UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Report for Event: August 11, 1997
PETRO UNION, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-20760 84-1091986
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
123 N.W. Fourth Street, Suite 3, Evansville, Indiana 47708
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(812) 424-6745
Not applicable
(Former name and address)
<PAGE>
Items 1 and 2. Changes in Control of Registrant and Acquisition
or Disposition of Assets.
On May 13, 1996, the Company filed a voluntary petition for
relief pursuant to Chapter 11 of the United States Bankruptcy
Code. The Company filed its first Plan of Reorganization on June
13, 1997. The Company filed its First Amended Plan of
Reorganization on July 13, 1997 (the "Plan"), which is expected
to be confirmed by the United States Bankruptcy Court of the
Southern District of Indiana (the "Bankruptcy Court") on August
25, 1997. Pursuant to the Plan, upon confirmation by the
Bankruptcy Court, the Company will issue one million shares of a
new class of no par value common stock ("Common Stock") and
cancel the existing class of $.125 par value common stock ("Old
Common Stock"). Upon emergence from bankruptcy, the Company is
expected to be capitalized in a sufficient sum to allow it to
engage in its horizontal drilling ventures, which is the core
business of the pre-petition Company.
Pursuant to the Plan and an Agreement and Plan of
Acquisition entered into by the Company and Horizontal Ventures,
Inc. ("HVI") on June 13, 1997 and confirmed by the Bankruptcy
Court on June 27, 1997 (subject only to the confirmation of the
proposed Plan of Reorganization), the Company will acquire upon
confirmation of the Plan all the outstanding stock of HVI and HVI
will become a wholly-owned subsidiary of the Company. HVI is the
Company's largest competitor in the horizontal drilling business.
HVI is an Oklahoma corporation with its principal place of
business located in Tulsa, Oklahoma. HVI has multiple sets of
drilling rigs and personnel which will enable the Company to
strengthen its horizontal drilling activities. At the time of
the acquisition the Company will transfer 590,000 shares of
Common Stock to the shareholders of HVI. Those shareholders will
then control in the aggregate 59% of the outstanding Common Stock
after reorganization. The consideration was determined based
upon HVI's inventory of equipment, its personnel and its
available working capital. The Company's bankruptcy counsel has
advised the Company that as a result of the waiver of certain
conditions precedent by HVI on August 11, 1997, the transaction
is probable to occur.
Upon the effective date of the Plan, the directors of the
Company will be: (1) Randeep S. Grewal; (2) Richard D. Wedel; (3)
Dr. Jan F. Haltrop; (4) Dirk Van Keulen; and (5) Donald A.
Christensen. Also on such date, the Officers of the Company will
be Randeep S. Grewal as the Chief Executive Officer and Richard
D. Wedel as the Chief Operating Officer.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of HVI
To be filed by amendment.
(b) Pro Forma Financial Information
Attached is a copy of the Pro Forma Balance Sheet for
the Company as of May 31, 1997, assuming the acquisition had
taken place on such date. The remainder of the required
financial statements will be filed by amendment.
(c) Exhibits
10.1 Agreement and Plan of Acquisition
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
PETRO UNION, INC.
Date: August 12, 1997 By: /s/ Richard D. Wedel
Richard D. Wedel
Its: President
RE-ORGANIZED PETRO UNION INC.
PRO-FORMA BALANCE SHEET MAY 31, 1997
ASSETS
CURRENT ASSETS:
CASH $42,378
SECURITIES $630,747
ACCOUNTS RECEIVABLE $163,272
TOTAL CURRENT ASSETS $836,397
TOTAL FIXED ASSETS $4,861,241
TOTAL ASSETS $5,697,638
LIABILITIES
CURRENT LIABILITIES
SHORT TERM NOTES $9,200
EMPLOYEE BENEFITS $966
ACCOUNTS PAYABLE $137,204
ACCRUED TAXES $418
OTHER ACCRUED LIABILITIES $113,045
TOTAL CURRENT LIABILITIES $260,833
TOTAL LONG TERM LIABILITIES $225,967
TOTAL LIABILITIES $486,800
TOTAL ASSETS - TOTAL LIABILITIES $5,210,838
NOTE: BALANCE SHEET UNAUDITED
PRO-FORMA INCLUSIVE OF HVI PER PLAN ACQUISITION
PRO-FORMA ASSUMES PLAN CONFIRMATION AS PER JUNE 13TH,
1997 FILING
AGREEMENT AND PLAN OF ACQUISITION
BETWEEN
PETRO UNION, INC.
AND
HORIZONTAL VENTURES, INC.
This Agreement and Plan of Acquisition is entered into this
12th day of June, 1997, between Petro Union, Inc., a Colorado
corporation (the "Petro"), and Horizontal Ventures, Inc., an
Oklahoma corporation ("HVI").
RECITALS
A. The Common Stock of Petro is listed on the Nasdaq
SmallCap Market.
B. Petro is currently subject to supervision in the U.S.
Bankruptcy Court for the Southern District of Indiana (the
"Bankruptcy Court"), File No. 96-70559-VHL-11, and in conjunction
therewith Petro desires to develop with the assistance of HVI a
plan of reorganization (the "Bankruptcy Plan of Reorganization")
which shall reflect this Agreement and which shall be submitted
to the creditors and the Bankruptcy Court for approval prior to
the consummation of this Agreement.
C. HVI was one of the first licensee of certain Amoco
horizontal drilling technology and has drilled more wells
utilizing such technology than any other licensee.
D. HVI desires to assist Petro, also an Amoco licensee, in
the completion of the Bankruptcy Plan of Reorganization, which
completion as a precondition to the consummation this Agreement
with Petro.
E. Pursuant to the Bankruptcy Plan of Reorganization to be
filed by Petro with the Bankruptcy Court and to be confirmed on
or before the closing of this Agreement, the creditors of Petro
agreeing to accept equity securities of Petro in connection with
the Bankruptcy Plan of Reorganization shall receive in the
aggregate, not more than 150,000 shares of Series B Common Stock
of Petro, no par value per share (the "Petro Series B Common
Stock"). To the extent that creditors do not accept equity
securities of Petro under such Bankruptcy Plan of Reorganization,
HVI will pay such creditors in cash as is acceptable to HVI. An
outline of the plan as contemplated as of the date of this
agreement is attached hereto as Exhibit A as it may be amended
from time to time.
F. The Boards of Directors of Petro and HVI believe it to
be in the best interest of each respective corporation and each
corporation's respective shareholders that Petro acquire all of
the issued and outstanding shares of HVI and in furtherance
thereof, have approved such acquisition subject to the terms and
conditions of this Agreement whereby HVI becomes a wholly-owned
subsidiary of Petro.
G. Pursuant to the acquisition, among other things, all
the outstanding shares of Common and Preferred Stock of HVI, no
par value per share (the "HVI Stock"), will be converted into an
aggregate of 590,000 shares of Petro Series B Common Stock.
