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EXHIBIT 10.1
STOCK PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
HS RESOURCES, INC.
"SELLER"
AND
UNIVERSAL RESOURCES CORPORATION
"BUYER"
DATED JULY 27, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS .........................................................................................1
Section 1.01 Defined Terms............................................................................1
Section 1.02 References and Titles....................................................................9
ARTICLE 2 PURCHASE AND SALE.......................................................................................9
Section 2.01 Purchase and Sale of HSRTW Common Shares.................................................9
Section 2.02 Adjustments to Purchase Price. ........................................................10
Section 2.03 The Closing. ...........................................................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................11
Section 3.01 Organization............................................................................11
Section 3.02 Partnerships and LLCs...................................................................11
Section 3.03 Authority and Enforceability............................................................11
Section 3.04 No Violations...........................................................................12
Section 3.05 Consents and Approvals..................................................................12
Section 3.06 Capital Structure.......................................................................13
Section 3.07 No Undisclosed Liabilities..............................................................13
Section 3.08 Brokers.................................................................................14
Section 3.09 Seller's Balance Sheet..................................................................14
Section 3.10 Absence of Certain Changes or Events....................................................14
Section 3.11 Compliance with Laws, Material Agreements and Permits...................................15
Section 3.12 Governmental Regulation.................................................................16
Section 3.13 Litigation..............................................................................16
Section 3.14 No Restrictions.........................................................................16
Section 3.15 Tax Audits and Settlements..............................................................16
Section 3.16 Taxes...................................................................................16
Section 3.17 Employee Benefit Plans..................................................................17
Section 3.18 Payment Contracts and Benefits..........................................................17
Section 3.19 Accounts Receivable.....................................................................17
Section 3.20 Insurance...............................................................................17
Section 3.21 Office and Other Equipment..............................................................18
Section 3.22 Title to Assets.........................................................................18
Section 3.23 Oil and Gas Operations..................................................................18
Section 3.24 Hydrocarbon Sales Agreements............................................................18
Section 3.25 Environmental Matters...................................................................19
Section 3.26 Royalties...............................................................................19
Section 3.27 Securities Matters......................................................................20
Section 3.28 Representations and Warranties Exclusive................................................20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................................................................20
Section 4.01 Organization............................................................................20
Section 4.02 Authority and Enforceability............................................................20
Section 4.03 No Violations...........................................................................20
Section 4.04 Consents and Approvals..................................................................21
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Section 4.05 Governmental Regulation.................................................................21
Section 4.06 Litigation..............................................................................21
Section 4.07 Funding.................................................................................21
Section 4.08 Brokers.................................................................................21
Section 4.09 Held for Investment.....................................................................21
Section 4.10 Buyer's Investigation; Sophisticated Buyer..............................................22
Section 4.11 Absence of Certain Changes and Events...................................................22
Section 4.12 Compliance with Law.....................................................................22
Section 4.13 No Undisclosed Liabilities..............................................................22
ARTICLE 5 COVENANTS ........................................................................................22
Section 5.01 Conduct of Business by Seller Pending Closing...........................................22
Section 5.02 Access to Assets, Personnel and Information.............................................25
Section 5.03 Additional Arrangements.................................................................26
Section 5.04 Public Announcements....................................................................26
Section 5.05 Payment of Expenses.....................................................................26
Section 5.06 Operations..............................................................................26
Section 5.07 Adjustments to the Financial Statements.................................................27
Section 5.08 Tax Matters.............................................................................29
Section 5.09 HSRTW Name Change.......................................................................30
Section 5.10 Signs...................................................................................31
Section 5.11 Horizon Dissolution.....................................................................31
Section 5.12 Section 29 ▇▇▇▇▇........................................................................31
Section 5.13 Office Lease............................................................................31
ARTICLE 6 TITLE AND ENVIRONMENTAL MATTERS........................................................................31
Section 6.01 Title Defect Adjustments................................................................31
Section 6.02 Environmental Defect Adjustments........................................................35
Section 6.03 Casualty Loss...........................................................................35
ARTICLE 7 CONDITIONS ........................................................................................36
Section 7.01 Conditions to Each Party's Obligation to Effect the Transaction.........................36
Section 7.02 Conditions to Obligations of Buyer.:....................................................36
Section 7.03 Conditions to Obligations of Seller.....................................................37
ARTICLE 8 CLOSING ........................................................................................37
Section 8.01 Closing Obligations.....................................................................37
ARTICLE 9 POST-CLOSING GAS IMBALANCE.............................................................................38
Section 9.01 Gas Balancing...........................................................................38
ARTICLE 10 TERMINATION ........................................................................................39
Section 10.01 Termination Rights......................................................................39
Section 10.02 Effect of Termination...................................................................40
ARTICLE 11 INDEMNIFICATION AND ASSUMPTION........................................................................41
Section 11.01 Survival of Representations and Warranties..............................................41
Section 11.02 Limited Indemnification By Seller.......................................................41
Section 11.03 Indemnification by Buyer and HSRTW......................................................44
Section 11.04 Matters Involving Third Parties.........................................................44
Section 11.05 Determination of Adverse Consequences...................................................45
Section 11.06 Application of Article 11...............................................................45
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ARTICLE 12 MISCELLANEOUS ........................................................................................46
Section 12.01 Amendment...............................................................................46
Section 12.02 Notices.................................................................................46
Section 12.03 Counterparts............................................................................46
Section 12.04 Entire Agreement; No Third Party Beneficiaries..........................................46
Section 12.05 Applicable Law..........................................................................46
Section 12.06 No Remedy in Certain Circumstances......................................................46
Section 12.07 Assignment..............................................................................47
Section 12.08 Waivers.................................................................................47
Section 12.09 Confidentiality Agreement...............................................................47
Section 12.10 Incorporation...........................................................................47
Section 12.11 Waiver of Jury Trial....................................................................47
Section 12.12 Jurisdiction and Venue..................................................................47
Section 12.13 Damage Waiver...........................................................................48
Section 12.14 Legal Fees..............................................................................48
Section 12.15 Further Assurances......................................................................48
Section 12.16 Transaction Deductible..................................................................48
Section 12.17 Transition..............................................................................48
SCHEDULES
Schedule 1.01(a) Allocated Values
Schedule 3.19-A Accounts Receivable HSRTW
Schedule 3.19-B Accounts Receivable Horizon
Schedule 3.21-A Excluded Assets
Schedule 3-21-B Field Equipment
Schedule 5.08(d) Tax Agreement
Schedule 5.12 Section 29 ▇▇▇▇▇
Schedule 9.01 Gas Balancing
Disclosure Schedule
EXHIBITS
Exhibit A Form of Opinions of Counsel
Exhibit B Escrow Agreement
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STOCK PURCHASE AND SALE AGREEMENT
This Stock Purchase and Sale Agreement (the "Agreement") is made and
entered into as of the 27th day of July, 1998, by and between Universal
Resources Corporation ("Buyer"), a Texas corporation, and HS Resources, Inc.
("HS Resources, Inc." or "Seller"), a Delaware corporation.
HSRTW, Inc. ("HSRTW"), a Delaware corporation, is a wholly owned
subsidiary of Seller. All of the issued and outstanding shares of capital stock
of HSRTW are owned by Seller. Buyer wishes to purchase from Seller all of the
capital stock of HSRTW on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, for and in consideration of the recitals and the mutual
covenants and agreements set forth in this Agreement, the parties to this
Agreement hereby agree as follows:
ARTICLE 1 DEFINITIONS
SECTION 1.01 DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given in this Section 1.01 or in the Sections
referred to below:
"Accounting Arbitrator" has the meaning specified in Section 5.07(c).
"Act" means the Securities Act of 1933, as amended.
"Adverse Consequences" means all actions, awards, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses.
"Affiliate" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person.
"Agreement" means this Stock Purchase and Sale Agreement, including all
exhibits and schedules, the Disclosure Schedule and any other schedules and
similar attachments, as amended, supplemented or modified from time to time.
"Allocated Values" means the allocation of values shown on Schedule
1.01(a).
"Applicable Rate" means the London Interbank Offered Rate for three-
(3) month loans as published in The Wall Street Journal, as such rate may be
adjusted from time to time plus 0.5%.
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"Arkoma" means Arkoma Resources, L.L.C.
"Bank Consent" means the full consent of Seller's lenders under its
senior credit facility to the transaction contemplated by this Agreement.
"Buyer" means Universal Resources Corporation.
"Buyer Indemnitees" has the meaning specified in Section 11.02.
"Buyer's Projected Costs" means the costs and expenses associated with
the maintenance, exploration, development, operation and abandonment of a well
or unit assuming that all projected ▇▇▇▇▇ and units listed in Schedule 1.01(a)
are drilled and developed and that all ▇▇▇▇▇ and units listed in Schedule
1.01(a) commence and/or continue to produce Hydrocarbons for the time period
necessary for Buyer to realize the present value for such ▇▇▇▇▇ or units as set
forth in Schedule 1.01(a) (assuming that such present value was determined with
a discount factor of 10% compounded annually).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any successor statutes and any
regulations promulgated thereunder.
"Cleanup" has the meaning specified in Section 11.02(b)(ii)(1).
"Closing" means the consummation of the transaction contemplated by
this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality Agreement dated
June 12, 1998, between Seller and Buyer relating to Seller's furnishing of
information to Buyer and Buyer's furnishing of information to Seller in
connection with Buyer's and Seller's evaluation of the possibility of the
transaction.
"Credit Adjustment" has the meaning specified in Section 6.01(h).
"DGCL" means the Delaware General Corporation Law.
"Defect Amount" has the meaning specified in Section 6.01(c).
"Defect Threshold" means the $10,000 amounts referred to in Sections
3.25, 6.01(a) and 6.02(a).
"Defensible Title" means such right, title and interest that is held
directly or indirectly by HSRTW or for the benefit of HSRTW, including the
interests of HSRTW in ▇▇▇▇▇, Arkoma and Horizon, in the Ownership Interests
that, except for and subject to the Permitted Encumbrances: (i) entitles HSRTW
to receive as to each Ownership Interest set forth in Schedule 1.01(a), not
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less than the "NRI" set forth in Schedule 1.01(a) in the oil, gas and associated
liquid and gaseous hydrocarbons produced, saved and marketed from such Ownership
Interests, as to its presently producing formations if currently productive or
as to undeveloped Ownership Interests, the projected or anticipated productive
formations; (ii) obligates HSRTW to bear costs and expenses relating to the
maintenance, development and operation of any such Ownership Interest in an
amount not greater than the "Working Interest" set forth in Schedule 1.01(a), as
to its presently producing formations if currently productive or as to
undeveloped Ownership Interests, the projected or anticipated productive
formations, without a proportionate increase in the NRI, and (iii) is free and
clear of liens and material encumbrances and defects. HSRTW's title to an
Ownership Interest shall be presumed to be Defensible Title, unless Buyer can
show through actual evidence (rather than a mere assertion that documents are
missing from Seller's records) submitted with a Title Defect notice pursuant to
Section 6.01(b) that HSRTW's title to an affected lease or well has failed or
that such Ownership Interest is subject to a Lien (except for Permitted
Encumbrances) that would create a material diminution in value in such Ownership
Interest.
"Disclosure Schedule" means the Disclosure Schedule attached hereto and
any documents listed on such Disclosure Schedule.
"Draco" means Draco Petroleum, Inc., an Oklahoma corporation and a
wholly-owned subsidiary of HSRTW, Inc.
"▇▇▇▇▇▇▇ Money" shall have the meaning specified in Section 2.01(b)(i).
"Effective Date Balance Sheet" has the meaning specified in Section
5.07(b).
"Effective Time" means September 1, 1998, at 7:00 a.m. at the location
of the Oil and Gas Interests.
"Environmental Defect" means any circumstance or condition that would
constitute a breach of Seller's warranty and representation set forth in Section
3.25 without regard to Seller's Knowledge, but taking into account the standards
set forth in Section 11.02(b)(v).
"Environmental Law" means any federal, state, or local statute, code,
ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, common law, injunction or other
authorization in effect on the date of this Agreement or at a previous time
applicable to Seller's operations relating to (a) emissions, discharges,
releases or threatened releases of Hazardous Materials into the natural
environment, including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater, publicly owned
treatment works, septic systems or land; (b) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of Hazardous
Materials; (c) occupational health and safety; or (d) otherwise relating to the
pollution of the environment, solid waste handling, treatment or disposal, or
operation or reclamation of oil and gas operations or mines.
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"Escrow Agreement" means the agreement specified in Section 2.01(b)(i),
a copy of which is attached hereto as Exhibit B.
"Estimated Effective Date Balance Sheet" has the meaning specified in
Section 5.07(a).
"Excess Amount" has the meaning specified in Section 11.02(b)(ii)(1).
"GAAP" means generally accepted accounting principles, as recognized by
the U.S. Financial Accounting Standards Board (or any generally recognized
successor).
"Governmental Action" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
"Governmental Authority" means any national, state, county or municipal
government, any agency, board, bureau, commission, court, department or other
instrumentality of any such government, or any arbitrator in any case that has
jurisdiction over Seller, HSRTW, Buyer or any of their respective properties or
assets.
"Hazardous Material" means (a) any "hazardous substance," as defined by
CERCLA or (b) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended.
"Horizon" means Horizon Gas Partners, L.P., a Delaware limited
partnership.
"HSES" means HS Energy Services, Inc., an Oklahoma corporation.
"HSRTW Common Stock" means the common stock, par value $.001 per share,
of HSRTW, Inc.
"Hydrocarbon Sales Agreement" means any sales agreement, purchase
contract or marketing agreement that is currently in effect and under which
HSRTW is a seller of Hydrocarbons (other than "spot" sales agreements entered
into in the ordinary course of business with a term of three months or less,
terminable without penalty on thirty (30) days' notice or less, and which
provide for a price not less than the market value price that would be received
pursuant to an arm's length contract for the same term with an unaffiliated
third-party purchaser).
"Hydrocarbons" means oil, condensate, gas, casinghead gas and other
liquid or gaseous hydrocarbons.
"Indemnified Party" has the meaning specified in Section 11.04(a).
"Indemnifying Party" has the meaning specified in Section 11.04(a).
"Knowledge", unless otherwise defined in this Agreement, means, with
respect to a Party hereto, the actual knowledge, without independent
investigation, of any officer or manager of
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such entity in charge of a discrete business area or function having
responsibility for the referenced matter.
"LLC" means an entity formed as a Limited Liability Company under the
Code and applicable state law.
"Lien" means any lien, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, encumbrance, right of a vendor under
any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto.
"Material Adverse Effect" means (a) when used with respect to Seller or
HSRTW, as the case may be, a result or consequence that would materially
adversely affect the financial condition, results of operations or business of
Seller or HSRTW or the aggregate value of its assets, would materially impair
the ability of Seller or HSRTW to own, hold, develop and operate their assets,
or would materially impair Seller's or HSRTW's ability to perform its
obligations hereunder or consummate the transactions contemplated hereby; and
(b) when used with respect to Buyer, a result or consequence that would
materially adversely affect the condition (financial or otherwise), results of
operations or business of Buyer or the aggregate value of its assets, would
materially impair the ability of Buyer to own, hold, develop and operate its
assets, or would impair Buyer's ability to perform its respective obligations
hereunder or consummate the transactions contemplated hereby.
