Exhibit 2.01
ACQUISITION AGREEMENT
AND
PLAN OF MERGER
This Acquisition Agreement and Plan of Merger ("Agreement"), dated as
of this 13th day of June, 2002, is made by and among Mid-Power Service
Corporation, a Nevada corporation ("Mid-Power"), Red Star, Inc., a Nevada
corporation ("Red Star"), and Mid-Power Resource Corporation, a Nevada
corporation ("MergerCo"), sometimes collectively referred to as the "Parties",
with reference to the following:
RECITALS:
A. Mid-Power is a corporation duly organized and validly existing under
the laws of the State of Nevada engaged in oil and gas production, development
and exploration in the United States. Mid-Power is required to file reports
pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Mid-Power's common stock is traded in the over-the-counter
market and is quoted on the OTC Bulletin Board administered by the Nasdaq Stock
Market.
B. Red Star is a corporation duly organized and validly existing under
the laws of the State of Nevada engaged in natural gas production in Utah, all
of the issued and outstanding shares of which are owned by Edward Mike Davis
("Davis").
C. The directors of Mid-Power and Red Star believe that the combination
of Red Star's assets with Mid-Power's capital and access to capital will result
in more profitable and utilized assets.
D. Red Star desires to be acquired by Mid-Power, so that all of the
shares of Red Star owned by the sole shareholder of Red Star, Davis, shall be
converted into cash, a promissory note and shares of common stock of Mid-Power
as hereinafter set forth.
E. In order to effect Mid-Power's acquisition of Red Star, Mid-Power's
wholly-owned subsidiary organized under the laws of the State of Nevada,
MergerCo, shall serve as the merger company, which, upon the terms and subject
to the conditions of this Agreement and in accordance with the laws governing
private corporations of the State of Nevada ("Nevada Law"), shall merge with and
into Red Star (the "Merger"), and Red Star shall survive the Merger (the
"Surviving Corporation"), for the purpose of making Red Star a wholly-owned
subsidiary of Mid-Power. Pursuant to the terms of the Merger, the shares of
common stock of Red Star ("Red Star Stock") issued and outstanding or existing
immediately prior to the "Effective Time" (as defined below) of the Merger, will
be converted at the Effective Time into the right to receive cash, a promissory
note and newly-issued shares of common stock of Mid-Power, par value $0.001 per
share ("New Mid-Power Stock"), subject to certain restrictions on transfer as
hereinafter provided. The shares of common stock of MergerCo issued and
outstanding immediately prior to the Effective Time shall be converted to stock
of the Surviving Corporation. The shares of common stock of Mid-Power, par value
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$0.001 per share ("Mid-Power Stock"), issued and outstanding immediately prior
to the Effective Time will remain issued and outstanding.
F. The respective boards of directors of Mid-Power and Red Star deem it
advisable to enter into this Agreement and have, by resolutions duly adopted,
approved this Agreement and determined that the Merger is consistent with and in
furtherance of the long-term business strategies of each of them, and is fair to
and in the best interests of each of them and each of their respective
stockholders, and have approved the issuance of New Mid-Power Stock, and the
other transactions contemplated hereby.
G. For federal income tax purposes, the Parties intend that the Merger
shall qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that each Party will take all actions requested by the other and reasonably
necessary to so qualify the Merger, although neither Party has obtained or will
be required to obtain or provide an opinion of counsel to the foregoing effect.
H. In order to expedite the consummation of the transaction
contemplated hereby and to meet the requirements of Red Star and Davis, on May
10, 2002, Davis and James W. Scott ("Scott"), acting for himself and in
anticipation of a possible assignment to and assumption by Mid-Power, entered
into an "Option Agreement" and those certain "Addendum to the Option Agreement
Dated May 10, 2002, between the Parties Hereinafter Named Below", dated as of
May 10, 11, 12 and June 10, 2002 (the "Option"), relating to the transaction
described in the Option and contemplated by this Agreement.
I. On the execution of the Option, Scott caused the initial $5,500,000
payment due under the Option to be made to Davis. Contemporaneous with the
execution of this Agreement, Scott is conveying to Mid-Power all of Scott's
right, title and interest under the Option, which is thereby accepted by
Mid-Power and acknowledged by Davis, who thereby releases and discharges Scott
from any further liability or obligation under the Option and agrees to look
solely to Mid-Power for any further performance thereunder with the same force
and effect as if such assignment and assumption had been effected May 10, 2002.
NOW, THEREFORE, in consideration of the premises and the
representations, covenants and agreements herein contained, the Parties hereto
hereby agree as follows:
ARTICLE I
PLAN OF MERGER OF MERGERCO INTO RED STAR
Section 1.01. Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Nevada Law, at the Effective
Time, MergerCo shall be merged with and into Red Star, the separate corporate
existence of Red Star and MergerCo shall cease, Red Star shall continue as the
Surviving Corporation of the Merger, and the capital stock of Red Star issued
and outstanding immediately prior to such Merger shall be converted at the
Effective Time into the right to receive cash, a promissory note, and New
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Mid-Power Stock as herein provided. The shares of MergerCo issued and
outstanding immediately prior to the Effective Time shall be converted into
stock of the Surviving Corporation. The form of the Articles of Merger to be
filed with the Secretary of State of the State of Nevada is attached hereto as
Exhibit "A".
Section 1.02. Terms of Merger. The terms of the Merger are:
(a) MergerCo shall be merged into Red Star in accordance with the
statutory procedure set forth in Nevada Revised Statutes ss. 92A, et seq.
(b) At the Effective Time, to the full extent provided under Nevada
Law, Red Star, as the Surviving Corporation, shall possess all the rights,
privileges, powers and franchises of a public, as well as of a private, nature
and be subject to all the restrictions, disabilities and duties of each of such
merged entities; and any and all rights, privileges, powers and franchises of
each of such merged entities, and all property, real, personal and mixed, and
all debts due to either of such merged entities on whatever account, as well as
stock subscriptions and all other things in action belonging to each of such
merged entities, shall be vested in Red Star, as the Surviving Corporation; and
all property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the respective corporation, and the title to any
real estate vested by deed or otherwise, in either constituent entity, shall not
revert or be in any way impaired; but all rights of creditors and all liens upon
any property of either constituent entity shall be preserved unimpaired, and all
debts, liabilities and duties of the constituent entities shall thenceforth
attach to Surviving Corporation and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by it. The Articles of Incorporation and the Bylaws of MergerCo shall become the
Articles of Incorporation and the Bylaws of the Surviving Corporation. A copy of
the form of the Articles of Incorporation and Bylaws of MergerCo are attached
hereto as Exhibit "B".
(c) The directors and officers of the Surviving Corporation shall be
the duly qualified and acting directors and officers of MergerCo immediately
prior to the Effective Time of the Merger.
(d) The corporate identity, existence, purposes, powers, franchises,
rights and immunities of MergerCo shall be merged into the Surviving
Corporation, and the Surviving Corporation shall be fully vested therewith.
(e) The name of the Surviving Corporation shall be Mid-Power Resource
Corporation.
Section 1.03. Basis of Exchange. At the Effective Time, the 1,000
common shares of Red Star owned by Davis, which shall constitute all the issued
and outstanding shares of Red Star, shall be surrendered to Mid-Power and Davis
shall be entitled to receive:
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(a) FIVE MILLION, FIVE HUNDRED THOUSAND DOLLARS ($5,500,000)
in cash, payable by crediting the payment of that amount on May 10,
2002, pursuant to the Option;
(b) TEN MILLION DOLLARS ($10,000,000) payable pursuant to a
promissory note in the form attached hereto as Exhibit "C", bearing
interest and payable as provided therein (the "Note"), together with a
duly executed and acknowledged Judgment By Confession in the form of
Exhibit "D" attached hereto, to be held by Davis pending payment in
full of the Note; and
(c) 17,125,365 shares of New Mid-Power Stock, (together, the
"Acquisition Consideration").
Section 1.04. Stock of Mid-Power after Merger. At the Effective Time
and after giving effect to the Merger, the total issued and outstanding shares
of Mid-Power shall be, and the number and manner by which the issued and
outstanding shares are held will be, including those shares reserved for
issuance, as follows:
STOCKHOLDER NUMBER OF SHARES (%)
----------- --------------------
Davis 17,125,365 (60%)
Others 11,416,910 (40%)
The 11,416,910 shares attributed to "Others" includes 7,180,244 shares
issued and outstanding at the Effective Time and 4,236,666 shares reserved for
issuance upon the exercise of options and conversion rights.
