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Exhibit 2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
EQUITABLE RESOURCES, INC.
STATOIL ENERGY, INC.,
STATOIL ENERGY HOLDINGS, INC.
AND
STATOIL NORTH AMERICA INC.
DATED AS OF
DECEMBER 31, 1999
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (together with the appendix and all
exhibits and schedules attached hereto, this "Agreement"), dated as of December
31, 1999, is entered into by and among Statoil North America Inc., a Delaware
corporation ("Majority Shareholder"), Statoil Energy, Inc., a Virginia
corporation (the "STEN Parent"), Statoil Energy Holdings, Inc., a Delaware
corporation ("STEN Holdings"; and together with STEN Parent, "STEN"), and
Equitable Resources, Inc., a corporation organized under the laws of
Pennsylvania ("Buyer").
RECITALS
A. STEN Parent owns and is engaged in oil and gas exploration and
production (the "Business") through its ownership of its direct wholly-owned
subsidiary, STEN Holdings and STEN Holdings' wholly-owned subsidiaries, Eastern
States Oil & Gas, Inc. a Delaware corporation ("ESOG"), and Eastern States
Exploration Co., a business trust organized under the laws of the Commonwealth
of Pennsylvania ("ESEC", and together with ESOG, the "Companies").
B. STEN Parent owns all of the outstanding common stock of STEN
Holdings and STEN Holdings owns all of (i) the outstanding common stock, par
value $1.00 per share, of ESOG (the "ESOG Common Stock") and (ii) the
outstanding beneficial interests of ESEC (the "ESEC Beneficial Interests", and
together with the ESOG Common Stock, the "Beneficial Interests").
X. XXXX Holdings wishes to sell, and Buyer wishes to purchase, all of
the Beneficial Interests in accordance with the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties herein contained, the Parties,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Acquisition Proposal" shall have the meaning assigned to it in Section
6.8(a).
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. The term
"control" as used in the preceding sentence means, with respect to a
corporation, the right to exercise, directly or
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indirectly, 50% or more of the voting rights attributable to the shares of the
controlled corporation, or with respect to any Person other than a corporation,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person. None of the Companies or
the Subsidiaries shall be considered an Affiliate of Buyer, STEN or Majority
Shareholder, and Buyer, STEN and Majority Shareholder shall not be considered
Affiliates of the Companies or the Subsidiaries.
"Agreement" shall have the meaning assigned to it in the first sentence
hereof.
"Allocated Value" shall have the meaning assigned to it in Appendix I.
"Allocations" shall have the meaning assigned to it in Section 9.9(b).
"Beneficial Interests" shall have the meaning assigned to it in Recital
B.
"Beneficial Owner" shall mean any Person having the power, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, to (i) vote, or to direct the voting of, a security and (ii) dispose
or to direct the disposition of, such security.
"Best Efforts" shall mean the taking by a Party of such action as would
be in accordance with reasonable commercial practices as applied to the
particular matter in question; provided, however, that such action shall not
include the incurrence of unreasonable expenses.
"Bid Purchase Price" shall have the meaning assigned to it in Section
2.2(a).
"Board" shall mean the Board of Directors of Buyer, Majority
Shareholder, STEN or the Companies, or of the Subsidiaries thereof, as the
context shall indicate.
"Business" shall have the meaning assigned to it in Recital A.
"Business Day" shall mean any day other than Saturday, Sunday or a
United States federal or New York state banking holiday.
"Business Interest Amount" means that amount of pre-tax interest income
equal to (a) 8% per annum simple interest accrued for the period beginning on
October 1, 1999 and ending on the Closing Date, multiplied by (b) the Bid
Purchase Price.
"Buyer" shall have the meaning assigned to it in the first sentence
hereof.
"CERCLA" shall have the meaning assigned to it in the definition of
"Environmental Law."
"Closing" shall have the meaning assigned to it in Section 3.1.
"Closing Date" shall have the meaning assigned to it in Section 3.1.
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"Closing Date Balance Sheet" shall have the meaning assigned to it in
Section 10.2(a).
"Closing Imbalance Position" means the aggregate amount of Production
Imbalances and Pipeline Imbalances of the Companies and the Subsidiaries as of
the Closing Date with in kind balances, calculated using a gas price equal to an
amount per MMBtu equal to the NYMEX Price plus $.20.
"Closing Net Working Capital Amount" means the excess of the
consolidated current assets over consolidated current liabilities of the
Companies and the Subsidiaries as of the Closing Date (giving effect to the
Closing), determined in accordance with GAAP consistent with the historic
accounting practices of the Companies and Subsidiaries modified by the
conventions set forth in the next sentence. For the purposes of determining the
Closing Net Working Capital Amount, (i) the existence of any third party
borrowings (whether long-term or short-term) and any intercompany borrowings
(whether long-term or short-term), intercompany accounts receivables or
intercompany accounts payable at the Closing shall be included, (ii) assets or
liabilities related to federal, state and local franchise and income taxes shall
not be included in such consolidated current liabilities, (iii) all Production
Imbalances and Pipeline Imbalances shall be excluded; and (iv) the unrecorded,
xxxx to market effects of unexpired Xxxxxx contained in the Hedge Book shall be
excluded.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of any succeeding law).
"Companies" shall have the meaning assigned to it in Recital A.
"Company Employee Plans" shall have the meaning assigned to it in
Section 5.16.
"Company Employees" shall have the meaning given in Section 5.16.
"Company Tax Return" means a tax return or returns prepared with
respect to the combined group of the Companies and the Subsidiaries (the
"Combined Group") for the tax period or periods beginning on October 1, 1999 and
ending on the Closing Date, which tax return or returns shall be prepared as if
such Combined Group filed a separate tax return (whether or not such Combined
Group actually files separate returns or joins in the filing of a consolidated
tax return). In preparing any Company Tax Return, any Tax Items generated by
other corporations (such as members of the same consolidated group, other than
the Companies and Subsidiaries), including, without limitation, any current
period losses and any net operating loss carryovers or other carryovers from
prior periods or years ("Prior Period Carryovers") attributable to such other
corporations (other than the Companies and Subsidiaries) shall be disregarded;
provided, however, that (i) any Tax Items generated by any Company or any
Subsidiary, including, without limitation, any current period losses, any
interest on debts (including intercompany debts between any Company and/or
Subsidiaries and such other member of its consolidated group prior to Closing
Date) of the Companies and Subsidiaries, and any Prior Period Carryovers shall
be considered, and (ii) in the event such Combined Group does not actually file
a separate return but joins in the filing of a consolidated tax return, any such
current period losses and Prior Period Carryovers shall be treated as first
utilized by such
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Combined Group prior to the utilization of any Prior Period Carryovers
attributable to other corporations within such consolidated group (other than
the Companies and Subsidiaries), provided, however, that the amount of net
operating loss carryovers or other carryovers attributable to such Companies
and/or Subsidiaries as of January 1, 1999, being all such carryovers from
periods or years prior to 1999, shall be determined under the consolidated
return regulations by treating such entities as if they left the consolidated
group on December 31, 1998.
"Confidential Information" shall mean all information that is disclosed
by or received from any Party to this Agreement to any other Party, excluding
such information that is (i) in the public domain, (ii) was in possession or
known by the recipient of such information prior to its disclosure or receipt,
or (iii) is disclosed by the provider of such information to a third party
without restriction on disclosure or use.
"Confidentiality Agreement" means the Confidentiality Agreement by and
between Den norske stats oljeselskap a.s, and Buyer, dated as of October 21,
1999.
"Contracts" shall have the meaning assigned to it in Section 5.11.
"Corporate Services" means the services listed under "SERVICES" in
Exhibit C to be provided by the Party specified therein after the Closing Date.
"Costs" shall have the meaning assigned to it in Section 8.1.
"Cure Period" shall have the meaning assigned to it in Appendix I.
"Elections" shall have the meaning assigned to it in Section 9.9(a).
"Employee Plans" shall have the meaning assigned to it in Section
5.16(a).
"Employee Retention Plan" shall mean that certain Employee Retention
Plan of STEN, adopted by STEN's Board on October 13, 1999.
"Employment Agreement Severance Payment" shall have the meaning
assigned to it in Section 10.6.
"Employment Agreements" shall mean the agreements listed on Schedule
1.1.
"Environmental Law" shall mean any Law in effect as of the Closing
relating to or addressing the production, abatement or elimination of pollution
or the protection, cleanup, or restoration of the environment, or to safety or
health, including, but not limited to, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act ("RCRA"),
the Federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Federal Toxic Substances Control Act, and the Federal
Occupational Safety and Health Act and any similar state statutes.
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"Environmental Letter" means that certain side letter attached hereto
as Exhibit E, dated the date hereof, with respect to environmental due diligence
and other matters between Buyer and STEN.
"Environmental Liability" means any obligation or liability arising
under or based on an Environmental Law and includes, but is not limited to,
responsibility for Removal, Remedial or Response actions and such liabilities or
obligations in the form of fines and penalties.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Plans" shall have the meaning assigned to it in Section 5.16(b).
"ESEC" shall have the meaning assigned to it in Recital A.
"ESEC Beneficial Interests" shall have the meaning assigned to it in
Recital B.
"ESOG" shall have the meaning assigned to it in Recital A.
"ESOG Common Stock" shall have the meaning assigned to it in Recital B.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action, provided that adequate reserves have been set aside
therefor in the Financial Statements; (ii) Liens in connection with worker's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations arising by operation of law in the ordinary
course of the Companies' or the Subsidiaries' business; (iii) legal or equitable
encumbrances deemed to exist by reason of the existence of any litigation or
other legal proceeding or arising out of a judgment or award with respect to
which an appeal is being prosecuted and that are set forth in Schedule 5.13,
provided that adequate reserves have been set aside therefor in the Financial
Statements; (iv) vendors', carriers', warehousemen's, repairmen's, mechanics',
workmen's, materialmen's, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the construction or
improvement of any property in respect of obligations that are not yet due or
that are being contested in good faith by appropriate proceedings by or on
behalf of the Companies or the Subsidiaries, provided that adequate reserves
have been set aside therefor in the Financial Statements; (v) Liens securing the
performance of bids, statutory obligations, surety and appeal bonds in the
ordinary course of the Companies' or a Subsidiaries' business and that are set
forth on Schedule 5.13; (vi) Liens to secure progress or partial payments made
by the Companies or any of the Subsidiaries and other Liens of like nature, in
each case made in the ordinary course of business and that are set forth on
Schedule 5.13; (vii) Liens reserved in leases for rent and for compliance with
the terms of the leases, to the extent that any such Lien referred to in this
clause (vii) does not materially impair the ownership, occupation, use or
enjoyment of the property covered by such Lien for the purposes for which such
property is held by the Companies or the Subsidiaries, does not materially
impair the value thereof and does not impair the ability of the Companies or the
Subsidiaries to sell the property affected thereby; (viii) rights reserved to or
vested in any
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Governmental Authority by the terms of any right, power, franchise, grant,
license or permit granted to the Companies or the Subsidiaries, or by any
provision of Law, to terminate such right, power, franchise, grant, license or
permit or to purchase, condemn, expropriate or recapture or to designate a
purchaser of any of the property of the Companies or the Subsidiaries; (ix)
rights reserved to or vested in any Governmental Authority to control or
regulate any material property (or material portion of all of the property) of
the Companies or the Subsidiaries, or to use such property in a manner which
does not materially impair the use of such property for the purposes for which
it is held by the Companies or the Subsidiaries, does not materially impair the
value thereof and does not impair the ability of the Companies or the
Subsidiaries to sell the property affected thereby; (x) any obligations or
duties affecting the material properties (or material portion of all the
properties) of the Companies or the Subsidiaries to any Governmental Authority
with respect to any franchise, grant, license or permit granted to the Companies
or the Subsidiaries, to the extent that any such obligation or duty referred to
in this clause (x) does not materially impair the ownership, occupation, use or
enjoyment of the property covered by such Lien for the purposes for which such
property is held by the Companies or the Subsidiaries, does not materially
impair the value thereof and does not impair the ability of the Companies or the
Subsidiaries to sell the property affected thereby; (xi) rights of a common
owner of any interest in real estate, rights of way or easements held by the
Companies or the Subsidiaries and such common owner as tenants in common or
through other common ownership; (xii) encumbrances (other than to secure the
payment of borrowed money or the deferred purchase price of property or
services), easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any rights of way or other property of the
Companies or the Subsidiaries for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines, removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment and materiality, and
defects, irregularities and deficiencies in title of any rights of way or other
property, to the extent that any such encumbrance referred to in this clause
(xii) does not materially impair the ownership, occupation, use or enjoyment of
the property covered by such encumbrance for the purposes for which such
property is held by the Companies or the Subsidiaries, does not materially
impair the value thereof and does not impair the ability of the Companies or the
Subsidiaries to sell the property affected thereby; (xiii) zoning and planning
ordinances and municipal regulations; (xiv) Liens securing only the purchase
price of equipment of the Companies or the Subsidiaries, provided that such Lien
shall not extend to or cover any other property of the Companies or its
Subsidiaries and that are set forth on Schedule 1.2; (xv) Liens created under
operating agreements for obligations not yet due; (xvi) Liens disclosed on
Schedule 1.3; (xvii) Title Defects that Buyer fails to assert in accordance with
the provisions of Appendix I prior to the Notice Date; (xviii) consents to
assignment by a Governmental Authority that are obtained by the Closing Date or
that are customarily obtained after the consummation of transactions of the
nature contemplated in this Agreement and (ix) other minor defects or
irregularities of title affecting any portion of any Oil and Gas Property that
individually or in the aggregate do not materially interfere with the operation,
value or use of any Oil and Gas Property; provided, however, that none of the
foregoing shall constitute an Excepted Lien to the extent that they reduce the
net revenue interest of the Companies and the Subsidiaries in production from
any Oil and Gas Property set forth on Schedule I-A or increase the working
interest of the Companies and the Subsidiaries in any Oil and Gas Property.
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"Excluded Assets" shall mean those assets set forth on Schedule 1.4.
"Excluded Liabilities" shall mean any liabilities related to the
Excluded Assets and those liabilities set forth on Schedule 1.5.
"Final Purchase Price" shall have the meaning assigned to it in Section
2.2(c).
"Financial Statements" shall have the meaning assigned to it in Section
5.7(a).
"GAAP" shall mean generally accepted accounting principles as applied
in the United States of America.
"Governmental Authority" shall mean the United States of America, any
state, commonwealth, territory or possession thereof, or any foreign government,
and any political subdivision of any of the foregoing, including, but not
limited to, courts, departments, commissions, boards, bureaus, agencies or other
instrumentalities.
"Gross-Up Amount" shall have the meaning assigned to it in Section
9.9(e).
"Hazardous Materials" shall mean all hazardous or toxic, radioactive,
or explosive substances, wastes or materials, hazardous wastes, solid wastes,
pollutants or contaminants (including, without limitation, asbestos, petroleum,
petroleum derivatives, crude oil, natural gas and natural gas derivatives and
liquids, PCBs, brine, naturally occurring radioactive material ("NORM")
wastewater, produced water, salt water, mercury and urea formaldehyde), to the
extent such substances or materials are listed or regulated as hazardous or
toxic materials under any Environmental Law.
"Hedge Book" means all the Xxxxxx set forth on Schedule 1.6 and
subsection (e) of Schedule 5.11 hereto.
"Xxxxxx" means any exchange traded futures, exchange traded options,
OTC swaps, OTC options and physical purchases and sales at fixed prices which
are not tied to a market price.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"Incremental Tax Cost" shall have the meaning assigned to it in Section
9.9(e).
"Indemnitee" shall have the meaning assigned to it in Section 8.3(a).
"Indemnitor" shall have the meaning assigned to it in Section 8.3(a).
"Interim Capital Expenditures" means the consolidated amount of capital
expenditures determined in accordance with GAAP consistent with the historic
accounting practices of the Companies and the Subsidiaries, including all
amounts capitalized under a full cost accounting
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method for oil and gas properties, made by the Companies and the Subsidiaries
between October 1, 1999 and the Closing Date, less any proceeds from the sale of
capital assets (including through the exercise of preferential rights to
purchase) received prior to the Closing Date; provided, however, that (i) only
those capital expenditures set forth on Schedule 1.7 for the months of October
and November 1999, and (ii) beginning December 1, 1999, only those capital
expenditures permitted under Section 6.1(b), shall be considered "Interim
Capital Expenditures."
"Interim Net Operating Revenues" means the consolidated amount of
operating revenues less operating expenses of the Companies and the Subsidiaries
between October 1, 1999 and the Closing Date determined in accordance with GAAP
consistent with the historic accounting practices of the Companies and
Subsidiaries, adjusted as follows:
(i) non-cash charges such as depletion, depreciation and amortization
shall be excluded,
(ii) operating expenses shall include a charge for Corporate Services
equal to $500,000 per month (pro-rated for partial months),
(iii) operating expenses shall not include any charges attributable to
a breach of a representation, warranty, covenant or agreement of
Majority Shareholder, STEN or the Companies herein,
(iv) the effects of federal, state and local income and franchise Taxes
shall be ignored,
(v) the effects of Xxxxxx contained in the Hedge Book which expire in
accordance with their terms between October 1, 1999 and the Closing
Date shall be included, and the effects of any other Xxxxxx not
contained in the Xxxxxx Book shall be excluded, and
(vi) any third party charges relating to the proposed royalty trust
public offering shall be excluded.
"IRS" shall mean the Internal Revenue Service or any other federal
agency at the time administering the Code.
"Law" shall mean any federal, state, or local law, statute, ordinance,
decree, requirement, directive, order, judgment, rule or regulation, including,
but not limited to, the terms of any license or permit issued by any
Governmental Authority.
"Leases" shall mean the leases described on Schedule I-A.
"Lien" shall mean, other than any Excepted Lien, any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind, including, without
limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof and the filing of or agreement to
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give any financing statement under the Uniform Commercial Code of any
jurisdiction and including any lien or charge arising by statute or other law.
"Majority Shareholder" shall have the meaning assigned to it in the
first sentence hereof.
"Majority Shareholder Group" shall have the meaning assigned to it in
Section 9.1(c).
"Marketable Title" shall have the meaning assigned to it in Appendix I.
"Master Hedge Agreement" shall have the meaning assigned to it in
Section 10.11.
"Material Adverse Effect" shall mean any change or effect that has, in
the aggregate, had a material adverse effect on the financial condition, assets
or liabilities (taken together) or businesses of the Companies and the
Subsidiaries, taken as a whole. For the purposes of Sections 5.8 and 7.2(l)
only, "Material Adverse Effect" shall not be deemed to have occurred if any
change in the financial condition, assets or liabilities or business of the
Companies is the result of (i) the failure of the Companies or the Subsidiaries
to meet projected results of operations (unless such failure is otherwise caused
by a Material Adverse Effect), (ii) changes in market or economic conditions
which affect the world or any regional economy generally, (iii) changes in the
rate of inflation, (iv) changes in valuation levels in the United States or
world equity or capital markets, (v) changes in world, national or regional
market prices for oil, gas or electricity, (vi) any change arising out of any
proposed or adopted legislation, or any other proposal or enactment by any
Governmental Authority, (vii) any adjustment to the Bid Purchase Price related
to the Closing Net Working Capital that does not adversely affect the ability of
the Companies and Subsidiaries to conduct business in the ordinary course from
October 1, 1999 to the Closing Date, or (viii) any failure of the Companies or
the Subsidiaries to achieve Year 2000 compliance as a result of supplier,
customer or third-party non-compliance.
"Notice Date" shall have the meaning assigned to it in Appendix I.
"NYMEX Price" shall mean the average of the settlement prices on the
day which is seven days prior to the Closing Date of the natural gas future
contracts for gas delivered at the Xxxxx Hub in Louisiana traded on the New York
Mercantile Exchange for the three nearest months then trading.
"Oil and Gas Property" means a fee mineral interest, lease, unit or
well, royalty interest, overriding royalty interest, production payment, and
other mineral interest, estate or entitlement described in Schedule I-A, and in
any mineral deed, oil and gas lease, permit, licenses and other instrument or
agreement described or referred to in Schedule I-A.
"Operative Documents" shall mean this Agreement, the Transition
Agreement and the Master Hedge Agreement.
"Options" shall mean all options, warrants, calls, subscriptions,
rights (including preemptive rights or rights of first refusal), agreements or
commitments of any character
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obligating any Company or any Subsidiary to issue shares of capital stock or
beneficial interests entitled to vote for the election of directors.
