sv4
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL
28, 2005
REGISTRATION NO.
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Petrohawk Energy Corporation
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE |
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1311 |
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86-0876964 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
1100 Louisiana, Suite 4400
Houston, Texas 77002
(832) 204-2700
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive
Offices)
Floyd C. Wilson
President and Chief Executive Officer
Petrohawk Energy Corporation
1100 Louisiana, Suite 4400
Houston, Texas 77002
(832) 204-2700
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies To:
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Dallas Parker
William T. Heller IV
Thompson & Knight LLP
333 Clay St., Suite 3300
Houston, Texas 77002
(713) 654-8111
(713) 654-1871 (Fax) |
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David S. Elkouri
Connie D. Tatum
Hinkle Elkouri Law Firm L.L.C.
301 N. Main, Suite 2000
Wichita, Kansas 67202
(316) 267-2000
(316) 264-1518 (Fax) |
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Robert G. Reedy
Porter & Hedges, L.L.P.
1000 Main Street,
36th
Floor
Houston, Texas 77002
(713) 226-6674
(713) 226-6274 (Fax) |
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: As soon as practicable after the effectiveness of
this Registration Statement and the effective time of the merger
as described in the Agreement and Plan of Merger, dated as of
April 3, 2005, included as Annex A to the joint proxy
statement/ prospectus forming a part of this Registration
Statement.
If the securities being registered on this form are to be
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Amount of |
Title of Each Class of |
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Amount to be |
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Offering Price |
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Aggregate |
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Registration |
Securities to be Registered |
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Registered(1) |
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per Share |
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Offering Price(2) |
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Fee |
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Common Stock, par value $0.001
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21,935,083 |
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N/A |
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$221,748,848 |
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$26,100 |
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(1) |
Represents the number of shares of the common stock of the
registrant that may be issued to former stockholders of Mission
Resources Corporation pursuant to the merger described herein. |
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(2) |
Pursuant to Securities Act Rule 457(c), (f)(1) and (f)(3),
and estimated solely for purposes of calculating the
registration fee, the proposed maximum aggregate offering price
is $221,748,848, which equals (1) the product of
(a) the average of the high and low prices of the common
stock, par value $0.01 per share, of Mission, of $7.54, as
quoted on the Nasdaq National Market on April 22, 2005 and
(b) the maximum total number of shares of common stock of
Mission to be canceled (which is 47,367,803 shares), less
(2) the maximum amount of cash to be paid by the Registrant
in exchange for shares of Mission common stock (which equals
$135,404,387). |
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
The information in this document is not
complete and may be changed. Petrohawk may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This document
is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or
sale is not permitted.
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SUBJECT TO COMPLETION, DATED APRIL 28,
2005
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
Petrohawk Energy Corporation (Petrohawk), its wholly
owned subsidiary, Petrohawk Acquisition Corporation
(Merger Sub), and Mission Resources Corporation
(Mission), have entered into an agreement and plan
of merger dated as of April 3, 2005 (the merger
agreement). Under the merger agreement, Petrohawk will
acquire Mission through a merger of Mission with and into Merger
Sub (the merger). Following the merger, Merger Sub
will be the surviving entity and will continue as a wholly owned
subsidiary of Petrohawk. The merger agreement is attached as
Annex A to this joint proxy statement/ prospectus and is
incorporated into this joint proxy statement/ prospectus by
reference. In the merger, Petrohawk will issue approximately
19.234 million shares of common stock and will pay
approximately $135.4 million in cash (based on the
outstanding shares of Mission common stock on April 1,
2005, and in each case subject to upward adjustment, up to
approximately 1.8 million shares of common stock and
$12.7 million in cash, in the event that any additional
shares of Mission common stock are issued in accordance with the
merger agreement pursuant to the exercise of Mission stock
options or otherwise). You may elect to receive either cash or
Petrohawk common stock with respect to each share of Mission
common stock you hold, subject in each case to allocation
procedures set forth in the merger agreement and described in
this document. Regardless of whether you elect to receive cash,
Petrohawk common stock, or a combination of cash and Petrohawk
common stock, or make no election, the merger agreement contains
provisions designed to cause the value of the per share
consideration you receive to be substantially equivalent. The
tables on pages 6 and 61 of this document set forth
hypothetical examples of the merger consideration you may
receive. The actual amount of cash or number of shares of
Petrohawk common stock that you will receive for each share of
Mission common stock you hold will not be known at the time of
the Mission special meeting to vote upon the proposed merger.
Those amounts will be determined after the effective time of the
merger based on a formula set forth in the merger agreement and
described in this document.
Your vote is important. We cannot complete the merger unless the
Mission stockholders adopt the merger agreement and the
Petrohawk stockholders approve the issuance of Petrohawk common
stock at their respective stockholder meetings. The obligations
of Petrohawk and Mission to complete the merger are also subject
to the satisfaction or waiver of certain other conditions to the
merger. The places, dates and times of the annual meeting of
Petrohawk and the special meeting of Mission are as follows:
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For Petrohawk stockholders:
10:00 a.m.,
CDT ,
2005
1100 Louisiana St., Suite 4400
Houston, Texas 77002 |
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For Mission stockholders:
10:00 a.m.,
CDT ,
2005
Four Seasons Hotel, 1300 Lamar St.
Houston, Texas 77010 |
This joint proxy statement/ prospectus gives you detailed
information about the annual meeting of Petrohawk and the
special meeting of Mission and the proposed merger. We urge
you to read this joint proxy statement/ prospectus carefully,
including Risk Factors on page 19 for a
discussion of the risks relating to the merger. Whether or
not you plan to attend your meeting, to ensure your shares are
represented at the meeting, please vote as soon as possible by
either completing and submitting the enclosed proxy card or
voting using the telephone or Internet voting procedures
described on your proxy card.
Each of our boards of directors recommends that you vote
FOR the adoption of the merger agreement and
approval of the merger and the other transactions contemplated
by the merger agreement and the other matters contemplated to be
voted upon at the annual meeting of Petrohawk and the special
meeting of Mission.
Petrohawk common stock is quoted on the Nasdaq National Market
under the symbol HAWK. Mission common stock is
quoted on the Nasdaq National Market under the symbol
MSSN.
Neither the SEC nor any state securities commission has
approved or disapproved of the securities to be issued under
this joint proxy statement/ prospectus or has passed upon the
adequacy or accuracy of the disclosure in this joint proxy
statement/ prospectus. Any representation to the contrary is a
criminal offense.
This joint proxy statement/ prospectus is
dated ,
2005 and is first being mailed to Petrohawk stockholders and
Mission stockholders on or
about ,
2005.
PETROHAWK ENERGY CORPORATION
1100 Louisiana St., Suite 4400
Houston, Texas 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
On ,
2005
TO THE STOCKHOLDERS OF PETROHAWK ENERGY CORPORATION:
We will hold the annual meeting of stockholders of Petrohawk
Energy Corporation (Petrohawk) at Petrohawks
offices, 1100 Louisiana St., Suite 4400, Houston, Texas,
on ,
2005, at 10:00 a.m., CDT, for the following purposes:
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1. To consider and vote upon a proposal to approve the
issuance of shares of common stock, par value $0.001 per
share, of Petrohawk pursuant to the Agreement and Plan of
Merger, dated as of April 3, 2005, by and among Petrohawk,
Petrohawk Acquisition Corporation, and Mission Resources
Corporation. |
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2. To consider and vote upon a proposal to amend
Petrohawks certificate of incorporation to increase the
number of authorized shares of common stock from 75 million
shares to 125 million shares. |
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3. To elect two nominees to the board of directors to serve
as Class I directors until their successors are duly
elected or until their earlier death, resignation, or removal. |
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4. To consider and vote upon a proposal to amend
Petrohawks Amended and Restated 2004 Employee Incentive
Plan to increase the number of authorized shares of common stock
under the plan from 2.75 million shares to
4.25 million shares. |
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5. To consider and vote upon a proposal to amend
Petrohawks Amended and Restated 2004 Non-Employee Director
Incentive Plan to increase the number of authorized shares of
common stock under the plan from 200,000 shares to
400,000 shares. |
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6. To ratify the selection of Deloitte & Touche
LLP as Petrohawks independent auditors for the year ending
December 31, 2005. |
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7. To transact any other business as may properly be
brought before the annual meeting or any adjournment or
postponement of the annual meeting. |
The Petrohawk board of directors has fixed the close of business
on ,
2005 as the record date for determining those Petrohawk
stockholders entitled to vote at the annual meeting and any
adjournment or postponement thereof. Accordingly, only
stockholders of record at the close of business on that date are
entitled to notice of, and to vote at, the annual meeting. A
complete list of the Petrohawk stockholders will be available
for examination at the offices of Petrohawk in Houston, Texas
during ordinary business hours for a period of 10 days
prior to the annual meeting.
The board of directors of Petrohawk recommends that Petrohawk
stockholders vote FOR each of the proposals to be
voted on at the annual meeting.
To ensure your representation at the annual meeting, please
complete and promptly mail your proxy card in the return
envelope enclosed, or authorize the individuals named on your
proxy card to vote your shares by calling the toll-free
telephone number or by using the Internet as described in the
instructions included with your proxy card or voting instruction
card. This will not prevent you from voting in person, but will
help to secure a quorum and avoid added solicitation costs. If
your shares are held in street name by your broker
or other nominee, only that holder can vote your shares and the
vote cannot be cast unless you provide instructions to your
broker. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Your
proxy may be revoked at any time before it is voted. Please
review the joint proxy statement/ prospectus accompanying this
notice for more complete information regarding the matters to be
voted on at the meeting.
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By Order of the Board of Directors |
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of Petrohawk Energy Corporation |
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Floyd C. Wilson |
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Chairman, President and Chief Executive Officer |
Houston, Texas
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2005
MISSION RESOURCES CORPORATION
1331 Lamar St., Suite 1455
Houston, Texas 77010-3039
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held
On ,
2005
TO THE STOCKHOLDERS OF MISSION RESOURCES CORPORATION:
We will hold a special meeting of stockholders of Mission
Resources Corporation at the Four Seasons Hotel, 1300 Lamar St.,
Houston, Texas,
on ,
2005, at 10:00 a.m., CDT, for the following purposes:
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1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger dated as of April 3, 2005, by
and among Petrohawk Energy Corporation, Petrohawk Acquisition
Corporation, and Mission Resources Corporation, and approve the
merger of Mission Resources Corporation with and into Petrohawk
Acquisition Corporation and the other transactions contemplated
by the merger agreement; and |
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2. To transact any other business as may properly be
brought before the special meeting or any adjournment or
postponement of the special meeting. |
The Mission board of directors has fixed the close of business
on ,
2005 as the record date for determining those Mission
stockholders entitled to vote at the special meeting and any
adjournment or postponement thereof. Accordingly, only
stockholders of record at the close of business on that date are
entitled to notice of, and to vote at, the special meeting. A
complete list of the Mission stockholders will be available for
examination at the offices of Mission in Houston, Texas during
ordinary business hours for a period of 10 days prior to
the special meeting.
The board of directors of Mission recommends that Mission
stockholders vote FOR the proposal to adopt the
merger agreement and approve the merger and the other
transactions contemplated by the merger agreement.
Under Delaware law, if the merger is completed, holders of
Mission common stock who do not vote in favor of, or consent in
writing to, the adoption of the merger agreement and approval of
the merger and the other transactions contemplated by the merger
agreement will have the right to seek appraisal of the fair
value of their shares, but only if they submit a written demand
for such an appraisal prior to the vote on the merger agreement
and they comply with the other Delaware law procedures and
requirements explained in the accompanying joint proxy
statement/ prospectus.
To ensure your representation at the special meeting, please
complete and promptly mail your proxy card in the return
envelope enclosed, or authorize the individuals named on your
proxy card to vote your shares by calling the toll-free
telephone number or by using the Internet as described in the
instructions included with your proxy card or voting instruction
card. This will not prevent you from voting in person, but will
help to secure a quorum and avoid added solicitation costs. If
your shares are held in street name by your broker
or other nominee, only that holder can vote your shares and the
vote cannot be cast unless you provide instructions to your
broker. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Your
proxy may be revoked at any time before it is voted. Please
review the joint proxy statement/ prospectus accompanying this
notice for more complete information regarding the merger and
the special meeting.
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By Order of the Board of Directors |
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of Mission Resources Corporation |
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Robert L. Cavnar |
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Chairman, President and Chief Executive Officer |
Houston, Texas
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2005
ADDITIONAL INFORMATION
This joint proxy statement/ prospectus incorporates by reference
important business and financial information about Petrohawk and
Mission from documents that are not included in or delivered
with this joint proxy statement/ prospectus. See Where You
Can Find More Information on page 142. This
information is available to you without charge upon your written
or oral request. You can obtain documents incorporated by
reference in this joint proxy statement/ prospectus by
requesting them in writing or by telephone from Petrohawk or
Mission at the following addresses:
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Petrohawk Energy Corporation
1100 Louisiana St., Suite 4400
Houston, Texas 77002
(832) 204-2700
Attention: Investor Relations |
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Mission Resources Corporation
1331 Lamar St., Suite 1455
Houston, Texas 77010-3039
(713) 495-3000
Attention: Investor Relations |
You also may obtain these documents at the Securities and
Exchange Commissions website, www.sec.gov, and you
may obtain certain of these documents at Petrohawks
website, www.petrohawk.com, by selecting Investor
Relations and then selecting SEC Filings, and
at Missions website, www.mrcorp.com, by selecting
Investor Relations and then selecting SEC
Filings. Information contained on the Petrohawk and
Mission websites is expressly not incorporated by reference into
this joint proxy statement/ prospectus. To receive timely
delivery of the documents in advance of the Petrohawk annual
meeting of stockholders or Mission special meeting of
stockholders, your request should be received no later
than ,
2005.
TABLE OF CONTENTS
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(i)
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(ii)
(iii)
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES
FOR THE ANNUAL AND SPECIAL MEETINGS
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Q: |
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Why is my vote important? |
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Under the Delaware General Corporation Law (the
DGCL), which governs Mission, the merger agreement
must be adopted by the holders of a majority of the outstanding
shares of Mission common stock entitled to vote. Accordingly, if
a Mission stockholder fails to vote, or if a Mission stockholder
abstains, that will have the same effect as a vote against
adoption of the merger agreement and approval of the merger and
the other transactions contemplated by the merger agreement. |
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Under the rules of the Nasdaq National Market, the issuance of
Petrohawk common stock in the merger and the amendments to
increase the shares available for issuance under
Petrohawks Amended and Restated 2004 Employee Incentive
Plan (the 2004 Employee Incentive Plan) and Amended
and Restated 2004 Non-Employee Director Incentive Plan (the
2004 Non-Employee Director Incentive Plan) require
the affirmative vote of a majority of the shares of common stock
voted at the Petrohawk annual meeting. Accordingly, assuming
that a quorum is present, the failure of a Petrohawk stockholder
to vote or a decision by a Petrohawk stockholder to abstain will
have no effect in determining whether these proposals are
approved. Approval of the issuance of Petrohawk common stock is
a condition to the merger agreement; however, the merger is not
conditioned on amending the 2004 Employee Incentive Plan or the
2004 Non-Employee Director Incentive Plan. |
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In addition, under the DGCL, which also governs Petrohawk, the
proposed amendment to Petrohawks certificate of
incorporation must be approved by the holders of a majority of
the outstanding shares of Petrohawk common stock and preferred
stock entitled to vote. Accordingly, if a Petrohawk stockholder
fails to vote, or if a Petrohawk stockholder abstains, that will
have the same effect as a vote against approval of the amendment
to the certificate of incorporation. The merger is not
conditioned on the approval of this amendment. |
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What do I need to do now? |
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A: |
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After you have carefully read this joint proxy statement/
prospectus, please respond by completing, signing and dating
your proxy card and returning it in the enclosed postage-paid
envelope or, if available, by submitting your proxy or voting
instruction by telephone or through the Internet as soon as
possible so that your shares will be represented and voted at
your special meeting. |
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What do I do if I want to change my vote after I have
delivered my proxy card? |
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You may change your vote at any time before your proxy is voted
at your meeting. You can do this in any of the three following
ways: |
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by sending a written notice to the Secretary of
Petrohawk or Mission, as appropriate, in time to be received
before your meeting stating that you would like to revoke your
proxy; |
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by completing, signing and dating another proxy card
and returning it by mail in time to be received before your
annual or special meeting, as appropriate, or, if you submitted
your proxy through the Internet or by telephone, you can change
your vote by submitting a proxy card at a later date, in which
case your later-submitted proxy will be recorded and your
earlier proxy revoked; or |
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if you are a holder of record, by attending your
annual or special meeting and voting in person. |
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If your shares are held in an account at a broker or other
nominee, you should contact your broker or other nominee to
change your vote. |
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If I am a Mission stockholder, should I send in my stock
certificates with my proxy card? |
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No. Please DO NOT send your Mission stock certificates with
your proxy card. Rather, prior to the election deadline of
5:00 p.m., CDT,
on ,
2005, you should send your Mission common stock certificates to
the exchange agent, together with your completed, signed
election form. If your shares are held in street
name by your broker or other nominee you should follow
your brokers or other nominees instructions for
making an election with respect to your shares. |
1
|
|
|
Q: |
|
What is the amount of cash and/or the number of shares of
Petrohawk common stock that I will receive for my shares of
Mission common stock? |
|
A: |
|
The actual amount of cash or number of shares of Petrohawk
common stock that you will receive for each share of Mission
common stock you hold cannot be determined until after the
effective time of the merger. Those amounts will be determined
based on a formula set forth in the merger agreement and
described in this document. The per share consideration will be
equal to the aggregate value of all Petrohawk common stock and
cash being issued in the merger divided by the total number of
shares of Mission common stock outstanding immediately prior to
the effective time of the merger. The value of the Petrohawk
common stock for these purposes (the Average Petrohawk
Common Stock Value) will be the volume-weighted average of
the closing sale prices per share of Petrohawk common stock as
quoted on the Nasdaq National Market during the 10 consecutive
trading day period during which the shares of Petrohawk common
stock are quoted on the Nasdaq National Market ending three
calendar days before the effective time of the merger or if such
calendar day is not a trading day, then ending on the trading
day immediately preceding such calendar day. There is a table on
pages 6 and 61 that sets forth the per share cash
consideration and the per share stock consideration that would
be received by Mission stockholders based on a range of
hypothetical Average Petrohawk Common Stock Values. |
|
Q: |
|
Is the value of the per share consideration that I receive
expected to be substantially equivalent regardless of which
election I make? |
|
A: |
|
Yes. The formula that will be used to calculate the per share
consideration is designed to substantially equalize the value of
the consideration to be received for each share of Mission
common stock in the merger at the time the calculation is made,
regardless of whether you elect to receive cash, stock, or a
combination of cash and stock, or do not make an election, for
your Mission shares. |
|
Q: |
|
If I am a Mission stockholder, when must I elect the type of
merger consideration that I prefer to receive? |
|
A: |
|
Holders of Mission common stock who wish to elect the type of
merger consideration they prefer to receive in the merger should
carefully review and follow the instructions set forth in the
election form provided to Mission stockholders together with
this joint proxy statement/ prospectus. These instructions
require that a properly completed and signed election form be
received by the exchange agent by the election deadline, which
is 5:00 p.m., CDT,
on ,
2005. If a Mission stockholder does not submit a properly
completed and signed election form to the exchange agent by the
election deadline, then such stockholder will have no control
over the type of merger consideration such stockholder may
receive, and, consequently, may receive only cash, only
Petrohawk common stock, or a combination of cash and Petrohawk
common stock in the merger. |
|
Q: |
|
If I am a Mission stockholder, can I change my election after
I submit my certificates? |
|
A: |
|
You can revoke your election and submit new election materials
prior to the election deadline. You may do so by submitting a
written notice to the exchange agent that is received prior to
the election deadline at the following address: |
|
|
|
American Stock Transfer & Trust Company |
Shareholder Services
59 Maiden Lane
New York, New York 10038
|
|
|
|
|
The revocation must specify the account name and such other
information as the exchange agent may request; revocations may
not be made in part. New elections must be submitted in
accordance with the election procedures described in this joint
proxy statement/ prospectus. If you instructed a broker to
submit an election for your shares, you must follow your
brokers directions for changing those instructions. |
2
|
|
|
Q: |
|
If my shares are held in street name by my broker
or other nominee, will my broker or other nominee vote my shares
for me? |
|
A: |
|
Your broker will NOT vote your shares held in street
name unless you instruct your broker how to vote. In the
case of Mission stockholders, such failure to vote will have the
same effect as a vote AGAINST adoption of the merger
agreement and approval of the merger and the other transactions
contemplated by the merger agreement, and in the case of
Petrohawk stockholders, such failure to vote will have the same
effect as a vote AGAINST approval of the proposal to
amend Petrohawks certificate of incorporation. You should
therefore provide your broker or other nominee with instructions
as to how to vote your shares. |
|
Q: |
|
Do I have dissenters rights? |
|
A: |
|
Under the DGCL, if the merger is completed, holders of Mission
common stock who do not vote in favor of, or consent in writing
to, the adoption of the merger agreement and approval of the
merger and the other transactions contemplated by the merger
agreement will have the right to seek appraisal of the fair
value of their shares, but only if they submit a written demand
for such an appraisal prior to the vote on the merger agreement
and they comply with the other Delaware law procedures and
requirements explained in the accompanying joint proxy
statement/ prospectus. |
|
Q: |
|
Who can I call with questions about the annual or special
meeting, the merger and the other matters to be voted upon? |
|
A: |
|
If you have any questions about these matters or how to submit
your proxy or voting instruction card, or if you need additional
copies of this document or the enclosed proxy card or voting
instruction card, you should contact: |
|
|
|
if you are a Petrohawk stockholder: |
|
|
|
Petrohawk
Energy Corporation |
|
|
1100
Louisiana St., Suite 4400 |
|
|
Houston,
Texas 77002 |
|
|
(832) 204-2700 |
|
|
Attention:
Investor Relations |
|
|
|
if you are a Mission stockholder: |
|
|
|
Mission
Resources Corporation |
|
|
1331
Lamar St., Suite 1455 |
|
|
Houston,
Texas 77010-3039 |
|
|
(713) 495-3000 |
|
|
Attention:
Investor Relations |
3
SUMMARY
This brief summary highlights selected information from this
joint proxy statement/ prospectus. It does not contain all of
the information that may be important to you. You should
carefully read this entire document and the other documents to
which this joint proxy statement/ prospectus refers you to fully
understand the merger and the other matters discussed in this
joint proxy statement/ prospectus. See Where You Can Find
More Information on page 142. Each item in this
summary refers to the page where that subject is discussed in
more detail. We have defined certain oil and gas industry terms
used in this document in the Glossary of Oil and Gas
Terms beginning on page 145.
Information about Petrohawk and Mission (Pages 28
and 31)
|
|
|
Petrohawk Energy Corporation |
|
1100 Louisiana St., Suite 4400 |
|
Houston, Texas 77002 |
|
(832) 204-2700 |
Petrohawk is a Delaware corporation. Petrohawks common
stock is quoted on the Nasdaq National Market under the symbol
HAWK. Petrohawk is an independent oil and gas
company engaged in the acquisition, development, production and
exploration of natural gas and oil properties located in North
America. Our properties are concentrated in the South Texas,
Anadarko, Permian Basin, East Texas, Arkoma and Gulf Coast
regions.
|
|
|
Mission Resources Corporation |
|
1331 Lamar St., Suite 1455 |
|
Houston, Texas 77010-3039 |
|
(713) 495-3000 |
Mission is a Delaware corporation. Missions common stock
is quoted on the Nasdaq National Market under the symbol
MSSN. Mission drills for, acquires, develops and
produces natural gas and crude oil, primarily in the Permian
Basin (in West Texas and Southeast New Mexico), along the Texas
and Louisiana Gulf Coast and in both the state and federal
waters of the Gulf of Mexico.
The Merger
Mission Will Merge With and Into a Subsidiary of Petrohawk
(Page 34)
We propose a merger of Mission with and into Merger Sub, a
wholly owned subsidiary of Petrohawk. Merger Sub will survive
the merger as a wholly owned subsidiary of Petrohawk. We have
attached the merger agreement to this joint proxy statement/
prospectus as Annex A. Please read the merger
agreement carefully. It is the legal document that governs the
merger. Subject to satisfaction of other conditions to the
merger, we anticipate that the closing of the merger will occur
within five days after the approval of the merger by the
requisite vote of the Mission stockholders and the approval of
the issuance of shares of Petrohawk common stock by the
requisite vote of the Petrohawk stockholders.
Mission Stockholders Will Receive Cash and/or Shares of
Petrohawk Common Stock in the Merger Depending on Their Election
and Any Adjustment (Pages 58 and 62)
The merger agreement provides that at the effective time of the
merger, each outstanding share of Mission common stock will be
converted into the right to receive a number of shares of
Petrohawk common stock, an amount of cash, or a combination of
Petrohawk common stock and cash, subject to the election and
allocation procedures described in this document. The actual
amount of cash or number of shares of Petrohawk common stock
that you will receive for each share of Mission common stock you
hold cannot be determined until after the effective time of the
merger. Those amounts will be determined based on a formula set
forth in the merger agreement and described under the heading
The Merger Merger
4
Consideration beginning on page 58 of this document.
The formula is designed to substantially equalize the value of
the consideration to be received for each share of Mission
common stock, at the time the calculation is made, regardless of
whether you elect to receive cash, stock or a combination of
cash and stock, or make no election. This equalization mechanism
was deemed to be desirable because the value of the Petrohawk
common stock will fluctuate. The value of the merger
consideration to be received with respect to each share of
Mission common stock will be equal to $3.26 plus approximately
$0.4631 per $1.00 of Average Petrohawk Common Stock Value.
The formula is also designed to fix the total number of shares
of Petrohawk common stock and the amount of cash to be issued
and paid, respectively, in the merger at approximately
19.234 million shares and approximately $135.4 million
in cash (in each case subject to upward adjustment up to
approximately 1.8 million shares and $12.7 million in
cash, in the event that any shares of Mission common stock are
issued in accordance with the merger agreement pursuant to the
exercise of Mission stock options or otherwise). Because the
amount of cash and the number of shares of Petrohawk common
stock to be paid and issued, respectively, in the merger are
fixed, the percentage of shares of Mission common stock that
will be exchanged for Petrohawk common stock and the percentage
that will be exchanged for cash will depend upon the Average
Petrohawk Common Stock Value. The greater the Average Petrohawk
Common Stock Value, the greater the percentage of shares of
Mission common stock that will be exchanged for shares of
Petrohawk common stock and the lesser the Average Petrohawk
Common Stock Value, the greater the percentage of shares of
Mission common stock that will be exchanged for cash.
For example, if the Average Petrohawk Common Stock Value is
$11.53, a Mission stockholder electing to receive stock would
receive 0.7458 shares of Petrohawk common stock per share
of Mission common stock having a value, based on such Average
Petrohawk Common Stock Value, of $8.60 per share, and a
Mission stockholder electing to receive cash would receive $8.60
in cash per share of Mission common stock, subject in each case
to the allocation procedures described under the heading
The Merger Conversion of Shares; Exchange of
Certificates; Elections as to Form of Consideration;
Allocations beginning on page 62 of this document.
Based on that Average Petrohawk Common Stock Value and
41,535,088 shares of Mission common stock outstanding,
62.09% of the outstanding shares of Mission common stock would
be exchanged for Petrohawk common stock and 37.91% of the
outstanding shares of Mission common stock would be exchanged
for cash.
5
The following table sets forth, based on various hypothetical
Average Petrohawk Common Stock Values, the per share cash
consideration and the per share stock consideration, as well as
the value of such stock consideration based on the hypothetical
Average Petrohawk Common Stock Values. The table also shows the
percentage of outstanding shares of Mission common stock that
would be converted into Petrohawk common stock and cash based on
such Average Petrohawk Common Stock Values. The table is based
on the assumption that no Mission stock options have been
exercised following the date of this joint proxy statement/
prospectus and prior to the closing of the merger, that no
additional shares of Mission common stock are otherwise issued
following the date of this joint proxy statement/ prospectus and
that the number of exchangeable shares of Mission common stock
is 41,535,088 (the number of shares Mission common stock
outstanding on April 1, 2005). To the extent that the
number of shares of Mission common stock outstanding increases
in accordance with the merger agreement (whether as a result of
the exercise of Mission stock options or otherwise), the number
of exchangeable shares will increase and the aggregate
transaction value will increase, but there will be no change in
the per share stock consideration or per share cash
consideration. Each additional exchangeable share of Mission
common stock will increase the aggregate transaction value by
0.4631 shares of Petrohawk common stock and $3.26 in cash.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share | |
|
|
|
|
|
|
|
|
|
|
Stock | |
|
|
|
|
|
Percentage of Outstanding | |
|
|
|
|
Consideration | |
|
|
|
|
|
Shares of Mission | |
Average |
|
|
|
(Shares of | |
|
|
|
|
|
Common Stock to Receive: | |
Petrohawk |
|
|
|
Petrohawk | |
|
Value of Per | |
|
Per Share | |
|
| |
Common |
|
Transaction | |
|
Common | |
|
Share Stock | |
|
Cash | |
|
Stock | |
|
Cash | |
Stock Value |
|
Value | |
|
Stock) | |
|
Consideration | |
|
Consideration | |
|
Consideration | |
|
Consideration | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$13.50
|
|
$ |
395,064,312 |
|
|
|
0.7046 |
|
|
$ |
9.5121 |
|
|
$ |
9.5116 |
|
|
|
65.73 |
% |
|
|
34.27 |
% |
13.25
|
|
|
390,255,795 |
|
|
|
0.7091 |
|
|
|
9.3956 |
|
|
|
9.3958 |
|
|
|
65.30 |
|
|
|
34.70 |
|
13.00
|
|
|
385,447,278 |
|
|
|
0.7138 |
|
|
|
9.2794 |
|
|
|
9.2800 |
|
|
|
64.87 |
|
|
|
35.13 |
|
12.75
|
|
|
380,638,761 |
|
|
|
0.7188 |
|
|
|
9.1647 |
|
|
|
9.1643 |
|
|
|
64.43 |
|
|
|
35.57 |
|
12.50
|
|
|
375,830,244 |
|
|
|
0.7239 |
|
|
|
9.0488 |
|
|
|
9.0485 |
|
|
|
63.97 |
|
|
|
36.03 |
|
12.25
|
|
|
371,021,727 |
|
|
|
0.7292 |
|
|
|
8.9327 |
|
|
|
8.9327 |
|
|
|
63.50 |
|
|
|
36.50 |
|
12.00
|
|
|
366,213,209 |
|
|
|
0.7347 |
|
|
|
8.8164 |
|
|
|
8.8170 |
|
|
|
63.03 |
|
|
|
36.97 |
|
11.75
|
|
|
361,404,692 |
|
|
|
0.7405 |
|
|
|
8.7009 |
|
|
|
8.7012 |
|
|
|
62.53 |
|
|
|
37.47 |
|
11.50
|
|
|
356,596,175 |
|
|
|
0.7466 |
|
|
|
8.5859 |
|
|
|
8.5854 |
|
|
|
62.03 |
|
|
|
37.97 |
|
11.25
|
|
|
351,787,658 |
|
|
|
0.7529 |
|
|
|
8.4701 |
|
|
|
8.4696 |
|
|
|
61.51 |
|
|
|
38.49 |
|
11.00
|
|
|
346,979,141 |
|
|
|
0.7594 |
|
|
|
8.3534 |
|
|
|
8.3539 |
|
|
|
60.98 |
|
|
|
39.02 |
|
10.75
|
|
|
342,170,624 |
|
|
|
0.7663 |
|
|
|
8.2377 |
|
|
|
8.2381 |
|
|
|
60.43 |
|
|
|
39.57 |
|
10.50
|
|
|
337,362,107 |
|
|
|
0.7736 |
|
|
|
8.1228 |
|
|
|
8.1223 |
|
|
|
59.86 |
|
|
|
40.14 |
|
10.25
|
|
|
332,553,590 |
|
|
|
0.7811 |
|
|
|
8.0063 |
|
|
|
8.0066 |
|
|
|
59.28 |
|
|
|
40.72 |
|
10.00
|
|
|
327,745,072 |
|
|
|
0.7891 |
|
|
|
7.8910 |
|
|
|
7.8908 |
|
|
|
58.69 |
|
|
|
41.31 |
|
|
9.75
|
|
|
322,936,555 |
|
|
|
0.7974 |
|
|
|
7.7747 |
|
|
|
7.7750 |
|
|
|
58.07 |
|
|
|
41.93 |
|
|
9.50
|
|
|
318,128,038 |
|
|
|
0.8062 |
|
|
|
7.6589 |
|
|
|
7.6593 |
|
|
|
57.44 |
|
|
|
42.56 |
|
|
9.25
|
|
|
313,319,521 |
|
|
|
0.8155 |
|
|
|
7.5434 |
|
|
|
7.5435 |
|
|
|
56.78 |
|
|
|
43.22 |
|
|
9.00
|
|
|
308,511,004 |
|
|
|
0.8253 |
|
|
|
7.4277 |
|
|
|
7.4277 |
|
|
|
56.11 |
|
|
|
43.89 |
|
|
8.75
|
|
|
303,702,487 |
|
|
|
0.8357 |
|
|
|
7.3124 |
|
|
|
7.3119 |
|
|
|
55.42 |
|
|
|
44.58 |
|
|
8.50
|
|
|
298,893,970 |
|
|
|
0.8466 |
|
|
|
7.1961 |
|
|
|
7.1962 |
|
|
|
54.70 |
|
|
|
45.30 |
|
|
8.25
|
|
|
294,085,452 |
|
|
|
0.8582 |
|
|
|
7.0802 |
|
|
|
7.0804 |
|
|
|
53.96 |
|
|
|
46.04 |
|
|
8.00
|
|
|
289,276,935 |
|
|
|
0.8706 |
|
|
|
6.9648 |
|
|
|
6.9646 |
|
|
|
53.19 |
|
|
|
46.81 |
|
Assuming an Average Petrohawk Common Stock Value of $11.53,
which was the closing price of Petrohawk common stock on
April 1, 2005, the business day prior to the announcement
of the proposed merger, the merger consideration would have a
value of approximately $8.60 per share of Mission common
stock. Assuming an Average Petrohawk Common Stock Value of
$ ,
which was the closing price of Petrohawk common stock
on ,
2005, the last practicable date prior to the distribution of this
6
document, the merger consideration would have a value of
approximately
$ per
share of Mission common stock. Assuming an Average Petrohawk
Common Stock Value of
$ based
on the volume-weighted average of the closing prices per share
of Petrohawk common stock during the ten consecutive trading
days ended three calendar days before the mailing of this joint
proxy statement/ prospectus, the merger consideration would have
a value of approximately
$ per
share of Mission common stock.
The actual value of the cash consideration or number of shares
of Petrohawk common stock that you will receive for each share
of Mission common stock you may hold may differ from the
hypothetical amounts shown in this example because the actual
amounts will be determined after the effective time of the
merger based on a formula set forth in the merger agreement and
described in this document.
No assurance can be given that the current fair market value
of Petrohawk common stock will be equivalent to the fair market
value of Petrohawk common stock on the date that the merger
consideration is received by a Mission stockholder or at any
other time. The actual fair market value of the Petrohawk common
stock received by Mission stockholders will depend upon the
market price of Petrohawk common stock upon receipt, which may
be higher or lower than the Average Petrohawk Common Stock Value
or the market price of Petrohawk common stock on the date the
merger was announced, on the date this document is mailed to
Mission stockholders, on the date a Mission stockholder makes an
election with respect to the merger consideration, or on the
date of the special meeting of Mission stockholders.
If You Are a Mission Stockholder, You May Receive a Different
Form or Combination of Merger Consideration Than What You Elect
(Page 62)
You may elect to receive cash, shares of Petrohawk common stock
or a combination of cash and Petrohawk common stock in exchange
for your shares of Mission common stock. However, since
Petrohawk is issuing a fixed number of shares of Petrohawk
common stock and paying a fixed amount of cash (in each case
subject to upward adjustment in the event that any shares of
Mission common stock are issued in accordance with the merger
agreement pursuant to the exercise of Mission stock options or
otherwise), you cannot be certain of receiving the form or
combination of consideration that you elect with respect to all
of your shares of Mission common stock.
If the elections result in an oversubscription of the pool of
cash or Petrohawk common stock, certain procedures for
allocating cash and Petrohawk common stock will be followed by
the exchange agent. See The Merger Conversion
of Shares; Exchange of Certificates; Elections as to Form of
Consideration; Allocations Allocation
beginning on page 64 of this document.
To Make an Election, Mission Stockholders Must Properly
Complete and Deliver the Election Form (Page 62)
If you are a Mission stockholder, you have received together
with this joint proxy statement/ prospectus an election form
with instructions for making cash and stock elections. You must
properly complete and deliver to the exchange agent your
election form along with your stock certificates (or a properly
completed notice of guaranteed delivery). Do not send your stock
certificates or election form with your proxy card.
Election forms and stock certificates (or a properly completed
notice of guaranteed delivery) must be received by the exchange
agent by the election deadline, which is 5:00 p.m., CDT,
on ,
2005. Once you tender your stock certificates to the exchange
agent, you may not transfer your shares of Mission common stock
until the merger is completed, unless you revoke your election
by written notice to the exchange agent that is received prior
to the election deadline.
If you fail to submit a properly completed election form,
together with your stock certificates (or a properly completed
notice of guaranteed delivery), prior to the election deadline,
you will be deemed not to have made an election. As a holder
making no election, you will be paid value per share equivalent
to the amount paid per share to holders making elections, but
you may be paid all in cash, all in Petrohawk
7
common stock, or in part cash and in part Petrohawk common
stock, depending on the remaining pool of cash and Petrohawk
common stock available for paying merger consideration after
honoring the cash elections and stock elections that other
Mission stockholders have made.
If you own shares of Mission common stock in street
name through a broker or other nominee and you wish to
make an election, you should seek instructions from the broker
or other nominee holding your shares concerning how to make your
election.
If the merger agreement is not adopted and the merger and the
other transactions contemplated by the merger agreement are not
approved by Mission stockholders, or the stock issuance is not
approved by Petrohawk stockholders, stock certificates will be
returned by the exchange agent by first class mail or through
book-entry transfer (in the case of shares of Mission common
stock delivered in book-entry form to the exchange agent).
The Meetings and Voting
Petrohawk Annual Meeting of Stockholders (Page 24)
The Petrohawk annual meeting will be held in Houston
on ,
2005 at 10:00 a.m., CDT. At the annual meeting, you will be
asked:
|
|
|
1. To consider and vote upon a proposal to approve the
issuance of shares of common stock, par value $0.001 per
share, of Petrohawk pursuant to the Agreement and Plan of
Merger, dated as of April 3, 2005, by and among Petrohawk,
Petrohawk Acquisition Corporation, and Mission Resources
Corporation. |
|
|
2. To consider and vote upon a proposal to amend
Petrohawks certificate of incorporation to increase the
number of authorized shares of common stock from 75 million
shares to 125 million shares. |
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3. To elect two nominees to the board of directors to serve
as Class I directors until their successors are duly
elected or until their earlier death, resignation, or removal. |
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4. To consider and vote upon a proposal to amend
Petrohawks 2004 Employee Incentive Plan to increase the
number of authorized shares of common stock under the plan from
2.75 million shares to 4.25 million shares. |
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5. To consider and vote upon a proposal to amend
Petrohawks 2004 Non-Employee Director Incentive Plan to
increase the number of authorized shares of common stock under
the plan from 200,000 shares to 400,000 shares. |
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6. To ratify the selection of Deloitte & Touche
LLP as Petrohawks independent auditors for the year ending
December 31, 2005. |
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7. To transact any other business as may properly be
brought before the annual meeting or any adjournment or
postponement of the annual meeting. |
You can vote at the Petrohawk annual meeting if you owned
Petrohawk common stock or 8% cumulative convertible preferred
stock at the close of business
on ,
2005. On that date, there
were shares
of Petrohawk common stock outstanding and entitled to vote,
approximately % of which were
owned and entitled to be voted by Petrohawk directors and
executive officers and their affiliates. Also on that date,
there were 598,271 shares of Petrohawk 8% cumulative
convertible preferred stock outstanding and entitled to vote,
none of which were owned by Petrohawk directors and executive
officers and their affiliates. You can cast one vote for each
share of Petrohawk common stock you owned on that date. Each
holder of Petrohawks 8% cumulative convertible preferred
stock is entitled to one vote for every two shares of 8%
cumulative convertible preferred stock owned on that date.
8
Approval of the issuance of Petrohawk common stock in the merger
requires the affirmative vote of a majority of the votes cast at
the meeting. Broker non-votes and abstentions have no impact on
this matter provided a quorum is present. Approval of the
amendment to the certificate of incorporation requires the
affirmative vote of holders of a majority of the outstanding
shares of Petrohawk stock entitled to vote. Consequently, broker
non-votes and abstentions on this matter have the effect of a
vote against the matter. Each of the directors nominated to
serve on Petrohawks board of directors as Class I
directors are elected by a plurality of the votes of
Petrohawks stockholders present in person or represented
by written proxy at the annual meeting. Any shares not voted
(whether by withholding the vote, broker non-vote or otherwise)
have no impact in the election of directors, except to the
extent the failure to vote for an individual results in another
candidate receiving a larger number of votes.
Approval of the amendment to the 2004 Employee Incentive Plan
and the amendment to the 2004 Non-Employee Director Incentive
Plan requires affirmative vote of a majority of the votes cast
at the meeting. Broker non-votes and abstentions on these
matters have no impact, provided that a quorum is present.
Although action by the stockholders on the ratification of
Petrohawks Audit Committees selection of an
independent auditor is not required, the Petrohawk Audit
Committee believes that it is important to seek stockholder
ratification of this appointment in light of the critical role
played by the independent auditor in maintaining the integrity
of financial controls and reporting.
Mission Special Stockholder Meeting (Page 26)
The Mission special meeting will be held in Houston, Texas
on ,
2005 at 10:00 a.m., CDT. At the special meeting, you will
be asked:
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1. to adopt the merger agreement and approve the
merger and the other transactions contemplated by the merger
agreement; and |
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2. to transact any other business as may properly be
brought before the special meeting or any adjournment or
postponement of the special meeting. |
You can vote at the Mission special meeting if you owned Mission
common stock at the close of business
on ,
2005. On that date, there
were shares
of Mission common stock outstanding and entitled to vote,
approximately % of which were
owned and entitled to be voted by Mission directors and
executive officers and their affiliates. Additionally, parties
owning approximately 32% of Mission common stock have entered
into separate voting agreements with Petrohawk and Mission
pursuant to which they have agreed, among other things, to vote
all shares owned by each of them in favor of the merger. You can
cast one vote for each share of Mission common stock you owned
on that date. In order to adopt the merger agreement and approve
the merger and the other transactions contemplated by the merger
agreement, the holders of a majority of the outstanding shares
of Mission common stock entitled to vote must vote in favor of
doing so.
Boards of Directors Recommendations to Stockholders
The Petrohawk board of directors believes that the merger and
the issuance of Petrohawk common stock in the merger is fair to
and in the best interests of the Petrohawk stockholders, and
recommends that Petrohawk stockholders vote FOR the
issuance of Petrohawk common stock in the merger. In addition,
the Petrohawk board of directors believes that the amendments to
Petrohawks certificate of incorporation, the 2004
Non-Employee Director Incentive Plan, and the 2004 Employee
Incentive Plan, the election of the persons nominated as
directors to the board of directors and the ratification of
Deloitte & Touche LLP as independent auditors for 2005
are in the best interests of the Petrohawk stockholders and
recommends that the Petrohawk stockholders vote FOR
each of these proposals.
The Mission board of directors believes that the merger is fair
to and in the best interests of the Mission stockholders, and
recommends that Mission stockholders vote FOR the
adoption of the merger agreement and approval of the merger and
the other transactions contemplated by the merger agreement.
9
To review the background and reasons for the merger in greater
detail see The Merger Background of the
Merger beginning on page 34 of this document, and to
review certain risks related to the merger, see Risk
Factors beginning on page 19 of this document,
The Merger Petrohawks Reasons for the
Merger; Recommendation of the Stock Issuance in the Merger by
the Petrohawk Board of Directors beginning on page 39
of this document and The Merger Missions
Reasons for the Merger; Recommendation of the Merger by the
Mission Board of Directors beginning on page 41 of
this document. Please refer to Proposed Amendment to
Petrohawks Certificate of Incorporation beginning on
page 106 of this document, Election of Petrohawk
Directors beginning on page 107 of this document,
Proposed Amendment to Petrohawks 2004 Employee
Incentive Plan beginning on page 125 of this
document, Proposed Amendment To Petrohawks 2004
Non-Employee Director Incentive Plan beginning on
page 128 of this document, and Ratification of
Independent Auditors beginning on page 141 of this
document for a more complete discussion of the other Petrohawk
proposals.
Comparative Market Price and Dividend Information
Comparative Market Price Information (Page 98)
Petrohawk common stock is quoted on the Nasdaq National Market
under the symbol HAWK, and Mission common stock is
quoted on the Nasdaq National Market under the symbol
MSSN.
The following table lists the closing prices of Petrohawk common
stock and Mission common stock on April 1, 2005, the last
trading day before we announced the proposed merger, and
on ,
2005, the last practicable date prior to distribution of this
document. The following table also presents the equivalent pro
forma prices for Mission common stock on those dates, as
determined by multiplying the closing prices of Petrohawk common
stock on those dates by 0.7458
and ,
each representing the fraction of a share of Petrohawk common
stock that Mission stockholders electing to receive Petrohawk
common stock would receive in the merger for each share of
Mission common stock, based on (1) a hypothetical Average
Petrohawk Common Stock Value of $11.53 which was the closing
price of Petrohawk common stock on April 1, 2005, the
business day prior to the announcement of the proposed merger
and (2) a hypothetical Average Petrohawk Common Stock Value
of
$ based
on the volume-weighted average of the trading sale prices per
share of Petrohawk common stock during the 10 consecutive
trading days ending
on ,
2005, respectively, and assuming no adjustment for
oversubscriptions.
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Petrohawk | |
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Mission | |
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Mission | |
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Common | |
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Common | |
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Equivalent | |
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Stock | |
|
Stock | |
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per Share | |
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April 1, 2005
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$ |
11.53 |
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$ |
7.22 |
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$ |
8.60 |
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,
2005
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The market prices of both Petrohawk common stock and Mission
common stock will fluctuate prior to the merger. You should
obtain current stock price quotations for Petrohawk common stock
and Mission common stock. You can get these quotations from a
newspaper, on the Internet or by calling your broker.
Dividend Policy of Petrohawk (Page 98)
Petrohawk has never paid any cash dividends on its common stock.
Petrohawk does not expect to declare or pay any cash or other
dividends in the foreseeable future on its common stock. Holders
of Petrohawks 8% cumulative convertible preferred stock
are entitled to receive cumulative dividends at the annual rate
of $0.74 per share when and as declared by the board of
directors of Petrohawk. No dividends may be paid on
Petrohawks common stock unless all cumulative dividends
due on all of the 8% cumulative convertible preferred stock have
been declared and paid. Petrohawks existing revolving
credit facility restricts the payment of cash dividends on
common stock and preferred stock (other than the 8% cumulative
convertible preferred stock), and Petrohawk may also enter into
credit agreements or other borrowing arrangements in the future
that restrict the ability to declare and pay cash dividends.
10
Matters to Be Considered in Deciding How to Vote
Fairness Opinion of Sanders Morris Harris Inc. to the
Petrohawk Board of Directors (Page 43)
In connection with the merger, Petrohawk retained Sanders Morris
Harris Inc. (SMH) as its financial advisor. In
deciding to approve the merger agreement, the Petrohawk board of
directors considered the opinion of SMH provided to the
Petrohawk board of directors on April 3, 2005, that, based
upon and subject to the assumptions made, matters considered,
qualifications, and limitations set forth in the written
opinion, as of that date, the financial consideration to be paid
by Petrohawk in the merger was fair, from a financial point of
view, to Petrohawk.
The full text of the written opinion of SMH, dated April 3,
2005, which sets forth, among other things, the assumptions
made, matters considered, qualifications, and limitations on the
review undertaken by SMH in connection with the opinion, is
attached to this document as Annex B. SMH provided
its opinion for the use and benefit of the Petrohawk board of
directors in connection with its consideration of the merger.
The SMH opinion is not a recommendation as to how any
stockholder of Petrohawk or Mission should vote or act with
respect to any matter relating to the merger.
Missions Financial Advisor and Merrill Lynch, Pierce,
Fenner & Smith Incorporateds Fairness Opinion to the
Mission Board of Directors (Page 51)
Under a letter agreement dated August 19, 2002, Mission
retained Petrie Parkman & Co., Inc. (Petrie
Parkman) to act as its financial advisor. Petrie Parkman
was not requested to, and did not, render an opinion to the
Mission board of directors in connection with the merger. In
connection with the merger, Mission retained Merrill Lynch,
Pierce, Fenner & Smith Incorporated (Merrill
Lynch) to opine on the fairness of the merger from a
financial point of view. In deciding to approve the merger
agreement, the Mission board of directors considered the opinion
of Merrill Lynch provided to the Mission board of directors on
April 3, 2005, that, as of the date of the opinion and
based upon and subject to the matters set forth in its opinion,
the consideration to be received by holders of Mission common
stock (other than Petrohawk and its affiliates) in the merger
was fair, from a financial point of view, to such holders.
The full text of the written opinion of Merrill Lynch, dated
April 3, 2005, which sets forth, among other things, the
assumptions made, procedures followed, matters considered, and
qualifications and limitations of the review undertaken by
Merrill Lynch in rendering its opinion, is attached to this
document as Annex C. Merrill Lynch provided its
opinion for the information and assistance of the Mission board
of directors in connection with its consideration of the
transaction contemplated by the merger agreement. The Merrill
Lynch opinion is not a recommendation as to how any Mission
stockholder should vote on the merger.
The Merger Generally Will Be Tax-Free to U.S. Holders
and Certain Non-U.S. Holders of Mission Common Stock to the
Extent They Receive Petrohawk Common Stock (Page 78)
Based on the opinions of Porter & Hedges, L.L.P.,
outside counsel to Mission, and Thompson & Knight LLP,
outside counsel to Petrohawk, we expect that the material
U.S. federal income tax consequences of the merger to
Mission stockholders that are U.S. persons will be as
follows:
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If you exchange Mission common stock solely for cash in the
merger, you generally should recognize capital gain or loss
equal to the difference between the amount of cash received and
your tax basis in the stock surrendered. |
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If you exchange Mission common stock solely for Petrohawk common
stock in the merger, you will not recognize any gain or loss,
except to the extent of the cash you receive in lieu of a
fractional Petrohawk share. |
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If you exchange Mission common stock for a combination of cash
and Petrohawk common stock in the merger, you generally will
recognize (i.e., take into account for tax purposes) gain (but
not loss). Your gain recognized generally will equal the lesser
of (1) the excess of the sum of the cash |
11
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and the fair market value of the Petrohawk common stock received
over your tax basis in the Mission stock surrendered, or
(2) the amount of cash received. |
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Your holding period for the Petrohawk common stock received in
the merger generally will include your holding period for the
Mission common stock exchanged in the merger. |
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Your aggregate tax basis of the shares of Petrohawk common stock
received in exchange for your Mission common stock pursuant to
the merger will be the same as the aggregate tax basis of your
Mission common stock surrendered in the merger decreased by the
amount of cash received in the merger and increased by the
amount of gain recognized in the merger. |
If you are a non-U.S. person that owns or has owned more
than 5% of the outstanding shares of Mission common stock at any
time during the shorter of (1) the five-year period ending
on the effective time of the merger or (2) the period
during which you held such Mission common stock (referred to as
the Testing Period), and you exchange your Mission common stock
solely for cash, solely for Petrohawk common stock constituting
5% or less of the outstanding shares of Petrohawk common stock,
or for a combination of cash and Petrohawk common stock
constituting 5% or less of the outstanding shares of Petrohawk
common stock immediately after the merger, we expect the
U.S. federal income tax consequences to you to be as
follows:
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You will recognize gain or loss measured by the difference
between (1) the amount of any cash received (including cash
instead of a fractional share of Petrohawk common stock) and the
fair market value of the Petrohawk common stock received in the
merger, and (2) the adjusted tax basis in the Mission
common stock you surrender in the merger. |
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The aggregate tax basis of the Petrohawk common stock received
in the merger will equal the fair market value of such Petrohawk
common stock as of the effective time of the merger. |
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The holding period for the Petrohawk common stock received in
the merger will begin the day after the effective time of the
merger. |
If you are a non-U.S. person that has owned more than 5% of
the outstanding shares of Mission common stock at any time
during the Testing Period, and you own more than 5% of the
outstanding shares of Petrohawk common stock after the merger,
we expect the U.S. federal income tax consequences to you
generally to be the same as previously described with respect to
a U.S. person.
We expect the tax consequences to a Mission stockholder that is
a non-U.S. person and who has not held more than 5% of
Missions outstanding common stock at any time during the
Testing Period to be as follows:
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You will not be subject to U.S. federal income tax on any gain
or loss you realize if you exchange your Mission stock solely
for shares of Petrohawk stock, solely for cash or for a
combination of cash and Petrohawk common stock in the merger. |
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The aggregate tax basis of the Petrohawk common stock received
in the merger will be equal to the aggregate tax basis of the
Mission common stock surrendered, decreased by the amount of
cash received in the merger. |
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The holding period for shares of Petrohawk common stock received
in exchange for shares of Mission common stock in the merger
will include the holding period of your Mission common stock
exchanged in the merger. |
Please refer to The Merger Material
U.S. Federal Income Tax Consequences beginning on
page 78 of this document for a more complete discussion of
the U.S. federal income tax consequences of the merger.
Determining the actual tax consequences of the merger to you may
be complex and will depend on your specific situation. You
should consult your tax advisor for a full understanding of the
mergers tax consequences for you.
12
Mission Directors and Executive Officers Have Interests in
the Merger that are in Addition to their Interests as
Stockholders (Page 86)
In considering the recommendation of the Mission board of
directors with respect to the adoption of the merger agreement
and the approval of the merger and the other transactions
contemplated by the merger agreement, Mission stockholders
should be aware that certain executive officers and directors of
Mission have interests in the merger that are in addition to the
interests of other stockholders of Mission generally.
Board of Directors After the Merger (Page 87)
After the merger, the board of directors of the combined company
will have nine members, consisting of the seven current members
of Petrohawks board of directors and two members to be
designated by Mission.
The Merger is Expected to Occur in the Third Quarter of 2005
(Page 66)
The merger will occur after all the conditions to its completion
have been satisfied or, if permissible, waived. Currently, we
anticipate that the merger will occur in the third quarter of
2005. However, we cannot assure you when or if the merger will
occur. If the merger has not been completed on or before
December 31, 2005, either Petrohawk or Mission may
terminate the merger agreement unless the failure to complete
the merger by that date is due to the failure of the party
seeking to terminate the merger agreement to fulfill any
material obligations under the merger agreement or a material
breach of the merger agreement by such party.
Completion of the Merger is Subject to Customary Conditions
(Page 67)
The completion of the merger is subject to a number of customary
conditions being met, including the adoption by Mission
stockholders of the merger agreement and approval by Mission
stockholders of the merger and the other transactions completed
by the merger agreement, the approval by Petrohawk stockholders
of the issuance of Petrohawk common stock in the merger and the
approvals of regulatory agencies.
Where the law permits, a party to the merger agreement could
elect to waive a condition to its obligation to complete the
merger, even if that condition has not been satisfied. We cannot
be certain when (or if) the conditions to the merger will be
satisfied or waived or that the merger will be completed.
Termination of the Merger Agreement; Fees Payable
(Page 76)
We may terminate the merger agreement by mutual written consent
at any time. Either of us also may terminate the merger
agreement if:
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the merger is not completed on or before December 31, 2005
(although this termination right is not available to a party
whose failure to fulfill any material obligations under, or
material breach of, the merger agreement resulted in the failure
to complete the merger by that date); |
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a court or other governmental entity of competent jurisdiction
issues a final nonappealable order having the effect of
permanently enjoining or otherwise prohibiting the merger; |
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the stockholders of Mission do not adopt the merger agreement
and approve the merger and the other transactions contemplated
by the merger agreement at the Mission stockholders
meeting; |
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the stockholders of Petrohawk do not approve the issuance of
Petrohawk common stock in the merger at the Petrohawk
stockholders meeting; |
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the other party is in breach of its representations, warranties,
covenants or agreements set forth in the merger agreement and
the breach rises to a level that would excuse the terminating
partys |
13
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obligation to complete the merger and is not cured in
30 days or cannot be cured by December 31, 2005; |
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prior to obtaining the requisite approval of the Mission
stockholders to adopt the merger agreement and approve the
merger, there occurs a change in Missions recommendation
that its stockholders adopt the merger agreement and approve the
merger and the other transactions contemplated by the merger
agreement; or |
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prior to obtaining the requisite approval of the Mission
stockholders to adopt the merger agreement and approve the
merger, Mission enters into an agreement or its board recommends
that Mission enter into an agreement with a third party that
would result in the third party owning or controlling 10% or
more of Missions common stock or assets. |
The merger agreement provides that in limited circumstances
described more fully beginning on page 76 of this document,
if there occurs a change in Missions recommendation that
its stockholders adopt the merger agreement and approve the
merger and the other transactions contemplated by the merger
agreement, or if the merger agreement is otherwise terminated
after Mission shall have received a third party acquisition
proposal and Mission enters into an agreement with respect to
that proposal within 12 months of termination of the merger
agreement then Mission will be required to pay a termination fee
of $12.5 million to Petrohawk. The effect of this
termination fee could be to discourage other companies from
seeking to acquire or merge with Mission prior to completion of
the merger, and could cause Mission to reject any acquisition
proposal from a third party which does not take into account the
termination fee.
We May Amend the Terms of the Merger and Waive Rights Under
the Merger Agreement (Page 84)
We may jointly amend the terms of the merger agreement, and
either party may waive its right to require the other party to
adhere to any of those terms, to the extent legally permissible.
However, after the Mission stockholders adopt the merger
agreement, they must approve any amendment or waiver that
reduces or changes the form of the consideration that will be
received by them, changes any term of the certificate of
incorporation of Merger Sub or adversely affects the Mission
stockholders.
Appraisal Rights (Page 86)
Shares of Mission common stock outstanding immediately prior to
the effective time of the merger and held by a holder who has
not voted in favor of, or consented in writing to, the adoption
of the merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement and who has
delivered a written demand for appraisal of such shares in
accordance with Section 262 of the DGCL will not be
converted into the right to receive the merger consideration,
unless and until the dissenting holder fails to perfect or
effectively withdraws or otherwise loses his or her right to
appraisal and payment under the DGCL. If, after the effective
time of the merger, a dissenting stockholder fails to perfect or
effectively withdraws or loses his or her right to appraisal,
his or her shares of Mission common stock will be treated as if
they had been converted as of the effective time of the merger
into the right to receive the merger consideration without
interest or dividends thereon.
Petrohawk will Account for the Merger Using the
Purchase Method of Accounting (Page 86)
Petrohawk will account for the merger as a purchase for
financial reporting purposes.
Comparison of the Rights of Mission Stockholders and
Petrohawk Stockholders (Page 99)
Mission stockholders who do not receive solely cash
consideration in the merger will become Petrohawk stockholders
upon the effective time of the merger, and their rights as such
will be governed by Petrohawks certificate of
incorporation and bylaws. See Comparison of Rights of
Holders of Petrohawk Common Stock and Mission Common Stock
beginning on page 99 for a description of the material
differences between the rights of Petrohawk stockholders and
Mission stockholders.
14
PETROHAWK ENERGY CORPORATION
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
Set forth below are highlights from Petrohawks
consolidated financial data as of and for the years ended
December 31, 2000 through 2004. This information should be
read together with Petrohawks consolidated financial
statements and related notes included in Petrohawks Annual
Report on Form 10-K for the year ended December 31,
2004, which is incorporated by reference in this document and
from which this information is derived.
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Year Ended December 31, | |
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| |
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2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
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| |
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| |
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| |
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| |
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| |
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(Thousands of dollars, except per share amounts) | |
Statement of Operations Data
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Revenues
|
|
$ |
33,577 |
|
|
$ |
12,925 |
|
|
$ |
9,648 |
|
|
$ |
13,656 |
|
|
$ |
8,358 |
|
Costs and expenses
|
|
|
24,331 |
|
|
|
11,935 |
|
|
|
16,530 |
|
|
|
26,206 |
|
|
|
6,638 |
|
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|
|
|
|
|
|
|
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|
|
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Income before taxes
|
|
|
9,246 |
|
|
|
990 |
|
|
|
(6,882 |
) |
|
|
(12,550 |
) |
|
|
1,720 |
|
Income tax provision
|
|
|
(1,129 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
3,504 |
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|
|
(294 |
) |
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|
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Income before cumulative effect of change in accounting method
|
|
|
8,117 |
|
|
|
966 |
|
|
|
(6,882 |
) |
|
|
(9,046 |
) |
|
|
1,426 |
|
Cumulative effect of change in accounting method, net of tax(1)
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|
|
|
|
|
|
1 |
|
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|
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|
|
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|
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|
|
|
|
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|
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Net income
|
|
$ |
8,117 |
|
|
$ |
967 |
|
|
$ |
(6,882 |
) |
|
$ |
(9,046 |
) |
|
$ |
1,426 |
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|
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|
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|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
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Income before cumulative effect of change in accounting method
|
|
$ |
0.71 |
|
|
$ |
0.08 |
|
|
$ |
(1.18 |
) |
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$ |
(1.50 |
) |
|
|
0.26 |
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|
|
Cumulative effect, net of tax(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
0.71 |
|
|
$ |
0.08 |
|
|
$ |
(1.18 |
) |
|
$ |
(1.50 |
) |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting method
|
|
$ |
0.36 |
|
|
$ |
0.08 |
|
|
$ |
(1.18 |
) |
|
$ |
(1.50 |
) |
|
$ |
0.26 |
|
|
Cumulative effect, net of tax(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
0.36 |
|
|
$ |
0.08 |
|
|
$ |
(1.18 |
) |
|
$ |
(1.50 |
) |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,808 |
|
|
|
6,216 |
|
|
|
6,209 |
|
|
|
6,184 |
|
|
|
5,308 |
|
|
Diluted
|
|
|
25,690 |
|
|
|
6,253 |
|
|
|
6,209 |
|
|
|
6,184 |
|
|
|
5,641 |
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$ |
486,164 |
|
|
$ |
41,428 |
|
|
$ |
41,684 |
|
|
$ |
48,154 |
|
|
$ |
53,121 |
|
Total assets
|
|
|
534,199 |
|
|
|
46,115 |
|
|
|
44,753 |
|
|
|
52,629 |
|
|
|
58,466 |
|
Long-term obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
239,500 |
|
|
|
13,285 |
|
|
|
13,635 |
|
|
|
13,649 |
|
|
|
13,814 |
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,526 |
|
|
Asset retirement obligations
|
|
|
12,726 |
|
|
|
1,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
|
|
|
7,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
247,091 |
|
|
|
29,270 |
|
|
|
28,048 |
|
|
|
35,874 |
|
|
|
40,060 |
|
Ratio of debt-to-book capital(2)
|
|
|
49% |
|
|
|
31% |
|
|
|
33% |
|
|
|
28% |
|
|
|
26% |
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$ |
19,858 |
|
|
$ |
5,793 |
|
|
$ |
4,386 |
|
|
$ |
9,047 |
|
|
$ |
3,229 |
|
|
Interest expense, net
|
|
|
2,965 |
|
|
|
476 |
|
|
|
558 |
|
|
|
868 |
|
|
|
393 |
|
|
|
(1) |
Cumulative effect of change in accounting method for 2003
relates to the adoption of SFAS No. 143, Asset
Retirement Obligations, on January 1, 2003. |
|
(2) |
Defined as Petrohawks total debt divided by total debt
plus its shareholders equity. |
15
MISSION RESOURCES CORPORATION
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
Set forth below are highlights from Missions consolidated
financial data as of and for the years ended December 31,
2000 through 2004. This information should be read together with
Missions consolidated financial statements and related
notes included in Missions Annual Report on
Form 10-K/A for the year ended December 31, 2004,
which are incorporated by reference in this document and from
which this information is derived.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Thousands of dollars, except per share amounts) | |
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
125,640 |
|
|
$ |
123,974 |
|
|
$ |
105,464 |
|
|
$ |
142,077 |
|
|
$ |
119,280 |
|
Costs and expenses
|
|
|
120,926 |
|
|
|
117,513 |
|
|
|
155,528 |
|
|
|
179,310 |
|
|
|
99,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
4,714 |
|
|
|
6,461 |
|
|
|
(50,064 |
) |
|
|
(37,233 |
) |
|
|
19,986 |
|
Income tax provision
|
|
|
(1,765 |
) |
|
|
(2,358 |
) |
|
|
11,580 |
|
|
|
9,055 |
|
|
|
12,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting method
|
|
|
2,949 |
|
|
|
4,103 |
|
|
|
(38,484 |
) |
|
|
(28,178 |
) |
|
|
32,208 |
|
Cumulative effect of change in accounting method, net of tax(1)
|
|
|
|
|
|
|
(1,736 |
) |
|
|
|
|
|
|
(2,767 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
2,949 |
|
|
$ |
2,367 |
|
|
$ |
(38,484 |
) |
|
$ |
(30,945 |
) |
|
$ |
32,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting method
|
|
$ |
0.08 |
|
|
$ |
0.17 |
|
|
$ |
(1.63 |
) |
|
$ |
(1.41 |
) |
|
$ |
2.32 |
|
|
|
Cumulative effect, net of tax(1)
|
|
|
|
|
|
|
(0.07 |
) |
|
|
|
|
|
|
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
0.08 |
|
|
$ |
0.10 |
|
|
$ |
(1.63 |
) |
|
$ |
(1.54 |
) |
|
$ |
2.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting method
|
|
$ |
0.07 |
|
|
$ |
0.17 |
|
|
$ |
(1.63 |
) |
|
$ |
(1.41 |
) |
|
$ |
2.27 |
|
|
Cumulative effect, net of tax(1)
|
|
|
|
|
|
|
(0.07 |
) |
|
|
|
|
|
|
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
(1.63 |
) |
|
$ |
(1.54 |
) |
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,529 |
|
|
|
23,696 |
|
|
|
23,586 |
|
|
|
20,051 |
|
|
|
13,899 |
|
|
Diluted
|
|
|
40,456 |
|
|
|
24,737 |
|
|
|
23,836 |
|
|
|
20,241 |
|
|
|
14,175 |
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$ |
337,927 |
|
|
$ |
302,128 |
|
|
$ |
300,719 |
|
|
$ |
379,738 |
|
|
$ |
148,936 |
|
Total assets
|
|
|
377,903 |
|
|
|
357,326 |
|
|
|
342,404 |
|
|
|
447,764 |
|
|
|
221,545 |
|
Long-term obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
170,000 |
|
|
|
198,496 |
|
|
|
226,431 |
|
|
|
261,695 |
|
|
|
125,450 |
|
|
Deferred income taxes
|
|
|
20,003 |
|
|
|
20,346 |
|
|
|
16,946 |
|
|
|
31,177 |
|
|
|
|
|
|
Asset retirement obligations
|
|
|
35,366 |
|
|
|
32,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
|
|
|
1,482 |
|
|
|
210 |
|
|
|
2,176 |
|
|
|
6,068 |
|
|
|
1,689 |
|
Shareholders equity
|
|
|
112,005 |
|
|
|
74,940 |
|
|
|
65,377 |
|
|
|
110,240 |
|
|
|
56,960 |
|
Ratio of debt-to-book capital(2)
|
|
|
60% |
|
|
|
73% |
|
|
|
78% |
|
|
|
70% |
|
|
|
69% |
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$ |
58,678 |
|
|
$ |
18,889 |
|
|
$ |
7,222 |
|
|
$ |
40,358 |
|
|
$ |
60,108 |
|
|
Interest expense, net
|
|
|
19,792 |
|
|
|
25,429 |
|
|
|
26,753 |
|
|
|
23,298 |
|
|
|
15,099 |
|
|
|
(1) |
Cumulative effect of change in accounting method for 2003
relates to the adoption of SFAS No. 143, Asset
Retirement Obligations, on January 1, 2003. Cumulative
effect of change in accounting method for 2001 relates to the
adoption of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, on January 1, 2001. |
|
(2) |
Defined as Missions total debt divided by total debt plus
its shareholders equity. |
16
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
DATA
The following table shows information about Petrohawks
financial condition and results of operations, including per
share data and financial ratios, on a pro forma basis after
giving effect to the disposition of certain royalty interest
properties and acquisition of Proton Oil & Gas
Corporation in February 2005 and the merger with Mission. This
information is called pro forma financial information in this
document. The table sets forth the information as if these
transactions had become effective on December 31, 2004
(using currently available fair value information), with respect
to balance sheet data, and January 1, 2004, with respect to
statement of operations data. This unaudited pro forma financial
information assumes that the transactions will be accounted for
using the purchase method of accounting and represents a current
estimate based on available information of the combined
companys results of operations. The unaudited pro forma
financial information includes adjustments to record the assets
and liabilities of Mission and Proton at their estimated fair
values and is subject to further adjustment as additional
information becomes available and as additional analyses are
performed.
The merger agreement was announced on April 4, 2005 and
provides for Petrohawk to issue approximately
19.234 million shares of common stock and
$135.4 million in cash as consideration to Mission common
stockholders (in each case subject to upward adjustment in the
event that any shares of Mission common stock are issued in
accordance with the merger agreement pursuant to the exercise of
Mission stock options or otherwise). This table should be read
together with, and is qualified in its entirety by, the
historical financial statements, including the notes thereto, of
Petrohawk and Mission incorporated by reference in this joint
proxy statement/ prospectus and the more detailed unaudited pro
forma condensed combined financial information, including the
notes thereto, appearing under Unaudited Pro Forma
Condensed Combined Financial Information beginning on
page 90.
The unaudited pro forma financial information, while helpful in
illustrating the financial characteristics of the combined
company under one set of assumptions, does not reflect the
impact of possible revenue enhancements, expense efficiencies,
asset dispositions and share repurchases, among other factors
that may result as a consequence of the merger and, accordingly,
does not attempt to predict or suggest future results. It also
does not necessarily reflect what the historical results of the
combined company would have been had the companies been combined
during these periods.
Selected Unaudited Pro Forma Condensed Combined Financial
Data
|
|
|
|
|
|
|
As of December 31, 2004 |
|
|
|
|
|
(in thousands) |
Pro Forma Balance Sheet Data
|
|
|
|
|
Total Assets
|
|
$ |
1,306,558 |
|
Long-term Debt
|
|
$ |
517,500 |
|
Shareholders Equity
|
|
$ |
476,592 |
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
|
December 31, 2004 |
|
|
|
|
|
(in thousands, except per share data) |
Pro Forma Statement of Operations Data
|
|
|
|
|
Revenues
|
|
$ |
271,761 |
|
Income from Operations
|
|
$ |
85,338 |
|
Income from Operations Per Share:
|
|
|
|
|
|
Basic
|
|
$ |
0.58 |
|
|
Diluted
|
|
$ |
0.39 |
|
17
Comparative Per Share Data
The following table sets forth certain historical per share data
of Petrohawk and Mission and per share data on an unaudited pro
forma combined basis after giving effect to the merger:
|
|
|
|
|
|
|
|
For the Year Ended |
|
|
December 31, 2004 |
|
|
|
Petrohawk Historical Per Share Data:
|
|
|
|
|
Income From Operations (in thousands)
|
|
$ |
8,117 |
|
|
Basic(a)
|
|
$ |
0.71 |
|
|
Diluted(b)
|
|
$ |
0.36 |
|
Book value(c)
|
|
$ |
9.62 |
|
|
Mission Historical Per Share Data:
|
|
|
|
|
Income From Operations (in thousands)
|
|
$ |
2,949 |
|
|
Basic(a)
|
|
$ |
0.08 |
|
|
Diluted(b)
|
|
$ |
0.07 |
|
Book value(c)
|
|
$ |
2.77 |
|
|
Pro Forma Combined Company Per Share Data:
|
|
|
|
|
Income From Operations (in thousands)
|
|
$ |
85,338 |
|
|
Basic(d)
|
|
$ |
0.58 |
|
|
Diluted(d)
|
|
$ |
0.39 |
|
Book value(e)
|
|
$ |
11.06 |
|
|
|
(a) |
Based on weighted average number of shares of common stock
outstanding for Petrohawk and Mission for such period,
respectively. |
|
|
|
(b) |
|
Based on the weighted average number of shares of common stock
outstanding plus the potential dilution that would occur if
interests in securities (options and other convertible
securities) were exercised and converted into common stock of
Petrohawk or Mission for such period. |
|
(c) |
|
Computed by dividing shareholders equity by the weighted
average number of shares of common stock at the end of such
period plus the weighted average dilutive effect of interests in
securities (options and other convertible securities). |
|
(d) |
|
Based on the pro forma combined income from operations from the
Unaudited Pro Forma Condensed Combined Financial
Information beginning on page 90 of this document
which gives effect to the merger under the purchase method of
accounting. |
|
(e) |
|
Computed by dividing shareholders equity by the weighted
average number of outstanding shares of Petrohawk common stock
at the end of such period, adjusted to include the estimated
number of shares of Petrohawk common stock to be issued in the
merger plus the weighted average dilutive effect of interests in
securities (options and other convertible securities) at the end
of such period. |
18
RISK FACTORS
In addition to the other information contained in or
incorporated by reference into this document, including, without
limitation, Petrohawks Annual Report on Form 10-K for
the fiscal year ended December 31, 2004, and Missions
Annual Report on Form 10-K/ A for the fiscal year ended
December 31, 2004, you should carefully consider the
following risk factors in deciding whether to vote to approve
the stock issuance or adopt the merger agreement and approve the
merger and the other transactions contemplated by the merger
agreement, as the case may be.
|
|
|
We may not be able to successfully integrate the
businesses of Petrohawk and Mission following the merger. |
The success of the merger depends in large part upon our ability
to integrate our organizations, operations, systems and
personnel. The integration of two previously independent
companies is a challenging, time-consuming and costly process.
Petrohawk and Mission have operated and, until the effective
time of the merger, will continue to operate, independently.
Petrohawk has grown rapidly through recent acquisitions and will
be required to integrate its recent acquisitions with Mission.
It is possible that the integration process could result in the
loss of key employees, the disruption of each companys
ongoing businesses or inconsistencies in standards, controls,
procedures and policies that adversely affect our ability to
maintain relationships with suppliers, customers and employees
or to achieve the anticipated benefits of the merger. In
addition, successful integration of the companies will require
the dedication of significant management resources, which will
temporarily detract attention from the day-to-day businesses of
the combined company. If we are not able to integrate our
organizations, operations, systems and personnel in a timely and
efficient manner, the anticipated benefits of the merger may not
be realized fully or at all or may take longer to realize than
expected.
|
|
|
The costs of the merger could adversely affect the
combined companys operating results. |
Petrohawk and Mission estimate the total merger-related costs,
exclusive of employee severance and benefit costs, to be
approximately $14 million, primarily consisting of
investment banking, legal and accounting fees and financial
printing and other related charges. The foregoing estimate is
preliminary and is subject to change. In addition, the combined
company will incur certain expenses in connection with the
integration of Petrohawks and Missions businesses.
|
|
|
Missions directors and executive officers have
interests in the merger in addition to those of the Mission
stockholders. |
In considering the recommendations of the Mission board of
directors with respect to the merger agreement, you should be
aware that Missions directors and executive officers have
financial and other interests in the merger in addition to their
interests as Mission stockholders. The receipt of compensation
or other benefits in connection with the merger (including
severance payments and the accelerated vesting of stock options)
may have influenced these directors and executive officers in
making their recommendations to adopt the merger agreement and
approve the merger and the other transactions contemplated by
the merger agreement. You should consider these interests in
connection with your vote on the merger, including whether these
interests may have influenced these directors and executive
officers to recommend or support the merger. For a detailed
description of the interests of the directors and executive
officers of Mission, see The Merger Financial
Interests of Missions Directors and Executive Officers in
the Merger beginning on page 86 of this document.
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Failure to complete the merger or delays in completing the
merger could negatively impact Petrohawks and
Missions stock prices and future business and
operations. |
If the merger is not completed for any reason, Petrohawk and
Mission may be subject to a number of material risks, including
the following:
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the individual companies will not realize the benefits expected
from the merger, including a potentially enhanced financial and
competitive position; |
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under certain circumstances, Mission may be required to pay
Petrohawk a termination fee of $12.5 million; |
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the price of Petrohawk common stock or Mission common stock may
decline to the extent that the current market price of the
common stock reflects a market assumption that the merger will
be completed; and |
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some costs relating to the merger, such as certain investment
banking fees and legal and accounting fees, must be paid even if
the merger is not completed. |
In addition, current and prospective employees of Petrohawk and
Mission may experience uncertainty about their future roles with
the companies until after the merger is completed or if the
merger is not completed. This may adversely affect the ability
of Petrohawk and Mission to attract and retain key personnel.
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Because the market price of Petrohawk common stock will
fluctuate, Mission stockholders cannot be sure of the value of
the merger consideration they will receive. |
Upon the effective time of the merger, each share of Mission
common stock will be converted into the right to receive merger
consideration consisting of shares of Petrohawk common stock or
cash, pursuant to the terms of the merger agreement. The value
of the merger consideration to be received by Mission
stockholders will be based on the volume-weighted average of the
closing sale prices per share of Petrohawk common stock during
the 10 consecutive trading day period ending on the third
calendar day prior to the effective time of the merger. This
average price may vary from the market price of Petrohawk common
stock on the date the merger was announced, on the date that
this document is mailed to Mission stockholders, on the date a
Mission stockholder makes an election with respect to the merger
consideration or on the date of the special meeting of Mission
stockholders. Because Petrohawk is issuing a fixed amount of
shares as part of the merger consideration (in each case subject
to upward adjustment in the event that any shares of Mission
common stock are issued in accordance with the merger agreement
pursuant to the exercise of Mission stock options or otherwise),
and because the provisions of the merger agreement operate to
substantially equalize the value of the consideration to be
received for each share of Mission common stock at the time the
calculation is made, any change in the price of Petrohawk common
stock prior to the effective time of the merger will affect the
value of the merger consideration that you will receive upon the
effective time of the merger, regardless of whether you elect to
receive cash, stock or a combination of cash and stock, or do
not make an election. Stock price changes may result from a
variety of factors, including general market and economic
conditions, changes in oil and natural gas prices, changes in
our respective businesses, operations and prospects, and
regulatory considerations. Many of these factors are beyond our
control.
Accordingly, at the time of the Mission special meeting, Mission
stockholders will not know or be able to calculate the amount of
any cash consideration they would receive with respect to each
share of Mission common stock or the exchange ratio used to
determine the number of any shares of Petrohawk common stock
they would receive with respect to each share of Mission common
stock upon the effective time of the merger.
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The market price of the shares of Petrohawk common stock
and the results of operations of Petrohawk after the merger may
be affected by factors different from those affecting Mission or
Petrohawk currently. |
The businesses of Petrohawk and Mission differ in some respects
and, accordingly, the results of operations of the combined
company and the market price of the combined companys
shares of common stock may be affected by factors different from
those currently affecting the independent results of operations
and market prices of each of Petrohawk or Mission. For a
discussion of the businesses of Petrohawk and Mission and of
certain factors to consider in connection with those businesses,
see the documents incorporated by reference in this document and
referred to under Where You Can Find More
Information beginning on page 142 of this document.
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Petrohawk stockholders will be diluted by the
merger. |
The merger will dilute the ownership position of the current
stockholders of Petrohawk. Based on the number of shares of
Mission common stock outstanding as of April 1, 2005,
Petrohawk would issue to Mission stockholders approximately
19.234 million shares of Petrohawk common stock in the
merger (subject to upward adjustment in the event that any
shares of Mission common stock are issued in accordance with the
merger agreement pursuant to the exercise of Mission stock
options or otherwise). As a result, Petrohawk stockholders and
Mission stockholders would hold approximately 67.6% and 32.4%,
respectively, of the combined companys common stock
outstanding after the completion of the merger.
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Mission stockholders may receive a form or combination of
consideration different from what they elect. |
While each Mission stockholder may elect to receive all cash,
all Petrohawk common stock or a combination of cash and
Petrohawk common stock in the merger, the pools of cash and
Petrohawk common stock available for all Mission stockholders
will be fixed amounts (in each case subject to upward adjustment
in the event that any shares of Mission common stock are issued
in accordance with the merger agreement pursuant to the exercise
of Mission stock options or otherwise). Accordingly, depending
on the elections made by other Mission stockholders, if you
elect to receive all cash in the merger, you may receive a
portion of your consideration in Petrohawk common stock and if
you elect to receive all Petrohawk common stock in the merger,
you may receive a portion of your consideration in cash. If you
elect to receive a combination of cash and Petrohawk common
stock in the merger, you may receive cash and Petrohawk common
stock in a proportion different from what you elected. If a
Mission stockholder does not submit a properly completed and
signed election form to the exchange agent by the election
deadline, then such stockholder will have no control over the
type of merger consideration such stockholder may receive, and,
consequently, may receive only cash, only Petrohawk common
stock, or a combination of cash and Petrohawk common stock in
the merger.
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If you tender shares of Mission common stock to make an
election, you will not be able to sell those shares unless you
revoke your election prior to the election deadline. |
If you are a Mission stockholder and want to make a cash or
stock election, you must deliver your stock certificates (or
follow the procedures for guaranteed delivery) and a properly
completed and signed election form to the exchange agent. The
deadline for doing this is 5:00 p.m., CDT,
on ,
2005. You will not be able to sell any shares of Mission common
stock that you have delivered unless you revoke your election
before the deadline by providing written notice to the exchange
agent. If you do not revoke your election, you will not be able
to liquidate your investment in Mission common stock for any
reason until you receive cash or Petrohawk common stock in the
merger. In the time between delivery of your shares and the
closing of the merger, the market price of Mission or Petrohawk
common stock may decrease, and you might otherwise want to sell
your shares of Mission to gain access to cash, make other
investments, or reduce the potential for a decrease in the value
of your investment.
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If the merger is completed, the date that you will receive
your merger consideration is uncertain. |
If the merger is completed, the date that you will receive your
merger consideration depends on the completion date of the
merger, which is uncertain. While we expect to complete the
merger in the third quarter of 2005, the completion date of the
merger might be later than expected due to unforeseen events.
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If Petrohawk or Mission fails to obtain all required
consents and approvals, third parties may terminate or alter
existing contracts. |
Petrohawks obligation to consummate the merger is
conditioned, among other things, upon receipt of all material
consents and approvals that Mission is required to obtain in
connection with the merger, except for such consents and
approvals the failure of which to be obtained individually or in
the aggregate would not be reasonably likely to have or result
in a material adverse effect on Mission. Certain agreements
between Mission and its suppliers, customers or other business
partners may require the consent or approval of these other
parties in connection with the merger. Petrohawk and Mission
have agreed to use reasonable best efforts to secure any
necessary consents and approvals. However, we cannot assure you
that Petrohawk and/or Mission will be able to obtain all the
necessary consents and approvals. If these consents and
approvals are not obtained and Petrohawk elects to waive the
closing condition relating to receipt of material consents, the
failure to have obtained such consents or approvals could have a
material adverse effect on the business of the combined company
after the merger.
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A significant decline in Petrohawks stock price may
prevent tax counsel from issuing an opinion that the merger
constitutes a reorganization under Section 368(a) of the
Internal Revenue Code, which is a condition to closing the
merger. |
The completion of the merger is conditioned on, among other
things, the receipt of opinions from tax counsel for Petrohawk
and Mission that the merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986,
as amended. The opinions will not be delivered unless the value,
at the effective time of the merger, of the Petrohawk stock
issued in the merger constitutes 40% or more of the value of the
combined merger consideration. In addition to the market value
of Petrohawks common stock at the effective time of the
merger, various factors affect this determination, including the
amount, if any, to be paid to Mission stockholders who perfect
their appraisal rights. Accordingly, it is not possible to state
with certainty the minimum trading price of the Petrohawk common
stock that would cause the value of the Petrohawk common stock
to be received in the merger to be equal to at least 40% of the
value of the combined merger consideration as of the
consummation of the merger.
If the tax opinions cannot be delivered at closing or the
conclusions in the tax opinions delivered are materially
different from the opinions described herein, either party may
terminate the merger; however, if neither party terminates the
merger, we will resolicit stockholder approval. Further, if the
parties waive the condition that they receive such opinions, we
will resolicit stockholder approval if the change in tax
consequences is material.
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Foreign persons who own or have owned a significant amount
of Mission common stock may be subject to U.S. federal
income tax on gain realized upon the exchange of their Mission
stock in the merger. |
If a foreign stockholder owns or has owned more than 5% of
Missions common stock at any time during the last five
years, then gain realized by such person upon the exchange of
Mission common stock in the merger may be subject to
U.S. federal income tax. See Material
U.S. Federal Income Tax Consequences; U.S. Federal
Income Tax Consequences to Non-U.S. Persons;
Non-U.S. Persons That Currently Hold or Have Held More than
5% of Missions Common Stock.
22
FORWARD-LOOKING STATEMENTS
This joint proxy statement/ prospectus, including information
included or incorporated by reference in this document, contains
certain forward-looking statements with respect to the financial
condition, results of operations, plans, objectives, intentions,
future performance and business of each of Petrohawk and Mission
and other statements that are not historical facts, as well as
certain information relating to the merger, including, without
limitation:
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statements relating to the benefits of the merger, including the
cost savings and accretion to reported earnings estimated to
result from the merger; |
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statements relating to revenues, production and expenses of the
combined company after the merger; and |
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statements preceded by, followed by or that include the words
believes, anticipates,
plans, predicts, expects,
envisions, hopes, estimates,
intends, will, continue,
may, potential, should,
confident, could or similar expressions. |
These forward-looking statements involve certain risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking statements due to, among
others, the factors discussed under Risk Factors
beginning on page 19 of this document, as well as the
following factors:
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the possibility that the companies may be unable to obtain
stockholder approvals required for the merger; |
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the possibility that problems may arise in successfully
integrating the businesses of the two companies; |
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the possibility that the merger may involve unexpected costs; |
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the possibility that the combined company may be unable to
achieve cost-cutting synergies; |
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the possibility that the businesses may suffer as a result of
uncertainty surrounding the merger; |
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the possibility that the industry may be subject to future
regulatory or legislative actions; |
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the volatility in commodity prices for oil and gas; |
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the presence or recoverability of estimated oil and gas reserves; |
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the ability to replace oil and gas reserves; |
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environmental risks; |
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drilling and operating risks; |
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exploration and development risks; |
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competition; |
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the ability of the combined companys management to execute
its plans to meet its goals; |
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general economic conditions, whether internationally, nationally
or in the regional and local market areas in which Petrohawk and
Mission are doing business, may be less favorable than
expected; and |
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other economic, competitive, governmental, legislative,
regulatory, geopolitical and technological factors may
negatively impact our businesses, operations or pricing. |
Additional factors that could cause actual results to differ
materially from those expressed in the forward-looking
statements are discussed in reports filed with the SEC by
Petrohawk and Mission. See Where You Can Find More
Information beginning on page 142 of this document.
Forward-looking statements speak only as of the date of this
joint proxy statement/ prospectus or the date of any document
incorporated by reference in this document. All subsequent
written and oral forward-looking statements concerning the
merger or other matters addressed in this joint proxy statement/
prospectus and attributable to Petrohawk or Mission or any
person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to
in this section. Except to the extent required by applicable law
or regulation, neither Petrohawk nor Mission undertakes any
obligation to update forward-looking statements to reflect
events or circumstances after the date of this joint proxy
statement/ prospectus or to reflect the occurrence of
unanticipated events.
23
PETROHAWK ANNUAL MEETING
General
This joint proxy statement/ prospectus is being furnished to
Petrohawk stockholders in connection with the solicitation of
proxies by the Petrohawk board of directors to be used at the
annual meeting of stockholders to be held at Petrohawks
offices, 1100 Louisiana St., Suite 4400, Houston,
Texas 77002,
on ,
2005 at 10:00 a.m., CDT, and at any adjournment or
postponement of that meeting. This joint proxy statement/
prospectus and the enclosed form of proxy are being sent to
Petrohawk stockholders on or
about ,
2005.