"NRI" means Net Revenue Interest.
"Oil and Gas Interest(s)" means (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties and assets
of any kind and nature, direct or indirect, including working, royalty and
overriding royalty interests, production payments, operating rights, net profits
interests, other nonworking interests and nonoperating interests; (b) interests
in and rights with respect to Hydrocarbons and other minerals or revenues
therefrom and contracts in connection therewith and claims and rights thereto
(including oil and gas leases, operating agreements, unitization and pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and agreements and,
in each case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; (c) easements,
rights-of-way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (d)
interests in equipment and machinery (including well equipment and machinery),
oil and gas production, gathering, transmission, compression, treating,
processing and storage facilities (including tanks, tank batteries, pipelines
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing. References in this Agreement to the "Oil and Gas Interests," "Oil and
Gas Interests of Seller" or "Seller's Oil and Gas Interests" mean the collective
Oil and Gas Interests of HSRTW held directly, indirectly or for the benefit of
HSRTW.
"Opinions of Counsel" means the opinions substantially in the form
attached as Exhibit A.
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"Ownership Interest" means each interest as separately identified by
line item for the oil and gas ▇▇▇▇▇ and/or undeveloped locations, as set forth
on Schedule 1.01(a).
"Ownership Period" has the meaning specified in Section 3.26.
"Permits" has the meaning specified in Section 3.11.
"Permitted Encumbrances" means (a) Liens for Taxes, assessments or
other governmental charges or levies if the same shall not at the particular
time in question be due and delinquent or (if foreclosure, distraint, sale or
other similar proceedings shall not have been commenced or, if commenced, shall
have been stayed) are being contested in good faith by appropriate proceedings
and if HSRTW shall have set aside on its books such reserves (segregated to the
extent required by sound accounting practices) as may be required by or
consistent with GAAP, whether reserves are set aside or not, which would not,
individually or in the aggregate, result in a Material Adverse Effect on HSRTW;
(b) Liens of carriers, warehousemen, mechanics, laborers, materialmen,
landlords, vendors, workmen and operators arising by operation of law in the
ordinary course of business or by a written agreement existing as of the date of
this Agreement and necessary or incident to the exploration, development,
operation and maintenance of Hydrocarbon properties and related facilities and
assets for sums not yet due or being contested in good faith by appropriate
proceedings, if HSRTW shall have set aside on its books such reserves
(segregated to the extent required by sound accounting practices) as may be
required by or consistent with GAAP, whether reserves are set aside or not,
which would not, individually or in the aggregate, result in a Material Adverse
Effect on HSRTW; (c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other social
security legislation (other than ERISA) which would not, individually or in the
aggregate, result in a Material Adverse Effect on HSRTW; (d) Liens incurred in
the ordinary course of business to secure the performance of bids, tenders,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance and repayment bonds and other obligations of a like nature; (e)
Liens, easements, rights-of-way, restrictions, servitudes, permits, conditions,
covenants, exceptions, reservations and other similar encumbrances incurred in
the ordinary course of business or existing on property and not materially
impairing the value of the assets of HSRTW or materially interfering with the
ordinary conduct of the business of HSRTW or rights to any of their assets; (f)
Liens arising pursuant to statute (or similar Liens created or arising by
operation of law) to secure a party's obligations as a purchaser of oil and gas;
(g) all rights to consent by, required notices to, filings with, or other
actions by Governmental Authorities to the extent customarily obtained
subsequent to closing; (h) farmout, carried working interest, joint operating,
unitization, royalty, overriding royalty, sales and similar agreements relating
to the exploration or development of, or production from, the Oil and Gas
Interests entered into in the ordinary course of business and not in violation
of Section 5.0l(c), provided the effect thereof on the WI and NRI of Seller has
been properly reflected in the Ownership Interests; (i) any defects,
irregularities or deficiencies in title to easements, rights-of-way or other
surface use agreements that do not materially adversely affect the value of any
asset of HSRTW; (j) preferential rights to purchase and Third Party Consents,
including a consent required to commence a waterflood or similar enhanced
recovery project necessary to achieve the value stated for a property on
Schedule 1.01(a); (k) rights reserved to or vested in any municipality or
governmental, tribal,
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statutory or public authority to control or regulate any of the Ownership
Interests in any manner, and all applicable laws, rules and orders of
governmental and tribal authority; and (l) all other liens, charges,
encumbrances, contracts, agreements, instruments, obligations, defects and
irregularities affecting the Ownership Interests (including, without limitation,
liens of operators relating to obligations not yet due or pursuant to which
HSRTW is not in default) that do not (or would not upon foreclosure or other
enforcement) reduce the NRI set forth in Schedule 1.01(a), nor prevent the
receipt of proceeds of production therefrom, nor increase the share of costs
above the working interest set forth in Schedule 1.01(a), nor are such as
materially to interfere with or detract from the ownership, operation, value or
use of the Ownership Interests; such defects include, without limitation:
(a) as to producing Oil and Gas Interests, those
which have not prevented the receipt of production proceeds by HSRTW or
its predecessors in title without suspense by a production purchaser
and as to which no challenge to title has been raised on the basis of
such defect, so long as it can reasonably be concluded either that such
challenge is unlikely or that such challenge would be unsuccessful by
reason of statutes of limitation, waiver, estoppel or other defenses;
(b) those defects customarily considered as advisory
or waivable as a matter of prudent business judgment;
(c) those in the nature of customary defects
expected to be encountered in the area involved and customarily
acceptable to Seller, Buyer or other prudent operators and interest
owners in the area, including, without limitation, defects that have
been cured by possession under applicable statutes of limitation,
defects in the early chain of title such as failure to recite marital
status in documents, omission of heirship or succession proceedings,
lack of survey and failure to record releases of liens, production
payments or mortgages that have expired of their own terms or which
through the passage of time or statute are no longer enforceable or
other defects that either as a practical matter have not resulted or
are not likely to result in claims that will materially adversely
affect HSRTW's title or are considered waivable under local bar
association-approved title standards or customary title practices in
the area; or
(d) those included in an attorney's title opinion or
that are otherwise evident from an examination of the records of Seller
that have existed for seven (7) years as of the date of this Agreement
and for which no claim has been asserted in writing to Seller or its
predecessors in title during said seven- (7) year period.
"Person" means any natural person, corporation, company, limited or
general partnership, joint stock company, joint venture, association, limited
liability company, trust, bank, trust company, land trust, business trust or
other entity or organization, whether or not a Governmental Authority.
"Phase I Environmental Audit" means an assessment of HSRTW's compliance
with Environmental Laws relative to the Ownership Interests consisting of
examination of HSRTW's files and public documents, interviews of personnel and
former personnel of HSRTW and of
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other appropriate persons, visual inspection of the Ownership Interests, and
NORM and asbestos surveys. The foregoing definitions shall not include or
authorize any soil borings or laboratory analysis of soil or groundwater samples
on or from the Ownership Interests.
"Preliminary Purchase Price" has the meaning specified in Section
8.01(a).
"Purchase Price" means the amount shown in Section 2.01(b).
"Representative" means any director, officer, employee, agent, advisor
(including legal, accounting and financial advisors), Affiliate or other
representative of HSRTW or Buyer, respectively.
"▇▇▇▇▇" means ▇▇▇▇▇ Participants, Ltd., a Texas limited partnership.
"Section 29 ▇▇▇▇▇" has the meaning specified in Section 5.12.
"Seller Balance Sheet" means the unaudited balance sheet of HSRTW and
its subsidiaries as of March 31, 1998.
"Seller Indemnitees" has the meaning specified in Section
11.02(b)(ii)(1).
"Tax Agreement" has the meaning specified in Section 5.08(d).
"Tax Returns" has the meaning specified in Section 3.16(a).
"Taxes" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, including income, gross receipts, ad
valorem, value added, excise, real or personal property, asset, sales, use,
federal royalty, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes or other
governmental taxes imposed or payable to the United States or any state, local
or foreign governmental subdivision or agency thereof, and in each instance such
term shall include any interest, penalties or additions to tax attributable to
any such Tax, including penalties for the failure to file any Tax Return or
report.
"Third Party Claim" has the meaning specified in Section 11.04(a).
"Third Party Consent" means the consent or approval of any Person other
than Seller, Buyer or any Governmental Authority.
"Title Arbitrator" has the meaning specified in Section 6.01(e).
"Title Defect" shall mean any material encumbrance or defect in
HSRTW's, Horizon's, ▇▇▇▇▇'▇ or Arkoma's title to the Oil and Gas Interests
(expressly excluding Permitted Encumbrances), that renders HSRTW's, Horizon's,
▇▇▇▇▇'▇ or Arkoma's title to such Oil and Gas Interest less than Defensible
Title.
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"Transaction Deductible" has the meaning specified in Section 12.16.
"Transition Period" has the meaning specified in Section 12.17.
"Trustee Release" means the full release by ▇▇▇▇▇▇ Trust and Savings
Bank under the Seller's Indentures dated December 1, 1993, and November 27,
1996, as amended, of the Subsidiary Guarantees described in such Indentures.
"WI" means Working Interest.
SECTION 1.02 REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections
and other subdivisions of or to this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any Article, Section, subsection
or other subdivisions of this Agreement are for convenience only, do not
constitute any part of this Agreement, and shall be disregarded in construing
the language hereof. The words "this Agreement," "herein," "hereby," "hereunder"
and "hereof," and words of similar import, refer to this Agreement as a whole
and not to any particular subdivision unless expressly so limited. The words
"this Article," "this Section" and "this subsection," and words of similar
import, refer only to the Article, Section or subsection hereof in which such
words occur. The word "or" is not exclusive, and the word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine or neuter genders shall be construed to state and include any other
gender, and words, terms and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.
ARTICLE 2 PURCHASE AND SALE
SECTION 2.01 PURCHASE AND SALE OF HSRTW COMMON SHARES.
(a) Basic Transaction. Subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from Seller, and Seller agrees
to sell, assign and deliver to Buyer, all of the HSRTW Common Stock for
the consideration specified below in this Article 2.
(b) Purchase Price. Buyer shall pay to Seller $157,539,511
(the "Purchase Price") by wire transfer of immediately available United
States funds to a designated account or accounts of Seller, subject to
adjustment as set forth in this Agreement, as follows:
(i) 10% of the Purchase Price representing an ▇▇▇▇▇▇▇
money deposit and payable by wire transfer upon execution of
this Agreement to ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP as escrow agent
for the parties hereto, to be deposited into an interest
bearing account, such escrow arrangement to be governed by the
Escrow Agreement entered into contemporaneously herewith
("▇▇▇▇▇▇▇ Money"); and
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(ii) the balance of the Purchase Price (after
deducting the original principal amount of the ▇▇▇▇▇▇▇ Money
but not interest or other earning thereon), as adjusted
pursuant to Section 2.02 and Article 11, payable at Closing,
subject to any post-closing adjustments as provided herein.
SECTION 2.02 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
adjusted as follows:
(a) increased or decreased as set forth in Section 5.07;
(b) in the event Closing does not occur on September 1, 1998,
increased by actual direct costs incurred by Seller or HSRTW (but not
to exceed $350,000 per month and not to duplicate any costs otherwise
charged to or borne by Buyer hereunder) for general and administrative
expenses associated with the Seller's Tulsa Office for the period after
the Effective Time up to the Closing Date, such maximum amount to be
prorated for any partial month after the Effective Time if Closing does
not occur on the last day of a month;
(c) decreased for Title Defects as set forth in Article 6 and
breaches of the representations and warranties set forth in Section
3.25 as determined in Article 11;
(d) increased or decreased as set forth in Section 9.01
regarding gas imbalances for Oil and Gas Interests;
(e) decreased for the amounts in "suspense accounts"
maintained by Seller attributable to the Oil and Gas Interests to the
extent such matters are not included in the adjustment made under (a)
above;
(f) increased (i) by the amount of actual capital expenses
made relating to the Hall B #6-34, ▇▇▇▇▇▇▇▇ #1-47, Ramp #1-50, and the
Mannering #2 ▇▇▇▇▇ (▇▇▇▇▇ committed to but not yet drilled as of the
date of this Agreement); (ii) by the amount of actual capital
expenditures made relating to Oil and Gas Interests between the date
hereof and the Effective Time if authorized pursuant to Section 5.01
hereof other than those specified in (i); and (iii) by an additional
$317,000;
(g) increased or decreased for ad valorem, real and personal
property taxes as provided in Section 5.08(a) to the extent such
matters are not included in the adjustment made under (a) above;
(h) if the Closing occurs after September 1, 1998, increased
by interest at the Applicable Rate on the Purchase Price less the
▇▇▇▇▇▇▇ Money for the period of time between the Effective Date and the
Closing Date;
(i) decreased by $152,000 for the exclusion of properties from
the Oil and Gas Interests as provided in Section 9.01(b);
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(j) any other amounts as agreed to between Seller and Buyer.
SECTION 2.03 THE CLOSING. The Closing of the transactions contemplated
by this Agreement shall take place at the offices of Seller in Denver, Colorado,
commencing at 9:00 a.m. local time on September 1, 1998, or such other time or
place as Buyer and Seller may mutually determine.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.01 ORGANIZATION. HSRTW (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware, (b) has the requisite corporate power and authority to own, lease
and operate its properties and to conduct its business as it is presently being
conducted, and (c) is duly qualified to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect). Copies of the articles of
incorporation and by-laws of HSRTW have heretofore been delivered to Buyer, and
such copies are accurate and complete as of the date of this Agreement. HSRTW
has no corporate subsidiaries other than Draco and HSES.
SECTION 3.02 PARTNERSHIPS AND LLCS. Seller owns the limited partner
interest in Horizon. The only other partner to Horizon is Horizon Natural
Resources, Inc., the general partner. Seller and Horizon Natural Resources, Inc.
have agreed that Horizon will be dissolved prior to August 31, 1998. A true and
correct copy of the Partnership Agreement of Horizon has been delivered to
Buyer. Draco owns a limited partner interest in ▇▇▇▇▇. To Seller's Knowledge,
▇▇▇▇▇ continues to be a valid and effective limited partnership operated in
accordance with the partnership agreement governing ▇▇▇▇▇. A true and correct
copy of the Partnership Agreement of ▇▇▇▇▇ has been delivered to Buyer. Horizon
owns an equity interest in Arkoma. To Seller's Knowledge, Arkoma is a validly
existing limited liability company that will automatically be dissolved upon the
dissolution of Horizon prior to Closing. A true and correct copy of the
Operating Agreement of Arkoma has been delivered to Buyer. HSRTW does not own
any interest in any corporation other than Draco and HSES, or any LLC or general
or limited partnership other than Horizon, Arkoma or ▇▇▇▇▇ (other than joint
venture, joint operating or ownership arrangements or tax partnerships entered
into in the ordinary course of business or other partnerships that, individually
or in the aggregate, are not material to the operations or business of HSRTW).
