EFFECT OF
THE MERGER ON THE CAPITAL STOCK OF THE COMPANY AND MERGER SUB; EXCHANGE
3.1
Effect of the Merger on Capital
Stock
. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, or any holder of any securities of Parent, Merger Sub or the Company:
(a)
Capital Stock of Merger Sub
. Each share of capital stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and shall represent one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation, which shall constitute the only outstanding share of common
stock of the Surviving Corporation immediately following the Effective Time.
(b)
Capital Stock of the
Company
.
(i) Subject to the other provisions of this
Article III
, each share of common
stock, par value $0.01 per share, of the Company (
Company Common Stock
), issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares and any shares of Time-Based Restricted Stock and
Performance-Based Restricted Stock, that are not treated as shares of Company Common Stock pursuant to
Section
3.2(a)
and
Section
3.2(b)
, respectively) (such shares of Company Common Stock,
together with any shares of Time-Based Restricted Stock and Performance-Based Restricted Stock which are treated as shares of Company Common Stock pursuant to
Section
3.2(a)
and
Section
3.2(b),
the
Eligible Shares
) shall be converted into the right to receive from Parent that number of fully-paid and nonassessable shares of Parent Common Stock equal to the Exchange Ratio (the
Merger Consideration
). As
used in this Agreement,
Exchange Ratio
means 0.320.
(ii) All such shares of
Company Common Stock, when so converted, shall cease to be outstanding and shall automatically be canceled and cease to exist. Each holder of a share of Company
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Common Stock that was outstanding immediately prior to the Effective Time shall cease to have any rights with respect thereto, except the right to receive (A) the Merger Consideration,
(B) any dividends or other distributions in accordance with
Section
3.3(g)
and (C) any cash to be paid in lieu of any fractional shares of Parent Common Stock in accordance with
Section
3.3(h)
, in each case to be issued or paid in consideration therefor upon the exchange of any Certificates or Book-Entry Shares, as applicable, in accordance with
Section
3.3(a)
.
(iii) All shares of Company Common Stock held by the Company as treasury shares or by Parent or Merger
Sub or by any wholly owned Subsidiary of Parent or Merger Sub immediately prior to the Effective Time and, in each case, not held on behalf of third parties (collectively,
Excluded Shares
) shall automatically be canceled and cease
to exist as of the Effective Time, and no consideration shall be delivered in exchange therefor.
(c)
Impact of
Stock Splits, Etc.
In the event of any change in (i) the number of shares of Company Common Stock, or securities convertible or exchangeable into or exercisable for shares of Company Common Stock or (ii) the number of shares of Parent
Common Stock, or securities convertible or exchangeable into or exercisable for shares of Parent Common Stock (including options to purchase Parent Common Stock), in each case issued and outstanding after the date of this Agreement and prior to the
Effective Time by reason of any stock split, reverse stock split, stock dividend, subdivision, reclassification, recapitalization, combination, exchange of shares or the like, the Exchange Ratio shall be equitably adjusted to reflect the effect of
such change and, as so adjusted, shall from and after the date of such event, be the Merger Consideration, subject to further adjustment in accordance with this
Section
3.1(c)
. Nothing in this
Section
3.1(c)
shall be construed to permit the Parties to take any action except to the extent consistent with, and not otherwise prohibited by, the terms of this Agreement.
3.2
Treatment of Equity Compensation Awards
.
(a)
Time-Based Restricted Stock
. Immediately prior to the Effective Time, each outstanding award of restricted
Company Common Stock subject only to time-based vesting (the
Time-Based Restricted Stock
) granted pursuant to the Companys 2014 Long Term Incentive Plan, as amended from time to time (the
Company Stock
Plan
), shall immediately vest in full and any forfeiture restrictions applicable to such Time-Based Restricted Stock shall lapse immediately and, by virtue of the Merger and without any action on the part of the holder thereof, each share
of Time-Based Restricted Stock shall be treated as a share a share of Company Common Stock for all purposes of this Agreement, including the right to receive the Merger Consideration in accordance with the terms hereof, less applicable Taxes
required to be withheld with respect to such vesting.
(b)
Performance-Based Restricted Stock
. Immediately
prior to the Effective Time, each outstanding award of restricted Company Common Stock subject to performance-based vesting (the
Performance-Based Restricted Stock
) granted pursuant to the Company Stock Plan shall (i) be
deemed to have satisfied any applicable continued service or time-based vesting requirements and (ii) have the performance period end. The Companys performance with respect to the performance goal(s) applicable to such Performance-Based
Restricted Stock shall be calculated based on actual performance through the Effective Time, as reasonably determined by the Compensation Committee of the Company Board in order to determine the number of shares of Performance-Based Restricted Stock
that vest (the
Earned Performance-Based Restricted Stock
) and any forfeiture restrictions applicable to such Earned Performance-Based Restricted Stock shall lapse immediately prior to the Effective Time and, without any action on
the part of the holder thereof, each share of Earned Performance-Based Restricted Stock shall be treated as a share of Company Common Stock for all purposes of this Agreement, including the right to receive the Merger Consideration in accordance
with the terms hereof, less applicable Taxes required to be withheld with respect to such vesting. The Company Board shall provide Parent with an estimate of the number of shares of Earned Performance-Based Restricted Stock that will vest pursuant
to this
Section
3.2(b)
at least three Business Days prior to the Effective Time.
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(c) Prior to the Effective Time, the Company Board and/or the Compensation
Committee of the Company Board shall take such action and adopt such resolutions as are required to (i) effectuate the treatment of the Time-Based Restricted Stock and the Performance-Based Restricted Stock pursuant to the terms of this
Section
3.2
, (ii) if requested by Parent in writing, cause the Company Stock Plan to terminate at or prior to the Effective Time and (iii) take all actions reasonably required to effectuate any provision of this
Section
3.2
, including to
ensure that from and after the Effective Time neither Parent nor the Surviving Corporation will be required to deliver shares of Company Common Stock or other capital stock of the Company to
any Person pursuant to or in settlement of any equity awards of the Company, including any Time-Based Restricted Stock or Performance-Based Restricted Stock;
provided, however
, that nothing in this
Section
3.2(c)
shall prohibit the settlement of an award of Performance-Based Restricted Stock after the Closing Date pursuant to the terms of such award.
3.3
Payment for Securities; Exchange
.
(a)
Exchange Agent; Exchange Fund
. Prior to the Effective Time, Parent shall enter into an agreement with the
Companys transfer agent to act as agent for the holders of Company Common Stock in connection with the Merger (the
Exchange Agent
) and to receive the Merger Consideration and cash sufficient to pay cash in lieu of fractional
shares, pursuant to
Section
3.3(h)
to which such holders shall become entitled pursuant to this
Article III
. Promptly after the Effective Time, Parent shall deposit, or cause to be deposited, with the Exchange Agent,
for the benefit of the holders of Eligible Shares, for issuance in accordance with this
Article III
through the Exchange Agent, the number of shares of Parent Common Stock issuable to in respect of Eligible Shares pursuant to
Section
3.1
. Parent agrees to make available to the Exchange Agent, from time to time as needed, cash sufficient to pay any dividends and other distributions pursuant to
Section
3.3(g)
and to make
payments in lieu of fractional shares pursuant to
Section
3.3(h)
. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be issued in exchange for Eligible Shares
pursuant to this Agreement out of the Exchange Fund. Except as contemplated by this
Section
3.3(a)
and
Sections
3.3(g)
and
3.3(h)
, the Exchange Fund shall not be used for any other purpose. Any cash and
shares of Parent Common Stock deposited with the Exchange Agent (including as payment for fractional shares in accordance with
Section
3.3(h)
and any dividends or other distributions in accordance with
Section
3.3(g)
) shall hereinafter be referred to as the
Exchange Fund
. Parent or the Surviving Corporation shall pay all charges and expenses, including those of the Exchange Agent, in connection with the
exchange of Eligible Shares pursuant to this Agreement. The cash portion of the Exchange Fund may be invested by the Exchange Agent as reasonably directed by Parent. To the extent, for any reason, the amount in the Exchange Fund is below that
required to make prompt payment of the aggregate cash payments contemplated by this
Article
III
, Parent shall promptly replace, restore or supplement the cash in the Exchange Fund so as to ensure that the Exchange Fund is
at all times maintained at a level sufficient for the Exchange Agent to make the payment of the aggregate cash payments contemplated by this
Article
III
. Any interest or other income resulting from investment of the cash
portion of the Exchange Fund shall become part of the Exchange Fund, and any amounts in excess of the amounts payable hereunder shall, at the discretion of Parent, be promptly returned to Parent or the Surviving Corporation.
(b)
Payment Procedures
.
(i)
Certificates
. As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to deliver to each record holder, as of immediately prior to the Effective Time, of an outstanding certificate or certificates that immediately prior to the Effective Time represented Eligible Shares (
Certificates
),
a notice advising such holders of the effectiveness of the Merger and a letter of transmittal (
Letter of Transmittal
) (which shall specify that delivery shall be effected, and risk of loss and title to Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent, and which shall be in a customary form and agreed to by Parent and the Company prior to the Closing) and instructions for use in effecting the surrender of Certificates for payment
of the Merger Consideration set forth in
Section
3.1(b)(
i
)
Upon surrender to the Exchange Agent of a Certificate, together with the Letter of
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Transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other customary documents as may be reasonably required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor (A) one or more shares of Parent Common Stock (which shall be in uncertificated book-entry form) representing, in the aggregate, the whole number of shares of Parent Common
Stock, if any, that such holder has the right to receive pursuant to
Section
3.1
(after taking into account all shares of Company Common Stock then held by such holder) and (B) a check in the amount equal to the cash
payable in lieu of any fractional shares of Parent Common Stock pursuant to
Section
3.3(h)
and dividends and other distributions pursuant to
Section
3.3(g)
.
(ii)
Non-DTC
Book-Entry Shares
. As soon as practicable
after the Effective Time, Parent shall cause the Exchange Agent to deliver to each record holder, as of immediately prior to the Effective Time, of Eligible Shares represented by book-entry (
Book-Entry Shares
) not held through
DTC, (A) a notice advising such holders of the effectiveness of the Merger, (B) a statement reflecting the number of shares of Parent Common Stock (which shall be in uncertificated book-entry form) representing, in the aggregate, the whole
number of shares of Parent Common Stock, if any, that such holder has the right to receive pursuant to
Section
3.1
(after taking into account all shares of Company Common Stock then held by such holder) and (C) a check
in the amount equal to the cash payable in lieu of any fractional shares of Parent Common Stock pursuant to
Section
3.3(h)
and dividends and other distributions pursuant to
Section
3.3(g)
.
(iii)
DTC Book-Entry Shares
. With respect to Book-Entry Shares held through DTC, Parent and the
Company shall cooperate to establish procedures with the Exchange Agent and DTC to ensure that the Exchange Agent will transmit to DTC or its nominees as soon as reasonably practicable on or after the Closing Date, upon surrender of Eligible Shares
held of record by DTC or its nominees in accordance with DTCs customary surrender procedures, the Merger Consideration, cash in lieu of fractional shares of Parent Common Stock, if any, and any unpaid
non-stock
dividends and any other dividends or other distributions, in each case, that DTC has the right to receive pursuant to this
Article III
.
(iv) No interest shall be paid or accrued on any amount payable for Eligible Shares pursuant to this
Article III
.
(v) With respect to Certificates, if payment of the Merger Consideration
(including any dividends or other distributions with respect to Parent Common Stock pursuant to
Section
3.3(g)
and any cash in lieu of fractional shares of Parent Common Stock pursuant to
Section
3.3(h)
) is to be made to a Person other than the record holder of such Eligible Shares, it shall be a condition of payment that shares so surrendered shall be properly endorsed or shall be otherwise in proper form
for transfer and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such shares surrendered or shall have
established to the satisfaction of the Surviving Corporation that such Taxes either have been paid or are not applicable. With respect to
Book-Entry
Shares, payment of the Merger Consideration (including any
dividends or other distributions with respect to Parent Common Stock pursuant to
Section
3.3(g)
and any cash in lieu of fractional shares of Parent Common Stock pursuant to
Section
3.3(h)
) shall
only be made to the Person in whose name such Book-Entry Shares are registered in the stock transfer books of the Company as of the Effective Time. Until surrendered as contemplated by this
Section
3.3(b
)(
v)
,
each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration payable in respect of such shares of Company Common Stock, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section
3.3(h)
and any dividends or other distributions to which such holder is entitled pursuant to
Section
3.3(g)
.
(c)
Termination of Rights
. All Merger Consideration (including any dividends or other distributions with respect
to Parent Common Stock pursuant to
Section
3.3(g)
and any cash in lieu of fractional shares of Parent Common Stock pursuant to
Section
3.3(h)
) paid upon the surrender of and in exchange for
Eligible Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Common Stock. At the Effective Time, the stock transfer books of the Surviving Corporation
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shall be closed immediately, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged for the Merger Consideration payable in respect of the
Eligible Shares previously represented by such Certificates, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to
Section
3.3(h)
and any dividends or other
distributions to which the holders thereof are entitled pursuant to
Section
3.3(g)
, without any interest thereon.
(d)
Termination of Exchange Fund
. Any portion of the Exchange Fund that remains undistributed to the former
stockholders of the Company on the 180
th
day after the Closing Date shall be delivered to Parent, upon demand, and any former common stockholders of the Company who have not theretofore received
the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to
Section
3.3(h)
and any dividends or other distributions with respect to Parent Common Stock to
which they are entitled pursuant to
Section
3.3(g)
, in each case without interest thereon, to which they are entitled under this
Article III
shall thereafter look only to the Surviving Corporation and Parent for
payment of their claim for such amounts.
(e)
No Liability
. None of the Surviving Corporation, Parent,
Merger Sub or the Exchange Agent shall be liable to any holder of Company Common Stock for any amount of Merger Consideration properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any
Certificate has not been surrendered prior to the time that is immediately prior to the time at which Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity, any such shares,
cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.
(f)
Lost, Stolen, or Destroyed Certificates
. If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect
of the shares of Company Common Stock formerly represented by such Certificate, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to
Section
3.3(h)
and any
dividends or other distributions to which the holders thereof are entitled pursuant to
Section
3.3(g)
.
(g)
Distributions with Respect to
Unexchanged
Shares of Parent Common Stock
. No dividends or other
distributions declared or made with respect to shares of Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the whole shares of Parent Common Stock that such
holder would be entitled to receive upon surrender of such Certificate and no cash payment in lieu of fractional shares of Parent Common Stock shall be paid to any such holder, in each case until such holder shall surrender such Certificate in
accordance with this
Section
3.3
. Following surrender of any such Certificate, there shall be paid to such holder of whole shares of Parent Common Stock issuable in exchange therefor, without interest, (i) promptly
after the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock. For purposes of
dividends or other distributions in respect of shares of Parent Common Stock, all whole shares of Parent Common Stock to be issued pursuant to the Merger shall be entitled to dividends pursuant to the immediately preceding sentence as if such whole
shares of Parent Common Stock were issued and outstanding as of the Effective Time.
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(h)
No Fractional Shares of Parent Common Stock
. No certificates or
scrip or shares representing fractional shares of Parent Common Stock shall be issued upon the exchange of Eligible Shares and such fractional share interests will not entitle the owner thereof to vote or to have any rights of a stockholder of
Parent or a holder of shares of Parent Common Stock. Notwithstanding any other provision of this Agreement, each holder of Eligible Shares exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates and Book-Entry Shares held by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to the product of (i) such fractional part of a share of
Parent Common Stock multiplied by (ii) the volume weighted average price of Parent Common Stock for the five consecutive trading days immediately prior to the Closing Date as reported by Bloomberg, L.P. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional interests, the Exchange Agent shall so notify Parent, and Parent shall cause the Exchange Agent to forward payments to such holders of fractional interests subject to
and in accordance with the terms hereof. The payment of cash in lieu of fractional shares of Parent Common Stock is not a separately
bargained-for
consideration but merely represents a mechanical
rounding-off
of the fractions in the exchange.
(i)
Withholding Taxes
.
Notwithstanding anything in this Agreement to the contrary, Parent, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from any amounts otherwise payable to any holder of Company Common Stock pursuant to this
Agreement any amount required to be deducted and withheld with respect to the making of such payment under applicable Law. To the extent such amounts are so properly deducted or withheld and paid over to the relevant Taxing Authority by the Exchange
Agent, the Surviving Corporation or Parent, as the case may be, such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Common Stock to whom such amounts would have been
paid absent such deduction or withholding by the Exchange Agent, the Surviving Corporation or Parent, as the case may be.
3.4
No Dissenters Rights
. No dissenters or appraisal rights shall be available with respect to the
Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter dated as of the date of this Agreement and delivered by the Company to Parent and Merger Sub on
or prior to the date of this Agreement (the
Company Disclosure Letter
) and except as disclosed in the Company SEC Documents (including all exhibits and schedules thereto and documents incorporated by reference therein) filed with
or furnished to the SEC and available on Edgar since December 31, 2016 and prior to the date of this Agreement (excluding any disclosures set forth or referenced in any risk factor section or in any other section, in each case, to the extent
they are forward-looking statements or cautionary, predictive,
non-specific
or forward-looking in nature), the Company represents and warrants to Parent and Merger Sub as follows:
4.1
Organization, Standing and Power
. Each of the Company and its Subsidiaries is a corporation, partnership or
limited liability company duly organized, as the case may be, validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization, with all requisite entity power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, other than, in the case of the Companys Subsidiaries, where the failure to be so organized or to have such power, authority or standing would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company (a
Company Material Adverse Effect
). Each of the Company and its Subsidiaries is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification or license necessary, other than where the failure to so qualify, license or be in good standing would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has heretofore made available to Parent
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complete and correct copies of its Organizational Documents and the Organizational Documents of RSP Permian LLC, each as amended prior to the execution of this Agreement, and each as made
available to Parent is in full force and effect, and neither the Company nor any of its Subsidiaries is in violation of any of the provisions of such Organizational Documents.
4.2
Capital Structure
.
(a) As of the date of this Agreement, the authorized capital stock of the Company consists of (i) 300,000,000 shares of
Company Common Stock and (ii) 15,000,000 shares of preferred stock, par value $0.01 per share (
Company Preferred Stock
and, together with the Company Common Stock, the
Company Capital Stock
). At the close of
business on March 27, 2018: (A) 159,424,290 shares of Company Common Stock were issued and outstanding and no shares of Company Preferred Stock were issued and outstanding; (B) The shares of Company Common Stock issued and outstanding include
805,318 shares of Time-Based Restricted Stock and 1,353,792 shares of Performance-Based Restricted Stock; and (C) 6,131,161 shares of Company Common Stock remained available for issuance pursuant to the Company Stock Plan.
(b) All outstanding shares of Company Common Stock have been duly authorized and are validly issued, fully paid and
non-assessable
and are not subject to preemptive rights. All outstanding shares of Company Common Stock have been issued and granted in compliance in all material respects with (i) applicable securities Laws
and other applicable Law and (ii) all requirements set forth in applicable contracts (including the Company Stock Plan). As of the close of business on March 27, 2018, except as set forth in this
Section
4.2
,
there are no outstanding options, warrants or other rights to subscribe for, purchase or acquire from the Company or any of its Subsidiaries any capital stock of the Company or securities convertible into or exchangeable or exercisable for capital
stock of the Company (and the exercise, conversion, purchase, exchange or other similar price thereof). All outstanding shares of capital stock or other equity interests of the Subsidiaries of the Company are owned by the Company, or a direct or
indirect wholly-owned Subsidiary of the Company, are free and clear of all Encumbrances and have been duly authorized, validly issued, fully paid and nonassessable. Except as set forth in this
Section
4.2
, and except for
stock grants or other awards granted in accordance with
Section
6.1(b)(ii)
, there are outstanding: (A) no shares of Company Capital Stock, Voting Debt or other voting securities of the Company, (B) no securities
of the Company or any Subsidiary of the Company convertible into or exchangeable or exercisable for shares of Company Capital Stock, Voting Debt or other voting securities of the Company and (C) no options, warrants, subscriptions, calls,
rights (including preemptive and appreciation rights), commitments or agreements to which the Company or any Subsidiary of the Company is a party or by which it is bound in any case obligating the Company or any Subsidiary of the Company to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional shares of Company Capital Stock or any Voting Debt or other voting securities of the Company, or obligating the Company
or any Subsidiary of the Company to grant, extend or enter into any such option, warrant, subscription, call, right, commitment or agreement. Other than the Stockholders Agreement, there are not any stockholder agreements, voting trusts or
other agreements to which the Company or any of its Subsidiaries is a party or by which it is bound relating to the voting of any shares of capital stock or other equity interest of the Company or any of its Subsidiaries. No Subsidiary of the
Company owns any shares of Company Capital Stock. As of the date of this Agreement, neither the Company nor any of its Subsidiaries has any (1) interests in a material joint venture or, directly or indirectly, equity securities or other similar
equity interests in any Person or (2) obligations, whether contingent or otherwise, to consummate any material additional investment in any Person other than its Subsidiaries and its joint ventures listed on
Schedule 4.2
of the Company
Disclosure Letter.
4.3
Authority; No Violations; Consents and Approvals
.
(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly authorized by all necessary corporate action on the part of the Company, subject, only with
respect to consummation of the Merger, to the
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Company Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due and valid execution of this Agreement by Parent and Merger Sub, constitutes
a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability relating to or
affecting creditors rights and to general principles of equity regardless of whether such enforceability is considered in a Proceeding in equity or at law (collectively,
Creditors
Rights
). The Company
Board, at a meeting duly called and held, has by unanimous vote (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company and holders of Company
Common Stock, (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend that the holders of Company Common Stock vote in favor of the adoption of
this Agreement and the Transactions, including the Merger (such recommendation described in
clause (iii)
, the
Company Board Recommendation
). The Company Stockholder Approval is the only vote of the holders of any class or
series of the Company Capital Stock necessary to approve and adopt this Agreement and the Merger.
(b) The
execution, delivery and performance of this Agreement does not, and the consummation of the Transactions will not (with or without notice or lapse of time, or both) (i) contravene, conflict with or result in a violation of any provision of the
Organizational Documents of the Company (assuming that the Company Stockholder Approval is obtained) or any of its Subsidiaries, (ii) with or without notice, lapse of time or both, result in a violation of, a termination (or right of
termination) of or default under, the creation or acceleration of any obligation or the loss of a benefit under, or result in the creation of any Encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under, any
provision of any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, permit, franchise or license to which the Company or any of its Subsidiaries is a party or by which it or any of its Subsidiaries or its or their
respective properties or assets are bound, or (iii) assuming the Consents referred to in
Section
4.4
are duly and timely obtained or made and the Company Stockholder Approval has been obtained, contravene, conflict
with or result in a violation of any Law applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such contraventions, conflicts, violations,
defaults, acceleration, losses, or Encumbrances that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is not party to any contract, arrangement or other commitment that would
or would reasonably be expected to entitle any Person to appoint one or more directors to the Parent Board.
4.4
Consents
. No Consent from any Governmental Entity, is required to be obtained or made by the Company or any
of its Subsidiaries in connection with the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the Transactions, except for: (a) the filing of a premerger notification report by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
HSR Act
), and the expiration or termination of the applicable waiting period with respect thereto; (b) the filing with the SEC of (i) a joint proxy
statement in preliminary and definitive form (the
Joint Proxy Statement
) relating to the meeting of the stockholders of the Company to consider the adoption of this Agreement (including any postponement, adjournment or recess
thereof, the
Company Stockholders Meeting
) and the Parent Stockholders Meeting and (ii) such reports under Section 13(a) of the Exchange Act, and such other compliance with the Exchange Act and the rules and regulations
thereunder, as may be required in connection with this Agreement and the Transactions; (c) the filing of the Certificate of Merger with the Office of the Secretary of State of the State of Delaware; (d) filings with the NYSE; (e) such
filings and approvals as may be required by any applicable state securities or blue sky laws or Takeover Laws; and (f) any such Consent that the failure to obtain or make would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
4.5
SEC Documents; Financial Statements
.
(a) Since December 31, 2016 (the
Applicable Date
), the Company has filed or furnished with the
SEC, on a timely basis, all forms, reports, certifications, schedules, statements and documents required to be filed
A-12
or furnished under the Securities Act or the Exchange Act, respectively, (such forms, reports, certifications, schedules, statements and documents, collectively, the
Company SEC
Documents
). As of their respective dates, each of the Company SEC Documents, as amended, complied, or if not yet filed or furnished, will comply as to form in all material respects with the applicable requirements of the Securities Act,
the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained, when filed or, if amended prior to the
date of this Agreement, as of the date of such amendment with respect to those disclosures that are amended, or if filed with or furnished to the SEC subsequent to the date of this Agreement, will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company SEC Documents, including all notes and schedules
thereto, complied, or, in the case of Company SEC Documents filed after the date of this Agreement, will comply in all material respects, when filed or if amended prior to the date of this Agreement, as of the date of such amendment, with the rules
and regulations of the SEC with respect thereto, were, or, in the case of Company SEC Documents filed after the date of this Agreement, will be prepared in accordance with generally accepted accounting principles in the United States
(
GAAP
) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01
of
Regulation
S-X
of the SEC) and fairly present in all material respects in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal
year-end
audit adjustments) the financial position of the Company and its consolidated Subsidiaries, as of their respective dates and the results of operations and the cash flows of the Company and its consolidated
Subsidiaries for the periods presented therein.
4.6
Absence of Certain Changes or Events
.
(a) Since December 31, 2017, there has not been any Company Material Adverse Effect or any event, change, effect or
development that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
(b) From December 31, 2017 through the date of this Agreement:
(i) the Company and its Subsidiaries have conducted their business in the ordinary course of business in
all material respects;
(ii) there has not been any material damage, destruction or other casualty
loss with respect to any material asset or property owned, leased or otherwise used by the Company or any of its Subsidiaries, including the Oil and Gas Properties of the Company and its Subsidiaries, whether or not covered by insurance; and
(iii) neither the Company nor any of its Subsidiaries has taken, or agreed, committed, arranged,
authorized or entered into any understanding to take, any action that, if taken after the date of this Agreement, would (without Parents prior written consent) have constituted a breach of any of the covenants set forth in
Sections
6.1(b)(
i
)
,
(v)
,
(vi)
,
(vii)
,
(viii)
,
(viii)
,
(xii)
,
(xiv)
or
(xvii)
(solely as it relates to the foregoing
Sections
6.1(b)(
i
)
,
(v)
,
(vi)
,
(vii)
,
(viii)
,
(viii)
,
(xii)
or
(xiv)
).
4.7
No Undisclosed Material Liabilities
. There are no liabilities of the Company or any of its Subsidiaries of
any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (a) liabilities adequately provided for on the balance sheet of the Company dated as of December 31, 2017 (including the notes
thereto) contained in the Companys Annual Report on Form
10-K
for the twelve-months ended December 31, 2017; (b) liabilities incurred in the ordinary course of business subsequent to
December 31, 2017; (c) liabilities incurred in connection with the Transactions; (d) liabilities incurred as permitted under
Section
6.1(b)(x)
and (e) liabilities that would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
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4.8
Information Supplied
. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (a) the registration statement on Form
S-4
to be filed with the SEC by Parent pursuant to which shares of Parent Common Stock
issuable in the Merger will be registered with the SEC (including any amendments or supplements, the
Registration Statement
) shall, at the time the Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or (b) the Joint
Proxy Statement will, at the date it is first mailed to stockholders of the Company and to stockholders of Parent and at the time of the Company Stockholders Meeting and the Parent Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Subject to the accuracy of the first sentence of
Section
5.7
, the Joint Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder;
provided
,
however
, that no
representation is made by the Company with respect to statements made therein based on information supplied by Parent or Merger Sub specifically for inclusion or incorporation by reference therein.
4.9
Company Permits; Compliance with Applicable Law
.
(a) The Company and its Subsidiaries hold and at all times since the Applicable Date held all permits, licenses,
certifications, registrations, consents, authorizations, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary to own, lease and operate their respective properties and assets and for the lawful conduct of
their respective businesses as they were or are now being conducted, as applicable (collectively, the
Company Permits
), and have paid all fees and assessments due and payable in connection therewith, except where the failure to so
hold or make such a payment would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All Company Permits are in full force and effect and no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, and the Company and its Subsidiaries are in compliance with the terms of the Company Permits, except where the failure to be in full force and effect or failure to so comply would
not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) The
businesses of the Company and its Subsidiaries are not currently being conducted, and at no time since the Applicable Date have been conducted, in violation of any applicable Law, except for violations that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. To the knowledge of the Company, no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or threatened, other than
those the outcome of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
4.10
Compensation; Benefits
.
(a) Set forth on
Schedule
4.10(a)
of the Company Disclosure Letter is a list, as of the date hereof, of
all of the material Company Plans.
(b) True, correct and complete copies of each of the material Company Plans and
related trust documents and favorable determination letters, if applicable, have been furnished or made available to Parent or its Representatives, along with the most recent report filed on Form 5500 and summary plan description with respect to
each Company Plan required to file a Form 5500, and all material correspondence to or from any Governmental Entity received in the last two years.
(c) Each Company Plan has been maintained in compliance with all applicable Laws, including ERISA and the Code, except
where the failure to so comply would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
A-14
(d) As of the date of this Agreement, there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the knowledge of the Company, threatened against, or with respect to, any of the Company Plans, and there are no Proceedings by a Governmental Entity with respect to any of the Company
Plans, except for such pending actions, suits, claims or Proceedings that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(e) All material contributions required to be made by the Company to the Company Plans pursuant to their terms have
been timely made.
(f) There are no material unfunded benefit obligations that have not been properly accrued for
in the Companys financial statements, and all contributions or other amounts payable by the Company or any of its Subsidiaries with respect to each Company Plan in respect of current or prior plan years have been paid or accrued in accordance
with GAAP.
(g) Each ERISA Plan that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and, to the knowledge of the Company, nothing has occurred that would adversely affect the qualification or tax exemption of any such Company Plan that
could give rise to any material liability. With respect to any ERISA Plan, neither the Company nor any of its Subsidiaries has engaged in a transaction in connection with which the Company or any of its Subsidiaries reasonably could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code in an amount that could be material.
(h) None of the Company or any member of its Aggregated Group contributes to or has an obligation to contribute to, and
no Company Plan is, a plan subject to Title IV of ERISA (including a multiemployer plan within the meaning of Section 3(37) of ERISA), Section 302 of ERISA, or Section 412 of the Code.
(i) Except as required by applicable Law, no Company Plan provides retiree or post-employment medical, disability, life
insurance or other welfare benefits to any Person, and none of the Company or any of its Subsidiaries has any obligation to provide such benefits.
(j) Except as set forth on
Schedule 4.10(j)
of the Company Disclosure Letter or pursuant to the terms of
Schedule 6.9(a)
of the Parent Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the Transactions could, either alone or in combination with another event, (i) entitle any Company Employee to
severance pay or any material increase in severance pay, (ii) accelerate the time of payment or vesting, or materially increase the amount of compensation due to any such Company Employee, (iii) directly or indirectly cause the Company to
transfer or set aside any material amount of assets to fund any material benefits under any Company Plan, (iv) otherwise give rise to any material liability under any Company Plan or (v) limit or restrict the right to materially amend,
terminate or transfer the assets of any Company Plan on or following the Effective Time.
