EXHIBIT 10.27
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "Agreement") dated the 1st day of June,
1999, is by and between ST. ▇▇▇▇ ▇▇▇▇ & EXPLORATION COMPANY, a Delaware
corporation ("St. ▇▇▇▇"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ AS TRUSTEE OF THE CLAY ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ TRUST, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, all of whom are together referred to herein as the
"Stockholders" and who own all of the capital stock of ▇▇▇▇▇ Petroleum
Corporation, a Montana corporation ("▇▇▇▇▇").
WHEREAS, St. ▇▇▇▇ desires to acquire all of the capital stock of ▇▇▇▇▇
from the Stockholders in exchange for shares of the common stock, par value of
$0.01 per share, of St. ▇▇▇▇ ("St. ▇▇▇▇ Stock") as hereinafter provided, and the
Stockholders desire to effect such exchange; and
WHEREAS, St. ▇▇▇▇ and the Stockholders desire that the transactions
provided for herein shall qualify as a reorganization pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE 1
DEFINITIONS; HEADINGS
1.01 Defined Terms. As used in this Agreement, terms defined in the
preamble and recitals of this Agreement have the meanings set forth therein, and
the following terms have the meanings set forth below:
(1) "Affiliates" mean Panterra, Quanterra Partnership and Quanterra
Corporation as subsequently defined.
(2) "Closing" has the meaning ascribed to such term in Section 2.03.
(3) "Code" means the Internal Revenue Code of 1986, as amended.
(4) "Consideration" means those shares of St. ▇▇▇▇ Stock set forth
on Schedule 1.01(4) which have been calculated in accordance with that
certain letter dated March 2, 1999, from St. ▇▇▇▇ to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as
amended by oral understanding which provides for the use of a five year
NYMEX strip pricing run as opposed to the two year NYMEX price strip
stated in the letter. This letter provides that the number of shares of
St. ▇▇▇▇ Stock that the Shareholders shall receive is based on a
proportionate net asset value comparison of St. ▇▇▇▇ with ▇▇▇▇▇ and its
Affiliates. This comparison is expressed by using a formula wherein X (the
number of shares of St. ▇▇▇▇ Stock that the Stockholders are to receive)
is the numerator of a fraction and the number of shares of St. ▇▇▇▇ Stock
issued and outstanding is the denominator of the fraction, and such
fraction equals a fraction in which the numerator is the net asset value
of ▇▇▇▇▇ and its Affiliates and the denominator is the net asset value of
St. ▇▇▇▇. Net asset value has been determined in accordance with the above
referenced letter subject to the referenced amended hydrocarbon pricing.
(5) "Environmental Laws" mean all federal, state and local rules and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(6) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(7) "GAAP" means generally accepted accounting principles
consistently applied.
(8) "Governmental Authority" means any federal, state, or local
court, arbitration tribunal or governmental department, board, commission,
bureau, agency, authority or instrumentality.
(9) "Hazardous Materials" mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable,
urea-formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing
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polychlorinated biphenyls (PCBs); (b) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
Environmental Law; (c) naturally occurring radioactive material (NORM);
and (d) any other chemical, material, substance or waste, exposure to
which is prohibited, limited or regulated by any Governmental Authority in
a jurisdiction in which ▇▇▇▇▇ operates.
(10) "Knowledge" as used (i) with respect to St. ▇▇▇▇ shall mean
those facts that are actually known or should reasonably have been or
become known in the ordinary course of business by the officers of St.
▇▇▇▇, taking into account the scope and nature of such officers'
responsibilities, and (ii) with respect to the Stockholders shall mean
facts that are actually known or should reasonably have been or become
known to any of the Stockholders in the ordinary course of business,
taking into account the scope and nature of the Stockholders' involvement
in the operation of ▇▇▇▇▇, Panterra, Quanterra Partnership and Quanterra
Corporation.
(11) "Laws" mean all (i) federal, state, or local or foreign laws,
rules and regulations, (ii) orders, (iii) Permits, and (iv) agreements
with federal, state, local, or foreign regulatory authorities to which the
Stockholders, ▇▇▇▇▇, Panterra, Quanterra Partnership, Quanterra
Corporation or St. ▇▇▇▇, as the case may be, is a party or by which any of
them or their property is bound.
(12) "Liens" mean all liens, liabilities, claims, security
interests, mortgages, pledges, agreements, obligations, restrictions, or
other encumbrances of any nature whatsoever, whether absolute, legal,
equitable, accrued, contingent or otherwise, including, without
limitation, any rights of first refusal.
(13) "1933 Act" means the Securities Act of 1933, as amended.
(14) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(15) "▇▇▇▇▇ Financial Statements" mean the unaudited financial
statements of ▇▇▇▇▇ for each of its past two fiscal years,
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July 31, 1997, July 31, 1998, and that prepared in connection with this
transaction dated as of December 31, 1998.
(16) "▇▇▇▇▇ Stock" means all of the issued and outstanding shares of
all Class A and Class B common stock of ▇▇▇▇▇
(17) "NASDAQ" means National Association of Securities Dealers
Automated Quotations System.
"Panterra" means Panterra Petroleum, a Montana general partnership
of which ▇▇▇▇▇ and St. ▇▇▇▇ are the partners and of which ▇▇▇▇▇ is the
managing partner.
"Panterra Financial Statements" mean the audited financial
statements of Panterra for the years ended December 31, 1996, December 31,
1997, and December 31, 1998.
(20) "Permits" mean all permits, licenses, franchises, orders,
certificates and approvals.
(21) "Quanterra Corporation" means Quanterra Energy Corporation.
(22) "Quanterra Partnership" means Quanterra Alpha Limited
Partnership of which Quanterra Corporation, ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ are
the partners.
(23) "Related Agreements" mean all of the other agreements to be
executed in connection with and pursuant to this Agreement.
(24) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
or disposing into the environment.
(25) "SEC" means the United States Securities and Exchange
Commission.
(26) "SEC Documents" mean all registration statements, proxy
statements, periodic reports and schedules filed by St.
▇▇▇▇ with the SEC under the Securities Laws.
(27) "Securities Laws" mean the 1933 Act, the 1934 Act, the
Investment Company of Act of 1940, as amended, the Trust
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Indenture Act of 1939, as amended, and the rules and regulations of the
SEC promulgated thereunder.
(28) "Taxes" mean any taxes or other governmental charges or
assessments of whatever kind or nature imposed by the United States, by
any other nation or by any state, county, municipality or governmental
subdivision, including without limitation, any income, franchise or any
other similar taxes based on or measured by income or otherwise, any sales
or use taxes, property, employment and employer withholdings,
unemployment, social security, occupational, customs, excise or other
taxes, together with any interest or penalties relating thereto.
(29) "Tax Reports" mean all returns or reports required to be filed
relating to the federal and state income tax filings of ▇▇▇▇▇ and its
Affiliates..
1.02 Other Definitional Provisions. Wherever the context so requires,
words used herein in the masculine gender shall be deemed to include the
feminine and neuter. A definition of any term shall be equally applicable to
both the singular and plural forms of the term defined.
1.03 Titles; Headings. All titles and headings appearing in this Agreement
are for identification only and are not to be used for interpretive purposes.
ARTICLE 2
EXCHANGE OF STOCK; CLOSING
2.01 Acquisition of ▇▇▇▇▇ Stock. Subject to the terms and conditions
herein stated, the Stockholders agree to assign, transfer and deliver to St.
▇▇▇▇ at Closing, and St. ▇▇▇▇ agrees to acquire from the Stockholders at
Closing, all of the issued and outstanding ▇▇▇▇▇ Stock. The certificates
representing the ▇▇▇▇▇ Stock shall be duly endorsed in blank by the
Stockholders. The Stockholders agree to cure any deficiencies with respect to
the endorsement of the certificates representing the ▇▇▇▇▇ Stock.
2.02 Exchange of Shares. At Closing, the Stockholders shall surrender the
certificate or certificates representing all the issued and outstanding ▇▇▇▇▇
Stock in exchange for certificates for the St. ▇▇▇▇ Stock issued in the name of
the Stockholders in the amount of the Consideration. The Stockholders shall
receive their certificates for the St. ▇▇▇▇ Stock issued as the Consideration as
set forth on Schedule 2.02 attached hereto.
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2.03 Closing. The closing of the transaction provided for herein (the
"Closing") shall take place at the offices of ▇▇▇▇▇ on June 1, 1999, at 10:00
a.m., local time.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
The Stockholders represent and warrant to St. ▇▇▇▇ as follows:
3.01 Ownership of Shares. The Stockholders are the lawful sole owners,
beneficially and of record, of all of the issued and outstanding shares of ▇▇▇▇▇
Stock and such stock is free and clear of all Liens. The ownership of ▇▇▇▇▇
Stock by the Stockholders is as set forth in Schedule 3.01 hereto.
3.02 Stockholders' Due Execution, Enforceability Against Stockholders.
This Agreement has been duly executed and delivered by the Stockholders and is a
valid and binding obligation of the Stockholders, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application referring to or
affecting enforcement of creditors' rights and general principles of equity. The
execution, delivery and performance of this Agreement by the Stockholders will
not violate or conflict with any agreement, instrument, judgment or decree to
which the Stockholders, ▇▇▇▇▇ or any Affiliate is a party or is subject.
3.03 Stockholders' Capacity. The Stockholders have full legal right,
power, authority and capacity to execute, deliver and perform their obligations
under this Agreement to consummate the transactions contemplated hereunder or
thereunder.
3.04 Organization Existence. ▇▇▇▇▇ is a corporation duly organized and
validly existing under the laws of Montana with all requisite corporate power
and authority to own, operate and lease its properties and assets and to carry
on its business as now being conducted. ▇▇▇▇▇ is duly qualified to do business
and is in good standing in each jurisdiction where the conduct of its business
or the ownership of its property requires such qualification. The jurisdictions
in which ▇▇▇▇▇ is qualified to do business, and the names and addresses of
▇▇▇▇▇'▇ registered agents in such jurisdictions, are set forth on Schedule 3.04
hereto. Schedule 3.04 hereto sets forth all names under which ▇▇▇▇▇ has
conducted or purported to conduct business since the date of its incorporation.
