EXHIBIT 10.45
AGREEMENT FOR EXERCISE OF OPTIONS;
ASSIGNMENT OF OIL AND GAS INTERESTS AND
GRANT OF PRODUCTION PAYMENT
THIS AGREEMENT FOR EXERCISE OF OPTIONS; ASSIGNMENT OF OIL AND GAS INTERESTS
AND GRANT OF PRODUCTION PAYMENT (this "Agreement") is entered into effective as
of April 1, 2001 (the "Option Effective Date") by and between HS RESOURCES,
INC., a Delaware corporation having offices at 0000 Xxxxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxxxxx 00000 ("HSR") and WESTTIDE INVESTMENTS, LLC, a Delaware limited
liability company having offices at 00 Xxxxxxxxxx Xxxxxx, X00X, Xxxxxx,
Xxxxxxxxxxxxx 00000 ("Westtide").
Recitals
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A. HSR and Westtide are parties to various Purchase and Sale Agreements
dated January 13, 1997 (HSR-IX), December 15, 1997 (HSR-X), April 14, 1998
(HSR-XII), November 24, 1998 (HSR-XIV), September 14, 1999 (HSR-XV), January 28,
2000 (HSR-XVI), and June 14, 2000 (HSR-XVII) (collectively, the "Purchase
Agreements"). Any defined term used in this Agreement but not defined herein
shall have the meaning given to such term in the Purchase Agreements.
B. Pursuant to the Purchase Agreements, Westtide purchased certain oil and
gas interests in consideration for the following "Purchase Price" payments to
HSR on the date of the respective transaction, reduced by the payments noted for
partial exercises of the Options described below:
Transaction Purchase Price Partial Option Exercise Payments
----------- -------------- --------------------------------
HSR-IX $1,460,000
HSR-X $3,197,000 $42,580 (0-0-00, XXX)
HSR-XII $ 124,000 $ 2,825 (5-1-99, SWP)
HSR-XIV $ 397,000 $11,163 (5-1-99, SWP)
$13,080 (0-0-00, XXX)
HSR-XV $ 290,000 amendment drafted, not executed
HSR-XVI $ 391,000
HSR-XVII $ 296,000
C. Pursuant to the Purchase Agreements, HSR assigned the Subject Interests
to Westtide and reserved a production payment of 100% of the Net Profits for a
specific volume of produced Subject Hydrocarbons (the "Westtide Production
Payments") in the following documents entitled Wellbore Assignment of Oil and
Gas Leases with Reservation of Production Payment (collectively, the
"Assignments"):
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Effective Date Transaction Recording Date Reception # - CO County
-------------- ----------- -------------- ------------------------
1-1-97 HSR-IX 1-23-97 2530438 - Weld
00-0-00 XXX-X 0-0-00 0000000 - Xxxx
3-13-98 1780755 - Boulder
0-0-00 XXX-XXX 0-00-00 0000000 - Xxxx
11-15-98 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0500850 - Xxxxx
0-0-00 XXX-XX 00-0-00 0000000 - Xxxx
10-6-99 C0599856 - Xxxxx
1-15-00 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0645638 - Xxxxx
6-1-00 HSR-XVII 6-19-00 2775688 - Weld
Each Assignment sets forth the xxxxx and oil and gas leases covered by such
Assignment and such xxxxx are identified on Exhibit "B" attached hereto
(collectively, the "Xxxxx" as defined below), and such oil and gas leases are
identified on Exhibit "A" attached hereto (collectively, the "Leases" as defined
below).
D. Pursuant to the Purchase Agreements, Westtide granted to HSR the option
to repurchase all of Westtide's oil and gas interests in the various applicable
Xxxxx under the following documents entitled Option to Purchase Oil and Gas
Interests (collectively, the "Options"):
Effective Date Transaction Recording Date Reception # - CO County
-------------- ----------- -------------- ------------------------
1-1-97 HSR-IX 1-23-97 2530439 - Weld
00-0-00 XXX-X 0-0-00 0000000 - Xxxx
3-13-98 1780757 - Boulder
0-0-00 XXX-XXX 0-00-00 0000000 - Xxxx
11-15-98 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0500851 - Xxxxx
0-0-00 XXX-XX 00-0-00 0000000 - Xxxx
10-6-99 C0599857 - Xxxxx
1-15-00 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0645639 - Xxxxx
6-1-00 HSR-XVII 6-19-00 2775689 - Weld
E. Each of the Options set forth terms under which HSR can purchase the
respective oil and gas interests from Westtide, including but not limited to the
method to determine the price to exercise the Option and the dates during which
the Option is effective.