"Organizational Documents" shall mean the Articles or Certificate of
Incorporation or Declaration of Trust, and the By-Laws, or their functional
equivalent as amended or supplemented, of STEN Parent, STEN Holdings, the
Companies, the Subsidiaries or Buyer, as the context may indicate.
"Party" or "Parties" shall mean either Majority Shareholder, STEN
Parent, STEN Holdings, or Buyer individually or collectively, as the context
shall indicate.
"Payout Balance" shall have the meaning assigned to it in Section 5.31.
"PCBs" shall mean polychlorinated biphenyls.
"Permit" shall mean any permit, license, order, approval,
certification, registrations, consents or other authorization issued under any
Law.
"Person" shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
"Pipeline Imbalances" shall mean net amounts, in cash or in kind,
either due to or owed from (i) the Companies' or any Subsidiaries' customers for
over-deliveries or under-deliveries pursuant to any gas sale or purchase
transaction, or (ii) any interstate or intrastate pipeline company, or any local
distribution company for over-deliveries or under-deliveries of natural gas
pursuant to the applicable tariff or procedures and regulations of the
respective company.
"Post-Closing Taxable Period" shall mean all or a portion of any
taxable period beginning after the Closing Date.
"Pre-Closing Taxable Period" shall mean all or a portion of any taxable
period ending on or before the Closing Date.
"Preliminary Purchase Price" shall have the meaning assigned to it in
Section 2.2(b).
"Production Imbalances" shall mean net amounts, in cash or in kind,
either due to or owed from the Companies or Subsidiaries for over-production or
under-production from any Oil and Gas Properties.
"RCRA" shall have the meaning assigned to the definition of
"Environmental Law."
"Records" shall mean and include all originals and copies (except where
the context indicates that only originals or copies are being referred to) of
minute books, tax records, documents, computer files and tapes, maps, books,
records, accounts and files in the possession or control of Majority
Shareholder, STEN any of their Affiliates or the
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Companies or the Subsidiaries relating to the Business, the Companies or the
Subsidiaries, excluding computer files and tapes (but not excluding copies of
the Companies data) which as a result of licensing restrictions are not
permitted to be made available to Buyer or retained by the Companies or the
Subsidiaries following the consummation of the transactions contemplated hereby,
despite STEN's Best Efforts to obtain waivers of such restrictions.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment (including the abandonment or discarding of barrels, containers,
and other closed receptacles containing any Hazardous Materials.)
"Remedial Action" shall mean those actions consistent with permanent
remedy taken instead of or in addition to Removal Actions in the event of a
Release or threatened Release of a Hazardous Material into the environment, to
prevent or minimize the Release of Hazardous Materials so that they do not
migrate to cause substantial danger to present or future public health or
welfare or the environment. The term includes, but is not limited to, such
actions at the location of the Release as storage, confinement, perimeter
protection using dikes, trenches, or ditches, clay cover, neutralization,
cleanup of Released Hazardous Materials and associated contaminated materials,
recycling or reuse, diversion, destruction, segregation of reactive wastes,
dredging or excavations, repair or replacement of leaking containers, collection
of leachate and runoff, onsite treatment or incineration, provision of
alternative water supplies, and any monitoring reasonably required to assure
that such actions protect the public health and welfare and the environment. The
term includes the costs of permanent relocation of residents and businesses and
community facilities where the President of the United States or a person with
equivalent authority as to such matters at any state office determines that,
alone or in combination with other measures, such relocation is more
cost-effective than and environmentally preferable to the transportation,
storage, treatment, destruction, or secure disposition offsite or Hazardous
Materials, or may otherwise be necessary to protect the public health or
welfare; the term includes offsite transport and offsite storage, treatment,
destruction, or secure disposition of Hazardous Materials and associated
contaminated materials.
"Removal Action" shall mean the cleanup or removal of released
Hazardous Materials from the environment, such actions as may be necessary taken
in the event of the threat of Release of Hazardous Materials into the
environment, such actions as may be necessary to monitor, assess, and evaluate
the Release or threat of Release of Hazardous Materials, the disposal of removed
material, or the taking of such other actions as may be necessary to prevent,
minimize, or mitigate damage to the public health or welfare or to the
environment, which may otherwise result from a Release or the threat of Release.
The term includes, in addition, without being limited to, security fencing or
other measures to limit access, provision of alternative water supplies,
temporary evacuation and housing of threatened individuals.
"Response Action" shall mean remove, removal, remedy, and remedial
action; and all such terms (including the terms "removal" and "remedial action")
including enforcement activities related thereto.
"Request Date" shall have the meaning assigned to it in Section 9.9(a).
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"Reserve Report" shall have the meaning assigned to it in Section 5.31.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Settlement Date" shall have the meaning assigned to it in Appendix I.
"Settlement Statement" shall have the meaning assigned to it in Section
10.2(b).
"Shareholder" and "Shareholders" shall mean each or all, as the context
shall indicate, of the shareholders of STEN Parent, including but not limited to
Majority Shareholder.
"STEN's Knowledge" shall mean the actual knowledge of any of Xxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxx Stromsvaag, Xxxxxxx X. Xxxx, Xxxxxx X.
XxXxxxxxx, Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx Xxxxxx, Xxxxxx X.
Xxxxxxxxx, Xxxxx X. Xxxx, Xxxxxx Xxxxxxx Xxxxx, Xxxxx X. Xxxxxxx, and, for
purposes of the representations and warranties in Section 5.19(b) only, Xxxxx
Xxxxxx, each during their employment with STEN, Majority Shareholder, the
Companies and the Subsidiaries.
"Subsidiaries" shall have the meaning assigned to it in Section
5.1(c).
"Systems" shall have the meaning assigned to it in Section 5.30.
"Tax" or "Taxes" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, premium
windfall profits, environmental, custom duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Claim" shall mean any Costs arising out of the breach of the
representations and warranties contained in Section 5.15 or any of the
provisions of Article IX.
"Tax Indemnified Party" shall have the meaning assigned to it in
Section 9.6(a).
"Tax Indemnifying Party" shall have the meaning assigned to it in
Section 9.6(a).
"Tax Items" shall have the meaning assigned to it in Section 9.1.
"Tax Returns" shall have the meaning assigned to it in Section 5.15.
"Third Party Claim" shall mean any claim, action or proceeding made or
brought by any Person (who or which is not a Party or an Affiliate of a Party)
or any Government Authority; provided, however, that any claim, action or
proceeding that gives rise to a Title Defect with respect to any Oil and Gas
Property shall not be considered a Third Party Claim to the extent it is subject
to an adjustment under Appendix I.
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"Title Defect" shall have the meaning assigned to it in Appendix I.
"Title Defect Amount" shall have the meaning assigned to it in Appendix
I.
"Transition Agreement" shall have the meaning assigned to it in Section
2.4.
"Transferred Severance Obligations" shall have the meaning assigned to
it in Section 10.6.
"UST" shall mean any one or combination of tanks (including underground
pipes connected thereto) which is used to contain an accumulation of Hazardous
Materials, and the volume of which (including the volume of the underground
pipes connected thereto) is 10 per centum or more beneath the surface of the
ground.
ARTICLE II
SALE AND PURCHASE OF BENEFICIAL INTERESTS
Section 2.1 Sale and Purchase. At the Closing, upon the terms and
subject to the conditions herein contained, and in reliance on the
representations and warranties of Majority Shareholder, STEN and the Buyer
contained herein, the Buyer agrees to purchase from STEN Holdings, and STEN
Holdings agrees to sell to the Buyer, the Beneficial Interests.
Section 2.2 Bid Purchase Price.
(a) The purchase price for the Beneficial Interests shall be SIX
HUNDRED THIRTY MILLION DOLLARS ($630,000,000) (the "Bid Purchase Price") subject
to adjustments thereto pursuant to Section 10.1.
(b) No later than 5 Business Days prior to the Closing Date, STEN shall
deliver to Buyer a statement setting forth STEN's good faith calculation of the
amount of the Preliminary Purchase Price. Such statement shall be accompanied by
a worksheet setting forth in reasonable detail STEN's estimate of the amount of
the adjustment to the Bid Purchase Price pursuant to Section 10.1. As used
herein, the "Preliminary Purchase Price" shall be the Bid Purchase Price as
adjusted based on STEN's estimate as to the adjustments to be made pursuant to
Section 10.1.
(c) The Bid Purchase Price as adjusted pursuant to Section 10.1 and as
finally determined pursuant to Section 10.2 shall be referred to as the "Final
Purchase Price".
(d) Notwithstanding the foregoing, the Final Purchase Price shall be
subject to further adjustments pursuant to Appendix I in connection with matters
set forth therein.
Section 2.3 Delayed Closing, Interest on Purchase Price. If Closing
shall not occur on or before the later of (i) the date that is the second
Business Day after the date on which the last of all of the conditions set forth
on Article VII (other than such conditions which, by
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their terms are not capable of being satisfied until the Closing Date) are
satisfied, or, where permissible, waived or (ii) forty (40) days after the date
hereof, the Bid Purchase Price shall be increased by an annual interest factor
thereon equal to 3.5% compounded monthly, from such applicable date until
Closing.
Section 2.4 Transition Agreement Payment. At Closing, Buyer shall also
pay STEN the amount set forth in the Asset Sale and Transition Services
Agreement (the "Transition Agreement") for the sale of certain assets identified
therein and performance of Corporate Services.
Section 2.5 Application of Sales Proceeds. The proceeds from the
transactions contemplated herein will be utilized first to repay all
intercompany debt of the Companies or the Subsidiaries owed to STEN, the
Majority Shareholder or any Affiliate as of the Closing Date, and the remainder
of the proceeds will be paid to STEN Holdings.
ARTICLE III
CLOSING
Section 3.1 Closing. The closing of the sale to and purchase by the
Buyer of the Beneficial Interests (the "Closing") shall take place at the
offices of Xxxxx & Xxxxx, L.L.P., The Warner, 0000 Xxxxxxxxxxxx Xxx., X.X.,
Xxxxxxxxxx, X.X. 00000-0000, at 10 o'clock a.m., Eastern Standard Time, on the
date that is the second Business Day after the day on which the last of the
conditions set forth on Article VII (other than such conditions which, by their
terms, are not capable of being satisfied until the Closing Date) is satisfied,
or, where permissible, waived, provided, however, that if such date is prior to
February 11, 2000, Buyer may extend the Closing to any date up to February 11,
2000 (the "Closing Date").
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby covenants with, and represents and warrants to STEN as
follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
Section 4.2 Organizational Documents. The Organizational Documents of
Buyer are in full force and effect as of the date hereof and have not been
amended or repealed. Buyer is not in violation, breach or default of any of the
provisions of its Organizational Documents.
Section 4.3 Authority and Authorization. Buyer has all requisite
corporate power to own, operate or lease its properties and to conduct its
business as is now being conducted, to enter into the Operative Documents and to
carry out its obligations thereunder.
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The execution, delivery and performance of the Operative Documents by Buyer has
been duly authorized by all necessary corporate action. The Operative Documents,
when duly executed and delivered to STEN and Majority Shareholder, will
constitute valid, binding and enforceable obligations of Buyer, enforceable in
accordance with its terms, except to the extent the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization or other laws and judicial
decisions of general application relating to or affecting the enforcement of
creditors' rights generally or by general equitable principles.
Section 4.4 No Conflicts; No Consents or Approvals.
(a) The execution, delivery and performance of the Operative Documents
by Buyer will not (i) conflict with, violate or result in a breach or default of
any provision of its Organizational Documents, (ii) conflict with or violate any
law, rule, regulation, ordinance, order, writ, injunction, judgment or decree
applicable to Buyer, or by which any of its properties or assets are bound, or
(iii) conflict with, or result in any breach of or default under (with or
without notice or lapse of time or both) any material note, bond, indenture,
mortgage, agreement, contract or other instrument to which Buyer is a party or
by which its properties or assets are bound.
(b) Except as set forth on Schedule 4.4 and for any filings or
approvals that may be required by the Securities Act or state blue sky law, no
waiver, approval, authorization, order, license, permit, franchise or consent of
or registration, declaration, qualification or filing with any Governmental
Authority or any other Person is required to be obtained by Buyer in connection
with the execution, delivery and performance by Buyer of the Operative Documents
and the transactions contemplated thereunder.
(c) There is no claim, action, suit or proceeding pending or, to the
knowledge of Buyer, threatened against Buyer or any of its properties which
seeks to prohibit, restrict or delay consummation of the transactions
contemplated under the Operative Documents, and there is no judgment, decree,
injunction, ruling or order of any court, Governmental Authority or arbitrator
outstanding against Buyer having any such effect.
Section 4.5 Investment Representations and Covenants.
(a) Buyer is acquiring the Beneficial Interests for its own account for
investment and not with a view to the distribution thereof.
(b) Buyer is an "accredited investor" as such term is defined in Rule
501(a) under the Securities Act.
(c) Buyer will not, directly or indirectly, voluntarily offer, sell,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire) any of the Beneficial Interests except in compliance with the
Securities Act and any applicable state blue sky laws and the rules and
regulations promulgated thereunder. Buyer understands that it may be required to
hold the Beneficial Interests for an indeterminate period or until a sale can be
made in compliance with, or pursuant to an exemption under, the Securities Act.
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Section 4.6 Confidentiality. Neither Buyer nor any Affiliate has made
any public announcement with respect to the transactions contemplated by the
Operative Documents. Neither Buyer nor any Affiliate has released any
Confidential Information received from STEN, the Companies or Majority
Shareholder except with respect to a filing made under the HSR Act.
Section 4.7 No Brokers or Finders. Buyer has not incurred any
liabilities, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by the Operative Documents, for which the
Companies have or shall have any responsibility whatsoever.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAJORITY SHAREHOLDER AND STEN
Majority Shareholder and STEN hereby covenant with, and represent and
warrant to Buyer as follows:
Section 5.1 Organization, Good Standing and Qualification.
(a) Majority Shareholder is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Majority
Shareholder is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary.
(b) STEN Parent is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia. STEN Holdings
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of STEN Parent and STEN Holdings is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary.
(c) ESEC is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. ESOG is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Companies are each duly qualified to do business
as foreign corporations and are in good standing in each jurisdiction in which
the character of their respective properties owned, operated or leased or the
nature of their respective activities makes such qualification necessary. Each
of the entities set forth in Schedule 5.1 is a direct or indirect subsidiary of
one of the Companies (collectively, the "Subsidiaries"). The Companies indicated
in Schedule 5.1 are the beneficial owners and record owners of the amount of
equity interest of the Subsidiaries set forth in Schedule 5.1. STEN Parent's
ownership interest in STEN Holdings and STEN Holdings' ownership interest in the
Companies and the Companies' ownership interest in the Subsidiaries is free and
clear of any
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liens or limitations on the voting rights thereof, such voting rights being
subject only to the terms and conditions of the Organizational Documents of the
particular Companies or Subsidiaries.
(d) Each of the Subsidiaries is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and is duly
qualified to do business as a foreign corporation or business trust and is in
good standing in each jurisdiction in which the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary.
(e) Except for the Subsidiaries and except as described on Schedule
5.1, none of the Companies or any of the Subsidiaries directly or indirectly
owns any equity interest in any other corporation, partnership, joint venture or
other business association or entity.
Section 5.2 Organizational Documents. Prior to the Closing, STEN Parent
will have furnished to Buyer complete and correct copies of the Organizational
Documents, each as amended to date, of each of the Companies and each of the
Subsidiaries. The Organizational Documents of STEN Parent, STEN Holdings, each
of the Companies and each of the Subsidiaries are in full force and effect as of
the date hereof and have not been amended or repealed. None of STEN Parent, STEN
Holdings, the Companies or any of the Subsidiaries is in violation, breach or
default of any of the provisions of its Organizational Documents.
Section 5.3 Capitalization.
(a) The authorized capital stock of ESOG and the authorized beneficial
interests of ESEC are as set forth on Schedule 5.3. The authorized and issued
and outstanding capital stock or beneficial interests, as the case may be, of
the Subsidiaries is as described on Schedule 5.3. Except as set forth in the
Operative Documents and as described on Schedule 5.3, neither of the Companies
nor any of the Subsidiaries has any outstanding or authorized shares of capital
stock, beneficial interests, Options, warrants, calls, subscriptions, rights
(including preemptive rights or rights of first refusal), agreements or
commitments of any character obligating either of the Companies or any of the
Subsidiaries to issue shares of its capital stock or any securities exercisable
for, convertible into, exchangeable for or evidencing the right to purchase or
subscribe for any shares of capital stock, beneficial interest or any other
security of either of the Companies or any of the Subsidiaries. All issued and
outstanding shares of the capital stock and beneficial interests of either of
the Companies or any of the Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights.
(b) Except as described on Schedule 5.3, there are no outstanding
contractual obligations (contingent or otherwise) of either of the Companies or
any of the Subsidiaries to retire, repurchase, redeem or otherwise acquire any
of the capital stock of either of the Companies or any of the Subsidiaries or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any of the Subsidiaries or in any other entity.
(c) The Beneficial Interests are free and clear of all liens,
encumbrances and restrictions, other than restrictions imposed by applicable
state blue sky laws, liens,
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encumbrances and restrictions that might have been created by Buyer and
restrictions imposed by the Operative Documents.
Section 5.4 Authority and Authorization. Each of the Companies and the
Subsidiaries has all requisite corporate power to own, operate or lease its
properties and to conduct its business as it is now being conducted, and STEN
Parent, STEN Holdings and Majority Shareholder have all requisite corporate
power to enter into the Operative Documents and to carry out its obligations
thereunder. The execution and delivery of the Operative Documents by STEN
Parent, STEN Holdings and Majority Shareholder has been duly authorized by all
necessary corporate action. As of the Closing, the consummation of the
transactions contemplated hereunder, performance of the Operative Documents by
STEN Parent, STEN Holdings and Majority Shareholder will have been duly
authorized by all necessary corporate action. The Operative Documents, when duly
executed and delivered by Buyer, will constitute valid, binding and enforceable
obligations of STEN Parent, STEN Holdings and Majority Shareholder, enforceable
against each in accordance with their terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other laws and judicial decisions of general application relating to or
affecting the enforcement of creditors' rights generally or by general equitable
principles.
Section 5.5 No Conflicts; No Consents or Approvals.
(a) Except as described on Schedule 5.5, the execution, delivery and
performance of the Operative Documents by STEN Parent, STEN Holdings and
Majority Shareholder will not (i) conflict with, violate or result in a breach
or default of any provision of the Organizational Documents of STEN Parent, STEN
Holdings, either of the Companies, the Subsidiaries or Majority Shareholder,
(ii) conflict with or violate any Law applicable to Majority Shareholder, STEN
Parent, STEN Holdings, either of the Companies or Subsidiaries, or by which any
of their respective properties or assets are bound, (iii) result in the creation
of any Lien upon any of the properties or assets of either of the Companies or
Subsidiaries, or (iv) conflict with, or result in any breach of or default under
(with or without notice or lapse of time or both) any Contracts.
(b) Except as set forth on Schedule 5.5 and except for any filings or
approvals that may be required by the HSR Act, Securities Act or state blue sky
laws, no waiver, approval, authorization, order, license, permit, franchise or
consent of or registration, declaration, qualification or filing with any
Governmental Authority or any other Person is required to be obtained or made by
STEN Parent, STEN Holdings or Majority Shareholder in connection with the
execution, delivery and performance by each of the Operative Documents.
(c) There is no claim, action, suit or proceeding pending or, to STEN's
Knowledge, threatened against STEN Parent, STEN Holdings, either of the
Companies or Majority Shareholder or any of their respective properties which
seeks to prohibit, restrict or delay consummation of the transactions
contemplated under the Operative Documents, and there is no judgment, decree,
injunction, ruling or order of any court, Governmental Authority or arbitrator
outstanding against STEN Parent, STEN Holdings, either of the Companies or
Majority Shareholder having any such effect.
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(d) The execution, delivery and performance of the Operative Documents
by STEN Parent, STEN Holdings and the Majority Shareholder will not result in
the modification, waiver or impairment of any obligation of a third party to
indemnify the Companies.
(e) As of the Closing Date, all consents required to be obtained by the
Majority Shareholder, STEN Parent and STEN Holdings for consummation of the
transactions hereunder shall have been obtained and shall be in full force.