Record Date and Voting
The Petrohawk board of directors has fixed the close of business
on ,
2005 as the record date for determining the holders of shares of
Petrohawk common stock and shares of 8% cumulative
convertible preferred stock entitled to receive notice of and to
vote at the Petrohawk annual meeting and any adjournments or
postponements thereof. Only holders of record of shares of
Petrohawk common stock and 8% cumulative convertible preferred
stock at the close of business on that date will be entitled to
vote at the Petrohawk annual meeting and at any adjournment or
postponement of that meeting. At the close of business on the
record date, there
were shares
of Petrohawk common stock outstanding, held by
approximately holders
of record, and shares of 8% cumulative convertible preferred
stock outstanding, held by
approximately holders
of record.
Each holder of shares of Petrohawk common stock outstanding on
the record date will be entitled to one vote for each share held
of record, and each holder of shares of Petrohawk 8% cumulative
convertible preferred stock outstanding on the record date will
be entitled to one vote for every two shares of 8% cumulative
convertible preferred stock, upon each matter properly submitted
at the Petrohawk annual meeting and at any adjournment or
postponement thereof. In order for Petrohawk to satisfy its
quorum requirements, the holders of at least a majority of the
total number of outstanding shares of Petrohawk common stock and
preferred stock entitled to vote at the meeting must be present.
You will be deemed to be present if you attend the meeting or if
you submit a proxy card (including through the Internet or
telephone) that is received at or prior to the meeting (and not
revoked).
If your proxy card is properly executed and received by
Petrohawk in time to be voted at the Petrohawk annual meeting,
the shares represented by your proxy card (including those given
through the Internet or by telephone) will be voted in
accordance with the instructions that you mark on your proxy
card. If you execute your proxy but do not provide Petrohawk
with any instructions, your shares will be voted FOR
the proposals set forth in the notice of annual meeting. If your
shares are held in street name by your broker or
other nominee and you do not provide that holder with
instructions on how to vote your shares, your broker or other
nominee will be permitted to vote your shares only on the
election of directors and the ratification of independent
auditors and not on the other proposals to be voted on at the
annual meeting.
The only matters that we expect to be presented at the Petrohawk
annual meeting are set forth in the notice of annual meeting. If
any other matters properly come before the Petrohawk annual
meeting, the persons named in the proxy card will vote the
shares represented by all properly executed proxies on such
matters in their best judgment.
Quorum; Vote Required
The approval of the issuance of Petrohawk common stock in the
merger and the amendments to the 2004 Employee Incentive Plan
and 2004 Non-Employee Director Incentive Plan require the
affirmative vote of a majority of the votes cast at the meeting.
If you vote in person or by proxy at the Petrohawk annual
meeting, you will be counted for purposes of determining whether
there is a quorum at the meeting. Shares of Petrohawk common
stock and preferred stock present in person or by proxy at the
Petrohawk annual meeting that are entitled to vote but are not
voted and broker non-votes will be counted
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for the purpose of determining whether there is a quorum for the
transaction of business at the Petrohawk annual meeting. A
broker non-vote occurs when a bank, broker or other nominee
holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have
discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
The required vote of Petrohawk stockholders on the stock
issuance and amendment of the 2004 Employee Incentive Plan and
2004 Non-Employee Director Incentive Plan is based upon the
number of shares that are actually voted. Accordingly, assuming
a quorum is present, the failure of a Petrohawk stockholder to
vote or a decision by a Petrohawk stockholder to abstain will
have no effect in determining whether the stock issuance is
approved. Approval of the amendment to Petrohawks
certificate of incorporation requires the affirmative vote of a
majority of the outstanding shares of Petrohawk common stock and
preferred stock entitled to vote. Accordingly, the failure of a
Petrohawk stockholder to submit a proxy card or to vote in
person, or a decision by a Petrohawk stockholder to abstain from
voting, with respect to the proposed amendment of
Petrohawks certificate of incorporation will have the
effect of a vote against approval of the amendment to the
certificate of incorporation.
Approval of the ratification of Deloitte & Touche LLP
as independent auditors for 2005 requires the affirmative vote
of a majority of the shares present and entitled to vote at a
meeting at which a quorum is present. Accordingly, assuming a
quorum is present at the annual meeting, the failure of a
Petrohawk stockholder to vote or a decision by a Petrohawk
stockholder to abstain will have no effect in determining
whether the ratification of Deloitte & Touche LLP is
approved.
The election of directors is by a plurality of affirmative votes
cast at a meeting at which a quorum is present, and, assuming a
quorum is present at the annual meeting, the failure of a
Petrohawk stockholder to vote or a decision by a Petrohawk
stockholder to abstain will have no effect in determining the
election of directors.
As of the record date:
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Petrohawk directors and executive officers and their affiliates
owned and were entitled to vote
approximately shares
of Petrohawk common stock, representing
approximately of
the outstanding shares of Petrohawk common stock; and |
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Mission directors and executive officers and their affiliates
did not own any shares of Petrohawk common stock or preferred
stock. |
We currently expect that Petrohawks directors and
executive officers will vote their shares of Petrohawk common
stock FOR all proposals set forth in the notice of
annual meeting.
Revocability of Proxies
The presence of a stockholder at the Petrohawk annual meeting
will not automatically revoke that stockholders proxy.
However, a stockholder may revoke a proxy at any time prior to
its exercise by:
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submitting a written revocation prior to the annual meeting to
David S. Elkouri, Secretary, Petrohawk Energy Corporation, 1100
Louisiana St., Suite 4400, Houston, Texas, 77002; |
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submitting another proxy prior to the annual meeting by
telephone, via the Internet or by mail that is dated later than
the original proxy; or |
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attending the Petrohawk annual meeting and voting in person. |
If your shares are held of record by a broker or other nominee,
you must follow the instructions on the form you receive from
your broker or other nominee with respect to changing or
revoking your proxy.
Voting Electronically or by Telephone
Petrohawk stockholders of record and many stockholders who hold
their shares through a broker or other nominee will have the
option to submit their proxy cards or voting instruction cards
electronically
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through the Internet or by telephone. Please note that there are
separate arrangements for using the Internet and telephone
depending on whether your shares are registered in
Petrohawks stock records in your name or in the name of a
broker or other nominee. If you hold your shares through a
broker or other nominee, you should check your proxy card or
voting instruction card forwarded by your broker or other
nominee to see which voting options are available.
Petrohawk stockholders of record may submit their proxies:
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through the Internet by visiting a website established for that
purpose at
http://www. .com
and following the instructions; or |
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by telephone by calling the toll-free number
1-800- in
the U.S., Puerto Rico, Canada or Mexico on a touch-tone phone
and following the recorded instructions. |
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and
employees of Petrohawk may solicit proxies for the annual
meeting from Petrohawk stockholders personally or by telephone
and other electronic means without additional remuneration for
soliciting such proxies. We will provide persons, firms, banks
and corporations holding shares in their names or in the names
of nominees, which in either case are beneficially owned by
others, proxy material for transmittal to such beneficial owners
and will reimburse such record owners for their expenses in
taking such actions. We have also made
arrangements with
Georgeson Shareholder Communications, Inc. to assist us in
soliciting proxies and have agreed to pay them $7,500, plus
reasonable expenses, for these services. Petrohawk and Mission
will equally share the expenses incurred in connection with the
printing and mailing of this document.
MISSION SPECIAL MEETING
General
This joint proxy statement/ prospectus is being furnished to
Mission stockholders in connection with the solicitation of
proxies by the Mission board of directors to be used at the
special meeting of stockholders to be held
on ,
2005 at 10:00 a.m., CDT, at the Four Seasons Hotel,
1300 Lamar St., Houston, Texas 77010, and at any
adjournment or postponement of that meeting. This joint proxy
statement/ prospectus and the enclosed form of proxy are being
sent to Mission stockholders on or
about ,
2005.
Record Date and Voting
The Mission board of directors has fixed the close of business
on ,
2005 as the record date for determining the holders of shares of
Mission common stock entitled to receive notice of and to vote
at the special meeting and any adjournment or postponement
thereof. Only holders of record of shares of Mission common
stock at the close of business on that date will be entitled to
vote at the special meeting and at any adjournment or
postponement of that meeting. At the close of business on the
record date, there
were shares
of Mission common stock outstanding, held by
approximately holders
of record.
Each holder of shares of Mission common stock outstanding on the
record date will be entitled to one vote for each share held of
record upon each matter properly submitted at the special
meeting and at any adjournment or postponement thereof. In order
for Mission to satisfy its quorum requirements, the holders of
at least a majority of the total number of outstanding shares of
Mission common stock entitled to vote at the meeting must be
present. You will be deemed to be present if you attend the
meeting or if you submit a proxy card (including through the
Internet or telephone) that is received at or prior to the
meeting (and not revoked).
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If your proxy card is properly executed and received by Mission
in time to be voted at the special meeting, the shares
represented by your proxy card (including those given through
the Internet or by telephone) will be voted in accordance with
the instructions that you mark on your proxy card. If you
execute your proxy but do not provide Mission with any
instructions, your shares will be voted FOR the
adoption of the merger agreement and approval of the merger and
the other transactions contemplated by the merger agreement. If
your shares are held in street name by your broker
or other nominee and you do not provide that holder with
instructions on how to vote your shares, your broker or other
nominee will not be permitted to vote your shares, which will
have the same effect as a vote against the merger.
The only matters that we expect to be presented at the special
meeting are the adoption of the merger agreement and the
approval of the merger and the other transactions contemplated
by the merger agreement. If any other matters properly come
before the special meeting, the persons named in the proxy card
will vote the shares represented by all properly executed
proxies on such matters in their discretion.
Quorum; Vote Required
Adoption of the merger agreement and approval of the merger and
the other transactions contemplated by the merger agreement
requires the affirmative vote of the holders of a majority of
the outstanding shares of Mission common stock. If you vote in
person or by proxy at the special meeting, you will be counted
for purposes of determining whether there is a quorum at the
special meeting. Shares of Mission common stock present in
person or by proxy at the special meeting that are entitled to
vote but are not voted and broker non-votes will be counted for
the purpose of determining whether there is a quorum for the
transaction of business at the special meeting. A broker
non-vote occurs when a broker or other nominee holding shares
for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power for
that particular item and has not received instructions from the
beneficial owner.
The required vote of Mission stockholders on the merger is based
upon the number of outstanding shares of Mission common stock,
and not the number of shares that are actually voted.
Accordingly, the failure to submit a proxy card or to vote in
person at the special meeting, or a decision by a Mission
stockholder to abstain from voting, will have the same effect as
an AGAINST vote with respect to this matter.
As of the record date:
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Mission directors and executive officers and their affiliates
owned and were entitled to vote approximately
258,000 shares of Mission common stock, representing less
than 1% of the outstanding shares of Mission common stock. |
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Petrohawk directors and executive officers and their affiliates
did not own and were not entitled to vote any shares of Mission
common stock. |
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Harbert Distressed Investment Master Fund, Ltd., Stellar
Funding, Ltd., and Guggenheim Capital, LLC, have entered into
separate voting agreements with Petrohawk and Mission pursuant
to which they have agreed, among other things, to vote all
shares of Mission common stock owned by each of them in favor of
the merger. The voting agreements also grant an irrevocable
proxy to Petrohawk empowering it to vote all such shares of
Mission common stock at any meeting of Missions
stockholders called for the purpose of voting on the merger. As
of April 1, 2005, such stockholders collectively own
13,264,905 shares, or approximately 32%, of the issued and
outstanding common stock of Mission. |
We currently expect that Missions directors and executive
officers will vote their shares FOR adoption of the
merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement, although none
of them has entered into any agreement obligating them to do so.
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Revocability of Proxies
The presence of a stockholder at the special meeting will not
automatically revoke that stockholders proxy. However, a
stockholder may revoke a proxy at any time prior to its exercise
by:
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submitting a written revocation prior to the special meeting to
Leslee M. Ranly, Secretary, Mission Resources Corporation, 1331
Lamar St., Suite 1455, Houston, Texas 77010; |
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submitting another proxy prior to the special meeting by
telephone, via the Internet or by mail that is dated later than
the original proxy; or |
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attending the special meeting and voting in person. |
If your shares are held of record by a broker or other nominee,
you must follow the instructions on the form you receive from
your broker or other nominee with respect to changing or
revoking your proxy.
Voting Electronically or by Telephone
Mission stockholders of record and many stockholders who hold
their shares through a broker or other nominee will have the
option to submit their proxy cards or voting instruction cards
electronically through the Internet or by telephone. Please note
that there are separate arrangements for using the Internet and
telephone depending on whether your shares are registered in
Missions stock records in your name or in the name of a
broker or other nominee. If you hold your shares through a
broker or other nominee, you should check your proxy card or
voting instruction card forwarded by your broker or other
nominee to see which voting options are available.
Mission stockholders of record may submit their proxies:
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through the Internet by visiting a website established for that
purpose at
http://www. .com
and following the instructions; or |
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by telephone by calling the toll-free number
1-800- in
the U.S., Puerto Rico, Canada or Mexico on a touch-tone phone
and following the recorded instructions. |
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and
employees of Mission may solicit proxies for the special meeting
from Mission stockholders personally or by telephone and other
electronic means without additional remuneration for soliciting
such proxies. We also will provide persons, firms, banks and
corporations holding shares in their names or in the names of
nominees, which in either case are beneficially owned by others,
proxy material for transmittal to such beneficial owners and
will reimburse such record owners for their expenses in taking
such actions. We have also made arrangements with Georgeson
Shareholder Communications, Inc. to assist us in soliciting
proxies and have agreed to pay them $7,500, plus reasonable
expenses, for these services. Mission and Petrohawk will equally
share the expenses incurred in connection with the printing and
mailing of this document.
INFORMATION ABOUT PETROHAWK
Petrohawk Energy Corporation, a Delaware corporation, is an
independent oil and gas company engaged in the acquisition,
development, production and exploration of natural gas and oil
properties located in North America. Petrohawk was formed in
June 1997 as Beta Oil & Gas, Inc., a Nevada
corporation. Petrohawk reincorporated in the state of Delaware
in July 2004 at which time it changed its name to Petrohawk
Energy Corporation. Petrohawks properties are concentrated
in the South Texas, Anadarko, Permian Basin, East Texas, Arkoma
and Gulf Coast regions.
At December 31, 2004, Petrohawks estimated total
proved oil and gas reserves were approximately 219 Bcfe,
consisting of 9.7 million barrels of oil and 160.9 Bcf
of natural gas. Proved reserves are approximately 73% gas on an
equivalent basis and approximately 78% were classified as proved
developed.
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Year-end prices used to determine proved reserves were
$40.25 per barrel of oil and $6.18 per Mmbtu of gas.
Petrohawk has increased its proved reserves and production
principally through acquisitions. Petrohawk focuses on
properties within its core operating areas that have a
significant proved reserve component and which management
believes have additional development and exploration
opportunities.
Recent Developments
Petrohawk has recently completed several transactions:
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Proton Oil & Gas Corporation Acquisition |
On February 25, 2005, Petrohawk completed the purchase of
Proton Oil & Gas Corporation (Proton) for
approximately $53 million. This transaction included
estimated proved reserves of approximately 28 Bcfe,
approximately 46% of which are natural gas, and 47% of which are
classified as proved developed. Current estimated production
from these properties is approximately 5.0 Mmcfe per day.
Protons properties are located in South Louisiana and
South Texas.
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Sale of Royalty Interest Properties |
On February 25, 2005, Petrohawk completed the disposition
of certain royalty interest properties previously acquired from
Wynn-Crosby Energy, Inc. (described below) for approximately
$80 million in cash. Petrohawk sold estimated proved
reserves of approximately 26 Bcfe with current estimated
production of approximately 5.0 Mmcfe per day.
On November 23, 2004, Petrohawk acquired Wynn-Crosby
Energy, Inc. and eight of the limited partnerships it managed
for a purchase price of approximately $425 million.
Estimated proved reserves at July 1, 2004, the effective
date of the transaction, were approximately 200 Bcfe with
estimated production of approximately 46 Mmcfe per day. At
December 31, 2004, estimated proved reserves were
approximately 190 Bcfe, 74% of which were natural gas and
approximately 76% were classified as proved developed. The
acquired properties are primarily located in the South Texas,
East Texas, Anadarko, Arkoma and Permian Basin regions and
include approximately 75,000 net undeveloped acres in the
Arkoma Basin region, as well as significant exploration
opportunities in South Louisiana, South Texas and the Anadarko
Basin.
On August 11, 2004, Petrohawk acquired from PHAWK, LLC
certain oil and gas properties in the Breton Sound area,
Plaquemines Parish, Louisiana and in the West Broussard field in
Lafayette Parish, Louisiana having approximately 2.9 Bcfe
of estimated proved reserves for $8.5 million.
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Recapitalization by PHAWK, LLC |
On May 25, 2004, PHAWK, LLC (formerly known as Petrohawk
Energy, LLC), which is owned by affiliates of EnCap Investments,
L.P., an affiliate of Liberty Energy Holdings LLC, Floyd C.
Wilson, and other members of Petrohawks management,
recapitalized Petrohawk with $60 million in cash. The
$60 million investment was structured as the purchase by
PHAWK of 7.576 million new shares of Petrohawk common stock
for $25 million, a $35 million five-year
8% subordinated note convertible into approximately
8.75 million shares of Petrohawk common stock, and warrants
to purchase 5.0 million shares of Petrohawk common
stock at a price of $3.30 per share.
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Properties
Petrohawks properties in South Texas produce primarily
from the Vicksburg, Wilcox and Frio formations, which range in
depth from approximately 5,500 feet to 15,000 feet.
The La Reforma field, located in Starr and Hidalgo
Counties, is the largest field in the Wynn-Crosby property base.
La Reforma is a significant Vicksburg formation field, and
Petrohawk owns between 25% and 50% working interest in this
area. Petrohawk is conducting an active drilling program at
La Reforma with three wells recently completed and four
additional locations expected to be drilled in 2005. The
Vicksburg formation in this area is complexly faulted and 3-D
seismic is extensively utilized to identify optimal structural
targets. Wells in this field typically produce at initial rates
of over 10.0 Mmcfe per day. Other Vicksburg/ Frio fields in
which Petrohawk owns a significant interest include Los Indios,
Nabors, Ann Mag and McAllen Ranch. The Heard Ranch field,
located in Bee County, was acquired in the Proton transaction
and produces from the Frio formation at depths of 3,500 to
4,000 feet. Petrohawk owns between a 76% and 89% working
interest at Heard Ranch and plans to drill six proved
undeveloped locations in 2005. In the Wilcox trend of Lavaca
County, Petrohawk owns between 20% and 25% working interest in
the Dry Hollow field, which produces from 12,500 to
15,000 feet in depth. At Dry Hollow, Petrohawk has
identified two proved undeveloped locations which are expected
to be drilled in 2005. Petrohawk also owns interests in the
Provident City and North Borchers fields in Lavaca County, as
well as in the Four Sevens field in Duval County.
The West Edmond Hunton Lime Unit (WEHLU) is
Petrohawks largest property in this region, covering
30,000 acres (approximately 47 square miles) primarily
in Oklahoma County, Oklahoma. The WEHLU field, originally
discovered in 1942, is the largest Hunton Lime formation field
in the state of Oklahoma. The field has 58 oil and natural gas
wells (28 currently producing) with stable production holding
the entire unit. Petrohawk owns a 98% working interest at WEHLU
and currently operates the field. Petrohawk has an agreement
with Avalon Exploration, Inc. of Tulsa, Oklahoma to jointly
develop additional reserves and production in WEHLU. The area of
mutual interest created by the agreement with Avalon covers
5,680 acres located in the central-northwest area of the
field.
Other significant properties in this area include interests in
the Lipscomb field in Lipscomb County, Texas where
Petrohawks working interests range from 75% to 100% and
the Eakly-Weatherford field in Caddo County, Oklahoma, where
working interests range from 1% to 26%. Production in these
fields is from the Cleveland, Atoka, Morrow and Springer
formations.
In the Permian Basin, Petrohawks principal properties are
in the Waddell Ranch field in Crane County, Texas, the ROC field
in Ward County, Texas, and the Teague field in Lea County, New
Mexico. Waddell Ranch is the largest field in West Texas and
produces primarily from the Queen, Grayburg,
San Andres, Clear Fork, and Ellenburger formations at
depths from 3,000 to 15,000 feet. Petrohawk owns a 3.5%
working interest in this property. The ROC field produces from
the Ellenberger and Montoya formations at measured depths of
13,000 to 17,000 feet. Petrohawk has identified four proved
undeveloped locations in this field, where it owns a working
interest of between 5% and 25%. In the Teague field, production
is from the Devonian, Seven Rivers, Queen and Grayburg
formations at a depth of 4,000 to 8,000 feet. Petrohawk
owns a 94% working interest in this property and has identified
two proved undeveloped locations.
Petrohawks properties in East Texas produce primarily from
the Cotton Valley and Travis Peak formations, which range in
depth from approximately 6,500 to 10,000 feet. Petrohawk
owns significant interests in the South Carthage, North
Beckville and Blocker fields in Panola and Harrison Counties,
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Texas. Petrohawks working interest in these fields is
between 47% and 100%. The producing formations of this area tend
to contain multiple producing horizons and are typically low
permeability sands that require fracture stimulation to achieve
optimal producing rates. This type of fracture stimulation
usually results in relatively high initial production rates that
decline rapidly during the first year of production and
subsequently stabilize at fairly low, more easily predictable
annual decline rates. Much of Petrohawks production in
this area is from wells that have been producing for several
years and are in the latter, more stable stage of production,
resulting in a relatively long reserves to production ratio.
In the Arkoma Basin, Petrohawks properties produce
primarily from the Atoka formation at depths of 2,500 to
6,000 feet. Petrohawk owns significant interests in the
Kinta, Cedars and Pine Hollow fields in Pittsburg and Haskell
Counties, Oklahoma. Petrohawks working interest in these
fields is between 23% and 100%. Portions of its acreage in this
region are near the Pine Hollow South field, where a new shale
gas drilling play is currently evolving. In addition, Petrohawk
owns approximately 55,100 net undeveloped acres in Logan,
Scott and Yell Counties, Arkansas.
The Gueydan field in Vermilion Parish, Louisiana is
Petrohawks largest field in the Gulf Coast region and was
acquired as part of the Proton transaction. Production in this
field is from 2,500 to 10,000 feet in depth.
Petrohawks working interest ranges from 50% to 100%, and
Petrohawk plans to drill eight wells in 2005 at Gueydan.
Petrohawk also owns significant interests in the West Broussard
field, which is located in Lafayette Parish, Louisiana. In 2003,
the Failla #1 well was drilled and completed, with the
well being placed on production in September 2003. During 2004,
the well produced approximately 15.0 gross Mmcf of natural
gas and 350 gross barrels of oil per day. Petrohawk has an
approximate 9% working interest in this well. An additional
development well, the Montesano #1, was drilled and
completed during the third quarter of 2004. The well was placed
on production in August 2004 and produced approximately
10.2 gross Mmcf of natural gas and 290 gross barrels
of oil per day during the fourth quarter of 2004. Petrohawk owns
a 23.1% working interest in this well, which will increase to
approximately 29.6% working interest after payout. The
Montesano #1 is projected to reach payout during the second
quarter of 2005. The Failla #1 and
Montesano #1 wells produce from the Bol Mex 3
formation at approximately 15,830 feet.
Petrohawk also has properties in the Breton Sound/ Main Pass
area in Louisiana state waters, including a 25% working interest
in six leased drilling prospects covering approximately
2,100 acres, as well as two producing wells, pipelines and
associated production facilities. Petrohawk possesses
79 square miles of recently reprocessed 3-D seismic data
covering this area. The main objective formation is the Tex W at
a depth of 11,500 feet. Wells in this area generally
produce at high rates and are short lived.
Petrohawk has between 5% and 12% working interest in the Ship
Shoal 208/239 field located in federal waters, offshore
Louisiana. In South Louisiana, Petrohawk also owns minor
interests in the South Lake Arthur field, Vermilion Parish,
which has produced over 1 Tcfe from the Myogyp formation.
In addition, Petrohawk owns interests in Old Ocean, a large Frio
formation field in Brazoria County, Texas.
INFORMATION ABOUT MISSION
Mission Resources Corporation is an independent oil and gas
exploration and production company headquartered in Houston,
Texas. Mission drills for, acquires, develops and produces
natural gas and crude oil primarily, in the Permian Basin (in
West Texas and Southeast New Mexico), along the Texas and
Louisiana Gulf Coast and in both the state and federal waters of
the Gulf of Mexico. At December 31, 2004, Missions
estimated net proved reserves, using constant prices that were
in effect at such date, were 93 Bcf of natural gas,
43 Bcfe of natural gas liquids, and 15 MMBbl of oil,
for total proved reserves of
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approximately 226 Bcfe. Approximately 60% of Missions
estimated net proved reserves were natural gas or natural gas
liquids, and approximately 78% were classified as proved
developed at December 31, 2004.
Properties
Waddell Ranch Field. Waddell Ranch field is a large,
mature property consisting of 900 producing wells and 300
injection wells. Productive formations range in depth from the
Queen formation at 3,000 feet to the Ellenburger formation
at 15,000 feet. This property, which covers over
75,000 acres, is located in Crane County, Texas. Burlington
Resources Inc. is the operator and Missions working
interest is approximately 10%. This field has had gross
cumulative production of 1.4 Tcf of natural gas and
422 MMBbl of oil. A portion of this field is under
waterflood. This field is under continuous development through
recompletions, workovers, and new drills.
Jalmat Field. Mission is the operator and holds an
approximate 95% working interest in the Jalmat field, located in
Lea County, New Mexico. The field consists of 140 producing
wells with production primarily from the Yates and Seven Rivers
formations at depths ranging from 3,000 to 4,200 feet. Gas
production from the Yates and Seven Rivers has a high heating
content and is processed at a nearby plant for the extraction of
NGLs. Numerous behind pipe recompletions and infill
drilling potential exist in both of the Yates and Seven Rivers
formations. Additionally, the deeper Queen formation may have
waterflood potential.
TXL North Unit. The TXL North Unit is an active
waterflood unit that consists of 260 wells and produces
from the Clearfork Tubb formation at a depth of approximately
5,600 feet. Anadarko Petroleum Corporation operates this
property, located in Ector County, Texas. Mission holds an
approximate 20% working interest and 25% net revenue interest.
This field is currently on a 10-acre infill program with
48 successful new wells drilled in 2004 with continued
drilling expected in 2005.
Goldsmith Field. The Goldsmith field consists primarily
of the CA Goldsmith Unit, operated by XTO Energy Inc., and is
located in Ector County, Texas. Mission holds a 25% working and
net revenue interest in this unit. The field consists of 250
producing wells with production primarily from the Clearfork and
Devonian formations at depths ranging from 5,500 to
8,000 feet. Development plans for 2005 include five new
drill wells in the Clearfork formation.
Wasson Field. Mission holds an approximate 37% working
interest in the Brahaney Unit in the Wasson field, located in
Yoakum County, Texas. Apache Corporation operates this
waterflood unit that consists of 90 producing wells and produces
from the San Andres formation at a depth of approximately
5,200 feet. Production has increased significantly in past
few years as a result of a successful infill drilling program.
In 2004, seven new wells were drilled and the development
drilling program continues with nine wells planned for 2005.
South Bayou Boeuf Field. South Bayou Boeuf field is
located in Lafourche Parish, Louisiana and produces from
multiple Miocene-age reservoirs at depths ranging from 10,000 to
12,500 feet. One well was drilled in 2004. Multiple
development drilling opportunities exist in other sands in the
field. Mission is the operator of the field with an average
working interest of 96% in seven producing wells.
Second Bayou Field. Second Bayou field is located in
Cameron Parish, Louisiana. The field produces oil from shallow
Miocene-age reservoirs at 5,500 feet and gas from deep
Miocene-age reservoirs below 10,000 feet. Mission operates
three of the six producing wells and holds an average working
interest of 55% in four oil wells and two gas wells.
Reddell Field. Reddell field is located in Evangeline
Parish, Louisiana and produces from the Upper, Middle and Lower
Wilcox formations at depths ranging from 10,000 to
13,000 feet. Burlington Resources
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Inc. is the operator of the field consisting of 16 producing
wells. In 2004, four wells were drilled with additional
development drilling planned for 2005. Mission holds a 15%
working interest in the field.
High Island Block A-553. Mission owns approximately a 37%
working interest and is the operator in this property located in
federal waters offshore Texas in 260 feet of water. The
block contains one platform with seven wells. The seventh well
was recently drilled and is being completed. Production is
primarily gas with liquid condensate from the Pleistocene and
Pliocene formations at depths ranging from 5,000 to
12,000 feet. One additional well is planned for 2005 with
more drilling expected in future years.
South Marsh Island Block 142. This property is
located in federal waters offshore Louisiana at a depth of
230 feet. Hunt Petroleum Inc. operates 16 wells on two
platforms that produce from the Pleistocene and Pliocene
formations at depths ranging from 3,000 to 7,000 feet.
Mission owns a 31% working interest. Two successful wells were
drilled in 2004 and additional drilling is planned. There are
additional development drilling and recompletion opportunities
on this block.
South Texas
Lions Wilcox Field. Mission participated in the drilling
of the Weise #1 well in July 2004, which began producing in
January 2005. Since January 1, 2005, Mission has
participated in the drilling of the Dehnert #1, Buckner
Foundation #1, and Weise #2 wells in the Lions Wilcox field in
Goliad County, Texas. The Simmons #1 and the Wright Materials #3
are currently drilling. We anticipate that these Lions Wilcox
field wells could have substantially similar results to the
Weise #1, which flowed at an initial gross rate of
14.5 million cubic feet of gas per day. Mission holds a 35%
working interest in the Weise #1, Dehnert #1, Simmons #1
and the Buckner Foundation #1, a 31.5% working interest in the
Weise #2, and a 28% working interest in the Wright Materials #3.
THE MERGER
The following description of the material information about the
merger, including the summary of the material terms and
provisions of the merger agreement and the descriptions of the
opinions of the parties financial advisors, is qualified
in its entirety by reference to the more detailed annexes to
this joint proxy statement/ prospectus. We urge you to read all
of the annexes to this joint proxy statement/ prospectus in
their entirety.
The merger agreement has been included as Annex A
to provide you with information regarding its terms. It is not
intended to provide any other factual information about us. Such
information can be found elsewhere in this joint proxy
statement/ prospectus and in the other public filings each of us
makes with the SEC, which are available without charge at
www.sec.gov.
The merger agreement contains representations and warranties
we made to each other. The assertions embodied in those
representations and warranties are qualified by information in
confidential disclosure schedules that we have exchanged in
connection with signing the merger agreement. While we do not
believe that they contain information securities laws require us
to publicly disclose, other than information that has already
been so disclosed, the disclosure schedules do contain
information that modifies, quantifies and creates exceptions to
the representations and warranties set forth in the attached
merger agreement. Accordingly, you should not rely on the
representations and warranties as characterizations of the
actual state of facts, since they are modified in important part
by the underlying disclosure schedules. These disclosure
schedules contain information that has been included in
Petrohawks and Missions prior public disclosures, as
well as potential additional nonpublic information. Moreover,
information concerning the subject matter of the representations
and warranties may have changed since the date of the merger
agreement, which subsequent information may or may not be fully
reflected in our public disclosures.
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Transaction Structure
The Petrohawk board of directors and the Mission board of
directors each has approved the merger agreement, which provides
for the merger of Mission with and into Merger Sub, which will
survive the merger as a wholly owned subsidiary of Petrohawk. We
expect to complete the merger in the third quarter of 2005. Each
share of Petrohawk common stock issued and outstanding at the
effective time of the merger will remain issued and outstanding
as one share of common stock of Petrohawk, and each share of
Mission common stock issued and outstanding at the effective
time of the merger will be converted into the right to receive
cash or Petrohawk common stock, as described below. See
Merger Consideration.
Merger Subs certificate of incorporation will be the
certificate of incorporation and Merger Subs bylaws will
be the bylaws of the surviving corporation after the effective
time of the merger. At the effective time of the merger, the
Petrohawk board of directors will be expanded by two members,
consisting of one Class I director and one Class II
director and these vacancies will be filled by designees of
Mission. The Class I directors term will expire in
2008, and the Class II directors term will expire
in 2006.
Source of Funds for Cash Portion of Merger Consideration
Petrohawk intends to pay the cash portion of the merger
consideration to the Mission stockholders and to repay
indebtedness under Missions existing credit facility from
funds available to Petrohawk at closing. Petrohawk currently
intends these funds to be comprised of funds available under
existing credit lines combined with the proceeds from an
offering of debt securities.
Background of the Merger
In July 2004, Mission announced that Petrie Parkman &
Co., Inc. was going to assist it in evaluating strategic
alternatives to enhance stockholder value. Petrie Parkman began
its evaluation by working with management to conduct a
comprehensive review of Missions existing asset base and
opportunity set, an assessment of the commodities, transactions,
debt and equity markets, and an evaluation of Missions
relative strengths and challenges in the then current
environment.
In July, August, and September 2004, Petrie Parkman contacted a
number of energy companies, including Petrohawk, regarding
potential strategic transactions with Mission. During this
period, Petrohawk was actively engaged in negotiations to
acquire Wynn-Crosby Energy, Inc. and eight limited partnerships
managed by it, which transaction was subsequently announced on
October 13, 2004. As a consequence, Petrohawk determined
that it was not an appropriate time for consideration of a
possible transaction with Mission, and, in September 2004,
Petrohawk notified Petrie Parkman that it was not able to
consider any transactions with Mission at that time. No
transactions were concluded with any of the other companies
contacted by Petrie Parkman as part of Missions evaluation
of strategic alternatives.
Mission announced that the previously announced evaluation of
strategic alternatives had been completed and Mission had
concluded that:
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Missions asset base remained under-exploited; |
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Mission had a strong menu of internal opportunities to create
value for the company; |
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Potential exists to acquire desirable assets; and |
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Mission recognized the availability of debt and equity capital
to finance attractive growth opportunities. |
Mission further announced that its plan to move forward included
five components:
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expand its exploration program in its core areas; |
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aggressively pursue acquisitions of producing properties; |
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hedge as appropriate to protect its investments; |
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expand its bank facilities as needed while maintaining
discipline in its capital structure; and |
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maintain an opportunistic posture. |
Following this announcement, Mission began expanding its
exploration program in its core areas and aggressively pursuing
acquisitions of producing properties, while continuing to divest
non-core properties. Mission, with the continued assistance of
Petrie Parkman, reviewed a number of potential acquisitions
during the next several months.
On February 23, 2005, Steve Herod, Petrohawks Vice
President of Corporate Development, contacted Petrie Parkman for
the purpose of discussing general merger and acquisition
opportunities for Petrohawk. Floyd Wilson, Petrohawks
Chairman, President, and Chief Executive Officer, and
Mr. Herod met with representatives of Petrie Parkman on
March 2, 2005. During this meeting, representatives of
Petrie Parkman asked Mr. Wilson and Mr. Herod whether
Petrohawk considered Mission a potential acquisition candidate.
Petrie Parkman arranged a meeting between Mr. Wilson and
Robert Cavnar, Missions Chairman, President and Chief
Executive Officer for March 11, 2005.
A confidentiality agreement between Mission and Petrohawk was
executed on March 9, 2005. On March 11, 2005,
Mr. Wilson, Mr. Cavnar, and a representative of Petrie
Parkman met and discussed generally a strategic merger between
Mission and Petrohawk. During the meeting, Mr. Wilson and
Mr. Cavnar each gave an overview of their respective
companies and they concluded that a merger would have potential
strategic, commercial, and financial benefits to the
stockholders of both companies, and the parties discussed in
general terms structural issues that would have to be addressed
in connection with a potential transaction, including the type
and mix of consideration to be paid and the range of relative
valuations of the companies. At the conclusion of the meeting,
each executive expressed an interest in beginning the process of
determining whether or not an agreement could be reached.
On March 11, 2005, Petrie Parkman delivered documents to
Mr. Cavnar and Mr. Wilson setting out various
potential structural and transaction terms and time frames for
recent transactions in the energy industry under such potential
structures. In addition, Petrie Parkman sent a worksheet, based
solely on publicly available information about Mission and
Petrohawk, outlining the pro forma combined statistics resulting
from a transaction between the two companies, assuming a range
of transaction prices.
Over the weekend of March 12, 2005 and March 13, 2005,
Petrohawk began the process of evaluating the proposed
transaction. On March 14, 2005, Petrohawk received a copy
of Netherland Sewells reserve report for Mission, and
Missions data base on its reserves. Petrohawks due
diligence continued throughout the week of March 14, 2005
as management, technical staff, engineers and certain advisors
of Petrohawk received and reviewed detailed information relating
to Missions businesses, assets and operations.
Later on March 14, 2005, Petrohawk held its regularly
scheduled monthly telephonic update for members of management
and board members. Prior to the call, board members received a
book containing information on Mission and the potential
transaction. During the call, Petrohawks management team
discussed the potential transaction generally.
On March 15, 2005, Mr. Cavnar, Mr. Wilson and a
representative of Petrie Parkman, held a conference call during
which they continued their discussions regarding the general
terms of the proposed transaction.
On March 16, 2005, Mission met with Petrie Parkman to
further discuss the possible transaction with Petrohawk.
On March 17, 2005, Petrohawk delivered to Mission a
non-binding letter of interest. The letter of interest expressed
Petrohawks interest in pursuing a potential transaction,
proposed consideration consisting of 50% cash and 50% Petrohawk
stock, valued at $8.25 per share, established an exchange
ratio for the stock portion of the consideration based on a
value per share of Petrohawk common stock of $10.72 per
share, indicating that voting agreements would be required of
Missions largest stockholders,
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and suggesting that the combined company board would consist of
nine members, two of whom would be designated by Mission.
Later in the day of March 17, 2005, Mr. Cavnar and
Mr. Wilson discussed telephonically the issues of interest
that were set forth in the letter of interest. Mr. Cavnar
emphasized that the timing of the transaction was important, as
due to the transaction discussions, Mission was considering
delaying a contemplated public offering of common stock to
provide additional financial flexibility to implement its
strategic plan. Mr. Cavnar indicated that his preference
was to have a definitive agreement finalized by the end of March
2005.
On March 17, 2005, the board of directors of Mission
conducted a telephone meeting to discuss the potential strategic
merger with Petrohawk and the letter of interest received from
Petrohawk regarding the potential transaction. Mr. Cavnar
reviewed with the board the terms set forth in the letter of
interest received from Petrohawk and asked representatives of
Petrie Parkman to discuss the proposed transaction, their
analysis of current market metrics, operating statistics,
reserves for each company, recent transactions by exploration
and production companies in the market, and to provide the board
with a basic overview of Petrohawk. Mr. Cavnar recommended
that Mission delay its proposed equity offering for
approximately two weeks to give Mission an opportunity to
evaluate a potential transaction with Petrohawk. He also
requested authority to negotiate the basic terms of the
transaction, subject to final board approval, asked that the
board appoint Herb Williamson as a special representative of the
board to participate in the due diligence and negotiation
processes, and asked that the board retain Merrill Lynch to
opine on the fairness of the merger, from a financial point of
view, of the consideration to be received by Missions
stockholders. The board unanimously approved each of the actions
requested by Mr. Cavnar, and Merrill Lynch was formally
engaged on March 22, 2005 to opine on the fairness of the
merger, from a financial point of view, of the consideration to
be received by Missions stockholders.
On March 18, 2005, a scheduled conference call between
certain members of the Petrohawk board and management occurred.
Petrohawks management and its board discussed primarily
Petrohawks technical evaluation of Mission, but also
discussed various financial evaluations and transaction
structures. Also on March 18, 2005, Mission sent Petrohawk
a preliminary due diligence request for information regarding
Petrohawk. Due diligence by Petrohawk continued through the
weekend of March 19, 2005 and March 20, 2005.
On March 21, 2005, management and other employees of each
company and representatives from Merrill Lynch attended a
meeting at Petrie Parkmans Houston office at which each
company made detailed technical presentations on its proved and
unproved reserves. Also on March 21, 2005, Petrohawk and
Mission executed a second confidentiality agreement relating to
information to be provided by Petrohawk to Mission. Later that
afternoon a conference call took place between attorneys from
both sides and personnel from both companies to discuss due
diligence and scheduling.
On March 22, 2005, representatives of Petrohawk and
Petrohawk personnel continued their due diligence review of
Mission at the offices of Petrie Parkman and Mission.
On March 23, 2005, Petrohawks legal counsel, Hinkle
Elkouri Law Firm L.L.C., delivered a draft merger agreement to
Porter & Hedges, L.L.P., outside counsel to Mission.
Thereafter, management and certain advisors of each company
continued to review and negotiate the legal and economic terms
of the merger agreement.
On March 23, 2005, Missions representatives and
personnel began due diligence on Petrohawk.
On March 24, 2005, Mr. Wilson met with
Mr. Williamson. Mr. Wilson discussed Petrohawks
philosophy, background, management and staff with
Mr. Williamson. Later in the day on March 24, 2005,
the Mission board of directors conducted a meeting to discuss
the current status of negotiations with Petrohawk, and to meet
with Mr. Wilson personally. Representatives of Petrie
Parkman and Porter & Hedges also attended the meeting.
All members of Missions board were present, one
telephonically. Mr. Wilson gave a presentation regarding
Petrohawk and answered questions from Missions directors
and advisors. In addition, Porter & Hedges presented a
preliminary overview of the merger agreement and the
36
fiduciary duties of Missions board of directors. Petrie
Parkman also gave a preliminary overview of the transaction and
Mission management gave a report on preliminary due diligence.
On March 25, 2005, Petrohawk held a board meeting
telephonically, and management provided the board with an update
on the proposed transaction with Mission. During the meeting,
board members raised questions regarding Missions
outstanding debt, deferred tax liability, and the expected
goodwill component of the proposed transaction. Also on
March 25, 2005, Petrohawk informally retained Sanders
Morris Harris to act as its financial advisor and provide an
opinion as to the fairness of the merger to Petrohawk from a
financial point of view.
On March 25, 2005, Porter & Hedges delivered a
revised version of the draft merger agreement to Petrohawk and
its counsel, Hinkle Elkouri, and Hinkle Elkouri delivered to
Porter & Hedges an initial draft of the voting
agreement to be executed by Missions largest stockholders.
Also on March 25, 2005, Mr. Wilson and Mr. Cavnar
discussed by telephone questions and concerns regarding
restrictive covenants contained in the indenture agreement
governing Missions public debt and the implications of
such provisions on transaction financing and structuring.
On March 26, 2005, representatives of Petrohawk, Mission,
Petrie Parkman, Guggenheim Capital, LLC, one of the underwriters
for Missions public debt offering in 2004, and Sidley,
Austin, Brown & Wood LLP, underwriters counsel in
Missions public debt offering, held a telephone conference
and discussed the covenant issues relating to Missions
public debt. Later in the day on March 26, 2005, as a
result of these covenant issues, Mr. Wilson called a Petrie
Parkman representative and advised him that Petrohawk wanted to
structure the transaction such that 60% of the merger
consideration was Petrohawk common stock and 40% was cash.
Over the weekend of March 26, 2005 and March 27, 2005,
due diligence by both parties continued. Mr. Wilson and
Mr. Cavnar corresponded regarding the potential transaction
and specific deal terms and negotiations on various matters
continued.
On March 28, 2005, Mr. Wilson and Mr. Cavnar had
several telephone conferences regarding the merger
consideration. Both parties had previously agreed to merger
consideration in the range from $8.00 to $8.50 per share
and to a cash/ stock ratio of 50/ 50. However, Petrohawk
proposed revising the merger consideration and the cash/ stock
ratio, due to certain restrictions in Missions
97/8%
senior notes indenture that could limit financings and growth by
the combined company. Petrohawk also indicated that any
amendment to the covenants or redemption of the notes would
require payments in excess of the par value of the notes. Based
on these conversations, Mr. Wilson and Mr. Cavnar
agreed to recommend to their boards that the merger
consideration be $8.15 per share and the cash/ stock ratio be
40/ 60.
On March 28, 2005, Petrohawk delivered to Mission a revised
non-binding letter of interest, which provided for cash merger
consideration based on $8.15 multiplied by the number of Mission
shares outstanding times 40% and a number of Petrohawk shares
determined by dividing $8.15 by the weighted average per share
closing price of Petrohawk shares for the 20 trading days ending
on April 1, 2005 and multiplying that result by 60%. In a
telephone conference between Mr. Cavnar and
Mr. Wilson, they agreed that each party would work towards
execution of a definitive merger agreement by Sunday,
April 3, 2005, based on the terms of the revised letter of
interest.
On March 29, 2005, Petrohawk held its regularly scheduled
audit committee meeting and board of directors meeting.
Petrohawks management provided materials to the board of
directors and conducted a presentation regarding the status of
due diligence and economics of the proposed merger with Mission.
The board discussed the proposed merger and a Petrohawk board
meeting was scheduled for April 1, 2005. Also on
March 29, 2005, Petrohawk approved the engagement of
Sanders Morris Harris to act as its financial advisor.
On March 29, 2005, Mission sent representatives of Harbert
Distressed Investment Master Fund, Ltd., Stellar Funding, Ltd.
and Guggenheim Capital, L.L.C. the initial draft of a voting
agreement.
37
Thereafter, until April 3, 2005, Hinkle Elkouri,
Porter & Hedges and legal representatives of Harbert,
Guggenheim and Stellar negotiated the terms and provisions of
the voting agreements.
On March 29, 2005, Missions board of directors held a
telephonic meeting to further discuss the status of negotiations
with Petrohawk. Also participating in the call was the senior
management team of Mission, and representatives of Petrie
Parkman, and Porter & Hedges. Mr. Cavnar provided
an update on the status of negotiations with Petrohawk and
reviewed the currently proposed terms as set forth in the
revised letter of interest. He also explained the reasons for
the recent change in the mix of stock and cash set forth in the
revised letter of interest. Representatives of Porter &
Hedges gave a detailed review of the boards fiduciary
duties in the context of this transaction and a detailed review
of the provisions of the draft merger agreement. Petrie Parkman
then reviewed the financial aspects of the transaction.
Following Petrie Parkmans presentation, members of the
senior management team provided their updated due diligence
report on Petrohawk to the board.
A further board meeting was scheduled for April 3, 2005, to
discuss and review the final forms of all the agreements
relating to the proposed transaction, receive an opinion from
Merrill Lynch as to the fairness of the transaction, from a
financial point of view, to Mission, and to vote on the proposed
transaction.
On March 30, 2005, a meeting was held at Missions
Houston offices to negotiate the outstanding issues on the
merger agreement. Mr. Cavnar, Mr. Wilson,
representatives of Petrie Parkman, counsel to Mission and to
Petrohawk, and members of the senior management team of Mission
attended the meeting. At this meeting, the parties negotiated
and agreed to all material terms to be included in the merger
agreement, other than economic terms already agreed to, subject
to board approval.
On March 31, 2005, Hinkle Elkouri and Porter &
Hedges continued negotiation of various provisions of the merger
agreement.
On April 1, 2005, Petrohawks board of directors held
their scheduled board meeting. The board members had previously
been provided information packages from management that
addressed the boards questions raised in the meeting of
March 29, 2005. The board had a number of comments and questions
related to the information. The board concluded that, subject to
a report on the completion of due diligence, receipt of a
fairness opinion from Sanders Morris Harris, and its final
review of the merger agreement, it viewed the transaction
favorably. The board set a further board meeting for
April 3, 2005.
On April 1, 2005, Hinkle Elkouri sent Porter &
Hedges an initial draft of a non-solicitation agreement for each
of Missions executive officers.
On April 2, 2005, the parties and their legal
representatives continued negotiating the merger agreement,
voting agreements, and non-solicitation agreements and exchanged
drafts of these agreements and the disclosure schedules to the
merger agreement. The parties also began to prepare a joint
press release and filings to be made with the SEC relating to
the proposed transaction. Also, on April 2, 2005,
Mr. Wilson, Mr. Cavnar and their representatives held
various telephone conferences regarding the assumption by
Petrohawk of Missions stock option plans, employee
benefits for Mission employees, and the handling of severance
payments arising under benefits plans and employment agreements.
On April 3, 2005, the parties finalized the terms of the
merger agreement, voting agreements, and non-solicitation
agreements.
On April 3, 2005, Petrohawks board of directors met
telephonically to consider the final terms of the proposed
business combination between Petrohawk and Mission. Prior to the
meeting, Petrohawks board of directors were provided with
a substantially final draft of the merger agreement and other
materials related to the transaction. At the meeting:
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Petrohawks management gave a presentation regarding the
terms of the proposed transaction and the results of due
diligence; |
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Hinkle Elkouri reviewed the provisions of the proposed merger
agreement; and |
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Sanders Morris Harris presented its analysis and rendered an
oral opinion, subsequently confirmed by delivery of its written
opinion dated April 3, 2005, that based upon and subject to
the assumptions made, matters considered, qualifications, and
limitations set forth in the written opinion, as of that date,
the financial consideration to be paid by Petrohawk in the
merger was fair, from a financial point of view, to Petrohawk
(see Opinion of Sanders Morris Harris). |
After discussion, Petrohawks board of directors
unanimously approved the merger, the merger agreement, and the
other transactions contemplated in the merger agreement and
unanimously resolved to recommend that Petrohawks
stockholders vote to approve the issuance of Petrohawk common
stock in connection with the merger and the other transactions
contemplated in the merger agreement.
On April 3, 2005, the Mission board of directors held a
special meeting to consider the final terms of the proposed
merger transaction between Petrohawk and Mission. Prior to the
meeting, Missions board of directors was provided with a
substantially final draft of the merger agreement and other
materials related to the proposed transaction. Mr. Cavnar
and Mr. Williamson attended the meeting in person at
Missions offices and the other members of the board of
directors attended by telephone. At the meeting:
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Missions management gave a presentation regarding the
terms of the proposed transaction and the results of due
diligence; |
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Representatives of Porter & Hedges reviewed the
provisions of the proposed merger agreement and related
agreements, and Missions general counsel also reviewed
matters related to employee benefits; |
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Petrie Parkman discussed the negotiation process and the
potential market reaction to an announcement of the
transaction; and |
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Merrill Lynch rendered an oral opinion, subsequently confirmed
by delivery of its written opinion dated April 3, 2005,
that as of such date, and based upon and subject to the factors
in the subject set forth in its opinion, the consideration to be
received by the holders of Mission common stock (other than
Petrohawk and its affiliates) in the merger was fair, from a
financial point of view, to such holders (see Opinion of
Merrill Lynch, Pierce, Fenner & Smith). |
After discussion, Missions board of directors unanimously
approved the merger, the merger agreement and the other
transactions contemplated therein, and unanimously resolved to
recommend that Missions stockholders adopt the merger
agreement and approve the merger and the other transactions
contemplated in the merger agreement.
Following these board meetings, Mr. Wilson and
Mr. Cavnar each advised the other that the merger had been
approved by the respective boards of Petrohawk and Mission and
the definitive merger agreement was executed on behalf of
Petrohawk and Mission, effective April 3, 2005.
Concurrently with the execution of the merger agreement, each of
Stellar Funding, Ltd., Guggenheim Capital, LLC, and Harbert
Distressed Investment Master Fund, Ltd. executed a voting
agreement with Mission and Petrohawk in which it agreed to vote
in favor of the merger, and each of Mr. Cavnar, Richard W.
Piacenti, John L. Eells, Marshall L. Munsell, Tom C. Langford
and William R. Picquet executed non-solicitation agreements with
Petrohawk in which each agreed to certain restrictions regarding
employees of Mission.
The parties issued a joint press release announcing the
execution of the merger agreement on the morning of
April 4, 2005.
Petrohawks Reasons for the Merger; Recommendation of
the Stock Issuance in the Merger by the Petrohawk Board of
Directors
Petrohawks board of directors has determined that the
merger is fair to, and in the best interests of, Petrohawk and
its stockholders. In deciding to approve the merger agreement
and to recommend that Petrohawks stockholders vote to
approve the issuance of Petrohawk common stock in connection
with the
39
merger, Petrohawks board of directors consulted with
Petrohawks management and legal and financial advisors and
considered a number of material factors, including:
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the combined company will be significantly larger than Petrohawk
and should have greater financial, operational and technical
strengths that should enable it to consider and more effectively
pursue additional opportunities; |
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a substantial number of the combined companys properties
are in the same geographic areas which will permit an
integration of those properties and a possible reduction in the
combined operating and administrative cost relative to those
properties; |
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the merger will add significantly to Petrohawks reserves
and production and is in accordance with Petrohawks
strategy of growth through acquisitions, and it should create a
better platform for further consolidation of oil and gas assets
in its core operating areas; |
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the merger will provide Petrohawk with a more balanced portfolio
of exploitation and exploratory opportunities, thereby giving
management more flexibility in its capital allocation decisions; |
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the merger will significantly increase Petrohawks cash
flow and cash flow per share and should permit an acceleration
of Petrohawks capital program; |
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the merger will create a larger company that is expected to have
more liquidity in its common stock and better access to capital
markets, which should provide more financial flexibility; |
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the merger will give Petrohawk the opportunity to add to its
technical and operational expertise by adding employees from
Mission and otherwise hiring qualified individuals; |
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the combined company will have properties that should be
attractive candidates for divestment, and given expected market
conditions there should be significant opportunities to use the
proceeds from the sale of such properties to reduce overall debt
of the combined company; and |
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Sanders Morris Harris presented its analysis and opinion to the
effect that, as of April 3, 2005 and based upon and subject
to the assumptions made, matters considered, qualifications, and
limitations set forth in the written opinion, the financial
consideration to be paid by Petrohawk in the merger was fair,
from a financial point of view, to Petrohawk. |
Petrohawks board of directors considered a number of
additional factors in reaching its decision including:
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information concerning the financial condition, results of
operations, prospects and businesses of Petrohawk and Mission,
including the respective companies reserves, production
volumes, cash flows from operations, recent performance of
common stock and the ratio of Petrohawks common stock
price to Missions common stock price over various periods,
as well as current industry, economic and market conditions; |
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the net asset value per share of the common stock of both
Petrohawk and Mission; and |
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the results of business, legal and financial due diligence
investigations of Mission conducted by Petrohawks
management and legal advisors. |
Petrohawks board of directors also considered a variety of
risks and other potentially negative factors concerning the
merger and the transactions contemplated by the merger
agreement, including the merger. These factors included:
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the increased amount of debt that the combined company would
have compared to Petrohawk on a stand-alone basis and the effect
of that debt on Petrohawks future operations; |
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the fact that a decrease in oil and gas prices would make the
merger less desirable from a financial point of view; |
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a decrease in oil and gas prices would reduce the expected
proceeds from expected divestitures and leave the company with a
higher than projected debt balance; |
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the fact that there are significant risks inherent in combining
and integrating two companies, including that the companies may
not be successfully integrated, and that successful integration
of the companies will require the dedication of significant
management resources, which will temporarily detract attention
from the day-to-day businesses of the combined company; |
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the fact that Petrohawk has experienced rapid growth and
integrating Mission with Petrohawk may be made more difficult
because of acquisitions made by Petrohawk in 2004 and early 2005; |
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the fact that the combined company will be partially reliant
upon drilling success on both proven and unproven properties in
order to meet its expectations regarding production, cash flow
and proven reserves and the fact there is always uncertainty in
successfully converting unproven properties into proven reserves; |
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the fact that the capital requirements necessary to achieve the
expected growth of the combined companys businesses will
be significant, and there can be no assurance that the combined
company will be able to fund all of its capital requirements
from operating cash flows, and the fact that the combined
company would have substantially more total long-term debt than
Petrohawk on a stand-alone basis; and |
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other matters described under the caption Risk
Factors. |
This discussion of the information and factors considered by
Petrohawks board of directors in reaching its conclusions
and recommendations includes all of the material factors
considered by the board but is not intended to be exhaustive. In
view of the wide variety of factors considered by
Petrohawks board of directors in evaluating the merger
agreement and the transactions contemplated by it, including the
merger, and the complexity of these matters, Petrohawks
board of directors did not find it practicable to, and did not
attempt to, quantify, rank or otherwise assign relative weight
to those factors. In addition, different members of
Petrohawks board of directors may have given different
weight to different factors.
It should be noted that this explanation of the reasoning of
Petrohawks board of directors and all other information
presented in this section is forward-looking in nature and,
therefore, should be read in light of the factors discussed
under the heading Forward-Looking Statements
beginning on page 23 of this document.
Petrohawks board of directors determined that the merger,
the merger agreement and the other transactions contemplated by
the merger agreement are in the best interests of Petrohawk and
its stockholders. Accordingly, Petrohawks board of
directors approved and adopted the merger agreement and
recommends that Petrohawk stockholders vote FOR
approval of the issuance of Petrohawk common stock in the merger.
Missions Reasons for the Merger; Recommendation of the
Merger by the Mission Board of Directors
Missions board of directors has determined that the merger
is fair to, and in the best interest of, Mission and its
stockholders. In deciding to approve the merger agreement and to
recommend that Missions stockholders vote to approve the
merger, Missions board consulted with Missions
management and legal and financial advisors and considered a
variety of factors, including:
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the merger consideration represented a premium of approximately
19% above the closing price of Missions common stock on
the last trading day immediately prior to the boards
approval; |
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the combined company will be significantly larger than Mission
and should have greater financial, operational and technical
strengths that should enable it to consider and more effectively
pursue additional types of opportunities; |
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the combined company will have a better balanced portfolio of
long-lived assets and near term higher risk, high impact
drilling opportunities; |
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Missions board of directors confidence in the
ability of Petrohawks chief executive officer to lead the
combined company and continue to enhance stockholder value; |
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subject to proration, Mission stockholders may elect to receive
cash or stock in the transaction thereby having the opportunity
to chose between participation in the combined company or
liquidity; |
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the combined company will have more favorable financing
opportunities based on its combined balance sheet and income
statement; |
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attractive acquisition opportunities are becoming increasingly
difficult to find at reasonable prices, which limits the ability
of Mission to execute its strategic plan of growth through
acquisition and exploration and development; |
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certain of the combined companys properties are in the
same geographic areas which will permit an integration of those
properties and a possible reduction in the combined operating
cost relative to those properties; |
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the combined companys enhanced cash flow should permit an
acceleration of the exploration program developed by Mission; |
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Mission will designate two members to be named to the board of
Petrohawk; |
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the combined companys larger market capitalization should
enhance its stock liquidity; |
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the opinion of Merrill Lynch delivered orally on April 3,
2005 and subsequently confirmed in writing that, as of such
date, and based on and subject to the matters set forth in its
opinion, the consideration to be received by holders of Mission
common stock (other than Petrohawk and its affiliates) in the
merger was fair, from a financial point of view, to such holders; |
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the execution of voting agreements by holders of approximately
32% of Missions common stock pursuant to which they have
agreed, among other things, to vote all shares owned by each of
them in favor of the merger; |
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holders of Mission common stock who dissent from the merger will
have appraisal rights under Delaware law, providing stockholders
who dispute the fairness of the merger an opportunity to have a
court determine the fair value of their share; |
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the financial and other interests in the merger of
Missions directors and executive officers; |
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the terms of the merger agreement and the structure of the
transaction, including the conditions to each companys
obligations to complete the merger; |
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the ability of Petrohawk and Mission to complete the merger,
including their ability to obtain the necessary regulatory
approvals and their obligation to attempt to obtain those
approvals; and |
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the terms of the merger agreement permit Missions board of
directors to change or withdraw its recommendation of the merger
to Mission stockholders, and to terminate the agreement with
Petrohawk, if, among other reasons, the board makes the
determination as set forth in the merger agreement regarding the
nature and terms of a proposed superior offer. |
Each of these factors supported Missions board of
directors conclusion that the merger is advisable and in
the best interest of Mission and its stockholders. In reaching
its conclusions, Missions board relied on Mission and
Petrohawks managements to provide accurate and complete
financial information, projections and assumptions as the
starting point for its analysis.
The Mission board of directors considered a number of additional
factors concerning the merger agreement and the transactions
contemplated by their merger agreement, including:
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information concerning the financial condition, results of
operations, prospects and businesses of Petrohawk and Mission,
including the respective companys reserves, production
volumes, cash |
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flows from operations, recent performance of common stock and
the ratio of Petrohawks common stock price to
Missions common stock price over various periods, as well
as current industry, economic and market conditions; |
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assessments of the net asset value per share of the common stock
of both Petrohawk and Mission; and |
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the results of business, legal and financial due diligence
investigations of Petrohawk conducted by Missions
management and advisors. |
Opinion of Sanders Morris Harris Inc. to the Petrohawk Board
of Directors
In late March 2005, Petrohawk advised Sanders Morris Harris Inc.
(SMH) that Petrohawk had made a preliminary,
non-binding proposal to acquire the outstanding common stock of
Mission and began discussing a possible engagement of SMH. On
March 29, 2005 Petrohawk approved the engagement of SMH as
its financial advisor to undertake a study to determine whether
it could issue a written opinion to Petrohawks board of
directors as to the fairness to Petrohawk, from a financial
point of view, of the consideration to be paid by Petrohawk in
connection with the proposed transaction.
At the April 3, 2005 meeting of Petrohawks board of
directors, SMH presented its analysis and rendered its oral
opinion, subsequently confirmed in writing, that based upon and
subject to assumptions made, matters considered, qualifications
and limitations set forth in the written opinion (which are
described below), as of that date, the financial consideration
to be paid by Petrohawk in the merger was fair, from a financial
point of view, to Petrohawk.
The full text of the written opinion of SMH, which sets forth
assumptions made, matters considered and limits on the review
undertaken by SMH, is attached to this proxy statement as
Annex B and is incorporated herein by reference. The
preparation of a fairness opinion is a complex analytical
process involving various determinations as to the most
appropriate and relevant methods of financial analysis and
application of those methods to the particular circumstances and
is therefore not readily susceptible to summary description. The
following description of the opinion sets forth the material
terms of the opinion and is qualified in its entirety by
reference to the full text of the opinion. You are urged to read
the full text of the opinion carefully and in its entirety.
The opinion was for the use and benefit of the board of
directors of Petrohawk and was provided to the board in
connection with its consideration of the merger. The opinion
does not address the relative merits of the merger as compared
to any alternative transactions or business strategies that
might be available, nor does it address the merits of the
underlying decision by Petrohawk to enter into the merger
agreement. The opinion is not intended to be and does not
constitute a recommendation to any shareholder of Petrohawk or
Mission as to how such shareholder should vote or act with
respect to any matter relating to the merger.
No limitations were imposed by Petrohawk upon SMH with respect
to the procedures followed or factors to be considered by SMH in
rendering its opinion. There were no material relationships or
transactions between SMH and Petrohawk, Petrohawks
affiliates or any other party to the merger prior to or at the
time that SMH and Petrohawk entered into the engagement letter
with respect to the opinion, no such material relationships or
transactions have since developed, and no such material
relationships or transactions are mutually understood to be
contemplated.
In arriving at the conclusions expressed in the opinion, among
other things, SMH reviewed and analyzed the following:
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the merger agreement; |
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such publicly available information concerning Petrohawk and
Mission that SMH believed to be relevant to the analysis for
each of Petrohawk and Mission; |
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certain financial and operating information with respect to the
respective businesses, operations, and prospects of Petrohawk
and Mission respectively, including financial and operating
projections furnished by the management of Petrohawk and of
Mission and in particular (a) certain estimates of proved
and non-proved reserves from Netherland, Sewell &
Associates, Inc. and management, projected future production,
revenue, operating costs and capital investments for each of
Petrohawk and Mission; (b) impacts of hedging the product
prices for the production levels projected by the respective
managements of Petrohawk and Mission; and (c) amounts and
timing or cost savings and operating synergies expected by the
management of Petrohawk resulting from the merger; |
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the historical market prices and trading volumes of
Petrohawks and Missions publicly traded securities
and a comparison of those trading histories with each other and
with those of other publicly-traded companies that SMH deemed
relevant; |
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a comparison of the historical financial results and present
financial condition of Petrohawk and Mission with each other and
with those of other publicly traded companies that SMH deemed
relevant; |
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a comparison of the financial terms of the merger with the
financial terms of certain other transactions that SMH deemed
relevant; |
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the potential pro forma impact of the merger on the future
financial performance of Petrohawk; |
|
|
|
the potential pro forma impact of the merger on the current
financial condition of Petrohawk, including the impact on
Petrohawks leverage levels and ratios; |
|
|
|
the relative contributions of Petrohawk and Mission to the
current and future financial performance of the combined company
on a pro forma basis; |
|
|
|
published estimates of independent research analysts with
respect to the future financial performance of Petrohawk and
Mission; |
|
|
|
the views of the management of Petrohawk and of Mission
concerning the strategic benefits of the merger and their
respective businesses, operations, assets, financial condition,
reserves, production levels, hedging levels, exploration
programs and prospects; and |
|
|
|
such other information, financial studies, analyses and
investigations as SMH deemed relevant. |
SMHs opinion was based upon market, economic, financial
and other conditions as they existed and could be evaluated on,
and on the information available as of, the date of the opinion,
and thus the opinion does not reflect any developments that may
occur or may have occurred after the date of its opinion and
prior to the consummation of the merger. It should be understood
that subsequent developments may affect SMHs opinion, and
SMH does not have any obligation to update, revise or reaffirm
its opinion. SMH expressed no opinion as to the price at which
the Petrohawk common stock or Mission common stock will trade at
any future time.
In preparing its opinion, SMH assumed and relied on the accuracy
and completeness of all information supplied or otherwise made
available to it, discussed with or reviewed by or for it, or
that was publicly available, and it has not assumed any
responsibility for independently verifying such information. SMH
further relied on the assurances of the management of Petrohawk
and of Mission that they are not aware of any facts that would
make such information inaccurate or misleading. With respect to
the financial forecast information furnished to or discussed
with it, including expected costs savings and operating
synergies, SMH assumed that such forecasts had been reasonably
prepared and reflect the best currently available estimates and
judgment of the management of Petrohawk and of Mission as to
expected future financial performance. SMH expresses no opinion
as to such financial forecast information or the assumptions on
which they were based.
With respect to the estimates of oil and gas reserves, SMH
assumed that they had been reasonably prepared on bases
reflecting the best available estimates and judgments of the
management and staff of Petrohawk, Mission and Netherland,
Sewell & Associates, Inc., as applicable, relating to
the oil and gas
44
properties of Petrohawk and Mission, respectively. SMH did not
make or commission an independent evaluation or appraisal of the
assets or liabilities of Petrohawk or Mission, nor, except for
the estimates of oil and gas reserves referred to above, was SMH
furnished with any such evaluations or appraisals. In addition,
SMH did not assume any obligation to conduct, nor did it
conduct, any physical inspection of the properties or facilities
of Petrohawk or Mission. SMH also assumed that the final form of
the merger agreement would be substantially similar to the last
draft reviewed, and that the merger would be consummated in
accordance with the terms of the merger agreement without waiver
of any of the conditions precedent to the merger contained in
the merger agreement.
Some of the summaries of financial analyses below include
information presented in tables. In order to understand fully
the financial analyses performed by SMH, the tables must be read
together with the accompanying text. Failing to consider the
methodologies and assumptions underlying the analyses could
create a misleading or incomplete view of the financial analyses.
Valuation Analysis of Petrohawk. SMHs analyses
included an analysis of Petrohawks common equity value
based upon various alternative valuation methodologies. Each
valuation methodology provided an estimate of Petrohawk common
equity value that was considered by SMH in its assessment of the
fairness, from a financial point of view, of the consideration
to be paid by Petrohawk in connection with the merger.
The following is a summary of the material financial analyses
performed by SMH in connection with providing its oral opinion
to Petrohawks board of directors on April 3, 2005.
Some of the summaries of the financial analyses include
information presented in tabular format. To fully understand the
financial analyses, the tables should be read together with the
text of each summary. Considering the data set forth in the
tables without considering the narrative description of the
financial analyses, including the methodologies and assumptions
underlying the analyses, could create a misleading or incomplete
view of the financial analyses.
The exchange ratio of 0.7718 is used for determining the total
number of shares of Petrohawk common stock to be issued in
connection with the merger. This exchange ratio is also
approximately the effective exchange ratio for the value of
total cash and stock consideration of $8.15 per share to be
paid in connection with the merger based upon an applicable
Petrohawk stock price of $10.56 per share.
Historical Exchange Ratio Analysis. SMH prepared an
analysis that examined the fluctuations of the ratio of
Missions common stock price in relation to
Petrohawks common stock price at various time intervals
within the last six months. These historical exchange ratios
were calculated daily by dividing Missions closing common
stock price by Petrohawks common stock price.
The following summarizes the results of SMHs exchange
ratio analysis for various periods of time as of April 1,
2005.
|
|
|
|
|
|
|
|
Average | |
|
|
Exchange | |
Time Frame |
|
Ratio | |
|
|
| |
April 1, 2005
|
|
|
0.63 |
|
7-Day Average
|
|
|
0.68 |
|
30-Day Average
|
|
|
0.70 |
|
90-Day Average
|
|
|
0.68 |
|
180 Day Period
|
|
|
|
|
|
High
|
|
|
0.80 |
|
|
Low
|
|
|
0.58 |
|
|
Mean
|
|
|
0.68 |
|
|
Median
|
|
|
0.68 |
|
In the past six months, the exchange ratio varied from a 180-day
low of 0.58x to a 180-day high of 0.80x. Both the mean and
median exchange ratios for this time frame were 0.68x. SMH noted
that the
45
exchange ratio of 0.7718 used for determining the total number
of shares of Petrohawk common stock to be issued is within the
180-day historical exchange ratio range.
Comparable Company Analysis. SMH researched numerous
available sources of information and held discussions with
Petrohawks management to find reasonably similar companies
that could be used for comparison purposes. Using publicly
available information, SMH calculated enterprise value multiples
of 2005 and 2006 estimated EBITDAX, as well as price to 2005 and
2006 estimated cash flow per share and earnings per share. In
each case, estimated EBITDAX, cash flow per share and earnings
per share were based on publicly available estimates from
independent equity research analysts.
SMH determined that the following companies were relevant to an
evaluation of Mission based on SMHs view of the
comparability of the operating and financial characteristics of
these four companies to those of Mission:
|
|
|
|
|
Brigham Exploration Co. |
|
|
|
Comstock Resources, Inc. |
|
|
|
Delta Petroleum Corp. |
|
|
|
KCS Energy, Inc. |
SMH also reviewed the same trading multiples for the companies
mentioned below. However, it was determined that these four
companies should be excluded from the comparison analysis due to
their larger size:
|
|
|
|
|
Stone Energy Corp. |
|
|
|
The Houston Exploration Co. |
|
|
|
Whiting Petroleum Corp. |
|
|
|
St. Mary Land & Exploration Co. |
The maximum, mean, median and minimum multiples for the four
companies included in the analysis are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Public Company Metrics |
|
Maximum | |
|
Mean | |
|
Median | |
|
Minimum | |
|
|
| |
|
| |
|
| |
|
| |
Enterprise Value/ 2005E EBITDAX
|
|
|
7.1 |
x |
|
|
6.3 |
x |
|
|
6.7 |
x |
|
|
4.7x |
|
Enterprise Value/ 2006E EBITDAX
|
|
|
6.2 |
x |
|
|
5.4 |
x |
|
|
6.1 |
x |
|
|
4.1x |
|
Price/ 2005E Cash Flow
|
|
|
8.0 |
x |
|
|
6.0 |
x |
|
|
5.9 |
x |
|
|
4.3x |
|
Price/ 2006E Cash Flow
|
|
|
5.8 |
x |
|
|
4.9 |
x |
|
|
5.2 |
x |
|
|
3.8x |
|
Price/ 2005E Earnings
|
|
|
20.5 |
x |
|
|
16.1 |
x |
|
|
16.6 |
x |
|
|
10.8x |
|
Price/ 2006E Earnings
|
|
|
19.3 |
x |
|
|
13.8 |
x |
|
|
12.9 |
x |
|
|
9.3x |
|
SMH applied the comparable company median multiples to
Missions 2005 and 2006 estimated EBITDAX, cash flow per
share and earnings per share and calculated a range of implied
equity values per share to determine a range of implied exchange
ratios. This analysis resulted in a range of implied equity
values per share of $6.47 to $10.78, indicating a range of
implied exchange ratios of 0.61 to 1.02. SMH noted that the
exchange ratio of 0.7718 used for determining the total number
of shares of Petrohawk common stock to be issued falls within
this range.
Comparable Transactions Analysis. SMH reviewed certain
publicly available information on selected corporate level and
asset level E&P transactions that were announced in 2004 and
2005. SMH analyzed relevant transaction multiples of these
transactions, including total purchase price (equity purchase
price plus assumed obligations), adjusted by the value allocated
to other businesses that are unrelated to exploration and
production of oil and gas, divided by proved reserves, daily
production and latest twelve month EBITDAX (defined as earnings
before interest, taxes, depreciation, amortization, and
exploration expense).
46
In addition, for each company, relevant transaction multiples
were analyzed on a regional basis to take into account the
companies differing geographic reserve mix. On a regional
basis, Petrohawks proved reserves were segmented into the
following categories: Mid-Continent, Permian Basin, and Gulf
Coast. Similarly, Missions proved reserves were segmented
into the following geographic categories: Permian Basin, Gulf
Coast, and Gulf of Mexico.
SMH studied transaction value multiples of proved reserves and
daily production for all the transactions reviewed in the
analysis. In analyzing the latest twelve month EBITDAX
transaction value multiple, only the corporate level
transactions were reviewed. The corporate level transactions
included in SMHs study are listed below.
|
|
|
|
|
Acquirer |
|
Target | |
|
|
| |
Cimarex Energy Company
|
|
|
Magnum Hunter Resources Inc. |
|
XTO Energy Incorporated
|
|
|
Antero Resources Corporation |
|
Chesapeake Energy Corporation
|
|
|
BRG Petroleum Corporation |
|
Noble Energy Incorporated
|
|
|
Patina Oil & Gas Corporation |
|
Petro-Canada
|
|
|
Prima Energy Corporation |
|
Forest Oil Corporation
|
|
|
Wiser Oil Company |
|
EnCana Corporation
|
|
|
Tom Brown Incorporated |
|
Kerr-McGee Corporation
|
|
|
Westport Resources Corporation |
|
The following summarizes the results of SMHs comparable
transaction analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple Range | |
|
|
| |
Transaction Value as a Multiple of: |
|
Low | |
|
Median | |
|
High | |
|
|
| |
|
| |
|
| |
Proved Reserves ($Mcfe)
|
|
$ |
0.70 |
|
|
$ |
1.57 |
|
|
$ |
2.98 |
|
Daily Production ($Mcfe/d)
|
|
$ |
3,292 |
|
|
$ |
8,200 |
|
|
$ |
11,417 |
|
LTM EBITDAX
|
|
|
6.6 |
x |
|
|
7.8 |
x |
|
|
9.1x |
|
The table below shows transaction value multiples of proved
reserves (price per mcfe) from SMHs analysis on a regional
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple Range | |
|
|
| |
Proved Reserves by Region: |
|
Low | |
|
Median | |
|
High | |
|
|
| |
|
| |
|
| |
Permian Basin
|
|
$ |
0.99 |
|
|
$ |
1.32 |
|
|
$ |
1.82 |
|
Mid-Continent
|
|
|
1.56 |
|
|
|
1.79 |
|
|
|
1.92 |
|
Gulf Coast Onshore
|
|
|
0.70 |
|
|
|
1.40 |
|
|
|
2.46 |
|
Gulf of Mexico
|
|
|
0.93 |
|
|
|
1.65 |
|
|
|
1.83 |
|
Corporate
|
|
|
1.19 |
|
|
|
1.88 |
|
|
|
2.98 |
|
By applying the median results of the above analysis to the
appropriate Mission metrics, SMH determined Missions
implied equity value per share to be between $4.18 and $8.80.
This yields a range of exchange ratios of 0.40 and 0.83. The
exchange ratio of 0.7718 used for determining the total number
of shares of Petrohawk common stock to be issued falls within
this range.
Net Asset Valuation Analysis. SMH conducted a net asset
valuation analysis of each of Petrohawk and Mission to estimate
the net asset value per share for each company. SMH performed
its analysis based on a variety of data sources provided by the
management of each respective company and certain other publicly
available information. SMH relied on the respective Netherland,
Sewell & Associates, Inc. reserve reports and
information provided by the respective managements to generate
the estimated cash flows for each respective company.
47
For Petrohawk and Mission, SMH calculated net asset valuation
under three different price scenarios. The natural gas and oil
price forecasts employed by SMH were based on New York
Mercantile Exchange, or NYMEX, price forecasts (Henry Hub,
Louisiana delivery for natural gas and West Texas Intermediate,
Cushing, Oklahoma delivery for oil) from which adjustments were
made to reflect location and quality differentials. NYMEX gas
price quotations are stated in heating value equivalents per
million British Thermal Units, or MMBtu, which are adjusted to
reflect the value per Mcf of gas. NYMEX oil price quotations are
stated in dollars per Bbl of crude oil. The table below presents
a summary of NYMEX natural gas and oil price forecasts employed
by SMH for each commodity price scenario.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Escalation | |
|
|
2005E | |
|
2006E | |
|
2007E | |
|
2008E | |
|
2009E | |
|
2010E | |
|
Thereafter | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Henry Hub ($/MMBtu)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case #1: Forward Strip Pricing
|
|
$ |
7.69 |
|
|
$ |
7.48 |
|
|
$ |
6.91 |
|
|
$ |
6.45 |
|
|
$ |
6.08 |
|
|
$ |
5.72 |
|
|
|
0 |
% |
Case #2
|
|
$ |
6.50 |
|
|
$ |
6.50 |
|
|
$ |
6.50 |
|
|
$ |
6.50 |
|
|
$ |
6.50 |
|
|
$ |
6.50 |
|
|
|
0 |
% |
Case #3
|
|
$ |
5.50 |
|
|
$ |
5.50 |
|
|
$ |
5.50 |
|
|
$ |
5.50 |
|
|
$ |
5.50 |
|
|
$ |
5.50 |
|
|
|
0 |
% |
West Texas Intermediate ($/Bbl)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case #1: Forward Strip Pricing
|
|
$ |
54.80 |
|
|
$ |
52.56 |
|
|
$ |
50.32 |
|
|
$ |
49.38 |
|
|
$ |
48.10 |
|
|
$ |
47.38 |
|
|
|
0 |
% |
Case #2
|
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
|
0 |
% |
Case #3
|
|
$ |
40.00 |
|
|
$ |
40.00 |
|
|
$ |
40.00 |
|
|
$ |
40.00 |
|
|
$ |
40.00 |
|
|
$ |
40.00 |
|
|
|
0 |
% |
For Mission, SMH used discount rates ranging from 8% to 10%,
which were commonly used in comparable transactions, to estimate
a range of present values for the future pre-tax cash flows
generated by its proved reserves. This information was derived
from Netherland, Sewell & Associates, Inc. reserve
reports and managements economic models. SMH then added
the value of Missions probable and possible reserves
(derived from third party reports and management estimates) and
other undeveloped exploratory acreage and risked these assets
based on insight from management and industry standards. SMH
then deducted the present value estimates of the future costs of
cash taxes (including benefit from Missions existing net
operating loss position and future intangible drilling costs
generated), general and administrative expenses, and hedging
losses from existing derivatives contracts using a discount rate
of 8%. SMH then deducted the total debt and added the working
capital and divided by Missions fully diluted shares
outstanding (estimated to be 45.4 million shares as of
December 31, 2004 (calculated by using the treasury stock
method for options and warrants).
For Petrohawk, SMH used discount rates ranging from 8% to 10% to
estimate a range of present values for the future pre-tax cash
flows generated by its proved reserves. This information was
derived from Netherland, Sewell & Associates, Inc.
reserve reports and managements economic models. SMH then
added the value of Petrohawks probable and possible
reserves (derived from third party reports and management
estimates) and risked these assets based on insight from
management and industry standards. SMH then deducted the present
value estimates of the future costs of cash taxes (including
benefit from Petrohawks future intangible drilling costs
generated), general and administrative expenses, and hedging
losses from existing derivatives contracts using a discount rate
of 8%. SMH then deducted the total debt and added the working
capital and divided by Petrohawks fully diluted shares
outstanding (estimated to be 52.9 million shares as of
March 31, 2004 (calculated using the treasury stock method
for options and warrants).
The net asset valuation analyses for Cases #1 3
yielded valuations for Petrohawk and Mission that implied an
exchange ratio of 0.67 to 0.80. The exchange ratio of 0.7718
used for determining the number of shares of Petrohawk common
stock to be issued falls within this range.
48
Premiums Analysis. SMH reviewed the premiums paid in the
following ten stock-for-stock business combinations in the oil
and gas exploration and production industry. The transactions
considered, including the date each transaction was announced,
were as follows:
|
|
|
|
|
Buyer/ Seller |
|
Date Announced | |
|
|
| |
Cimarex Energy Co./ Magnum Hunter Resources Inc.
|
|
|
1/26/2005 |
|
Noble Energy Inc./ Patina Oil & Gas Corp.
|
|
|
12/16/2004 |
|
Petro-Canada/ Prima Energy Corp.
|
|
|
6/9/2004 |
|
Forest Oil Corp./ Wiser Oil Co.
|
|
|
5/24/2004 |
|
EnCana Corp./ Tom Brown Inc.
|
|
|
4/15/2004 |
|
Kerr-McGee Corp./ Westport Resources Corp.
|
|
|
4/7/2004 |
|
Evergreen Resources Inc./ Carbon Energy Corp.
|
|
|
3/31/2003 |
|
Plains Exploration & Production Co./ Nuevo Energy
Co.
|
|
|
2/12/2004 |
|
Devon Energy Corp./ Ocean Energy, Inc.
|
|
|
2/24/2003 |
|
Plains Exploration & Production Co./ 3TEC Energy
Corp.
|
|
|
2/3/2003 |
|
For each transaction listed above, SMH calculated the premium
represented by the offer price over the target companys
share price for the one day period prior to the
transactions announcement and the target companys
average share price for the ten-day, twenty-day and thirty-day
periods prior to the transactions announcement. This
analysis indicated the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Period (Prior to Transaction Announcement) |
|
Low Premium | |
|
High Premium | |
|
Mean Premium | |
|
|
| |
|
| |
|
| |
One day
|
|
|
3.6 |
% |
|
|
23.8 |
% |
|
|
15.8 |
% |
10 days
|
|
|
6.6 |
% |
|
|
26.1 |
% |
|
|
16.9 |
% |
20 days
|
|
|
8.3 |
% |
|
|
23.2 |
% |
|
|
16.8 |
% |
30 days
|
|
|
8.9 |
% |
|
|
24.1 |
% |
|
|
17.4 |
% |
SMH calculated the implied premium represented by the
consideration per share for Mission over its share price for the
one-day period prior to the transactions announcement and
its average share price for the ten-day, twenty-day and
thirty-day periods prior to the transactions announcement.
This analysis indicated an implied premium of 12.9%, 14.5%,
12.5% and 14.2%, respectively, for each of the indicated time
periods. SMH noted that each of these implied premiums is within
the selected range of premiums calculated from the precedent
corporate transactions above.
Relative Contribution Analysis. SMH reviewed and analyzed
the relative contributions to be made by Petrohawk and Mission
to the combined company based upon operating results (before
giving effect to any merger-related synergies or cost savings)
and market capitalization. These contributions were compared to
the ownership stake Mission would have in the combined company
following the merger assuming an exchange ratio of 0.7718. Based
on current proved reserves and daily production and publicly
available equity research estimates of operating results for the
year ending December 31, 2005, we determined that
Petrohawks and Missions relative contributions to
the combined company ranged from approximately 49% to 62% for
Petrohawk and from approximately 38% to 51% for Mission. These
contribution percentages implied exchange ratios ranging from
0.79 to 1.43. The exchange ratio of 0.7718 used for determining
the number of shares of Petrohawk common stock to be issued
falls within reasonable proximity of this range.
Pro Forma Analysis. In its review of the transaction, SMH
considered the financial impact of the merger to Petrohawk. SMH
also analyzed the pro forma balance sheet and credit statistics
as compared to Petrohawks current balance sheet and credit
statistics. SMH then compared debt to total capitalization, net
debt to total capitalization, debt to estimated 2005 EBITDAX and
net debt to estimated 2005 EBITDAX on a stand alone basis and
pro forma for the merger. This analysis indicated that the
merger would result in higher leverage on all analyzed metrics
than Petrohawk on a stand-alone basis. SMH also compared
earnings per share, discretionary cash flow per share and
EBITDAX per share of Petrohawk on
49
a stand-alone basis to these metrics of Petrohawk pro forma for
the acquisition. This analysis indicated that the merger would
be accretive to Petrohawks discretionary cash flow and
EBITDAX on a per share basis but slightly dilutive to estimated
2005 earnings. In performing its analysis, SMH did not include
adjustments for synergies.
General. SMH was not asked to opine and did not express
any opinion with respect to any legal, accounting, and tax
matters arising in connection with the merger, and relied
without independent verification on the accuracy and
completeness of the advice provided to it by Petrohawk and
Mission and their respective legal counsel, accountants, and
other financial advisers. SMH was not authorized to negotiate
the terms of the merger, and has based its opinion solely upon
the merger as negotiated by others.
The summary set forth above summarizes the material analyses
performed by SMH, but it does not purport to be a complete
description of the analyses presented to the Petrohawk Board by
SMH. The preparation of a fairness opinion is a complex process
involving various judgments and determinations, assumptions and
analysis and is not necessarily susceptible to partial analysis
or summary description. In arriving at its opinion, SMH
considered the results of all of its analyses. Some of these
analyses were based upon forecasts of future results, which may
be significantly more or less favorable than those suggested by
the analyses. The analyses do not purport to be appraisals or to
reflect the prices at which Petrohawks common stock or
Missions common stock may trade at any time after
announcement of the merger. None of the companies that SMH used
in the analyses of other publicly traded companies and none of
the transactions used in the analyses of comparable transactions
is identical to Petrohawk, Mission or the proposed merger.
Accordingly, these analyses must take into account differences
in the financial and operating characteristics of the selected
publicly traded companies and differences in the structure and
timing of the selected transactions and other factors that would
affect the public trading values and acquisition values of the
companies considered. Because the analyses are inherently
subject to uncertainty, being based upon numerous factors and
events, including, without limitation, factors related to
general economic and competitive conditions beyond the control
of the parties or their respective advisors, neither SMH nor any
other person assumes responsibility if future results or actual
values are materially different from those forecast.
In arriving at this opinion, SMH did not attribute any
particular weight to any analysis undertaken or factor
considered by it and believes that the totality of the analyses
and factors operated collectively to support this opinion.
Accordingly, SMH believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without
considering all analyses and factors, would create an incomplete
view of the process underlying this opinion. SMH believes that
selecting any portion of its analyses or of the summary set
forth above, without considering the analyses as a whole, would
create an incomplete view of the process underlying SMHs
opinion.
The Petrohawk board of directors selected SMH as its financial
advisor because of its reputation as an investment banking and
advisory firm with substantial experience in transactions
similar to the merger. As part of its investment banking
business, SMH is continually engaged in providing financial
advisory services and rendering fairness opinions in connection
with mergers and acquisitions, leveraged buyouts, business and
securities valuations for a variety of regulatory and planning
purposes, mergers, financial restructurings and private
placements of debt and equity securities.
SMH received a customary fixed fee upon the delivery of this
opinion and no portion of SMHs fee is contingent on the
consummation of the merger or the conclusions reached in the SMH
opinion. SMH has not performed investment banking services for
Petrohawk in the past or received fees for other services. In
addition, Petrohawk agreed, among other things, to reimburse SMH
for certain of its reasonable out-of-pocket expenses incurred in
connection with the services provided by SMH, including the
reasonable fees of its legal counsel. Petrohawk has also agreed
to indemnify SMH against various liabilities, including
liabilities arising under U.S. federal securities laws or
relating to or arising out of the merger or its engagement by
Petrohawk. In the ordinary course of business, SMH or its
affiliates may actively trade in
50
Petrohawks or Missions securities for its own
accounts and for the accounts of SMHs customers and,
accordingly, may at any time hold long or short positions in
such securities.
Petrie Parkman & Co., Inc.
Under a letter agreement dated as of August 19, 2002, as
amended, Mission retained Petrie Parkman to act as a financial
advisor in connection with identifying and assessing options and
alternatives available to Mission, as well as considering,
evaluating, and, if appropriate, executing possible tactical and
strategic acquisition, divestiture, exchange merger, sale,
restructuring, refinancing, or other transactions involving
Mission, its assets or its securities with one or more third
parties. Petrie Parkman was not requested to, and did not,
render an opinion to the Mission board of directors in
connection with the merger. In connection with the merger and
pursuant to the engagement letter, Mission agreed to pay Petrie
Parkman customary investment banking fees, which are contingent
upon the consummation of the merger for its financial advisory
services in connection with the merger. In addition, Mission
agreed to reimburse Petrie Parkman for certain expenses incurred
by it in connection with its engagement, including fees and
expenses of counsel. Mission also entered into a customary
indemnification agreement with Petrie Parkman.