(k) Neither the Company
nor any Subsidiary has any obligation to provide, and no Company Plan or other agreement provides any individual with the right to, a gross up, indemnification, reimbursement or other payment for any excise or additional taxes, interest or penalties
incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any payment to be deductible under Section 280G of the Code.
(l) No Company Plan is maintained outside the jurisdiction of the United States or covers any Company Employees who
reside or work outside of the United States.
4.11
Labor Matters
.
(a) As of the date of this Agreement, (i) neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other agreement with any labor union, (ii) there is no pending union
A-15
representation petition involving employees of the Company or any of its Subsidiaries, and (iii) the Company does not have knowledge of any activity or Proceeding of any labor organization
(or representative thereof) or employee group (or representative thereof) to organize any such employees.
(b) As
of the date of this Agreement, there is no unfair labor practice, charge or grievance arising out of a collective bargaining agreement, other agreement with any labor union, or other labor-related grievance Proceeding against the Company or any of
its Subsidiaries pending, or, to the knowledge of the Company, threatened, other than such matters that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) As of the date of this Agreement, there is no strike, dispute, slowdown, work stoppage or lockout pending, or, to
the knowledge of the Company, threatened, against or involving the Company or any of its Subsidiaries, other than such matters that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) The Company and its Subsidiaries are, and since January 1, 2017 have been, in compliance in all material
respects with all applicable Laws respecting employment and employment practices, and there are no Proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, by or on behalf of any applicant
for employment, any current or former employee or any class of the foregoing, relating to any of the foregoing applicable Laws, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any
other discriminatory, wrongful or tortious conduct in connection with the employment relationship, other than any such matters described in this sentence that would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Since January 1, 2017, neither the Company nor any of its Subsidiaries has received any written notice of the intent of the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of
Labor or any other Governmental Entity responsible for the enforcement of labor or employment Laws to conduct an investigation with respect to the Company or any of its Subsidiaries which would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
4.12
Taxes
.
(a) All material Tax Returns required to be filed (taking into account extensions of time for filing) by the Company or
any of its Subsidiaries have been filed and all such filed Tax Returns are complete and accurate in all material respects. All material Taxes that are due and payable by the Company or any of its Subsidiaries (other than Taxes being contested in
good faith by appropriate Proceedings and for which adequate reserves have been established in accordance with GAAP) have been paid in full. All material withholding Tax requirements imposed on or with respect to the Company or any of its
Subsidiaries have been satisfied in full, and the Company and its Subsidiaries have complied in all material respects with all information reporting (and related withholding) and record retention requirements.
(b) There is not in force any waiver or agreement for any extension of time for the assessment or payment of any
material Tax by the Company or any of its Subsidiaries.
(c) There is no outstanding material claim, assessment or
deficiency against the Company or any of its Subsidiaries for any Taxes that has been asserted in writing by any Governmental Entity. There are no proceedings pending or, to the knowledge of the Company, threatened regarding any material Taxes of
the Company and its Subsidiaries or the assets of the Company and its Subsidiaries.
(d) Neither the Company nor
any of its Subsidiaries is a party to any material Tax allocation, sharing or indemnity contract or arrangement (not including, for the avoidance of doubt (i) an agreement or arrangement solely among the members of a group the common parent of
which is the Company or any of its Subsidiaries, or (ii) any Tax sharing or indemnification provisions contained in any agreement entered into in the ordinary course
A-16
of business and not primarily relating to Tax (e.g., leases, credit agreements or other commercial agreements)). Neither the Company nor any of its Subsidiaries has any material liability for
Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations
§ 1.1502-6
(or any similar provision of state, local or foreign Law) or as a transferee or
successor.
(e) Neither the Company nor any of its Subsidiaries has participated, or is currently participating, in
a listed transaction, as defined in Treasury Regulations
§ 1.6011-4(b)(2).
(f) Neither the Company nor any of its Subsidiaries has constituted a distributing corporation or a
controlled corporation in a distribution of stock intended to qualify for
tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or
(ii) as part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) in conjunction with the Transactions.
(g) No written claim has been made by any Taxing Authority in a jurisdiction where the Company or any of its
Subsidiaries does not currently file a Tax Return that it is or may be subject to any material Tax in such jurisdiction, nor has any such assertion been threatened or proposed in writing and received by the Company or any of its Subsidiaries.
(h) The Company has made available to Parent complete and correct copies of any private letter ruling requests, closing
agreements or gain recognition agreements with respect to Taxes which has been requested or will remain in effect as of the Closing.
(i) There are no Encumbrances for material Taxes on any of the assets of the Company or any of its Subsidiaries, except
for Permitted Encumbrances.
(j) Neither the Company nor any of its Subsidiaries will be required to include any
material item of income in, or to exclude any material item of deduction from, taxable income in any taxable period (or portion thereof) ending after the Closing Date as a result of any closing agreement, installment sale or open transaction on or
prior to the Closing Date, any accounting method change or agreement with any Taxing Authority, any prepaid amount received on or prior to the Closing Date, any intercompany transaction or excess loss account described in Section 1502 of the
Code (or any corresponding provision of Law with respect to Taxes), or any election pursuant to Section 108(i) of the Code (or any similar provision of Law) made with respect to any taxable period ending on or prior to the Closing Date.
(k) Neither the Company nor any of its Subsidiaries is a U.S. shareholder (within the meaning of
Section 951(b) of the Code) of any foreign corporation which may be required to include in income any amounts under Section 951(a) of the Code.
(l) After reasonable diligence, neither the Company nor any of its Subsidiaries is aware of the existence of any fact,
or has taken or agreed to take any action, that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(m) The Company is, and has been since formation, properly classified for United States federal income tax purposes as
a corporation.
4.13
Litigation
. Except for such matters as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, there is no (a) Proceeding pending, or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their Oil and Gas Properties or
(b) judgment, decree, injunction, ruling, order, writ, stipulation, determination or award of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries.
A-17
4.14
Intellectual Property
.
(a) The Company and its Subsidiaries own or have the right to use all Intellectual Property used in or necessary for the
operation of the businesses of each of the Company and its Subsidiaries as presently conducted (collectively, the
Company Intellectual Property
) free and clear of all Encumbrances except for Permitted Encumbrances, except where
the failure to own or have the right to use such properties has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) To the knowledge of the Company, the use of the Company Intellectual Property by the Company and its Subsidiaries
in the operation of the business of each of the Company and its Subsidiaries as presently conducted does not infringe, misappropriate or otherwise violate any Intellectual Property of any other Person, except for such matters that have not had and
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) The Company and its Subsidiaries have taken reasonable measures consistent with prudent industry practices to
protect the confidentiality of trade secrets used in the businesses of each of the Company and its Subsidiaries as presently conducted, except where failure to do so has not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) Except as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, the IT Assets owned, used, or held for use by the Company or any of its Subsidiaries (i) are sufficient for the current needs of the businesses of the Company and its
Subsidiaries; (ii) have not malfunctioned or failed within the past three years and (iii) to the knowledge of the Company, are free from any malicious code.
(e) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect (i) the Company and each of its Subsidiaries have used commercially reasonable measures to ensure the confidentiality, privacy and security of Personal Information collected or held for use by the Company or its
Subsidiaries; and (ii) to the knowledge of the Company, there has been no unauthorized access to or unauthorized use of any IT Assets, Personal Information or trade secrets owned or held for use by the Company or its Subsidiaries
.
4.15
Real Property
. Except as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect and with respect to
clauses (a)
and
(b)
, except with respect to any of the Companys Oil and Gas Properties, (a) the Company and its Subsidiaries have good, valid and defensible title to
all material real property owned by the Company or any of its Subsidiaries (collectively, the
Company Owned Real Property
) and valid leasehold estates in all material real property leased, subleased, licensed or otherwise occupied
(whether as tenant, subtenant or pursuant to other occupancy arrangements) by the Company or any Subsidiary of the Company (collectively, including the improvements thereon, the
Company Material Leased Real Property
) free and
clear of all Encumbrances and defects and imperfections, except Permitted Encumbrances, (b) each agreement under which the Company or any Subsidiary of the Company is the landlord, sublandlord, tenant, subtenant, or occupant with respect to the
Company Material Leased Real Property (each, a
Company Material Real Property Lease
) to the knowledge of the Company is in full force and effect and is valid and enforceable against the parties thereto in accordance with its
terms, subject, as to enforceability, to Creditors Rights, and neither the Company nor any of its Subsidiaries, or to the knowledge of the Company, any other party thereto, has received written notice of any default under any Company Material
Real Property Lease, and (c) as of the date of this Agreement, there does not exist any pending or, to the knowledge of the Company, threatened, condemnation or eminent domain Proceedings that affect any of the Companys Oil and Gas
Properties, Company Owned Real Property or Company Material Leased Real Property.
4.16
Rights-of-Way
. Each of the Company and its Subsidiaries has such Consents, easements,
rights-of-way,
permits and licenses from each Person (collectively
Rights-of-Way
) as are sufficient to conduct
A-18
its business in the manner described, except for such
Rights-of-Way
the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect. Each of the Company and its Subsidiaries has fulfilled and performed all its material obligations with respect to such
Rights-of-Way
and conduct their business in a manner that does not violate any of the
Rights-of-Way
and no event has occurred
that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such
Rights-of-Way,
except for such revocations, terminations and impairments that would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All pipelines operated by the Company and its Subsidiaries are subject to
Rights-of-Way
or are located on real property owned or leased by the
Company, and there are no gaps (including any gap arising as a result of any breach by the Company or any of its Subsidiaries of the terms of any
Rights-of-Way)
in the
Rights-of-Way
other than gaps that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
4.17
Oil and Gas Matters
.
(a) Except as would not reasonably be expected to have a Company Material Adverse Effect, and except for property
(i) sold or otherwise disposed of in the ordinary course of business since the date of the reserve report prepared by Netherland, Sewell & Associates, Inc. (the
Company Independent Petroleum Engineers
) relating to
the Company interests referred to therein as of December 31, 2017 (the
Company
Reserve Report
) or (ii) reflected in the Company Reserve Report or in the Company SEC Documents as having been sold or otherwise
disposed of (other than sales or dispositions after the date hereof in accordance with
Section
6.1(b)(v)
), the Company and its Subsidiaries have good and defensible title to all Oil and Gas Properties forming the basis for
the reserves reflected in the Company Reserve Report and in each case as attributable to interests owned by the Company and its Subsidiaries, free and clear of any Encumbrances, except for Permitted Encumbrances. For purposes of the foregoing
sentence, good and defensible title means that the Companys or one or more of its Subsidiaries, as applicable, title (as of the date hereof and as of the Closing) to each of the Oil and Gas Properties held or owned by them
(or purported to be held or owned by them) (1) entitles the Company (or one or more of its Subsidiaries, as applicable) to receive (after satisfaction of all Production Burdens applicable thereto), not less than the net revenue interest share
shown in the Company Reserve Report of all Hydrocarbons produced from such Oil and Gas Properties throughout the life of such Oil and Gas Properties, (2) obligates the Company (or one or more of its Subsidiaries, as applicable) to bear a
percentage of the costs and expenses for the maintenance and development of, and operations relating to, such Oil and Gas Properties, of not greater than the working interest shown on the Company Reserve Report for such Oil and Gas Properties (other
than any positive differences in such percentage) and the applicable working interest shown on the Company Reserve Report for such Oil and Gas Properties that are accompanied by a proportionate (or greater) net revenue interest in such Oil and Gas
Properties and (3) is free and clear of all Encumbrances (other than Permitted Encumbrances).
(b) Except for
any such matters that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, the factual,
non-interpretive
data supplied by the Company to the Company
Independent Petroleum Engineers relating to the Company interests referred to in the Company Reserve Report, by or on behalf of the Company and its Subsidiaries that was material to such firms estimates of proved oil and gas reserves
attributable to the Oil and Gas Properties of the Company and its Subsidiaries in connection with the preparation of the Company Reserve Report was, as of the time provided, accurate in all respects. Except for any such matters that, individually or
in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, the oil and gas reserve estimates of the Company set forth in the Company Reserve Report are derived from reports that have been prepared by the Company
Independent Petroleum Engineers, and such reserve estimates fairly reflect, in all respects, the oil and gas reserves of the Company at the dates indicated therein and are in accordance with SEC guidelines applicable thereto applied on a consistent
basis throughout the periods involved. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion
A-19
by production, there has been no change in respect of the matters addressed in the Company Reserve Report that would reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Except as would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect, (i) all rentals,
shut-ins
and similar payments owed to any Person or individual under (or otherwise with respect to) any Oil and Gas Leases have been properly and timely
paid, (ii) all royalties, minimum royalties, overriding royalties and other Production Burdens with respect to any Oil and Gas Properties owned or held by the Company or any of its Subsidiaries have been timely and properly paid and
(iii) none of the Company or any of its Subsidiaries (and, to the Companys knowledge, no third party operator) has violated any provision of, or taken or failed to take any act that, with or without notice, lapse of time, or both, would
constitute a default under the provisions of any Oil and Gas Lease (or entitle the lessor thereunder to cancel or terminate such Oil and Gas Lease) included in the Oil and Gas Properties owned or held by the Company or any of its Subsidiaries.
(d) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, all proceeds from the sale of Hydrocarbons produced from the Oil and Gas Properties of the Company and its Subsidiaries are being received by them in a timely manner and are not being held in suspense (by the Company, any of its
Subsidiaries, any third party operator thereof or any other Person) for any reason other than awaiting preparation and approval of division order title opinions for recently drilled Wells.
(e) All of the Wells and all water, CO
2,
injection or other
wells located on the Oil and Gas Leases of the Company and its Subsidiaries or otherwise associated with an Oil and Gas Property of the Company or its Subsidiaries have been drilled, completed and operated within the limits permitted by the
applicable contracts entered into by the Company or any of its Subsidiaries related to such wells and applicable Law, and all drilling and completion (and plugging and abandonment) of such wells and all related development, production and other
operations have been conducted in compliance with all applicable Law except, in each case, as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, none of the material Oil and Gas Properties of the Company or its Subsidiaries is subject to any preferential purchase, consent or similar right that would become operative as a result of the Transactions.
4.18
Environmental Matters
. Except for those matters that would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect:
(a) the Company and its Subsidiaries and their respective
operations and assets are in compliance with Environmental Laws;
(b) the Company and its Subsidiaries are not
subject to any pending or, to the Companys knowledge, threatened Proceedings under Environmental Laws;
(c) there have been no Releases of Hazardous Materials at any property currently or, to the knowledge of the Company,
formerly owned, operated or otherwise used by the Company or any of its Subsidiaries, or, to the knowledge of the Company, by any predecessors of the Company or any Subsidiary of the Company, which Releases are reasonably likely to result in
liability to the Company under Environmental Law, and, as of the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written notice asserting a liability or obligation under any Environmental Laws with respect to
the investigation, remediation, removal, or monitoring of the Release of any Hazardous Materials at or from any property currently or formerly owned, operated, or otherwise used by the Company, or at or from any offsite location where Hazardous
Materials from the Companys or its Subsidiaries operations have been sent for treatment, disposal, storage or handling; and
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(d) as of the date of this Agreement, there have been no environmental
investigations, studies, audits, or other analyses conducted during the past three (3) years by or on behalf of, or that are in the possession of, the Company or its Subsidiaries addressing potentially material environmental matters with
respect to any property owned, operated or otherwise used by any of them that have not been delivered or otherwise made available to Parent prior to the date hereof.
4.19
Material Contracts
.
(a)
Schedule
4.19
of the Company Disclosure Letter, together with the lists of exhibits contained in the
Company SEC Documents, sets forth a true and complete list, as of the date of this Agreement, of:
(i) each material contract (as such term is defined in Item 601(b)(10) of Regulation
S-K
under the Exchange Act);
(ii) each contract that provides for
the acquisition, disposition, license, use, distribution or outsourcing of assets, services, rights or properties (other than Oil and Gas Properties) with respect to which the Company reasonably expects that the Company and its Subsidiaries will
make annual payments in excess of $25,000,000 or aggregate payments in excess of $100,000,000;
(iii) each contract that constitutes a commitment relating to Indebtedness or the deferred purchase
price of property by the Company or any of its Subsidiaries (whether incurred, assumed, guaranteed or secured by any asset) in excess of $25,000,000, other than agreements solely between or among the Company and its Subsidiaries;
(iv) each contract for lease of personal property or real property (other than Oil and Gas Properties)
involving payments in excess of $25,000,000 in any calendar year or aggregate payments in excess of $100,000,000 that are not terminable without penalty or other liability to the Company (other than any ongoing obligation pursuant to such contract
that is not caused by any such termination) within 60 days, other than contracts related to drilling rigs;
(v) each contract that is a
non-competition
contract or other
contract that (A) purports to limit in any material respect either the type of business in which the Company or its Subsidiaries (or, after the Effective Time, Parent or its Subsidiaries) may engage or the manner or locations in which any of
them may so engage in any business (including any contract containing any area of mutual interest, joint bidding area, joint acquisition area, or
non-compete
or similar type of provision), (B) could require
the disposition of any material assets or line of business of the Company or its Subsidiaries (or, after the Effective Time, Parent or its Subsidiaries) or (C) prohibits or limits the rights of the Company or any of its Subsidiaries to make,
sell or distribute any products or services, or use, transfer or distribute, or enforce any of their rights with respect to, any of their material assets;
(vi) each contract involving the pending acquisition or sale of (or option to purchase or sell) any
material amount of the assets or properties of the Company, taken as a whole, other than contracts involving the acquisition or sale of (or option to purchase or sell) Hydrocarbons in the ordinary course of business;
(vii) each contract for any Derivative Transaction;
(viii) each material partnership, joint venture or limited liability company agreement, other than any
customary joint operating agreements, unit agreements or participation agreements affecting the Oil and Gas Properties of the Company;
(ix) each joint development agreement, exploration agreement, participation, farmout, farmin or program
agreement or similar contract requiring the Company or any of its Subsidiaries to make expenditures from and after January 1, 2018 that would reasonably be expected to be in excess of $25,000,000 in the aggregate, other than customary joint
operating agreements and continuous development obligations under Oil and Gas Leases;
(x) each
collective bargaining agreement to which the Company is a party or is subject;
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(xi) each agreement under which the Company or any of its
Subsidiaries has advanced or loaned any amount of money to any of its officers, directors, employees or consultants, in each case with a principal amount in excess of $120,000;
(xii) any contract (A) that provides for the sale by the Company or any of its Subsidiaries of
Hydrocarbons (1) in excess of 10,000 barrels of oil equivalent of Hydrocarbons per day over a period of one month (calculated on a yearly average basis) or (2) for a term greater than ten (10) years or (B) which the Company
reasonably expects that it will make aggregate payments in excess of $25,000,000 in any of the next three succeeding fiscal years or $100,000,000 over the life of the contract that, in the case of (A) and (B), has a remaining term of greater
than sixty (60) days and does not allow the Company or such Subsidiary to terminate it without penalty to the Company or such Subsidiary within 60 days;
(xiii) each contract for any Company Related Party Transaction; or
(xiv) each agreement that contains any most favored nation or most favored customer
provision, call or put option, preferential right or rights of first or last offer, negotiation or refusal, in each case other than those contained in (A) any agreement in which such provision is solely for the benefit of the Company or any of
its Subsidiaries, (B) customary royalty pricing provisions in Oil and Gas Leases or (C) customary preferential rights in joint operating agreements, unit agreements or participation agreements affecting the business or the Oil and Gas
Properties of the Company or any of its Subsidiaries, to which the Company or any of its Subsidiaries or any of their respective Affiliates is subject, and is material to the business of the Company and its Subsidiaries, taken as a whole.
(b) Collectively, the contracts set forth in
Section
4.19(a)
are herein referred to as the
Company Contracts
. A complete and correct copy of each of the Company Contracts has been made available to Parent. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, each Company Contract is legal, valid, binding and enforceable in accordance with its terms on the Company and each of its Subsidiaries that is a party thereto and, to the knowledge of the Company, each other party thereto, and is in full
force and effect, subject, as to enforceability, to Creditors Rights. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries is
in breach or default under any Company Contract nor, to the knowledge of the Company, is any other party to any such Company Contract in breach or default thereunder, and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by the Company or its Subsidiaries, or, to the knowledge of the Company, any other party thereto. There are no disputes pending or, to the knowledge of the Company, threatened with respect to any Company
Contract and neither the Company nor any of its Subsidiaries has received any written notice of the intention of any other party to any Company Contract to terminate for default, convenience or otherwise any Company Contract, nor to the knowledge of
the Company, is any such party threatening to do so, in each case except as has not had or would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
4.20
Derivative Transactions
.
(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, all Derivative Transactions entered into by the Company or any of its Subsidiaries or for the account of any of its customers as of the date of this Agreement were entered into in accordance with applicable Laws, and in accordance with the
investment, securities, commodities, risk management and other policies, practices and procedures employed by the Company and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to
understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions.
(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, the Company and each of its Subsidiaries have duly performed in all respects all of their
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respective obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and there are be no breaches, violations, collateral deficiencies, requests
for collateral or demands for payment, or defaults or allegations or assertions of such by any party thereunder.
(c) The Company SEC Documents accurately summarize, in all material respects, the outstanding positions under any
Derivative Transaction of the Company and its Subsidiaries, including Hydrocarbon and financial positions under any Derivative Transaction of the Company attributable to the production and marketing of the Company and its Subsidiaries, as of the
dates reflected therein.
Schedule 4.20(c)
of the Company Disclosure Letter lists, as of the date of this Agreement, all Derivative Transactions to which the Company or any of its Subsidiaries is a party.
4.21
Insurance
. Set forth on
Schedule
4.21
of the Company Disclosure Letter is a true, correct and
complete list of all material insurance policies held by the Company or any of its Subsidiaries as of the date of this Agreement (collectively, the
Material Company Insurance Policies
). Except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect, each of the Material Company Insurance Policies is in full force and effect on the date of this Agreement and a true, correct and complete copy of each Material Company
Insurance Policy has been made available to Parent. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, all premiums payable under the Material Company Insurance Policies prior to
the date of this Agreement have been duly paid to date, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that (including with respect to the Transactions), with notice or lapse of time or both,
would constitute a breach or default, or permit a termination of any of the Material Company Insurance Policies. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, as of the date
of this Agreement, no written notice of cancellation or termination has been received with respect to any Material Company Insurance Policy.
4.22
Opinion of Financial Advisor
. The Company Board has received the opinion of Tudor Pickering Holt & Co
Advisors LP addressed to the Company Board to the effect that, based upon and subject to the limitations, qualifications and assumptions set forth therein, as of the date of the opinion, the Merger Consideration to be received by the holders of
Eligible Shares pursuant to this Agreement is fair, from a financial point of view, to such holders. A copy of such opinion will be provided (solely for informational purposes) by the Company to Parent promptly following the execution of this
Agreement (it being agreed that such opinion is for the benefit of the Company Board and may not be relied upon by Parent or Merger Sub or any other Person).
4.23
Brokers
. Except for the fees and expenses payable to Tudor, Pickering, Holt & Co., no broker,
investment banker, or other Person is entitled to any brokers, finders or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company.
4.24
Related Party Transactions
.
Schedule
4.24
of the Company Disclosure Letter sets
forth, as of the date of this Agreement, a complete and correct list of any transaction or arrangement involving in excess of $120,000 under which any (a) present or former executive officer or director of the Company or any of its
Subsidiaries, (b) beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of 5% or more of any class of the equity securities of the Company or any of its Subsidiaries whose status as a 5% holder is known to the Company
as of the date of this Agreement or (c) Affiliate, associate or member of the immediate family (as such terms are respectively defined in
Rules 12b-2
and
16a-1
of the Exchange Act) of any of the foregoing (but only, with respect to the Persons in
clause (b)
, to the knowledge of the Company) is a party to any actual or proposed loan, lease or other contract
with or binding upon the Company or any of its Subsidiaries or any of their respective properties or assets or has any interest in any property owned by the Company or any of its Subsidiaries, in each case, including any bond, letter of credit,
guarantee, deposit, cash account, escrow, policy of insurance or other credit support instrument or security posted or delivered by any Person listed in
clauses (a)
,
(b)
or
(c)
in connection with the operation of the
business of the Company or any of its Subsidiaries (each of the foregoing, a
Company Related Party Transaction
).
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4.25
Regulatory Matters
.
(a) The Company is not (i) an investment company or a company controlled by an
investment company within the meaning of the U.S. Investment Company Act of 1940 or (ii) a holding company, a subsidiary company of a holding company, an Affiliate of a holding
company, a public utility or a public-utility company, as each such term is defined in the U.S. Public Utility Holding Company Act of 2005.
(b) All natural gas pipeline systems and related facilities constituting the Companys and its Subsidiaries
properties are (i) gathering facilities that are exempt from regulation by the U.S. Federal Energy Regulatory Commission under the Natural Gas Act of 1938 and (ii) not subject to rate regulation or comprehensive
nondiscriminatory access regulation under the Laws of any state or other local jurisdiction.
4.26
Takeover
Laws
. Assuming the accuracy of the representations and warranties set forth in
Section
5.24
, the approval of the Company Board of this Agreement and the Transactions represents all the action necessary to render
inapplicable to this Agreement and the Transactions any Takeover Law or any anti-takeover provision in the Companys Organizational Documents that is applicable to the Company, the shares of Company Common Stock or the Transactions.
4.27
No Additional Representations
.
(a) Except for the representations and warranties made in this
Article
IV
, neither the Company
nor any other Person makes any express or implied representation or warranty with respect to the Company or its Subsidiaries or their respective businesses, operations, assets, liabilities or conditions (financial or otherwise) in connection with
this Agreement or the Transactions, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company nor any other Person makes or has made any
representation or warranty to Parent, Merger Sub, or any of their respective Affiliates or Representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to the Company or any of its
Subsidiaries or their respective businesses; or (ii) except for the representations and warranties made by the Company in this
Article
IV
, any oral or written information presented to Parent or Merger Sub or any of
their respective Affiliates or Representatives in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course of the Transactions. Notwithstanding the foregoing, nothing in this
Section
4.27
shall limit Parents or Merger Subs remedies with respect to claims of fraud arising from or relating to the express representations and warranties made by the Company in this
Article
IV
.
(b) Notwithstanding anything contained in this Agreement to the contrary,
the Company acknowledges and agrees that none of Parent, Merger Sub or any other Person has made or is making any representations or warranties relating to Parent or its Subsidiaries (including Merger Sub) whatsoever, express or implied, beyond
those expressly given by Parent and Merger Sub in
Article
V
, including any implied representation or warranty as to the accuracy or completeness of any information regarding Parent furnished or made available to the
Company, or any of its Representatives and that the Company has not relied on any such other representation or warranty not set forth in this Agreement. Without limiting the generality of the foregoing, the Company acknowledges that no
representations or warranties are made with respect to any projections, forecasts, estimates, budgets or prospect information that may have been made available to the Company or any of its Representatives (including in certain data
rooms, virtual data rooms, management presentations or in any other form in expectation of, or in connection with, the Merger or the other Transactions).
ARTICLE V
REPRESENTATION AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure letter dated as of the date of this Agreement and delivered by Parent and Merger Sub to the Company on
or prior to the date of this Agreement (the
Parent Disclosure Letter
) and except
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as disclosed in the Parent SEC Documents (including all exhibits and schedules thereto and documents incorporated by reference therein) filed with or furnished to the SEC and available on Edgar
since December 31, 2016 and prior to the date of this Agreement (excluding any disclosures set forth or referenced in any risk factor section or in any other section, in each case, to the extent they are forward-looking statements or
cautionary, predictive,
non-specific
or forward-looking in nature), Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:
5.1
Organization, Standing and Power
. Each of Parent and its Subsidiaries is a corporation, partnership or
limited liability company duly organized, as the case may be, validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization, with all requisite entity power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, other than, in the case of Parents Subsidiaries, where the failure to be so organized or to have such power, authority or standing would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent (a
Parent Material Adverse Effect
). Each of Parent and its Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction
in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification or license necessary, other than where the failure to so qualify, license or be in good standing would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Parent and Merger Sub each has heretofore made available to the Company complete and correct copies of its Organizational Documents, each as amended prior to the
execution of this Agreement, and each as made available to Parent is in full force and effect, and neither Parent nor any of its Subsidiaries is in violation of any of the provisions of such Organizational Documents.
5.2
Capital Structure
.
(a) As of the date of this Agreement, the authorized capital stock of Parent consists of (i) 300,000,000 shares of
Parent Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share (
Parent Preferred Stock
and, together with the Parent Common Stock, the
Parent Capital Stock
). At the close of
business on March 27, 2018: (A) 149,070,598 shares of Parent Common Stock were issued and outstanding and no shares of Parent Preferred Stock were issued and outstanding; (B) the shares of Parent Common Stock issued and outstanding include
1,141,713 shares of restricted Parent Common Stock issued pursuant to Parents 2015 Stock Incentive Plan, as amended from time to time (the
Parent Stock Plan
); and (C) 2,972,706 shares of Parent Common Stock were reserved for
issuance pursuant to the Parent Stock Plan, of which 1,077,411 shares of Parent Common Stock were reserved for issuance pursuant to the vesting of outstanding performance units.
(b) All outstanding shares of Parent Common Stock have been duly authorized and are validly issued, fully paid and
non-assessable
and are not subject to preemptive rights. The Parent Common Stock to be issued pursuant to this Agreement, when issued, will be validly issued, fully paid and nonassessable and not subject to
preemptive rights. All outstanding shares of Parent Common Stock have been issued and granted in compliance in all material respects with (i) applicable securities Laws and other applicable Law and (ii) all requirements set forth in
applicable contracts (including the Parent Stock Plan). The Parent Common Stock to be issued pursuant to this Agreement, when issued, will be issued in compliance in all material respects with (A) applicable securities Laws and other applicable
Law and (B) all requirements set forth in applicable contracts. As of the close of business on March 27, 2018, except as set forth in this
Section
5.2
, there are no outstanding options, warrants or other rights to
subscribe for, purchase or acquire from Parent or any of its Subsidiaries any capital stock of Parent or securities convertible into or exchangeable or exercisable for capital stock of Parent (and the exercise, conversion, purchase, exchange or
other similar price thereof). All outstanding shares of capital stock or other equity interests of the Subsidiaries of Parent are owned by Parent, or a direct or indirect wholly-owned Subsidiary of Parent, are free and clear of all Encumbrances and
have been duly authorized, validly issued, fully paid and nonassessable. Except as set forth in this
Section
5.2
, and except for changes since March 27, 2018 resulting from the exercise of stock options outstanding at
such date (and the issuance of shares thereunder), or stock grants or other awards granted in accordance with
Section
6.2(b)(ii)
, there are outstanding: (1) no shares of Parent Capital Stock, Voting Debt or other
voting securities of Parent; (2) no securities of Parent or any
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Subsidiary of Parent convertible into or exchangeable or exercisable for shares of capital stock, Voting Debt or other voting securities of Parent, and (3) no options, warrants,
subscriptions, calls, rights (including preemptive and appreciation rights), commitments or agreements to which Parent or any Subsidiary of Parent is a party or by which it is bound in any case obligating Parent or any Subsidiary of Parent to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional shares of capital stock or any Voting Debt or other voting securities of Parent, or obligating Parent or any Subsidiary
of Parent to grant, extend or enter into any such option, warrant, subscription, call, right, commitment or agreement. There are not any stockholder agreements, voting trusts or other agreements to which Parent or any of its Subsidiaries is a party
or by which it is bound relating to the voting of any shares of capital stock or other equity interest of Parent or any of its Subsidiaries. No Subsidiary of Parent owns any shares of Parent Common Stock or any other shares of Parent Capital Stock.
