UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 12, 2001
COMSTOCK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
STATE OF NEVADA 000-16741 94-1667468
(State or other (Commission of File Number) (I.R.S. Employer
jurisdiction incorporation) Identification Number)
5300 Town And Country Boulevard
Suite 500
Frisco, Texas 75034
(Address of principal executive offices)
(972) 668-8800
(Registrant's Telephone No.)
Item 5. Other Events
On November 12, 2001, Comstock Resources, Inc. (the "Company") entered into
an agreement and plan of merger (the "Merger Agreement") with DevX Energy, Inc.,
a Delaware corporation ("DevX"), which provides for the Company to acquire DevX.
Pursuant to the Merger Agreement, Comstock Acquisition Inc. (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of Comstock
Holdings, Inc. ("Holdings"), a Delaware corporation, which, in turn, is a wholly
owned subsidiary of the Company, will offer to purchase, through a cash tender
offer (the "Offer"), all of the outstanding shares of common stock of DevX for
$7.32 per share. The Offer is expected to commence on November 15, 2001, or as
soon thereafter as is practicable, and to remain open for at least 20 business
days. The Offer will be followed by a merger in which stockholders whose shares
are not tendered in the Offer will receive $7.32 per share in cash (the
"Merger"). In the Merger, the Purchaser will be merged with and into DevX and
DevX will become a wholly owned subsidiary of Holdings. The Offer is conditioned
upon, among other things, there having been validly tendered and not withdrawn
prior to the expiration date greater than 50% of the number of then outstanding
shares (including all shares issuable upon the exercise of the then outstanding
options or warrants to purchase shares).
The Board of Directors of DevX has approved the Merger Agreement and the
related transactions and will recommend that DevX stockholders tender their
shares to the Purchaser in the Offer.
The total consideration to be paid for the acquisition of all of the
outstanding shares of common stock of DevX pursuant to the Offer and the Merger
is approximately $92.9 million. As of September 30, 2001, DevX had $50.0 million
in long-term debt outstanding which is expected to remain outstanding after the
merger.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1. A copy of
the press release announcing the Offer and the Merger was filed by the Company
with the Securities and Exchange Commission under cover of a Tender Offer
Statement on Schedule TO on November 13, 2001, and is incorporated herein by
reference.
Investors and security holders are strongly advised to read both the Tender
Offer Statement on Schedule TO and the Solicitation/Recommendation Statement on
Schedule 14D-9 regarding the tender offer referred to herein, when they become
available, because they will contain important information. The Company will
file the Tender Offer Statement and DevX will file the
Solicitation/Recommendation Statement with the Securities and Exchange
Commission. Investors and security holders may obtain a free copy of these
statements (when available) and other documents filed by the Company and DevX at
the SEC's web site at www.sec.gov.
Item 7. Financial Statements and Exhibits
(c) Exhibits
2.1 Agreement and Plan of Merger among Comstock Resources, Inc., Comstock
Holdings, Inc., Comstock Acquisition Inc. and DevX Energy, Inc. dated
as of November 12, 2001
99.1 Press Release issued by Comstock Resources, Inc. on November 13, 2001
(incorporated herein by reference to Exhibit 99.1 to the Tender Offer
Statement on Schedule TO filed by the Company on November 13, 2001)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
COMSTOCK RESOURCES, INC.
Dated: November 13, 2001 By: /s/ M. Jay Allison
-------------------
M. Jay Allison
President and Chief Executive Officer
EXHIBIT INDEX
Item
Number Description
------ -----------
2.1 Agreement and Plan of Merger among Comstock Resources, Inc.,
Comstock Holdings, Inc., Comstock Acquisition Inc. and DevX
Energy, Inc. dated as of November 12, 2001
99.1 Joint Press Release issued by Comstock Resources, Inc. and DevX
Energy, Inc. on November 13, 2001 (incorporated herein by
reference to Exhibit 99.1 to the Tender Offer Statement on
Schedule TO filed by the Company on November 13, 2001)
AGREEMENT AND PLAN OF MERGER
Among
COMSTOCK RESOURCES, INC.,
COMSTOCK HOLDINGS, INC.,
COMSTOCK ACQUISITION INC.
and
DEVX ENERGY, INC.
Dated as of November 12, 2001
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.......................................................1
SECTION 1.01 Definitions...............................................1
ARTICLE II THE OFFER.........................................................5
SECTION 2.01 The Offer.................................................5
SECTION 2.02 Company Action............................................8
ARTICLE III THE MERGER........................................................9
SECTION 3.01 The Merger................................................9
SECTION 3.02 Effective Time; Closing...................................9
SECTION 3.03 Effect of the Merger.....................................10
SECTION 3.04 Certificate of Incorporation; By-laws....................10
SECTION 3.05 Directors and Officers...................................10
SECTION 3.06 Conversion of Securities.................................10
SECTION 3.07 Dissenting Shares........................................11
SECTION 3.08 Surrender of Shares; Stock Transfer Books................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................12
SECTION 4.01 Organization and Qualification; Subsidiaries.............12
SECTION 4.02 Certificate of Incorporation and By-laws.................13
SECTION 4.03 Capitalization...........................................13
SECTION 4.04 Authority Relative to This Agreement.....................14
SECTION 4.05 No Conflict; Required Filings and Consents...............14
SECTION 4.06 Permits; Compliance......................................15
SECTION 4.07 SEC Filings; Financial Statements........................16
SECTION 4.08 Absence of Certain Changes or Events.....................16
SECTION 4.09 Absence of Litigation....................................17
SECTION 4.10 Employee Benefit Plans...................................17
SECTION 4.11 Labor and Employment Matters.............................19
SECTION 4.12 Offer Documents; Schedule 14D-9..........................20
SECTION 4.13 Oil and Gas Operations...................................20
SECTION 4.14 Gas Imbalances...........................................20
SECTION 4.15 Oil and Gas Agreements...................................20
SECTION 4.16 Properties...............................................20
SECTION 4.17 Oil and Gas Reserves.....................................21
SECTION 4.18 Take-or-Pay Deliveries...................................22
SECTION 4.19 Hedging..................................................22
SECTION 4.20 Intellectual Property....................................22
SECTION 4.21 Taxes....................................................22
SECTION 4.22 Environmental Matters....................................23
SECTION 4.23 Material Contracts.......................................23
SECTION 4.24 Insurance................................................25
SECTION 4.25 Brokers..................................................25
SECTION 4.26 Opinion of Financial Advisors............................25
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...........25
SECTION 5.01 Corporate Organization...................................25
SECTION 5.02 Authority Relative to This Agreement.....................26
SECTION 5.03 No Conflict; Required Filings and Consents...............26
SECTION 5.04 Offer Documents; Proxy Statement.........................27
SECTION 5.05 Brokers..................................................27
SECTION 5.06 Absence of Litigation....................................27
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER...........................27
SECTION 6.01 Conduct of Business by the Company Pending the Merger....27
ARTICLE VII ADDITIONAL AGREEMENTS............................................30
SECTION 7.01 Stockholders' Meeting....................................30
SECTION 7.02 Proxy Statement..........................................30
SECTION 7.03 Company Board Representation; Section 14(f)..............31
SECTION 7.04 Access to Information; Confidentiality...................31
SECTION 7.05 No Solicitation of Transactions..........................32
SECTION 7.06 Employee Matters.........................................33
SECTION 7.07 Directors' and Officers' Indemnification and Insurance...33
SECTION 7.08 Notification of Certain Matters..........................34
SECTION 7.09 Further Action; Reasonable Best Efforts..................34
SECTION 7.10 Public Announcements.....................................35
SECTION 7.11 Confidentiality Agreement................................35
ARTICLE VIII CONDITIONS TO THE MERGER.........................................35
SECTION 8.01 Conditions to the Merger.................................35
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................36
SECTION 9.01 Termination..............................................36
SECTION 9.02 Effect of Termination....................................37
SECTION 9.03 Fees.....................................................37
SECTION 9.04 Amendment................................................38
SECTION 9.05 Waiver...................................................38
ARTICLE X GENERAL PROVISIONS...............................................38
SECTION 10.01 Notices.................................................38
if to Holdings or Purchaser:............................38
SECTION 10.02 Severability............................................39
SECTION 10.03 Entire Agreement; Assignment............................39
SECTION 10.04 Parties in Interest.....................................39
SECTION 10.06 Governing Law...........................................40
SECTION 10.07 Waiver of Jury Trial....................................40
SECTION 10.08 Headings................................................40
SECTION 10.09 Counterparts............................................40
Annex A Conditions to the Offer
ii
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 2001 (this
"Agreement"), among COMSTOCK RESOURCES, INC., a Delaware corporation ("CRI"),
COMSTOCK HOLDINGS, INC., a Delaware corporation ("Holdings"), COMSTOCK
ACQUISITION INC., a Delaware corporation and a wholly owned subsidiary of
Holdings ("Purchaser"), and DEVX ENERGY, INC., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of CRI, Holdings, Purchaser and the
Company have each determined that it is in the best interests of their
respective stockholders for Holdings to acquire the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, Purchaser shall make a cash
tender offer (the "Offer") to acquire all the shares of common stock, par value
$0.234 per share, of the Company ("Shares") that are issued and outstanding for
$7.32 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being the "Per Share Amount"), net to the seller in cash, upon the
terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "Board") has approved
the making of the Offer and resolved to recommend that holders of Shares tender
their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of CRI, Holdings, Purchaser and the Company have each approved this Agreement
and declared its advisability and approved the merger (the "Merger") of
Purchaser with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law"), following the consummation of the
Offer and upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, CRI,
Holdings, Purchaser and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. (a) For purposes of this Agreement:
"Acquisition Proposal" means any offer from any third party to acquire by
any means all or any substantial part of the assets or the shares of capital
stock of the Company or of any Subsidiary.
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"beneficial owner", with respect to any Shares, has the meaning ascribed to
such term under Rule 13d-3(a) of the Exchange Act.
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"business day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings; or, in the case of determining a
date when any payment is due, any day (other than a Saturday or Sunday) on which
banks are not required or authorized to close in the City of New York.
"control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract or otherwise;
"Environmental Law" means any United States federal, state, local or
non-United States law relating to (i) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii)
pollution or protection of the environment.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Company or any Subsidiary and which, together with
the Company or any Subsidiary, is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
"Hazardous Substances" means (i) those substances defined in or regulated
under the following United States federal statutes and their state counterparts,
and all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) polychlorinated biphenyls, and (iii)
any substance, material or waste regulated by any Governmental Authority
pursuant to any Environmental Law.
"knowledge of the Company" means the actual knowledge of any director or
officer of the Company.
"Liens" mean liens, security interests, charges, mortgages or other
encumbrances of any kind.
"Material Adverse Effect" means, when used in connection with the Company
or any Subsidiary, any event, circumstance, change or effect that is or is
reasonably likely to be materially adverse to the business or financial
condition of the Company and its Subsidiaries taken as a whole; provided that in
no event shall any of the following be deemed to constitute or be taken into
account in determining a Material Adverse Effect: any event, circumstance,
change or effect that results from (i) changes affecting the economy generally,
(ii) changes in the market price of natural gas, (iii) the public announcement
or pendency of the Offer, the Merger or the other transactions contemplated
hereby, or (iv) changes in the price of the Company's common stock.
