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
December 17, 1997
Date of Report (Date of earliest event reported)_______________________________
MAGNUM HUNTER RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 1-12508 87-0462881
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 401-0752
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(Former name or former address, if changed since last report)
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Item 2. Acquisition of Assets
On December 17, 1997, Magnum Hunter Resources, Inc. acquired a thirty
percent (30%) membership interest in NGTS, LLC, a newly formed wholly owned
subsidiary of Natural Gas Transmission Services, Inc. NGTS, LLC assumed all of
NGTS' operations as of December 1, 1997.
Magnum Hunter completed the $4.35 million acquisition from NGTS with a
combination of cash ($2.35 million) and promissory notes ($2.0 million) that
have equity "put" features once Magnum Hunter's common stock achieves a trading
range of $7.50 per share. Magnum Hunter may, at its option and at any time,
retire the promissory notes with stock or cash. Magnum Hunter funded the
acquisition by drawing on its revolving line of credit with its lenders.
Dallas based NGTS is a four year old natural gas marketing and trading
company with operations concentrated in the western two-thirds of the country.
In fiscal 1996, NGTS reported audited pre-tax income of $2.3 million on total
revenues of $154.9 million. For the nine months ended September 30, 1997, NGTS
reported unaudited pre-tax income of $2.2 million on revenues of $131.4 million.
NGTS is presently marketing approximately 280 million cubic feet of natural gas
per day. As of December 1, 1997, Magnum Hunter and its gas gathering subsidiary,
Hunter Gas Gathering, Inc., has dedicated its natural gas production to NGTS,
LLC for marketing.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
It is impractible at this time to file the required financial statements of
the acquired business. The Registrant, however, believes that such information
will be filed within 45 days and hereby undertakes to file such information as
soon as practicable, but in no event later than 60 days from January 1, 1998.
(b) Pro Forma Financial Information
It is impractible at this time to file the required pro forma financial
information relative to the acquired business. The Registrant, however, believes
that such information will be filed within 45 days and hereby undertakes to file
such information as soon as practicible, but in no event later than 60 days from
January 1, 1998.
(c) Exhibits
2.1 Purchase and Sale Agreement between the Registrant and NGTS dated
December 17, 1997.
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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.
MAGNUM HUNTER RESOURCES, INC.
/s/ Chris Tong
BY:____________________________
Chris Tong
Sr. Vice President and
Chief Financial Officer
Dated: December 29, 1997
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), dated as of this 17th day
of December, 1997, is executed by and among the parties hereto on the terms and
conditions contained herein.
ARTICLE I
DEFINITION OF TERMS
As used herein, the terms specified below shall have the following
meanings:
"Tim Allen" means Tim Allen, an individual.
"Gregg Allen" means Gregg Allen, an individual.
"Boss" means Steven S. Boss, an individual.
"Brown" means Lonnie Brown, an individual.
"Burkhead" means Brian Burkhead, an individual.
"Buyer" means Hunter Gas Gathering, Inc., a Texas corporation.
"NGTS" means Natural Gas Transmissions Services, Inc., a Texas Corporation.
"Newco" means NGTS LLC,. a Texas limited liability company.
"Parent" means Magnum Hunter Resources, Inc., a Nevada corporation.
"Shareholder" means Tim Allen, Gregg Allen, Boss, Brown or Burkhead.
"Shareholders" means Tim Allen, Gregg Allen, Boss, Brown and Burkhead.
