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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT To SECTION 13 OR 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 1, 1995
HUNTER RESOURCES, INC.
(Exact name of Registrant as specified in its Charter)
Commission file number 1-1705
Pennsylvania 87-0205057
(State of Incorporation) (I.R.S. Employer Identification No.)
600 East Las Colinas Blvd., Suite 1200, Irving, Texas 75039
(Address of principal executive offices) (Zip Code)
(214) 401-0752
(Registrant's telephone number, including area code)
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Page 1 of 39 pages contained in the sequential numbering system.
1
CURRENT REPORT OF EVENTS
Item 2. Recent Developments
On December 1, 1995, Hunter Gas Gathering, Inc. ("Hunter Gas"), a wholly-owned
subsidiary of Hunter Resources, Inc. ("Hunter"), closed on an acquisition
("Superior") of two unregulated gas gathering systems. The total consideration
was $1 million cash, funded by Hunter's existing line of credit. The acquisition
had an effective date of July 1, 1995. The gathering systems are located in
Texas and Louisiana.
Item 7. Financial Statements and Exhibits.
Sequentially
Numbered Page
(a) Financial Statements of the Business Acquired:
Historical Summary of Revenue and Direct Operating Expenses (Unaudited) for the
Year Ending December 31, 1994 and Nine Months Ending September 30, 1995 3
Notes to Unaudited Historical Summary of Revenues and Direct Operating Expenses for the
Year Ending December 31, 1994 and Nine Months Ending September 30, 1995 4
(b) Pro forma financial information:
Pro Forma Consolidated Financial Information (unaudited) 5
Pro Forma Consolidated Balance Sheet (unaudited) as of September 30, 1995 6
Pro Forma Consolidated Statement of Operations (unaudited)
For the Twelve Months Ended December 31, 1994 7
Pro Forma Consolidated Statement of Operations (unaudited)
For the Nine Months Ended September 30, 1995 8
Notes to Unaudited Pro Forma Consolidated Financial Statements 9
(c) Exhibits:
Agreement to Acquire Assets 10
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: August 19, 1996 HUNTER RESOURCES, INC.
By: /s/ Gary C. Evans
-----------------
Gary C. Evans
President
2
HUNTER RESOURCES, INC. AND SUBSIDIARIES
PROPERTIES ACQUIRED DECEMBER 1, 1995
Historical Summary of Revenues and Direct Operating Expenses for the
Year Ending December 31, 1994 and the Nine Months Ending September 30, 1995
(Unaudited)
Year Nine Months
Ended Ended
1994 1995
------------------------------------------------------------
Gas gathering and marketing $ 3,133,000 $ 1,797,000
Oil and gas sales 39,000 33,000
Purchases of natural gas (2,451,000) (1,287,000)
Pipeline operating expenses (494,000) (298,000)
------------------------------------------------------------
Net revenues
$ 227,000 $ 245,000
------------------------------------------------------------
See Notes to Unaudited Historical Summary
3
HUNTER RESOURCES, INC. AND SUBSIDIARIES
Properties Acquired December 1, 1995
Notes to Unaudited Historical Summary of Revenues and Direct
Operating Expenses for Year
Ending December 31, 1994 and Nine Months Ending September 30, 1995
1. Basis of Presentation
The accompanying Historical Summary of Revenues and Direct Operating
Expenses relates to the operations of the gathering systems acquired by Hunter
Resources, Inc. (the "Company") on December 1, 1995. The properties were
acquired in exchange for $1,000,000 in cash, funded by an existing bank line of
credit. Revenues are recorded when gas is transported through the gathering
systems and when oil and gas is sold. Direct operating expenses are recorded
when the related liability is incurred. Direct operating expenses include
purchases of natural gas and pipeline operating expenses. Depreciation and
amortization of oil and gas properties and general and administrative expenses
have been excluded from operating expenses in the accompanying historical
summary because the amounts would not be comparable to those resulting from
proposed future operations.
2. The Historical Summary presented herein was prepared for the purposes of
complying with the financial statement requirements of a business acquisition to
be filed on Form 8-K as promulgated by Regulation S-B Item 3-10 of the
Securities Exchange Act of 1934.
4
MAGNUM PETROLEUM, I. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(unaudited)
The following unaudited pro forma consolidated balance sheet of the Company is
based on the historical consolidated balance sheet as of September 30, 1995,
adjusted to give effect for the acquisition of the Superior gas gathering
systems acquired December 1, 1995, the purchase of the remaining ownership
interests of Midland Hunter Petroleum Limited Liability Company ("Midland") on
October 18, 1995, and the Reef and Tana oil and gas properties acquired October
25, 1995 and November 9, 1995 as if the acquisitions had been consummated at the
balance sheet date. The historical consolidated statements of operations of the
Company for the year ended December 31, 1994 and the nine months ended September
30, 1995 have been adjusted to give effect for the Superior acquisition as if
the acquisition had been consummated at the beginning of each respective period
presented. In addition, the Company has also adjusted the consolidated
statements of operations for the acquisition on March 31, 1995 of the Arrington
oil and gas properties, the October 18, 1995 acquisition of the Midland
ownership interest, the October 25, 1995 acquisition of the Reef oil and gas
properties and the November 9, 1995 acquisition of the Tana oil and gas
properties as if the acquisitions had been consummated at the beginning of each
respective period presented. The Arrington, Midland, Reef and Tana acquisitions
were previously reported on amended Forms 8-K filed September 26, 1995, July 24,
1996, January 8, 1996, and January 24, 1996, respectively.
The pro forma consolidated balance sheet and statements of operations have
been prepared based on estimates and assumptions deemed by management of the
Company to be appropriate and do not purport to be indicative of the results of
operations which would actually have been obtained if the acquisitions had
occurred as presented in such statements, or which may be obtained in the
future. The pro forma consolidated balance sheet and statements of operations
should be read in conjunction with the historical consolidated financial
statements and notes thereto included in the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1994 and the Company's Quarterly Report on
Form 10-QSB for the nine months ended September 30, 1995, which have been filed
with the Securities and Exchange Commission.
5
HUNTER RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(Unaudited)
Hunter Midland Pro Forma Combined
Historical Historical Adjustments Pro Forma
------------- ------------- ------------- -------------
ASSETS
CURRENT ASSETS:
Cash $ 87,000 $ 47,000 $(F) (12,000) $ 122,000
Notes and accounts receivable, net:
Trade (less reserve of $84,000) (A) 300,000
Affiliates (A)(300,000)
Prepaids 852,000 77,000 (F) (19,000) 910,000
TOTAL CURRENT ASSETS 79,000 79,000
91,000 12,000 (F) (3,000) 100,000
------------- ------------- ------------- -------------
1,109,000 136,000 (34,000) 1,211,000
------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT:
Oil and gas properties, full cost method 8,780,000 1,563,000 (A)6,387,000 16,339,000
(F) (391,000)
Pipelines 674,000 (A)1,000,000 1,674,000
Other property 218,000 218,000
------------ ------------ ------------- -------------
9,672,000 1,563,000 6,996,000 18,231,000
Accumulated depreciation, depletion,
amortization and impairment (4,934,000) (476,000) (A) 476,000 (4,934,000)
PROPERTY AND EQUIPMENT, NET 4,738,000 1,087,000 7,472,000 13,297,000
------------ ------------ ------------- -------------
Excess of cost of investments in subsidiaries
over net assets acquired, 963,000 963,000
Accounts and notes receivable, net: Trade - -
Affiliates 86,000 86,000
Deposits and other assets 4,000 2,000 6,000
------------ ------------ ------------- -------------
TOTAL ASSETS $ 6,900,000 $ 1,225,000 $ 7,438,000 $ 15,563,000
============ ============ ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities: Trade $ 957,000 $ 170,000 $(A) 20,000 $ 1,105,000
(F) (42,000)
Affiliates 19,000 60,000 (F) (15,000) 64,000
Suspended revenue interests 733,000 733,000
Notes payable, current 575,000 204,000 (A)2,731,000 3,459,000
(F) (51,000)
------------ ------------ ------------- -------------
TOTAL CURRENT LIABILITIES 2,284,000 434,000 2,643,000 5,361,000
Deferred income tax 7,000 7,000
Long-term debt, less current portion 1,166,000 191,000 (F) (48,000) 6,122,000
(A)4,813,000
Production Payment Liability (Non-Recourse) 305,000 305,000
Other Liabilities 85,000 - (A) 600,000 685,000
TOTAL LIABILITIES ------------ ------------ ------------- -------------
Commitments and contingencies 3,847,000 625,000 8,008,000 12,480,000
============ ============ ============= =============
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 1,000,000 shares authorized
for each Class A,B,C; 90,000 shares (Class A, Series 1)
issued and outstanding 90,000 90,000
Common stock, $.10 par value; 100,000,000 shares authorized;
18,354,261 shares issued and outstand 1,835,000 1,835,000
Capital in excess of par value 1,816,000 560,000 (F)(560,000) 1,816,000
Accumulated deficit (668,000) 40,000 (F) (10,000) (638,000)
------------ ------------ ------------- -------------
3,073,000 600,000 (570,000) 3,103,000
Less 22,000 shares of treasury stock at cost and Put stock (20,000) - (20,000)
------------ ------------ ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 3,053,000 600,000 (570,000) 3,083,000
------------ ------------ ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,900,000 $ 1,225,000 $ 7,438,000 $ 15,563,000
============ ============ ============= =============
See notes to Pro Forma Consolidated Financial Statements
6
HUNTER RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Twelve Months ended December 31, 1994
-------------------------------------------------------------------------------------------------
Hunter Arrington Midland Reef Tana Superior Pro forma Combined
Historical Historical Historical Historical Historical Historical Adjustments Pro forma
---------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
Revenues:
Gas gathering and marketing $ 443,000 $ $ $ $ $3,133,000 $ $ 3,576,000
Oil and gas sales 581,000 563,000 921,000 1,446,000 3,176,000 39,000 (F) (230,000) 6,496,000
Oil field services and
commissions 1,122,000 (B) 48,000 1,170,000
Interest 26,000 26,000
Other 184,000 184,000
---------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
TOTAL REVENUES 2,356,000 563,000 921,000 1,446,000 3,176,000 3,172,000 (182,000) 11,452,000
---------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
Expenses:
Purchases of natural gas 262,000 2,451,000 2,713,000
Pipeline operations 76,000 494,000 570,000
Lease operating 412,000 153,000 693,000 327,000 674,000 (F)(173,000) 2,086,000
Cost of services 654,000 654,000
Depreciation, depletion,
amortization and impairment 263,000 167,000 (C)1,377,000 1,807,000
General and administrative 513,000 25,000 (D) 52,000 590,000
Interest 44,000 32,000 (E) 603,000 679.000
Legal settlement expenses 117,000 117,000
---------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
TOTAL EXPENSES 2,341,000 153,000 917,000 327,000 674,000 2,945,000 1,859,000 9,216,000
---------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
NET INCOME (LOSS) 15,000 410,000 4,000 1,119,000 2,502,000 227,000 (2,041,000) 2,236,000
PREFERRED DIVIDENDS (9,000) (9,000)
---------- --------- ---------- ---------- ---------- ---------- ------------- -------------
NET INCOME (LOSS)
APPLICABLE TO COMMON STOCK $ 6,000 $410,000 $ 4,000 $1,119,000 $2,502,000 $ 227,000 $ (2,041,000) $ 2,227,000
========== ========== ========== ========== ========== ========== ============= =============
NET INCOME PER SHARE
primarily and fully diluted) $ * $ .12
========== =============
* Less than $.01 per share
See notes to Pro Forma Consolidated Financial Statements
7
HUNTER RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Nine Months ended September 30, 1995
-------------------------------------------------------------------------------------------------
Hunter Arrington Midland Reef Tana Superior Pro forma Combined
Historical Historical Historical Historical Historical Historical Adjustments Pro forma
----------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
Revenues:
Gas gathering and marketing $ 144,000 $ $ $ $ $1,797,000 $ $ 1,941,000
Oil and gas sales 708,000 123,000 563,000 859,000 1,495,000 33,000 (F) (141,000) 3,640,000
Oil field services and
commissions 409,000 (B) 11,000 420,000
Interest 20,000 20,000
Other 271,000 115,000 (F) (29,000) 357,000
----------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
TOTAL REVENUES
1,552,000 123,000 678,000 859,000 1,495,000 1,830,000 (159,000) 6,378,000
----------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
Expenses:
Purchases of natural gas 83,000 1,287,000 1,370,000
Pipeline operations 41,000 298,000 339,000
Lease operating 329,000 32,000 405,000 225,000 531,000 (F) (101,000) 1,421,000
Cost of services 299,000 299,000
Depreciation, depletion,
amortization and impairment 284,000 102,000 (C) 748,000 1,134,000
General and administrative 349,000 44,000 (D) 30,000 423,000
Interest 129,000 34,000 (E) 550,000 713,000
----------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
TOTAL EXPENSES
1,514,000 32,000 585,000 225,000 531,000 1,585,000 1,227,000 5,699,000
----------- ---------- ---------- ---------- ---------- ---------- ------------- -------------
NET INCOME (LOSS) $ 38,000 $ 91,000 $ 93,000 $ 634,000 $ 964,000 $ 245,000 $(1,386,000) $ 679,000
=========== ========== ========== ========== ========== ========== ============= =============
NET INCOME PER SHARE $ * $ .04
(primarily and fully diluted) =========== =============
* Less than $.01 per share
See notes to Pro Forma Consolidated Financial Statements
8
HUNTER RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following adjustments have been reflected in the accompanying Pro Forma
Consolidated Balance Sheet as of September 30, 1995 and Consolidated Statements
of Operations for the year ended December 31, 1994 and the nine months ended
September 30, 1995 to give effect for the Superior acquisition of gas gathering
pipelines on December 1, 1995.
