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Exhibit 2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated July 26, 1995, by and among QUAKER STATE
CORPORATION (hereinafter referred to as "Quaker State"), QSE&P, INC.
(hereinafter referred to as "QSE&P"), a wholly-owned subsidiary of Quaker State
(said corporations being hereinafter referred to as "Sellers"), and BELDEN &
BLAKE CORPORATION (hereinafter referred to as "Buyer").
WITNESSETH THAT:
WHEREAS, Sellers own oil and gas properties and related assets
primarily located in the Appalachian Basin including working, royalty and
overriding royalty interests in oil and gas wells, natural gas gathering
systems, gas storage rights, undeveloped oil and gas leases and fee mineral
interests, vehicles and oilfield equipment and supplies and other assets, and
WHEREAS, Quaker State or QSE&P is the general partner or
managing general partner of the limited and general partnerships listed in
Annex A (the "Partnerships") which own working interests or production payment
interests in certain oil and gas wells, including Quaker State 1990-1 Drilling
Fund, L.P., Quaker State 1992-1 Drilling Fund, L.P. and Quaker State 1994-1
Drilling Fund, L.P. (such Drilling Funds collectively, the "Drilling
Partnerships"), and Quaker State 1990-2 Gas Production Fund, L.P., Quaker State
1992-2 Gas Production Fund, L.P. and Quaker State 1994-2 Gas Production Fund,
L.P. (such Gas Production Funds collectively, the "Production Partnerships"),
and
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WHEREAS, as general partner or managing general partner,
Quaker State or QSE&P has the power and authority to sell any or all of the
properties and assets of five of the Partnerships, namely Quaker State 1986-1
Drilling Fund, L.P., Quaker State 1986-2 Drilling Fund, L.P., Quaker State
1987-1 Drilling Fund, L.P., Quaker State 1988-1 Drilling Fund, L.P., and Quaker
State 1989-1 Drilling Fund, L.P. (said Partnerships being hereinafter referred
to as the "Selling Drilling Funds"), and
WHEREAS, Quaker State or QSE&P acts as operator of the oil and
gas wells of each of the Partnerships under operating agreements with the
Partnerships and as operator of certain other oil and gas wells in which third
parties own working interests under joint operating agreements with such
working interest owners, and
WHEREAS, Sellers desire to sell, assign and transfer, or cause
to be sold, assigned and transferred, to Buyer, and Buyer desires to purchase
and acquire from Sellers and the Selling Drilling Funds, certain properties,
assets and rights of Sellers, including the rights and obligations of Sellers
under the said operating agreements and joint operating agreements, and certain
properties and assets of the Selling Drilling Funds, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein and of the mutual benefits to be
derived hereby, the parties hereto have agreed and, by these presents, do
hereby agree as follows:
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ARTICLE I
PURCHASE AND SALE
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1.1 AGREEMENT TO SELL AND PURCHASE. Upon the terms and subject to
the conditions herein set forth, on the Closing Date (as defined in Section
7.1) Sellers shall sell, convey and assign (or cause to be sold, conveyed and
assigned) to Buyer, and Buyer shall purchase and acquire, the Assets (as
defined in Section 1.2) and the right to receive the Production Payment and the
Partnership Revenue Interests pursuant to Section 1.4, for the price of
Fifty-Five Million Seven Hundred Thirty-Three Thousand Nine Hundred Fourteen
Dollars ($55,733.914.00) (the "Purchase Price"), adjusted as provided in
Section 7.2 (as so adjusted, the "Adjusted Purchase Price"), and Buyer shall
assume the Assumed Obligations as provided in Section 1.6.
1.2 ASSETS. The term "Assets" means the following assets of
Sellers and the Selling Drilling Funds described in paragraphs (a) through (h)
of this Section 1.2 (except to the extent that any of the following are
Excluded Assets as defined in Section 1.3):
(a) PRODUCING PROPERTIES. All the right, title and interest of
Sellers and the Selling Drilling Funds in and to (i) the active and registered
inactive oil and gas wells (the "Wells") listed in Schedule 1.2(a)(i) of the
Disclosure Schedule to be delivered after the date hereof to Buyer by Sellers
and initialed by the parties (the "Disclosure Schedule") and all tangible
personal property and fixtures directly associated with the Wells or primarily
used in the operation thereof or the production, treatment, processing, storage
or gathering of oil, gas or other hydrocarbons therefrom, including all pumping
units, engines, motors and electric lines, casing, tubing, rods, pumps,
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above ground tanks, separators, meters, valves, compressors, sales lines, flow
lines, connections and lateral lines and other ancillary equipment used
primarily in the operation of the Wells; (ii) all oil and gas leases listed in
Schedule 1.2(a)(ii) of the Disclosure Schedule embracing real property on which
the Wells are located (the "Leases") and the related unitization,
communitization and pooling agreements listed therein, together with all
working, royalty, overriding royalty and other interests of Sellers and the
Selling Drilling Funds in the Leases or such real property or attributable to
production therefrom; (iii) the fee oil and gas interests associated with the
Wells that are described in Schedule 1.2(a)(iii) of the Disclosure Schedule;
and (iv) all easements, rights-of-way, licenses and roads necessary for the
operation of the Wells or the production, storage, collection or gathering of
oil, gas or other hydrocarbons therefrom that are described in Schedule
1.2(a)(iv) of the Disclosure Schedule (collectively, the "Producing
Properties").
(b) GAS GATHERING SYSTEMS. All of Sellers' right, title and
interest in and to the gas gathering systems described below (the "Gas
Gathering Systems"), together with all rights-of-way, easements, licenses,
meter site agreements and compressor site agreements covering real property on
which the Gas Gathering Systems are located, and all pipes, valves, meters,
compressors and compression facilities directly associated with the operating
thereof:
(i) the QSE&P gas gathering system
located in parts of Warren, Venago
and Crawford Counties, Pennsylvania,
the approximate location and route
of which is shown in Schedule
1.2(b)(i) of the Disclosure
Schedule;
(ii) the Stage Coach gas gathering system
located in parts of Tioga County,
New York and Bradford County,
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Pennsylvania, the approximate
location and route of which is shown
in Schedule 1.2(b)(ii) of the
Disclosure Schedule;
(iii) the Braxton County gas gathering
system located in parts of Braxton
and Nicholas Counties, West
Virginia, the approximate location
and route of which is shown in
Schedule 1.2(b)(iii) of the
Disclosure Schedule; and
(iv) the Pettet gas gathering system
located in parts of Morgan and Perry
Counties, Ohio, the approximate
location and route of which is shown
in Schedule 1.2(b)(iv) of the
Disclosure Schedule.
(c) OPERATING RIGHTS. All the right, title and interest of
Sellers in, to and under the operating agreements and joint operating
agreements relating to oil and gas exploration and production that are listed
in Schedule 1.2(c) of the Disclosure Schedule (the "Operating Agreements") and
to the contract administrative and operating fees chargeable to third parties
thereunder by Sellers (the "Operating Rights").
(d) UNDEVELOPED ACREAGE. All the right, title and interest of
Sellers in and to all undeveloped oil and gas leases held by primary term
listed in Schedule 1.2(d) of the Disclosure Schedule (the "Undeveloped
Leases"), and all subsurface fee mineral interests associated with Sellers' oil
and gas operations wherever located described in Schedule 1.2(d) of the
Disclosure Schedule (the "Undeveloped Acreage").
(e) GAS STORAGE RIGHTS. All of the natural gas storage rights of
Sellers in the Stage Coach Field in Tioga County, New York and Bradford County,
Pennsylvania, and all the right, title and interest of Sellers in the wells and
leases associated therewith listed in Schedule 1.2(e) of the Disclosure
Schedule (the "Gas Storage Rights").
(f) NON-OPERATED ROYALTIES AND OVERRIDING ROYALTIES. All royalty
and overriding royalty interests of Sellers in and under the oil and gas leases
listed in
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Schedule 1.2(f) of the Disclosure Schedule and in the wells operated
by third parties listed in Schedule 1.2(f) of the Disclosure Schedule located
on the real property covered by such leases (the "Non-Operated Royalty
Interests").
(g) MISCELLANEOUS ASSETS. All of the right, title and interest of
Sellers in and to the other tangible assets and properties that are primarily
used in the business of the Natural Gas Exploration and Production division of
Sellers (other than the Excluded Assets as defined in Section 1.3) including,
but not limited to, the following: (i) the district offices located in
Pleasantville, Pennsylvania and Belpre, Ohio and all tangible personal property
located therein, including furniture, computers and related software, technical
data (including seismic, geological and geophysical data) and office machines;
(ii) the field offices, equipment yards, garages and shops listed and described
in Schedule 1.2(g)(ii) of the Disclosure Schedule and all tangible personal
property located therein, including the property listed in Schedule 1.2(g)(ii)
of the Disclosure Schedule; (iii) the licensed and unlicensed vehicles,
trailers and tractors owned or leased by Sellers listed in Schedule 1.2(g)(iii)
of the Disclosure Schedule; and (iv) all new and used oilfield supplies and
equipment carried in inventory, including, but not limited to, casing, tubing,
rods, line pipe, pumping units, tanks, separators, meters, valves, wellheads,
gas engines, frac tanks, test tanks, frac valves, gas compressors and other
inventory items shown on the Inventory List as of December 31, 1994, furnished
to Buyer by Sellers, except for items removed from inventory since that date
(the "Miscellaneous Assets").
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(h) RECORDS. All files, records or data owned by or in the
possession of either of the Sellers primarily relating to or necessary for the
operation of the Assets, including all land, lease, division and transfer
order, prospect and title files and records, geological and production records,
engineering records and data, logs, core data, pressure data and other related
data and records, other than tax returns, related work papers and other related
documents and records, (the "Records"), and copies of all files, records and
data owned by or in the possession of either of the Sellers primarily relating
to the Partnerships and necessary for the operation of the Assets, including
copies of Partnership tax returns, related work papers and other related
documents and records to the extent necessary to permit Buyer to prepare
Partnership tax returns following the Closing.
1.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary in
Section 1.2, Sellers or the Selling Drilling Funds will retain and not
transfer, and Buyer will not purchase or acquire, the following assets
(collectively, the "Excluded Assets"):
(a) any surface properties other than (i) those appurtenant to the
district offices, field offices, equipment yards, garages and shops referred to
in Section 1.2(g) hereof and (ii) the easements, rights-of-way, roads and
licenses necessary for the operation and maintenance of the Wells and the
production of oil and gas therefrom and the operation and maintenance of the
Gas Gathering Systems;
(b) any properties or assets excluded from the sale pursuant to
the provisions of Section 5.1 hereof for so long as the same shall be so
excluded;
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(c) any properties or assets sold or otherwise disposed of by
Sellers or the Selling Drilling Funds prior to the Closing Date to the extent
permitted by Section 4.1(a) hereof;
(d) any of the interests of Sellers in the natural gas gathering
system commonly referred to as the "Bonanza Pipeline" located in Ohio and
operated by MB Operating Co. or in the oil and gas wells operated by MB
Operating Co.;
(e) the partnership interests of Sellers in the Partnerships as
shown in Annex A to the Disclosure Schedule, the interests of Sellers in the
oil and gas wells associated with the Partnerships as described in Section
1.3(e) of the Disclosure Schedule, and the leasehold interests and fee oil and
gas interests of Sellers associated with the Partnerships as described in
Section 1.3(e) of the Disclosure Schedule;
(f) the working or other interests of Sellers in the oil and gas
wells listed in Schedule 1.3(f) of the Disclosure Schedule (the "Section 29
Wells") which qualify for tax credits under Section 29 of the Internal Revenue
Code, as amended (the "Code"), and the oil and gas leases embracing lands on
which the Section 29 Wells are located (the "Section 29 Leases"), and the fee
oil and gas interests associated with the Section 29 Wells that are described
in Schedule 1.3(f) of the Disclosure Schedule; and
(g) the assets, if any, described in Schedule 1.3(g) of the
Disclosure Schedule.
