. Insider Interests; Transactions with Management......................37
Section 4.15. Vote Required........................................................38
Section 4.16. Brokers..............................................................38
Section 4.17. Board Recommendations................................................38
Section 4.18. Disclosure..........................................................38
ARTICLE V - COVENANTS............................................................................................38
Section 5.01. Affirmative Covenants of the Company.................................38
Section 5.02. Affirmative Covenants of QRI.........................................40
Section 5.03. Negative Covenants of the Company. .................................42
Section 5.04. Negative Covenants of QRI............................................45
Section 5.05. Access and Information...............................................46
ARTICLE VI - ADDITIONAL AGREEMENTS...............................................................................47
Section 6.01. Presentation to Stockholders.........................................47
Section 6.02. Registration Statement; Proxy Statement/Prospectus...................47
Section 6.03. Appropriate Action: Consents; Filings................................49
Section 6.04. Affiliates; Tax Treatment............................................50
Section 6.05. Public Announcements.................................................51
Section 6.06. AMEX Listing.........................................................51
Section 6.07. State Takeover Statutes..............................................51
Section 6.08. Board Seat...........................................................51
Section 6.09. Options..............................................................51
Section 6.10. Common Stock Warrants................................................52
Section 6.11. Indemnification......................................................52
Section 6.12. Employment Contracts. ..............................................55
Section 6.13. Comfort Letters......................................................55
Section 6.14. Sales Under Rule 145 if Applicable...................................55
ARTICLE VII - CLOSING CONDITIONS.................................................................................56
Section 7.02. Additional Conditions to Obligations of QRI..........................57
Section 7.03. Additional Conditions to Obligations of the Company..................58
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ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.................................................................60
Section 8.01. Termination..........................................................60
Section 8.02. Effect of Termination; Remedies. ...................................61
Section 8.03. Amendment............................................................61
Section 8.04. Waiver. ............................................................61
Section 8.05. Fees, Expenses and Other Payments....................................62
ARTICLE IX - GENERAL PROVISIONS..................................................................................63
Section 9.01. Effectiveness of Representations, Warranties and Agreements..........63
Section 9.02. Notices..............................................................63
Section 9.03. Certain Definitions..................................................64
Section 9.04. Headings.............................................................66
Section 9.05. Severability.........................................................66
Section 9.06. Entire Agreement.....................................................66
Section 9.07. Assignment...........................................................66
Section 9.08. Parties in Interest..................................................66
Section 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative................66
Section 9.10. Governing Law........................................................67
Section 9.11. Counterparts.........................................................67
Section 9.12. Specific Performance.................................................67
Section 9.14. Limitation on Liability..............................................68
Section 9.15. Dispute Resolution...................................................68
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
September __, 1998 (this "Agreement"), is by and between QUICKSILVER RESOURCES
INC., a Delaware corporation ("QRI"), and MSR EXPLORATION LTD., a Delaware
corporation (the "Company").
WHEREAS, the Company, upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware ("DGCL"), will merge with and into QRI (the "Merger");
WHEREAS, the Special Committee (as herein defined) of the Board of
Directors of the Company, and the Board of Directors of the Company (with the
members of the Xxxxxx family abstaining), have determined that the Merger is
advisable and is fair to, and in the best interests of, the Company and its
stockholders, have approved and adopted this Agreement and the transactions
contemplated hereby, and have recommended approval and adoption of this
Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of QRI has determined that the Merger
is advisable and is fair to, and in the best interests of, QRI and its
stockholders, has approved and adopted this Agreement and the transactions
contemplated hereby, and has recommended approval and adoption of this Agreement
by the stockholders of QRI;
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a tax-free reorganization under the provisions of Section
368(a)(1)(A) of the United States Internal Revenue Code of 1986, as amended (the
"Code") and it is also intended that the Merger will be accounted for as a
purchase;
WHEREAS, QRI consummated a series of transactions (the "Formation
Transaction") whereby (i) Quicksilver Energy, L.C., a Michigan limited liability
company ("QELC"), Mercury Exploration Company, a Texas corporation ("Mercury"),
and certain affiliates and employees of Mercury (the "Mercury Affiliates")
contributed certain assets or interests therein to QRI in exchange for shares of
common stock, par value $.01 per share of QRI ("QRI Common Stock"), (ii)
Michigan Gas Partners, Limited Partnership, a Texas limited partnership ("MGP"),
merged with and into QRI, with the sole limited partner of MGP, Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership
("JEDI"), receiving shares of QRI Common Stock in the merger, and (iii) certain
indebtedness of QELC to Trust Company of the West, a California trust company
("TCW"), was repaid by the issuance of shares of QRI Common Stock to TCW (QELC,
Mercury, the Mercury Affiliates, JEDI and TCW are referred to herein as the
"Contributing Entities") (any agreement, document or instrument entered into in
connection with the Formation Transactions are collectively referred to herein
as the "Formation Documents" and individually as a "Formation Document").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.03 of this Agreement), the Company shall be merged
with and into QRI. As a result of the Merger, the separate corporate existence
of the Company shall cease and QRI shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
Section 1.02. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of Jenkens & Xxxxxxxxx, a Professional Corporation, 0000 Xxxx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx, at 9:00 am., local time, on the second business day
immediately following the day on which the last to be fulfilled or waived of the
conditions set forth in Article VII shall be fulfilled or waived in accordance
herewith (other than conditions with respect to actions the respective parties
hereto will take at the Closing), or (b) at such other time, date or place as
QRI and the Company may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
Section 1.03. Effective Time. On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing a Certificate of Merger with
the Secretary of State of the State of Delaware, in such form as is required by,
and executed in accordance with the relevant provisions of, the DGCL (the date
and time of the completion of such filing or such later date and time as may be
specified in the Certificate of Merger as the effective time of the Merger being
the "Effective Time").
Section 1.04. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in Section 259 of the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of QRI and the Company
shall vest in the Surviving Corporation, and all debts, obligations, liabilities
and duties of each of QRI and the Company shall become the debts, obligations,
liabilities and duties of the Surviving Corporation.
Section 1.05. Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Surviving Corporation, which shall be in the
form of Exhibit "A" hereto, shall be the Certificate of Incorporation of QRI as
in effect immediately prior to the Effective Time and shall continue to be its
Certificate of Incorporation until amended as provided therein and under the
DGCL. Prior to the Effective Time, QRI shall take all necessary corporate action
to amend its certificate of incorporation so as to conform with the form of
Certificate of Incorporation attached hereto as Exhibit "A".
Section 1.06. Bylaws. At the Effective Time and without further action
on the part of the Company or QRI, the Bylaws of the Surviving Corporation,
which shall be in the form of Exhibit "B" hereto, shall be the Bylaws of QRI in
effect as of the Effective Time and thereafter shall continue to be its Bylaws
until amended as provided therein and under the DGCL. Prior to the Effective
Time, QRI shall take all necessary corporate action to amend and restate its
bylaws to conform with the form of Bylaws attached hereto as Exhibit "B".
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Section 1.07. Directors and Officers. Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx,
Xxxxx X. Xxxxxx, Xxxx Xxxxxx, Xxxxxx X. Xxxxxx, D. Xxxxxxx Xxxx and X. Xxxxxxx
Xxxxxx III shall be the directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
Section 1.08. Tax Consequences. It is intended that the Merger shall
constitute a tax-free reorganization within the meaning of Section 368(a)(1)(A)
of the Code, and that this Agreement shall constitute a "plan of reorganization"
for the purposes of Section 368 of the Code.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Merger Consideration: Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of QRI, the Company or the holders of any of the Company's
securities:
(a) Subject to the other provisions of this Article II, each
share of common stock, par value $.01 per share, of the Company
("Company Common Stock") issued and outstanding immediately prior to
the Effective Time (excluding any Dissenting Shares and any Company
Common Stock described in Section 2.01(d) of this Agreement) shall be
converted into the right to receive one-tenth (0.10) of one fully paid
and nonassessable share of common stock, par value $.0l per share, of
QRI ("QRI Common Stock") (the "Conversion Ratio").
(b) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of QRI Common
Stock or Company Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Conversion Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares; provided,
that however, no adjustment shall be made with regard to the 100,000
shares of QRI Common Stock currently outstanding pursuant to a stock
split in connection with the Merger that results in an increase in the
number of outstanding shares of QRI Common Stock to 10,310,806 shares.
(c) As a result of their conversion pursuant to Section
2.01(a), all shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired. Each
certificate previously evidencing Company Common Stock outstanding
immediately prior to the Effective Time (other than Company Common
Stock described in Section 2.01(d) of this Agreement and any Dissenting
Shares) ("Converted Common Stock") shall thereafter represent, subject
to Section 2.02(d) of this Agreement, the right to receive that number
3
of shares of QRI Common Stock determined pursuant to the Conversion
Ratio and, if applicable, the right to receive cash pursuant to Section
2.02(d) of this Agreement ("Merger Consideration"). The holders of
certificates previously evidencing Converted Common Stock shall cease
to have any rights with respect to such Converted Common Stock except
the right to receive the Merger Consideration applicable thereto and
as otherwise provided herein or by law. Such certificates previously
evidencing Converted Common Stock shall be exchanged for certificates
evidencing whole shares of QRI Common Stock issued in consideration
therefor upon the surrender of such certificates in accordance with
the provisions of Section 2.02 of this Agreement. No fractional shares
of QRI Common Stock shall be issued and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.02(d) of this Agreement.
(d) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Common Stock held in the treasury of
the Company immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof and no payment shall be
made with respect thereto.
(e) Each share of common stock, par value $.0l per share, of
QRI issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding and shall thereafter represent one
validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation, and shall not be converted or affected by
virtue of the Merger.
Section 2.02. Exchange Agency; Surrender of Certificates.
(a) Exchange Fund. At or prior to the Effective Time, QRI
shall deposit, or cause to be deposited, with a bank or trust company
designated by QRI (the "Exchange Agent"), for the benefit of the
holders of Converted Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent (i) certificates evidencing a
number of shares of QRI Common Stock equal to the product of the
Conversion Ratio multiplied by the number of Converted Common Stock
issued and outstanding, and (ii) cash in an amount sufficient to
provide for the payments to be made in lieu of issuing any fractional
shares of QRI Common Stock as provided in Section 2.02(d) of this
Agreement. Additionally, subject to the provisions of subsection (e) of
this Section 2.02, QRI shall, if and when a payment date has occurred
with respect to a dividend or distribution that has been declared
subsequent to the Effective Time, deposit with the Exchange Agent an
amount in cash (or property of like kind to that which is the subject
of such dividend or distribution) equal to the dividend or distribution
per share of QRI Common Stock times the number of shares of QRI Common
Stock evidenced by certificates theretofore representing Converted
Common Stock that have not theretofore been surrendered for exchange in
accordance with this Section 2.02. The certificates and cash (and
property, if any) deposited with the Exchange Agent in accordance with
this Section 2.02(a) are hereinafter referred to as the "Exchange
Fund." The Exchange Agent shall, pursuant to irrevocable instructions,
deliver QRI Common Stock (and any dividends or distribution related
thereto) and/or cash, as described above, in exchange for surrendered
certificates pursuant to the terms of this Agreement out of the
Exchange Fund.
4
(b) Exchange Procedures. As soon as practicable after the
Effective Time, QRI shall cause the Exchange Agent to send to each
record holder of Company Common Stock at the Effective Time (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing Company Common Stock (the "Certificates") shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in
such form and contain such other provisions as QRI and the Company
shall reasonably determine), and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates
representing shares of QRI Common Stock, and any cash in lieu of
fractional shares, into which the shares of Company Common Stock
represented by such Certificate or Certificates shall have been
converted pursuant to this Agreement. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, as applicable, a certificate
representing that number of whole shares of QRI Common Stock that such
holder has the right to receive pursuant to the provisions of this
Article II and cash in the amount such holder has the right to receive
pursuant to such provisions, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of
the Company, a certificate evidencing the proper number of shares of
QRI Common Stock may be issued to the transferee if the Certificate
evidencing the Company Common Stock shall be surrendered to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered for exchange in accordance with
the provisions of Section 2.02 of this Agreement, each Certificate
theretofore representing Converted Common Stock shall from and after
the Effective Time represent for all purposes only the right to receive
the applicable Merger Consideration as set forth in this Agreement. If
any holder of Converted Common Stock shall be unable to surrender such
holder's Certificates because such Certificates have been lost or
destroyed, such holder may deliver in lieu thereof an affidavit and
indemnity bond in form and substance and with surety reasonably
satisfactory to QRI. No interest shall be paid on any Merger
Consideration payable to former holders of Converted Common Stock.
(c) Distributions with Respect to QRI Common Stock. No
dividends or other distributions declared or made after the Effective
Time with respect to QRI Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate previously representing shares of Company Common Stock with
respect to any shares of QRI Common Stock evidenced thereby, and no
Merger Consideration shall be paid to any such holders until the holder
of such Certificate shall surrender such Certificate theretofore
representing shares of Company Common Stock. Subject to applicable
laws, following surrender of any such Certificate, there shall be paid
to the holder of the certificates evidencing whole shares of QRI Common
Stock issued in exchange therefor, without interest, (i) promptly
following the surrender of such Certificate and in addition to the
amount of any cash payable with respect to a fractional share of QRI
Common Stock to which such holder is entitled pursuant to Section
2.02(d) of this Agreement, the amount of dividends or other
distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of QRI Common Stock and (ii) at
the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
5
surrender and a payment date occurring after surrender payable with
respect to such whole shares of QRI Common Stock.
(d) No Fractional Shares. No certificates or scrip evidencing
fractional shares of QRI Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share
interests shall not entitle the owner thereof to any rights of a
stockholder of QRI. In lieu of any such fractional shares, (i) each
holder of a Certificate previously evidencing Company Common Stock,
upon surrender of such Certificate for exchange pursuant to this
Article II, shall be paid an amount in cash (without interest), rounded
to the nearest cent, determined by multiplying (A) the Closing Price
multiplied by the Conversion Ratio by (B) the fractional interest to
which such holder would otherwise be entitled (after taking into
account all shares of Company Common Stock held of record by such
holder at the Effective Time). "Closing Price" means the closing sales
price of the MSR Common Stock on the American Stock Exchange ("AMEX")
(or such other quotation system or securities exchange on which the MSR
Common Stock is then quoted or listed) as reported by the Wall Street
Journal on the day preceding the Closing Date as provided in Section
1.02 hereof.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains unclaimed by the former holders of Converted Common
Stock on the second anniversary of the Closing Date shall be delivered
to QRI, upon demand, and any former holders of Converted Common Stock
who have not theretofore complied with this Article II shall thereafter
look only to QRI for the Merger Consideration and dividends or
distributions to which they are entitled, without any interest thereon.
Neither QRI nor the Company shall be liable to any former holder of
Converted Common Stock for any Merger Consideration (or dividends or
distributions with respect thereto) or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Withholding. QRI (or any affiliate thereof) shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any former holder of Converted
Common Stock such amounts as QRI (or any affiliate thereof) is required
to deduct and withhold with respect to the making of such payment under
the Code or any other provision of federal, state, local or foreign tax
law and QRI agrees to remit to the proper taxing authority such amounts
so withheld. To the extent that amounts are so withheld by QRI, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the former holder of the Converted Common Stock in
respect of which such deduction and withholding was made by QRI.
Section 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration, deliverable in respect thereof pursuant to this Agreement
in accordance with the procedures set forth in this Article II. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of
6
1933, as amended (the "Securities Act"), shall not be exchanged until QRI has
received a written agreement from such person as provided in Section 6.04.
Section 2.04. Dissenters' Rights.
(a) Notwithstanding the provision of Section 2.01 or any other
provision in this Agreement to the contrary, each share of Company
Common Stock issued and outstanding immediately prior to the Effective
Time and held by stockholders who have not voted such shares in favor
of the Merger or consented thereto in writing and qualify under and
have complied with all of the provisions of Article 11, Section 3,
entitled Right to Dissent, of the Certificate of Incorporation of the
Company and Section 184 of the Business Corporations Act (Alberta) as
in effect on July 31, 1997 (the "Appraisal Provisions") ("Dissenting
Shares") shall not, by virtue of the Merger, be converted into the
right to receive the Merger Consideration but such stockholder shall be
entitled to receive payment of the appraised value of such shares of
Company Common Stock or held by them in accordance with the provisions
of the Company's Certificate of Incorporation and the Appraisal
Provisions; provided, however, that if any holder of Dissenting Shares
(i) subsequently delivers a written withdrawal of his demand for
appraisal rights (with the written consent of QRI if such written
withdrawal is not made after the Effective Time within the time periods
required by the provisions of the Company's Certificate of
Incorporation or the Appraisal Provisions), or (ii) fails to perfect
dissenter's rights as provided in the Company's Certificate of
Incorporation and the Appraisal Provisions, or (iii) if neither any
holder of Dissenting Shares nor the Surviving Corporation has filed a
petition demanding a determination of the value of Dissenting Shares
within the time provided in the Company's Certificate of Incorporation
and the Appraisal Provisions, the Dissenting Shares held by such holder
or holders (as the case may be) shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Merger Consideration as provided in this
Agreement without any interest thereon and shall be treated for all
purposes as Converted Common Stock.
(b) The Company shall give QRI (i) prompt notice of any
written demands for appraisal, withdrawal of demands for appraisal and
any other instruments served pursuant to the Company's Certificate of
Incorporation and the Appraisal Provisions and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for
appraisal under the Company's Certificate of Incorporation and the
Appraisal Provisions. The Company agrees that prior to the Effective
Time, it will not, without the prior written consent of QRI,
voluntarily make or agree to make any payment with respect to, or
settle or offer to settle, any such demands.
(c) Each holder of Dissenting Shares who becomes entitled,
pursuant to the provisions of the Company's Certificate of
Incorporation and the Appraisal Provisions, to payment for his or its
Dissenting Shares shall receive payment therefor after the Effective
Time from the Surviving Corporation (but only after the amount thereof
shall have been agreed upon or finally determined pursuant to such
provisions) and such shares shall be canceled.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to QRI that:
Section 3.01. Organization and Qualification: Subsidiaries. The Company
is a corporation, and each of the Company's subsidiaries (as such term in
defined in Section 9.03 herein) is a corporation or partnership, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and each of the Company and its subsidiaries has
all requisite power and authority to own, lease and operate its properties and
to conduct its business as it is now being conducted and is qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so qualified
and in good standing could not reasonably be expected to have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as used in this
Agreement shall mean any change or effect that would be materially adverse to
the financial condition, results of operations, business, or prospects of the
Company and its subsidiaries, taken as a whole, at the time of such change or
effect; provided, however, no Company Material Adverse Effect shall be deemed to
have occurred hereunder as a result of changes in oil or gas prices. Section
3.01 of the Disclosure Schedule delivered by the Company to QRI concurrently
with the execution of this Agreement (the "Company Disclosure Schedule") sets
forth, as of the date of this Agreement, a true and complete list of all the
Company's directly or indirectly owned subsidiaries, together with (a) the
jurisdiction of incorporation or organization of each such subsidiary and the
percentage of each such subsidiary's outstanding capital stock or other equity
interests owned by the Company or another subsidiary of the Company and (b) an
indication of whether each such subsidiary is a "Significant Subsidiary" as
defined in Section 9.03 of this Agreement.
Section 3.02. Certificate of Incorporation and Bylaws. The Company has
heretofore furnished or made available to QRI complete and correct copies of the
Certificate of Incorporation and the Bylaws or the equivalent organizational
documents, in each case as amended or restated to the date hereof, of the
Company and each of its Significant Subsidiaries. Neither the Company nor any of
its subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws (or equivalent organizational documents).
Section 3.03. Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock, par value $.01 per share,
and 10,000,000 shares of Preferred Stock, par value $0.01 per share. At
the date hereof, 25,777,014 shares of Company Common Stock were issued
and outstanding, no shares of Company Common Stock were held by the
Company in its treasury or by the Company's subsidiaries and 12,840,000
shares of Company Common Stock were reserved for issuance as follows:
(i) 250,000 shares were reserved for issuance upon exercise of stock
options heretofore granted or available for grant pursuant to the
Company's 1997 Stock Option Plan (the "Company Option Plan"), of which
options to purchase 248,570 shares were granted as of December 31,
1997; and (ii)
8
12,590,000 shares were reserved for issuance upon the exercise of the
warrants (the "Common Stock Warrants") listed and described in Section
3.03(a) of the Company Disclosure Schedule. Except as described in this
Section 3.03 or in Section 3.03(a) of the Company Disclosure Schedule,
no shares of capital stock of the Company are issued and outstanding or
reserved for issuance for any other purpose. Each of the issued shares
of capital stock of each of the Company and its subsidiaries is duly
authorized, validly issued and fully paid and nonassessable, and has
not been issued in violation of (nor are any of the authorized shares
of capital stock of, or other equity interests in, the Company or any
of its subsidiaries subject to) any preemptive or similar rights
created by statute, the Certificate of Incorporation or Bylaws (or the
equivalent organizational documents) of the Company or any of its
subsidiaries, any agreement to which the Company or any of its
subsidiaries is a party or is bound or applicable federal or state
securities laws. Except as set forth in Section 3.03(a) of the Company
Disclosure Schedule, all issued shares or other equity interests in the
subsidiaries of the Company owned by the Company or a subsidiary of the
Company are owned free and clear of all security interests, liens,
claims, pledges, agreements, limitations on the Company's or such
subsidiaries' voting rights, charges or other encumbrances of any
nature whatsoever.
(b) No bonds, debentures, notes or other indebtedness of the
Company or its subsidiaries having the right to vote (or convertible
into or exchangeable or exercisable for securities having the right to
vote) on any matters on which stockholders may vote ("Company Voting
Debt") are issued or outstanding. All shares of Company Common Stock
that may be issued upon exercise of stock options granted pursuant to
the Company Option Plan or Common Stock Warrants will, when issued in
accordance with the terms of such stock options, warrants, and the
related Company Option Plan, be validly issued, fully paid and
nonassessable and not subject to preemptive rights and issued in
compliance with applicable federal and state securities laws.
(c) Except as set forth in Section 3.03(a) above or in Section
3.03(c) of the Company Disclosure Schedule, there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or
any of its subsidiaries is a party relating to the issued or unissued
capital stock of the Company or any of its subsidiaries or obligating
the Company or any of its subsidiaries to grant, issue, sell or
register under federal or state securities laws any shares of capital
stock, Company Voting Debt or other equity interests of the Company or
any of its subsidiaries. Except as set forth in Section 3.03(c) of the
Company Disclosure Schedule, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries (i) to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or other
capital stock of the Company or the capital stock of any subsidiary of
the Company or (ii) other than advances to wholly owned subsidiaries in
the ordinary course of business, to provide funds to, or to make any
investment in (in the form of a loan, capital contribution or
otherwise), or to provide any guarantee with respect to the obligations
of, any subsidiary of the Company or any other person. Except (i) as
set forth in Section 3.03(c) of the Company Disclosure Schedule or (ii)
for the subsidiaries of the Company set forth in Section 3.01 of the
Company Disclosure Schedule, neither the Company nor any of its
subsidiaries (x) directly or indirectly owns, (y) has agreed to
purchase or otherwise acquire or (z) holds any interest
9
convertible into or exchangeable or exercisable for the capital stock
or any other equity interests of any corporation, partnership, joint
venture or other business association or entity. Except as set forth in
Section 3.03(c) of the Company Disclosure Schedule or for any
agreements, arrangements or commitments between the Company and its
wholly owned subsidiaries or between such wholly owned subsidiaries,
there are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on, or calculated in accordance
with, the revenues or earnings of the Company or any of its
subsidiaries. Except as set forth in Section 3.03(c) of the Company
Disclosure Schedule, there are no voting trusts, proxies or other
agreements or understandings to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound with respect to the voting of any shares of
capital stock or other equity interests of the Company or any of its
subsidiaries.
(d) Section 3.03(d) of the Company Disclosure Schedule sets
forth a complete and correct list as of the date hereof of (i) the
number of options to purchase Company Common Stock outstanding and the
number of shares of Company Common Stock issuable thereunder, (ii) the
number of Common Stock Warrants outstanding and the number of shares of
Company Common Stock issuable thereunder, (iii) the exercise price of
each such outstanding stock option and warrant, and (iv) the number of
stock options and warrants then exercisable. Complete and correct
copies of the Company Option Plan, all forms of stock options issued
pursuant to the Company Option Plan or otherwise, and all forms of
Common Stock Warrants, including all amendments thereto, have been made
available to QRI.
