ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 19th day of October, 1995, by and
among METRO CAPITAL CORPORATION, a Wyoming corporation (the "Purchaser"), and
KARLTON TERRY OIL COMPANY, a Colorado corporation ("KTOC"), KARLTON TERRY and
JUBAL TERRY (the "Shareholders.") (KTOC and the Shareholders are referred to
herein collectively as the "Sellers").
WHEREAS, the Sellers are willing to sell, and the Purchaser is willing
to purchase, certain of the assets, and assume certain of the liabilities, of
the Sellers on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE ASSETS
1.1 PURCHASE AND SALE OF THE ASSETS. At the Closing (as hereinafter
defined), subject to the terms and conditions stated herein, the Sellers
agree to sell, assign, convey and transfer to the Purchaser, and the
Purchaser agrees to purchase from the Sellers, the following described
interests (the "Assets"):
(a) The undivided interests described in Exhibit A hereto in and
to the entire estates created by the leases, licenses, permits and other
agreements described in Exhibit A (the "Leases"), insofar as the Leases cover
and relate to the land described in Exhibit A (the "Land"), together with
identical undivided interests in and to all the property and rights incident
thereto, including all rights in, to and under all agreements, product
purchase and sale contracts, leases, permits, rights-of-way, easements,
licenses, farmouts, options and orders in any way relating thereto;
(b) Identical undivided interests in and to all of the personal
property, fixtures and improvements now or as of the Effective Time (as
defined in Section 1.2 below) on the Land, appurtenant thereto or used or
obtained in connection therewith or with the production, treatment, sale or
disposal of hydrocarbons or water produced therefrom or attributable thereto
and all other appurtenances there unto belonging;
(c) All files, books, records and engineering and geological data
related to the foregoing; and
(d) Those options (the "Asset Options") described in Exhibit A to
acquire interests in the Leases and Land.
1.2 EFFECTIVE TIME. The purchase and sale of the Assets shall be
effective for all purposes as of November 1, 1995 at 7:00 A.M., local time
(the "Effective Time"), said time to be determined for each locality
described in Exhibit A in accordance with the time generally observed in said
locality.
1.3 PURCHASE PRICE; ALLOCATION COVENANTS. In full consideration for
the purchase of the Assets, the Purchaser will issue to the Sellers, in the
respective percentages to be specified by Sellers to Purchaser prior to
Closing, 7,717,820 shares of restricted Class B Common Stock of the Purchaser
(the "Class B Common Stock"), having the attributes set forth in Section 1.5,
which when issued will be validly issued, fully paid and nonassessable shares
of Class B Common Stock. At Closing, such 7,717,820 shares of Class B Common
Stock shall represent 80% of the issued and outstanding securities of the
Purchaser after giving effect to the issuances of certain of the securities
described on Schedule 10.19. The Purchaser and the Sellers each covenants
with the other that it will promptly give written notice to the other of any
inquiry or challenge of such allocation by any federal, state or local tax
authority. It is the intention of the parties, and a condition precedent to
the obligation of the Sellers to complete the transaction contemplated
hereby, that such transaction qualify as a nontaxable event pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
1.4 PURCHASER SUBSIDIARY. Prior to the Closing, the Purchaser will
transfer (and Sellers agree to such transfer) to Bishop Cable Communications
Corporation, its wholly-owned Wyoming subsidiary (the "Subsidiary") all of
its assets (the "Purchaser Excluded Assets") except for (i) the amount of
cash and marketable securities in excess of $1.2 million, which amount in any
event shall be at least $700,000; and, (ii) its working interest in, and its
operating agreement with respect to, the property known as Twenty Mile Hill,
which is held by Metro Minerals Corporation, a wholly-owned subsidiary of
Purchaser (a copy of the legal description of which is hereto attached as
Exhibit B). All economic credit for any net operating loss of the Purchaser
calculated as of September 30, 1995, shall be given to the Subsidiary, and
the Subsidiary shall have no obligation whatsoever for payment of any
consolidated tax liability until such time as the separate taxable income of
the Subsidiary exceeds the aforementioned net operating loss, which as of
June 30, 1995, was approximately $830,000. In the event Closing occurs after
November 30, 1995, then the net operating loss shall be calculated as of the
end of the calendar month preceding the month in which Closing occurs. After
the Closing, the Subsidiary shall loan the Purchaser, upon its request,
amounts up to $18,000 as are necessary to pay debt service on that portion of
the Assets known as the Lake Hatch properties, which loans shall be made for
a period of up to 90 days on a fully secured basis with simple interest at
the annual rate of 10% and pursuant to other commercially reasonable terms
and conditions to be agreed upon by the parties. Such loan shall be repaid as
the first priority out of proceeds of a private placement of Purchaser's
securities but in any event shall be repaid within 90 days after the making
of such loan.
The Common Stock of the Subsidiary shall be distributed to the holders
of the Purchaser's Common Stock as soon as practicable and, if so qualified,
on a non-taxable basis. In any event, and regardless of tax consequences,
the parties intend, and Purchaser shall cause, such distribution to occur not
later than 36 months from the Closing. The Subsidiary shall be operated
autonomously
2
by the current management of the Purchaser, but in no event for more than
five years, pursuant to the terms of an operating agreement (the "Operating
Agreement") and management agreement (the "Management Agreement") to be
entered into with the Purchaser and its management. Copies of the Operating
Agreement and the Management Agreement are attached hereto as Exhibits C and
D, respectively. Such compensation shall be self funded by the Subsidiary
and not the Purchaser. The Operating Agreement and the Management Agreement
shall be ratified by the Purchaser immediately after the Closing Date. The
Subsidiary shall assume, and shall indemnify and hold harmless Sellers and
Purchaser from, any and all liabilities, costs, claims and assessments
related to the Purchaser Excluded Assets.
1.5 CLASS B COMMON STOCK. The Class B Common Stock shall have all of
the rights of the currently issued and outstanding shares of the Purchaser's
Common Stock, except that (i) the Class B Common Stock shall not be entitled
to participate in any distribution of shares or assets of the Subsidiary and
(ii) each share of Class B Common Stock shall be entitled to 1.6 votes on all
issues presented for vote by the shareholders. The rights and restrictions of
the Class B Common Stock shall be set forth in the materials submitted to the
shareholders of Purchaser pursuant to Section 5.4, which materials must be
acceptable to Sellers, in their reasonable discretion. The Class B Common
Stock shall be fully convertible on a one-for-one share basis into the
Purchaser's Common Stock commencing 36 months from the Closing Date.
Commencing 30 months from the Closing Date, the Class B Common Stock shall be
convertible on a one to one share basis, provided that the number of shares
so converted until the date 36 months after the Closing Date shall be limited
to that number of shares of Common Stock of the Purchaser that may be sold by
an affiliate pursuant to the volume limitation provisions of Rule 144
promulgated under the Securities Act of 1933, as amended. Up to 500,000
shares of Class B Common Stock may be converted into the Purchaser's Common
Stock to the extent used by the Sellers to exercise the Asset Options. Such
shares of the Purchaser's Class B Common Stock will be subject to demand
registration rights commencing six months from the date of conversion, which
registration rights will include one demand registration right and other
terms and conditions as are agreed to by the parties.