As of the date of this Agreement, neither Parent nor any of its Subsidiaries has any (x) interest in a material joint venture, directly or indirectly, equity securities or other similar equity interests in any Person or (y) obligations,
whether contingent or otherwise, to consummate any material additional investment in any Person other than its Subsidiaries and its joint ventures listed on
Schedule
5.2(b)(y)
of the Parent Disclosure Letter. As of the date
of this Agreement, the authorized capital stock of Merger Sub consists of 1,000
shares of common stock, par value $0.01 per share, all of which shares are validly issued, fully paid and nonassessable and are owned by Parent.
5.3
Authority; No Violations; Consents and Approvals
.
(a) Each of Parent and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the Transactions have been duly authorized by all necessary corporate action on the part
of each of Parent (subject to obtaining Parent Stockholder Approval) and Merger Sub (other than the adoption of this Agreement by Parent as sole stockholder of Merger Sub, which shall occur immediately after the execution and delivery of this
Agreement). This Agreement has been duly executed and delivered by each of Parent and Merger Sub, and, assuming the due and valid execution of this Agreement by the Company, constitutes a valid and binding obligation of each of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its terms, subject as to enforceability to Creditors Rights. The Parent Board, at a meeting duly called and held, has by unanimous vote (i) determined that this Agreement and
the transactions contemplated hereby, including the Parent Stock Issuance, are fair to, and in the best interests of, Parent and the holders of Parent Common Stock, (ii) approved and declared advisable this Agreement and the transactions
contemplated hereby, including the Parent Stock Issuance, and (iii) resolved to recommend that the holders of Parent Common Stock approve the Parent Stock Issuance (such recommendation described in
clause (iii)
, the
Parent Board
Recommendation
). The Merger Sub Board has by unanimous vote (A) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, Merger Sub and the sole
stockholder of Merger Sub and (B) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger. Parent, as the owner of all of the outstanding shares of capital stock of Merger Sub, will
immediately after the execution and delivery of this Agreement adopt this Agreement in its capacity as sole stockholder of Merger Sub. The Parent Stockholder Approval is the only vote of the holders of any class or series of Parents capital
stock necessary to approve the Parent Stock Issuance.
(b) The execution, delivery and performance of this
Agreement does not, and the consummation of the Transactions will not (with or without notice or lapse of time, or both) (i) contravene, conflict with or result in a violation of any provision of the Organizational Documents of either
Parent (assuming that the Parent Stockholder Approval is obtained) or Merger Sub, (ii) with or without notice, lapse of time or both, result in a violation of, a termination (or right of termination) of or default under, the creation or
acceleration of any obligation or the loss of a benefit under, or result in the creation of any Encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under, any provision of any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, permit, franchise or license to which Parent or any of its Subsidiaries is a party or by which Parent or Merger Sub or any of their respective Subsidiaries or their
A-26
respective properties or assets are bound or (iii) assuming the Consents referred to in
Section
5.4
are duly and timely obtained or made and the Parent Stockholder
Approval has been obtained, contravene, conflict with or result in a violation of any Law applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, other than any such contraventions, conflicts, violations,
defaults, acceleration, losses or Encumbrances that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
5.4
Consents
. No Consent from, any Governmental Entity is required to be obtained or made by Parent or any of
its Subsidiaries in connection with the execution, delivery and performance of this Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub of the Transactions, except for: (a) the filing of a premerger notification
report by Parent under the HSR Act, and the expiration or termination of the applicable waiting period with respect thereto; (b) the filing with the SEC of (i) the Joint Proxy Statement and the Registration Statement and (ii) such
reports under Section 13(a) of the Exchange Act, and such other compliance with the Exchange Act and the rules and regulations thereunder, as may be required in connection with this Agreement and the Transactions; (c) the filing of the
Certificate of Merger with the Office of the Secretary of State of the State of Delaware; (d) filings with the NYSE; (e) such filings and approvals as may be required by any applicable state securities or blue sky Laws or
Takeover Laws; and (f) any such Consent that the failure to obtain or make would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
5.5
SEC Documents; Financial Statements
.
(a) Since the Applicable Date, Parent has filed or furnished with the SEC, on a timely basis, all forms, reports,
certifications, schedules, statements and documents required to be filed or furnished under the Securities Act or the Exchange Act, respectively, (such forms, reports, certifications, schedules, statements and documents, collectively, the
Parent SEC Documents
). As of their respective dates, each of the Parent SEC Documents, as amended, complied, or if not yet filed or furnished, will comply as to form in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Parent SEC Documents, and none of the Parent SEC Documents contained, when filed or, if amended
prior to the date of this Agreement, as of the date of such amendment with respect to those disclosures that are amended, or if filed with or furnished to the SEC subsequent to the date of this Agreement, will contain any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) The financial statements of Parent included in the Parent SEC Documents, including all notes and schedules thereto,
complied, or, in the case of Parent SEC Documents filed after the date of this Agreement, will comply in all material respects, when filed or if amended prior to the date of this Agreement, as of the date of such amendment, with the rules and
regulations of the SEC with respect thereto, were, or, in the case of Parent SEC Documents filed after the date of this Agreement, will be prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01
of Regulation
S-X
of the SEC) and fairly present in all material
respects in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal
year-end
audit adjustments) the financial position of Parent and its consolidated
Subsidiaries as of their respective dates and the results of operations and the cash flows of Parent and its consolidated Subsidiaries for the periods presented therein.
5.6
Absence of Certain Changes or Events
.
(a) Since December 31, 2017, there has not been any Parent Material Adverse Effect or any event, change, effect or
development that, individually or in the aggregate, would reasonably be expected to have a Parent Material Adverse Effect.
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(b) From December 31, 2017 through the date of this Agreement, Parent
and its Subsidiaries have conducted their business in the ordinary course of business in all material respects.
5.7
Information Supplied
. None of the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in (a) the Registration Statement shall, at the time the Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or (b) the Joint Proxy Statement will, at the date it is first mailed to stockholders of the
Company and to stockholders of Parent and at the time of the Company Stockholders Meeting and the Parent Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Subject to the accuracy of the first sentence of
Section
4.8
, the Joint Proxy Statement and the
Registration Statement will comply as to form in all material respects with the provisions of the Exchange Act and the Securities Act, respectively, and the rules and regulations thereunder;
provided
,
however
, that no representation is
made by Parent with respect to statements made therein based on information supplied by the Company specifically for inclusion or incorporation by reference therein.
5.8
No Undisclosed Material Liabilities
. There are no liabilities of Parent or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (a) liabilities adequately provided for on the balance sheet of Parent dated as of December 31, 2017 (including the notes thereto)
contained in Parents Annual Report on Form
10-K
for the twelve months ended December 31, 2017; (b) liabilities incurred in the ordinary course of business subsequent to December 31, 2017;
(c) liabilities incurred in connection with the Transactions; (d) liabilities incurred as permitted under
Section
6.2(b)(viii)
; and (e) liabilities that would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
5.9
Parent Permits; Compliance with Applicable
Law
.
(a) Parent and its Subsidiaries hold and at all times since the Applicable Date held all permits, licenses,
certifications, registrations, consents, authorizations, variances, exemptions, orders, franchises, and approvals of all Governmental Entities necessary to own, lease and operate their respective properties and assets and for the lawful conduct of
their respective businesses as they were or are now being conducted, as applicable (collectively, the
Parent Permits
), and have paid all fees and assessments due and payable in connection therewith, except where the failure to so
hold or make such a payment would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. All Parent Permits are in full force and effect and no suspension or cancellation of any of the Parent Permits
is pending or, to the knowledge of Parent, threatened, and Parent and its Subsidiaries are in compliance with the terms of the Parent Permits, except where the failure to be in full force and effect or failure to so comply would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) The businesses of Parent
and its Subsidiaries are not currently being conducted, and at no time since the Applicable Date have been conducted, in violation of any applicable Law, except for violations that would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. To the knowledge of Parent no investigation or review by any Governmental Entity with respect to Parent or any of its Subsidiaries is pending or threatened, other than those the outcome of which would not
reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
5.10
Compensation; Benefits
.
(a) Each material Parent Plan has been maintained in compliance with all applicable Laws, including ERISA and the Code,
except where the failure to so comply would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
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(b) As of the date of this Agreement, there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the knowledge of Parent, threatened against, or with respect to, any of the Parent Plans, and there are no Proceedings by a Governmental Entity with respect to any of the Parent Plans,
except for such pending actions, suits, claims or Proceedings that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) All material contributions required to be made to the Parent Plans pursuant to their terms have been timely made.
(d) There are no material unfunded benefit obligations that have not been properly accrued for in Parents
financial statements or disclosed in the notes thereto in accordance with GAAP.
(e) None of Parent or any member
of its Aggregated Group contributes to or has an obligation to contribute to, and no Parent Plan is, a plan subject to Title IV of ERISA (including a multiemployer plan within the meaning of Section 3(37) of ERISA), Section 302 of ERISA,
or Section 412 of the Code.
(f) Neither the execution and delivery of this Agreement nor the consummation of
the Transactions could, either alone or in combination with another event, (i) entitle any employee of Parent to severance pay or any material increase in severance pay, (ii) accelerate the time of payment or vesting, or materially
increase the amount of compensation due to any such employee of Parent, (iii) directly or indirectly cause Parent to transfer or set aside any material amount of assets to fund any material benefits under any Parent Plan, (iv) otherwise
give rise to any material liability under any Parent Plan or (v) limit or restrict the right to materially amend, terminate or transfer the assets of any Parent Plan on or following the Effective Time.
(g) Neither Parent nor any Subsidiary has any obligation to provide, and no Parent Plan or other agreement provides any
individual with the right to, a gross up, indemnification, reimbursement or other payment for any excise or additional taxes, interest or penalties incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any
payment to be deductible under Section 280G of the Code.
5.11
Labor Matters
.
(a) As of the date of this Agreement, (i) neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement or other agreement with any labor union, (ii) there is no pending union representation petition involving employees of Parent or any of its Subsidiaries, and (iii) Parent does not have knowledge of any activity or
proceeding of any labor organization (or representative thereof) or employee group (or representative thereof) to organize any such employees.
(b) As of the date of this Agreement, there is no unfair labor practice, charge or grievance arising out of a
collective bargaining agreement, other agreement with any labor union, or other labor-related grievance proceeding against Parent or any of its Subsidiaries pending, or, to the knowledge of Parent, threatened, other than such matters that would not
reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) As of the
date of this Agreement, there is no strike, dispute, slowdown, work stoppage or lockout pending, or, to the knowledge of Parent, threatened, against or involving Parent or any of its Subsidiaries, other than such matters that would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(d) Parent and its
Subsidiaries are, and since January 1, 2017 have been, in compliance in all material respects with all applicable Laws respecting employment and employment practices, and there are no Proceedings pending or, to the knowledge of Parent,
threatened against Parent or any of its Subsidiaries, by or on behalf of any applicant for employment, any current or former employee or any class of the foregoing, relating to
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any of the foregoing applicable Laws, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship, other than any such matters described in this sentence that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Since
January 1, 2017, neither Parent nor any of its Subsidiaries has received any written notice of the intent of the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor or any other Governmental
Entity responsible for the enforcement of labor or employment Laws to conduct an investigation with respect to Parent or any of its Subsidiaries which would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
5.12
Taxes
.
(a) All material Tax Returns required to be filed (taking into account extensions of time for filing) by Parent or any
of its Subsidiaries have been filed and all such filed Tax Returns are complete and accurate in all material respects. All material Taxes that are due and payable by Parent or any of its Subsidiaries (other than Taxes being contested in good faith
by appropriate Proceedings and for which adequate reserves have been established in accordance with GAAP) have been paid in full. All material withholding Tax requirements imposed on or with respect to Parent or any of its Subsidiaries have been
satisfied in full, and Parent and its Subsidiaries have complied in all material respects with all information reporting (and related withholding) and record retention requirements.
(b) There is not in force any waiver or agreement for any extension of time for the assessment or payment of any
material Tax by Parent or any of its Subsidiaries.
(c) There is no outstanding material claim, assessment or
deficiency against Parent or any of its Subsidiaries for any Taxes that has been asserted in writing by any Governmental Entity. There are no proceedings pending or, to the knowledge of Parent, threatened regarding any material Taxes of Parent and
its Subsidiaries or the assets of Parent and its Subsidiaries.
(d) Neither Parent nor any of its Subsidiaries is a
party to any material Tax allocation, sharing or indemnity contract or arrangement (not including, for the avoidance of doubt (i) an agreement or arrangement solely among the members of a group the common parent of which is Parent or any of its
Subsidiaries, or (ii) any Tax sharing or indemnification provisions contained in any agreement entered into in the ordinary course of business and not primarily relating to Tax (e.g., leases, credit agreements or other commercial agreements)).
Neither Parent nor any of its Subsidiaries has any material liability for Taxes of any Person (other than Parent or any of its Subsidiaries) under Treasury Regulations
§ 1.1502-6
(or any similar
provision of state, local or foreign Law) or as a transferee or successor.
(e) Neither Parent nor any of its
Subsidiaries has participated, or is currently participating, in a listed transaction, as defined in Treasury Regulations
§ 1.6011-4(b)(2).
(f) Neither Parent nor any of its Subsidiaries has constituted a distributing corporation or a
controlled corporation in a distribution of stock intended to qualify for
tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or
(ii) as part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) in conjunction with the Transactions.
(g) No written claim has been made by any Taxing Authority in a jurisdiction where Parent or any of its Subsidiaries
does not currently file a Tax Return that it is or may be subject to any material Tax in such jurisdiction, nor has any such assertion been threatened or proposed in writing and received by Parent or any of its Subsidiaries.
(h) Parent has made available to Parent complete and correct copies of any private letter ruling requests, closing
agreements or gain recognition agreements with respect to Taxes which has been requested or will remain in effect as of the Closing.
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(i) There are no Encumbrances for material Taxes on any of the assets of
Parent or any of its Subsidiaries, except for Permitted Encumbrances.
(j) Neither Parent nor any of its
Subsidiaries will be required to include any material item of income in, or to exclude any material item of deduction from, taxable income in any taxable period (or portion thereof) ending after the Closing Date as a result of any closing agreement,
installment sale or open transaction on or prior to the Closing Date, any accounting method change or agreement with any Taxing Authority, any prepaid amount received on or prior to the Closing Date, any intercompany transaction or excess loss
account described in Section 1502 of the Code (or any corresponding provision of Law with respect to Taxes), or any election pursuant to Section 108(i) of the Code (or any similar provision of Law) made with respect to any taxable period
ending on or prior to the Closing Date.
(k) Neither Parent nor any of its Subsidiaries is a U.S.
shareholder (within the meaning of Section 951(b) of the Code) of any foreign corporation which may be required to include in income any amounts under Section 951(a) of the Code.
(l) After reasonable diligence, neither Parent nor any of its Subsidiaries is aware of the existence of any fact, or
has taken or agreed to take any action, that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(m) Each of Parent and Merger Sub is, and has been since formation, properly classified for United States federal
income tax purposes as a corporation.
5.13
Litigation
. Except for such matters as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect, there is no (a) Proceeding pending, or to the knowledge of Parent, threatened against Parent or any of its Subsidiaries or any of its Subsidiaries or any of
their Oil and Gas Properties, or (b) judgment, decree, injunction, ruling, order, writ, stipulation, determination or award of any Governmental Entity or arbitrator outstanding against Parent or any of its Subsidiaries.
5.14
Intellectual Property
.
(a) Parent and its Subsidiaries own or have the right to use all Intellectual Property used in or necessary for the
operation of the businesses of each of Parent and its Subsidiaries as presently conducted (collectively, the
Parent Intellectual Property
) free and clear of all Encumbrances except for Permitted Encumbrances, except where the
failure to own or have the right to use such properties has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. To the knowledge of Parent, the use of the Parent Intellectual
Property by Parent and its Subsidiaries in the operation of the business of each of Parent and its Subsidiaries as presently conducted does not infringe, misappropriate or otherwise violate any Intellectual Property of any other Person, except for
such matters that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries have taken reasonable measures consistent with prudent industry practices to protect
the confidentiality of trade secrets used in the businesses of each of Parent and its Subsidiaries as presently conducted, except where failure to do so has not had and would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(c) Except as has not had and would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect, the IT Assets owned, used, or held for use by Parent or any of its Subsidiaries (i) are sufficient for the current needs of the businesses of Parent and its Subsidiaries
(ii) have not malfunctioned or failed within the past three years and (iii) to the knowledge of Parent, are free from any malicious code.
(d) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect (i) Parent and each of its Subsidiaries have used commercially
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reasonable measures to ensure the confidentiality, privacy and security of Personal Information collected or held for use by Parent or its Subsidiaries; and (ii) to the knowledge of Parent,
there has been no unauthorized access to or unauthorized use of any IT Assets, Personal Information or trade secrets owned or held for use by Parent or its Subsidiaries
5.15
Real Property
. Except as would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect, and with respect to
clauses (a)
and
(b)
, except with respect to any of Parents Oil and Gas Properties, (a) Parent and its Subsidiaries have good, valid and defensible title to all
material real property owned by Parent or any of its Subsidiaries (collectively, the
Parent Owned Real Property
) and valid leasehold estates in all material real property leased, subleased, licensed or otherwise occupied (whether
as tenant, subtenant or pursuant to other occupancy arrangements) by Parent or any Subsidiary of Parent (collectively, including the improvements thereon, the
Parent Material Leased Real Property
) free and clear of all
Encumbrances and defects and imperfections, except Permitted Encumbrances, (b) each agreement under which Parent or any Subsidiary of Parent is the landlord, sublandlord, tenant, subtenant, or occupant with respect to the Parent Material Leased
Real Property (each, a
Parent Material Real Property Lease
) to the knowledge of Parent is in full force and effect and is valid and enforceable against the parties thereto in accordance with its terms, subject, as to
enforceability, to Creditors Rights, and neither Parent nor any of its Subsidiaries, or to the knowledge of Parent, any other party thereto, has received written notice of any default under any Parent Material Real Property Lease, and
(c) as of the date of this Agreement, there does not exist any pending or, to the knowledge of Parent, threatened, condemnation or eminent domain proceedings that affect any of Parents Oil and Gas Properties, Parent Owned Real Property or
Parent Material Leased Real Property.
5.16
Rights-of-Way
. Each of
Parent and its Subsidiaries has such
Rights-of-Way
as are sufficient to conduct its business in the manner described, except for such
Rights-of-Way
the absence of which would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Each of Parent and its Subsidiaries has fulfilled and performed
all its material obligations with respect to such
Rights-of-Way
and conduct their business in a manner that does not violate any of the
Rights-of-Way
and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such
Rights-of-Way,
except for such revocations, terminations and impairments that would not reasonably be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect. All pipelines operated by Parent and its Subsidiaries are subject to
Rights-of-Way
or are located on real property owned or leased by Parent, and there
are no gaps (including any gap arising as a result of any breach by Parent or any of its Subsidiaries of the terms of any
Rights-of-Way)
in the
Rights-of-Way
other than gaps that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
5.17
Oil and Gas Matters
.
(a) Except as would not reasonably be expected to have a Parent Material Adverse Effect, and except for property
(i) sold or otherwise disposed of in the ordinary course of business since the dates of the reserve reports prepared by Cawley, Gillespie & Associates, Inc. and Netherland, Sewell & Associates, Inc. (collectively,
the
Parent Independent Petroleum Engineers
) relating to the Parent interests referred to therein as of December 31, 2017 (collectively, the
Parent Reserve Reports
) or (ii) reflected in the Parent
Reserve Reports or in the Parent SEC Documents as having been sold or otherwise disposed of (other than sales or dispositions after the date hereof in accordance with
Section
6.1(b)(v
)), Parent and its Subsidiaries have
good and defensible title to all Oil and Gas Properties forming the basis for the reserves reflected in the Parent Reserve Reports and in each case as attributable to interests owned by Parent and its Subsidiaries, free and clear of any
Encumbrances, except for Permitted Encumbrances. For purposes of the foregoing sentence, good and defensible title means that Parents or one or more of its Subsidiaries, as applicable, title (as of the date hereof and as of
the Closing) to each of the Oil and Gas Properties held or owned by them (or purported to be held or owned by them) (1) entitles Parent (or one or more of its Subsidiaries, as applicable) to receive (after satisfaction of all Production Burdens
applicable thereto), not less than the net revenue interest share shown in the Parent Reserve Reports of all
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Hydrocarbons produced from such Oil and Gas Properties throughout the life of such Oil and Gas Properties, (2) obligates Parent (or one or more of its Subsidiaries, as applicable) to bear a
percentage of the costs and expenses for the maintenance and development of, and operations relating to, such Oil and Gas Properties, of not greater than the working interest shown on the Parent Reserve Reports for such Oil and Gas Properties (other
than any positive differences in such percentage) and the applicable working interest shown on the Parent Reserve Reports for such Oil and Gas Properties that are accompanied by a proportionate (or greater) net revenue interest in such Oil and Gas
Properties and (3) is free and clear of all Encumbrances (other than Permitted Encumbrances).
(b) Except for
any such matters that, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, the factual,
non-interpretive
data supplied by Parent to the Parent
Independent Petroleum Engineers relating to the Parent interests referred to in the Parent Reserve Reports, by or on behalf of Parent and its Subsidiaries that was material to such firms estimates of proved oil and gas reserves attributable to
the Oil and Gas Properties of Parent and its Subsidiaries in connection with the preparation of the Parent Reserve Reports was, as of the time provided, accurate in all respects. Except for any such matters that, individually or in the aggregate,
would not reasonably be expected to have a Parent Material Adverse Effect, the oil and gas reserve estimates of Parent set forth in the Parent Reserve Reports are derived from reports that have been prepared by the Parent Independent Petroleum
Engineers, and such reserve estimates fairly reflect, in all respects, the oil and gas reserves of Parent at the dates indicated therein and are in accordance with SEC guidelines applicable thereto applied on a consistent basis throughout the
periods involved. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in respect of the matters
addressed in the Parent Reserve Reports that would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) all rentals,
shut-ins
and similar payments owed to any Person or individual under (or otherwise with respect to) any Oil and Gas Leases have been properly and timely paid, (ii) all
royalties, minimum royalties, overriding royalties and other Production Burdens with respect to any Oil and Gas Properties owned or held by Parent or any of its Subsidiaries have been timely and properly paid and (iii) none of Parent or any of
its Subsidiaries (and, to the Parents knowledge, no third party operator) has violated any provision of, or taken or failed to take any act that, with or without notice, lapse of time, or both, would constitute a default under the provisions
of any Oil and Gas Lease (or entitle the lessor thereunder to cancel or terminate such Oil and Gas Lease) included in the Oil and Gas Properties owned or held by Parent or any of its Subsidiaries.
(d) Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, all proceeds from the sale of Hydrocarbons produced from the Oil and Gas Properties of Parent and its Subsidiaries are being received by them in a timely manner and are not being held in suspense (by Parent, any of its Subsidiaries, any
third party operator thereof or any other Person) for any reason other than awaiting preparation and approval of division order title opinions for recently drilled Wells.
(e) All of the Wells and all water, CO
2,
injection or other
wells located on the Oil and Gas Leases of Parent and its Subsidiaries or otherwise associated with an Oil and Gas Property of Parent or its Subsidiaries have been drilled, completed and operated within the limits permitted by the applicable
contracts entered into by Parent or any of its Subsidiaries related to such wells and applicable Law, and all drilling and completion (and plugging and abandonment) of such wells and all related development, production and other operations have been
conducted in compliance with all applicable Law except, in each case, as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, none of the material Oil and Gas Properties of Parent or its Subsidiaries is subject to any preferential purchase, consent or similar right that would become operative as a result of the Transactions.
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5.18
Environmental Matters
. Except for those matters that would not
reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect:
(a) Parent and
its Subsidiaries and their respective operations and assets are in compliance with Environmental Laws;
(b) Parent
and its Subsidiaries are not subject to any pending or, to Parents knowledge, threatened Proceedings under Environmental Laws;
(c) there have been no Releases of Hazardous Materials at any property currently or, to the knowledge of Parent,
formerly owned, operated or otherwise used by Parent or any of its Subsidiaries, or, to the knowledge of Parent, by any predecessors of Parent or any Subsidiary of Parent, which Releases are reasonably likely to result in liability to Parent under
Environmental Law, and, as of the date of this Agreement, neither Parent nor any of its Subsidiaries has received any written notice asserting a liability or obligation under any Environmental Laws with respect to the investigation, remediation,
removal, or monitoring of the Release of any Hazardous Materials at or from any property currently or formerly owned, operated, or otherwise used by Parent, or at or from any offsite location where Hazardous Materials from Parents or its
Subsidiaries operations have been sent for treatment, disposal, storage or handling; and
(d) as of the date
of this Agreement, there have been no environmental investigations, studies, audits, or other analyses conducted during the past three (3) years by or on behalf of, or that are in the possession of, Parent or its Subsidiaries addressing
potentially material environmental matters with respect to any property owned, operated or otherwise used by any of them that have not been delivered or otherwise made available to the Company prior to the date hereof.
5.19
Material Contracts
.
(a)
Schedule
5.19
of the Parent Disclosure Letter, together with the lists of exhibits contained in the
Parent SEC Documents, sets forth a true and complete list, as of the date of this Agreement, of:
(i) each material contract (as such term is defined in Item 601(b)(10) of Regulation
S-K
under the Exchange Act);
(ii) each contract that provides for
the acquisition, disposition, license, use, distribution or outsourcing of assets, services, rights or properties (other than Oil and Gas Properties) with respect to which Parent reasonably expects that Parent and its Subsidiaries will make annual
or aggregate payments in excess of $100,000,000;
(iii) each contract that constitutes a commitment
relating to Indebtedness or the deferred purchase price of property by Parent or any of its Subsidiaries (whether incurred, assumed, guaranteed or secured by any asset) in excess of $100,000,000, other than agreements solely between or among Parent
and its Subsidiaries;
(iv) each contract for lease of personal property or real property (other
than Oil and Gas Properties) involving payments in excess of $100,000,000 in any calendar year or over the life of the contract that are not terminable without penalty or other liability to Parent (other than any ongoing obligation pursuant to such
contract that is not caused by any such termination) within 60 days, other than contracts related to drilling rigs;
(v) each contract containing any area of mutual interest, joint bidding area, joint acquisition area, or
non-compete
or similar type of provision that, following the Effective Time, by virtue of Parent becoming an Affiliate of the Company as a result of the Transaction, would by its terms materially restrict the
ability of the Parent or any of its Subsidiaries to compete in any line of business or with any Person or geographic area during any period of time after the Effective Time;
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(vi) each contract involving the pending acquisition or
sale of (or option to purchase or sell) any material amount of the assets or properties of Parent, taken as a whole, other than contracts involving the acquisition or sale of (or option to purchase or sell) Hydrocarbons in the ordinary course of
business;
(vii) each material partnership, joint venture or limited liability company agreement,
other than any customary joint operating agreements, unit agreements or participation agreements affecting the Oil and Gas Properties of Parent;
(viii) each joint development agreement, exploration agreement, participation, farmout, farmin or
program agreement or similar contract requiring Parent or any of its Subsidiaries to make expenditures from and after January 1, 2018 that would reasonably be expected to be in excess of $100,000,000 in the aggregate, other than customary joint
operating agreements and continuous development obligations under Oil and Gas Leases;
(ix) any
contract (A) that provides for the sale by Parent or any of its Subsidiaries of Hydrocarbons (1) in excess of 20,000 barrels of oil equivalent of Hydrocarbons per day over a period of one month (calculated on a yearly average basis) or
(2) for a term greater than ten (10) years or (B) which Parent reasonably expects that it will make aggregate payments in excess of $100,000,000 in any of the next three succeeding fiscal years or over the life of the contract that,
in the case of (A) or (B), (x) has a remaining term of greater than sixty (60) days and does not allow Parent or such Subsidiary to terminate it without penalty to Parent or such Subsidiary within 60 days and (y) provides for a
take-or-pay
clause or any similar prepayment obligation and acreage dedication, minimum volume commitments or capacity reservation fees to a gathering,
transportation or other arrangement downstream of the wellhead, that cover, guaranty or commit volumes; and
(x) each agreement that contains any most favored nation or most favored customer provision,
call or put option, preferential right or rights of first or last offer, negotiation or refusal, in each case other than those contained in (A) any agreement in which such provision is solely for the benefit of Parent or any of its
Subsidiaries, (B) customary royalty pricing provisions in Oil and Gas Leases or (C) customary preferential rights in joint operating agreements, unit agreements or participation agreements affecting the business or the Oil and Gas
Properties of Parent or any of its Subsidiaries, to which Parent or any of its Subsidiaries or any of their respective Affiliates is subject, and is material to the business of Parent and its Subsidiaries, taken as a whole.
(b) Collectively, the contracts set forth in
Section
5.19(a)
are herein referred to as the
Parent Contracts
. A complete and correct copy of each of the Parent Contracts has been made available to the Company. Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, each Parent Contract is legal, valid, binding and enforceable in accordance with its terms on Parent and each of its Subsidiaries that is a party thereto and, to the knowledge of Parent, each other party thereto, and is in full force and
effect, subject, as to enforceability, to Creditors Rights. Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, neither Parent nor any of its Subsidiaries is in breach or
default under any Parent Contract nor, to the knowledge of Parent, is any other party to any such Parent Contract in breach or default thereunder, and no event has occurred that with the lapse of time or the giving of notice or both would constitute
a default thereunder by Parent or its Subsidiaries, or, to the knowledge of Parent, any other party thereto. There are no disputes pending or, to the knowledge of Parent, threatened with respect to any Parent Contract and neither Parent nor any of
its Subsidiaries has received any written notice of the intention of any other party to any Parent Contract to terminate for default, convenience or otherwise any Parent Contract, nor to the knowledge of Parent, is any such party threatening to do
so, in each case except as has not had or would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
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5.20
Derivative Transactions
. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse Effect:
(a) All Derivative
Transactions entered into by Parent or any of its Subsidiaries or for the account of any of its customers as of the date of this Agreement were entered into in accordance with applicable Laws, and in accordance with the investment, securities,
commodities, risk management and other policies, practices and procedures employed by Parent and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or
in consultation with their advisers) and to bear the risks of such Derivative Transactions.