Section 3.04. Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (subject to,
with respect to the Merger, the approval and adoption of this Agreement by the
stockholders of the Company as described in Section 6.01 of this Agreement). The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (subject to, with respect to the Merger, the
approval and adoption of this Agreement by the stockholders of the Company as
described in Section 6.01 of this Agreement). This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by QRI, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
Section 3.05. No Conflict: Required Filings and Consents.
(a) Except as disclosed in Section 3.05(a) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance by the Company of its
obligations hereunder, including consummation of the transactions
contemplated hereby, will not (i) conflict with or violate the
Certificate of Incorporation or Bylaws, or the equivalent
organizational documents, in each case as amended or restated, of the
Company or any of its Significant Subsidiaries, (ii) conflict with or
violate any federal,
10
state, foreign or local law, statute, ordinance, rule or regulation
(collectively, "Laws") in effect as of the date of this Agreement or
any judgment, order or decree to which the Company or any of its
subsidiaries is a party or by or to which any of their respective
properties are bound or subject or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair any of the Company's or
any of its subsidiaries' rights or alter the rights or obligations of
any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under,
or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by or to which the
Company or any of its subsidiaries or any of their respective
properties are bound or subject, excluding from the foregoing clause
(iii) any such conflicts, violations, breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that individually or in the
aggregate could not reasonably be expected to have a Company Material
Adverse Effect. The Board of Directors of the Company has approved the
Merger, this Agreement and the transactions contemplated hereby. The
provisions of Section 203 of the DGCL are inapplicable to the Merger,
this Agreement, and the transactions contemplated hereby. To the best
of the Company's knowledge, no other state takeover statute or similar
statute or regulation applies or purports to apply to the Merger, this
Agreement or any of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated
hereby, will not, require the Company to obtain any consent, license,
permit, waiver, approval, authorization or order of, or to make any
filing with or notification to, any governmental or regulatory
authority, federal, state, local or foreign (collectively,
"Governmental Entities"), except (i) for (A) applicable requirements,
if any, of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and state securities or blue sky laws
("Blue Sky Laws") and (B) the pre-merger notification requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and (ii) the filing and recordation of appropriate
merger documents as required by the DGCL.
Section 3.06. Permits; Compliance. Except as disclosed in Section 3.06
of the Company Disclosure Schedule, each of the Company and its subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders (collectively, the "Permits")
necessary to own, lease and operate their properties and to carry on their
businesses as they are now being conducted, except where the failure to possess
such Permits could not reasonably be expected to have a Company Material Adverse
Effect. Section 3.06 of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, all actions, proceedings, or investigations, pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to result in the loss,
revocation, suspension or cancellation of a Permit held by the Company or a
subsidiary of the Company. Except as set forth in Section 3.06 of the Company
Disclosure Schedule, (i) neither the Company nor any of its subsidiaries is in
conflict with, in default
11
under or in violation of (a) any Law applicable to the Company or any of its
subsidiaries or by which any of their respective properties are bound or subject
or (b) any of the Permits held by the Company or a subsidiary of the Company,
except for any such conflicts, defaults or violations that individually or in
the aggregate could not reasonably be expected to have a Company Material
Adverse Effect; (ii) neither the Company nor any of its subsidiaries is in
conflict with, in default under or in violation of any judgment, order or decree
applicable to the Company of any of its subsidiaries or any material Permits
held by the Company or a subsidiary of the Company; and (iii) neither the
Company nor any of its subsidiaries has received from any Governmental Entity
any notice with respect to possible conflicts with, defaults under or violations
of (a) any Law applicable to the Company or any of its subsidiaries or by which
any of their respective properties are bound or subject, (b) any judgment, order
or decree applicable to the Company or any of its subsidiaries, or (c) any of
the Permits held by the Company or a subsidiary of the Company.
Section 3.07. Reports; Financial Statements; Undisclosed Liabilities.
(a) Since March 7, 1997, except as disclosed in Section 3.07
of the Company Disclosure Schedule, the Company has filed all forms,
reports, statements and other documents required to be filed with the
Securities and Exchange Commission ("SEC"), including, without
limitation, (i) all Annual Reports on Form 10-KSB, (ii) all Quarterly
Reports on Form 10-QSB, (iii) all proxy statements relating to meetings
of stockholders (whether annual or special), (iv) all Current Reports
on Form 8-K and (v) all other reports, schedules, registration
statements or other documents (collectively referred to as the "Company
SEC Reports"). As of their respective dates, the Company SEC Reports
complied in all material respects with the requirements of applicable
Laws (including the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports) and the Company SEC Reports, including,
without limitation, any financial statements or schedules included
therein, did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(b) The Company has heretofore delivered to QRI (i) a
consolidated balance sheet of the Company and its subsidiaries as of
December 31, 1997 and (ii) a consolidated statement of income,
stockholders' equity and cash flows for the period from inception,
March 7, 1997 to December 31, 1997, certified by Deloitte and Touche
LLP, whose report thereon is included therewith. The Company has also
delivered to QRI (i) an unaudited consolidated balance sheet of the
Company and its subsidiaries as of June 30, 1998 and (ii) unaudited
consolidated statements of income, stockholders' equity and cash flows
for the six month period ended June 30, 1998. Such audited and
unaudited consolidated financial statements, including any such
financial statements and schedules contained in the Company SEC reports
(or incorporated by reference therein) (i) are in accordance with the
books and records of the Company and its subsidiaries in all material
respects and were prepared in accordance with the published rules and
regulations of the SEC and generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except
(A) to the extent disclosed therein or required by changes in generally
accepted accounting principles), and (B) with respect to Company SEC
Reports, as may be indicated in the notes
12
thereto, and (ii) fairly present in all material respects the
consolidated financial position of the Company and its subsidiaries as
of the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated (except, in the
case of unaudited consolidated financial statements for interim
periods, for the absence of footnotes and subject to adjustments,
consisting only of normal, recurring accruals, necessary to present
fairly such results of operations and cash flows).
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries as of December 31,
1997, including the notes thereto, neither the Company or any of its
subsidiaries has any liabilities or obligations material to the Company
and its subsidiaries that are not referenced on such balance sheet.
Except as set forth in Section 3.07 of the Company Disclosure Schedule,
since December 31, 1997, neither the Company nor any of its
subsidiaries has incurred any liabilities except for (i) liabilities or
obligations incurred in the ordinary course of business and consistent
with past practice which do not have a Company Material Adverse Effect,
and (ii) for professional fees and expenses incurred in connection with
or as a result of the Merger.
Section 3.08. Absence of Certain Changes or Events. Except as set forth
in Section 3.08 of the Company Disclosure Schedule, since December 31, 1997, the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course and in a manner consistent with past practice and there has
not been (a) any damage, destruction or loss with respect to any assets of the
Company or any of its subsidiaries that, whether or not covered by insurance,
would constitute a Company Material Adverse Effect, (b) any change by the
Company or its subsidiaries in their significant accounting policies, (c) except
for dividends by a subsidiary of the Company to the Company or another wholly
owned subsidiary of the Company, any declaration, setting aside or payment of
any dividends or distributions in respect of shares of Company Common Stock or
the shares of stock of, or other equity interests in, any subsidiary of the
Company or any redemption, purchase or other acquisition of any of the Company's
securities or any of the securities of any subsidiary of the Company, (d) any
increase in the benefits under, or the establishment or amendment of, any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, performance awards (including, without limitation, the granting of
stock appreciation rights or restricted stock awards), stock purchase or other
employee benefit plan, or any increase in the compensation payable or to become
payable to any of the directors or officers of the Company or the employees of
the Company or its subsidiaries as a group, except for (i) increases in salaries
or wages payable or to become payable in the ordinary course of business and
consistent with past practice or (ii) the granting of stock options in the
ordinary course of business to employees of the Company or its subsidiaries who
are not directors or executive officers of the Company, (e) a material reduction
in the rate of production of oil, gas or other hydrocarbons from the Company
Properties, viewed as a whole, other than changes in the ordinary course of
operation, changes that result from depletion in the ordinary course of
operation, and changes that result from variances in markets for the oil, gas
and other hydrocarbons, or (f) any other Company Material Adverse Effect.
Section 3.09. Absence of Litigation. Except as set forth in Section
3.09 of the Company Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of the Company,
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of the Company,
threatened
13
against the Company or any of its subsidiaries or any properties or rights of
the Company or any of its subsidiaries, and neither the Company nor any of its
subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders.
Section 3.10. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program,
arrangement, contract, employment agreement, stock option, bonus,
incentive or similar plan (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to presently or at any time within the six (6) year period
prior to the date of this Agreement by the Company or any other entity
that, together with the Company, would be treated as a single employer
under Code Section 414 ("ERISA Affiliate"), or with respect to which
the Company or any ERISA Affiliate could reasonably be expected to
incur liability under ERISA (the "Company Benefit Plans"), the Company
has delivered or made available to QRI a true and correct copy of (i)
such Company Benefit Plan, (ii) each trust agreement, if any, relating
to such Company Benefit Plan, (iii) the most recent summary plan
description of each Company Benefit Plan for which a summary plan
description is required, (iv) the most recent determination letter
issued by the IRS with respect to any Company Benefit Plan that is
intended to be qualified under Section 401 of the Code ("Qualified
Plans"), (v) Internal Revenue Service Forms 5500 for each Company
Benefit Plan for each of the three (3) most recent plan years, and (vi)
the most recent actuarial report, if any, for each Company Benefit
Plan. Section 3.10 of the Company Disclosure Schedule contains a
complete list of all Company Benefit Plans.
(b) Each of the Company Benefit Plans is in compliance with
its terms and with all applicable laws, including, but not limited to,
ERISA and the Code, and except as set forth in Section 3.10 of the
Company Disclosure Schedule, no Company Benefit Plan has an accumulated
or waived funding deficiency within the meaning of Section 412 of the
Code. Except as set forth in Section 3.10 of the Company Disclosure
Schedule, neither the Company nor any ERISA Affiliate is or has
contributed to a "multiemployer plan," as defined in Section 3(37) of
ERISA, and neither the Company nor any ERISA Affiliate has any past,
present or future obligation or liability to contribute to any
multiemployer plan. Neither the Company nor any ERISA Affiliate has
completely or partially withdrawn from any multiemployer plan with
respect to which there is any outstanding liability as of the date of
this Agreement. Neither the Company nor any ERISA Affiliate has
incurred, directly or indirectly, any material liability (including any
material contingent liability) to or on account of a Company Benefit
Plan under Sections 409 or 502 of ERISA or Section 4975 of the Code or
pursuant to Title IV of ERISA to which the Company or an ERISA
Affiliate made, or was required to make, contributions during the five
(5) years ending on the date of this Agreement. As of the date of this
Agreement, no condition exists that presents a material risk to the
Company or an ERISA Affiliate of incurring such a material liability.
No proceedings have been instituted to terminate any Company Benefit
Plan that is subject to Title IV of ERISA and the Pension
14
Benefit Guaranty Corporation is not expected to institute any such
proceedings, and no "reportable event," as such term in defined in
Section 4043 of ERISA has occurred with respect to any Company Benefit
Plan.
(c) Except as set forth in Section 3.10 of the Company
Disclosure Schedule, the current value of the assets of each of the
Company Benefit Plans that are subject to Title IV of ERISA, based upon
reasonable actuarial assumptions, equals or exceeds the present value
of the accrued benefits under each such Company Benefit Plan and all
contributions or other amounts payable by the Company and each ERISA
Affiliate as of the date of this Agreement with respect to each Plan in
respect of current or prior plan years has been either paid or accrued
on the latest balance sheet included in the Company's most recent SEC
Report on Form 10-KSB or accrued since December 31, 1997. There are no
pending, or, to the best knowledge of the Company and each ERISA
Affiliate, threatened or anticipated claims (other than routine claims
for benefits) by, on behalf of or against any of the Company Benefit
Plans or any trusts related thereto.
(d) There are no collective bargaining or other labor union
contracts to which the Company or its subsidiaries is a party and no
collective bargaining agreement is being negotiated by the Company or
any of its subsidiaries. There is no pending or, to the best knowledge
of the Company, threatened labor dispute, strike or work stoppage
against the Company or any of its subsidiaries.
(e) No Company Benefit Plan provides retiree medical or other
retiree welfare benefits and neither the Company nor any of its
subsidiaries is contractually or otherwise obligated to provide medical
or other welfare benefits upon retirement or termination of employment
of employees.
(f) Neither the Company nor any of its ERISA Affiliates
contributes to or has an obligation to contribute to, or has within six
years prior to the date of this Agreement contributed to or had an
obligation to contribute to, an employee benefit plan that is or was
subject to Title IV of ERISA or Section 412 of the Code.
(g) No transaction prohibited by ERISA Section 406 and no
"prohibited transaction" under Code Section 4975(c) has occurred with
respect to any Company Benefit Plan. All "fiduciaries," as defined in
ERISA Section 3(21), with respect to the Company Benefit Plans have
complied in all respects with the requirements of ERISA Section 404.
Neither the Company nor any ERISA Affiliate has any liability to the
Internal Revenue Service or the PBGC with respect to any Company
Benefit Plan.
(h) Each Company Benefit Plan provides that it may be amended
or terminated at any time except for benefits protected under Code
Section 411(d).
(i) Each Qualified Plan is qualified in form and operation
under Code Section 401 (a) and each trust for each Qualified Plan is
exempt from federal income tax under Code Section 501(a). No event has
occurred or circumstances exist that will or could give rise to
disqualification or loss of tax-exempt status of any Qualified Plan or
related trust.
15
All determination letters with respect to Qualified Plans remain in
effect and have not been revoked.
(j) The Company and each ERISA Affiliate has complied with the
provisions of ERISA Section 601 et. seq. and Code Section 4980B.
(k) No payment that is owed or may become due to any director,
officer, employee or agent of the Company or any of its subsidiaries
will be non-deductible to the Company or such subsidiary or subject to
tax under Code Sections 280G or 4999; nor will the Company or any of
its subsidiaries be required to "gross-up" or otherwise compensate any
such person because of the imposition of any excise tax on a payment to
such person. The consummation of the transaction contemplated under
this Agreement will not accelerate or increase any liability under any
Company Benefit Plan because of an acceleration or increase of any of
the rights or benefits to which employees may be entitled thereunder.
(l) The Company has no obligation or liability for benefits
under any "employee benefit plan" as defined in Section 3(3) of ERISA
owing to Mercury.
Section 3.11. Taxes. Except as set forth in Section 3.11 of the
Company Disclosure Schedule:
(a) (i) all returns and reports ("Tax Returns") of or with
respect to any Tax (as defined in Section 9.03 of this Agreement) that
are required to be filed on or before the date hereof by or with
respect to the Company or any of its subsidiaries have been duly and
timely filed, (ii) Taxes that have become due with respect to the
period covered by each such Tax Return have been paid, (iii) all
withholding Tax requirements imposed on or with respect to the Company
or any of its subsidiaries have been satisfied in all material
respects, and (iv) no penalty, interest or other charge is due with
respect to the late filing of any such Tax Return or late payment of
any such Tax.
(b) There is no claim against the Company or any of its
subsidiaries for any amount of Taxes, no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return
of or with respect to the Company or any of its subsidiaries, and no
Tax Return of or with respect to the Company or any of its subsidiaries
has been, or is being, audited by the Internal Revenue Service or any
state, local or other taxing authority other than those disclosed (and
to which are attached copies of all audit or similar reports) in
Section 3.11 of the Company Disclosure Schedule.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the financial statements referred to in Section 3.07
of this Agreement are sufficient to cover the payment of all Taxes,
whether or not assessed or disputed, with respect to the Company and
any of its subsidiaries up to and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due
and for Taxes being contested in good faith that have been disclosed in
Section 3.11 of the Company Disclosure
16
Schedule and for which adequate provisions have been made in the
financial statements referred to in Section 3.07, no liens for Taxes
exist upon the assets of any of the Company or any of its subsidiaries.
(e) Neither the Company nor any of its 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.
(f) Neither the Company nor any of its subsidiaries has made
an election under Section 341(f) of the Code. Except as disclosed in
Section 3.11 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under the
circumstances could obligate it to make any payments that will not be
deductible under Sections 162(m) or 280G of the Code.
(g) The Company and its subsidiaries have not taken or agreed
to take any action that would create a material risk that the Merger
would not qualify as a tax free reorganization under the provisions of
Section 368(a)(1)(A) of the Code.
(h) Neither the Company nor any of its subsidiaries (i) has
ever been a member of an Affiliated Group (as defined in Section 1504
of the Code) other than a group the common parent of which was the
Company or (ii) has any liability for the Taxes of any person (other
than the Company or any of its subsidiaries) under Treas. Reg. ss.
1.1502-6 (or any similar provision under state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
Section 3.12. Affiliates. Section 3.12 of the Company Disclosure
Schedule identifies all persons who, to the knowledge of the Company, may be
deemed to be affiliates ("Affiliates") of the Company within the meaning of that
term as used in Rule 145 promulgated pursuant to the Securities Act, including,
without limitation, all directors and executive officers of the Company.
Section 3.13. Environmental Matters. Except for matters disclosed in
Section 3.13 of the Company Disclosure Schedule:
(a) To the best knowledge of Company all of the properties,
operations and activities of the Company and its subsidiaries comply
with all applicable Environmental Laws (as defined in Section 9.03).
(b) None of the Company, its subsidiaries or their properties
and operations are subject to any existing, pending or, to the
knowledge of the Company, threatened action, suit, investigation,
inquiry or proceeding by or before any Governmental Authority or third
party under any Environmental Law.
(c) To the best knowledge of the Company all notices, permits,
licenses or similar authorizations, if any, required to be obtained or
filed by the Company or any its subsidiaries under any Environmental
Law in connection with any aspect of the business of the Company
17
or its subsidiaries, including without limitation those relating to the
treatment, storage, disposal or release of a hazardous substance or
solid waste, have been duly obtained or filed and will remain valid and
in effect after the Merger, and the Company and its subsidiaries are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations.
(d) To the best knowledge of the Company, the Company and its
subsidiaries have satisfied and are currently in compliance with all
financial responsibility requirements applicable to its operations and
imposed by any Governmental Authority under any Environmental Law, and
neither the Company nor any of its subsidiaries has received any notice
of noncompliance with any such financial responsibility requirements.
(e) To the best knowledge of the Company, there are no
physical or environmental conditions existing on any property of the
Company or any of its subsidiaries or resulting from the Company's or
any of its subsidiaries' operations or activities with respect to any
of the Company Properties, past or present, at any location, that would
give rise to any on-site or off-site investigative, remedial, response,
contribution or similar obligations under any Environmental Laws.
(f) To the best knowledge of the Company, since the effective
date of the relevant requirements of applicable Environmental Laws, all
hazardous substances or solid wastes generated by the Company or any of
its subsidiaries or used in connection with any of their properties or
operations have to the extent required by Environmental Laws been
transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only at
treatment, storage and disposal facilities authorized under
Environmental Laws to treat, store or dispose of such substances and
wastes, and, to the best knowledge of the Company and with respect to
such substances and wastes, such carriers and facilities have been and
are operating in compliance with such authorizations, are not subject
to any material unperformed investigative, remedial, response,
contribution or similar obligations under, and are not the subject of
any existing, pending or overtly threatened action, investigation or
inquiry by any Governmental Authority or third party in connection
with, any Environmental Laws.
(g) There has been no exposure of any person or property to
hazardous substances, solid waste or any pollutant or contaminant, nor
has there been any release of hazardous substances, solid waste or any
pollutant or contaminant into the environment by the Company or any of
its subsidiaries in connection with their properties or operations that
could reasonably be expected to have a Company Material Adverse Effect.
(h) The Company shall make available to QRI all internal and
external environmental audits and studies and all correspondence on
substantial environmental matters in the possession of the Company
relating to any of the current or former properties or operations of
the Company or any of its subsidiaries.
Section 3.14. Properties.
18
(a) The oil, gas and/or mineral leases, and interests which
comprise part of the properties, rights and interests listed on Section
3.14 of the Company Disclosure Schedule (the "Company Properties"), and
all other material contracts, agreements, licenses, permits and
easements, rights-of-way and other rights-of-surface use comprising any
part of or otherwise relating to the Company Properties (such leases
and such material contracts, agreements, licenses, permits, easements,
rights-of-way and other rights-of-surface use being herein called the
"Company Basic Documents"), are in full force and effect and constitute
valid and binding obligations of the parties thereto; all contracts and
agreements that are Company Basic Documents are disclosed in Section
3.14(a) of the Company Disclosure Schedule. Neither the Company nor any
subsidiary is in breach or default (and no situation exists which with
the passing of time or giving of notice would create such a breach or
default) of its obligations under the Company Basic Documents, and no
breach or default by any third party (or situation which with the
passage of time or giving of notice would create such a breach or
default) exists, to the extent such breach or default (whether by the
Company, any subsidiary or such a third party) could materially
adversely affect (after the date hereof) the ownership, operation,
value or use of any Company Properties. All payments (including,
without limitation, all delay rentals, royalties, excess royalties,
overriding royalty interests, shut-in royalties and valid calls for
payment or prepayment under operating agreements) owing under Company
Basic Documents have been and are being made (timely and properly, and
before the same became delinquent) by the Company or its subsidiaries
in all material respects and, where the non-payment of same by a third
party could materially adversely affect the ownership, operation, value
or use of a Company Property after the date hereof, have been and are
being made, by such third party in all material respects.
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, neither the Company nor any subsidiary has
incurred any expenses, or made commitments to make expenditures, in
connection with (and no other obligations or liabilities have been
incurred) that would materially adversely affect the ownership or
operation of the Company Properties after the date of this Agreement,
other than routine expenses incurred in the normal operation of
existing xxxxx on the Company Properties. All expenses payable under
the terms of the Company Basic Documents have been properly and timely
paid except for such expenses as are being currently paid prior to
delinquency in the ordinary course of business. Except as set forth in
Section 3.14(b) of the Company Disclosure Schedule, no proposals are
currently outstanding (whether made by the Company, any subsidiary or
by any other party) to drill additional xxxxx, or to deepen, plug back,
abandon, or rework existing xxxxx, or to conduct other operations for
which consent is required under the applicable operating agreement, or
to conduct any other material operations, other than normal operation
of existing xxxxx on the Company Properties.
(c) There exist no agreements or arrangements for the sale,
gathering, transportation, compression, treating, processing or other
marketing of a material volume of production from the Company
Properties (including without limitation, calls on, or other rights to
purchase, production, whether or not the same are currently being
exercised) other than (A) the agreements set forth in Section 3.14(c)
of the Company Disclosure Schedule, and (B) agreements or arrangements
that are cancelable on 30 days notice or less without penalty or
detriment. Any contracts or other arrangements under which the Company
or any
19
subsidiary is processing, gathering, transporting or otherwise
marketing any material volume of oil, gas or other minerals (whether or
not attributable to the Company Properties) for the account of a third
party include terms that represent an arm's length, commercially
reasonable trade for the Company or any subsidiary. All of the proceeds
from the sale of production from the Company Properties are being
properly and timely paid to the Company by the purchasers of production
without suspension or indemnity other than standard division order
indemnities.
(d) Except as set forth in Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary has
received prepayments (including, but not limited to, payments for oil
and gas not taken pursuant to "take-or-pay" arrangements) for any oil
or gas produced from the Company Properties as a result of which the
obligation does (or may) exist to deliver oil or gas produced from the
Company Properties after the date of this Agreement without then
receiving payment (or without then receiving full payment) therefor or
to make repayments in cash. For each Company Property listed in Section
3.14(d) of the Company Disclosure Schedule, such section reflects (A)
the total amount of prepayment received as of the date hereof, (and the
amount of any recoupment thereof heretofore made), and (B) whether or
not a cash payment can be required in the event recoupment out of
production proves to be inadequate. Except as set forth in Section
3.14(d) of the Company Disclosure Schedule, there is no Company
Property with respect to which the Company, any subsidiary, and/or
their respective predecessors in title, have collectively taken more
(referred to herein as "Over-produced") or materially less (referred to
herein as "Under-produced") production from such Company Property (or
on the units in which such Company Property participates), or any
product thereof, than the ownership of the Company or any Company
subsidiary and such predecessors in such Company Property would entitle
the Company or any Company subsidiary and such predecessors (absent any
balancing agreement or arrangement) to receive, to the extent such
Over-produced or Under-produced position has not, as of the date
hereof, been fully made up or otherwise extinguished. For each Company
Property listed in Section 3.14 of the Company Disclosure Schedule,
such section reflects, on a well-by-well or any other basis as may be
dictated by any applicable balancing agreement, (A) whether the Company
or any subsidiary is in an Over-produced or Under-produced position,
(B) the amount of such over-production or under-production, (C) a
description of the written balancing agreement (if any) pertaining to
such Company Property (or a statement that no such agreement exists)
and (D) a statement as to whether royalties, overriding royalties or
other burdens against the Company's or any subsidiaries's net revenue
interest in the affected Company Properties were, during the period the
subject imbalance accrued, paid based upon receipts or entitlements.
Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, there are no pipeline imbalances that have arisen due to the
failure of nominations made by the Company or any subsidiary to match
actual deliveries of production from any one or more Company
Properties. Except as set forth on Section 13.14(d) of the Company
Disclosure Schedule, (i) none of the purchasers under any production
sales contracts has exercised any economic out provision; (ii) none of
the purchasers under any production sales contracts has curtailed its
takes of natural gas in violation of such contracts; and (iii) none of
the purchasers under any production sales contracts has given notice
that it desires to amend the production sales contracts with respect to
price or quantity of deliveries under take-or-pay provisions or
otherwise. The Company is not entitled to receive any portion of the
20
interest of QRI in any production or to receive cash or other payments
to "balance" any disproportionate allocation of production under
any operating agreement, gas balancing and storage agreement, gas
processing or dehydration agreement, gas transportation or other
similar agreements; and QRI is not obligated to pay any penalties or
other payments under any gas transportation or other agreement as a
result of the delivery of quantities of gas from the Company
Properties.
(e) The Company and each subsidiary has all governmental
licenses and permits necessary to own and operate the Company
Properties as presently being owned and operated, and such licenses,
permits and filings are in full force and effect, and neither the
Company nor any subsidiary has received written notice of any
violations in respect of any such licenses or permits.
(f) Except as set forth in Section 3.14(f) of the Company
Disclosure Schedule, neither the Company, any subsidiary nor any
Company Property is subject to (A) any area of mutual interest
agreements or non-compete agreements, (B) any farm-out or farm-in
agreement under which any party thereto is entitled to receive
assignments not yet made, or could earn additional assignments after
the date hereof, (C) any tax partnership, or (D) any agreement,
contract or commitment relating to the disposition or acquisition of
the assets of, or any interest in, any business entity.
(g) All severance, production, ad valorem, windfall profit and
other similar taxes based on or measured by ownership or operation of
the Company Properties have been, and are being, paid (properly and
timely, and before the same become delinquent) by the Company and each
subsidiary in all respects.
(h) The ownership and operation of the Company Properties has,
to the extent that non-conformance could materially adversely affect
the ownership, operation, value or use thereof after the date hereof,
been in conformity with all applicable laws, and all applicable rules,
regulations and orders of all governmental agencies having
jurisdiction.
(i) Except as set forth in Section 3.14(i) of the Company
Disclosure Schedule, there are no Preferential Rights or Consents,
other than Routine Governmental Approvals (as defined below), that
affect any Company Property or Properties and that will be triggered by
the Merger. For purposes of this Agreement, "Preferential Right" means
any preferential right or option to purchase or otherwise to acquire a
thing; "Consent" means any consent to assign or transfer, including a
transfer occasioned by a merger, or any other restriction or limitation
on transferability; "Routine Governmental Approvals" means approvals
required to be obtained from any governmental or tribal authority that
are customarily obtained after consummation of a transaction.
(j) Except as set forth in Section 3.14(j) of the Company
Disclosure Schedule, there exist no agreements or other arrangements
whereunder the Company or any subsidiary undertakes to perform
gathering, transportation, processing or other marketing services for
any third party, including without limitation the owner of a royalty or
overriding royalty interest burdening a lease included in the Company
Properties, for a fee or other consideration that is now, or may
21
hereafter be, unrepresentative of commercial rates being received by
third parties in comparable, arm's length transactions.
(k) Except as set forth in Section 3.14(k) of the Company
Disclosure Schedule, the Company and/or its subsidiaries have good and
defensible title to the Company Properties, free and clear of all
liens, security interests, and encumbrances except for (a) the
contracts, agreements, burdens, encumbrances and other matters set
forth in the descriptions of certain of the Company Properties in
Section 3.14 of the Company Disclosure Schedule, (b) statutory liens
for taxes which are not yet delinquent, (c) liens under operating
agreements, pooling orders and unitization agreements, and mechanics'
materialmen's liens, with respect to obligations which are not yet due,
and (d) minor defects and irregularities in title to any Company
Property, so long as such defects and irregularities do not materially
impair the value of such Company Property or the use thereof for the
purposes for which such Company Property is held. With respect to each
Company Property described in Section 3.14 of the Company Disclosure
Schedule, the ownership of the Company and/or the subsidiaries in such
Company Property does and will, (A) with respect to each tract of land
described in Section 3.14 of the Company Disclosure Schedule (whether
described directly in such section or described by reference to another
instrument) in connection with such Company Property, (1) entitle the
Company and/or a subsidiary to receive a decimal or percentage share of
the oil, gas and other hydrocarbons produced from, or allocated to,
such tract equal to or not less than the decimal or percentage share
set forth in Section 3.14 of the Company Disclosure Schedule in
connection with such tract opposite the words "Net Revenue Interest"
(or words of similar import), (2) cause the Company or any subsidiary
to be obligated to bear a decimal or percentage share of the cost of
exploration, development and operation of such tract of land
(collectively, the "Costs") not greater than the decimal or percentage
share set forth in Section 3.14 of the Company Disclosure Schedule in
connection with such tract opposite the words "Working Interest" (or
words of similar import) and (B) if such Company Property is shown in
Section 3.14 of the Company Disclosure Schedule to be subject to a unit
or units, with respect to each such unit, (1) entitle the Company
and/or the subsidiaries to receive a decimal or percentage share of all
substances covered by such unit that are produced from, or allocated
to, such unit equal to or not less than the decimal or percentage share
set forth in Section 3.14 of the Company Disclosure Schedule in
connection with such Company Property opposite the words "Unit Net
Revenue Interest" or words of similar import (and if such Company
Property is subject to more than one unit, words identifying such
interest with such unit), and (2) obligate the Company and/or the
subsidiaries to bear a decimal or percentage share of the Costs not
greater than as set forth in Section 3.14 of the Company Disclosure
Schedule in connection with such Company Property opposite the words
"Unit Working Interest" or words of similar import (and if such Company
Property is subject to more than one unit, words identifying such
interest with such unit). With respect to each Company Property
described in Section 3.14 of the Company Disclosure Schedule that is
subject to a voluntary or involuntary pooling, unitization or
communitization agreement and/or order, the term "tract of land" as
used in this subsection (k) shall mean the pooled, unitized or
communitized area as an entirety and shall not be deemed to refer to
any individual tract committed to said pooled, unitized or communitized
area. Without limitation of the foregoing, the ownership by the Company
and/or the subsidiaries of the Company Properties does and will, with
respect to each well or unit identified in Section 3.14 of the Company
22
Disclosure Schedule, entitle the Company and/or the subsidiaries to
receive a decimal or percentage share of the oil, gas and other
hydrocarbons produced from, or allocated to, such well or unit equal to
not less than the decimal or percentage share set forth, for such well
or unit, in the column headed "Net Revenue Interest" in Section 3.14 of
the Company Disclosure Schedule, and cause the Company and/or the
subsidiaries to be obligated to bear a decimal or percentage share of
the Costs of such well or unit equal to not more than the decimal or
percentage share set forth, for such well or unit, in the column headed
"Working Interest" in such section. The above-described shares of
production that the Company and/or its subsidiaries are entitled to
receive and share of expenses that the Company and/or its subsidiaries
are obligated to bear are not, and will not, be subject to change other
than such change that arise pursuant to non-consent provisions of
operating agreements described in Section 13.4 of the Company
Disclosure Schedule in connection with operations hereafter proposed,
or such changes are reflected in Section 13.4 of the Company Disclosure
Schedule.
(l) The Company has delivered to QRI a copy of the Reserve
Report prepared by Citadel Engineering, Ltd. and dated as of March 5,
1998, (the "Citadel Report") relating to the Company's oil and gas
reserves (the "Oil and Gas Reserves"). There are no statements or
conclusions in the Citadel Report that are based upon or include
misleading information or fail to take into account material
information regarding the matters reported therein. To the knowledge of
the Company, the estimates of reserves in the Citadel Report was
prepared in accordance with standard geological and engineering methods
generally accepted in the oil and gas industry. The estimates of the
lease operating expenses, production and ad valorem taxes and capital
expenditures in the Citadel Report reasonably reflect the historical
experience of the Company, and the Company has no reason to believe
that the estimates will not reflect future lease operating expenses,
production and ad valorem taxes and capital expenses. The historical
factual information supplied by the Company to the independent
engineering firm in connection with the preparation of the Citadel
Report was, at the time of delivery to such firms, true and complete in
all material respects.
Section 3.15. Real Property. Section 3.15 of the Company Disclosure
Schedule lists all real property that is owned or leased by the Company (other
than the Company Properties).
Section 3.16. Insider Interests; Transactions with Management. Except
as set forth in Section 3.16 of the Company Disclosure Schedule, no officer,
director, or employee of the Company or holder of more than five percent of the
Company Common Stock currently outstanding has any interest in any property,
real or personal, tangible or intangible, agreement, arrangement, or
understanding, written or oral, providing for the employment of, furnishing of
services by, rental or real or personal property from, or otherwise requiring
payments to any such shareholder, officer, director or employee used in or
pertaining to the business of the Company or any subsidiary, except for the
ordinary rights of a stockholder or employee stock option holder. Except as
disclosed in the Company SEC Reports, no executive officer, director or
stockholder of the Company or any of its subsidiaries has, since March 7, 1997,
engaged in any business dealings with the Company or any of its subsidiaries,
other than such business dealings as would not be required to be disclosed in
such documents or reports pursuant to the Securities Act and the rules and
regulations promulgated thereunder. Except as set forth on Schedule 3.16, no
executive officer or director of the Company or any of its subsidiaries (except
in his capacity as such) has any direct or indirect material interest in (a) any
23
competitor, customer, supplier or agent of the Company or any of its
subsidiaries, or (b) any person that is a party to any contract or agreement
with the Company or any of its subsidiaries.
Section 3.17. Contracts and Agreements. The contracts and agreements
listed in Section 3.17 of the Company Disclosure Schedule or filed as exhibits
to any of the Company SEC Reports constitute all of the written and oral
contracts, commitments, leases, and other agreements (including, without
limitation, promissory notes, loan agreements, and other evidences of
indebtedness) to which the Company or any of its subsidiaries is a party or by
which any of their properties are bound with respect to which the obligations of
or the benefits to be received by the Company or any of its subsidiaries,
individually or in the aggregate, could reasonably be expected to have a value
in excess of $100,000 in any consecutive 12-month period (each a "Material
Contract"). Except as set forth in Section 3.17 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries are and, to the best
knowledge of the Company, no other party thereto is in default (and no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default) under any Material Contract, and neither the Company nor
any of its subsidiaries have waived any right under any Material Contract.
Neither the Company nor any of its subsidiaries have received any notice of
default or termination under any Material Contract and neither the Company nor
any of its subsidiaries has assigned or otherwise transferred any rights under
any Material Contract or any other contract, to the extent default or
termination could have a Company Material Adverse Effect.
Section 3.18. Vote Required. The only votes of the holders of any class
or series of Company capital stock necessary to approve the Merger and this
Agreement are the affirmative votes of the holders of at least a majority of the
outstanding shares of the Company Common Stock. Members of the Xxxxxx Family and
Mercury control approximately 46% of the outstanding Company Common Stock, and
they have agreed (a copy of which agreement has been furnished to QRI
concurrently with the execution of this Agreement) to vote their shares of
Company Common Stock in favor of the Merger at the Company stockholders meeting
referred to in Section 6.01.
Section 3.19. Brokers. Except for payments due to EVEREN Securities,
Inc. disclosed on Schedule 3.19 hereto, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
Section 3.20. Opinion of Financial Advisor. The Board of Directors of
the Company has received the written opinion of EVEREN Securities, Inc. to the
effect that, as of the date of this Agreement, the Merger Consideration to be
paid to the holders of the Company Common Stock (other than holders of shares
held by Mercury Exploration Company and shares held by members of the Xxxxxx
family and their Affiliates) is fair, from a financial point of view, to such
holders. The Company will promptly deliver a copy of such opinion to QRI.
Section 3.21. Special Committee Recommendations. By a unanimous vote of
the disinterested directors constituting a Special Committee of the Board of
Directors formed to consider the Merger (the "Special Committee") present at a
meeting of the Special Committee (which meeting was duly called and held and at
which a quorum was present at all times), and by unanimous vote of the Board of
Directors of the Company (with members of the Xxxxxx family abstaining) (which
meeting was duly called and held at which a quorum was present at all times),
the Special Committee
24
and the Board of Directors (with members of the Xxxxxx family abstaining) (a)
approved and adopted this Agreement, including the Merger and the other
transactions contemplated hereby, and determined that the Merger is fair to the
stockholders of the Company (other than holders of shares held by Mercury
Exploration Company and shares held by members of the Xxxxxx family and their
Affiliates), and (b) subject to Section 6.01 hereof, resolved to recommend
approval and adoption of this Agreement, including the Merger and the other
transactions contemplated herein, by the stockholders of the Company.
Section 3.22. Disclosure. No representation or warranty hereunder
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QRI
QRI hereby represents and warrants to the Company that:
Section 4.01. Organization and Qualification. QRI is a corporation,
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and QRI has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing could not reasonably be expected to have a QRI Material Adverse Effect.
The term "QRI Material Adverse Effect" as used in this Agreement shall mean any
change or effect that would be materially adverse to the financial condition,
results of operations, business, or prospects of QRI taken as a whole, at the
time of such change or effect; provided, however, no QRI Material Adverse Effect
shall be deemed to have occurred hereunder as a result of changes in oil or gas
prices.
QRI has no subsidiaries (as that term is defined in Section 9.03
herein).
Section 4.02. Certificate of Incorporation and Bylaws; Formation
Documents. QRI has heretofore furnished or made available to the Company
complete and correct copies of the Certificate of Incorporation and Bylaws, in
each case as amended or restated to the date hereof, of QRI and complete and
correct copies of each of the Formation Documents. QRI is not in violation of
any of the provisions of its Certificate of Incorporation or Bylaws (or
equivalent organizational documents) or the Formation Documents, and to the best
knowledge of QRI, no other party to the Formation Documents is in violation
thereof.
Section 4.03. Capitalization.
(a) The authorized capital stock of QRI as of the Effective
Time will consist of 40,000,000 shares of QRI Common Stock, par value
$.01 per share ("QRI Common Stock") and 10,000,000 shares of preferred
stock par value $.01 per share (the "Preferred Stock"). Immediately
prior to the Effective Time, 10,310,806 shares of QRI Common Stock will
be issued and outstanding and no shares of Preferred Stock will be
issued and outstanding.
25
Except as described in this Section 4.03 or in Section 4.03(a) of the
QRI Disclosure Schedule, no shares of capital stock of QRI are reserved
for issuance for any other purpose. Each of the issued shares of
capital stock of, or other equity interests in, QRI is duly authorized,
validly issued and, in the case of shares of capital stock, fully paid
and nonassessable, and has not been issued in violation of (nor are any
of the authorized shares of capital stock of, or other equity interests
in, QRI subject to) any preemptive or similar rights created by
statute, the Certificate of Incorporation or Bylaws (or the equivalent
organizational documents) of QRI, any agreement to which QRI is a party
or is bound or applicable federal or state securities laws.
(b) No bonds, debentures, notes or other indebtedness of QRI
having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on
which stockholders may vote ("QRI Voting Debt") are issued or
outstanding.
(c) Except as set forth in Section 4.03(a) above or in Section
4.03(c) of the QRI Disclosure Schedule, there are no options, warrants
or other rights (including registration rights), agreements,
arrangements or commitments of any character to which QRI is a party
relating to the issued or unissued capital stock of QRI or obligating
QRI to grant, issue or sell any shares of capital stock, QRI Voting
Debt or other equity interests of QRI. Except as set forth in Section
4.03(c) of the QRI Disclosure Schedule, there are no obligations,
contingent or otherwise, of QRI (i) to repurchase, redeem or otherwise
acquire any shares of QRI Common Stock or other capital stock of QRI or
(ii) to provide funds to, or to make any investment in (in the form of
a loan, capital contribution or otherwise), or to provide any guarantee
with respect to the obligations of any other person. Except as set
forth in Section 4.03(c) of the QRI Disclosure Schedule, QRI (x) does
not directly or indirectly own, (y) has not agreed to purchase or
otherwise acquire or (z) does not hold any interest convertible into or
exchangeable or exercisable for the capital stock or any other equity
interests of any corporation, partnership, joint venture or other
business association or entity. Except as set forth in Section 4.03(c)
of the QRI Disclosure Schedule, there are no agreements, arrangements
or commitments of any character (contingent or otherwise) pursuant to
which any person is or may be entitled to receive any payment based on,
or calculated in accordance with, the revenues or earnings of QRI.
Except as set forth in Section 4.03(c) of the QRI Disclosure Schedule,
there are no voting trusts, proxies or other agreements or
understandings to which QRI is a party or by which QRI is bound with
respect to the voting of any shares of capital stock or other equity
interests of QRI.
Section 4.04. Authority. QRI has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by QRI and the
performance by QRI of its obligations hereunder, including the consummation of
the transactions contemplated hereby, have been or were duly authorized by all
necessary corporate action and no other corporate proceedings on the part of QRI
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (subject to, with respect to the Merger, the approval and
adoption of this Agreement by the stockholders of QRI as set forth in Section
6.01 of this Agreement). This Agreement has been duly executed and delivered by
QRI and,
26
assuming the due authorization, execution and delivery hereof by the Company,
constitutes the legal, valid and binding obligations of QRI, enforceable against
QRI in accordance with its terms. The Formation Transactions have been
consummated in all material respects in accordance with all applicable Laws.
Section 4.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by QRI, does
not and the performance by QRI of its obligations hereunder, including
consummation of the transactions contemplated hereby does not (i)
conflict with or violate the Certificate of Incorporation or Bylaws, or
the equivalent organizational documents, in each case as amended or
restated, of QRI, (ii) conflict with or violate any Laws in effect as
of the date of this Agreement or any judgment, order or decree to which
QRI is a party or by or to which any of its properties are bound or
subject or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or impair any of QRI's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under,
or result in the creation of a lien or encumbrance on any of the
properties or assets of QRI pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which QRI is a party or by or to
which QRI or any of its properties are bound or subject, excluding from
the foregoing clauses (ii) and (iii) any such conflicts, violations,
breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or
encumbrances that individually or in the aggregate could not reasonably
be expected to have a QRI Material Adverse Effect.
(b) The execution and delivery of this Agreement by QRI does
not and the performance by QRI of its obligations hereunder, including
consummation of the transactions contemplated hereby, will not, require
QRI to obtain any consent, license, permit, waiver, approval,
authorization or order of, or to make any filing with or notification
to, any governmental or regulatory authority, federal, state, local or
foreign (collectively, "Governmental Entities"), except (i) for (A)
applicable requirements, if any, of the Securities Act, the Exchange
Act, and the Blue Sky Laws and (B) the pre-merger notification
requirements of the HSR Act and (ii) the filing and recordation of
appropriate merger documents as required by the DGCL.
Section 4.06. Permits; Compliance. Except as disclosed in Section 4.06
of the QRI Disclosure Schedule, QRI is in possession of all Permits necessary to
own, lease and operate its properties and to carry on its business as it is now
being conducted except where the failure to possess such Permits could not
reasonably be expected to have a QRI Material Adverse Effect. Except as
disclosed in Section 4.06 of the QRI Disclosure Schedule, as of the date of this
Agreement, there are no actions, proceedings, or investigations pending or, to
the knowledge of QRI, threatened against QRI that could reasonably be expected
to result in the loss, revocation, suspension or cancellation of a Permit held
by QRI. Except as set forth in Section 4.06 of the QRI Disclosure Schedule, (i)
QRI is not in conflict with, in default under or in violation of (a) any Law
applicable to QRI or by which any of its properties are bound or subject or (b)
any of the Permits held by QRI, except for any such conflicts, defaults or
violations that individually or in the aggregate could not
27
reasonably be expected to have QRI Material Adverse Effect; (ii) is not in
conflict with, in default under or in violation of any judgment, order or decree
applicable to QRI or any material Permits held by QRI; and (iii) QRI has not
received from any Governmental Entity any notice with respect to possible
conflicts with, defaults under or violations of (a) any Law applicable to QRI or
by which any of its properties are bound or subject, (b) any judgment, order or
decree applicable to QRI, or (c) any of the Permits held by QRI.
Section 4.07. Reports; Financial Statements.
(a) QRI has heretofore delivered to the Company (i) an
unaudited balance sheet of QRI as of June 30, 1998, and (ii) statements
of income, stockholders' equity and cash flows for the period beginning
with inception and ending June 30, 1998. QRI has also delivered to the
Company (i) an unaudited balance sheet of QRI as of June 30, 1998, and
(ii) pro forma unaudited balance sheets and statements of income,
stockholders' equity and cash flows as of June 30, 1998, giving effect
to the Formation Transactions. Such unaudited historical financial
statements, including any such financial statements and schedules to be
contained in the Registration Statement on Form S-4 (as defined in
Section 6.02 hereof) (i) are and will be in accordance with the books
and records of QRI in all material respects and have been prepared in
accordance with the published rules and regulations of the SEC and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (A) to the extent disclosed
therein or required by changes in generally accepted accounting
principles, and (B) in the case of the unaudited financial statements,
as permitted by the rules and regulations of the SEC) and (ii) fairly
present in all material respects the consolidated financial position of
QRI as of the respective dates thereof and the results of operations
and cash flows for the periods indicated (except, in the case of
unaudited financial statements for interim periods, for the absence of
footnotes and subject to adjustments, consisting only of normal,
recurring accruals, necessary to present fairly such results of
operations and cash flows). Such unaudited pro forma financial
statements delivered by QRI to the Company fairly present QRI's pro
forma financial position and statements of operation as of and for the
periods scheduled therein, and the pro forma adjustments giving effect
to the Formation Transactions have been properly applied to the
historical amounts in the compilation of those statements.
Section 4.08. Absence of Certain Changes or Events. Except as set forth
in Section 4.08 of the QRI Disclosure Schedule, since January 1, 1998, QRI has
conducted its business only in the ordinary course and in a manner consistent
with past practice and there has not been (a) any damage, destruction or loss
with respect to any assets of QRI, including any assets acquired from any of the
Contributing Entities that, whether or not covered by insurance, would
constitute a QRI Material Adverse Effect, (b) any change by QRI in its
significant accounting policies, (c) a material reduction in the rate of
production of oil, gas or other hydrocarbons from the QRI Properties, viewed as
a whole, other than changes in the ordinary course of operation, changes that
result from depletion in the ordinary course of operation, and changes that
result from variances in markets for the oil, gas and other hydrocarbons, or (d)
any other QRI Material Adverse Effect.
Section 4.09. Absence of Litigation. Except as set forth in Section
4.09 of the QRI Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of QRI, investigation
28
of any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the knowledge of QRI, threatened against QRI
or any properties or rights of QRI, and QRI is not subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of QRI, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
Section 4.10. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program,
arrangement, contract, employment agreement, stock option, bonus,
incentive or similar plan (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA), maintained or
contributed presently or at any time within the six (6) year period
prior to the date of this Agreement to by QRI or any ERISA Affiliate,
or with respect to which QRI or any ERISA Affiliate could reasonably be
expected to incur liability under ERISA (the "QRI Benefit Plans"), QRI
has delivered or made available to the Company a true and correct copy
of (i) such QRI Benefit Plan, (ii) each trust agreement, if any,
relating to such QRI Benefit Plan, (iii) the most recent summary plan
description of each QRI Benefit Plan for which a summary plan
description is required, (iv) the most recent determination letter
issued by the IRS with respect to any QRI Benefit Plan that is intended
to be a Qualified Plan (v) Internal Revenue Service Forms 5500 for each
Company Benefit Plan for each of the three (3) most recent plan years,
and (vi) the most recent actuarial report, if any, for each QRI Benefit
Plan. Section 4.10 of QRI Disclosure Schedule contains a complete list
of all QRI Benefit Plans.