SECTION 3.03 AUTHORITY AND ENFORCEABILITY. Seller has the requisite
corporate power and authority to enter into and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Seller, including approval by the board of directors of Seller, and
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no other corporate proceedings on the part of Seller are necessary to authorize
the execution or delivery of this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except to the extent
that (a) the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 3.04 NO VIOLATIONS. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and compliance by Seller with the provisions hereof will not, conflict with,
result in any violation of or default (with or without notice or lapse of time
or both) under, give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any Lien on any of the properties or assets of HSRTW
or Seller under, any provision of (a) the certificate or articles of
incorporation or by-laws of Seller or HSRTW, (b) any loan or credit agreement,
note, bond, mortgage, indenture, lease, permit, concession, franchise, license
or other agreement or instrument applicable to Seller or HSRTW, (c) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in Section 3.05 are duly and timely obtained or made, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Seller
or HSRTW or any of their respective properties or assets, or (d) any provision
of the partnership agreements governing Horizon and ▇▇▇▇▇ or the operating
agreement governing Arkoma, other than (y) in the case of clause (b) above, any
such conflict, violation, default, right, loss or Lien that may arise under
matters disclosed on the Disclosure Schedule, and (z) in the case of clause (b)
or (c) above, any such conflict, violation, default, right, loss or Lien that,
individually or in the aggregate, would not have a Material Adverse Effect on
Seller.
SECTION 3.05 CONSENTS AND APPROVALS. No Governmental Action from any
Governmental Authority is required by or with respect to Seller in connection
with the execution and delivery of this Agreement by Seller or the consummation
by Seller of the transactions contemplated hereby, except for the following: (a)
any Governmental Action which the failure to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect on Seller; (b)
all Governmental Action by Governmental Authorities to the extent customarily
obtained subsequent to Closing; (c) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws or
Environmental Laws; and (d) such filings and approvals as may be required by any
pre-transaction notification, securities, corporate or other law, rule or
regulation. No Third Party Consent is required by or with respect to Seller in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (y) any such Third Party
Consent which the failure to obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Seller, or (z) such consent, approval or
waiver as set forth in the Disclosure Schedule.
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SECTION 3.06 CAPITAL STRUCTURE.
(a) The authorized capital stock of HSRTW consists of 1,000
shares of HSRTW Common Stock, par value $.001 per share.
(b) There are issued and outstanding 1,000 shares of HSRTW
Common Stock. No shares of HSRTW Common Stock are held by HSRTW as
treasury stock.
(c) All outstanding shares of HSRTW Common Stock are owned by
Seller. Except as set forth in (b) above there are outstanding (i) no
shares of capital stock or other voting securities of HSRTW, (ii) no
securities of HSRTW or any other Person convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of HSRTW, and (iii) no subscriptions, options, warrants,
calls, rights (including preemptive rights), commitments,
understandings or agreements to which Seller is a party or by which it
is bound obligating Seller or HSRTW to issue, deliver, sell, purchase,
redeem or acquire shares of capital stock or other voting securities of
HSRTW (or securities convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities of HSRTW) or
obligating Seller or HSRTW to grant, extend or enter into any such
subscription, option, warrant, call, right, commitment, understanding
or agreement.
(d) All outstanding shares of HSRTW capital stock are validly
issued, fully paid and nonassessable and not subject to any preemptive
right.
(e) All outstanding shares of capital stock and other voting
securities of Draco are owned by HSRTW, free and clear of all Liens,
claims and options of any nature (except for Permitted Encumbrances).
There are outstanding (i) no securities of Draco or any other Person
convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities of Draco, and (ii) no subscriptions,
options, warrants, calls, rights (including preemptive rights),
commitments, understandings or agreements to which Draco is a party or
by which it is bound obligating Draco to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock or other voting
securities of Draco (or securities convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of
Draco) or obligating Draco to grant, extend or enter into any such
subscription, options, warrant, call, right, commitment, understanding
or agreement.
(f) There is no stockholder agreement, voting trust or other
agreement or understanding to which Seller is a party or by which it is
bound relating to the voting or transfer of any shares of the capital
stock of HSRTW.
SECTION 3.07 NO UNDISCLOSED LIABILITIES. As of the date of this
Agreement, there are no liabilities of HSRTW of any kind whatsoever (including,
to Seller's Knowledge, liabilities of Draco, Horizon, Arkoma and ▇▇▇▇▇), whether
accrued, contingent, absolute, determined, determinable or otherwise, that are
reasonably likely to have a Material Adverse Effect on HSRTW, other than (a)
liabilities reflected in the Seller Balance Sheet, (b) liabilities incurred in
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the ordinary course of business subsequent to March 31, 1998, and (c)
liabilities under this Agreement or expressly disclosed herein, including
matters disclosed in the Disclosure Schedule and the exhibits attached hereto.
SECTION 3.08 BROKERS. No broker, finder, investment banker or other
Person is or will be, in connection with the transactions contemplated by this
Agreement, entitled to any brokerage, finder's or other fee or compensation
based on any arrangement or agreement made by or on behalf of Seller and for
which Buyer will have any obligations or liability.
SECTION 3.09 SELLER BALANCE SHEET. The Seller Balance Sheet fairly
presents in all material respects the financial condition of HSRTW as of the
date thereof, utilizing HSRTW's accounting records as prepared to be included as
a part of the consolidated reporting group of Seller, and related entities, with
appropriate adjustments for intercompany accounts and before giving effect to
income taxes.
SECTION 3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise
set forth in the Disclosure Schedule or as contemplated by this Agreement, to
the Knowledge of Seller, since March 31, 1998, through the date hereof, HSRTW
has not done any of the following:
(a) Discharged or satisfied any Lien or paid any obligation or
liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of business and consistent
with past practices;
(b) Except for intra-Affiliate fund transfers and advances,
paid or declared any dividends or distributions, purchased, redeemed,
acquired or retired stock or other securities from its stockholders or
other security holders;
(c) Except for Permitted Encumbrances, suffered or permitted
any Lien to arise or be granted or created against or upon any of its
assets;
(d) Amended its certificate or articles of incorporation or
by-laws;
(e) Made any material investment in or contribution, payment,
advance or loan to any Person, except for payments or transfers to
Affiliates, other than in the ordinary course of business and
consistent with past practices;
(f) Sold, transferred or leased any of its assets to, or
entered into any other transactions with, any third party, other than
in the ordinary course of business;
(g) Made any material change in any of the accounting
principles followed by it or the method of applying such principles;
(h) Entered into any material transactions (other than this
Agreement) except in the ordinary course of business and consistent
with past practices;
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(i) Accelerated, terminated, modified, or cancelled any
material agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) to which HSRTW is a party,
or is bound;
(j) Issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligations involving more than $100,000 in the
aggregate;
(k) Delayed or postponed the payment of accounts payable and
other liabilities outside the ordinary course of business;
(l) Cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more
than $100,000 in the aggregate or outside the ordinary course of
business;
(m) Issued, sold, or otherwise disposed of any of its capital
stock or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(n) Made any loan to, or entered into any other transaction
with, any of its directors, officers, or employees outside the ordinary
course of business;
(o) Made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(p) Made any change in tax elections or the manner taxes are
reported;
(q) Entered into any Hydrocarbon Sales Agreement except as
disclosed on the Disclosure Schedule;
(r) Entered into any swap, hedging or similar arrangements
which remain open on the date of this Agreement except as disclosed on
the Disclosure Schedule.
SECTION 3.11 COMPLIANCE WITH LAWS, MATERIAL AGREEMENTS AND PERMITS.
HSRTW is not in material violation of, or in default in any material respect
under, and no event has occurred that (with notice or the lapse of time or both)
would constitute a material violation of or default under any applicable law,
rule, regulation, order, writ, decree or judgment of any Governmental Authority
(excluding Environmental Laws). HSRTW has, or Seller on behalf of HSRTW has,
obtained and holds all permits, licenses, variances, exemptions, orders,
franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of its business or the lawful ownership, use
and operation of its assets ("Permits"), except for Permits under Environmental
Laws and Permits which the failure to obtain or hold would not, individually or
in the aggregate, have a Material Adverse Effect. HSRTW and/or Seller on behalf
of HSRTW is in compliance with the terms of such Permits, except where the
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect. No investigation or review by any Governmental Authority
(excluding those under Environmental
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Laws) with respect to HSRTW is pending or, to the Knowledge of Seller,
threatened, other than those the outcome of which would not, individually or in
the aggregate, have a Material Adverse Effect. To the Knowledge of Seller, no
party to any material agreement is in material breach of the terms, provisions
and conditions of such material agreement.
SECTION 3.12 GOVERNMENTAL REGULATION. HSRTW is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any state public utilities laws.
SECTION 3.13 LITIGATION. Except as otherwise set forth in the
Disclosure Schedule and except for matters involving Environmental Laws or
landowner or overriding royalties (which are discussed in Sections 3.25 and
3.26), as of the date of this Agreement (a) no litigation, arbitration,
investigation or other proceeding is pending or, to the Knowledge of Seller,
threatened against HSRTW, its subsidiaries and partnerships or its assets which,
if adversely determined, would reasonably be expected to have a Material Adverse
Effect; (b) HSRTW is not subject to any outstanding injunction, judgment, order,
decree or ruling (other than routine oil and gas field regulatory orders); and
(c) Seller has no Knowledge of any facts that are likely to give rise to any
litigation before any Governmental Authority which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on HSRTW.
SECTION 3.14 NO RESTRICTIONS. Except as otherwise set forth in the
Disclosure Schedule, HSRTW is not a party to (a) any agreement, indenture or
other instrument that contains restrictions with respect to the payment of
dividends or other distributions with respect to its capital, (b) any agreement,
contract or commitment relating to the making of any advance to, or investment
in, any Person (other than advances in the ordinary course of business), or (c)
any agreement, contract or commitment limiting in any respect its ability to
compete with any Person or otherwise conduct business of any line or nature.
SECTION 3.15 TAX AUDITS AND SETTLEMENTS. Except as otherwise set forth
in the Disclosure Schedule, HSRTW is not a party or subject to any unresolved or
incomplete tax audit settlement.
SECTION 3.16 TAXES.
(a) HSRTW and any affiliated, combined or unitary group of
which any such corporation is or was a member has (i) timely filed
including extensions, all federal and all state, local and foreign
returns, declarations, reports, estimates, information returns and
statements ("Tax Returns") required to be filed by it with respect to
any Taxes, and (ii) timely paid all Taxes that are due and payable as
shown on the Tax Returns (except for Taxes that are being contested in
good faith by appropriate proceedings and for which sufficient reserves
have been established).
(b) Except as otherwise set forth in the Disclosure Schedule,
(i) no audits or other administrative or court proceedings are
presently pending with regard to any federal, state or local income or
franchise Taxes for which HSRTW would be liable, and
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(ii) there are no pending requests for rulings from any taxing
authority, no outstanding subpoenas or requests for information by any
taxing authority with respect to any Taxes, no proposed reassessments
by any taxing authority of any property owned or leased, and no
agreements in effect to extend the time to file any material Tax Return
or the period of limitations for the assessment or collection of any
material Taxes for which HSRTW would be liable.
(c) Except as otherwise set forth in the Disclosure Schedule,
(i) there are no liens on any of the assets of HSRTW for unpaid taxes,
other than liens for Taxes not yet due and payable, and (ii) HSRTW has
no liability under Treasury Regulation ss. 1.1502-6 or any analogous
state, local or foreign law by reason of having been a member of any
consolidated, combined or unitary group, other than the affiliated
group of which Seller is the common parent corporation.
(d) The amount of liability for unpaid Taxes of HSRTW does
not, in the aggregate, materially exceed the amount of the liability
accruals for Taxes reflected on Seller Balance Sheet.
SECTION 3.17 EMPLOYEE BENEFIT PLANS. HSRTW does not maintain an
employee benefit plan, nor does HSRTW have any fixed or contingent liability
with respect to, any employee benefit, pension or other plan previously in
existence that is subject to ERISA. HSRTW has no employees as of the date of
this Agreement and will have no employees as of the Closing Date.
SECTION 3.18 PAYMENT CONTRACTS AND BENEFITS. Except as otherwise set
forth in the Disclosure Schedule HSRTW is not subject to or obligated under any
consulting, employment, severance, termination or similar arrangement, any
employee benefit, incentive or deferred compensation plan with respect to any
Person, or any bonus, profit sharing, pension, stock option, stock purchase or
similar plan or other arrangement or other fringe benefit plan entered into or
maintained for the benefit of employees or any other Person.
SECTION 3.19 ACCOUNTS RECEIVABLE. All of the accounts, notes and loans
receivable that have been recorded on the books of HSRTW as reflected in the
Seller Balance Sheet and are bona fide and represent accounts, notes and loans
receivable validly due for goods sold or services rendered and are reasonably
expected to be collected in full within 90 days after the applicable invoice or
note maturity date. Except for Permitted Encumbrances, all of such accounts,
notes and loans receivable are free and clear of any and all Liens and other
adverse claims and charges, and none of such accounts, notes or loans receivable
is subject to any offsets or claims of offset; and none of the obligors on such
accounts, notes or loans receivable has given written notice to HSRTW that it
will or may refuse to pay the full amount or any portion thereof.
SECTION 3.20 INSURANCE. Seller, for the benefit of HSRTW, maintains,
and through the Closing Date will maintain, insurance with reputable insurers
(or pursuant to prudent self-insurance programs) in such amounts and covering
such risks as are generally in accordance with
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normal industry practice for companies engaged in businesses similar to those of
HSRTW and owning properties in the same general area in which HSRTW conducts its
business. None of such policies or binders was obtained through the use of false
or misleading information or the failure to provide the insurer with all
information requested in order to evaluate the liabilities and risks insured.
There is no material default with respect to any provision contained in any such
policy or binder, nor has HSRTW failed to give any notice or present any claim
under any such policy or binder in due and timely fashion. There are no billed
but unpaid premiums past due under any such policy or binder. Except as
otherwise set forth in the Disclosure Schedule, (a) there are no outstanding
claims under any such policies or binders relating to HSRTW; (b) no notice of
cancellation or non-renewal of any such policies or binders has been received;
and (c) there are no performance bonds outstanding with respect to HSRTW other
than such bonds routinely obtained in the oil and gas industry.
SECTION 3.21 OFFICE AND OTHER EQUIPMENT. Except for the excluded assets
listed on Schedule 3.21-A, all office equipment in the Tulsa office of Seller
and HSRTW as of June 24, 1998, shall be transferred to Buyer at the Closing. All
field equipment listed on Schedule 3.21-B shall be transferred to Buyer at the
Closing; subject to such substitutions or removals thereof that occur in the
ordinary course of business. Buyer shall accept all of such property and
equipment in its "as is, where is, with all faults" condition without any
warranty or representation, either express or implied as to quality,
merchantability, or fitness for any use whatsoever.
SECTION 3.22 TITLE TO ASSETS. HSRTW has Defensible Title to all Oil and
Gas Interests included or reflected in the Ownership Interests and all of its
other assets; provided, however, as to the Oil and Gas Interests held by or
through Horizon, Seller, through Horizon, has Defensible Title to a portion of
such assets that is not less than 85% of the NRI and WI as set forth on Schedule
1.01(a). Adjustments to the Purchase Price for Title Defects shall be made
pursuant to Article 6 and such Article is the sole remedy for all matters
related to title to the Oil and Gas Interests. Nevertheless, there will be a
Purchase Price adjustment for any disparities between Schedule 1.01(a) and the
Horizon interest transferred to Buyer as provided in Section 6.01(d)(ix).