Petrie Parkman, as part of its investment banking business is
continually engaged in the evaluation of energy-related
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and
evaluations for corporate or other purposes. Petrie Parkman is
an internationally recognized investment banking firm that has
substantial experience in transaction similar to the proposed
merger. Petrie Parkman has in the recent past provided
investment banking services to Mission and has received
customary fees for such services.
Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated to the Mission Board of Directors
On April 3, 2005, Merrill Lynch, Pierce, Fenner &
Smith Incorporated delivered its oral opinion, which was
subsequently confirmed in a written opinion dated April 3,
2005, to the board of directors of Mission to the effect that,
as of that date and based upon the assumptions made, matters
considered and limits of review set forth in its written
opinion, the consideration to be received by Mission
stockholders pursuant to the proposed merger was fair from a
financial point of view to the holders of Mission common stock
other than Petrohawk and its affiliates.
Merrill Lynchs written opinion sets forth the assumptions
made, matters considered and limits on the scope of review
undertaken by Merrill Lynch. Each holder of Mission common stock
is encouraged to read Merrill Lynchs opinion in its
entirety. Merrill Lynchs opinion was intended for the use
and benefit of the board of directors of Mission, does not
address the merits of the underlying decision by Mission to
engage in the merger and does not constitute a recommendation to
any stockholder as to how that stockholder should vote on the
merger or any related matter, or as to the type of consideration
such shareholder should elect to receive in the merger. In
addition, Merrill Lynch was not asked to address nor does its
opinion address the fairness to, or any other consideration of,
the holders of any class of securities, creditors or other
constituencies of Mission, other than the holders of Mission
common stock. This summary of Merrill Lynchs opinion is
qualified by reference to the full text of the opinion attached
as Annex C.
In arriving at its opinion, Merrill Lynch, among other things:
|
|
|
|
|
Reviewed certain publicly available business and financial
information relating to Mission and Petrohawk that it deemed to
be relevant; |
|
|
|
Reviewed certain information, including financial forecasts,
relating to the business, earnings, hydrocarbon production, cash
flow, assets, liabilities and prospects of Mission and Petrohawk
furnished to it by Mission and Petrohawk, respectively; |
|
|
|
Reviewed certain proved oil and gas reserve data furnished to
Merrill Lynch by Mission and Petrohawk, including the report of
Netherland, Sewell & Associates, Inc. dated
February 10, 2005 |
51
|
|
|
|
|
with respect to the proved oil and gas reserves and related
future revenues of Mission as of December 31, 2004 and the
report of Netherland, Sewell & Associates, Inc. dated
March 1, 2005 with respect to the proved oil and gas
reserves and related future revenues of Petrohawk as of
December 31, 2004, as well as information relating to
potential future drilling sites and probable oil and gas
reserves of Mission and the probable and possible oil and gas
reserves of Petrohawk furnished to Merrill Lynch by Mission and
Petrohawk, respectively; |
|
|
|
Conducted discussions with members of senior management and
representatives of Mission and Petrohawk concerning the matters
described in the three bullet points above, as well as their
respective businesses and prospects before and after giving
effect to the merger; |
|
|
|
Reviewed the market prices and valuation multiples for Mission
common stock and Petrohawk common stock and compared them with
those of certain publicly traded companies that it deemed to be
relevant; |
|
|
|
Reviewed the results of operations of Mission and Petrohawk and
compared them with those of certain publicly traded companies
that it deemed to be relevant; |
|
|
|
Compared the proposed financial terms of the merger with the
financial terms of certain other transactions that it deemed to
be relevant; |
|
|
|
Participated in certain discussions and limited negotiations
among representatives of Mission and Petrohawk and their
financial and legal advisors; |
|
|
|
Reviewed the potential pro forma impact of the merger; |
|
|
|
Reviewed the merger agreement; and |
|
|
|
Reviewed such other financial studies and analyses and took into
account such other matters as it deemed necessary, including its
assessment of general economic, market and monetary conditions. |
In preparing its opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or
otherwise made available to Merrill Lynch, discussed with or
reviewed by or for Merrill Lynch, or publicly available, and did
not assume any responsibility for independently verifying such
information or undertaking an independent evaluation or
appraisal of any of the assets or liabilities of Mission or
Petrohawk and was not furnished with any such evaluation or
appraisal (other than the reserve data referred to above), nor
did Merrill Lynch evaluate the solvency or fair value of Mission
or Petrohawk under any state or federal laws relating to
bankruptcy, insolvency or similar matters. In addition, Merrill
Lynch has not assumed any obligation to conduct any physical
inspection of the properties or facilities of Mission or
Petrohawk. With respect to the oil and gas reserve reports,
hydrocarbon production forecasts or other financial forecast
information furnished to or discussed with Merrill Lynch by
Mission or Petrohawk, Merrill Lynch assumed that such
information was reasonably prepared and reflected the best
currently available estimates and judgment of Missions or
Petrohawks management as to the expected future financial
performance of Mission or Petrohawk, as the case may be, and of
their respective petroleum engineers as to their respective oil
and gas reserves, related future revenues and associated costs.
Merrill Lynch further assumed that the merger would qualify as a
tax-free reorganization for U.S. federal income tax
purposes. Merrill Lynch has also assumed that the final form of
the Agreement will be substantially similar to the last draft
they reviewed.
The opinion of Merrill Lynch was necessarily based upon market,
economic and other conditions as they existed and could be
evaluated on, and on the information made available to Merrill
Lynch as of, the date of its opinion. Merrill Lynch assumed that
in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger,
no restrictions, including any divestiture requirements or
amendments or modifications, would be imposed that would have a
material adverse effect on the contemplated benefits of the
merger.
52
In connection with the preparation of its opinion, Merrill Lynch
was not authorized by Mission or its board of directors to
solicit, nor did Merrill Lynch solicit third-party indications
of interest for the acquisition of all or any part of Mission.
The following is a summary of the material financial and
comparative analyses performed by Merrill Lynch that were
presented to Missions board of directors in connection
with its opinion. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Merrill Lynchs financial analyses, the
tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the
financial analyses. Considering the data described below without
considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of
Merrill Lynchs financial analyses.
Analysis of Mission
Comparable Public Companies Analysis. Using publicly
available information, Merrill Lynch compared certain financial
and operating information and ratios for Mission with
corresponding financial and operating information and ratios for
the following six independent oil and gas exploration and
production companies:
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|
|
|
Brigham Exploration Company |
|
|
|
Carrizo Oil and Gas, Inc. |
|
|
|
Comstock Resources Inc. |
|
|
|
KCS Energy, Inc. |
|
|
|
Swift Energy Company |
|
|
|
Whiting Petroleum Corporation |
Merrill Lynch reviewed:
|
|
|
|
|
the ratio of the equity value to projected 2005 discretionary
cash flow per share, which is referred to below as Equity
value/2005E CFPS; |
|
|
|
the ratio of the enterprise value, which is defined as equity
value plus total long term debt minus cash plus liquidation
preference of preferred stock plus minority interest, to
projected 2005 earnings before interest, taxes, depreciation and
amortization, which is referred to below as Enterprise
value/2005E EBITDA; |
|
|
|
the ratio of the enterprise value to the year end 2004 quantity
of estimated proved reserves (adjusted as applicable) on a
dollars per thousand cubic feet equivalent (assuming a
conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil), which is referred to below as
Enterprise value/proven reserves ($/Mcfe); and |
|
|
|
the ratio of the enterprise value to recently disclosed
projected 2005 net daily production on a dollars per
thousand cubic feet equivalent per day (assuming a conversion
ratio of six thousand cubic feet of natural gas to one barrel of
oil), which is referred to below as Enterprise value/2005E
daily production ($/Mcfe/d). |
53
This analysis indicated the following:
Mission Comparable Public Companies Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark |
|
High | |
|
Low | |
|
Mean | |
|
Median | |
|
Reference Range | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Equity value/2005E CFPS
|
|
|
9.5 |
x |
|
|
4.0 |
x |
|
|
5.7 |
x |
|
|
5.0 |
x |
|
|
3.8x 4.3x |
|
Enterprise value/2005E EBITDA
|
|
|
9.1 |
x |
|
|
4.7 |
x |
|
|
6.2 |
x |
|
|
6.0 |
x |
|
|
4.5x 5.0x |
|
Enterprise value/proved reserves ($/Mcfe)
|
|
$ |
4.20 |
|
|
$ |
1.44 |
|
|
$ |
2.69 |
|
|
$ |
2.49 |
|
|
$ |
1.75 $2.25 |
|
Enterprise value/2005E daily production ($/Mcfe/d)
|
|
$ |
15,101 |
|
|
$ |
6,577 |
|
|
$ |
9,994 |
|
|
$ |
9,662 |
|
|
$ |
6,000 $7,000 |
|
Using the reference ranges described above, this analysis
indicated a range of implied enterprise values of Mission of
approximately $450 million to $520 million and implied
prices per share of Mission common stock of approximately $6.27
to $7.82 (based upon 45.5 million diluted shares
outstanding and $164.0 million of net debt), compared to
the implied value of the consideration to be received in the
merger of $8.60, based upon the closing price per share of
Petrohawk common stock on April 1, 2005 of $11.53.
Comparable Acquisition Analysis. Using publicly available
information, Merrill Lynch examined the following fifteen
selected transactions in the oil and gas exploration and
production industry. The transactions considered and the date
each transaction was announced were as follows:
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|
|
|
|
|
|
Date | |
Buyer/Seller |
|
Announced | |
|
|
| |
Forest Oil Corporation/ Undisclosed Private Company
|
|
|
2/28/05 |
|
Cimarex Energy Co./ Magnum Hunter Resources, Inc.
|
|
|
1/26/05 |
|
XTO Energy Incorporated/ Antero Resources Corporation
|
|
|
1/11/05 |
|
Chesapeake Energy Corporation/ BRG Petroleum Corporation
|
|
|
12/27/04 |
|
Noble Energy, Inc./ Patina Oil & Gas Corporation
|
|
|
12/16/04 |
|
Newfield Exploration Company/ Inland Resources Inc.
|
|
|
8/6/04 |
|
Affiliate of Carlyle/ Riverstone Global Energy and Power
Fund II, L.P./ Belden & Blake Corporation
|
|
|
6/17/04 |
|
Petro-Canada/ Prima Energy Corporation
|
|
|
6/9/04 |
|
Forest Oil Corporation/ The Wiser Oil Company
|
|
|
5/23/04 |
|
Pioneer Natural Resources Company/ Evergreen Resources,
Inc.
|
|
|
5/4/04 |
|
EnCana Corporation/ Tom Brown, Inc.
|
|
|
4/15/04 |
|
Kerr-McGee/ Westport Resources Corporation
|
|
|
4/7/04 |
|
Plains Exploration & Production Company/ Nuevo Energy
Company
|
|
|
2/12/04 |
|
Devon Energy Corporation/ Ocean Energy, Inc.
|
|
|
2/24/03 |
|
Plains Exploration & Production Company/3TEC Energy
Corporation
|
|
|
2/3/03 |
|
Merrill Lynch reviewed:
|
|
|
|
|
the ratio of the transaction value to latest-twelve-month
earnings before interest, taxes, depreciation and amortization,
which is referred to below as Transaction Value/ LTM
EBITDA; |
|
|
|
the ratio of the transaction value to the quantity of estimated
proven reserves on a dollars per thousand cubic feet equivalent
(assuming a conversion ratio of six thousand cubic feet of
natural gas to one barrel of oil), which is referred to below as
Transaction Value/ Reserves ($/Mcfe); |
|
|
|
the ratio of the transaction value to net daily production on a
dollars per thousand cubic feet equivalent per day (assuming a
conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil), which is referred to below as
Transaction Value/ Production ($/Mcfe/d); |
54
The analysis indicated the following:
Mission Comparable Transaction Analysis
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|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
Benchmark |
|
High | |
|
Low | |
|
Median | |
|
Mean | |
|
Mean | |
|
Mean | |
|
Mean | |
|
Reference Range | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Transaction Value/ LTM EBITDA
|
|
|
13.6 |
x |
|
|
5.0 |
x |
|
|
8.0 |
x |
|
|
7.4 |
x |
|
|
8.1 |
x |
|
|
7.2 |
x |
|
|
7.8 |
x |
|
|
6.5x 7.5x |
|
Transaction Value/ Reserves ($/Mcfe)
|
|
$ |
3.64 |
|
|
$ |
0.76 |
|
|
$ |
1.64 |
|
|
$ |
1.77 |
|
|
$ |
1.99 |
|
|
$ |
1.77 |
|
|
$ |
1.47 |
|
|
$ |
2.00 $2.50 |
|
Transaction Value/ Production ($/Mcfe/d)
|
|
$ |
12,838 |
|
|
$ |
3,119 |
|
|
$ |
7,433 |
|
|
$ |
7,408 |
|
|
$ |
7,875 |
|
|
$ |
7,710 |
|
|
$ |
5,350 |
|
|
$ |
8,000 $8,500 |
|
This analysis indicated a range of implied enterprise values of
Mission of approximately $485 million to $560 million,
and implied prices per share of Mission common stock of
approximately $7.08 to $8.70 (based upon 45.5 million
diluted shares outstanding and $164.0 million of net debt),
compared to the implied value of the consideration to be
received in the merger of $8.60, based upon the closing price
per share of Petrohawk common stock on April 1, 2005 of
$11.53.
Merger Premium Analysis. Merrill Lynch reviewed the
premiums paid in the following ten cash component business
combinations in the oil and gas exploration and production
industry. The transactions considered, including the date each
transaction was announced, were as follows:
|
|
|
|
|
|
|
Date | |
Buyer/Seller |
|
Announced | |
|
|
| |
Noble Energy Inc./ Patina Oil & Gas Corp.
|
|
|
12/16/04 |
|
Petro-Canada/ Prima Energy Corporation
|
|
|
6/9/04 |
|
Forest Oil Corporation/ Wiser Oil Company
|
|
|
5/23/04 |
|
Pioneer Natural Resources/ Evergreen Resources
|
|
|
5/4/04 |
|
EnCana Corp./ Tom Brown, Inc.
|
|
|
4/15/04 |
|
Hawker Resources, Inc./ Southward Energy Ltd.
|
|
|
3/17/03 |
|
Cerberus Capital Management, L.P./ Exco Resources Inc.
|
|
|
3/12/03 |
|
Plains Exploration & Production Company/3TEC Energy
Corporation
|
|
|
2/3/03 |
|
Canadian Natural/ Rio Alto Exploration
|
|
|
5/13/02 |
|
Paramount Resources/ Summit Resources
|
|
|
5/12/02 |
|
For each transaction listed above, Merrill Lynch calculated the
premium represented by the offer price over the target
companys share price for the one day period prior to the
transactions announcement and the target companys
average share price for the ten day and thirty day periods prior
to the transactions announcement. This analysis indicated
the following:
Mission Merger Premium Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Period (Prior to |
|
|
|
|
|
|
|
|
Transaction Announcement) |
|
High Premium | |
|
Low Premium | |
|
Mean Premium | |
|
Median Premium | |
|
|
| |
|
| |
|
| |
|
| |
One day
|
|
|
32.2 |
% |
|
|
(4.0 |
)% |
|
|
14.5 |
% |
|
|
18.7 |
% |
10 days
|
|
|
31.7 |
% |
|
|
(3.5 |
)% |
|
|
15.3 |
% |
|
|
18.8 |
% |
30 days
|
|
|
37.4 |
% |
|
|
5.9 |
% |
|
|
17.9 |
% |
|
|
17.5 |
% |
Merrill Lynch used the mean historical premium and the closing
price per share of Mission common stock for the corresponding
periods prior to the announcement of the merger, and adjusted
the low end of the implied value per share downward to reflect
no premium to the closing price per share of Mission common
stock one day prior to the announcement of the merger to take
into account the fact that certain recent cash component mergers
had been announced with no premium, or a discount, to the one
day prior closing price. This analysis indicated a range of
implied prices per share of Mission common stock of
55
approximately $7.22 to $8.41, compared to the implied value of
the consideration to be received in the merger of $8.60, based
upon the closing price per share of Petrohawk common stock on
April 1, 2005 of $11.53.
Discounted Cash Flow Analysis. Merrill Lynch performed a
discounted cash flow analysis for Mission to estimate the net
asset value of Mission common stock. Merrill Lynch evaluated two
scenarios: (1) Strip Pricing and (2) Strip/ Flat
Pricing. The principal variable in the scenarios were assumed
oil and natural gas prices. The Strip Pricing scenario is based
on the forward strip through 2010 as of April 1, 2005 and
held at the 2010 strip thereafter. The Strip/ Flat Pricing
scenario is based on the forward strip through 2007 as of
April 1, 2005 and $35.00/ Bbl oil and $5.00/ Mcf natural
gas thereafter. Using financial forecasts provided by Mission
management, Merrill Lynch discounted the projected after-tax
cash flows from Mission at rates ranging from 8% to 10%, and
applied a risk weighting to the proved reserves and probable
reserves that it deemed appropriate based upon its judgment.
This analysis indicated a range of implied net asset values of
Mission of approximately $200 million to $345 million
and implied values per share of Mission common stock of
approximately $4.39 to $7.59 (based upon 45.5 million
diluted shares outstanding and $164.0 million of net debt),
compared to the implied value of the consideration to be
received in the merger of $8.60, based upon the closing price
per share of Petrohawk common stock on April 1, 2005 of
$11.53.
Historical Stock Performance. Merrill Lynch reviewed
historical trading prices for Mission common stock. This review
indicated that during the one year period ending April 1,
2005, the Mission common stock traded as low as $3.08 per
share and as high as $7.98 per share, compared to the
implied value of the consideration to be received in the merger
of $8.60, based upon the closing price per share of Petrohawk
common stock on April 1, 2005 of $11.53.
Analysis of Petrohawk
Comparable Public Companies Analysis. Using publicly
available information, Merrill Lynch compared certain financial
and operating information and ratios for Petrohawk with
corresponding financial and operating information and ratios for
the independent oil and gas exploration and production companies
listed above under Analysis of Mission
Comparable Public Companies Analysis. Merrill Lynch
reviewed:
|
|
|
|
|
the ratio of the equity value to projected 2005 discretionary
cash flow per share, which is referred to below as Equity
value/2005E CFPS; |
|
|
|
the ratio of the enterprise value to projected 2005 earnings
before interest, taxes, depreciation and amortization, which is
referred to below as Enterprise value/2005E EBITDA; |
|
|
|
the ratio of the enterprise value to the year end 2004 quantity
of estimated proved reserves (adjusted as applicable) on a
dollars per thousand cubic feet equivalent (assuming a
conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil), which is referred to below as
Enterprise value/proven reserves ($/Mcfe); and |
|
|
|
the ratio of the enterprise value to recently disclosed
projected 2005 net daily production on a dollars per
thousand cubic feet equivalent per day (assuming a conversion
ratio of six thousand cubic feet of natural gas to one barrel of
oil), which is referred to below as Enterprise value/2005E
daily production ($/Mcfe/d). |
56
This analysis indicated the following:
Petrohawk Comparable Public Companies Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark |
|
High | |
|
Low | |
|
Mean | |
|
Median | |
|
Reference Range | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Equity value/2005E CFPS
|
|
|
9.5 |
x |
|
|
4.0 |
x |
|
|
5.7 |
x |
|
|
5.0 |
x |
|
|
4.5x 5.5x |
|
Enterprise value/2005E EBITDA
|
|
|
9.1 |
x |
|
|
4.7 |
x |
|
|
6.2 |
x |
|
|
6.0 |
x |
|
|
5.5x 6.5x |
|
Enterprise value/proved reserves ($/Mcfe)
|
|
$ |
4.20 |
|
|
$ |
1.44 |
|
|
$ |
2.69 |
|
|
$ |
2.49 |
|
|
$ |
2.75 $3.25 |
|
Enterprise value/2005E daily production ($/Mcfe/d)
|
|
$ |
15,101 |
|
|
$ |
6,577 |
|
|
$ |
9,994 |
|
|
$ |
9,662 |
|
|
$ |
9,000 $10,000 |
|
Using the reference ranges described above, this analysis
indicated a range of implied enterprise values of Petrohawk of
approximately $615 million to $710 million, and
implied prices per share of Petrohawk common stock of
approximately $7.92 to $9.75 (based upon 52.3 million
diluted shares outstanding and $199.8 million of net debt),
compared to the closing price per share of Petrohawk common
stock on April 1, 2005 of $11.53.
Discounted Cash Flow Analysis. Merrill Lynch performed a
discounted cash flow analysis for Petrohawk to estimate the net
asset value of Petrohawk common stock. Merrill Lynch evaluated
two scenarios: (1) Strip Pricing and (2) Strip/ Flat
Pricing. The principal variable in the scenarios were assumed
oil and natural gas prices. The Strip Pricing scenario is based
on the forward strip through 2010 as of April 1, 2005 and
held at the 2010 strip thereafter. The Strip/ Flat Pricing
scenario is based on the forward strip through 2007 as of
April 1, 2005 and $35.00/ Bbl oil and $5.00/ Mcf natural
gas thereafter. Using financial forecasts provided by Petrohawk
management, Merrill Lynch discounted the projected after-tax
cash flows from Petrohawk at rates ranging from 8% to 10%, and
applied a risk weighting for proved, probable and possible
reserves that it deemed appropriate based upon its judgment.
This analysis indicated a range of implied net asset values of
Petrohawk of $380 million to $565 million, and implied
values per share of Petrohawk common stock of approximately
$7.24 to $10.80 (based upon 52.3 million diluted shares
outstanding and $199.8 million of net debt), compared to
the closing price per share of Petrohawk common stock on
April 1, 2005 of $11.53.
Historical Stock Performance. Merrill Lynch reviewed
historical trading prices for Petrohawk common stock. This
review indicated that during the one year period ending
April 1, 2005, the Petrohawk common stock traded as low as
$5.50 per share and as high as $11.94 per share,
compared to the closing price per share of Petrohawk common
stock on April 1, 2005 of $11.53.
Exchange Ratio Analysis. Merrill Lynch used the implied
share prices from its Comparable Companies Analysis and
Discounted Cash Flow Analysis, for both Mission and Petrohawk,
in order to calculate a range of implied exchange ratios. The
range of implied exchange ratios was calculated by dividing the
implied low share price of Mission by the implied high share
price of Petrohawk for each of the analyses, and by dividing the
implied high share price of Mission by the implied low share
price of Petrohawk for each of the analyses. The calculated
exchange ratios were then multiplied by 62.1%, representing the
implied equity percentage of aggregate consideration pursuant to
the merger agreement based on the closing price per share of
Petrohawk common stock on April 1, 2005 of $11.53. Each
range of implied exchange ratios was compared to 0.4631, the
exchange ratio specified in the merger agreement for calculating
the value of the equity component of the merger consideration.
For each methodology, the equity component exchange ratio of
0.4631 was above the low end of the range.
Pro Forma Analysis. Merrill Lynch analyzed the pro forma
effect of the merger and estimated the resulting
accretion/dilution to the combined companys projected
per-share earnings and discretionary cash flow during 2005 and
2006.
This analysis indicated that, based on Mission and Petrohawk
IBES consensus estimates (without giving effect to any projected
synergies), the merger would be slightly dilutive to projected
earnings per share in 2005 and 2006 for the combined company as
compared to the same estimates for Petrohawk on a
57
stand-alone basis, and accretive to projected discretionary cash
flow per share for the combined company in 2005 and 2006, as
compared to the same estimates for Petrohawk on a stand-alone
basis.
The summary set forth above summarizes the material analyses
performed by Merrill Lynch but does not purport to be a complete
description of the analyses performed by Merrill Lynch in
arriving at its opinion. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to
partial or summary description. Accordingly, Merrill Lynch
believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors
considered by Merrill Lynch, without considering all analyses
and factors, could create an incomplete view of the processes
underlying the Merrill Lynch opinion. Merrill Lynch did not
assign relative weights to any of its analyses in preparing its
opinion. The matters considered by Merrill Lynch in its analyses
were based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond Missions and Merrill Lynchs control
and involve the application of complex methodologies and
educated judgments. In addition, no company utilized as a
comparison in the analyses described above is identical to
Mission or Petrohawk, and none of the transactions utilized as a
comparison is identical to the merger.
Missions board of directors selected Merrill Lynch to
deliver its opinion because of Merrill Lynchs reputation
as an internationally recognized investment banking firm with
substantial experience in transactions similar to the merger and
because Merrill Lynch is familiar with Mission and its business.
As part of Merrill Lynchs investment banking business,
Merrill Lynch is continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings,
secondary distributions of listed and unlisted securities and
private placements.
Pursuant to the terms of the engagement letter dated
March 22, 2005 between Merrill Lynch and Mission, Mission
was required to pay and has paid Merrill Lynch a fee of
$1.0 million upon the delivery of Merrill Lynchs
fairness opinion dated April 3, 2005. In addition, Mission
agreed to indemnify Merrill Lynch for certain liabilities
arising out of its engagement and to reimburse Merrill Lynch for
certain expenses incurred in connection with this engagement,
including the reasonable fees and disbursements of counsel,
regardless of whether or not the merger is consummated. Merrill
Lynch has, in the past, provided financial advisory services to
Mission. Merrill Lynch may continue to provide services for
Mission and Petrohawk and may receive fees for the rendering of
such services. In addition, in the ordinary course of business,
Merrill Lynch may actively trade the Mission common stock and
other securities of Mission, as well as the common stock of
Petrohawk and other securities of Petrohawk, for its own account
and for the accounts of its customers and, accordingly, Merrill
Lynch may at any time hold a long or short position in such
securities.
Merger Consideration
The merger agreement provides that at the effective time of the
merger each share of Mission common stock issued and outstanding
immediately prior to the effective time will be converted into
the right to receive either a number of shares of Petrohawk
common stock or an amount of cash, in each case as described
below. Mission stockholders will have the right to elect to
receive either cash or Petrohawk common stock with respect to
each share of Mission common stock they hold, such that each
Mission stockholder may elect to receive his or her merger
consideration entirely in cash, entirely in Petrohawk common
stock or in a combination of cash and Petrohawk common stock,
subject in each case to the allocation procedures described
below. See Conversion of Shares; Exchange of
Certificates; Elections as to Form of Consideration;
Allocations Election Procedure and
Allocation. In our discussion we refer
to the number of shares of Petrohawk common stock to be received
for each share of Mission common stock being converted into
Petrohawk stock as the per share stock
consideration, and we refer to the amount of cash to be
received for each share of Mission common stock being converted
into cash as the per share cash consideration.
In the merger, Petrohawk will issue approximately
19.234 million shares of common stock and will pay
approximately $135.4 million in cash (based on the
outstanding shares of Mission common stock on
58
March 31, 2005 and in each case subject to upward
adjustment, up to approximately 1.8 million shares of
common stock and $12.7 million in cash, in the event that
any additional shares of Mission common stock are issued in
accordance with the merger agreement pursuant to the exercise of
Mission stock options or otherwise). The actual per share stock
consideration and per share cash consideration to be paid to
Mission stockholders cannot be determined until after the
effective time of the merger. We intend to announce these
amounts when known.
Subject to the allocation procedures described below, the cash
consideration to be paid for each share of Mission common stock
in respect of which a cash election is made will be equal to the
amount obtained by dividing the aggregate
consideration by the total common stock
amount. In our discussion we also refer to that amount as
the per share consideration.
|
|
|
|
|
The aggregate consideration is the dollar amount of
the sum of: |
|
|
|
the product of (1) the aggregate number of shares of
Petrohawk common stock that Petrohawk will issue pursuant to the
merger (which is the product of 0.7718 and 60% of the
total common stock amount) and (2) the
Average Petrohawk Common Stock Value (referred to in
the merger agreement as the final parent stock
price), and |
|
|
|
the aggregate amount of cash Petrohawk will pay pursuant to the
merger (which is the product of (1) 40% of the total common
stock amount and (2) $8.15). We refer to this aggregate
amount of cash as the total cash amount. |
|
|
|
The Average Petrohawk Common Stock Value is the
volume-weighted average of the closing prices per share of
Petrohawk common stock as reported on the Nasdaq National Market
during the ten consecutive trading day period during which the
shares of Petrohawk common stock are traded on the Nasdaq
National Market ending on the third calendar day immediately
prior to the effective time of the merger (or, if such calendar
day is not a trading day, ending on the trading day immediately
preceding such calendar day). We refer to this ten consecutive
trading day period as the valuation period. |
|
|
|
The total common stock amount is the total number of
shares of Mission common stock outstanding immediately prior to
the effective time of the merger; provided that, for purposes of
determining the aggregate consideration, the total common stock
amount will not exceed the sum of 41,535,088 (the number of
shares of Mission common stock outstanding on March 31,
2005) and 5,832,715 (the number of shares of Mission common
stock permitted to be issued by Mission prior to the merger
pursuant to existing stock options under the terms of the merger
agreement). |
Subject to the allocation procedure described below, the
consideration to be paid for each share of Mission common stock
in respect of which a stock election is made will be the number
of shares of Petrohawk common stock equal to the exchange
ratio, which is the number obtained by dividing the per
share consideration by the Average Petrohawk Common Stock Value.
The formula described above is designed to substantially
equalize the value of the consideration to be received for each
share of Mission common stock in the merger at the time the
calculation is made, regardless of whether a Mission stockholder
elects to receive cash, Petrohawk common stock, or a combination
of cash and Petrohawk common stock. This equalization mechanism
was deemed to be desirable because the value of the Petrohawk
common stock will fluctuate. The value of the merger
consideration to be received with respect to each share of
Mission common stock will be equal to $3.26 plus approximately
$0.4631 per $1.00 of Average Petrohawk Common Stock Value.
In order to ensure that the value of the consideration for each
share of Mission common stock is as equal as possible upon
receipt by Mission stockholders, regardless of the form of the
consideration, the equalization mechanism is to be applied based
on the Average Petrohawk Common Stock Value. The formula is also
designed to fix the total number of shares of Petrohawk common
stock and the amount of cash to be issued and paid,
respectively, in the merger (in each case subject to upward
adjustment, up to approximately 1.8 million shares of
common stock and $12.7 million in cash, in the event that
any shares
59
of Mission common stock are issued in accordance with the merger
agreement pursuant to the exercise of Mission stock options or
otherwise). Because the amount of cash and the number of shares
of Petrohawk common stock to be paid and issued, respectively,
in the merger are fixed at approximately $135.4 million and
19.234 million shares, respectively, the percentage of
shares of Mission common stock that will be exchanged for
Petrohawk common stock and the percentage that will be exchanged
for cash will depend upon the Average Petrohawk Common Stock
Value. The greater the Average Petrohawk Common Stock Value, the
greater the percentage of shares of Mission common stock that
will be exchanged for shares of Petrohawk common stock and the
lesser the Average Petrohawk Common Stock Value, the greater the
percentage of shares of Mission common stock that will be
exchanged for cash.
For example, if the Average Petrohawk Common Stock Value is
$11.00, a Mission stockholder receiving stock would receive
0.7594 shares of Petrohawk common stock per share of
Mission common stock having a value, based on such Average
Petrohawk Common Stock Value, of $8.35 per share, and a
Mission stockholder receiving cash would receive $8.35 in cash
per share of Mission common stock, subject in each case to the
allocation procedures described below. Based on that Average
Petrohawk Common Stock Value, approximately 39% of the
outstanding shares of Mission common stock would be exchanged
for cash, and approximately 61% would be exchanged for Petrohawk
common stock.
The greater the Average Petrohawk Common Stock Value, the lesser
the number of shares of Mission common stock that will be
exchanged for cash and the greater the number of shares that
will be exchanged for Petrohawk common stock. For example, if
the Average Petrohawk Common Stock Value is $12.00, then
approximately 37% of the outstanding shares of Mission common
stock would be exchanged for cash, and approximately 63% would
be exchanged for Petrohawk common stock. Based on an Average
Petrohawk Common Stock Value of $12.00, a Mission stockholder
receiving stock would receive 0.7341 shares of Petrohawk
common stock per share of Mission common stock having a value,
based on such Average Petrohawk Common Stock Value, of
$8.81 per share, and a Mission stockholder receiving cash
would receive $8.81 in cash per share of Mission common stock,
subject in each case to the allocation procedures described
below.
Conversely, the lesser the Average Petrohawk Common Stock Value
the greater the number of shares of Mission common stock that
will be exchanged for cash and the lesser the number of shares
that will be exchanged for Petrohawk common stock. For example,
if the Average Petrohawk Common Stock Value is $9.00, then
approximately 44% of the outstanding shares of Mission common
stock would be exchanged for cash, and approximately 56% would
be exchanged for Petrohawk common stock. Based on an Average
Petrohawk Common Stock Value of $9.00, a Mission stockholder
receiving stock would receive 0.8255 shares of Petrohawk
common stock per share of Mission common stock having a value,
based on such Average Petrohawk Common Stock Value, of
$7.43 per share, and a Mission stockholder receiving cash
would receive $7.43 in cash per share of Mission common stock,
subject in each case to the allocation procedures described
below.
60
The following table sets forth, based on various hypothetical
Average Petrohawk Common Stock Values, the per share cash
consideration and the per share stock consideration, as well as
the value of such stock consideration based on the hypothetical
Average Petrohawk Common Stock Values. The table also shows the
percentage of outstanding shares of Mission common stock that
would be converted into Petrohawk common stock and cash based on
such Average Petrohawk Common Stock Value. The table is based on
the assumption that no Mission options have been exercised
following the date of this joint proxy statement/ prospectus and
prior to the closing of the merger, that no additional shares of
Mission common stock are otherwise issued following the date of
this joint proxy statement, and that the number of exchangeable
shares is 41,535,088 (the number of shares of Mission common
stock outstanding on April 1, 2005). To the extent that the
number of shares of Mission common stock outstanding increases
in accordance with the merger agreement (whether as a result of
the exercise of Mission options or otherwise), the number of
exchangeable shares will increase and the aggregate transaction
value will increase, but there will be no change in the per
share stock consideration or per share cash consideration. Each
additional exchangeable share of Mission common stock will
increase the aggregate transaction value by 0.4631 shares
of Petrohawk common stock and $3.26 in cash.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share | |
|
|
|
|
|
|
|
|
|
|
Stock | |
|
|
|
|
|
Percentage of Outstanding | |
|
|
|
|
Consideration | |
|
|
|
|
|
Shares of Mission | |
Average |
|
|
|
(Shares of | |
|
|
|
|
|
Common Stock to Receive: | |
Petrohawk |
|
|
|
Petrohawk | |
|
Value of Per | |
|
Per Share | |
|
| |
Common |
|
Transaction | |
|
Common | |
|
Share Stock | |
|
Cash | |
|
Stock | |
|
Cash | |
Stock Value |
|
Value | |
|
Stock) | |
|
Consideration | |
|
Consideration | |
|
Consideration | |
|
Consideration | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$13.50
|
|
$ |
395,064,312 |
|
|
|
0.7046 |
|
|
$ |
9.5121 |
|
|
$ |
9.5116 |
|
|
|
65.73 |
% |
|
|
34.27 |
% |
13.25
|
|
|
390,255,795 |
|
|
|
0.7091 |
|
|
|
9.3956 |
|
|
|
9.3958 |
|
|
|
65.30 |
|
|
|
34.70 |
|
13.00
|
|
|
385,447,278 |
|
|
|
0.7138 |
|
|
|
9.2794 |
|
|
|
9.2800 |
|
|
|
64.87 |
|
|
|
35.13 |
|
12.75
|
|
|
380,638,761 |
|
|
|
0.7188 |
|
|
|
9.1647 |
|
|
|
9.1643 |
|
|
|
64.43 |
|
|
|
35.57 |
|
12.50
|
|
|
375,830,244 |
|
|
|
0.7239 |
|
|
|
9.0488 |
|
|
|
9.0485 |
|
|
|
63.97 |
|
|
|
36.03 |
|
12.25
|
|
|
371,021,727 |
|
|
|
0.7292 |
|
|
|
8.9327 |
|
|
|
8.9327 |
|
|
|
63.50 |
|
|
|
36.50 |
|
12.00
|
|
|
366,213,209 |
|
|
|
0.7347 |
|
|
|
8.8164 |
|
|
|
8.8170 |
|
|
|
63.03 |
|
|
|
36.97 |
|
11.75
|
|
|
361,404,692 |
|
|
|
0.7405 |
|
|
|
8.7009 |
|
|
|
8.7012 |
|
|
|
62.53 |
|
|
|
37.47 |
|
11.50
|
|
|
356,596,175 |
|
|
|
0.7466 |
|
|
|
8.5859 |
|
|
|
8.5854 |
|
|
|
62.03 |
|
|
|
37.97 |
|
11.25
|
|
|
351,787,658 |
|
|
|
0.7529 |
|
|
|
8.4701 |
|
|
|
8.4696 |
|
|
|
61.51 |
|
|
|
38.49 |
|
11.00
|
|
|
346,979,141 |
|
|
|
0.7594 |
|
|
|
8.3534 |
|
|
|
8.3539 |
|
|
|
60.98 |
|
|
|
39.02 |
|
10.75
|
|
|
342,170,624 |
|
|
|
0.7663 |
|
|
|
8.2377 |
|
|
|
8.2381 |
|
|
|
60.43 |
|
|
|
39.57 |
|
10.50
|
|
|
337,362,107 |
|
|
|
0.7736 |
|
|
|
8.1228 |
|
|
|
8.1223 |
|
|
|
59.86 |
|
|
|
40.14 |
|
10.25
|
|
|
332,553,590 |
|
|
|
0.7811 |
|
|
|
8.0063 |
|
|
|
8.0066 |
|
|
|
59.28 |
|
|
|
40.72 |
|
10.00
|
|
|
327,745,072 |
|
|
|
0.7891 |
|
|
|
7.8910 |
|
|
|
7.8908 |
|
|
|
58.69 |
|
|
|
41.31 |
|
|
9.75
|
|
|
322,936,555 |
|
|
|
0.7974 |
|
|
|
7.7747 |
|
|
|
7.7750 |
|
|
|
58.07 |
|
|
|
41.93 |
|
|
9.50
|
|
|
318,128,038 |
|
|
|
0.8062 |
|
|
|
7.6589 |
|
|
|
7.6593 |
|
|
|
57.44 |
|
|
|
42.56 |
|
|
9.25
|
|
|
313,319,521 |
|
|
|
0.8155 |
|
|
|
7.5434 |
|
|
|
7.5435 |
|
|
|
56.78 |
|
|
|
43.22 |
|
|
9.00
|
|
|
308,511,004 |
|
|
|
0.8253 |
|
|
|
7.4277 |
|
|
|
7.4277 |
|
|
|
56.11 |
|
|
|
43.89 |
|
|
8.75
|
|
|
303,702,487 |
|
|
|
0.8357 |
|
|
|
7.3124 |
|
|
|
7.3119 |
|
|
|
55.42 |
|
|
|
44.58 |
|
|
8.50
|
|
|
298,893,970 |
|
|
|
0.8466 |
|
|
|
7.1961 |
|
|
|
7.1962 |
|
|
|
54.70 |
|
|
|
45.30 |
|
|
8.25
|
|
|
294,085,452 |
|
|
|
0.8582 |
|
|
|
7.0802 |
|
|
|
7.0804 |
|
|
|
53.96 |
|
|
|
46.04 |
|
|
8.00
|
|
|
289,276,935 |
|
|
|
0.8706 |
|
|
|
6.9648 |
|
|
|
6.9646 |
|
|
|
53.19 |
|
|
|
46.81 |
|
Assuming an Average Petrohawk Common Stock Value of $11.53,
which was the closing price of Petrohawk common stock on
April 1, 2005, the last trading day prior to the
announcement of the proposed merger, the merger consideration
would have a value of approximately $8.60 per share of
Mission common stock. Assuming an Average Petrohawk Common Stock
Value of
$ which
was the closing price of Petrohawk common stock
on ,
2005, the last business day prior to the date of this document,
the
61
merger consideration would have a value of approximately
$ per
share of Mission common stock. Assuming an Average Petrohawk
Common Stock Value of
$ based
on the volume-weighted average of the closing prices per share
of Petrohawk common stock during the ten consecutive trading
days ended three calendar days prior to the date of mailing of
this joint proxy statement/ prospectus, the merger consideration
would have a value of approximately
$ per
share of Mission common stock.
The actual value of the cash consideration or number of shares
of Petrohawk common stock that you will receive for each share
of Mission common stock you hold may differ from the
hypothetical amounts shown in this example because the actual
amounts will be determined after the effective time of the
merger based on a formula set forth in the merger agreement and
described in this document.
No assurance can be given that the current fair market value of
Petrohawk common stock will be equivalent to the fair market
value of Petrohawk common stock on the date that the merger
consideration is received by a Mission stockholder or at any
other time. The actual fair market value of the Petrohawk common
stock received by Mission stockholders depends upon the fair
market value of Petrohawk common stock upon receipt, which may
be higher or lower than the Average Petrohawk Common Stock Value
or the market price of Petrohawk common stock on the date the
merger was announced, on the date that this document is mailed
to Missions stockholders, on the date a Mission
stockholder makes an election with respect to the merger
consideration or on the date of the special meeting of Mission
stockholders.
If, between the date of the merger agreement and the effective
time, the shares of Petrohawk common stock are changed into a
different number or class of shares by reason of
reclassification, split-up, combination, exchange of shares or
similar readjustment, or a stock dividend is declared with a
record date within that period, appropriate adjustments will be
made to the per share cash consideration and the per share stock
consideration.
No fractional shares of Petrohawk common stock will be issued to
any holder of Mission common stock in connection with the
merger. For each fractional share that would otherwise be
issued, Petrohawk will pay cash in an amount equal to the
fraction multiplied by the average of the closing sale prices of
Petrohawk common stock on the Nasdaq National Market for the
five trading days immediately preceding the date on which the
merger occurs. No interest will be paid or accrued on cash
payable in lieu of fractional shares of Petrohawk common stock.
Conversion of Shares; Exchange of Certificates; Elections as
to Form of Consideration; Allocations
The conversion of Mission common stock into the right to receive
the merger consideration will occur automatically at the
effective time of the merger. As soon as reasonably practicable
after the effective time of the merger, American Stock
Transfer & Trust Company, as exchange agent, will
exchange certificates formerly representing shares of Mission
common stock for merger consideration to be received in the
merger pursuant to the terms of the merger agreement.
Subject to the allocation mechanism described below, each
Mission stockholder may elect to receive with respect to his or
her shares of Mission common stock, all cash, all Petrohawk
common stock or a combination of cash and Petrohawk common stock.
Cash Election Shares. Stockholders who elect to receive
cash for some or all of their shares will receive the per share
cash consideration in respect of that portion of such
holders shares of Mission common stock equal to such
holders cash election, subject to the allocation mechanism
described below. In our discussion we refer to the shares for
which cash elections have been made as cash election
shares.
Stock Election Shares. Stockholders who elect to receive
Petrohawk common stock for some or all of their shares will
receive the per share stock consideration in respect of that
portion of such holders shares of Mission common stock
equal to such holders stock election, subject to the
allocation mechanism
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described below. In our discussion we refer to the shares for
which stock elections have been made as stock election
shares.
No Election Shares. Stockholders who indicate that they
have no preference as to whether they receive cash or Petrohawk
common stock, and stockholders who do not make a valid election,
will be deemed to have made no election.
Stockholders who are deemed to have made no election will
receive the per share stock consideration unless there is an
oversubscription of the stock consideration, in which case they
may receive the per share cash consideration for some or all
their shares of Mission common stock. In our discussion we refer
to the shares held by stockholders who have made no election as
no election shares. See
Allocation beginning on page 64 of
this document.
For example, assuming a Mission stockholder holds
100 shares of Mission stock (and that the Average Petrohawk
Common Stock Value is $11.00), if such stockholder made:
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an all cash election, he or she would receive
approximately $835 in cash; |
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an all stock election, he or she would receive
75 shares of Petrohawk common stock (and cash in lieu of
fractional shares); and |
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an election for a combination of cash and stock, he or
she would receive approximately $8.35 for each cash election
share and approximately 0.7594 shares of Petrohawk common
stock for each stock election share. Assuming 50 cash election
shares and 50 stock election shares, the Mission stockholder
would receive approximately $417.50 in cash, 37 shares of
Petrohawk common stock and cash in lieu of fractional shares. |
The actual allocation of cash and stock would be subject in each
case to the allocation procedures described under the heading
Allocation beginning on page 64 of
this document.
A fixed total number of shares of Petrohawk common stock will
be issued and a fixed total amount of cash paid in the merger.
Accordingly, there is no assurance that a holder of Mission
common stock will receive the form of consideration that the
holder elects with respect to any or all shares of Mission
common stock held by that holder. If the elections result in an
oversubscription with respect to shares of Mission common stock
which would otherwise receive either the per share stock
consideration or the per share cash consideration, the
procedures for allocating Petrohawk common stock and cash
described below under Allocation will be
followed by the exchange agent.
Election Form. Together with this joint proxy statement/
prospectus, each Mission stockholder received an election form
and other appropriate and customary transmittal materials. Each
election form allows the holder to specify (1) the number
of shares with respect to which the holder elects to receive the
per share stock consideration, (2) the number of shares
with respect to which the holder elects to receive the per share
cash consideration or (3) that the holder makes no
election. Petrohawk will also make available forms of election
to persons who become holders of Mission common stock subsequent
to the record date for the Mission special meeting up until the
close of business on the business day prior to the election
deadline.
Holders of Mission common stock who wish to elect the type of
merger consideration they will receive in the merger should
carefully review and follow the instructions set forth in the
election form. Shares of Mission common stock as to which the
holder has not made a valid election prior to the election
deadline, which is 5:00 p.m., Houston, Texas time,
on ,
2005, will be deemed no election shares.
To make an election, a holder of Mission common stock must
submit a properly completed election form so that it is actually
received by the exchange agent at or prior to the election
deadline in accordance with the instructions on the election
form. An election form will be properly completed only if
accompanied by certificates representing all shares of Mission
common stock covered by the election form (or appropriate
evidence as to the loss, theft or destruction of such
certificate, appropriate evidence as to the ownership of that
certificate by the claimant, and appropriate and customary
indemnification). If a stockholder cannot deliver his or her
stock certificates to the exchange agent by the election
deadline, a stockholder may deliver a notice of guaranteed
delivery promising to deliver his or her stock certificates,
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as described in the election form, so long as (1) the
guarantee of delivery is from a firm which is a member of a
registered national securities exchange or a commercial bank or
trust company having an office in the U.S. and (2) the
actual stock certificates are in fact delivered to the exchange
agent by the time set forth in the guarantee of delivery. If you
own shares of Mission common stock in street name by
your broker or other nominee and you wish to make an election,
you should seek instructions from the broker or other nominee
holding your shares concerning how to make your election.
An election may be revoked or changed by the person submitting
the election form prior to the election deadline. In the event
of a revocation of an election, the exchange agent will, upon
receiving a written request from the holder of Mission common
stock making a revocation, return the certificates of Mission
common stock submitted by that holder, and that holder will be
deemed to have made no election. The exchange agent will have
reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to
disregard immaterial defects in the election forms, and any good
faith decisions of the exchange agent regarding these matters
will be binding and conclusive.
Neither Petrohawk nor the exchange agent will be under any
obligation to notify any person of any defects in an election
form. If you instructed a broker to submit an election for
your shares, you must follow your brokers directions for
changing those instructions.
Shares of Mission common stock as to which the holder has not
made a valid election prior to the election deadline, including
as a result of revocation, will be deemed no election shares. If
it is determined that any purported cash election or stock
election was not properly made, the purported election will be
deemed to be of no force or effect and the holder making the
purported election will be deemed not to have made an election
for these purposes, unless a proper election is subsequently
made on a timely basis.
Soon after the effective time of the merger, the exchange agent
will send a letter of transmittal to each person who was a
Mission stockholder at the effective time of the merger who has
not previously and properly surrendered certificates
representing shares of Mission common stock to the exchange
agent. This mailing will contain instructions on how to
surrender certificates formerly representing shares of Mission
common stock (if these certificates have not already been
surrendered) in exchange for the merger consideration the holder
is entitled to receive under the merger agreement.
If certificates formerly representing shares of Mission common
stock are presented for transfer after the effective time of the
merger, they will be exchanged for the merger consideration into
which the shares of Mission common stock formerly represented by
that certificate shall have been converted.
If a certificate formerly representing shares of Mission common
stock has been lost, stolen or destroyed, the exchange agent
will issue the consideration properly payable under the merger
agreement upon receipt of appropriate evidence as to that loss,
theft or destruction, appropriate evidence as to the ownership
of that certificate by the claimant, and appropriate and
customary indemnification.
A fixed number of shares of Petrohawk common stock will be
issued and a fixed amount of cash paid in the merger in each
case subject to upward adjustment in the event that any shares
of Mission common stock are issued in accordance with the merger
agreement pursuant to Mission stock options or otherwise.
Accordingly, there is no assurance that you will receive the
form or combination of consideration that you elect with respect
to any or all shares of Mission common stock you hold. If the
elections of all of the Mission stockholders result in an
oversubscription of the pool of cash or Petrohawk common stock,
the exchange agent will allocate between cash and Petrohawk
common stock in the manner described below.
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Oversubscription of the Cash Consideration. If the
aggregate cash amount that would be paid upon the conversion in
the merger of the cash election shares is more than the total
cash amount, then:
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all stock election shares and no election shares will be
converted into the right to receive the per share stock
consideration; |
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the exchange agent will then select from among the cash election
shares, by a pro rata selection process, a sufficient number of
shares such that the aggregate cash amount that will be paid in
the merger equals as closely as practicable the total cash
amount; |
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all cash election shares selected by the exchange agent through
the pro rata selection process described above will be converted
into the right to receive the per share stock
consideration; and |
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the cash election shares that have not been selected by the
exchange agent to be converted into the per share stock
consideration will be converted into the right to receive the
per share cash consideration. |
Oversubscription of the Stock Consideration. If the
aggregate cash amount that would be paid upon the conversion in
the merger of the cash election shares is less than the total
cash amount, then:
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all cash election shares will be converted into the right to
receive the per share cash consideration; |
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the exchange agent will then select from among the non-electing
shares and then, if necessary, from among the stock election
shares, by a pro rata selection process, a sufficient number of
shares such that the aggregate cash amount that will be paid in
the merger equals as closely as practicable the total cash
amount; |
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all no election and stock election shares selected by the
exchange agent through the pro rata selection process described
above will be converted into the right to receive the per share
cash consideration; and |
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the stock election shares and any no election shares that have
not been selected by the exchange agent to be converted into the
per share cash consideration will be converted into the right to
receive the per share stock consideration. |
The allocation described above will be computed by the exchange
agent within 10 days after the election deadline, unless
the merger has not been completed, in which case the allocation
will be completed as soon as practicable after the effective
time of the merger. The exchange agent will use an equitable pro
rata allocation process to be mutually determined by Mission and
Petrohawk.
Because the U.S. federal income tax consequences of
receiving cash or Petrohawk common stock, or both cash and
Petrohawk common stock, will differ, Mission stockholders are
urged to read carefully the information set forth under the
heading Material U.S. Federal Income Tax
Consequences and to consult their tax advisors for a full
understanding of the mergers tax consequences to them. In
addition, because the stock consideration can fluctuate in value
from the determination made during the valuation period, the
economic value per share received by Mission stockholders who
receive the stock consideration may, as the date of receipt by
them, be more or less than the amount of cash consideration per
share received by Mission stockholders who receive cash
consideration.
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Dividends and Distributions |
Until you surrender your Mission stock certificates for
exchange, any dividends or other distributions declared after
the effective time with respect to Petrohawk common stock into
which any of your shares may have been converted will accrue,
but will not be paid. When you surrender your certificates,
Petrohawk will pay any unpaid dividends or other distributions,
without interest. After the effective time, there will be no
transfers on the stock transfer books of Mission of any shares
of Mission common stock.
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Each of Petrohawk, the surviving corporation and the exchange
agent will be entitled to deduct and withhold from the merger
consideration payable to any Mission stockholder the amounts it
is required to deduct and withhold under the Internal Revenue
Code or any state, local or foreign tax law. Withheld amounts
will be treated for all purposes of the merger as having been
paid to the stockholders from whom they were withheld.
Treatment of Stock Options
Pursuant to their terms and the Mission stock option plans, all
options to acquire Mission common stock that are outstanding
prior to the merger will automatically become vested and
exercisable at the effective time of the merger. Each
outstanding option to acquire Mission common stock granted under
Missions stock option plans that is outstanding and
unexercised immediately prior to the effective time of the
merger will be converted automatically at the effective time of
the merger into an option to purchase Petrohawk common stock and
will continue to be governed by the terms of the Mission stock
plan and related agreement under which it was granted, except
that:
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the number of shares of Petrohawk common stock subject to the
new Petrohawk stock option will be equal to the product of the
number of shares of Mission common stock subject to the Mission
stock option and the exchange ratio (determined as described
above under the heading Merger
Consideration), rounded up or down to the nearest whole
share; and |
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the exercise price per share of Petrohawk common stock subject
to the new Petrohawk stock option will be equal to the exercise
price per share of Mission common stock under the Mission stock
option divided by the exchange ratio, rounded up or down to the
nearest whole cent. |
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in any event, all options to acquire Mission common stock will
be adjusted in a manner that satisfies the requirements of
Section 424(a) of the Internal Revenue Code and the
regulations thereunder. If an option holder ceases to be a
director, officer, or employee, or consultant of the combined
company or any of its affiliates, such option shall remain
exercisable in accordance with the terms of Missions stock
option plans and employment agreements, if applicable.
Additionally, each option plan shall not be amended or modified
in a manner that would result in a termination of or have an
adverse effect on options previously granted or in a manner that
would result in any option becoming deferred compensation under
Section 409A of the Internal Revenue Code. |
Effective Time
The merger will be completed when we file a certificate of
merger with the Secretary of State of the State of Delaware.
Subject to satisfaction of the other conditions to the merger,
we anticipate that the closing of the merger will occur within
five business days after the approval of the merger by the
requisite votes of the Mission stockholders and the approval of
the issuance of shares of Petrohawk common stock by the
requisite vote of the Petrohawk stockholders. However, the
effective time of the merger could be delayed if there is a
delay in satisfying any conditions to the merger. There can be
no assurances as to whether, or when, Petrohawk and Mission will
obtain the required approvals or complete the merger. If the
merger is not completed on or before December 31, 2005,
either Petrohawk or Mission may terminate the merger agreement,
unless the failure to complete the merger by that date is due to
the failure of the party seeking to terminate the merger
agreement to fulfill any material obligations under the merger
agreement or a material breach of the merger agreement by such
party. See Conditions to the Completion of the
Merger immediately below.
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Conditions to the Completion of the Merger
The completion of the merger is subject to various conditions.
While it is anticipated that all of these conditions will be
satisfied, there can be no assurance as to whether or when all
of the conditions will be satisfied or, where permissible,
waived.
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Conditions to Each Partys Obligations |
Each partys obligation to complete the merger is subject
to the satisfaction or waiver of the following conditions:
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adoption and approval by Missions stockholders of the
merger agreement and the merger; |
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approval by Petrohawks stockholders of the issuance of
Petrohawk shares in the merger; |
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approval by the Nasdaq National Market of listing of the shares
of Petrohawk common stock to be issued in the merger, subject to
official notice of issuance; |
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other than the filing of the certificate of merger in accordance
with the DGCL, the receipt of all authorizations, consents and
approvals of all governmental entities required to be obtained
prior to consummation of the merger, except for such
authorizations, consents and approvals the failure of which to
be obtained individually or in the aggregate has not had, and
would not be reasonably likely to have or result in, a material
adverse effect on any party to the merger agreement; |
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effectiveness of the registration statement, of which this joint
proxy statement/ prospectus constitutes a part, and absence of
any stop order or proceedings for such purpose pending before or
threatened by the SEC; and |
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absence of any statute, rule, order, decree or regulation, and
of any action taken by any court or other governmental entity of
competent jurisdiction, which temporarily, preliminarily or
permanently restrains, precludes, enjoins or otherwise prohibits
the consummation of the merger or makes the merger illegal. |
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Additional Conditions to Missions Obligations |
The obligation of Mission to complete the merger is subject to
the satisfaction or waiver of the following conditions:
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accuracy of Petrohawks and Merger Subs
representations and warranties contained in the merger agreement
both at and as of the date of the merger agreement and at and as
of the closing date of the merger, as if made at and as of the
closing date of the merger (except to the extent expressly made
as of an earlier date, in which case as of such date), except
where, in the case of all representations and warranties except
those regarding Petrohawks capitalization, corporate power
and authority, tax matters, validity of the merger agreement and
SEC reports, the failure to be accurate individually or in the
aggregate has not had, and would not be reasonably likely to
have or result in, a material adverse effect on Petrohawk; |
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the performance in all material respects by Petrohawk and Merger
Sub of their respective obligations contained in the merger
agreement; |
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absence of any suit, action or proceeding by any court or other
governmental entity seeking to restrain, preclude, enjoin or
prohibit the merger or any of the other transactions
contemplated by the merger agreement; and |
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the receipt by Mission of an opinion of its counsel, dated as of
the date this joint proxy statement/ prospectus is filed and as
of the closing date of the merger, to the effect that the merger
will be treated as a reorganization under Section 368(a) of
the Internal Revenue Code and that each party to the merger
agreement will be a party to the reorganization
within the meaning of Section 368(b) of the Internal
Revenue Code. |
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Additional Conditions to Petrohawks
Obligations |
The obligations of Petrohawk and Merger Sub to complete the
merger are subject to the satisfaction or waiver of the
following conditions:
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accuracy of Missions representations and warranties
contained in the merger agreement both at and as of the date of
the merger agreement and at and as of the closing date of the
merger, as if made at and as of the closing date of the merger
(except to the extent expressly made as of an earlier date, in
which case as of such date), except where, in the case of all
representations and warranties except those regarding
Missions capitalization, corporate power and authority,
tax matters, validity of the merger agreement and SEC reports,
the failure to be accurate individually or in the aggregate has
not had, and would not be reasonably likely to have or result
in, a material adverse effect on Mission; |
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the performance in all material respects by Mission of its
obligations contained in the merger agreement; |
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absence of any suit, action or proceeding by any court or other
governmental entity seeking to (1) restrain, preclude,
enjoin or prohibit the merger or any of the other transactions
contemplated by the merger agreement, or (2) prohibit or
limit in any material respect the ownership or operation of any
of the parties to the merger agreement or any of their
respective affiliates of a substantial portion of the business
or assets of Mission and its subsidiaries, taken as a whole, or
to require any person to dispose of or hold separate any
material portion of the business or assets of Mission and its
subsidiaries, taken as a whole, as a result of the merger or any
of the other transactions contemplated by the merger agreement; |
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the receipt by Petrohawk of an opinion of its counsel, dated as
of the date this joint proxy statement/ prospectus is filed and
as of the closing date of the merger, to the effect that the
merger will be treated as a reorganization under
Section 368(a) of the Internal Revenue Code and that each
party to the merger agreement will be a party to the
reorganization within the meaning of Section 368(b)
of the Internal Revenue Code; |
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the number of dissenting shares not exceeding 10% of the
outstanding shares of Missions common stock; and |
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receipt of all material consents and approvals of any person
that Mission or any of its subsidiaries are required to obtain
in connection with the consummation of the merger, including
consents and approvals from parties to loans, contracts, leases
or other agreements, except for such consents and approvals the
failure of which to be obtained individually or in the aggregate
would not be reasonably likely to have or result in a material
adverse effect on Mission. |
Representations and Warranties
The merger agreement contains representations and warranties
made by each of the parties regarding aspects of their
respective businesses, financial condition and structure, as
well as other facts pertinent to the merger. Each of Mission on
the one hand and Petrohawk and Merger Sub, on the other hand,
has made representations and warranties to the other in the
merger agreement with respect to the following subject matters:
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corporate existence, good standing and qualification to conduct
business; |
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capitalization, including ownership of subsidiary capital stock
and the absence of restrictions or encumbrances with respect to
capital stock of any subsidiary; |
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corporate power and authorization to enter into and carry out
the obligations of the merger agreement and the enforceability
of the merger agreement; |
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absence of any conflict or violation of organizational
documents, third party agreements or law or regulation as a
result of entering into and carrying out the obligations of the
merger agreement; |
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governmental, third party and regulatory approvals or consents
required to complete the merger; |
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filings and reports with the SEC, and financial information; |
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absence of certain changes, events or circumstances; |
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absence of undisclosed liabilities; |
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accuracy of the information supplied for inclusion in this joint
proxy statement/ prospectus; |
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employee benefit plans; |
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litigation, government orders, judgments and decrees; |
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compliance with laws; |
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intellectual property; |
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material contracts; |
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taxes; |
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environmental matters; |
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real property and operating equipment; |
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insurance; |
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labor and employment matters; |
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transactions with affiliates; |
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derivative and hedging transactions; |
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disclosure controls and procedures; |
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oil and gas reserves, assets and operations; |
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investment company status; |
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recommendations of merger by boards of directors; |
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receipt of fairness opinions; |
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required vote; |
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fees payable to brokers in connection with the merger; |
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tax matters relating to the merger; and |
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no other representations or warranties. |
Petrohawk and Merger Sub also have made representations and
warranties to Mission with respect to the interim operations of
Merger Sub. Mission also has made representations and warranties
to Petrohawk with respect to Missions existing rights
agreement.
The representations and warranties contained in the merger
agreement will not survive beyond the effective time of the
merger.
Conduct of Business Pending the Merger
Mission has agreed that it will, and will cause its subsidiaries
to, during the period from the date of the merger agreement
until the effective time of the merger or the date, if any, on
which the merger
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agreement is terminated, except as expressly contemplated or
permitted by the merger agreement, required by applicable law,
or agreed to in writing by Petrohawk:
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conduct the business of Mission and its subsidiaries only in the
ordinary course consistent with past practice; |
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use its reasonable best efforts to preserve intact its business
organization and goodwill and the business organization and
goodwill of its subsidiaries; and |
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use its reasonable best efforts to keep available the services
of its current officers and employees and preserve and maintain
existing relations with customers, suppliers, officers,
employees and creditors. |
Mission has also agreed that it will not, and will not permit
any of its subsidiaries to, during the period from the date of
the merger agreement until the effective time of the merger or
the date, if any, on which the merger agreement is terminated,
except as expressly contemplated or permitted by the merger
agreement, required by applicable law, or agreed to in writing
by Petrohawk:
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enter into any new line of business, incur or commit to any
capital expenditures, or any obligations or liabilities in
connection with any capital expenditures during calendar year
2005 other than capital expenditures and obligations or
liabilities incurred or committed to in an amount not greater in
the aggregate than, and during the same time period set forth
in, Missions current capital budget approved by the board
of directors of Mission in December 2004, plus $6 million
from Missions 2004 capital budget that was not spent;
provided that Mission shall provide Petrohawk with advance
notice of any and all expenditures made by Mission in excess of
$1 million in sufficient time to allow Petrohawk to provide
input on such expenditures; |
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amend its certificate of incorporation or bylaws or similar
organizational documents; |
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declare, set aside or pay any dividend or other distribution,
whether payable in cash, stock or any other property or right,
with respect to its capital stock, except that Mission may
permit any direct or indirect wholly-owned subsidiary to do any
of the foregoing; |
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adjust, split, combine or reclassify any capital stock or issue,
grant, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of capital stock of
any class or of any other such securities or agreements of
Mission or any of its subsidiaries, other than issuances by
Mission (1) of options to new employees of Mission in the
ordinary course of Missions business consistent with past
practices, (2) pursuant to Mission options (outstanding as
of April 3, 2005, or issued thereafter in accordance with
the merger agreement); |
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except as required pursuant to the terms of the Mission benefit
plans in effect on the date of the merger agreement, redeem,
purchase or otherwise acquire directly or indirectly any of its
capital stock or any other securities or agreements of the type
described in the preceding paragraph; |
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except as required pursuant to the terms of the Mission benefit
plans in effect on the date of the merger agreement, grant any
increase in the compensation or benefits payable or to become
payable by Mission or any of its subsidiaries to any former or
current director, officer or employee of Mission or any of its
subsidiaries; |
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except as required pursuant to the terms of the Mission benefit
plans in effect on the date of the merger agreement, adopt,
enter into, amend or otherwise increase, or accelerate the
payment or vesting of the amounts, benefits or rights payable or
accrued or to become payable or accrued under, any Mission
benefit plan (other than entry into employment agreements with
new hires in the ordinary course of business consistent with
past practice; provided that such employment agreement shall be
terminable at will, without penalty (other than severance
obligations that accrue under Missions amended and
restated change in control plan as in effect on the date of the
merger agreement) to Mission or any of its subsidiaries); |
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grant any severance or termination pay to any officer, director
or employee of Mission or any of its subsidiaries (other than
severance pay to non-contract employees related to termination
of such employees employment in the ordinary course of
Missions business consistent with its past practices); |
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designate any more prospects under the Mission bonus and
deferred compensation plan; |
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change its methods of accounting in effect as of the date of the
merger agreement, except in accordance with changes in
U.S. generally accepted accounting principles
(GAAP) as concurred to by Missions independent
auditors; |
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acquire any business organization, division or business by
merger, consolidation, purchase of an equity interest or assets,
or by any other manner, or acquire any assets (other than in the
ordinary course of business consistent with past practice or
pursuant to agreements in effect on the date of the merger
agreement); |
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sell, lease, exchange, transfer or otherwise dispose of, or
agree to sell, lease, exchange, transfer or otherwise dispose
of, any material assets (other than the sale of inventory and
hydrocarbons in the ordinary course of business consistent with
past practice or the sale of any assets pursuant to agreements
in effect on the date of the merger agreement); |
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mortgage, pledge, hypothecate, grant any security interest in,
or otherwise subject any of its assets to any liens, subject to
limited exceptions; |
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pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) where such
payment, discharge or satisfaction would require any payment
except for the payment, discharge or satisfaction of liabilities
or obligations in accordance with the terms of agreements in
effect on the date of the merger agreement or entered into after
the date of the merger agreement in the ordinary course of
business consistent with past practice, and except for any
payments, discharges or settlements that do not exceed $250,000
individually or $1 million in the aggregate; |
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compromise, settle or grant any waiver or release relating to
any litigation, other than settlements or compromises of
litigation where the amount paid or to be paid does not exceed
$250,000 individually or $1 million in the aggregate; |
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engage in any transaction with (except pursuant to agreements in
effect at the time of the merger agreement), or enter into any
agreement, arrangement, or understanding with, directly or
indirectly, any of Missions affiliates (not including any
employees of Mission or any of its subsidiaries, other than the
directors and executive officers thereof); |
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make or change any material tax election, change any method of
tax accounting, grant an extension of time to assess any tax or
settle any tax claim, amend any tax return in any material
respect or settle or compromise any material tax liability; |
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take any action that would, or could reasonably be expected to,
result in any of its representations and warranties set forth in
the merger agreement becoming untrue in a manner that would give
rise to the failure of the closing condition relating to the
satisfaction of the representations and warranties of Mission
(see Conditions to the Completion of the
Merger); |
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adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Mission or any of
its subsidiaries (other than the merger or with respect to an
inactive wholly-owned subsidiary of Mission) or any agreement
relating to an acquisition proposal; |
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incur or assume any long-term debt or incur or assume any
short-term indebtedness (except for short-term indebtedness in
the ordinary course of business consistent with past practice
and in no event exceeding $10 million in the aggregate); |
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modify the terms of any indebtedness to increase Missions
obligations with respect to such indebtedness; |
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assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for
the obligations of any other person, except in the ordinary
course of business consistent with past practice and in no event
exceeding $250,000 in the aggregate; |
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make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly-owned
subsidiaries of Mission, or by wholly-owned subsidiaries to
Mission, or customary loans or advances to employees in
accordance with past practice and in no event exceeding $250,000
in the aggregate); |
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enter into any material commitment or transaction, except in the
ordinary course of business consistent with past practice; |
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enter into any agreement, understanding or commitment that
materially restrains, limits or impedes Missions or any of
its subsidiaries ability to compete with or conduct any
business or line of business, including geographic limitations
on Missions or any of its subsidiaries activities
(other than confidentiality agreements and area of mutual
interest agreements in the ordinary course of business
consistent with past practice); |
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modify or amend in any material respect, or terminate, any
material contract to which it is a party or waive in any
material respect or assign any of its material rights or claims,
except in the ordinary course of business consistent with past
practice; |
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fail to maintain in full force and effect the existing insurance
policies covering Mission or its subsidiaries or their
respective properties, assets and businesses or comparable
replacement policies, except to the extent such policies cease
to be available on commercially reasonable terms; or |
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enter into an agreement, contract, commitment or arrangement to
take any of the prohibited actions described above. |
In addition, Mission has agreed that it shall not, nor shall it
permit any of its subsidiaries to, enter into any transaction or
take any other action that would be reasonably likely to have a
material adverse impact on, or materially delay, the
consummation of the transactions contemplated by the merger
agreement.
Petrohawk has agreed that it will, and will cause its
subsidiaries to, conduct the business of Petrohawk and its
subsidiaries only in the ordinary course consistent with past
practice during the period from the date of the merger agreement
until the effective time of the merger or the date, if any, on
which the merger agreement is terminated, except as contemplated
or permitted by the merger agreement, required by applicable
law, or agreed to in writing by Mission.
Petrohawk has also agreed that it will not, and will not permit
any of its subsidiaries to, during the period from the date of
the merger agreement until the effective time of the merger or
the date, if any, on which the merger agreement is terminated,
except as expressly contemplated or permitted by the merger
agreement, required by applicable law, or agreed to in writing
by Mission:
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enter into any new line of business, except as may reasonably
relate to Petrohawks existing business; |
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incur or commit to any capital expenditures, or any obligations
or liabilities in connection with any capital expenditures
during the calendar year 2005 in excess of $5 million over
Petrohawks 2005 capital budget; |
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solely in the case of Petrohawk and any non-wholly owned
subsidiary of Petrohawk, declare, set aside, or pay any dividend
or other distribution on its capital stock (other than on
Petrohawks 8% Cumulative Convertible preferred stock); |
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adjust, split, combine or reclassify any capital stock or issue,
grant, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of capital stock of
any class or of any other such securities or agreements of
Petrohawk, other than issuances by Petrohawk (1) of options
to new employees of Petrohawk in the ordinary course of
Petrohawks business consistent with past practices,
(2) pursuant to Petrohawk options, warrants, and
convertible notes (outstanding as of April 3, 2005, or
issued thereafter in accordance with the merger agreement), or
except as required under any current plans in effect as of
April 3, 2005, redeem purchase or otherwise acquire any
Petrohawk capital stock or any other Petrohawk securities; |
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change its methods of accounting in effect as of the date of the
merger agreement, except in accordance with changes in GAAP; |
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acquire any person or business organization or any assets but
only to the extent any such acquisition or the total of such
acquisitions exceed $40 million from the date of the merger
agreement until December 31, 2005; |
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other than the sale or consumption of inventory and hydrocarbons
in the ordinary course of business, sell, lease, transfer, or
dispose of any assets but only to the extent such sales, leases,
or transfers do not exceed $40 million in the aggregate
from the date of the merger agreement until December 31,
2005; |
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take any action that would, or could reasonably be expected to,
result in any of its representations and warranties set forth in
the merger agreement becoming untrue in a manner that would give
rise to the failure of the closing condition relating to the
satisfaction of the representations and warranties of Petrohawk
(see Conditions to the Completion of the
Merger); |
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solely in the case of Petrohawk, amend its certificate of
incorporation or bylaws or similar organizational documents in a
manner that adversely affects the terms of Petrohawk common
stock, other than to increase the number of authorized shares of
Petrohawk common stock; |
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solely in the case of Petrohawk, adopt or enter into a plan of
complete or partial liquidation or dissolution; or |
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enter into an agreement, contract, commitment or arrangement to
do any of the foregoing. |
In addition, Petrohawk has agreed that it will not, nor will it
permit any of its subsidiaries to, enter into any transaction or
take any other action (including any amendment of
Petrohawks certificate of incorporation) that would be
reasonably likely to have a material adverse impact on, or
materially delay, the consummation of the transactions
contemplated by the merger agreement.
Reasonable Best Efforts to Obtain Required Stockholder
Vote
Each of Mission and Petrohawk will promptly and duly call, give
notice of, convene and hold a meeting of its stockholders to be
held as soon as is reasonably practicable after the date on
which the registration statement of which this document is part
becomes effective. In the case of Mission stockholders, the
purpose of voting will be to adopt the merger agreement and
approve the merger and the other transactions contemplated by
the merger agreement. In the case of Petrohawk stockholders, the
purpose of voting will be to approve of the issuance of shares
of common stock under the merger. Each of Mission and Petrohawk
will, through its board of directors, use its reasonable best
efforts to obtain the approval of its respective stockholders in
respect of the foregoing. Notwithstanding any adverse
recommendation, change or similar circumstance, nothing in the
merger agreement is intended to relieve
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the parties of their respective obligations to hold a meeting of
their stockholders for the approval required to complete the
merger.
No Solicitation of Alternative Transactions
The merger agreement provides, subject to limited exceptions
described below, that Mission will not, and will cause its
subsidiaries and representatives not to:
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directly or indirectly initiate, solicit, knowingly encourage or
facilitate (including by way of furnishing information), or take
any other action designed to facilitate or encourage any
inquiries or the making of any proposal that constitutes, or is
reasonably likely to lead to, any acquisition proposal (as
defined below); |
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participate or engage in any discussions or negotiations with,
disclose any non-public information relating to itself or any of
its subsidiaries, or afford access to its properties, books or
records to any person that has made or is contemplating making
an acquisition proposal; or |
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accept or enter into any agreement that (1) constitutes,
relates to, or could reasonably be expected to lead to any
acquisition proposal or (2) requires, intends to cause or
could reasonably be expected to cause either Mission or
Petrohawk to respectively abandon, terminate or fail to
consummate the merger. |
The merger agreement permits Mission to take and disclose to its
stockholders a position with respect to an acquisition proposal
from a third party to the extent required under applicable
federal securities laws. If Mission receives a bona fide
unsolicited written acquisition proposal at any time prior to
obtaining the required Mission stockholder vote adopting the
merger agreement and approving the merger and the other
transactions contemplated by the merger agreement, then Mission
and its board of directors may participate and engage in
negotiations with, furnish non-public information to, and afford
access to its properties, books or records to, the third party
making the acquisition proposal if:
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the acquisition proposal was not solicited, initiated, knowingly
encouraged or facilitated by Mission, its subsidiaries, or any
of its officers or directors, investment bankers, attorneys,
accountants, financial advisors, agents or other representatives; |
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the proposal constitutes, or the board of directors of Mission
determines in good faith, after consultation with its financial
advisors and outside legal counsel, that such acquisition
proposal could reasonably be expected to lead to a superior
proposal (as defined below); and |
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the person making the acquisition proposal has entered into a
confidentiality agreement on specified terms with Mission. |
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Missions Ability to Make an Adverse Recommendation
Change in Response to a Superior Proposal |
At any time prior to obtaining the required Mission stockholder
vote adopting the merger agreement and approving the merger and
the other transactions contemplated by the merger agreement, and
subject to Missions compliance at all times with the
non-solicitation provisions described above, and to its ability
to terminate the agreement in certain circumstances, (discussed
below), the board of directors of Mission may make an adverse
recommendation change (as defined below) in response to a
superior proposal if:
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four business days before making such change, Mission provides
written notice to Petrohawk (a notice of superior
proposal) that: |
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advises Petrohawk that the board of directors of Mission or any
of its committees has received a superior proposal; |
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specifies the material terms and conditions of the superior
proposal; |
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identifies the person or group making such superior
proposal; and |
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in the event that Petrohawk proposes any alternative transaction
during such four business day period, the board of directors of
Mission determines in good faith, after consultation with its
financial advisors and outside legal counsel, that such
alternative transaction is not at least as favorable to Mission
and its stockholders from a financial point of view as the
superior proposal, taking into account all financial, legal and
regulatory terms and conditions of the alternative transaction
proposed by Petrohawk. |
Mission has also agreed to:
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advise Petrohawk in writing of any request for information or
any acquisition proposal received from any person, or any
inquiry, discussions or negotiations with respect to any
acquisition proposal, the terms and conditions of any request,
acquisition proposal, inquiry, discussions or negotiations, and
the identity of the person or group making any request or
acquisition proposal or with whom any discussions or
negotiations are taking place; |
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provide Petrohawk any non-public information concerning Mission
provided to any other person or group in connection with any
acquisition proposal that was not previously provided to
Petrohawk and copies of any written materials received from that
person or group; |
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keep Petrohawk fully informed of the status of any acquisition
proposals (including any changes to any material terms and
conditions); and |
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not release any third party from, or waive any provisions of,
any confidentiality or standstill agreement to which Mission is
a party. |
Acquisition Proposal. For purposes of the merger
agreement, the term acquisition proposal means any
bona fide proposal for the:
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direct or indirect acquisition or purchase of a business or
assets that constitutes 10% or more of the net revenues, net
income or the assets (based on fair market value) of Mission and
its subsidiaries, taken as a whole; |
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direct or indirect acquisition or purchase of 10% or more of any
class of equity securities or capital stock of Mission or any of
its subsidiaries whose business constitutes 10% or more of the
net revenues, net income or assets of Mission and its
subsidiaries, taken as a whole; or |
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merger, consolidation, restructuring, transfer of assets or
other business combination, sale of shares of capital stock,
tender offer, exchange offer, recapitalization, stock repurchase
program or other similar transaction that if consummated would
result in any person beneficially owning 10% or more of any
class of equity securities of Mission or any of its subsidiaries
whose business constitutes 10% or more of the net revenues, net
income or assets of Mission and its subsidiaries, taken as a
whole, other than the transactions contemplated by the merger
agreement. |
Superior Proposal. For purposes of the merger agreement,
the term superior proposal means any bona fide
written acquisition proposal, made by a third party to purchase,
directly or indirectly, 50% or more of the assets of Mission and
its subsidiaries, taken as a whole, or 50% or more of the
outstanding equity securities of Mission pursuant to a tender
offer, exchange offer or merger on terms that a majority of the
board of directors of Mission determines in good faith to be
superior to Mission and its stockholders (in their capacity as
stockholders) from a financial point of view as compared to the
transactions contemplated by the merger agreement and to any
alternative transaction or changes to the terms of the merger
agreement proposed by Petrohawk (after the board of directors of
Mission consults with its financial advisors and takes into
account all financial, legal and regulatory terms and conditions
of the acquisition proposal and the merger agreement, including
any changes to the terms of the merger agreement offered by
Petrohawk in response to the superior proposal, including any
conditions to and expected timing of consummation, and any risks
of non-consummation, of the acquisition proposal).
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Adverse Recommendation Change. For purposes of the merger
agreement, the term adverse recommendation change
means a direct or indirect action or public proposal made by
Missions board of directors or a committee of its board of
directors, in response to a superior proposal, to:
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withdraw (or amend or modify in a manner adverse to Petrohawk)
its approval, recommendation or declaration of advisability of
the merger agreement, the merger or the other transactions
contemplated by the merger agreement; or |
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recommend, adopt or approve any acquisition proposal. |
Termination of the Merger Agreement
The merger agreement may be terminated by written notice at any
time prior to the effective time of the merger in any of the
following ways:
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by mutual written consent of Petrohawk and Mission; |
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by either Petrohawk or Mission: |
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if the merger is not completed on or before December 31,
2005, unless the failure of the closing to occur by this date is
due to the failure of the party seeking to terminate the merger
agreement to fulfill any material obligation under the merger
agreement or a material breach of the merger agreement by such
party; |
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if any court or other governmental entity shall have issued a
statute, rule, order, decree or regulation or taken any other
action (which Petrohawk and Mission will use their reasonable
best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the consummation of the
merger or making the merger illegal and such statute, rule,
order, decree, regulation or other action has become final and
nonappealable, provided that the terminating party is not in
breach of its obligation to use reasonable best efforts to
complete the merger; |
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if the Mission stockholders fail to adopt the merger agreement
by the requisite vote, provided that this right to terminate is
not available to Mission if it has breached any of its
obligations relating to non-solicitation of offers described
above under No Solicitation of Alternative
Transactions or breached any of its obligations relating
to completing this joint proxy statement/ prospectus and
convening a stockholders meeting described above under
Reasonable Best Efforts to Obtain Required
Stockholder Vote; |
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if there has been a material breach of or any inaccuracy in any
of the representations or warranties set forth in the merger
agreement on the part of any of the other parties, which breach
has not been cured within 30 days following receipt by the
breaching party of written notice of such breach from the
terminating party, or which breach, by its nature, cannot be
cured prior to December 31, 2005 (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement); provided, however, that no party will
have the right to terminate the merger agreement for the
foregoing purposes unless the breach of representation or
warranty, together with all other such breaches, would entitle
the party receiving such representation not to consummate the
transactions contemplated by the merger agreement; |
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if there has been a material breach of any of the covenants or
agreements set forth in the merger agreement on the part of any
of the other parties, which breach has not been cured within
30 days following receipt by the breaching party of written
notice of such breach from the terminating party, or which
breach, by its nature, cannot be cured prior to
December 31, 2005 (provided that the terminating party is
not then in material breach of any representation, warranty,
covenant or other agreement contained in the merger
agreement); or |
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if the Petrohawk stockholders fail to approve the issuance of
Petrohawk shares pursuant to the merger; provided that this
right to terminate is not available to Petrohawk if it has
breached any of its obligations relating to non-solicitation of
offers described above under No Solicitation
of Alternative Transactions or breached any of its
obligations relating to completing this joint proxy statement/
prospectus and convening a stockholders meeting described above
under Reasonable Best Efforts to Obtain
Required Stockholder Vote; |
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if, prior to obtaining the required vote of the Mission
stockholders adopting the merger agreement and approving the
merger and the other transactions contemplated by the merger
agreement (i) Mission or its board of directors has entered
into an agreement with respect to an acquisition proposal (other
than a permissible confidentiality agreement) or approved or
recommended, or, in the case of a committee, proposed to the
Mission board of directors to approve or recommend, an
acquisition proposal (as defined above under
No Solicitation of Alternative
Transactions), (ii) Mission or its board of directors
or any committee thereof has resolved to do any of the
foregoing, or (iii) an adverse recommendation change shall
have occurred in response to a superior proposal or
Missions board of directors, or any committee thereof, has
resolved to make an adverse recommendation change. |
Except for the termination fee set forth in the merger agreement
and as described below, all costs and expenses incurred in
connection with the merger agreement and the transactions
contemplated thereby shall be paid by the party incurring such
costs or expenses.
Mission must pay Petrohawk a termination fee of
$12.5 million if:
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the merger agreement is terminated by Petrohawk or Mission due
to an adverse recommendation change by Mission in response to a
superior proposal; or |
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the merger agreement is terminated by Petrohawk or Mission
because Mission or its board of directors has entered into an
agreement with respect to an acquisition proposal (other than a
permissible confidentiality agreement) or, approved or
recommended, or, in the case of a committee, proposed to the
Mission board of directors to approve or recommend, an
acquisition proposal, or Mission or its board of directors or
any committees thereof has resolved to do any of the foregoing; |
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an acquisition proposal with respect to Mission has been
proposed by any person (other than by Petrohawk, Merger Sub or
any of their respective affiliates) or any person has publicly
announced its intention (whether or not conditional) to make
such acquisition proposal and such acquisition proposal or such
intention has otherwise become publicly known to Missions
stockholders generally; and |
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thereafter the merger agreement is terminated by either
Petrohawk or Mission for failure to close the merger on or
before December 31, 2005 or because the Mission
stockholders failed to adopt the merger agreement by the
required vote, and |
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within 12 months after termination of the merger agreement,
Mission or any of its subsidiaries enters into any definitive
agreement providing for an acquisition proposal (as
described above under No Solicitation of
Alternative Transactions, except that all references to
10% therein are deemed to be references to
40% for the purposes of the provision described in
this paragraph), or an acquisition proposal with respect to
Mission or any of its subsidiaries is consummated. |
In the event of the termination of the merger agreement as
described above, written notice must be given by the terminating
party to the other parties specifying the provision of the
merger agreement
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pursuant to which such termination is made, and except as
described in this paragraph, the merger agreement shall become
null and void after the expiration of any applicable period
following such notice. In the event of the termination of the
merger agreement, there will be no liability on the part of
Petrohawk, Merger Sub or Mission, except as described above
under Termination Fees and Expenses
above and except with respect to the requirement to comply with
the confidentiality agreement; provided that no party will be
relieved from any liability or obligation with respect to any
willful breach of the merger agreement.
Material U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal
income tax consequences of the merger to Mission stockholders
who are U.S. persons or non-U.S. persons (as defined
below). This summary is based on provisions of the Internal
Revenue Code, Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations of the Internal
Revenue Code, all as in effect as of the date of this joint
proxy statement/ prospectus, and all of which are subject to
change, possibly with retroactive effect. This summary does not
address all aspects of U.S. federal income taxation that
may be applicable to Mission stockholders in light of their
particular circumstances or to Mission stockholders subject to
special treatment under U.S. federal income tax law, such
as:
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entities treated as partnerships for U.S. federal income
tax purposes or Mission stockholders that hold their shares
through entities treated as partnerships for U.S. federal
income tax purposes; |
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certain former citizens or long-term residents of the U.S.; |
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persons who hold Mission common stock as part of a straddle,
hedging transaction, synthetic security, conversion transaction
or other integrated investment or risk reduction transaction; |
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U.S. persons, as defined below, whose functional currency
is not the U.S. dollar; |
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persons who acquired Mission common stock through the exercise
of employee stock options or otherwise as compensation; |
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persons subject to the U.S. alternative minimum tax; |
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mutual funds; |
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banks, insurance companies, and other financial institutions; |
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regulated investment companies; |
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tax-exempt organizations; |
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dealers in securities or foreign currencies; and |
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traders in securities that mark-to-market. |
This summary is also limited to persons who hold Mission common
stock as a capital asset. The following summary does not address
the tax consequences of the merger under state, local and
foreign laws and U.S. federal laws other than
U.S. federal income tax laws. Mission stockholders are
urged to consult their tax advisors as to the specific tax
consequences to them of the merger, including the applicability
and effect of U.S. federal, state, local and foreign income
and other tax laws to their particular circumstances.
For purposes of this discussion, a U.S. person
means a beneficial owner of shares of Mission common stock that
is (1) a citizen or individual resident of the U.S.,
including an alien individual who meets one of the
resident-alien tests under Section 7701(b) of the Internal
Revenue Code, (2) a corporation or other entity taxable as
a corporation created or organized under the laws of the
U.S. or any of its political subdivisions, (3) a trust
if (A) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial
decisions of the trust or (B) the trust has made a valid
election under the applicable Treasury Regulations
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to be treated as a U.S. person, or (4) an estate, the
income of which is subject to U.S. federal income taxation
regardless of its source.
For purposes of this discussion, a
non-U.S. person means a beneficial owner of
shares of Mission common stock that is not a U.S. person.
The obligation of Mission to consummate the merger is
conditioned on its receipt of an opinion from Porter &
Hedges, L.L.P., dated as of the closing date of the merger, to
the effect that, on the basis of the facts, assumptions,
representations, and covenants set forth or referred to therein,
for U.S. federal income tax purposes, (1) the merger
will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and
(2) Petrohawk, Merger Sub, and Mission will each be a
party to the reorganization within the meaning of
Section 368(b) of the Internal Revenue Code. In addition,
the obligation of Petrohawk to consummate the merger is
conditioned on its receipt of an opinion from
Thompson & Knight LLP, dated as of the closing date of
the merger, to the effect that, on the basis of the facts,
assumptions, representations, and covenants set forth or
referred to therein, for U.S. federal income tax purposes,
(1) the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and
(2) Petrohawk, Merger Sub, and Mission will each be a
party to the reorganization within the meaning of
Section 368(b) of the Internal Revenue Code.
In connection with the filing of the registration statement of
which this document forms a part, Porter & Hedges and
Thompson & Knight have delivered to Mission and
Petrohawk, respectively, the opinions set forth above. An
opinion of counsel represents counsels best legal judgment
and is not binding on the Internal Revenue Service or any court.
No ruling has been, or will be, sought from the Internal Revenue
Service as to the tax consequences of the merger. Accordingly,
there can be no certainty that the Internal Revenue Service will
not challenge the conclusions set forth in any of the opinions
stated or referred to herein or that a court would not sustain
such a challenge.