(b) Each of the QRI Benefit Plans is in compliance with its
terms and all applicable laws, including, but not limited to, ERISA and
the Code and except as set forth in Section 4.10 of the QRI Disclosure
Schedule, no QRI Benefit Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code. Except as set
forth in Section 4.10 of the QRI Disclosure Schedule, neither QRI nor
any ERISA Affiliate is or has contributed to "multiemployer plan," as
defined in Section 3(37), and neither the Company nor any ERISA
Affiliate has any past, present or future obligation or liability to
contribute to any multiemployer plan of ERISA. Neither QRI nor any
ERISA Affiliate has completely or partially withdrawn from any
multiemployer plan with respect to which there is any outstanding
liability as of the date of this Agreement. Neither QRI nor any ERISA
Affiliate has incurred, directly or indirectly, any material liability
(including any material contingent liability) to or on account of a QRI
Benefit Plan under Sections 409 or 502 of ERISA or Section 4975 of Code
or pursuant to Title IV of ERISA to which QRI or an ERISA Affiliate
made, or was required to make, contributions during the five (5) years
ending on the date of this Agreement. As of the date of this Agreement,
no condition exists that presents a material risk to QRI or an ERISA
Affiliate of incurring such a material liability. No proceedings have
been instituted to terminate any QRI Benefit Plan that is subject to
Title IV of ERISA and the PBGC is not expected to institute proceedings
and no "reportable event," as such term in defined in Section 4043 of
ERISA, has occurred with respect to any QRI Benefit Plan.
29
(c) Except as set forth in Section 4.10 of the QRI Disclosure
Schedule, the current value of the assets of each of the QRI Benefit
Plans that are subject to Title IV of ERISA, based upon reasonable
actuarial assumptions, equals or exceeds the present value of the
accrued benefits under each such QRI Benefit Plan and all contributions
or other amounts payable by QRI and each ERISA Affiliate as of the date
of this Agreement with respect to each Plan in respect of current or
prior plan years has been either paid or accrued on the latest balance
sheet. There are no pending, or, to the best knowledge of QRI and each
ERISA Affiliate any threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the QRI
Benefit Plans or any trusts related thereto.
(d) There are no collective bargaining or other labor union
contracts to which QRI is a party and no collective bargaining
agreement is being negotiated by QRI. There is no pending or, to the
best knowledge of QRI, threatened labor dispute, strike or work
stoppage against the QRI.
(e) No QRI Benefit Plan provides retiree medical or other
retiree welfare benefits and neither QRI is contractually or otherwise
obligated to medical or other welfare benefits upon retirement or
termination of employment of employees.
(f) Neither QRI nor any of its ERISA Affiliates contributes to
or have an obligation to contribute to, or has within six years prior
to the date of this Agreement contributed to or had an obligation to
contribute to, an employee benefit plan that is or was subject to Title
IV of ERISA or Section 412 of the Code.
(g) No transaction prohibited by ERISA Section 406 and no
"prohibited transaction" under Code Section 4975(c) has occurred with
respect to any QRI Benefit Plan. All "fiduciaries," as defined in ERISA
Section 3(21), with respect to the QRI Benefit Plans have complied in
all respects with the requirements of ERISA Section 404. Neither QRI
nor any ERISA Affiliate has any liability to the Internal Revenue
Service or the PBGC with respect to any QRI Benefit Plan.
(h) Each QRI Benefit Plan provides that it may be amended or
terminated at any time except for benefits protected under Code Section
411(d).
(i) Each Qualified Plan is qualified in form and operation
under Code Section 401 (a) and each trust for each Qualified Plan is
exempt from federal income tax under Code Section 501(a). No event has
occurred or circumstances exist that will or could give rise to
disqualification or loss of tax-exempt status of any Qualified Plan or
related trust. All determination letters with respect to Qualified
Plans remain in effect and have not been revoked.
(j) QRI and each ERISA Affiliate has complied with the
provisions of ERISA Section 601 et. seq. and Code Section 4980B.
(k) No payment that is owed or may become due to any director,
officer, employee or agent of QRI will be non-deductible to QRI or
subject to tax under Code Sections 280G or 4999; nor will QRI be
30
required to "gross-up" or otherwise compensate any such person because
of the imposition of any excise tax on a payment to such person. The
consummation of the transaction contemplated under this Agreement will
not accelerate or increase any liability under any QRI Benefit Plan
because of an acceleration or increase of any of the rights or benefits
to which employees may be entitled thereunder.
Section 4.11. Taxes. Except as set forth in Section 4.11 of the QRI
Disclosure Schedule:
(a) (i) all Tax Returns that are required to be filed on or
before the date hereof by or with respect to QRI have been duly and
timely filed, (ii) Taxes that have become due with respect to the
period covered by each such Tax Return have been paid, (iii) all
withholding Tax requirements imposed on or with respect to QRI have
been satisfied in all material respects, and (iv) no penalty, interest
or other charge is due with respect to the late filing of any such Tax
Return or late payment of any such Tax.
(b) There is no claim against QRI for any amount of Taxes, no
assessment, deficiency or adjustment has been asserted or proposed with
respect to any Tax Return of or with respect to QRI, and no Tax Return
of or with respect to QRI has been, or is being, audited by the
Internal Revenue Service or any state, local or other taxing authority
other than those disclosed (and to which are attached copies of all
audit or similar reports) in Section 4.11 of the QRI Disclosure
Schedule.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the financial statements referred to in Section 4.07
of this Agreement are sufficient to cover the payment of all Taxes,
whether or not assessed or disputed, with respect to QRI up to and
through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due
and for Taxes being contested in good faith that have been disclosed in
Section 4.11 of the QRI Disclosure Schedule and for which adequate
provisions have been made in the financial statements referred to in
Section 4.07, no liens for Taxes exist upon the assets of QRI.
(e) QRI has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) QRI has not made an election under Section 341(f) of the
Code. Except as disclosed in Section 4.11 of the QRI Disclosure
Schedule, QRI has not made any payments, is obligated to make any
payments, or is a party to any agreement that under the circumstances
could obligate it to make any payments that will not be deductible
under Sections 162(m) or 280G of the Code.
(g) QRI has not taken or agreed to take any action that would
create a material risk that the Merger would not qualify as a tax free
reorganization under the provisions of Section 368(a)(1)(A) of the
Code.
31
(h) QRI (i) has never been a member of an Affiliated Group (as
defined in Section 1504 of the Code) other than a group the common
parent of which was QRI or (ii) has any liability for the Taxes of any
person (other than QRI) under Treas. Reg. ss. 1.1502-6 (or any similar
provision under state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
Section 4.12. Environmental Matters. Except for matters disclosed in
Section 4.12 of the QRI Disclosure Schedule:
(a) To the best knowledge of QRI all of the properties,
including the QRI Properties (as defined in Section 4.13 hereof),
operations and activities of QRI comply with all applicable
Environmental Laws (as defined in Section 9.03).
(b) QRI and the properties, including the QRI Properties, and
operations of QRI are not subject to any existing, pending or, to the
knowledge of QRI, threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority or third party under
any Environmental Law.
(c) To the best knowledge of QRI, all notices, permits,
licenses or similar authorizations, if any, required to be obtained or
filed by QRI under any Environmental Law in connection with any aspect
of the business of QRI or the QRI Properties, including without
limitation those relating to the treatment, storage, disposal or
release of a hazardous substance or solid waste, have been duly
obtained or filed and will remain valid and in effect after the Merger,
and QRI is in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations.
(d) To the best knowledge of QRI, QRI has satisfied and is
currently in compliance with all financial responsibility requirements
applicable to its operations and imposed by any Governmental Authority
under any Environmental Law, and QRI has not received any notice of
noncompliance with any such financial responsibility requirements.
(e) To the best knowledge of QRI, there are no physical or
environmental conditions existing on any property of QRI or resulting
from QRI's operations or activities with respect to any of the QRI
Properties, past or present, at any location, that would give rise to
any on-site or off-site investigative, remedial, response, contribution
or similar obligations under any Environmental Laws.
(f) To the best knowledge of QRI, since the effective date of
the relevant requirements of applicable Environmental Laws, all
hazardous substances or solid wastes generated by QRI or used in
connection with QRI's properties, including the QRI Properties, or
operations have to the extent required by Environmental Laws been
transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only at
treatment, storage and disposal facilities authorized under
Environmental Laws to treat, store or dispose of such substances and
wastes, and, to the best knowledge of QRI and with respect to such
substances and wastes, such carriers and facilities have been and are
operating in compliance with such authorizations, are not subject to
any material unperformed investigative, remedial, response,
32
contribution or similar obligations under, and are not the subject of
any existing, pending or overtly threatened action, investigation or
inquiry by any Governmental Authority or third party in connection
with, any Environmental Laws.
(g) There has been no exposure of any person or property to
hazardous substances, solid waste or any pollutant or contaminant, nor
has there been any release of hazardous substances, solid waste or any
pollutant or contaminant into the environment by QRI in connection with
the properties or operations of QRI, including the QRI Properties, that
could reasonably be expected to have a QRI Material Adverse Effect.
(h) QRI shall make available to MSR all internal and external
environmental audits and studies and all correspondence on substantial
environmental matters in the possession of QRI relating to any of the
current or former properties or operations of QRI, including the QRI
Properties.
Section 4.13. Properties.
(a) The oil, gas and/or mineral leases, and interests in which
comprise part of the properties, rights and interest of QRI listed in
Schedule 4.13 (collectively, the "QRI Properties"), and all other
material contracts, agreements, licenses permits and easements,
rights-of-way and other rights-of-surface use comprising any part of or
otherwise relating to the QRI Properties (such leases and such material
contracts, agreements, licenses, permits, easements, rights-of-way and
other rights-of-surface use being herein called the "QRI Basic
Documents"), are in full force and effect and constitute valid and
binding obligations of the parties thereto; all contracts and
agreements which are QRI Basic Documents are disclosed in Section
4.13(a) of the QRI Disclosure Schedule. QRI is not in breach or default
(and no situation exists which with the passing of time or giving or
notice would create such a breach or default) of its obligations under
the QRI Basic Documents, and no breach or default by any third party
(or situation which with the passage of time or giving of notice would
create such a breach of default) exists, to the extent such breach or
default (whether by QRI or such a third party) could materially
adversely affect (after the date hereof) the ownership, operation,
value or use of any QRI Properties. All payments (including, without
limitation, all delay rentals, royalties, excess royalties, overriding
royalty interests, shut-in royalties and valid calls for payment or
prepayment under operating agreements) owing under QRI Basic Documents
have been and are being made (timely and properly, and before the same
became delinquent) by QRI in all material respects and, where the
non-payment of same by a third party could materially adversely affect
the ownership, operation, value or use of a QRI Property after the date
hereof, have been and are being made by such third party in all
material respects.
(b) Except as set forth in Section 4.13(b) of the QRI
Disclosure Schedule, QRI has not incurred any expenses, or made
commitments to make expenditures, in connection with (and no other
obligations or liabilities have been incurred) that would materially
adversely affect the ownership or operation of the QRI Properties after
the date hereof, other than routine expenses incurred in the normal
operation of existing xxxxx on the QRI Properties. All expenses payable
under the terms of the QRI Basic Contracts have been properly and
33
timely paid except for such expenses as are being currently paid prior
to delinquency in the ordinary course of business. Except as set forth
in Section 4.13(b) of the QRI Disclosure Schedule, no proposals are
currently outstanding (whether made by QRI or by any other party) to
drill additional xxxxx, or to deepen, plug back, abandon, or rework
existing xxxxx, or to conduct other operations for which consent is
required under the applicable operating agreement, or to conduct any
other material operations, other than normal operation of existing
xxxxx on the QRI Properties.
(c) There exist no agreements or arrangements for the sale,
gathering, transportation, compression, treating, processing or other
marketing of a material volume of production from the QRI Properties
(including without limitation, calls on, or other rights to purchase,
production, whether or not the same are currently being exercised)
other than (A) the agreements set forth in Section 4.13(c) of the QRI
Disclosure Schedule, and (B) agreements or arrangements that are
cancelable on 30 days notice or less without penalty or detriment. Any
contracts or other arrangements under which QRI is processing,
gathering, transporting or otherwise marketing any material volume of
oil, gas or other minerals (whether or not attributable to the QRI
Properties) for the account of a third party include terms that
represent an arm's length, commercially reasonable trade for QRI. All
of the proceeds from the sale of production from the QRI Properties are
being properly and timely paid to QRI by the purchaser of production
without suspension or indemnity other than standard division order
indemnities.
(d) Except as set forth in Section 4.13(d) of the QRI
Disclosure Schedule, QRI has not received prepayments (including, but
not limited to, payments for oil and gas not taken pursuant to
"take-or-pay" arrangements) for any oil or gas produced from the QRI
Properties as a result of which the obligation does (or may) exist to
deliver oil or gas produced from the QRI Properties after the date
hereof without then receiving payment (or without then receiving full
payment) therefor or to make repayments in cash. For each QRI Property
listed in Section 4.13(d) of the QRI Disclosure Schedule, such section
reflects (A) the total amount of prepayment received as of the date
hereof (and the amount of any recoupment thereof heretofore made), and
(B) whether or not a cash payment can be required in the event
recoupment out of production proves to be inadequate. Except as set
forth in Section 4.13 of the QRI Disclosure Schedule, there is no QRI
Property with respect to which QRI and/or its predecessors in title,
have collectively Over-Produced or Under-Produced from such QRI
Property (or on the units in which such QRI Property participates), or
any product thereof, than the ownership of QRI and such predecessors in
such QRI Property would entitle QRI and such predecessors (absent any
balancing agreement or arrangement) to receive, to the extent such
Over-produced or Under-produced position has not, as of the date
hereof, been fully made up or otherwise extinguished. For each QRI
Property listed in Section 4.13(d) of the QRI Disclosure Schedule, such
section reflects, on a well-by-well or any other basis as may be
dictated by any applicable balancing agreement, (A) whether QRI is in
an Over-produced or Under-produced position, (B) the amount of such
over-production or under-production, (C) a description of the written
balancing agreement (if any) pertaining to such QRI Property (or a
statement that no such agreement exists) and (D) a statement as to
whether royalties, overriding royalties, or other burdens against QRI's
net revenue interest in the affected QRI Properties were, during the
period the subject imbalance accrued, paid based upon receipts or
34
entitlements. Except as set forth in Section 4.13(d) of the QRI
Disclosure Schedule, there are no pipeline imbalances that have arisen
due to the failure or nominations made by QRI to match actual
deliveries of production from any one or more QRI Properties. Except
as set forth on Section 4.13(d) of the QRI Disclosure Schedule, (i)
none of the purchasers under any production sales contracts has
exercised any economic out provision; (ii) none of the purchasers under
any production sales contracts has curtailed its takes of natural gas
in violation of such contracts; and (iii) none of the purchasers under
any production sales contracts has given notice that it desires to
amend the production sales contracts with respect to price or quantity
of deliveries under take-of-pay provisions or otherwise. QRI is not
entitled to receive any portion of the interest of the Company in any
production or to receive cash or other payments to "balance" any
disproportionate allocation of production under any operating
agreement, gas balancing and storage agreement, gas processing or
dehydration agreement, gas transportation or other similar agreements.
(e) QRI has all governmental licenses and permits necessary to
own and operate the QRI Properties as presently being owned and
operated, and such licenses, permits and filings are in full force and
effect, and QRI has not received written notice of any violations in
respect of any such licenses or permits.
(f) Except as set forth in Section 4.13(f) of the QRI
Disclosure Schedule, neither QRI nor any QRI Property is subject to (A)
any area of mutual interest agreements or non-compete agreements, (B)
any farm-out or farm-in agreement under which any party thereto is
entitled to receive assignments not yet made, or could earn additional
assignments after the date hereof, (C) any tax partnership, or (D) any
agreement, contract or commitment relating to the disposition or
acquisition of the assets of, or any interest in, any business entity.
(g) All severance, production, ad valorem, windfall profit and
other similar taxes based on or measured by the ownership or operation
of the QRI Properties have been, and are being, paid (properly and
timely, and before the same become delinquent) by QRI in all respects.
(h) The ownership and operation of the QRI Properties has, to
the extent that non-conformance could materially adversely affect the
ownership, operation, value or use thereof after the date hereof, been
in conformity with all applicable laws, and all applicable rules,
regulations and orders of all governmental agencies having
jurisdiction.
(i) Except as set forth in Section 4.13(i) of the QRI
Disclosure Schedule, there are no Preferential Rights or Consents,
other than Routine Governmental Approvals, that affect any QRI Property
or Properties and that will be triggered by the Merger.
(j) Except as set forth in Section 4.13(j) of the QRI
Disclosure Schedule, there exist no agreements or other arrangements
whereunder QRI undertakes to perform gathering, transportation,
processing or other marketing services for any third party, including
without limitation the owner of a royalty or overriding royalty
interest burdening a lease included in the QRI Properties, for a fee or
other consideration that is now, or may hereafter be, unrepresentative
35
of commercial rates being received by third parties in comparable,
arm's length transactions.
(k) Except as set forth in Section 4.13(k) of the QRI
Disclosure Schedule, QRI has good and defensible title to the QRI
Property, free and clear of all liens, security interests, and
encumbrances except for (a) the contracts, agreements, burdens,
encumbrances and other matters set forth in the descriptions of certain
of the QRI Properties in Section 4.13 of the QRI Disclosure Schedule,
(b) statutory liens for taxes which are not yet delinquent, (c) liens
under operating agreements, pooling orders and unitization agreements,
and mechanics' materialmen's liens, with respect to obligations which
are not yet due, and (d) minor defects and irregularities in title to
any QRI Property, so long as such defects and irregularities do not
materially impair the value of such QRI Property or the use thereof for
the purposes for such QRI Property is held. With respect to each QRI
Property described in Section 4.13 of the QRI Disclosure Schedule, the
ownership of QRI in such QRI Property does and will, (A) with respect
to each tract of land described in Section 4.13 of the QRI Disclosure
Schedule (whether described directly in such section or described by
reference to another instrument) in connection with such QRI Property,
(1) entitle QRI to receive a decimal or percentage share of the oil,
gas, and other hydrocarbons produced from, or allocated to, such tract
equal to or not less than the decimal or percentage share set forth in
Section 4.13 of the QRI Disclosure Schedule in connection with such
tract opposite the words "Net Revenue Interest" (or words of similar
import), (2) cause QRI to be obligated to bear a decimal or percentage
share of the Costs of exploration, development and operation of such
tract of land not greater than the decimal or percentage share set
forth in Section 4.13 of the QRI Disclosure Schedule in connection with
such tract opposite the words "Working Interest" (or words of similar
import) and (B) if such QRI Property is shown in Section 4.13 of the
QRI Disclosure Schedule to be subject to a unit or units, with respect
to each such unit, (1) entitle QRI to receive a decimal or percentage
share of all substances covered by such unit that are produced from, or
allocated to, such unit equal to or not less than the decimal or
percentage share set forth in Section 4.13 of the QRI Disclosure
Schedule in connection with such QRI Property opposite the words "Unit
Net Revenue Interest" or words of similar import (and if such QRI
Property is subject to more than one unit, words identifying such
interest with such unit), and (2) obligate QRI to bear a decimal or
percentage share of the Costs not greater than as set forth in Section
4.13 of the QRI Disclosure Schedule in connection with such QRI
Property opposite the words "Unit Working Interests" or words of
similar import (and if such QRI Property is subject to more than one
unit, words identifying such interests with such unit). With respect to
each QRI Property described in Section 4.13 of the QRI Disclosure
Schedule that is subject to a voluntary or involuntary pooling,
unitization or communitization agreement and/or order, the term "tract
of land" as used in this subsection (k) shall mean the pooled, unitized
or communitized area as an entirety and shall not be deemed to refer to
any individual tract committed to said pooled, unitized or communitized
area. Without limitation of the foregoing, the ownership by QRI of the
QRI Properties does and will, with respect to each well or unit
identified in Section 4.13 of the QRI Disclosure Schedule entitle QRI
to receive a decimal or percentage share of the oil, gas and other
hydrocarbons produced from, or allocated to, such well or unit equal to
not less than the decimal or percentage share set forth, for such well
or unit, in the column headed "Net Revenue Interest" in Section 4.13 of
the QRI Disclosure Schedule, and cause QRI to be obligated to bear a
decimal or percentage share of the cost of operation of such well or
36
unit equal to not more than the decimal or percentage share set forth,
for such well or unit, in the column headed "Working Interest" in
Section 4.13 of the QRI Disclosure Schedule. The above-described shares
of production on which QRI is entitled to receive and shares of
expenses that QRI is obligated to bear are not and will not be subject
to change other than such changes that arise pursuant to non-consent
provisions of operating agreements described in Section 4.13 of the QRI
Disclosure Schedule in connection with operations hereafter proposed,
or such changes are reflected in Section 4.13 of the QRI Disclosure
Schedule.
(l) QRI has delivered to the Company copies of (i) the reserve
report dated as of January 1, 1998 prepared by XxXxxxx Petroleum
Consultants, Ltd., independent petroleum engineers (the "XxXxxxx
Report"), relating to the oil and gas reserves attributable to certain
Mercury Exploration Company properties, (ii) the reserve report dated
August 1, 1997 prepared by Xxxxxxxx & Associates, Inc., independent
petroleum engineers (the "Xxxxxxxx Report"), (iii) the reserve report
dated as of January 1, 1998 prepared by X.X. Xxxxxxxx and Associates,
Inc., independent petroleum engineers (the "QELC Holditch Report"),
relating to the oil and gas reserves attributable to the properties of
Quicksilver Energy L.C. and (iv) the reserve report dated as of January
1, 1998 prepared by X.X. Xxxxxxxx and Associates, Inc., independent
petroleum engineers (together with the XxXxxxx Report, the Xxxxxxxx
Report and the QELC Holditch Report, the "Reports"), relating to the
oil and gas reserves attributable to properties of Michigan Gas
Partners. There are no statements or conclusions in any of the Reports
that are based upon or include misleading information or fail to take
into account material information regarding the matters reported
therein. To the knowledge of QRI, the estimates of reserves in the
Reports were prepared in accordance with standard geological and
engineering methods generally accepted in the oil and gas industry. The
estimates of the lease operating expenses, production and ad valorem
taxes and capital expenditures in the Reports reasonably reflect the
historical experience of QRI and the Contributing Entities, and QRI has
no reason to believe that the estimates will not reflect future lease
operating expenses, production and ad valorem taxes and capital
expenses. The historical factual information supplied by Mercury to the
independent engineering firms in connection with the preparation of the
Reports was, at the time of delivery to such firms, true and complete
in all material respects. Section 4.13 of the QRI Disclosure Schedule
sets forth a list of all other current reserve reports covering the QRI
Properties, true and complete copies of which have been delivered to
the Company by QRI.
Section 4.14. Insider Interests; Transactions with Management. Except
as set forth in Section 4.14 of the QRI Disclosure Schedule, no officer,
director, or employee of QRI or holder of more than five percent of QRI Common
Stock currently outstanding has any interest in any property, real or personal,
tangible or intangible, agreement, arrangement, or understanding, written or
oral, providing for the employment of, furnishing of services by, rental or real
or personal property from, or otherwise requiring payments to any such
shareholder, officer, director or employee used in or pertaining to the business
of QRI, except for the ordinary rights of a stockholder or employee stock option
holder. No executive officer, director or stockholder of the QRI has, since
January 1, 1997, engaged in any business dealings with QRI, other than such
business dealings as would not be required to be disclosed in such documents or
reports pursuant to the Securities Act and the rules and regulations promulgated
thereunder. Except as set forth on Schedule 4.14, no executive officer or
37
director of QRI (except in his capacity as such) has any direct or indirect
material interest in (a) any competitor, customer, supplier or agent of QRI, or
(b) any person that is a party to any contract or agreement with QRI.
Section 4.15. Vote Required. Except as required under the terms of the
Formation Documents, approval of the Merger and this Agreement requires solely
the affirmative votes of the outstanding shares of QRI Common Stock held by the
Contributing Entities, and no other vote or consent by any shareholder of QRI is
required to approve the Merger and this Agreement. Members of the Xxxxxx family
and the Contributing Entities control in excess of a majority of the outstanding
shares of QRI Common Stock, and they have agreed (a copy of which agreement has
been furnished to the Company concurrently with the execution of this Agreement)
to vote their shares of QRI Common Stock and their shares of Company Common
Stock in favor of approval of the Merger and this Agreement at the QRI and
Company stockholders meetings referred to in Section 6.01 (or to consent thereto
by written consent of the stockholders of QRI in lieu thereof in accordance with
the DGCL and QRI's Certificate of Incorporation). All approvals required of the
Contributing Entities to the Merger, this Agreement and the transactions
contemplated hereby under the provisions of the QRI stockholder agreement have
been irrevocably given, and copies thereof have been forwarded to the Company
concurrently with the execution of this Agreement (provided, the terms thereof
are subject to the rights of QRI, JEDI and TCW under an Agreement, dated , 1998
(the "Voting Agreement"), among QRI, JEDI and TCW, a copy of which has been
delivered to the Company).