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3.05 Capital Stock. ▇▇▇▇▇ is authorized to issued 10,000 shares of Class A
common voting stock without par value and 40,000 shares of Class B common
non-voting stock without par value. As of the date of this Agreement, ▇▇▇▇▇ has
issued and there are outstanding 5,000 shares of Class A common stock and 20,000
shares of Class B common stock. Other than the ▇▇▇▇▇ Stock, there is no class or
series of equity of ▇▇▇▇▇ authorized, issued or outstanding. All such
outstanding shares of ▇▇▇▇▇ Stock have been duly authorized and validly issued
and are fully paid and nonassessable. There are no outstanding options,
warrants, rights, calls, commitments, conversions rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of any equity security of ▇▇▇▇▇, including any ▇▇▇▇▇
Stock, other than as contemplated by this Agreement.
3.06 Subsidiaries. Except as set forth in Schedule 3.06 hereto, ▇▇▇▇▇ does
not have any subsidiaries or hold any equity or ownership interest of any kind,
whether beneficially or of record, in any corporation, partnership, liability
company, joint venture, or other enterprise or entity of any nature whatsoever.
3.07 No Restrictions Against Performance. Neither the execution, delivery
nor performance of this Agreement or the Related Agreements, nor the
consummation of the transactions contemplated in this Agreement or in the
Related Agreements will, with or without the giving of notice or the passage of
time, or both, violate any provisions of, conflict with, result in a breach of,
constitute a default under, or result in the creation or imposition of any Lien
or adverse condition under:
(a) the Articles of Incorporation and By-Laws of ▇▇▇▇▇ or of
Quanterra Corporation;
(b) any Law which is applicable to ▇▇▇▇▇ or any Affiliate or any of
their properties or assets;
(c) any contract, indenture, instrument, agreement, mortgage, lease,
right, or other obligation or restriction to which ▇▇▇▇▇ or any Affiliate is a
party or by which ▇▇▇▇▇ or any Affiliate or any of their properties or assets is
or may be bound; or
(d) any order, judgment, writ, injunction, decree, license,
franchise, permit or other authorization of any Governmental Authority by which
either ▇▇▇▇▇ or any Affiliate or any of their properties or assets is or may be
bound or by which the Stockholders may be bound.
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3.08 Historical Financial Information. The ▇▇▇▇▇ Financial Statements,
true and complete copies of which have been previously delivered to St. ▇▇▇▇
present fairly the financial position, assets and liabilities of ▇▇▇▇▇ as of the
dates thereof and the revenues, expenses, results of operations and cash flows
of ▇▇▇▇▇ for the periods covered thereby, on a tax basis with adjustments made
in accordance with GAAP so that the net asset value of ▇▇▇▇▇ can be determined
and reasonably compared with the net asset value of St. ▇▇▇▇. The ▇▇▇▇▇
Financial Statements are in accordance with the books and records of ▇▇▇▇▇ and
do not reflect any transactions which are not bona fide transactions. The books
and records of ▇▇▇▇▇ have been maintained in accordance with applicable laws,
rules and regulations, and in the ordinary course of business. To the best of
Stockholders' Knowledge, the accounts and notes receivable of ▇▇▇▇▇ reflected in
the ▇▇▇▇▇ Financial Statements are valid, existing and genuine and represent
sales actually made or services actually delivered by ▇▇▇▇▇ in bona fide
transactions in the ordinary course of business consistent with past practice
and there is no material right of setoff or counterclaim or threat thereof that
would jeopardize the collectability of such accounts and notes receivable at the
aggregate recorded amounts thereof. The Stockholders have no Knowledge of any
material difference that would arise if the ▇▇▇▇▇ Financial Statements were
prepared in accordance with GAAP as opposed to being prepared on a tax basis
with the GAAP-type adjustments that have been made.
3.09 No Undisclosed Liabilities. To the best of Stockholders' Knowledge,
no basis exists on the date hereof for assertions against ▇▇▇▇▇ of any material
claim or liability of any nature other than (i) those which have been disclosed
in the ▇▇▇▇▇ Financial Statements, or (ii) have been incurred in the ordinary
course of the business of ▇▇▇▇▇ since December 31, 1998 and which do not
constitute a breach of the representation and warranty set forth in Section
3.10. For purposes of this Section 3.09, a claim or liability shall be deemed to
be "material" if it involves an amount in excess of $25,000, individually or in
the aggregate, as the context requires.
3.10 No Adverse Effects or Changes. Since December 31, 1998, Stockholders
are not aware of any event involving either ▇▇▇▇▇ or any Affiliate that has had
a material adverse effect on its business or its assets. Except as listed on
Schedule 3.10, since December 31, 1998, neither ▇▇▇▇▇ nor any Affiliate has:
(a) made any change in its authorized capital or outstanding
securities;
(b) borrowed or agreed to borrow any funds, guaranteed the repayment
of any indebtedness or incurred any other contingent financial
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obligations, except borrowings incurred in the ordinary course of its business
in accordance with its past practices;
(c) satisfied any obligation or liability (absolute or contingent),
other than obligations and liabilities incurred in the ordinary course of its
business in accordance with its past practices;
(d) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever in respect of
its capital stock, or purchased, redeemed or otherwise acquired, or agreed to
purchase, redeem or otherwise acquire, any of its outstanding capital stock;
(e) except as set forth on Schedule 3.10(e), sold, transferred or
otherwise disposed of, or agreed to sell transfer or otherwise dispose of, any
material assets, properties or rights, except inventory and equipment in the
ordinary course of its business in accordance with its past practices, or
canceled or otherwise terminated, or agreed to cancel or otherwise terminate,
any debts or claims other than accounts receivable write-offs and writedowns in
the ordinary course of its business in accordance with its past practices;
(f) other than in the ordinary course of business in accordance with
its past practices, entered, or agreed to enter, into any agreement or
arrangements to sell any of its assets, properties or rights, including
inventories and equipment;
(g) made or permitted any amendment or termination of any material
contract, agreement, permit or license to which it is a party or by which it or
any of its properties are bound;
(h) except as set forth on Schedule 3.10(h), made, directly or
indirectly, any accrual or arrangement for or payment of any bonuses or special
compensation of any kind or any severance or termination pay to any present or
former officer, director or executive employee;
(i) except for customary raises granted in the ordinary course of
its business in accordance with its past practices, increased the rate of
compensation payable, or to become payable, by it to any of its officers,
directors or employees or adopted any new, or made any increase in, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement
or other employee benefit plan payment or arrangement made to, for or with any
present or former such officers, directors, or executive employees;
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(j) incurred, or become subject to, any uninsured claim or liability
for any material damages for any negligence or other tort or breach of contract;
(k) made any capital expenditures (or commitments therefor) which in
the aggregate exceed $50,000;
(l) suffered any damages, destruction or casualty losses in excess
of $10,000 as to any single occurrence or $50,000 in the aggregate;
(m) entered into any other material transaction other than in the
ordinary course of its business in accordance with its past practices; or
(n) suffered any material adverse change in condition of or title to
any of its assets except depletion through normal production within authorized
allowables, ordinary changes in rates of production, and depreciation of
equipment through ordinary wear and tear.
3.11 Third-Party and Governmental Consents. Except as set forth in
Schedule 3.11 hereto, no approval, consent, waiver, order or authorization of,
or registration, qualification, declaration, or filing with, or notice to, any
Governmental Authority or other third party is required on the part of the
Stockholders, ▇▇▇▇▇ or any Affiliate in connection with the execution and
delivery of this Agreement or the Related Agreements by the Stockholders or the
consummation of the transactions contemplated hereby or thereby. All of the
consents and approvals set forth on Schedule 3.11 have been obtained.
3.12 Real and Personal Property
(a) Real Property. Schedule 3.12(a) sets forth a list of all real
properties, other than properties acquired for the development of or exploration
for oil and gas resources, owned, leased, or subject to a contract or purchase
and sale or lease commitment by ▇▇▇▇▇, written or oral, (collectively "Real
Property"), and with respect to all owned Real Property, a description of the
nature and amount of any liens, mortgages and encumbrances incurred by ▇▇▇▇▇
affecting such Real Property. Except as set forth in Schedule 3.12(a), the
buildings, premises and equipment that are owned or leased by ▇▇▇▇▇ are in good
operating condition and repair, subject only to ordinary wear and tear customary
within the local trade. To the Knowledge of the Stockholders there is no matter
currently pending the effect of which in any material respect would interfere
with or prevent the continued use of any of the Real Property for the purposes
for which it is now being used or would materially affect the values thereof.
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(b) Oil and Gas Leases and ▇▇▇▇▇. Schedule 3.12(b) sets forth a
true, correct and complete list of all oil and gas leases and ▇▇▇▇▇ in which
either ▇▇▇▇▇ or its Affiliates is a party, whether as lessor, lessee, or the
owner of any non-cost bearing interest. The interests of either ▇▇▇▇▇ or its
Affiliates in all leases listed on such Schedule are valid and subsisting and in
full force and effect, and all rentals and other payments now due have been
paid. ▇▇▇▇▇ and its Affiliates enjoy and are in peaceful and undisturbed
possession as to their respective ownership share under each lease so listed in
which it is a lessee. Neither ▇▇▇▇▇ nor its Affiliates have received any notice
of, and to the Knowledge of the Stockholders, there does not exist, any event of
default or event, occurrence or act which, with the giving of notice or the
lapse of time or both, would become a default under any such lease, and neither
▇▇▇▇▇ nor its Affiliates have violated any of the terms or conditions under any
such lease in any material respect. The real property under the leases referred
to in Schedule 3.12(b) is free from material physical defects. Such real
property and the fixtures, equipment, and other property attached, situated or
appurtenant thereto are in good operating condition and repair, in compliance
with all applicable Laws and are adequate and suitable for the purposes for
which they are presently being used, except for such matters which in the
aggregate would not have a material adverse effect on the business of ▇▇▇▇▇.
