STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "AGREEMENT") is made and entered into
this 26th day of July, 2001, among the parties set forth in EXHIBIT "A" hereto
(collectively, the "SELLERS" and individually a "SELLER"), Questar Market
Resources, Inc. (the "PURCHASER") and Shenandoah Energy Inc. (the "COMPANY").
RECITALS
A. WHEREAS, Sellers are, or will be at the Closing, the owners of 100% of
the equity securities, stock options, warrants and any other stock rights
presently outstanding, or issued immediately prior to the Closing, including
Common Stock, Series "A" Preferred Stock ("SERIES A") and Series "B" Preferred
Stock ("SERIES B") (collectively, the "SHARES") of the Company in the amounts
set forth in EXHIBIT "B"; and
B. WHEREAS, Purchaser desires to purchase all (100%) of Sellers' Shares
and Sellers desire to sell such Shares for the Aggregate Purchase Price
(defined below) in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT OF SALE AND PURCHASE OF SHARES. Subject to the terms and
conditions contained in this Agreement, Sellers shall sell to Purchaser and
Purchaser shall purchase from Sellers all of the Shares as further described on
EXHIBIT "B".
2. TIME AND PLACE OF CLOSING; PURCHASE PRICE.
a. CLOSING. The closing of this transaction shall be held at 9:00
a.m. on July 31, 2001 in the offices of the Company at 000 Xxxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, or on such other date, time or
place to be mutually agreed upon by the parties (hereinafter, the
"CLOSING" or "CLOSING DATE").
b. PURCHASE PRICE. The "AGGREGATE PURCHASE PRICE" for the Shares
shall be $324,000,000.00 less the Employee Bonus Amount to be allocated
among the Sellers as set forth on EXHIBIT "B".
3. DEPOSIT ON THE EXECUTION DATE. Purchaser will pay into an escrow
account (the "ESCROW Account") pursuant to an Escrow Agreement in the form of
EXHIBIT "C" (the "ESCROW AGREEMENT") at U.S. Bank (the "ESCROW AGENT") a
deposit of $10,000,000.00 in immediately available funds upon its execution of
this Agreement (the "DEPOSIT"). At the Closing, the Deposit with accrued
interest will be applied against the Aggregate Purchase Price. If the Closing
does not occur prior to August 10, 2001, the Deposit with accrued interest will
be refunded to Purchaser unless Closing fails to occur due to Purchaser's
breach of any of its obligations, covenants, representations or warranties
hereunder (and such breach was not cured within 10 days of written notice to
Purchaser of such breach), in which case the Deposit with accrued interest, in
lieu of any other damages, shall be allocated among the Sellers in accordance
with each Seller's Deposit Sharing Ratio after the payment to the Company of
all expenses incurred by the Company in connection herewith.
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4. SELLER'S REPRESENTATIONS AND WARRANTIES. Each Seller hereby severally
and not jointly represents and warrants to Purchaser, with respect to
itself/himself/herself, as follows:
a. ORGANIZATION AND STANDING. To the extent Seller is a
corporation, partnership, limited liability company or other business
entity formed under the laws of any state, such business entity is duly
organized, validly existing and in good standing under the laws of the
state of organization and in such other jurisdictions necessary for the
consummation of this Agreement.
b. POWER. Seller has all requisite power and authority to carry on
its business as presently conducted and to enter into this Agreement.
The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will
not, as of Closing, violate, or be in conflict with, any material
provision of its governing documents, when applicable, or any material
provision of any agreement or instrument to which it is a party or by
which it is bound, or to any judgment, decree, order, statute, rule or
regulation applicable to it.
c. AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite actions of the Seller.
This Agreement constitutes the legal, valid and binding obligation of the
Seller, and is enforceable in accordance with its terms, subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium and
other laws for the protection of creditors, as well as to general
principles of equity, regardless whether such enforceability is considered
in a proceeding in equity or at law.
d. TITLE TO SHARES. Seller owns, or at Closing will own, the Shares
shown next to its/his/her name on EXHIBIT "B" and, at Closing, will convey
to Purchaser good and marketable title to its/his/her Shares free and clear
of any and all liens, claims, encumbrances, other pledges or security
interests and all other defects of title or other matters whatsoever.
e. LIABILITY FOR BROKERS' FEES. Seller has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transaction contemplated by this Agreement for which
Purchaser shall have any responsibility.
5. SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Each
Seller represents and warrants to the Purchaser, severally and not jointly,
that, to the extent of such Seller's actual knowledge without inquiry, the
statements contained in this SECTION 5 are true as of the date of this
Agreement. With respect to Shell Capital Inc., The Prudential Insurance Company
of America, Chevron U.S.A. Inc. and Green Bay Packaging, Inc. the term "to the
extent of such Seller's actual knowledge" shall mean the actual knowledge
without inquiry of the representative(s) of such Seller sitting as a director of
the Company or as an observer to the board of directors of the Company on June
1, 2001. The Company also makes the same representations to the best of its
knowledge.
a. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of the
Company and its Subsidiaries (i) is duly incorporated or formed and validly
existing, under the laws of its state of incorporation or formation; and
(ii) is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required.