ARTICLE II
AGREEMENT TO PURCHASE AND SALE
SECTION 2.1: Agreement
On the terms and subject to the conditions herein set forth, Buyer agrees
to purchase a
Purchase and Sale Agreement, Page - 1
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membership interest in Newco from NGTS which interest shall be equal to 30% of
the Members Percentage Interest of Newco, as such term is defined in the
Regulations of Newco, and NGTS agrees to sell, transfer, assign and convey to
Buyer its respective beneficial right, title and interest in and to thirty
percent (30%) of the membership interests of Newco. The ownership of the
membership interest of Newco, before and after the consummation of the
transaction contemplated herein will be as follows:
Existing Ownership of Newco Post Closing Ownership of Newco
NGTS 100% NGTS 70%
Buyer 30%
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Total: 100%
SECTION 2.2: Purchase Price
The purchase price agreed to be paid by Buyer for the thirty percent (30%)
of the membership interests of Newco, is Four Million Three Hundred Fifty
Thousand Dollars and no cents ($4,350,000.00) (the "Base Purchase Price"). The
Base Purchase Price shall be payable as follows:
(i) Two Million Three Hundred Fifty Thousand and No/100 Dollars
($2,350,000.00) in cash by wire transfer at the Closing Date to the NGTS; and
(ii) Two promissory notes, each in the principal amount of One Million and
No/100 Dollars ($1,000,000.00), made payable to NGTS, with an interest rate of
9% per annum, payable on the terms and conditions shown in the form of
promissory note attached hereto as Exhibit "A" (the "Promissory Notes").
(iii) The promissory notes shall be secured by a security interest and lien
on the Buyer's membership interest in Newco. Buyer shall execute and deliver to
NGTS a security agreement, financing statement and such other documents and
instruments which NGTS's counsel deems necessary to perfect such lien under the
laws of the State of Texas.
SECTION 2.3: Effective Time, Closing Date and Closing
The "Effective Time" of the sale shall be December 1, 1997, at 12:01 am.
Central Standard Time. Buyer's purchase of a 30% membership interest in Newco
shall take place on or before 5:00 p.m. Central Standard Time on December 17,
1997, which date and time shall herein be referred to as the "Closing Date". The
place of "Closing" shall be at the offices of Buyer, located at 600 East Las
Colinas Blvd., Suite 1200, Irving, Texas 75039.
Purchase and Sale Agreement, Page - 2
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SECTION 2.4: Additional Contributions of Capital to Newco
The transactions contemplated herein are predicated on the basis that the
pro forma balance sheet of Newco, as of December 1, 1997, attached hereto as
Exhibit "B" is correct in all material aspects. In the event that on the Closing
Date, the then current information presented in the pro forma balance sheet of
Newco as of December 1, 1997, does not show a positive amount of net working
capital, NGTS agrees and the Shareholders agree to cause NGTS to contribute an
additional amount of capital to Newco so that the net working capital of Newco
is positive. (Positive working capital is defined as the total current assets of
Newco as of December 1, 1997, being equal to or greater than the total current
liabilities of Newco on the same date as determined by generally accepted
accounting principles.)
In addition, at Closing, NGTS shall deliver to Buyer an updated pro forma
balance sheet of Newco as of December 1, 1997, based on the most recent
information available, prepared in accordance with generally accepted accounting
principles. In the event that such updated pro forma balance sheet at Closing
does not reflect a membership equity interest of Newco of $600,000.00 plus
$900,000 preferred equity membership interest, then NGTS agrees and the
Shareholders agree to cause NGTS to contribute an additional amount of capital
to Newco so that the membership equity interest as of December 1, 1997 is
$600,000.00 plus $900,000 preferred equity membership interest.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 3.1: Representations and Warranties of Buyer
Buyer represents and warrants that the following are true and correct as of
the date hereof and will be true and correct through the Closing Date as if made
on that date:
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation;
(b) The execution, delivery and performance by the Buyer of this Agreement
and any other agreements contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by the
Buyer. This Agreement and any other agreement contemplated hereby have been or
will be as of the Closing Date duly executed and delivered by the Buyer and
constitutes or will constitute legal, valid and binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies;
(c) Buyer is acquiring from NGTS thirty percent (30%) of the membership
interest in Newco;
Purchase and Sale Agreement, Page - 3
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(d) The execution and delivery of this Agreement will not violate any
provision of or constitute a default under any statute, or any order, rule or
regulation of any court or governmental agency into which Buyer is subject;
(e) Buyer represents to NGTS that Buyer is engaged in the business of
exploring for and producing oil, gas and other minerals as an ongoing business
and thus possesses oil and gas expertise or has in Buyer's employ qualified
management, accountants, professional counsel or industry knowledgeable
personnel to competently evaluate the historical cash flow of NGTS and Newco,
and, based upon Buyer's appraisal of Newco, Buyer has ascertained a market value
of Four Million Three Hundred Fifty Thousand $4,350,000.00 for NGTS' thirty
percent (30%) membership interest in Newco;
(f) Buyer acknowledges that the Shareholders and NGTS have made no
representations, either expressed or implied, as to the current market value of
NGTS and Newco; and
(g) Buyer acknowledges that the Shareholders and NGTS have made no
representations, either expressed or implied, in regard to the value of the
properties owned by NGTS or Newco or the businesses of NGTS or Newco.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND NGTS
SECTION 4.1: Representations and Warranties of NGTS
NGTS hereby represents and warrants to Buyer, that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
(a) NGTS is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, with all requisite
corporate power and authority to carry on the business in which it is engaged,
to own the properties it owns, and is duly qualified and licensed to do business
and is in good standing in all jurisdictions where the nature of its business
makes such qualification necessary.
