AGREEMENT AND PLAN OF MERGER

(b) Capitalization. The authorized capital stock of Target consists of 100,000,000 Target Common Shares, 23,799,322 of which are currently issued and outstanding. All of the Target Common Shares have been duly authorized and validly issued and are fully paid and nonassessable. Target does not hold any shares of its own capital. No Target Common Shares are subject to any pledges, security interests, other liens, restrictions on transfer, encumbrances or other rights of any kind or nature (“Encumbrances”). All outstanding shares of capital stock of the Subsidiaries of Target are fully owned by Target or a wholly-owned Subsidiary of Target, free and clear of any Encumbrances. Except as set forth in this Section 4.01(b), there are no outstanding or authorized subscriptions, options, warrants, calls, rights, commitments, convertible securities, other equity securities of any kind or nature or any other agreements of any kind or nature obligating Target or any shareholder of Target to issue, sell or otherwise transfer any additional Target Common Shares or any other shares of capital stock of Target or any other securities convertible into or evidencing the right to subscribe for any Target Common Shares. All of the outstanding securities of Target were issued in compliance with all applicable federal and state securities and corporate laws, and none of the outstanding securities has been issued in violation of any preemptive rights, rights of first refusal or similar rights. Neither Target nor, to Target’s knowledge, any Shareholder is a party to any voting trust agreement or other contract, agreement, arrangement, commitment, plan or understanding restricting or otherwise relating to voting, dividend or other rights with respect to any of the capital stock of Target. No amounts attributed to the earnings or assets of Target have been distributed, or deemed distributed, by Target to any holder of the Target's capital stock. The number of Target Common Shares owned by each of the Major Shareholders is set forth in Schedule 4.01(b) attached hereto.

 

(c) Authority Relative to this Agreement. Except for the required approval by Target’s shareholders to be obtained pursuant to this Agreement prior to the Effective Time, Target has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Target and the consummation by Target of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Target and, except for the required approval of Target’s shareholders to be obtained pursuant to this Agreement prior to the Effective Time, no other corporate proceedings on the part of Target are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Target, and, assuming this Agreement constitutes a valid and binding obligation of Parent, this Agreement constitutes a valid and binding agreement of Target, enforceable against Target in accordance with its terms, except as limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights and by general equitable principles.

 

(d) Absence of Certain Changes. Since the Balance Sheet Date (as hereinafter defined), no event has occurred that has had or could have a Material Adverse Effect. Since the Balance Sheet Date, there has not been, directly or indirectly, (i) any declaration, setting aside or payment of any dividend or other distribution in respect of the Target Common Shares, any return of any capital or other distribution of assets to shareholders, or any redemption or other acquisition by Target of Target Common Shares or other securities or obligations of Target; (ii) any significant change by Target or any Subsidiary in accounting methods, principles or practices except as required by a change in generally accepted accounting principles, (iii) any direct or indirect material purchase or other acquisition of stock of any individual or entity of any kind or nature (collectively, “person” or “Person”), or any direct or indirect loan, advance (other than advances to employees for travel or entertainment expenses in the ordinary course of business) or capital contribution to any person, (iv) a grant of any general increase in the compensation of its officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or any increase in the compensation payable or to become payable to any such officer or employee; and (v) any agreement to take, whether in writing or otherwise, any action which would make or have made any representation or warranty in this Article 4 untrue or incorrect. Since the Balance Sheet Date, Target and its Subsidiaries have conducted their respective businesses only in the ordinary and usual course consistent with past practice. Since the Balance Sheet Date, neither Target nor any of its Subsidiaries have (A) sold, assigned or transferred any of its tangible assets except in the ordinary course of business, or canceled any debt or claim, except for write-offs in the ordinary course of business consistent with past practices, (B) suffered any loss of property or waived any right whether or not in the ordinary course of business, except where such loss or waiver would not have a Material Adverse Effect, (C) (i) granted any severance or termination pay to any of its directors, officers, employees or consultants, (ii) increased any benefits payable under any existing severance or termination pay policies or employment agreements, or (iii) increased the compensation, bonus or other benefits payable to any of its directors, officers, consultants or employees, (D) made any material change in the manner of its business or operations, (E) entered into any transaction except in the ordinary course of business or as otherwise contemplated hereby or (F) entered into any commitment (contingent or otherwise) to do any of the foregoing.