1.6 PERFORMANCE PROVISION. Prior to Closing, Purchaser shall grant an
option (the "Option") in a form mutually acceptable to the parties to issue
800,000 shares of the Purchaser's Common Stock (the "Option Shares"), the
terms of which shall be as follows:
(i) Exercisability- The Option shall become exercisable commencing
36 months from the Closing in the event that one of the following events has
not occurred by such time: (a) realization of a minimum of $16.5 Million of
Proved and Probable Reserves; or, (b) the average bid price for the
Purchaser's Common Stock shall have been at least $4.00 for two periods of
twenty consecutive trading days; or (c) cash flow (gross revenues from oil
and gas production less expenses directly charged against such production)
for the Purchaser shall have been greater than $2,000,000 for any fiscal year.
(ii) Optionees- The Options shall be distributed PRO RATA to the
then current holders of the Purchaser's Common Stock.
(iii) Term- The Option shall be exercisable for a period of 120 days.
3
(iv) Exercise Price- The Option shall be exercisable at a per share
price of $0.10.
(v) Registration Rights- All shares issued upon exercise of the
Option shall be registered with the SEC as soon as is practicable, but in no
event later than nine months after the end of the Option Term.
1.7 CLOSING OF THE PURCHASE. The closing of the purchase and sale
provided for herein (the "Closing") shall take place at the offices of
Brenman Key & Bromberg, P.C., 1775 Sherman Street, Suite 1001, Denver
Colorado, or at such other location as the parties may agree, on or before
November 17, 1995, or as soon as practicable thereafter in the event
additional time is necessary to comply with applicable requirements of the
SEC with respect to the Proxy Materials to be issued by the Purchaser as
provided under Section 5.4 hereof, which date may be extended by ten days by
the mutual agreement of the parties (the "Closing Date"). In no event shall
the Closing Date be later than January 1, 1996, provided that the party
responsible for any delay after November 17 shall reimburse the other party
for all reasonable out of pocket expenses incurred by the other party.
ARTICLE 2
REPRESENTATIONS OF THE SELLERS
As an inducement to the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
the Purchaser will rely thereon, the Sellers represent and warrant to the
Purchaser as follows, which representations shall be true, both as of the
date hereof and as of the Closing Date.
2.1 DUE INCORPORATION AND QUALIFICATION. KTOC is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the corporate power and lawful authority to carry on its
business as now being conducted. KTOC is duly qualified or otherwise
authorized as a foreign corporation to transact business in every
jurisdiction in which: (a) the nature of the business conducted or the
character or location of the properties owned by it makes such
qualification necessary; and (b) failure to so qualify might impair title to
properties or the right to enforce contracts against others, result in
exposure to liability in such jurisdictions or have an adverse effect on the
assets or business of KTOC.
2.2 STOCK OWNERSHIP. The Shareholders own all of the issued capital
stock of KTOC. There are no outstanding rights to acquire any of the capital
stock of KTOC either from KTOC or the Shareholders.
2.3 TITLE TO ASSETS. Except for Permitted Encumbrances (as defined in
Schedule 2.3) and those other matters listed in SCHEDULE 2.3, the Sellers
have good and defensible title to the Assets subject to no encumbrance, lien,
charge, option, right of first refusal, or other restriction of any kind or
character.
4
2.4 AUTHORITY AND CONSENTS. KTOC and Shareholders each have full power
and authority to execute and deliver this Agreement and the other agreements
required to be executed and delivered hereunder (this Agreement and such
other agreements being hereinafter referred to as the "Closing Documents")
and to carry out the transactions contemplated hereby and KTOC has taken all
requisite corporate action to authorize the execution, delivery and
performance of the Closing Documents. The Sellers are not subject to, or a
party to, any charter, bylaw, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character that is
not typical of similarly situated oil and gas entities and that materially,
adversely affect the business, operation or condition of any Seller or the
Assets or would prevent consummation of the transactions contemplated by this
Agreement. The Closing Documents are valid and binding agreements of the
Sellers enforceable in accordance with the terms thereof. No consent,
authorization or approval of, or declaration, filing or registration with,
any governmental or regulatory authority or any consent, authorization or
approval of any other third party is required to enable KTOC or the
Shareholders to enter into and perform their respective obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the consummation of the transactions contemplated thereby will:
(a) Be in violation of the Certificate of Incorporation or Bylaws
of KTOC or constitute a breach of any evidence of indebtedness or
agreement to which KTOC or the Shareholders is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of the Assets are subject or
under any material contract to which any of the Sellers is a party, or
permit the termination of any such contract by another person;
(c) Result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon the Assets under any agreement or
commitment to which any of the Sellers is bound;
(d) Accelerate, or constitute an event entitling, or which would,
upon notice or lapse of time or both, entitle the holder of any
indebtedness to accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to the Assets; or
(g) Violate or cause any revocation of or limitation on any Permit
(as hereinafter defined in Section 2.9).
5
2.5 FINANCIAL STATEMENTS. Audited statement of assets and liabilities
of KTOC Contributed Properties as at December 31, 1994 and audited statement
of direct revenues and expenses for the two years then ended (hereinafter,
the "KTOC Audited Financial Statements") and an unaudited statement of assets
and liabilities of KTOC Contributed Properties as at June 30, 1995 and
unaudited statements of direct revenues and expenses for the six months ended
June 30, 1995 and 1994 (hereinafter, the "KTOC Unaudited Financial
Statements") will be provided to Purchaser within 10 days after the date
hereof. The KTOC Audited and KTOC Unaudited Financial Statements are
referred to hereinafter collectively as the KTOC Financial Statements. The
KTOC Financial Statements will be complete and accurate in all material
respects. The KTOC Audited Financial Statements, including the footnotes
thereto, will be prepared in accordance with generally accepted accounting
principles ("GAAP") and will present fairly the assets and liabilities of
KTOC Contributed Properties as of the dates thereof and their direct revenues
and expenses for the periods indicated. The KTOC Audited Financial Statements
shall have been (i) audited by KTOC's independent certified public
accountants in accordance with generally accepted auditing standards and
(ii) based upon information prepared in accordance with customary industry
standards and practices.
2.6 TAX MATTERS. The Sellers have paid all federal, state, county,
local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net income
(individually, a "Tax" and collectively, the "Taxes") required to be paid by
them through the date hereof, and all deficiencies or other additions to any
Tax, interest and penalties owed by them in connection with any Tax.
2.7 NO TAX LIENS. None of the Assets is subject to any lien pursuant to
Section 6321 of the Code for nonpayment of federal taxes, or any lien in
favor of any state under any comparable provision of state law, under which
transferee liability might be imposed upon the Purchaser under Section 6323
of the Code or any comparable provision of state or local law.