SECTION 3.23 OIL AND GAS OPERATIONS. Except as otherwise set forth in
the Disclosure Schedule to the Knowledge of Seller, all ▇▇▇▇▇ included in the
Oil and Gas Interests of HSRTW have been drilled and (if completed) completed,
operated and produced in accordance with generally accepted oil and gas field
practices and in compliance in all material respects with applicable oil and gas
leases and applicable laws, rules and regulations (excluding Environmental
Laws), except where any failure or violation could not reasonably be expected to
have a Material Adverse Effect on HSRTW.
SECTION 3.24 HYDROCARBON SALES AGREEMENTS. The Disclosure Schedule
contains a complete list of the Hydrocarbon Sales Agreements to which HSRTW is a
party but excluding such Hydrocarbon Sales Agreements relating to the Oil and
Gas Interests held by or through Horizon, Arkoma and ▇▇▇▇▇. Except as otherwise
set forth in the Disclosure Schedule, to the Knowledge of Seller, each
Hydrocarbon Sales
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Agreement is valid, binding and in full force and effect, and no party is in
material breach or default of any Hydrocarbon Sales Agreement, and no event has
occurred that with notice or lapse of time (or both) would constitute a material
breach or default or permit termination, modification or acceleration under any
Hydrocarbon Sales Agreement.
SECTION 3.25 ENVIRONMENTAL MATTERS. Except as set forth in the
Disclosure Schedule and for such matters as would not reasonably be expected to
have a Material Adverse Effect on HSRTW, to the Knowledge of Seller as of the
time of execution of this Agreement:
(a) HSRTW has conducted its business and operated its assets,
and is conducting its business and operating its assets, in material
compliance with all Environmental Laws;
(b) HSRTW has not been notified by any Governmental Authority
or other third party that any of the operations or assets of HSRTW is
the subject of any investigation or inquiry by any Governmental
Authority or other third party evaluating whether any material remedial
action is needed to respond to a release or threatened release of any
Hazardous Material or to the improper storage or disposal (including
storage or disposal at offsite locations) of any Hazardous Material;
(c) HSRTW has not filed any notice under any Environmental Law
indicating that (i) HSRTW is responsible for the improper release into
the environment, or the improper storage or disposal, of any Hazardous
Material, or (ii) any Hazardous Material is improperly stored or
disposed of upon any property of HSRTW, that in either case remains
unresolved;
(d) HSRTW has no material contingent liability in connection
with (i) the release or threatened release into the environment at,
beneath or on any property now or previously owned or leased by HSRTW,
or (ii) the storage or disposal of any Hazardous Material; and
(e) HSRTW has not received a claim, complaint, notice, inquiry
or request for information involving any material matter which remains
unresolved as of the date of this Agreement with respect to any alleged
violation of any Environmental Law or regarding potential liability
under any Environmental Law relating to operations or conditions of any
facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or
formerly owned, leased or operated by HSRTW.
(f) For purposes of this Section 3.25 only, a matter shall be
considered material only if the Adverse Consequences associated with
such matter with respect to each Ownership Interest exceed $10,000.
SECTION 3.26 ROYALTIES. HSRTW has timely and properly paid in the
correct amount all landowner royalties and overriding royalty interests with
respect to the production from
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Ownership Interests during the period from June 16, 1996, through the date
hereof (the "Ownership Period").
SECTION 3.27 SECURITIES MATTERS. To Seller's Knowledge, there are no
circumstances that have occurred during the Ownership Period constituting
violations of the Securities Act of 1933 and the Securities and Exchange Act of
1934 or the rules and regulations thereunder that would be likely to give rise
to Adverse Consequences that would have a Material Adverse Effect on HSRTW.
SECTION 3.28 REPRESENTATIONS AND WARRANTIES EXCLUSIVE. TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE REPRESENTATIONS AND WARRANTIES MADE BY
SELLER IN THIS AGREEMENT AND THE DISCLOSURE SCHEDULE ARE IN LIEU OF AND ARE
EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, SELLER HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR
WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION (INCLUDING, WITHOUT LIMITATION, THE CONFIDENTIAL OFFERING
MEMORANDUM) BY SELLER OR ANY OTHER PERSON IN CONNECTION WITH THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY. NO WARRANTY AND REPRESENTATION SHALL BE
CONSIDERED TO COVER A SUBJECT THAT IS MORE SPECIFICALLY ADDRESSED BY ANOTHER
WARRANTY AND REPRESENTATION.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01 ORGANIZATION. Buyer (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of its state
of incorporation, (b) has the requisite power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted, and (c) is duly qualified to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Buyer).
SECTION 4.02 AUTHORITY AND ENFORCEABILITY. Buyer has the requisite
corporate power and authority to enter into and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Buyer, and no other corporate proceedings on the part of Buyer are necessary
to authorize the execution or delivery of this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms.
SECTION 4.03 NO VIOLATIONS. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and compliance by Buyer
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with the provisions hereof will not, conflict with, result in any violation of
or default (with or without notice or lapse of time or both) under, give rise to
a right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under, or result in the creation of any Lien on any
of the properties or assets of Buyer under, any provision of (a) the certificate
of incorporation or by-laws of Buyer, (b) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or
other agreement or instrument applicable to Buyer, or (c) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Buyer, or any
of its respective properties or assets.
SECTION 4.04 CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to Buyer or in connection
with the execution and delivery of this Agreement by Buyer or the consummation
by Buyer of the transactions contemplated hereby. No Third Party Consent is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 4.05 GOVERNMENTAL REGULATION. Neither Buyer nor any of its
subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any state public utilities laws.
SECTION 4.06 LITIGATION. There is no litigation, proceeding or
investigation pending or, to the Knowledge of Buyer, threatened against or
affecting Buyer (i) that questions the validity or enforceability of this
Agreement or any other document, instrument or agreement to be executed and
delivered by Buyer or in connection with the transactions contemplated hereby;
(ii) that would reasonably be expected to have a Material Adverse Effect on
Buyer, or (iii) that otherwise would reasonably be expected to interfere with
Buyer's ability to perform its obligations hereunder.
SECTION 4.07 FUNDING. Buyer has available adequate liquid funds in an
aggregate type and amount sufficient to pay (a) all amounts required to be paid
to Seller upon consummation of the transaction contemplated hereunder, and (b)
all expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated hereby.
SECTION 4.08 BROKERS. No broker, finder, investment banker or other
Person is or will be, in connection with the transactions contemplated by this
Agreement, entitled to any brokerage, finder's or other fee or compensation
based on any arrangement or agreement made by or on behalf of Buyer and for
which Seller will have any obligation or liability.
SECTION 4.09 HELD FOR INVESTMENT. Buyer will be acquiring the HSRTW
Common Stock pursuant to this Agreement for investment only and not with a view
to the distribution thereof in violation of federal or state securities laws.
Buyer understands that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), or under any state
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securities or Blue Sky laws and must be held indefinitely unless they are
subsequently registered under the Act and such state laws or an exemption from
such registration is available.
SECTION 4.10 BUYER'S INVESTIGATION; SOPHISTICATED BUYER. Prior to the
Closing, Buyer shall have directly and through its Representatives, at Buyer's
sole expense, in cooperation with Seller, made such investigation of HSRTW as
Buyer deemed necessary or advisable, and Buyer acknowledges that it is and shall
be relying solely on its own investigation and the representations and
warranties contained in this Agreement and the Disclosure Schedule in deciding
to proceed with the purchase of the HSRTW Common Stock. Further, Buyer expressly
represents that it (i) is a sophisticated purchaser owned by or employing
individuals having substantial experience in the conduct of businesses, (ii) its
agents shall, prior to the Closing Date, have had the opportunity to have
exercised due diligence in its examination of the affairs of the business of
HSRTW, and (iii) has not relied on any representation or warranty by Seller, or
its agents, officers, stockholders, or employees, in entering into this
Agreement, except as may be expressly stated or provided herein and the
Disclosure Schedule.
SECTION 4.11 ABSENCE OF CERTAIN CHANGES AND EVENTS. Other than as a
result of (a) events or conditions which are of a general or industry-wide
nature, or (b) events or conditions pertaining to Buyer and its subsidiaries
which have been disclosed in writing by Buyer to Seller since December 31, 1997,
there has not been any material adverse change in the financial condition,
properties or businesses of Buyer and its subsidiaries taken as a whole.
SECTION 4.12 COMPLIANCE WITH LAW. The business of Buyer and its
subsidiaries is not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity, except for
violations which either individually or in the aggregate do not and are not
expected to have a Material Adverse Effect on the financial condition,
properties or businesses of Buyer and its subsidiaries taken as a whole.
SECTION 4.13 NO UNDISCLOSED LIABILITIES. There are no liabilities of
Buyer of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are reasonably likely to have a Material Adverse
Effect on Buyer's ability to consummate the transactions set forth in this
Agreement.
ARTICLE 5 COVENANTS
SECTION 5.01 CONDUCT OF BUSINESS BY SELLER PENDING CLOSING. Seller
covenants and agrees with Buyer that, from the date of this Agreement until the
Closing Date, HSRTW will conduct its business only in the ordinary and usual
course consistent with past practices. Notwithstanding the preceding sentence,
Seller covenants and agrees with Buyer that, except as specifically contemplated
in this Agreement or as disclosed in the Disclosure Schedule, from the date of
this Agreement until the Closing Date, without the prior written consent of
Buyer:
(a) HSRTW will not (i) amend its certificate or articles of
incorporation or by-laws; (ii) split, combine or reclassify any of its
outstanding capital stock; (iii) issue, sell
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or agree to issue or sell any securities, including its capital stock,
any rights, options or warrants to acquire its capital stock, or
securities convertible into or exchangeable or exercisable for its
capital stock; (iv) purchase, cancel, retire, redeem or otherwise
acquire any of its outstanding capital stock or other securities; (v)
merge or consolidate with, or transfer all or substantially all of its
assets to, another corporation or other business entity; (vi)
liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution); or (vii) enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing; except that prior
to Closing, HSRTW shall cause HS Energy Services, Inc. to become a
wholly-owned subsidiary of Seller.
(b) Except for intracompany transfers or payments to
Affiliates in the ordinary course of business and consistent with past
practices, HSRTW will not (i) acquire any corporation, partnership or
other business entity or any interest therein (other than interests in
joint ventures, joint operation or ownership arrangements or tax
partnerships acquired in the ordinary course of business); (ii) elect
to participate in the drilling, workover, completion, recompletion,
plugging and abandonment of any well or sell, lease or sublease,
transfer or otherwise dispose of or mortgage, pledge or otherwise
encumber any Ownership Interest with an Allocated Value in excess of
$100,000, in the aggregate, or any other assets that have a value at
the time of such sale, lease, sublease, transfer or disposition in
excess of $100,000, in the aggregate (except that this clause shall not
apply to the sale of Hydrocarbons in the ordinary course of business
(iii) farm-out any Ownership Interest or interest therein with an
Allocated Value in excess of $25,000; (iv) make any material loans,
advances or capital contributions to, or investments in, any Person
(other than loans or advances in the ordinary course of business and
consistent with past practices or capital contributions to Horizon,
Arkoma or ▇▇▇▇▇ required by the terms of the partnership agreements);
(v) enter into any material agreement or any other agreement not
terminable by HSRTW upon notice of thirty (30) days or less and without
penalty or other obligation (other than Hydrocarbon Sales Agreements
entered into in the ordinary course of business and consistent with
past practices); or (vi) enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing. Seller shall cause
HSRTW to use reasonable efforts to consult with Buyer's designated
Representative as to any matter covered by this Section 5.01(b).
(c) HSRTW will not (i) incur any indebtedness for borrowed
money; (ii) incur any other obligation or liability (other than
liabilities incurred in the ordinary course of business and consistent
with past practices); (iii) assume, endorse (other than endorsements of
negotiable instruments in the ordinary course of business), guarantee
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the liabilities or obligations of any
Person; or (iv) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(d) HSRTW will use its reasonable best efforts to operate,
maintain and otherwise deal with its Oil and Gas Interests in
accordance with good and prudent oil and gas field practices.
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(e) HSRTW shall not resign, transfer or otherwise voluntarily
relinquish any right it has as of the date of this Agreement, as
operator of any Oil and Gas Interest.
(f) HSRTW will not (i) enter into, or otherwise become liable
or obligated under or pursuant to, (1) any employee benefit, pension or
other plan (whether or not subject to ERISA), (2) any other stock
option, stock purchase, incentive or deferred compensation plans or
arrangements or other fringe benefit plan, or (3) any consulting,
employment, severance, termination or similar agreement with any
Person, or amend or extend any such plan, arrangement or agreement;
(ii) grant, or otherwise become liable for or obligated to pay, any
severance or termination payments, bonuses or increases in compensation
or benefits to, or forgive any indebtedness of, any employee or
consultant; or (iii) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(g) HSRTW will keep and maintain accurate books and records in
the same manner as such books and records are kept and maintained
currently.
(h) HSRTW will not create, incur, assume or permit to exist
any Lien on any of its assets, except for Permitted Encumbrances
incurred or created in the ordinary course of business.
(i) HSRTW will (1) pay all Taxes, assessments and other
governmental charges imposed upon any of its assets or with respect to
its franchises, business, income or assets that have become due and
payable before any penalty or interest accrues thereon; (2) pay all
claims (including claims for labor, services, materials and supplies)
that have become due and payable and which by law have or may become a
Lien upon any of its assets prior to the time when any penalty or fine
shall be incurred with respect thereto or any such Lien shall be
imposed thereon; and (3) comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of
any Governmental Authority, obtain or take all Governmental Actions
necessary in the operation of its businesses, and comply with and
enforce the provisions of all material agreements, including paying
when due all rentals, royalties, expenses and other liabilities
relating to their businesses or assets; provided, however, this Section
5.0l(i) shall not be violated if HSRTW incurs obligations for penalties
and interest in connection with gross production tax reporting in the
ordinary course of business; and provided further, that HSRTW may
contest the imposition of any such Taxes, assessments and other
governmental charges, any such claim, or the requirements of any
applicable law, rule, regulation or order or any material agreement if
done so in good faith by appropriate proceedings and if adequate
reserves are established in accordance with GAAP or as may be
determined as sufficient by Seller.
(j) Seller, for the benefit of HSRTW, will maintain in full
force and effect the policies or binders of insurance described in
Section 3.20.
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SECTION 5.02 ACCESS TO ASSETS, PERSONNEL AND INFORMATION.
(a) From the date of this Agreement until the Closing Date,
Seller shall afford to Buyer and Buyer Representatives, at Buyer's sole
risk and expense, reasonable full access to any of the assets, books
and records, contracts, representatives, agents and facilities of
HSRTW, except for such books and records of Seller relating to its
corporate, tax, financial planning and analysis matters and except for
such records that are privileged (other than for environmental matters
which will be made available on an unrestricted basis). During such
period, HSRTW or Seller will make available Buyer Representatives
adequate office space and facilities as available at the office of
Seller in Tulsa, Oklahoma. Seller shall cause its Representatives to
use their reasonable best efforts to provide Buyer's Representatives
with requested files, existing reports and other existing information.
