\nXV. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32<\/p>\nXVI. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32<\/p>\n
XVII. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
\n<\/c><\/c><\/s><\/table>\n
iv
\n 6
\n AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
This Agreement and Plan of Reorganization (this “Agreement”), dated
\nJanuary 31, 1996, by and among TOM BROWN, INC. (“TBI”), a Delaware corporation,
\nTBI ACQUISITION, INC. (“TBI ACQUISITION”), a Delaware corporation and wholly
\nowned subsidiary of TBI, K N ENERGY, INC. (“KNE”), a Kansas corporation, and
\nKN PRODUCTION COMPANY (“KNPC”), a Delaware Corporation and wholly owned
\nsubsidiary of KNE. TBI ACQUISITION and KNPC are hereinafter sometimes
\ncollectively referred to as the “Constituent Corporations”.<\/p>\n
WITNESSETH:<\/p>\n
TBI, TBI ACQUISITION, KNPC and KNE have reached an agreement for the
\nmerger of TBI ACQUISITION with and into KNPC (the “Merger”) in accordance with
\nthe applicable provisions of the laws of the State of Delaware. TBI, TBI
\nACQUISITION, KNPC and KNE wish to enter into this definitive agreement setting
\nforth the terms and conditions of the Merger.<\/p>\n
For federal income tax purposes, it is intended that the Merger shall
\nqualify as a reorganization within the meaning of Section 368(a) of the
\nInternal Revenue Code of 1986, as amended (the “Code”).<\/p>\n
For and in consideration of the foregoing and of the mutual covenants,
\nagreements, representations and warranties hereinafter contained, TBI, TBI
\nACQUISITION, KNE and KNPC hereby agree as follows:<\/p>\n
I. TRANSACTIONS AND TERMS OF MERGER<\/p>\n
1.1 Merger. Subject to the terms of this Agreement, on the
\nEffective Date (as defined in Section 1.2), TBI ACQUISITION shall be merged
\nwith and into KNPC, and the separate existence of TBI ACQUISITION shall
\nthereupon cease, all in accordance with the applicable provisions of the
\nGeneral Corporation Law of the State of Delaware (“DGCL”). KNPC shall be the
\nsurviving corporation of the Merger (sometimes referred to herein as the
\n“Surviving Entity”) and shall continue to be governed by the DGCL and the
\nseparate corporate existence of KNPC and all of its rights, privileges,
\nimmunities and franchises, public and private, and all of its duties and
\nliabilities as a corporation organized under the DGCL, will continue unaffected
\nby the Merger. All rights and obligations, and all assets and liabilities of
\nTBI Acquisition, possessed by it at the Effective Date shall be transferred to,
\nassumed by and vested in the Surviving Entity.<\/p>\n
1.2 Effective Time of Merger. Contemporaneously with the closing
\nof the transactions contemplated by this Agreement, the parties hereto shall
\ncause the Merger to be consummated by filing a Certificate of Merger (the
\n“Certificate of Merger”) with the Secretary of State of the State of Delaware,
\nin such form as required by, and executed in accordance with, the relevant
\nprovisions of the DGCL (the date and time of such filing, or such later date
\nand<\/p>\n
1
\n 7
\ntime as may be agreed upon by TBI and KNE and set forth therein, being called
\nthe “Effective Date”). Notwithstanding the foregoing, the parties hereto agree
\nthat upon the filing of the Certificate of Merger, the transactions
\ncontemplated by this Agreement shall be deemed for all economic purposes to
\nhave been effective as of the close of business on December 31, 1995.<\/p>\n
1.3 Certificate of Incorporation. From and after the Effective
\nDate, and until thereafter amended as provided by law, the Certificate of
\nIncorporation of KNPC as in effect immediately prior to the Effective Date
\nshall continue to be the Certificate of Incorporation of the Surviving Entity;
\nprovided, however, Article First of the Certificate of Incorporation of KNPC
\nshall be amended to change the name of the Surviving Entity to TBI Production
\nCompany.<\/p>\n
1.4 Bylaws. From and after the Effective Date, and until
\nthereafter amended as provided by law, the Bylaws of KNPC as in effect
\nimmediately prior to the Effective Date shall continue to be the Bylaws of the
\nSurviving Entity.<\/p>\n
1.5 Directors and Officers. On the Effective Date, the persons
\nwho are serving as the officers and directors of TBI ACQUISITION immediately
\nprior to the Effective Date shall become the officers and directors,
\nrespectively, of the Surviving Entity. Such persons shall serve until their
\nsuccessors have been elected and qualified in accordance with law and the
\nCertificate of Incorporation and Bylaws of the Surviving Entity.<\/p>\n
1.6 Manner and Basis of Converting Shares.<\/p>\n
(a) On the Effective Date, the 100,000 issued and outstanding
\n shares of common stock, $0.01 par value, of KNPC (the “KNPC Common
\n Stock”), the same being all of the issued and outstanding shares of
\n KNPC stock, and all of which is owned by KNE, shall, in the aggregate
\n and by virtue of the Merger and without any action on the part of the
\n holder thereof, be converted into 1,000,000 shares of $1.75
\n Convertible Preferred Stock, Series A, $0.10 par value, of TBI (the
\n “TBI Preferred Stock”) having the terms set forth on Exhibit A
\n attached hereto and 918,367 shares of common stock, $0.10 par value,
\n of TBI (the “TBI Common Stock”).<\/p>\n
(b) On the Effective Date, the 10,000 issued and
\n outstanding shares of common stock, $0.10 par value, of TBI
\n ACQUISITION (the “TBI ACQUISITION Stock”), the same being all of the
\n issued and outstanding shares of TBI ACQUISITION stock, and all of
\n which is owned by TBI, shall, in the aggregate and by virtue of the
\n Merger and without any action on the part of the holder thereof, be
\n converted into an aggregate of 100,000 fully paid and nonassessable
\n shares of the common stock, $0.01 par value, of the Surviving Entity.<\/p>\n
(c) Any shares of KNPC capital stock held in the treasury
\n of KNPC shall automatically be cancelled and no shares or other
\n securities shall be issuable, and no cash shall be paid, with respect
\n thereto.<\/p>\n
2
\n 8
\n (d) Immediately after the Effective Date and as a part of
\n the Closing, KNE, as the sole owner and holder of all outstanding
\n certificates theretofore representing all of the outstanding KNPC
\n Common Stock, upon receipt by KNE of stock certificates registered in
\n its name representing the TBI Preferred Stock and the TBI Common
\n Stock, shall deliver such certificates representing all of the KNPC
\n Common Stock to TBI (in proper form for transfer to TBI).<\/p>\n
1.7 Time and Place of Closing. A closing of the transactions
\ncontemplated hereby (the “Closing”) shall take place at 9:00 o’clock A.M. on
\nWednesday, January 31, 1996, or as soon as practicable thereafter as the
\nconditions set forth herein are satisfied or waived and contemporaneously with
\nthe filing of the Certificate of Merger, at the offices of KNE, 370 Van Gordon
\nStreet, Lakewood, Colorado, or at such other location as the parties may agree
\nin writing. The date on which the Closing occurs is referred to as the
\n“Closing Date”. At the Closing, the documents required to be delivered by the
\nparties shall be exchanged (including properly endorsed stock certificates
\nrepresenting all of the KNPC Common Stock, the TBI Preferred Stock and the TBI
\nCommon Stock), and the Certificate of Merger will be executed, certified,
\nacknowledged and filed as provided in Section 1.2.<\/p>\n
II. REPRESENTATIONS AND WARRANTIES OF TBI AND TBI ACQUISITION<\/p>\n
TBI and TBI ACQUISITION each jointly and severally represent and
\nwarrant to KNPC and KNE as follows:<\/p>\n
2.1 Organization and Standing. TBI and TBI ACQUISITION are each
\ncorporations duly organized, validly existing and in good standing under the
\nlaws of the State of Delaware and have full corporate power to conduct their
\nbusiness as it is now being conducted. Copies of the Certificates of
\nIncorporation and Bylaws of TBI and TBI ACQUISITION have been delivered to KNE,
\nand such copies are complete and correct and in full force and effect on the
\ndate of this Agreement. TBI and TBI ACQUISITION are both duly qualified to do
\nbusiness and are in good standing as foreign corporations in all jurisdictions
\nwhere the character of their properties or the nature of their activities makes
\nsuch qualification necessary and where the failure to be so qualified would
\nhave a Material Adverse Effect (as defined in Section 2.9 hereof) on the
\nbusiness or financial condition of TBI or TBI ACQUISITION.<\/p>\n
2.2 No Conflict With Other Documents. Neither the execution and
\ndelivery of this Agreement nor the carrying out of the transactions
\ncontemplated hereby will result in any violation, termination or modification
\nof, or be in conflict with, TBI’s or TBI ACQUISITION’s Certificates of
\nIncorporation or Bylaws, any terms of any contracts or other instruments to
\nwhich TBI or TBI ACQUISITION is a party, or any judgment, decree or order
\napplicable to TBI or TBI ACQUISITION, or result in the creation of any lien,
\ncharge or encumbrance upon any of the properties or assets of TBI or TBI
\nACQUISITION.<\/p>\n
3
\n 9
\n 2.3 Authority. The execution, delivery and performance of this
\nAgreement by TBI and TBI ACQUISITION have been duly authorized by their
\nrespective Boards of Directors, and this Agreement is a valid, legally binding
\nand enforceable obligation of TBI and TBI ACQUISITION.<\/p>\n
2.4 Authorization for Shares. On the Closing Date the shares of
\nTBI Preferred Stock and the shares of TBI Common Stock referred to in Section
\n1.6(a) of this Agreement will have been duly authorized and, when issued in the
\nMerger, will have been legally and validly issued and will be fully paid and
\nnonassessable and no stockholder of TBI will have any preemptive right of
\nsubscription or purchase in respect thereof. The shares of TBI Common Stock
\nissuable upon conversion of the TBI Preferred Stock are duly authorized and
\nreserved for issuance and, when issued in accordance with the terms of the TBI
\nPreferred Stock, will be validly issued, fully paid, nonassessable and free of
\npreemptive rights.<\/p>\n
2.5 TBI Reports. Since December 31, 1992, TBI has filed on a
\ntimely basis with the United States Securities and Exchange Commission (the
\n“Commission”) all forms, reports and documents required to be filed by it
\n(collectively, the “TBI SEC Reports”) pursuant to the federal securities laws
\nand the Rules and Regulations (defined below), all of which have complied as of
\ntheir respective filing dates in all material respects with the applicable
\nprovisions of the Securities Act of 1933, as amended (the “Securities Act”),
\nand the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
\nthe Rules and Regulations promulgated by the Commission thereunder (the “Rules
\nand Regulations”), and none of the TBI SEC Reports, including without
\nlimitation, any financial statements or schedules included therein, at the time
\nfiled, contained any untrue statement of a material fact or omitted to state
\nany material fact required to be stated therein or necessary in order to make
\nthe statements therein, in light of the circumstances under which they were
\nmade, not misleading. TBI has heretofore delivered or made available to KNE,
\nin the form filed with the SEC, all of the TBI SEC Reports.<\/p>\n
2.6 Consents and Approvals. Neither the execution and delivery of
\nthis Agreement by TBI or TBI ACQUISITION nor the consummation of the
\ntransactions contemplated hereby will require any consent, approval,
\nauthorization or permit of, or filing with or notification to, any governmental
\nor regulatory authority, except (i) for filings required under the Exchange
\nAct, (ii) for notification pursuant to, and expiration or termination of the
\nwaiting period under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
\nas amended (the “HSR Act”), (iii) for filing and recording of the Certificate
\nof Merger pursuant to the DGCL and (iv) such consents as have been obtained or
\nwill be obtained prior to Closing.<\/p>\n
2.7 Capitalization. TBI’s authorized capital stock consists of
\n(i) 30,000,000 shares of common stock, $0.10 par value, per share, of which
\n21,114,144 were issued and outstanding as of January 1, 1996, and (ii)
\n2,500,000 shares of preferred stock, $0.10 par value per share, of which
\n1,000,000 shares were issued and outstanding as of January 1, 1996 (inclusive
\nof the shares issued pursuant to the Merger). Since January 1, 1996, no shares
\nof common stock of TBI have been issued except upon exercise of employee and
\ndirector stock options or pursuant to employee benefit plans. As of January 1,
\n1996 there were outstanding options to purchase<\/p>\n
4
\n 10
\n1,610,350 shares of common stock of TBI and no options have been granted after
\nJanuary 1, 1996, except for options granted to employees and directors under
\nexisting stock option plans in the ordinary course of business. Except for
\nsuch stock options and TBI’s Shareholder Rights Plan, there are no existing
\noptions, warrants, calls, subscriptions, or other rights or other agreements or
\ncommitments obligating TBI to issue, transfer or sell any shares of capital
\nstock of TBI. There are no voting trusts or other agreements or understandings
\nto which TBI is a party with respect to the voting of capital stock of TBI.<\/p>\n
2.8 Financial Statements. The audited consolidated financial
\nstatements of TBI contained in the TBI SEC Reports were prepared in accordance
\nwith generally accepted accounting principles, consistently applied throughout
\nthe periods covered by such statements (“GAAP”), and present fairly TBI’s
\nconsolidated financial condition and the consolidated results of its operations
\nas of the relevant dates thereof and for the periods covered thereby.<\/p>\n
2.9 Absence of Certain Changes. Except as disclosed in TBI’s SEC
\nReports (without further amendment), since September 30, 1995 there has not
\nbeen any (i) change in the financial condition, results of operations or
\nbusiness of TBI and its subsidiaries, taken as a whole (except for changes due
\nto general economic or industry-wide conditions) or (ii) other events or
\nconditions of any character that, individually or in the aggregate, have or
\nwould reasonably be expected to have an adverse effect of $1,000,000 or more (a
\n“Material Adverse Effect”) upon the financial condition, business or operations
\nof TBI and its subsidiaries, taken as a whole.<\/p>\n
2.10 Absence of Undisclosed Liabilities. Neither TBI nor any
\nsubsidiary has any material indebtedness, liability or obligation, contingent
\nor otherwise, of the type required by GAAP to be reflected on a balance sheet
\nthat is not reflected or reserved against in the balance sheet dated as of
\nSeptember 30, 1995 (which is included in TBI’s Form 10-Q Report for the interim
\nperiod then ended) or otherwise disclosed in TBI’s SEC Reports, except for such
\nindebtedness, liabilities or obligations which have arisen after such date in
\nthe ordinary course of business.<\/p>\n
2.11 Compliance. Each of TBI and its subsidiaries has all
\nlicenses, franchises, certificates, consents, permits and authorizations from
\nall governmental authorities necessary for the lawful conduct of its business,
\nexcept where the failure to hold any of the foregoing would not have a Material
\nAdverse Effect upon the financial condition, business or operations of TBI.