1.4 ASSIGNMENT OF CERTAIN INTERESTS IN CERTAIN EXCLUDED ASSETS.
(a) SECTION 29 WELLS. On the Closing Date, Sellers shall,
pursuant to one or more agreements or instruments in form and substance
mutually satisfactory to Sellers
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and Buyer, (i) convey to Buyer a production payment in each of the Section 29
Wells consisting of a right entitling Buyer to receive an amount equal to
99% of the net proceeds of production attributable to the interests of Sellers
in the Section 29 Wells during the period from the Closing Date through
December 31, 2002 (the "Production Payment") and (ii) grant to Buyer an option
to purchase on April 1, 2003 all the right, title and interest of Sellers in
the Section 29 Wells and the Section 29 Leases for a price equal to the then
fair market value of the Section 29 Wells and Section 29 Leases as determined
by mutual agreement of the parties, or if they are unable to agree, as
determined by an independent third party jointly selected by Sellers and Buyer.
(b) PARTNERSHIPS. On the Closing Date, (i) each of the Sellers
shall assign to Buyer the right to receive an amount equal to 99% of the
profits and distributions (net of losses before depreciation, depletion,
amortization and other non-cash expenses) allocable to such Seller when paid to
such Seller as general partner or managing general partner of each of the
Drilling Partnerships and the Production Partnerships of which such Seller is a
general partner or managing general partner (the "Partnership Revenue
Interests") during the period from the Closing Date through the date of
termination of the relevant Partnership or (in the case of the Drilling
Partnerships) if earlier, December 31, 2005 in the case of Quaker State 1990-1
Drilling Fund, L.P. December 31, 2007 in the case of Quaker State 1992-1
Drilling Fund, L.P. or December 31, 2009 in the case of Quaker State 1994-1
Drilling Fund, L.P. and (ii) Buyer shall agree to pay to each Seller an amount
equal to 99% of the losses before depreciation, depletion, amortization and
other non-cash expenses (net of profits and
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distributions) allocable to such Seller plus 99% of the other liabilities and
obligations incurred by such Seller (when payable by such Seller) as general
partner or managing general partner of such Partnership, in each case pursuant
to an agreement in form and substance mutually satisfactory to Sellers and
Buyer. On the Closing Date, Sellers shall grant (or cause to be
granted) to Buyer an option, pursuant to an agreement in form and substance
mutually satisfactory to Sellers and Buyer, to purchase all the right, title
and interest of the Drilling Partnerships and Sellers in the oil and gas wells
in which the Drilling Partnerships have a working interest, exercisable by
written notice of exercise during the six month period following the
termination of the Partnership Revenue Interests, at a price equal to the then
fair market value of the properties as determined by mutual agreement of the
parties, or if they are unable to agree, as determined by an independent third
party jointly selected by Sellers and Buyer.
(c) CERTAIN OTHER INTERESTS OF SELLER. On the Closing Date,
Sellers shall, pursuant to one or more agreements or instruments in form and
substance mutually satisfactory to Sellers and Buyer, convey to Buyer a
production payment in each of the royalty, overriding royalty or working
interests of Sellers described in Section 1.4(c) of the Disclosure Schedule,
consisting of a right entitling Buyer to receive an amount equal to 99% of the
net proceeds of production attributable to such interests during the period
from the Closing Date until termination of the Partnership Revenue Interest for
the Partnership to which such interest of Sellers relates.
1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
initially allocated among the Assets, the Production Payment and the
Partnership Revenue
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Interests as set forth in Schedule 1.5 of the Disclosure Schedule. Such
allocations have been determined by negotiations between the parties on the
basis of the respective fair market values of the assets and properties
comprising the Assets, the Production Payment and the Partnership Revenue
Interests and otherwise in accordance with Section 1060 of the Code as of
January 1, 1995. Such allocations shall be modified after the Closing to
reflect all adjustments to the Purchase Price made pursuant to Section 5.1,
5.4, 5.5 or 7.2. Sellers and Buyer shall, and shall cause their respective
affiliates to, (a) file their federal, state and local income tax returns in a
manner consistent with the allocation of the Purchase Price under this Section
1.5, and (b) not take any position for tax purposes in a manner inconsistent
with such allocation.
1.6 ASSUMPTION OF CERTAIN CONTRACTUAL OBLIGATIONS BY BUYER.
(a) Subject to the terms and conditions set forth herein and
subject to the indemnity provided for in clauses (i) and (ii) of Section
8.1(a), on the Closing Date Buyer shall assume and agree to pay, perform and
discharge the following liabilities and obligations relating to the Assets
(collectively, the "Assumed Obligations"):
(i) any and all performance obligations not
requiring the payment of money existing on,
or arising or accruing after, the Closing
Date relating to the Assets, including such
obligations under or with respect to the
Leases, the Section 29 Leases, the Operating
Agreements, the Undeveloped Leases and the
leases, agreements and contracts listed or
described in Schedule 1.2(b), 1.2(e), 1.2(f)
and 2.23 of the Disclosure Schedule; and
(ii) any and all liabilities and obligations
relating to the Assets that arise or accrue after the
Closing Date.
(b) Buyer shall assume the Assumed Obligations by executing and
delivering to Sellers at the Closing an assumption agreement in form and
substance mutually
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satisfactory to Sellers and Buyer (the "Assumption Agreement"). The
Assumption Agreement will also contain provisions mutually satisfactory to
Sellers and Buyer with respect to, among other things, (i) Buyer's
administration of the suspense account funds referred to in Sections 2.18 and
7.4 hereof (including indemnification of Sellers with respect to any
misapplication of such funds) and (ii) Buyer's indemnification obligation set
forth in the last sentence of Section 5.6.
1.7 NON-ASSUMPTION OF SELLERS' LIABILITIES. Except for the
assumption by Buyer of the Assumed Obligations as provided in Section 1.6,
Buyer shall not assume or be responsible for any liabilities or obligations of
Sellers relating to or arising out of the operation or ownership of the Assets
by Sellers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Buyer (subject to Section
4.2(e) and the second sentence of Section 5.4(a)) as of the date hereof and (as
modified pursuant to Section 4.2(e) and by the transactions permitted by this
Agreement) as of the Closing Date, as follows:
2.1 CORPORATE ORGANIZATION AND EXISTENCE. Each of the Sellers is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with the corporate power and authority to own
its properties and carry on its business as now being conducted.
2.2 AUTHORITY OF SELLERS. Each of the Sellers has the authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. All action on
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the part of the directors and shareholders of each of the Sellers necessary to
authorize the execution, delivery and consummation of this Agreement has been
duly and validly taken. This Agreement has been duly executed and delivered by
each of the Sellers and constitutes the valid and binding obligation of each of
the Sellers, enforceable against each of the Sellers in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency
and other laws in effect from time to time relating to or affecting the
enforcement of creditors' rights generally and general principles of equity.
2.3 NO VIOLATION OR BREACH. Except as set forth in Schedule 2.3
of the Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated herein by
either of the Sellers will:
(a) conflict with, result in a violation of, or require the
consent of any person under, any of the terms, conditions or provisions of its
certificate of incorporation or bylaws;
(b) to the knowledge of Sellers, except as set forth in Schedule
2.4 of the Disclosure Schedule and except for compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), conflict with or result in a breach, default or violation of, or require
any filing, consent, authorization or approval under, any law, statute,
ordinance, decree, order, judgment, rule, regulation or governmental permit,
certificate or license to which either of the Sellers or any of the Assets is
subject; or
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(c) result in the creation of any material lien, charge or other
encumbrance upon any of the Assets, other than any lien, charge or other
encumbrance created by or through Buyer.
2.4 CONSENTS AND PREFERENTIAL PURCHASE RIGHTS. Except as set
forth in Schedule 2.4 of the Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated herein by either of the Sellers will (i) entitle any person (other
than Buyer) to exercise any preferential purchase right, option to purchase,
first refusal or similar right with respect to any of the Assets or Section 29
Wells, or (ii) require the consent, authorization or approval of any third
party under any material contract, agreement, lease, easement, license or
permit listed in any Section of the Disclosure Schedule.
2.5 NO DEFAULT. Except as set forth in Schedule 2.5 of the
Disclosure Schedule, neither of the Sellers is in material violation of or
material default under, and no condition exists that with the giving of notice
or lapse of time or both would constitute such a material violation of or
material default under, (i) any order, judgment or decree of any court,
governmental agency or governmental authority relating to any of the Assets or
Section 29 Wells by which either of the Sellers or any Partnership is bound or
to which any of the Assets or Section 29 Wells is subject or (ii) any
governmental permit, order or license relating to any of the Assets or Section
29 Wells or the operation thereof or the production, collection, storage or
transportation of oil, gas and other hydrocarbons therefrom, including, but not
limited to, drilling permits, federal and state water discharge permits,
plugging permits or orders and brine hauling permits.
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2.6 LITIGATION. Except as set forth in Schedule 2.6 of the
Disclosure Schedule, no claim, suit, action, arbitration proceeding or other
proceeding is pending or, to the best knowledge of Sellers, threatened against
either Seller in connection with the Assets or Section 29 Wells or relating to
the transactions contemplated hereby before any court, governmental agency or
other governmental authority that would reasonably be expected to (i) result in
the material impairment or loss of title of either of the Sellers to any of the
Assets or the Section 29 Wells, (ii) result in the material impairment or loss
of the value of the interests of either of the Sellers in any of the Assets or
the Section 29 Wells, (iii) materially hinder or impede the development of any
of the Leases or the Undeveloped Acreage or the operation of any of the Wells
or the Section 29 Wells or (iv) result in the removal of either of the Sellers
as operator under any of the Operating Agreements or in the termination or
cancellation of any of such agreements.
2.7 ACCURACY OF CERTAIN HISTORICAL FINANCIAL INFORMATION. To the
knowledge of Sellers, the underlying historical financial data consisting of
Sellers' computer file records of revenues and direct operating expenses
attributable to the Wells and Section 29 Wells for the year ended December 31,
1994 and for the three month period ended March 31, 1995 (as more particularly
set forth or described in Schedule 2.7 of the Disclosure Schedule) furnished to
Ernst & Young LLP by Sellers in connection with the preparation of the
Statements of Revenues and Direct Operating Expenses of the Assets for the
years ended December 31, 1994 and 1993 and for the three months ended March 31,
1995 and March 31, 1994 accurately reflected, in accordance with the generally
accepted accounting principles consistently applied throughout the periods
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involved, the revenues derived from, and the direct operating expenses incurred
in, the operation of the Assets for such periods. Since March 31, 1995 there
has not been any material adverse change in the revenues derived from, or
direct operating expenses incurred in, the operation of the Assets, except for
any change resulting from normal production declines, seasonal market
conditions and sales curtailments due to market prices.