(c) Personal Property. Except as otherwise identified on Schedule
3.12(c) hereto, ▇▇▇▇▇ has good, valid, marketable, legal and beneficial title to
all of its personal property, free and clear of all Liens. There are no
outstanding options, warrants, commitments, agreements or any other rights of
any character entitling any person or entity, other than St. ▇▇▇▇, to acquire
any interest in all or any part of the personal property of ▇▇▇▇▇.
3.13 Accounts and Notes Receivable. Schedule 3.13 sets forth a list as of
December 31, 1998, of all accounts and notes receivable of ▇▇▇▇▇ and the
Affiliates together with:
(a) an aging schedule setting forth all such accounts receivable
(other than intercompany receivables)
(b) the identity of any asset in which ▇▇▇▇▇ or an Affiliate holds a
security interest to secure payment of the underlying indebtedness;
(c) a description of the nature and amount of any lien on or
security interest in such accounts and notes receivable; and
(d) an identification of the accounts receivable on this Schedule
3.13 which have been collected in their entirety since December 31, 1998.
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Except as specifically identified on Schedule 3.13, the Stockholders believe to
the best of their Knowledge that the accounts and notes receivable itemized are
collectible in the ordinary course of ▇▇▇▇▇'▇ and the Affiliates' businesses.
3.14 Accounts Payables and Promissory Notes. Schedule 3.14 sets forth a
list of:
(a) all accounts payable of ▇▇▇▇▇ and the Affiliates as of December
31, 1998, together with an appropriate aging schedule;
(b) all long-term and short-term promissory notes, installment
contracts, loan agreements and credit agreements to which ▇▇▇▇▇ or the
Affiliates is a party or to which any of their properties are subject;
(c) all indentures, mortgages, security agreements, pledges, and any
other agreements, pledges, and any other agreements of ▇▇▇▇▇ and the Affiliates
relating thereto or with respect to collateral securing the same; and
(d) an identification of the accounts payable on Schedule 3.14 that
have been fully or partially paid since December 31, 1998.
3.15 Insurance and Bonds.
(a) Schedule 3.15 sets forth a list of all insurance policies and
bonds held by ▇▇▇▇▇ including those covering its properties, buildings,
equipment, fixtures, employees, and operations. Such list specifies with respect
to each such policy:
(i) the insurer and agent;
(ii) the amount of coverage;
(iii) the dates of premiums or payments due thereunder; and
(b) the expiration date, as applicable.
Each such policy identified is currently in full force and effect. All insurance
premiums due according to the applicable payment schedules reflected in such
policies have been timely paid. Except as set forth on Schedule 3.15, there are
no facts or circumstances known to the Stockholders or under which any claims
for uninsured losses or damages are likely to be asserted against ▇▇▇▇▇ in an
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amount in excess of $10,000 nor are there any such claims pending against ▇▇▇▇▇;
(c) the insurance policies currently maintained by ▇▇▇▇▇ provide
coverage believed by the Stockholders to be adequate for its properties, assets,
products and operations;
(d) ▇▇▇▇▇ has not requested cancellation of any material policy of
insurance at any time during the previous two years;
(e) ▇▇▇▇▇ has not sought and been denied any insurance coverage
during the two-year period prior to the Closing Date. All bonds issued to secure
performance of or payment by ▇▇▇▇▇ under any material contract in progress or
yet to be completed, including those contracts identified in Schedule 3.15, are
in force and effect and are identified on Schedule 3.15. Neither ▇▇▇▇▇ nor the
Stockholders have made any representations or undertaken any other act which
would give rise to a viable claim that any such existing bond is invalid or
unenforceable; there are no facts or circumstances under which the validity or
enforceability by ▇▇▇▇▇ of any such existing bond could be successfully
challenged; and
(f) the transactions contemplated by this Agreement will have no
adverse effect on any such existing bond.
3.16 Bank Accounts. Schedule 3.16 sets forth a list of (i) the name of
each bank or other financial institution in which ▇▇▇▇▇ or the Affiliates have
an account or safe deposit box; (ii) the names of all person authorized to draw
thereon or to have access thereto; and (iii) the names of all persons other than
the officers of ▇▇▇▇▇ and the Affiliates who are authorized to incur liabilities
on behalf of ▇▇▇▇▇ or the Affiliates for borrowed funds.
3.17 Compliance with Laws. To the best of Stockholders' Knowledge, ▇▇▇▇▇
and the Affiliates have complied with and are not in default under any Laws the
violation of which could have a material adverse effect on their business,
properties or assets.
3.18 Litigation. There is no judicial or administrative claim, action,
suit or proceeding pending or, to the Knowledge of the Stockholders, threatened
against or relating to the Stockholders, ▇▇▇▇▇, the Affiliates or the officers
or directors of ▇▇▇▇▇ or the Affiliates in their capacities as officers or
directors, the business, properties or assets of ▇▇▇▇▇ or the Affiliates or the
transactions contemplated by this Agreement or the Related Agreements,
including, but not limited to, actions or proceedings alleging any violation of
any Environmental Law, before
13
any federal, state, or local court, arbitration tribunal or Governmental
Authority, which would, individually or in the aggregate, materially adversely
affect the Stockholders, the business, properties or assets of ▇▇▇▇▇ or the
Affiliates, or the transactions contemplated by this Agreement or the Related
Agreements and to the Knowledge or the Stockholders there does not exist any
valid basis for any such claim, action, suit or proceeding. There are no claims,
actions, suits, proceedings or investigations pending or, to the Knowledge of
the Stockholders, threatened by or against the Stockholders, ▇▇▇▇▇ or the
Affiliates with respect to this Agreement or the Related Agreements, or in
connection with the transactions contemplated hereby or thereby and the
Stockholders have no reason to believe there exists a valid basis for any such
claim, action, suit, proceeding or investigation.
3.19 Permits. Schedule 3.19 hereto sets forth a true, correct and complete
list of all Permits of any federal, state or local regulatory or Governmental
Authority relating to the business properties or assets of ▇▇▇▇▇. The Permits
constitute all permits, licenses, franchises, orders, certificates and approvals
which are required for the lawful operation of the business, properties and
assets of ▇▇▇▇▇. Further, ▇▇▇▇▇ is in compliance in all material respects with
all such Permits and owns or has owned or had valid Permits to use all
properties, tangible or intangible, necessary for the conduct of its business
and the operation of its properties and assets in the manner in which they are
now conducted and operated.
3.20 Taxes.
(a) All Tax Reports required to be filed by ▇▇▇▇▇ and the Affiliates
that are required to be filed on or prior to the Closing have been duly filed
and are true, complete and accurate in all material respects. All Taxes owed
with respect to the periods covered by such Tax Reports have been duly paid.
▇▇▇▇▇ and the Affiliates have complied with all applicable laws, rules and
regulations relating to the withholding and payment of Taxes and has timely
withheld and paid to the proper governmental authorities all amounts required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor or stockholder.
(b) There are no agreements, waivers or other arrangements providing
for extension of time with respect to the assessment or collection of any Tax on
▇▇▇▇▇ or the Affiliates ; there are not any actions, suits, proceedings,
investigations or claims now pending against ▇▇▇▇▇ or the Affiliates in respect
of unpaid Taxes, and there are no matters under discussion with any federal,
state, county or local Governmental Authority relating to any amount of unpaid
Taxes. Except as otherwise set forth on Schedule 3.20, the Tax Reports of ▇▇▇▇▇
and
14
the Affiliates have not been audited and are not in the process of being audited
by the applicable taxing authorities, and there is no Tax deficiency
outstanding, proposed or assessed against ▇▇▇▇▇ or the Affiliates, and ▇▇▇▇▇ and
the Affiliates are not a party to any Tax allocation or Tax sharing agreement.
(c) Since its formation, ▇▇▇▇▇ has been treated as a C Corporation
for federal income tax purposes.
3.21 Employee Benefit Plans and Employment Agreement.
(a) Set forth on Schedule 3.21(a) is a list of each employee benefit
plan (within the meaning of Section 3(3) of ERISA), written or oral employment
or consulting agreement, severance pay plan or agreement, employee relations
policy (or practice, agreement or arrangement), agreements with respect to
leased or temporary employees, vacation plan or arrangement, sick pay plan,
stock purchase plan, stock option plan, fringe benefit plan, incentive plan,
bonus plan, cafeteria or flexible spending account plan and any deferred
compensation agreement, (or plan, program, or arrangement) covering any present
or former employee of ▇▇▇▇▇ and which is, or at any time was, sponsored or
maintained by (or to which contributions are, were, or at any time were required
to have been, made by ▇▇▇▇▇. Each and every such plan, program, policy,
practice, arrangement and agreement included on the list set forth under
Schedule 3.21(a) is hereinafter referred to as an "Employee Benefit Plan".
(b) With respect to each Employee Benefit Plan, there has been
delivered to St. ▇▇▇▇, (i) copies of each such Employee Benefit Plan (including
all trust agreements, insurance or annuity contracts, descriptions, general
notices to employees or beneficiaries and any other material documents or
instruments relating thereto); (ii) the most recent audited (if required or
otherwise available) or unaudited financial statement with respect to each such
Employee Benefit Plan; (iii) copies of the most recent determination letters
with respect to any such Employee Benefit Plan which is an employee pension
benefit plan (as such term is defined under ERISA) intended to qualify under the
Code; and (iv) copies of the most recent actuarial reports, if any, of each such
Employee Benefit Plan.