\nNeither TBI nor any subsidiary has violated, nor is it in violation of, any
\nsuch licenses, franchises, certificates, consents, permits or authorizations or
\nany applicable statutes, laws, ordinances, rules and regulations (including,
\nwithout limitation, any of the foregoing related to occupational safety,
\nconservation, unfair competition, labor practices or corrupt practices) of any
\ngovernmental authorities, except where such violations do not, and insofar as
\nreasonably can be foreseen will not, have a Material Adverse Effect upon the
\nfinancial condition, business or operations of TBI and its subsidiaries, taken
\nas a whole, and, except as disclosed in the TBI SEC Reports, neither TBI nor
\nany subsidiary has received any notice from a governmental or regulatory
\nauthority within three years of the date hereof of any such violation. This
\nSection 2.11 shall not apply to any matters involving product registration,
\npollution control or<\/p>\n
5
\n 11
\nenvironmental contamination or any matters arising under any Environmental Laws
\n(as that term is defined in Section 2.16 hereof), which matters will be
\ngoverned by Section 2.16 of this Agreement.<\/p>\n
2.12 Tax Matters.<\/p>\n
(a) All tax returns required to be filed by TBI and its
\nsubsidiaries before the date hereof with respect to any of their income,
\nproperties or operations, are in all material respects true, complete and
\ncorrect and have been duly filed in a timely manner, and all taxes required to
\nhave been paid in connection with such tax returns have been paid, except where
\nthe failure to so file or pay would not have a Material Adverse Effect upon the
\nfinancial condition, business or operations of TBI and its subsidiaries, taken
\nas a whole.<\/p>\n
(b) To TBI’s knowledge, (i) there are no claims, investigations or
\nassessments pending or threatened against TBI and its subsidiaries for any
\nalleged deficiency in taxes, and (ii) there is no audit or investigation
\ncurrently being conducted that could cause TBI or its subsidiaries to be liable
\nfor any taxes, which in any case would have a Material Adverse Effect upon the
\nfinancial condition, business or operations of TBI and its subsidiaries, taken
\nas a whole.<\/p>\n
(c) TBI and its subsidiaries have complied in all material
\nrespects with all tax withholding provisions of applicable federal, state and
\nlocal laws and have paid over to the proper governmental authorities all
\namounts required to be so withheld or paid over before the date hereof, except
\nwhere the failure to so withhold would not have a Material Adverse Effect upon
\nthe financial condition, business or operations of TBI and its subsidiaries,
\ntaken as a whole.<\/p>\n
(d) Neither TBI nor any of its affiliates has taken or agreed to
\ntake any action that would prevent the Merger from constituting a
\nreorganization qualifying under the provisions of Section 368(a) of the Code.<\/p>\n
(e) Neither TBI nor TBI ACQUISITION is an investment company as
\ndefined in Section 368(a)(2)(F)(iii) and (iv) of the Code.<\/p>\n
(f) Neither TBI nor TBI ACQUISITION is under the jurisdiction of a
\ncourt in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
\nof the Code.<\/p>\n
(g) There is no intercorporate indebtedness existing between TBI
\nand KNPC or between TBI ACQUISITION and KNPC that was issued or acquired or
\nthat will be settled at a discount.<\/p>\n
2.13 Litigation. There are no claims, actions, suits, proceedings
\nor investigations pending or, to the knowledge of TBI, threatened against TBI
\nor any of its subsidiaries, or any properties or rights of TBI or any of its
\nsubsidiaries, before any court, arbitrator, administrative, governmental or
\nregulatory authority or body, domestic or foreign, that, in the event of an
\nadverse decision or outcome, could reasonably be expected to have a Material
\nAdverse Effect<\/p>\n
6
\n 12
\nupon the financial condition, business or operations of TBI and its
\nsubsidiaries, taken as a whole.<\/p>\n
2.14 Title to Property. TBI and each of its subsidiaries have good
\nand defensible title to all of their properties and assets, free and clear of
\nall liens, charges and encumbrances, except those reflected in the financial
\nstatements included in the TBI SEC Reports or in the notes to such financial
\nstatements, liens for taxes not yet due and payable, materialman’s, mechanic’s,
\nrepairman’s, employee’s, contractor’s, operator’s and other similar liens and
\nimperfections or charges arising in the ordinary course of business (i) if they
\nhave not been filed pursuant to law, (ii) if so filed, they have not yet become
\ndue and payable or payment is being withheld as provided by law, or (iii) if
\ntheir validity is being contested in good faith by appropriate actions and such
\nother liens or imperfections of title, if any, as are in the nature of
\ncustomary defects expected to be encountered in the area involved and
\ncustomarily acceptable to prudent operators and interest owners in the area and
\nwhich do not materially detract from the value of or interfere with the present
\nuse of the property affected thereby (all of such liens, charges, encumbrances,
\nimperfections and defects which are so permitted are herein called “Permitted
\nImperfections”).<\/p>\n
2.15 Other Vote Required. No vote of the holders of any class or
\nseries of TBI’s capital stock is necessary to approve the issuance of the TBI
\nPreferred Stock or the TBI Common Stock in the Merger.<\/p>\n
2.16 Environmental Laws and Regulations. Except as disclosed in
\nthe TBI SEC Reports, TBI is in compliance in all material respects with all
\napplicable federal, state and local laws and regulations relating to product
\nregistration, pollution control and environmental contamination including, but
\nnot limited to, all laws and regulations governing the generation, use,
\ncollection, discharge or disposal of Hazardous Materials as herein defined and
\nall laws and regulations with regard to record keeping, notification and
\nreporting requirements respecting Hazardous Materials (collectively,
\n“Environmental Laws”). Except as disclosed in the TBI SEC Reports, TBI has not
\nbeen alleged to be in violation of, or has not been subject to any
\nadministrative or judicial proceeding pursuant to Environmental Laws, either
\nnow or anytime during the past three years. There are no facts or
\ncircumstances known to TBI which TBI reasonably expects could form the basis
\nfor the assertion of any Charge (as defined below) against TBI relating to
\nproduct registration, pollution control or environmental contamination
\nincluding, but not limited to, any Charge arising from past or present
\nenvironmental practices asserted under CERCLA (as defined below) and RCRA (as
\ndefined below) or any other Environmental Law, which TBI believes might have a
\nmaterial adverse affect on the business, results of operations, financial
\ncondition or prospects of TBI.<\/p>\n
For purposes of this section, the following terms shall have the
\nfollowing meanings:<\/p>\n
“Hazardous Materials” shall mean materials defined as
\n “hazardous substances” or “hazardous waste” or “solid wastes”
\n (including petroleum, petroleum products and oils) (i) the
\n Comprehensive Environmental Response Compensation and Liability Act of
\n 1980, and any amendments thereto<\/p>\n
7
\n 13
\n (“CERCLA”), (ii) the Resource Conservation and Recovery Act and any
\n amendments thereto (“RCRA”), and (iii) any similar federal, state or
\n local environmental statutes; and “Charge” shall mean any and all
\n claims, demands, causes of action, suits, proceedings, administrative
\n proceedings, losses, judgments, decrees, debts, damages, liabilities,
\n court costs, attorney’s fees and any other expenses incurred, assessed
\n or sustained by or against TBI.<\/p>\n
III. REPRESENTATIONS AND WARRANTIES OF KNPC AND KNE<\/p>\n
KNPC and KNE each hereby jointly and severally represent and warrant
\nto TBI and TBI ACQUISITION as follows:<\/p>\n
3.1 Organization and Standing; Subsidiaries. KNE and KNPC are
\neach corporations duly organized, validly existing and in good standing under
\nthe laws of the States of Kansas and Delaware, respectively, and have full
\ncorporate power to carry on their respective business as it is now being
\nconducted and to own or hold under lease the properties and assets they now own
\nor hold under lease. KNPC has no subsidiaries (GASCO, Inc., formerly a wholly
\nowned subsidiary of KNPC, having been merged with and into KNPC, effective
\nJanuary 1, 1995). In addition, KNPC does not own, directly or indirectly, any
\ncapital stock or equity securities of any corporation or have any direct or
\nindirect equity or other ownership interest in any other business. Copies of
\nthe charter documents and bylaws of KNPC have been delivered to TBI, and such
\ncopies are complete and correct and in full force and effect. KNPC is duly
\nqualified to do business in all jurisdictions where the character of its
\nproperties or the nature of its activities makes such qualification necessary.<\/p>\n
3.2 Capitalization of KNPC. KNPC’s entire authorized capital
\nstock consists of 100,000 shares of common stock, $0.01 par value, all of which
\nare issued and outstanding and owned of record and beneficially owned by KNE.