2.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule
2.8 of the Disclosure Schedule, since December 31, 1994 there has not been:
(a) any loss or damage (whether or not covered by insurance) to
any of the Wells, Section 29 Wells, Gas Gathering Systems or material
Miscellaneous Assets which materially and adversely affects the condition,
operation or value thereof;
(b) any sale, lease or disposition of any material Assets (except
oil, gas and inventory items) not approved in advance by Buyer; and
(c) any sale or disposition of any items of oilfield equipment or
supplies inventory except those items withdrawn from inventory for use in
drilling, equipping and completing new oil and gas wells on the Leases, the
Section 29 Leases or the Undeveloped Acreage or in re-working or re-equipping
the Wells or the Section 29 Wells, other than in the ordinary course of
business.
2.9 OIL AND GAS WELLS.
(a) Schedules 1.2(a)(i) and 1.3(e) of the Disclosure Schedule
accurately set forth information regarding each of the Wells and the Section 29
Wells, respectively, the name (if any) and location of each such well, the
applicable identification and permit
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number, the percentage of the working interest owned by Sellers and/or the
Partnerships therein (to the extent of the interest of Sellers in the
Partnership) and the net revenue interest of Sellers and/or the Partnerships
therein (to the extent of the interest of Sellers in the Partnerships).
Sellers and the Partnerships are receiving on a current basis the proceeds of
production from each of the Wells and the Section 29 Wells in an amount not
less than the respective net revenue interests of Sellers and the Partnerships
therein, and are currently paying costs and expenses relating to each of the
Wells and the Section 29 Wells not in excess of the respective working
interests of Sellers and the Partnerships therein.
(b) Except as set forth in Schedule 2.9 of the Disclosure
Schedule, the Wells and the Section 29 Wells have been drilled, completed and,
to the knowledge of Sellers, bottomed within the boundaries specified in any
applicable permit or within the limits otherwise permitted by contract or law
and on the real property covered by, and substantially in accordance with the
provisions of, the Leases or the Section 29 Leases applicable thereto. All the
Wells and the Section 29 Wells have been drilled, completed and operated in
substantial compliance with all applicable laws, rules, regulations, permits,
orders, judgments and decrees of any court or governmental or regulatory
authority, all applicable laws and permitting procedures for the drilling or
operation of oil and gas wells and the spacing, completion and bottoming of
wells and the disposal of water therefrom.
(c) Except as disclosed in Schedule 2.9 of the Disclosure
Schedule, as of the date hereof none of the Wells or the Section 29 Wells has
been plugged or abandoned.
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(d) All claims of which Sellers have received written notice prior
to the date hereof relating to material damages to the surface estate caused by
operations on the real property covered by the Leases or the Section 29 Leases
have been or will be resolved and any required payments in full settlement
thereof have been or will have been accepted by the appropriate owner of the
surface estate.
(e) Sellers and the Partnerships hold all governmental licenses
and permits necessary to operate the Wells and the Section 29 Wells as
currently operated and to sell production and dispose of water therefrom
(except for those licenses and permits which would not result in material
liabilities or have a material adverse effect on the value of the Wells or the
Section 29 Wells if not obtained or maintained), all such licenses and permits
are in full force and effect and no material violations have occurred or exist
in respect of any such license or permit. No proceeding by any governmental
authority is pending or, to the knowledge of Sellers, threatened that would
reasonably be expected to result in the revocation or limitation of any such
license or permit.
(f) Quaker State or QSE&P is the operator of all the Wells and the
Section 29 Wells, except those identified in Schedule 2.9(f) of the Disclosure
Schedule.
2.10 DEVELOPED LEASES.
(a) Schedules 1.2(a)(ii) and 1.3(e) of the Disclosure Schedule
accurately set forth the following information regarding each of the Leases and
the Section 29 Leases: the lease number, the name of the lessor, the lease
date, approximate number of acres covered by the lease, the name(s) (if any)
and identification number of the Well(s) or
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Section 29 Well(s) thereon, certain recording information and the location
by county of the lands covered thereby.
(b) Each of the Leases and Section 29 Leases is valid, binding and
in full force and effect against the Seller party thereto and, to Sellers'
knowledge, each other party thereto, and no material default exists thereunder
in the payment by Sellers or any Partnership of rentals, royalties or other
amounts due thereunder or in the performance of any other obligation of either
of the Sellers or any of the Partnerships thereunder that would entitle the
lessor to cancel or terminate such Lease or Section 29 Lease.
(c) Each of the Leases and Section 29 Leases is a valid and
subsisting encumbrance upon or an estate in the real property covered thereby
prior in right to any other encumbrance or lien on such real property affecting
the oil and gas underlying such real property, except for encumbrances and
liens which would not materially adversely affect the use thereof as currently
operated, and there is no other lease, severance of mineral interest or any
other condition in the state of title to the underlying fee interest in the
real property covered by the Leases and the Section 29 Leases which would
reasonably be expected to materially restrict, interfere with or limit in any
way the oil and gas operations contemplated by the Leases and the Section 29
Leases as such operations are currently conducted.
(d) No party to any Lease or Section 29 Lease or any successor to
the interest of such party has filed or, to the knowledge of Sellers,
threatened to file any
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action to terminate, cancel, rescind or procure judicial reformation of any
Lease or Section 29 Lease.
2.11 GAS GATHERING SYSTEMS.
(a) Except as set forth in Schedule 2.11 of the Disclosure
Schedule, Sellers are the sole owners of the Gas Gathering Systems and have the
right to operate and maintain such systems pursuant to easements,
rights-of-way, licenses, permits and other rights necessary for the operation
and maintenance of the Gas Gathering Systems. Except as set forth in Schedule
2.11 of the Disclosure Schedule, none of such easements, rights-of-way, permits
or other rights would terminate or cease by reason of the termination or
expiration of any of the Leases or Section 29 Leases.
(b) Except as set forth in Schedule 2.11 of the Disclosure
Schedule, neither of the Sellers has received prior to the date hereof any
written notices contesting the placement of the Gas Gathering Systems or the
validity of any of such easements, rights-of-way or licenses.
(c) Neither of the Sellers is subject to, or each is exempt from,
regulation as a public utility under the laws of the states in which the Gas
Gathering Systems are located in connection with the operation of the Gas
Gathering Systems as presently operated and the sale and transportation of gas
to purchasers through the Gas Gathering Systems.
(d) Each of the gas transportation, gas sales, meter site,
compressor site and other agreements relating to the Gas Gathering Systems is
in full force and effect against the Seller party thereto and, to the knowledge
of Sellers, each other party
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thereto, and no material default exists thereunder in the payment by Sellers of
any amounts due thereunder or in the performance of any other material
obligations of either of the Sellers or, to Sellers' knowledge, any other
party thereto.
2.12 OPERATING AGREEMENTS. Quaker State or QSE&P is the operator
of certain oil and gas wells under the Operating Agreements listed and
described in Schedule 1.2(c) of the Disclosure Schedule, which description
includes the respective dates thereof, the names of the parties thereto and the
wells to which the respective Operating Agreements apply. Sellers have made
available to Buyer true and correct copies of all the Operating Agreements and
all amendments and supplements thereto. The Operating Agreements are valid,
binding and in full force and effect against the Seller party thereto and, to
the knowledge of Sellers, each other party thereto, and no material default
exists thereunder in the payment of any amounts payable by Quaker State or
QSE&P or in the performance of any other material obligation of Quaker State or
QSE&P thereunder. The operating fees and costs charged to the owners of the
working interests under the Operating Agreements have not exceeded the amounts
authorized or permitted by the Operating Agreements. There are no material
outstanding calls or payments under authorities for expenditure which are due
from either of the Sellers or which either of the Sellers has committed to make
under any of the Operating Agreements which have not been made.
2.13 PARTNERSHIPS.
(a) Annex A to the Disclosure Schedule sets forth a complete list
of all limited partnerships and general partnerships which own interests in any
of the Wells or the
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Section 29 Wells and of which either or both of Sellers is
general partner or a managing general partner. Quaker State and/or QSE&P own
partnership interests in the Partnerships entitling Sellers to the share of
profits, losses and distributions of each Partnership in the percentage set
forth opposite the name of such Partnership on such Annex A. Each of the
Partnerships has been duly organized and is validly existing under the laws of
the jurisdiction of its organization and has full power and authority to own
and hold its properties and to carry on its business as presently conducted.
Sellers have previously made available to Buyer complete and correct copies of
the partnership agreements and limited partnership agreements of the respective
Partnerships, none of which has been amended or restated since the date hereof.
(b) Annex A to the Disclosure Schedule accurately sets forth the
percentage of the working interest and net revenue interest of each Partnership
in the Wells and Section 29 Wells set forth below the name of such Partnership
therein.
2.14 UNDEVELOPED ACREAGE. Sellers own the Undeveloped Leases and
fee mineral interests listed and described in Schedule 1.2(d) of the Disclosure
Schedule, free and clear of any mortgages, liens or other similar encumbrances
created by, through or under Sellers, other than those arising by operation of
law. All of the Undeveloped Leases are valid, binding and in full force and
effect against the Seller party thereto and, to the knowledge of Sellers, each
other party thereto, and Sellers have made all payments, including rentals and
delay rentals, due in respect of the Undeveloped Leases. No party to any
Undeveloped Lease or any successor to the interest of such party has filed, or
to the knowledge of Sellers, threatened to file any
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action to terminate, cancel, rescind or procure judicial reformation of any
Undeveloped Lease.
2.15 NON-OPERATED ROYALTY INTERESTS. Schedule 1.2(f) of the
Disclosure Schedule accurately sets forth the following information regarding
each of the oil and gas wells operated by third parties in which Sellers have a
royalty interest or overriding royalty interest: the name (if any) and location
of each such well, the name of the operator and the percentage of the royalty
or overriding royalty interest owned by Sellers therein and, with respect to
the oil and gas lease(s) covering the real property on which such Well is
located, the name of the lessor, the lease date and certain recording
information. Each of such leases is valid, binding and in full force and
effect against the Seller party thereto and, to the knowledge of Sellers, each
other party thereto, and no material default exists thereunder in the payment
of any royalties or overriding royalties due to either of the Sellers
thereunder.
2.16 MISCELLANEOUS ASSETS. Sellers own all the Miscellaneous
Assets (other than those which are leased by Sellers), free and clear of any
mortgages, security interests or similar liens or encumbrances granted by
Sellers.
2.17 CONDITION OF ASSETS. The Wells, the Section 29 Wells, the Gas
Gathering Systems and the Miscellaneous Assets are in reasonably good operating
condition and in a state of reasonable maintenance and repair in accordance
with reasonable industry practice.
2.18 TAXES, EXPENSES AND ROYALTIES. All federal, state or local
production, severance, gross receipts, excise and similar taxes and assessments
based on or
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measured by the ownership of the Wells or the Section 29 Wells or
the production of hydrocarbons or the receipt of proceeds therefrom for all
periods ending on or before the Closing Date have been or will be paid by
Sellers or the Selling Drilling Funds. All costs and expenses incurred by
Sellers or the Selling Drilling Funds on or before the Closing Date in
connection with the ownership and operation of the Wells and the Section 29
Wells and all amounts payable by Sellers or the Selling Drilling Funds to the
holders of royalty, overriding royalty, working and other interests with
respect to the sale of hydrocarbons produced from the Wells and the Section 29
Wells and sold on or before the Closing Date have been or will be paid by
Sellers or the Selling Drilling Funds, except for amounts being held in
suspense accounts as set forth in Schedule 2.18 of the Disclosure Schedule.