(c) With respect to each Employee Benefit Plan:
(i) each such Employee Benefit Plan which is an employee
pension benefit plan intended to qualify under the Code so qualifies and has
received a favorable determination letter as to its qualification under the
Code, and no event has occurred that will or could be expected to give rise to
disqualification or loss of tax-exempt status of any such plan or related trust;
15
(ii) ▇▇▇▇▇ has complied in all material respects with all
provisions of ERISA and no act or omission by the Stockholders, ▇▇▇▇▇ or any
fiduciary of any Employee Benefit Plan has occurred that will or could be
expected to give rise to liability for a breach of fiduciary responsibilities
under ERISA or to any fines or penalties under ERISA;
(iii) all insurance and annuity premiums, if any, required for
all periods up to and including the Closing have been or will be paid;
(iv) no Employee Benefit Plan provides for any post-retirement
life, medical, dental or other welfare benefits (whether or not insured) for any
current or former employee except as required under Code or ERISA or applicable
state or local Law;
(v) all contributions required to have been made by law or
under the terms of any contract, agreement or Employee Benefit Plan for all
complete and partial periods up to and including the Closing have been made or
will be made;
(vi) the transactions contemplated by this Agreement will not
be the direct or indirect cause of any amount paid or payable from such Employee
Benefit Plan being classified as an excess parachute payment under Code;
(vii) there are no matters pending before the United States
Internal Revenue Service, the United States Department of Labor or the Pension
Benefit Guaranty Corporation ("PBGC");
(viii) there have been no claims or notice of claims filed
under any fiduciary liability insurance policy covering any Employee Benefit
Plan;
(ix) to the extent applicable, each such Employee Benefit Plan
has complied with the "secondary payor" requirements of the Social Security Act;
(x) each and every such Employee Benefit Plan which is a group
health plan (as such term is defined under the Code or ERISA complies, and in
each and every case has complied, with the applicable requirements of Code,
ERISA, the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996, and all other federal, state or local Laws or
ordinances requiring the provision or continuance of health or medical benefits;
16
(xi) each and every Employee Benefit Plan which is a cafeteria
plan or flexible spending account plan complies, and in each and every case has
complied, with the applicable requirements of the Code and all other applicable
federal, state, or local Laws or ordinances; and
(xii) each and every Employee Benefit Plan which is a
dependent care assistance program complies, and in each and every case has
complied, with the applicable requirements of the Code and all other applicable
federal, state or local Laws or ordinances.
(d) With respect to any employee benefit plan (within the meaning of
ERISA), stock purchase plan, stock option plan, fringe benefit plan, bonus plan
or any deferred compensation agreement, plan or program (whether or not any such
plan, program, or agreement is currently in effect):
(i) there are no action, suits, or claims (other than routine
claims for benefits in the ordinary course) pending or, to the Knowledge of the
Stockholders threatened, and the Stockholders have no Knowledge of any facts
which could give rise to any such actions, suits, or claims (other than routine
claims for benefits in the ordinary course), which could subject ▇▇▇▇▇ to any
liability;
(ii) ▇▇▇▇▇ has not engaged in a prohibited transaction, as
such term is defined in the Code which would subject ▇▇▇▇▇ to any taxes,
penalties or other liabilities resulting from prohibited transactions under the
Code or under ERISA;
(iii) no event has occurred and no condition exists that could
subject ▇▇▇▇▇ to any tax or penalty under the Code, or to a fine under ERISA;
(iv) ▇▇▇▇▇ is not subject to (1) any liability, lien or other
encumbrance under any agreement imposing secondary liability on ▇▇▇▇▇ as a
seller of the assets of a business under ERISA or the Code, (2) contingent
liability under ERISA to the PBGC or to any plan, participant, or other person
or (3) a lien or other encumbrance under ERISA; and
(e) (i) ▇▇▇▇▇ is not subject to any legal, contractual, equitable,
or other obligation to continue any Employee Benefit Plan of any nature,
including, without limitation any Employee Benefit Plan or any other pension,
profit sharing, welfare, post-retirement welfare plan, or post-retirement
welfare plan, or any stock option, stock or cash award, non-qualified deferred
17
compensation or executive compensation plan, policy or practice (or to continue
participation in any such benefit plan, policy or practice) on or after the
Closing;
(ii) ▇▇▇▇▇ may, in any manner, and without the consent of any
employee, beneficiary or other person, terminate, modify or amend any such
Employee Benefit Plan (or its participation in such Employee Benefit Plan or any
other plan, program or practice) effective as of any date on or after the
Closing; and
(iii) no representations or communications (directly or
indirectly, orally, in writing or otherwise) with respect to participation,
eligibility for benefits, vesting, benefit accrual coverage or other material
terms of any Employee Benefit Plan have been made prior to the Closing to any
employee, beneficiary or other person other than those which are in accordance
with the terms and provisions of each such Employee Benefit Plan as in effect
immediately prior to the Closing.
(f) ▇▇▇▇▇ has at no time participated in a multi-employer pension
plan.
(g) With respect to each and every Employee Benefit Plan subject to
ERISA: (i) no such Employee Benefit Plan or related trust has been terminated or
partially terminated; (ii) no liability to the PBGC has been or is expected to
be incurred with respect to such Employee Benefit Plan; (iii) the PBGC has not
instituted and is not expected to institute any proceedings to terminate such
Employee Benefit Plan; (iv) there has been no reportable event (within the
meaning of ERISA); (v) there exists no condition or set of circumstances that
presents a material risk of the termination of such Employee Benefit Plan by the
PBGC; (vi) no accumulated funding deficiency (as defined under ERISA and the
Code), whether or not waived, exists with respect to such Employee Benefit Plan;
and (vii) the current value of all vested accrued benefits under each such
Employee Benefit Plan did not as of the last day of the most recently ended
fiscal year of each Employee Benefit Plan, and will not as of the Closing,
exceed the current value of the assets of each such Employee Benefit Plan
allocable to such vested accrued benefits.
3.22 Certain Employees and Salaries. Schedule 3.22 sets forth a list of
the names and salary rates of all employees of ▇▇▇▇▇ whose current regular
annual salary rate is $60,000 or more, together with any bonuses paid or payable
to each such employee of ▇▇▇▇▇ for the preceding or current fiscal year, and, to
the extent existing at Closing, all arrangements with respect to any bonuses or
other payments to be paid to such employees by ▇▇▇▇▇ from and after the date of
Closing. Schedule 3.22 also identifies the company cars, club memberships
18
and other fringe benefits paid or payable in the future by ▇▇▇▇▇ pursuant to
existing agreements on behalf of such employees.
3.23 Material Contracts. Schedule 3.23 lists all contracts and
arrangements, written, electronic, oral, or otherwise, of the following types to
which ▇▇▇▇▇ or an Affiliates is a party or by which they are bound, or to which
any of their assets or properties is subject:
(a) any contract or arrangement of any kind with any employee,
officer or director of ▇▇▇▇▇ or an Affiliate or the Stockholders or any member
of a Stockholder's family;
(b) any contract or arrangement of any nature which involves the
payment or receipt of cash or other property, any unperformed commitment, or
goods or services, having a value in excess of $10,000;
(c) any contract or arrangement pursuant to which ▇▇▇▇▇ or an
Affiliate has made or will make loans or advances, or has or will have incurred
debts or become a guarantor or surety or pledged its credit on or otherwise
become responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business);
(d) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property (to the extent not addressed in
Section 3.14) or personal property or agreement for financing;
(e) any contract or arrangement involving a partnership, joint
venture, jointly owned corporation or other cooperative undertaking;
(f) any contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business of
▇▇▇▇▇ or an Affiliate;
(g) any power of attorney or agency agreement or arrangement with
any person pursuant to which such person is granted the authority to act for or
on behalf of ▇▇▇▇▇ or an Affiliate or ▇▇▇▇▇ or an Affiliate is granted the
authority to act for or on behalf of any person;
(h) any contract for which the full performance thereof may extend
beyond sixty calendar days from the date of this Agreement;
19
(i) any real property leases to which ▇▇▇▇▇ or an Affiliate is a
party, whether as lessor or lessee, which relate to the business of ▇▇▇▇▇ or an
Affiliate not listed on Schedule 3.12(b);
(j) any contract not made in the ordinary course of business which
is to be performed at or after the date of this Agreement; and
(k) any contract not specified above that is material to the
business, properties or assets of ▇▇▇▇▇ or an Affiliate;
There has been delivered to St. ▇▇▇▇ ▇▇▇▇, correct and complete copies of each
document listed on Schedule 3.23 and a written description of each oral
arrangement so listed. Except as disclosed on Schedule 3.23, all such contracts
and arrangements, if canceled at any time by the other party, would not have a
material adverse effect on the business, properties or assets of ▇▇▇▇▇ or an
Affiliate. There have been delivered to St. ▇▇▇▇ accurate copies of each form
which has been used in the business of ▇▇▇▇▇ or an Affiliate and is in effect
with respect to any third party at the time of Closing. Except as set forth on
Schedule 3.23 hereto, each contract between ▇▇▇▇▇ or an Affiliate and any third
party is valid and in full force and effect and constitutes the legal, valid and
binding obligation of ▇▇▇▇▇ or an Affiliate and the other parties thereto,
enforceable against ▇▇▇▇▇ or an Affiliate and the other parties thereto in
accordance with their respective terms, and, to the Knowledge of the
Stockholders, there are no existing violations or defaults by ▇▇▇▇▇ or an
Affiliate (including, but not limited to, the subcontracting or delegation by
▇▇▇▇▇ or an Affiliate of duties to third parties) or by any other party thereto
and no event, act or omission has occurred which (with or without notice, lapse
of time or the happening or occurrence of any other event) would result in a
violation or default thereunder. No other party to any such contract has in
writing or otherwise asserted the right, and no basis exists for the assertion
of any enforceable right to renegotiate, cancel or terminate prior to the full
term thereof any of the terms or conditions of any such contract, nor does ▇▇▇▇▇
or an Affiliate have any Knowledge that any party to any such contract intends
not to renew any such contract upon termination of its current term. Except as
set forth on Schedule 3.23 hereto, no consent of any party to such contracts is
required for the execution, delivery or performance of this Agreement or the
Related Agreements or the consummation of the transactions contemplated hereby
or thereby.
3.24 Labor Matters. ▇▇▇▇▇ has conducted, and currently is conducting its
business in full compliance with all Laws relating to employment and employment
practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment. Except as set forth on Schedule 3.24, the
relationships of ▇▇▇▇▇ with its employees are good and there is, and during the
20
past five years there has been, no labor strike, dispute, slow-down, work
stoppage or other labor difficulty actually pending or threatened against or
involving ▇▇▇▇▇. Except as set forth on Schedule 3.24, to the Knowledge of the
Stockholders there are no facts or circumstances that could give rise to a claim
for wrongful termination or discrimination on any basis. Except as set forth on
Schedule 3.24, none of the employees of ▇▇▇▇▇ is covered by any collective
bargaining agreement, no collective bargaining agreement is currently being
negotiated and, to the Knowledge of the Stockholders, no attempt is currently
being made or during the past three years has been made to organize any
employees of ▇▇▇▇▇ to form or enter a labor union or similar organization.