\nAll such shares of KNPC Common Stock have been duly and validly issued and are
\nfully paid, non-assessable and free of any preemptive rights. KNE has good and
\ndefensible title to the KNPC Common Stock, free of liens, restrictions or
\nencumbrances of any kind. Neither KNPC nor KNE is a party to or bound by any
\noptions, calls, contracts or commitments of any character relating to any
\nissued or unissued stock or any other equity security issued or to be issued by
\nKNPC.<\/p>\n
3.3 Financial Statements. KNPC has delivered to TBI copies of
\nKNPC’s unaudited financial statements for the fiscal years ended December 31,
\n1992, December 31, 1993 and December 31, 1994 and KNPC’s unaudited financial
\nstatements for the ten month period ended October 31, 1995. These financial
\nstatements are true and complete in all material respects, have been prepared
\nin accordance with GAAP, and present fairly the financial position and results
\nof operations of KNPC at the dates of such statements and for the periods
\ncovered thereby.<\/p>\n
3.4 Absence of Undisclosed Liabilities. Except as and to the
\nextent reflected or reserved against in the unaudited balance sheets (including
\nthe notes thereto) included within KNPC’s financial statements referred to in
\nSection 3.3 of this Agreement or as disclosed in<\/p>\n
8
\n 14
\nSchedule 3.4, at the respective dates of such financial statements, KNPC had no
\nmaterial indebtedness, liability or obligation, contingent or otherwise, of a
\ntype required by GAAP to be reflected on a balance sheet that is not reflected
\nor reserved against in the KNPC balance sheet as of October 31, 1995, except
\nfor such indebtedness, liabilities or obligations which have arisen after such
\ndate in the ordinary course of business.<\/p>\n
3.5 Absence of Certain Changes. Since October 31, 1995, there has
\nnot been any (i) change in KNPC’s financial position, results of operations,
\nassets, liabilities, net worth or business of KNPC (except for changes due to
\ngeneral economic or industry-wide conditions) or (ii) other events or
\nconditions of any character that, in either case, individually or in the
\naggregate, have or would reasonably be expected to have a Material Adverse
\nEffect upon the financial condition, business or operations of KNPC.<\/p>\n
3.6 Accounts Receivable. The accounts receivable shown on the
\nbalance sheet contained in the October 31, 1995 financial statements of KNPC,
\nor those accounts receivable thereafter acquired by KNPC, have been collected
\nor are collectible in the normal course of business at the aggregate recorded
\namounts thereof less applicable reserves computed in accordance with past
\npractice, and such reserves are adequate.<\/p>\n
3.7 Inventories; Prepaid Items. The inventories of KNPC shown on
\nthe balance sheet of KNPC as of October 31, 1995 and those shown on Schedule
\n3.7 hereto, or those inventories thereafter acquired by KNPC, consisted of
\nitems of a quality and quantity usable or salable in the normal course of
\nbusiness; the value of all inventory items which were obsolete or of below
\nstandard quality were, at the date of such balance sheets, written off or down
\nto realizable market value, or adequate reserves were provided therefor; and
\nthe values at which such inventories are carried reflect KNPC’s normal
\ninventory valuation policy of stating inventories at cost or market, whichever
\nis lower. The prepaid items shown as assets on such balance sheet are
\nconsistent with past practice and are stated at proper values.<\/p>\n
3.8 Condition of Tangible Assets. All facilities, equipment and
\nother material items of tangible property and assets of KNPC are adequate,
\nsubject to routine maintenance, for the operations for which they are being
\nused by KNPC; such facilities and equipment are in good repair and operating
\ncondition, normal wear and tear excepted, and are sufficient for KNPC to
\noperate its business as it is currently being operated.<\/p>\n
3.9 Litigation. Except as set forth on Schedule 3.9 hereof, there
\nis no litigation, proceeding or governmental investigation pending or, to the
\nknowledge of KNPC or KNE, threatened against or relating to KNPC, its
\nproperties or businesses, or the transactions contemplated by this Agreement.
\nExcept as set forth on Schedule 3.9 hereof, KNPC is not subject to or bound by
\nany order of any court, regulatory commission, board or administrative body
\nentered in any proceeding to which it is a party or of which it or KNE have
\nknowledge. KNE agrees, represents and warrants that it will retain the
\nobligation of defending KNPC in that certain suit styled Grynberg v. K N., et
\nal, Cause No. 92 N 2000 in the United States District Court for Colorado (and
\nany other litigation or regulatory proceedings arising therefrom) and will
\nindemnify and hold TBI and KNPC harmless from any and all liability that may
\nresult from such suit.<\/p>\n
9
\n 15
\n 3.10 Intellectual Property. KNPC does not own or possess any
\ntrademarks, service marks, trade names, copyrights, licenses or franchises and
\nnone are necessary for the present and currently planned future conduct of its
\nbusiness.<\/p>\n
3.11 Compliance. KNPC has all licenses, franchises, certificates,
\nconsents, permits and authorizations from all governmental authorities
\nnecessary for the lawful conduct of its business, except where the failure to
\nhold any of the foregoing would not have a Material Adverse Effect upon the
\nfinancial condition, business or operations of KNPC. Schedule 3.11 fairly and
\naccurately summarizes and lists all material licenses, permits, approvals,
\nauthorizations and regulatory matters relating to the business or products of
\nKNPC. KNPC has not violated, nor is it in violation of, any such licenses,
\nfranchises, certificates, consents, permits or authorizations or any applicable
\nstatutes, laws, ordinances, rules and regulations (including, without
\nlimitation, any of the foregoing related to occupational safety, conservation,
\nunfair competition, labor practices or corrupt practices) of any governmental
\nauthorities, except where such violations do not, and insofar as reasonably can
\nbe foreseen will not, have a Material Adverse Effect upon the financial
\ncondition, business or operations of KNPC, and, except as disclosed on Schedule
\n3.11, KNPC has not received any notice from any governmental or regulatory
\nauthority within three years of the date hereof of any such violation. This
\nSection 3.11 shall not apply to any matters involving product registration,
\npollution control or environmental contamination or any matters arising under
\nany Environmental Laws (as that term is defined in Section 2.16 hereof), which
\nmatters will be governed by Section 3.24 of this Agreement.<\/p>\n
3.12 No Conflict With Other Documents. Except as shown on Schedule
\n3.12, neither the execution and delivery of this Agreement nor the carrying out
\nof the transactions contemplated hereby will result in any violation,
\ntermination or modification of, or be in conflict with, KNPC’s or KNE’s
\nCertificate of Incorporation or Bylaws, any terms of any contract or other
\ninstruments to which KNPC or KNE is a party, or any judgment, decree or order
\napplicable to KNPC or KNE, or result in the creation of any lien, charge or
\nencumbrance upon any of the properties or assets of KNPC or permit the
\ntermination or acceleration of the maturity of, any indebtedness for borrowed
\nmoney of KNPC, or permit the termination of, or trigger a right of first
\nrefusal under, or cause the loss of any right or option under any instrument to
\nwhich KNPC is a party or by which any of its property is bound.<\/p>\n
3.13 KNPC Authority. The execution, delivery and performance of
\nthis Agreement by KNPC has been duly authorized and approved by the Board of
\nDirectors of KNPC and this Agreement is a valid, legally binding and
\nenforceable obligation of KNPC. This Agreement and the other transactions
\ncontemplated hereunder have been, or will be prior to the Closing, approved by
\nKNE as the sole shareholder of KNPC, and all corporate authorizations required
\nfor consummation of the transactions contemplated by this Agreement have been,
\nor will be prior to the Closing, received and will continue to be in full force
\nand effect.<\/p>\n
3.14 KNE Authority. KNE has full power and authority to enter into
\nthis Agreement and to agree to the transactions contemplated hereby. This
\nAgreement has been duly executed and delivered by KNE and constitutes a valid
\nand legally binding and enforceable obligation of KNE.<\/p>\n
10
\n 16
\n 3.15 Contracts. Except as shown on Schedule 3.15 attached hereto
\n(the “Contract Schedule”), KNPC is not a party to or subject to: (a) any
\nemployment contract with any officer, consultant, director, employee; (b) any
\nplan or contract or arrangement providing for bonuses, pensions, options,
\ndeferred compensation, retirement payments, profit sharing or the like; (c) any
\ncontract or agreement with any labor union, (d) any lease (other than oil, gas
\nand mineral leases) of real or personal property with a remaining term in
\nexcess of three months; (e) any agreement for the purchase, sale or other
\ndisposition of any materials, equipment, supplies or inventory, except
\nindividual purchases from or sales to customers pursuant to agreements having a
\nterm of less than three months and incurred in the ordinary course of business;
\n(f) any instrument creating a lien (other than Permitted Imperfections) or
\nevidencing or related to indebtedness for borrowed money; (g) any franchise,
\ndistributorship or similar agreement; (h) any material contract containing
\ncovenants not to enter into or consummate the transactions contemplated hereby
\nor which will be terminated or modified by the carrying out of such
\ntransactions; (i) any contract or agreement to provide services that are not
\nterminable with less than thirty (30) days notice; or (j) any other material
\ncontract or agreement not of the type covered by any of the other specific
\nitems of this section. Except as shown on the Contract Schedule, each of the
\ncontracts, instruments and other documents described on the Contract Schedule
\nis valid and in full force and effect, and a true and complete copy thereof has
\nheretofore been delivered to TBI. Except as shown on the Contract Schedule,
\nKNPC is not in default, or alleged to be in default, in any material respect
\nunder any of the contracts, instruments, obligations or other documents to
\nwhich it is a party or by which it is bound. Except as shown on the Contract
\nSchedule, the consummation of the transactions contemplated by this Agreement
\nwill not cause a default under, or provide any right of termination with
\nrespect to, any contract, instrument, obligation or other document to which
\nKNPC or KNE is a party or by which either company is bound or permit the
\ntermination or acceleration of the maturity of, any indebtedness for borrowed
\nmoney of KNPC, or permit the termination of, or trigger a right of first
\nrefusal under, or cause the loss of any right or option under any instrument to
\nwhich KNPC is a party or by which any of its property is bound. Except as
\nshown on the Contract Schedule, to the best of KNPC’s and KNE’s knowledge, no
\nparty which whom KNPC has an agreement is in default thereunder in any material
\nrespect.<\/p>\n
3.16 Customers. Schedule 3.16 attached hereto is a true and
\ncomplete listing of the ten largest customers of KNPC for the fiscal year
\nDecember 31, 1994 and for the ten months ended October 31, 1995. KNPC and KNE
\nhave received no notice and do not have knowledge, that any such customer will
\nnot continue to do business with KNPC at volumes consistent with past practices
\nsubsequent to the closing of the transactions contemplated by this Agreement.<\/p>\n
3.17 Tax Matters. All Federal, state and local tax returns
\nrequired to be filed by KNPC have been duly filed, and all taxes, interest,
\npenalties, assessments and\/or deficiencies shown to be due on such returns or
\nfor which KNPC has received notices or assessments from applicable taxing
\nauthorities, have in all respects been paid or adequate provision for payment
\nthereof has been made. The current provisions made for taxes on the balance
\nsheets of KNPC contained in the financial statements referred to in Section 3.3
\nof this Agreement are sufficient for the payment of all unpaid federal, state,
\ncounty, local and other taxes of KNPC which were due and owing as of the
\nrespective date of each such balance sheet. The consolidated Federal income
\ntax returns of the affiliated group of companies of which KNE is the common
\nparent<\/p>\n
11
\n 17
\nhave been audited by the Internal Revenue Service through 1985. No notices of
\ndeficiencies have been issued with respect to any year examined or not yet
\nexamined. KNE has entered into agreements extending the statute of limitations
\nwith respect to federal or state taxes, including the statute pertaining to
\nKNPC.<\/p>\n
3.18 Title to Properties. KNPC has good and defensible title to
\nall its properties and assets, real and personal (including those reflected in
\nthe balance sheet contained in the October 31, 1995 financial statements
\nreferred to in Section 3.3 of this Agreement, except as sold or otherwise
\ndisposed of in the ordinary course of business since October 31, 1995), in each
\ncase, free and clear of all liens, charges and encumbrances, except for such
\nPermitted Imperfections. KNPC’s ownership of its oil and gas properties is
\nsuch that, with respect to any oil and gas property listed on Schedule 3.18
\nattached hereto (a) KNPC is entitled to receive a percentage share of the oil,
\ngas and other hydrocarbons produced from or allocated to, such oil and gas
\nproperty which is not less than the percentage share set forth on Schedule 3.18
\nin connection with such oil and gas property in the column headed “NRI” or (b)
\nKNPC is not obligated to bear a percentage share of the cost of operation of
\nsuch oil and gas property which is not greater than the percentage share set
\nforth on Schedule 3.18 in connection with such oil and gas property in the
\ncolumn headed “WI” (unless the share of production from such oil and gas
\nproperty to which KNPC is entitled is proportionately larger than the “NRI”
\nshown for such oil and gas property on Schedule 3.18).<\/p>\n
3.19 Pension and Employee Benefit Plans. KNPC has no employees and
\nno plans in effect for pension, profit sharing, deferred compensation,
\nseverance pay, bonuses, stock options, stock purchases, or any other form of
\nretirement or deferred benefit, or for any health, accident or other welfare
\nplan. All severance benefits payable to employees of KNE or others performing
\nservices for KNPC as of the date of Closing shall be the sole responsibility of
\nKNE.<\/p>\n
3.20 Insurance. Schedule 3.20 attached hereto summarizes
\ncompletely and accurately the insurance currently carried by KNE and KNPC in
\nrespect of the properties and operations of KNPC, including, without
\nlimitation, information as to limits of coverage, deductibles, annual premium
\nrequirements and expiration dates with respect to product liability, general
\nliability, umbrella liability, contractual liability, employers’ liability,
\nautomobile liability, workers’ compensation, property and casualty, business
\ninterruption and other insurance carried by KNPC. Such insurance continues to
\nbe in full force and effect, and KNPC is in compliance with all materials
\nrequirements and provisions thereof. Except as set forth on such schedule,
\nnone of the insurance carried by KNPC is subject to any retroactive rate or
\naudit adjustments, or co-insurance arrangements. True and correct copies of
\nall insurance policies relating to such coverage have been provided by KNPC to
\nTBI.<\/p>\n
3.21 No Pending Transactions. Except for the transactions
\ncontemplated by this Agreement and those disclosed on Schedule 3.21 hereto,
\nKNPC is not a party to or bound by or the subject of any agreement, undertaking
\nor commitment (i) to merge or consolidate with, or acquire all or substantially
\nall of the property and assets of, any other corporation or person, or (ii) to
\nsell, lease or exchange any of its property and assets to any other corporation
\nor person other than transactions which are in the ordinary course of business.