2.19 CERTAIN MATTERS RELATING TO PRODUCTION.
(a) Neither of the Sellers nor any of the Partnerships is
obligated, by virtue of a "take or pay" or other prepayment arrangement, a gas
balancing agreement or any similar provision in any contract for the sale of
production, to deliver at some future time any material amount of production
from any of the Wells without receiving full payment therefor at or after the
time of delivery.
(b) All net proceeds from the sale of production attributable to
the interests of the Sellers and the Partnerships in the Wells and the Section
29 Wells are currently being paid in full to Sellers or the Partnerships and no
material portion of such proceeds is currently being suspended or withheld by
the purchaser thereof.
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2.20 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 2.20
of the Disclosure Schedule:
(a) No underground petroleum or chemical storage tanks have been
installed by Sellers which remain on any property owned or leased by either of
the Sellers that is included in the Assets. No property owned or leased by
either of the Sellers that is included in the Assets has been used by Sellers
as a landfill or a waste disposal site in material violation of any
environmental law applicable to the Assets.
(b) Neither of the Sellers is in material violation of, or subject
to any material liability for the violation by Sellers of, any environmental
law applicable to the Assets. For purposes hereof, "environmental law" means
any federal, state or local law, ordinance, rule, regulation, license, permit,
order, judgment, decree or injunction relating to and regulating (i) the
protection, preservation or restoration of the environment (including air,
water, vapor, surface water, ground water, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource) or (ii)
the use, storage, recycling, treatment, generation, transportation, processing,
handling, production, release or disposal of any pollutant, hazardous
substance, toxic substance or hazardous waste.
(c) Neither Seller is subject to any material liability or
obligation relating to the release by Sellers of hazardous substances or wastes
at, in or under any property owned or leased by either of the Sellers which is
included in the Assets, except for the production and temporary storage of oil
produced from the Wells and the Section 29 Wells in substantial compliance with
all applicable environmental laws. For purposes
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hereof, "hazardous substances" and "hazardous wastes" are materials defined as
"hazardous substances," or "hazardous wastes" in (i) the Comprehensive
Environmental Response, Compensation and Liability act of 1980 as amended
by the Superfund Amendments and Reauthorization Act of 1986, and any amendments
thereto and regulations thereunder, (ii) the Resource Conservation and Recovery
Act of 1976 as amended by the Hazardous and Solid Waste Amendments of 1984, and
any amendments thereto and regulations thereunder, and (iii) to the extent not
inconsistent with the definitions contained in the acts and regulations listed
in clauses (i) and (ii) above, any other environmental law.
(d) Neither of the Sellers has received prior to the date hereof
any written or oral notice from any governmental authority or any written
notice from any private party of any material violation of any environmental
law applicable to the Assets or of any demand, request for information,
citation, summons or complaint relating to any material violation thereof
(other than violations that have been or will have been cured prior to the
Closing Date).
2.21 REAL ESTATE OWNED AND LEASED. The real estate and
improvements thereon owned or leased by Sellers and included in the
Miscellaneous Assets conform in all material respects with all applicable laws,
ordinances and regulations, including all building and zoning laws, the failure
to comply with which would have a material adverse effect on the value or use
of such property. Schedule 2.21 of the Disclosure Schedule contains a complete
list and brief description (including the use to which such property is being
employed) of all material leases, subleases or other agreements
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under which either of the Sellers is lessee or sublessee of real estate
included in the Miscellaneous Assets, complete and correct copies of which have
been made available to Buyer. Each of such leases, subleases and other
agreements is valid, binding and in full force and effect against the Seller
party thereto and to the knowledge of Sellers, each other party thereto, and
neither of Sellers is in default in the payment or performance of any of its
material obligations thereunder. Sellers have good and marketable title to the
real estate and improvements thereon included in the Miscellaneous Assets
(other than the real estate and improvements leased by Sellers), free and clear
of any mortgages, liens or similar encumbrances, except liens for real estate
taxes and assessments not yet due and payable, and other liens or encumbrances
arising by operation of law.
2.22 TECHNICAL DATA. Sellers have sufficient ownership or
contractual rights to use the seismic, geological, geophysical and other
technical data included in the Miscellaneous Assets.
2.23 CONTRACTS. Schedule 2.23 of the Disclosure Schedule lists
each of the material gas transportation and gas sales agreements related to the
Assets or Section 29 Wells and each material lease or sublease relating to
vehicles or equipment included in the Miscellaneous Assets.
2.24 UPDATED INVENTORY LIST. The updated Inventory List to be
delivered to Buyer by Sellers at the Closing shall accurately reflect all
withdrawals from and additions to the inventory of oilfield equipment and
supplies since December 31, 1994 through the date that is 15 business days
prior to the Closing Date and with respect to
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additions shall show the cost thereof and with respect to withdrawals shall
identify the wells on which such inventory was used.
2.25 ACCURACY AS OF CLOSING DATE. Subject to Section 4.2(e), the
representations and warranties made hereinabove in this Article II (as modified
by transactions permitted by this Agreement and by Schedule 5.4 of the
Disclosure Schedule) will be true and correct in all material respects on the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers, as of the date hereof
and as of the Closing Date, as follows:
3.1 CORPORATE ORGANIZATION AND EXISTENCE. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio, with the corporate power and authority to own its properties and
carry on its business as now being conducted.
3.2 AUTHORITY OF BUYER. Buyer has the authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the performance of the
transactions contemplated hereby by Buyer have been duly authorized by its
Board of Directors. No other corporate action, approval or proceeding on the
part of Buyer or its shareholders is necessary to authorize the execution,
delivery and consummation of this Agreement. This
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Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable against it in accordance
with the terms hereof, except as such enforceability may be limited by
bankruptcy, insolvency and similar laws in effect from time to time relating to
or affecting the enforcement of creditors' rights generally and general
principles of equity.
3.3 NO VIOLATION OR DEFAULT. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (a) violate any provision or constitute a default (whether with notice or
lapse of time or both) under the articles of incorporation or code of
regulations of Buyer, any law or regulation to which Buyer or any of its
properties or assets is subject or any contract, agreement, instrument, order,
arbitration award, judgment or decree to which Buyer is a party or by which it
is bound, or (b) except with respect to the HSR Act, require Buyer to obtain
any waiver, consent, approval or authorization of, or to make any filing with,
any governmental department, commission, agency or other governmental or
regulatory authority.
3.4 LITIGATION. No litigation, governmental investigation or
other proceeding is pending or, to Buyer's knowledge, threatened by, against or
affecting Buyer that might delay, prevent or hinder the consummation of the
transactions contemplated hereby.
3.5 FUNDS AVAILABLE. Buyer has, or will have on or before the
Closing Date, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Purchase Price
at the Closing. Buyer has delivered to Sellers a binding commitment letter
from Bank One, Texas and NBD Bank (the
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"Lenders") pursuant to which the Lenders have committed to make available to
Buyer all financing required for Buyer to consummate the transaction
contemplated by this Agreement.
3.6 ACCURACY AS OF CLOSING DATE. The representations and
warranties made hereinabove in this Article III will be true and correct on and
as of the Closing Date, with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date.
ARTICLE IV
ADDITIONAL COVENANTS OF SELLERS AND BUYER
4.1 COVENANTS OF SELLERS. Sellers covenant and agree with Buyer
as follows:
(a) CERTAIN CHANGES. Except as may be expressly permitted by this
Agreement, from the date hereof until the Closing, Sellers will not, without
the prior written consent of Buyer (which consent shall not be unreasonably
withheld):
(i) make any material change in the conduct of the
business or operations relating to the Assets that
would reasonably be expected to have a material
adverse effect on the value of the Assets;
(ii) voluntarily terminate or amend in any material
respect any of the Leases, the Section 29 Leases or
the Operating Agreements (except for the substitution
of Buyer as operator thereunder);
(iii) sell, lease or otherwise dispose of any of the Assets;
(iv) make or enter into any commitments or agreements
relating to the operation of the Wells or the Section
29 Wells or the sale, purchase, processing or
transportation of production from or attributable to
the Wells or the Section 29 Wells after the Closing;
(v) mortgage, pledge or similarly encumber any of the
Assets;
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(vi) execute any material authorities for expenditure or
consent to the commencement of any new operations for
the drilling or completing of any new well on the
Leases, the Section 29 Leases or the Undeveloped
Acreage or to the redrilling, re-working,
re-equipping or recompleting of any Well on the
Leases;
(vii) make or enter into any agreement or contract
requiring an expenditure (other than arising as a
result of an emergency) relating to the Producing
Properties, the Section 29 Wells or Gas Gathering
Systems in excess of $5,000 in any one case; or
(viii) commit themselves to do any of the foregoing;
provided, however, that nothing contained in this Section 4.1(a) or elsewhere
in this Agreement shall limit the rights of Sellers and the Selling Drilling
Funds to produce, consume and sell production from the Wells and the Section 29
Wells, or otherwise operate or conduct their business, in the ordinary course
of business.
(b) CERTAIN COVENANTS WITH RESPECT TO THE ASSETS. Except as may
otherwise be expressly provided herein, Sellers will, from the date hereof to
the Closing (the "Preclosing Period"), unless otherwise consented to in writing
by Buyer (which consent will not be unreasonably withheld):
(i) promptly notify Buyer of the receipt during the
Preclosing Period by Sellers of any written notice or
written claim or written threat of notice or claim
which becomes known to Sellers relating to any
material default or breach under, or relating to the
termination or cancellation or written threat of
termination or cancellation of, any of the Leases,
Section 29 Leases or Operating Agreements;
(ii) promptly notify the Buyer of the occurrence during
the Preclosing Period of any material loss or damage
to any of the Wells, the Section 29 Wells, the Gas
Gathering Systems or the Miscellaneous Assets that
becomes known to Sellers and that would cost more
than $5,000 in any one case to repair or restore;
(iii) cause to be paid all rentals, shut-in royalties,
minimum royalties and other payments that are
necessary to maintain in force Sellers' rights in and
to the Leases and the Section 29 Leases on which the
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Wells and Section 29 Wells are located, and pay
timely all material costs and expenses incurred by it
in connection with such wells and leases; and
(iv) use their reasonable efforts to maintain and operate
the Wells and the Section 29 Wells substantially in
accordance with all applicable legal requirements and
the contracts relating thereto, and in substantially
the same manner that Sellers heretofore have operated
such properties.
(c) ACCESS. Sellers will afford to Buyer and its authorized
representatives, at Buyer's sole expense, risk and cost and upon reasonable
notice, reasonable access from the date hereof until the Closing Date, during
normal business hours, to the personnel, properties, books and records of
Sellers which are related primarily to the Assets to the extent that such
access and disclosure would not unreasonably interfere with the normal
operation of the business of Sellers or violate the terms of any agreement by
which either Seller is bound; provided, however, that the confidentiality of
any data or information so acquired shall be maintained by Buyer and its
representatives in accordance with the Confidentiality Agreement between Quaker
State and Buyer dated February 8, 1995 (the "Confidentiality Agreement"),
except that the Statements of Revenues and Direct Operating Expenses of the
Assets for the years ended December 31, 1993 and 1994 and for the three months
ended March 31, 1994 and 1995 prepared by Ernst & Young have been included in
regulatory filings under the securities laws with the consent of Sellers who
have approved the form and substance thereof. Buyer shall have the right to
physically inspect the Assets at Buyer's sole expense, risk and cost and upon
reasonable notice, from the date hereof until the Closing Date during normal
business hours to the extent such inspection would not
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unreasonably interfere with the normal operation of the business of Sellers or
violate the terms of any agreement by which neither Seller is bound. Such
right shall include the right of Buyer through an environmental consultant of
its choice to conduct an environmental investigation of the Assets, including
such limited subsurface investigations and sampling as reasonably deemed
necessary by Buyer or such consultant in order to fully evaluate the
environmental condition of the Assets. Any report prepared by Buyer's
consultant shall be treated by Buyer and its representatives (including such
consultant) as confidential information in accordance with the terms and
provisions of the Confidentiality Agreement, and shall be provided to Sellers
at their request. Sellers agree that copies of all of the Leases, Section 29
Leases and the Undeveloped Leases, title data and reports relating thereto,
including all title opinions which have been prepared covering all or any
portion of the Leases, the Section 29 Leases, Undeveloped Leases, Gas Gathering
Systems or owned real estate constituting a part of the Assets, shall be made
available for Buyer's inspection at Sellers' offices, provided that Buyer and
its representatives shall treat all such information as confidential
information in accordance with the terms and provisions of the Confidentiality
Agreement.
