<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1996.
REGISTRATION NO. 333-01991
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
HS RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 94-3036864
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
ONE MARITIME PLAZA
15TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
TELEPHONE: (415) 433-5795
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
NICHOLAS J. SUTTON
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
ONE MARITIME PLAZA
15TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
TELEPHONE: (415) 433-5795
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
<TABLE>
<S> <C>
MICHAEL E. DILLARD, P.C. ROBERT A. CURRY
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. CONNER & WINTERS,
1700 PACIFIC AVENUE, SUITE 4100 A PROFESSIONAL CORPORATION
DALLAS, TEXAS 75201-4618 2400 FIRST PLACE TOWER, 15 E. 5TH STREET
(214) 969-2800 TULSA, OKLAHOMA 74103-4391
(918) 586-5711
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
---------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
HS RESOURCES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NO. ITEM IN FORM S-4 LOCATION OR HEADING IN PROSPECTUS
----- ---------------------------------------- ---------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Available Information; Incorporation of
Documents by Reference; Inside Front Cover of
Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; Special
Factors; Information About the Combining
Companies; Index to Unaudited Pro Forma
Financial Statements
4. Terms of the Transaction................ Prospectus Summary; Special Factors; The
Merger Agreement and Related Agreements;
Description of HSR Capital Stock; Comparison
of Stockholder Rights
5. Pro Forma Financial Information......... Prospectus Summary; Information About the
Combining Companies; Index to Unaudited Pro
Forma Financial Statements
6. Material Contacts With the Company Being
Acquired................................ Risk Factors; Special Factors; The Merger
Agreement and Related Agreements; Information
About the Combining Companies
7. Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Not Applicable
8. Interests of Named Experts and
Counsel................................. Prospectus Summary; Special Factors; Legal
Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to
S-3 Registrants......................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Information About the
Combining Companies; Index to Unaudited Pro
Forma Financial Statements
11. Incorporation of Certain Information by
Reference............................... Inside Front Cover Page of Prospectus;
Incorporation of Documents by Reference
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM
NO. ITEM IN FORM S-4 LOCATION OR HEADING IN PROSPECTUS
----- ---------------------------------------- ---------------------------------------------
<S> <C> <C>
12. Information With Respect to S-2 or S-3
Registrants............................. Not Applicable
13. Incorporation of Certain Information by
Reference............................... Not Applicable
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants....... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to
S-3 Companies........................... Not Applicable
16. Information With Respect to S-2 or S-3
Companies............................... Outside Front Cover Page of Prospectus;
Incorporation of Documents by Reference;
Prospectus Summary; Information About the
Combining Companies
17. Information With Respect to Companies
Other than S-2 or S-3 Companies......... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited...... Outside Front Cover Page of Prospectus;
Incorporation of Documents by Reference;
Prospectus Summary; Risk Factors; The
Meetings; Special Factors; The Merger
Agreement and Related Agreements; Comparison
of Stockholder Rights; Stockholders'
Proposals
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited
or in an Exchange Offer................. Not Applicable
</TABLE>
<PAGE> 4
HS RESOURCES, INC. TIDE WEST OIL COMPANY
May 13, 1996
Dear Stockholders of HS Resources, Inc. ("HSR") and Tide West Oil Company ("Tide
West"):
Attached is a Notice of Special Meeting of Stockholders for either HSR or
Tide West and an accompanying Joint Proxy Statement/Prospectus which describes
the matters to be acted upon at special meetings of the stockholders of HSR and
Tide West. At the respective meetings, stockholders of HSR and Tide West will be
asked to consider and vote upon certain proposals related to the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of February 25, 1996, and
amended and restated as of April 29, 1996, by and among HSR, HSR Acquisition,
Inc. (a wholly owned subsidiary of HSR, hereafter "Merger Sub") and Tide West.
The Merger Agreement provides for the merger of Tide West with and into Merger
Sub (the "Merger"). The separate existence of Tide West will cease and Merger
Sub will succeed to all of the assets, rights, liabilities and obligations of
Tide West. Stockholders are urged to review carefully the accompanying Joint
Proxy Statement/Prospectus. This document contains a detailed description of the
Merger.
Pursuant to the terms of voting agreements executed in connection with the
Merger Agreement, HSR has obtained agreements from affiliates of Tide West to
vote a majority of the outstanding shares of common stock of Tide West ("Tide
West Common Stock") in favor of the Merger.
In the Merger, each outstanding share of Tide West Common Stock will be
converted into .6295 of a share of common stock of HSR ("HSR Common Stock") and
the right to receive a cash payment of $8.75 less 3% of the amount by which the
average of the per share closing sales prices of HSR Common Stock for the 10
trading days ending five business days preceding the closing of the Merger
exceeds $10.50. The amount of HSR Common Stock to be issued and the amount of
cash to be paid per share of Tide West Common Stock in connection with the
Merger may be adjusted pursuant to a formula described in the accompanying Joint
Proxy Statement/Prospectus. If the amount of HSR Common Stock to be issued and
the amount of cash to be paid per share of Tide West Common Stock were
calculated treating the date of this Joint Proxy Statement/Prospectus as the
closing date of the Merger and assuming no holders of Tide West Common Stock
have perfected their dissenters' appraisal rights and assuming there is no
holder of 5% or more of the Tide West Common Stock that has not represented that
it has no intention, plan or arrangement to dispose of the HSR Common Stock to
be received in the Merger, each share of Tide West Common Stock would, as a
result of the Merger, be converted into of a share of HSR Common Stock and
$ cash, and HSR would issue shares of HSR Common Stock in the
aggregate in connection with the Merger. If such calculations were performed
under the same assumptions, and treating February 26, 1996 (the date of the
public announcement of the execution of the Merger Agreement), as the closing
date of the Merger, each share of Tide West Common Stock would, as a result of
the Merger, be converted into .6295 of a share of HSR Common Stock and $8.73
cash, and HSR would issue 6,161,312 shares of HSR Common Stock in the aggregate
in connection with the Merger.
The proposed Merger requires, among other conditions, the approval of the
matters described in the accompanying Joint Proxy Statement/Prospectus by the
stockholders of HSR and Tide West.
FOR THE REASONS DETAILED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS, THE BOARDS OF DIRECTORS OF HSR AND TIDE WEST HAVE DETERMINED THAT
THE MERGER AGREEMENT AND THE MERGER ARE IN THE BEST INTERESTS OF HSR AND TIDE
WEST, RESPECTIVELY, AND THEIR RESPECTIVE STOCKHOLDERS. THE BOARD OF DIRECTORS OF
HSR HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT HSR'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL TO BE CONSIDERED AT THE HSR
SPECIAL MEETING AS DESCRIBED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS. THE BOARD OF DIRECTORS OF TIDE WEST HAS APPROVED THE
MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT TIDE WEST'S STOCKHOLDERS
VOTE FOR APPROVAL OF THE PROPOSAL TO BE CONSIDERED AT THE TIDE WEST SPECIAL
MEETING AS DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
Your continued support of the new HSR is greatly appreciated. Because of
the significance to HSR and Tide West of the proposed Merger, your participation
at the special meetings of stockholders of HSR and Tide West, in person or by
proxy, is especially important. Even if you plan to attend the relevant meeting,
we hope you will complete, sign, date and return your proxy promptly in the
enclosed envelope that has been provided for your convenience. This will not
limit your right to vote in person or to attend the meeting. You may revoke your
proxy by following the procedures set forth in the accompanying Joint Proxy
Statement/Prospectus.
<TABLE>
<S> <C>
NICHOLAS J. SUTTON PHILIP B. SMITH
Chairman of the Board and President and Chief
Chief Executive Officer Executive Officer
HS Resources, Inc. Tide West Oil Company
</TABLE>
<PAGE> 5
HS RESOURCES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1996
To the Stockholders of HS Resources, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of HS Resources, Inc., a Delaware corporation ("HSR"), will be held on
June 14, 1996, commencing at 10:00 a.m., local time, at the Sheraton Palace
Hotel, 2 New Montgomery Street, San Francisco, California, to consider and act
upon the following matters which are described in more detail in the
accompanying Joint Proxy Statement/Prospectus:
1. To approve the issuance of up to 7,161,312 shares of common stock
of HSR ("HSR Common Stock") in accordance with the Agreement and Plan of
Merger, dated as of February 25, 1996, and amended and restated as of April
29, 1996 (the "Merger Agreement"), by and among HSR, HSR Acquisition, Inc.,
a Delaware corporation and wholly owned subsidiary of HSR, and Tide West
Oil Company, a Delaware corporation, as required by the rules of the New
York Stock Exchange.
2. To consider and act upon such other business as may properly be
brought before the Special Meeting or any adjournment or postponement
thereof.
The Special Meeting will be held on the same day as the 1996 Annual Meeting
of Stockholders of HSR.
The close of business on May 8, 1996, has been fixed as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting and any adjournment or postponement thereof. A complete list of
the stockholders entitled to vote at the Special Meeting will be open to the
examination of any stockholder, for any purpose germane to the Special Meeting,
during ordinary business hours for a period of 10 days prior to the date of the
Special Meeting at the offices of HSR at One Maritime Plaza, 15th Floor, San
Francisco, California 94111, and at the time and place of the Special Meeting.
Holders of HSR Common Stock are not entitled to dissenters' appraisal rights
under the Delaware General Corporation Law in respect of the merger contemplated
by the Merger Agreement.
When the proxies are returned properly executed, the shares represented
thereby will be voted in accordance with the indicated instructions. However, if
no instructions have been specified on the returned proxy, the shares
represented thereby will be voted "FOR" the issuance of the HSR Common Stock
pursuant to the Merger Agreement. Any stockholder giving a proxy has the right
to revoke such proxy, at any time before it is voted, by filing with the
Secretary of HSR either an instrument revoking the proxy or a duly executed
proxy bearing a later date. Proxies also may be revoked by attending the Special
Meeting and voting in person.
By Order of the Board of Directors
HS RESOURCES, INC.
James M. Piccone
Secretary
San Francisco, California
May 13, 1996
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE DATE THE ENCLOSED
GREEN STRIPED PROXY CARD, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF HS
RESOURCES, INC., SIGN EXACTLY AS YOUR NAME APPEARS THEREON AND RETURN
IMMEDIATELY.
<PAGE> 6
TIDE WEST OIL COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1996
To the Stockholders of Tide West Oil Company:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of Tide West Oil Company, a Delaware corporation ("Tide West"), will
be held on June 14, 1996, commencing at 10:00 a.m., local time, at the offices
of Tide West at 6666 South Sheridan, Suite 250, Tulsa, Oklahoma, to consider and
act upon the following matters which are described in more detail in the
accompanying Joint Proxy Statement/Prospectus:
1. To approve and adopt the Agreement and Plan of Merger, dated as of
February 25, 1996, and amended and restated as of April 29, 1996 (the
"Merger Agreement"), by and among Tide West, HS Resources, Inc., a Delaware
corporation ("HSR"), and HSR Acquisition, Inc., a Delaware corporation and
wholly owned subsidiary of HSR ("Merger Sub"), and to approve the merger of
Tide West with and into Merger Sub pursuant thereto (the "Merger").
2. To consider and act upon such other business as may properly be
brought before the Special Meeting or any adjournment or postponement
thereof.
The close of business on May 8, 1996, has been fixed as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting and any adjournment or postponement thereof. A complete list of
the stockholders entitled to vote at the Special Meeting will be open to the
examination of any stockholder, for any purpose germane to the Special Meeting,
during ordinary business hours for a period of 10 days prior to the date of the
Special Meeting at the offices of Tide West at 6666 South Sheridan, Suite 250,
Tulsa, Oklahoma 74133, and at the time and place of the Special Meeting. Holders
of common stock of Tide West are entitled to certain dissenters' appraisal
rights under the Delaware General Corporation Law in respect of the Merger.
When the proxies are returned properly executed, the shares represented
thereby will be voted in accordance with the indicated instructions. However, if
no instructions have been specified on the returned proxy, the shares
represented thereby will be voted "FOR" approval of the Merger and the Merger
Agreement. Any stockholder giving a proxy has the right to revoke such proxy, at
any time before it is voted, by filing with the Secretary of Tide West either an
instrument revoking the proxy or a duly executed proxy bearing a later date.
Proxies also may be revoked by attending the Special Meeting and voting in
person.
By Order of the Board of Directors
TIDE WEST OIL COMPANY
/s/ PEGGY E. GWARTNEY
Peggy E. Gwartney
Secretary
Tulsa, Oklahoma
May 13, 1996
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE DATE THE ENCLOSED
PROXY CARD, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF TIDE WEST OIL
COMPANY, SIGN EXACTLY AS YOUR NAME APPEARS THEREON AND RETURN IMMEDIATELY.
<PAGE> 7
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED MAY 2, 1996
PROSPECTUS
HS RESOURCES, INC.
AND
TIDE WEST OIL COMPANY
JOINT PROXY STATEMENT
---------------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock, par value $0.001 per share ("HSR Common Stock"), of HS Resources,
Inc., a Delaware corporation ("HSR"), in connection with the solicitation of
proxies by the Board of Directors of HSR (the "HSR Board") for use at a special
meeting of stockholders of HSR (the "HSR Special Meeting") to be held on Friday,
June 14, 1996, at the Sheraton Palace Hotel, 2 New Montgomery Street, San
Francisco, California, commencing at 10:00 a.m., local time, and at any
adjournment or postponement thereof. At the HSR Special Meeting, the
stockholders of HSR will consider and vote upon the issuance of up to 7,161,312
shares of HSR Common Stock in accordance with the Agreement and Plan of Merger,
dated as of February 25, 1996, and amended and restated as of April 29, 1996
(the "Merger Agreement"), by and among HSR, HSR Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of HSR ("Merger Sub"), and Tide West Oil
Company, a Delaware corporation ("Tide West"), pursuant to which Tide West will
merge with and into Merger Sub (the "Merger").
This Joint Proxy Statement/Prospectus is also being furnished to holders of
common stock, par value $0.01 per share ("Tide West Common Stock"), of Tide West
in connection with the solicitation of proxies by the Board of Directors of Tide
West (the "Tide West Board") for use at a special meeting of stockholders of
Tide West (the "Tide West Special Meeting") to be held on Friday, June 14, 1996,
at the offices of Tide West at 6666 South Sheridan, Suite 250, Tulsa, Oklahoma,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof. At the Tide West Special Meeting, the stockholders of Tide West will
consider and vote upon the Merger Agreement and the Merger.
Holders of HSR Common Stock do not have dissenters' appraisal rights in
respect of the Merger. Holders of Tide West Common Stock do have dissenters'
appraisal rights in respect of the Merger. See "Special Factors -- Appraisal
Rights" and Section 262 of the Delaware General Corporation Law (the "Delaware
Act") attached hereto as Annex D.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of HSR
with respect to shares of HSR Common Stock to be issued in the Merger in
exchange for outstanding shares of Tide West Common Stock.
Based upon the $ closing sales price of HSR Common Stock, as reported
on the New York Stock Exchange, Inc. (the "NYSE") on May , 1996, the business
day immediately preceding the date of this Joint Proxy Statement/Prospectus, and
treating the date of this Joint Proxy Statement/Prospectus as the closing date
of the Merger, approximately shares of HSR Common Stock would be
issued to holders of Tide West Common Stock upon consummation of the Merger
(assuming no holders of Tide West Common Stock had perfected their dissenters'
appraisal rights and assuming there is no holder of 5% or more of the Tide West
Common Stock that has not represented that it has no intention, plan or
arrangement to dispose of the HSR Common Stock to be received in the Merger).
The maximum number of shares of HSR Common Stock required to be issued under the
Merger Agreement is 7,161,312.
The shares of HSR Common Stock offered hereby have been approved for
listing on the NYSE subject to official notice of issuance and requisite
approval of the Merger and the Merger Agreement by the stockholders of Tide West
and approval of the issuance of HSR Common Stock in connection with the Merger
by the stockholders of HSR.
FOR A DISCUSSION OF CERTAIN CONSIDERATIONS REGARDING THE BUSINESSES AND
OPERATIONS OF HSR AND TIDE WEST THAT SHOULD BE EVALUATED BEFORE VOTING ON THE
PROPOSALS DESCRIBED HEREIN AT THE HSR SPECIAL MEETING OR THE TIDE WEST SPECIAL
MEETING, SEE "RISK FACTORS" BEGINNING ON PAGE 21.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/ PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Joint Proxy Statement/Prospectus and accompanying forms of proxy are
first being mailed to stockholders of HSR and of Tide West on or about May 13,
1996.
The date of this Joint Proxy Statement/Prospectus is May , 1996.
<PAGE> 8
AVAILABLE INFORMATION
HSR and Tide West are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements, information statements and other
information filed by HSR and by Tide West with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also may be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. HSR Common Stock is listed on the
NYSE. Reports, proxy and information statements and other information relating
to HSR can be inspected at the offices of the NYSE at 20 Broad Street, New York,
New York 10005. Reports, proxy statements and other information relating to Tide
West can be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, Washington, D.C. 20006.
HSR has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities to be issued pursuant to the Merger Agreement. This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements contained in this Joint
Proxy Statement/Prospectus or in any document incorporated by reference in this
Joint Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein or therein are summaries of the material terms
thereof and are not necessarily complete. In each instance reference is made to
the full text of such contract or other document filed as an exhibit to the
Registration Statement or such other document. The Registration Statement,
including exhibits filed as a part thereof, are available for inspection and
copying at the Commission's offices as described above.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, which have been filed by HSR with the Commission
pursuant to the Exchange Act (File No. 0-18886), are incorporated by reference
into this Joint Proxy Statement/Prospectus and are deemed to be a part hereof:
(a) HSR's Annual Report on Form 10-K for the year ended December 31, 1995 (the
"HSR 1995 Form 10-K"); (b) HSR's Current Report on Form 8-K, dated February 28,
1996, as amended by HSR's Current Report on Form 8-K/A (Amendment No. 1), dated
March 12, 1996; (c) HSR's Current Report on Form 8-K, dated March 11, 1996; and
(d) the description of the HSR Common Stock contained in HSR's Registration
Statement on Form 10 declared effective by the Commission on April 18, 1991.
The following document, which has been filed by Tide West with the
Commission pursuant to the Exchange Act (File No. 0-10727), is incorporated by
reference into this Joint Proxy Statement/Prospectus and is deemed to be a part
hereof: Tide West's Annual Report on Form 10-K for the year ended December 31,
1995 (the "Tide West 1995 Form 10-K"). Copies of the Tide West 1995 Form 10-K
are being sent to HSR and Tide West stockholders along with this Joint Proxy
Statement/Prospectus.
All reports subsequently filed by HSR pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the HSR Special Meeting shall be
deemed to be incorporated by reference into this Joint Proxy
Statement/Prospectus and are deemed to be a part hereof from the date of filing
of such reports. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
2
<PAGE> 9
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST, WITHOUT CHARGE, DIRECTED, IN THE CASE OF DOCUMENTS RELATING TO HSR, TO
JAMES M. PICCONE, THE SECRETARY OF HS RESOURCES, INC., AT 1999 BROADWAY, SUITE
3600, DENVER, COLORADO 80202, TELEPHONE 303-296-3600, OR, IN THE CASE OF
DOCUMENTS RELATING TO TIDE WEST, TO PEGGY E. GWARTNEY, THE SECRETARY OF TIDE
WEST OIL COMPANY, AT 6666 S. SHERIDAN, SUITE 250, TULSA, OKLAHOMA 74133,
TELEPHONE 918-488-8962. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
PRIOR TO THE RESPECTIVE SPECIAL MEETINGS, ANY REQUEST SHOULD BE MADE BY MAY ,
1996.
---------------------
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HSR, TIDE
WEST OR ANY OTHER PERSON. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS UNLAWFUL OR TO OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
3
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
AVAILABLE INFORMATION........................... 2
INCORPORATION OF DOCUMENTS BY REFERENCE......... 2
SUMMARY......................................... 5
General....................................... 5
HS Resources, Inc............................. 5
HSR Acquisition, Inc.......................... 5
Tide West Oil Company......................... 5
The Merger.................................... 6
Recent Acquisitions........................... 7
Financing..................................... 7
Tide West Stock Options....................... 8
Reasons for the Merger........................ 8
Recommendations of the Boards of Directors of
HSR and Tide West........................... 9
Opinions of Financial Advisors................ 9
Conversion Procedures......................... 10
Description of Other Terms of the
Merger Agreement............................ 10
Certain Federal Income Tax Consequences....... 10
Accounting Treatment.......................... 11
Regulatory Filings............................ 11
The Special Meetings.......................... 11
Appraisal Rights.............................. 11
Voting Agreements............................. 12
HSR Securities to be Issued................... 12
Comparative Market Price Information.......... 13
Comparative Per Share Information............. 13
Available Financial Information............... 14
Forward-Looking Statements or Information..... 14
Risk Factors.................................. 14
Selected Financial Information................ 15
Summary Selected Historical Operating Data.... 16
Summary Historical Oil and Gas Reserve
Information................................. 16
Selected Historical and Unaudited Pro Forma
Financial Data of HSR....................... 17
RISK FACTORS.................................... 21
Significantly Increased Operations............ 21
Determination of Conversion Number............ 21
Tax Risks..................................... 22
Increased Leverage............................ 22
Existing Agreements to Vote for the Merger and
the Merger Agreement........................ 23
Interests of Certain Persons in the Merger.... 23
Differences in Rights of Common Stockholders
and Certain Anti-Takeover Matters........... 23
THE MEETINGS.................................... 24
Matters to be Considered at the Special
Meetings.................................... 24
Boards of Directors' Recommendations.......... 24
Voting at Meetings; Record Dates.............. 24
HSR Proxies................................... 25
Tide West Proxies............................. 25
Solicitation of Proxies....................... 26
SPECIAL FACTORS................................. 27
Background of the Merger...................... 27
Reasons for the Merger -- HSR................. 30
Reasons for the Merger -- Tide West........... 31
Recommendation of the HSR Board............... 32
<CAPTION>
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<S> <C>
Opinions of the HSR Financial Advisors........ 32
Recommendation of the Tide West Board......... 37
Opinion of the Tide West Financial Advisor.... 38
Effects of the Merger......................... 42
Interests of Certain Persons in the Merger.... 44
Accounting Treatment.......................... 46
Certain Federal Income Tax Consequences....... 46
Regulatory Filings............................ 49
Restrictions on Resales by Affiliates of Tide
West........................................ 49
Listing on the New York Stock Exchange........ 50
Appraisal Rights.............................. 50
THE MERGER AGREEMENT AND RELATED AGREEMENTS..... 53
The Merger.................................... 53
Effective Time of the Merger.................. 53
Manner and Basis of Converting Shares......... 53
Terms of the Merger Agreement................. 55
Registration Rights Agreement................. 60
Voting Agreements............................. 60
INFORMATION ABOUT THE COMBINING COMPANIES....... 62
HS Resources, Inc............................. 62
Tide West Oil Company......................... 66
Pro Forma Information for the Combined
Company..................................... 67
INDEX TO UNAUDITED PRO FORMA FINANCIAL
STATEMENTS.................................... 70
DESCRIPTION OF HSR CAPITAL STOCK................ 90
Authorized and Outstanding Capital Stock...... 90
HSR Common Stock.............................. 90
HSR Preferred Stock........................... 90
DESCRIPTION OF TIDE WEST CAPITAL
STOCK......................................... 92
Authorized and Outstanding Capital Stock...... 92
Tide West Common Stock........................ 92
Tide West Preferred Stock..................... 92
COMPARISON OF STOCKHOLDER RIGHTS................ 93
LEGAL MATTERS................................... 98
EXPERTS......................................... 98
STOCKHOLDERS' PROPOSALS......................... 99
INDEX TO STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES............................ F-1
AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER..............................Annex A
FAIRNESS OPINION OF
MERRILL LYNCH & CO..........................Annex B
FAIRNESS OPINION OF
LEHMAN BROTHERS, INC........................Annex C
FAIRNESS OPINION OF PRUDENTIAL
SECURITIES INCORPORATED.....................Annex D
SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW CONCERNING
APPRAISAL RIGHTS OF DISSENTING
STOCKHOLDERS................................Annex E
DEFINITIONS OF CERTAIN TERMS..................Annex F
</TABLE>
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<PAGE> 11
SUMMARY
The following is only a summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus and does not purport to be complete.
Reference is made to, and this summary is qualified in its entirety by, the more
detailed information contained elsewhere in this Joint Proxy Statement/
Prospectus. As used in this Joint Proxy Statement/Prospectus, the term "HSR"
refers to such corporation and, except where the context otherwise requires, its
subsidiaries, and the term "Tide West" refers to such corporation and, except
where the context otherwise requires, its subsidiaries. All information
concerning HSR included in this Joint Proxy Statement/Prospectus has been
furnished by HSR and all information concerning Tide West included in this Joint
Proxy Statement/Prospectus has been furnished by Tide West. Definitions of
certain industry terms used in this Joint Proxy Statement/Prospectus are
included herein as Annex F. Stockholders are urged to read this Joint Proxy
Statement/Prospectus in its entirety.
GENERAL
At the HSR Special Meeting and the Tide West Special Meeting, holders of
HSR Common Stock and Tide West Common Stock will be asked to act upon proposals
related to the merger of Tide West with and into Merger Sub pursuant to the
terms of the Merger Agreement which are more particularly described herein. If
the Merger and related proposals are approved by the requisite votes of such
stockholders, Tide West will be merged into Merger Sub, a wholly owned
subsidiary of HSR, the separate existence of Tide West will cease and Merger Sub
will succeed to all of the assets, rights, liabilities and obligations of Tide
West. If the Merger and related proposals are not approved by the requisite
votes of such stockholders, HSR and Tide West intend to continue to operate
independently. For a description of certain important federal income tax
consequences of the Merger, see "Special Factors -- Certain Federal Income Tax
Consequences."
HS RESOURCES, INC.
HSR was organized in 1987 to consolidate interests owned and/or managed by
members of the current HSR management team. HSR is an independent oil and gas
company engaged in the acquisition, exploitation, development and exploration of
oil and natural gas properties. Although HSR's predecessors have operated in
many areas of the United States, including in the Mid-Continent region, HSR and
its predecessors have concentrated most of their activities since 1982 in the
Wattenberg Field area of the Denver-Julesburg Basin near Denver, Colorado (the
Denver-Julesburg Basin, inclusive of the Wattenberg Field, being herein referred
to as the "D-J Basin" and that portion of the Denver-Julesburg Basin, exclusive
of the Wattenberg Field, being herein referred to as the "Greater D-J Basin"),
and have grown rapidly as a result of certain significant leasehold acquisitions
and associated development drilling programs. The principal executive offices of
HSR are located at One Maritime Plaza, 15th Floor, San Francisco, California
94111, and its telephone number is (415) 433-5795.
For additional information concerning HSR, see "Information About the
Combining Companies -- HS Resources, Inc." and "-- Pro Forma Information for the
Combined Company" and the Unaudited Pro Forma Financial Statements of HSR
referred to in "Index to Unaudited Pro Forma Financial Statements."
HSR ACQUISITION, INC.
Merger Sub is a wholly owned subsidiary of HSR that was formed to
facilitate the consummation of the Merger and has conducted no activities other
than in connection with the Merger and the Merger Agreement. The principal
executive offices of Merger Sub are located at One Maritime Plaza, 15th Floor,
San Francisco, California 94111, and its telephone number is (415) 433-5795.
TIDE WEST OIL COMPANY
Tide West is an independent oil and gas company focused on the acquisition
and enhancement of producing oil and gas properties. All of Tide West's oil and
gas properties are located in the United States, with principal operations
conducted in portions of the Anadarko and Arkoma geologic basins located within
Oklahoma and Texas, as well as in portions of the Southern Oklahoma and
Texas/New Mexico regions. Over the last several years, Tide West has been
successful in acquiring oil and gas properties, principally in the Mid-
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<PAGE> 12
Continent region of the United States (primarily Oklahoma and Texas), where
management is best able to exploit its expertise and experience obtained through
operating properties in that region. The principal executive offices of Tide
West are located at 6666 South Sheridan, Suite 250, Tulsa, Oklahoma 74133, and
its telephone number is (918) 488-8962.
For additional information concerning Tide West, see "Information About the
Combining Companies -- Tide West Oil Company."
THE MERGER
Pursuant to the Merger Agreement, and subject to certain conditions, Tide
West will be merged with and into Merger Sub, and Merger Sub will be the
surviving corporation. Upon consummation of the Merger, the separate existence
of Tide West will cease and Merger Sub will succeed to all of the assets,
rights, liabilities and obligations of Tide West. The surviving corporation of
the Merger is referred to herein as the "Surviving Corporation."
As a result of the Merger, the Tide West stockholders will receive shares
of HSR Common Stock in exchange for their shares of Tide West Common Stock, with
each share of Tide West Common Stock being exchanged for a fraction of a share
of HSR Common Stock equal to the Conversion Number and cash in the amount of the
Cash Consideration. The "Conversion Number" is .6295, subject to certain
adjustments. The "Cash Consideration," which is also subject to adjustment, is
$8.75 less 3% of the amount by which the Market Price exceeds $10.50. "Market
Price" is the average of the per share closing sales prices of HSR Common Stock
on the NYSE over the 10 trading days ending five business days preceding the
closing date of the Merger (the "Closing Date"). The Conversion Number and the
Cash Consideration are subject to adjustment as described in "The Merger
Agreement and Related Agreements -- Terms of the Merger Agreement -- Adjustments
to the Conversion Number and Cash Consideration." The Cash Consideration, which
is dependent on both the Market Price and the Conversion Number, cannot be
determined at this time. The Market Price is to be determined by reference to
the closing sales price of the HSR Common Stock over a period that has yet to
begin. The Conversion Number is to be determined by reference to the closing
sales price of the HSR Common Stock on the date immediately preceding the
Closing Date and also cannot be determined at this time.
The Merger Agreement provides that, under certain circumstances, the Cash
Consideration will be decreased and the Conversion Number will be
correspondingly increased so that the value of the HSR Common Stock (based on
the closing sales price on the date immediately preceding the Closing Date) paid
to the holders of Tide West Common Stock in connection with the Merger is
greater than or equal to 40% of the total consideration paid to the holders of
Tide West Common Stock; provided, however, the maximum number of shares of HSR
Common Stock required to be issued in connection with the Merger is 7,161,312
(which equates to a Conversion Number of .7317) and any further adjustments to
the consideration to be paid to the holders of Tide West Common Stock necessary
to satisfy the foregoing formula (herein referred to as the "Adjustment
Formula") would be solely from a further reduction of the Cash Consideration.
See "The Merger Agreement and Related Agreements -- Terms of the Merger
Agreement -- Adjustments to the Conversion Number and Cash Consideration."
If the Conversion Number and the Cash Consideration were calculated
treating February 26, 1996 (the date of the public announcement of the execution
of the Merger Agreement), as the Closing Date, assuming no holders of Tide West
Common Stock had perfected their dissenters' appraisal rights and assuming there
is no holder of 5% or more of the Tide West Common Stock that has not
represented that it has no intention, plan or arrangement to dispose of the HSR
Common Stock to be received in the Merger, the Conversion Number would be .6295,
the Cash Consideration would be $8.73, and HSR would issue 6,161,312 shares of
HSR Common Stock in the aggregate in connection with the Merger. If such
calculations were performed under the same assumptions, and treating the date of
this Joint Proxy Statement/Prospectus as the Closing Date, the Conversion Number
would be , the Cash Consideration would be $ , and HSR would
issue shares of HSR Common Stock in the aggregate in connection with
the Merger.
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<PAGE> 13
A condition to Tide West's obligation to effect the Merger is that the
Adjustment Formula (disregarding the limit contained therein on the maximum
number of shares of HSR Common Stock required to be issued in the Merger) would
not require HSR to issue more than 7,161,312 shares of HSR Common Stock in
connection with the Merger. If this condition is not satisfied, Tide West may
(a) waive the condition and consummate the Merger pursuant to the terms of the
Merger Agreement (in which case HSR will issue the maximum of 7,161,312 shares
of HSR Common Stock, and any further adjustments to the consideration paid to
the holders of Tide West Common Stock to satisfy the Adjustment Formula will be
solely from a further reduction of the Cash Consideration), (b) terminate the
Merger Agreement or (c) cause the Merger to be restructured. See "The Merger
Agreement and Related Agreements -- Terms of the Merger Agreement --
Restructuring of the Merger."
RECENT ACQUISITIONS
On March 15, 1996, HSR completed an acquisition (the "Initial Basin
Acquisition") of certain oil and gas properties from Basin Exploration, Inc.
("Basin") in the D-J Basin. Concurrently with its approval of the Initial Basin
Acquisition, the HSR Board approved a second acquisition of additional oil and
gas properties from Basin. This additional acquisition (the "Second Basin
Acquisition" and, together with the Initial Basin Acquisition, the "Basin
Acquisitions") is subject to approval by the stockholders of Basin and is
expected to be completed by the end of the second quarter of 1996. Accordingly,
the pro forma financial information of HSR contained in this Joint Proxy
Statement/Prospectus reflects the Initial Basin Acquisition and the consummation
of the Merger, with and without the effect of the Second Basin Acquisition.
Unless otherwise indicated, all reserve and operating data concerning HSR
contained in this Joint Proxy Statement/Prospectus excludes the effects of the
Basin Acquisitions. See "Information About the Combining Companies -- HS
Resources, Inc. -- Recent Acquisitions" and "-- Pro Forma Information for the
Combined Company," the Unaudited Pro Forma Financial Statements of HSR referred
to in "Index to Pro Forma Financial Statements" and the Statements of Revenues
and Direct Operating Expenses referred to in "Index to Statements of Revenues
and Direct Operating Expenses." The Initial Basin Acquisition was financed
through HSR's bank facility on an interim basis pending completion of
documentation of permanent financing arrangements with respect to the Initial
Basin Acquisition. See "Information About the Combining Companies -- HS
Resources, Inc. -- Financing."
FINANCING
The aggregate cash consideration required and net liabilities assumed in
connection with consummating the Merger and the Basin Acquisitions are expected
to be $254.5 million, with $129.0 million for the Merger and $125.5 million for
the Basin Acquisitions. Through existing negotiated arrangements, HSR has
available to it a number of specific capital options with which to meet these
capital needs. In order to provide the senior bank debt capacity necessary to
effect the Merger and the Basin Acquisitions, HSR has entered into a letter of
intent with The Chase Manhattan Bank, N.A. ("Chase") indicating Chase's intent
to provide, on a syndicated basis, an unsecured revolving credit facility of up
to $375 million. HSR believes this facility will be sufficient to (a) finance
the cash portion of the consideration paid to Basin and to the holders of Tide
West Common Stock, (b) absorb HSR's current outstanding senior indebtedness
($78.5 million at March 26, 1996, following the Initial Basin Acquisition and
the Chase Asset Monetization Arrangement (as defined herein)) and the new debt
to be assumed in connection with the Merger ($40.8 million at December 31,
1995), (c) pay HSR's transaction costs incurred with respect to the Merger and
the Basin Acquisitions and (d) provide HSR with additional financial
flexibility.
On March 26, 1996, in a financing transaction facilitated by Chase, HSR
closed the sale to an unaffiliated third party of certain low-growth assets
acquired in the Initial Basin Acquisition, principally the producing and proved
developed non-producing wells (the "Chase Asset Monetization Arrangement"). HSR
reserved a production payment in such wells and retained an option to
repurchase, in whole or in part, the wells for fair market value at any time.
HSR also retained what it considers to be the high-growth assets, including the
proved and unproved drillsites, operations, the right to market production from
the wells, infill rights and proceeds from the monetization of Section 29 tax
credits. HSR will operate these properties under a fee
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agreement. As a result of the Chase Asset Monetization Arrangement, HSR was able
to reduce by $23.1 million the debt it had incurred by closing the Initial Basin
Acquisition, which debt was assumed by the party that acquired the properties.
HSR intends to transfer a portion of the assets to be acquired in the Second
Basin Acquisition in a similar transaction so that the aggregate reduction in
the amount of debt that HSR would have otherwise incurred in closing the Basin
Acquisitions will be approximately $82 million.
HSR anticipates that, following the consummation of the Merger and the
Basin Acquisitions, and assuming approximately $82 million of the assets
acquired in the Basin Acquisitions are financed through the Chase Asset
Monetization Arrangement or similar arrangement, HSR's debt-to-total capital
ratio will be 63%. HSR intends to reduce such leverage to a more balanced level
as soon as practicable by utilizing one or a combination of options available to
it, including asset monetization transactions, off-balance sheet financings,
sale and lease-back transactions, divestitures of non-core/non-strategic assets,
issuance of equity securities and certain other negotiated financing options
already in place. See "Information About the Combining Companies -- HS
Resources, Inc. -- Financing."
TIDE WEST STOCK OPTIONS
There are currently outstanding options to purchase 937,840 shares of Tide
West Common Stock, all of which are or will become fully vested prior to the
Closing Date. If not exercised prior to the Closing Date, each such option will
be cancelled and converted into the right to receive, for each share of Tide
West Common Stock with respect to which such option is exercisable, cash in an
amount equal to the amount by which the Merger Consideration exceeds the per
share exercise price of such option. "Merger Consideration" is the sum of (a)
the Cash Consideration and (b) the product of the Conversion Number and the
Market Price. The amounts so determined will be paid to the holders of such
options not later than three business days after the Closing Date. See "Special
Factors -- Effects of the Merger -- Conversion of Tide West Common Stock and
Other Securities -- Tide West Stock Options."
REASONS FOR THE MERGER
The HSR Board determined to approve the Merger Agreement and the
transactions contemplated thereby and to recommend that its stockholders vote
FOR the issuance of shares of HSR Common Stock in accordance with the Merger
Agreement for the following reasons: (a) the Merger provides geographic
diversification for HSR into attractive geographic regions; (b) the Tide West
properties offer significant upside potential through aggressive and
technologically oriented exploitation and exploration; (c) the Merger provides
advantageous synergies between HSR's current gas marketing group and Tide West's
trading and transportation business; (d) the Tide West properties are relatively
concentrated and are primarily operated by Tide West; (e) the Merger brings HSR
to a size level that HSR's management believes will improve the liquidity of HSR
Common Stock and should help HSR achieve a wider market following; and (f) the
Merger offers the opportunity to create a combined company with greater
financial resources, competitive strength and business opportunities than would
be possible for HSR alone.
The Tide West Board determined to approve the Merger Agreement and the
transactions contemplated thereby and to recommend that its stockholders vote
FOR approval of the Merger Agreement and the Merger for the following reasons:
(a) under current market conditions, the Merger offers the best opportunity of
maximizing value for Tide West's stockholders; (b) the Merger presents a
significant opportunity for diversification and partial liquidation of the
investment of Tide West's stockholders by allowing them to receive cash for a
portion of their investment and to become stockholders in a larger publicly
traded independent oil and gas company whose stock, the Tide West Board
believes, has greater upside potential than the Tide West Common Stock; (c) the
Merger offers the opportunity to create a combined company with greater
financial resources, competitive strength and business opportunities than would
be possible for Tide West alone; (d) the Merger is expected to provide Tide
West's stockholders with enhanced liquidity with respect to the HSR Common Stock
received by them in the Merger; and (e) the Merger is expected to provide Tide
West's stockholders with the opportunity to receive a premium over the market
price of their shares of Tide West Common Stock immediately prior to the
announcement on February 26, 1996, of the proposed Merger and a premium over the
market price of their shares of Tide West Common Stock
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<PAGE> 15
immediately prior to the announcement on October 20, 1995, of the intention of
the Tide West Board to sell Tide West.
For a discussion of the reasons for the Merger and other factors considered
by the HSR Board and the Tide West Board, see "Special Factors -- Reasons for
the Merger -- HSR" and "-- Reasons for the Merger -- Tide West."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF HSR AND TIDE WEST
The HSR Board believes that the terms of the Merger and the issuance of
shares of HSR Common Stock pursuant to the Merger Agreement are fair to, and in
the best interests of, HSR and its stockholders. Accordingly, the HSR Board has
approved the Merger Agreement, the Merger, the issuance of HSR Common Stock and
payment of the aggregate Cash Consideration in accordance with the Merger
Agreement and recommends that holders of HSR Common Stock vote FOR the issuance
of HSR Common Stock in accordance with the Merger Agreement. See "Special
Factors -- Recommendation of the HSR Board."
The Tide West Board believes that the terms of the Merger are fair to, and
in the best interests of, Tide West and its stockholders. Accordingly, the Tide
West Board has approved the Merger Agreement and the Merger and recommends that
holders of shares of Tide West Common Stock vote FOR adoption and approval of
the Merger Agreement and the Merger. See "Special Factors -- Recommendation of
the Tide West Board."
OPINIONS OF FINANCIAL ADVISORS
HSR engaged Lehman Brothers, Inc. ("Lehman Brothers") and Prudential
Securities Incorporated ("Prudential Securities" and, together with Lehman
Brothers, the "HSR Financial Advisors") to act as financial advisors in
connection with the Merger and to render their opinions as to the fairness, from
a financial point of view, to HSR of the consideration to be paid by HSR in the
Merger. On February 24, 1996, Lehman Brothers delivered its oral opinion, which
opinion was subsequently confirmed in writing, to the HSR Board, that, as of
such date and subject to certain assumptions, factors and limitations, the
consideration to be paid by HSR for the Tide West Common Stock in the Merger was
fair, from a financial point of view, to HSR. Each of the HSR Financial Advisors
has provided its written opinion dated March 26, 1996. A copy of the full text
of each of the opinions of the HSR Financial Advisors dated the date of this
Joint Proxy Statement/Prospectus, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the review by the HSR
Financial Advisors in rendering their opinions, are attached as Annex C and
Annex D to this Joint Proxy Statement/Prospectus and are incorporated herein by
reference. This Joint Proxy Statement/Prospectus contains a summary of the
material terms of the opinions of Lehman Brothers and Prudential Securities.
Reference is made to the full text of the opinions attached as Annex C and Annex
D hereto. The March 26, 1996, opinions are substantially identical to the
opinions attached as Annex C and Annex D hereto. STOCKHOLDERS OF HSR ARE URGED
TO READ CAREFULLY THE OPINIONS OF THE HSR FINANCIAL ADVISORS IN THEIR ENTIRETY.
For a more particular description of the opinions, information regarding fees
and expenses to be paid to Lehman Brothers and Prudential Securities by HSR upon
consummation of the Merger and Lehman Brothers' and Prudential Securities' prior
representation of HSR, see "Special Factors -- Opinions of the HSR Financial
Advisors."
Merrill Lynch & Co. ("Merrill Lynch") delivered its oral opinion,
subsequently confirmed in writing, dated February 24, 1996, that, as of such
date, the consideration to be received by the holders of the Tide West Common
Stock was fair to such holders, taken as a whole, from a financial point of
view. Merrill Lynch has confirmed such opinion in an opinion dated the date of
this Joint Proxy Statement/Prospectus. A copy of the full text of the opinion of
Merrill Lynch dated the date of this Joint Proxy Statement/Prospectus, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex B to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This Joint Proxy
Statement/Prospectus contains a summary of the material terms of the opinion of
Merrill Lynch set forth in this Joint Proxy Statement/Prospectus. Reference is
made to the full text of such opinion attached as Annex B hereto. The February
24, 1996, opinion is substantially identical to the opinion attached as Annex B
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<PAGE> 16
hereto. STOCKHOLDERS OF TIDE WEST ARE URGED TO READ CAREFULLY THE OPINION IN ITS
ENTIRETY. For a more particular description of this opinion and information
regarding fees and expenses payable to Merrill Lynch by Tide West, see "Special
Factors -- Opinion of the Tide West Financial Advisor."
CONVERSION PROCEDURES
As soon as practicable after the Closing Date, HSR will cause Harris
Savings and Trust, the transfer agent for shares of HSR Common Stock (the
"Exchange Agent"), to mail to each record holder of Tide West Common Stock as of
the Closing Date a letter of transmittal to be used to effect the exchange of
certificates representing Tide West Common Stock for certificates representing
HSR Common Stock and the Cash Consideration, along with instructions for using
such letter of transmittal to effect such exchange (collectively, the "Letter of
Transmittal"). TIDE WEST STOCKHOLDERS SHOULD NOT SURRENDER THEIR STOCK
CERTIFICATES UNTIL THE LETTER OF TRANSMITTAL IS RECEIVED AND THEN SHOULD
SURRENDER THEIR STOCK CERTIFICATES ONLY ACCOMPANIED BY A PROPERLY COMPLETED AND
EXECUTED LETTER OF TRANSMITTAL. See "The Merger Agreement and Related
Agreements -- Manner and Basis of Converting Shares."
DESCRIPTION OF OTHER TERMS OF THE MERGER AGREEMENT
The Merger Agreement contains various other terms and provisions, including
certain representations and warranties made by both HSR and Tide West, certain
covenants and agreements made by both HSR and Tide West (including agreements
relating to the conduct of Tide West's business pending consummation of the
Merger and agreements restricting Tide West's ability to solicit or enter into
an agreement with respect to an alternative transaction or furnish information
to or negotiate with another party with respect to an alternative transaction)
and certain conditions that must be satisfied or waived prior to consummation of
the Merger (including obtaining requisite stockholder approvals and making
certain governmental filings). Such provisions are summarized under "The Merger
Agreement and Related Agreements." In addition, a copy of the Merger Agreement
is included as Annex A to this Joint Proxy Statement/Prospectus, and reference
should be made to such copy for the complete text of such provisions.
The Merger Agreement is subject to termination at the option of either HSR
or Tide West if the Merger is not consummated on or before July 31, 1996, and
prior to such time upon the occurrence of certain specified events. The Merger
Agreement may be amended or supplemented at any time by agreement of HSR and
Tide West; provided, that, after any stockholder approval of the Merger, no
amendment may be made which adversely affects the rights of the holders of the
Tide West Common Stock or the HSR Common Stock without further stockholder
approval. It is anticipated that the Merger will become effective as promptly as
practicable after the requisite stockholder approvals have been obtained, all
other conditions to the Merger have been satisfied or waived and a certificate
of merger is accepted for filing by the Secretary of State of Delaware (the
"Effective Time"). At any time prior to the Effective Time, subject to certain
restrictions, the parties may waive any provision of the Merger Agreement. See
"The Merger Agreement and Related Agreements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under the terms of the Merger Agreement, Tide West will be merged into
Merger Sub, a subsidiary of HSR, which will be the Surviving Corporation. It is
expected that the Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986 (the "Code") by virtue
of the application of Section 368(a)(2)(D) of the Code. Each Tide West
stockholder will recognize the amount of gain, but not loss, realized in the
transaction, but only to the extent of cash received (excluding any cash
received in lieu of issuing fractional shares or in respect of the assertion of
appraisal rights). Generally, Tide West stockholders receiving cash in lieu of
fractional shares will be treated as receiving such cash in redemption of such
fractional shares. For a discussion of these and other federal income tax
considerations in connection with the Merger, see "Special Factors -- Certain
Federal Income Tax Consequences."
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ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase by HSR in accordance with
generally accepted accounting principles. For a discussion of the effect of the
application of purchase accounting to this transaction, see "Special
Factors -- Accounting Treatment."
REGULATORY FILINGS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "Antitrust Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. HSR and Tide West
filed notification and report forms under the Antitrust Act with the FTC and the
Antitrust Division on , 1996. On ,
1996, the FTC notified HSR and Tide West that early termination of the Antitrust
Act waiting period had been granted.
THE SPECIAL MEETINGS
The HSR Special Meeting will be held on Friday, June 14, 1996, at the
Sheraton Palace Hotel, 2 New Montgomery Street, San Francisco, California, at
10:00 a.m., local time. The purpose of the HSR Special Meeting is to consider
and act upon (a) a proposal to approve the issuance of up to 7,161,312 shares of
HSR Common Stock in accordance with the Merger Agreement and (b) such other
business as may properly be brought before the HSR Special Meeting or any
adjournment or postponement thereof. Holders of record of shares of HSR Common
Stock at the close of business on May 8, 1996, are entitled to notice of, and to
vote at, the HSR Special Meeting. On such date, there were shares of
HSR Common Stock outstanding, each of which will be entitled to vote on each
matter to be acted upon or which may properly be brought before the HSR Special
Meeting. The affirmative vote of the holders of a majority of the issued and
outstanding shares of HSR Common Stock that are present in person or represented
by proxy at the HSR Special Meeting at which a quorum is present will be
required to approve the issuance of the HSR Common Stock upon consummation of
the Merger. Approximately 10% of the outstanding shares of HSR Common Stock are
held by directors and executive officers of HSR and their affiliates.
The Tide West Special Meeting will be held on Friday, June 14, 1996, at the
offices of Tide West at 6666 South Sheridan, Suite 250, Tulsa, Oklahoma, at
10:00 a.m., local time. The purpose of the Tide West Special Meeting is to
consider and act upon (a) a proposal to approve and adopt the Merger Agreement
and to approve the Merger and (b) such other business as may properly be brought
before the Tide West Special Meeting or any adjournment or postponement thereof.
Holders of record of shares of Tide West Common Stock at the close of business
on May 8, 1996, are entitled to notice of, and to vote at, the Tide West Special
Meeting. On such date, there were 9,787,628 shares of Tide West Common Stock
outstanding, each of which will be entitled to vote on each matter to be acted
upon or which may properly be brought before the Tide West Special Meeting. The
affirmative vote of the holders of a majority of the issued and outstanding
shares of Tide West Common Stock will be required to approve and adopt the
Merger Agreement and to approve the Merger. HSR has, pursuant to certain voting
and proxy agreements entered into between HSR and certain stockholders of Tide
West, acquired the right to vote a majority of the outstanding shares of Tide
West Common Stock in favor of the Merger and the Merger Agreement. Accordingly,
HSR has sufficient voting power to assure the approval of the Merger and the
Merger Agreement by the Tide West stockholders without the affirmative vote of
any other stockholder of Tide West. Approximately 53.3% of the outstanding
shares of Tide West Common Stock are held by directors and executive officers of
Tide West and their affiliates. For additional information concerning the
special meetings, see "The Meetings."
APPRAISAL RIGHTS
Under the Delaware Act, holders of HSR Common Stock are not entitled to
dissenters' appraisal rights in respect of the Merger. Holders of Tide West
Common Stock may demand an appraisal of the fair value of
11
<PAGE> 18
Tide West Common Stock and payment of cash in lieu of accepting the Cash
Consideration and shares of HSR Common Stock issuable to them in connection with
the Merger. Any holder of Tide West Common Stock who desires to exercise
appraisal rights (each, a "Dissenting Stockholder") must: (a) hold shares of
Tide West Common Stock on the date of making a demand for appraisal; (b)
continuously hold shares of Tide West Common Stock through the Effective Time of
the Merger; (c) deliver, prior to the Tide West Special Meeting, a written
demand for appraisal to Tide West at 6666 South Sheridan, Suite 250, Tulsa,
Oklahoma 74133-1750, Attention: Secretary; and (d) otherwise satisfy all of the
requirements of Section 262 of the Delaware Act. In order to preserve such
stockholder's appraisal rights, a Tide West stockholder must not vote in favor
of the Merger. Voting against the Merger, abstaining from voting or failing to
vote, however, will not constitute a written demand for appraisal. Any Tide West
stockholder who fails to timely and properly perfect such stockholder's
appraisal rights will lose such right to appraisal and will have such
stockholder's Tide West Common Stock converted into the right to receive the
Cash Consideration and shares of HSR Common Stock in accordance with the terms
of the Merger Agreement, without any interest thereon. See "Special
Factors -- Appraisal Rights," "The Meetings" and Annex E hereto.
A condition to HSR's obligation to consummate the Merger is that holders of
no more than 3% of Tide West Common Stock shall have exercised their dissenters'
appraisal rights. See "The Merger Agreement and Related Agreements -- Terms of
the Merger Agreement -- Conditions to Consummation of the Merger." The amount of
Tide West Common Stock subject to perfected dissenters' appraisal rights as of
the Closing Date is used in the calculation of the Adjustment Formula to
determine the Conversion Number and the Cash Consideration. See "The Merger
Agreement and Related Agreements -- Terms of the Merger Agreement -- Adjustments
to the Conversion Number and Cash Consideration."
VOTING AGREEMENTS
On February 25, 1996, HSR and Natural Gas Partners, L.P., a Delaware
limited partnership ("NGP"), entered into an Agreement to Vote and Proxy (the
"NGP Voting Agreement") pursuant to which NGP agreed to vote, and granted to HSR
a proxy to vote, NGP's 4,550,000 shares of Tide West Common Stock, representing
approximately 46.49% of the Tide West Common Stock, in favor of the Merger and
the Merger Agreement. On February 25, 1996, HSR and Philip B. Smith, President,
a director and a stockholder of Tide West ("Smith"), entered into an Agreement
to Vote and Proxy (the "Smith Voting Agreement" and, together with the NGP
Voting Agreement, the "Voting Agreements") pursuant to which Smith agreed to
vote, and granted to HSR a proxy to vote, 344,000 shares of Tide West Common
Stock, representing an additional 3.51% of the Tide West Common Stock, in favor
of the Merger and the Merger Agreement. Pursuant to the Voting Agreements, HSR
has acquired the voting rights to a majority of the outstanding shares of Tide
West Common Stock. Accordingly, HSR has sufficient voting power to assure the
approval of the Merger and the Merger Agreement by the Tide West stockholders
without the affirmative vote of any other stockholder of Tide West.
NGP and Smith each entered into the Voting Agreements in consideration of
HSR entering into the Merger Agreement and, in the case of NGP, HSR agreeing to
provide NGP with representation on the HSR Board. In addition, pursuant to the
Voting Agreements, NGP and Smith each agreed, among other things, that they
would not make any sale, transfer or other disposition of any shares of HSR
Common Stock received by them in the Merger for one year from the Effective
Time. NGP and Smith also agreed that they would not, among other things,
directly or indirectly, sell, transfer or encumber any of the Tide West Common
Stock subject to their respective Voting Agreements during the term of such
Voting Agreement, nor would they take any action which would, if taken by Tide
West, violate the provisions of the Merger Agreement relating to negotiations
with third parties regarding the acquisition of Tide West Common Stock or the
merger or other business combination of Tide West with or into any third party.
See "Special Factors -- Interests of Certain Persons in the Merger" and "The
Merger Agreement and Related Agreements -- Voting Agreements."
HSR SECURITIES TO BE ISSUED
In connection with the Merger, in addition to the aggregate Cash
Consideration to be paid in exchange for the outstanding shares of Tide West
Common Stock, HSR will issue up to 7,161,312 shares of HSR
12
<PAGE> 19
Common Stock. For a description of the terms and relative rights of the HSR
Common Stock, see "Description of HSR Capital Stock." HSR Common Stock is listed
for trading on the NYSE. The HSR Common Stock to be issued in connection with
the Merger has been approved for listing on the NYSE, subject to official notice
of issuance and requisite approval of the Merger and the Merger Agreement by the
stockholders of Tide West and approval of the issuance of HSR Common Stock in
connection with the Merger by the stockholders of HSR.
COMPARATIVE MARKET PRICE INFORMATION
HSR Common Stock is traded on the NYSE under the symbol "HSE." Tide West
Common Stock is traded on The Nasdaq Stock Market ("Nasdaq") under the symbol
"TIDE."
The following table shows, for each of February 23, 1996 (the last trading
day prior to the public announcement of the execution of the Merger Agreement),
and May , 1996 (the latest practicable date prior to the date of this Joint
Proxy Statement/Prospectus), (a) the last reported sales price of the HSR Common
Stock, as reported by the NYSE, (b) the last reported sales price of the Tide
West Common Stock, as reported by Nasdaq, and (c) the equivalent value for the
Tide West Common Stock assuming conversion of the Tide West Common Stock into
shares of HSR Common Stock and cash pursuant to the Merger.
<TABLE>
<CAPTION>
TIDE WEST
COMMON STOCK
-----------------------
HSR EQUIVALENT
COMMON STOCK HISTORICAL VALUE*
------------ ---------- ----------
<S> <C> <C> <C>
February 23, 1996............................................ $ 11.375 $13.00 $15.89
May , 1996................................................. $ $ $
</TABLE>
- ---------------
* Calculated by multiplying the historical market price per share of the HSR
Common Stock on the indicated day by the Conversion Number, which represents
the fraction of a share of HSR Common Stock that would be issuable in the
Merger in exchange for each share of Tide West Common Stock if the Merger were
to be consummated on that day, and adding the Cash Consideration of $8.73 and
$ for February 23, 1996, and May , 1996, respectively. See "The Merger
Agreement and Related Agreements -- Terms of the Merger
Agreement -- Adjustments to the Conversion Number and Cash Consideration."
For information relating to market prices of and dividends on HSR Common
Stock and Tide West Common Stock, see "Information About the Combining
Companies -- HS Resources, Inc. -- Price Range of HSR Common Stock and
Dividends" and " -- Tide West Oil Company -- Price Range of Tide West Common
Stock and Dividends." STOCKHOLDERS OF TIDE WEST AND HSR ARE URGED TO OBTAIN
CURRENT QUOTATIONS FOR EACH OF THESE SECURITIES.
Following the Merger, HSR Common Stock will continue to be traded on the
NYSE. Following the Merger, Tide West Common Stock will cease to be traded on
Nasdaq and there will be no further market for such stock.
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain comparative per share information
for HSR and Tide West. The "Prior to Merger" information for HSR is historical
and pro forma information, with the pro forma information giving effect to the
Initial Basin Acquisition, and for Tide West is historical information. The
"Assuming Merger" information is pro forma information of HSR giving effect to
the Merger presented on a per share basis, assuming the Conversion Number is
and the Cash Consideration is $ (such Conversion Number
and Cash Consideration calculated treating the date of this Joint Proxy
Statement/Prospectus as the Closing Date of the Merger and assuming no holders
of Tide West Common Stock have perfected their dissenters' appraisal rights and
assuming there is no holder of 5% or more of the Tide West Common Stock that has
not represented that it has no intention, plan or arrangement to dispose of the
HSR Common Stock to be received in the Merger). See "The Merger Agreement and
Related Agreements -- Terms of the Merger Agreement -- Adjustments to the
Conversion Number and Cash
13
<PAGE> 20
Consideration." The "Assuming Merger" information is pro forma with the "With
Second Basin Acquisition" information giving effect to the Initial Basin
Acquisition, the Merger and the Second Basin Acquisition and the "Without Second
Basin Acquisition" information giving effect to the Initial Basin Acquisition
and the Merger, in each case as if all of such transactions had occurred on
January 1, 1995.
<TABLE>
<CAPTION>
PRIOR TO MERGER ASSUMING MERGER
------------------------------------ ---------------------------------------
HSR TIDE WEST WITH WITHOUT
------------------------ ---------- SECOND BASIN SECOND BASIN
PRO ACQUISITION ACQUISITION
FORMA ------------------ ------------------
WITH PER PER
INITIAL PER EQUIVALENT PER EQUIVALENT
BASIN HSR TIDE WEST HSR TIDE WEST
HISTORICAL ACQUISITION HISTORICAL SHARE SHARE SHARE SHARE
---------- ----------- ---------- ----- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Book value:
As of December 31, 1995.................... $10.88 $ 10.88 $7.61
Income (loss) from continuing operations:
Year ended December 31, 1995............... 0.02 0.03 0.65
Cash dividends:
Year ended December 31, 1995............... -- -- -- -- -- -- --
</TABLE>
AVAILABLE FINANCIAL INFORMATION
Historical financial statements and other information for HSR and Tide West
are included in documents incorporated by reference into this Joint Proxy
Statement/Prospectus. For a list of such documents and instructions as to how to
obtain copies of such documents, see "Incorporation of Documents by Reference."
This Joint Proxy Statement/Prospectus also includes (a) pro forma financial
statements for HSR and certain pro forma oil and gas information, giving effect
to the Initial Basin Acquisition and the Merger, with and without giving effect
to the Second Basin Acquisition, and (b) statements of revenues and direct
operating expenses for properties acquired in the Initial Basin Acquisition and
properties to be acquired in the Second Basin Acquisition. See "Information
About the Combining Companies -- HS Resources, Inc. -- Recent Acquisitions" and
"-- Pro Forma Information for the Combined Company," the Unaudited Pro Forma
Financial Statements of HSR referred to in "Index to Unaudited Pro Forma
Financial Statements" and the Statements of Revenues and Direct Operating
Expenses referred to in "Index to Statements of Revenues and Direct Operating
Expenses."
FORWARD-LOOKING STATEMENTS OR INFORMATION
CERTAIN STATEMENTS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS ARE
NOT BASED ON HISTORICAL FACTS, BUT ARE FORWARD-LOOKING STATEMENTS THAT ARE BASED
UPON NUMEROUS ASSUMPTIONS ABOUT FUTURE CONDITIONS THAT MAY ULTIMATELY PROVE TO
BE INACCURATE. ACTUAL EVENTS AND RESULTS MAY MATERIALLY DIFFER FROM ANTICIPATED
RESULTS DESCRIBED IN SUCH STATEMENTS. HSR'S ABILITY TO ACHIEVE SUCH RESULTS IS
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES. SUCH RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO, PRODUCT PRICES, CONTINUED AVAILABILITY OF
CAPITAL AND FINANCING, NUMBER OF SHARES OF HSR COMMON STOCK ISSUED IN CONNECTION
WITH THE MERGER, AMOUNT OF OTHER FINANCING AND OTHER FACTORS AFFECTING HSR'S
BUSINESS THAT MAY BE BEYOND HSR'S CONTROL, INCLUDING, BUT NOT LIMITED TO, THE
MATTERS DESCRIBED IN "RISK FACTORS."
RISK FACTORS
Stockholders of HSR and Tide West should refer to the information under
"Risk Factors" for a discussion of certain matters that should be considered in
connection with an evaluation of the proposals to be considered at the
respective stockholders meetings.
14
<PAGE> 21
SELECTED FINANCIAL INFORMATION
The following tables set forth certain selected historical consolidated
financial data for HSR and Tide West. It should be read in conjunction with the
historical financial statements of HSR and Tide West incorporated by reference
into this Joint Proxy Statement/Prospectus.
HS RESOURCES, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Financial Data:
Gross Revenues.................................. $ 13,136 $ 27,633 $ 47,477 $ 60,401 $ 55,340
Total Expenses.................................. 12,163 20,066 31,232 50,290 54,890
-------- -------- -------- -------- --------
Income Before Provision for Income Taxes and
Extraordinary Item............................ $ 973 $ 7,567 $ 16,245 $ 10,111 $ 450
======== ======== ======== ======== ========
Net Income...................................... $ 584 $ 3,690 $ 10,056 $ 6,259 $ 274
======== ======== ======== ======== ========
Net Income Per Share -- Fully Diluted........... $ 0.11 $ 0.55 $ 0.92 $ 0.53 $ 0.02
Other Financial Data:
Net Cash Provided by Operating Activities....... $ 3,051 $ 20,469 $ 33,745 $ 36,553 $ 31,179
Net Cash Used in Investing Activities........... (18,596) (45,607) (91,410) (85,793) (65,284)
Net Cash Provided by Financing Activities....... 21,591 24,838 71,683 28,778 33,564
Balance Sheet Data (At Period End):
Total Assets.................................... $ 83,026 $120,452 $228,260 $269,070 $302,089
Long-term Debt (net of current portion)......... 36,303 20,640 74,420 103,478 125,537
Stockholders' Equity............................ 28,901 78,731 113,299 119,358 119,174
</TABLE>
TIDE WEST OIL COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(5)
-----------------------------------------------------------
1991(1) 1992(1) 1993(1) 1994(1) 1995
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Financial Data:
Total Operating Revenues..................... $ 5,030 $ 24,958 $ 96,028 $117,720 $119,435
Total Operating Expenses..................... 4,094 19,957 88,393 107,604 106,828
------- -------- -------- -------- --------
Operating Income............................. 936 5,001 7,635 10,116 12,607
Income Before Income Taxes and Cumulative
Effect of Change in Accounting
Principle(2)............................... $ 1,360 $ 4,375 $ 6,878 $ 7,998 $ 10,687
======= ======== ======== ======== ========
Net Income(3)................................ $ 1,360 $ 4,239 $ 4,030 $ 5,095 $ 6,671
======= ======== ======== ======== ========
Net Income Per Share -- Primary(2)........... $ 0.26 $ 0.80 $ 0.43 $ 0.52 $ 0.67
Net Income Per Share -- Fully Diluted........ 0.26 0.80 0.43 0.52 0.65
Other Financial Data:
Net Cash Provided by Operating Activities.... $ 3,397 $ 4,614 $ 11,884 $ 17,683 $ 24,056
Net Cash Used in Investing Activities........ (2,415) (27,956) (40,045) (27,760) (26,568)
Net Cash (Used in) Provided by Financing
Activities................................. (210) 23,170 27,426 10,005 5,892
Balance Sheet Data (At Period End):
Total Assets................................. $14,771 $ 70,481 $106,606 $124,320 $144,397
Long-Term Debt............................... -- 21,565 22,300 32,300 40,800
Partners' Capital............................ 13,550 -- -- -- --
Stockholders' Equity(4)...................... -- 29,475 65,364 70,459 74,506
</TABLE>
- ---------------
(1) Certain reclassifications were made to conform to the presentation used in
1995.
(2) Effective January 1, 1993, Tide West changed its method of accounting for
income taxes. The cumulative effect of this change reduced 1993 net income
$300,000, or $0.05 per share.
(3) Tide West was a partnership until the reverse acquisition of Draco Gas
Partners, L.P. ("Draco"), effective December 1, 1992, and, therefore, was
not subject to income tax.
(4) No cash dividends have been paid. Draco, which was a partnership, paid a
$1.1 million cash distribution to its partners in January 1992.
(5) See Tide West 1995 Form 10-K, "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations," Consolidated Statements
of Income and Notes to Consolidated Financial Statements and Quarterly
Financial Data for information relating to significant items affecting the
results of operations.