\nExcept for the transactions contemplated by this Agreement, KNE is not a party
\nto or bound by or the subject<\/p>\n
12
\n 18
\nof any agreements, undertaking or commitment to sell or otherwise transfer any
\nof the KNPC Common Stock.<\/p>\n
3.22 Disclosure. No representation or warranty made by KNPC or KNE
\nin this Agreement and no written statement contained in any certificate,
\nschedule, list or other instrument or document specified in or delivered
\npursuant to this Agreement, whether heretofore furnished to TBI or hereafter
\nrequired to be furnished to TBI, contains or will contain any untrue statement
\nof a material fact or omits or will omit to state any material fact necessary
\nto make the statements contained herein or therein not misleading. To the best
\nknowledge of KNE and KNPC, all information relating to the historical and
\nprospective financial position, results of operations, assets and business of
\nKNPC which is or would be material (based on standards applied under the
\nSecurities Act, the Exchange Act and the Rules and Regulations) to the
\nconversion and transfer of KNPC Common Stock has been provided by KNPC and KNE
\nto TBI.<\/p>\n
3.23 Transactions with Affiliates. KNPC is not a party to any
\ntransaction with any (i) current or former officer, director, shareholder or
\nemployee of KNPC or KNE, or (ii) any parent, spouse, child, brother, sister or
\nother family member of any such officer, director, shareholder or employee;
\n(iii) any corporation, partnership or other entity of which any such officer,
\ndirector, shareholder or employee or any such family member is an officer,
\ndirector, partner, trustee or greater than 10% shareholder (based on percentage
\nownership of voting stock or other voting interest) or (iv) any “affiliate” or
\n“associate” of any such persons or entities (as such terms are defined in the
\nrules and regulations promulgated under the Securities Act) including, without
\nlimitation, any transaction involving a contract, agreement or other
\narrangement providing for the employment of, furnishing of materials, products
\nor services by, rental of real or personal property from, or otherwise
\nrequiring payments to, any such person or entity.<\/p>\n
3.24 Environmental Laws and Regulations. Except as disclosed on
\nSchedule 3.24 attached hereto, KNPC is in compliance in all material respects
\nwith all applicable federal, state and local laws and regulations relating to
\nproduct registration, pollution control and environmental contamination
\nincluding, but not limited to, all laws and regulations governing the
\ngeneration, use, collection, discharge or disposal of Hazardous Materials as
\nherein defined and all laws and regulations with regard to record keeping,
\nnotification and reporting requirements respecting Hazardous Materials. Except
\nas disclosed on Schedule 3.24 attached hereto, KNPC has not been alleged to be
\nin violation of, or has not been subject to any administrative or judicial
\nproceeding pursuant to any Environmental Law, either now or at any time during
\nthe past three years. Except as disclosed on Schedule 3.24 attached hereto,
\nthere are no facts or circumstances known to KNE or KNPC which KNE or KNPC
\nreasonably expect could form the basis for the assertion of any Charge (as
\ndefined below) against KNPC relating to product registration, pollution control
\nor environmental contamination, including, but not limited to, any Charge
\narising under CERCLA (as defined in Section 2.16 hereof) and RCRA (as defined
\nin Section 2.16 hereof), or any other Environmental Law, which KNPC believes
\nmight have a material adverse effect on the business, results of operations,
\nfinancial condition or prospects of KNPC.<\/p>\n
13
\n 19
\n For purposes of this Section, the term “Charge” shall mean any and all
\nclaims, demands, causes of action, suits, proceedings, administrative
\nproceedings, losses, judgments, decrees, debts, damages, liabilities, court
\ncosts, attorney’s fees and any other expenses incurred, assessed or sustained
\nby or against KNPC.<\/p>\n
3.25 Bank Accounts and Powers of Attorney. Set forth in Schedule
\n3.25 attached hereto is an accurate and complete list showing the name and
\naddress of each bank or financial institution in which KNPC has an account or
\nsafe deposit box, the persons authorized to draw thereon or to have access
\nthereto, and the names of all persons, if any, holding powers of attorney from
\nKNPC and a summary statement of the terms thereof.<\/p>\n
IV. COVENANTS OF TBI AND TBI ACQUISITION<\/p>\n
TBI and TBI ACQUISITION jointly and severally covenant to KNPC and KNE
\nexcept as otherwise consented to in writing by KNE after the date of this
\nAgreement, as follows:<\/p>\n
4.1 Consents. TBI and TBI ACQUISITION will take all necessary
\ncorporate or other action and use their respective best efforts to complete all
\nfilings and obtain all governmental and other consents and approvals required
\nfor consummation of the transactions contemplated by this Agreement, including,
\nspecifically, any filings required to comply with the requirements of the HSR
\nAct.<\/p>\n
4.2 Cause Conditions to be Satisfied. TBI and TBI ACQUISITION
\nwill use their best efforts to cause all of the conditions described in
\nArticles VII and VIII of this Agreement to be satisfied (to the extent such
\nmatters reasonably are within their control).<\/p>\n
4.3 Notice of Litigation. TBI and TBI ACQUISITION will provide
\nwritten notice to KNE of any litigation, proceeding or governmental
\ninvestigation which arises, or to the knowledge of TBI or TBI ACQUISITION, is
\nthreatened or in process, after the date of this Agreement and prior to the
\nClosing, against or relating to the transactions contemplated by this
\nAgreement, setting forth in such notice the facts and circumstances currently
\navailable to TBI or TBI ACQUISITION with respect to such litigation, proceeding
\nor investigation.<\/p>\n
V. COVENANTS OF KNPC AND KNE<\/p>\n
KNPC and KNE jointly and severally covenant to TBI and TBI ACQUISITION
\nexcept as otherwise consented to in writing by TBI after the date of this
\nAgreement, as follows:<\/p>\n
5.1 Conduct of Business. After the date of this Agreement and on
\nor prior to the date of the Closing, KNPC (a) will conduct its business only in
\nthe ordinary course; (b) will not enter into or agree to enter into or adopt
\nany employee pension, profit-sharing, retirement, insurance, incentive
\ncompensation, severance or similar plan, agreement or arrangement, or enter
\ninto any employment contracts; (c) shall not, other than in the customary and
\nordinary course of business, incur any liability for borrowed money, encumber
\nany of its assets or enter into any agreements relating to the incurrence of
\nadditional debt; (d) will use its best efforts to preserve its business
\norganization intact, to keep available the service of its officers, and<\/p>\n
14
\n 20
\nindependent contractors and the employees of KNE providing services to KNPC and
\nto preserve the goodwill of suppliers, customers and others doing business with
\nit; (e) will not acquire or agree to acquire by merging or consolidating with,
\npurchasing substantially all of the assets of, or otherwise, any business or
\nany corporation, partnership, association or other business organization or
\ndivision thereof; (f) will not enter into or amend any contract or agreement
\nwith any labor union or any lease of real estate or personal property other
\nthan oil, gas and mineral leases and other leases entered into or amended in
\nthe ordinary course of business in a manner consistent with past practices
\ncalling for yearly lease payments not in excess of $10,000; (g) will not enter
\ninto any agreement for the purchase, sale or other disposition, or purchase,
\nsell or dispose of, any equipment, supplies, inventory, investments or other
\nassets (other than sales of inventory and purchases of materials and supplies
\nin the ordinary course of business and in accordance with past practices); (h)
\nwill not compromise or write-off any material account receivable other than by
\ncollection of the full recorded amount thereof; (i) will not change its
\nCertificate of Incorporation or bylaws; (j) will not change the number of
\nshares or terms of its authorized, issued or outstanding capital stock, nor
\nenter into or grant any options, calls, contracts or commitments of any
\ncharacter relating to any issued or unissued capital stock; and (k) will not
\ndeclare or make any dividend or other distribution or payment in respect of its
\ncapital stock; provided, however, and notwithstanding anything in the foregoing
\nto the contrary, KNPC may, prior to the Closing, distribute to KNE or other
\ndesignees of KNE the assets described on Schedule 5.1 hereof.<\/p>\n
5.2 Information. KNPC will give TBI and to TBI’s officers,
\naccountants, counsel and other representatives full access, during normal
\nbusiness hours throughout the period prior to the Closing, to all the
\nproperties, books, contracts, commitments and records of KNPC and all such
\ninformation concerning KNPC and its business and properties as TBI may
\nreasonably request.<\/p>\n
5.3 Consents. KNPC and KNE will take all necessary corporate or
\nother action and use their respective best efforts to complete all filings and
\nobtain all governmental and other consents and approvals required for
\nconsummation of the transactions contemplated by this Agreement, including,
\nspecifically, any filings required to comply with the requirements of the HSR
\nAct.<\/p>\n
5.4 Notice of Litigation. KNE and KNPC will provide written
\nnotice to TBI of any litigation, proceeding or governmental investigation which
\narises, or to the knowledge of KNPC or KNE, is threatened or in process, after
\nthe date of this Agreement and prior to the Closing, against or relating to
\nKNPC, its properties or businesses, or the transactions contemplated by this
\nAgreement, setting forth in such notice the facts and circumstances currently
\navailable to KNE or KNPC with respect to such litigation, proceeding or
\ninvestigation.<\/p>\n
5.5 Corporate Transactions. During the term of this Agreement,
\nneither KNPC nor KNE will seek the affiliation of KNPC with any entity other
\nthan TBI and neither will negotiate or entertain any offer with respect to the
\nsale of part or all of the capital stock of KNPC or any of KNPC’s assets.