2
"Oil and Gas Agreements" means the following types of agreements or
contracts to which the Company or a Subsidiary is a party, whether as an
original party, by succession or assignment or otherwise: oil and gas leases,
farm-in and farm-out agreements, agreements providing for an overriding royalty
interest, agreements providing for a royalty interest, agreements providing for
a net profits interest, crude oil or natural gas sales or purchase contracts,
joint operating agreements, unit operating agreements, unit agreements, field
equipment leases, and agreements restricting the Company or a Subsidiary's
ability to operate, obtain, explore for or develop interests in a particular
geographic area.
"person" means an individual (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), corporation, partnership,
limited partnership, limited liability company, syndicate, trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
"subsidiary" or "subsidiaries" of the Company, the Surviving Corporation,
CRI or any other person means any and all corporations, partnerships, joint
ventures, associations, limited liability companies and other entities
controlled by such person, directly or indirectly, through one or more
intermediaries.
"Superior Proposal" means any Acquisition Proposal which the Board
determines, in its good faith judgment (after having received the advice of FBR
or such other financial advisor of recognized reputation), to be more favorable
to the Company's stockholders than the Offer and the Merger and for which
financing, to the extent required, is then committed.
"Suspension Event" means the occurrence of any of the following: (i) any
general suspension of trading in, or limitation on prices for, securities on any
national securities exchange, Nasdaq or in the over-the-counter market in the
United States, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, or (iii) any
limitation (whether or not mandatory) by any Governmental Authority on, or other
event that materially and adversely affects, the extension of credit by banks or
other lending institutions.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges.
3
(b) The following terms have the meaning set forth in the Sections set
forth below:
Defined Term Location of Definition
------------ ----------------------
Ableco Indebtedness Section 6.01(e)
Action Section 4.09
AFE Section 6.01(j)
Agreement Preamble
Blue Sky Laws Section 4.05(b)
Board Recitals
Certificate of Merger Section 3.02
Certificates Section 3.09(b)
Code Section 4.10(b)
Company Preamble
Company Preferred Stock Section 4.03
Company's Oil and Gas Interests Section 4.16(a)
Company Stock Option Section 3.07
Company Stock Option Plans Section 3.07
Confidentiality Agreement Section 7.04(b)
CRI Preamble
D&O Section 7.07(b)
Delaware Law Recitals
Disclosure Schedule Section 4.01(b)
Dissenting Shares Section 3.08(a)
Effective Time Section 3.02
ERISA Section 4.10(a)
Exchange Act Section 2.01(a)
Fairness Opinion Section 2.02(a)
Fee Section 9.03(a)
FBR Section 2.02
GAAP Section 4.07(b)
Good and Marketable Title Section 4.16(b)
Governmental Authority Section 4.05(b)
Holdings Preamble
Hydrocarbons Section 4.13(b)
Initial Expiration Date Section 2.01(a)
IRS Section 4.10(a)
Material Contracts Section 4.23 (a)
Material Subsidiary Section 4.01(c)
Merger Recitals
Merger Consideration Section 2.01(d)
Minimum Condition Section 2.01(a)
Multiemployer Plan Section 4.10(b)
Multiple Employer Plan Section 4.10(b)
Offer Recitals
Offer Documents Section 2.01(e)
Offer to Purchase Section 2.01(e)
4
Defined Term Location of Definition
------------ ----------------------
Outstanding Options Section 2.01(b)
Outstanding Warrants Section 2.01(c)
Paying Agent Section 3.09(a)
Permits Section 4.06
Per Share Amount Recitals
Plans Section 4.10(a)
Proxy Statement Section 4.12
Purchaser Preamble
Recent Balance Sheet Section 4.07(c)
Reserve Report Section 4.17
Schedule 14D-9 Section 2.02(b)
Schedule TO Section 2.01(e)
SEC Section 2.01(a)
SEC Reports Section 4.07(a)
Securities Act Section 4.07(a)
Shares Recitals
Share Acceptance Date Section 2.01
Stockholders' Meeting Section 7.01(a)
Subsidiary Section 4.01(a)
Surviving Corporation Section 3.03
Transactions Section 2.02(a)
Warrant Section 3.07
ARTICLE II
THE OFFER
SECTION 2.01 The Offer.
(a) Provided that none of the events set forth in Annex A hereto shall
have occurred or be continuing, Purchaser shall commence the Offer as promptly
as reasonably practicable but in no event later than seven (7) business days
after the date hereof. The obligation of Purchaser to accept for payment Shares
tendered pursuant to the Offer shall be subject to (i) the condition (the
"Minimum Condition") that at least the number of Shares tendered shall
constitute a 50% plus one share of the sum of the number of then outstanding
Shares plus all Shares issuable upon the exercise of the Outstanding Options (as
of the business day preceding the Initial Expiration Date) and Outstanding
Warrants (as of the business day preceding the Initial Expiration Date) shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer and (ii) the satisfaction or waiver of each of the other conditions set
forth in Annex A hereto. Purchaser expressly reserves the right to waive any
such condition set forth in Annex A, to increase the Per Share Amount, and to
make any other changes in the terms and conditions of the Offer; provided,
however, that no change may be made which decreases the Per Share Amount,
changes the form of consideration payable, reduces the maximum number of Shares
to be purchased in the Offer or imposes or modifies (other than to waive)
conditions to the Offer in addition to those set forth in Annex A hereto.
Subject to the terms of the Offer and this Agreement and the satisfaction or
waiver of the Minimum Condition as of the scheduled expiration date, which shall
initially be 20 business days following the commencement of the Offer, and the
other conditions set forth in Annex A hereto, Purchaser will accept for payment
and pay for all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after such expiration date of the Offer (such date, as
extended pursuant to this Agreement, the "Share Acceptance Date").
Notwithstanding the foregoing, Purchaser shall be entitled to extend the Offer
from time to time without the consent of the Company: (i) until no later than
January 11, 2002 if at the initial expiration of the Offer, which will be 12:00
midnight eastern standard time on the twentieth business day following
5
commencement of the Offer, as may be extended (the "Initial Expiration Date"),
the Minimum Condition is not satisfied, or (ii) until no later than December 31,
2001, if at the Initial Expiration Date, the Minimum Condition is satisfied, but
any other condition to the Offer is not satisfied or waived. Purchaser agrees to
extend the Offer from time to time until not later than December 31, 2001, if at
the then scheduled expiration date, the Minimum Condition has not been satisfied
or waived as permitted by this Agreement. Any extension of the Offer pursuant to
this Section 2.01 shall not, without the written consent of the Company, exceed
the number of days that Purchaser reasonably believes will be necessary so that
the Minimum Condition will be satisfied. In addition, Purchaser may, without the
consent of the Company, extend any then scheduled expiration date of the Offer
for any period required by applicable rules, regulations, interpretations or
positions of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or for any period required by applicable law. If
the Initial Expiration Date has occurred, but fewer than 90% of the Shares have
been validly tendered and not withdrawn as of the Initial Expiration Date,
Purchaser may provide for a subsequent offering period (as contemplated by Rule
14d-11 under the Securities Act of 1934, as amended (the "Exchange Act")) as
long as providing for the subsequent offering period does not require the
extension of the initial offer period under applicable rules and regulations of
the SEC, which subsequent offering period shall not exceed 20 business days. In
addition, the Per Share Amount may be increased and the Offer may be extended to
the extent required by law in connection with such increase in each case without
the consent of the Company. On or prior to the dates that Purchaser becomes
obligated to accept for payment and pay for Shares pursuant to the Offer,
Holdings shall provide or cause to be provided to Purchaser the funds necessary
to pay for all Shares that Purchaser becomes so obligated to accept for payment
and pay for pursuant to the Offer.
The Per Share Amount shall, subject to applicable withholding of taxes, be
net to the seller in cash, upon the terms and subject to the conditions of the
Offer. Notwithstanding the foregoing and subject to the applicable rules of the
SEC and the terms and conditions of the Offer, Purchaser expressly reserves the
right to delay payment for Shares in order to comply in whole or in part with
applicable laws. Any such delay shall be effected in compliance with Rule
14e-1(c) under the Exchange Act.
(b) Following the execution of this Agreement, the Company shall use
its reasonable best efforts to cause all holders (and such holders' spouses) of
options to purchase Shares granted under the Company's 1997 Incentive Stock
Option Plan and the Company's Directors Non-Qualified Option Plan , each as
amended through the date of this Agreement (the "Company Stock Option Plans"),
to execute prior to the Initial Expiration Date an Option Relinquishment and
Release Agreement (herein so called) in the form attached hereto as Exhibit A.
At the Share Acceptance Date, Purchaser shall cause the Paying Agent to pay to
6
such holders who have previously delivered an Option Relinquishment and Release
Agreement the cash amount equal to the product of (i) the number of Shares
subject to such option (irrespective of whether such option is then exercisable)
and (ii) the amount by which the Per Share Amount exceeds the exercise or strike
price per Share subject to such option less any required withholding taxes. In
the event that an option holder fails to deliver an Option Relinquishment and
Release Agreement prior to the Initial Expiration Date, such holder's options
(the "Outstanding Options") shall, in accordance with the terms and conditions
of the governing Company Stock Option Plan and the holder's stock option
agreement(s), be converted without any action on the part of the holder thereof
into the right to receive Merger Consideration upon the exercise of such
holder's options in accordance with, and within the time period prescribed by,
the applicable Company Stock Option Plan and the holder's stock option
agreement(s). The Purchaser shall pay, or cause the Paying Agent to pay, to each
holder of Outstanding Options, the Merger Consideration, less any required
withholding taxes, as promptly as practicable after receiving a valid exercise
of such options by the holder thereof. To the extent that options to purchase
the Company's common stock are exercised by holders prior to the Effective Time,
such holders shall receive certificates evidencing the Shares underlying the
options and may surrender such certificates to the Paying Agent at the Effective
Time for payment in cash as provided in Article III hereof.
(c) Following the execution of this Agreement, the Company shall send
to holders of warrants to purchase Shares written notice of the Offer and Merger
and such information required by the terms of such warrant. The Company shall
send to all such persons a Warrant Relinquishment and Release Agreement (herein
so called) in the form attached hereto as Exhibit B and shall use its reasonable
best efforts to cause all holders of warrants (and such holders' spouses) to
execute prior to the Initial Expiration Date a Warrant Relinquishment and
Release Agreement. At the Share Acceptance Date, Purchaser shall cause the
Paying Agent to pay to such holders who have previously delivered a Warrant
Relinquishment and Release Agreement the cash amount equal to the product of (i)
the number of Shares subject to such warrant and (ii) the amount by which the
Per Share Amount exceeds the exercise price per share of Shares subject to such
warrant less any required withholding taxes. In the event that a warrant holder
fails to deliver a Warrant Relinquishment and Release Agreement prior to the
Initial Expiration Date, such holder's warrants (the "Outstanding Warrants")
shall, in accordance with the terms and conditions of the Outstanding Warrant be
converted without any action on the part of the holder thereof into the right to
receive Merger Consideration upon the exercise of such holder's warrants in
accordance with the warrant agreement(s). The Purchaser shall pay, or cause the
Paying Agent to pay, to each holder of Outstanding Warrants, the Merger
Consideration, less any required withholding taxes, as promptly as practicable
after receiving a valid exercise of such warrants by the holder thereof. To the
extent that warrants to purchase the Shares are exercised by holders prior to
the Effective Time, such holders shall receive certificates evidencing the
Shares underlying the warrants and may surrender such certificates to the Paying
Agent at the Effective Time for payment in cash as provided in Article III
hereof.