(d) PUBLIC ANNOUNCEMENTS. Sellers shall not issue any public
announcement or statement with respect to the transactions contemplated hereby
except upon the consent of Buyer or upon the advice of Sellers' counsel that
such announcement or statement is required by law, regulation or rule of the
Securities and Exchange
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Commission or any stock exchange. Sellers shall make available to Buyer the
text of any public announcement prior to the release of any such announcement.
(e) NOTIFICATION OF CLAIMS. Sellers shall promptly notify Buyer
of any of the following of which Sellers receive written notice after the date
hereof and prior to the Closing Date: (i) any proceeding or inquiry initiated
or made against or to Sellers by any governmental authority, nongovernmental
entity or person with respect to any hazardous substances or hazardous wastes
present on, or any environmental condition relating to, the Assets that is
alleged to violate applicable environmental law; and (ii) any suit, action or
other proceeding against Sellers before any court or any governmental authority
arising or threatened in writing prior to the Closing that relates to the
Assets and that would reasonably be expected to result in the impairment or
loss of Sellers' title to any material portion of the Assets or the value
thereof or to hinder or impede the operation of any of the Wells, the Section
29 Wells or the Gas Gathering Systems.
(f) WAIVERS AND CONSENTS. Sellers shall use reasonable efforts
not requiring the expenditure of money to obtain prior to Closing (i) written
waivers of all preferential rights to purchase, options to purchase and rights
of first refusal affecting any of the Assets, (ii) consents to the transfer to
Buyer of the Operating Rights and to effect the substitution of Buyer as
operator under all the Operating Agreements and (iii) the consent of all
persons required to enable Sellers to transfer the Assets, the Section 29 Wells
and the Partnership Revenue Interests to Buyer.
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(g) HSR ACT. Sellers will (i) file as promptly as practicable
with the Department of Justice and the Federal Trade Commission the
notification and report form with respect to the transactions contemplated
herein specified by the HSR Act requesting early termination of the waiting
period thereunder and (ii) respond promptly to inquiries from the Federal Trade
Commission or the Department of Justice in connection with such filing.
(h) REMOVAL OF TANK AND DRUMS. Sellers agree to remove, at their
expense, the underground collection tank located in the Red Haw Yard in
Ashtabula County, Ohio and the 48 drums of glycol at the NAP Station within
ninety (90) days after the Closing. Buyer will cooperate with Sellers, and
afford Sellers access to such property to permit such removal.
4.2 COVENANTS OF BUYER. Buyer covenants and agrees with Sellers
as follows:
(a) PUBLIC ANNOUNCEMENTS. Buyer shall not issue any public
announcement or statement with respect to the transactions contemplated hereby
except upon the consent of Sellers or upon the advice of Buyer's counsel that
such announcement or statement is required by law, regulation or rule of the
Securities and Exchange Commission or any stock exchange. Buyer shall make
available to Sellers the text of any public announcement prior to the release
of any such announcement.
(b) CONFIDENTIAL INFORMATION. The confidentiality of any data or
information received by Buyer regarding the business and assets of Sellers
shall be maintained by Buyer and its representatives in accordance with the
Confidentiality Agreement, except as provided in Section 4.1(c) hereof with
respect to the inclusion of the Statements of
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Revenues and Direct Operating Expenses of the Assets in regulatory filings
under the securities laws.
(c) HSR ACT. Buyer will (i) file as promptly as practicable with
the Department of Justice and the Federal Trade Commission the notification and
report form with respect to the transactions contemplated hereunder specified
by the HSR Act requesting early termination of the waiting period thereunder,
and (ii) respond promptly to inquiries from the Federal Trade Commission or the
Department of Justice in connection with such filing.
(d) COOPERATION. Buyer shall use reasonable efforts not requiring
the expenditure of money to cooperate with Sellers in obtaining any waivers or
consents as contemplated by Section 4.1(f). In addition, Buyer shall notify
Sellers of any title deficiencies, environmental conditions or other
information relating to the Assets or Section 29 Wells discovered by Buyer in
the course of its due diligence investigations and of which Ronald Clements,
Paul Poole, Leo Schrider or Buyer's legal department has actual knowledge which
may affect the accuracy of the representations and warranties of Sellers herein
or the information set forth in the Disclosure Schedule.
(e) UPDATING. Buyer agrees that Sellers shall have the right to
deliver a certificate to Buyer not later than three (3) business days prior to
the Closing Date notifying Buyer of any inaccuracy or breach of the
representations or warranties made by Sellers herein, in which event Buyer
shall have the right to decide whether to waive the condition to Closing set
forth in Section 6.2(a) with respect to such inaccuracy or breach. If Buyer
does waive such condition or proceeds to consummate the Closing,
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then the representations and warranties of Sellers herein shall be deemed
modified as set forth in such certificate for all purposes, including
without limitation, for purposes of indemnification under Article VIII, and
Sellers shall have no liability to Buyer with respect to such inaccuracy or
breach unless otherwise expressly agreed in writing by Sellers and Buyer at or
prior to the Closing.
ARTICLE V
MATTERS RELATING TO CERTAIN ASSETS
5.1 ASSETS EXCLUDED FROM SALE. In the event that:
(a) after the date hereof and prior to the Closing, there shall
have been any material loss or damage to any of the Assets or
Section 29 Wells, or
(b) the findings of an environmental audit of the Assets and
Section 29 Wells conducted by Buyer prior to the Closing Date
(which findings become known to Buyer after the date hereof)
disclose an environmental condition unacceptable to Buyer in
its reasonable judgment with respect to any of the Assets or
Section 29 Wells,
then in any such events Sellers shall have the right to repair or remediate
such damage or condition prior to the Closing Date. If Sellers shall fail to
so repair or remediate any such damage or condition, the parties shall endeavor
to mutually agree on the estimated cost of repair or remediation ("Repair
Costs"). If the parties mutually agree on the Repair Costs, the amount thereof
shall be for the account of Buyer, and shall reduce Sellers' Liability
Threshold (as defined in Section 8.1(b)) and shall be applied against Sellers'
Non-Environmental Liability Cap (as defined in Section 8.1(b)) or, if such
costs relate to an environmental condition, against Sellers' Liability Cap (as
defined in Section 8.1(b). If the parties are unable to agree on the amount of
such
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reduction, Buyer shall have the right to exclude from the sale hereunder
the interests of Sellers in the assets that would otherwise constitute Assets
or Section 29 Wells and to which such loss, damage or condition relates, in
which case the Purchase Price as adjusted pursuant to Section 7.2 shall be
reduced by the amount of the Purchase Price payable at the Closing allocated
thereto as set forth in Section 5.1 of the Disclosure Schedule (as such
allocation would be adjusted pursuant to Sections 1.5 and 7.2); provided that
Sellers shall not be obligated to consummate the Closing if the Purchase Price
would be reduced pursuant to this Section 5.1 by $5,600,000 or more in the
aggregate.
5.2 SUBSEQUENT PURCHASE AND SALE. Following the Closing Sellers
shall have the right to repair or remediate any of the matters referred to in
Section 5.1 with respect to any assets excluded from the sale pursuant to
Section 5.1, and Buyer will cooperate with Sellers, and afford Sellers access
to such assets and any property on which such assets are located to permit
Sellers to effect such repair or remediation. In the event that Sellers shall
have repaired or remediated such matters within twelve (12) months of the
Closing, then Sellers shall sell and Buyer shall purchase the assets so
excluded from the sale for a purchase price which will place the parties in the
same position as if such excluded assets had been transferred to Buyer on the
Closing Date (the amount of the Purchase Price reduction for such assets plus
interest thereon at 9% per annum from the Closing Date and adjustment for net
revenues from the Closing Date). Buyer shall be responsible for the operation
of all such excluded assets during such twelve
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month period and any extensions thereof, and the Administrative Services Agency
and Operating Agreement will provide for and govern such operations.
5.3 ASSETS REQUIRING CONSENTS OR WAIVERS. In the event that
Sellers have not obtained prior to the Closing (a) any third-party consent
necessary to transfer to Buyer the interests of Sellers in any Asset (including
licenses and road permits) or Section 29 Well, or (b) any waiver of
preferential purchase right, option to purchase, first refusal right or similar
right entitling the holder to purchase the interests of Sellers in any Asset or
Section 29 Well, or (c) any third-party consent necessary for the substitution
of Buyer for Quaker State or QSE&P under any Operating Agreement; or (d) any
approval or consent required to assign to Buyer any Partnership Revenue
Interest, then the sale hereunder shall nevertheless include the interests of
Sellers in such Asset, Section 29 Well, Operating Agreement or Partnership
Revenue Interest, subject however, to Sellers' repurchase obligations under
Section 5.6 with respect to any Asset, Section 29 Well, Operating Agreement
(and the Wells or Section 29 Wells to which such Operating Agreement applies)
or Partnership Revenue Interest referred to in clauses (a), (c) or (d) of this
Section 5.3.
5.4 TITLE DEFECTS.
(a) Schedule 5.4 of the Disclosure Schedule sets forth a list of
material title failures, title defects or deficiencies relating to the Wells,
the Section 29 Wells, the Leases, the Section 29 Leases or the Gathering
Systems and related rights-of-way, easements and licenses (a "Defect"). The
representations and warranties of Sellers herein shall be deemed modified as
set forth in Section 5.4 of the Disclosure Schedule
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for all purposes, including, without limitation, for purposes of
indemnification under Article VIII. Sellers shall have the right to cure or
remedy any such Defect prior to the Closing. If Sellers shall fail to cure or
remedy any such Defect, the parties shall endeavor to mutually agree on the
estimated costs of curing or remedying such Defect (the "Curing Costs"). If
the parties mutually agree on the Curing Costs of such Defect, the amount
thereof shall be for the account of Buyer, and shall reduce Sellers' Liability
Threshold (as defined in Section 8.1(b)) and shall be applied against Sellers'
Non-Environmental Liability Cap (as defined in Section 8.1(b)).
(b) If the parties are unable to agree on the Curing Costs of any
such Defect, the sale hereunder shall nevertheless include the Wells, the
Section 29 Wells, the Leases, the Section 29 Wells or the Gas Gathering Systems
to which such Defect relates, subject, however, to Sellers repurchase
obligations under Section 5.6 with respect thereto. During the twelve (12)
month period following the Closing, Buyer shall have the right, and shall use
all reasonable efforts, to remedy or cure any such Defect, and any amounts
reasonably expended by Buyer in remedying or curing such Defect shall first be
applied against Sellers Liability Threshold (and Buyer shall be entitled to
indemnification for the balance in accordance with Article VIII).