b. CAPITALIZATION. Except as set forth on EXHIBIT "B", which shall
include reference to the stock options and warrants described in SECTION
8(c)(i), there are no other authorized securities of the Company, including
any stock options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require
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the Company to issue, sell,or otherwise cause to become outstanding any of
its capital stock.There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company.
c. AFFILIATES. The Company does not have any subsidiaries or own
any capital stock in any other corporation except as set forth on
SCHEDULE 5(c).
d. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5(d) are the
following financial statements (collectively the "FINANCIAL STATEMENTS"):
(i) audited consolidated balance sheets of the Company as of December 31,
1999 and 2000, and the related consolidated statements of operations,
shareholders' equity, and cash flows of the Company for the year ended
December 31, 2000; and (ii) an unaudited consolidated balance sheet of the
Company as of May 31, 2001, and related consolidated statements of
operations and cash flows for the five months then ended (the "MOST RECENT
PERIOD END"). The Financial Statements at and for the five-month period
ended May 31, 2001, are herein referred to as the "MOST RECENT FINANCIAL
STATEMENTS." The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and present fairly, in all material
respects, the consolidated financial position of the Company as of such
dates and the results of operations for such periods, and are consistent
with the books and records of the operations for such periods, and are
consistent with the books and records of the Company; provided, however,
that the Most Recent Financial Statements are subject to normal year-end
adjustments and lack footnotes and other presentation items.
e. EVENTS SUBSEQUENT TO MOST RECENT PERIOD END. Since May 31, 2001,
there have not been any changes in the assets, condition or affairs,
financial or otherwise, of the Company and the Subsidiaries, taken as a
whole, which have had or will have, in the aggregate, a Material Adverse
Effect.
f. LEGAL COMPLIANCE. The Company and each of the Subsidiaries (i)
is in substantial compliance with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) and (ii) has or has timely applied for
all permits, licenses, certificates of authority, orders and approvals
of, and has made all filings and applications with federal, state, and
local regulatory bodies required to carry on its current operations in
the ordinary course of business, except where the failure to so comply
or to obtain or apply for such permits, licenses, certificates of
authority, orders or approvals or to make such filings or applications
would not have a Material Adverse Effect.
g. TAX MATTERS. The Company and each of the Subsidiaries has
properly filed all tax returns that it was required to file, if any, and
has paid all taxes shown thereon as owing.
h. MATERIAL AGREEMENTS. SCHEDULE 5(h) lists all contracts to which
the Company or any Subsidiary is a party, the performance of which will
involve consideration in excess of $1,000,000.00 per year (the "MATERIAL
AGREEMENTS"). The Company has made available to the Purchaser a complete
copy of each Material Agreement. With respect to each Material
Agreement, the Company is not in breach or default of the terms and
conditions of such agreement, except where such breaches or defaults
would not have a Material Adverse Effect.
i. LITIGATION. SCHEDULE 5(i) sets forth each instance in which the
Company or any Subsidiary (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, or (ii) is a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court
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or quasi-judicial or administrative agency of any jurisdiction, or (iii)
has been threatened to be sued or made a party to any such proceeding.
j. ENVIRONMENTAL MATTERS. The Company and the Subsidiaries have
obtained or have made application for all Environmental Approvals required
to carry on their current operations in the ordinary course of business and
all such Environmental Approvals are valid and in full force and effect;
and the Company and the Subsidiaries are in substantial compliance with all
such Environmental Laws, except where such defects or failures to obtain or
apply for Environmental Approvals or be in substantial compliance with
Environmental Laws would not, individually or in the aggregate, have a
Material Adverse Effect. There is no order or directive that relates to
environmental matters and that requires any work, repairs, construction or
capital expenditures with respect to the Company's or any Subsidiary's
assets. There is no demand or notice issued to the Company or any
Subsidiary with respect to the breach of any Environmental Laws pertaining
to the Company's assets that would reasonably cause a Material Adverse
Effect.
k. TRANSACTIONS WITH SELLERS. SCHEDULE 5(k) lists all contracts and
agreements between the Company or any Subsidiary, on one hand, and any
Seller or its affiliates on the other.
l. TITLE TO PETROLEUM AND NATURAL GAS RIGHTS. The Company directly
or indirectly through one of its Subsidiaries owns the NRI and WI set
forth in SCHEDULE 5(l), free and clear of all liens, charges,
encumbrances, conversion rights and adverse claims, except for Permitted
Encumbrances and the Company has not done or failed to do any act or
thing whereby any of the underlying leases may become subject to
termination, surrender, forfeiture, cancellation, or alienation, except
with respect to any such defects in ownership, action or failure to act
that would not, individually or in the aggregate, result in a Material
Adverse Effect.
m. HEDGING TRANSACTIONS, GAS IMBALANCES AND PREPAID GAS
OBLIGATIONS. SCHEDULE 5(m) sets forth all hedge transactions to which
the Company is a party and gas imbalances pertaining to the Company's
operations and assets. Except where identified as a negative imbalance
on SCHEDULE 5(m), the Company is not obligated to deliver oil, gas or
natural gas liquids without receiving full payment therefor. The Company
is not obligated by virtue of a prepayment arrangement, under any
contract or arrangement for the provision of services, to provide
services at some future time without then or thereafter receiving full
payment therefor.