(d) If the payment equal to the Per Share Amount in cash (the "Merger
Consideration") is to be made to a person other than the person in whose name
the surrendered certificate formerly evidencing Shares is registered on the
stock transfer books of the Company, it shall be a condition of payment that the
certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate
7
surrendered, or shall have established to the satisfaction of Purchaser that
such taxes either have been paid or are not applicable.
(e) As promptly as reasonably practicable on the date of commencement
of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on
Schedule TO (together with all amendments and supplements thereto, the "Schedule
TO") with respect to the Offer.
The Schedule TO shall contain or shall incorporate by reference an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule TO, the Offer to
Purchase and such other documents, together with all supplements and amendments
thereto, being referred to herein collectively as the "Offer Documents"). Each
of CRI, Purchaser and the Company agrees to correct promptly any information
provided by it for use in the Offer Documents that shall have become false or
misleading in any material respect, and CRI and Purchaser further agree to take
all steps necessary to cause the Schedule TO, as so corrected, to be filed with
the SEC, and the other Offer Documents, as so corrected, to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. CRI and Purchaser shall give the Company and its
counsel a reasonable opportunity to review and comment on the Offer Documents
prior to such documents being filed with the SEC or disseminated to holders of
Shares. CRI and Purchaser shall provide the Company and its counsel with any
comments CRI, Purchaser or their counsel may receive from the SEC or its staff
with respect to the Offer Documents after the receipt of such comments and shall
provide the Company and its counsel with a reasonable opportunity to participate
in the response of CRI or Purchaser to such comments.
SECTION 2.02 Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents that (i) the Board, at a meeting duly called and held on November 4,
2001, has (a) determined that this Agreement and the transactions contemplated
hereby, including each of the Offer and the Merger (collectively, the
"Transactions"), are fair to, and in the best interests of, the holders of
Shares, (b) approved, adopted and declared advisable this Agreement and the
Transactions (such approval and adoption having been made in accordance with
Delaware Law, including, without limitation, Section 203 thereof) and (c)
resolved to recommend that the holders of Shares accept the Offer and tender
their Shares pursuant to the Offer, and approve and adopt this Agreement and the
Merger, and (ii) Friedman, Billings, Ramsey & Co., Inc. ("FBR") has delivered to
the Board its opinion that the consideration to be received by the holders of
Shares pursuant to each of the Offer and the Merger is fair to the holders of
Shares from a financial point of view (the "Fairness Opinion"). The Company
hereby consents to the inclusion in the Offer Documents of the recommendation of
the Board described in the immediately preceding sentence, and the Company shall
not withdraw or modify such recommendation in any manner adverse to CRI,
Holdings or Purchaser except as provided in Section 7.05(b). The Company has
been advised by its directors and executive officers that they intend to tender
all Shares beneficially owned by them to Purchaser pursuant to the Offer.
8
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 containing the Fairness Opinion and, except as provided in
Section 7.05(b), the recommendation of the Board described in Section 2.02(a)
(together with all amendments and supplements thereto, the "Schedule 14D-9"),
and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Exchange Act, and any other applicable federal securities
laws. Each of CRI, Holdings, Purchaser and the Company agrees to correct
promptly any information provided by it for use in the Schedule 14D-9 which
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9, as so
corrected, to be filed with the SEC and disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company shall give CRI, Holdings, and Purchaser and their counsel a
reasonable opportunity to review and comment on the Schedule 14D-9 prior to such
document being filed with the SEC or disseminated to holders of Shares. The
Company shall provide CRI, Holdings, and Purchaser and their counsel with any
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 after the receipt of such comments and shall
provide CRI, Holdings, Purchaser and their counsel with a reasonable opportunity
to participate in the response of the Company to such comments.
(c) The Company shall promptly cause its transfer agent to furnish
Purchaser with mailing labels containing the names and addresses of all record
holders of Shares and with security position listings of Shares held in stock
depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of Shares. The Company shall
promptly furnish Purchaser with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance in disseminating the
Offer Documents to holders of Shares as CRI, Holdings, or Purchaser may
reasonably request. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, CRI, Holdings, and
Purchaser shall hold in confidence the information contained in such labels,
listings and files, shall use such information only in connection with the
Transactions, and, if this Agreement shall be terminated in accordance with
Section 9.01, shall deliver and shall cause their agents to deliver to the
Company all copies of such information then in their possession or control.
ARTICLE III
THE MERGER
SECTION 3.01 The Merger. Upon the terms and subject to the satisfaction or
waiver of the conditions set forth in Article VIII, and in accordance with
Delaware Law, Purchaser shall be merged with and into the Company.
SECTION 3.02 Effective Time; Closing. As promptly as practicable (but not
later than two business days) after the satisfaction or, if permissible, waiver
of the conditions set forth in Article VIII, the parties hereto shall cause the
Merger to be consummated by filing this Agreement or a certificate of merger or
certificate of ownership and merger (in either case, the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such form as
9
is required by, and executed in accordance with, the relevant provisions of
Delaware Law (the date and time of such filing being the "Effective Time").
Prior to such filing, a closing shall be held at the offices of Locke Liddell &
Sapp LLP, 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201, or such other place
as the parties shall agree, for the purpose of confirming the satisfaction or
waiver, as the case may be, of the conditions set forth in Article VIII.
SECTION 3.03 Effect of the Merger. As a result of the Merger, the separate
corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation"). At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of the Company and Purchaser shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 3.04 Certificate of Incorporation; By-laws.
(a) At the Effective Time, the Certificate of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that, at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is DevX Energy, Inc."
(b) Unless otherwise determined by CRI prior to the Effective Time,
and subject to Section 7.07(a), the By-laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
SECTION 3.05 Directors and Officers. The directors of Purchaser shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, and the officers of Purchaser immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or removal.
SECTION 3.06 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, the Company or the
holders of any of the following securities:
(a) each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 3.06(b)
and any Dissenting Shares (as hereinafter defined)) shall be canceled and shall
be converted automatically into the right to receive an amount equal to the
Merger Consideration payable, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 3.09, of the certificate that
formerly evidenced such Share;
10
(b) each Share held in the treasury of the Company and each Share
owned by CRI, Holdings, Purchaser, or the Company immediately prior to the
Effective Time shall be canceled without any conversion thereof and no payment
or distribution shall be made with respect thereto; and
(c) each share of common stock, par value $0.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
SECTION 3.07 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
Shares that are outstanding immediately prior to the Effective Time and that are
held by stockholders who shall have neither voted in favor of the Merger nor
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of Delaware Law
(collectively, the "Dissenting Shares") shall not be converted into, or
represent the right to receive, the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such Shares held
by them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 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, without any interest thereon, upon
surrender, in the manner provided in Section 3.09, of the certificate or
certificates that formerly evidenced such Shares.
(b) The Company shall give CRI (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of CRI, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
SECTION 3.08 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate a bank or
trust company to act as agent (the "Paying Agent") for the holders of Shares to
receive the funds to which holders of Shares shall become entitled pursuant to
Section 3.06(a) and CRI shall make funds available to the Paying Agent. Such
funds shall be invested by the Paying Agent as directed by the Surviving
Corporation.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
Section 3.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
11
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive and CRI shall cause Paying Agent to pay in exchange therefor the
Merger Consideration for each Share formerly evidenced by such Certificate, and
such Certificate shall then be canceled. No interest shall accrue or be paid on
the Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate. If the payment equal to the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered certificate formerly evidencing Shares is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate
surrendered, or shall have established to the satisfaction of Purchaser that
such taxes either have been paid or are not applicable. If any holder of Shares
is unable to surrender such holder's Certificates because such Certificates have
been lost, mutilated or destroyed, such holder may deliver in lieu thereof an
affidavit and indemnity bond in a reasonable amount in form and substance and
with surety reasonably satisfactory to the Surviving Corporation.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and, thereafter, such holders shall be entitled to look to the
Surviving Corporation and CRI (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to CRI, Holdings and Purchaser to enter into this
Agreement, the Company hereby represents and warrants to CRI, Holdings and
Purchaser that:
SECTION 4.01 Organization and Qualification; Subsidiaries.
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(a) Except as disclosed in Section 4.01 of the Disclosure Schedule,
each of the Company and each subsidiary of the Company (a "Subsidiary") is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company and each Subsidiary is duly
qualified or licensed as a foreign corporation to do business and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where such failure to be qualified or licensed
would not have a Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of incorporation of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary and the names of the directors and officers of each Subsidiary, is
set forth in Section 4.01(b) of the Disclosure Schedule, which has been prepared
by the Company and delivered by the Company to CRI, Holdings and Purchaser prior
to the execution and delivery of this Agreement (the "Disclosure Schedule").
Except as disclosed in Section 4.01(b) of the Disclosure Schedule, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
(c) All names by which the Company previously conducted business or
was known as are listed in Section 4.01(c) of the Disclosure Schedule.