Section 1.05. Valuation of Red Star Assets. The Parties agree and
acknowledge that Red Star is now and at the Effective Time will be possessed of
certain oil and gas leases, wells and personal property assets, as more
particularly described in the Red Star Schedules attached pursuant to Article II
(the "Assets"). The Parties agree that for purposes of this Agreement, the value
of Red Star as of the Effective Time is and will be FORTY MILLION, THREE HUNDRED
THIRTY-ONE THOUSAND, SEVEN HUNDRED SEVENTY-NINE AND 25/100 DOLLARS
($40,331,779.25) (the "Agreed Value"). Assets shall include, except as otherwise
provided herein, all right, title and interest owned, controlled or otherwise
legal or equitable to Red Star in the interests reflected in Red Star's "Current
Balance Sheet" (as defined below) or used by it in its present business as
specified in Red Star Schedule 1.05 attached hereto. Such Assets include all
contract and lease rights of Red Star. The Parties acknowledge and agree that
there will be no tangible or intangible, real or personal, properties or assets
of Red Star not included with this transaction.
Section 1.06. Accounting Treatment for Acquisition. The acquisition
contemplated by this Agreement will be accounted for by Mid-Power in such form
and manner as it, upon the advice of its regular firm of certified public
accountants, may deem appropriate.
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Section 1.07. Closing; Effective Time. Unless this Agreement shall have
been terminated pursuant to section 4.01, and subject to the satisfaction or, if
permissible, waiver of the conditions set forth in Article VIII, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kolesar &
Leatham, Chtd., 3320 West Sahara Avenue, Suite 380, Las Vegas, Nevada 89102, as
soon as practicable (but in any event within two business days) after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VIII, but in any event on or before 11:59:59 p.m., local time, June 13, 2002, or
at such other date, time and place as the Parties may agree. The date on which
the Closing takes place is referred to herein as the "Closing Date." As promptly
as practicable following the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing the Articles of Merger with the Secretary of
State of the State of Nevada (the date and time of such filing, or such later
date or time agreed upon by the Parties and set forth therein, being the
"Effective Time"). For accounting purposes, upon consummation of the Merger, the
results of operations of Red Star from and after May 10, 2002, shall be
attributable to Mid-Power.
Section 1.08. Further Instruments. From time to time, as and when
reasonably requested by the Surviving Corporation, Mid-Power, MergerCo and Red
Star shall execute deliver, or cause to be executed and delivered, all such
other instruments, and will take or cause to be taken such further or other
action as the Surviving Corporation may deem necessary or desirable in order to
vest in and confirm to the Surviving Corporation title to and possession of all
property, rights, privileges, powers and franchises and otherwise to carry out
the intent and purposes of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RED STAR
Red Star hereby represents and warrants to Mid-Power that as of the
date of this Agreement and at the Effective Time:
Section 2.01. Organization and Good Standing. Red Star is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada, and has full corporate power and authority to own and hold the
properties and Assets owned and leased by it, to conduct its business as
presently conducted, and to carry out the transactions described in this
Agreement. Red Star will attempt to become duly qualified and in good standing
to do business in Utah and in each other jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so duly
qualified and in good standing would not have a "Red Star Material Adverse
Effect" (as defined below). The term "Red Star Material Adverse Effect" as used
in this Agreement shall mean any change or effect that, individually or when
taken together with all such other changes or effects, would be reasonably
likely to be materially adverse to the assets, liabilities, financial condition,
results of operations or current or future business of Red Star. The Articles of
Incorporation and Bylaws of Red Star as currently in effect are attached hereto
as Red Star Schedule 2.01.
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Section 2.02. Capitalization. All shares of Red Star are owned by
Davis, free and clear of all liens, claims and encumbrances, and there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of any capital stock or other securities of Red Star or any securities
convertible into or exchangeable for shares of capital stock or other securities
of Red Star. The aggregate number of shares that Red Star is authorized to issue
is 1,000, consisting of 1,000 common shares with a par value $0.01 per share.
Section 2.03. Authority. Red Star has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Red Star's
board of directors and, by the execution hereof by Davis, its sole stockholder,
and no other corporate proceedings on the part of Red Star are necessary to
authorize this Agreement and the transactions contemplated hereby, except as set
forth herein. This Agreement has been duly executed and delivered by Red Star.
Section 2.04. Noncontravention. Red Star is not subject to or obligated
under any charter, bylaw or contract provision, or any license, franchise or
permit, or any order or decree, that would be breached or violated, or in
respect of which a right of acceleration would be created, by its executing and
carrying out this Agreement.
Section 2.05. Absence of Undisclosed Liabilities. Except as and to the
extent reflected in Red Star's "Current Balance Sheet" (as defined below)
attached hereto, Red Star has no known liabilities, claims, suits or obligations
and Red Star is not subject to any pending action, order, injunction, judgment,
litigation, proceeding, arbitration action, governmental audit or investigation,
nor is Red Star or any of its directors, officers or agents, or any of them,
aware of any threatened action, litigation, proceeding, arbitration action,
governmental audit or investigation.
Section 2.06. Freedom from Encumbrance. Consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the Assets of Red Star
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which Red Star is a party or by which it may
be bound or to which any of the Assets is subject.
Section 2.07. Financial Statements. Included in Schedule 2.07 of the
Red Star Schedules are the unaudited balance sheet of Red Star and the Assets
and operations acquired as of December 31, 2001, and the related statements of
operations of Red Star and the Assets and operations acquired for the year ended
December 31, 2001, including the notes thereto. Such schedule also includes the
unaudited balance sheet of Red Star and the Assets and operations acquired as of
May 31, 2002 ("Red Star's Current Balance Sheet"), together with the notes
thereto as of the dates indicated. All of the financial records of Red Star are
auditable in accordance with generally accepted accounting principles and
generally accepted auditing standards for publicly traded entities without
unreasonable effort or expense.
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Section 2.08. Merchantable Title. Red Star is informed and believes
that Red Star Schedule 2.08 attached hereto contains a complete description of
all oil and gas or mineral leases or other rights included in the Assets it owns
or uses in its business or purports to own, including, without limitation, those
reflected in Red Star's Current Balance Sheet. Also included in Red Star
Schedule 2.08 is that certain acquisition title opinion dated July 16, 2001, by
the law firm of VanCott, Bagley, Cornwall & McCarthy, as prepared for Davis,
relating to the oil and gas interests set forth therein (the "Original Title
Opinion"), which are being assigned to Red Star by Davis. To the best knowledge
of Red Star and Davis, except as reflected in that certain Assignment, Bill of
Sale, and Conveyance, of even date herewith, between Davis and Red Star (a copy
of which has been reviewed and approved by Mid-Power), no changes to the status
of title will have occurred between that status shown in the Original Title
Opinion and the "New Title Opinion" (as defined below). Further, to the best
knowledge of Red Star and Davis, except as and to the extent reflected in Red
Star Schedule 2.08 attached hereto, none of such properties and Assets of Red
Star is subject to, except as reflected in the Original Title Opinion, any known
mortgage, pledge, lien, charge, security interest, encumbrance, restriction,
lease, license, easement, liability or adverse claim. All buildings and all
fixtures, equipment and other property and assets that are included in Red
Star's Current Balance Sheet or are material to Red Star's business that are
held under leases by Red Star are held under valid instruments enforceable by
Red Star in accordance with their respective terms. Substantially all of Red
Star's equipment in regular use has been well maintained and is in good and
serviceable condition, reasonable wear and tear excepted.
Section 2.09. Business Activity of Red Star. Red Star's principal
executive offices are located at 200 Rancho Circle, Las Vegas, Nevada, and the
sole business conducted by Red Star is ownership and development of oil and gas
assets located in Carbon and Emery Counties, Utah.
Section 2.10. Compliance Permits. Except as disclosed on Red Star
Schedule 2.10 and to the best knowledge of Red Star, Red Star has not violated
and is in compliance with all laws, statutes, ordinances, regulations, rules and
orders of any federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
of governmental agency, department or authority, including without limitation,
environmental laws, relating to the Assets of Red Star, except where the
violation or failure to comply, individually or in the aggregate, would not have
a material adverse effect on Red Star. Except as disclosed on Red Star Schedule
2.10, Red Star has not received any notice to the effect that, or otherwise been
advised that, Red Star is not in compliance with any such statutes, regulations,
rules, judgments, decrees, orders, ordinances or other laws, and Red Star has no
reason to anticipate that any existing circumstances are likely to result in
violations of any of the foregoing, which failure or violation could, in any one
case or in the aggregate, have a material adverse effect on Red Star. Red Star
and, to Red Star's knowledge, each third-party operator of any of Red Star's
properties, is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business in all material respects as it is now being conducted or
as presently foreseeable.
Section 2.11. Governmental Authorizations. Except as disclosed on Red
Star Schedule 2.11, Red Star has all licenses, franchises, permits and other
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governmental authorizations that are legally required to enable it to conduct
its business in all material respects as conducted at the Effective Time. Except
for compliance with federal and state securities and corporation laws, as herein
provided, no authorization, approval, consent or order of, or registration,
declaration, or filing with, any court or other governmental body is required in
connection with the execution and delivery by Red Star of this Agreement and the
consummation by Red Star of the transactions contemplated hereby. Davis will
assist Mid-Power in the pursuit of the qualification of Red Star by the Federal
government and the State of Utah as an "operator" of the oil and gas leases
included in the Assets, which qualification shall be diligently pursued by
Mid-Power.