5.5 PURCHASE PRICE REDUCTION. If the aggregate Repair Costs
mutually agreed to pursuant to Section 5.1 plus the aggregate Curing Costs
mutually agreed to pursuant to Section 5.4 exceed Sellers' Liability Threshold,
the Purchase Price shall be reduced by the amount of such excess. Any
reduction of Sellers' Liability Threshold and the Purchase Price under Sections
5.1 and 5.4 shall be Buyer's sole and exclusive remedy
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with respect to all losses, damages and environmental conditions as to
which the parties have agreed in the Repair Costs and with respect to all
Defects as to which the parties have agreed on the Curing Costs, and Sellers
shall have no further liability to Buyer with respect thereto.
5.6 SELLERS REPURCHASE OBLIGATION. In the event that within
twelve (12) months after the Closing any of the consents or approvals referred
to in clauses (a), (c) or (d) of Section 5.3 shall not have been obtained by
Buyer (who shall use all reasonable efforts to obtain such consents and
approvals), or Buyer shall not have cured any Defect referred to in Section
5.4, then upon Buyer's written request given to Sellers within sixty (60) days
after the end of such twelve month period, Sellers shall, at their election,
either (i) purchase the Asset, the Operating Agreement and the Wells to which
such agreement applies and/or the Partnership Revenue Interest as to which such
consent or approval was not obtained, and/or the Well, Lease, or Gas Gathering
System specified in Buyer's written request to which such Defect relates, for a
price equal to the amount of the Purchase Price allocated thereto as set forth
in Schedule 5.1 of the Disclosure Schedule (as such allocation is adjusted
pursuant to Sections 1.5 and 7.2) plus interest thereon at 9% per annum from
the Closing Date, less net revenues from the Closing Date, or (ii) indemnify
Buyer against any loss, damage or expense sustained by Buyer with respect
thereto in accordance with Article VIII; provided, however, that Sellers'
repurchase or indemnification obligation under this Section 5.6, plus Sellers'
indemnification and other obligations under Section 8.1(a) or that otherwise
are subject to Sellers' Non-Environmental Liability Cap as defined in Section
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8.1(b), shall not exceed such Sellers' Non-Environmental Liability Cap (as such
Cap may be reduced in accordance with the provisions of this Article V). In
the event Sellers shall elect to so purchase any such Asset, Operating
Agreement and the Wells applicable thereto, Partnership Revenue Interest,
Lease, or Gas Gathering System or so indemnify Buyer, such purchase or
indemnity shall be Buyer's sole and exclusive remedy with respect thereto and
Sellers shall have no further liability to Buyer with respect thereto. In
addition, Buyer shall indemnify and hold Seller harmless from any liabilities
incurred with respect to such Assets, Operating Agreements, Leases, Partnership
Revenue Interests or Gas Gathering Systems during the period of Buyer's
ownership.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of
Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of all the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained herein shall be true and
correct in all material respects as of the date of this Agreement and on and as
of the Closing Date with the same effect as if made on such date.
(b) COMPLIANCE. Buyer shall have performed or complied in all
material respects with all covenants and agreements required by this Agreement
to be performed by Buyer at or prior to the Closing.
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(c) NO SUITS. No suit or other proceeding shall be pending or
threatened by any third party before any court of competent jurisdiction or any
governmental authority seeking to restrain, prohibit or declare illegal, or
seeking substantial damages in connection with, the transactions contemplated
by this Agreement. On the Closing Date, there shall be no injunction,
restraining order, judgment or decree of any nature of any court or other
governmental authority in effect that restrains or prohibits the consummation
of the transactions contemplated by this Agreement.
(d) HSR ACT. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(e) CONSENTS. All approvals, filings, authorizations and consents
listed in Schedule 6.1(e) of the Disclosure Schedule shall have been obtained
or made.
(f) PURCHASE PRICE REDUCTIONS. The Purchase Price shall not be
reduced pursuant to Sections 5.1 and 5.4 by $5,600,000 or more in the
aggregate.
(g) DESIGNATED EMPLOYEES CERTIFICATES. Sellers shall have
received from each of the Designated Employees a certificate dated the Closing
Date and in form and substance satisfactory to Sellers stating that, to their
knowledge as of the date hereof and the Closing Date, the representations and
warranties of Sellers contained in Article II were and are true and correct in
all material respects, and that such Designated Employee has not received any
notice or claim or threat thereof referred to in any provision of Article II or
Section 4.1 that such Designated Employee has not fully transmitted in writing
to the Legal Department of Quaker State prior to the Closing Date.
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6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to consummate the transactions contemplated by this Agreement are subject to
the satisfaction at or prior to the Closing of all the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Sellers contained herein (as modified
pursuant to Section 4.2(e) and by the transactions permitted by this Agreement
and by Schedule 5.4 of the Disclosure Schedule) shall be true and correct in
all material respects as of the date of this Agreement and on and as of the
Closing Date with the same effect as if made on such date.
(b) COMPLIANCE. Sellers shall have performed or complied in all
material respects with all covenants and agreements required by this Agreement
to be performed by Sellers at or prior to the Closing.
(c) NO SUITS. No suit or other proceeding shall be pending or
threatened by any third party before any court of competent jurisdiction or any
governmental authority seeking to restrain, prohibit or declare illegal, or
seeking substantial damages in connection with, the transactions contemplated
by this Agreement. On the Closing Date, there shall be no injunction,
restraining order, judgment or decree of any nature of any court or other
governmental authority in effect that restrains or prohibits the consummation
of the transactions contemplated by this Agreement.
(d) TAX CLEARANCE CERTIFICATE. Sellers shall have provided Buyer
with tax clearance certificates or other similar documents that may be required
by any state
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taxing authority in order to relieve Buyer of any obligation to withhold any
material portion of the Purchase Price.
(e) HSR ACT. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
ARTICLE VII
CLOSING
7.1 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") will be held at such place, time and date as Sellers and
Buyer may mutually agree, but in no event later than September 15, 1995 (unless
extended by mutual agreement). The date upon which Closing actually occurs is
referred to herein as the Closing Date.
7.2 PURCHASE PRICE ADJUSTMENTS. The Purchase Price shall be
adjusted as follows:
(a) The Purchase Price shall be increased by the following:
(i) the value of oil in tanks (excluding basic sediment
and water and anything below the water draw valve) as
of the close of business on December 31, 1994;
(ii) the amount of all direct costs and expenses
(including abandonment expenses) paid or incurred by
Sellers with respect to the Assets and Section 29
Wells during the period January 1, 1995 through the
Closing Date (the "Adjustment Period");
(iii) the amount of all direct costs and other capital
expenditures paid or incurred by Sellers approved in
writing in advance by Buyer which relate to the
drilling, completing, equipping and connecting to the
Gas Gathering Systems of oil and gas wells by Sellers
during the Adjustment Period, including intangible
drilling and development costs, dry hole costs and
the cost of purchased well equipment (excluding
transfers from inventory);
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(iv) the amount of all direct costs and other capital
expenditures paid or incurred by Sellers, approved in
writing in advance by Buyer, which relate to the
re-working or re-equipping of the Wells or the
Section 29 Wells during the Adjustment Period;
(v) the amount of all other capital expenditures paid
or incurred by Sellers and approved in writing in
advance by Buyer;
(vi) an amount equal to (x) the amount of Administrative
Expense incurred by Quaker State's Natural Gas
Exploration and Production Division during the
Adjustment Period, plus (y) the amount of the
Management Fee charged by Quaker State to such
Division during the Adjustment Period, in each case
determined in a manner consistent with the historical
practices of Sellers in developing their internal
reporting of revenues and expenses as used or
reflected in the 1994 income statement for Quaker
State's Natural Gas Exploration and Production
Division, minus (z) an amount calculated at $6,000
per month during the Adjustment Period.
(vii) the amount of all severance, production, excise or
similar taxes and assessments based upon, measured by
or imposed with respect to the production of
hydrocarbons from the Wells or the receipt of
proceeds therefrom during the Adjustment Period and
not reimbursed by the purchaser of production.
(b) The Purchase Price shall be decreased by the following:
(i) the aggregate amount of all revenues received or
accrued by Sellers which are attributable, under
generally accepted accounting principles consistently
applied in accordance with Sellers' historical
practices, to the operation of the Assets during the
Adjustment Period including, without limitation,
revenues received or accrued from the sale of oil and
gas produced from the Producing Properties (net of
any royalties or other burdens on production),
revenues attributable to the Non-Operated Royalty
Interests, revenues received or accrued from the
marketing or transportation of gas and revenues
received or accrued from equipment rentals and the
sale, salvage or other disposition of the Assets
during the Adjustment Period;
(ii) the aggregate amount of all revenues received or
accrued by Quaker State or QSE&P in its capacity as
operator of oil and gas wells under the Operating
Agreements which are attributable, under generally
accepted accounting principles, consistently applied
in accordance with Sellers' historical practices to
contract
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administrative and well operating services
during the Adjustment Period;
(iii) the value (determined by the contract price in effect
on the Closing Date) of gas which Quaker State or
QSE&P was obligated to deliver to third parties after
the Closing Date and for which Quaker State or QSE&P
had received payment on or before the Closing Date;
(iv) the amount of any transfer taxes or conveyance fees
payable by Buyer for which Sellers are liable under
Section 7.6 in connection with the sale of the
Assets;
(v) the aggregate reductions agreed upon by Sellers and
Buyer pursuant to Sections 5.1 and 5.4 and for assets
excluded from the sale pursuant to the provisions of
Section 5.1;
(vi) an amount equal to 99% of the net revenues of Sellers
attributable to production from the Section 29 Wells
during the Adjustment Period; and
(vii) an amount equal to 99% of the net revenues received
or accrued by the Partnerships during the Adjustment
Period allocable to the interests of Sellers in such
Partnerships;
(viii) estimated real estate taxes and assessments
on fee interests in real property included in
the Assets for any period ending on or before
December 31, 1994.
In the event that the Purchase Price is so decreased by any amount of
revenues accrued by Sellers, Buyer shall promptly remit to Sellers any amount
of such revenue if and to the extent received by Buyer.
7.3 CLOSING ESTIMATE. At least three (3) business days prior to
the Closing Date, Sellers shall prepare and deliver to Buyer an estimate of the
adjustments to the Purchase Price to be made pursuant to Section 7.2 setting
forth in reasonable detail the calculation thereof. The Purchase Price as
adjusted in accordance with such estimate is hereinafter referred to as the
"Estimated Purchase Price."
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7.4 CLOSING OBLIGATIONS OF SELLERS. At the Closing, Sellers shall
deliver to Buyer such deeds, assignments, bills of sale, certificates of title
and other instruments of transfer as are necessary to transfer all the right,
title and interest of Sellers in and to the Assets (other than fee mineral
interests), free and clear of all mortgages, liens, security interests and
similar encumbrances (other than those contemplated hereby), in form and
substance mutually satisfactory to Sellers and Buyer. Sellers shall deliver to
Buyer deeds to the fee mineral interests included in the Assets as soon as
reasonably practicable after the Closing. In addition, Sellers shall execute
and deliver to Buyer (a) an instrument or instruments conveying the Production
Payment and granting the related purchase option as provided in Section 1.4(a),
such instruments to be in form and substance mutually satisfactory to Sellers
and Buyer, (b) an instrument or instruments assigning to Buyer the Partnership
Revenue Interests as provided in Section 1.4(b), such instruments to be in form
and substance mutually satisfactory to Sellers and Buyer, (c) an Administrative
Services Agency and Operating Agreement in form and substance mutually
satisfactory to Sellers and Buyer (the "Administrative Services Agency
Agreement") and (d) an updated schedule of the amounts being held in suspense
accounts. Within 90 days after the Closing, Sellers will deliver a check
payable to Buyer for the aggregate amount being held in such accounts that are
attributable to the Assets.