H. In connection with this Agreement, Richard D. Wedel
shall receive 70,000 shares Petro Series B Common and Randeep
Grewal shall receive 70,000 shares of the Series B Common Stock
in consideration for entering into employment agreements with
Petro under the terms of this Agreement.
I. In connection with this Agreement the total net book
value of the combined entities post acquisition shall be not less
than $5,000,000.00 U.S. and there shall be a maximum of 1,000,000
shares of Petro Series B Common Stock issued and outstanding.
In order to consummate this plan of Acquisition, the parties
hereto, in consideration of the mutual agreements and on the
basis of the representations and warranties hereinafter set
forth, do hereby agree as follows:
[Remainder of page intentionally left blank]
<PAGE>
ARTICLE 1
THE ACQUISITION
Section 1.1 The Acquisition. Upon the terms and subject to
the conditions hereof, Petro will acquire all of the issued and
outstanding shares of HVI and HVI will become a wholly owned
subsidiary of Petro ( the Acquisition ). The outstanding shares
of HVI Common and Preferred Stock shall be exchanged for an
aggregate of 590,000 shares of Petro Series B Common Stock.
Section 1.2 Consideration for Transfer to Petro. Upon
consummation of this Agreement at the closing (the "Closing"),
subject to the terms and conditions of this Agreement, and in
full consideration for the transaction, each Common Stockholder
of HVI will receive one share of Petro Series B Common Stock for
every six shares of HVI Stock owned by such stockholder,
representing an aggregate of 590,000 shares of Petro Series B
Common Stock to be issued hereunder to the Common Stockholders of
HVI. Each share of Petro Series B Common Stock issued hereunder
shall be fully paid and nonassessable, and shall have the rights,
preferences, privileges and restrictions set forth in the
Articles of Amendment to the Articles of Incorporation of Petro
in the form attached hereto as Schedule 1.2 (the "Aquiror
Articles of Amendment").
ARTICLE 2
CLOSING
Subject to the terms and conditions hereof, the Closing
shall be held at the offices of Cohen Brame & Smith Professional
Corporation in Denver, Colorado at 10:00 a.m., within five days
following the receipt of confirmation by the Bankruptcy Court of
the Bankruptcy Plan of Reorganization. At the Closing, the
Common and Preferred Stockholders of HVI shall receive in
exchange for their shares of HVI Common and Preferred Stock the
consideration described in Section 1.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties by HVI. Except as
set forth on the HVI Schedule of Exceptions attached hereto as
Schedule 3.1, HVI represents and warrants to Petro, as a material
inducement to Petro to execute and perform its obligations under
this Agreement, as follows:
(1) Organization and Standing of HVI. HVI is a
corporation duly organized and validly existing and in good
standing under the laws of the State of Oklahoma. It has
all requisite corporate power and authority to carry on its
business as now being conducted, to enter into this
Agreement and to carry out and perform the terms and
provisions of this Agreement. HVI has no subsidiaries and,
further, has no direct or indirect interest, either by way
of stock ownership or otherwise, in any other firm,
corporation, association, or business.
(2)(a) Capitalization and Indebtedness for Borrowed
Moneys. HVI is duly and lawfully authorized by its Articles
of Incorporation to issue 1,000,000 shares of HVI Common
Stock and 3,000,000 shares of Preferred Stock, of which
783,071 shares of Common Stock and 3,000,000 shares of
Preferred Stock are validly issued and outstanding on the
date of this Agreement. HVI has no shares of treasury
stock. All of the outstanding shares of HVI's Common and
Preferred Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
(b) HVI is not presently liable on account of any
indebtedness for borrowed moneys, except as reflected in the
Financial Statements.
(c) There are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments,
convertible securities, or other agreements or arrangements
of any character or nature whatever under which HVI is or
may be obligated to issue or purchase shares of its capital
stock.
(3) Ownership of HVI's Common and Preferred Stock. To
the best of HVI's knowledge after inquiry, (i) the shares
of its Common and Preferred Stock of HVI are held by the
persons set forth in Schedule 3.1(3) of this Agreement (the
"Stockholders"), free and clear of all liens, claims,
encumbrances, and restrictions of every kind; and (ii)
Schedule 3.1(3) of this Agreement contains a complete and
accurate list of all of the Stockholders of HVI and the
shares of its Common and Preferred Stock held by each.
(4) HVI's Authority. The execution, delivery, and
performance of this Agreement has been duly authorized by
all requisite corporate action. This Agreement constitutes
a valid and binding obligation of HVI enforceable in
accordance with their terms (except as limited by
bankruptcy, insolvency, or other laws affecting the
enforcement of creditors' rights). No provision of the
Articles of Incorporation and any amendments thereto, Bylaws
and any amendments thereto, minutes or share certificates of
HVI, or of any contract to which HVI is a party or otherwise
bound, prevents the Stockholders from delivering good title
to their shares of such capital stock in the manner
contemplated hereunder.
(5) Financial Statements. HVI has furnished Petro
with its audited balance sheet as of December 31, 1996 and
its statements of operations, stockholders' equity and cash
flows for the year then ended, and its unaudited balance
sheet as of May 31, 1997 and its statements of operations
and cash flows for the three months then ended
(collectively, the "HVI Financial Statements"). All of the
HVI Financial Statements present fairly the financial
position of HVI as of the respective dates, and the results
of its operations for the respective periods therein
specified, The HVI Financial Statements were prepared in
accordance with generally accepted accounting principles
applied upon a basis consistent with prior accounting
periods, and the audited HVI Financial Statements were
audited in accordance with generally accepted auditing
standards. The HVI Financial Statements are attached as
Schedule 3.1(5).
(6) Present Status. Other than as described herein or
in the Schedules attached hereto, HVI has not, since May 31,
1997:
(a) Incurred any material obligations or liabilities,
absolute, accrued, contingent, or otherwise and whether due
or to become due, except current liabilities incurred in the
ordinary course of business, none of which materially
adversely affects the business or prospects of HVI;
(b) Discharged or satisfied any material liens or
encumbrances, or paid any material obligation or liability,
absolute, accrued, contingent, or otherwise and whether due
or to become due, other than (i) current liabilities shown
on the HVI Financial Statements and current liabilities
incurred since the close of business on the date of the HVI
Financial Statements, in each case, in the ordinary course
of business and (ii) expenses incurred in connection with
the transactions contemplated by this Agreement (including,
without limitation, reasonable attorney fees and costs);
(c) Declared or made any payment or distribution to
its stockholders or purchased or redeemed, or obligated
itself to purchase or redeem, any of its shares of Common
and Preferred Stock or other securities;
(d) Mortgaged, pledged, or subjected to lien, or any
other encumbrances or charges, any of its assets, tangible
or intangible;
(e) Sold or transferred any of its assets except for
inventory sold in the ordinary course of business or
canceled any debt or claim;
(f) Suffered any damage, destruction, or loss (whether
or not covered by insurance) affecting the properties,
licenses, business, or prospects of HVI, or waived any
rights of material value;
(g) Except with respect to this Agreement, entered
into any material transaction other than in the ordinary
course of business;
(7) Litigation. Except as disclosed in the HVI
Financial Statements, there are no legal actions, suits,
arbitrations, or other legal or administrative proceedings
pending or threatened against HVI which would materially
affect it, its properties, assets, or business; and HVI is
not aware of any facts which to its knowledge might result
in any action, suit, arbitration, or other proceeding which
in turn might result in any material adverse change in the
business or condition (financial or otherwise) of HVI or its
properties or assets. HVI is not in default with respect to
any judgment, order, or decree of any court or any
government agency or instrumentality.