Section 2.12. No Agreements To Sell the Assets. Red Star has no
commitment or legal obligation, absolute or contingent, to any other person or
firm to, directly or indirectly, sell, assign, transfer or effect a sale of the
property and Assets of Red Star or to enter into any agreement or cause the
entering into of an agreement with respect to any of the foregoing.
Section 2.13. Books and Records. None of the books, records and
workpapers of Red Star and relating to the Assets that have been presented to
Mid-Power for review contain information that Red Star knows to be untrue or
materially incorrect or misleading. The books and records, financial and
otherwise, of Red Star and relating to the Assets are in all material respects
complete and correct and have been made and maintained in accordance with sound
business and bookkeeping practices and, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of Red Star.
Section 2.14. Tax Matters. Neither Red Star nor, to the knowledge of
Red Star, any of its affiliates has taken agreed to take or failed to take any
action that would prevent the Merger from constituting a tax-free reorganization
qualifying under the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E)
of the Code.
Section 2.15. Taxes. Except as set forth in Red Star Schedule 2.15 and
except as such failure of any representation or warranty made in this Section
2.15 to be true and correct that would not have a Red Star Material Adverse
Effect:
(a) Except to the extent that the applicable statute of limitations has
expired, all returns required to be filed by or on behalf of Red Star have been
(i) duly filed on a timely basis with the appropriate governmental authorities
and such returns are true, correct and complete, and (ii) duly paid in full or
made a provision in accordance with generally accepted accounting principles for
the payment of all Taxes for all periods covered by such returns or with respect
to any period prior to the Effective Time.
(b) Red Star has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of taxes
(including any estimated taxes and the withholding of taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign laws) and has,
within the time and the manner prescribed by law, withheld from employee wages
and paid over all amounts withheld under applicable laws.
(c) Red Star (i) has not been a member of an affiliated group filing a
consolidated federal income tax return other than a group the common parent of
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which was Red Star, (ii) does not have any liability under Treas. Reg. ss.
1.1502-6 or any analogous state, local or foreign law by reason of having been a
member of any consolidated, combined or unitary group, and (iii) is not a party
to any tax-sharing agreement with any person.
(d) There is no material dispute or claim concerning any liabilities
for Taxes of Red Star either raised or reasonably expected to be raised by any
taxing authority.
(e) Red Star has made available to Mid-Power complete copies of (i) all
federal income tax returns of Red Star for all periods since the formation of
Red Star for all periods open under the statute of limitations for assessments,
and (ii) examination reports and statements of deficiencies assessed by Red
Star.
(f) No consent under Section 341(f) of the Code has been filed with
respect to Red Star.
(g) Red Star has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant to Section 280G of the Code.
(h) Red Star has not agreed, nor is it required to make, prior to the
Effective Time, any adjustment under Code Section 481(a) by reason of a change
in accounting method or otherwise.
(i) Red Star has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 279(a) and (b) of the Code.
(j) The amount of liability for unpaid taxes of Red Star for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for taxes reflected on
Red Star's Current Balance Sheet as of the Effective Time.
(k) Red Star has not disposed of any property in a transaction that is
presently accounted for under the installment method.
(l) Red Star is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond property or
as tax-exempt use property within the meaning of Section 168 of the Code.
(m) Red Star elected to be treated as a "S" corporation from and after
April 22, 1997.
Section 2.16. Employment Matters. There are no material controversies
pending or threatened between Red Star and any of its employees.
Section 2.17. Disclosure of Tangible Personal Property. Included in Red
Star Schedule 2.17 are descriptions of all items of tangible personal property
included in the Assets of Red Star as of the date hereof. In the case of any
asset leased to or by Red Star or assigned to or by Red Star, the disclosure
also includes the current name and address of the lessor/lessee or
assignor/assignee and a copy of the lease and/or assignment agreement.
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Section 2.18. Information Supplied. Without limiting any of the
representations and warranties contained herein, no representation or warranty
of Red Star and no statement by Red Star or other information contained in
documents referred to in this Agreement or the exhibits hereto, as of the date
of such representation, warranty, statement or document, contains or contained
any untrue statement of material fact, or, at the date thereof, omits or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements are or were
made, not misleading.
Section 2.19. Certain Contracts and Restrictions. Red Star Schedule
2.19 to this Agreement lists, as of the date hereof, each agreement, contract or
commitment (including any amendments thereto), other than the property interests
described in Schedule 2.08, to which Red Star is a party or by which Red Star is
bound involving consideration during the next 12 months in excess of $10,000 or
that is otherwise material to the Assets, liabilities, financial condition,
results of operations or current or future business of Red Star, taken as a
whole. As of the date of this Agreement and except as indicated on Red Star
Schedule 2.19, Red Star has fully complied with all material terms and
conditions of all agreements, contracts and commitments listed in Red Star
Schedule 2.19 and all such agreements, contracts and commitments are in full
force and effect, Red Star has no knowledge of any defaults thereunder or any
cancellations or modifications thereof, and such agreements, contracts and
commitments are not subject to any memorandum or other written document or
understanding permitting cancellation.
Section 2.20. Technical Information. The information provided by Red
Star to the engineering firm(s) engaged to evaluate the properties and Assets of
Red Star is, or will be, at the time provided, complete and accurate in all
respects and has not been modified or withdrawn. Red Star has no knowledge or
reason to believe that the quantities, sales prices, operating costs or
estimated future results of production of reserves from Red Star's data provided
or to be provided are or will be inaccurate in any material respect, based on
the assumptions set forth therein. Except for future price adjustments and
production curtailments, Red Star knows of no fact, event or circumstance
materially or adversely affecting the value of the properties as described in
such data.
Section 2.21. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Red Star.
Section 2.22. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth in Red Star Schedule 2.22, since
the date of Red Star's Current Balance Sheet, Red Star has conducted its
business in the ordinary course of business consistent with past practice. Since
the date of Red Star's Current Balance Sheet, there has not been (i) any event,
change or effect (including the occurrence of any liabilities of any nature,
whether or not accrued, contingent or otherwise) having or that would be
reasonably likely to have, individually or in the aggregate, a Red Star Material
Adverse Effect; (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to the
equity interests of Red Star or any redemption, purchase or other acquisition by
Red Star of any of Red Star's capital stock; (iii) any revaluation by Red Star
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of its Assets, including the writing down of the value of inventory or the
writing down or off of notes or accounts receivable, other than in the ordinary
course of business and consistent with past practices; (iv) any change by Red
Star in accounting principles or methods, except insofar as may be required by a
change in generally accepted accounting principles; (v) a fundamental change in
the nature of Red Star's business; (vi) any arrangement for the disposition of
any material property or assets of Red Star; (vii) any accrual or arrangement
for or payment of bonuses or special compensation of any kind or any severance
or termination pay to any present or former officer, employee or stockholder;
(viii) any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement or other employee benefit plan, payment or
arrangement made to, for or with its officers, directors or employees, or (ix) a
Red Star Material Adverse Effect.
Section 2.23. Environmental Matters. Except as and to the extent
reflected in Red Star Schedule 2.23 attached hereto:
(a) To the best of Red Star's and Davis' knowledge, Red Star's Assets
are, and at all times have been (except as set forth in Red Star Schedule
2.23(a)), operated in accordance with all applicable environmental laws, and to
the best of Red Star's and Davis' knowledge, no condition exists with respect to
Red Star's Assets that would or could reasonably be expected to subject Red Star
or Mid-Power to any damages (including without limitation actual, consequential,
exemplary and punitive damages), liability (absolute or contingent, determined
or determinable), penalties, injunctive relief or cleanup costs under any
applicable environmental laws, or that require or could reasonably be expected
to require cleanup, removal, remedial action or other response by either Red
Star or Mid-Power.
(b) To the best of Red Star's and Davis' knowledge, Red Star and Davis
have not received and, none of their predecessors in title to Red Star's Assets
has received, any notice from a governmental agency asserting or alleging a
violation of any environmental laws as they relate to Red Star's Assets, except
as set forth in Red Star Schedule 2.23(b).
(c) To the best of Red Star's and Davis' knowledge, there are no
pending or threatened suits, actions, claims or proceedings against Red Star or
Davis or, to the best of Red Star's and Davis' knowledge, against any
predecessors in title to Red Star's Assets, arising from or related to, directly
or indirectly, any environmental laws as they relate to Red Star's Assets.
(d) To the best of Red Star's and Davis' knowledge, neither Red Star,
Davis nor any predecessor in title to Red Star's Assets is subject to any
judgment, decree, order or citation related to or arising out of any
environmental laws, and, to the best of Red Star's and Davis' knowledge, neither
Red Star nor Davis has been named or listed as a potentially responsible party
by any governmental or other entity in a matter arising under or relating,
directly or indirectly, to any environmental laws.