7.5 CLOSING OBLIGATIONS OF BUYER. At the Closing, Buyer shall (a)
pay (by wire transfer of federal or other immediately available funds in the
amount of the Estimated Purchase Price and (b) execute and deliver to the
Escrow Agent (i) the Assumption
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Agreement, (ii) the agreements referred to in Section 1.4(b), (iii) a Crude Oil
Supply Agreement in form and substance satisfactory to Sellers and Buyer and
(iv) the Administrative Services Agency Agreement.
7.6 RECORDING FEES. The recording fees for the deeds, assignments
and other instruments transferring the Assets to Buyer shall be borne and paid
by Buyer. Each of the Sellers, on the one hand, and Buyer, on the other hand,
shall bear and pay all sales, transfer, conveyance and similar taxes, fees and
charges arising in connection with the transactions contemplated by this
Agreement which are imposed or assessed against such party under applicable
law.
7.7 DELIVERY OF RECORDS, ETC. On the Closing Date or as soon
thereafter as practicable, Sellers will deliver or cause to be delivered to
Buyer at Sellers' offices or other location specified by Sellers all original
copies of the Records. For a period equal to the greater of five (5) years
after the Closing Date and the period of any statute of limitations under the
Code or any extension thereof, Buyer shall preserve and maintain same and
permit Sellers and their authorized representatives to have reasonable access
thereto. At the end of such period, Buyer shall offer the Records to the
Sellers. Notwithstanding the foregoing, during such period, Buyer may dispose
of any such Records which are first offered to, but not accepted by, Sellers.
7.8 SETTLEMENT STATEMENT. Within six (6) months following the
Closing, Sellers and Buyer shall jointly prepare a statement (the "Settlement
Statement") setting forth the final adjustments to be made to the Purchase
Price pursuant to Section 7.2. If Sellers and Buyer are unable to agree on the
Settlement Statement within such
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six-month period, an independent accounting firm, mutually acceptable to
Sellers and Buyer, shall be engaged to determine the amount of such final
adjustments to the Purchase Price. The decision of such independent accounting
firm shall be binding upon the parties, and the fees and expenses of such
independent accounting firm shall be borne one-half by Buyer and one-half by
Sellers. The Purchase Price as so adjusted is referred to herein as the "Final
Purchase Price". If the Estimated Purchase Price exceeds the Final Purchase
Price, Sellers shall pay to Buyer the amount of such excess plus interest
thereon at the rate of 9% per annum from the Closing Date to the date of
payment. If the Final Purchase Price exceeds the Estimated Purchase Price,
Buyer shall pay to Sellers the amount of such excess plus interest thereon at
the rate of 9% per annum from the Closing Date to the date of payment. Any
payments contemplated by this Section 7.8 shall be made by wire transfer of
federal or other immediately available funds within five (5) business days
after the date of such final determination.
ARTICLE VIII
EXTENT AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 INDEMNIFICATION OF BUYER.
(a) Subject to the other provisions of this Article VIII, Sellers
agree after the Closing to indemnify Buyer against, and hold Buyer harmless
from, any loss, damage or expense (including reasonable attorneys' fees)
sustained by Buyer to the extent arising out of or resulting from (i) any
inaccuracy in or breach of any of the representations, warranties or covenants
made by Sellers in this Agreement, (ii) any Defect (as defined
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in Section 5.4) to the extent provided in Section 5.4(b), (iii) any
failure of Sellers to pay, perform, fulfill and discharge all costs, expenses
and liabilities (other than the Assumed Obligations) incurred by them in
connection with the Assets and Section 29 Wells prior to the Closing Date with
respect to Sellers' ownership or operation of the Assets and Section 29 Wells
prior to the Closing Date including, without limitation, all such amounts
payable after the Closing Date to holders of royalty, overriding royalty,
working or other interests in the Wells and Section 29 Wells with respect to
the sale of oil and gas or other hydrocarbons prior to the Closing Date and all
severance, production, ad valorem and similar production based taxes due and
payable after the Closing Date with respect to the sale of oil, gas or other
hydrocarbons from the Wells and Section 29 Wells prior to the Closing Date,
(iv) any claims, losses, damages, costs, expenses, causes of action and
judgments of any kind or character with respect to any liabilities (other than
the Assumed Obligations) to the extent arising prior to the Closing Date out of
or in connection with Sellers' ownership and operation of the Assets and
Section 29 Wells prior to the Closing Date, including, without limitation, any
interest, penalty and other reasonable costs and expenses incurred in
connection therewith or the defense thereof; and (v) the non-compliance by
Sellers with the bulk sales laws of Pennsylvania, West Virginia, Ohio or New
York.
(b) Notwithstanding the provisions of Section 8.1(a), Sellers
shall not be required to indemnify or hold harmless Buyer with respect to any
claim for indemnification thereunder and shall not be liable for the inaccuracy
or breach of any warranty, representation, covenant or agreement made by
Sellers herein (including, but
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not limited to, the provisions of Section 8.1(a)) or in connection with the
transactions contemplated hereby or for any Defect, except to the extent and by
the amount that the loss, damage or expense to Buyer resulting from the
breach of one or more of such warranties, representations, covenants or
agreements and/or from one or more Defects shall exceed $150,000 in the
aggregate (the "Liability Threshold"), nor shall Sellers' aggregate liability
therefor (including for any repurchase or indemnification obligation under
Section 5.6) exceed $10,000,000 for matters not involving the breach of the
representations and warranties of Sellers relating to environmental matters set
forth in Sections 2.9(b), 2.9(d), 2.9(e) or 2.20 (the "Non-Environmental
Liability Cap") and $25,000,000 including the breach of such representations
and warranties relating to environmental matters set forth in such Sections
(the "Liability Cap"), in each case as such Caps may be reduced in accordance
with the provisions of Article V. In the event of the breach of a
representation or warranty relating to Sellers' title to any of the Assets not
excluded from the sale for which Sellers are liable to Buyer under Section
8.1(a), Sellers shall have the opportunity to cure the title defect involved
and any amounts expended by Sellers in curing title shall be applied against
Sellers' Non-Environmental Liability Cap under this Section 8.1(b). In the
event of the breach of the representations and warranties of Sellers relating
to environmental matters or set forth in Sections 2.9(b), 2.9(d), 2.9(e) or
2.20 for which Sellers are liable to Buyer under Section 8.1(a), Sellers shall
have the right to control and perform any environmental remediation work
subject to Buyer's approval (which shall not be unreasonably withheld), and any
amounts expended by Sellers in connection with such remediation work shall be
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applied against Sellers' Liability Cap under this Section 8.1(b). The
indemnity provided for in this Section 8.1 shall be the sole and exclusive
remedy of Buyer for any inaccuracy or breach of any representation or warranty
or any breach of any covenant or agreement of Sellers made in or in
connection with this Agreement or the transactions contemplated hereby, except
for any inaccuracy or breach arising from facts or conditions with respect to
which Buyer receives a purchase price adjustment or reduction in Sellers'
Liability Threshold pursuant to Sections 5.1, 5.4 or 7.2 (as to which
inaccuracy or breach such purchase price adjustment or reduction in Sellers'
Liability Threshold shall be the sole and exclusive remedy of Buyer).
8.2 INDEMNIFICATION OF SELLERS. Buyer agrees after the Closing to
(i) indemnify Sellers against, and hold Sellers harmless from, any loss, damage
or expense (including reasonable attorneys' fees) sustained by Sellers arising
out of or resulting from any inaccuracy in or breach of any of the
representations, warranties or covenants made by Buyer in this Agreement, (ii)
pay, perform, fulfill and discharge the Assumed Obligations and all costs,
expenses and liabilities incurred from and after the Closing Date with respect
to the ownership or operation of the Assets from and after the Closing Date,
(iii) indemnify, defend and hold Sellers harmless from and against any and all
claims, losses, damages, costs, expenses, causes of action and judgments of any
kind or character with respect to all liabilities arising out of or in
connection with the ownership or operation of the Assets from and after the
Closing Date, including, without limitation, any interest, penalty and other
costs and expenses incurred in connection therewith or the defense thereof, and
(iv) to pay to the holders of royalty, overriding
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royalty and working interests in the Wells and Section 29 Wells the amounts to
which they are entitled with respect to the oil, gas and other hydrocarbons
produced therefrom and sold prior to the Closing Date to the extent of the
aggregate amount held by Sellers in suspense accounts and paid over to Buyer at
the Closing.
8.3 SURVIVAL. The representations and warranties set forth in
this Agreement shall survive the Closing for a period expiring on the second
anniversary of the Closing Date (the "Expiration Date"), following which date
such representations and warranties shall be of no further force or effect, and
none of the parties may bring any action or present any claim for any
inaccuracy or breach of such representations and warranties; provided, however,
that there shall be no termination of any indemnified party's right to assert a
bona fide claim for indemnification for the inaccuracy or breach of any
representation or warranty of any indemnifying party under Section 8.1 or 8.2
and to be indemnified with respect thereto in accordance with the provisions of
Article VIII if such claim has been asserted in writing in reasonable detail
and transmitted to the indemnifying party prior to the Expiration Date. The
covenants and agreements of Sellers and Buyer set forth in this Agreement shall
terminate on the Expiration Date and thereafter shall be of no further force or
effect; provided, however, that there shall be no termination of any covenant
or agreement with respect to a bona fide claim for breach thereof (or in the
case of Article VIII, for indemnification thereunder) if such claim has been
asserted in writing in reasonable detail and transmitted to the party against
whom such claim is asserted prior to the Expiration Date.
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8.4 ASSUMPTION OF DEFENSE. In the case of any claim asserted by a
third party against a party indemnified pursuant to Section 8.1 or 8.2, written
notice shall be given to the indemnifying party and the indemnified party shall
permit the indemnifying party to assume the defense of any such litigation or
claim (or litigation resulting therefrom); provided that counsel for the
indemnifying party who shall conduct the defense of such claim or litigation
shall be approved by the indemnified party (which approval shall not be
unreasonably withheld). The indemnified party may only participate in such
defense at its own expense; provided, however, that the indemnifying party
shall pay such expense to the extent required under Section 8.1 or 8.2, as
applicable, if the indemnifying party shall not in fact have employed counsel
to assume the defense of such claim or litigation. In the defense of any such
claim or litigation, the indemnifying party shall not, except with the consent
of the indemnified party (which shall not be unreasonably withheld), consent to
the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party as the case may be, of a release from all liability in
respect of such claim or litigation. The indemnifying party and the
indemnified party shall cooperate in the defense of any claim or litigation
subject to this Article VIII and the records of each shall be available to the
other with respect to such defense.