3.25 Environmental Matters. Except as set forth in Schedule 3.25:
(a) ▇▇▇▇▇ and the Affiliates are currently in compliance in all
material respects with all applicable Environmental Laws, have cured any past
violations or alleged violations of Environmental Laws to the satisfaction of
Governmental Authorities, are not currently in receipt of any notice of
violation, are not currently in receipt of any notice of any potential liability
for cleanup of Hazardous Materials and are not now subject to any investigation
or information request by a Governmental Authority concerning Hazardous
Materials or any Environmental Laws. To the Knowledge of the Stockholders, ▇▇▇▇▇
and the Affiliates hold and are in compliance with all governmental permits,
licenses, and authorizations necessary to operate those aspects of their
businesses that relate to siting, wetlands, coastal zone management, air
emission, discharges to surface or ground water, discharges to any sewer or
septic system, noise emissions, solid waste disposal or the generation, use,
transportation or other management of Hazardous Materials. Neither ▇▇▇▇▇ nor an
Affiliate has ever generated, manufactured, refined, recycled, discharged,
emitted, released, buried, processed, produced, reclaimed, stored, treated,
transported, or disposed of any Hazardous Materials except in compliance with
all applicable Laws, including applicable Permit requirements;
(b) No assets of ▇▇▇▇▇ or an Affiliate are subject to any Lien in
favor of any person as a result of any Hazardous Material or response thereto;
(c) To the Knowledge of the Stockholders, all facilities where any
person has treated, stored, disposed of, reclaimed, or recycled any Hazardous
Material on behalf of ▇▇▇▇▇ or an Affiliate are in compliance with Environmental
Laws.
21
3.26 Necessary Property.
(a) To the extent not otherwise listed on a schedule to this
Agreement, the assets of ▇▇▇▇▇, whether tangible or intangible, which are
required for the operation by ▇▇▇▇▇ of its businesses now conducted are listed
on Schedule 3.26(a).
(b) ▇▇▇▇▇ has consummated each act or deed, if any, necessary to
transfer, pursuant to the exchange of shares provided for by this Agreement,
beneficial ownership of the assets described on Schedule 3.26(a) as well as the
assets listed on any other schedule attached hereto to St. ▇▇▇▇, and ▇▇▇▇▇
represents that St. ▇▇▇▇ will not have any liability or obligation relating to
the transfer of such assets.
3.27 Minute Books and Charter Documents. All corporate records and books
(including stock transfer ledgers) of ▇▇▇▇▇ and Quanterra Corporation have been
made available to St. ▇▇▇▇ for its review.
3.28 Broker's Fees. No agent, broker or other person is or may be entitled
to a commission or finder's fee in connection with the transactions contemplated
by this Agreement, or is or may be entitled to make any claim against ▇▇▇▇▇ or
against St. ▇▇▇▇ as a result of any actions by the Stockholders or ▇▇▇▇▇. The
Stockholders shall indemnify St. ▇▇▇▇ against any claim for any such commission
or finder's fee made by any agent, broker or other person as a result of any
actions by the Stockholders or ▇▇▇▇▇.
3.29 Investment Representation. Each of the Stockholders acknowledges that
the issuance to him or her by St. ▇▇▇▇ of the shares of St. ▇▇▇▇ Stock
constituting the Consideration pursuant to this Agreement has not been
registered under the 1933 Act or any state securities Law, and that such St.
▇▇▇▇ Stock may not be sold or transferred other than pursuant to an effective
registration statement under the 1933 Act or pursuant to an available exemption
from such registration, and further acknowledges that the certificates
representing the St. ▇▇▇▇ Stock will bear a restrictive legend to the foregoing
effect. Each Stockholder is acquiring the St. ▇▇▇▇ Stock for investment purposes
only, for his or her own account (and not for the account(s) of others) and not
with a view to the distribution thereof. Each Stockholder confirms that (i) he
or she is familiar with the business of St. ▇▇▇▇ and has had the opportunity to
ask questions of appropriate executive officers of St. ▇▇▇▇ (and that he or she
has received responses thereto to his or her satisfaction) and to obtain such
information about the business and financial condition of St. ▇▇▇▇ as he or she
has reasonably requested, and (ii) he or she has such knowledge and
22
experience in financial and business matters that he or she is capable of
evaluating and accepting the merits and risks of an investment in St. ▇▇▇▇
Stock.
3.30 Questionable Payments. Neither ▇▇▇▇▇ nor an Affiliate nor any
executive employee, agent, or representative of ▇▇▇▇▇ or an Affiliate (including
the Stockholders) has made, directly or indirectly, any (a) bribes, kickbacks or
illegal payments, (b) payments that were falsely recorded on the books and
records of ▇▇▇▇▇ or an Affiliate, or (c) payments to governmental officials for
improper purposes.
3.31 Tax Reports. Schedule 3.31 contains true and correct copies of the
Tax Reports filed by either ▇▇▇▇▇ or its Affiliates for the past three tax years
including tax year 1998.
3.32 Joint Operating Agreements. Neither ▇▇▇▇▇ nor an Affiliate has
entered into any joint operating agreement regarding any of the leases or ▇▇▇▇▇
affected by this Agreement that contains terms or conditions which impose duties
or obligations on ▇▇▇▇▇ or any Affiliate beyond those customarily contained or
created by joint operating agreements executed in the ordinary course of
conducting an oil and gas business.
3.33 Affiliates. The Stockholders represent and warrant to St. ▇▇▇▇ with
respect to Panterra and the Panterra Financials, and with respect to Quanterra
Partnership, the matters set forth in Section 3.08 and Section 3.09 to the same
extent as those representations and warranties by the Stockholders apply to
▇▇▇▇▇. Quanterra Partnership is a limited partnership organized and in good
standing under the laws of the State of Montana of which Quanterra Corporation
is the sole general partner and as such holds a one percent partnership interest
and ▇▇▇▇▇ holds a forty-nine and one-half percent limited partner interest.
3.34 No Misstatements or Omissions. No representation or warranty made in
this Agreement or on any Schedule hereto by the Stockholders is false or
misleading as to any material fact or omits to state a material fact required to
make any of such information not misleading in any material respect. In
addition, all other information made available by ▇▇▇▇▇ to St. ▇▇▇▇, whether in
oral, written, or any other form, is true and correct to the Knowledge of the
Stockholders, and such information is not false or misleading as to any material
fact. To the Knowledge of the Stockholders, the foregoing representations,
warranties, schedules and information constitute full disclosure of all material
facts with respect to the business, assets and liabilities of ▇▇▇▇▇ and the
Affiliates.
23
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ST. ▇▇▇▇
St. ▇▇▇▇ represents and warrants to the Stockholders as follows:
4.01 Organization; Good Standing. St. ▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority and legal right to
own, operate and lease its properties and assets and to carry on its business as
now being conducted and to enter into this Agreement and perform its obligations
hereunder, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the conduct of its business or
the ownership of its property requires such qualification.
4.02 Authority. St. ▇▇▇▇ has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the Related
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement. St. ▇▇▇▇
has the power and authority to deliver the Consideration, and all necessary
corporate action to authorize the delivery of the Consideration has been taken.
4.03 Due Execution and Enforceability. This Agreement is a valid and
binding obligation of St. ▇▇▇▇, enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application referring to or affecting enforcement of
creditors' rights and general principles of equity.
4.04 No Restrictions Against Performance. Neither the execution, delivery,
authorization or performance of this Agreement, nor the consummation of the
transactions contemplated hereby will, with or without the giving of notice or
the passage of time, or both, violate any provisions of, conflict with, result
in a breach of, constitute a default under, or result in the creation or
imposition of any Lien or adverse condition under (i) the Certificate of
Incorporation or By-Laws of St. ▇▇▇▇; (ii) any federal, state or local Law,
which is applicable to St. ▇▇▇▇; (iii) any contract, indenture, instrument,
agreement, mortgage, lease, right or other obligation or restriction to which
St. ▇▇▇▇ is a party or by which it is bound; or (iv) any order, judgment, writ,
injunction, decree, license, franchise, permit or other authorization of any
Governmental Authority by which St. ▇▇▇▇ is bound.
4.05 Capital Stock of St. ▇▇▇▇. The authorized capital stock of St. ▇▇▇▇
consists of 50,000,000 shares of common stock of which 10,827,067 are issued and
outstanding. All of the issued and outstanding shares of St. ▇▇▇▇ Stock are,
24
and all of the shares of St. ▇▇▇▇ Stock, when issued in accordance with the
terms of this Agreement are or will be, duly and validly authorized and issued
and outstanding, fully paid and nonassessable. None of the outstanding shares of
St. ▇▇▇▇ Stock to be issued pursuant to this Agreement will be issued in
violation of any preemptive rights of the current or past holders of St. ▇▇▇▇
Stock. Except as disclosed on Schedule 4.05 hereto, as of the date of this
Agreement, there are no other equity securities of St. ▇▇▇▇ outstanding and no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character provided for the
purchase, issuance or sale of any shares of the capital stock of St. ▇▇▇▇, other
than as contemplated by this Agreement.
4.06 SEC Filings; Financial Statements of St. ▇▇▇▇. St. ▇▇▇▇ has timely
filed and made available to the Stockholders all SEC Documents required to be
filed by St. ▇▇▇▇ during calendar year 1998 and since December 31, 1998 . The
SEC Documents (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Laws and other applicable Laws, and
(ii) did not, at the time they were filed (or, if amended, or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in the SEC Documents or necessary in order to make the
statements in the SEC Documents in light of the circumstances under which they
were made, not misleading. Each of the St. ▇▇▇▇ financial statements (including,
in each case, any related notes) contained in the SEC Documents complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP (except to the extent required by changes in GAAP, as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q under the 1934 Act, as amended), and
fairly presented in all material respects the consolidated financial positions
of St. ▇▇▇▇ and its subsidiaries as at the respective dates and the consolidated
results of operations and cash flows of the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
4.07 Materially Adverse Change of Condition. St. ▇▇▇▇ has no Knowledge of
any material adverse change in the condition of or title to its assets which
have occurred subsequent to December 31, 1998, except depletion through normal
production within authorized allowables, ordinary changes and rates of
production, and depreciation of equipment through ordinary wear and tear.