(b) Buyer and Buyer Representatives shall have the right to
conduct a Phase I Environmental Audit, make a physical assessment of
the assets of HSRTW and, in connection therewith, shall have the right
to enter and inspect such assets and all buildings and improvements
thereon, and generally conduct such tests, examinations, investigations
and studies, as Buyer deems necessary, desirable or appropriate for the
preparation of engineering or other reports relating to such assets,
their condition and the presence of Hazardous Materials. Seller shall
be provided at least twenty-four (24) hours prior notice of such
activities, and Seller Representatives shall have the right to witness
all such tests and investigations. Buyer shall (and shall cause Buyer
Representatives to) keep any data or information acquired by any such
examinations and the results of any analyses of such data and
information strictly confidential and will not (and will cause Buyer
Representatives not to) disclose any of such data, information or
results to any Person unless otherwise required by law or regulation
and then only after written notice to Seller of the determination of
the need for disclosure. Immediately upon its receipt thereof, Buyer
shall provide Seller with an actual, correct and complete copy of all
data, reports, analyses, estimates and advice Buyer acquires in
connection with any examination of the Oil and Gas Interests, which
information Seller shall keep confidential, and which information
Seller shall return to Buyer at such time as Seller has no further
potential obligations to Buyer under Section 11.02 with respect to the
warranty and representation in Section 3.25. Buyer hereby releases
HSRTW and Seller from any loss, liability or claim arising out of, and
shall indemnify, defend and hold HSRTW and Seller and their
Representatives harmless from and against, any and all losses,
liabilities and claims to the extent arising out of or as a result of
the activities of Buyer and Buyer Representatives on the assets of
HSRTW in connection with conducting such environmental and physical
assessment, except to the extent of and limited by the gross negligence
or willful misconduct of HSRTW or Seller or any representative thereof.
(c) Buyer will maintain as confidential and will not (and will
cause Buyer Representatives not to), use any information obtained
pursuant to this Section 5.02 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
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(d) Notwithstanding anything in this Section 5.02 to the
contrary, (i) HSRTW or Seller shall not be obligated under the terms of
this Section 5.02 to disclose to Buyer or Buyer Representatives, or
grant Buyer or Buyer Representatives access to, information that is
within their possession or control but subject to a valid and binding
confidentiality agreement with a third party without first obtaining
the consent of such third party, and Seller, to the extent reasonably
requested by Buyer, will use reasonable commercial efforts to obtain
any such consent.
SECTION 5.03 ADDITIONAL ARRANGEMENTS. Subject to the terms and
conditions herein provided, Seller and Buyer shall take, or cause to be taken,
all action and shall do, or cause to be done, all things necessary, appropriate
or desirable under any applicable laws and regulations or under applicable
governing agreements to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts to obtain
all necessary waivers, consents and approvals and effecting all necessary
registrations and filings. Seller and Buyer shall take, or cause to be taken,
all action or shall do, or cause to be done, all things necessary, appropriate
or desirable to cause the covenants and conditions applicable to the
transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Authority shall have issued any
order, decree, ruling or injunction, or taken any other action that would have
the effect of restraining, enjoining or otherwise prohibiting or preventing the
consummation of the transactions contemplated hereby, each of Seller and Buyer
shall use its reasonable efforts to have such order, decree, ruling or
injunction or other action declared ineffective as soon as practicable.
SECTION 5.04 PUBLIC ANNOUNCEMENTS. Prior to the Closing and for thirty
(30) days thereafter, Seller and Buyer will consult with each other before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated by this Agreement and shall use diligence,
restraint and good faith in attempting to accommodate the reasonable requests of
the other party to limit or complete information in such press release;
provided, however, the foregoing shall not prevent either party, after complying
with the foregoing, from making a public disclosure it believes in good faith
upon advice of counsel is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities.
SECTION 5.05 PAYMENT OF EXPENSES. Each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 5.06 OPERATIONS. Except as otherwise provided for in the
Transition Agreement, Buyer shall, or shall cause HSRTW to, subject to the
applicable terms of existing operating agreements, take over operations as of
7:00 a.m. local time at the wellsites on the day after the Closing Date, with
respect to Seller operated ▇▇▇▇▇ included in the Oil and Gas Interests. Upon
taking over operations, Buyer will, or will cause HSRTW to, post all necessary
state, federal and local bonds and shall assist Seller in having Seller's
existing bonds released, or in the alternative, having the ▇▇▇▇▇ so operated by
Buyer or HSRTW released from Seller's existing bond. Seller shall use its
reasonable best efforts (without the expenditure of funds or prosecution
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of litigation) to assist Buyer in retaining operatorship or succeeding to
operatorship of the Oil and Gas Interests.
SECTION 5.07 ADJUSTMENTS TO THE FINANCIAL STATEMENTS.
(a) On or before five (5) days prior to Closing, Seller shall
prepare and submit to Buyer for Buyer's review and approval, an
unaudited balance sheet of HSRTW (the "Estimated Effective Date Balance
Sheet") current as of the close of business on August 31, 1998, and
similar in form and on the same basis as the Seller Balance Sheet
(prepared as of March 31, 1998) previously furnished to Buyer. The
Purchase Price shall be adjusted as appropriate at Closing to reflect
the positive or negative change in the Estimated Effective Date Balance
Sheet from the financial position of HSRTW as reflected in the Seller
Balance Sheet, but only as to the difference that the sum of "current
assets", "office, transportation and other equipment" and "other
assets" (for purposes of this paragraph only, this sum shall be
referred to as the "Assets") as reflected on the Seller Balance Sheet
exceeds the "current liabilities" (for purposes of this paragraph only,
this amount shall be referred to as the "Liabilities") reflected
thereon changes between the date of the Seller Balance Sheet and the
date of Estimated Effective Date Balance Sheet. If the amount that the
Assets exceeds the Liabilities as shown on the Seller Balance Sheet
increases on the Estimated Effective Date Balance Sheet, the Purchase
Price shall be adjusted upward by that amount. If the amount that the
Assets exceeds the Liabilities as shown on the Seller Balance Sheet
decreases on the Estimated Effective Date Balance Sheet, the Purchase
Price shall be reduced by that amount.
(b) Within ninety (90) days following Closing, Seller shall
prepare and deliver to Buyer for Buyer's review and approval, a
proposed final balance sheet of HSRTW as of August 31, 1998, prepared
in accordance with (a) above (the "Effective Date Balance Sheet").
Buyer shall have thirty (30) days to examine the Effective Date Balance
Sheet and to assert adjustments thereto. Subject to the following
paragraph, Buyer and Seller shall settle and adjust the Purchase Price
in accordance with the last two sentences of (a) for all matters on
which they agree, and the party owing funds to the other shall pay such
funds within one hundred fifty (150) days following Closing. Matters on
which the parties cannot agree shall be submitted to arbitration in
accordance with (c) below.
(c) If the parties fail to agree on the Effective Date Balance
Sheet and the appropriate adjustments to the Purchase Price to be made
as a result thereof, the disputed items shall be resolved by binding
arbitration submitting the same to the accounting firm of Price,
Waterhouse (Denver, Colorado office) (the "Accounting Arbitrator"). The
Accounting Arbitrator shall resolve disputes regarding any such
adjustments within thirty (30) days of submittal by the parties of the
relevant materials for review taking into account, among other things,
the likelihood the disputed item will cause Buyer to not receive value
bargained for under this Agreement, the length of time that the item
has been treated by Seller or its predecessors in the manner Seller has
asserted on the Effective Date Balance Sheet, and the industry custom
and practice of treatment for the disputed item. The decision of the
Accounting Arbitrator shall be final and binding on
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the parties and shall not be subject to appeal to a court that may have
jurisdiction over disputes between the parties. The fees and expenses
of the Accounting Arbitrator shall be borne equally by the parties. Any
amounts owed by either party shall be paid to the other party within
five (5) days of the decision of the Accounting Arbitrator.
(d) Subsequent to agreement as to the Effective Date Balance
Sheet, Seller may receive payments for pre-Effective Time amounts owed
to HSRTW for the sale of Hydrocarbons which were not reflected as a
"receivable" on the Effective Date Balance Sheet. Seller shall remit to
Buyer that portion of such amounts that are payable to a Third Party
(such as royalty owners, other working interest owners, or taxing
authorities).
(e) Subsequent to agreement as to the Effective Date Balance
Sheet, Seller may receive an invoice for payment of money by Seller
attributable to goods and services provided to HSRTW prior to the
Effective Time which were not reflected as a "payable" on the Effective
Date Balance Sheet. Seller shall forward such invoice to Buyer for
payment and shall remit to Buyer that portion of the invoice
attributable to HSRTW. Buyer shall be responsible for collecting that
portion of the invoice payable by a Third Party (such as other working
interest owners).
(f) Subsequent to agreement as to the Effective Date Balance
Sheet, Buyer may receive payments for pre-Effective Time amounts owed
to HSRTW for the sale of Hydrocarbons which were not reflected as a
"receivable" on the Effective Date Balance Sheet. Buyer shall remit to
Seller the monies received less that portion of such amounts that are
payable to a Third Party (such as royalty owners, other working
interest owners, or taxing authorities).
(g) Subsequent to agreement as to the Effective Date Balance
Sheet, Buyer may receive an invoice for payment of money attributable
to goods and services provided to HSRTW prior to the Effective Time
which were not reflected as a "payable" on the Effective Date Balance
Sheet. Buyer shall pay such invoice and Seller shall promptly pay to
Buyer, after receipt of an invoice from Buyer, that portion of the
invoice attributable to HSRTW. Buyer shall be responsible for
collecting that portion of the invoice payable by a Third Party (such
as other working interest owners).
(h) Seller shall be entitled to use or distribute cash
received attributable to the Ownership Interests provided the
distribution does not adversely affect HSRTW's ability to conduct its
business in its usual and customary manner. In the event Closing does
not occur on September 1, 1998, the Purchase Price shall be decreased
at Closing for the cash so used by Seller subsequent to September 1,
1998, and through the Closing that is distributed to Seller from HSRTW
in the form of a dividend or other distribution that is not used in the
business of HSRTW, but rather for the benefit of Seller.
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SECTION 5.08 TAX MATTERS.
(a) Payment and Apportionment of Real Property Taxes and
Personal Property Taxes. With respect to real property taxes and
personal property taxes:
(i) Real and Personal Property Taxes. All ad valorem
taxes, real property taxes and personal property taxes that
are based on or measured by production for the year in which
the Effective Date occurs shall be apportioned as of the
Effective Date between Seller and Buyer. As to all such ad
valorem, real and personal property taxes, Seller shall be
responsible for all taxes based on or measured by production
occurring prior to the Effective Date. Buyer shall file all
required reports and returns incident to such taxes and shall
be responsible for all such taxes based on or measured by
production occurring on and after the Effective Date. For all
such real and personal property taxes, other than taxes based
on or measured by oil and gas production, Seller shall be
liable for the portion of such taxes based upon the number of
days in the year occurring prior to the Effective Date, and
Buyer shall be liable for the portion of such taxes based upon
the number of days in the year occurring on and after the
Effective Date. Buyer shall file all required reports and
returns incident to these taxes and shall remit to the
appropriate taxing authorities all taxes for the year in which
the Effective Date occurs that are not paid by Seller as of
the Closing Date. Seller shall pay to Buyer, at the time of
Buyer's remittance, Seller's share of such taxes to the extent
such amounts were not credited to Buyer in calculating
adjustments in the Purchase Price in Section 2.02.
(ii) Liability and Right to Purchase Claims. Seller
shall retain liability for all adjustments, examinations or
claims relating to taxes that are paid by Seller and that are
allocated to Seller pursuant to this Section 5.08. Buyer shall
retain liability for all adjustments, examinations or claims
relating to taxes that are paid by Buyer and that are
allocated to Buyer pursuant to this Section 5.08. Seller shall
administer and defend any examination, claim or adjustments
arising in connection with taxes to be paid by Buyer but which
are allocated to Seller pursuant to this Section 5.08.
(iii) Other Taxes. All excise, production, severance,
gross receipts, conservation, oil and gas severance and other
similar taxes relating to production of Hydrocarbons
attributable to the Oil and Gas Interests prior to the
Effective Time shall be allocated to Seller, and all such
taxes relating to production on or after the Effective Time
shall be allocated to Buyer. Buyer shall file any reports or
returns not filed as of the Closing, and shall remit to the
proper taxing authorities any such taxes allocated to Seller,
but not paid as of the Closing. Seller shall pay Seller's
share of such taxes at the time Buyer remits such taxes to the
extent such amounts were not credited to Buyer in the Purchase
Price as adjusted pursuant to Section 2.02.
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(b) Sales Taxes. The Purchase Price does not include any sales
taxes or other transfer taxes imposed in connection with the sale of
the HSRTW Common Stock. Buyer shall pay any sales tax or other transfer
tax, as well as any applicable conveyance, transfer and recording fee,
and real estate transfer stamps or taxes imposed on or related to the
transfer of the HSRTW Common Stock pursuant to this Agreement including
sales taxes if any arising from the election contemplated in Paragraph
2 of the Agreement as to Tax Matters. Buyer shall defend and indemnify
Seller against and hold Seller harmless from any loss, liability or
claim, including penalties and interest, resulting from such matters.
(c) Tax Proceedings. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the
liability for taxes for any period Seller is or may be liable under
Section (a)(ii) above Buyer shall notify Seller in writing within
thirty (30) days of receiving notice thereof. As to any such taxes for
which Seller is or may be liable under Section (a)(ii) above Seller
shall, at Seller's expense, control or settle the contest of such
examination, claim adjustment or other proceeding, and shall indemnify
Buyer against all losses, damages, costs, expenses, liabilities,
claims, demands, penalties, fines, assessments, settlements, and any
related expenses in connection therewith. In the event adjustment, or
other proceeding relating to the liability for taxes for any period
Buyer is or may be liable under Section (a)(ii) above Seller shall
notify Buyer in writing within thirty (30) days of receiving notice
thereof. As to any such taxes for which Buyer is or may be liable under
Section (a)(ii) Buyer shall, at Buyer's expense, control or settle the
contest of such examination, claim, adjustment, or other proceeding,
and shall indemnify Seller against all losses, damages, costs,
expenses, liabilities, claims, demands, penalties, fines, assessments,
settlements, and any related expenses in connection therewith. The
parties shall cooperate with each other and with their respective
affiliates in the negotiations and settlement of any proceeding
described in this Section 5.08. Each party shall provide, or cause to
be provided, to the other party necessary authorizations, including
powers of attorney, to control any proceeding which such party is
entitled to control.
(d) Income Taxes. The Agreement of the Parties regarding
income taxes is set forth in the Tax Agreement attached as Schedule
5.08(d).
(e) Adjustment. Any adjustments made pursuant to this Article
shall be considered adjustments to the Purchase Price.
SECTION 5.09 HSRTW NAME CHANGE. Upon Closing, Buyer shall immediately
file the appropriate documents with the Secretary of State of Delaware and all
other states where HSRTW is registered as a foreign qualification to cause the
name of HSRTW to be changed so that the letters "HSR," HS Resources, HS, or
HSRTW or any other similarity to the name of Seller is removed from the
corporate name of HSRTW. Buyer shall not otherwise use Seller's name, HSRTW, or
the letters HS, HSR or any similar name or letters for any purpose.
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SECTION 5.10 SIGNS. Within thirty (30) days of Closing, Buyer shall
cause the name of Seller or any reference to Seller, to be removed from any
signs located on or about any of the Oil and Gas Interests.