Section 5.6 Compliance with Laws. Except as set forth on Schedule 5.6,
the businesses and operations of the Companies and the Subsidiaries have been
and are being conducted in compliance with all applicable Laws
Section 5.7 Financial Statements.
(a) STEN Parent has heretofore delivered to Buyer copies of (i) the
audited balance sheet of ESOG and the Subsidiaries on a consolidated basis as of
December 31, 1998, 1997 and 1996, and the unaudited balance sheet of ESOG and
the Subsidiaries as of September 30, 1999 and the related statements of income
and cash flows for the related annual and nine-month periods ended December 31,
1998, 1997 and 1996, and September 30, 1999 (except for cash flows for September
30, 1999), respectively and the notes and schedules thereto, together with the
unqualified report thereon of Ernst & Young, independent public accountants
relating to the annual periods ending December 31, 1998, 1997 and 1996 and (ii)
the unaudited balance sheet of ESEC as of December 31, 1998, 1997 and 1996, and
the unaudited balance sheet of ESEC as of September 30, 1999 and the related
statement of income for the related annual and nine month periods ended December
31, 1998, 1997 and 1996 and September 30, 1999, respectively and the notes and
schedules thereto (collectively, the "Financial Statements").
(b) The Financial Statements (i) were prepared in accordance with GAAP
consistently applied, except as noted in the written information delivered to
Buyer, throughout the periods covered thereby, and (ii) are free of material
misstatements and fairly present the financial condition of the Companies and
the Subsidiaries on a consolidated basis as of the respective dates thereof and
the results of their operations on a consolidated basis for the respective
periods covered thereby (subject in the case of unaudited statements to
footnotes).
Section 5.8 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as described on Schedule 5.8, since September
30, 1999, the Business has been conducted in the ordinary course and there has
not been (a) any Material Adverse Effect; or (b) any damage, destruction or
loss, that has caused a Material Adverse Effect.
Section 5.9 Public Announcement of Transaction. Neither the Majority
Shareholder nor STEN has made any public announcement with respect to the
transactions contemplated by the Operative Documents nor made any other filing
with a Governmental Authority that disclosed Buyer's investment in the Companies
contemplated by the Operative Documents, except with respect to the filing made
under the HSR Act or filings made pursuant to state or federal securities laws.
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Section 5.10 Guarantees. Except for guarantees by the Companies or any
of the Subsidiaries of obligations of Subsidiaries, as described on Schedule
5.10, neither of the Companies nor any of the Subsidiaries is a maker of any
guarantees, except for negotiable instruments endorsed for collection or deposit
in the ordinary course of the Companies' or any Subsidiaries' business.
Section 5.11 Contracts. Listed on Schedule 5.11 are all contracts,
understandings, commitments or agreements of the Companies and the Subsidiaries
of the type described below except for (i) those which will be released or
terminated at or prior to Closing with no liability to the Companies or any of
the Subsidiaries that are a party thereto, (ii) those that can be terminated
without penalty within ninety (90) days, and (iii) the Leases (collectively, the
"Contracts"):
(a) any compensation, severance or employment agreement that is not
terminable at the will of the Companies or its Subsidiaries as well as any
collective bargaining agreement;
(b) any agreement for capital expenditures or the acquisition or
construction of fixed assets which contractually requires future payments in
excess of $1 million;
(c) any agreement granting to any Person a right of first refusal,
option, subscription right, or other preferential right to purchase or acquire
any of the Beneficial Interests;
(d) agreements, contracts, mortgage, notes, indentures or other
instruments relating to the borrowing, or the guarantee of any borrowing or
other obligations, by the Companies or any of the Subsidiaries in excess of $1
million;
(e) any agreement for the purchase, sale, transportation or storage of
electric power, natural gas, natural gas liquids, crude oil or condensate, or
any financial product instrument related thereto, with a term of more than 90
days;
(f) any agreement for the sale of any working interests in any oil or
gas leases which involves payment to the Companies or any of its Subsidiaries in
excess of $1 million;
(g) any agreement for the sale of any asset (other than sales of oil,
gas, natural gas liquids or condensate in the ordinary course of business) of
the Companies or the Subsidiaries for more than $1 million;
(h) any agreement which constitutes a lease (other than an oil and gas
lease) under which the Companies or any of the Subsidiaries is the lessor or
lessee of real or personal property which lease (i) cannot be terminated by the
Companies or any of the Subsidiaries without penalty upon not more than 30 days
notice and (ii) involves an annual base rental in excess of $1 million;
(i) any agreement with Majority Shareholder, STEN or their respective
Affiliates that involves payment in excess of $1 million;
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(j) any other agreement which (i) involves future payment by or to the
Companies or any of the Subsidiaries in excess of $1 million and (ii) is not an
agreement entered into in the ordinary course of owning, operating and
developing oil and gas leases and marketing production therefrom or an agreement
that constitutes Leases under which the Companies or any of the Subsidiaries is
a lessor or lessee;
(k) any bond, letter of credit, material agreement of surety or
guaranty by the Companies or the Subsidiaries, other than in the ordinary course
of business;
(l) any agreement containing noncompetition or other limitations
restricting the conduct of the Business, other than agreements relating to the
use of seismic or other geological or geophysical information that is
proprietary or areas of mutual interest entered into in connection with the
Companies' or any of the Subsidiaries exploration program affecting lands in the
immediate vicinity of properties presently owned by the Companies or the
Subsidiaries;
(m) any partnership, joint venture or similar agreements;
(n) agreements relating to the release or disposal of Hazardous
Materials;
(o) agreements with a Governmental Authority that currently are binding
on, or restrict the actions of, the Companies or the Subsidiaries, other than
leases or licenses;
(p) contracts (other than existing production sales contracts)
containing calls on production or options to purchase production in favor of a
third party;
(q) agreements in the nature of a settlement or a conciliation
agreement arising out of any pending claim asserted by any other Person; and
(r) any agreements creating areas of mutual interests or any similar
agreement granting to third parties the right to participate in the operations
or activities with the Companies or its Subsidiaries.
None of the Companies or any of the Subsidiaries has received notice of
any default under any Contract. None of the Companies or any of the Subsidiaries
is in default under any of the Contracts (which default could result in the
termination of the Contract or subject the Companies or any of the Subsidiaries
to liability), and none of the Companies or any of the Subsidiaries has waived
any material right under any of the Contracts. To STEN's Knowledge, all
Contracts are valid and enforceable by the Companies or the respective
Subsidiaries in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization or other laws and judicial decisions of general
application relating to or affecting the enforcement of creditors' rights
generally or to general equitable principles.
Section 5.12 Payment of Dividends, Stock Redemption Rights. Except as
described on Schedule 5.12, there are no outstanding contractual obligations
(contingent or otherwise) of the Companies or any Subsidiaries that would
prohibit or restrict the Companies'
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or any Subsidiaries' ability to declare or pay dividends or to repurchase or
redeem the Companies' Beneficial Interests.
Section 5.13 Litigation. Except for (i) claims as described on Schedule
5.13, (ii) claims under worker's compensation and similar Laws as described on
Schedule 5.13, and (iii) routine claims for employee benefits, there are no
actions, suits, government investigations, or legal, administrative, arbitration
or other proceedings pending or, to STEN's Knowledge, threatened against the
Companies or any of the Subsidiaries, nor are the Companies or any of the
Subsidiaries or any of their respective properties subject to any order,
judgment, injunction or decree, except for matters affecting the oil and gas
industry generally.
Section 5.14 Leases. Except as set forth on Schedule 5.14, with respect
to the Oil and Gas Properties that are Leases (but only to STEN's Knowledge with
respect to Leases not operated by the Companies or the Subsidiaries):
(a) The Leases have been maintained according to their terms, in
compliance with all material arrangements to which the Leases are subject;
(b) The Leases are presently in full force and effect as to the lands
and depths currently set forth therein;
(c) To STEN's Knowledge, no other party to any Lease is in breach or
default with respect to any of its material obligations thereunder; and
(d) There has not occurred any event, fact or circumstance which with
the lapse of time or the giving of notice, or both, would constitute such a
breach or default on behalf of any of the Companies or the Subsidiaries or, to
STEN's Knowledge, with respect to any other parties.
Section 5.15 Tax Returns and Audits. Each of the Companies and each of
the Subsidiaries has duly filed with the appropriate taxing authority all
returns, notices, and reports ("Tax Returns") with respect to Taxes of each of
such Companies and Subsidiaries that it has been or is required to file on or
prior to the Closing Date, other than such Tax Returns for which an extension
has been timely requested. Each of the Companies and each of the Subsidiaries is
not delinquent in the payment of any Taxes nor has it requested any extension of
time within which to file any tax return which return has not since been or will
not be timely filed. No deficiency for any Taxes has been asserted or assessed
against either of the Companies or any of the Subsidiaries (other than as
reflected in the Financial Statements) or which has not been paid. Except as set
forth in Schedule 5.15, no litigation regarding Taxes of the Companies or the
Subsidiaries is currently pending, there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any Tax
Returns required to be filed by or with respect to the Companies and each of the
Subsidiaries, and none of the Tax Returns are currently being audited or
examined by any taxing authority.
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Section 5.16 Employee Plans; Labor Matters.
(a) The term "Employee Plan" shall be defined to mean any stock
purchase, stock option, pension, profit sharing, bonus, deferred compensation,
incentive compensation, severance or termination pay, vacation or other paid
leave benefits, hospitalization or other medical or dental, life or other
insurance, supplemental unemployment benefits plan or agreement or policy or
other arrangement providing employment-related compensation or benefits,
including, without limitation, "employee benefit plans," as defined in Section
3(3) of ERISA. STEN Parent has heretofore provided or made available to Buyer
(i) a true and complete copy of each Employee Plan established by or contributed
to by, or with respect to, which costs or liabilities are or are reasonably
expected to be incurred by, the Companies or any of the Subsidiaries as of the
date of this Agreement ("Company Employee Plans"), (ii) each trust agreement,
insurance policy or other funding arrangement relating to such Company Employee
Plan, (iii) the three most recent IRS Form 5500 for such Company Employee Plan
(iv) the most recent audited financial statements prepared in connection with
any such plan and (v) the most recent determination letter issued by the IRS
with respect to any Company Employee Plan intended to be qualified under Section
401(a) of the Code. Schedule 5.16 contains a true and correct listings of all
Employee Plans.
(b) Except as set forth on Schedule 5.16, (i) None of the Company
Employee Plans which is an "employee benefit plan," as defined in Section 3(3)
of ERISA (collectively, "ERISA Plans"), is a "multiemployer pension plan," as
described in Section 3(37) of ERISA, or a "multiple employer plan," as defined
in Section 4063 of ERISA, (ii) no material liability under Title IV of ERISA has
been incurred by the Companies, any of the Subsidiaries or any ERISA Plan since
the effective date of ERISA that has not been satisfied in full, other than
liability for premiums that are not yet due and payable to the PBGC, and there
exists no fact or circumstances which could be expected to result in such
liability, and (iii) the Companies have no announced plan or legally binding
commitment to create any additional Company Employee Plans or to materially
modify or change any of the Company Employee Plans except as required by law,
(iv) no ERISA Plan is maintained in connection with any trust described in
Section 501(c)(9) of the Code, and (v) no ERISA Plan is a "multiple employer
welfare arrangement," as defined in Section 3(4) of ERISA. No securities of the
Companies or any affiliates of the Companies are held in trust or are otherwise
set aside for funding benefit obligations under any Company Employee Plan. Full
payment has been made, or will be made in accordance with Section 404(a)(6) of
the Code, of all amounts which the Companies or the Subsidiaries are required to
pay under the terms of each of the Company Employee Plans and Section 412 of the
Code, and all such amounts properly accrued through the date of this Agreement
with respect to the current plan year thereof will be paid by the Companies on
or prior to the date of this Agreement or will be properly recorded on the
Companies' financial statements. During the past six years, neither the
Companies nor any of its affiliates have made or been required to make
contributions to any "multiemployer plan," as defined in Section 3(37) of ERISA.
For purposes of this Section 5.16, an "affiliate" of any Person means any other
Person which, together with such Person, would be treated as a single employer
under section 414 of the Code. There are no accumulated funding deficiencies as
defined in Section 412 of the Code (whether or not waived) with respect to any
Company Employee Plan. The fair market value of the assets held with respect to
each Company Employee Plan which is an employee pension benefit plan, as defined
in Section 3(2) of ERISA, exceeds the actuarially determined present value of
all benefit liabilities accrued under such Company Employee Plan (whether or not
vested) determined using
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reasonable actuarial assumptions. The Companies and all of the affiliates of the
Companies have paid and discharged promptly, when due, all liabilities and
obligations arising under ERISA or the Code, of a character, which if unpaid or
unperformed, might result in the imposition of a lien against any of the assets
of the Companies or its affiliates.
(c) Each Company Employee Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS to
the effect that it is so qualified and nothing has occurred since the date of
such letter to adversely affect the qualified status of each such plan. Except
as set forth on Schedule 5.16, none of the Company Employee Plans in effect on
the date hereof would result, separately or in the aggregate, in the payment of
any "excess parachute payment" within the meaning of Section 280G of the Code or
the payment of any other amount that would not be deductible by the Companies or
any affiliate of the Companies. Each Company Employee Plan has been operated in
all material respects in accordance with its terms and the requirements of
applicable law. There have been no non-exempt "prohibited transactions" within
the meaning of Section 4975 of the Code or Section 406 of ERISA with respect to
any Company Employee Plan to which either of those sections may apply, which
might result in any liability of the Companies or its affiliates.
(d) No Company Employee Plan provides benefits, including, without
limitation, death, medical or health benefits (whether or not insured), after an
employee's retirement or termination of employment, other than (i) continuation
coverage required pursuant to Section 4980B of the Code and Part 6 of Title I of
ERISA, and the regulation thereunder, any other applicable law and the Employee
Retention Plan and (ii) retirement benefits under STEN's 401K plan and none of
the Companies or any Affiliate has made representations, agreements, covenants
or commitments to provide such benefits.
(e) Except as set forth in Schedule 5.16, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of the Companies or the Subsidiaries to severance pay,
employment compensation or any other payment, benefit or award or (ii)
accelerate the time of payment or vesting, or increase the amount of any
benefit, award or compensation due any such employee.
(f) To STEN's Knowledge, (i) there are no pending, threatened or
anticipated claims against any of the Company Employee Plans, by any employee or
beneficiary covered under any such Company Employee Plan, or otherwise involving
any such Company Employee Plan (other than routine claims for benefits) and (ii)
there is no basis for such a claim.
(g) The Companies and the Subsidiaries have maintained workers'
compensation coverage as required by the applicable state law through purchase
of insurance as described on Schedule 5.16 and not by self-insurance or
otherwise, except as disclosed to Buyer on Schedules 5.16.
(h) Except as set forth in Schedule 5.16, neither of the Companies nor
any of the Subsidiaries is a party to, or bound by, any collective bargaining
agreement with a labor union or labor organization or, to the best of STEN's
Knowledge (after reasonable inquiry of managerial personnel), are the Companies
or any of its Subsidiaries the subject of any formal proceeding
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asserting that the Companies or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor organization
as to wages or conditions of employment. Except as disclosed on Schedule 5.16,
(i) no employees of the Companies or any Subsidiaries are represented by any
labor organization or collective bargaining representative, (ii) to STEN's
Knowledge (after reasonable inquiry of managerial personnel), as of the date
hereof, none of the Companies or any Subsidiaries has been the subject of any
representational campaign by any union or other organization or group seeking to
become the collective bargaining representative of any of their employees or has
been subject to or threatened with any strike or other concerted labor activity
or dispute, and (iii) none of the Companies or any Subsidiaries has any
obligations under any affirmative action plan. There is no pending or, to STEN's
Knowledge, threatened proceeding by or before, and none of the Companies or any
Subsidiaries are subject to any judgment, order, writ, injunction or decree of
or inquiry from, the National Labor Relations Board, the Equal Employment
Opportunity Commission, the Department of Labor, the Office of Federal Contract
Compliance or any other Governmental Authority in connection with any current,
former or prospective employee of the Companies or any of the Subsidiaries. The
Companies and the Subsidiaries have not breached or otherwise failed to comply
with any provisions of any collective bargaining agreement or affirmative action
plan, and are in full compliance with all terms of any affirmative action plan
as well as any collective bargaining agreement and there are no grievances
outstanding thereunder.
(i) Schedule 5.16 sets forth a true and complete list of each Person
currently employed by the Companies or any Subsidiaries and each Person
currently employed by STEN and whose employment will be transferred to the
Companies or the Subsidiaries as of the Closing Date or who has or claims to
have an employment relationship or rights with respect to recall or to
restoration of employment, by the Companies or any Subsidiaries by name; job
title; and status (e.g., active or inactive and reason) (the "Company
Employees").
(j) Other than STEN's 401K plan, no Company Employee Plan has any
pension or post-retirement liability.
Section 5.17 Insurance. Schedule 5.17 contains a list of all policies
of property damage, liability and other forms of insurance (other than officer's
and director's liability policies) which cover occurrences as of, or claims in
excess of $500,000 made on, the date hereof and maintained by STEN, the
Companies or any of the Subsidiaries or by Majority Shareholder or any Affiliate
thereof to the extent applicable to either of the Companies, any of the
Subsidiaries or any of their respective properties or assets. Buyer acknowledges
that no insurance coverage or policy currently maintained by Majority
Shareholder, STEN or any Affiliate (other than the Companies or the
Subsidiaries) will extend beyond the Closing for the benefit of the Companies or
the Subsidiaries. Also set forth on Schedule 5.11 is a list of all bonds,
letters of credit and other surety obligations maintained by the Companies and
its Subsidiaries.
Section 5.18 No Brokers or Finders. The Companies have incurred no
liabilities, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by the Operative Documents, for which Buyer shall
have any responsibility whatsoever.
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Section 5.19 Regulatory Matters; Permits.
(a) Except as disclosed in the Financial Statements, none of the
Companies or any of the Subsidiaries has any material rate or other refund
obligations. The xxxxx in which the Companies or any of the Subsidiaries owns an
interest that produce natural gas and crude oil have all been drilled,
completed, operated and properly qualified under applicable state regulatory
commission requirements and under any of the Contracts or pooling and unit
agreements applicable thereto. None of the Companies or any of the Subsidiaries
has any properties which have produced in excess of the quantities prescribed by
applicable state regulatory agencies. Such xxxxx are in compliance with all
applicable state laws and regulations.
(b) Environmental Matters. Except as set forth in Schedule 5.19:
(i) None of the Companies or the Subsidiaries or any property,
owned, leased or in which they currently have any right or interest is
in violation of any applicable Environmental Law other than a violation
that would not reasonably be expected to result in or create any
Environmental Liability. To STEN's Knowledge, none of the properties
previously owned or leased by the Companies or the Subsidiaries or in
which they held a right or interest, and subsequently conveyed by the
Companies or the Subsidiaries to a third party is currently in
violation of any applicable Environmental Law. None of the Companies or
the Subsidiaries has been notified during the past three years by a
Governmental Authority of any violation of any applicable Environmental
Law that would reasonably be expected to create an Environmental
Liability after the Closing.
(ii) None of the Companies or the Subsidiaries (A) is subject
to any consent decree, compliance order, or administrative order issued
by a Governmental Authority pursuant to an applicable Environmental
Law, nor (B) has received a written request for information, notice of
violation, demand letter, administrative inquiry, complaint or claim
from any Governmental Authority pursuant to any Environmental Law,
other than a request, notice, demand, inquiry, complaint or claim which
would not reasonably be expected to result in or create an
Environmental Liability.
(iii) None of the Companies or any Subsidiaries or any
property, owned, leased or in which they currently have any right or
interest is subject to any liens recorded by any Governmental Authority
under an applicable Environmental Law.
(iv) The Companies and the Subsidiaries hold all material
Permits under Environmental Laws necessary to conduct the Business in
the same manner as is currently being conducted and such Permits are in
full force and effect, except the failure of which to have or to be
obtained or maintained would not reasonably be expected to result in or
create an Environmental Liability. None of the Companies or the
Subsidiaries are aware of any restriction or limitation in the
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Permits that would preclude the Buyer from using the Permits the day
after the Closing to conduct the Business in the same manner as is
currently being conducted by the Companies and the Subsidiaries.
(v) All known meter sites owned or operated by the Companies
or any Subsidiaries that have been contaminated with Releases of
mercury have been remediated in accordance with applicable
Environmental Laws and the expense for such remediation has been
substantially paid.