The opinions of Porter & Hedges and Thompson &
Knight and the opinions set forth below have been rendered on
the basis of certain assumptions, representations, and
covenants, including those contained in officers
certificates of Mission and Petrohawk, all of which must be true
and accurate in all respects as of the effective date of the
registration statement and must continue to be true and accurate
in all respects as of the effective time of the merger. If any
of those assumptions or representations are inaccurate,
incomplete, or untrue or any of the covenants are breached, the
conclusions contained in the opinions referred to in this
paragraph or stated below could be affected.
The opinions delivered by Porter & Hedges and
Thompson & Knight and as set forth below assume that
the value of the Petrohawk stock issued in the merger will equal
at least 40% of the value of the combined merger consideration.
It is not possible to state with certainty whether this
assumption will be correct at the effective time of the merger
because various factors affect this determination, including the
market value of Petrohawk common stock at the effective time of
the merger, and the amount, if any, to be paid to Mission
stockholders who perfect their appraisal rights. If the
assumption regarding the relative value of the Petrohawk stock
to be issued in the merger is untrue at the effective time of
the merger, we will either terminate the merger or resolicit
stockholder approval for the merger because the tax opinions
delivered at closing will differ materially from the opinions
described herein. We will also resolicit stockholder approval
for the merger if Petrohawk and Mission waive the condition that
they receive such opinions.
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U.S. Federal Income Tax Consequences to
U.S. Persons |
Subject to the limitations and qualifications set forth herein,
the following discussion constitutes the opinion of
Porter & Hedges and of Thompson & Knight as to
the material U.S. federal income tax consequences of the
merger to a Mission stockholder that is a U.S. person:
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If a Mission stockholder exchanges all of his or her shares of
Mission common stock solely for shares of Petrohawk common stock
in the merger, that Mission stockholder will not recognize
(i.e., take into account for income tax purposes) gain or loss,
except for any gain or loss recognized with respect to cash
received instead of a fractional share of Petrohawk common
stock. See Cash Received Instead of a
Fractional Share below. |
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If a Mission stockholder exchanges his or her shares of Mission
common stock solely for cash in the merger, that Mission
stockholder generally will recognize capital gain or loss equal
to the difference between the amount of cash received and his or
her tax basis in the Mission common stock. If, however, the
Mission stockholder owns shares of Petrohawk common stock
actually or constructively after the merger, the stockholder
might be subject to dividend treatment. See
Possible Treatment of Cash as a Dividend
immediately below. |
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If a Mission stockholder exchanges his or her shares of Mission
common stock for a combination of Petrohawk common stock and
cash, that Mission stockholder generally will recognize gain
(but not loss). Any such gain recognized will equal the lesser
of: (1) the amount of cash received by the stockholder in
the merger and (2) the excess, if any, of (a) the sum
of the amount of cash and the fair market value of the Petrohawk
common stock received by the stockholder in the merger over
(b) that stockholders adjusted tax basis in the
Mission common stock exchanged by the stockholder in the merger.
For this purpose, a Mission stockholder must calculate gain
separately for each identifiable block of Mission common stock
exchanged by the stockholder in the merger. Cash received
instead of fractional shares of Petrohawk stock is excluded from
the calculations discussed in (1) and (2) above, and
instead is treated as discussed below under
Cash Received Instead of a Fractional
Share. Except as discussed under
Possible Treatment of Cash as a
Dividend, any gain recognized by a Mission stockholder in
the merger generally will constitute capital gain. |
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The aggregate tax basis of the shares of Petrohawk common stock
received by a Mission stockholder in exchange for Mission common
stock pursuant to the merger will be the same as the aggregate
tax basis of the stockholders Mission common stock
surrendered in the merger, decreased by the amount of cash
received by the stockholder in the merger and increased by the
amount of gain or dividend income recognized by the stockholder
in the merger. |
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The holding period of the shares of Petrohawk common stock
received by a Mission stockholder in the merger generally will
include the holding period of the stockholders Mission
common stock exchanged for Petrohawk common stock. |
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If a Mission stockholder has differing bases or holding periods
in respect of his or her shares of Mission common stock, such
stockholder should consult his or her tax advisor prior to the
exchange to identify the bases or holding periods of the
particular shares of Petrohawk common stock received in the
merger. |
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Possible Treatment of Cash as a Dividend |
There are certain circumstances, generally involving a Mission
stockholder who is also a substantial holder of Petrohawk common
stock, in which all or part of the gain recognized by such
stockholder would be treated as a dividend rather than as
capital gain. Each Mission stockholder should consult his or her
tax advisor about the possibility that all or a portion of any
cash received in exchange for Mission common stock will be
treated as a dividend, based on the stockholders specific
circumstances.
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Cash Received Instead of a Fractional Share |
Petrohawk will not issue any fractional shares of Petrohawk
common stock in the merger. Rather, each holder of Mission
common stock exchanged in the merger who otherwise would have
received a fraction of a share of Petrohawk common stock will
receive cash. A Mission stockholder who receives cash instead of
a fractional share of Petrohawk common stock generally will
recognize capital gain or loss based on the difference between
the amount of cash received and the tax basis that the
stockholder would have had in such fractional share.
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Capital Gain and Dividend Income of Individuals |
Capital gain recognized by an individual holder of Mission
common stock in connection with the merger generally will be
subject to a maximum U.S. federal income tax rate of 15% if
the individuals holding period for the Mission common
stock is more than one year at the effective time of the merger.
Capital gain on stock held for one year or less may be taxed at
regular rates of up to 35%. The deductibility of capital losses
is subject to limitations. Any dividend income recognized in the
merger by individual Mission stockholders generally will be
subject to tax at a maximum rate of 15%.
Mission stockholders receiving Petrohawk common stock in the
merger must file a statement with their U.S. federal income
tax returns setting forth their tax basis in the Mission common
stock exchanged in the merger and the fair market value of the
Petrohawk common stock and the amount of any cash received in
the merger. In addition, Mission stockholders will be required
to retain permanent records of these facts relating to the
merger.
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U.S. Federal Income Tax Consequences to
Non-U.S. Persons |
This discussion does not address the U.S. federal income
tax consequences to stockholders that are subject to special
rules such as: (1) a stockholder that is a
non-U.S. person and that holds its Mission common stock in
connection with a trade or business conducted in the
U.S. or in connection with an office or fixed place of
business located in the U.S.; (2) a stockholder that is a
nonresident alien individual and that either is present in the
U.S. for 183 days or more in the taxable year or is subject
to provisions of the Internal Revenue Code applicable to
expatriates; or (3) a stockholder that is affected by the
provisions of an income tax treaty to which the U.S. is a
party.
If you are a non-U.S. person and you may be subject to
special tax rules because you conduct business in the U.S., you
have been present in the U.S. for 183 days or more in
the taxable year, you are an expatriate of the U.S., or you are
affected by the provisions of an income tax treaty to which the
U.S. is a party, you are urged to consult your tax advisor
to determine the tax consequences of the merger to you.
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Non-U.S. Persons That Have Not Held More Than 5% of
Missions Common Stock in the Prior Five Years |
Gain or loss realized by a non-U.S. person that exchanges
Mission common stock in the merger will not be subject to
U.S. federal income tax if that stockholder has not held
(either directly or indirectly, after the application of the
constructive ownership rules of Section 318 of the Internal
Revenue Code as modified by Section 897(c)(6)(C) of the
Internal Revenue Code) more than 5% of the outstanding shares of
Mission common stock at any time during the shorter of
(1) the five-year period ending on the effective date of
the merger or (2) the period during which such stockholder
held such Mission common stock, the shorter of such periods
referred to as the Testing Period. For purposes of determining
whether a non-U.S. person owns or has owned more than 5% of
the outstanding shares of Mission, the constructive ownership
rules of Section 318 of the Internal Revenue Code (as
modified by Section 897(c)(6)(C) of
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the Internal Revenue Code) treat a foreign stockholder as owning
shares that are (1) owned by (or that are subject to an
option held by) certain family members, corporations,
partnerships, estates or trusts or (2) subject to an option
held by that foreign stockholder.
The material U.S. federal income tax consequences of the
merger to a non-U.S. person that has not held more than 5%
of the outstanding shares of Missions common stock during
the Testing Period are as follows:
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If a non-U.S. person exchanges all of his or her shares of
Mission common stock solely for shares of Petrohawk common stock
in the merger, that stockholder will not recognize any gain or
loss. |
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If a non-U.S. person exchanges his or her shares of Mission
common stock solely for cash or for a combination of cash
(including cash instead of a fractional share of Petrohawk
common stock) and Petrohawk common stock in the merger, any gain
realized by that non-U.S. person will not be subject to
U.S. federal income tax. |
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A non-U.S. person will have an aggregate tax basis in the
Petrohawk common stock received in the merger equal to the
aggregate tax basis of the stockholders Mission common
stock surrendered decreased by the amount of cash received by
the stockholder in the merger. |
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A non-U.S. persons holding period for shares of
Petrohawk common stock received in exchange for shares of
Mission common stock in the merger will include the holding
period of the stockholders Mission common stock exchanged
for Petrohawk common stock. |
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If you are a non-U.S. person and you have differing bases
or holding periods in your shares of Mission common stock to be
exchanged in the merger, you should consult your tax advisor
prior to the exchange to identify the bases or holding periods
of the particular shares of Petrohawk common stock that you will
receive in the merger. |
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Non-U.S. Persons That Currently Hold or Have Held More
Than 5% of Missions Common Stock |
If a non-U.S. person has owned (either directly or
indirectly) more than 5% of the outstanding shares of Mission
common stock, but such ownership was not held at any time during
the Testing Period, then that non-U.S. person generally
will not be subject to U.S. federal income tax in
connection with the merger. Under these circumstances, the
U.S. federal income tax consequences to such a stockholder
should be the same as those previously described with respect to
a non-U.S. person that has never held more than 5% of the
outstanding shares of Mission common stock.
Generally, if a non-U.S. person owns or has owned (either
directly or indirectly) more than 5% of the outstanding shares
of Mission common stock at any time during the Testing Period
(referred to here as a Significant Non-U.S. Person), then
gain or loss realized by such person upon the exchange of
Mission common stock in the merger will be subject to
U.S. federal income tax. There is an exception from tax if
a Significant Non-U.S. Person exchanges its Mission common
stock for stock in a U.S. real property holding
corporation (a USRPHC) in a reorganization under
section 368(a) of the Internal Revenue Code (such as the
merger) and the stock received in the exchange would be subject
to U.S. federal income tax if it was sold immediately after
the exchange. Petrohawk believes that it is a USRPHC and expects
to be a USRPHC after the effective time of the merger.
Assuming that Petrohawks common stock continues to be
traded on the NASDAQ National Market immediately after the
merger, Petrohawk stock received in the merger by a Significant
Non-U.S. Person would qualify for the exception from tax
only if that Significant Non-U.S. Person owns more than 5%
of the outstanding shares of Petrohawk common stock immediately
after the merger. The U.S. federal income tax consequences
to a Significant Non-U.S. Person who owns more than 5% of
the outstanding shares of Petrohawk common stock immediately
after the merger should generally be the same as previously
described with respect to a U.S. person.
If a Significant Non-U.S. Person exchanges all of his or
her shares of Mission common stock solely for cash, solely for
Petrohawk common stock constituting 5% or less of the
outstanding shares of
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Petrohawk common stock, or for a combination of cash and
Petrohawk common stock constituting 5% or less of the
outstanding shares of Petrohawk common stock immediately after
the merger:
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such stockholder will recognize gain or loss measured by the
difference between (1) the sum of the amount of any cash
received (including cash instead of a fractional share of
Petrohawk common stock) and the fair market value of the
Petrohawk common stock received in the merger over (2) that
Significant Non-U.S. Persons tax basis in its Mission
common stock surrendered in the merger. Except as discussed
under U.S. Federal Income Tax
Consequences to U.S. Persons Possible Treatment
of Cash as a Dividend, any gain or loss recognized by a
Significant Non-U.S. Person in the merger generally will
constitute capital gain or loss effectively connected with the
conduct of a U.S. trade or business. |
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the aggregate tax basis of the Petrohawk common stock received
in the merger will equal the fair market value of that Petrohawk
common stock as of the effective time of the merger; |
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such stockholders holding period for the Petrohawk common
stock received in the merger will begin the day after the
effective time of the merger; and |
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if you are a Significant Non-U.S. Person and you have
differing bases or holding periods in your shares of Mission
common stock to be exchanged in the merger, you should consult
your own tax advisor prior to the exchange to identify the bases
or holding periods of the particular shares of Petrohawk common
stock that you will receive in the merger. |
A Significant Non-U.S. Person subject to U.S. federal
income tax also may be required to:
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file a U.S. federal income tax return reporting the gain or
loss subject to tax as income effectively connected with the
conduct of a trade or business within the U.S. and taxable as
either ordinary income or capital gain; and |
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pay any tax due upon the filing of the return or, depending upon
the circumstances, earlier through estimated payments. |
Under Section 1445 of the Internal Revenue Code, a person
acquiring stock in a USRPHC from a foreign person generally is
required to deduct and withhold a tax equal to 10% of the amount
realized by that foreign person on the sale or exchange of that
stock, referred to here as FIRPTA Withholding. However,
Section 1445(b)(6) of the Internal Revenue Code exempts
from FIRPTA Withholding stock that is regularly traded on an
established securities market.
Mission believes that it has continuously been a USRPHC and that
it will be a USRPHC as of the effective time of the merger.
Mission also believes that Mission common stock will continue to
be regularly traded on the NASDAQ National Market at all times
leading up to and as of the effective time of the merger, such
that Mission common stock should be considered to be
regularly traded on an established securities market
for purposes of Section 897(c)(3) of the Internal Revenue
Code. Assuming that this expectation proves to be correct,
neither Petrohawk (nor the exchange agent) will be required to
deduct and withhold amounts on account of FIRPTA Withholding
with respect to a non-U.S. persons exchange of
Mission common stock in the merger.
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U.S. Federal Income Tax Consequences to Stockholders
That Exercise Appraisal Rights |
A U.S. person who receives cash pursuant to the exercise of
appraisal rights generally will recognize capital gain or loss
measured by the difference between the cash received and its
adjusted tax basis in its Mission common stock.
If a non-U.S. person that is not a Significant
Non-U.S. Person receives cash pursuant to the exercise of
appraisal rights, any gain realized by such person generally
will not be subject to U.S. federal income tax.
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If a Significant Non-U.S. Person receives cash pursuant to
the exercise of appraisal rights, that Significant
Non-U.S. Person generally will be subject to
U.S. federal income tax on capital gain or loss measured by
the difference between the amount of cash received and his or
her tax basis in its Mission common stock.
Certain U.S. and non-U.S. holders of Mission common stock
may be subject to backup withholding (currently at a rate of
28%) on amounts received pursuant to the merger. Backup
withholding will not apply, however, to a Mission stockholder
who (1) provides a correct taxpayer identification number
or (2) comes within certain exempt categories and, in each
case, complies with applicable certification requirements. In
addition to being subject to backup withholding, if a Mission
stockholder does not provide Petrohawk (or the exchange agent)
with his or her correct taxpayer identification number, the
stockholder may be subject to penalties imposed by the Internal
Revenue Service. Any amounts withheld under the backup
withholding rules may be allowed as a refund or a credit against
the stockholders U.S. federal income tax liability,
provided that the stockholder furnishes certain required
information to the Internal Revenue Service.
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Obtain Personal Tax Advice |
The summary of material U.S. federal income tax
consequences set forth above is intended to provide only a
general summary of the merger and is not intended to be a
complete analysis or description of all potential
U.S. federal income tax consequences of the merger. In
addition, the summary does not address tax consequences that may
vary with, or are contingent on, individual circumstances.
Moreover, the summary does not address any non-income tax or any
foreign, state, local or other tax consequences of the merger.
Accordingly, each Mission stockholder is urged to consult his
or her own tax advisor to determine the particular federal,
state, local or foreign income, reporting or other tax
consequences of the merger to that stockholder.
Extension, Waiver and Amendment of the Merger Agreement
At any time prior to the effective time of the merger,
Petrohawk, Merger Sub and Mission may, to the extent legally
allowed:
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extend the time for the performance of any of the obligations or
other acts of the other parties under the merger agreement; |
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waive any inaccuracies in the other parties
representations and warranties contained in the merger agreement
or in any document, certificate or writing delivered pursuant
the merger agreement by the other parties; and |
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waive the other parties compliance with any of its
agreements or conditions contained in the merger agreement. |
Any such waiver or extension is subject to the following
conditions:
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any agreement allowing an extension or waiver must be set forth
in a written instrument signed on behalf of the party allowing
the extension or waiver; |
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any waiver will only waive the respective matter described in
the writing and will not impair the rights of the party granting
the waiver in any other respect or at any other time; |
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neither any waiver by any party to the merger agreement, nor the
failure by any party to enforce any provisions of the merger
agreement or to exercise any rights will be construed as a
waiver of any other breach or default, or as a waiver of any
such provisions, rights or privileges under the merger
agreement; and |
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the rights and remedies provided under the merger agreement are
cumulative and none is exclusive of any other, or of any rights
or remedies that any party may otherwise have. |
Subject to compliance with applicable law, Petrohawk, Merger Sub
and Mission may amend the merger agreement at any time before or
after adoption of the merger agreement by Mission stockholders.
However, after any adoption of the merger agreement by Mission
stockholders there may not be, without their further approval,
any amendment of the merger agreement that:
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changes the merger consideration to be received by the Mission
stockholders in the merger; |
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changes any term of the certificate of incorporation of Merger
Sub; or |
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adversely affects the holders of any shares of Mission capital
stock. |
Employee Benefit Plans and Existing Agreements
The merger agreement provides that Mission will modify its
severance benefit plans so that Mission employees that are
offered comparable employment and pay, with Petrohawks
normal benefits, will not be entitled to severance pay, unless
they are subsequently terminated without cause within one year
following the effective date of the merger.
The service of each Mission employee with Mission or its
subsidiaries (or any predecessor employer) prior to the
effective time of the merger will be treated as service with
Petrohawk and its subsidiaries for purposes of each employee
benefit plan of Petrohawk in which such Mission employee is
eligible to participate after the effective time of the merger,
including for purposes of eligibility, vesting and benefit
levels and accruals (other than defined benefit pension plan
accruals).
Following the effective time of the merger, for purposes of each
employee benefit plan of Petrohawk in which any Mission employee
or his or her eligible dependents is eligible to participate,
Petrohawk has agreed to, and has agreed to cause its
subsidiaries to, (1) waive any pre-existing condition,
exclusion, actively-at-work requirement or waiting period to the
extent such condition, exclusion, requirement or waiting period
was satisfied or waived under the comparable employee benefit
plan of Mission as of the effective time of the merger (or, if
later, the date on which the employee transitions to the
Petrohawk benefit plan) and (2) provide full credit for any
co-payments, deductibles or similar payments made or incurred
prior to the effective time of the merger for the plan year in
which the effective time date of the merger (or the applicable
plan transition date) occurs.
The merger agreement acknowledges that it contains no
requirement that Petrohawk or any of its affiliates continue to
employ any Mission employee for any length of time following the
closing date of the merger. The merger agreement does not
prevent Petrohawk or its affiliates from terminating, or
modifying the terms of employment of, any Mission employee
following the closing date of the merger or terminating or
modifying to any extent any employee benefit plan of Mission or
any other employee benefit plan, program, agreement or
arrangement that Petrohawk or its affiliates may establish or
maintain.
Nasdaq National Market Listing of Petrohawk Common Stock;
Delisting and Deregistration of Mission Common Stock
It is a condition to completion of the merger that the shares of
Petrohawk common stock issuable in the merger be authorized for
listing on the Nasdaq National Market, subject to official
notice of issuance. If the merger is completed, Mission common
stock will cease to be quoted on the Nasdaq National Market and
Missions shares will be deregistered under the Exchange
Act.
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Expenses
The merger agreement provides that each of Petrohawk and Mission
will pay its own costs and expenses in connection with the
transactions contemplated by the merger agreement, except as
described above in Termination of the Merger
Agreement Termination Fees and Expenses.
Dividends
The merger agreement provides that, prior to the effective time:
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Mission or any of its subsidiaries may not declare, set aside or
pay any dividend or other distribution, whether payable in cash,
stock or any other property or right, with respect to its
capital stock, except that Mission may permit any direct or
indirect wholly-owned subsidiary to do any of the
foregoing; and |
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Petrohawk or any of its subsidiaries may not declare, set aside
or pay any dividend or other distribution (other than in the
case of any wholly owned subsidiary of Petrohawk), whether
payable in cash, stock or any other property or right, with
respect to its capital stock except that Petrohawk may pay
quarterly cash dividends on its preferred stock. |
Appraisal Rights
Shares of Mission common stock outstanding immediately prior to
the effective time of the merger and held by a holder who has
not voted in favor of, or consented in writing to, the adoption
of the merger agreement and approval of the merger and the other
transactions contemplated by the merger agreement and who has
delivered a written demand for appraisal of such shares in
accordance with Section 262 of the DGCL will not be
converted into the right to receive the merger consideration,
unless and until the dissenting holder fails to perfect or
effectively withdraws or otherwise loses his or her right to
appraisal and payment under the DGCL. If, after the effective
time of the merger, a dissenting stockholder fails to perfect or
effectively withdraws or loses his or her right to appraisal,
his or her shares of Mission common stock will be treated as if
they had been converted as of the effective time of the merger
into the right to receive the merger consideration without
interest or dividends thereon.
Regulatory Filings and Approvals Required to Complete the
Merger
We are not aware of any material governmental or regulatory
approval required for the completion of the merger, other than
compliance with the applicable corporate law of the State of
Delaware.
Accounting Treatment
The merger will be accounted for as a purchase, as
that term is used under GAAP, for accounting and financial
reporting purposes. Mission will be treated as the acquired
corporation for accounting and financial reporting purposes.
Missions assets, liabilities and other items will be
adjusted to their estimated fair value on the closing date of
the merger and combined with the historical book values of the
assets and liabilities of Petrohawk. Applicable income tax
effects of these adjustments will be included as a component of
the combined companys deferred tax asset or liability. The
difference between the estimated fair value of the assets
(including separately identifiable intangible assets),
liabilities and other items (adjusted as discussed above) and
the purchase price will be recorded as goodwill. Financial
statements of Petrohawk issued after the merger will reflect the
values and will not be restated retroactively to reflect the
historical financial position or results of operations of
Mission.
Financial Interests of Missions Directors and Executive
Officers in the Merger
In considering the recommendations of the Mission board of
directors with respect to the merger agreement, you should be
aware that Missions directors and executive officers have
financial and other interests in the merger in addition to their
interests as stockholders of Mission. The Mission board of
directors was aware of these additional interests and considered
them, among other matters, in reaching its
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decision to approve the merger agreement and to recommend that
Mission stockholders vote to adopt the merger agreement and
approve the merger and the other transactions contemplated by
the merger agreement.
The merger agreement provides that Petrohawk will increase the
size of its board of directors by two members, for a total of
nine members, and that following the merger Petrohawk will
appoint two persons designated by the Mission board of directors
to fill the vacancies created by such increase, which will
consist of one Class I director whose term will expire in
2008 and one Class II director whose term will expire in
2006. Petrohawk has also agreed to recommend that the
Class II director designee be elected to the Petrohawk
board of directors at the first annual meeting of Petrohawk
stockholders following the merger.
Pursuant to their terms and the Mission stock option plans, all
options to acquire Mission common stock, including stock options
held by directors and executive officers of Mission, that are
outstanding prior to the merger will automatically become vested
and exercisable at the effective time of the merger. The merger
agreement provides that each stock option that is outstanding
and unexercised immediately prior to the effective time of the
merger will be converted into an option to acquire shares of
Petrohawk common stock. For a more complete description of the
terms of the new Petrohawk stock options, see above under the
heading Treatment of Options.
The following table sets forth, as of April 22, 2005 the
number of shares of Mission common stock subject to vested and
unvested stock options held by Missions directors and
executive officers and the estimated value of those stock
options based on the closing price of Mission of $7.52 per
share on April 22, 2005:
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|
Options | |
|
Options | |
|
|
|
|
| |
|
| |
|
| |
|
| |
Robert L. Cavnar
|
|
Chairman, President and Chief Executive Officer |
|
|
191,666 |
|
|
$ |
860,954 |
|
|
|
2,058,334 |
|
|
$ |
13,882,296 |
|
Richard W. Piacenti
|
|
Executive Vice President and Chief Financial Officer |
|
|
108,333 |
|
|
$ |
469,039 |
|
|
|
391,667 |
|
|
$ |
2,424,211 |
|
John (Jack) L. Eells
|
|
Senior Vice President Exploration and Geoscience |
|
|
75,000 |
|
|
$ |
332,500 |
|
|
|
350,000 |
|
|
$ |
2,255,750 |
|
Marshall L. Munsell
|
|
Senior Vice President Land and Land Administration |
|
|
100,000 |
|
|
$ |
418,251 |
|
|
|
250,000 |
|
|
$ |
1,403,249 |
|
Tom C. Langford
|
|
Senior Vice President General Counsel |
|
|
200,000 |
|
|
$ |
259,000 |
|
|
|
100,000 |
|
|
$ |
129,500 |
|
William R. Picquet
|
|
Senior Vice President Operations and Engineering |
|
|
125,000 |
|
|
$ |
47,500 |
|
|
|
125,000 |
|
|
$ |
47,500 |
|
David A. B. Brown
|
|
Director |
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
$ |
201,575 |
|
Joseph N. Jaggers
|
|
Director |
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
$ |
140,525 |
|
Robert R. Rooney
|
|
Director |
|
|
|
|
|
|
|
|
|
|
39,000 |
|
|
$ |
200,300 |
|
Herbert C. Williamson, III
|
|
Director |
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
$ |
197,575 |
|
87
Messrs. Cavnar, Piacenti, Eells, Munsell, Langford and
Picquet are each party to an employment agreement with Mission.
These agreements provide that in the event such executives
employment with Mission is terminated without cause, or by the
executive for good reason, within twelve months following a
change of control, such executive will receive severance pay
equal to two years of salary plus a pro rated portion of his
annual bonus, which bonus will not be less than one-half the
executives current salary, and, if applicable, an
additional cash payment to make the executive whole for certain
tax liabilities, as well as payment for any accrued and used
vacation time or other unpaid benefits. In addition, all stock
options held by the executive will immediately vest and the
period during which they may be exercised extended for up to one
year, and, if he so elects, he will be provided, at
Missions expense, continuing coverage under Missions
group health plans for the applicable coverage period under the
Consolidated Omnibus Budget Reconciliation Act of 1985.
|
|
|
Indemnification and Insurance |
The merger agreement provides that, after the effective time of
the merger, Petrohawk will indemnify, defend and hold harmless
the present and former officers, directors, employees and agents
of Mission and its subsidiaries in such capacities to the
fullest extent that Mission or its subsidiaries would have been
required to do so in accordance with the provisions of each
indemnification or similar agreement between Mission or any of
its subsidiaries and any such individual, in each case against
any losses, damages, expenses or liabilities resulting from any
claim, liability, loss, damage, cost or expense, asserted
against, or incurred by, any such individual that is based on
the fact that such individual is or was a director, officer,
employee or agent of Mission or its subsidiaries and arising out
of actions or omissions or alleged actions or omissions
occurring at or prior to the effective time of the merger.
Petrohawk will also take all necessary actions to ensure that
its directors and officers liability insurance
continues to cover each officer and director of Mission, in each
case so long as they remain employed or retained by Petrohawk or
any affiliate of Petrohawk (including the surviving corporation)
as an officer or director.
In addition, the merger agreement provides that prior to the
closing of the merger, Mission will purchase, and after the
effective time of the merger the surviving corporation will
maintain, directors and officers liability insurance
covering, for a period of six years after the effective time of
the merger, the directors and officers of Mission and its
subsidiaries who are currently covered by Missions
existing directors and officers liability insurance
with respect to claims arising from facts or events that
occurred before the effective time of the merger, on terms and
conditions substantially similar to those in effect on
April 3, 2005; provided, however, that the aggregate annual
premiums for such insurance at any time during such period may
not exceed 250% of the per annum rate of premium currently paid
by Mission and its subsidiaries for such insurance on
April 3, 2005.
|
|
|
Restrictions on Resales by Affiliates |
Shares of Petrohawk common stock to be issued to Mission
stockholders in the merger have been registered under the
Securities Act, as amended, and may be traded freely and without
restriction by those stockholders not deemed to be affiliates
(as that term is defined under the Securities Act) of Mission.
Any subsequent transfer of shares, however, by any person who is
an affiliate of Mission at the time the merger is submitted for
a vote of the Mission stockholders will, under existing law,
require either:
|
|
|
|
|
the further registration under the Securities Act of the
Petrohawk common stock to be transferred; |
|
|
|
compliance with Rule 145 promulgated under the Securities
Act, which permits limited sales under certain
circumstances; or |
|
|
|
the availability of another exemption from registration. |
An affiliate of Mission is a person who directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, Mission. These
restrictions are expected to apply to the directors and
executive officers of Mission and the holders of 10% or more of
the outstanding
88
Mission common stock. The same restrictions apply to the spouses
and certain relatives of those persons and any trusts, estates,
corporations or other entities in which those persons have a 10%
or greater beneficial or equity interest. Petrohawk will give
stop transfer instructions to the transfer agent with respect to
the shares of Petrohawk common stock to be received by persons
subject to these restrictions, and the certificates for their
shares will be appropriately legended.
89
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes present how the combined
financial statements of Petrohawk and Mission may have appeared
had the businesses actually been combined as of
December 31, 2004 (with respect to the balance sheet
information using currently available fair value information) or
as of January 1, 2004 (with respect to statements of
operations information). The unaudited pro forma condensed
combined financial information shows the impact of the merger of
Petrohawk and Mission on the historical financial position and
results of operations under the purchase method of accounting
with Petrohawk treated as the acquirer. Under this method of
accounting, the assets and liabilities of Mission are recorded
by Petrohawk at their estimated fair values as of the date the
merger is completed. The unaudited pro forma condensed combined
financial information combines the historical financial
information of Petrohawk on a pro forma basis, taking into
account Petrohawks February 25, 2005 disposition of
certain royalty interest properties and acquisition of Proton
Oil & Gas Corporation, with Mission as of and for the
year ended December 31, 2004. The unaudited pro forma
condensed combined balance sheet as of December 31, 2004
assumes the merger was completed on that date. The unaudited pro
forma condensed combined statements of operations gives effect
to the merger with Mission, as if it had been completed on
January 1, 2004.
The merger agreement was executed on April 3, 2005 and
provides for Petrohawk to issue approximately
19.234 million shares of common stock and
$135.4 million in cash as consideration to Mission common
stockholders (in each case subject to upward adjustment in the
event that any shares of Mission common stock are issued in
accordance with the merger agreement pursuant to the exercise of
Mission stock options or otherwise). The unaudited pro forma
condensed combined financial information has been derived from
and should be read together with the historical consolidated
financial statements and the related notes of Petrohawk and
Mission, which are incorporated in this document by reference.
The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and does not
indicate the financial results of the combined companies had the
companies actually been combined and had the impact of possible
revenue enhancements, expense efficiencies, asset dispositions
and share repurchases, among other factors, been considered. In
addition, as explained in more detail in the accompanying notes
to the unaudited pro forma condensed combined financial
information, the allocation of the purchase price reflected in
the pro forma condensed combined financial information is
subject to adjustment and may vary from the actual purchase
price allocation that will be recorded upon the effective time
of the merger.
90
Petrohawk Energy Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petrohawk | |
|
|
Petrohawk | |
|
Mission | |
|
Merger | |
|
Pro Forma | |
|
|
Pro Forma | |
|
Historical | |
|
Adjustments | |
|
Combined | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
ASSETS |
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
6,306 |
|
|
$ |
5,975 |
|
|
$ |
135,000 |
(3) |
|
$ |
6,631 |
|
|
|
|
|
|
|
|
|
|
|
|
(135,000 |
)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,650 |
)(3) |
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas sales
|
|
|
23,939 |
|
|
|
12,175 |
|
|
|
|
|
|
|
36,114 |
|
|
|
Other
|
|
|
974 |
|
|
|
4,953 |
|
|
|
|
|
|
|
5,927 |
|
Receivables from price risk management activities |
|
|
5,092 |
|
|
|
|
|
|
|
|
|
|
|
5,092 |
|
|
Prepaid expenses and other
|
|
|
2,428 |
|
|
|
5,683 |
|
|
|
|
|
|
|
8,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
38,739 |
|
|
|
28,786 |
|
|
|
(5,650 |
) |
|
|
61,875 |
|
Property and Equipment, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties, full cost method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject to amortization
|
|
|
460,480 |
|
|
|
900,323 |
|
|
|
(900,323 |
)(2) |
|
|
884,480 |
|
|
|
|
|
|
|
|
|
|
|
|
424,000 |
(2) |
|
|
|
|
|
|
Unevaluated properties, not subject to amortization
|
|
|
68,841 |
|
|
|
8,858 |
|
|
|
(8,858 |
)(2) |
|
|
218,841 |
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
(2) |
|
|
|
|
Other property and equipment
|
|
|
2,765 |
|
|
|
5,610 |
|
|
|
|
|
|
|
8,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,086 |
|
|
|
914,791 |
|
|
|
(335,181 |
) |
|
|
1,111,696 |
|
Less depreciation, depletion and amortization
|
|
|
(49,674 |
) |
|
|
(574,085 |
) |
|
|
574,085 |
(2) |
|
|
(49,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482,412 |
|
|
|
340,706 |
|
|
|
238,904 |
|
|
|
1,062,022 |
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
165,748 |
(2) |
|
|
165,748 |
|
Other Assets
|
|
|
12,012 |
|
|
|
8,411 |
|
|
|
(7,560 |
)(3) |
|
|
16,913 |
|
|
|
|
|
|
|
|
|
|
|
|
4,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
533,163 |
|
|
$ |
377,903 |
|
|
$ |
395,492 |
|
|
$ |
1,306,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other
|
|
$ |
21,800 |
|
|
$ |
9,470 |
|
|
|
|
|
|
$ |
31,270 |
|
|
Commodity hedging contracts
|
|
|
1,990 |
|
|
|
10,477 |
|
|
|
|
|
|
|
12,467 |
|
|
Current portion of long-term debt
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
Other accrued liabilities
|
|
|
4,806 |
|
|
|
19,100 |
|
|
|
|
|
|
|
23,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
29,096 |
|
|
|
39,047 |
|
|
|
|
|
|
|
68,143 |
|
Long-Term Debt
|
|
|
128,000 |
|
|
|
15,000 |
|
|
$ |
(15,000 |
)(3) |
|
|
168,000 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
(3) |
|
|
|
|
Subordinated Note Payable
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
Term Loan B
|
|
|
49,500 |
|
|
|
25,000 |
|
|
|
(25,000 |
)(3) |
|
|
49,500 |
|
Senior
97/8
Notes
|
|
|
|
|
|
|
130,000 |
|
|
|
|
|
|
|
130,000 |
|
New Debt
|
|
|
|
|
|
|
|
|
|
|
135,000 |
(3) |
|
|
135,000 |
|
Asset Retirement Obligation
|
|
|
13,235 |
|
|
|
35,366 |
|
|
|
|
|
|
|
48,601 |
|
Deferred Tax Liability
|
|
|
23,274 |
|
|
|
20,003 |
|
|
|
(20,003 |
)(4) |
|
|
186,274 |
|
|
|
|
|
|
|
|
|
|
|
|
163,000 |
(4) |
|
|
|
|
Other
|
|
|
7,966 |
|
|
|
1,482 |
|
|
|
|
|
|
|
9,448 |
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Common stock
|
|
|
40 |
|
|
|
418 |
|
|
|
(418 |
)(3) |
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
19 |
(3) |
|
|
|
|
|
Additional Paid-In Capital
|
|
|
262,046 |
|
|
|
208,740 |
|
|
|
(208,740 |
)(3) |
|
|
499,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
206,362 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,052 |
|
|
|
|
|
|
Treasury stock
|
|
|
(36 |
) |
|
|
(1,937 |
) |
|
|
1,937 |
(3) |
|
|
(36 |
) |
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
(7,933 |
) |
|
|
7,933 |
(1) |
|
|
|
|
|
Accumulated deficit
|
|
|
(14,959 |
) |
|
|
(87,283 |
) |
|
|
87,283 |
(3) |
|
|
(22,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
(7,933 |
)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,092 |
|
|
|
112,005 |
|
|
|
117,495 |
|
|
|
476,592 |
|
|
|
Total Liabilities and Stockholders Equity
|
|
$ |
533,163 |
|
|
$ |
377,903 |
|
|
$ |
395,492 |
|
|
$ |
1,306,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements
91
Petrohawk Energy Corporation
Unaudited Pro Forma Condensed Combined Statement of
Operations
For the Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petrohawk | |
|
|
Petrohawk | |
|
Mission | |
|
Merger | |
|
Pro Forma | |
|
|
Pro Forma | |
|
Historical | |
|
Adjustments(7) | |
|
Combined | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas
|
|
$ |
121,952 |
|
|
$ |
128,707 |
|
|
$ |
20,656 |
(1) |
|
$ |
271,315 |
|
|
Field services and other
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
122,398 |
|
|
|
128,707 |
|
|
|
20,656 |
|
|
|
271,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operations
|
|
|
32,833 |
|
|
|
29,060 |
|
|
|
|
|
|
|
61,893 |
|
|
|
Production, severance and ad valorem taxes
|
|
|
808 |
|
|
|
9,400 |
|
|
|
|
|
|
|
10,208 |
|
|
|
Gathering, transportation and other
|
|
|
|
|
|
|
346 |
|
|
|
|
|
|
|
346 |
|
|
Field services
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
168 |
|
|
General and administrative
|
|
|
11,829 |
|
|
|
12,751 |
|
|
|
|
|
|
|
24,580 |
|
|
Stock-based compensation
|
|
|
3,529 |
|
|
|
4,120 |
|
|
|
|
|
|
|
7,649 |
|
|
Depreciation, depletion and amortization
|
|
|
40,203 |
|
|
|
44,229 |
|
|
|
(84,432 |
)(2) |
|
|
79,275 |
|
|
|
|
|
|
|
|
|
|
|
|
79,275 |
(2) |
|
|
|
|
|
Accretion of asset retirement obligations
|
|
|
611 |
|
|
|
1,202 |
|
|
|
|
|
|
|
1,813 |
|
|
Other
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
90,472 |
|
|
|
101,108 |
|
|
|
(5,157 |
) |
|
|
186,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations
|
|
|
31,926 |
|
|
|
27,599 |
|
|
|
25,813 |
|
|
|
85,338 |
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on mark-to-market derivative contracts
|
|
|
4,000 |
|
|
|
|
|
|
|
(23,940 |
)(1) |
|
|
(19,940 |
) |
|
Equity income of non-affiliates
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
85 |
|
|
Investment income
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
Interest expense
|
|
|
(10,146 |
) |
|
|
(19,818 |
) |
|
|
19,818 |
(5) |
|
|
(34,027 |
) |
|
|
|
|
|
|
|
|
|
|
|
(23,881 |
)(5) |
|
|
|
|
|
Interest income and other
|
|
|
249 |
|
|
|
(3,067 |
) |
|
|
|
|
|
|
(2,818 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(5,792 |
) |
|
|
(22,885 |
) |
|
|
(28,003 |
) |
|
|
(56,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax
|
|
|
26,134 |
|
|
|
4,714 |
|
|
|
(2,190 |
) |
|
|
28,658 |
|
Income Tax Provision
|
|
|
(14,138 |
) |
|
|
(1,765 |
) |
|
|
15,903 |
(6) |
|
|
(10,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
(10,790 |
)(6) |
|
|
|
|
Net Income
|
|
|
11,996 |
|
|
|
2,949 |
|
|
|
2,923 |
|
|
|
17,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Dividends
|
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Applicable to Common Stockholders
|
|
$ |
11,551 |
|
|
$ |
2,949 |
|
|
$ |
2,923 |
|
|
$ |
17,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income Per Common Share(6)
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
|
$ |
0.58 |
|
Diluted Net Income Per Common Share(6)
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
$ |
0.39 |
|
Weighted Average Shares Outstanding:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,809 |
|
|
|
|
|
|
|
19,233 |
(3) |
|
|
30,042 |
|
|
Fully Diluted
|
|
|
23,854 |
|
|
|
|
|
|
|
21,604 |
(3) |
|
|
45,458 |
|
See Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements
92
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Data
The unaudited Petrohawk Pro Forma financial data has
been prepared to give effect to Petrohawks acquisition of
Proton and disposition of certain royalty interests. Information
under the heading Merger Adjustments gives effect to
the adjustments related to the acquisition of Mission. The
unaudited pro forma consolidated statements are not necessarily
indicative of the results of Petrohawks future operations.
|
|
|
|
(1) |
To reflect Petrohawks recognition of mark-to-market losses
associated with derivative liabilities assumed in the merger
with Mission. As a result of the business combination,
Missions costless collars will not qualify for hedge
accounting treatment, and, as a result, Petrohawk will continue
to recognize mark-to-market gains and losses in future earnings
until the collars mature. |
|
|
(2) |
To record the preliminary purchase price allocation to evaluated
and unevaluated property and goodwill. These adjustments also
adjust depreciation, depletion and amortization expense to give
effect to the purchase price allocation using the unit of
production method under the full cost method of accounting. |
|
|
(3) |
To record the retirement and issuance of debt and equity
instruments, and related costs, in connection with the merger. |
|
|
(4) |
To record the deferred tax position of the combined company,
inclusive of the deferred tax gross-up in connection with the
merger. |
|
|
(5) |
To adjust interest expense to give effect to the anticipated
financing activities in connection with the merger. |
|
|
(6) |
To record income tax expense on the combined company results of
operations based on a 37.65% combined federal and state tax rate. |
|
|
(7) |
Mission Resources will incur approximately $15.0 million in
transaction costs. These costs consist of accounting, consulting
and legal fees in addition to costs associated with employee
severance. These costs are directly attributable to the
transaction and have been excluded from the pro forma financial
statements as they represent material nonrecurring charges. |
93
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes present how the combined
financial statements of Petrohawk may have appeared on
December 31, 2004 (with respect to the balance sheet
information using currently available fair value information) or
as of January 1, 2004 (with respect to the statements of
operation information). The unaudited pro forma condensed
combined financial information combines the historical financial
information of Petrohawk on a pro forma basis, taking into
account Petrohawks November 23, 2004 acquisition of
Wynn-Crosby, the February 25, 2005 disposition of certain
royalty interest properties and acquisition of Proton
Oil & Gas Corporation as of and for the year ended
December 31, 2004.
The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and does not
indicate the financial results of Petrohawk Energy Corporation
had the impact of these transactions actually been reflected in
the results of operations and had the impact of possible revenue
enhancements and expense efficiencies, among other factors, been
considered.
94
Petrohawk Energy Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petrohawk | |
|
Royalty | |
|
Proton | |
|
Proton | |
|
Petrohawk | |
|
|
Historical | |
|
Sale | |
|
Historical | |
|
PPA Adj | |
|
Pro Forma | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
ASSETS |
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
5,660 |
|
|
|
|
|
|
$ |
646 |
|
|
$ |
|
|
|
$ |
6,306 |
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas sales
|
|
|
22,481 |
|
|
|
|
|
|
|
1,458 |
|
|
|
|
|
|
|
23,939 |
|
|
Other
|
|
|
670 |
|
|
|
|
|
|
|
304 |
|
|
|
|
|
|
|
974 |
|
|
Receivables from price risk management activities
|
|
|
4,973 |
|
|
|
|
|
|
|
|
|
|
|
119 |
(2) |
|
|
5,092 |
|
|
Prepaid expenses and other
|
|
|
2,238 |
|
|
|
|
|
|
|
190 |
|
|
|
|
|
|
|
2,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
36,022 |
|
|
|
|
|
|
|
2,598 |
|
|
|
119 |
|
|
|
38,739 |
|
Property and Equipment, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties, full cost method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject to amortization
|
|
|
484,233 |
|
|
$ |
(80,000 |
)(1) |
|
|
23,579 |
|
|
|
9,394 |
(3) |
|
|
460,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,274 |
(3) |
|
|
|
|
|
|
Unevaluated properties, not subject to amortization
|
|
|
48,841 |
|
|
|
|
|
|
|
|
|
|
|
20,000 |
(3) |
|
|
68,841 |
|
Other Property and Equipment
|
|
|
2,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
535,839 |
|
|
|
(80,000 |
) |
|
|
23,579 |
|
|
|
52,668 |
|
|
|
532,086 |
|
Less depreciation, depletion and amortization
|
|
|
(49,674 |
) |
|
|
|
|
|
|
(2,536 |
) |
|
|
2,536 |
(3) |
|
|
(49,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
486,165 |
|
|
|
(80,000 |
) |
|
|
21,043 |
|
|
|
55,204 |
|
|
|
482,412 |
|
Other Assets
|
|
|
12,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
534,199 |
|
|
$ |
(80,000 |
) |
|
$ |
23,641 |
|
|
$ |
55,323 |
|
|
$ |
533,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other
|
|
$ |
20,399 |
|
|
|
|
|
|
$ |
1,401 |
|
|
$ |
|
|
|
$ |
21,800 |
|
|
Commodity hedging contracts
|
|
|
1,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,990 |
|
|
Current portion of long-term debt
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
Other accrued liabilities
|
|
|
4,276 |
|
|
|
|
|
|
|
861 |
|
|
|
(331 |
)(2) |
|
|
4,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
27,165 |
|
|
|
|
|
|
|
2,262 |
|
|
|
(331 |
) |
|
|
29,096 |
|
Long-Term Debt
|
|
|
155,000 |
|
|
$ |
(80,000 |
)(1) |
|
|
8,550 |
|
|
|
44,450 |
(4) |
|
|
128,000 |
|
Subordinated Note Payable
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
Term Loan B
|
|
|
49,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,500 |
|
Asset Retirement Obligation
|
|
|
12,726 |
|
|
|
|
|
|
|
509 |
|
|
|
|
|
|
|
13,235 |
|
Deferred Tax Liability
|
|
|
|
|
|
|
|
|
|
|
1,705 |
|
|
|
21,569 |
(3) |
|
|
23,274 |
|
Other
|
|
|
7,716 |
|
|
|
|
|
|
|
|
|
|
|
250 |
(2) |
|
|
7,966 |
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Common stock
|
|
|
40 |
|
|
|
|
|
|
|
8 |
|
|
|
(8 |
)(4) |
|
|
40 |
|
|
Additional paid-in capital
|
|
|
262,046 |
|
|
|
|
|
|
|
8,138 |
|
|
|
(8,138 |
)(4) |
|
|
262,046 |
|
|
Treasury stock
|
|
|
(36 |
) |
|
|
|
|
|
|
(53 |
) |
|
|
53 |
(4) |
|
|
(36 |
) |
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(14,959 |
) |
|
|
|
|
|
|
2,522 |
|
|
|
(2,522 |
)(4) |
|
|
(14,959 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,092 |
|
|
|
|
|
|
|
10,615 |
|
|
|
(10,615 |
) |
|
|
247,092 |
|
|
|
Total Liabilities and Stockholders Equity
|
|
$ |
534,199 |
|
|
$ |
(80,000 |
) |
|
$ |
23,641 |
|
|
$ |
55,323 |
|
|
$ |
533,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements
95
Petrohawk Energy Corporation
Unaudited Pro Forma Condensed Combined Statement of
Operations
For the Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petrohawk/ | |
|
|
|
|
|
|
|
|
|
|
Petrohawk | |
|
Wynn-Crosby | |
|
Wynn-Crosby | |
|
Royalty | |
|
Proton | |
|
Proton | |
|
Petrohawk | |
|
|
Historical | |
|
Adjustment | |
|
Pro Forma | |
|
Sale | |
|
Historical | |
|
PPA Adj. | |
|
Pro Forma | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas
|
|
$ |
33,229 |
|
|
$ |
92,313 |
|
|
$ |
125,542 |
|
|
$ |
(11,230 |
) |
|
$ |
7,640 |
|
|
|
|
|
|
$ |
121,952 |
|
|
Field services and other
|
|
|
348 |
|
|
|
98 |
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
33,577 |
|
|
|
92,411 |
|
|
|
125,988 |
|
|
|
(11,230 |
) |
|
|
7,640 |
|
|
|
|
|
|
|
122,398 |
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operations
|
|
|
5,692 |
|
|
|
25,286 |
|
|
|
30,978 |
|
|
|
|
|
|
|
1,855 |
|
|
|
|
|
|
|
32,833 |
|
|
|
Production, severance and ad valorem taxes
|
|
|
2,319 |
|
|
|
(1,124 |
) |
|
|
1,195 |
|
|
|
(922 |
) |
|
|
535 |
|
|
|
|
|
|
|
808 |
|
|
|
Gathering, transportation and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Field services
|
|
|
168 |
|
|
|
|
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168 |
|
|
General and administrative
|
|
|
7,802 |
|
|
|
3,137 |
|
|
|
10,939 |
|
|
|
|
|
|
|
890 |
|
|
|
|
|
|
|
11,829 |
|
|
Stock-based compensation
|
|
|
3,529 |
|
|
|
|
|
|
|
3,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,529 |
|
|
Depreciation, depletion and amortization
|
|
|
9,231 |
|
|
|
28,843 |
|
|
|
38,074 |
|
|
|
(3,292 |
) |
|
|
1,102 |
|
|
$ |
(1,102 |
)(3) |
|
|
40,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,421 |
(3) |
|
|
|
|
|
Accretion of asset retirement obligations
|
|
|
137 |
|
|
|
456 |
|
|
|
593 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
611 |
|
|
Other
|
|
|
|
|
|
|
491 |
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
28,878 |
|
|
|
57,089 |
|
|
|
85,967 |
|
|
|
(4,214 |
) |
|
|
4,400 |
|
|
|
4,319 |
|
|
|
90,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations
|
|
|
4,699 |
|
|
|
35,322 |
|
|
|
40,021 |
|
|
|
(7,016 |
) |
|
|
3,240 |
|
|
|
(4,319 |
) |
|
|
31,926 |
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on mark-to-market derivative contracts
|
|
|
7,441 |
|
|
|
(3,524 |
) |
|
|
3,917 |
|
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
4,000 |
|
|
Equity income of non-affiliates
|
|
|
|
|
|
|
85 |
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85 |
|
|
Investment income
|
|
|
|
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
Interest expense
|
|
|
(3,178 |
) |
|
|
(7,816 |
) |
|
|
(10,994 |
) |
|
|
2,512 |
|
|
|
(292 |
) |
|
|
292 |
(5) |
|
|
(10,146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,664 |
)(5) |
|
|
|
|
|
Interest income and other
|
|
|
284 |
|
|
|
(48 |
) |
|
|
236 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
4,547 |
|
|
|
(11,283 |
) |
|
|
(6,736 |
) |
|
|
2,512 |
|
|
|
(196 |
) |
|
|
(1,372 |
) |
|
|
(5,792 |
) |
Income Before Income Tax
|
|
|
9,246 |
|
|
|
24,039 |
|
|
|
33,285 |
|
|
|
(4,504 |
) |
|
|
3,044 |
|
|
|
(5,691 |
) |
|
|
26,134 |
|
Income Tax Provision
|
|
|
(1,129 |
) |
|
|
(11,403 |
) |
|
|
(12,532 |
) |
|
|
(460 |
) |
|
|
(1,035 |
) |
|
|
1,035 |
(6) |
|
|
(14,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,146 |
)(6) |
|
|
|
|
Net Income
|
|
|
8,117 |
|
|
|
12,636 |
|
|
|
20,753 |
|
|
|
(4,964 |
) |
|
|
2,009 |
|
|
|
(5,802 |
) |
|
|
11,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Dividends
|
|
|
(445 |
) |
|
|
|
|
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Applicable to Common Stockholders
|
|
$ |
7,672 |
|
|
$ |
12,636 |
|
|
$ |
20,308 |
|
|
$ |
(4,964 |
) |
|
$ |
2,009 |
|
|
$ |
(5,802 |
) |
|
$ |
11,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income Per Common Share(6)
|
|
|
|
|
|
|
|
|
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1.07 |
|
Diluted Net Income Per Common Share(6)
|
|
|
|
|
|
|
|
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.50 |
|
Weighted Average Shares Outstanding:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
10,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,809 |
|
|
Fully Diluted
|
|
|
|
|
|
|
|
|
|
|
23,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,854 |
|
See Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements
96
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Data
The unaudited pro forma financial data has been prepared to give
effect to Petrohawks disposition of certain royalty
interests and acquisition of Proton Oil & Gas
Corporation. The unaudited pro forma consolidated statements are
not necessarily indicative of the results of Petrohawks
future operations.
|
|
|
|
(1) |
To adjust for the disposition of royalty properties in the
amount of $80 million and repayment of debt with the sales
proceeds. |
|
|
(2) |
Represents the estimated fair value of assets and liabilities
assumed by Petrohawk from Proton in connection with the
acquisition. |
|
|
(3) |
To record the preliminary purchase price allocation to evaluated
and unevaluated property. These adjustments also adjust
depreciation, depletion and amortization expense to give effect
to the purchase price allocation using the unit of production
method under the full cost method of accounting. |
|
|
(4) |
To record the issuance of debt and elimination of Protons
stockholders equity in connection with the acquisition. |
|
|
(5) |
To adjust interest expense to give effect to the financing
activities in connection with the acquisition. |
|
|
(6) |
To record income tax expense on the combined company results of
operations based on a 37.65% combined federal and state tax rate. |
97
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Petrohawk
Petrohawk common stock is listed on the Nasdaq National Market
and traded under the symbol HAWK. The following
table sets forth, for the calendar quarters indicated, the high
and low reported sales prices per share of Petrohawk common
stock on the Nasdaq National Market, as adjusted for a
one-for-two reverse stock split on May 26, 2004.
|
|
|
|
|
|
|
|
|
|
|
Petrohawk | |
|
|
Common Stock | |
|
|
| |
Quarter Ended |
|
High | |
|
Low | |
2003 |
|
| |
|
| |
|
|
|
|
|
|
|
March 31
|
|
$ |
2.14 |
|
|
$ |
1.38 |
|
June 30
|
|
|
3.30 |
|
|
|
1.24 |
|
September 30
|
|
|
3.04 |
|
|
|
2.30 |
|
December 31
|
|
|
4.72 |
|
|
|
2.60 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
$ |
7.84 |
|
|
$ |
3.70 |
|
June 30
|
|
|
9.57 |
|
|
|
5.50 |
|
September 30
|
|
|
8.80 |
|
|
|
6.40 |
|
December 31
|
|
|
9.89 |
|
|
|
7.85 |
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
$ |
10.98 |
|
|
$ |
7.45 |
|
June 30 (through April 26, 2005)
|
|
|
11.94 |
|
|
|
9.07 |
|
Mission
Mission common stock is listed on the Nasdaq National Market and
traded under the symbol MSSN. The following table
sets forth, for the calendar quarters indicated, the high and
low reported sales prices per share of Mission common stock on
the Nasdaq National Market.
|
|
|
|
|
|
|
|
|
|
|
Mission | |
|
|
Common Stock | |
|
|
| |
Quarter Ended |
|
High | |
|
Low | |
2003 |
|
| |
|
| |
|
|
|
|
|
|
|
March 31
|
|
$ |
0.47 |
|
|
$ |
0.22 |
|
June 30
|
|
|
1.88 |
|
|
|
0.25 |
|
September 30
|
|
|
2.45 |
|
|
|
1.30 |
|
December 31
|
|
|
2.99 |
|
|
|
1.62 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
$ |
3.32 |
|
|
$ |
2.09 |
|
June 30
|
|
|
6.21 |
|
|
|
3.08 |
|
September 30
|
|
|
6.73 |
|
|
|
4.36 |
|
December 31
|
|
|
7.02 |
|
|
|
5.10 |
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
$ |
7.98 |
|
|
$ |
4.85 |
|
June 30 (through April 26, 2005)
|
|
|
8.00 |
|
|
|
7.06 |
|
Petrohawk Future Dividend Policy
The holders of Petrohawk common stock receive dividends if and
when declared by the Petrohawk board of directors out of legally
available funds. Petrohawk has never paid any cash dividends on
its
98
common stock. Petrohawk does not expect to declare or pay any
cash or other dividends in the foreseeable future on our common
stock. Holders of its 8% cumulative convertible preferred stock
are entitled to receive cumulative dividends at the annual rate
of $0.74 per share when and as declared by our board of
directors. No dividends may be paid on the common stock unless
all cumulative dividends due on all of our 8% cumulative
convertible preferred stock have been declared and paid.
Petrohawks existing revolving credit facility restricts
its ability to pay cash dividends on our preferred stock and
common stock (other than on its 8% cumulative convertible
preferred stock), and Petrohawk may also enter into credit
agreements or other borrowing arrangements in the future that
restrict our ability to declare cash dividends on its preferred
stock and common stock.
COMPARISON OF RIGHTS OF HOLDERS OF PETROHAWK AND MISSION
COMMON STOCK
After the effective time of the merger, to the extent Mission
stockholders receive Petrohawk common stock in the merger, the
rights of former stockholders of Mission will be determined by
reference to Petrohawks certificate of incorporation and
bylaws and the DGCL. The material differences between the rights
of holders of Mission common stock and the rights of holders of
Petrohawk common stock, resulting from the differences in their
governing documents are summarized below.
The following summary does not purport to be a complete
statement of the rights of holders of Petrohawk common stock
under Petrohawks certificate of incorporation and bylaws
or the rights of the holders of Mission common stock, under
Missions certificate of incorporation and bylaws, or a
complete description of the specific provisions referred to
below. This summary contains a list of the material differences
but is not meant to be relied upon as an exhaustive list or a
detailed description of the provisions discussed and is
qualified in its entirety by reference to the governing
corporate instruments of Petrohawk and Mission, to which the
holders of Mission common stock are referred. Copies of the
governing corporate instruments of Petrohawk and Mission are
available, without charge, to any person, including any
beneficial owner to whom this joint proxy statement/ prospectus
is delivered, by following the instructions listed under
Where You Can Find More Information beginning on
page 142 of this document.
Petrohawk. The rights of Petrohawk stockholders are
governed by the DGCL and Petrohawks certificate of
incorporation and bylaws, as amended.
Mission. The rights of Mission stockholders are governed
by the DGCL and Missions certificate of incorporation and
bylaws, as amended.
Petrohawk. The authorized capital stock of Petrohawk
currently consists of 80 million shares of capital stock,
comprised of 75 million shares of Petrohawk common stock,
par value $0.001 per share and 5 million shares of
Petrohawk preferred stock, par value $0.001 per share,
1.5 million shares of which have been designated 8%
cumulative convertible preferred stock. Petrohawk is also
proposing that its stockholders approve an amendment to its
certificate of incorporation to increase Petrohawks
authorized common stock from 75 million shares to
125 million shares, but the merger is not conditioned on
approval of this amendment.
Mission. The authorized capital stock of Mission consists
of 65 million shares of capital stock, comprised of
60 million shares of common stock, par value $0.01 per
share and 5 million shares of preferred stock, par value
$0.01 per share.
99
|
|
|
Number and Election of Board of Directors |
Petrohawk. Petrohawks certificate of incorporation
and bylaws provide that the board of directors of Petrohawk
shall have not less than one nor more than eleven members, as
such number may be designated by the board of directors from
time to time.
The board of directors of Petrohawk is divided into three
classes: Class I, Class II, and Class III.
According to Petrohawks certificate of incorporation, no
one class shall have more than one director more than any other
class. If a fraction is contained in the quotient arrived at by
dividing the authorized number of directors by three, then, if
such fraction is one-third, the extra director shall be a member
of Class III, and if such fraction is two-thirds, one of
the extra directors shall be a member of Class II and one
of the extra directors shall be a member of Class III,
unless otherwise provided from time to time by resolution
adopted by the board of directors.
Each director shall serve for a term ending on the date of the
third annual meeting following the annual meeting at which such
director was elected and until said directors successor is
duly elected and qualified, or until his or her earlier death,
resignation or removal; provided, that each initial
director in Class I shall serve for a term expiring at
Petrohawks annual meeting held in 2005; each initial
director in Class II shall serve for a term expiring at
Petrohawks annual meeting held in 2006; and each initial
director in Class III shall serve for a term expiring at
Petrohawks annual meeting held in 2007.
Petrohawks board of directors currently has seven members.
Pursuant to the merger agreement, upon consummation of the
merger, Petrohawks board of directors will be expanded to
include two members to be designated by the Mission board of
directors.
Mission. Missions bylaws provide that the board of
directors of Mission shall have not less than three nor more
than nine members, as such number may be designated by either
resolution of the board of directors or by the stockholders at
Missions annual meeting. Except for vacancies and newly
created directorships resulting from any increase in the
authorize number of directors, each director shall be elected at
the annual meeting of stockholders and shall hold office until
his successor is elected and qualified. The Mission board of
directors currently has five members.
|
|
|
Vacancies and Newly Created Directorships |
Petrohawk. Petrohawks certificate of incorporation
and bylaws state that, unless and until filled by the
stockholders, any vacancy in the board of directors, however
occurring, including a vacancy resulting from an enlargement of
the board, may be filled by a vote of a majority of the
directors then in office, although less than a quorum, or by a
sole remaining director. If there are no directors in office,
the vacancies may be filled by the stockholders. A director
elected to fill a vacancy shall be elected to hold office until
the next election of the class for which such director shall
have been chosen, subject to the election and qualification of
his successor and to his earlier death, resignation or removal.
Mission. Missions bylaws state that vacancies and
newly created directorships resulting from any increase in the
authorized number of directors may be filled by the affirmative
vote of a majority of the directors then in office, though less
than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in
office, an election may be held in a manner provided by statute.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less
than a majority of the whole board of directors (as constituted
immediately prior to any such increase), then the Delaware Court
of Chancery may, upon application of any stockholder or
stockholders holding at least 10% of the total number of
Petrohawks shares then outstanding having the right to
vote for such directors, summarily order an election to be held
to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office.
100
|
|
|
Nominations by Stockholders |
Petrohawk. Petrohawks bylaws are silent regarding
nomination of persons for election to the board of directors.
Mission. Missions bylaws provide that nominations
of persons for election to the board of directors of Mission
shall be accepted, and votes cast for a proposed nominee shall
be counted by the inspectors of election, only if, at least
ninety days prior to the meeting, Missions Secretary
receives a statement signed by the proposed nominee stating that
he consents the nomination and intends to serve as director if
elected. Such statement shall also contain the nominees
stock ownership in Mission, the nominees occupations and
business history for the previous five years, other
directorships of the nominee and all other information required
by the federal proxy rules in effect at the time the nominee
submits said statement.
|
|
|
Annual Meetings of Stockholders |
Petrohawk. Petrohawks bylaws provide that the
annual meeting of Petrohawk stockholders shall be held at such
date, time and place as may be designated from time to time by
resolution of the board of directors. The purpose of the annual
meeting shall be to elect members of the board of directors and
to transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating
the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than 10
nor more than 60 days before the date of the meeting. Such
notice should also detail those matters that the board of
directors intends to present for action by the stockholders.
Petrohawk stockholders are permitted under the Petrohawk bylaws
to bring business before the annual meeting of Petrohawk
stockholders, provided that:
|
|
|
(i) the business is brought before the meeting by a
stockholder of record entitled to vote at such meeting; |
|
|
(ii) written notice of such stockholders intent to
bring such business before such meeting is received by
Petrohawks Secretary not later than at the close of
business on the 60th day nor earlier than the close of business
on the 90th day prior to the first anniversary of the preceding
years annual meeting of stockholders; provided, however,
that in the event that the date of the annual meeting is more
than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the 90th
day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual
meeting and the 10th day following the issuance by the
Corporation of a press release announcing the meeting
date; and |
|
|
(iii) the notice sets forth: (A) a brief description
of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting;
(B) the name and address of the stockholder who intends to
propose such business; (C) a representation that the
stockholder is a holder of record of Petrohawks shares
entitled to vote at such meeting and intends to appear in person
or by proxy at such meeting to propose such business;
(D) any material interest of the stockholder in such
business; and (E) as to the stockholder giving the notice
and the beneficial owner, if any, or whose behalf the proposal
is made: (y) the name and address of such stockholder and
of such beneficial owner and (z) the class and number of
Petrohawks shares which are owned beneficially and of
record by such stockholder and such beneficial owner. |
Mission. Missions bylaws provide that the annual
meeting of the stockholders for the election of directors and
for the transaction of such other business as may properly come
before the meeting is to be held on such date, place and time as
the board of directors of Mission shall fix and set forth in the
notice of the meeting. Written notice of the annual meeting
shall be given to each stockholder entitled to vote at such
meeting not less than 10 nor more than 60 days before the
date of the meeting.
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Special Meetings of Stockholders |
Petrohawk. Petrohawks bylaws provide that special
meetings of the stockholders, for any purpose or purposes, may
be called by the majority vote of the board of directors, the
chairman of the board, or by Petrohawks chief executive
officer and president. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not
less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Mission. Missions bylaws provide that special
meetings of the stockholders, unless otherwise provided by
statute, may only be called by the chairman of the board or a
majority vote of the board of directors. Written notice of a
special meeting stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called
shall be given not less than 10 nor more than 60 days
before the date of the meeting to each stockholder entitled to
vote at such meeting.
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Stockholder Action by Written Consent |
Petrohawk. Petrohawks bylaws provide that any
action required or permitted to be taken at any annual or
special stockholder meeting may be taken without a meeting,
without prior notice and without a vote, if consented to in
writing by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to take such
action at a meeting at which all shares entitled to vote thereon
were present and voted.
Mission. Missions certificate of incorporation
provides that any action required or permitted to be taken at
any annual or special stockholder meeting may be taken without a
meeting if consented to in writing by all the stockholders
entitled to vote thereon.
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Quorum of the Stockholders, Vote Required,
Adjournment |
Petrohawk. Petrohawks bylaws provide that the
holders of a majority of the outstanding shares of the company
entitled to vote at any stockholders meeting, represented either
in person or by proxy, shall constitute a quorum for the
transaction of business at such meeting. If quorum is present,
the affirmative vote of the majority of the shares represented
at the meeting entitled to vote on the subject matter shall be
the act of the stockholders, unless the vote of a greater number
of shares on the matter being voted on is required by applicable
law or Petrohawks certificate of incorporation or bylaws.
The stockholders present at a duly called or held meeting at
which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken
(other than adjournment) is approved by a majority of the shares
required to constitute a quorum. Any meeting of stockholders may
be adjourned at any time, whether or not there is a quorum, by
the chairman of such meeting or the vote of the majority of
shares represented at such meeting. When a meeting is adjourned
to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. Any business
which might have been transacted at the original meeting may be
transacted at the adjourned meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Mission. Missions bylaws provide that a majority of
the shares issued and outstanding and entitled to vote at any
meeting of the stockholders, present in person or by proxy,
shall constitute a quorum. However, unless otherwise provided in
the proxy instrument, no proxy shall be voted on or after three
years from its date. If quorum is present, the affirmative vote
of the majority of the shares represented at the meeting
entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number of shares on
the matter being voted on is required by applicable law or
Missions certificate of incorporation or bylaws. If,
however, such quorum shall not be present or represented in any
meeting of the stockholders, the stockholders entitled to vote
thereat shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting,
until a quorum shall be
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present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any businesses which
might have been transacted at the meeting as originally notified
may be transacted. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall
be giving to each stockholder of record entitled to vote at the
meeting.
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Power to Amend the Certificate of Incorporation |
Petrohawk. Petrohawks certificate of incorporation
may be amended, altered changed or repealed by holders of a
majority of the outstanding stock entitled to vote on the
amendment in the manner and as provided by the DGCL.
Mission. Missions certificate of incorporation
provides that it may be amended, altered, changed or repealed in
the manner now or thereafter prescribed by statute. The DGCL
provides for amendment by holders of a majority of the
outstanding stock entitled to vote on the amendment.
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Power to Amend the Bylaws |
Petrohawk. Petrohawks bylaws may be altered,
amended or repealed or new bylaws may be adopted by the
stockholders or by the board of directors at any regular meeting
of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors
if notice of such alteration, amendment, repeal or adoption of
new bylaws be contained in the notice of such special meeting.
Mission. Missions bylaws may be altered, amended or
repealed or new bylaws may be adopted by the stockholders or by
the board of directors of Mission, when such power is conferred
upon the board of directors by the certificate of incorporation,
at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of
the board of directors if notice of the amendment is contained
in the notice of such special meeting. Missions
certificate of incorporation expressly authorizes the board of
directors to make, alter or repeal the bylaws of the corporation.
DESCRIPTION OF PETROHAWK CAPITAL STOCK
General
The authorized capital stock of Petrohawk consists of
75 million shares of Petrohawk common stock, par value
$0.001 per share, and 5 million shares of Petrohawk
preferred stock, par value $0.001 per share,
1.5 million shares of which have been designated 8%
cumulative convertible preferred stock. As of April 21,
2005, 40,137,954 shares of Petrohawk common stock were
outstanding, and 598,271 shares of preferred stock were
outstanding. As of April 21, 2005, approximately
14.4 million shares of Petrohawk common stock were
reserved for issuance upon outstanding warrants and convertible
securities and 2.95 million shares of Petrohawk common
stock were available for delivery in the future in respect of
awards that have been or are authorized to be made under
Petrohawks stock-based compensation plans.
The following summary of the terms of the capital stock of
Petrohawk is not intended to be complete and is subject in all
respects to the applicable provisions of the DGCL, and is
qualified by reference to the certificate of incorporation and
bylaws of Petrohawk. To obtain copies of these documents, see
Where You Can Find More Information beginning on
page 142 of this document.
Common Stock
Voting rights. Each share of common stock is entitled to
one vote in the election of directors and on all other matters
submitted to a vote of stockholders. Stockholders do not have
the right to cumulate their votes in the election of directors.
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Dividends, distributions and stock splits. Holders of
common stock are entitled to receive dividends if, as and when
such dividends are declared by the board of directors out of
assets legally available therefore after payment of dividends
required to be paid on shares of preferred stock, if any.
Petrohawks credit facility restricts our ability to pay
cash dividends.
Liquidation. In the event of any dissolution,
liquidation, or winding up of Petrohawks affairs, whether
voluntary or involuntary, after payment of debts and other
liabilities and making provision for any holders of its
preferred stock who have a liquidation preference, our remaining
assets will be distributed ratably among the holders of common
stock.
Fully paid. All shares of common stock outstanding are
fully paid and nonassessable.
Other rights. Holders of common stock have no redemption
or conversion rights and no preemptive or other rights to
subscribe for Petrohawk securities.
Preferred Stock
Petrohawks board of directors has the authority to issue
up to 5 million shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates,
conversion rates, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares
constituting any series or the designation of that series, which
may be superior to those of the common stock, without further
vote or action by the stockholders. One of the effects of
undesignated preferred stock may be to enable our board of
directors to render more difficult or to discourage an attempt
to obtain control of Petrohawk by means of a tender offer, proxy
contest, merger or otherwise, and as a result to protect the
continuity of our management. The issuance of shares of the
preferred stock by the board of directors as described above may
adversely affect the rights of the holders of common stock. For
example, preferred stock issued by Petrohawk may rank superior
to the common stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and
may be convertible into shares of common stock. Accordingly, the
issuance of shares of preferred stock may discourage bids for
Petrohawk common stock or may otherwise adversely affect the
market price of its common stock.
8% Cumulative Convertible Preferred Stock
As of April 21, 2005, 598,271 shares of 8% cumulative
convertible preferred stock were outstanding. The 8% cumulative
convertible preferred stock entitles holders of such shares to
the right to receive quarterly dividends of 8% per annum.
The following discussion summarizes some, but not all, of the
provisions of the certificate of designation governing the 8%
cumulative convertible preferred stock. You should read the
certificate of designation incorporated by reference herein,
because it, and not this description, defines the rights of
holders of the 8% cumulative convertible preferred stock.
Ranking. The 8% cumulative convertible preferred stock
ranks senior to the common stock and any other series of stock
with respect to dividend rights and rights upon liquidation,
dissolution or winding up.
Dividend Rights. Each holder of the 8% cumulative
convertible preferred stock is entitled to receive cumulative
dividends at an annual rate of 8% of the liquidation value per
share of 8% Cumulative Convertible preferred stock, or
$9.25 per year. The dividends are cumulative from the
original issue date of the 8% cumulative convertible preferred
stock, whether or not in any period we were legally permitted to
pay such dividends or such dividends were declared. Dividends
are payable quarterly, within 15 days of the end of the
calendar quarters ending March 31, June 30,
September 30, and December 31 of each year.
Petrohawk may not declare or pay any dividend or other
distribution to holders of common stock or any other class or
series of its stock, unless all accrued and unpaid dividends on
the 8% Cumulative Convertible preferred stock have been paid or
declared and set apart for payment.
Liquidation Rights. Upon any liquidation, dissolution or
winding up, no distribution will be made to any holders of
common stock or any other series of stock, unless the holders of
our 8% Cumulative
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Convertible preferred stock have received an amount equal to
$9.25 per share, plus any accrued but unpaid dividends and
cumulated dividends, an amount referred to as the liquidation
preference. The following transactions will not be deemed to be
a liquidation, dissolution or winding up for purposes of
determining the rights of holders of the 8% cumulative
convertible preferred stock (so long as the holders of 8%
cumulative convertible preferred stock have essentially
equivalent rights following any such transaction, as determined
by Petrohawks board of directors in the reasonable
exercise of its discretion):
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a consolidation or merger with or into any other corporation or
corporations, |
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a sale of all or substantially all of its assets, or |
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a series of related transactions in which more than 50% of its
voting power is disposed of. |
Any other reorganization, consolidation, merger or sale will be
deemed to be a liquidation and entitle the holders of the 8%
cumulative convertible preferred stock to a liquidation
preference.
Conversion. The 8% cumulative convertible preferred stock
is convertible into common stock at the option of a holder at
any time. In addition, the 8% cumulative convertible preferred
stock automatically converts into common stock effective on the
first trading day after the reported high selling price for the
common stock is at least 150% of the initial liquidation price,
or $13.875 per share, for any 10 trading days. Initially,
each share of 8% cumulative convertible preferred stock is
convertible at a rate of one-half share of common stock for each
share of 8% cumulative convertible preferred stock converted,
although this conversion rate is subject to adjustment in
certain circumstances, including stock splits or combinations of
our common stock.
The holder of any shares of 8% cumulative convertible preferred
stock may exercise the conversion right by surrendering to
Petrohawk or its transfer agent the certificate or certificates
for the shares to be converted, though in the case of an
optional conversion, the holder must first give Petrohawk notice
that such holder elects to convert. Petrohawk will deliver to
such holder the certificate or certificates for the number of
shares of its common stock to which the holder is entitled. In
the case of an optional conversion, conversion will be deemed to
have been effected immediately prior to the close of business on
the day Petrohawk receives notice of conversion; otherwise,
conversion will be deemed to have occurred at the close of
business on the day the automatic conversion occurs.
No fractional shares of common stock will be issued upon
conversion of shares of 8% cumulative convertible preferred
stock. All shares, including fractional shares, of common stock
issuable to a holder of 8% cumulative convertible preferred
stock will be aggregated. If after such aggregation, the
conversion would result in the issuance of a fractional share of
common stock, the fraction will be rounded up or down to the
nearest whole number of shares.
Upon any reorganization or reclassification of Petrohawks
capital stock or any consolidation or merger of Petrohawk with
or into another company or any sale of all or substantially all
of its assets to another company, and if such transaction is not
treated as a liquidation, dissolution or winding up, Petrohawk
or such successor entity, as the case may be, will make
appropriate provision so that each share of 8% cumulative
convertible preferred stock then outstanding will be convertible
into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale,
reclassification, change or conveyance by a holder of the number
of shares of common stock into which such share of 8% cumulative
convertible preferred stock might have been converted
immediately before such transaction, subject to such adjustment
which will be as nearly equivalent as may be practicable to the
adjustments described above. These provisions will similarly
apply to successive consolidations, mergers, conveyances or
transfers.
Redemption. Petrohawk has the unilateral right to redeem
all or any of the outstanding 8% cumulative convertible
preferred stock from the date of issuance; however, it must pay
a premium for any shares of 8% cumulative convertible preferred
stock redeemed on or before June 2006. The holders of the 8%
cumulative convertible preferred stock will be entitled to a
liquidation preference equal to the stated value of the 8%
cumulative convertible preferred stock plus any unpaid and
accrued dividends through the
105
date of any liquidation or dissolution. At April 21, 2005,
the liquidation preference was approximately $5.5 million.
Petrohawk may purchase shares of 8% cumulative convertible
preferred stock from the holders of such shares on such terms as
may be agreeable among the holders and Petrohawk, so long as
Petrohawk is not in default of our obligations to holders of 8%
cumulative convertible preferred stock, and any such purchase
does not adversely affect other holders of outstanding 8%
cumulative convertible preferred stock.
Consent Rights and Voting Rights. Petrohawk must receive
the approval of the holders of a majority of the 8% cumulative
convertible preferred stock to undertake any of the following:
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modify its certificate of incorporation or bylaws so as to amend
or change any of the rights, preferences or privileges of, or
applicable to, the 8% cumulative convertible preferred stock; |
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authorize or issue any other preferred equity security senior to
any of the rights or preferences applicable to the 8% cumulative
convertible preferred stock; or |
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purchase or otherwise acquire for value any of its common stock
or other equity security while there exists any arrearages in
the payment of dividends to the holders of the 8% Cumulative
Convertible preferred stock. |
The holders of Petrohawks 8% cumulative convertible
preferred stock may vote with the holders of common stock on all
matters presented to the stockholders for a vote. Each holder of
our 8% Cumulative Convertible preferred stock is entitled to a
number of votes on any matter equal to the whole number of
shares of common stock into which one share of our 8% cumulative
convertible preferred stock is convertible as of the record date
for any vote by Petrohawks stockholders.
PROPOSED AMENDMENT TO PETROHAWKS CERTIFICATE OF
INCORPORATION
Petrohawk presently is authorized to issue 75 million
shares of common stock and 5 million shares of preferred
stock. As of April 21, 2005, 40,137,954 shares of
Petrohawk common stock were issued and outstanding. A total of
2.95 million shares of Petrohawk common stock were
available for delivery in the future in respect of awards that
have been or are authorized to be made under Petrohawks
stock-based compensation plans. As of April 21, 2005,
598,271 shares of 8% cumulative convertible preferred stock
of Petrohawk were issued and approximately 19.234 million
shares of Petrohawk common stock will be issued in the merger
upon the conversion of Mission common stock. Approximately
1.8 million shares of Petrohawk common stock will be issued
in the event that any additional shares of Mission common stock
are issued in accordance with the merger agreement pursuant to
the exercise of Mission stock options.
The Petrohawk board of directors has approved an amendment to
Petrohawks certificate of incorporation to increase the
number of authorized shares of Petrohawk common stock from
75 million to 125 million. Petrohawk has a sufficient
number of authorized shares under Petrohawks certificate
of incorporation to complete the merger, and approval of the
amendment to increase the number of authorized shares of common
stock is not a condition to the merger; however, Petrohawk may
not have sufficient authorized and unissued shares of common
stock following the merger to permit the conversion or exercise
of all of its convertible securities, warrants, or options under
its stock option plans if the amendment is not approved by
stockholders.
The Petrohawk board of directors believes that an increase is
advisable and in the best interests of Petrohawk and Petrohawk
stockholders. Following the merger, in the event that the
amendment to Petrohawks certificate of incorporation is
not approved, Petrohawk will have approximately 16 million
authorized and unissued shares of Petrohawk common stock. In
addition, Petrohawk will have outstanding securities convertible
or exercisable for a total of approximately 20.4 million
shares of Petrohawk common stock, including approximately
1.8 million shares that will be issued upon exercise of
Mission stock options converted in the merger. The Petrohawk
board of directors believes that an increase in authorized
shares of Petrohawk common stock to 125 million will give
Petrohawk greater flexibility in the future by allowing
Petrohawk the latitude to declare stock dividends or stock
splits, to use its common stock to acquire other
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assets (for example, the merger), or to issue its common stock
for other corporate purposes, including stock dividends, raising
additional capital, issuance pursuant to employee and director
stock plans and possible future acquisitions. Although Petrohawk
will not be in breach or default under any of its agreements
immediately following the merger, Petrohawk will have
outstanding securities that are exercisable or convertible into
more shares of Petrohawk common stock than are presently
authorized. Increasing the authorized number of shares of common
stock will prevent a breach or default, in absence of
renegotiation, in the event that all such securities are
exercised or converted in the future. There are no current
plans, understandings or arrangements for issuing a material
number of additional shares of Petrohawk common stock from the
additional shares proposed to be authorized pursuant to the
amendment.
The issuance of shares of Petrohawk common stock, including the
additional shares that would be authorized if the proposed
amendment is adopted, may dilute the present equity ownership
position of current holders of Petrohawk common stock and may be
made without stockholder approval, unless otherwise required by
applicable laws or stock exchange regulations. The amendment
might also have the effect of discouraging an attempt by another
person or entity through the acquisition of a substantial number
of shares of Petrohawk common stock, to acquire control of
Petrohawk with a view to consummating a merger, sale of all or
any part of Petrohawks assets, or a similar transaction,
because the issuance of new shares could be used to dilute the
stock ownership of such person or entity.
All shares of Petrohawk common stock, including those now
authorized and those that would be authorized by the proposed
amendment to Petrohawks certificate of incorporation, are
equal in rank and have the same voting, dividend and liquidation
rights. Holders of Petrohawk common stock do not have preemptive
rights.
The Petrohawk board of directors unanimously recommends that
Petrohawk stockholders vote FOR approval of the
amendment to Petrohawks certificate of incorporation.
To effect the increase in authorized shares of Petrohawk common
stock, it is proposed that the first sentence of
Article Fourth of Petrohawks Certificate of
Incorporation be amended to read in its entirety as follows:
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The aggregate number of shares of stock the Corporation is
authorized to issue is 125,000,000 shares of a class
designated as common stock par value $0.001 per share, and
5,000,000 shares of a class designated as preferred stock,
par value $0.001 per share, and the relative rights of the
shares of each class are as follows: |
The affirmative vote of the holders of a majority of the
outstanding shares of Petrohawk common stock and preferred
stock, voting together as a single class, is required to approve
the amendment to Petrohawks certificate of incorporation.
Unless a contrary choice is specified, proxies solicited by the
Petrohawk board of directors will be voted for the amendment.
ELECTION OF PETROHAWK DIRECTORS
Petrohawks Amended and Restated Bylaws specify that the
authorized number of directors of Petrohawk shall not be less
than one and not more than eleven. As of the date of this joint
proxy statement/prospectus, Petrohawks board of directors
consists of seven directors, four of whom have been determined
to be independent directors as set forth in Nasdaq Marketplace
Rule 4200(a)(15). As discussed more fully below, two of
Petrohawks current directors, Messrs. Wilson and
Bridwell, have been nominated for reelection at Petrohawks
2005 Annual Meeting because of the expiration of the term of
their class, Class I, on Petrohawks classified Board
of Directors.
The Petrohawk board of directors unanimously recommends that
Petrohawk stock holders vote FOR all nominees.
In addition to the elections of Mr. Wilson and
Mr. Bridwell, pursuant to the terms of the merger
agreement, upon closing of the merger, Petrohawks board of
directors will increase the number of board
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members from seven to nine. Under the merger agreement,
Petrohawks board of directors has agreed to appoint two
additional directors, designated by Mission, to Petrohawks
board of directors, which will consist of one Class I
director whose term will expire in 2008 and one Class II
director whose term will expire in 2006. One of the requirements
relating to Missions designation of individuals for
appointment to Petrohawks board of directors, however, is
that such individuals would be considered independent
directors under Nasdaq rules and SEC regulations once
appointed to Petrohawks board of directors.
Directors are elected by plurality vote of the shares present at
the annual meeting, meaning that the director nominee with the
most affirmative votes for a particular slot is elected for that
slot. Any shares not voted (whether by withholding the vote,
broker non-vote or otherwise) have no impact in the election of
directors, except to the extent the failure to vote for an
individual results in another candidate receiving a larger
number of votes in person and represented by proxy at the annual
meeting. If you sign your proxy card but do not give
instructions with respect to the voting of directors, your
shares will be voted for Messrs. Wilson and Bridwell.
Prior to the merger, the board of directors has established the
number of directors at seven. If either nominee becomes
unavailable for any reason, Petrohawks board of directors
may propose a substitute nominee and the shares represented by
proxy will be voted for any substitute nominee, unless the board
reduces the number of directors. The board has no reason to
expect that either nominee will become unavailable.
The following table sets forth the names and ages of all
directors and director nominees for election, the length of
their continuous service as a director of Petrohawk, their
membership in board committees, and the positions in Petrohawk
held by them:
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Expiration of | |
Directors |
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Position |
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Term | |
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Floyd C. Wilson
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May 2004 |
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58 |
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Chairman of the Board, President Chief Executive Officer,
Director and Director Nominee |
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2005 |
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Tucker S. Bridwell(1)(2)(3)
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May 2004 |
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53 |
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Director and Director Nominee |
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2005 |
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James L. Irish III(1)
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May 2004 |
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59 |
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Director |
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2006 |
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David B. Miller(2)
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May 2004 |
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54 |
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Director |
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2007 |
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D. Martin Phillips(3)
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May 2004 |
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50 |
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Director |
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2007 |
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Daniel A. Rioux(2)(3)
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July 2004 |
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36 |
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Director |
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2007 |
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Robert C. Stone, Jr.(1)
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September 2000 |
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55 |
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Director |
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2006 |
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(1) |
Member of the audit committee |
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Member of the compensation committee |
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Member of the nominating committee |
Petrohawks Board of Directors recommends a vote FOR
the election to the Board of Directors of both of the following
nominees who were recommended for reelection by Petrohawks
nominating committee:
Floyd C. Wilson was elected as the Chairman of the Board,
President and Chief Executive Officer, and appointed Director,
of Petrohawk on May 25, 2004 and was elected as a director
on July 15, 2004. He is an owner, President and Chief
Executive Officer of PHAWK, LLC which he founded in June 2003.
Mr. Wilson was the Chairman and Chief Executive Officer of
3TEC Energy Corporation from August 1999 until its merger with
Plains Exploration & Production Company in June 2003.
Mr. Wilson founded W/ E Energy Company L.L.C., formerly
known as 3TEC Energy Company L.L.C. in 1998 and served as its
President until August 1999. Mr. Wilson began his career in
the energy business in Houston, Texas in 1970 as a completion
engineer. He moved to Wichita, Kansas in 1976 to start an oil
and gas operating
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company, one of several private energy ventures which preceded
the formation of W/ E Energy Company L.L.C. Mr. Wilson
founded Hugoton Energy Corporation in 1987, and served as its
Chairman, President and Chief Executive Officer. In 1994,
Hugoton completed an initial public offering and was merged into
Chesapeake Energy Corporation in 1998.
Tucker S. Bridwell was appointed as a director of
Petrohawk on May 25, 2004 and was elected as a director on
July 15, 2004. Mr. Bridwell has been the President of
Mansefeldt Investment Corporation and the Dian Graves Owen
Foundation since September 1997 and manages investments for both
entities. He has been in the energy business in various
capacities for over 25 years. Mr. Bridwell served as
chairman of First Permian, LLC from 2000 until its sale to
Energen Corporation in April 2002. He is a certified public
accountant and holds B.B.A and M.B.A degrees from Southern
Methodist University.
The following briefly describes the background and business
experience of Petrohawks remaining five directors whose
terms do not expire at the 2005 annual meeting:
James L. Irish III was appointed as a director of
Petrohawk on May 25, 2004 and was elected as a director on
July 15, 2004. Mr. Irish served as a director of 3TEC
Energy Corporation from 2002 until June 2003. Mr. Irish is
currently of counsel with Thompson & Knight LLP, a
Texas based law firm. Mr. Irish has been an attorney with
Thompson & Knight LLP serving in various capacities,
including Managing Partner, since 1969.
David B. Miller was appointed as a director of Petrohawk
on May 25, 2004 and was elected as a director on
July 15, 2004. He is Senior Managing Director and
co-founder of EnCap Investments L.P., an investment management
and merchant banking firm focused on the upstream and midstream
sectors of the oil and gas industry that was founded in 1988.
Prior to the formation of EnCap Investments L.P.,
Mr. Miller co-founded and served as President and Managing
General Partner of PMC Reserve Acquisition Company, a
partnership with Pitts Energy Group. Prior to the establishment
of EnCap, Mr. Miller served as Co-Chief Executive Officer
of MAZE Exploration Inc., a Denver, Colorado, based oil and gas
company he co-founded in 1981. Before forming MAZE,
Mr. Miller was a Vice President in the Energy Department of
Republic National Bank of Dallas from 1974 to 1980.