 

(e) Financial Statements. Target has provided to Parent, or will provide to Parent within thirty (30) days of the date of this Agreement, true and complete copies of (i) the audited consolidated balance sheet of Target and its Subsidiaries as of December 31, 2004, and the related audited statements of operations and changes in stockholders' equity for the fiscal year then ended, and (ii) the unaudited consolidated balance sheet of Target and its Subsidiaries and the related unaudited statements of operations for the period ended December 31, 2005 (collectively, the “Financial Statements”). The Financial Statements (i) have been, or will be, prepared in accordance with generally accepted accounting principles (“GAAP”) on a basis consistent throughout the periods covered thereby; (ii) present, or will present, fairly, in all material respects, the financial condition of Target and its Subsidiaries as of the dates thereof and the results of their operations for the periods then ended; and (iii) are, or will be, consistent with the books and records of Target and its Subsidiaries, which books and records are true, correct and complete in all material respects. For purposes of this Agreement, the “Balance Sheet” means the consolidated balance sheet of Target and its Subsidiaries dated as of December 31, 2005, and the “Balance Sheet Date” means December 31, 2005. All liabilities and obligations, whether absolute, accrued, contingent or otherwise, whether direct or indirect, and whether due or to become due, which existed at the date of such Financial Statements and are required, under GAAP, to be recorded or disclosed in the balance sheets included in the Financial Statements or disclosed in notes to the Financial Statements are, or will be, so recorded or disclosed.

(q) Insurance. Each insurance policy maintained by Target and its Subsidiaries covering Target, the Subsidiaries and their respective business, employees, agents and assets, copies of which have been provided to Parent, is in full force and effect and is reasonable in coverage and amount in relation to the risks to which Target, its Subsidiaries and their respective employees, businesses, properties and other assets may be exposed in the operation of its business prior to the Closing. None of such policies shall, pursuant to their terms, in any way be affected by or terminate or lapse by reason of this Agreement or the Merger. No notice of cancellation or termination has been received with respect to any such policy.

 

(r) Brokerage Fees and Commissions. No person is entitled to receive from Target or its Subsidiaries any investment banking, brokerage or finder's fee in connection with this Agreement or the transactions contemplated hereby.

 

(s) Contracts. All of Target’s and its Subsidiaries’ Contracts are valid and binding obligations of Target and its Subsidiaries and, to the knowledge of Target, of the other respective parties thereto. Target and its Subsidiaries have duly performed their respective obligations under all Contracts and, to the knowledge of Target, each other party thereto has performed its obligations thereunder. Neither Target, its Subsidiaries nor any other party is in breach of any term or provision of any Contract.

 

(t) SEC Registration Status. Target and its Subsidiaries are not required to file and do not file any periodic or other reports under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

 

(u) Affiliated Transactions. There are no Contracts or other material transactions or agreements between Target or any of its Subsidiaries, on the one hand, and any (a) officer or director of Target or of any of its Subsidiaries; (b) Major Shareholder; or (c) affiliate of any such officer, director or Major Shareholder.