(b) Newco is a limited liability company duly organized, validly existing
and in good standing under the laws of its state of organization, with all
requisite corporate power and authority to carry on the business in which it is
engaged, to own the properties it owns, and is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary.
(c) The execution, delivery and performance by NGTS of this Agreement and
any other agreements contemplated hereby, and the consummation of the
transactions contemplated hereby
Purchase and Sale Agreement, Page - 4
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and thereby have been duly authorized by the Shareholders and the board of
Directors of NGTS. This Agreement and any other agreement contemplated hereby
have been or will be as of the Closing Date duly executed and delivered by NGTS,
and constitute or will constitute legal, valid and binding obligations of NGTS,
enforceable against NGTS in accordance with their respective terms, except as
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
(d) Prior to Closing, NGTS has or will permit Buyer full access at all
reasonable times to the business premises of NGTS and Newco. Additionally, all
records, files and documents of NGTS and Newco are or will be available to Buyer
relating to the business of NGTS and Newco. NGTS shall allow Buyer to photocopy
any and all contracts, agreements, purchaser statements, and any other
information or data in possession of NGTS or Newco regarding its properties,
provided that in the event that the transactions contemplated herein do not
close that all copies shall be returned to NGTS or destroyed, and that Buyer
further agrees not to disclose the contents thereof of any business methods of
NGTS to any person.
(e) On the Closing Date, NGTS will be the sole registered owner and will
have full right, power and authority to sell and convey the thirty percent (30%)
membership interest in Newco and such ownership interest will be free and clear
of any and all liens, mortgages, pledges, or other rights or encumbrances
whatsoever, disclosed or undisclosed. Specifically, there are no beneficial
owners of such ownership interest or of any interest in or to any such ownership
interest other than NGTS. Upon Buyer acquiring the thirty percent (30%) of the
membership interest in Newco, Buyer shall be deemed to have obtained good and
merchantable title to said membership interest. Section 2.1 hereof sets forth a
true, accurate and complete list of all holders of the membership interest of
Newco, and the ownership interest held by each such person. All securities
issued by Newco, were issued in compliance, in all respects, with all applicable
federal and state securities laws. There are no outstanding rights, options,
agreements or arrangements to subscribe for or to purchase membership interests
of Newco, or any stock or securities convertible into or exchangeable for
membership interests.
(f) NGTS has assigned and transferred to Newco effective December 1, 1997,
the following property:
(1) Those assets and properties set forth and described on Exhibit "C",
including the cash set forth thereon, all operating assets, other than cash,
tangible and intangible, of each kind or character of right, title, claim or
interest which NGTS had in connection with the natural gas marketing business
operated by NGTS prior to December 1, 1997, including, but not limited to,
contract marketing rights, gas transmission rights, gas transportation rights
and other assets, and all agreements, ratifications, extensions and renewals
thereof and associated therewith, as of the December 1, 1997.
(2) Any right, title or interest of NGTS in or to any accounts receivable,
money held in escrow or suspense accounts, or future receipts attributable to
NGTS's business operations prior
Purchase and Sale Agreement, Page - 5
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to December 1, 1997.