(8) Compliance With the Law and other Instruments. To
the best of HVI's knowledge, the business operation of HVI
has been and is being conducted in material compliance with
all applicable laws, rules, and regulations of all
authorities. HVI is not in violation of, or in default
under, any term or provision of its Articles of
Incorporation, as amended, or its Bylaws, as amended, or of
any license (including but not limited to the Amoco
horizontal drilling technology license), lien, mortgage,
lease, agreement, instrument, order, judgment, or decree, or
subject to any restriction, contained in any of the
foregoing, of any kind or character which materially
adversely affects in any way the business, properties,
assets, or prospects of HVI, or prevent consummation of the
exchange of securities contemplated by this Agreement.
(9) Title to Properties and Assets. HVI has good and
marketable title to all its properties and assets, including
without limitation those reflected in the HVI Financial
Statements and those used or located on property controlled
by HVI in its business (except assets sold in the ordinary
course of business), subject to no mortgage, pledge, lien,
charge, security interest, encumbrance, or restriction
except those which (a) are disclosed in the HVI Financial
Statements as securing specified liabilities; or (b) do not
materially adversely affect the use thereof.
(10) Creditor's Arrangements. HVI has not made any
assignment for the benefit of creditors, nor has any
involuntary or voluntary petition in bankruptcy been filed
by or against HVI.
(11) Contracts and Other Obligations. Except with
respect to this transaction, HVI is not a party to, or
otherwise bound by, any written or oral contract or
agreement not made in the ordinary course of business.
HVI has in all material respects performed all
obligations required to be performed by it to date and is
not in material default under any of the contracts,
agreements, leases, documents, or other arrangements to
which it is a party or by which it is otherwise bound. To
the best of HVI's knowledge, all parties with whom HVI has
contractual arrangements are in material compliance
therewith and are not in default thereunder, and HVI has not
been notified by any party of its intent to terminate any
material contract with HVI.
(12) Records. The books of account, minute books,
stock certificate books, and stock transfer ledgers of HVI
are complete and correct, and there have been no
transactions involving the business of HVI which properly
should have been set forth in said respective books, other
than those set forth therein.
(13) Brokers or Finders. All negotiations on the part
of HVI relative to this Agreement and the transactions
contemplated hereby have been carried on by HVI without the
intervention of any person or as the result of any act of
HVI in such manner as to give rise to any valid claim
against HVI or Petro for a brokerage commission, finder's
fee, or other like payment.
(14) Absence of Certain Changes or Events. Since May
31, 1997, there has not been any material adverse change in,
or event or condition materially and adversely affecting,
the condition (financial or otherwise), properties, assets,
liabilities, or the business of HVI.
(15) Taxes. HVI has duly filed all federal, state,
county and local income, franchise, excise, real and
personal property and other tax returns and reports
(including, but not limited to, those relating to social
security, withholding, unemployment insurance, and
occupation (sales) and use taxes) required to have been
filed by HVI up to the date hereof. All of the foregoing
returns are true and correct in all material respects and
HVI has paid all taxes, interest and penalties shown on such
returns or reports as being due. HVI has paid or made
adequate provision in the HVI Financial Statements or its
books and records for all taxes payable in respect of all
periods ending on or before the date hereof. HVI has no
material liability for any taxes, interest or penalties of
any nature whatsoever, except for those taxes which may have
arisen up to the Closing Date in the ordinary course of
business and are properly accrued on the books of HVI as of
the Closing Date.
(16) Environmental Matters. There are no actions,
proceedings or investigations pending or, to the actual
knowledge of HVI, threatened before any federal or state
environmental regulatory body, or before any federal or
state court, alleging noncompliance by HVI with the
Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA") or any other Environmental
Laws. To the actual knowledge of HVI: (i) there is no
reasonable basis for the institution of any action,
proceeding or investigation against HVI under any
Environmental Law; (ii) HVI is not responsible under any
Environmental Law for any release by any person at or in the
vicinity of real property of any hazardous substance (as
defined by CERCLA), caused by the spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of any
such hazardous substance into the environment; (iii) HVI is
not responsible for any costs of any remedial action
required by virtue of any release of any toxic or hazardous
substance, pollutant or contaminant into the environment
including, without limitation, costs arising from security
fencing, alternative water supplies, temporary evacuation
and housing and other emergency assistance undertaken by any
environmental regulatory body; (iv) HVI is in compliance
with all applicable Environmental Laws; and (v) no real
property used, owned, managed or controlled by HVI contains
any toxic or hazardous substance including, without
limitation, any asbestos, PCBs or petroleum products or
byproducts in any form, the presence, location or condition
of which (a) violates any Environmental Law, or
(b) otherwise would pose any significant health or safety
risk unless remedial measures were taken. For purposes of
this Agreement, "Environmental Laws" shall mean any federal,
state, local or municipal statute, ordinance or regulation,
or order, ruling or other decision of any court,
administrative agency, or other governmental authority
pertaining to the release of hazardous substances (as
defined in CERCLA) into the environment.
Section 3.2 Representations and Warranties by Petro. Except
as set forth on Petro Schedule of Exceptions attached hereto as
Schedule 3.2, Petro represents and warrants to HVI, as a material
inducement to HVI to execute and perform its obligations under
this Agreement, as follows:
(1) Organization and Standing of Petro. Petro is a
corporation duly organized and validly existing and in good
standing under the laws of the State of Colorado. It has
all requisite corporate power and authority to carry on its
business as now being conducted, to enter into this
Agreement and to carry out and perform the terms and
provisions of this Agreement. Petro has no direct or
indirect interest, either by way of stock ownership or
otherwise, in any other firm, corporation, association, or
business.