2.8 COMPLIANCE WITH LAWS; PERMITS. The Sellers are not in violation of
any applicable order, judgment, injunction, award or decree relating to their
businesses. To the Sellers' knowledge, the Sellers are not in violation of
any federal, state, local or foreign law, ordinance or regulation or any
other requirement of any governmental or regulatory body, court or arbitrator
applicable to the Assets, the violation of which would have a material,
adverse effect on the Assets. The Sellers hold all licenses, permits, orders
and approvals of any federal, state or local governmental or regulatory
bodies (collectively, "Permits") that are material to or necessary for the
conduct of their businesses as now conducted. All Permits are in full force
and effect and no proceeding to revoke or limit any of such Permits is
pending or, to the knowledge of the Sellers, threatened.
2.9 LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory
body or arbitration tribunal against or involving the Assets. Except as set
forth in SCHEDULE 2.9, there are no actions or suits against the Sellers or,
to the knowledge of the Sellers, claims or investigations (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
pending or, to the knowledge of the Sellers,
6
threatened against or involving the Assets. Responsibility for any
litigation involving the Assets pending prior to the Closing, including
without limitation, the matters set forth on SCHEDULE 2.9 and the
satisfaction of judgments (including related costs and fees) shall remain
with the Sellers.
2.10 CONTRACTS AND OTHER AGREEMENTS. With respect to each material
contract under which any of the Sellers are obligated, neither the Sellers
nor any other party to each such contract is in default nor has any default
been asserted by any party, and there has not occurred any event which, with
the passage of time or giving of notice, or both, would constitute such
default or permit termination, modification or acceleration of such contract.
2.11 LEASES. With respect to each Lease, neither the Sellers nor any
other party to each such Lease is in default nor has any default been
asserted by any party, and there has not occurred any event which, with the
passage of time or giving of notice, or both, would constitute such default
or permit termination, modification or acceleration of the Lease.
2.12 LIABILITIES. Except as otherwise set forth in this Agreement or
any Schedule hereto, the Sellers have no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
known or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise which has of could have a material adverse effect on the Assets.
2.13 RELATIONSHIPS. No officer or director of KTOC possesses, directly
or indirectly, any financial interest in, or is a director, officer,
stockholder or employee of, any corporation, firm, association or business
organization that is a manufacturer for, or client, supplier, customer,
lessor, lessee, or competitor or potential competitor of, KTOC.
2.14 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document,
report or statement in writing that has been supplied by or on behalf of the
Sellers or by any of KTOC's directors or officers in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no fact
or circumstance known to the Sellers that materially and adversely affects or
that may materially and adversely affect the Assets, which has not been set
forth in this Agreement, the Schedules, Exhibits, certificates or
statements furnished in writing to the Purchaser in connection with the
transactions contemplated by this Agreement.
2.15 BROKER'S OR FINDER'S FEES. Except as provided on Schedule 2.15
attached hereto, no agent, broker, person or firm acting on behalf of any of
the Sellers is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
2.16 INSURANCE. The Sellers maintain those insurance policies set
forth on Schedule 2.16.
7
ARTICLE 3
REPRESENTATIONS OF THE PURCHASER
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
the Sellers will rely thereon, the Purchaser represents and warrants to the
Sellers the following (both as of the date hereof and as of the Closing Date):
3.1 DUE INCORPORATION AND QUALIFICATION. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Wyoming, and has the corporate power and lawful
authority to carry on its business as now being conducted.
3.2 CERTIFICATE OF INCORPORATION, BYLAWS AND MINUTES; CAPITAL
STRUCTURE. The Purchaser has heretofore delivered to the Sellers true and
complete copies of its and each of its Subsidiaries' Certificate of
Incorporation (certified by the Secretary of State of Wyoming) and their
Bylaws (certified by their corporate secretary) as in effect on the date
hereof. As of the date hereof, the authorized capital stock of Purchaser
consists of 6,000,000 shares of common stock and 3,000,000 shares of
preferred stock, of which 1,649,455 shares of common stock and no shares of
preferred stock are validly issued and outstanding, and are fully paid and
nonassessable. As of the date hereof and immediately after the Closing,
except as set forth on Schedule 10.19, (A) Purchaser is not and will not be a
party to or be bound by any contract, agreement or arrangement to issue or
sell any capital stock or any other security convertible into any capital
stock or other security of Purchaser (other than pursuant to this Agreement)
(B) there will not be any outstanding preemptive rights, rights of first
refusal, options, warrants or other rights to subscribe for or purchase or
contracts, agreements, or arrangements with respect to any capital stock or
other security of Purchaser authorized or not or any other security
convertible into any capital stock or any other security authorized or not of
Purchaser, and (C) Purchaser shall have no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein, or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding shares of
capital stock of Purchaser have been offered, issued and sold by Purchaser in
compliance with applicable federal and state securities laws. Except for
stock issued pursuant to outstanding options, no additional shares of
Purchaser's capital stock will be issued between the date hereof and the
Closing Date without the prior written consent of Sellers.
3.3 AUTHORITY OF THE PURCHASER. The Purchaser has full power and
authority to execute and deliver this Agreement and the Closing Documents and
to carry out the transactions contemplated hereby. The Purchaser is not
subject to, or a party to, any charter, bylaw, mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind
or character that is not typical of similar situated entities and that
materially, adversely affect the business, operation or condition of
Purchaser or would prevent consummation of the transactions contemplated by
this Agreement. The Closing Documents are valid and binding agreements of
the Purchaser, enforceable in accordance with their terms. No consent,
authorization or approval of, or declaration, filing or registration with, any
8
governmental or regulatory authority or any consent, authorization or
approval of any other third party is necessary in order to enable the
Purchaser to enter into and perform its obligations under the Closing
Documents, and neither the execution and delivery of the Closing Documents
nor the consummation of the transactions contemplated thereby will:
(a) Be in violation of its Certificate of Incorporation or Bylaws
or constitute a breach of any evidence of indebtedness or agreement to
which it is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of its property is subject or
under any contract to which it is a party, or permit the termination of
any such contract by another person;
(c) Result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon any of its property or assets under
any agreement or commitment to which it is bound;
(d) Accelerate, or constitute an event entitling, or which would,
upon notice or lapse of time or both, entitle the holder of any
indebtedness to accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any permit.
3.4 COMPLIANCE WITH LAWS. The Purchaser is not in violation of any
applicable order, judgment, injunction, award or decree.
3.5 RESTRICTIVE DOCUMENTS. The Purchaser is not subject to, or a party
to, any charter, bylaw, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which adversely
affects the business practices, operations or condition of the Purchaser or
any of its assets, or which would prevent consummation of the transactions
contemplated by this Agreement.
3.6 THE CLASS B COMMON STOCK. The Class B Common Stock to be issued to
the Sellers in accordance with Section 1.5, will be validly issued, fully
paid, non-assessable shares of Class B Common Stock.
3.7 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing that has been supplied by or on behalf of the Purchaser
in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact, or omits any statement of a material
fact necessary
9
in order to make the statements contained herein or therein not misleading.
There is no fact or circumstance known to the Purchaser that materially and
adversely affects or that may materially and adversely affect the
Purchaser, which has not been set forth in this Agreement, the Schedules,
Exhibits, certificates or statements furnished in writing to the Sellers in
connection with the transactions contemplated by this Agreement.