(e) To the best of Red Star's and Davis' knowledge, Red Star or Davis
has obtained or caused to be obtained all permits, licenses and approvals
related to Red Star's Assets required under any environmental laws, except as
otherwise disclosed in this Agreement.
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(f) To the best of Red Star's and Davis' knowledge, there are not now,
nor have there ever been (except as set forth on Red Star Schedule 2.23(f)),
hazardous materials discharged, leaked, spilled or released in, on, to, from or
at any properties owned, leased or operated by Red Star or stored, treated,
recycled at or in tanks or other facilities thereon or related thereto that
could give rise or could reasonably be expected to give rise to liability under
any environmental laws.
(g) To the best of Red Star's and Davis' knowledge, excluding well
bunkers, pipelines and surface equipment associated with all the drilling and
producing for gas from wells in the Clear Creek Unit, there are no underground
storage tanks, surface impoundments, or wastewater injection wells located on or
in any of Red Star's Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MID-POWER
Mid-Power represents and warrants to Red Star and Davis that as of the
date of this Agreement and at the Effective Time:
Section 3.01. Organization and Good Standing. Mid-Power is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has full corporate power and authority to own and
hold the properties and assets owned and leased by it, and to conduct its
business as presently conducted. Mid-Power is duly qualified, validly existing
and in good standing under the laws of each other jurisdiction in which the
nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be so duly qualified and in good standing would not have a "Mid-Power Material
Adverse Effect" (as defined below). The term "Mid-Power Material Adverse Effect"
as used in this Agreement shall mean any change or effect that, individually or
when taken together with all such other changes or effects, would be reasonably
likely to be materially adverse to the assets, liabilities, financial condition,
results of operations or current or future business of Mid-Power..
Section 3.02. Authority. Mid-Power has the requisite corporate power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Mid-Power's
board of directors, and no other corporate proceedings on the part of Mid-Power
are necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Mid-Power.
Section 3.03. Noncontravention. Mid-Power is not subject to or
obligated under any charter, bylaw, contract provision, license, franchise,
permit, order or decree that would be breached or violated, or in respect of
which a right of acceleration would be created by, its executing and carrying
out this Agreement.
Section 3.04. Reports; Financial Statements.
Page 12
(a) Except as set forth in Schedule 3.04(a), since September 30, 1999,
Mid-Power (then known as Caplan Corporation) and its subsidiaries have filed all
forms, reports, statements and other documents required to be filed with (i) the
Securities and Exchange Commission (the "SEC") including, without limitation,
(1) all Annual Reports on Form 10-K or 10-KSB, (2) all Quarterly Reports on Form
10-Q or 10-QSB (the balance sheet contained in the Quarterly Report for March
31, 2002 is referred to herein as the "Mid-Power Current Balance Sheet"), (3)
all Current Reports on Form 8-K, and (4) all other reports, schedules,
registration statements or other documents (collectively referred to as the
"Mid-Power SEC Reports"); (ii) any applicable state securities authorities; and
(iii) any other applicable federal or state regulatory authorities, except where
the failure to file any such forms, reports, statements or other documents would
not have a Mid-Power Adverse Effect (all such forms, reports, statements and
other documents in clauses (i), (ii) and (iii) of this section 3.05(a) being
referred to herein collectively as the "Mid-Power Reports"). The Mid-Power
Reports, including any Mid-Power Reports filed after the date of this Agreement
and prior to the Effective Time, (x) were or will be prepared in accordance with
the requirements of applicable law (including, with respect to Mid-Power SEC
Reports, the Securities Act of 1933 ("Securities Act") and the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Mid-Power SEC Reports) and (y) did not at the time they were filed, or
will not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading.
(b) Each of the consolidated financial statements (including in each
case any related notes thereto) contained in Mid-Power SEC Reports filed prior
to the Effective Time has been or will be prepared in accordance with the
published rules and regulations of the SEC and generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
(i) to the extent required by changes in generally accepted accounting
principles; (ii) with respect to Mid-Power SEC Reports filed prior to the date
of this Agreement, as may be indicated in the notes thereto; and (iii) with
respect to interim financial statements as may be permitted by Item 310 of
Regulation S-B) and fairly present or will fairly present the consolidated
financial position of Mid-Power and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated (including reasonable estimates of normal and recurring
year-end adjustments), except that any unaudited interim financial statements
were or will be subject to normal and recurring year-end adjustments and any pro
forma financial statements contained in such consolidated financial statements
are not necessarily indicative of the consolidated financial position of
Mid-Power and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated.
Section 3.05. Compliance Permits. Except as disclosed on Mid-Power
Schedule 3.05 and to the best knowledge of Mid-Power, Mid-Power has not violated
and is in compliance with all laws, statutes, ordinances, regulations, rules and
orders of any federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
of governmental agency, department or authority, including without limitation,
Page 13
environmental laws, relating to the Assets of Mid-Power, except where the
violation or failure to comply, individually or in the aggregate, would not have
a Mid-Power Adverse Effect on Mid-Power. Except as disclosed on Mid-Power
Schedule 3.05, Mid-Power has not received any notice to the effect that, or
otherwise been advised that, Mid-Power is not in compliance with any such
statutes, regulations, rules, judgments, decrees, orders, ordinances or other
laws, and Mid-Power has no reason to anticipate that any existing circumstances
are likely to result in violations of any of the foregoing, which failure or
violation could, in any one case or in the aggregate, have a Mid-Power Adverse
Effect on Mid-Power. Mid-Power and, to Mid-Power's knowledge, each third-party
operator of any of Mid-Power's properties, is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business in all material respects as it is
now being conducted or as presently foreseeable.
Section 3.06. Governmental Authorizations. Mid-Power has all licenses,
franchises, permits and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted at the Effective Time. Except for compliance with federal and state
securities and corporation laws, as herein provided, no authorization, approval,
consent or order of, or registration, declaration, or filing with, any court or
other governmental body is required in connection with the execution and
delivery by Mid-Power of this Agreement and the consummation by Mid-Power of the
transactions contemplated hereby.
Section 3.07. No Agreements To Sell the Assets. Mid-Power has no
commitment or legal obligation, absolute or contingent, to any other person or
firm to, directly or indirectly, sell, assign, transfer or effect a sale of the
property and assets of Mid-Power or to enter into any agreement or cause the
entering into of an agreement with respect to any of the foregoing.
Section 3.08. Books and Records. None of the books, records and
workpapers of Mid-Power that have been presented to Red Star for review contain
information that Mid-Power knows to be untrue or materially incorrect or
misleading. The books and records, financial and otherwise, of Mid-Power are in
all material respects complete and correct and have been made and maintained in
accordance with sound business and bookkeeping practices and, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of Mid-Power.
Section 3.09. Tax Matters. Neither Mid-Power nor any of its affiliates
has taken, agreed to take or failed to take any action that would prevent the
Merger from constituting a tax-free reorganization qualifying under the
provisions of Section 368(a)(1)(A) and Section 368(a)(3)(E) of the Code.
Section 3.10. Taxes. Except as set forth in Mid-Power Schedule 3.10 and
except as such failure of any representation or warranty made in this Section
3.10 to be true and correct that would not have a "Mid-Power Material Adverse
Effect" (as defined below):
(a) Except to the extent that the applicable statute of limitations has
expired, all returns required to be filed by or on behalf of Mid-Power have been
Page 14
(i) duly filed on a timely basis with the appropriate governmental authorities
and such returns are true, correct and complete, and (ii) duly paid in full or
made a provision in accordance with generally accepted accounting principles for
the payment of all Taxes for all periods covered by such returns or with respect
to any period prior to the Effective Time.
(b) Mid-Power has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of taxes
(including any estimated taxes and the withholding of taxes pursuant to Sections
1441 and 1443 of the Code or similar provisions under any foreign laws) and has,
within the time and the manner prescribed by law, withheld from employee wages
and paid over all amounts withheld under applicable laws.
(c) Mid-Power (i) has not been a member of an affiliated group filing a
consolidated federal income tax return other than a group the common parent of
which was Mid-Power, (ii) does not have any liability under Treas. Reg. ss.
1.1503-6 or any analogous state, local or foreign law by reason of having been a
member of any consolidated, combined or unitary group, and (iii) is not a party
to any tax-sharing agreement with any person.
(d) There is no material dispute or claim concerning any liabilities
for Taxes of Mid-Power either raised or reasonably expected to be raised by any
taxing authority.
(e) Mid-Power has made available to Red Star complete copies of (i) all
federal income tax returns of Mid-Power for all periods since the formation of
Mid-Power for all periods open under the statute of limitations for assessments,
and (ii) examination reports and statements of deficiencies assessed by
Mid-Power.
(f) No consent under Section 341(f) of the Code has been filed with
respect to Mid-Power.
(g) Mid-Power has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant to Section 380G of the Code.