(vi) The Companies and the Subsidiaries have not been involved
as a "potentially responsible party," as that term is used in CERCLA,
in any proceeding, investigation, notice, or inquiry, initiated or
maintained by the federal Environmental Protection Agency, or a
comparable state agency. To STEN's Knowledge, no offsite disposal
facility used by the Companies or the Subsidiaries has resulted in or
is likely to become the subject of such a proceeding, investigation,
notice, or inquiry, by either the federal Environmental Protection
Agency or a comparable state agency.
(vii) There are no USTs located in, at, on or under any
property currently owned or leased by the Companies or the Subsidiaries
except for a UST that would not reasonably be expected to result in or
create an Environmental Liability.
(viii) To STEN's Knowledge, all used oil and hydrocarbons
(including any PCBs) removed from pigging pipelines have been properly
handled under applicable Environmental Laws by the Companies and the
Subsidiaries.
(ix) To STEN's Knowledge, the Companies and the Subsidiaries
do not own or operate any PCB-containing equipment and there are no
locations on property currently owned or leased by the Companies or the
Subsidiaries that are contaminated with PCBs that require Remedial,
Removal or Response action under current cleanup standards of the
Environmental Protection Agency or a comparable state agency.
(x) To STEN's Knowledge, there are no abandoned or currently
being used landfills or manufactured gas plants on property owned,
leased, or operated by any of the Companies or any Subsidiaries, except
for those for which all required Permits have been obtained and are in
effect and except for those that would not result in or create an
Environmental Liability.
(c) No federal, state or local regulatory agency has any pending or
threatened regulatory actions against the Companies, any Subsidiaries or any
property owned, leased or in which they have any other right or interest.
(d) The Companies and the Subsidiaries hold all Permits necessary to
conduct their business in the same manner as is currently being conducted and
such Permits are in full
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force and effect. No event has occurred with respect to any such Permits that
(i) allows, or after notice or lapse of time or both would allow, revocation or
termination thereof, or (ii) would result in any other impairment of the rights
of the holder of such Permit.
(e) None of the Majority Shareholder, STEN, the Companies or any of the
Subsidiaries is in violation of the Public Utility Regulatory Policies Act of
1978, as amended, or is a "holding company," an "affiliate" of a "holding
company," or a "subsidiary company" of a "holding company" or a "public utility"
within the meaning of Public Utility Holding Company Act of 1935, as amended.
Section 5.20 Additional Drilling Obligations. Except as described on
Schedule 5.20, to STEN's Knowledge, and except for drilling obligations that may
be required by Law prior to the Closing, with respect to the Oil and Gas
Properties, there are no obligations of the Companies that require the drilling
of additional xxxxx or other material development operations in order to earn or
to continue to hold all or any portion of the Oil and Gas Properties, and
neither STEN nor the Companies have been advised by a lessor of any requirements
or demands to drill additional xxxxx which requirements or demands have not been
resolved or reasonably waived in connection with the issuance of any
supplemental title opinion.
Section 5.21 Prepayment for Production. Except as described on Schedule
5.21, none of the Companies or the Subsidiaries is obligated, by virtue of a
prepayment arrangement, a "take or pay" arrangement, a production payment or any
other arrangement, to deliver hydrocarbons produced from the Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor. Payments for gas sold pursuant to a gas contract to which the
Companies or the Subsidiaries are a party are current and in accordance with the
prices set forth therein. To STEN's Knowledge, no purchaser under any such gas
contract has communicated to the Companies, directly or indirectly, its intent
to cancel, terminate or renegotiate any of the gas contracts or otherwise to
fail or refuse to take or pay for gas in the quantities and at the prices set
out in any such gas contract whether such failure or refusal was pursuant to any
force majeure, market-out or any similar provision contained in any such gas
contract or otherwise.
Section 5.22 [Reserved].
Section 5.23 Plugging and Abandonment of Xxxxx. Other than as set forth
on Schedule 5.23, there are no xxxxx operated by either of the Companies or any
Subsidiaries that (i) either of the Companies or the Subsidiaries is currently
obligated by Law or contract to plug and abandon; (ii) either of the Companies
or any of the Subsidiaries would be obligated by Law or contract to plug and
abandon with the lapse of time, or upon notice or both, because such xxxxx are
not currently capable of producing hydrocarbons in commercial quantities; (iii)
are subject to exceptions to a requirement to plug and abandon issued by a
Governmental Authority having jurisdiction over the Oil and Gas Properties; or
(iv) have been plugged and abandoned but have not been plugged in accordance
with all applicable requirements of each Governmental Authority having
jurisdiction over the Oil and Gas Properties.
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Section 5.24 Intellectual Property. Except as described on Schedule
5.24, to STEN's Knowledge, (i) each of the Companies and the Subsidiaries has
the sole and unrestricted right to use the patents, trademarks, copyrights or
other intellectual property rights described on Schedule 5.24, which are all the
patents, trademarks, copyrights or other intellectual property rights owned by
either of the Companies or any of the Subsidiaries in their respective
businesses, and (ii) none of the Companies or the Subsidiaries has infringed or
have been claimed to have infringed the patent, trademark, copyright or other
intellectual property rights of any Person. Except as described on Schedule
5.24, no Person is infringing the patent, trademark or other intellectual
property rights of the Companies or the Subsidiaries.
Section 5.25 Preferential Rights. Except as disclosed on Schedule 5.25,
there are no preferential rights that have been triggered in the past or will be
triggered by the consummation of the transactions contemplated hereby with
respect to the Oil and Gas Properties that have not been waived or have not
expired.
Section 5.26 Condition of Equipment. Except as set forth in Schedule
5.26 and except for casualty losses after the date hereof, the Oil and Gas
Properties and all material equipment and facilities which are a part thereof or
used in connection therewith meet industry standards concerning good working
order and repair, reasonable wear and tear excepted.
Section 5.27 Royalties. Except as set forth in Schedule 5.27, all
royalties, overriding royalties, compensatory royalties and other payments due,
prior to the Closing Date, from or in respect of production with respect to the
Oil and Gas Properties have been or will be properly and correctly paid or
provided for except with respect to any disputes involving any such payments.
Section 5.28 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 5.28 and except for the Excluded Liabilities and any Environmental
Liability, none of the Companies or the Subsidiaries has, or since the date of
the Financial Statements have incurred, any liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise), except (i)
liabilities reflected on the Financial Statements, (ii) liabilities described in
the notes accompanying the Financial Statements, (iii) current liabilities which
have arisen since the date of the Financial Statements in the ordinary course of
business (none of which is a material liability for breach of contract, tort or
infringement) or (iv) liabilities arising under executory contracts (other than
the Contracts) entered into in the ordinary course of business (none of which is
a material liability for breach of contract).
Section 5.29 Accounts Receivable. To STEN's Knowledge, all accounts
receivable of the Companies and the Subsidiaries reflected on the Financial
Statements or arising since the date of the Financial Statements are good and
have been collected or are collectible and are subject to no defenses, set-offs
or counterclaims that are not reflected on the Financial Statements.
Section 5.30 Year 2000. To STEN's Knowledge, each system that is
comprised of software, hardware, databases or embedded control systems
(microprocessor controlled or controlled by any robotic or other device)
(collectively, "Systems") that constitutes any part of,
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or is used by the Companies or the Subsidiaries in connection with the use,
operation or enjoyment of, any tangible or intangible asset or real property of
the Companies or Subsidiaries will not be adversely affected by the advent of
the year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century. To
STEN's Knowledge, the Companies have no reason to believe that they will incur
material expenses arising from or relating to the failure of any of its Systems
as a result of the advent of the year 2000, the advent of the twenty-first
century or the transition from the twentieth century through the year 2000 and
into the twenty-first century. To STEN's Knowledge, each System of the Companies
and the Subsidiaries are able to accurately process date data, including but not
limited to, calculating, comparing and sequencing from, into and between the
twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap-year calculations. To STEN's Knowledge, no Person from
whom the Companies receive goods or services or otherwise does business,
utilizes computer software and related systems that are not Year 2000 compliant
and which non-compliance can reasonably be expected to have a Material Adverse
Effect on the Companies.
Section 5.31 Reserves and Reserve Reports. To STEN's Knowledge, the
factual data furnished to Xxxxx Xxxxx for use in connection with the preparation
of the Reserve Report was accurate in all material respects. "Reserve Report"
means the reserve report of the Companies and the Subsidiaries prepared by Xxxxx
Xxxxx as of December 31, 1998 regarding the Oil and Gas Properties. Neither STEN
nor Majority Shareholder makes any representation or warranty to Buyer with
respect to any financial projection or forecast relating to the Companies or the
Subsidiaries. Except as set forth above, with respect to any projections or
forecasts delivered by Majority Shareholder or the Companies to Buyer with
respect to the Oil and Gas Properties, Buyer acknowledges that (i) there are
uncertainties inherent in trying to evaluate such projections or forecasts, (ii)
it is familiar with such uncertainties, (iii) it is not relying on such
projections or forecasts in its evaluation of the owned assets, including the
Oil and Gas Properties, (iv) it is taking full responsibility for making its own
evaluation of the adequacy of all such projections or forecasts, and (v) it
shall have no claim against Majority Shareholder or STEN with regard thereto,
unless material elements thereof were in fact known to be false when provided to
Buyer. EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS SECTION 5.31, NEITHER
MAJORITY SHAREHOLDER NOR STEN MAKES ANY WARRANTY AND HEREBY DISCLAIMS ANY
WARRANTY THAT THE RESERVE ESTIMATES, CASH FLOW ESTIMATES, PRICE ESTIMATES, OR
PRODUCTION OR FLOW RATE ESTIMATES CONTAINED IN THE RESERVE REPORT OR IN ANY
SUPPLEMENT THERETO OR UPDATE THEREOF ARE IN ANY WAY COMPLETE, ACCURATE OR NOT
MISLEADING, THE SAME BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE INHERENTLY
SUBJECT TO INCOMPLETENESS AND INACCURACY.
ARTICLE VI
PRE-CLOSING COVENANTS
Section 6.1 Covenants of STEN and Majority Shareholder. From the date
hereof through the Closing Date, STEN and Majority Shareholder covenant and
agree with Buyer as follows:
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(a) Access. Upon reasonable notice from Buyer to Majority Shareholder,
Majority Shareholder shall, and shall cause STEN to, permit Buyer and its
authorized employees, agents, accountants, legal counsel, and other
representatives to have reasonable access, at Buyer's sole expense, risk and
cost, to the facilities, properties, personnel and Records of the Companies and
the Subsidiaries (including, without limitation, all title, land, geological,
geophysical, seismic, engineering, production, product sales, personnel-related
documents and financial Records and data) for the purpose of conducting an
investigation of their financial condition, corporate status, business,
properties and assets and to inspect the environmental conditions of the Oil and
Gas Properties and other real properties in accordance with the procedures set
forth in the Environmental Letter; provided, however, that such investigation
shall be conducted in a manner that does not unreasonably interfere with normal
operations of STEN and the Companies. Buyer will not contact any employee of the
Companies, STEN or Majority Shareholder or their Affiliates without first
obtaining the approval of an authorized representatives of Majority Shareholder.
Majority Shareholder will furnish, or cause STEN or the Companies to furnish,
Buyer with such additional financial and operating data and other information
pertaining to the Companies and their assets and operations as Buyer may
reasonably request; provided however, that nothing in this Agreement shall
obligate Majority Shareholder to take any action that would reasonably disrupt
the normal course of its or any of its Affiliates', STEN's, the Companies' or
the Subsidiaries' businesses, or violate the terms of any applicable Law,
agreement or contract to which it or any of such Persons is a party, or to which
it or any such Person or any of their respective assets are subject; and
provided further, that the confidentiality of any data or information to which
Buyer is given access shall be maintained by Buyer and its representatives in
accordance with the Confidentiality Agreement.
(b) Operation of Business. Except as contemplated in this Agreement or
otherwise consented to by Buyer in writing (which consent will not be
unreasonably delayed, withheld or conditioned), STEN Parent will, and will cause
STEN Holdings, the Companies and the Subsidiaries, with respect to the Companies
and the Subsidiaries, to:
(i) use their Best Efforts to conduct the Business in the
ordinary course of business consistent with past practices and to keep
the Business intact;
(ii) enter into new physical commodity and transmission
purchase and sale commitments, provided that such commitments are
consistent in scale and duration with existing commitments;
(iii) use their Best Efforts to comply in all material
respects with all applicable Laws and use their Best Efforts to
maintain compliance in all material respects with the Contracts and to
maintain good relationships with the customers, suppliers and others it
customarily transacts business with;
(iv) continue their existing practices relating to the
maintenance and operation of their assets;
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(v) to the extent that any of the following would impair the
ability to operate in the normal course, not declare or pay any
dividend or other distribution in respect of their capital stock or
beneficial interests, or directly or indirectly purchase, redeem, or
otherwise acquire or dispose of any share of their capital stock or
beneficial interests or any subscriptions, warrants, options, calls or
other commitments or rights to acquire any shares of their capital
stock or beneficial interests or take any steps otherwise affecting or
changing the Companies' capitalization;
(vi) not merge into or with or consolidate with any other
Person or acquire all or substantially all of the business or assets of
any Person;
(vii) not make any change in their respective certificates of
incorporation or bylaws;
(viii) not purchase any securities of any Person or issue or
sell any securities (including Options) of any Company or any
Subsidiary;
(ix) not create, incur, assume or guarantee any material
long-term debt or capitalized lease obligation or, except in the
ordinary course of business and consistent with past practices, incur
or assume any material short-term debt in excess of $2 million
outstanding at any time;
(x) not take any action or enter into any commitment with
respect to or in contemplation of any liquidation, dissolution,
recapitalization, reorganization or other winding up of either the
Companies or the Subsidiaries;
(xi) not grant any preferential right of purchase or similar
right to require the consent of any Person to the transfer or
assignment of the assets or operations of the Companies or the
Subsidiaries;
(xii) not take, or knowingly permit to be taken, any action in
the conduct of the business of the Companies or the Subsidiaries that
would cause any representation or warranty to be untrue or inaccurate
or would be contrary to or in breach of any of the terms or provisions
of this Agreement;
(xiii) not change the Companies' or the Subsidiaries'
accounting methods, principles or practices, other than such changes
required by GAAP;
(xiv) not amend any Tax Return, make any Tax election or
settle or compromise any tax liability;
(xv) not incur any capital expenditures during any month that
exceeds 125% of the amount set forth on Schedule 1.7 for such month;
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(xvi) modify in any material respect or terminate prior to the
scheduled expiration thereof any Contract;
(xvii) discontinue or modify any policy or binder of insurance
currently maintained;
(xviii) other than assigning the Employment Agreements to the
Companies, enter into or amend any employment or severance arrangement
with any employee or establish or adopt a collective bargaining
agreement;
(xix) establish or amend any Employee Plan;
(xx) not take any action that would limit, reduce or
extinguish any indemnity or right of contribution from a third party
which may be available to the Buyers, the Companies or the
Subsidiaries, and will take all necessary action, of which it has
actual knowledge, to preserve claims under any such indemnity;
(xxi) not sell, lease or otherwise dispose of any of the Oil
and Gas Properties which, individually or in the aggregate, have an
Allocated Value of $1 million or more; or
(xxii) not commit to do any of the foregoing.
(c) HSR Act. Majority Shareholder will (i) file as promptly as
practicable with the Department of Justice and the Federal Trade Commission the
notification and report form required for the transactions contemplated
hereunder by the HSR Act, requesting early termination of the waiting period
thereunder, and (ii) respond promptly to inquiries from the Federal Trade
Commission or the Department of Justice in connection with such filings.
(d) Satisfaction of Conditions. Majority Shareholder and STEN will use
their respective Best Efforts to obtain the satisfaction of the conditions to
Closing set forth in Section 7.2.
(e) Press Releases. Subject to applicable securities law or stock
exchange requirements and other legal requirements, STEN and Majority
Shareholder shall promptly advise and consult with, and obtain the consent
(which consent shall not be unreasonably withheld) of, Buyer before issuing, or
permitting any of their respective directors, officers, employees, agents or
Affiliates to issue, any press release with respect to this Agreement or the
transactions contemplated hereby.
(f) Insurance. STEN and the Companies shall not voluntarily terminate
and will maintain in force and effect through the Closing Date the insurance
coverages set forth on Schedule 5.17 or will cause to be placed in force and
effect comparable insurance coverage. Buyer recognizes that the insurance
coverages set forth on Schedule 5.17 are policies covering the operations and
assets of Majority Shareholder, STEN and their respective Affiliates and the
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limits of coverage available thereunder to the Companies are subject to claims
by Majority Shareholder and its Affiliates.
(g) Payments. All payments of any kind required to be made by the
Companies or the Subsidiaries to a third party under any contract or agreement
or maturing prior to the Closing Date shall be properly and timely paid and
provided for.
Section 6.2 Covenants of Buyer. From the date hereof through the
Closing Date, Buyer covenants and agrees with STEN and Majority Shareholder as
follows:
(a) HSR Act. Buyer will (i) file as promptly as practicable, with the
Department of Justice and the Federal Trade Commission, the notification and
report form required for the transactions contemplated hereunder by the HSR Act,
requesting early termination of the waiting period thereunder, (ii) pay the
applicable filing fee in connection with such filing and (iii) respond promptly
to inquiries from the Federal Trade Commission or the Department of Justice in
connection with such filings.
(b) Satisfaction of Conditions. Buyer will use its Best Efforts to
obtain the satisfaction of the conditions to Closing set forth in Section 7.1.
(c) Press Releases. Subject to applicable securities law or stock
exchange requirements and other legal requirements, Buyer shall promptly advise,
and consult with, and obtain the consent (which consent shall not be
unreasonably withheld) of, Majority Shareholder before issuing, or permitting
any of its directors, officers, employees, agents, or Affiliates to issue, any
press release with respect to this Agreement or the transactions contemplated
hereby.
(d) Prohibited Actions. Prior to the Closing Date, neither the Buyer
nor any Affiliate shall make or agree to enter into any acquisition, joint
venture, business combination or investment, nor take any actions in connection
with making or agreeing to enter into any acquisition, joint venture, business
combination or investment, that could reasonably be expected to delay, conflict
with or prevent the clearance of the transactions contemplated hereunder by
either the United States Department of Justice or the Federal Trade Commission.
Section 6.3 Supplements to Schedules. Majority Shareholder and STEN
may, from time to time, by written notice to Buyer received not later than the
day prior to the anticipated Closing Date, supplement or amend any Schedule to
correct any matter that would constitute a breach of any representation or
warranty of STEN or Majority Shareholder herein contained; provided, however
that any such supplement or amendment of any Schedule will not be effective to
cure and correct any breach of any representation, warranty or covenant that
would have existed by reason of Majority Shareholder or STEN not having made
such supplement or amendment.
Section 6.4 Release of Guarantees, Bonds. Buyer acknowledges that
Majority Shareholder, STEN and their respective Affiliates have guaranteed
obligations (whether of performance or of payment) of, and obtained letters of
credit, bonds, or other surety obligations for, the Companies, as set forth on
Schedule 6.4. Buyer shall use its Best Efforts to cause the
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release as of the Closing Date of Majority Shareholder, STEN and their
respective Affiliates from all obligations relating to any such guarantees,
letters of credit, bonds, or other surety obligations and any liabilities
related thereto. Following the Closing Date, Buyer will continue to use its Best
Efforts to procure any such releases not obtained by the Closing Date. Buyer
will reimburse the Majority Shareholder, STEN or their Affiliates for (i) the
servicing fees and costs, if any, necessary to maintain such guaranteed
obligations, letters of credit, bonds and other surety obligations of the
Majority Shareholder, STEN and their Affiliates that remain outstanding after
the Closing Date and (ii) amounts, if any, drawn under such outstanding
guaranteed obligations, letters of credit, bonds and other surety obligations
charged to the Majority Shareholder, STEN or their Affiliates after the Closing
Date.
Section 6.5 Excluded Assets On or prior to the Closing Date, the
Companies will transfer all Excluded Assets to Majority Shareholder, STEN or an
Affiliate of STEN or Majority Shareholder.