n. OFFICE LEASE. SCHEDULE 5(n) contains an accurate description
of all office leases by which the Company is bound.
o. INSURANCE. SCHEDULE 5(o) describes all contracts of insurance
maintained by the Company, which are in full force and effect and all
premiums due and owing in connection with such policies have been paid. The
Company has given notice or has otherwise presented every material claim
known to the Company to be covered by insurance under its insurance
policies or contracts in a timely fashion.
p. LABOR MATTERS AND EMPLOYEE BENEFIT PLANS. Except as shown on
SCHEDULE 5(p) hereto, the Company is not a party to any agreement or
commitment for any obligation to make contributions under any pension plan,
retirement income plan, profit sharing plan or other plan or arrangement
providing for employee benefits compensation or severance obligations,
retention obligations, royalty plan, net profits plan, or any plan, program
or other arrangement providing for medical services or coverage, dental
care, life insurance or disability insurance to employees. Specifically,
the Company has complied in all material respects with the Employee
Retirement Income Security Act.
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q. CONDITION OF XXXXX. All major facilities and all producing, shut
in or suspended oil and/or gas xxxxx and all water and other disposal and
injection xxxxx operated by the Company or operated by operators acting on
the Company's behalf, have been drilled and, if completed, have been
completed, operated and produced in accordance with good and generally
accepted oil and gas field practices and in substantial compliance with all
applicable laws, rules and regulations in force at the time of such
activity, except where the failure to so drill, complete, operate or
produce would not, individually or in the aggregate, result in a Material
Adverse Effect.
r. NO NOTICES OF DEFAULT OR CLAIM FOR INDEMNIFICATION. No notice of
default by the Company or claim for indemnification against the Company or
any of the Subsidiaries has been made in writing or threatened in writing
by any person that would reasonably cause a Material Adverse Effect.
s. PAYMENT OF ROYALTIES AND TAXES. Except as set forth in SCHEDULE
5(s), all royalties and all ad valorem, property, production, severance and
similar taxes and assessments based on, or measured by, the Company's or
any Subsidiary's ownership of the production of petroleum substances from
the Company's or any Subsidiary's assets or the receipt of proceeds
therefrom that are payable by the Company or any Subsidiary and which have
accrued or will accrue prior to the Closing Date, to the extent required to
be paid prior to the Closing, have been or will be properly and fully paid
and discharged in the manner and at the time prescribed by all applicable
agreements and governmental regulations or, to the extent not required to
be paid prior to the Closing, have been accrued in the normal course of
business, subject to routine and ordinary adjustments and corrections.
t. CREDIT FACILITY. Since May 31, 2001 the Company has not made any
borrowings under its Credit Facility except for borrowings (i) in the
ordinary course of business or (ii) for items covered in the Company's 2001
budget.
5A. NO CLAIM OF INDEMNIFICATION UNDER MASTER AGREEMENT. Chevron U.S.A.
Inc. represents and warrants to Purchaser that as of the date hereof neither
it nor its affiliates (collectively, "CHEVRON") have asserted, and the Company
has not received, any notice of default or inquiry or claim for
indemnification arising out of or relating to the Company's indemnification
obligation under the Master Agreement for Sale and Contribution of Assets
dated as of August 10, 1999 by and among Chevron U.S.A. Inc., The Xxxxxxxx
Company and Shenandoah Energy Inc. (the "MASTER AGREEMENT") nor is Chevron
presently aware of any facts or circumstances that would reasonably cause it
to make any such notice or inquiry or claim.
6. PURCHASER'S REPRESENTATIONS. Purchaser represents and warrants to
Sellers and Company as of the date hereof and at Closing as follows:
a. ORGANIZATION AND STANDING. Purchaser is a corporation, formed
under the laws of the state of Utah, such business entity is duly
organized, validly existing and in good standing under the laws of such
state and in such other jurisdictions necessary for the consummation of
this Agreement.
b. POWER. Purchaser has all requisite power and authority to
carry on its business as presently conducted and to enter into this
Agreement. The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will
not, as of Closing, violate, or be in conflict with, any material provision
of its governing
5
documents, when applicable, or any material provision of any agreement or
instrument to which it is a party or by which it is bound, or to any
judgment, decree, order, statute, rule or regulation applicable to it.
c. AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite action of the Purchaser
and Questar Corporation. This Agreement constitutes the legal, valid and
binding obligation of the Purchaser, and is enforceable in accordance with
its terms, subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium and other laws for the protection of creditors,
as well as to general principles of equity, regardless whether such
enforceability is considered in a proceeding in equity or at law.
d. ACQUISITION NOT FOR DISTRIBUTION PURPOSES. Purchaser is
acquiring the Shares for investment purposes and not with a view to
distribution.
e. RESTRICTION ON TRANSFERS. Purchaser acknowledges that the
Shares are not registered under the Securities Act of 1933, as amended.