(2)(a) Capitalization and Indebtedness for Borrowed
Moneys. Petro is duly and lawfully authorized by its
Articles of Incorporation, as amended, to issue 50,000,000
shares of Common Stock, $.125 par value per share (the
"Petro Common Stock"), of which 17,537,945 shares are issued
and outstanding as of the date hereof. Petro is authorized
to issue 40,000,000 shares of Preferred Stock, $.0001 par
value. No Preferred Stock has been designated or is issued
or outstanding. Petro has no treasury stock and no other
authorized series or class of stock. All the outstanding
shares of Petro Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable and free
of preemptive rights. All of the Petro Series B Common
Stock to be issued pursuant to this Agreement to the
shareholders of HVI in exchange for their shares of HVI's
Common and Preferred Stock shall be duly authorized pursuant
to the filing of Petro Articles of Amendment with the
Colorado Secretary of State and all other necessary
corporate action, validly issued, fully paid, nonassessable,
issued in compliance with state and federal securities laws
and upon compliance with the exemption granted by Section
3(a)(10) of the Securities Act of 1933, and will be issued
without restrictive legend (except as necessary to indicate
control) and be freely tradeable subject to the resale
limitations of Rules 144 and 145 under the Securities Act of
1933, as amended, and the provisions of Section 6.1 of this
Agreement.
(b) Petro is not presently liable on account of any
indebtedness for borrowed moneys, except as reflected in the
financial statements described in subparagraph (4), below.
(c) There are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments,
convertible securities, or other agreements or arrangements
of any character or nature whatever under which Petro is or
may be obligated to issue or purchase shares of its capital
stock.
(3) Petro's Authority. The execution, delivery, and
performance of this Agreement shall have been duly
authorized by all requisite corporate action. This
Agreement constitutes a valid and binding obligation of
Petro enforceable in accordance with its terms (except as
limited by bankruptcy, insolvency, or other laws affecting
the enforcement of creditors' rights). No provision of the
Articles of Incorporation and any amendments thereto, Bylaws
and any amendments thereto, minutes or share certificates of
Petro, or of any contract to which Petro is a party or
otherwise bound, prevents Petro from delivering good title
to its shares of such capital stock in the manner
contemplated hereunder.
(4) Financial Statements. Petro has furnished to HVI
its audited balance sheet as of December 31, 1996 and its
statements of operations, stockholders' equity and cash
flows for the year then ended, and its unaudited balance
sheet as of May 31, 1997 and its statements of operations
and cash flows for the three months then ended
(collectively, the "Petro Financial Statements"). All of
Petro Financial Statements present fairly the financial
position of Petro as of the respective dates, and the
results of its operations for the respective periods therein
specified, Petro Financial Statements were prepared in
accordance with generally accepted accounting principles
applied upon a basis consistent with prior accounting
periods, and the audited Petro Financial Statements were
audited in accordance with generally accepted auditing
standards. Petro's Financial Statements are attached hereto
as Schedule 3.2(4).
(5) Present Status. Petro has not, since May 31,
1997:
(a) Incurred any obligations or liabilities, absolute,
accrued, contingent, or otherwise and whether due or to
become due, except current liabilities incurred in the
ordinary course of business, none of which adversely affects
the business or prospects of Petro;
(b) Discharged or satisfied any liens or encumbrances,
or paid any obligation or liability, absolute, accrued,
contingent, or otherwise and whether due or to become due,
other than current liabilities shown on Petro's Financial
Statements and current liabilities incurred since the close
of business on the date of Petro's Financial Statements, in
each case, in the ordinary course of business;
(c) Declared or made any payment or distribution to
its stockholders or purchased or redeemed, or obligated
itself to purchase or redeem, any of its shares of Common
Stock or other securities;
(d) Mortgaged, pledged, or subjected to lien, or any
other encumbrances or charges, any of its assets, tangible
or intangible;
(e) Sold or transferred any of its assets, or canceled
any debt or claim;
(f) Suffered any damage, destruction, or loss (whether
or not covered by insurance) affecting the properties,
business, or prospects of Petro, or waived any rights of
substantial value;
(g) Except with respect to this Agreement, entered
into any transaction other than in the ordinary course of
business;
(6) Litigation. Except as disclosed in Petro's
Financial Statements or in Schedule 3.2, there are no legal
actions, suits, arbitrations, or other legal or
administrative proceedings pending or threatened against
Petro which would affect it, its properties, assets, or
business; and Petro is not aware of any facts which to its
knowledge might result in any action, suit, arbitration, or
other proceeding which in turn might result in any material
adverse change in the business or condition (financial or
otherwise) of Petro or its properties or assets. Petro is
not in default with respect to any judgment, order, or
decree, of any court or any government agency or
instrumentality, except as set forth in Acquiror's financial
statements.
(7) Compliance With the Law and Other Instruments. To
the best of Acquiror's knowledge, the business operation of
Petro has been and is being conducted in accordance with all
applicable laws, rules, and regulations of all authorities.
Petro is not in violation of, or in default under, any term
or provision of its Articles of Incorporation, as amended,
or its Bylaws, as amended, or of any lien, mortgage, lease,
agreement, instrument, order, judgment, or decree, or
subject to any restriction, contained in any of the
foregoing, of any kind or character which materially
adversely affects in any way the business, properties,
assets, or prospects of Petro, or which would prohibit Petro
from entering into this Agreement or prevent consummation of
the exchange of securities contemplated by this Agreement.
(8) Title to Properties and Assets. Petro has good
and marketable title to all its properties and assets,
including without limitation those reflected in Petro's
Financial Statements and those used or located on property
controlled by Petro in its business (except assets sold in
the ordinary course of business), subject to no mortgage,
pledge, lien, charge, security interest, encumbrance, or
restriction except those which (a) are disclosed in Petro's
Financial Statements as securing specified liabilities; or
(b) do not materially adversely affect the use thereof.
(9) Creditor's Arrangements. Petro is currently
subject to supervision in Bankruptcy Court and will no later
than June 16, 1997 file a Plan of Reorganization.
(10) Contracts and Other Obligations. Petro is not a
party to or otherwise bound by, any written or oral:
(a) Contract or agreement not made in the ordinary
course of business;
(b) Employment or consultant contract which is not
terminable at will without cost or other liability to Petro
or any successor;
(c) Contract with any labor union;
(d) Bonus, pension, profit-sharing, retirement, share
purchase, stock option, hospitalization, group insurance, or
similar plan providing employee benefits, except as
disclosed in its filings with the Securities and Exchange
Commission;
(e) Advertising contract or contract for public
relations services;
(f) Purchase, supply, or service contracts in excess
of $1,000 each, or in the aggregate of $10,000 for all such
contracts whether below or above $1,000;
(g) Deed of trust, mortgage, conditional sales
contract, security agreement, pledge agreement, trust
receipt, or any other agreement or arrangement whereby any
of the assets or properties of Petro are subjected to a
lien, encumbrance, charge, or other restriction;
(h) Contract or other commitment continuing for a
period of more then thirty days and which is not terminable
without cost or other liability to Petro or its successor;
or
Petro has in all material respects performed all
obligations required to be performed by it to date and is
not in material default under any of the contracts,
agreements, leases, documents, or other arrangements to
which it is a party or by which it is otherwise bound. To
the best of Acquiror's knowledge, all parties with whom
Petro has contractual arrangements are in compliance
therewith and are not in default thereunder.