\nDuring the term of this Agreement, neither KNPC nor KNE will authorize or
\npermit any officer, director or employee of KNE or KNPC to, or any investment
\nbanker, attorney, accountant or other representative retained by KNPC or KNE
\nto, solicit or encourage<\/p>\n
15
\n 21
\n(including by way of furnishing information) any inquiries or the making of any
\nproposal that may reasonably be expected to lead to the acquisition of part or
\nall of KNPC’s capital stock or substantially all of its assets by any person
\nother than TBI. During the term of this Agreement, KNPC promptly will advise
\nTBI orally, followed by written confirmation, of any such inquiries or
\nproposals.<\/p>\n
5.6 Cause Conditions to be Satisfied. KNPC and KNE will use their
\nbest efforts to cause all of the conditions described in Articles VII and VIII
\nof this Agreement to be satisfied (to the extent such matters reasonably are
\nwithin their control).<\/p>\n
5.7 Hiring Employees. KNE will use its reasonable efforts to
\nassist TBI in hiring such of the present oil and gas employees of KNE as TBI
\nshall make known to KNE.<\/p>\n
VI. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
\n COMPLIANCE WITH SECURITIES ACT<\/p>\n
6.1 Definition. As used in this Article VI, the term “Holder”
\nshall mean KNE and any other party holding certificates representing shares of
\nthe TBI Preferred Stock or the TBI Common Stock or any other securities of TBI
\nissued in connection therewith or in respect thereof.<\/p>\n
6.2 Restrictions on Transferability. The TBI Preferred Stock and
\nthe TBI Common Stock shall not be sold, assigned, transferred or pledged except
\npursuant to a registration statement prepared and filed with the Commission
\npursuant to the Securities Act or upon satisfaction of the conditions specified
\nin this Article VI, which conditions are intended to ensure compliance with the
\nprovisions of the Securities Act. KNE will cause any proposed purchaser,
\nassignee, transferee, or pledgee of the TBI Preferred Stock or the TBI Common
\nStock to agree to take and hold such securities subject to the provisions and
\nconditions of this Article VI, unless the TBI Preferred Stock or the TBI Common
\nStock is being distributed pursuant to a registration statement prepared and
\nfiled with the Commission pursuant to the Securities Act.<\/p>\n
6.3 Restrictive Legend. Each certificate representing (i) the TBI
\nPreferred Stock or the TBI Common Stock and (ii) any other securities issued in
\nrespect of the TBI Preferred Stock or the TBI Common Stock upon any stock
\nsplit, stock dividend, recapitalization, merger, consolidation or similar
\nevent, shall (unless otherwise permitted by the provisions of Section 6.4
\nbelow) be stamped or otherwise imprinted with legends substantially in the
\nfollowing form (in addition to any other legend required under applicable state
\nsecurities laws):<\/p>\n
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
\n INVESTMENT AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
\n SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. SUCH
\n SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
\n REGISTRATION OR QUALIFICATION UNLESS TOM BROWN, INC. RECEIVES AN
\n OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING<\/p>\n
16
\n 22
\n THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION,
\n QUALIFICATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT OR
\n STATE SECURITIES LAWS. IN ADDITION, THE SHARES REPRESENTED BY THIS
\n CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON THE TRANSFER AND
\n DISPOSITIONS THEREOF CONTAINED IN SECTION 6.4 OF THAT CERTAIN
\n AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF JANUARY 31, 1996, BY
\n AND AMONG TOM BROWN, INC., TBI ACQUISITION, INC., K N ENERGY, INC. AND
\n K N PRODUCTION COMPANY. COPIES OF THE AGREEMENT COVERING THE
\n ACQUISITION OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
\n OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
\n THIS CERTIFICATE TO THE SECRETARY OF TOM BROWN, INC. AT THE PRINCIPAL
\n EXECUTIVE OFFICES OF TOM BROWN, INC.<\/p>\n
KNE and each Holder consent to TBI’s making a notation on its records
\nand giving instructions to any transfer agent of the TBI Preferred Stock or the
\nTBI Common Stock in order to implement the restrictions on transfer established
\nin this Article VI.<\/p>\n
6.4 Notice of Proposed Transfers. KNE and the Holder of each
\ncertificate representing TBI Preferred Stock or TBI Common Stock, by acceptance
\nthereof, agree to comply in all respects with the provisions of this Section
\n6.4. Prior to any proposed sale, assignment, transfer or pledge of any TBI
\nPreferred Stock or TBI Common Stock (other than transfers not involving a
\nchange in beneficial ownership) unless there is in effect a registration
\nstatement under the Securities Act covering the proposed transfer, the Holder
\nthereof shall give written notice to TBI of such Holder’s intention to effect
\nsuch transfer, sale, assignment or pledge. Each such notice shall describe the
\nmanner and circumstances of the proposed transfer, sale, assignment or pledge
\nin sufficient detail, and shall be accompanied, at KNE’s or such Holder’s
\nexpense, by either (i) an unqualified written opinion of legal counsel who
\nshall be, and whose legal opinion shall be, reasonably satisfactory to TBI and
\naddressed to TBI, to the effect that the proposed transfer of the TBI Preferred
\nStock or TBI Common Stock may be effected without registration under the
\nSecurities Act, or (ii) a “no action” letter from the Commission to the effect
\nthat the transfer of such securities without registration will not result in a
\nrecommendation by the staff of the Commission that action be taken with respect
\nthereto, whereupon the Holder of such TBI Preferred Stock or TBI Common Stock
\nshall be entitled to transfer such TBI Preferred Stock or TBI Common Stock in
\naccordance with the terms of the notice delivered by the Holder to TBI or (iii)
\nother evidence of compliance with the Securities Act acceptable to TBI. Unless
\nsuch transfer is made pursuant to Rule 144 under the Securities Act each
\ncertificate evidencing the TBI Preferred Stock and the TBI Common Stock
\ntransferred as above provided shall be stamped or imprinted with the legend set
\nforth in Section 6.3 above, except that any such certificate shall not bear
\nsuch legend if in the opinion of counsel for KNE or such Holder and TBI such
\nlegend is not required in order to establish compliance with the Securities
\nAct.<\/p>\n
17
\n 23
\n 6.5 TBI Investment Representations. TBI represents and warrants
\nthat it is acquiring the KNPC Common Stock for investment and not with a view
\nto the public distribution thereof and agrees that any future distribution
\nthereof will be in compliance with all applicable securities laws.<\/p>\n
VII. CONDITIONS TO TBI’S AND TBI ACQUISITION’S OBLIGATIONS<\/p>\n
Unless waived by TBI and TBI ACQUISITION in writing in their sole
\ndiscretion, all obligations of TBI and TBI ACQUISITION under this Agreement are
\nsubject to the fulfillment, prior to or at the Closing, of each of the
\nfollowing conditions:<\/p>\n
7.1 Representations, Warranties and Covenants. The
\nrepresentations and warranties of KNPC and KNE contained in Article III of this
\nAgreement shall be true at and as of the Closing Date, and shall be deemed made
\nagain at and as of such date and be true as so made again; KNPC and KNE shall
\nhave performed all obligations and complied with all covenants required by this
\nAgreement to be performed or complied with by them on or prior to the Closing.<\/p>\n
7.2 Opinion of Counsel. KNPC and KNE shall have delivered to TBI
\na favorable opinion of their counsel, Martha Wyrsch, Esquire, dated the
\nClosing Date, in form and substance satisfactory to TBI and its counsel, to the
\neffect that: (a) each of KNE and KNPC is a corporation duly organized, validly
\nexisting and in good standing under the laws of their respective jurisdictions
\nof incorporation, and has full corporate power to carry on its business as it
\nis now being conducted and to own or hold under lease the properties and assets
\nit now owns or holds under lease; (b) KNPC is duly qualified to do business in
\nall jurisdictions where the character of its properties or the nature of its
\nactivities makes such qualification necessary and where the failure to qualify
\nwould be materially adverse to KNPC; (c) the authorized, issued and outstanding
\ncapital stock of KNPC is as set forth in Section 3.2 of this Agreement, and
\neach of the issued and outstanding shares of KNPC Common Stock has been duly
\nauthorized and issued and is fully paid and non-assessable; (d) the execution,
\ndelivery and performance of this Agreement and all other documents to be
\nexecuted by KNE and KNPC in connection with this Agreement (the “KNPC
\nDocuments”) have been duly authorized and approved by all requisite action of
\nthe Board of Directors of KNE and KNPC and KNE as the sole shareholder of KNPC,
\nand this Agreement and all other KNPC Documents have been duly executed and
\ndelivered by KNE and KNPC and constitute valid and legally binding obligations
\nof KNE and KNPC; (e) the execution and delivery of this Agreement and the other
\nKNPC Documents did not, and the consummation of the transactions contemplated
\nhereby and thereby will not, violate any provision of any agreement,
\ninstrument, order, judgment or decree, of which such counsel has knowledge, to
\nwhich KNE or KNPC may be a party or by which either of them is bound; (f)
\nexcept as may be specified by such counsel, such counsel does not know of any
\nmaterial suit or proceeding pending or threatened against or affecting KNPC,
\nKNE or any of their respective businesses or properties or the consummation of
\nthe transactions contemplated hereunder; (g) all regulatory and governmental
\napprovals, consents and filings required of KNPC or KNE for the consummation of
\nthe transactions contemplated by this Agreement or any of the other KNPC
\nDocuments have been obtained or made, and, to the best knowledge of such
\ncounsel, all such approvals, consents or filings remain in full effect as of
\nthe date of such<\/p>\n
18
\n 24
\nopinion; and (h) to such further effect regarding the validity and sufficiency
\nof legal proceedings and matters relative to the transactions contemplated by
\nthis Agreement as TBI may reasonably request.<\/p>\n
7.3 Approvals of Governmental Authorities. All governmental
\napprovals necessary or advisable in the opinion of TBI’s counsel to consummate
\nthe transactions contemplated by this Agreement shall have been received and
\nshall not contain any provision which, in the judgment of TBI, is unduly
\nburdensome.<\/p>\n
7.4 No Adverse Proceedings or Events. No suit, action or any
\nother proceeding against KNE, KNPC, TBI or TBI ACQUISITION, or their respective
\nofficers or directors, shall have been instituted and resulted in entry of a
\ncourt order (which has not subsequently been dismissed, terminated or vacated)
\nenjoining, either temporarily or permanently, the consummation of the
\ntransactions contemplated by this Agreement. No suit, action or other
\nproceeding against KNE, KNPC, TBI or TBI ACQUISITION, or their respective
\nofficers or directors, shall be threatened or pending before any court or
\ngovernmental agency in which it will be, or it is, sought to restrain or
\nprohibit any of the transactions contemplated by this Agreement or to obtain
\ndamages or other relief in connection with this Agreement or the transactions
\ncontemplated hereby.<\/p>\n
7.5 Consents and Actions; Contracts. All requisite consents of
\nany third parties and other actions which KNPC and KNE have covenanted to use
\ntheir best efforts to obtain and take under Section 5.3 hereof shall have been
\nobtained and completed or any waiting period required in connection therewith
\nshall have expired. All material contracts and agreements of KNPC, including,
\nwithout limitation, all contracts and agreements listed on the Contract
\nSchedule, shall be in full force and effect and shall not be affected by the
\nconsummation of the transactions contemplated hereby.<\/p>\n
7.6 Certificate. KNPC and KNE shall have delivered to TBI a
\nCertificate or Certificates dated the Closing Date, in form and substance
\nsatisfactory to TBI and its counsel, certifying that the representations and
\nwarranties of KNPC and KNE contained in this Agreement are true and correct on
\nand as of the Closing Date.<\/p>\n
7.7 Other Evidence. TBI shall have received from KNPC and KNE
\nsuch further certificates and documents evidencing due action in accordance
\nwith this Agreement, including certified copies of proceedings of the Board of
\nDirectors and shareholder of KNPC, as TBI reasonably shall request.<\/p>\n
7.8 Execution of Limited Liability Company Agreement. The Limited
\nLiability Company Agreement attached hereto as Exhibit B shall be executed and
\ndelivered on behalf of both KNE and TBI.<\/p>\n
7.9 Execution of Registration Rights Agreement. The Registration
\nRights Agreement attached hereto as Exhibit C shall be executed and delivered
\non behalf of KNE and TBI.<\/p>\n
19
\n 25
\n 7.10. Filing of Certificate of Merger. The Certificate of Merger
\nshall be filed with the Secretary of State of the State of Delaware, in such
\nform as required by, and executed in accordance with, the relevant provisions
\nof, the DGCL.<\/p>\n
7.11 Delivery of Stock Certificates. The certificates representing
\nall of the outstanding KNPC Common Stock shall be delivered to TBI in proper
\nform for transfer to TBI and the certificates registered in the name of KNE
\nrepresenting all of the TBI Preferred Stock and the TBI Common Stock shall be
\ndelivered to KNE.<\/p>\n
VIII. CONDITIONS TO KNPC’S AND KNE’S OBLIGATIONS<\/p>\n
Unless waived by KNPC and KNE in writing in their sole discretion, all
\nobligations of KNPC and KNE under this Agreement are subject to the
\nfulfillment, prior to or at the Closing, of each of the following conditions:<\/p>\n
8.1 Representations, Warranties and Covenants. The
\nrepresentations and warranties of TBI and TBI ACQUISITION contained in Article