5.01 Conduct of Business of Target. Except as contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, Target and its Subsidiaries shall each (a) conduct its operations according to its ordinary and usual course of business and consistent with past practice, including, without limitation, continue its current drilling and workover program without cost mark-up or promotion charges being added to capital or workover related costs, or for additional reserves resulting from the drilling or workover operations; (b) use its best efforts to preserve intact its business organization and assets in all material respects, and maintain satisfactory relationships with suppliers, distributors, customers, banks and others having business relationships with them; (c) confer on a regular and frequent basis with one or more representatives of Parent to report operational matters of a material nature and the general status of ongoing operations; and (d) notify Parent of any emergency or other change in the normal course of its business or its Subsidiaries' businesses or in the operation of its properties or its Subsidiaries' properties and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated). Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, neither Target nor any of its Subsidiaries, as the case may be, shall, without the prior written consent of Parent, (i) issue, sell or pledge, or commit, authorize or propose the issuance, sale or pledge of (A) additional shares of capital stock of any class (including the Shares), or securities convertible into any such shares, or any rights, warrants or options to acquire any such shares or other convertible securities, or grant or accelerate any right to convert or exchange any securities of Target for Shares, or (B) any other securities in respect of, in lieu of or in substitution for Shares outstanding on the date thereof; (ii) purchase or otherwise acquire, or propose to purchase or otherwise acquire, any of its outstanding securities (including the Shares); (iii) split, combine or reclassify any shares of its capital stock, or redeem or otherwise acquire any of its securities; (iv) declare or pay any dividend or distribution on any shares of capital stock of Target; (v) make any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities or any material change in its capitalization, or enter into a material contract or release or relinquish any material contract rights not in the ordinary course of business; (vi) incur any long-term debt for borrowed money or short-term debt for borrowed money; (vii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (viii) make any loans, advances (other than advances to employees for travel and entertainment in the ordinary course of business) or capital contributions to, or investments in, any other person; (ix) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than when due; (x) waive, release, grant or transfer any rights of value or modify or change in any material respect any existing material license, lease, contract or other agreement or arrangement; (xi) other than in the ordinary course of business and consistent with past practice and not in an amount in excess of $50,000 or other than capital expenditures budgeted for the current period, make any capital expenditures or commitments for capital expenditures; (xii) acquire, sell, lease or dispose of (directly or by merger, consolidation or other business combination) any assets outside the ordinary course of business or any material assets, or enter into any commitment or transaction outside the ordinary course of business or adopt a plan of liquidation or resolutions providing for its liquidation, dissolution, merger, consolidation or other reorganization; (xiii) propose or adopt any amendments to its Articles of Incorporation or Bylaws; (xiv) enter into any new employment agreement with any officer, director or employee or grant any material increase in the compensation or benefits to any officer, director or employee; (xv) take any action to terminate any of its employee benefit plans; (xvi) take any action with respect to the grant of any severance or termination pay (otherwise than pursuant to written policies or consistent with written practices in effect prior to the date hereof) or with respect to any increase of benefits payable under its written severance or termination pay practices in effect on the date hereof; (xvii) adopt or amend any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment or other employee benefit plan, agreement, trust, fund, plan or arrangement for the benefit or welfare of any employee or pay any benefit not required by any existing plan or arrangement (including, without limitation, the granting of stock options, stock appreciation rights, shares of restricted stock or performance units); (xviii) file any consolidated Federal Tax Return relating to Taxes or income other than a Federal Tax Return to be filed by Target on or before January 15, 2007, in respect of federal income taxes for the fiscal year ended April 30, 2006; (xix) materially change accounting policies or procedures or any of its methods of reporting income, deductions or other material items for income tax purposes, except as required by GAAP or applicable law; or (xx) agree in writing or otherwise to take any of the foregoing actions or any action which would make any representation or warranty in this Agreement untrue or incorrect.

(a) No statute, rule, regulation, executive order, decree or injunction or other legal restraint shall have been enacted, entered, promulgated or enforced by any court or other governmental authority which is in effect and has the effect of prohibiting the consummation of the Merger;

 

(b) All approvals (including permits) of, and consents by, all federal, state, local and foreign governmental agencies and authorities and all filings with and submissions to all such agencies and authorities as may be required for the consummation of the Merger shall have been obtained or made (including any filings required by the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and any waiting period relating thereto shall have expired or been terminated); and

 

(c) In connection with the Merger and the other transactions contemplated hereby and without limiting the foregoing, each of the parties hereto shall have taken all action necessary to ensure that (i) no Takeover Statute or similar law is or becomes applicable to the Merger, this Agreement or any of the other transactions contemplated hereby, or (ii) if any Takeover Statute or similar law becomes applicable to the Merger, this Agreement or any of the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such law on the Merger and the other transactions contemplated by this Agreement.