(b) Parent and each of
its Subsidiaries have duly performed in all respects all of their respective obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and there are be no breaches, violations, collateral
deficiencies, requests for collateral or demands for payment, or defaults or allegations or assertions of such by any party thereunder.
(c) The Parent SEC Documents accurately summarize, in all material respects, the outstanding positions under any
Derivative Transaction of Parent and its Subsidiaries, including Hydrocarbon and financial positions under any Derivative Transaction of Parent attributable to the production and marketing of Parent and its Subsidiaries, as of the dates reflected
therein.
5.21
Insurance
. Except as would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect:
(a) Each of the material insurance policies held by Parent or any of
its Subsidiaries as of the date of this Agreement (collectively, the
Material Parent Insurance Policies
) is in full force and effect on the date of this Agreement;
(b) all premiums payable under the Material Parent Insurance Policies prior to the date of this Agreement have been
duly paid to date and neither Parent nor any of its Subsidiaries has taken any action or failed to take any action that (including with respect to the Transactions), with notice or lapse of time or both, would constitute a breach or default, or
permit a termination of any of the Material Company Insurance Policies; and
(c) as of the date of this Agreement,
no written notice of cancellation or termination has been received with respect to any Material Parent Insurance Policy.
5.22
Opinion of Financial Advisor
. The Parent Board has received the opinion of Morgan Stanley & Co.
LLC (
Morgan Stanley
) addressed to the Parent Board to the effect that, as of the date of such opinion, and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the
scope of the review undertaken by Morgan Stanley as set forth therein, the Exchange Ratio pursuant to this Agreement is fair from a financial point of view to Parent.
5.23
Brokers
. Except for the fees and expenses payable to Morgan Stanley & Co. LLC, no broker,
investment banker, or other Person is entitled to any brokers, finders or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent.
5.24
Ownership of Company Common Stock
. Neither Parent nor any of its Subsidiaries own any shares of Company
Common Stock (or other securities convertible into, exchangeable for or exercisable for shares of Company Common Stock).
5.25
Business Conduct
. Merger Sub was incorporated on March 23, 2018. Since its inception, Merger Sub has
not engaged in any activity, other than such actions in connection with (a) its organization and (b) the
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preparation, negotiation and execution of this Agreement and the Transactions. Merger Sub has no operations, has not generated any revenues and has no assets or liabilities other than those
incurred in connection with the foregoing and in association with the Merger as provided in this Agreement.
5.26
Regulatory Matters
.
(a) Parent is not (i) an investment company or a company controlled by an investment
company within the meaning of the U.S. Investment Company Act of 1940 or (ii) a holding company, a subsidiary company of a holding company, an Affiliate of a holding company, a public
utility or a public-utility company, as each such term is defined in the U.S. Public Utility Holding Company Act of 2005.
(b) All natural gas pipeline systems and related facilities constituting Parents and its Subsidiaries
properties are (i) gathering facilities that are exempt from regulation by the U.S. Federal Energy Regulatory Commission under the Natural Gas Act of 1938 and (ii) not subject to rate regulation or comprehensive
nondiscriminatory access regulation under the Laws of any state or other local jurisdiction.
5.27
No Additional
Representations
.
(a) Except for the representations and warranties made in this
Article
V
, neither Parent nor any other Person makes any express or implied representation or warranty with respect to Parent or its Subsidiaries or their respective businesses, operations, assets, liabilities or conditions
(financial or otherwise) in connection with this Agreement or the Transactions, and Parent hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither Parent nor any other Person
makes or has made any representation or warranty to the Company or any of its Affiliates or Representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to Parent or any of its
Subsidiaries or their respective businesses; or (ii) except for the representations and warranties made by Parent in this
Article
V
, any oral or written information presented to the Company or any of its Affiliates or
Representatives in the course of their due diligence investigation of Parent, the negotiation of this Agreement or in the course of the Transactions. Notwithstanding the foregoing, nothing in this
Section
5.27
shall limit
the Companys remedies with respect to claims of fraud arising from or relating to the express written representations and warranties made by Parent and Merger Sub in this
Article
V
.
(b) Notwithstanding anything contained in this Agreement to the contrary, Parent acknowledges and agrees that none of
the Company or any other Person has made or is making any representations or warranties relating to the Company or its Subsidiaries whatsoever, express or implied, beyond those expressly given by the Company in
Article
IV
,
including any implied representation or warranty as to the accuracy or completeness of any information regarding the Company furnished or made available to Parent, or any of its Representatives and that neither Parent nor Merger Sub has relied on
any such other representation or warranty not set forth in this Agreement. Without limiting the generality of the foregoing, Parent acknowledges that no representations or warranties are made with respect to any projections, forecasts, estimates,
budgets or prospect information that may have been made available to Parent or any of its Representatives (including in certain data rooms, virtual data rooms, management presentations or in any other form in expectation of,
or in connection with, the Merger or the other Transactions).
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1
Conduct of Company Business Pending the Merger
.
(a) Except as set forth on
Schedule
6.1(a)
of the Company Disclosure Letter, as expressly
permitted or required by this Agreement, as may be required by applicable Law or otherwise consented to by Parent in
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writing (which consent shall not be unreasonably withheld, delayed or conditioned), the Company covenants and agrees that, until the earlier of the Effective Time and the termination of this
Agreement pursuant to
Article
VIII
, it shall, and shall cause each of its Subsidiaries to, use reasonable best efforts to conduct its businesses in the ordinary course, including by using reasonable best efforts to preserve
substantially intact its present business organization, goodwill and assets, to keep available the services of its current officers and employees and preserve its existing relationships with Governmental Entities and its significant customers,
suppliers, licensors, licensees, distributors, lessors and others having significant business dealings with it.
(b) Except as set forth on the corresponding subsection of
Schedule 6.1(b)
of the Company Disclosure Letter, as
expressly permitted or required by this Agreement, as may be required by applicable Law or otherwise consented to by Parent in writing (which consent shall not be unreasonably withheld, delayed or conditioned), until the earlier of the Effective
Time and the termination of this Agreement pursuant to
Article
VIII
the Company shall not, and shall not permit its Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make any other distribution in respect of any
outstanding capital stock of, or other equity interests in, the Company or its Subsidiaries, except for dividends and distributions by a direct or indirect wholly-owned Subsidiary of the Company to the Company or another direct or indirect
wholly-owned Subsidiary of the Company; (B) split, combine or reclassify any capital stock of, or other equity interests in, or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for
equity interests in the Company or any of its Subsidiaries; or (C) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, the Company or any Subsidiary of
the Company, except as required by the terms of any capital stock or equity interest of a Subsidiary existing and disclosed to Parent as of the date hereof or in respect of any Time-Based Restricted Stock or Performance-Based Restricted Stock
outstanding as of the date hereof, or issued after the date hereof in accordance with this Agreement, in accordance with the terms of the Company Stock Plan and applicable award agreements;
(ii) offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or
sell, any capital stock of, or other equity interests in, the Company or any of its Subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than: (A) the
delivery of Company Common Stock upon the vesting or lapse of any restrictions on any shares of Time-Based Restricted Stock or Performance-Based Restricted Stock outstanding on the date hereof in accordance with the terms of the Company Stock Plan
and applicable award agreements; (B) issuances by a wholly-owned Subsidiary of the Company of such Subsidiarys capital stock or other equity interests to the Company or any other wholly-owned Subsidiary of the Company; and (C) shares
of capital stock issued as a dividend made in accordance with
Section
6.1(b)(
i
)
;
(iii) amend or propose to amend the Companys Organizational Documents or amend or propose to amend
the Organizational Documents of any of the Companys Subsidiaries (other than ministerial changes);
(iv) (A) merge, consolidate, combine or amalgamate with any Person other than between wholly-owned
Subsidiaries of the Company or (B) acquire or agree to acquire (including by merging or consolidating with, purchasing any equity interest in or a substantial portion of the assets of, licensing, or by any other manner), any business or any
corporation, partnership, association or other business organization or division thereof, in each case other than acquisitions for which the consideration is less than $25,000,000 individually or in the aggregate;
(v) sell, lease, transfer, farmout, license, Encumber (other than Permitted Encumbrances), discontinue
or otherwise dispose of, or agree to sell, lease, transfer, farmout, license, Encumber (other than Permitted Encumbrances), discontinue or otherwise dispose of, any portion of its assets or properties; other than (A) sales, leases or
dispositions for which the consideration is less than $25,000,000 in the aggregate or (B) the sale of Hydrocarbons in the ordinary course of business;
(vi) authorize, recommend, propose, enter into, adopt a plan or announce an intention to adopt a plan of
complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or
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other reorganization of the Company or any of its Subsidiaries, other than such transactions among wholly-owned Subsidiaries of the Company;
(vii) change in any material respect their material accounting principles, practices or methods that
would materially affect the consolidated assets, liabilities or results of operations of the Company and its Subsidiaries, except as required by GAAP or applicable Law;
(viii) except (i) in the ordinary course of business and consistent with past practice,
(ii) resulting from a change in or otherwise required by Law, or (iii) to the extent not material: make, change or revoke any Tax election, change an annual Tax accounting period, adopt or change any Tax accounting method, file any amended
Tax Return, enter into any closing agreement with respect to Taxes, settle any material Tax claim, audit, assessment or dispute, surrender any right to claim a refund, agree to an extension or waiver of the statute of limitations with respect to the
assessment or determination of any Tax, or take any action which is reasonably likely to result in a material increase in the Tax liability of the Company or its Subsidiaries;
(ix) (A) grant any material increases in the compensation payable or to become payable to any of its
directors, officers or key employees except as required by applicable Law or pursuant to a Company Plan existing as of the date hereof, (B) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other
way secure the payment, of compensation or benefits under any Company Plan, (C) grant any new equity-based awards, or amend or modify the terms of any outstanding equity-based awards, under any Company Plan, (D) pay or agree to pay to any
director, officer or key employee making an annualized salary of more than $300,000, whether past or present, any material pension, retirement allowance or other employee benefit not required by any of any Company Plan existing as of the date
hereof; (E) enter into any new, or amend any existing, material employment or severance or termination agreement with any director, officer or key employee making an annualized salary of more than $300,000; (E) establish any material Company
Plan which was not in existence or approved by the Company Board prior to the date of this Agreement, or amend any such plan or arrangement in existence on the date of this Agreement if such amendment would have the effect of enhancing any benefits
thereunder or otherwise result in increased costs to the Company; (F) hire any employee or engage any independent contractor (who is a natural person) with annual salary or wage rate or consulting fees in excess of $300,000; or
(G) terminate the employment of any executive officer other than for cause;
provided
,
however
, that notwithstanding the foregoing in this
Section
6.1(b)(ix)
, in no event shall the Company be
permitted to increase, in any respect, the compensation and benefits payable to the individuals participating in the Companys Executive Change in Control and Severance Benefit Plan as of the date hereof, or otherwise enter into any new, or
amend any existing, agreement with such persons;
(x) (A) retire, repay, defease, repurchase or
redeem all or any portion of the outstanding aggregate principal amount of the Companys 6.625% Senior Notes due 2022; (B) incur, create or assume any Indebtedness or guarantee any such Indebtedness of another Person or (C) create any
Encumbrances on any property or assets of the Company or any of its Subsidiaries in connection with any Indebtedness thereof, other than Permitted Encumbrances;
provided
,
however
, that the foregoing
clauses (B)
and
(C)
shall not restrict the incurrence of Indebtedness (1) under existing credit facilities, (2) by the Company that is owed to any wholly-owned Subsidiary of the Company or by any Subsidiary of the Company that is owed to the
Company or a wholly-owned Subsidiary of the Company, (3) incurred or assumed in connection with any acquisition permitted by
Section
6.1(b)(iv)
, (4) additional Indebtedness in an amount not to exceed $3,000,000 or
(5) the creation of any Encumbrances securing any Indebtedness permitted by the foregoing
clauses (1)
,
(2)
,
(3)
or
(4)
;
(xi) (A) enter into any contract that would be a Company Contract if it were in effect on the date of
this Agreement or (B) modify, amend, terminate or assign, or waive or assign any rights under, any Company Contract (including the renewal of existing Company Contract on substantially the same terms in the ordinary course of business
consistent with past practice), other than in each case, with respect to
Sections 4.19(a)(vii)
,
(x)
, and
(xi)
only, in the ordinary course of business consistent with past practice;
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(xii) cancel, modify or waive any debts or claims held by
the Company or any of its Subsidiaries or waive any rights held by the Company or any of its Subsidiaries having in each case a value in excess of $5,000,000 in the aggregate;
(xiii) waive, release, assign, settle or compromise or offer or propose to waive, release, assign,
settle or compromise, any Proceeding (excluding any audit, claim or other proceeding in respect of Taxes) other than (A) the settlement of such proceedings involving only the payment of monetary damages by the Company or any of its Subsidiaries
of any amount exceeding $5,000,000 in the aggregate and (B) as would not result in any restriction on future activity or conduct or a finding or admission of a violation of Law;
provided
, that the Company shall be permitted to settle any
Transaction Litigation in accordance with
Section
6.11
;
(xiv) make or
commit to make any capital expenditures that are, in the aggregate greater than 125% of the quarterly budgeted amount of capital expenditures scheduled to be made in the Companys capital expenditure budget set forth in
Schedule
6.1(b
)(
xiv)
of the Company Disclosure Letter, except for capital expenditures to repair damage resulting from insured casualty events or capital expenditures required on an emergency basis or for the
safety of individuals, assets or the environment;
(xv) take any action, cause any action to be
taken, knowingly fail to take any action or knowingly fail to cause any action to be taken, which action or failure to act would prevent or impede, or would be reasonably likely to prevent or impede, the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;
(xvi) take any action or omit to take any
action that is reasonably likely to cause any of the conditions to the Merger set forth in
Article
VII
to not be satisfied; or
(xvii) agree to take any action that is prohibited by this
Section
6.1(b)
.
6.2
Conduct of Parent Business Pending the Merger
.
(a) Except as set forth on
Schedule
6.2(a)
of the Parent Disclosure Letter, as expressly
permitted or required by this Agreement, as may be required by applicable Law or otherwise consented to by the Company in writing (which consent shall not be unreasonably withheld, delayed or conditioned), Parent covenants and agrees that, until the
earlier of the Effective Time and the termination of this Agreement pursuant to
Article
VIII
, it shall, and shall cause each of its Subsidiaries to, use reasonable best efforts to conduct its businesses in the ordinary
course, including by using reasonable best efforts to preserve substantially intact its present business organization, goodwill and assets, to keep available the services of its current officers and employees and preserve its existing relationships
with Governmental Entities and its significant customers, suppliers, licensors, licensees, distributors, lessors and others having significant business dealings with it.
(b) Except as set forth on the corresponding subsection of
Schedule 6.2(b)
of the Parent Disclosure Letter, as
expressly permitted or required by this Agreement, as may be required by applicable Law or otherwise consented to by Company in writing (which consent shall not be unreasonably withheld, delayed or conditioned), until the earlier of the Effective
Time and the termination of this Agreement pursuant to
Article
VIII
, Parent shall not, and shall not permit its Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make any other distribution in respect of any
outstanding capital stock of, or other equity interests in, Parent or its Subsidiaries, except for dividends and distributions by a direct or indirect wholly owned Subsidiary of Parent to Parent or another direct or indirect wholly-owned Subsidiary
of Parent; (B) split, combine or reclassify any capital stock of, or other equity interests in, or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for equity interests in Parent or
any of its Subsidiaries; or (C) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, Parent, except as required by the terms of any capital stock or equity
interest of a Subsidiary or as contemplated by any Parent Plan in each case existing as of the date hereof;
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(ii) offer, issue, deliver, grant or sell, or authorize or
propose to offer, issue, deliver, grant or sell, any capital stock of, or other equity interests in, Parent or any of its Subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or
equity interests, other than: (A) the issuance of Parent Common Stock upon the vesting or lapse of any restrictions on any awards granted under Parent Stock Plan and outstanding on the date hereof or issued in compliance with
clause
(C)
below; (B) issuances by a wholly-owned Subsidiary of Parent of such Subsidiarys capital stock or other equity interests to Parent or any other wholly-owned Subsidiary of Parent; (C) issuances of
awards granted under the Parent Stock Plan in the ordinary course of business consistent with past practice; and (D) issuances of Parent Common Stock through any private or public registered offering or other transaction, including any
acquisition permitted by Section 6.2(b)(iv), from time to time, of up to 15% of the shares of Parent Common Stock issued and outstanding as of the date of this Agreement, in the aggregate;
(iii) amend or propose to amend Parents Organizational Documents (other than in immaterial
respects) or adopt any material change in the Organizational Documents of any of Parents Subsidiaries that would adversely affect the consummation of the Transactions;
(iv) (A) except as contemplated in
Section
6.4
in respect of approving,
endorsing, recommending or entering into a Parent Competing Proposal (provided that any reference to 20% in the definition of Parent Competing Proposal shall be deemed to be a reference to more than 50% for purposes of this
Section 6.2(b)(iv)) that expressly contemplates Parents continued compliance with this Agreement and that would not prevent, materially delay or materially impair the ability of the Parties to consummate the Transaction (any such
approved, endorsed, recommended or entered into proposal, a
Parent Takeover Proposal
), merge, consolidate, combine or amalgamate with any Person other than between wholly-owned Subsidiaries of Parent or, in the case of a
Subsidiary of Parent, in connection with any acquisition permitted by clause (B) or (B) acquire or agree to acquire (including by merging or consolidating with, purchasing any equity interest in or a substantial portion of the assets of,
licensing, or by any other manner), any business or assets or any corporation, partnership, association or other business organization or division thereof, other than (x) in one or more of such transactions that do not involve
(i) consideration valued in excess of $2,000,000,000 in the aggregate and (ii) the direct or indirect acquisition of any material assets located outside of the Permian Basin (including the New Mexico Shelf), (y) in connection with a Parent
Permitted Acquisition or (z) swaps of assets or property for no cash consideration, provided that substantially all of the assets received by Parent in any such swap are located in the Permian Basin (including the New Mexico Shelf);
(v) sell, lease, transfer, farmout, or license, Encumber (other than Permitted Encumbrance), discontinue
or otherwise dispose of, or agree to sell, lease, transfer, farmout, license, Encumber (other than Permitted Encumbrance), discontinue or otherwise dispose of, any portion of its assets or properties; other than (A) sales, leases or
dispositions for which the cash consideration is less than $500,000,000, (B) the sale of Hydrocarbons in the ordinary course of business, or (C) swaps of assets or property for no cash consideration, provided that substantially all of the
assets received by Parent in any such swap are located in the Permian Basin (including the New Mexico Shelf);
(vi) authorize, recommend, propose, enter into, adopt a plan or announce an intention to adopt a plan of
complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Parent or any of its Subsidiaries, other than such transactions among wholly owned Subsidiaries of Parent;
(vii) change in any material respect their material accounting principles, practices or methods that
would materially affect the consolidated assets, liabilities or results of operations of Parent and its Subsidiaries, except as required by GAAP or applicable Law;
(viii) (A) incur, create or assume any Indebtedness or guarantee any such Indebtedness of another Person
or (B) create any Encumbrances on any property or assets of Parent or any of its Subsidiaries in connection with any Indebtedness thereof, other than Permitted Encumbrances;
provided
,
however
, that the foregoing shall not restrict
the incurrence of Indebtedness (1) under existing credit facilities, (2) by
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Parent that is owed to any wholly-owned Subsidiary of Parent or by any Subsidiary of Parent that is owed to Parent or a wholly-owned Subsidiary of Parent, (3) additional Indebtedness in an
amount not to exceed $500,000,000, (4) incurred or assumed in connection with any Parent Permitted Acquisition or any other acquisition permitted by
Section
6.2(b)(iv)
(provided that the incurrence or assumption of such
Indebtedness would not reasonably be expected to cause Parent to lose its investment grade credit rating), (5) refinancing indebtedness issued or incurred to refinance any Indebtedness permitted by the foregoing
clauses (1)
,
(2)
,
(3)
or
(4)
; or (6) the creation of any Encumbrances securing any Indebtedness permitted by the foregoing
clauses (1)
,
(2)
,
(3)
,
(4)
or
(5)
;
(ix) take any action, cause any action to be taken, knowingly fail to take any action or knowingly fail
to cause any action to be taken, which action or failure to act would prevent or impede, or would be reasonably likely to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;
(x) take any action or omit to take any action that is reasonably likely to cause any of the conditions
to the Merger set forth in
Article
VII
to not be satisfied; or
(xi) agree
to take any action that is prohibited by this
Section
6.2(b)
.
6.3
No Solicitation by
the Company
.
(a) From and after the date of this Agreement, the Company and its officers and directors will,
will cause the Companys Subsidiaries and their respective officers and directors to, and will use their reasonable best efforts to cause the other Representatives of the Company and its Subsidiaries to, immediately cease, and cause to be
terminated, any discussion or negotiations with any Person conducted heretofore by the Company or any of its Subsidiaries or Representatives with respect to any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to,
a Company Competing Proposal. Within one (1) Business Days of the date of this Agreement the Company shall deliver a written notice to each Person that has received
non-public
information regarding the
Company within the six (6) months prior to the date of this Agreement pursuant to a confidentiality agreement with the Company for purposes of evaluating any transaction that could be a Company Competing Proposal and for whom no similar notice
has been delivered prior to the date of this Agreement requesting the prompt return or destruction of all confidential information concerning the Company and any of its Subsidiaries heretofore furnished to such Person. The Company will immediately
terminate any physical and electronic data access related to any such potential Company Competing Proposal previously granted to such Persons.
(b) From and after the date of this Agreement, the Company and its officers and directors will not, will cause the
Companys Subsidiaries and their respective officers and directors not to, and will use their reasonable best efforts to cause the other Representatives of the Company and its Subsidiaries not to, directly or indirectly:
(i) initiate, solicit, propose, knowingly encourage, or knowingly facilitate any inquiry or the making
of any proposal or offer that constitutes, or would reasonably be expected to result in, a Company Competing Proposal;
(ii) engage in, continue or otherwise participate in any discussions with any Person with respect to or
negotiations with any Person with respect to, relating to, or in furtherance of a Company Competing Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to a Company Competing Proposal;
(iii) furnish any information regarding the Company or its Subsidiaries, or access to the properties,
assets or employees of the Company or its Subsidiaries, to any Person in connection with or in response to any Company Competing Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to a Company Competing
Proposal;
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(iv) enter into any letter of intent or agreement in
principal, or other agreement providing for a Company Competing Proposal (other than a confidentiality agreement as provided in
Section
6.3(e)(ii)
entered into in compliance with
Section 6.3(e)(ii))
; or
(v) submit any Company Competing Proposal to the vote of the stockholders of the Company;
provided
, that notwithstanding anything to the contrary in this Agreement, the Company or any of its Representatives may, (A) in response to an
unsolicited inquiry or proposal, seek to clarify the terms and conditions of such inquiry or proposal to determine whether such inquiry or proposal constitutes a Company Superior Proposal and (B) in response to an inquiry or proposal from a
third party, inform a third party or its Representative of the restrictions imposed by the provisions of this
Section
6.3
(without conveying, requesting or attempting to gather any other information except as otherwise
specifically permitted hereunder).
(c) From and after the date of this Agreement, the Company shall promptly (and
in any event within the shorter of one Business Day or 48 hours) notify Parent of the receipt by the Company (directly or indirectly) of any Company Competing Proposal or any expression of interest, inquiry, proposal or offer with respect to a
Company Competing Proposal made on or after the date of this Agreement, any request for information or data relating to the Company or any of its Subsidiaries made by any Person in connection with a Company Competing Proposal or any request for
discussions or negotiations with the Company or a Representative of the Company relating to a Company Competing Proposal (including the identity of such Person), and the Company shall provide to Parent promptly (and in any event within the shorter
of one Business Day or 48 hours) (i) a copy of any such expression of interest, inquiry, proposal or offer with respect to a Company Competing Proposal made in writing provided to the Company or any of its Subsidiaries or (ii) any such
expression of interest, inquiry, proposal or offer with respect to a Company Competing Proposal is not (or any portion thereof is not) made in writing, a written summary of the material financial and other terms thereof. Thereafter the Company shall
(i) keep Parent reasonably informed, on a prompt basis (and in any event within the shorter of one Business Day or 48 hours), of any material development regarding the status or terms of any such expressions of interest, proposals or offers
(including any amendments thereto) or material requests and shall promptly (and in any event within the shorter of one Business Day or 48 hours) apprise Parent of the status of any such discussions or negotiations and (ii) provide to Parent as
soon as practicable after receipt or delivery thereof (and in any event within the shorter of one Business Day or 48 hours) copies of all material written correspondence and other material written materials provided to the Company or its
Representatives from any Person. Without limiting the foregoing, the Company shall notify Parent if the Company determines to begin providing information or to engage in discussions or negotiations concerning a Company Competing Proposal, prior to
providing any such information or engaging in any such discussions or negotiations.
(d) Except as permitted by
Section
6.3(e)
, the Company Board, including any committee thereof, agrees it shall not:
(i) withhold, withdraw, qualify or modify, or publicly propose or announce any intention to withhold,
withdraw, qualify or modify, in a manner adverse to Parent or Merger Sub, the Company Board Recommendation;
(ii) fail to include the Company Board Recommendation in the Joint Proxy Statement;
(iii) approve, endorse or recommend, or publicly propose or announce any intention to approve, endorse
or recommend, any Company Competing Proposal;
(iv) publicly declare advisable or publicly propose
to enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (other than a confidentiality
agreement referred to in
Section
6.3(e
)(
ii)
entered into in compliance with
Section
6.3(e)(ii)
) relating to a Company Competing Proposal (a
Company Alternative Acquisition
Agreement
);
(v) in the case of a Company Competing Proposal that is structured as a
tender offer or exchange offer pursuant to
Rule 14d-2
under the Exchange Act for outstanding shares of Company Common Stock
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(other than by Parent or an Affiliate of Parent), fail to recommend, in a Solicitation/Recommendation Statement on Schedule
14D-9,
against acceptance of
such tender offer or exchange offer by its stockholders on or prior to the earlier of (A) three (3) Business Days prior to the date of the Company Stockholders Meeting (or promptly after commencement of such tender offer or exchange offer
if commenced on or after the third Business Day prior to the date of the Company Stockholders Meeting) or (B) ten (10) business days (as such term is used in Rule
14d-9
of the Exchange Act) after
commencement of such tender offer or exchange offer;
(vi) if a Company Competing Proposal shall
have been publicly announced or disclosed (other than pursuant to the foregoing
clause (v)
), fail to publicly reaffirm the Company Board Recommendation on or prior to the earlier of (A) five (5) Business Days after Parent so requests in
writing or (B) three (3) Business Days prior to the date of the Company Stockholders Meeting (or promptly after announcement or disclosure of such Company Competing Proposal if announced or disclosed on or after the third Business Day prior to
the date of the Company Stockholders Meeting); or
(vii) cause or permit the Company to enter into a
Company Alternative Acquisition Agreement (together with any of the actions set forth in the foregoing
clauses
(
i
), (ii), (iii), (iv), (v) and (vi)
, a
Company Change of Recommendation
).
(e) Notwithstanding anything in this Agreement to the contrary:
(i) the Company Board may after consultation with its outside legal counsel, make such disclosures as
the Company Board thereof determines in good faith are necessary to comply with Rule
14d-9
or Rule
14e-2(a)
promulgated under the Exchange Act or other disclosure
required to be made in the Joint Proxy Statement by applicable U.S. federal securities laws;
provided
,
however
, that if such disclosure has the effect of withdrawing or adversely modifying the Company Board Recommendation, such
disclosure shall be deemed to be a Company Change of Recommendation and Parent shall have the right to terminate this Agreement as set forth in
Section
8.1(c)
;
(ii) prior to, but not after, the receipt of the Company Stockholder Approval, the Company and its
Representatives may engage in the activities prohibited by
Sections 6.3(b)(ii)
or
6.3(b)(iii)
(and, only with respect to a Company Competing Proposal that satisfies the requirements in the following clauses (1) and (2), may
solicit, propose, knowingly encourage, or knowingly facilitate any inquiry or the making of any proposal or offer with respect to such Company Competing Proposal or any modification thereto) with any Person if (1) the Company receives a
bona
fide
written Company Competing Proposal from such Person that was not solicited at any time following the execution of this Agreement and (2) such Company Competing Proposal did not arise from a breach of the obligations set forth in this
Section
6.3
;
provided
,
however
, that (A) no information that is prohibited from being furnished pursuant to
Section
6.3(b)
may be furnished until the Company receives an executed
confidentiality agreement from such Person containing limitations on the use and disclosure of
non-public
information furnished to such Person by or on behalf of the Company that are no less favorable to the
Company in the aggregate than the terms of the Confidentiality Agreement, as determined by the Company Board in good faith after consultation with its legal counsel; (
provided,
further
, that such confidentiality agreement does not
contain provisions which prohibit the Company from providing any information to Parent in accordance with this
Section
6.3
or that otherwise prohibits the Company from complying with the provisions of this
Section
6.3
), (B) that any such
non-public
information has previously been made available to, or is made available to, Parent prior to or concurrently with (or in the case of oral
non-public
information only, promptly (and in any event within the shorter of one Business Day and 48 hours) after) the time such information is made available to such Person, (C) prior to taking any such
actions, the Company Board or any committee thereof determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Company Competing Proposal is, or would reasonably be expected to lead to, a Company
Superior Proposal and (D) prior to taking any such actions, the Company Board determines in good faith after consultation with its outside legal counsel that failure to take such action would be inconsistent with the fiduciary duties owed by
the Company Board to the stockholders of the Company under applicable Law;
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(iii) prior to, but not after, the receipt of the Company
Stockholder Approval, in response to a
bona fide
written Company Competing Proposal from a third party that was not solicited at any time following the execution of this Agreement and did not arise from a breach of the obligations set forth
in this
Section
6.3
, if the Company Board so chooses, the Company Board may effect a Company Change of Recommendation or may terminate this Agreement pursuant to
Section
8.1(d)
;
provided
,
however
, that such a Company Change of Recommendation or termination may not be made unless and until:
(A) the Company Board determines in good faith after consultation with its financial advisors and
outside legal counsel that such Company Competing Proposal is a Company Superior Proposal;
(B) the
Company Board determines in good faith, after consultation with its outside legal counsel, that failure to effect a Company Change of Recommendation in response to such Company Superior Proposal would be inconsistent with the fiduciary duties owed
by the Company Board to the stockholders of the Company under applicable Law;
(C) the Company
provides Parent written notice of such proposed action and the basis thereof three (3) Business Days in advance, which notice shall set forth in writing that the Company Board intends to consider whether to take such action and include a copy
of the available proposed Company Competing Proposal and any applicable transaction and financing documents;
(D) after giving such notice and prior to effecting such Company Change of Recommendation or
termination, the Company negotiates (and causes its officers, employees, financial advisor and outside legal counsel to negotiate) in good faith with Parent (to the extent Parent wishes to negotiate) to make such adjustments or revisions to the
terms of this Agreement as would permit the Company Board not to effect a Company Change of Recommendation or terminate this Agreement pursuant to
Section
8.1(d)
in response thereto; and
(E) at the end of the three (3) Business Day period, prior to taking action to effect a Company
Change of Recommendation or terminate this Agreement pursuant to
Section
8.1(d)
, the Company Board takes into account any adjustments or revisions to the terms of this Agreement proposed by Parent in writing and any
other information offered by Parent in response to the notice, and determines in good faith after consultation with its financial advisors and outside legal counsel, that the Company Competing Proposal remains a Company Superior Proposal and that
the failure to effect a Company Change of Recommendation in response to such Company Superior Proposal would be inconsistent with the fiduciary duties owed by the Company Board to the stockholders of the Company under applicable;
provided
,
that in the event of any material amendment or material modification to any Company Superior Proposal (it being understood that any amendment or modification to the economic terms of any such Company Superior Proposal shall be deemed material), the
Company shall be required to deliver a new written notice to Parent and to comply with the requirements of this
Section
6.3(e)(iii)
with respect to such new written notice, except that the advance written notice obligation
set forth in this
Section
6.3(e)(iii)
shall be reduced to one (1) Business Day;
provided
,
further
, that any such new written notice shall in no event shorten the original three (3) Business Day
notice period; and
(iv) prior to, but not after, receipt of the Company Stockholder Approval, in
response to a Company Intervening Event that occurs or arises after the date of this Agreement and that did not arise from or in connection with a breach of this Agreement by the Company, the Company may, if the Company Board so chooses, effect a
Company Change of Recommendation;
provided
,
however
, that such a Company Change of Recommendation may not be made unless and until:
(A) the Company Board determines in good faith after consultation with its financial advisors and
outside legal counsel that a Company Intervening Event has occurred;
(B) the Company Board
determines in good faith, after consultation with its outside legal counsel, that failure to effect a Company Change of Recommendation in response to such Company
A-45
Intervening Event would be inconsistent with the fiduciary duties owed by the Company Board to the stockholders of the Company under applicable Law;
(C) the Company provides Parent written notice of such proposed action and the basis thereof three
(3) Business Days in advance, which notice shall set forth in writing that the Company Board intends to consider whether to take such action and includes a reasonably detailed description of the facts and circumstances of the Company
Intervening Event;
(D) after giving such notice and prior to effecting such Company Change of
Recommendation, the Company negotiates (and causes its officers, employees, financial advisor and outside legal counsel to negotiate) in good faith with Parent (to the extent Parent wishes to negotiate) to make such adjustments or revisions to the
terms of this Agreement as would permit the Company Board not to effect a Company Change of Recommendation in response thereto; and
(E) at the end of the three (3) Business Day period, prior to taking action to effect a Company
Change of Recommendation, the Company Board takes into account any adjustments or revisions to the terms of this Agreement proposed by Parent in writing and any other information offered by Parent in response to the notice, and determines in
good faith after consultation with its financial advisors and outside legal counsel, that the failure to effect a Company Change of Recommendation in response to such Company Intervening Event would be inconsistent with the fiduciary duties owed by
the Company Board to the stockholders of the Company under applicable Law;
provided
, that in the event of any material changes regarding any Company Intervening Event, the Company shall be required to deliver a new written notice to Parent
and to comply with the requirements of this
Section
6.3(e)(iv)
with respect to such new written notice, except that the advance written notice obligation set forth in this
Section
6.3(e)(iv)
shall
be reduced to one (1) Business Day;
provided
,
further
, that any such new written notice shall in no event shorten the original three (3) Business Day notice period.