Purchaser will not sell, transfer or otherwise dispose of the Shares in
violation of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or the rules promulgated thereunder,
including Rule 144 under the Securities Act of 1933, as amended.
f. LIABILITY FOR BROKERS' FEES. Purchaser has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating
to the transaction contemplated by this Agreement for which any Seller
shall have any responsibility.
x. XXXX-XXXXX-XXXXXX. Purchaser has made a good faith determination
that the fair market value of the assets of the Company that would not be
exempt from the requirements of the Xxxx-Xxxxx-Xxxxxx Act pursuant to 16
C.F.R.Section.802.3 if acquired directly does not exceed $50 million.
7. COVENANTS.
a. INDEPENDENT EVALUATION. Purchaser is experienced and
knowledgeable in the oil and gas business. Purchaser is aware of risks
associated with the oil and gas business and, specifically, the Company's
business, operations and assets and has formed its own judgment as to the
value of the Shares. Purchaser is relying upon its own judgment and
decision in entering into and consummating the transaction. Between the
execution date and the Closing Date, Sellers shall use commercially
reasonable efforts to assist Purchaser in being afforded the opportunity to
examine the files, records, information and data regarding the business of
the Company and its Affiliates (the "RECORDS"), in addition to information
that is available in the public domain. Purchaser acknowledges and agrees
that neither the Company nor its Affiliates, directors, officers or
employees of any of them nor Sellers have made any representations or
warranties, express or implied, written or oral, as to the accuracy of the
Records. Except for the representations and warranties of Sellers contained
in this Agreement, Sellers have not made any representation or warranty to
Purchaser including any estimate with respect to the value of the assets of
the Company or reserves or any projections as to events that could or could
not occur. In entering into this Agreement, Purchaser acknowledges and
affirms that it has relied and will rely solely on the terms,
representations and warranties of this Agreement and upon its independent
analysis, evaluation and investigation of, and judgment with respect to,
the business, economic, legal, tax or other consequences of this
transaction including its own estimate and appraisal of the extent and
value of the petroleum, natural gas and other reserves attributable to the
assets of the
6
Company. Purchaser's representatives will be given full access and the
opportunity to conduct a Phase I Environmental Inspection and equipment
inventory and to visit with personnel and physically examine the assets and
operations of the Company. Except as expressly provided in this Agreement,
no Seller shall have any liability to Purchaser or its affiliates, agents,
representatives or employees resulting from any use, authorized or
unauthorized, of the Records or other information relating to the Company.
b. LIABILITY OF SELLERS SEVERAL AND NOT JOINT. Any liability of a
Seller arising hereunder shall be several to each Seller and not joint, and
no Seller shall be liable for the breach of any representation, warranty or
covenant hereunder by another Seller. The liability of each Seller
hereunder shall be limited in amount to the amount shown under the column
labeled "Distribution Amount" on EXHIBIT "B" for each such Seller. To the
extent a Seller incurs any liability hereunder together with all other
Sellers, the liability of such Seller shall not exceed the liability of all
Sellers hereunder multiplied by such Seller's Sharing Ratio.
c. EXERCISE OF OPTIONS AND WARRANTS. Each Option Holder or Warrant
Holder that is a party hereto agrees to exercise all of its Options and/or
warrants immediately prior to Closing and the amount owed to the Company as
a result of such exercise (which is set forth in the column labeled
"Exercise Amount" on EXHIBIT "B") shall be offset against such Option
Holder's or Warrant Holder's share of the Aggregate Purchase Price (which
is set forth in the column labeled "Purchase Price" on EXHIBIT "B"), so
that each Option Holder or Warrant Holder shall receive at Closing such
Option Holder's or Warrant Holder's share of the Distribution Amount (which
is set forth on EXHIBIT "B"), less any required tax withholdings with
respect to the Option Holders.
d. PURCHASER'S OBLIGATION TO CLOSE. Purchaser shall not have the
obligation to close unless 100% of the Shares (including Shares issued upon
the exercise of Options and warrants) are tendered at Closing.
e. TREATMENT OF OPTION POOL. The Sellers and the Company agree to
amend the Option Plan to provide for cash bonus payments to participants in
the Option Pool in an amount equal to the Employee Bonus Amount in lieu of
options that have been previously allocated to the Option Pool. The Company
shall determine the allocation of the Employee Bonus Amount to the
individual participants and shall provide such allocation to the Escrow
Agent at least two (2) business days prior to Closing.
f. 401(k) PLAN. The Company will terminate its 401(k) plan
immediately prior to Closing. Purchaser agrees that all employees of the
Company shall be eligible to participate and vest immediately in
Purchaser's parent's 401(k) plan (the "401(k) PLAN"), as of the Closing
Date, without any waiting period. Purchaser shall permit each employee of
the Company who was a participant in the Company's 401(k) plan to elect to
rollover or transfer his account balance under the Company's 401(k) plan to
the 401(k) Plan (excluding, however, any outstanding loans).
g. UPDATE OF EXHIBIT "B" PRIOR TO CLOSING. The Company shall
provide Purchaser an updated EXHIBIT "B" two (2) business days prior to
Closing to reflect any changes resulting from the adjustment of the Option
Price (if the Closing occurs on a date other than July 31, 2001). Each
Seller authorizes the Company to: (i) adjust EXHIBIT "B" as provided in
this SECTION 7(g); and (ii) enter into and to perform its obligations under
the Escrow Agreement.