(11) Records. The books of account, minute books,
stock certificate books, and stock transfer ledgers of Petro
are complete and correct, and there have been no
transactions involving the business of Petro which properly
should have been set forth in said respective books, other
than those set forth therein.
(12) Brokers or Finders. All negotiations on the part
of Petro relative to this Agreement and the transactions
contemplated hereby have been carried on by Acquiror without
the intervention of any person or as the result of any act
of Petro in such manner as to give rise to any valid claim
against HVI for a brokerage commission, finder's fee, or
other like payment.
(13) Absence of Certain Changes or Events. Since May
31, 1997, there has not been any material adverse change in,
or event or condition materially and adversely affecting,
the condition (financial or otherwise), properties, assets,
liabilities or, to the knowledge of Acquiror, the business
or prospects of Petro.
(14) Taxes. Petro has duly filed all federal, state,
county and local income, franchise, excise, real and
personal property and other tax returns and reports
(including, but not limited to, those relating to social
security, withholding, unemployment insurance, and
occupation (sales) and use taxes) required to have been
filed by Petro up to the date hereof. All of the foregoing
returns are true and correct in all material respects and
Petro has paid all taxes, interest and penalties shown on
such returns or reports as being due. Petro has no
liability for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up
to the Closing Date in the ordinary course of business and
are properly accrued on the books of Petro as of the Closing
Date.
(15) Environmental Matters. There are no actions,
proceedings or investigations pending or, to the actual
knowledge of Petro, threatened before any federal or state
environmental regulatory body, or before any federal or
state court, alleging noncompliance by Petro with CERCLA or
any other Environmental Laws. To the actual knowledge of
Petro: (i) there is no reasonable basis for the institution
of any action, proceeding or investigation against Petro
under any Environmental Law; (ii) Petro is not responsible
under any Environmental Law for any release by any person at
or in the vicinity of real property of any hazardous
substance (as defined by CERCLA), caused by the spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of any
such hazardous substance into the environment; (iii) Petro
is not responsible for any costs of any remedial action
required by virtue of any release of any toxic or hazardous
substance, pollutant or contaminant into the environment
including, without limitation, costs arising from security
fencing, alternative water supplies, temporary evacuation
and housing and other emergency assistance undertaken by any
environmental regulatory body; (iv) Petro is in compliance
with all applicable Environmental Laws; and (v) no real
property used, owned, managed or controlled by Petro
contains any toxic or hazardous substance including, without
limitation, any asbestos, PCBs or petroleum products or
byproducts in any form, the presence, location or condition
of which (a) violates any Environmental Law, or
(b) otherwise would pose any significant health or safety
risk unless remedial measures were taken.
(16) SEC Filings. Petro has filed with the SEC all
reports and other documents required to be filed by Petro
pursuant to the Securities Exchange Act of 1934, as amended
(the "34 Act"), and the applicable rules and regulations
thereunder. As of their respective dates, each of such
reports and other documents complied in all material
respects with the requirements of the 1934 Act and the
applicable rules and regulations thereunder, and such
reports and other documents contained, as of their
respective dates, no untrue statements of any material facts
nor omitted to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
ACTIONS AND OBLIGATIONS OF THE
ACQUIROR AND HVI BEFORE AND
AFTER THE CLOSING AND SECURITIES ACT MATTERS
Section 4.1 Actions of HVI Pending Closing. HVI covenants
with Petro that from the date hereof to and including the Closing
Date:
(1) Correct as of Closing. Each representation and
warranty of HVI set forth in Paragraph 3.1 of this Agreement
shall be true and correct on and as of the Closing Date.
(2) Operations. Except with the prior written consent
of the Committee established in Section 4.3 (1) Petro, HVI
will:
(a) Conduct its affairs and business only in the
ordinary course of business;
(b) Not create or incur any material liabilities other
than current liabilities incurred in the ordinary course of
business;
(c) Not create or incur, or suffer to exist, any
mortgage, lien, pledge, hypothecation, charge, encumbrance,
or restriction of any kind which is not otherwise disclosed
in this Agreement;
(d) Not make any capital expenditures, or capital
additions or betterment, except as many be involved in
ordinary repairs, maintenance, and replacement;
(e) Except with regard to completion of the terms of
this Agreement, enter into any contract or commitment,
except in the ordinary course of business, pursuant to which
it will be obligated to expend, or entitled to receive, in
excess of $10,000 annually;
(f) Maintain its assets and properties in good
condition and repair, and not sell, or otherwise dispose of,
any of its material assets or properties, except sales out
of inventory in the ordinary course of business;
(g) Not declare or pay any dividend on, or make any
other distribution upon, or purchase, retire, or redeem, any
shares of its Common and Preferred Stock, or set aside any
funds for any such purpose;
(h) Not issue or sell, or obligate itself to issue or
sell any additional shares of its Common or Preferred Stock,
whether or not such shares have been previously authorized
or issued, or issue or sell any warrants, rights, or options
to acquire any such shares, or acquire any stock of any
corporation, or any interest in any business enterprise;
(i) Not amend its Articles of Incorporation or Bylaws;
(j) Not pay, or agree to pay, conditionally or
otherwise, any bonus, extra compensation, pension, or
severance pay to any director, stockholder, officer,
consultant, agent, or employee under any pension plan or
otherwise, or increase the compensation paid by it at May
31, 1997 to any officer, director, agent, consultant, or
employee;
(k) Not discharge or satisfy any material lien,
charge, or encumbrance, nor pay any obligation or liability,
absolute or contingent, except (i) current liabilities shown
on the HVI Financial Statements dated May 31, 1997, or
current liabilities incurred since said date in the ordinary
course of business, and (ii) expenses incurred in connection
with the transactions contemplated by this Agreement
(including, without limitation, reasonable attorneys' fees,
accounting fees, and costs);
(l) Except with respect to this transaction, not merge
or consolidate, or obligate itself to do so, with, or into
any other entity;
(m) Not enter into any transactions, or take any acts
which if effected or performed prior to the date of this
Agreement, would constitute a breach of the representations,
warranties, and agreements contained herein;
(n) Not institute, settle, or agree to settle any
action or proceeding before any court or governmental body;
and
(3) Access to Records. HVI will afford Petro, its
representatives, counsel, agents, and employees, at all
reasonable times, and in a manner and under circumstances
which will not cause unreasonable interference with the
operation of HVI's business, access to all of the properties
of HVI, and its books, files, records, insurance policies,
and other corporate books and records, for the purpose of
audit, inspection, and examination thereof, and will do, and
cause HVI to do, everything reasonably necessary to enable
Petro to make a complete examination of the assets and
properties of HVI, and the condition thereof. No such
examination, however, shall constitute a waiver or
relinquishment, on the part of Petro, of its right to rely
upon the covenants, representations, and warranties made by
HVI and the Stockholders in the provisions of this
Agreement.