A) To reflect the acquisition of the Superior gas gathering systems for
$1,000,000 funded by a borrowing from the Company's principal lending bank.
The adjustment also reflects the acquisition of the remaining seventy-five
percent (75%) ownership interest in an affiliated company ("Midland") from
a joint venture partner. The purchase price of $1,075,287 consisted of i)
$300,000 in cash which was borrowed from Magnum Petroleum, Inc. ("Magnum"),
ii) $300,000 represented by 85,131 shares of restricted common stock of
Magnum valued at $3.52 per share and iii) the assumption of existing bank
indebtedness of $475,287. In addition, the adjustment reflects the
acquisition of the Reef properties on October 25, 1995 for $2,335,000
funded by a borrowing from the Company's principal lending bank and the
issuance of a note payable to Magnum Petroleum, Inc. for $257,000,
representing the value of the Magnum Petroleum, Inc. shares issued in the
acquisition. Also, the adjustment reflects the acquisition of the Tana
properties on November 9, 1995 for $4,229,000 funded by a borrowing from
the Company's principal lending bank for $3,104,000 and the issuance of a
note payable to the previous owner in the amount of $1,125,000.
B) To reflect overhead fee income charged to outside owners on the acquired
properties for which operating rights were also acquired. The overhead fee
income generated by the Arrington acquisition was estimated at $43,000 and
$7,000 for the year ended December 31, 1994 and the nine months ended
September 30, 1995, respectively. The remainder of $5,000 and $4,000 arose
from the Reef acquisition.
C) To reflect additional depletion on oil and gas properties as recalculated
using the full cost method and depreciation of pipelines over a fifteen
year life using the straight-line method.
D) To reflect additional estimated general and administrative costs associated
with the increase in the number of properties and the assumption of
operator's duties on the acquired properties. The estimated additional
general and administrative expense for the Arrington acquisition was $6,000
and $2,000 for the year ended December 31, 1994 and the nine months ended
September 30, 1995, respectively. An additional $12,000 and $9,000,
respectively, arose from the Reef acquisition, while the Tana acquisition
accounted for $20,000 and $15,000, respectively. The Superior acquisition
accounted for $20,000 and $15,000, respectively. Also, the expense
adjustment includes the elimination of $6,000 and $11,000 respectively,
related to the Midland acquisition as such amounts are included in the
Hunter historical amounts.
E) To reflect interest expense associated with the financed portion of the
acquisitions. The estimated additional interest expense for the Arrington
acquisition amounted to $120,000 and $32,000 for the year ended December
31, 1994 and the nine months ended September 30, 1995. The Reef acquisition
amounted to $169,000 and $170,000 for the respective periods, while the
Tana acquisition amounted to $254,000 and $291,000, respectively. The
Superior acquisition contributed $68,000 and $66,000, respectively. In
addition, the expense adjustment includes the elimination of $8,000 and
$9,000, respectively, related to the Midland acquisition as such amounts
are included in the Hunter historical amounts.
F) To eliminate amounts related to the Midland acquisition which are recorded
in the Hunter historical amounts.
9
EXHIBIT "A"
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement"), is entered
into this 18th day of August, 1995, but effective as of 7:00 a.m., Central
Daylight Savings Time, on July 1, 1995 (the "Effective Time"), by and among
SUPERIOR PIPELINE CORPORATION, a British Columbia corporation ("Superior"),
SUPERIOR PIPELINE CORPORATION, a Texas corporation ("SPC"), CWF ASSOCIATES,
LTD., a Texas limited partnership ("CWF") (Superior, SPC and CWF are sometimes
referred to hereinafter individually as "Seller" and collectively as the
"Sellers") and HUNTER GAS GATHERING, INC., a Texas corporation ("Buyer").
RECITALS
A. SPC operates gas gathering systems and pipelines in the States of Texas,
New Mexico and Louisiana (the "Business").
B. SPC owns certain gas gathering systems and pipelines known as the North
Appleby Gas Gathering System, Longwood Gas Gathering System, West Mims Gas
Gathering System and East Carlsbad Gas Gathering System (the "Systems") and
rights related thereto (the Systems and related rights are collectively referred
to herein as the "Assets"), all as more particularly described in Section 1.1 of
this Agreement and the diagrams attached thereto.
B. Superior owns all of the issued and outstanding shares of capital stock
of SPC and CWF is the majority shareholder of Superior.
C. Sellers desire for SPC to sell, and Buyer desires to purchase, the
Assets on the terms, and subject to the conditions, hereinafter set forth.
TERMS AND CONDITIONS
In consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to the
conditions set forth herein, the parties hereby agree as follows:
1.PURCHASE AND SALE OF ASSETS.
1.1
ASSETS TO BE PURCHASED AND SOLD. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined), effective as of the
Effective Time, SPC shall, and Superior and CWF shall cause SPC to, sell,
assign, transfer, deliver and convey to Buyer, and Buyer shall purchase,
acquire, accept and pay for, all of SPC's right, title and interest in and to
the Assets,
10
free and clear of any Liens (as hereinafter defined), which shall include the
following items to the extent applicable to the Systems:
(a) each of the Systems described on Schedule 1.1(a) attached hereto,
including, but not limited to, all pipe, meters, metering tubes,
metering stations, controllers, samplers, recorders, valves, generators,
motors, pumping stations, pumping equipment, compressor stations,
compressor equipment, cathodic or electrical protection units, bypasses,
regulators, drips, flanges, welds, pig traps, flow control equipment,
separators, dehydration and storage facilities, measurement and other
equipment, software and any connections, fittings and appurtenant
facilities as of the Effective Time installed in or upon or otherwise
related to operation or maintenance of the Systems (the "Equipment");
(b) all contracts and agreements, including but not limited to, (i) gas
transportation agreements, gas purchase agreements, gas sale agreements,
gas marketing agreements, gas treatment agreements, liquid sales
agreements, equipment leases and all other agreements pertaining to the
Assets listed on Schedule 1.1(b)(i) and (ii) permits, consents,
authorizations, qualifications, certificates, registrations and other
approvals and licenses used in connection with the construction,
operation and maintenance of the Systems listed on Schedule 1.1(b)(ii),
together with SPC's rights under any confidentiality or similar
agreements entered into with third parties relating to the Systems
(collectively, the "Assumed Contracts");
(c) all easements, rights-of-way and real property interests pertaining
to the Systems or used in connection with the construction, operation
and maintenance of the Systems and owned by SPC at the Effective Time,
including, but not limited to, all real property leases and all rights
to use the surface of any lands or other properties for access to the
Systems (including prescriptive rights) owned by SPC (collectively, the
"Real Property Interests");
(d) all of the files, records and data relating to the items described
in subsections (a), (b), and (c) of this Section 1.1, including, but not
limited to, all operating processes, drawings, specifications,
blueprints, flow sheets, equipment and parts lists and descriptions,
related instructions, manuals, data, operating records, technical
records, contract files and accounting records and procedures related to
the Systems (collectively, the "Records");
(e) all liquid hydrocarbon inventory owned by SPC accruing to the
Systems from and after the Effective Time which has not been sold and
delivered in the ordinary course of SPC's business (the "Drip"); and
(f) all other tangible and intangible Assets necessary or desirable for
Buyer to effectively operate the Systems which are owned by SPC and
which SPC can convey and which are accepted by Buyer.
1.2 EXCLUDED ASSETS.
The Assets do not include, and Buyer shall not acquire any interest in,
the following items (collectively, the "Excluded Assets"):
(a) cash on hand and on deposit in the bank accounts;
11
(b) accounts receivable, whether payable in cash, in kind or otherwise,
except accounts receivable accrued after the Effective Time, which
shall be owned by Buyer;
(c) all corporate, financial, tax and legal records (other than title and
the Records) of Sellers;
(d) prepayments, deposits and similar interests attributable to the period
prior to the Effective Time;
(e) refunds of costs, taxes or expenses attributable to the period prior
to the Effective Time;
(f) rights under the Assumed Contracts which accrue prior to the Effective
Time; and
(g) any hydrocarbons owned by producers, Sellers or others attributable to
periods prior to the Effective Time.