25
4.08 Third-Party and Governmental Consents. Except as set forth on
Schedule 4.08 hereto, and those customarily obtained after Closing, no approval,
consent, waiver, order or authorization of, or registration, qualification,
declaration or filings with, or notice to, any Governmental Authority or other
third party is required on the part of St. ▇▇▇▇ in connection with the execution
of this Agreement, the Related Agreements, or the consummation of the
transactions contemplated hereby or thereby. All of the consents and approvals
set forth on Schedule 4.08 have been obtained.
4.09 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or, to the Knowledge of St. ▇▇▇▇, threatened, by or
against St. ▇▇▇▇ with respect to this Agreement or the Related Agreements, or in
connection with the transactions contemplated hereby or thereby and St. ▇▇▇▇ has
no reason to believe there exists a valid basis for any such claim, action,
suit, proceeding, or investigation.
4.10 Broker's Fees. No agent, broker or other person is or may be entitled
to a commission or finder's fee in connection with the transactions contemplated
by this Agreement, or is or may be entitled to make any claim against the
Stockholders or ▇▇▇▇▇ or against St. ▇▇▇▇ or any of its subsidiaries or
affiliates as a result of any actions by St. ▇▇▇▇. St. ▇▇▇▇ shall indemnify the
Stockholders against any claim for any such commission or finder's fee made by
any agent, broker or other person as a result of any actions by St. ▇▇▇▇.
4.11 No Misstatements or Omissions. No representation or warranty made in
this Agreement by St. ▇▇▇▇ is false or misleading as to any material fact or
omits to state a material fact required to make any of such information not
misleading in any material respect. In addition, all other information made
available by St. ▇▇▇▇ to the Stockholders, whether in oral, written or any other
form, is true and correct to the Knowledge of St. ▇▇▇▇, and such information is
not false or misleading as to any material fact. To the knowledge of St. ▇▇▇▇,
the foregoing representations, warranties and information, together with the SEC
Documents, constitute full disclosure of all material facts with respect to the
business, assets and liabilities of St. ▇▇▇▇.
ARTICLE 5
DELIVERIES
5.01 Deliveries by the Stockholders. At the Closing, in addition to any
other documents required to be delivered under the terms of this Agreement, the
Stockholders shall deliver the following:
26
(a) A certificate of the Stockholders dated the Closing, certifying
that any consents and approvals referred to in Section 3.11, which are
obtainable prior to the Closing, have been obtained, together with copies of
such consents and approvals.
(b) Copies of the Articles of Incorporation of ▇▇▇▇▇ certified as of
a recent date by the Secretary of State of Montana.
(c) Copies of the By-Laws of ▇▇▇▇▇ including all amendments thereto,
certified by the Secretary or an Assistant Secretary of ▇▇▇▇▇.
(d) A Certificate dated not earlier than seven calendar days prior
to Closing of the Secretary of State of Montana as to the valid existence of
▇▇▇▇▇.
(e) Certificates of authority dated during 1999 of the Secretary of
State of each of the states in which ▇▇▇▇▇ is qualified to do business, as to
the due qualification or license of ▇▇▇▇▇ as a foreign corporation in such
state.
(f) The opinion of ▇▇▇▇▇▇▇, Haughey, Hanson, Toole & ▇▇▇▇▇▇▇▇, PLLP,
counsel to ▇▇▇▇▇ and the Stockholders, substantially in the form of Exhibit
5.01(f) hereto.
(g) Evidence in form and substance satisfactory to St. ▇▇▇▇ of the
resignation of all of the directors of ▇▇▇▇▇ other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
(h) The Stockholders shall deliver to St. ▇▇▇▇ Uniform Commercial
Code financing statement searches for the State of Montana and any other state
in which ▇▇▇▇▇ or the Affiliates do business, dated within 15 calendar days
prior to the date of the Closing, showing that there are no security interests,
judgments, taxes, other liens or encumbrances outstanding against ▇▇▇▇▇ or the
Affiliates or their assets, or against the Stockholders.
5.02 Deliveries by St. ▇▇▇▇. At the Closing, in addition to any other
documents required to be delivered under the terms of this Agreement, St. ▇▇▇▇
shall have delivered or will deliver the following:
(a) A certificate of the President or a Vice President of St. ▇▇▇▇,
dated the Closing Date, certifying that any consents and approvals referred to
in Section 4.08 have been obtained, together with copies of such consents and
approvals.
27
(b) A copy of the Certificate of Incorporation of St. ▇▇▇▇,
certified as of a recent date by the Secretary of State of Delaware.
(c) A copy of the By-Laws of St. ▇▇▇▇, including all amendments
thereto, certified by the Secretary or an Assistant Secretary of St. ▇▇▇▇.
(d) A Certificate, dated as of a recent date of the Secretary of
State of the State of Delaware as to the valid existence and good standing of
St. ▇▇▇▇.
(e) Resolutions adopted by the Board of Directors of St. ▇▇▇▇
authorizing this Agreement and the Related Agreements and the transactions
contemplated hereby, certified by the Secretary or an Assistant Secretary of St.
▇▇▇▇.
(f) The opinion of the law firm ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll,
LLP, counsel to St. ▇▇▇▇, substantially in the form of Exhibit 5.02(f) hereto.
ARTICLE 6
RELATED AGREEMENTS
6.01 Related Agreements. The obligation of the Stockholders to exchange
the ▇▇▇▇▇ Stock for the St. ▇▇▇▇ Stock is subject to the execution and delivery
of the following Related Agreements at the Closing:
(a) Severance Agreements with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the form of Exhibit 6(a)
hereto. In addition, separate and apart from such Severance Agreements, St. ▇▇▇▇
agrees that should any ▇▇▇▇▇ employee be terminated or leave the employment of
St. ▇▇▇▇ or ▇▇▇▇▇, in determining what, if any, payments will be offered to the
former employee, due regard will be given to the individual's duration of
employment with ▇▇▇▇▇. Nothing in the preceding sentence shall alter or amend
St. Mary's policies with regard to payments to employees who no longer remain in
the employment of St. ▇▇▇▇, and St. ▇▇▇▇ will continue to make its determination
regarding these types of payments on a case-by-case basis taking into account
all considerations it deems appropriate in making these types of decisions
consistent with St. Mary's past practices. In addition, St. ▇▇▇▇ will take into
consideration any ▇▇▇▇▇ employee's years of service with ▇▇▇▇▇ with regard to
participation in any St. ▇▇▇▇ employee benefit plan with the exception of the
pension plan;
(b) An employment agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the form of
Exhibit 6(b) hereto;
28
(c) A Stock Option Plan Participation Agreement with ▇▇▇ ▇▇▇▇▇▇ in
the form of Exhibit 6(c) hereto; and
(d) An Agreement with respect to the 401(k) Retirement Plan of ▇▇▇▇▇
in the form of Exhibit 6(d) hereto.
ARTICLE 7
INDEMNIFICATION
7.01 Survival of Representations, Warranties and Covenants. Without
affecting the validity or applicability of the indemnification provisions set
forth in Sections 7.02 and 7.03 of this Agreement, the representations,
warranties, and covenants of the Stockholders and St. ▇▇▇▇ contained in this
Agreement shall survive the Closing and remain in full force and effect until
one year after the Closing except that such representations and warranties shall
remain in full force and effect until two years after the Closing with respect
to any breach thereof resulting in or otherwise involving a claim by a third
party against St. ▇▇▇▇, ▇▇▇▇▇ or an Affiliate (a "Third Party Claim").
7.02 Indemnification by and on Behalf of the Stockholders. Subject to the
provisions of Section 7.05, the Stockholders jointly and severally agree to
defend, indemnify and hold St. ▇▇▇▇ harmless from and against any and all
losses, liabilities, damages, costs or expenses (including reasonable attorneys'
fees, penalties, and interest) payable to or for the benefit of, or asserted by,
any party, resulting from, arising out of, or incurred as a result of:
(a) the breach of any representation and/or warranty made by the
Stockholders herein; or (b) any claim, whether made before or after the date of
this Agreement, or any litigation, proceeding or governmental investigation,
whether commenced before or after the date of this Agreement, arising out of the
businesses of ▇▇▇▇▇ or the Affiliates prior to the Closing, or otherwise arising
out of any act or occurrence prior to, or any condition or facts existing as of,
Closing, regardless of whether or not referred to on a Schedule to this
Agreement or otherwise disclosed or known to St. ▇▇▇▇ as of Closing. No claim by
St. ▇▇▇▇ for indemnification by the Stockholders shall be made after one year
has elapsed following the Closing except that a claim for indemnification may be
made by St. ▇▇▇▇ with respect to a Third Party Claim until two years has elapsed
following the Closing.
The indemnification obligation of the Stockholders set forth above shall
be limited to those amounts attributable solely to ▇▇▇▇▇ with respect to
interests or activities of it, including those realized with respect to an
interest of ▇▇▇▇▇ in any
29
property partially owned by it or realized with respect to any partnership
interest of ▇▇▇▇▇ (including its interest in an Affiliate), but shall not apply
with respect to an ownership interest or partnership interest (even if in an
Affiliate) of others.
7.03 Indemnification by St. ▇▇▇▇. Subject to the provisions of Section
7.05, St. ▇▇▇▇ agrees to defend, indemnify and hold the Stockholders harmless
from and against any and all losses, liabilities, damages, costs, or expenses
(including reasonable attorneys' fees, penalties and interest) payable to or for
the benefit of, or asserted by, any party, resulting from, arising out of, or
incurred as a result of the breach of any representation and warranty made by
St. ▇▇▇▇ herein or in accordance herewith. No claim by the Stockholders for
indemnification by St. ▇▇▇▇ shall be made after one year has elapsed following
the Closing except that a claim for indemnification may be made by the
Stockholders with respect to a Third Party Claim until two years has elapsed
following the Closing.