Section 6.6 Confidentiality Agreement Notwithstanding anything therein
to the contrary, the Parties agree that (i) the term of the Confidentiality
Agreement shall hereby be extended to the earlier of (x) the Closing Date or (y)
the termination of this Agreement in accordance with Article XI, and (ii) each
of the Parties, whether or not a signatory to the Confidentiality Agreement,
shall be bound by the terms of the Confidentiality Agreement (other than
paragraphs 6, 7 and 8 thereof) as if such Party was a Party thereto.
Section 6.7 Governmental Approvals. The Parties shall have obtained all
material permits, consents and approvals of Governmental Authorities disclosed
on Schedules 4.4 and 5.5 so that consummation of the transactions contemplated
hereby will be in compliance with applicable Law. In addition, STEN (with the
reasonable assistance of Buyer) shall obtain all consents and approvals of
private Persons (i) the granting of which is necessary for the consummation of
the transactions contemplated hereby and (ii) the non-receipt of which would
have a Material Adverse Effect.
Section 6.8 No Solicitations.
(a) Majority Shareholder will notify Buyer immediately and in any event
within twenty-four (24) hours of receipt of any proposals by, request for any
information from, or initiation of or attempt or request to initiate any
negotiations or discussions with, Majority Shareholder or its subsidiaries or
their officers, directors, employees, investment bankers, attorneys, accountants
or other agents, in each case in connection with any Acquisition Proposal (as
defined below) or the consideration of making an Acquisition Proposal
("Acquisition Proposal Interest") indicating, in connection with such notice,
the terms and conditions of any Acquisition Proposals or offers. Majority
Shareholder agrees that as of the date hereof it shall cease and cause to be
terminated any activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal Interest. The term
"Acquisition Proposal," as used herein, means any offer or proposal for a
merger, consolidation or other business combination or joint venture involving
any of the Companies or the Subsidiaries or the acquisition of any substantial
equity interest in, or a substantial portion of the assets of, any of the
Companies or the Subsidiaries or any offer or proposal with respect to any
recapitalization or
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restructuring with respect to any of the Companies or the Subsidiaries, other
than the transactions contemplated by this Agreement.
(b) From the date hereof until this Agreement is terminated in
accordance with its terms, each of Majority Shareholder, STEN, the Companies and
the Subsidiaries shall not, and shall use their Best Efforts to ensure that
their respective directors, officers, trustees, employees, investment bankers,
attorneys, accountants or other agents shall not, directly or indirectly (i)
solicit, initiate or knowingly encourage, or take any action to facilitate the
making of, any Acquisition Proposal, (ii) enter into any agreement with respect
to any Acquisition Proposal or (iii) engage in discussions or negotiations with,
or provide any information relating to the Companies or the Subsidiaries to any
Person relating to an Acquisition Proposal.
ARTICLE VII
CLOSING CONDITIONS
Section 7.1 Conditions to Obligations of STEN and Majority Shareholder.
The obligations of STEN and Majority Shareholder to proceed with the Closing are
subject to the satisfaction at or prior to Closing of all of the following
conditions, any one or more of which may be waived in writing in whole or in
part by Majority Shareholder (which waiver shall be deemed to constitute a
waiver of any liability Buyer may have under this Agreement with respect to the
event or condition causing such condition not to be satisfied at Closing):
(a) Compliance. Buyer shall have complied in all material respects with
its covenants and agreements contained herein, and Buyer's representations and
warranties contained herein, or in any certificate or similar instrument
required to be delivered by or on behalf of it pursuant hereto, shall be true
and correct in all material respects on and as of the Closing Date, with the
same effect as though made at such time provided, that if a representation or
warranty is expressly made only as of a specific date, it need only be true and
correct as of such date;
(b) Officers' Certificate. Majority Shareholder and STEN shall have
received a certificate dated as of the Closing Date and signed by (i) Buyer's
President or any Vice President, to the effect that the conditions specified in
Section 7.1(a) have been fulfilled and (ii) Buyer's Secretary or any Assistant
Secretary, certifying the accuracy and completeness of the copies of, as well as
the current effectiveness of, the resolutions to be attached thereto of the
Board (or any committee thereof) of it authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, as well as to the incumbency of the officers executing this
Agreement on behalf of it and any documents to be executed and delivered by it
at Closing;
(c) No Orders. No order, writ, injunction or decree shall have been
entered and be in effect by any court of competent jurisdiction or any
governmental or regulatory instrumentality or authority, and no statute, rule,
regulation or other requirements shall have been promulgated or enacted and be
in effect, that restrains, enjoins or invalidates the transactions contemplated
hereby;
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(d) No Suits. No suit or other proceeding shall be pending or
threatened in writing by any third party before any court or governmental agency
seeking to restrain or prohibit or declare illegal, or seeking substantial
damages in connection with, the transactions contemplated by this Agreement;
(e) HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated;
(f) Legal Opinion. STEN and Majority Shareholder shall have received a
legal opinion from Xxxxxxxx & Xxxxxx L.L.P., legal counsel of Buyer, and/or the
Assistant General Counsel of Buyer, each in a form reasonably acceptable to
Majority Shareholder, STEN and their counsel;
(g) Guarantees, Bonds and Insurance. Majority Shareholder shall have
received from Buyer all releases, replacements and substitutions with respect to
guarantees, letter of credit, bonds, insurance or other surety obligations
required in Section 6.4 or an indemnity of Buyer in lieu thereof in form and
substance reasonably satisfactory to Majority Shareholder;
(h) Governmental Approvals. The Companies and the Subsidiaries shall
have received all material permits, consents and approvals set forth in Section
5.5; and
(i) Payment of Preliminary Purchase Price. Buyer shall have paid by
wire transfer to STEN Holdings the Preliminary Purchase Price.
Section 7.2 Conditions to Obligations of Buyer. The obligations of
Buyer to proceed with the Closing are subject to the satisfaction at or prior to
Closing of all of the following conditions, any one or more of which may be
waived in writing in whole or in part by Buyer (which waiver shall be deemed to
constitute a waiver of any liability STEN or Majority Shareholder may have under
this Agreement with respect to the event or condition causing such condition not
be to satisfied at Closing):
(a) Compliance. STEN and Majority Shareholder shall have complied in
all material respects with their covenants and agreements contained herein, and
STEN's and Majority Shareholder's representations and warranties contained
herein or in any certificate or similar instrument required to be delivered by
or on behalf of STEN or Majority Shareholder pursuant hereto, shall be true and
correct on and as of the Closing Date (other than such inaccuracies or breaches
that do not, individually or in the aggregate, have a Material Adverse Effect),
with the same effect as though made at such time; provided that if a
representation or warranty is expressly made only as of a specific date, it need
only be true and correct as of such date;
(b) Officers' Certificate. Buyer shall have received a certificate
dated as of the Closing Date and signed by (i) the STEN Parent's Chairman,
President, Executive Vice President or any Vice President, STEN Holding's
Chairman, President, Executive Vice President or any Vice President and Majority
Shareholder's Chairman, President, Executive Vice President
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or any Vice President, to the effect that the conditions specified in Section
7.2(a) have been fulfilled and (ii) STEN Parent's Secretary or Assistant
Secretary, STEN Holding's Secretary or Assistant Vice President and Majority
Shareholder's Secretary or an Assistant Secretary, certifying the accuracy and
completeness of the copies of, as well as the current effectiveness of, the
resolutions to be attached thereto of the Board (or any committee thereof) of
each authorizing the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein, as well as to the
incumbency of the officers executing this Agreement on behalf of each and any
documents to be executed and delivered by each at Closing;
(c) No Orders. No order, writ, injunction or decree shall have been
entered and be in effect by any court of competent jurisdiction or any
governmental or regulatory instrumentality or authority, and no statute, rule,
regulation or other requirement shall have been promulgated or enacted and be in
effect, that restrains, enjoins or invalidates the transactions contemplated
hereby;
(d) No Suits. No suit or other proceeding shall be pending or
threatened in writing by any third party before any court or governmental agency
seeking to restrain or prohibit or declare illegal, or seeking substantial
damages in connection with, the transactions contemplated by this Agreement;
(e) HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated; provided, however, that, after consultation
with Majority Shareholder, Buyer shall not be required to accept any such
expiration or termination to the extent that the Department of Justice or the
Federal Trade Commission limits or restricts the operations of Buyer, or any of
its Affiliates, the Companies or the Subsidiaries, requires the divestiture by
Buyer, any of its Affiliates, the Companies or the Subsidiaries of assets or
operations or otherwise would impose terms or conditions that in the good faith
judgment of the Buyer would reasonably be likely to have a material adverse
effect on Buyer, its Affiliates, the Companies or the Subsidiaries.
(f) Legal Opinions. Buyer shall have received legal opinions from
Xxxxxx X. XxXxxxxxx and Xxxxx & Xxxxx, L.L.P., legal counsel to STEN and
Majority Shareholder respectively, reasonably satisfactory to Buyer and its
counsel;
(g) Delivery of Beneficial Interests. Buyer shall have received from
STEN Holdings (i) one or more stock certificates representing the ESOG Common
Stock, duly endorsed for transfer to Buyer or accompanied by stock powers duly
executed in blank; and (ii) one or more certificates representing the shares of
ESEC Beneficial Interest;
(h) Governmental Approvals. Buyer and the Companies and the
Subsidiaries shall have received all material permits, consents and approvals
set forth on Schedule 4.4 and 5.5 hereof; provided, however, that Buyer, after
consultation with Majority Shareholder, shall not be required to accept any such
permit, consent or approval that limits or restricts the operations of Buyer,
any of its Affiliates, the Companies or the Subsidiaries, requires the
divestiture by Buyer, any of its Affiliates, the Companies or the Subsidiaries
of assets or operations or otherwise
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would impose terms or conditions that in the good faith judgment of Buyer would
reasonably be likely to have a material adverse effect on Buyer, its Affiliates,
the Companies or the Subsidiaries;
(i) Delivery of Minute Books of Companies and the Subsidiaries. The
Majority Shareholder shall have delivered the minute books and other permanent
Records of the Companies and each of the Subsidiaries;
(j) Resignations. The written resignations (or evidence of removal) of
the directors and officers of the Companies and each of the Subsidiaries that
are designated in writing by Buyer to the Majority Shareholder not less than 10
days before the Closing Date, shall be delivered, such resignations to be
effective on the Closing Date; provided, however, that nothing in this Section
7.2(j) shall affect the Buyer's obligations to pay severance to any officers
required pursuant to Section 10.6;
(k) Credit Support. If requested by Buyer, Majority Shareholder shall
deliver to Buyer a credit support instrument (issued by the Majority
Shareholder's ultimate parent company or by a Person whose credit is reasonably
acceptable to Buyer) supporting payment obligations of the Majority Shareholder
under this Agreement and any obligations of STEN or its Affiliates under any
contract or agreement between STEN or its Affiliates, on the one hand, and the
Companies or the Subsidiaries, on the other hand;
(l) No Material Adverse Effect. From the date of this Agreement until
the Closing Date, there shall not have occurred any change or effect that has
had a Material Adverse Effect; and
(m) Receipt of Preliminary Purchase Price Estimate. Buyer shall have
received STEN's estimate of the Preliminary Purchase Price no later than 5
Business Days prior to the Closing Date.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification by Majority Shareholder and STEN.
(a) Majority Shareholder and STEN shall indemnify and hold harmless
Buyer (and, after the Closing, the Companies and the Subsidiaries), and their
respective officers, directors, employees, advisors, agents and controlling
Persons, from any liability, damage, loss, penalty, cost or expense, including
reasonable attorney's fees and costs of investigating and defending against
lawsuits, complaints, actions or other pending or threatened litigation (the
"Costs"), arising from or attributable to (i) any breach of any representation,
warranty or agreement, made by Majority Shareholder or STEN in Article V of this
Agreement; (ii) any Third Party Claim in respect to the conduct of the Business
or the ownership of the assets by any of the Companies or the Subsidiaries (or
their successors) prior to the Closing Date; (iii) any
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Excluded Asset or Excluded Liability; (iv) any Third Party Claim brought by or
on behalf of any Shareholder or employee of Majority Shareholder, STEN Parent or
STEN Holdings or any Company Employee, which seeks to enjoin, challenge the
validity of, obtain damages with respect to, or otherwise is related to this
Agreement (other than obligations Buyer has undertaken under Section 10.6
hereof) or the consummation of the transactions contemplated hereby; (v) any
liabilities to the extent STEN is indemnified, and recovers pursuant to such
indemnity, pursuant to the Stock Purchase Agreement by and between Ashland
Exploration Holdings, Inc. and The Eastern Group, Inc., dated as of May 20,
1997; (vi) any Costs resulting from the failure to fully discharge the debts
secured by the liens set forth in Schedule 1.3; (vii) any Xxxxxx of the
Companies or the Subsidiaries other than as described in Schedule 5.11(e), the
Hedge Book or the Master Hedge Agreement; provided, however, that this Section
8.1 shall be inapplicable with respect to any matter for which a Party shall be
entitled to indemnification pursuant to Article IX; and (viii) any claim by any
Company Employee related to any alleged rights to any Options or other form of
equity participation granted prior to the Closing Date.
(b) STEN agrees to assert, and to use commercially reasonable efforts
to enforce, at Buyer's request, any claim against Ashland Exploration Holdings,
Inc. for which STEN is entitled to indemnification pursuant to the agreement
referenced in Section 8.1(v) hereof; provided that STEN and Buyer agree that (i)
if STEN is able to recover pursuant to such agreement with Ashland Exploration
Holdings, Inc., Buyer shall pay the Costs related to asserting such
indemnification to the extent STEN is not able to otherwise recover the Costs of
asserting such indemnification from Ashland Explorations Holdings, Inc.; and
(ii) with respect to any claim for which STEN is not able to recover pursuant to
such agreement with Ashland Exploration Holdings, Inc., such claim will be
eligible for indemnification to the extent otherwise available under Section
8.1(a).
Section 8.2 Indemnification by Buyer. Buyer shall indemnify and hold
harmless STEN, Majority Shareholder, their respective officers, directors,
employees, advisors, agents and controlling Persons from Costs arising from or
attributable to (i) any breach of any representation, warranty or agreement made
by Buyer in Article IV of this Agreement, and (ii) any Third Party Claim in
respect to the conduct of the Business or the ownership of the assets by any of
the Companies or the Subsidiaries on or after the Closing Date and (iii) except
as set forth in Section 10.6(e), any claim by any employee of the Companies or
the Subsidiaries pursuant to an Employment Agreement (other than with respect to
any Options or other form of equity participation); provided, however, that this
Section 8.2 shall be inapplicable with respect to any matter for which a Party
shall be entitled to indemnification pursuant to Article IX.
Section 8.3 Procedures for Third Party Claims.
(a) Promptly after the assertion by any third party of any Third Party
Claim against any party entitled to be indemnified under this Article VIII (the
"Indemnitee") that, in the judgment of such Indemnitee, may result in the
incurrence by such Indemnitee of Costs for which such Indemnitee would be
entitled to indemnification pursuant to this Agreement, such Indemnitee shall
give prompt written notice (including copies of all papers served with respect
to such claim) to the Person such Indemnitee seeks indemnification from
hereunder (the "Indemnitor") of the commencement thereof, which notice shall
describe in reasonable detail the nature of the Third Party Claim, an estimate
of the amount of damages attributable to the Third
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Party Claim to the extent feasible and the basis of the Indemnitee's request for
indemnification under this Agreement. In case any Third Party Claim that is
subject to indemnification under this subsection (a) shall be brought against an
Indemnitee and it shall give prompt written notice to the Indemnitor of the
commencement thereof, the Indemnitor may, and at the request of the Indemnitee
shall, participate in and control the defense of the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnitee; provided,
however, that no delay on the part of the Indemnitee in notifying the Indemnitor
shall relieve the Indemnitor from any obligation hereunder unless (and then
solely to the extent) the Indemnitor thereby is prejudiced. The Indemnitee shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the Indemnitee unless (i) the employment thereof has been
specifically authorized in writing by the Indemnitor, (ii) the Indemnitor failed
to assume the defense and employ counsel or failed to diligently prosecute or
settle the Third Party Claim or (iii) there shall exist or develop a conflict
that would ethically prohibit counsel to the Indemnitor from representing the
Indemnitee. If requested by the Indemnitor, the Indemnitee shall cooperate with
the Indemnitor and its counsel in contesting any Third Party Claim that the
Indemnitor elects to contest, including, without limitation, by making any
counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person, in each case only if and to the extent that
any such counterclaim or cross-complaint arises from the same actions or facts
giving rise to the Third Party Claim. The Indemnitor shall be the sole judge of
the acceptability of any compromise or settlement of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder; provided, that
the Indemnitor shall give the Indemnitee reasonable prior written notice of any
such proposed settlement or compromise and will not consent to the entry of any
judgment or enter into any settlement with respect to any Third Party Claim
without the prior written consent of the Indemnitee(s), which consent shall not
be unreasonably withheld. The Indemnitor (if the Indemnitee is entitled to
indemnification hereunder) shall reimburse the Indemnitee for its reasonable out
of pocket costs incurred with respect to such cooperation.
(b) If the Indemnitor fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of subsection (a) or if the Indemnitor assumes the defense of the
Indemnitee pursuant to subsection (a) but fails to diligently prosecute or
settle the Third Party Claim, then the Indemnitee shall have the right to
defend, at the sole cost and expense of the Indemnitor (if the Indemnitee is
entitled to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnitee to a final conclusion or settled. The Indemnitee shall have full
control of such defense and proceedings; provided that the Indemnitee shall not
settle such Third Party Claim without the written consent of the Indemnitor,
which consent shall not be unreasonably withheld. The Indemnitor may participate
in, but not control, any defense or settlement controlled by the Indemnitee
pursuant to this subsection (b), and the Indemnitor shall bear its own costs and
expenses with respect to such participation.
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Section 8.4 Limits and Special Provisions for Recovery for Indemnified
Costs.
(a) Claims for breach of representations and warranties and Third Party
Claims under Sections 8.1(a)(i), 8.1(a)(ii), 8.2(i) and 8.2(ii) shall only be
made prior to December 31, 2001.
(b) No Party shall have any obligation to indemnify any other Party for
breaches of representations and warranties or agreements or Third Party Claims
where the Costs under Sections 8.1(a)(i), 8.1(a)(ii), 8.2(i) and 8.2(ii) related
to such individual claim are less than $50,000.
(c) Neither Majority Shareholder nor STEN shall be liable for any
indemnifiable Costs under Section 8.1(a)(i) that relates to a breach of a
representation or warranty contained in Section 5.19(b) or under 8.1(a)(ii) that
relates to any Environmental Liability, unless and until the aggregate amount of
all such Costs exceeds $2,500,000, in which case Majority Shareholder and STEN,
on the one hand, and Buyer, on the other hand, shall each be liable for 50% of
all such Costs that exceed $2,500,000 up to and until such time as the aggregate
amount of all such Costs equal $5,000,000, at which point Majority Shareholder
and STEN shall be solely liable for all Costs that exceed $5,000,000.
(d) Neither Majority Shareholder nor STEN shall be liable for any Costs
under Section 8.1(a)(i) or (ii) other than such Costs as are referenced in
Section 8.4(c) unless and until the aggregate amount of all such other Costs
exceeds $5,000,000, at which point Majority Shareholder and STEN shall be solely
liable for all Costs that exceed $5,000,000.
(e) The indemnification obligations of Majority Shareholder under
Section 8.1(a)(i) and (ii) and Buyer under Section 8.2 shall be subject to a
maximum aggregate amount equal to 50% of the Final Purchase Price.
Section 8.5 Exclusive Remedy; Scope of Representations.
(a) THE PARTIES ACKNOWLEDGE AND AGREE THAT THE REMEDIES SET FORTH IN
THIS AGREEMENT, INCLUDING THE DEDUCTIBLES, LIABILITY LIMITS, SURVIVAL PERIODS,
DISCLAIMERS AND LIMITATIONS ON REMEDIES, ARE INTENDED TO BE, AND SHALL BE, THE
EXCLUSIVE REMEDIES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH PARTY HEREBY RELEASES, WAIVES AND DISCHARGES, AND
COVENANTS NOT TO XXX WITH RESPECT TO, ANY CAUSE OF ACTION OR CLAIM NOT EXPRESSLY
PROVIDED FOR IN THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, CLAIMS UNDER STATE
OR FEDERAL SECURITIES LAWS, AVAILABLE AT COMMON LAW OR BY STATUTE.