1.3 ASSUMPTION OF LIABILITIES.
Except as limited by this Section 1.3, Buyer hereby assumes and agrees to
pay, perform and discharge, (a) to the extent not theretofore performed, paid or
discharged, all liabilities and/or obligations arising from and after the
Effective Time under or with respect to the Assumed Contracts and (b) all
liabilities and/or obligations arising out of the operation of the Business or
the Assets from and after the Effective Time (collectively, the "Assumed
Liabilities") and Buyer expressly agrees to remain liable for, to indemnify
Sellers, their directors, officers, employees, advisors, agents, partners and
shareholders against and hold each of them harmless from, and to discharge, the
Assumed Liabilities. Notwithstanding the foregoing, Buyer assumes no liabilities
or obligations of, or claims against, Sellers other than the Assumed
Liabilities.
1.4 RETENTION OF LIABILITIES.
Except for the Assumed Liabilities, Buyer shall not assume any LIABILITIES
OR OBLIGATIONS of Sellers arising out of the operation of the Business or the
Assets prior to the Effective Time (collectively, the "Excluded Liabilities")
and Sellers expressly agree to remain liable for, to indemnify Buyer, its
directors, officers, employees, advisors, agents, partners and shareholders
against and hold each of them harmless from, and to discharge, the Excluded
Liabilities.
1.5 ASSIGNMENT AND ASSUMPTION OF ASSUMED CONTRACTS.
Buyer shall be entitled to the rights and benefits of Sellers under, and
Buyer shall assume and be responsible to perform the liabilities and obligations
of Sellers under, the Assumed Contracts for and in respect of all periods from
and after the Effective Time. Sellers shall pay to Buyer, from time to time
after the Closing, any amounts received by it after the Closing with respect to
the Assumed Contracts to the extent that such amounts pertain to or are
attributable to obligations performed or performable on or after the Effective
Time and Buyer shall pay to Sellers any amounts received by Buyer with respect
to the Assumed Contracts to the extent that such amounts pertain to or are
attributable to obligations performed by Sellers prior to the Effective Time.
Buyer assumes no obligations or liabilities of, or claims against, Sellers,
except for any obligations or liabilities of Sellers under the Assumed
12
Contracts which accrue and which would be (but for this Agreement) required to
be performed by Sellers from and after the Effective Time.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on Schedule 1.6. Buyer and Sellers hereby agree to
furnish such reports and returns to the Internal Revenue Service and the
Secretary of Treasury as may be required by Section 1060 of the Code and the
treasury regulations issued thereunder. All such reports and returns shall be
consistent with the allocation of the Purchase Price set forth on Schedule 1.6.
2. PURCHASE CONSIDERATION
2.1 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Assets shall be a total of One Million Two Hundred Thousand and No/100 U.S.
Dollars ($1,200,000.00), subject to adjustment as provided in Section 2.2 below.
One Hundred Thousand and No/100 U.S. Dollars ($100,000.00) of the Purchase Price
(the "Escrowed Funds") shall be payable upon execution of this Agreement by
Buyer and Sellers by Buyer's delivery of a confirmed wire transfer of funds,
bank cashier's check or other form of immediately available funds to First
Interstate Bank of Texas, N.A., Irving, Texas, as Escrow Agent, to be held and
distributed in accordance with the terms of the Escrow Agreement attached hereto
as Annex "A" (the "Escrow Agreement"), and the remainder shall be payable by
Buyer to Sellers at the Closing. The fees of the Escrow Agent shall be paid by
the party to which the Escrowed Funds are disbursed.
2.2 PURCHASE PRICE ADJUSTMENTS. The Purchase Price shall be subject to the
adjustment as follows:
(a) At the Closing, the Purchase Price shall be adjusted upward by (i) the
amount of all direct expenditures made by Sellers with respect to the
ownership, operation and maintenance of the Assets attributable solely to
the period from the Effective Time to the Closing Date (as hereinafter
defined) similar to those shown on Schedule 2.2(a) plus a management fee in
the amount of Six Thousand Five Hundred and No/100 U.S. Dollars ($6,500.00)
per month, (ii) the amount of all reasonable direct expenditures made by
SPC for capital improvements and modifications in accordance with the terms
of this Agreement, including, but not limited to, expansion improvements
and modifications to the North Appleby Gas Gathering System, during the
period from the Effective Time to the Closing Date, (iii) all prepaid
expenses attributable to the Assets paid by Sellers prior to the Effective
Time which are attributable to the period from and after the Effective
Time, and (iv) any other amount agreed upon by Sellers and Buyer in
accordance with the terms of this Agreement; and downward by (x) the gross
proceeds received by Sellers and attributable to the Assets during the
period from the Effective Time to the Closing Date (the gross proceeds
shall not include proceeds received by Sellers at any time insofar as such
proceeds are attributable to the Assets for periods prior to the Effective
Time, which proceeds shall belong to Sellers), (y) the proceeds from the
sale, salvage or other disposition of equipment comprising a part of the
Assets made in accordance with the terms of this Agreement during the
period from the Effective Time to the Closing Date, and (z) any other
amount agreed upon by Sellers and Buyer, including without limitation,
adjustments to the Purchase Price in accordance with Article 6 hereof.
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(b) As soon as reasonably practicable after the Closing, but not later than
ninety (90) days thereafter, the parties undertake to and shall, in
accordance with this Agreement and generally accepted accounting
principles, agree with respect to a statement (the "Final Settlement
Statement") setting forth each adjustment or payment that was not finally
determined as of the Closing and showing the calculation of such
adjustments to the Purchase Price. The parties shall undertake to agree
with respect to the Final Settlement Statement and the "Final Purchase
Price" no later than February 15, 1996. In the event that (i) the Final
Purchase Price is more than the adjusted Purchase Price paid at Closing,
Buyer shall pay to Sellers the amount of such difference; or (ii) the Final
Purchase Price is less than the adjusted Purchase Price paid at Closing,
Sellers shall pay to Buyer the amount of such difference, in either event
by corporate check.
(c) Ad Valorem taxes for the current year and utility charges for the
billing periods including the Effective Time shall be apportioned pro rata
among Buyer and Sellers as of the Effective Time. If the amount of ad
valorem taxes for the current year and the amount of utility charges for
the billing periods including the Effective Time are not ascertainable on
the Effective Time, such taxes and utility charges shall be apportioned
based on the immediately preceding tax year and billing periods; provided,
however, that such utility charges shall be reapportioned based on actual
charges promptly after such amounts are ascertained.
(d) Sellers hereby are authorized and permitted to solicit proposals and
offers from, or respond to a submission of a proposal or offer from, any
person or entity (other than Buyer) relating to any transaction which would
result in the acquisition, purchase or other transfer of all or any portion
of the East Carlsbad Gas Gathering System and the West Mims Gas Gathering
System; provided, however, that prior to effecting any such transaction
Sellers shall have obtained Buyer's written approval thereof. If such a
transaction occurs, the Purchase Price shall be reduced by the purchase
price received by Sellers for such gas gathering systems and this Agreement
shall be amended to delete any reference to such gas gathering systems from
the Assets being transferred hereunder.
3. THE CLOSING.
3.1 PLACE, TIME AND DATE. The consummation of the purchase and sale of the
Assets provided for in this Agreement (the "Closing") shall take place at
the offices of Locke Purnell Rain Harrell, 2200 Ross Avenue, Suite 2200,
Dallas, Texas, at 10:00 a.m., Central Daylight Savings Time, on the later
of (a) ten (10) days after Sellers shall have received the necessary
consents and approvals of their shareholders or partners to the
transactions contemplated by this Agreement or (b) ten (10) days after
Superior shall have received the necessary consents, approvals and
authorizations of the Vancouver Stock Exchange to the transactions
contemplated by this Agreement, or at such other place, time or date as the
parties hereto shall mutually agree (the "Closing Date").
3.2 DELIVERIES BY SELLERS. At the Closing, Sellers shall deliver the
following to Buyer:
(a) the Escrow Agreement duly executed by Sellers;
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(b) an Assignment and Bill of Sale duly executed by SPC conveying to Buyer
all of SPC's right, title and interest in and to the Equipment, the Records
and the Drip in the form attached hereto as Annex "B" (the "Assignment and
Bill of Sale");
(c) an Assignment and Assumption Agreement duly executed by SPC conveying
to Buyer all of SPC's right, title and interest in and to the Assumed
Contracts in the form attached hereto as Annex "C" (the "Assignment and
Assumption Agreement");
(d) a special warranty deed duly executed by SPC conveying to Buyer all of
SPC's right, title and interest in and to the Real Property Interests in
the form attached hereto as Annex "D" (the "Special Warranty Deed");
(e) a Stock Purchase and Sale Agreement duly executed by SPC selling and
transferring 1,000 shares of common stock, par value $1.00 per share, which
constitute all of the issued and outstanding shares of capital stock of SPL
Gas Marketing, Inc., a Texas corporation, in the form attached hereto as
Annex "E" (the "Stock Purchase and Sale Agreement");
(f) a certificate executed by Sellers stating that the conditions set forth
in Sections 7.1(a) and 7.1(b) of this Agreement have been satisfied;
(g) certified copies of resolutions duly adopted by each Seller authorizing
the execution, delivery and performance of this Agreement and all other
agreements contemplated hereby and thereby;
(h) certificates of existence and good standing or equivalents for each
Seller from the Secretary of State of the jurisdiction of its incorporation
or organization and certificates of authority from every jurisdiction where
each Seller is doing business, each dated not earlier than fifteen (15)
days prior to the Closing Date;
(i) an opinion of counsel of Locke Purnell Rain Harrell (A Professional
Corporation) and an opinion of counsel of DuMoulin Black addressed to
Buyer, substantially in the forms attached hereto as Annex "F" and Annex
"G", respectively;
(j) consents from third parties to the assignment of the Assumed Contracts,
substantially in the form attached hereto as Annex "H"; and
(k) such other documents and instruments of transfer as may be required by
this Agreement or reasonably requested by Buyer to convey to Buyer good and
defensible title in and possessory rights to the Assets.
3.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver the following
to Sellers:
(a) a confirmed wire transfer of funds, bank cashier's check or other form
of immediately available funds in the amount of the unpaid portion of the
Purchase Price, in accordance with written instructions provided by Sellers
to Buyer prior to the Closing and as adjusted in accordance with the
provisions of Section 2.2 hereof;
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(b) the Escrow Agreement duly executed by Buyer;
(c) the Assignment and Assumption Agreement duly executed by Buyer;
(d) the Special Warranty Deed duly executed by Buyer;
(e) the Stock Purchase and Sale Agreement duly executed by Buyer; and
(f) such other documents and instruments as may be required by this
Agreement or reasonably requested by Sellers.
4.REPRESENTATIONS AND WARRANTIES.
4.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly
and severally represent and warrant to Buyer that the following are true and
correct on and as of the date of this Agreement and will be true and correct as
of the Closing as if made on and as of the Closing Date:
(a)ORGANIZATION.