7.04 Notice of Claims. The Stockholders and St. ▇▇▇▇ shall give prompt
written notice to each other of any claim by any party which might give rise to
a claim by the Stockholders or St. ▇▇▇▇ against the other based upon the
indemnity provisions contained herein, stating the nature and basis of the claim
and the actual or estimated amount thereof; provided, however, that failure to
give such notice will not affect the obligation of the indemnifying party to
provide indemnification in accordance with the provisions of this Article 7
unless, and only to the extent that, such indemnifying party is actually
prejudiced thereby. In the event that any action, suit or proceeding is brought
by a third party against the Stockholders or St. ▇▇▇▇ with respect to which the
other party may have liability under the indemnification provisions contained
herein, the indemnifying party shall have the right, at its sole cost and
expense, to defend such action in the name or on behalf of the indemnified party
and, in connection with any such action, suit or proceeding, the parties hereto
agree to render to each other such assistance as may reasonably be required in
order to ensure the proper and adequate defense of any such action, suit or
proceeding; provided further, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate because of actual or
potential differing interests between such indemnified party and any other party
represented by such counsel. Neither party hereto shall make any settlement of
any claim which might give rise to liability of the other party under the
indemnification provisions contained herein without the written consent of such
other party, which consent such other party covenants shall not be unreasonably
withheld.
30
7.05 Limitation of Liability. Notwithstanding the provisions of this
Article 7, neither the Stockholders collectively nor St. ▇▇▇▇ shall have any
liability to the other with respect to any matter which liability does not
exceed $150,000 as to any single liability or $250,000 as to liabilities in the
aggregate irrespective of their single size except that such limitations shall
not apply to any Third Party Claim. In the event of any liability of the
Stockholders for indemnification, St. ▇▇▇▇ ▇▇▇ elect to cause such liability to
be satisfied in part or in whole by reducing pro rata the St. ▇▇▇▇ Stock issued
to the Stockholders by the number of shares (rounded to the nearest whole
number) equal to the amount of the Stockholders' liability based on the
published closing price for a share of St. ▇▇▇▇ Stock on the day such liability
is quantified, and the certificates of St. ▇▇▇▇ Stock issued to the Stockholders
shall bear a legend to that effect.
ARTICLE 8
SHARE RESTRICTIONS
8.01 Restricted Shares. The Stockholders hereby agree that during the
period beginning on the Closing and, subject to Section 8.05, ending on the date
which is three years after the date hereof, the Stockholders will not sell,
assign, transfer, pledge, hypothecate, encumber or otherwise dispose of
("Transfer") any shares of St. ▇▇▇▇ Stock received as part of the Consideration
(the "Restricted Shares"), other than in accordance with the terms of this
Article 8 or as otherwise agreed by St. ▇▇▇▇ in writing in its sole discretion,
and any such purported Transfer shall be void, except that the Stockholders may
make a Permitted Transfer (as hereinafter defined), if and only if the
transferee in such Permitted Transfer ("Permitted Transferee") executes and
delivers a written agreement to the effect that the Restricted Shares
transferred to such Permitted Transferee shall be bound by the terms of this
Article 8 as if such Permitted Transferee were an original party hereto.
8.02 Permitted Transfer. For purposes of this Article 8, a "Permitted
Transfer" of Restricted Shares by any Stockholder is (i) any bona fide gift of
such Restricted Shares by the Stockholder, including a charitable gift, (ii) any
transfer of such Restricted Shares by the Stockholder to a trustee for the
benefit of the Stockholder or the Stockholder's ancestors, descendants or
spouse, or (iii) any transfer of such Restricted Shares by a Stockholder to the
Stockholder's executors, administrators or legal representatives, heirs or
devisees pursuant to the laws of descent and distribution.
8.03 Restrictive Legends; Stop Orders. The certificate or certificates
representing Restricted Shares issued to the Stockholders or any Permitted
Transferee shall bear an appropriate legend referring to the restrictions on
Transfer contained in this Article 8 (together with the legends referred to in
31
Section 3.29 and Section 7.05 hereof) shall be endorsed with substantially the
following legend in addition to any other legend which may appear on such
certificate or certificates:
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTECATION, ENCUMBRANCE OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS AND CONDITIONS OF A STOCK EXCHANGE AGREEMENT DATED JUNE 1,
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇ & EXPLORATION COMPANY AND ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ AND
OTHER INDIVIDUALS. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF
ST. ▇▇▇▇ ▇▇▇▇ & EXPLORATION COMPANY.
To assure compliance with the terms of this Agreement, St. ▇▇▇▇ shall also be
permitted to deliver appropriate "stop transfer" instructions covering
certificates representing Restricted Shares to any transfer agent or registrar
of the shares of St. ▇▇▇▇ Stock.
8.04 Termination of Restrictions. Any provision of this Agreement to the
contrary notwithstanding, the restrictions on Transfer contained in this Article
8 shall expire as follows: (i) with respect to twenty percent of the original
number of Restricted Shares, one year after the date hereof, and (ii) with
respect to the remaining Restricted Shares, three years after the date hereof.
The restrictions contained herein shall expire with respect to the Restricted
Shares held by the Stockholders in proportion to his respective ownership of
shares of St. ▇▇▇▇ Stock on the date hereof.
8.05 Removal of Legends. Whenever the restrictions imposed by this Article
8 shall terminate by reason of the passage of time and the Restricted Shares are
transferable pursuant to Rule 144(k) under the Securities Act or other available
exemption from the registration requirements of the Securities Act, each holder
of Restricted Shares shall be entitled to receive from St. ▇▇▇▇, without cost or
expense, a new certificate representing such Restricted Shares not bearing the
legends set forth in Section 8.03 and Section 3.29 upon receipt of an opinion of
counsel reasonably satisfactory to St. ▇▇▇▇ that such restrictions have
terminated in accordance with their terms and that such Restricted Shares are
transferable without registration under the Securities Act pursuant to Rule
144(k) under the Securities Act or other available exemption from the
registration requirements of the Securities Act.
32
8.06 Voting Rights. The holder or holders of Restricted Shares shall
retain the full right to vote or to execute and deliver a proxy to vote
Restricted Shares on any matter submitted to holders of St. ▇▇▇▇ Stock.
ARTICLE 9
GENERAL PROVISIONS
9.01 Continuance of ▇▇▇▇▇. Subject to a major change of circumstance such
as a change of control of St. ▇▇▇▇, after Closing, St. ▇▇▇▇ will conduct its
business affairs in the areas where ▇▇▇▇▇ has historically been involved as well
as any additional areas deemed appropriate by St. ▇▇▇▇ using the ▇▇▇▇▇ entity in
name as a wholly owned subsidiary of St. ▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will become
an employee charged with the responsibility of running the day-to-day affairs of
▇▇▇▇▇ as its President and Chief Executive Officer. During the time that ▇▇▇▇▇▇
▇. ▇▇▇▇▇ retains the title of President and Chief Executive Officer of ▇▇▇▇▇,
St. ▇▇▇▇ agrees that the principal office of ▇▇▇▇▇ will remain in Billings,
Montana.
9.02 Net Profit Interest Pools. It is understood and agreed that the
current employees of ▇▇▇▇▇ will not participate in the employee net profits
interest pool of St. ▇▇▇▇ for the calendar year 1999. Eligible ▇▇▇▇▇ employees
will be offered participation in such pool during the calendar year 2000 and
thereafter. During calendar year 1999, the current ▇▇▇▇▇ employees will maintain
their compensation plans in existence as of January 1, 1999 for the 1999
calendar year and will maintain their customary participation therein.
9.03 Expenses. Except as otherwise expressly provided herein, each party
to this Agreement shall pay its or his own expenses (including, without
limitation, the fees and expenses of its or his agents, representatives,
counsel, and accountants) incurred in connection with the negotiation, drafting,
execution, delivery and performance of this Agreement and the Related Agreements
and the transactions contemplated hereby and thereby.
9.04 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Stockholders and St. ▇▇▇▇ and their respective
heirs, personal representatives, successors, representatives and assigns.
9.05 Waiver. No provision of this Agreement shall be deemed waived by
course of conduct, including the act of closing, unless such waiver is made in
writing signed by all then existing or surviving parties hereto, stating that it
is intended specifically to modify this Agreement, nor shall any course of
conduct
33
operate or be construed as a waiver of any subsequent breach of this Agreement,
whether of a similar or dissimilar nature.
9.06 Entire Agreement. This Agreement (together with the Schedules and
Exhibits hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by St. ▇▇▇▇ or by the Stockholders (or by any
director, officer, employee, agent, or other representative of such parties)
relating to the matters contemplated hereby. This Agreement (together with the
Schedules and Exhibits hereto) constitutes the entire agreement between the
parties and there are no agreements or commitments except as expressly set forth
herein. To the extent there exists any conflict between this Agreement and any
of the Related Agreements, this Agreement shall control.
9.07 Further Assurances. Each of the parties hereto agrees to execute all
further documents and instruments and to take or to cause to be taken all
reasonable actions which are necessary or appropriate to complete the
transactions contemplated by this Agreement.
9.08 Notices. All notices, demands, requests, and other communications
hereunder shall be in writing and shall be deemed to have been duly given and
shall be effective upon receipt if delivered by hand, or sent by certified or
registered United States mail, postage prepaid and return receipt requested, or
by prepaid overnight express service or facsimile transmission (with receipt
confirmed). Notices shall be sent to the parties to the following addresses (or
at such other addresses for a party as shall be specified by like notice;
provided that such notice shall be effective only upon receipt thereof):
If to the Stockholders:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
34
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to St. ▇▇▇▇:
St. ▇▇▇▇ ▇▇▇▇ & Exploration Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.09 Amendments, Supplements, Etc. This Agreement may be amended or
modified only by a written instrument executed by all parties hereto which
states specifically that it is intended to amend or modify this Agreement.
9.10 Severability. In the event that any provision contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein
and, in lieu of each such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
but still be legal, valid and enforceable.
9.11 Governing Law. This Agreement and its interpretation shall be
governed by the laws of the State of Colorado.