(3) All claims and causes of action of Shareholders, NGTS, or Newco against
others arising from acts or transactions affecting or relating to any of the
business of NGTS prior to December 1, 1997, including, but not limited to,
rights and claims against purchasers and/or sellers of gas and other monetary
claims or rights against others.
(4) All right, title or interest which NGTS, as of December 1, 1997, had in
or to any personal property, and improvements located at any of the corporate
office(s) of NGTS, or elsewhere, described on Exhibit "C" which is attached to
and made a part hereof and incorporated herein, as of December 1, 1997
(including, but not limited to, gas purchase and sale contracts, transportation
agreements, furniture, fixtures, inventories, computers, software, licenses,
permits and other equipment).
(g) There are no legal entities which Newco, directly or indirectly, owns
any equity interests.
(h) There are no actions, suits, proceedings or governmental investigations
or inquiries pending, and to their knowledge, threatened against NGTS or Newco
or any asset, operation, or business of NGTS or Newco which would seek to delay,
prevent or hinder or which might be adversely determined to affect title to or
the value of the properties or business of NGTS and Newco.
(i) The audited balance sheet, statements of income and retained earnings,
statements of cash flows and notes to the financial statements relevant thereto,
as of December 31, 1996, and NGTS's unaudited balance sheet, statements of
income and retained earnings, and statements of cash flows, as of October 31,
1997, furnished by NGTS to Buyer, adequately reflecting the then current assets
and liabilities of the Company pursuant to generally accepted accounting
principles.
(j) The financial statements of NGTS and Newco shall not reflect the burden
of any debt or liability other than those incurred in the day-to-day operations
of its business.
(k) The pro forma balance sheet of Newco as of December 1, 1997, attached
hereto as Exhibit "B" is true and correct to the best belief and knowledge of
NGTS.
(l) Except as disclosed in the financial statements delivered to the Buyer
and subject to the assignment by NGTS to Newco of the assets and property set
forth in Exhibit "C" attached hereto, there has not been:
(1) Any adverse change in the financial condition, results of operations or
business of NGTS and Newco;
(2) Any sale, lease, transfer, license or assignment of any assets,
tangible or intangible, of NGTS and Newco, other than in the ordinary course of
business;
Purchase and Sale Agreement, Page - 6
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(3) Any damage, destruction or property loss, whether or not covered by
insurance, affecting adversely the properties or business of NGTS and Newco;
(4) Any subjection to any lien on any of the assets, tangible or
intangible, of NGTS and Newco (other than liens arising by operation of law
which secure obligations which are not yet due and payable and liens pursuant to
and granted by NGTS' or Newco's bank credit facility);
(5) Any waiver or release by NGTS and Newco of any right of any material
value;
(6) Any arrangement, agreement or undertaking entered into by NGTS and
Newco, except guaranties and letters of credit to secure the purchase of natural
gas, not terminable on 30 days or less notice without cost or liability
including, without limitation, any payment of or promise to pay any bonus or
special compensation, with employees or any increase in compensation or benefits
to officers or directors of NGTS and Newco, other than in the ordinary course of
business;
(7) Any acceleration, termination, modification or cancellation (or threat
thereof) by any party of any contract, lease or other agreement or instrument to
which NGTS or Newco is a party or by which it is bound so as to affect,
materially and adversely, the properties or business of NGTS and Newco; or
(8) Any other transaction or commitment entered into other than in the
ordinary course of business by NGTS and Newco including, but not limited to, an
acquisition of any asset or property of any kind in an aggregate amount in
excess of $50,000 without the written consent of Buyer;
(m) There have been no dividends or distributions, declared, made or paid
by Newco.
(n) NGTS and Newco have either discharged or caused to be discharged all
taxes of every kind and character, as the same shall have become due.
(o) The written information delivered to Buyer by NGTS which relates to the
business and properties of NGTS and Newco and the Properties and all other
information presented in the written material delivered to Buyer is to the best
of, NGTS' s management's knowledge, true, complete and accurate; and
(p) There are no claims, actions, suits, proceedings or investigations
pending against or affecting NGTS' and Newco's business at law or in equity
before any court or before or by any federal, state, municipal or other
governmental department, commission, board, agency or instrumentality, relating
to environmental matters. NGTS and Newco are not subject to any continuing court
or administrative order, writ, injunction or decree applicable to NGTS' or
Newco's business relating to any environmental matter. NGTS and Newco are not in
violation of or in default
Purchase and Sale Agreement, Page - 7
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with respect to any statute, regulation, order, writ, injunction or decree of
any court or federal, state, municipal or other governmental department,
commission, board, agency or instrumentality relating to any environmental
matter.