(h) Mid-Power has not agreed, nor is it required to make, prior to the
Effective Time, any adjustment under Code Section 481(a) by reason of a change
in accounting method or otherwise.
(i) Mid-Power has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 379(a) and (b) of the Code.
(j) The amount of liability for unpaid taxes of Mid-Power for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for taxes reflected on
Mid-Power's Current Balance Sheet as of the Effective Time.
(k) Mid-Power has not disposed of any property in a transaction that is
presently accounted for under the installment method.
Page 15
(l) Mid-Power is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond property or
as tax-exempt use property within the meaning of Section 168 of the Code.
Section 3.11. Employment Matters. There are no material controversies
pending or threatened between Mid-Power and any of its employees.
Section 3.12. Information Supplied. Without limiting any of the
representations and warranties contained herein, no representation or warranty
of Mid-Power and no statement by Mid-Power or other information contained in
documents referred to in this Agreement or the exhibits hereto, as of the date
of such representation, warranty, statement or document, contains or contained
any untrue statement of material fact, or, at the date thereof, omits or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements are or were
made, not misleading.
Section 3.13. Certain Contracts and Restrictions. Mid-Power Schedule
3.13 to this Agreement lists, as of the date hereof, each agreement, contract or
commitment (including any amendments thereto), to which Mid-Power is a party or
by which Mid-Power is bound involving consideration during the next 12 months in
excess of $10,000 or that is otherwise material to the Assets, liabilities,
financial condition, results of operations or current or future business of
Mid-Power, taken as a whole. As of the date of this Agreement and except as
indicated on Mid-Power Schedule 3.13, Mid-Power has fully complied with all
material terms and conditions of all agreements, contracts and commitments
listed in Mid-Power Schedule 3.13 and all such agreements, contracts and
commitments are in full force and effect, Mid-Power has no knowledge of any
defaults thereunder or any cancellations or modifications thereof, and such
agreements, contracts and commitments are not subject to any memorandum or other
written document or understanding permitting cancellation.
Section 3.14. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Mid-Power.
Section 3.15. Absence of Certain Changes or Events. Except as
contemplated by this Agreement, as disclosed in the Mid-Power SEC Reports, or as
set forth in Mid-Power Schedule 3.15, since the date of Mid-Power's Current
Balance Sheet, Mid-Power has conducted its business in the ordinary course of
business consistent with past practice. Since the date of Mid-Power's Current
Balance Sheet, there has not been (i) any event, change or effect (including the
occurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having or that would be reasonably likely to have, individually or
in the aggregate, a Mid-Power Material Adverse Effect; (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the equity interests of Mid-Power or any
redemption, purchase or other acquisition by Mid-Power of any of Mid-Power's
capital stock; (iii) any revaluation by Mid-Power of its Assets, including the
writing down of the value of inventory or the writing down or off of notes or
accounts receivable, other than in the ordinary course of business and
consistent with past practices; (iv) any change by Mid-Power in accounting
principles or methods, except insofar as may be required by a change in
Page 16
generally accepted accounting principles; (v) a fundamental change in the nature
of Mid-Power's business; (vi) any arrangement for the disposition of any
material property or assets of Mid-Power; (vii) any accrual or arrangement for
or payment of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer, employee or stockholder;
(viii) any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement or other employee benefit plan, payment or
arrangement made to, for or with its officers, directors or employees, or (ix) a
Mid-Power Material Adverse Effect.
Section 3.16 New Mid-Power Stock. The New Mid-Power Stock will, when
issued, be fully paid and non-assessable.
ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
Section 4.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders in such case where approval is required:
(a) by mutual consent of MergerCo and Red Star;
(b) by either Party, if there shall be any order, which is final and
nonappealable, preventing the consummation of the Merger, except if the Party
relying on such order to terminate this Agreement has not complied with its
obligations under this Agreement; or
(c) by either Party, if the Merger shall not have been consummated on
or before 11:59:59 p.m., local time, June 13, 2002.
The right of the Parties hereto to terminate this Agreement pursuant to this
section 4.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of either Party hereto, any person
controlling such Party or any of its officers, directors, managers, partners,
representatives or agents, whether prior to or after the execution of this
Agreement.
Section 4.02. Effect of Termination. Except as provided in section 7.02
of this Agreement, in the event of the termination of this Agreement pursuant to
section 4.01 this Agreement shall forthwith become void, there shall be no
liability on the part of one Party to the other Party to consummate the
transaction contemplated by this Agreement, and all rights and obligations of
either Party hereto shall cease, except that nothing herein shall relieve the
other Party of any liability for any breach of such Party's covenants or
agreements contained in this Agreement or any willful breach of such Party's
representations or warranties contained in this Agreement.
Section 4.03. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties hereto.
Page 17
ARTICLE V
INDEMNIFICATION
Section 5.01. Indemnification of Davis. In addition to any other
indemnification provided in this Agreement or in any other documents executed in
connection herewith, Mid-Power shall protect, defend, indemnify and save
harmless Davis for, from and against all liabilities, obligations, claims,
demands, damages, penalties, causes of action, losses, fines, costs and expenses
(including without limitation out-of-pocket attorneys' fees and expenses),
imposed upon or incurred by or asserted against Davis by reason of: (a)
ownership, development, management and operation of the Assets or any interest
therein or receipt of any income therefrom from and after the Effective Time;
(b) any failure on the part of Mid-Power to perform or comply with any of the
terms of this Agreement; (c) the presence, disposal, escape, seepage, leakage,
spillage, discharge, emission, release, or threatened release of any "Hazardous
Materials" (as defined in Nevada Revised Statutes, Section 40.504) on, from, or
affecting the Assets or any other property from and after the Effective Time;
(d) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials from and after
the Effective Time; (e) any lawsuit brought or threatened, settlement reached,
or government order relating to such Hazardous Materials arising out of
activities occurring from and after the Effective Time; (f) any failure of
Mid-Power to comply with any applicable laws; (g) any representation or warranty
made in this Agreement or any other documents executed in connection herewith
being false or misleading in any respect as of the date such representation or
warranty was made or as of the Effective Time; and (h) any claim by brokers,
finders or similar persons claiming to be entitled to a commission in connection
with any transaction involving the Assets or any part thereof under any legal
requirement or any liability asserted against Davis with respect thereto. Any
amounts payable to Davis by reason of the application of this Section shall be
immediately due and payable and shall bear interest at the Default Rate (as
defined in the Note) from the date loss or damage is sustained by Davis until
paid. The obligations and liabilities of Mid-Power under this Section shall
survive any termination, satisfaction or assignment of this Agreement and any
closing hereunder.
Section 5.02. Indemnification of Mid-Power. In addition to any other
indemnification provided in this Agreement or in any other documents executed in
connection herewith, Davis shall protect, defend, indemnify and save harmless
Mid-Power for, from and against all liabilities, obligations, claims, demands,
damages, penalties, causes of action, losses, fines, costs and expenses
(including without limitation out-of-pocket attorneys' fees and expenses),
imposed upon or incurred by or asserted against Mid-Power by reason of: (a) to
the extent Davis has actual knowledge of the subject thereof any known liability
that comes from the ownership, development, management and operation of the
Assets or any interest therein or receipt of any income therefrom prior to the
Effective Time, except as otherwise provided in this Agreement; (b) any failure
on the part of Red Star or Davis to perform or comply with any of the terms of
this Agreement; (c) to the extent Davis has actual knowledge of the subject
thereof the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release, or threatened release of any "Hazardous Materials" (as
defined in Nevada Revised Statutes, Section 40.504) on, from, or affecting the
Assets or any other property prior to the Effective Time; (d) to the extent
Page 18
Davis has actual knowledge of the subject thereof any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related
to such Hazardous Materials prior to the Effective Time; (e) any lawsuit brought
or threatened, settlement reached, or government order relating to such
Hazardous Materials arising out of activities occurring prior to the Effective
Time; (f) any failure of Red Star or Davis to comply with any applicable laws;
and (g) any representation or warranty made in this Agreement or any other
documents executed in connection herewith being false or misleading in any
respect as of the date such representation or warranty was made or as of the
Effective Time. Any amounts payable to Mid-Power by reason of the application of
this Section shall be immediately due and payable and shall bear interest at the
Default Rate (as defined in the Note) from the date loss or damage is sustained
by Mid-Power until paid. The obligations and liabilities of Davis under this
Section shall survive any termination, satisfaction or assignment of this
Agreement and any closing hereunder.
Section 5.03. Claims for Indemnification. Whenever any claim shall
arise for indemnification hereunder, the Party seeking indemnification (the
"Indemnified Party"), shall promptly notify, in writing, the Party from whom
indemnification is sought (the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by any Party, the notice to the Indemnifying Party
shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld, unless suit shall have been
instituted against it and the Indemnifying Party shall not have taken control of
such suit after notification thereof as provided in section 5.04 hereof.