3.8 FINANCIAL STATEMENTS. Purchaser has provided Sellers with the
audited balance sheets of Purchaser and all of its subsidiaries as at March
31, 1994 and 1995 and audited statements of operations and cash flows for the
two years then ended (hereinafter, the "Purchaser Audited Financial
Statements") and an unaudited balance sheet of Purchaser as at June 30, 1995
and unaudited statements of operations and cash flows for the three months
then ended (hereinafter, the "Purchaser Unaudited Financial Statements.") The
Purchaser Audited and Unaudited Financial Statements are referred to
hereinafter collectively as the Purchaser Financial Statements. The Purchaser
Financial Statements are complete and accurate in all material respects. The
Purchaser Audited Financial Statements, including the footnotes thereto,
have been prepared in accordance with GAAP and present fairly the financial
position of Purchaser at the dates thereof and the results of its operations
and cash flows for the periods indicated. The Purchaser Audited Financial
Statements have been audited by Purchaser's independent certified public
accountants in accordance with generally accepted auditing standards.
3.9 TAX MATTERS. The Purchaser has paid all federal, state, county,
local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net income
(individually, a "Tax" and collectively, the "Taxes") required to be paid by
it through the date hereof, and all deficiencies or other additions to any
Tax, interest and penalties owed by them in connection with any Tax.
3.10 NO TAX LIENS. None of the assets of Purchaser is subject to any
lien in favor of the United States pursuant to Section 6321 of the Code for
nonpayment of federal taxes, or any lien in favor of any state under any
comparable provision of state law, under which transferee liability might be
imposed upon the Purchaser under Section 6323 of the Code or any comparable
provision of state or local law.
3.11 COMPLIANCE WITH LAWS; PERMITS. The Purchaser is not in violation
of any applicable order, judgment, injunction, award or decree relating to
its businesses. To the Purchaser's knowledge, the Purchasers are not in
violation of any federal, state, local or foreign law, ordinance or
regulation or any other requirement of any governmental or regulatory body,
court or arbitrator applicable to its assets, the violation of which would
have a material, adverse effect on such assets. The Purchaser holds all
permits that are material to or necessary for the conduct of its businesses
as now conducted. All Permits are in full force and effect and no proceeding
to revoke or limit any of such Permits is pending or, to the knowledge of the
Purchaser, threatened.
3.12 LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body
or arbitration tribunal against or involving Purchaser or its assets. There
are no actions or suits against the Purchaser or, to the knowledge of
10
the Purchaser, claims or investigations (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance) pending or, to
the knowledge of the Purchaser, threatened against or involving its assets.
Responsibility for any litigation involving the Purchaser Excluded Assets
pending prior to the Closing and the satisfaction of judgments (including
related costs and fees) shall remain with the Purchaser.
3.13 CONTRACTS AND OTHER AGREEMENTS. With respect to each material
contract under which the Purchaser is obligated, neither the Purchaser nor
any other party to each such contract is in default nor has any default been
asserted by any party, and there has not occurred any event which, with the
passage of time or giving of notice, or both, would constitute such default
or permit termination, modification or acceleration of such contract.
3.14 LIABILITIES. Except as otherwise set forth in this Agreement or
any Schedule hereto, neither the Purchaser nor its wholly-owned subsidiary,
Metro Minerals Corporation, has any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
known or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise which has of could have a material adverse effect on either of such
entity's business or its assets.
3.15 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
3.16 INDEPENDENT INVESTIGATION. Purchaser acknowledges that it has
conducted its independent review and analysis of the Assets and has not
relied upon Sellers or any representation of Sellers, other than as
explicitly set forth in this Agreement, concerning the amount or value of
reserves attributable to the Assets or the condition of any property included
in the Assets.
3.17 SUBSIDIARIES. There are no subsidiaries of Purchaser other than as
described in its most recent form 10-K filed with the Securities and Exchange
Commission.
11
ARTICLE 4
TITLE PROCEDURES AND OTHER MATTERS
4.1 TITLE PROCEDURES. If any of the information or material supplied by
Sellers to Purchaser pursuant to this Agreement or any other information or
data reflects the existence of any encumbrance, encroachment, defect in or
objection to title, other than those set forth in the Schedules attached
hereto, that render title to the Assets or any portion thereof less than good
and defensible (collectively, "Title Defects"), written notice of the Title
Defects shall be given to Sellers at least 15 days before the scheduled
Closing Date. If Title Defects shall be so specified, Sellers shall use their
reasonable efforts to cure or remove the Title Defects at the expense of
Sellers. If the Title Defects are not cured or removed at or prior to the
Closing, Purchaser may elect in writing to:
(a) Grant a further period or periods of time (up to an additional
30 days) within which Sellers may cure or remove the Title Defects;
(b) Terminate this Agreement; or
(c) Proceed with the Closing, provided, however, that completion of
the Closing shall operate as a waiver by Purchaser of any Title Defects.
4.2 ENGINEERING AND ACCOUNTING MATTERS. Purchaser shall have 10 days
from the date on which Sellers have completed and delivered to Purchaser
Sellers' accounting and engineering audits and reports (collectively the
"Reports") in which to review the Reports and provide Sellers with notice of
any alleged deficiencies (the "Deficiencies") therein. If any Deficiencies
are so specified, Sellers shall have the option, at their expense, to remedy
such Deficiencies. If the deficiencies are not remedied to Purchaser's
reasonable satisfaction within 30 days after the date hereof, then Purchaser
may elect to terminate this Agreement by providing written notice of such
election to Sellers.
4.3 SELLERS' REVIEW OF PURCHASER'S CORPORATE RECORDS. For a period of
two weeks following the date of this Agreement, Sellers shall have the right
to review all records of Purchaser. If any of the information or material so
reviewed reflects the existence of any liability, indebtedness, claim, loss,
damage, deficiency, obligation or responsibility accrued, absolute,
contingent or otherwise which has not been previously disclosed to Sellers,
then Sellers may at their option provide Purchaser with a notice of such
matter and Purchaser shall have ten days in which to cure or remove such
matter. In the event that Purchaser is unable to cure or remove such matter,
then Sellers may elect in writing to:
(a) grant a further period or periods of time (up to an additional
30 days) within which Purchaser may cure or remove such matter;
(b) terminate this Agreement; or
12
(c) proceed with the Closing, provided, however, that completion of
the Closing shall operate as a waiver by Sellers of any such matter.
ARTICLE 5
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and
the Closing Date:
5.1 CONDUCT OF BUSINESS. The parties shall conduct their respective
businesses in the ordinary course and in such a manner so that the
representations and warranties contained in Articles 2 and 3 shall continue
to be true and correct on and as of the Closing Date as if made on and as of
the Closing Date.
5.2 NOTICE OF EVENTS. Each party shall promptly notify the other party
of (a) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of this
Agreement, or (b) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule, Exhibit or
statement delivered hereunder, had such event, occurrence, transaction or
item existed on the date hereof, other than items arising in the ordinary
course of business which would not render any of the representations,
warranties or other agreements of the notifying party misleading.