\nII of this Agreement shall be true at and as of the Closing Date, and shall be
\ndeemed made again at and as of such date and be true as so made again; TBI and
\nTBI ACQUISITION shall have performed all obligations and complied with all
\ncovenants required by this Agreement to be performed or complied with by them
\non or prior to the Closing.<\/p>\n
8.2 Opinion of Counsel. TBI and TBI ACQUISITION shall have
\ndelivered to KNE a favorable opinion of their counsel, Lynch, Chappell & Alsup,
\ndated the Closing Date, in form and substance satisfactory to KNE and its
\ncounsel, to the effect that: (a) each of TBI and TBI ACQUISITION is a
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the State of Delaware, and has full corporate power to carry on its business
\nas it is now being conducted and to own or hold under lease the properties and
\nassets it now owns or holds under lease; (b) TBI is duly qualified to do
\nbusiness in all jurisdictions where the character of its properties or the
\nnature of its activities makes such qualification necessary and where the
\nfailure to qualify would be materially adverse to TBI and its subsidiaries,
\ntaken as a whole; (c) the authorized, issued and outstanding capital stock of
\nTBI is as set forth in Section 2.7 of this Agreement , and each of the issued
\nand outstanding shares of common stock of TBI has been duly authorized and
\nissued and is fully paid and nonassessable; (d) The execution, delivery and
\nperformance of this Agreement and all other documents to be executed by TBI and
\nTBI ACQUISITION in connection with this Agreement (the “TBI Documents”) have
\nbeen duly authorized and approved by all requisite action of the Boards of
\nDirectors of TBI and TBI ACQUISITION and this Agreement and all other TBI
\nDocuments have been duly executed and delivered by TBI and TBI ACQUISITION and
\nconstitute valid and legally binding obligations of TBI and TBI ACQUISITION; (e)
\nthe shares of TBI Preferred Stock and the shares of TBI Common Stock referred to
\nin Section 1.6 of this Agreement have been duly authorized and, when issued and
\ndelivered in accordance with and pursuant to the Merger, will have been legally
\nand validly issued and will be fully paid and nonassessable and no stockholder
\nof TBI will have any preemptive right of subscription or purchase in respect
\nthereof; (f) the shares of TBI Common Stock issuable upon conversion of the TBI
\nPreferred Stock are duly authorized and reserved for issuance and, when issued
\nin accordance with the terms of the TBI Preferred<\/p>\n
20
\n 26
\nStock, will be validly issued, fully paid, nonassessable and free of preemptive
\nrights; (g) the execution and delivery of this Agreement and the other TBI
\nDocuments did not, and the consummation of the transactions contemplated hereby
\nand thereby will not, violate any provision of any agreement, instrument,
\norder, judgment or decree, of which such counsel has knowledge, to which TBI or
\nTBI ACQUISITION may be a party or by which either of them is bound; (h) except
\nas may be specified by such counsel, such counsel does not know of any material
\nsuit or proceeding, pending or threatened against or affecting TBI or TBI
\nACQUISITION or any of their respective businesses or properties or the
\nconsummation of the transactions contemplated hereunder, (i) all regulatory and
\ngovernmental approvals, consents and filings required of TBI or TBI ACQUISITION
\nfor the consummation of the transactions contemplated by this Agreement or any
\nof the other TBI Documents have been obtained or made, and, to the best
\nknowledge of such counsel, all such approvals, consents or filings remain in
\nfull effect as of the date of such opinion; and (j) to such further effect
\nregarding the validity and sufficiency of legal proceedings and matters
\nrelative to the transactions contemplated by this Agreement as KNE may
\nreasonably request.<\/p>\n
8.3 Approval of Governmental Authorities. All governmental
\napprovals necessary or advisable in the opinion of KNE’s counsel to consummate
\nthe transactions contemplated by this Agreement shall have been received and
\nshall not contain any provision which, in the judgment of KNE, is unduly
\nburdensome.<\/p>\n
8.4 No Adverse Proceedings or Events. No suit, action or other
\nproceeding against TBI, TBI ACQUISITION, KNPC or KNE, or their respective
\nofficers or directors, shall have been instituted and resulted in entry of a
\ncourt order (which has not subsequently been dismissed, terminated or vacated)
\nenjoining, either temporarily or permanently, the consummation of the
\ntransactions contemplated by this Agreement. No suit, action or other
\nproceeding against TBI, TBI ACQUISITION, KNPC or KNE, or their respective
\nofficers or directors, shall be threatened or pending before any court of
\ngovernmental agency in which it will be, or it is, sought to restrain or
\nprohibit or to obtain damages or other relief in connection with this Agreement
\nor the transactions contemplated hereby.<\/p>\n
8.5 Consents and Actions. All requisite consents of any third
\nparties and other actions which TBI and TBI ACQUISITION have covenanted to use
\ntheir best efforts to obtain and take under Section 4.1 of this Agreement shall
\nhave been obtained and completed or any waiting period required in connection
\ntherewith shall have expired.<\/p>\n
8.6 Certificates. TBI and TBI ACQUISITION shall have delivered to
\nKNPC and KNE a Certificate or Certificates dated the Closing Date, in form and
\nsubstance satisfactory to KNPC and KNE and their counsel, certifying that the
\nrepresentations and warranties of TBI and TBI ACQUISITION contained in this
\nAgreement are true and correct on and as of the Closing Date.<\/p>\n
8.7 Other Evidence. KNPC and KNE shall have received from TBI and
\nTBI ACQUISITION such further certificates and documents evidencing due action
\nin accordance with this Agreement, including certified copies of proceedings of
\nthe Board of Directors of TBI and TBI ACQUISITION, as KNPC and KNE reasonably
\nshall request.<\/p>\n
21
\n 27
\n 8.8 Execution of Limited Liability Company Agreement. The Limited
\nLiability Company Agreement attached hereto as Exhibit B shall be executed and
\ndelivered on behalf of both KNE and TBI.<\/p>\n
8.9 Execution of Registration Rights Agreement. The Registration
\nRights Agreement attached hereto as Exhibit C shall be executed and delivered
\non behalf of KNE and TBI.<\/p>\n
8.10 Filing of Certificate of Merger. The Certificate of Merger
\nshall be filed with the Secretary of State of the State of Delaware, in such
\nform as required by , and executed in accordance with, the relevant provisions
\nof, the DGCL.<\/p>\n
8.11 Delivery of Stock Certificates. The certificates
\nrepresenting all of the outstanding KNPC Common Stock shall be delivered to TBI
\nin proper form for transfer to TBI and the certificates registered in the name
\nof KNE representing all of the TBI Preferred Stock and the TBI Common Stock
\nshall be delivered to KNE.<\/p>\n
IX. COVENANTS TO BE PERFORMED AFTER CLOSING<\/p>\n
9.1 Agreements to Survive Closing. The Limited Liability Company
\nAgreement between TBI and KNE in the form of Exhibit B attached hereto and the
\nRegistration Rights Agreement in the form of Exhibit C attached hereto shall
\neach survive the Closing. Notwithstanding the provisions of Article XI hereof.
\nThe representations, warranties and agreements made by the parties to this
\nAgreement in this Article IX shall all survive the Closing.<\/p>\n
9.2 Option to Purchase Properties. TBI hereby grants to KNE the
\nright to purchase any KNPC properties or interests, the production from which
\nqualifies for the production tax credit granted under Section 29 of the Code,
\nat a price to be determined based on the calculations set forth on Exhibit D
\nattached hereto, reflecting future estimated production and cash flows from
\nsuch KNPC properties or interests. Such right shall be exercised by notice in
\nwriting given by KNE to TBI on or before June 30, 1996 and shall be consummated
\nas soon after the giving of such notice as is practicable<\/p>\n
9.3 Standstill. Unless waived in writing by TBI, during the
\nperiod commencing on the Effective Date and ending on the third anniversary
\nthereof, neither KNE nor any of its affiliates (as defined in Rule 12b-2 under
\nthe Exchange Act) shall:<\/p>\n
(a) acquire or agree, offer, seek or propose to acquire (or
\nrequest permission to do so), ownership (including, but not limited to
\nbeneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any
\nassets (except as contemplated by Section 9.2 of this Agreement and by the
\nLimited Liability Company Agreement executed pursuant to Sections 7.8 and 8.8
\nof this Agreement) or businesses or any additional securities issued by TBI, or
\nany rights or options to acquire such ownership (including from a third party);
\nor<\/p>\n
22
\n 28
\n (b) contest any election of directors by the stockholders of TBI
\n(except as otherwise provided by the Certificate of Designations, Powers,
\nPreferences and Rights of the TBI Preferred Stock), provided that if all
\ncumulative dividends on the TBI Preferred Stock have not been declared and paid
\nby TBI as they accumulate, then KNE and its affiliates may contest any election
\nof directors by the shareholders of TBI; or<\/p>\n
(c) enter into any discussions, negotiations, arrangements or
\nunderstandings with any third party with respect to any of the foregoing.<\/p>\n
Such restrictions shall not prevent the sale of the common stock of
\nTBI underlying the TBI Preferred Stock or the sale of the TBI Common Stock held
\nby KNE pursuant to Rule 144 under the Securities Act or any registration
\nstatement under the Securities Act in which such securities are included
\npursuant to the registration rights granted to KNE by TBI pursuant to the
\nRegistration Rights Agreement referred to in Sections 7.9 and 8.9 of this
\nAgreement.<\/p>\n
9.4 Reorganization Covenants and Representations:<\/p>\n
(a) Following the Merger, the Surviving Entity will hold at least
\n90 percent of the fair market value of its net assets and at least 70 percent
\nof the fair market value of its gross assets and at least 90 percent of the
\nfair market value of TBI ACQUISITION’s net assets and at least 70 percent of
\nthe fair market value of TBI ACQUISITION’S gross assets held immediately prior
\nto the Merger. For purposes of this representation, amounts used by KNPC or
\nTBI ACQUISITION to pay Merger expenses and all redemptions and distributions
\n(except for regular, normal dividends) made by KNPC will be included as assets
\nof KNPC or TBI ACQUISITION, respectively, immediately prior to the Merger.<\/p>\n
(b) The Surviving Entity has no plan or intention to issue
\nadditional shares of its stock that would result in TBI’s losing control of the
\nSurviving Entity within the meaning of Section 368(c) of the Code.<\/p>\n
(c) TBI has no plan or intention to reacquire any of the TBI
\nCommon Stock or TBI Preferred Stock issued in the Merger.<\/p>\n
(d) TBI has no plan or intention to liquidate the Surviving
\nEntity, to merge the Surviving Entity with or into another corporation, to sell
\nor otherwise dispose of the stock of the Surviving Entity, or to cause the
\nSurviving Entity to sell or otherwise dispose of any of its assets or of any of
\nthe assets acquired from TBI ACQUISITION except for dispositions made in the
\nordinary course of business.<\/p>\n
23
\n 29
\n (e) TBI ACQUISITION will have no liabilities assumed by the
\nSurviving Entity and will not transfer to the Surviving Entity any assets
\nsubject to liabilities in the Merger.<\/p>\n
(f) Following the Merger, the Surviving Entity will continue its
\nhistoric business or use a significant portion of its historic business assets
\nin a business.<\/p>\n
9.5 Preparation of Tax Returns; Responsibility for Taxes.<\/p>\n
(a) KNE shall cause to be included in the consolidated federal
\nincome tax returns (and the state income tax returns of any state that permits
\nconsolidated, combined or unitary income tax returns, if any) of the KNE
\naffiliated group for all periods ending on or before the Effective Date, all
\nitems of income, gain, loss, deduction and credit and other tax items (“Tax
\nItems”) of KNPC which are required to be included therein, shall file timely
\nall such tax returns with the appropriate taxing authorities, and shall be
\nresponsible for the timely payment (and entitled to any refund) of all taxes
\ndue with respect to the periods covered by such tax returns. At or prior to
\nthe Closing, KNE shall cause KNPC to distribute to KNE the amount reflected as
\na liability for such taxes on the financial statements of KNPC as of and for
\nthe period ended December 31, 1995, to the extent not previously distributed to
\nKNE.<\/p>\n
(b) With respect to any state income tax return covering a taxable
\nperiod ending on or before the Effective Date that is required to be filed
\nafter the Closing Date with respect to KNPC that is not described in paragraph
\n(a) above, KNE shall cause such tax return to be prepared, shall cause to be
\nincluded in such tax return all Tax Items required to be included therein,
\nshall timely submit to TBI for filing such tax return with the appropriate
\ntaxing authority, and shall be responsible for the timely payment (and entitled
\nto any refund) of all taxes due with respect to the period covered by such tax
\nreturn. At or prior to the Closing, KNE shall cause KNPC to distribute to KNE
\nthe amount reflected as a liability for such taxes on the financial statements
\nof KNPC as of and for the period ended December 31, 1995, to the extent not
\npreviously distributed to KNE.<\/p>\n
(c) With respect to any tax return of KNPC not described in
\nparagraph (a) or (b) above, TBI shall cause such tax return to be prepared,
\nshall cause to be included in such tax return all Tax Items required to be
\nincluded therein, shall file timely such tax return with the appropriate taxing
\nauthority, and shall be responsible for the timely payment (and entitled to any
\nrefund) of all taxes due with respect to the period covered by such tax return.