15
<PAGE> 22
SUMMARY SELECTED HISTORICAL OPERATING DATA
The following table sets forth summary information with respect to HSR's
and Tide West's operations for the periods indicated.
<TABLE>
<CAPTION>
HSR TIDE WEST
------------------------ ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------
1993 1994 1995 1993 1994 1995
------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Production
Oil (MBbls)............................... 967 1,664 1,582 297 362 571
Natural gas (MMcf)........................ 14,684 20,108 21,049 10,053 14,087 18,099
Oil equivalent (MBoe)..................... 3,414 5,015 5,090 1,973 2,710 3,588
Average net sales price
Oil ($ per Bbl)........................... $16.09 $14.83 $16.52 $ 15.79 $ 15.39 $ 16.55
Natural gas ($ per Mcf)................... $ 2.03 $ 1.70 $ 1.30 $ 1.95 $ 1.66 $ 1.44
Production and operating costs per Boe(1)... $ 2.84 $ 2.68 $ 2.75 $ 3.22 $ 2.54 $ 2.86
</TABLE>
- ---------------
(1) Includes lease operating expenses plus production taxes per Boe and excludes
general and administrative expenses.
SUMMARY HISTORICAL OIL AND GAS RESERVE INFORMATION
The following table sets forth summary information with respect to HSR's
and Tide West's proved oil and gas reserves as of December 31, 1995. For pro
forma reserve information concerning HSR as of December 31, 1995, see
"Information About the Combining Companies -- Pro Forma Information for the
Combined Company -- Oil and Gas Properties -- Pro Forma Reserves."
<TABLE>
<CAPTION>
OIL
CRUDE OIL NATURAL GAS EQUIVALENT
(MBBLS) (MMCF) (MBOE)
--------- ----------- ----------
<S> <C> <C> <C>
Net Proved Reserves
HSR:
Developed.............................................. 11,557 219,262 48,101
Undeveloped............................................ 8,031 79,515 21,283
-------- --------- ---------
Total............................................. 19,588 298,777 69,384
Tide West:
Developed.............................................. 5,831 194,624 38,268
Undeveloped............................................ 1,154 42,863 8,298
-------- --------- ---------
Total............................................. 6,985 237,487 46,566
</TABLE>
16
<PAGE> 23
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA OF HSR
The following selected historical and unaudited pro forma balance sheet
data as of December 31, 1995, and historical and unaudited pro forma statements
of operations data for the year then ended adjust the historical financial
information of HSR and Tide West to reflect (a) the consummation of the Merger
and both the Initial and Second Basin Acquisitions (with respect to the Selected
Historical and Pro Forma Financial Data With Second Basin Acquisition as of and
for the Year Ended December 31, 1995), (b) the Merger and the Initial Basin
Acquisition (with respect to the Selected Historical and Pro Forma Financial
Data Without Second Basin Acquisition as of and for the Year Ended December 31,
1995) and (c) only the Initial Basin Acquisition (with respect to the Selected
Historical and Pro Forma Financial Data With Initial Basin Acquisition as of and
for the Year Ended December 31, 1995). The pro forma balance sheets and
statements of operations included elsewhere herein were prepared as if the
Merger and Basin Acquisitions were consummated, as the case may be, on December
31, 1995, and January 1, 1995, respectively. The pro forma adjustments are based
on estimates and assumptions explained in further detail in the notes
accompanying such pro forma financial statements. With respect to the Initial
Basin Acquisition, HSR has entered into the Chase Asset Monetization Arrangement
pursuant to which it sold at its cost certain of the interests that it had
acquired from Basin (see "Information About the Combining Companies -- HS
Resources, Inc. -- Financing"). The interests sold represent primarily proved
producing and proved non-producing wells, which HSR sold for cash and a retained
production payment. Pursuant to the terms of the retained production payment,
HSR will not receive any production revenues from such wells (except in certain
instances) until a specified amount of revenue has been produced in the future.
Therefore, with respect to the Initial Basin Acquisition, the following pro
forma financial statement data does not reflect any production revenues or
related expenses during the pro forma period. HSR will operate the properties on
behalf of the buyer for a fee and has an option to repurchase the properties.
HSR is entitled to accrue interest on its retained production payment at
the rate of 8.5% per year, and such amount is reflected as interest income.
Following the Chase Asset Monetization Arrangement transaction, HSR has retained
primarily proved undeveloped properties, undrilled locations and Section 29 tax
credits and believes these are the higher growth assets. These assets have been
recorded on a pro forma basis in HSR's oil and gas property account at cost. It
is HSR's intention to enter into a similar arrangement with respect to the
Second Basin Acquisition and, therefore, the same treatment has been given to
those properties.
The selected historical and unaudited pro forma financial data should be
read in conjunction with the related unaudited pro forma financial statements
and related notes and the related historical financial statements and related
notes included elsewhere herein. The pro forma information presented is not
necessarily indicative of the financial position or results that would have
actually occurred had the Merger and the Basin Acquisitions been consummated on
the dates indicated or which may occur in the future.
17
<PAGE> 24
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
WITH SECOND BASIN ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
(HISTORICAL)
--------------------- PRO FORMA UNAUDITED
HSR TIDE WEST ADJUSTMENTS PRO FORMA
-------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Oil and gas sales......................... $ 53,394 $ 36,508 $ $ 89,902
-------- -------- --------- --------
Other gas revenues........................ 1,782 2,052 E 3,834
Trading and transportation................ 82,927 82,927
Interest and other income................. 164 1,266 1,864 J 3,331
37 K
-------- -------- --------- --------
- -- --
--------
Total revenues.................... 55,340 120,701 3,953 179,994
-------- -------- --------- --------
- -- --
--------
EXPENSES:
Production taxes.......................... 4,050 2,517 6,567
Lease operating........................... 9,936 7,747 17,683
Depreciation, depletion and
amortization........................... 26,609 11,365 (11,365)F 47,145
20,536 F
General and administrative................ 4,076 4,557 (1,060)G 7,573
Interest.................................. 10,219 3,186 7,884 H 21,289
Trading and transportation................ 80,642 80,642
-------- -------- --------- --------
- -- --
--------
Total expenses.................... 54,890 110,014 15,995 180,899
- -- --
-------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME
TAXES..................................... 450 10,687 (12,042) (905)
PROVISION (BENEFIT) FOR INCOME TAXES........ 176 4,016 (4,537)I (345)
-------- -------- --------
- -- --
--------
NET INCOME (LOSS)........................... $ 274 $ 6,671 $ (7,505) $ (560)
======== ======== ========= ========
EARNINGS (LOSS) PER SHARE:
Common and common equivalent shares....... $ 0.02 $ 0.67 $ (0.03)
======== ======== ========
Common and common equivalent shares --
assuming full dilution................. $ 0.02 $ 0.65 $ (0.03)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common and common equivalent shares....... 11,440 9,897 5,976 C 17,416
======== ======== ========= ========
Common and common equivalent shares --
assuming full dilution................. 11,450 10,247 5,976 C 17,426
======== ======== ========= ========
BALANCE SHEET DATA:
Current assets............................ $ 11,086 $ 24,708 $ (2,444) $ 33,350
Working capital (deficiency).............. (16,115) 4,370 (7,098) (18,843)
Oil and gas properties, net............... 278,811 117,550 168,315 564,676
Total assets.............................. 302,089 144,397 166,132 612,618
Long-term debt............................ 51,000 40,800 134,580 226,380
9 7/8% Senior subordinated notes.......... 74,537 -- -- 74,537
Stockholders' equity...................... 119,174 74,506 (21,247) 172,433
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements beginning on page 73.
18
<PAGE> 25
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
WITHOUT SECOND BASIN ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
(HISTORICAL)
---------------------- PRO FORMA UNAUDITED
HSR TIDE WEST ADJUSTMENTS PRO FORMA
-------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Oil and gas sales........................ $ 53,394 $ 36,508 $ $ 89,902
Other gas revenues....................... 1,782 377 E 2,159
Trading and transportation............... 82,927 82,927
Interest and other income................ 164 1,266 564 J 2,031
37 K
-------- -------- --------- --------
- -- --
---------- --
Total revenues................... 55,340 120,701 978 177,019
-------- -------- ---------
- -- --
---------- --
EXPENSES:
Production taxes......................... 4,050 2,517 6,567
Lease operating.......................... 9,936 7,747 17,683
Depreciation, depletion and
amortization.......................... 26,609 11,365 (11,365)F 46,556
19,947 F
General and administrative............... 4,076 4,557 (1,060)G 7,573
Interest................................. 10,219 3,186 5,952 H 19,357
Trading and transportation............... 80,642 80,642
-------- -------- --------- --------
- -- --
--------
Total expenses................... 54,890 110,014 13,474 178,378
-------- -------- ---------
- -- --
--------
INCOME (LOSS) BEFORE INCOME TAXES.......... 450 10,687 (12,496) (1,359)
PROVISION (BENEFIT) FOR INCOME TAXES....... 176 4,016 (4,710)I (518)
-------- -------- ---------
- -- --
--------
NET INCOME (LOSS).......................... $ 274 $ 6,671 $ (7,786) $ (841)
======== ======== ========= ========
EARNINGS (LOSS) PER SHARE:
Common and common equivalent shares...... $ 0.02 $ 0.67 $ (0.05)
======== ======== ========
Common and common equivalent shares --
assuming full dilution................ $ 0.02 $ 0.65 $ (0.05)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common and common equivalent shares...... 11,440 9,897 5,976 C 17,416
======== ======== ========= ========
Common and common equivalent shares --
assuming full dilution................ 11,450 10,247 5,976 C 17,426
======== ======== ========= ========
BALANCE SHEET DATA:
Current assets........................... $ 11,086 $ 24,708 $ (2,444) $ 33,350
Working capital (deficiency)............. (16,115) 4,370 (7,098) (18,843)
Oil and gas properties, net.............. 278,811 117,550 136,735 533,096
Total assets............................. 302,089 144,397 134,552 581,038
Long-term debt........................... 51,000 40,800 104,600 196,400
9 7/8% Senior subordinated notes......... 74,537 -- -- 74,537
Stockholders' equity..................... 119,174 74,506 (21,247) 172,433
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements beginning on page 80.
19
<PAGE> 26
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA WITH INITIAL BASIN ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------
HISTORICAL
---------- PRO FORMA UNAUDITED
HSR ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Oil and gas sales....................................... $ 53,394 $ -- $ 53,394
Other gas revenues...................................... 1,782 377 B 2,159
Trading and transportation..............................
Interest and other income............................... 164 564 E 728
-------- ------- --------
Total revenues.................................. 55,340 941 56,281
-------- ------- --------
EXPENSES:
Production taxes........................................ 4,050 -- 4,050
Lease operating......................................... 9,936 -- 9,936
Depreciation, depletion and amortization................ 26,609 -- 26,609
General and administrative.............................. 4,076 -- 4,076
Interest................................................ 10,219 833 C 11,052
Trading and transportation.............................. -- -- --
-------- ------- --------
Total expenses.................................. 54,890 833 55,723
-------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES......................... 450 108 558
PROVISION (BENEFIT) FOR INCOME TAXES...................... 176 36 D 212
-------- ------- --------
NET INCOME (LOSS)......................................... $ 274 $ 72 $ 346
======== ======= ========
EARNINGS (LOSS) PER SHARE:
Common and common equivalent shares..................... $ 0.02 $ 0.03
======== ======= ========
Common and common equivalent shares -- assuming full
dilution............................................. $ 0.02 $ 0.03
======== ======= ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Common and common equivalent shares..................... 11,440 -- 11,440
======== ======= ========
Common and common equivalent shares -- assuming full
dilution............................................. 11,450 -- 11,450
======== ======= ========
BALANCE SHEET DATA:
Current assets.......................................... $ 11,086 $ -- $ 11,086
Working capital (deficiency)............................ (16,115) -- (16,115)
Oil and gas properties, net............................. 278,811 13,620 292,431
Total assets............................................ 302,089 13,620 315,709
Long-term debt.......................................... 51,000 12,808 63,808
9 7/8% Senior subordinated notes........................ 74,537 -- 74,537
Stockholders' equity.................................... 119,174 -- 119,174
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements beginning on page 87.
20
<PAGE> 27
RISK FACTORS
The following matters should be considered carefully in connection with
evaluating the proposals to be considered at the Tide West Special Meeting and
the HSR Special Meeting.
SIGNIFICANTLY INCREASED OPERATIONS
As a result of the Merger and the Initial Basin Acquisition, HSR's
operations will be significantly increased by the addition of approximately 890
operated wells. The additional wells (both operated and non-operated) have
approximately 49.8 MMBoe of net proved reserves and approximately 12,900 Boe of
net daily production (net to HSR's interest, but not including the effect of the
Chase Asset Monetization Arrangement). Although HSR has conducted activities in
many areas of the United States, including the Mid-Continent region, in recent
years its activities have focused on the Rocky Mountain region, with particular
concentration in the D-J Basin. As a result of the Merger, HSR will own and
operate properties in areas where it has not had operations for many years,
including the Anadarko and Arkoma Basins, Southern Oklahoma, West Texas and New
Mexico. If the Second Basin Acquisition is consummated, HSR's operations will be
further increased by the addition of approximately 492 operated wells. The
additional wells (both operated and non-operated) have approximately 24.7 MMBoe
of net proved reserves and approximately 3,600 Boe of net daily production (net
to HSR's interest, but not including the effect of the Chase Asset Monetization
Arrangement). In addition to the ability of HSR's management to successfully
address the risks regularly associated with oil and gas exploration and
production companies, HSR's success depends on the ability of HSR's management
to successfully assimilate the properties acquired in these acquisitions, manage
a significantly larger organization, continue its business strategy and
assimilate and utilize Tide West's management and employees. Additionally, the
degree of success of the Tide West acquisition may be influenced by HSR's
ability to take advantage of perceived marketing strategies, and there can be no
assurance that HSR will be able to do so. Consequently, a Tide West stockholder
who receives HSR Common Stock in the Merger will own an investment in a company
with a different risk profile than that of Tide West. The respective businesses
of Tide West and HSR are described in the documents incorporated by reference
into this Joint Proxy Statement/Prospectus. See "Information About the Combining
Companies."
DETERMINATION OF CONVERSION NUMBER
The Cash Consideration is dependent on both the Market Price and the
Conversion Number and cannot be determined at this time. The Market Price is to
be determined by reference to the closing sales price of the HSR Common Stock
over a period that has yet to begin. The Conversion Number is to be determined
by reference to the closing sales price of the HSR Common Stock on the date
immediately preceding the Closing Date and also cannot be determined at this
time. The Merger Agreement provides that the Cash Consideration shall be
decreased and the Conversion Number shall be correspondingly increased so that
the value of the HSR Common Stock (based on the closing sales price on the date
immediately preceding the Closing Date) paid to the holders of Tide West Common
Stock in connection with the Merger is greater than or equal to 40% of the total
consideration paid to the holders of Tide West Common Stock; provided, however,
the maximum number of shares of HSR Common Stock required to be issued in
connection with the Merger is 7,161,312 (which equates to a Conversion Number of
.7317) and any further adjustments to the consideration to be paid to the
holders of Tide West Common Stock necessary to satisfy the Adjustment Formula
would be solely from a further reduction of the Cash Consideration. The effect
of the Adjustment Formula is to reduce potentially the aggregate value of the
consideration paid in the Merger per share of Tide West Common Stock. The final
calculation of the Conversion Number and Cash Consideration pursuant to the
Adjustment Formula is dependent on (a) the closing sales price of HSR Common
Stock on the date immediately preceding the Closing Date, (b) the amount of Tide
West Common Stock held by persons who individually hold more than 5% of the
outstanding shares of Tide West Common Stock as of the Closing Date and who have
not represented as of such date that they have no intention, plan or arrangement
to dispose of the HSR Common Stock received in the Merger and (c) the number of
shares of Tide West Common Stock the holders of which have perfected their
dissenters' appraisal rights as of the Closing Date. Adjustments to the
consideration paid to the holders of Tide West Common Stock up to the point
where HSR would be
21
<PAGE> 28
required to issue 7,161,312 shares of HSR Common Stock affect both the holders
of Tide West Common Stock (through a reduction in the aggregate value of the
consideration paid in the Merger per share of Tide West Common Stock) and HSR
(through dilution resulting from the issuance of additional shares of HSR Common
Stock); however, further adjustments, where, but for the limit in the Adjustment
Formula, HSR would be required to issue additional shares of HSR Common Stock,
are borne solely by the holders of Tide West Common Stock and may adversely
affect the value of the consideration paid to them in the Merger. See "The
Merger Agreement and Related Agreements -- Terms of the Merger
Agreement -- Adjustments to the Conversion Number and Cash Consideration."
A condition to Tide West effecting the Merger is that the Adjustment
Formula (disregarding the limit contained therein on the maximum number of
shares of HSR Common Stock required to be issued in the Merger) would not
require HSR to issue more than 7,161,312 shares of HSR Common Stock in
connection with the Merger. If this condition is not satisfied, Tide West may
(a) waive the condition and consummate the Merger pursuant to the terms of the
Merger Agreement (in which case HSR will issue the maximum of 7,161,312 shares
of HSR Common Stock, and any further adjustments to the consideration paid to
the holders of Tide West Common Stock to satisfy the Adjustment Formula shall be
solely from a further reduction of the Cash Consideration), (b) terminate the
Merger Agreement or (c) cause the Merger to be restructured. See "The Merger
Agreement and Related Agreements -- Terms of the Merger
Agreement -- Restructuring of the Merger."
TAX RISKS
If the Merger is consummated, but fails to qualify as a reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, (a)
Tide West would be treated as if it had sold its assets to Merger Sub for an
amount equal to the fair market value of the HSR Common Stock received plus the
amount of total cash (including the cash received in lieu of fractional shares)
in a taxable transaction and would recognize gain or loss upon such deemed sale,
(b) each Tide West stockholder would recognize gain or loss in an amount equal
to the difference between the fair market value of the HSR Common Stock plus the
amount of cash received by such stockholder and such stockholder's aggregate
adjusted basis in its Tide West Common Stock cancelled in the Merger, and (c)
Merger Sub would be treated as having sold the HSR Common Stock delivered in the
Merger and, therefore, would be treated as having recognized taxable gain in an
amount equal to the fair market value of the HSR Common Stock issued in
connection with the Merger. It is a condition to the consummation of the Merger
that both Tide West and HSR receive an opinion of counsel to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code; however, HSR and Tide West will not obtain an Internal Revenue Service
("IRS") ruling to that effect. For a discussion of these and other federal
income tax considerations in connection with Merger, see "Special
Factors -- Certain Federal Income Tax Consequences."
INCREASED LEVERAGE
Under the Chase Asset Monetization Arrangement, HSR has sold certain of the
assets acquired in the Initial Basin Acquisition to an unaffiliated third party
subject to a production payment in favor of HSR. See "Information About the
Combining Companies -- HS Resources, Inc. -- Financing." HSR intends to transfer
approximately $59 million of the assets to be acquired in the Second Basin
Acquisition in a transaction similar to the Chase Asset Monetization
Arrangement. It is HSR's present intention to use a combination of financing
options and/or property dispositions to reduce its debt-to-total capital ratio
following completion of the Merger and the Basin Acquisitions. On a pro forma
basis, giving effect to the asset monetization transaction relating to the
Initial Basin Acquisition through the use of the Chase Asset Monetization
Arrangement and the anticipated asset monetization transaction with respect to
the Second Basin Acquisition, HSR's debt-to-total capital ratio following the
Merger and the Basin Acquisitions would be approximately 63%. On a pro forma
basis, giving effect to the asset monetization transaction relating to the
Initial Basin Acquisition and assuming that HSR did not utilize a similar asset
monetization transaction with respect to the Second Basin Acquisition, HSR's
debt-to-total capital ratio following the Merger and the Basin
22
<PAGE> 29
Acquisitions would be approximately 67%. While it is HSR's present intention to
do so, there can be no assurance that HSR will be able to reduce its
debt-to-total capital ratio as anticipated. Higher leverage increases the
relative amount of interest expense the Company pays compared to its revenue and
other expenses. With all other factors remaining the same, an increase in
leverage would reduce the amount and proportion of net income the Company would
realize from its operations. Additionally, because higher leverage is perceived
to increase the risk of default, an increase in leverage may reduce the
availability of debt capital to the Company, or may increase the interest rate
or similar costs of such capital.
EXISTING AGREEMENTS TO VOTE FOR THE MERGER AND THE MERGER AGREEMENT
Two Tide West stockholders (consisting of Tide West's largest stockholder
and one of Tide West's directors who is also an executive officer) owning
collectively a majority of the outstanding shares of Tide West Common Stock have
agreed to vote shares representing a majority of the outstanding shares of Tide
West Common Stock in favor of the Merger and the Merger Agreement. Consequently,
absent the occurrence of some event that would cause the termination of one or
both of the Voting Agreements, approval of the Merger and the Merger Agreement
by Tide West's stockholders (which requires the affirmative vote of holders of a
majority of the outstanding shares of Tide West Common Stock) is assured.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Tide West Board (which has recommended that Tide
West stockholders vote in favor of the proposal described in this Joint Proxy
Statement/Prospectus) have interests in the Merger that are separate from the
interests of the Tide West stockholders generally. NGP, which owns 46.49% of the
outstanding shares of Tide West Common Stock, is the beneficial owner of 6.4% of
the outstanding shares of HSR Common Stock, and Kenneth A. Hersh, a limited
partner in the general partner of NGP, serves as a director of both HSR and Tide
West. Philip B. Smith, a director, officer and stockholder of Tide West, is the
NGP Designee (as defined herein). See "Special Factors -- Interests of Certain
Persons in the Merger."
DIFFERENCES IN RIGHTS OF COMMON STOCKHOLDERS AND CERTAIN ANTI-TAKEOVER MATTERS
There are significant differences between the rights of holders of Tide
West Common Stock and the rights of holders of HSR Common Stock. The
differences, which are discussed under "Comparison of Stockholder Rights,"
generally relate to voting rights. The HSR Board can, without obtaining
stockholder approval, issue shares of HSR Preferred Stock (as defined herein),
having rights that could adversely affect the voting power of holders of the HSR
Common Stock. Also, a dividend distribution of HSR Rights (as defined herein)
was made by HSR as of March 14, 1996, to holders of HSR Common Stock. Each HSR
Right entitles the holder to purchase from HSR a fraction of a share of HSR
Preferred Stock at a predetermined price upon the occurrence of certain
specified events. HSR is subject to Section 203 (as defined herein), which
restricts certain business combinations with any "interested stockholders," as
defined in Section 203. In addition, the HSR Charter and HSR Bylaws (each as
defined herein) provide for (a) a classified board of directors, (b) limitations
on stockholder action by written consent, (c) limitations on the ability to call
a special meeting and (d) a 66 2/3% vote to approve certain business
combinations and changes to the HSR Charter. Any of the foregoing factors could
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that might be considered by individual stockholders to be in
their best interests. See "Description of HSR Capital Stock" and "Comparison of
Stockholders Rights."
23
<PAGE> 30
THE MEETINGS
This Joint Proxy Statement/Prospectus is being furnished to the holders of
HSR Common Stock in connection with the solicitation of proxies by the HSR Board
for use at the HSR Special Meeting to be held on Friday, June 14, 1996, at the
Sheraton Palace Hotel, 2 New Montgomery Street, San Francisco, California,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof.
This Joint Proxy Statement/Prospectus is also being furnished to the
holders of Tide West Common Stock in connection with the solicitation of proxies
by the Tide West Board for use at the Tide West Special Meeting to be held on
Friday, June 14, 1996, at the offices of Tide West at 6666 South Sheridan, Suite
250, Tulsa, Oklahoma, commencing at 10:00 a.m., local time, and at any
adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
At the HSR Special Meeting, the stockholders of HSR, as required by the
rules of the NYSE, will consider and vote upon a proposal to approve the
issuance of up to 7,161,312 shares of HSR Common Stock in accordance with the
Merger Agreement. The HSR stockholders will also transact such other business as
may properly be brought before the HSR Special Meeting.
At the Tide West Special Meeting, the stockholders of Tide West will
consider and vote upon a proposal to approve and adopt the Merger Agreement and
to approve the Merger. The Tide West stockholders will also transact such other
business as may properly be brought before the Tide West Special Meeting.
BOARDS OF DIRECTORS' RECOMMENDATIONS
THE HSR BOARD HAS APPROVED THE MERGER AND THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT HSR'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL SUBMITTED TO HSR STOCKHOLDERS AS
DESCRIBED IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
THE TIDE WEST BOARD HAS APPROVED THE MERGER, THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT TIDE
WEST'S STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL SUBMITTED TO THE TIDE WEST
STOCKHOLDERS AS DESCRIBED IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
VOTING AT MEETINGS; RECORD DATES
HSR. HSR has established May 8, 1996, as the record date for the
determination of stockholders entitled to notice of and to vote at the HSR
Special Meeting. Only holders of record of HSR Common Stock at the close of
business on such date are entitled to vote at the HSR Special Meeting. On May 8,
1996, HSR had outstanding and entitled to vote shares of HSR Common
Stock, each of which is entitled to one vote per share. On such date, there were
approximately holders of record of HSR Common Stock.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of HSR Common Stock that are present in person or represented
by proxy at the HSR Special Meeting at which a quorum is present will be
required to approve the matters described in this Joint Proxy
Statement/Prospectus, provided that the total vote cast represents in excess of
50% in interest of all securities entitled to vote on such matters.
TIDE WEST. Tide West has established May 8, 1996, as the record date for
the determination of stockholders entitled to notice of and to vote at the Tide
West Special Meeting. Only holders of record of Tide West Common Stock at the
close of business on such date are entitled to vote at the Tide West Special
Meeting. On May 8, 1996, Tide West had outstanding and entitled to vote
9,787,628 shares of Tide West Common Stock, each of which is entitled to one
vote per share. On such date, there were approximately holders of
record of Tide West Common Stock.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of Tide West Common Stock will be required to approve and
adopt the Merger Agreement and approve the Merger. Pursuant to the Voting
Agreements, HSR has obtained agreements to vote, and has been granted proxies to
24
<PAGE> 31
vote, a majority of the outstanding shares of Tide West Common Stock in favor of
the Merger and the Merger Agreement. Accordingly, HSR has sufficient voting
power to approve the Merger and the Merger Agreement without the affirmative
vote of any other stockholder of Tide West.
HSR PROXIES
Shares of HSR Common Stock represented by properly executed proxies
received by HSR prior to or at the HSR Special Meeting will be voted in
accordance with the instructions contained therein. Shares of HSR Common Stock
represented by properly executed proxies for which no instruction is given will
be voted FOR the issuance of HSR Common Stock pursuant to the Merger Agreement.
An abstention has the same effect as a vote AGAINST the proposal described in
this Joint Proxy Statement/Prospectus, but any abstaining stockholder who is
present at the HSR Special Meeting, either in person or by proxy, will be
counted for purposes of determining whether a quorum exists.
Each holder of HSR Common Stock is requested to complete, sign, date and
return promptly the enclosed proxy card in the postage paid envelope provided
for this purpose in order to ensure that such holder's shares are voted.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised. A proxy may be revoked by (a)
delivering to the Secretary of HSR, at or before the taking of the vote at the
HSR Special Meeting, a written notice of revocation bearing a later date than
the proxy, (b) duly executing a later-dated proxy relating to the same shares
and delivering it to the Secretary of HSR before the taking of the vote at the
HSR Special Meeting or (c) attending the HSR Special Meeting and voting in
person (although attendance at the HSR Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
later-dated proxy should be sent or delivered to HS Resources, Inc., One
Maritime Plaza, 15th Floor, San Francisco, California 94111, Attn: Secretary. To
be effective, a notice of revocation or later-dated proxy must be received by
the Secretary of HSR before the taking of the vote at the HSR Special Meeting.
The HSR Board is aware of no matters to be presented at the HSR Special
Meeting other than those described in this Joint Proxy Statement/Prospectus. If
other matters are properly brought before the HSR Special Meeting, it is the
intention of the persons named in the proxies to vote the shares to which said
proxies relate in accordance with their judgment.
TIDE WEST PROXIES
Shares of Tide West Common Stock represented by properly executed proxies
received by Tide West prior to or at the Tide West Special Meeting will be voted
in accordance with the instructions contained therein. Shares of Tide West
Common Stock represented by properly executed proxies for which no instruction
is given will be voted FOR approval of the Merger Agreement and the Merger. An
abstention (or broker non-vote) has the same effect as a vote AGAINST the
proposal described in this Joint Proxy Statement/Prospectus, but any abstaining
stockholder who is present at the Tide West Special Meeting, either in person or
by proxy (including broker non-voting), will be counted for purposes of
determining whether a quorum exists.
Each holder of Tide West Common Stock is requested to complete, sign, date
and return promptly the enclosed proxy card in the postage paid envelope
provided for this purpose in order to ensure that such holder's shares are
voted.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised. A proxy may be revoked by (a)
delivering to the Secretary of Tide West, at or before the taking of the vote at
the Tide West Special Meeting, a written notice of revocation bearing a later
date than the proxy, (b) duly executing a later-dated proxy relating to the same
shares and delivering it to the Secretary of Tide West before the taking of the
vote at the Tide West Special Meeting or (c) attending the Tide West Special
Meeting and voting in person (although attendance at the Tide West Special
Meeting will not in and of itself constitute a revocation of a proxy). Any
written notice of revocation or later-dated proxy should be
25
<PAGE> 32
sent or delivered to Tide West Oil Company, 6666 South Sheridan, Suite 250,
Tulsa, Oklahoma 74133-1750, Attn: Secretary. To be effective, a notice of
revocation or later-dated proxy must be received by the Secretary of Tide West
before the taking of the vote at the Tide West Special Meeting.
The Tide West Board is aware of no matters to be presented at the Tide West
Special Meeting other than those described in this Joint Proxy
Statement/Prospectus. If other matters are properly brought before the Tide West
Special Meeting, it is the intention of the persons named in the proxies to vote
the shares to which such proxies relate in accordance with their judgment.
SOLICITATION OF PROXIES
The cost and expenses associated with printing this Joint Proxy
Statement/Prospectus will be borne equally by HSR and Tide West. Corporate
Investors Communications, Inc. ("CIC") has been retained to solicit proxies on
behalf of HSR for an aggregate fee of $3,500 plus out-of-pocket expenses. In
addition to solicitation by CIC, directors, officers and employees of HSR and
Tide West may solicit proxies from stockholders of HSR and Tide West,
respectively, in person or by telephone, telegram or other means of
communication. Such persons will not be additionally compensated for such
solicitation but will be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith. Arrangements will be made with brokerage
firms, nominees, fiduciaries and other custodians for forwarding proxy
solicitation materials to the beneficial owners of shares held of record by such
persons. HSR and Tide West will reimburse such persons for their reasonable
expenses incurred in connection therewith. All costs of the solicitation of
proxies will be borne by HSR with respect to the holders of HSR Common Stock and
by Tide West with respect to the holders of Tide West Common Stock.
STOCKHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH THEIR PROXY
CARDS. STOCK CERTIFICATES SHOULD NOT BE SUBMITTED FOR EXCHANGE BY TIDE WEST
STOCKHOLDERS UNTIL A LETTER OF TRANSMITTAL IS RECEIVED. See "The Merger
Agreement and Related Agreements -- Manner and Basis of Converting Shares."
26
<PAGE> 33
SPECIAL FACTORS
The Merger Agreement provides for a business combination between HSR and
Tide West in which Tide West will be merged with and into Merger Sub, a wholly
owned subsidiary of HSR. As a result of the Merger, Tide West's separate
existence will cease and Merger Sub, as the surviving corporation in the Merger,
will continue its corporate existence under the laws of the State of Delaware
and will succeed to all of the assets, rights, liabilities and obligations of
Tide West. The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, will become the certificate of
incorporation of the Surviving Corporation and will be amended to change the
name of the Surviving Corporation to HSRTW, Inc. The bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, will become the bylaws of the
Surviving Corporation. As a part of the Merger, the holders of Tide West Common
Stock will be issued shares of HSR Common Stock and cash in exchange for their
Tide West Common Stock. It is intended that the transaction be treated as a
purchase for accounting purposes and as a reorganization under Section
368(a)(1)(A) of the Code by reason of Section 368(a)(2)(D) of the Code for
federal income tax purposes. The discussion in this Joint Proxy
Statement/Prospectus of the Merger and the description of the principal terms
and conditions of the Merger are summaries of the material terms thereof.
Reference is made to the full text of the Merger Agreement, a copy of which is
included as Annex A to this Joint Proxy Statement/Prospectus and which is
incorporated into this Joint Proxy Statement/Prospectus by reference.
BACKGROUND OF THE MERGER
In September 1994, Tide West signed an agreement providing for a business
combination between Tide West and another company. In January 1995, as a result
of market price changes, this agreement was terminated by mutual agreement
between Tide West and the other company. At that time, the Tide West Board
decided that it was in the best interests of Tide West and its stockholders for
Tide West to remain independent for the time being and not to renew or initiate
discussions with any other company regarding a business combination.
During the next several months of 1995, management of Tide West continued
its previous strategy of seeking to acquire, operate and enhance producing oil
and gas properties. In the meantime, various members of the Tide West Board, in
informal discussions, continued to be concerned that Tide West, in its present
structure and at its present size, would not be able to successfully complete
the larger oil and gas property acquisitions necessary to grow Tide West at a
rate acceptable to the Tide West Board and the Tide West stockholders. At
special meetings on August 30, 1995, and September 15, 1995, the Tide West Board
continued to discuss Tide West's acquisition strategy and other methods by which
stockholder value might be enhanced, including the possible sale of Tide West.
Concerns were again expressed at these meetings over the difficulties in
continuing Tide West's acquisition program when taking into account the
competition for the available oil and gas properties and pricing concerns with
respect to such acquisitions, the belief that Tide West's value was not being
recognized in the marketplace, uncertainty with regard to future oil and gas
prices, growth prospects for Tide West and cohesiveness of management. At a
special meeting on September 19, 1995, the Tide West Board concluded that it was
in the best interests of the Tide West stockholders for Tide West to retain an
investment banking firm as financial advisor to advise the Tide West Board
regarding strategic alternatives for enhancing stockholder value, including the
possibility of selling the company.
During September and October 1995, members of the Tide West Board and
management met informally with representatives of several investment banking
firms. On October 12 and 13, 1995, three investment banking firms made detailed
presentations to the Tide West Board regarding their recommendations as to
maximizing value to Tide West stockholders. At a special meeting on October 12,
1995, the Tide West Board met to evaluate two of these investment banking firms
and their respective presentations to the Tide West Board. On October 13, 1995,
the Tide West Board held informal discussions to evaluate the third investment
banking firm and its presentation to the Tide West Board. At a special meeting
of the Tide West Board on October 19, 1995, it was decided that the course of
action which was in the best interests of the Tide West stockholders was an
orderly sale of the company. This course of action was consistent with the
recommendation made by each of the three investment banking firms that made
presentations to the Tide West Board.
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On October 19, 1995, Tide West entered into an engagement letter, dated as
of October 18, 1995, with Merrill Lynch to serve as Tide West's financial
advisor to assist with the sale of Tide West. On October 20, 1995, Tide West
issued a press release announcing the engagement of Merrill Lynch and the
intention of the Tide West Board to sell the company.
It was determined that one of the members of the Tide West Board, Kenneth
A. Hersh, might be interested in leading an effort to purchase Tide West.
Consequently, while Mr. Hersh did not resign from the Tide West Board, he was
excluded from all further meetings and discussions of the Tide West Board
relating to preparation for and decisions concerning the sale of Tide West,
including the Merger.
On October 23, 1995, an organizational meeting was held among Tide West
management and representatives of Merrill Lynch. During the next several weeks,
Tide West management and Merrill Lynch prepared a data room and offering
materials to help describe Tide West, including its property base and
exploitation potential, to potential purchasers. Merrill Lynch began contacting
potential purchasers in order to ascertain their interest in Tide West, and a
form of confidentiality agreement (containing a standstill provision) was
prepared.
On November 28, 1995, Merrill Lynch began mailing confidentiality
agreements to interested potential purchasers. A total of 73 confidentiality
agreements were mailed out and 44 were signed and returned. In some cases,
including HSR, changes were negotiated between the potential purchaser and
counsel for Tide West. On December 1, 1995, Merrill Lynch began distributing
offering materials, containing confidential information about Tide West, to
those potential purchasers who had signed confidentiality agreements with Tide
West, including HSR.
Between December 11, 1995, and February 1, 1996, 19 companies, including
HSR, sent representatives to the Tide West data room. On January 25, 1996,
Merrill Lynch mailed bid letters and forms of Agreement and Plan of Merger to
all companies who had sent representatives to the data room.
On February 9, 1996, Merrill Lynch received proposals from companies
desiring to enter into a business combination with Tide West, including HSR. A
total of nine proposals were received, including proposals for all cash, all
stock and combination cash/stock transactions. These proposals were described by
Merrill Lynch to the Tide West Board in two separate conference calls on
February 9, 1996.
On February 12, 1996, a special meeting of the Tide West Board was held in
Tulsa to consider the proposals which had been received. All directors, except
Mr. Hersh, were present in person. Also present were counsel to Tide West,
representatives of Merrill Lynch and outside counsel to Merrill Lynch. Merrill
Lynch presented to the Tide West Board an analysis of the proposals which had
been received. The Tide West Board discussed the relative advantages and
disadvantages of a business combination with each company, the strengths of each
company's indication of interest, the likelihood that each company would be able
to finance its proposal (in the case of cash and combination cash/stock
proposals), and the Tide West Board's perception of the value of the stock of
each company (in the case of proposals involving part or all stock). The Tide
West Board determined that four of the proposals, including HSR's, were
sufficiently attractive to warrant further discussions. Merrill Lynch, at the
request of the Tide West Board, scheduled meetings for the Tide West directors
with certain of these companies in order to enable the directors to better
evaluate their proposals.
During the next several days, meetings were held with three of the selected
potential purchasers, including HSR. The first meeting between representatives
of Tide West and Merrill Lynch and representatives of HSR and Lehman Brothers
was held in Denver on February 17, 1996. (Prior to this meeting, Tide West
signed a reciprocal confidentiality and standstill agreement with respect to
HSR.) This meeting, which was attended by all members of the Tide West Board
other than Mr. Hersh (Mr. Flint by telephone), was intended primarily to provide
Tide West and Merrill Lynch with information upon which to base an evaluation of
HSR Common Stock. On the same day, representatives of HSR began a due diligence
investigation with respect to Tide West in order to supplement information
previously learned from their evaluation of Tide West.
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On February 20, 1996, HSR advised Tide West about its pending discussions
with Basin (Tide West had executed an agreement to be bound by the HSR
confidentiality agreement regarding Basin). The Tide West Board determined that
the combination of cash and stock offered by HSR, including the fact that the
HSR Common Stock had upside potential equal to or greater than the stock of any
of the other companies offering stock, was such that the HSR proposal was of
greater value to the Tide West stockholders than any of the other proposals.
Accordingly, on February 21, 1996, representatives of Tide West and Merrill
Lynch began meeting with representatives of HSR in Denver to negotiate the terms
of the Merger Agreement. Negotiations continued until February 24, 1996. During
this process, the Tide West Board and the HSR Board were kept apprised of
developments through various meetings and telephone conversations. (Mr. Hersh,
who was at that time and still is a member of the board of directors of both
Tide West and HSR, was not informed of the discussions until February 22, 1996.)
On February 23, 1996, the HSR Board held a telephonic meeting with all
members, certain staff and HSR's legal advisors and representatives of Lehman
Brothers to consider the Merger and the Basin Acquisitions. Mr. Hersh was
present by telephone at the meeting. On February 24, 1996, the HSR Board
continued the telephonic meeting at which it further considered the proposed
Merger, Merger Agreement and the Basin Acquisitions, including the Cash
Consideration and the Conversion Number. Mr. Hersh did not participate in the
continuation of the meeting on February 24, 1996, and did not vote on any
matters.
On February 24, 1996, the Tide West Board, together with its legal and
financial advisors, met by telephone conference call to consider the proposed
Merger Agreement and the transactions contemplated thereby, including the Cash
Consideration and the Conversion Number. Mr. Hersh did not participate in the
Tide West Board meeting but was informed of the meeting and of the proposed
transaction.
At the meeting of the HSR Board, members of HSR senior management, together
with its legal and financial advisors, reviewed the background of the proposed
Merger, the strategic rationale for and the potential benefits of the Merger to
HSR, a summary of due diligence findings, financial and valuation analyses of
the transaction, and the terms of the Merger Agreement. Lehman Brothers
delivered to the HSR Board its oral opinion (subsequently confirmed in writing)
that, based on the matters presented to the HSR Board and as set forth in its
opinion, the transaction contemplated by the Merger Agreement was fair to HSR
and the holders of HSR Common Stock, taken as a whole, from a financial point of
view. After considering the presentation of HSR senior management and its legal
advisor and the presentation and opinion of Lehman Brothers, along with various
other factors, on February 24, 1996, the HSR Board (other than Mr. Hersh who was
not present for the February 24, 1996, continuation of the HSR Board meeting)
unanimously approved the Merger Agreement and the transactions contemplated
thereby, authorized the officers of HSR to execute the Merger Agreement on
behalf of HSR, and approved a recommendation that the stockholders of HSR vote
in favor of the issuance of HSR Common Stock pursuant to the terms of the Merger
Agreement.
At the meeting of the Tide West Board, members of Tide West's senior
management, together with its legal and financial advisors, reviewed the
background of the proposed Merger, the potential benefits of the Merger to the
stockholders of Tide West, financial and valuation analyses of the transaction,
and the terms of the Merger Agreement. Merrill Lynch delivered to the Tide West
Board its oral opinion (subsequently confirmed in writing) that, based on the
matters presented to the Tide West Board and as set forth in its opinion, the
consideration to be received by the holders of Tide West Common Stock pursuant
to the Merger Agreement was fair to such holders, taken as a whole, from a
financial point of view. After considering the presentation of Tide West's
senior management and its legal advisor and the presentation and opinion of
Merrill Lynch, along with various other factors, the Tide West Board (other than
Mr. Hersh who was not present for the meeting) unanimously approved the Merger
Agreement and the transactions contemplated thereby, authorized the officers of
Tide West to execute the Merger Agreement on behalf of Tide West, approved a
recommendation that the stockholders of Tide West vote in favor of the approval
of the Merger and the Merger Agreement and approved the Voting Agreements for
purposes of Section 203 of the Delaware Act.
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On February 25, 1996, officers of Tide West and HSR executed and delivered
the Merger Agreement and certain stockholders of Tide West (holding in the
aggregate in excess of a majority of the outstanding shares of Tide West Common
Stock) agreed, among other things, to vote their shares of Tide West Common
Stock in favor of the Merger and the Merger Agreement.
On April 29, 1996, officers of Tide West and HSR agreed to make certain
modifications to the original Merger Agreement relating to the timing of certain
calculations relating to the Market Price and of the Closing Date and executed
and delivered an amended and restated version of the Merger Agreement.
REASONS FOR THE MERGER -- HSR
The HSR Board believes that the terms of the Merger are fair to, and in the
best interests of, HSR and its stockholders. The HSR Board has approved, subject
to various conditions (including stockholder approval of the issuance of
additional HSR Common Stock), the Merger Agreement and the Merger, the issuance
of additional HSR Common Stock upon consummation of the Merger in accordance
with the Merger Agreement and the other transactions contemplated thereby, and
recommends that the holders of HSR Common Stock vote FOR approval of the
issuance of additional HSR Common Stock at the HSR Special Meeting.
The HSR Board believes that the Merger is desirable for a number of
reasons: (a) it provides geographic diversification of HSR into attractive
geographic regions; (b) the Tide West properties offer significant upside
potential through aggressive and technologically oriented exploitation and
exploration; (c) it provides advantageous synergies between HSR's current gas
marketing group and Tide West's trading and transportation business; (d) the
Tide West properties are relatively concentrated and are primarily operated by
Tide West; (e) the Merger brings HSR to a size level that HSR's management
believes will improve the liquidity of HSR Common Stock and should help HSR
achieve a wider market following; and (f) the Merger offers the opportunity to
create a combined company with greater financial resources, competitive strength
and business opportunities than would be possible for HSR alone. Each of these
factors is discussed in more detail below.
DIVERSIFICATION. One of HSR's strategic objectives is to diversify its
property base to include production outside of the Rocky Mountain region. The
HSR Board believes that Tide West's properties, which are primarily located in
the Mid-Continent area, are an excellent diversification balance to HSR's
approximately 1,300 wells in the D-J Basin and approximately 1,000,000
undeveloped acres in the Rocky Mountain region.
From a stockholder's standpoint, diversification achieves a number of
important objectives. First, diversification is desirable in order to reduce
HSR's historically high reserve-to-production ratio. HSR's existing properties
have a ratio of approximately 14 to 1. While this provides excellent foundation
of stable, long-lived cash flow, HSR desires to blend the ratio in order to
increase cash flow and provide greater growth potential. Tide West's
reserve-to-production ratio of approximately 10 to 1 provides a counterbalance
to HSR's existing long-lived assets. Secondly, the geographical location of Tide
West's properties, and the proximity to Mid-Continent markets and Henry Hub,
provide product market and price diversification to HSR's Rocky Mountain
concentration of properties. Finally, Tide West's undrilled locations present a
complementary product profile to HSR's lower risk and proved undeveloped
locations in that they generally possess slightly higher potential but are
somewhat riskier.
EXPLOITATION AND EXPLORATION POTENTIAL. HSR believes that there are
extensive exploitation and exploration opportunities to be pursued on and around
the Tide West properties. In the process of acquiring proved developed producing
properties, Tide West has assembled a substantial inventory of exploitation
opportunities, ranging from low risk proved undeveloped drillsites to attractive
probable locations. HSR has identified almost 200 gross drillsites on the Tide
West properties. In addition, because Tide West has focused primarily on
acquisitions, it has not attempted to develop the exploratory potential of many
of its properties. Tide West and HSR have identified numerous areas with
exploration potential within the Tide West acreage inventory. HSR intends to use
its strong exploration staff, many of whom have experience in the areas where
the Tide West properties are located, to develop many of the exploitation and
exploratory opportunities held by Tide West.
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MARKETING SYNERGIES. The Merger also provides advantageous synergies
between HSR's current gas marketing group and Tide West's trading and
transportation business. HSR has developed into one of the most active and
successful natural gas producer/marketers in the Colorado Front Range area. Tide
West has established itself as one of the most successful Mid-Continent traders
and transporters. The combination of the two groups creates exciting synergies
and should present opportunities to improve product prices and profit from
market imbalances. HSR's Denver marketing group will be better able to move gas
from the Colorado Front Range and into the Mid-Continent, and vice-versa, when
imbalances exist. The Mid-Continent group will have the added flexibility of
capitalizing on trading differentials between the two regions, and could
facilitate and benefit from trading and marketing of gas HSR may produce as a
result of its activities in the Gulf Coast area.
OPERATIONS AND CONCENTRATION. HSR is one of the most efficient operators in
the United States with 1995 overhead of $0.80 per Boe and lease operating
expenses of $1.95 per Boe. Tide West is similarly efficient, with 1995 overhead
of $1.09 per Boe and lease operating expenses of $2.16 per Boe. The concentrated
nature of Tide West's properties and its historic efficiency will enable HSR to
continue its longstanding record of efficient operations. More than
three-fourths of Tide West's reserves are located in the Anadarko and Arkoma
Basins and in the Southern Oklahoma region. Additionally, Tide West operates 82%
of its wells. The concentration of properties and significant percentage of
operated wells provide operational efficiency and control which are fundamental
to realizing the expected value of these assets.
SIZE, STOCK LIQUIDITY AND MARKET FOLLOWING. HSR also believes the Merger is
attractive because it will increase the size of HSR's operations and property
base and potentially improve the trading characteristics of the HSR Common Stock
by increasing its stockholder base. On a pro forma basis, HSR will have
approximately 140 MMBoe of reserves and will produce in excess of 30,000 Boe a
day. Assuming the consummation of the Merger, HSR would be one of the larger
independent oil and gas companies in the United States. In addition, following
the Merger, the number of outstanding shares of HSR Common Stock will increase,
which should improve the liquidity of the HSR Common Stock. Furthermore, there
is very little overlap between HSR's and Tide West's institutional stockholders.
Thus, the Merger should create a broader base of stockholders.
FINANCIAL ASPECTS. If the Merger is consummated, HSR will have increased
its asset base by more than 50%. The combination of the Merger and the Basin
Acquisitions would cause HSR to more than double in size if all of Tide West's
and Basin's acquired assets were to be placed on the balance sheet. HSR believes
that this increase in size will enable it to obtain better access to capital at
a lower cost. HSR's size should also result in it being exposed to a greater
number of business opportunities, and may allow it to better compete in
capturing these opportunities.
REASONS FOR THE MERGER -- TIDE WEST
The Tide West Board believes that the terms of the Merger are fair to, and
in the best interests of, Tide West and its stockholders. The Tide West Board
has approved, subject to stockholder approval, the Merger Agreement, the Merger
and the transactions contemplated thereby and recommends that the holders of
Tide West Common Stock vote FOR approval of the Merger and the Merger Agreement
at the Tide West Special Meeting.
The Tide West Board believes that the Merger is desirable for the following
reasons: (a) under current market conditions, the Merger offers the best
opportunity of maximizing value for Tide West's stockholders; (b) the Merger
presents a significant opportunity for diversification and partial liquidation
of the investment of Tide West's stockholders by allowing them to receive cash
for a portion of their investment and to become stockholders in a larger
publicly traded independent oil and gas company whose stock, the Tide West Board
believes, has greater upside potential than the Tide West Common Stock; (c) the
Merger offers the opportunity to create a combined company with greater
financial resources, competitive strength and business opportunities than would
be possible for Tide West alone; (d) the Merger is expected to provide Tide
West's stockholders with enhanced liquidity with respect to the HSR Common Stock
received in the Merger because the number of shares outstanding and the trading
volume of the combined company will be significantly larger than the number of
shares outstanding and trading volume of the Tide West Common Stock; and (e) the
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Merger is expected to provide Tide West's stockholders with the opportunity to
receive a premium over the market price of their shares of Tide West Common
Stock immediately prior to the announcement on February 26, 1996, of the
proposed Merger and a premium over the market price of their shares of Tide West
Common Stock immediately prior to the announcement on October 20, 1995, of the
intention of the Tide West Board to sell Tide West.
For the reasons stated above, the Tide West Board determined that the
interests of Tide West's stockholders would best be served by pursuing the
Merger.
RECOMMENDATION OF THE HSR BOARD
For the reasons described under "--Reasons for the Merger--HSR," the HSR
Board believes that the Merger is in the best interests of the HSR stockholders
and that the consideration to be paid to the Tide West stockholders is fair to
the HSR stockholders. Accordingly, THE HSR BOARD RECOMMENDS THAT THE
STOCKHOLDERS OF HSR VOTE FOR THE ISSUANCE OF UP TO 7,161,312 SHARES OF HSR
COMMON STOCK IN ACCORDANCE WITH THE MERGER AGREEMENT.
In arriving at its recommendation, the HSR Board considered the following
factors without assigning relative weights to any: (a) HSR's internal detailed
engineering, geological and financial review and evaluation of Tide West; (b)
the diversification objectives of HSR; (c) the exploitation and exploration
potential of the Tide West properties and HSR's ability to implement
technology-based exploitation and exploration on these properties; (d) the
marketing synergies between HSR and Tide West; (e) the concentration of Tide
West properties and operational control over such properties; (f) the expected
effect on the liquidity of shares of HSR Common Stock and market following of
HSR; (g) the likely long term positive effect on the liquidity of HSR Common
Stock; (h) the likelihood that, for federal tax purposes, HSR would not be
negatively impacted; (i) the effect of the issuance of the cash consideration,
assumption of debt and issuance of stock on the financial structure and position
of HSR; (j) the expected accretive cash flow per share effect on HSR Common
Stock; (k) the expected increase in financial resources, competitive strength
and business opportunities from the creation of a combined company; (l) the
combined effect and synergies between the Merger and the Basin Acquisitions; and
(m) the advice of HSR's financial advisor, Lehman Brothers, summarized below,
including its opinion that the consideration to be paid for the shares of Tide
West Common Stock is fair to HSR from a financial point of view.
The HSR Board held a telephonic meeting on February 23, 1996, and
continuing on February 24, 1996, at which the full HSR Board was present (except
that Mr. Hersh was absent from the continuation of the meeting on February 24,
1996), during which the Merger and the Basin Acquisitions were discussed and
considered. Because Mr. Hersh is a limited partner in the general partner of
NGP, the major stockholder of Tide West, and a director of Tide West, Mr. Hersh
elected not to be present during the continuation of the meeting of the HSR
Board on February 24, 1996, at which the Merger and the Basin Acquisitions were
further discussed and considered and, accordingly, did not vote on any matter.
All voting members of the HSR Board voted in favor of the Merger and in favor of
recommending that the stockholders of HSR approve the issuance of additional
shares of HSR Common Stock to consummate the Merger. Prior to voting, the HSR
Board considered the matters discussed under "-- Reasons for the Merger -- HSR"
and "-- Interests of Certain Persons in the Merger."
OPINIONS OF THE HSR FINANCIAL ADVISORS
HSR engaged Lehman Brothers and Prudential Securities to act as financial
advisors in connection with the Merger and to render their opinions as to the
fairness, from a financial point of view, to HSR of the consideration to be paid
by HSR in the Merger.
On February 24, 1996, in connection with the evaluation of the Merger
Agreement and the transactions contemplated by the HSR Board, Lehman Brothers
delivered its oral opinion, which opinion was subsequently confirmed in writing,
that, as of such date and subject to certain assumptions, factors and
limitations as described below, the consideration to be paid by HSR for the Tide
West Common Stock in the Merger was fair, from a financial point of view, to
HSR. Each of the HSR Financial Advisors has provided its written
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opinion dated March 26, 1996. A copy of each of the opinions of the HSR
Financial Advisors dated the date of this Joint Proxy Statement/Prospectus (the
"Opinions"), which set forth assumptions made, procedures followed, matters
considered and limitations on the review by the HSR Financial Advisors in
rendering the Opinions, are attached as Annex C and Annex D to this Joint Proxy
Statement/Prospectus and are incorporated herein by reference. This Joint Proxy
Statement/Prospectus contains a summary of the material terms of the Opinions.
Reference is made to the full text of such Opinions attached as Annex C and
Annex D hereto. The March 26, 1996, opinions of the HSR Financial Advisors are
substantially identical to the Opinions.
No limitations were imposed by HSR on the scope of the investigation or the
procedures to be followed by the HSR Financial Advisors in rendering the
Opinions. The HSR Financial Advisors were not requested to and did not make any
recommendation to the HSR Board as to the form or amount of the consideration to
be paid for the Tide West Common Stock in the Merger, which was determined
through arm's length negotiations between HSR and Tide West. In arriving at the
Opinions, the HSR Financial Advisors did not ascribe a specific range of values
to Tide West, but made a determination as to the fairness, from a financial
point of view, to HSR of the consideration to be paid to the stockholders of
Tide West on the basis of the financial and comparative analyses summarized
below. The Opinions are for the use and benefit of the HSR Board in connection
with its consideration of the Merger and do not constitute a recommendation to
any stockholder of HSR as to how such stockholder should vote at the HSR Special
Meeting with respect to the issuance of HSR Common Stock pursuant to the Merger
Agreement. The HSR Financial Advisors were not requested to opine as to, and the
Opinions do not in any manner address, HSR's underlying business decision to
proceed with or effect the Merger.
In arriving at the Opinions, the HSR Financial Advisors reviewed and
analyzed: (a) the Merger Agreement and the specific terms of the Merger; (b)
publicly available information concerning HSR and Tide West which the HSR
Financial Advisors believed to be relevant to their inquiry; (c) financial and
operating information with respect to the business, operations and prospects
(including financial projections) of HSR and Tide West furnished to the HSR
Financial Advisors by HSR and Tide West; (d) the trading histories of the HSR
Common Stock and the Tide West Common Stock from January 1, 1994, to March 26,
1996, and a comparison of the trading histories with those of other companies
which the HSR Financial Advisors deemed relevant; (e) certain reserve and
reserve production estimates for Tide West prepared by Tide West, and an audit
performed by Netherland, Sewell & Associates, Inc. ("Netherland, Sewell") as of
July 1, 1995, of a portion of the Tide West reserve estimates; (f) certain
reserve and reserve production estimates for HSR prepared by HSR; (g) a
comparison of the historical financial results and present financial condition
of HSR and Tide West with those of other companies that the HSR Financial
Advisors deemed relevant; and (h) comparison of the financial terms of the
Merger with the terms of certain other recent transactions which the HSR
Financial Advisors deemed relevant. In addition, the HSR Financial Advisors had
discussions with the managements of HSR and Tide West concerning their
respective businesses, operations, assets, financial condition and prospects
(including financial projections) and undertook such other studies, analyses and
investigations as the HSR Financial Advisors deemed appropriate.
In arriving at the Opinions, the HSR Financial Advisors assumed and relied
upon the accuracy and completeness of the financial and other information used
by them in arriving at the Opinions without assuming any responsibility for
independent verification of such information and further relied upon the
assurances of the managements of HSR and Tide West that they were not aware of
any facts that would make such information inaccurate or misleading. With
respect to the financial forecasts of HSR and Tide West provided to the HSR
Financial Advisors by the managements of HSR and Tide West, respectively, upon
advice of HSR, the HSR Financial Advisors assumed that such forecasts were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the managements of HSR and Tide West, as the case may be, as to
the future financial performance of HSR and Tide West and that HSR and Tide West
will perform substantially in accordance with such forecasts with respect to the
gas and oil reserve estimates and future natural gas and oil production volumes
for HSR and Tide West. With HSR's consent, the HSR Financial Advisors relied
upon a reserve audit for a portion of the Tide West properties prepared as of
July 1, 1995, by Netherland, Sewell, Tide West's independent petroleum
engineering consulting firm. In arriving at
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their Opinions, the HSR Financial Advisors did not conduct a physical inspection
of the properties or facilities of HSR or Tide West and did not make or obtain
any other evaluations or appraisals of the assets or liabilities of HSR or Tide
West. The Opinions were necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date of their
Opinions.
In connection with its presentation to the HSR Board on February 24, 1996,
and in advising the HSR Board of its opinion, Lehman Brothers, and in the case
of Prudential Securities with respect to its advising the HSR Board of its
opinion, performed a variety of financial and comparative analyses, as
summarized below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, an opinion is not readily susceptible to summary description.
Furthermore, in arriving at the Opinions, the HSR Financial Advisors did not
attribute any particular weight to any analysis and factor considered by the HSR
Financial Advisors, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, the HSR Financial
Advisors believe that their analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying the Opinions. In their analyses, the HSR
Financial Advisors made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of HSR and Tide West. Any estimates contained in
these analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable than
as set forth therein. In addition, analyses relating to the value of businesses
do not purport to be appraisals or to reflect the prices at which businesses may
actually be sold.
PURCHASE PRICE ANALYSIS AND STOCK PRICE PERFORMANCE. The HSR Financial
Advisors performed an analysis of the Merger which indicated an implied purchase
price pursuant to terms of the Merger for each share of Tide West Common Stock
of $15.36, based on an exchange ratio of .6295 shares of HSR Common Stock per
share of Tide West Common Stock, a $10.50 per share price for HSR Common Stock
and cash consideration of $8.75 per share of Tide West Common Stock. The HSR
Financial Advisors analysis indicated that the pro forma ownership percentage of
holders of Tide West Common Stock of the pro forma combined company would be
approximately 34% following the Merger. The HSR Financial Advisors also examined
the trading history of the Tide West Common Stock and the HSR Common Stock in
terms of both price and volume during the period from January 1, 1994 through
March 26, 1996.
DISCOUNTED CASH FLOW ANALYSIS OF TIDE WEST. Using a discounted cash flow
analysis, the HSR Financial Advisors estimated the present value of the future
cash flows that Tide West could be expected to generate from January 1, 1996,
and beyond. This analysis was performed using three cases which employed
different assumptions as to projected production volumes and oil and gas price
forecasts.
In Case I, reserve reports prepared by Tide West (containing both proved
and, in certain reports, probable reserve estimates), a report of Netherland,
Sewell setting forth its estimates for a portion of Tide West's proved reserves
at January 1, 1995, and the Netherland, Sewell audit as of July 1, 1995, of a
portion of the Tide West proved reserve estimates were used to project future
oil and gas production volumes. Additional reserve reports for property
acquisitions made subsequent to July 1, 1995, were also prepared by Tide West
and used to project future production volumes. Such Case I reserve forecast is
herein defined as the "Tide West Reserve Assessment." Projected production
volumes were risked by reserve category. The natural gas price forecast was
based on Lehman Brothers' research projections for spot market sales and on a
standard heating value of 1,000 British Thermal Units per cubic foot of gas.
Adjustments were made to the natural gas price forecast to reflect
transportation charges and quality differentials. Lehman Brothers' research
forecast for gas prices per Mcf for the years 1996 through 2000 were $2.35,
$2.05, $1.90, $1.85 and $2.10, respectively, and were assumed to escalate at 2%
per year thereafter. The oil price forecast was based on Lehman Brothers'
research projections for West Texas Intermediate ("WTI") equivalent crude oil on
the spot market and was then adjusted for transportation and quality
differentials. For the years 1996 through 2000, WTI oil prices per barrel were
assumed to be $16.75, $16.75, $17.09, $17.43 and $17.78, respectively, and were
assumed to escalate at 2% per year thereafter. The gas and oil price forecast
used in Case I is herein defined as the "Lehman Price Deck."
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In Case II, reserve reports prepared by HSR, defined as the "HSR Reserve
Assessment," based on due diligence by HSR on Tide West, including review of the
Tide West reserve reports and the Netherland, Sewell audit as of July 1, 1995,
of a portion of the Tide West reserve estimates, were used to project future
natural gas and oil production volumes. The natural gas price forecast was based
on NYMEX quotes for future delivery of natural gas at Henry Hub, Louisiana. Such
natural gas price forecasts per Mcf for the years 1996 through 2000 were $2.16,
$1.95, $1.96, $1.99 and $2.03, respectively, and were assumed to escalate at 2%
per year thereafter. The WTI oil price forecast per barrel for the years 1996
and 1997 was $16.75 and was assumed to escalate at 2% per year thereafter.
Adjustments were made to the natural gas and oil price forecasts to reflect
transportation and quality differentials. The gas and oil price projections used
in Case II are herein defined as the "HSR Price Deck."
In Case III, future natural gas and oil projections were based on the HSR
Reserve Assessment. Natural gas and oil price projections were based on the
Lehman Price Deck.
In Cases I, II and III, operating expenses necessary to lift and produce
the estimated reserves were assumed to increase at 2% per year. The cash flows
were discounted at 10% and 12%, which in the judgment of the HSR Financial
Advisors represent the appropriate discount rates for small and medium sized
exploration and production companies for valuing oil and gas properties.
By discounting the projected cash flows generated by Tide West, adding
assessed value for other assets, deducting the present value of estimated
general and administrative expenses and deducting net liabilities, the HSR
Financial Advisors arrived at a net asset reference value range per share for
Tide West Common Stock at $19.03 to $21.59 in Case I, $13.12 to $15.36 in Case
II and $13.31 to $15.46 in Case III. In each case, per share amounts were
determined using 9.79 million shares of Tide West Common Stock outstanding.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARABLE COMPANIES. Using publicly
available information, the HSR Financial Advisors compared selected financial
data of Tide West with similar data of selected publicly-traded companies
engaged in the businesses considered by the HSR Financial Advisors to be
comparable to those of HSR and Tide West. Specifically, the HSR Financial
Advisors included in their review Barrett Resources Corporation, Cabot Oil and
Gas Corporation, Cross Timbers Oil Company, Devon Energy Corporation, DLB Oil
and Gas Inc., Hugoton Energy Corporation, Louis Dreyfus Natural Gas Corp.,
Parker and Parsley Petroleum Co., United Meridian Corporation and Vintage
Petroleum, Inc. These companies were deemed by the HSR Financial Advisors to be
the most comparable to Tide West. An analysis of the ratio of total market
capitalization (defined as market value of equity plus debt and preferred stock
less available cash) at March 20, 1996, to estimated 1995 earnings before
interest, taxes, depreciation, depletion, amortization and exploration expense
(defined as EBITDE) yielded a multiple range of 4.7 times to 12.8 times, a mean
value of 8.8 times and a median value of 8.9 times. The ratio of total market
capitalization at March 20, 1996, to estimated 1996 EBITDE yielded a multiple
range of 2.4 times to 8.0 times, a mean value of 5.9 times, and a median value
of 6.0 times. Using an HSR Common Stock price of $10.50 per share, Tide West's
implied total market capitalization to estimated 1995 and 1996 EBITDE ratios
would be 7.8 times and 5.2 times, respectively. An analysis of the ratio of
equity market value at March 20, 1996, to estimated 1995 after-tax,
after-leverage cash flow from operations before changes in working capital
(defined as CFFO) yielded a multiple range of 3.8 times to 10.7 times, a mean
value of 7.3 times and a median value of 6.8 times. The ratio of equity market
value at March 20, 1996, to estimated 1996 CFFO yielded a multiple range of 2.8
times to 7.5 times, a mean value of 4.8 times and a median value of 4.3 times.
Using an HSR Common Stock price of $10.50 per share, Tide West's implied equity
market value to estimated 1995 and 1996 CFFO ratios would be 7.3 times and 5.2
times, respectively.