35
9.12 Counterpart Execution. This Agreement may be executed in counterparts
and each counterpart shall constitute a binding agreement as if the parties had
executed a single document. The parties agree that such counterpart execution
may be evidenced by a facsimile transmission of the execution page for each such
party, and such facsimile execution shall constitute a binding execution by such
party. At or after Closing, the parties agree that a sufficient number of
original counterpart executions will be obtained and affixed to this Agreement
so that each party will have an originally executed Agreement.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------ ---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇ Cebull
------------------------------ ---------------------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Trustee of the
Clay ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ ---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
His Attorney-in-Fact
ST. ▇▇▇▇ ▇▇▇▇ & EXPLORATION COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
President
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LIST OF SCHEDULES
_____ Schedule 1.01(4) - Consideration - Shares of St. ▇▇▇▇ Stock used as
Consideration
_____ Schedule 2.02 - Exchange of Shares - Certificates for St. ▇▇▇▇ Stock
used as Consideration
_____ Schedule 3.01 - Ownership of Shares - Ownership of ▇▇▇▇▇ Stock by
Stockholders
_____ Schedule 3.04 - Organization Existence - Jurisdictions where ▇▇▇▇▇
is qualified to do business; names and addresses of registered
agents in such jurisdictions; and names under which ▇▇▇▇▇ has
conducted or purported to conduct business since date of
incorporation
_____ Schedule 3.06 - Subsidiaries - List, if any, of ▇▇▇▇▇ subsidiaries,
ownership in any corporation, partnership, liability company, joint
venture, or other enterprise or entity
_____ Schedule 3.10 - No Adverse Effects or Changes - ▇▇▇▇▇
_____ Schedule 3.10(e) - List, if any, of any disposition of
any material assets, properties or rights, or canceled
or terminated, or agreed to cancel or terminate any
debts or claims other accounts receivable write-offs and
writedowns in the ordinary course of business (since
December 31, 1998)
_____ Schedule 3.10(h) - List, if any, of any accrual or
arrangement for or payment of any bonus or special
compensation or severance or termination pay to any
present or former officer, director, or executive
employee (since December 31, 1998)
_____ Schedule 3.11 - Third Party and Governmental Consents - List, if
any, of the Third Party and Governmental Consents required on the
part of Stockholders, ▇▇▇▇▇, or its Affiliates
_____ Schedule 3.12 - Real and Personal Property
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_____ Schedule 3.12(a) - Real Property - List of all real
property other than properties acquired for development
of or exploration for oil and gas resources, owned,
leased or subject to a contract by ▇▇▇▇▇ (written or
oral). Owned Real Property needs a description of the
nature and amount of any liens, mortgages, and
encumbrances affecting such property. List, if any, of
any building, premises and equipment (owned or leased by
▇▇▇▇▇) that are not in good condition and repair.
_____ Schedule 3.12(b) - Oil and Gas Leases and ▇▇▇▇▇ List of
oil and gas leases in which ▇▇▇▇▇ or its Affiliate is a
party
_____ Schedule 3.12(c) - Personal Property - List, if any, of
any outstanding options, warrants, commitments,
agreements or any other right against any of the
personal property (other than St. ▇▇▇▇)
_____ Schedule 3.13 - Accounts and Notes Receivable - List of ▇▇▇▇▇'▇ and
its Affiliate's accounts and notes receivables as of December 31,
1998
_____ Aging report setting forth all accounts receivables
(other than intercompany receivables)
_____ Identify any asset holding a security interest to secure
payment of the underlying indebtedness
_____ Description of the nature and amount of any lien on or
security interest in such accounts and notes receivable
_____ Identify accounts receivable on Schedule 3.13 which have
been collected in their entirety since December 31,
1998.
_____ Schedule 3.14 - Accounts Payables and Promissory Notes - ▇▇▇▇▇ and
its Affiliate. List of:
_____ Accounts payable as of December 31, 1998 with
Appropriate aging report
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_____ Long-term and short-term promissory notes, installment
contracts, loan agreements, and credit agreements
_____ Indentures, mortgages, security agreements, pledges,
etc.
_____ Identify accounts payable on Schedule 3.13 which have
been fully or partially paid since December 31, 1998.
_____ Schedule 3.15 - Bonds and Insurance
_____ List of all insurance policies and bonds. List should
include (i) insurer and agent; (ii) amount of coverage;
(iii) premium dates; and (iv) expiration dates, if any.
_____ List, if any, of any facts or circumstances under which
claims for uninsured losses or damages are likely to be
Asserted against ▇▇▇▇▇ in excess of $10,000 or pending
claims against ▇▇▇▇▇
_____ Schedule 3.16 - Bank Accounts - List of (i) names of banks or
financial institutions where ▇▇▇▇▇ or the Affiliates has banks
Accounts and safety deposit boxes (ii) names of persons authorized
to draw on account or access the safety deposit box; and (iii) names
of persons other than officers who are authorized to incur
Liabilities for borrowed funds
_____ Schedule 3.19 - Permits - List of all federal, state or local
regulatory or governmental authority permits relating to the
business properties or assets of ▇▇▇▇▇
_____ Schedule 3.20 - Taxes - List, if any, of audited Tax reports of
▇▇▇▇▇
_____ Schedule 3.21 - Employee Benefit Plans and Employment Agreement
_____ Schedule 3.21(a) - List of every Employee Benefit Plan
_____ Copies of such Employee Benefit Plan
_____ Copy of the most recent audit or unaudited
financial statement with regard to each
Employee Benefit Plan
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_____ Copies of most recent determination letters
to any Employee Benefit Plan which is an
employee pension benefit plan
_____ Copies of most recent actuarial reports,
if any, of each such Employee Benefit Plan
_____ Schedule 3.22 - Certain Employees and Salaries - List of names and
salary rates of all employees of ▇▇▇▇▇ whose current regular annual
salary rate is $60,000 or more. List also identifies company cars,
club memberships, and other fringe benefits
_____ Schedule 3.23 - Material Contracts - List of all contracts and
Arrangements written, electronic, oral or otherwise. Copies of all
Contracts listed.
_____ Schedule 3.24 - Labor Matters - List, if any, of any labor strike,
dispute, slow-down, work stoppage, or other labor difficulty in the
Last 5 years
_____ Schedule 3.25 - Environmental Matters
_____ Schedule 3.26 - Necessary Property - Assets of ▇▇▇▇▇ not otherwise
Listed on a schedule, whether tangible or intangible which are
required for the operation by ▇▇▇▇▇ of its businesses
_____ Schedule 3.31 - Tax Reports - Copies of tax reports filed by ▇▇▇▇▇
or its Affiliates for the past two years including 1998
_____ Schedule 4.05 - Capital Stock of St. ▇▇▇▇ - List, if any, of
outstanding equity securities, options, warrants, rights, call,
Commitments, conversion rights, rights of exchange, plans or other
Agreements of any character provided for the purchase, issuance or
sale of any shares of capital stock of St. ▇▇▇▇ (other than
Contemplated in this Agreement)
_____ Schedule 4.08 - Third Party and Governmental Consents - List, if
Any, of the Third Party and Governmental Consents required on the
part of St. ▇▇▇▇
_____ Exhibit 5.01(f) - Form opinion letter from Quanterra counsel
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_____ Exhibit 5.02(g) - Form opinion letter from St. ▇▇▇▇ counsel
_____ Exhibit 6(a) - Form Severance Agreement
_____ Exhibit 6(b) - Form Employment Agreement
_____ Exhibit 6(c) - form Stock Option Plan Participation Agreement
_____ Exhibit 6(d) - Form 401(k) Retirement Plan of ▇▇▇▇▇
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DELIVERIES BY ST. ▇▇▇▇
_____ 1. A certificate from the President or a Vice President dated the
date of Closing, certifying that any third party or
governmental consents and approvals have been obtained,
together with copies of such consents and approvals.
_____ 2. A copy of STML&EC Certificate of Incorporation (recent date)
from Secretary of State of Delaware.
_____ 3. A copy of the By-Laws of St. ▇▇▇▇, including all amendments
thereto certified by the Secretary or an Assistant Secretary
of St. ▇▇▇▇.
_____ 4. A Certificate of Good Standing for STML&E (recent date) from
Secretary of State of Delaware
_____ 5. STML&EC Resolutions adopted by the Board of Directors of
Authorizing transaction
_____ 6. Opinion letter from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
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CONDITIONS BY ▇▇▇▇▇ PETROLEUM CORPORATION
_____ 1. A Stockholders certificate (dated as of Closing) regarding
Consents and approvals, together with copies of such consents
And approvals
_____ 2. Certified Articles of Incorporation (recent date) from
Secretary of State of Montana.
_____ 3. By-Laws including all amendments thereto certified by the
Secretary or an Assistant Secretary
_____ 4. Certificate from the Montana Secretary of State (dated within
seven calendar days prior to Closing) as to the valid
existence of ▇▇▇▇▇.
_____ 5. Certificates of Authority dated during 1999 from the Secretary
of State of each of the states in which ▇▇▇▇▇ is qualified to
do business
_____ 6. Opinion letter from ▇▇▇▇▇▇▇, Haughey, Hanson, Toole &
▇▇▇▇▇▇▇▇, PLLP
_____ 7. Evidence of resignation of all of the directors of ▇▇▇▇▇ other
than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
_____ 8. Uniform Commercial Code financing statement searches for the
State of Montana and any other state in which ▇▇▇▇▇ or its
Affiliates do business (dated within 15 calendar days prior to
the date of the Closing)
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ADDITIONAL AGREEMENTS NEEDED FOR CLOSING
_____ Severance Agreements
_____ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_____ ▇▇▇▇ ▇▇▇▇▇▇
_____ ▇▇▇▇▇ ▇▇▇▇▇▇
_____ ▇▇▇ ▇▇▇▇▇▇
_____ ▇▇▇▇ ▇▇▇▇▇▇
_____ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____ Employment agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_____ Stock Option Plan Participation Agreement with ▇▇▇ ▇▇▇▇▇▇
_____ An Agreement with respect to the 401(k) Retirement Plan of ▇▇▇▇▇
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