(f) During the period commencing with the execution and delivery of this Agreement and continuing until the earlier of
the Effective Time and termination of this Agreement in accordance with
Article
VIII
, the Company shall not (and it shall cause its Subsidiaries not to) terminate, amend, modify or waive any provision of any
confidentiality, standstill or similar agreement to which it or any of its Subsidiaries is a party;
provided
, that, notwithstanding any other provision in this
Section
6.3
, prior to, but not after, the
time the Company Stockholder Approval is obtained, if, in response to an unsolicited request from a third party to waive any standstill or similar provision, the Company Board determines in good faith, after consultation with its outside
legal counsel that the failure to take such action would be inconsistent with its fiduciary duties owed by the Company Board to the stockholders of the Company under applicable Law, the Company may waive any such standstill or similar
provision solely to the extent necessary to permit a third party to make a Company Competing Proposal, on a confidential basis, to the Company Board and communicate such waiver to the applicable third party;
provided
,
however
, that the
Company shall advise Parent at least two Business Days prior to taking such action. The Company represents and warrants to Parent that it has not taken any action that (i) would be prohibited by this
Section
6.3(f)
or
(ii) but for the ability to avoid actions inconsistent with the fiduciary duties owed by the Company Board to the stockholders of the Company under applicable Law, would have been prohibited by this
Section
6.3(f)
during the 30 days prior to the date of this Agreement.
(g) Notwithstanding anything to the contrary in this
Section
6.3
, any action, or failure to take action, that is taken by a director or officer of the Company or any of its Subsidiaries in violation of this
Section
6.3
shall be deemed to be a breach
of this
Section
6.3
by the Company.
6.4
No Solicitation by Paren
t
.
(a) From and after the date of this Agreement, Parent and its officers and directors will not, will cause Parents
Subsidiaries and their respective officers and directors not to, and will use their reasonable best efforts to
A-46
cause the other Representatives of Parent and its Subsidiaries not to, directly or indirectly, initiate, solicit any inquiry or propose the making of any proposal or offer that constitutes, or
would reasonably be expected to result in, a Parent Competing Proposal.
(b) From and after the date of this
Agreement, Parent shall promptly notify the Company of the receipt by Parent (directly or indirectly) of any Parent Competing Proposal or indication of consideration of making a Parent Competing Proposal made on or after the date of this Agreement,
and Parent shall provide to the Company reasonably promptly (i) a copy of any such expression of interest, inquiry, proposal or offer with respect to a Parent Competing Proposal made in writing provided to Parent or any of its Subsidiaries or
(ii) any such expression of interest, inquiry, proposal or offer with respect to a Parent Competing Proposal is not (or any portion thereof is not) made in writing, a written summary of the material financial and other terms thereof. Thereafter
Parent shall (i) keep the Company reasonably informed of any material development regarding the status or terms of any such expressions of interest, proposals or offers (including any material amendments thereto) or material requests and shall
reasonably promptly apprise the Company of the status of any such discussions or negotiations. Without limiting the foregoing, Parent shall notify the Company if Parent determines to begin providing information or to engage in discussions or
negotiations concerning a Parent Competing Proposal, prior to providing any such information or engaging in any such discussions or negotiations. Notwithstanding anything to the contrary set forth in this Agreement, all information and documentation
provided by Parent to the Company pursuant to this
Section
6.4(b)
shall be subject to the confidentiality provisions of the Confidentiality Agreement, except for disclosure required by applicable Law.
(c) Except as permitted by
Section
6.4(d)
, Parent Board, including any committee thereof,
agrees it shall not:
(i) withhold, withdraw, qualify or modify, or publicly propose or announce any
intention to withhold, withdraw, qualify or modify, in a manner adverse to the Company, the Parent Board Recommendation;
(ii) fail to include the Parent Board Recommendation in the Joint Proxy Statement;
(iii) approve, endorse, recommend or enter into, or publicly propose or announce any intention to
approve, endorse, recommend or enter into, any Parent Competing Proposal other than a Parent Takeover Proposal (together with any of the actions set forth in the foregoing
clauses
(
i
)
and
(ii).
a
Parent Change of Recommendation
).
(d) Notwithstanding anything in this Agreement to the
contrary, prior to, but not after, receipt of Parent Stockholder Approval, in response to a Parent Intervening Event that occurs or arises after the date of this Agreement and that did not arise from or in connection with a breach of this Agreement
by Parent, Parent may, if Parent Board so chooses, effect a Parent Change of Recommendation;
provided
,
however
, that such a Parent Change of Recommendation may not be made unless and until:
(i) Parent Board determines in good faith after consultation with its financial advisors and outside
legal counsel that a Parent Intervening Event has occurred;
(ii) Parent Board determines in good
faith, after consultation with its outside legal counsel, that failure to effect a Parent Change of Recommendation in response to such Parent Intervening Event would be inconsistent with the fiduciary duties owed by Parent Board to the stockholders
of Parent under applicable Law;
(iii) Parent provides the Company written notice of such proposed
action and the basis thereof three (3) Business Days in advance, which notice shall set forth in writing that Parent Board intends to consider whether to take such action and includes a reasonably detailed description of the facts and
circumstances of Parent Intervening Event;
(iv) after giving such notice and prior to effecting
such Parent Change of Recommendation, Parent negotiates (and causes its officers, employees, financial advisor and outside legal counsel to
A-47
negotiate) in good faith with the Company (to the extent the Company wishes to negotiate) to make such adjustments or revisions to the terms of this Agreement as would permit Parent Board not to
effect a Parent Change of Recommendation in response thereto; and
(v) at the end of the three
(3) Business Day period, prior to taking action to effect a Parent Change of Recommendation, Parent Board takes into account any adjustments or revisions to the terms of this Agreement proposed by the Company in writing and any other
information offered by the Company in response to the notice, and determines in good faith after consultation with its financial advisors and outside legal counsel, that the failure to effect a Parent Change of Recommendation in response to such
Parent Intervening Event would be inconsistent with the fiduciary duties owed by Parent Board to the stockholders of Parent under applicable Law;
provided
, that in the event of any material changes regarding any Parent Intervening Event,
Parent shall be required to deliver a new written notice to the Company and to comply with the requirements of this
Section
6.4(d)(v)
with respect to such new written notice, except that the advance written notice
obligation set forth in this
Section
6.4(d)(v)
shall be reduced to one (1) Business Day;
provided
,
further
, that any such new written notice shall in no event shorten the original three (3) Business
Day notice period.
(e) Notwithstanding anything in this Agreement to the contrary, the Parent Board may after
consultation with its outside legal counsel, make such disclosures as the Parent Board thereof determines in good faith are necessary to comply with Rule
14d-9
or Rule
14e-2(a)
promulgated under the Exchange Act or other disclosure required to be made in the Joint Proxy Statement by applicable U.S. federal securities laws;
provided
,
however
, that if such
disclosure has the effect of withdrawing or adversely modifying the Parent Board Recommendation, such disclosure shall be deemed to be a Parent Change of Recommendation and the Company shall have the right to terminate this Agreement as set forth in
Section
8.1(e)
;
6.5
Preparation of Joint Proxy Statement and Registration
Statement
.
(a) Parent will promptly furnish to the Company such data and information relating to it, its
Subsidiaries (including Merger Sub) and the holders of its capital stock, as the Company may reasonably request for the purpose of including such data and information in the Joint Proxy Statement and any amendments or supplements thereto used by the
Company to obtain the adoption by its stockholders of this Agreement. The Company will promptly furnish to Parent such data and information relating to it, its Subsidiaries and the holders of its capital stock, as Parent may reasonably request for
the purpose of including such data and information in the in the Joint Proxy Statement and the Registration Statement and any amendments or supplements thereto.
(b) Promptly following the date hereof, the Company and Parent shall cooperate in preparing and shall use their
respective reasonable best efforts to cause to be filed with the SEC within
twenty-one
(21) days of the date of this Agreement, (i) a mutually acceptable Joint Proxy Statement relating to the matters
to be submitted to the holders of Company Common Stock at the Company Stockholders Meeting and the holders of Parent Common Stock at the Parent Stockholders Meeting and (ii) the Registration Statement (of which the Joint Proxy Statement will be
a part). The Company and Parent shall each use reasonable best efforts to cause the Registration Statement and the Joint Proxy Statement to comply with the rules and regulations promulgated by the SEC and to respond promptly to any comments of the
SEC or its staff. Parent and the Company shall each use its reasonable best efforts to cause the Registration Statement to become effective under the Securities Act as soon after such filing as reasonably practicable and Parent shall use reasonable
best efforts to keep the Registration Statement effective as long as is necessary to consummate the Merger. Each of the Company and Parent will advise the other promptly after it receives any request by the SEC for amendment of the Joint Proxy
Statement or the Registration Statement or comments thereon and responses thereto or any request by the SEC for additional information. Each of the Company and Parent shall use reasonable best efforts to cause all documents that it is responsible
for filing with the SEC in connection with the Transactions to comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act. Notwithstanding the foregoing, prior to filing the
Registration Statement (or any amendment or supplement
A-48
thereto) or mailing the Joint Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, each of the Company and Parent will
(i) provide the other with a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response), (ii) shall include in such document or response all comments reasonably
and promptly proposed by the other and (iii) shall not file or mail such document or respond to the SEC prior to receiving the approval of the other, which approval shall not be unreasonably withheld, conditioned or delayed.
(c) Parent and the Company shall make all necessary filings with respect to the Merger and the Transactions under the
Securities Act and the Exchange Act and applicable blue sky laws and the rules and regulations thereunder. Each Party will advise the other, promptly after it receives notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction. Each of the Company and
Parent will use reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated.
(d) If at any time prior to the Effective Time, any information relating to Parent or the Company, or any of their
respective Affiliates, officers or directors, should be discovered by Parent or the Company that should be set forth in an amendment or supplement to the Registration Statement or the Joint Proxy Statement, so that such documents would not include
any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly
notify the other Party and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by applicable Law, disseminated to the stockholders of the Company and Parent.
6.6
Stockholders Meetings
.
(a) The Company shall take all action necessary in accordance with applicable Laws and the Organizational Documents of
the Company to duly give notice of, convene and hold a meeting of its stockholders for the purpose of obtaining the Company Stockholder Approval, to be held as promptly as reasonably practicable following the clearance of the Joint Proxy Statement
by the SEC and the Registration Statement is declared effective by the SEC (and in any event will use reasonable best efforts to convene such meeting within 45 days thereof). Except as permitted by
Section
6.3
, the Company
Board shall recommend that the stockholders of the Company vote in favor of the adoption of this Agreement at the Company Stockholders Meeting and the Company Board shall solicit from stockholders of the Company proxies in favor of the adoption of
this Agreement, and the Joint Proxy Statement shall include the Company Board Recommendation. Notwithstanding anything to the contrary contained in this Agreement, the Company (i) shall be required to adjourn or postpone the Company
Stockholders Meeting (A) to the extent necessary to ensure that any legally required supplement or amendment to the Joint Proxy Statement is provided to the Companys stockholders or (B) if, as of the time for which the Company
Stockholders Meeting is scheduled, there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at such Company Stockholders Meeting and (ii) may adjourn
or postpone the Company Stockholders Meeting if, as of the time for which the Company Stockholders Meeting is scheduled, there are insufficient shares of Company Common Stock represented (either in person or by proxy) to obtain the Company
Stockholder Approval;
provided
,
however
, that unless otherwise agreed to by the Parties, the Company Stockholders Meeting shall not be adjourned or postponed to a date that is more than ten (10)
Business Days after the date
for which the meeting was previously scheduled (
it
being
understood
that such Company Stockholders Meeting shall be adjourned or postponed every time the circumstances described in the foregoing
clauses
(
i
)(A)
and
(
i
)(B)
exist, and, with Parents consent, such Company Stockholders Meeting may be adjourned or postponed every time the circumstances described in the foregoing
clause (ii)
exist);
and
provided
further
that the Company Stockholders Meeting shall not be adjourned or postponed to a date on or after two (2) Business Days prior to the End Date. If requested by Parent, the Company shall promptly provide all
voting tabulation reports relating to the Company Stockholders Meeting that have been prepared by the Company or the Companys
A-49
transfer agent, proxy solicitor or other Representative, and shall otherwise keep Parent reasonably informed regarding the status of the solicitation and any material oral or written
communications from or to the Companys stockholders with respect thereto. Unless there has been a Company Change of Recommendation in accordance with
Section
6.3
, the Parties agree to cooperate and use their
reasonable best efforts to defend against any efforts by any of the Companys stockholders or any other Person to prevent the Company Stockholder Approval from being obtained. Once the Company has established a record date for the Company
Stockholders Meeting, the Company shall not change such record date or establish a different record date for the Company Stockholders Meeting without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned
or delayed), unless required to do so by applicable Law or its Organizational Documents or in connection with a postponement or adjournment permitted hereunder. Without the prior written consent of Parent or as required by applicable Law,
(i) the adoption of this Agreement shall be the only matter (other than a
non-binding
advisory proposal regarding compensation that may be paid or become payable to the named executive officers of the
Company in connection with the Merger and matters of procedure) that the Company shall propose to be acted on by the stockholders of the Company at the Company Stockholders Meeting and the Company shall not submit any other proposal to such
stockholders in connection with the Company Stockholders Meeting or otherwise (including any proposal inconsistent with the adoption of this Agreement or the consummation of the Transactions) and (ii) the Company shall not call any meeting of
the stockholders of the Company other than the Company Stockholders Meeting.
(b) Parent shall take all action
necessary in accordance with applicable Laws and the Organizational Documents of Parent to duly give notice of, convene and hold a meeting of its stockholders for the purpose of obtaining the Parent Stockholder Approval, to be held as promptly as
reasonably practicable following the clearance of the Joint Proxy Statement by the SEC and the Registration Statement is declared effective by the SEC (and in any event will use reasonable best efforts to convene such meeting within 45 days
thereof). Except as permitted by
Section
6.4
, the Parent Board shall recommend that the stockholders of Parent vote in favor of the issuance of Parent Common Stock in the Merger and the Parent Board shall solicit from
stockholders of Parent proxies in favor of the Parent Stock Issuance, and the Joint Proxy Statement shall include the Parent Board Recommendation. Notwithstanding anything to the contrary contained in this Agreement, Parent (i) shall be
required to adjourn or postpone the Parent Stockholders Meeting (A) to the extent necessary to ensure that any legally required supplement or amendment to the Joint Proxy Statement is provided to the Parents stockholders or (B) if,
as of the time for which the Parent Stockholders Meeting is scheduled, there are insufficient shares of Parent Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at such Parent Stockholders
Meeting and (ii) may adjourn or postpone the Parent Stockholders Meeting if, as of the time for which the Parent Stockholders Meeting is scheduled, there are insufficient shares of Parent Common Stock represented (either in person or by proxy)
to obtain the Parent Stockholder Approval;
provided
,
however
, that unless otherwise agreed to by the Parties, the Parent Stockholders Meeting shall not be adjourned or postponed to a date that is more than ten (10)
Business
Days after the date for which the meeting was previously scheduled (it being understood that such Parent Stockholders Meeting shall be adjourned or postponed every time the circumstances described in the foregoing
clauses (
i
)(A)
and
(
i
)(B)
exist, and, with the Companys consent, such Parent Stockholders Meeting may be adjourned or postponed every time the circumstances described in the foregoing
clause (ii)
exist); and
provided
further
that the Parent Stockholders Meeting shall not be adjourned or postponed to a date on or after two (2) Business Days prior to the End Date. If requested by the Company, Parent shall promptly provide all voting tabulation reports
relating to the Parent Stockholders Meeting that have been prepared by Parent or Parents transfer agent, proxy solicitor or other Representative, and shall otherwise keep the Company reasonably informed regarding the status of the solicitation
and any material oral or written communications from or to Parents stockholders with respect thereto.
Unless there has been a Parent Change of Recommendation in accordance with
Section
6.4
, the Parties agree to cooperate and use their reasonable best efforts to defend against any efforts by any of the Parents stockholders or any other Person to prevent the Parent Stockholder Approval from
being obtained. Once Parent has established a record date for the Parent Stockholders Meeting, Parent shall not change such record date or establish a different record date for the Parent Stockholders Meeting without the prior written consent of the
Company (which consent shall not be
A-50
unreasonably withheld, conditioned or delayed), unless required to do so by applicable Law or its Organizational Documents or in connection with a postponement or adjournment permitted hereunder.
(c) The Parties shall cooperate and use their reasonable best efforts to set the record dates for and hold the
Company Stockholders Meeting and the Parent Stockholders Meeting, as applicable, on the same day.
(d) Without
limiting the generality of the foregoing but subject to the Companys ability to terminate this Agreement pursuant to
Section
8.1(d)
, each of the Company and Parent agrees that its obligations to hold the Company
Stockholders Meeting and the Parent Stockholders Meeting, as applicable, pursuant to this
Section
6.6
shall not be affected by the making of a Company Change of Recommendation or a Parent Change of Recommendation, as
applicable, and its obligations pursuant to this
Section
6.6
shall not be affected by the commencement, announcement, disclosure, or communication to the Company or Parent, as applicable, of any Company Competing Proposal
or Parent Competing Proposal or other proposal (including, in the case of the Company, a Company Superior Proposal) or the occurrence or disclosure of any Company Intervening Event or Parent Intervening Event.
(e) Within three (3) Business Days following the date of this Agreement, the Company shall take all necessary
actions in accordance with applicable Law, its Organizational Documents and the rules of the NYSE to duly postpone the 2018 Annual Meeting of the holders of Company Common Stock (the
Company Annual Meeting
) and prior to the
termination of this Agreement, without the prior written consent of Parent or as otherwise required by applicable Law, the Company shall not resume, hold or convene the Company Annual Meeting or any other meeting of its stockholders other than the
Company Stockholders Meeting.
(f) Immediately after the execution of this Agreement, Parent shall duly approve and
adopt this Agreement in its capacity as the sole stockholder of Merger Sub in accordance with applicable Law and the Organizational Documents of Merger Sub and deliver to the Company evidence of its vote or action by written consent so approving and
adopting this Agreement.
6.7
Access to Information
.
(a) Subject to applicable Law and the other provisions of this
Section
6.7
, the Company
and Parent each shall (and shall cause its Subsidiaries to), upon request by the other, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Joint Proxy Statement, the Registration Statement, or any other statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to any third
party or any Governmental Entity in connection with the Transactions. The Company shall, and shall cause each of its Subsidiaries to, afford to Parent and its Representatives, during the period prior to the earlier of the Effective Time and the
termination of this Agreement pursuant to the terms of
Section
8.1
, reasonable access, at reasonable times upon reasonable prior notice, to the officers, key employees, agents, properties, offices and other facilities of
the Company and its Subsidiaries and to their books, records, contracts and documents and shall, and shall cause each of its Subsidiaries to, furnish reasonably promptly to Parent and its Representatives such information concerning its and its
Subsidiaries business, properties, contracts, records and personnel as may be reasonably requested, from time to time, by or on behalf of Parent. Parent and its Representatives shall conduct any such activities in such a manner as not to
interfere unreasonably with the business or operations of the Company or its Subsidiaries or otherwise cause any unreasonable interference with the prompt and timely discharge by the employees of the Company and its Subsidiaries of their normal
duties. Notwithstanding the foregoing:
(i) No Party shall be required to, or to cause any of its
Subsidiaries to, grant access or furnish information, as applicable, to the other Party or any of its Representatives to the extent that such information is subject to an attorney/client privilege or the attorney work product doctrine or that such
access or the furnishing of such information, as applicable, is prohibited by applicable Law or an existing contract or
A-51
agreement (
provided
,
however
, the Company or Parent, as applicable, shall inform the other Party as to the general nature of what is being withheld and the Company and Parent shall
reasonably cooperate to make appropriate substitute arrangements to permit reasonable disclosure that does not suffer from any of the foregoing impediments, including through the use of commercially reasonable efforts to (A) obtain the required
consent or waiver of any third party required to provide such information and (B) implement appropriate and mutually agreeable measures to permit the disclosure of such information in a manner to remove the basis for the objection, including by
arrangement of appropriate clean room procedures, redaction or entry into a customary joint defense agreement with respect to any information to be so provided, if the Parties determine that doing so would reasonably permit the disclosure of such
information without violating applicable Law or jeopardizing such privilege);
(ii) No Party shall
have access to personnel records of the other Party or any of its Subsidiaries relating to individual performance or evaluation records, medical histories or other information that in the other Partys good faith opinion the disclosure of which
could subject the other Party or any of its Subsidiaries to risk of liability;
(iii) Parent shall
not be permitted to conduct any sampling or analysis of any environmental media or building materials at any facility of the Company or its Subsidiaries without the prior written consent of the Company (granted or withheld in its sole discretion);
and
(iv) no investigation or information provided pursuant to this
Section
6.7
shall affect or be deemed to modify any representation or warranty made by the Company, Parent or Merger Sub herein.
(b) The Confidentiality Agreement dated as of March 21, 2018 between Parent and the Company (the
Confidentiality Agreement
) shall survive the execution and delivery of this Agreement and shall apply to all information furnished thereunder or hereunder;
provided
, that Section 6 of the Confidentiality Agreement
shall be of no force and effect as of the date hereof. From and after the date of this Agreement until the earlier of the Effective Time and termination of this Agreement in accordance with
Article
VIII
, each Party shall
continue to provide access to the other Party and its Representatives to the electronic data room relating to the Transactions maintained by or on behalf of it to which the other Party and its Representatives were provided access prior to the date
of this Agreement.
6.8
HSR and Other Approvals
.
(a) Except for the filings and notifications made pursuant to Antitrust Laws to which
Sections
6.8(b)
and
6.8(c)
, and not this
Section
6.8(a)
, shall apply, promptly following the execution of this Agreement, the Parties shall proceed to prepare and file with the appropriate Governmental Entities and other third parties
all authorizations, consents, notifications, certifications, registrations, declarations and filings that are necessary in order to consummate the Transactions and shall diligently and expeditiously prosecute, and shall cooperate fully with each
other in the prosecution of, such matters. Notwithstanding the foregoing, in no event shall either the Company or Parent or any of their respective Affiliates be required to pay any consideration to any third parties or give anything of value to
obtain any such Persons authorization, approval, consent or waiver to effectuate the Transactions, other than filing, recordation or similar fees. Parent and the Company shall have the right to review in advance and, to the extent reasonably
practicable, each will consult with the other on and consider in good faith the views of the other in connection with, all of the information relating to Parent or the Company, as applicable, and any of their respective Subsidiaries, that appears in
any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the Transactions (including the Joint Proxy Statement). The Company and its Subsidiaries shall not agree to any actions,
restrictions or conditions with respect to obtaining any consents, registrations, approvals, permits, expirations of waiting periods or authorizations in connection with the Transactions without the prior written consent of Parent (which consent,
subject to
Sections
6.8(b)
, may be withheld in Parents sole discretion).
(b) As promptly as
reasonably practicable following the execution of this Agreement, but in no event later than fifteen (15) Business Days following the date of this Agreement, the Parties shall make any filings
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required under the HSR Act. As promptly as reasonably practicable, the Parties shall make the filings and notifications as may be required by foreign competition laws and merger regulations (the
Competition Law Notifications
). Each of Parent and the Company shall cooperate fully with each other and shall furnish to the other such necessary information and reasonable assistance as the other may reasonably request in
connection with its preparation of any filings under any applicable Antitrust Laws. Unless otherwise agreed, Parent and the Company shall each use its reasonable best efforts to ensure the prompt expiration of any applicable waiting period under the
HSR Act or any Competition Law Notifications. Parent and the Company shall each use its reasonable best efforts to respond to and comply with any request for information from any Governmental Entity charged with enforcing, applying, administering,
or investigating the HSR Act, any Competition Law Notifications or any other Law designed to prohibit, restrict or regulate actions for the purpose or effect of mergers, monopolization, restraining trade or abusing a dominant position (collectively,
Antitrust Laws
), including the Federal Trade Commission, the Department of Justice, any attorney general of any state of the United States, the European Commission or any other competition authority of any jurisdiction
(
Antitrust Authority
). Parent and the Company shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from any Antitrust Authority. Notwithstanding anything
herein to the contrary, Parent shall take any and all action necessary, including but not limited to (i) selling or otherwise disposing of, or holding separate and agreeing to sell or otherwise dispose of, assets, categories of assets or
businesses of the Company or Parent or their respective Subsidiaries; (ii) terminating existing relationships, contractual rights or obligations of the Company or Parent or their respective Subsidiaries; (iii) terminating any venture or
other arrangement; (iv) creating any relationship, contractual rights or obligations of the Company or Parent or their respective Subsidiaries or (v) effectuating any other change or restructuring of the Company or Parent or their
respective Subsidiaries (and, in each case, to enter into agreements or stipulate to the entry of an order or decree or file appropriate applications with any Antitrust Authority in connection with any of the foregoing and in the case of actions by
or with respect to the Company or its Subsidiaries or its or their businesses or assets;
provided
,
however
, that any such action may, at the discretion of the Company, be conditioned upon consummation of the Merger) (each a
Divestiture Action
) to ensure that no Governmental Entity enters any order, decision, judgment, decree, ruling, injunction (preliminary or permanent), or establishes any Law or other action preliminarily or permanently
restraining, enjoining or prohibiting the consummation of the Merger, or to ensure that no Antitrust Authority with the authority to clear, authorize or otherwise approve the consummation of the Merger, fails to do so by the End Date;
provided
,
further
,
however
, that, notwithstanding any other provisions of this Agreement, none of Parent or any of its Subsidiaries shall be required to take or agree to take any Divestiture Action or other action that would
reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, financial condition or operations of Parent and its Subsidiaries from and after the Effective Time (but, for purposes of determining whether
any effect is material, calculated as if Parent and its Subsidiaries from and after the Effective Time were collectively the same size as Company and its Subsidiaries prior to the Effective Time), taken as a whole (a
Regulatory Material
Adverse Effect
). Notwithstanding any other provisions of this
Section
6.8
, in no event shall Parent have to take or agree to take any Divestiture Action or other action (other than
de minimis
actions) with
respect to Parent and its Subsidiaries (other than with respect to the Company and its Subsidiaries (from and after the Effective Time)). The Company shall agree to take any Divestiture Action requested by Parent if such actions are only effective
after the Effective Time and conditioned upon the consummation of the Transactions. In the event that any Divestiture Action is proposed by or acceptable to a Governmental Entity, Parent shall have the right to determine the manner in which to
implement the requirement of such Governmental Entity;
provided
, that in no event shall Parent or the Company (or any of their respective Subsidiaries or other Affiliates) be required to take or effect any such action that is not conditioned
upon the consummation of the Transactions;
provided
,
further
, that Parent shall consult with the Company and give consideration to the views of the Company on all matters relating to any possible Divestiture Action. In the event that
any action is threatened or instituted challenging the Merger as violative of any Antitrust Law, Parent shall take such action, including any Divestiture Action, as may be necessary to avoid, resist or resolve such action (
provided
, that in
no event shall this
Section
6.8(b)
require Parent to make or agree to take any Divestiture Action that would reasonably be expected to have, individually or in the aggregate, a Regulatory Material Adverse Effect). Parent
shall be entitled to direct any Proceedings with any Antitrust Authority or other Person relating to any of the foregoing,
provided
,
however
, that it shall afford
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the Company a reasonable opportunity to participate therein. In addition, subject to the terms of this
Section
6.8
, in the event that any permanent or preliminary
injunction or other order is entered or becomes reasonably foreseeable to be entered in any Proceeding that would make consummation of the Transactions in accordance with the terms of this Agreement unlawful or that would restrain, enjoin or
otherwise prevent or materially delay the consummation of the Transactions, Parent shall take promptly any and all steps necessary to vacate, modify or suspend such injunction or order so as to permit such consummation prior to the End Date. The
Parties shall take reasonable efforts to share information protected from disclosure under the attorney-client privilege, work product doctrine, joint defense privilege or any other privilege pursuant to this
Section
6.8(b)
so as to preserve any applicable privilege.