SECTION 5.11 HORIZON DISSOLUTION. Prior to Closing, Seller shall cause
the dissolution of Horizon and shall use its reasonable best efforts to cause
the general partner of Horizon to make the distribution or assignment (provided
that any assignments may not be recorded in the county records as of the day of
Closing) of all of HSRTW's share of Oil and Gas Interests held by Horizon to
HSRTW.
SECTION 5.12 SECTION 29 ▇▇▇▇▇. HSRTW entered into a Purchase and Sale
Agreement dated August 9, 1996, with WestTide Investments, LLC regarding the
monetization of "Section 29 tax credits" as allowed under the Code on certain
qualifying ▇▇▇▇▇ included in the Oil and Gas Interests. These ▇▇▇▇▇ are listed
on Schedule 5.12 to this Agreement and shall be referred to as the "Section 29
▇▇▇▇▇." Prior to Closing, Seller shall exercise its option to repurchase the
Section 29 ▇▇▇▇▇ and cause such monetization transaction to be terminated in
order that HSRTW as of the Effective Date will not fail to have Defensible Title
to the Section 29 ▇▇▇▇▇ because of the monetization transaction; provided,
however, that the option to purchase and termination may be made conditional on
the Closing of the transaction contemplated by this Agreement and that the
reassignment to HSRTW of the appropriate interest will be executed as part of
the Closing documents and will not be recorded prior to Closing.
SECTION 5.13 OFFICE LEASE. Prior to Closing, Seller shall cause the
office lease for the Seller of its Tulsa office to be assigned into HSRTW if and
to the extent permitted under the terms of the lease. At Closing, Buyer shall
assume all obligations thereunder.
ARTICLE 6 TITLE AND ENVIRONMENTAL MATTERS
SECTION 6.01 TITLE DEFECT ADJUSTMENTS.
(a) No adjustment to the Purchase Price for Title Defects
shall be made unless and until, as to each Ownership Interest, the
value of Title Defects exceeds $10,000 such adjustment to be further
subject to the Transaction Deductible provision set forth in Section
12.16. Each Ownership Interest set forth on Schedule 1.01(a) shall
constitute a separate asset for purposes of this Article 6 and a Title
Defect that pertains to more than one Ownership Interest shall be
considered a separate Title Defect as to each Ownership Interest.
(b) Buyer shall give Seller written notice of Title Defects on
or before September 15, 1998. Such notice shall be in writing and shall
include: (i) a description of the Title Defect, (ii) the Allocated
Value of the Ownership Interest affected by the Title Defect, (iii) the
amount by which Buyer believes the Allocated Value of such Ownership
Interest has been reduced because of such Title Defect and the
reasoning therefor, and (iv) supporting documentation, including title
opinions, title claims, or other data that evidences the Title Defect.
Buyer shall be deemed to have waived all Title Defects of
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which Seller has not been given timely notice by Buyer and all Title
Defects for which a remedy is not provided under this Article 6.
(c) Subject to the limitations contained in Section (a) above
if an Ownership Interest is affected by a Title Defect, the Purchase
Price shall be reduced by the net reduction in value of the pertinent
property caused by the Title Defect (the "Defect Amount") based on the
criteria listed in Section 6.01(d) as well as the likelihood that the
Title Defect will cause a title failure (considering such matters as
the length of time the Title Defect has existed without being subject
to an adverse claim, the producing status of the property, the nature
of the Defect, whether the potential claimant has executed a division
order and/or received proceeds without asserting the title claim, and
all of the other factors considered in connection with determining
whether a matter is a Permitted Encumbrance) and also taking into
account the method for attributing the Allocated Value for the relevant
property, the legal and practical effect of the Title Defect or other
breach, the probability of adverse impact of the Title Defect or breach
of title warranty on the use and enjoyment of the property interest
affected, and the predicted duration of the Title Defect or breach of
title warranty over the life of the property involved. The amount of
any reduction shall not exceed the Allocated Value of the Ownership
Interest in question. A Purchase Price adjustment will not be made if,
prior to November 15, 1998, at Seller's election: (i) the Title Defect
has been cured (consistent with the standards contained herein) or (ii)
for Title Defects for which there is a mere risk of title failure,
Seller agrees to indemnify Buyer against all losses, costs, expenses
and liabilities with respect to such Title Defect up to Allocated Value
thereof.
(d) Without limiting Seller's right to dispute the
existence of a Title Defect and subject to the factors listed in
Section 6.01(c) that may cause the Defect Amount of a Title Defect to
be less than the maximum potential economic effect of the Title Defect,
the Defect Amount shall take into account the following:
(i) If the Title Defect relates to failure
of title to the entirety of HSRTW's title to an Ownership
Interest, the maximum amount of the Defect Amount shall be the
amount set forth as the value for that Ownership Interest in
Schedule 1.01(a).
(ii) If the Title Defect results from a lien,
security interest, pledge or collateral assignment upon
one or more Ownership Interests (or a portion thereof) which
is liquidated in amount, then the maximum amount of the Defect
Amount shall be the amount necessary to remove such lien,
security interest, pledge or collateral assignment from
HSRTW's title to such one or more Ownership Interests (or
portion thereof).
(iii) If the Title Defect results from HSRTW
having a lesser NRI in an Ownership Interest than the NRI
specified therefor in Schedule 1.01(a), the maximum amount of
the Defect Amount shall be equal to the product obtained by
multiplying the value for that Ownership Interest in Schedule
1.01(a), by a
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fraction, the numerator of which is the reduced NRI and the
denominator of which is the NRI specified for such Ownership
Interest in Schedule 1.01(a).
(iv) If the Title Defect results from HSRTW
having a greater WI in an Ownership Interest than the WI
specified therefor in Schedule 1.01(a), the maximum amount of
the Defect Amount shall be equal to the present value
discounted at 10% compounded annually) of the increase in
Buyer's Projected Costs with respect to such Ownership
Interest for the period from and after the Effective Time
which is attributable to such increase in the WI.
(v) If the Title Defect results from any
matter not described in paragraph (i), (ii), (iii), or (iv)
above, then the maximum amount of the Defect Amount shall be a
portion of the value set forth for that Ownership Interest in
Schedule 1.01(a), said portion to be equal to the differences
between the value of HSRTW's title to such Ownership Interest
without such Title Defect and with such Title Defect (assuming
the value without such Title Defect to be the value set forth
in Schedule 1.01(a)).
(vi) If a Title Defect is not effective or
does not affect HSRTW's title to an Ownership Interest
throughout the entire productive life of such Ownership
Interest, such fact shall be taken into account in determining
the Defect Amount.
(vii) If a Title Defect affects only a
portion of an Ownership Interest (as contrasted with an
undivided interest in the entirety of such Ownership Interest)
and a portion of the Purchase Price has not been allocated
specifically to such portion of an Ownership Interest in
Schedule 1.01(a), then for purposes of computing the Defect
Amount, the Purchase Price allocated to such Ownership
Interest shall be further allocated among the portions of such
Ownership Interest in a fair and reasonable manner taking into
account the values set forth in Schedule 1.01(a).
(viii) A Title Defect shall not result from
a clerical, typographical or mathematical error (including the
erroneous listing of an Oil and Gas Interest set forth on
Schedule 1.01(a) in which HSRTW does not have an ownership
interest) in the computation of HSRTW's WI or NRI as set forth
in Schedule 1.01(a) and correction thereof would not be
applied to the aggregate value of all Title Defects. Should
such error be found, Buyer shall be entitled to a reduction in
the Purchase Price based on the Allocated Value set forth on
Schedule 1.01(a). Such reduction in the Purchase Price shall
not be subject to the Transaction Deductible provision set
forth in Section 12.16.
(ix) The Defect Amount for a Title Defect
resulting from the general partner of Horizon electing to
receive a distribution in kind of its share of the Oil and Gas
Interests held by Horizon, shall be determined in accordance
with Section 6.01(d)(iii) above except that such reduction
shall not be subject to either the
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$10,000 amount as set forth in Section 6.01(a) above, or the
Transaction Deductible provisions set forth in Section 12.16.
(e) To the extent Seller and Buyer can reach agreement prior
to Closing under Section 6.01(c) as to any particular Title Defect, the
Purchase Price shall be adjusted under Section 2.02 for such
agreed-upon amounts. As to all remaining Title Defects, Seller and
Buyer shall attempt in good faith to reach agreement under (c) above by
November 15, 1998, and as to Title Defects for which the parties can
reach agreement, any monies that are owed shall be paid by the owing
party to the other party by November 25, 1998. If the Seller and Buyer
are unable to agree on the extent of the adjustment to the Purchase
Price relative to any Title Defect by November 15, 1998, the dispute
shall be submitted to binding arbitration before a mutually agreeable
arbitrator with at least ten (10) years experience in oil and gas title
matters (the "Title Arbitrator"). The Title Arbitrator shall resolve
the dispute within thirty (30) days of submittal of the relevant
documentation by the parties. The decision of the Title Arbitrator is
final and is not subject to appeal by the parties to any court that may
have jurisdiction. If the decision of the Title Arbitrator requires
payment of funds, the party required to pay such amounts shall pay the
other party within five (5) days of the arbitrator's decision. Fees and
expenses of the Title Arbitrator shall be borne equally by the parties.
(f) Certain of the Oil and Gas Interests, such as certain
federal and Indian leases, are held in the name of Seller rather than
HSRTW. At Closing, Seller shall execute an assignment of such leases to
Buyer. These items shall not constitute a Title Defect as to the
affected Oil and Gas Interest.
(g) If assignments to HSRTW of the Oil and Gas Interests held
by Horizon and to which HSRTW is entitled pursuant to the Horizon
Partnership Agreement have not been made as of the Closing, such
failure shall not constitute a Title Defect but Seller shall use its
reasonable best efforts to cause the general partner of Horizon to
make and deliver such assignments in accordance with the terms of the
Horizon Partnership Agreement and shall indemnify Buyer for any
damages or detriment suffered by Buyer resulting from the general
partner's failure to make such assignments.
(h) If there is any inaccuracy in Schedule 1.01(a) that
results in an increase in the value of an Oil and Gas Interest, the
amount of increased value (a "Credit Adjustment"), determined in a
similar manner as a reduction for a Title Defect is determined, shall
be a credit against any reductions to the Purchase Price for Title
Defects. Credit Adjustments, if any, shall reduce Seller's obligation
to make any payments to Buyer or to suffer reduction of the Purchase
Price under Articles 3, 6 or 11 of this Agreement. Buyer shall
promptly notify Seller of any inaccuracies it discovers in Schedule
1.01(a) that might lead to a Credit Adjustment.
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SECTION 6.02 ENVIRONMENTAL DEFECT ADJUSTMENTS.
(a) No adjustment to the Purchase Price for Environmental
Defects shall be made unless and until, as to each Ownership Interest,
the value of Environmental Defects exceeds $10,000, such adjustment to
be further subject to the Transaction Deductible provision set forth
in Section 12.16. Each Ownership Interest set forth on Schedule
1.01(a) shall constitute a separate asset for purposes of this Article
6 and an Environmental Defect that pertains to more than one Ownership
Interest shall be considered a separate Environmental Defect as to
each Ownership Interest.
(b) Buyer shall give Seller written notice of Environmental
Defects on or before September 15, 1998. Such notice shall be in
writing and shall include: (i) a description of the Environmental
Defect; (ii) the Allocated Value of the Ownership Interest affected by
the Environmental Defect; (iii) Buyer's good faith estimate of the
costs associated with correcting the circumstance or condition to the
extent required by the standards set forth in Section 11.02(b)(v); and
(iv) supporting documentation, including all data, reports and
analysis of which Buyer is aware concerning the problem. Buyer shall
be deemed to have waived all breaches of Seller's warranty and
representation with respect to any circumstance or condition of which
Seller has Knowledge as of September 15, 1998, and for which Buyer has
not provided a valid notice pursuant to this Section 6.02(b).
(c) Subject to the limitations contained in Section (a) above,
if an Ownership Interest is affected by an Environmental Defect, the
Purchase Price shall be reduced by the Excess Amount; provided,
however (A) no reduction shall be made with respect to an Ownership
Interest subject to an Environmental Defect if on or before Closing
Seller elects any of the options set forth in Sections 11.02(b)(ii)(2)
or (3) or 11.02(b)(iii), and (B) all of the provisions of Section
11.02(b)(ii)(1) shall apply with respect to any property as to which a
reduction in the Purchase Price is made.
SECTION 6.03 CASUALTY LOSS. If subsequent to the date of this Agreement
and, prior to the Closing, all or any material portion of an Ownership Interest
is destroyed by fire or other casualty, is taken in condemnation or under the
right of eminent domain or proceedings for such purposes are pending or
threatened, the obligations of Buyer shall remain in effect and the Purchase
Price shall not be adjusted. Seller shall, at the Closing, pay to Buyer all sums
paid to Seller by third parties by reason of the destruction or taking of such
Ownership Interest, and shall assign, transfer and set over unto Buyer all of
the right, title and interest of Seller in and to any unpaid awards or other
payment from third parties arising out of the destruction, taking or pending or
threatened taking. Seller shall not voluntarily compromise, settle or adjust any
material amount payable by reason of any material destruction, taking or pending
or threatened taking without first obtaining the written consent of Buyer.
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ARTICLE 7 CONDITIONS
SECTION 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
TRANSACTION. The respective obligations of each party to effect the transaction
contemplated by this Agreement shall be subject to the satisfaction, at or prior
to the Closing Date, of the following condition:
(a) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transaction contemplated hereunder
shall be in effect; provided, however, that prior to invoking this
condition, each party shall have complied fully with its obligations
under Section 5.03 and, in addition, shall use all reasonable efforts
to have any such decree, ruling, injunction or order vacated, except as
otherwise contemplated by this Agreement.
SECTION 7.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of
Buyer to effect the transaction contemplated by this Agreement is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Buyer:
(a) Representations, Warranties and Covenants. The
representations and warranties of Seller set forth in Article 3 shall
be true and correct in all material respects as of the Closing Date as
though made on and as of that time (unless by its express terms or
reasonable interpretation the representation and warranty is made as of
a time specific), and Seller shall have performed its covenants
hereunder in all material respects to the extent such were to be
performed prior to Closing and Buyer shall have received a certificate
signed by the Chief Executive Officer or President of Seller to both
such effects; provided, however, that the condition set forth in this
Section 7.02(a) shall be deemed to be satisfied even if one or more of
such representations and warranties are not true and correct or
covenants have been breached, so long as the failure of such
representations, warranties or covenants (in the aggregate) do not
result in Adverse Consequences that exceed fifteen percent (15%) of the
Purchase Price set forth in Section 2.01(b) (unadjusted pursuant to
other provisions of this Agreement). For purposes of this Section
7.02(a) only, Adverse Consequences shall include from first dollar
Defect Amounts determined as provided in Section 6.01(c) and (d), of
Title Defects and breaches of Section 3.25 with respect to which notice
has been given in accordance with Section 6.01(b) or Section 6.02(b) on
or before five (5) business days prior to Closing. For purposes of this
Section 7.02(a), the Transaction Deductible and Defect Threshold shall
be ignored. Asserted Title Defects and Defect Amounts and asserted
breaches of the representation and warranty in Section 3.25 and other
asserted breaches shall be subject to Seller's objections and the
factors listed in Section 6.01(c) and (d) or Section 11.02(b)(v) and
shall not be included if Seller agrees either to cure the defect,
exclude the relevant property or indemnify Buyer in accordance with the
applicable provisions of this Agreement.