Section 5.04. Defense by Indemnifying Party. In connection with any
claim giving rise to indemnity hereunder resulting from or arising out any claim
or legal proceeding by a person who is not a Party to this Agreement, the
Indemnifying Party, at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
it acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate (but not control) the defense
of any such action, with its counsel and at its own expense. If the Indemnifying
Party does not assume the defense of any such claim or litigation resulting
therefrom within 30 days after the date such claim is made:
(a) the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including, but
not limited to, settling such claim or litigation, after giving notice
of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate; and
(b) the Indemnifying Party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at
its own expense. If the Indemnifying Party thereafter seeks to question
the manner in which the Indemnified Party defended such third-party
claim or the amount or nature of any such settlement, the Indemnifying
Party shall have the burden to prove by a preponderance of the evidence
Page 19
that the Indemnified Party did not defend or settle such third-party
claim in a reasonably prudent manner.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Acquisition of New Mid-Power Stock and Restrictions on
Transfer. The consummation of this Agreement and the transactions contemplated
herein, including the issuance of the New Mid-Power Stock to Davis as
contemplated hereby, constitutes the offer and sale of securities under the
Securities Act and applicable state securities laws. Such transactions shall be
consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes that depend, among other items, on the
circumstances under which Davis acquires such securities.
(a) In order to provide documentation for reliance upon exemptions from
the registration and prospectus delivery requirements for such transactions, the
approval of the Merger and this Agreement by Davis indicates his acceptance of,
and concurrence in, the following representations and warranties:
(i) Davis confirms his status as an "accredited investor," as
defined under Rule 501 of Regulation D promulgated under the Securities
Act, on the basis that he is a natural person whose individual net
worth as of the Effective Time, exceeds $1,000,000.
(ii) Davis acknowledges that neither the SEC nor the
securities commission of any state or other federal agency has made any
determination as to the merits of acquiring the New Mid-Power Stock and
that the transactions contemplated herein involve certain risks.
(iii) Davis has received and read this Agreement and
understands the risk related to the consummation of the transactions
herein contemplated.
(iv) Davis has such knowledge and experience in business and
financial matters that he is capable of evaluating the Merger and
Mid-Power and its business operations.
(v) Davis has been provided with a copy of the Agreement plus
all materials and information requested by his representative,
including any information requested to verify any information furnished
(to the extent such information is available or can be obtained without
unreasonable effort or expense), and he has been provided the
opportunity for direct communication with Mid-Power and its
representatives regarding the transactions contemplated hereby.
(vi) All information that Davis has provided to Mid-Power or
its agents or Representatives concerning his suitability to hold shares
in Mid-Power following the transactions contemplated hereby is
complete, accurate and correct.
(vii) Davis has not offered or sold any interest in this
Agreement and has no present intention of dividing the New Mid-Power
Stock to be received or the rights under this Agreement with others or
of reselling or otherwise disposing of any portion of such stock or
rights, either currently or after the passage of a fixed or
determinable period of time or on the occurrence or nonoccurrence of
any predetermined event or circumstance.
Page 20
(viii) Davis was at no time solicited by any leaflet, public
promotional meeting, circular, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or
solicitation in connection with the offer, sale or purchase of the New
Mid-Power Stock through this Agreement.
(ix) Davis anticipates no need in the foreseeable future to
sell the New Mid-Power Stock to be acquired pursuant hereto. Davis is
able to bear the economic risks of this investment, and consequently,
without limiting the generality of the foregoing, is able to hold the
New Mid-Power Stock to be received for an indefinite period.
(x) Davis understands that the New Mid-Power Stock has not
been registered, but is being acquired by reason of a specific
exemption under the Securities Act as well as under certain state
securities laws for transactions by an issuer not involving any public
offering and that any disposition of the New Mid-Power Stock may, under
certain circumstances, be inconsistent with this exemption and may make
the holder who disposes of such stock an "underwriter" within the
meaning of the Securities Act. It is understood that the definition of
"underwriter" focuses upon the concept of "distribution" and that any
subsequent disposition of the New Mid-Power Stock can only be effected
in transactions that are not considered distributions.
(xi) Davis acknowledges that the New Mid-Power Stock must be
held and may not be sold, transferred or otherwise disposed of for
value unless it is subsequently registered under the Securities Act or
an exemption from such registration is available. Except as provided
herein, Mid-Power is under no obligation to register the New Mid-Power
Stock under the Securities Act. If Rule 144 is available (and no
assurance is given that it will be except as expressly set forth in
this Agreement), after one year and prior to two years following the
Effective Time, only routine sales of such New Mid-Power Stock in
limited amounts can be made in reliance upon Rule 144 in accordance
with the terms and conditions of that rule. Mid-Power is under no
obligation to Davis to make Rule 144 available, except as may be
expressly agreed to by it in writing in this Agreement, and in the
event Rule 144 is not available, compliance with Regulation A or some
other disclosure exemption may be required before such persons can
sell, transfer or otherwise dispose of such New Mid-Power Stock without
registration under the Securities Act. Mid-Power's registrar and
transfer agent will maintain a stop transfer order against the
registration or transfer of the New Mid-Power Stock, and the
certificate representing the New Mid-Power Stock will bear a legend in
substantially the following form so restricting the sale of such
securities:
Page 21
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act. The
securities have been acquired for investment and may not be
sold or transferred without complying with Rule 144 in the
absence of an effective registration or other compliance under
the Securities Act.
(xii) Davis acknowledges that Mid-Power may refuse to register
transfer of the shares of the New Mid-Power Stock in the absence of
compliance with Rule 144 unless the holder furnishes the issuer with a
"no-action" or interpretive letter from the SEC or an opinion of
counsel reasonably acceptable to Mid-Power stating that the transfer is
proper. Further, unless such letter or opinion states that the New
Mid-Power Stock is free of any restrictions under the Securities Act,
the issuer may refuse to transfer the New Mid-Power Stock to any
transferee who does not furnish in writing to the issuer the same
representations and agree to the same conditions with respect to such
New Mid-Power Stock as set forth herein. The issuer may also refuse to
transfer the New Mid-Power Stock if any circumstances are present
reasonably indicating that the transferee's representations are not
accurate.
(b) Each Party acknowledges that the basis for relying on exemptions
from registration or qualifications are factual, depending on the conduct of the
various Parties, and that no legal opinion or other assurance will be required
or given to the effect that the transactions contemplated hereby are in fact
exempt from registration or qualification.
Section 6.02. Registration Procedures and Expenses. Mid-Power shall
register the resale of all of the New Mid-Power Stock owned by Davis pursuant to
the terms of a Registration Rights Agreement, in the form attached hereto as
Exhibit "E" and incorporated herein by this reference, to be executed and
delivered at the Closing.
Section 6.03. No Representation Regarding Tax Treatment. No
representation or warranty is being made or legal opinion given by any Party to
any other regarding the treatment of this transaction for federal or state
income taxation. Although this transaction has been structured in an effort to
qualify for treatment under Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code, there is no assurance that any part of this transaction in fact meets the
requirements for such qualification. Each Party has relied exclusively on its
own legal, accounting and other tax advisers regarding the treatment of this
transaction for federal and state income taxes and on no representation,
warranty or assurance from any other party or such other party's legal,
accounting or other advisor(s).
Section 6.04. Public Announcements. Neither Party shall issue any press
release or otherwise make any public statements with respect to the Merger
without the approval of the other Party.
Section 6.05. Updated Title Opinion. Within thirty (30) days after the
Effective Time, Davis shall deliver to Mid-Power, at Mid-Power's expense, an
updated acquisition title opinion, dated as of the Effective Time, performed by
Page 22
the law offices of VanCott, Bagley, Cornwall & McCarthy confirming the ownership
by Red Star of the property interests described in and the conclusions set forth
in the Old Title Opinion, except as permitted by this Agreement (the "New Title
Opinion").
Section 6.06. Obligations after Closing. For a period of three years
following the Effective Time, Davis shall have access to and the right to copy
all of the records of Mid-Power relative to Red Star as may be necessary for
preparation of employee or corporate tax returns, employee tax reports, and
customary accounting functions. Additionally, Mid-Power and Davis shall each
make available to the other, at reasonable times and upon reasonable advance
notice, relevant records and personnel in connection with the preparation of a
defense or the participation in a defense, participation in the prosecution of
claim or litigation, and negotiation of a settlement relating to any pending,
future or threatened litigation, or government agency proceeding (including a
tax audit), or in the preparation of financial statements and reports involving
the conduct of Red Star's business before or after the Closing.