(i) Superior is a corporation duly organized, validly existing and in
good standing under the laws of the Canadian Province of British
Columbia, its jurisdiction of incorporation.
(ii) SPC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, its state of
incorporation, and has full corporate power and authority to carry on
its business as now being conducted, to own and hold under lease the
properties and assets which it owns or holds under lease and perform all
its obligations under the agreements and instruments to which it is a
party or by which it is bound. SPC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state
or other jurisdiction in which the ownership or leasing of the
properties owned or leased by it or the nature of the activities
conducted by it requires such qualification.
(iii) CWF is a limited partnership organized under the laws of the State
of Texas, with full power and authority to own, lease or operate all
properties and assets now owned, leased or operated by it, to carry on
its business as now conducted and to perform all its obligations under
the agreements and instruments to which it is a party or by which it is
bound.
(b) AUTHORITY; NO CONFLICT. This Agreement constitutes the legal, valid
and binding obligation of each Seller enforceable against each Seller in
accordance with its terms. Each Seller has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this
Agreement and to perform its obligations hereunder. Neither the
execution and delivery of this Agreement by any Seller nor the
consummation of the transactions contemplated by it will:
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(i) violate or conflict with any provision of the certificate or
articles of incorporation or bylaws or other charter document of
Superior or SPC or the certificate of limited partnership or the
partnership agreement of CWF;
(ii) violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court, government,
governmental agency or instrumentality, domestic or foreign, or
arbitrator, binding upon any Seller;
(iii) result in a breach of, or constitute a default under (or with
notice or lapse of time, or both, result in a breach of or constitute a
default under), or otherwise give any person the right to terminate, any
lease, license, contract or other agreement or instrument to which any
Seller is a party or by which it is bound; or
(iv) result in, or require, the creation or imposition of, any
mortgage, deed of trust, pledge, lien, security interest or other
charge or encumbrance of any nature upon or with respect to any of the
Assets (collectively referred to herein as "Liens").
Except as set forth on Schedule 4.1(b) and for the necessary consents,
approvals and authorizations of the Vancouver Stock Exchange, the
shareholders of Superior and SPC and the partners of CWF, none of the
Sellers is required to give prior notice to, or obtain any consent,
approval or authorization of, any governmental body, creditor or other
person in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated by this
Agreement.
(c) FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Sellers have
previously delivered to Buyer copies of (i) the audited consolidated
balance sheet of Superior as of July 31, 1992, July 31, 1993 and July 31,
1994, and the related audited consolidated statements of operations,
statements of shareholders' equity and statements of cash flows for the
fiscal period from inception (October 21, 1991) to July 31, 1992 and for
the fiscal years ended July 31, 1993 and July 31, 1994, together with the
report thereon by Arthur Andersen & Co., independent public accountants,
and the footnotes thereto and (ii) the unaudited consolidated balance sheet
as of June 30, 1995 and the unaudited consolidated statements of operations
and cash flows of Superior for the period then ended (collectively, the
"Financial Statements"). The Financial Statements (i) are in accordance
with the books and records and accounting methods of Superior, (ii) present
fairly in all material respects the financial position and results of
operations of Superior on a consolidated basis as of the dates and for the
periods indicated and (iii) have been prepared in accordance with generally
accepted United States accounting principles, subject, in the case of the
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually, or in the aggregate, be materially
adverse) and the absence of footnotes (which, if presented, would not
differ materially from those included in the audited Financial Statements).
The Financial Statements reflect the consistent application of those
accounting principles throughout the periods involved, except as noted
therein.
(d) ABSENCE OF CERTAIN DEVELOPMENTS. Since June 30, 1995, SPC has not,
and Superior and CWF have not caused SPC to:
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(i) subjected any of the Assets, or permitted any of the Assets to
become subject, to any Lien;
(ii) sold, assigned, leased or otherwise transferred any of the Assets
other than in the ordinary course of business;
(iii) disclosed any proprietary or confidential information to any
person except in connection with this Agreement or in the ordinary
course of business;
(iv) operated the Business other than in the ordinary course,
consistent with SPC's past practices; or
(v) entered into any agreement or understanding (other than this
Agreement) to do or permit any of the foregoing.
(e) COMPLIANCE WITH LAW. To the best of each Seller's knowledge, SPC
has complied with all, and is not in violation of any, (i) statutes,
laws, regulations, decrees and order of the United States, all states,
municipalities and agencies (federal, state and local) and all foreign
jurisdictions applicable to the Business and/or the Assets, and (ii)
safety, health and environmental statutes, laws, regulations, decrees
and order of the United States, and all states, municipalities and
agencies (federal, state and local) applicable to the Business and/or
the Assets, except such failures to comply or violations which would
not, individually or in the aggregate, materially adversely affect the
Assets or the operations of SPC.
(f) TITLE AND CONDITION OF ASSETS. SPC has good and defensible title
to the Real Property Interests and tangible and intangible personal
property owned by it that comprise the Assets, free and clear of
Liens, other than liens and defects of title which do not,
individually or in the aggregate, materially detract from the value of
the Assets or the use or enjoyment thereof in the ordinary course of
business.
The Equipment (i) is in good operating condition, order and repair,
subject to ordinary wear and tear, and has been maintained in
accordance with standard industry practice; (ii) is capable of being
used for the purpose for which it is intended without present need for
repair or replacement except in the ordinary course of the business;
(iii) conforms in all material respects with all applicable legal
requirements known to each Seller; and (iv) in the aggregate provides
the capacity to enable SPC to engage in commercial operation on a
continuous basis (subject to normal maintenance and repair in the
ordinary course). All of the Equipment constituting the Assets is
adequate and sufficient for all operations conducted by SPC in
substantially the same manner as conducted prior to the Closing.
All real and tangible personal properties held by SPC under lease are
held under valid and binding lease agreements that are in full force
and effect. To each Seller's knowledge, SPC is not in default, and no
notice of alleged default has been received by SPC, under any such
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lease and no lessor is in default or alleged to be in default
thereunder. None of the rights of SPC under any lease will be impaired
by the consummation of the transactions contemplated by this
Agreement.
Other than its ownership of all of the issued and outstanding shares
of capital stock of SPC, Superior has no assets.
(g)TAXES.
(i)All taxes, penalties, interest and assessments, including, without
limitation, income, withholding, payroll, excise, unemployment, FICA,
medicare, franchise, sales, use, personal property, real property and
ad valorem taxes, with respect to SPC, the Business and the Assets,
have been paid in full.
(ii)All tax returns and reports required to be filed by Sellers with
respect to the Business and the Assets have been prepared in
accordance with applicable rules and regulations and timely filed with
all proper taxing authorities. Such returns are correct in all
material respects and SPC is not required to pay any other taxes, in
any amount, except as shown in such returns. An extension of time
within which to file any return or report which has not been filed has
not been requested or granted.
(iii)Sellers have not granted any waivers or extensions of time with
respect to any audit or time to collect taxes. To each Seller's
knowledge, no deficiency for any tax, assessment or governmental
charges against SPC has been threatened, claimed, proposed or
assessed.
(iv)Sellers shall be responsible for, and Buyer shall have no
liability or obligation with respect to, any tax liability incurred by
Sellers as a result of the consummation of the transactions
contemplated by this Agreement.
(h)BROKER'S OR FINDER'S FEES. No person is entitled, directly or
indirectly, to compensation by reason of any agreement or
understanding with any Seller, as a broker or finder in connection
with the sale and purchase of the Assets (other than the finder's fee
paid by Sellers to Alliance Energy Services). Sellers shall indemnify
and hold Buyer harmless from and against any and all claims by any
person as a broker or finder in connection with the sale and purchase
of the Assets, directly or indirectly, by reason of an agreement or
understanding with any Seller but not paid by Sellers.
(i) CLAIMS AGAINST THE ASSETS. There are, to each Seller's knowledge,
no first rights of refusal, preferential rights, options or claims of
a similar nature affecting the Assets.
(j) GAS AGREEMENTS. To each Seller's knowledge, there are no gas
purchase or sale agreements, gas gathering or transportation
agreements, third party operating agreements or other similar
agreements affecting the Assets, except as set forth on Schedule
4.1(j) hereto.
(k) LITIGATION AND CLAIMS. Except as set forth on Schedule 4.1(k),
there is not (a) pending or, to the knowledge of each Seller,
threatened, any litigation, action, suit, arbitration, investigation,
inquiry, audit, complaint, charge or other proceeding to which any
Seller is a party involving the Assets or Business, or to which the
Assets or the Business are subject,
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before or by any court or governmental or regulatory agency or body,
or (b) any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or
arbitrator outstanding against any Seller or enforceable against the
Assets or Business.
(l) VALIDITY OF EASEMENTS, ETC. To each Seller's knowledge, all
easements, rights-of-way, permits, crossing agreements and surface
rights included in the Assets are in full force and effect and are
valid and subsisting and, except for those consents, approvals and
authorizations set forth on Schedule 4.1(b), freely assignable, and
all rentals and other payments due thereunder have been properly and
timely paid and all conditions necessary to keep them in force have
been duly performed.
(m) ENVIRONMENTAL MATTERS. (i)To each Sellers' knowledge, no written
notice, notification, demand, request for information, citation,
summons, complaint or order has been received, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or has been threatened by any governmental entity or other
party with respect to any (A) alleged violation by SPC of any
Environmental Laws, (B) alleged failure by SPC to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with the conduct of the Business
or (C) Regulated Activity conducted by SPC.
(ii)To each Sellers' knowledge, SPC has no material Environmental
Liabilities and there has been no release of Hazardous Substances into
the environment by SPC or with respect to any of its properties which
has had, or would reasonably be expected to have, a material adverse
effect on SPC.
(iii)During the period of time SPC has owned the Systems, there have
been no mercury meters on or attached to any part of the Systems.
(iv)For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean all Federal, state and local statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and governmental restrictions applicable to the
Systems now in effect and relating to human health, the environment or
to emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof.
"Environmental Liabilities" shall mean all liabilities, whether vested
or unvested, contingent or fixed, actual or potential, which (i) arise
under or relate to Environmental Laws and (ii) relate to actions
occurring or conditions existing on or prior to the Effective Time.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, including glycol and petroleum, their
derivatives, by-products and other
20
hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Regulated Activity" shall mean any generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous
Substances.
(n) LICENSES AND PERMITS. SPC possesses all the licenses, permits
authorizations, approvals, registrations and other rights of every
kind and character listed in Schedule 1.1(b)(ii) ("Permits"), copies
of all which have been delivered to Buyer. Such Permits constitute all
the Permits necessary under law or otherwise for SPC to construct,
own, operate, maintain and use the Assets in the manner in which they
are now being constructed, operated, maintained and used. Each of such
Permits and SPC's rights with respect thereto (i) is valid and
subsisting, in full force and effect, and enforceable by SPC, and (ii)
following consummation of the transactions contemplated hereby, will
continue to be valid and substituting in full force and effect, and
enforceable by Buyer without any consent or approval of any court or
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign or third party; or, in lieu of such existing Permits,
replacement or substitute Permits will be available to or obtainable
by Buyer at little or no cost in the ordinary course after application
by Buyer therefor. To each Seller's knowledge, SPC is in compliance in
all material respects with the terms of such Permits. None of such
Permits have been, or to the knowledge of any Seller, is threatened to
be, revoked, canceled, suspended or modified.