SECTION 4.02 Certificate of Incorporation and By-laws. The Company has
heretofore furnished to CRI a complete and correct copy of the Certificate of
Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation, By-laws or equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
13
SECTION 4.03 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, par value $0.234 per share, and
50,000,000 shares of preferred stock, par value $0.01 per share ("Company
Preferred Stock") of which 9,600,000 shares have been designated as Series A
Preferred Stock, 9,600,000 shares have been designated as Series B Preferred
Stock and 10,400 shares have been designated as Series C Preferred Stock. As of
the date hereof, (a) 12,649,522 Shares were issued and outstanding, all of which
are validly issued, fully paid and nonassessable, (b) 100,000 Shares are held in
the treasury of the Company, (c) no Shares are held by the Subsidiaries, (d)
522,500 Shares are reserved for future issuance pursuant to outstanding stock
options or stock incentive rights granted pursuant to the Company Stock Option
Plans and (e) 265,000 Shares are reserved for future issuance pursuant to
exercise of the Warrants. As of the date hereof, no shares of Company Preferred
Stock are issued and outstanding. Except as set forth in this Section 4.03 or in
Section 4.03 of the Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Subsidiary or obligating
the Company or any Subsidiary to issue or sell any shares of capital stock of,
or other equity interests in, the Company or any Subsidiary. Section 4.03 of the
Disclosure Schedule sets forth the following information with respect to each
Company Stock Option and Warrant outstanding on the date of this Agreement: (i)
the name of the Option or Warrant holder; (ii) the particular plan pursuant to
which such Company Stock Option was granted; (iii) the number of Shares subject
to such Company Stock Option or Warrant; (iv) the exercise price of such Company
Stock Option or Warrant; (v) the date on which such Company Stock Option or
Warrant was granted or issued; (vi) the applicable vesting schedule; (vii) the
date on which such Company Stock Option or Warrant expires; and (viii) whether
the exercisability of such Option or Warrant will be accelerated in any way by
the transactions contemplated by this Agreement. All Shares subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares or any capital stock of any Subsidiary or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary or any other person. Except as
disclosed in Section 4.03 of the Disclosure Schedule, each outstanding share of
capital stock of each Subsidiary is duly authorized, validly issued, fully paid
and nonassessable, and each such share is owned by the Company or another
Subsidiary free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
any Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
SECTION 4.04 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly 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 (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then-outstanding Shares,
if and to the extent required by applicable law, and the filing and recordation
of appropriate merger documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by CRI, Holdings, and Purchaser,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. At a meeting duly called and
held on November 4, 2001, the Board approved this Agreement and the
Transactions, and such approvals are sufficient so that the restrictions on
business combinations set forth in Section 203(a) of Delaware Law shall not
apply to the Merger.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary, (ii) assuming that
all consents, approvals, authorizations and other actions described in Section
4.05(b) have been obtained and all filings and obligations described in Section
4.05(b) have been made, conflict with or violate any United States or non-United
States national, state, provincial, municipal, county or local statute, law,
14
ordinance, regulation, rule, code, executive order, injunction, judgment, decree
or other order ("Law") applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) other than as described in Section 4.05(a) of the Disclosure Schedule,
result in any breach of or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Subsidiary pursuant to or under, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except, with respect to clause (ii) or (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
materially delay consummation of the Offer or Merger, or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement and would not have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States or non-United States national, state, provincial,
municipal, county or local government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority"), except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, (ii) filing and
recordation of appropriate merger documents as required by Delaware Law, and
(iii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the Offer or the Merger, or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement and would not have a Material Adverse Effect.
SECTION 4.06 Permits; Compliance. Each of the Company and the Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company or the
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted, or as presently contemplated to be
conducted (the "Permits"), except where the failure to have, or the suspension
or cancellation of, any of the Permits would not prevent or materially delay
consummation of the Offer or the Merger or otherwise prevent or materially delay
the Company from performing its obligations under this Agreement and would not
have a Material Adverse Effect. No suspension or cancellation of any of the
Permits is pending or, to the knowledge of the Company, threatened, which
suspension or cancellation would have a Material Adverse Effect. Neither the
Company nor any Subsidiary is in conflict with, or in default, breach or
violation of, (a) any Law applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound, except for
any such conflicts, defaults, breaches or violations that would not prevent or
materially delay consummation of the Offer or the Merger or otherwise prevent or
15
materially delay the Company from performing its obligations under this
Agreement and would not have a Material Adverse Effect.
SECTION 4.07 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by it with the SEC since July 1, 1999, including (i) its Transition
Report on Form 10-K for the Transition Period from July 1, 2000 to December 31,
2000, (ii) its Annual Report on Form 10-K for the fiscal year ended June 30,
2000, (iii) its Quarterly Reports on Form 10-Q for the periods ended June 30,
2001 and March 31, 2001, (iv) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since July 1, 1999 and
(v) all other forms, reports and other registration statements (other than
Quarterly Reports on Form 10-Q not referred to in clause (iii) above) filed by
the Company with the SEC since July 1, 1999 (the forms, reports and other
documents referred to in clauses (i) - (v) above being, collectively, the "SEC
Reports"). The SEC Reports (i) were prepared in accordance with either the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, or, if
amended, as of the date of such amendment, 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 made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presents, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein except as otherwise noted therein
and for normal, recurring year-end adjustments.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as at June 30, 2001
including the notes thereto (the "Recent Balance Sheet") or as specifically
disclosed in SEC Reports filed since June 30, 2001 and prior to the date of this
Agreement, neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since June 30, 2001.
(d) The Company has heretofore furnished to CRI complete and correct
copies of all amendments and modifications that have not been filed by the
Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
SECTION 4.08 Absence of Certain Changes or Events. Since December 31, 2000,
except as set forth in Section 4.08 of the Disclosure Schedule, or as expressly
contemplated by this Agreement, or specifically disclosed in the SEC Reports
filed since December 31, 2000 and prior to the date of this Agreement, (a) the
16
Company and the Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice, and (b) there has
not been any Material Adverse Effect.
SECTION 4.09 Absence of Litigation. Except as set forth in Section 4.09 of
the Disclosure Schedule, there is no litigation, suit, claim, action, proceeding
or investigation (an "Action") pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any Governmental Authority that would have
a Material Adverse Effect. Neither the Company nor any Subsidiary nor any
property or asset of the Company or any Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or similar written agreement
with, or continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would prevent or materially delay consummation of the Offer or
the Merger or otherwise prevent or materially delay the Company from performing
its obligations under this Agreement or would have a Material Adverse Effect.
SECTION 4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Disclosure Schedule lists (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, to which the
Company or any Subsidiary is a party, with respect to which the Company, any
Subsidiary or any ERISA Affiliate has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of, or any current or former
consultant to, the Company or any Subsidiary, (ii) each employee benefit plan
for which the Company or any Subsidiary could incur liability under Section 4069
of ERISA in the event such plan has been or were to be terminated, (iii) any
plan in respect of which the Company or any Subsidiary could incur liability
under Section 4212(c) of ERISA, and (iv) any contracts, arrangements or
understandings between the Company or any Subsidiary and any employee of the
Company or any Subsidiary including, without limitation, any contracts,
arrangements or understandings relating in any way to a sale of the Company or
any Subsidiary (collectively, the "Plans"). Each Plan is in writing (or a
written summary exists) and the Company has made available to Purchaser a true
and complete copy of each Plan and has made available to Purchaser a true and
complete copy of each material document, if any, prepared in connection with
each such Plan, including, without limitation, (i) a copy of each trust or other
funding arrangement, if such a trust or funding arrangement exists, (ii) each
summary plan description and summary of material modifications thereto, (iii)
the most recent three years' Internal Revenue Service ("IRS") Forms 5500, if
applicable (iv) the most recently received IRS determination letter for each
such Plan, if applicable, and (v) the most recent three years' actuarial reports
and financial statements in connection with each such Plan, if applicable.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
single-employer plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary could incur liability under Section 4063 or
17
4064 of ERISA (a "Multiple Employer Plan"). Except as listed in Section 4.10(a)
of the Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance or similar-type benefits to any person, (ii) obligates the
Company or any Subsidiary to pay separation, severance or similar-type benefits
solely or partially as a result of any transaction contemplated by this
Agreement, or (iii) obligates the Company or any Subsidiary to make any payment
or provide any benefit as a result of a "change in control", within the meaning
of such term under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Except as listed in Section 4.10(a) of the Disclosure Schedule,
none of the Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of the
Company or any Subsidiary.
(c) Each Plan is now and always has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. The Company and the
Subsidiaries have performed all obligations required to be performed by them
under, are not in any material respect in default under or in violation of, and
have no knowledge of any material default or violation by any party to, any
Plan. No Action or any audit or investigation by any Governmental Authority is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and no fact or event
exists that could reasonably be expected to give rise to any such Action.
(d) Each Plan that is intended to be qualified under Section 401(a) of
the Code has timely received a favorable determination, opinion, advisory or
notification letter from the IRS that the Plan is so qualified and each trust
established in connection with any Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received an
opinion, advisory or modification letter from the IRS that it is so exempt, and
no fact or event has occurred since the date of such letter or letters from the
IRS that could reasonably be expected to adversely affect the qualified status
of any such Plan or the exempt status of any such trust.
(e) There has not been to the best of Company's knowledge any
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Neither the Company nor any
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could reasonably be expected to give rise to any
such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority and no
fact or event exists to the best of Company's knowledge which could reasonably
be expected to give rise to any such challenge or disallowance.
18
(g) None of the Plans is subject to the laws of any country other than
the United States.
SECTION 4.11 Labor and Employment Matters.
(a) Section 4.11 of the Disclosure Schedule sets forth a list of all
employees of the Company and any Subsidiary, together with their dates of hire,
and any employees currently on leave of absence, indicating the nature of and
length of such leave and whether such employees have employment agreements. The
Company has previously provided to CRI a schedule setting forth current base
salary and total wages paid in the prior year for all employees listed in
Section 4.11 of the Disclosure Schedule. Except as set forth in Section 4.11 of
the Disclosure Schedule, (i) there are no controversies pending or, to the
knowledge of the Company, threatened between the Company or any Subsidiary and
any of their respective employees; (ii) neither the Company nor any Subsidiary
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary, nor, to the
knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees; (iii) there are no unfair labor practice
complaints pending against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; (iv) there is no strike, slowdown,
work stoppage or lockout, or, to the knowledge of the Company, threat thereof,
by or with respect to any employees of the Company or any Subsidiary; and (v)
there are no currently effective agreements relating to severance or similar
payments or other benefits to be provided to directors, officers, employees,
consultants or former employees of the Company or any Subsidiary in connection
with or after termination of such director, officer, consultant or employee's
employment or other relationship with the Company or that may otherwise be owing
as a result of the Transactions.
(b) The Company and the Subsidiaries are in material compliance with
all applicable laws relating to the employment of labor, including those related
to wages, hours, collective bargaining and the payment and withholding of taxes
and other sums as required by the appropriate Governmental Authority, and have
withheld and paid to the appropriate Governmental Authority or are holding for
payment not yet due to such Governmental Authority all amounts required to be
withheld from employees of the Company or any Subsidiary and are not liable for
any arrears of wages, Taxes, penalties or other sums for failure to comply with
any of the foregoing. The Company and the Subsidiaries have paid in full to all
employees or adequately accrued for in accordance with GAAP consistently applied
all wages, salaries, commissions, bonuses, benefits and other compensation due
to or on behalf of such employees, and there is no claim with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or
threatened before any Governmental Authority with respect to any persons
currently or formerly employed by the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees or
employment practices. There is no charge of discrimination in employment or
employment practices, for any reason, including, without limitation, age,
gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the knowledge of the Company, threatened
before the United States Equal Employment Opportunity Commission, or any other
19
Governmental Authority in any jurisdiction in which the Company or any
Subsidiary have employed or employ any person, except as would not have a
Material Adverse Effect.
(c) The Company and the Subsidiaries are in compliance with the
provisions of the WARN Act and any similar state laws. Section 4.11 of the
Disclosure Schedule lists all employees who have been terminated in the 90-day
period ending as of the date hereof.
SECTION 4.12 Offer Documents; Schedule 14D-9.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the times the Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to stockholders of the Company, as the
case may be, 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, in the light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by CRI,
Holdings, Purchaser or any of CRI, Holdings or Purchaser's representatives for
inclusion in the Schedule 14D-9. The Schedule 14D-9 shall comply in all material
respects as to form with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.13 Oil and Gas Operations. Except as set forth in Section 4.13 of
the Disclosure Schedule, proceeds from the sale of crude oil, natural gas
liquids and other hydrocarbons produced from crude oil or natural gas
("Hydrocarbons") produced from the Company's Oil and Gas Interests are being
received by the Company and the Subsidiaries in a timely manner and are not
being held in suspense for any reason (except in the ordinary course of business
or which would not have a Material Adverse Effect).