\nKNE shall determine (by an interim closing of the books as of the Effective
\nDate except for ad valorem taxes which shall be prorated on a daily basis) the
\nportion of the tax due with respect to the period covered by such Tax Return
\nwhich is attributable to the portion of such taxable period ending the
\nEffective Date. If the amount of tax so determined to be attributable to the
\nportion of such taxable period ending on December 31, 1995 exceeds the amount
\nreflected as a liability for such tax on the financial statements of KNPC as of
\nand for the period ended December 31, 1995, KNE shall pay to TBI the amount of
\nsuch excess tax not less than 5 days prior to the due date of such Tax Return.<\/p>\n
24
\n 30
\n (d) Notwithstanding anything to the contrary herein, any franchise
\ntax paid or payable with respect to KNPC shall be allocated to the taxable
\nperiod during which the right to do business obtained by the payment of such
\nfranchise tax relates, regardless of whether such franchise tax is measured by
\nincome, operations, assets or capital relating to another taxable period. With
\nrespect to any franchise tax so allocated to the taxable period ended December
\n31, 1995: (i) the amount of such franchise tax shall be prorated on a daily
\nbasis between the portion of such taxable period ending on December 31, 1995
\nand the remaining portion of such taxable period, and (ii) if the amount of
\nsuch franchise tax paid or provided for as of December 31, 1995 exceeds the
\namount so prorated to the portion of such taxable period ending as of December
\n31, 1995, the excess amount shall be paid by KNPC to KNE.<\/p>\n
(e) Any tax return to be prepared pursuant to the provisions of
\nthis Section 9.5 shall be prepared in a manner consistent with practices
\nfollowed in prior years with respect to similar tax returns, except for changes
\nrequired by changes in law or fact.<\/p>\n
(f) KNE shall grant to TBI (or its designees) access at all
\nreasonable times to all of the information, books and records relating to KNPC
\nwithin the possession of KNE (including workpapers and correspondence with
\ntaxing authorities), and shall afford TBI (or its designees) the right (at
\nTBI’s expense) to take extracts therefrom and to make copies thereof, to the
\nextent reasonably necessary to permit TBI (or its designees) to prepare tax
\nreturns and to conduct negotiations with tax authorities.<\/p>\n
(g) TBI shall grant or cause KNPC to grant to KNE (or its
\ndesignees) access at all reasonable times to all of the information, books,
\nrecords relating to KNPC within the possession of TBI and KNPC (including
\nworkpapers and correspondence with taxing authorities), and shall afford KNE
\n(or its designees) the right (at KNE’s expense) to take extracts therefrom and
\nto make copies thereof, to the extent reasonably necessary to permit KNE (or
\nits designees) to prepare tax returns and to conduct negotiations with taxing
\nauthorities.<\/p>\n
(h) TBI shall be responsible for the payment of all state and
\nlocal transfer, sales, use or other similar taxes, if any, resulting from the
\ntransactions contemplated by this Agreement.<\/p>\n
9.6 Closing and Post-Closing Adjustments. As soon as practicable
\nafter the Closing, TBI shall pay to KNE an amount in cash sufficient to (i)
\ncompensate KNE for one-half of the direct salary cost paid by KNE for employees
\nand independent contractors performing services for KNPC during the month of
\nJanuary, 1996, and (ii) compensate KNE for any other costs incurred by it in
\nthe ordinary course of KNPC’s business for the month of January, 1996. Within
\nfourteen (14) days following the Closing, KNE shall calculate and furnish to
\nTBI the amount that will need to be paid by it or received by it to cause
\nKNPC’s working capital, deferred credits and deferred charges as of December
\n31, 1995 to have a zero balance. If a payment to KNPC by KNE is needed to
\ncause such items to have a zero balance, KNE shall make such payment when it
\ndelivers such calculation to TBI. If a payment by KNPC to KNE is needed to
\ncause such items to have a zero balance, KNPC shall make such payment to KNE.<\/p>\n
25
\n 31
\nOn or before April 1, 1996, TBI shall provide KNE with a schedule (the
\n“Adjustment Schedule”) of post-closing adjustments (with appropriate supporting
\ndocumentation) which shall, in TBI’s opinion be necessary to correct for any
\ndiscrepancy made by KNE in determining KNPC’s working capital, deferred credits
\nand deferred charges as of December 31, 1995 and bringing the balance of such
\nitems to zero. KNE shall have fifteen (15) days following receipt of the
\nAdjustment Schedule from TBI in which to question the adjustments proposed by
\nTBI. To the extent such proposed adjustments are not questioned by KNE, they
\nshall be paid by the party owing the same within five (5) days following the
\nexpiration of such fifteen (15) day period. To the extent KNE questions any
\nadjustment proposed by TBI, representatives of the parties shall make a good
\nfaith effort to agree on such proposed adjustments within fifteen (15) days of
\nreceipt by TBI of KNE’s written objections to the adjustments proposed by TBI
\n(with appropriate supporting documentation). If the parties do not agree on
\nany of the proposed adjustments within such fifteen (15) day period, either
\nparty may seek resolution of their dispute through binding arbitration to be
\nconducted in Denver, Colorado in accordance with the Commercial Arbitration
\nRules of the American Arbitration Association. Upon written demand of either
\nparty, the parties shall meet and attempt to appoint a single arbitrator. If
\nthe parties fail to name an arbitrator within ten (10) days from such demand,
\nthen the arbitrator shall be selected by the American Arbitration Association
\nfrom the panels of arbitrators of the American Arbitration Association. The
\narbitrator selected to act hereunder shall be qualified by education and
\ntraining to pass upon the particular question in dispute and shall make a
\ndecision on the dispute within thirty (30) days after his appointment, subject
\nto any reasonable delay due to unforseen circumstances. The compensation and
\nexpenses of the single arbitrator shall be borne equally by the parties.
\nArbitration may proceed in the absence of any party if notice of the
\nproceedings has been given to such party. The parties agree to abide by all
\nawards rendered in such proceedings. Notwithstanding the foregoing, no
\npost-closing adjustments shall be made unless the aggregate of all such
\nadjustments to correct for any discrepancy made by KNE in determining KNPC’s
\nworking capital, deferred credits and deferred charges as of December 31, 1995
\nand bringing the balance of such items to zero exceed $200,000, whereupon the
\nadjustments shall be inclusive of such $200,000 amount.<\/p>\n
X. INDEMNIFICATION<\/p>\n
10.1 Indemnification of TBI. KNE hereby covenants and agrees to
\nindemnify and hold harmless TBI and each subsidiary and each of their
\nrespective officers and directors (the “TBI Affiliates”), and their respective
\nsuccessors and assigns, at all times from and after the date of Closing against
\nand in respect of the following (collectively the “Claims”):<\/p>\n
(a) all liabilities of KNPC of any nature, whether
\naccrued, absolute, contingent or otherwise, which existed as of December 31,
\n1995, or arose out of the conduct of any business, the ownership or use of any
\nproperty, or the existence or occurrence of any events, condition or set of
\nfacts, at or prior to December 31, 1995, and which were not adequately provided
\nfor or reflected in the October 31, 1995 financial statements delivered
\npursuant to Section 3.3 of this Agreement, or incurred in the ordinary course
\nof business subsequent to October 31, 1995 or otherwise disclosed to TBI
\npursuant to this Agreement, including, but not<\/p>\n
26
\n 32
\nlimited to, any liabilities for federal, state or local taxes for any year or
\nperiod and including, specifically, any damage or loss resulting to KNPC as a
\nresult of the fire that occurred on or about January 6, 1996 in connection with
\nKNPC’s Wolf Creek Property (the “Wolf Creek Fire”);<\/p>\n
(b) any damage or loss resulting from any
\nmisrepresentation, breach of representation or warranty or non-fulfillment of
\nany agreement or covenant on the part of KNPC or KNE under this Agreement, or
\nfrom any misrepresentation in or omission from any certificate or other
\ninstrument or documents furnished or to be furnished by KNPC or KNE hereunder;
\nand<\/p>\n
(c) all claims, actions, suits, proceedings, demands,
\nassessments, judgments, costs, attorney’s fees and expenses of any nature
\nincident to any of the matters indemnified against pursuant to this Section
\n10.1.<\/p>\n
10.2 Indemnification of KNE. TBI hereby covenants and agrees to
\nindemnify and hold harmless KNE and each subsidiary and each of their
\nrespective officers and directors (the “KNE Affiliates”), and their respective
\nsuccessors and assigns, at all times from and after the date of Closing against
\nand in respect of the following (collectively the “Claims”):<\/p>\n
(a) all liabilities of KNPC of any nature, whether accrued,
\nabsolute, contingent or otherwise, which arise out of the conduct of any
\nbusiness, the ownership or use of any property, or the existence or occurrence
\nof any events, condition or set of facts, on or after January 1, 1996,
\nincluding, but not limited to, any liabilities for federal, state or local
\ntaxes for any year or period;<\/p>\n
(b) any damage or loss resulting from any misrepresentation,
\nbreach of representation or warranty or non-fulfillment of any agreement or
\ncovenant on the part of TBI or TBI ACQUISITION under this Agreement, or from
\nany misrepresentation in or omission from any certificate or other instrument
\nor documents furnished or to be furnished by TBI or TBI ACQUISITION hereunder;
\nand<\/p>\n
(c) all claims, actions, suits, proceedings, demands, assessments,
\njudgments, costs, attorney’s fees and expenses of any nature incident to any of
\nthe matters indemnified against pursuant to this Section 10.2.<\/p>\n
10.3 Threshold Amounts. Notwithstanding anything to the contrary
\nherein, the parties agree that no indemnification obligation (other than that
\narising as a result of the Wolf Creek Fire) shall arise under the terms of this
\nAgreement unless and until the aggregate value of all such indemnification
\nobligations is equal to or greater than $2,000,000, whereupon the obligation to
\nindemnify shall include the full amount of such liability or claim. The full
\namount of any liability or loss to KNPC arising out of the Wolf Creek Fire
\nshall be borne by KNE.<\/p>\n
27
\n 33
\n 10.4 Survival of Indemnity. The agreements to indemnify set forth
\nin Section 10.1 and 10.2 above shall survive the Closing and shall be fully
\nenforceable in law or in equity against the party responsible for
\nindemnification (the “Indemnifying Party”) if written notice of the amount for
\nwhich the indemnification is sought is given to the Indemnifying Party within
\nfifteen (15) months following the Closing Date, except for losses involving tax
\nmatters which shall survive for the applicable period of limitations (the
\n“Indemnity Period”).<\/p>\n
10.5 Notice and Defense. The party (KNE or TBI) seeking
\nindemnification under the terms of this Article X (the “Indemnified Party”)
\nshall notify the Indemnifying Party of any Claim whether or not resulting from
\naction by a third party or parties, which gives rise to indemnification
\nhereunder. Notice of such Claim must be given during the Indemnity Period.