(b) EXCEPT AS EXPRESSLY PROVIDED IN OR CONTEMPLATED BY THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTIES OR GUARANTEES TO THE OTHER, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, AND BOTH PARTIES
DISCLAIM AND WAIVE ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW.
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ARTICLE IX
TAX MATTERS
Section 9.1 Preparation and Filing of Tax Returns.
(a) With respect to each Tax Return covering a taxable period ending on
or before the Closing Date that is required to be filed after the Closing Date
for, by or with respect to the Companies or the Subsidiaries (other than the Tax
Returns described in paragraph (c)), Majority Shareholder shall cause such Tax
Return to be prepared (at Majority Shareholder's sole cost and expense) and
shall cause to be included in such Tax Return all items of income, gain, loss,
deduction and credit or other items (collectively "Tax Items") required to be
included therein. Majority Shareholder shall determine (by a methodology that
uses the principles of an interim closing of the books as of the Closing Date,
except for Taxes and Tax Items (including franchise and ad valorum taxes) that
are calculated on an annual basis shall be pro rated on a daily basis), the
portion, if any, of the Tax shown with respect to the period covered by such Tax
Return which is attributable to the Companies or the Subsidiaries for a
Pre-Closing Taxable Period. In addition, Majority Shareholder shall cause a
Company Tax Return to be prepared (at Majority Shareholder's sole cost and
expense) and shall cause to be included in such Company Tax Return all items of
Tax Items included in any such actual Tax Return, utilizing the same
methodologies used in the preparation of any such actual Tax Return pursuant to
this Section 9.1(a). At least 30 days prior to the due date (including
extensions) of such Tax Return, Majority Shareholder shall deliver to Buyer a
copy of such actual Tax Return (and the corresponding Company Tax Return) and
its determinations. Buyer shall have the right to review and comment on such Tax
Return (and the corresponding Company Tax Return) and to request reasonable
revisions thereto within 15 days of receiving copies thereof. If the Majority
Shareholder and Buyer shall be unable to agree upon revisions to such Tax
Returns (and/or the corresponding Company Tax Returns) within 15 days of
Majority Shareholder's receipt of Buyer's reasonable objections, then
independent tax counsel or a nationally recognized public accounting firm, in
each case mutually acceptable to Majority Shareholder and Buyer, shall be
engaged to decide the dispute, the costs of such counsel or accounting firm to
be shared equally by Majority Shareholder and Buyer. If any Tax is finally
determined to be due or owing pursuant to this Section 9.1(a) with respect to
the period or periods covered by such Tax Return and such Tax is attributable to
Tax Items arising on or prior to September 30, 1999, Majority Shareholder shall
pay such Tax (or if Buyer should be required to pay such Tax, Majority
Shareholder will reimburse Buyer for such amount not less than five (5) days
prior to the date such Tax is due). If (1) any Tax is shown with respect to the
period or periods covered by such Company Tax Return, and (2) such Tax is
attributable to a Tax Item which is included in a corresponding actual Tax
Return for such period or periods which is filed by the Majority Shareholder or
other member of the consolidated group of which it is a member, Buyer shall pay
to Majority Shareholder the Tax shown on the Company Tax Return for such period
or periods not less than 5 days prior to the due date of such corresponding
actual Tax Return, provided, however, that if such actual Tax Return is required
by law to be filed by Buyer, Buyer shall cause the Companies or the Subsidiaries
to file timely such actual Tax Return with the appropriate taxing authority and
to pay the amount of Taxes (including the additional Tax attributable to Tax
Items on the Company Tax Return) shown to be due on such Tax Return; and
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provided further that (y) such payment of such Tax by Buyer shall be in lieu of
any payment to the Majority Shareholder pursuant to this Section 9.1(a), and (z)
to the extent that Tax attributable to such Tax Item shown on the Company Tax
Return for such periods or periods (i) is more than the Tax shown on such actual
Tax Return for such period or periods, Buyer shall pay to Majority Shareholder
the amount of such excess not less than 5 days prior to the due date of the
corresponding Tax Return, or (ii) with respect to returns other than federal
income tax returns, is less that the Tax attributable to such Tax Item shown on
such actual Tax Return, Majority Shareholder shall pay to Buyer the amount of
such difference not less than 5 days prior to the due date of the corresponding
actual Tax Return.
(b) With respect to each Tax Return covering a taxable period beginning
on or before the Closing Date and ending after the Closing Date (other than the
Tax Returns described in paragraphs (a) and (c)), Buyer shall cause such Tax
Return to be prepared (at Buyer's sole cost and expense) and shall cause to be
included in such Tax Return all Tax Items required to be included therein. Buyer
shall determine (by a methodology that uses the principles of an interim closing
of the books as of the Closing Date, except for Taxes and Tax Items (including
franchise and ad valorum taxes that are calculated on an annual basis shall be
prorated in a daily basis), the portion, if any, of the Tax shown with respect
to the period covered by such Tax Return which is attributable to the Companies
or the Subsidiaries for a Pre-Closing Taxable Period. In addition, Buyer shall
cause a Company Tax Return to be prepared (at Buyer's sole cost and expense)
and, shall cause to be included in such Company Tax Return all items of Tax
Items included in any such actual Tax Return, utilizing the same methodologies
used in the preparation of any such actual Tax Return pursuant to this Section
9.1(b). At least 30 days prior to the due date (including extensions) of such
Tax Return, Buyer shall deliver to Majority Shareholder a copy of such Tax
Return (and the corresponding Company Tax Return) and its determinations.
Majority Shareholder shall have the right to review and comment on such Tax
Return (and the corresponding Company Tax Return) and to request reasonable
revisions to such Tax Return (and/or the corresponding Company Tax Return)
within 15 days of receiving copies thereof. If the Buyer and Majority
Shareholder shall be unable to agree upon revisions to such Tax Return (and/or
the corresponding Company Tax Return) within 15 days of Buyer's receipt of
notice of Majority Shareholder's reasonable objections, then independent tax
counsel or a nationally recognized public accounting firm, in each case,
mutually acceptable to Buyer and Majority Shareholder, shall be engaged to
decide such dispute, the cost of such counsel or accounting firm to be shared
equally by Majority Shareholder and Buyer. If any Tax finally determined as due
and owing pursuant to this Section 9.1(b) with respect to the period or periods
covered by such Tax Return and such Tax is attributable to Tax Items arising on
or prior to September 30, 1999, Majority Shareholder shall pay such Tax (or if
Buyer should be required to pay such Tax, Majority Shareholder will reimburse
Buyer for such amount not less than 5 days prior to the date such Tax is due. If
(1) any Tax is shown with respect to the period or periods covered by such
Company Tax Return, and (2) such Tax is attributable to a Tax Item which is
included in a corresponding actual Tax Return for such period or periods which
is filed by the Majority Shareholder or other member of the consolidated group
of which it is a member, Buyer shall pay to Majority Shareholder the Tax shown
on the Company Tax Return for such period or periods not less than 5 days prior
to the due date of such corresponding actual Tax Return; provided, however, that
if such actual Tax Return is required by law to be filed by Buyer, Buyer shall
cause the Companies or the Subsidiaries to file timely such actual Tax Return
with the
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appropriate taxing authority and to pay the amount of Taxes (including the
additional Tax attributable to Tax Items on the Company Tax Return) shown to be
due on such Tax Return; and provided further that (y) such payment of such Tax
by Buyer shall be in lieu of any payment to the Majority Shareholder pursuant to
this Section 9.1(b), and (z) to the extent that Tax attributable to such Tax
Item shown on the Company Tax Return for such period or periods (i) is less that
the Tax attributable to such Tax Item shown on such actual Tax Return, Majority
Shareholder shall pay to Buyer the amount of such difference not less than 5
days prior to the due date of the corresponding actual Tax Return, or (ii) with
respect to returns other than federal income tax returns, is more that the Tax
attributable to such Tax Item shown on such actual Tax Return, Buyer shall pay
to Majority Shareholder the amount of such difference not less than 5 days prior
to the due date of the corresponding actual Tax Return.
(c) Majority Shareholder shall cause, as the common parent of the
affiliated group of corporations filing a consolidated federal income Tax Return
which includes the Companies and the Subsidiaries (the "Majority Shareholder
Group"), to be included in the consolidated federal income Tax Returns (and the
state income Tax Returns of any state that permits consolidated, combined or
unitary income Tax Returns, for which an election has been made if any) of
Majority Shareholder Group for all periods ending on or before or which include
the Closing Date, all Tax Items of the Companies and the Subsidiaries which are
required to be included therein, shall file timely all such Tax Returns with the
appropriate taxing authorities and shall pay timely all taxes due with respect
to the periods covered by such Tax Returns; provided, however, that if no
Section 338(h)(10) election is made as provided in Section 9.9, the Majority
Shareholder shall not file any amended Tax Returns for the Companies or the
Subsidiaries for any periods ending on or before or which include the Closing
Date without the written consent of Buyer, which shall not be unreasonably
withheld or delayed.
(d) Any Tax Return or Company Tax Return to be prepared pursuant to the
provision of this Article IX shall be prepared in a manner consistent with
practices followed in prior years with respect to similar Tax Returns, except
for changes required by changes in law; provided, however, that such Tax Return
or Company Tax Return may be prepared in a manner not consistent with prior year
practices if (i) such manner is permissible under the applicable tax law and
regulations and (ii) the change does not work to the disadvantage of the other
Party with respect to the calculations required by this Article IX. The Parties
recognize that for all Tax purposes the purchase and sale of the Beneficial
Interests as contemplated hereby will be treated as occurring on the Closing
Date.
Section 9.2 Tax Allocation Arrangements. Effective as of the Closing
Date, any tax indemnity, sharing, allocation or similar agreement or arrangement
that may be in effect prior to the Closing Date between or among the Majority
Shareholder and/or any Affiliate and the Companies, or the Subsidiaries, shall
be extinguished in full, and any liabilities or rights existing under any such
agreement or arrangement shall cease to exist and shall no longer be
enforceable. Effective as of the Closing Date, none of the Companies or any of
the Subsidiaries has any liability for any Taxes owed by any other member of an
"affiliated group" within the meaning of Section 1504 of the Code of which any
Companies or Subsidiaries has been a member for any period ending on or before
the Closing Date pursuant to a tax sharing or tax allocation agreement or
otherwise.
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Section 9.3 Access to Information.
(a) Majority Shareholder and each member of Majority Shareholder Group
shall grant to Buyer (or its designees) access at all reasonable times to all of
the information, books and records relating to the Companies and the
Subsidiaries within the possession of Majority Shareholder or any member of
Majority Shareholder Group (including without limitation work papers and
correspondence with taxing authorities), and shall afford Buyer (or its
designees) the right (at Buyer's expense) to take extracts therefrom and to make
copies thereof, to the extent reasonably necessary to permit Buyer (or its
designees) to prepare Tax Returns, to conduct negotiations with Tax authorities,
and to implement the provisions of, or to investigate or defend any claims
between the Parties arising under, this Agreement.
(b) Buyer shall grant to Majority Shareholder (or its designees) access
at all reasonable times to all of the information, books and records relating to
the Companies and the Subsidiaries within the possession of Buyer, the Business,
the Companies or the Subsidiaries (including without limitation work papers and
correspondence with taxing authorities), and shall afford Majority Shareholder
(or its designees) the right (at Majority Shareholder's expense) to take
extracts therefrom and to make copies thereof, to the extent reasonably
necessary to permit Majority Shareholder (or its designees) to prepare Tax
Returns, to conduct negotiations with Tax authorities, and to implement the
provisions of, or to investigate or defend any claims between the parties
arising under, this Agreement.
(c) Each of the Parties hereto will preserve and retain all schedules,
work papers and other documents relating to any Tax Returns of or with respect
to the Surviving Corporation, the Companies or any of the Subsidiaries or to any
claims, audits or other proceedings affecting the Business, the Companies or the
Subsidiaries until the expiration of the statute of limitations (including
extensions) applicable to the taxable period to which such documents relate or
until the final determination of any controversy with respect to such taxable
period, and until the final determination of any payments that may be required
with respect to such taxable period under this Agreement.
Section 9.4 Majority Shareholder Indemnification. Majority Shareholder
hereby agrees to protect, defend, indemnify and hold harmless the Buyer the
Companies and the Subsidiaries from and against, and agrees to pay any Taxes of
the Companies or the Subsidiaries attributable to any Pre-Closing Taxable Period
to the extent such Tax is not reflected on the Closing Date Balance Sheet;
provided, however, that this paragraph shall be applicable only if the aggregate
amount of such taxes exceeds $50,000.
Section 9.5 Buyer Indemnifications. Buyer agrees to protect, defend,
indemnify and hold harmless Majority Shareholder from and against, and agrees to
pay any Taxes of the Buyer, Companies or the Subsidiaries for which Majority
Shareholder is not liable under Section 9.4; provided, however, that this
paragraph shall be applicable only if the aggregate amount of such taxes exceeds
$50,000.
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Section 9.6 Indemnification Procedures.
(a) If a claim shall be made by any taxing authority that, if
successful, would result in the indemnification of a Party under this Agreement
(referred to herein as the "Tax Indemnified Party"), the Tax Indemnified Party
shall, upon receiving notice of such claim, promptly notify the Party obligated
under this Agreement to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing of such fact; provided, however, that this
paragraph shall be applicable only if the aggregate amount of such taxes exceeds
$50,000.
(b) The Tax Indemnified Party shall take such action in connection with
contesting such claim as the Tax Indemnifying Party shall reasonably request in
writing from time to time, including the selection of counsel and experts and
the execution of powers of attorney, provided that (i) within 30 days after the
notice described in Section 9.6(a) has been delivered (or such earlier date that
any payment of Taxes is due by the Tax Indemnified Party but in no event sooner
than 5 days after the Tax Indemnifying Party's receipt of such notice), the Tax
Indemnifying Party requests that such claim be contested, (ii) the Tax
Indemnifying Party shall have agreed to pay to the Tax Indemnified Party all
costs and expenses that the Tax Indemnified Party incurs in connection with
contesting such claim, including, without limitation, reasonable attorneys' and
accountants' fees and disbursements, and (iii) if the Tax Indemnified Party is
requested by the Tax Indemnifying Party to pay the Tax claims and xxx for a
refund, the Tax Indemnifying Party shall have advanced to the Tax Indemnified
Party, on an interest-free basis, the amount of such claim. The Tax Indemnified
Party shall not make any payment of such claim for at least 30 days (or such
shorter period as may be required by applicable law) after the giving of the
notice required by Section 9.6(a), shall give to the Tax Indemnifying Party any
information reasonably requested relating to such claim, and otherwise shall
cooperate with the Tax Indemnifying Party in good faith in order to contest
effectively any such claim.
(c) Subject to the provisions of Section 9.6(b), the Tax Indemnified
Party shall enter into a settlement of such contest with the applicable taxing
authority or prosecute such contest to a determination in a court or other
tribunal of initial or appellate jurisdiction, all as the Tax Indemnifying Party
may request.
(d) If, after actual receipt by the Tax Indemnified Party of an amount
advanced by the Tax Indemnifying Party pursuant to Section 9.6(b)(iii), the
extent of the liability of the Tax Indemnified Party with respect to the claim
shall be established by the final judgment or decree of a court or other
tribunal or a final and binding settlement with an administrative agency having
jurisdiction thereof, the Tax Indemnified Party shall promptly repay the Tax
Indemnifying Party the amount advanced to the extent of any refund received by
the Tax Indemnified Party with respect to the claim together with any interest
received thereon from the applicable taxing authority and any recovery of legal
fees from such taxing authority, net of any Taxes as are required to be paid by
the Tax Indemnified Party with respect to such refund, interest or legal fees
(calculated at the maximum applicable statutory rate of Tax without regard to
any other Tax Items). Notwithstanding the foregoing, the Tax Indemnified Party
shall not be required to make any payment hereunder before such time as the Tax
Indemnifying Party shall have made all payments or indemnities then due with
respect to the Tax Indemnified Party pursuant to this Agreement.
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(e) Promptly after a final determination, the Tax Indemnifying Party
shall pay to the Tax Indemnified Party the amount of any tax Costs to which the
Tax Indemnified Party may become entitled by reason of the provisions of this
Article IX.
Section 9.7 Refunds or Credits.
(a) Except as otherwise set forth in this Agreement, to the extent all
or any portion of any refunds or credits with respect to Taxes paid by the
Companies and Subsidiaries are attributable to any Pre-Closing Taxable Period
(determined in accordance with Section 9.1) and such refund or credit (or
portion thereof) is not reflected on the Closing Date Balance Sheet, such
refunds or credits (or portion thereof) shall be paid to the Majority
Shareholder within 10 days after such amounts are received by the Buyer,
Companies, Subsidiaries or the Buyer.
(b) Except as provided in paragraph (a), the Majority Shareholder shall
have no interest in and no right to receive all or any portion of any refunds or
credits with respect to Taxes paid by the Companies and the Subsidiaries, and
shall cause any such refund or credit to be forward to Buyer or to the Buyer
within 10 business days from receipt thereof.
(c) To the extent any such refund or credit described in paragraphs (a)
or (b) is properly includable in the taxable income of the initial recipient,
the amount forwarded or reimbursed (as provided in such paragraphs (a) and (b)),
as the case may be, shall be reduced by a percentage of the amount of such
refund or credit equal to the highest marginal federal income tax rate for the
tax period in which the refund or credit is received. Any refunds or
reimbursements not made within 10 Business Day period specified above shall bear
interest from the date received by the refunding or reimbursing Party at the
prime or base rate publicly announced by The Chase Manhattan Bank, from time to
time, compounded monthly, but not to exceed the maximum nonusurious rate
permitted by applicable law.
Section 9.8 Conflict. In the event of a conflict between the provisions
of this Article IX and any other provision of this Agreement, this Article IX
shall control.
Section 9.9 Section 338(h)(10) Elections.
(a) At the request of Buyer, which request shall be made in writing to
the Majority Shareholder within six months after the Closing Date (the "Request
Date"), the common parent of the "selling group" of the Companies (as defined in
Treasury Reg. Section 1.338-1(c)(12)) shall join Buyer in making a timely
election under Section 338(g) and 338(h)(10) of the Code and any similar state
law elections in all applicable states (the "Elections"), with respect to the
sale and purchase of the Beneficial Interests pursuant to this Agreement, and
each Party shall provide to the other all necessary information to permit such
Elections to be made.
(b) The Majority Shareholder on behalf of the Shareholders and the
Buyer shall, as promptly as practicable following the Closing Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules, and other document as may be required) to effect and preserve timely
the Elections. In connection with such Elections, within 60 days following the
Request Date, the Majority Shareholder on behalf of the Shareholders and Buyer
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shall act together in good faith to (i) determine and agree upon the amount of
the "adjusted grossed-up basis" of the Beneficial Interests (within the meaning
of Treasury Regulation Section 1.338(h)(10)-1T(e)(6) and (ii) agree upon
appropriate allocations (the "Allocations") of the "adjusted grossed-up basis"
of the Beneficial Interests among the assets of the Companies in accordance with
Section 338(b)(5) of the Code and the Treasury Regulations promulgated
thereunder. The Shareholders shall calculate gain or loss, if any, resulting
from the Elections in a manner consistent with the Allocations in any Tax Return
or otherwise and Buyer shall allocate the "adjusted grossed-up basis" of the
Beneficial Interests among the assets of the Companies in a manner consistent
with the Allocations and shall not take any position inconsistent with the
Allocations in any Tax Return or otherwise; provided, the Buyer shall be
entitled to add its Transaction Costs to the "adjusted grossed-up basis" of the
Beneficial Interests for purposes of allocating such basis amount among the
assets of the Companies.
(c) If, within 60 days following the Request Date, the Parties are
unable to agree upon the calculations of either (i) the amount of the "adjusted
grossed-up basis" of the Beneficial Interests, or (ii) the Allocations or both,
then, independent tax counsel or a nationally recognized public accounting firm,
in each case mutually acceptable to Majority Shareholder and Buyer, shall be
engaged to decide the dispute, the cost of such counsel or accounting firm to be
shared equally by Majority Shareholder and Buyer. The Majority Shareholder shall
be liable for, and shall indemnify and hold harmless Buyer, the Companies, and
the Subsidiaries against, any Taxes or other costs attributable to a failure on
the part of any of the Shareholders to take all actions required of them under
this Section 9.9.