F. Pursuant to the Purchase Agreements, Westtide and HSR entered into
various Management Agreements for the operation of the Xxxxx, which are
evidenced by instruments entitled Memorandum of Management Agreement and Power
of Attorney, recorded as follows (the "Management Agreements"):
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Effective Date Transaction Recording Date Reception # - CO County
-------------- ----------- -------------- ------------------------
1-1-97 HSR-IX 1-23-97 2530440 - Weld
00-0-00 XXX-X 0-0-00 0000000 - Xxxx
3-13-98 1780758 - Boulder
0-0-00 XXX-XXX 0-00-00 0000000 - Xxxx
11-15-98 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0500852 - Xxxxx
0-0-00 XXX-XX 00-0-00 0000000 - Xxxx
10-6-99 C0599858 - Xxxxx
1-15-00 XXX-XXX 0-0-00 0000000 - Xxxx
0-0-00 C0645640 - Xxxxx
6-1-00 HSR-XVII 6-19-00 2775690 - Weld
G. Pursuant to the Purchase Agreements, six separate Recourse Promissory
Notes were granted by Westtide to HSR and were respectively dated December 15,
1997, April 14, 1998, November 24, 1998, September 14, 1999, January 28, 2000
and June 14, 2000 (collectively, the "Recourse Notes").
H. Pursuant to the Purchase Agreements, the members of Westtide entered
into a Contribution Agreement associated with each transaction to contribute
funds to Westtide to pay the amounts to be paid by Westtide under the respective
Purchase Agreement and Assignment for that transaction. FMR Corp. guarantied the
payment by such members of amounts due pursuant to the Contribution Agreements
by seven separate Guaranty Agreements dated January 13, 1997, December 15, 1997,
April 14, 1998, November 24, 1998, September 14, 1999, January 28, 2000 and June
14, 2000 (collectively, the "FMR Guaranties").
I. HSR desires to exercise all of the Options, terminate the Westtide
Production Payments, terminate the FMR Guaranties, cancel the Recourse Notes,
and terminate the Management Agreements, all pursuant to the terms and
conditions set forth in this Agreement, and Westtide desires to convey all of
its interests in the Xxxxx and Leases to HSR in accordance with the terms and
conditions of this Agreement, subject to the terms of the Option Exercise
Production Payment.
In consideration of the covenants and agreements set forth herein, the
parties hereto agree as follows:
Agreement
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I. Assignment
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In consideration of (i) the delivery from HSR to Westtide of the Option
Exercise Price Payment (as defined below), (ii) the conveyance of and payments
from HSR to Westtide under the Option Exercise Production Payment (as defined
below), and (iii) other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Westtide does hereby GRANT,
BARGAIN, SELL, TRANSFER, ASSIGN and CONVEY to HSR, its successors and assigns,
as of the Option Effective Date all of the following interests which Westtide
obtained in the Assignments (collectively, the "Interests"):
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1. All of Westtide's right, title and interest (including but not
limited to working interests, royalty interests and overriding royalty
interests) in and to the oil and gas leases and mineral interests described
in Exhibit "A," attached hereto and made a part hereof for all purposes,
and the xxxxx described in Exhibit "B," attached hereto and made a part
hereof for all purposes (the above described interest in such leases and
mineral interests being herein called the "Leases" and the above described
interest in such xxxxx being herein called the "Xxxxx"), subject to any
restrictions, exceptions, reservations, conditions, limitations, burdens,
contracts, agreements and other matters applicable to the Leases and the
Xxxxx;
2. All of Westtide's right, title and interest in and to, or derived
from, the following insofar and only insofar as same are attributable to
the Leases and the Xxxxx:
(a) All presently existing and valid oil, gas or mineral unitization,
pooling, operating and communitization agreements, declarations and orders
affecting the Leases and Xxxxx, with respect to the properties covered and
the units created thereby (the "Units");
(b) The personal property and fixtures that are appurtenant to the
Leases, the Xxxxx and the Units, including all xxxxx, casing, tubing,
pumps, separators, tanks, lines and other personal property and oil field
equipment on such Leases or Units;
(c) All presently existing and valid gas sales, purchase, gathering
and processing contracts and operating agreements, joint venture
agreements, partnership agreements, rights-of-way, easements, permits and
surface leases and other contracts, agreements, instruments, claims and
rights, only in relevant part to the extent and insofar as the same are
appurtenant to the Leases, Xxxxx and interests conveyed in the Units;
to have and to hold the Interests forever.
Westtide and HSR confirm (i) that HSR has given notice to Westtide which is
sufficient to satisfy the terms of the notice provisions under the Options, and
(ii) that the consideration delivered and received is in full satisfaction and
discharge of the Option Price with respect to the Interests and any and all
payments required under the Options for the Interests.