8. OPERATION OF BUSINESS. From the date hereof until the Closing Date,
the Company will not, without the written consent of Purchaser (which consent
shall not be unreasonably withheld), except
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as expressly contemplated by this Agreement, engage in any practice, take any
action, or enter into any transaction outside the ordinary course of business.
Without limiting the generality of the foregoing, from the date hereof until the
Closing Date, the Company will not, without the written consent of Purchaser
(which consent shall not be unreasonably withheld), except as expressly
contemplated by this Agreement, do any of the following:
a. amend or otherwise change its charter or bylaws or equivalent
organizational documents;
b. make or commit to make any capital expenditure or group of
related capital expenditures in excess of $250,000.00 individually or
$1,000,000.00 in the aggregate that is not provided for in the Company's
2001 budget previously provided to the Purchaser;
c. issue, sell, pledge, dispose of, grant, encumber or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any
shares of capital stock of any class of the Company, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company, except for (A)
up to 346,761 Options that have been or will be granted to employees of the
Company prior to Closing pursuant to the Option Plan, as amended by SECTION
7(e), or (b) shares to be issued by the Company upon the exercise of the
stock options described in (A) above or the 193,548 warrants currently
outstanding, or (ii) any assets and properties material to the Company,
except for (A) sales of oil, gas, or natural gas liquids in the ordinary
course of business, or (B) pledges of assets and properties required by any
financing documents to which the Company is a party on the date hereof;
d. acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or any division thereof or any
material amount of assets, except for acquisitions of assets in the
ordinary course of business;
e. incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except borrowing in the ordinary course of
business pursuant to any existing credit agreements;
f. increase the compensation payable or to become payable to, or
grant any severance or termination pay to, its officers, employees,
directors or consultants, except pursuant to existing contractual
arrangements, or existing compensation plans, or enter into any employment,
consulting or severance agreement with, any director, officer or other
employee or consultant of the Company, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, compensation, stock
option (except the amendment to the Option Plan described in SECTION 7(e)),
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer, employee or
consultant except, in each case, for actions resulting from the normal
application of the Company's policies, consistent with past practice;
g. declare, set aside or pay any dividend or make any other
pro-rata distribution to shareholders; or
h. amend in any material respect any Material Agreement or
terminate any Material Agreement prior to the expiration of the term
thereof.
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9. OBLIGATIONS OF THE PARTIES AT CLOSING.
a. SELLERS' ACTIONS AT CLOSING. At Closing, each Seller shall
execute, acknowledge and deliver to Purchaser the following:
(i) TRANSFER OF SHARES. The original stock certificates
representing such Seller's Shares, duly endorsed (or accompanied by duly
executed stock powers);
(ii) CERTIFICATE. A certificate certifying that the
representations and warranties provided hereunder by such Seller are
accurate and true in all material respects as of the Closing as to such
Seller; and
(iii) OTHER NECESSARY INSTRUMENTS. All other instruments as may
be reasonably required to consummate the agreements of the parties
hereunder.
b. PURCHASER'S ACTIONS AT CLOSING. At Closing, upon the tendering
of 100% of the Shares,Purchaser shall:
(i) PAYMENT AT CLOSING. Deliver the remaining portion of the
Aggregate Purchase Price (as adjusted pursuant to SECTION 3 above),
less the Option Exercise Amount and the Warrant Exercise Amount, into
the Escrow Account together with distribution instructions executed by
the Company in accordance with EXHIBIT "B";
(ii) PAYMENT OF EMPLOYEE BONUS AMOUNT. Deliver the Employee
Bonus Amount into the Escrow Account together with the distribution
instructions executed by the Company; and
(iii) CERTIFICATE. Deliver a certificate certifying that the
representations and warranties provided hereunder by the Purchaser are
accurate and true in all material respects as of the Closing.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants contained herein shall expire at Closing except that
(i) those contained in SECTIONS 4, 6, 7 AND 12 shall survive Closing and (ii)
those contained in SECTIONS 5 AND 5A shall survive for a period of six months
after Closing. No claim or cause of action shall be maintained based upon any
such representation, warranty or covenant after its expiration.
11. TERMINATION OF AGREEMENT. This Agreement may be terminated as provided
below:
a. by mutual written consent of the Purchaser and the Majority of
Sellers at any time prior to the Closing;
b. the Purchaser may terminate this Agreement by giving written
notice to Sellers and the Company at any time prior to the Closing (i) in
the event any Seller or the Company has breached any representation,
warranty, or covenant contained in this Agreement in any material respect,
the Purchaser has notified the Sellers and the Company of the breach, the
breach has continued without cure for a period of 10 days after the notice
of breach and the breach has resulted or is likely to result in a Material
Adverse Effect, or (ii) if the Closing shall not have occurred on or before
August 10, 2001, by reason of the failure of any condition precedent
hereunder (unless the failure results primarily from Purchaser itself
breaching any representation,
9
warranty, or covenant contained in this Agreement); or (iii) in the event
100% of the Shares (including Shares that will be issued upon the exercise
of the Options or warrants) are not tendered prior to August 10, 2001; or
c. the Majority of Sellers may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing (i) in the
event the Purchaser has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, the Sellers have
notified the Purchaser of the breach, and the breach has continued without
cure for a period of 10 days after the notice of breach, or (ii) if the
Closing shall not have occurred on or before August 10, 2001, by reason of
the failure of any condition precedent hereunder (unless the failure
results primarily from at least a Majority of Sellers or the Company
breaching any representation, warranty, or covenant contained in this
Agreement).