(o) DISCLOSURE. No representation, warranty or covenant by any Seller
contained in this Agreement or the Exhibits or Schedules hereto, or
any agreement, document or instrument to be delivered at the Closing
by any Seller, contains or shall contain any untrue statement of a
material fact or omits or shall omit to state therein a material fact
(other than those facts generally recognized to be industry risks
normally associated with the Assets) necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. Copies of all documents furnished to Buyer in
connection with this Agreement or pursuant hereto are true and
complete in all material respects. None of the Sellers knows of any
facts (other than those facts generally recognized to be industry
risks normally associated with the Assets) related to the Assets which
have not been disclosed in writing to Buyer which materially and
adversely affect or will materially and adversely affect such Assets
or the ability of any Seller to perform this Agreement.
4.2 REPRESENTATION AND WARRANTIES OF BUYER. Buyer represents and
warrants to Sellers that the following are true and correct on and as
of the date of this Agreement and will be true and correct as of the
Closing as if made on and as of the Closing Date:
(a)ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas, its state of incorporation, and is qualified to
transact business and is in good standing as a foreign corporation in
the jurisdictions where it is required to qualify in order to conduct
its businesses as presently conducted. Buyer has the corporate power
and authority to own, lease or operate all properties and assets now
owned, leased or operated by it, to carry on its businesses as now
conducted and to perform all its obligations under the agreements and
instruments to which it is a party or by which it is bound.
21
(b)AUTHORITY, NO CONFLICT. Buyer has good and sufficient corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by Buyer and constitutes the legal,
valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms. Neither the execution and delivery of this
Agreement by Buyer nor the consummation of the transactions
contemplated by it will:
(i) violate or conflict with any provision of the articles of
incorporation or bylaws of Buyer;
(ii) violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court,
government, governmental agency or instrumentality, domestic or
foreign, or arbitrator binding upon Buyer; or
(iii) result in a breach of, or constitute a default under (or with
notice or lapse of time or both result in a breach of or constitute a
default under), or otherwise give any person the right to terminate,
any lease, license, contract or other agreement or instrument to which
Buyer is a party or by which it is bound and which is material to the
business or condition of Buyer.
Except for the satisfaction of any conditions referred to in Section
6, Buyer is not required to give prior notice to, or obtain any
consent, approval or authorization of, any governmental authority,
creditor or other person in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby.
(c) BROKER'S OR FINDER'S FEES. No person is entitled, directly or
indirectly, to compensation by reason of any agreement or
understanding with Buyer, as a broker or finder in connection with the
sale and purchase of the Assets. Buyer shall indemnify and hold
Sellers harmless from and against any and all claims by any person as
a broker or finder in connection with the sale and purchase of the
Assets, directly or indirectly, by reason of an agreement or
understanding with Buyer but not paid by Buyer.
(d)LITIGATION AND CLAIMS. There is not (a) pending or, to the
knowledge of Buyer, threatened, any litigation, action, suit,
arbitration, investigation, inquiry, audit, complaint, charge or other
proceeding to which Buyer is a party before or by any court or
governmental or regulatory agency or body, or (b) any judgment,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator
outstanding against Buyer which seeks to restrain or prohibit Buyer
from purchasing the Assets.
4.3 LIMITATION OF WARRANTIES AND REMEDIES. The parties agree that the
disclaimers of warranties contained in this Section 4.3 of this
Agreement are "conspicuous" for the purposes of any applicable law,
rule or order. Notwithstanding anything in this Agreement to the
contrary, the Assets are being sold by Sellers to Buyer without
recourse, covenant, representation or warranty of any kind, expressed,
implied or statutory except as specifically set forth herein. WITHOUT
LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
EXCEPT AS EXPRESSLY SET FORTH
22
IN SECTION 4.1(m) HEREOF, SELLERS EXPRESSLY DISCLAIM AND NEGATE, AND
BUYER EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS,
IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE
ENVIRONMENTAL CONDITION OF THE ASSETS. EXCEPT AS EXPRESSLY SET FORTH
IN SECTION 4.1(f) HEREOF, SELLERS EXPRESSLY DISCLAIM AND NEGATE, AND
BUYER HEREBY WAIVES, AS TO THE PIPELINES, EQUIPMENT AND FIXTURES
CONSTITUTING A PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv) ANY CLAIMS BY BUYER
FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, AS OF THE
EFFECTIVE TIME OR THE DATE OF EXECUTION OF THIS AGREEMENT, AND (v) ANY
AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW; IT BEING THE
EXPRESS INTENTION OF BOTH SELLERS AND BUYER THAT THE PIPELINES,
EQUIPMENT AND FIXTURES INCLUDED WITHIN THE ASSETS ARE HEREBY CONVEYED
TO BUYER IN THEIR PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND
"WHERE IS" WITH ALL FAULTS, SUBJECT TO THE EXPRESS REPRESENTATIONS AND
WARRANTIES CONTAINED IN SECTION 4.1 (f) HEREOF, AND THAT BUYER HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.
5. CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING
5.1 ACCESS TO RECORDS AND THE ASSETS. Between the date of this
Agreement and the Closing Date, Sellers shall give to Buyer reasonable
access to the premises, books and records of SPC relating to the
Assets, and cause the officers and employees of Sellers to furnish
such financial and operating data and other information with respect
to the Assets as Buyer may from time to time reasonably request.
5.2 OPERATION OF THE ASSETS. Between the date of this Agreement and
the Closing Date, except as contemplated herein or except with the
prior written consent of Buyer (which consent will not be unreasonably
withheld or delayed), SPC covenants and agrees, and Superior and CWF
covenant and agree to cause SPC, to:
(a)operate the Business in the normal and ordinary course;
(b)operate the Assets in a prudent, good and workmanlike manner and in
accordance with all valid laws, regulations and orders of governmental
authorities having jurisdiction and in accordance with existing
arrangements for such operations;
(c)pay or caused to be paid all costs and expenses incurred in
connection with the Assets;
(d)comply with all contracts and other agreements relating to the
Assets;
(e)promptly notify Buyer of any suit, action or other proceedings
which may arise or be threatened from and after the date of this
Agreement and through the Closing Date; and
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(f)promptly notify Buyer of any notice of claimed default (or any
event which, with the giving of notice or the passage of time, or
both, will constitute a default) under any order, writ, injunction or
decree of any court, commission or administrative agency affecting the
Assets or any other agreement affecting the Assets which may arise
from and after the date of this Agreement through the Closing Date.
5.3 NEGATIVE COVENANTS. Between the date of this Agreement and the
Closing Date, except as contemplated herein or except with the prior
written consent of Buyer (which consent will not be unreasonably
withheld or delayed), SPC covenants and agrees, and Superior and CWF
covenant and agree to cause SPC, to not:
(a)enter into any new agreements or commitments effecting the Assets
which extend beyond the Closing Date;
(b)modify or terminate any agreement effecting any of the Assets;
(c)encumber, sell, mortgage, release, transfer, abandon or otherwise
dispose of any of the Assets or any interests therein;
(d) make any expenditures for capital improvements and modifications
to the System or any other expenditures in excess of Five Thousand and
No/100 U.S. Dollars ($5,000.00); or
(e) sell, salvage or dispose of equipment comprising a part of the
Assets having a value in excess of Five Thousand and No/100 U.S.
Dollars ($5,000.00).
5.4CONFIDENTIALITY.
In connection with the transactions contemplated by this Agreement, in
addition to, and not by way of limitation of, any other obligations of
Buyer under or pursuant to any other agreement, whether written or
oral, with Sellers or any other obligations of Buyer at law or in
equity, all information furnished to Buyer or to any one acting in its
behalf will be kept confidential by Buyer and such other person and
their respective associates, affiliates, agents, employees,
consultants and advisors (collectively, the "Representatives") prior
to the Closing Date (or in the event the Closing does not occur, at
all times) and will not be used in any manner adverse to Sellers.
During such time, Buyer will hold and will cause the Representatives
to hold in strict confidence, unless compelled to disclose by judicial
or administrative process or, in the opinion of its counsel, by other
requirements of law, all documents and information concerning the
Assets furnished to Buyer or any Representative by Sellers or any of
their Representatives in connection with the transactions contemplated
by this Agreement (except to the extent that such information can be
shown to have been (i) previously available to the person to which it
was furnished on a non-confidential basis prior to its disclosure,
(ii) in the public domain, or (iii) available on a non-confidential
basis from a person other than a person not bound by any
confidentiality agreement). Buyer may release or disclose such
information to any Representative in connection with this Agreement
prior to the Closing Date or in the event the Closing does not occur
only if the Representative is informed of the confidential nature of
such information and agrees in writing to the confidential treatment
of all such information. If the transactions contemplated by this
Agreement are not consummated, Buyer agrees to keep the
24
information confidential. Notwithstanding the foregoing, if a person has
been requested or required (by oral questions, interrogatories, request
for information or documents, subpoena, civil investigative demand or
similar process) to disclose any information, the person so being
required will notify Sellers so that Sellers may seek an appropriate
protective order. Buyer covenants that Buyer and each Representative
will cooperate fully with Sellers in seeking such a protective order.
5.5 SHAREHOLDER APPROVAL. At the earliest practicable date, Superior
will duly call and hold a special shareholder meeting whereby this
Agreement and the transactions and agreements contemplated herein will
be submitted for the consideration and approval of Superior's
shareholders (the "Superior Shareholder Vote"), which approval will be
recommended by Superior's Board of Directors. CWF agrees and covenants
to vote in favor of the approval of this Agreement and the transactions
and agreements contemplated herein. The Superior Shareholder Vote will
be effectuated in compliance with applicable law.