SECTION 4.14 Gas Imbalances. Except as set forth in Section 4.14 of the
Disclosure Schedule, none of the Company or the Subsidiaries has received any
material deficiency payment under any gas contract for which any person has a
right to take deficiency gas from the Company or a Subsidiary, nor has the
Company or any Subsidiary received any material payment for production which is
subject to refund or recoupment out of future production.
SECTION 4.15 Oil and Gas Agreements. The Company has previously provided or
made available to CRI true and complete copies of all the Oil and Gas Agreements
together with all amendments, extensions and other modifications thereof.
SECTION 4.16 Properties.
(a) Except for items disclosed in Section 4.16 of the Disclosure
Schedule and goods and other property sold, used or otherwise disposed of since
June 30, 2001 in the ordinary course of business, the Company and the
Subsidiaries have Good and Marketable Title, for oil and gas purposes, in and to
all oil and gas properties set forth in the Reserve Report as owned by the
Company and the Subsidiaries (the "Company's Oil and Gas Interests"), and
defensible title for oil and gas purposes to all other properties, interests in
properties and assets, real and personal, reflected on the balance sheet of the
Company in its Quarterly Report on Form 10-Q for the period ended June 30, 2001,
20
as owned by the Company and the Subsidiaries, free and clear of any Liens,
except: (i) Liens associated with obligations reflected in the SEC Reports; (ii)
Liens for current Taxes not yet due and payable, (iii) materialman's,
mechanic's, repairman's, employee's, contractors, operator's, and other similar
liens, charges or encumbrances arising in the ordinary course of business (A) if
they have not been perfected pursuant to law, (B) if perfected, they have not
yet become due and payable or payment is being withheld as provided by law, or
(C) if their validity is being contested in good faith by appropriate action,
(iv) all rights to consent by, required notices to, filings with, or other
actions by governmental entities in connection with the sale or conveyance of
oil and gas leases or interests if they are customarily obtained subsequent to
the sale or conveyance, and (v) such imperfections of title, easements and Liens
which have not had, or would not reasonably be expected to have, a Material
Adverse Effect. To the knowledge of the Company, all leases and other agreements
pursuant to which the Company or any of the Subsidiaries leases or otherwise
acquires or obtains operating rights affecting any real or personal property are
in good standing, valid and effective and all royalties, rentals and other
payment due by the Company to any lessor of any such oil and gas leases have
been paid, except in each case, as has not had, and would not reasonably be
expected to have, a Material Adverse Effect. All major items of operating
equipment of the Company and the Subsidiaries used in connection with the
Company's Oil and Gas Interests over which the Company has operating rights are
in good operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted, except as has not had, and would not reasonably
be expected to have, a Material Adverse Effect.
(b) The term "Good and Marketable Title" will, for purposes of this
Section 4.16, with respect to the Company and the Subsidiaries, mean such title
that: (i) is deducible of record (from the records of the applicable parish or
county or (A) in the case of federal leases, from the records of the applicable
office of the Minerals Management Service or Bureau of Land Management, (B) in
the case of Indian leases, from the applicable office of the Bureau of Indian
Affairs, (C) in the case of state leases, from the records of the applicable
state land office) or is assignable to the Company or the Subsidiaries out of an
interest of record (as so defined) by reason of the performance by the Company
or the Subsidiaries of all operations required to earn an enforceable right to
such assignment; (ii) entitles the Company or the Subsidiaries to receive not
less than the interest set forth in the Reserve Report with respect to each
proved property evaluated therein under the caption "Net Revenue Interest" or
"NRI" without reduction during the life of such property except as stated in the
Reserve Report; (iii) obligates the Company or the Subsidiaries to pay costs and
expenses relating to each such proved property in an amount not greater than the
interest set forth under the caption "Working Interest" or "WI" in the Reserve
Report with respect to such property without increase over the life of such
property except as shown on the Reserve Report; and (iv) does not restrict the
ability of the Company or the Subsidiaries to utilize the properties as
currently intended; except in each case where deficiencies referenced in clauses
(i) through (iv) would reasonably be expected to have a Material Adverse Effect.
SECTION 4.17 Oil and Gas Reserves. The Company has furnished CRI prior to
the date of this Agreement with the Company's estimates of its and the
Subsidiaries' oil and gas reserves as of June 30, 2001 (the "Reserve Report").
To the knowledge of the Company, except as have not had, and would not
reasonably be expected to have, a Material Adverse Effect, the production
volumes and pressure data used to prepare the Reserve Report were accurate.
21
SECTION 4.18 Take-or-Pay Deliveries. Except as would not reasonably be
expected to have a Material Adverse Effect, there are no calls (exclusive of
market calls) on the Company's oil or gas production and the Company has no
obligation to deliver oil or gas pursuant to any take-or-pay, prepayment or
similar arrangement without receiving full payment therefor, excluding gas
imbalances disclosed in Section 4.14 of the Disclosure Schedule.
SECTION 4.19 Hedging. Section 4.19 of the Disclosure Schedule sets forth
all futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from, relate to or reduce or eliminate
the risk of fluctuations in the price of commodities, including Hydrocarbons or
securities, to which the Company or any of the Subsidiaries is bound.
SECTION 4.20 Intellectual Property. The Company and the Subsidiaries own or
possess all necessary licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, free and clear of Liens, and to the knowledge of the Company, there
are no assertions or claims challenging the validity of any of the foregoing
which would have, or would reasonably be expected to have, a Material Adverse
Effect. Except in the ordinary course of business, neither the Company nor any
of the Subsidiaries has granted to any other person any license to use any of
the foregoing. To the knowledge of the Company, the conduct of the Company's and
the Subsidiaries' respective businesses as currently conducted does not conflict
with any patents, patent rights, licenses, trademarks, trademark rights, trade
names, trade name rights or copyrights of others in a way which would have, or
would be reasonably expected to have, a Material Adverse Effect. To the
knowledge of the Company there is no infringement of any proprietary right owned
by the Company or any of the Subsidiaries in a way which would have, or would be
reasonably expected to have, a Material Adverse Effect.
SECTION 4.21 Taxes.
(a) Each of the Company, the Subsidiaries and each affiliated,
consolidated, combined, unitary or similar group of which any such corporation
or entity is or was a member has (i) duly filed (or there has been filed on its
behalf) on a timely basis (taking into account any extensions of time to file
before the date hereof) with appropriate Governmental Authorities all Tax
returns, statements, reports, declarations, estimates and forms ("Returns")
required to be filed by or with respect to it, except to the extent that any
failure to file would not have, or reasonably be expected to have, a Material
Adverse Effect, and (ii) duly paid or deposited in full on a timely basis or
made adequate provisions in accordance with generally accepted accounting
principles (or there has been paid or deposited or adequate provision has been
made on its behalf) for the payment of all Taxes required to be paid by it other
than those being contested in good faith by the Company or a Subsidiary and
except to the extent that any failure to pay or deposit or make adequate
provision for the payment of such Taxes would not have, or reasonably be
expected to have, a Material Adverse Effect.
(b) Except to the extent set forth in Section 4.21 of the Disclosure
Schedule, (i) none of the federal income tax returns of the Company or any of
the Subsidiaries have been examined by the IRS for all periods; (ii) as of the
date hereof, neither the Company nor any of the Subsidiaries has granted any
requests, agreements, consents or waivers to extend the statutory period of
22
limitations applicable to the assessment of any Taxes with respect to any
Returns of the Company or any of the Subsidiaries that will be outstanding as of
the Effective Time; (iii) neither the Company nor any of the Subsidiaries is a
party to, is bound by or has any obligation under any Tax sharing, allocation or
indemnity agreement or any similar agreement or arrangement that would have, or
would reasonably be expected to have, a Material Adverse Effect; and (iv) there
are no Liens for Taxes on any assets of the Company or the Subsidiaries except
for Taxes not yet currently due, with respect to matters being contested by the
Company in good faith for which adequate reserves are reflected in the financial
statements and those which could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.22 Environmental Matters.
(a) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, to the knowledge of the Company, there are not any
present or past conditions or circumstances at, or arising out of, any current
or former businesses, assets or properties of the Company or any Subsidiary,
including but not limited to, on-site or off-site disposal or release of any
Hazardous Substance, which constitute a violation under any Environmental Law or
could reasonably be expected to give rise to: (i) liabilities or obligations for
any notification, cleanup, remediation, disposal or corrective action under any
Environmental Law or (ii) claims arising for damage to natural resources.
(b) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, neither the Company nor any of the Subsidiaries has (i)
received any written notice of noncompliance with, violation of, or liability or
potential liability under any Environmental Law, (ii) received any written
notice regarding any existing, pending or threatened investigation or inquiry
related to alleged violations under any Environmental Law or regarding any
claims for remedial obligations or contribution under any Environmental Law or
(iii) entered into any consent decree or order or is subject to any order of any
court or governmental authority or tribunal under any Environmental Law or
relating to the cleanup of any Hazardous Substance.
(c) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, the Company and the Subsidiaries have in full force and
effect all permits, licenses, approvals and other authorizations required by
Environmental Laws to conduct their operations and to operate and use any of the
Company's or the Subsidiaries' assets for their current purposes and uses and
are operating in material compliance thereunder.
(d) Except as would not have or reasonably be expected to have a
Material Adverse Effect, the Company does not know of any reason that would
preclude it from renewing or obtaining a reissuance or transfer of the permits,
licenses, approvals, or other authorizations required pursuant to any applicable
Environmental Law to conduct their operations and to operate and use any of the
Company's or the Subsidiaries' assets for their current purposes and uses.
23
SECTION 4.23 Material Contracts.
(a) Other than the Oil and Gas Agreements, which have been previously
made available or provided to CRI, subsections (i) through (xii) of Section 4.23
of the Disclosure Schedule contain a list of the following types of contracts
and agreements to which the Company or any Subsidiary is a party (such
contracts, agreements and arrangements as are required to be set forth in
Section 4.23(a) of the Disclosure Schedule, together with the Oil and Gas
Agreements, being the "Material Contracts"):
(i) each contract or agreement that contemplates an exchange of
consideration with a value of more than $250,000 net to the Company's interest;
(ii) all management contracts (excluding contracts for
employment) and contracts with other consultants, including any contracts
involving the payment of royalties or other amounts calculated based upon the
revenues or income of the Company or any Subsidiary or income or revenues
related to any product of the Company or any Subsidiary, which require continued
payment thereunder and cannot be terminated by the Company or Subsidiary, as the
case may be, with 30-day notice;
(iii) all contracts and agreements evidencing indebtedness for
borrowed money of the Company;
(iv) all contracts and agreements with any Governmental
Authority, excluding state leases or other governmental mineral rights;
(v) all contracts and agreements providing for benefits under any
Plan, excluding individual stock option grant agreements and stock subscription
agreements;
(vi) all agreements related to professional services rendered to
the Company or any Subsidiary in connection with the Offer, the Merger and this
Agreement;
(vii) all contracts providing for "earn-out" or similar
contingent payments in excess of $250,000 by the Company or any Subsidiary;
(viii) all joint venture, partnership, and similar agreements;
(ix) all contracts for employment required to be listed in
Section 4.11 of the Disclosure Schedule;
(x) all contracts providing for indemnification of directors,
officers, employees, consultants or other persons other than normal course
indemnity provisions; and
(xi) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company, any
Subsidiary or the conduct of their respective businesses, or the absence of
which would prevent or delay consummation of the Offer or the Merger or
otherwise prevent or delay the Company from performing its obligations under
this Agreement or would have a Material Adverse Effect.