This assignment is made without representation or warranty of title to the
Interests except for matters arising by, through or under Westtide, but not
otherwise.
II. Payment and Closing
-------------------
1. Penalty Payments. Paragraph 1.a. of each of the Options establishes
certain penalty payments to exercise the Options prior to January 1, 2003
(the "Penalty Payments"). Upon the execution of this Agreement and the
conclusion of the Closing contemplated hereunder, HSR shall have no further
obligation to Westtide for the Penalty Payments.
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2. Option Price. Paragraph 5 of each of the Options establishes the
Option Price to exercise the Option. The Option Price is the estimated
current fair market value of Westtide's interest in the Interests
(post-Westtide Production Payment tail net of the Reversion Interest) to be
purchased. The parties agree that the current fair market value of
Westtide's interest in the Interests as of the Option Effective Date plus
the Penalty Payments is equal to the sum of the value of (i) the Option
Exercise Production Payment, and (ii) the Option Exercise Price Payment(as
defined below).
3. Option Exercise Production Payment. HSR hereby grants to Westtide a
production payment interest in and to the production of Subject
Hydrocrabons (including, but not limited to, any Subject Hydrocarbons
resulting from hydraulic fracture restimulation of the Xxxxx) from the
Leases, such that, commencing with the calendar quarter which includes the
Option Effective Date, HSR shall make payments to Westtide within sixty
(60) days following the end of each calendar quarter in an amount equal to
$0.8385 of each dollar of tax credits available to HSR under Section 29 of
the Internal Revenue Code of 1986, as amended (the "Code) as a result of
the sale of Subject Hydrocarbons produced from the Xxxxx during such
calendar quarter (determined without regard to limitations on HSR's use of
the credits imposed by Section 29(b)(6) of the Code and without regard to
whether HSR has sufficient income to actually use such credits or in fact
utilizes such credits), through that calendar quarter which ends on
December 31, 2002 (the "Option Exercise Production Payment"). Payments from
HSR to Westtide under the Option Exercise Production Payment shall be
limited to and made only from the proceeds of production from the Subject
Hydrocarbons. HSR shall have no obligation to make payments to Westtide on
any tax credits which may be available to HSR after December 31, 2002, even
if the provisions of Section 29 of the Code are extended beyond December
31, 2002. Payments on the Option Exercise Production Payment shall be
computed and made by HSR to Westtide in the same manner that Westtide was
required to make payments to HSR under the Purchase Agreements. Any
outstanding payment under the Option Exercise Production Payment which is
due and owing shall bear interest at the rate of eighteen percent (18%) per
annum, compounded daily, from the date the payment is due until the date
the payment is received by Westtide. The obligation to make payments on the
Option Exercise Production Payment shall survive the Closing of this
Agreement and shall continue until all of the payments due with respect to
the production of Subject Hydrocarbons from the Option Effective Date
through and until December 31, 2002 have been paid to and received by
Westtide. Upon receipt of all payments due under the Option Exercise
Production Payment, Westtide shall execute and deliver to HSR a recordable
instrument evidencing satisfaction and termination of the Option Exercise
Production Payment.
4. Closing and Assignment. The closing of the purchase of the
Interests pursuant to the exercise of the Options shall occur at the
offices of HSR on April 3, 2001 (the "Closing"). Upon full execution and
delivery of this Agreement, HSR will deliver by wire transfer a payment to
Westtide (the "Option Exercise Price Payment") in the amount of
$8,816,176.00. For the convenience of the parties hereto, this Agreement
and all related documents may be signed and transmitted to Xxxxx Xxxxxx &
Xxxxxx LLP prior to April 3, 2001, but shall be held in escrow and deemed
not delivered until the Closing occurs on April 3, 2001.
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III. Cancellation of Recourse Notes
------------------------------
HSR hereby cancels and terminates as of the Option Effective Date the
Recourse Notes. HSR delivers herewith to Westtide the originals of each of the
Recourse Notes, each marked "CANCELED, PAID IN FULL," evidencing the full and
complete satisfaction of the obligations thereunder by Westtide, and the waiver
and release hereunder by HSR of any unsatisfied obligations therein of Westtide.
IV. Termination of Westtide Production Payment Obligations
------------------------------------------------------
HSR hereby releases Westtide of all liability with respect to the Westtide
Production Payments due on the production of Subject Hydrocarbons occurring
after the Option Effective Date.
V. Termination of FMR Guaranties
-----------------------------
HSR hereby releases FMR Corp. of all liability for its obligations under
the FMR Guaranties, and HSR and Westtide hereby terminate the FMR Guaranties as
of the Option Effective Date.