5.6 NO OTHER BIDS FOR SELLER. Sellers shall not, and shall not authorize
or knowingly permit any employee, agent, investment banker, attorney,
accountant or other representative of Sellers to make, solicit,
initiate, encourage or respond to a submission of a proposal or offer
from any person or entity (other than Buyer) relating to any transaction
which would result in the acquisition, purchase or other transfer of all
or any portion of the North Appleby Gas Gathering System and the
Longwood Gas Gathering System (hereinafter collectively referred to as a
"Third-Party Offer"). Sellers shall not participate in any negotiations
regarding, or furnish to any person or entity (other than Buyer), any
information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt
by any person or entity (other than Buyer) to do or seek any of the
foregoing. Sellers will immediately cease and cause to be terminated any
contacts or negotiations currently pending with respect to Third-Party
Offers, if any, and shall use their best efforts to cause all reports,
material, data and other written information heretofore disseminated by
them or on their behalf by any such employee, agent, investment banker,
attorney, accountant or other representative in connection with any such
Third-Party Offer or any inquiry or proposal related thereto to be
promptly returned to them. Sellers shall promptly notify Buyer of the
receipt of any Third-Party Offer or any inquiry or communication which
might reasonably be expected to lead to any Third-Party Offer and will
provide Buyer with all information that Buyer may reasonably request
with respect thereto. Notwithstanding the foregoing, nothing contained
herein shall prohibit or limit Sellers' ability to solicit proposals and
offers from, or respond to a submission of a proposal or offer from, any
person or entity (other than Buyer) relating to any transaction which
would result in the acquisition, purchase or other transfer of all or
any portion of the East Carlsbad Gas Gathering System and the West Mims
Gas Gathering System in accordance with the terms of Section 2.2(d).
6. ADDITIONAL AGREEMENTS
6.1 TITLE PROCEDURE.
(a) NOTICE. If any of the information or material supplied or made
available for inspection by Sellers pursuant to this Agreement or any
other information or records reviewed by Buyer reflect the existence of
any material encroachment, defect in or objection to title (including
objection to the terms of any easement, permit or other agreement) to
the
25
Systems or any portion thereof which is not to be removed or cured
(all of which are herein called "Title Defects"), Buyer shall deliver
written notice of the Title Defects to Sellers as soon as practicable
but no later than September 29, 1995. As used herein, with regard to
Real Property Interests which comprise a portion of the Systems, Title
Defects shall not include defects that have been cured by possession
under applicable statute of limitation or prescription, defects in
early chain of title such as failure to recite marital status in
documents, omission of heirship or succession proceedings, lack of
survey, failure to record releases of liens or mortgages that have
expired by their own terms, to the extent such matters are not
reasonably expected to result in claims that will materially adversely
affect title to the assets comprising the System, if the same are
deemed to be acceptable according to the title standards of the
applicable state.
(b) BUYER'S REMEDIES. As to Title Defects so notified to Sellers,
Buyer shall elect as follows, subject to Sellers' right to cure in
accordance with Section 6.5 hereof:
(i) If such Title Defects cause a decrease of more than five percent
(5%) in the value, as determined in accordance with subsection 6.1(c)
below, of all of the Systems, Buyer may elect to terminate this
Agreement; or
(ii) Buyer may elect to accept all of the Systems subject to the Title
Defects and reduce the Purchase Price downward in an amount equal to
the decrease in the value of the Systems determined in accordance with
subsection 6.1(c) hereof; or
(iii) Buyer may elect in writing to waive the Title Defect.
(c) DETERMINATION OF DECREASE IN VALUE. For purposes of this Section
6.1, the amount of decrease in value of the Systems due to uncured or
unremedied Title Defects shall be determined by mutual written
agreement of the parties.
6.2 CASUALTY LOSS.
(a) If, prior to the Closing Date, any portion of a System is
destroyed by fire or other casualty, or if any portion of a System
shall be taken in condemnation or under the right of eminent domain or
if proceedings for such purposes shall be pending or threatened (the
value of such casualty or taking referred to hereafter as a "Loss"),
Buyer may elect to terminate this Agreement as to the affected System
if the value of the Loss is more than five percent (5%) of the
Purchase Price allocated to the affected System as set forth on
Schedule 1.6 hereof.
(b) If this Agreement is not terminated according to this Section 6.2,
this Agreement shall remain in full force and effect notwithstanding
any such destruction or taking and Sellers shall at the Closing, at
Buyer's election, (i) pay to Buyer all sums paid to Sellers and
attributable to the affected System by reason of such destruction or
taking and shall assign, transfer and set over unto Buyer all of the
right, title and interest of Sellers in and to any unpaid awards or
other payments arising out of such destruction or taking, including
the right to enforce insurance policies or (ii) adjust the Purchase
Price by the amount of the
26
Loss. Sellers shall not voluntarily compromise, settle or adjust any
amounts payable by reason of such destruction or taking without first
obtaining the written consent of Buyer.
(c) For purposes of this Section 6.2, the value of the Loss shall be
determined by mutual written agreement of the parties.
6.3 ENVIRONMENTAL PROCEDURE.
(a) Sellers consent to the performance of an environmental assessment
("Environmental Assessment") on all or a part of the Systems and agree
to allow Buyer or its consultant or other technical representatives
(the "Consultant") to have access to the Systems for this purpose at
any reasonable time or times prior to September 29, 1995 (the
"Assessment Period") and at such times thereafter if a Defect Notice
shall have been delivered to Sellers pursuant to Section 6.3(j) hereof.
(b) The scope of work for the Environmental Assessment will be mutually
agreed upon in writing by Buyer and Sellers. The agreement of Sellers
will not be unreasonably withheld or delayed. The parties acknowledge
and agree that, as a result of the Environmental Assessment conducted
by Buyer, additional testing may be required to fully assess the
environmental condition of the Systems. Sellers agree that they will
not unreasonably withhold or delay consent to conduct a modified or
expanded scope of work necessary for Buyer to fully assess the
environmental condition of the Systems.
(c) Buyer will bear all costs associated with the Environmental
Assessment. Sellers understand and acknowledge that the Environmental
Assessment may involve subsurface testing of soil, groundwater and any
surface water at the Systems and may involve soil borings and the
installation of groundwater monitoring wells. Buyer will be responsible
for disposing of any soil cuttings or other waste generated by this
testing and will restore the Systems at the end of the Assessment
Period to their condition prior to the performance of the Environmental
Assessment. Buyer agrees to indemnify and hold Sellers harmless from
any liability arising from the acts or omissions of Buyer or its
representatives during the performance of the Environmental Assessment.
(d) No invasive testing or excavation other than soil borings, the
installation of groundwater monitoring wells and grab samples of
surface soil, surface water or sediment approved by Sellers under
paragraph (b) will be undertaken without the prior written consent of
Sellers, which shall not be unreasonably withheld or delayed.
6.4 Unless otherwise required by law or required by a lender to be
disclosed in order for Buyer to obtain funding for the acquisition of
the Assets, Buyer agrees to treat confidentially all reports prepared
for Buyer by the Consultant in connection with the performance of the
Environmental Assessment and the information contained in such reports
(collectively, the "Information"). The Information may only be used by
Buyer in deciding whether or not to acquire the Systems. In the event
that Buyer or its representatives become legally compelled to disclose
any of the Information, Buyer will provide Sellers with prompt written
notice prior to any such disclosure so that Sellers, if they disagree
with this obligation to disclose, may seek a protective order or other
appropriate remedy and/or waive compliance with any applicable
provisions of this paragraph.
27
(a) If requested, Buyer will make the Information available to Sellers
and will provide Sellers with copies of the Information without charge.
(b) Sellers will have the right to have a representative or
representatives accompany the Consultant at all times during the
Environmental Assessment and Buyer agrees to give Sellers verbal notice
not less than 48 hours before any visits by the Consultant to the
Systems.
6.5 Buyer agrees to take and provide to Sellers upon request identical
split samples of all sampling done on the Systems.
(a) For the purposes of this Section 6.3, the following terms will have
the following meanings:
(i) "Disqualifying Environmental Condition" means (A) the
presence, as determined by the Environmental Assessment, of a material
amount of Hazardous Substances in the soil, groundwater or surface
water in, on, at or under the Systems in a manner or quantity: (x)
which is required by Environmental Laws or by any applicable action or
guidance levels or other standards published by any governmental agency
with jurisdiction over the Systems to be remediated, or if no such
requirements, level or standard exists, which exceeds naturally
occurring levels and which also exceeds levels generally accepted to
pose an imminent and substantial risk to human health; or (y) for which
a permit or closure plan is required under applicable Environmental
Laws for its continued presence at the Systems; or (B) the failure of a
System to have a permit required under applicable Environmental Laws,
including, without limitation, permits for air emissions. An amount of
Hazardous Substances shall be deemed material only if the cost of the
following activities equals or exceeds the "Threshold Amount": (1)
remediating the Systems so that such Hazardous Substances present in
the soil, groundwater or surface water in, on, at or under the Systems
are no longer required to be remediated in the manner described in
subparagraph (x) above or no longer exceed the levels described in
subparagraph (x) above; or (2) obtaining the permit or implementing the
closure plan required under applicable Environmental Laws for the
continued presence of Hazardous Substances. The failure of a System to
have a permit required under applicable Environmental Laws shall be
deemed material only if the cost of obtaining the permit exceeds the
Threshold Amount.
(ii) "Threshold Amount" means more than five percent (5%) of
the value of such System as reflected in Schedule 1.6 hereof.
(b) To assert the existence of a Disqualifying Environmental
Condition at the Property, Buyer shall provide Sellers prior to the
expiration of the Assessment Period with a written notice ("Defect
Notice") asserting the existence of a Disqualifying Environmental
Condition together with the Environmental Assessment which must contain
a conclusion that a Disqualifying Environmental Condition exists, and
which conclusion must be reasonably substantiated by the results of the
investigation conducted by the Consultant. The Defect Notice shall
include a reasonable estimate of the cost of performing the work
necessary to bring the Disqualifying Environmental Condition into
compliance with
28
Environmental Laws and shall expressly provide that Sellers shall be
deemed to accept the Defect Notice if they fail to reject it in
writing within ten (10) days.
(c) If the existence of a Disqualifying Environmental Condition
is established pursuant to the above paragraphs, then Buyer shall have
the option by written notice to Sellers: (i) to terminate this entire
Agreement or terminate this Agreement as to the affected System(s), in
which event the Purchase Price will be adjusted downward in an amount
equal to the value of the affected System as reflected on Schedule 1.6
hereof; or (ii) withdraw the Defect Notice and agree to accept the
affected System(s) subject to the Disqualifying Environmental
Condition. If Buyer fails timely to exercise this option to terminate
it will be deemed to have withdrawn the Defect Notice. If Buyer
withdraws the Defect Notice, then the parties will proceed to Closing,
the Purchase Price will be reduced by the estimate of the cost of the
remediation contained in the Defect Notice to correct the
Disqualifying Environmental Condition and Buyer will covenant in a
document executed at the Closing to remediate the Disqualifying
Environmental Condition within a reasonable time after the Closing and
to release, indemnify and hold Sellers harmless from any liability
associated with the Disqualifying Environmental Condition.
6.6 RECORDS PROCEDURE.
(a) Notice. If the result of Buyer's review of the Assumed
Contracts is unsatisfactory to Buyer, Buyer shall deliver written
notice thereof to Sellers as soon as practicable but no later than
September 29, 1995, identifying the reasons for objection to the
Assumed Contracts (the "Assumed Contract Objections").