SECTION 4.2: Representations and Warranties of Shareholders
Each Shareholder represents and warrants to Buyer, that to the best of his
knowledge and belief all of the representations and warranties of NGTS set forth
in Section 5.1 are true and correct.
ARTICLE V
CLOSING
SECTION 5.1: Actions to be Taken at Closing
At the time of Closing, the following events and actions shall occur or
shall have occurred:
(a) NGTS and Buyer shall execute and deliver the Amendment to the
Regulations of Newco, as set forth in Exhibit "D" attached hereto.
(b) Newco shall issue to Buyer a membership certificate(s) representing
thirty percent (30%) of the membership interests of Newco.
(c) Buyer shall make payment to NGTS or Shareholders by wire transfer for
the cash purchase price as described in Section 2.2 herein.
(d) Buyer shall deliver to NGTS the Promissory Notes described in Section
2.2 herein.
(e) Buyer shall have delivered a Consent to Assignment, in the form
attached to the Promissory Note, in favor of Steven S. Boss.
(f) Buyer shall execute and deliver to NGTS the security agreement and
financing statement to perfect a lien in Buyer's membership interest in Newco,
to secure payment of the Promissory Notes.
(g) Buyer, NGTS and Shareholders shall each deliver the other such other
documents, certificates opinions and materials as are required under the
provisions of this Agreement, including the accounting and funds in payment
thereof as provided for in Sections 2.4 herein.
(h) Newco and Buyer shall enter into and execute a gas purchase and sales
agreement in forth and substance mutually agreed to between the parties
providing for the marketing by Newco of all gas produced by or the sale or
marketing of which is controlled by Buyer, Parent or their affiliates.
Purchase and Sale Agreement, Page - 8
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(i) NGTS shall have formed Newco under the laws of the state of Texas and
NGTS shall have adopted the Regulations of Newco providing for NGTS to be the
sole managing member of Newco. Shareholders shall deliver to Buyer a certified
copy of Newco's organizational documents under the state of its formation.
(j) All current employees of NGTS who have employment, shareholder or
management agreements with NGTS shall either assign such agreement to Newco or
shall execute a new employment, shareholder or management agreement with Newco
on terms and conditions mutually agreed to between the parties.
(k) Newco shall deliver to Buyer proof of (i) general liability insurance
in an amount not less than $5 million dollars providing coverage for Newco and
its officers, employees, and agents, (ii) property insurance in an amount
customary and reasonable for Newco's operations and (iii) any other insurance
covering risks and errors and omissions customary maintained in the industry
which Newco does business, each in form and substance mutually agreed to between
the parties.
(1) NGTS shall have assigned to Newco all permits and licenses necessary
for Newco to conduct its business without interruption.
(m) NGTS shall deliver to Buyer the copy of an agreement between Newco and
Eland Energy, Inc. ("Eland") for Newco to use Eland's computer system and
associated software and all other general and administrative services which
Eland currently provides NGTS. Such agreement shall provide that Eland will
provide such services and shall be reimbursed at such rates as Newco and Eland
shall from time to time negotiate.
(n) Newco shall enter into and execute a gas marketing agreement with Eland
Energy, Inc. to market the gas produced or controlled by Eland Energy, Inc., the
form of which is attached as Exhibit"E".
SECTION 5.2: Conditions to Obligations of Buyer
The obligations of Buyer pursuant to this Agreement are subject to the
conditions that on the Closing Date:
(a) All terms, covenants and conditions and warranties made by the
Shareholders and NGTS in this Agreement shall be true and correct as of the
Closing Date.
(b) No action or proceeding by or before any court or other governmental
body shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated hereby or which might affect the right
of Buyer to own, control and enjoy the full benefit of the membership interest
in Newco after the Closing Date.