If any Party terminates this Agreement pursuant to this Section, all
rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except, in the case of termination
resulting from a breach by any Party, for any liability of the Party in such
breach). If this Agreement is terminated for any cause other than Purchaser's
breach hereof, Sellers shall refund the Deposit to Purchaser as provided in the
Escrow Agreement, with any interest actually accrued thereon.
12. GENERAL PROVISIONS.
a. ENTIRE AGREEMENT. This Agreement together with the Exhibits
contains the entire understanding of the Parties with regard to the subject
matter hereof and no warranties, representations, promises or agreements
have been made between the Parties other than as expressly herein set
forth. This Agreement supersedes any previous agreement or understanding
between the Parties and cannot be modified or amended except in a writing
executed by the Purchaser and the Majority of Sellers.
b. BINDING EFFECT. Upon execution, this Agreement shall be binding
and fully enforceable and shall inure to the benefit of the Parties hereto,
their successors, assigns, personal representatives and heirs.
c. NOTICES. All notices as may be required by this Agreement shall
be deemed given if delivered personally or sent by facsimile during normal
business hours of the recipient, the next business day if sent by overnight
courier, or upon receipt if sent by U.S. Mail to the respective parties at
the addresses set forth below:
To Sellers: See EXHIBIT "A"
To Purchaser: Questar Market Resources, Inc.
000 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
ATTN: X. X. Xxxxxxx
To Company: Shenandoah Energy Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
ATTN: Xxxxxxxx X. Xxxxxx
d. SEVERABILITY. In the event that any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid
by any court of competent jurisdiction, the
10
validity and enforceability of the remaining provisions, or portions
thereof, shall not be affected thereby and effect shall be given to the
intent manifested by the provisions, or portions thereof, held to be
enforceable and valid.
e. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Utah without regard to its choice of law
provisions.
f. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall be considered an original and
an enforceable agreement.
g. NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the others of any material breach of any of its representations
and warranties contained herein.
h. EXCLUSIVITY. Prior to the Closing or the termination of this
Agreement, Sellers will not (and the Sellers will not cause or permit the
Company to) solicit, initiate, or encourage the submission of any proposal
or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of the Company (including
any acquisition structured as a merger, consolidation, or share exchange).
i. POST-CLOSING COVENANTS. After Closing, if any further action is
necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party. If any Party is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with any
transaction on or prior to the Closing Date involving the Company, each of
the other Parties shall cooperate with it and its counsel in the defense or
contest, all at the sole cost and expense of the contesting or defending
Party.
j. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the Purchaser and the Company; provided, however, that any
Party may make any public disclosure it believes in good faith is required
by applicable law, or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).
k. NO THIRD PARTY BENEFICIARIES. Except as provided in SECTION
7(e),this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted
assigns.
l. EXPENSES. Notwithstanding anything contained herein, all fees,
costs, and expenses for investment advisors, attorneys, and accountants
retained by the Company to facilitate the transactions contemplated by this
Agreement shall be paid by the Company. All fees, costs, and expenses
incurred by the Purchaser in connection with the transactions contemplated
by this Agreement shall be paid by the Purchaser.
m. LIMITATION OF DAMAGES. There shall be no liability under this
Agreement for consequential, special, punitive or exemplary damages.
11
13. DEFINITIONS.
a. "Affiliates" means the Persons listed on SCHEDULE 5(c).
b. "Aggregate Purchase Price." This term shall have the meaning
set forth in SECTION 2.
c. "Closing." This term shall have the meaning set forth in
SECTION 2.
d. Closing Date." This term shall have the meaning set forth in
SECTION 2.
e. "Common Stock Purchase Warrant Agreements" means, collectively,
(i) the Common Stock Purchase Warrant Agreement dated December 30, 1999
between the Company and The Prudential Insurance Company of America and
(ii) the Common Stock Purchase Warrant Agreement dated December 30, 1999
between the Company and Shell Capital Inc.
f. "Company." This term shall have the meaning set forth in
Paragraph A.
g. "Credit Facility" means that certain Senior Secured Revolving
Credit Agreement dated November 27, 2000, by and among First Union National
Bank, U.S. Bank National Association, BNP Paribas, the Senior Lenders
Signatory thereto and the Company.
h. "Deposit." This term shall have the meaning set forth in
SECTION 3.
i. "Deposit Sharing Ratio" shall be as set forth in EXHIBIT "B".
j. "Employee Bonus Amount" shall equal the number of shares
(56,450) that would otherwise have been issued to the Option Pool pursuant
to the Option Plan, but for the amendment of the Option Plan as described
in SECTION 7(e), multiplied by the difference between the Stock Value and
the Option Price on the Closing Date. The Employee Bonus Amount shown on
EXHIBIT "B" shall be updated by the Company and provided to Purchaser two
(2) business days prior to Closing.