5.3 EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing Date, each
party shall be entitled, through its employees, agents, counsel, accountants
and other representatives, and such party's lenders, to make such
investigation of the assets, properties, business and operations of the other
party's businesses, and such examination of the books, records and financial
condition of the other party's businesses as the examining party wishes. If
this Agreement terminates (a) each party shall keep confidential and shall
not use in any manner any information or documents obtained from the other
party, unless readily ascertainable from public or published information, or
trade sources, or subsequently developed by the examining party, or received
from a third party not under an obligation to the other party to keep such
information confidential, and (b) any documents obtained from the other party
shall be promptly returned to it. Without limiting the foregoing, Sellers
agree to make available to Purchaser all title opinions, abstracts, status
reports and other title data relating to the Assets.
5.4 PURCHASER SHAREHOLDER MEETING. Prior to the Closing Date, the Board
of Directors of the Purchaser shall prepare proxy materials (the "Proxy
Materials") and give notice of and convene a special meeting of shareholders
(the "Special Shareholders Meeting") for the purpose of: (1) approving this
Agreement and the transactions contemplated hereby; (2) approving an
amendment to the Purchaser's Articles of Incorporation (the "Articles of
Amendment") to (a) change the Purchaser's name to American Rivers Oil
Company, Inc.; (b) increase the number of authorized shares of the
Purchaser's Common Stock and Preferred Stock and authorize shares of Class B
Common Stock in amounts and containing terms so as to allow
13
the consummation of the transactions contemplated hereby; and (3) approving
an increase in the number of shares of the Purchaser's Common Stock covered
by the Purchaser's 1992 Incentive Stock Option Plan to an amount equal to
five percent of the issued and outstanding capital stock of Purchaser. All
such actions and communications shall be taken and given in compliance with
all laws, rules and regulations applicable to Purchaser.
The Sellers shall cooperate with the Purchaser in the preparation and
processing of the Proxy Materials in all reasonable respects as requested by
the Purchaser and will furnish in writing to the Purchaser the information
relating to the Sellers which is required to be set forth therein. Sellers
shall pay one-half of Purchaser's reasonable expenses in printing and mailing
the Proxy Materials. If at any time prior to the Closing, any event should
occur relating to the Sellers which is required to be set forth in an
amendment of or supplement to the Proxy Materials, such party shall promptly
inform the Purchaser and shall furnish all necessary information with respect
thereto to the Purchaser.
Purchaser agrees to recommend to its shareholders that they approve all
of the items specified above in this Section 5.4. Robert E. Thrailkill, John
A. Alsko and Robert J. Thrailkill join in this agreement for the purposes of
agreeing to support and recommend such items to Purchaser's shareholders and
agree to vote their stock in Purchaser in favor of such proposals.
5.5 STAND-STILL AGREEMENT. From and after the date hereof and up to and
including the Closing or the termination of this Agreement, the parties agree
to conduct their respective businesses in the ordinary course and agree that
during such period each shall have the exclusive right to negotiate with the
other with respect to the Assets and stock that are the subject of this
Agreement, and during such period each party agrees not to directly or
through intermediaries solicit, entertain or otherwise discuss with any
person or entity any offers to purchase or otherwise acquire any or all of
the Assets or such stock. Should any party be in violation of this provision,
that party shall be liable on an accountable basis to the other parties for
their expense, including time of their personnel, reasonably incurred in
connection with the negotiation and preparation of this Agreement, together
with reasonable attorney fees for collection.
5.6 PURCHASER'S EFFORTS TO CLOSE.
(a) Purchaser shall use its best efforts to take or cause to be
taken all such actions as may be necessary or advisable to consummate and
make effective the purchase of the Assets and the transactions contemplated
by this Agreement and to assure that as of the Closing Date it will not be
under any material corporate, legal or contractual restriction that would
prohibit or delay the timely consummation of such transactions.
(b) Purchaser shall cause all the representations and warranties
of Purchaser contained in this Agreement to be true and correct on and as of
the Closing Date. To the extent the conditions precedent to the obligations
of Sellers are within the control of Purchaser, Purchaser shall cause such
conditions to be satisfied on or prior to the Closing Date and, to the extent
the conditions precedent to the obligations of Sellers are not within the
control
14
of Purchaser, Purchaser shall use its best efforts to cause such conditions
to be satisfied on or prior to the Closing Date.
5.7 SELLERS' EFFORTS TO CLOSE.
(a) Sellers shall use their best efforts to take or cause to be
taken all such actions as may be necessary or advisable to consummate and
make effective the sale of the Assets and the transactions contemplated by
this Agreement and to assure that as of the Closing Date they will not be
under any material corporate, legal or contractual restriction that would
prohibit or delay the timely consummation of such transactions.
(b) Sellers shall cause all the representations and warranties of
Sellers contained in this Agreement to be true and correct on and as of the
Closing Date. To the extent the conditions precedent to the obligations of
Purchaser are within the control of Sellers, Sellers shall cause such
conditions to be satisfied on or prior to the Closing Date and, to the extent
the conditions precedent to the obligations of Purchaser are not within the
control of Sellers, Sellers shall use their best efforts to cause such
conditions to be satisfied on or prior to the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to enter into and to complete the
transactions contemplated by this Agreement is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Purchaser only in writing:
6.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of the Sellers contained in
this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Sellers
shall have performed and complied with all covenants and agreements required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date. The Sellers shall have delivered to the Purchaser certificates,
dated the Closing Date, to such effect.
6.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of
the transactions which are the subject of this Agreement shall have been
obtained.
6.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts or other agreements with the Sellers that may be
required in connection with the performance by the Sellers of their
respective obligations under this Agreement or the continuance of such
contracts or other agreements without material modification after the Closing
Date shall have been obtained. The Purchaser also shall have received all
required waivers or consents under any
15
material debt instrument or other material agreement to which any of the
Sellers is a party or by which any of them is bound.
6.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement
or to seek damages or a discovery order in connection with such
transactions, or that has or could reasonably be expected to have, in the
opinion of the Purchaser, a materially adverse effect on the Assets.
6.5 TRANSFER DOCUMENTS. The Purchaser shall have received assignments
and such other instruments of sale, transfer, conveyance and assignment
transferring all of the Assets from the Sellers.
6.6 CERTIFICATES, ETC. OF KTOC. KTOC shall have delivered all certified
resolutions, certificates, documents or instruments with respect to KTOC's
authority and such other matters as the Purchaser's counsel may have
reasonably requested prior to the Closing Date.
6.7 ADEQUATE FINANCIAL STATEMENTS. The Sellers shall have supplied to
the Purchaser the Financial Statements and pro forma financial statements
adequate to comply with the requirements of Items 7(a) and 7(b) of Form 8-K
under the Exchange Act and Section 10(a)(3) of the Securities Act and shall
demonstrate an ability to supply other financial statements as such may
become necessary to comply with the requirements of the Exchange Act.
6.8 PURCHASER SHAREHOLDER APPROVAL. The Purchaser's Special
Shareholders Meeting shall have been held and all matters listed in Section
5.4 shall have been approved.