(d) In the event that a written request is made by Buyer pursuant to
paragraph (a) of this Section 9.9, Buyer shall pay to Majority Shareholder an
amount equal to the sum of (1) any Incremental Tax Cost and (2) the Gross-Up
Amount, within ten (10) days of such written notice.
(e) For purposes of this Section 9.9, "Incremental Tax Cost" shall mean
the net difference, whenever realized, between (i) the combined hypothetical
federal, state, and local income tax liability or benefit to the Majority
Shareholder attributable to sale of all Beneficial Interests, computed as if (w)
the parties had not made the Section 338(h)(10) election and (x) the Majority
Shareholder held 100% of the Beneficial Interests of the Companies, and (ii) the
combined actual federal, state and local income tax liability to the Majority
Shareholder attributable to the sale of the Beneficial Interests, assuming (y) a
Section 338(h)(10) election, in both cases computed by giving effect to the
federal, state or local income tax consequences of the receipt of any payment
under this Section 9.9, and (z) the Majority Shareholder held 100% of the
Beneficial Interests of the Companies. For purposes of this Section 9.9,
"Gross-Up Amount" shall mean the additional amount determined with respect to an
Incremental Tax Cost payment, which, when added to the Incremental Tax cost
payment, will result in a payment that leaves the recipient of such payment with
an amount equal to the payment after taking into account all federal, state and
local income taxes deemed to be payable by the recipient of such Incremental Tax
Cost payment on the receipt or accrual of such payment and the Gross-Up Amount
with respect thereto, assuming that such taxes are payable for any such
recipient at the highest marginal income tax rate under Code section 11(b)(1)
plus 2% for the year such payment is paid.
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(f) If, following the final determination of the Final Purchase Price,
there is any subsequent adjustment to such consideration or indemnity payment
made between Buyer and Majority Shareholder, the Incremental Tax Cost hereunder
shall be recalculated. If, as a result of a subsequent adjustment to the Final
Purchase Price or indemnity payment, the Incremental Tax Cost is increased,
Buyer shall pay to the Majority Shareholder an amount equal to such increase
within ten (10) days following the payment of such adjustment or indemnity
payment. If, as a result of a subsequent adjustment to the Final Purchase Price
or indemnity payment, the Incremental Tax Cost is reduced, the Majority
Shareholder shall pay to Buyer an amount equal to such decrease within ten (10)
days following the payment of such adjustment or indemnity payment.
(g) If an election is made pursuant to Code section 338 or 338(h)(10)
in accordance with the terms of this Section 9.9, the parties intend that any
income and gain or loss recognized as a result of, and in accordance with, the
making of such election will be included in the consolidated federal income tax
return of Majority Shareholder's Group and any resulting tax liability will be
paid by the common parent of Majority Shareholder's Group. The Majority
Shareholder further agrees that so long as Buyer complies with and makes the
payments to (i) Majority Shareholder contemplated by the preceding paragraphs of
this Section 9.9, Majority Shareholder will pay and be responsible for, and will
indemnify and save Buyer and the Companies and the Subsidiaries harmless from,
any Taxes imposed on Buyer and the Companies and the Subsidiaries by any state
or local Tax authority resulting from the joint election (or Buyer's election)
to treat the purchase of the Beneficial Interests as an asset acquisition under
the statutes of any such Tax authority, and (ii) will not take any position for
tax purposes which is inconsistent with such election.
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Adjustments to Purchase Price. The Bid Purchase Price
shall be adjusted as follows (subject to further adjustments, if any, pursuant
to Appendix I):
(a) increased by the Interim Net Operating Revenues if the amount of
the Interim Net Operating Revenues is negative and decreased by the Interim Net
Operating Revenues if the amount of the Interim Net Operating Revenues is
positive;
(b) increased by the amount of Interim Capital Expenditures;
(c) increased by the Closing Net Working Capital Amount if the amount
of the Closing Net Working Capital Amount is positive and decreased by the
Closing Net Working Capital Amount if the amount of the Closing Net Working
Capital Amount is negative;
(d) decreased by the Closing Imbalance Position if the amount of the
Closing Imbalance Position is negative (a net over produced position) and
increased by the Closing Imbalance Position if the amount of the Closing
Imbalance Position is positive (a net under produced position); and
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(e) increased by the Business Interest Amount, and, if applicable, any
amount payable pursuant to Section 2.3 hereof.
Section 10.2 Post-Closing Audit; Settlement Statement.
(a) Within 90 days after the Closing Date, Buyer shall prepare a
consolidated balance sheet of the Companies and the Subsidiaries as of the
Closing Date (the "Closing Date Balance Sheet"). Such Closing Date Balance Sheet
shall be prepared in accordance with GAAP as consistently applied by the
Companies and the Subsidiaries prior to the Closing Date.
(b) Within 30 days of the receipt of the Closing Date Balance Sheet
STEN shall prepare and deliver to Buyer a statement (the "Settlement Statement")
setting forth the Bid Purchase Price as adjusted pursuant to Section 10.1 and
showing the calculations thereof along with any objections that STEN may have to
the Closing Date Balance Sheet as audited. Buyer agrees to make available such
information as may be reasonably requested by STEN to enable STEN to prepare the
Settlement Statement.
(c) Within 15 days after Buyer's receipt of the proposed Settlement
Statement, Buyer shall deliver to STEN a written report containing any changes
that Buyer proposes to be made to such proposed Settlement Statement. The
Parties shall undertake in good faith to agree on the Settlement Statement no
later than 45 days after Buyer's receipt of the proposed Settlement Statement
and, if such agreement is so reached, such agreed upon amount shall be deemed
the Final Purchase Price (subject to further adjustments, if any, pursuant to
Appendix I). If Buyer fails to deliver a written statement with proposed changes
to the Settlement Statement within 30 days of receipt thereof, the Settlement
Statement tendered by STEN shall be deemed final and binding and the adjusted
amount of the Bid Purchase Price set forth therein shall be deemed to be the
Final Purchase Price. If Buyer and Majority Shareholder shall be unable to agree
on the Settlement Statement within 45 days of Buyer's receipt thereof, Ernst &
Young, L.L.P. shall be engaged to make its determination of the amount in
dispute (and only such amount). Each Party shall bear and pay one-half of the
fees and other costs charged by such accounting firm.
(d) If any accounting firm is engaged as provided in Section 10.2(c),
Majority Shareholder, STEN and Buyer agree to provide such accounting firm with
all books, Records and other information relevant to the determination of the
amount in dispute. Such accounting firm shall be instructed to use a materiality
standard as such firm may determine to be reasonable under the circumstances, in
light of the cost to be incurred and the amount in issue. Such accounting firm
shall be instructed to make such calculations as soon as practicable. The final
determination of any of the aforesaid components of the Bid Purchase Price
pursuant to this Section 10.2(d) shall be binding on the Parties hereto and the
adjusted amount of the Bid Purchase Price as determined by such accounting firm
shall be deemed to be the Final Purchase Price (subject to further adjustments,
if any, pursuant to Appendix I).
(e) The amount of the difference between the Preliminary Purchase Price
paid by Buyer to STEN at the Closing and the Final Purchase Price as determined
in accordance with this
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Section 10.2, together with interest thereon at a rate of 7 % per annum,
compounded monthly, from the Closing Date to the date of payment, shall be paid
within 5 Business Days after its final determination in immediately available
funds. Such payment shall be made by STEN to Buyer if the Preliminary Purchase
Price paid at Closing exceeds the Final Purchase Price determined in accordance
with this Section 10.2, and such payment shall be made by Buyer to STEN if the
Preliminary Purchase Price paid at Closing is less than the Final Purchase Price
determined in accordance with this Section 10.2.
Section 10.3 Preservation of Books and Records; Access. For a period of
seven years after the Closing Date, Buyer shall (a) preserve and retain the
Records and all other corporate, accounting, legal, auditing and other books and
Records of the Companies (including, without limitation, any documents relating
to any governmental or non-governmental actions, suits, proceedings or
investigations) relating to the conduct of the business and operations of the
Companies prior to the Closing Date and (b) permit STEN, Majority Shareholder
and their authorized representatives to have reasonable access thereto on the
same basis as applies to Buyer pursuant to Section 6.1(a) and to meet with
employees of Buyer and the Companies on a mutually convenient basis in order to
obtain additional information and explanations with respect to such books and
Records.
Section 10.4 Further Assurances. Each Party shall at any time, and from
time to time, upon the reasonable request by the other Party and without further
consideration, execute and deliver such instruments of transfer or other
documents and take such further action as may be reasonably required in order to
transfer to Buyer the Beneficial Interests or to perfect any other undertaking
or consummate or implement the transactions contemplated by this Agreement. In
addition, neither the Majority Shareholder nor STEN shall knowingly take any
action after the Closing Date that would limit, reduce or extinguish any
indemnity or right of contribution from a third party which may be available to
the Buyer, the Companies or the Subsidiaries, and, at the reasonable request of
Buyer, will use commercially reasonable efforts to take all necessary action to
preserve claims under any such indemnity.
Section 10.5 Casualty Loss. Without prejudice to Buyer's rights set
forth in Section 7.2(l), if, after the date hereof and prior to the Closing
Date, all or any part of the owned assets of the Companies or the Subsidiaries
shall be destroyed by explosion, fire or other casualty, and if the Closing
occurs, then with respect to the owned assets affected thereby, at Buyer's
request either (i) such part shall be treated as subject to a Title Defect and
handled under Appendix I or (ii) Majority Shareholder shall pay to Buyer at
Closing all sums paid and assign to Buyer all sums payable to Majority
Shareholder, STEN or any of their Affiliates (other than the Companies) by third
parties by reason of the destruction of such assets, and in addition, Majority
Shareholder and STEN shall assign, transfer and set over unto Buyer all of the
right, title and interest of Majority Shareholder or STEN in and to any unpaid
awards or other payments from third parties arising out of such destruction.
Neither Majority Shareholder nor STEN shall voluntarily comprise, settle or
adjust any amounts payable by reason of such destruction without the prior
written consent of Buyer.
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Section 10.6 Employees.
(a) From and after the Closing Date, except as otherwise set forth
herein, Buyer will cause the Companies or the Subsidiaries, as applicable, to
honor, in accordance with their terms and this Agreement, the Employment
Agreements. For a period of one year from the Closing Date, Buyer shall, or
shall cause the Companies and to Subsidiaries to, provide salary and welfare
benefits coverage to each Company Employee so that the salary and welfare
benefits coverage received by each such Company Employee is comparable in the
aggregate to the salary and welfare benefits coverage of each such Company
Employee immediately prior to the Closing Date. Thereafter, Buyer shall, or
shall cause the Companies and to Subsidiaries to, provide welfare benefits to
Company Employees under the Employee Plans of Buyer or Buyer's Affiliates or
other Employee Plans of the Companies so that the aggregate benefits to such
Company Employees are comparable to those that are applicable to
similarly-situated employees of Buyer. For the avoidance of doubt, none of
Buyer, the Companies nor the Subsidiaries shall be obligated to make available
to any Company Employee (i) any stay bonuses in addition to the obligations to
pay the stay bonuses referenced in Section 10.6(c) below or (ii) any Options or
other rights for equity ownership in the Buyer, the Companies or the
Subsidiaries. Buyer agrees, and agrees to cause the Companies, the Subsidiaries
or any of Buyer's Affiliates, to provide that, with respect to any Employee
Plans of Buyer, its Affiliates or the Companies, or the Subsidiaries, all
Company Employees shall receive recognition for their service before the Closing
Date with STEN, Majority Shareholder and their Affiliates, as well as
predecessors of the same, for purposes of seniority, eligibility to participate,
eligibility for benefits and vesting, with the exclusion of Buyer's pension
plan, in which case service will only be recognized for eligibility and vesting
purposes. Buyer agrees to waive, and to cause the Companies or any of Buyer's
Affiliates to waive, any and all applicable pre-existing condition exclusions
that would otherwise apply to any Company Employee under any Employee Plan of
Buyer, Buyer's Affiliates or the Companies that provides medical or dental
welfare benefits for which a Company Employee may be eligible to participate on
or after the Closing Date, and Buyer further agrees, and shall cause the
Companies and Buyer's Affiliates to agree, that any expenses incurred by or on
behalf of any Company Employees on or before the Closing Date during the plan
year or other coverage period in which such Company Employees are first provided
coverage under such Employee Plans shall be taken into account under the
Employee Plans of Buyer, Buyer's Affiliates and the Companies for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions.
(b) From and after the Closing Date, the Company Employees shall cease
to be eligible for any plan, fund, program, policy, practice, custom,
understanding, contract or arrangement of the Majority Shareholder, STEN or any
of its Affiliates.
(c) Set forth on Part I of Schedule 10.6 is the following, with respect
to the Employee Retention Plan: (i) the amount of base pay severance obligation
(including without limitation salary continuation and benefit continuation
obligations) pursuant to the Employee Retention Plan; (ii) the amount of stay
bonuses payable to each Company Employee; and (iii) the amount of incentive
compensation payable to employees pursuant to the Employee Retention Plan (the
"Transferred Severance Obligations"). Buyer acknowledges that Schedule 10.6
calculates each Company Employee's severance payment as if the termination date
was March 31, 2000, and that the actual date of termination will be used, along
with the provisions of the Employee Retention Plan, to calculate each Company
Employee's actual Transfer Severance
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Obligations. Buyer agrees to cause, or cause the Companies or the Subsidiaries,
to pay the Transferred Severance Obligations which may come due on or after the
Closing Date and to provide such Company Employees with such continued welfare
benefits coverage as specified in the Employee Retention Plan.
(d) Set forth on Part II of Schedule 10.6 is the following, with
respect to the Company Employees who are parties to the Employment Agreements:
the amount that would be paid to each such Company Employee assuming termination
of such Company Employee (the "Employment Agreement Severance Payments"). Buyer
acknowledges that Schedule 10.6 calculates each such Company Employee's
Employment Agreement Severance Payment as if the termination date was March 31,
2000, and that the actual termination date will be used, along with the
provisions of the Employment Agreements, to calculate such Company Employee's
Employment Agreement Severance Payment. Buyer agrees to cause, or to cause the
Companies or the Subsidiaries, to pay the Employment Agreement Severance
Payments which may come due on or after the Closing Date.
(e) If the Transferred Severance Obligations and/or Employment
Agreement Severance Payments indicated on Schedule 10.6 are inaccurate, Majority
Shareholder and STEN agree to indemnify the Buyer for all additional obligations
or severance payments by the Buyer, the Companies or the Subsidiaries resulting
from such inaccuracy.
(f) All Company Employees (except for those that are on long-term
disability as of the date hereof) shall become employees of the Buyer (or remain
employees of the Companies or the Subsidiaries) as of the Closing Date. None of
the Buyer, the Companies or the Subsidiaries shall have any obligation under
this Agreement to continue the employment of any Company Employee following the
Closing Date.
Section 10.7 Post-Closing Proceeds. If the Closing occurs, promptly
after its receipt thereof, Majority Shareholder and STEN agree to pay to Buyer
any and all proceeds received by Majority Shareholder or STEN after the Closing
Date that are attributable to the ownership of the assets of the Companies and
the Subsidiaries that are not Excluded Assets, but only to the extent that such
proceeds shall not have been the subject of a downward Final Purchase Price
adjustment.
Section 10.8 Change of Name. As of the Closing Date, the Companies
shall not utilize or otherwise operate under the name "Statoil Energy, Inc."
Section 10.9 Transition Agreement. On or before the Closing Date, STEN
and Buyer agree to enter into the Transition Agreement substantially in
accordance with the terms set forth on Exhibit C. Pursuant to such Transition
Agreement, Buyer will agree to buy certain assets set forth therein from STEN
and STEN will agree to provide Corporate Services provided therein to Buyer.
Section 10.10 Post-Closing Confidentiality Agreement. The Majority
Shareholder agrees that after the Closing Date, it shall, and shall cause its
Affiliates, officers, directors and employees to hold in confidence, any and all
proprietary, confidential or secret
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information or data of or in respect of the Companies or Subsidiaries and shall
not disclose, publish or intentionally use such information or data for any
purpose.
Section 10.11 The Hedge Book. At the Closing, Buyer and STEN agree to
enter into a Master Hedge Agreement substantially in accordance with the terms
set forth on Exhibit D (the "Master Hedge Agreement").
Section 10.12 Discharged Liens. Buyer, Majority Shareholder and STEN
each agree to use their Best Efforts to obtain the discharge of each of the
liens set forth on Schedule 1.3 on or before the first anniversary of the
Closing Date. Majority Shareholder and STEN each agree to indemnify Buyer for
any out-of-pocket costs incurred by Buyer or the Companies in connection with
obtaining the discharge of such liens.
Section 10.13 Non-Solicitation. For a period of six months from the
Closing Date (a) none of Majority Shareholder, STEN or any of their Affiliates
shall knowingly solicit to employ any of the Company Employees; and (b) none of
Buyer, the Companies, the Subsidiaries or any of their Affiliates shall
knowingly solicit to employ any officers, directors or employees of STEN other
than the Company Employees.
Section 10.14 Directors' and Officers' Insurance. On or prior to the
Closing Date, STEN shall either (i) purchase $2 million of tail directors' and
officers' insurance covering all directors and officers of the Companies and the
Subsidiaries prior to the Closing Date, with respect to actions taken prior to
the Closing Date, for a three year period after the Closing Date, or (ii)
indemnify Buyer, the Companies and the Subsidiaries in writing, reasonably
acceptable to Buyer, for any and all claims for indemnification by any directors
or officers of the Companies or the Subsidiaries prior to the Closing Date, with
respect to actions taken prior to the Closing Date, for a three year period
after the Closing Date.
ARTICLE XI
TERMINATION
Section 11.1 Termination. This Agreement may be terminated in the
following instances:
(a) upon written notice to the Buyer by Majority Shareholder, if
through no fault of STEN or Majority Shareholder, the Closing does not occur on
or before May 30, 2000; or
(b) upon written notice to the Majority Shareholder by Buyer, if
through no fault of Buyer, the Closing does not occur on or before May 30, 2000;
or
(c) any time by the mutual written agreement of Buyer and Majority
Shareholder.
Section 11.2 Effect of Termination. The following provisions shall
apply in the event of a termination of this Agreement:
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(a) If this Agreement is terminated by any Party for any reason except
pursuant to an express right to do so set forth herein, subject to the last
sentence of this Section 11.2(a), the other Parties shall be entitled to all
rights and remedies available to them in law or equity as a result of such
wrongful termination. Upon termination of this Agreement by Majority Shareholder
pursuant to an express right to do so set forth herein, STEN shall be free to
enjoy immediately all rights of ownership of the Beneficial Interests and shall
be free to sell, transfer, encumber and otherwise dispose of such Beneficial
Interests to any Party, without any restriction under this Agreement. In no
event shall any Party ever be entitled to punitive, consequential or speculative
damages, including, without limitation, lost profits.
(b) The Parties hereby agree that the provisions of this Section 11.2
and Sections 6.1(e), 6.2(c), 12.2, 12.3, 12.9 and 12.10 shall survive any
termination of this Agreement pursuant to the provisions of this Article XI.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Survival of Representations and Warranties. All
representations and warranties made pursuant to or in connection with the
Operative Documents shall survive the execution and delivery of this Agreement
and the Closing, but shall terminate on December 31, 2001 provided, that there
shall be no such termination with respect to any representation or warranty as
to which a bona fide claim has been asserted prior to such date.
Section 12.2 Amendment and Waiver. This Agreement may not be amended or
modified except by a written instrument signed by Majority Shareholder, STEN and
Buyer. The waiver by any Party of such Party's rights under this Agreement in
any particular instance or instances, whether intentional or otherwise, shall
not be considered as a continuing waiver which would prevent subsequent
enforcement of such rights or of any other rights.
Section 12.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
hand-delivered, delivered by facsimile with telephone confirmation of receipt or
sent by recognized overnight delivery service, return receipt requested, to the
following Parties at the following addresses or to such other Parties and at
such other addresses as shall be specified by like notice:
(a) if to Buyer:
Equitable Resources, Inc.
Suite 3300 - 000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Corporate Secretary
Telephone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxxxxx & Xxxxxx, L.L.P.
00 Xxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
(b) if to STEN Parent, STEN Holdings or Majority Shareholder:
Den norske stats oljeselskap a.s
N4035 Stavanger
Norway
Attn: Per Xxxxx Xxxxxxxxx
Telephone: 00 00 00 0000
Facsimile: 47 51 99 4606
with copies to:
Statoil North America Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Statoil Energy, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxx & Xxxxx, L.L.P.