Section 4.16. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of QRI.
Section 4.17. Board Recommendations. By a unanimous vote of the
directors present at a meeting of QRI's Board of Directors (which meeting was
duly called and held and at which a quorum was present at all times), or by
unanimous written consent, the Board of Directors of QRI (a) approved and
adopted this Agreement and the other transactions contemplated herein, and
determined that the Merger is fair to the stockholders of QRI, and (b) resolved
to recommend approval and adoption of this Agreement, including the Merger and
the other transactions contemplated herein, by the stockholders of QRI.
Section 4.18. Disclosure. No representation or warranty hereunder
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by QRI, the
Company will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary course
consistent with past practices;
38
(b) use its best efforts to preserve intact its business
organization, maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good a
repair and condition as at present, ordinary wear and tear excepted,
and use its best efforts to maintain supplies and inventories in
quantities consistent with its customary business practices;
(d) use its best efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(e) promptly notify QRI, JEDI and TCW of (i) any material
adverse change in the condition (financial or otherwise), of the
business, properties, assets, liabilities or prospects of the Company
and its subsidiaries or in the operation of the business or the
properties of the Company and its subsidiaries, (ii) any litigation or
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) involving the Company or
any of its subsidiaries, (iii) the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would likely cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect when made or at any time from the date of
this Agreement to the Effective Time; (iv) any failure of the Company
to comply in any respect with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
or (v) any other event that could reasonably be expected to result in a
Company Material Adverse Effect; provided, however, that no such
notification shall affect the representations and warranties of the
Company or the conditions to the obligations of the parties hereunder;
(f) (i) file all Tax Returns required to be filed on or before
the Closing Date by or with respect to the Company or any of its
subsidiaries, (ii) include in each such Tax Return all items of income,
gain, loss, deduction and credit or other items required to be included
in each such Tax Return, (iii) timely pay in full all Taxes that become
due pursuant to such Tax Returns, and (iv) satisfy all withholding
requirements imposed on or with respect to the Company;
(g) to the extent legally and contractually authorized to do
so, give QRI and its attorneys and other representatives access at all
reasonable times to the Company Properties and to the Company and any
the subsidiaries' records (including, without limitation, title files,
division order files, well files, production records, equipment
inventories, windfall profit tax records and production, severance and
ad valorem tax records) pertaining to the ownership and/or operation of
the Company Properties;
(h) to the extent third parties operate the Company
Properties, take such steps as would a prudent non-operator to cause
the operator to (i) continue the routine operation of the Company
Properties in the ordinary course of business and as would a prudent
operator,
39
(ii) operate the Company Properties in conformity (in all material
respects) with all the Company Basic Documents and all applicable
rules, regulations and orders of all Governmental Authorities having
jurisdiction, and (iii) maintain the machinery, improvements, equipment
and other personal property and fixtures forming a part of the Company
Properties in at least as good of a condition as they are on the date
of this Agreement; where the Company or any the subsidiary is the
operator of a Company Property, they will (unless removed without its
consent) remain the operator of such Company Property;
(i) cause all expenses (including, without limitation, all
bills for labor, materials and supplies used or furnished for use in
connection with the Company Properties and all ad valorem, severance,
production, windfall profit and similar taxes) and liabilities relating
to the ownership or operation of the Company Properties to be paid and
discharged in the ordinary course of business; and
(j) request, from the appropriate parties (and in accordance
with the documents creating such rights and/or requirements), all
Consents relating to any Company Property and waivers of Preferential
Rights relating to any material Company Property.
Section 5.02. Affirmative Covenants of QRI. QRI hereby covenants and
agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by the Company, QRI
will:
(a) operate its business in the usual and ordinary course
consistent with past practices;
(b) use its best efforts to preserve intact its business
organization, maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good a
repair and condition as at present, ordinary wear and tear excepted,
and use its best efforts to maintain supplies and inventories in
quantities consistent with its customary business practices;
(d) use its best efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(e) promptly notify the Company of (i) any material adverse
change in the condition (financial or otherwise), of the business,
properties, assets, liabilities or prospects of QRI or in the operation
40
of its businesses or properties; (ii) any litigation or governmental
complaints, investigations or hearings (or communications indicating
that the same may be contemplated) involving QRI or the Contributing
Entities, (iii) the occurrence, or failure to occur, of any event,
which occurrence or failure to occur would likely cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect when made or at any time from the date of
this Agreement to the Effective Time; (iv) any failure of QRI to comply
in any respect with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; or (v) any
other event that could reasonably be expected to result in a QRI
Material Adverse Effect; provided, however, that no such notification
shall affect the representations and warranties of QRI or the
conditions to the obligations of the parties hereunder;
(f) (i) file all Tax Returns required to be filed on or before
the Closing Date by or with respect to QRI, (ii) include in each such
Tax Return all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return, (iii)
timely pay in full all Taxes that become due pursuant to such Tax
Returns, and (iv) satisfy all withholding requirements imposed on or
with respect to QRI;
(g) promptly as practicable prepare and file an application
with AMEX to list on AMEX the QRI Common Stock, including the QRI
Common Stock to be issued in the Merger, effective as of the Effective
Time and shall use all reasonable efforts to cause such application to
be approved prior to the Effective Time, and shall comply in all
material respects with the requirements of AMEX in connection with such
listing;
(h) to the extent legally and contractually authorized to do
so, give the Company and its attorneys and other representatives access
at all reasonable times to the QRI Properties and to QRI's records
(including, without limitation, title files, division order files, well
files, production records, equipment inventories, windfall profit tax
records and production, severance and ad valorem tax records)
pertaining to the ownership and/or operation of the QRI Properties;
(i) to the extent third parties operate the QRI Properties,
will take such steps as would a prudent non-operator to cause the
operator to (i) continue the routine operation of the QRI Properties in
the ordinary course of business and as would a prudent operator, (ii)
operate the QRI Properties in conformity (in all material respects)
with all QRI Basic Documents, and all applicable rules, regulations and
orders of all Governmental Authorities having jurisdiction, and (iii)
maintain the machinery, improvements, equipment and other personal
property and fixtures forming a part of the QRI Properties in at least
as good of a condition as they are on the date of this Agreement; where
QRI is the operator of a QRI Property, QRI will (unless removed without
its consent) remain the operator of such QRI Property;
(j) cause all expenses (including, without limitation, all
bills for labor, materials and supplies used or furnished for use in
connection with the QRI Properties and all ad valorem, severance,
production, windfall profit and similar taxes) and liabilities relating
to
41
the ownership or operation of the QRI Properties to be promptly paid
and discharged in the ordinary course of business;
(k) request, from the appropriate parties (and in accordance
with the documents creating such rights and/or requirements), all
Consents relating to any QRI Property and waivers of any Preferential
Rights relating to any material QRI Property; and
(l) prior to the Effective Time, take all necessary corporate
action to amend its Certificate of Incorporation and Bylaws so as to
conform with Exhibits A and B hereto, respectively, as contemplated by
Sections 1.05 and 1.06 hereof.
Section 5.03. Negative Covenants of the Company. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by QRI from
the date of this Agreement until the Effective Time, the Company shall not do,
and shall not permit any of its subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become
payable to any director; (ii) increase the compensation payable or pay
bonuses to officers or employees of the Company or any of its
subsidiaries other than in the ordinary course of business and
consistent with past practices; (iii) grant any severance or
termination pay (other than pursuant to agreements or arrangements in
effect on the date hereof) or enter into any employment or severance
agreement with, any director, officer or employee; (iv) establish,
adopt or enter into any employee benefit plan or arrangement; (v) make
any loans to any stockholders, officers, directors or employees or make
any change in its borrowing arrangements; or (vi) amend, or take any
other actions (including, without limitation, the waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a "change in control" (as defined in the respective
plans) of the Company or a filing under Section 13(d) or 14(d) of the
Exchange Act with respect to the Company) with respect to any of the
Company Benefit Plans or any of the plans, programs, agreements,
policies or other arrangements described in Section 3.10(a) of this
Agreement;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock or
other equity interests, except dividends by a wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of the
Company;
(c) (i) redeem, purchase or otherwise acquire any shares of
its or any of its subsidiaries' capital stock or any securities or
obligations convertible into or exchangeable for any shares of its or
its subsidiaries' capital stock (other than any such acquisition
directly from any wholly owned subsidiary of the Company in exchange
for capital contributions or loans to such subsidiary), or any options,
warrants or conversion or other rights to acquire any shares of its or
its subsidiaries' capital stock or any such securities or obligations,
(ii) effect any reorganization or recapitalization of the Company or
any of its subsidiaries, or (iii) split, combine or reclassify any of
its or its subsidiaries' capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its or its subsidiaries' capital stock;
provided, however, that nothing in this Section 5.03 shall prohibit the
42
merger of a wholly-owned, direct or indirect subsidiary of the Company
with and into the Company;
(d) issue (whether upon original issue or out of treasury),
sell, grant, award, deliver or limit the voting rights of any shares of
any class of its or its subsidiaries' capital stock, any securities
convertible into or exercisable or exchangeable for any such shares, or
any rights, warrants or options to acquire any such shares (except for
the issuance of shares upon the exercise of outstanding stock options
or warrants in accordance with their terms);
(e) except for the merger of a wholly-owned, direct or
indirect subsidiary of the Company with and into the Company, acquire
or agree to acquire (whether pursuant to a definitive agreement, a
non-binding letter of intent or otherwise), by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets of any
other Person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business and consistent with past
practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of ("Transfer"), or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of its assets
or any assets of any of its subsidiaries, except for Transfers of
assets in the ordinary course of business and consistent with past
practice;
(g) initiate, solicit or encourage (including by way of
furnishing information or assistance) any Alternative Transaction (as
defined below), or enter into discussions or negotiate with any Person
or entity in furtherance of an Alternative Transaction, or disclose any
nonpublic information relating to the Company or any of its
subsidiaries to, or afford access to the properties, books or records
of the Company or any of its subsidiaries, or agree to, or endorse, any
Alternative Transaction, or authorize or permit any of the officers,
directors, employees or agents of the Company or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of
the Company's subsidiaries (the "Representatives") to take any such
action, provided, however, that at any time prior to the time that the
Company's stockholders shall have voted to approve this Agreement, the
Special Committee of the Board of Directors of the Company may cause
the Company to furnish information to, and may participate in
discussions or negotiations with, any Person who (without any
solicitation, initiation, encouragement, discussion or negotiation,
directly or indirectly, with the Company or any of its subsidiaries or
their respective Representatives) has submitted a written proposal to
the Special Committee of the Board of Directors relating to an
Alternative Transaction that the Special Committee of the Company's
Board of Directors, in the exercise of its fiduciary duty after
consideration of written advice from its legal and financial advisors,
determines is more beneficial to the stockholders of the Company than
the Merger. For purposes of this Agreement, "Alternative Transaction"
shall mean any of the following (other than the transactions
contemplated by this Agreement) involving the Company or any of its
subsidiaries: (i) any purchase, lease, exchange, transfer or other
acquisition or assumption of all or a material portion of the assets of
the Company and its subsidiaries, taken as a whole; (ii) any merger,
43
consolidation, share exchange, business combination or similar
transaction involving the Company or any of its subsidiaries; or (iii)
a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
20% or more of the outstanding voting of the Company.
(h) adopt or propose to adopt any amendments to its
Certificate of Incorporation or its Bylaws;
(i) (i) change any of its significant accounting policies or
(ii) make or rescind any express or deemed election relating to Taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1997
except, in the case of clause (i) or clause (ii), as may be required by
Law or generally accepted accounting principles;
(j) take or permit any action that could prevent the Merger
from qualifying as a tax-free reorganization under Section 368 of the
Code, and the Company will use its best efforts to prevent any of its
officers or directors from taking or permitting any such action;
(k) take or permit any action that could adversely affect or
delay the ability of either the Company or QRI to obtain any necessary
approvals of any Governmental Entities required for the transactions
contemplated hereby or to perform its covenants and agreements under
this Agreement;
(l) except as set forth in Section 5.03(l) of the Company
Disclosure Schedule, neither the Company nor any subsidiaries will
sell, transfer or abandon any portion of the Company Properties other
than (i) items of materials, supplies, machinery, equipment,
improvements or other personal property or fixtures forming a part of
the Company Properties (and then only if the same is replaced with an
item of equal suitability and value free of liens and security
interests, which replacement item will then, for the purposes of this
Agreement, become part of the Company Properties) or (ii) production of
oil, gas and/or other minerals, or the products therefrom, in the
ordinary course of business under arrangements that do not cause the
representations and warranties set forth elsewhere herein to be untrue;
neither the Company nor any subsidiary will, without QRI's consent,
release, permit to terminate, modify or reduce its rights under any
oil, gas and/or mineral lease forming a material part of the Company
Properties, or any other material the Company Basic Document, or enter
into any new agreements which would be the Company Basic Documents;
(m) take materially more of the oil or gas produced from the
xxxxx located on any Company Property (or on units in which such
properties participate) than their ownership of such Company Property
would entitle them (absent any oil or gas balancing agreement or
arrangement) to take;
44
(n) take any action that would, or that reasonably could be
expected to, result in any of the representations and warranties set
forth in this Agreement becoming untrue or any of the conditions to the
Merger set forth in Article VI not being satisfied. The Company
promptly shall advise QRI orally and in writing of any change or event
having, or which, insofar as reasonably can be foreseen, would have, a
material adverse effect on the Company and its subsidiaries, taken as a
whole; and
(o) agree in writing or otherwise to do any of the foregoing.
Section 5.04. Negative Covenants of QRI. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, QRI shall not
do any of the following:
(a) amend or modify any one or more of the Formation Documents
delivered to the Company under Section 4.02 in any material respect.
(b) propose to adopt any amendments to its Certificate of
Incorporation or its Bylaws that could reasonably be expected to delay
or have an adverse effect on the consummation of the transactions
contemplated by this Agreement or would otherwise be inconsistent in
any material respect with the terms and conditions of this Agreement or
the other agreements or transactions contemplated hereby (it being
understood that this clause (b) shall not in any respect limit the
right and power of QRI to amend its Certificate of Incorporation to
increase the authorized number of shares of any class of capital stock
of QRI) or to adopt the Certificate of Incorporation contemplated by
Section 1.05 of this Agreement;
(c) change any of its significant accounting policies except
as may be required by Law or generally accepted accounting principles;
(d) declare or pay any dividend (other than a stock split in
the form of a stock dividend as provided for in the last proviso in
Section 2.01(b))on, or make any other distribution in respect of,
outstanding shares of its or its subsidiaries capital stock or other
equity interests;
(e) take or permit any action that would adversely affect or
delay the ability of either the Company or QRI to obtain any necessary
approvals of any Governmental Entities required for the transactions
contemplated hereby or to perform its covenants and agreements under
this Agreement;
(f) take or permit any action which could prevent the Merger
from qualifying as a tax-free organization under Section 368 of the
Code, and QRI will use its best efforts to prevent any of its officers
or directors from taking or permitting any such action;
(g) except as contemplated by this Agreement, issue (whether
upon original issue or out of treasury), sell, grant, award, deliver or
limit the voting rights of any shares of any class of its capital
stock, any securities convertible into or exercisable or exchangeable
for any such shares, or any rights, warrants or options to acquire any
45
such shares (except for the issuance of shares upon the exercise of
outstanding awards, stock options or warrants in accordance with their
terms), or amend or otherwise modify in any material respect the terms
of such rights, warrants and options;
(h) QRI will not sell, transfer or abandon any portion of the
QRI Properties other than (i) items of materials, supplies, machinery,
equipment, improvements or other personal property or fixtures forming
a part of the QRI Properties (and then only if the same is replaced
with an item of equal suitability and value free of liens and security
interests, which replacement item will then, for the purposes of this
Agreement, become part of the QRI Properties) or (ii) production of
oil, gas and/or other minerals, or the products therefrom, in the
ordinary course of business under arrangements that do not cause the
representations and warranties set forth elsewhere herein to be untrue;
QRI will not, without the Company's consent, release, permit to
terminate, modify or reduce its rights under any oil, gas and/or
mineral lease forming a material part of the QRI Properties, or any
other material QRI Basic Document, or enter into any new agreements
which would be QRI Basic Documents;
(i) QRI will not take materially more of the oil or gas
produced from the xxxxx located on any QRI Property (or on units in
which such properties participate) than QRI's ownership of such QRI
Property would entitle QRI (absent any oil or gas balancing agreement
or arrangement) to take;
(j) QRI shall not take any action that would, or that
reasonably could be expected to, result in any of the representations
and warranties set forth in this Agreement becoming untrue or any of
the conditions to the Merger set forth in Article VII not being
satisfied. QRI promptly shall advise the Company orally and in writing
of any change or event having, or which, insofar as reasonably can be
foreseen, would have, a material adverse effect on QRI or the QRI
Properties; and.
(k) agree in writing or otherwise to do any of the foregoing.
Section 5.05. Access and Information.
(a) The Company shall, and shall cause its subsidiaries to,
(i) afford to QRI and QRI's officers, directors, stockholders,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "QRI Representatives") access during
ordinary business hours and at other reasonable times, upon reasonable
prior notice, to the officers, employees, accountants, agents,
properties, offices and other facilities of the Company and its
subsidiaries and to the books and records thereof and (ii) furnish
promptly to QRI and the QRI Representatives such information concerning
the business, properties, contracts, records and personnel of the
Company and its subsidiaries (including, without limitation, financial,
operating and other data and information) as may be reasonably
requested, from time to time, by QRI.
(b) QRI shall, and shall cause its subsidiaries to, (i) afford
to the Company and the Company's officers, directors, employees,
accountants, consultants, legal counsel, agents and other
46
representatives (collectively, the "Company Representatives") access
during ordinary business hours and at other reasonable times, upon
reasonable prior notice, to the officers, employees, accountants,
agents, properties, offices and other facilities of QRI and its
subsidiaries and to the books and records thereof and (ii) furnish
promptly to the Company and the Company Representatives such
information concerning the business, properties, intellectual property
assets, contracts, records and personnel of QRI and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by the
Company.
(c) No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the
parties that are contained herein and each such representation and
warranty shall survive such investigation.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Presentation to Stockholders. The Company shall, promptly
after the date of this Agreement, take all actions necessary in accordance with
the DGCL and its Certificate of Incorporation and Bylaws and the rules of AMEX
to present the Merger and this Agreement to the holders of the Company Common
Stock for their consideration and approval by the vote thereof at a meeting of
the Company's stockholders duly called and convened to act on the Merger and
this Agreement (the "Company Stockholders' Meeting"). In like manner, QRI shall,
promptly after the date of this Agreement, take all actions necessary in
accordance with the DGCL, QRI's Certificate of Incorporation and Bylaws to
present the Merger and this Agreement to the holders of QRI Common Stock for
their consideration and approval by the vote thereof at a meeting of QRI's
stockholders duly called and convened to act on the Merger and this Agreement
(the "QRI Stockholders' Meeting") (or, in lieu thereof, such action may be taken
by written consent in accordance with the DGCL and QRI's Certificate of
Incorporation). The Company and QRI shall consult with each other in connection
with such meetings and each shall use its best efforts to cause such meetings to
occur on the same date. The Company and QRI shall use their reasonable best
efforts to solicit from their respective stockholders proxies in favor of the
approval and adoption of this Agreement and to secure the vote of stockholders
required by the DGCL and their respective Certificates of Incorporation and
Bylaws and by the rules of AMEX to approve and adopt the Merger and this
Agreement. The Board of Directors of QRI and the Special Committee and the Board
of Directors of the Company shall recommend that their respective stockholders
approve and adopt this Agreement and the Merger on the terms and conditions set
forth in this Agreement. Provided, however, that nothing contained in this
Section 6.01 or elsewhere in this Agreement shall require the Board of Directors
of the Company, or the Special Committee thereof, to take any action or refrain
from taking any action that the Board of Directors of the Company determines in
good faith after consultation with and based on the advice of outside counsel
could be reasonably expected to result in a breach of its fiduciary duties under
applicable law; provided further that, in the event the Board of Directors, or
the Special Committee thereof, receives a proposal to enter into an Alternative
Transaction that the Special Committee, after consideration of advice from its
legal and financial advisors, determines is more beneficial to the stockholders
of the Company than the Merger, the Company's Board of Directors, or the Special
Committee, may, in the exercise of its fiduciary obligations, withdraw or modify
its approval or recommendation of this Agreement or the Merger.
47
Notwithstanding any other provision hereof, no party shall be restricted from
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender offer or exchange offer.
Section 6.02. Registration Statement; Proxy Statement/Prospectus.
(a) As promptly as practicable after the execution of this
Agreement, QRI shall prepare and file with the SEC a registration
statement on Form S-4 (the "Registration Statement") containing a Proxy
Statement/Prospectus (the "Proxy Statement/ Prospectus") for
stockholders of the Company in connection with (i) the registration
under the Securities Act of the offer, sale and delivery of QRI Common
Stock to be issued in the Merger and (ii) the vote of the stockholders
of the Company with respect to the Merger and this Agreement. QRI and
the Company shall each use all reasonable efforts to cause the
Registration Statement to become effective as promptly as practicable,
and shall take any action required to be taken in order to comply with
any applicable federal or state securities laws in connection with the
issuance of shares of QRI Common Stock in the Merger. QRI and the
Company shall each furnish all information concerning itself and the
holders of its capital stock as the other may reasonably request in
connection with such actions. As promptly as practicable after the
Registration Statement shall have become effective, the Company and QRI
shall mail (the "Mailing Date") the Proxy Statement/Prospectus to the
holders of Company Common Stock of record at least 20 calendar days
prior to the Company Stockholders' Meeting. It shall be a condition to
the mailing of the Proxy Statement/Prospectus that QRI and the Company
shall have received the comfort letters described in Section 6.13 of
this Agreement, if QRI shall have requested such letters as described
in Section 6.13 hereof.
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statements made therein not misleading and (ii) the Proxy
Statement/Prospectus will, at the Mailing Date and at the time of the
Company Stockholders' Meeting and the QRI Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they
were made, not misleading. If at any time prior to the Company
Stockholders' Meeting or the QRI Stockholders' Meeting any event or
circumstance relating to the Company or any of its Affiliates, or its
or their respective officers or directors, should be discovered by the
Company that should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement/Prospectus, the
Company shall promptly inform QRI. All documents that the Company is
responsible for filing with any Governmental Entity in connection with
the transactions contemplated hereby, including, without limitation,
the Proxy Statement/Prospectus to the extent that the information
contained therein relates to the Company and its subsidiaries or the
transactions contemplated hereby, will comply as to form in all
material respects with the provisions of applicable law, including
applicable provisions of the Securities Act, the Exchange Act and the
rules and regulations thereunder, and each such document required to be
filed with any
48
Governmental Entity other than the SEC will comply with the provisions
of applicable Law as to the information required to be contained
therein.
(c) None of the information supplied or to be supplied by QRI
for inclusion in (i) the Registration Statement will, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
(ii) the Proxy Statement/Prospectus will, at the Mailing Date and at
the time of the Company Stockholders' Meeting and the QRI Stockholders'
Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances in
which they were made, not misleading. If at any time prior to the
Company Stockholders' Meeting or the QRI Stockholders' Meeting any
event or circumstance relating to QRI or any of its Affiliates, or its
or their respective officers or directors, should be discovered by QRI
that should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement/Prospectus, QRI shall promptly
inform the Company. All documents that QRI is responsible for filing
with any Governmental Entity in connection with the transactions
contemplated hereby, including, without limitation, the Registration
Statement to the extent that the information contained therein relates
to QRI and its subsidiaries or the transactions contemplated hereby,
will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder, and each
such document required to be filed with any Governmental Entity other
than the SEC will comply with the provisions of applicable Law as to
the information required to be contained therein.
Section 6.03. Appropriate Action: Consents; Filings.