(c) Shareholders, NGTS and Newco shall have delivered to Buyer a pro forma
closing
Purchase and Sale Agreement, Page - 9
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balance sheet of Newco, as of December 1, 1997, based on the most current
information available. The pro forma balance sheet to be delivered to Buyer must
reflect a membership equity interest of $600,000.00 plus a $900,000 preferred
equity membership interest.
(d) All actions to be taken by Shareholders, NGTS and Newco pursuant to
Section 6.1 shall have been completed or consummated as of the Closing Date.
SECTION 5.3: Conditions to Obligations of NGTS and Shareholders
The obligations of NGTS and Shareholders pursuant to this Agreement are
subject to the conditions that on the Closing Date:
(a) All terms, covenants and conditions and warranties made by Buyer in
this Agreement shall be true and correct as of the Closing Date.
(b) All actions to be taken by Buyer pursuant to Section 6.1 shall have
been completed or consummated as of the Closing Date.
ARTICLE VI
AGREEMENTS AND COVENANTS OF SHAREHOLDERS AND NGTS
SECTION 6.1: Affirmative Covenants
During the period from December 1, 1997 Newco has:
(a) Carried on the business with respect to its properties and business in
a prudent and diligent manner in accordance with prevailing industry standards;
(b) Promptly notified Buyer of the receipt of any notice or claim, written
or oral, of default, breach by NGTS or Newco, or of any termination or
cancellation of any material contract, lease or other agreements relating to the
Properties and Personalty;
(c) Promptly notified Buyer of the loss of or damage to any of the
properties of Newco;
(d) Given prompt notice to Buyer of any claims or litigation, threatened or
instituted or any other material event or occurrence involving or affecting any
of the properties or business of Newco or NGTS; and
(e) Not declare or pay any dividends or distributions or permit any change
in the capital structure or ownership of Newco, without first obtaining the
approval of Buyer in writing.
Purchase and Sale Agreement, Page - 10
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ARTICLE VII
POST CLOSING COVENANTS
Section 7.1: Post Closing Agreements
(A) Unless otherwise noted within 60 days of the Closing Date, Shareholders
and Newco shall provide Buyer with the following:
(a) Sublease entered into between Eland and Newco providing for the
Sublease of the office space which NGTS currently occupies on the same terms and
conditions which NGTS currently uses such office space from Eland;
(b) As provided for Section 6.1, general liability insurance reflecting
Newco as the named insured party.
(c) Shareholders and Newco shall have delivered to Buyer a final pro forma
balance sheet of Newco as of December 1, 1997, prepared in accordance with
generally accepted accounting principles, reflecting the pro forma balance sheet
of Newco as of December 1, 1997. In the event that such final balance sheet to
be delivered to Buyer reflects negative net working capital ("Net Working
Capital") or less than $600,000 in common equity, as of December 1, 1997, as
adjusted, if applicable, for the AGE receivable as treated in Newco's year end
audited financial statements, then NGTS agrees and the Shareholders agree to
cause NGTS to contribute an additional amount of capital to Newco so that the
Net Working Capital as of December 1, 1997 is positive. In the event that the
common equity of Newco is less than $600,000 as of December 1, 1997 as a result
of the treatment of the AGE receivable after netting out certain aged accounts
payable, then a sufficient amount of the preferred ownership interest shall be
converted to common equity to make the common equity $600,000 as of December 1,
1997. In such event, as Newco is able to take into income certain additional
aged accounts payable, the preferred ownership interest shall be increased
accordingly in the same amount as the reduction, but in no event greater than
$900,000.
(d) Buyer and Parent, subject to the terms of Buyer's and Parent's credit
facility, agree to guarantee the trade payables of Newco for the purchase of
natural gas; provided, that Buyer and Parent may decline to guarantee any
transaction if Buyer reasonably believes that the party which has contracted to
buy the gas is not credit worthy.
(e) Newco shall reimburse Buyer for not more that $50,000 in fees charged
by Buyer and Parent's bank to amend the Buyer and Parent's loan agreement to
permit Buyer and Parent to make guarantees of Newco's trade payables for the
purchase of natural gas.