(b) Except as disclosed in Section 4.23(b) of the Disclosure Schedule and
except as would not prevent or delay consummation of the Offer or the Merger or
24
otherwise prevent or delay the Company from performing its obligations under
this Agreement and would not have a Material Adverse Effect, (i) each Material
Contract is a legal, valid and binding agreement of the Company, and none of the
Material Contracts is in default by its terms or has been canceled by the other
party; (ii) to the Company's knowledge, no other party is in breach or violation
of, or default under, any Material Contract; and (iii) the Company and the
Subsidiaries are not in receipt of any claim of default under any such
agreement. The Company has furnished or made available to CRI true and complete
copies of all Material Contracts, including any amendments thereto.
SECTION 4.24 Insurance.
(a) Section 4.24(a) of the Disclosure Schedule sets forth, with
respect to each insurance policy under which the Company or any Subsidiary is
insured (other than such policies contemplated in Section 4.10), a named insured
or otherwise the principal beneficiary of coverage which is currently in effect,
(i) the names of the insurer, the principal insured and each named insured, (ii)
the policy number, (iii) the period, scope and amount of coverage and (iv) the
premium charged.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable against the Company in accordance with its
terms and, except for policies that have expired under their terms in the
ordinary course, is in full force and effect; (ii) neither the Company nor any
Subsidiary is in material breach or default (including any such breach or
default with respect to the payment of premiums or the giving of notice), and no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination or modification, under the
policy; and (iii) to the knowledge of the Company, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation.
SECTION 4.25 Brokers. No broker, finder or investment banker (other than
FBR) is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company. The Company has heretofore furnished to CRI a complete and correct
copy of all agreements between the Company and FBR pursuant to which such firm
would be entitled to any payment relating to the Transactions.
SECTION 4.26 Opinion of Financial Advisors. The Board of Directors of the
Company has received the opinion of FBR to the effect that, as of the date of
this Agreement, the Merger Consideration is fair, from a financial point of
view, to the holders of the Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CRI, HOLDINGS AND PURCHASER
As an inducement to the Company to enter into this Agreement, CRI, Holdings
and Purchaser hereby, jointly and severally, represent and warrant to the
Company that:
SECTION 5.01 Corporate Organization. Each of Holdings and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
25
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not prevent or materially delay consummation of the Transactions, or otherwise
prevent Holdings or Purchaser from performing its material obligations under
this Agreement. CRI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, and has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not prevent or materially delay consummation of
the Transactions, or otherwise prevent CRI from performing its material
obligations under this Agreement.
SECTION 5.02 Authority Relative to This Agreement. Each of CRI, Holdings
and Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by CRI, Holdings
and Purchaser and the consummation by CRI, Holdings and Purchaser of the
Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of CRI, Holdings or
Purchaser are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the filing and recordation
of appropriate merger documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by CRI, Holdings and Purchaser and,
assuming due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of each of CRI, Holdings and Purchaser
enforceable against each of Holdings and Purchaser in accordance with its terms.
At a meeting duly called or by way of unanimous written consent, the Boards of
Directors of CRI, Holdings and Purchaser each unanimously approved this
Agreement and the Transactions.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by CRI, Holdings and
Purchaser do not, and the performance of this Agreement by CRI, Holdings and
Purchaser will not, (i) conflict with or violate the Articles of Incorporation
of CRI, the Certificate of Incorporation of Parent or Purchaser or the By-laws
of any of CRI, Holdings or Purchaser, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 5.03(b) have
been obtained and all filings and obligations described in Section 5.03(b) have
been made, conflict with or violate any Law applicable to CRI, Holdings or
Purchaser or by which any property or asset of either of them is bound or
affected, or (iii) result in any breach of, or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of CRI, Holdings or Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which CRI, Holdings or Purchaser is a party or by
which any property or asset of either of them is bound or affected, except, with
respect to clause (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or materially delay
consummation of the Offer or Merger, or otherwise prevent or materially delay
CRI, Holdings and Purchaser from performing their obligations under this
Agreement.
26
(b) The execution and delivery of this Agreement by CRI, Holdings and
Purchaser do not, and the performance of this Agreement by CRI, Holdings and
Purchaser will not, require any consent, approval, authorization or permit of,
or filing with, or notification to, any Governmental Authority, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state
takeover laws, (ii) filing and recordation of appropriate merger documents as
required by Delaware Law, and (iii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or materially delay consummation of the Offer or Merger, or
otherwise prevent or materially delay CRI, Holdings or Purchaser from performing
their obligations under this Agreement.
SECTION 5.04 Offer Documents. The Offer Documents shall not, at the time
the Offer Documents are filed with the SEC or are first published, sent or given
to stockholders of the Company, as the case may be, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, CRI, Holdings and Purchaser make no representation or warranty
with respect to any information supplied by the Company or any of its
representatives for inclusion in any of the Offer Documents. The Offer Documents
shall comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 5.05 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of CRI, Holdings or
Purchaser.
SECTION 5.06 Absence of Litigation. None of CRI, Holdings and Purchaser is
subject to any continuing order of, consent decree, settlement agreement or
similar written agreement with, or continuing investigation by, any Governmental
Authority, or any order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority that would prevent or materially delay
consummation of the Offer or the Merger or otherwise prevent or materially delay
Holdings or Purchaser from performing its respective obligations under this
Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 Conduct of Business by the Company Pending the Merger. The
Company agrees that, between the date of this Agreement and the Effective Time,
unless CRI shall otherwise agree in writing and except for actions taken or
omitted for the purpose of complying with this Agreement, the businesses of the
Company and the Subsidiaries shall be conducted only in, and the Company and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use its reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations. By way of amplification and not limitation, except as expressly
contemplated by this Agreement and Section 6.01 of the Disclosure Schedule,
neither the Company nor any Subsidiary shall, between the date of this Agreement
27
and the Effective Time, directly or indirectly, do any of the following without
the prior written consent of CRI:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) split, combine, reclassify, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(c) issue (other than upon the exercise of options or warrants
previously granted to current or former officers, employees or directors of the
Company), purchase, redeem, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of any class of capital stock of the Company or any Subsidiary, or any
options, warrants, convertible or exchangeable securities or other rights of any
kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Subsidiary;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for dividends by any direct or indirect wholly
owned Subsidiary to the Company or any other Subsidiary;
(e) sell, transfer, assign, dispose of or encumber (except to the
extent that the Company's and the Subsidiaries' ability to so restrict their
right to encumber their assets is limited under the documentation related to the
indebtedness of the Company and certain Subsidiaries under that certain Amended
and Restated Credit Agreement dated as of October 22, 1999 between the Company,
certain Subsidiaries, the lenders listed therein and Ableco Finance LLC, as
Collateral Agent, as may be amended (the "Ableco Indebtedness")), any assets of
the Company or any Subsidiary, excluding closing of the Company's office in
Ottawa, Canada, and the dissolution of Nasgas, LLC, or enter into any agreement
or commitment with respect to assets of the Company or a Subsidiary, other than
in the ordinary course consistent with past good business practice and other
than transfers between the Company and its Subsidiaries;
(f) sell, transfer, assign, dispose of or encumber (except to the
extent that the Company's and the Subsidiaries' ability to so restrict their
right to encumber their assets is limited under the documentation related to the
Ableco Indebtedness) any of the Company's Oil and Gas Interests represented in
the Reserve Report or enter into any agreement or commitment with respect to any
such sale, transfer, assignment, disposition or encumbrance;
(g) other than in the ordinary course and consistent with past
business practice, incur or become contingently liable for any indebtedness or
guarantee any such indebtedness or redeem, purchase or acquire or offer to
redeem, purchase or acquire any debt;
(h) acquire or agree to acquire any assets other than in the ordinary
course and consistent with past business practice;
(i) modify or amend any existing agreement or enter into any new
agreement with the Company's financial advisors or other similar consultants,
including without limitation, FBR;
28
(j) elect not to participate in any well to which proven reserves (as
identified in the Reserve Report) have been attributed in the Reserve Report
proposed pursuant to any existing net profits agreement or joint operating
agreement; notwithstanding the foregoing, if the applicable authorization for
expenditure ("AFE") exceeds $250,000 net to the Company's interest and CRI fails
to approve such expenditure as contemplated by Section 6.01(k)(iv) below, the
Company shall not be deemed to be in default of this Section 6.01(j) for its
failure to participate in such well;
(k) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or any significant amount of assets, except for purchases of
inventory in the ordinary course of business consistent with past practice; (ii)
incur any indebtedness for borrowed money other than draws under the Company's
existing revolving credit facility or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations of
any person, or make any loans or advances; (iii) except as provided in Section
6.01(j), enter into any contract or agreement other than in the ordinary course
of business and consistent with past practice; (iv) issue any AFE or authorize
any other individual capital expenditure in excess of $250,000 net to the
Company's interest; or (v) except as provided in Section 6.01(j), enter into or
amend any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 6.01(k);
(l) increase the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and consistent with past practice in salaries
or wages of employees of the Company or any Subsidiary who are not directors or
officers of the Company or any Material Subsidiary, or establish, adopt, enter
into or amend (except as may be required by law) any collective bargaining,
bonus, profit-sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee, other than year-end bonuses as previously
disclosed to CRI;
(m) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures;
(n) make any material Tax election or settle or compromise any
material Tax liability;
(o) other than in connection with the winding up of the Ottawa office
and agreements with Brian J. Barr, Donald Moore, Bruce Benn, Robert Lindsey and
Edward J. Munden as disclosed in Section 4.11 of the Disclosure Schedule pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of liabilities reflected or reserved against in the Recent
Balance Sheet or subsequently incurred in the ordinary course of business and
consistent with past practice or liabilities or obligations owed to the Company
or its Subsidiaries;
29
(p) amend, modify or consent to the termination of any Material
Contract, or amend, waive, modify or consent to the termination of the Company's
or any Subsidiary's material rights thereunder;
(q) commence or settle any material Action; or
(r) publicly announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Board, shall, in accordance with applicable law
and the Company's Certificate of Incorporation and By-laws, (i) duly call, give
notice of, convene and hold an annual or special meeting of its stockholders as
promptly as practicable following consummation of the Offer for the purpose of
considering and taking action on this Agreement and the Merger (the
"Stockholders' Meeting") and (ii) (a) include in the Proxy Statement, and not
subsequently withdraw or modify in any manner adverse to CRI, Holding or
Purchaser, the recommendation of the Board that the stockholders of the Company
approve and adopt this Agreement and the Transactions and (b) use its best
efforts to obtain such approval and adoption. At the Stockholders' Meeting, CRI,
Holdings and Purchaser shall cause all Shares then owned by them and their
subsidiaries to be voted in favor of the approval and adoption of this Agreement
and the Transactions.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the then outstanding Shares, the parties shall take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as promptly as reasonably
practicable after such acquisition, without a meeting of the stockholders of the
Company.