VI. Termination of Management Agreements
------------------------------------
Westtide and HSR hereby terminate the Management Agreements; provided,
however, that all obligations of HSR to maintain insurance which identifies
Westtide as an additional insured shall continue through the Option Effective
Date, and provided further, that the obligation of HSR for indemnification of
Westtide under the Management Agreements shall survive the termination of the
Management Agreements. HSR hereby waives any and all claims and causes of action
it has or may have against Westtide under the Management Agreements and
acknowledges that its authority as Attorney-in-Fact of Westtide with respect to
the Interests under the respective Management Agreements is hereby extinguished.
VII. Representations and Covenants.
-----------------------------
1. HSR hereby ratifies and confirms all of its representations and
warranties under each Purchase Agreement regarding the qualification of the
Subject Hydrocarbons for the tax credits available under Section 29 of the
Code . The rights of Westtide under the Purchase Agreements shall survive
the Closing, and Westtide shall be entitled to enforce all of the remedies
under the Purchase Agreements for any failure of any of the Subject
Hydrocarbons to satisfy any such qualification requirements.
2. Notwithstanding the termination of the Management Agreements, HSR
covenants that for all Subject Hydrocarbons produced during the period from
the Option Effective Date until December 31, 2002, HSR will provide
Westtide with reports at the same time payments are made on the Option
Exercise Production Payment, and such reports shall be sufficient to
support the computation of the payment and the underlying tax credits
available to HSR during such quarter. Westtide shall have the right to
audit the books
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and records (including federal income tax returns) of HSR with respect to
the production and sales of Subject Hydrocarbons from the Xxxxx and Leases
and the tax credits associated therewith from the effective date of the
respective Purchase Agreement until December 31, 2004.
3. Within sixty (60) days after the Option Effective Date, HSR and
Westtide shall reconcile and set off the outstanding amounts due between
them on any and all (i) Prepaid Credit Amounts, (ii) Credit Payment Amounts
which have accrued and are due and owing based on sales of Subject
Hydrocarbons through March 31, 2001, and (iii) overpayments of Credit
Payment Amounts with respect to the Subject Hydrocarbons produced prior to
the Option Effective Date. The reconciliation of such amounts shall be
documented by a written statement signed by both parties, and the resulting
net payment after set off shall occur by wire transfer of immediately
available funds to the party to whom such net payment is due.
4. If at any time following the execution and delivery of this
Agreement but prior to July 1, 2002, HSR determines that it cannot utilize
the tax credits available under Section 29 of the Code with respect to the
sale of Subject Hydrocarbons, HSR and Westtide covenant to enter into good
faith negotiations for a period of thirty (30) days following HSR's written
notification to Westtide of such determination in an effort to monetize the
value of the tax credits available through December 31, 2002 on terms
substantially similar to those under the Purchase Agreements. Neither HSR
nor Westtide shall be bound to enter into any such agreement.
5. HSR represents and warrants that the Interests are not subject to
any preferential right, consent to assignment, or similar limitation on
transfer, except to the extent previously disclosed by HSR to Westtide
pursuant to the Purchase Agreements. HSR shall indemnify, defend, save and
hold harmless Westtide and its affiliates, officers, directors, successors
and assigns from any claim or cause of action related to or arising from
any preferential right, consent to assignment or similar limitation on
transfer affecting this Agreement and HSR further waives any claim or cause
of action it might have against Westtide in any way related to such
preferential right, consent to assignment, or similar limitation on
transfer.
VIII. Miscellaneous.
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1. The Credit Payment Amount overpayment provisions set forth in each
Purchase Agreement shall not be amended, waived or limited in any way by
the terms of this Agreement and the rights of Westtide under the Purchase
Agreements shall survive the Closing.
2. The parties hereto agree to execute and deliver to each other all
such other and additional instruments, notices and documents and to do all
such other and further acts as may be necessary to more fully effect the
intent of the parties contemplated herein.
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3. This Agreement sets forth the full and complete agreement of the
parties hereto with respect to the subject matter hereof, and this
Agreement may not be amended except by written document executed by both
HSR and Westtide.
4. This Agreement is binding upon and shall inure to the benefit of
HSR and Westtide and their respective successors and assigns; provided,
however, that the Option Exercise Production Payment shall remain as a
burden against the Leases until the production payment is satisfied
thereunder.
5. This Agreement may be executed in multiple counterparts, with each
counterpart being an original, and all counterparts together constituting
the Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
Attest: HS RESOURCES, INC.
By: /s/ XXXXX X. XXXXXXX By: /s/ XXXXX X. XXXXX
---------------------------------- ------------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxx
Title: Secretary Title: Chief Financial Officer
WESTTIDE INVESTMENTS, LLC
By its Manager,
Fontenelle, Inc.
By: /s/ XXXX X. XXXXXXXXXX
------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Attorney-in-Fact
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