\nUpon receipt of a notice of Claim, with respect to third party actions, the
\nIndemnifying Party shall have, at its election, the right, but not the
\nobligation, to compromise or defend any such matter at its sole cost and
\nexpense through counsel chosen by the Indemnifying Party and approved by the
\nIndemnified Party; provided, however, that any such compromise or defense shall
\nbe conducted in a manner which is reasonable and not contrary to the
\nIndemnified Party’s interests and the Indemnified Party shall in all events
\nhave a right to veto any such compromise or defense which is unreasonable or
\nwhich would jeopardize in any material respect any assets or business of the
\nIndemnified Party or any Affiliates of the Indemnified Party or increase the
\npotential liability of, or create a new liability for, the Indemnified Party or
\nany Affiliates of the Indemnified Party and, provided further that the
\nIndemnifying Party shall in all events indemnify the Indemnified Party and its
\nAffiliates against any damage resulting from the manner in which such matter is
\ncompromised or defended, including any failure to pay any Claim while such
\nlitigation is pending. If the Indemnifying Party does undertake to compromise
\nor defend, the Indemnifying Party shall notify the Indemnified Party of its
\nintention to do so. Each party agrees in all cases to cooperate with the party
\nassuming the primary defense of any Claim and its or his counsel in the
\ncompromise of or defense of any Claim. In addition, the non-defending party
\nshall at all times be entitled to monitor such defense through the appointment,
\nat its or his own cost and expense, of advisory counsel of its or his own
\nchoosing.<\/p>\n
10.6 Limitation on Indemnity Obligation. KNE’s obligation to
\nindemnify TBI under this Article X shall not exceed $20,000,000.00, in the
\naggregate.<\/p>\n
XI. SURVIVAL<\/p>\n
Except for the matters expressly provided to survive the Closing in
\nArticle IX of this Agreement, the representations, warranties and agreements
\nmade by the parties in this Agreement and in any other certificates and
\ndocuments delivered in connection herewith, including the indemnification
\nobligations of KNE and TBI set forth in Article X hereof, shall survive the
\nClosing under this Agreement only for a period of fifteen (15) months following
\nClosing, without limitation regardless of any investigation made by the party
\nseeking indemnification under Article X.<\/p>\n
28
\n 34
\n XII. BROKERS AND ADVISORS<\/p>\n
Except with respect to the engagement of Petrie, Parkman & Co., who is
\nacting as financial advisor for KNE in connection with the transactions
\ncontemplated by this Agreement, whose fees and expenses KNE hereby agrees to be
\nfully responsible for, and except with respect to the engagement of Schroder
\nWertheim & Co., who is acting as financial advisor for TBI in connection with
\nthe transactions contemplated by this Agreement, whose fees and expenses TBI
\nhereby agrees to be fully responsible for. KNPC and KNE on the one hand, and
\nTBI and TBI ACQUISITION, on the other hand, represent and warrant to each other
\nthat the transactions contemplated by this Agreement have been negotiated
\ndirectly between them and their respective counsel, without the intervention of
\nany person as a result of any action by them in such a manner as to give rise
\nto a valid claim against any party hereto for a brokerage commission, finder’s
\nfee, counseling or advisory fee, or like payment, and each agree to indemnify
\nthe other against any such liability arising from or through it.<\/p>\n
XIII. FEES AND EXPENSES<\/p>\n
Each party to this Agreement shall bear its own expenses relating
\nhereto, including fees and disbursements of its counsel and accountants, except
\nthat KNE shall pay all such fees and expenses of KNPC incurred prior to
\nClosing.<\/p>\n
XIV. NOTICE<\/p>\n
All notices, requests, demands and other communications under or in
\nconnection with this Agreement shall be in writing, and,<\/p>\n
(a) if to TBI or TBI ACQUISITION, shall be addressed to:<\/p>\n
Tom Brown, Inc.
\n P. O. Box 2608
\n Midland, Texas 79702
\n Attention: Mr. Donald L. Evans,
\n Chairman of the Board
\n Telephone: (915) 682-9715
\n Telecopy: (915) 682-9171<\/p>\n
29
\n 35
\n with a copy to:<\/p>\n
Lynch, Chappell & Alsup
\n 300 N. Marienfeld, Suite 700
\n Midland, Texas 79701
\n Attn: Mr. James M. Alsup
\n Telephone: (915) 683-3351
\n Telecopy: (915) 683-2587<\/p>\n
(b) if to KNPC, shall be addressed to:<\/p>\n
K N Production Company
\n P. O. Box 281304
\n Lakewood, Colorado 80228-8304
\n Attention: Mr. Geoff Solich
\n Telephone: (303) 980-9340
\n Telecopy: (303) 989-0823<\/p>\n
and if to KNE, shall be addressed to:<\/p>\n
K N Energy, Inc.
\n P. O. Box 281304
\n Lakewood, Colorado 80228-8304
\n Attention: Mr. Geoff Solich
\n Telephone: (303) 989-1740
\n Telecopy: (303) 763-3115<\/p>\n
with a copy to:<\/p>\n
Vinson & Elkins
\n 2300 First City Tower
\n 1001 Fannin Street
\n Houston, Texas 77002-6760
\n Attention: Mr. William G. Lee
\n Telephone: (713) 758-2180
\n Telecopy: (713) 758-2346<\/p>\n
All such notices, requests, demands or communications shall be mailed
\npostage prepaid, certified mail, return receipt requested, or delivered
\npersonally or by telecopy and shall be sufficient and effective when delivered
\nto or received at the address so specified. Any party may change the address
\nat which it is to receive notice by like written notice to the others.<\/p>\n
30
\n 36
\n XV. TERMINATION<\/p>\n
This Agreement may be terminated and the transactions contemplated
\nhereby abandoned as provided in this Article XV, by notice given by the
\nterminating party to the non-terminating parties containing the certificate of
\nthe terminating party’s Secretary to the effect that the Board of Directors of
\nthe terminating party has authorized the giving of such notice, under any of
\nthe following circumstances:<\/p>\n
(a) Mutual Agreement. By mutual agreement of KNE and TBI;<\/p>\n
(b) Lapse of Time. At the option of KNE or TBI if the
\nClosing has not occurred on or before February 29, 1996 (the “Outside Date”)
\nunless that date has been extended by mutual agreement of TBI and KNE in which
\ncase the date to which the Outside Date has been extended shall be the Outside
\nDate;<\/p>\n
(c) KNPC or KNE’s Failure to Perform. At the option of TBI,
\nprior to the Closing pursuant to this Agreement, if (i) there shall have been a
\nbreach of any representation or warranty on the part of KNPC, or (ii) there
\nshall have been a breach of any covenant or agreement on the part of KNPC or
\nKNE, which shall not have been cured prior to the earlier of (a) ten days
\nfollowing notice of such breach, and (b) two business days prior to the Outside
\nDate;<\/p>\n
(d) TBI’s Failure to Perform. At the option of KNE, prior to
\nthe Closing pursuant to this Agreement, if (i) there shall have been a breach
\nof any representation or warranty on the part of TBI or (ii) there shall have
\nbeen a breach of any covenant or agreement on the part of TBI which shall not
\nhave been cured prior to the earlier of (a) ten days following notice of such
\nbreach, and (b) two business days prior to the Outside Date.<\/p>\n
XVI. ENTIRE AGREEMENT<\/p>\n
This Agreement (including the exhibits hereto and the lists, schedules
\nand documents delivered pursuant hereto, which are a part hereof) is intended
\nby the parties to and does constitute the entire agreement of the parties with
\nrespect to the transactions contemplated by this Agreement. This Agreement
\nsupersedes any and all prior understandings, written or oral, between the
\nparties, and this Agreement may be amended, modified, waived, discharged or
\nterminated only by an instrument in writing signed by the party against which
\nenforcement of the amendment, modification, waiver, discharge or termination is
\nsought.<\/p>\n
XVII. GENERAL<\/p>\n
The paragraph headings contained in this Agreement are for reference
\npurposes only and shall not affect in any way the meaning or interpretation of
\nthis Agreement. This Agreement may be executed simultaneously in two or more
\ncounterparts, each of which shall be deemed an original, but all of which
\ntogether shall constitute one and the same instrument. This<\/p>\n
31
\n 37
\nAgreement shall inure to he benefit of and be binding upon the parties hereto
\nand their respective successors and assigns, but nothing herein, express or
\nimplied, is intended to or shall confer any rights, remedies or benefits upon
\nany person other than the parties hereto. This Agreement may not be assigned
\nby any party hereto. This Agreement shall be construed in accordance with and
\ngoverned by the laws of the State of Delaware.<\/p>\n
32
\n 38
\n IN WITNESS WHEREOF, TBI, TBI ACQUISITION, KNPC and KNE have caused
\nthis Agreement to be duly executed as of the date first above written.<\/p>\n
TOM BROWN, INC.<\/p>\n
By: \/s\/ Peter R. Scherer
\n —————————————–
\n Name: Peter R. Scherer
\n Title: Executive Vice President<\/p>\n
TBI ACQUISITION, INC.<\/p>\n
By: \/s\/ Peter R. Scherer
\n —————————————–
\n Name: Peter R. Scherer
\n Title: Executive Vice President<\/p>\n
K N PRODUCTION COMPANY<\/p>\n
By: \/s\/ George M. Simmons
\n —————————————–
\n Name: George M. Simmons
\n Title: President and Chief
\n Operating Officer<\/p>\n
K N ENERGY, INC.<\/p>\n
By: \/s\/ H. Rickey Wells
\n —————————————–
\n Name: H. Rickey Wells
\n Title: Vice President – Operations<\/p>\n
33<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6962],"corporate_contracts_industries":[9409],"corporate_contracts_types":[9622,9626],"class_list":["post-43214","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-brown-tom-inc","corporate_contracts_industries-energy__exploration","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43214","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43214"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43214"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43214"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43214"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}