6.9 APPROVAL OF COUNSEL. All actions and proceedings hereunder and
all documents and other papers to be delivered by the Sellers hereunder or in
connection with the consummation or the transactions contemplated hereby, and
all other related matters shall have been approved by counsel to Purchaser,
as to their form.
6.10 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
operation, condition, or value if the Assets shall have occurred since the
date hereof.
6.11 ASSET OPTIONS. The Asset Options shall have been duly exercised,
which exercise may be achieved as provided in Section 10.21.
16
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLERS TO CLOSE
The obligation of the Sellers to enter into and to complete the
transactions contemplated by this Agreement is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Sellers only in writing:
7.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of the Purchaser contained
in this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Purchaser
shall have performed and complied with all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date. The Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date, to such effect.
7.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of
the transactions which are the subject of this Agreement shall have been
obtained.
7.3 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement,
or to seek damages or a discovery order in connection with such transactions,
or that has or could reasonably be expected to have, in the opinion of the
Sellers, a materially adverse effect on the assets, properties, businesses,
operations or financial condition of the Purchaser.
7.4 TAX TREATMENT. Sellers shall be satisfied, in their reasonable
judgment, that the transaction contemplated hereby will qualify as a
nontaxable event pursuant to Section 351 of the Code.
7.5 OPERATING AND MANAGEMENT AGREEMENTS. The Purchaser and the
Purchaser's Subsidiary shall have entered into the Operating and Management
Agreements substantially in the forms attached as Exhibits C and D, and
Sellers hereby approve of such agreements.
7.6 PURCHASER'S SHAREHOLDER APPROVAL. The Purchaser's Special Meeting
of Shareholders shall have been held and all matters listed in Section 5.4
shall have been approved.
7.7 TRANSFER TO SUBSIDIARY. The Purchaser shall have transferred to
the Subsidiary the Purchaser Excluded Assets as provided for in Section 1.4
hereof, and Sellers hereby approve of such transfer.
7.8 CERTIFICATES, ETC. OF PURCHASER. Purchaser shall have delivered
all certified resolutions, certificates, documents or instruments with
respect to Purchaser's authority and such other matters as Seller's counsel
may have reasonably requested prior to the Closing Date.
17
7.9 APPROVAL OF COUNSEL. All actions and proceedings hereunder and all
documents and other papers to be delivered by the Purchaser hereunder or in
connection with the consummation or the transactions contemplated hereby, and
all other related matters shall have been approved by counsel to Sellers, as
to their form.
7.10 NO MATERIAL ADVERSE CHANGE. There shall have occurred no material
adverse change in the operation, value or condition of Purchaser.
ARTICLE 8
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall
be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
8.1 TRANSFER DOCUMENTS. The Sellers shall deliver duly executed
transfer documents and/or instruments of assignment in accordance with
Section 6.5.
8.2 THE CLASS B COMMON STOCK. The Purchaser shall deliver to the
Sellers certificates representing the Class B Common Stock in accordance with
the terms of Section 1.5. The Sellers shall deliver to the Purchaser
executed investment letters.
8.3 ITEMS RELATING TO LEGENDS. The Purchaser and Sellers shall take
those actions described in Section 10.19 relating to resignations, opinion of
counsel and instruction letter to transfer agent.
8.4 OPERATING AND MANAGEMENT AGREEMENTS. The Purchaser shall deliver
the executed Operating and Management Agreements
8.5 CLOSING CERTIFICATES OF THE SELLERS. The Sellers shall deliver to
the Purchaser closing certificates as required by Section 6.1, dated the
Closing Date, in a form satisfactory to the Purchaser.
8.6 CLOSING CERTIFICATE OF THE PURCHASER. The Purchaser shall deliver
to the Sellers a closing certificate as required by Section 7.1, dated the
Closing Date, in a form satisfactory to the Sellers.
8.7 CERTIFICATE REGARDING RESOLUTIONS OF KTOC. KTOC shall deliver to
the Purchaser copies of resolutions certified as required by Section 6.6.
8.8 CERTIFICATE REGARDING RESOLUTIONS OF PURCHASER. Purchaser shall
deliver to Sellers copies of resolutions certified as required by Section 7.8.
18
8.9 OPINION OF SELLERS' COUNSEL. The Sellers shall deliver an opinion
of their counsel in form and substance satisfactory to the Purchaser.
8.10 OPINION OF PURCHASER'S COUNSEL. The Purchaser shall deliver an
opinion of its counsel in form and substance satisfactory to the Sellers.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement
shall survive the Closing for a period of two years after the Closing Date
with the exception of Sections 2.6 and 3.9, which shall survive for a period
of time which is equal to the statute of limitations period applicable to the
respective Tax liability being asserted.
9.2 INDEMNITY AGREEMENTS OF THE SELLERS. The Sellers shall indemnify,
defend, reimburse and hold harmless the Purchaser from and against any and
all claims, demands, penalties, fines, liabilities, obligations, losses,
settlements, damages, costs and expenses resulting from:
(i) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of the
Sellers contained in this Agreement, or
(ii) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the Sellers contained in any other
agreement, certificate or other instrument furnished or to be
furnished to the Purchaser by the Sellers pursuant to this Agreement.
(iii) all costs, expenses, claims and liabilities relating to
the operation of the Assets for periods of time prior to the Closing
Date;
(iv) any of the matters set forth in SCHEDULE 2.9;
(v) the violation or alleged violation by the Sellers of any
Environmental Laws (as hereinafter defined), or any orders,
requirements or demands of any governmental authorities related
thereto, resulting from events or circumstances occurring on or
before the Closing Date; and
(vi) fees and disbursement of counsel incident to any of the
foregoing.
For purposes of this Agreement, "Environmental Laws" shall mean any and
all federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or requirements of any governmental
authority regulating, relating to or imposing liability or standards
19
of conduct concerning environmental protection matters, including all
requirements pertaining to reporting, licensing, permitting, investigation,
removal or remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials (as hereinafter defined), chemical
substances, pollutants or contaminants or relating to the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials, chemical substances,
pollutants or contaminants.
For purposes of this Agreement, "Hazardous Materials" shall mean any
substance (i) the presence of which requires investigation, removal or
remediation under any federal, state or local statute, regulation, rule,
ordinance, order, action, policy or common law, (ii) which is or becomes
defined as a "hazardous substance," "hazardous material," "pollutant" or
"contaminant" under any federal, state or local statute, regulation, rule or
ordinance or any amendments thereto, and/or (iii) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is or becomes regulated by any governmental authority.
9.3 INDEMNITY AGREEMENT OF THE PURCHASER. The Purchaser shall
indemnify, defend, reimburse and hold harmless the Sellers from and against
any and all claims, demands, penalties, fines, liabilities, obligations,
losses, settlements, damages, costs and expenses resulting from:
(i) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of the Purchaser
contained in this Agreement;
(ii) the transfer or operation of the Purchaser Excluded
Assets;
(iii) claims made by the holders of Purchaser's Common Stock
related to the operation or management or any other issue regarding
the Subsidiary; or
(iv) the violation or alleged violation by the Purchaser or
Metro Minerals Corporation of any Environmental Laws, or any orders,
requirements or demands of any governmental authorities related thereto,
resulting from events or circumstances occurring on or before the
Closing Date;
(v) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the Purchaser, contained in any other
agreement, certificate or other instrument furnished or to be furnished
to the Sellers by the Purchaser pursuant to this Agreement.