(c) Parent and Merger Sub shall not take any action that could
reasonably be expected to hinder or delay in any material respect the obtaining of clearance or the expiration of the required waiting period under the HSR Act, any Competition Law Notifications or any other applicable Antitrust Law.
6.9
Employee Matters
.
(a) For a period of 12 months following the Closing Date, Parent shall cause each individual who is employed as of the
Closing Date by the Company or a Subsidiary thereof (a
Company Employee
) and who remains employed by Parent or any of its Subsidiaries (including the Surviving Corporation or any of its Subsidiaries) to be provided with
(i) base compensation (salary or wages, as applicable), and as applicable, annual cash bonus and equity compensation opportunities at target that are no less favorable, in each respect, than those in effect for such Company Employee immediately
prior to the Closing Date and (ii) employee benefits (including retirement plan participation) that are no less favorable in the aggregate than those in effect for such Company Employee immediately prior to the Closing Date through the Company
Plans. Parent shall also cause eligible Company Employees to be provided with the benefits outlined in
Schedule 6.9(a)
of the Parent Disclosure Letter pursuant to the terms of such
Schedule 6.9(a)
.
(b) From and after the Effective Time, as applicable, Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries, to take commercially reasonable efforts to credit the Company Employees for purposes of vesting, eligibility and benefit accrual under the Parent Plans (other than with respect to any defined benefit plan as defined in
Section 3(35) of ERISA, retiree medical benefits or disability benefits or to the extent it would result in a duplication of benefits) in which the Company Employees participate, for such Company Employees service with the Company and its
Subsidiaries, to the same extent and for the same purposes that such service was taken into account under a corresponding Company Plan immediately prior to the Closing Date. Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries, to give service credit for long term disability coverage purposes for the Company Employees service with the Company and its Subsidiaries.
(c) From and after the Effective Time, as applicable, Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries, to take commercially reasonable efforts to (i) waive any limitation on health and welfare coverage of any Company Employee and his or her eligible dependents due to
pre-existing
conditions
and/or waiting periods, active employment requirements and requirements to show evidence of good health under the applicable health and welfare Parent Plan to the extent such Company Employee and his or her eligible dependents are covered under an a
Company Plan immediately prior to the Closing Date, and such conditions, periods or requirements are satisfied or waived under such Company Plan and (ii) give each Company Employee credit for the plan year in which the Closing Date occurs
towards applicable deductibles and annual
out-of-pocket
limits for medical expenses incurred prior to the Closing Date for which payment has been made, in each case, to
the extent permitted by the applicable insurance plan provider.
(d) From and after the Effective Time, Parent
shall, or shall cause the Surviving Corporation and its Subsidiaries, to assume and honor their respective obligations under the Companys Executive Change in Control and Severance Benefit Plan.
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(e) Prior to the Effective Time, if requested by Parent in writing, the
Company shall cause the Companys participation in the defined contribution retirement plan in which the Company is a participating employer (the
Company 401(k) Plan
) to be terminated, effective immediately prior thereto.
Prior to the Effective Time and thereafter (as applicable), Parent shall take any and all action as may be required, including amendments to the
tax-qualified
defined contribution retirement plan designated by
Parent (the
Parent 401(k) Plan
) to (i) permit each Company Employee to make rollover contributions of eligible rollover distributions (within the meaning of Section 401(a)(31) of the Code) in the form of cash
in an amount equal to the full account balance distributed or distributable to such Company Employee from the Company 401(k) Plan to the Parent 401(k) Plan, including any outstanding loans. Each Company Employee shall become a participant in the
Parent 401(k) Plan on the Closing Date (giving effect to the service crediting provisions of
Section
6.9(b)
); it being agreed that there shall be no gap in participation in a
tax-qualified
defined contribution plan.
(f) For purposes of determining
the number of vacation days and other paid time off to which each Company Employee is entitled during the calendar year in which the Closing occurs, Parent, the Surviving Corporation or one of its Subsidiaries will assume and honor all unused
vacation and other paid time off days accrued or earned by such Company Employee as of the Closing Date for the calendar year in which the Closing Date occurs.
(g) Nothing in this Agreement shall constitute an amendment to, or be construed as amending, any Employee Benefit Plan
sponsored, maintained or contributed to by the Company, Parent or any of their respective Subsidiaries. The provisions of this
Section
6.9
are for the sole benefit of the Parties and nothing herein, expressed or implied, is
intended or will be construed to confer upon or give to any Person (including, for the avoidance of doubt, any Company Employee or other current or former employee of the Company or any of their respective Affiliates), other than the Parties and
their respective permitted successors and assigns, any third-party beneficiary, legal or equitable or other rights or remedies (including with respect to the matters provided for in this
Section
6.9
) under or by reason of
any provision of this Agreement. Nothing in this Agreement is intended to prevent Parent, the Surviving Corporation or any of their Affiliates (i) from amending or terminating any of their respective Employee Benefit Plans or, after the
Effective Time, any Company Plan in accordance with their terms or (ii) after the Effective Time, from terminating the employment of any Company Employee.
6.10
Indemnification; Directors and Officers Insurance
.
(a) Without limiting any other rights that any Indemnified Person may have pursuant to any employment agreement or
indemnification agreement in effect on the date hereof or otherwise, from the Effective Time, Parent and the Surviving Corporation shall, jointly and severally, indemnify, defend and hold harmless each Person who is now, or has been at any time
prior to the date of this Agreement or who becomes prior to the Effective Time, a director or officer of the Company or any of its Subsidiaries or who acts as a fiduciary under any Company Plan, in each case, when acting in such capacity (the
Indemnified Persons
) against all losses, claims, damages, costs, fines, penalties, expenses (including attorneys and other professionals fees and expenses), liabilities or judgments or amounts that are paid in
settlement, of or incurred in connection with any threatened or actual Proceeding to which such Indemnified Person is a party or is otherwise involved (including as a witness) based, in whole or in part, on or arising, in whole or in part, out of
the fact that such Person is or was a director or officer of the Company or any of its Subsidiaries, a fiduciary under any Company Plan or is or was serving at the request of the Company or any of its Subsidiaries as a director, officer or fiduciary
of another corporation, partnership, limited liability company, joint venture, Employee Benefit Plan, trust or other enterprise, as applicable, or by reason of anything done or not done by such Person in any such capacity, whether pertaining to any
act or omission occurring or existing prior to or at, but not after, the Effective Time and whether asserted or claimed prior to, at or after the Effective Time (
Indemnified Liabilities
), including all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or pertaining to, this Agreement or the Transactions, in each case to the fullest extent permitted under applicable Law (and Parent and the Surviving Corporation shall, jointly and
severally, pay expenses incurred in connection therewith in advance of the final disposition of any such Proceeding to each Indemnified Person to the fullest
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extent permitted under applicable Law). Without limiting the foregoing, in the event any such Proceeding is brought or threatened to be brought against any Indemnified Persons (whether arising
before or after the Effective Time), (i) the Indemnified Persons may retain the Companys regularly engaged legal counsel or other counsel satisfactory to them, and Parent and the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Persons as promptly as statements therefor are received, and (ii) Parent and the Surviving Corporation shall use its best efforts to assist in the defense of any such matter. Any Indemnified Person
wishing to claim indemnification or advancement of expenses under this
Section
6.10
, upon learning of any such Proceeding, shall notify the Surviving Corporation (but the failure so to notify shall not relieve a Party from
any obligations that it may have under this
Section
6.10
except to the extent such failure materially prejudices such Partys position with respect to such claims). With respect to any determination of whether any
Indemnified Person is entitled to indemnification by Parent or Surviving Corporation under this
Section
6.10
, such Indemnified Person shall have the right, as contemplated by the DGCL, to require that such determination be
made by special, independent legal counsel selected by the Indemnified Person and approved by Parent or Surviving Corporation, as applicable (which approval shall not be unreasonably withheld or delayed), and who has not otherwise performed material
services for Parent, Surviving Corporation or the Indemnified Person within the last three (3) years.
(b) Parent and the Surviving Corporation shall not amend, repeal or otherwise modify any provision in the
Organizational Documents of the Surviving Corporation in any manner that would affect (or manage the Surviving Corporation or its Subsidiaries, with the intent to or in a manner that would) adversely the rights thereunder or under the Organizational
Documents of the Surviving Corporation or any of its Subsidiaries of any Indemnified Person to indemnification, exculpation and advancement except to the extent required by applicable Law. Parent shall, and shall cause the Surviving Corporation to,
fulfill and honor any indemnification, expense advancement or exculpation agreements between the Company or any of its Subsidiaries and any of its directors or officers existing and in effect prior to the date of this Agreement.
(c) Parent and the Surviving Corporation shall indemnify any Indemnified Person against all reasonable costs and
expenses (including reasonable attorneys fees and expenses), such amounts to be payable in advance upon request as provided in
Section
6.10(a)
, relating to the enforcement of such Indemnified Persons rights
under this
Section
6.10
or under any charter, bylaw or contract regardless of whether such Indemnified Person is ultimately determined to be entitled to indemnification hereunder or thereunder.
(d) Parent and the Surviving Corporation will cause to be put in place, and Parent shall fully prepay immediately prior
to the Effective Time, tail insurance policies with a claims period of at least six (6) years from the Effective Time (the
Tail Period
) from an insurance carrier with the same or better credit rating as the
Companys current insurance carrier with respect to directors and officers liability insurance (
D&O Insurance
) in an amount and scope at least as favorable as the Companys existing policies with respect
to matters, acts or omissions existing or occurring at or prior to, but not after, the Effective Time;
provided
,
however
, that in no event shall the aggregate cost of the D&O Insurance exceed during the Tail Period 300% of the
current aggregate annual premium paid by the Company for such purpose; and
provided
,
further
, that if the cost of such insurance coverage exceeds such amount, the Surviving Corporation shall obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(e) In the event that Parent or the Surviving Corporation or any
of its successors or assignees (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, in each such case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this
Section
6.10
. Parent and the Surviving Corporation shall not sell, transfer, distribute or otherwise dispose of any of their assets in a manner that would reasonably be expected to render Parent or Surviving Corporation
unable to satisfy their obligations under this
Section
6.10
. The provisions of this
Section
6.10
are intended to be for the benefit of, and shall be enforceable by, the Parties and each Person
entitled to indemnification or insurance coverage or expense
A-56
advancement pursuant to this
Section
6.10
, and his heirs and Representatives. The rights of the Indemnified Persons under this
Section
6.10
are
in addition to any rights such Indemnified Persons may have under the Organizational Documents of the Company or any of its Subsidiaries, or under any applicable contracts or Law. Parent and the Surviving Corporation shall pay all expenses,
including attorneys fees, that may be incurred by any Indemnified Person in enforcing the indemnity and other obligations provided in this
Section
6.10
.
6.11
Transaction Litigation
. In the event any Proceeding by any Governmental Entity or other Person is commenced
or, to the knowledge of the Company or Parent, as applicable, threatened, that questions the validity or legality of the Transactions or seeks damages in connection therewith, including stockholder litigation (
Transaction
Litigation
), the Company or Parent, as applicable, shall promptly notify the other Party of such Transaction Litigation and shall keep the other Party reasonably informed with respect to the status thereof. The Company shall give
Parent a reasonable opportunity to participate in the defense or settlement of any Transaction Litigation and shall consider in good faith Parents advice with respect to such Transaction Litigation;
provided
, that the Company shall not
offer or agree to settle any Transaction Litigation without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed).
6.12
Public Announcements
. The initial press release with respect to the execution of this Agreement shall be a
joint press release to be reasonably agreed upon by the Parties. No Party shall, and each will cause its Representatives not to, issue any public announcements or make other public disclosures regarding this Agreement or the Transactions, without
the prior written approval of the other Party. Notwithstanding the foregoing, a Party, its Subsidiaries or their Representatives may issue a public announcement or other public disclosures (a) required by applicable Law, (b) required by
the rules of any stock exchange upon which such Partys or its Subsidiarys capital stock is traded or (c) consistent with the final form of the joint press release announcing the Merger and the investor presentation given to
investors on the morning of announcement of the Merger;
provided
, in each case, such Party uses reasonable best efforts to afford the other Party an opportunity to first review the content of the proposed disclosure and provide reasonable
comments thereon; and
provided
,
however
, that no provision this Agreement shall be deemed to restrict in any manner a Partys ability to communicate with its employees (
provided
, that prior to making any written
communications to the directors, officers or employees of the Company or any of its Subsidiaries pertaining to compensation or benefit matters that are affected by the Transactions, the Company shall provide Parent with a copy of the intended
communication, the Company shall provide Parent a reasonable period of time to review and comment on the communication, and the Company shall consider any timely comments in good faith) and that neither Party shall be required by any provision of
this Agreement to consult with or obtain any approval from any other Party with respect to a public announcement or press release issued in connection with the receipt and existence of a Company Competing Proposal or a Parent Competing Proposal, as
applicable, and matters related thereto or a Company Change of Recommendation or Parent Change of Recommendation, as applicable, other than as set forth in
Section
6.3
or
Section
6.4
, as
applicable.
6.13
Advice of Certain Matters; Control of Business
. Subject to compliance with applicable Law,
the Company and Parent, as the case may be, shall confer on a regular basis with each other and shall promptly advise each other orally and in writing of any change or event having, or which would be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect or Parent Material Adverse Effect, as the case may be. Except with respect to Antitrust Laws as provided in
Section
6.8
, the Company and Parent shall promptly provide each other
(or their respective counsel) copies of all filings made by such Party or its Subsidiaries with the SEC or any other Governmental Entity in connection with this Agreement and the Transactions. Without limiting in any way any Partys rights or
obligations under this Agreement, nothing contained in this Agreement shall give any Party, directly or indirectly, the right to control or direct the other Party and their respective Subsidiaries operations prior to the Effective Time. Prior
to the Effective Time, each of the Parties shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries respective operations.
6.14
Transfer Taxes
.
Except as otherwise provided in
Section
3.3(b)
, all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees imposed with respect to the Merger or the transfer of shares
A-57
of Company Common Stock pursuant to the Merger shall be borne by Parent or the Company and expressly shall not be a liability of holders of shares of Company Common Stock. The Parties will
cooperate, in good faith, in the filing of any Tax Returns with respect to Transfer Taxes and the minimization, to the extent reasonably permissible under applicable Law, of the amount of any Transfer Taxes.
6.15
Reasonable Best Efforts; Notification
.
(a) Except to the extent that the Parties obligations are specifically set forth elsewhere in this
Article
VI
, upon the terms and subject to the conditions set forth in this Agreement (including
Section
6.3
), each of the Parties shall use reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner reasonably practicable, the Merger and
the other Transactions.
(b) Subject to applicable Law and as otherwise required by any Governmental Entity, the
Company and Parent each shall keep the other apprised of the status of matters relating to the consummation of the Transactions, including promptly furnishing the other with copies of notices or other communications received by Parent or the
Company, as applicable, or any of its Subsidiaries, from any third party or any Governmental Entity with respect to the Transactions (including those alleging that the approval or consent of such Person is or may be required in connection with the
Transactions). The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, upon becoming aware of (i) any condition, event or circumstance that will result in any of the conditions in
Sections
7.2(a)
or
7.3(a)
not being met, or (ii) the failure by such Party to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this
Agreement;
provided
,
however
, that no such notification shall affect the representations, warranties, covenants or agreements of the Parties or the conditions to the obligations of the Parties under this Agreement.
6.16
Section 16 Matters
. Prior to the Effective Time, Parent, Merger Sub and the Company shall take all such
steps as may be required to cause any dispositions of equity securities of the Company (including derivative securities) or acquisitions of equity securities of Parent (including derivative securities) in connection with this Agreement by each
individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company, or will become subject to such reporting requirements with respect to Parent, to be exempt under Rule
16b-3
under the Exchange Act.
6.17
Stock Exchange Listing and Delisting
.
Parent shall take all action necessary to cause the Parent Common Stock to be issued in the Merger to be approved for listing on the NYSE prior to the Effective Time, subject to official notice of issuance. Prior to the Closing Date, the Company
shall cooperate with Parent and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Law and rules and policies of the
NYSE to enable the delisting by the Surviving Corporation of the shares of Company Common Stock from the NYSE and the deregistration of the shares of Company Common Stock under the Exchange Act as promptly as practicable after the Effective
Time, and in any event no more than ten days after the Effective Time. If the Surviving Corporation is required to file any quarterly or annual report pursuant to the Exchange Act by a filing deadline that is imposed by the Exchange Act and which
falls on a date within the 15 days following the Closing Date, the Company shall make available to Parent, at least ten Business Days prior to the Closing Date, a substantially final draft of any such annual or quarterly report reasonably likely to
be required to be filed during such period.
6.18
Financing Cooperation
.
(a) From and after the date of this Agreement, and through the earlier of the Effective Time and the date on which this
Agreement is terminated in accordance with
Article
VIII
, the Company shall, and shall cause each of its Subsidiaries and use reasonable best efforts to cause its and their Representatives (including their
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auditors) to, use its respective reasonable best efforts to provide all customary cooperation (including providing reasonably available financial and other information regarding the Company and
its Subsidiaries for use in marketing and offering documents and to enable Parent to prepare pro forma financial statements) as reasonably requested by Parent to assist Parent in the arrangement of any bank debt financing or any capital markets debt
financing for the purposes of financing any repayment or refinancing of debt contemplated by this Agreement or required in connection with the Transactions and any other amounts required to be paid in connection with the consummation of the
Transactions (collectively, the
Debt Financing
);
provided
,
however
, that no obligation of the Company or any of its Subsidiaries under the Debt Financing shall be effective prior to the Effective Time.
Notwithstanding anything to the contrary herein, any breach by the Company or its Subsidiaries of their obligations under this
Section
6.18
shall not constitute a breach of the condition precedent set forth in
Section
7.2(a)
hereof, unless such breach is a Willful and Material Breach and directly results in the Debt Financing not being available to Parent.
(b) Except as a result of gross negligence, fraud or willful misconduct by the Company, its Subsidiaries or its or
their Representatives, or arising from information relating to the Company and its Subsidiaries provided in writing by the Company, its Subsidiaries or its or their Representatives (including any historical financial information furnished in writing
by or on behalf of the Company and/or its Subsidiaries, and financial statements and audits thereof), Parent shall indemnify, defend and hold harmless the Company, its Subsidiaries and its and their respective Representatives from and against any
and all losses, damages, claims and reasonable and documented
out-of-pocket
fees and expenses (including reasonable fees and expenses of one outside legal counsel,
accountants, investment bankers, experts, consultants and other advisors, and the costs of all filing fees and printing costs) actually suffered or incurred by them in connection with any action taken in accordance with
this
Section 6.18
and any information utilized in connection therewith In addition, Parent shall, promptly upon written request by the Company, reimburse the Company for all reasonable and documented
out-of-pocket
fees and expenses (including reasonable fees and expenses of outside legal counsel, accountants, investment bankers, experts, consultants and other
advisors, and the costs of all filing fees and printing costs) incurred by the Company or its Subsidiaries in connection with the performance of the Companys obligations under this
Section 6.18
.
6.19
Tax Matters
.
(a) Each of Parent and the Company will use its reasonable best efforts to cause the Merger to qualify, and will not
take (and will use its reasonable best efforts to prevent any Affiliate of such Party from taking) any actions that would reasonably be expected to prevent the Merger from qualifying, as a reorganization under the provisions of Section 368(a)
of the Code. Each of Parent and the Company will comply, to the extent reasonably expected to be necessary to cause the Merger to qualify as a reorganization under the provisions of Section 368(a) of the Code, with all representations,
warranties, and covenants contained in the Parent Tax Certificate and the Company Tax Certificate, respectively.
(b) Parent and the Company will cooperate with one another to facilitate the issuance of the opinions of counsel
referred to in
Section
7.2(d)
and
Section
7.3(d)
. In connection therewith, (i) Parent shall deliver to each such counsel a duly executed certificate containing such
representations, warranties and covenants as shall be reasonably necessary or appropriate to enable such counsel to render the opinion described in
Section
7.2(d)
or
Section
7.3(d)
, as applicable
(the
Parent Tax Certificate
) and (ii) the Company shall deliver to each such counsel a duly executed certificate containing such representations, warranties and covenants as shall be reasonably necessary or appropriate to
enable such counsel to render the opinion described in
Section
7.2(d)
or
Section
7.3(d)
, as applicable (the
Company Tax Certificate
), in each case dated as of the Closing Date
(and, if requested, dated as of the date on which the Registration Statement is declared effective by the SEC), and Parent and the Company shall provide such other information as reasonably requested by each counsel for purposes of rendering the
opinions described in
Section
7.2(d)
and
Section
7.3(d)
.
6.20
Takeover Laws
. None of the Parties will take any action that would cause the Transactions to be subject to
requirements imposed by any Takeover Laws, and each of them will take all reasonable steps within its
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control to exempt (or ensure the continued exemption of) the Transactions from the Takeover Laws of any state that purport to apply to this Agreement or the Transactions.
6.21
Obligations of Merger Sub
. Parent shall take all action necessary to cause Merger Sub and the Surviving
Corporation to perform their respective obligations under this Agreement.
6.22
Company Corporate Offices
.
Notwithstanding anything in this Agreement to the contrary, for a period of no less than one year following the Closing Date, Parent will maintain a meaningful business presence in the Companys current corporate offices in Dallas, Texas.
ARTICLE VII
CONDITIONS PRECEDENT
7.1
Conditions to Each Partys Obligation to Consummate the Merger
. The respective obligation of each Party
to consummate the Merger is subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived jointly by the Parties, in whole or in part, to the extent permitted by applicable Law:
(a)
Stockholder Approvals
. The Company Stockholder Approval and the Parent Stockholder Approval shall have been
obtained in accordance with applicable Law and the Organizational Documents of the Company and Parent, as applicable.
(b)
Regulatory Approval
. Any waiting period applicable to the Transactions under the HSR Act shall have been
terminated or shall have expired.
(c)
No Injunctions or Restraints
. No Governmental Entity having
jurisdiction over any Party shall have issued any order, decree, ruling, injunction or other action that is in effect (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the Merger and no
Law shall have been adopted that makes consummation of the Merger illegal or otherwise prohibited.
(d)
Registration Statement
. The Registration Statement shall have been declared effective by the SEC under the
Securities Act and shall not be the subject of any stop order or Proceedings seeking a stop order.
(e)
NYSE
Listing
. The shares of Parent Common Stock issuable to the holders of shares of Company Common Stock pursuant to this Agreement shall have been authorized for listing on the NYSE, upon official notice of issuance.
7.2
Additional Conditions to Obligations of Parent and Merger Sub
. The obligations of Parent and Merger Sub to
consummate the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived exclusively by Parent, in whole or in part, to the extent permitted by applicable Law:
(a)
Representations and Warranties of the Company
. (i) The representations and warranties of the Company
set forth in the first sentence of
Section
4.1
(Organization, Standing and Power),
Section
4.2(a)
(Capital Structure), the third and fifth sentences of
Section
4.2(b)
(Capital Structure),
Section
4.3(a)
(Authority), and
Section
4.6(a)
(Absence of Certain Changes or Events) shall have been true and correct as of the date of this Agreement and shall be true and
correct as of the Closing Date, as though made on and as of the Closing Date (except, with respect to
Section
4.2(a)
and the third and fifth sentences of
Section
4.2(b)
, for any
de
minimis
inaccuracies) (except that representations and warranties that speak as of a specified date or period of time shall have been true and correct only as of such date or period of time), (ii) all other representations and warranties
of the Company set forth in
Section
4.2(b)
(Capital Structure) (except for the second sentence of
Section
4.2(b)
)
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shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects as of the Closing Date, as though made on and as
of the Closing Date (except that representations and warranties that speak as of a specified date or period of time shall have been true and correct all material respects only as of such date or period of time), and (iii) all other
representations and warranties of the Company set forth in
Article
IV
shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date, as though made on and as of the
Closing Date (except that representations and warranties that speak as of a specified date or period of time shall have been true and correct only as of such date or period of time), except, in the case of this
clause
(iii)
, where the failure of such representations and warranties to be so true and correct (without regard to qualification or exceptions contained therein as to materiality, in all material
respects or Company Material Adverse Effect) would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b)
Performance of Obligations of the Company
. The Company shall have performed, or complied with, in all
material respects all agreements and covenants required to be performed or complied with by it under this Agreement on or prior to the Effective Time.
(c)
Compliance Certificate
. Parent shall have received a certificate of the Company signed by an executive
officer of the Company, dated the Closing Date, confirming that the conditions in
Sections
7.2(a)
and
(a)
have been satisfied.
(d)
Tax Opinion
. Parent shall have received an opinion from Sullivan & Cromwell LLP, in form and
substance reasonably satisfactory to Parent, dated as of the Closing Date (and, if requested, dated as of the date on which the Registration Statement is declared effective by the SEC), to the effect that, on the basis of the facts, representations
and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering the opinion described in this
Section
7.2(d)
, Sullivan & Cromwell LLP shall have received and may rely upon the Parent Tax Certificate and the Company Tax Certificate and such other information reasonably requested by and provided to it by the
Company or Parent for purposes of rendering such opinion.
7.3
Additional Conditions to Obligations of the
Company
. The obligation of the Company to consummate the Merger is subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived exclusively by the Company, in whole or in part, to
the extent permitted by applicable Law:
(a)
Representations and Warranties of Parent and Merger Sub
.
(i) The representations and warranties of Parent and Merger Sub set forth in the first sentence of
Section
5.1
(Organization, Standing and Power),
Section
5.2(a)
(Capital Structure), the
second sentence, fifth sentence and seventh sentence of
Section
5.2(b)
(Capital Structure),
Section
5.3(a)
(Authority), and
Section
5.6(a)
(Absence of Certain Changes or
Events) shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date, as though made on and as of the Closing Date (except, with respect to
Section
5.2(a)
and the
second sentence, fifth sentence and seventh sentence of
Section
5.2(b)
for any
de
minimis
inaccuracies) (except that representations and warranties that speak as of a specified date or period of time shall
have been true and correct only as of such date or period of time), (ii) all other representations and warranties of Parent set forth in
Section
5.2(b)
(Capital Structure) (except for the third sentence of
Section
5.2(b)
) shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects as of the Closing Date, as though made on and as of the
Closing Date (except that representations and warranties that speak as of a specified date or period of time shall have been true and correct in all material respects only as of such date or period of time), and (iii) all other representations
and warranties of Parent and Merger Sub set forth in
Article
V
shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date, as though made on and as of the Closing
Date (except that representations and warranties that speak as of a specified date or period of time shall have been true and correct only as of such date or period of time), except where the failure of such representations and warranties to be so
true and correct
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(without regard to qualification or exceptions contained therein as to materiality, in all material respects or Parent Material Adverse Effect) that would not
reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b)
Performance of Obligations of Parent and Merger Sub
. Parent and Merger Sub each shall have performed, or
complied with, in all material respects all agreements and covenants required to be performed or complied with by them under this Agreement at or prior to the Effective Time.
(c)
Compliance Certificate
. The Company shall have received a certificate of Parent signed by an executive
officer of Parent, dated the Closing Date, confirming that the conditions in
Sections
7.3(a)
and
(b)
have been satisfied.
(d)
Tax Opinion
. The Company shall have received an opinion from Vinson & Elkins LLP, in form and
substance reasonably satisfactory to the Company, dated as of the Closing Date (and, if requested, dated as of the date on which the Registration Statement is declared effective by the SEC), to the effect that, on the basis of the facts,
representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering the opinion described in this
Section
7.3(d)
, Vinson & Elkins LLP shall have received and may rely upon the Parent Tax Certificate and the Company Tax Certificate and such other information reasonably requested by and provided to it by the
Company or Parent for purposes of rendering such opinion.
7.4
Frustration of Closing Conditions
. None of
the Parties may rely, either as a basis for not consummating the Merger or for terminating this Agreement, on the failure of any condition set forth in
Sections
7.1
,
7.2
or
7.3
, as the case may be, to be satisfied if
such failure was caused by such Partys breach in any material respect of any provision of this Agreement.
ARTICLE VIII
TERMINATION
8.1
Termination
. This Agreement may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether (except as expressly set forth below) before or after the Company Stockholder Approval or the Parent Stockholder Approval has been obtained:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent:
(i) if any Governmental Entity having jurisdiction over any Party shall have issued any order, decree,
ruling or injunction or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger and such order, decree, ruling or injunction or other action shall have become final and nonappealable, or if
there shall be adopted any Law that permanently makes consummation of the Merger illegal or otherwise permanently prohibited;
provided
,
however
, that the right to terminate this Agreement under this
Section
8.1(b)(
i
)
shall not be available to any Party whose failure to fulfill any material covenant or agreement under this Agreement has been the cause of or resulted in the action or event described in this
Section
8.1(b)(
i
)
occurring;
(ii) if the Merger shall not
have been consummated on or before 5:00 p.m. Houston time, on October 31, 2018 (such date being the
End Date
);
provided
,
however
, that the right to terminate this Agreement under this
Section
8.1(b)(ii)
shall not be available to any Party whose failure to fulfill any material covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Merger to occur on or before
such date;
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(iii) in the event of a breach by the other Party of any
representation, warranty, covenant or other agreement contained in this Agreement which would give rise to the failure of a condition set forth in
Sections
7.2(a)
or
(a)
or
Section
7.3(a)
or
(b)
, as applicable (and such breach is not curable prior to the End Date, or if curable prior to the End Date, has not been cured by the earlier of (i) thirty (30) days after the giving of
written notice to the breaching Party of such breach and (ii) two (2) Business Days prior to the End Date) (a
Terminable Breach
);
provided
,
however
, that the terminating Party is not then in Terminable
Breach of any representation, warranty, covenant or other agreement contained in this Agreement; or
(iv) if (A) the Company Stockholder Approval shall not have been obtained upon a vote held at a
duly held Company Stockholders Meeting, or at any adjournment or postponement thereof, or (B) the Parent Stockholder Approval shall not have been obtained upon a vote held at a duly held Parent Stockholders Meeting, or at any adjournment or
postponement thereof; or
(c) by Parent, prior to, but not after, the time the Company Stockholder Approval is
obtained, if the Company Board or a committee thereof shall have effected a Company Change of Recommendation (whether or not such Company Change of Recommendation is permitted by this Agreement), other than as a result of Parent approving,
endorsing, recommending or entering into a Parent Takeover Proposal;
(d) by the Company, prior to, but not after,
the time the Company Stockholder Approval is obtained, in order to enter into a definitive agreement with respect to a Company Superior Proposal;
provided
,
however
, that the Company shall have contemporaneously with such termination
tendered payment to Parent of the fee pursuant to
Section
8.3(b)
and the Company has complied with
Section
6.3(b)
in all material respects in respect of such Company Competing Proposal;
(e) by the Company, prior to, but not after, the time the Parent Stockholder Approval is obtained, if the Parent Board
or a committee thereof shall have effected a Parent Change of Recommendation (whether or not such Parent Change of Recommendation is permitted by this Agreement); or
(f) by Parent, if the Company, its Subsidiaries or any of the Companys directors or executive officers shall have
Willfully and Materially Breached the obligations set forth in
Section
6.3(b)
(No Solicitation by the Company).