Mr. Miller served as a director of 3TEC Energy Corporation
from 1999 until June 2003 and of Denbury Resources, Inc. from
July, 2001 to February, 2004. Mr. Miller holds M.B.A. and
B.B.A. degrees from Southern Methodist University, and he
currently sits on the Executive Board of the Edwin L. Cox School
of Business at SMU. EnCap Energy Capital Fund IV, L.P. and
EnCap Energy Capital Fund IV-B, L.P., which are members of
PHAWK and which are indirectly controlled by EnCap Investments
L.P. have the contractual right to nominate a majority of the
members of the board of directors of PHAWK pursuant to
PHAWKs limited liability agreement.
D. Martin Phillips was appointed as a director of
Petrohawk on May 25, 2004 and was elected as a director on
July 15, 2004. Mr. Phillips is Senior Managing
Director and Principal of EnCap Investments L.P., an investment
management and merchant banking firm focused on the upstream and
midstream sectors of the oil and gas industry that was founded
in 1988. Prior to joining EnCap in 1989, from 1978 to 1989,
Mr. Phillips served in various management capacities with
NCNB Texas National Bank, including as Senior Vice President in
the Energy Banking Group. Mr. Phillips served as a director
of 3TEC Energy Corporation from 1999 until June 2003 and of
Plains Resources, Inc. from June, 1998 to June, 2004.
Mr. Phillips holds M.B.A. and B.S. degrees from Louisiana
State University. Mr. Phillips also attended the Stonier
Graduate School of Banking at Rutgers University. EnCap Energy
Capital Fund IV, L.P. and EnCap Energy Capital
Fund IV-B, L.P., which are members of PHAWK and which are
indirectly controlled by EnCap Investments L.P. have the
contractual right to nominate a majority of the members of the
board of directors of PHAWK pursuant to PHAWKs limited
liability agreement.
Daniel A. Rioux was elected as a member of
Petrohawks board of directors on July 15, 2004.
Mr. Rioux is the Vice President and Treasurer of Liberty
Energy Holdings, LLC, which invests in oil and gas exploration
and production, as well as related private equity transactions,
on behalf of its insurance company parent. Prior to joining
Liberty Energy Holdings, LLC, Mr. Rioux was Vice President
of Liberty Energy Corporation, now a subsidiary of Liberty
Energy Holdings, LLC, which invests in oil and gas
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exploration and production, as well as related private equity
transactions, on behalf of its insurance company parent.
Mr. Rioux holds a B.S. in Finance from Bryant College and
an M.B.A from Babson College (F.W. Olin School of Business).
Robert C. Stone, Jr. has served as a director of
Petrohawk since September 2000 and was reelected as a director
on July 15, 2004. Currently, Mr. Stone serves as
Senior Vice President/ Manager of Energy Lending at Whitney
National Bank in New Orleans, Louisiana and has been employed
there since 2000. Prior to this position, Mr. Stone was
Manager of Energy Technical Services, Energy/ Maritime Division
at Hibernia National Bank from 1998 to 2000 that included
evaluation responsibilities for all syndicated and direct
lending E&P segment clients. Mr. Stone has held senior
management positions in energy banking for over 20 years,
with emphasis on small-cap, public and private producers. His
experience includes underwriting and managing senior debt,
mezzanine and private equity to the independent sector. He began
his banking career as an engineer with First National Bank of
Commerce in New Orleans in 1983 after working in various
engineering positions with Exxon Company, U.S.A. for seven
years. He was also a Founding Governor of the City Energy Club
of New Orleans and is involved with many civic organizations in
New Orleans where he still resides. Mr. Stone holds both a
B.S. and M.S. in Engineering from the University of Houston.
All of Petrohawks current directors, except for
Mr. Stone, were originally nominated to serve in such
capacity, at least in part, due to their affiliation with PHAWK,
LLC, which acquired control of Petrohawk in May of 2004. None of
Petrohawks directors or director nominees currently serve
as directors of any other company with a class of securities
registered pursuant to section 12 of the Exchange Act or
subject to the requirement of section 15(d) of such act or
any company registered as an investment company under the
Investment Company Act of 1940, as amended. Additionally, none
of the events identified in Item 401(f) of
Regulation S-K that are material to an evaluation of the
ability or integrity of any director or director nominee have
occurred during the past five years with respect to any such
individual.
Board of Directors; Independence and Corporate Governance
On June 3, 2004, Petrohawks board of directors
adopted Petrohawks Corporate Governance Guidelines, a copy
of which is posted on Petrohawks website at
www.petrohawk.com. The Corporate Governance Guidelines
set forth Petrohawks policy with respect to qualifications
of the members of the board of directors and its audit,
compensation, and nominating committees, and director
responsibilities. The Corporate Governance Guidelines also set
forth Petrohawks categorical standards policy regarding
director independence, to assist Petrohawks board of
directors in determining director independence under the
applicable NASDAQ rules and federal laws. Under the NASDAQ
Marketplace Rules and Petrohawks Corporate Governance
Guidelines, as of December 31, 2004 and due to the
conversion of Petrohawks Series B preferred stock
into shares of Petrohawk common stock, Petrohawk ceased being a
Controlled Company within the definition provided in
the NASDAQ Marketplace Rules, and therefore, Petrohawks
board of directors will be required to be comprised of a
majority of directors who meet the criteria for independence
required by the applicable NASDAQ rules by December 31,
2005. As required under the NASDAQ Marketplace Rules and
Petrohawks Corporate Governance Guidelines, all of the
members of Petrohawks audit committee must be and are
currently independent directors, subject to
heightened independence requirements pursuant to the applicable
NASDAQ rules and federal law. Petrohawks board of
directors has determined that each of Messrs. Bridwell,
Irish, Rioux and Stone is an independent director satisfying all
the requirements for independence set forth in the
NASDAQ Marketplace Rules and consistent with Petrohawks
Corporate Governance Guidelines. Pursuant to NASDAQ Marketplace
Rule requirements, Petrohawks nominating and compensation
committees are currently comprised of a majority of
independent directors. Messrs. Bridwell, Irish
and Stone are the members of Petrohawks boards audit
committee and also satisfy independence requirements
as set forth in applicable federal law.
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Board Meetings and Committees
During 2004, 12 meetings of Petrohawks board of directors
were held. All directors who served on Petrohawks board
during 2004 attended at least 75% of the total meetings of the
board and each committee on which they serve. Petrohawks
directors also took action by unanimous written consent on six
occasions. Prior to the closing of the PHAWK, LLC
recapitalization on May 25, 2004, whereby PHAWK obtained
control over Petrohawk, the board had an executive committee, an
audit committee, a compensation committee and a nominating
committee. On May 25, 2004, the executive committee of the
board was eliminated, and the following committees of the board
were reestablished: the audit committee, the compensation
committee and the nominating committee. Petrohawks
Corporate Governance Guidelines require Petrohawks
independent directors to hold periodic executive sessions (in
accordance with applicable NASDAQ rules).
Executive Committee
Until May 25, 2004, Petrohawks board of directors had
an executive committee whose purpose was to formulate and
implement recommendations, strategies and actions, which were
intended to support and protect stockholder value. This
committee was comprised of three voting members:
Messrs. Robert E. Davis, Jr., Robert C.
Stone, Jr. and David A. Wilkins. This committee did not
meet during 2004 and was dissolved on May 25, 2004.
Audit Committee
Petrohawks board of directors has established an audit
committee whose purpose is to oversee its financial reporting
and controls and to recommend to the board each year the
appointment of an independent auditor. This committee met on
five occasions during 2004. On May 25, 2004,
Messrs. Davis and Melman resigned as members of
Petrohawks audit committee, and in addition to
Mr. Stone, the following members of its board of directors
were appointed and currently serve on the audit committee:
Messrs. Tucker S. Bridwell and James L. Irish III.
Mr. Irish is the current chairman of the audit committee.
Petrohawks board of directors adopted a new written
charter for the audit committee on June 3, 2004. A copy of
the audit committee charter is posted on Petrohawks
website at www.petrohawk.com. In accordance with the
audit committees charter, the primary functions of the
audit committee are to monitor internal accounting controls and
financial reporting practices, review financial statements and
related information, select and retain Petrohawks
independent auditors, review and evaluate the performance,
services, and fees of the independent auditors, pre-approve all
audit and permitted non-audit services to be provided by the
independent auditors, monitor the independence of the
independent auditors, and produce a report for inclusion in
Petrohawks proxy statement. Petrohawks independent
auditors report directly to the audit committee. Additionally,
the audit committee discusses with management Petrohawks
earnings releases, including the use of pro-forma financial
information, and the information and earnings guidance provided
to analysts and rating agencies. The audit committee also
reviews and discusses quarterly reports from independent
auditors regarding critical accounting policies and practices,
alternative treatments of financial information within generally
accepted accounting principles, and other material written
communication between the independent auditors and management.
Petrohawks board of directors has determined that each of
the current members of the audit committee is independent for
purposes of serving on the audit committee under the applicable
NASDAQ rules and federal law, and otherwise meets the
requirements of the audit committee charter, the applicable
NASDAQ rules, and the Corporate Governance Guidelines applicable
to audit committee members. Petrohawks board of directors
has also determined that each current member of the audit
committee is financially literate under the applicable NASDAQ
rules and that Mr. Stone qualifies as an audit
committee financial expert under such NASDAQ rules and
Item 401(a) of Regulation S-K.
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Compensation Committee
Petrohawks board of directors established a compensation
committee of the board of directors. The compensation committee
is responsible for formulating and recommending to the full
board of directors the compensation paid to Petrohawks
executive officers, and to produce an annual report for
inclusion in Petrohawks proxy statement. The compensation
committee also administers Petrohawks stock option plans,
including the Amended and Restated 1999 Incentive and
Nonstatutory Stock Option Plan, the 2004 Non-Employee Director
Incentive Plan, and the 2004 Employee Incentive Plan. Until
May 25, 2004, the committee consisted of
Messrs. Robert C. Stone, Jr., Robert E.
Davis, Jr., and Rolf N. Hufnagel. In connection with the
closing of the PHAWK transaction on May 25, 2004,
Messrs. Stone, Davis and Hufnagel resigned as members of
the compensation committee, and were replaced by
Messrs. Tucker S. Bridwell and David B. Miller. On
July 15, 2004, Mr. Daniel A. Rioux was appointed as an
additional member of the compensation committee. The current
members of the compensation committee are Messrs. Miller,
Bridwell and Rioux with Mr. Miller serving as the current
chair of the compensation committee. Petrohawks board of
directors has determined that each of the current members of the
compensation committee is a non-employee director in
accordance with Rule 16b-3 of the Securities Exchange Act
of 1934, as amended, and an outside director in
accordance with Section 162(m) of the Internal Revenue
Code, as required in the compensation committee charter.
Petrohawks board of directors has also determined that
Messrs. Bridwell and Rioux, who comprise a majority of the
compensation committee are independent pursuant to
the applicable NASDAQ rules and federal law. This committee met
one time and took action by unanimous written consent two times
during 2004. Petrohawks board of directors adopted a new
written charter for the compensation committee on May 25,
2004. A copy of the compensation committee charter is posted on
Petrohawks website at www.petrohawk.com.
Nominating Committee
Petrohawks board of directors established a nominating
committee of the board of directors in October of 2002. Until
May 25, 2004, the nominating committee consisted of
Messrs. Robert C. Stone, Jr., Robert E.
Davis, Jr., and David A. Melman, and the committee did not
have a written charter nor had it developed a policy with regard
to the consideration of any director candidates recommended by
stockholders or the qualifications the nominees for directors
should possess. In connection with the closing of the PHAWK
transaction on May 25, 2004, Messrs. D. Martin
Phillips and Tucker S. Bridwell were appointed as the new
members of the nominating committee, and the board of directors
adopted a new written charter for the nominating committee. A
copy of the nominating committee charter is posted on
Petrohawks website at www.petrohawk.com. The board
of directors appointed Mr. Daniel A. Rioux as an additional
member of the nominating committee on March 29, 2005. The
current members of the nominating committee are
Messrs. Phillips, Bridwell and Rioux with Mr. Phillips
serving as chair of the nominating committee. The committee met
two times in 2004. The primary functions of the nominating
committee are to recommend candidates to the board of directors
as nominees for election at the annual meeting of stockholders
or to fill vacancies as they may occur, and to perform an annual
performance evaluation of the board of directors. This committee
will also review candidates suggested for nomination by the
stockholders. With respect to procedures for stockholders to
suggest candidates for consideration by the committee for the
2006 annual meeting of stockholders, see Board of
Directors; Corporate Governance Matters Nomination
Process and Submission of Stockholder Proposals for
the 2006 Annual Meeting of Stockholders. Petrohawks
board of directors has also determined that
Messrs. Bridwell and Rioux, who comprise a majority of the
nominating committee, are independent pursuant to
applicable NASDAQ rules.
Board of Directors; Corporate Governance Matters
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Code of Ethics and Code of Conduct |
Petrohawks board of directors has adopted a code of ethics
for its chief executive officer and senior financial officers
and a code of conduct for all directors, officers, and employees
of Petrohawk. Petrohawks code of ethics was filed with the
Securities and Exchange Commission (SEC) as an
exhibit to
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Petrohawks annual report on Form 10-K/ A on
April 20, 2004, and is available on the SECs website
at www.sec.gov or on Petrohawks website at
www.petrohawk.com. Petrohawks code of conduct was
adopted by its current board of directors on June 7, 2004,
and is available on Petrohawks website at
www.petrohawk.com. Petrohawk is required to promptly
disclose any amendments to, or waivers under, the codes with
respect to executive officers and directors, in accordance with
applicable federal law. Petrohawk will also provide any person,
without charge, a copy of the code of ethics and the code of
conduct. Requests for a copy of the code of ethics or the code
of conduct may be made by writing to Petrohawk at Petrohawk
Energy Corporation, 1100 Louisiana, Suite 4400, Houston,
Texas 77002, Attention: Chief Ethics Officer.
Petrohawks nominating committee has been established to
review possible candidates for nomination to the board of
directors and to recommend candidates for nomination to the
board for approval. The committee and the board have adopted the
Corporate Governance Guidelines that describe specific traits,
abilities, and experience for which the committee and the board
look in determining candidates for election to the board. Among
the standards and qualifications the committee and the board
seek are individuals of high ethical character who share in the
values of Petrohawk. They also seek individuals with a variety
of experience, including chief executive officers,
entrepreneurs, independent business owners, licensed attorneys,
and certified public accountants. Additionally, the board is
expected to have some members with specialized skills in the oil
and gas exploration and development industry, including
individuals with strong technical backgrounds. Absent special
circumstances, Petrohawk is generally of the view that the
continuing service of qualified incumbents promotes stability
and continuity in the board room, giving Petrohawk the benefit
of the familiarity and insight into Petrohawks affairs
that the directors have accumulated during their tenure, while
contributing to the boards ability to work as a collective
body. Accordingly, it is the general policy of the committee,
absent special circumstances, to nominate qualified incumbent
directors who continue to satisfy the committees
membership on the board, whom the committee believes will
continue to make important contributions to the board and who
consent to stand for reelection, and if reelected, continue
their service on the board. The nominating committee is
responsible for assessing the appropriate mix of skills and
characteristics required of directors in the context of
perceived needs of the board at any given point in time and will
review and update the criteria as deemed necessary. A copy of
the Corporate Governance Guidelines can be found on
Petrohawks website at www.petrohawk.com.
Petrohawks nominating committee considers suggestions from
many sources, including management, directors, stockholders, and
stockholders with contractual rights to nominate and appoint
directors, regarding possible candidates for nomination to the
board of directors. Any such suggestion by a stockholder for
consideration by the committee for nomination as a candidate to
be elected at an upcoming annual meeting of stockholders should
be submitted to the nominating committee in writing,
c/o David S. Elkouri, Secretary, at 1100 Louisiana,
Suite 4400, Houston, Texas, 77002. The information should
include the name and address of the stockholder suggesting the
individual as they appear on Petrohawks books, the number
and class of shares owned beneficially and of record by the
stockholder, the suggested individuals name and address, a
description of all arrangements or understandings (if any)
between the stockholder and the individual being suggested for
the committees consideration, the information about the
individual being suggested that would be required to be included
in a proxy statement filed with the Securities and Exchange
Commission, and an indication of the individuals
willingness to be named as a nominee and to serve as a director
of Petrohawk if nominated by the committee and the board. The
recommendation must be accompanied by the candidates
written consent to being named in Petrohawks proxy
statement as a nominee for election to the board of directors
and to serving as a director, if elected. The recommendation and
the director candidates written consent must be provided
to Petrohawk for an annual meeting of stockholders in accordance
with the provisions of Submission of Stockholder Proposals
for the 2006 Annual Meeting of Stockholders below.
Petrohawk may also require any proposed nominee to furnish such
other information as Petrohawk or the committee may reasonably
require to determine the eligibility of the nominee to serve as
a director. For the deadline
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for stockholder suggestions of individuals to be considered by
the committee for nomination as a candidate to be elected at the
2006 annual meeting of stockholders, see Submission of
Stockholder Proposals for the 2006 Annual Meeting of
Stockholders. Possible candidates who have been suggested
by stockholders are evaluated by the nominating committee in the
same manner as are other possible candidates. The committee has
not yet retained a third-party search firm to identify
candidates at this time, but may do so in the future in its
discretion.
The committee did not receive any stockholder recommendations
for nomination to the Board in connection with this years
annual meeting. The nominating committee has recommended
Messrs. Wilson and Bridwell, who are current Class I
directors, for reelection as the term of their class,
Class I, is expiring on Petrohawks classified board
of directors.
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Communications with the Board |
Stockholders may communicate concerns to any specific director,
board committee, or to the full board of directors by sending
letters addressed to the directors at Petrohawk Energy
Corporation, 1100 Louisiana, Suite 4400, Houston, Texas
77002, Attention: Chief Ethics Officer. Petrohawks Chief
Ethics Officer will then forward the communication to the
intended director or directors. If the stockholder wishes the
communication to be confidential, then the communication should
be provided in a form that will maintain confidentiality.
Petrohawks Corporate Governance Guidelines provide that
the independent directors will hold executive sessions at least
twice annually with only independent directors present. The
chairman of the audit committee is expected to preside over
executive sessions. The Corporate Governance Guidelines also
provide that non-employee directors may meet periodically in
executive session without management present.
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Board Attendance of Stockholder Meetings |
Historically, Petrohawk has held board meetings at the time of
its annual meetings of stockholders and has informally
encouraged its directors to attend the annual meeting of
stockholders. Petrohawk had no formal policy in this regard
until the adoption of Petrohawks Corporate Governance
Guidelines on June 3, 2004. Petrohawks Corporate
Governance Guidelines provide that Petrohawks directors
are encouraged to attend annual meetings of Petrohawks
stockholders.
Management
The following table sets forth the names and ages of our
executive officers, the length of their service as officers and
the positions in Petrohawk held by them.
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Executive Officers
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Floyd C. Wilson
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May 2004 |
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58 |
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Chairman of the Board, President and Chief Executive Officer |
Stephen W. Herod
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May 2004 |
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46 |
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Vice President Corporate Development |
Shane M. Bayless
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May 2004 |
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38 |
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Vice President Chief Financial Officer and Treasurer |
Richard K. Stoneburner
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May 2004 |
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51 |
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Vice President Exploration |
Larry L. Helm
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July 2004 |
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57 |
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Vice President Chief Administrative Officer |
Richard H. Smith
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November 2004 |
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47 |
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Vice President Land |
Mark J. Mize
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November 2004 |
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33 |
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Controller |
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Executive Officers
Our executive officers are appointed to serve until the meeting
of the board of directors following the next annual meeting of
stockholders and until their successors have been elected and
qualified. The following information is provided about our
current executive officers:
Floyd C. Wilson was appointed as the Chairman of the
Board, President, Chief Executive Officer and Director of
Petrohawk on May 25, 2004. He is an owner, President and
Chief Executive Officer of PHAWK, LLC (formerly Petrohawk
Energy, LLC) which he founded in June 2003. Mr. Wilson was
the Chairman and Chief Executive Officer of 3TEC Energy
Corporation from August 1999 until its merger with Plains
Exploration & Production Company in June 2003.
Mr. Wilson founded W/ E Energy Company L.L.C., formerly
known as 3TEC Energy Company L.L.C. in 1998 and served as its
President until August 1999. Mr. Wilson began his career in
the energy business in Houston in 1970 as a completion engineer.
He moved to Wichita in 1976 to start an oil and gas operating
company, one of several private energy ventures which preceded
the formation of W/ E. Mr. Wilson founded Hugoton Energy
Corporation in 1987, and served as its Chairman, President and
Chief Executive Officer. In 1994, Hugoton completed an initial
public offering and was merged into Chesapeake Energy
Corporation in 1998.
Stephen W. Herod was appointed as Vice
President Corporate Development of Petrohawk on
May 25, 2004. He was employed by PHAWK from its formation
in June 2003 until May 2004. He served as Executive Vice
President Corporate Development for 3TEC Energy
Corporation from December 1999 until its merger with Plains
Exploration & Production Company in June 2003 and as
Assistant Secretary from May 2001 until June 2003.
Mr. Herod served as a director of 3TEC from July 1997 until
January 2002. Mr. Herod served as the Treasurer of 3TEC
from 1999 until 2001. From July 1997 to December 1999,
Mr. Herod was Vice President Corporate
Development of 3TEC. Mr. Herod served as President and a
director of Shore Oil Company from April 1992 until the merger
of Shore with 3TECs predecessor in June 1997. He joined
Shores predecessor as Controller in February 1991.
Mr. Herod was employed by Conquest Exploration Company from
1984 until 1991 in various financial management positions,
including Operations Accounting Manager. From 1981 to 1984,
Superior Oil Company employed Mr. Herod as a financial
analyst.
Shane M. Bayless was appointed as Vice
President Chief Financial Officer and Treasurer of
Petrohawk on May 25, 2004. He was employed by PHAWK from
its formation in June 2003 until May 2004. He was Vice President
and Controller of 3TEC from July 2000 until 3TECs merger
with Plains Exploration & Production Company in June
2003. Mr. Bayless served as the Treasurer of 3TEC from
March 2001 until June 2003. Prior to joining 3TEC,
Mr. Bayless was employed by Encore Acquisition Company as
Vice President and Controller from 1998 to 2000.
Mr. Bayless worked as the Controller from 1996 to 1998 and
as the Accounting Manager from 1993 to 1996 at Hugoton. From
1990 to 1993, Mr. Bayless was an Audit Senior with
Ernst & Young LLP. He is a Certified Public Accountant.
Richard K. Stoneburner was appointed as Vice
President Exploration of Petrohawk on May 25,
2004. He was employed by PHAWK from its formation in June 2003
until May 2004. He joined 3TEC in August 1999 and was its Vice
President Exploration from December 1999 until its
merger with Plains Exploration & Production Company in
June 2003. Mr. Stoneburner was employed by W/ E Energy
Company as District Geologist from 1998 to 1999. Prior to
joining 3TEC, Mr. Stoneburner worked as a geologist for
Texas Oil & Gas, The Reach Group, Weber Energy
Corporation, Hugoton and, independently through his own company,
Stoneburner Exploration, Inc. Mr. Stoneburner has over
25 years of experience in the energy business.
Larry L. Helm was appointed Vice President
Chief Administrative Officer on July 15, 2004. Prior to
serving as an executive officer, Mr. Helm served on
Petrohawks Board of Directors for approximately two
months. Mr. Helm was employed with Bank One Corporation
from December 1989 through December 2003. Most recently
Mr. Helm served as Executive Vice President of Middle
Market Banking from October 2001 to December 2003. From April
1998 to August 1999, he served as Executive Vice President of
the Energy and Utilities Banking Group. Prior to joining Bank
One, he worked for 16 years in
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the banking industry primarily serving the oil and gas sector.
He served as director of 3TEC Energy Corporation from 2000 to
June 2003.
Richard H. Smith joined Petrohawk on May 25, 2004
concurrent with the investment by PHAWK and became Vice
President Land in November 2004. Mr. Smith
joined PHAWK as Land Manager in March 2004. Mr. Smith was
Land Manager Gulf Region USA with the Unocal
Corporation from April 2001 until the commencement of his
employment at PHAWK. From September 1997 until April 2001,
Mr. Smith served as Land Manager Gulf Coast
Division for Basin Exploration, Inc. Prior to his employment at
Basin, Mr. Smith held land management positions in varying
capacities on a continual basis since January 1981. During this
period he was employed by Sonat Exploration Company, Michel T.
Halbouty Energy Co., Pend Oreille Oil & Gas Company and
Norcen Explorer, Inc. Mr. Smith graduated from The
University of Texas at Austin in December 1980 with a BBA in
Petroleum Land Management. He is a Certified Professional
Landman.
Mark J. Mize joined Petrohawk on November 29, 2004
as Controller. Prior to joining Petrohawk he was the Manager of
Financial Reporting of Cabot Oil & Gas Corporation from
January 2003 to November 2004. Prior to his employment at Cabot
Oil & Gas Corporation, he was an Audit Manager with
PricewaterhouseCoopers LLP from 1996 to 2002. He is a Certified
Public Accountant.
Compensation
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Compensation of Directors |
Employee directors receive no additional compensation for
service on Petrohawks board of directors or any committee
thereof. Until May 27, 2004, Petrohawks policy was
that all of its directors received actual expense
reimbursements, and each of its outside directors received
$1,500 in fees per board and committee meeting, including
meetings held by teleconference.
On May 27, 2004, Petrohawks board of directors
adopted a new policy for the compensation of its directors.
Under the new policy, all of Petrohawks directors will
continue to receive actual expense reimbursements. In addition,
Petrohawks non-employee directors will each receive
$20,000 in cash per year (payable on a quarterly basis in the
amount of $5,000), with the option to receive each quarterly
amount in shares of Petrohawks common stock instead of in
cash, at the trading value of the shares of Petrohawks
common stock on the date of the last day of each calendar
quarter. The chairman of Petrohawks audit committee will
receive an additional $5,000 per year (payable on a
quarterly basis in the amount of $1,250), with the option to
receive each quarterly amount in shares of Petrohawks
common stock instead of in cash, at the trading value of the
shares of Petrohawks common stock on the date of the last
day of each calendar quarter. Each member of Petrohawks
audit committee (other than the chairman) will receive an
additional $2,500 per year (payable on a quarterly basis in
the amount of $625), with the option to receive each quarterly
amount in shares of Petrohawks common stock instead of in
cash, at the trading value of the shares of Petrohawks
common stock on the date of the last day of each calendar
quarter. In 2004, the aggregate of the directors fees paid
to all outside directors was $119,453.
In addition, under Petrohawks new policy and pursuant to
the terms of the 2004 Non-Employee Director Plan, each
non-employee director received a grant of 3,750 shares of
Petrohawks common stock within sixty days of the date such
director began his service on Petrohawks board of
directors in 2004, with the same provisions relating to the
schedule of the lifting of their restrictions. Under this
policy, additional grants of 2,500 restricted shares of
Petrohawks common stock, with the same schedule for the
lifting of the restrictions, are expected to be made to each
non-employee director on each anniversary of his or her service
as a director of Petrohawk. The number of shares granted to each
new non-employee director and upon each non-employee
directors anniversary date may be adjusted from time to
time, as determined by our board of directors. All current
non-employee directors each received a grant of 3,750 restricted
shares of Petrohawks common stock following approval of
the 2004 Non-Employee Director Plan by Petrohawks
stockholders at the 2004 annual meeting of stockholders.
116
Prior to May 27, 2004, Petrohawks policy with respect
to non-employee director options was as follows: Prior to
July 1, 2003, non-employee directors received options to
purchase 25,000 shares of Petrohawk common stock for
their initial year of service and 12,500 shares each year
thereafter, if re-elected, on their anniversary dates, provided
that options granted to each of these directors could not cover
more than 50,000 shares in the aggregate. This policy was
changed so that effective July 1, 2003, directors would
receive only annual option grants covering 5,000 shares on
the date of the annual meeting but with no cap on the number of
shares which may be covered by these options. Prior to
July 1, 2003, the option granted to the chairman of the
board of directors each year covered an additional
12,500 shares, but effective July 1, 2003, this was
reduced to 7,500 additional shares each year. Prior to
July 1, 2003, the chairman of the audit committee received
an additional 12,500 shares covered by his option each year
but this was reduced to 7,500 shares effective July 1,
2003. The exercise price of these options is equal to 110% of
the fair market value of the common stock on the date of grant.
The numbers of shares of stock issuable upon exercise of options
and the per share option exercise prices provided in this
paragraph reflect an adjustment for the one-for-two reverse
stock split effective May 26, 2004. No options were issued
in 2004 to non-employee directors prior to May 27, 2004.
Petrohawk maintains director and officer liability insurance.
|
|
|
Summary Executive Compensation Table |
The following Summary Compensation Table sets forth annual and
long-term compensation paid during the periods indicated to the
persons described below:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching | |
|
|
|
|
|
|
|
|
Securities | |
|
|
|
Contributions | |
|
|
|
|
|
|
|
|
Underlying | |
|
All Other | |
|
to Simple IRA | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus | |
|
Options | |
|
Compensation | |
|
Retirement Plan | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Floyd C. Wilson(1)
|
|
|
2004 |
|
|
$ |
150,481 |
|
|
$ |
250,000 |
(2) |
|
|
150,000 |
(3) |
|
$ |
3,335 |
|
|
$ |
16,000 |
|
|
Chairman of the Board, |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen W. Herod(1)
|
|
|
2004 |
|
|
$ |
90,288 |
|
|
$ |
150,000 |
(2) |
|
|
75,000 |
(3) |
|
$ |
1,210 |
|
|
$ |
13,000 |
|
|
Vice President Corporate |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shane M. Bayless(1)
|
|
|
2004 |
|
|
$ |
90,288 |
|
|
$ |
150,000 |
(2) |
|
|
75,000 |
(3) |
|
$ |
5,084 |
|
|
$ |
13,000 |
|
|
Vice President, Chief Financial |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and Treasurer
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry L. Helm(1)
|
|
|
2004 |
|
|
$ |
76,731 |
|
|
$ |
150,000 |
(2) |
|
|
75,000 |
(3) |
|
|
|
|
|
$ |
7,673 |
|
|
Vice President Chief |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative Officer
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard K. Stoneburner(1)
|
|
|
2004 |
|
|
$ |
90,288 |
|
|
$ |
150,000 |
(2) |
|
|
75,000 |
(3) |
|
$ |
6,249 |
|
|
$ |
5,000 |
|
|
Vice President Exploration |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Wilkins(1)
|
|
|
2004 |
|
|
$ |
63,561 |
|
|
$ |
150,000 |
|
|
|
|
|
|
$ |
160,769 |
|
|
$ |
8,220 |
|
|
Former Chief Executive Officer,
|
|
|
2003 |
|
|
$ |
160,000 |
|
|
$ |
400,000 |
|
|
|
50,000 |
(4) |
|
$ |
4,054 |
(6) |
|
$ |
8,000 |
|
|
President and Director
|
|
|
2002 |
|
|
$ |
32,205 |
|
|
$ |
50,000 |
|
|
|
250,000 |
(5) |
|
$ |
1,062 |
(6) |
|
$ |
966 |
|
|
|
(1) |
Messrs. Wilson, Herod, Bayless and Stoneburner joined
Petrohawk on May 25, 2004. Mr. Helm joined Petrohawk
on June 28, 2004. Mr. Wilkins resigned his position on
May 25, 2004. |
|
(2) |
Bonuses earned in 2004 were paid in January 2005. |
|
(3) |
Shares of common stock underlying stock options were granted on
July 12, 2004 at an exercise price of $7.50 per share
and expire on July 11, 2014. |
|
(4) |
50,000 shares of common stock underlying stock options were
granted on December 31, 2003 at an exercise price of
$3.80 per share and expire on December 31, 2013. This
number of shares of stock |
117
|
|
|
issuable upon exercise of options and the per share option price
reflect an adjustment for the one-for-two reverse stock split
effective May 26, 2004. |
|
|
(5) |
As partial consideration for the forfeiture of
Mr. Wilkins incentive common stock options (vested
and unvested) with his former employer, he was granted an option
to purchase 250,000 shares of our common stock at an
exercise price of $2.60 per share. This number of shares of
stock issuable upon exercise of options and the per share option
price reflects an adjustment for the one-for-two reverse stock
split effective May 26, 2004. |
|
(6) |
Represents compensation for use of company-owned or leased
vehicle. |
Petrohawk uses stock options as part of the overall compensation
of directors, officers and employees. In the following table,
Petrohawk shows certain information with respect to stock
options granted in 2004 to the named executive officers. The
numbers of shares of stock issuable upon exercise of options and
the per share option exercise prices used in the following table
reflects an adjustment for the one-for-two reverse stock split
effective May 26, 2004.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of | |
|
|
|
|
|
|
|
|
Number of | |
|
Total Options | |
|
Exercise | |
|
|
|
|
|
|
Securities | |
|
Granted to | |
|
or Base | |
|
|
|
|
|
|
Underlying | |
|
Employees in | |
|
Price | |
|
Expiration | |
|
Grant Date | |
Name |
|
Options | |
|
2004(1) | |
|
($/Sh)(2) | |
|
Date | |
|
Present Value $(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Floyd C. Wilson
|
|
|
150,000 |
|
|
|
21% |
|
|
$ |
7.50 |
|
|
|
07/11/2014 |
|
|
$ |
563,250 |
|
Stephen W. Herod
|
|
|
75,000 |
|
|
|
10% |
|
|
$ |
7.50 |
|
|
|
07/11/2014 |
|
|
$ |
281,625 |
|
Shane M. Bayless
|
|
|
75,000 |
|
|
|
10% |
|
|
$ |
7.50 |
|
|
|
07/11/2014 |
|
|
$ |
281,625 |
|
Larry L. Helm
|
|
|
75,000 |
|
|
|
10% |
|
|
$ |
7.50 |
|
|
|
07/11/2014 |
|
|
$ |
281,625 |
|
Richard K. Stoneburner
|
|
|
75,000 |
|
|
|
10% |
|
|
$ |
7.50 |
|
|
|
07/11/2014 |
|
|
$ |
281,625 |
|
|
|
(1) |
Based on a total of 717,500 shares underlying options
granted to certain employees during the fiscal year 2004. |
|
(2) |
The exercise price is the average of the high and low sales
prices of our common stock on the date of grant. |
|
(3) |
In accordance with the rules of the SEC, this column illustrates
one measure of value for the respective options over a ten-year
period using the Black-Scholes option-pricing model. This
valuation model is hypothetical; the actual amount that will be
received by a holder of an option will depend on the excess of
the market price of the shares over the exercise price on the
date the option is exercised. If the market price does not
increase above the exercise price, compensation to the grantee
will be zero. The Black-Scholes option-pricing model is a
mathematical formula used for estimating option values that
incorporates various assumptions. The Grant Date Present Value
set out in the column above is based on the following
assumptions: (a) a ten-year option term; (b) 73.9%
expected future annual stock volatility for the options;
(c) a risk-free rate of return of 3.0% for the options
granted; and (d) no expected dividend yield. The above
model does not include any reduction in value for
non-transferability, forfeiture or vesting of options. |
118
|
|
|
Aggregated Option Exercises in 2004 and Year-End
Values |
The following table shows certain information with respect to
stock options exercised in 2004 by the named executive officers
and the value of their unexercised stock options at
December 31, 2004. The numbers of shares of stock issuable
upon exercise of options and the per share option exercise
prices used or assumed in the following table or the footnotes
thereto reflect an adjustment for the one-for-two reverse stock
split effective May 26, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Value of Unexercised In- | |
|
|
Shares | |
|
|
|
Underlying Unexercised | |
|
The-Money Options at the | |
|
|
Acquired on | |
|
Value | |
|
Options at Fiscal Year End | |
|
Fiscal Year End ($)(1) | |
Name |
|
Exercise | |
|
Realized | |
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
David A. Wilkins(2)
|
|
|
10,000 |
|
|
|
90,793 |
|
|
|
290,000/290,000 |
|
|
|
1,668,400/1,668,400 |
|
|
|
(1) |
The value of in-the-money options is equal to the fair market
value of a share of common stock at fiscal year end, based on
the last sale price of our common stock ($8.56 per share),
less the exercise price. |
|
(2) |
As more fully described in the Summary Compensation Table and in
the table under Option Grants in 2004,
Mr. Wilkins was granted options covering
100,000 shares of common stock during 2003. In 2002, he was
granted options covering 500,000 shares of common stock as
discussed below under Employment Agreements, Termination
of Employment and Change of Control Agreements. |
|
|
|
Equity Compensation Plan Information |
The following table sets forth certain information as of
December 31, 2004 with respect to compensation plans
(including individual compensation arrangements) under which
equity securities of Petrohawk are authorized for issuance. The
numbers of shares of stock issuable upon exercise of options and
the per share option exercise prices, and the number of
securities remaining available for future issuance under equity
compensation plans used in the following table reflect an
adjustment for the one-for-two reverse stock split effective
May 26, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
Securities | |
|
|
|
|
|
|
Remaining | |
|
|
|
|
|
|
Available for | |
|
|
Number of | |
|
Weighted- | |
|
Future Issuance | |
|
|
Securities to be | |
|
Average Exercise | |
|
Under Equity | |
|
|
Issued Upon | |
|
Price of | |
|
Compensation | |
|
|
Exercise of | |
|
Outstanding | |
|
Plans (Excluding | |
|
|
Outstanding | |
|
Options, | |
|
Securities | |
|
|
Options, Warrants | |
|
Warrants and | |
|
Reflected in | |
|
|
and Rights | |
|
Rights | |
|
Column (a)) | |
Plan Category |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders
|
|
|
994,000 |
|
|
$ |
7.35 |
|
|
|
2,187,500 |
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
994,000 |
|
|
$ |
7.35 |
|
|
|
2,187,500 |
|
|
|
|
Employment Agreements, Termination of Employment and
Change of Control Arrangements |
It is anticipated that Messrs. Wilson, Herod, Bayless, Helm
and Stoneburner will enter into employment agreements with
Petrohawk which are expected to be recommended to the board of
directors by the compensation committee and approved by the full
board.
Effective October 21, 2002, Mr. Wilkins was appointed
as Petrohawks President and Chief Executive Officer and
joined its board of directors, and continued his service with
Petrohawk until his resignation on May 25, 2004.
Mr. Wilkins compensation included in fiscal year 2004
and until his resignation an annual base salary of $160,000 and
eligibility for 2004 incentive compensation equal to, and not
less than,
119
$64,000, which was equal to 40% of his annual salary. Upon
commencement of his employment with Petrohawk, Mr. Wilkins
was granted options to purchase 250,000 shares of
Petrohawk common stock at an exercise price of $2.60 per
share, and on December 31, 2003 was granted an option to
purchase 50,000 shares at a price equal to $3.80 per
share, Petrohawks common stock split-adjusted closing
price on NASDAQ for the preceding day. These options have a term
of ten years and vest over a three-year period from the date of
grant, with one third becoming exercisable on the first
anniversary of the grant, one third becoming exercisable on the
second anniversary of the grant and the remaining one third
becoming exercisable on the third anniversary of the grant. The
option agreements with Mr. Wilkins have been amended to
provide that they will be exercisable in full immediately and
they will continue to be exercisable through the fifth
anniversary of the closing of the PHAWK, LLC transaction or
until they would have otherwise expired absent termination of
employment, whichever is earlier.
|
|
|
Compensation Committee Interlocks and Insider
Participation |
Prior to Petrohawks recapitalization in May of 2004,
Messrs. Stone, Davis, and Hufnagel served on the
compensation committee. Messrs. Davis and Hufnagel, who
resigned from Petrohawks board on May 25, 2004, have
overriding royalty interests in certain of Petrohawks oil
and gas properties. See Certain Relationships and Related
Transactions above. After the closing of the PHAWK
transaction in May of 2004, Messrs. Miller, Bridwell and
Rioux were appointed to the compensation committee.
Messrs. Miller, Bridwell and Rioux are not, and have not
been, officers or employees of Petrohawk. Directors Miller,
Bridwell and Rioux have certain direct and indirect interests in
PHAWK which engaged in certain transactions with Petrohawk
during its fiscal year 2004. See Petrohawk Transactions
with Related Persons.
120
Common Stock Performance Graph
The following common stock performance graph shows the
performance of Petrohawks stock up to December 31,
2004. As required by applicable rules of the SEC, the
performance graph shown below was prepared based on the
following assumptions:
|
|
|
|
|
A $100 investment was made in our common stock and each index on
December 31, 1999. |
|
|
|
All quarterly dividends were reinvested at the average of the
closing stock prices at the beginning and end of the quarter. |
The indices in the performance graph compare the annual
cumulative total stockholder return on our common stock with the
cumulative total return of The NASDAQ Stock Market (U.S.) Index
and a peer group index comprised of five U.S. companies
engaged in crude oil and natural gas operations whose stocks
were traded on NASDAQ during the period from January 1,
2000 through December 31, 2004. The companies that comprise
the peer group are Brigham Exploration Co. (BEXP), Comstock
Resources, Inc. (CRK), Delta Petroleum Corp. (DPTR), KCS Energy,
Inc. (KCS), and Mission Resources Corporation (MSSN).
As discussed under the heading Information About
Petrohawk Recent Developments, on May 25,
2004 PHAWK, LLC recapitalized Petrohawk with $60 million in
cash and changed Petrohawks management.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1999 | |
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
Total Return Analysis |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Petrohawk
|
|
$ |
100 |
|
|
$ |
100.63 |
|
|
$ |
65.48 |
|
|
$ |
11.56 |
|
|
$ |
26.49 |
|
|
$ |
57.55 |
|
NASDAQ
|
|
$ |
100 |
|
|
$ |
60.71 |
|
|
$ |
47.93 |
|
|
$ |
32.82 |
|
|
$ |
49.23 |
|
|
$ |
53.46 |
|
Peer Group
|
|
$ |
100 |
|
|
$ |
358.08 |
|
|
$ |
241.26 |
|
|
$ |
244.95 |
|
|
$ |
680.02 |
|
|
$ |
937.75 |
|
Petrohawk Compensation Committee Report on Executive
Compensation
Until May 25, 2004, the members of the compensation
committee were Messrs. Robert C. Stone, Jr., Robert E.
Davis, Jr., and Rolf N. Hufnagel, outside directors of
Petrohawk. On May 25, 2004, all members of the compensation
committee resigned as members of the compensation committee in
connection with the closing of the PHAWK investment and were
replaced by Messrs. David B. Miller and Tucker S. Bridwell.
On July 15, 2004, Mr. Daniel A. Rioux was appointed as
an additional member to the compensation committee. The
compensation committee is currently comprised of
Messrs. Miller, Bridwell and Rioux.
121
The general policy of Petrohawks Compensation Committee is
to provide executive compensation designed to enhance
stockholder value, including annual compensation, consisting of
salary and bonus awards, and long-term compensation, consisting
of stock options and other equity based compensation. To this
end, the Compensation Committee designs compensation plans and
incentives to link the financial interests of its stockholders,
to encourage support of Petrohawks long-term goals, to tie
executive compensation to Petrohawks performance, to
attract and retain talented leadership and to encourage
ownership of Petrohawks common stock by executive officers.
In making decisions affecting executive compensation, the
Compensation Committee reviews the nature and scope of the
executive officers responsibilities as well as each
officers effectiveness in supporting Petrohawks
long-term goals. The Compensation Committee also considers the
compensation practices of Petrohawks peer group of
companies. Based upon these and other factors which it considers
relevant, and in light of Petrohawks performance during
2004, the Compensation Committee has considered it appropriate,
and in the best interest of Petrohawk and its stockholders, to
set the overall executive compensation in keeping with the
average of companies in Petrohawks comparison group to
enable Petrohawk to continue to attract, retain and motivate the
highest level of executive personnel.
There are two primary types of compensation provided to
Petrohawks executive officers:
|
|
|
|
|
Annual compensation, which includes base salary, intended to
provide a stable annual salary at a level consistent with
individual contributions, and annual performance bonuses
intended to link officers compensation to Petrohawks
performance. |
|
|
|
Long-term compensation, which includes stock or other equity
based compensation intended to encourage actions to maximize
stockholder value. |
Annual Compensation
Consistent with its stated policy, the Compensation Committee
aims to position base salaries for Petrohawks executive
officers annually at levels that take into consideration the
performance of Petrohawk, individual performance of each
executive and the executives scope of responsibility in
relation to other officers and key executives within Petrohawk.
In selected cases, other factors may also be considered.
Petrohawk pays cash bonuses based on Petrohawks
performance in relation to predetermined objectives and
individual executive performance for the year then ended. The
Compensation Committee previously established objectives related
to Petrohawks earnings, revenue and stockholder value.
Cash bonuses were awarded to Petrohawks executive officers
based on Petrohawks performance during 2004 against these
objectives.
Long-Term Compensation
The Compensation Committee is committed to long-term incentive
programs for executives that promote the long-term growth of
Petrohawk. The Compensation Committee believes that the
management employees should be rewarded with a proprietary
interest in Petrohawk for continued long-term performance and to
attract, motivate and retain qualified and capable executives.
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Equity Based Compensation |
The Compensation Committee grants options to purchase shares of
Petrohawk common stock to executive officers under
Petrohawks Amended and Restated 2004 Employee Incentive
Plan that was adopted by Petrohawk and approved by its
stockholders in 2004.
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Compensation of Chief Executive Officer
During 2004, Petrohawks Chief Executive Officer received
salary of $150,481 and a bonus for his performance of $250,000,
which bonus was paid in January of 2005. The Chief Executive
Officer is eligible to participate in all of Petrohawks
long-term incentive programs which are available to its
employees. During 2004, the Chief Executive Officer received
stock options to purchase 150,000 shares of Petrohawks
common stock.
In reviewing the overall compensation of our Chief Executive
Officer, Floyd C. Wilson, the Compensation Committee considered
compensation paid to chief executive officers of comparable
companies and compared the performance of Petrohawk to that of
those companies. In addition, the Compensation Committee
determined that Mr. Wilsons performance was
extraordinary in guiding Petrohawk from June, 2004 through
December, 2004. Under Mr. Wilsons leadership,
Petrohawk made several acquisitions, including the
$425 million acquisition of Wynn-Crosby Energy, Inc. and
eight limited partnerships that it managed. In connection with
the Wynn-Crosby acquisition, Petrohawk issued $200 million
of automatically convertible preferred stock in a private
placement at a price the Compensation Committee determined was
attractive. Petrohawk experienced a dramatic increase in its
stock price during the year and Petrohawks reputation
among analysts, investors and the overall public was that it
transformed into a dynamic, growing mid-cap energy company.
Internal Revenue Code Section 162(m)
The Compensation Committee also considers the potential impact
of Section 162(m) of the Internal Revenue Code of 1986, as
amended (Section 162(m)). Section 162(m) disallows a tax
deduction for any publicly held corporation for individual
compensation exceeding $1 million in any taxable year for
the Chief Executive Officer and the other senior executive
officers, other than compensation that is performance-based and
meets certain other technical requirements. Based on these
requirements, the Compensation Committee has determined that
Section 162(m) will not prevent Petrohawk from receiving a tax
deduction for any of the compensation paid to executive officers.
The report of the compensation committee of Petrohawk set forth
below was prepared and adopted by its compensation committee.
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Respectfully Submitted, |
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David B. Miller, Chairman |
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Tucker S. Bridwell |
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Daniel A. Rioux |
Report of the Petrohawk Audit Committee
Petrohawks audit committee acts under a written charter
adopted and approved by the board of directors on June 3,
2004, which is available on Petrohawks website at
www.petrohawk.com. Until June 3, 2004, the audit committee
acted under a written charter adopted and approved by the board
of directors on June 6, 2000, and as amended on
March 27, 2001. Each of the current members of
Petrohawks audit committee is independent as
defined by the listing standards for The NASDAQ Stock Market and
in accordance with Petrohawks Corporate Governance
Guidelines. The report of the audit committee of Petrohawk set
forth below has been prepared and adopted by Petrohawks
audit committee.
This report is presented regarding the matters relating to
Petrohawks audited financial statements for the year ended
December 31, 2004.
It is not the responsibility of the audit committee to plan or
conduct audits or to determine that Petrohawks financial
statements are in all material respects complete and accurate in
accordance with generally accepted accounting principles. This
is the responsibility of management and the independent
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auditors. It is also not the responsibility of the audit
committee to assure compliance with laws and regulations and
Petrohawks conduct.
Petrohawks audit committee has reviewed the audited
financial statements as of and for the fiscal year ended
December 31, 2004, discussed with management such audited
financial statements, received written disclosures and the
letter from independent auditors required by Independence
Standards Board Standard No. 1, as currently in effect,
discussed with the independent auditors such auditors
independence, the matters required to be discussed by the
Statement on Auditing Standards 61, as amended by SAS No. 90,
and other matters the audit committee deemed relevant and
appropriate. The audit committee has also considered whether the
independent auditors provision of information technology
and other non-audit services to Petrohawk is compatible with
maintaining the auditors independence. The audit committee
has concluded that the independent auditors are independent from
Petrohawk and its management.
Based on these reviews and discussions, the audit committee
recommended to the board of directors that the audited financial
statements as of and for the fiscal year ended December 31,
2004 be included in Petrohawks Annual Report on Form 10-K
for such fiscal year.
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2004 Audit Committee |
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James L. Irish, III, Chairman |
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Robert C. Stone, Jr. |
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Tucker S. Bridwell |
Accounting Fees
Petrohawks principal accounting firm for the 2004 fiscal
year, effective July 20, 2004, was Deloitte &
Touche LLP. Effective June 20, 2003, Petrohawks
principal accounting firm for the 2003 fiscal year was
Ernst & Young, LLP, and for the fiscal year 2002,
including and up to June 20, 2003 was Hein &
Associates LLP. The aggregate fees billed by Deloitte &
Touche LLP for professional services rendered for the audit of
our annual financial statements, reviews of the financial
statements included in our Quarterly Reports on Form 10-Q,
consultations, and other consents to or assistance with
Securities and Exchange Commission filings for the year ended
December 31, 2004 was $408,938. The aggregate fees billed
by Ernst & Young, LLP and Hein & Associates
LLP for professional services rendered for the audit of our
annual financial statements, reviews of the financial statements
included in our Quarterly Reports on Form 10-Q,
consultations, and other consents to or assistance with
Securities and Exchange Commission filings for the years ended
December 31, 2003 (through June 20, 2003) and
December 31, 2002 was $18,170 and $107,609, respectively.
Petrohawk did not engage Ernst & Young, LLP or
Hein & Associates LLP for any professional services
that would be considered audit related fees during the years
ended December 31, 2003 and 2002. Petrohawk did engage
Deloitte & Touche LLP to provide due diligence services
related to Wynn-Crosby Energy, Inc. acquisition and paid fees of
$100,000 for the year-ended December 31, 2004.
The aggregate fees billed by KPMG LLP and Ernst &
Young, LLP for professional services relating to tax
compliance, tax advice and preparation of our federal and state
income tax returns and state franchise tax returns for the years
ended December 31, 2004 and 2003 were $56,300 and $13,203,
respectively.
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Petrohawk did not engage Deloitte & Touche LLP,
Ernst & Young, LLP, or Hein & Associates LLP
for any additional professional services other than as disclosed
above for the years ended December 31, 2004 and 2003.
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Audit Committee Pre-Approval Policy |
All audit fees, audit related fees and tax fees as described
above for the year ended December 31, 2004 were
pre-approved by our audit committee, which concluded that the
provision of such services by Deloitte & Touche LLP and
Ernst & Young, LLP was compatible with the maintenance
of Deloitte & Touche LLPs and Ernst &
Young, LLPs independence in the conduct of their auditing
functions. Petrohawks audit committees pre-approval
policy provides that pre-approval of all such services must be
approved separately by the audit committee. The audit committee
has not delegated any such pre-approval authority to anyone
outside the audit committee. Each member of the audit committee
has the authority to pre-approve non-audit services up to
$50,000 to be performed by our auditors.
PROPOSED AMENDMENT TO PETROHAWKS 2004 EMPLOYEE
INCENTIVE PLAN
On July 15, 2004, Petrohawk stockholders approved the 2004
Employee Incentive Plan. As originally approved by our
stockholders, the plan provided that the aggregate number of
shares of incentive stock, restricted stock and shares of common
stock which may be issued under stock options granted under the
plan would not exceed 750,000 shares, and, in addition, the
aggregate number of shares of incentive stock and restricted
stock which may be granted under the plan would not exceed
375,000 shares. On November 29, 2004, the plan was
amended to increase the aggregate number of shares of common
stock (including common stock options) that may be issued under
the plan from 750,000 shares to 2.75 million shares,
and to increase the number of shares of Incentive Stock and
Restricted Stock issuable under the plan from
375,000 shares to 1.375 million shares. In connection
with the merger and the common stock issued upon the occurrence
of the merger, Petrohawks board of directors believes it
is in the best interest of Petrohawk and its stockholders to
amend the 2004 Employee Incentive Plan to increase the aggregate
number of shares of common stock (including common stock
options) that may be issued under the plan from
2.75 million shares to 4.25 million shares, and to
increase the number of shares of incentive stock and restricted
stock issuable under the plan from 1.375 million shares to
2.125 million shares.
The amendment to the 2004 Employee Incentive Plan will make
available to Petrohawks board of directors stock options,
restricted stock, and incentive stock awards to Petrohawks
management and employees representing, in the aggregate, up to
ten percent (10%) of Petrohawks outstanding common stock.
Petrohawks board of directors and management believe that
the 2004 Employee Incentive Plan will help attract and retain
competitively superior employees and promote long-term growth
and profitability by aligning employee and stockholder
interests. A summary of the essential features of the plan is
provided below, but is qualified in its entirety by reference to
the full text of the plan, as amended, which is incorporated by
reference in this joint proxy statement/prospectus
Under the terms of the plan, the maximum number of shares that
may be subject to stock options granted under the plan to an
employee during any calendar year will continue to be limited to
200,000 shares (subject to adjustment in the event of a
recapitalization or other corporate action affecting the number
of shares outstanding), and the maximum number of shares of
restricted stock and incentive stock that may be issued to an
employee during any calendar year will continue to be limited to
100,000 shares (subject to adjustment in the event of a
recapitalization or other corporate action affecting the number
of shares outstanding). The shares with respect to which stock
options, restricted stock, and incentive stock may be granted
are shares of common stock as presently constituted. The plan
provides that if Petrohawk recapitalizes, reclassifies its
capital stock, or otherwise changes its capital structure (a
recapitalization), the number and class of shares of
stock covered by a stock option theretofore granted
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shall be adjusted so that such option shall thereafter cover the
number and class of shares of stock and securities to which the
optionee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to the recapitalization,
the optionee had been the holder of record of the number of
shares of stock then covered by such option.
The plan provides that, upon a corporate change,
Petrohawks compensation committee may accelerate the
vesting of stock options, cancel stock options and make payments
in respect thereof in cash, adjust the outstanding option as
appropriate to reflect such corporate change, or provide that
each option shall thereafter be exercisable for the number and
class of securities or property that the optionee would have
been entitled to had the option already been exercised. The plan
provides that a corporate change occurs (a) if
Petrohawk is to be dissolved and liquidated, (b) if
Petrohawk is not the surviving entity in any merger,
consolidation or other reorganization (or survives only as a
subsidiary of an entity other than a previously wholly owned
subsidiary of Petrohawk), (c) if Petrohawk sells, leases,
or exchanges all or substantially all of its assets, (d) if
any person, entity or group acquires or gains ownership or
control of more than 50% of Petrohawks outstanding shares
of voting stock, or (e) if after a contested election of
directors, the persons who were directors before such election
cease to constitute a majority of the board.
Petrohawks board of directors may terminate the plan with
respect to any shares for which options, restricted stock, or
incentive stock have not theretofore been granted. The board may
amend the plan; however, it may not amend the plan without
stockholder approval if the amendment: (i) would materially
increase the benefits accruing to participants under the plan,
(ii) increase the aggregate number of shares which may be
issued pursuant to the provisions of the plan, (iii) change
the class of individuals eligible to receive options, restricted
stock and incentive stock grants under the plan, or
(iv) extend the term of the plan.
Administration of the Plan. Pursuant to the provisions of
the plan, Petrohawks board of directors has appointed the
compensation committee to administer the plan. Petrohawks
compensation committee presently consists of Messrs. David
B. Miller, Daniel A. Rioux, and Tucker S. Bridwell.
Type of Grants Under the Plan. Petrohawks
compensation committee may grant to Petrohawks employees
incentive stock, restricted stock, and options to purchase
shares of Petrohawk common stock. The compensation committee has
the power to determine the terms upon which restricted stock,
incentive stock and stock options will be granted, including the
number of shares of restricted stock and incentive stock to
issue, the restrictions applicable to such shares of restricted
stock, including vesting requirements, and, with respect to
stock options, the number of shares of common stock subject to
each option, the exercisability and vesting requirements of each
stock option, and the form of consideration payable upon the
exercise of such stock option (i.e., whether cash or
exchange of existing shares of Petrohawk common stock in a
cashless transaction or a combination thereof). The option price
of shares of common stock issued under each stock option shall
be equal to the fair market value of shares subject to the stock
option on the date the stock option is granted. Stock options
granted under the plan may be incentive stock options or
non-statutory stock options.
Eligibility of Participants, Term and Transferability.
Restricted stock, incentive stock, and stock options may be
granted under the plan only to individuals who are employees of
Petrohawk or its parent or subsidiary corporation at the time of
grant. No incentive stock option shall be granted to an employee
who owns or who would own immediately before the grant of such
incentive stock option more than 10% of the total combined
voting power of all classes of stock of Petrohawk or its parent
or subsidiary corporation, unless (i) at the time such
stock option is granted the option price is 110% of the fair
market value of the shares granted on the date of the grant and
(ii) such stock option by its terms is not exercisable
after the expiration of five years from the date of grant. The
term of each stock option granted to other employees shall be
not more than ten years from the date of the grant. To the
extent that the aggregate fair market value (determined at the
time the respective incentive stock option is granted) of shares
with respect to which incentive stock options are exercisable
for the first time by an individual during any calendar year
under all incentive stock option plans of Petrohawk and its
parent and subsidiary corporations exceeds $100,000, such excess
incentive stock options shall be treated as non-statutory stock
options. Restricted
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stock and stock options granted under the plan shall not be
transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations
order; provided, however, the compensation committee may, in its
discretion, authorize all or a portion of the options to be
granted on terms which permit transfer by the optionee to
(i) the members of the optionees immediate family,
(ii) a trust or trusts for the exclusive benefit of such
immediate family, or (iii) a partnership in which such
members of such immediate family are the only partners, provided
that there may be no consideration for any such transfer. The
plan further provides that following any permitted transfer, the
option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer.
Restricted stock, incentive stock and the shares of common stock
transferred to an optionee as a result of the exercise of an
option shall be restricted securities under
Rule 144 as promulgated under the 1933 Act and may
only be resold or transferred in compliance with such rule and
the registration requirements or an exemption from such
requirements under the 1933 Act. The plan shall terminate
and no further restricted stock, incentive stock or stock
options shall be issued under the plan after June 2, 2014.
Awards granted. As of April 21, 2005, options
representing approximately 1,745,000 shares of common stock
and 5,000 shares of restricted stock have been awarded
under the 2004 Employee Incentive Plan.
Federal Income Tax Consequences. Petrohawk believes that
under present federal income tax laws the following are the
federal income tax consequences generally arising with respect
to awards granted under the plan. The grant of restricted stock
and incentive stock will cause the employee to recognize
ordinary income measured by the difference between (i) the
fair market value of the shares of restricted stock or incentive
stock (as the case may be) received at the first time the rights
of the employee in such restricted or incentive stock are
transferable or are not subject to a substantial risk of
forfeiture and (ii) the amount paid by the employee for the
restricted stock or incentive stock (if any), unless the
employee elects to be taxed at the time of the award
notwithstanding the restrictions (to minimize the tax payable in
respect of the appreciation in the value of the stock from the
time it is awarded until the restrictions lapse). Petrohawk
generally will be entitled to a deduction for the same amount at
the time income is recognized by the employee.
The grant of an option will ordinarily create no tax
consequences for the employee or Petrohawk. Upon exercise of a
non-statutory option, however, the employee will recognize
ordinary income equal to the difference between the exercise
price and the fair market value of the stock acquired on the
date of exercise. When an employee exercises a non-statutory
option, Petrohawk generally will be entitled to a deduction for
the amount recognized by the employee as ordinary income. The
treatment to an employee of a subsequent disposition of shares
acquired upon the exercise of a non-statutory depends on how
long the shares have been held. Generally, there will be no tax
consequences to Petrohawk in connection with a disposition of
shares acquired under a non-statutory option.
Upon the exercise of an incentive stock option, the employee
will not recognize ordinary income and Petrohawk will not be
entitled to a deduction. An employee will recognize income only
upon the disposition of the shares acquired upon the exercise of
an incentive option. The tax treatment to an employee upon
disposition of the stock acquired under an incentive stock
option depends on whether or not the stock is disposed of within
the statutorily required holding period for such stock (two
years from the date of the incentive stock option grant or one
year from the date on which the stock was transferred) upon the
exercise of the incentive stock option.
The foregoing provides only a very general description of the
application of federal income tax laws to awards under the 2004
Employee Incentive Plan. The summary does not address the
effects of foreign, state and local tax laws.
The Petrohawk board of directors unanimously proposes and
recommends that you vote to approve the proposal to amend
Petrohawks 2004 Employee Incentive Plan.
To effect the increase in the aggregate number of shares of
Petrohawk common stock (including common stock options) that may
be issued under Petrohawks 2004 Employee Incentive Plan,
it is
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proposed that the first two sentences in Section V of
Petrohawks 2004 Employee Incentive Plan be deleted in
their entirety and replaced with the following:
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The aggregate number of shares of Restricted Stock, shares
of Incentive Stock and Shares which may be issued under Stock
Options granted under the Plan shall not exceed 4,250,000. In
addition, the aggregate number of shares of Restricted Stock and
Incentive Stock combined which may be issued under the Plan
shall not exceed 2,125,000. |
PROPOSED AMENDMENT TO PETROHAWKS 2004
NON-EMPLOYEE DIRECTOR INCENTIVE PLAN
In July 2004, Petrohawk adopted the 2004 Non-Employee Director
Incentive Plan covering 200,000 shares. The plan provides
for the grant of both incentive stock options and restricted
shares of Petrohawks stock. This plan was designed to
attract and retain the services of non-employee directors. At
the adoption of the plan each non-employee director received
7,500 restricted shares of Petrohawks common stock.
Under the plan each new non-employee director will receive
7,500 shares of Petrohawks common stock. Additional
grants of 5,000 restricted shares of Petrohawks common
stock are expected to be issued to each non-employee director on
each anniversary of his or her service. As of December 31,
2004, 45,000 shares have been issued under this plan and
there had been no forfeited or cancelled shares. In connection
with the merger, the common stock issued upon occurrence of the
merger, and the two additional directors that will be appointed
to Petrohawks board, Petrohawks board of directors
believes it is in the best interest of Petrohawk and its
stockholders to amend the 2004 Non-Employee Director Incentive
Plan to increase the aggregate number of shares of common stock
(including common stock options) that may be issued under the
plan from 200,000 shares to 400,000 shares.
Petrohawks board and management believe that the 2004
Non-Employee Director Incentive Plan will help attract and
retain experienced and knowledgeable individuals as non-employee
directors of Petrohawk and promote long-term growth by aligning
non-employee director and stockholder interests.
The shares with respect to which stock options, restricted stock
and incentive stock may be granted are shares of common stock of
Petrohawk as presently constituted. The plan provides that if
Petrohawk recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure, the number and class of
shares of stock covered by a stock option theretofore granted
shall be adjusted so that such option shall thereafter cover the
number and class of shares of stock and securities to which the
optionee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to the recapitalization,
the optionee had been the holder of record of the number of
shares of stock then covered by such option.
The 2004 Non-Employee Director Incentive Plan provides that,
upon a corporate change, Petrohawks compensation committee
may accelerate the vesting of stock options, cancel stock
options and make payments in respect thereof in cash, adjust the
outstanding option as appropriate to reflect such corporate
change, or provide that each option shall thereafter be
exercisable for the number and class of securities or property
that the optionee would have been entitled to had the option
already been exercised. The plan provides that a corporate
change occurs (a) if Petrohawk is to be dissolved and
liquidated, (b) if Petrohawk is not the surviving entity in
any merger, consolidation or other reorganization (or survives
only as a subsidiary of an entity other than a previously wholly
owned subsidiary of Petrohawk), (c) if Petrohawk sells,
leases or exchanges all or substantially all of its assets,
(d) if any person, entity or group acquires or gains
ownership or control of more than 50% of the outstanding shares
of Petrohawks voting stock or (e) if after a
contested election of directors, the persons who were directors
before such election cease to constitute a majority of the board.
Petrohawks board may terminate the 2004 Non-Employee
Director Incentive Plan with respect to any shares for which
options, restricted stock or incentive stock have not
theretofore been granted. The board may amend the plan; however,
without stockholder approval the board may not: (i) make
amendments which would materially increase the benefits accruing
to participants under the plan, (ii) increase the aggregate
number of shares which may be issued pursuant to the provisions
of the plan,
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(iii) change the class of individuals eligible to receive
options, restricted stock and incentive stock grants under the
plan, or (iv) extend the term of the plan.
Administration of the Plan. Pursuant to the provisions of
the plan, Petrohawks board of directors has appointed the
compensation committee to administer the plan. Our compensation
committee consists of Messrs. David B. Miller, Daniel A.
Rioux, and Tucker S. Bridwell.
Type of Grants Under the Plan. Petrohawk may grant
non-employee directors incentive stock, restrictive stock and
options to purchase shares of Petrohawk common stock. Our board
has the power to determine the terms upon which restricted
stock, incentive stock and stock options will be granted,
including the number of shares of restricted stock and incentive
stock to issue, the restrictions applicable to such shares of
restricted stock, including vesting requirements, and, with
respect to stock options, the number of shares of common stock
subject to each option, the exercisability and vesting
requirements of each stock option, and the form of consideration
payable upon the exercise of such stock option
(i.e., whether cash or exchange of existing shares of
Petrohawk common stock in a cashless transaction or a
combination thereof). Unless modified by the board, the
following grants shall be made: (i) within sixty
(60) days after the approval of the plan by Petrohawk
stockholders, an award of 7,500 shares of restricted stock
will be granted to each person who is a non-employee director at
that time; (ii) thereafter, and excluding those
non-employee directors receiving an award pursuant to the
immediately preceding clause, within sixty (60) days after
a person becomes a non-employee director, an award of
7,500 shares of restricted stock be granted to each such
person; and (iii) each year on the anniversary date of the
date on which a non-employee director became a director, an
additional 5,000 shares of restricted stock shall be
awarded to such person as long as he or she is serving as a
non-employee director at that time. Unless modified by the
board, the committee has recommended that all grants of
restricted stock be restricted for a period ending on six
(6) months from the date of grant with the restriction that
the grantee be a non-employee director of Petrohawk for the
entire six (6) month period. The option price of share of
common stock issued under each stock option shall be equal to
the fair market value of shares subject to the stock option on
the date the stock option is granted.
Eligibility of Participants, Term and Transferability.
Restricted stock, incentive stock and stock options may be
granted under the plan only to individuals who are non-employee
directors of Petrohawk at the time of grant. It is anticipated
that if the plan is approved by Petrohawk stockholders, six
non-employee directors will be eligible for grants under the
plan at that time. restricted stock and stock options granted
under the plan shall not be transferable other than by will or
the laws of descent and distribution or pursuant to a qualified
domestic relations order; provided, however, the compensation
committee may, in its discretion, authorize all or a portion of
the options to be granted on terms which permit transfer by the
optionee to (i) the members of the optionees
immediate family, (ii) a trust or trusts for the exclusive
benefit of such immediate family, or (iii) a partnership in
which such members of such immediate family are the only
partners, provided that there may be no consideration for any
such transfer. The plan further provides that following any
permitted transfer, the option shall continue to be subject to
the same terms and conditions as were applicable immediately
prior to transfer. restricted stock, incentive stock and the
shares of common stock transferred to an optionee as a result of
the exercise of an option shall be restricted
securities under Rule 144 as promulgated under the
1933 Act and may only be resold or transferred in compliance
with such rule and the registration requirements or an exemption
from such requirements under the 1933 Act. The 2004 Non-Employee
Director Incentive Plan shall terminate and no further
restricted stock, incentive stock or stock options shall be
issued under the plan after June 2, 2014.
Awards granted. As of April 21, 2005, Petrohawk has
granted 45,000 shares of restricted stock under the 2004
Non-Employee Director Incentive Plan. Such shares are, and
future awards will be, restricted for a six-month period
following grant. Therefore, all of Petrohawks non-employee
directors have an interest in the approval of the amendment to
the 2004 Non-Employee Director Incentive Plan which may differ
from the interests of its stockholders.
Federal Income Tax Consequences. The Company believes
that under present federal income tax laws the following are the
federal income tax consequences generally arising with respect
to awards granted
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under the plan. The grant of restricted stock and incentive
stock will cause the non-employee director to recognize ordinary
income measured by the difference between (i) the fair
market value of the shares of restricted stock or incentive
stock (as the case may be) received at the first time the rights
of the non-employee director in such Restricted or incentive
stock are transferable or are not subject to a substantial risk
of forfeiture and (ii) the amount paid by the non-employee
director for the restricted stock or incentive stock (if any),
unless the non-employee director elects to be taxed at the time
of the award notwithstanding the restrictions (to minimize the
tax payable in respect of the appreciation in the value of the
stock from the time it is awarded until the restrictions lapse).
The Company generally will be entitled to a deduction for the
same amount at the time income is recognized by the non-employee
director.
The grant of an option will ordinarily create no tax
consequences for the non-employee director or Petrohawk. Upon
exercise of an option, however, the non-employee director will
recognize ordinary income equal to the difference between the
exercise price and the fair market value of the stock acquired
on the date of exercise. When a non-employee director exercises
an option, Petrohawk generally will be entitled to a deduction
for the amount recognized by the non-employee director as
ordinary income.
The treatment to a non-employee director of a subsequent
disposition of shares acquired upon the exercise of an option
depends on how long the shares have been held. Generally, there
will be no tax consequences to Petrohawk in connection with a
disposition of shares acquired under an option.
The foregoing provides only a very general description of the
application of federal income tax laws to awards under the 2004
Non-Employee Incentive Plan. The summary does not address the
effects of foreign, state and local tax laws.
The Petrohawk board of directors unanimously proposes and
recommends that stockholders vote to approve the proposal to
amend Petrohawks 2004 Non-Employee Director Incentive
Plan.
To effect the increase in the aggregate number of shares of
Petrohawk common stock (including common stock options) that may
be issued under Petrohawks 2004 Non-Employee Director
Incentive Plan, it is proposed that the first sentence in
Section V of Petrohawks 2004 Non-Employee Director
Incentive Plan be deleted in its entirety and replaced with the
following:
|
|
|
The aggregate number of shares of Restricted Stock, shares
of Incentive Stock and Shares which may be issued under Stock
Options granted under the Plan shall not exceed 400,000. |
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE
2006 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented under
Rule 14a-8 of the Securities Exchange Act of 1934 for
inclusion in Petrohawks proxy statement and accompanying
proxy for Petrohawks 2006 annual meeting of stockholders,
including nomination of an individual for election as a director
at the 2006 annual meeting of stockholders, must be received at
Petrohawks principal executive offices in Houston, Texas,
on or
before ,
2006, and must meet all the requirements of Rule 14a-8. If
a stockholder intends to present a proposal at Petrohawks
2006 annual meeting but has not sought the inclusion of such
proposal in our proxy materials, the proposal must be received
by us on or
before ,
2006, or Petrohawks management proxies for the 2006 annual
meeting will be entitled to use their discretionary voting
authority if the proposal is then raised at the meeting, without
any discussion of the matter in its proxy materials. For a
description of some of the requirements for suggesting an
individual for consideration by the nominating committee for
election as a director, see Board of Directors; Corporate
Governance Matters Nomination Process.
Proposals and other notices should be sent to:
|
|
|
David S. Elkouri, Secretary |
|
1100 Louisiana St., Suite 4400 |
|
Houston, Texas 77002 |
130
The use of certified mail, return receipt requested, is
suggested.
PETROHAWK TRANSACTIONS WITH RELATED PERSONS
Mr. James L. Irish III, an independent member of
Petrohawks board, is of counsel to Thompson &
Knight LLP, which Petrohawk has engaged for the purpose of
obtaining legal advice.
On May 27, 2004, Petrohawks board of directors formed
a special committee and appointed Mr. Robert C.
Stone, Jr. as the sole disinterested director to serve on
the special committee to evaluate, negotiate and possibly
complete the potential purchase by Petrohawk of the oil and gas
properties of PHAWK. The special committee was given the
authority to determine, direct and conduct the process to be
undertaken by Petrohawk with respect to the evaluation of the
potential purchase by Petrohawk of PHAWKs oil and gas
properties. The special committee also had the authority to
appoint independent legal counsel, independent appraisers,
financial advisors and engineering consultants in connection
with this evaluation, and to negotiate any proposed terms and
conditions of the potential purchase. The special committee was
also given the authority to reject any proposals for the
potential purchase by Petrohawk of PHAWKs oil and gas
properties if the committee deemed such purchase not to be in
the best interests of Petrohawk. In furtherance of its duties,
the special committee hired the engineering firm of Netherland,
Sewell & Associates, Inc. to provide the reserve
evaluation and engaged Petro Capital Advisors, LLC (not
affiliated with Petrohawk) to evaluate the fairness, from a
financial point of view, of the purchase to Petrohawk. Petro
Capital Advisors, LLC rendered a fairness opinion to the special
committee based on several different valuation approaches,
depending on the type of asset.
On August 11, 2004, Petrohawk closed the purchase from
PHAWK of certain oil and gas properties in the Breton Sound
area, Plaquemines Parish, Louisiana, and in the West Broussard
Field in Lafayette Parish, Louisiana having approximately
2.9 Bcfe of proved reserves. This purchase included the
acquisition of 79 square miles of recently reprocessed 3D
seismic data and a 25% working interest in 8 leased drilling
prospects covering approximately 2,528 gross acres in
Breton Sound as well as two producing wells, pipelines and
associated production facilities in Block 11 and 23,
Breton Sound. Also, a 14% working interest (10% net revenue
interest) was acquired in the RLSUA Montesano #1 in the West
Broussard Field which had recently gone on production. The
aggregate purchase price for all of the proved reserves, seismic
data, undeveloped acreage, pipelines, production facility and
other assets was $8.5 million in cash. The effective date
of the acquisition was June 1, 2004 and the effects of this
transaction were first reported in Petrohawks results for
the quarter ending September 30, 2004.
In addition to the purchase of certain oil and gas properties by
Petrohawk from PHAWK, Petrohawk is also indebted to PHAWK
pursuant to the terms of a $35 million five year
8% subordinated note convertible into approximately
8.75 million shares of Petrohawk common stock.
Messrs. Miller, Phillips, Rioux, Bridwell, Irish and
Wilson, six of the seven current directors of Petrohawk, as well
as Mr. Helm, Vice President Chief
Administrative Officer of Petrohawk, may be deemed to be
interested in the purchase by Petrohawk of PHAWKs oil and
gas properties. Mr. Wilson, Director, Chairman of the
Board, President and Chief Executive Officer of Petrohawk is
also an owner and President and Chief Executive Officer of
PHAWK. In addition, FCW, LLC, a member of PHAWK, has the
contractual right to nominate one of the five members of the
board of directors of PHAWK pursuant to PHAWKs limited
liability agreement and has nominated Mr. Wilson, the
majority member of FCW, LLC. FCW, LLC has made an approximately
10% capital contribution to PHAWK. Messrs. David B. Miller
and D. Martin Phillips, both directors of Petrohawk, are also
directors of PHAWK. In addition, EnCap Energy Capital
Fund IV, L.P. and EnCap Energy Capital Fund IV-B,
L.P., which are members of PHAWK, have the contractual right to
nominate a majority of the members of the board of directors of
PHAWK pursuant to that entitys limited liability company
agreement. These EnCap entities have nominated
Messrs. Miller and Phillips, along with a third nominee, to
the board of PHAWK. Messrs. Miller and Phillips control,
indirectly, EnCap Energy Capital Fund IV, L.P. and EnCap
Energy Capital Fund IV-B, L.P. which have collectively made
an approximately 64% capital contribution to PHAWK. Each of
Messrs. Helm, Bridwell and Irish has made less than a 0.2%
capital contribution each
131
to PHAWK, but do not hold any directorship or office in PHAWK
and are not otherwise affiliated with that entity.
Mr. Rioux, a Petrohawk director, is also a director of
PHAWK. In addition, Kellen Holdings, LLC, a member of PHAWK
which made an approximately 19% capital contribution to that
entity, is an affiliate of Liberty Energy Holdings, LLC of which
Mr. Rioux is Vice President and Treasurer.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following tables sets forth information regarding the
beneficial ownership by directors, executive officers and
persons known to own beneficially 5% or more of:
|
|
|
|
|
Petrohawk and Mission common stock as of April 1,
2005; and |
|
|
|
the combined company common stock as of April 1, 2005
assuming: |
|
|
|
|
|
that the exchange ratio is 0.7458 shares of Petrohawk
common stock for each share of Mission common stock; and |
|
|
|
the conversion of all Mission stock options into Petrohawk stock
options. |
Beneficial ownership has been determined in accordance with
applicable SEC rules, under which a person is deemed to be the
beneficial owner of securities if he or she has or shares voting
power or investment power with respect to such securities or has
the right to acquire beneficial ownership within 60 days.
Information is provided for reporting purposes only and should
not be construed as an admission of actual beneficial ownership.
Unless otherwise indicated, to the knowledge of Petrohawk or
Mission, as applicable, the persons listed in the table below
have sole voting and investment powers with respect to the
shares indicated.
The percentages are based on (i) 41,535,088 shares of
Mission common stock issued and outstanding on April 1,
2005, and (ii) 40,146,336 shares of Petrohawk common stock
issued and outstanding as of April 1, 2005. The combined
company percentages are based on shares of Petrohawk common
stock assumed to be issued and outstanding immediately after the
merger. Except as otherwise set forth below, the address of each
beneficial owner listed under the Petrohawk Energy Corporation
and The Combined Company tables is that of Petrohawk at 1100
Louisiana St., Suite 4400, Houston, Texas 77002 and the
address of each beneficial owner listed under the Mission
Resources Corporation table is that of Mission at 1331 Lamar
St., Suite 1455, Houston, Texas 77010.
Petrohawk Energy Corporation
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
|
|
Shares of |
|
|
|
Preferred |
|
|
|
|
Common Stock |
|
|
|
Stock |
|
|
|
|
Beneficially |
|
Percent of |
|
Beneficially |
|
Percent of |
Name and Address of Beneficial Owner |
|
Owned |
|
Class |
|
Owned(1) |
|
Class |
|
|
|
|
|
|
|
|
|
Floyd C. Wilson
|
|
|
8,355,090 |
(1) |
|
|
18.47 |
% |
|
|
0 |
|
|
|
* |
|
Stephen W. Herod
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Shane M. Bayless
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Larry L. Helm
|
|
|
66,666 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Richard K. Stoneburner
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Richard H. Smith
|
|
|
23,332 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Mark J. Mize
|
|
|
11,751 |
(3) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
David B. Miller
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
c/o EnCap Investments L.P.
3811 Turtle Creek Blvd., Suite 1080
Dallas, Texas 75219 |
|
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|
|
|
|
|
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|
|
|
|
|
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|
|
132
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
|
|
Shares of |
|
|
|
Preferred |
|
|
|
|
Common Stock |
|
|
|
Stock |
|
|
|
|
Beneficially |
|
Percent of |
|
Beneficially |
|
Percent of |
Name and Address of Beneficial Owner |
|
Owned |
|
Class |
|
Owned(1) |
|
Class |
|
|
|
|
|
|
|
|
|
D. Martin Phillips
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
c/o EnCap Investments L.P.
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Rioux
|
|
|
0 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
175 Berkeley Street
Boston, MA 02116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tucker S. Bridwell
|
|
|
8,518 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
400 Pine St., Suite 1000
Abilene, Texas 79601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L. Irish III
|
|
|
8,631 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C. Stone, Jr.
|
|
|
95,000 |
(7) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
49 Allard Boulevard
New Orleans, Louisiana 70119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PHAWK, LLC
|
|
|
8,245,757 |
(8) |
|
|
18.27 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 4400
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Energy Capital Fund IV, L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Energy Capital Fund IV-B, L.P.
|
|
|
8,245,757 |
(5)(6)(9) |
|
|
18.27 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Equity Fund IV GP, L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Investments L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Investments GP, L.L.C.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNBD GP LLC
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary R. Petersen
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L. Zorich
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
18.31 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
Houston, Texas 77002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCW, LLC
|
|
|
8,245,757 |
(9)(10) |
|
|
18.27 |
% |
|
|
0 |
|
|
|
* |
|
BBT Fund, L.P.
|
|
|
1,100,000 |
(11) |
|
|
2.74 |
%(13) |
|
|
0 |
|
|
|
* |
|
|
Concentrated Alpha Partners, L.P.
Corporate Center
West Bay Road
Grand Cayman, Cayman Islands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
|
|
Shares of |
|
|
|
Preferred |
|
|
|
|
Common Stock |
|
|
|
Stock |
|
|
|
|
Beneficially |
|
Percent of |
|
Beneficially |
|
Percent of |
Name and Address of Beneficial Owner |
|
Owned |
|
Class |
|
Owned(1) |
|
Class |
|
|
|
|
|
|
|
|
|
Ospraie Management, L.P.
|
|
|
2,775,000 |
(12) |
|
|
6.91 |
%(14) |
|
|
0 |
|
|
|
* |
|
|
Ospraie Management, Inc.
Dwight Anderson
780 Third Avenue,
42nd Floor
New York, New York 10017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Sound Capital, LLC
|
|
|
2,300,000 |
(13) |
|
|
5.73 |
%(15) |
|
|
0 |
|
|
|
* |
|
|
53 Forest Avenue, Suite 202
Old Greenwich, Connecticut 06870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group
|
|
|
8,760,797 |
(14) |
|
|
19.21 |
% |
|
|
0 |
|
|
|
* |
|
|
|
|
|
* |
Represents less than 1% of that class of stock outstanding. |
|
|
(1) |
Represents 1,000 shares of common stock and
108,333 shares of common stock underlying stock options and
shares owned by PHAWK, LLC. Floyd C. Wilson may be deemed to
share the voting and dispositive control over the shares of
common stock owned by PHAWK. FCW, LLC, a member of PHAWK, has
the contractual right to nominate one of the members of the
board of directors of PHAWK pursuant to PHAWKs governing
documents and has nominated Floyd C. Wilson, the majority member
of FCW, LLC. There are five directors on the board of directors
of PHAWK. Floyd C. Wilson disclaims beneficial ownership of the
reported securities in excess of his pecuniary interest in such
securities. |
|
(2) |
Represents shares of common stock underlying stock options. |
|
(3) |
Represents 85 shares of common stock and 11,666 shares
of common stock underlying stock options. |
|
(4) |
Represents 3,245,757 shares of common stock and warrants to
purchase 5,000,000 shares of common stock exercisable
within 60 days after the date hereof owned by PHAWK and
16,810 shares of common stock owned by EnCap Energy Capital
Fund IV, L.P. |
|
(5) |
These entities or persons may be deemed to share voting and
dispositive control over the shares of common stock owned by
PHAWK and, except with respect to EnCap Energy Capital
Fund IV-B, L.P., the shares owned by EnCap Energy Capital
Fund IV, L.P. EnCap Energy Capital Fund IV, L.P. and
EnCap Energy Capital Fund IV-B, L.P., which are members of
PHAWK, have the contractual right to nominate a majority of the
members of the board of directors of PHAWK pursuant to
PHAWKs limited liability company agreement. EnCap Energy
Capital Fund IV, L.P. and EnCap Energy Capital
Fund IV-B, L.P. are controlled indirectly by David B.
Miller, Gary R. Petersen, D. Martin Phillips and Robert L.
Zorich. In addition, Mr. Miller and Mr. Phillips are
members of PHAWKs board of directors. Messrs. Miller,
Petersen, Phillips and Zorich are members of RNBD GP LLC which
in turn has management control, directly or indirectly, over the
other EnCap entities listed on this beneficial ownership table,
including EnCap Investments GP, L.L.C., EnCap Investments L.P.,
EnCap Equity Fund IV GP, L.P., EnCap Energy Capital
Fund IV-B, L.P., and EnCap Energy Capital Fund IV,
L.P. EnCap Equity Fund IV GP, L.P., EnCap Investments L.P.,
EnCap Investments GP, L.L.C., and RNBD GP LLC have management
control, directly or indirectly, over EnCap Energy Capital
Fund IV, L.P., and EnCap Energy Capital Fund IV-B, L.P. |
|
(6) |
Each of EnCap Energy Capital Fund IV, L.P., EnCap Energy
Capital Fund IV-B, L.P., EnCap Equity Fund IV GP,
L.P., EnCap Investments L.P., EnCap Investments GP, L.L.C., RNBD
GP LLC, David B. Miller, Gary R. Petersen, D. Martin Phillips,
and Robert L. Zorich disclaim beneficial ownership of the
reported securities (except in the instance of EnCap Energy
Capital Fund IV, L.P. of the securities owned directly by
EnCap Energy Capital Fund IV, L.P.) in excess of such
entitys or persons respective pecuniary interest in
the securities. |
|
(7) |
Represents 87,500 shares of common stock underlying stock
options and 7,500 shares of common stock. |
134
|
|
(8) |
Includes 3,245,757 shares of common stock and warrants to
purchase 5,000,000 shares of common stock exercisable
within 60 days after the date hereof. |
|
(9) |
Represents shares owned by PHAWK. |
|
|
(10) |
FCW, LLC may be deemed to share voting and dispositive control
over the shares of common stock owned by PHAWK by virtue of
having the contractual right to nominate one of the members of
the board of directors of PHAWK pursuant to PHAWKs
governing documents. FCW, LLC disclaims beneficial ownership of
the reported securities in excess of its pecuniary interest in
the securities. |
|
(11) |
Information obtained from a Schedule 13G filed by BBT Fund,
L.P. and Concentrated Alpha Partners, L.P. with the Securities
and Exchange Commission on December 2, 2004 on behalf of
BBT Fund, L.P., Concentrated Alpha Partners, L.P., BBT Genpar,
L.P., BBT-FW, Inc., CAP Genpar, L.P., CAP-FW, Inc., Clive Bode
and Sid R. Bass. This Schedule 13G provides that such
entities and individuals have sole voting and dispositive power
over a total of 7.6% of the common stock of Petrohawk. |
|
(12) |
Information obtained from a Schedule 13G filed by Ospraie
Management, L.P., Ospraie Management, Inc. and Dwight Anderson
with the Securities and Exchange Commission on January 24,
2005. This Schedule 13G provides that Ospraie Management,
L.P., Ospraie Management, Inc. and Dwight Anderson have shared
and voting and dispositive power over 5.7% of the common stock
of Petrohawk. |
|
(13) |
Information obtained from a Schedule 13G filed by North
Sound Capital, LLC with the Securities and Exchange Commission
on January 31, 2005. This Schedule 13G provides that
North Sound Capital, LLC has shared voting and dispositive power
over 5.79% of the common stock of Petrohawk. |
|
(14) |
Includes 8,760,797 shares of common stock,
5,000,000 shares of common stock underlying warrants and
472,496 shares of common stock underlying stock options. |
Mission Resources Corporation
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
|
|
Common Stock |
|
|
|
|
Beneficially |
|
Percent of |
Name and Address of Beneficial Owner |
|
Owned |
|
Class |
|
|
|
|
|
Harbert Distressed Investment Master Fund, Ltd.(1)
|
|
|
7,700,000 |
|
|
|
18.5 |
% |
|
c/o International Fund Services (Ireland) Limited
Third Floor, Bishops Square, Redmonds Hill
Dublin 2, Ireland |
|
|
|
|
|
|
|
|
Guggenheim Investment Management, LLC(2)
|
|
|
6,250,000 |
|
|
|
15.1 |
% |
|
135 East 57th Street, 9th Floor
New York, New York 10022 |
|
|
|
|
|
|
|
|
Robert L. Cavnar(3)
|
|
|
2,232,500 |
|
|
|
5.1 |
% |
Richard W. Piacenti(4)
|
|
|
580,600 |
|
|
|
1.4 |
% |
John (Jack) L. Eells(5)
|
|
|
434,000 |
|
|
|
1.0 |
% |
Marshall L. Munsell(6)
|
|
|
293,334 |
|
|
|
* |
|
William R. Picquet(7)
|
|
|
125,000 |
|
|
|
* |
|
Tom C. Langford(8)
|
|
|
100,000 |
|
|
|
* |
|
Robert R. Rooney(9)
|
|
|
72,904 |
|
|
|
* |
|
David A.B. Brown(10)
|
|
|
47,000 |
|
|
|
* |
|
Herbert C. Williamson, III(10)
|
|
|
35,000 |
|
|
|
* |
|
Joseph N. Jaggers(11)
|
|
|
35,000 |
|
|
|
* |
|
Directors and executive officers as a group (10 persons)
|
|
|
4,114,311 |
|
|
|
9.1 |
% |
135
|
|
(1) |
Based on a Schedule 13G/ A filed on February 14, 2005,
by Harbert Distressed Investment Master Fund, Ltd. (the
Master Fund), HMC Distressed Investment Offshore
Manager, L.L.C. (HMC Management), HMC Investors,
L.L.C. (HMC Investors), Philip Falcone, Raymond J.