(b) Buyer's Remedies. As to any Assumed Contract Objections so
notified to Sellers, Buyer shall elect as follows, subject to Sellers'
right to cure in accordance with Section 6.5 hereof:
(i) If the effect of Assumed Contract Objections causes a
decrease of more than five percent (5%) in the value, as
determined in accordance with subsection 6.4(c) hereof, of all of
the Systems, Buyer may elect to terminate this Agreement; or
(ii) Buyer may elect to accept the Assumed Contracts subject
to the Assumed Contract Objections and reduce the Purchase Price
downward in an amount equal to the decrease in the value, as
determined in accordance with subsection 6.4(c) hereof, of the
Systems; or
(iii) Buyer may elect in writing to waive the Assumed
Contract Objections.
(c) DETERMINATION OF DECREASE IN VALUE. For purposes of this
Section 6.4, the amount of decrease in value of the Systems shall be
determined by mutual written agreement of the parties.
(d) ASSUMED CONTRACTS. As to Assumed Contracts or other
agreements not identified to Buyer on the date of this Agreement,
Buyer shall have the right to reject the
29
same and the same shall not be included among the contracts and
agreements to be conveyed to Buyer hereunder.
6.7 SELLERS' RIGHT TO CURE OR SATISFY OBJECTIONS. Prior to the date of
agreement regarding the Final Settlement Statement as provided for in
Section 2.2(b) hereof, Sellers shall have the right, but not the
obligation, to cure or remove to the satisfaction of Buyer any Title
Defects or Assumed Contract Objections for which a preliminary purchase
price adjustment has been agreed to by Buyer and Sellers pursuant to
Sections 6.1 and 6.4 hereof. The Adjusted Purchase Price reflected on
the Final Settlement Statement shall be adjusted upward by an amount
equal to the value of the Title Defects or Assumed Contract Objections
satisfied by Sellers and for which a preliminary purchase price
adjustment (downward) was made in calculating the Purchase Price in
Sections 6.1 and 6.4 hereof.
7. CONDITIONS OF CLOSING.
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated by this Agreement at the Closing are
subject to the satisfaction and fulfillment on or prior to the Closing Date of
the following conditions, each of which may be waived in writing by Buyer:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. The
representations and warranties of Sellers contained in this
Agreement shall be deemed to have been made again at and as of
the Closing Date and, with appropriate modifications of time with
respect to representations and warranties made as of a specified
date, shall then be true and correct in all material respects.
(b) SELLERS' PERFORMANCE. Sellers shall have performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with by Sellers on or
before the Closing Date.
(c) AUTHORIZATIONS RECEIVED. All action required to taken by or
on the part of each Seller to authorize the execution, delivery
and performance of this Agreement by such Seller and the
consummation of the transactions contemplated by this Agreement
shall have been duly and validly taken by such Seller. At the
Closing, each Seller shall have delivered to Buyer true and
complete copies, certified by the secretary or an assistant
secretary of Seller or of Seller's general partner, of
resolutions evidencing the foregoing action.
(d) DELIVERY OF CERTIFICATES AND INSTRUMENTS. Sellers shall have
delivered to Buyer a certificate stating that the conditions in
Sections 7.1(a) and 7.1(b) have been satisfied. Sellers shall
have delivered to Buyer the documents and instruments referred to
in Section 3.2 and such other documents as Buyer may reasonably
request to effect the transfer and conveyance of the Assets to
Buyer.
(e) NO PROHIBITION OF TRANSACTION. No action, proceeding or
investigation (including private causes of action) or regulation
or legislation shall have been instituted, threatened or proposed
before, nor any order issued by, any court, governmental agency
or authority or legislative body to enjoin, restrain, prohibit or
obtain substantial damages (i) in respect of, or which is related
to, or arises
30
out of, this Agreement or the consummation of the transactions
contemplated by this Agreement; or (ii) which, in the reasonable
judgment of the Buyer, could have a material adverse effect on
the Assets.
(f) DUE DILIGENCE INVESTIGATION. Buyer shall have completed its
due diligence investigation of the Assets and the Business on or
before September 29, 1995 (the "Due Diligence Period"), and the
results of such investigation shall be satisfactory to Buyer in
all respects, as determined in Buyer's sole discretion. Buyer
shall notify Sellers in writing of Buyer's determination of
whether or not the due diligence investigation was satisfactory
to Buyer.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of
Sellers to consummate the transactions contemplated by this Agreement
at the Closing are subject to the satisfaction and fulfillment on or
prior to the Closing Date of the following conditions, each of which
may be waived in writing by Sellers:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. The
representations and warranties of Buyer contained in this
Agreement shall be deemed to have been made again at and as of
the Closing Date and, with appropriate modifications of time with
respect to representations and warranties made as of a specified
date, shall then be true and correct in all material respects.
(b) BUYER'S PERFORMANCE. Buyer shall have performed and complied
with all covenants and agreements required by this Agreement to
be performed or complied with by Buyer on or before the Closing
Date.
(c) AUTHORIZATIONS RECEIVED. All action required to be taken by
or on the part of Buyer to authorize the execution, delivery and
performance of this Agreement by Buyer and the consummation of
the transactions contemplated by this Agreement shall have been
duly and validly taken by Buyer. At the Closing, Buyer shall have
delivered to Sellers true and complete copies, certified by
Buyer's secretary or an assistant secretary, of resolutions
evidencing the foregoing action.
(d) PURCHASE PRICE AND OTHER PAYMENTs. Buyer shall have delivered
to Sellers the Purchase Price and any other payments required to
be made as of the Closing Date pursuant to this Agreement.
(e) NO PROHIBITION OF TRANSACTION. No action, proceeding or
investigation (including private causes of action) or regulation
or legislation shall have been instituted, threatened or proposed
before, nor any order issued by, any court, governmental agency
or authority or legislative body to enjoin, restrain, prohibit or
obtain substantial damages (i) in respect of, or which is related
to, or arises out of, this Agreement or the consummation of the
transactions contemplated by this Agreement; or (ii) which, in
the reasonable judgment of the Sellers, is reasonably likely to
prevent Buyer from performing any obligation undertaken by it
under this Agreement which is to be performed before or after the
Closing.
31
(f) DELIVERY OF CERTIFICATES AND INSTRUMENTS. Buyer shall have
delivered to Sellers a certificate stating that the conditions in
Sections 7.2(a) and 7.2(b) have been satisfied. Buyer shall have
delivered to Sellers the documents and instruments referred to in
Section 3.3(a) and such other documents as Sellers may reasonably
request to effect the transfer and conveyance of the Assets to
Buyer.
(g) DUE DILIGENCE NOTICE. Pursuant to Section 7.1(f), Sellers
shall have received the written notice from Buyer regarding
satisfaction of the due diligence investigation.
(h) APPROVAL OF VANCOUVER STOCK EXCHANGE. Superior shall have
received the necessary consents, approvals and authorizations of
the Vancouver Stock Exchange to the consummation of the
transactions contemplated by this Agreement.
(i) SHAREHOLDER AND PARTNER APPROVAL. Sellers shall have received
the necessary consents and approvals of their shareholders or
partners, as the case may be, to the transactions contemplated by
this Agreement.
8. TERMINATION.
8.1 TERMINATION EVENTS. Subject to the provisions of Section 8.2,
this Agreement may, by written notice given at or prior to the Closing
in the manner hereinafter provided, be terminated:
(a) by either Buyer or Sellers if a material default or breach
shall be made by the other party hereto with respect to the
due and timely performance of any of its covenants and
agreements contained herein, or with respect to the due
compliance with any of its representations, warranties or
covenants, and such default cannot be cured and has not been
waived;
(b) by Buyer if all of the conditions set forth in Section 7.1
shall not have been satisfied on or before the Closing Date,
other than through failure of Buyer to fully comply with its
obligations hereunder, and shall not have been waived by
Buyer on or before such date;
(c) by Buyer in accordance with the terms of Article 6;
(d) by Sellers, if all of the conditions set forth in Section
7.2 shall not have been satisfied on or before the Closing
Date, other than through failure of Sellers to fully comply
with their obligations hereunder, and shall not have been
waived by Sellers on or before such date;
(e) by mutual written consent of Buyer and Sellers; or
(f) by either Buyer or Sellers if the Closing shall not have
occurred, other than through failure of any such party to
fulfill its obligations hereunder, on or before December 15,
1995, or such later date as may be mutually agreed upon by
the parties.
32
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
8.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 8.1, all further obligations of the
parties hereunder shall terminate, except the obligations of the
parties under Section 5.4 which shall not be affected by the
termination of this Agreement; provided that, if this Agreement is so
terminated by a party because one or more of the conditions to such
party's obligations hereunder is not satisfied as a result of the
other party's willful failure to comply with its obligations under
this Agreement, the terminating party's right to pursue all legal
remedies for breach of contract or otherwise, including, without
limitation, damages relating thereto, shall also survive such
termination unimpaired.
8.3 DISBURSEMENT OF ESCROWED FUNDS. Upon termination of this
Agreement, the Escrowed Funds shall be disbursed as follows:
(a) If this Agreement is terminated by Buyer on or before the
expiration of the Due Diligence Period, the Escrowed Funds shall be
disbursed to Buyer.
(b) If this Agreement is terminated for any reason after the
expiration of the Due Diligence Period, the Escrowed Funds shall be
disbursed to Sellers; provided, however, that in the event this
Agreement is terminated by Buyer pursuant to Section 8.1(b), the
Escrowed Funds shall be disbursed to Buyer; provided, further, that in
the event this Agreement is terminated by Buyer pursuant to Section
8.1(f) as a result of Seller having failed to satisfy the conditions
contained in Section 7.2(h) and Section 7.2(i) on or before December
15, 1995, the Escrowed Funds shall be disbursed to Buyer.
9. INDEMNIFICATION AND SURVIVAL.
9.1 INDEMNIFICATION BY SELLERS. Sellers hereby jointly and
severally agree to indemnify and hold harmless Buyer, its directors,
officers, employees, advisors, agents, partners and shareholders at
all times from and after the Closing Date against and with respect to:
(a) The Excluded Liabilities;
(b) Any and all loss, injury, damage or deficiency resulting from
any misrepresentation or breach of warranty on the part of Sellers
under this Agreement;
(c) Any and all loss, injury, damage or deficiency resulting from
any breach of any covenant or agreement on the part of Sellers under
this Agreement or any agreement, document or instrument contemplated
hereby;
(d) Any liability arising out of the operation by SPC of the
Business before the Effective Time (except with respect to Assumed
Liabilities); and
(e) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments, reasonable costs and legal and other expenses
incident to any of the foregoing.
33
9.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify
and hold harmless Sellers, their directors, officers, employees,
advisors, agents, partners and shareholders at all times from and
after the Closing Date against and with respect to:
(a) The Assumed Liabilities;
(b) Any and all loss, injury, damage or deficiency resulting from
any misrepresentation or breach of warranty on the part of Buyer under
this Agreement;
(c) Any and all loss, injury, damage or deficiency resulting from
any breach of any covenant or agreement on the part of Buyer under
this Agreement or any agreement, document or instrument contemplated
hereby;
(d) Any liability arising out of the operation by Buyer of the
Business on or after the Effective Time; and
(e) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, reasonable costs and legal and other expenses
incident to any of the foregoing.