(a) QRI and the Company and its subsidiaries shall each use
all reasonable efforts promptly (i) to take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary,
proper or advisable under applicable Law or otherwise to consummate and
make effective the transactions contemplated by this Agreement, (ii) to
obtain from any Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained by
the Company or any of its subsidiaries or QRI, respectively, in
connection with the authorization, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, the Merger, and (iii) to make
all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required
under (A) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state
securities laws, (B) the HSR Act, and (C) any other applicable Law; and
QRI and the Company shall cooperate with each other in connection with
the making of all such filings, including providing copies of all such
documents to the nonfiling party and its advisors prior to filing and,
if requested, shall accept all reasonable additions, deletions or
changes suggested in connection therewith. The Company and QRI shall
furnish all information required for any application or other filing to
be made pursuant to the rules
49
and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
(b) QRI and the Company and its subsidiaries agree to
cooperate and to use all reasonable efforts to contest and resist any
action, including legislative, administrative or judicial action, and
to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent)
(an "Order") that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation, by
vigorously pursuing all available avenues of administrative and
judicial appeal and all available legislative action.
(c) The Company and QRI shall each promptly give any notices
regarding the Merger, this Agreement or the transactions contemplated
hereby to third parties required by Law or by any material contract,
license, lease or other material agreement to which it is a party or by
which it is bound, and use, and cause its subsidiaries, if any, to use,
all reasonable efforts to obtain any third party Consents or waivers of
Preferential Rights (i) necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, (ii) otherwise
required under any contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated by
this Agreement, or (iii) required to prevent a Company Material Adverse
Effect or a QRI Material Adverse Effect, respectively, from occurring;
provided, however, that this Section 6.03 shall not impose any
obligations on or confer any rights upon any person or entity other
than the parties to this Agreement.
(d) If any party shall fail to obtain any third party Consent
or waivers of Preferential Rights described in subsection (c) above,
such party shall use all reasonable efforts, and shall take any such
actions reasonably requested by the other parties, to limit the adverse
effect upon the Company, its subsidiaries, and QRI, and their
respective businesses resulting, or that could reasonably be expected
to result from the failure to obtain such consent.
Section 6.04. Affiliates; Tax Treatment.
(a) The Company shall obtain and deliver to QRI (i) on the
date that this Agreement is executed by QRI, an executed agreement,
substantially in the form of Exhibit C hereto from each person
identified as an Affiliate of the Company in Section 3.12 of the
Company Disclosure Schedule, and (ii) by the Closing Date, from any
other person who is an Affiliate of the Company on the Closing Date.
(b) QRI shall be entitled to place legends as specified in
such letter agreements on the certificates evidencing any QRI Common
Stock to be received by such Affiliates of the Company pursuant to the
terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent of the QRI Common Stock, consistent
with the terms of such letter agreements.
50
(c) Neither the Company nor its subsidiaries nor QRI or other
Affiliates shall (i) take any action, or fail to take any action, that
would jeopardize qualification of the Merger as a tax-free
reorganization within the meaning of Section 368(a)(1)(A) of the Code
or (ii) enter into any contract, agreement, commitment or arrangement
with respect to the foregoing.
(d) At or before the Closing, QRI and the Company shall
provide an officer's certificate, in form and substance reasonably
satisfactory to the Company, to Jenkens & Xxxxxxxxx, a Professional
Corporation, to assist such counsel in rendering the written opinion
provided for in Section 7.01(d) of this Agreement. The Company shall
use all reasonable efforts to obtain from its Affiliates such
certificate as may be requested by such counsel in connection with such
opinion.
Section 6.05. Public Announcements. Except as otherwise required by
applicable Law or the rules of AMEX, neither QRI nor the Company nor any of its
subsidiaries shall issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld.
Section 6.06. AMEX Listing. QRI shall use all reasonable efforts to
cause the shares of QRI Common Stock to be issued in the Merger to be approved
for listing, subject to official notice of issuance, on AMEX prior to the
Effective Time.
Section 6.07. State Takeover Statutes. The Company will take all steps
necessary to exempt the transactions contemplated by this Agreement from, and if
necessary challenge the validity of, any applicable state takeover law,
including, without limitation, Section 203 of the DGCL. The Company shall take
all actions necessary under the DGCL, including approving the transactions
contemplated by this Agreement, to ensure that the prohibitions on business
combinations set forth in Section 203 of the DGCL do not, or will not, apply to
the transactions contemplated by this Agreement.
Section 6.08. Board Seat. Promptly following the Effective Time,
consistent with applicable law and its Bylaws, the Board of Directors of QRI
shall increase the number of members of its Board of Directors from 3 to 8, and
shall elect Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxx Xxxxxx, Xxxxxx
X. Xxxxxx, D. Xxxxxxx Xxxx and X. Xxxxxxx Xxxxxx III to fill seven of such
vacancies, to serve as such until the next annual meeting of QRI stockholders or
such time as their respective successors shall have been duly elected or
appointed and qualified.
Section 6.09. Options.
(a) At the Effective Time, each option granted by the Company
to purchase shares of Company Common Stock that is outstanding and
unexercised immediately prior thereto shall cease to represent a right
to acquire shares of Company Common Stock and shall be converted
automatically into an option to purchase shares of QRI Common Stock in
an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company benefit plans under
51
which they were issued and the agreements evidencing grants
thereunder).
(i) The number of shares of QRI Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of Company Common Stock subject to the
original option and the Conversion Ratio, provided that any
fractional shares of QRI Common Stock resulting from such
multiplication shall be rounded to the nearest whole share;
and
(ii) The exercise price per share of QRI Common Stock
under the new option shall be equal to the exercise price per
share of Company Common Stock under the original option
divided by the Conversion Ratio, provided that such exercise
price shall be rounded down to the nearest whole cent.
(b) The adjustment provided herein with respect to any options
that are "incentive options" (as defined in Section 422 of the Code)
shall be and is intended to be effectuated in a manner which is
consistent with Section 424(a) of the Code. Except as set forth in
clauses (i) and (ii) of Section 6.09(a), above, the duration and other
terms of the new option shall be the same as the original option except
that all references to the Company or any of its subsidiaries shall be
deemed to be references to QRI.
(c) If and to the extent required by the terms of the plans
governing the original options or pursuant to the terms of any
agreements evidencing grants thereunder, the Company shall use its
reasonable efforts to obtain the consent of each holder of outstanding
options to the treatment provided in subparagraph (a) of this Section
6.09.
Section 6.10. Common Stock Warrants.
(a) At the Effective Time, each Common Stock Warrant granted
by the Company to purchase shares of Company Common Stock that is
outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Company Common Stock and shall
be converted automatically into a warrant to purchase shares of QRI
Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the agreements
evidencing such Common Stock Warrants).
(i) The number of shares of QRI Common Stock to be
subject to the new Warrant shall be equal to the product of
the number of shares of Company Common Stock subject to the
original Common Stock Warrant and the Conversion Ratio,
provided that any fractional shares of QRI Common Stock
resulting from such multiplication shall be rounded to the
nearest whole share; and
(ii) The exercise price per share of QRI Common Stock
under the new Warrant shall be equal to the exercise price per
share of Company Common Stock under the original Common Stock
Warrant divided by the Conversion Ratio, provided that such
exercise price shall be rounded down to the nearest whole
cent.
52
(iii) Except as set forth in clauses (i) and (ii) of
this Section 6.10(a), the expiration date and other terms of
the new warrant shall be the same as the original warrant
except that all references to the Company or any of its
subsidiaries shall be deemed to be references to QRI.
If and to the extent required by the terms of the Common Stock Purchase
Warrants, the Company shall use its reasonable efforts to obtain the consent of
each holder of such Warrants to the treatment thereof provided in subparagraph
(a) of this Section 6.10.
Section 6.11. Indemnification.
(a) The Company shall indemnify and hold harmless, to the
fullest extent permitted under applicable law, and after the Effective
Time, QRI and the Surviving Corporation shall indemnify and hold
harmless, to the fullest extent permitted under applicable law, each
present and former director and officer of the Company or any of its
subsidiaries, and each person who is or was then serving as a director
of the Company or any of its subsidiaries (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties")
against any expenses, including reasonable attorneys' fees, fines,
losses, claims, damages, liabilities, costs, judgments and amounts paid
in settlement in connection with any threatened, pending or completed
claim, action, suit, proceeding or investigation (whether civil,
criminal or administrative) arising out of or pertaining to any action
or omission occurring prior to the Effective Time (including, without
limitation, any that arise out of or relate to the Merger and the
transactions contemplated by this Agreement) that are asserted or
commenced prior to or within six years following the Effective Time,
and the Company, QRI or the Surviving Corporation, as the case may be,
will advance expenses to each such Indemnified Party (provided the
person to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such person is not
entitled to indemnification), provided the Indemnified Party asserting
the right to indemnification hereunder shall have acted in good faith
and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
that such person reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action
or proceeding, that such person and reasonable cause to believe that
his conduct was unlawful. In the event of any such claim, action, suit,
proceeding or investigation (whether asserted or commenced before or
after the Effective Time), the Company, QRI or the Surviving
Corporation, as the case may be, will be entitled to participate in
and, to the extent that it may wish, to assume the defense thereof;
provided, however, that if any Indemnified Party (or group of
Indemnified Parties) reasonably believes that it is advisable for such
Indemnified Parties to be represented by separate counsel as a result
of a conflict, on any significant issue between the positions of the
Indemnified Party (or group of Indemnified Parties) and the Company,
QRI or the Surviving Corporation, as the case may be, as determined
53
under applicable standards of professional conduct or if the Company,
QRI or the Surviving Corporation shall promptly fail to assume
responsibility for such defense, such Indemnified Party (or group of
Indemnified Parties) may retain counsel satisfactory to such
Indemnified Party (or group of Indemnified Parties), who will represent
such Indemnified Party (or group of Indemnified Parties), and the
Company, QRI or the Surviving Corporation, as the case may be, shall
pay all reasonable fees and expenses of such counsel promptly as
statements therefor are received; provided, that the Indemnified
Parties and the Company, QRI or the Surviving Corporation, as the case
may be, will use their respective best efforts to assist in the
vigorous defense of any such matter; provided, further, that neither
the Company, QRI nor the Surviving Corporation shall be liable for any
settlement effected without their written consent, which consent, if
the Company, QRI or the Surviving Corporation fails to assume the
defense of any such matter, shall not be unreasonably withheld and in
no event shall be withheld in bad faith; and provided, further, that
neither the Company, QRI nor the Surviving Corporation shall have any
obligation hereunder to any Indemnified Party (i) when and if a court
of competent jurisdiction shall ultimately determine, after exhaustion
of all avenues of appeal, that such Indemnified Party is not entitled
to indemnification hereunder (at which point such Indemnified Party
shall promptly refund, without interest, to the indemnifying party all
amounts previously paid by the indemnifying party hereunder) and (ii)
unless such Indemnified Party has delivered to QRI an undertaking to
refund amounts paid as provided in clause (i) above. Any Indemnified
Party wishing to claim indemnification under this Section 6.11, upon
learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify the indemnifying party thereof. In the event the
Indemnified Parties are entitled to separate counsel pursuant to this
paragraph (a), the Indemnified Parties may as a group retain only one
such law firm to represent them with respect to any such matter unless
there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or
more Indemnified Parties in which case the Indemnified Parties may
retain, at the expense of the Company, QRI or the Surviving
Corporation, as the case may be, two additional law firms.
(b) The Company, its subsidiaries and the Surviving
Corporation will perform and discharge all indemnification agreements
to which the Company or any of its subsidiaries is a party and that
have been disclosed in Section 6.11(b) of the Company Disclosure
Schedule.
(c) This Section shall survive the closing of the transactions
contemplated hereby, is intended to benefit the Company, QRI, the
Surviving Corporation and each of the Indemnified Parties (each of whom
shall be entitled to enforce this Section against the Company or the
Surviving Corporation, as the case may be) and shall be binding on all
successors and assigns of the Surviving Corporation. The exercise by
any person of such person's rights under any of paragraphs (a) or (b)
of this Section shall not preclude the exercise of such person's rights
under any such other paragraph of this section, provided that such
party shall not be entitled to multiple recoveries thereunder.
54
(d) For six years from the Effective Time, QRI shall cause the
Surviving Corporation to provide to the Company's current directors and
officers liability insurance protection of the same kind and scope as
that provided by the Company's directors' and officers' liability
insurance policies (copies of which have been made available to QRI) in
effect on the date hereof; provided, however, that in no event shall
the Surviving Corporation be required to expend in any one year an
amount in excess of 150% of the annual premiums currently paid by the
Company for such insurance; and, provided, further, that if the annual
premiums of such insurance coverage exceeds such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(e) In the event the Surviving Corporation, QRI or any of
their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation or QRI, as
the case may be, assume the obligations set forth in this Section 6.11.
(f) Nothing in this Section 6.11 shall alter or replace the
obligations of an insurer that provides coverage to the Company or QRI.
Section 6.12. Employment Contracts. The Company represents that it has
previously delivered or made available to QRI all employment, retirement,
termination, severance or similar agreements with officers or other employees of
the Company and its subsidiaries which are currently in effect, all of which are
listed in the Company Disclosure Schedule. Section 6.12 of the Company
Disclosure Schedule lists all such agreements and plans that provide for payment
of amounts or awards upon consummation of a "change of control" of the Company,
including all those providing for payments or awards upon consummation of the
Merger. The Company has made available to QRI true, correct and complete copies
of all such agreements and plans. The Company will not enter into any such
agreements after the date hereof without QRI's prior written consent.
Section 6.13. Comfort Letters.
(a) If requested by QRI, the Company shall cause Deloitte and
Touche LLP to deliver a letter, dated as of the date of the Proxy
Statement/Prospectus and as of the Closing Date, and addressed to QRI
and its Board of Directors, in form and substance reasonably
satisfactory to QRI and customary in scope and substance for agreed
upon procedures letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to
the Proxy Statement/Prospectus.
(b) If QRI should make the request for the Company to cause
Deloitte and Touche LLP to deliver the letter referred to in
subparagraph (a) of this Section 6.13, QRI shall then cause Xxxxxx &
Xxxxxxx to deliver a letter dated as of the date of the Proxy
Statement/ Prospectus and as of the Closing Date, and addressed to QRI
and the Company and their respective Boards of Directors, in form and
substance reasonably satisfactory to the
55
Company and customary in scope and substance for agreed upon procedures
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy
Statement/Prospectus.
Section 6.14. Sales Under Rule 145 if Applicable.
(a) QRI will use its best efforts to comply with the reporting
requirements of the Exchange Act after the Effective Time.
(b) Upon being informed in writing by any person who, at the
Effective Time, was an officer, director or a shareholder of the
Company that may be deemed to be an affiliate of the Company (within
the meaning of the Exchange Act), that such person intends to sell any
shares of QRI Common Stock acquired in the Merger under Rule 145 under
the Exchange Act, QRI will certify in writing to such person that it
has been subject to the reporting requirements of the Exchange Act for
at least 90 days and it has filed all of the reports required to be
filed by it under the Exchange Act to enable such person to sell such
person's QRI Common Stock acquired in the Merger under Rule 145 (or
will inform such person in writing that it has not filed such reports).
QRI will further supply such person with any information in its
possession which he may reasonably request in connection with any such
proposed sale.
(c) If any of the certificates representing any QRI Common
Stock acquired in the Merger is presented to QRI's transfer agent for
registration of transfer in connection with any sale theretofore made
under paragraph (d) of Rule 145, provided such certificate is duly
endorsed for transfer or accompanied by a duly executed stock power and
is accompanied by an opinion of counsel satisfactory to QRI that such
transfer has complied with the requirements of Rule 145, QRI will
promptly instruct its transfer agent to register such transfer and to
issue one or more new certificates free of any stop transfer order or
restrictive legend.
Section 6.15. Stockholder Litigation. The Company shall give QRI the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement; provided, no such settlement shall
be agreed to without QRI's consent, which consent shall not be unreasonably
withheld; and further provided, that no settlement requiring a payment by a
director of the Company shall be agreed to without such director's consent.
ARTICLE VII
CLOSING CONDITIONS
Section 7.01. Conditions to Obligations of Each Party Under This
Agreement. The respective obligations of each party to effect the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions (any or all of which
may be waived by the parties hereto in writing, in whole or in part, to the
extent permitted by applicable Law):
56
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated by the SEC.
(b) Listing of QRI Common Stock. The AMEX shall have approved
the listing, subject to official notice of issuance of the QRI Common
Stock, including the QRI Common Stock to be issued in the Merger.
(c) Stockholder Approval. The Merger and this Agreement shall
have been approved and adopted by the requisite vote of the
stockholders of the Company and of QRI in accordance with the DGCL and
the respective Certificates of Incorporation of the Company and QRI.
(d) HSR Act. The Company and QRI shall have made all filings,
if any, required under the HSR Act and the applicable waiting period
under the HSR Act with respect to the transactions contemplated by this
Agreement shall have expired or been terminated.
(e) Company Tax Opinion. The Company shall have received from
Jenkens & Xxxxxxxxx, a Professional Corporation a written opinion,
dated as of the Mailing Date and as of the Closing Date, to the effect
that the Merger, when effected in accordance with this Agreement, will
qualify as a tax free reorganization under Section 368(a)(1)(A) of the
Code and, QRI and the Company will constitute parties to such
reorganization, and a copy of such opinion shall have been delivered to
QRI.
(f) NationsBank, N.A. and any other lenders to QRI, and Banque
Paribas and any other lenders to the Company, shall have consented to
the Merger under the terms of this Agreement, and the indebtedness to
those lenders shall have been consolidated and restructured in such
manner as to require no guaranty by anyone other than subsidiaries of
QRI and the Company and to require no collateral be provided by anyone
other than QRI, the Company and their respective subsidiaries, all on
terms reasonably satisfactory to QRI and the Company.
(g) Consents. All consents required pursuant to Sections
6.09 and 6.10 shall have been obtained.
Section 7.02. Additional Conditions to Obligations of QRI. The
obligations of QRI to effect the Merger and the other transactions contemplated
by this Agreement are also subject to the following conditions (any or all of
which may be waived by QRI in writing, in whole or in part):
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this
Agreement shall have been true and correct in all material respects at
and as of the date made and, except as contemplated or permitted by
this Agreement, at and as of the Effective Time as if made at and as of
such time. QRI shall have received a certificate of the President and
the Chief Executive Officer of the Company, in his capacity as such,
dated the Closing Date, to the effect that each of the representations
and
57
warranties of the Company contained in this Agreement were true and
correct in all material respects as of the date made and, except as
contemplated or permitted by this Agreement, at and as of the Effective
Time as if made at and as of such time.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time. QRI shall have received a certificate of
the President and the Chief Executive Officer of the Company, in his
capacity as such, dated the Closing Date, to such effect.
(c) Consents. All consents, authorizations, orders and
approvals of, or filings or registrations with, any Governmental Entity
required in connection with the execution, delivery and performance of
this Agreement shall have been obtained or made, except for filings
required under the DGCL in connection with the Merger and the Company
shall have obtained all consents, authorizations, waivers and approvals
required from third parties required under all material agreements and
instruments by reason of the Merger and the consummation of the
transactions contemplated hereby.
(d) No Governmental Proceedings or Litigation. There shall not
be pending or threatened any action, proceeding, claim or counterclaim
by any Governmental Entity or by any third party which seeks to or
would (i) prohibit or restrict the consummation of the Merger, (ii)
require the disposition of or the holding separate of any of the stock
or assets of the Company or its subsidiaries or impose material
limitations on the ability of QRI to control in any material respect
the business, assets or operations of either QRI or the Company, or
(iii) have a material adverse effect on QRI's business or materially
impair the ability of the Company to perform their obligations
hereunder. There shall not be pending any action, proceeding or claim
by any stockholder of MSR based on the provisions of subsections (1)
and (2) of Article 11 of MSR's Certificate of Incorporation. There
shall not be in effect any order, decree or injunction (whether
preliminary, final or appealable) of a United States Federal or state
court of competent jurisdiction, and no statute, rule or regulation
shall have been enacted or promulgated by any Governmental Entity,
which (i) prohibits or restricts consummation of the Merger or the
transactions contemplated hereby, (ii) requires QRI to hold separate or
dispose of any of the stock or assets of the Company or its
subsidiaries or imposes material limitations on the ability of QRI to
control in any material respect the business, assets or operations of
either QRI or the Company or (iii) has a material adverse effect on the
business of QRI or on the Company and its subsidiaries or materially
impairs the ability of QRI to perform its obligations hereunder.
(e) Affiliate Agreements. The Company shall have delivered to
QRI the letter agreements called for by Section 6.04.
(f) Dissenting Shares. The aggregate number of Dissenting
Shares held by Shareholders of the Company shall not exceed 5% of the
aggregate number of shares of Company Common Stock outstanding as of
the date of this Agreement.
58
Section 7.03. Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the following conditions (any or all of
which may be waived by the Company in writing, in whole or in part):
(a) Representations and Warranties. Each of the
representations and warranties of QRI contained in this Agreement shall
have been true and correct in all material respects at and as of the
date made and, except as contemplated or permitted by this Agreement,
at and as of the Effective Time as if made at and as of such time. The
Company shall have received a certificate of the President and the
Chief Executive Officer of QRI, in their capacities as such, dated as
of the Effective Time, to the effect that each of the representations
and warranties of QRI contained in this Agreement were true and correct
in all material respects as of the date made and, except as
contemplated by this Agreement, at and as of the Effective Time as if
made at and as of such time.
(b) Agreements and Covenants. QRI shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at
or prior to the Effective Time. The Company shall have received a
certificate of the Chairman and Chief Executive Officer of QRI, in such
capacities, dated the Closing Date, to that effect.
(c) Consents. All consents, authorizations, orders and
approvals of, or filings or registrations with, any Governmental Entity
required in connection with the execution, delivery and performance of
this Agreement shall have been obtained or made, except for filings
required under the DGCL in connection with the Merger, and QRI shall
have obtained all consents, authorizations, waivers and approvals
required from third parties required under all material agreements and
instruments by reason of the Merger and the consummation of the
transactions contemplated hereby, except for such consents,
authorizations, waivers and approvals where the failure to obtain such
could not reasonably be expected to result in a QRI Material Adverse
Effect.
(d) No Governmental Proceedings or Litigation. There shall not
be pending or threatened any action, proceeding, claim or counterclaim
by any Governmental Entity or by any third party that seeks to or would
(i) prohibit or restrict the consummation of the Merger, (ii) require
the disposition of or the holding separate of any of the stock or
assets of the Company or its subsidiaries or impose material
limitations on the ability of the Surviving Corporation to control in
any material respect the business, assets or operations of either the
Surviving Corporation or the Company, or (iii) have a material adverse
effect on the Surviving Corporation's business or materially impair the
ability of the Company to perform their obligations hereunder. There
shall not be in effect any order, decree or injunction (whether
preliminary, final or appealable) of a United States Federal or state
court of competent jurisdiction, and no statute, rule or regulation
shall have been enacted or promulgated by any Governmental Entity,
which (i) prohibits or restricts consummation of the Merger or the
transactions contemplated hereby, (ii) requires QRI to hold separate or
dispose of any of the stock or assets of the Company or its
subsidiaries or the Surviving Corporation or imposes material
limitations on the ability of QRI to control in any material
59
respect the business, assets or operations of either QRI or the
Surviving Corporation, or (iii) has a material adverse effect on the
business of QRI or on the Surviving Corporation or materially impairs
the ability of QRI to perform its obligations hereunder.
(e) Fairness Opinion. EVEREN Securities, Inc. shall have
confirmed in writing to the Special Committee that on each of (i) the
date of mailing of the Proxy Statement/Prospectus and (ii) the Closing
Date the Merger Consideration to be paid to holders of the Company
Common Stock (other than holders of shares held by Mercury Exploration,
Company or the Xxxxxx family members or Affiliates thereof) is fair,
from a financial point of view, to such holders as of the mailing date
and the Closing Date (as applicable).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This Agreement may be terminated and the
Merger hereby contemplated may be abandoned at any time notwithstanding approval
of this Agreement by the stockholders of the Company and/or QRI, but prior to
the Effective Time:
(a) by mutual written consent duly authorized by the Board of
Directors of QRI and the Special Committee of the Board of Directors of
the Company;
(b) by QRI, if there has been a material breach of the
representations and warranties of the Company contained in this
Agreement or if the Company has failed to comply in any material
respect with any of its covenants or agreements set forth in this
Agreement, and the Company shall not have cured such breach or failure
within ten days of receipt of written notice thereof from QRI (a
"Terminating Company Breach"); and provided, however, if such breach or
failure is incapable of cure within such ten day period, such breach or
failure shall constitute a Terminating Company Breach immediately upon
receipt of written notice thereof from QRI;
(c) by the Company, if there has been a material breach of the
representations and warranties of QRI contained in this Agreement or if
QRI has failed to comply in any material respect with any covenant or
agreement on the part of QRI set forth in this Agreement, and QRI shall
not have cured such breach or failure within ten days of receipt of
written notice thereof from the Company (a "Terminating QRI Breach");
and provided, however, if such breach or failure is incapable of cure
within such ten day period such breach or failure shall constitute a
Terminating QRI Breach immediately upon receipt of written notice
thereof from the Company.