(4) Consultation. HVI will endeavor to keep Petro
apprized with respect to the operation and conduct of HVI's
business prior to the Closing Date.
Section 4.2 Actions of Petro Pending Closing. Petro covenants
with HVI that from the date hereof to and including the Closing
Date:
(1) Correct as of Closing. Each representation and
warranty of Petro set forth in Paragraph 3.2 of this
Agreement shall be true and correct on and as of the Closing
Date.
(2) Operations. Except with the prior written consent
of the Committee to the contrary, Petro will:
(a) Conduct its affairs and business only in the
ordinary course of business;
(b) Not create or incur any liabilities other than
current liabilities incurred in the ordinary course of
business;
(c) Not create or incur, or suffer to exist, any
mortgage, lien, pledge, hypothecation, charge, encumbrance,
or restriction of any kind;
(d) Not make or become a party to any contract or
commitment, or renew, extend, amend, or modify any contract
or commitment, except in the ordinary course of business,
except agreements related to the consummation of this
Agreement;
(e) Not make any capital expenditures or capital
additions or betterment except as many be involved in
ordinary repairs, maintenance, and replacement;
(f) Except with regard to completion of the terms of
this Agreement, not enter into any contract or commitment,
except in the ordinary course of business, pursuant to which
it will be obligated to expend, or entitled to receive, in
excess of $10,000 in amount;
(g) Not declare or pay any dividend on or make any
other distribution upon, or purchase, retire or redeem, any
shares of its Common and Preferred Stock, or set aside any
funds for any such purpose;
(h) Not issue or sell or obligate itself to issue or
sell any additional shares of its Common and Preferred Stock
(other than with respect to the Bankruptcy Plan of
Reorganization), whether or not such shares have been
previously authorized or issued, or issue or sell any
warrants, rights, or options to acquire any such shares, or
acquire any stock of any corporation or any interest in any
business enterprise;
(i) Except as necessary to accomplish the transactions
contemplated herein, not amend its Articles of Incorporation
or Bylaws;
(j) Not pay or agree to pay, conditionally or
otherwise, any bonus, extra compensation, pension, or
severance pay to any director, stockholder, offer,
consultant, agent, or employee under any pension plan or
otherwise, or increase the compensation paid by it at May
31, 1997 to any officer, director, agent, consultant, or
employee;
(k) Except with respect to the Bankruptcy Plan of
Reorganization, not discharge or satisfy any lien, charge or
encumbrance, nor pay any obligation or liability, absolute
or contingent, except (i) current liabilities shown on the
Financial Statements dated May 31, 1997 or current
liabilities incurred since said date in the ordinary course
of business and (ii) expenses incurred in connection with
the transactions contemplated by this Agreement (including,
without limitation, reasonable attorneys' fees, accounting
fees, and costs);
(l) Use reasonable commercial efforts to preserve its
business organization intact;
(m) Use reasonable commercial efforts to preserve the
goodwill of its suppliers, customers, and those having
business relations with it;
(n) Not merge or consolidate, or obligate itself to do
so, with or into any other entity; and
(o) Not enter into any transactions or take any acts
which if effected or performed prior to the date of this
Agreement, would constitute a breach of the representations,
warranties, and agreements contained herein.
(3) Access to Records. Petro will afford HVI, its
representatives, counsel, agents, and employees, at all
reasonable times and in a manner and under circumstances
which will not cause unreasonable interference with the
operation of Petro's business, access to all of the
properties of Petro and its books, files, records, insurance
policies, and other corporate books and records, for the
purpose of audit, inspection, and examination thereof, and
will do, and cause Petro to do, everything reasonable
necessary to enable Petro to make a complete examination of
the assets and properties of Petro and the condition
thereof. No such examination, however, shall constitute a
waiver or relinquishment on the part of Petro of its right
to rely upon the covenants, representations, and warranties
made by Petro in the provisions of this Agreement.
(4) Consultation. Petro will endeavor to keep HVI
apprized with respect to the operation and conduct of
Petro's business prior to the Closing Date.
Section 4.3 Undertakings of
Petro
and HVI.
(1) Coordination of Operations Pending Closing The
parties hereto have
appointed Richard D. Wedel and Randeep Grewal to act as an
operating committee (the Committee ) to coordinate all
operations of Petro and HVI during the period commencing on
the date of this agreement through the Closing Date. The
activities and decisions to be coordinated include but are
not limited to contracts, drilling activities, hiring, and
staffing activities. Notwithstanding, all such decisions
that may directly benefit the committee members shall
require Board of Director approvals from both HVI and Petro.
Additionally, HVI and Petro agree that the Committee and its
members shall be treated as directors of the individual
corporations they represent and therefore shall be subject
to all the rights of limitation of liability and
indemnification granted to officers and directors of the
Company pursuant to their charters, bylaws and any
applicable agreements.
(2) Petro and HVI each will hold, and will cause its
respective officers, directors, employees, consultants,
advisors and agents to hold, in confidence, unless compelled
to disclose by judicial or administrative process or by
other requirements of law, all confidential documents and
information concerning the parties furnished to any other
party in connection with the transactions contemplated by
this Agreement, except to the extent that such information
can be shown to have been (i) previously known on a non-
confidential basis by the disclosing party; (ii) in the
public domain; or (iii) later lawfully acquired by the
closing party from sources other than as a result of the
transactions contemplated herein; provided that each party
may disclose such information to its officers, directors,
employees, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement, so
long as such persons are informed of the confidential nature
of such information and are directed to treat such
information confidentially in accordance herewith. Each
party's obligation to hold any such information in
confidence shall be satisfied if it exercises the same care
with respect to such information as it would take to
preserve the confidentiality of its own similar information.
Subject to the foregoing and Section 4.3(2) below, each
party shall keep confidential the terms of this Agreement
and of the transactions contemplated hereby except to the
extent such information is legally required to be disclosed.
If this Agreement is terminated, such confidence shall be
maintained and each party will, and will use its best
efforts to cause its officers, directors, employees,
consultants, advisors and agents to, destroy or deliver to
each other party, upon request, all documents and other
materials, and all copies thereof, obtained by such party in
connection with this Agreement, that are subject to such
confidence. The parties obligations under this
Section 4.3(2) shall terminate on the Closing Date.
(3) No press release or other public disclosure of
matters related to this Agreement or any of the transactions
contemplated hereby shall be made by Petro or HVI unless the
other parties shall have provided its consent to the form
and substance thereof; provided, however, that nothing
herein shall be deemed to prohibit any party hereto from
making any disclosure which its counsel deems necessary or
advisable in order to fulfill such party's disclosure
obligations imposed by law.