SECTION 7.02 Proxy Statement. If approval of the Company's stockholders is
required by applicable law to consummate the Merger, promptly following
consummation of the Offer, the Company shall file the Proxy Statement with the
SEC under the Exchange Act, and shall use its best efforts to have the Proxy
Statement cleared by the SEC as promptly as practicable. CRI, Purchaser and the
Company shall cooperate with each other in the preparation of the Proxy
Statement, and the Company shall notify CRI of the receipt of any comments of
the SEC with respect to the Proxy Statement and of any requests by the SEC for
any amendment or supplement thereto or for additional information and shall
provide to CRI promptly copies of all correspondence between the Company or any
representative of the Company and the SEC with respect thereto. The Company
shall give CRI and its counsel the opportunity to review the Proxy Statement,
including all amendments and supplements thereto, prior to its being filed with
the SEC and shall give CRI and its counsel the opportunity to review all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC. Each of the Company, CRI,
Holdings and Purchaser agrees to use its reasonable best efforts, after
30
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Stockholders' Meeting at the earliest practicable
time.
SECTION 7.03 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by Purchaser of 50% plus one Share of
the outstanding Shares (including Shares purchased pursuant to the Offer),
Purchaser shall be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Board as shall give Purchaser representation
on the Board equal to the product of the total number of directors on the Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser following such purchase bears to the
total number of Shares then outstanding, and the Company shall, at such time,
promptly take all actions necessary to cause Purchaser's designees to be elected
as directors of the Company, including increasing the size of the Board or
securing the resignations of incumbent directors, or both. At such times, the
Company shall use its best efforts to cause persons designated by Purchaser to
constitute the same percentage as persons designated by Purchaser shall
constitute of the Board of (i) each committee of the Board, (ii) each board of
directors of each Subsidiary, and (iii) each committee of each such board, in
each case only to the extent permitted by applicable law. Notwithstanding the
foregoing, until the Effective Time, at the request of CRI, the Company shall
use its best efforts to ensure that at least two members of the Board and each
committee of the Board and such boards and committees of the Subsidiaries, as of
the date hereof, who are not employees of the Company shall remain members of
the Board and of such boards and committees.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to
fulfill its obligations under this Section 7.03, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. CRI, Holdings or Purchaser shall supply to the Company, and be
solely responsible for, any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 7.03, prior to the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or By-laws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of CRI, Holdings or
Purchaser, or waiver of any of the Company's rights hereunder, shall require the
concurrence of a majority of the directors of the Company then in office who
neither were designated by Purchaser nor are employees of the Company or any
Subsidiary, and, if serving on the Board currently, were disinterested directors
in connection with the Board's consideration of this Agreement.
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SECTION 7.04 Access to Information; Confidentiality.
(a) From the date hereof until the Effective Time, the Company shall,
and shall cause the Subsidiaries and the officers, directors, employees,
auditors and agents of the Company and the Subsidiaries to, afford the officers,
employees and agents of CRI and Purchaser and persons providing or proposing to
provide CRI, Holdings or Purchaser with financing for the Transactions complete
access at all reasonable times to the officers, employees, agents, properties,
offices, plants and other facilities, books and records of the Company and each
Subsidiary, and shall furnish CRI, Holdings and Purchaser and persons providing
or proposing to provide CRI, Holdings or Purchaser with financing for the
Transactions with such financial, operating and other data and information as
CRI, Holdings or Purchaser, through their officers, employees or agents, may
reasonably request.
(b) All information obtained by CRI, Holdings or Purchaser pursuant to
this Section 7.04 shall be kept confidential in accordance with the
confidentiality agreement, dated January 16, 2001 (the "Confidentiality
Agreement"), between CRI and the Company and nothing herein shall limit or
abrogate the terms of the Confidentiality Agreement, except as set forth in
Section 7.10.
(c) No investigation pursuant to this Section 7.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto or any condition to the
Offer.
SECTION 7.05 No Solicitation of Transactions.
(a) Neither the Company nor any Subsidiary through any officer,
director, advisor or other person acting on its behalf shall, directly or
indirectly, solicit, initiate or encourage in any way any Acquisition Proposal;
provided, however, that the Company may furnish information to and negotiate
with a third party (a "Potential Acquirer") if the Potential Acquirer has, in
circumstances not involving any breach by the Company of the foregoing
provisions, made a tender or exchange offer for, or a proposal to the Board to
acquire 20% or more of the Shares, and (A) the Board determines in good faith,
based on the advice of outside counsel, that the failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties to the
stockholders of the Company under applicable law, and (B) the Company's Board is
advised by its financial advisor that such Potential Acquirer has the financial
wherewithal to consummate the acquisition and such acquisition would be more
favorable to the stockholders of the Company than the Transactions contemplated
by this Agreement.
(b) Except as set forth in this Section 7.05(b), neither the Board nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to CRI, Holdings or Purchaser, the approval or
recommendation by the Board or any such committee of this Agreement, the Offer
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that, prior to
the Share Acceptance Date pursuant to the Offer, the Board determines in good
faith that it is required to do so by its fiduciary duties under applicable law
after having received advice from outside legal counsel, the Board may withdraw
or modify its approval or recommendation of the Offer and the Merger, but only
to terminate this Agreement in accordance with Section 9.01(d)(ii) (and,
31
concurrently with such termination, cause the Company to enter into an agreement
with respect to a Superior Proposal).
(c) The Company shall, and shall direct or cause its directors,
officers, employees, representatives and agents to, immediately cease and cause
to be terminated any discussions or negotiations with third parties that may be
ongoing with respect to any Acquisition Proposal.
(d) The Company shall promptly advise CRI in writing (within 48 hours)
of the material terms and conditions of such Acquisition Proposal.
SECTION 7.06 Employee Matters. The Company and the Subsidiaries will
cooperate with Purchaser in making their employees available during regular
business hours for Purchaser to conduct interviews to determine the prospect of
continuing employment of such employees following the Effective Time. As soon as
practicable after the date hereof, and in any event not later than the Share
Acceptance Date, Purchaser will provide to the Company a list of the employees
whom it intends to continue to employ, and a summary of the material terms of
such employment, which terms shall not be less favorable than such employee's
current employment terms, provided that such employees who are retained and for
whom a retention bonus would be due and payable (as disclosed in Section 4.11 of
the Disclosure Schedule) shall be paid such bonus on December 31, 2001. At any
time after receipt of the list, the Company may terminate any employees whose
names are not on such list and shall pay any severance to such employees to
which they may be entitled under the terms of any employment contract,
termination agreement or policies in existence as of October 19, 2001 or as
described in Section 7.06 of the Disclosure Schedule. Nothing contained in this
Section 7.06 shall change the nature of the "at will" employment relationship
that exists between the Company, the Subsidiaries, and their employees. After
the Effective Date, CRI will cause the Company to maintain welfare benefit plans
with benefits no less favorable to the persons covered thereby than the
Company's existing welfare benefit plans for such period of time as is necessary
for the Company to fulfill its obligations under the Company's existing
contracts and policies. The previous sentence may not be amended or waived
without the consent of the persons for whom the Company is obligated to provide
coverage.
SECTION 7.07 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation of the Surviving Corporation
shall contain provisions no less favorable with respect to indemnification than
are set forth in Article VI of the By-laws of the Company, which provisions
shall not be amended, repealed or otherwise modified in any manner that would
materially adversely affect the rights thereunder of individuals who, at or
prior to the Effective Time, were directors, officers, employees, fiduciaries or
agents of the Company, unless such modification shall be required by law.
(b) CRI shall maintain the directors' and officers' ("D&O") insurance
that serves to reimburse persons currently covered by the Company's D&O
insurance in full force and effect for the continued benefit of such persons for
a continuous period of not less than two years from the Effective Time on terms
that are not materially different from the Company's D&O insurance currently in
effect (provided that the Surviving Corporation may substitute therefor policies
33
of at least the same coverage containing terms and conditions that are not less
favorable) with respect to matters occurring prior to the Effective Time.
(c) In the event the Company, CRI, or the Surviving Corporation 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
Company, CRI or the Surviving Corporation, as the case may be, or at CRI's
option, CRI, shall assume the obligations set forth in this Section 7.07.
(d) Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 7.07 shall survive the consummation of the Merger.
(e) The parties acknowledge that the provisions of this Section 7.07
are in addition to and not in lieu of the indemnification obligations of the
Company set forth in the agreements listed in Section 4.23 of the Disclosure
Schedule.
SECTION 7.08 Notification of Certain Matters. The Company shall give prompt
notice to CRI, and CRI shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which reasonably could be expected to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect,
(b) any failure of the Company, CRI, Holdings or Purchaser, as the case may be,
to comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder, and (c) any other material adverse development (other
than changes in general economic conditions or changes in oil or natural gas
prices) relating to the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries; provided, however, that the
delivery of any notice pursuant to this Section 7.08 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 7.09 Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all Permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company and the Subsidiaries as are necessary for
the consummation of the Transactions and to fulfill the conditions to the Offer
and the Merger; provided that neither CRI, Purchaser nor Holdings will be
required by this Section 7.09 to take any action, including entering into any
consent decree, hold separate orders or other arrangements, that (a) requires
the divestiture of any assets of any of CRI, Holdings, Purchaser, the Company or
any of their respective subsidiaries or (b) limits CRI's ability to operate, the
Company and the Subsidiaries or any portion thereof or any of CRI's or its
affiliates' other assets or businesses in a manner consistent with past
practice. In case, at any time after the Effective Time, any further action is
34
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such action.
(b) Each of the parties hereto agrees to cooperate and use its
reasonable best efforts to vigorously contest and resist any Action, including
administrative or judicial Action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Transactions, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal.
SECTION 7.10 Public Announcements. CRI and the Company agree that no public
release or announcement concerning the Transactions, the Offer or the Merger
shall be issued by either party without the prior consent of the other party
(which consent shall not be unreasonably withheld), except as such release or
announcement may be required by Law or the rules or regulations of any United
States securities exchange or national market, in which case the party required
to make the release or announcement shall use its best efforts to allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance.
SECTION 7.11 Confidentiality Agreement. Upon the acceptance for payment of
Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed to
have terminated without further action by the parties thereto.