Because of the inherent differences between the businesses, operations and
prospects of Tide West and the businesses, operations and prospects of the
companies included in the comparable group, the HSR Financial Advisors believed
that a purely quantitative comparable company analysis would not be particularly
meaningful in the context of the Merger. The HSR Financial Advisors believed
that an appropriate use of a comparable company analysis in this instance would
involve qualitative judgments concerning differences between the financial and
operating characteristics of Tide West and the companies in the comparable group
that would affect the public trading values of HSR, Tide West and such other
companies.
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ANALYSES OF SELECTED COMPARABLE TRANSACTIONS. The HSR Financial Advisors
reviewed the prices paid, to the extent publicly available, of selected
acquisition transactions which involved certain oil and gas companies similar to
Tide West's operations which took place between June 1993 and February 1996.
Transactions reviewed by the HSR Financial Advisors include Enron Capital &
Trade Corporation/Coda Energy Company, National Energy Group/Alexander Energy
Corporation, Apache Corporation/Hadson Energy Resources, Tom Brown Inc./Presidio
Oil Company, Barrett Resources Corporation/Plains Petroleum Company and Cabot
Oil & Gas Corporation/Washington Energy Resources Corporation (the "Comparable
Transactions"). The HSR Financial Advisors reviewed the multiples paid in the
Comparable Transactions based on the total consideration for each of the
transactions to, among other things, such acquired companies' respective proved
reserves. In particular, the HSR Financial Advisors calculated offer values
expressed in terms of dollars per thousand cubic feet equivalent of proved
reserves ("$/Mcfe"). The calculations yielded a range of offer values per
thousand cubic feet of gas equivalent of $0.45/Mcfe to $1.21/Mcfe calculated on
a 6 to 1 gas to oil basis. Using an HSR Common Stock price of $10.50 per share
and the Tide West Reserve Assessment, the implied value expressed in terms of
$/Mcfe was $0.63. Using the HSR Reserve Assessment, the implied value in terms
of $/Mcfe was $0.83.
Because the market conditions, rationale and circumstances surrounding each
of the transactions analyzed were specific to each transaction and because of
the inherent differences between the businesses, operations and prospects of
Tide West and the acquired businesses analyzed, the HSR Financial Advisors
believed that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, and accordingly, also made qualitative
judgments concerning differences between the characteristics of these
transactions and the Merger that would affect the acquisition values of Tide
West and such acquired companies.
PRO FORMA MERGER ANALYSIS. The HSR Financial Advisors analyzed certain pro
forma effects which could result from the Merger. In connection with such
analyses, the HSR Financial Advisors reviewed the projections provided by the
management of Tide West with respect to the future financial performance of Tide
West for the years 1995, 1996 and 1997, and, after discussing such projections
with the managements of Tide West and HSR, made certain adjustments. In
addition, the HSR Financial Advisors utilized the HSR Price Deck for oil and gas
price forecasts and used the HSR Reserve Assessment of Tide West for projected
production volumes. The HSR Financial Advisors then developed their own analysis
of the pro forma effects of the Merger, after considering certain information
that they deemed relevant. This analysis indicated that the CFFO per share of
the combined company would be accretive to HSR (both with and without the Basin
Acquisitions) in all three years and the pro forma earnings per share (both with
and without the Basin Transactions) would be accretive in all three years. For
the purposes of such analysis, the HSR Financial Advisors defined CFFO per share
as (a) net income to common stock plus depletion, depreciation, amortization and
exploration expenses plus deferred taxes and other non-cash charges, but not
including changes in working capital, divided by (b) the pro forma shares
outstanding.
Lehman Brothers and Prudential Securities are internationally recognized
investment banking firms engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and for other
purposes. HSR selected Lehman Brothers and Prudential Securities to act as its
financial advisors in connection with the Merger because of their reputation and
substantial experience in transactions similar to the Merger.
HSR FINANCIAL ADVISORS FEES. In connection with Lehman Brothers' services
as financial advisor to HSR, HSR has agreed to pay Lehman Brothers as
compensation for its services a fee, which is contingent upon the consummation
of the Merger, in the amount of 0.6% of the value of the aggregate consideration
to be paid by HSR in the Merger, including the assumption of net liabilities,
which fee is estimated to be approximately $ million (treating the date of
this Joint Proxy Statement/Prospectus as the Closing Date). HSR has also agreed
to reimburse Lehman Brothers for certain reasonable out-of-pocket expenses
incurred in connection with the Merger (including reasonable fees and expenses
of its legal counsel) and to indemnify Lehman Brothers and certain related
persons against certain liabilities and expenses in connection with the Merger,
including certain liabilities under the federal securities laws. HSR has paid an
aggregate of $113,000 to
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Lehman Brothers during the prior two years in connection with matters unrelated
to the Basin Acquisitions and the Merger.
In connection with Prudential Securities' services as financial advisor to
HSR, HSR has agreed to pay Prudential Securities as compensation for its
services a fee, which is contingent upon the consummation of the Merger, in the
amount of 0.4% of the value of the aggregate consideration to be paid by HSR in
the Merger, including the assumption of net liabilities, which fee is estimated
to be approximately $ million (treating the date of this Joint Proxy
Statement/Prospectus as the Closing Date). HSR has also agreed to reimburse
Prudential Securities for certain reasonable out-of-pocket expenses incurred in
connection with the Merger (including reasonable fees and expenses of its legal
counsel) and to indemnify Prudential Securities and certain related persons
against certain liabilities and expenses in connection with the Merger,
including certain liabilities under the federal securities laws.
Lehman Brothers has acted as an underwriter of HSR debt and equity
securities in the past. In the ordinary course of business, the HSR Financial
Advisors actively trade the securities of Tide West and HSR for their own
accounts and for the accounts of their customers and, accordingly, either Lehman
Brothers or Prudential Securities may at any time hold a long or short position
in such securities.
RECOMMENDATION OF THE TIDE WEST BOARD
For the reasons described under "-- Reasons for the Merger -- Tide West,"
the Tide West Board believes that the Merger is in the best interests of the
Tide West stockholders and that the consideration to be received in the Merger
by the Tide West stockholders is fair to the Tide West stockholders.
Accordingly, THE TIDE WEST BOARD RECOMMENDS THAT THE STOCKHOLDERS OF TIDE WEST
VOTE FOR THE APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
In arriving at its recommendation, the Tide West Board considered the
following factors without assigning relative weights to any: (a) Tide West's
strategic alternatives, including remaining a separate company; (b) the terms
and conditions of the proposed Merger, including the consideration to be
received by the Tide West stockholders; (c) the financial condition, results of
operations, business, market position, prospects and strategic objectives of
HSR; (d) the strength of HSR's management organization; (e) the likelihood that,
for federal income tax purposes, no gain or loss will be recognized by Tide West
stockholders with respect to the HSR Common Stock received in exchange for their
Tide West Common Stock; (f) the fairness opinion of Merrill Lynch discussed
below; (g) the fact that receiving the proposal from HSR was the result of a
lengthy and thorough process that included a number of other companies, several
of which made proposals, all of which were considered by the Tide West Board to
be less favorable to the Tide West stockholders than the HSR proposal; (h) the
fact that the terms and conditions of the proposed Merger were the result of
arms' length negotiations between HSR and the Tide West Board; (i) the fact that
the terms and conditions of the proposed Merger were acceptable to Tide West's
largest stockholder, who has the greatest financial interest in maximizing the
benefit to the Tide West stockholders; (j) the likelihood that the Tide West
stockholders will receive a premium over the market price of their shares of
Tide West Common Stock immediately prior to the announcement of the proposed
Merger and a premium over the market price of their shares of Tide West Common
Stock immediately prior to the announcement on October 20, 1995, of the
intention of the Tide West Board to sell Tide West; and (k) the Tide West
Board's conclusion that the terms of the Merger Agreement would not preclude
another bidder from offering to pay a higher price for Tide West.
All members of the Tide West Board (other than Mr. Hersh, who was informed
of the meeting but declined to participate because of his position as a director
of HSR) were present at the special meeting held on February 24, 1996, at which
the Tide West Board approved the Merger, authorized Tide West to enter into the
Merger Agreement and determined to recommend that the stockholders of Tide West
vote in favor of the approval of the Merger and the Merger Agreement. At that
special meeting, all directors present voted in favor of such matters. Prior to
voting, the Tide West Board considered the matters discussed under "-- Reasons
for the Merger -- Tide West" and "-- Interests of Certain Persons in the
Merger."
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OPINION OF THE TIDE WEST FINANCIAL ADVISOR
At the special meeting of the Tide West Board held on February 24, 1996, to
consider entering into the Merger Agreement, Merrill Lynch delivered its oral
opinion (subsequently confirmed in writing) dated February 24, 1996, that, as of
such date, the consideration to be received by the holders of the Tide West
Common Stock was fair to such holders, taken as a whole, from a financial point
of view. Merrill Lynch has confirmed its written opinion dated February 24,
1996, in an opinion dated the date of this Joint Proxy Statement/Prospectus. A
copy of the opinion of Merrill Lynch dated the date of this Joint Proxy
Statement/Prospectus, which sets forth the assumptions made, matters considered
and limitations on the review undertaken, is attached as Annex B to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. This Joint
Proxy Statement/Prospectus contains a summary of the material terms of such
opinion of Merrill Lynch. Reference is made to the full text of such opinion
attached as Annex B hereto. The February 24, 1996, opinion is substantially
identical to the opinion attached as Annex B hereto. STOCKHOLDERS OF TIDE WEST
ARE URGED TO READ CAREFULLY THE MERRILL LYNCH OPINION IN ITS ENTIRETY.
Merrill Lynch's opinion is directed only to the fairness from a financial
point of view of the consideration to be received by the holders of Tide West
Common Stock and does not constitute a recommendation to any stockholder as to
how such stockholder should vote at the Tide West Special Meeting. The
consideration to be received by the holders of the Tide West Common Stock was
determined through negotiations between Tide West and HSR and was unanimously
approved by the Tide West Board (except for Mr. Hersh, who did not participate).
Merrill Lynch provided advice during the course of such negotiations, but did
not make a recommendation with respect to the amount of the consideration to be
received by the holders of the Tide West Common Stock.
In arriving at its opinion dated the date of this Joint Proxy
Statement/Prospectus, Merrill Lynch, among other things: (a) reviewed Tide
West's annual reports, Forms 10-K and related financial information for the
three fiscal years ended December 31, 1994; Tide West's Forms 8-K dated November
20, 1992, and December 15, 1993; Tide West's Forms 10-Q and the related
unaudited financial information for the quarterly periods ended March 31, 1995,
June 30, 1995, and September 30, 1995; and Tide West's unaudited financial
information for the year ended December 31, 1995; (b) reviewed HSR's annual
reports, Forms 10-K and related financial information for the three fiscal years
ended December 31, 1994; HSR's Forms 8-K dated July 9, 1992, and August 13,
1993; HSR's Forms 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1995, June 30, 1995, and September 30, 1995;
and HSR's unaudited financial information for the year ended December 31, 1995;
(c) reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flow, assets and prospects of Tide West and HSR,
furnished to Merrill Lynch by Tide West and HSR, respectively; (d) reviewed
certain reserve and reserve production estimates for Tide West prepared by Tide
West, a report of Netherland, Sewell setting forth its estimates for a portion
of Tide West's reserves at January 1, 1995, and a reserve audit for a portion of
the Tide West properties prepared as of July 1, 1995, by Netherland, Sewell, and
discussed such reserve and reserve production estimates with Tide West and
Netherland, Sewell; (e) reviewed certain reserve and reserve production
estimates for December 31, 1995, for HSR prepared by HSR and reviewed by
Williamson Petroleum Consultants, Inc. ("Williamson") and discussed such reserve
and reserve production estimates with HSR; (f) reviewed certain reserve and
reserve production estimates for December 31, 1995, relating to the Basin
Acquisitions, prepared by Basin and audited by Netherland, Sewell and discussed
such reserve and reserve production estimates with HSR; (g) conducted
discussions with members of senior management of Tide West and HSR concerning
their respective businesses and prospects; (h) reviewed the historical market
prices and trading activity for the Tide West Common Stock and the HSR Common
Stock and compared them with that of certain publicly traded companies which
Merrill Lynch deemed to be reasonably similar to Tide West and HSR,
respectively; (i) compared the published reserve information, results of
operations and similar financial information of Tide West and HSR with that of
certain companies which Merrill Lynch deemed to be reasonably similar to Tide
West and HSR, respectively; (j) compared the proposed financial terms of the
transactions contemplated by the Merger Agreement with the financial terms of
certain other mergers and acquisitions which Merrill Lynch deemed to be
relevant; (k) considered the pro forma effect of the Merger on HSR's
capitalization ratios and earnings and cash flow with and without the effect of
the Basin
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Acquisitions; (l) reviewed the Merger Agreement; (m) reviewed the NGP Voting
Agreement and the Smith Voting Agreement; (n) reviewed the Registration Rights
Agreement; (o) reviewed a draft of the Asset Purchase and Sale Agreement
relating to the Basin Acquisitions dated February 23, 1996; and (p) reviewed
such other financial studies and analyses and performed such other
investigations and took into account such other matters as Merrill Lynch deemed
necessary, including Merrill Lynch's assessment of general economic, market and
monetary conditions.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
Tide West and HSR, and Merrill Lynch did not independently verify such
information or undertake an independent appraisal of the assets or liabilities
of Tide West or HSR or certain assets of Basin. With respect to the reserve
related information furnished by Tide West and HSR, Merrill Lynch assumed that
they were reasonably prepared and reflected the best currently available
estimates and judgment of the managements of Tide West and HSR as to the
reserves of Tide West or HSR, as the case may be. With respect to the financial
forecasts furnished by Tide West and HSR, Merrill Lynch assumed that they were
reasonably prepared and reflected the best currently available estimates and
judgment of Tide West's or HSR's management as to the expected future financial
performance of Tide West and HSR, as the case may be.
Merrill Lynch's opinion was based upon market, economic, financial and
other conditions as they existed and could be evaluated as of the date of such
opinion.
In developing its opinion, Merrill Lynch relied heavily on Tide West as to
certain accounting aspects of the Merger and, as provided in the Merger
Agreement, Merrill Lynch also assumed that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code.
The following is a brief summary of the analyses performed by Merrill Lynch
in connection with its opinion dated February 24, 1996, which it discussed with
the Tide West Board at its meeting held on February 24, 1996. In connection with
its opinion dated as of the date of this Joint Proxy Statement/Prospectus,
Merrill Lynch performed certain procedures, including each of the financial
analyses described below, to update its analyses made in connection with the
delivery of its opinion dated February 24, 1996, and reviewed with the
managements of Tide West and HSR the financial information on which such
analyses were based and other factors, including the current financial results
of such companies and the future prospects for such companies.
DISCOUNTED CASH FLOW ANALYSIS OF TIDE WEST. Using a discounted cash flow
analysis, Merrill Lynch calculated the present value of the after-tax future
cash flows that Tide West could be expected to generate from January 1, 1996,
and beyond based upon (a) reserve reports prepared by Tide West (containing
proved and, in certain reports, probable and possible reserve estimates, and the
production profile relating to such reserves), a report of Netherland, Sewell
setting forth its estimates for a portion of Tide West's proved reserves at
January 1, 1995, and the Netherland, Sewell audit as of July 1, 1995, of a
portion of the Tide West proved reserve estimates, and (b) Merrill Lynch's oil
and gas price forecasts under two distinct pricing scenarios, Case I and Case
II.
The natural gas price forecasts were based on forecasts for spot market
sales and on a standard heating value of 1,000 British Thermal Units per cubic
foot of gas. Adjustments were made to the natural gas price forecasts to reflect
transportation charges and quality differentials. In Case I, gas prices per Mcf
for the years 1996 to 2000 were assumed to be $1.90, $1.90, $1.90, $2.00 and
$2.10, respectively, and were assumed to escalate at 4% per annum thereafter. In
Case II, gas prices per Mcf for the years 1996 to 2000 were assumed to be $2.00,
$2.05, $2.10, $2.20 and $2.30, respectively, and were assumed to escalate at 6%
per annum thereafter. In both pricing scenarios, the unadjusted natural gas
price was capped at $5.00 per Mcf in the later years.
The oil price forecasts were based on WTI equivalent crude oil on the spot
market and were then adjusted for the transportation and quality of Tide West's
crude oil. In Case I, unadjusted WTI oil prices per barrel for the years 1996 to
2000 were assumed to be $17.00, $18.00, $19.00, $20.00 and $21.00, respectively,
and were assumed to escalate at 4% per annum thereafter. In Case II, unadjusted
WTI oil prices per barrel for the years
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1996 to 2000 were assumed to be $17.50, $19.00, $21.00, $22.00 and $23.00,
respectively, and were assumed to escalate at 6% per annum thereafter. In both
pricing scenarios, the unadjusted oil price was capped at $50.00 per barrel in
the later years.
Operating expenses and maintenance capital expenditures, necessary to lift
and produce the proved, probable and possible reserves estimated in the
engineering reports, were assumed to increase at a rate of 4% per annum. The
after-tax cash flows were discounted at rates from 10% to 15% for proved
developed reserves, from 12.5% to 17.5% for proved undeveloped reserves, from
12.5% to 15% for Horizon Gas Partners, L.P. ("Horizon") reserves (Tide West's
net interest in Horizon is approximately 93.7%), from 15% to 20% for probable
reserves and from 20% to 30% for possible reserves.
By discounting all the after-tax cash flows generated by Tide West's
proved, probable and possible reserves as of January 1, 1996, adding assessed
value for undeveloped acreage and other assets (including the Horizon reserves)
and deducting estimated net long-term debt and working capital, Merrill Lynch
arrived at a net asset reference value range per share for Tide West Common
Stock of $11.97 to $16.06 in Case I and $14.52 to $19.64 in Case II. In each
case, per share amounts were determined using 9.79 million shares of Tide West
Common Stock outstanding.
DISCOUNTED CASH FLOW ANALYSIS OF HSR. Using a discounted cash flow
analysis, Merrill Lynch calculated the present value of the after-tax future
cash flows that HSR could be expected to generate from January 1, 1996, and
beyond based upon (a) reserve reports prepared by HSR and reviewed annually by
Williamson (containing proved reserve estimates for HSR and the production
profiles relating to such reserves); (b) reserve reports prepared by Basin and
audited annually by Netherland, Sewell (containing proved reserve estimates for
Basin and the production profiles relating to such reserves); and (c) Merrill
Lynch's oil and gas price forecasts under the same two pricing scenarios that
were applied to Tide West's reserves, Case I and Case II. The after-tax cash
flows for HSR and Basin proved reserves were discounted at rates of 10% and
12.5%.
By discounting all the after-tax cash flows generated by HSR's and Basin's
proved reserves as of January 1, 1996, assessing the value of HSR's and Basin's
probable reserve base at 10% of the proved reserves, assessing the value of
Basin's tax credits at 70% of the discounted tax credit at 10%, assessing the
acreage and upside potential of HSR's undeveloped acreage at $25 to $30 per acre
and assessing the value of other assets as estimated by HSR at 1.0 to 1.5 times
book value, Merrill Lynch arrived at a total asset reference value range for
HSR, with and without the Basin Acquisitions. After deducting estimated net
long-term debt and working capital ($413 million with the Basin Acquisitions and
$288 million without the Basin Acquisitions), Merrill Lynch arrived at a net
asset reference value range per share for HSR Common Stock with the Basin
Acquisitions of $3.04 to $8.21 per share in Case I and $7.86 to $14.26 in Case
II. Without the Basin Acquisitions, the net asset reference value range per
share for HSR was $5.93 to $9.63 in Case I and $9.09 to $13.56 in Case II. In
each case, per share amounts were determined based on 11.4 million shares of HSR
Common Stock outstanding.
ANALYSIS OF SELECTED COMPARABLE ACQUISITION TRANSACTIONS. Merrill Lynch
reviewed publicly available information on certain acquisitions which involved
Mid-Continent oil and gas properties similar to Tide West's operations and
consideration in excess of $100 million and which took place between June 1993
and February 1996. Merrill Lynch considered the following oil and gas
acquisitions: Enron Capital & Trade Corporation/Coda Energy Company, National
Energy Group/Alexander Energy Corporation, Apache Corporation/Aquila Energy
Corporation, Amoco Corporation/Santa Fe Minerals Corporation (Mid-Continent
properties), Barrett Resources Corporation/Plains Petroleum Company and Samson
Energy Corporation/Grace Petroleum Corporation.
Merrill Lynch reviewed publicly available information on certain
acquisitions which involved Rocky Mountain region oil and gas properties similar
to HSR's operations and consideration in excess of $50 million and which took
place between June 1993 and February 1996. Merrill Lynch considered the
following oil and gas acquisitions: Devon Energy Corporation/Unocal Corporation,
Citation Oil & Gas Corporation/Apache Corporation, Tom Brown, Inc./Presidio Oil
Company, Cabot Oil & Gas Corporation/Washington Energy Resources Corporation,
and United Meridian Corporation/Norfolk Holdings, Inc.
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Merrill Lynch examined multiples based on the total consideration for each
of the transactions to, among other things, such acquired companies' respective
proved reserves. In particular, Merrill Lynch calculated offer value expressed
in terms of dollars per Mcfe of proved reserves. The comparable Mid-Continent
oil and gas transactions had a range of offer values of $.62/Mcfe to $1.38/Mcfe
calculated on a 6 Mcf to 1 barrel basis, and $.57/Mcfe to $1.19/Mcfe calculated
on a 10 Mcf to 1 barrel basis. The comparable Rocky Mountain oil and gas
transactions had a range of offer values of $.50/Mcfe to $.86/Mcfe (6:1 basis)
and $.43/Mcfe to $.72/Mcfe (10:1 basis). Merrill Lynch then calculated the
aggregate and per share (assuming 9.79 million shares of Tide West Common Stock
and 11.4 million shares of HSR Common Stock outstanding) imputed equity values
for Tide West and HSR by applying Tide West's and HSR's proved reserves to the
multiples derived from its analysis of the comparable acquisition transactions.
These imputed equity values for Tide West ranged from $111.9 million, or $11.45
per share, to $151.9 million, or $15.55 per share. The imputed equity values for
HSR with the Basin Acquisitions ranged from $96.6 million, or $8.47 per share,
to $171.6 million, or $15.05 per share. No acquisition analysis was done for HSR
without the Basin Acquisitions.
No company utilized in the comparable acquisition transaction analyses was
identical to Tide West or HSR. Accordingly, an analysis of the results of the
foregoing is not purely mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the comparable acquired companies and other factors, such as total
consideration paid in relation to a company's reserves, total oil and gas
reserves, reserve life index and location of the reserves acquired, that could
affect the acquisition value of such companies, Tide West and HSR.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARABLE COMPANIES. Merrill Lynch
compared selected historical stock, operating and financial ratios for Tide West
and HSR to the corresponding data and ratios of the following publicly traded
companies: Barrett Resources Corporation, Basin Exploration, Inc., Cabot Oil &
Gas Corporation, Cross Timbers Oil Company, Devon Energy Corporation, Hugoton
Energy Corporation, Louis Dreyfus Natural Gas Corp., Nuevo Energy Company and
Seagull Energy Corporation. An analysis of the ratio of adjusted market
capitalization (defined as market value of equity plus debt and preferred stock
less available cash) at February 6, 1996, to 1995 estimated pre-tax,
pre-leverage cash flow (defined as EBITDE or Earnings Before Interest, Taxes,
Depreciation, Depletion, Exploration Expense and Amortization) yielded a
multiple range of 4.9 times to 14.1 times, a mean value of 8.0 times and a
median value of 6.5 times. The application of Tide West's adjusted market
capitalization to EBITDE multiple as a low end limit and the comparable company
median ratio of 6.5 times as the upper end limit to Tide West's 1995 estimated
EBITDE, less net long-term debt and working capital, yielded a net asset
reference value range per share of $12.99 to $16.57 for Tide West Common Stock
(assuming 9.79 million shares outstanding) and $6.28 to $12.86 for HSR Common
Stock (assuming 11.4 million shares outstanding) with the Basin Acquisitions. No
trading company analysis was done for HSR without the Basin Acquisitions.
No company utilized in the above comparable companies analyses is identical
to either Tide West or HSR. Accordingly, an analysis of the results of the
foregoing is not purely mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the comparable companies and other factors that could affect the public
trading value of the comparable companies or company to which they are being
compared.
PRO FORMA MERGER CONSEQUENCES ANALYSIS. Merrill Lynch analyzed certain pro
forma effects which could result from the Merger. In connection with such
analyses, Merrill Lynch reviewed the projections provided by members of
management of Tide West with respect to the future financial performance of Tide
West for the years 1995, 1996 and 1997, and, after discussing such projections
with members of management of Tide West, made certain adjustments. In addition,
Merrill Lynch utilized its own oil and gas price forecasts and made certain
adjustments to projected capital expenditures. Merrill Lynch then developed its
own analysis of the pro forma effects of the Merger, after considering publicly
available information that it deemed relevant. This analysis indicated that the
discretionary cash flow per share of the combined company would be accretive to
HSR (including the Basin Acquisitions) in all three years by 2.6%, 21.1% and
24.9%, respectively, although the pro forma earnings per share would be dilutive
in all three years. For the purposes of such analysis, Merrill Lynch defined
discretionary cash flow per share as (a) net income to common stock plus
depletion,
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depreciation, amortization and exploration expenses, plus deferred taxes and
other non-cash charges, but not including changes in working capital, divided by
(b) the pro forma shares outstanding.
Merrill Lynch reviewed certain pro forma effects which could result from
the Merger. Merrill Lynch calculated the net asset reference value range per
share for the combination of HSR and Tide West, with and without the Basin
Acquisitions. With the Basin Acquisitions, the net asset reference value range
per share was $3.70 to $9.34 in Case I and $8.26 to $15.27 in Case II. Without
the Basin Acquisitions, such range per share was $5.58 to $10.26 in Case I and
$9.06 to $14.81 in Case II. With the Basin Acquisitions, the acquisition
analysis' net asset reference value range per share was $6.95 to $13.50 and the
trading analysis' range per share was $6.38 to $12.65.
The summary set forth above does not purport to be a complete description
of the analyses conducted by Merrill Lynch or Merrill Lynch's presentation to
the Tide West Board. Merrill Lynch believes that its analyses must be considered
as a whole and that selecting portions of its analyses and the factors
considered by it, without considering all factors and analyses, could create an
incomplete view of the process underlying its opinion. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. In performing its analyses, Merrill
Lynch made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
control of Tide West or HSR. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. In addition, analyses relating to the value of the business do
not purport to be appraisals or to reflect the prices at which businesses may
actually be sold. Because such estimates are inherently subject to uncertainty,
neither Tide West, HSR, Merrill Lynch nor any other person assumes
responsibility for their accuracy.
Merrill Lynch is an internationally recognized investment banking firm
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and for other purposes. Tide West selected Merrill
Lynch to act as its financial advisor in connection with the Merger because of
its international reputation and its substantial experience in transactions
similar to the Merger.
TIDE WEST FINANCIAL ADVISOR FEE. In connection with Merrill Lynch's
services as financial advisor to Tide West, Tide West has agreed to pay Merrill
Lynch, as compensation for its services, a fee in an amount equal to 1% of the
value of the aggregate consideration to be received by Tide West Stockholders in
the Merger and the amount of Tide West indebtedness, which fee is estimated to
be approximately $ million (treating the date of this Joint Proxy
Statement/Prospectus as the Closing Date). Tide West has also agreed to
reimburse Merrill Lynch for certain reasonable out-of-pocket expenses incurred
in connection with the Merger (including reasonable fees and expenses of its
legal counsel) and to indemnify Merrill Lynch and certain related persons
against certain liabilities and expenses in connection with the Merger,
including certain liabilities under the federal securities laws.
In the ordinary course of Merrill Lynch's business, it may actively trade
the securities of Tide West and HSR for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
EFFECTS OF THE MERGER
CONVERSION OF TIDE WEST COMMON STOCK AND OTHER SECURITIES
Tide West Common Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof, but subject to the
treatment of fractional shares and other adjustments, each share of Tide West
Common Stock that is issued and outstanding immediately prior to the Effective
Time (other than shares of Tide West Common Stock held by Dissenting
Stockholders) will be converted into the right to receive (a) shares of HSR
Common Stock, with each such share of Tide West Common Stock being converted
into the fraction of a share of HSR Common Stock equal to the Conversion Number,
and (b) cash in the amount of the Cash Consideration. The Conversion Number is
defined as .6295, but is subject to adjustment upon the occurrence of certain
events as described below. The Cash Consideration is $8.75 less 3%
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of the amount by which the Market Price exceeds $10.50, subject to adjustment
upon the occurrence of certain events as described below. The Closing Date will
be the day on which both the Tide West Special Meeting and the HSR Special
Meeting have been held (or such later date as is agreed upon by HSR and Tide
West). See "The Merger Agreement and Related Agreements -- Terms of the Merger
Agreement -- Adjustments to the Conversion Number and Cash Consideration."
Each such share of Tide West Common Stock, when so converted, will
automatically be cancelled and retired, will cease to exist and will no longer
be outstanding, and the holder of any certificate representing any such shares
will cease to have any rights with respect thereto, except the right to receive
the shares of HSR Common Stock to be issued in exchange therefor and the Cash
Consideration (along with any cash in lieu of a fractional share of HSR Common
Stock and any unpaid dividends and distributions with respect to such shares of
HSR Common Stock, both as discussed below), without interest, upon the surrender
of such certificate in accordance with the terms of the Merger Agreement.
Tide West Treasury Stock. At the Effective Time, by virtue of the Merger,
all shares of Tide West Common Stock that are held as treasury stock shall be
cancelled and retired and shall cease to exist, and no shares of HSR Common
Stock, Cash Consideration or other consideration shall be paid or payable in
exchange therefor.
Tide West Stock Options. As of the date of this Joint Proxy
Statement/Prospectus, Tide West has outstanding options to acquire approximately
937,840 shares of Tide West Common Stock (the "Tide West Stock Options"). The
Tide West Stock Options have previously been granted to employees of Tide West
pursuant to Tide West's existing stock option plan. Each Tide West Stock Option
shall be or become fully vested prior to the Effective Time and, at the option
of the holder thereof, either (a) shall be exercised immediately prior to the
Effective Time or (b) at the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, shall be cancelled and converted
into the right to receive, for each share of Tide West Common Stock with respect
to which such Tide West Stock Option is exercisable, cash in an amount equal to
the amount by which the Merger Consideration exceeds the per share exercise
price of such Tide West Stock Option. Merger Consideration is the sum of (i) the
Cash Consideration and (ii) the product of the Conversion Number and the Market
Price. The amounts so determined shall be paid to the holders of the Tide West
Stock Options not later than three business days after the Effective Time.
Tide West Warrants. As of the date of this Joint Proxy
Statement/Prospectus, Tide West had outstanding (a) approximately 2,796,600
common stock warrants, each entitling the holder to purchase one-tenth of one
share of Tide West Common Stock for an exercise price of $3.00 (the "Tide West
Common Stock Warrants"), and (b) 140,000 unit warrants, each entitling the
holder to purchase two-tenths of one share of Tide West Common Stock and two
Tide West Common Stock Warrants (each exercisable to purchase one-tenth of one
share of Tide West Common Stock for an exercise price of $3.00) for a total
exercise price of $5.10 (the "Tide West Unit Warrants" and, together with the
Tide West Common Stock Warrants, the "Tide West Warrants"). The Tide West
Warrants were issued by Tide West in connection with a public issuance of Tide
West Common Stock in 1991 and terminate on June 21, 1996.
All Tide West Warrants will remain outstanding following the Effective Time
and, at the Effective Time, without any action on the part of Tide West or any
holder thereof, will be assumed by HSR. Following such assumption, each Tide
West Warrant will be exercisable on the same terms and conditions as applied
immediately prior to the Effective Time, except as follows: (a) each Tide West
Common Stock Warrant will be exercisable for that number of shares of HSR Common
Stock and the amount of Cash Consideration into which the number of shares of
Tide West Common Stock subject to such Tide West Common Stock Warrant
immediately prior to the Effective Time would have been converted had they been
issued and outstanding immediately prior to the Effective Time; and (b) each
Tide West Unit Warrant will be exercisable for (i) that number of shares of HSR
Common Stock and the amount of Cash Consideration into which the number of
shares of Tide West Common Stock subject to such Tide West Unit Warrant
immediately prior to the Effective Time would have been converted if they had
been issued and outstanding immediately prior to the Effective Time plus (ii)
two Tide West Common Stock Warrants (with each such Tide West Common Stock
Warrant being exercisable as described in clause (a) above). The exercise price
of the Tide West Warrants is
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substantially greater than the current market price of the shares of Tide West
Common Stock into which they are exercisable.
Net Operating Loss Carryforward. At December 31, 1995, Tide West had net
operating loss ("NOL") carryforwards totaling $3.4 million, which will expire
during the years 2004 through 2006. These NOLs will be available to the combined
company after the Merger, subject to the limitations described herein. Under
Section 382 of the Code, the taxable income of Merger Sub, by virtue of
succeeding to the assets and liabilities of Tide West, will be offset by
pre-ownership change NOL carryforwards subject to an annual limitation (the "382
Limitation") that applies when an "ownership change" occurs. Consistent with
administrative positions of the IRS, HSR and Tide West intend to take the
position that, upon the execution of the Merger Agreement, an ownership change
occurred for purposes of Section 382. As a result of this ownership change, the
total amount of Tide West's NOL carryforwards will not be affected, but a 382
Limitation will be calculated equal to the value of the Tide West Common Stock
immediately before the ownership change multiplied by the "long-term tax exempt
rate," as such term is defined in Section 382 of the Code, subject to adjustment
for certain built-in gains of Tide West. If it is determined that an ownership
change occurred on a different date, the 382 Limitation might be materially
higher or lower. Additionally, due to a prior ownership change, these losses are
currently subject to a 382 Limitation of $816,000 annually, subject to
adjustment for certain built-in gains.
To the extent the 382 Limitation exceeds the federal taxable income of the
post-merger company for a given year, the 382 Limitation for the subsequent year
will be increased by such excess. NOL carryforwards of Tide West will be
disallowed entirely if certain continuity of business enterprise requirements
are not met. It is expected these requirements will be met. The effect of the
382 Limitation may be to defer the use of Tide West's existing NOL
carryforwards. There can be no assurance that the combined company will be able
to use the Tide West NOL carryforwards in full before their expiration.
Consummation of the Merger in 1996 will result in a closing of Tide West's
1996 taxable year on the effective date of the Merger and would accelerate the
expiration period of the NOL carryforwards by one year. Tide West has no capital
loss carryforwards at the end of Tide West's first taxable year ending after
December 31, 1994, whether or not the Merger is consummated.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Tide West Board with respect to
the Merger Agreement, the stockholders of Tide West should be aware that certain
members of Tide West's management and certain members of the Tide West Board
have certain interests in the Merger separate from the interests of the Tide
West stockholders generally. These separate interests are summarized below.
ADDITIONAL HSR DIRECTOR FOLLOWING THE MERGER. Immediately subsequent to the
Effective Time, for so long as NGP owns at least 50% of the shares of HSR Common
Stock acquired by NGP in the Merger, NGP will be entitled to designate one
person to be a member of the HSR Board (the "NGP Designee"). HSR will have the
right to approve any individual named as the NGP Designee, which approval will
not be unreasonably withheld. Immediately subsequent to the Effective Time, HSR
is required to take such action as is required under its certificate of
incorporation and bylaws to increase the size of the HSR Board by one and will
elect, or will cause to be elected, the NGP Designee to fill the vacancy so
created. The HSR Board has the authority to, and intends immediately subsequent
to the Effective Time to, increase the size of the HSR Board by one and fill the
vacancy with the NGP Designee. The initial NGP Designee is Philip B. Smith, an
officer, director and stockholder of Tide West.
VOTING AGREEMENTS. HSR and NGP have entered into the NGP Voting Agreement
pursuant to which NGP has agreed, among other things, (a) to vote the 4,550,000
shares of Tide West Common Stock owned by it in favor of the Merger (and has
granted a proxy to HSR in connection therewith), (b) not to sell any shares of
HSR Common Stock that it receives in the Merger for a period of one year
subsequent to the Merger and (c) not to sell, transfer or otherwise encumber any
shares of Tide West Common Stock subject to the NGP Voting Agreement for the
term of such Voting Agreement.
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HSR and Smith have entered into the Smith Voting Agreement pursuant to
which Smith has agreed, among other things, (a) to vote 344,000 shares of Tide
West Common Stock owned by him in favor of the Merger (and has granted a proxy
to HSR in connection therewith), (b) not to sell his shares of HSR Common Stock
received in the Merger for a period of one year subsequent to the consummation
of the Merger and (c) not to sell, transfer or otherwise encumber any shares of
Tide West Common Stock subject to the Smith Voting Agreement for the term of
such Voting Agreement.
The foregoing description of the NGP Voting Agreement and the Smith Voting
Agreement is subject to the provisions of such agreements which are included as
exhibits to, or incorporated by reference in, the Registration Statement of
which this Joint Proxy Statement/Prospectus is a part. See "Incorporation of
Documents by Reference" and "The Merger Agreement and Related
Agreements -- Voting Agreements." The Tide West Board approved the Voting
Agreements for purposes of Section 203 of the Delaware Act.
INDEMNIFICATION. HSR has agreed that, for a period of not less than one
year following the Effective Time, it will cause the Director and Officer
Liability Insurance coverage of Tide West to continue in effect. HSR has agreed
that, from and after the consummation of the Merger, it will indemnify each
person who is, has been at any time prior to the date of the Merger Agreement,
or becomes prior to the Effective Date, an officer or director of Tide West to
the extent such officers and directors are currently entitled to indemnity from
Tide West, subject to certain exceptions.
TREATMENT OF TIDE WEST EMPLOYEES. After the Effective Time, HSR may, in its
sole discretion, offer employment to, or cause the Surviving Corporation to
offer to continue the employment of, certain employees of Tide West (the
"Retained Employees"). HSR has agreed to provide the Retained Employees with the
same benefits that accrue to employees of HSR and its subsidiaries. In addition,
for a period of 12 months following the Effective Time, HSR has agreed to, or to
cause the Surviving Corporation to, either (a) maintain the effectiveness of the
Tide West employee benefit plans for the benefit of the Retained Employees or
(b) provide the Retained Employees with the rights and benefits of HSR's
employee benefit plans. With respect to employees of Tide West who are not
Retained Employees, HSR has agreed, for a period of 18 months following the
Effective Time, either (a) to maintain the Tide West health benefit plans for
the benefit of such persons, or (b) to provide such persons with the rights and
benefits of HSR's employee health benefit plans; provided, that HSR is not
required to pay the premiums for coverage under such plans for any such persons,
except to the extent provided in any severance agreement agreed to by Tide West
and HSR. In addition, HSR has agreed that the present employees of Tide West
will be credited for their service with Tide West and its predecessor entities
for purposes of determining eligibility and vesting in any employee benefit
plans provided by HSR, that their benefits under HSR's medical benefits plan
will not be subject to any exclusions for any pre-existing conditions and that
credit will be received for any deductibles or out-of-pocket amounts previously
paid. HSR has agreed to, or to cause the Surviving Corporation to, fulfill all
coverage continuation obligations imposed by Section 4980B of the Code and
Section 601 of the Employee Retirement Income Security Act of 1974, as amended,
for those employees of Tide West or its subsidiaries who are not Retained
Employees.
COMPLETION BONUSES. At the time the Tide West Board determined and publicly
announced that Tide West would be sold, the Tide West Board decided, and it was
announced to the employees of Tide West, that Tide West would pay to each Tide
West employee, who is still employed by Tide West at the Closing Date, a
completion bonus, payable immediately prior to the Closing Date (whether or not
the employee retains employment with the Surviving Corporation), in order to
provide such employees with an incentive to remain in the employ of Tide West
and to help prepare Tide West for sale. The amounts of such bonuses are, in the
case of certain employees, measured in part by the Market Price. The Tide West
Board also decided, for similar reasons, to pay to NGP (which acts as a
financial advisor to Tide West) a fixed completion bonus. The aggregate amount
of such completion bonuses to be paid immediately prior to the Closing Date (a)
treating the date of this Joint Proxy Statement/Prospectus as the Closing Date,
would be approximately $ , and (b) treating February 26, 1996 (the date
of the public announcement of the execution of the Merger Agreement), as the
Closing Date, would be approximately $2,784,000.
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REGISTRATION RIGHTS AGREEMENT. HSR has agreed with NGP, Tide West's largest
stockholder (three representatives of which are members of the Tide West Board),
to prepare and file, under certain prescribed conditions, a registration
statement under the Securities Act covering the 2,864,225 shares of HSR Common
Stock (assuming no adjustments to the Conversion Number) that NGP receives in
the Merger. Such registration will relieve NGP from certain restrictions to
which it would otherwise be subject with respect to resales of such HSR Common
Stock. See "-- Restrictions on Resales by Affiliates of Tide West" and "The
Merger Agreement and Related Agreements -- Registration Rights Agreement."
INTERESTS OF NGP AND KENNETH A. HERSH. NGP is Tide West's largest
stockholder having ownership of approximately 46.49% of the outstanding Tide
West Common Stock as of February 25, 1996. Three representatives of NGP are
current members of the Tide West Board, including Mr. Hersh, a limited partner
in the general partner of NGP, who has been a director of Tide West since 1992
and a director of HSR since 1990. Mr. Hersh currently holds 1,000 shares of HSR
Common Stock. In connection with certain loans made by NGP and/or its affiliates
to HSR in 1990 and 1991, HSR issued NGP warrants which are currently
exerciseable for an aggregate of 740,262 shares of HSR Common Stock at per share
exercise prices ranging from $6.67 to $9.00.
On October 21, 1993, HSR issued to Kenneth A. Hersh an option to purchase
7,500 shares of HSR Common Stock (the "Hersh Option") pursuant to HSR's 1993
Directors' Stock Option Plan (the "HSR Directors' Option Plan"). Pursuant to an
Assignment of Option Agreement, dated October 21, 1993, between Mr. Hersh and
NGP (the "Assignment of Option"), Mr. Hersh assigned the Hersh Option to NGP for
no consideration. In connection with this assignment, HSR has granted NGP rights
to have the shares of HSR Common Stock issuable upon exercise of the Hersh
Option registered under the Securities Act. Currently, 4,500 shares of HSR
Common Stock are exercisable pursuant to the Hersh Option and the remaining
3,000 shares will vest ratably over a four year period from the date of the
grant.
Mr. Hersh is also entitled to receive a vested option to purchase 1,500
shares of HSR Common Stock as of February 1996 (the "Additional Option"). Mr.
Hersh has indicated that he will assign the Additional Option to NGP once it is
formally issued.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase in accordance with generally
accepted accounting principles. The purchase method requires that the cost of
the acquisition (i.e., cash, stock and net liabilities assumed), plus deferred
taxes related thereto, be allocated among the assets and liabilities acquired
based upon their fair value. The purchase method, when applied to oil and gas
exploration and production companies, prohibits the allocation of the purchase
price to goodwill. This practice tends to overstate the amounts allocated to oil
and gas properties when intangibles of value are among the attributes considered
in determining the price to be paid. In considering the amount to be paid for
Tide West Common Stock, HSR recognized several intangible assets to which
purchase price cannot currently be allocated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
This section is a summary of the material federal income tax consequences
which are expected to result from the Merger. It is impracticable to comment on
all aspects of federal, state, local and foreign laws that may affect the tax
consequences of the transactions contemplated hereby as they relate to the
particular circumstances of each stockholder or potential stockholder.
Therefore, the federal income tax discussion set forth below applies only to
holders of shares of Tide West Common Stock who hold such shares as capital
assets and, to the extent applicable, to the stockholders of HSR who hold shares
of HSR Common Stock as capital assets. The federal income tax consequences to
any particular stockholder may be affected by matters not discussed below. For
example, certain types of holders (including foreign persons, life insurance
companies, tax exempt organizations and taxpayers who may be subject to the
alternative minimum tax) may be subject to special rules not addressed herein.
Furthermore, the discussion may not be applicable with respect to shares
received pursuant to the exercise of employee stock options or otherwise as
compensation.
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This summary is based on the current provisions of the Code, existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to changes that may or may not be applied
retroactively. Many provisions of the Code which have been recently enacted or
amended have not been interpreted by the courts or the IRS.
Conner & Winters, A Professional Corporation, counsel for Tide West, has
delivered an opinion to the effect that the description of the federal income
tax consequences to HSR, Merger Sub, Tide West and holders of Tide West Common
Stock contained under the headings "Summary -- Certain Federal Income Tax
Consequences" and "Special Factors -- Certain Federal Income Tax Consequences"
correctly sets forth the material Federal income tax consequences of the Merger
(other than the discussion concerning a transaction pursuant to Section 351 of
the Code). Such opinion is based upon, among other things, certain
representations made by Tide West and HSR and representation letters provided by
Tide West and HSR to counsel containing customary statements relating to planned
dispositions of shares of HSR Common Stock by the holders of Tide West Common
Stock or of Tide West assets or Merger Sub by Merger Sub or HSR. Based upon such
representation letters, which will be confirmed by Tide West and HSR prior to
the closing of the Merger, it is the opinion of Conner & Winters that the Merger
will be treated for Federal income tax purposes as a reorganization described in
Section 368(a) of the Code. It is a condition to the obligations of Tide West
and HSR to consummate the Merger that such opinion shall not have been withdrawn
prior to the Closing Date.
No ruling has been requested from the IRS with respect to any of the
matters discussed herein; thus, no assurance can be provided that the statements
set forth herein (which do not bind the IRS or the courts) will not be
challenged by the IRS or would be sustained by a court if so challenged.
THE DISCUSSION SET FORTH BELOW ADDRESSES THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF GENERAL APPLICABILITY WHICH ARE EXPECTED TO RESULT FROM THE
MERGER. STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS TO DETERMINE THE TAX
CONSEQUENCES OF THE MERGER AND THE ACQUISITION, HOLDING AND DISPOSITION OF THE
SECURITIES OFFERED HEREBY, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS WITH RESPECT TO THEIR OWN
PARTICULAR CIRCUMSTANCES.
The Merger should be treated as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code by virtue of the application of Section
368(a)(2)(D) of the Code.
Generally, if the Merger constitutes a reorganization within the meaning of
Section 368(a) of the Code, Tide West stockholders receiving both HSR Common
Stock and cash will be required to recognize the amount of gain realized in the
Merger, if any, but only to the extent of the amount of cash received
(excluding, for purposes of this paragraph, cash received in lieu of fractional
shares, which is discussed below). For this purpose, the gain realized in the
Merger will be the value of the HSR Common Stock plus the amount of cash
received pursuant to the Merger, over such stockholder's collective basis in the
shares of Tide West Common Stock cancelled in the Merger. Such stockholder will
take a basis in the HSR Common Stock received pursuant to the Merger equal to
such stockholder's collective basis in the shares of Tide West Common Stock
cancelled in the Merger, plus the amount of gain recognized in the overall
transaction, less the amount of cash received. Solely for purposes of
determining the character of the gain recognized, each Tide West stockholder
will be deemed to have received solely HSR Common Stock, followed by a
redemption of a number of shares of HSR Common Stock equal (in value) to the
amount of the cash consideration received in the Merger. The character of the
gain recognized in the transaction will depend upon each Tide West stockholder's
personal situation. A Tide West stockholder that does not own HSR Common Stock
before the transaction will generally recognize capital gain.
EACH TIDE WEST STOCKHOLDER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE AMOUNT AND CHARACTER OF THE GAIN, IF ANY, THAT MAY BE RECOGNIZED
AS A RESULT OF THE MERGER.
Any holder of Tide West Common Stock that was received pursuant to the
exercise of an employee stock option immediately before the Effective Time may
realize different tax results in the Merger. Each such
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holder of Tide West Common Stock is encouraged to consult his or her own tax
advisor regarding the amount and character of the income recognized, if any,
from the acquisition of such stock and the subsequent exchange of that stock for
HSR Common Stock.
Each holder of Tide West Stock Warrants who receives cash for such warrants
will recognize gain to the extent the amount of cash received in exchange for
such warrants exceeds the holder's basis in the warrants.
If the Merger fails to qualify as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, Tide West will be treated as
if it had sold all of its assets to Merger Sub for an amount equal to the fair
market value, as of the Effective Time, of the HSR Common Stock received plus
the amount of total cash (including the cash received in lieu of fractional
shares) in a taxable transaction and will recognize gain or loss upon such
deemed sale. Further, if the Merger fails to qualify as a reorganization, Merger
Sub may be treated as having sold the HSR Common Stock delivered in the Merger
and, therefore, may be treated as having recognized taxable gain in an amount
equal to the fair market value of the HSR Common Stock so delivered. In
addition, if the Merger fails to qualify as a reorganization, the Merger will be
fully taxable to the Tide West stockholders. In such event, a Tide West
stockholder will recognize capital gain or loss on the receipt of HSR Common
Stock pursuant to the Merger. The measure of such gain or loss will be equal to
the difference between such Tide West stockholder's adjusted tax basis in such
holder's shares of Tide West Common Stock and the value of the consideration
received therefor (i.e., the value of the HSR Common Stock plus the amount of
cash, if any). The gain or loss recognized will be considered long-term capital
gain or loss if such Tide West stockholder held the shares of Tide West Common
Stock cancelled in the Merger for more than one year. Otherwise the gain will be
considered short-term capital gain. A Tide West stockholder will take a fair
market value basis in any HSR Common Stock received pursuant to the Merger, and
the holding period for such HSR Common Stock will begin on the day following the
Merger.
If the Merger is restructured as a "Horizontal Double Dummy" ("HDD")
transaction pursuant to Section 351 of the Code, the tax results to Tide West
stockholders and HSR stockholders could differ. If the transaction is
restructured as an HDD, each HSR stockholder will be deemed to have exchanged
its HSR Common Stock for Newco Common Stock (as defined herein). Generally, each
HSR stockholder will recognize no gain or loss on the exchange. Each HSR
stockholder will take a basis and holding period in the Newco Common Stock equal
to the basis and holding period of each stockholder in its HSR Common Stock.
If the transaction is restructured as an HDD, each Tide West stockholder
will be deemed to have exchanged its Tide West Common Stock for Newco Common
Stock and cash. Each Tide West stockholder will recognize the amount of gain,
but not loss, realized in the transaction to the extent of the amount of total
cash received (including the amount of cash received in lieu of fractional
shares). For this purpose, the amount of gain realized in the HDD transaction to
a Tide West stockholder is the amount of the consideration received (i.e., the
value of the Newco Common Stock plus the amount of total cash received pursuant
to the transaction, over such Tide West stockholder's collective basis in the
shares of Tide West Common Stock cancelled in the transaction). The character of
such gain will be long-term capital gain if such Tide West stockholder held its
Tide West Common Stock for more than one year. Otherwise the gain will be
considered short-term capital gain. Each Tide West stockholder will take a basis
in its Newco Common Stock equal to the aggregate basis in the Tide West Common
Stock it held plus the amount of gain recognized in the transaction, less the
amount of cash received. See "The Merger Agreement and Related Agreements --
Terms of the Merger Agreement -- Restructuring of the Merger."
RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES
Unless the transaction is treated as an HDD transaction, Tide West
stockholders receiving cash in lieu of fractional shares of HSR Common Stock
will be treated as receiving such cash in redemption of such fractional shares.
For federal income tax purposes a Tide West stockholder is treated as if it had
received the actual fractional share of HSR Common Stock followed by a
redemption of that fractional share by HSR. Generally, a Tide West stockholder
will recognize gain or loss in respect of such redemption measured by the
difference between such stockholder's basis in the fractional share surrendered
and the amount of cash received.
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BACKUP WITHHOLDING
Federal income tax law requires that a holder of Tide West Common Stock
provide the Exchange Agent with its correct taxpayer identification number,
which is, in the case of a Tide West stockholder who is an individual, his or
her social security number, or, in the alternative, establish a basis for
exemption from backup withholding. Exempt holders (including, among others,
corporations and certain foreign individuals) are not subject to the backup
withholding and reporting requirements. If the correct taxpayer identification
number or an adequate basis for exemption is not provided, a Tide West
stockholder will be subject to withholding of 31% of the cash received in
connection with the Merger.
To prevent backup withholding, each Tide West stockholder must complete the
Substitute Form W-9 which will be provided by the Exchange Agent with the
Transmittal Letter and certify under penalties of perjury (a) that the taxpayer
identification number provided is correct (or that such Tide West stockholder is
awaiting a taxpayer identification number) and (b) that the Tide West
stockholder is not subject to backup withholding because (i) such Tide West
stockholder is exempt from backup withholding, (ii) the Tide West stockholder
has not been notified by the IRS that such Tide West stockholder is subject to
backup withholding as a result of the failure to report all interest or
dividends or (iii) the IRS has notified such Tide West stockholder that it is no
longer subject to backup withholding. The Substitute Form W-9 should be
completed, signed, and returned to the Exchange Agent. In order for a foreign
individual to qualify as an exempt recipient, such Tide West stockholder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Exchange
Agent.
REGULATORY FILINGS
Under the Antitrust Act, and the rules promulgated thereunder by the FTC,
the Merger may not be consummated until notifications have been given and
certain information has been furnished to the FTC and the Antitrust Division and
specified waiting period requirements have been satisfied. HSR and Tide West
filed notification and report forms under the Antitrust Act with the FTC and the
Antitrust Division on , 1996. On , 1996, the FTC
notified HSR and Tide West that early termination of the Antitrust Act waiting
period had been granted.
At any time before or after consummation of the Merger, and notwithstanding
that early termination of the Antitrust Act waiting period has been granted, the
FTC or the Antitrust Division or any state could take such action under the
federal or state antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the
Merger or seeking divestiture of Tide West or the business of HSR or Tide West.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
Based on information available to them, HSR and Tide West believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, HSR and Tide West would prevail or would not be required to accept certain
conditions possibly including certain divestitures in order to consummate the
Merger. See "The Merger Agreement and Related Agreements -- Terms of the Merger
Agreement -- Certain Covenants and Agreements" and "-- Conditions to
Consummation of the Merger."
RESTRICTIONS ON RESALES BY AFFILIATES OF TIDE WEST
The shares of HSR Common Stock to be issued in the Merger have been
registered under the Securities Act and, when so issued, will be freely
transferable, except by persons who are deemed to be "affiliates" of Tide West
(as that term is defined in Rule 144 under the Securities Act). Affiliates of
Tide West will be subject to certain restrictions imposed by Rule 145 under the
Securities Act on their ability to resell any of the shares of HSR Common Stock
they receive in the Merger. Generally, those restrictions prohibit an affiliate
of Tide West from selling, within two years following the consummation of the
Merger, any of the shares of HSR Common Stock that such affiliate receives in
the Merger other than, within any three-month period, a number of shares that
does not exceed the greater of (a) 1% of the total number of shares of HSR
Common Stock
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then outstanding or (b) the average weekly trading volume of the HSR Common
Stock over a specified four-week period. An affiliate of Tide West will be
relieved from those resale restrictions if sales of the shares of HSR Common
Stock it receives in the Merger are registered under the Securities Act.
The Merger Agreement provides that, within 30 days prior to the
consummation of the Merger, Tide West will prepare and deliver to HSR a list
identifying all persons who, at the time of the Tide West Special Meeting, may
be deemed to be "affiliates" of Tide West (as that term is defined in Rule 144
under the Securities Act). Tide West is then required to use its best efforts to
cause each of such persons to execute and deliver to HSR a written agreement
acknowledging the applicability of the Rule 145 resale restrictions. HSR's
obligation to consummate the Merger is conditioned on its receipt of such an
agreement from each affiliate of Tide West.
As of the date of this Joint Proxy Statement/Prospectus, NGP, which owns
approximately 46% of the outstanding shares of Tide West Common Stock, and the
directors and executive officers of Tide West are the only persons known to Tide
West to be "affiliates" of Tide West (as that term is defined in Rule 144 under
the Securities Act). Each of such persons has indicated an intention to execute
the written agreement referred to above. NGP and HSR have entered into an
agreement relating to the registration under the Securities Act of the sale of
shares of HSR Common Stock that NGP receives in the Merger. Such registration,
which is to become effective on or before the first anniversary of the Closing
Date, will relieve NGP of the resale restrictions imposed by Rule 145 with
respect to sales of HSR Common Stock so registered. See "The Merger Agreement
and Related Agreements -- Registration Rights Agreement."
LISTING ON THE NEW YORK STOCK EXCHANGE
HSR Common Stock is currently listed for trading on the NYSE and it is
anticipated that such stock will continue to be traded thereon immediately
following consummation of the Merger. The HSR Common Stock to be issued as
consideration in the Merger has been approved for listing on the NYSE subject to
official notice of issuance and the requisite approval of the proposals
described in this Joint Proxy Statement/ Prospectus by the stockholders of Tide
West and HSR.
APPRAISAL RIGHTS
The following is a summary of the rights of holders of Tide West Common
Stock seeking appraisal under Section 262 of the Delaware Act ("Section 262").
Section 262 is reprinted in its entirety as Annex E to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Holders of HSR
Common Stock will not have any statutory appraisal rights under the Delaware Act
in connection with, or as a result of, the matters to be acted upon at the HSR
Special Meeting.
ELIGIBLE STOCKHOLDERS. Under Section 262, holders of shares of Tide West
Common Stock ("Shares") may demand an appraisal of the fair value of their
Shares and payment of cash in lieu of accepting the shares of HSR Common Stock
issuable to them in connection with the Merger. All references in Section 262
and this summary thereof to a "stockholder" or "Dissenting Stockholder" are to
the record holder of the Shares as to which appraisal rights are asserted. A
person having a beneficial interest in Shares that are held of record in the
name of another person, such as a broker or nominee, and who desires to exercise
appraisal rights, must act promptly to cause the record holder to follow
properly the steps summarized below in a timely manner to perfect the appraisal
rights the beneficial owner may have.
EXERCISING PROCEDURES. Tide West must notify each Tide West stockholder,
not less than 20 days prior to the Tide West Special Meeting, that appraisal
rights are available and must provide each Tide West stockholder with a copy of
Section 262. This Joint Proxy Statement/Prospectus constitutes such notice.
Stockholders of record who desire to exercise their appraisal rights must: (a)
hold Shares on the date of making a demand for appraisal; (b) continuously hold
Shares through the Effective Time; (c) deliver, prior to the Tide West Special
Meeting, a written demand for appraisal to Tide West at 6666 South Sheridan,
Suite 250, Tulsa, Oklahoma 74133-1750, Attention: Secretary; and (d) otherwise
satisfy all of the following conditions. A request for appraisal rights need not
be made with respect to all Shares owned by a stockholder where such stockholder
holds shares of record as nominee for the beneficial owner thereof. It is not
clear,
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however, and the Delaware courts have not decided the question of whether a
single beneficial owner must request appraisal rights with regard to all Shares
owned by such stockholder in order to preserve appraisal rights or whether an
individual stockholder can seek an appraisal as to part, but not all, of his or
her holdings in all contexts. Although a stockholder must not have voted in
favor of the Merger, Section 262 does not require that a stockholder vote
against the Merger in order to preserve his or her appraisal rights. Voting
against the Merger, granting a proxy to vote against the Merger, abstaining from
voting or failing to vote, however, will not constitute a written demand for
appraisal. Within 10 days after the Effective Time, the Surviving Corporation is
required to notify each Dissenting Stockholder who has complied with Section
262, and has not voted in favor of or consented to the Merger, that the Merger
has become effective.
Within 120 days after the Effective Time, the Surviving Corporation, or any
stockholder who has satisfied the foregoing conditions and is otherwise entitled
to appraisal rights under Section 262, may file a petition in the Delaware
Chancery Court demanding a determination of the value of the Shares. Merger Sub
does not intend to file a petition or initiate any negotiations with respect to
the fair value of these Shares. Accordingly, stockholders of Tide West who wish
to exercise appraisal rights should regard it as their obligation to initiate
all necessary action with respect to the perfection of their appraisal rights
within the time periods prescribed in Section 262. Notwithstanding the
foregoing, at any time within 60 days after the Effective Time or at any time
thereafter with written approval of the Surviving Corporation, any Dissenting
Stockholder has the right to withdraw its demand for appraisal and may accept
the terms offered pursuant to the Merger Agreement.
Only a holder of record of Shares is entitled to assert appraisal rights
for Shares registered in that holder's name. The demand should be executed by or
for the holder of record, fully and correctly, as the holder's name appears on
the holder's stock certificate. If the Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the Shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the demand should
be executed by or for all joint owners. An authorized agent, including one of
two or more joint owners, may execute the demand for appraisal for a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is acting
as authorized agent for the record owner.
A record holder, such as a broker, who holds Shares as nominee for the
beneficial owner thereof may exercise the holder's right of appraisal with
respect to such Shares. If such record holder holds Shares as nominee for more
than one beneficial owner, it may exercise the holder's right of appraisal with
respect to the Shares held for all or less than all of those beneficial owners.
In that case, the written demand should set forth the number of Shares covered
by it. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares outstanding in the name of the applicable record
owner.
Within 120 days after the Effective Time, any Dissenting Stockholder who
has complied with the requirements for exercise of appraisal rights, as
discussed above, is entitled, upon written request, to receive from the
Surviving Corporation a statement setting forth the aggregate number of Shares
not voted in favor of the Merger and with respect to which demands for appraisal
have been received and the aggregate number of holders of those Shares. This
statement must be mailed to such Dissenting Stockholder within 10 days after the
written request therefor has been received by the Surviving Corporation or
within 10 days after the expiration of the period for delivery of demands for
appraisal, whichever is later.
A Dissenting Stockholder will fail to perfect, and will effectively lose
its right to appraisal, if no petition for appraisal is filed within 120 days
after the Effective Time, or if such stockholder delivers to HSR a written
withdrawal of its demand for an appraisal within 60 days after the Effective
Time or thereafter with the written approval of the Surviving Corporation. If
any Dissenting Stockholder fails to perfect or effectively withdraws or loses
its right to appraisal, the Shares of that holder will be converted into the
right to receive shares of HSR Common Stock and Cash Consideration in accordance
with the terms of the Merger Agreement, without any interest thereon.
Furthermore, no appraisal proceeding in the Delaware Chancery Court will be
dismissed as to any stockholder without the approval of the Court, which
approval may be conditioned upon such terms that the Court deems just.
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FAIR VALUE DETERMINATION. If a petition for appraisal is timely filed, at a
hearing on the petition, the Delaware Chancery Court will determine the
Dissenting Stockholders entitled to appraisal rights and will appraise the
Shares owned by those stockholders, determining the Shares' "fair value"
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The judicial determination of the
"fair value" of the Shares is required to be based on all relevant factors
involving the value of a company, including market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the Merger which throw any light on
future prospects of the merged corporation. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. In Weinberger, the Delaware Supreme Court held that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." The presiding Court shall direct payment of
the fair value of the Shares by the Surviving Corporation to the stockholders
entitled thereto, and such Court may direct that the interest paid be simple or
compound. Tide West stockholders considering exercising their dissenters' rights
of appraisal should bear in mind that the fair value of their Shares determined
under Section 262 could be more than, the same as or less than the value of the
shares of HSR Common Stock they would receive if they did not seek appraisal of
their shares.
COSTS. The cost of the appraisal proceeding may be determined by the
Delaware Chancery Court and taxed against the parties as such Court deems
equitable in the circumstances. Upon application of a Dissenting Stockholder,
the Delaware Chancery Court may order all or a portion of the expenses incurred
by any Dissenting Stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all Shares
entitled to appraisal. Thus, the Delaware Chancery Court has the ability to
ensure that all Dissenting Stockholders who benefit from the appraisal action
share the expenses.
VOTING RIGHTS; DIVIDENDS, ETC. Any Dissenting Stockholder who has duly
demanded appraisal in compliance with Section 262 will not, after the Effective
Time, be entitled to vote the Shares subject to such demand for any purpose or
to receive payment of dividends or other distributions on such Shares, except
for dividends or distributions payable to stockholders of record at a date prior
to the Effective Time.
Dissenters who elect to receive cash for their Tide West Common Stock may
be subject to federal and/or state income tax on any gain resulting from the
transaction. See "-- Certain Federal Income Tax Consequences."
THE PROVISIONS OF SECTION 262 ARE TECHNICAL IN NATURE AND COMPLEX. IT IS
SUGGESTED THAT ANY STOCKHOLDER WHO DESIRES TO DISSENT CONSULT INDEPENDENT LEGAL
COUNSEL BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF SECTION 262
MAY PRECLUDE THE EXERCISE OF APPRAISAL RIGHTS.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is included in this Joint Proxy Statement/Prospectus
as Annex A, and other related agreements. The following discussion is qualified
in its entirety by reference to the Merger Agreement.
THE MERGER
The Merger Agreement provides that, subject to the terms and conditions
thereof, at the Effective Time, Tide West will be merged with and into Merger
Sub, and the separate corporate existence of Tide West will thereupon cease.
Merger Sub will be the Surviving Corporation in the Merger and will continue to
be governed by the Delaware Act, and the separate corporate existence of Merger
Sub with all of its rights, privileges, immunities, powers and franchises will
continue unaffected by the Merger, except as set forth in the Merger Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become effective
immediately when a certificate of merger is accepted for filing by the Secretary
of State of Delaware or at such time thereafter as is provided in such
certificate of merger. It is anticipated that, if the matters described in this
Joint Proxy Statement/ Prospectus are adopted and approved at the HSR Special
Meeting and at the Tide West Special Meeting and all other conditions to the
Merger have been satisfied or waived, the Effective Time will occur on the day
on which both such meetings have been held (or such later date as is agreed upon
by HSR and Tide West).
MANNER AND BASIS OF CONVERTING SHARES
GENERAL. Immediately after the Effective Time, HSR shall deposit with the
Exchange Agent, for the benefit of the holders of shares of Tide West Common
Stock and for exchange in accordance with the Merger Agreement, certificates
representing the shares of HSR Common Stock to be issued, and funds necessary to
pay the Cash Consideration, in exchange for shares of Tide West Common Stock.