(a) All representations and warranties of Target contained in this Agreement (including the Disclosure Schedule hereto) shall be true and correct as of the date when made and on and as of the Closing Date;

 

(b) Target and the Major Shareholders, respectively, shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by Target or any Major Shareholder prior to or on the Closing Date;

 

(c) Any consent from any Party that under any Contract could terminate by reason of the transactions contemplated hereby shall have been delivered to Parent and shall be in form and substance reasonably satisfactory to Parent;

 

(d) Parent shall have received the opinion of counsel to Target, dated as of the Closing Date, in substantially the form of Annex “B” attached hereto and made a part hereof for all purposes;

 

(e) All corporate and other proceedings taken or required to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Parent and its counsel, and counsel to Parent shall have received all such information and such counterpart originals or certified or other copies of such documents as Parent or its counsel may reasonably request. Parent shall have received such other instruments, approvals and other documents as it may reasonably request to make effective the transactions contemplated hereby;

 

(f) Subject to Section 5.06(b) of this Agreement, Parent shall be satisfied in its sole discretion, with its legal, financial, geological and business investigations of the Business, the Assets and the liabilities (other than liabilities of Target [and not its Subsidiaries] arising from breaches of (i) Sections 4.01(b); (ii) and 4.01(i) hereof involving matters occurring prior to March 22, 2005) of Target and its Subsidiaries;

 

(g) Since the Balance Sheet Date, there shall have been no change in the Business, operations, Assets, results of operations or condition (financial or otherwise) of Target and its Subsidiaries that has had or could reasonably be expected to have a Material Adverse Effect;

 

(h) Parent shall have received audited financial statements for the periods ended December 31, 2005, together with such other financial statements and data as shall be reasonably requested in order to enable Parent to satisfy its financial reporting obligations under the Federal securities laws, which financial statements shall comply with Regulation S-X under the Securities Act;

 

(i) The Merger shall have been duly approved by the requisite vote under applicable law and Parent’s certificate of incorporation by the shareholders of Parent at a duly held meeting and the shareholders of Parent owning twenty percent (20%) or more of the shares sold in Parent’s initial public offering shall not have exercised their conversion rights as described in the Parent’s Prospectus dated October 24, 2005;

 

(j) Parent shall have filed its proxy statement relating to the Merger with and had same cleared by the SEC, and such proxy statement shall have been properly mailed to Parent’s shareholders; and

 

(k) Parent and its counsel shall have received a certificate of the President and Treasurer of Target dated the Closing Date and certifying that the conditions set forth in Sections 6.02(a) and 6.02(b) hereof have been satisfied. Such certificate shall be in form and substance reasonably satisfactory to Parent.

 

 

8.01 Indemnification by Major Shareholders.

If to Parent or Acquisition Sub:
Platinum Energy Resources, Inc. 152 West 57th Street New York, New York 10019 Attention: Mark Nordlicht Facsimile: 212 ###-###-####
With a copy to:
Sills Cummis Epstein & Gross P.C. One Riverfront Plaza Newark, New Jersey 07102 Attention: Eliezer M. Helfgott Facsimile: 973 ###-###-####
If to Target:
Tandem Energy Holdings, Inc. Midland, Texas ###-###-#### Attention: Tim G. Culp Facsimile: 432 ###-###-####
With a copy to:
Snell Wylie & Tibbals 8150 North Central Suite 1800 Dallas, Texas 75206 Attention: Phillip A. Wylie Facsimile: 214 ###-###-####