8.5 ADJUSTMENTS TO INDEMNIFICATION PAYMENTS. Any payment required
to be made by the indemnifying party pursuant to Section 8.1 or 8.2 in respect
of any claim shall be net of any proceeds realized by and paid to the
indemnified party in respect of such claim under any applicable insurance or
other indemnities or warranties. The
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indemnified party shall use its reasonable efforts to make claims under any
applicable insurance or other indemnities or warranties relating to any claim
for which it is seeking indemnification pursuant to this Article VIII. Any
payment made by the indemnifying party to or on behalf of the indemnified party
pursuant to this Article VIII shall not take into account, and the indemnified
party shall have no claim for indemnification and the indemnifying party shall
not be liable in respect of, (a) any taxes (including all interest and
penalties thereon) attributable to the receipt or payment of any indemnity
payment by the indemnifying party pursuant to this Article VIII, or (b) any
punitive, exemplary, consequential or similar damages, except for such damages
awarded with respect to a claim asserted by a third party against the
indemnified party to the extent such indemnified party is entitled to
indemnification hereunder with respect thereto. Unless otherwise required by
law, each of the Sellers and Buyer agree to treat any such indemnity payment by
the other party as an adjustment to the Purchase Price for tax purposes.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated in the following
instances:
(a) Subject to Section 9.2(a), by written notice from either Buyer
or Sellers to the other if the Closing shall not have occurred on or prior to
5:00 p.m. New York City time on September 15, 1995;
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(b) By written notice from either Buyer or Sellers to the other if
a final non-appealable judgment or order has been entered against Buyer or
either of the Sellers restraining, prohibiting, declaring illegal or awarding
substantial damages in connection with the transactions contemplated hereby;
(c) Subject to Section 9.2(a), by written notice from Sellers to
Buyer if any of the conditions contained in Section 6.1 hereof are not
satisfied at the time established (pursuant to Section 7.1) for the Closing to
occur;
(d) Subject to Section 9.2(a), by written notice from Buyer to
Sellers if any of the conditions contained in Section 6.2 hereof are not
satisfied at the time established (pursuant to Section 7.1) for the Closing to
occur; or
(e) At any time by the mutual written agreement of Buyer and
Sellers.
9.2 EFFECT OF TERMINATION; LIMITATION ON RIGHT TO TERMINATE.
(a) Neither Sellers nor Buyer shall be allowed to exercise any
right of termination pursuant to Section 9.1 if the event giving rise to the
termination right shall be due to the failure of the party seeking to terminate
this Agreement to perform in any material respect any of the covenants or
agreements set forth herein to be performed by such party.
(b) If this Agreement is terminated as permitted under Section
9.1, such termination shall be without liability to any party to this
Agreement; provided, however, that if this Agreement is terminated pursuant to
the provisions of Sections 9.1(a), 9.1(c) or 9.1(d) due to the failure of any
party to perform in any material respect any of the covenants or agreements set
forth herein to be performed or observed by such party,
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such party shall pay to the other as liquidated damages the sum of
$1,000,000 in cash on demand. Such payment shall be the sole and exclusive
remedy of the recipient with respect to any such failure to perform by the
other.
(c) Sellers and Buyer hereby agree that the provisions of this
Section 9.2 and of Sections 10.6 and 4.2(b) shall survive any termination of
this Agreement pursuant to the provisions of Section 9.1.
ARTICLE X
MISCELLANEOUS
10.1 EMPLOYMENT AND SEVERANCE MATTERS. Buyer shall have the right
(but not the obligation) prior to the Closing to interview employees of Sellers
and to extend offers of employment to such of those employees as Buyer shall
determine. For each Quaker State or QSE&P employee hired by Buyer and
subsequently laid off or discharged by Buyer for other than good cause during
the one hundred twenty (120) day period following the Closing, Quaker State
agrees to provide severance benefits for such employee in accordance with
Quaker State policies and practices as presently in effect.
10.2 EXCLUSIVE AGREEMENT. This Agreement supersedes all prior
written or oral agreements between the parties with respect to the transactions
contemplated herein, other than the Confidentiality Agreement and, except for
such Confidentiality Agreement, is intended as a complete and exclusive
statement of the terms of the agreement between the parties with respect to the
transactions contemplated herein.
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10.3 AMENDMENTS. No amendment or modification of this Agreement
and no waiver hereunder shall be binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification
or waiver is sought. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Terms such as "herein," "hereby," "hereto"
and "hereof" refer to this Agreement as a whole.
10.4 BENEFIT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assignable or otherwise transferable by
any party hereto without the written consent of the other party hereto. No
such assignment shall release any party of any of its obligations under this
Agreement. Nothing in this Agreement shall entitle any person other than the
parties hereto and their respective successors and permitted assigns to any
claim, cause of action, remedy or right of any kind. As used herein, the terms
"Sellers' knowledge", "knowledge of Sellers", "best knowledge of Sellers", and
"known to Sellers" and similar references shall mean the actual knowledge of
any of the Designated Employees. "Designated Employees" means the directors
and officers of each of the Sellers and Carl Carlson, Duane Clark, Sam Barber,
Janus Morris, Shirley Riddle and Frank Rotundo. For purposes of Article II and
Section 4.1, Sellers shall not be deemed to have received any notice or claim
or threat thereof unless such notice or claim or threat thereof shall have been
received in writing (or, in the case of any oral notice from any governmental
authority referred to in Section
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2.20(d), orally) by the Legal Department of Quaker State or by one of the
Designated Employees.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same agreement.
10.6 EXPENSES. Sellers, on the one hand, and Buyer on the other
hand, shall bear their respective expenses, costs and fees (including transfer
taxes, attorneys', auditors' and financing commitment fees) in connection with
the transactions contemplated hereby including the preparation, execution and
delivery of this Agreement and compliance herewith, whether or not the
transactions contemplated hereby shall be consummated.
10.7 FURTHER ASSURANCES.
(a) The parties hereto each agree to deliver or cause to be
delivered to the other on the Closing Date, and at such other times thereafter
as shall be reasonably requested, any additional instrument that the other may
reasonably request for the purpose of carrying out this Agreement.
(b) After the Closing, Sellers and Buyer shall execute,
acknowledge and deliver all such further conveyances, transfer orders, division
orders, notices, assumptions, releases and acquittances, and such other
instruments, and shall take such further actions not requiring any expenditure
of money as may be reasonably necessary or appropriate to assure fully to
Buyer, its successors or assigns, ownership of all of the Assets intended to be
conveyed to Buyer pursuant to this Agreement.
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10.8 NO OTHER REPRESENTATIONS OR WARRANTIES, ETC. NOTWITHSTANDING
ANYTHING CONTAINED IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT AND
UNDERSTANDING OF EACH OF THE PARTIES THAT NONE OF THE PARTIES IS MAKING ANY
REPRESENTATION OR WARRANTY WHATSOEVER, ORAL OR WRITTEN, EXPRESS OR IMPLIED,
OTHER THAN THOSE SET FORTH IN ARTICLES II AND III AND NONE OF THE PARTIES IS
RELYING ON ANY STATEMENT, REPRESENTATION OR WARRANTY, ORAL OR WRITTEN, EXPRESS
OR IMPLIED, MADE OR COMMUNICATED TO SUCH PARTY, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN SUCH ARTICLES. EXCEPT AS OTHERWISE SPECIFICALLY
SET FORTH IN THIS AGREEMENT, SELLERS EXPRESSLY DISCLAIM ANY EXPRESS OR IMPLIED
WARRANTY OR REPRESENTATION AS TO THE CONDITION, MERCHANTABILITY, USEFULNESS OR
SUITABILITY FOR ANY PURPOSE OF ANY OF THE ASSETS, AND IT IS UNDERSTOOD AND
AGREED THAT, EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT,
BUYER TAKES THE ASSETS "AS IS" AND "WHERE IS", IN THEIR THEN PRESENT CONDITION
AND STATE OF REPAIR WITH ALL FAULTS. THE PARTIES AGREE THAT THIS IS AN ARM'S
LENGTH TRANSACTION IN WHICH THE PARTIES' UNDERTAKINGS AND OBLIGATIONS ARE
LIMITED TO THE PERFORMANCE OF THEIR OBLIGATIONS UNDER THIS AGREEMENT. BUYER
ACKNOWLEDGES THAT IT HAS ONLY A CONTRACTUAL RELATIONSHIP WITH SELLERS, BASED
SOLELY ON THE TERMS OF THIS
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AGREEMENT, AND THAT THERE IS NO SPECIAL RELATIONSHIP OF TRUST OR RELIANCE
BETWEEN BUYER AND SELLERS.
10.9 ACCESS TO COMPUTER. From the Closing Date until November 1,
1995, Sellers agree that Buyer shall have reasonable access to the computer to
the extent available at the corporate offices of Sellers in Oil City,
Pennsylvania to assist Buyer in disbursing royalties, rentals and production
revenue checks.
10.10 BULK SALES COMPLIANCE WAIVER. Buyer hereby waives compliance by
Sellers with any applicable bulk sales laws.
10.11 NOTICES. Any notice, request, instruction or other
communication required or permitted to be given hereunder by either Sellers or
Buyer to the other shall be in writing and shall be duly given if (a) delivered
by hand, (b) mailed by certified mail, return receipt requested, (c) sent by
telecopier, or (d) sent by Express Mail, Federal Express or other courier
delivery service, as follows:
If to Sellers, addressed to:
Quaker State Corporation
255 Elm Street
Oil City, PA 16301
Attention: Paul C. Konney
Telephone: (814) 676-7676
Telecopier: (814) 676-7030
If to Buyer, addressed to:
Belden & Blake Corporation
5200 Stoneham Road
North Canton, Ohio 44720
Attention: Joseph M. Vitale
Telephone: (216) 499-1660
Telecopier: (216) 497-5470
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or, in each case, at such other address as may be specified in writing to the
other party hereto in accordance herewith.
Notice given by hand, Express Mail, Federal Express or other courier
delivery service or by mail shall be effective upon receipt. Notice given by
telecopier shall be effective upon actual receipt if received during the
recipients' normal business hours, or at the beginning of the recipients' next
business day after receipt if not received during the recipients' normal
business hours. All notices by telecopier shall be confirmed by the sender
promptly after transmission in writing by certified mail or personal delivery.
Any party may change the address to which notice is to be given to it by giving
notice as provided above of such change of address.
10.12 GOVERNING LAW, ETC. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof. Buyer and Sellers hereby irrevocably submit to the jurisdiction
of the courts of the State of New York and the Federal courts of the United
States of America located in the State, City and County of New York solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and hereby waive,
and agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or
is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any of such document may not be enforced
in or by said courts, and the parties
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hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State or Federal
court. Buyer and Sellers hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of any
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 10.11, or
in such other manner as may be permitted by law, shall be valid and sufficient
service thereof.
10.13 WAIVER OF PUNITIVE DAMAGES. THE PARTIES TO THIS AGREEMENT
EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY,
CONSEQUENTIAL OR SIMILAR DAMAGES IN (I) ANY CLAIM FOR INDEMNIFICATION UNDER
ARTICLE VIII OF THIS AGREEMENT OR (II) ANY ARBITRATION, LAWSUIT, LITIGATION OR
PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT, OR THE BREACH,
TERMINATION OR VALIDITY OF ANY PROVISION OF THIS AGREEMENT OR ANY RELATED
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY RELATED
DOCUMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (C) IT MAKES THIS WAIVER
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VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.13.
10.14 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR ANY
RELATED DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
RELATED DOCUMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY, AND (D) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.14.
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Executed as of the date first set forth above.
SELLERS :
QUAKER STATE CORPORATION
By : /s/ Conrad A. Conrad
------------------------------
QSE&P, Inc.
By : /s/ Conrad A. Conrad
------------------------------
BUYER :
BELDEN & BLAKE CORPORATION
By : /s/ Henry S. Belden, IV
------------------------------
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