(4) Each party shall provide the others with adequate
opportunity to conduct such reviews and examinations of the
business, properties and conditions (financial and
otherwise) of the others as each party shall deem prudent,
provided that such investigations shall not interfere
unreasonably with the normal operations of the party being
reviewed.
(5) The Petro Series B Common Stock to be issued to
HVI pursuant to this Agreement and collateral agreements
hereto will not be registered under the 1933 Act in reliance
on the exemption from registration set forth in Section
3(a)(10) thereof and accordingly will be issued without
restrictive legend except as necessary to evidence control.
(6) Bankruptcy Court and Creditor Approval. Petro
Series B Common Stock to be issued to certain creditors and
shareholders of Petro will be issued in accordance with
Section 1145 of the U.S. Bankruptcy Code and accordingly
will not be registered under the 1933 Act in reliance on the
exemption from registration set forth in Section 3(a)(10)
thereof. No later than June 16, 1997, Petro shall file
pursuant to Subchapter II of Chapter 11 of the U.S.
Bankruptcy Code a plan of reorganization which has been
approved by the boards of directors of both Petro and HVI
(the "Bankruptcy Plan of Reorganization") with the U.S.
Bankruptcy Court for the Southern District of Indiana (the
"Bankruptcy Court"), and will also submit such Bankruptcy
Plan of Reorganization to Petro's creditors, for the purpose
of obtaining the approval of the Bankruptcy Court and such
creditors of such Bankruptcy Plan of Reorganization and the
issuance of securities thereunder. HVI shall use its
reasonable efforts to assist Petro and its bankruptcy
counsel in filing such Bankruptcy Plan of Reorganization.
Petro and HVI shall each use their best efforts to prosecute
such Plan of Reorganization.. HVI will fund all acceptable
legal, administrative fees and cash requirements, pre-
approved by HVI, if any, required to consummate the plan.
HVI with Petro's counsel will lead the creditor
negotiations.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.1 Conditions Precedent to Obligations of HVI.
Except as may be waived in writing by HVI, all of the obligations
of HVI under this Agreement are subject to the fulfillment, prior
to or at the Closing on the Closing Date, of each of the
following conditions:
(1) Bankruptcy Court Confirmation of Plan of
Reorganization. The bankruptcy Plan of Reorganization which
serves as a fundamental premise of this Agreement shall have
been confirmed by the Bankruptcy Court subject to the
funding of the plan.
(2) Filing of Petro s Articles of Amendment. Petro's
Articles of Amendment shall have been filed with the
Colorado Secretary of State providing for the new capitol
structure including cancellation of the current Common Stock
and the provision of the new Series B Common Stock.
(3) Nasdaq Listing. Petro shall have maintained its
listing on the Nasdaq SmallCap Market.
(4) SEC Reports Current. Petro shall be current with
respect to its reporting obligations with the U.S.
Securities Exchange Commission.
(5) Representations and Warranties True. The
representations and warranties of Petro in Paragraph 3.2
hereof shall be true and correct in all material respects as
of the Closing Date, subject to any changes contemplated by
this Agreement.
(6) Opinion of Petro s Counsel. Petro shall have
delivered to HVI the opinion, dated the Closing Date, of
Acquiror's counsel, Cohen Brame & Smith Professional
Corporation in form attached hereto as Schedule 5.1(6).
(7) Directors' Approval. Consummation of the
transactions contemplated herein shall have been approved by
the Board of Directors of Petro at special meetings of the
Board of Directors to be held for the purpose of obtaining
such approvals or by unanimous written consent.
(8) Third-Party Consents. On or before the Closing
Date, all material consents or approvals by any third party,
if any, which are required to be obtained by Petro in
connection with the execution, delivery or performance of
this Agreement or the consummation of the transactions
contemplated herein shall have been obtained.
(9) Compliance with Agreements. Petro shall have
performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with
by it prior to or on the Closing Date.
(10) No Contracts Terminated. Petro shall not have had
any contract or contracts, which in the aggregate would
materially affect its business, terminated prior to the
Closing Date.
(11) No Damage to Assets. At the Closing Date the
machinery, equipment, inventory, or other tangible property
of Petro shall not have suffered loss or damage on account
of fire, flood, accident, act of war, civil commotion, or
any other cause or event beyond the reasonable power and
control of Petro (whether or not similar to the foregoing),
to an extent which substantially affects the value of the
properties and assets of Petro. Loss or damage shall be
considered to affect substantially the value of said
properties and assets within the meaning of this paragraph
if the book value of such properties and assets so lost or
damaged exceeds five percent (5%) in book value of all such
tangible properties and assets.
(12) Certificate of Officers. Petro shall have
delivered to HVI a certificate dated the Closing Date,
executed in its corporate name by, and verified by, the oath
of its President certifying to the fulfillment of the
conditions specified in this Section 5.1.
(13) Employment Agreements. Randeep Grewal and Richard
D. Wedel shall be living on the date of the Closing, shall
not be incapacitated so as to render them unavailable for
employment by Petro, and shall execute on or before the
Closing, Employment Agreements in the forms attached hereto
as Schedule 5.1(13) and approved by the Boards of Directors
of both Petro and HVI whereby Grewal shall act as the
Chairman and Chief Executive Officer and Wedel shall be
Vice-Chairman and Chief Operating Officer of the Company.
Section 5.2 Conditions Precedent to Obligations of Petro.
Except as may be waived in writing by Petro, all of the
obligations of Petro under this Agreement are subject to
fulfillment, prior to or at the Closing on the Closing Date, of
each of the following conditions:
(1) Bankruptcy Court Confirmation of Plan of
Reorganization. The bankruptcy Plan of Reorganization which
serves as a fundamental premise of this Agreement shall have
been confirmed by the Bankruptcy Court subject only to the
funding of the plan.
(2) Funding of the Bankruptcy Plan of Reorganization.
HVI shall have provided to Petro the HVI Financial
Statements and sufficient evidence that HVI has a sufficient
number of short radius horizontal drilling units and
adequate cash to fund the Plan of Reorganization and ongoing
working capita such that the combined net book value of the
parties is not less that $5,000,000.00 US.
(3) Representations and Warranties True. The
representations and warranties of HVI in Paragraph 3.1
hereof shall be true and correct as of the Closing Date,
subject to any changes contemplated by this Agreement.
(4) Third-Party Consents. On or before the Closing
Date, all material consents or approvals by any third party,
if any, which are required to be obtained, including the
Stockholders of HVI in connection with the execution,
delivery or performance of this Agreement or the
consummation of the transactions contemplated herein shall
have been obtained.
(5) Compliance With Agreement. HVI shall have
performed and complied with all agreements or conditions
required by this Agreement to be performed and complied with
by them prior to or on the Closing Date.
(6) Certificate of Officers. HVI shall have delivered
to Petro a certificate, dated the Closing Date, executed in
its corporate name by, and verified by, the oath of its
President or any Vice President and its Secretary or an
Assistant Secretary, certifying to the fulfillment of the
conditions specified in this Section 5.2.