8.2
Notice of Termination; Effect of Termination
.
(a) A terminating Party shall provide written notice of termination to the other Party specifying with particularity the
reason for such termination and any termination shall be effective immediately upon delivery of such written notice to the other Party.
(b) In the event of termination of this Agreement by any Party as provided in
Section
8.1
,
this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any Party except with respect to this
Section
8.2
,
Section
6.7(b)
,
Section
8.3
and
Articles I
and
IX
(and the provisions that substantively define any related defined terms not substantively defined in
Article
I
);
provided
,
however
,
that notwithstanding anything to the contrary herein, no such termination shall relieve any Party from liability for any damages for a Willful and Material Breach of any covenant, agreement or obligation hereunder or fraud.
8.3
Expenses and Other Payments
.
(a) Except as otherwise provided in this Agreement, each Party shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the Transactions, whether or not the Merger shall be consummated.
(b) If the Company terminates this Agreement pursuant to
Section
8.1(d)
(Company Superior
Proposal), then the Company shall pay Parent the Company Termination Fee in cash by wire transfer of immediately available funds to an account designated by Parent contemporaneously with such termination of this Agreement.
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(c) If (i) Parent terminates this Agreement pursuant to
Section
8.1(c)
(Company Change of Recommendation), or
Section
8.1(f)
(No Solicitation by the Company), then the Company shall pay Parent the Company Termination Fee, in each case, in cash by wire
transfer of immediately available funds to an account designated by Parent no later than three (3) Business Days after notice of termination of this Agreement.
(d) If the Company terminates this Agreement pursuant to
Section
8.1(e)
(Parent Change of
Recommendation), then Parent shall pay the Company the Parent Termination Fee in cash by wire transfer of immediately available funds to an account designated by the Company no later than three (3) Business Days after notice of termination of
this Agreement.
(e) If either the Company or Parent terminates this Agreement pursuant to (i)
Section
8.1(b)(iv)(A)
(Failure to Obtain Company Stockholder Approval), other than any such termination following the Company Board or a committee thereof having effected a Company Change of Recommendation as a result of Parent approving, endorsing,
recommending or entering into a Parent Takeover Proposal, then the Company shall pay Parent the Parent Expenses or (ii)
Section 8.1(b)(iv)(B)
(Failure to Obtain Parent Stockholder Approval), then Parent shall pay the Company the
Company Expenses, in each case, no later than three (3) Business Days after notice of termination of this Agreement.
(f) If (i) (A) Parent or the Company terminates this Agreement pursuant to
Section
8.1(b)(iv)(A)
(Failure to Obtain Company Stockholder Approval), other than any such termination following the Company Board or a committee thereof having effected a Company Change of Recommendation as a result of
Parent approving, endorsing, recommending or entering into a Parent Takeover Proposal, and on or before the date of any such termination a Company Competing Proposal shall have been publicly announced or publicly disclosed and not been publicly
withdrawn without qualification at least seven (7) Business Days prior to the Company Stockholders Meeting or (B) the Company or Parent terminates this Agreement pursuant to
Section
8.1(b)(ii)
(End Date) or Parent
terminates this Agreement pursuant to
Section
8.1(b)(iii)
(Company Terminable Breach) and following the execution of this Agreement and on or before the date of any such termination a Company Competing Proposal shall have
been announced, disclosed or otherwise communicated to the Company Board and not withdrawn without qualification at least seven (7) Business Days prior to the date of such termination, and (ii) within twelve (12) months after the date
of such termination, the Company enters into a definitive agreement with respect to a Company Competing Proposal (or publicly approves or recommends to the stockholders of the Company or otherwise does not oppose, in the case of a tender or exchange
offer, a Company Competing Proposal) or consummates a Company Competing Proposal, then the Company shall pay Parent the Company Termination Fee less any amount previously paid by the Company pursuant to
Section
8.3(e)(
i
)
. For purposes of this
Section
8.3(f)
, (1) any reference in the definition of Company Competing Proposal to 20% shall be deemed to be a reference to
more than 50% (2) with respect to
clause (B)
only, a Company Competing Proposal will not be deemed to have been publicly withdrawn by any Person if, within twelve (12) months of the termination of the
Agreement, the Company or any of its Subsidiaries will have entered into a definitive agreement with respect to, or will have consummated, or will have approved or recommended to the stockholders of the Company or otherwise not opposed, in the case
of a tender offer or exchange offer, a Company Competing Proposal made by or on behalf of such Person or any of its Affiliates and (3) any Company Competing Proposal made prior to the execution of this Agreement will be deemed to have been made
following the execution of this Agreement if the Company breaches its obligations under
Section
6.3(a)
with respect thereto.
(g) If (i) (A) Parent or the Company terminates this Agreement pursuant to
Section
8.1(b)(iv)(B)
(Failure to Obtain Parent Stockholder Approval), and on or before the date of any such termination a Parent Competing Proposal shall have been publicly announced or publicly disclosed and not been
publicly withdrawn without qualification at least seven (7) Business Days prior to the Parent Stockholders Meeting or (B) Company or Parent terminates this Agreement pursuant to
Section
8.1(b)(ii)
(End Date) or the
Company terminates this Agreement pursuant to
Section
8.1(b)(iii)
(Parent Terminable Breach) and following the execution of this Agreement and on or before the date of any such termination a Parent Competing Proposal shall
have been announced, disclosed or otherwise communicated to the Parent Board and not withdrawn without qualification at
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least seven (7) Business Days prior to the date of such termination, and (ii) within twelve (12) months after the date of such termination, Parent enters into a definitive
agreement with respect to a Parent Competing Proposal (or publicly approves or recommends to the stockholders of Parent or otherwise does not oppose, in the case of a tender or exchange offer, a Parent Competing Proposal) or consummates a Parent
Competing Proposal, then Parent shall pay the Company the Parent Termination Fee less any amount previously paid by Parent pursuant to
Section
8.3(e)(ii)
. For purposes of this
Section
8.3(g)
, (1)
any reference in the definition of Parent Competing Proposal to 20% shall be deemed to be a reference to more than 50% and (2) with respect to
clause (B)
only, a Parent Competing Proposal will not be deemed
to have been publicly withdrawn by any Person if, within twelve (12) months of the termination of the Agreement, Parent or any of its Subsidiaries will have entered into a definitive agreement with respect to, or will have
consummated, or will have approved or recommended to the stockholders of Parent or otherwise not opposed, in the case of a tender offer or exchange offer, a Parent Competing Proposal made by or on behalf of such Person or any of its Affiliates and
(3) any Parent Competing Proposal made prior to the execution of this Agreement will be deemed to have been made following the execution of this Agreement if Parent breaches its obligations under
Section
6.4(a)
with
respect thereto.
(h) If Parent or the Company terminates this Agreement pursuant to
Section
8.1(b)(iv)(A)
(Failure to Obtain Company Stockholder Approval), and on or before the date of any such termination the Company Board or a committee thereof shall have effected a Company Change of Recommendation as a
result of Parent approving, endorsing, recommending or entering into a Parent Takeover Proposal, then Parent shall pay the Company the Parent Termination Fee in cash by wire transfer of immediately available funds to an account designated by the
Company no later than three (3) Business Days after notice of termination of this Agreement.
(i) In no event
shall Parent be entitled to receive more than one payment of the Company Termination Fee or more than one payment of Parent Expenses. If Parent receives the Company Termination Fee, then Parent will not be entitled to also receive a payment of the
Parent Expenses. In no event shall the Company be entitled to receive more than one payment of the Parent Termination Fee or more than one payment of Company Expenses. If the Company receives the Parent Termination Fee, then the Company will not be
entitled to also receive a payment of the Company Expenses. The Parties agree that the agreements contained in this
Section
8.3
are an integral part of the Transactions, and that, without these agreements, the Parties would
not enter into this Agreement. If a Party fails to promptly pay the amount due by it pursuant to this
Section
8.3
, interest shall accrue on such amount from the date such payment was required to be paid pursuant to the
terms of this Agreement until the date of payment at the rate of 8% per annum. If, in order to obtain such payment, the other Party commences a Proceeding that results in judgment for such Party for such amount, the defaulting Party shall pay the
other Party its reasonable
out-of-pocket
costs and expenses (including reasonable attorneys fees and expenses) incurred in connection with such Proceeding. The
Parties agree that the monetary remedies set forth in this
Section
8.3
and the specific performance remedies set forth in
Section
9.11
shall be the sole and exclusive remedies of (i) the
Company and its Subsidiaries against Parent and Merger Sub and any of their respective former, current or future directors, officers, shareholders, Representatives or Affiliates for any loss suffered as a result of the failure of the Merger to be
consummated except in the case of fraud or a Willful and Material Breach of any covenant, agreement or obligation (in which case only Parent and Merger Sub shall be liable for damages for such fraud or Willful and Material Breach), and upon payment
of such amount, none of Parent or Merger Sub or any of their respective former, current or future directors, officers, shareholders, Representatives or Affiliates shall have any further liability or obligation relating to or arising out of this
Agreement or the Transactions, except for the liability of Parent in the case of fraud or a Willful and Material Breach of any covenant, agreement or obligation; and (ii) Parent and Merger Sub against the Company and its Subsidiaries and any of
their respective former, current or future directors, officers, shareholders, Representatives or Affiliates for any loss suffered as a result of the failure of the Merger to be consummated except in the case of fraud or a Willful and Material Breach
of any covenant, agreement or obligation (in which case only the Company shall be liable for damages for such fraud or Willful and Material Breach), and upon payment of such amount, none of the Company and its Subsidiaries or any of their respective
former, current or future directors, officers, shareholders, Representatives or Affiliates shall have any further liability or obligation relating to or
A-65
arising out of this Agreement or the Transactions, except for the liability of the Company in the case of fraud or a Willful and Material Breach of any covenant, agreement or obligation.
ARTICLE IX
GENERAL
PROVISIONS
9.1
Schedule Definitions
. All capitalized terms in the Company Disclosure Letter and the Parent
Disclosure Letter shall have the meanings ascribed to them herein (including in
Annex
A
) except as otherwise defined therein.
9.2
Survival
. Except as otherwise provided in this Agreement, none of the representations, warranties,
agreements and covenants contained in this Agreement will survive the Closing;
provided
,
however
, that
Article
I
(and the provisions that substantively define any related defined terms not substantively
defined in
Article
I
), this
Article
IX
and the agreements of the Parties in
Articles
II
and
III
, and
Section
4.27
(No Additional Representations)
Section
5.27
, (No Additional Representations),
Section
6.9
(Employee Matters),
Section
6.10
(Indemnification; Directors and Officers Insurance),
Section
6.19
(Tax Matters) and those other covenants and agreements contained herein that by their terms apply, or that are to be performed in whole or in part, after the Closing, shall survive the Closing. The
Confidentiality Agreement shall (i) survive termination of this Agreement in accordance with its terms and (ii) terminate as of the Effective Time.
9.3
Notices
. All notices, requests and other communications to any Party under, or otherwise in connection with,
this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered in person; (b) if transmitted by facsimile (but only upon confirmation of transmission by the transmitting equipment); (c) if transmitted by
electronic mail (
e-mail
) (but only if confirmation of receipt of such
e-mail
is requested and received;
provided
, that each notice Party shall
use reasonable best efforts to confirm receipt of any such email correspondence promptly upon receipt of such request); or (d) if transmitted by national overnight courier, in each case as addressed as follows:
(i) if to Parent or Merger Sub, to:
One Concho Center
600 W.
Illinois Avenue
Midland, Texas 79701
Attention: General Counsel
Facsimile (432)
221-0654
E-mail:
TCounts@concho.com
with a required copy to (which copy shall not constitute notice):
Sullivan & Cromwell LLP
125 Broad Street
New York, New
York 10004
Attention: Joseph B. Frumkin
Krishna Veeraraghavan
Facsimile (212)
291-9061
E-mail: frumkinj@sullcrom.com
veeraraghavank@sullcrom.com
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(ii) if to the Company, to:
RSP Permian, Inc.
3141 Hood
Street, Suite 500
Dallas, Texas 75219
Attention: James Mutrie
Facsimile (214)
252-2750
E-mail: jmutrie@rsppermian.com
with a required copy to (which copy shall not constitute notice):
Vinson & Elkins LLP
1001 Fannin, Suite 2500
Houston, Texas 77002
Attention: Douglas E. McWilliams
Stephen M. Gill
Lande Spottswood
Facsimile (713)
615-5956
E-mail: dmcwilliams@velaw.com
sgill@velaw.com
lspottswood@velaw.com
9.4
Rules of Construction
.
(a) Each of the Parties acknowledges that it has been represented by counsel of its choice throughout all negotiations
that have preceded the execution of this Agreement and that it has executed the same with the advice of said independent counsel. Each Party and its counsel cooperated in the drafting and preparation of this Agreement and the documents referred to
herein, and any and all drafts relating thereto exchanged between the Parties shall be deemed the work product of the Parties and may not be construed against any Party by reason of its preparation. Accordingly, any rule of law or any legal decision
that would require interpretation of any ambiguities in this Agreement against any Party that drafted it is of no application and is hereby expressly waived.
(b) The inclusion of any information in the Company Disclosure Letter or Parent Disclosure Letter shall not be deemed
an admission or acknowledgment, in and of itself and solely by virtue of the inclusion of such information in the Company Disclosure Letter or Parent Disclosure Letter, as applicable, that such information is required to be listed in the Company
Disclosure Letter or Parent Disclosure Letter, as applicable, that such items are material to the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, as the case may be, or that such items have resulted
in a Company Material Adverse Effect or a Parent Material Adverse Effect. The headings, if any, of the individual sections of each of the Parent Disclosure Letter and Company Disclosure Letter are inserted for convenience only and shall not be
deemed to constitute a part thereof or a part of this Agreement. The Company Disclosure Letter and Parent Disclosure Letter are arranged in sections corresponding to the Sections of this Agreement merely for convenience, and the disclosure of an
item in one section of the Company Disclosure Letter or Parent Disclosure Letter, as applicable, as an exception to a particular representation or warranty shall be deemed adequately disclosed as an exception with respect to all other
representations or warranties to the extent that the relevance of such item to such representations or warranties is reasonably apparent on its face, notwithstanding the presence or absence of an appropriate section of the Company Disclosure Letter
or Parent Disclosure Letter with respect to such other representations or warranties or an appropriate cross reference thereto.
(c) The specification of any dollar amount in the representations and warranties or otherwise in this Agreement or in
the Company Disclosure Letter or Parent Disclosure Letter is not intended and shall not be
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deemed to be an admission or acknowledgment of the materiality of such amounts or items, nor shall the same be used in any dispute or controversy between the Parties to determine whether any
obligation, item or matter (whether or not described herein or included in any schedule) is or is not material for purposes of this Agreement.
(d) All references in this Agreement to Annexes, Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions refer to the corresponding Annexes, Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections,
subsections or other subdivisions of this Agreement are for convenience only, do not constitute any part of such Articles, Sections, subsections or other subdivisions, and shall be disregarded in construing the language contained therein. The words
this Agreement, herein, hereby, hereunder and hereof and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The
words this Section, this subsection and words of similar import, refer only to the Sections or subsections hereof in which such words occur. The word including (in its various forms) means including, without
limitation. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise expressly requires. Unless the context otherwise requires, all defined terms contained herein shall include the singular and plural and the conjunctive and disjunctive forms of such defined terms. Unless
the context otherwise requires, all references to a specific time shall refer to Houston, Texas time. The word or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a
subject or other thing extends and such phrase shall not mean simply if. The term dollars and the symbol $ mean United States Dollars. The table of contents and headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof.
(e) In this Agreement, except as the context may otherwise require, references to: (i) any agreement (including
this Agreement), contract, statute or regulation are to the agreement, contract, statute or regulation as amended, modified, supplemented, restated or replaced from time to time (in the case of an agreement or contract, to the extent permitted by
the terms thereof and, if applicable, by the terms of this Agreement); (ii) any Governmental Entity include any successor to that Governmental Entity; (iii) any applicable Law refers to such applicable Law as amended, modified, supplemented or
replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under such statute) and references to any section of any applicable Law or other law include any successor to such section; (iv) days
mean calendar days; when calculating the period of time within which, or following which, any act is to be done or step taken pursuant to this Agreement, the date that is the reference day in calculating such period shall be excluded and if the last
day of the period is a
non-Business
Day, the period in question shall end on the next Business Day or if any action must be taken hereunder on or by a day that is not a Business Day, then such action may be
validly taken on or by the next day that is a Business Day; and (v) made available means, with respect to any document, that such document was in the electronic data room relating to the Transactions maintained by the Company or Parent,
as applicable, prior to the execution of this Agreement.
9.5
Counterparts
. This Agreement may be executed
in two (2) or more counterparts, including via facsimile or email in portable document format (.pdf) form transmission, all of which shall be considered one and the same agreement and shall become effective when two
(2) or more counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart.
9.6
Entire Agreement; No Third Party Beneficiaries
. This Agreement (together with the Confidentiality Agreement
and any other documents and instruments executed pursuant hereto) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. Except for
the provisions of (a)
Article III
(including, for the avoidance of doubt, the rights of the former holders of Company Common Stock, Time-Based Restricted Stock and Performance-Based Restricted Stock to receive the Merger Consideration)
but only from and after the Effective Time and
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(b)
Section
6.10
(which from and after the Effective Time is intended for the benefit of, and shall be enforceable by, the Persons referred to therein and by their
respective heirs and Representatives) but only from and after the Effective Time, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the Parties any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.7
Governing Law; Venue; Waiver of Jury Trial
.
(a) THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT
OF RELATE TO THIS AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.
(b) THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE
OR, IF THE COURT OF CHANCERY OF THE STATE OF DELAWARE OR THE DELAWARE SUPREME COURT DETERMINES THAT, NOTWITHSTANDING SECTION 111 OF THE DGCL, THE COURT OF CHANCERY DOES NOT HAVE OR SHOULD NOT EXERCISE SUBJECT MATTER JURISDICTION OVER SUCH MATTER,
THE SUPERIOR COURT OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE SOLELY IN CONNECTION WITH ANY DISPUTE THAT ARISES IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS
OF THIS AGREEMENT AND THE DOCUMENTS REFERRED TO IN THIS AGREEMENT OR IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR INTERPRETATION OR ENFORCEMENT
HEREOF OR ANY SUCH DOCUMENT THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY
NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED EXCLUSIVELY BY SUCH A DELAWARE STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT
TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN
SECTION
8.3
OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (II) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THE FOREGOING WAIVER; (III) SUCH PARTY MAKES THE FOREGOING WAIVER VOLUNTARILY AND (IV) SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS
SECTION 9.7
.
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9.8
Severability
. Each Party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or
invalidate or render unenforceable such other term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties 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 greatest extent possible. Except as otherwise
contemplated by this Agreement, in response to an order from a court or other competent authority for any Party to take any action inconsistent herewith or not to take an action consistent herewith or required hereby, to the extent that a Party took
an action inconsistent with this Agreement or failed to take action consistent with this Agreement or required by this Agreement pursuant to such order, such Party shall not incur any liability or obligation unless such Party did not in good faith
seek to resist or object to the imposition or entering of such order.
9.9
Assignment
. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. Any purported assignment in violation of this
Section
9.9
shall be void.
9.10
Affiliate Liability
. Each of the following is herein referred to as a
Company
Affiliate
): (a) any direct or indirect holder of equity interests or securities in the Company (whether stockholders or otherwise), and (b) any director, officer, employee, Representative or agent of (i) the Company or
(ii) any Person who controls the Company. No Company Affiliate shall have any liability or obligation to Parent or Merger Sub of any nature whatsoever in connection with or under this Agreement or the transactions contemplated hereby or thereby
other than for fraud, and Parent and Merger Sub hereby waive and release all claims of any such liability and obligation, other than for fraud. Each of the following is herein referred to as a
Parent Affiliate
): (x) any direct or
indirect holder of equity interests or securities in Parent (whether stockholders or otherwise), and (y) any director, officer, employee, Representative or agent of (i) Parent or (ii) any Person who controls Parent. No Parent
Affiliate shall have any liability or obligation to the Company of any nature whatsoever in connection with or under this Agreement or the transactions contemplated hereby or thereby other than for fraud, and the Company hereby waive and release all
claims of any such liability and obligation, other than for fraud.
9.11 Specific Performance. The Parties agree
that irreparable damage, for which monetary damages would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached by the
Parties. Prior to the termination of this Agreement pursuant to
Section
8.1
, it is accordingly agreed that the Parties shall be entitled to an injunction or injunctions, or any other appropriate form of specific performance
or equitable relief, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, in each case in accordance with this
Section
9.11
, this being in
addition to any other remedy to which they are entitled under the terms of this Agreement at law or in equity. Each Party accordingly agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent
or restrain breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of such Party under this Agreement all in accordance with the terms of this
Section
9.11
. Each Party further
agrees that no other Party or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this
Section
9.11
, and
each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. If prior to the End Date, any Party hereto brings an action to enforce specifically the performance of the
terms and provisions hereof by any other Party, the End Date shall automatically be extended by such other time period established by the court presiding over such action.
9.12
Amendment
. This Agreement may be amended by the Parties at any time before or after adoption of this
Agreement by the stockholders of the Company, but, after any such adoption, no amendment shall be made
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which by law would require the further approval by such stockholders without first obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the Parties.
9.13
Extension; Waiver
. At any time prior to the Effective Time, the Company
and Parent may, to the extent legally allowed:
(a) extend the time for the performance of any of the obligations
or acts of the other Party hereunder;
(b) waive any inaccuracies in the representations and warranties of the
other Party contained herein or in any document delivered pursuant hereto; or
(c) waive compliance with any of the
agreements or conditions of the other Party contained herein.
Notwithstanding the foregoing, no failure or delay by the Company or Parent
in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder. No agreement on the part of a Party to any such extension or
waiver shall be valid unless set forth in an instrument in writing signed on behalf of such Party.
[
Signature Page Follows
]
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IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be signed by its respective
officer thereunto duly authorized, all as of the date first written above.
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CONCHO RESOURCES INC.
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By:
|
|
/s/ Tim Leach
|
Name:
|
|
Tim Leach
|
Title:
|
|
Chief Executive Officer
|
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GREEN MERGER SUB INC.
|
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|
By:
|
|
/s/ Tim Leach
|
Name:
|
|
Tim Leach
|
Title:
|
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Chief Executive Officer
|
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RSP PERMIAN, INC.
|
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By:
|
|
/s/ Steven Gray
|
Name:
|
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Steven Gray
|
Title:
|
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Chief Executive Officer
|
[Signature Page to Agreement and Plan of Merger]
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ANNEX A
Certain Definitions
Affiliate
means, with respect to any Person, any other Person directly or indirectly, controlling, controlled by, or under
common control with, such Person, through one or more intermediaries or otherwise.
Aggregated Group
means all entities
under common control with any Person within the meaning of Section 414(b), (k), or (m) of the Code or Section 4001 of ERISA.
beneficial
ownership
, including the correlative term
beneficially owning
, has the meaning
ascribed to such term in Section 13(d) of the Exchange Act.
Business Day
means a day other than a day on which
banks in the State of New York or the State of Delaware are authorized or obligated to be closed.
Company Competing
Proposal
means any contract, proposal, offer or indication of interest relating to any transaction or series of related transactions (other than transactions only with Parent or any of its Subsidiaries) involving, directly or indirectly:
(a) any acquisition (by asset purchase, stock purchase, merger, or otherwise) by any Person or group of any business or assets of the Company or any of its Subsidiaries (including capital stock of or ownership interest in any Subsidiary) that
generated 20% or more of the Companys and its Subsidiaries assets (by fair market value), net revenue or earnings before interest, Taxes, depreciation and amortization for the preceding twelve months, or any license, lease or long-term
supply agreement having a similar economic effect, (b) any acquisition of beneficial ownership by any Person or group of 20% or more of the outstanding shares of Company Common Stock or any other securities entitled to vote on the election of
directors or any tender or exchange offer that if consummated would result in any Person or group beneficially owning 20% or more of the outstanding shares of Company Common Stock or any other securities entitled to vote on the election of directors
or (c) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries.
Company Expenses
means a cash amount equal to $100,000,000 to be paid in respect of the Companys costs and expenses
in connection with the negotiation, execution and performance of this Agreement and the Transactions.
Company Intervening
Event
means a material development or change in circumstance that occurs or arises after the date of this Agreement that was not known to or reasonably foreseeable by the Company Board as of the date of this Agreement;
provided
,
however
, that in no event shall the receipt, existence or terms of a Company Competing Proposal or any matter relating thereto or of consequence thereof constitute a Company Intervening Event. For the avoidance of doubt, the entry into a
definitive agreement by Parent in respect of a Parent Takeover Proposal, or any approval, endorsement or recommendation by the Parent Board (or a committee thereof) shall constitute a Company Intervening Event.
Company Plan
means an Employee Benefit Plan sponsored, maintained, or contributed to by the Company.
Company Stockholder Approval
means the adoption of this Agreement by the holders of a majority of the outstanding shares of
Company Common Stock in accordance with the DGCL and the Organizational Documents of the Company.
Company Superior
Proposal
means a
bona fide
written proposal that is not solicited after the date of this Agreement and is made after the date of this Agreement by any Person or group (other than Parent or any of its Affiliates) to acquire, directly
or indirectly, (a) businesses or assets of the Company or any of its Subsidiaries (including capital stock of or ownership interest in any Subsidiary) that account for 50% or more of the fair
A-73
market value of such assets or that generated 50% or more of the Companys and its Subsidiaries net revenue or earnings before interest, Taxes, depreciation and amortization for the
preceding twelve months, respectively, or (b) more than 50% of the outstanding shares of Company Common Stock, in each case whether by way of merger, amalgamation, share exchange, tender offer, exchange offer, recapitalization, consolidation,
sale of assets or otherwise, that in the good faith determination of the Company Board, after consultation with its financial advisors, that (i) if consummated, would result in a transaction more favorable to the Companys stockholders
from a financial point of view than the Merger (after taking into account the time likely to be required to consummate such proposal and any adjustments or revisions to the terms of this Agreement offered by Parent in response to such proposal or
otherwise), (ii) is reasonably likely to be consummated on the terms proposed, taking into account any legal, financial, regulatory and stockholder approval requirements, the sources, availability and terms of any financing, financing market
conditions and the existence of a financing contingency, the likelihood of termination, the timing of closing, the identity of the Person or Persons making the proposal and any other aspects considered relevant by the Company Board and
(iii) for which, if applicable, financing is fully committed or reasonably determined to be available to the Company Board.
Company Termination Fee
means $250,000,000.
Consent
means any filing, notice, report, registration, approval, consent, ratification, permit, permission, waiver,
expiration of waiting periods or authorization.
control
and its correlative terms, 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.
Derivative Transaction
means any swap transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities (including, without limitation, natural gas, natural gas liquids, crude oil and condensate), bonds, equity securities, loans,
interest rates, catastrophe events, weather-related events, credit-related events or conditions or any indexes, or any other similar transaction (including any put, call or other option with respect to any of these transactions) or combination of
any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other
similar arrangements related to such transactions.
DTC
means The Depositary Trust Company.
Edgar
means the Electronic Data Gathering, Analysis and Retrieval System administered by the SEC.
Employee Benefit Plan
of any Person means any employee benefit plan (within the meaning of Section 3(3) of
ERISA, regardless of whether such plan is subject to ERISA), and any personnel policy (oral or written), equity option, restricted equity, equity purchase plan, equity compensation plan, phantom equity or appreciation rights plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or arrangement, vacation or holiday pay policy, retention or severance pay plan, policy or agreement, deferred compensation agreement or arrangement, change in control,
hospitalization or other medical, dental, vision, accident, disability, life or other insurance, executive compensation or supplemental income arrangement, consulting agreement, employment agreement, and any other employee benefit plan, agreement,
arrangement, program, practice, or understanding for any present or former director, employee or contractor of the Person.
Encumbrances
means liens, pledges, charges, encumbrances, claims, hypothecation, mortgages, deeds of trust, security
interests, restrictions, rights of first refusal, defects in title, prior assignment, license sublicense or other burdens, options or encumbrances of any kind or any agreement, option, right or privilege
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(whether by Law, contract or otherwise) capable of becoming any of the foregoing (any action of correlative meaning, to
Encumber
).
Environmental Laws
means any and all applicable Laws pertaining to prevention of pollution or protection of the environment
(including, without limitation, any natural resource damages or any generation, use, storage, treatment, disposal or Release of Hazardous Materials into the indoor or outdoor environment) in effect as of the date hereof
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Plan
means any employee benefit plan within the meaning of Section 3(3) of ERISA,
Exchange Act
means the Securities Exchange Act of 1934.
Governmental Entity
means any court, governmental, regulatory or administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign.
group
has the meaning ascribed to such term in Section 13(d)
of the Exchange Act.
Hazardous Materials
means any (a) chemical, product, substance, waste, pollutant, or
contaminant that is defined or listed as hazardous or toxic or that is otherwise regulated under any Environmental Law; (b) asbestos containing materials, whether in a friable or
non-friable
condition,
lead-containing material polychlorinated biphenyls, naturally occurring radioactive materials or radon; and (c) any Hydrocarbons.
Hydrocarbons
means any hydrocarbon-containing substance, crude oil, natural gas, condensate, drip gas and natural gas
liquids, coalbed gas, ethane, propane, iso-butane,
nor-butane,
gasoline, scrubber liquids and other liquids or gaseous hydrocarbons or other substances (including minerals or gases), or any combination
thereof, produced or associated therewith.
Indebtedness
of any Person means, without duplication:
(a) indebtedness of such Person for borrowed money; (b) obligations of such Person to pay the deferred purchase or acquisition price for any property of such Person; (c) reimbursement obligations of such Person in respect of drawn
letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (d) obligations of such Person under a lease to the extent such obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person under GAAP; and (e) indebtedness of others as described in
clauses
(a)
through
(d)
above guaranteed by such Person; but Indebtedness does
not include accounts payable to trade creditors, or accrued expenses arising in the ordinary course of business consistent with past practice, in each case, that are not yet due and payable, or are being disputed in good faith, and the endorsement
of negotiable instruments for collection in the ordinary course of business.