(vi) any liability specifically assumed by the Purchaser; and
(vii) fees and disbursement of counsel incident to any of the
foregoing.
20
9.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE. The party seeking
indemnification under this Article 9 shall give the party from whom
indemnification is sought prompt written notice of the assertion of any third
party claim of which said party has knowledge which is covered by the
indemnity agreements set forth in Section 9.2 or Section 9.3 and the party
obligated to indemnify will undertake the defense thereof by representatives
chosen by the party seeking indemnification but acceptable to the party
obligated to indemnify. If the party obligated to indemnify, within a
reasonable period of time after notice of any such claim fails to defend, the
party seeking indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the party obligated to indemnify, subject to the right of the party
obligated to indemnify to assume the defense of such claim at any time prior
to settlement, compromise or final determination thereof. Anything in this
Section 9.4 to the contrary notwithstanding, if there is a reasonable
probability that a claim may adversely affect the party seeking
indemnification, other than as a result of money damages or other payments,
the party seeking indemnification shall have the right, at the cost and
expense of the party obligated to indemnify, to defend, compromise or settle
such claim.
(b) PAYMENT OF SUMS DUE. After any final judgment or award shall
have been rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been consummated, or the
parties shall have arrived at a mutually binding agreement, with respect to
each separate third party claim indemnified by the party obligated to
indemnify, the party seeking indemnification shall forward to the party
obligated to indemnify notice of any sums due and owing by the party seeking
indemnification with respect to such claim and the party obligated to
indemnify shall pay such sums to the party seeking indemnification in cash,
within 30 days after the date of such notice.
9.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties agrees
that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceeding, such parties shall meet in a timely
manner and attempt in good faith to negotiate a settlement of such dispute
during which time such parties shall disclose to the others all relevant
information relating to such dispute.
9.6 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 9, in the event of any dispute or controversy, the prevailing party
in such dispute shall, in addition to any other remedies the prevailing party
may obtain in such dispute, be entitled to recover from the other party all
of its reasonable legal fees and out-of-pocket costs incurred by such party
in enforcing or defending its rights hereunder.
21
ARTICLE 10
CERTAIN ADDITIONAL AGREEMENTS
10.1 PROCEEDS OF PRODUCTION; EXPENSES. Purchaser and Sellers shall
be entitled to the proceeds from the Assets as follows:
(a) Purchaser shall be entitled to receive all proceeds,
including without limitation proceeds of production, and shall be obligated
to bear all expenses attributable to the Assets after the Effective Time.
(b) Sellers shall be entitled to receive all proceeds, including
without limitation proceeds of production, and shall be obligated to bear all
expenses attributable to the Assets prior the Effective Time.
10.2 PUBLIC STATEMENTS. No party to this Agreement shall issue any
public statement or announcement concerning the transactions contemplated by
this Agreement without the prior consent of the other parties, except as
otherwise may be required by law.
10.3 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire
agreement of the parties with respect to the subject matter hereof, and may
not be modified, amended or terminated except by a written instrument
specifically referring to this Agreement signed by each of the parties hereto
or as otherwise provided in this Agreement.
10.4 CONSTRUCTION. In the event of an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The parties
intend that the each representation, warranty and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating
to the same subject matter, regardless of the relative levels of specificity,
which the party has not breached shall not detract from or mitigate the fact
that the party is in breach of the first representation, warranty or covenant.
10.5 WAIVERS AND CONSENTS. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed
a waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
10.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given only if and when (a)
personally delivered, or (b) three business
22
days after mailing, postage prepaid, by certified mail, or (c) when delivered
(and receipted for) by an overnight delivery service, addressed in each case
as follows:
(i) If to the Sellers, to:
Karlton Terry, President
Karlton Terry Oil Company
700 East 9th Avenue, Suite 106
Denver, Colorado 80203
FAX NO. (303) 832-2404
with a copy to:
William R. Roberts, Esq.
Holme Roberts & Owen LLC
1401 Pearl Street, Suite 400
Boulder, Colorado 80202
FAX NO. (303) 444-1063
(ii) If to the Purchaser, to:
Robert E. Thrailkill, President
Metro Capital Corporation
716 College View Drive
Riverton, Wyoming 82501
FAX NO. (307) 856-1851
with a copy to:
A. Thomas Tenenbaum, Esq.
Brenman Key & Bromberg, P.C.
1775 Sherman Street, Suite 1001
Denver, Colorado 80203
FAX NO. (303) 839-1633
Any party to this Agreement may change the address for the giving of notices
and communications to it or him, and/or copies thereof, by written notice to
the other parties in conformity with the foregoing.
10.7 FURTHER ASSURANCES. From and after the date of this Agreement,
each of the parties hereto will cooperate with each other and will use its or
his best efforts to obtain all necessary waivers and consents from third
parties. The Sellers, at any time and from time to time on and after the
Closing, upon request by the Purchaser and without further consideration,
shall take or cause to be taken such actions and execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such transfers,
conveyances and assurances as may be required or desirable for the
23
better conveying, transferring, assigning, delivering, assuring and
confirming the Assets to the Purchaser.
10.8 RIGHTS OF THIRD PARTIES. All conditions of the obligations of the
parties hereto, and all undertakings herein, except as otherwise provided by
a written consent, are solely and exclusively for the benefit of the parties
hereto and their successors and assigns, and no other person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms or be entitled to assume that any
party hereto will refuse to consummate the exchange contemplated hereby in
the absence of strict compliance with any or all thereof, and no other person
or entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole
or in part, by mutual consent of the parties hereto at any time, if in their
sole discretion they deem it desirable to do so.
10.9 HEADINGS. The Table of Contents and Article and Section
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
10.10 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Wyoming.
10.11 ARBITRATION.
(a) GENERAL. All disputes and claims arising in connection with this
Agreement shall be settled in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except as modified below, by a
panel of three arbitrators, one of whom will be selected by the Sellers, one
by the Purchaser and one mutually agreed to by the arbitrators selected by
the Sellers and the Purchaser. Initiation of an arbitration will not stay the
operation of this Agreement and the parties will continue to abide by their
respective obligations set forth herein. The parties will settle all accounts
based upon the results of said arbitration within 30 days of the conclusion
of the arbitration.
(b) LOCATION OF ARBITRATION. Any such arbitration shall take place in
Cheyenne, Wyoming.
(b) SERVICE OF PROCESS. Service of process in any such arbitration
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail) or delivery by
overnight courier, postage and/or fees prepaid.
(c) MODIFICATIONS TO THE ARBITRATION RULES. The provisions of the
Commercial Arbitration Rules of the American Arbitration Association which
shall apply to arbitrations hereunder are hereby modified as follows:
(1) Any demand for arbitration must be in writing and in no
event may be made after the date that institution of legal proceedings based
upon the claim made in the demand would be barred by the applicable statute
of limitations.