Harbert and Michael D. Luce. The Master Fund is a Cayman Islands
corporation with its principal business address at
c/o International Fund Services (Ireland) Limited,
Third Floor, Bishops Square, Redmonds Hill,
Dublin 2, Ireland. Each of HMC Management and HMC Investors
is a Delaware limited liability company. Each of
Messrs. Falcone, Harbert and Luce is a United States
citizen. The principal business address for each of HMC
Management and Mr. Falcone is 555 Madison Avenue, 16th
Floor, New York, New York 10022. The principal business address
for each of HMC Investors and Messrs. Harbert and Luce is
One Riverchase Parkway South, Birmingham, Alabama 35244. As of
the date of the Schedule 13G/ A, the Master Fund, HMC
Management, HMC Investors, Mr. Falcone, Mr. Harbert
and Mr. Luce may be deemed to beneficially own 7,605,015,
7,605,015, 7,700,000, 7,700,000, 7,700,000 and
7,700,000 shares, respectively. The Master Fund and HMC
Management have the shared power to vote or direct the vote of
7,605,015 shares and have shared power to dispose or direct
the disposition of 7,605,015 shares. HMC Investors and
Messrs. Falcone, Harbert and Luce have the shared power to
vote or direct the vote of 7,700,000 shares and have shared
power to dispose or direct the disposition of
7,700,000 shares. The Master Fund, HMC Management, HMC
Investors and Messrs. Falcone, Harbert and Luce
specifically disclaimed beneficial ownership in the shares
reported therein except to the extent of its pecuniary interest
therein. In addition, in the event that any action is submitted
to Missions stockholders for their approval, whether at a
meeting or by written consent, at a time when the Master Fund
and its affiliates collectively own more than 9.9% of
Missions voting securities, unless otherwise approved in
writing in advance by Mission, Master Fund has agreed to vote
all voting securities as to which it has the right to vote that
exceeds the 9.9% amount in the same manner as (i.e., in favor
of, against and abstentions with respect to) and proportionately
to the votes cast by all other voting securities that are
entitled to vote with respect to such matter. On April 3,
2005, Harbert entered into a voting agreement with Petrohawk and
us pursuant to which they have agreed, among other things, to
vote all shares of our common stock owned by it in favor of the
Merger. The voting agreement also grants an irrevocable proxy to
Petrohawk empowering it to vote all such shares of our common
stock at any meeting of our stockholders called for the purpose
of voting on the Merger. |
|
(2) |
Based on a Schedule 13G/ A filed on April 22, 2004 by
Stellar Funding, Ltd. (Stellar), Guggenheim
Investment Management, LLC (GIM) and Guggenheim
Capital, LLC (GCL). The principal business address
for each of Seller and GIM is 135 East 57th Street, 9th Floor,
New York, New York 10022. The principal business address for GCL
is 227 West Monroe Street, Suite 400, Chicago, Illinois
60606. Stellar is a private investment vehicle managed by GIM
and has contractually delegated to GIM all investment and voting
power over the 6,250,000 shares of common stock
beneficially owned by Stellar. As a result, GIM, which is a
wholly owned subsidiary of GCL, may be deemed to be the
beneficial owner of the shares of common stock owned by Stellar.
In addition, as a result of a memorandum signed by Stellar and
GC, which contemplates a sale of a portion of the shares owned
by Stellar to GC, GC may be considered part of a group with
Stellar. Accordingly, GC may be deemed to be the beneficial
owner of the shares of common stock owned by Stellar. GIM is a
wholly owned subsidiary of GC, and GC may be deemed ultimately
to control GIM. GC, its executive officers and directors, and
its direct and indirect subsidiaries, may beneficially own
shares of common stock and such shares are not reported in the
Schedule 13G/ A. Due to the separate management and
independent operation of GIM, GC disclaims beneficial ownership
of common stock beneficially owned by the reporting persons by
reason of its ownership of GIM. Each of Stellar, GC and GCL has
disclaimed the beneficial ownership of the shares of common
stock owned by the other reporting persons. In addition, in the
event that any action is submitted to Missions
stockholders for their approval, whether at a meeting or by
written consent, at a time when Stellar and its affiliates
collectively own more than 9.9% of Missions voting
securities, |
136
|
|
|
unless otherwise approved in writing in advance by Mission,
Stellar has agreed to vote all voting securities as to which it
has the right to vote that exceeds the 9.9% amount in the same
manner as (i.e., in favor of, against and abstentions with
respect to) and proportionately to the votes cast by all other
voting securities that are entitled to vote with respect to such
matter. On April 3, 2005, Stellar and GCL entered into a
voting agreement with Petrohawk and us pursuant to which they
have agreed, among other things, to vote all shares of our
common stock owned by them in favor of the Merger. The voting
agreement also grants an irrevocable proxy to Petrohawk
empowering it to vote all such shares of our common stock at any
meeting of our stockholders called for the purpose of voting on
the Merger. |
|
(3) |
Includes 2,187,500 shares of common stock issuable upon the
exercise of vested options. |
|
(4) |
Includes 462,500 shares of common stock issuable upon the
exercise of vested options. |
|
(5) |
Includes 400,000 shares of common stock issuable upon the
exercise of vested options. |
|
(6) |
Includes 283,334 shares of common stock issuable upon the
exercise of vested options. |
|
(7) |
Includes 125,000 shares of common stock issuable upon the
exercise of vested options. |
|
(8) |
Includes 100,000 shares of common stock issuable upon the
exercise of vested options. |
|
(9) |
Includes 39,000 shares of common stock issuable upon the
exercise of vested options. |
|
|
(10) |
Includes 35,000 shares of common stock issuable upon the
exercise of vested options. |
|
(11) |
Includes 30,000 shares of common stock issuable upon the
exercise of vested options. |
137
The Combined Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of | |
|
|
|
|
Shares of | |
|
|
|
Preferred | |
|
|
|
|
Common Stock | |
|
|
|
Stock | |
|
|
|
|
Beneficially | |
|
Percent of | |
|
Beneficially | |
|
Percent of | |
Name and Address of Beneficial Owner |
|
Owned | |
|
Class | |
|
Owned | |
|
Class | |
|
|
| |
|
| |
|
| |
|
| |
Floyd C. Wilson
|
|
|
8,355,090 |
(1) |
|
|
13.0 |
% |
|
|
0 |
|
|
|
* |
|
Stephen W. Herod
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Shane M. Bayless
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Larry L. Helm
|
|
|
66,666 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Richard K. Stoneburner
|
|
|
58,333 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Richard H. Smith
|
|
|
23,332 |
(2) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
Mark J. Mize
|
|
|
11,751 |
(3) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
David B. Miller
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
c/o EnCap Investments L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3811 Turtle Creek Blvd., Suite 1080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas, Texas 75219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Martin Phillips
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
c/o EnCap Investments L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Rioux
|
|
|
0 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
175 Berkeley Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston, Massachusetts 02116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tucker S. Bridwell
|
|
|
8,518 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
400 Pine St., Suite 1000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abilene, Texas 79601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L. Irish III
|
|
|
8,631 |
|
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
1700 Pacific Avenue, Suite 3300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas, Texas 75201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C. Stone
|
|
|
95,000 |
(7) |
|
|
* |
|
|
|
0 |
|
|
|
* |
|
|
49 Allard Boulevard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orleans, Louisiana 70119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PHAWK, LLC
|
|
|
8,245,757 |
(8) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
EnCap Energy Capital Fund IV, L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Energy Capital Fund IV-B, L.P.
|
|
|
8,245,757 |
(5)(6)(9) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Equity Fund IV GP, L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Investments L.P.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EnCap Investments GP, L.L.C.
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNBD GP LLC
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary R. Petersen
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of | |
|
|
|
|
Shares of | |
|
|
|
Preferred | |
|
|
|
|
Common Stock | |
|
|
|
Stock | |
|
|
|
|
Beneficially | |
|
Percent of | |
|
Beneficially | |
|
Percent of | |
Name and Address of Beneficial Owner |
|
Owned | |
|
Class | |
|
Owned | |
|
Class | |
|
|
| |
|
| |
|
| |
|
| |
Robert L. Zorich
|
|
|
8,262,567 |
(4)(5)(6) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
|
1100 Louisiana, Suite 3150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCW, LLC
|
|
|
8,245,757 |
(9)(10) |
|
|
12.8 |
% |
|
|
0 |
|
|
|
* |
|
Harbert Distressed Investment Master Fund, Ltd.
|
|
|
5,742,660 |
(11) |
|
|
9.7 |
% |
|
|
0 |
|
|
|
* |
|
|
c/o International Fund Services (Ireland) Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Floor, Bishops Square, Redmonds Hill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dublin 2, Ireland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guggenheim Investment Management, LLC
|
|
|
4,661,250 |
(12) |
|
|
7.9 |
% |
|
|
0 |
|
|
|
* |
|
|
135 East 57th Street, 9th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, New York 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents 1,000 shares of common stock and
108,333 shares of common stock underlying stock options and
shares owned by PHAWK, LLC. Floyd C. Wilson may be deemed to
share the voting and dispositive control over the shares of
common stock owned by PHAWK. FCW, LLC, a member of PHAWK, has
the contractual right to nominate one of the members of the
board of directors of PHAWK pursuant to PHAWKs governing
documents and has nominated Floyd C. Wilson, the majority member
of FCW, LLC. There are five directors on the board of directors
of PHAWK. Floyd C. Wilson disclaims beneficial ownership of the
reported securities in excess of his pecuniary interest in such
securities. |
|
(2) |
Represents shares of common stock underlying stock options. |
|
(3) |
Represents 85 shares of common stock and 11,666 shares
of common stock underlying stock options. |
|
(4) |
Represents 3,245,757 shares of common stock and warrants to
purchase 5,000,000 shares of common stock exercisable
within 60 days after the date hereof owned by PHAWK and
16,810 shares of common stock owned by EnCap Energy Capital
Fund IV, L.P. |
|
(5) |
These entities or persons may be deemed to share voting and
dispositive control over the shares of common stock owned by
PHAWK and, except with respect to EnCap Energy Capital
Fund IV-B, L.P., the shares owned by EnCap Energy Capital
Fund IV, L.P. EnCap Energy Capital Fund IV, L.P. and
EnCap Energy Capital Fund IV-B, L.P., which are members of
PHAWK, have the contractual right to nominate a majority of the
members of the board of directors of PHAWK pursuant to
PHAWKs limited liability company agreement. EnCap Energy
Capital Fund IV, L.P. and EnCap Energy Capital
Fund IV-B, L.P. are controlled indirectly by David B.
Miller, Gary R. Petersen, D. Martin Phillips and Robert L.
Zorich. In addition, Mr. Miller and Mr. Phillips are
members of PHAWKs board of directors. Messrs. Miller,
Petersen, Phillips and Zorich are members of RNBD GP LLC which
in turn has management control, directly or indirectly, over the
other EnCap entities listed on this beneficial ownership table,
including EnCap Investments GP, L.L.C., EnCap Investments L.P.,
EnCap Equity Fund IV GP, L.P., EnCap Energy Capital
Fund IV-B, L.P., and EnCap Energy Capital Fund IV,
L.P. EnCap Equity Fund IV GP, L.P., EnCap Investments L.P.,
EnCap Investments GP, L.L.C., and RNBD GP LLC have management
control, directly or indirectly, over EnCap Energy Capital
Fund IV, L.P., and EnCap Energy Capital Fund IV-B, L.P. |
|
(6) |
Each of EnCap Energy Capital Fund IV, L.P., EnCap Energy
Capital Fund IV-B, L.P., EnCap Equity Fund IV GP,
L.P., EnCap Investments L.P., EnCap Investments GP, L.L.C., RNBD
GP LLC, David B. Miller, Gary R. Petersen, D. Martin Phillips,
and Robert L. Zorich disclaim beneficial ownership of the
reported securities (except in the instance of EnCap Energy
Capital |
139
|
|
|
Fund IV, L.P. of the securities owned directly by EnCap
Energy Capital Fund IV, L.P.) in excess of such
entitys or persons respective pecuniary interest in
the securities. |
|
(7) |
Represents 87,500 shares of common stock underlying stock
options and 7,500 shares of common stock. |
|
(8) |
Includes 3,245,757 shares of common stock and warrants to
purchase 5,000,000 shares of common stock exercisable
within 60 days after the date hereof. |
|
(9) |
Represents shares owned by PHAWK. |
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(10) |
FCW, LLC may be deemed to share voting and dispositive control
over the shares of common stock owned by PHAWK by virtue of
having the contractual right to nominate one of the members of
the board of directors of PHAWK pursuant to PHAWKs
governing documents. FCW, LLC disclaims beneficial ownership of
the reported securities in excess of its pecuniary interest in
the securities. |
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(11) |
Assumes Harbert Distressed Investment Master Fund, Ltd. elects
to receive the Per Share Stock Consideration for each share of
Mission common stock it owns. |
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Assumes Guggenheim Investment Management, LLC elects to receive
the Per Share Stock Consideration for each share of Mission
common stock it owns. |
140
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires Petrohawk directors, certain officers and holders of
10% or more of any class of Petrohawks stock to report to
the SEC, by a specified date, initial reports of ownership and
reports of changes in ownership of Petrohawk stock and other
equity securities. Petrohawk believes that during the fiscal
year ended December 31, 2004, its directors and executive
officers complied with all these filing requirements, based
solely on a review of copies of reports filed under
Section 16(a) furnished to Petrohawk and on the written
representations of Petrohawk directors and executive officers
except that Messrs. Wilson, Herod, Bayless, Helm,
Stoneburner, Miller, Phillips, Bridwell, Stone, Irish and Rioux
were each late filing a Form 4. Messrs. Smith and Mize
were each late filing a Form 3.
RATIFICATION OF INDEPENDENT AUDITORS
The audit committee of Petrohawks board has appointed
Deloitte & Touche LLP, certified public accountants, as
auditors to examine the financial statements of Petrohawk for
the fiscal year ending December 31, 2005, and to perform
other appropriate accounting services and is requesting
ratification of such appointment by the stockholders. If the
stockholders do not ratify the appointment of
Deloitte & Touche LLP, the adverse vote will be
considered as a direction to the audit committee to select other
auditors for the next fiscal year. However, because of the
difficulty and expense of making any substitution of auditors
after the beginning of the current fiscal year, it is
contemplated that the appointment for the fiscal year ending
December 31, 2005, will be permitted to stand unless the
audit committee finds other reasons for making a change. It is
understood that even if the selection of Deloitte &
Touche LLP is ratified, the audit committee, in its discretion,
may direct the appointment of a new independent accounting firm
at any time during the year if the audit committee feels that
such a change would be in the best interests of Petrohawk and
its stockholders.
The ratification of Deloitte & Touche LLP requires the
affirmative vote of holders of a majority of the shares of
Petrohawk common stock present, in person or proxy, and entitled
to vote at the annual meeting.
Representatives of Deloitte & Touche LLP are expected
to be present at the annual meeting, will have the opportunity
to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
The Petrohawk audit committee recommends that Petrohawk
stockholders vote to approve the proposal to ratify the
selection of Deloitte & Touche LLP as Petrohawks
independent auditors for the fiscal year ending
December 31, 2005.
LEGAL MATTERS
The validity of the Petrohawk common stock to be issued in
connection with the merger will be passed upon for Petrohawk by
Thompson & Knight LLP. Thompson & Knight LLP
and Porter & Hedges, L.L.P. will deliver their opinions
to Petrohawk and Mission, respectively, as to certain
U.S. federal income tax matters.
EXPERTS
The consolidated financial statements of Petrohawk Energy
Corporation and Subsidiaries incorporated in this prospectus by
reference from Petrohawk Energy Corporations Annual Report
on Form 10-K for the year ended December 31, 2004 have
been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report,
which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
141
The consolidated financial statements of Mission Resources
Corporation as of December 31, 2004 and 2003, and for each
of the years in the three-year period ended December 31,
2004, and managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2004 have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent
registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in
accounting and auditing. The audit reports incorporated by
reference herein contain an explanatory paragraph regarding the
Companys adoption of Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset
Retirement Obligations effective January 1, 2003 and
SFAS No. 142, Goodwill and Other Intangible
Assets effective January 1, 2002.
The consolidated financial statements of Petrohawk Energy
Corporation at December 31, 2003 and for the year then
ended, appearing in Petrohawk Energy Corporations Annual
Report (Form 10-K/ A) for the year ended December 31,
2003, have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their report
thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein
by reference in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Petrohawk Energy
Corporation, incorporated in this prospectus by reference to the
annual report on Form 10-K, as amended, of Petrohawk Energy
Corporation as of December 31, 2002 and for the year ended
December 31, 2002, have been so incorporated in reliance on
the report of Hein & Associates LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
The combined financial statements of Wynn-Crosby Energy, Inc.
and its affiliated partnerships as of December 31, 2003,
and for each of the years in the three-year period ended
December 31, 2003, have been incorporated in this
prospectus in reliance upon the report of KPMG LLP, an
independent registered public accounting firm, incorporated by
reference in this prospectus, and upon the authority of said
firm as experts in accounting and auditing. The audit report
covering the December 31, 2003 combined financial
statements refers to a change in the method of accounting for
abandonment obligations in accordance with Statement of
Financial Accounting Standards No. 143 Accounting for
Asset Retirement Obligations as of January 1, 2003,
and a change in the method of accounting for derivative
instruments in accordance with Statement of Financial Accounting
Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities as of January 1,
2001.
Certain estimates of proved oil and gas reserves for both
Petrohawk Energy Corporation and Mission Resources Corporation
referred to and incorporated by reference herein were based in
part upon engineering reports prepared by Netherland, Sewell
& Associates, Inc., independent petroleum engineers. These
estimates are included and incorporated herein in reliance on
the authority of such firm as experts in such matters.
WHERE YOU CAN FIND MORE INFORMATION
Petrohawk has filed with the SEC a registration statement under
the Securities Act that registers the distribution to Mission
stockholders of the shares of Petrohawk common stock to be
issued in connection with the merger. The registration
statement, including the attached exhibits and schedules,
contains additional relevant information about Petrohawk and
Petrohawk common stock. The rules and regulations of the SEC
allow us to omit certain information included in the
registration statement from this joint proxy statement/
prospectus.
Petrohawk and Mission also file reports, proxy statements and
other information with the SEC under the Exchange Act. You may
read and copy this information at the Public Reference Room of
the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the
SECs Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy statements and other information about
issuers, like Petrohawk and Mission, who file electronically
with the SEC. The address of that site is
http://www.sec.gov.
142
The SEC allows Petrohawk and Mission to incorporate by
reference information into this joint proxy statement/
prospectus. This means that Petrohawk and Mission can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this
joint proxy statement/ prospectus, except for any information
that is superseded by information that is included directly in
this joint proxy statement/ prospectus or in other later-filed
documents that are incorporated by reference. Information
furnished under Item 2.02 or Item 7.01 of
Petrohawks or Missions current reports on
Form 8-K is not incorporated by reference in this joint
proxy statement/ prospectus and registration statement. The
information incorporated by reference contains important
information about our companies and their financial condition.
The following documents filed with the SEC by Petrohawk and
Mission are incorporated by reference into this joint proxy
statement/ prospectus.
Petrohawk filings with the SEC
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Annual Report on Form 10-K/A for the year ended
December 31, 2004; |
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Current Report on 8-K/A filed on December 1, 2004; |
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Current Reports on Form 8-K filed on January 6, 2005,
January 21, 2005, February 10, 2005, February 22,
2005, March 3, 2005, two reports filed on April 4,
2005, and April 18, 2005; and |
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The description of Petrohawks common stock set forth in
Petrohawks registration statements filed pursuant to
Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating such description. |
Mission filings with the SEC
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Annual Report on Form 10-K for the year ended December 31,
2004; |
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Current Reports on Form 8-K filed on January 28, 2005,
February 7, 2005, March 2, 2005, two reports filed on
March 8, 2005, March 9, 2005, March 16, 2005,
March 29, April 4, 2005 and April 18,
2005; and |
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The description of Missions common stock set forth in
Missions registration statements filed pursuant to
Section 12 of the Exchange Act, including any amendment or
report filed for purposes of updating any such description. |
All documents and reports filed by Petrohawk and Mission with
the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act between the date of this joint proxy
statement/ prospectus and the date of our meetings are
incorporated by reference into this joint proxy statement/
prospectus. These documents include periodic reports, such as
annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K (excluding
information furnished under Items 2.02 or 7.01), as well as
proxy statements.
Petrohawk has supplied all information contained or incorporated
by reference in this joint proxy statement/ prospectus relating
to Petrohawk, as well as all pro forma financial information,
and Mission has supplied all relevant information relating to
Mission.
Documents incorporated by reference are available from the
companies without charge, excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this joint proxy statement/
prospectus. You can obtain documents incorporated by reference
in this joint proxy
143
statement/ prospectus by requesting them in writing or by
telephone from the appropriate company at the following
addresses:
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Petrohawk Energy Corporation
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Mission Resources Corporation |
1100 Louisiana St., Suite 4400
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1331 Lamar St., Suite 1455 |
Houston, Texas 77002
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Houston, Texas 77010 |
(832) 204-2700
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(713) 495-3000 |
Attention: Investor Relations
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Attention: Investor Relations |
If you would like to request documents, please make sure your
request is received
by ,
2005, in order to receive them before our meetings. If you
request any incorporated documents from Petrohawk or Mission,
the appropriate company will mail them to you by first class
mail, or another equally prompt means, within one business day
after your request is received.
We have not authorized anyone to give any information or make
any representation about the merger or the companies that is
different from, or in addition to, that contained in this joint
proxy statement/ prospectus or in any of the materials that have
been incorporated into this joint proxy statement/ prospectus.
Therefore, if anyone distributes this type of information, you
should not rely upon it. If you are in a jurisdiction where
offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this joint proxy
statement/ prospectus or the solicitation of proxies is
unlawful, or you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this
joint proxy statement/ prospectus does not extend to you. The
information contained in this joint proxy statement/ prospectus
speaks only as of the date of this joint proxy statement/
prospectus unless the information specifically indicates that
another date applies.
144
GLOSSARY OF OIL AND GAS TERMS
The following are abbreviations and definitions of certain terms
commonly used in the oil and gas industry and this document:
Bbl. One stock tank barrel, or 42 U.S. gallons
liquid volume, used in reference to oil or other liquid
hydrocarbons.
Bcf. One billion cubic feet of gas.
Bcfe. One billion cubic feet of gas equivalent.
BOE. One stock tank barrel equivalent of oil, calculated
by converting gas volumes to equivalent oil barrels at a ratio
of 6 Mcf to 1 Bbl of oil.
Development well. A well drilled within the proved area
of an oil or gas reservoir to the depth of a stratigraphic
horizon known to be productive.
Gas. Natural gas.
MBbl. One thousand barrels of oil or other liquid
hydrocarbons.
MBOE. One thousand BOE.
Mcf. One thousand cubic feet of gas.
Mcfe. One thousand cubic feet of gas equivalent.
MMBbl. One million barrels of oil or other liquid
hydrocarbons.
MMBtu. One million British Thermal units. One British
thermal unit is the amount of heat required to raise the
temperature of one pound of water to one degree Fahrenheit.
MMcf. One million cubic feet of gas.
MMcfe. One million cubic feet of gas equivalent.
Oil. Crude oil, condensate and natural gas liquids.
Operator. The individual or company responsible for the
exploration and/or exploitation and/or production of an oil or
gas well or lease.
Proved developed reserves. Proved developed oil and gas
reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating
methods. Additional oil and gas expected to be obtained through
the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms
of primary recovery should be included as proved developed
reserves only after testing by a pilot project or after
the operation of an installed program has confirmed through
production response that increased recovery will be achieved.
Proved reserves. Per Article 4-10(a)(2) of
Regulation S-X, the SEC defines proved oil and gas reserves
as the estimated quantities of oil, gas, and natural gas liquids
which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating
conditions, i.e., prices and costs as of the date the estimate
is made. Prices include consideration of changes in existing
prices provided only by contractual arrangements, but not on
escalations based upon future conditions.
Reservoirs are considered proved if economic producibility is
supported by either actual production or conclusive formation
test. The area of a reservoir considered proved includes:
(i) that portion delineated by drilling and defined by
gas-oil and/or oil-water contacts, if any; and (ii) the
immediately adjoining portions not yet drilled, but which can be
reasonably judged as economically productive on the basis of
available geological and engineering data. In the absence of
information on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of
the reservoir.
145
Reserves which can be produced economically through application
of improved recovery techniques (such as fluid injection) are
included in the proved classification when
successful testing by a pilot project, or the operation of an
installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.
Estimates of proved reserves do not include: (i) oil that
may become available from known reservoirs but is classified
separately as indicated additional reserves;
(ii) oil, gas, and natural gas liquids, the recovery of
which is subject to reasonable doubt because of uncertainty as
to geology, reservoir characteristics, or economic factors;
(iii) oil, gas, and natural gas liquids, that may occur in
undrilled prospects; and (iv) oil, gas, and natural gas
liquids, that may be recovered from oil shales, coal, gilsonite
and other such sources.
Proved undeveloped reserves. Proved undeveloped oil and
gas reserves are reserves that are expected to be recovered from
new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion.
Reserves on undrilled acreage shall be limited to those drilling
units offsetting productive units that are reasonably certain of
production when drilled. Proved reserves for other undrilled
units can be claimed only where it can be demonstrated with
certainty that there is continuity of production from the
existing productive formation. Under no circumstances should
estimates for proved undeveloped reserves be attributable to any
acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such
techniques have been proved effective by actual tests in the
area and in the same reservoir.
Royalty. An interest in an oil and gas lease that gives
the owner of the interest the right to receive a portion of the
production from the leased acreage (or of the proceeds of the
sale thereof), but generally does not require the owner to pay
any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowners
royalties, which are reserved by the owner of the leased acreage
at the time the lease is granted, or overriding royalties, which
are usually reserved by an owner of the leasehold in connection
with a transfer to a subsequent owner.
Tcf. One trillion cubic feet of gas.
Tcfe. One trillion cubic feet of gas equivalent.
Upstream. The portion of the oil and gas industry focused
on acquiring, exploiting, developing, exploring for and
producing oil and gas.
Working interest. An interest in an oil and gas lease
that gives the owner of the interest the right to drill for and
produce oil and gas on the leased acreage and requires the owner
to pay a share of the costs of drilling and production
operations.
146
Annex A
The merger agreement has been included to provide you with
information regarding its terms. It is not intended to provide
any other factual information about us. Such information can be
found elsewhere in this joint proxy statement/ prospectus and in
the other public filings each of us makes with the SEC, which
are available without charge at www.sec.gov.
The merger agreement contains representations and warranties
we made to each other. The assertions embodied in those
representations and warranties are qualified by information in
confidential disclosure schedules that we have exchanged in
connection with signing the merger agreement. While we do not
believe that they contain information securities laws require us
to publicly disclose, other than information that has already
been so disclosed, the disclosure schedules do contain
information that modifies, quantifies and creates exceptions to
the representations and warranties set forth in the attached
merger agreement. Accordingly, you should not rely on the
representations and warranties as characterizations of the
actual state of facts, since they are modified in important part
by the underlying disclosure schedules. These disclosure
schedules contain information that has been included in
Petrohawks and Missions prior public disclosures, as
well as potential additional nonpublic information. Moreover,
information concerning the subject matter of the representations
and warranties may have changed since the date of the merger
agreement, which subsequent information may or may not be fully
reflected in the our public disclosures.
AGREEMENT AND PLAN OF MERGER
(as amended April 26, 2005)
AGREEMENT AND PLAN OF MERGER, dated as of April 3,
2005, is by and among Mission Resources Corporation, a Delaware
corporation (the Company), Petrohawk Energy
Corporation, a Delaware corporation (Parent), and
Petrohawk Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of Parent (Purchaser).
WHEREAS, the respective Boards of Directors of Parent,
Purchaser and the Company have each approved this Agreement and
the merger of the Company with and into Purchaser (the
Merger) upon the terms and subject to the conditions
of this Agreement and in accordance with the terms of this
Agreement and the General Corporation Law of the State of
Delaware (the DGCL);
WHEREAS, concurrently with the execution and delivery of
this Agreement, (i) Parent and Company have entered into
voting agreements with each of Harbert Distressed Investment
Master Fund, Ltd., Guggenheim Capital, LLC, and Stellar Funding,
Ltd., under which such parties have among other things agreed to
support the Merger upon the terms and conditions set forth
therein (the Voting Agreements) and
(ii) Company has delivered to the Parent Non-Solicitation
Agreements executed by Robert L. Cavnar, Richard W. Piacenti,
John L. Eells, Marshall L. Munsell, Tom C. Langford and William
R. Picquet (the Non-Solicitation Agreements);
WHEREAS, the respective Boards of Directors of Parent and
the Company have determined that the Merger is fair to, and in
the best interests of, their respective stockholders; and
WHEREAS for U.S. federal income Tax purposes, it is
intended that (a) the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the
Code, (b) this Agreement will constitute a plan of
reorganization within the meaning of Treasury
Regulation Section 1.368-2(g) and (c) Parent,
Purchaser and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code.
A-1
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The
Merger. Upon the terms and subject to conditions of this
Agreement and in accordance with the DGCL, at the Effective
Time, the Company shall be merged with and into Purchaser. At
the Effective Time, the separate existence of the Company shall
cease and Purchaser shall continue as the surviving corporation
(the Surviving Corporation). The Merger shall have
the effect as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, upon the
Merger, all the rights, privileges, immunities, powers and
franchises of the Company and Purchaser shall vest in the
Surviving Corporation and all the obligations, duties, debts and
liabilities of the Company and Purchaser shall be the
obligations, duties, debts and liabilities of the Surviving
Corporation.
Section 1.2. Effective
Time. Upon the terms and subject to the conditions of this
Agreement, as promptly as practicable after the Closing and on
the Closing Date, Purchaser and the Company will cause a
certificate of merger (the Certificate of Merger) to
be duly prepared, executed, acknowledged and filed with the
Secretary of State of the State of Delaware (the Secretary
of State) as provided in the DGCL. The Merger shall become
effective on the date and at the time when the Certificate of
Merger has been duly filed with the Secretary of State or,
subject to the DGCL, such other time as is agreed upon by the
parties and specified in the Certificate of Merger, and such
time is hereinafter referred to as the Effective
Time.
Section 1.3. Closing.
Unless this Agreement shall have been terminated and the
transactions contemplated herein abandoned pursuant to
Section 7.1 and subject to the satisfaction or waiver of
the conditions set forth in Article VI, the closing of the
Merger (the Closing) will take place at
10:00 a.m., Houston time, on a date to be specified by the
parties, which shall be no later than the second Business Day
after satisfaction or waiver (by the party entitled to waive the
condition) of all of the conditions set forth in Article VI
(except for those conditions that by their nature cannot be
satisfied until the Closing, but subject to the satisfaction or
waiver of those conditions) (the Closing Date), at
the offices of Thompson & Knight, LLP, 333 Clay Street,
Suite 3300, Houston, Texas 77002, unless another time, date
and/or place is agreed to in writing by the parties hereto.
Section 1.4. Certificate
of Incorporation; Bylaws. Pursuant to the Merger,
(a) the Certificate of Incorporation of Purchaser, as in
effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by
applicable Law, and (b) the Bylaws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
Section 1.5. Directors
and Officers of the Surviving Corporation and Certain
Subsidiaries.
(a) The directors of Purchaser immediately prior to the
Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with
the Surviving Corporations Certificate of Incorporation
and Bylaws.
(b) The officers of Purchaser immediately prior to the
Effective Time shall, from and after the Effective Time, be the
initial officers of the Surviving Corporation and shall hold
office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
Section 1.6. Effect
on Capital Stock.
(a) At the Effective Time, subject to the other provisions
of this Article I and Section 2.1, each share of the
Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares of Company Common Stock
held directly or indirectly by Parent, Purchaser or the
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Company or any of their respective Subsidiaries and except for
any Dissenting Shares), together with the Company Rights
attached thereto or associated therewith, shall, by virtue of
this Agreement and without any action on the part of the holder
thereof, be converted into and exchangeable for the right to
receive, at the election of the holder thereof as provided in
and subject to the provisions of Section 1.7, either
(i) the Per Share Stock Consideration or (ii) cash in
an amount equal to the Per Share Consideration (the Per
Share Cash Consideration, and together with the Per Share
Stock Consideration, the Merger Consideration).
For purposes of this Agreement:
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Aggregate Consideration shall mean the sum of
(x) the Total Stock Consideration and (y) the Total
Cash Amount. |
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Deemed Stock Amount shall mean the Total Common
Stock Amount; provided, however, that regardless of the actual
number of shares of Company Common Stock outstanding immediately
prior to the Effective Time, in no event shall the Deemed Stock
Amount exceed the sum of (i) 41,535,088, (ii) the
aggregate number of shares of Company Common Stock, if any,
issued by the Company after the Cut-off Time and prior to the
date of this Agreement upon the exercise of the Company Options
outstanding as of the Cut-off Time and disclosed in
Section 3.2(a) of the Company Disclosure Letter in
accordance with the terms of such options and (iii) the
aggregate number of shares of Company Common Stock, if any,
issued by the Company after the date of this Agreement and prior
to the Effective Time as permitted by Section 5.1(e). |
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Exchange Ratio shall mean the quotient, rounded to
the nearest ten-thousandth, obtained by dividing the Per Share
Consideration by the Final Parent Stock Price. |
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Final Parent Stock Price shall mean the
volume-weighted average of the closing prices per share of
Parent Common Stock as reported on the Nasdaq National Market
(Nasdaq) during the Valuation Period. |
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Per Share Consideration shall mean the quotient,
rounded to the nearest ten-thousandth, obtained by dividing the
Aggregate Consideration by the Total Common Stock Amount. |
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Per Share Stock Consideration shall mean a number of
shares (which need not be a whole number) of Parent Common Stock
equal to the Exchange Ratio. |
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Total Cash Amount shall mean the product obtained by
multiplying (x) $8.15 by (y) 40% of the Deemed Stock
Amount. |
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Total Common Stock Amount shall mean the total
number of shares of Company Common Stock outstanding immediately
prior to the Effective Time. |
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Total Stock Amount shall mean the product obtained
by multiplying (x) 0.7718 by (y) 60% of the Deemed
Stock Amount. |
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Total Stock Consideration shall mean the product
obtained by multiplying (x) the Total Stock Amount by
(y) the Final Parent Stock Price. |
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Valuation Period shall mean the ten consecutive
trading days during which the shares of Parent Common Stock are
traded on Nasdaq ending on the third calendar day immediately
prior to the Effective Time, or if such calendar day is not a
trading day, then ending on the trading day immediately
preceding such calendar day. |
(b) All of the shares of Company Common Stock, and
associated Company Rights converted into the Merger
Consideration pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease
to exist, and each holder of a certificate (each a
Certificate) previously representing any such shares
of Company Common Stock shall thereafter cease to have any
rights with respect to such securities, except the right to
receive (i) the Merger Consideration, (ii) any
dividends and
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other distributions in accordance with Section 2.1(c), and
(iii) any cash to be paid in lieu of any fractional share
of Parent Common Stock in accordance with Section 2.1(e).
(c) If, between the date of this Agreement and the
Effective Time, the shares of Parent Common Stock shall be
changed or proposed to be changed into a different number or
class of shares by reason of the occurrence of or record date
with respect to any reclassification, recapitalization,
split-up, combination, exchange of shares or similar
readjustment, in any such case within such period, or a stock
dividend thereon shall be declared with a record date within
such period, appropriate adjustments shall be made to the Per
Share Cash Consideration and the Per Share Stock Consideration.
(d) At the Effective Time, all shares of Company Common
Stock that are owned directly or indirectly by Parent, Purchaser
or the Company or any of their respective Subsidiaries shall be
cancelled and shall cease to exist and no stock of Parent, cash
or other consideration shall be delivered in exchange therefor.
All shares of Parent Common Stock that are owned by the Company
or any of its Subsidiaries shall become authorized unissued
stock of Parent.
(e) Each issued and outstanding share of common stock, par
value $0.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving
Corporation.
(f) The calculations required by Section 1.6(a) shall
be prepared by Parent promptly after the Closing.
Section 1.7. Election
Procedures.
(a) An election form and other appropriate and customary
transmittal materials (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates
theretofore representing shares of Company Common Stock shall
pass, only upon proper delivery of such Certificates to the
Exchange Agent) in such form as Parent shall specify and as
shall be reasonably acceptable to the Company (the
Election Form) shall be mailed together with the
Proxy Statement or at such other time as the Company and Parent
may agree (the Mailing Date) to each holder of
record of Company Common Stock as of the close of business on
the record date for notice of the Company Special Meeting (the
Election Form Record Date).
(b) Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documentation
and instructions), other than any holder of Dissenting Shares,
to specify (i) the number of shares of such holders
Company Common Stock with respect to which such holder elects to
receive the Per Share Stock Consideration (Stock Election
Shares), (ii) the number of shares of such
holders Company Common Stock with respect to which such
holder elects to receive the Per Share Cash Consideration
(Cash Election Shares), or (iii) that such
holder makes no election with respect to such holders
Company Common Stock (No Election Shares). Any
Company Common Stock with respect to which the Exchange Agent
has not received an effective, properly completed Election Form
on or before 5:00 p.m., Houston time, on the 33rd day
following the Mailing Date (or such other time and date as the
Company and Parent shall agree) (the Election
Deadline) (other than any shares of Company Common Stock
that constitute Dissenting Shares as of such time) shall also be
deemed to be No Election Shares.
(c) Parent shall make available one or more Election Forms
as may reasonably be requested from time to time by all Persons
who become holders (or beneficial owners) of Company Common
Stock between the Election Form Record Date and the close
of business on the Business Day prior to the Election Deadline,
and the Company shall provide to the Exchange Agent all
information reasonably necessary for it to perform as specified
herein.
(d) Any such election shall have been properly made only if
the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election
Form shall be deemed properly completed only if accompanied by
one or more Certificates (or customary affidavits and
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indemnification regarding the loss or destruction of such
Certificates or the guaranteed delivery of such Certificates)
representing all shares of Company Common Stock covered by such
Election Form, together with duly executed transmittal materials
included in the Election Form. Any Election Form may be revoked
or changed by the Person submitting such Election Form prior to
the Election Deadline. In the event an Election Form is revoked
prior to the Election Deadline, the shares of Company Common
Stock represented by such Election Form shall become No Election
Shares and Parent shall cause the Certificates representing
Company Common Stock to be promptly returned without charge to
the Person submitting the Election Form upon written request to
that effect from the holder who submitted the Election Form,
except to the extent (if any) a subsequent election is properly
made with respect to any or all of the applicable shares of
Company Common Stock. Subject to the terms of this Agreement and
of the Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any election, revocation or
change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith
decisions of the Exchange Agent regarding such matters shall be
binding and conclusive. None of Parent, Purchaser or the
Exchange Agent shall be under any obligation to notify any
Person of any defect in an Election Form.
(e) Within ten Business Days after the Election Deadline,
unless the Effective Time has not yet occurred, in which case as
soon after the Effective Time as practicable (and in no event
more than ten Business Days after the Effective Time), Parent
shall cause the Exchange Agent to effect the allocation among
the holders of Company Common Stock of rights to receive Parent
Common Stock or cash in the Merger in accordance with the
Election Forms as follows:
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(i) Cash Election Shares More Than Total Cash Amount. If
the aggregate cash amount that would be paid upon the conversion
of the Cash Election Shares in the Merger is greater than the
Total Cash Amount, then: |
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(1) all Stock Election Shares and No Election Shares shall
be converted into the right to receive the Per Share Stock
Consideration, |
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(2) the Exchange Agent shall then select from among the
Cash Election Shares, by a pro rata selection process, a
sufficient number of shares (Stock Designated
Shares) such that the aggregate cash amount that will be
paid in the Merger equals as closely as practicable the Total
Cash Amount, and all Stock Designated Shares shall be converted
into the right to receive the Per Share Stock
Consideration, and |
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(3) the Cash Election Shares that are not Stock Designated
Shares will be converted into the right to receive the Per Share
Cash Consideration. |
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(ii) Cash Election Shares Less Than Total Cash Amount. If
the aggregate cash amount that would be paid upon conversion of
the Cash Election Shares in the Merger is less than the Total
Cash Amount, then: |
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(1) all Cash Election Shares shall be converted into the
right to receive the Per Share Cash Consideration, |
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(2) the Exchange Agent shall then select first from among
the No Election Shares and then (if necessary) from among the
Stock Election Shares, by a pro rata selection process, a
sufficient number of shares (Cash Designated Shares)
such that the aggregate cash amount that will be paid in the
Merger equals as closely as practicable the Total Cash Amount,
and all Cash Designated Shares shall be converted into the right
to receive the Per Share Cash Consideration, and |
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(3) the Stock Election Shares and the No Election shares
that are not Cash Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration. |
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(iii) Cash Election Shares Equal to Total Cash Amount. If
the aggregate cash amount that would be paid upon conversion of
the Cash Election Shares in the Merger is equal to the Total
Cash Amount, then subparagraphs (i) and
(ii) above shall not apply and all Cash Election Shares
shall be |
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converted into the right to receive the Per Share Cash
Consideration and all Stock Election Shares and No Election
Shares shall be converted into the right to receive the Per
Share Stock Consideration. |
Notwithstanding anything in this Agreement to the contrary, for
purposes of determining the allocations set forth in this
Section 1.7(e), Parent shall have the right, but not the
obligation, to require that any shares of Company Common Stock
that constitute Dissenting Shares as of the Election Deadline be
treated as Cash Election Shares, although no such shares shall
be subject to any of the pro rata selection processes
contemplated by this Section 1.7(e).
(f) The pro rata selection process to be used by the
Exchange Agent shall consist of such equitable pro ration
processes as shall be mutually determined by Parent and the
Company.
Section 1.8 Stock
Options. (a) At the Effective Time, each option granted
by the Company to purchase shares of Company Common Stock (each
a Company Option) which was granted pursuant to any
stock option plan, program or arrangement of the Company as set
forth on Section 3.2 the Company Disclosure Letter
(collectively, the Company Option Plans), that is
outstanding and unexercised immediately prior to the Effective
Time shall cease to represent a right to acquire share of
Company Common Stock, and Parent shall assume each such Company
Option (hereafter, Assumed Option) subject to the
terms of the applicable Company Option Plan and the agreement
evidencing the grant thereunder of such Assumed Option;
provided, however, that the (i) the number of shares of
Parent Common Stock purchaseable upon such exercise of such
Assumed Option shall be equal to the number of shares of Company
Common Stock that were purchasable under such Company Option
immediately prior to the Effective Time multiplied by the
Exchange Ratio, and rounded to the nearest whole share, and
(ii) the per share exercise price under such Assumed Option
shall be adjusted by dividing the per share exercise price under
such Company Option by the Exchange Ratio, and rounding to the
nearest whole cent. Any provision of this Agreement to the
contrary notwithstanding, in the case of any Assumed Option, the
exercise price, the number of shares of Parent Common Stock
purchasable pursuant to such Assumed Option and the terms and
conditions of exercise of such options shall be determined in a
manner that complies with Section 424(a) of the Code and
the regulations thereunder. Prior to the Effective Time, Parent
shall prepare and file with the SEC a registration statement on
Form S-8 (or other appropriate form) registering all the
shares of Parent Common Stock subject to the Assumed Options,
and such registration statement shall be kept effective (and the
current status of the prospectus or prospectuses required
thereby shall be maintained) as long as any Assumed Option
remains outstanding.
Section 1.9 Dissenting
Shares. Notwithstanding anything in this Agreement to the
contrary, with respect to each share of Company Common Stock as
to which the holder thereof shall have properly complied with
the provisions of Section 262 of the DGCL as to appraisal
rights (each, a Dissenting Share), if any, such
holder shall be entitled to payment, solely from the Surviving
Corporation, of the appraisal value of the Dissenting Shares to
the extent permitted by and in accordance with the provisions of
Section 262 of the DGCL; provided, however, that
(i) if any holder of Dissenting Shares, under the
circumstances permitted by and in accordance with the DGCL,
affirmatively withdraws his demand for appraisal of such
Dissenting Shares, (ii) if any holder of Dissenting Shares
fails to establish his entitlement to appraisal rights as
provided in the DGCL or (iii) if any holder of Dissenting
Shares takes or fails to take any action the consequence of
which is that such holder is not entitled to payment for his
shares under the DGCL, such holder or holders (as the case may
be) shall forfeit the right to appraisal of such shares of
Company Common Stock and such shares of Company Common Stock
shall thereupon cease to constitute Dissenting Shares and if
such forfeiture shall occur following the Election Deadline,
each such share of Company Common Stock shall thereafter be
deemed to have been converted into and to have become, as of the
Effective Time, the right to receive, without interest thereon,
the Per Share Stock Consideration; provided that Parent shall be
entitled to convert each such share into the right to receive
the Per Share Cash Consideration or a combination of the Per
Share Cash Consideration and Per Share Stock Consideration if
Parent shall have received an opinion from Thompson &
Knight, LLP stating
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that the Merger shall not fail to satisfy the continuity of
interest requirement under Section 368 of the Code as a
result thereof. The Company shall give Parent prompt notice of
any demands received by the Company for appraisal of shares of
Company Common Stock, and Parent shall have the right to
participate in all negotiations and proceedings with respect to
such demands. The Company shall not settle, make any payments
with respect to, or offer to settle, any claim with respect to
Dissenting Shares without the written consent of Parent.
ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1 Exchange
of Certificates.
(a) Exchange Agent. Prior to the Effective
Time, Parent shall deposit, or shall cause to be deposited, with
a bank or trust company designated by Parent and reasonably
satisfactory to the Company (the Exchange Agent),
for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II,
through the Exchange Agent, sufficient cash and certificates
representing shares of Parent Common Stock to make pursuant to
this Article II all deliveries of cash and Parent Common
Stock as is required by Article I. 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 2.1(c) and to make payments in lieu of
fractional shares pursuant to Section 2.1(e). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the
Merger Consideration contemplated to be paid for shares of
Company Common Stock pursuant to this Agreement out of the
Exchange Fund. Except as contemplated by Sections 2.1(c)
and 2.1(e), the Exchange Fund shall not be used for any other
purpose. Any cash and certificates representing Parent Common
Stock deposited with the Exchange Agent (including as payment
for fractional shares in accordance with Section 2.1(e) and
any dividends or other distributions in accordance with
Section 2.1(c)) shall hereinafter be referred to as the
Exchange Fund.
(b) Exchange Procedures. Promptly after the
Effective Time, Parent shall instruct the Exchange Agent to mail
to each holder of record of a Certificate or Certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and
shall be in customary form and subject to the reasonable
approval of the Company prior to the Effective Time) and
(ii) instructions for its use in effecting the surrender of
the Certificates in exchange for the Merger Consideration
payable in respect of the shares of Company Common Stock
represented by such Certificates. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, properly completed and duly
executed, and such other documents as may be required pursuant
to such instructions, 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 unless a physical certificate is requested)
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 1.6 (after taking into account
all shares of Company Common Stock previously represented by all
Certificates then held by such holder) and (B) a check in
the amount equal to the cash portion of the Merger
Consideration, if any, that such holder has the right to receive
pursuant to Section 1.6 and this Article II, including
cash payable in lieu of any fractional shares of Parent Common
Stock pursuant to Section 2.1(e) and dividends and other
distributions pursuant to Section 2.1(c). No interest shall
be paid or accrued on any Merger Consideration, cash in lieu of
fractional shares or on any unpaid dividends and distributions
payable to holders of Certificates. In the event of a transfer
of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, the Merger
Consideration payable in respect of such shares of Company
Common Stock may be paid to a transferee if the Certificate
representing such shares of Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and the Person requesting such
exchange shall pay to the Exchange Agent in advance any transfer
or other Taxes required by reason of the delivery
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of the Merger Consideration in any name other than that of the
registered holder of the Certificate surrendered, or required
for any other reason, or shall establish to the satisfaction of
the Exchange Agent that such Tax has been paid or is not
payable. Until surrendered as contemplated by this
Section 2.1, 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 the shares of Company Common Stock represented by such
Certificate, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to
Section 2.1(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.1(c).
(c) 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 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 until such holder
shall surrender such Certificate in accordance with this
Section 2.1. Following surrender of any such Certificate,
there shall be paid to such holder of shares of Parent Common
Stock issuable in exchange therefor, without interest,
(a) 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 shares of
Parent Common Stock, and (b) 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 shares of Parent Common Stock. For purposes of
dividends or other distributions in respect of shares of Parent
Common Stock, all 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 shares of
Parent Common Stock were issued and outstanding as of the
Effective Time.
(d) Further Rights in Company Common Stock.
The Merger Consideration issued upon conversion of a share of
Company Common Stock in accordance with the terms hereof
(including any payments made pursuant to Section 2.1(c) or
Section 2.1(e)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such share of Company
Common Stock.
(e) Fractional Shares. No certificates or
scrip or shares of Parent Common Stock representing fractional
shares of Parent Common Stock or book-entry credit of the same
shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner
thereof to vote or to have any rights as a holder of any shares
of Parent Common Stock.
Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock 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 delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) the average of the closing sale
prices of Parent Common Stock on Nasdaq as reported by The Wall
Street Journal for the five trading days immediately preceding
the date on which the Effective Time shall occur and
(ii) the fraction of a share of Parent Common Stock which
such holder would otherwise be entitled to receive pursuant to
Section 1.6. 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, or shall cause the Surviving
Corporation to, deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such
holders of fractional interests subject to and in accordance
with the terms hereof. The parties acknowledge that payment of
cash consideration in lieu of issuing fractional shares of
Parent Common Stock was not separately bargained for
consideration but merely represents a mechanical rounding off
for purposes of simplifying the corporate and accounting
problems that would otherwise be caused by the issuance of
fractional shares of Parent Common Stock.
(f) Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the holders
of Company Common Stock for six months after the Effective Time
shall be delivered to Parent upon demand and, from and after
such delivery to Parent, any holders of Company Common
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Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent, as a
general creditor thereof, for the Merger Consideration payable
in respect of such shares of Company Common Stock, any cash in
lieu of fractional shares of Parent Common Stock to which they
are entitled pursuant to Section 2.1(e) and any dividends
or other distributions with respect to Parent Common Stock to
which they are entitled pursuant to Section 2.1(c), in each
case, without any interest thereon.
(g) No Liability. Neither Parent nor the
Surviving Corporation shall be liable to any holder of shares of
Company Common Stock for any such shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant
to any abandoned property, escheat or similar Law.
(h) Lost 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 required by Parent, the
posting by such Person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange
Agent shall pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable in respect of the
shares of Company Common Stock 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 2.1(e) and any dividends or other distributions to
which the holders thereof are entitled pursuant to
Section 2.1(c), in each case, without any interest thereon.
(i) Withholding. Each of Parent, the
Surviving Corporation and the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock
such amounts as Parent, the Surviving Corporation or the
Exchange Agent is required to deduct and withhold under the Code
or any provision of state, local, or foreign Tax Law, with
respect to the making of such payment. To the extent that
amounts are so withheld by Parent, the Surviving Corporation or
the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder
of Company Common Stock in respect of whom such deduction and
withholding was made by Parent, the Surviving Corporation or the
Exchange Agent, as the case may be.
Section 2.2 Stock
Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and thereafter there shall
be no further registration of transfers of shares of Company
Common Stock theretofore outstanding on the records of the
Company. From and after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall
be converted into the Merger Consideration payable in respect of
the shares of Company Common Stock 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 2.1(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant
to Section 2.1(c), without any interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered by the
Company to Parent at or prior to the execution and delivery of
this Agreement (the Company Disclosure Letter) (each
section of which qualifies the correspondingly numbered
representation, warranty or covenant to the extent specified
therein and such other representations, warranties or covenants
to the extent a matter in such section is disclosed in such a
way as to make its relevance to such other representation,
warranty or covenant reasonably apparent), the Company
represents and warrants to Parent and Purchaser as follows:
Section 3.1 Organization.
(a) Each of the Company and each of its Subsidiaries is a
corporation or other entity duly organized, validly existing,
and in good standing under the Laws of the jurisdiction of its
incorporation or
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organization, and has all requisite corporate or other power and
authority to own, lease, use and operate its properties and to
carry on its business as it is now being conducted.
(b) Each of the Company and each of its Subsidiaries is
duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in
which such qualification or licensing is required, except where
the failure to be so qualified or licensed individually or in
the aggregate has not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company.
(c) The Company has previously delivered to Parent a
complete and correct copy of each of its certificate of
incorporation and bylaws in each case as amended (if so amended)
to the date of this Agreement, and has made available the
certificate of incorporation, bylaws or other organizational
documents of each of its Subsidiaries, in each case as amended
(if so amended) to the date of this Agreement. Neither the
Company nor any of its Subsidiaries is in violation of its
certificate of incorporation, bylaws or similar governing
documents.
(d) Section 3.1(d) of the Company Disclosure Letter
sets forth a true and correct list of all of the Subsidiaries of
the Company and their respective jurisdictions of incorporation
or organization. The respective certificates or articles of
incorporation and bylaws or other organizational documents of
the Subsidiaries of the Company do not contain any provision
limiting or otherwise restricting the ability of the Company to
control its Subsidiaries in any material respect.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
60,000,000 shares of the common stock of the Company, par
value $.01 per share (the Company Common Stock)
and 5,000,000 shares of preferred stock, par value
$.01 per share (the Company Preferred Stock).
As of the close of business on March 31, 2005 (the
Cut-off Time), (i) 41,535,088 shares of
Company Common Stock were issued and outstanding, and
(ii) 5,832,715 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding Company
Options. From the Cut-off Time to the date of this Agreement, no
additional shares of Company Common Stock have been issued
(other than pursuant to Company Options which were outstanding
as of the Cut-off Time and are disclosed in Section 3.2(a)
of the Company Disclosure Letter as contemplated below), no
additional Company Options have been issued or granted, and
there has been no increase in the number of shares of Company
Common Stock issuable upon exercise of the Company Options from
those issuable under such Company Options as of the Cut-off
Time. As of the date of this Agreement,
(i) 389,323 shares of Company Common Stock are held in
the treasury of the Company, and (ii) there are no shares
of Company Preferred Stock issued and outstanding or held in
treasury. Except for the treasury shares described above in this
Section 3.2, neither the Company nor any of its
Subsidiaries directly or indirectly owns any shares of Company
Common Stock. No bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into or exchangeable
for securities having the right to vote) on any matters on which
stockholders of the Company may vote are issued or outstanding.
All issued and outstanding shares of the Companys capital
stock are, and all shares that may be issued or granted pursuant
to the exercise of Company Options will be, when issued or
granted in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable and
free of preemptive rights, with no personal liability attaching
to the ownership thereof. Except for the Company Options and the
Company Series A Preferred Stock purchase rights (the
Company Rights) issued pursuant to the Rights
Agreement, dated as of September 12, 1997, between the
Company and American Stock Transfer & Trust Company, as
amended to date (the Company Rights Agreement),
there are no outstanding or authorized (x) options,
warrants, preemptive rights, subscriptions, calls or other
rights, convertible securities, agreements, stock appreciation
rights, phantom equity or other claims or commitments of any
character (including rights plans or poison
pills) obligating the Company or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock or other
equity interest in the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or
equity interests, (y) contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of the Company or any of its
Subsidiaries or any such securities or agreements listed in
clause (x) of this sentence, or (z) voting trusts
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or similar agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the
capital stock of the Company or any of its Subsidiaries.
Section 3.2(a) of the Company Disclosure Letter sets forth
the following information with respect to each Company Option
outstanding as of the Cut-off Time: (i) name of the holder;
(ii) number of shares of Company Common Stock issuable upon
exercise thereof; (iii) exercise price; (iv) issue
date; (v) termination date; and (vi) whether such
option contains any put, redemption or similar feature. At the
Effective Time, there will not be any outstanding subscriptions,
options, warrants, calls, preemptive rights, subscriptions, or
other rights, convertible or exchangeable securities,
agreements, claims or commitments of any character by which the
Company or any of its Subsidiaries will be bound calling for the
purchase or issuance of any shares of the capital stock of the
Company or any of its Subsidiaries or securities convertible
into or exchangeable for such shares or any other such
securities or agreements. No additional shares shall be issued
and all necessary action has been take to render the Company
Rights inapplicable to the Merger.
(b) (i) All of the issued and outstanding shares of
capital stock (or equivalent equity interests of entities other
than corporations) of each of the Companys Subsidiaries
are owned, directly or indirectly, by the Company free and clear
of any Liens, other than statutory Liens for Taxes not yet due
and payable and such other restrictions as may exist under
applicable Law, and all such shares or other ownership interests
have been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof, and
(ii) neither the Company nor any of its Subsidiaries owns
any shares of capital stock or other securities of, or interest
in, any other Person, except for (A) shares of capital
stock or other securities of non-affiliates that (x) do not
constitute more than a 5% interest in such non-affiliates or
(y) have an aggregate value (per issuer) that does not
exceed $100,000 and (B) the securities of the Subsidiaries
of the Company. Neither the Company nor any Subsidiary of the
Company is obligated to make any capital contribution to or
other investment in any other Person.
(c) No material indebtedness of the Company or any of its
Subsidiaries contains any restriction upon (i) the
prepayment of any indebtedness of the Company or any of its
Subsidiaries, (ii) the incurrence of indebtedness by the
Company or any of its Subsidiaries, or (iii) the ability of
the Company or any of its Subsidiaries to grant any Lien on the
properties or assets of the Company or any of its Subsidiaries.
Section 3.3 Authorization;
Validity of Agreement.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Board of Directors of
the Company (the Company Board). Except for the
Company Required Vote, no other corporate proceedings on the
part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and
the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery of this
Agreement by Parent and Purchaser, is a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforcement may be
subject to or limited by (i) bankruptcy, insolvency or
other similar Laws, now or hereafter in effect, affecting
creditors rights generally and (ii) the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(b) The Company Board has adopted such resolutions as are
necessary so that the provisions of Section 203 of the DGCL
are inapplicable to the Merger or any of the other transactions
contemplated by this Agreement. Except for Section 203 of
the DGCL (which has been rendered inapplicable), to the
knowledge of the Company, no moratorium,
control share, fair price or other
antitakeover Laws are applicable to the Merger or any of the
other transactions contemplated by this Agreement.
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Section 3.4 No
Violations; Consents and Approvals.
(a) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of
the Merger or any other transactions contemplated hereby will
(i) violate any provision of the certificate of
incorporation or the bylaws of the Company, or the certificate
of incorporation, bylaws or similar governing documents of any
of the Companys Subsidiaries, (ii) violate, conflict
with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination,
cancellation or amendment under, accelerate the performance
required by, or result in the creation of any Lien upon any of
the respective properties or assets of the Company or any of its
Subsidiaries under, or result in the acceleration or trigger of
any payment, time of payment, vesting or increase in the amount
of any compensation or benefit payable pursuant to, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, lease,
license, contract, collective bargaining agreement, agreement or
other legally binding instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of
them or any of their respective assets or properties may be
bound, or (iii) conflict with or violate any federal,
state, local or foreign order, writ, injunction, judgment,
settlement, award, decree, statute, law, rule or regulation
(collectively, Laws) applicable to the Company, any
of its Subsidiaries or any of their respective properties or
assets; except in the case of clause (iii), for such
conflicts, violations, breaches, defaults or Liens which
individually or in the aggregate have not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on the Company.
(b) No material filing or registration with, declaration or
notification to, or order, authorization, consent or approval
of, any federal, state, local or foreign court, arbitral,
legislative, executive or regulatory authority or agency (a
Governmental Entity) or any other Person is required
in connection with the execution, delivery and performance of
this Agreement by the Company or the consummation by the Company
of the Merger or any other transactions contemplated hereby,
except for (i) the filing with the SEC of the Proxy
Statement in definitive form relating to the meetings of the
Companys and Parents stockholders to be held in
connection with this Agreement and the transactions contemplated
hereby, and the filing and declaration of effectiveness of the
registration statement on Form S-4 (the S-4) in
which the Proxy Statement will be included as a prospectus,
(ii) the adoption of this Agreement and the approval of the
Merger by the Company Required Vote, (iii) such filings,
authorizations or approvals as may be required under
(A) the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder
(HSR Act) or (B) any other Competition Laws,
rules or regulations, (iv) the filing of the Certificate of
Merger with the Secretary of State and (v) such consents,
approvals, orders, authorizations, notifications, registrations,
declarations and filings (x) as are customarily made or
obtained in connection with the transfer of interests in or
change of control of ownership of oil and gas properties and
(y) the failure of which to be obtained or made,
individually or in the aggregate, has not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on the Company or materially impair the ability of the
Company to perform its obligations under this Agreement.
Section 3.5 SEC
Reports and Financial Statements.
(a) The Company has timely filed with the SEC all forms and
other documents (including exhibits and other information
incorporated therein) required to be filed by it since
January 1, 2002 (such documents, the Company SEC
Documents), including (i) its Annual Reports on
Form 10-K for the years ended December 31, 2002,
December 31, 2003 and December 31, 2004, respectively,
(ii) its Quarterly Reports on Form 10-Q for the
periods ended March 31, June 30 and September 30,
2004, (iii) all proxy statements relating to meetings of
stockholders of the Company since January 1, 2002 (in the
form mailed to stockholders), and (iv) all other forms,
reports and registration statements required to be filed by the
Company with the SEC since January 1, 2002. As of their
respective dates, the Company SEC Documents, including the
financial statements and schedules provided therein or
incorporated by reference therein, (x) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading and (y) complied in
all material respects with
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the applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder (the Exchange Act), the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder (the Securities Act) and the
Sarbanes-Oxley Act of 2002, and the rules and regulations
promulgated thereunder (SOX), as the case may be.
(b) The December 31, 2004 consolidated balance sheet
of the Company and the related consolidated statements of
income, changes in stockholders equity and cash flows
(including, in each case, the related notes, where applicable),
as reported in the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2004
filed with the SEC under the Exchange Act fairly present, and
the financial statements to be filed by the Company with the SEC
after the date of this Agreement will fairly present (subject,
in the case of unaudited statements, to recurring audit
adjustments normal in nature and amount), in all material
respects, the consolidated financial position and the results of
the consolidated operations, cash flows and changes in
stockholders equity of the Company and its Subsidiaries as
of the respective dates or for the respective fiscal periods
therein set forth; each of such statements (including the
related notes, where applicable) complies, and the financial
statements to be filed by the Company with the SEC after the
date of this Agreement will comply, with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto; and each of such statements (including
the related notes, where applicable) has been, and the financial
statements to be filed by the Company with the SEC after the
date of this Agreement will be, prepared in accordance with
generally accepted accounting principles (GAAP)
consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. The books and
records of the Company and its Subsidiaries have been, and are
being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions. KPMG LLP is an independent public
accounting firm with respect to the Company and has not resigned
or been dismissed as independent public accountants of the
Company.
Section 3.6 Absence
of Certain Changes.
(a) Except as disclosed in the Company SEC Documents filed
by the Company with the SEC prior to the date of this Agreement
(the Specified Company SEC Documents), to the extent
that it is reasonably apparent that the disclosure in the
Specified Company SEC Documents is responsive to the matters set
forth in this Section 3.6(a), since December 31, 2004,
(i) the Company and its Subsidiaries have conducted their
respective operations only in the ordinary course consistent
with past practice and (ii) there has not occurred or
continued to exist any event, change, occurrence, effect, fact,
circumstance or condition which, individually or in the
aggregate, has had, or would be reasonably likely to have or
result in, a Material Adverse Effect on the Company.
(b) Except as as previously provided to Parent by the
Company or as disclosed in the Specified Company SEC Documents,
to the extent that it is reasonably apparent that the disclosure
in the Specified Company SEC Documents is responsive to the
matters set forth in this Section 3.6(b), since
December 31, 2004 to the date of this Agreement, neither
the Company nor any of its Subsidiaries has (i) except as
required pursuant to the terms of the Company Plans as in effect
on December 31, 2004 or as required to comply with
applicable Law, (A) increased or agreed to increase the
wages, salaries, compensation, pension, or other fringe benefits
or perquisites payable to any officer, employee or director from
the amount thereof in effect as of December 31, 2004, other
than increases in wages, salaries and other cash compensation in
the ordinary course of business consistent with past practice,
(B) granted any severance or termination pay,
(C) entered into or made any loans to any of its officers,
directors or employees or made any change in its borrowing or
lending arrangements for or on behalf of any of such Persons or
(D) adopted or amended, or accelerated the payment or
vesting of benefits under, any Company Plan, (ii) declared,
set aside or paid any dividend or other distribution (whether in
cash, stock or property) with respect to any of the
Companys capital stock, (iii) effected or authorized
any split, combination or reclassification of any of the
Companys capital stock or any issuance thereof or issued
any other securities in respect of, in lieu of or in
substitution for shares of the Companys capital stock,
except for issuances of Company Common Stock upon the exercise
of Company Options, in each case in accordance with their terms
at the time of exercise, (iv) changed in any material
respect, or had
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knowledge of any reason that required any material change in,
any accounting methods (or underlying assumptions), principles
or practices of the Company or its Subsidiaries, including any
material reserving, renewal or residual method, practice or
policy, (v) made any material Tax election or settled or
compromised any material income Tax liability, (vi) made
any material change in the policies and procedures of the
Company or its Subsidiaries in connection with trading
activities, (vii) sold, leased, exchanged, transferred or
otherwise disposed of any material Company Asset other than in
the ordinary course consistent with past practice,
(viii) revalued, or had knowledge of any reason that
required revaluing, any of the Company Assets in any material
respect, including writing down the value of any of the Company
Assets or writing off notes or accounts receivable, in each case
in any material respect and other than in the ordinary course of
business consistent with past practice, or (ix) made any
agreement or commitment (contingent or otherwise) to do any of
the foregoing.
Section 3.7 Absence
of Undisclosed Liabilities. Except as disclosed in the
Specified Company SEC Documents, to the extent that it is
reasonably apparent that the disclosure in the Specified Company
SEC Documents is responsive to the matters set forth in this
Section 3.7, neither the Company nor any of its
Subsidiaries has any liabilities or obligations (accrued,
contingent or otherwise), except for (i) liabilities that
individually or in the aggregate have not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on the Company, (ii) liabilities in respect of
Litigation (which are the subject of Section 3.10), and
(iii) liabilities under Environmental Laws (which are the
subject of Section 3.14). Neither the Company nor any of
its Subsidiaries is in default in respect of the terms and
conditions of any indebtedness or other agreement which
individually or in the aggregate has had, or would be reasonably
likely to have or result in, a Material Adverse Effect on the
Company.
Section 3.8 Proxy
Statement; Form S-4; Merger Documents. None of the
information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (a) the S-4 at
the time the S-4 becomes effective under the Securities Act or
(b) the Proxy Statement (and any amendment thereof or
supplement thereto) at the date(s) mailed to the stockholders of
the Company and Parent, at the time of the Company Special
Meeting, at the time of the Parent Stockholders Meeting
and at the Effective Time, will 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. The Proxy Statement and the S-4 will
comply in all material respects with the provisions of the
Exchange Act, except that no representation is made by the
Company with respect to statements made in the Proxy Statement
based on information supplied to the Company by Parent or
Purchaser for inclusion in the Proxy Statement or the S-4.
Section 3.9 Employee
Benefit Plans; ERISA.
(a) Section 3.9(a) of the Company Disclosure Letter
contains a complete and correct list as of the date of this
Agreement of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation
right or other equity-based incentive, severance, termination,
change in control, retention, employment, hospitalization or
other medical, life or other insurance, disability, other
welfare, supplemental unemployment, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each
other director or employee compensation or benefit plan,
program, agreement or arrangement, sponsored, maintained or
contributed to by the Company, any of its Subsidiaries or by any
trade or business, whether or not incorporated (an ERISA
Affiliate), that together with the Company or any of its
Subsidiaries would be deemed a single employer
within the meaning of Section 4001(b) of the Employee
Retirement Income Security Act of 1974, as amended
(ERISA), or to which the Company or an ERISA
Affiliate is party, whether written or oral, for the benefit of
any current or former officer, employee or director of the
Company, any of its Subsidiaries or any ERISA Affiliate (the
Company Plans). In this Section 3.9,
80% shall be substituted for 50% in the
definition of Subsidiary set forth in
Section 8.5. Section 3.9(a) of the Company Disclosure
Letter contains the name of the Companys ERISA Affiliates.
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(b) With respect to each Company Plan, the Company has
heretofore delivered to Parent complete and correct copies of
each of the following documents (including all amendments to
such documents), as applicable:
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(i) the Company Plan or a written description of any
Company Plan not in writing; |
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(ii) a copy of the most recent annual report or Internal
Revenue Service Form 5500 Series, including all related
reports required therewith; |
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(iii) a copy of the most recent Summary Company Plan
Description (SPD), together with all Summaries of
Material Modification issued with respect to such SPD and all
other material employee communications relating to each Company
Plan distributed by the Company or any of its Subsidiaries from
December 31, 2004 to the date of this Agreement; |
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(iv) if the Company Plan or any obligations thereunder are
funded through a trust or any other funding vehicle or through
insurance, the trust or other funding agreement and the latest
financial statements thereof or evidence of insurance coverage
thereof; |
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(v) all contracts relating to the Company Plan with respect
to which the Company or any ERISA Affiliate may have any
material liability, including insurance contracts, investment
management agreements, subscription and participation agreements
and record keeping agreements; |
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(vi) if the Company Plan is intended to qualify under
Section 401(a) of the Code, the most recent determination
letter received from the Internal Revenue Service; and |
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(vii) all material communications between the Company or
any ERISA Affiliate and any Governmental Entity. |
(c) No Company Plan in effect as of the date hereof is
subject to Title IV or Section 302 of ERISA. No
liability under Title IV or Section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that would be
reasonably likely to result in the Company or any ERISA
Affiliate incurring any such liability. Insofar as the
representation made in this Section 3.9(c) applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, such
representation is made with respect to any employee benefit
plan, program, agreement or arrangement subject to Title IV
of ERISA to which the Company or any ERISA Affiliate made, or
was required to make, contributions during the five-year period
ending on the last day of the most recent plan year ended prior
to the Closing Date.
(d) None of the Company, any ERISA Affiliate, any of the
Company Plans, any trust created thereunder and, to the
knowledge of the Company, any trustee or administrator thereof
has engaged in a transaction or has taken or failed to take any
action with respect to a Company Plan in connection with which
the Company, any of its Subsidiaries or any ERISA Affiliate
would be reasonably likely to be subject to a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a Tax imposed pursuant to Section 4975(a) or (b), 4976
or 4980B of the Code.
(e) All contributions required to be made by the Company
and its ERISA Affiliates Subsidiaries with respect to any
Company Plan on or prior to the Closing Date have been timely
made or are reflected on the consolidated balance sheet of the
Company dated as of December 31, 2004 contained in the
Specified Company SEC Documents. Since December 31, 2004
there has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any
ERISA Affiliate relating to, or change in the terms of employee
participation or coverage under, any Company Plan that would
increase materially the expense of maintaining such Company Plan
above the level of expense incurred in respect thereof for the
most recent fiscal year ended prior to the date hereof.
(f) Each of the Company Plans has been operated and
administered by the Company and its ERISA Affiliates in all
material respects in accordance with applicable Laws, including
ERISA and the Code.
(g) With respect to each of the Company Plans that is
intended to be qualified within the meaning of
Section 401(a) of the Code, the Company has received a
currently effective determination letter from
A-15
the IRS stating that it is so qualified, such letter has not
been revoked, and, to the knowledge of the Company, no event has
occurred that would be reasonably likely to affect such
qualified status. No fund established under a Company Plan is
intended to satisfy the requirements of Section 501(c)(9)
of the Code.
(h) No amounts payable under the Company Plans as a result
of the transactions contemplated hereby will fail to be
deductible for federal income Tax purposes by virtue of
Sections 280G or 162(m) of the Code.
(i) No Company Plan provides death, medical,
hospitalization or similar benefits (whether or not insured)
with respect to any current or former employee of the Company,
its Subsidiaries or any ERISA Affiliate after retirement or
other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any
employee pension plan, as that term is defined in
Section 3(2) of ERISA or (iii) benefits, the full
direct cost of which is borne by the current or former employee
(or beneficiary thereof).
(j) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with any
other event, (i) entitle any current or former employee,
officer or director of the Company, any of its Subsidiaries or
any ERISA Affiliate to severance pay, unemployment compensation
or any other similar termination payment under any Company Plan,
or (ii) accelerate the time of payment or vesting of,
increase the amount of or otherwise enhance any benefit due any
such employee, officer or director under any Company Plan.
(k) To the knowledge of the Company, neither the Company
nor any Subsidiary has contributed to a nonconforming group
health plan (as defined in Section 5000(c) of the Code) and
no ERISA Affiliate of the Company or any of its Subsidiaries has
incurred a Tax under Section 5000(a) of the Code which is
or could become a liability of the Company or any of its
Subsidiaries.
(l) There is no pending or, to the knowledge of the
Company, threatened material Litigation by, on behalf of or
against any Company Plan by any participant (or beneficiary
thereof) in such Company Plan or otherwise involving any such
Company Plan (other than routine claims for benefits).
Section 3.10 Litigation;
Compliance with Law.
(a) Except as disclosed in the Specified Company SEC
Documents, (i) there is no Litigation pending or, to the
knowledge of the Company, threatened in writing against,
relating to or naming as a party thereto the Company or any of
its Subsidiaries, any of their respective properties or assets
or any of the Companys officers or directors (in their
capacities as such), (ii) there is no agreement, order,
judgment, decree, injunction or award of any Governmental Entity
against and/or binding upon the Company, any of its Subsidiaries
or any of the Companys officers or directors (in their
capacities as such) that, in the case of either clause (i)
or (ii), individually or in the aggregate has had, or would be
reasonably likely to have or result in, a Material Adverse
Effect on the Company, and (iii) there is no Litigation
that the Company or any of its Subsidiaries has pending against
other parties, where such Litigation is intended to enforce or
preserve material rights of the Company or any of its
Subsidiaries.
(b) Each of the Company and its Subsidiaries has complied,
and is in compliance, in all material respects with all Laws and
Permits which affect the respective businesses of the Company or
any of its Subsidiaries, the Company Real Property and/or the
Company Assets, and the Company and its Subsidiaries have not
been and are not in violation in any material respect of any
such Law or Permit; nor has any notice, charge, claim or action
has been received by the Company or any of its Subsidiaries or
been filed, commenced, or to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries
alleging any violation of the foregoing.
(c) The Company and its Subsidiaries hold all Permits
necessary for the ownership, leasing, operation, occupancy and
use of the Company Real Property, the Company Assets and the
conduct of their respective businesses as currently conducted
(Company Permits), except where the failure to hold
such Company Permits individually or in the aggregate has not
had, and would not be reasonably likely to
A-16
have or result in, a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has received
notice that any Company Permit will be terminated or modified or
cannot be renewed in the ordinary course of business, and the
Company has no knowledge of any reasonable basis for any such
termination, modification or nonrenewal, in each case except for
any such terminations, modifications or nonrenewals that
individually or in the aggregate have not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on the Company. The execution, delivery and performance
of this Agreement and the consummation of the Merger or any
other transactions contemplated hereby do not and will not
violate any Company Permit, or result in any termination,
modification or nonrenewal thereof, except in each case for any
such violations, terminations, modifications or nonrenewals that
individually or in the aggregate have not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on the Company.
(d) This Section 3.10 does not relate to matters with
respect to (i) Company Plans, ERISA and other employee
benefit matters (which are the subject of Section 3.9),
(ii) Tax Laws and other Tax matters (which are the subject
of Section 3.13), (iii) Environmental Laws and other
environmental matters (which are the subject of
Section 3.14), and (iv) labor matters (which are the
subject of Section 3.17).
Section 3.11 Intellectual
Property.
(a) The Company and its Subsidiaries own, or possess
sufficient and legally enforceable licenses or other rights to
use, any and all United States and foreign patents, patent
applications, patent disclosures, mask works, computer software,
geophysical data, trademarks, trade dress, trade names, logos,
Internet domain names, copyrights and service marks, including
applications to register and registrations for any of the
foregoing, as well as trade secrets, know-how, data and other
proprietary rights and information (all of the foregoing,
referred to as Technology and together with
trademarks, trade names and service marks, referred to as
Intellectual Property) necessary for the conduct of
the business and operations of the Company and its Subsidiaries
as currently conducted, free and clear of any Liens (except for
any Permitted Liens).
(b) To the knowledge of the Company, the conduct of the
business of the Company and its Subsidiaries does not infringe,
conflict with or otherwise violate in any material respect any
Intellectual Property of any Person, and none of the Company or
any of its Subsidiaries has received notice or has knowledge of
any such material infringement, conflict or other violation.
Section 3.12 Material
Contracts.
(a) Except as disclosed in the Specified Company SEC
Documents, to the extent that it is reasonably apparent that the
disclosure in the Specified Company SEC Documents is responsive
to the matters set forth in this Section 3.12(a), as of the
date of this Agreement, neither the Company nor any of its
Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (i) which is a material contract (as defined in
Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement, (ii) which
materially restrains, limits or impedes the Companys or
any of its Subsidiaries, or will materially restrain,
limit or impede the Surviving Corporations, ability to
compete with or conduct any business or any line of business,
including geographic limitations on the Companys or any of
its Subsidiaries or the Surviving Corporations
activities, but excluding confidentiality agreements and areas
of mutual interest agreements entered into in the ordinary
course of business, (iii) which is a material take-or-pay
agreement or other similar agreement that entitles purchasers of
production to receive delivery of Hydrocarbons without paying
therefor, or (iv) which is otherwise material to the
Company and its Subsidiaries taken as a whole. Each contract,
arrangement, commitment or understanding of the type described
in this Section 3.12(a), whether or not disclosed in the
Specified Company SEC Documents, is referred to herein as a
Company Material Contract. The Company has
previously made available to Parent true, complete and correct
copies of each Company Material Contract.
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(b) (i) Each Company Material Contract is valid and
binding and in full force and effect, (ii) the Company and
each of its Subsidiaries has performed all obligations required
to be performed by it to date under each Company Material
Contract, (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would
constitute, a default on the part of the Company or any of its
Subsidiaries under any such Company Material Contract and
(iv) to the knowledge of the Company, no other party to
such Company Material Contract is in default in any respect
thereunder, except in each case where there has not been, and
would not be reasonably likely to be, individually or in the
aggregate, a material adverse effect on the rights or remedies
of the Company or its Subsidiaries under such Company Material
Contracts.
Section 3.13 Taxes.
(a) (i) All material Returns required to be filed by
or with respect to the Company, its Subsidiaries and each
Company Consolidated Group have been timely filed in accordance
with all applicable Laws and all such Returns are true, correct
and complete in all material respects, (ii) the Company,
its Subsidiaries and each Company Consolidated Group have timely
paid all material Taxes due or claimed to be due, (iii) all
material Employment and Withholding Taxes and any other material
amounts required to be withheld with respect to Taxes have been
either duly and timely paid to the proper Governmental Entity or
properly set aside in accounts for such purpose in accordance
with applicable Laws, (iv) the charges, accruals and
reserves for Taxes with respect to the Company, its Subsidiaries
and each Company Consolidated Group reflected in the balance
sheet, dated as of December 31, 2004, included in the
Companys Annual Report on Form 10-K for the term
ended December 31, 2004 (the Company Balance
Sheet) are adequate under GAAP, (v) no material
deficiencies or other claims for any Taxes asserted or assessed,
or, to the knowledge of the Company, proposed, against the
Company or any of its Subsidiaries has not been resolved in all
material respects, and (vi) there is no material Litigation
pending or, to the knowledge of any of the Company or its
Subsidiaries, threatened or scheduled to commence, against or
with respect to the Company or any of its Subsidiaries in
respect of any Tax or Return.
(b) The statutes of limitations for the federal income Tax
Returns of the Company, its Subsidiaries and each Company
Consolidated Group have expired or otherwise have been closed
for all taxable periods ending on or before December 31,
1998.
(c) Since January 1, 1999, neither the Company nor any
of its Subsidiaries has been a member of any affiliated
group (as defined in Section 1504(a) of the Code) or
has been included in any consolidated,
unitary or combined Return (other than
Returns which include only the Company and any Subsidiaries of
the Company) provided for under the Laws of the United States,
any foreign jurisdiction or any state or locality and none of
the Company nor any of its Subsidiaries has any liability for
the Taxes of any Person (other than the Company or any of its
Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision
under any state, local or foreign law), or as a successor or
transferee.
(d) Except as set forth on Section 3.13.(d) of the
Company Disclosure Letter, as of the date of this Agreement, to
the knowledge of the Company, there are no
Non-U.S. Stockholders that hold more than 5% of the Company
Common Stock.
(e) There are no Tax sharing, allocation, indemnification
or similar agreements or arrangements, whether written or
unwritten, in effect under which the Company or any of its
Subsidiaries could be liable for any material Taxes of any
Person other than the Company or any Subsidiary of the Company.
(f) Neither the Company nor any of its Subsidiaries has
entered into an agreement or waiver extending any statute of
limitations relating to the payment or collection of a material
amount of Taxes, nor is any request for such a waiver or
extension pending.
(g) There are no Liens for Taxes on any asset of the
Company or its Subsidiaries, except for Permitted Liens.
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(h) Neither the Company nor any of its Subsidiaries is the
subject of or bound by any material private letter ruling,
technical advice memorandum, closing agreement or similar
material ruling, memorandum or agreement with any taxing
authority.
(i) Neither the Company nor its Subsidiaries has entered
into, has any liability in respect of, or has any filing
obligations with respect to, any reportable
transactions, as defined in Section 1.6011-4(b)(1) of
the Treasury Regulations.
(j) Neither the Company nor any of its Subsidiaries will be
required to include any material item of income in, or exclude
any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date as a result of any (i) change in method of accounting
for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or
similar provision of state, local or foreign Tax Law),
(ii) closing agreement as described in
Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign Tax Law) executed on or
prior to the Closing Date, or (iii) deferred intercompany
gain or excess loss account described in Treasury Regulations
under Section 1502 of the Code (or any corresponding or
similar provision of state, local or foreign Tax Law).
(k) Neither the Company nor any of its Subsidiaries has
taken or agreed to take any action or knows of any fact,
agreement, plan or other circumstance that would be reasonably
likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(l) The Company has made available to Parent correct and
complete copies of (i) all U.S. federal income Tax
Returns of the Company and its Subsidiaries relating to taxable
periods ending on or after December 31, 2001, filed through
the date hereof and (ii) any material audit report within
the last three years relating to any material Taxes due from or
with respect to the Company or any of its Subsidiaries.
(m) No jurisdiction where the Company or any of its
Subsidiaries does not file a Return has made a claim that the
Company or any of its Subsidiaries is required to file a Return
for a material amount of Taxes for such jurisdiction.
(n) Within the last three years, neither the Company nor
any of its Subsidiaries have owned any material assets located
outside the United States or conducted a material trade or
business outside the United States.
(o) All of the transactions which the Company has accounted
for as hedges under SFAS 133 have also been treated as
hedging transactions for federal income Tax purposes pursuant to
Treasury Regulation Section 1.1221-2 and have been
properly identified as such under Treasury Regulation
Section 1.1221-2(f).
Section 3.14 Environmental
Matters.
(a) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company, the
Company and its Subsidiaries have complied, and are in
compliance, with all applicable Environmental Laws, which
compliance includes the possession of all Permits required under
applicable Environmental Laws and compliance with the terms and
conditions thereof and the making and filing with all applicable
Governmental Entities of all reports, forms and documents and
the maintenance of all records required to be made, filed or
maintained by it under any Environmental Law. Neither the
Company nor any of its Subsidiaries has received any
communication (written or, if oral, would be reasonably likely
to result in a formal claim) from any Person, whether a
Governmental Entity, citizens group, employee or otherwise, that
alleges that the Company or any of its Subsidiaries is not in
compliance in any material respect with Environmental Laws and
that has not been resolved in all material respects.
(b) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company,
there are no Environmental Claims pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any
Person whose liability for any
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Environmental Claim the Company or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(c) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company,
neither the Company nor any of its Subsidiaries is subject to
any liability or obligation (accrued, contingent or otherwise)
to cleanup, correct, abate or to take any response, remedial or
corrective action under or pursuant to any Environmental Laws,
relating to (i) environmental conditions on, under, or
about any of the properties or assets owned, leased, operated or
used by the Company or any of its Subsidiaries or, to the
knowledge of the Company, any predecessor thereto at the present
time or in the past, including the air, soil, surface water and
groundwater conditions at, on, under, from or near such
properties, or (ii) the past or present use, management,
handling, transport, treatment, generation, storage, disposal or
Release of any Hazardous Substances, whether on-site at any
Company Real Property, or at any off-site location. The Company
has provided or made available to Parent all material studies,
assessments, reports, data, results of investigations or audits,
analyses and test results, in the possession, custody or control
of the Company or any of its Subsidiaries relating to
(x) the environmental conditions on, under or about any of
the properties or assets owned, leased, operated or used by any
of the Company and its Subsidiaries or any predecessor in
interest thereto at the present time or in the past and
(y) any Hazardous Substances used, managed, handled,
transported, treated, generated, stored or Released by any
Person on, under, about or from, any of the properties, assets
and businesses of the Company or any of its Subsidiaries.
(d) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company, to
the knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or
incidents, including the Release, emission, discharge, presence
or disposal of any Hazardous Substance, that would be reasonably
likely to form the basis of any Environmental Claim against the
Company or any of its Subsidiaries or against any Person whose
liability for such Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by
operation of law.
(e) Without in any way limiting the generality of the
foregoing, there are no underground storage tanks located at any
property currently owned, leased or operated by the Company or
any of its Subsidiaries.
(f) Neither the Company nor any of its Subsidiaries is
required by virtue of the transactions contemplated by this
Agreement, or as a condition to the effectiveness of any
transactions contemplated by this Agreement, (i) to perform
a site assessment for Hazardous Substances at any Company Real
Property or (ii) to remove or remediate any Hazardous
Substances from any Company Real Property.
Section 3.15 Company
Real Property; Operating Equipment.
(a) Section 3.15(a) of the Company Disclosure Letter
contains a complete and correct list, as of the date of this
Agreement, of all Company Owned Real Property setting forth
information sufficient to specifically identify such Company
Owned Real Property and the legal owner thereof. The Company and
its Subsidiaries have good, valid fee simple title to the
Company Owned Real Property, free and clear of any Liens other
than Permitted Liens. Each Company Lease grants the lessee under
the Company Lease the exclusive right to use and occupy the
premises and rights demised thereunder free and clear of any
Lien other than Permitted Liens. Each of the Company and its
Subsidiaries has good and valid title to the leasehold estate or
other interest created under its respective Company Leases free
and clear of any Liens other than Permitted Liens.
(b) The Company Real Property constitutes all the fee,
leasehold and other interests in real property held by the
Company and its Subsidiaries, other than the Company Oil and Gas
Properties. The use and operation of the Company Real Property
in the conduct of the business of the Company and its
Subsidiaries does not violate any instrument of record or
agreement affecting the Company Real Property, except for such
violations as individually or in the aggregate have not had, and
would not be reasonably likely to have or result in, a Material
Adverse Effect on the Company. No current use by the Company
A-20
and its Subsidiaries of the Company Real Property is dependent
on a nonconforming use or other governmental approval.
(c) All material operating equipment owned or leased by the
Company or any of its Subsidiaries are, in the aggregate, in a
state of repair so as to be adequate in all material respects
for reasonably prudent operations in the areas in which they are
operated.
(d) All personal property of the Company on the date hereof
shall become the personal property of the Surviving Corporation
at the Effective Date.
Section 3.16 Insurance.
Section 3.16 of the Company Disclosure Letter contains a
complete and correct list of all material insurance policies
maintained by or on behalf of any of the Company and its
Subsidiaries as of the date of this Agreement. Such policies
are, and at the Closing policies or replacement policies having
substantially similar coverages will be, in full force and
effect, and all premiums due thereon have been or will be paid.