Such shares of HSR Common Stock, together with any dividends or distributions
with respect thereto and such funds, are referred to as the "Exchange Fund."
As soon as reasonably practicable after the Effective Time, HSR will cause
the Exchange Agent to mail to each record holder of Tide West Common Stock as of
the Effective Time a Letter of Transmittal to be used to effect the exchange of
certificates representing Tide West Common Stock for certificates representing
HSR Common Stock and the Cash Consideration, including instructions for using
such Letter of Transmittal to effect such exchange. When a holder of Tide West
Common Stock surrenders a certificate representing shares of Tide West Common
Stock to the Exchange Agent, along with a properly completed and executed Letter
of Transmittal and any other required documents, such holder will be entitled to
receive a certificate representing the number of whole shares of HSR Common
Stock and cash in the amount of the Cash Consideration that such holder has the
right to receive as a result of the Merger, along with any cash in lieu of
fractional shares of HSR Common Stock to which he would otherwise be entitled
and any unpaid dividends and distributions that he has the right to receive. If
such holder is an "affiliate" of Tide West (as such term is defined in Rule 144
under the Securities Act), one of the required documents to effect the exchange
will be an executed agreement relating to certain resale restrictions (as
described under "Special Factors -- Restrictions on Resales by Affiliates of
Tide West"), unless previously delivered to HSR. TIDE WEST STOCKHOLDERS SHOULD
NOT SURRENDER THEIR STOCK CERTIFICATES UNTIL THE LETTER OF TRANSMITTAL IS
RECEIVED AND THEN SHOULD SURRENDER THEIR STOCK CERTIFICATES ONLY ACCOMPANIED BY
A PROPERLY COMPLETED AND EXECUTED LETTER OF TRANSMITTAL.
After the Effective Time, there will be no further registration of
transfers on the Surviving Corporation's stock transfer books of the shares of
Tide West Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, a certificate representing Tide West Common
Stock is presented to the Surviving Corporation or Tide West's transfer agent
for any reason, it shall be cancelled and exchanged as described above. If a
holder of Tide West Common Stock has transferred ownership of such Tide West
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Common Stock but such transfer is not registered in the transfer records of Tide
West as of the Effective Time, a certificate representing the appropriate number
of shares of HSR Common Stock (along with any cash in lieu of a fractional share
and any unpaid dividends and distributions that such holder has the right to
receive) may be issued or paid to the transferee if the certificate representing
shares of Tide West Common Stock, when presented for exchange, is accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
TREATMENT OF FRACTIONAL SHARES. No fractional shares of HSR Common Stock
will be issued in the Merger. When a holder of Tide West Common Stock surrenders
a certificate representing shares of Tide West Common Stock in exchange for a
certificate representing shares of HSR Common Stock, such holder will also
receive an amount of cash (without interest) determined by multiplying (a) the
Market Price by (b) the fraction of a share of HSR Common Stock to which such
holder of Tide West Common Stock would otherwise be entitled. HSR will make
available to the Exchange Agent, in addition to cash necessary to fund the Cash
Consideration, the amount of cash necessary to make such payments.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions with respect to HSR Common Stock issued in the Merger will be paid
until the holder of Tide West Common Stock entitled thereto surrenders his Tide
West certificate for exchange as described above. Upon such surrender, (a) the
surrendering holder will be paid, without interest, the amount of dividends or
other distributions (having a record date after the Effective Time but on or
prior to surrender and a payment date on or prior to surrender) theretofore paid
with respect to the number of whole shares of HSR Common Stock that such holder
is entitled to receive (less the amount of any withholding taxes that may be
required with respect thereto), and (b) at the appropriate payment date, the
surrendering holder will be paid, without interest, the amount of dividends or
other distributions (having a record date after the Effective Time but on or
prior to surrender and a payment date subsequent to surrender) payable with
respect to the number of whole shares of HSR Common Stock that such holder
receives (less the amount of any withholding taxes that may be required with
respect thereto).
TERMINATION OF EXCHANGE FUND. Any shares of HSR Common Stock, and any cash,
held by the Exchange Agent in accordance with the terms of the Merger Agreement
that remain unclaimed by the former stockholders of Tide West one year following
the Effective Time will be delivered to HSR upon demand. Thereafter, any former
stockholders of Tide West who have not theretofore complied with the exchange
procedures set forth in the Merger Agreement may look only to HSR for payment of
their claim for HSR Common Stock, the Cash Consideration, any cash in lieu of
fractional shares of HSR Common Stock and any dividends or distributions with
respect to HSR Common Stock (all without interest). Notwithstanding the above,
neither HSR, Tide West, the Surviving Corporation, the Exchange Agent nor any
other person will be liable to any former holders of Tide West Common Stock for
any amount properly delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law. Any amounts remaining unclaimed by
former holders of Tide West Common Stock for a period of three years following
the Effective Time (or such earlier date immediately prior to the time at which
such amounts would otherwise escheat to or become property of any governmental
entity) will, to the extent permitted by applicable law, become the property of
HSR, free and clear of any claims or interest of any such holders or their
successors, assigns or personal representatives previously entitled thereto.
NO INTEREST. No interest will be payable under any circumstances by HSR,
the Exchange Agent or any other person with respect to any shares of HSR Common
Stock, the Cash Consideration, any cash in lieu of fractional shares or any cash
in payment of unpaid dividends or distributions.
LOST, STOLEN OR DESTROYED TIDE WEST CERTIFICATES. If any certificate
representing shares of Tide West Common Stock has been lost, stolen or
destroyed, the Exchange Agent will nevertheless issue in exchange therefor the
shares of HSR Common Stock and the Cash Consideration (along with any cash in
lieu of fractional shares and any unpaid dividends or distributions) deliverable
with respect thereto, so long as the person claiming that such certificate has
been lost, stolen or destroyed makes an affidavit of that fact and, if required
by HSR, posts a bond in such reasonable amount as HSR may direct as indemnity
against any claim that may be subsequently made against HSR with respect to such
lost, stolen or destroyed certificate.
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TERMS OF THE MERGER AGREEMENT
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, HSR and Tide West have made various
representations and warranties relating to, among other things, their respective
capital structure, businesses and financial condition, the accuracy of their
various filings with the Commission, the satisfaction of certain legal
requirements for the Merger and certain litigation matters. The representations
and warranties of each of the parties to the Merger Agreement will expire upon
consummation of the Merger.
CERTAIN COVENANTS AND AGREEMENTS
Conduct of Tide West's Business Pending the Merger. In the Merger
Agreement, Tide West agreed with HSR that, from the date of the Merger Agreement
until the Effective Time, Tide West will conduct its business only in the
ordinary and usual course consistent with past practices. In furtherance
thereof, Tide West made a number of specific agreements with respect to the
conduct of its business pending the consummation of the Merger. These agreements
addressed such matters as: the amendment or modification of its organizational
documents; the division, combination or reclassification of any of its
outstanding capital stock; the declaration, setting aside or payment of
dividends or other distributions with respect to its capital stock; the issuance
or sale of its capital stock or other securities; the purchase, cancellation,
retirement, redemption or acquisition of its capital stock or other securities;
mergers, consolidations or sales of all or substantially all of its assets; its
liquidation, winding-up or dissolution; the acquisition of any business entity
or any interest therein; the sale, lease, sublease, transfer, disposition or
encumbering of certain significant assets; the farming out of certain oil and
gas interests; the sale, transfer, disposition or encumbering of certain other
securities; the making of material loans, advances, capital contributions or
investments; the incurrence of certain indebtedness or other liabilities; the
entering into of certain contracts or agreements; its operating practices with
respect to certain oil and gas interests; the resignation, transfer or
relinquishment of certain rights relating to oil and gas interests; the entering
into of employee benefit plans, compensation plans or employee agreements; the
payment of bonuses; increases in compensation or other employee benefits; the
creation or incurrence of liens or other encumbrances on certain assets; the
payment of taxes, assessments or other governmental charges; the payment of all
claims; compliance with governmental laws, rules and regulations; the
maintenance of insurance; the entering into of contracts, agreements,
commitments or arrangements with respect to most of the foregoing; and various
other matters related to the operation of Tide West. It is not anticipated that
any of such agreements will have a material adverse effect on Tide West's
business or financial condition in the event that the Merger is not consummated.
Conduct of HSR's Business Pending the Merger. In the Merger Agreement, HSR
agreed with Tide West that, from the date of the Merger Agreement until the
Effective Time, except for transactions disclosed by HSR to Tide West prior to
the date of the Merger Agreement, HSR will conduct its business only in the
ordinary and usual course consistent with past practices. In furtherance
thereof, HSR made a number of specific agreements with respect to the conduct of
its business pending the consummation of the Merger. These agreements addressed
such matters as: the division, combination or reclassification of any of its
outstanding capital stock; the declaration, setting aside or payment of
dividends or other distributions with respect to its capital stock other than a
dividend of rights to holders of HSR Common Stock in connection with the
adoption and implementation of a shareholder rights plan; mergers,
consolidations, sales of all or substantially all of its assets; its
liquidating, winding-up or dissolution; and the entering into of contracts or
agreements with respect to any of the foregoing. It is not anticipated that any
of such agreements will have a material adverse effect on HSR's business or
financial condition in the event that the Merger is not consummated.
Access to Assets, Personnel and Information. Each of HSR and Tide West has
agreed that, from the date of the Merger Agreement until the consummation of the
Merger, it will allow the other party reasonable access to assets, personnel and
information in an effort to allow such other party to fully and adequately
investigate its properties, business and financial condition. In the case of
HSR, such investigation may include an environmental inspection of Tide West's
oil and gas properties. As of the date of this Joint Proxy
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Statement/Prospectus, each party has received the full cooperation of the other
party and neither party is aware of any facts or circumstances that would
constitute a breach of any representation or warranty contained in the Merger
Agreement.
Stock Exchange Listing. The shares of HSR Common Stock offered hereby have
been approved for listing on the NYSE, subject to official notice of issuance
and requisite approval of the Merger and the Merger Agreement by the
stockholders of Tide West and approval of the issuance of HSR Common Stock in
connection with the Merger by the stockholders of HSR.
Additional Arrangements. Each of HSR and Tide West has agreed to take, or
cause to be taken, all action and do, or cause to be done, all things necessary,
appropriate or desirable under the Antitrust Act or any other applicable laws
and regulations or under applicable governing agreements to consummate the
Merger and the transaction contemplated by the Merger Agreement, including using
its best efforts to obtain all necessary waivers, consents and approvals and
effecting all necessary registrations and filings. Each of HSR and Tide West has
agreed to take, or cause to be taken, all action and do, or cause to be done,
all things necessary, appropriate or desirable to cause the covenants and
conditions applicable to the parties' respective obligations to effect the
Merger to be performed or satisfied as soon as practicable. In addition, each of
HSR and Tide West has agreed that, if any governmental authority issues any
order, decree, ruling or injunction or takes any other action that would have
the effect of restraining, enjoining or otherwise prohibiting or preventing the
consummation of the Merger, it will use its reasonable best efforts to have such
order, decree, ruling or injunction or other action declared ineffective as soon
as practicable.
Agreements of Affiliates. At least 30 days prior to the Effective Time,
Tide West has agreed to cause to be prepared and delivered to HSR a list
identifying all persons who, at the time of the Tide West Special Meeting, may
be deemed to be "affiliates" of Tide West, as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act. Tide West has agreed to use
its best efforts to cause any such affiliates to execute and deliver to HSR, on
or prior to the Closing Date, a written agreement relating to certain resale
restrictions.
NO SOLICITATION OF ALTERNATIVE TRANSACTIONS
In the Merger Agreement, Tide West agreed to, and agreed to use its best
efforts to cause each of its representatives (including its employees, officers,
directors and financial and legal advisors) to, terminate any and all existing
activities, discussions and negotiations with third parties (other than HSR)
with respect to any alternative transaction involving the acquisition of Tide
West. Furthermore, Tide West and its representatives are prohibited by the terms
of the Merger Agreement from initiating, soliciting or knowingly encouraging the
submission of any offer or proposal in connection with an alternative
transaction unless such other party has submitted a bona fide proposal for an
alternative transaction and the Tide West Board determines that the failure to
furnish information to, negotiate with or assist such other party might
reasonably be expected to subject the directors of Tide West to liability for
breach of their fiduciary duties to the stockholders of Tide West. Tide West is
required to promptly communicate to HSR the terms and conditions of any proposal
relating to an alternative transaction and to keep HSR informed as to the status
of negotiations, actions or discussions. In the event that Tide West terminates
the Merger Agreement in order to pursue an alternative transaction, HSR will be
entitled to a fee of $5.0 million.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to the satisfaction or waiver of
various conditions on one or both parties' part, including: (a) approval and
adoption of the Merger and the Merger Agreement by the Tide West stockholders;
(b) approval of the issuance of HSR Common Stock pursuant to the Merger
Agreement by the HSR stockholders; (c) compliance with the applicable provisions
of the Antitrust Act and expiration or termination of the applicable waiting
period thereunder; (d) receipt of all consents, approvals, permits and
authorizations required to be obtained from any governmental authority prior to
the consummation of the Merger; (e) continued effectiveness of the Registration
Statement; (f) the absence of any court orders restraining, enjoining or
otherwise prohibiting the consummation of the Merger; and (g) receipt of a
letter
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from Arthur Andersen LLP immediately prior to the Effective Time, in form and
substance reasonably satisfactory to each of HSR and Tide West.
In addition, HSR's obligation to consummate the Merger is subject to
satisfaction of the following conditions (unless waived by HSR): (a) continued
accuracy of all representations and warranties made by Tide West in the Merger
Agreement; provided, however, that this condition will be deemed to be satisfied
so long as breaches of Tide West's representations and warranties (in the
aggregate) do not result in (i) damages or losses to HSR, (ii) a net reduction
in the aggregate value of the assets of Tide West and its subsidiaries or (iii)
a reduction in the aggregate net value of Tide West's and its subsidiaries'
assets, when added to any reduction resulting from certain matters disclosed to
HSR at the time of the execution of the Merger Agreement, in an aggregate amount
for clauses (i), (ii) and (iii) above (the "Failure Amount") that exceeds $10
million; provided, that to the extent the Failure Amount exceeds $5 million, the
aggregate amount of Cash Consideration shall be reduced by an amount (not to
exceed $5 million) by which the Failure Amount exceeds $5 million (and the Cash
Consideration per share for Tide West Common Stock shall be proportionately
reduced); provided further, that to the extent the Failure Amount exceeds $10
million, HSR may elect to close the Merger after effecting the foregoing
reduction; (b) material performance by Tide West of its covenants and agreements
under the Merger Agreement; (c) receipt by HSR of a written agreement from each
"affiliate" of Tide West (as such term is defined in Rule 144 under the
Securities Act) relating to certain resale restrictions (as described under
"Special Factors -- Restrictions on Resales by Affiliates of Tide West"); (d)
the absence of any material adverse change in the condition (financial or
otherwise), operations or business of Tide West (other than changes, including
changes in commodity prices, generally affecting the oil and gas industry); (e)
continued effectiveness of the fairness opinion from Lehman Brothers referred to
in "Special Factors -- Opinions of the HSR Financial Advisors"; (f) continued
effectiveness of an opinion from counsel regarding certain tax issues as
described in the Merger Agreement; (g) no more than 3% of the holders of Tide
West Common Stock shall have exercised their dissenters' appraisal rights under
the Delaware Act; and (h) receipt by HSR and Merger Sub of a legal opinion by
Tide West's counsel, in form and substance reasonably acceptable to HSR.
Tide West's obligation to consummate the Merger is subject to satisfaction
of the following conditions (unless waived by Tide West): (a) continued accuracy
of all representations and warranties made by HSR in the Merger Agreement; (b)
material performance by HSR of its covenants and agreements under the Merger
Agreement; (c) continued effectiveness of the fairness opinion from Merrill
Lynch referred to in "Special Factors--Opinion of the Tide West Financial
Advisor"; (d) continued effectiveness of an opinion from its counsel regarding
certain tax issues as described in the Merger Agreement; (e) the absence of any
material adverse change in the condition (financial or otherwise), operations or
business of HSR (other than changes, including changes in commodity prices,
generally affecting the oil and gas industry); (f) the receipt by Tide West of
an opinion of the general counsel of HSR, in form and substance reasonably
acceptable to Tide West; and (g) the adjustments to Cash Consideration and the
Conversion Number referred to in clause (a) in the above paragraph would result
in the issuance of not more than 7,161,312 shares of HSR Common Stock in
connection with the Merger.
TERMINATION RIGHTS
The parties may terminate the Merger Agreement with no liability or
obligation to each other on account of such termination if they mutually consent
thereto. In addition, either party may terminate the Merger Agreement with no
liability or obligation to the other party on account of such termination if:
(a) the Merger has not been consummated by July 31, 1996 (provided, however,
that the right to terminate under this provision will not be available to a
party if its breach of the Merger Agreement has been the cause of or resulted in
the failure of the Merger to be consummated on or before such date); (b) a
governmental authority issues an order permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger and such order has become
final and nonappealable (provided, however, that the right to terminate under
this provision will not be available to a party until such party has used all
reasonable efforts to remove such order); or (c) the Tide West stockholders fail
to approve the Merger and the Merger Agreement at the
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Tide West Special Meeting or the HSR stockholders fail to approve the issuance
of HSR Common Stock pursuant to the Merger Agreement at the HSR Special Meeting.
HSR may terminate the Merger Agreement with no liability or obligation to
Tide West on account of such termination if: (a) there has been a breach of any
of the representations and warranties made by Tide West in the Merger Agreement
(subject to the $10 million threshold discussed in the second paragraph under
"-- Conditions to Consummation of the Merger") and Tide West has failed to cure
such breach within 30 days after receiving notice thereof; or (b) Tide West has
failed to comply in any material respect with any of its covenants and
agreements under the Merger Agreement and such failure has not been, or cannot
be, cured within a reasonable time after notice and demand for cure thereof. In
addition, HSR may terminate the Merger Agreement, and will be entitled to
receive from Tide West a fee of $5.0 million, if the Tide West Board amends or
withdraws its recommendation of the Merger to the Tide West stockholders, such
recommendation is not reinstated in full within five business days after such
amendment or withdrawal and the Tide West stockholders fail to approve the
Merger at the Tide West Special Meeting.
Tide West may terminate the Merger Agreement with no liability or
obligation to HSR on account of such termination if: (a) there has been a breach
of any of the representations and warranties made by HSR and Merger Sub in the
Merger Agreement, and HSR has failed to cure such breach within 30 days after
receiving notice thereof; or (b) either HSR or Merger Sub has failed to comply
in any material respect with any of its covenants and agreements under the
Merger Agreement and such failure has not been, or cannot be, cured within a
reasonable time after notice and demand for cure thereof. In addition, Tide West
may terminate the Merger Agreement, but only upon payment to HSR of a fee of
$5.0 million, if (a) it is prepared to enter into a binding agreement with
respect to an alternative transaction involving the acquisition of Tide West or
a material portion of its assets (so long as HSR has been given three days
notice of Tide West's intentions so that HSR may have the opportunity to amend
or modify the provisions of the Merger in response to such alternative
transaction) or (b) the Tide West Board determines that its fiduciary duty to
the stockholders of Tide West requires it to amend or withdraw its
recommendation of the matters described in this Joint Proxy
Statement/Prospectus.
If the Merger Agreement is terminated by either party pursuant to any of
the provisions described above, the Merger will be abandoned, the Merger
Agreement will become void and there will be no further obligation on either
party's part with respect to the Merger Agreement (with certain specified
exceptions). A termination of the Merger Agreement will not, however, relieve
either party from any liability for damages incurred as a result of its breach
of the Merger Agreement prior to such termination.
PAYMENT OF EXPENSES
Tide West and HSR will each pay its own expenses incident to preparing for,
entering into and carrying out the provisions of the Merger Agreement and the
consummation of the Merger, whether or not the Merger is consummated, except
that the fee for filing the Registration Statement with the Commission will be
borne by HSR, the costs and expenses associated with printing this Joint Proxy
Statement/Prospectus will be borne equally by HSR and Tide West and the costs
and expenses associated with mailing this Joint Proxy Statement/Prospectus and
related materials to (a) the stockholders of Tide West and soliciting the votes
of the stockholders of Tide West will be borne by Tide West and (b) the
stockholders of HSR and soliciting the votes of the stockholders of HSR will be
borne by HSR.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time before or
after approval of the Merger by the Tide West stockholders; provided, however,
that after any such approval, the parties will not amend the Merger Agreement in
a manner that by law requires further approval by the Tide West stockholders
without first obtaining such further approval.
At any time prior to the Effective Time, the parties may, to the extent
legally allowed, extend the time for the performance of any of the obligations
under the Merger Agreement, waive any inaccuracies in the
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representations and warranties contained in the Merger Agreement or waive
performance of any covenants or agreements contained in the Merger Agreement.
ADJUSTMENTS TO THE CONVERSION NUMBER AND CASH CONSIDERATION
The Cash Consideration is dependent on both the Market Price and the
Conversion Number and cannot be determined at this time. The Market Price is to
be determined by reference to the closing sales price of the HSR Common Stock
over a period that has yet to begin. The Conversion Number is to be determined
by reference to the closing sales price of the HSR Common Stock on the date
immediately preceding the Closing Date and also cannot be determined at this
time. The Merger Agreement provides that the Cash Consideration shall be
decreased and the Conversion Number shall be correspondingly increased so that
the value of the HSR Common Stock (based on the closing sales price on the date
immediately preceding the Closing Date) paid to the holders of Tide West Common
Stock in connection with the Merger is greater than or equal to 40% of the total
consideration paid to the holders of Tide West Common Stock; provided, however,
the maximum number of shares of HSR Common Stock required to be issued in
connection with the Merger is 7,161,312 (which equates to a Conversion Number of
.7317) and any further adjustments to the consideration to be paid to the
holders of Tide West Common Stock necessary to satisfy the Adjustment Formula
would be solely from a further reduction of the Cash Consideration. In making
the calculations pursuant to the Adjustment Formula (a) shares of HSR Common
Stock issued to any 5% holder of Tide West Common Stock as of the Closing Date
who has not represented as of that date that it has no intention, plan or
arrangement to dispose of the HSR Common Stock received in the Merger are
treated as cash, and (b) the amount of consideration paid to holders of Tide
West Common Stock who have perfected their dissenters' appraisal rights as of
the Closing Date shall be assumed to be (on a per share basis) the greater of
(i) the sum of the value of a share of HSR Common Stock (valued at the closing
sales price on the date immediately preceding the Closing Date) and the Cash
Consideration given per share of Tide West Common Stock and (ii) $15.89.
If the Conversion Number and the Cash Consideration were calculated
treating February 26, 1996 (the date of the public announcement of the execution
of the Merger Agreement), as the Closing Date, assuming no holders of Tide West
Common Stock had perfected their dissenters' appraisal rights and assuming there
is no holder of 5% or more of the Tide West Common Stock that has not
represented that it has no intention, plan or arrangement to dispose of the HSR
Common Stock to be received in the Merger, the Conversion Number would be .6295,
the Cash Consideration would be $8.73 and HSR would issue 6,161,312 shares of
HSR Common Stock in the aggregate in connection with the Merger. If such
calculations were performed under the same assumptions, and treating the date of
this Joint Proxy Statement/Prospectus as the Closing Date, the Conversion Number
would be , the Cash Consideration would be $ and HSR would issue
shares of HSR Common Stock in the aggregate in connection with the
Merger. Because the Conversion Number (and, therefore, the aggregate number of
shares of HSR Common Stock to be issued in the Merger) is subject to adjustment,
the Merger Agreement provides that the maximum number of shares of HSR Common
Stock that HSR is required to issue in connection with the Merger is 7,161,312
shares, which is 1,000,000 shares more than HSR would have issued if the
Conversion Number and the Cash Consideration were calculated based on the
foregoing assumptions and treating February 26, 1996 (the date of the public
announcement of the execution of the Merger Agreement), as the Closing Date.
RESTRUCTURING OF THE MERGER
A condition to the obligation of Tide West to effect the Merger is that the
Adjustment Formula (disregarding the limit contained therein on the maximum
number of shares of HSR Common Stock required to be issued in the Merger) would
not require HSR to issue more than 7,161,312 shares of HSR Common Stock in
connection with the Merger. If this condition is not satisfied, Tide West can
either: (a) waive the condition and consummate the Merger pursuant to the terms
of the Merger Agreement (in which case HSR will issue the maximum of 7,161,312
shares of HSR Common Stock, and any further adjustments to the consideration
paid to the holders of Tide West Common Stock to satisfy the Adjustment Formula
will be solely from a further reduction of the Cash Consideration); (b)
terminate the Merger Agreement; or
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(c) cause the Merger to be restructured. If this last option is chosen by Tide
West, upon written notice from Tide West delivered to HSR within 15 days after
the approval of the matters contained in this Joint Proxy Statement/Prospectus
at both the Tide West Special Meeting and the HSR Special Meeting, the Merger
shall be restructured under Section 351 of the Code as a "Horizontal Double
Dummy" transaction whereby (a) the holders of HSR Common Stock would receive one
share of common stock ("Newco Common Stock") of a newly created holding company
("Newco") in exchange for each share of HSR Common Stock as a result of a merger
of a newly created subsidiary of Newco with and into HSR, and (b) the holders of
Tide West Common Stock would receive $8.75 and .6295 of a share of Newco Common
Stock for each share of Tide West Common Stock as a result of a merger of
another newly created subsidiary of Newco with and into Tide West. In such
event, the Merger Agreement would be deemed to be appropriately modified to
reflect such restructuring and the parties thereto would agree to use their
reasonable best efforts to effect such restructured transaction by, among other
things, resoliciting the holders of HSR Common Stock and the holders of Tide
West Common Stock for their approval of such transaction.
REGISTRATION RIGHTS AGREEMENT
Contemporaneously with the consummation of the Merger, HSR and NGP will
enter into a Registration Rights Agreement (the "Registration Rights Agreement")
pursuant to which HSR will prepare and file with the Commission a "shelf"
registration statement under the Securities Act (a "Shelf Registration")
covering the 2,864,225 shares of HSR Common Stock (assuming no adjustments to
the Conversion Number) that NGP receives in the Merger ("Registrable
Securities"). Under the Registration Rights Agreement, HSR will use its best
efforts to have the Shelf Registration declared effective on or before the first
anniversary of the Effective Time, and HSR will keep the Shelf Registration
continuously effective for a period of at least three years.
At any time after the first anniversary of the Effective Time and during
the term of the Registration Rights Agreement, HSR is required, upon written
request of the holders of not less than 50% of the Registrable Securities, to
use its best efforts to effect the registration under the Securities Act of the
Registrable Securities for which such a request has been received (a "Demand
Registration"). HSR is obligated to effect no more than two Demand
Registrations.
In addition, if HSR proposes to register any of its equity securities under
the Securities Act, any holder of Registrable Securities may, by giving written
request to HSR thereof, request that HSR include in such registered offering any
or all of such holder's Registrable Securities (a "Piggyback Registration"). HSR
will use its best efforts to effect the Piggyback Registration unless HSR
determines for any reason not to register or to delay registration of the
securities in the underlying offering.
NGP has indicated that it has no present intention to sell or otherwise
dispose of its shares of HSR Common Stock received in the Merger and has agreed
not to do so for a period of one year. NGP will continue to evaluate its
investment in HSR following the Merger in light of market conditions and other
factors.
VOTING AGREEMENTS
Pursuant to the Voting Agreements, HSR has sufficient voting power to
assure the approval of the Merger and the Merger Agreement by the Tide West
stockholders without the affirmative vote of any other stockholder of Tide West.
On February 25, 1996, HSR and NGP entered into the NGP Voting Agreement pursuant
to which NGP agreed to vote, and granted to HSR a proxy to vote, its 4,550,000
shares of Tide West Common Stock, representing approximately 46.49% of Tide West
Common Stock, in favor of the Merger and the Merger Agreement. On February 25,
1996, HSR and Philip B. Smith, President, a director and a stockholder of Tide
West, entered into the Smith Voting Agreement pursuant to which Smith agreed to
vote, and granted to HSR a proxy to vote, 344,000 shares of Tide West Common
Stock, representing an additional 3.51% of the Tide West Common Stock, in favor
of the Merger and the Merger Agreement. NGP and Smith each entered into the
Voting Agreements in consideration of HSR entering into the Merger Agreement
and, in the case of NGP, HSR agreeing to provide NGP with representation on the
HSR Board. In addition, pursuant to the Voting Agreements, NGP and Smith each
agreed that they would not make any sale, transfer or other disposition of any
shares of HSR Common Stock for one year from the date such shares are received
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by them pursuant to the Merger. NGP and Smith also agreed that they would not,
among other things, directly or indirectly, sell, transfer or encumber any of
the Tide West Common Stock subject to their respective Voting Agreement during
the term of the Voting Agreements, nor would they take any action which would,
if taken by Tide West, violate the provisions of the Merger Agreement relating
to negotiations with third parties regarding the acquisition of Tide West Common
Stock or the merger or other business combination of Tide West into any third
party or negotiations concerning an Alternative Proposal (as defined in the
Merger Agreement). See "Special Factors -- Interests of Certain Persons in the
Merger."
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INFORMATION ABOUT THE COMBINING COMPANIES
HS RESOURCES, INC.
Information about HSR is contained in various documents that have been
filed by HSR with the Commission and incorporated by reference into this Joint
Proxy Statement/Prospectus. Such information includes historical financial
statements, information about HSR's properties and oil and gas reserves and
information about the nature of HSR's business, its management and the HSR
Common Stock. Reference should be made to such documents for complete
information about HSR. For a list of such documents and instructions as to how
to obtain copies of such documents, see "Incorporation of Documents by
Reference."
HSR PROPERTIES
HSR currently owns interests in over 1,300 wells and over 450 proved
undeveloped drillsites and more than 100 additional, unbooked potential sites.
In addition, HSR owns over 1,100,000 gross undeveloped acres in five basins in
the Rocky Mountain region, and owns rights (geophysical permits, options to
lease and leases) to 89,000 gross onshore acres in Louisiana and Texas.
Moreover, HSR has acquired over 376 miles of 3-D seismic in three different
areas.
Wattenberg Field. HSR owns interests in more than 1,283 wells in the
Wattenberg Field and operates 82% of such wells. It also has over 425 proved
undeveloped drilling locations and hundreds of additional, potential unbooked
locations in the Wattenberg Field, based on current spacing. Over the last two
years, HSR has conducted detailed technical analyses of the drainage of certain
reservoirs in the Wattenberg Field area and has concluded that existing spacing
is not draining all reserves. Should infill drilling come to pass, HSR believes
it may own unbooked reserves associated with approximately 600 infill locations.
Greater D-J Basin. HSR owns interests in 164 wells in the Greater D-J Basin
and operates approximately 78% of such wells. It also has over 77 proved
undeveloped drilling locations and hundreds of additional, potential unbooked
locations in the Greater D-J Basin. HSR owns rights in over 320,000 gross acres
in the Greater D-J Basin. Over the last two years it has drilled 97 wells on the
acreage, 70% of which have been successful. HSR originally selected the Greater
D-J Basin as a focus of activities because management believed the operational
and technical expertise it had developed in the Wattenberg Field could be
applied to adjacent areas within the D-J Basin, and because it felt the Greater
D-J Basin had been underexploited with advanced technologies. HSR has shot five
3-D seismic surveys in the Greater D-J Basin, covering 70 square miles, and has
discovered one new field and one extension field based on those surveys. More
recently, HSR used the new 3-D coherence processing technology to help locate
the channel system connecting two producing fields. Although not yet tested by
the drill bit in the area, this revolutionary technology could further minimize
the risk of dry holes.
Other Rocky Mountain Properties. HSR has assembled 724,000 gross
undeveloped acres in the Rocky Mountain region outside the D-J Basin. In the
Williston Basin, HSR owns 348,000 gross undeveloped acres in two distinct
project areas, Daniels County and West Sioux Pass. HSR has shot 144 square miles
of 3-D seismic over the two project areas. To date, nine wells have been drilled
in Daniels County, six of which have been completed as producers, including two
new field discoveries. Current activities include the evaluation of horizontal
drilling applications, deeper structures indicated on the West Sioux Pass
acreage and Lodgepole formation potential.
In the Greater Green River Basin, HSR has accumulated 239,000 gross
undeveloped acres, including 132,000 gross undeveloped acres in the Sand Wash
Basin, 55,000 gross undeveloped acres on the Rock Springs Uplift, 40,000 gross
undeveloped acres in a basin centered gas play in the Green River Basin and
12,000 gross undeveloped acres in other areas. HSR has shot 108 miles of high
resolution 2-D seismic over the Sand Wash Basin acreage. An initial test well
has been drilled in each of the Sand Wash Basin and in the deeper portion of the
Rock Springs Uplift. Hydrocarbons were encountered in each of those tests,
although commercial production has not yet been established. Leasehold costs in
assembling the large position in the Greater Green River Basin were generally
low, and the leases are long term.
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In the Hugoton Embayment, HSR owns 137,000 gross undeveloped acres. The
acreage was acquired because of the potential for extending the shallower gas
production, and because it was believed to be on trend with deeper oil
discoveries. Tests of the shallower gas potential proved uneconomic, but seismic
analysis of the deeper potential is encouraging, and additional tests are
underway. As with its other large concentrated positions, the lease acquisition
costs were low and the leases are long term.
SouthTech. During 1995, HSR joined Aspect Resources Limited-Liability
Company to form SouthTech Exploration, L.L.C. ("SouthTech"), which will exploit
3-D seismic and coherence cube technologies to explore onshore Gulf Coast
prospects. SouthTech's targets are both shallow exploitation objectives and
deeper exploration reservoirs in the prolific salt dome regions of South
Louisiana and the Upper Texas Gulf Coast.
Through SouthTech, HSR owns various seismic rights, options and mineral
interests over 89,000 gross acres and is currently leasing in the area.
SouthTech is actively developing 10 prospect areas, and is conducting its fourth
3-D seismic shoot. Total 3-D seismic coverage for the four shoots is 132 square
miles. HSR has preliminarily identified 60-80 potential drillsites on the first
four of the 10 prospect areas. Initial drilling operations are expected to
commence by mid-year.
RECENT ACQUISITIONS
On March 15, 1996, HSR completed the Initial Basin Acquisition comprised of
certain oil and gas properties owned by Basin in the Wattenberg Field near
Denver, Colorado, for approximately $38 million. This transaction was financed
through HSR's bank facility on an interim basis pending completion of
documentation of permanent financing arrangements with respect to the Initial
Basin Acquisition. Concurrently with its approval of the Initial Basin
Acquisition, the HSR Board approved the Second Basin Acquisition comprised of
the remainder of Basin's D-J Basin assets for $87.5 million. The Second Basin
Acquisition is subject to approval by the stockholders of Basin and is expected
to be completed by the end of the second quarter of 1996. Without giving effect
to the Chase Asset Monetization Arrangement, the Basin Acquisitions in aggregate
cover approximately 850 wells, having approximately 35 MMBoe of net proved
reserves and approximately 5,500 Boe of net daily production, and include
certain undeveloped acreage. Approximately 72% of the reserves are natural gas
and 67% are developed. The properties are in the immediate vicinity of HSR's
existing D-J Basin operations, and HSR expects to realize significant operating
efficiencies and cost savings by integrating these assets into its existing
property base. The Basin Acquisitions also enhance HSR's position as one of the
most active producers/marketers in the D-J Basin and the remainder of the
Colorado Front Range.
HSR believes the Basin Acquisitions are an excellent strategic fit with the
Merger and are desirable for a number of reasons: (a) the properties and
production can be added with no material incremental overhead; (b) significant
reductions in lease operating costs should be achievable, along with production
enhancement; (c) the properties offer significant upside potential because of
the proved undeveloped locations and potential infill drilling; and (d) the
control of the gas associated with Basin's properties expands HSR's marketing
strength and leverage. Although HSR has entered into the Chase Asset
Monetization Arrangement covering the properties acquired in the Initial Basin
Acquisition, HSR retains operations, gas marketing rights, development locations
and an option to repurchase the producing wells subject to this arrangement.
Therefore, the strategic consideration discussed below apply notwithstanding the
consummation of the Chase Asset Monetization Arrangement, or any similar future
arrangement affecting the properties to be acquired in the Second Basin
Acquisition.
Consolidation Economics. The acquisition of Basin's properties demonstrate
the compelling economics of consolidation. In particular, because of the similar
nature of the properties and their geographical proximity, the Basin properties,
with production equal to about 40% of HSR's existing production (without giving
effect to the Chase Asset Monetization Arrangement), can be added at little
incremental overhead.
Operating Efficiencies and Enhancements. The Basin properties are
completely interspersed with HSR's core Wattenberg Field properties, frequently
sharing leaselines. As a result, HSR's management believes it should be able to
effect meaningful reductions in lease operating costs. In addition, because of
the extent of its activities in the area (HSR has operated in the area for more
than 14 years and participated in over 1,300
63
<PAGE> 70
wells), HSR has developed significant technical expertise which it believes can
be used to enhance production from the Basin properties.
Increased Development Inventory. The Basin properties add significant
upside potential by increasing HSR's inventory of proved undeveloped and
potential drillsites, along with expanding the possible application of infill
drilling opportunities. The Basin properties contain approximately 250 proved
undeveloped drilling locations. In addition, the Basin properties have
potentially hundreds of unbooked locations which can be economic with cost,
price or technological enhancements, which, assuming the consummation of the
Second Basin Acquisition, would increase HSR's inventory in the D-J Basin to
over 750 proved undeveloped locations, significantly expanding HSR's existing
inventory of hundreds of unbooked potential sites.
In addition, the Second Basin Acquisition expands HSR's infill potential.
Over the last two years, HSR has conducted a series of engineering and geologic
analyses and evaluations which indicate that significant reserves remain in the
Wattenberg Field and that some type of infill drilling may be appropriate.
Should infill become economic, HSR's position is significantly expanded as a
result of the Second Basin Acquisition.
Marketing Leverage. Basin's daily gross D-J Basin gas production amounts to
approximately 26 MMcf. HSR's daily gross D-J Basin gas production amounts to
approximately 95 MMcf. Combined, they account for about 26% of the Wattenberg
Field production and 13% of the total daily gas consumption in Colorado, most of
which is in the Colorado Front Range. Although some of Basin's gas is subject to
marketing by a third party, the additional volumes of gas will add significant
leverage in HSR obtaining premium markets and prices.
Additional value from the Basin Acquisitions may be realized as a result of
recent developments in D-J Basin gas prices. Historically, D-J Basin prices were
tied to the Colorado Interstate Gas Index (the "CIG Index"). Beginning in late
1995, the D-J Basin prices began to separate from the CIG Index. As a result,
gas prices in the D-J Basin have rebounded significantly in recent months and
appear to be no longer linked to the historical CIG Index. From January 1, 1996,
through March 14, 1996, D-J Basin gas prices have averaged approximately $0.88
per Mcf above traditional CIG Index prices. The separation is a result of a
number of factors, including a recent tariff change for D-J Basin producers that
significantly reduces the cost of transporting the product to local markets and
significant pipeline constraints in Wyoming. HSR's management does not believe
that these developments are temporary. These factors should result in higher
product prices for D-J Basin gas than would have been otherwise obtainable.
FINANCING
HSR has articulated and implemented a four-part corporate strategy designed
to enhance stockholder value. The components of this strategy are (1) geographic
and product diversification, (2) consolidation to achieve operational
efficiencies, (3) enhancement of downstream value and (4) sophisticated,
value-creating financial transactions. The financing activities of HSR are
designed to efficiently support these strategies. As an active part of its
financing activities, HSR will review periodically a wide range of capital
financing options available to it. These may include senior bank credit
facilities, asset monetization transactions, off-balance sheet financings, sale
and leaseback transactions, divestitures of non-core/non-strategic assets,
issuance of new debt and equity securities and other financings
HSR's primary activities involve the acquisition, development and
exploitation of oil and gas properties. Whenever possible, HSR seeks to maximize
its operational and financial flexibility in order to be able to respond to
perceived opportunities or changes in cash flow. One element of HSR's overall
financial strategy is to maintain an efficient balance of debt and equity
capital. As a general guideline, HSR believes that to maintain such a balance, a
debt-to-total capital ratio of less than 50% is appropriate. As HSR pursues its
opportunities, it anticipates that its approach to meeting its capital
requirements will change, as will the mix of financing tools employed and the
resulting capital structure. HSR prefers to maintain a capital structure that
provides the flexibility to increase its leverage, as necessary and prudent, to
accomplish its strategic objectives, including acquisition transactions. It will
generally not be efficient to perpetually maintain a high level of equity
capital in anticipation of such transactions. This is true both because the
timing of strategic transactions cannot be controlled and because the dilutive
effect of excess equity does not serve the best interests of its
64
<PAGE> 71
stockholders or minimize its cost of capital. If, as in connection with the
Merger and the Basin Acquisitions, leverage is increased to capture attractive
opportunities, it will be HSR's goal to reduce such leverage following the
transaction by means of a wide range of capital financing options available to
it, including, but not limited to, those mentioned above.
The aggregate cash consideration required and net liabilities to be assumed
in connection with consummating the Merger and the Basin Acquisitions are
expected to be $254.5 million, $129.0 million for the Merger and $125.5 million
for the Basin Acquisitions. Through existing negotiated arrangements, HSR has
available a number of specific capital options with which to meet these capital
needs. In order to provide the senior bank debt capacity necessary to effect the
Merger and the Basin Acquisitions, HSR has entered into a letter of intent with
Chase indicating Chase's intent to provide, on a syndicated basis, an unsecured
revolving credit facility of up to $375 million. HSR believes this facility will
be sufficient to (a) finance the payment of the cash portion of the
consideration to Basin and to the Tide West shareholders, (b) absorb HSR's
current outstanding senior indebtedness ($78.5 million at March 26, 1996,
following the Initial Basin Acquisition and the Chase Asset Monetization
Arrangement) and the new debt to be assumed in connection with the Merger ($40.8
million at December 31, 1995), (c) pay HSR's transaction costs incurred with
respect to the Merger and the Basin Acquisitions and (d) provide HSR with
additional financial flexibility. This senior credit facility is subject to due
diligence, final engineering, negotiation of definitive documentation and other
conditions, and there can be no assurance that the financing will be completed.
Subsequent to the closing of the Initial Basin Acquisition, HSR determined
that it could best accomplish its corporate and capital strategic goals through
the Chase Asset Monetization Arrangement consisting of a sale by HSR to an
unaffiliated third party of certain low-growth assets acquired in the Initial
Basin Acquisition, principally the producing and proved developed non-producing
wells. HSR reserved a production payment in such wells and retained an option to
repurchase, in whole or in part, the wells for fair market value at any time.
HSR retained what it considers to be the high-growth assets, including the
proved and unproved drillsites, operations, the right to market production from
the wells, infill rights, and proceeds from the monetization of Section 29 tax
credits. HSR will operate these properties under a fee arrangement. As a result
of the transaction, HSR was able to reduce by $23.1 million the debt it had
incurred by closing the Initial Basin Acquisition, which debt was assumed by the
party which acquired the properties. HSR intends to sell a portion of the assets
to be acquired in the Second Basin Acquisition in a similar transaction so that
the aggregate reduction in the amount of debt that HSR would have otherwise
incurred in closing the Basin Acquisitions would be approximately $82 million.
HSR believes that the rights and benefits that it retained in the Chase
Asset Monetization Arrangement and the rights and benefits that it intends to
retain in the contemplated asset monetization arrangement affecting the
properties purchased in the Second Basin Acquisition will be significant. The
combined Basin Acquisitions include approximately 250 proved undeveloped
drillsites and a similar number of unproved locations. Since these will be
retained by HSR, HSR will have the opportunity to drill and produce these
properties and realize the return thereon. HSR has also retained the right to
market gas and oil production from the properties. Although some of the gas
subject to the Basin Acquisitions is subject to marketing rights held by the gas
processor, HSR is currently negotiating a release of all such gas from these
commitments. HSR believes that its expected ability to control the marketing of
the 26 MMcfs of gas produced per day from the Basin properties will
significantly enhance HSR's marketing strength in the Colorado Front Range
market. Additionally, HSR anticipates that its retention of operations will
enable it to continue to improve the economies of scale associated with its
operations and, therefore, to reduce the per well and production unit costs of
operating the HSR wells.
HSR anticipates that, following the consummation of the Merger and the
Basin Acquisitions, and assuming approximately $82 million of the assets
acquired in the Basin Acquisitions are financed through the Chase Asset
Monetization Arrangement or a similar arrangement, HSR's debt-to-total capital
ratio will be approximately 63%. HSR intends to reduce such leverage as soon as
practicable through the most efficient combination of options available to it.
In addition to the options discussed above, HSR may utilize its other financing
alternatives currently available. HSR has extended the arrangement it has in
place with Trust Company of the West for a $90 million non-recourse, volumetric
overriding royalty financing facility. This
65
<PAGE> 72
facility may be used by HSR for a variety of corporate purposes, including
acquisitions of new properties, exploration and development drilling, or the
monetization of existing corporate properties, with the proceeds being used
substantially at HSR's discretion, including repayment of bank debt. HSR also
has entered into a letter agreement with Chase providing for a $25 million
sale-leaseback financing arrangement pursuant to which HSR may sell certain
production equipment and surface facilities to a Chase affiliate and enter into
a lease agreement for the continued use of such equipment. The arrangement is
subject to various conditions prior to closing. If such a financing arrangement
is ultimately consummated, enabling HSR to effectively monetize certain
undervalued assets, HSR contemplates that the lease would be treated as an
operating lease for financial reporting purposes.
HSR intends to use the foregoing capital options, and others that may
become available to it, to facilitate in an efficient manner the achievement of
its corporate and financial flexibility goals.
PRICE RANGE OF HSR COMMON STOCK AND DIVIDENDS
The HSR Common Stock is quoted on the NYSE under the symbol "HSE." The
following table sets forth certain information as to the last sale prices per
share of HSR Common Stock as quoted on the NYSE. HSR has never paid dividends on
the HSR Common Stock. HSR's fiscal year ends on December 31 of each year. On
February 23, 1996, the last full trading day prior to the public announcement of
the signing of the Merger Agreement, the last sales price per share of HSR
Common Stock, as quoted on the NYSE, was $11.375. On May , 1996, the last full
trading day for which quotations were available at the time of printing of this
Joint Proxy Statement/Prospectus, the last sales price per share of HSR Common
Stock, as quoted on the NYSE, was $ . STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT QUOTATIONS FOR HSR COMMON STOCK.
<TABLE>
<CAPTION>
HSR COMMON
STOCK
-------------
CALENDAR YEAR LOW HIGH
------------------------------------------------------------ ---- ----
<S> <C> <C>
1994
First Quarter............................................. $18 3/4 $24 3/4
Second Quarter............................................ $18 $22 5/8
Third Quarter............................................. $19 1/4 $22 7/8
Fourth Quarter............................................ $17 1/8 $21 1/2
1995
First Quarter............................................. $13 3/4 $17 1/2
Second Quarter............................................ $13 3/4 $16 7/8
Third Quarter............................................. $13 1/8 $15 1/8
Fourth Quarter............................................ $12 5/8 $14 7/8
1996
First Quarter............................................. $ 9 1/2 $13 1/8
Second Quarter (through May , 1996)..................... $ $
</TABLE>
Certain additional information about the HSR Common Stock and the rights of
stockholders with respect thereto is set forth under "Description of HSR Capital
Stock" and "Comparison of Stockholder Rights."
TIDE WEST OIL COMPANY
Information about Tide West is contained in various documents that have
been filed by Tide West with the Commission and incorporated by reference into
this Joint Proxy Statement/Prospectus. Such information includes historical
financial statements, information about Tide West's properties and oil and gas
reserves and information about the nature of Tide West's business, its
management and the Tide West Common Stock. Reference should be made to such
documents for complete information about Tide West. For a list of such documents
and instructions as to how to obtain copies of such documents, see
"Incorporation of Documents by Reference."
66
<PAGE> 73
PRICE RANGE OF TIDE WEST COMMON STOCK AND DIVIDENDS
Tide West Common Stock is quoted on Nasdaq under the symbol "TIDE." The
following table sets forth certain information as to the last sale prices per
share of Tide West Common Stock as quoted on Nasdaq. Tide West's fiscal year
ends on December 31 of each year. Tide West did not pay any dividends on the
Tide West Common Stock during any of the periods described below, and Tide West
does not presently intend to pay cash dividends on the Tide West Common Stock.
Furthermore, Tide West is currently restricted from paying cash dividends on the
Tide West Common Stock under its existing bank credit facility. On February 23,
1996, the last full trading day prior to the public announcement of the signing
of the Merger Agreement, the last sales price per share of Tide West Common
Stock, as quoted on Nasdaq, was $13.00. On May , 1996, the last full trading
day for which quotations were available at the time of printing of this Joint
Proxy Statement/Prospectus, the last sales price per share of Tide West Common
Stock as quoted on Nasdaq, was $ . STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT QUOTATIONS FOR TIDE WEST COMMON STOCK.
<TABLE>
<CAPTION>
TIDE WEST
COMMON STOCK
-------------
CALENDAR YEAR LOW HIGH
------------------------------------------------------------ ---- ----
<S> <C> <C>
1994
First Quarter............................................. $ 9 1/4 $12 3/4
Second Quarter............................................ $10 3/4 $12 1/2
Third Quarter............................................. $11 $15 1/2
Fourth Quarter............................................ $ 9 3/4 $13
1995
First Quarter............................................. $ 8 1/4 $10 5/8
Second Quarter............................................ $ 9 7/8 $11 3/4
Third Quarter............................................. $10 $11 1/2
Fourth Quarter............................................ $10 1/8 $14
1996
First Quarter............................................. $12 $15 1/4
Second Quarter (through May , 1996)..................... $ $
</TABLE>
Certain additional information about the Tide West Common Stock and the
rights of stockholders with respect thereto is set forth under "Description of
Tide West Capital Stock" and "Comparison of Stockholder Rights."
PRO FORMA INFORMATION FOR THE COMBINED COMPANY
Pro forma financial information showing the effect of the Merger and the
Second Basin Acquisition on the financial statements of HSR (in the case of
historical financial statements of HSR, as adjusted to reflect the Initial Basin
Acquisition) are contained in this Joint Proxy Statement/Prospectus. See "Index
to Unaudited Pro Forma Financial Statements." The following is certain
additional pro forma information about HSR giving effect to the consummation of
the Merger and the Basin Acquisitions .
OIL AND GAS PROPERTIES
HSR is an independent oil and gas company engaged in the acquisition,
exploitation, development and exploration of oil and natural gas properties.
Although HSR and its predecessors have operated in various places throughout the
United States, HSR has recently concentrated most of its activities in the
Wattenberg Field area of the D-J Basin near Denver, Colorado.
Tide West is an independent oil and gas company focused on the acquisition
and enhancement of producing oil and gas properties. All of Tide West's oil and
gas properties are located in the United States, with principal operations
conducted in portions of the Anadarko and Arkoma geologic basins located within
Oklahoma and Texas, as well as in portions of the Southern Oklahoma and
Texas/New Mexico regions.
67
<PAGE> 74
Growth Opportunities. Following the Merger and the Basin Acquisitions, HSR
will have a substantial inventory of "growth options" ranging from development
and infill opportunities to significant exploitation and exploration exposure.
On a pro forma basis, assuming consummation of the Merger and the Second Basin
Acquisition, HSR will have access to:
- Over 1.1 million gross undeveloped acres in seven producing basins.
- Over 376 miles of 3-D seismic surveys, including active projects in five
separate areas (Southern Louisiana, Texas, Oklahoma, Colorado,
Montana/North Dakota).
- Over 750 proved development drilling locations in the D-J Basin, and
hundreds of additional potential locations.
- Approximately 800 potential infill sites in the Wattenberg Field, should
infill drilling occur.
- Over 200 proved and probable exploitation opportunities in the
Mid-Continent region, with additional unbooked exploration potential.
- Ten existing project areas and rights to 89,000 gross acres in the
prolific salt dome region of the Gulf Coast with 60-80 current potential
drillsites.
Pro Forma Reserves. The following table provides information regarding
HSR's pro forma reserves as of December 31, 1995, assuming (a) consummation of
the Initial Basin Acquisition, giving effect to the Chase Asset Monetization
Arrangement, (b) consummation of the Initial Basin Acquisition, giving effect to
the Chase Asset Monetization Arrangement, and the Merger and (c) consummation of
the Basin Acquisitions and the Merger, giving effect to the Chase Asset
Monetization Arrangement, and assuming HSR's anticipated sale of a portion of
the assets to be acquired in the Second Basin Acquisition in a facility similar
to the Chase Asset Monetization Arrangement.
<TABLE>
<CAPTION>
PRO FORMA PROVED RESERVES AS OF DECEMBER 31, 1995(1)
------------------------------------------------------------
WITH INITIAL WITH
WITH INITIAL BASIN ACQUISITION BASIN ACQUISITIONS
BASIN ACQUISITION AND MERGER(2) AND MERGER(2)
----------------- ----------------- ------------------
<S> <C> <C> <C>
Oil (MBbls)............................. 21,437 27,078 30,344
Natural gas (MMcf)...................... 310,791 511,617 548,531
Equivalent barrels (MBoe)............... 73,236 112,348 121,766
Pre-tax SEC 10 value (in thousands)..... $ 261,941 $ 444,870 $458,830
SEC 10 value (in thousands)............. $ 201,967 $ 340,783 $349,289
</TABLE>
- ---------------
(1) On a pro forma basis, HSR's proved developed reserves as of December 31,
1995, are 11,557 MBbls and 219,262 MMcf (with the Initial Basin
Acquisition), 17,388 MBbls and 413,886 MMcf (with the Initial Basin
Acquisition and the Merger) and 17,388 MBbls and 413,886 MMcf (with the
Basin Acquisitions and the Merger).
(2) Reserves attributable to the Merger reflect HSR's engineering estimate of
39.1 MMBoe, which estimate is lower than Tide West's engineering estimate.
WELLS AND ACREAGE.
Pro Forma with and without Second Basin Acquisition. On a pro forma basis
(assuming consummation of the Merger and the sale of a portion of the assets to
be acquired in the Second Basin Acquisition in a facility similar to the Chase
Asset Monetization Arrangement), with and without the Second Basin Acquisition,
HSR's properties at December 31, 1995, include interests in 1,371 productive oil
wells (1,121 net wells) and 1,196 productive gas wells (570 net wells),
approximately 63% of which are operated by HSR. Such well information is not
affected by the consummation of the Second Basin Acquisition because of HSR's
anticipated sale of a portion of the assets to be acquired in the Second Basin
Acquisition in a facility similar to the Chase Asset Monetization Arrangement.
Such properties also include approximately 1.07 million total net mineral acres
with the Second Basin Acquisition and approximately 1.04 million total net
mineral acres without the Second Basin Acquisition.
68
<PAGE> 75
1996 Capital Expenditure Budget
HSR's capital expenditure budget for 1996 is expected to be approximately
$70 million with the Second Basin Acquisition and approximately $63.5 million
without the Second Basin Acquisition. This budget will be funded primarily by
internally-generated cash flow, bank borrowings, dispositions of non-strategic
assets and joint venture financings. The following table outlines HSR's
estimated capital expenditure budget for 1996 (assuming consummation of the
Merger) (a) with the Second Basin Acquisition, assuming HSR's anticipated sale
of a portion of the assets to be acquired in the Second Basin Acquisition in a
facility similar to the Chase Asset Monetization Arrangement, and, in the
alternative, (b) without the Second Basin Acquisition.
<TABLE>
<CAPTION>
PRO FORMA BUDGET FOR 1996
-------------------------------------------
WITH SECOND WITHOUT SECOND
BASIN ACQUISITION BASIN ACQUISITION
----------------- -----------------
BUDGETED BUDGETED
EXPENDITURES EXPENDITURES
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Tide West properties............................. $17,000 $17,000
D-J Basin........................................ 46,500 41,000
Louisiana........................................ 3,000 3,000
Other............................................ 3,500 2,500
------------ ------------
Total.................................. $70,000 $63,500
============ ============
</TABLE>
Management of HSR continually reevaluates capital expenditures during a
particular year in light of market conditions, opportunities presented
(including acquisition opportunities) and other factors and may increase or
decrease capital spending, or reallocate amounts between areas or projects, if
deemed necessary or desirable, including in the event the Merger and/or the
Second Basin Acquisition is not consummated.
CAPITALIZATION
The following table sets forth the capitalization of HSR and its
subsidiaries at December 31, 1995, on a pro forma basis (assuming consummation
of the Merger) as adjusted (a) with the Second Basin Acquisition, assuming HSR's
anticipated sale of a portion of the assets to be acquired in the Second Basin
Acquisition in a facility similar to the Chase Asset Monetization Arrangement,
and, in the alternative, (b) without the Second Basin Acquisition:
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION
AS OF DECEMBER 31, 1995
-----------------------------
WITH WITHOUT
SECOND BASIN SECOND BASIN
ACQUISITION ACQUISITION
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt......................... $ 12,400 $ 12,400
Long-term debt............................................... 300,917 270,937
Stockholders' equity......................................... 172,433 172,433
--------- --------
Total capitalization............................... $485,750 $455,770
======== ========
</TABLE>
69
<PAGE> 76
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following is a list of the unaudited pro forma financial statements
included in this Joint Proxy Statement/Prospectus. Other financial statements
are included in various other documents that are incorporated into this Joint
Proxy Statement/Prospectus by reference. See "Incorporation of Documents by
Reference."
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HSR
HSR, TIDE WEST, INITIAL BASIN ACQUISITION, SECOND BASIN ACQUISITION AND PRO
FORMA ADJUSTMENTS
<TABLE>
<S> <C>
Pro Forma Balance Sheet with Second Basin Acquisition as of December 31, 1995... 71
Pro Forma Statement of Operations with Second Basin Acquisition for the Year
Ended December 31, 1995....................................................... 72
Notes to Pro Forma Financial Statements......................................... 73
HSR, TIDE WEST, INITIAL BASIN ACQUISITION AND PRO FORMA ADJUSTMENTS
Pro Forma Balance Sheet without Second Basin Acquisition as of December 31,
1995.......................................................................... 78
Pro Forma Statement of Operations without Second Basin Acquisition for the Year
Ended December 31, 1995....................................................... 79
Notes to Pro Forma Financial Statements......................................... 80
HSR, INITIAL BASIN ACQUISITION AND PRO FORMA ADJUSTMENTS
Pro Forma Balance Sheet with Initial Basin Acquisition as of December 31,
1995.......................................................................... 85
Pro Forma Statement of Operations with Initial Basin Acquisition for the Year
Ended December 31, 1995....................................................... 86
Notes to Pro Forma Financial Statements......................................... 87
</TABLE>
PRO FORMA FINANCIAL STATEMENTS WITH SECOND BASIN ACQUISITION
The following unaudited pro forma condensed consolidated balance sheet as
of December 31, 1995, and pro forma condensed consolidated statement of
operations for the year then ended adjust the historical financial information
of HSR and Tide West to reflect the consummation of the Merger and the Basin
Acquisitions. The pro forma balance sheet and statement of operations were
prepared as if the Merger and Basin Acquisitions were consummated on December
31, 1995 and January 1, 1995, respectively. The pro forma adjustments are based
on estimates and assumptions explained in further detail in the accompanying
notes. With respect to the Initial Basin Acquisition, HSR has entered into the
Chase Asset Monetization Arrangement pursuant to which it sold at its cost
certain of the interests that it had acquired from Basin (see "Information About
the Combining Companies -- HS Resources, Inc. -- Financing"). The interests sold
represent primarily proved producing and proved non-producing wells, which HSR
sold for cash and a retained production payment. Pursuant to the terms of the
retained production payment, HSR will not receive any production revenues from
such wells (except in certain instances) until a specified amount of revenue has
been produced in the future. Therefore, with respect to the Initial Basin
Acquisition, the accompanying pro forma financial statements do not reflect any
production revenues or related expenses during the pro forma period. HSR will
operate the properties on behalf of the buyer for a fee and has an option to
repurchase the properties at fair market value. Based on its operational
experience and engineering judgment, HSR calculated the fee to cover its
estimated actual direct and indirect costs associated with operating the
properties, and therefore HSR does not expect to generate significant net
revenue or incur any losses from such operations.
HSR is entitled to accrue interest on its retained production payment at
the rate of 8.5% per year, and such amount is reflected as interest income.
Following the Chase Asset Monetization Arrangement transaction, HSR has retained
primarily proved undeveloped properties, undrilled locations and Section 29 tax
credits, and believes these are the higher growth assets. These assets have been
recorded on a pro forma basis in HSR's oil and gas property account at cost. It
is HSR's intention to enter into a similar arrangement with respect to the
Second Basin Acquisition and, therefore, the same treatment has been given to
those properties.
The unaudited pro forma financial statements should be read in conjunction
with the related historical financial statements and related notes. The pro
forma information presented is not necessarily indicative of the financial
position or results that would have actually occurred had the Merger and Basin
Acquisitions been consummated on the dates indicated or which may occur in the
future.
70
<PAGE> 77
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
WITH SECOND BASIN ACQUISITION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
(HISTORICAL)
--------------------------- PRO FORMA UNAUDITED
HSR TIDE WEST ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS...................... $ 11,085,645 $ 24,708,000 $ (2,444,000)D $ 33,349,645
------------ ------------ ------------ ------------
OIL AND GAS PROPERTIES, at cost,
using the full cost method:
Undeveloped acreage............... 26,778,702 30,611,655 A 57,390,357
Costs subject to depreciation,
depletion and amortization..... 341,382,375 149,734,000 81,719,356 A 572,835,731
Less -- accumulated
depreciation, depletion and
amortization................. (89,350,067) (32,184,000) 32,184,000 F (89,350,067)
Retained production payment....... 23,800,000 A 23,800,000
------------ ------------ ------------ ------------
Net oil and gas properties..... 278,811,010 117,550,000 168,315,011 564,676,021
------------ ------------ ------------ ------------
Gas gathering and other, net...... 12,192,610 2,139,000 260,970 A 14,592,580
------------ ------------ ------------ ------------
TOTAL ASSETS........................ $302,089,265 $144,397,000 $166,131,981 $612,618,246
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES................. $ 27,200,319 $ 20,338,000 $ 4,654,000 A $ 52,192,319
------------ ------------ ------------ ------------
ACCRUED AD VALOREM
TAXES............................. 6,574,405 2,412,153 A 8,986,558
MINORITY INTEREST................... 117,000 117,000
LONG-TERM BANK DEBT, net of current
portion........................... 51,000,000 40,800,000 134,580,200 D/A 226,380,200
9 7/8% SENIOR SUBORDINATED NOTES,
net of unamortized discount....... 74,536,875 74,536,875
DEFERRED INCOME TAXES............... 23,603,540 8,636,000 45,732,790 B 77,972,330
STOCKHOLDERS' EQUITY................ 119,174,126 74,506,000 (21,247,162)C 172,432,964
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................ $302,089,265 $144,397,000 $166,131,981 $612,618,246
============ ============ ============ ============
</TABLE>
The accompanying Notes are an integral part of these Statements.
71
<PAGE> 78
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
WITH SECOND BASIN ACQUISITION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(HISTORICAL)
------------------------- PRO FORMA UNAUDITED
HSR TIDE WEST ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales................ $53,394,029 $36,508,000 $ $ 89,902,029
Other gas revenues............... 1,782,349 2,051,944 E 3,834,293
Trading and transportation....... 82,927,000 82,927,000
Interest and other income........ 163,510 1,266,000 1,864,516 J 3,331,151
37,125 K
----------- ----------- ----------- ------------
Total revenues........... 55,339,888 120,701,000 3,953,585 179,994,473
----------- ----------- ----------- ------------
EXPENSES:
Production taxes................. 4,050,483 2,517,000 6,567,483
Lease operating.................. 9,935,809 7,747,000 17,682,809
Depreciation, depletion and
amortization.................. 26,608,885 11,365,000 (11,365,000)F 47,144,826
20,535,941 F
General and administrative....... 4,075,581 4,557,000 (1,060,000)G 7,572,581
Interest......................... 10,218,555 3,186,000 7,884,558 H 21,289,113
Trading and transportation....... 80,642,000 80,642,000
----------- ----------- ----------- ------------
Total expenses........... 54,889,313 110,014,000 15,995,499 180,898,812
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME
TAXES............................ 450,575 10,687,000 (12,041,914) (904,339)
PROVISION (BENEFIT) FOR INCOME
TAXES............................ 176,419 4,016,000 (4,536,973)I (344,554)
----------- ----------- ----------- ------------
NET INCOME (LOSS).................. $ 274,156 $ 6,671,000 $(7,504,941) $ (559,785)
=========== =========== =========== ============
EARNINGS (LOSS) PER SHARE:
Common and common equivalent
shares........................ $ 0.02 $ 0.67 $ (0.03)
=========== =========== ============
Common and common equivalent
shares -- assuming full
dilution...................... $ 0.02 $ 0.65 $ (0.03)
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common and common equivalent
shares........................ 11,440,000 9,897,000 5,976,472 C 17,416,472
=========== =========== =========== ============
Common and common equivalent
shares -- assuming full
dilution...................... 11,450,000 10,247,000 5,976,472 C 17,426,472
=========== =========== =========== ============
</TABLE>
The accompanying Notes are an integral part of these Statements.