(B) If necessary, to allow Parent, at its sole cost and expense, to prepare
audited and unaudited financial statements of Newco and NGTS for filing with the
Securities and Exchange Commission, Newco and NGTS agree to provide Buyer (or
its designated representatives) with
Purchase and Sale Agreement, Page - 11
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access to all of Newco's and NGTS' financial accounting records and shall
reasonably cooperate with Parent in its efforts to prepare such audited or
unaudited financial statements for filing with the Securities and Exchange
Commission.
ARTICLE VIII
SECURITIES LAWS
SECTION 8.1: Securities Laws and Compliance
The parties will arrange for and effect all necessary procedures under the
requirements of applicable federal and state securities laws, including those of
the Securities and Exchange Commission and the state securities boards
promulgated thereunder to the extent that this Agreement is properly consummated
to comply with all federal and state securities registration requirements, or to
take full advantage of any appropriate exemptions therefrom, and otherwise to be
in accord with all federal and state securities law anti-fraud restrictions.
Buyer has had the opportunity to acquire all information concerning NGTS,
Newco and the properties and business of NGTS and Newco which Buyer deems
relevant to make a fully informed decision regarding the consummation of the
transaction contemplated hereby. Buyer will execute an investor representation
letter substantially in the form set out in Exhibit "F".
NGTS has had the opportunity to acquire all information concerning Parent
which it deems relevant to make a fully informed decision regarding the
consummation of the transaction contemplated hereby. NGTS will execute an
investor representation letter substantially in the form set out in Exhibit "G".
ARTICLE IX
MISCELLANEOUS
SECTION 9.1: Notice
Any notice or other communication required or permitted to be given under
this Agreement must be in writing, and may be given by hand delivery or
depositing the same in the United States mail, certified delivery, return
receipt requested, properly addressed as provided below. Notice deposited in the
mail in the manner provided above shall be effective and shall be deemed
received upon the expiration of five business days.
For purposes of notices hereunder, the addresses of the parties shall be as
follows:
Shareholders: Tim Allen
8150 N. Central Expressway, Suite 400
Dallas, Texas 75206
Purchase and Sale Agreement, Page - 12
<PAGE>
Gregg Allen
8150 N. Central Expressway, Suite 400
Dallas, Texas 75206
Steven S. Boss
8150 N. Central Expressway, Suite 525
Dallas, Texas 75206
Lonnie G. Brown
8150 N. Central Expressway, Suite 525
Dallas, Texas 75206
Brian Burkhead
8150 N. Central Expressway, Suite 525
Dallas, Texas 75206
NGTS: NGTS, Inc.
8150 N. Central Expressway, Suite 525
Dallas, Texas 75206
Buyer: Hunter Gas Gathering, Inc.
600 East Las Colinas Blvd., Suite 1200
Irving, TX 75039
Attn: R. Renn Rothrock
President
Parent: Magnum Hunter Resources, Inc.
600 East Las Colinas Blvd., Suite 1200
Irving, IX 75039
Attn: Gary Evans
President
Any party may change its address by the giving of notice hereunder at any
time by giving notice of change in the manner specified above.
SECTION 9.2: Survival of Representations. Warranties. Covenants and Agreements
The representation, warranties, covenants and agreements of Seller, Buyer
and NGTS set forth herein shall survive the Closing.
Purchase and Sale Agreement, Page - 13
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SECTION 9.3: Waiver
No term or condition of this Agreement shall be deemed to have been waived
nor shall there be any estoppel to enforce any provision of this Agreement
except by written instrument of the party charged with waiver or estoppel. No
waiver of the terms and conditions of this Agreement by any party hereto shall
act as a waiver of any other matter concerning this Agreement.
SECTION 9.4: Entire Agreement
This Agreement constitutes the entire agreement and understanding between
the parties hereto and may not be modified or amended except in writing signed
by the parties hereto:
SECTION 9.5: Expense
Whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto shall be obligated to pay the fees and
expense of its counsel, accountants and other experts incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. All other costs shall be borne by the party
incurring such costs.