Intellectual Property
means any and all
proprietary, industrial and intellectual property rights, under the applicable Law of any jurisdiction or rights under international treaties, both statutory and common law rights, including: (a) utility models, supplementary protection
certificates, invention disclosures, registrations, patents and applications for same, and extensions, divisions, continuations,
continuations-in-part,
reexaminations,
revisions, renewals, substitutes, and reissues thereof; (b) trademarks, service marks, certification marks, collective marks, brand names, d/b/as, trade names, slogans, domain names, symbols, logos, trade dress and other identifiers of
source, and registrations and applications for registrations thereof and renewals of the same (including all common law rights and goodwill associated with the foregoing and symbolized thereby); (c) published and unpublished works of authorship,
whether copyrightable or not, copyrights therein and thereto, together with all common law and moral rights therein, database rights, and registrations and applications for registration of the foregoing, and all renewals, extensions , restorations
and reversions thereof; (d) trade secrets,
know-how,
and other rights in information, including designs, formulations, concepts, compilations of information, methods, techniques, procedures, and
processes, whether or not patentable; (e) Internet domain names and URLs; and (f) all other intellectual property, industrial or proprietary rights.
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IT Assets
means computers, software, servers, networks, workstations, routers,
hubs, circuits, switches, data communications lines, and all other information technology equipment, and all associated documentation.
knowledge
means the actual knowledge of, (a) in the case of the Company, the individuals listed in
Schedule 1.1
of the Company Disclosure Letter and (b) in the case of Parent, the individuals listed in
Schedule 1.1
of the Parent Disclosure Letter.
Law
means any law, rule, regulation, ordinance, code, judgment, order, treaty, convention, governmental directive or other
legally enforceable requirement, U.S. or
non-U.S.,
of any Governmental Entity, including common law.
Material Adverse Effect
means, when used with respect to any Party, any fact, circumstance, effect, change, event or
development that (a) would prevent, materially delay or materially impair the ability of such Party or its Subsidiaries to consummate the Transactions or (b) has, or would have, a material adverse effect on the financial condition,
business, or results of operations of such Party and its Subsidiaries, taken as a whole;
provided
,
however
, that with respect to this
clause (b)
only, no effect (by itself or when aggregated or taken together with any and
all other effects) to the extent directly or indirectly resulting from, arising out of, attributable to, or related to any of the following shall be deemed to be or constitute a Material Adverse Effect or shall be taken into account when
determining whether a Material Adverse Effect has occurred or may, would or could occur:
(i) general economic conditions (or changes in such conditions) or conditions in the global economy
generally;
(ii) conditions (or changes in such conditions) in the securities markets, credit
markets, currency markets or other financial markets, including (A) changes in interest rates and changes in exchange rates for the currencies of any countries and (B) any suspension of trading in securities (whether equity, debt,
derivative or hybrid securities) generally on any securities exchange or
over-the-counter
market;
(iii) conditions (or changes in such conditions) in the oil and gas exploration, development or
production industry (including changes in commodity prices, general market prices and regulatory changes affecting the industry);
(iv) political conditions (or changes in such conditions) or acts of war, sabotage or terrorism
(including any escalation or general worsening of any such acts of war, sabotage or terrorism);
(v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural
disasters, weather conditions;
(vi) the announcement of this Agreement or the pendency or
consummation of the Transactions (other than with respect to any representation or warranty that is intended to address the consequences of the execution or delivery of this Agreement or the announcement or consummation of the Transactions);
(vii) compliance with the terms of, or the taking of any action expressly permitted or required by, this
Agreement (except for any obligation under this Agreement to operate in the ordinary course of business (or similar obligation) pursuant to
Sections
6.1
or
6.2
, as applicable);
(viii) changes in Law or other legal or regulatory conditions, or the interpretation thereof, or changes
in GAAP or other accounting standards (or the interpretation thereof), or that result from any action taken for the purpose of complying with any of the foregoing; or
(ix) any changes in such Partys stock price or the trading volume of such Partys stock, or
any failure by such Party to meet any analysts estimates or expectations of such Partys revenue, earnings or other financial performance or results of operations for any period, or any failure by such Party or any of its Subsidiaries to
meet any internal budgets, plans or forecasts of its revenues, earnings or other financial
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performance or results of operations (
it
being
understood
that the facts or occurrences giving rise to or contributing to such changes or failures may constitute, or be taken
into account in determining whether there has been or will be, a Material Adverse Effect);
provided
,
however
, except to the extent such
effects directly or indirectly resulting from, arising out of, attributable to or related to the matters described in the foregoing
clauses (i) (v)
disproportionately adversely affect such Party and its Subsidiaries, taken as a whole,
as compared to other similarly situated participants operating in the oil and gas exploration, development or production industry (in which case, such adverse effects (if any) shall be taken into account when determining whether a Material
Adverse Effect has occurred or may, would or could occur solely to the extent they are disproportionate).
NYSE
means the New York Stock Exchange.
Oil and Gas Leases
means all leases, subleases, licenses or other occupancy or
similar agreements (including any series of related leases with the same lessor) under which a Person leases, subleases or licenses or otherwise acquires or obtains rights to produce Hydrocarbons from real property interests.
Oil and Gas Properties
means all interests in and rights with respect to (a) oil, gas, mineral, and similar properties
of any kind and nature, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other
non-working
interests
and
non-operating
interests (including all Oil and Gas Leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, and in each
case, interests thereunder), surface interests, fee interests, reversionary interests, reservations and concessions and (b) all Wells located on or producing from such leases and properties.
Organizational Documents
means (a) with respect to a corporation, the charter, articles or certificate of
incorporation, as applicable, and bylaws thereof, (b) with respect to a limited liability company, the certificate of formation or organization, as applicable, and the operating or limited liability company agreement thereof, (c) with
respect to a partnership, the certificate of formation and the partnership agreement, and (d) with respect to any other Person the organizational, constituent and/or governing documents and/or instruments of such Person.
other
Party
means (a) when used with respect to the Company, Parent and Merger Sub and (b) when used with
respect to Parent or Merger Sub, the Company.
Parent Competing Proposal
means any contract, proposal, offer or
indication of interest relating to any transaction or series of related transactions involving directly or indirectly: (a) any acquisition (by asset purchase, stock purchase, merger, or otherwise) by any Person or group of any business or
assets of Parent or any of its Subsidiaries (including capital stock of or ownership interest in any Subsidiary) that generated 20% or more of Parents and its Subsidiaries assets (by fair market value), net revenue or earnings before
interest, Taxes, depreciation and amortization for the preceding twelve (12) months, or any license, lease or long-term supply agreement having a similar economic effect, (b) any acquisition of beneficial ownership by any Person or group
of 20% or more of the outstanding shares of Parent Common Stock or any other securities entitled to vote on the election of directors or any tender or exchange offer that if consummated would result in any Person or group beneficially owning 20% or
more of the outstanding shares of Parent Common Stock or any other securities entitled to vote on the election of directors or (c) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving Parent and that occurs after or fewer than seven (7) Business Days prior to the date on which the polls close at the Company Stockholders Meeting or is conditioned on
non-consummation
of the Merger.
Parent Expenses
means a cash amount equal to
$50,000,000 to be paid in respect of Parents costs and expenses in connection with the negotiation, execution and performance of this Agreement and the Transactions.
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Parent Intervening Event
means a material development or change in
circumstance that occurs or arises after the date of this Agreement that was not known to or reasonably foreseeable by the Parent Board as of the date of this Agreement.
Parent Permitted Acquisition
means any acquisition (by asset purchase or exchange, stock purchase, merger, or otherwise)
that (a) does not require approval by the stockholders of Parent, (b) is approved by at least
two-thirds
of the Parent Board after its receipt of a customary fairness opinion with respect thereto
from an investment bank of national standing, (c) would not reasonably be expected to prevent or materially impair or materially delay consummation of the Merger, (d) would not reasonably be expected to cause Parent to lose its investment
grade rating, and (e) at least 65% of the assets in the acquisition are located in the Permian Basin (including the New Mexico Shelf).
Parent Plan
means an Employee Benefit Plan sponsored, maintained, or contributed to by Parent.
Parent Stockholder Approval
means the approval of the Parent Stock Issuance by the affirmative vote of a majority of shares
of Parent Common Stock entitled to vote thereon and present in person and represented by proxy at the Parent Stockholders Meeting in accordance with the rules and regulations of the NYSE and the Organizational Documents of Parent.
Parent Stockholders Meeting
means a meeting of the stockholders of Parent to consider the approval of the Parent Stock
Issuance, including any postponement, adjournment or recess thereof.
Parent Termination Fee
means $350,000,000.
Party
or
Parties
means a party or the parties to this Agreement, except as the context may otherwise
require.
Permitted Encumbrances
means:
(a) to the extent not applicable to the transactions contemplated hereby or thereby or otherwise waived prior to the
Effective Time, preferential purchase rights, rights of first refusal, purchase options and similar rights granted pursuant to any contracts, including joint operating agreements, joint ownership agreements, stockholders agreements, organic
documents and other similar agreements and documents;
(b) contractual or statutory mechanics,
materialmens, warehousemans, journeymans and carriers liens and other similar Encumbrances arising in the ordinary course of business for amounts not yet delinquent and Encumbrances for Taxes or assessments or other
governmental charges that are not yet delinquent or, in all instances, if delinquent, that are being contested in good faith in the ordinary course of business and for which adequate reserves have been established in accordance with GAAP by the
party responsible for payment thereof;
(c) Production Burdens payable to third parties that are deducted in the
calculation of discounted present value in the Company Reserve Report or the Parent Reserve Reports, as applicable, and any Production Burdens payable to third parties affecting any Oil and Gas Property that was acquired subsequent to the date of
the Company Reserve Report or the dates of the Parent Reserve Reports, as applicable;
(d) Encumbrances arising in
the ordinary course of business under operating agreements, joint venture agreements, partnership agreements, Oil and Gas Leases,
farm-out
agreements, division orders, contracts for the sale, purchase,
transportation, processing or exchange of oil, gas or other Hydrocarbons, unitization and pooling declarations and agreements, area of mutual interest agreements, development agreements, joint ownership arrangements and other agreements that are
customary in the oil and gas business,
provided
,
however
, that, in each case, such Encumbrance (i) secures obligations that are not Indebtedness or a deferred purchase price and are not delinquent and (ii) would not be
reasonably expected to have a Material Adverse Effect, on the value, use or operation of the property encumbered thereby;
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(e) such Encumbrances as the Company (in the case of Encumbrances with
respect to properties or assets of Parent or its Subsidiaries) or Parent (in the case of Encumbrances with respect to properties or assets of the Company or its Subsidiaries), as applicable, may have expressly waived in writing;
(f) all easements, zoning restrictions,
rights-of-way,
servitudes, permits, surface leases and other similar rights in respect of surface operations, and easements for pipelines, streets, alleys, highways,
telephone lines, power lines, railways and other easements and
rights-of-way,
on, over or in respect of any of the properties of the Company or Parent, as applicable, or
any of their respective Subsidiaries, that are customarily granted in the oil and gas industry and do not materially interfere with the operation, value or use of the property or asset affected;
(g) any Encumbrances discharged at or prior to the Effective Time (including Encumbrances securing any Indebtedness
that will be paid off in connection with Closing);
(h) Encumbrances imposed or promulgated by applicable Law or
any Governmental Entity with respect to real property, including zoning, building or similar restrictions; or
(i) Encumbrances, exceptions, defects or irregularities in title, easements, imperfections of title, claims, charges,
security interests,
rights-of-way,
covenants, restrictions and other similar matters that would be accepted by a reasonably prudent purchaser of oil and gas interests,
that would not reduce the net revenue interest share of the Company or Parent, as applicable, or such Partys Subsidiaries, in any Oil and Gas Lease below the net revenue interest share shown in the Company Reserve Report or Parent Reserve
Reports, as applicable, with respect to such lease, or increase the working interest of the Company or Parent, as applicable, or of such Partys Subsidiaries, in any Oil and Gas Lease above the working interest shown on the Company Reserve
Report or Parent Reserve Reports, as applicable, with respect to such lease.
Person
means any individual, partnership,
limited liability company, corporation, joint stock company, trust, estate, joint venture, Governmental Entity, association or unincorporated organization, or any other form of business or professional entity.
Personal Information
means any information that, alone or in combination with other information held by the Company or any
of its Subsidiaries, identifies or could reasonably be used to identify an individual, and any other personal information that is subject to any applicable Laws.
Proceeding
means any actual or threatened claim (including a claim of a violation of applicable Law or Environmental Law),
cause of action, action, audit, demand, litigation, suit, proceeding, investigation, grievance, citation, summons, subpoena, inquiry, hearing, originating application to a tribunal, arbitration or other proceeding at law or in equity or order or
ruling, in each case whether civil, criminal, administrative, investigative or otherwise, whether in contract, in tort or otherwise, and whether or not such claim, cause of action, action, audit, demand, litigation, suit, proceeding, investigation
grievance, citation, summons, subpoena, inquiry, hearing, originating application to a tribunal, arbitration or other proceeding or order or ruling results in a formal civil or criminal litigation or regulatory action.
Production Burdens
means any royalties (including lessors royalties), overriding royalties, production payments, net
profit interests or other burdens upon, measured by or payable out of oil, gas or mineral production.
Release
means
any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing into the indoor or outdoor environment.
Representatives
means, with respect to any Person, the officers, directors, employees, accountants, consultants, agents,
legal counsel, financial advisors and other representatives of such Person.
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Sarbanes-Oxley Act
means the Sarbanes-Oxley Act of 2002.
SEC
means the United States Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933.
Stockholders
Agreement
means that certain Stockholders Agreement, dated as of January 23,
2014, entered into by and among the Company, RSP Permian Holdco, L.L.C., Ted Collins, Jr., Wallace Family Partnership, LP, ACTOIL, LLC, Rising Star Energy Development Co., L.L.C. and Pecos Energy Partners, L.P.
Subsidiary
means, with respect to a Person, any Person, whether incorporated or unincorporated, of which (a) at least
50% of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions, (b) a general partner interest or (c) a managing member
interest, is directly or indirectly owned or controlled by the subject Person or by one or more of its respective Subsidiaries.
Takeover Law
means any fair price, moratorium, control share acquisition,
business combination or any other anti-takeover statute or similar statute enacted under applicable Law.
Tax
Returns
means any return, report, statement, information return or other document (including any related or supporting information) filed or required to be filed with any Taxing Authority in connection with the determination, assessment,
collection or administration of any Taxes.
Taxes
means any and all taxes and similar charges, levies or other
assessments of any kind, including, but not limited to, income, corporate, capital, excise, property, sales, use, turnover, value added and franchise taxes, deductions, withholdings and custom duties, together with all interest, penalties, and
additions to tax, imposed by any Governmental Entity.
Taxing Authority
means any Governmental Entity having
jurisdiction in matters relating to Tax matters.
Transactions
means the Merger and the other transactions contemplated
by this Agreement and each other agreement to be executed and delivered in connection herewith and therewith.
Transfer
Taxes
means any transfer, sales, use, stamp, registration or other similar Taxes; provided, for the avoidance of doubt, that Transfer Taxes shall not include any income, franchise or similar taxes arising from the Transactions.
Voting Debt
of a Person means bonds, debentures, notes or other Indebtedness having the right to vote (or convertible into
securities having the right to vote) on any matters on which stockholders of such Person may vote.
Wells
means all oil
or gas wells, whether producing, operating,
shut-in
or temporarily abandoned, located on an Oil and Gas Lease or any pooled, communitized or unitized acreage that includes all or a part of such Oil and Gas
Lease or otherwise associated with an Oil and Gas Property of the applicable Person or any of its Subsidiaries, together with all oil, gas and mineral production from such well.
Willful and Material Breach
including the correlative term Willfully and Materially Breach, shall mean a
material breach (or the committing of a material breach) that is a consequence of an act or failure to take an act by the breaching party with the knowledge that the taking of such act (or the failure to take such act) may constitute a breach of
this Agreement.
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ANNEX B
Form of Certificate of Incorporation of the Surviving Corporation
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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RSP PERMIAN, INC.
[
●
], 2018
FIRST. The name of the corporation is RSP PERMIAN, INC. (the
Corporation
).
SECOND. The address of the corporations registered office in the State of Delaware is Corporation Service Company, 251 Little Falls
Drive, Wilmington, Delaware 19808, County of New Castle. The name of its registered agent at such address is The Corporation Service Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware, as amended.
FOURTH. The total number of shares that the Corporation shall have
authority to issue is 1,000 shares of Common Stock, and the par value of each of such share is $0.01.
FIFTH. The board of directors
of the Corporation is expressly authorized to adopt, amend or repeal bylaws of the Corporation.
SIXTH. Elections of directors need
not be by written ballot except and to the extent provided in the bylaws of the Corporation.
SEVENTH. To the fullest extent
permitted by law, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to, modification of or repeal of this Article SEVENTH
shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to any such amendment, modification or repeal.
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Annex B
March 27, 2018
Board of Directors
Concho Resources, Inc.
600 W. Illinois Avenue
Midland TX 79701
Members of the Board:
We understand that RSP Permian, Inc. (RSP or the Company), Concho Resources, Inc. (the Buyer) and Green Merger Sub, Inc.,
a wholly owned subsidiary of the Buyer (Acquisition Sub), propose to enter into an Agreement and Plan of Merger, substantially in the form of the draft dated March 27, 2018 (the Merger Agreement), which provides, among
other things, for the merger (the Merger) of Acquisition Sub with and into the Company. Pursuant to the Merger, the Company will become a wholly owned subsidiary of the Buyer, and each outstanding share of common stock, par value $0.01
per share, of the Company (the Company Common Stock), other than shares held by the Company as treasury shares or by the Buyer or Acquisition Sub or any wholly owned subsidiary of the Buyer or Acquisition Sub, will be converted into the
right to receive 0.320 shares (the Exchange Ratio) of common stock, par value $0.001 per share, of the Buyer (the Buyer Common Stock), subject to adjustment in certain circumstances (the Consideration). The terms
and conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant
to the Merger Agreement is fair from a financial point of view to the Buyer.
For purposes of the opinion set forth herein, we have:
1)
|
Reviewed certain publicly available financial statements and other business and financial information of the Company and the Buyer, respectively;
|
2)
|
Reviewed certain internal financial statements and other financial and operating data concerning the Company and the Buyer, respectively;
|
3)
|
Reviewed certain financial projections prepared by the management of the Company, (the Projections);
|
4)
|
Reviewed information relating to certain strategic, financial and operational benefits anticipated from the Merger, prepared by the management of the Buyer (the Synergies);
|
5)
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Discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;
|
6)
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Discussed the past and current operations and financial condition and the prospects of the Buyer, including the Synergies, with senior executives of the Buyer;
|
7)
|
Reviewed the pro forma impact of the Merger on the Buyers cash flow, consolidated capitalization and certain financial ratios;
|
8)
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Reviewed the reported prices and trading activity for the Company Common Stock and the Buyer Common Stock;
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9)
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Compared the financial performance of the Company and the Buyer and the prices and trading activity of the Company Common Stock and the Buyer Common Stock with that of certain other publicly-traded companies comparable
with the Company and the Buyer, respectively, and their securities;
|
10)
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Reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
|
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11)
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Participated in certain discussions and negotiations among representatives of the Company and the Buyer and their financial and legal advisors;
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12)
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Reviewed the Merger Agreement and certain related documents; and
|
13)
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Performed such other analyses, reviewed such other information and considered such other factors as we have deemed appropriate.
|
We have assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or
otherwise made available to us by the Company and the Buyer, and formed a substantial basis for this opinion. At your direction, our analyses relating to the business and financial prospects of the Company and the Buyer for purposes of our opinion
were made on the bases of the Projections and the Synergies. With respect to the Projections and the Synergies, we have assumed, with your consent, that they have been reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the Company and the Buyer of the future financial performance of the Company and the Buyer, respectively, and of the strategic, financial and operational benefits anticipated to result from the Merger,
including the potential impact of recent changes in the U.S. tax laws and regulations pursuant to H.R. 1, Tax Cuts and Jobs Act, enacted on December 22, 2017 (the Tax Cuts and Jobs Act). We express no view as to the Projections or
the Synergies, nor the assumptions on which they were based, including the potential impact of the Tax Cuts and Jobs Act. We further note that (i) the actual and estimated financial and operating performance and the share price data we reviewed
for the companies with publicly traded equity securities that we deemed to be relevant and (ii) the financial terms of certain acquisition transactions that we deemed relevant might not, in whole or in part, reflect the potential impact of the
Tax Cuts and Jobs Act. In addition, we have assumed, with your consent, that the Merger will be consummated in accordance with all applicable laws and regulations and in accordance with the terms set forth in the Merger Agreement without any waiver,
amendment or delay of any terms or conditions, including, among other things, that the Merger will be treated as a
tax-free
reorganization pursuant to the Internal Revenue Code of 1986, as amended and that the
definitive Merger Agreement will not differ in any material respect from the draft thereof furnished to us. Morgan Stanley & Co. LLC (Morgan Stanley) has assumed, with your consent, that in connection with the receipt of any
governmental, regulatory or other approvals, consents or agreements required in connection with the proposed Merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the Company, the
Buyer, their respective subsidiaries or the contemplated benefits expected to be derived in the proposed Merger. We are not legal, tax or regulatory advisors. We are financial advisors only and have relied upon, without independent verification, the
assessment of the Buyer and the Company and their legal, tax and regulatory advisors with respect to legal, tax and regulatory matters. We have not performed any tax assessment in connection with the Merger. We express no opinion with respect to the
fairness of the amount or nature of the compensation to any of the Companys officers, directors or employees, or any class of such persons, relative to the Consideration to be paid to the holders of shares of the Company Common Stock in the
transaction. We have not been requested to make, and have not made, any independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or the Buyer, nor have we been furnished with any such valuations or
appraisals. Our opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events occurring after the date hereof may affect this opinion and the
assumptions used in preparing it, and we do not assume any obligation to update, revise or reaffirm this opinion.
Our opinion is limited to the fairness,
from a financial point of view to the Buyer, of the Exchange Ratio. We have not been requested to opine as to, and our opinion does not in any manner address, the Buyers underlying business decision to proceed with or effect the transactions
contemplated by the Merger Agreement, or the likelihood that the Merger is consummated. Our opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or
not such alternatives could be achieved or are available.
We have acted as financial advisor to the Board of Directors of the Buyer in connection with
this transaction and will receive a fee for our services, a portion of which is contingent upon the rendering of this financial opinion,
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and the remainder of which is contingent upon the closing of the Merger. In addition, the Buyer has agreed to reimburse certain of our expenses and indemnify us and certain related parties for
certain liabilities and other items arising out of or related to our engagement. In the two years prior to the date hereof, we and our affiliates have not provided financial advisory or financing services for the Buyer or the Company and have not
received any fees in connection with such services. Morgan Stanley and our affiliates may seek to provide financial advisory and financing services to the Buyer and the Company and their respective affiliates in the future and would expect to
receive fees for the rendering of these services.
Please note that Morgan Stanley is a global financial services firm engaged in the securities,
investment management and individual wealth management businesses. Our securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as
providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions,
and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of the Buyer, the Company, or any other company, or any currency or commodity, that may be
involved in this transaction, or any related derivative instrument.
This opinion has been approved by a committee of Morgan Stanley investment banking
and other professionals in accordance with our customary practice. This opinion is for the information of the Board of Directors of the Buyer (in its capacity as such) in connection with its consideration of the Merger only and may not be used for
any other purpose or disclosed without our prior written consent, except that a copy of this opinion may be included in its entirety in any filing the Buyer is required to make with the Securities and Exchange Commission in connection with this
transaction if such inclusion is required by applicable law. In addition, this opinion does not in any manner address the prices at which the Buyer Common Stock will trade following consummation of the Merger or at any time and Morgan Stanley
expresses no opinion or recommendation as to how the shareholders of the Buyer and the Company should vote at the shareholders meetings to be held, or act on any matter, in connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the Buyer.
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|
|
Very truly yours,
MORGAN STANLEY & CO. LLC
|
|
|
By:
|
|
/s/ Jonathan W. Cox
|
|
|
Jonathan W. Cox
|
|
|
Managing Director
|
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Annex C
March 27, 2018
Board of Directors of RSP Permian, Inc.
3141 Hood St.
Suite 500
Dallas, TX 75219
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of the Eligible Shares (as defined below) of
RSP Permian, Inc. (the Company), of the Merger Consideration (as defined below) to be received by such holders, in the aggregate, pursuant to the Agreement and Plan of Merger (the Agreement), by and among Concho Resources
Inc. (Parent), Green Merger Sub Inc., a wholly owned subsidiary of Parent (Merger Sub), and the Company. The Agreement provides for, among other things, the merger of Merger Sub with and into the Company (the
Merger) pursuant to which the Company will be the surviving corporation (the Surviving Corporation) and become a wholly-owned subsidiary of Parent, and each issued and outstanding Eligible Share will be converted into the
right to receive 0.320 shares of common stock, par value $0.001 per share of Parent (the Merger Consideration). The transactions contemplated by the Agreement are referred to herein as the Transactions. Eligible
Shares means the shares of common stock, par value $0.01 per share (the Company Common Stock), of the Company, issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares and any shares of
Time-Based Restricted Stock and Performance-Based Restricted Stock, that are not treated as shares of Company Common Stock pursuant to Section 3.2(a) and Section 3.2(b) of the Agreement) and any shares of Time- Based Restricted Stock and
Performance-Based Restricted Stock which are treated as shares of Company Common Stock pursuant to Section 3.2(a) and Section 3.2(b) of the Agreement. Capitalized terms used but not defined herein shall have the meanings given to them in
the Agreement.
Tudor Pickering Holt & Co Advisors LP (TPH) and its affiliates, including Perella Weinberg Partners,
as part of their investment banking business, are regularly engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. TPH and its affiliates also engage in securities trading and brokerage, private equity
activities, investment management activities, equity research and other financial services, and in the ordinary course of these activities, TPH and its affiliates may from time to time acquire, hold or sell, for their own accounts and for the
accounts of their customers, (i) equity, debt and other securities (including derivative securities) and financial instruments (including bank loans and other obligations) of the Company, Parent, any of the other Parties and any of their
respective affiliates and (ii) any currency or commodity that may be involved in the Transactions and the other matters contemplated by the Agreement. In addition, TPH and its affiliates and certain of its employees, including members of the
team performing services in connection with the Transactions, as well as certain private equity and investment management funds associated or affiliated with TPH in which they may have financial interests, may from time to time acquire, hold or make
direct or indirect investments in or otherwise finance a wide variety of companies, including the Parties, other prospective counterparties and their respective affiliates. We have acted as financial advisor to the Company in connection with, and
have participated in certain negotiations leading to, the Transactions
.
We
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expect to receive fees for our services, the principal portion of which is contingent upon the consummation of the Transaction, and the Company has agreed to reimburse our expenses and indemnify
us against certain liabilities arising out of our engagement. We have previously provided services to the Parties and certain affiliates of the Parties as previously disclosed to you, and we may provide investment banking or other financial services
to the Company, Parent or any of the other Parties or their respective shareholders, affiliates or portfolio companies in the future. In connection with such investment banking or other financial services, we may receive compensation.
In connection with this opinion, we have reviewed, among other things, (i) a draft of the Agreement provided to us on March 27,
2018; (ii) the most recently available annual report to stockholders and the Annual Report on Form 10-K of the Company, in each case, for the year ended December 31, 2017; (iii) the most recently available annual report to
shareholders and the Annual Report on Form 10-K of Parent, in each case, for the year ended December 31, 2017; (iv) certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Parent; (v) certain
other communications from the Company and Parent to their respective stockholders; (vi) (a) certain internal financial information and forecasts (and any commodity price updates thereto) for the Company prepared by management of the
Company and for Parent prepared by the management of the Parent and (b) hydrocarbon resource and production data and forecasts for the Company prepared by management of the Company and hydrocarbon resource and production forecasts for Parent
prepared by management of the Company based on certain data provided by Parent (clauses (a) and (b), collectively, the Forecasts); (vii) certain publicly available research analyst reports with respect to the future financial
performance of the Company and Parent; and (viii) certain synergies projected by the management of the Company to result from the Transactions (the Synergies). The Forecasts and Synergies reflect certain assumptions regarding the
oil and gas industry and future commodity prices made by managements of the Company and Parent that were and are subject to significant uncertainty and volatility and that, if different than assumed, could have a material impact on our analysis and
this opinion. We also have held discussions with members of the senior managements of the Company and Parent regarding their assessment of the strategic rationale for, and the potential benefits of, the Transactions and the past and current business
operations, financial condition and future prospects of their respective entities and of Merger Sub. In addition, we have reviewed the reported price and trading activity for Company Common Stock and Parent Common Stock, compared certain financial
and stock market information for the Company and Parent with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the oil and gas
exploration and production industry and performed such other studies and analyses, and considered such other factors, as we considered appropriate.
For purposes of our opinion, we have assumed and relied upon, without assuming any responsibility for independent verification, the accuracy
and completeness of all of the financial, accounting, legal, tax and other information provided to, discussed with or reviewed by or for us, or publicly available, including without limitation, the assumed number of Eligible Shares and outstanding
shares of Parent Common Stock immediately prior to the Effective Time. In that regard, we have assumed with your consent that the Forecasts and Synergies have been reasonably prepared on a basis reflecting the best currently available estimates and
judgments of the Company, and provide a reasonable basis upon which to evaluate the Transactions. We have also assumed with your consent that (i) the executed Agreement (together with any exhibits and schedules thereto) will not differ in any
respect material to our analyses or opinion from the draft we have examined, referenced above, (ii) the Merger will be treated as a tax- free reorganization, pursuant to the Internal Revenue Code of 1986, as amended, (iii) all conditions
to the consummation of the Transactions will be obtained without amendment or waiver thereof or to any other term of the Agreement and (iv) all governmental, regulatory or other consents or approvals necessary for the consummation of the
Transactions will be obtained, in the case of each of the foregoing clauses (i)-(iv), without any adverse effect on the Company, Parent, Merger Sub, the holders of Company Common Stock or the expected benefits of the Transactions in any way
meaningful to our analysis. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities (including any
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contingent, derivative or off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries or Parent or any of its subsidiaries, and we have not been furnished with any such
evaluation or appraisal. Our opinion does not address any legal, regulatory, tax or accounting matters.
Our opinion does not address the
underlying business decision of the Board of Directors of the Company or any other party to engage in the Transactions, or the relative merits of the Transactions as compared to any other alternative transaction that might be available to the
Company. This opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the Merger Consideration pursuant to the Agreement. We do not express any view on, and our opinion does not address, any other term or
aspect of the Agreement or the Transactions, including, without limitation, the fairness of the Transactions to, or any consideration paid or received in connection therewith by, creditors or other constituencies of the Company or Parent; nor as to
the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or Parent, or any class of such persons, in connection with the Transactions, whether relative to the Merger
Consideration pursuant to the Agreement or otherwise. We are not expressing any opinion as to the price at which the shares of Company Common Stock or Parent Common Stock will trade at any time. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. We assume no obligation to update, revise or reaffirm our opinion and expressly disclaim any responsibility to do so based on
circumstances, developments or events occurring, or of which we become aware, after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the Transactions, and such opinion does not constitute a recommendation as to how any holder of interests in the Company should vote with respect to such Transactions or any other matter. This opinion has been
reviewed and approved by TPHs fairness opinion committee.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration to be received by the holders of Eligible Shares pursuant to the Agreement is fair, from a financial point of view, to such holders.
Very truly yours,
C-3