9.3 NOTICE OF INDEMNIFICATION; METHOD OF ASSERTING CLAIMS. A
party claiming indemnification hereunder is hereinafter referred to as
the "Indemnified Party" and a party against whom such claims are
asserted hereunder is hereinafter referred to as to the "Indemnifying
Party." All claims for indemnification by any Indemnified Party under
this Article 9 will be asserted and resolved as follows:
(a) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder
is asserted against or sought to be collected from such Indemnified
Party by a third party, said Indemnified Party will with reasonable
promptness notify the Indemnifying Party of such claim or demand,
specifying the nature of and specific basis for such claim or demand
and the amount or the estimated amount thereof to the extent then
feasible (which estimate will not be conclusive of the final amount of
such claim and demand the "Claim Notice"). The Indemnifying Party will
not be obligated to indemnify the Indemnified Party with respect to
any such claim or demand if the failure of the Indemnified Party to
promptly notify the Indemnifying Party of such a claim or demand
materially prejudices the Indemnifying Party's ability to defend
against the claim or demand. The Indemnifying Party will have thirty
(30) days from the personal receipt of the Claim Notice (the "Notice
Period") to notify the Indemnified Party (i) whether or not it
disputes the liability of the Indemnifying Party to the Indemnified
Party hereunder with respect to such claim or demand and (ii) whether
or not it desires at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against such claim or demand;
provided, however, that any Indemnified Party is hereby authorized
prior to and during the Notice Period to file any motion, answer or
other pleading which it deems necessary or appropriate to protect its
interests or those of the Indemnifying Party and not materially
prejudicial to the Indemnifying Party. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice
Period that it desires to defend the Indemnified Party against such
claim or demand, except as hereinafter provided, the Indemnifying
Party will have the right to defend against, and shall control the
defense against, all appropriate proceedings. If the Indemnified Party
desires to participate in, but not control, any such defense or
settlement it may do so at its
34
sole cost and expense. In the event the Indemnifying Party shall fail
to defend against any such claim or demand, the Indemnified Party
shall have the right, but not the obligation, to defend against the
same and recover the cost thereof from the Indemnifying Party,
including reasonable legal costs and expenses and all amounts paid as
a result of such claim or demand. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any claim or demand which the
Indemnifying Party elects to contest, or, if appropriate and related
to the claim in question, in making any counterclaim against the
person asserting the third-party claim or demand, or any
cross-complaint against any person. No claim may be settled without
the consent of the Indemnifying Party and the Indemnified Party, which
consent will not be unreasonably withheld or delayed.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder which does not involve a claim
or demand being asserted against or sought to be collected from it by a
third party, the Indemnified Party will send a Claim Notice with
respect to such claim to the Indemnifying Party. The Indemnifying Party
shall notify the Indemnified Party in writing on or before the
expiration of the Notice Period of the Indemnifying Party's election to
(i) cure the claim within thirty (30) days after the expiration of the
Notice Period, (ii) dispute the claim or (iii) pay the Indemnified
Party the amount claimed on the Claim Notice. If the Indemnifying Party
does not notify the Indemnified Party within the Notice Period of the
Indemnifying Party's election or cure the claim within the prescribed
time period, the amount of such claim will be conclusively deemed a
liability of the Indemnifying Party hereunder.
9.4 SURVIVAL. All representations, warranties, covenants and
agreements made in this Agreement shall survive for a period of one (1) year
after the Closing Date. Notwithstanding the preceding sentence, any
representation, warranty, covenant and agreement in respect of which indemnity
may be sought under this Article 9 shall survive the time at which it would
otherwise terminate pursuant to such sentence, if prior to such time notice of
the breach thereof giving rise to such indemnity shall have been given to the
party against whom such indemnity may be sought; provided, however, that such
survival shall be effective only with respect to the claim for indemnity arising
out of the breach specified in such notice. After the Closing, the sole and
exclusive remedy of any party for any breach by the other shall be the
indemnities contained in this Article 9 which shall survive the Closing.
9.5 LIMITATION OF LIABILITY. The aggregate liability of
Sellers for indemnification under Section 9.1 shall be limited to One Hundred
Thousand and No/100 U.S. Dollars ($100,000.00). The aggregate liability of Buyer
for indemnification under Section 9.2 shall be limited to One Hundred Thousand
and No/100 U.S. Dollars ($100,000.00).
10. MISCELLANEOUS.
10.1 EXPENSES. Except as expressly otherwise provided
herein, each party to this Agreement shall bear its respective expenses incurred
in connection with the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel and accountants. In the case of termination of
this Agreement, the obligation of each party to pay its own expenses shall be
subject to any rights of such party arising from a breach of this Agreement by
the other party.
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10.2 NOTICES. Except as otherwise set forth herein, all
notices given in connection with this Agreement shall be in writing and shall be
delivered either by personal delivery, by telecopy or similar facsimile means,
by certified or registered mail, return receipt requested, or by express courier
or delivery service, addressed to the parties hereto at the following addresses:
SELLERS
c/o CWF Associates, Ltd.
5080 Spectrum Drive
Suite 809-West
Dallas, Texas 75248
Attention: Mr. A. Russ Hensley
Telecopy: (214) 701-7272
BUYER
Hunter Gas Gathering, Inc.
600 East Las Colinas Boulevard
Suite 1200
Irving, Texas 75039
Attention: President
Telecopy: (214) 401-3110
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given when received, if sent by telecopy or
similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means); and when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail,
return receipt requested.
10.3 FURTHER ASSURANCES. The parties hereto agree (i) to
furnish upon request to each other such further information; (ii) to execute and
deliver to each other such other documents; and (iii) to do such other acts and
things, all as the other party hereto may at any time reasonably request for the
purpose of carrying out the intent of this Agreement and the documents referred
to herein.
10.4 EMPLOYEES. Buyer has not agreed to and nothing herein
shall be construed to obligate Buyer to offer employment to or continue the
employment of any officer, employee, agent or representative of Sellers,
including, without limitation, those performing services relating to the Systems
as of the Closing or the Effective Time. Any successor clause or successor
agreement in any labor contracts or other labor arrangements shall not be
applicable to the sale and purchase of the Systems or otherwise affect or impose
any conditions or obligations upon Buyer. With respect to any employees of
Sellers that perform services with respect to the Systems and are terminated by
Sellers, it shall be the responsibility of Sellers to comply with all applicable
laws in connection therewith, including, without limitation, the Worker
Adjustment and Retraining Act. Buyer takes the Systems not subject to any
collective bargaining or similar agreement. Buyer shall have no liability or
obligation with regard to any employment claims by any of
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Sellers' employees relating to or arising out of their employment by Sellers,
any employment contract with same, any pension or other benefit liability of
same, any law requiring notice of severance or severance benefit, or any
liability under the Employee Retirement Income Security Act of 1974, as amended,
or any pension, severance or other benefit plan pertaining to employment by
same. Notwithstanding and without limiting the foregoing, Buyer shall be
entitled to offer employment to any of the Sellers' officers, employees, agents
and representatives who are performing or have performed services relating to
the Systems.
10.5 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
on the part of any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(i) no claim or right arising out of this Agreement or the documents referred to
herein can be discharged by one party hereto, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party hereto; (ii) no waiver which may be given by a party hereto shall be
applicable except in the specific instance for which it is given; and (iii) no
notice to or demand on one party hereto shall be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to herein.
10.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement is
intended by the parties to this Agreement as a final expression of their
agreement with respect to the subject matter hereof, and is intended as a
complete and exclusive statement of the terms and conditions of that agreement.
This Agreement may not be modified, rescinded, or terminated orally, and no
modification, rescission, termination or attempted waiver of any of the
provisions hereof (including this Section) shall be valid unless in writing and
signed by the party against whom the same is sought to be enforced.
10.7 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. This
Agreement shall apply to and be binding in all respects upon, and shall inure to
the benefit of, the successors and assigns of the parties hereto. This Agreement
may not be assigned or transferred by Superior, SPC or CWF without the written
consent of Buyer. Nothing expressed or referred to in this Agreement is intended
or shall be construed to give any person or entity other than the parties to
this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement, or any provision hereof, it being the intention of
the parties hereto that this Agreement and all of its provisions and conditions
are for the sole and exclusive benefit of the parties to this Agreement, their
successors and assigns, and for the benefit of no other person or entity.
10.8 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof to any person or circumstance, is held by
a court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect under present or future laws effective during the effective term of any
such provision, such invalid, illegal or unenforceable provision shall be fully
severable; and this Agreement shall then be construed and enforced as if such
invalid, illegal or unenforceable provision had not been contained in this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
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Furthermore, in lieu of each such illegal, invalid, or unenforceable provision,
there shall be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
10.9 ANNOUNCEMENTS. Sellers and Buyer shall consult with each other with
regard to all press releases and other public announcements issued at or prior
to the Closing concerning this Agreement or the transactions contemplated hereby
and, except as may be required by applicable laws or the applicable rules and
regulations of any governmental agency or stock exchange, neither Buyer nor
Sellers shall issue any such press release or make any other public announcement
without the prior written consent of the other party.
10.10 SECTION HEADINGS, CONSTRUCTIOn. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
10.11 SCHEDULES, EXHIBITS, ETC. Matters disclosed by Seller or by Buyer in
any schedule, exhibit, or financial statement delivered by or to Buyer or
Seller, as the case may be, pursuant to any section hereof shall be deemed to be
disclosed with respect to all sections of this Agreement.
10.12 CONSENT OR PERMISSION NOT TO BE UNREASONABLY WITHHELD. Except as
otherwise expressly stated herein, whenever the consent or permission of a party
hereto is required hereunder, such consent or permission shall not be
unreasonably withheld or delayed.
10.13 TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
10.14 GOVERNING LAW. This Agreement shall be governed by, and construed
under, the laws of the State of Texas without regard to conflicts of laws, all
rights and remedies being governed by such laws.
10.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same agreement.
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SIGNATURES
To evidence the binding effect of the covenants and agreements
described above, Sellers (by their duly authorized officers and general partner)
and Buyer (by its duly authorized officer) have each caused this Agreement to be
executed as of the date first written above.
SELLERS:
SUPERIOR PIPELINE CORPORATION
By: /s/ A. Russ Hensley
--------------------------
A. Russ Hensley, President
SUPERIOR PIPELINE CORPORATION
By: /s/ A. Russ Hensley
---------------------------
A. Russ Hensley, President
CWF ASSOCIATES, LTD.
By: CWF Energy, Inc., its
general partner
By: /s/ A. Russ Hensley
-----------------------
A. Russ Hensley, President
BUYER:
HUNTER GAS GATHERING, INC.
By: /s/ R. Renn Rothrock, Jr.
--------------------------
R. Renn Rothrock, Jr., Executive
Vice President
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