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(b) Consents. Seller shall obtain the Bank Consent, and the
Trustee Release (either or both of which may be conditioned on the
consummation of the Closing and the delivery of opinions, certificates
and other documents to be provided by Seller to the Bank or the
Trustee).
(c) All opinions required to be delivered at Closing shall be
in the form required by this Agreement.
(d) All documents required to be delivered at Closing shall be
in a form in compliance with the obligations hereunder in all material
respects.
SECTION 7.03 CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to effect the transaction contemplated by this Agreement is subject to
the satisfaction of the following conditions, any or all of which may be waived
in whole or in part by Seller:
(a) Representations, Warranties and Covenants. The
representations and warranties of Buyer set forth in Article 4 shall be
true and correct in all material respects as of the Closing Date as
though made on and as of that time (unless by its express terms or by
reasonable implication the representation and warranty is made as of a
specific time) and Buyer shall have performed in all material respects
all covenants and agreements required to be performed by them under
this Agreement at or prior to the Closing Date, and Seller shall have
received a certificate signed by the Chief Executive Officer, President
or a Vice President of Buyer to both such effects.
(b) Consents. Seller shall obtain the Bank Consent, and the
Trustee Release (either or both of which may be conditioned on the
consummation of the Closing and the delivery of opinions, certificates
and other documents to the Bank or the Trustee).
(c) All opinions required to be delivered at Closing shall be
in the form required by this Agreement.
(d) All documents required to be delivered at Closing shall be
in a form in compliance with the obligations hereunder in all material
respects.
ARTICLE 8 CLOSING
SECTION 8.01 CLOSING OBLIGATIONS. At the Closing the following events
shall occur, each being a condition precedent to the others and each being
deemed to have occurred simultaneously with the others:
(a) Seller and Buyer shall execute and deliver a settlement
statement, prepared in accordance with this Agreement and that shall
set forth the Preliminary Purchase Price and each adjustment and the
calculation of such adjustments used to determine such amount. Seller
shall provide Buyer with the Preliminary Settlement Statement five (5)
days prior to Closing for Buyer's review and approval. The term
"Preliminary Purchase
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Price" shall mean the Purchase Price, adjusted as provided in Section
2.02, using for such adjustments the best information then available.
(b) Buyer shall deliver to Seller the Preliminary Purchase
Price, less the principal amount of the ▇▇▇▇▇▇▇ Money by direct bank or
wire transfer in immediately available United States funds to the
account or accounts designated by Seller.
(c) Buyer and Seller shall direct ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. to
deliver the ▇▇▇▇▇▇▇ Money and all interest and other earnings thereon
less escrow expenses to Seller in the manner described in (b).
(d) Seller and Buyer shall execute, acknowledge and deliver
transfer orders or letters in lieu thereof directing purchasers of
production to make payment to HSRTW, if necessary, of proceeds
attributable to production from the Oil and Gas Interests.
(e) Seller shall prepare such notices of change in
operatorship for those Seller-operated ▇▇▇▇▇ for which Buyer or HSRTW
has taken over operations as are reasonable and customary in the
industry.
(f) Seller shall deliver to Buyer the certificates for all of
the HSRTW Common Stock properly executed for assignment to Buyer.
(g) Seller shall deliver to Buyer resignations of the members
of the board of directors and all officers of HSRTW.
(h) Seller and Buyer shall execute and deliver the Tax
Agreement.
(i) Seller and Buyer shall execute and deliver the respective
Opinions of Counsel.
(j) Seller and Buyer shall execute the Officers' Certificates
required in Section 7.02(a) and Section 7.03(a) respectively.
(k) Seller shall deliver to Buyer the re-assignment of the
Section 29 ▇▇▇▇▇ as required in Section 5.12 of this Agreement.
(l) Seller shall deliver to Buyer schedules as prepared by
Seller relating to ▇▇▇▇▇, oil and gas leases, oil and gas equipment,
and non-oil and gas assets related to the Ownership Interests of HSRTW.
ARTICLE 9 POST-CLOSING GAS IMBALANCE
SECTION 9.01 GAS BALANCING.
(a) General. Schedule 9.01 sets forth the gas imbalance as to
the Oil and Gas Interests as of the various dates set forth on the
Schedule. At Closing, the Purchase
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Price shall be adjusted by such amount based on a value of $1.00 per
MCF. The parties will use their best efforts to update (to the
Effective Time) the volume amounts listed on Schedule 9.01 within sixty
(60) days from the Closing Date. If the gas imbalance of an Oil and Gas
Interest indicated on Schedule 9.01 changes or additional Oil and Gas
Interests are added as a result of this update, the parties will make
the appropriate payments to one another within ninety (90) days after
Closing based on a value of $1.00 per MCF to reflect the updated
imbalance volume and the resulting balancing value for the Oil and Gas
Interest. If Seller and a third party operator disagree as to the
amount of any imbalance, Buyer and Seller shall mutually agree to an
amount. After ninety (90) days after the Closing, there shall be no
further adjustment made as to gas imbalance on any of the Ownership
Interests.
(b) Certain ▇▇▇▇▇. The State D, ▇▇▇▇▇▇ 1-27 and Van Vilet 1-26
▇▇▇▇▇ presently held by Horizon shall be excluded from the Ownership
Interests, the Purchase Price shall be reduced by the Allocated Value
thereof, and Seller shall indemnify Buyer and HSRTW from any liability
for such ▇▇▇▇▇ including gas imbalances, abandonment and reclamation.
If the retention of such ▇▇▇▇▇ gives rise to any third party claims
concerning obligations of applicable operating agreements or other
governing agreements, the parties will cooperate to ensure that Buyer
receives the enjoyment of ownership of the other ▇▇▇▇▇ and the leases
subject to such agreements. The gas imbalances with respect to such
▇▇▇▇▇ shall be excluded from the gas imbalances referred to and
adjusted for in Section 9.01(a).
ARTICLE 10 TERMINATION
SECTION 10.01 TERMINATION RIGHTS. This Agreement may be terminated and
the transaction contemplated hereunder may be abandoned at any time prior to the
Closing Date:
(a) By mutual written consent of Buyer and Seller;
(b) By either Seller or Buyer if (i) the transaction
contemplated hereunder has not been consummated by September 15, 1998
(provided, however, that the right to terminate this Agreement pursuant
to this clause (i) shall not be available to any party whose breach of
any representation or warranty or failure to perform any covenant or
agreement under this Agreement has been the cause of or resulted in the
failure of the transaction contemplated hereunder to occur on or before
such date); or (ii) any Governmental Authority shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transaction and
such order, decree, ruling or other action shall have become final and
nonappealable (provided, however, that the right to terminate this
Agreement pursuant to this clause (ii) shall not be available to any
party until such party has used all reasonable efforts to remove such
injunction, order or decree);
(c) By Buyer if there has been a material breach of the
representations and warranties made by Seller in Article 3 of this
Agreement or Seller has failed to comply in
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any material respect with any of its covenants or agreements contained
in this Agreement (provided, however, that Buyer shall not be entitled
to terminate this Agreement pursuant to this Section 10.01(c) unless
Buyer has given Seller at least forty-eight (48) hours prior notice of
such breach, Seller has failed to cure such breach within such
forty-eight (48) hour period, as a result of such failure Adverse
Consequences have occurred or it is reasonably foreseeable that they
will occur in an amount exceeding fifteen percent (15%) of the Purchase
Price set forth in Section 2.01(b), determined in the same manner as
set forth in Section 7.02(a), if the Closing were to occur on the day
on which Buyer gives Seller notice of such termination (this percentage
being the same as and not in addition to the fifteen percent (15%)
referenced in Section 7.02(a));
(d) By Seller if there has been a material breach of the
representations and warranties made by Buyer in Article 4 of this
Agreement or Buyer has failed to comply in any material respect with
any of its covenants or agreements contained in this Agreement,
(provided, however, that except with respect to a failure of Buyer to
close, Seller shall not be entitled to terminate this Agreement
pursuant to this Section 10.01(d) unless Seller has given Buyer at
least forty-eight (48) hours prior notice of such breach, Buyer has
failed to cure such breach within such forty-eight (48) hour period,
and the condition described in Section 7.03(a) other than the provision
thereof relating to the certificate signed by the chief executive
officer of Buyer, would not be satisfied if the Closing were to occur
on the day on which Seller gives Buyer notice of such termination;
(e) In the event of the termination of this Agreement by
Seller in accordance with Sections (a), (b) or (d) above, Seller shall
have no liability hereunder of any nature whatsoever to Buyer,
including any liability for damages. If Buyer terminates this Agreement
in accordance with Sections (a), (b) or (c) above, it shall have no
liability hereunder of any nature whatsoever to Seller including any
liability for damages and Seller and Buyer shall promptly cause the
Escrow Agent to return the ▇▇▇▇▇▇▇ Money with all interest earned
thereon to Buyer. If Seller terminates this Agreement in accordance
with Section (d) above, Buyer and Seller shall cause the Escrow Agent
to deliver to Seller the ▇▇▇▇▇▇▇ Money with all interest earned thereon
as liquidated damages and not as a penalty, the parties acknowledging
that actual damages would be very difficult to determine in this event.
SECTION 10.02 EFFECT OF TERMINATION. If this Agreement is terminated by
either Seller or Buyer pursuant to the provisions of Section 10.01 above, there
shall be no further obligation on the part of any party hereto or its respective
Affiliates, directors, officers, or stockholders except the obligations embodied
in Section 10.01(e) and the obligations pursuant to the provisions of Section
5.02(b) (but only to the extent of the confidentiality and indemnification
provisions contained therein), and Article 11, Sections 5.05, 12.02, 12.04,
12.05, 12.11, 12.12, 12.13, 12.14, and the Confidentiality Agreement (which
shall continue pursuant to their terms); provided, however, that a termination
of this Agreement shall not relieve any party hereto from any liability for
damages incurred as a result of a breach by such party of its representations,
warranties, covenants, agreements or other obligations hereunder occurring prior
to such termination.
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ARTICLE 11 INDEMNIFICATION AND ASSUMPTION
SECTION 11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Seller's Representations and Warranties. The representations and
warranties of the Seller contained in the Sections listed below shall survive
Closing (even if the Buyer knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect for the respective periods shown below:
AGREEMENT SECTION SURVIVAL PERIOD
----------------- ---------------
3.22 to September 15, 1998
3.07 through 3.16,
3.18 through 3.21, and
3.23 and 3.24 180 days
3.01 through 3.06 and 3.25 one year
3.26 two years
3.17 and 3.27 unlimited
(b) Buyer's Representations and Warranties. The representations and
warranties of the Buyer shall survive Closing (even if the Seller knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one (1) year.
SECTION 11.02 LIMITED INDEMNIFICATION BY SELLER. If the Closing occurs,
Seller shall indemnify, defend and hold harmless Buyer and HSRTW and their
respective Affiliates, directors, officers, shareholders, employees, agents and
representatives ("Buyer Indemnitees") from any Adverse Consequence resulting
from the breach by Seller of any warranty and representation contained in
Article 3 hereof except Section 3.22, and from the breach by Seller of any of
Seller's covenants hereunder; regardless in either case of the negligence or
fault of Buyer Indemnitees (other than HSRTW and its Affiliates prior to the
Effective Time), other than gross negligence or willful misconduct, including
instances in which the Buyer Indemnitees' (other than HSRTW and its Affiliates
prior to the Effective Time), negligence or fault is the sole or concurrent
proximate cause of the indemnified liability. Seller's obligations under this
Section 11.02 are subject to the following conditions, corporations and
limitations:
(a) Seller's obligation under this Article 11 for breaches of
warranties and representations is strictly conditioned (with time being
the essence hereof) on Buyer or HSRTW providing written notice to
Seller of a claim for indemnification under this Section 11.02 prior to
the end of the applicable survival period referred to in Section 11.01
above, and in the case of the warranty and representation set forth in
Sections 3.25
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and 3.26, is conditioned additionally upon Buyer's receipt of written
notice of a Third-Party Claim based on the same facts on which the
asserted breach is based having been asserted in writing against Buyer
or on or before the end of the survival period applicable to such
warranty and representation. As a condition to being effective, such
notice must contain (i) sufficient details concerning the claim of
breach so that Seller can determine the full extent and nature of the
breach and (ii) reasonable evidence supporting Buyer's claim of breach
as well as any and all information, documentation or evidence Buyer may
have, including such information that may be contrary to the claim of
breach.
(b) Seller's indemnity obligation under this Article 11 for
breaches of representations and warranties other than the
representation and warranty in Section 3.26 is subject to the
Transaction Deductible provision set forth in Section 12.16. In
addition, claims for breach of Seller's environmental representations
and warranties contained in Section 3.25 shall be subject to the
following:
(i) No breach shall exist with respect to any
environmental matter with respect to which Seller had
Knowledge as of September 15, 1998.
(ii) Seller may elect to do any of the following
(singly or in any combination) to satisfy any indemnification
obligation with respect to claims for breach of Section 3.25:
(1) Seller may tender to Buyer Seller's
reasonable estimate of costs for any cleanup,
removal, recovery, response, restoration, corrective
action or remedial action that is required in order
to cure Seller's breach ("Cleanup") over the
Transaction Deductible (the "Excess Amount"), with
Buyer being obligated to perform such Cleanup
diligently and in a workmanlike manner in accordance
with the standards set forth in Section 11.02(b)(v),
and with Buyer, after such tender is made, being
obligated to thereafter indemnify, defend and hold
harmless Seller and its respective Affiliates,
directors, officers, shareholders, employees, agents
and representatives ("Seller Indemnitees") for any
further Adverse Consequences associated with
environmental matters on the relevant property. If
Buyer disputes Seller's reasonable estimate of costs,
and the Parties cannot reach agreement, the matter,
including the existence and value of the breach,
shall be submitted to arbitration. The arbitrator
shall be an environmental consulting firm with
extensive experience with regard to oil and gas
producing properties located in the same general area
as those submitted for arbitration. Prior to Closing,
the parties shall attempt to agree on the name of one
(1) acceptable environmental consulting firm
available to act as arbitrator in the event of a
dispute. If the parties cannot agree on the mutually
acceptable arbitrator, the arbitrator shall be
selected in accordance with the commercial rules of
the American Arbitration Association.
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(2) Seller may perform the Cleanup at
its own cost.
(3) Seller may require Buyer to cause HSRTW
to assign the properties subject to the
indemnification claim to Seller, with Seller paying
to HSRTW or Buyer (at Buyer's election) the Allocated
Value hereunder for such assignment (net of any
adjustment for net production revenue received by
Buyer or HSRTW after the Effective Date), such
assignment to contain a special warranty of title
from HSRTW for any defects or encumbrances by,
through or under Buyer or HSRTW, and with Seller
thereafter indemnifying, defending and holding
harmless Buyer Indemnitees for any Adverse
Consequences associated with Environmental Laws on or
in connection with the assigned property (except such
Adverse Consequences as are caused by HSRTW or
Buyer).
(iii) Seller's obligation to indemnify Buyer pursuant
to this Section 11.02, shall be fully satisfied at such time
as the cumulative effect of the options elected by Seller
under Section 11.02(b)(ii)(1), (2) and (3) above reduce the
Excess Amount to zero.