SECTION 7.12 Assumption of Agreements. At the Share Acceptance Date, CRI
shall enter into an assumption or guaranty agreement reasonably satisfactory to
Messrs. Barr and Munden, pursuant to which CRI will assume or guaranty the
obligations of the Company under those certain termination agreements between
the Company and each of Mr. Barr and Mr. Munden each dated as of August 31,
2001.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Merger. The obligations of each party to
effect the Merger shall be subject to the satisfaction, at or prior to the
Effective Time, of the following conditions:
(a) Stockholder Approval. If and to the extent required by Delaware
Law, this Agreement and the Transactions shall have been approved and adopted by
the affirmative vote of the stockholders of the Company;
(b) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Shares by CRI, Holdings or Purchaser or any affiliate of either of them
illegal or otherwise restricting, preventing or prohibiting consummation of the
Transactions; and
(c) Offer. Purchaser or its permitted assignee shall have purchased
all Shares validly tendered and not withdrawn pursuant to the Offer; provided,
however, that this condition shall not be applicable to the obligations of CRI,
35
Holdings or Purchaser if, in breach of this Agreement or the terms of the Offer,
Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions by the stockholders of the Company:
(a) by mutual written consent of each of CRI, Holdings, Purchaser and
the Company duly authorized by the Boards of Directors of CRI, Holdings,
Purchaser and the Company; or
(b) by either CRI, Holdings, Purchaser or the Company if (i) the
Effective Time shall not have occurred on or before June 30, 2002; provided,
however, that the right to terminate this Agreement under this Section 9.01(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (ii) any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling which has become final and nonappealable and
has the effect of making consummation of the Offer or the Merger illegal or
otherwise preventing or prohibiting consummation of the Offer or the Merger; or
(c) by CRI if (i) due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A hereto,
Purchaser shall have (a) failed to commence the Offer within 30 days following
the date of this Agreement, (b) terminated the Offer without having accepted any
Shares for payment thereunder or (c) failed to accept Shares for payment
pursuant to the Offer within 90 days following the commencement of the Offer
(provided, however, that the applicable time period specified in (a) and (c)
above shall be extended until June 30, 2002), unless such action or inaction
under (a), (b) or (c) shall have been caused by or resulted from the failure of
CRI, Holdings or Purchaser to perform, in any material respect, any of their
covenants or agreements contained in this Agreement, or the material breach by
CRI, Holdings or Purchaser of any of their representations or warranties
contained in this Agreement (ii) prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn, modified or
failed to make in a manner adverse to CRI, Purchaser or Holdings its approval or
recommendation of this Agreement, the Offer or the Merger, or shall have
recommended or approved any Acquisition Proposal, or shall have resolved to do
any of the foregoing; or
(d) by the Company, upon approval of the Board, if (i) Purchaser shall
have (x) failed to commence the Offer within seven (7) business days following
the date of this Agreement, or (y) terminated the Offer without having accepted
any Shares for payment thereunder, unless such action or inaction under (x) or
(y) shall have been caused by or resulted from the failure of the Company to
perform, in any material respect, any of its material covenants or agreements
36
contained in this Agreement or the material breach by the Company of any of its
material representations or warranties contained in this Agreement, (ii) the
Share Acceptance Date has not occurred by January 1, 2002 (but subject to the
occurrence of an extension of the Offer pursuant to Section 2.01 or a Suspension
Event), unless such failure of the Share Acceptance Date to occur shall have
been caused by or resulted from the failure of the Company to perform, in any
material respect, any of its material covenants or agreements contained in this
Agreement or the material breach by the Company of any of its material
representations or warranties contained in this Agreement, (iii) CRI, Holdings
or Purchaser shall have committed a material breach of this Agreement, or (iv)
prior to the Share Acceptance Date, the Board determines in good faith that it
is required to do so by its fiduciary duties under applicable law after having
received advice from outside legal counsel in order to enter into a definitive
agreement with respect to a Superior Proposal, upon two calendar days' prior
written notice to CRI setting forth in reasonable detail the identity of the
person making, and the final terms and conditions of, the Superior Proposal;
provided, however, that any termination of this Agreement pursuant to this
Section 9.01(d)(iv) shall not be effective until the Company has made full
payment of all amounts provided under Section 9.03;
provided, however, that in each case, the time periods and deadlines in
subsection (c) and (d) of this Section 9.01 may be extended, at the option of
either party as reasonably necessitated by the occurrence of a Suspension Event
for such period of time as may be reasonably necessary (but not to exceed five
(5) business days) following the conclusion of a Suspension Event, but in no
event to exceed January 31, 2002.
SECTION 9.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
and there shall be no liability on the part of any party hereto, except (a) as
set forth in Section 9.03 and (b) nothing herein shall relieve any party from
liability for any intentional breach hereof prior to the date of such
termination; provided, however, that the Confidentiality Agreement shall survive
any termination of this Agreement.
SECTION 9.03 Fees.
(a) In the event this Agreement is terminated pursuant to Section
9.01(c)(ii) or 9.01(d)(iv), then, in any such event, the Company shall pay CRI
promptly (but in no event later than one business day after the first of such
events shall have occurred) a fee of $3,500,000 (the "Fee"), which amount shall
be payable in immediately available funds.
(b) Except as set forth in this Section 9.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(c) In the event that the Company shall fail to pay the Fee it shall
also pay CRI interest on such unpaid Fee, commencing on the date that the Fee
became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in the City of New York, as such bank's Base
Rate.
37
SECTION 9.04 Amendment. Subject to Section 7.03, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement and
the Transactions by the stockholders of the Company, no amendment may be made
that would reduce the amount or change the type of consideration into which each
Share shall be converted upon consummation of the Merger. This Agreement may not
be amended except by an instrument in writing signed by each of the parties
hereto.
SECTION 9.05 Waiver. Subject to Section 7.03, at any time prior to the
Effective Time, any party hereto may (a) extend the time for the performance of
any obligation or other act of any other party hereto, (b) waive any inaccuracy
in the representations and warranties of any other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any
agreement of any other party or any condition to its own obligations contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by overnight
courier or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.01):
if to CRI, Holdings or Purchaser:
Comstock Resources, Inc.
5300 Town and Country Blvd.
Suite 500
Frisco, Texas 75034
Attention: M. Jay Allison, President
with a copy to:
Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201
Attention: Jack E. Jacobsen
if to the Company:
DevX Energy, Inc.
13760 Noel Road
Suite 1030
Dallas, Texas 75240
Attention: Joseph T. Williams
with a copy to:
Haynes and Boone, LLP
1600 N. Collins Blvd., Suite 2000
Richardson, Texas 75080
Attention: William L. Boeing
SECTION 10.02 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 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 a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.03 Entire Agreement; Assignment. This Agreement supercedes the
letter of intent dated October 19, 2001 between CRI and the Company and
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Sections 7.04(b) and 7.11,
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned (whether pursuant to a merger, by operation of law or
otherwise), except that CRI, Holdings and Purchaser may assign all or any of
their rights and obligations hereunder to any affiliate of CRI, provided that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
SECTION 10.04 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Sections 7.06 and 7.07 (which are intended to be for the
benefit of the persons considered thereby and may be enforced by such persons).
SECTION 10.05 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
39
SECTION 10.06 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any Texas state or federal court sitting in Dallas
County, Texas. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any state or federal court sitting in the Dallas County, Texas
for the purpose of any Action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to assert
by way of motion, defense, or otherwise, in any such Action, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the Action
is brought in an inconvenient forum, that the venue of the Action is improper,
or that this Agreement or the Transactions may not be enforced in or by any of
the above- named courts.
SECTION 10.07 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions.
SECTION 10.08 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.09 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more 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 10.10 CRI Guaranty. CRI unconditionally guaranties all of Holdings'
and Purchaser's obligations and agreements under this Agreement.
[Signature Page Follows]
40
IN WITNESS WHEREOF, CRI, Holdings, Purchaser and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
COMSTOCK RESOURCES, INC.
By:/s/M.JAY ALLISON
-----------------
M. Jay Allison, President
COMSTOCK HOLDINGS, INC.
By:/s/M.JAY ALLISON
-----------------
M. Jay Allison, President
COMSTOCK ACQUISITION INC.
By:/s/M.JAY ALLISON
-----------------
M. Jay Allison, President
DEVX ENERGY, INC.
By:/s/JOSEPH T. WILLIAMS
---------------------
Joseph T. Williams, President
41
Annex A
Conditions to the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment any Shares tendered pursuant to the Offer, and
may extend, terminate or amend the Offer, if (i) immediately prior to the
expiration of the Offer, the Minimum Condition shall not have been satisfied, or
(ii) at any time on or after the date of this Agreement and prior to the
expiration of the Offer, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any Action by any
Governmental Authority (i) challenging or seeking to make illegal, delay, or
otherwise, directly or indirectly, restrain or prohibit or make materially more
costly, the making of the Offer, the acceptance for payment of any Shares by
CRI, Holdings, Purchaser or any other affiliate of CRI, or the consummation of
any other Transaction, or seeking to obtain damages in connection with any
Transaction; (ii) seeking to prohibit or limit the ownership or operation by the
Company, CRI or any of their subsidiaries of all or any of the business or
assets of the Company, CRI or any of their subsidiaries or to compel the
Company, CRI or any of their subsidiaries, as a result of the Transactions, to
dispose of or to hold separate all or any portion of the business or assets of
the Company, CRI or any of their subsidiaries; (iii) seeking to impose or
confirm any limitation on the ability of CRI, Holdings, Purchaser or any other
affiliate of CRI to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly presented
to the Company's stockholders, including, without limitation, the approval and
adoption of this Agreement and the Transactions; (iv) seeking to require
divestiture by CRI, Holdings, Purchaser or any other affiliate of CRI of any
Shares; or (v) that otherwise is likely to materially and adversely affect CRI
or have a Material Adverse Effect;
(b) any Governmental Authority or court of competent jurisdiction
shall have issued an order, decree, injunction or ruling or taken any other
action (i) permanently restraining, enjoining or otherwise prohibiting or
preventing the Transactions and such order, decree, injunction, ruling or other
action shall have become final and non-appealable, or (ii) that is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clause (i) through (v) of paragraph (a) above;
(c) there shall have been any statute, rule, regulation, legislation
or interpretation enacted, promulgated, amended, issued or deemed applicable to
(i) CRI, the Company or any subsidiary or affiliate of CRI or the Company or
(ii) any Transaction, by any United States legislative body or Governmental
Authority with appropriate jurisdiction, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(d) (i) the Board, or any committee thereof, shall have withdrawn or
modified, in a manner adverse to CRI, Holdings or Purchaser, the approval or
recommendation of the Offer, the Merger, the Agreement, or approved or
recommended any Acquisition Proposal or any other acquisition of Shares other
than the Offer, the Merger or (ii) the Board, or any committee thereof, shall
have resolved to do any of the foregoing;
Annex A - 1
(e) (i) any representation or warranty of the Company in the Agreement
that is qualified as to Material Adverse Effect shall not be true and correct as
so qualified or (ii) any representation or warranty that is not so qualified
shall not be true and correct (except where the failure to be true and correct
would not have a Material Adverse Effect), in each case as if such
representation or warranty was made as of such time on or after the date of this
Agreement (except as to any representation or warranty made as of a specified
date);
(f) the Company shall have failed to perform, in any material respect,
any obligation or to comply, in any material respect, with any agreement or
covenant of the Company to be performed or complied with by it under the
Agreement; or
(g) the Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of CRI, Purchaser and
Holdings and may be asserted by CRI, Purchaser or Holdings regardless of the
circumstances giving rise to any such condition or may be waived by CRI,
Purchaser or Holdings in whole or in part at any time and from time to time in
their sole discretion. The failure by CRI, Holdings or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
Annex A-2