(d) by either QRI or the Company, if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting any of the
60
transactions contemplated hereby and such order, decree, ruling or
other action shall have become final and non-appealable preventing the
consummation of the Merger;
(e) by either QRI or the Company, if the Effective Time shall
not have occurred on or before January 31, 1999; provided that neither
the Company nor QRI shall be entitled to terminate this Agreement
pursuant to this paragraph if such party's material breach of this
Agreement has been the cause of or resulted in the failure of the
Effective Time to occur at or prior to such time;
(f) by either QRI or the Company, if at the meetings of their
respective stockholders (including any adjournment thereof) called for
by Section 6.01 hereof, this Agreement and the Merger shall fail to be
approved and adopted by the affirmative vote of the stockholders of QRI
and the Company required under the DGCL and their respective
Certificates of Incorporation; provided, however, that QRI shall not be
permitted to terminate this Agreement pursuant to this paragraph if any
of the Contributing Entities and/or the members of the Darden family,
or any of the Affiliates, shall have failed to comply with the voting
provisions of the Voting Agreement.
(g) by the Special Committee, upon three (3) Business Days'
prior notice to QRI, following receipt of a proposal for an Alternative
Transaction with respect to the Company that the Special Committee, in
the exercise of its fiduciary duty, after consideration of advice from
its legal and financial advisors, has determined to be more beneficial
to the Company's stockholders than the Merger (a "Superior Proposal");
provided, however, that prior to any such termination, the Company
shall advise QRI in writing of the determination by the Special
Committee that the Special Committee has determined that such proposal
is a Superior Proposal, which notice will include a summary of such
proposal. During such three (3) business day period QRI may propose to
the Special Committee an Alternative Transaction, and the Special
Committee shall, and shall cause its respective financial and legal
advisors to, negotiate with QRI in good faith with respect to such
adjustments in the terms and conditions of this Agreement so that such
proposal would not constitute a Superior Proposal and thereby enable
the Company to proceed with the transactions contemplated herein.
Section 8.02. Effect of Termination; Remedies. Except as provided in
Section 9.01, Section 9.13 and Section 8.05 of this Agreement and in this
Section 8.02, in the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of QRI or the Company or any of their respective officers
or directors to the other and all rights and obligations of any party hereto
shall cease, except that nothing herein shall relieve any party from its
obligations with respect to any breach of this Agreement; provided, however,
notwithstanding anything herein to the contrary except to the extent such breach
relates to the payment of amounts owed under Section 8.05, the liability of any
party for any breach (other than a willful or intentional breach) of this
Agreement shall be limited to the difference of (i) $100,000 less (ii) the
amount of any payments made by such party pursuant to clauses (i), (iii) and
(iv) of the last proviso of the penultimate sentence of Section 8.05(a) provided
the foregoing shall not limit either party's rights under Section 9.12 to
specific performance.
61
Section 8.03. Amendment. This Agreement may be amended by the Company
and QRI by action taken by or on behalf of the Board of Directors of QRI, the
Special Committee and the Board of Directors of the Company (with members of the
Xxxxxx family abstaining) at any time prior to the Effective Time; provided,
however, that after approval of the Merger by the stockholders of the Company or
the stockholders of QRI, any such amendment shall be subject to the provisions
of Section 251 of the DGCL; and further provided, that this Agreement may not be
amended unless JEDI and TCW shall have consented thereto in writing. This
Agreement may not be amended except by an instrument in writing signed by the
Company and QRI and with the written consent of JEDI and TCW.
Section 8.04. Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party or parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other party or parties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party or parties with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound
thereby.
Section 8.05. Fees, Expenses and Other Payments.
(a) All Expenses (as defined in paragraph (b) of this Section
8.05) incurred by the parties hereto shall be borne solely and entirely
by the party that has incurred such Expenses; provided, however, that
the allocable share of each of QRI and the Company for all expenses
related to printing, filing and mailing the Registration Statement and
the Proxy Statement and all SEC and other regulatory filing fees
incurred in connection with the Registration Statement and the Proxy
Statement, and all filing fees incurred in connection with all
regulatory filings made under the HSR Act, shall be one-half; further,
provided, that (i) in the event that either the Company or QRI
terminates this Agreement pursuant to clause (b), (e) or (f) of Section
8.01 (except in the case of a termination under clause (f) of Section
8.01 under circumstances in which this Agreement and the Merger shall
fail to be approved and adopted by the Stockholders of QRI as required
under QRI's Certificate of Incorporation, its stockholders agreement
and the DGCL) and (A) either this Agreement has not been submitted to
stockholders of the Company or the stockholders of the Company have
failed to approve this Agreement by the requisite vote; (B) after the
date of this Agreement but at or before the time this Agreement is so
terminated, the Company or the Special Committee shall have received a
proposal for an Alternative Transaction; and (C) any Alternative
Transaction is consummated within one year after the date of this
Agreement, the Company shall promptly pay to QRI the sum of $500,000 in
cash upon the consummation of the Alternative Transaction; (ii) in the
event that the Company terminates this Agreement pursuant to clause (g)
of Section 8.01 the Company shall promptly pay to QRI the sum of
$500,000 in cash; (iii) in the event that (A) the Company or QRI
terminates this Agreement pursuant to clause (f) of Section 8.01
because the stockholders of the Company have failed to approve this
Agreement by the requisite vote or (B) QRI terminates this Agreement
pursuant to clause (b) of Section 8.01, or (C) the closing condition
specified in clause (e) of Section 7.03 hereof shall not have been
fulfilled or waived on the Closing Date, and this Agreement shall have
been terminated by the Company or QRI pursuant to clause (e) of
62
Section 8.01 by reason of such failure of condition, the Company
promptly shall pay to QRI the sum of $100,000 in cash as reimbursement
for an agreed upon estimate of Expenses incurred by QRI in connection
with the transactions contemplated hereby, which amount shall not
reduce any amounts owed, if any, to QRI pursuant to clause (i) above;
(iv) in the event that (A) the Company or QRI terminates this Agreement
pursuant to clause (f) of Section 8.01 because the stockholders of QRI
shall have failed to approve this Agreement by the requisite vote
required by QRI's Certificate of Incorporation, its stockholders
agreement and the DGCL; or (B) the Company terminates this Agreement
pursuant to clause (c) of Section 8.01, QRI promptly shall pay to the
Company the sum of $100,000 in cash as reimbursement for an agreed upon
amount of Expenses incurred by the Company in connection with the
transactions contemplated hereby. Notwithstanding anything herein to
the contrary, the Company and QRI acknowledge that the sole and
exclusive remedy for termination of this Agreement under clause (b) or
clause (c) of Section 8.01 shall be the payments provided for in
clauses (iii) and (iv) and, if applicable, clause (i) of the last
proviso of the preceding sentence of this Section 8.05(a), and neither
QRI nor the Company shall have any liability for any other damages
incurred by the other party in connection therewith, including, but not
limited to consequential or special damages.
(b) "Expenses" as used in this Agreement shall include all
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party
or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement,
the preparation, printing, filing and mailing of the Registration
Statement and the Proxy Statement/Prospectus, the solicitation of
stockholder approvals and all other matters related to the consummation
of the transactions contemplated hereby.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Effectiveness of Representations, Warranties and
Agreements.
(a) Except as set forth in Section 9.01(b) of this Agreement,
the representations, warranties, covenants and agreements of each party
hereto shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any other party hereto,
any person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the
execution of this Agreement.
(b) The representations and warranties in this Agreement shall
terminate at the Effective Time. This Section 9.01(b) shall not limit
any covenant or agreement of the parties hereto that by its terms
contemplates performance after the Effective Time.
Section 9.02. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally, sent by nationally recognized
overnight courier service, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (
or at such other address for a party as shall be specified by like changes of
63
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to QRI, to:
Quicksilver Resources Inc.
0000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Telecopier No.: (000) 000-0000
with copies to:
Xxxxxx & Hanger, L.L.P.
000 Xxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxx, Esq.
Telecopier No.: (000) 000-0000
Enron Capital & Trade Resources
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
Milbank, Tweed, Xxxxxx & XxXxxx
000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx
Attention: Xxxxx X. Xxxx, Esq.
Telecopier No.: (000) 000-0000
(b) If to the Company, to:
MSR Exploration Ltd.
0000 Xxxxxxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Vice President-Finance
Telecopier No.: (000) 000-0000
with copies to:
Jenkens & Xxxxxxxxx
a Professional Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: L. Xxxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
64
Section 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned person; provided that,
for purposes of this Agreement, JEDI and TCW are not "Affiliates" of
QRI, the Xxxxxx family, Mercury or QELC.
(b) "Business day" means any day other than a day on which
banks in the State of New York, State of California or the State of
Texas are authorized or obligated to be closed;
(c) "Control" (including the terms "controlled," "controlled
by" and "under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a person, whether
through the ownership of stock or as trustee or executor, by contract
or credit arrangement or otherwise;
(d) "Environmental Laws": any all laws, rules, orders,
regulations, statues, ordinances, guidelines, codes or decrees of the
United States or any other nation, or any state, local, municipal or
other Governmental Authority or other Laws (including common law)
regulating, relating to or imposing liability or standards of conduct
concerning protection of human health or the environment, as now or may
at any time hereafter be in effect.
(e) "Knowledge" or "known" shall mean, with respect to any
matter in question, the actual knowledge of an executive officer of the
Company or QRI, as the case may be, of such matter after having made
due and diligent inquiry with respect to such matter of all appropriate
personnel of the party in question who would reasonably be expected to
be familiar with the matter involved;
(f) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d) of the Exchange Act);
(g) "Proxy Statement/Prospectus" or "Joint Proxy
Statement/Prospectus" shall mean a joint proxy statement/prospectus or
joint information statement/prospectus included in the Registration
Statement at the time the Registration Statement is declared effective
under the Securities Act and meeting the requirements of Schedule 14A
or Schedule 14C of the SEC's Proxy Rules promulgated pursuant to the
Exchange Act;
(h) "Registration Statement" shall mean a registration
statement of QRI on Form S-4 filed with the SEC pursuant to the
Securities Act for the purpose of registering thereunder the offering
and sale of the QRI Common Stock to be issued pursuant to the Merger;
65
(i) "Significant Subsidiary" means any subsidiary of the
Company or QRI, as the case may be, that would constitute a Significant
Subsidiary of such party within the meaning of Rule 1-02 of Regulation
S-X of the SEC;
(j) "Subsidiary" or "subsidiaries" of the Company, QRI, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
QRI, the Surviving Corporation or any such other Person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity; and
(k) "Tax" or "Taxes" shall mean any and all taxes, charges,
fees, levies, assessments, duties or other amounts payable to any
federal, state, local or foreign taxing authority or agency, including,
without limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and gains taxes, (ii) customs,
duties, imposts, charges, levies or other similar assessments of any
kind, and (iii) interest, penalties and additions to tax imposed with
respect thereto.
Section 9.04. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 9.06. Entire Agreement. This Agreement (together with the
Exhibits, the Company Disclosure Schedule and the QRI Disclosure Schedule)
constitutes the entire agreement of the parties, and supersede all prior
agreements and undertakings, both written and oral, among the parties, with
respect to the subject matter of this Agreement.
Section 9.07. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
Section 9.08. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and the beneficiaries of
the provisions of Section 6.11 herein, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
66
Section 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
Section 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
Section 9.11. Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 9.12. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to this Agreement to perform the provisions
in accordance with their specific terms or to otherwise breach such provisions,
including its failure to take all actions as are necessary on its part to the
consummation of the Merger, will cause irreparable injury to the other parties
to this Agreement for which damages, even if available, will not be an adequate
remedy. Accordingly, each of the parties hereto hereby consents to the issuance
of injunctive relief by any court of competent jurisdiction to compel
performance of any party's obligations, including an injunction to prevent
breaches, and to the granting by any such court of the remedy of specific
performance of the terms and conditions hereof.
Section 9.13. Confidentiality Agreement.
(a) Each party hereto agrees that all Confidential Information
(as defined below) received by such party (the "Receiving Party") from
the any other party hereto (the "Disclosing Party") shall be kept
confidential by the receiving party and shall not be disclosed by the
receiving party in any manner whatsoever; provided, however, that (i)
any of such Confidential Information may be disclosed to such
directors, (and, in the case of QRI, its stockholders) officers,
employees, and authorized representatives (including without limitation
attorneys, accountants, consultants, bankers, and financial advisors)
of the receiving party (collectively, the "Receiving Party's
Representatives") as need to know such information for the purpose of
evaluating the Merger (it being understood that such receiving party's
representatives shall be informed by the receiving party of the
confidential nature of such information and shall be required to treat
such information confidentially), (ii) any disclosure of Confidential
Information may be made to the extent to which the disclosing party
consents in writing, (iii) Confidential Information may be disclosed by
the receiving party or any receiving party's representatives to the
extent that, in the opinion of counsel for the receiving party or such
receiving party's representatives is legally compelled to do so,
provided that, prior to making such disclosure, the party being legally
compelled to disclose such information advises and consults with the
disclosing party regarding such disclosure and provided further that
the party being legally compelled to disclose such information
discloses only that portion of the Confidential Information as is
legally required, and (iv) any of such Confidential Information may be
67
disclosed to any banks or other financial institutions or other
prospective investors that may provide Financing if such banks or
other financial institutions or other prospective investors agree to
comply with the provisions of this Section. The term "Confidential
Information", as used herein, means all information (irrespective of
the form of communication) obtained by or on behalf of a receiving
party from a disclosing party or its representatives, other than
information which (i) was or becomes generally available to the public
other than as a result of disclosure by the receiving party or any
receiving party's representative, (ii) was or becomes available to the
receiving party on a nonconfidential basis prior to disclosure to the
receiving party or its representatives, or (iii) was or becomes
available to the receiving party from a source other than the
disclosing party or its representatives, provided that such source is
not known by the receiving party to be bound by a confidentiality
agreement with the disclosing party.
(b) If this Agreement is terminated, each receiving party
shall promptly return, and shall use their reasonable best efforts to
cause all receiving party representatives to promptly return, all
Confidential Information to the disclosing party without retaining any
copies thereof, provided that such portion of the Confidential
Information as consists of notes, compilations, analyses, reports,
studies, or other documents prepared by the receiving party or the
receiving party's representatives shall be destroyed.
Section 9.14. LIMITATION ON LIABILITY. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, NEITHER PARTY HERETO SHALL BE LIABLE HEREUNDER
FOR ANY LOSS OF PROFITS, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE OTHER
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE SOLE REMEDIES FOR
BREACHES OF THIS AGREEMENT (OTHER THAN WILLFUL OR INTENTIONAL BREACHES) SHALL BE
AS PROVIDED IN SECTIONS 8.02 AND 9.12.
Section 9.15. Dispute Resolution. Notwithstanding any other provisions
hereof, any disputes ("Disputes") arising out of or relating to this Agreement
shall be governed by the following procedures in the following order until
finally resolved:
(a) If a Dispute arises out of or relates to this Agreement,
or the breach thereof, within 30 days of receipt of receipt of written
notice of a Dispute, the parties hereto shall attempt in good faith to
resolve such dispute by negotiation among senior executives of their
respective companies who have authority to settle the controversy;
(b) If the Dispute cannot be settled through such negotiations
within the 30 day period set forth in Subsection (a), the parties agree
to attempt in good faith to settle the dispute by mediation within 20
days immediately following the 30 day period set forth in Subsection
(a) in Dallas, Texas under the Commercial Mediation Rules of the
American Arbitration Association.
(c) If the Dispute cannot be settled by such mediation, the
parties agree to submit the dispute to binding arbitration in Dallas,
Texas, under Texas state and applicable Federal law upon receipt of a
written demand for arbitration by either of the parties setting forth
the names of the other party or parties. Within 15 days after such
68
commencement, each party shall select one person to act as arbitrator,
and the two selected shall select a third arbitrator within 10 days of
appointment. If the arbitrators fail to select a third arbitrator, then
the American Arbitration Association shall select the third arbitrator
(such arbitrators that are selected pursuant to this Section 9.15(c)
shall be referred to herein as the "Arbitrators"). Except as otherwise
provided herein, the Arbitrators shall have the authority to award any
remedy or relief a state or federal court of the state of Texas could
order or grant, including, without limitation, specific performance,
the awarding of compensatory damages, the issuance of an injunction and
other equitable relief, but excluding any punitive or consequential
damages. If the remedy sought is a monetary award, each party shall
simultaneously, on the twentieth business day following the
commencement of the arbitration, propose to the Arbitrators the amount
that party believes should be awarded, and with respect to compensatory
damages, the Arbitrators shall make an award in whichever of the two
amounts they deem most reasonable. The Arbitrators' decision shall be
issued with findings of fact and conclusions of law and shall be
non-appealable. Notwithstanding anything in this subsection (c) to the
contrary, the losing party in a Dispute hereunder shall pay all
reasonable legal fees and expenses incurred by the prevailing party in
connection with the arbitration.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
QUICKSILVER RESOURCES INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Name: Xxxxx Xxxxxx
------------------------------
Title: Vice President
-----------------------------
MSR EXPLORATION LTD.
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
------------------------------
Title: Vice President
------------------------------
69
EXHIBIT A
Form of Certificate of Incorporation of Quicksilver Resources Inc.
RESTATED
CERTIFICATE OF INCORPORATION
OF
QUICKSILVER RESOURCES INC.
Quicksilver Resources Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that this Restated Certificate of
Incorporation has been duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware.
This Restated Certificate of Incorporation restates, integrates, and amends the
provisions of the Corporation's Certificate of Incorporation as originally filed
on December 18, 1997, omitting such matters as may be omitted pursuant to the
provisions of Section 245(c) of the General Corporation Law of the State of
Delaware. Notice of the adoption of this Restated Certificate of Incorporation
has been given to all nonconsenting stockholders of the Corporation in
accordance with Section 228(d) of the Delaware General Corporation Law.
FIRST: The name of the Corporation is Quicksilver Resources Inc.
SECOND: The address of its registered office in the State of
Delaware is Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, xx xxx Xxxx xx Xxxxxxxxxx, Xxxxxx of New
Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be
conducted or promoted is: To engage in any lawful act
or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: The aggregate number of shares of all classes of
stock which the Corporation shall be authorized to
issue is 50,000,000, divided into the following:
40,000,000 shares of Common Stock, par value of one
cent ($0.01) per share (the "Common Stock") and
10,000,000 shares of Preferred Stock, par value of
one cent ($0.01) per share (the "Preferred Stock").
The Board of Directors of the Corporation is
expressly vested with authority to issue one or more
series of Preferred Stock having such voting powers,
full or limited, or no voting powers, and such
designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof
as are permitted by law and as shall be stated and
expressed in the resolution or resolutions providing
for the issue of each such series of stock adopted by
the Board of Directors.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is
expressly authorized:
To make, alter or repeal the by-laws of the
Corporation.
SEVENTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation shall so
provide.
Meetings of stockholders may be held within or
without the State of Delaware, as the by-laws may
provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes)
outside the State of Delaware at such place or places
as may be designated from time to time by the board
of directors or in the by-laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this
Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted
subject to this reservation.
NINTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived any
improper personal benefit. Neither the amendment nor
repeal of this Article Nine, nor the adoption of any
provision of the Corporation's Certificate of
Incorporation inconsistent with this Article Nine,
shall eliminate or reduce the effect of this Article
Nine in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Article
Nine, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
TENTH: To the fullest extent permitted by applicable law,
the Corporation shall indemnify any officer or
director as set forth in the bylaws of the
Corporation, pursuant to Section 145 of the Delaware
General Corporation Law.
In witness whereof the Corporation has caused this Restated Certificate
of Incorporation to be signed by its authorized officer this _____ day of
_____________, 1998.
2
QUICKSILVER RESOURCES INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
THE STATE OF TEXAS
COUNTY OF TARRANT
This instrument was acknowledged before me on the _____ day of
______________, 1998, by _____________________, ____________________ of
Quicksilver Resources Inc., a Delaware corporation, on behalf of said
corporation.
-----------------------------------
Notary Public, State of Texas
My Commission Expires:
---------------------------------
3
EXHIBIT B
Form of Bylaws of Quicksilver Resources, Inc.
BY-LAWS
QUICKSILVER RESOURCES INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other place or places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors shall be held at such time and place, either
within or without the State of Delaware, as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting. Meetings
of stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders, commencing
with the year 1998, shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, at which meeting the stockholders shall elect by a plurality
vote a Board of Directors and transact such other business as may properly be
brought before the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual
meeting, stating the place, date, and hour of the meeting, shall be given to
each stockholder of record entitled to vote at such meeting not less than 10 or
more than 60 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by order of the Board of
Directors, the Chairman of the Board or the President. Such request shall state
the purpose or purposes of the proposed special meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 5. Notice of Special Meetings. Written notice of a special
meeting, stating the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at such meeting not less than 10 or more than 60 days
before the date of the meeting.
Section 6. Quorum. Except as otherwise provided by statute or the
Certificate of Incorporation, the holders of stock having a majority of the
voting power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the .adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 7. Organization. At each meeting of the stockholders, the
Chairman of the Board or the President, determined as provided in Article V of
these By-Laws, or if those officers shall be absent therefrom, another officer
of the Corporation chosen as chairman present in person or by proxy and entitled
to vote thereat, or if all the officers of the Corporation shall be absent
therefrom, a stockholder holding of record shares of stock of the Corporation so
chosen, shall act as chairman of the meeting and preside thereat. The Secretary,
or if he shall be absent from such meeting or shall be required pursuant to the
provisions of this Section 7 to act as chairman of such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present
thereat) whom the chairman of such meeting shall appoint, shall act as secretary
of such meeting and keep the minutes thereof.
Section 8. Voting. Except as otherwise provided in the Certificate of
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of Article
VII of these By-Laws as the record date for the determination of stockholders
who shall be entitled to notice of and to vote at such meeting. Shares of its
own stock belonging to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held directly or indirectly by the Corporation, shall not be
entitled to vote. Any vote by stock of the Corporation may be given at any
meeting of the stockholders by the stockholder entitled thereto, in person or by
his proxy appointed by an instrument in writing subscribed by such stockholder
or by his attorney thereunto duly authorized and delivered to the Secretary of
the Corporation or to the secretary of the meeting; provided, however, that no
proxy shall be voted or acted upon after three years from its date, unless said
proxy shall provide for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law. At all meetings of the stockholders all matters, except
where other provision is made by law, the Certificate of incorporation, or these
By-Laws, shall be decided by the vote of a majority of the votes cast by the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by a stockholder of the Corporation
present in person or by proxy at any meeting of the stockholders and entitled to
vote thereat, or so directed by the chairman of the meeting, the vote thereat on
any question other than the election or removal of directors need not be by
2
written ballot. Upon a demand of any such stockholder for a vote by written
ballot on any question or at the direction of such chairman that a vote by
written ballot be taken on any question, such vote shall be taken by written
ballot. On a vote by written ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and shall state the
number of shares voted.
Section 9. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of its stock ledger,
either directly or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board of Directors, to prepare and
make, at least 10 days before every meeting of the stockholders, a complete list
of the stockholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days before said meeting, either at
a place within the city where said meeting is to be held, which place shall be
specified in the notice of said meeting, or, if not so specified, at the place
where said meeting is to be held. The list shall also be produced and kept at
the time and place of said meeting during the whole time thereof, and may be
inspected by any stockholder of record who shall be present thereat. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, such list or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.
Section 10. Inspectors of Votes. At each meeting of the stockholders,
the chairman of such meeting may appoint two Inspectors of Votes to act thereat,
unless the Board of Directors shall have theretofore made such appointments.
Each Inspector of Votes so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Votes, if any, shall take charge of the ballots, if any, at such
meeting and, after the balloting thereat on any question, shall count the
ballots cast thereon and shall make a report in writing to the secretary of such
meeting of the results thereof. An Inspector of Votes need not be a stockholder
of the Corporation, and any officer of the Corporation may be an Inspector of
Votes on any question other than a vote for or against his election to any
position with the Corporation or on any other question in which he may be
directly interested.