The Company and its Subsidiaries have complied in all material
respects with the terms and provisions of such policies. With
respect to any material insurance claim submitted by the Company
or any of its Subsidiaries since January 1, 2003, neither
the Company nor any of its Subsidiaries has received any refusal
of coverage, reservation of rights or other notice that the
issuer of the applicable insurance policy or policies is not
willing or able to perform its obligations thereunder that has
not been settled.
Section 3.17 Labor
Matters.
(a) Neither the Company nor any of its Subsidiaries is, or
since January 1, 2000 has been, a party to or bound by a
collective bargaining agreement or other similar agreement with
any labor union or labor organization applicable to the
employees of the Company or any of its Subsidiaries, and no such
agreement is currently being negotiated. Since January 1,
2000, no representation election petition or application for
certification has been filed by any employees of the Company or
any of its Subsidiaries, nor is such a petition or application
pending with the National Labor Relations Board or any
Governmental Entity, and, to the knowledge of the Company, no
labor union is currently engaged in or threatening,
organizational efforts with respect to any employees of the
Company or any of its Subsidiaries. Since January 1, 2000,
no labor dispute, strike, slowdown, picketing, work stoppage,
lockout or other collective labor action involving the employees
of the Company or any of its Subsidiaries has occurred or is in
progress or, to the knowledge of the Company, has been
threatened against the Company or any of its Subsidiaries.
(b) Except as individually or in the aggregate has not had,
and would not be reasonably likely to have or result in, a
Material Adverse Effect on the Company, each of the Company and
its Subsidiaries is in compliance with all applicable Laws
respecting employment and employment practices, terms and
conditions of employment, immigration and wages and hours, and
is not engaged in any unfair or unlawful labor practice.
(c) There is no material Litigation pending, or to the
knowledge of the Company, threatened involving the Company or
any of its Subsidiaries and any of their respective employees or
former employees.
(d) To the knowledge of the Company, since January 1,
2003, no employee of the Company or any of its Subsidiaries has
provided or is providing information to any law enforcement
agency regarding the commission or possible commission of any
crime or the violation or possible violation of any material
applicable Law, in each case, by the Company, any of its
Subsidiaries or any of their respective officers or directors.
(e) Since January 1, 2001, neither the Company nor any
of its Subsidiaries has effectuated (i) a plant
closing (as defined in the Worker Adjustment and
Retraining Notification Act, as amended (the WARN
Act)), affecting any site of employment or one or more
facilities or operating units within any site of employment or
facility of the Company or any of its Subsidiaries, or
(ii) a mass layoff (as defined in the WARN Act)
affecting any site of employment or facility of the Company or
any of its
A-21
Subsidiaries and for which the Company or any of its
Subsidiaries has any liability; nor has the Company or any of
its Subsidiaries been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to
trigger application of any state, local or foreign Law or
regulation similar to the WARN Act.
(f) Section 3.17(f) of the Company Disclosure Letter
contains a complete and correct list, as of the date of this
Agreement, of the names of all directors and officers of the
Company and all other Company employees, together with
(i) any incentive or bonus arrangement with respect to such
Person and (ii) the number of shares of Company Common
Stock owned beneficially or of record, or both, by each such
Person who is an executive officer or director of the Company.
The Company has previously provided to Parent the annual base
salary or wages with respect to all Company employees.
Section 3.18 Affiliate
Transactions. Section 3.18 of the Company Disclosure
Letter contains a complete and correct list, as of the date of
this Agreement, of all agreements, contracts, transfers of
assets or liabilities or other commitments or transactions,
whether or not entered into in the ordinary course of business,
to or by which the Company or any of its Subsidiaries, on the
one hand, and any of their respective officers or directors (or
any of their respective affiliates, other than the Company or
any of its direct or indirect wholly owned Subsidiaries) on the
other hand, are or have been a party or otherwise bound or
affected, and that (a) are currently pending, in effect or
have been in effect during the past 12 months,
(b) involve continuing liabilities and obligations that,
individually or in the aggregate, have been, are or will be
material to the Company and its Subsidiaries, taken as a whole
and (c) are not Company Plans disclosed in
Section 3.9(a) of the Company Disclosure Letter.
Section 3.19 Derivative
Transactions and Hedging. Section 3.19 of the Company
Disclosure Letter contains a complete and correct list of all
Derivative Transactions (including each outstanding Hydrocarbon
or financial hedging position attributable to the Hydrocarbon
production of the Company and its Subsidiaries) 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. All such
Derivative Transactions were, and any Derivative Transactions
entered into after the date of this Agreement will be, 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. The Company and each of its Subsidiaries
have duly performed in all material respects all of their
respective obligations under the Derivative Transactions to the
extent that such obligations to perform have accrued, and, to
the knowledge of the Company, there are no material breaches,
violations, collateral deficiencies, requests for collateral or
demands for payment (except for ordinary course margin deposit
requests), or defaults or allegations or assertions of such by
any party thereunder.
Section 3.20 Disclosure
Controls and Procedures. Since January 1, 2003, the
Company and each of its Subsidiaries has had in place
disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) of the Exchange Act) designed
and maintained to ensure in all material respects that
(a) transactions are executed in accordance with
managements general or specific authorizations,
(b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principals and to maintain accountability
for assets, (c) access to assets is permitted only in
accordance with managements general or specific
authorization, (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences,
(e) all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and (f) all such information is
accumulated and communicated to the Companys management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports. The
Companys disclosure controls and procedures ensure that
information required to be disclosed by the Company in the
reports filed with the SEC under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms.
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Section 3.21 Oil
and Gas.
(a) The Company has furnished Parent prior to the date of
this Agreement with reports estimating the Companys and
its Subsidiaries proved oil and gas reserves as of
December 31, 2004, as prepared by Netherland,
Sewell & Associates, Inc. (the Company Reserve
Report). The factual, non-interpretive data on which the
Company Reserve Report was based for purposes of estimating the
oil and gas reserves set forth in the Company Reserve Report was
accurate in all material respects.
(b) All operated producing oil and gas wells included in
the Company Reserve Report have been operated and produced and,
to the knowledge of the Company, drilled, in accordance in all
material respects with generally accepted oil and gas field
practices and in compliance in all material respects with
applicable oil and gas leases and applicable Law.
(c) All material proceeds from the sale of crude oil,
natural gas liquids and other hydrocarbons produced from crude
oil or natural gas (Hydrocarbons) produced from the
Company Oil and Gas Properties are being received by the Company
and its Subsidiaries in a timely manner and are not being held
in suspense for any reason (except in the ordinary course of
business).
(d) Except as previously provided to Parent by the Company,
there are no Company and/or its Subsidiaries gas balancing or
similar obligations as of the date of the information provided.
Neither the Company nor any of its Subsidiaries has received any
material advance, take-or-pay or other similar payments that
entitle purchasers of production to receive deliveries of
Hydrocarbons without paying therefor, and, on a net,
company-wide basis, the Company is neither underproduced nor
overproduced, in either case, to any material extent, under gas
balancing or similar arrangements.
(e) 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 as
attributable to interests owned by the Company and its
Subsidiaries and free and clear of all Liens, except for
(i) Permitted Liens and (ii) Liens associated with
obligations reflected in the Company Reserve Report. The oil and
gas leases and other agreements that provide the Company and its
Subsidiaries with operating rights in the oil and gas properties
reflected in the Company Reserve Report are legal, valid and
binding and in full force and effect, and the rentals, royalties
and other payments due thereunder have been properly and timely
paid and there is no existing default (or event that, with
notice or lapse of time or both, would become a default) under
any of such oil and gas leases or other agreements, except, in
each case, as individually or in the aggregate has not had, and
would not be reasonably likely to have or result in, a Material
Adverse Effect on the Company.
(f) No claim, notice or order from any Governmental Entity
or other Person has been received by the Company or any of its
Subsidiaries due to Hydrocarbon production in excess of
allowables or similar violations that could result in
curtailment of production after the Closing Date from any unit
or oil and gas properties of the Company or any of its
Subsidiaries, except any such violations which individually or
in the aggregate has not had, and would not be reasonably likely
to have or result in, a Material Adverse Effect on the Company.
Section 3.22 Investment
Company. Neither the Company nor any of its Subsidiaries is
an investment company, a company
controlled by an investment company, or
an investment adviser within the meaning of the
Investment Company Act of 1940, as amended (the Investment
Company Act), or the Investment Advisers Act of 1940, as
amended (the Advisers Act).
Section 3.23 Recommendation
of Company Board of Directors; Opinion of Financial Advisor.
(a) The Company Board, at a meeting duly called and held,
duly adopted resolutions (i) determining that this
Agreement and the transactions contemplated hereby are fair to,
and in the best interests of, the stockholders of the Company,
(ii) approving this Agreement and the transactions
contemplated hereby, (iii) resolving to recommend adoption
of this Agreement and approval of the Merger and the other
transactions contemplated hereby by the stockholders of the
Company and (iv) directing that the adoption of this
Agreement and the approval of the Merger and the other
transactions contemplated hereby be
A-23
submitted to the Companys stockholders for consideration
in accordance with this Agreement, which resolutions, as of the
date of this Agreement, have not been subsequently rescinded,
modified or withdrawn in any way.
(b) The Company has received an opinion of Merrill
Lynch & Co. Inc. (Merrill Lynch) to the
effect that, as of the date of this Agreement, the Merger
Consideration to be received by the holders of shares of Company
Common Stock (other than Parent, Purchaser or the Company) in
the Merger is fair, from a financial point of view, to such
holders. The Company has received the approval of Merrill Lynch
to permit the inclusion of a copy of its written opinion in its
entirety in the Proxy Statement, subject to Merrill Lynchs
review of the Proxy Statement.
Section 3.24 Required
Vote by Company Stockholders. The affirmative vote of the
holders of a majority of the outstanding shares of Company
Common Stock entitled to vote hereon (the Company Required
Vote) is the only vote of any class of capital stock of
the Company required by the DGCL or the certificate of
incorporation or the bylaws of the Company to adopt this
Agreement and approve the Merger and the other transactions
contemplated hereby.
Section 3.25 Brokers.
Except for Petrie Parkman & Co. Inc. (Petrie
Parkman) and Merrill Lynch, no broker, finder or
investment banker is entitled to any brokerage, finders or
other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or any of its Subsidiaries, that is
or will be payable by the Company or any of its Subsidiaries.
The Company is solely responsible for the fees and expenses of
Merrill Lynch as and to the extent set forth in the engagement
letter dated March 27, 2005, and of Petrie Parkman as and
to the extent set forth in the engagement letter dated as of
August 19, 2002. The Company has previously delivered to
Parent a true and correct copy of such engagement letters.
Section 3.26 Tax
Matters. Neither the Company nor, to the knowledge of the
Company, any of its Subsidiaries has taken or agreed to take any
action that would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the
Code. Without limiting the generality of the foregoing, to the
knowledge of the Company:
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(a) The Merger will be carried out strictly in accordance
with this Agreement and the Company is not a party to any other
written or oral agreements regarding the Merger other than those
expressly referred to in this Agreement. |
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(b) The fair market value of the Aggregate Consideration
will be approximately equal to the fair market value of the
shares of Company Common Stock surrendered in the exchange. |
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(c) The aggregate fair market value, determined at the
Effective Time, of the Total Stock Consideration will not be
less than forty percent (40%) of the value, determined at the
Effective Time, of the shares of Company Common Stock
outstanding immediately before the Effective Time. For this
purpose, it is assumed that the fair market value of the
outstanding shares of Company Common Stock will equal the fair
market value of the Aggregate Consideration. |
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(d) Prior to the Effective Time and in connection with or
anticipation of the Merger, (i) none of the shares of
Company Common Stock will be redeemed, (ii) no
extraordinary dividends will be made with respect to the shares
of Company Common Stock, and (iii) none of the shares of
Company Common Stock will be acquired by the Company or any
Related Person. |
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(e) The only capital stock of the Company issued and
outstanding is Company Common Stock. |
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(f) The Company and Company stockholders will each pay
their respective expenses, if any, incurred in connection with
the Merger. |
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(g) Any compensation paid to the Company stockholders who
enter (or have entered) into employment, consulting or
noncompetitive contracts, if any, with Parent, Purchaser, or the
Surviving Corporation (a) will be for services actually
rendered or to be rendered, (b) will be commensurate |
A-24
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with amounts paid to third parties bargaining at arms
length for similar services, and (c) will not represent
consideration for the surrender of the shares of the Company
Common Stock in the Merger. |
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(h) No debt of the Company is guaranteed by any Company
stockholder. |
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(i) The Company owns no stock of Parent. |
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(j) Purchaser will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held
by the Company immediately prior to the Merger. For purposes of
this representation, amounts paid by the Company to holders of
Dissenting Shares, amounts paid by the Company to stockholders
or holders of Company Options who receive cash or other property
(including amounts used to pay cash in lieu of fractional
shares), the Company assets used to pay its reorganization
expenses, and all redemptions and distributions made by the
Company in contemplation or as part of the Merger, will be
included in assets of the Company held immediately prior to the
Merger. |
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(k) No assets of the Company have been sold, transferred or
otherwise disposed of which would prevent Parent and the
Surviving Corporation from continuing the historic business of
the Company or from using a significant portion of the
Companys historic business assets in a business following
the Merger. |
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(l) The Company is not an investment company as defined in
Section 368(a)(2)(F) of the Code. An investment company is
(a) a regulated investment company; (b) a real estate
investment trust; or (c) a corporation (i) fifty
percent (50%) or more of the value of whose total assets are
stock and securities, and (ii) eighty percent (80%) or more
of the value of whose total assets are held for investment. For
this purpose, total assets shall not include cash
and cash items (including receivables) and government securities. |
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(m) The fair market value of the assets of the Company
transferred to Purchaser in the Merger will equal or exceed the
sum of the liabilities assumed or paid by Parent or Purchaser,
plus the amount of liabilities, if any, to which the transferred
assets are subject. |
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(n) The total adjusted basis of the assets of the Company
transferred to Purchaser in the Merger will equal or exceed the
sum of the liabilities assumed or paid by Parent or Purchaser,
plus the amount of liabilities, if any, to which the transferred
assets are subject. |
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(o) The Company is not under the jurisdiction of a court in
a title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code. |
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(p) There is no indebtedness existing between Parent and
the Company, or between Purchaser and the Company, that was or
will be issued, acquired, or settled at a discount in connection
with the Merger. |
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(q) The Company has substantial non-tax business purposes
and reasons for the Merger, and the terms of the Merger are the
product of arms length negotiations. |
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(r) The Company will not take, and the Company is not aware
of any plan or intention of any of the Company stockholders to
take, any position on any Return, or take any other Tax
reporting position, that is inconsistent with the treatment of
the Merger as a reorganization within the meaning of
Section 368(a) of the Code, unless otherwise required by a
determination (as defined in Code
Section 1313(a)(1)). |
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(s) No stock or securities of the Company will be issued to
any Company stockholder for services rendered to or for the
benefit of Parent, Purchaser, or the Company in connection with
the Merger (except to the extent of outstanding Company Options
described in Section 1.8). |
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(t) No stock or securities of Parent or of the Company will
be issued to any Company stockholder for any indebtedness owed
to any Company stockholder in connection with the Merger. |
A-25
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(u) The liabilities of the Company to be assumed or paid by
Parent and Purchaser and the liabilities to which the
transferred assets of the Company are subject were incurred by
the Company in the ordinary course of its business. |
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(v) No assets were transferred to the Company, nor did the
Company assume any liabilities, in anticipation of the Merger. |
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(w) The Company has not distributed the stock of any
corporation in a transaction satisfying the requirements of
Section 355 of the Code since April 16, 1997. The
stock of the Company has not been distributed in a transaction
satisfying the requirements of Section 355 of the Code
since April 16, 1997. |
For purposes of this section, a Related Person with
respect to either Parent or Purchaser shall mean
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(i) a corporation that, immediately before or immediately
after a purchase, exchange, redemption, or other acquisition of
Parent Common Stock, is a member of an Affiliated Group (as
defined herein) of which Parent (or any successor corporation)
is a member, or |
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(ii) a corporation in which Parent (or any successor
corporation), owns, or which owns with respect to Parent (or any
successor corporation), directly or indirectly, immediately
before or immediately after such purchase, exchange, redemption,
or other acquisition, at least 50% of the total combined voting
power of all classes of stock entitled to vote or at least 50%
of the total value of shares of all classes of stock, taking
into account for purposes of this clause (ii) any stock
owned by 5% or greater stockholders of Parent (or any successor)
or such corporation, a proportionate share of the stock owned by
entities in which Parent (or any successor) or such corporation
owns an interest, and any stock which may be acquired pursuant
to the exercise of options. |
For purposes of this section, Affiliated Group shall
mean one or more chains of corporations connected through stock
ownership with a common parent corporation, but only if
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(x) the common parent owns directly stock that possesses at
least 80% of the total voting power, and has a value at least
equal to 80% of the total value, of the stock in at least one of
the other corporations, and |
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(y) stock possessing at least 80% of the total voting
power, and having a value at least equal to 80% of the total
value, of the stock in each corporation (except the common
parent) is owned directly by one or more of the other
corporations. |
For purposes of the preceding sentence, stock does
not include any stock that (a) is not entitled to vote,
(b) is limited and preferred as to dividends and does not
participate in corporate growth to any significant extent,
(c) has redemption and liquidation rights that do not
exceed the issue price of such stock (except for a reasonable
redemption or liquidation premium), and (d) is not
convertible into another class of stock.
Section 3.27 No
Other Representations or Warranties. Except for the
representations and warranties contained in this
Article III, neither the Company nor any other Person makes
any other express or implied representation or warranty on
behalf of the Company or any of its affiliates in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Except as set forth in the disclosure letter delivered by Parent
to the Company at or prior to the execution and delivery of this
Agreement (the Parent Disclosure Letter) (each
section of which qualifies the correspondingly numbered
representation, warranty or covenant to the extent specified
therein and such other representations, warranties or covenants
to the extent a matter in such section is disclosed
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in such a way as to make its relevance to such other
representation, warranty or covenant reasonably apparent),
Parent and Purchaser, jointly and severally, represent and
warrant to the Company as follows:
Section 4.1 Organization.
(a) Each of Parent, Purchaser and their respective
Subsidiaries is a corporation or other entity duly organized,
validly existing, and in good standing under the Laws of the
jurisdiction of its incorporation or organization, and has all
requisite corporate or other power and authority to own, lease,
use and operate its properties and to carry on its business as
it is now being conducted.
(b) Each of Parent, Purchaser and their respective
Subsidiaries is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction
in which such qualification or licensing is required, except
where the failure to be so qualified or licensed individually or
in the aggregate has not had, and would not be reasonably likely
to have or result in, a Material Adverse Effect on Parent.
(c) Each of Parent and Purchaser has previously delivered
to the Company a complete and correct copy of each of its
certificate of incorporation and bylaws in each case as amended
(if so amended) to the date of this Agreement, and has made
available the certificate of incorporation, bylaws or other
organizational documents of each of its Subsidiaries, in each
case as amended (if so amended) to the date of this Agreement.
Neither Parent, Purchaser nor any of their respective
Subsidiaries is in violation of its certificate of
incorporation, bylaws or similar governing documents.
(d) Section 4.1(d) of the Parent Disclosure Letter
sets forth a true and correct list of all of the Subsidiaries of
Parent and Purchaser and their respective jurisdictions of
incorporation or organization. The respective certificates or
articles of incorporation and bylaws or other organizational
documents of the Subsidiaries of Parent and Purchaser do not
contain any provision limiting or otherwise restricting the
ability of Parent or Purchaser to control any of their
respective Subsidiaries in any material respect.
Section 4.2 Capitalization.
(a) As of the date of this Agreement, the authorized
capital stock of Parent consists of 75,000,000 shares of
common stock, par value $.001 per share (the Parent
Common Stock), 5,000,000 shares of preferred stock,
par value $.001 per share (the Parent Preferred
Stock). As of March 31, 2005,
(i) 40,137,954 shares of Parent Common Stock were
issued and outstanding, (ii) 8,382 shares of Parent
Common Stock were issued and held in the treasury of Parent,
(iii) 598,271 shares of Parent Preferred Stock were
issued and outstanding, and (iv) 2,2023,500 shares of
Parent Common Stock were reserved for issuance upon exercise of
outstanding options under the 1999 Employee Incentive Plan, as
amended and the 2004 Employee Incentive Plan and 2004
Non-Employee Director Incentive Plan, as amended (the
Parent Stock Options) and
(v) 5,331,008 shares were reserved for issuance upon
exercise of outstanding warrants, and
(vi) 8,750,000 shares were reserved for issuance upon
exercise of outstanding convertible notes. Neither Parent nor
any of its Subsidiaries directly or indirectly owns any shares
of Company Common Stock. Except as set forth on the Parent
Disclosure Letter, no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any
matters on which stockholders of Parent may vote are issued or
outstanding. All the issued and outstanding shares of
Parents capital stock are, and all shares which may be
issued or granted pursuant to the exercise of the Parent Stock
Options, warrants or convertible notes will be, when issued or
granted in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable and
free of preemptive rights, with no personal liability attaching
to ownership thereof. Except as set forth above and on the
Parent Disclosure Letter, there are no existing
(x) options, warrants, preemptive rights, subscriptions,
calls or other rights, convertible securities, agreements,
claims or commitments of any character obligating Parent or any
of its Subsidiaries to issue, transfer or sell any shares of
capital stock or other equity interest in Parent or any of its
Subsidiaries or securities convertible into or exchangeable for
such shares or equity interests, (y) contractual
obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any capital stock of Parent or any
of its Subsidiaries or any such securities or agreements listed
in
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clause (x) of this sentence, or (z) voting trusts
or similar agreements to which Parent or any of its Subsidiaries
is a party with respect to the voting of the capital stock of
Parent or any of its Subsidiaries.
(b) All of the issued and outstanding shares of capital
stock (or equivalent equity interests of entities other than
corporations) of each of Parents Subsidiaries are
beneficially owned, directly or indirectly, by Parent free and
clear of any Lien, other than statutory Liens for Taxes not yet
due and payable and such restrictions as may exist under
applicable Law and Liens in favor or Parents lenders, and
all such shares or other ownership interests have been duly
authorized and validly issued and are fully paid and
non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
Section 4.3 Authorization;
Validity of Agreement. Each of Parent and Purchaser has the
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Parent and
Purchaser of this Agreement and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly
authorized by the respective Board of Directors of Parent and
Purchaser. Except for the Required Parent Vote, no other
corporate proceedings on the part of Parent or Purchaser are
necessary to authorize the execution, delivery and performance
of this Agreement by Parent and Purchaser and the consummation
of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Purchaser and,
assuming due authorization, execution and delivery of this
Agreement by the Company, is a valid and binding obligation of
each of Parent and Purchaser enforceable against it in
accordance with its terms, except as such enforcement may be
subject to or limited by (i) bankruptcy, insolvency or
other similar Laws, now or hereafter in effect, affecting
creditors rights generally and (ii) the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
Section 4.4 No
Violations; Consents and Approvals.
(a) Except as set forth on the Parent Disclosure Letter,
neither the execution, delivery and performance of this
Agreement by Parent and Purchaser nor the consummation by Parent
and Purchaser of the Merger or any other transactions
contemplated hereby will (i) violate any provision of the
certificate of incorporation or the bylaws of Parent or
Purchaser, or the certificate of incorporation, bylaws or
similar governing documents of any of Parents or
Purchasers respective Subsidiaries, (ii) violate,
conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of
termination, cancellation or amendment under, accelerate the
performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Parent or
Purchaser or any of their respective Subsidiaries under, or
result in the acceleration or trigger of any payment, time of
payment, vesting or increase in the amount of any compensation
or benefit payable pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, lease, license, contract,
collective bargaining agreement, agreement or other legally
binding instrument or obligation to which Parent or Purchaser or
any of their respective Subsidiaries is a party or by which any
of them or any of their respective assets or properties may be
bound, or (iii) conflict with or violate any Laws
applicable to Parent or Purchaser, any of their respective
Subsidiaries or any of their respective properties or assets;
except in the case of clause (ii), for such conflicts,
violations, breaches, defaults or Liens which individually or in
the aggregate have not had, and would not be reasonably likely
to have or result in, a Material Adverse Effect on Parent.
(b) No material filing or registration with, declaration or
notification to, or order, authorization, consent or approval
of, any Governmental Entity or any other Person is required in
connection with the execution, delivery and performance of this
Agreement by Parent and Purchaser or the consummation by Parent
and Purchaser of the Merger or any other transactions
contemplated hereby, except for (i) the filing with the SEC
of the Proxy Statement in definitive form relating to the
meetings of the Companys and Parents stockholders to
be held in connection with this Agreement and the transactions
contemplated hereby, and the filing and declaration of
effectiveness of the S-4 in which the Proxy Statement will be
included as a prospectus, (ii) the adoption of the Parent
Proposal by the Required Parent Vote, (iii) such
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filings, authorizations or approvals as may be required under
(A) the HSR Act or (B) any other Competition Laws,
rules or regulations, (iv) the filing of the Certificate of
Merger with the Secretary of State and (v) such consents,
approvals, orders, authorizations, notifications, registrations,
declarations and filings (x) as are customarily made or
obtained in connection with the transfer of interests in or
change of control of ownership of oil and gas properties and
(y) the failure of which to be obtained or made,
individually or in the aggregate, has not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on Parent.
Section 4.5 SEC
Reports and Financial Statements.
(a) Parent has timely filed with the SEC all forms and
other documents (including exhibits and other information
incorporated therein) required to be filed by it since
January 1, 2001 (such documents, the Parent SEC
Documents), including (i) its Annual Reports on
Form 10-K for the years ended December 31, 2001,
December 31, 2002, December 31, 2003 and
December 31, 2004, respectively, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31,
June 30 and September 30, 2004, (iii) all proxy
statements relating to meetings of stockholders of Parent since
January 1, 2001 (in the form mailed to stockholders), and
(iv) all other forms, reports and registration statements
required to be filed by Parent with the SEC since
January 1, 2001. As of their respective dates, the Parent
SEC Documents, including the financial statements and schedules
provided therein or incorporated by reference therein,
(x) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading
and (y) complied in all material respects with the
applicable requirements of the Exchange Act, the Securities Act
and SOX, as the case may be.
(b) The December 31, 2004 consolidated balance sheet
of Parent and the related consolidated statements of income,
changes in stockholders equity and cash flows (including,
in each case, the related notes, where applicable), as reported
in Parents Annual Report on Form 10-K for the fiscal
year ended December 31, 2004 filed with the SEC under the
Exchange Act fairly present, and the financial statements to be
filed by Parent with the SEC after the date of this Agreement
will fairly present (subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and
amount), in all material respects, the consolidated financial
position and the results of the consolidated operations, cash
flows and changes in stockholders equity of Parent and its
Subsidiaries as of the respective dates or for the respective
fiscal periods therein set forth; each of such statements
(including the related notes, where applicable) complies, and
the financial statements to be filed by Parent with the SEC
after the date of this Agreement will comply, with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has
been, and the financial statements to be filed by Parent with
the SEC after the date of this Agreement will be, prepared in
accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q.
The books and records of Parent and its Subsidiaries have been,
and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions. Deloitte & Touche LLP is an
independent public accounting firm with respect to Parent and
has not resigned or been dismissed as independent public
accountants of Parent.
Section 4.6 Absence
of Certain Changes.
(a) Except as disclosed in the Parent SEC Documents filed
by Parent with the SEC prior to the date of this Agreement (the
Specified Parent SEC Documents), to the extent that
it is reasonably apparent that the disclosure in the Specified
Parent SEC Documents is responsive to the matters set forth in
this Section 4.6(a), since December 31, 2004,
(i) Parent and its Subsidiaries have conducted their
respective operations only in the ordinary course consistent
with past practice and (ii) there has not occurred or
continued to exist any event, change, occurrence, effect, fact,
circumstance or condition which, individually or in the
aggregate, has had, or would be reasonably likely to have or
result in, a Material Adverse Effect on Parent.
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(b) Except as set forth in the Parent Disclosure Letter or
as disclosed in the Specified Parent SEC Documents, to the
extent that it is reasonably apparent that the disclosure in the
Specified Parent SEC Documents is responsive to the matters set
forth in this Section 4.6(b), since December 31, 2004
to the date of this Agreement, neither Parent nor any of its
Subsidiaries has (i) except as required pursuant to the
terms of the Parent Plans as in effect on December 31, 2004
or as required to comply with applicable Law, (A) increased
or agreed to increase the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any
officer, employee or director from the amount thereof in effect
as of December 31, 2004, other than increases in wages,
salaries and other cash compensation in the ordinary course of
business consistent with past practice, (B) granted any
severance or termination pay, (C) entered into or made any
loans to any of its officers, directors or employees or made any
change in its borrowing or lending arrangements for or on behalf
of any of such Persons or (D) adopted or amended, or
accelerated the payment or vesting of benefits under, any Parent
Plan, (ii) declared, set aside or paid any dividend or
other distribution (whether in cash, stock or property) with
respect to any of the Parents capital stock, other than
regular quarterly cash dividends on the Parent Preferred Stock,
(iii) effected or authorized any split, combination or
reclassification of any of the Parents capital stock or
any issuance thereof or issued any other securities in respect
of, in lieu of or in substitution for shares of the
Parents capital stock, except for issuances of Parent
Common Stock upon the exercise of Parent Options, in each case
in accordance with their terms at the time of exercise,
(iv) changed in any material respect, or had knowledge of
any reason that required any material change in, any accounting
methods (or underlying assumptions), principles or practices of
Parent or its Subsidiaries, including any material reserving,
renewal or residual method, practice or policy, (v) made
any material Tax election or settled or compromised any material
income Tax liability, (vi) made any material change in the
policies and procedures of Parent or its Subsidiaries in
connection with trading activities, (vii) sold, leased,
exchanged, transferred or otherwise disposed of any material
Parent Asset other than in the ordinary course consistent with
past practice, (viii) revalued, or had knowledge of any
reason that required revaluing, any of the Parent Assets in any
material respect, including writing down the value of any of the
Parent Assets or writing off notes or accounts receivable, in
each case in any material respect and other than in the ordinary
course of business consistent with past practice, or
(ix) made any agreement or commitment (contingent or
otherwise) to do any of the foregoing.
Section 4.7 Absence
of Undisclosed Liabilities. Except as disclosed in the
Specified Parent SEC Documents, to the extent that it is
reasonably apparent that the disclosure in the Specified Parent
SEC Documents is responsive to the matters set forth in this
Section 4.7, neither Parent nor any of its Subsidiaries has
any liabilities or obligations (accrued, contingent or
otherwise), except for (i) liabilities that individually or
in the aggregate have not had, and would not be reasonably
likely to have or result in, a Material Adverse Effect on
Parent, (ii) liabilities in respect of Litigation (which
are the subject of Section 4.10), and
(iii) liabilities under Environmental Laws (which are the
subject of Section 4.14). Neither Parent nor any of its
Subsidiaries is in default in respect of the terms and
conditions of any indebtedness or other agreement which
individually or in the aggregate has had, or would be reasonably
likely to have or result in, a Material Adverse Effect on Parent.
Section 4.8 Proxy
Statement; Form S-4; Merger Documents. None of the
information supplied or to be supplied by Parent or Purchaser
for inclusion or incorporation by reference in (a) the S-4
at the time the S-4 becomes effective under the Securities Act
or (b) the Proxy Statement (and any amendment thereof or
supplement thereto) at the date(s) mailed to the stockholders of
the Company and Parent, at the time of the Company Special
Meeting, at the time of the Parent Stockholders Meeting
and at the Effective Time, will 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. The Proxy Statement and the S-4 will
comply in all material respects with the provisions of the
Exchange Act, except that no representation is made by Parent or
Purchaser with respect to statements made in the Proxy Statement
based on information supplied to Parent or Purchaser by the
Company for inclusion in the Proxy Statement or the S-4.
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Section 4.9 Parent
Employee Benefit Plans; ERISA.
(a) Section 4.9(a) of the Parent Disclosure Letter
contains a complete and correct list as of the date of this
Agreement of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation
right or other equity-based incentive, severance, termination,
change in control, retention, employment, hospitalization or
other medical, life or other insurance, disability, other
welfare, supplemental unemployment, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each
other director or employee compensation or benefit plan,
program, agreement or arrangement, sponsored, maintained or
contributed to by Parent, any of its Subsidiaries or by any
trade or business, whether or not incorporated (a Parent
ERISA Affiliate), that together with Parent or any of its
Subsidiaries would be deemed a single employer
within the meaning of Section 4001(b) of ERISA, or to which
Parent or a Parent ERISA Affiliate is party, whether written or
oral, for the benefit of any current or former officer, employee
or director of Parent, any of its Subsidiaries or any Parent
ERISA Affiliate (the Parent Plans). In this
Section 4.9, 80% shall be substituted for
50% in the definition of Subsidiary set
forth in Section 8.5. Section 4.9(a) of the Parent
Disclosure Letter contains the name of the Parents ERISA
Affiliates.
(b) With respect to each Parent Plan, Parent has heretofore
delivered to the Company complete and correct copies of each of
the following documents (including all amendments to such
documents), as applicable:
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(i) the Parent Plan or a written description of any Parent
Plan not in writing; |
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(ii) a copy of the most recent annual report or Internal
Revenue Service Form 5500 Series, including all related
reports required therewith; |
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(iii) a copy of the most recent Summary Parent Plan
Description (Parent SPD), together with all
Summaries of Material Modification issued with respect to such
Parent SPD and all other material employee communications
relating to each Parent Plan distributed by Parent or any of its
Subsidiaries from December 31, 2004 to the date of this
Agreement; |
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(iv) if the Parent Plan or any obligations thereunder are
funded through a trust or any other funding vehicle or through
insurance, the trust or other funding agreement and the latest
financial statements thereof or evidence of insurance coverage
thereof; |
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(v) all contracts relating to the Parent Plan with respect
to which Parent or any Parent ERISA Affiliate may have any
material liability, including insurance contracts, investment
management agreements, subscription and participation agreements
and record keeping agreements; |
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(vi) if the Parent Plan is intended to qualify under
Section 401(a) of the Code, the most recent determination
letter received from the Internal Revenue Service; and |
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(vii) all material communications between Parent or any
Parent ERISA Affiliate and any Governmental Entity. |
(c) No Parent Plan in effect as of the date hereof is
subject to Title IV or Section 302 of ERISA. No
liability under Title IV or Section 302 of ERISA has
been incurred by Parent or any Parent ERISA Affiliate that has
not been satisfied in full, and no condition exists that would
be reasonably likely to result in Parent or any Parent ERISA
Affiliate incurring any such liability. Insofar as the
representation made in this Section 4.9(c) applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, such
representation is made with respect to any employee benefit
plan, program, agreement or arrangement subject to Title IV
of ERISA to which Parent or any Parent ERISA Affiliate made, or
was required to make, contributions during the five-year period
ending on the last day of the most recent plan year ended prior
to the Closing Date.
(d) None of Parent, any Parent ERISA Affiliate, any of the
Parent Plans, any trust created thereunder and, to the knowledge
of Parent, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action with
respect to a Parent Plan in connection with
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which Parent, any of its Subsidiaries or any Parent ERISA
Affiliate would be reasonably likely to be subject to a material
civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a Tax imposed pursuant to Section 4975(a) or (b),
4976 or 4980B of the Code.
(e) All contributions required to be made by Parent and its
ERISA Affiliates with respect to any Parent Plan on or prior to
the Closing Date have been timely made or are reflected on the
consolidated balance sheet of Parent dated as of
December 31, 2004 contained in the Specified Parent SEC
Documents. Since December 31, 2004, there has been no
amendment to, written interpretation of or announcement (whether
or not written) by Parent or any Parent ERISA Affiliate relating
to, or change in the terms of employee participation or coverage
under, any Parent Plan that would increase materially the
expense of maintaining such Parent Plan above the level of
expense incurred in respect thereof for the most recent fiscal
year ended prior to the date hereof.
(f) Each of the Parent Plans has been operated and
administered by Parent and its ERISA Affiliates in all material
respects in accordance with applicable Laws, including ERISA and
the Code.
(g) With respect to each of the Parent Plans that is
intended to be qualified within the meaning of
Section 401(a) of the Code, Parent has received a currently
effective determination letter from the IRS stating that it is
so qualified, such letter has not been revoked, and, to the
knowledge of Parent, no event has occurred that would be
reasonably likely to affect such qualified status. No fund
established under a Parent Plan is intended to satisfy the
requirements of Section 501(c)(9) of the Code.
(h) No amounts payable under the Parent Plans as a result
of the transactions contemplated hereby will fail to be
deductible for federal income Tax purposes by virtue of
Sections 280G or 162(m) of the Code.
(i) No Parent Plan provides death, medical, hospitalization
or similar benefits (whether or not insured) with respect to any
current or former employee of Parent, its Subsidiaries or any
Parent ERISA Affiliate after retirement or other termination of
service, other than (i) coverage mandated by applicable
Law, (ii) death benefits under any employee pension
plan, as that term is defined in Section 3(2) of
ERISA or (iii) benefits, the full direct cost of which is
borne by the current or former employee (or beneficiary thereof).
(j) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with any
other event, (i) entitle any current or former employee,
officer or director of Parent, any of its Subsidiaries or any
Parent ERISA Affiliate to severance pay, unemployment
compensation or any other similar termination payment under any
Parent Plan, or (ii) accelerate the time of payment or
vesting of, increase the amount of or otherwise enhance any
benefit due any such employee, officer or director under any
Parent Plan.
(k) To the knowledge of Parent, neither Parent nor any
Subsidiary has contributed to a nonconforming group health plan
(as defined in Section 5000(c) of the Code) and no Parent
ERISA Affiliate or any of its Subsidiaries has incurred a Tax
under Section 5000(a) of the Code which is or could become
a liability of Parent or any of its Subsidiaries.
(l) There is no pending or, to the knowledge of Parent,
threatened material Litigation by, on behalf of or against any
Parent Plan by any participant (or beneficiary thereof) in such
Parent Plan or otherwise involving such Parent Plan (other than
routine claims for benefits).
Section 4.10 Litigation;
Compliance with Law.
(a) Except as disclosed in the Specified Parent SEC
Documents, (i) there is no Litigation pending or, to the
knowledge of Parent, threatened in writing against, relating to
or naming as a party thereto Parent or any of its Subsidiaries,
any of their respective properties or assets or any of
Parents officers or directors (in their capacities as
such), (ii) there is no agreement, order, judgment, decree,
injunction or award of any Governmental Entity against and/or
binding upon Parent, any of its Subsidiaries or any of
Parents officers or directors (in their capacities as
such) that, in the case of either clause (i) or (ii),
individually or in the aggregate has had, or would be reasonably
likely to have or result in, a Material
A-32
Adverse Effect on Parent, and (iii) there is no Litigation
that Parent or any of its Subsidiaries has pending against other
parties, where such Litigation is intended to enforce or
preserve material rights of Parent or any of its Subsidiaries.
(b) Each of Parent and its Subsidiaries has complied, and
is in compliance, in all material respects with all Laws and
Permits which affect the respective businesses of Parent or any
of its Subsidiaries, the Parent Real Property and/or the Parent
Assets, and Parent and its Subsidiaries have not been and are
not in violation in any material respect of any such Law or
Permit; nor has any notice, charge, claim or action has been
received by Parent or any of its Subsidiaries or been filed,
commenced, or to the knowledge of Parent, threatened against
Parent or any of its Subsidiaries alleging any violation of the
foregoing.
(c) Parent and its Subsidiaries hold all Permits necessary
for the ownership, leasing, operation, occupancy and use of the
Parent Real Property, the Parent Assets and the conduct of their
respective businesses as currently conducted (Parent
Permits), except where the failure to hold such Parent
Permits individually or in the aggregate has not had, and would
not be reasonably likely to have or result in, a Material
Adverse Effect on Parent. Neither Parent nor any of its
Subsidiaries has received notice that any Parent Permit will be
terminated or modified or cannot be renewed in the ordinary
course of business, and Parent has no knowledge of any
reasonable basis for any such termination, modification or
nonrenewal, in each case except for any such terminations,
modifications or nonrenewals that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent. The
execution, delivery and performance of this Agreement and the
consummation of the Merger or any other transactions
contemplated hereby do not and will not violate any Parent
Permit, or result in any termination, modification or nonrenewal
thereof, except in each case for any such violations,
terminations, modifications or nonrenewals that individually or
in the aggregate have not had, and would not be reasonably
likely to have or result in, a Material Adverse Effect on Parent.
(d) This Section 4.10 does not relate to matters with
respect to (i) Parent Plans, ERISA and other employee
benefit matters (which are the subject of Section 4.9),
(ii) Tax Laws and other Tax matters (which are the subject
of Section 4.13), (iii) Environmental Laws and other
environmental matters (which are the subject of
Section 4.14), and (iv) labor matters (which are the
subject of Section 4.17).
Section 4.11 Intellectual
Property.
(a) Parent and its Subsidiaries own, or possess sufficient
and legally enforceable licenses or other rights to use, any and
all Technology and Intellectual Property necessary for the
conduct of the business and operations of Parent and its
Subsidiaries as currently conducted, free and clear of any Liens
(except for any Permitted Liens).
(b) To the knowledge of Parent, the conduct of the business
of Parent and its Subsidiaries does not infringe, conflict with
or otherwise violate in any material respect any Intellectual
Property of any Person, and none of Parent or any of its
Subsidiaries has received notice or has knowledge of any such
material infringement, conflict or other violation.
Section 4.12 Material
Contracts.
(a) Except as disclosed in the Parent Disclosure Letter and
the Specified Parent SEC Documents, to the extent that it is
reasonably apparent that the disclosure in the Specified Parent
SEC Documents is responsive to the matters set forth in this
Section 4.12(a), as of the date of this Agreement, neither
Parent nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether
written or oral) (i) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement,
(ii) which materially restrains, limits or impedes
Parents or any of its Subsidiaries, or will
materially restrain, limit or impede the Surviving
Corporations, ability to compete with or conduct any
business or any line of business, including geographic
limitations on Parents or any of its Subsidiaries or
the Surviving Corporations activities, but excluding
confidentiality agreements and area of mutual interest
agreements entered into in the ordinary course of business,
(iii) which is a material take-or-pay agreement or other
similar agreement that entitles purchasers of production to
receive delivery of Hydrocarbons without paying therefor, or (iv
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which is otherwise material to Parent and its Subsidiaries taken
as a whole. Each contract, arrangement, commitment or
understanding of the type described in this
Section 4.12(a), whether or not set forth in
Section 4.12(a) of the Parent Disclosure Letter or
disclosed in the Specified Parent SEC Documents, is referred to
herein as a Parent Material Contract. Parent has
previously made available to the Company true, complete and
correct copies of each Parent Material Contract.
(b) (i) Each Parent Material Contract is valid and
binding and in full force and effect, (ii) Parent and each
of its Subsidiaries has performed all obligations required to be
performed by it to date under each Parent Material Contract,
(iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a
default on the part of Parent or any of its Subsidiaries under
any such Parent Material Contract and (iv) to the knowledge
of Parent, no other party to such Parent Material Contract is in
default in any respect thereunder, except in each case where
there has not been, and would not be reasonably likely to be,
individually or in the aggregate, a material adverse effect on
the rights or remedies of Parent or its Subsidiaries under such
Parent Material Contracts.
Section 4.13 Taxes.
(a) (i) All material Returns required to be filed by
or with respect to Parent, its Subsidiaries and each Parent
Consolidated Group have been timely filed in accordance with all
applicable Laws and all such Returns are true, correct and
complete in all material respects, (ii) Parent, its
Subsidiaries and each Parent Consolidated Group have timely paid
all material Taxes due or claimed to be due, (iii) all
material Employment and Withholding Taxes and any other material
amounts required to be withheld with respect to Taxes have been
either duly and timely paid to the proper Governmental Entity or
properly set aside in accounts for such purpose in accordance
with applicable Laws, (iv) the charges, accruals and
reserves for Taxes with respect to Parent, its Subsidiaries and
each Parent Consolidated Group reflected in the balance sheet,
dated as of December 31, 2004, included in Parents
Annual Report on Form 10-K for the term ended
December 31, 2004 (the Parent Balance Sheet)
are adequate under GAAP, (v) no material deficiencies or
other claims for any Taxes asserted or assessed, or, to the
knowledge of Parent, proposed, against Parent or any of its
Subsidiaries has not been resolved in all material respects, and
(vi) there is no material Litigation pending or, to the
knowledge of any of Parent or its Subsidiaries, threatened or
scheduled to commence, against or with respect to Parent or any
of its Subsidiaries in respect of any Tax or Return.
(b) The statutes of limitations for the federal income Tax
Returns of Parent, its Subsidiaries and each Parent Consolidated
Group have expired or otherwise have been closed for all taxable
periods ending on or before December 31, 1998.
(c) Since January 1, 1999, neither Parent nor any of
its Subsidiaries has been a member of any affiliated
group (as defined in Section 1504(a) of the Code) or
has been included in any consolidated,
unitary or combined Return (other than
Returns which include only Parent and any Subsidiaries of
Parent) provided for under the Laws of the United States, any
foreign jurisdiction or any state or locality and none of Parent
nor any of its Subsidiaries has any liability for the Taxes of
any Person (other than Parent or any of its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar
provision under any state, local or foreign law), or as a
successor or transferee.
(d) There are no Tax sharing, allocation, indemnification
or similar agreements or arrangements, whether written or
unwritten, in effect under which Parent or any of its
Subsidiaries could be liable for any material Taxes of any
Person other than Parent or any Subsidiary of Parent.
(e) Neither Parent nor any of its Subsidiaries has entered
into an agreement or waiver extending any statute of limitations
relating to the payment or collection of a material amount of
Taxes, nor is any request for such a waiver or extension pending.
(f) There are no Liens for Taxes on any asset of Parent or
its Subsidiaries, except for Permitted Liens.
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(g) Neither Parent nor any of its Subsidiaries is the
subject of or bound by any material private letter ruling,
technical advice memorandum, closing agreement or similar
material ruling, memorandum or agreement with any taxing
authority.
(h) Neither Parent nor its Subsidiaries has entered into,
has any liability in respect of, or has any filing obligations
with respect to, any reportable transactions, as
defined in Section 1.6011-4(b)(1) of the Treasury
Regulations.
(i) Neither Parent nor any of its Subsidiaries will be
required to include any material item of income in, or exclude
any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date as a result of any (i) change in method of accounting
for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or
similar provision of state, local or foreign Tax Law),
(ii) closing agreement as described in
Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign Tax Law) executed on or
prior to the Closing Date, or (iii) deferred intercompany
gain or excess loss account described in Treasury Regulations
under Section 1502 of the Code (or any corresponding or
similar provision of state, local or foreign Tax Law).
(j) Neither Parent nor any of its Subsidiaries has taken or
agreed to take any action or knows of any fact, agreement, plan
or other circumstance that would be reasonably likely to prevent
the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(k) Parent has made available to the Company correct and
complete copies of (i) all U.S. federal income Tax
Returns of Parent and its Subsidiaries relating to taxable
periods ending on or after December 31, 2001, filed through
the date hereof and (ii) any material audit report within
the last four years relating to any material Taxes due from or
with respect to Parent or any of its Subsidiaries.
(l) No jurisdiction where Parent or any of its Subsidiaries
does not file a Return has made a claim that Parent or any of
its Subsidiaries is required to file a Return for a material
amount of Taxes for such jurisdiction.
(m) Within the last three years, neither the Parent nor any
of its Subsidiaries has owned any material assets located
outside the United States or conducted a material trade or
business outside the United States.
(n) All of the transactions which Parent has accounted for
as hedges under SFAS 133 have also been treated as hedging
transactions for federal income Tax purposes pursuant to
Treasury Regulation Section 1.1221-2 and have been
properly identified as such under Treasury
Regulation Section 1.1221-2(f).
Section 4.14 Environmental
Matters.
(a) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent, Parent
and its Subsidiaries have complied, and are in compliance, with
all applicable Environmental Laws, which compliance includes the
possession of all Permits required under applicable
Environmental Laws and compliance with the terms and conditions
thereof and the making and filing with all applicable
Governmental Entities of all reports, forms and documents and
the maintenance of all records required to be made, filed or
maintained by it under any Environmental Law. Neither Parent nor
any of its Subsidiaries has received any communication (written
or, if oral, would be reasonably likely to result in a formal
claim) from any Person, whether a Governmental Entity, citizens
group, employee or otherwise, that alleges that Parent or any of
its Subsidiaries is not in compliance in any material respect
with Environmental Laws and that has not been resolved in all
material respects.
(b) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent, there
are no Environmental Claims pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries or,
to
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the knowledge of Parent, against any Person whose liability for
any Environmental Claim Parent or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(c) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent, neither
Parent nor any of its Subsidiaries is subject to any liability
or obligation (accrued, contingent or otherwise) to cleanup,
correct, abate or to take any response, remedial or corrective
action under or pursuant to any Environmental Laws, relating to
(i) environmental conditions on, under, or about any of the
properties or assets owned, leased, operated or used by Parent
or any of its Subsidiaries or, to the knowledge of the Parent,
any predecessor thereto at the present time or in the past,
including the air, soil, surface water and groundwater
conditions at, on, under, from or near such properties, or
(ii) the past or present use, management, handling,
transport, treatment, generation, storage, disposal or Release
of any Hazardous Substances, whether on-site at any Parent Real
Property, or at any off-site location. Parent has provided or
made available to the Company all material studies, assessments,
reports, data, results of investigations or audits, analyses and
test results, in the possession, custody or control of Parent or
any of its Subsidiaries relating to (x) the environmental
conditions on, under or about any of the properties or assets
owned, leased, operated or used by any of Parent and its
Subsidiaries or any predecessor in interest thereto at the
present time or in the past and (y) any Hazardous
Substances used, managed, handled, transported, treated,
generated, stored or Released by any Person on, under, about or
from, any of the properties, assets and businesses of Parent or
any of its Subsidiaries.
(d) Except for such matters that individually or in the
aggregate have not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent, to the
knowledge of Parent, there are no past or present actions,
activities, circumstances, conditions, events or incidents,
including the Release, emission, discharge, presence or disposal
of any Hazardous Substance, that would be reasonably likely to
form the basis of any Environmental Claim against Parent or any
of its Subsidiaries or against any Person whose liability for
such Environmental Claim Parent or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(e) Without in any way limiting the generality of the
foregoing, there are no underground storage tanks located at any
property currently owned, leased or operated by Parent or any of
its Subsidiaries.
(f) Neither Parent nor any of its Subsidiaries is required
by virtue of the transactions contemplated by this Agreement, or
as a condition to the effectiveness of any transactions
contemplated by this Agreement, (i) to perform a site
assessment for Hazardous Substances at any Parent Real Property
or (ii) to remove or remediate any Hazardous Substances
from any Parent Real Property.
Section 4.15 Parent
Real Property; Operating Equipment.
(a) Section 4.15(a) of the Parent Disclosure Letter
contains a complete and correct list, as of the date of this
Agreement, of all Parent Owned Real Property setting forth
information sufficient to specifically identify such Parent
Owned Real Property and the legal owner thereof. Parent and its
Subsidiaries have good, valid fee simple title to the Parent
Owned Real Property, free and clear of any Liens other than
Permitted Liens. Each Parent Lease grants the lessee under the
Parent Lease the exclusive right to use and occupy the premises
and rights demised thereunder free and clear of any Lien other
than Permitted Liens. Each of Parent and its Subsidiaries has
good and valid title to the leasehold estate or other interest
created under its respective Parent Leases free and clear of any
Liens other than Permitted Liens.
(b) The Parent Real Property constitutes all the fee,
leasehold and other interests in real property held by Parent
and its Subsidiaries, other than the Parent Oil and Gas
Properties. The use and operation of the Parent Real Property in
the conduct of the business of Parent and its Subsidiaries does
not violate any instrument of record or agreement affecting the
Parent Real Property, except for such violations as individually
or in the aggregate have not had, and would not be reasonably
likely to have or result in, a Material Adverse Effect on
Parent. No current use by Parent and its Subsidiaries of the
Parent Real Property is dependent on a nonconforming use or
other governmental approval.
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(c) All material operating equipment owned or leased by
Parent or any of its Subsidiaries are, in the aggregate, in a
state of repair so as to be adequate in all material respects
for reasonably prudent operations in the areas in which they are
operated.
Section 4.16 Insurance.
Section 4.16 of the Parent Disclosure Letter contains a
complete and correct list of all material insurance policies
maintained by or on behalf of any of Parent and its Subsidiaries
as of the date of this Agreement. Such policies are, and at the
Closing policies or replacement policies having substantially
similar coverages will be, in full force and effect, and all
premiums due thereon have been or will be paid. Parent and its
Subsidiaries have complied in all material respects with the
terms and provisions of such policies. With respect to any
material insurance claim submitted by Parent or any of its
Subsidiaries since January 1, 2003, neither Parent nor any
of its Subsidiaries has received any refusal of coverage,
reservation of rights or other notice that the issuer of the
applicable insurance policy or policies is not willing or able
to perform its obligations thereunder.
Section 4.17 Labor
Matters.
(a) Neither Parent nor any of its Subsidiaries is, or since
January 1, 2000 has been, a party to or bound by a
collective bargaining agreement or other similar agreement with
any labor union or labor organization applicable to the
employees of Parent or any of its Subsidiaries, and no such
agreement is currently being negotiated. Since January 1,
2000, no representation election petition or application for
certification has been filed by any employees of Parent or any
of its Subsidiaries, nor is such a petition or application
pending with the National Labor Relations Board or any
Governmental Entity, and, to the knowledge of Parent, no labor
union is currently engaged in or threatening, organizational
efforts with respect to any employees of Parent or any of its
Subsidiaries. Since January 1, 2000, no labor dispute,
strike, slowdown, picketing, work stoppage, lockout or other
collective labor action involving the employees of Parent or any
of its Subsidiaries has occurred or is in progress or, to the
knowledge of Parent, has been threatened against Parent or any
of its Subsidiaries.
(b) Except as individually or in the aggregate has not had,
and would not be reasonably likely to have or result in, a
Material Adverse Effect on Parent, each of Parent and its
Subsidiaries is in compliance with all applicable Laws
respecting employment and employment practices, terms and
conditions of employment, immigration and wages and hours, and
is not engaged in any unfair or unlawful labor practice.
(c) There is no material Litigation pending, or to the
knowledge of Parent, threatened involving Parent or any of its
Subsidiaries and any of their respective employees or former
employees.
(d) To the knowledge of Parent, since January 1, 2003,
no employee of Parent or any of its Subsidiaries has provided or
is providing information to any law enforcement agency regarding
the commission or possible commission of any crime or the
violation or possible violation of any material applicable Law,
in each case, by Parent, any of its Subsidiaries or any of their
respective officers or directors.
(e) Since January 1, 2001, neither Parent nor any of
its Subsidiaries has effectuated (i) a plant
closing (as defined in the WARN Act), affecting any site
of employment or one or more facilities or operating units
within any site of employment or facility of Parent or any of
its Subsidiaries, or (ii) a mass layoff (as
defined in the WARN Act) affecting any site of employment or
facility of Parent or any of its Subsidiaries and for which
Parent or any of its Subsidiaries has any liability; nor has
Parent nor any of its Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any state, local
or foreign Law or regulation similar to the WARN Act.
(f) Section 4.17(f) of the Parent Disclosure Letter
contains a complete and correct list, as of the date of this
Agreement, of the names of all directors and officers of Parent,
together with the number of shares of Parent Common Stock owned
beneficially or of record, or both, by such Person.
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Section 4.18 Affiliate
Transactions. Section 4.18 of the Parent Disclosure
Letter contains a complete and correct list, as of the date of
this Agreement, of all agreements, contracts, transfers of
assets or liabilities or other commitments or transactions,
whether or not entered into in the ordinary course of business,
to or by which Parent or any of its Subsidiaries, on the one
hand, and any of their respective officers or directors (or any
of their respective affiliates, other than Parent or any of its
direct or indirect wholly owned Subsidiaries) on the other hand,
are or have been a party or otherwise bound or affected, and
that (a) are currently pending, in effect or have been in
effect during the past 12 months, (b) involve
continuing liabilities and obligations that, individually or in
the aggregate, have been, are or will be material to Parent and
its Subsidiaries, taken as a whole and (c) are not Parent
Plans.
Section 4.19 Derivative
Transactions and Hedging. Section 4.19 of the Parent
Disclosure Letter contains a complete and correct list of all
Derivative Transactions (including each outstanding Hydrocarbon
or financial hedging position attributable to the Hydrocarbon
production of Parent and its Subsidiaries) 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. All such
Derivative Transactions were, and any Derivative Transactions
entered into after the date of this Agreement will be, 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. Parent and each of its Subsidiaries have duly
performed in all material respects all of their respective
obligations under the Derivative Transactions to the extent that
such obligations to perform have accrued, and, to the knowledge
of Parent, there are no material breaches, violations,
collateral deficiencies, requests for collateral or demands for
payment (except for ordinary course margin deposit requests), or
defaults or allegations or assertions of such by any party
thereunder.
Section 4.20 Disclosure
Controls and Procedures. Since January 1, 2003, Parent
and each of its Subsidiaries has had in place disclosure
controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) of the Exchange Act) designed
and maintained to ensure in all material respects that
(a) transactions are executed in accordance with
managements general or specific authorizations,
(b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principals and to maintain accountability
for assets, (c) access to assets is permitted only in
accordance with managements general or specific
authorization, (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences,
(e) all information (both financial and non-financial)
required to be disclosed by Parent in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and (f) all such information is
accumulated and communicated to Parents management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of Parent required under the
Exchange Act with respect to such reports. Parents
disclosure controls and procedures ensure that information
required to be disclosed by Parent in the reports filed with the
SEC under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SECs
rules and forms.
Section 4.21 Oil
and Gas.
(a) Parent has furnished the Company prior to the date of
this Agreement with a report estimating certain of Parent and
its Subsidiaries proved oil and gas reserves as of
December 31, 2004 as prepared by Netherland,
Sewell & Associates, Inc. ( the Parent Reserve
Report). The factual, non-interpretive data on which the
Parent Reserve Report was based for purposes of estimating the
oil and gas reserves set forth in the Parent Reserve Report was
accurate in all material respects.
(b) All operated producing oil and gas wells included in
the Parent Reserve Report have been operated and produced and,
to the knowledge of Parent, drilled, in accordance in all
material respects with generally accepted oil and gas field
practices and in compliance in all material respects with
applicable oil and gas leases and applicable Law.
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(c) All material proceeds from the sale of Hydrocarbons
produced from Parent Oil and Gas Properties are being received
by Parent and its Subsidiaries in a timely manner and are not
being held in suspense for any reason (except in the ordinary
course of business).
(d) Neither Parent nor any of its Subsidiaries has received
any material advance, take-or-pay or other similar payments that
entitle purchasers of production to receive deliveries of
Hydrocarbons without paying therefor, and, on a net,
company-wide basis, Parent is neither underproduced nor
overproduced, in either case, to any material extent, under gas
balancing or similar arrangements.
(e) 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 Report as attributable
to interests owned by Parent and its Subsidiaries and free and
clear of all Liens, except for (i) Permitted Liens and
(ii) Liens associated with obligations reflected in the
Parent Reserve Report. The oil and gas leases and other
agreements that provide Parent and its Subsidiaries with
operating rights in the oil and gas properties reflected in the
Parent Reserve Reports are legal, valid and binding and in full
force and effect, and the rentals, royalties and other payments
due thereunder have been properly and timely paid and there is
no existing default (or event that, with notice or lapse of time
or both, would become a default) under any of such oil and gas
leases or other agreements, except, in each case, as
individually or in the aggregate has not had, and would not be
reasonably likely to have or result in, a Material Adverse
Effect on Parent.
(f) No claim, notice or order from any Governmental Entity
or other Person has been received by Parent or any of its
Subsidiaries due to Hydrocarbon production in excess of
allowables or similar violations that could result in
curtailment of production after the Closing Date from any unit
or oil and gas properties of Parent or any of its Subsidiaries,
except any such violations which individually or in the
aggregate has not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on Parent.
Section 4.22 Investment
Company. Neither Parent nor any of its Subsidiaries,
including Purchaser, is an investment company, a
company controlled by an investment
company, or an investment adviser within the
meaning of the Investment Company Act, or the Advisers Act.
Section 4.23 Interim
Operations of Purchaser. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated by this
Agreement and has engaged in no business other than in
connection with entering into this Agreement and engaging in the
transactions contemplated by this Agreement.
Section 4.24 Required
Vote. The affirmative vote of the holders of a majority of
votes cast at a meeting at which a majority of the outstanding
shares of Parent Common Stock and Parent Preferred Stock are
present and voting (the Required Parent Vote) is the
only vote of the holders of any class or series of the capital
stock of Parent necessary to authorize the issuance of Parent
Common Stock pursuant to this Agreement under Nasdaq Marketplace
Rule 4350 (i)(1)(c) (the Parent Proposal).
Section 4.25 Recommendation
of Parent Board of Directors; Opinion of Financial Advisor.
(a) The Parent Board, at a meeting duly called and held,
duly adopted resolutions (i) determining that this
Agreement, the transactions contemplated hereby and the Parent
Proposal are fair to, and in the best interests of, the
stockholders of Parent, (ii) approving this Agreement, the
transactions contemplated hereby and the Parent Proposal,
(iii) resolving to recommend approval and adoption of the
Parent Proposal to the stockholders of Parent and
(iv) directing that the Parent Proposal be submitted to
Parents stockholders for consideration in accordance with
this Agreement, which resolutions, as of the date of this
Agreement, have not been subsequently rescinded, modified or
withdrawn in any way.
(b) Parent has received an opinion of Sanders Morris Harris
Inc. (Sanders Morris) to the effect that, as of the
date of this Agreement, the Merger Consideration to be paid by
Parent in the Merger is fair, from a financial point of view, to
Parent, a signed copy of which opinion has been, or will
promptly be, delivered to the Company. Parent has received the
approval of Sanders Morris to permit the inclusion
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of a copy of its written opinion in its entirety in the Proxy
Statement, subject to Sanders Morris review of the Proxy
Statement.
Section 4.26 Brokers.
Other than the fee paid to Sanders Morris for the work done in
rendering the opinion set forth in
Section 4.26(b) above, No broker, finder or investment
banker is entitled to any brokerage, finders or other fee
or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf
of Parent or any of its Subsidiaries, that is or will be payable
by Parent or any of its Subsidiaries. Parent is solely
responsible for the fees and expenses of Sanders Morris.
Section 4.27 Tax
Matters. Neither Parent nor, to the knowledge of Parent, any
of its Subsidiaries has taken or agreed to take any action that
would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code. Without
limiting the generality of the foregoing, to the knowledge of
Parent:
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(a) The Merger will be carried out strictly in accordance
with this Agreement, and there are no other written or oral
agreements relating to the Merger other than those expressly
referred to in this Agreement. |
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(b) In connection with the Merger, no shares of Company
Common Stock will be acquired by Parent or a Related Person for
consideration other than shares of Parent Common Stock, except
for the Per Share Cash Consideration, payments to holders of
Dissenting Shares, if any, and any cash received in lieu of
fractional share interests in Shares of Parent Common Stock. |
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(c) The fair market value of the Aggregate Consideration
will be approximately equal to the fair market value of the
shares of Company Common Stock surrendered in the exchange. |
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(d) Other than cash paid in lieu of fractional shares of
Parent Common Stock, neither Parent nor Purchaser (nor any
Related Person) has any plan or intention to redeem or otherwise
reacquire, directly or indirectly, any shares of Parent Common
Stock to be issued in the Merger. |
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(e) Parent has no stock repurchase program and has no
current plan or intention to adopt such a plan. |
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(f) The aggregate fair market value, determined at the
Effective Time, of the Total Stock Consideration will not be
less than forty percent (40%) of the value, determined at the
Effective Time, of the shares of Company Common Stock
outstanding immediately before the Effective Time. For this
purpose, it is assumed that the fair market value of the
outstanding shares of Company Common Stock will equal the fair
market value of the Aggregate Consideration. |
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(g) Neither Parent nor any Related Person owns, nor has it
owned during the past five years, any shares of stock of the
Company. Neither Parent nor any Related Person has caused any
other Person to acquire stock of the Company on behalf of Parent
or a Related Person, and will not directly or indirectly acquire
any stock of the Company in connection with the Merger, except
as described in this Agreement. |
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(h) Parent has not, directly or indirectly, transferred any
cash or property to the Company (or any entity controlled
directly or indirectly by the Company) for less than full and
adequate consideration and has not made any loan to the Company
(or any entity controlled directly or indirectly by the Company)
in anticipation of the Merger. |
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(i) There is no intercompany indebtedness existing between
Parent and Company, or between Purchaser and Company, that was
or will be issued, acquired, or settled at a discount in
connection with the Merger. |
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(j) Parent will pay its own expenses incurred in connection
with or as part of the Merger or related transactions. Parent
has not paid and will not pay, directly or indirectly, any
expenses (including transfer taxes) incurred by any holder of
shares of Company Common Stock in connection with or as part of
the Merger or any related transactions. Parent has not agreed to
assume, nor will it |
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directly or indirectly assume, any expense or other liability,
whether fixed or contingent, of any holder of shares of Company
Common Stock. |
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(k) Any compensation paid to the holders of shares of
Company Common Stock who enter (or have entered) into
employment, consulting or noncompetitive contracts, if any, with
Parent, Purchaser, or the Surviving Corporation (a) will be
for services actually rendered or to be rendered, (b) will
be commensurate with amounts paid to third parties bargaining at
arms length for similar services, and (c) will not
represent consideration for the surrender of the shares of
Company Common Stock in the Merger. |
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(l) Purchaser is wholly and directly owned by Parent and
has been newly formed solely to consummate the Merger. Prior to
the Effective Time, Purchaser will have no assets other than
cash to satisfy capital requirements under state law and has
not, and will not, conduct any business activities or other
operations of any kind other than the issuance of its stock to
Parent or as otherwise expressly required by this Agreement. |
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(m) At the Effective Time, Purchaser will not have or issue
any warrants, options, convertible securities, or any other type
of right pursuant to which any Person could acquire any stock in
Purchaser. |
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(n) Purchaser will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held
by Company immediately prior to the Merger. For purposes of this
representation, amounts paid by Company to holders of Dissenting
Shares, amounts paid by Company to stockholders or holders of
Company Options who receive cash or other property (including
amounts used to pay cash in lieu of fractional shares), Company
assets used to pay its reorganization expenses, and all
redemptions and distributions made by Company in contemplation
or as part of the Merger will be included as assets of the
Company held immediately prior to the Merger. |
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(o) Following the Merger, the Surviving Corporation will
continue the historic business of Company or use a significant
portion of its assets in a business, within the meaning of
Treasury Regulation Section 1.368-1(d). |
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(p) Parent has no plan or intention to liquidate the
Surviving Corporation following the Merger; to merge the
Surviving Corporation with another corporation; to sell or
otherwise dispose of the stock of the Surviving Corporation; or
to cause or permit the Surviving Corporation to sell or
otherwise dispose of any of the assets of Company except for
dispositions made in the ordinary course of business or
transfers or successive transfers to one or more corporations
controlled (within the meaning of Section 368(c) of the
Code) in each case by the transferor corporation. |
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(q) Following the Merger, neither Parent nor the Surviving
Corporation has any plan or intention to cause the Surviving
Corporation to issue additional shares of Surviving Corporation
stock that would result in Parent owning stock possessing less
than eighty percent (80%) of the total combined voting power of
all classes of stock entitled to vote or less than eighty
percent (80%) of the total number of shares of all other classes
of stock of the Surviving Corporation. |
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(r) Parent is paying no consideration for the shares of the
Company Common Stock other than the Aggregate Consideration. |
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(s) Any Company liabilities assumed or paid by Parent or
Purchaser and the liabilities to which the transferred assets of
the Company are subject were incurred by the Company in the
ordinary course of its business. |
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(t) Neither Parent nor Purchaser is an investment company
within the meaning of Sections 368(a)(2)(F) of the Code. An
investment company is (1) a regulated investment company;
(2) a real estate investment trust; or (3) a
corporation (i) fifty percent (50%) or more of the value of
whose total assets are stock and securities, and
(ii) eighty percent (80%) or more of the value of |
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whose total assets are held for investment. For this purpose,
total assets shall not include cash and cash items
(including receivables) and government securities. |
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(u) Parent has substantial non-tax business purposes and
reasons for the Merger, and the terms of the Merger are the
product of arms length negotiations. |
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(v) Neither Parent nor the Surviving Corporation will take
any position on any Return, or take any other Tax reporting
position that is inconsistent with the treatment of the Merger
as a reorganization within the meaning of Section 368(a) of
the Code, unless otherwise required by a
determination (as defined in Code
Section 1313(a)(1)). |
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(w) No stock or securities of Parent will be issued to any
Company stockholder for services rendered to or for the benefit
of Parent, Purchaser, or the Company in connection with the
Merger. |
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(x) No stock or securities of Parent will be issued for any
indebtedness owed to any Company stockholder in connection with
the Merger. |
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(y) The payment of cash in lieu of fractional shares of
Parent Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares
and does not represent separately bargained for consideration.
The total cash that will be paid in the Merger to the holders of
Common Company Stock instead of issuing fractional shares of
Parent Common Stock will not exceed one percent (1%) of the
total consideration that will be paid in the Merger to the
Company stockholders in exchange for their Company Common Stock. |
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(z) No stock of Purchaser will be issued in connection with
the Merger. |
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(aa) Parent has not distributed the stock of any
corporation in a transaction satisfying the requirements of
Section 355 of the Code since April 16, 1997. The
stock of Parent has not been distributed in a transaction
satisfying the requirements of Section 355 of the Code
since April 16, 1997. |
Section 4.28 No
Other Representations or Warranties. Except for the
representations and warranties contained in this
Article IV, neither Parent, Purchaser nor any other Person
makes any other express or implied representation or warranty on
behalf of Parent, Purchaser or any of their respective
affiliates in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Interim
Operations of the Company.
The Company covenants and agrees as to itself and its
Subsidiaries that during the period from the date of this
Agreement until the Effective Time or the date, if any, on which
this Agreement is earlier terminated pursuant to
Section 7.1, except as (w) disclosed in
Section 5.1 of the Company Disclosure Letter,
(x) expressly contemplated or permitted by this Agreement,
(y) required by applicable Law, or (z) agreed to in
writing by Parent, after the date of this Agreement and prior to
the Effective Time:
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(a) the business of the Company and its Subsidiaries shall
be conducted only in the ordinary course consistent with past
practice, and the Company shall use its reasonable best efforts
to preserve intact its business organization and goodwill and
the business organization and goodwill of its Subsidiaries and
keep available the services of their current officers and
employees and preserve and maintain existing relations with
customers, suppliers, officers, employees and creditors; |
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(b) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) enter into any new line of business,
(ii) incur or commit to any capital expenditures, or any
obligations or liabilities in connection with any capital
expenditures during calendar year 2005 other than capital
expenditures and obligations or liabilities incurred or
committed to in an amount not greater in the aggregate than, and
during the same time period set forth in, and generally on the
same specific items included in the |
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Companys total capital budget for calendar year 2005
approved by the Company Board in December 2004, which has been
furnished to Parent prior to the date of this Agreement, plus
$6 million from the 2004 budget that was not spent;
provided however, with respect to any and all expenditures and
commitments made by the Company after the date of this Agreement
which are in excess of $1,000,000, the Company shall provide
Parent reasonable notice and an opportunity to give input
regarding any such expenditures. |
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(c) the Company shall not, nor shall it permit any of its
Subsidiaries to, amend its certificate of incorporation or
bylaws or similar organizational documents; |
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(d) the Company shall not, nor shall it permit any of its
Subsidiaries (other than direct or indirect wholly owned
Subsidiaries) to, declare, set aside or pay any dividend or
other distribution, whether payable in cash, stock or any other
property or right, with respect to its capital stock; |
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(e) the Company shall not, nor shall it permit any of its
Subsidiaries to (i) adjust, split, combine or reclassify
any capital stock or issue, grant, sell, transfer, pledge,
dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class or of any other such securities or
agreements of the Company or any of its Subsidiaries, other than
issuances of Stock and Company Rights pursuant to the Company
Options outstanding on the date of this Agreement except with
respect to issuances of Company stock options prior to the
Election Deadline to new employees in the ordinary course of
business and consistent with past practice, or (ii) except
as required pursuant to the terms of the Company Plans in effect
on the date of this Agreement, redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock or any
other securities or agreements of the type described in
clause (i) of this Section 5.1(e); |
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(f) except as required pursuant to the terms of the Company
Plans in effect on the date of this Agreement or except as
specifically described on Section 5.1(f) of the Company
Disclosure Letter, the Company shall not, nor shall it permit
any of its Subsidiaries to, (i) grant any increase in the
compensation or benefits payable or to become payable by the
Company or any of its Subsidiaries to any former or current
director, officer or employee of the Company or any of its
Subsidiaries, (ii) adopt, enter into, amend or otherwise
increase, or accelerate the payment or vesting of the amounts,
benefits or rights payable or accrued or to become payable or
accrued under, any Company Plan (other than entry into
employment agreements with new hires in the ordinary course of
business consistent with past practice; provided that such
employment agreement shall be terminable at will, without
penalty to the Company or any of its Subsidiaries,
(iii) grant any severance or termination pay to any
officer, director or employee of the Company or any of its
Subsidiaries except termination amounts paid to non-contract
employees related to termination of such employees
employment in Companys ordinary course of business and
consistent with Companys past practices, or
(iv) designate any more prospects under the Mission
Resources Corporation Bonus and Deferred Compensation Plan; |
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(g) the Company shall not, nor shall it permit any of its
Subsidiaries to, change its methods of accounting in effect as
of the date of this Agreement, except in accordance with changes
in GAAP as concurred to by the Companys independent
auditors; |
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(h) the Company shall not, nor shall it permit any of its
Subsidiaries to (i) acquire any Person or other business
organization, division or business by merger, consolidation,
purchase of an equity interest or assets, or by any other
manner, or (ii) other than in the ordinary course of
business consistent with past practice or pursuant to agreements
in effect on the date of this Agreement and set forth in
Section 5.1(h) of the Company Disclosure Letter, acquire
any assets; |
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(i) other than the sale or consumption of inventory and
Hydrocarbons in the ordinary course of business consistent with
past practice or the sale of any assets pursuant to agreements
in effect on the date of this Agreement and set forth in
Section 5.1(i) of the Company Disclosure Letter, the
Company shall not, nor shall it permit any of its Subsidiaries
to, sell, lease, exchange, transfer or |
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otherwise dispose of, or agree to sell, lease, exchange,
transfer or otherwise dispose of, any material Company Assets
and shall not, nor shall it permit any of its Subsidiaries to
sell, lease exchange, transfer or otherwise dispose of, or agree
to sell, lease, exchange, transfer or otherwise dispose of any
material Company Assets; |
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(j) the Company shall not, nor shall it permit any of its
Subsidiaries to, mortgage, pledge, hypothecate, grant any
security interest in, or otherwise subject to any other Lien
other than Permitted Liens, any of the Company Assets; |
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(k) except as set forth on Schedule 5.1(k) of the
Company Disclosure Letter, the Company shall not, nor shall it
permit any of its Subsidiaries to, (i) except as set forth
in clause (ii) below, and except for payment of current
accounts payable in the ordinary course of business, pay,
discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) where such
payment, discharge or satisfaction would require any payment
except for the payment, discharge or satisfaction of liabilities
or obligations in accordance with the terms of agreements in
effect on the date of this Agreement or entered into after the
date of this Agreement in the ordinary course of business
consistent with past practice and not in violation of this
Agreement, in each case to which the Company or any of its
Subsidiaries is bound and except for any payments, discharges or
settlements that do not exceed $250,000 individually or
$1,000,000 in the aggregate, or (ii) compromise, settle,
grant any waiver or release relating to any Litigation, other
than settlements or compromises of litigation where the amount
paid or to be paid does not exceed $250,000 individually or
$1,000,000 in the aggregate; |
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(l) the Company shall not, nor shall it permit any of its
Subsidiaries to, engage in any transaction with (except pursuant
to agreements in effect at the time of this Agreement and set
forth in Section 3.9(a) or 3.18 of the Company Disclosure
Letter), or enter into any agreement, arrangement, or
understanding with, directly or indirectly, any of the
Companys affiliates; provided, that for the avoidance of
doubt, for purposes of this clause (l), the term
affiliates shall not include any employees of the
Company or any of its Subsidiaries, other than the directors and
executive officers thereof; |
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(m) except as set forth in Section 5.1(m) of the
Company Disclosure Letter, the Company shall not, nor shall it
permit any of its Subsidiaries to, make or change any material
Tax election, change any method of Tax accounting, grant any
extension of time to assess any Tax or settle any Tax claim,
amend any Return in any material respect or settle or compromise
any material Tax liability; |
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(n) the Company shall not, nor shall it permit any of its
Subsidiaries to, take any action that would, or could reasonably
be expected to, result in any of its representations and
warranties set forth in this Agreement becoming untrue in a
manner that would give rise to the failure of the closing
condition set forth in Section 6.3(a); |
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(o) the Company shall not, nor shall it permit any of its
Subsidiaries to, adopt or enter into a plan of complete or
partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merger or
with respect to an inactive wholly-owned Subsidiary of the
Company) or any agreement relating to an Acquisition Proposal,
except as provided for in Section 5.3; |
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(p) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) incur or assume any long-term debt, or
except in the ordinary course of business consistent with past
practice and in no event exceeding $10,000,000 in the aggregate,
incur or assume any short-term indebtedness, (ii) modify
the terms of any indebtedness to increase the Companys
obligations with respect thereto (iii) assume, guarantee,
endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any
other Person (other than a Subsidiary of the Company), except in
the ordinary course of business consistent with past practice
and in no event exceeding $250,000 in the aggregate,
(iv) make any loans, advances or capital contributions to,
or investments in, any other Person (other than to wholly owned
Subsidiaries of the Company, or by |
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such Subsidiaries to the Company, or customary loans or advances
to employees in accordance with past practice and in no event
exceeding $250,000) in the aggregate, or (v) enter into any
material commitment or transaction, except in the ordinary
course of business consistent with past practice; |
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(q) the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into any agreement, understanding or
commitment that materially restrains, limits or impedes the
Companys or any of its Subsidiaries ability to
compete with or conduct any business or line of business,
including geographic limitations on the Companys or any of
its Subsidiaries activities (other than confidentiality
agreements and area of mutual interest agreements entered into
in the ordinary course of business); |
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(r) except in the ordinary course of business consistent
with past practice or as contemplated by this Agreement, the
Company shall not, nor shall it permit any of its Subsidiaries
to, modify or amend in any material respect, or terminate, any
material contract to which it is a party or waive in any
material respect or assign any of its material rights or claims; |
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(s) the Company shall not, nor shall it permit any of its
Subsidiaries to, fail to maintain in full force and effect the
existing insurance policies covering the Company or its
Subsidiaries or their respective properties, assets and
businesses or comparable replacement policies, except to the
extent such policies cease to be available on commercially
reasonable terms; and |
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(t) the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into an agreement, contract, commitment
or arrangement to do any of the foregoing. |
Notwithstanding anything in this Section 5.1 to the
contrary, the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into any transaction or take any other
action that would be reasonably likely to have a material
adverse impact on, or materially delay, the consummation of the
transactions contemplated by this Agreement.
Section 5.2 Interim
Operations of Parent.
Parent covenants and agrees as to itself and its Subsidiaries
that during the period from the date of this Agreement until the
Effective Time or the date, if any, on which this Agreement is
earlier terminated pursuant to Section 7.1, except as
(w) disclosed in Section 5.2 of the Parent Disclosure
Letter, (x) expressly contemplated or permitted by this
Agreement, (y) required by applicable Law, or
(z) agreed to in writing by the Company, after the date of
this Agreement and prior to the Effective Time:
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(a) the business of Parent and its Subsidiaries shall be
conducted only in the ordinary course consistent with past
practice; |
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(b) the Parent shall not, nor shall it permit any of its
Subsidiaries to, (i) enter into any new line of business,
or (ii) incur or commit to any capital expenditures, or any
obligations or liabilities in connection with any capital
expenditures during calendar year 2005 other than capital
expenditures and obligations or liabilities incurred or
committed to in an amount not greater in the aggregate than, and
during the same time period set forth in, the Parents
total capital budget for calendar year 2005 approved by the
Board of Directors of Parent in February 2005, which has been
furnished to the Company prior to the date of this Agreement,
plus $5 million; |
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(c) solely in the case of Parent and any non-wholly owned
Subsidiary of Parent, Parent shall not declare, set aside or pay
any dividend or other distribution, whether payable in cash,
stock or any other property or right, with respect to its
capital stock; provided, however, that nothing contained herein
shall prohibit Parent from paying the quarterly cash dividend on
Parent Preferred Stock; |
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(d) Parent shall not (i) adjust, split, combine or
reclassify any capital stock or issue, grant, sell, transfer,
pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class or of any other such
securities or agreements of Parent, other than |
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issuances of stock pursuant to the Parent Plans and with respect
to Parent Stock Options and warrants and convertible notes
outstanding on the date of this Agreement or issuance of stock
options to new employees consistent with Parents ordinary
course of business consistent with past practice, or
(ii) except as required pursuant to the terms of the Parent
Plans in effect on the date of this Agreement, redeem, purchase
or otherwise acquire directly or indirectly any of its capital
stock or any other securities or agreements of the type
described in clause (i) of this Section 6.1(d); |
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(e) Parent shall not, nor shall it permit any of its
Subsidiaries to, change its methods of accounting in effect as
of the date of this Agreement, except in accordance with changes
in GAAP as concurred to by Parents independent auditors; |
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(f) Parent shall not, nor shall it permit any of its
Subsidiaries to (i) acquire any Person or other business
organization, division or business by merger, consolidation,
purchase of an equity interest or assets, or by any other
manner, or (ii) other than in the ordinary course of
business consistent with past practice or pursuant to agreements
in effect on the date of this Agreement and set forth in
Section 4.12 of the Parent Disclosure Letter, acquire any
assets, provided however, to the extent the total value of such
acquisitions subsequent to the date of this Agreement during
calendar year 2005 do not exceed $40 million, such
restrictions shall not apply; |
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(g) other than the sale or consumption of inventory and
Hydrocarbons in the ordinary course of business consistent with
past practice or the sale of any assets pursuant to agreements
in effect on the date of this Agreement and set forth in
Section 4.12 of the Parent Disclosure Letter, Parent shall
not, nor shall it permit any of its Subsidiaries to, sell,
lease, exchange, transfer or otherwise dispose of, or agree to
sell, lease, exchange, transfer or otherwise dispose of, any
material Parent Assets; provided Parent shall be permitted to
take any such actions provided the total value of all assets
subject to the activities set forth herein shall not exceed
$40 million subsequent to the date of this Agreement during
calendar year 2005; |
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(h) Parent shall not, nor shall it permit any of its
Subsidiaries to, take any action that would, or could reasonably
be expected to, result in any of its representations and
warranties set forth in this Agreement becoming untrue in a
manner that would give rise to the failure of the closing
condition set forth in Section 6.2(a); |
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(i) solely in the case of Parent, Parent shall not amend
its certificate of incorporation or bylaws or similar
organizational documents in a manner that adversely affects the
terms of the Parent Common Stock, provided, Parent shall be
permitted to amend its Certificate of Incorporation to increase
the number of its authorized shares of Company Common Stock; |
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(j) solely in the case of Parent, Parent shall not adopt or
enter into a plan of complete or partial liquidation or
dissolution; |
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(k) Parent shall not, nor shall it permit any of its
Subsidiaries to, enter into any new line of business, except as
may reasonably relate to Parents existing
businesses; and |
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(l) Parent shall not, nor shall it permit any of its
Subsidiaries to, enter into an agreement, contract, commitment
or arrangement to do any of the foregoing. |
Notwithstanding anything in this Section 5.2 to the
contrary, Parent shall not, nor shall it permit any of its
Subsidiaries to, enter into any transaction or take any other
action (including any amendment of Parents certificate of
incorporation) that would be reasonably likely to have a
material adverse impact on, or materially delay, the
consummation of the transactions contemplated by this Agreement.
Section 5.3 Acquisition
Proposals.
(a) The Company agrees that, except as expressly
contemplated by this Agreement, neither it nor any of its
Subsidiaries shall, and the Company shall, and shall cause its
Subsidiaries to, cause their respective officers, directors,
investment bankers, attorneys, accountants, financial advisors,
agents and other representatives not to (i) directly or
indirectly initiate, solicit, knowingly encourage or facilitate
A-46
(including by way of furnishing information) any inquiries or
the making or submission of any proposal that constitutes, or
could reasonably be expected to lead to, an Acquisition
Proposal, (ii) participate or engage in discussions or
negotiations with, or disclose any non-public information or
data relating to the Company or any of its Subsidiaries or
afford access to the properties, books or records of the Company
or any of its Subsidiaries to any Person that has made an
Acquisition Proposal or to any Person in contemplation of an
Acquisition Proposal, or (iii) accept an Acquisition
Proposal or enter into any agreement, including any letter of
intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar
agreement, arrangement or understanding, (A) constituting
or related to, or that is intended to or could reasonably be
expected to lead to, any Acquisition Proposal (other than an
Acceptable Confidentiality Agreement permitted pursuant to this
Section 5.3) or (B) requiring, intended to cause, or
which could reasonably be expected to cause the Company to
abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement (each an
Acquisition Agreement). Any violation of the
foregoing restrictions by any of the Companys Subsidiaries
or by any representatives of the Company or any of its
Subsidiaries, whether or not such representative is so
authorized and whether or not such representative is purporting
to act on behalf of the Company or any of its Subsidiaries or
otherwise, shall be deemed to be a breach of this Agreement by
the Company. Notwithstanding anything to the contrary in this
Agreement, the Company and the Company Board may take any
actions described in clause (ii) of this
Section 5.3(a) with respect to a third party if at any time
prior to obtaining the Company Required Vote (x) the
Company receives a written Acquisition Proposal from such third
party (and such Acquisition Proposal was not during such time
period initiated, solicited, knowingly encouraged or facilitated
by the Company or any of its Subsidiaries or any of their
respective officers, directors, investment bankers, attorneys,
accountants, financial advisors, agents or other
representatives) and (y) such proposal constitutes, or the
Company Board determines in good faith (after consultation with
its financial advisors and outside legal counsel) that such
proposal could reasonably be expected to lead to, a Superior
Proposal, provided that the Company shall not deliver any
information to such third party without entering into an
Acceptable Confidentiality Agreement. Nothing contained in this
Section 5.3 shall prohibit the Company or the Company Board
from taking and disclosing to the Companys stockholders a
position with respect to an Acquisition Proposal pursuant to
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act
or from making any similar disclosure, in either case to the
extent required by applicable Law.
(b) Neither (i) the Company Board nor any committee
thereof shall directly or indirectly (A) withdraw (or amend
or modify in a manner adverse to Parent or Purchaser), or
publicly propose to withdraw (or amend or modify in a manner
adverse to Parent or Purchaser), the approval, recommendation or
declaration of advisability by the Company Board or any such
committee thereof of this Agreement, the Merger or the other
transactions contemplated by this Agreement or
(B) recommend, adopt or approve, or propose publicly to
recommend, adopt or approve, any Acquisition Proposal (any
action described in this clause (i) being referred to as a
Company Adverse Recommendation Change) nor
(ii) shall the Company or any of its Subsidiaries execute
or enter into an Acquisition Agreement. Notwithstanding the
foregoing, at any time prior to obtaining the Company Required
Vote, and subject to the Companys compliance at all times
with the provisions of this Section 5.3 and
Section 5.6, in response to a Superior Proposal, the
Company Board may make a Company Adverse Recommendation Change
and enter into an Acquisition Agreement; provided, however, that
the Company shall not be entitled to exercise its right to make
a Company Adverse Recommendation Change and enter into an
Acquisition Agreement in response to a Superior Proposal
(X) until four Business Days after the Company provides
written notice to Parent (a Company Notice) advising
Parent that the Company Board or a committee thereof has
received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal, and identifying the Person
or group making such Superior Proposal and (Y) if during
such four Business Day period, Parent proposes any alternative
transaction (including any modifications to the terms of this
Agreement), unless the Company Board determines in good faith
(after consultation with its financial advisors and outside
legal counsel, and taking into account all financial, legal, and
regulatory terms and conditions of such alternative transaction
proposal) that such alternative transaction proposal is
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not at least as favorable to the Company and its stockholders
from a financial point of view as the Superior Proposal (it
being understood that any change in the financial or other
material terms of a Superior Proposal shall require a new
Company Notice and a new four Business Day period under this
Section 5.3(b)).