72
<PAGE> 79
HS RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS WITH SECOND BASIN ACQUISITION
(A) Record cost of the oil and gas properties, retained production payment
and production tax liability assumed and additional bank debt incurred by HSR in
connection with the Basin Acquisitions and Merger as follows:
<TABLE>
<CAPTION>
INITIAL SECOND TOTAL
BASIN BASIN TIDE WEST PRO FORMA
ACQUISITION ACQUISITION MERGER ADJUSTMENTS
----------- ----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Acquisition Costs
Purchase price including liabilities
assumed........................... $ 38,000 $ 87,500 $ 210,960(*) $ 336,460
Transaction costs.................... 520 1,480 8,000 10,000
--------- --------- --------- ---------
38,520 88,980 218,960 346,460
Less: Amount sold pursuant to the
Chase Asset Monetization
Arrangement....................... (24,900) (57,400) (82,300)
--------- --------- --------- ---------
Net purchase price................... 13,620 31,580 218,960 264,160
Deferred tax gross-up (see note B)... 54,369 54,369
Transaction costs charged to
stockholders' equity.............. (8,000) (8,000)
Less: Tide West assets
(historical)...................... (144,397) (144,397)
--------- --------- --------- ---------
Total pro forma adjustment........... $ 13,620 $ 31,580 $ 120,932 $ 166,132
========= ========= ========= =========
Allocation of Acquisition Costs
Current assets....................... $ $ $ (2,444) $ (2,444)
Oil and gas properties -- undeveloped
properties........................ 1,500 3,500 25,612 30,612
Oil and gas properties -- developed
properties........................ 4,920 11,480 65,319 81,719
Accumulated DD&A -- Tide West
historical........................ 32,184 32,184
Retained production payment.......... 7,200 16,600 23,800
Gas gathering and other, net......... 261 261
--------- --------- --------- ---------
Total pro forma adjustment........... $ 13,620 $ 31,580 $ 120,932 $ 166,132
========= ========= ========= =========
Acquisition Funding and Liabilities
Assumed
Current liabilities.................. $ $ $ 4,654 $ 4,654
Accrued ad valorem taxes............. 812 1,600 2,412
Long term bank debt.................. 12,808 29,980 91,792 134,580
Deferred income taxes................ 45,733 45,733
Stockholders' equity -- common
stock............................. 6 6
Stockholders' equity -- net paid in
capital........................... (21,253) (21,253)
--------- --------- --------- ---------
Total pro forma adjustment........... $ 13,620 $ 31,580 $ 120,932 $ 166,132
========= ========= ========= =========
</TABLE>
- ---------------
(*) The purchase price including liabilities assumed for the Merger is comprised
of (i) cash consideration of $87,536,353, including $4,463,856, assuming 3%
dissenters, (ii) HSR Common Stock value of $61,258,838 for the issuance of
5,976,472 shares valued at $10.25 per share and (iii) assumed Tide West
liabilities of $62,165,000.
73
<PAGE> 80
(B) Record additional deferred taxes resulting from the Merger. The gross
up of the property costs and deferred tax liability are required due to the
difference between the purchase price of the properties acquired and the tax
basis of those properties.
(C) Adjustment to eliminate the historical cost of Tide West's
Stockholders' Equity of $74,506,000 and to record the issuance of 5,976,472
additional HSR shares valued at $10.25 per share less related transaction costs
of $8,000,000.
(D) Record reduction in long-term debt repaid with Tide West cash.
(E) Record estimated income from the monetization of Section 29 tax credits
generated from the assets acquired in the Basin Acquisitions. The annual
estimated qualifying production is approximately 869,000 Mcf for the Initial
Basin Acquisition and 3,856,000 Mcf for the Second Basin Acquisition. No tax
credits are anticipated from Tide West production. The adjustment is based on
the monetization of the Section 29 tax credits available from the Basin
Acquisitions pursuant to arrangements the Company has with two financial
institutions under the same terms as currently apply to the monetization of the
Company's other Section 29 tax credits.
(F) Record the elimination of Tide West's accumulated depreciation,
depletion and amortization ("DD&A") and record consolidated DD&A expense on the
assets acquired. Pro forma DD&A expense on proved oil and gas properties is
computed by combining HSR's net unamortized costs of proved properties plus the
portion of the purchase price and transaction costs allocated to proved
properties and using the units-of-production amortization method based on
estimates of total pro forma proved reserves. The combined DD&A rate per Boe for
the assets acquired is $5.24. The depreciation expense recorded for the Tide
West corporate fixed assets is $332,000.
(G) General and administrative expenses have been adjusted to reflect
savings in salary and bonus expense that would have occurred if the Merger had
taken place at the beginning of the period. The adjustment reflects the salary
and bonuses paid to three senior executives of Tide West who will be terminated
effective upon the closing of the Merger and who will not be replaced.
(H) Record elimination of Tide West interest expense and record interest
expense related to debt necessary to finance the Merger and Basin Acquisitions,
using HSR's average LIBOR rate during 1995 of 7.32%. Interest was calculated on
new debt of approximately $138,300,000 which is composed of $12,800,000 for the
Initial Basin Acquisition, $30,000,000 for the Second Basin Acquisition and
$95,500,000 for the Merger. Interest was capitalized on undeveloped property
costs as appropriate.
(I) Record the tax effect of the acquisition assuming a combined federal
and state effective tax rate of 38.1%.
(J) Record interest income on the retained production payment at the rate
of 8.5%.
(K) To adjust for Tide West successful efforts expenses capitalized under
full cost accounting.
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Supplemental oil and gas reserve information related to the Pro Forma
Financial Statements With Second Basin Acquisition is reported in compliance
with FASB Statement No. 69, "Disclosures about Oil and Gas Producing
Activities." Net proved oil and gas reserves and the discounted future net cash
flows related to those reserves were estimated by HSR's petroleum engineers as
of January 1, 1996, the effective date of the acquisition. Information presented
in that report was the basis for the net proved oil and gas reserve and
standardized measure disclosures presented below. Since reserve evaluations for
other periods had not been prepared, it was necessary to make certain
assumptions and adjustments to prepare the following disclosures. However, HSR
believes that the disclosures presented are adequate and are not misleading.
74
<PAGE> 81
The following tables set forth information for the year ended December 31,
1995, with respect to changes in the proved reserves. Quantities of natural gas
are expressed in this report in terms of thousand cubic feet (Mcf). Oil is
quantified in terms of barrels (Bbls).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
-------------------
OIL GAS
BBLS MCF
------ -------
(IN THOUSANDS)
<S> <C> <C>
Total proved reserves:
Beginning of year........................................................ 26,314 479,298
Production............................................................... (2,153) (39,148)
Consolidation of limited partnership..................................... 419 15,964
Revisions of previous estimates.......................................... (1,965) (16,604)
Extensions, discoveries and other additions.............................. 2,012 51,804
Purchases of reserves in place........................................... 5,828 59,103
Sale of reserves in place................................................ (111) (1,886)
------ -------
End of year.............................................................. 30,344 548,531
====== =======
</TABLE>
At December 31, 1995, proved developed reserves included 16,980 MBbls and
391,502 MMcf.
Information with respect to the estimated discounted future net cash flows
for the Pro Forma Financial Statements With Second Basin Acquisition for the
year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Future cash inflows............................................................ $1,508,421
Future production costs........................................................ (406,062)
Future development costs....................................................... (188,794)
----------
Future pre-tax cash flows...................................................... 913,565
Future income tax expense...................................................... (221,818)
----------
After-tax future net cash flows................................................ 691,747
10% annual discount............................................................ (342,458)
----------
Discounted future net cash flows............................................... $ 349,289
==========
</TABLE>
As of December 31, 1995 the oil and gas prices used in the determination of
future cash flows were $18.62 and $1.72 per Bbl and per Mcf, respectively.
For standardized measure purposes, future income taxes are estimated using
the "year-by-year" method. However, for ceiling test purposes, future income
taxes are estimated using the "short-cut" method.
75
<PAGE> 82
Principal changes for the Pro Forma Financial Statements With Second Basin
Acquisition estimated discounted future net cash flows for the year ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
<S> <C>
Beginning of year............................................................ $ 298,015
Oil and gas sales, net of production costs................................. (63,915)
Sales of reserves in place, net............................................ (1,850)
Net change in prices and production costs.................................. 9,974
Extensions and discoveries less related costs.............................. 61,128
Change in future development costs......................................... (19,037)
Development costs incurred during the year that reduce future development
costs................................................................... 33,402
Revision of previous quantity estimates.................................... (38,555)
Purchases of reserves in place, net........................................ 70,926
Accretion of discount...................................................... 39,251
Net change in income taxes................................................. (15,046)
Changes in production rates and other...................................... (25,004)
---------
End of Year.................................................................. $ 349,289
=========
</TABLE>
76
<PAGE> 83
PRO FORMA FINANCIAL STATEMENTS WITHOUT
SECOND BASIN ACQUISITION
The following unaudited pro forma condensed consolidated balance sheet as
of December 31, 1995, and pro forma condensed consolidated statement of
operations for the year then ended adjust the historical financial information
of HSR and Tide West to reflect the Merger and the Initial Basin Acquisition.
The pro forma balance sheet and statement of operations were prepared as if the
Merger and Initial Basin Acquisition were consummated on December 31, 1995 and
January 1, 1995, respectively. The pro forma adjustments are based on estimates
and assumptions explained in further detail in the accompanying notes. With
respect to the Initial Basin Acquisition, HSR has entered into the Chase Asset
Monetization Arrangement pursuant to which it sold at its cost certain of the
interest that it had acquired from Basin (see "Information About the Combining
Companies -- HS Resources, Inc. -- Financing"). The interests sold represent
primarily proved producing and proved non-producing wells, which HSR sold for
cash and a retained production payment. Pursuant to the terms of the retained
production payment, HSR will not receive any production revenues from such wells
(except in certain instances) until a specified amount of revenue has been
produced in the future. Therefore, with respect to the Initial Basin
Acquisition, the accompanying pro forma financial statements do not reflect any
production revenues or related expenses during the pro forma period. HSR will
operate the properties on behalf of the buyer for a fee and has an option to
repurchase the properties.
HSR is entitled to accrue interest on its retained production payment at
the rate of 8.5% per year, and such amount is reflected as interest income.
Following the Chase Asset Monetization Arrangement transaction, HSR has retained
primarily proved undeveloped properties, undrilled locations and Section 29 tax
credits, and believes these are higher growth assets. These assets have been
recorded on a pro forma basis in HSR's oil and gas property account at cost.
The unaudited pro forma financial statements should be read in conjunction
with the related historical financial statements and related notes. The pro
forma information presented is not necessarily indicative of the financial
position or results that would have actually occurred had the Merger and Initial
Basin Acquisition been consummated on the dates indicated or which may occur in
the future.
77
<PAGE> 84
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
WITHOUT SECOND BASIN ACQUISITION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
(HISTORICAL)
--------------------------- PRO FORMA
HSR TIDE WEST ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS....................... $ 11,085,645 $ 24,708,000 $ (2,444,000)D $ 33,349,645
------------ ------------ ------------ ------------
OIL AND GAS PROPERTIES, at cost,
using the full cost method:
Undeveloped acreage................ 26,778,702 27,111,655 A 53,890,357
Costs subject to depreciation,
depletion and amortization...... 341,382,375 149,734,000 70,239,356 A 561,355,731
Less -- accumulated
depreciation, depletion and
amortization.................. (89,350,067) (32,184,000) 32,184,000 F (89,350,067)
Retained production payment........ 7,200,000 A 7,200,000
------------ ------------ ------------ ------------
Net oil and gas properties...... 278,811,010 117,550,000 136,735,011 533,096,021
------------ ------------ ------------ ------------
Gas gathering and other, net....... 12,192,610 2,139,000 260,970 A 14,592,580
------------ ------------ ------------ ------------
TOTAL ASSETS......................... $302,089,265 $144,397,000 $134,551,981 $581,038,246
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES.................. $ 27,200,319 $ 20,338,000 $ 4,654,000 A $ 52,192,319
------------ ------------ ------------ ------------
ACCRUED AD VALOREM TAXES............. 6,574,405 812,326 A 7,386,731
MINORITY INTEREST.................... 117,000 117,000
LONG-TERM BANK DEBT, net of current
portion............................ 51,000,000 40,800,000 104,600,027 D/A 196,400,027
9 7/8% SENIOR SUBORDINATED NOTES, net
of unamortized discount............ 74,536,875 74,536,875
DEFERRED INCOME TAXES................ 23,603,540 8,636,000 45,732,790 B 77,972,330
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY................. 119,174,126 74,506,000 (21,247,162)C 172,432,964
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $302,089,265 $144,397,000 $134,551,981 $581,038,246
============ ============ ============ ============
</TABLE>
The accompanying Notes are an integral part of these Statements.
78
<PAGE> 85
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
WITHOUT SECOND BASIN ACQUISITION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(HISTORICAL)
------------------------- PRO FORMA
HSR TIDE WEST ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales................ $53,394,029 $36,508,000 $ $ 89,902,029
Other gas revenues............... 1,782,349 377,304 E 2,159,653
Trading and transportation....... 82,927,000 82,927,000
Interest and other income........ 163,510 1,266,000 564,055 J 2,030,690
37,125 K
----------- ----------- ----------- ------------
Total revenues........... 55,339,888 120,701,000 978,484 177,019,372
----------- ----------- ----------- ------------
EXPENSES:
Production taxes................. 4,050,483 2,517,000 6,567,483
Lease operating.................. 9,935,809 7,747,000 17,682,809
Depreciation, depletion and
amortization.................. 26,608,885 11,365,000 (11,365,000)F 46,556,410
19,947,525 F
General and administrative....... 4,075,581 4,557,000 (1,060,000)G 7,572,581
Interest......................... 10,218,555 3,186,000 5,952,066 H 19,356,621
Trading and transportation....... 80,642,000 80,642,000
----------- ----------- ----------- ------------
Total expenses........... 54,889,313 110,014,000 13,474,591 178,377,904
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME
TAXES............................ 450,575 10,687,000 (12,496,107) (1,358,532)
PROVISION (BENEFIT) FOR INCOME
TAXES............................ 176,419 4,016,000 (4,710,020)I (517,601)
----------- ----------- ----------- ------------
NET INCOME (LOSS).................. $ 274,156 $ 6,671,000 $(7,786,087) $ (840,931)
=========== =========== =========== ============
EARNINGS (LOSS) PER SHARE:
Common and common equivalent
shares........................ $ 0.02 $ 0.67 $ (0.05)
=========== =========== ============
Common and common equivalent
shares -- assuming full
dilution...................... $ 0.02 $ 0.65 $ (0.05)
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common and common equivalent
shares........................ 11,440,000 9,897,000 5,976,472 C 17,416,472
=========== =========== =========== ============
Common and common equivalent
shares -- assuming full
dilution...................... 11,450,000 10,247,000 5,976,472 C 17,426,472
=========== =========== =========== ============
</TABLE>
The accompanying Notes are an integral part of these Statements.
79
<PAGE> 86
HS RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS WITHOUT
SECOND BASIN ACQUISITION
(A) Record cost of the oil and gas properties, retained production payment
and production tax liability assumed and additional bank debt incurred by HSR in
connection with the Initial Basin Acquisition and Merger as follows:
<TABLE>
<CAPTION>
INITIAL TOTAL PRO
BASIN TIDE WEST FORMA
ACQUISITION MERGER ADJUSTMENTS
----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisition Costs
Purchase price including liabilities assumed.... $ 38,000 $ 210,960(*) $ 248,960
Transaction costs............................... 520 8,000 8,520
--------- --------- ---------
38,520 218,960 257,480
Less: Amount sold pursuant to the Chase Asset
Monetization Arrangement..................... (24,900) (24,900)
--------- --------- ---------
Net purchase price.............................. 13,620 218,960 232,580
Deferred tax gross-up (see note B).............. 54,369 54,369
Transaction costs charged to stockholders'
equity....................................... (8,000) (8,000)
Less: Tide West assets (historical)............. (144,397) (144,397)
--------- --------- ---------
Total pro forma adjustment...................... $ 13,620 $ 120,932 $ 134,552
========= ========= =========
Allocation of Acquisition Costs
Current assets.................................. $ $ (2,444) $ (2,444)
Oil and gas properties -- undeveloped
properties................................... 1,500 25,612 27,112
Oil and gas properties -- developed
properties................................... 4,920 65,319 70,239
Accumulated DD&A -- Tide West historical........ 32,184 32,184
Retained production payment..................... 7,200 7,200
Gas gathering and other, net.................... 261 261
--------- --------- ---------
Total pro forma adjustment...................... $ 13,620 $ 120,932 $ 134,552
========= ========= =========
Acquisition Funding and Liabilities Assumed
Current liabilities............................. $ $ 4,654 $ 4,654
Accrued ad valorem taxes........................ 812 812
Long term bank debt............................. 12,808 91,792 104,600
Deferred income taxes........................... 45,733 45,733
Stockholders' equity -- common stock............ 6 6
Stockholders' equity -- net paid in capital..... (21,253) (21,253)
--------- --------- ---------
Total pro forma adjustment...................... $ 13,620 $ 120,932 $ 134,552
========= ========= =========
</TABLE>
- ---------------
(*) The purchase price including liabilities assumed for the Merger is
comprised of (i) cash consideration of $87,536,353, including $4,463,856,
assuming 3% dissenters, (ii) HSR Common Stock value of $61,258,838 for the
issuance of 5,976,472 shares valued at $10.25 per share and (iii) assumed
Tide West liabilities of $62,165,000.
(B) Record additional deferred taxes resulting from the Merger. The gross
up of the property costs and deferred tax liability are required due to the
difference between the purchase price of the properties acquired and the tax
basis of those properties.
(C) Adjustment to eliminate the historical cost of Tide West's
Stockholders' Equity of $74,506,000 and to record the issuance of 5,976,472
additional HSR shares valued at $10.25 per share less related transaction costs
of $8,000,000.
(D) Record reduction in long-term debt repaid with Tide West cash.
80
<PAGE> 87
(E) Record estimated income from the monetization of Section 29 tax credits
generated from the assets acquired in the Basin Acquisition. The annual
estimated qualifying production is approximately 869,000 Mcf for the Initial
Basin Acquisition. No tax credits are anticipated from Tide West production. The
adjustment is based on the monetization of the Section 29 tax credits available
from the Initial Basin Acquisition pursuant to arrangements the Company has with
two financial institutions under the same terms as currently apply to the
monetization of the Company's other Section 29 tax credits.
(F) Record the elimination of Tide West's accumulated depreciation,
depletion and amortization (DD&A) and record consolidated DD&A expense on the
assets acquired. Pro forma DD&A expense on proved oil and gas properties is
computed by combining HSR's net unamortized costs of proved properties plus the
portion of the purchase price and transaction costs allocated to proved
properties and using the units-of-production amortization method based on
estimates of total pro forma proved reserves. The combined DD&A rate per Boe for
the assets acquired is $5.18. The depreciation expense recorded for the Tide
West fixed assets is $332,000.
(G) General and administrative expenses have been adjusted to reflect
savings in salary and bonus expense that would have occurred if the Merger had
taken place at the beginning of the period. The adjustment reflects the salary
and bonuses paid to three senior executives of Tide West who will be terminated
effective upon the closing of the Merger and who will not be replaced.
(H) Record elimination of Tide West interest expense and record interest
expense related to debt necessary to finance the Merger and Initial Basin
Acquisition, using HSR's average LIBOR rate during 1995 of 7.32%. Interest was
calculated on new debt of approximately $108,300,000 which was composed of
$12,800,000 for the Initial Basin Acquisition and $95,500,000 for the Merger.
Interest was capitalized on undeveloped property costs as appropriate.
(I) Record the tax effect of the acquisition assuming a combined federal
and state effective tax rate of 38.1%.
(J) Record interest income on the retained production payment at the rate
of 8.5%.
(K) To adjust for Tide West successful efforts expenses capitalized under
full cost accounting.
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Supplemental oil and gas reserve information related to the Pro Forma
Financial Statements Without Second Basin Acquisition is reported in compliance
with FASB Statement No. 69, "Disclosures about Oil and Gas Producing
Activities." Net proved oil and gas reserves and the discounted future net cash
flows related to those reserves were estimated by HSR's petroleum engineers as
of January 1, 1996, the effective date of the acquisition. Information presented
in that report was the basis for the net proved oil and gas reserve and
standardized measure disclosures presented below. Since reserve evaluations for
other periods had not been prepared, it was necessary to make certain
assumptions and adjustments to prepare the following disclosures. However, HSR
believes that the disclosures presented are adequate and are not misleading.
The following tables set forth information for the year ended December 31,
1995, with respect to changes in the proved reserves. Quantities of natural gas
are expressed in this report in terms of thousand cubic feet (Mcf). Oil is
quantified in terms of barrels (Bbls).
81
<PAGE> 88
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
OIL GAS
BBLS MCF
------ -------
(IN THOUSANDS)
<S> <C> <C>
Total proved reserves:
Beginning of year......................................................... 23,048 442,385
Production................................................................ (2,153) (39,149)
Consolidation of limited partnership...................................... 419 15,964
Revisions of previous estimates........................................... (1,965) (16,604)
Extensions, discoveries and other additions............................... 2,012 51,804
Purchases of reserves in place............................................ 5,828 59,103
Sale of reserves in place................................................. (111) (1,886)
------ -------
End of year............................................................... 27,078 511,617
====== =======
</TABLE>
At December 31, 1995, proved developed reserves included 16,980 MBbls and
391,502 MMcf.
Information with respect to the estimated discounted future net cash flows
for the Pro Forma Financial Statements Without Second Basin Acquisition for the
year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Future cash inflows.................................................... $1,382,949
Future production costs................................................ (378,350)
Future development costs............................................... (139,600)
----------
Future pre-tax cash flows.............................................. 864,999
Future income tax expense.............................................. (208,671)
----------
After-tax future net cash flows........................................ 656,328
10% annual discount.................................................... (315,545)
----------
Discounted future net cash flows....................................... $ 340,783
==========
</TABLE>
As of December 31, 1995 the oil and gas prices used in the determination of
future cash flows were $18.56 and $1.72 per Bbl and Mcf, respectively.
For standardized measure purposes, future income taxes are estimated using
the "year-by-year" method. However, for ceiling test purposes, future income
taxes are estimated using the "short-cut" method.
82
<PAGE> 89
Principal changes for the Pro Forma Financial Statements Without Second
Basin Acquisition estimated discounted future net cash flows for the year ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Beginning of year...................................................... $291,544
Oil and gas sales, net of production costs........................... (63,915)
Sales of reserves in place, net...................................... (1,850)
Net change in prices and production costs............................ 7,381
Extensions and discoveries less related costs........................ 61,128
Change in future development costs................................... (19,037)
Development costs incurred during the year that reduce future
development costs................................................. 33,402
Revision of previous quantity estimates.............................. (38,555)
Purchases of reserves in place, net.................................. 70,926
Accretion of discount................................................ 37,783
Net change in income taxes........................................... (17,804)
Changes in production rates and other................................ (20,220)
--------
End of Year............................................................ $340,783
========
</TABLE>
83
<PAGE> 90
PRO FORMA FINANCIAL STATEMENTS
WITH INITIAL BASIN ACQUISITION
The following unaudited pro forma condensed consolidated balance sheet as
of December 31, 1995, and pro forma condensed consolidated statement of
operations for the year then ended adjust the historical financial information
of HSR to reflect the Initial Basin Acquisition. The pro forma balance sheet and
statement of operations were prepared as if the Initial Basin Acquisition was
consummated on December 31, 1995 and January 1, 1995, respectively. The pro
forma adjustments are based on estimates and assumptions explained in further
detail in the accompanying notes. With respect to the Initial Basin Acquisition,
HSR has entered into the Chase Asset Monetization Arrangement pursuant to which
it sold at its cost certain of the interests that it had acquired from Basin
(see "Information About the Combining Companies -- HS Resources,
Inc. -- Financing"). The interests sold represent primarily proved producing and
proved non-producing wells, which HSR sold for cash and a retained production
payment. Pursuant to the terms of the retained production payment, HSR will not
receive any production revenues from such wells (except in certain instances)
until a specified amount of revenue has been produced in the future. Therefore,
with respect to the Initial Basin Acquisition, the accompanying pro forma
financial statements do not reflect any production revenues or related expenses
during the pro forma period. HSR will operate the properties on behalf of the
buyer for a fee and has an option to repurchase the properties at fair market
value.
HSR is entitled to accrue interest on its retained production payment at
the rate of 8.5% per year, and such amount is reflected as interest income.
Following the Chase Asset Monetization Arrangement transaction, HSR has retained
primarily proved undeveloped properties, undrilled locations and Section 29 tax
credits, and believes these are the higher growth assets. These assets have been
recorded on a pro forma basis in HSR's oil and gas property account at cost.
The unaudited pro forma financial statements should be read in conjunction
with the related historical financial statements and related notes. The pro
forma information presented is not necessarily indicative of the financial
position or results that would have actually occurred had the Initial Basin
Acquisition been consummated on the dates indicated or which may occur in the
future.
84
<PAGE> 91
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
WITH INITIAL BASIN ACQUISITION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
(HISTORICAL)
------------ PRO FORMA
HSR ADJUSTMENTS PRO FORMA
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS..................................... $ 11,085,645 $ -- $ 11,085,645
------------ ----------- ------------
OIL AND GAS PROPERTIES, at cost, using the full
cost method:
Undeveloped acreage.............................. 26,778,702 1,500,000 A 28,278,702
Costs subject to depreciation, depletion and
amortization.................................. 341,382,375 4,920,000 A 346,302,375
Less -- accumulated depreciation, depletion
and amortization............................ (89,350,067) -- (89,350,067)
Retained production payment...................... 7,200,000 A 7,200,000
------------ ----------- ------------
Net oil and gas properties.................... 278,811,010 13,620,000 292,431,010
------------ ----------- ------------
Gas gathering and other, net..................... 12,192,610 -- 12,192,610
------------ ----------- ------------
TOTAL ASSETS....................................... $302,089,265 $13,620,000 $315,709,265
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES................................ $ 27,200,319 $ -- $ 27,200,319
------------ ----------- ------------
ACCRUED AD VALOREM TAXES........................... 6,574,405 812,326 A 7,386,731
MINORITY INTEREST..................................
LONG-TERM BANK DEBT, net of current portion........ 51,000,000 12,807,674 A 63,807,674
9 7/8% SENIOR SUBORDINATED NOTES, net of
unamortized discount............................. 74,536,875 -- 74,536,875
DEFERRED INCOME TAXES.............................. 23,603,540 -- 23,603,540
------------ ----------- ------------
STOCKHOLDERS' EQUITY............................... 119,174,126 -- 119,174,126
------------ ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $302,089,265 $13,620,000 $315,709,265
============ =========== ============
</TABLE>
The accompanying Notes are an integral part of these Statements.
85
<PAGE> 92
HS RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
WITH INITIAL BASIN ACQUISITION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
---------- PRO FORMA
HSR ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales.................................. $53,394,029 $ -- $53,394,029
Other gas revenues................................. 1,782,349 377,304 B 2,159,653
Interest and other income.......................... 163,510 564,055 E 727,565
----------- -------- -----------
Total revenues............................. 55,339,888 941,359 56,281,247
----------- -------- -----------
EXPENSES:
Production taxes................................... 4,050,483 -- 4,050,483
Lease operating.................................... 9,935,809 -- 9,935,809
Depreciation, depletion and amortization........... 26,608,885 -- 26,608,885
General and administrative......................... 4,075,581 -- 4,075,581
Interest........................................... 10,218,555 833,578 C 11,052,133
----------- -------- -----------
Total expenses............................. 54,889,313 833,578 55,722,891
----------- -------- -----------
INCOME (LOSS) BEFORE INCOME TAXES.................... 450,575 107,781 558,356
PROVISION (BENEFIT) FOR INCOME TAXES................. 176,419 36,315 D 212,734
----------- -------- -----------
NET INCOME (LOSS).................................... $ 274,156 $ 71,466 $ 345,622
=========== ======== ===========
EARNINGS (LOSS) PER SHARE:
Common and common equivalent shares................ $ 0.02 0.03
=========== ===========
Common and common equivalent shares -- assuming
full dilution................................... $ 0.02 $ 0.03
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Common and common equivalent shares................ 11,440,000 -- 11,440,000
=========== ======== ===========
Common and common equivalent shares -- assuming
full dilution................................... 11,450,000 - 11,450,000
=========== ======== ===========
</TABLE>
The accompanying Notes are an integral part of these Statements.
86
<PAGE> 93
HS RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS WITH
INITIAL BASIN ACQUISITION
(A) Record cost of the oil and gas properties, retained production payment
and production tax liability assumed and additional bank debt incurred by HSR in
connection with the Initial Basin Acquisition as follows:
<TABLE>
<CAPTION>
TOTAL
PRO FORMA
ADJUSTMENTS
--------------
(IN THOUSANDS)
<S> <C>
Acquisition Costs
Purchase price including liabilities assumed......................... $ 38,000
Transaction costs.................................................... 520
--------
38,520
Less: Amount sold pursuant to the Chase Asset Monetization
Arrangement................................................... (24,900)
--------
Net purchase price................................................... $ 13,620
========
Allocation of Acquisition Costs
Oil and gas properties -- undeveloped properties..................... $ 1,500
Oil and gas properties -- developed properties....................... 4,920
Retained production payment.......................................... 7,200
--------
Total pro forma adjustment........................................... $ 13,620
========
Acquisition Funding and Liabilities Assumed
Accrued ad valorem taxes............................................. $ 812
Long-term bank debt.................................................. 12,808
--------
Total pro forma adjustment........................................... $ 13,620
========
</TABLE>
(B) Record estimated income from the monetization of Section 29 tax credits
generated from the assets acquired in the Initial Basin Acquisition. The annual
estimated qualifying production is approximately 869,000 Mcf for the Initial
Basin Acquisition. The adjustment is based on the monetization of the Section 29
tax credits available from the Initial Basin Acquisition pursuant to
arrangements the Company has with two financial institutions under the same
terms as currently apply to the monetization of the Company's other Section 29
tax credits.
(C) Record interest expense related to debt necessary to finance the
Initial Basin Acquisition, using HSR's average LIBOR rate during 1995 of 7.32%.
Interest was calculated on new debt of approximately $12,800,000 for the Initial
Basin Acquisition. Interest was capitalized on undeveloped property costs as
appropriate.
(D) Record the tax effect of the acquisition assuming a combined federal
and state effective tax rate of 38.1%.
(E) Record interest income on the retained production payment at the rate
of 8.5%.
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Supplemental oil and gas reserve information related to the Pro Forma
Financial Statements With Initial Basin Acquisition is reported in compliance
with FASB Statement No. 69, "Disclosures about Oil and Gas Producing
Activities." Net proved oil and gas reserves and the discounted future net cash
flows related to those reserves were estimated by HSR's petroleum engineers as
of January 1, 1996, the effective date of the acquisition. Information presented
in that report was the basis for the net proved oil and gas reserve and
87
<PAGE> 94
standardized measure disclosures presented below. Since reserve evaluations for
other periods had not been prepared, it was necessary to make certain
assumptions and adjustments to prepare the following disclosures. However, HSR
believes that the disclosures presented are adequate and are not misleading.
The following tables set forth information for the year ended December 31,
1995, with respect to changes in proved reserves. Quantities of natural gas are
expressed in this report in terms of thousand cubic feet (Mcf). Oil is
quantified in terms of barrels (Bbls).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
-------------------
OIL GAS
BBLS MCF
------ -------
(IN THOUSANDS)
<S> <C> <C>
Total proved reserves:
Beginning of year........................................................ 20,150 277,292
Production............................................................... (1,581) (21,050)
Revisions of previous estimates.......................................... (1,294) (1,364)
Extensions, discoveries and other additions.............................. 1,127 11,851
Purchases of reserves in place........................................... 3,124 45,354
Sale of reserves in place................................................ (89) (1,292)
------ -------
End of year.............................................................. 21,437 310,791
====== =======
</TABLE>
At December 31, 1995, proved developed reserves included 11,557 MBbls and
219,262 MMcf.
For standardized measure purposes, future income taxes are estimated using
the "year-by-year" method. However, for ceiling test purposes, future income
taxes are estimated using the "short-cut" method.
Information with respect to the estimated discounted future net cash flows
for the Pro Forma Financial Statements With Initial Basin Acquisition for the
year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Future cash inflows............................................................ $ 908,764
Future production costs........................................................ (233,550)
Future development costs....................................................... (122,499)
----------
Future pre-tax cash flows...................................................... 552,715
Future income tax expense...................................................... (135,319)
----------
After-tax future net cash flows................................................ 417,396
10% annual discount............................................................ (215,429)
----------
Discounted future net cash flows............................................... $ 201,967
==========
</TABLE>
As of December 31, 1995 the oil and gas prices used in the determination of
future cash flows were $18.64 and $1.64 per Bbl and per Mcf, respectively.
88
<PAGE> 95
Principal changes in estimated discounted future net cash flows for the Pro
Forma Financial Statements With Initial Basin Acquisition for the year ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
<S> <C>
Beginning of year............................................................ $ 196,219
Oil and gas sales, net of production costs................................. (38,529)
Sales of reserves in place, net............................................ (1,339)
Net change in prices and production costs.................................. 4,402
Extensions and discoveries less related costs.............................. 11,195
Change in future development costs......................................... (14,745)
Development costs incurred during the year that reduce future development
costs................................................................... 33,402
Revision of previous quantity estimates.................................... (6,919)
Purchases of reserves in place, net........................................ 36,213
Accretion of discount...................................................... 23,771
Net change in income taxes................................................. (18,482)
Changes in production rates and other...................................... (23,221)
---------
End of Year.................................................................. $ 201,967
=========
</TABLE>
89
<PAGE> 96
DESCRIPTION OF HSR CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of HSR consists of (a) 30,000,000 shares of
HSR Common Stock and (b) 15,000,000 shares of preferred stock, par value $.001
per share, issuable in series ("HSR Preferred Stock"). No class of capital stock
of HSR entitles the holder thereof to any preemptive rights to purchase or
subscribe for shares of any class or any other securities.
The following description of the material terms of the capital stock of HSR
is subject to the detailed provisions of HSR's Amended and Restated Certificate
of Incorporation, as amended (the "HSR Charter"), and bylaws as currently in
effect (the "HSR Bylaws"). This description does not purport to be complete or
to give full effect to the terms of the provisions of statutory or common law.
Reference is made to the HSR Charter filed as an exhibit to HSR's Registration
Statement on Form S-1, filed October 2, 1992, the HSR Bylaws, filed as an
exhibit to HSR's Annual Report on Form 10-K for the fiscal year ended December
31, 1992, and the Rights Agreement, dated as of February 28, 1996, between HSR
and Harris Trust Company of California (the "HSR Rights Agreement"), filed as an
exhibit to HSR's Registration Statement on Form 8-A, dated February 28, 1996,
all of which are incorporated herein by reference.
HSR COMMON STOCK
All issued and outstanding shares of HSR Common Stock are validly issued,
fully paid and nonassessable, and all shares of HSR Common Stock issued in
connection with the Merger will likewise be validly issued, fully paid and
nonassessable. The holders of HSR Common Stock are entitled to one vote for each
share held on all matters submitted to a vote of common stockholders. The HSR
Common Stock does not have cumulative voting rights. Each share of HSR Common
Stock is entitled to participate equally in dividends, as and when declared by
the HSR Board, and in the distribution of assets in the event of liquidation,
subject in all cases to any prior rights of outstanding shares of HSR Preferred
Stock. The shares of HSR Common Stock have no preemptive or conversion rights,
redemption rights or sinking fund provisions.
The outstanding shares of HSR Common Stock are listed on the NYSE and trade
under the symbol "HSE." Harris Savings and Trust is the transfer agent,
registrar and dividend disbursing agent for the HSR Common Stock.
HSR PREFERRED STOCK
Under the HSR Charter, the HSR Board is authorized, without further
stockholder action, to provide for the issuance of up to 15,000,000 shares of
HSR Preferred Stock in one or more series. The rights, preferences, privileges
and restrictions, including dividend rights, voting rights, conversion rights,
terms of redemption and liquidation preferences, of the HSR Preferred Stock of
each series will be fixed or designated by the HSR Board pursuant to a
certificate of designations without stockholder approval. As of the date of this
Joint Proxy Statement/Prospectus, no shares of HSR Preferred Stock have been
issued.
On February 28, 1996, the HSR Board declared a dividend distribution of one
Preferred Stock Purchase Right (an "HSR Right") for each outstanding share of
HSR Common Stock. The description and terms of the HSR Rights are set forth in
the HSR Rights Agreement. The distribution was made as of March 14, 1996, to
stockholders of record on that date. Each HSR Right entitles the registered
holder of HSR Common Stock to purchase from HSR one one-hundredth ( 1/100) of a
share of HSR Preferred Stock, designated as Series A Junior Preferred Stock, at
a price of $60.00 per one one-hundredth ( 1/100) of a share. The HSR Rights will
expire at the close of business on March 14, 2006, unless earlier redeemed by
HSR, as described in the HSR Rights Agreement.
Initially, the HSR Rights will not be exercisable or represented by a
separate certificate but will trade together with the HSR Common Stock. The HSR
Rights, unless redeemed prior thereto, become exercisable only upon the close of
business on the day which is the earlier of (a) the tenth day after a public
announcement that a person or group of affiliated or associated persons, with
certain exceptions as noted in the
90
<PAGE> 97
HSR Rights Agreement, has acquired beneficial ownership of 15% or more of HSR's
voting stock (an "Acquiring Person") or (b) the tenth business day (or such
later date as may be determined by the HSR Board prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) after the
commencement or announcement of an intention to commence a tender or exchange
offer, the consummation of which would result in the ownership of 30% or more of
HSR's voting stock (even if no stock is actually purchased pursuant to such
offer). An Acquiring Person does not include, among others, NGP upon its
acquisition of beneficial ownership of 20.193% of the voting stock of HSR
pursuant to the Merger Agreement; provided, that NGP will thereafter become an
Acquiring Person upon the acquisition of additional voting stock of HSR so that
NGP, together with its affiliates and associates, is the beneficial owner of
22.193% or more of the voting stock of HSR; provided, further, that in the event
NGP does not acquire voting stock of HSR pursuant to the Merger Agreement, NGP
will nonetheless become an Acquiring Person if it, together with its affiliates
and associates, will be the beneficial owner of 15% or more of the voting stock
of HSR. All further issuances of HSR Common Stock (including the HSR Common
Stock to be issued in connection with the Merger) will include HSR Rights.
For as long as the HSR Rights are redeemable pursuant to the terms of the
HSR Rights Agreement, HSR may, except with respect to the redemption price or
date of expiration of the HSR Rights, amend the HSR Rights in any manner,
including an amendment to extend the time period in which the HSR Rights may be
redeemed. At any time when the HSR Rights are not then redeemable, HSR may amend
the HSR Rights in any manner that does not materially adversely affect the
interests of holders of the HSR Rights as such. Amendments to the HSR Rights
Agreement from and after the time that any Person (as defined in the HSR Rights
Agreement) becomes an Acquiring Person requires the approval of a majority of
the Continuing Directors (as defined in the HSR Rights Agreement).
A copy of the HSR Rights Agreement has been filed with the Commission as an
exhibit to a Registration Statement on Form 8-A, dated February 28, 1996. A copy
of the HSR Rights Agreement is available from the Commission. This is a summary
description of the material terms of the HSR Rights. Reference is made to the
full text of the HSR Rights Agreement. See "Incorporation of Documents by
Reference."
91
<PAGE> 98
DESCRIPTION OF TIDE WEST CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of Tide West consists of (a) 20,000,000 shares
of Tide West Common Stock and (b) 20,000,000 shares of preferred stock, par
value $.01 per share, issuable in series ("Tide West Preferred Stock"). No class
of capital stock of Tide West entitles the holder thereof to any preemptive
rights to purchase or subscribe for shares of any class or any other securities,
other than as the Tide West Board may determine.
The following description of the material terms of the capital stock of
Tide West is subject to the detailed provisions of Tide West's Certificate of
Incorporation, as amended (the "Tide West Charter"), and bylaws as currently in
effect (the "Tide West Bylaws"). This description does not purport to be
complete or to give full effect to the terms of the provisions of statutory or
common law. Reference is made to the Tide West Charter and the Tide West Bylaws,
which are filed as exhibits to the Tide West 1995 Form 10-K, which is
incorporated into this Joint Proxy Statement/Prospectus by reference.
TIDE WEST COMMON STOCK
All issued and outstanding shares of Tide West Common stock are validly
issued, fully paid and nonassessable. The holders of Tide West Common Stock are
entitled to one vote for each share held on all matters submitted to a vote of
common stockholders. The Tide West Common Stock does not have cumulative voting
rights. Each share of Tide West Common Stock is entitled to participate equally
in dividends, as and when declared by the Tide West Board, and in the
distribution of assets in the event of liquidation, subject in all cases to any
prior rights of outstanding shares of Tide West Preferred Stock. The shares of
Tide West Common Stock have no preemptive or conversion rights, redemption
rights or sinking fund provisions.
The outstanding shares of Tide West Common Stock are listed on Nasdaq and
trade under the symbol "TIDE." The First National Bank of Boston is the transfer
agent, registrar and dividend disbursing agent for the Tide West Common Stock.
TIDE WEST PREFERRED STOCK
Pursuant to the Tide West Charter, Tide West is authorized to issue up to
20,000,000 shares of Tide West Preferred Stock, and the Tide West Board by
resolution may establish one or more classes or series of Tide West Preferred
Stock having the number of shares, designations, relative voting rights,
dividend rights, liquidation and other rights, preferences and limitations that
the Tide West Board fixes without any stockholder approval. As of the date of
this Joint Proxy Statement/Prospectus, no shares of Tide West Preferred Stock
have been issued and no series of Tide West Preferred Stock has been designated
by the Tide West Board.
92
<PAGE> 99
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Merger, holders of Tide West Common Stock (other than
Dissenting Stockholders) will become stockholders of HSR, and the rights of all
such former Tide West stockholders will thereafter be governed by the HSR
Charter, the HSR Bylaws and the HSR Rights Agreement. The following is a summary
comparison of the material differences between the rights of holders of HSR
Common Stock and holders of Tide West Common Stock. Because both Tide West and
HSR are organized and exist under Delaware law and are subject to the corporate
laws of Delaware, these differences arise from various provisions of the
certificates of incorporation and bylaws of the two companies. Reference is made
to the full text of the HSR Charter, the HSR Bylaws, the HSR Rights Agreement,
the Tide West Charter and the Tide West Bylaws. For information as to how to
obtain copies of such documents, see "Incorporation of Documents by Reference."
CLASSIFICATION OF BOARD OF DIRECTORS
<TABLE>
<S> <C>
HSR. The HSR Board is divided into Tide West. Tide West does not have a
three classes. The directors of each class classified board of directors. Rather, all
are elected for three-year terms, with the of the members of the Tide West Board are
terms of the three classes staggered so that elected to serve one-year terms, at each
directors from a single class are elected at annual meeting of stockholders.
each annual meeting of stockholders.
</TABLE>
Classification of directors has the effect of making it more difficult for
stockholders to change the composition of the board of directors. At least two
annual meetings of stockholders, instead of one, will generally be required to
effect a change in the majority of the HSR Board. Such a delay may help ensure
that the HSR directors, if confronted by a stockholder attempting to force a
proxy contest, a tender or exchange offer or other extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be the
best interests of the stockholders. The classification provisions could also
have the effect of discouraging a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of HSR even though
such a transaction could be beneficial to HSR and its stockholders. The
classification of the HSR Board might also increase the likelihood that
incumbent directors will retain their positions.
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS; FILLING VACANCIES
<TABLE>
<S> <C>
HSR. The HSR Bylaws provide that, Tide West. The Tide West Bylaws provide
subject to any rights of holders of HSR that the number of directors of Tide West shall
Preferred Stock, the number of directors of be fixed from time to time by the Tide West
HSR will be fixed from time to time by Board pursuant to a resolution adopted by
action of not less than a majority of the not less than a majority of the Tide West
HSR Board then in office, but in no event directors present at any meeting at which a
may the number of directors be less than quorum is present, but in no event may the
five nor more than nine. The HSR Board number of directors be less than one nor
currently consists of five members, three of more than twelve. The Tide West Board
whom are officers of HSR and the remaining currently consists of seven members, three
two of whom are independent directors, one of whom are officers of Tide West and the
of whom is a limited partner in the general remaining four of whom are independent
partner of NGP. directors. Of the independent directors, two
are limited partners and one is the general
partner in the general partner of NGP.
The HSR Charter provides that
stockholders may remove a director of HSR The Tide West Bylaws provide that
with or without cause at any time upon the stockholders may remove a director of Tide
affirmative vote of one or more stockholders West, with or without cause, at any time
holding not less than 50% of the voting upon the affirmative vote of holders of a
power of all the then outstanding shares of majority of all the then outstanding shares
stock entitled to vote generally in the of stock entitled to vote generally in the
election of directors (the "HSR Voting election of directors.
Stock").
</TABLE>
93
<PAGE> 100
<TABLE>
<S> <C>
Any vacancies (including newly-created The Tide West Bylaws provide that vacancies
directorships) will be filled only by the (including newly-created directorships) may
affirmative vote of a majority of the be filled by the vote of a majority of the
remaining directors. A director appointed to directors then in office, though less than a
fill a vacancy created by the resignation or quorum, or by a sole remaining director.
termination of a director will serve the Each director so elected shall hold office
remainder of the term of the resigning or until the next annual meeting of the
terminated director. stockholders and until his or her successor
shall have been duly elected and shall
qualify.
</TABLE>
The effect of the foregoing provisions could be to increase the likelihood
that incumbent directors of HSR will retain their positions. In addition, the
HSR Board, because of the provisions relating to the fixing of the number of
directors and the filling of vacancies, could prevent any stockholder or group
of stockholders from enlarging the HSR Board and filling the new directorships
with such stockholder's or group's own nominees.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
<TABLE>
<S> <C>
HSR. Action by stockholders of HSR may Tide West. Action by stockholders of Tide
be taken without a meeting of stockholders West may be taken without a meeting of the
by written consent so long as one or more stockholders by written consent so long as
stockholders holding at least 75% of the the stock ownership represented by those
outstanding stock entitled to vote on such consenting in writing to the action amounts
action at a meeting of stockholders consent at least to the number of votes that would
in writing to such action. Special meetings have been necessary to approve such action
of the stockholders may be called at any at a meeting of stockholders. Special
time by HSR's President or Chairman of the meetings of the stockholders may be called
Board, by a majority of the HSR Board or by at any time by Tide West's President or
one or more stockholders holding not less Chairman of the Board, a majority of the
than 50% of all of the outstanding stock Tide West Board or one or more stockholders
entitled to vote on the business to be holding not less than one-tenth of all of
transacted at such meeting, for any purpose the outstanding stock entitled to vote on
or purposes for which meetings may be the business to be transacted at such
lawfully held. special meeting, for any purpose or purposes
for which meetings may be lawfully called.
</TABLE>
The HSR provisions limiting stockholder action by written consent and
limiting the ability to call special meetings could have the effect of delaying
consideration of a stockholder proposal until the next annual meeting of
stockholders. These provisions could also limit the ability of the holders of
HSR Common Stock from unilaterally using the written consent procedure to take
stockholder action.
BUSINESS AT ANNUAL MEETINGS
<TABLE>
<S> <C>
HSR. Any business properly brought Tide West. The Tide West Bylaws contain
before an annual meeting of HSR substantially similar provisions.
stockholders may be considered at such
meeting.
</TABLE>
"FAIR PRICE" PROVISIONS
<TABLE>
<S> <C>
HSR. The HSR Charter contains a "fair Tide West. The Tide West Charter does not
price" provision that requires the have a provision similar or comparable to
affirmative vote of the holders of at least the fair price provision of the HSR Charter.
66 2/3% of the HSR Voting Stock and the
affirmative vote of at least a majority of
the HSR Common Stock to approve any merger,
consolidation, sale or lease of all or
substantially all of HSR's assets or certain
other transactions
</TABLE>
94
<PAGE> 101
<TABLE>
<S> <C>
involving a Related Person (as defined
below). For purposes of this fair price
provision, a "Related Person" is any person
beneficially owning 5% or more of the HSR
Voting Stock who is a party to the
transaction at issue, or an affiliate of HSR
who was the beneficial owner of more than 5%
of the HSR Voting Stock within the past two
years and is a party to the transaction at
issue. The approval of 66 2/3% of the HSR
Voting Stock is not applicable to certain
transactions, including those that are
approved by at least two-thirds of HSR
Disinterested Directors (defined generally
as those members of the HSR Board who are
not affiliates or associates of the Related
Person and who were members of the HSR Board
prior to the time that the Related Person
became such) or that meet certain "fair
price" criteria contained in the HSR
Charter.
</TABLE>
The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for HSR, even
though such an offer might be beneficial to HSR and its stockholders.
"BLANK CHECK" PREFERRED STOCK
<TABLE>
<S> <C>
HSR. Subject to certain limitations Tide West. The Tide West Charter contains
prescribed by law and the rules of the substantially similar provisions relating to
NYSE, the HSR Board is authorized by the HSR Tide West Preferred Stock. See "Description
Charter, without any approval or other of Tide West Capital Stock -- Tide West
action by the HSR stockholders, to provide Preferred Stock."
for the issuance of shares of HSR Preferred
Stock in one or more series, to establish
the number of shares of each such series and
to fix the designations, powers, preferences
and rights of the shares of each such series
and any qualifications, limitation or
restrictions thereof. See "Description of
HSR Capital Stock -- HSR Preferred Stock."
</TABLE>
Management of HSR believes that the ability of the HSR Board to issue one
or more series of HSR Preferred Stock provides HSR with flexibility in
structuring possible future financing and acquisitions and in meeting other
corporate needs that might arise. Although the HSR Board has no intention at the
present time of doing so, it could issue additional series of HSR Preferred
Stock that could, depending on the terms of such series, further impede the
completion of a merger, tender offer or other takeover attempt. The HSR Board
will make any determination to issue such additional shares based on its
judgment as to the best interests of HSR and its stockholders. The HSR Board, in
so acting, could issue shares of HSR Preferred Stock having additional terms
that discourage an acquisition attempt through which an acquiror may be able to
change the composition of the HSR Board, including a tender offer or other
transaction that some of the HSR stockholders might believe to be in their best
interests or in which stockholders might receive a premium for the stock over
the then current market price of such stock.
95
<PAGE> 102
AMENDMENTS TO CERTIFICATE OF INCORPORATION
<TABLE>
<S> <C>
HSR. The HSR Charter provides that Tide West. Approval by the holders of a
approval by the holders of at least majority of the outstanding Tide West stock
two-thirds of the outstanding HSR Voting entitled to vote is required to amend the
Stock is required to amend the HSR Charter. Tide West Charter.
In addition, (a) approval by the holders of
at least 66 2/3% of the outstanding HSR
Voting Stock, together with approval by the
holders of at least 66 2/3% of the
outstanding HSR Common Stock or (b) approval
of at least two-thirds of all directors then
in office is required to amend the fair
price provisions described above.
</TABLE>
The provisions requiring the approval of holders of more than a majority of
the outstanding HSR Voting Stock make it more difficult for stockholders to make
changes in the HSR Charter, including changes designed to facilitate the
exercise of control over HSR.
PREFERRED STOCK PURCHASE RIGHTS
<TABLE>
<S> <C>
HSR. Pursuant to the HSR Rights Tide West. Tide West does not have a
Agreement, each HSR Right entitles a rights agreement or other agreement or
registered holder of HSR Common Stock to provisions similar to the HSR Rights Agreement.
purchase from HSR one one- hundredth (1/100)
of a share of HSR Preferred Stock,
designated as Series A Junior Preferred
Stock, at a price of $60.00 per one
one-hundredth (1/100) of a share. The HSR
Rights were issued to the HSR stockholders
of record on March 14, 1996.
The HSR Rights, unless earlier redeemed
by the HSR Board, become exercisable upon
the close of business on the day which is
the earlier of (a) the tenth day following a
public announcement that a person or group
of affiliated or associated persons, with
certain exceptions set forth in the HSR
Rights Agreement, has become an Acquiring
Person, and (b) the tenth business day,
subject to certain restrictions, after a
tender or exchange offer has been announced
or commenced. Prior to this time, the HSR
Rights would not be exercisable, would not
be represented by a separate certificate and
would not be transferable apart from the HSR
Common Stock. NGP, subject to certain
conditions, is not an Acquiring Person. See
"Description of HSR Capital Stock -- HSR
Preferred Stock."
</TABLE>
The HSR Rights Agreement is designed to protect the stockholders of HSR in
the event of an attempt to acquire control of HSR by discouraging transactions
which are not on terms which deal fairly with all of its stockholders. The HSR
Rights Agreement accomplishes this objective by encouraging anyone wishing to
acquire control of HSR to negotiate with the HSR Board. The HSR Rights Agreement
was implemented in February 1996 because HSR could be vulnerable to certain
coercive takeover attempts that may deprive HSR stockholders of the opportunity
to realize full value on their investment. Moreover, since numerous other
publicly-owned U.S. companies have adopted similar protective measures, it is
appropriate that HSR's stockholders be afforded similar protection. The
distribution of the HSR Rights is not intended to prevent a
96
<PAGE> 103
takeover of HSR on terms beneficial to its stockholders and, in fact, will not
do so. It may, however, deter an attempt to acquire HSR in a manner or on terms
that the HSR Board determines not to be in the best interests of its
stockholders, and it may render a change in control of HSR more difficult. The
HSR Rights also are intended to protect HSR and its stockholders against unfair
takeover tactics which often unfairly pressure stockholders to sell their
investments at less than full value.
DELAWARE ANTI-TAKEOVER STATUTE
<TABLE>
<S> <C>
HSR. HSR is a Delaware corporation and Tide West. Tide West is also a Delaware
is subject to Section 203 of the Delaware corporation and is also subject to Section
Act ("Section 203"). In general, Section 203 203 of the Delaware Act, with generally the
prevents an "interested stockholder" same effect as that described for HSR. The
(defined generally as a person owning 15% or provisions of Section 203 will not apply to
more of the HSR Voting Stock) from engaging the Merger because the Merger has been
in a "business combination" (as defined in approved by the Tide West Board.
Section 203) with HSR for three years
following the date that person becomes an
interested stockholder unless (a) before
that person became an interested
stockholder, the HSR Board approved the
transaction in which the interested
stockholder became an interested stockholder
or approved the business combination, (b)
upon completion of the transaction that
resulted in the interested stockholder's
becoming an interested stockholder, the
interested stockholder owns at least 85% of
the HSR Voting Stock outstanding at the time
the transaction commenced (excluding stock
held by directors who are also officers of
HSR and by employee stock plans that do not
provide employees with the right to
determine confidentially whether shares held
subject to the plan will be tendered in a
tender or exchange offer) or (c) following
the transaction in which that person became
an interested stockholder, the business
combination is approved by the HSR Board and
authorized at a meeting of stockholders by
the affirmative vote of the holders of at
least two-thirds of the HSR Voting Stock not
owned by the interested stockholder.
Under Section 203, these restrictions
also do not apply to certain business
combinations proposed by an interested
stockholder following the announcement or
notification of one of certain extraordinary
transactions involving HSR and a person who
was not an interested stockholder during the
previous three years or who became an
interested stockholder with the approval of
a majority of HSR's directors, if that
extraordinary transaction is approved or not
opposed by a majority of the directors who
were directors before any person became an
interested stockholder in the previous three
years or who were recommended for election
</TABLE>
97
<PAGE> 104
<TABLE>
<S> <C>
or elected to succeed such directors by a
majority of such directors then in office.
Upon consummation of the Merger, NGP
will be an "interested stockholder" for
purposes of Section 203.
</TABLE>
Under certain circumstances, Section 203, as described above, may make it
more difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. The
provision of Section 203 may encourage companies interested in acquiring HSR to
negotiate in advance with the HSR Board, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction that results in the
stockholder becoming an interested stockholder.
LIMITATION OF LIABILITY OF DIRECTORS
<TABLE>
<S> <C>
HSR. As permitted by Delaware law, the Tide West. The Tide West Charter contains a
HSR Charter provides that a director will similar limitation on director liability.
not be personally liable to HSR or its
stockholders for monetary damages for breach
of fiduciary duty as a director, except for
liability (a) for any breach of the
director's duty of loyalty to HSR or its
stockholders, (b) for acts or omissions not
in good faith or that involve intentional
misconduct or a knowing violation of law,
(c) under Section 174 of the Delaware Act
(which concerns unlawful payments of
dividends, stock purchases or redemptions)
or (d) for any transaction from which the
director derived an improper personal
benefit.
</TABLE>
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies, such as an injunction or rescission based on a director's
breach of his duty of care. The provisions described above apply to an officer
of the corporation only if he is a director of the corporation and is acting in
his capacity as a director and do not apply to officers who are not also
directors.
LEGAL MATTERS
The validity of the securities to be issued in connection with the Merger
will be passed upon for HSR by Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
Dallas, Texas. The federal income tax consequences in connection with the Merger
will be passed upon by Conner & Winters, a Professional Corporation, Tulsa,
Oklahoma. Robert A. Curry, a shareholder and director of Conner & Winters, is
also a director of Tide West.
EXPERTS
The consolidated financial statements of Tide West incorporated in this
Joint Proxy Statement/Prospectus by reference from the Tide West 1995 Form 10-K,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the 1993 change in the method of accounting
for income taxes), which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of HSR as of December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995,
incorporated herein by reference from the HSR 1995
98
<PAGE> 105
Form 10-K, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report (which report expresses an unqualified
opinion), which is incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The Statements of Revenues and Direct Operating Expenses for the Basin
Acquisition Properties as of December 31, 1995 and 1994, and for each of the two
years in the period ended December 31, 1995, included in this Joint Proxy
Statement/Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
The estimated reserve evaluations and related calculations of Netherland,
Sewell set forth in this Joint Proxy Statement/Prospectus, and incorporated
herein by reference from the Tide West 1995 Form 10-K, have been included
herein, and have been so incorporated, in reliance upon the authority of such
firm as experts in petroleum engineering.
The estimated reserve evaluations prepared by HSR and reviewed by
Williamson set forth in this Joint Proxy Statement/Prospectus, and incorporated
herein by reference from the HSR 1995 Form 10-K, have been included herein, and
have been so incorporated, in reliance upon the authority of such firm as
experts in petroleum engineering.
STOCKHOLDERS' PROPOSALS
HSR has scheduled its 1996 Annual Meeting of Stockholders for June 14,
1996, whether or not the Merger is consummated. Stockholder proposals intended
to be presented at that meeting must have been submitted by December 29, 1995,
for consideration by HSR for possible inclusion in the proxy materials for that
meeting.
If the Merger is not consummated and the 1996 Annual Meeting of
Stockholders of Tide West is to be held, the only Tide West stockholder
proposals eligible to be considered for inclusion in the proxy materials for
that meeting will be those that were duly submitted to Tide West by December 9,
1995, as provided in the 1995 Annual Meeting Proxy Statement of Tide West.
99
<PAGE> 106
INDEX TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
INITIAL BASIN ACQUISITION
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Statements of Revenues and Direct Operating Expenses for the Initial Basin Acquisition
Properties.......................................................................... F-3
Notes to Statements of Revenues and Direct Operating Expenses for the Initial Basin
Acquisition Properties.............................................................. F-4
SECOND BASIN ACQUISITION
Report of Independent Public Accountants.............................................. F-6
Statements of Revenues and Direct Operating Expenses for the Second Basin Acquisition
Properties.......................................................................... F-7
Notes to Statements of Revenues and Direct Operating Expenses for the Second Basin
Acquisition Properties.............................................................. F-8
</TABLE>
F-1
<PAGE> 107
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HS Resources, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses for the oil and gas properties acquired from Basin
Exploration, Inc. ("Initial Basin Acquisition Properties") for each of the two
years in the period ended December 31, 1995. These statements are the
responsibility of HS Resources, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The statements of revenues and direct operating expenses for the Initial
Basin Acquisition Properties were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission as described in
Note 1, and are not intended to be a complete presentation of revenues and
expenses.
In our opinion, the statements referred to above present fairly, in all
material respects, the revenues and direct operating expenses for the Initial
Basin Acquisition Properties for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 15, 1996
F-2
<PAGE> 108
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE INITIAL BASIN ACQUISITION PROPERTIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1995 1994
------ -------
<S> <C> <C>
Oil and Gas Revenues...................................................... $8,656 $11,445
------ -------
Production Taxes.......................................................... 639 805
Lease Operating Expenses.................................................. 1,908 2,315
------ -------
Total Direct Operating Expenses........................................... 2,547 3,120
------ -------
Revenues in Excess of Direct Operating Expenses........................... $6,109 $ 8,325
====== =======
</TABLE>
The accompanying Notes are an integral part of these Statements.
F-3
<PAGE> 109
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES FOR
THE INITIAL BASIN ACQUISITION PROPERTIES
1. BASIS OF PRESENTATION
On March 15, 1996, HS Resources, Inc. (the "Company") completed the initial
acquisition of Basin Exploration, Inc.'s interest in approximately 330 oil and
gas properties located in the Denver-Julesburg Basin of Colorado. The Initial
Basin Acquisition had a January 1, 1996 effective date.
The accompanying statements of revenues and direct operating expenses were
derived from the historical accounting records of the acquired properties. The
statements do not include depreciation, depletion and amortization, general and
administrative, income tax or interest expenses as these costs may not be
comparable to the expenses expected to be incurred.
2. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Supplemental oil and gas reserve information related to the Initial Basin
Acquisition Properties is reported in compliance with FASB Statement No. 69,
"Disclosures about Oil and Gas Producing Activities." Net proved oil and gas
reserves and the discounted future net cash flows related to those reserves were
estimated by the Company's petroleum engineers as of January 1, 1996, the
effective date of the acquisition. Information presented in that report was the
basis for the net proved oil and gas reserve and standardized measure
disclosures presented below. Since reserve evaluations for other periods had not
been prepared, it was necessary to make certain assumptions and adjustments to
prepare the following disclosures. However, the Company believes that the
disclosures presented are adequate and are not misleading.
The following tables set forth information for the years ended December 31,
1995 and 1994, with respect to changes in the proved reserves for the Initial
Basin Acquisition Properties. Quantities of natural gas are expressed in this
report in terms of thousand cubic feet (mcf). Oil is quantified in terms of
barrels (bbls).
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
--------------- ---------------
OIL GAS OIL GAS
BBLS MCF BBLS MCF
----- ------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total proved reserves:
Beginning of year............................................ 4,164 44,185 4,542 47,859
Production................................................... (273) (3,211) (378) (3,674)
Revisions of previous estimates.............................. 0 0 0 0
Extensions, discoveries and other additions.................. 0 0 0 0
Purchases of reserves in place............................... 0 0 0 0
Sale of reserves in place.................................... 0 0 0 0
----- ------ ----- ------
End of year.................................................. 3,891 40,974 4,164 44,185
===== ====== ===== ======
</TABLE>
At December 31, 1995 and 1994, proved developed reserves included 2,021,000
and 2,163,000, respectively, barrels of oil and 28,905,000 and 31,170,000,
respectively, mcf of gas.
F-4
<PAGE> 110
Information with respect to the estimated discounted future net cash flows
for the Initial Basin Acquistion Properties for the years ended December 31,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Future cash inflows................................................. $139,046 $134,798
Future production costs............................................. (45,767) (48,314)
Future development costs............................................ (18,844) (18,844)
-------- --------
Future pre-tax cash flows........................................... 74,435 67,640
Future income tax expense........................................... (8,743) (6,167)
-------- --------
After-tax future net cash flows..................................... 65,692 61,473
10% annual discount................................................. (34,433) (23,573)
-------- --------
Discounted future net cash flows.................................... $ 31,259 $ 37,900
======== ========
</TABLE>
As of December 31, 1995 and 1994, the oil and gas prices used in the
determination of future cash flows were $19.10 and $1.659, and $15.592 and
$1.809, per barrel and per mcf, respectively.
Principal changes in the estimated discounted future net cash flows for the
Initial Basin Acquistion Properties for the years ended December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Beginning of year.......................................... $ 37,900 $29,146
Oil and gas sales, net of production costs............... (6,109) (8,325)
Sales of reserves in place, net.......................... 0 0
Net change in prices and production costs................ 8,407 (1,432)
Extensions and discoveries less related costs............ 0 0
Change in future development costs....................... 0 2,966
Revision of previous quantity estimates.................. 0 0
Purchases of reserves in place, net...................... 0 0
Accretion of discount.................................... 4,407 3,722
Net change in income taxes............................... 2,190 4,790
Changes in production rates and other.................... (15,536) 7,033
--------- -------
End of Year................................................ $ 31,259 $37,900
========= =======
</TABLE>
F-5
<PAGE> 111
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HS Resources, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses for the oil and gas properties to be acquired from Basin
Exploration, Inc. ("Second Basin Acquisition Properties") for each of the two
years in the period ended December 31, 1995. These statements are the
responsibility of HS Resources, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The statements of revenues and direct operating expenses for the Second
Basin Acquisition Properties were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission as described in
Note 1, and are not intended to be a complete presentation of revenues and
expenses.
In our opinion, the statements referred to above present fairly, in all
material respects, the revenues and direct operating expenses for the Second
Basin Acquisition Properties for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 15, 1996
F-6
<PAGE> 112
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE SECOND BASIN ACQUISITION PROPERTIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Oil and Gas Revenues..................................................... $16,621 $18,995
------- -------
Production Taxes......................................................... 1,290 1,421
Lease Operating Expenses................................................. 2,352 2,040
------- -------
Total Direct Operating Expenses.......................................... 3,642 3,461
------- -------
Revenues in Excess of Direct Operating Expenses.......................... $12,979 $15,534
======= =======
</TABLE>
The accompanying Notes are an integral part of these Statements.
F-7
<PAGE> 113
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES FOR THE SECOND BASIN ACQUISITION PROPERTIES
1. BASIS OF PRESENTATION
In February, 1996 HS Resources, Inc. (the "Company") entered into an
agreement with Basin Exploration, Inc. ("Basin") to acquire the remainder of
Basin's oil and gas properties in the Denver-Julesburg Basin of Colorado,
subject to approval by the stockholders of Basin. If consummated, the Second
Basin Acquisition will have an effective date of January 1, 1996.