Section 11. Actions Without a Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may by taken at any annual or special meeting of stockholders, may
be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
3
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors, which shall have and may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, the Certificate of Incorporation, or these ByLaws directed or required
to be exercised or done by the stockholders.
Section 2. Number, Qualification, and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall not be less
than one (1) or more than eight (8). Within the limits above specified, the
number of directors which shall constitute the whole Board of Directors shall be
determined by resolution of the Board of Directors or by the stockholders at any
annual or special meeting or otherwise pursuant to action of the stockholders.
Directors need not be stockholders. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Sections 4 and 5 of this
Article III, and each director elected shall hold office until the annual
meeting next after his election and until his successor is duly elected and
qualified, or until his death or retirement or until he resigns or is removed in
the manner hereinafter provided. Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy and entitled
to vote on the election of directors at any annual or special meeting of
stockholders. Such election shall be by written ballot.
Section 3. Resignations. Any director may resign at any time by giving
written notice of his resignation to the Corporation. Any such resignation shall
take effect at the time specified therein, or if the time when it shall become
effective shall not be specified therein, then it shall take effect immediately
upon its receipt by the Secretary. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the affirmative vote by written ballot of
a majority in voting interest of the stockholders of record of the Corporation
entitled to vote, given at an annual meeting or at a special meeting of the
stockholders called for that purpose or otherwise. The vacancy in the Board of
Directors caused by any such removal shall be filled by the stockholders at such
meeting or, if not so filled, by the Board of Directors as provided in Section 5
of this Article III.
Section 5. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
annual meeting next after their election and until their successors are elected
and qualified, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
Section 6. Place of Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
4
Section 7. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event such meeting is not held immediately following the
annual meeting of stockholders, the meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or the
Secretary on 24 hours' notice to each director, either personally or by
telephone or by mail, telegraph, telex, cable, wireless, or other form of
recorded communication; special meetings shall be called by the Chairman of the
Board, the President, or the Secretary in like manner and on like notice on the
written request of two directors. Notice of any such meeting need not be given
to any director, however, if waived by him in writing or by telegraph, telex,
cable, wireless, or other form of recorded communication, or if he shall be
present at such meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the Board
of Directors, a majority of the directors at the time in office (but not less
than one-third of the whole Board of Directors) shall constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the Meeting, until
a quorum shall be present.
Section 11. Remuneration. Unless otherwise expressly provided by
resolution adopted by the Board of Directors, none of the directors shall, as
such, receive any stated remuneration for his services; but the Board of
Directors may at any time and from time to time by resolution provide that a
specified sum shall be paid to any director of the Corporation, either as his
annual remuneration as such director or member of any committee of the Board of
Directors or as remuneration for his attendance at each meeting of the Board of
Directors or any such Committee. The Board of Directors may also likewise
provide that the corporation shall reimburse each director for any expenses paid
by him on account of his attendance at any meeting. Nothing in this Section 11
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving remuneration therefor.
5
COMMITTEES OF DIRECTORS
Section 12. Executive Committee; How Constituted and Powers. The Board
of Directors, by majority vote of the whole Board of Directors, may designate an
Executive Committee consisting of three of the directors of the Corporation.
Subject to the provisions of Section 141 of the Delaware General Corporation
Law, the Executive Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it. The Board of Directors shall have
the power at any time, by majority vote of the whole Board of Directors, to
change the membership of the Executive Committee, to fill all vacancies in it,
or to dissolve it, either with or without cause.
Section 13. Organization. The Chairman of the Executive Committee, to
be selected by the Board of Directors, shall act as chairman at all meetings of
the Executive Committee and the Secretary shall act as secretary thereof. In
case of the absence from any meeting of the Executive Committee of the Chairman
of the Executive Committee or the Secretary, the Executive Committee may appoint
a chairman or secretary, as the case may be, of the meeting.
Section 14. Meetings. Regular meetings of the Executive Committee, of
which no notice shall be necessary, may be held on such days and at such places,
within or without the State of Delaware, as shall be fixed by resolution adopted
by a majority of the Executive Committee and communicated in writing to all its
members. Special meetings of the Executive Committee shall be held whenever
called by the Chairman of the Executive Committee or a majority of the members
of the Executive Committee then in office. Notice of each special meeting of the
Executive Committee shall be given by mail, telegraph, telex, cable, wireless,
or other form of recorded communication or be delivered personally or by
telephone to each member of the Executive Committee not later than the day
before the day on which such meeting is to be held. Notice of any such meeting
need not be given to any member of the Executive Committee, however, if waived
by him in writing or by telegraph, telex, cable, wireless, or other form of
recorded communication, or if he shall be present at such meeting; and any
meeting of the Executive Committee shall be a legal meeting without any notice
thereof having been given, if all the members of the Executive Committee shall
be present thereat. Subject to the provisions of this Article III, the Executive
Committee, by resolution adopted by a majority of the whole Executive Committee,
shall fix its own rules of procedure.
Section 15. Quorum and Manner of Acting. A majority of the Executive
Committee shall constitute a quorum for the transaction of .business, and the
act of a majority of those present at a meeting thereof at which a quorum is
present shall be the act of the Executive Committee.
Section 16. Other Committees. The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board of Directors, designate
one or more other committees consisting of one or more directors of the
Corporation, which, to the extent provided in said resolution or resolutions,
shall have and may exercise, subject to the provisions of Section 141 of the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation, and these By-Laws, the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
6
shall have the power to authorize the seal of the Corporation to be affixed to
all papers which may require it; but no such committee shall have the power to
fill vacancies in the Board of Directors, the Executive Committee, or any other
committee or in their respective membership, to appoint or remove officers of
the Corporation, or to authorize the issuance of shares of the capital stock of
the Corporation, except that such a committee may, to the extent provided in
said resolutions, grant and authorize options and other rights with respect to
the common stock of the Corporation pursuant to and in accordance with any plan
approved by the Board of Directors. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors. A majority of all the members of any such E committee
may determine its action and fix the time and place of its meetings and specify
what notice thereof, if any, shall be given, unless the Board of Directors shall
otherwise provide. The Board of Directors. shall have power to change the
members of any such committee at any time to fill vacancies, and to discharge
any such committee, either with or without cause, at any time.
Section 17. Alternate Member of Committees. The Board of Directors may
designate one or more directors as alternate members of the Executive Committee
or any other committee, who may replace any absent or disqualified member at any
meeting of the committee, or if none be so appointed, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 18. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.
GENERAL
Section 19. Actions Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or the committee.
Section 20. Presence at Meetings by Means of Communications Equipment.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting conducted pursuant to this Section 20 shall
constitute presence in person at such meeting.
7
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of any
applicable statute, the Certificate of Incorporation, or these By-Laws, notice
is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, in
person or by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given in
any manner permitted by Article III hereof and shall be deemed to be given at
the time when first transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any applicable statute, the Certificate of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a waiver
of notice by a director or stockholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.
Section 3. When Notice Unnecessary. Whenever, under the provisions of
the Act, the Certificate of Incorporation or these Bylaws, any notice is
required to be given to any stockholder, such notice need not be given to the
stockholder if:
(a) notice of two consecutive annual meetings and all notices of
meetings held during the period between those annual meetings,
if any, or
(b) all (but in no event less than two) payments (if sent by first
class mail) of distributions or interest on securities during
a 12-month period, have been mailed to that person, addressed
at his address as shown on the records of the Corporation, and
have been returned undeliverable. Any action or meeting taken
or held without notice to such a person shall have the same
force and effect as if the notice had been duly given. If such
a person delivers to the Corporation a written notice setting
forth his then current address, the requirement that notice be
given to that person shall be reinstated.
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers. The elected officers of the
Corporation shall be a President, one or more Vice Presidents, with or without
such descriptive titles as the Board of Directors shall deem appropriate, a
Secretary, and a Treasurer, and, if the Board of Directors so elects, a Chairman
of the Board (who shall be a director) and a Controller. The Board of Directors
or the Executive Committee of the Board of Directors by resolution also may
appoint one or more Assistant Vice Presidents, Assistant Treasurers, Assistant
Secretaries, Assistant Controllers, and such other officers and agents as from
8
time to time may appear to be necessary or advisable in the conduct of the
affairs of the Corporation.
Section 2. Time of Election or Appointment. The Board of Directors at
its annual meeting shall elect or appoint, as the case may be, the officers to
fill the positions designated in or pursuant to Section I of this Article V.
Officers of the Corporation may also be elected or appointed, as the case may
be, at any other time.
Section 3. Salaries of Elected Officers. The salaries of all elected
officers of the Corporation shall be fixed by the Board of Directors.
Section 4. Term. Each officer of the Corporation shall hold his office
until his successor is duly elected or appointed and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 5. Duties of the Chairman of the Board. The Chairman of the
Board, if one be elected, shall be the chief executive officer of the
Corporation and shall have all of the powers and duties as are provided for the
chief executive officer of the Corporation as specified in Section 6 below, in
the absence of any person designated and elected to be the Chairman of the
Board, and shall preside when present at all meetings of the Board of Directors
and at all meetings of the stockholders. In addition, he shall advise and
counsel the President and other officers of the Corporation, and shall exercise
such powers and perform such duties as shall be assigned to or required of him
from time to time by the Board of Directors.
Section 6. Duties of the President. In the absence of any person
designated and elected to be the Chairman of the Board, The President shall be
the chief executive officer of the Corporation and, subject to the provisions of
these By-Laws, shall have the general supervision of the affairs of the
Corporation and shall have general and active control of all of its business. He
shall preside, when present, at all meetings of stockholders and all meetings of
the Board of Directors, except when the Chairman of the Board presides and as
may otherwise be provided by statute or by the By-Laws. The chief executive
officer shall see that all orders and resolutions of the Board of Directors and
the stockholders are carried into effect. The chief executive officer shall have
general authority to execute bonds, deeds, and contracts in the name of the
Corporation and affix the corporate seal thereto; to sign stock certificates; to
cause the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to fix their
compensation, subject to the provisions of the By-Laws; to remove or suspend any
employee or agent who shall have been employed or appointed under his authority
or under authority of an officer subordinate to him; to suspend for cause,
pending final action by the authority which shall have elected or appointed him,
any officer subordinate to the chief executive officer; and, in general, to
exercise all powers and authority usually appertaining to the chief executive
officer of a corporation and except as otherwise provided in these By-Laws. The
9
President shall advise and counsel the Chairman of the Board and the officers of
the Corporation, and shall exercise such powers and perform such duties as shall
be assigned to or required of him from time to time by the Board of Directors
and the Chairman of the Board.
Section 7. Duties of Vice Presidents. In the absence of the President
or in the event of his inability or refusal to act, the Vice President (or in
the event there be more than one Vice President, the Vice Presidents in the
order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.
Section 8. Duties of Assistant Vice Presidents. In the absence of a
Vice President or in the event of his inability or refusal to act, the Assistant
Vice President (or in the event there shall be more than one, the Assistant Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties and exercise the powers of that Vice President, and shall perform such
other duties and have such other powers as the Board of Directors, the
President, or the Vice President under whose supervision he is appointed may
from time to time prescribe.
Section 9. Duties of the Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the Executive Committee or other standing committees when required. He shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation, and he, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it, and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary shall
keep and account for all books, documents, papers, and records of the
Corporation, except those for which some other officer or agent is properly
accountable. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of the
secretary of a corporation.
Section 10. Duties of Assistant Secretaries. In the absence of the
Secretary or in the event of his inability or refusal to act, the Assistant
Secretary (or, if there shall be more than one, the Assistant Secretaries in the
order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors, the President, or the
Secretary may from time to time prescribe.
Section 11. Duties of the Treasurer. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in
10
books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall. render to the President and
the Board of Directors, at its regular meetings or when the Board of Directors
so requires, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
he shall give the Corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money, and
other property of whatever kind in his possession or under his control belonging
to the Corporation. The Treasurer shall be under the supervision of the Vice
President in charge of finance, if one is so designated, and he shall perform
such other duties as may be prescribed by the Board of Directors, the President,
or any such Vice President in charge of finance.
Section 12. Duties of Assistant Treasurers. The Assistant Treasurer or
Assistant Treasurers shall assist the Treasurer, and in the absence of the
Treasurer or in the event of his inability or refusal to act, the Assistant
Treasurer (or in the event there shall be more than one, the Assistant
Treasurers in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other .powers as the Board of Directors, the President, or
the Treasurer may from time to time prescribe.
Section 13. Duties of the Controller. The Controller, if one is
appointed, shall have supervision of the accounting practices of the Corporation
and shall prescribe the duties and powers of any other accounting personnel of
the Corporation. He shall cause to be maintained an adequate system of financial
control through a program of budgets and interpretive reports. He shall initiate
and enforce measures and procedures whereby the business of the Corporation
shall be conducted with the maximum efficiency and economy. If required, he
shall prepare a monthly report covering the operating results of the
Corporation. The Controller shall be under the supervision of the Vice President
in charge of finance, if one is so designated, and he shall perform such other
duties as may be prescribed by the Board of Directors, the President, or any
such Vice President in charge of finance.
Section 14. Duties of Assistant Controller. The Assistant Controller or
Assistant Controllers shall assist the Controller, and in the absence of the
Controller or in the event of his inability or refusal to act, the Assistant
Controller (or, if there shall be more than one, the Assistant Controllers in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Controller and perform such other duties and have
such other powers as the Board of Directors, the President, or the Controller
may from time to time prescribe.
11
ARTICLE VI
INDEMNIFICATION
Section 1. Actions other Than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise (all of such persons being hereafter
referred to in this Article as a "Corporate Functionary"), against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation or, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a Corporate Functionary against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Determination of Right to Indemnification. Any
indemnification under Sections 1 or 2 of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Corporate Functionary is proper
in the circumstances because he has met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article VI. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders.
12
Section 4. Right to Indemnification. Notwithstanding the other
provisions of this Article VI, to the extent that a Corporate Functionary has
been successful on the merits or otherwise in defense of any action, suit, or
proceeding referred to in Sections 1 or 2 of this Article VI (including the
dismissal of a proceeding without prejudice or the settlement of a proceeding
without admission of liability), or in defense of any claim, issue, or, matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 5. Prepaid Expenses. Expenses incurred in defending a civil or
criminal action, suit, or proceeding shall be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding, upon receipt of an
undertaking by or on behalf of the Corporate Functionary to repay such amount if
it shall ultimately be determined he is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
Section 6. Right to Indemnification upon Application; Procedure upon
Application. Any indemnification under Sections 2, 3 and 4, or any .advance
under Section 5, of this Article VI shall be made promptly upon, and in any
event within 60 days after, the written request of the Corporate Functionary,
unless with respect to applications under sections 2, 3 or 5 of this Article VI,
a determination is reasonably and promptly made by the Board of Directors by
majority vote of a quorum consisting of disinterested directors that such
Corporate Functionary acted in a manner set forth in such Sections as to justify
the corporation in not indemnifying or making an advance of expenses to the
corporate Functionary. If no quorum of disinterested directors is obtainable,
the Board of Directors shall promptly direct that independent legal counsel
shall decide whether the Corporate Functionary acted in a manner set forth in
such Sections as to justify the Corporation's not indemnifying or making an
advance of expenses to the Corporate Functionary. The right to indemnification
or advance of expenses granted by this Article VI shall be enforceable by the
Corporate Functionary in any court of competent jurisdiction if the Board of
Directors or independent legal counsel denies his claim, in whole or in part, or
if no disposition of such claim is made within 60 days. The expenses of the
Corporate Functionary incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such proceeding shall also
be indemnified by the Corporation.
Section 7. Other Rights and Remedies. The indemnification and
advancement of expenses or provided by or granted pursuant to this Article VI
shall not be deemed exclusive of any other rights to which any person seeking
indemnification and advancement of expenses or may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, and shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Corporate Functionary
and shall inure to the benefit of the heirs, executors, and administrators of
such a person. Any repeal or modification of these by-laws or relevant
provisions of the Delaware General Corporation Law and other applicable law, if
any, shall not affect any then existing rights of a Corporate Functionary to
indemnification or advancement of expenses.
13
Section 8. Insurance. Upon resolution passed by the Board of Directors,
the Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee, or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
Section 9. Mergers. For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting or surviving
corporation, constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, or agents, so .that any person who is or was a
director, officer, employee, or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 10. Savings Provision. If this Article VI or any portion hereof
shall be invalidated on any ground by a court of competent Jurisdiction, the
Corporation shall nevertheless indemnify each Corporate Functionary as to
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit, proceeding, or investigation,
whether civil, criminal, or administrative, including a grand jury proceeding or
action or suit brought by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President, or a Vice
President and by the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences, and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock; provided, that, except as otherwise provided in
Section 202 of the General Corporation Law of the State of Delaware; in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences, and relative,
participating, optional, or other special rights of each class of stock or
14
series thereof and the qualifications, limitations, or restrictions of such
preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 3. New Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation and alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed
or the issuance of such new certificate.
Section 4. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, it shall be the duty of the Corporation, subject to any proper
restrictions on transfer, to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
Section 5. Record Date. The Board of Directors may fix in advance a
date, not preceding the date on which the resolution fixing the record date is
adopted, and (i) not more than 60 days nor less than 10 days preceding the date
of any meeting of stockholders, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, (ii) not more than 10 days after the date on which the
resolution fixing the record date is adopted, as a record date in connection
with obtaining a consent of the stockholders in writing to corporate action
without a meeting, or (iii) not more than 60 days before the date for payment of
any dividend or distribution, or the date for the allotment of rights, or the
date when any change, or conversion or exchange of capital stock shall go into
effect, or the date on which any other lawful action shall be taken, as the
record date for determining the stockholders entitled to receive payment of any
such dividend or distribution, or to receive any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock or other lawful action of the corporation, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, any such
meeting and any adjournment thereof (provided, however, that the Board of
Directors may fix a new record date for an adjourned meeting), or to give such
consent, or to receive payment of such dividend or distribution, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
15
Section 6. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, if any, subject to the provisions of the Certificate of
Incorporation, may be declared by the Board of Directors (but not any committee
thereof) at any regular meeting, pursuant to law. Dividends may be paid in cash,
in property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
thinks proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 3. Annual Statement. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
Section 4. Checks. All checks or demands for money and promissory notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time prescribe.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the word
"Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed, reproduced, or otherwise.
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ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may
be adopted by the stockholders or by the Board of Directors at any regular
meeting of the stockholders or the Board of Directors or at any special meeting
of the stockholders or the Board of Directors if notice of such alteration,
amendment, repeal, or adoption of new By-Laws be contained in the notice of such
special meeting.
17
EXHIBIT C
Form of Affiliate Agreement
COMPANY AFFILIATE AGREEMENT
AGREEMENT (hereinafter referred to as the "Agreement") entered into as
of _________, 1998, between Quicksilver Resources Inc., a Delaware corporation
(hereinafter referred to as the "Acquiror"), and the stockholder (the
"Stockholder") of MSR Exploration Ltd., a Delaware corporation (hereinafter
referred to as the "Company").
W I T N E S S E T H:
WHEREAS, the Acquiror and the Company, propose to enter, or have
entered into an Agreement and Plan of Merger and Reorganization expected to be
dated, or dated _______, 1998 (hereinafter referred to as the "Merger
Agreement"), pursuant to which the Company will be merged into Acquiror (the
"Merger"); and
WHEREAS, upon the consummation of the Merger and in connection
therewith, the Stockholder will become the owner of shares of Common Stock of
Acquiror (hereinafter referred to as the "Acquiror Shares").
NOW, THEREFORE, in consideration of the promises and the mutual
agreements, provisions and covenants set forth in the Merger Agreement, and
hereinafter in this Agreement, it is hereby agreed as follows:
1. The Stockholder hereby agrees that:
(a) It or he may be deemed to be an "affiliate" of the Company
within the meaning of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), of the Commission.
(b) He agrees not to offer, sell, pledge, transfer or
otherwise dispose of any of the Acquiror Shares unless at that time either:
(i) such transaction shall be permitted pursuant
to the provisions of Rule 145(d) under the Securities Act;
(ii) counsel representing the Stockholder,
satisfactory to the Acquiror, shall have advised the Acquiror in a written
opinion letter satisfactory to the Acquiror and the Acquiror's counsel and
upon which the Acquiror and its counsel may rely, that no registration under the
Securities Act would be required in connection with the proposed sale, transfer
or other disposition;
(iii) a registration statement under the Securities
Act covering the Acquiror Shares proposed to be sold, transferred or otherwise
disposed of, describing the manner and terms of the proposed sale, transfer
or other disposition, and containing a current prospectus under the Securities
Act, shall be effective under the Securities Act; or
(iv) an authorized representative of the Commission
shall have rendered written advice to the Stockholder (sought by the Stockholder
or counsel to the Stockholder, with a copy thereof and of all other related
communications delivered to the Acquiror) to the effect that the Commission
would take no action, or that the staff of the Commission would not recommend
that the Commission take action, with respect to the proposed sale, transfer or
other disposition if consummated.
The Stockholder understands that the Acquiror is under no obligation to
register the sale, transfer or other disposition of the Acquiror Common Stock by
the Stockholder on its behalf or to take any other action necessary in order to
make compliance with an exemption from registration available.
(c) Until a public sale of the Acquiror Shares represented by
such certificate has been made in compliance with one of the alternative
conditions set forth in the subparagraphs of paragraph (b) of this Section 1,
all certificates representing the Acquiror Shares deliverable to the Stockholder
pursuant to the Merger Agreement and in connection with the Merger and any
certificates subsequently issued with respect thereto or in substitution
therefor shall bear a legend substantially as follows:
"The shares represented by this certificate may not be
offered, sold, pledged, transferred or otherwise disposed of
except in compliance with paragraph (d) of Rule 145
promulgated by the Securities and Exchange Commission."
Acquiror, at its discretion, may cause stop transfer orders to be placed with
its transfer agent(s) with respect to the certificates for the Acquiror Shares
but not as to the certificates for any part of the Acquiror Shares as to which
said legend is no longer appropriate as hereinabove provided.
(d) The Stockholder will observe and comply with the
Securities Act and the General Rules and Regulations thereunder, as now in
effect and as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, pledge or transfer or other
disposition of the Acquiror Shares or any part thereof.
2. From and after the Effective Time of the Merger and for so long as
necessary in order to permit the Stockholder to sell the Acquiror Shares
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, Acquiror will use its best efforts to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, referred to in paragraph (c)(1) of Rule 144 under the
Securities Act (or, if applicable, Acquiror will use its best efforts to make
publicly available the information regarding itself referred to in paragraph
(c)(2) of Rule 144) in order to permit the Stockholder to sell, pursuant to the
terms and conditions of Rule 145 and the applicable provisions of Rule 144, the
Acquiror Shares.
3. The Stockholder agrees that it or he will not perfect any
dissenter's appraisal rights under the Certificate of Incorporation or the
Appraisal Provisions (as defined in the Merger Agreement)
4. The Stockholder represents that it or he knows of no plan (written
or oral) pursuant to which the stockholders of the Company intend to sell or
otherwise dispose of any Acquiror Shares to be received by them pursuant to the
Merger Agreement which would reduce their holdings of such Acquiror Shares to an
2
amount having in the aggregate a value at the time of the Merger of less than
50% of all Common Stock of the Company outstanding prior to the Merger.
5. No waiver by any party hereto of any condition or of any breach of
any provision of this Agreement shall be effective unless in writing.
6. All notices, requests, demands or other communications which are
required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given if delivered by hand or
(except where receipt thereof is specifically required for purposes of this
Agreement) mailed by registered or certified mail, postage prepaid, as follows:
If to the Stockholder, at the address set forth below the Stockholder's
signature at the end hereof.
If to Acquiror:
To:
Quicksilver Resources Inc.
0000 Xxxxxxxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx 00000
or to such other address as any party hereto or any Stockholder may designate
for itself by notice given as herein provided
7. For the convenience of the parties hereto this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document. This
Agreement shall be enforceable by, and shall inure to the benefit of and be
binding upon, the parties hereto and their respective successors and assigns.
8. This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Delaware.
9. If a court of competent jurisdiction determines that any provision
of this Agreement is unenforceable or enforceable only if limited in time and/or
scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
3
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
Stockholder:
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[signature]
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---------------------------------------------
---------------------------------------------
[print name and address]
Accepted and agreed to as of
______________, 1998.
Acquiror:
QUICKSILVER RESOURCES INC.
By:
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Name:
-----------------------------------
Title:
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