Section 6.07. Anti-Dilution. From and after the Effective Time and
until such time as the Note has been fully paid, Mid-Power shall not issue any
capital stock or options therein, whether common or preferred, that would cause
the ownership of Davis to become less than sixty percent (60%) of the ownership,
beneficial or legal, of Mid-Power. Following payment in full of the Note and
until one (1) year and one (1) month following the Effective Time, Mid-Power
shall not issue any capital stock or options therein, whether common or
preferred, that would cause the ownership of Davis to become less than fifty-one
percent (51%) of the ownership, beneficial or legal, of Mid-Power. Until five
(5) years following the Effective Time, Mid-Power shall not issue any capital
stock or options therein, whether common or preferred, that would cause the
ownership of Davis to become less than thirty-six percent (36%) of the
ownership, beneficial or legal, of Mid-Power. The obligations and liabilities of
Mid-Power under this Section shall survive any termination, satisfaction or
assignment of this Agreement and any closing hereunder. Nothing contained herein
shall be construed as requiring Davis to surrender any of the shares of the New
Mid-Power Stock received pursuant to this Agreement.
Section 6.08. Release of Liabilities. Mid-Power acknowledges that Davis
is a co-obligor with Red Star of those certain Conditional Sales Contracts with
General Motors Acceptance Corporation for the two (2) GMC pick-up trucks more
particularly described on Schedule 2.17. Mid-Power will use its best efforts
within a reasonable period of time following the Effective Time to cause Davis
to be released from such liability.
Section 6.09 Settlement Proceeds. Notwithstanding anything else
contained herein to the contrary, Mid-Power acknowledges and agrees that the
proceeds of any settlement reached with Petroleum Development Corporation
("PDC") regarding a contractual dispute between Davis and PDC shall be payable
solely to Davis. Davis believes that the amount of such settlement proceeds may
be $287,500.00 and Mid-Power agrees that all negotiations are to be conducted at
the sole and absolute discretion of Davis without any direction by or from
Mid-Power. In the event a settlement with PDC is not reached, Davis, on the same
basis as set forth above, may pursue any and all causes of action or claims
against PDC arising from the agreements between PDC and Davis, including
mediation, arbitration and/or suits at law and the like, all at Davis' cost and
Page 23
expense. Mid-Power agrees to cooperate with Davis to effect the intent of this
Section 6.09. Davis agrees to indemnify Mid-Power as related to acts/actions
covered within this Section 6.09.
Section 6.10 Bonds and Refundable Deposits. As a bond to guarantee
performance in favor of the State of Utah, Division of Oil, Gas and Mining (the
"Division") of Davis' obligation with regard to certain wells pursuant to the
Division's Request for Agency Action, presently pending before the State of Utah
Board of Oil, Gas and Mining, Davis has heretofore deposited cash in the amount
of $80,000.00 (the "Collateral") to enable the issuance of a surety bond (the
"Old Bond"). Scott has prior hereto provided financial assets which are to
replace such Old Bond. Upon release of the Old Bond, the Collateral shall be
paid to Davis. All other surety or financial bonds and refundable deposits as
shall have been posted and/or made by Red Star or Davis prior to the Effective
Time shall be and remain the property of Davis after the Effective Time, and
upon the designation of Mid-Power as the operator, the bonds shall be replaced
by Mid-Power. All refunds of the original bonds and deposits shall be paid to
Davis. Until such time that Mid-Power Resource is approved as the operator,
Davis shall continue to be Operator and Davis shall continue to operate the
Clear Creek Unit as a reasonably prudent operator. Subject to the
representations of Davis, once Mid-Power is the Operator, Davis is released of
all liability for the bonds or the subject matter thereof, including the
plugging, abandoning and reclamation of wells on the Clear Creek Unit. Davis
shall negotiate using his sole and absolute discretion without any direction by
or from Mid-Power with the Division to a satisfactory conclusion the final form
of the stipulated Order and Settlement Agreement, which will result in the
Division's Request for Agency Action currently pending before the Board of Oil
Gas and Mining being dismissed with prejudice.
Section 6.11. Additional Financial Statements of Red Star and the
Assets and Operations Acquired.
(a) Pursuant to the requirements of Section 15(d) of the
Exchange Act, Mid-power is required to file with the SEC, within 75
days after the Effective Time, a current report on Form 8-K containing
specified audited and unaudited historical financial information
respecting any business acquired in accordance with the requirements of
Item 310 of Regulation S-B. In order to meet this requirement, promptly
following the Effective Time, Davis shall, with diligence and dispatch,
provide or otherwise make available to Mid-Power all of the books,
records and financial information, including all books and records of
original entry, in the care, custody or control of Davis or Red Star,
as the case may be, relating to Red Star and the Assets and operations
acquired for all periods during which they were owned by either Davis
or Red Star and, to the extent available without unreasonable effort or
expense, for such period subsequent to December 31, 1999, that they
were owned or operated by any third party. Promptly following receipt
of or access to such information, Mid-Power shall engage, authorize and
instruct its certified public accountants to undertake an audit of such
financial information, at Mid-Power's cost, and to issue an unqualified
opinion meeting the requirements of Article 2 of Regulation S-X
promulgated by the SEC with respect thereto in order to enable
Mid-Power to satisfy its reporting requirements under Section 15(d) of
the Exchange Act.
Page 24
(b) If Davis is able to provide to provide financial
information for that portion of 2000 that precedes his acquisition of
the Assets on or about December 15, 2000, in form and substance
sufficient to enable Mid-Power's certified public accountants to issue
an unqualified opinion meeting the requirements of Article 2 of
Regulation S-X promulgated by the SEC with respect thereto, on or
before the date on which such financial information is required to be
included in a current report on Form 8-K, Davis shall be deemed to have
satisfied his obligations respecting the completion of audited
historical financial information respecting the Assets and operations
acquired, and Mid-Power shall include the audited financial information
for 2000 and 2001 together with the other required interim and pro
forma financial information in a report on Form 8-K and timely file
such report (a "Financial Statement Filing Date").
(c) If Davis is unable to provide financial information for
that portion of 2000 that precedes his acquisition of the Assets on or
about December 15, 2000, in form and substance sufficient to enable
Mid-Power's certified public accountants to issue an unqualified
opinion meeting the requirements of Article 2 of Regulation S-X
promulgated by the SEC with respect thereto, Mid-Power shall use its
best efforts, with the cooperation and assistance of Davis, to seek a
waiver or other relief from the requirement to provide audited
financial statements respecting the full fiscal year ended December 31,
2000. If such waiver or other relief is obtained, Davis shall be deemed
to have satisfied his obligations respecting the completion of audited
historical financial information respecting the Assets and operations
acquired, and Mid-Power shall include the audited financial information
for 2001 together with the other required interim and pro forma
financial information in a report on Form 8-K and timely file such
report (a "Financial Statement Filing Date").
(d) If a waiver or other relief from providing audited
historical financial information for Red Star and the Assets and
operations acquired for the year ended December 31, 2000, is not
obtained, Mid-Power shall change its fiscal year to a calendar year.
Davis shall not be deemed to have satisfied its obligations respecting
the completion of audited historical financial information on Red Star
and the Assets and operations acquired until Mid-Power has filed
audited financial statements for the two full fiscal years ended
December 31, 2001 and 2002, on or before the date they are due under
Mid-Power's reporting obligations pursuant to Section 15(d) of the
Exchange Act (a "Financial Statement Filing Date").
(e) Pursuant to the terms of the Registration Rights
Agreement, in substantially the form attached hereto as Exhibit "E" and
incorporated herein by reference, to be executed and delivered at the
Closing, Mid-Power shall be obligated to file a registration statement
under the Securities Act within 30 days after the first Financial
Statement Filing Date to occur, as provided above.
Page 25
ARTICLE VII
CONFIDENTIAL INFORMATION
Section 7.01. Confidential Information.
(a) Red Star shall (i) afford Mid-Power and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Mid-Power Representatives") reasonable
access at reasonable times, upon reasonable prior notice, to the officers,
directors, employees, agents, properties, offices and other facilities of Red
Star and to the books and records thereof; and (ii) furnish promptly to
Mid-Power and the Mid-Power Representatives such information concerning the
business, properties, contracts, records and personnel of Red Star (including,
without limitation, financial, operating and other data and information) as may
be reasonably requested, from time to time, by Mid-Power or such Mid-Power
Representatives.
(b) Mid-Power shall (i) afford to Red Star and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Red Star Representatives"), reasonable
access at reasonable times, upon reasonable prior notice, to the officers,
directors, employees, accountants, agents, properties, offices and other
facilities of Mid-Power (including any subsidiary) and to the books and records
thereof; and (ii) furnish promptly to Red Star and the Red Star Representatives
such information concerning the business, properties, contracts, records and
personnel of Mid-Power (including any subsidiary) (including, without
limitation, financial, operating and other data and information) as may be
reasonably requested, from time to time, by Red Star or such Red Star
Representatives.
(c) Notwithstanding the foregoing provisions of this section, no Party
shall be required to grant access or furnish information to the other Party to
the extent that such access to or the furnishing of such information is
prohibited by Law. No investigation by the Parties hereto made heretofore or
hereafter shall affect the representations and warranties of the Parties that
are herein contained and each such representation and warranty shall survive
such investigation.