k. "Environmental Approvals" means all applicable permits, licenses
and approvals required by governmental authorities pursuant to the
Environmental Laws with respect to the use of a property or operation of a
business.
l. "Environmental Laws" means any valid and applicable federal,
state or local law, statute, or ordinance, in effect as of the date hereof,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
emissions, discharges, releases or threatened releases of hazardous
materials. Environmental Laws include, but are not limited to: the
Occupational Safety and Health Act; the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980; the Resource
Conservation and Recovery Act; the Toxic Substances Control Act; the Clean
Water Act; the Clean Air Act; the Federal Water Pollution Control Act; the
Oil Pollution Control Act; the Endangered Species Act; and the Safe
Drinking Water Act, as such acts may have been amended or supplemented from
time to time, the
12
state and local counterparts or equivalents of all such acts, and all
rules, regulations and orders adopted under any such statutes.
m. "Escrow Account". This term shall have the meaning given to it
in SECTION 3.
n. "Escrow Agent". This term shall have the meaning given to it in
SECTION 3
o. "Escrow Agreement". This term shall have the meaning given to it
in SECTION 3.
p. "GAAP" means United States generally accepted accounting
principles in effect from time to time.
q. "Majority of Sellers" means Sellers representing sixty-six and
two-thirds percent of the total number of Shares of Common Stock (including
Common Stock to be issued upon the exercise of all warrants and Options),
Series A Preferred Stock, and Series B Preferred Stock.
r. "Material Adverse Effect" means any material adverse effect on
the business, operations, assets, or financial condition of the Company and
its Affiliates, taken as a whole, except for any such effects resulting
from changes affecting the United States economy, financial and capital
markets or the oil and gas industry in general, or changes in the prices
generally paid for oil, natural gas or equivalents.
s. "Material Agreements." This term shall have the meaning set
forth in SECTION 5(h).
t. "NRI" means a fractional or percentage interest in and to all
hydrocarbons produced from or allocated to a well or unit after deduction
of all lessors royalties, overriding royalties, and other burdens and
payments out of production that burden such fractional or percentage
interest in such well or unit.
u. "Option" or "Options" shall have the same meaning as set forth
in the Option Plan.
v. "Option Exercise Amount" shall be determined by multiplying the
number of Options and former options allocated to the Option Pool (403,211)
by the Option Price on the Closing Date. The Option Exercise Price and the
Option Exercise Amount shown on EXHIBIT "B" shall be updated by the Company
and provided to Purchaser two (2) business days prior to the Closing.
w. "Option Holder" shall have the same meaning as set forth in the
Option Plan.
x. "Option Plan" shall mean the Company's 2000 Stock Option Plan,
as amended.
y. "Option Pool" shall have the same meaning as set forth in the
Option Plan.
z. "Option Price" shall have the same meaning as set forth in the
Option Plan. If Closing occurs on July 31, 2001, the Option Price shall
equal $67.8648 per share; the Option Price shall be redetermined in
accordance with the Option Plan if Closing occurs at a later date.
13
aa. "Party" and "Parties" shall mean Questar Market Resources, Inc.,
the Company and each Seller as reflected on EXHIBIT "A".
bb. "Permitted Encumbrances" means the following:
(i) liens for taxes not yet due or, if due, being challenged
in good faith by appropriate proceedings;
(ii) materialmen's, mechanics', and other similar liens or
charges arising in the ordinary course of business for obligations
that are not delinquent and that will be paid or discharged in the
ordinary course of business or, if delinquent, that are being
contested in good faith in the ordinary course of business;
(iii) easements, rights-of-way, servitudes, permits, surface
leases, and other rights in respect of surface operations that do not
materially interfere with the Company's operations of the portion of
the Company property burdened thereby;
(iv) liens arising under operating agreements, unitization, and
pooling agreements, orders and statutes and production sales
contracts securing amounts not yet due or, if due, being contested in
good faith in the ordinary course of business;
(v) royalties, overriding royalties, net profits interests,
production payments, reversionary interests, and similar interests
that do not decrease the Company's NRI below the NRI shown in
SCHEDULE 5(l), or increase the Company's WI above the WI shown in
SCHEDULE 5(l), without at least a proportionate increase in the
Company's NRI;
(vi) conventional rights of reassignment requiring notice to
the holders of the rights prior to surrendering or releasing a
leasehold interest;
(vii) calls on production exercisable only at prices
substantially equivalent to then-current fair market value;
(viii)all rights to consent by, required notices to, filings
with, or other actions by any local, county, state, federal or tribal
governmental bodies, authorities or agencies in connection with the
transactions contemplated by this Agreement, if the same are
customarily sought subsequent to such transactions;
(ix) the terms and conditions of the Material Agreements to the
extent such terms and conditions do not decrease the Company's NRI
below the NRI shown on SCHEDULE 5(l), or increase the Company's WI
above the WI shown in SCHEDULE 5(l) without a corresponding
proportionate increase in the Company's NRI; and
(x) liens and security interests arising under the Company's
Credit Facility.