(c) Neither the Parent Board nor any committee thereof
shall directly or indirectly withdraw (or amend or modify in a
manner adverse to the Company), or publicly propose to withdraw
(or amend or modify in a manner adverse to the Company), the
approval, recommendation or declaration of advisability by the
Parent Board or any such committee thereof of this Agreement,
the Merger, the other transactions contemplated by this
Agreement or the Parent Proposal.
(d) The Parties agree that in addition to the obligations
of the Company and Parent set forth in
paragraphs (a) through (c) of this
Section 5.3, as promptly as practicable after receipt
thereof, the Company shall advise Parent in writing of any
request for information or any Acquisition Proposal received
from any Person, or any inquiry, discussions or negotiations
with respect to any Acquisition Proposal, and the terms and
conditions of such request, Acquisition Proposal, inquiry,
discussions or negotiations, and the Company shall promptly
provide to Parent copies of any written materials received by
the Company in connection with any of the foregoing, and the
identity of the Person or group making any such request,
Acquisition Proposal or inquiry or with whom any discussions or
negotiations are taking place. The Company agrees that it shall
simultaneously provide to Parent any non-public information
concerning itself or its Subsidiaries provided to any other
Person or group in connection with any Acquisition Proposal
which was not previously provided to the Parent. The Company
shall keep Parent fully informed of the status of any
Acquisition Proposals (including the identity of the parties and
price involved and any changes to any material terms and
conditions thereof). The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or
standstill agreement to which it is a party.
(e) For purposes of this Agreement Acquisition
Proposal shall mean any bona fide proposal, whether or not
in writing, for the (i) direct or indirect acquisition or
purchase of a business or assets that constitute 10% or more of
the net revenues, net income or the assets (based on the fair
market value thereof) of the Company and its Subsidiaries, taken
as a whole, (ii) direct or indirect acquisition or purchase
of 10% or more of any class of equity securities or capital
stock of the Company or any of its Subsidiaries whose business
constitutes 10% or more of the net revenues, net income or
assets of the Company and its Subsidiaries, taken as a whole, or
(iii) merger, consolidation, restructuring, transfer of
assets or other business combination, sale of shares of capital
stock, tender offer, exchange offer, recapitalization, stock
repurchase program or other similar transaction that if
consummated would result in any Person or Persons beneficially
owning 10% or more of any class of equity securities of the
Company or any of its Subsidiaries whose business constitutes
10% or more of the net revenues, net income or assets of the
Company and its Subsidiaries, taken as a whole, other than the
transactions contemplated by this Agreement. The term
Superior Proposal shall mean any bona fide written
Acquisition Proposal made by a third party to acquire, directly
or indirectly, pursuant to a tender offer, exchange offer,
merger, share exchange, consolidation or other business
combination, (A) 50% or more of the assets of the Company
and its Subsidiaries, taken as a whole, or (B) 50% or more
of the equity securities of the Company, in each case on terms
which a majority of the board of directors of the Company
determines in good faith (after consultation with its financial
advisors and outside legal counsel, and taking into account all
financial, legal and regulatory terms and conditions of the
Acquisition Proposal and this Agreement, including any
alternative transaction (including any modifications to the
terms of this Agreement) proposed by any other party in response
to such Superior Proposal, including any conditions to and
expected timing of consummation, and any risks of
non-consummation, of such Acquisition Proposal) to be superior
to such party and its stockholders (in their capacity as
stockholders) from a financial point of view as compared to the
transactions contemplated hereby and to any alternative
transaction (including any modifications to the terms of this
Agreement) proposed by the Parent pursuant to this
Section 5.3.
(f) Immediately after the execution and delivery of this
Agreement, the Company will, and will cause its Subsidiaries and
their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, cease and
terminate any existing activities, discussions or negotiations
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with any parties conducted heretofore with respect to any
possible Acquisition Proposal. The Company agrees that it shall
(i) take the necessary steps to promptly inform its
officers, directors, investments bankers, attorneys,
accountants, financial advisors, agents or other representatives
involved in the transactions contemplated by this Agreement of
the obligations undertaken in this Section 5.3 and
(ii) request each Person who has heretofore executed a
confidentiality agreement in connection with such Persons
consideration of acquiring the Company or any portion thereof to
return or destroy (which destruction shall be certified in
writing by an executive officer of such Person) all confidential
information heretofore furnished to such Person by or on its
behalf.
Section 5.4 Access
to Information and Properties.
(a) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, each of the Company and
Parent shall, and shall cause each of its Subsidiaries to,
afford to the authorized representatives of the other party,
including officers, employees, accountants, counsel and other
representatives of the other party, reasonable access, during
normal business hours during the period prior to the Effective
Time, to all of its properties, contracts, books, commitments,
records, data and books and personnel and, during such period,
it shall, and shall cause its Subsidiaries to, make available to
the other parties all information concerning its business,
properties and personnel as the other parties may reasonably
request. No party nor any of its Subsidiaries shall be required
to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of
its customers, jeopardize any attorney-client privilege or
contravene any Law or binding agreement entered into prior to
the date of this Agreement. The Company and Parent will make
appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding
sentence apply.
(b) From the date of this Agreement until the Effective
Time, each party and its authorized representatives, including
engineers, advisors and consultants, lenders and financing
sources, upon reasonable notice and in a manner that does not
unreasonably interfere with the business of the applicable party
or any of its Subsidiaries, may enter into and upon all or any
portion of the real property owned or leased by the other party
in order to investigate and assess, as such party reasonably
deems necessary or appropriate, the environmental condition of
such real property and the other assets or the businesses of
such other party or any of its Subsidiaries (an
Investigation). An Investigation may include a
Phase I environmental site assessment, or similar
investigation; provided, however, that an Investigation shall
not include any sampling or testing of soil and/or ground or
surface waters at, on or under any real property. Each party
hereto shall, and shall cause each of its Subsidiaries to,
cooperate with the other parties in conducting any such
Investigation, facilitating further testing or evaluation as may
be reasonably prudent with respect to matters identified in the
investigation, allow any other party reasonable access to such
partys and its Subsidiaries respective businesses,
real property and other assets, together with full permission to
conduct any such Investigation, and provide to any other party
all plans, soil or surface or ground water tests or reports, any
environmental investigation results, reports or assessments
previously or contemporaneously conducted or prepared by or on
behalf of such party, its Subsidiaries, or any of their
predecessors that are in the possession of such party or any of
its Subsidiaries, and all information relating to environmental
matters regarding such partys and its Subsidiaries
respective businesses, real property and other assets that are
in the possession of such party or any of its Subsidiaries.
(c) Parent and the Company will hold any information
contemplated under Sections 5.4(a) and/or (b) above in
accordance with the provisions of the confidentiality agreements
between the Company and Parent, dated as of March 9, 2005
and March 21, 2005, respectively (together, the
Confidentiality Agreement).
(d) No investigation by Parent or the Company or their
respective representatives shall affect the representations,
warranties, covenants or agreements of the other set forth in
this Agreement.
Section 5.5 Further
Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions herein
provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all
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things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by
this Agreement, including using reasonable best efforts to
satisfy the conditions precedent to the obligations of any of
the parties hereto, to obtain all necessary authorizations,
consents and approvals, and to effect all necessary
registrations and filings, and to assist Parent and Purchaser in
obtaining any financing it may arrange in connection with the
merger. Each of the parties hereto will furnish to the other
parties such necessary information and reasonable assistance as
such other parties may reasonably request in connection with the
foregoing and will provide the other parties with copies of all
filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental
Entity in connection with this Agreement and the transactions
contemplated hereby.
(b) Each of Parent, Purchaser and the Company shall use
their respective reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the
transactions contemplated hereby under any applicable Law.
Without limiting the foregoing, the Company and Parent shall, as
soon as practicable, file any required Notification and Report
Forms under the HSR Act with the Federal Trade Commission (the
FTC) and the Antitrust Division of the Department of
Justice (the Antitrust Division) and shall use
reasonable best efforts to respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division
for additional information or documentation.
(c) Each party shall (i) take all actions necessary to
ensure that no state takeover Law or similar Law is or becomes
applicable to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement and (ii) if any
state takeover Law or similar Law becomes applicable to this
Agreement, the Merger or any of the other transactions
contemplated by this Agreement, take all action necessary to
ensure that the Merger and the other transactions contemplated
by this Agreement may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Law on this Agreement, the Merger
and the other transactions contemplated by this Agreement;
provided, however, that notwithstanding the foregoing, Parent
shall not be required to take any action to exempt any
stockholder of the Company from any such Law.
(d) In case at any time after the Effective Time any
further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors
of the Surviving Corporation shall take or cause to be taken all
such necessary action.
(e) Each of the parties hereto shall use reasonable best
efforts to prevent the entry of, and to cause to be discharged
or vacated, any order or injunction of a Governmental Entity
precluding, restraining, enjoining or prohibiting consummation
of the Merger.
(f) Notwithstanding the foregoing provisions of this
Section 5.5, neither Parent nor Purchaser shall be required
to accept, as a condition to obtaining any required approval or
resolving any objection of any Governmental Entity, any
requirement to divest or hold separate or in trust (or the
imposition of any other condition or restriction with respect
to) any of the respective businesses of Parent, Purchaser, the
Company or any of their respective Subsidiaries, the Company
Assets, the Parent Assets, the Company Real Property or the
Parent Real Property.
Section 5.6 Proxy
Statement; Form S-4; Stockholders Meeting.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent shall cooperate in preparing
and each shall cause to be filed with the SEC, in connection
with the Merger, a joint proxy statement in preliminary form
(together with any amendments or supplements thereto, the
Proxy Statement) and Parent shall promptly prepare
and file with the SEC the S-4, in which the Proxy Statement will
be included as a prospectus, and the parties shall file, if
necessary, any other statement or schedule relating to this
Agreement and the transactions contemplated hereby. Each of the
Company, Parent and Purchaser shall use their respective
reasonable best efforts to furnish the information required
respectively concerning them and to be included by the SEC in
the Proxy Statement, the S-4 and any such statement or schedule.
Each of the Company and Parent shall use its reasonable best
efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing, and each of
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the Company and Parent shall as promptly as practicable
thereafter mail the Proxy Statement to its stockholders. Parent
shall also use reasonable best efforts to obtain all necessary
state securities Law or Blue Sky permits and
approvals required to carry out the transactions contemplated by
this Agreement.
(b) If at any time prior to the Effective Time, any event
or circumstance relating to the Company or Parent and Purchaser
or any of their respective affiliates, or its or their
respective officers or directors, should be discovered by the
Company, Parent or Purchaser that should be set forth in an
amendment to the S-4 or a supplement to the Proxy Statement, the
Company, Parent or Purchaser shall promptly inform the other
parties hereto thereof in writing. All documents that the
Company or Parent is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply
as to form in all material respects with applicable requirements
of the Securities Act and the Exchange Act. The parties shall
notify each other promptly of the time when the S-4 has become
effective, of the issuance of any stop order or suspension of
the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any
jurisdiction, or of the receipt of any comments from the SEC or
the staff of the SEC and of any request by the SEC or the staff
of the SEC for amendments or supplements to the Proxy Statement
or the S-4 or for additional information and shall supply each
other with copies of (i) all correspondence between it or
any of its Representatives, on the one hand, and the SEC or the
staff of the SEC, on the other hand, with respect to the Proxy
Statement, the S-4 or the Merger and (ii) all orders of the
SEC relating to the S-4.
(c) The Company, acting through the Company Board, shall,
in accordance with its certificate of incorporation and bylaws
and with applicable Law, promptly and duly call, give notice of,
convene and hold, as soon as practicable following the date upon
which the S-4 becomes effective for the purposes of voting upon
the adoption of this Agreement and the approval of the
consummation of the transactions contemplated by this Agreement,
including the Merger, a special meeting of its stockholders for
the sole purpose of considering and taking action upon this
Agreement (such meeting, including any postponement or
adjournment thereof, the Company Special Meeting),
and shall use its reasonable best efforts to hold the Company
Special Meeting as soon a practical but no later than
45 days after such date. Except as otherwise provided in
Section 5.3(b), the Company, acting through the Company
Board, shall (i) recommend adoption of this Agreement and
include in the Proxy Statement such recommendation and
(ii) use its reasonable best efforts to solicit and obtain
such adoption. Notwithstanding any Company Adverse
Recommendation Change or the commencement, public proposal,
public disclosure or communication to the Company of any
Acquisition Proposal with respect to the Company or any of its
Subsidiaries, or any other fact or circumstance, unless this
Agreement has been terminated by the Company in accordance with
Section 7.1(d) below, this Agreement shall be submitted to
the stockholders of the Company at the Company Special Meeting
for the purpose of adopting this Agreement, with such
disclosures as shall be required by applicable Law. At any such
Company Special Meeting following any such withdrawal, amendment
or modification of the Company Boards recommendation of
this Agreement, the Company may submit this Agreement to its
stockholders without a recommendation or with a negative
recommendation (although the approval of this Agreement by the
Company Board may not be rescinded or amended), in which event
the Company Board may communicate the basis for its lack of a
recommendation or negative recommendation to its stockholders in
the Proxy Statement or an appropriate amendment or supplement
thereto.
(d) Parent, acting through the Parent Board, shall, in
accordance with its certificate of incorporation and bylaws and
with applicable Law, promptly and duly call, give notice of,
convene and hold, as soon as practicable following the date upon
which the S-4 becomes effective for the purposes of voting upon
the Parent Proposal a special meeting of its stockholders (such
meeting, including any postponements or adjournments thereof,
the Parent Stockholders Meeting), and shall
use its reasonable best efforts to hold the Parent
Stockholders Meeting as soon as practical but no later
than 45 days after such date. Parent, acting through the
Parent Board, shall (i) recommend approval of the Parent
Proposal and include in the Proxy Statement such recommendation
and (ii) use its reasonable best efforts to solicit and
obtain such approval.
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Section 5.7 Notification
of Certain Matters.
(a) The Company shall give prompt notice to Parent of any
fact, event or circumstance as to which the Company obtains
knowledge that would be reasonably likely to result in a failure
of a condition set forth in Section 6.3(a) or 6.3(b).
Parent and Purchaser shall give prompt notice to the Company of
any fact, event or circumstance as to which Parent or Purchaser
obtains knowledge that would be reasonably likely to result in a
failure of a condition set forth in Section 6.2(a) or
6.2(b).
(b) Immediately prior to Closing, the Company shall provide
Parent with a complete list of the number of employee
terminations (other than voluntary resignations and terminations
for cause) for the 90-day period prior to Closing, by facility
or geographic site of employment.
Section 5.8 Directors
and Officers Insurance and Indemnification.
(a) After the Effective Time, Parent shall
(i) indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company
and any of its Subsidiaries in such capacities
(Indemnified Parties) to the fullest extent that the
Company or any of its Subsidiaries would have been required to
do so in accordance with the provisions of each indemnification
or similar agreement between the Company or any of its
Subsidiaries and any Indemnified Party, in each case against any
losses, damages, expenses or liabilities resulting from any
claim, liability, loss, damage, cost or expense, asserted
against, or incurred by, an Indemnified Party that is based on
the fact that such Indemnified Party is or was a director,
officer, employee or agent of the Company or any of its
Subsidiaries and arising out of actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time
and (ii) take all necessary actions to ensure that
Parents directors and officers liability
insurance continues to cover each Company Director and each
officer and director of the Company, in each case so long as
they remain employed or retained by Parent or any affiliate of
Parent (including the Surviving Corporation) as an officer or
director.
(b) Prior to the Closing, the Company shall purchase, and
after the Effective Time the Surviving Corporation shall
maintain, directors and officers liability insurance
covering, for a period of six years after the Effective Time,
the directors and officers of the Company and its Subsidiaries
who are currently covered by the Companys existing
directors and officers liability insurance with
respect to claims arising from facts or events that occurred
before the Effective Time, on terms and conditions substantially
similar to such directors and officers than those in effect on
the date of this Agreement; provided, however, that the
aggregate annual premiums for such insurance at any time during
such period shall not exceed 250% of the per annum rate of
premium currently paid by the Company and its Subsidiaries for
such insurance on the date of this Agreement.
Section 5.9 Publicity.
Neither the Company, Parent, Purchaser nor any of their
respective affiliates shall issue or cause the publication of
any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated by
this Agreement without the prior consultation of the other
party, except as may be required by Law or by any listing
agreement with a Nasdaq if all reasonable best efforts have been
made to consult with the other party. In addition, the Company
agrees to consult with Parent before issuing any press release
or other announcement with respect to its business, except as
may be required by Law or by any listing agreement with Nasdaq
if all reasonable best efforts have been made to consult with
Parent.
Section 5.10 Stock
Exchange Listing. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued
in the Merger to be approved for listing on Nasdaq subject to
official notice of issuance, as of the Effective Time.
Section 5.11 Employee
Benefits.
(a) Nothing in this Agreement shall be construed as
requiring Parent or any of its affiliates to employ any employee
of the Company for any length of time following the Closing
Date. Except as specifically provided in this Agreement, nothing
in this Agreement, express or implied, shall be construed to
prevent Parent or its affiliates from (i) terminating, or
modifying the terms of employment of, any Company
A-52
employee following the Closing Date or (ii) terminating or
modifying to any extent any Company Plan or any other employee
benefit plan, program, agreement or arrangement that Parent or
its affiliates may establish or maintain.
(b) Schedule 5.11 (b) of the Company Disclosure
Letter sets forth, with respect to each senior officer of the
Company, the cash severance payments that would be due to such
senior officer under each senior officers employment
agreement upon a Change of Control (as defined therein). At the
Effective Time, the Surviving Company shall pay to each of the
senior officers, pursuant to the employment agreements of such
officers, the amount of severance set forth on
Schedule 5.11(b) and a bonus and vacation amount calculated
by multiplying (i) the number of days between
January 1, 2005 to the Effective Date, by (ii) the
applicable daily rate of bonus and vacation set forth opposite
each senior officers name on Schedule 5.11(b)
provided, however, in no event will the bonus amount be less
than one-half of such officers then current annual salary.
At the Effective Time, (i) each of the employment
agreements of the senior officers will be terminated and any
nonsolicitation provisions therein will also be terminated and
will not survive the Effective Time, (ii) all of the
payments, benefits and other actions and obligations of the
Company to be taken or made under the employment agreements in
the event of a Change of Control (as defined therein) and the
termination of the senior officer without Cause (as defined
therein) shall be taken or made by the Company, the Parent or
the Surviving Corporation as appropriate, (iii) as provided
in the employment agreements, all options held by the senior
officers will be vested in full at the Effective Time and will
be exercisable as provided in Section 5(f)(i) of the
employment agreements and (iv) Parent and Surviving
Corporation shall reimburse each senior officer for any out of
pocket expenses incurred to continue coverage (for himself and
his family) under the group health plan for the applicable
period under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended (COBRA), but only if the senior
officer elects such COBRA continuation in accordance with the
time limits and in the applicable COBRA regulations.
(c) The Company shall use its best efforts to cause the
senior officers of the Company set forth on
Schedule 5.11(b) of the Company Disclosure Letter (other
than Robert L. Cavnar) to agree to continue working for the
Surviving Corporation for up to sixty (60) days after the
Effective Time. During the portion of such sixty (60) day
period which Parent requests a senior officer to continue
working for the Surviving Corporation and such senior officer
works for the Surviving Corporation, such senior officer shall
be entitled to receive (i) the applicable portion of his
2005 base salary, (ii) a bonus and vacation payment
calculated based upon the number of days he is employed after
the Effective Time divided by 365 then multiplied by the
applicable daily bonus and vacation amount as set forth on
Schedule 5.11(b), and (iii) employee benefits
consistent with the Surviving Corporations existing
benefit plans. Parent shall determine and notify each of such
senior officer of the date of termination of such senior
officers employment with Surviving Corporation, which
shall not extend beyond sixty (60) days after the Effective
Time unless mutually agreed between Parent and such senior
officer, by giving such senior officers at least two
(2) weeks prior notice of such termination.
(d) The Company shall cause the Companys Severance
Benefit Plan (Non-Officer Employees) and Severance Benefit Plan
(Non-Contract Officers) (collectively, the Severance
Benefit Plans) to be modified so that if Parent offers a
Company employee (other than those senior officers set forth on
Section 5.11(b) of the Company Disclosure Letter)
employment with Surviving Corporation, Parent or their
affiliates in a comparable position located in Houston, Texas,
with comparable pay and Surviving Corporations or
Parents normal benefits, such person will not be entitled
to receive any severance pay pursuant to the Severance Benefit
Plans unless he or she is terminated without cause by Parent,
Surviving Corporation or their affiliates within one
(1) year of the Effective Date, and in such event, his or
her severance pay pursuant to the applicable Severance Benefit
Plan shall be due upon termination. In the event a Company
employee is not offered employment with Parent, the Surviving
Corporation or their affiliates in a comparable position located
in Houston, Texas, with comparable pay and Surviving
Corporations or Parents normal benefits, such person
will be entitled to severance pay in accordance with the terms
of the applicable Severance Benefit Plan, as modified pursuant
to the above. The Severance Benefit Plan shall not be terminated
until 13 months after the Effective Time.
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(e) The parties hereby agree and acknowledge that
Section 5.11(e) of the Company Disclosure Letter sets
forth, with respect to each noncontract officer of the
Company, the cash severance payments and vacation payments that
would be due to such officer under the Companys various
agreements or programs the Company has with each officer and/or
under the Companys Severance Benefit Plan (Non-Contract
Officers).
(f) The Companys Retention and Incentive Plan
(Non-Officer Employees) shall remain in full force and effect
past the Effective Time until all payments thereunder have been
satisfied. Prior to the Effective Time, the Company, or the
appropriate committee of the Company Board, will make the
decisions necessary to allocate the payments under this plan
subject to the terms of the plan and the limits set forth
therein on aggregate payments thereunder.
(g) To the extent allowed by law and the terms of
Parents plan, for purposes of determining years of
service, eligibility, vesting and benefit levels with Parent,
the Surviving Corporation or its affiliates with regard to
employee benefits offered by Parent, the Surviving Corporation
or its affiliates, years of service in which a Company employee
has been employed by the Company or its predecessors shall be
counted. To the extent allowed by law and the terms of
Parents plans, following the Effective Time, for purposes
of each Parent plan in which any continuing employee or his or
her eligible dependents is eligible to participate after the
Effective Time, Parent shall, or shall cause its Subsidiaries
to, (i) waive any pre-existing condition, exclusion,
actively-at-work requirement or waiting period to the extent
such condition, exclusion, requirement or waiting period was
satisfied or waived under the comparable Company plan as of the
Effective Time (or, if later, any applicable plan transaction
date) and (ii) provide full credit for any co-payments,
deductibles or similar payments made or incurred prior to the
Effective Time for the plan year in which the Effective Time (or
such transition date) occurs. In order to implement the intent
of Section 5.11(g), Parent all reasonable actions to amend
the Parents plans.
At the Effective Time, each Company Option shall be fully vested
in accordance with the Company Plans. If the holder of the
Company Option ceases to be a director, officer, or employee, or
consultant of the Surviving Corporation or any its affiliates
(including Parent and its Subsidiaries), such option shall
remain exercisable in accordance with the terms of the Company
Plans and employment agreements, if applicable. After the
Effective Time, the Company Plans shall not be amended or
modified in a manner that would result in the termination of or
have an adverse effect on options previously granted thereunder
or in a manner that would result in any Company Option becoming
deferred compensation under Section 409A of the Code
including, but not limited to, any amendment or modification
that would result in a modification after October 3, 2004
making the grandfather provisions provided in guidance issued
under Section 409A of the Code inapplicable to the Company
Options.
Section 5.12 Appointment
of Directors. Parent shall take all necessary corporate
action to increase the size of the Board of Directors of Parent
by two members and to appoint the Company Designated Directors
immediately following the Effective Time to fill the vacancies
on the Board of Directors of Parent created by such increase.
Parent, through the Parent Board and subject to the Parent
Boards fiduciary duties to the stockholders of Parent,
shall take all necessary action to recommend that the Company
Designated Directors be elected to the Parent Board in the proxy
statement relating to the first annual meeting of the
stockholders of Parent following the Closing.
Section 5.13 Rights
Agreement. The Company Board shall take such action as is
necessary to render the Company Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement.
Section 5.14 Certain
Tax Matters.
(a) Parent and the Company shall each use its reasonable
best efforts to cause the Merger to qualify as a
reorganization within the meaning of
Section 368(a) of the Code, and before or after the
Effective Time, neither Parent nor the Company shall knowingly
take any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken which action or
failure to act could cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code, unless
otherwise required
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to properly comply with Laws or generally accepted accounting
principles applicable to Parent or the Company.
(b) Parent and the Company shall comply with the record
keeping and information reporting requirements set forth in
Treasury Regulation Section 1.368-3.
(c) Parent and the Company shall each use its reasonable
best efforts to obtain the Tax opinions set forth in
Sections 6.2(d) and 6.3(d). This Agreement is intended to
constitute a plan of reorganization within the
meaning of Treasury Regulation Section 1.368-2(g).
(d) Officers of Parent, Purchaser and the Company shall
execute and deliver to Porter & Hedges, L.L.P., Tax
counsel for the Company, and Thompson & Knight, LLP,
Tax counsel for Parent, certificates substantially in the form
agreed to by the parties and such law firms at such time or
times as may reasonably be requested by such law firms,
including prior to the time the S-4 is declared effective by the
SEC and the Effective Time, in connection with such Tax
counsels respective delivery of opinions pursuant to
Sections 6.2(d) and 6.3(d). Each of Parent, Purchaser and
the Company shall use its reasonable best efforts not to take or
cause to be taken any action that would cause to be untrue (or
fail to take or cause not to be taken any action which would
cause to be untrue) any of the certifications and
representations included in the certificates described in this
Section 5.14(b). Company shall identify in a letter to
Parent all Persons who are, on the date hereof,
affiliates of Company, as such term is used in
Rule 145 under the Securities Act. Company shall use all
reasonable efforts to cause its respective affiliates to deliver
to Parent not later than 10 days prior to the date of the
Parent Special Meeting, a written agreement in a form reasonably
acceptable to Parent and the Company and shall use all
reasonable efforts to cause Persons who become
affiliates after such date but prior to Closing to
execute and deliver agreements at least 5 days prior to the
Closing Date.
(e) The Company and Parent shall cooperate in the
preparation, execution and filing of all Tax Returns,
questionnaires, applications or other documents regarding any
real property transfer or gains, sales, use, transfer, value
added, stock transfer and stamp Taxes, and transfer, recording,
registration and other fees and similar Taxes which become
payable in connection with the Merger that are required or
permitted to be filed on or before the Effective Time. Each of
Purchaser and the Company shall pay, without deduction from any
amount payable to holders of Company Common Stock and without
reimbursement from the other party, any such Taxes or fees
imposed on it by any Governmental Entity, which becomes payable
in connection with the Merger.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions
to Each Partys Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger
shall be subject to the satisfaction on or prior to the Closing
Date of each of the following conditions (any or all of which
may be waived by the parties hereto in writing, in whole or in
part, to the extent permitted by applicable Law):
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(a) (i) This Agreement and the Merger shall have been
adopted and approved by the Company Required Vote and
(ii) the Parent Proposal shall have been approved and
adopted by the Required Parent Vote; |
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(b) No statute, rule, order, decree or regulation shall
have been enacted or promulgated, and no action shall have been
taken, by any Governmental Entity of competent jurisdiction
which temporarily, preliminarily or permanently restrains,
precludes, enjoins or otherwise prohibits the consummation of
the Merger or makes the Merger illegal; |
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(c) Other than filing the Certificate of Merger in
accordance with the DGCL, all authorizations, consents and
approvals of all Governmental Entities required to be obtained
prior to consummation of the Merger shall have been obtained,
except for such authorizations, consents, and approvals the |
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failure of which to be obtained individually or in the aggregate
has not had, and would not be reasonably likely to have or
result in, a Material Adverse Effect on any party to this
Agreement; |
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(d) The S-4 shall have been declared effective, and no stop
order suspending the effectiveness of the S-4 shall be in effect
and no proceedings for such purpose shall be pending before or
threatened by the SEC; and |
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(e) The shares of Parent Common Stock issuable to the
stockholders of the Company in the Merger and to the holders of
the Company Options shall have been authorized for listing on
Nasdaq, subject to official notice of issuance. |
Section 6.2 Conditions
to the Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further
subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
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(a) (i) The representations and warranties of each of
Parent and Purchaser set forth in Sections 4.2, 4.3, 4.5(a)
and all statements set forth in Section 4.27 (relating to
Taxes) shall be true and correct in all material respects both
at and as of the date of this Agreement and at and as of the
Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of
such date); and (ii) the representations and warranties of
each of Parent and Purchaser set forth in this Agreement (other
than the representations and warranties set forth in
Sections 4.2, 4.3, 4.5(a) and all statements set forth in
Section 4.27 (relating to Taxes), shall be true and correct
(without giving effect to any limitation as to
materiality or Material Adverse Effect
set forth therein) both at and as of the date of this Agreement
and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date,
in which case as of such date), except where the failure of such
representations and warranties to be so true and correct
(without giving effect to any limitation as to
materiality or Material Adverse Effect
set forth therein) individually or in the aggregate has not had,
and would not be reasonably likely to have or result in, a
Material Adverse Effect on Parent. The Company shall have
received a certificate signed on behalf of Parent by each of two
senior executive officers of Parent to the foregoing effect; |
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(b) Each of Parent and Purchaser shall have performed in
all material respects its obligations under this Agreement
required to be performed by it at or prior to the Effective Time
pursuant to the terms of this Agreement, and the Company shall
have received a certificate signed on behalf of each of Parent
and Purchaser by the Chief Executive Officer of each of Parent
and Purchaser to such effect; |
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(c) There shall not be pending any suit, action or
proceeding by any Governmental Entity seeking to restrain,
preclude, enjoin or prohibit the Merger or any of the other
transactions contemplated by this Agreement; and |
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(d) The Company shall have received the opinion of
Porter & Hedges, L.L.P, counsel to the Company, in form
and substance reasonably satisfactory to the Company, on the
date on which the Form S-4 is filed and on the Closing
Date, in each case dated as of such respective date, rendered on
the basis of facts, representations and assumptions set forth in
such opinion and the certificates obtained from officers of
Parent, Purchaser and the Company, all of which are consistent
with the state of facts existing as of the date on which the
Form S-4 is filed and the Effective Time, as applicable, to
the effect that (i) the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the
Code and (ii) the Company, Parent and Purchaser will each
be a party to the reorganization within the meaning
of Section 368 of the Code. In rendering the opinion
described in this Section 6.2(d), Porter & Hedges,
L.L.P shall have received and may rely upon the certificates and
representations referred to in Section 5.14(d). |
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(e) Parent must have delivered to its counsel, the Company
and the Companys counsel a certificate signed on behalf of
Parent by a duly authorized officer of Parent certifying the
representations set forth in Section 4.27 and as otherwise
reasonably requested by Parents tax counsel. |
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Section 6.3 Conditions
to Obligations of Parent and Purchaser to Effect the Merger.
The obligations of Parent and Purchaser to effect the Merger are
further subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
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(a) (i) The representations and warranties of the
Company set forth in Sections 3.2, 3.3 and 3.5(a) and all
statements set forth in Section 3.26 (relating to Taxes)
shall be true and correct in all material respects both at and
as of the date of this Agreement and at and as of the Closing
Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such
date); and (ii) the representations and warranties of the
Company set forth in this Agreement (other than the
representations and warranties set forth in Sections 3.2,
3.3 and 3.5(a) and the statements set forth in
Section 3.26) shall be true and correct (without giving
effect to any limitation as to materiality or
Material Adverse Effect set forth therein) both at
and as of the date of this Agreement and at and as of the
Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to
any limitation as to materiality or Material
Adverse Effect set forth therein) individually or in the
aggregate has not had, and would not be reasonably likely to
have or result in, a Material Adverse Effect on the Company.
Parent shall have received a certificate signed on behalf of the
Company by each of two senior executive officers of the Company
to the foregoing effect; |
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(b) The Company shall have performed in all material
respects each of its obligations under this Agreement required
to be performed by it at or prior to the Effective Time pursuant
to the terms of this Agreement, and Parent shall have received a
certificate signed on behalf of the Company by the Chief
Executive Officer or Chief Financial Officer to such effect; |
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(c) There shall not be pending any suit, action or
proceeding by any Governmental Entity seeking to
(i) prohibit or limit in any material respect the ownership
or operation by the Company, Parent, Purchaser or any of their
respective affiliates of a substantial portion of the business
or assets of the Company and its Subsidiaries, taken as a whole,
or to require any such Person to dispose of or hold separate any
material portion of the business or assets of the Company and
its Subsidiaries, taken as a whole, as a result of the Merger or
any of the other transactions contemplated by this Agreement or
(ii) restrain, preclude, enjoin or prohibit the Merger or
any of the other transactions contemplated by this Agreement; |
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(d) Parent shall have received the opinion of
Thompson & Knight, LLP, counsel to Parent, in form and
substance reasonably satisfactory to Parent, on the date on
which the Form S-4 is filed and on the Closing Date, in
each case dated as of such respective date, rendered on the
basis of facts, representations and assumptions set forth in
such opinion and the certificates obtained from officers of
Parent, Purchaser and the Company, all of which are consistent
with the state of facts existing as of the date on which the
Form S-4 is filed or the Effective Time, as applicable, to
the effect that (i) the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the
Code and (ii) the Company, Parent and Purchaser will each
be a party to the reorganization within the meaning
of Section 368 of the Code. In rendering the opinion
described in this Section 6.3(d), Thompson &
Knight, LLP,shall have received and may rely upon the affiliate
letters, certificates and representations referred to in
Section 5.14(d); |
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(e) The number of Dissenting Shares shall not exceed 10% of
the outstanding shares of Company Common Stock; and |
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(f) All material consents and approvals of any Person that
the Company or any of its Subsidiaries are required to obtain in
connection with the consummation of the Merger, including
consents and approvals from parties to loans, contracts, leases
or other agreements, shall have been obtained, and a copy of
each such consent and approval shall have been provided to
Parent at or prior to the Closing, except for such consents and
approvals the failure of which to be obtained individually |
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or in the aggregate would not be reasonably likely to have or
result in a Material Adverse Effect on the Company. |
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(g) The Company must have delivered to its counsel, Parent
and Parents counsel a certificate signed on behalf of the
Company by a duly authorized officer of the Company certifying
the representations set forth in Section 3.26 and as
otherwise reasonably requested by the Companys tax counsel. |
ARTICLE VII
TERMINATION
Section 7.1 Termination.
Notwithstanding anything herein to the contrary, this Agreement
may be terminated and the Merger may be abandoned at any time
prior to the Effective Time:
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(a) By the mutual consent of Parent and the Company in a
written instrument. |
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(b) By either the Company or Parent upon written notice to
the other, if: |
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(i) the Merger shall not have been consummated on or before
December 31, 2005 (the Termination Date);
provided that the right to terminate this Agreement pursuant to
this Section 7.1(b)(i) shall not be available to a party
whose failure to fulfill any material obligation under this
Agreement or other material breach of this Agreement has been
the cause of, or resulted in, the failure of the Merger to have
been consummated on or before such date; |
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(ii) any Governmental Entity shall have issued a statute,
rule, order, decree or regulation or taken any other action
(which statute, rule, order, decree, regulation or other action
the parties hereto shall have used their reasonable best efforts
to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger or making
the Merger illegal and such statute, rule, order, decree,
regulation or other action shall have become final and
nonappealable (provided that the terminating party is not then
in breach of Section 5.5); |
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(iii) the stockholders of the Company fail to adopt this
Agreement by the Company Required Vote at the Company Special
Meeting; provided that the Company shall not be entitled to
terminate this Agreement pursuant to this
Section 7.1(b)(iii) if it has breached any of its
obligations under Section 5.3 or Section 5.6; |
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(iv) there shall have been a material breach of or any
inaccuracy in any of the representations or warranties set forth
in this Agreement on the part of any of the other parties, which
breach is not cured within 30 days following receipt by the
breaching party of written notice of such breach from the
terminating party, or which breach, by its nature, cannot be
cured prior to the Termination Date (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein); provided, however, that no party shall have the right
to terminate this Agreement pursuant to this
Section 7.1(b)(iv) unless the breach of representation or
warranty, together with all other such breaches, would entitle
the party receiving such representation not to consummate the
transactions contemplated by this Agreement under
Section 6.3(a) (in the case of a breach of representation
or warranty by the Company) or Section 6.2(a) (in the case
of a breach of representation or warranty by Parent or
Purchaser); |
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(v) if there shall have been a material breach of any of
the covenants or agreements set forth in this Agreement on the
part of any of the other parties, which breach shall not have
been cured within 30 days following receipt by the
breaching party of written notice of such breach from the
terminating party, or which breach, by its nature, cannot be
cured prior to the Termination Date (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein); or |
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(vi) the Parent Proposal shall not have been approved and
adopted by the Required Parent Vote at the Parent
Stockholders Meeting; provided that Parent shall not be
entitled to terminate this Agreement pursuant to this
Section 7.1(b)(vi) if it has breached any of its
obligations under Section 5.3 or 5.6. |
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(c) By Parent, upon written notice to the Company, if prior
to obtaining the Company Required Vote (i) the Company, or
the Company Board, as the case may be, shall have
(A) entered into any Acquisition Agreement or
(B) approved or recommended, or, in the case of a
committee, proposed to the Company Board, to approve or
recommend, any Acquisition Proposal, (ii) the Company or
the Company Board or any committee thereof shall have resolved
to do any of the foregoing, or (iii) a Company Adverse
Recommendation Change shall have occurred in response to a
Superior Proposal or the Company Board or any committee thereof
shall have resolved to make such Company Adverse Recommendation
Change. |
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(d) By the Company, upon written notice to Parent, if prior
to obtaining the Required Company Vote (i) the Company, or
the Company Board, as the case may be, shall have
(A) entered into any Acquisition Agreement or
(B) approved or recommended, or, in the case of a
committee, proposed to the Company Board, to approve or
recommend, any Acquisition Proposal, (ii) the Company Board
or any committee thereof shall have resolved to do any of the
foregoing, or (iii) a Company Adverse Recommendation Change
shall have occurred in response to a Superior Proposal or the
Company Board or any committee thereof shall have resolved to
make such Company Adverse Recommendation Change. |
Section 7.2 Effect
of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice
thereof shall forthwith be given by the terminating party to the
other parties specifying the provision of this Agreement
pursuant to which such termination is made, and except as
provided in this Section 7.2, this Agreement shall
forthwith become null and void after the expiration of any
applicable period following such notice. In the event of such
termination, there shall be no liability on the part of Parent,
Purchaser or the Company, except as set forth in
Section 8.1 of this Agreement and except with respect to
the requirement to comply with the Confidentiality Agreement;
provided that nothing herein shall relieve any party from any
liability or obligation with respect to any willful breach of
this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees
and Expenses.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such costs or expenses, except as provided in
Sections 8.1(d) and 8.1(e).
(b) If this Agreement is terminated by Parent pursuant to
Section 7.1(c) or 7.1(d), then the Company shall pay to
Parent in immediately available funds a termination fee in an
amount equal to U.S. $12.5 million (the
Termination Fee).
(c) In the event that (i) an Acquisition Proposal with
respect to the Company has been proposed by any Person (other
than Parent and Purchaser or any of their respective affiliates)
or any Person has publicly announced its intention (whether or
not conditional) to make such Acquisition Proposal or such
Acquisition Proposal or such intention has otherwise become
publicly known to the Companys stockholders generally,
(ii) thereafter this Agreement is terminated by either the
Company or Parent pursuant to Section 7.1(b)(i) or
7.1(b)(iii) and (iii) within 12 months after the
termination of this Agreement, the Company or any of its
Subsidiaries enters into any definitive agreement providing for
an Acquisition Proposal, or an Acquisition Proposal with respect
to the Company or any of its Subsidiaries is consummated, then
the Company shall pay to Parent the Termination Fee in
immediately available funds.
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(d) For purposes of clause (iii) of
Section 8.1(c) only, the term Acquisition
Proposal shall have the meaning assigned to such term in
Section 5.3(f) except that all references to
10% therein shall be deemed to be references to
40%.
(e) Any payment of the Termination Fee pursuant to
Section 8.1(b) or 8.1(c) shall be made within one Business
Day after termination of this Agreement by wire transfer of
immediately available funds to an account designated by Parent.
Any payment of the Termination Fee pursuant to
Section 8.1(d) shall be made prior to the first to occur of
the events described in clause (iii) of
Section 8.1(d). The parties acknowledge that the agreements
contained in this Section 8.1 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, none of the parties would enter into this
Agreement; accordingly, if the Company fails promptly to pay or
cause to be paid the amounts due pursuant to this
Section 8.1, and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company
for the amounts set forth in this Section 8.1, the Company
shall pay to Parent its reasonable costs and expenses (including
attorneys fees and expenses) in connection with such suit
and any appeal relating thereto, together with interest on the
amounts set forth in this Section 8.1 at the prime rate of
Citibank, N.A. in effect on the date such payment was required
to be made.
(g) This Section 8.1 shall survive any termination of
this Agreement.
Section 8.2 Amendment;
Waiver.
(a) This Agreement may be amended by the parties to this
Agreement, by action taken or authorized by their respective
boards of directors, at any time before or after approval by the
stockholders of the Company of the matters presented in
connection with the Merger, but after any such approval no
amendment shall be made without the approval of the stockholders
of the Company if such amendment alters or changes (i) the
Merger Consideration, (ii) any term of the Certificate of
Incorporation or (iii) any terms or conditions of this
Agreement if such alteration or change would adversely affect
the holders of any shares of capital stock of the Company. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties to
this Agreement may (i) extend the time for the performance
of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations
and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto by
the other party or (iii) waive compliance with any of the
agreements or conditions of the other parties hereto contained
herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Any such
waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way
impair the rights of the party granting such waiver in any other
respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the
parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other
breach or default of a similar nature, or as a waiver of any of
such provisions, rights or privileges hereunder. The rights and
remedies herein provided are cumulative and none is exclusive of
any other, or of any rights or remedies that any party may
otherwise have at Law or in equity.
Section 8.3 Survival.
The representations and warranties contained in this Agreement
or in any certificates or other documents delivered prior to or
as of the Effective Time shall survive until (but not beyond)
the Effective Time. The covenants and agreements of the parties
hereto (including the Surviving Corporation after the Merger)
shall survive the Effective Time without limitation (except for
those which, by their terms, contemplate a shorter survival
period).
Section 8.4 Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed given upon
(a) transmitters confirmation of a receipt of a
facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand,
(c) the expiration of five Business Days after the
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day when mailed in the United States by certified or registered
mail, postage prepaid, or (d) delivery in Person, addressed
at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to the Company, to:
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Mission Resources Corporation |
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1331 Lamar, Suite 1455 |
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Houston, Texas 77010-3039 |
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Facsimile: 713-495-3103 |
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Attn: Robert L. Cavnar |
with a copy to:
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Porter & Hedges, L.L.P. |
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1000 Main Street,
36th
Floor |
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Houston, Texas 77002 |
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Facsimile: (713) 226-6274 |
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Attn: Robert G. Reedy |
and
(b) if to Parent or Purchaser, to:
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Petrohawk Energy Corporation |
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1100 Louisiana, Suite 4400 |
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Houston, Texas 77002 |
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Facsimile: 832-204-2800 |
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Attn: Floyd C. Wilson |
with a copy to:
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Hinkle Elkouri Law Firm L.L.C. |
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301 N.Main, Suite 2000 |
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Wichita, KS 67202 |
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Facsimile: 316-660-6011 |
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Attn: David S. Elkouri |
Section 8.5 Interpretation.
When a reference is made in this Agreement to Articles or
Sections, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. Whenever the words
include, includes or
including are used in this Agreement they shall be
deemed to be followed by the words without
limitation. The word affiliates when used in
this Agreement shall have the respective meanings ascribed to
them in Rule 12b-2 under the Exchange Act. The phrase
beneficial ownership and words of similar import
when used in this Agreement shall have the meaning ascribed to
it in Rule 13d-3 under the Exchange Act. The phrase
the date of this Agreement, date hereof
and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to April 3, 2005.
Section 8.6 Headings;
Schedules. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Disclosure of any
matter pursuant to any Section of the Company Disclosure Letter
or Parent Disclosure Letter shall not be deemed to be an
admission or representation as to the materiality of the item so
disclosed.
Section 8.7 Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be
considered one and the same agreement.
Section 8.8 Entire
Agreement. This Agreement and the Confidentiality Agreement
constitute the entire agreement, and supersede all prior
agreements and understandings (written and oral), among the
parties with respect to the subject matter of this Agreement.
Section 8.9 Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its
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regulatory policy, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired
or invalidated.
Section 8.10 Governing
Law; Jurisdiction. This Agreement shall be governed,
construed and enforced in accordance with the Laws of the State
of Delaware without giving effect to the principles of conflicts
of law thereof. Each of the parties hereto hereby agrees that
any claim, suit, action or other proceeding, directly or
indirectly, arising out of, under or relating to this Agreement
shall be heard and determined in the Chancery Court of the State
of Delaware (and each agrees that no such claim, action, suit or
other proceeding relating to this Agreement shall be brought by
it or any of its affiliates except in such court), and the
parties hereto hereby irrevocably and unconditionally submit to
the exclusive jurisdiction of any such court in any such claim,
suit, action or other proceeding and irrevocably and
unconditionally waive the defense of an inconvenient forum to
the maintenance of any such claim, suit, action or other
proceeding. Each of the parties hereto further agrees that, to
the fullest extent permitted by applicable Law, service of any
process, summons, notice or document by U.S. registered
mail to such Persons respective address set forth in
Section 8.4 shall be effective service of process for any
claim, action, suit or other proceeding in Delaware with respect
to any matters to which it has submitted to jurisdiction as set
forth above in the immediately preceding sentence. The parties
hereto hereby agree that a final, non-appealable judgment in any
such claim, suit, action or other proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by applicable Law.
Section 8.11 Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties; provided that each
of Parent and Purchaser may assign this Agreement to any of its
Subsidiaries, or to any lender to each of Parent and Purchaser
or any Subsidiary or affiliate thereof as security for
obligations to such lender, and provided, further, that no
assignment to any such lender shall in any way affect
Parents or Purchasers obligations or liabilities
under this Agreement.
Section 8.12 Parties
in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party to this Agreement and their
permitted assignees, and (other than Sections 5.8 and 8.11)
nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this
Agreement. Without limiting the foregoing, no direct or indirect
holder of any equity interests or securities of any party to
this Agreement (whether such holder is a limited or general
partner, member, stockholder or otherwise), nor any affiliate of
any party to this Agreement, nor any director, officer,
employee, representative, agent or other controlling Person of
each of the parties to this Agreement and their respective
affiliates shall have any liability or obligation arising under
this Agreement or the transactions contemplated hereby.
Section 8.13 Specific
Performance. The parties to this Agreement agree that
irreparable damage would occur in the event that any provision
of this Agreement was not performed by Company in accordance
with the terms of this Agreement and that Parent and Purchaser
shall be entitled to specific performance of the terms of this
Agreement in addition to any other remedy at Law or equity.
Section 8.14 Definitions.
The following terms have the following definitions:
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Acceptable Confidentiality Agreement means, with
respect to the Company or Parent, an agreement that imposes
obligations and restrictions on the counterparty thereto which
are substantially similar to the terms that are binding on the
other party to this Agreement, as applicable, under the
Confidentiality Agreement. |
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Acquisition Agreement has the meaning given such
term on page 55 of this Agreement. |
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Acquisition Proposal has the meaning given such term
on page 56 of this Agreement. |
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Advisers Act has the meaning given such term on
page 27 of this Agreement. |
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Affiliated Group has the meaning given such term on
page 30 of this Agreement. |
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Aggregate Consideration has the meaning given such
term on page 3 of this Agreement. |
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Antitrust Division has the meaning given such term
on page 58 of this Agreement. |
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Business Day means any day other than Saturday and
Sunday and any day on which banks are not required or authorized
to close in the State of Texas. |
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Cash Designated Shares has the meaning given such
term on page 6 of this Agreement. |
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Cash Election Shares has the meaning given such term
on page 4 of this Agreement. |
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Certificate has the meaning given such term on
page 3 of this Agreement. |
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Certificate of Merger has the meaning given such
term on page 2 of this Agreement. |
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Closing has the meaning given such term on
page 2 of this Agreement. |
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Closing Date has the meaning given such term on
page 2 of this Agreement. |
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Code means the Internal Revenue Code of 1986, as
amended. |
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Company has the meaning given such term on
page 1 of this Agreement. |
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Company Adverse Recommendation Change has the
meaning given such term on page 55 of this Agreement. |
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Company Assets means all of the properties and
assets (real, personal or mixed, tangible or intangible) of the
Company and its Subsidiaries. |
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Company Balance Sheet has the meaning given such
term on page 20 of this Agreement. |
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Company Board has the meaning given such term on
page 13 of this Agreement. |
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Company Common Stock has the meaning given such term
on page 11 of this Agreement. |
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Company Consolidated Group means any affiliated
group within the meaning of Section 1504(a) of the Code, in
which the Company (or any Subsidiary of the Company) is or has
ever been a member or any group of corporations with which
Company files, has filed or is or was required to file an
affiliated, consolidated, combined, unitary or aggregate Tax
return. |
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Company Designated Directors means two individuals
that if serving on Parents Board of Directors would
qualify as independent directors under Nasdaq and
SEC definitions and who are proposed by the Company to serve on
the Board of Directors of Parent and who are reasonably
acceptable to Parent. |
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Company Disclosure Letter has the meaning given such
term on page 10 of this Agreement. |
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Company Leased Real Property means all interests in
real property pursuant to the Company Leases other than the
Company Oil and Gas Properties and other oil, gas and mineral
rights of the Company and its Subsidiaries. |
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Company Leases means the real property leases,
subleases, licenses and use or occupancy agreements pursuant to
which Company or any of its Subsidiaries is the lessee,
sublessee, licensee, user, operator or occupant of real
property, or interests therein other than such leases,
subleases, licenses and use or occupancy agreements relating to
the Company Oil and Gas Properties and other oil, gas and
mineral rights of the Company and its Subsidiaries. |
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Company Material Contract has the meaning given such
term on page 20 of this Agreement. |
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Company Notice has the meaning given such term on
page 55 of this Agreement. |
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Company Oil and Gas Properties means all of the
Companys or any of its Subsidiaries right, title and
interest in, to and under, or derived from oil and gas leases
and rights, Wells and Units, |
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including all land, facilities, personal property and equipment,
Contracts and information pertaining or relating thereto. |
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Company Option has the meaning given such term on
page 6 of this Agreement. |
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Company Option Plans has the meaning given such term
on page 6 of this Agreement. |
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Company Owned Real Property means the material real
property and interests in real property owned by the Company and
its Subsidiaries other than the Company Oil and Gas Properties
and other oil, gas and mineral rights of the Company and its
Subsidiaries. |
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Company Permits has the meaning given such term on
page 19 of this Agreement. |
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Company Plans has the meaning given such term on
page 16 of this Agreement. |
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Company Preferred Stock has the meaning given such
term on page 11 of this Agreement. |
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Company Real Property means the Company Owned Real
Property and the Company Leased Real Property. |
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Company Required Vote has the meaning given such
term on page 27 of this Agreement. |
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Company Reserve Report has the meaning given such
term on page 26 of this Agreement. |
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Company Rights has the meaning given such term on
page 11 of this Agreement. |
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Company Rights Agreement has the meaning given such
term on page 12 of this Agreement. |
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Company SEC Documents has the meaning given such
term on page 14 of this Agreement. |
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Company Special Meeting has the meaning given such
term on page 60 of this Agreement. |
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Competition Laws means Laws that are designed or
intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization, lessening of competition or
restraint of trade and includes the HSR Act. |
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Confidentiality Agreement has the meaning given such
term on page 58 of this Agreement. |
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Cut-off Time has the meaning given such term on
page 11 of this Agreement. |
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Deemed Stock Amount has the meaning given such term
on page 3 of this Agreement. |
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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,
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 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. |
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DGCL has the meaning given such term on page 1
of this Agreement. |
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Dissenting Share has the meaning given such term on
page 7 of this Agreement. |
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Effective Time has the meaning given such term on
page 2 of this Agreement. |
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Election Deadline has the meaning given such term on
page 4 of this Agreement. |
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Election Form has the meaning given such term on
page 4 of this Agreement. |
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Election Form Record Date has the meaning given
such term on page 4 of this Agreement. |
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Employment and Withholding Taxes means any federal,
state, local, foreign or other employment, unemployment,
insurance, social security, disability, workers
compensation, payroll, |
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health care or other similar Tax and all Taxes required to be
withheld by or on behalf of each of the Company and any of its
Subsidiaries or the Parent or any of its Subsidiaries, as the
case may be, in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other
party, in each case, on or in respect of the business or assets
thereof. |
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Environmental Claim means any claim, demand, suit,
action, cause of action, proceeding, investigation or notice to
the Company or any of its Subsidiaries by any Person or entity
alleging any potential liability (including potential liability
for investigatory costs, cleanup costs, governmental response
costs, natural resource damages, personal injuries, or
penalties) arising out of, based on, or resulting from
(i) the presence, or Release into the environment, of any
Hazardous Substance (as hereinafter defined) at any location,
whether or not owned, leased, operated or used by the Company or
its Subsidiaries, or the Parent or any of its Subsidiaries, as
the case may be, (ii) circumstances forming the basis of
any violation, or alleged violation, of any applicable
Environmental Law. |
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Environmental Laws means all Laws, including common
law, relating to pollution, cleanup, restoration or protection
of the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata and natural
resources) or to the protection of flora or fauna or their
habitat or to human or public health or safety, including
(i) Laws relating to emissions, discharges, Releases or
threatened Releases of Hazardous Substances, or otherwise
relating to the manufacture, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of Hazardous Substances, including the
Comprehensive Environmental Response, Compensation, and
Liability Act and the Resource Conservation and Recovery Act,
and (ii) the Occupational Safety and Health Act. |
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ERISA has the meaning given such term on
page 16 of this Agreement. |
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ERISA Affiliate has the meaning given such term on
page 16 of this Agreement. |
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Exchange Act shall mean the Securities Exchange Act
of 1934, as amended. |
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Exchange Agent has the meaning given such term on
page 7 of this Agreement. |
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Exchange Fund has the meaning given such term on
page 8 of this Agreement. |
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Exchange Ratio has the meaning given such term on
page 3 of this Agreement. |
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FTC has the meaning given such term on page 58
of this Agreement. |
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GAAP has the meaning given such term on page 14
of this Agreement. |
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Governmental Entity has the meaning given such term
on page 13 of this Agreement. |
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Hazardous Substance means (i) chemicals,
pollutants, contaminants, wastes, toxic and hazardous
substances, and oil and petroleum products, (ii) any
substance that is or contains asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, chlorides, radon gas or
related materials or lead or lead-based paint or materials,
(iii) any substance, material or waste that requires
investigation, removal or remediation under any Environmental
Law, or is defined, listed or identified as hazardous, toxic or
otherwise dangerous under any Environmental Laws or
(iv) any substance that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous. |
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HSR Act has the meaning given such term on
page 14 of this Agreement. |
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Hydrocarbons has the meaning given such term on
page 26 of this Agreement. |
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Indemnified Parties has the meaning given such term
on page 61 of this Agreement. |
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Intellectual Property has the meaning given such
term on page 19 of this Agreement. |
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Investigation has the meaning given such term on
page 57 of this Agreement. |
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Investment Company Act has the meaning given such
term on page 27 of this Agreement. |
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Knowledge means, with respect to the Company, the
actual knowledge of the individuals listed in
Section 3.17(f) of the Company Disclosure Letter, after due
inquiry and (ii) with respect to Parent, the actual
knowledge of the individuals listed in Section 4.17(f) of
the Parent Disclosure Letter, after due inquiry. |
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Laws has the meaning given such term on page 13
of this Agreement. |
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Liens means any mortgage, pledge, deed of trust,
hypothecation, right of others, claim, security interest,
encumbrance, burden, title defect, title retention agreement,
lease, sublease, license, occupancy agreement, easement,
covenant, condition, encroachment, voting trust agreement,
interest, option, right of first offer, negotiation or refusal,
proxy, lien, charge or other restrictions or limitations of any
nature whatsoever. |
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Litigation means any action, claim, suit,
proceeding, audit, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal or regulatory, in
law or in equity, by or before any Governmental Entity or
arbitrator (including workers compensation claims). |
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Mailing Date has the meaning given such term on
page 4 of this Agreement. |
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Material Adverse Effect means, with respect to
Parent or the Company, as the case may be, (i) a material
adverse effect on the business, results of operations or
financial condition of such party and its Subsidiaries taken as
a whole or (ii) any change or effect that prevents or
materially impedes or delays the consummation by such party of
the Merger and the other transactions contemplated hereby;
provided, that none of the following shall be deemed, either
alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether
there has been or will be, a Material Adverse Effect:
(A) changes and effects attributable to changes in Laws of
general applicability or interpretations thereof by courts or
governmental authorities, (B) changes and effects
attributable to or resulting from changes in general industry
conditions or general economic conditions, including changes in
commodity prices, except, in each case, to the extent any such
changes or effects disproportionately affect such party in
comparison to other companies in the same industry and
(C) changes and effects attributable to the announcement or
pendency of this Agreement or the Merger. |
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Merger has the meaning given such term on
page 1 of this Agreement. |
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Merger Consideration has the meaning given such term
on page 2 of this Agreement. |
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Merrill Lynch has the meaning given such term on
page 27 of this Agreement. |
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Nasdaq has the meaning given such term on
page 3 of this Agreement. |
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No Election Shares has the meaning given such term
on page 4 of this Agreement. |
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Non-U.S. Stockholder means a stockholder who is
not (i) an individual who is a citizen or resident of the
United States, (ii) a corporation, or other Person taxable
as a corporation, created or organized in or under the Laws of
the United States, any state thereof or the District of
Columbia, (iii) an estate, the income of which is subject
to U.S. federal income taxation regardless of its source,
(iv) a trust if (x) a court within the United States
is able to exercise primary supervision over the administration
of the trust and (y) one or more U.S. Persons have the
authority to control all substantial decisions of the trust or
if the trust has made a valid election to be treated as a
U.S. Person or (v) a partnership, or other Person
treated as a partnership for United States federal income Tax
purposes, to the extent that the beneficial ownership of the
Company Common Stock is attributed to its partners who fall into
the categories described in clauses (i)-(iv) above. |
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Non-Solicitation Agreements has the meaning set
forth on page 1 of this Agreement. |
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Parent has the meaning given such term on
page 1 of this Agreement. |
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Parent Assets means all of the properties and assets
(real, personal or mixed, tangible or intangible) of Parent and
its Subsidiaries. |
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Parent Balance Sheet has the meaning given such term
on page 40 of this Agreement. |
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Parent Common Stock has the meaning given such term
on page 31 of this Agreement. |
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Parent Consolidated Group means any affiliated group
within the meaning of Section 1504(a) of the Code, in which
Parent (or any Subsidiary of Parent) is or has ever been a
member or any group of corporations with which Parent files, has
filed or is or was required to file an affiliated, consolidated,
combined, unitary or aggregate Tax return. |
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Parent Disclosure Letter has the meaning given such
term on page 31 of this Agreement. |
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Parent Leased Real Property means all interests in
real property pursuant to the Parent Leases other than the
Parent Oil and Gas Properties and other oil, gas and mineral
rights of Parent and its Subsidiaries. |
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Parent Leases means the real property leases,
subleases, licenses and use or occupancy agreements pursuant to
which Parent or any of its Subsidiaries is the lessee,
sublessee, licensee, user, operator or occupant of real
property, or interests therein other than such leases,
subleases, licenses and use or occupancy agreements relating to
the Parent Oil and Gas Properties and other oil, gas and mineral
rights of Parent and its Subsidiaries. |
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Parent ERISA Affiliate has the meaning given such
term on page 36 of this Agreement. |
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Parent Material Contract has the meaning given such
term on page 39 of this Agreement. |
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Parent Oil and Gas Properties means, with respect to
Parent or any of its Subsidiaries, all of Parents or any
of its Subsidiaries right, title and interest in, to and
under, or derived from oil and gas leases and rights, Wells and
Units, including all land, facilities, personal property and
equipment, Contracts and information pertaining or relating
thereto. |
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Parent Owned Real Property means the material real
property and interests in real property owned by Parent and its
Subsidiaries other than the Parent Oil and Gas Properties and
other oil, gas and mineral rights of Parent and its Subsidiaries. |
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Parent Permits has the meaning given such term on
page 38 of this Agreement. |
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Parent Plans has the meaning given such term on
page 36 of this Agreement. |
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Parent Preferred Stock has the meaning given such
term on page 31 of this Agreement. |
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Parent Proposal has the meaning given such term on
page 46 of this Agreement. |
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Parent Real Property means the Parent Owned Real
Property and the Parent Leased Real Property. |
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Parent Reserve Report has the meaning given such
term on page 45 of this Agreement. |
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Parent SEC Documents has the meaning given such term
on page 33 of this Agreement. |
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Parent SPD has the meaning given such term on
page 36 of this Agreement. |
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Parent Stock Options has the meaning given such term
on page 32 of this Agreement. |
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Parent Stockholders Meeting has the meaning
given such term on page 60 of this Agreement. |
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Per Share Cash Consideration has the meaning given
such term on page 2 of this Agreement. |
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Per Share Consideration has the meaning given such
term on page 3 of this Agreement. |
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Per Share Stock Consideration has the meaning given
such term on page 3 of this Agreement. |
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Permit means any permit, license, waiver,
concession, grant, registration, variance, exemption,
authorization, operating certificate, franchise, order or
approval issued by any Governmental Entity. |
A-67
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Permitted Liens means (i) Liens reserved
against or identified in the Company SEC Documents or the
Company Balance Sheet or the Parent Balance Sheet, as the case
may be, to the extent so reserved or reflected or described in
the notes thereto, (ii) Liens for Taxes not yet due and
payable, (iii) in the case of oil and gas leases, the
lessors royalty interest(s), and (iv) those Liens
that, individually or in the aggregate with all other Permitted
Liens, do not and would not be reasonably likely to materially
interfere with the use or value of the properties or assets of
the Company and its Subsidiaries or Parent and its Subsidiaries,
as the case may be, and in each case taken as a whole as
currently used, or otherwise individually or in the aggregate
have not had, and would not reasonably be likely to have or
result in, a Material Adverse Effect on the Company or Parent,
as the case may be. |
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Person means any natural person, firm, individual,
partnership, joint venture, business trust, trust, association,
corporation, company, unincorporated entity or Governmental
Entity. |
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Petrie Parkman has the meaning given such term on
page 27 of this Agreement. |
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Proxy Statement has the meaning given such term on
page 59 of this Agreement. |
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Purchaser has the meaning given such term on
page 1 of this Agreement. |
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Related Person has the meaning given such term on
page 30 of this Agreement. |
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Release means any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting,
escaping, emptying, dispersal, leaching, migration or placing
into, through or upon the environment, including any land, soil,
surface water, ground water or air. |
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Required Parent Vote has the meaning given such term
on page 46 of this Agreement. |
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Return means any return, estimated Tax return,
report, declaration, form, claim for refund or information
statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof. |
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S-4 has the meaning given such term on page 13
of this Agreement. |
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SEC means the U.S. Securities and Exchange
Commission. |
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Secretary of State has the meaning given such term
on page 2 of this Agreement. |
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Securities Act has the meaning given such term on
page 14 of this Agreement. |
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SOX has the meaning given such term on page 14
of this Agreement. |
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SPD has the meaning given such term on page 17
of this Agreement. |
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Specified Company SEC Documents has the meaning
given such term on page 15 of this Agreement. |
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Specified Parent SEC Documents has the meaning given
such term on page 34 of this Agreement. |
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Stock Designated Shares has the meaning given such
term on page 5 of this Agreement. |
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Stock Election Shares has the meaning given such
term on page 4 of this Agreement. |
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Subsidiary means with respect to any Person, any
other Person of which 50% or more of the securities or other
interests having by their terms ordinary voting power for the
election of directors or others performing similar functions are
directly or indirectly owned by such Person. |
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Superior Proposal has the meaning given such term on
page 56 of this Agreement. |
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Surviving Corporation has the meaning given such
term on page 1 of this Agreement. |
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Tax means (i) any federal, state, local,
foreign or other tax, import, duty or other governmental charge
or assessment or deficiencies thereof, including income,
alternative, minimum, |
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accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits,
gross receipts, value added, sales, use, excise, custom duties,
transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental, real
and personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance,
social security, disability, workers compensation,
payroll, health care, withholding, estimated or other similar
tax and including all interest and penalties thereon and
additions to tax; (ii) any liability for the payment of any
amounts described in clauses (i), (ii) or
(iii) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result
of transferor, successor or similar liability; and
(iii) any liability for the payments of any amounts as a
result of being a party to any Tax sharing agreement or as a
result of any express or implied obligation to indemnify any
other Person with respect to the payment of any amounts of the
type described in clause (i) or (ii). |
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Technology has the meaning given such term on
page 19 of this Agreement. |
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Termination Date has the meaning given such term on
page 68 of this Agreement. |
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Termination Fee has the meaning given such term on
page 69 of this Agreement. |
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Total Cash Amount has the meaning given such term on
page 3 of this Agreement. |
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Total Common Stock Amount has the meaning given such
term on page 3 of this Agreement. |
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Total Stock Amount has the meaning given such term
on page 3 of this Agreement. |
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Total Stock Consideration has the meaning given such
term on page 3 of this Agreement. |
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Treasury Regulations means the regulations
promulgated by the United States Treasury Department under the
Code. |
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Unit means the area covered by a unitization,
communitization or pooling agreement or order applicable to
Wells, but only as to those formations in which a Well or Wells
are currently completed and producing Hydrocarbons. |
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Voting Agreements has the meaning given such term on
page 1 of this Agreement. |
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WARN Act has the meaning given such term on
page 25 of this Agreement. |
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Well means a well for the purpose of discovering or
producing Hydrocarbons or disposing of fluids produced in
connection with the production of Hydrocarbons. |
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IN WITNESS WHEREOF, Parent, Purchaser and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first written
above.
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PETROHAWK ENERGY CORPORATION |
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Title: |
Chairman, President and Chief
Executive Officer |
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PETROHAWK ACQUISITION CORPORATION |
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Title: |
Chairman, President and Chief
Executive Officer |
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MISSION RESOURCES CORPORATION |
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Title: |
Chairman, President and Chief
Executive Officer |
A-70
Annex B
SANDERS MORRIS HARRIS
April 3, 2005
Board of Directors
Petrohawk Energy Corp.
1100 Louisiana, Suite 4400
Houston, TX 77002
Members of the Board:
We understand that Petrohawk Energy Corp.
(Petrohawk) and Mission Resources Corporation
(Mission) are considering entering into a
transaction (the Proposed Transaction) in accordance
with the terms of the draft Agreement and Plan of Merger, dated
as of April 3, 2005, among Petrohawk, Petrohawk Acquisition
Co., and Mission (the Agreement), pursuant to which
(i) Mission will merge with and into a wholly-owned
subsidiary of Petrohawk (the Merger) and
(ii) upon the effectiveness of the Merger, each share of
the common stock of Mission will be converted into the right to
receive a pro rata share of a Total Stock Amount (as defined in
the Agreement) and a Total Cash Amount (as defined in the
Agreement), which consideration (the Consideration),
based on a per share value of Petrohawk common stock of $10.56,
would be approximately $8.15 per share. We further
understand that the Consideration will consist of either a
fraction of Petrohawk common stock (determined by the
Exchange Ratio as defined in the Agreement) or a pro
rata allocation of the Total Cash Amount, depending upon the
election made, or not made, by each individual shareholder. We
further understand that the Total Cash Amount and the Total
Stock Amount are not subject to change based on changes in the
price of Petrohawk common stock. For purposes of calculating the
final Per Share Consideration (as defined in the Agreement), the
Aggregate Consideration (as defined in the Agreement) will be
divided by the Total Common Stock Amount (as defined in the
Agreement). For purposes of calculating the final Exchange
Ratio, the Per Share Consideration (as defined in the Agreement)
shall be divided by the per share value of Petrohawks
common stock determined by taking the volume-weighted average
per share closing price for the ten consecutive trading days
ending on the third calendar day immediately prior to the
effective time of the Merger (or the immediately preceding
trading day if such date is not a trading day). The terms and
conditions of the Merger are set forth in more detail in the
draft Agreement reviewed by us the date hereof.
We have been requested by the Board of Directors of Petrohawk to
render our opinion with respect to the fairness, from a
financial point of view, to Petrohawk of the Consideration to be
paid by Petrohawk in the Merger (the Opinion). We
have not been requested to opine as to, and our Opinion does not
in any manner address, Petrohawks underlying business
decision to proceed with or effect the Proposed Transaction. In
arriving at the Opinion, we have reviewed and analyzed, among
other things:
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1. The Agreement; |
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2. Such publicly available information concerning Petrohawk
and Mission that we believe to be relevant to our analysis,
including, without limitation, the Annual Reports on
Form 10-K for the years ended December 31, 2004 for
each of Petrohawk and Mission; |
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3. Certain financial and operating information with respect
to the respective businesses, operations, and prospects of
Petrohawk and Mission respectively, including financial and
operating projections furnished by the managements Petrohawk and
Mission and in particular (a) certain estimates of proved
and non-proved reserves from Netherland, Sewell &
Associates, Inc. and management, projected future production,
revenue, operating costs and capital investments for each of
Petrohawk and Mission; (b) impacts of hedging of production
levels projected by the respective |
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management Petrohawk and Mission; and (c) amounts and
timing or cost savings and operating synergies expected by the
management of Petrohawk resulting from the Merger; |
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4. The historical market prices and trading volumes of
Petrohawks and Missions publicly traded securities
from May 26, 2004 to the present and a comparison of those
trading histories with each other and with those of other
publicly-traded companies that we deemed relevant; |
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5. A comparison of the historical financial results and
present financial condition of Petrohawk and Mission with each
other and with those of other publicly-traded companies that we
deemed relevant; |
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6. A comparison of the financial terms of the Merger with
the financial terms of certain other transactions that we deemed
relevant; |
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7. The potential pro forma impact of the Merger on the
future financial performance of Petrohawk; |
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8. The potential pro forma impact of the Merger on the
current financial condition of Petrohawk, including the impact
on Petrohawks leverage levels and ratios; |
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9. The relative contributions of Petrohawk and Mission to
the current and future financial performance of the combined
company on a pro forma basis; |
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10. Published estimates of independent research analysts
with respect to the future financial performance of Petrohawk
and Mission; |
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11. The views of the managements of Petrohawk and Mission
concerning the strategic benefits of the Merger and their
respective businesses, operations, assets, financial condition,
reserves, production levels, hedging levels, exploration
programs and prospects; and |
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12. Such other information, financial studies, analyses and
investigations as we deemed relevant. |
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information
used by us without assuming any responsibility for independent
verification of such information and have further relied upon
the assurances of the managements of Petrohawk and Mission that
they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the
financial projections of Petrohawk and Mission, upon advice of
Petrohawk and Mission, respectively, we have assumed that such
projections have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
managements of Petrohawk and Mission as to the future financial
performance of Petrohawk and Mission, respectively, and that
each of Petrohawk and Mission will perform substantially in
accordance with such projections. Upon advice of Petrohawk and
Mission, respectively, we have assumed that the reserve and
related estimates have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments
of the managements of Petrohawk and Mission, respectively, and
that the reserve estimates will be realized substantially in
accordance therewith. Upon the advice of Petrohawk, we have
assumed that the amounts and timing of the hedging contracts are
reasonable and that their impact will be realized substantially
in accordance with such estimates. In arriving at our opinion,
we have not conducted a physical inspection of the properties
and facilities of Petrohawk and Mission and have not made or
obtained from third parties other than Netherland,
Sewell & Associates, Inc. any evaluations or appraisals
of the assets and liabilities of Petrohawk and Mission.
With respect to all legal, accounting, and tax matters arising
in connection with the Merger, we have relied without
independent verification on the accuracy and completeness of the
advice provided to Petrohawk and Mission by their legal counsel,
accountants, and other financial advisers. Based on that advice,
we have assumed that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and therefore as a tax-free
transaction to the stockholders of Petrohawk.
B-2
In arriving at this Opinion, Sanders Morris Harris Inc.
(SMH) did not attribute any particular weight to any
analysis or factor considered by it. Accordingly, SMH believes
that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process
underlying this Opinion.
SMH will receive a fee upon the delivery of this Opinion. In
addition, Petrohawk has agreed to indemnify us for certain
liabilities that may arise out of our engagement. SMH has not
performed investment banking services for Petrohawk or Mission
in the past or received fees for other services. In the ordinary
course of business, SMH or its affiliates may actively trade in
Petrohawks and/or Missions securities for its own
accounts and for the accounts of SMHs customers and,
accordingly, may at any time hold a long or short position in
such securities.
This Opinion is for the use and benefit of the Board of
Directors of the Petrohawk and is provided to the Board of
Directors in connection with its consideration of the Proposed
Transaction and is not intended to be and does not constitute a
recommendation to any shareholder of the Petrohawk or Mission as
to how such shareholder should vote with respect to the Merger.
In addition, we express no opinion as to the price at which
shares of common stock of Petrohawk actually will trade
following announcement of the Merger.
Our Opinion is based upon market, economic, financial and other
conditions as they exist and can be evaluated on, and on the
information available to us as of, the date of this letter. SMH
consents to the inclusion of the text of this Opinion in any
notice or appropriate disclosure to the public shareholders of
Petrohawk and in any filing Petrohawk is required by law to make.
Based upon and subject to the foregoing, it is our Opinion that,
as of the date hereof, the Consideration to be paid by Petrohawk
in the Merger is fair, from a financial point of view, to
Petrohawk.
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Sanders Morris Harris Inc. |
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G. Clyde Buck |
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Managing Director |
B-3
Annex C
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
April 3, 2005
Board of Directors
Mission Resources Corporation
1331 Lamar, Suite 1455
Houston, Texas 77010
Members of the Board of Directors:
Mission Resources Corporation (the Company),
Petrohawk Energy Corporation (the Acquiror) and
Petrohawk Acquisition Corporation, a wholly owned subsidiary of
the Acquiror (Acquisition Sub), propose to enter
into an Agreement and Plan of Merger (the Agreement)
pursuant to which the Company will be merged with Acquisition
Sub in a transaction (the Merger) in which each
outstanding share of the Companys common stock, par value
$.01 per share (together with the associated stock purchase
rights, the Company Shares), will be converted into
the right to receive, at the election of the holder thereof,
subject to proration and other adjustments set forth in the
Agreement, either (i) shares of common stock, par value
$.001 per share, of the Acquiror (Acquiror
Shares) or (ii) cash, in each case having a value
equal to the sum of $3.26 plus the value of .4631 Acquiror
Shares based on the Final Parent Stock Price as defined in the
Merger Agreement (such consideration, the Merger
Consideration). The number of Acquiror Shares to be
received by a holder of Company Shares electing to receive
Acquiror Shares in the Merger, and the amount of cash to be
received by a holder of Company Shares electing to receive cash
in the Merger will vary based on the Final Parent Stock Price as
provided in the Merger Agreement.
You have asked us whether, in our opinion, the Merger
Consideration is fair from a financial point of view to the
holders of the Company Shares other than the Acquiror and its
affiliates.
In arriving at the opinion set forth below, we have, among other
things:
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(1) Reviewed certain publicly available business and
financial information relating to the Company and the Acquiror
that we deemed to be relevant; |
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(2) Reviewed certain information, including financial
forecasts, relating to the business, earnings, hydrocarbon
production, cash flow, assets, liabilities and prospects of the
Company and the Acquiror furnished to us by the Company and the
Acquiror, respectively; |
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(3) Reviewed certain proved oil and gas reserve data
furnished to us by the Company and the Acquiror, including the
report of Netherland, Sewell & Associates, Inc. dated
February 10, 2005 with respect to the proved oil and gas
reserves and related future revenues of the Company as of
December 31, 2004 and the report of Netherland,
Sewell & Associates, Inc. dated March 1, 2005 with
respect to the proved oil and gas reserves and related future
revenues of the Acquiror as of December 31, 2004, as
well as information relating to potential future drilling sites
and probable oil and gas reserves of the Company and the
probable and possible oil and gas reserves of the Acquiror
furnished to us by the Company and the Acquiror, respectively; |
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(4) Conducted discussions with members of senior management
and representatives of the Company and the Acquiror concerning
the matters described in clauses 1, 2 and 3 above, as well
as their respective businesses and prospects before and after
giving effect to the Merger; |
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(5) Reviewed the market prices and valuation multiples for
the Company Shares and the Acquiror Shares and compared them
with those of certain publicly traded companies that we deemed
to be relevant; |
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(6) Reviewed the results of operations of the Company and
the Acquiror and compared them with those of certain publicly
traded companies that we deemed to be relevant; |
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(7) Compared the proposed financial terms of the Merger
with the financial terms of certain other transactions that we
deemed to be relevant; |
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(8) Participated in certain discussions and limited
negotiations concerning the Merger among representatives of the
Company and the Acquiror and their financial and legal advisors; |
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(9) Reviewed the potential pro forma impact of the Merger; |
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(10) Reviewed the Agreement dated April 3,
2005; and |
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(11) Reviewed such other financial studies and analyses and
took into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions. |
In preparing our opinion, we have assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to us, discussed with or reviewed by or
for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the
assets or liabilities of the Company or the Acquiror or been
furnished with any such evaluation or appraisal (other than
reserve reports referred to herein), nor have we evaluated the
solvency or fair value of the Company or the Acquiror under any
state or federal laws relating to bankruptcy, insolvency or
similar matters. In addition, we have not assumed any obligation
to conduct any physical inspection of the properties or
facilities of the Company or the Acquiror. With respect to the
oil and gas reserve reports, hydrocarbon production forecasts
and other financial forecast information furnished to or
discussed with us by the Company or the Acquiror, we have
assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the
Companys or the Acquirors management as to the
expected future financial performance of the Company or the
Acquiror, as the case may be, and of their respective petroleum
engineers as to their respective oil and gas reserves, related
future revenues and associated costs. We have further assumed
that the Merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have also assumed that
the final form of the Agreement will be substantially similar to
the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof. We have
assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for
the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed
that will have a material adverse effect on the contemplated
benefits of the Merger.
In connection with the preparation of this opinion, we have not
been authorized by the Company or the Board of Directors to
solicit, nor have we solicited, third-party indications of
interest for the acquisition of all or any part of the Company.
We are acting as financial advisor to the Company in connection
with the Merger and will receive a fee from the Company for our
services contingent upon the delivery of this opinion. In
addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past,
provided financial advisory services to the Company and may
continue to do so, and may receive fees for the rendering of
such services. In addition, in the ordinary course of our
business, we may actively trade the Company Shares and other
securities of the Company, as well as the Acquiror Shares and
other securities of the Acquiror, for our own account and for
the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
This opinion is for the use and benefit of the Board of
Directors of the Company. Our opinion does not address the
merits of the underlying decision by the Company to engage in
the Merger and does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the
proposed Merger or any matter related thereto, or as to the type
of consideration such shareholder should elect to
C-2
receive in the Merger. In addition, you have not asked us to
address, and this opinion does not address, the fairness to, or
any other consideration of, the holders of any class of
securities, creditors or other constituencies of the Company,
other than the holders of the Company Shares.
We are not expressing any opinion herein as to the prices at
which the Company Shares or the Acquiror Shares will trade
following the announcement or consummation of the Merger.
On the basis of and subject to the foregoing, we are of the
opinion that, as of the date hereof, the Merger Consideration is
fair from a financial point of view to the holders of the
Company Shares other than the Acquiror and its affiliates.
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/s/ |
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED |
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MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED |
C-3
Annex D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this
section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to
§ 228 of this title shall be entitled to an appraisal
by the Court of Chancery of the fair value of the
stockholders shares of stock under the circumstances
described in subsections (b) and (c) of this section.
As used in this section, the word stockholder means
a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words
stock and share mean and include what is
ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
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(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of
§ 251 of this title. |
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(2) Notwithstanding paragraph (1) of this
subsection, appraisal rights under this section shall be
available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except: |
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a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof; |
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders; |
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c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or |
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d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph. |
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(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation. |
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
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(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or |
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(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then, either a
constituent corporation before the effective date of the merger
or consolidation, or the surviving or resulting corporation
within ten days thereafter, shall notify each of the holders of
any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, |
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provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which
the notice is given. |
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections
(a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw
such stockholders demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after such stockholders written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining
their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section
and who has submitted such stockholders certificates of
stock to the Register in Chancery, if such is required, may
D-3
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in
subsection (e) of this section or thereafter with the
written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms
as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 20. |
Indemnification of Directors and Officers |
The bylaws of Petrohawk provide that the corporation shall
indemnify to the fullest extent authorized by law any person
made or threatened to be made a party to any action or
proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or
was a director or officer of Petrohawk or any predecessor of
Petrohawk or serves or served any other enterprise as a
director, officer, employee or agent at the request of Petrohawk
or any predecessor of Petrohawk. Petrohawk may also indemnify
any person made or threatened to be made a party to any action
or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or
was an employee or agent of Petrohawk or any predecessor of
Petrohawk or serves or served any other enterprise as a
director, officer, employee or agent at the request of Petrohawk
or any predecessor of Petrohawk.
If any director or officer of Petrohawk has been successful on
the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding paragraph, or in defense
of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys fees)
actually and reasonably incurred by such person in connection
therewith.
Petrohawk maintains insurance to protect itself and its
directors, officers, employees and agents against all expenses,
liability and loss (including attorneys fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement), whether or not the corporation would have
the power to indemnify such person against such expense,
liability or loss under the applicable provisions of the DGCL.
The Petrohawk bylaws also provide that Petrohawk may, in its
discretion, pay the expenses (including attorneys fees)
incurred in defending any civil, criminal, administrative or
investigative action, suit or proceeding in advance of its final
disposition; provided, however, that expenses (including
attorneys fees) incurred by a present or former officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by
Petrohawk in advance of the final disposition of such action,
suit or proceeding upon receipt by Petrohawk of an undertaking
by or on behalf of such officer or director to repay all such
amounts advanced if it should ultimately be determined that such
person is not entitled to be indemnified by Petrohawk.
|
|
|
|
|
|
2 |
.1 |
|
Agreement and Plan of Merger, dated as of April 3, 2005, by
and among the Registrant, Petrohawk Acquisition Corporation, and
Mission Resources Corporation (included as Annex A to the
joint proxy statement/ prospectus in Part I of this
Registration Statement). |
|
5 |
.1* |
|
Opinion of Thompson & Knight LLP as to the legality of
the securities. |
|
8 |
.1 |
|
Form of Tax Opinion of Thompson & Knight LLP. |
|
8 |
.2 |
|
Form of Tax Opinion of Porter & Hedges, L.L.P. |
|
23 |
.1 |
|
Consent of Thompson & Knight LLP (to be included in
opinion filed as Exhibit 5.1 and Exhibit 8.1). |
|
23 |
.2 |
|
Consent of Porter & Hedges, L.L.P. (to be included in
opinion filed as Exhibit 8.2). |
|
|
23 |
.3 |
|
Consent of Deloitte & Touche LLP, Independent
Registered Public Accounting Firm for Petrohawk Energy
Corporation. |
|
23 |
.4 |
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm for Mission Resources Corporation. |
|
23 |
.5 |
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm for Wynn-Crosby Energy, Inc. and affiliates. |
II-1
|
|
|
|
|
|
23 |
.6 |
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm for Beta Oil & Gas, Inc. |
|
23 |
.7 |
|
Consent of Hein & Associates, LLP, Independent
Registered Public Accounting Firm for Beta Oil & Gas,
Inc. |
|
23 |
.8 |
|
Consent of Netherland, Sewell & Associates, Inc.,
Petroleum Engineers for Petrohawk Energy Corporation and Mission
Resources Corporation. |
|
24 |
.1 |
|
Powers of Attorney (included on signature page hereto). |
|
99 |
.1* |
|
Form of Proxy for Holders of Mission Common Stock. |
|
99 |
.2* |
|
Form of Proxy for Holders of Petrohawk Common Stock. |
|
99 |
.3 |
|
Consent of Sanders Morris Harris Inc. |
|
99 |
.4 |
|
Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. |
|
|
* |
To be filed by amendment. |
Item 22. Undertakings
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrants annual report pursuant to
Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
The Registrant undertakes that every prospectus (1) that is
filed pursuant to the immediately preceding paragraph, or
(2) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or
II-2
other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
The undersigned Registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in Houston, Texas, on the 27th day of April,
2005.
|
|
|
PETROHAWK ENERGY
CORPORATION
|
|
|
|
|
Title: |
Chairman of the Board, President and Chief Executive Officer |
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Floyd
C. Wilson, Shane M. Bayless, and each of them severally, acting
alone and without the other, his or her true and lawful
attorney-in-fact with authority to execute the name of each such
person, and to file with the Securities and Exchange Commission,
together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation
post-effective amendments) to this Registration Statement
necessary or advisable to enable the registrant to comply with
the Securities Act, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such changes in this
Registration Statement as the aforesaid attorney-in-fact deems
appropriate.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
/s/ FLOYD C. WILSON
Floyd
C. Wilson |
|
Chairman of the Board of Directors, President and Chief
Executive Officer (Principal Executive Officer) |
|
April 27, 2005 |
|
/s/ SHANE M. BAYLESS
Shane
M. Bayless |
|
Chief Financial Officer, Vice President and Treasurer (Principal
Financial Officer and Principal Accounting Officer) |
|
April 27, 2005 |
|
/s/ TUCKER S. BRIDWELL
Tucker
S. Bridwell |
|
Director |
|
April 27, 2005 |
|
/s/ JAMES L. IRISH III
James
L. Irish III |
|
Director |
|
April 27, 2005 |
|
/s/ DAVID B. MILLER
David
B. Miller |
|
Director |
|
April 27, 2005 |
|
/s/ D. MARTIN PHILLIPS
D.
Martin Phillips |
|
Director |
|
April 27, 2005 |
II-4
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
/s/ DANIEL A. RIOUX
Daniel
A. Rioux |
|
Director |
|
April 27, 2005 |
|
/s/ ROBERT C. STONE, JR.
Robert
C. Stone, Jr. |
|
Director |
|
April 27, 2005 |
II-5
INDEX TO EXHIBITS
|
|
|
|
|
|
2 |
.1 |
|
Agreement and Plan of Merger, dated as of April 3, 2005, by
and among the Registrant, Petrohawk Acquisition Corporation, and
Mission Resources Corporation (included as Annex A to the
joint proxy statement/ prospectus in Part I of this
Registration Statement). |
|
5 |
.1* |
|
Opinion of Thompson & Knight LLP as to the legality of
the securities. |
|
8 |
.1 |
|
Form of Tax Opinion of Thompson & Knight LLP. |
|
8 |
.2 |
|
Form of Tax Opinion of Porter & Hedges, L.L.P. |
|
23 |
.1 |
|
Consent of Thompson & Knight LLP (to be included in
opinion filed as Exhibit 5.1 and Exhibit 8.1). |
|
23 |
.2 |
|
Consent of Porter & Hedges, L.L.P. (to be included in
opinion filed as Exhibit 8.2). |
|
23 |
.3 |
|
Consent of Deloitte & Touche LLP, Independent
Registered Public Accounting Firm for Petrohawk Energy
Corporation. |
|
23 |
.4 |
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm for Mission Resources Corporation. |
|
23 |
.5 |
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm for Wynn-Crosby Energy, Inc. and affiliates. |
|
23 |
.6 |
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm for Beta Oil & Gas, Inc. |
|
23 |
.7 |
|
Consent of Hein & Associates, LLP, Independent
Registered Public Accounting Firm for Beta Oil & Gas,
Inc. |
|
23 |
.8 |
|
Consent of Netherland, Sewell & Associates, Inc.,
Petroleum Engineers for Petrohawk Energy Corporation and Mission
Resources Corporation. |
|
24 |
.1 |
|
Powers of Attorney (included on signature page hereto). |
|
99 |
.1* |
|
Form of Proxy for Holders of Mission Common Stock. |
|
99 |
.2* |
|
Form of Proxy for Holders of Petrohawk Common Stock. |
|
99 |
.3 |
|
Consent of Sanders Morris Harris Inc. |
|
99 |
.4 |
|
Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. |
|
|
* |
To be filed by amendment. |
II-6