(7) Opinion of HVI's Counsel. HVI shall have
delivered to Petro an opinion dated as of the Closing date
of Baer, Marks & Upham LLP, counsel to HVI, in the form
attached hereto as Schedule 5.2(7).
(8) No Contracts Terminated. HVI shall not have had
any contract or contracts, which in the aggregate would
materially affect its business, terminated prior to the
Closing Date.
(9) No Damage to Assets. At the Closing Date the
machinery, equipment, inventory, or other tangible property
of HVI shall not have suffered loss or damage on account of
fire, flood, accident, act of war, civil commotion, or any
other cause or event beyond the reasonable power and control
of HVI (whether or not similar to the foregoing), to an
extent which substantially affects the value of the
properties and assets of HVI. Loss or damage shall be
considered to affect substantially the value of said
properties and assets within the meaning of this paragraph
if the book value of such properties and assets so lost or
damaged exceeds five percent (5%) in book value of all such
tangible properties and assets.
(10) Employment Agreements. Randeep Grewal and Richard
D. Wedel shall be living on the date of the Closing, shall
not be incapacitated so as to render them unavailable for
employment by Petro, and shall execute on or before the
Closing, Employment Agreements in the forms attached hereto
as Schedule 5.1(13) and approved by the Boards of Directors
of both Petro and HVI, whereby Grewal shall act as the
Chairman and Chief Executive Officer and Wedel shall be
Vice-Chairman and Chief Operating Officer of the Company.
ARTICLE 6
POST CLOSING COVENANTS
Section 6.1 Reports Under Securities Exchange Act of 1934.
With a view to making available to the shareholders of HVI the
benefits of Rule 144 and 145 promulgated under the Act and any
other rule or regulation of the SEC that may at any time permit a
Stockholder to sell securities of Petro to the public without
registration, Petro agrees to:
(1) make and keep public information available, as
those terms are understood and defined in Rule 144;
(2) file with the SEC in a timely manner all reports
and other documents required of Petro under the Act and the
1934 Act; and
(3) furnish to any shareholder, so long as the
shareholder owns any Series Common and Preferred Stock,
forthwith upon request (i) a written statement by Petro that
it has complied with the reporting requirements of Rule 144,
the Act and the 1934 Act, (ii) a copy of the most recent
annual report of Petro and such other reports and documents
so filed by Petro, and (iii) such other information as may
be reasonably requested in availing any shareholder of any
rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such
form.
Section 6.2 Business. It is the understanding of the parties
hereto that the business of Petro subsequent to the Closing shall
be to continue the business of providing horizontal drilling
services to the oil and gas industry.
ARTICLE 7
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES:
All statements of fact contained herein, any certificate or
schedule delivered by or on behalf of HVI or Petro pursuant to
the terms hereof, shall be deemed representations and warranties
made by HVI and Petro, respectively, to each other under this
Agreement. The representations and warranties of the parties
shall not survive the Closing.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Amendment. This Agreement may be amended or
modified at any time and in all respects by an instrument in
writing executed on behalf of each of the parties hereto.
Section 8.2 Board of Directors. Upon the Closing, the Board
of Directors of Petro shall have five members and shall consist
of Randeep Grewal, Richard D. Wedel, Dr. Jan F. Holthrop, Dirk
van Keulen and Donald A. Christensen.
Section 8.3 Assignment. Neither this Agreement nor any right
created hereby shall be assignable by HVI (or their successors in
interest) or Petro without the prior written consent of the
others, except by the laws of succession. Nothing in this
Agreement, express or implied, is intended to confer upon any
person, other than the parties hereto and their respective
successors, assigns, heirs, executors, administrators, or
personal representations, any rights or remedies under or by
reason of this Agreement.
Section 8.4 Notices. Any notice, communication, request,
reply, or advice, hereinafter severally and collectively called
"notice," in this Agreement provided or permitted to be given,
made, or accepted by either party to the other must be in writing
and may be given or be served by depositing the same in the
United States mail, addressed to the party to be notified,
postage prepaid and registered or certified with return receipt
requested, by delivering the same in person to an officer of such
party, or by sending the same via facsimile transmission with the
original deposited in the United States mail in the manner herein
above described. Notice given in the manner herein above
described shall be effective only if an when received by the
parties to be notified. For purposes of notice the addresses of
the parties shall, until changed as hereinafter provided, be as
follows:
(1) If to Petro:
Richard D. Wedel, President
Petro Union, Inc.
123 Main Street, Suite 300
Evansville, IN 47708
Fax: (812) 424-3576
Phone: (812) 424-6745
with a copy to:
Roger V. Davidson, Esq.
Cohen Brame & Smith Professional Corporation
1700 Lincoln Street, Suite 1800
Denver, Colorado 80203
Fax: (303) 894-0475
Phone: (303) 837-8800
(2) If to HVI:
Randeep Grewal, President
4815 South Harvard, Suite 470
Tulsa, OK 74135
Fax: (918) 743-5088
Phone: (918) 743-4744
with a copy to:
Ivan Dreyer, Esq.
Baer, Marks & Upham LLP
805 Third Avenue
New York, NY 10022
Fax: (212) 702-5941
or at such other addresses as any party may have
advised the others in writing.
Section 8.5 Paragraph and Other Headings. Paragraph and other
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.6 Severability. In the event that any one or more
of the provisions 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 other provisions of this Agreement, but this Agreement
shall be constructed as if such invalid, illegal, or
unenforceable provisions had never been contained therein.
Section 8.7 Governing Law. This Agreement shall be construed
under and in accordance with the laws of the State of Colorado.
Section 8.8 Attorney Fees. If any action at law or inequity,
including an action declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorney fees from the
other party, which fees may be set by the court in the trial of
such on or may be enforced in a separate action brought for that
purpose, and which fees shall be in addition to any other relief
which may be awarded.
Section 8.9 Counterparts. This Agreement and all other copies
of this Agreement insofar as they relate to the rights, duties,
and remedies of parties, shall be deemed to be one agreement.
This Agreement may be executed concurrently in one or more
counterparts by facsimile, each which shall be deemed an
original, but all which together shall constitute one and the
same instrument.
Section 8.10 Integrated Agreement. This Agreement constitutes
the entire agreement between the parties hereto, and there are no
agreements, understandings, restrictions, warranties, or
representations between the parties other than those set forth
herein or herein provided for.
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<PAGE>
IN WITNESS WHEREOF, this Agreement and Plan of Acquisition
has been executed the day and year set forth above.
PETRO UNION, INC.
By:
____________________________________
Richard D. Wedel, President
Attest:
____________________________________
Its:
____________________________________
HORIZONTAL VENTURES, INC.
By:
____________________________________
Randeep Grewal, President
Attest:
____________________________________
Its:
____________________________________