The accompanying statement of revenues and direct operating expenses was
derived from the historical accounting records of the acquired properties. The
statements do not include depreciation, depletion and amortization, general and
administrative, income tax or interest expenses as these costs may not be
comparable to the expenses expected to be incurred.
2. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Supplemental oil and gas reserve information related to the Second Basin
Acquisition Properties is reported in compliance with FASB Statement No. 69,
"Disclosures about Oil and Gas Producing Activities." Net proved oil and gas
reserves and the discounted future net cash flows related to those reserves were
estimated by the Company's petroleum engineers as of January 1, 1996, the
effective date of the acquisition. Information presented in that report was the
basis for the net proved oil and gas reserve and standardized measure
disclosures presented below. Since reserve evaluations for other periods had not
been prepared, it was necessary to make certain assumptions and adjustments to
prepare the following disclosures. However, the Company believes that the
disclosures presented are adequate and are not misleading.
The following tables set forth information for the years ended December 31,
1995 and 1994, with respect to changes in the proved reserves for the Second
Basin Acquisition Properties. Quantities of natural gas are expressed in this
report in terms of thousand cubic feet (mcf). Oil is quantified in terms of
barrels (bbls).
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------- -------------------
OIL BBLS GAS MCF OIL BBLS GAS MCF
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total proved reserves:
Beginning of year.................................... 6,593 118,419 6,990 126,099
Production........................................... (381) (7,499) (396) (7,680)
Revisions of previous estimates...................... 0 0 0 0
Extensions, discoveries and other additions.......... 0 0 0 0
Purchases of reserves in place....................... 0 0 0 0
Sale of reserves in place............................ 0 0 0 0
----- ------- ----- -------
End of year.......................................... 6,212 110,920 6,594 118,419
===== ======= ===== =======
</TABLE>
At December 31, 1995 and 1994, proved developed reserves included 2,947,000
and 3,128,000, respectively, barrels of oil and 74,006,000 and 79,010,000,
respectively, mcf of gas.
F-8
<PAGE> 114
Information with respect to the estimated discounted future net cash flows
for the Second Basin Acquisition Properties for the years ended December 31,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Future cash inflows................................................. $311,107 $297,533
Future production costs............................................. (87,738) (86,729)
Future development costs............................................ (53,337) (53,337)
-------- --------
Future pre-tax cash inflows......................................... 170,032 157,467
Future income tax expense........................................... (19,616) (14,666)
-------- --------
Future net cash flows............................................... 150,416 142,801
10% annual discount................................................. (79,135) (70,142)
-------- --------
Discounted future net cash flows.................................... $ 71,281 $ 72,659
======== ========
</TABLE>
As of December 31, 1995 and 1994, the oil and gas prices used in the
determination of future cash flows were $19.10 and $1.735, and $15.59 and
$1.809, per barrel and per mcf, respectively.
Principal changes in the estimated discounted future net cash flows for the
Second Basin Acquisition Properties for the years ended December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Beginning of year.................................................. $ 72,659 $ 63,938
Oil and gas sales, net of production costs....................... (12,979) (15,534)
Sales of reserves in place, net.................................. 0 0
Net change in prices and production costs........................ 14,166 165
Extensions and discoveries less related costs.................... 0 0
Change in future development costs............................... 0 0
Revision of previous quantity estimates.......................... 0 0
Purchases of reserves in place, net.............................. 0 0
Accretion of discount............................................ 8,732 8,161
Net change in income taxes....................................... 5,789 10,054
Changes in production rates and other............................ (17,086) 5,875
-------- --------
End of year........................................................ $ 71,281 $ 72,659
======== ========
</TABLE>
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ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this "Agreement")
is made and entered into as of the 29th day of April, 1996, by and among HS
RESOURCES, INC. ("Parent"), a Delaware corporation; HSR ACQUISITION, INC.
("Merger Sub"), a Delaware corporation; and Tide West Oil Company ("Tide West"),
a Delaware corporation.
RECITALS
A. The board of directors of each of Parent and Tide West determined that
it was in the best interests of its respective stockholders to approve the
strategic alliance of Parent and Tide West by means of the merger of Tide West
with and into Merger Sub upon the terms and subject to the conditions set forth
in an Agreement and Plan of Merger (the "Original Agreement") made and entered
into as of the 25th day of February, 1996, by and among Parent, Merger Sub and
Tide West.
B. For federal income tax purposes, it is intended that such merger qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
C. Parent, Merger Sub, and Tide West desire to make certain modifications
to the terms of the Original Agreement relating to the timing of certain
calculations relating to the Market Price and of the Closing Date (each as
defined herein).
NOW, THEREFORE, for and in consideration of the recitals and the mutual
covenants and agreements set forth in this Agreement, the parties to this
Agreement hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, each of the following terms
has the meaning given in this Section 1.1 or in the Sections referred to below:
"AFFILIATE" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person.
"AGREEMENT" means this Agreement and Plan of Merger, as amended,
supplemented or modified from time to time.
"ALLOCATED VALUES" means the allocation of values shown on SCHEDULE 1.1(A).
"ALTERNATIVE PROPOSAL" has the meaning specified in Section 5.4(b).
"ALTERNATIVE TRANSACTION" has the meaning specified in Section 5.4(d).
"BANK CREDIT AGREEMENT" means (a) the Second Amended and Restated Credit
Agreement, dated as of June 15, 1995, between Tide West, as borrower, and Union
Bank, Den norske Bank AS, Colorado National Bank, and Texas Commerce Bank,
National Association, as lenders (as amended and supplemented as of the date of
the Original Agreement), and/or (b) the Credit Agreement, dated as of December
20, 1993, between TWTT, as borrower, and Union Bank, Den norske Bank AS, and
Colorado National Bank, as lenders (as amended and supplemented as of the date
of the Original Agreement).
"CASH CONSIDERATION" means $8.75 less three percent of the amount by which
the Market Price exceeds $10.50.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any successor statutes and any regulations
promulgated thereunder.
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"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List.
"CERTIFICATE OF MERGER" means the certificate of merger, prepared and
executed in accordance with the applicable provisions of the DGCL, filed with
the Secretary of State of Delaware to reflect the consummation of the Merger.
"CLOSING" means the closing of the Merger and the consummation of the other
transactions contemplated by this Agreement.
"CLOSING DATE" means the date on which the Closing occurs, which date shall
be the day on which both the Tide West Meeting and the Parent Meeting have been
held (or such later date as is agreed upon by the parties).
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means, collectively, the letter agreements
dated November 28, 1995, and February 17, 1996, between Tide West and Parent
relating to Tide West's furnishing of information to Parent and Parent's
furnishing of information to Tide West in connection with Parent's and Tide
West's evaluation of the possibility of the Merger.
"CONVERSION NUMBER" means 0.6295.
"DGCL" means the Delaware General Corporation Law.
"DEFENSIBLE TITLE" means such right, title and interest that is (a)
evidenced by an instrument or instruments filed of record in accordance with the
conveyance and recording laws of the applicable jurisdiction to the extent
necessary to prevail against competing claims of bona fide purchasers for value
without notice and (b) subject to Permitted Encumbrances, free and clear of all
Liens, claims, infringements, burdens or other defects.
"DISCLOSURE SCHEDULE" means the DISCLOSURE SCHEDULE attached hereto and any
documents listed on such DISCLOSURE SCHEDULE and expressly incorporated therein
by reference.
"DISSENTING STOCKHOLDER(S)" means holder(s) of Tide West Common Stock who
have validly perfected appraisal rights under Section 262 of the DGCL.
"DRACO" means Draco Petroleum, Inc., an Oklahoma corporation and a
wholly-owned subsidiary of Tide West.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EFFECTIVE TIME" has the meaning specified in Section 2.7.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, common law, injunction or other
authorization in effect on the date of the Original Agreement or at a previous
time applicable to Tide West's operations relating to (a) emissions, discharges,
releases or threatened releases of Hazardous Materials into the natural
environment, including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater, publicly-owned
treatment works, septic systems or land; (b) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of Hazardous
Materials; (c) occupational health and safety; or (d) otherwise relating to the
pollution of the environment, solid waste handling treatment or disposal, or
operation or reclamation of oil and gas operations or mines.
"EXCHANGE AGENT" means Harris Savings and Trust, the transfer agent for
shares of Parent Common Stock.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE FUND" has the meaning specified in Section 2.5(a).
"FAILURE AMOUNT" has the meaning specified in Section 6.2(a).
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"GAAP" means generally accepted accounting principles, as recognized by the
U.S. Financial Accounting Standards Board (or any generally recognized
successor).
"GOVERNMENTAL ACTION" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over any of the Tide West Companies, Parent or
Merger Sub or any of their respective properties or assets.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"HAZARDOUS MATERIAL" means (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
the Resource Conservation and Recovery Act, as amended; (c) any solid,
hazardous, dangerous or toxic chemical, material, waste or substance, within the
meaning of and regulated by any Environmental Law; (d) any radioactive material,
including any naturally occurring radioactive material, and any source, special
or byproduct material as defined in 42 U.S.C. 2011 et seq. and any amendments or
authorizations thereof; (e) any asbestos-containing materials in any form or
condition; (f) any polychlorinated biphenyls in any form or condition; or (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof.
"HORIZON" means Horizon Gas Partners, L.P., a Delaware limited partnership.
"HYDROCARBON AGREEMENT" means any of the Hydrocarbon Sales Agreements, the
Hydrocarbon Purchase Agreements and the Hydrocarbon Support Agreements.
"HYDROCARBON PURCHASE AGREEMENT" means any sales agreement, purchase
contract or marketing agreement that is currently in effect and under which any
of the Tide West Companies is a buyer of Hydrocarbons for resale (other than
purchase agreements entered into in the ordinary course of business with a term
of three months or less, terminable without penalty on 30 days' notice or less,
which provide for a price not greater than the market value price that would be
paid pursuant to an arm's-length contract for the same term with an unaffiliated
third party seller, and which do not obligate the purchaser to take any
specified quantity of Hydrocarbons or to pay for any deficiencies in quantities
of Hydrocarbons not taken).
"HYDROCARBON SALES AGREEMENT" means any sales agreement, purchase contract
or marketing agreement that is currently in effect and under which any of the
Tide West Companies is a seller of Hydrocarbons (other than "spot" sales
agreements entered into in the ordinary course of business with a term of three
months or less, terminable without penalty on 30 days' notice or less, and which
provide for a price not less than the market value price that would be received
pursuant to an arms'-length contract for the same term with an unaffiliated
third party purchaser).
"HYDROCARBON SUPPORT AGREEMENT" means any gathering, transportation,
treatment, compression, processing or similar agreement that is currently in
effect and to which any of the Tide West Companies is a party (other than
gathering, transportation, treatment, compression, processing and similar
agreements that have been entered into in the ordinary course of business and
which contain market value prices and terms of the type found in gathering,
transportation, treatment, compression, processing and similar agreements
entered into between unaffiliated parties in arm's-length transactions).
"HYDROCARBONS" means oil, condensate, gas, casinghead gas and other liquid
or gaseous hydrocarbons.
"INDEMNIFIED PARTIES" has the meaning specified in Section 5.15.
"LIEN" means any lien, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, encumbrance, rights of a vendor under
any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto.
"MAJOR TIDE WEST STOCKHOLDER" means Natural Gas Partners, L.P., a Delaware
limited partnership.
"MARKET PRICE" means the average of the per share closing sales prices of
the Parent Common Stock on the NYSE (as reported by The Wall Street Journal, or
if not so reported, by another authoritative source) over the 10 trading days
ending five business days preceding the Closing Date.
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"MATERIAL" or "MATERIALLY" (whether or not capitalized) means circumstances
or results having an economic effect in excess of $500,000, except as otherwise
specified.
"MATERIAL ADVERSE EFFECT" means (a) when used with respect to Tide West, a
result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of the Tide West
Companies (taken as a whole) or the aggregate value of their assets, would
materially impair the ability of the Tide West Companies (taken as a whole) to
own, hold, develop and operate their assets, or would impair Tide West's ability
to perform its obligations hereunder or consummate the transactions contemplated
hereby; and (b) when used with respect to Parent, a result or consequence that
would materially adversely affect the condition (financial or otherwise),
results of operations or business of Parent and the Parent Material Subsidiaries
(taken as a whole) or the aggregate value of their assets, would materially
impair the ability of Parent and the Parent Material Subsidiaries (taken as a
whole) to own, hold, develop and operate their assets, or would impair Parent's
or Merger Sub's ability to perform its respective obligations hereunder or
consummate the transactions contemplated hereby.
"MERGER" has the meaning specified in Section 2.1.
"MERGER CONSIDERATION" means the sum of (a) the Cash Consideration plus (b)
the product of the Conversion Number and the Market Price.
"MERGER SUB" means HSR Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent.
"MERGER SUB COMMON STOCK" means the common stock, par value $.001 per
share, of Merger Sub.
"MERRILL LYNCH" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"NYSE" means The New York Stock Exchange, Inc.
"OIL AND GAS INTEREST(S)" means (a) direct and indirect interests in and
rights with respect to oil, gas, mineral and related properties and assets of
any kind and nature, direct or indirect, including working, royalty and
overriding royalty interests, production payments, operating rights, net profits
interests, other non-working interests and non-operating interests; (b)
interests in and rights with respect to Hydrocarbons and other minerals or
revenues therefrom and contracts in connection therewith and claims and rights
thereto (including oil and gas leases, operating agreements, unitization and
pooling agreements and orders, division orders, transfer orders, mineral deeds,
royalty deeds, oil and gas sales, exchange and processing contracts and
agreements and, in each case, interests thereunder), surface interests, fee
interests, reversionary interests, reservations and concessions; (c) easements,
rights of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (d)
interests in equipment and machinery (including well equipment and machinery),
oil and gas production, gathering, transmission, compression, treating,
processing and storage facilities (including tanks, tank batteries, pipelines
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing. References in this Agreement to the "OIL AND GAS INTERESTS OF TIDE
WEST" or "TIDE WEST'S OIL AND GAS INTERESTS" mean the collective Oil and Gas
Interests of the Tide West Companies.
"OWNERSHIP INTERESTS" means the ownership interests of Tide West in its
assets, as set forth on Schedule 1.1(b).
"PARENT" means HS Resources, Inc., a Delaware corporation.
"PARENT CERTIFICATE" means a certificate representing shares of Parent
Common Stock.
"PARENT COMMON STOCK" means the common stock, par value $.001 per share, of
Parent.
"PARENT FINANCIAL STATEMENTS" means the audited and unaudited consolidated
financial statements of Parent and its subsidiaries (including the related
notes) included (or incorporated by reference) in Parent's Annual Report on Form
10-K for the year ended December 31, 1994, and Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995, in each case as filed with the SEC.
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"PARENT MATERIAL SUBSIDIARY(IES)" means Resource Gathering Systems, Inc.,
Resolute Resources, Inc., Elk Exploration, Inc. and HS Partners, Inc.
"PARENT MEETING" means the meeting of the stockholders of Parent called for
the purpose of voting on the Tide West Proposal.
"PARENT PREFERRED STOCK" means the preferred stock, par value $.001 per
share, of Parent.
"PARENT REPRESENTATIVE" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of Parent or its subsidiaries.
"PARENT SEC DOCUMENTS" has the meaning specified in Section 4.5.
"PAYOUT BALANCES" has the meaning specified in Section 3.36.
"PERMITTED ENCUMBRANCES" means (a) Liens for Taxes, assessments or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent or (if foreclosure, distraint, sale or other
similar proceedings shall not have been commenced or, if commenced, shall have
been stayed) are being contested in good faith by appropriate proceedings and if
any of the Tide West Companies shall have set aside on its books such reserves
(segregated to the extent required by sound accounting practices) as may be
required by or consistent with GAAP and, whether reserves are set aside or not,
are listed on the DISCLOSURE SCHEDULE; (b) Liens of carriers, warehousemen,
mechanics, laborers, materialmen, landlords, vendors, workmen and operators
arising by operation of law in the ordinary course of business or by a written
agreement existing as of the date of the Original Agreement and necessary or
incident to the exploration, development, operation and maintenance of
Hydrocarbon properties and related facilities and assets for sums not yet due or
being contested in good faith by appropriate proceedings, if any of the Tide
West Companies shall have set aside on its books such reserves (segregated to
the extent required by sound accounting practices) as may be required by or
consistent with GAAP and, whether reserves are set aside or not, are listed on
the DISCLOSURE SCHEDULE; (c) Liens incurred in the ordinary course of business
in connection with worker's compensation, unemployment insurance and other
social security legislation (other than ERISA) which would not, individually or
in the aggregate, result in a Material Adverse Effect on the Tide West
Companies; (d) Liens incurred in the ordinary course of business to secure the
performance of bids, tenders, trade contracts, leases, statutory obligations,
surety and appeal bonds, performance and repayment bonds and other obligations
of a like nature; (e) Liens, easements, rights-of-way, restrictions, servitudes,
permits, conditions, covenants, exceptions, reservations and other similar
encumbrances incurred in the ordinary course of business or existing on property
and not materially impairing the value of the assets of any of Tide West
Companies or interfering with the ordinary conduct of the business of any of the
Tide West Companies or rights to any of their assets; (f) Liens arising pursuant
to Section 9.319 of the Texas Business and Commerce Code and all other similar
Liens created or arising by operation of law to secure a party's obligations as
a purchaser of oil and gas; (g) all rights to consent by, required notices to,
filings with, or other actions by Governmental Authorities to the extent
customarily obtained subsequent to closing; (h) farmout, carried working
interest, joint operating, unitization, royalty, overriding royalty, sales and
similar agreements relating to the exploration or development of, or production
from, Hydrocarbon properties entered into in the ordinary course of business and
not in violation of Section 5.1(c), provided the effect thereof on the working
and net revenue interest of Tide West has been properly reflected in the
Ownership Interests; (i) any defects, irregularities or deficiencies in title to
easements, rights-of-way or other surface use agreements that do not materially
adversely affect the value of any asset of any of the Tide West Companies by an
amount in excess of $10,000; (j) preferential rights to purchase and Third-Party
Consents; (k) Liens arising under or created pursuant to either Bank Credit
Agreement; and (l) Liens described on the DISCLOSURE SCHEDULE.
"PERSON" means any natural person, corporation, company, limited or general
partnership, joint stock company, joint venture, association, limited liability
company, trust, bank, trust company, land trust, business trust or other entity
or organization, whether or not a Governmental Authority.
"PROXY STATEMENT/PROSPECTUS" means a joint proxy statement in definitive
form relating to the Tide West Meeting and the Parent Meeting, which proxy
statement will be included as a prospectus in the Registration Statement.
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"REGISTRATION STATEMENT" means the Registration Statement on Form S-4 to be
filed by Parent in connection with the issuance of Parent Common Stock pursuant
to the Merger.
"RESERVE DATA VALUE" means the 10% present value of the proved reserves
contained in Tide West's Oil and Gas Interests, as shown on the October 1, 1995,
reserve report of Tide West.
"RESPONSIBLE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, President or any Vice President of such corporation.
"RETAINED EMPLOYEES" has the meaning specified in Section 5.16.
"RODEN" means Roden Participants, Ltd., a Texas limited partnership.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARE PRICE" means the per share closing sales price of the Parent Common
Stock on the NYSE (as reported by The Wall Street Journal, or if not so
reported, by another authoritative source) on the day immediately preceding the
Closing Date.
"SURVIVING CORPORATION" has the meaning specified in Section 2.2.
"TAX RETURNS" has the meaning specified in Section 3.16(a).
"TAXES" means taxes of any kind, levies or other like assessments, customs,
duties, imposts, charges or fees, including income, gross receipts, ad valorem,
value added, excise, real or personal property, asset, sales, use, federal
royalty, license, payroll, transaction, capital, net worth and franchise taxes,
estimated taxes, withholding, employment, social security, workers compensation,
utility, severance, production, unemployment compensation, occupation, premium,
windfall profits, transfer and gains taxes or other governmental taxes imposed
or payable to the United States or any state, local or foreign governmental
subdivision or agency thereof, and in each instance such term shall include any
interest, penalties or additions to tax attributable to any such Tax, including
penalties for the failure to file any Tax Return or report.
"THIRD-PARTY CONSENT" means the consent or approval of any Person other
than Tide West, Parent or any Governmental Authority.
"TIDE WEST" means Tide West Oil Company, a Delaware corporation.
"TIDE WEST CERTIFICATE" means a certificate representing shares of Tide
West Common Stock.
"TIDE WEST COMMON STOCK" means the common stock, par value $.01 per share,
of Tide West.
"TIDE WEST COMMON STOCK WARRANT" means a common stock purchase warrant
(issued and outstanding on the date of the Original Agreement and at the
Effective Time or subject to a Tide West Unit Warrant issued and outstanding on
the date of the Original Agreement and at the Effective Time) representing the
right to purchase one-tenth of a share of Tide West Common Stock for an exercise
price of $3.00, whether issued pursuant to the Warrant Agreement, dated as of
June 21, 1991, between Tide West and American Securities Transfer, Incorporated
(as amended or supplemented as of the date of the Original Agreement) or upon
exercise of a Tide West Unit Warrant.
"TIDE WEST COMPANIES" means Tide West, TWTT and Draco.
"TIDE WEST EMPLOYEE BENEFIT PLANS" has the meaning specified in Section
3.17(a).
"TIDE WEST FINANCIAL STATEMENTS" means the audited and unaudited
consolidated financial statements of Tide West and its subsidiaries (including
the related notes) included (or incorporated by reference) in Tide West's Annual
Report on Form 10-K for the year ended December 31, 1994, and Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995, in each case as filed
with the SEC.
"TIDE WEST GUARANTY" means a guarantee by Tide West of TWTT's obligations
under any Hydrocarbon Agreement or other natural gas purchase agreement.
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"TIDE WEST MATERIAL AGREEMENT(S)" means (a) any written or oral agreement,
contract, commitment or understanding to which any of the Tide West Companies is
a party, by which any of the Tide West Companies is directly or indirectly
bound, or to which any asset of any of the Tide West Companies may be subject,
involving total value or consideration in excess of $500,000, (b) either Bank
Credit Agreement, and/or (c) the partnership agreement of Horizon, in each case
as amended and supplemented as of the date of the Original Agreement.
"TIDE WEST MEETING" means the meeting of the stockholders of Tide West
called for the purpose of voting on the Tide West Proposal.
"TIDE WEST PERMITS" has the meaning specified in Section 3.11.
"TIDE WEST PROPOSAL" means the proposal to approve this Agreement and the
Merger, which proposal is to be presented to the stockholders of Tide West and
Parent in the Proxy Statement/Prospectus.
"TIDE WEST REPRESENTATIVE" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of any of the Tide West Companies.
"TIDE WEST SEC DOCUMENTS" has the meaning specified in Section 3.6.
"TIDE WEST STOCK OPTION" means an option (issued and outstanding on the
date of the Original Agreement and immediately prior to the Effective Time) to
acquire shares of Tide West Common Stock granted pursuant to the Tide West Oil
Company 1991 Stock Option Plan.
"TIDE WEST UNIT WARRANT" means a purchase warrant (issued and outstanding
on the date of the Original Agreement and at the Effective Time) representing
the right to purchase a unit for an exercise price of $5.10, with each such unit
consisting of two-tenths of a share of Tide West Common Stock and two Tide West
Common Stock Warrants.
"TIDE WEST WARRANT" means a Tide West Common Stock Warrant or a Tide West
Unit Warrant.
"TWTT" means Tide West Trading & Transport Company, an Oklahoma corporation
and a wholly-owned subsidiary of Tide West.
1.2 REFERENCES AND TITLES. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of this Agreement, and shall be disregarded in construing the language
hereof. The words "THIS AGREEMENT," "HEREIN," "HEREBY," "HEREUNDER" and
"HEREOF," and words of similar import, refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The words "THIS
ARTICLE," "THIS SECTION" and "THIS SUBSECTION," and words of similar import,
refer only to the Article, Section or subsection hereof in which such words
occur. The word "OR" is not exclusive, and the word "INCLUDING" (in its various
forms) means "INCLUDING WITHOUT LIMITATION." Pronouns in masculine, feminine or
neuter genders shall be construed to state and include any other gender, and
words, terms and titles (including terms defined herein) in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires.
As used in the representations and warranties contained in this Agreement,
the phrase "TO THE KNOWLEDGE" of the representing party shall mean that
Responsible Officers of such representing party, individually or collectively,
either (a) know that the matter being represented and warranted is true and
accurate or (b) have no reason, after reasonable inquiry, to believe that the
matter being represented and warranted is not true and accurate.
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ARTICLE 2
THE MERGER
2.1 THE MERGER. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Tide West shall be merged with and into Merger
Sub in accordance with the provisions of this Agreement. Such merger is referred
to herein as the "MERGER."
2.2 EFFECT OF THE MERGER. Upon the effectiveness of the Merger, the
separate existence of Tide West shall cease and Merger Sub, as the surviving
corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its
corporate existence under the laws of the State of Delaware. The Merger shall
have the effects specified in this Agreement and the DGCL.
2.3 GOVERNING INSTRUMENTS, DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION.
(a) The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until duly amended in accordance with
its terms and applicable law; provided, however, that Article I thereof shall be
amended and restated to read in its entirety as follows: "Article I: The name of
the corporation is HSRTW, Inc."
(b) The by-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until duly
amended in accordance with their terms and applicable law.
(c) The directors and officers of Merger Sub at the Effective Time shall be
the directors and officers, respectively, of the Surviving Corporation from the
Effective Time until their respective successors have been duly elected or
appointed in accordance with the certificate of incorporation and by-laws of the
Surviving Corporation and applicable law.
2.4 EFFECT ON SECURITIES.
(a) MERGER SUB STOCK. At the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof, each share of Merger Sub
Common Stock outstanding immediately prior to the Effective Time shall remain
outstanding and continue as one share of capital stock of the Surviving
Corporation and each certificate evidencing ownership of any such shares shall
continue to evidence ownership of the same number of shares of the capital stock
of the Surviving Corporation.
(b) TIDE WEST SECURITIES.
(i) TIDE WEST COMMON STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof (but
subject to the provisions of Section 2.5(e)), each share of Tide West
Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares of Tide West Common Stock held by
Dissenting Stockholders) shall be converted into the right to receive (A)
shares of validly issued, fully paid and nonassessable Parent Common Stock,
with each such share of Tide West Common Stock being converted into the
fraction of a share of Parent Common Stock equal to the Conversion Number;
and (B) cash in the amount of the Cash Consideration. Each share of Tide
West Common Stock, when so converted, shall automatically be cancelled and
retired, shall cease to exist and shall no longer be outstanding; and the
holder of any certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Parent Common Stock to be issued in exchange therefor and the Cash
Consideration (along with any cash in lieu of fractional shares of Parent
Common Stock as provided in Section 2.5(e) and any unpaid dividends and
distributions with respect to such shares of Parent Common Stock as
provided in Section 2.5(c)), without interest, upon the surrender of such
certificate in accordance with Section 2.5. The Cash Consideration shall be
decreased in increments of $.01 and the Conversion Number shall be
correspondingly increased for each such increment by an amount equal to
$.01 divided by the Share Price (with the aggregate increase in the
Conversion Number rounded to the fourth decimal point) to the extent
necessary to cause "(A)" to be equal to or greater than 40 percent of "(B)"
where (A) is the product of the Share Price and the number of shares of
Parent Common Stock issued in the Merger (excluding those shares issued to
any 5 percent shareholder of Tide West Common
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Stock as of the Closing Date that has not represented that as of such date
it has no intention, plan or arrangement to dispose of any Parent Common
Stock received in the Merger), and (B) is the sum of (i) the product
determined in clause (A) (without applying the parenthetical exclusion in
clause (A)), (ii) the amount of cash to be paid to holders of Tide West
Common Stock pursuant to Section 2.4(b)(i) as Cash Consideration, and (iii)
the amount of cash or other property to be paid to holders of Tide West
Common Stock that exercise dissenter's rights as contemplated under Section
2.4(b)(v) which shall be assumed to be (on a per share basis) the greater
of (I) the sum of the value of the Parent Common Stock (valued at the Share
Price) and the Cash Consideration given per share of Tide West Common Stock
and (II) the sum of $8.75 and the product of .6295 and the Share Price
determined as if the date of the Original Agreement were the Closing Date;
provided, however, if the adjustments to the Cash Consideration and the
Conversion Number pursuant to the foregoing formulas would result in the
issuance of more than 7,161,312 shares of Parent Common Stock under this
Section 2.4(b)(i), then (i) adjustments to the Cash Consideration and the
Conversion Number pursuant to the foregoing formulas shall first be
determined so as to result in an issuance of 7,161,312 shares of Parent
Common Stock, and (ii) based on the Conversion Number so determined, the
Cash Consideration shall thereafter be reduced to the extent necessary so
as to cause "(A)" to be equal to 40 percent of "(B)" using the actual Share
Price.
(ii) TIDE WEST TREASURY STOCK. At the Effective Time, by virtue of
the Merger, all shares of Tide West Common Stock that are issued and held
as treasury stock shall be cancelled and retired and shall cease to exist,
and no shares of Parent Common Stock, Cash Consideration or other
consideration shall be paid or payable in exchange therefor.
(iii) TIDE WEST STOCK OPTIONS. Each Tide West Stock Option shall be
or become fully vested prior to the Effective Time and, at the option of
the holder thereof, either (A) shall be exercised immediately prior to the
Effective Time; or (b) at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, shall be cancelled
and converted into the right to receive, for each share of Tide West Common
Stock with respect to which such Tide West Stock Option is exercisable,
cash in an amount equal to the amount by which the Merger Consideration
exceeds the per share exercise price of such Tide West Stock Option. The
amounts so determined shall be paid to the holders of the Tide West Stock
Options not later than three business days after the Effective Time.
(iv) TIDE WEST WARRANTS. All Tide West Warrants shall remain
outstanding following the Effective Time. At the Effective Time, by virtue
of the Merger and without any action on the part of Tide West or any holder
thereof, each Tide West Warrant shall be assumed by Parent and shall be
exercisable on the same terms and conditions as apply immediately prior to
the Effective Time, except as follows:
(A) Each Tide West Common Stock Warrant shall be exercisable for
that number of shares of Parent Common Stock and the amount of Cash
Consideration into which the number of shares of Tide West Common Stock
subject to such Tide West Common Stock Warrant immediately prior to the
Effective Time would be converted under Section 2.4(b)(i); and
(B) Each Tide West Unit Warrant shall be exercisable for (1) that
number of shares of Parent Common Stock and the amount of Cash
Consideration into which the number of shares of Tide West Common Stock
subject to such Tide West Unit Warrant immediately prior to the
Effective Time would be converted under Section 2.4(b)(i), plus (2) two
Tide West Common Stock Warrants (with each such Tide West Common Stock
Warrant representing the right to purchase that number of shares of
Parent Common Stock and to receive that amount of Cash Consideration
into which the number of shares of Tide West Common Stock subject to
such Tide West Common Stock Warrant immediately prior to the Effective
Time would be converted under Section 2.4(b)(i)).
(v) Except as provided in this Section 2.4(b) or as otherwise agreed
to by the parties, (A) the provisions of any other plan, program or
arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Tide West Companies shall become null
and void, and (B) the Tide West Companies shall use all reasonable efforts
to ensure that, following the Effective
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Time, no holder of options or rights or any participant in any plan,
program or arrangement shall have any right thereunder to acquire any
equity securities of the Tide West Companies, Merger Sub, Parent or any
direct or indirect subsidiary thereof.
(vi) SHARES OF DISSENTING STOCKHOLDERS. Any issued and outstanding
shares of Tide West Common Stock held by a Dissenting Stockholder shall be
converted into the right to receive such consideration as may be determined
to be due to such Dissenting Stockholder pursuant to the DGCL; provided,
however, shares of Tide West Common Stock outstanding at the Effective Time
and held by a Dissenting Stockholder who shall, after the Effective Time,
withdraw his demand for appraisal or lose his right of appraisal as
provided in the DGCL, shall be deemed to be converted, as of the Effective
Time, into the right to receive the shares of Parent Common Stock and the
amount of cash (without interest) specified in Section 2.4(b)(i) in
accordance with the procedures specified in Section 2.5(b). Tide West shall
give Parent (A) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other instruments served
pursuant to the DGCL received by Tide West, and (B) the opportunity to
direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. Tide West will not voluntarily make any payment
with respect to any demands for appraisal and will not, except with the
prior written consent of Parent, settle or offer to settle any such
demands.
2.5 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE FUND. Immediately after the Effective Time, Parent shall
deposit with the Exchange Agent, for the benefit of the holders of shares of
Tide West Common Stock and for exchange in accordance with this Agreement,
certificates representing the shares of Parent Common Stock to be issued, and
funds necessary to pay the Cash Consideration, in exchange for shares of Tide
West Common Stock pursuant to Section 2.4(b)(i). Such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto (as
provided in Section 2.5(c)) and such funds, are referred to herein as the
"EXCHANGE FUND." The Exchange Agent, pursuant to irrevocable instructions
consistent with the terms of this Agreement, shall deliver the Parent Common
Stock and the Cash Consideration to be issued or paid pursuant to Section
2.4(b)(i) out of the Exchange Fund, and the Exchange Fund shall not be used for
any other purpose whatsoever. The Exchange Agent shall not be entitled to vote
or exercise any rights of ownership with respect to the Parent Common Stock held
by it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect thereto for
the account of Persons entitled thereto.
(b) EXCHANGE PROCEDURES.
(i) As soon as reasonably practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a Tide
West Certificate that, immediately prior to the Effective Time, represented
shares of Tide West Common Stock, which was converted into the right to
receive Parent Common Stock and Cash Consideration pursuant to Section
2.4(b)(i), a letter of transmittal to be used to effect the exchange of
such Tide West Certificate for a Parent Certificate (and cash in lieu of
fractional shares) and the Cash Consideration, along with instructions for
using such letter of transmittal to effect such exchange. The letter of
transmittal (or the instructions thereto) shall specify that delivery of
any Tide West Certificate shall be effected, and risk of loss and title
thereto shall pass, only upon delivery of such Tide West Certificate to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify.
(ii) Upon surrender to the Exchange Agent of a Tide West Certificate
for cancellation, together with a duly completed and executed letter of
transmittal and any other required documents (including, in the case of any
Person constituting an "affiliate" of Tide West for purposes of Rule 145(c)
and (d) under the Securities Act, a written agreement from such Person as
described in Section 5.10, if not theretofore delivered to Parent), (A) the
holder of such Tide West Certificate shall be entitled to receive in
exchange therefor a Parent Certificate representing the number of whole
shares of Parent Common Stock and Cash Consideration that such holder has
the right to receive pursuant to Section 2.4(b)(i), any cash in lieu of
fractional shares of Parent Common Stock as provided in Section 2.5(e), and
any unpaid dividends and distributions that such holder has the right to
receive pursuant to Section 2.5(c) (after
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giving effect to any required withholding of taxes); and (B) the Tide West
Certificate so surrendered shall forthwith be cancelled. No interest shall
be paid or accrued on the Cash Consideration, cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders
of Tide West Certificates.
(iii) In the event of a transfer of ownership of Tide West Common
Stock that is not registered in the transfer records of Tide West, a Parent
Certificate representing the appropriate number of shares of Parent Common
Stock and the appropriate Cash Consideration (along with any cash in lieu
of fractional shares and any unpaid dividends and distributions that such
holder has the right to receive) may be issued or paid to a transferee if
the Tide West Certificate representing such shares of Tide West Common
Stock is presented to the Exchange Agent accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(iv) Until surrendered as contemplated by this Section 2.5(b), each
Tide West Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender a Parent
Certificate representing shares of Parent Common Stock and Cash
Consideration as provided in Section 2.4(b)(i) (along with any cash in lieu
of fractional shares and any unpaid dividends and distributions).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock declared or made after
the Effective Time with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Tide West Certificate. Subject to the effect of
applicable laws, (i) at the time of the surrender of a Tide West Certificate for
exchange in accordance with the provisions of this Section 2.5, there shall be
paid to the surrendering holder, without interest, the amount of dividends or
other distributions (having a record date after the Effective Time but on or
prior to surrender and a payment date on or prior to surrender) theretofore paid
with respect to the number of whole shares of Parent Common Stock that such
holder is entitled to receive (less the amount of any withholding taxes that may
be required with respect thereto); and (ii) at the appropriate payment date,
there shall be paid to the surrendering holder, without interest, the amount of
dividends or other distributions (having a record date after the Effective Time
but on or prior to surrender and a payment date subsequent to surrender) payable
with respect to the number of whole shares of Parent Common Stock that such
holder receives (less the amount of any withholding taxes that may be required
with respect thereto).
(d) NO FURTHER OWNERSHIP RIGHTS IN TIDE WEST COMMON STOCK. All shares of
Parent Common Stock issued, and the Cash Consideration paid, upon the surrender
for exchange of shares of Tide West Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 2.5(c) or (e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Tide West Common Stock. After the Effective Time, there shall be no
further registration of transfers on the Surviving Corporation's stock transfer
books of the shares of Tide West Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, a Tide West
Certificate is presented to the Surviving Corporation for any reason, it shall
be cancelled and exchanged as provided in this Section 2.5.
(e) TREATMENT OF FRACTIONAL SHARES. No Parent Certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in the
Merger and, except as provided in this Section 2.5(e), no dividend or other
distribution, stock split or interest shall relate to any such fractional share,
and such fractional share shall not entitle the owner thereof to vote or to any
other rights of a stockholder of Parent. In lieu of any fractional share of
Parent Common Stock to which a holder of Tide West Common Stock would otherwise
be entitled, such holder, upon surrender of a Tide West Certificate as described
in this Section, shall be paid an amount in cash (without interest) determined
by multiplying (i) the Market Price by (ii) the fraction of a share of Parent
Common Stock to which such holder would otherwise be entitled, in which case
Parent shall make available to the Exchange Agent, without regard to any other
cash being provided to the Exchange Agent, the amount of cash necessary to make
such payments.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund and
cash held by the Exchange Agent in accordance with the terms of this Section 2.5
that remains unclaimed by the former stockholders of Tide West for a period of
one year following the Effective Time shall be delivered to Parent,
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upon demand. Thereafter, any former stockholders of Tide West who have not
theretofore complied with the provisions of this Section 2.5 shall look only to
Parent for payment of their claim for Parent Common Stock, the Cash
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock (all without
interest).
(g) NO LIABILITY. Neither Parent, Tide West, the Surviving Corporation,
the Exchange Agent nor any other Person shall be liable to any former holder of
shares of Tide West Common Stock for any amount properly delivered to any public
official pursuant to any applicable abandoned property, escheat or similar law.
Any amounts remaining unclaimed by former holders of Tide West Common Stock for
a period of three years following the Effective Time (or such earlier date
immediately prior to the time at which such amounts would otherwise escheat to
or become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Parent, free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
(h) LOST, STOLEN, OR DESTROYED TIDE WEST CERTIFICATES. If any Tide West
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Tide West Certificate to be
lost, stolen or destroyed and, if required by Parent, the posting by such Person
of a bond, in such reasonable amount as Parent may direct, as indemnity against
any claim that may be made against it with respect to such Tide West
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Tide West Certificate the shares of Parent Common Stock and the Cash
Consideration (along with any cash in lieu of fractional shares pursuant to
Section 2.5(e) and any unpaid dividends and distributions pursuant to Section
2.5(c)) deliverable with respect thereto pursuant to this Agreement.
2.6 CLOSING. The Closing shall take place on the Closing Date at such
time and place as is agreed upon by Parent and Tide West.
2.7 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
immediately when the Certificate of Merger is accepted for filing by the
Secretary of State of Delaware or at such time thereafter as is provided in the
Certificate of Merger (the "EFFECTIVE TIME"). As soon as practicable after the
Closing, the Certificate of Merger shall be filed, and the Effective Time shall
occur, on the Closing Date; provided, however, that the Certificate of Merger
may be filed prior to the Closing Date or prior to the Closing so long as it
provides for an effective time that occurs on the Closing Date immediately after
the Closing.
2.8 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent, Merger
Sub, and Tide West shall use all reasonable efforts to take all such actions as
may be necessary or appropriate in order to effectuate the Merger under the DGCL
as promptly as commercially practicable. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
either of Merger Sub or Tide West, the officers and directors of the Surviving
Corporation are fully authorized, in the name of the Surviving Corporation or
otherwise to take, and shall take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TIDE WEST
Tide West hereby represents and warrants to Parent and Merger Sub as
follows:
3.1 ORGANIZATION. Each of the Tide West Companies (a) is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, (b) has the requisite power and authority to own, lease
and operate its properties and to conduct its business as it is presently being
conducted, and (c) is duly qualified to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Tide West). Copies of the
certificate or articles of incorporation and by-laws of each of the Tide West
Companies have heretofore
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been delivered to Parent, and such copies are accurate and complete as of the
date of the Original Agreement. Tide West has no corporate subsidiaries other
than TWTT and Draco.
3.2 PARTNERSHIPS. Tide West owns a limited partner interest in Horizon,
such limited partner interest representing a "pre-payout" interest in the
capital of Horizon of 95% and a "pre-payout" interest in the distributions,
profits and losses of Horizon of 93%. Draco owns a limited partner interest in
Roden, such limited partner interest representing a "pre-payout" interest in the
capital and in the profits and losses of Roden of 17.93%. None of the Tide West
Companies owns any general or limited partner interest in any general or limited
partnership other than Horizon or Roden (other than joint venture, joint
operating or ownership arrangements or tax partnerships entered into in the
ordinary course of business or other partnerships that, individually or in the
aggregate, are not material to the operations or business of the Tide West
Companies, taken as a whole).
3.3 AUTHORITY AND ENFORCEABILITY. Tide West has the requisite corporate
power and authority to enter into and deliver this Agreement and (with respect
to consummation of the Merger, subject to the valid approval of the Tide West
Proposal by the stockholders of Tide West) to consummate the transactions
contemplated hereby. The Board of Directors of Tide West has taken all necessary
action to approve the transactions contemplated by the Agreement to Vote and
Proxy dated as of the date of the Original Agreement between Parent and the
Major Tide West Stockholder pursuant to Section 203(a) of the DGCL. The
execution and delivery of this Agreement and (with respect to consummation of
the Merger, subject to the valid approval of the Tide West Proposal by the
stockholders of Tide West) the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Tide West, including approval by the board of directors of Tide
West, and no other corporate proceedings on the part of Tide West are necessary
to authorize the execution or delivery of this Agreement or (with respect to
consummation of the Merger, subject to the valid approval of the Tide West
Proposal by the stockholders of Tide West) to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Tide West and (with respect to the Merger, subject to the valid
approval of the Tide West Proposal by the stockholders of Tide West and assuming
that this Agreement constitutes a valid and binding obligation of Parent and
Merger Sub) constitutes a valid and binding obligation of Tide West enforceable
against Tide West in accordance with its terms.
3.4 NO VIOLATIONS. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance by
Tide West with the provisions hereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of any of the Tide West Companies
under, any provision of (a) the certificate or articles of incorporation or
by-laws of any of the Tide West Companies, (b) any loan or credit agreement,
note, bond, mortgage, indenture, lease, permit, concession, franchise, license
or other agreement or instrument applicable to any of the Tide West Companies,
or (c) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.5 are duly and timely obtained or
made, any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to any of the Tide West Companies or any of their respective
properties or assets, other than (y) in the case of clause (b) above, any such
conflict, violation, default, right, loss or Lien that may arise under either
Bank Credit Agreement or any Tide West Guaranty disclosed on the DISCLOSURE
SCHEDULE, and (z) in the case of clause (b) or (c) above, any such conflict,
violation, default, right, loss or Lien that, individually or in the aggregate,
would not have a Material Adverse Effect on Tide West.
3.5 CONSENTS AND APPROVALS. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to any of the Tide West Companies in
connection with the execution and delivery of this Agreement by Tide West or the
consummation by Tide West of the transactions contemplated hereby, except for
the following: (a) any such consent, approval, order, authorization,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Tide West; (b) the filing of the Certificate of Merger with the Secretary of
State of Delaware pursuant to the provisions of the DGCL; (c) the filing of a
pre-merger notification report by Tide West under the HSR Act and the expiration
or
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termination of the applicable waiting period; (d) the filing with the SEC of the
Proxy Statement/Prospectus and such reports under Section 13(a) of the Exchange
Act and such other compliance with the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby and the obtaining
from the SEC of such orders as may be so required; (e) such filings and
approvals as may be required by any applicable state securities, "blue sky" or
takeover laws or Environmental Laws; and (f) such filings and approvals as may
be required by any foreign pre-merger notification, securities, corporate or
other law, rule or regulation. No Third-Party Consent is required by or with
respect to any of the Tide West Companies in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (w) any such Third-Party Consent which the failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect on
Tide West, (x) the valid approval of the Tide West Proposal by the stockholders
of Tide West, (y) any consent, approval or waiver required by the terms of
either Bank Credit Agreement, and (z) any consent, approval or waiver required
by the terms of any Tide West Guaranty disclosed on the DISCLOSURE SCHEDULE.
3.6 SEC DOCUMENTS. Tide West has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Tide West with the SEC since December 31, 1993, and
prior to the date of the Original Agreement (the "TIDE WEST SEC DOCUMENTS"),
which are all the documents (other than preliminary material) that Tide West was
required to file with the SEC since such date. As of their respective dates, the
Tide West SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Tide West SEC Documents,
and none of the Tide West SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.7 FINANCIAL STATEMENTS. The Tide West Financial Statements were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of
the SEC) and fairly present, in accordance with applicable requirements of GAAP
(in the case of the unaudited statements, subject to normal, recurring
adjustments), the consolidated financial position of Tide West and its
subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of Tide West and its subsidiaries for
the periods presented therein.
3.8 CAPITAL STRUCTURE.
(a) The authorized capital stock of Tide West consists of 20,000,000 shares
of Tide West Common Stock and 20,000,000 shares of preferred stock, par value
$.01 per share.
(b) There are issued and outstanding (i) 9,787,628 shares of Tide West
Common Stock, (ii) Tide West Stock Options relating to 937,840 shares of Tide
West Common Stock, (iii) 2,796,600 Tide West Common Stock Warrants relating to
279,660 shares of Tide West Common Stock, and (iv) 140,000 Tide West Unit
Warrants relating to 28,000 shares of Tide West Common Stock and 280,000 Tide
West Common Stock Warrants (which, in turn, relate to 28,000 shares of Tide West
Common Stock). No shares of Tide West Common Stock are held by Tide West as
treasury stock.
(c) Except as set forth in Section 3.8(b), there are outstanding (i) no
shares of capital stock or other voting securities of Tide West, (ii) no
securities of Tide West or any other Person convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of Tide West,
and (iii) no subscriptions, options, warrants, calls, rights (including
preemptive rights), commitments, understandings or agreements to which Tide West
is a party or by which it is bound obligating Tide West to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock or other voting securities
of Tide West (or securities convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of Tide West) or obligating
Tide West to grant, extend or enter into any such subscription, option, warrant,
call, right, commitment, understanding or agreement.
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(d) All outstanding shares of Tide West capital stock are validly issued,
fully paid and nonassessable and not subject to any preemptive right.
(e) All outstanding shares of capital stock and other voting securities of
each of TWTT and Draco are owned by Tide West, free and clear of all Liens,
claims and options of any nature (except for Permitted Encumbrances). There are
outstanding (i) no securities of TWTT, Draco or any other Person convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities of TWTT or Draco, and (ii) no subscriptions, options, warrants,
calls, rights (including preemptive rights), commitments, understandings or
agreements to which either TWTT or Draco is a party or by which it is bound
obligating TWTT or Draco to issue, deliver, sell, purchase, redeem or acquire
shares of capital stock or other voting securities of TWTT or Draco (or
securities convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities of TWTT or Draco) or obligating TWTT or Draco
to grant, extend or enter into any such subscription, option, warrant, call,
right, commitment, understanding or agreement.
(f) Except as otherwise set forth in the DISCLOSURE SCHEDULE, there is no
stockholder agreement, voting trust or other agreement or understanding to which
Tide West is a party or by which it is bound relating to the voting of any
shares of the capital stock of any of the Tide West Companies.
3.9 NO UNDISCLOSED LIABILITIES. There are no liabilities of any of the
Tide West Companies of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that are reasonably likely to
have a Material Adverse Effect on Tide West, other than (a) liabilities
adequately provided for in the Tide West Financial Statements, (b) liabilities
incurred in the ordinary course of business subsequent to September 30, 1995,
and (c) liabilities under this Agreement.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise set forth
in the DISCLOSURE SCHEDULE or as contemplated by this Agreement, to the
knowledge of Tide West, since September 30, 1995, none of the Tide West
Companies has done any of the following:
(a) Discharged or satisfied any Lien or paid any obligation or liability,
absolute or contingent, other than current liabilities incurred and paid in the
ordinary course of business and consistent with past practices;
(b) Paid or declared any dividends or distributions, purchased, redeemed,
acquired or retired any indebtedness, stock or other securities from its
stockholders or other securityholders, made any loans or advances or guaranteed
any loans or advances to any Person (other than loans, advances or guaranties
made in the ordinary course of business and consistent with past practices), or
otherwise incurred or suffered to exist any liabilities (other than current
liabilities incurred in the ordinary course of business and consistent with past
practices);
(c) Except for Permitted Encumbrances, suffered or permitted any Lien to
arise or be granted or created against or upon any of its assets;
(d) Cancelled, waived or released any rights or claims against, or
indebtedness owed by, third parties;
(e) Amended its certificate or articles of incorporation or by-laws;
(f) Made or permitted any amendment, supplement, modification or
termination of any Tide West Material Agreement;
(g) Sold, leased, transferred, assigned or otherwise disposed of (i) any
Oil and Gas Interests of Tide West that, individually or in the aggregate, were
assigned a value in the Reserve Data Value of $100,000 or more, or (ii) any
other assets that, individually or in the aggregate, had a value at the time of
such lease, transfer, assignment or disposition of $50,000 or more (and, in each
case where a sale, lease, transfer, assignment or other disposition was made, it
was made for fair consideration in the ordinary course of business); provided,
however, that this Section 3.10(g) shall not apply to Hydrocarbons sold in the
ordinary course of business and consistent with past practices;
(h) Made any investment in or contribution, payment, advance or loan to any
Person (other than investments, contributions, payments or advances, or
commitments with respect thereto, less than $100,000 in the aggregate, made in
the ordinary course of business and consistent with past practices);
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(i) Paid, loaned or advanced (other than the payment, advance or
reimbursement of expenses in the ordinary course of business) any amounts to, or
sold, transferred or leased any of its assets to, or entered into any other
transactions with, any of its Affiliates;
(j) Made any material change in any of the accounting principles followed
by it or the method of applying such principles;
(k) Entered into any material transactions (other than this Agreement)
except in the ordinary course of business and consistent with past practices;
(l) Increased benefits or benefit plan costs or changed bonus, insurance,
pension, compensation or other benefit plans or arrangements or granted any
bonus or increase in wages, salary or other compensation or made any other
change in employment terms to any officers, directors or employees of the Tide
West Companies (except in the ordinary course of business and consistent with
past practices);
(m) Accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $100,000 to which any of the Tide West
Companies is a party or by which any of them is bound;
(n) Issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness for borrowed money or capitalized lease
obligations involving more than $100,000 in the aggregate (other than pursuant
to the Bank Credit Agreement);
(o) Delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(p) Cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $100,000 or
outside the ordinary course of business;
(q) Issued, sold, or otherwise disposed of any of its capital stock or
granted any options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(r) Made any loan to, or entered into any other transaction with, any of
its directors, officers, or employees outside the ordinary course of business;
(s) Made or pledged to make any charitable or other capital contribution
outside the ordinary course of business;
(t) Expended or committed to expend capital in excess of $9,000,000;
(u) Made any change in tax elections or the manner taxes are reported;
(v) Entered into any Hydrocarbon sales or call arrangements not cancelable
on 60 days' notice;
(w) Entered into any swap, hedging or similar arrangements which remain
open on the date of the Original Agreement except as disclosed on the DISCLOSURE
SCHEDULE;
(x) Accelerated the vesting period of any option or warrant;
(y) Otherwise been involved in any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary course of
business involving any of the Tide West Companies;
(z) Agreed, whether in writing or otherwise, to do any of the foregoing; or
(aa) Suffered any Material Adverse Effect (other than changes or trends,
including changes or trends in commodity prices, generally prevalent in or
affecting the oil and gas industry).
3.11 COMPLIANCE WITH LAWS, MATERIAL AGREEMENTS AND PERMITS. None of the
Tide West Companies is in violation of, or in default in any material respect
under, and no event has occurred that (with notice or the lapse of time or both)
would constitute a violation of or default under, (a) its certificate or
articles of incorporation or by-laws, (b) any applicable law, rule, regulation,
order, writ, decree or judgment of any Governmental Authority, or (c) any Tide
West Material Agreement, except (in the case of clause (b) or (c)
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above) for any violation or default that would not, individually or in the
aggregate, have a Material Adverse Effect on Tide West. Each of the Tide West
Companies has obtained and holds all permits, licenses, variances, exemptions,
orders, franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of its business or the lawful ownership, use
and operation of its assets ("TIDE WEST PERMITS"), except for Tide West Permits
which the failure to obtain or hold would not, individually or in the aggregate,
have a Material Adverse Effect on Tide West. Each of the Tide West Companies is
in compliance with the terms of its Tide West Permits, except where the failure
to comply would not, individually or in the aggregate, have a Material Adverse
Effect on Tide West. No investigation or review by any Governmental Authority
with respect to any of the Tide West Companies is pending or, to the knowledge
of Tide West, threatened, other than those the outcome of which would not,
individually or in the aggregate, have a Material Adverse Effect on Tide West.
To the knowledge of Tide West, no party to any Tide West Material Agreement is
in material breach of the terms, provisions and conditions of such Tide West
Material Agreement.
3.12 GOVERNMENTAL REGULATION. Neither Tide West nor any subsidiary of
Tide West is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940 or any state public utilities laws.
3.13 LITIGATION. Except as otherwise set forth in the DISCLOSURE
SCHEDULE, (a) no litigation, arbitration, investigation or other proceeding of
any Governmental Authority is pending or, to the knowledge of Tide West,
threatened against any of the Tide West Companies or their respective assets
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect on Tide West; (b) Tide West has no knowledge of any facts that
are likely to give rise to any litigation, arbitration, investigation or other
proceeding of any Governmental Authority which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on Tide West;
and (c) no Tide West Company is subject to any outstanding injunction, judgment,
order, decree or ruling (other than routine oil and gas field regulatory
orders). There is no litigation, proceeding or investigation pending or, to the
knowledge of Tide West, threatened against or affecting any of the Tide West
Companies that questions the validity or enforceability of this Agreement or any
other document, instrument or agreement to be executed and delivered by Tide
West in connection with the transactions contemplated hereby.
3.14 NO RESTRICTIONS. Except as otherwise set forth in the DISCLOSURE
SCHEDULE, none of the Tide West Companies is a party to (a) any agreement,
indenture or other instrument that contains restrictions with respect to the
payment of dividends or other distributions with respect to its capital, (b) any
financial arrangement with respect to or creating any indebtedness to any Person
(other than indebtedness reflected in the Tide West Financial Statements or
indebtedness incurred in the ordinary course of business), (c) any agreement,
contract or commitment relating to the making of any advance to, or investment
in, any Person (other than advances in the ordinary course of business), (d) any
guaranty or other contingent liability with respect to any indebtedness or
obligation of any Person (other than guaranties undertaken in the ordinary
course of business and other than the endorsement of negotiable instruments for
collection in the ordinary course of business), or (e) any agreement, contract
or commitment limiting in any respect its ability to compete with any Person or
otherwise conduct business of any line or nature.
3.15 TAX AUDITS AND SETTLEMENTS. Except as otherwise set forth in the
DISCLOSURE SCHEDULE, none of the Tide West Companies is a party or subject to
any unresolved or incomplete tax audit settlement.
3.16 TAXES.
(a) Each of the Tide West Companies and any affiliated, combined or unitary
group of which any such corporation is or was a member has (i) timely filed all
federal and all state, local and foreign returns, declarations, reports,
estimates, information returns and statements ("TAX RETURNS") required to be
filed by it with respect to any Taxes, (ii) timely paid all Taxes that are due
and payable (except for Taxes that are being contested in good faith by
appropriate proceedings and for which sufficient reserves have been established)
for which any of the Tide West Companies may be liable, and (iii) complied with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes, and has timely withheld from employee wages and paid over
to the proper governmental authorities all amounts required to be so withheld
and paid over.
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(b) Except as otherwise set forth in the DISCLOSURE SCHEDULE, (i) no audits
or other administrative or court proceedings are presently pending with regard
to any federal, state or local income or franchise Taxes for which any of the
Tide West Companies would be liable, and (ii) there are no pending requests for
rulings from any taxing authority, no outstanding subpoenas or requests for
information by any taxing authority with respect to any Taxes, no proposed
reassessments by any taxing authority of any property owned or leased, and no
agreements in effect to extend the time to file any material Tax Return or the
period of limitations for the assessment or collection of any material Taxes for
which any of the Tide West Companies, as the case may be, would be liable.
(c) Except as otherwise set forth in the DISCLOSURE SCHEDULE, (i) there are
no liens on any of the assets of the Tide West Companies for unpaid taxes, other
than liens for Taxes not yet due and payable, (ii) no Tide West Company has any
liability under Treasury Regulation sec. 1.1502-6 or any analogous state, local
or foreign law by reason of having been a member of any consolidated, combined
or unitary group, other than the affiliated group of which Tide West is the
common parent corporation, (iii) no Tide West Company has ever been included in
an affiliated group of corporations within the meaning of Section 1504 of the
Code other than the current affiliated group of which Tide West is the common
parent corporation, and (iv) no Tide West Company is or has been a party to any
tax sharing agreement between related corporations.
(d) The amount of liability for unpaid Taxes of the Tide West Companies
does not, in the aggregate, materially exceed the amount of the liability
accruals for Taxes reflected on the Tide West Financial Statements. The deferred
tax accounts are properly reflected in the Tide West Financial Statements.
(e) Tide West has made available to Parent complete copies of all Tax
Returns filed by the Tide West Companies with respect to any Taxes and all tax
audit reports, work papers, statements of deficiencies, and closing or other
agreements with respect thereto with respect to tax years 1993 and 1994.
(f) Except as otherwise set forth in the DISCLOSURE SCHEDULE, (i) no Tide
West Company is required to treat any of its assets as owned by another person
for federal income tax purposes or as tax-exempt bond financed property or
tax-exempt use property within the meaning of Section 168 of the Code, (ii) no
Tide West Company has entered into any compensatory agreements which would
result in a nondeductible expense pursuant to Section 280G of the Code, (iii) no
election has been made under Section 338 of the Code and no events have occurred
which would result in a deemed election under Section 338 of the Code with
respect to any Tide West Company, (iv) no election has been made under Section
341(f) of the Code with respect to any Tide West Company, (v) no Tide West
Company has participated in any international boycott as defined in Code Section
999, (vi) there are no outstanding balances of deferred gain or loss accounts
with respect to any Tide West Company under Treas. Reg. sec.sec. 1.1502-13 or
1.1502-13T, (vii) no Tide West Company has made or will make any election under
Treas. Reg. sec. 1.502-20(g)(1) with respect to the reattribution of net
operating losses, (viii) no Tide West Company is subject to any arrangement
treated as a partnership for federal income tax purposes, and (ix) no Tide West
Company has or has ever conducted branch operations in any foreign country
within the meaning of Treas. Reg.sec. 1.367(a)-6T.
(g) The books and records of Tide West, including the Tax Returns made
available to Parent, contain accurate and complete information with respect to:
(i) all material tax elections in effect with respect to the Tide West
Companies, (ii) the current tax basis of the assets of the Tide West Companies,
(iii) any excess loss accounts of any Tide West Company (iv) the current and
accumulated earnings and profits of Tide West, (v) the net operating losses and
net capital losses of the Tide West Companies, the years that such net operating
and net capital losses expire, and any restrictions to which such net operating
and net capital losses are subject under any provision of the Code or
consolidated return regulations, (vi) tax credit carryovers of the Tide West
Companies, and (vii) any overall foreign losses to the Tide West Companies under
Section 904(f) of the Code.
(h) The management of the Tide West Companies is unaware of any intention,
plan or arrangement on behalf of any holder of Tide West Common Stock to make
any disposition of the Parent Common Stock following the Effective Time.
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(i) No shareholder of Tide West that is a foreign corporation or a
nonresident alien individual has owned as much as 5% of the outstanding stock of
Tide West at any time during the five year period ending on the date of the
Original Agreement.
3.17 EMPLOYEE BENEFIT PLANS.
(a) The DISCLOSURE SCHEDULE sets forth a complete and accurate list of all
"employee benefit plans," as defined in Section 3(3) of ERISA, including
severance pay, sick leave, vacation pay, salary continuation for disability,
compensation agreements, retirement, deferred compensation, bonus, long-term
incentive, stock option, stock purchase, hospitalization, medical insurance,
life insurance and scholarship programs maintained by any of the Tide West
Companies or to which any of the Tide West Companies contributed or is obligated
to contribute (the "TIDE WEST EMPLOYEE BENEFIT PLANS"). Except for the Tide West
Employee Benefit Plans, none of the Tide West Companies maintains, or has any
fixed or contingent liability with respect to, any employee benefit, pension or
other plan that is subject to ERISA.
(b) There is no material violation of ERISA with respect to the filing of
applicable reports, documents and notices regarding any Tide West Employee
Benefit Plan with any Governmental Authority or the furnishing of such documents
to the participants or beneficiaries of the Tide West Employee Benefit Plans.
With respect to the Tide West Employee Benefit Plans, there exists no condition
or set of circumstances in connection with the Tide West Companies that could be
expected to result in liability reasonably likely to have a Material Adverse
Effect on the Tide West Companies under ERISA, the Code or any applicable law.
With respect to the Tide West Employee Benefit Plans, individually and in the
aggregate, there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
GAAP, on the financial statements of the Tide West Companies, which obligations
are reasonably likely to have a Material Adverse Effect on the Tide West
Companies.
(c) The Tide West Employee Benefit Plans have been maintained, in all
material respects, in accordance with their terms and in accordance with all
applicable federal and state laws, and neither Tide West, TWTT, Draco, nor any
"party in interest" or "disqualified person" with respect to the Tide West
Employee Benefit Plans, has engaged in any "prohibited transaction" within the
meaning of Section 4975 of the Code.
(d) Except as otherwise set forth in the DISCLOSURE SCHEDULE, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any payment becoming due to any
employee or group of employees of any of the Tide West Companies.
3.18 EMPLOYMENT CONTRACTS AND BENEFITS. Except as otherwise set forth in
the DISCLOSURE SCHEDULE or otherwise provided for in any Tide West Employee
Benefit Plan, (a) none of the Tide West Companies is subject to or obligated
under any consulting, employment, severance, termination or similar arrangement,
any employee benefit, incentive or deferred compensation plan with respect to
any Person, or any bonus, profit sharing, pension, stock option, stock purchase
or similar plan or other arrangement or other fringe benefit plan entered into
or maintained for the benefit of employees or any other Person, and (b) no
employee of any of the Tide West Companies or any other Person owns, or has any
right granted by any of the Tide West Companies to acquire, any interest in any
of the assets or business of any of the Tide West Companies.
3.19 LABOR MATTERS.
(a) No employees of any of the Tide West Companies are represented by any
labor organization. No labor organization or group of employees of any of the
Tide West Companies has made a demand for recognition or certification as a
union or other labor organization, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. There are no organizing activities involving any of the Tide West
Companies pending with any labor organization or group of employees of any of
the Tide West Companies.
(b) Each of the Tide West Companies is in material compliance with all
laws, rules, regulations and orders relating to the employment of labor,
including all such laws, rules, regulations and orders relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health, workers'
compensation and
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the collection and payment of withholding or Social Security Taxes and similar
Taxes, except where the failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on Tide West.
3.20 ACCOUNTS RECEIVABLE. Except as otherwise set forth in the Disclosure
Schedule, (a) all of the accounts, notes and loans receivable that have been
recorded on the books of the Tide West Companies are bona fide and represent
accounts, notes and loans receivable validly due for goods sold or services
rendered and are reasonably expected to be collected in full within 90 days
after the applicable invoice or note maturity date (other than such accounts,
notes and loans receivable that, individually or in the aggregate, do not have a
book value as of the date of the Original Agreement in excess of $500,000); (b)
except for Permitted Encumbrances, all of such accounts, notes and loans
receivable are free and clear of any and all Liens and other adverse claims and
charges, and none of such accounts, notes or loans receivable is subject to any
offsets or claims of offset; and (c) none of the obligors on such accounts,
notes or loans receivable has given notice to any of the Tide West Companies
that it will or may refuse to pay the full amount or any portion thereof.
3.21 INSURANCE. Each of the Tide West Companies maintains, and through
the Closing Date will maintain, insurance with reputable insurers (or pursuant
to prudent self-insurance programs) in such amounts and covering such risks as
are in accordance with normal industry practice for companies engaged in
businesses similar to those of the Tide West Companies and owning properties in
the same general area in which the Tide West Companies conduct their businesses.