SECTION 9.6: Heading
Descriptive headings are used for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
SECTION 9.7: CHOICE OF LAW: ARBITRATION.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICTS OF
LAWS. VENUE FOR ALL DISPUTES AND LITIGATION HEREUNDER OR ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL LIE EXCLUSIVELY IN
DALLAS COUNTY, TEXAS. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY ALLEGED BREACH HEREOF, SHALL BE SETTLED BY ARBITRATION.
THE PARTIES HERETO AGREE THAT ANY SUCH CONTROVERSY SHALL BE SUBMITTED TO THREE
ARBITRATORS SELECTED FROM THE PANELS OF ARBITRATORS OF THE AMERICAN ARBITRATION
ASSOCIATION ("AAA") AND SHALL BE GOVERNED BY THE COMMERCIAL ARBITRATION RULES OF
THE AAA, AS AMENDED AND IN EFFECT ON THE DATE A DEMAND FOR ARBITRATION IS FILED
WITH THE AAA. ANY DEMAND SHALL SPECIFY A DOLLAR AMOUNT OF DAMAGES SOUGHT.
ARBITRATION SHALL OCCUR IN DALLAS, TEXAS AND JUDGMENT UPON AN AWARD RENDERED MAY
BE ENTERED IN ANY UNITED STATES DISTRICT COURT OR STATE COURT IN DALLAS, TEXAS.
Purchase and Sale Agreement, Page - 14
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SECTION 9.08 Confidentiality
Buyer has obtained and may continue to obtain confidential and proprietary
information regarding NGTS and Newco and Buyer agrees to treat such information
confidentially and not disclose such information to any person prior to Closing,
or it does not occur, to any person at anytime without the prior written consent
of NGTS and Newco.
SECTION 9.09 Exhibits
The Exhibits referred to in this Agreement are hereby incorporated in this
Agreement by this reference and constitute a part of this Agreement. Each party
has received a complete set of Exhibits as of the execution of this Agreement
SECTION 9.10: Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their successors and assigns; provided, no assignment by
either party shall be made without the express written consent of the other
party and if such consent is granted, no assignment shall relieve such party of
any of its obligations hereunder.
SECTION 9.11: Assignment of Agreements and Covenants
Neither no party hereto shall assign or delegate this Agreement to a third
party without the prior written consent of the other party hereto.
SECTION 9:12: Indemnification/Risk of Loss
Risk of Loss to the assets of Newco shall be upon NGTS until the time of
Closing. At Closing, said risk of loss shall pass to Buyer with respect to
Buyer's thirty percent (30%) membership interest in Newco at Closing.
Notwithstanding anything to the contrary herein, NGTS and Shareholders shall
indemnify and hold Buyer free and harmless from liability for any and all costs,
expenses, taxes and causes of action of every kind and character in connection
with the operation of NGTS's business for events occurring prior to December 1,
1997.
SECTION 9.1 3: Signature in Counterparts
This Agreement may be signed in multiple counterparts by the Buyer, NGTS,
and Shareholders, each of which, when taken together, shall constitute the
original document.
SECTION 9.14: Brokers
Each party agrees that it will hold the other party harmless from any claim
by any broker or finder asserting it was employed by such party in connection
with the transactions contemplated
Purchase and Sale Agreement, Page - 15
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hereby.
SECTION 9.1 5: Title Vesting
Each of the parties hereto agree to execute any and all mutually-acceptable
documents so as to vest in Buyer a 30% membership interest in Newco.
WITNESSES: ____________________________
TIM ALLEN
____________________________
GREGG ALLEN
____________________________
STEVEN S. BOSS
____________________________
LONNIE G. BROWN
____________________________
BRIAN BURKHEAD
Purchase and Sale Agreement, Page - 16
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ATTEST: NATURAL GAS TRANSMISSION SERVICES, INC.
_________________________________
Steven S. Boss
Chief Executive Officer
_________________________________
Lonnie G. Brown, President
ATTEST: HUNTER GAS GATHERING, INC.
_________________________________
R. Renn Rothrock, President
ATTEST: MAGNUM HUNTER RESOURCES, INC.
_________________________________
Gary C. Evans, President
and Chief Executive Officer
Purchase and Sale Agreement, Page - 17