(d) The information received pursuant to this section shall be deemed
to be "Confidential Information." Each Party hereto agrees that it will treat in
confidence all documents, materials and other Confidential Information that it
shall have obtained regarding the other Party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents. Such documents, materials and other Confidential Information shall
not be communicated to any third Person (other than to their respective counsel,
accountants, financial advisors or lenders) and shall not be used for any
purpose to the detriment of the other Party. No Party shall use any Confidential
Information in any manner whatsoever except solely for the purpose of evaluating
a possible business relationship with the other Party. No Party and no Mid-Power
or Red Star Representative will, during the term of this Agreement or at any
time during the two years thereafter, irrespective of the time, manner or cause
Page 26
of termination of this Agreement, use, disclose, copy or assist any other person
or firm in the use, disclosure or copying of any documents, materials or other
Confidential Information of the other Party hereto.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS
Section 8.01. Conditions to Mid-Power's Obligations. The obligations of
Mid-Power under this Agreement are subject to the fulfillment of the following
conditions on or prior to the Effective Time to the satisfaction of Mid-Power
and their advisors:
(a) The transaction documents referenced in this Agreement and the
exhibits hereto shall have been duly drafted, authorized, executed and delivered
and shall be in full force and effect, or will have been fully and completely
performed, at the Effective Time.
(b) Mid-Power shall have received certified copies of the appropriate
proceedings of the board of directors of Red Star with respect to the
authorization of this Agreement and all transactions contemplated herein to
which Red Star is a Party.
(c) Mid-Power shall have received a certificate as to the good standing
of Red Star.
(d) The representation and warranties of Red Star and Davis contained
in this Agreement and in other instruments contemplated herein and any
certificate, document or other agreement delivered pursuant thereto shall be
true and correct as of the Effective Time as though made at the Effective Time.
(e) Red Star shall have performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement or
any instrument contemplated herein to be performed or complied with by it or
them on or prior to the Effective Time.
(f) Mid-Power shall have received a certificate dated the Closing Date
and signed by the duly authorized chief executive officer and principal
accounting or financial officer or officers of Red Star to the effect that the
representations and warranties of Red Star set forth in this Agreement are true
and correct as of the date of the certificate; there has been no material
adverse change to the financial condition, business or operations of Red Star
nor has any event occurred that, with the lapse of time or giving of notice of
both, may cause or create any material adverse change in the financial
condition, business or operations of Red Star up to and including the date of
the certificate; all conditions required by this Agreement to have been met,
satisfied or performed by Red Star have been met; and all authorizations,
consents, approvals, registrations and/or filings with any third party,
governmental body, agency or court required in connection with the execution and
delivery of the documents by Red Star have been obtained and are in full force
and effect or, if not required to have been obtained, will be in full force and
effect by such time as may be required.
Page 27
(g) Mid-Power shall receive, within a reasonable time after the
Effective Date, a certificate from the Secretary of State of the State of Nevada
and a Utah Uniform Commercial Code certificate from the Division of Corporations
and Commercial Code to the effect that there are no encumbrances of record on
the Assets of Red Star, other than those disclosed in the Red Star Schedules.
(h) Mid-Power shall have received further documents, certificates or
instruments relating to the transactions contemplated hereby as Mid-Power may
reasonably request.
Section 8.02. Conditions to Red Star's Obligations. The obligations of
Red Star under this Agreement are subject to the fulfillment of the following
conditions on or prior to the Effective Time to the satisfaction of Red Star and
its advisors:
(a) The transaction documents referenced in this Agreement and the
exhibits hereto shall have been duly drafted, authorized, executed and delivered
and shall be in full force and effect, or will have been fully and completely
performed, at the Effective Time.
(b) Red Star shall have received certified copies of the appropriate
proceedings of the board of directors of Mid-Power with respect to the
authorization of this Agreement and all transactions contemplated herein to
which Mid-Power is a Party.
(c) Red Star shall have received a certificate as to the good standing
of Mid-Power and MergerCo.
(d) The representation and warranties of Mid-Power contained in this
Agreement and in other instruments contemplated herein and any certificate,
document or other agreement delivered pursuant thereto shall be true and correct
as of the Effective Time as though made at the Effective Time.
(e) Mid-Power shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement or any instrument contemplated herein to be performed or complied with
by it or them on or prior to the Effective Time.
(f) Red Star shall have received a certificate dated the Closing Date
and signed by the duly authorized chief executive officer and principal
accounting or financial officer or officers of Mid-Power to the effect that the
representations and warranties of Mid-Power set forth in this Agreement are true
and correct as of the date of the certificate; there has been no material
adverse change to the financial condition, business or operations of Mid-Power
nor has any event occurred that, with the lapse of time or giving of notice of
both, may cause or create any material adverse change in the financial
condition, business or operations of Mid-Power up to and including the date of
the certificate; all conditions required by this Agreement to have been met,
satisfied or performed by Mid-Power have been met; and all authorizations,
consents, approvals, registrations and/or filings with any third party,
governmental body, agency or court required in connection with the execution and
Page 28
delivery of the documents by Mid-Power have been obtained and are in full force
and effect or, if not required to have been obtained, will be in full force and
effect by such time as may be required.
(g) Red Star shall receive, within a reasonable time after the
Effective Date, a certificate from the Secretary of State of the State of Nevada
to the effect that there are no encumbrances of record on the Assets of
Mid-Power, other than those disclosed in the Mid-Power Schedules.
(h) Red Star shall have received further documents, certificates or
instruments relating to the transactions contemplated hereby as Red Star may
reasonably request.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement or any document
delivered pursuant hereto on or prior to the Effective Time shall survive the
Closing of the transactions to be consummated on the Effective Time.
Section 9.02. Notices to Parties. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied or mailed by registered or certified mail (return receipt requested)
to the persons at the following addresses (or at such other address for a Party
as shall be specified by like notice):
(a) If to Mid-Power, to:
Mid-Power Service Corporation
3800 Howard Hughes Parkway
Suite 860
Las Vegas, Nevada 89109
(b) If to Red Star, to:
Red Star, Inc.
200 Rancho Circle
Las Vegas, Nevada 89107-4601
Section 9.03. Notice to Third Parties. All notices to Mid-Power's
customers, suppliers and other third parties and all other publicity or releases
relating to the transactions contemplated hereby and issued between the date of
this Agreement and the Effective Time will be approved by all Parties hereto
prior to release or dissemination.
Section 9.04. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof" and
"hereinafter" refer to this Agreement as a whole and not to the particular
Page 29
sentence or paragraph where they appear, unless the context otherwise requires.
Terms used in the plural include the singular, and vice versa, unless the
context otherwise requires.
Section 9.05. Drafting Party. The provisions of this Agreement and the
documents and instruments referred to herein have been examined, negotiated,
drafted and revised by counsel for each Party hereto and no implication shall be
drawn nor made against any Party hereto by virtue of the drafting of this
Agreement.
Section 9.06. Attorney Fees. If any action is brought by any Party
against another Party or Parties to enforce this Agreement or any provision
contained herein, the prevailing Party shall be entitled to recover from the
other Party or Parties reasonable attorneys' fees, costs and expenses incurred
in connection with the prosecution or defense of such action.
Section 9.07. Severability. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability or any other provisions of this Agreement, which shall remain in
full force and effect in such jurisdiction, or the validity or enforceability of
such provision in any other jurisdiction.
Section 9.08. Specific Performance. The Parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist, and damages would be difficult to
determine, and that the Parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 9.09. Miscellaneous. This Agreement, including the exhibits and
related documents mentioned herein:
(a) except as otherwise set forth hereinabove, constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the Parties, or any of
them, with respect to the subject matter hereof;
(b) is not intended to and shall not confer upon any other
person any rights or remedies hereunder or otherwise with respect to
the subject matter hereof;
(c) shall not be transferred or assigned by any Party without
the prior written consent of all other Parties;
(d) shall be governed in all respects, including validity,
interpretation and effect by the laws of the state of nevada;
(e) may be executed in two or more counterparts, each of which
shall be deemed an original, but which together shall constitute a
single agreement; and
(f) shall be binding upon and inure to the benefit of each of
the Parties hereto and to their respective transferees, successors and
assigns.
Page 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by and through their respective presidents, hereunto duly authorized,
all as of the date first above written.
MID-POWER SERVICE CORPORATION, RED STAR, INC.,
a Nevada corporation a Nevada corporation
By: /s/ James W. Scott By: /s/ Edward Mike Davis
----------------------------------------- -------------------------
JAMES W. SCOTT EDWARD MIKE DAVIS
President President
MID-POWER RESOURCE CORPORATION,
a Nevada corporation
By: /s/ James W. Scott
-----------------------------------------
JAMES W. SCOTT
President
Solely as to the provisions of Sections 2.08, 2.11, 2.23, 5.02 and Article VI of
the foregoing agreement,
/s/ Edward Mike Davis
- ---------------------------------
Edward Mike Davis
Page 31