Each of the Tide West Companies may terminate each of its insurance policies or
binders at or after the Closing and will incur no penalties or other material
costs in doing so. None of such policies or binders was obtained through the use
of false or misleading information or the failure to provide the insurer with
all information requested in order to evaluate the liabilities and risks
insured. There is no material default with respect to any provision contained in
any such policy or binder, nor has any of the Tide West Companies failed to give
any notice or present any claim under any such policy or binder in due and
timely fashion. There are no billed but unpaid premiums past due under any such
policy or binder. Except as otherwise set forth in the DISCLOSURE SCHEDULE, (a)
there are no outstanding claims under any such policies or binders and, to the
knowledge of Tide West, there has not occurred any event that might reasonably
form the basis of any claim against or relating to any of the Tide West
Companies that is not covered by any of such policies or binders; (b) no notice
of cancellation or non-renewal of any such policies or binders has been
received; and (c) there are no performance bonds outstanding with respect to any
of the Tide West Companies.
3.22 INTANGIBLE PROPERTY. There are no material trademarks, trade names,
patents, service marks, brand names, computer programs, databases, industrial
designs, copyrights or other intangible property that are necessary for the
operation, or continued operation, of the business of any of the Tide West
Companies or for the ownership and operation, or continued ownership and
operation, of any of their assets, for which the Tide West Companies do not hold
valid and continuing authority in connection with the use thereof.
3.23 TITLE TO ASSETS. The Tide West Companies (individually or
collectively) have Defensible Title to all Oil and Gas Interests of Tide West
included or reflected in the Ownership Interests and all of their other assets.
Each Oil and Gas Interest included or reflected in the Ownership Interests
entitles the Tide West Companies (individually or collectively) to receive not
less than the undivided interest set forth in (or derived from) the Ownership
Interests of all Hydrocarbons produced, saved and sold from or attributable to
such Oil and Gas Interest, and the portion of the costs and expenses of
operation and development of such Oil and Gas Interest that is borne or to be
borne by the Tide West Companies (individually or collectively) is not greater
than the undivided interest set forth in (or derived from) the Ownership
Interests.
3.24 OIL AND GAS OPERATIONS. Except as otherwise set forth in the
DISCLOSURE SCHEDULE:
(a) All wells included in the Oil and Gas Interests of Tide West have been
drilled and (if completed) completed, operated and produced in accordance with
generally accepted oil and gas field practices and in compliance in all material
respects with applicable oil and gas leases and applicable laws, rules and
regulations, except where any failure or violation could not reasonably be
expected to have a Material Adverse Effect on Tide West; and
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(b) Proceeds from the sale of Hydrocarbons produced from Tide West's Oil
and Gas Interests are being received by the Tide West Companies in a timely
manner and are not being held in suspense for any reason (except for amounts,
individually or in the aggregate, not in excess of $100,000 and held in suspense
in the ordinary course of business).
3.25 HYDROCARBON SALES AND PURCHASE AGREEMENTS. The DISCLOSURE SCHEDULE
contains a complete list of the Hydrocarbon Agreements to which any of the Tide
West Companies is a party involving total value or consideration in excess of
$500,000. Except as otherwise set forth in the DISCLOSURE SCHEDULE, to the
knowledge of Tide West, each of the Hydrocarbon Agreements is valid, binding and
in full force and effect, and no party is in material breach or default of any
Hydrocarbon Agreement, and no event has occurred that with notice or lapse of
time (or both) would constitute a material breach or default or permit
termination, modification or acceleration under any Hydrocarbon Agreement.
3.26 FINANCIAL AND COMMODITY HEDGING. The DISCLOSURE SCHEDULE accurately
summarizes the outstanding Hydrocarbon and financial hedging positions of the
Tide West Companies (including fixed price controls, collars, swaps, caps,
hedges and puts) as of the date reflected on the DISCLOSURE SCHEDULE.
3.27 ENVIRONMENTAL MATTERS. Except as set forth in the Disclosure
Schedule, to the knowledge of Tide West:
(a) Each of the Tide West Companies has conducted its business and operated
its assets, and is conducting its business and operating its assets, in material
compliance with all Environmental Laws;
(b) None of the Tide West Companies has been notified by any Governmental
Authority or other third party that any of the operations or assets of any of
the Tide West Companies is the subject of any investigation or inquiry by any
Governmental Authority or other third party evaluating whether any material
remedial action is needed to respond to a release or threatened release of any
Hazardous Material or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Material;
(c) None of the Tide West Companies and no other Person has filed any
notice under any federal, state or local law indicating that (i) any of the Tide
West Companies is responsible for the improper release into the environment, or
the improper storage or disposal, of any Hazardous Material, or (ii) any
Hazardous Material is improperly stored or disposed of upon any property of any
of the Tide West Companies;
(d) None of the Tide West Companies has any material contingent liability
in connection with (i) the release or threatened release into the environment
at, beneath or on any property now or previously owned or leased by any of the
Tide West Companies, or (ii) the storage or disposal of any Hazardous Material;
(e) None of the Tide West Companies has received any claim, complaint,
notice, inquiry or request for information involving any matter which remains
unresolved as of the date of the Original Agreement with respect to any alleged
violation of any Environmental Law or regarding potential liability under any
Environmental Law relating to operations or conditions of any facilities or
property (including off-site storage or disposal of any Hazardous Material from
such facilities or property) currently or formerly owned, leased or operated by
any of the Tide West Companies;
(f) No property now or previously owned, leased or operated by any of the
Tide West Companies is listed on the National Priorities List pursuant to CERCLA
or on the CERCLIS or on any other federal or state list as sites requiring
investigation or cleanup;
(g) None of the Tide West Companies is directly transporting, has directly
transported, is directly arranging for the transportation of, or has directly
transported, any Hazardous Material to any location which is listed on the
National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar
federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations that may lead to material claims
against such company for remedial work, damage to natural resources or personal
injury, including claims under CERCLA;
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(h) There are no sites, locations or operations at which any of the Tide
West Companies is currently undertaking, or has completed, any remedial or
response action relating to any such disposal or release, as required by
Environmental Laws; and
(i) All underground storage tanks and solid waste disposal facilities owned
or operated by the Tide West Companies are used and operated in material
compliance with Environmental Laws.
3.28 BOOKS AND RECORDS. All books, records and files of the Tide West
Companies (including those pertaining to Tide West's Oil and Gas Interests,
wells and other assets, those pertaining to the production, gathering,
transportation and sale of Hydrocarbons, and corporate, accounting, financial
and employee records) (a) have been prepared, assembled and maintained in
accordance with usual and customary policies and procedures and (b) fairly and
accurately reflect the ownership, use, enjoyment and operation by the Tide West
Companies of their respective assets.
3.29 BROKERS. Except as set forth on the DISCLOSURE SCHEDULE, no broker,
finder, investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage, finder's
or other fee or compensation based on any arrangement or agreement made by or on
behalf of Tide West and for which Parent, or any of the Tide West Companies will
have any obligation or liability.
3.30 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Tide West Common Stock is the only vote of the holders
of any class or series of Tide West capital stock or other voting securities
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby.
3.31 MAINTENANCE OF MACHINERY. All equipment and machinery owned by any
of the Tide West Companies has had reasonable and prudent maintenance, upkeep
and repair since the date it was acquired by the Tide West Companies.
3.32 GAS IMBALANCES. To the knowledge of Tide West, except as is
reflected on the Disclosure Schedule, Tide West has received no deficiency
payments under gas contracts for which any party has a right to take deficiency
gas from Tide West, nor has Tide West received any payments for production which
are subject to refund or recoupment out of future production.
3.33 CALLS ON PRODUCTION. Except as reflected on the DISCLOSURE SCHEDULE,
no party has a call or preferential right to purchase production from any of
Tide West's Oil and Gas Interests.
3.34 SECTION 29 CREDITS. Tide West is entitled to tax credits under
Section 29 of the Code. The approximate amount of such credits is accurately
reflected in the materials and information provided by Tide West to Parent.
3.35 ROYALTIES. To the knowledge of Tide West as to wells not operated by
Tide West, and without qualification as to knowledge as to all wells operated by
Tide West, all royalties, overriding royalties, compensatory royalties and other
payments due from or in respect of production with respect to the Tide West's
Oil and Gas Interests, have been or will be, prior to the Effective Time,
properly and correctly paid or provided for in all material respects, except for
those for which Tide West has a valid right to suspend.
3.36 PAYOUT BALANCES. To the knowledge of Tide West, and based on
information given to Tide West by third-party operators for all wells not
operated by Tide West, the Payout Balance for any well owned by Tide West is
properly reflected in the DISCLOSURE SCHEDULE as of the respective dates shown
thereon. "PAYOUT BALANCE(S)" means the status, as of the dates of Tide West's
calculations, of the recovery by Tide West or a third party of a cost amount
specified in the contract relating to a well out of the revenue from such well
where the net revenue interest of Tide West therein will be reduced when such
amount has been recovered.
3.37 PLUGGING AND ABANDONMENT LIABILITIES. Except to the extent expressly
set forth in the DISCLOSURE SCHEDULE, Tide West has no obligation as of the date
of the Original Agreement under applicable statutes and regulations to plug and
abandon any well.
3.38 PREPAYMENTS. Except as reflected in the DISCLOSURE SCHEDULE, no
prepayment for Hydrocarbon sales has been received by Tide West for Hydrocarbons
which have not been delivered as of the date of the Original Agreement.
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3.39 DISCLOSURE AND INVESTIGATION. No representation or warranty of Tide
West set forth in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
Tide West as follows:
4.1 ORGANIZATION. Each of Parent and Merger Sub (a) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (b) has the requisite power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted, and (c) is duly qualified to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except where any failure to be so qualified as a
foreign corporation or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent). Copies of the certificate
of incorporation and by-laws of each of Parent and Merger Sub have heretofore
been delivered to Tide West, and such copies are accurate and complete as of the
date of the Original Agreement.
4.2 AUTHORITY AND ENFORCEABILITY. Each of Parent and Merger Sub has the
requisite corporate power and authority to enter into and deliver this Agreement
and (with respect to consummation of the Tide West Proposal, subject to the
approval by the stockholders of Parent) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and (with
respect to consummation of the Tide West Proposal, subject to the approval by
the stockholders of Parent) the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Parent and Merger Sub, including approval by the board of
directors of Parent and the board of directors and stockholders of Merger Sub,
and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize the execution or delivery of this Agreement or (with
respect to consummation of the Tide West Proposal, subject to the approval by
the stockholders of Parent) to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Parent and
Merger Sub and (with respect to consummation of the Tide West Proposal, subject
to the approval by the stockholders of Parent, and assuming that this Agreement
constitutes a valid and binding obligation of Tide West) constitutes a valid and
binding obligation of each of Parent and Merger Sub enforceable against each of
them in accordance with its terms.
4.3 NO VIOLATIONS. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance by
Parent and Merger Sub with the provisions hereof will not, conflict with, result
in any violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of Parent or any Parent Material
Subsidiary under, any provision of (a) the certificate of incorporation or
by-laws of Parent or Merger Sub or any provision of the comparable charter or
organizational documents of any Parent Material Subsidiary, (b) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other agreement or instrument applicable to Parent, Merger
Sub or any Parent Material Subsidiary, or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
4.4 are duly and timely obtained or made, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent, Merger Sub or any
Parent Material Subsidiary or any of their respective properties or assets,
other than, in the case of clause (b) or (c) above, any such conflict,
violation, default, right, loss or Lien that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent.
4.4 CONSENTS AND APPROVALS. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to Parent or Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the
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consummation by Parent and Merger Sub of the transactions contemplated hereby,
except for the following: (a) any such consent, approval, order, authorization,
registration, declaration, filing or permit which the failure to obtain or make
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent; (b) the filing of the Certificate of Merger with the Secretary of State
of Delaware pursuant to the provisions of the DGCL; (c) the filing of a
pre-merger notification report by Parent under the HSR Act and the expiration or
termination of the applicable waiting period; (d) the filing with the SEC of the
Registration Statement and such reports under Section 13(a) of the Exchange Act
and such other compliance with the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby and the obtaining
from the SEC of such orders as may be so required; (e) the filing with the NYSE
of a listing application relating to the shares of Parent Common Stock to be
issued pursuant to the Merger and the obtaining from the NYSE of its approvals
thereof; (f) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws or Environmental Laws; and (g)
such filings and approvals as may be required by any foreign pre-merger
notification, securities, corporate or other law, rule or regulation. No
Third-Party Consent is required by or with respect to Parent, Merger Sub or any
Parent Material Subsidiary in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (x) any such Third-Party Consent which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Parent, and
(y) the valid approval of the Tide West Proposal by the stockholders of Parent.
4.5 SEC DOCUMENTS. Parent has made available to Tide West a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC since December 31, 1994, and prior
to the date of the Original Agreement (the "PARENT SEC DOCUMENTS"), which are
all the documents (other than preliminary material) that Parent was required to
file with the SEC since such date. As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Documents, and
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 FINANCIAL STATEMENTS. The Parent Financial Statements were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present, in accordance with applicable requirements of GAAP (in the
case of the unaudited statements, subject to normal, recurring adjustments), the
consolidated financial position of Parent and its subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Parent and its subsidiaries for the periods presented therein.
4.7 CAPITAL STRUCTURE.
(a) The authorized capital stock of Parent consists of 30,000,000 shares of
Parent Common Stock and 15,000,000 shares of Parent Preferred Stock. The
authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub
Common Stock.
(b) There are issued and outstanding 10,948,513 shares of Parent Common
Stock and no shares of Parent Preferred Stock. 1,490,699 shares of Parent Common
Stock are issuable upon exercise of outstanding stock options and warrants.
22,718 shares of Parent Common Stock and no shares of Parent Preferred Stock are
held by Parent as treasury stock.
(c) Except as set forth in Section 4.7(b), there are outstanding (i) no
shares of capital stock or other voting securities of Parent, (ii) no securities
of Parent or any other Person convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities of Parent, and (iii) no
subscriptions, options, warrants, calls, rights (including *preemptive rights,
commitments, understandings or agreements to which Parent is a party or by which
it is bound) obligating Parent to issue, deliver, sell, purchase, redeem or
acquire shares of capital stock or other voting securities of Parent (or
securities convertible into or exchangeable or
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exercisable for shares of capital stock or other voting securities of Parent) or
obligating Parent to grant, extend or enter into any such subscription, option,
warrant, call, right, commitment, understanding or agreement.
(d) All outstanding shares of Parent capital stock are, and (when issued)
the shares of Parent Common Stock to be issued pursuant to the Merger and upon
exercise of the Tide West Stock Options or Tide West Warrants will be, validly
issued, fully paid and nonassessable and not subject to any preemptive right.
(e) 1,000 shares of Merger Sub Common Stock are issued and outstanding, all
of which are owned by Parent. All outstanding shares of Merger Sub Common Stock
are validly issued, fully paid and nonassessable and not subject to any
preemptive right.
(f) As of the date of the Original Agreement there is no, and at the
Effective Time there will not be any, stockholder agreement, voting trust or
other agreement or understanding to which Parent is a party or by which it is
bound relating to the voting of any shares of the capital stock of Parent.
4.8 GOVERNMENTAL REGULATION. Neither Parent nor any of its subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, the Investment Company Act
of 1940 or any state public utilities laws.
4.9 LITIGATION. There is no litigation, proceeding or investigation
pending or, to the knowledge of Parent, threatened against or affecting Parent
or Merger Sub that questions the validity or enforceability of this Agreement or
any other document, instrument or agreement to be executed and delivered by
Parent or Merger Sub in connection with the transactions contemplated hereby.
4.10 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business or activity (or conducted any operations) of any
kind, entered into any agreement or arrangement with any person or entity, or
incurred, directly or indirectly, any material liabilities or obligations,
except in connection with its incorporation, the negotiation of this Agreement,
the Merger and the transactions contemplated hereby.
4.11 FUNDING. Parent has available adequate funds in an aggregate amount
sufficient to pay (a) all amounts required to be paid to the stockholders of
Tide West upon consummation of the Merger, (b) all amounts required to be paid
in respect of all Tide West Stock Options and Tide West Warrants upon exercise
thereof, and (c) all expenses incurred by Parent and Merger Sub in connection
with this Agreement and the transactions contemplated hereby.
4.12 BROKERS. Except as has been disclosed in writing to Tide West
concerning Parent's arrangement with Lehman Brothers, no broker, finder,
investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage, finder's
or other fee or compensation based on any arrangement or agreement made by or on
behalf of Parent or Merger Sub and for which Parent, Merger Sub or any of the
Tide West Companies will have any obligation or liability.
4.13 DISCLOSURE AND INVESTIGATION. No representation or warranty of
Parent or Merger Sub set forth in this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein not misleading.
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ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS BY TIDE WEST PENDING CLOSING. Tide West covenants
and agrees with Parent and Merger Sub that, from the date of the Original
Agreement until the Effective Time, each of the Tide West Companies will conduct
its business only in the ordinary and usual course consistent with past
practices. Notwithstanding the preceding sentence, Tide West covenants and
agrees with Parent and Merger Sub that, except as specifically contemplated in
this Agreement, from the date of the Original Agreement until the Effective
Time, without the prior written consent of Parent:
(a) None of the Tide West Companies will (i) amend its certificate or
articles of incorporation or by-laws; (ii) split, combine or reclassify any of
its outstanding capital stock; (iii) declare, set aside or pay any dividends or
other distributions (whether payable in cash, property or securities) with
respect to its capital stock; (iv) issue, sell or agree to issue or sell any
securities, including its capital stock, any rights, options or warrants to
acquire its capital stock, or securities convertible into or exchangeable or
exercisable for its capital stock (other than shares of Tide West Common Stock
issued pursuant to the exercise of any Tide West Stock Option, shares of Tide
West Common Stock issued pursuant to the exercise of any Tide West Common Stock
Warrant or shares of Tide West Common Stock and Tide West Common Stock Warrants
issued pursuant to the exercise of any Tide West Unit Warrant, each as
outstanding on the date of the Original Agreement); (v) purchase, cancel,
retire, redeem or otherwise acquire any of its outstanding capital stock or
other securities; (vi) merge or consolidate with, or transfer all or
substantially all of its assets to, another corporation or other business
entity; (vii) liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution); or (viii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(b) None of the Tide West Companies will (i) acquire any corporation,
partnership or other business entity or any interest therein (other than
interests in joint ventures, joint operation or ownership arrangements or tax
partnerships acquired in the ordinary course of business); (ii) sell, lease or
sublease, transfer or otherwise dispose of or mortgage, pledge or otherwise
encumber any Oil and Gas Interests of Tide West that were assigned a value in
the Reserve Data Value in excess of $50,000, individually, or $250,000, in the
aggregate, or any other assets that have a value at the time of such sale,
lease, sublease, transfer or disposition in excess of $50,000, individually, or
$250,000, in the aggregate, (except that this clause shall not apply to the sale
of Hydrocarbons in the ordinary course of business or to encumbrances under
either of the Bank Credit Agreements); (iii) farm-out any Oil and Gas Interest
of Tide West or interest therein; (iv) sell, transfer or otherwise dispose of or
mortgage, pledge or otherwise encumber any securities of any other Person
(including any capital stock or other securities in TWTT or Draco or any
partnership interest in Horizon or Roden); (v) make any material loans, advances
or capital contributions to, or investments in, any Person (other than loans or
advances in the ordinary course of business and consistent with past practices
or capital contributions to either Horizon or Roden required by the terms of its
partnership agreement); (vi) enter into any Tide West Material Agreement or any
other agreement not terminable by any of the Tide West Companies upon notice of
30 days or less and without penalty or other obligation (other than Hydrocarbon
Agreements entered into in the ordinary course of business and consistent with
past practices); or (vii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(c) None of the Tide West Companies will (i) permit to be outstanding at
any time under the Bank Credit Agreement indebtedness for borrowed money in
excess of $45,000,000; (ii) incur any indebtedness for borrowed money other than
under the Bank Credit Agreement; (iii) incur any other obligation or liability
(other than liabilities incurred in the ordinary course of business and
consistent with past practices); (iv) assume, endorse (other than endorsements
of negotiable instruments in the ordinary course of business), guarantee or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the liabilities or obligations of any Person (other than Parent
Guaranties entered into in the ordinary course of business and consistent with
past practices); or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
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(d) The Tide West Companies will operate, maintain and otherwise deal with
the Oil and Gas Interests of Tide West in accordance with good and prudent oil
and gas field practices and in accordance with all applicable oil and gas leases
and other contracts or agreements and all applicable laws, rules and
regulations.
(e) None of the Tide West Companies shall resign, transfer or otherwise
voluntarily relinquish any right it has as of the date of the Original
Agreement, as operator of any Oil and Gas Interest of Tide West.
(f) None of the Tide West Companies will (i) enter into, or otherwise
become liable or obligated under or pursuant to, (1) any employee benefit,
pension or other plan (whether or nor subject to ERISA), (2) any other stock
option, stock purchase, incentive or deferred compensation plans or arrangements
or other fringe benefit plan, or (3) any consulting, employment, severance,
termination or similar agreement with any Person, or amend or extend any such
plan, arrangement or agreement; (ii) except for payments made pursuant to any
Tide West Employee Benefit Plan or any plan, agreement or arrangement described
in the DISCLOSURE SCHEDULE, grant, or otherwise become liable for or obligated
to pay, any severance or termination payments, bonuses or increases in
compensation or benefits (other than payments, bonuses or increases that are
mandated by the terms of agreements existing as of the date of the Original
Agreement or that are paid in the ordinary course of business, consistent with
past practices, and not individually or in the aggregate material in amount) to,
or forgive any indebtedness of, any employee or consultant; or (iii) enter into
any contract, agreement, commitment or arrangement to do any of the foregoing.
(g) The Tide West Companies will keep and maintain accurate books, records
and accounts in accordance with GAAP.
(h) None of the Tide West Companies will create, incur, assume or permit to
exist any Lien on any of its assets, except for Permitted Encumbrances.
(i) The Tide West Companies will (i) pay all Taxes, assessments and other
governmental charges imposed upon any of their assets or with respect to their
franchises, business, income or assets before any penalty or interest accrues
thereon; (ii) pay all claims (including claims for labor, services, materials
and supplies) that have become due and payable and which by law have or may
become a Lien upon any of their assets prior to the time when any penalty or
fine shall be incurred with respect thereto or any such Lien shall be imposed
thereon; and (iii) comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority,
obtain or take all Governmental Actions necessary in the operation of their
businesses, and comply with and enforce the provisions of all Tide West Material
Agreements, including paying when due all rentals, royalties, expenses and other
liabilities relating to their businesses or assets; provided, however, Tide West
will not be in violation of this Section 5.1(i) if any of the Tide West
Companies incur obligations for penalties and interest in connection with gross
production tax reporting in the ordinary course of business; and provided
further, that the Tide West Companies may contest the imposition of any such
Taxes, assessments and other governmental charges, any such claim, or the
requirements of any applicable law, rule, regulation or order or any Tide West
Material Agreement if done so in good faith by appropriate proceedings and if
adequate reserves are established in accordance with GAAP or as may be
determined as sufficient by Tide West's board of directors.
(j) The Tide West Companies will maintain in full force and effect the
policies or binders of insurance described in Section 3.21.
(k) The Tide West Companies will at all times preserve and keep in full
force and effect their corporate existence and rights and franchises material to
their performance under this Agreement.
(l) Tide West will not engage in any practice, take any action or permit by
inaction any of the representations and warranties contained in Section 3.1,
3.2, 3.4, 3.5, 3.8, 3.11, 3.12, 3.14, 3.17, 3.18, 3.19, 3.27, 3.28, 3.29, 3.31,
3.33, 3.35 or 3.39 to become untrue.
(m) Tide West will not engage in any practice, take any action, or permit
by inaction any of the representations and warranties contained in Section 3.10
(other than clause (n) thereof) to become untrue, except (i) Tide West may pay
successful deal bonuses to its employees as disclosed in the DISCLOSURE
SCHEDULE, (ii) all currently outstanding Tide West Stock Options will become
fully vested prior to the
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Effective Time, (iii) Tide West may make or commit to make capital expenditures
as described in the Disclosure Schedule, not to exceed $3,000,000 in the
aggregate, (iv) the Tide West Companies may enter into fully covered commodity
swap, hedging and similar arrangements; and (v) Tide West may pay, to marketers
and executives, bonuses relating to marketing during the first quarter,
consistent with past practices.
5.2 CONDUCT OF BUSINESS BY PARENT PENDING CLOSING. Parent covenants and
agrees with Tide West that, from the date of the Original Agreement until the
Effective Time, except for transactions disclosed by Parent to Tide West prior
to the date of the Original Agreement, Parent will conduct its business only in
the ordinary and usual course consistent with past practices. Notwithstanding
the preceding sentence, Parent covenants and agrees with Tide West that, from
the date of the Original Agreement until the Effective Time, without the prior
written consent of Tide West:
(a) Parent will not (i) split, combine or reclassify any of its outstanding
capital stock; (ii) declare, set aside or pay any dividends or other
distributions (whether payable in cash, property or securities) with respect to
its capital stock other than a dividend of rights to holders of Parent Common
Stock in connection with the adoption and implementation of a shareholder rights
plan; (iii) merge or consolidate with, or transfer all or substantially all of
its assets to, another corporation or other business entity; (iv) liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution); or (v) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing.
(b) Parent will at all times preserve and keep in full force and effect its
corporate existence and rights and franchises material to its performance under
this Agreement.
(c) Parent will not engage in any practice, take any action or permit by
inaction, any of the representations and warranties contained in Section 4.1,
4.3, 4.4, 4.7, 4.8, 4.10, 4.11, 4.12 or 4.13 to become untrue.
5.3 ACCESS TO ASSETS, PERSONNEL AND INFORMATION.
(a) From the date of the Original Agreement until the Effective Time, Tide
West shall afford to Parent and the Parent Representatives, at Parent's sole
risk and expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents and facilities of the Tide West
Companies and shall, upon request, furnish promptly to Parent (at Parent's
expense) a copy of any file, book, record, contract, permit, correspondence, or
other written information, document or data concerning any of the Tide West
Companies (or any of their respective assets) that is within the possession or
control of Tide West. During such period, Tide West will make available to a
reasonable number of Parent Representatives adequate office space and facilities
at the principal office facility of Tide West in Tulsa, Oklahoma, and will
permit a reasonable number of Parent Representatives to observe, but not
participate in, staff meetings at those facilities and other facilities of any
of the Tide West Companies.
(b) Parent and the Parent Representatives shall have the right to make an
environmental and physical assessment of the assets of the Tide West Companies
and, in connection therewith, shall have the right to enter and inspect such
assets and all buildings and improvements thereon, conduct soil and water tests
and borings and generally conduct such tests, examinations, investigations and
studies as Parent deems necessary, desirable or appropriate for the preparation
of engineering or other reports relating to such assets, their condition and the
presence of Hazardous Materials. Tide West shall be provided 24 hours prior
notice of such activities, and Tide West Representatives shall have the right to
witness all such tests and investigations. Parent shall (and shall cause the
Parent Representatives to) keep any data or information acquired by any such
examinations and the results of any analyses of such data and information
strictly confidential and will not (and will cause the Parent Representatives
not to) disclose any of such data, information or results to any Person unless
otherwise required by law or regulation and then only after written notice to
Tide West of the determination of the need for disclosure. Parent shall
indemnify, defend and hold the Tide West Companies and the Tide West
Representatives harmless from and against any and all claims to the extent
arising out of or as a result of the activities of Parent and the Parent
Representatives on the assets of the Tide West Companies in connection with
conducting such environmental and physical assessment, except to the extent of
and
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limited by the negligence or willful misconduct of any of the Tide West
Companies or any Tide West Representative.
(c) From the date of the Original Agreement until the Effective Time,
Parent shall afford to Tide West and the Tide West Representatives, at Tide
West's sole risk and expense, reasonable access to any of the assets, books and
records, contracts, employees, representatives, agents and facilities of Parent
and the Parent Material Subsidiaries and shall, upon request, furnish promptly
to Tide West (at Tide West's expense) a copy of any file, book, record,
contract, permit, correspondence, or other written information, document or data
concerning Parent or any of the Parent Material Subsidiaries (or any of their
respective assets) that is within the possession or control of Parent.
(d) From the date of the Original Agreement until the Effective Time, Tide
West will fully and accurately disclose, and will cause each of TWTT and Draco
to fully and accurately disclose, to Parent and the Parent Representatives all
information that is (i) reasonably requested by Parent or any of the Parent
Representatives, (ii) known to any of the Tide West Companies, and (iii)
relevant in any manner or degree to the value, ownership, use, operation,
development or transferability of the assets of any of the Tide West Companies.
(e) From the date of the Original Agreement until the Effective Time,
Parent will fully and accurately disclose, and will cause each of the Parent
Material Subsidiaries to fully and accurately disclose, to Tide West and the
Tide West Representatives all information that is (i) reasonably requested by
Tide West or any of the Tide West Representatives, (ii) known to Parent or any
Parent Material Subsidiary, and (iii) relevant in any manner or degree to the
value, ownership, use, operation, development or transferability of the assets
of Parent or any Parent Material Subsidiary.
(f) From the date of the Original Agreement until the Effective Time, each
of Parent and Tide West shall (i) furnish to the other, promptly upon receipt or
filing (as the case may be), a copy of each communication between such party and
the SEC after the date of the Original Agreement relating to the Merger or the
Registration Statement and each report, schedule, registration statement or
other document filed by such party with the SEC after the date of the Original
Agreement relating to the Merger, and (ii) promptly advise the other of the
substance of any oral communications between such party and the SEC relating to
the Merger or the Registration Statement.
(g) Tide West will (and will cause TWTT, Draco and the Tide West
Representatives to) fully cooperate in all reasonable respects with Parent and
the Parent Representatives in connection with Parent's examinations, evaluations
and investigations described in this Section 5.3, and Parent will (and will
cause the Parent Representatives to) fully cooperate in all reasonable respects
with Tide West and the Tide West Representatives in connection with Tide West's
examinations, evaluations and investigations described in this Section 5.3.
(h) Tide West agrees that it will not (and will cause the Tide West
Representatives not to), and Parent agrees that it will not (and will cause the
Parent Representatives not to), use any information obtained pursuant to this
Section 5.3 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement.
(i) Notwithstanding anything in this Section 5.3 to the contrary, (i) Tide
West shall not be obligated under the terms of this Section 5.3 to disclose to
Parent or the Parent Representatives, or grant Parent or the Parent
Representatives access to, information that is within Tide West's possession or
control but subject to a valid and binding confidentiality agreement with a
third party without first obtaining the consent of such third party, and Tide
West, to the extent reasonably requested by Parent, will use its best efforts to
obtain any such consent; and (ii) Parent shall not be obligated under the terms
of this Section 5.3 to disclose to Tide West or the Tide West Representatives,
or grant Tide West or the Tide West Representatives access to, information that
is within Parent's possession or control but subject to a valid and binding
confidentiality agreement with a third party without first obtaining the consent
of such third party, and Parent, to the extent reasonably requested by Tide
West, will use its best efforts to obtain any such consent.
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5.4 NO SOLICITATION.
(a) Immediately following the execution of this Agreement, Tide West will
(and will use its best efforts to cause each of the Tide West Representatives
to) terminate any and all existing activities, discussions and negotiations with
third parties (other than Parent) with respect to any possible transaction
involving the acquisition of the Tide West Common Stock or the merger or other
business combination of Tide West with or into any such third party.
(b) Tide West will not (and will use its best efforts to cause the Tide
West Representatives not to) solicit, initiate or knowingly encourage the
submission of, any offer or proposal to acquire all or any part of the Tide West
Common Stock or all or any material portion of the assets or business of Tide
West (other than the transactions contemplated by this Agreement), whether by
merger, purchase of assets, tender offer, exchange offer or otherwise (an
"ALTERNATIVE PROPOSAL"); provided, however, that, if Tide West or any Tide West
Representative shall receive an Alternative Proposal, then Tide West
Representatives may discuss such Alternative Proposal with the Person presenting
such Alternative Proposal and provide information to such Person if the board of
directors of Tide West determines in good faith, after considering the advice of
its legal counsel, that it is required to do so in order to discharge properly
its fiduciary duty to Tide West's stockholders.
(c) Tide West will promptly communicate to Parent the terms and conditions
of any Alternative Proposal that it may receive and will keep Parent informed as
to the status of any actions, including any discussions, taken pursuant to such
Alternative Proposal.
(d) If Tide West or any Tide West Representative receives an Alternative
Proposal and the board of directors of Tide West determines in good faith, after
considering the advice of its legal counsel, that it is required to do so in
order to discharge properly its fiduciary duty to Tide West's stockholders, then
Tide West Representatives may negotiate the terms of such Alternative Proposal
and a binding definitive agreement with such Person with respect thereto (an
"Alternative Transaction").
(e) Nothing in this Section 5.4 shall permit Tide West to terminate this
Agreement except as specifically provided in Section 7.1.
5.5 TIDE WEST STOCKHOLDERS MEETING. Tide West shall take all action
necessary in accordance with applicable law and its certificate of incorporation
and by-laws to convene a meeting of its stockholders as promptly as practicable
after the date of the Original Agreement for the purpose of voting on the Tide
West Proposal. The board of directors of Tide West shall recommend approval of
the Tide West Proposal and shall take all lawful action to solicit such
approval, including timely mailing the Proxy Statement/Prospectus to the
stockholders of Tide West. Notwithstanding the above, however, the following
shall be conditions to the mailing of the Proxy Statement/Prospectus:
(a) Tide West shall have received an opinion from Merrill Lynch or another
firm of investment bankers or financial advisors selected by Tide West (which
opinion shall be acceptable in form and substance to Tide West) to the effect
that the consideration to be received in the Merger by the holders of shares of
Tide West Common Stock is fair to such holders from a financial point of view,
and such opinion shall not have been withdrawn, revoked or modified.
(b) Tide West shall have received an opinion (reasonably acceptable in form
and substance to Tide West) from Conner & Winters, A Professional Corporation
(or such other firm as is reasonably acceptable to Tide West) to the effect that
(i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) each of
Parent, Tide West and Merger Sub will be a party to such reorganization within
the meaning of Section 368(b) of the Code, (iii) no gain or loss will be
recognized by Parent, Tide West or Merger Sub as a result of the Merger, and
(iv) no gain or loss, except with respect to the amount of Cash Consideration
received, will be recognized by a stockholder of Tide West as a result of the
Merger with respect to the shares of Tide West Common Stock converted into
shares of Parent Common Stock by such stockholder, and such opinion shall not
have been withdrawn, revoked or modified. Such opinion may be based upon
representations of the parties and shareholders of the parties.
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(c) Tide West shall have received a letter from Arthur Andersen & Co.,
independent public accountants, addressed to Parent and Tide West, dated as of
the date the Proxy Statement/Prospectus is first mailed to Tide West's
stockholders, in form and substance reasonably satisfactory to Tide West, in
connection with such accountants' review of certain financial and accounting
matters contained in the Proxy Statement/Prospectus and the Registration
Statement.
5.6 PARENT STOCKHOLDERS MEETING. Parent shall take all action necessary
in accordance with applicable law and its certificate of incorporation and
bylaws to convene a meeting of its stockholders as promptly as practicable after
the date of the Original Agreement for the purpose of voting on the Tide West
Proposal. The Board of Directors of Parent shall recommend approval of the Tide
West Proposal and shall take all lawful action to solicit such approval,
including timely mailing the Proxy Statement/Prospectus to the stockholders of
Parent. Notwithstanding the above, however, the following shall be conditions to
the mailing of the Proxy Statement/Prospectus:
(a) Parent shall have received an opinion from Lehman Brothers or another
firm of investment bankers or financial advisors selected by Parent (which
opinion shall be acceptable in form and substance to Parent) to the effect that
the Merger is fair to the Parent from a financial point of view, and such
opinion shall not have been withdrawn, revoked or modified.
(b) Parent shall have received an opinion of the type described in Section
5.5(b), from counsel as is reasonably acceptable to Parent and such opinion
shall not have been withdrawn, revoked or modified.
(c) Parent shall have received a letter from Arthur Andersen & Co.,
independent public accountants, addressed to Parent and Tide West, dated as of
the date the Proxy Statement/Prospectus is first mailed to Parent's
stockholders, in form and substance reasonably satisfactory to Parent, in
connection with such accountants' review of certain financial and accounting
matters contained in the Proxy Statement/Prospectus and the Registration
Statement.
5.7 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS.
(a) Parent and Tide West shall cooperate and promptly prepare the
Registration Statement, and Parent shall file the Registration Statement with
the SEC as soon as practicable after the date of the Original Agreement and in
any event not later than 45 days after the date of the Original Agreement.
Parent shall use its best efforts, and Tide West shall cooperate with Parent
(including furnishing all information concerning Tide West and the holders of
Tide West Common Stock as may be reasonably requested by Parent), to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Parent shall use its best efforts, and Tide
West shall cooperate with Parent, to obtain all necessary state securities laws
or "blue sky" permits, approvals and registrations in connection with the
issuance of Parent Common Stock pursuant to the Merger.
(b) Parent and Tide West will cause the Registration Statement (including
the Proxy Statement/ Prospectus), at the time it becomes effective under the
Securities Act, to comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder.
(c) Tide West hereby covenants and agrees with Parent that (i) the
Registration Statement (at the time it becomes effective under the Securities
Act and at the Effective Time) will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (provided, however, that
this clause (i) shall apply only to information contained in the Registration
Statement that was supplied by Tide West specifically for inclusion therein);
and (ii) the Proxy Statement/Prospectus (at the time it is first mailed to
stockholders of Tide West and Parent, at the time of the Tide West Meeting and
the Parent Meeting, and at the Effective Time) will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading (provided, however,
that this clause (ii) shall not apply to any information contained in the Proxy
Statement/ Prospectus that was supplied by Parent specifically for inclusion
therein). If, at any time prior to the Effective Time, any event with respect to
Tide West, or with respect to other information supplied by Tide West
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specifically for inclusion in the Registration Statement, occurs and such event
is required to be described in an amendment to the Registration Statement, Tide
West shall promptly notify Parent of such occurrence and shall cooperate with
Parent in the preparation and filing of such amendment. If, at any time prior to
the Effective Time, any event with respect to Tide West, or with respect to
other information included in the Proxy Statement/Prospectus, occurs and such
event is required to be described in a supplement to the Proxy
Statement/Prospectus, such event shall be so described and such supplement shall
be promptly prepared, filed and disseminated.
(d) Parent hereby covenants and agrees with Tide West that (i) the
Registration Statement (at the time it becomes effective under the Securities
Act and at the Effective Time) will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (provided, however, that
this clause (i) shall not apply to any information contained in the Registration
Statement that was supplied by Tide West specifically for inclusion therein);
and (ii) the Proxy Statement/Prospectus (at the time it is first mailed to
stockholders of Tide West and Parent, at the time of the Tide West Meeting and
the Parent Meeting, and at the Effective Time) will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading (provided, however,
that this clause (ii) shall apply only to information contained in the Proxy
Statement/ Prospectus that was supplied by Parent specifically for inclusion
therein). If, at any time prior to the Effective Time, any event with respect to
Parent, or with respect to other information included in the Registration
Statement, occurs and such event is required to be described in an amendment to
the Registration Statement, such event shall be so described and such amendment
shall be promptly prepared and filed. If, at any time prior to the Effective
Time, any event with respect to Parent, or with respect to other information
supplied by Parent specifically for inclusion in the Proxy Statement/Prospectus,
occurs and such event is required to be described in a supplement to the Proxy
Statement/Prospectus, Parent shall promptly notify Tide West of such occurrence
and shall cooperate with Tide West in the preparation, filing and dissemination
of such supplement.
(e) Neither the Registration Statement nor the Proxy Statement/Prospectus
nor any amendment or supplement thereto will be filed or disseminated to the
stockholders of Tide West or Parent without the approval of both Parent and Tide
West. Parent shall advise Tide West, promptly after it receives notice thereof,
of the time when the Registration Statement has become effective under the
Securities Act, the issuance of any stop order with respect to the Registration
Statement, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any comments or requests for additional information by the SEC with respect
to the Registration Statement.
5.8 STOCK EXCHANGE LISTING. Parent shall cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
5.9 ADDITIONAL ARRANGEMENTS. Subject to the terms and conditions herein
provided, each of Tide West and Parent shall take, or cause to be taken, all
action and shall do, or cause to be done, all things necessary, appropriate or
desirable under the HSR Act and any other applicable laws and regulations or
under applicable governing agreements to consummate and make effective the
transactions contemplated by this Agreement, including using its best efforts to
obtain all necessary waivers, consents and approvals and effecting all necessary
registrations and filings. Each of Tide West and Parent shall take, or cause to
be taken, all action or shall do, or cause to be done, all things necessary,
appropriate or desirable to cause the covenants and conditions applicable to the
transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Authority shall have issued any
order, decree, ruling or injunction, or taken any other action that would have
the effect of restraining, enjoining or otherwise prohibiting or preventing the
consummation of the transactions contemplated hereby, each of Tide West and
Parent shall use its reasonable efforts to have such order, decree, ruling or
injunction or other action declared ineffective as soon as practicable.
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5.10 AGREEMENTS OF AFFILIATES. At least 30 days prior to the Effective
Time, Tide West shall cause to be prepared and delivered to Parent a list
identifying all Persons who, at the time of the Tide West Meeting, may be deemed
to be "affiliates" of Tide West as that term is used in paragraphs (c) and (d)
of Rule 145 under the Securities Act. Tide West shall use its best efforts to
cause each Person who is identified as an affiliate of Tide West in such list to
execute and deliver to Parent, on or prior to the Closing Date, a written
agreement, in the form attached hereto as EXHIBIT 5.10 (if such Person has not
executed and delivered an agreement substantially to the same effect
contemporaneously with the execution of this Agreement). Parent shall be
entitled to place legends as specified in such agreements on the Parent
Certificates representing any Parent Common Stock to be issued to such Persons
in the Merger.
5.11 PUBLIC ANNOUNCEMENTS. Prior to the Closing, Tide West and Parent
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement and shall not issue any press release or make any such public
statement prior to obtaining the approval of the other party; provided, however,
that such approval shall not be required where such release or announcement is
required by applicable law; and provided further, that either Tide West or
Parent may respond to inquiries by the press or others regarding the
transactions contemplated by this Agreement, so long as such responses are
consistent with such party's previously issued press releases.
5.12 NOTIFICATION OF CERTAIN MATTERS. Tide West shall give prompt notice
to Parent of (a) any representation or warranty contained in Article 3 being
untrue or inaccurate when made, (b) the occurrence of any event or development
that would cause (or could reasonably be expected to cause) any representation
or warranty contained in Article 3 to be untrue or inaccurate on the Closing
Date, or (c) any failure of Tide West to comply with or satisfy any covenant,
condition, or agreement to be complied with or satisfied by it hereunder. Parent
shall give prompt notice to Tide West of (x) any representation or warranty
contained in Article 4 being untrue or inaccurate when made, (y) the occurrence
of any event or development that would cause (or could reasonably be expected to
cause) any representation or warranty contained in Article 4 to be untrue or
inaccurate on the Closing Date, or (z) any failure of Parent to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder.
5.13 PAYMENT OF EXPENSES. Each party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Merger
shall be consummated, except that (a) the fee for filing the Registration
Statement with the SEC shall be borne by Parent; (b) the costs and expenses
associated with printing the Proxy Statement/Prospectus shall be borne equally
by Parent and Tide West; and (c) the costs and expenses associated with mailing
the Proxy Statement/Prospectus to the stockholders of (i) Tide West, and
soliciting the votes of the stockholders of Tide West, shall be borne by Tide
West, and (ii) Parent, and soliciting the votes of the stockholders of Parent,
shall be borne by Parent.
5.14 REGISTRATION RIGHTS. Parent and the Major Tide West Stockholder
shall enter into a Registration Rights Agreement, in the form attached hereto as
EXHIBIT 5.14, at the Closing.
5.15 INSURANCE; INDEMNIFICATION. The Parent shall cause the Director and
Officer Liability Insurance coverage currently maintained by Tide West to
continue in effect for a period of not less than one year following the
Effective Time. From and after the Effective Time, Parent shall indemnify and
hold harmless each person who is, has been at any time prior to the date of the
Original Agreement, or becomes prior to the Effective Time, an officer or
director of any of the Tide West Companies (collectively, the "INDEMNIFIED
PARTIES") against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation arising out
of or pertaining to acts or omissions, or alleged acts or omissions, by him in
his capacity as an officer or director of any of the Tide West Companies, which
acts or omissions occurred prior to the Effective Time; provided, however, that
Parent shall be under no obligation to indemnify any Indemnified Party pursuant
to this Section 5.15 except to the extent that such Indemnified Party was
entitled to indemnification from any of the Tide West Companies (pursuant to
applicable law or contract) immediately prior to the Effective Time. The
procedures associated with such indemnification shall be the same as those
associated with the Indemnified Parties' indemnification from any of the Tide
West Companies, as the case
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may be, immediately prior to the Effective Time (provided, however, that Parent
shall be under no obligation to deposit trust funds pursuant to any
"change-in-control" or similar provisions). Tide West hereby agrees that, from
and after the date of the Original Agreement until the Effective Time, it will
not (and it will cause each of TWTT and Draco not to) amend, modify or otherwise
alter any contractual provision under which any Indemnified Party is entitled to
indemnification from any of the Tide West Companies at the time of the execution
of this Agreement. The provisions of this Section 5.15 are intended to be for
the benefit of, and shall be enforceable by, the parties hereto and each
Indemnified Party and their respective heirs and representatives.
5.16 TIDE WEST EMPLOYEES. After the Effective Time, it is expected that
Parent may, in its sole discretion, offer employment to, or cause the Tide West
Companies to continue the employment of, certain employees of the Tide West
Companies (the "RETAINED EMPLOYEES"). Parent shall provide the Retained
Employees with the same benefits that accrue to employees of Parent and its
subsidiaries. In addition, for a period of 12 months following the Effective
Time, Parent shall, or shall cause the Surviving Corporation to, either (a)
maintain the effectiveness of the Tide West Employee Benefit Plans for the
benefit of the Retained Employees or (b) provide the Retained Employees with the
rights and benefits of Parent's employee benefit plans. With respect to
employees of the Tide West Companies who are not Retained Employees, Parent
shall, for a period of 18 months following the Effective Time, either (a)
maintain the Tide West health benefit plans for the benefit of such persons, or
(b) provide such persons with the rights and benefits of Parent's employee
health benefit plans; provided, that Parent shall not be required to pay the
premiums for coverage under such plans for any such persons, except to the
extent provided in any severance agreement agreed to by the Tide West Companies
and Parent. Parent further agrees that the Retained Employees shall be credited
for their service with the Tide West Companies, and their respective predecessor
entities, for purposes of eligibility and vesting in the employee plans provided
by Parent. The Retained Employees' benefits under Parent's medical benefit plan
shall not be subject to any exclusions for any pre-existing conditions, and
credit shall be received for any deductibles or out-of-pocket amounts previously
paid. Parent shall, or shall cause the Surviving Corporation to, fulfill all
coverage continuation obligations imposed by Section 4980B of the Code and
Section 601 of ERISA for those employees of the Tide West Companies who are not
Retained Employees. The provisions of this Section 5.16 are intended to be for
the benefit of, and shall be enforceable by, the parties hereto and the
employees of the Tide West Companies covered by the Tide West Employee Benefit
Plans at the Effective Time and their respective heirs and representatives.
5.17 RESTRUCTURING OF MERGER. If the condition to Closing set forth in
Section 6.3(g) is not either satisfied or waived by Tide West, upon written
notice from Tide West delivered to Parent within 15 days after the approval of
the Tide West Proposal at both the Tide West Meeting and the Parent Meeting, the
Merger shall be restructured under Section 351 of the Code as a "Horizontal
Double Dummy" transaction whereby (a) the holders of Parent Common Stock would
receive one share of common stock ("Newco Common Stock") of a newly created
holding company ("Newco") in exchange for each share of Parent Common Stock as a
result of a merger of a newly created subsidiary of Newco with and into Parent,
and (b) the holders of Tide West Common Stock would receive $8.75 and .6295 of a
share of Newco Common Stock for each share of Tide West Common Stock as a result
of a merger of another newly created subsidiary of Newco with and into Tide
West. In such event, this Agreement shall be deemed to be appropriately modified
to reflect such restructuring and the parties hereto shall use their reasonable
best efforts to effect such restructured transaction.
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ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions:
(a) STOCKHOLDER APPROVAL. The Tide West Proposal shall have been duly and
validly approved and adopted by the stockholders of Tide West and Parent, all as
required by the DGCL and the charter and bylaws of Tide West and Parent.
(b) OTHER APPROVALS. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated and all
filings required to be made prior to the Effective Time with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time from, any Governmental Authority or other person in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Tide West, Parent and Merger Sub shall have
been made or obtained (as the case may be), except where the failure to obtain
such consents, approvals, permits and authorizations would not be reasonably
likely to result in a Material Adverse Effect on Parent (assuming the Merger has
taken place) or to materially adversely affect the consummation of the Merger.
(c) SECURITIES LAW MATTERS. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and shall be effective at
the Effective Time, and no stop order suspending such effectiveness shall have
been issued, no action, suit, proceeding or investigation by the SEC to suspend
such effectiveness shall have been initiated and be continuing, and all
necessary approvals under state securities laws relating to the issuance or
trading of the Parent Common Stock to be issued in the Merger shall have been
received.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior to
invoking this condition, each party shall have complied fully with its
obligations under Section 5.9 and, in addition, shall use all reasonable efforts
to have any such decree, ruling, injunction or order vacated, except as
otherwise contemplated by this Agreement.
(e) ACCOUNTANTS' LETTER. Parent and Tide West shall have received a letter
from Arthur Andersen & Co., immediately prior to the Effective Date, in form and
substance reasonably satisfactory to each of Parent and Tide West, dated as of
the Effective Date, which letter shall address matters as are customary for
transactions similar to those contemplated in this Agreement.
(f) NYSE LISTING. The shares of Parent Common Stock issuable pursuant to
the Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Parent and Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Tide West set forth in Article 3 shall be true and correct in all material
respects as of the Closing Date as though made on and as of that time, and
Parent shall have received a certificate signed by the chief executive officer
of Tide West to such effect; provided, however, that the condition set forth in
this Section 6.2(a) shall be deemed to be satisfied even if one or more of such
representations and warranties (without giving effect to the individual
materiality thresholds otherwise included as a part of such representations and
warranties) are not true and correct, so long as the failure of such
representations and warranties (without giving effect to the individual
materiality thresholds otherwise included as a part of such representations and
warranties) to be true and correct (in the aggregate) does not result in (i)
damages or losses to Parent, (ii) a net reduction in the aggregate value of the
assets of the Tide West Companies (with respect to Ownership Interests, as
determined
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by reference to the Allocated Values) or (iii) reduction in the aggregate net
value of the assets of the Tide West Companies resulting from the items and
matters set forth in Section 3.13 of the DISCLOSURE SCHEDULE, in an aggregate
amount for clauses (i), (ii) and (iii) (the "FAILURE AMOUNT") that exceeds
$10,000,000; provided, that to the extent the Failure Amount exceeds $5,000,000,
the aggregate cash portion of the consideration to be paid to the holders of
shares of Tide West Common Stock in connection with the Merger shall be reduced
by an amount (not to exceed $5,000,000) by which the Failure Amount exceeds
$5,000,000 (and the Cash Consideration per share of Tide West Common Stock shall
be proportionately reduced); provided further, that to the extent the Failure
Amount exceeds $10,000,000, Parent may elect to close the Merger after effecting
the reduction contained in the immediately preceding proviso.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS BY TIDE WEST. Tide West shall
have performed in all material respects all covenants and agreements required to
be performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed by the chief executive officer
of Tide West to such effect.
(c) LETTERS FROM TIDE WEST AFFILIATES. Parent shall have received from
each Person named in the list referred to in Section 5.10 an executed copy of
the agreement described in Section 5.10.
(d) NO ADVERSE CHANGE. From the date of the Original Agreement through the
Closing, there shall not have occurred any change in the condition (financial or
otherwise), operations or business of any of the Tide West Companies that would
have or would be reasonably likely to have a Material Adverse Effect on Tide
West (other than changes, including changes in commodity prices, generally
affecting the oil and gas industry).
(e) FAIRNESS OPINION. The fairness opinion described in Section 5.6(a)
shall not have been withdrawn, revoked, or modified.
(f) TAX OPINION. The tax opinion described in Section 5.6(b) shall not
have been withdrawn, revoked or modified.
(g) DISSENTING STOCKHOLDERS. The holders of no more than three percent of
the Tide West Common Stock shall have exercised their right to dissent from the
Merger under the DGCL.
(h) LEGAL OPINION. Parent and Merger Sub shall have received an opinion of
Conner & Winters, a Professional Corporation, counsel for Tide West, dated the
Closing Date, in form and substance reasonably acceptable to Parent, covering
the subjects set forth in Sections 3.1, 3.2, 3.3, 3.4 and 3.5.
6.3 CONDITIONS TO OBLIGATION OF TIDE WEST. The obligation of Tide West to
effect the Merger is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by Tide West:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Merger Sub set forth in Article 4 shall be true and correct in all
material respects as of the Closing Date as though made on and as of that time,
and Tide West shall have received a certificate signed by the chief executive
officer or the chief financial officer of Parent to such effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS BY PARENT AND MERGER
SUB. Parent and Merger Sub shall have performed in all material respects all
covenants and agreements required to be performed by them under this Agreement
at or prior to the Closing Date, and Tide West shall have received a certificate
signed by the chief executive officer or the chief financial officer of Parent
to such effect.
(c) FAIRNESS OPINION. The fairness opinion described in Section 5.5(a)
shall not have been withdrawn, revoked, or modified.
(d) TAX OPINION. The tax opinion described in Section 5.5(b) shall not
have been withdrawn, revoked, or modified.
(e) NO ADVERSE CHANGE. From the date of the Original Agreement through the
Closing, there shall not have occurred any change in the condition (financial or
otherwise), operations or business of Parent and its
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subsidiaries that would have or would be reasonably likely to have a Material
Adverse Effect on Parent (other than changes, including changes in commodity
prices, generally affecting the oil and gas industry).
(f) LEGAL OPINION. Tide West shall have received an opinion of the general
counsel of Parent, dated the Closing Date, in form and substance reasonably
acceptable to Tide West, covering the subjects set forth in Sections 4.1, 4.2,
4.3 and 4.4.
(g) MAXIMUM NUMBER OF SHARES. The adjustments to the Cash Consideration
and the Conversion Number pursuant to the formulas set forth in Section
2.4(b)(i) (other than the last proviso thereof) would result in the issuance of
not more than 7,161,312 shares of Parent Common Stock in connection with the
Merger.
ARTICLE 7
TERMINATION
7.1 TERMINATION RIGHTS. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of the Tide West Proposal by the stockholders of Tide West:
(a) By mutual written consent of Parent and Tide West;
(b) By either Tide West or Parent if (i) the Merger has not been
consummated by July 31, 1996 (provided, however, that the right to terminate
this Agreement pursuant to this clause (i) shall not be available to any party
whose breach of any representation or warranty or failure to perform any
covenant or agreement under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date); (ii) any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable (provided, however, that the right to terminate this Agreement
pursuant to this clause (ii) shall not be available to any party until such
party has used all reasonable efforts to remove such injunction, order or
decree); or (iii) the Tide West Proposal shall not have been approved by the
required vote of (A) the Tide West stockholders at the Tide West Meeting or at
any adjournment thereof, or (B) the Parent stockholders at the Parent Meeting or
at any adjournment thereof;
(c) By Parent if (i) there has been a breach of the representations and
warranties made by Tide West in Article 3 of this Agreement (provided, however,
that Parent shall not be entitled to terminate this Agreement pursuant to this
clause (i) unless Parent has given Tide West at least 30 days prior notice of
such breach, Tide West has failed to cure such breach within such 30-day period,
and the condition described in Section 6.2(a), other than the provision thereof
relating to the certificate signed by the chief executive officer of Tide West,
would not be satisfied if the Closing were to occur on the day on which Parent
gives Tide West notice of such termination); or (ii) Tide West has failed to
comply in any material respect with any of its covenants or agreements contained
in this Agreement and such failure has not been, or cannot be, cured within a
reasonable time after notice and demand for cure thereof;
(d) By Tide West if (i) there has been a breach of the representations and
warranties made by Parent and Merger Sub in Article 4 of this Agreement
(provided, however, that Tide West shall not be entitled to terminate this
Agreement pursuant to this clause (i) unless Tide West has given Parent at least
30 days prior notice of such breach, Parent has failed to cure such breach
within such 30-day period, and the condition described in Section 6.3(a), other
than the provision thereof relating to the certificate signed by the chief
executive officer of Parent, would not be satisfied if the Closing were to occur
on the day on which Tide West gives Parent notice of such termination); or (ii)
Parent or Merger Sub has failed to comply in any material respect with any of
its respective covenants or agreements contained in this Agreement, and, in
either such case, such breach or failure has not been, or cannot be, cured
within a reasonable time after notice and a demand for cure thereof;
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(e) By Tide West if (i) Tide West is prepared to enter into a binding
definitive agreement to effect an Alternative Transaction; and (ii) Tide West
has given Parent at least three business days' prior notice of its intention to
terminate this Agreement pursuant to this Section 7.1(e) (along with a
description of all relevant terms and conditions of such Alternative
Transaction), during which period Parent shall have the opportunity to propose
amendments or modifications to the terms of the Merger; or
(f) By Parent if the board of directors of Tide West shall have failed to
recommend adoption of the Tide West Proposal at the time the Proxy
Statement/Prospectus is first mailed to stockholders of Tide West or shall have
amended or withdrawn any such recommendation and such recommendation is not
reinstated in its prior form within five business days after such amendment or
withdrawal.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated by either Tide
West or Parent pursuant to the provisions of Section 7.1, this Agreement shall
forthwith become void except for, and there shall be no further obligation on
the part of any party hereto or its respective Affiliates, directors, officers,
or stockholders except pursuant to, the provisions of Sections 5.3(c) (but only
to the extent of the confidentiality and indemnification provisions contained
therein), 5.7(c), 5.7(d), 5.13 and 7.3, Article 8 and the Confidentiality
Agreement (which shall continue pursuant to their terms); provided, however,
that a termination of this Agreement shall not relieve any party hereto from any
liability for damages incurred as a result of a breach by such party of its
representations, warranties, covenants, agreements or other obligations
hereunder occurring prior to such termination.
7.3 FEES AND EXPENSES. If this Agreement is terminated pursuant to
Section 7.1(e) or (f), Tide West shall promptly, but in no event later than one
business day after termination of this Agreement, pay to Parent a fee equal to
$5,000,000 in same day funds, plus interest on such amount from the date payable
until paid at a rate of eight percent per annum.
ARTICLE 8
MISCELLANEOUS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations or warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the consummation of the
Merger.
8.2 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval of the Tide West Proposal by the stockholders of
Tide West; provided, however, that after any such approval, no amendment shall
be made that by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by a written
instrument signed on behalf of each of the parties hereto.
8.3 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally, by facsimile
transmission or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received (or, if mailed, five
business days after the date of mailing) at the following addresses or facsimile
transmission numbers (or at such other address or facsimile transmission number
for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub: HS Resources, Inc., One Maritime Plaza,
15th Floor, San Francisco, CA 94111, Attention: Chief Executive Officer
(facsimile transmission number: 415-433-5811), with a copy (which shall not
constitute notice) to HS Resources, Inc., 1999 Broadway, Suite 3600, Denver, CO
80202, Attention: General Counsel (facsimile transmission number: 303-296-3601).
(b) If to Tide West: Tide West Oil Company, 6666 South Sheridan, Suite 250,
Tulsa, Oklahoma 74133-1750, Attention: Philip B. Smith, President (facsimile
transmission number: 918-481-0992), with a copy (which shall not constitute
notice) to Robert A. Curry, Conner & Winters, 2400 First Place Tower, 15 East
5th Street, Tulsa, Oklahoma 74103 (facsimile transmission number: 918-586-8548).
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8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
8.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the Confidentiality Agreement and the documents and instruments
delivered by the parties in connection with this Agreement) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; and (b) except as provided in Article 2 or Section 5.3(c), 5.15 or 5.16,
is solely for the benefit of the parties hereto and their respective successors,
legal representatives and assigns and does not confer on any other person any
rights or remedies hereunder.
8.7 APPLICABLE LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
8.8 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby, unless the foregoing inconsistent action or the
failure to take an action constitutes a material breach of this Agreement or
makes this Agreement impossible to perform, in which case this Agreement shall
terminate pursuant to Article 7. Except as otherwise contemplated by this
Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent Governmental
Authority, such party shall not incur any liability or obligation unless such
party breached its obligations under Section 5.9 or did not in good faith seek
to resist or object to the imposition or entering of such order or judgment.
8.9 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to any newly-formed direct or
indirect wholly-owned corporate subsidiary of Parent. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.10 WAIVERS. At any time prior to the Effective Time, the parties hereto
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive performance of any of the
covenants or agreements, or satisfaction of any of the conditions, contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. Except as provided in this Agreement, no action taken pursuant to
this Agreement, including any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision hereof
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provisions hereof.
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8.11 CONFIDENTIALITY AGREEMENT. Parent agrees to be bound by the terms of
the Confidentiality Agreement as if it were a party thereto. The Confidentiality
Agreement shall remain in full force and effect following the execution of this
Agreement until terminated as described in Section 7.2, is hereby incorporated
herein by reference and shall constitute a part of this Agreement for all
purposes; provided, however, that any standstill provisions contained therein
will, effective as of the Closing, be deemed to have been waived to the extent
necessary for the parties to consummate the Merger in accordance with the terms
of this Agreement. Any and all information received by Parent pursuant to the
terms and provisions of this Agreement shall be governed by the applicable terms
and provisions of the Confidentiality Agreement.
8.12 INCORPORATION. Exhibits and Schedules referred to herein are
attached to and by this reference incorporated herein for all purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, on the date first written above.
"Tide West" "Parent"
TIDE WEST OIL COMPANY HS RESOURCES, INC.
By: /s/ ROBERT H. MASE By: /s/ P. MICHAEL HIGHUM
----------------------------- ---------------------------
Robert H. Mase P. Michael Highum
Vice President President
"Merger Sub"
HSR ACQUISITION, INC.
By: /s/ P. MICHAEL HIGHUM
---------------------------
P. Michael Highum
President
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ANNEX B
FORM OF FAIRNESS OPINION
OF MERRILL LYNCH & CO.
, 1996
Board of Directors
Tide West Oil Company
6666 S. Sheridan Road, Suite 250
Tulsa, OK 74133
Gentlemen:
Tide West Oil Company (the "Company") and a wholly-owned subsidiary of HS
Resources, Inc. ("HS"), HSR Acquisition, Inc. ("HSR"), propose to enter into an
agreement (the "Agreement") pursuant to which the Company will be merged with
HSR in a transaction (the "Merger") in which each outstanding share of the
Company's common stock, par value $0.01 per share (the "Shares"), will be
converted into the right to receive $8.75 in cash, less three percent of the
amount by which HS' market price, defined as the average stock price for ten
days, before the closing of the Merger, exceeds $10.50, and 0.6295 shares of
common stock, par value $0.01 per share, of HS (the "HS Shares"). The cash
consideration may be decreased, and the conversion rates for the HS Shares may
be correspondingly increased, in accordance with the Agreement if necessary to
assure the tax-free nature of the Merger to the Company's shareholders. The
Merger is expected to be considered by the shareholders of the Company and HS at
special shareholders' meetings and consummated shortly after the date of such
meetings.
You have asked us whether, in our opinion, the proposed consideration to be
received by the holders of the Shares in the Merger is fair to such
shareholders, taken as a whole, from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31, 1994;
the Company's Forms 8-K dated November 20, 1992 and December 15, 1993; the
Company's Forms 10-Q and the related unaudited financial information for
the quarterly periods ended March 31, 1995, June 30, 1995 and September 30,
1995; and unaudited financial information for the year ended December 31,
1995;
(2) Reviewed HS' Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1994; HS' Forms
8-K dated July 9, 1992 and August 13, 1993; HS' Forms 10-Q and the related
unaudited financial information for the quarterly periods ended March 31,
1995, June 30, 1995 and September 30, 1995; and unaudited financial
information for the year ended December 31, 1995;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company and HS, furnished to us by the Company and HS, respectively;
(4) Reviewed for January 1, 1995, July 1, 1995, October 1, 1995, and
December 31, 1995, certain reserve and reserve production estimates for the
Company prepared by the Company, a report of Netherland, Sewell &
Associates, Inc. setting forth its estimates for a portion of the Company's
reserves at January 1, 1995, and a reserve audit for a portion of the
Company's properties prepared as of July 1, 1995, by Netherland, Sewell &
Associates, Inc., and discussed such reserve and reserve production
estimates with the Company and Netherland, Sewell & Associates, Inc.;
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<PAGE> 156
(5) Reviewed certain reserve and reserve production estimates for
December 31, 1995 for HS prepared by HS and reviewed by Williamson
Petroleum Consultants, Inc. and discussed such reserve and reserve
production estimates with HS;
(6) Reviewed certain reserve and reserve production estimates for
December 31, 1995, relating to the acquisition of certain assets from Basin
Exploration, Inc., prepared by Basin Exploration, Inc. and audited by
Netherland, Sewell & Associates, Inc. and discussed such reserve and
reserve production estimates with HS;
(7) Conducted discussions with members of senior management of the
Company and HS concerning their respective business and prospects;
(8) Reviewed the historical market prices and trading activity for
the Shares and HS Shares and compared them with that of certain publicly
traded companies which we deemed to be reasonably similar to the Company
and HS, respectively;
(9) Compared the published reserve information, results of operations
and similar financial information of the Company and HS with that of
certain companies which we deemed to be reasonably similar to the Company
and HS, respectively;
(10) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(11) Considered the proforma effect of the Merger on HS'
capitalization ratios and earnings and cash flow, with and without the
effect of the acquisition of certain assets from Basin Exploration, Inc.;
(12) Reviewed a draft of the Agreement and Plan of Merger dated
February 23, 1996;
(13) Reviewed drafts of the Agreement to Vote and Proxy Agreements
dated February 23, 1996, of Natural Gas Partners, L.P. and Philip B. Smith;
(14) Reviewed a draft of the Registration Rights Agreement dated
February 23, 1996;
(15) Reviewed a draft of the Asset Purchase and Sale Agreement
relating to the Basin Exploration, Inc. properties dated February 23, 1996;
and
(16) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
HS, and we have not independently verified such information or undertaken an
independent appraisal of the assets or liabilities of the Company, HS or certain
assets of Basin Exploration, Inc. With respect to the financial forecasts and
internal reserve reports furnished by the Company and HS, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's or HS' management as to the expected
future financial performance of the Company, HS or certain assets of Basin
Exploration, Inc., as the case may be.