The Warner
0000 Xxxxxxxxxxxx Xxx., X.X.
Washington, D.C. 200042400
Attn: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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All such notices shall be deemed to have been given and received on the second
Business Day after sending by recognized overnight delivery service.
Section 12.4 Specific Performance. The Parties acknowledge and agree
that the breach of the provisions of the Operative Documents by Buyer on the one
hand, or STEN and Majority Shareholder, on the other hand, could not be
adequately compensated with monetary damages, and the Parties hereto agree,
accordingly, that injunctive relief and specific performance shall be
appropriate remedies to enforce the provisions of the Operative Documents and
waive any claim or defense that there is an adequate remedy at law for such
breach; provided, however, that nothing herein shall limit the remedies herein,
legal or equitable, otherwise available and all remedies herein are in addition
to any remedies available at law or otherwise.
Section 12.5 Entire Agreement. The Operative Documents and those
documents expressly referred to herein and therein constitute the entire
agreement and understanding among the Parties and supersede all other prior
agreements and undertakings, both written and oral, among the Parties, or any of
them, with respect to the subject matter hereof and thereof.
Section 12.6 Severability. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the Parties shall be construed and enforced accordingly.
Section 12.7 Assignment; No Third Party Benefit. This Agreement may not
be assigned by any Party without the prior written consent of the other Parties;
provided, however that Buyer shall have the right to assign the right to receive
the Beneficial Interests at the Closing to any subsidiary of Buyer without any
other Party's consent upon 5 Business Days prior notice to STEN Parent. This
Agreement shall not run to the benefit of or be enforceable by any Person other
than a Party to this Agreement and, subject to the first sentence of this
Section 12.7, its successors and assigns. Except as expressly provided herein,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the Parties, and their respective successors and
permitted assigns, any rights, benefits, or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 12.8 Headings. The headings of the Sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
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Section 12.9 Choice of Law. The Parties agree that this Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, excluding any laws thereof which would direct application of law of
another jurisdiction.
Section 12.10 Expenses. Each of the Parties hereto shall pay, without
the right of reimbursement from the other, its respective expenses in connection
with the transactions contemplated by this Agreement.
Section 12.11 Counterparts. This Agreement may be executed in any
number of counterparts and by the Parties hereto in separate counterparts, with
the same effect as if all Parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
Section 12.12 Gender, Number, "including". When the context requires,
the gender of all words used herein shall include the masculine, feminine and
neuter and the number of all words shall include the singular and plural. The
terms "including" as used in this Agreement is used to list items by way of
example and shall be deemed to mean "including, but not limited to" wherever
used.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above.
EQUITABLE RESOURCES, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------------
Title: SVP and Chief Financial Officer
---------------------------------
STATOIL ENERGY, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
----------------------------------
Title: President
---------------------------------
STATOIL ENERGY HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
----------------------------------
Title: President
---------------------------------
STATOIL NORTH AMERICA INC.
By: /s/ Xxxxxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxxxxx X. Xxxx
----------------------------------
Title: Vice President, DNSO
Attorney-in-Fact, SNA
---------------------------------
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APPENDIX I
TITLE MATTERS
1. DEFINITIONS. This Appendix I incorporates the defined terms
contained in the Agreement and also includes the following definitions:
A. "Allocated Value" means the value allocated to each Oil and Gas
Property on Schedule I-A as set forth on Schedule I-A, reflecting the portion of
the Purchase Price associated with each Oil and Gas Property.
B. "Marketable Title" means such title as (a) will enable Buyer, as
STEN's successor in title, to receive from a particular Oil and Gas Property at
least the "Net Revenue Interest" for the Oil and Gas Properties set forth on
Schedule I-A as being associated with such Oil and Gas Property, without
reduction, suspension or termination throughout the productive life of xxxxx
located on the Oil and Gas Properties, except for any reduction, suspension or
termination caused by Buyer or its Affiliates after the Closing Date, or that
arises as a result of Excepted Liens or set forth in any Schedule to the
Agreement; (b) will obligate Buyer, as STEN's successor in title, to bear no
greater "Working Interest" than the Working Interest for each of the Oil and Gas
Properties identified on Schedule I-A as being associated with such Oil and Gas
Property, without increase throughout the productive life of such Well, except
for any increase caused by Buyer or its Affiliates after the Closing Date, or
that arises as result of Excepted Liens or set forth in any Schedule to the
Agreement; and (c) is free and clear of all Liens.
C. "Notice Date" means the date that is twelve months after the Closing
Date.
D. "Settlement Date" means the date that is twenty-four months after
the Closing Date.
E. "Title Defect" means any Lien, other than as specifically waived by
Buyer in writing, that is identified by Buyer to Majority Shareholder at any
time on or before the Notice Date, and that renders title to an Oil and Gas
Property (or any portion thereof) less than Marketable Title.
F. "Title Defect Amount" means the amount by which the Allocated Value
of an Oil and Gas Property has been reduced by a Title Defect, which shall be
determined taking into account the following to the extent applicable to the
particular Title Defect:
(a) If Buyer and the Majority Shareholder agree on the Title Defect
Amount, that amount shall be the Title Defect Amount;
(b) If the Title Defect is a lien, encumbrance or other charge which
is undisputed and liquidated in amount, then the Title Defect Amount shall be
the amount necessary to be paid to remove the Title Defect from the affected Oil
and Gas Property;
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63
(c) If the Title Defect represents a discrepancy between (i) the net
revenue interest for any Oil and Gas Property and (ii) the net revenue interest
or percentage stated on Schedule I-A, then the Title Defect Amount shall be the
product of the Allocated Value of such Oil and Gas Property multiplied by a
fraction, the numerator of which is the net revenue interest or percentage
ownership decrease and the denominator of which is the net revenue interest or
percentage ownership stated on Schedule I-A;
(d) If the Title Defect represents an obligation, encumbrance,
burden or charge upon or other defect in title to the affected Oil and Gas
Property of a type not described in subsections (a), (b) and (c) above, the
Title Defect Amount shall be determined by taking into account the Allocated
Value of the Oil and Gas Property so affected, the portion of such Oil and Gas
Property affected by the Title Defect, the legal effect of the Title Defect, the
potential economic effect of the Title Defect over the life of the affected Oil
and Gas Property, the values placed on the Title Defect by the Buyer and the
Majority Shareholder and such other factors as are necessary to make a proper
evaluation; and
(e) notwithstanding anything to the contrary, in this Appendix I,
the aggregate Title Defect Amounts attributable to the effects of all Title
Defects upon any given Oil and Gas Property shall not exceed the Allocated Value
of such Oil and Gas Property.
2. NOTICE OF TITLE DEFECTS. If Buyer elects to seek an adjustment to the
Purchase Price for any Title Defect, Buyer must notify Majority Shareholder of
any Title Defects at any time from the date of this Agreement until on or before
the Notice Date. Each notice of a Title Defect must be in writing and must
describe the alleged Title Defect, specify the Oil and Gas Property affected and
set forth Buyer's assessment of the Title Defect Amount. Buyer shall use its
Best Efforts to notify Majority Shareholder of any defect or other irregularity
in title as soon as practicable following discovery of any such defect. Buyer
shall not be entitled to any adjustment to the Purchase Price with respect to
any Title Defect that has not been noticed in writing to the Majority
Shareholder on or prior to the Notice Date. Notwithstanding the foregoing, (i)
Buyer may deliver to Majority Shareholder no later than 30 days after the first
anniversary of the Closing Date (the "Schedule 1.3 Notice Date") a list of all
liens set forth on Schedule 1.3 that have not been discharged and released of
record on or before the first anniversary of the Closing Date and such list
shall constitute a timely notice of Title Defect under this Paragraph 2;
provided, however, that Buyer shall have the right to deliver such list of
non-discharged liens on or after the Schedule 1.3 Notice Date, but in such case
the Settlement Date with respect to such liens shall be extended one day for
each day after the Schedule 1.3 Notice Date that such list is delivered to
Majority Shareholder; and (ii) with respect to any Title Defect timely noticed
to Majority Shareholder pursuant to clause (i) of this sentence, Majority
Shareholder shall, or shall cause STEN to make any payments due pursuant to
Paragraph 4 hereof irrespective of whether the aggregate Title Defect Amounts
shall have exceeded $2.5 million.
3. MAJORITY SHAREHOLDER'S ELECTION TO CURE. Majority Shareholder may elect to
cure the alleged Title Defect on or before the Settlement Date. If Majority
Shareholder elects to cure the Title Defect, then Majority Shareholder shall use
commercially reasonable efforts to cure such Title Defect prior to the
Settlement Date (the "Cure Period").
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0. ADJUSTMENTS TO FINAL PURCHASE PRICE FOR UNCURED TITLE DEFECTS.
A. If at the Settlement Date a Title Defect identified by Buyer in
accordance with this Appendix I remains uncured, then Majority Shareholder
shall, or shall cause STEN to, pay to Buyer on the Settlement Date (and
the Final Purchase Price shall be deemed to be reduced accordingly) an
amount equal to the aggregate of all Title Defect Amounts agreed to by
Buyer and Majority Shareholder or determined by arbitration as set forth
below for all such Title Defects, less the amount of any net revenues
attributable to such Oil and Gas Properties for the period after the
Closing Date received by Buyer and attributable to such Oil and Gas
Properties (provided that Majority Shareholder shall indemnify Buyer in
the event that Buyer, the Companies on the Subsidiaries become obligated
to return or refund any such amounts), plus interest on such amount at a
rate of 7% per annum, to the extent that such aggregate of all such Title
Defect Amounts exceeds $2.5 million, and then only to the extent of such
excess. There shall be no adjustment or reduction of the Final Purchase
Price for any Title Defects prior to the Settlement Date.
B. With respect to any Title Defect exceeding 50% of the Allocated
Value for the affected Oil and Gas Property and for which the Final
Purchase Price is to be adjusted pursuant to Xxxxxxxxx 0X, Xxxxxxxx
Shareholder shall have the right to either make the payment provided for
in Paragraph 4A or elect within ten (10) Business Days after the amount of
the adjustment to the Final Purchase Price is established to have Buyer
reconvey to STEN or Majority Shareholder, at Majority Shareholder's
election, the entire interest in the Oil and Gas Properties subject to the
Title Defect. Any such reconveyance shall be accomplished promptly after
notification of Majority Shareholder's election by means of an Assignment
substantially in the form of Exhibit B. Contemporaneously with the
delivery of the Assignment, the Majority Shareholder shall deliver to
Buyer (i) the entire Allocated Value for such Oil and Gas Property reduced
by the net revenue, if any, received by Majority Shareholder or STEN and
attributable to the Oil and Gas Property being reconveyed plus interest on
such amount at a rate of 7% per annum, and (ii) an assumption and
indemnity agreement pursuant to which Majority Shareholder shall assume
and indemnify Buyer, the Company and the Subsidiaries from and against,
and agree to perform and discharge any and all, liabilities and
obligations relating to the ownership or operation of such Oil and Gas
Property (excluding only such liabilities and obligations as may have been
created by the Companies or the Subsidiaries after the Closing and prior
to the date of such conveyance).
C. If it is determined prior to the Settlement Date that the actual net
revenue interest of Buyer in any Oil and Gas Property is greater than 105%
of the net revenue interest shown on Schedule I-A in such Oil and Gas
Property as of the Closing Date, then the value (based on the values set
forth in Schedule I-A) of the difference between the actual interest and
the net revenue interest shown on Schedule I-A shall be treated as an
unanticipated enhancement that shall be subtracted from any adjustments to
the Final Purchase Price for Title Defects made pursuant to Paragraphs 4A,
4B and 4C above.
5. DISPUTE RESOLUTION. If Majority Shareholder disagrees (i) that any issue with
respect to the title of any of the Oil and Gas Properties constitutes a Title
Defect or (ii) with the Title Defect Amount claimed by Buyer with respect to any
Title Defect, then Majority Shareholder
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65
shall notify Buyer of such dispute by the Settlement Date. If Buyer disputes
that any Title Defect has been cured by Majority Shareholder, it shall notify
Majority Shareholder by the Settlement Date. Buyer and Majority Shareholder
shall negotiate in good faith to resolve any dispute pursuant to this Paragraph
5 within thirty (30) days of notice. If a dispute continues to exist as to any
matter referred to in this Paragraph 5 thirty (30) days after notice, either
Buyer or Majority Shareholder may request arbitration of such dispute pursuant
to Exhibit A of the Agreement; provided however, the arbitrator shall be
instructed to render his decision within thirty (30) days of the date the matter
is submitted.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................................................1
ARTICLE II SALE AND PURCHASE OF BENEFICIAL INTERESTS.............................................13
Section 2.1 Sale and Purchase..........................................................13
Section 2.2 Bid Purchase Price.........................................................13
Section 2.3 Delayed Closing, Interest on Purchase Price................................13
Section 2.4 Transition Agreement Payment...............................................14
Section 2.5 Application of Sales Proceeds..............................................14
ARTICLE III CLOSING..............................................................................14
Section 3.1 Closing....................................................................14
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER....................................14
Section 4.1 Organization and Good Standing.............................................14
Section 4.2 Organizational Documents...................................................14
Section 4.3 Authority and Authorization................................................14
Section 4.4 No Conflicts; No Consents or Approvals.....................................15
Section 4.5 Investment Representations and Covenants...................................15
Section 4.6 Confidentiality............................................................16
Section 4.7 No Brokers or Finders......................................................16
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAJORITY SHAREHOLDER AND STEN.............16
Section 5.1 Organization, Good Standing and Qualification..............................16
Section 5.2 Organizational Documents...................................................17
Section 5.3 Capitalization.............................................................17
Section 5.4 Authority and Authorization................................................18
Section 5.5 No Conflicts; No Consents or Approvals.....................................18
Section 5.6 Compliance with Laws.......................................................19
Section 5.7 Financial Statements.......................................................19
Section 5.8 Absence of Certain Changes or Events.......................................19
Section 5.9 Public Announcement of Transaction.........................................19
Section 5.10 Guarantees.................................................................20
Section 5.11 Contracts..................................................................20
Section 5.12 Payment of Dividends, Stock Redemption Rights..............................21
Section 5.13 Litigation.................................................................22
Section 5.14 Leases.....................................................................22
Section 5.15 Tax Returns and Audits.....................................................22
Section 5.16 Employee Plans; Labor Matters..............................................23
Section 5.17 Insurance..................................................................25
Section 5.18 No Brokers or Finders......................................................26
Section 5.19 Regulatory Matters; Permits................................................26
Section 5.20 Additional Drilling Obligations............................................28
Section 5.21 Prepayment for Production..................................................28
Section 5.22 [Reserved].................................................................28
Section 5.23 Plugging and Abandonment of Xxxxx..........................................28
Section 5.24 Intellectual Property......................................................29
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Section 5.25 Preferential Rights........................................................29
Section 5.26 Condition of Equipment.....................................................29
Section 5.27 Royalties..................................................................29
Section 5.28 Absence of Undisclosed Liabilities.........................................29
Section 5.29 Accounts Receivable........................................................29
Section 5.30 Year 2000..................................................................29
Section 5.31 Reserves and Reserve Reports...............................................30
ARTICLE VI PRE-CLOSING COVENANTS.................................................................30
Section 6.1 Covenants of STEN and Majority Shareholder.................................30
Section 6.2 Covenants of Buyer.........................................................34
Section 6.3 Supplements to Schedules...................................................34
Section 6.4 Release of Guarantees, Bonds...............................................34
Section 6.5 Excluded Assets............................................................35
Section 6.6 Confidentiality Agreement..................................................35
Section 6.7 Governmental Approvals.....................................................35
Section 6.8 No Solicitations...........................................................35
ARTICLE VII CLOSING CONDITIONS...................................................................36
Section 7.1 Conditions to Obligations of STEN and Majority Shareholder.................36
Section 7.2 Conditions to Obligations of Buyer.........................................37
ARTICLE VIII INDEMNIFICATION.....................................................................39
Section 8.1 Indemnification by Majority Shareholder and STEN...........................39
Section 8.2 Indemnification by Buyer...................................................40
Section 8.3 Procedures for Third Party Claims..........................................40
Section 8.4 Limits and Special Provisions for Recovery for Indemnified Costs...........42
Section 8.5 Exclusive Remedy; Scope of Representations.................................42
ARTICLE IX TAX MATTERS...........................................................................43
Section 9.1 Preparation and Filing of Tax Returns......................................43
Section 9.2 Tax Allocation Arrangements................................................45
Section 9.3 Access to Information......................................................46
Section 9.4 Majority Shareholder Indemnification.......................................46
Section 9.5 Buyer Indemnifications.....................................................46
Section 9.6 Indemnification Procedures.................................................47
Section 9.7 Refunds or Credits.........................................................48
Section 9.8 Conflict...................................................................49
Section 9.9 Section 338(h)(10) Elections...............................................49
ARTICLE X ADDITIONAL AGREEMENTS..................................................................50
Section 10.1 Adjustments to Purchase Price..............................................50
Section 10.2 Post-Closing Audit; Settlement Statement...................................51
Section 10.3 Preservation of Books and Records; Access..................................52
Section 10.4 Further Assurances.........................................................52
Section 10.5 Casualty Loss..............................................................52
Section 10.6 Employees..................................................................53
Section 10.7 Post-Closing Proceeds......................................................54
Section 10.8 Change of Name.............................................................54
Section 10.9 Transition Agreement.......................................................54
Section 10.10 Post-Closing Confidentiality Agreement.....................................54
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Section 10.11 The Hedge Book.............................................................55
Section 10.12 Discharged Liens...........................................................55
Section 10.13 Non-Solicitation...........................................................55
Section 10.14 Directors' and Officers' Insurance.........................................55
ARTICLE XI TERMINATION...........................................................................55
Section 11.1 Termination................................................................55
Section 11.2 Effect of Termination......................................................55
ARTICLE XII MISCELLANEOUS........................................................................56
Section 12.1 Survival of Representations and Warranties.................................56
Section 12.2 Amendment and Waiver.......................................................56
Section 12.3 Notices....................................................................56
Section 12.4 Specific Performance.......................................................58
Section 12.5 Entire Agreement...........................................................58
Section 12.6 Severability...............................................................58
Section 12.7 Assignment; No Third Party Benefit.........................................58
Section 12.8 Headings...................................................................58
Section 12.9 Choice of Law..............................................................59
Section 12.10 Expenses...................................................................59
Section 12.11 Counterparts...............................................................59
Section 12.12 Gender, Number, "including"................................................59
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XXXXXXXX
Xxxxxxxx I Title Matters
EXHIBITS
Exhibit A Arbitration Procedures
Exhibit B Form of Assignment
Exhibit C Terms of Transition Agreement
Exhibit D Terms of Master Hedge Agreement
Exhibit E Environmental Letter
SCHEDULES
Schedule 1.1 Employment Agreements
Schedule 1.2 Equipment Purchase Payment Liens
Schedule 1.3 Other Excepted Liens
Schedule 1.4 Excluded Assets
Schedule 1.5 Excluded Liabilities
Schedule 1.6 Hedge Book
Schedule 1.7 Capital Expenditures
Schedule 4.4 Buyer Consents and Approvals
Schedule 5.1 The Companies' Ownership Interests in Subsidiaries and Other
Entities
Schedule 5.3 Capitalization of Subsidiaries; Repurchase Obligations
Schedule 5.5 Necessary Consents and Approvals
Schedule 5.6 Compliance with Laws
Schedule 5.8 Changes or Events
Schedule 5.10 Guarantees
Schedule 5.11 Contracts
Schedule 5.12 Payment of Dividends and Stock Redemption Rights
Schedule 5.13 Litigation
Schedule 5.14 Exception to Leases
Schedule 5.15 Tax Matters
Schedule 5.16 Employee Benefit Plans and Employees
Schedule 5.17 Insurance
Schedule 5.19 Environmental Compliance Issues
Schedule 5.20 Additional Drilling Obligations
Schedule 5.21 Prepayment for Production
Schedule 5.23 Plugging and Abandonment Obligations
Schedule 5.24 Intellectual Property
Schedule 5.25 Preferential Rights
Schedule 5.26 Condition of Equipment
Schedule 5.27 Royalties
Schedule 5.28 Undisclosed Liabilities
Schedule 6.4 Surety Obligations
Schedule 10.6 Severance Obligations
Schedule I-A Oil and Gas Properties Information; Allocated Values