24
(2) The arbitrators' decision must be made within 45 days from
the date the arbitration proceedings are initiated and shall be binding on
the parties. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
(3) The prevailing party shall be awarded reasonable attorneys'
fees and expenses, and other costs and expenses incurred in connection with
the arbitration, unless the arbitrators for good cause determine otherwise.
(4) Costs and fees of the arbitrators shall be borne by the
nonprevailing party, unless the arbitrators for good cause determine
otherwise.
10.12 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by
operation of law or with the consent of the other parties. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.14 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.15 BULK SALES. The Purchaser hereby waives compliance by the
Sellers with the provisions of the Bulk Sales law of any state, if applicable
to the transfer of the Assets, and the Sellers agree to indemnify and hold
the Purchaser harmless from any liability, other than liabilities expressly
assumed by the Purchaser hereunder, incurred as a result of the failure to so
comply.
10.16 EXPENSES. Except as provided in Section 5.4 with respect to
certain of the expenses related to the Proxy Materials, each party shall pay
its own costs and expenses, including the fees and disbursements of its
respective counsel, in connection with the negotiation, preparation and
execution of the Agreement and the consummation of the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
10.17 BOOKS AND RECORDS. The files, books and records comprising a
portion of the Assets may be maintained after the Closing Date at the current
offices of KTOC, which may become the principal offices of Purchaser.
10.18 JOINDER BY SUBSIDIARY. The Subsidiary joins in this Agreement
for the purpose of guaranty, and does hereby jointly and severally guaranty,
all of the obligations of Purchaser hereunder, including without limitation
any and all indemnities and covenants of Purchaser in favor of Sellers. In
the event Sellers have any right to pursue indemnity from Purchaser, Sellers
may elect to pursue any such remedy against the Subsidiary without making any
claim against or pursuing any other remedy against Purchaser.
25
10.19 ISSUANCES OF SECURITIES. Schedule 10.19 describes securities of
Purchaser recently issued and to be issued pursuant to obligations of
Purchaser, and certain rights and obligations related to such securities. At
Closing Sellers will cause Purchaser to ratify such issuances and
obligations. Pursuant to Rule 144(k) promulgated under the Securities Act of
1993, as amended, Purchaser shall remove all restrictive legends from
certificates evidencing shares of Common Stock owned for more than three
years by Messrs. Robert E. Thrailkill, John A. Alsko, Gene E. York, John
Benesch and Robert J. Thrailkill (collectively the "Requesting Parties")
90 days after receipt of their resignations from their positions as officers
and directors of Purchaser, which resignations shall be delivered at Closing,
together with an opinion of counsel stating that (i) none of the Requesting
Parties is an "affiliate" of the Purchaser, as defined in Rule 144 and
(ii) the three-year holding period for each Requesting Party has been
satisfied. Also at Closing, Purchaser shall deliver to the Requesting Parties
instructions from Purchaser's new board of directors to Purchaser's transfer
agent directing the transfer agent to so remove such legends.
10.20 OBLIGATIONS OF SELLERS. Notwithstanding any other term or
provision hereof to the contrary the maximum liability of the Sellers to
Purchaser, the Subsidiary or any other party claiming by, through or under
either of them under this Agreement, or any other document or certificate
executed in connection herewith, shall be the value of their Restricted
Stock, as defined below. Until the date two years after the date hereof, or
such longer period as may be required as provided below (collectively the
"Restriction Period"), Sellers shall maintain their ownership of at least 39%
of the issued and outstanding shares (the "Restricted Shares") of the Class B
Common Stock received by Sellers, which shares shall bear a legend evidencing
the obligations and restrictions contained in this Section 10.20. Sellers
shall be allowed to transfer such Restricted Shares free and clear of such
restriction and the terms hereof during the Restriction Period only if they
substitute stock or other assets subject to such legend or other similar
restriction as may be reasonably requested by the management of the
Subsidiary and having a value not less than the lesser of the value of the
Restricted Securities or $4,000,000. For purposes of determining the value
of the Restricted Securities, each share of Restricted Securities shall be
deemed to have a value of 75% of the market value of a share of the
Purchaser's common stock. For purposes of this Section 10.20, the market
value of the share of Purchaser's common stock shall be determined by the
average bid and asked price for the previous 20 days of trading of such stock
prior to the date of valuation or, if there is no public market then
available for such stock, then the fair market value shall be determined by
the agreement of the parties. In the event that a claim is made against
Sellers under this agreement during the period allowed under Section 9.1,
then the Restriction Period shall be extended until such time as the claim is
finally resolved or satisfied.
10.21 ESCROW. Upon the election of either the Sellers or the
Purchaser, the Closing contemplated hereby shall take place into escrow with
Brenman Key & Bromberg, P.C. through its counsel, Tom Tenenbaum, Esq., acting
as escrow agent, pursuant to an agreement to be entered into promptly after
the date hereof containing the following described terms and such other terms
as the parties may agree. Such escrow agreement shall provide that the
transfer documents described in 8.1 above, the Class B Common Stock described
in 8.2 above, the Operating and Management Agreements and all the other
closing documents described in this Article 8 shall be placed into escrow.
In addition, the proceeds of the loan described in Section 1.4 and up to
500,000 shares of the Class B Common Stock described in Section 1.5 shall be
placed into escrow to be delivered by the escrow agent to the optionees under
the Asset Options. At such time as the escrow agent is satisfied that the
Asset Options have been duly and validly exercised, then the escrow agent
shall
26
close the escrow by delivering the relevant documents, funds and stock
certificates to the appropriate parties.
10.22 CHANGE OF OPERATOR. Sellers shall use all reasonable efforts to
enable Purchaser to take over as operator promptly after Closing each of
those Assets operated by any Seller on the date hereof. In the event any such
operation cannot be transferred, the Seller who remains as operator shall pay
to Purchaser any economic benefit of being operator net of such Seller's
actual costs of operating.
10.23 EMPLOYMENT AGREEMENTS. The Shareholders shall each enter into
Employment agreements with the Purchaser to be effective immediately after
the Closing and having terms of three years, providing for salaries of
$125,000 and $75,000, respectively for Karlton Terry and Jubal Terry, and
containing such other terms and conditions as the parties may agree.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"PURCHASER"
METRO CAPITAL CORPORATION
By /s/ Robert E. Thrailkill
_______________________________
Robert E. Thrailkill, President
"SELLER"
KARLTON TERRY OIL COMPANY
By /s/ Karlton Terry
______________________________
Karlton Terry, President
"SHAREHOLDERS" AND "SELLERS"
/s/ Karlton Terry
_________________________________
Karlton Terry
/s/ Karlton Terry
_________________________________
Jubal Terry by Karlton Terry
POA
27
Bishop Cable Communications Corporation
By: /s/ Robert E. Thrailkill
______________________________
The undersigned join in this Agreement solely for the purposes set
forth in Section 5.4.
/s/ Robert E. Thrailkill
_________________________________
Robert E. Thrailkill
/s/ John A. Alsko
_________________________________
John A. Alsko
/s/ Robert J. Thrailkill
_________________________________
Robert J. Thrailkill
28