In developing our opinion, we have relied heavily on the Company and HS as
to certain accounting aspects of the Merger and, as provided in the Agreement
and Plan of Merger, we have also assumed that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
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On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be received by the holders of the Shares pursuant
to the Merger is fair to such shareholders, taken as a whole, from a financial
point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:
-----------------------------
Gregory P. Pipkin
Director
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ANNEX C
FORM OF FAIRNESS OPINION
OF LEHMAN BROTHERS, INC.
, 1996
Board of Directors
HS Resources, Inc.
One Maritime Plaza
San Francisco, CA 94111
Members of the Board:
We understand that HS Resources ("HSR" or the "Company") has entered into
an agreement to acquire Tide West Oil Company ("Tide West") pursuant to a merger
for stock and cash, with Tide West merging with and into HSR Acquisition Inc., a
newly formed, wholly-owned subsidiary of the Company ("Merger Sub"). We further
understand that, as consideration in the merger, Tide West shareholders will
receive $8.75 in cash and 0.6295 shares of HSR common stock for each share of
Tide West common stock, subject to adjustment, and that Merger Sub will assume
net liabilities of Tide West of approximately $38.7 million (the "Proposed
Transaction"). The terms and conditions of the Proposed Transaction, including
with respect to the potential adjustment of the cash and common stock
proportions of the consideration to be paid to holders of Tide West common
stock, are set forth in more detail in the Agreement and Plan of Merger dated as
of February 25, 1996, and amended and restated as of April 29, 1996, by and
among HSR, Merger Sub and Tide West (the "Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the consideration to be paid by the Company in the Proposed
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, the Company's underlying business decision to proceed
with or effect the Proposed Transaction.
In arriving at our opinion, we have reviewed and analyzed: (1) the
Agreement and the specific terms of the Proposed Transaction, (2) publicly
available and such other information concerning the Company and Tide West which
we believe to be relevant to our inquiry including Tide West's Annual Reports;
Forms 10-K and related financial information for the three fiscal years ended
December 31, 1994; Tide West's Forms 8-K dated November 20, 1992 and December
15, 1993; Tide West's Forms 10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1995, June 30, 1995, and September 30,
1995; and Tide West's unaudited financial information for the year ended
December 31, 1995; and HSR's Annual Reports; Forms 10-K and related financial
information for the three fiscal years ended December 31, 1994; HSR's Forms 8-K
dated July 9, 1992, and August 13, 1993; HSR's Forms 10-Q and the related
unaudited financial information for the quarterly periods ended March 31, 1995,
June 30, 1995, and September 30, 1995; and HSR's unaudited financial information
for the year ended December 31, 1995, (3) financial and operating information
with respect to the business, operations and prospects (including financial
projections) of the Company and Tide West furnished to us by the Company and
Tide West, (4) the trading histories of the common stock of the Company and Tide
West from January 1, 1994 to March 26, 1996 and a comparison of the trading
histories with those of other companies that we deemed relevant, (5) certain
reserve and reserve production estimates for Tide West prepared by Tide West,
and an audit performed by Netherland, Sewell & Associates, Inc., as of July 1,
1995, of a portion of the Tide West reserve estimates, (6) certain reserve and
reserve production estimates for HSR prepared by HSR, (7) a comparison of the
historical financial results and present financial condition of the Company and
Tide West with those of other companies that we deemed relevant, and (8) a
comparison of the financial terms of the Proposed Transaction with the terms of
certain other recent transactions which we deemed relevant. In addition, we have
had discussions with the managements of the Company and Tide West concerning
their respective businesses, operations, assets,
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<PAGE> 159
financial conditions and prospects and undertook such other studies, analyses
and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of the managements of the Company and
Tide West that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company and Tide West provided to us by management of the Company and Tide West
respectively, upon advice of the Company we have assumed that such projections
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the managements of the Company and Tide West, as the
case may be, as to the future financial performance of the Company and Tide West
and that the Company and Tide West will perform substantially in accordance with
such projections. With respect to oil and gas reserve estimates and future
natural gas and oil production volumes for Tide West, with your consent we have
relied upon partial reserve audits performed by Netherland, Sewell & Associates,
Inc., Tide West's independent reserve engineer. In arriving at our opinion, we
have not conducted a physical inspection of the properties and facilities of
Tide West and have not made or obtained any other evaluations or appraisals of
the assets or liabilities of Tide West. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be paid
by the Company in the Proposed Transaction is fair to the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the debt
and equity securities of the Company and Tide West for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS, INC.
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<PAGE> 160
ANNEX D
FORM OF FAIRNESS OPINION
OF PRUDENTIAL SECURITIES INCORPORATED
, 1996
Board of Directors
HS Resources, Inc.
One Maritime Plaza
San Francisco, CA 94111
Members of the Board:
We understand that HS Resources, ("HSR" or the "Company"), HSR Acquisition
(the "Merger Sub"), a wholly-owned subsidiary of HSR and Tide West Oil Company
("Tide West"), have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated February 25, 1996, and amended and restated as of April 29,
1996, pursuant to which Tide West will be merged with and into Merger Sub (the
"Merger"). At the Merger, Tide West will cease to exist and Merger Sub will
succeed to all of the assets, rights, liabilities and obligations of Tide West.
We further understand that in the Merger, each outstanding share of Tide West
common stock will be converted into 0.6295 of one share of Common Stock of HSR
and the right to receive in cash $8.75 (the "Merger Consideration"), subject to
modification under certain circumstances.
You have requested our opinion as to the fairness from a financial point of
view to the Company of the Merger Consideration to be paid by the Company in the
Merger.
In conducting our analysis and arriving at the opinion expressed herein, we
have:
(1) read the Merger Agreement and reviewed the terms of the Merger;
(2) reviewed historical audited financial information for both the
Company and Tide West for each of the three fiscal years ending December
31, 1994 and the unaudited Company and Tide West financial information for
the year ending December 31, 1995;
(3) analyzed certain operating and financial information with respect
to the business, operations and prospects of the Company and Tide West
including financial forecasts furnished to us by the Company and Tide West;
(4) analyzed the trading history of Tide West and HSR common stock
from January 1, 1994 to March 26, 1996 and compared those trading histories
with those of other companies that we deemed comparable;
(5) reviewed certain reserve and reserve production estimates for Tide
West prepared by Tide West, an audit performed by Netherland, Sewell &
Associates, Inc. as of July 1, 1995 of a portion of the Tide West reserve
estimates, and certain reserve and reserve production estimates for HSR and
prepared by HSR;
(6) compared the historical financial results and present financial
condition of Tide West with other companies we deemed comparable;
(7) compared the financial terms of the Merger with the financial
terms of certain other transactions that we deemed relevant;
(8) reviewed such other financial studies and analyses and performed
such other investigations as we deemed necessary, including our assessment
of economic and market conditions generally and with respect to the
exploration and development industry; and
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<PAGE> 161
(9) conducted discussions with the management of Tide West concerning
its business, operations, assets, financial condition and prospects
including financial forecasts and undertaken such other studies, analyses
and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company and Tide
West, upon advice of the Company, we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the managements of the Company and Tide West, as the
case may be, as to the future financial performance of the Company and Tide West
and that the Company and Tide West will perform substantially in accordance with
such projections. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company or Tide West and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of the Company or Tide West. Our opinion necessarily is based upon market,
economic and other conditions as they exist, and can be evaluated as of the date
of this letter.
Based upon and subject to the foregoing, we are of the opinion that as of
the date hereof, the consideration to be offered in the Merger is fair to the
Company from a financial point of view.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services which is contingent upon the
consummation of the Merger. In addition, the Company has agreed to indemnify us
for certain liabilities that may arise out of the rendering of this opinion. In
the ordinary course of our business, we may trade in the debt and/or equity
securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is prepared for the Board of Directors and is not a
recommendation to the Company's shareholders as to how such shareholders should
vote with respect to the Merger.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
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<PAGE> 162
ANNEX E
DELAWARE GENERAL CORPORATION LAW
SEC. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251, sec. 252, sec. 254, sec. 257, sec. 258, sec. 263
or sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsections (f) or (g) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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<PAGE> 163
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their
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<PAGE> 164
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the petition
shall be accompanied by such a duly verified list. The Register in Chancery, if
so ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall
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<PAGE> 165
be dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
E-4
<PAGE> 166
ANNEX F
DEFINITIONS OF CERTAIN TERMS
When used in this Joint Proxy Statement/Prospectus, the following terms
have the meanings indicated below.
"Bbl" means a standard barrel of 42 U.S. gallons and represents the basic
unit for measuring the production of crude oil and condensate.
"Bcf" means one billion cubic feet.
"Boe" means a barrel-of-oil-equivalent and is a customary convention used
in the United States to express oil and gas volumes on a comparable basis. It is
determined on the basis of the estimated relative energy content of natural gas
to oil, being approximately 6 Mcf of natural gas per barrel of oil.
"gross" acre or well means an acre or well in which a working interest is
owned.
"MBbl" means one thousand Bbls.
"MBoe" means one thousand Boes.
"Mcf" means one thousand cubic feet under prescribed conditions of pressure
and temperature and represents the basic unit for measuring the production of
natural gas.
"Mcfe" means a thousand cubic feet equivalent, which is determined using
the ratio of one barrel of crude oil, condensate or natural gas liquids to six
Mcf of natural gas so that 1/6 of a barrel of crude oil, condensate or natural
gas liquids is referred to as one thousand cubic feet of natural gas equivalent
or one Mcfe.
"MMBoe" means one million Boes.
"MMcf" means one million cubic feet.
"net" acres or wells are determined by multiplying the gross acres or
wells, as the case may be, by the applicable working interest in those gross
acres or wells.
"proved reserves" means those estimated quantities of crude oil and natural
gas that geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known oil and gas reservoirs under
existing economic and operating conditions. Proved reserves are limited to those
quantities of oil and gas that can be expected to be recoverable commercially at
current prices and costs, under existing regulatory practices and with existing
conventional equipment and operating methods.
"SEC 10 value" means the present value of estimated future net revenues,
before income taxes, of proved reserves, determined in all material respects in
accordance with the rules and regulations of the Commission (generally using
prices and costs in effect on the specified date and a 10% discount rate).
<PAGE> 167
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers under certain circumstances for liabilities incurred in connection
with their activities in such capacities (including reimbursement for expenses
incurred). The Registrant's Amended and Restated Certificate of Incorporation,
provides for indemnification of officers and directors to the fullest extent
permitted by the Delaware General Corporation Law. The Registrant's Bylaws also
provide that the Registrant shall indemnify directors and officers under certain
circumstances for liabilities and expenses incurred by reason of their
activities in such capacities. In addition, the Registrant has insurance
policies that provide liability coverage to directors and officers while acting
in that capacity. HSR maintains a $20 million policy of officers and directors
liability insurance.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
Article 11 of the Registrant's Amended and Restated Certificate of
Incorporation (the "Certificate") and Article VI, Section 1 of the Registrant's
Second Amended and Restated Bylaws (the "Bylaws") state that: "To the fullest
extent permitted by the General Corporation Law of Delaware, a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director."
Article 12(a) of the Certificate and Article VI, Section 2(a) of the Bylaws
state that: "The corporation shall indemnify each person who was or is made a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he, or a person of whom he is the legal
representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the General Corporation Law of Delaware."
Article 12(b) of the Certificate and Article VI, Section 2(b) of the Bylaws
state that: "The corporation may purchase and maintain insurance, at its
expense, on behalf of any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify such person
against such liability under the General Corporation Law of Delaware."
Finally, individual Indemnification Agreements have been entered into
between HSR and each officer and director of HSR which contractually obligate
HSR to provide the officers and directors (i) indemnification, (ii) insurance or
self-insurance in lieu thereof and (iii) additional indemnification.
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<PAGE> 168
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- ---------------------------------------------------------------------------------------------
<S> <C>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of April
29, 1996, among HSR, Merger Sub and Tide West (attached as Annex A to
the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
3.1 -- Amended and Restated Certificate of Incorporation of HSR
(incorporated by reference to Exhibit 3.1 to HSR's Form S-1, No.
33-52774, filed on October 2, 1992 (the "HSR 1992 Form S-1").
3.2 -- Second Amended and Restated By-Laws of HSR (incorporated by reference
to Exhibit 3.2 to the HSR 1992 Form S-1).
3.3 -- Certificate of Incorporation of Tide West (incorporated by reference
to Exhibit 4.1 to Tide West's Current Report on Form 8-K dated
November 20, 1992).
3.4 -- Amendment to Certificate of Incorporation of Tide West, dated January
29, 1993 (effective February 1, 1993) (incorporated by reference to
Exhibit 3.2 to Tide West's Registration Statement on Form S-1, No.
33-57058 (the "Tide West Form S-1")).
3.5 -- Restated By-laws of Tide West (incorporated by reference to Exhibit
3.3 to the Tide West Form S-1).
*4.1 -- Form of Registration Rights Agreement, by and between HSR and NGP, to
be executed at Closing.
4.2 -- Rights Agreement, dated as of February 28, 1996, between HSR and
Harris Trust Company of California, as rights agent (incorporated by
reference to Exhibit 1 to HSR's Form 8-A, dated February 28, 1996, as
amended by HSR's Form 8-A/A (Amendment No. 1), dated March 12, 1996).
*5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. regarding
legality of the securities to be registered.
*8.1 -- Form of Opinion of Conner & Winters, A Professional Corporation,
regarding tax matters.
*11 -- Statement Regarding Computation of Per Share Earnings.
*23.1 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in the
opinion filed as Exhibit 5.1 to this Registration Statement).
*23.2 -- Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 8.1 to this Registration Statement).
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of Deloitte & Touche LLP.
*23.5 -- Consent of Lehman Brothers, Inc.
*23.6 -- Consent of Prudential Securities Incorporated.
*23.7 -- Consent of Merrill Lynch & Co.
*23.8 -- Consent of Williamson Petroleum Consultants, Inc.
*23.9 -- Consent of Netherland, Sewell & Associates, Inc.
*23.10 -- Consent of Philip B. Smith, the NGP board nominee.
#24.1 -- Power of Attorney of Registrant.
#27.1 -- Financial Data Schedule.
99.1 -- Opinion of Lehman Brothers, Inc. (attached as Annex C to the Joint
Proxy Statement/Prospectus forming a part of this Registration
Statement).
</TABLE>
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<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- ---------------------------------------------------------------------------------------------
<S> <C>
99.2 -- Opinion of Prudential Securities Incorporated (attached as Annex D to
the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
99.3 -- Opinion of Merrill Lynch & Co. (attached as Annex B to the Joint
Proxy Statement/Prospectus forming a part of this Registration
Statement).
*99.4 -- Form of Proxy for Special Meeting of Stockholders of HSR.
*99.5 -- Form of Proxy for Special Meeting of Stockholders of Tide West.
99.6 -- Agreement to Vote and Proxy, dated as of February 25, 1996, between
HSR and NGP (incorporated by reference to Exhibit B to HSR's Schedule
13D filed on March 6, 1996).
99.7 -- Agreement to Vote and Proxy, dated as of February 25, 1996, between
HSR and Smith (incorporated by reference to Exhibit C to HSR's
Schedule 13D filed on March 6, 1996).
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
# Previously filed.
ITEM 22. UNDERTAKINGS.
512(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this effective Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference into this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 170
512(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
512(g)(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
512(g)(2) The undersigned registrant undertakes that every prospectus (i)
that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
512(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 22(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 herein, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
Item 22(c) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 2 to this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Francisco, State of California, on May 1, 1996.
HS RESOURCES, INC.
By: /s/ NICHOLAS J. SUTTON
-------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ ----------------
<C> <S> <C>
/s/ NICHOLAS J. SUTTON Chairman of the Board, Chief May 1, 1996
- --------------------------------------------- Executive Officer and
Nicholas J. Sutton Director (Principal
Executive Officer)
* President and Director May 1, 1996
- ---------------------------------------------
P. Michael Highum
* Chief Financial Officer and May 1, 1996
- --------------------------------------------- Director (Principal
James E. Duffy Financial and Accounting
Officer)
* Director May 1, 1996
- ---------------------------------------------
Kenneth A. Hersh
* Director May 1, 1996
- ---------------------------------------------
Michael J. Savage
*By: /s/ NICHOLAS J. SUTTON
----------------------------------
Nicholas J. Sutton
Attorney-In-Fact
</TABLE>
II-5
<PAGE> 172
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. TITLE PAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of April
29, 1996, among HSR, Merger Sub and Tide West (attached as Annex A to
the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
3.1 -- Amended and Restated Certificate of Incorporation of HSR
(incorporated by reference to Exhibit 3.1 to HSR's Form S-1, No.
33-52774, filed on October 2, 1992 (the "HSR 1992 Form S-1").
3.2 -- Second Amended and Restated By-Laws of HSR (incorporated by reference
to Exhibit 3.2 to the HSR 1992 Form S-1).
3.3 -- Certificate of Incorporation of Tide West (incorporated by reference
to Exhibit 4.1 to Tide West's Current Report on Form 8-K dated
November 20, 1992).
3.4 -- Amendment to Certificate of Incorporation of Tide West, dated January
29, 1993 (effective February 1, 1993) (incorporated by reference to
Exhibit 3.2 to Tide West's Registration Statement on Form S-1, No.
33-57058 (the "Tide West Form S-1")).
3.5 -- Restated By-laws of Tide West (incorporated by reference to Exhibit
3.3 to the Tide West Form S-1).
*4.1 -- Form of Registration Rights Agreement, by and between HSR and NGP, to
be executed at Closing.
4.2 -- Rights Agreement, dated as of February 28, 1996, between HSR and
Harris Trust Company of California, as rights agent (incorporated by
reference to Exhibit 1 to HSR's Form 8-A, dated February 28, 1996, as
amended by HSR's Form 8-A/A (Amendment No. 1), dated March 12, 1996).
*5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. regarding
legality of the securities to be registered.
*8.1 -- Form of Opinion of Conner & Winters, A Professional Corporation,
regarding tax matters.
*11 -- Statement Regarding Computation of Per Share Earnings.
*23.1 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in the
opinion filed as Exhibit 5.1 to this Registration Statement).
*23.2 -- Consent of Conner & Winters, A Professional Corporation (included in
the opinion filed as Exhibit 8.1 to this Registration Statement).
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of Deloitte & Touche LLP.
*23.5 -- Consent of Lehman Brothers, Inc.
*23.6 -- Consent of Prudential Securities Incorporated.
*23.7 -- Consent of Merrill Lynch & Co.
*23.8 -- Consent of Williamson Petroleum Consultants, Inc.
*23.9 -- Consent of Netherland, Sewell & Associates, Inc.
*23.10 -- Consent of Philip B. Smith, the NGP board nominee.
#24.1 -- Power of Attorney of Registrant.
#27.1 -- Financial Data Schedule.
99.1 -- Opinion of Lehman Brothers, Inc. (attached as Annex C to the Joint
Proxy Statement/Prospectus forming a part of this Registration
Statement).
</TABLE>
<PAGE> 173
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. TITLE PAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
99.2 -- Opinion of Prudential Securities Incorporated (attached as Annex D to
the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
99.3 -- Opinion of Merrill Lynch & Co. (attached as Annex B to the Joint
Proxy Statement/Prospectus forming a part of this Registration
Statement).
*99.4 -- Form of Proxy for Special Meeting of Stockholders of HSR.
*99.5 -- Form of Proxy for Special Meeting of Stockholders of Tide West.
99.6 -- Agreement to Vote and Proxy, dated as of February 25, 1996, between
HSR and NGP (incorporated by reference to Exhibit B to HSR's Schedule
13D filed on March 6, 1996).
99.7 -- Agreement to Vote and Proxy, dated as of February 25, 1996, between
HSR and Smith (incorporated by reference to Exhibit C to HSR's
Schedule 13D filed on March 6, 1996).
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
# Previously filed.
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into this ____ day of __________, 1996, by and between HS Resources,
Inc., a Delaware corporation (the "Company"); and Natural Gas Partners, L.P., a
Delaware limited partnership (the "Shareholder").
Background. The Company and Tide West Oil Company ("Tide West") are
parties to that certain Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which the Company is issuing to the shareholders of Tide West,
including the Shareholder, shares of the Company's common stock, par value
$.001 ("Common Stock").
In consideration of the transactions effected pursuant to the Merger
Agreement and the mutual covenants and agreements herein set forth, the parties
to this Agreement hereby agree, subject to the terms and conditions hereinafter
set forth, as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms shall have the following respective meanings:
Commission: The Securities and Exchange Commission or any other
governmental authority at the time administering the Securities Act or the
Exchange Act.
Exchange Act: The Securities Exchange Act of 1934, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include a reference
to the comparable section, if any, of any such similar or successor federal
statute.
Person: A corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a trust or estate, an
unincorporated organization, or a government or any department or agency
thereof.
Registrable Securities: (a) Any shares of Common Stock issued to the
Shareholder under the terms of or in conjunction with the Merger Agreement, and
(b) any securities issued or issuable with respect to any Common Stock referred
to in the foregoing clause by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise; provided, however, that no
shares of Common Stock issued or issuable to the Shareholder prior to the
consummation of the transactions contemplated in the Merger Agreement shall be
considered Registrable Securities. As to any particular Registrable
Securities, once issued, such securities shall cease to be Registrable
Securities when (v) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (w) they shall become freely tradeable under Rule 144 under the
Securities Act without limitation as to volume, (x) they shall have been
transferred pursuant to Rule 144 or Rule 144A (or any successor provision)
under the Securities Act, (y) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent
<PAGE> 2
disposition of them shall not require registration or qualification under the
Securities Act or any similar state law then in force, or (z) they shall have
ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2 of this Agreement, including
without limitation all registration, filing and listing or NASDAQ fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, all messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants (including without limitation the expenses of
any special audits or "cold comfort" letters required by or incident to such
performance and compliance), premiums and other costs of policies of insurance,
if any, against liabilities arising out of the public offering of the
Registrable Securities being registered, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions, transfer taxes, if any,
relating to the Registrable Securities being registered, and the fees and
disbursements of any counsel retained by the holder or holders of the
Registrable Securities being registered.
Securities Act: The Securities Act of 1933, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such similar or successor
federal statute.
Shelf Registration: As defined in Section 2.1 of this Agreement.
2. Registration under Securities Act
2.1 Shelf Registration. The Company will prepare and file a
"shelf" registration statement on an appropriate form pursuant to Rule 415
under the Securities Act (or any similar rule that may be adopted by the
Commission) with respect to the Registrable Securities (together with any
subsequent "shelf" registration statement filed pursuant hereto, the "Shelf
Registration"), and will use its best efforts to have the Shelf Registration
declared effective on or before the first anniversary of the date hereof. The
Company will pay all Registration Expenses in connection with the Shelf
Registration. The Shelf Registration shall be kept continuously effective for
a period ending not less than three years after the date hereof and thereafter
until such time as the amount of Registrable Securities held by the
Shareholder, together with the Shareholder's affiliates, represents less than
10 percent of the then outstanding Common Stock (the "Registration Period").
2.2 Registration on Request. (a) Request. Upon the written
request, made at any time during the period commencing on the first anniversary
of the date hereof, and continuing throughout the Registration Period, of the
holder or holders of not less than 50 percent of the Registrable Securities,
that the Company effect the registration under the Securities Act of all or
part of such holders' Registrable Securities (provided that the Registrable
Securities so requested to be registered represent not less than 50 percent of
the Registrable Securities), and specifying the intended method of disposition
thereof (including whether or not such disposition is intended to be effected
as an underwritten offering), the Company will, within 15 days after the date
of such written request, give written notice of such requested registration to
all other
-2-
<PAGE> 3
holders of Registrable Securities and thereupon the Company will use its best
efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company
has been so requested to register by the holder or holders submitting
the request, and
(ii) all other Registrable Securities which the
Company has been requested to register by the holder or holders
thereof by written request given to the Company within 15 days after
the giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered.
If any holder or holders of Registrable Securities requesting
registration under this Section 2.2(a) shall specify that the intended method
of disposition is to be an underwritten offering, such holder or holders shall
consult with the Company concerning the feasibility of effecting such
disposition as an underwritten offering. The Company shall use its best
efforts to effect such disposition as an underwritten offering unless, after
such consultation, the Company and such holder or holders shall agree not to
pursue such method of disposition.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.2 in connection
with an underwritten offering by one or more holders of Registrable Securities,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration that the inclusion of such other securities would
not adversely affect such offering, and (ii) the requirements of Section 2.2(g)
below are satisfied.
(c) Registration Statement Form. Registrations under
this Section 2.2 shall be on such appropriate registration form of the
Commission (i) for which the Company qualifies and which the Company's counsel
(after consultation with counsel for the holders of Registrable Securities)
deems appropriate, and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request for such registration. The Company agrees to include
in any such registration statement all information as to the holder or holders
of the Registrable Securities being registered which such holder or holders
shall reasonably request or which shall be required by applicable law.
(d) Expenses. Except as provided in Section 2.2(e)
below, the Company will pay all Registration Expenses incurred in connection
with any registration requested pursuant to this Section 2.2 which the Company
is obligated to effect, whether or not such registration is effected.
(e) Effected Registration Statement. A registration
requested pursuant to this Section 2.2 shall be deemed to have been effected
(i) if a registration statement with respect thereto has become effective, (ii)
if the registration statement is withdrawn prior to its effectiveness pursuant
to the request of all of the holders of Registrable Securities who have
-3-
<PAGE> 4
requested the inclusion in such registration statement of some or all of their
Registrable Securities, unless one or more of the holders of Registrable
Securities have elected to pay (and shall actually have paid) the Registration
Expenses relating thereto, (iii) if, after the registration statement has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and such stop order, injunction or
other order or requirement results from any action or inaction of a holder or
holders of Registrable Securities, or (iv) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived and such
conditions are not satisfied due to a failure by a holder of Registrable
Securities to satisfy a condition required to be satisfied by such holder
pursuant to the purchase agreement or underwriting agreement, unless one or
more of the holders of Registrable Securities have elected to pay (and shall
actually have paid) the Registration Expenses relating thereto.
(f) Selection of Underwriters. If a requested
registration pursuant to this Section 2.2 involves an underwritten offering,
the underwriter or underwriters thereof shall be selected by the holder or
holders of a majority of the Registrable Securities to be so registered,
subject to the approval of the Company, such approval not to be unreasonably
withheld.
(g) Priority in Requested Registrations. If a requested
registration pursuant to this Section 2.2 involves an underwritten offering,
and the managing underwriter shall advise the Company in writing (with a copy
to each holder of Registrable Securities requesting registration) that, in its
opinion, the number of Registrable Securities and other securities of the
Company held by any other party requested to be included in such registration
exceeds the number which can be sold in (or during the time of) such offering
within a price range acceptable to the holder or holders of a majority (by
number of shares) of the Registrable Securities requested to be included in
such registration, the Company will include in such registration all
Registrable Securities requested to be included in such registration (unless
the provisions of the following sentence apply) and will include in such
registration other securities of the Company (including any securities proposed
to be issued and sold by the Company) held by any other party only to the
extent that the number of shares which the Company is advised can be so sold in
(or during the time of) such offering exceeds the number of Registrable
Securities to be included in such registration. If a requested registration
pursuant to this Section 2.2 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting registration) that, in its opinion,
the number of Registrable Securities requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering within a price range acceptable to the holder or holders of a
majority (by number of shares) of the Registrable Securities requested to be
included in such registration, the Company will include in such registration
only Registrable Securities requested to be included in such registration and
only to the extent of the number of shares which the Company is advised can be
so sold in (or during the time of) such offering; the Registrable Securities to
be included in such registration shall be taken up pro rata from the holder or
holders of Registrable Securities requesting such registration on the basis of
the percentage of Registrable Securities requested to be included in such
registration.
-4-
<PAGE> 5
(h) Limitation on Registrations. The Company's
obligations under this Section 2.2 shall be limited to effecting two
registrations, within the meaning of Section 2.2(e) above.
(i) Company's Right to Delay Registration.
Notwithstanding the foregoing provisions of this Section 2.2, (i) the Company
shall not be obligated to effect a registration pursuant to this Section 2.2
within a period of 120 days after the effective date of a registration
statement previously filed as a result of a request pursuant to this Section
2.2; (ii) if the Company has issued and sold to the public, pursuant to a
registration statement filed under the Securities Act, any of its securities
within three months prior to the date of its receipt of a request for
registration pursuant to this Section 2.2 and the Company's investment banker
has advised the Company in writing that the registration of Registrable
Securities would adversely affect the market for the Company's securities
covered by such registration statement, the Company shall have the right to
delay the requested registration of Registrable Securities for such period as
the investment banker may so advise, but no more than 120 days after the date
on which such request was made; and (iii) the Company shall be entitled to
postpone for a reasonable period of time the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to this
Section 2.2 if, at the time it receives a request for registration pursuant to
this Section 2.2, the Company determines, in its reasonable judgment, that such
registration and offering would materially interfere with any financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its affiliates and promptly gives the holders of
Registrable Securities written notice of such determination.
2.3 Incidental Registration. (a) Right to Include Registrable
Securities. If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than by a registration on Form S-8
or Form S-4 or any successor or similar form and other than pursuant to Section
2.1 or 2.2 of this Agreement), whether or not for sale for its own account,
each such time it will give prompt written notice to all holders of Registrable
Securities of its intention to do so, of the intended method of disposition,
and of such holders' rights under this Section 2.3. Upon the written request
of any such holder made within 15 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof, which can be
by underwritten offering, even if such was not intended by the Company), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by a holder or holders of Registrable Securities, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason, after consultation with the holder or holders
of Registrable Securities which have requested inclusion in such registration,
not to register or to delay registration of such securities, the Company may,
at its election, give written notice of such determination to each such holder
of Registrable Securities and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or
-5-
<PAGE> 6
holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.2 above, and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities. No registration effected under this Section
2.3 shall relieve the Company of its obligation to effect any registration
under Section 2.1 above or upon request under Section 2.2 above. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.3.
(b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 2.3 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Company, to be distributed by or through one or more underwriters under
underwriting terms appropriate for such a transaction, (ii) the Registrable
Securities so requested to be registered for sale for the account of a holder
or holders of Registrable Securities are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Registrable Securities pursuant to Section 2.5(b) below), and (iii) the
managing underwriter of such underwritten offering shall inform the Company and
the holder or holders of Registrable Securities requesting such registration in
writing of its belief that the number of securities requested to be included in
such registration exceeds the number which can be sold in (or during the time
of) such offering, then the Company shall include in such registration only
securities proposed to be sold by the Company for its own account, Registrable
Securities and securities having registration rights that are pari passu to
those relating to the Registrable Securities (the "Pari Passu Securities"). If
the registration was initiated by the Company without a registration having
been requested, under Section 2.2 above, within the prior 120-day period, the
Company may include all securities proposed by the Company to be sold for its
own account and may decrease the number of Registrable Securities and Pari
Passu Securities so proposed to be sold and so requested to be included in such
registration (pro rata on the basis of the percentage of the securities of the
Company, by number of shares, requested to be included in the registration by
the holder or holders of such Registrable Securities and Pari Passu Securities)
to the extent necessary to reduce the number of securities to be included in
the registration to the level recommended by the managing underwriter. If,
however, the registration was initiated by the Company within 120 days of a
requested registration and is in response thereto or in lieu thereof, then the
Company shall include in the registration all Registrable Securities requested
to be included in such registration and shall decrease the number of securities
proposed to be sold by the Company and to be included in such registration to
the extent necessary to reduce the number of securities to be included in the
registration to the level recommended by the managing underwriter.
Notwithstanding the foregoing, if the registration was initiated at the request
of any holders of Pari Passu Securities (the "Initiating Pari Passu
Securities"), the holders of the Initiating Pari Passu Securities may include
all securities proposed to be sold by such holders and the Company shall (i)
decrease the number of securities proposed by the Company to be sold for its
own account to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter and (ii) if such decrease is still not sufficient, decrease the
number of Registrable Securities and Pari Passu Securities not held by holders
of Initiating Pari Passu Securities ("Non-Initiating Pari Passu Securities") so
proposed to be sold and so requested to be included in such registration (pro
rata on the basis of the percentage of the securities of the Company, by number
of shares, requested to be included in the registration by the holder or
holders of such Registrable Securities and Non-
-6-
<PAGE> 7
Initiating Pari Passu Securities) to the extent necessary to reduce the number
of securities to be included in the registration to the level recommended by
the managing underwriter.
2.4 Registration Procedures. Whenever the Company is required
to effect, or to use its best efforts to effect, the registration of any
Registrable Securities under the Securities Act as provided in Section 2.1, 2.2
or 2.3 above, the Company will, as expeditiously as possible:
(a) with respect to the registration of Registrable
Securities under the Securities Act as provided in Section 2.2 or 2.3
above, prepare and (as soon thereafter as possible or in any event no
later than 90 days after the end of the period within which requests
for registration may be given to the Company or such longer period as
the Company shall in good faith require to produce the financial
statements required in connection with such registration) file with
the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that
the Company may discontinue any registration of its securities which
are not Registrable Securities at any time prior to the effective date
of the registration statement relating thereto;
(b) prepare and file with the Commission such
amendments and supplements to the requisite registration statement and
the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement until such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as
set forth in such registration statement, but in no event for a period
which would exceed 180 days from the date on which the registration
statement became effective; provided, however, the Shelf Registration
shall be kept effective for the time period set forth in Section 2.1
above;
(c) furnish to each seller of Registrable
Securities covered by such registration statement such number of
conformed copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request;
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any such
purpose be required to either qualify generally to do business as a
foreign corporation, or subject itself to taxation in any jurisdiction
wherein it would not, but for the requirements of this subparagraph
(d), be obligated to be so qualified or subject to taxation or to
consent to
-7-
<PAGE> 8
general service of process in any such jurisdiction or to any material
restrictions on the conduct of its business, or any restrictions on
payments to any of its shareholders;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(f) furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller (and the
underwriters, if any) of (i) an opinion of counsel for the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement) reasonably
satisfactory in form and substance to such seller, and (ii) a "comfort
letter," dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement), signed by
the independent public accountants who have audited the Company's
financial statements included in such registration statement, in each
case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten public offerings of securities
and, in the case of the accountants' letter, such other financial
matters, and, in the case of the legal opinion, such other legal
matters, as such seller or such holder (or the underwriters, if any)
may reasonably request;
(g) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller or holder promptly prepare and furnish to such seller or
holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(h) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable,
an historical earnings statement covering the period of at least 12
months, but not more than 18 months, beginning with the first month of
the first full fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and will furnish to
each such seller at least five business days prior to the filing
thereof a copy
-8-
<PAGE> 9
of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules or regulations
thereunder;
(i) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(j) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Common Stock is then listed.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.4(g) above, (i) such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by said Section
2.4(g), (ii) such holder will promptly deliver copies of such supplemented or
amended prospectus to each purchaser or potential purchaser to whom such holder
had delivered the initial prospectus, and (iii) if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
Each holder of Registrable Securities further agrees that, prior to
any disposition of Registrable Securities pursuant to the Shelf Registration,
such holder shall give written notice of the desired disposition to the
Company, including the anticipated date thereof, and such holder shall not
effect such disposition until such holder either (i) has received from the
Company copies of a supplemented or amended prospectus as contemplated in
Section 2.4(g) above, or (ii) has been advised in writing by the Company that
the use of the applicable prospectus is appropriate and has received copies of
any previous amendments or supplements thereto.
2.5 Underwritten Offerings. (a) Requested Underwritten
Offerings. If an offering requested by holders of Registrable Securities
pursuant to Section 2.2 above is to be underwritten, the Company will enter
into an underwriting agreement with the underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each such
holder and the underwriters and to contain such representations and warranties
by the Company and such other terms as are generally prevailing in agreements
of this type. The holder or holders of Registrable Securities requesting
registration will reasonably cooperate with the Company in the negotiation of
the underwriting agreement, provided that nothing herein contained shall
diminish the foregoing obligations of the Company. The holder or holders of
Registrable Securities to be distributed by such underwriters shall be parties
to such underwriting
-9-
<PAGE> 10
agreement and any necessary or appropriate custody agreements, shall execute
appropriate powers of attorney, and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holder or holders of Registrable Securities
and that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holder or holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company
at any time proposes to register any of its securities under the Securities
Act, as contemplated by Section 2.3 above, and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in said Section
2.3 and subject to the provisions of this Section 2.5(b), arrange for such
underwriters to include all of the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters. In the event that the managing underwriter of any underwritten
offering shall inform the Company and the holder or holders of Registrable
Securities requesting the inclusion of their securities in such offering in
writing of its belief that the number of securities requested to be sold in
such offering exceeds the number which can be sold in such offering, then the
Company shall include in such offering only securities proposed to be sold by
the Company for its own account and Registrable Securities and Pari Passu
Securities. If the registration was initiated by the Company without
registration having been requested, under Section 2.2 above, within the prior
120-day period, the Company may include in such offering all securities
proposed by the Company to be sold for its own account and may decrease the
number of Registrable Securities and Pari Passu Securities so proposed to be
sold and so requested to be included in such offering (pro rata on the basis of
the percentage of the securities, by number of shares, of the Company requested
to be included in the offering by the holder or holders of such Registrable
Securities and Pari Passu Securities) to the extent necessary to reduce the
number of securities to be included in such offering to the level recommended
by the managing underwriter. If, however, the registration was initiated by
the Company within 120 days of a requested registration and is in response
thereto or in lieu thereof, then the Company shall include in the registration
all Registrable Securities requested to be included in such registration and
shall decrease the number of securities proposed to be sold by the Company and
to be included in such registration to the extent necessary to reduce the
number of securities to be included in the registration to the level
recommended by the managing underwriter. Notwithstanding the foregoing, if the
registration was initiated at the request of any holders of Initiating Pari
Passu Securities, the holders of the Initiating Pari Passu Securities may
include all securities proposed to be sold by such holders and the Company
shall (i) decrease the number of securities proposed by the Company to be sold
for its own account to the extent necessary to reduce the number of securities
to be included in the registration to the level recommended by the managing
underwriter and (ii) if such decrease is still not sufficient, decrease the
number of Registrable Securities and Non-Initiating Pari Passu Securities so
proposed to be sold and so requested to be included in such registration (pro
rata on the basis of the percentage of the securities of the Company, by number
of shares, requested to be
-10-
<PAGE> 11
included in the registration by the holder or holders of such Registrable
Securities and Non-Initiating Pari Passu Securities) to the extent necessary to
reduce the number of securities to be included in the registration to the level
recommended by the managing underwriter. The holder or holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate custody agreements, shall execute appropriate powers
of attorney, and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holder or holders of Registrable Securities and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such holder or holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and
any other representation required by law.
2.6 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holder or holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.7 Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
the seller of any Registrable Securities covered by such registration
statement, its directors, officers, representatives and agents, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director, officer, representative, agent, underwriter or controlling
Person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer,
representative, agent, underwriter and controlling Person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any
-11-
<PAGE> 12
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such seller
specifically for use in the preparation thereof; and provided further, that the
Company shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such seller or any such director, officer, representative,
agent, underwriter or controlling Person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.4 above, that the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.7(a) above) the
Company, each director, officer, representative and agent of the Company and
each other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such seller specifically for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer, representative,
agent, or controlling Person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims and Procedures. Promptly after
receipt by an indemnified Person of notice of the commencement of any action or
proceeding involving a claim referred to in Section 2.7(a) or (b) above, such
indemnified Person will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified Person to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under Section 2.7(a) or (b) above, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified Person, unless in such
indemnified Person's reasonable judgment a conflict of interest between such
indemnified Person and such indemnifying party may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof jointly with any other indemnifying party similarly
notified to the extent that it may
-12-
<PAGE> 13
wish, with counsel reasonably satisfactory to such indemnified Person, and
after notice from the indemnifying party to such indemnified Person of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified Person for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. If, in such indemnified Person's reasonable
judgment a conflict of interest does or may exist in respect of such claim, the
indemnified Person or Persons shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified
Person or Persons, in which case the indemnifying party shall bear the costs of
such defense. No indemnifying party shall, without the consent of the
indemnified Person, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified Person of a release from all
liability with respect to such claim or litigation and otherwise in form and
substance satisfactory to the indemnified Person. The indemnifying party shall
not be required to indemnify any indemnified Person against any settlement or
judgment which is consented to by an indemnified Person without the consent of
the indemnifying party.
(d) Other Indemnification. Indemnification similar to
that specified in Sections 2.7(a), (b) and (c) above (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) Indemnification Payments. The indemnification
required by this Section 2.7 shall be made by prompt payments of the amounts
thereof during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
(f) Contribution. If any of the indemnification
provisions provided for in this Section 2.7 are determined to be unenforceable
or unavailable to an indemnified Person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified Person, shall
contribute to the amount paid or payable by such indemnified Person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified Person
from the registration statement, but also the relative fault of the indemnified
Person and the indemnifying party in connection with the statements or
omissions which resulted in such claim or action as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and the
indemnified Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified Person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigating or defending any action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any Person who is not guilty of such fraudulent
misrepresentation.
-13-
<PAGE> 14
2.8 Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination or subdivision of shares
which would materially adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in any
registration of its securities contemplated by this Section 2 or the
marketability of such Registrable Securities under any such registration.
3. Rules 144 and 144A. The Company represents and warrants to
the Shareholder that it has filed registration statements pursuant to the
requirements of Section 12 of the Exchange Act and/or pursuant to the
requirements of the Securities Act, and has filed the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder. The Company will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rules 144 and 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
4. Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the holder
or holders of a majority of the Registrable Securities at the time outstanding;
provided, however, if such amendment, action or omission to act would adversely
affect the right of any holder of Registrable Securities, no consent thereto
shall be effective without the concurrence of each holder who would be
adversely affected thereby. Each holder of Registrable Securities at the time
or thereafter outstanding shall be bound by a consent authorized by this
Section 4, whether or not such Registrable Securities shall have been marked to
indicate such consent.
5. Notices. All notices and other communications required or
permitted hereunder shall be in writing, and shall be deemed to have been
delivered on the date delivered by hand or transmitted by telegram, facsimile
or by similar means, on the first day following the day when sent by recognized
courier or overnight delivery service (fees prepaid), or on the third day
following the day when deposited in the U.S. mail, registered or certified
(postage prepaid), addressed (a) if to the Shareholder, at the address set
forth in the stock records of the Company, or such address as the Shareholder
shall have furnished to the Company in writing, or (b) if to the Company, to HS
Resources, Inc., One Maritime Plaza, 15th Fl., San Francisco, CA 94111, Attn:
Chief Executive Officer, telephone: (415) 433-5795; facsimile: (415)
433-5811, with a copy to HS Resources, Inc., 1999 Broadway, Suite 3600, Denver,
CO 80202, Attn: General Counsel, telephone: (303) 296-3600, facsimile: (303)
296-3601, or such other address, or to the attention of such other Person or
Persons, as the Company shall have furnished to each holder of Registrable
Securities at the time outstanding.
6. Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this
-14-
<PAGE> 15
Agreement which are for the benefit of the Shareholder shall also be for the
benefit of and enforceable by any subsequent holder of any Registrable
Securities who has executed a copy of this Agreement or otherwise indicated its
agreement to be bound hereby, subject to the provisions respecting the minimum
numbers or percentages of shares of Registrable Securities required in order to
be entitled to certain rights, or take certain actions, contained herein.
7. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
8. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Delaware, without regard to principles of
conflicts of laws.
9. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
10. Other Registration Rights. The Company shall not at any
time grant registration rights to any holder of shares of Common Stock which
are more favorable to such holder, in terms of priority in registration, than
the rights set forth in this Agreement.
11. Legend. The stock certificate representing Registrable
Securities shall have the following legend:
"The shares represented by this Certificate are subject to a
Registration Rights Agreement dated ___________, 1996, between HS
Resources, Inc. (the "Company") and Natural Gas Partners, L.P. A copy
of such agreement is on file at the Company's principal place of
business and a copy will be provided to the holder hereof at no cost
upon written request to the corporate secretary of the Company."
[The remainder of this page is intentionally left blank.]
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement, or have caused this Agreement to be executed and delivered by their
respective duly authorized officers, on the date first above written.
"COMPANY" "Shareholder"
HS Resources, Inc. Natural Gas Partners, L.P.
By: G.F.W. Energy, L.P.
its General Partner
By: By:
----------------------------------- ------------------------------
Name: R. Gamble Baldwin
---------------------------- General Partner
Title:
---------------------------
-16-
<PAGE> 1
EXHIBIT 5.1
[AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. LETTERHEAD]
April 30, 1996
HS Resources, Inc.
One Maritime Plaza
15th Floor
San Francisco, California 94111
Gentlemen:
We have acted as counsel to HS Resources, Inc., a Delaware corporation
(the "Company"), in connection with the proposed merger between Tide West Oil
Company ("Tide West") and a wholly owned subsidiary of the Company, whereby (i)
the Company will issue shares of Common Stock, par value $0.001 per share (the
"Common Stock"), and make a payment of cash in exchange for all of the
outstanding shares of Tide West common stock, par value $0.01 per share (the
"Tide West Common Stock"), and (ii) Tide West will be merged with and into a
wholly owned subsidiary of the Company pursuant to the terms of an Agreement
and Plan of Merger, dated as of February 25, 1996, as amended and restated as
of April 29, 1996 (the "Merger Agreement"), by and between the Company, HSR
Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Merger Sub"), and Tide West, the form of which is filed as an exhibit
to a registration statement on Form S-4, No. 333-1991 (the "Registration
Statement"), originally filed with the Securities and Exchange Commission on
March 26, 1996.
We have, as counsel, examined such corporate records, certificates and
other documents and reviewed such questions of law as we have deemed necessary,
relevant or appropriate to enable us to render the opinions set forth below.
In rendering such opinions, we have assumed the genuineness of all signatures
and the authenticity of all documents examined by us. As to various questions
of fact material to such opinions, we have relied upon representations of the
Company.
Based upon such examination and representations, we advise you that,
in our opinion:
A. Subject to approval by a majority of the stockholders of the
Company at a special meeting called for the purpose of approving such
issuance, the shares of Common Stock
<PAGE> 2
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
HS Resources, Inc.
April 30, 1996
Page 2
which are to be issued and delivered by the Company as contemplated by
the Merger Agreement, have been duly and validly authorized by the
Company.
B. Subject to approval by a majority of the stockholders of the
Company at a special meeting called for the purpose of approving such
issuance, the shares of Common Stock which are to be issued and
delivered by the Company as contemplated by the Merger Agreement will
be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Joint Proxy Statement/ Prospectus contained therein.
Sincerely,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE> 1
EXHIBIT 8.1
[CONNER & WINTERS LETTERHEAD]
May , 1996
Tide West Oil Company
6666 South Sheridan
Tulsa, Oklahoma 74133-1750
HS Resources, Inc.
One Maritime Plaza
15th Floor
San Francisco, California 94111
Re: Federal Income Tax Consequences of Merger of Tide West Oil
Company with and into HSR Acquisition, Inc., a Wholly Owned
Subsidiary of HS Resources, Inc.
Gentlemen:
We have acted and will act as counsel to Tide West Oil Company ("Tide
West") in connection with the merger (the "Merger") of Tide West with and into
HSR Acquisition, Inc. ("Merger Sub"), a wholly owned subsidiary of HS Resources,
Inc. ("HSR"), pursuant to the Agreement and Plan of Merger dated February 25,
1996, as amended and restated as of April 29, 1996 (the "Merger Agreement"), by
and among Tide West, Merger Sub and HSR. In our capacity as counsel to Tide
West, Tide West has requested our opinion regarding certain of the federal
income tax consequences of the Merger pursuant to Section 5.5(b) of the Merger
Agreement.
We understand that this letter will be submitted as an exhibit to the
Registration Statement No. 333-01991 on Form S-4 (as amended, the "Registration
Statement") which was filed by HSR on March 27, 1996, with the Securities and
Exchange Commission relating to the securities that will be issued by HSR
pursuant to the Merger Agreement. We further understand that our opinion will be
referred to in the Joint Proxy Statement/Prospectus which will be included in
the Registration Statement under the caption "SPECIAL FACTORS -- Certain Federal
Income Tax Consequences." We hereby consent to such use of our opinion.
All terms used herein without definition shall have the respective meanings
specified in the Merger Agreement and, unless otherwise indicated, all section
references herein are to the Internal Revenue Code of 1986, as amended (the
"Code").
INFORMATION RELIED UPON
In rendering the opinion expressed herein, we have examined such documents
as we have deemed appropriate, including the Merger Agreement and the
Registration Statement. In our examination of documents, we have assumed that
all documents submitted to us as photocopies or telecopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, that all
signatures are genuine and that all statements set forth in such documents are
accurate. We also have obtained such additional information and representations
as we have deemed relevant and necessary through consultations with various
representatives of Tide West and HSR.
It is a condition to the obligations of Tide West and HSR to effect the
Merger that this opinion has not been withdrawn, revoked or modified. For
purposes of our opinion we have relied upon and assumed the initial and
continuing accuracy of the following statements, representations and covenants
which have been certified to us by Tide West and HSR. We expect to receive
written confirmation of such statements, representations and covenants
immediately prior to the Effective Time.
<PAGE> 2
Tide West Oil Company
HS Resources, Inc.
May , 1996
Page 2
1. The fair market value of the HSR stock and other consideration
received by each Tide West stockholder will be approximately equal to the
fair market value of the Tide West stock surrendered in the Merger.
2. There is no plan or intention by the stockholders of Tide West who
own 5 percent or more of the Tide West stock, and to the best of the
knowledge of the management of Tide West, there is no plan or intention on
the part of the remaining stockholders of Tide West to sell, exchange or
otherwise dispose of a number of shares of HSR stock received in the Merger
that would reduce the Tide West stockholders' ownership of HSR stock to a
number of shares having a value, as of the Effective Time, of less than 40
percent of the value of all of the formerly outstanding stock of Tide West
as of the same date. For purposes of this representation, shares of Tide
West stock exchanged for cash or other property, surrendered by dissenters
or exchanged for cash in lieu of fractional shares of HSR stock will be
treated as outstanding Tide West stock at the Effective Time. Moreover,
shares of Tide West stock and shares of HSR stock held by Tide West
stockholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger will be considered in making this representation.
3. Merger Sub will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of
the gross assets held by Tide West immediately prior to the Merger. For
purposes of this representation, amounts paid by Tide West to dissenters,
amounts paid by Tide West to Tide West stockholders who receive cash or
other property, Tide West assets used to pay its reorganization expenses,
and all redemptions and distributions (except for regular, normal
dividends) made by Tide West immediately preceding the transfer, will be
included as assets of Tide West held immediately prior to the Merger.
4. Prior to the Merger, HSR will be in control of Merger Sub within
the meaning of section 368(c)(1) of the Code.
5. Following the transaction, Merger Sub will not within two years
issue additional shares of its stock that would result in HSR losing
control of Merger Sub within the meaning of section 368(c)(1) of the Code.
6. HSR has no plan or intention to reacquire any of its stock issued
in the Merger.
7. HSR has no plan or intention to liquidate Merger Sub; to merge
Merger Sub with and into another corporation; to sell or otherwise dispose
of the stock of Merger Sub; or to cause Merger Sub to sell or otherwise
dispose of any of the assets of Tide West acquired in the Merger, except
for dispositions made in the ordinary course of business, including
dispositions to create operating efficiencies, or transfers described in
section 368(a)(2)(c) of the Code.
8. The liabilities of Tide West assumed by Merger Sub and the
liabilities to which the transferred assets of Tide West are subject were
incurred by Tide West in the ordinary course of its business (including
debt to expand its business).
9. Following the Merger, Merger Sub will continue the historic
business of Tide West or use a significant portion of Tide West's business
assets in a business.
10. HSR, Merger Sub, Tide West, and the stockholders of Tide West will
pay their respective expenses, if any, incurred in connection with the
Merger.
11. There is no intercorporate indebtedness existing between HSR and
Tide West or between Merger Sub and Tide West that was issued, acquired, or
will be settled at a discount.
12. No two parties to the Merger are investment companies as defined
in section 368(a)(2)(f)(iii) and (iv) of the Code.
<PAGE> 3
Tide West Oil Company
HS Resources, Inc.
May , 1996
Page 3
13. Tide West is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of section 368(a)(3)(a) of the Code.
14. The fair market value of the assets of Tide West transferred to
Merger Sub will equal or exceed the sum of the liabilities assumed by
Merger Sub, plus the amount of liabilities, if any, to which the
transferred assets are subject.
15. No stock of Merger Sub will be issued in the Merger.
16. There are no documents or agreements which alter, modify or change
in any way the validity and accuracy of the above statements,
representations and covenants.
OPINION
Based upon the foregoing, it is our opinion that, for federal income tax
purposes:
1. The Merger will be treated as a "reorganization" within the meaning
of section 368(a) of the Code and the regulations thereunder.
2. Each of HSR, Tide West and Merger Sub will be a party to such
reorganization within the meaning of section 368(b) of the Code and the
regulations thereunder.
3. No gain or loss will be recognized by HSR, Tide West or Merger Sub
as a result of the Merger.
4. No gain or loss, except with respect to the amount of Cash
Consideration received, will be recognized by a stockholder of Tide West as
a result of the Merger with respect to the shares of Tide West Common Stock
converted into shares of HSR Common Stock by such stockholder.
CONCLUSION
The opinion expressed herein and the discussions in the Joint Proxy
Statement/Prospectus under the captions "SUMMARY -- Certain Federal Income Tax
Consequences," "RISK FACTORS -- Tax Risks" and "SPECIAL FACTORS -- Certain
Federal Income Tax Consequences" address all of the material federal income tax
consequences associated with the Merger to (a) holders of Tide West Common Stock
who (i) receive HSR Common Stock and cash pursuant to the Merger and (ii) are
citizens or residents of the United States and domestic corporations and
partnerships which hold Tide West Common Stock as a capital asset; (b) Tide
West; and (c) HSR and Merger Sub.
Our opinion is based upon existing statutory, regulatory, and judicial
authority, any of which may be changed at any time with retroactive effect. In
addition, our opinion is based solely on the documents that we have examined,
the additional information that we have obtained, and the statements set out
herein that we have assumed to be true on the day hereof and at the Effective
Time. Our opinion cannot be relied upon if any of the material facts contained
in such documents or in any such additional information are, or later become,
inaccurate or if any of the material statements set out herein are, or later
become, inaccurate. Our opinion is limited to the federal income tax matters
specifically covered hereby, and we have not been asked to address, nor have we
addressed herein, any other tax consequences of the Merger.
Very truly yours,
<PAGE> 1
Exhibit 11
Statement re Computation of Per Share Earnings
(In thousands except per share amounts)
TIDE WEST OIL COMPANY
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a) $ 6,671 $ 5,095 $ 4,030
======================================================
Shares:
Weighted average shares outstanding, disregarding exercise of options 9,897 9,902 9,303
Assumed exercise of options based on the modified treasury stock method
using average market price if effect is more than 3% dilutive -- -- --
------------------------------------------------------
Weighted average number of shares, as adjusted 9,897 9,902 9,303
------------------------------------------------------
Earnings per share (a) $ 0.67 $ 0.52 $ 0.43
======================================================
FULLY DILUTED EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a) $ 6,671 $ 5,095 $ 4,030
======================================================
Shares:
Weighted average shares outstanding, disregarding exercise of options 9,897 9,902 9,303
Assumed exercise of options based on the modified treasury stock method
using closing market price if effect is more than 3% dilutive 350 -- --
------------------------------------------------------
Weighted average number of shares, as adjusted 10,247 9,902 9,303
Earnings per share (a) $ 0.65 $ 0.52 $ 0.43
======================================================
</TABLE>
(a) These amounts agree with the related amounts in the statements of income.
HS RESOURCES, INC.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Net Income 274 6,259 10,056
-----------------------------------------------
Weighted Average Shares Outstanding 11,440 11,713 10,858
-----------------------------------------------
Net Income per Share 0.02 0.53 0.93
-----------------------------------------------
Weighted Average Dilutive Shares Outstanding 10 11 80
-----------------------------------------------
Primary Weighted Average Shares Outstanding 11,450 11,724 10,938
-----------------------------------------------
Primary Net Income Per share 0.02 0.53 0.92
-----------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Amendment No. 2 to Registration Statement No. 333-01991 of
our report dated February 29, 1996 included in HS Resources, Inc.'s Form 10-K
for the year ended December 31, 1995 and to inclusion of our reports dated March
15, 1996 on the Statements of Revenues and Direct Operating Expenses for the
Initial Basin Acquisition Properties and the Second Basin Acquisition Properties
and to all other references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
May 1, 1996
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-01991 of HS Resources, Inc. on Form S-4 of our
report dated February 26, 1996 (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to the 1993 change in the method
of accounting for income taxes) appearing in the Annual Report on Form 10-K of
Tide West Oil Company for the year ended December 31, 1995 and to the reference
to us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
May 1, 1996
Tulsa, Oklahoma
<PAGE> 1
EXHIBIT 23.5
CONSENT OF LEHMAN BROTHERS INC.
May 1, 1996
We hereby consent to the inclusion in the Proxy Statement/Prospectus
forming part of this Registration Statement of our opinion dated March 26, 1996
to the Board of Directors of HS Resources, Inc., attached as Annex C to such
Proxy Statement/Prospectus, and the references to such opinion contained
therein. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "Securities Act"), and we do not thereby admit that we are experts with
respect to any part of this Registration Statement within the meaning of the
term "expert" as used in the Securities Act.
LEHMAN BROTHERS INC.
By: /s/
<PAGE> 1
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use and incorporation by reference in the Joint
Proxy Statement/Prospectus constituting part of this Registration Statement on
Form S-4 of our fairness opinion, dated March 26, 1996, regarding the fairness,
from a financial point of view, to HS Resources, Inc. ("HSR") of the
consideration to be paid by HSR pursuant to the Agreement and Plan of Merger,
dated as of February 25, 1996, and amended and restated as of April 29, 1996,
among HSR, HSR Acquisition, Inc., a wholly owned subsidiary of HSR, and Tide
West Oil Company. We hereby also consent to references to our firm in the
Registration Statement on Form S-4.
PRUDENTIAL SECURITIES INCORPORATED
New York, New York
May 1, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion to the Board of Directors of
Tide West Oil Company, which is included as an exhibit to this Registration
Statement and all references to our firm and such opinion included in the Joint
Proxy Statement/Prospectus forming a part of this Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 and the
rules and regulations promulgated thereunder (the "Securities Act"), and we do
not thereby admit that we are experts with respect to any part of this
Registration Statement under the meaning of the term "expert" as used in the
Securities Act.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/
Its: Director
Houston, Texas
May 1, 1996
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT PETROLEUM RESERVE ENGINEERS
Williamson Petroleum Consultants, Inc. hereby consents to the inclusion in
the Joint Proxy Statement/Prospectus constituting part of this Registration
Statement on Form S-4 (the "Registration Statement") filed by HS Resources, Inc.
in connection with its issuance of its Common Stock pursuant to the Amended and
Restated Agreement and Plan of Merger, dated April 29, 1996, among HS Resources,
Inc., HSR Acquisition, Inc., and Tide West Oil Company, and in the HS Resources,
Inc. Annual Report on Form 10-K for the year ended December 31, 1995 (which Form
10-K is incorporated by reference into the Registration Statement) of portions
of our review letter entitled "Review of Oil and Gas Reserves and Associated Net
Revenues to the Interests of HS Resources, Inc. as Prepared by HS Resources,
Inc., Effective December 31, 1995, Constant Pricing Economics, Williamson
Project 5.8339" dated February 13, 1996, with respect to the oil and gas
reserves of HS Resources, Inc. and the associated future net revenues, for the
year ended December 31, 1995. We also consent to the reference to our firm under
the caption "Experts" in said Joint Proxy Statement/Prospectus.
[SIGNATURE]
WILLIAMSON PETROLEUM CONSULTANTS, INC.
Houston, Texas
May 1, 1996
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the incorporation by reference into the Registration
Statement on Form S-4, No. 333-01991, being filed by HS Resources, Inc. of all
references to our firm included in Tide West Oil Company's Annual Report on Form
10-K for the year ended December 31, 1995. We hereby further consent to the
reference to our firm and reports prepared and audit performed by our firm in
the Registration Statement on Form S-4.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ FREDERIC D. SEWELL
---------------------------------
Frederic D. Sewell
President
Dallas, Texas
May 1, 1996
<PAGE> 1
EXHIBIT 23.10
CONSENT OF PHILIP B. SMITH
In accordance with the requirements of Rule 438 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), I hereby consent to the references to my name appearing
in this Registration Statement on Form S-4 and in the accompanying Joint Proxy
Statement/Prospectus forming a part thereof relating to the registration under
the Securities Act of up to 7,161,312 shares of common stock of HS Resources,
Inc. ("HSR") to be issued to stockholders of Tide West Oil Company ("Tide West")
in connection with the proposed merger of Tide West with and into a wholly-owned
subsidiary of HSR.
/s/ Philip B. Smith
Philip B. Smith
May 1, 1996
<PAGE> 1
EXHIBIT 99.4
[FORM OF PROXY]
HS RESOURCES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
JUNE 14, 1996
THIS PROXY IS SOLICITED ON BEHALF OF HS RESOURCES, INC.'S BOARD OF DIRECTORS
The undersigned hereby appoints P. Michael Highum, Nicholas J. Sutton
and James M. Piccone, and each of them, proxies for the undersigned, with full
power of substitution to vote all shares of HS Resources, Inc. Common Stock
which the undersigned may be entitled to vote at the Special Meeting of
Stockholders of HS Resources, Inc., on Friday, June 14, 1996, at 10:00 A.M., or
at any adjournment thereof, upon the matter set forth on the reverse side and
described in the accompanying Joint Proxy Statement/Prospectus and upon such
other business as may properly come before the meeting or any adjournment
thereof.
- -----------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK THIS PROXY AS INDICATED
PLEASE MARK COMMENT/ADDRESS ON THE REVERSE SIDE TO VOTE ON ANY ITEM.
BOX ON REVERSE SIDE IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS,
PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED.
(Continued and to be signed on other side.)
================================================================================
[REVERSE]
HS RESOURCES, INC.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
The Board of Directors Recommends a Vote FOR Item 1.
Item 1 - To approve the issuance of up to 7,161,312 shares of common stock
("HSR Common Stock") of HS Resources, Inc., a Delaware corporation
("HSR"), in accordance with the Agreement and Plan of Merger, dated
as of February 28, 1996, and amended and restated as of April 29,
1996, by and among HSR, HSR Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of HSR, and Tide West Oil
Company, a Delaware corporation, as required by the New York Stock
Exchange.
For [ ] Against [ ] Abstain [ ]
Item 2 - In their discretion, the proxies are authorized to vote on such
other business as may properly be brought before the Special
Meeting or any adjournment or postponement thereof.
[ ] I PLAN TO ATTEND MEETING [ ] COMMENTS/ADDRESS CHANGE
Please mark this box if you have
written comments/address change on
the reverse side.
Receipt is hereby acknowledged of the
HS Resources, Inc. Notice of Special
Meeting and Proxy Statement.
Dated:
---------------------------- -----------------------------------------
Signature
- ---------------------------------------------
NOTE: Please sign as name appears hereon
Joint owner should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title
as such.
<PAGE> 1
EXHIBIT 99.5
[FORM OF PROXY]
TIDE WEST OIL COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 14, 1996
The undersigned hereby (a) acknowledges receipt of the Notice of Special
Meeting of Stockholders of Tide West Oil Company ("Tide West") to be held on
June 14, 1996, and the Joint Proxy Statement/Prospectus in connection
therewith, and (b) constitutes and appoints Philip B. Smith and Robert H. Mase,
and each of them, his attorneys and proxies, with full power of substitution to
each, for and in the name, place and stead of the undersigned, to vote, and to
act with respect to, all of the shares of Common Stock of Tide West standing in
the name of the undersigned or with respect to which the undersigned is
entitled to vote and act at the Special Meeting and at any adjournment or
postponement thereof, as indicated on the reverse side of this card.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE OTHER SIDE
AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-----------
See Reverse
Side
-----------
[REVERSE]
[X] Please mark
votes as in
this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BELOW. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
1. TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS OF
FEBRUARY 25, 1996, AS AMENDED AND RESTATED AS OF APRIL 29, 1996, BY
AND AMONG TIDE WEST OIL COMPANY ("TIDE WEST"), HS RESOURCES, INC. AND
HSR ACQUISITION, INC. ("MERGER SUB") AND TO APPROVE THE MERGER OF TIDE
WEST WITH AND INTO MERGER SUB PURSUANT THERETO.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND AT ANY AND
ALL ADJOURNMENTS OR POSTPONEMENTS THEREOF.
MARK HERE FOR [ ] MARK HERE IF YOU [ ]
ADDRESS CHANGE PLAN TO ATTEND
AND NOTE AT LEFT THE MEETING
Please sign exactly as name appears to
the left. When signing on behalf of a
corporation, partnership, estate, trust
or in other representative capacity,
please sign name and title. For joint
accounts, each joint owner must sign.
Signature: Date
------------------ ------
Signature: Date
------------------ ------