(i) Is free and clear of all defects, burdens and liens;

 

(ii) In the case of each Oil and Gas Interest, (A) is filed, recorded or otherwise referenced of record in the records of the applicable county in a manner which under applicable local law constitutes imputed notice of such Oil and Gas Interest to third parties acquiring an interest in or an encumbrance against such Oil and Gas Interest, or (1) in the case of federal leases, in the records of the applicable office of the Bureau of Land Management, (2) in the case of Indian leases and mineral development agreements, in the applicable office of the Bureau of Indian Affairs or applicable tribal records, or (3) in the case of state leases, in the records of the applicable state land office, but only to the extent the records referenced in (1), (2) and (3) above constitute imputed notice under applicable local law to third parties acquiring an interest in or an encumbrance against such leases, or (B) is assignable to Target or a Subsidiary out of an interest of record (as provided in clause (A) above), but only to the extent that all conditions required to earn an enforceable right to such assignment have been satisfied and the record owner of such interest is ready, willing and able to make such assignment;

 

(iii) In the case of each Oil and Gas Interest set forth in the reserve reports of Target or a Subsidiary that entitles Target or its Subsidiaries to receive and retain, without reduction, suspension or termination and after deduction of all applicable royalties, overriding royalties, production payments or other burdens payable out of production, not less than the percentage set forth in the reserve reports as Target's or its Subsidiaries’ “Net Revenue Interest” of all Hydrocarbons produced, saved and marketed from such Oil and Gas Interest, through the productive life of such Oil and Gas Interest, except for changes or adjustments in such “Net Revenue Interest” after the date hereof and in compliance with Target’s and its Subsidiaries’ covenants and agreement under this Agreement that result from the establishment of new units, changes in existing units (or the participating areas therein), the entry into of new pooling or unitization agreements, or an election not to participate in an operation under a joint operating agreement or a unit agreement;

 

(iv) In the case of each Oil and Gas Interest set forth in the reserve report of Target or its Subsidiaries that obligates Target or its Subsidiaries to bear not greater than the percentage set forth in the reserve report as Target's or its Subsidiaries’ “Working Interest” of the costs and expenses relating to the maintenance, development and operation of such Oil and Gas Interest (including the plugging and abandonment and site restoration with respect to all existing and future wells located thereon or attributable thereto), through plugging, abandonment and salvage of all wells and related lease facilities located on such Oil and Gas Interest or lands pooled, unitized or otherwise combined therewith, except for changes or adjustments in such “Working Interest” after the date hereof and in compliance with Target’s and its Subsidiaries’ covenants and agreement under this Agreement that result from the establishment of new units, changes in existing units (or the participating areas therein), the entry into of new pooling or unitization agreements, or an election by a third party not to participate in an operation under a joint operating agreement or a unit agreement;

 

(v) In the case of each Oil and Gas Interest, reflects that all royalties, rentals, Pugh clause payments, shut in gas payments and other payments due with respect to such Oil and Gas Interest have been properly and timely paid, except for payments held in suspense for title or other reasons which are customary in the industry and which will not result in grounds for cancellation of Target’s or its Subsidiaries’ rights in such Oil and Gas Interest; and

 

(vi) Reflects that all consents to assignment, notices of assignment or preferential purchase rights which are applicable to or must be complied with in connection with the transaction contemplated by this Agreement, have been obtained and complied with to the extent the failure to obtain or comply with the same could render this transaction or any such prior sale, assignment or transfer (or any right or interest affected thereby) void or voidable or could result in Parent or its Subsidiaries incurring any liability or loss of title.

	Parent:
	PLATINUM ENERGY RESOURCES, INC.
	By:	/s/ Mark Nordlicht
		Mark Nordlicht,
		Chairman

	Target:
	TANDEM ENERGY HOLDINGS, INC.
	By:	/s/ Tim G. Culp
		Tim G. Culp
		President

 

 

			/s/ Jack A. Chambers
			Jack A. Chambers