(iv) Seller, in lieu of any of the remedies required
by Section 11.02(b)(ii) or (iii) above and provided that the
delay of Cleanup or similar action on a property will not
materially adversely affect the liability associated with the
property, may elect to defend, indemnify and hold harmless
Buyer Indemnitees from any Adverse Consequences arising in
connection with the specific item with respect to which a
breach of the warranty and representation exists without
limitation in time.
(v) Seller shall not be deemed to have breached the
warranty and representation in Section 3.25 if the condition
or circumstance giving rise to the allegation of breach meets
or exceeds any one of the following standards:
(1) compliance with Environmental Laws as they
are being enforced by the applicable Governmental
Authority as of the date hereof.
(2) compliance with Environmental Laws as
generally evident on Buyer's properties of a similar
nature (and Buyer shall give Seller reasonable
access on forty-eight (48) hours notice to examine
such properties for purposes of determining this
standard).
(3) compliance with Environmental Laws as
generally evident on properties of similar nature of
the "Majors" in the relevant jurisdiction.
The value of any Adverse Consequences associated with any
alleged breach shall also take into account the probability
that the applicable Governmental Authority will become aware
of any noncompliance (unless such noncompliance is required to
be reported) and actually require compliance.
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(c) The aggregate obligations of Seller under this Section
11.02 shall not exceed $25,000,000 under any circumstances.
(d) Notwithstanding the above provisions of this Section
11.02, Seller shall indemnify, defend and hold harmless the Buyer
Indemnities from any Adverse Consequences resulting from the matters
set forth on the Disclosure Schedule that are indicated to be retained
by Seller. This indemnity obligation shall not be subject to and shall
not be included in the Transaction Deductible and shall not count
toward the aggregate "cap" amount set forth in Section 11.02(c).
SECTION 11.03 INDEMNIFICATION BY BUYER AND HSRTW. Except (a) with
respect to the matters for which Seller has provided an express limited
indemnification as set forth in Section 11.02, (b) Purchase Price adjustments
covered by Section 2.02 and Section 5.07 and Article 9 to the extent such
adjustments are provided for after Closing, (c) Title Defect adjustments covered
by Article 6, and (d) tax obligations covered by the Tax Agreement and Section
5.08, from and after the Closing, Buyer and HSRTW shall assume and shall, to the
fullest extent permitted by law, indemnify, defend and hold harmless Seller
Indemnitees against all Adverse Consequences associated with (i) the breach by
Buyer of any warranty, representation or covenant contained in this Agreement;
(ii) the business of HSRTW or operations conducted by Seller on behalf of HSRTW
prior to, and after the Effective Date; regardless in either case of the
negligence, or other fault of Seller Indemnitees, including instances in which
the Seller Indemnitees' negligence, or other fault is the sole or concurrent
proximate cause of the indemnified liability; or (iii) the matters set forth on
the Disclosure Schedule that are indicated to be assumed by Buyer.
Notwithstanding the foregoing, this shall not require Buyer or HSRTW to
indemnify against or hold Seller Indemnitees harmless for Adverse Consequences
associated with the activities of HSES.
SECTION 11.04 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify an indemnified party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against Seller,
Buyer or HSRTW (the "Indemnifying Party") under this Article 11, the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent that) the Indemnifying Party thereby is
prejudiced.
(b) Any Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within fifteen (15)
days after the Indemnified Party has given notice of the Third Party
Claim; provided, however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently thereafter in
order to preserve its rights in this regard; and provided further that
the Indemnified Party may retain separate
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co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim.
(c) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with
Section 11.04(b) above, (i) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the judgment
or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the Indemnified Party and
(ii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably).
(d) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with
Section 11.04(b) above, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner he or
it reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (ii) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in
this Section 11.04.
SECTION 11.05 DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall
make appropriate adjustments for tax consequences and insurance coverage and
take into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this Article
11. All indemnification payments under this Article 11 shall be deemed
adjustments to the Purchase Price.
SECTION 11.06 APPLICATION OF ARTICLE 11. This Article 11 provides the
sole and exclusive remedy for breaches of representations, warranties and
covenants under this Agreement except:
(a) Accounting adjustments to the Purchase Price for normal
operating revenues and expenses, as well as capital expenditures in the
ordinary course of business, are handled by Sections 2.02 and 5.07.
(b) Indemnities with respect to tax matters including, but not
limited to Section 5.08 and tax matters covered by the Tax Agreement.
(c) All adjustments, indemnities, and provisions with respect
to Title Defects are handled exclusively by Article 6 .
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ARTICLE 12 MISCELLANEOUS
SECTION 12.01 AMENDMENT. This Agreement may not be amended except by a
written instrument signed on behalf of each of the parties hereto.
SECTION 12.02 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and either delivered personally, by
facsimile transmission or by registered or certified mail (postage prepaid and
return receipt requested) and shall be deemed given when received (or, if
mailed, five (5) business days after the date of mailing) at the following
addresses or facsimile transmission numbers (or at such other address or
facsimile transmission number for a party as shall be specified by like notice):
(a) If to Seller: HS Resources, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice
President--Acquisitions & Divestitures (facsimile transmission number:
303/296-9523), with a copy (which shall not constitute notice) to HS
Resources, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: General Counsel (facsimile transmission number:
303-296-9709).
(b) If to Buyer: Universal Resources Corporation, ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇.▇. ▇▇▇▇▇▇▇,
President and Chief Executive Officer (facsimile transmission number:
801/326-2066).
SECTION 12.03 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two (2) or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 12.04 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (together with the Confidentiality Agreement and the documents and
instruments delivered by the parties in connection with this Agreement) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; and (b) is solely for the benefit of the parties hereto
and their respective successors, legal representatives and assigns and does not
confer on any other person any rights or remedies hereunder.
SECTION 12.05 APPLICABLE LAW. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Colorado regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION 12.06 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not
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in any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes this Agreement impossible to perform, in which case this
Agreement shall terminate pursuant to Article 10. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent
Governmental Authority, such party shall not incur any liability or obligation
unless such party breached its obligations under Section 5.03 or did not in good
faith seek to resist or object to the imposition or entering of such order or
judgment.
SECTION 12.07 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by Buyer hereto (whether by
operation of law or otherwise) without the prior written consent of Seller.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
SECTION 12.08 WAIVERS. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive performance
of any of the covenants or agreements, or satisfaction of any of the conditions,
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereof shall not operate or be construed as a waiver of
any prior or subsequent breach of the same or any other provisions hereof.
SECTION 12.09 CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement
shall remain in full force and effect following the execution of this Agreement.
Any and all information received by Buyer under this Agreement shall be governed
by the applicable terms and provisions of the Confidentiality Agreement.
SECTION 12.10 INCORPORATION. Exhibits and Schedules referred to herein
are attached to and by this reference incorporated herein for all purposes.
SECTION 12.11 WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.
SECTION 12.12 JURISDICTION AND VENUE. The Parties hereby irrevocably
and unconditionally consent to submit to the non-exclusive venue and
jurisdiction of the courts of the state of Colorado and of the United States of
America located in Colorado for any actions, suits
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or proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and Buyer agrees not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of process, summons, notice or document by U.S. registered mail shall be
effective service of process for any action, suit or proceeding brought against
Buyer in any such court.
SECTION 12.13 DAMAGE WAIVER. NO PARTY SHALL BE LIABLE FOR OR BE
REQUIRED TO PAY FOR OR INDEMNIFY AN INDEMNIFIED PARTY FOR SPECIAL, PUNITIVE,
EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES SUFFERED BY THE
INDEMNIFIED PARTY IN CONNECTION WITH OR IN ANY MATTER RELATING TO THIS AGREEMENT
PROVIDED THIS LIMITATION SHALL NOT LIMIT ANY OBLIGATIONS OTHERWISE PROVIDED FOR
HEREUNDER TO INDEMNIFY A PARTY FOR THE FOREGOING TYPE OF DAMAGES THAT MUST BE
PAID TO A THIRD PARTY.
SECTION 12.14 LEGAL FEES. The prevailing party in any legal proceeding
brought under or to enforce this Agreement shall be additionally entitled to
recover court costs and reasonable attorneys' fees from the non-prevailing
party.
SECTION 12.15 FURTHER ASSURANCES. After the Closing, each of the
parties will execute, acknowledge, and deliver to the other such further
instruments, and take such other actions as may be reasonably requested in order
to more effectively assure to said party all of the respective properties,
rights, titles, interests, estates, and privileges intended to be assigned,
delivered, or inuring to the benefit of such party and consummation of the
transactions contemplated hereby.
SECTION 12.16 TRANSACTION DEDUCTIBLE. Buyer shall not be entitled to
any reduction of the Purchase Price hereunder or payments or indemnifications
from Seller for Title Defects under Article 6 or indemnification for breaches of
warranties, representations and covenants under Article 11 (excluding from the
effect of this Section 12.16 matters (such as, but not limited to, Section 3.26)
which by the express terms of other provisions in this Agreement are not
affected by this Section 12.16), except to the extent the combined value of the
following matters exceeds $2,000,000:
(a) the Defect Amount associated with Title Defects
that would otherwise require an adjustment of the Purchase Price
pursuant to Article 6; and
(b) amounts Seller would otherwise have to bear or
pay to or on behalf of Buyer Indemnitees pursuant to Article 11.
The term "Transaction Deductible" means the $2,000,000 referred to above
including the above provisions regarding the determination of credits against
such amount.
SECTION 12.17 TRANSITION. The parties recognize that matters involving
the transition of the business of HSRTW to Buyer have not been addressed in the
forgoing provisions of this Agreement. Therefore, the parties agree that as a
general principle, they will cooperate with each other to accomplish an orderly
transfer of the business that satisfies the reasonable needs of each party to
conduct its business and satisfy its obligations corporately and under this
Agreement,
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and allows each party to enjoy the benefits it has secured under this agreement,
with the expenses for such transition generally being borne by the party or
parties benefiting from the expense. This obligation shall continue for the
period of time necessary to accomplish the orderly transition, but shall not
continue after November 30, 1998 (the "Transition Period"). The transition shall
anticipate the following obligations and conditions:
(a) Press Releases. Immediately upon the execution of this
Agreement, Seller and Buyer shall coordinate with respect to the
prompt issuance of press releases in compliance with Section 5.04 of
this Agreement. The parties shall keep the execution of this Agreement
and all information concerning the subject of this Agreement
confidential until such press releases have been issued.
(b) Employee Announcement. Promptly following the issuance of
press releases, Seller shall convene a meeting of its Tulsa-based
employees to disclose the existence of this Agreement and to
communicate the process for initial transition steps as outlined
below.
(c) Transition Agreement. Promptly following the execution of
this Agreement, the parties shall meet and endeavor in good faith to
agree upon a written Transition Agreement covering in detail all of
the subjects addressed in this Section 12.17 concerning transition, as
well as any other subjects that may impact the orderly transition of
the business of HSRTW from Seller to Buyer. Such agreement shall be
completed and executed by the parties on or before August 14, 1998. As
to transition matters, any conflict between this Agreement and the
Transition Agreement, the terms of the Transition Agreement shall
control.
(d) Office Lease.
(1) Seller shall, if permitted by the terms of the office
lease, transfer the office lease for such space to HSRTW on
or before Closing, and Buyer shall agree to assume all
liability for such lease from and after the Effective Time.
If there are any restrictions or conditions on transferring
the lease, Seller and Buyer shall use their reasonable best
efforts to satisfy such restrictions and conditions or Seller
shall sublet or make other arrangements so that Buyer can
utilize the space.
(2) Buyer shall permit Seller to occupy so much of the
space for the Transition Period without charge as is
necessary to allow Seller to conveniently fulfill all of its
objectives and obligations discussed in this Section 12.17,
and including allowing HSES to remain in that portion of the
office space currently used and occupied by HSES until the
end of the Transition Period or until such earlier time when
HSES moves its operations to other office space. HSES shall
use its best reasonable efforts to locate other office space
as soon as practicable after September 1, 1998, and if HSES
has not relocated by October 1, 1998, Seller shall pay a pro
rata portion of the office rent attributable to the office
space occupied by HSES thereafter.
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(e) Personnel. Promptly after the announcement of this
transaction to the Tulsa based employees of Seller, Seller shall
request from each employee his/her consent to release to Buyer the
employee's resume and current salary information. Seller shall not
release such information to Buyer for any employee that does not
consent to such release. For those consenting employees, Buyer may
interview such employees upon 24 hours notice to Seller. Should Buyer
wish to make an offer to that employee, Buyer shall consult with
Seller prior to making such an offer, in order that Buyer and Seller
may reasonably agree as to the most convenient date for which the
employee would no longer be an employee of Seller and would be hired
by Buyer.
(f) File Access. After Closing, Buyer shall provide Seller
reasonable access during normal business hours to files and records
that Seller reasonably needs in order to comply with its obligations
under this Agreement and to respond to audits and/or litigation or
arbitration proceedings. Buyer agrees to maintain the records of HSRTW
for a period of seven years after Closing. If Buyer elects to destroy
any such records, or any portion thereof, it shall notify Seller prior
to such destruction and provide Seller with an opportunity to take
possession of the same.
(g) Field Operations. At Closing, Buyer shall take over
supervision of the field operations for the Ownership Interests. If
Buyer is unable to take over such supervision, Buyer may request that
Seller continue to supervise such activities.
(h) Marketing. Between the date of this Agreement and Closing,
Buyer and Seller shall coordinate the nominations of natural gas for
the month of September and shall further reasonably cooperate with one
another as deemed necessary by Buyer regarding the marketing, gas
control and contract administration activities necessary in order to
sell Hydrocarbons from the Oil and Gas Interests after Closing.
(i) Land and Accounting Functions. Buyer may request that
Seller after Closing continue providing land and lease administration
activities, such as lease administration and division orders, and
maintain all land, lease and other records, and provide associated
services, pay rentals, shut-in payments and other lease payments.
Buyer may request that Seller after Closing continue providing
accounting functions such as royalty and other lease payments, payment
of accounts payable, collection of accounts receivable, computation
and payment of severance and other taxes based on production, gas
balancing, and general ledger and financial reporting activities.
(j) Employee Contacts. Seller and Buyer shall designate
certain employees to contact for the coordination of activities
required in order to have an orderly transition of the business of
HSRTW to Buyer.
(k) Transition Expenses. Buyer shall pay for the actual;
direct costs incurred by Seller which are necessary or requested for
the orderly transition of HSRTW to Buyer (not to exceed $350,000 per
month) pursuant to the foregoing.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized Representatives, on the date first written
above.
"SELLER" "BUYER"
HS RESOURCES, INC. UNIVERSAL RESOURCES CORPORATION
By: By:
-------------------------------- ----------------------------------
Name: P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇.▇. ▇▇▇▇▇▇▇
Title: President Title: President and CEO
Entrada Industries, Inc., a Utah corporation, hereby represents that it is the
direct corporate parent of Universal Resources Corporation and hereby
unconditionally guarantees and agrees to cause Universal Resources Corporation
to timely, and fully perform each and every covenant and obligation set forth in
the foregoing Stock Purchase and Sale Agreement.
ENTRADA INDUSTRIES, INC.
By:
-----------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
Date: July 27, 1998
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