cc. "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock
company, trust, enterprise, unincorporated organization, or
governmental entity.
dd. "Phase I Environmental Inspection" means an assessment of the
Company's compliance with Environmental Laws consisting of
examination of the
14
Company's files and public documents, interviews of personnel of
the Company and of other appropriate persons, visual inspection
of Company property, and NORM and asbestos surveys.
ee. "Shares." This term shall have the meaning set forth in
Paragraph A.
ff. Subsidiaries" means all Affiliates.
gg. Sharing Ratio" shall be as set forth in EXHIBIT "B".
hh. "Stock Value" shall mean the consideration received for one (1)
share of Common Stock under this Agreement as shown next to the
"Price Per Share" column on EXHIBIT "B".
ii. "Warrant Exercise Amount" is $1,935.48, which is determined
pursuant to the Common Stock Purchase Warrant Agreements by
multiplying the total number of warrants issued thereunder
(193,548) times the Initial Exercise Price ($0.01 per share) as
such term is defined under the Stock Purchase Warrant
Agreements.
jj. "Warrant Holder" shall mean a holder of warrants issued pursuant
to the Common Stock Purchase Warrant Agreements.
kk. "WI" means a fraction or percentage of the costs and expenses
associated with the maintenance, exploration, development,
operation and abandonment of a well or unit.
PURCHASER:
QUESTAR MARKET RESOURCES, INC.
By:
---------------------------------------------------
Name: X. X. Xxxxxxx
Title: President & CEO
Date: July 26, 2001
16
COMPANY:
SHENANDOAH ENERGY INC.
By:
---------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President & CEO
Date: July ___, 2001
17
SELLER #1:
ADVANCE XXXX SUB COMPANY
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
18
SELLER #2:
XXXXXX X. XXXXXXXX, III, AN INDIVIDUAL
By:
---------------------------------------------------
Name: Xxxxxx X. Xxxxxxxx, III
Date: July ___, 2001
19
SELLER #3:
CHEVRON U.S.A. INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
20
SELLER #4:
XXXXXX X. XXXXXXXX, III REVOCABLE TRUST
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
21
SELLER #5:
XXXXXXXX X. XXX, AN INDIVIDUAL SHAREHOLDER AND AN OPTION HOLDER
By:
---------------------------------------------------
Name: Xxxxxxxx X. Xxx
Date: July ___, 2001
22
SELLER #6:
GREEN BAY PACKAGING, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
23
SELLER #7:
XXXXXXX XXXXXXXX TRUST #1
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
24
SELLER #8:
XXXXXXX XXXXXXXX TRUST #2
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
25
SELLER #9:
XXXXXXX X. XXXXXXXX REVOCABLE TRUST
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
26
SELLER #10:
M&R FAMILY LIMITED PARTNERSHIP
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
27
SELLER #11:
THE XXXXXXX FAMILY TRUST
By:
---------------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Trustee
Date: July ___, 2001
and
By:
---------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
Date: July ___, 2001
28
SELLER #12:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXXXX XXXXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
29
SELLER #13:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXX XXXXXXXX XXXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
30
SELLER #14:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXXXXXX XXXXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
31
SELLER #15:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXXXX XXXXXXXX XXXXXXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
32
SELLER #16:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXXXX XXXXXXXX XXXXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
33
SELLER #17:
XXXXXX X. XXXXXXXX TRUST NO. 3 - XXXXX XXXXXXXX XXXXXX
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
34
SELLER #18:
XXXXXXXX ENERGY COMPANY, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
35
SELLER #19:
XXXXXXXX XXXXXXXX XXXXXXXX MARITAL TRUST
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
36
SELLER #20:
XXXXXXXX XXXXXXXX XXXXXXXX TRUST
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
37
SELLER #21:
XXXXX X. XXXXX FAMILY TRUST
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
38
SELLER #22:
SHELL CAPITAL INC.
AS A SHAREHOLDER AND A WARRANT HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
39
SELLER #23:
THE XXXXXX TRUST DATED SEPTEMBER 8, 1999
By:
---------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Co-Trustee
Date: July ___, 2001
XXXXXXXX X. XXXXXX, AN OPTION HOLDER
By:
---------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Date: July ___, 2001
40
SELLER #24:
XXXXXX X. XXXXXXXXXXX, AN INDIVIDUAL
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
41
SELLER #25:
XXXXX X. XXXXXXXX XXXXXXX TRUST NO. 1
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
42
SELLER #26:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AS A SHAREHOLDER AND A WARRANT HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date: July ___, 2001
43
SELLER #27:
XXXXXX XXXXXX XXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
44
SELLER #28:
XXXXXX X. XXXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
45
SELLER #29:
XXXX X. XXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
46
SELLER #30:
XXXXX X. XXXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
47
SELLER #31:
XXXX X. XXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
48
SELLER #32:
XXXXX X. XXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
49
SELLER #33:
XXXXXXXXXXX X. XXXXXX, AN INDIVIDUAL OPTION HOLDER
By:
---------------------------------------------------
Name:
-------------------------------------------------
Date: July ___, 2001
50
