AGREEMENT FOR PURCHASE AND SALE
BLACK STONE HOLDINGS PARTNERSHIP ET AL
AS SELLER
BLACK STONE OIL COMPANY
AS OPERATOR
AND
COMSTOCK OIL & GAS, INC.
AS BUYER
AND
COMSTOCK RESOURCES, INC.
AS GUARANTOR
TABLE OF CONTENTS
ARTICLE I
Construction and Definitions
Section 1.1 Separate Agreement With Each Seller..............................1
Section 1.2 Defined Terms....................................................2
ARTICLE II
Purchase and Sale
Section 2.1 Agreement to Sell and Purchase..................................10
Section 2.2 Purchase Price..................................................10
Section 2.3 Allocated Values................................................10
ARTICLE III
Effective Time
Section 3.1 Revenues and Expenses...........................................11
ARTICLE IV
Title and Environmental Matters
Section 4.1 Title Examination Period........................................11
Section 4.2 Title Defects...................................................12
Section 4.3 Notice of Title Defects.........................................12
Section 4.4 Determination of and Remedies for Title Defects.................13
Section 4.5 Special Warranty of Title.......................................14
Section 4.6 Remedies for Title Benefits.....................................16
Section 4.7 Environmental Procedure.........................................16
Section 4.8 Determination of Disqualifying Environmental Condition..........17
Section 4.9 Remedies for a Disqualifying Environmental Condition............19
Section 4.10 Correction of a Disqualifying Environmental Condition...........20
ARTICLE V
Representations and Warranties of Sellers and Operator
Section 5.1 Representations and Warranties of Working Interest Owners.... ..20
Section 5.2 Representations and Warranties of Selling Stockholders..........24
Section 5.3 Representations and Warranties of Operator......................25
ARTICLE VI
Representations and Warranties of Buyer and Guarantor
Section 6.1 Representations and Warranties of Buyer.........................31
Section 6.2 Representations and Warranties of Guarantor.....................33
ARTICLE VII
Operation of the Subject Assets and Other Covenants
Section 7.1 Operation of the Subject Assets Prior to Closing................34
Section 7.2 Operation of Certain Areas After the Closing....................35
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Section 7.3 Operator's Geophysical Data.....................................35
Section 7.4 Course of Conduct by Operator...................................36
Section 7.5 Approvals and Consents..........................................37
Section 7.6 Investigations..................................................37
Section 7.7 Final S Corporation Federal Income Tax Return...................37
Section 7.8 Compiled Financials.............................................38
Section 7.9 Distributions...................................................38
ARTICLE VIII
Conditions to Obligations of Sellers
Section 8.1 Representations.................................................38
Section 8.2 Performance.....................................................38
Section 8.3 Pending Matters.................................................38
Section 8.4 Hart-Scott-Rodino...............................................38
Section 8.5 Adjusted Purchase Price.........................................38
Section 8.6 Execution and Delivery of Closing Documents.....................38
Section 8.7 Certificates....................................................38
Section 8.8 Opinion.........................................................39
ARTICLE IX
Conditions to Obligations of Buyer
Section 9.1 Representations.................................................39
Section 9.2 Performance.....................................................39
Section 9.3 Pending Matters.................................................39
Section 9.4 Hart-Scott-Rodino...............................................39
Section 9.5 Execution and Delivery of Closing Documents.....................39
Section 9.6 Certificates....................................................39
Section 9.7 Consents and Approvals..........................................40
Section 9.8 All Sellers to Close............................................40
Section 9.9 Nonforeign Affidavit............................................40
Section 9.10 Operator........................................................40
Section 9.11 ................................................................40
ARTICLE X
Closing
Section 10.1 Time and Place of Closing.......................................40
Section 10.2 Extension.......................................................40
Section 10.3 Actions to be Taken Prior to Closing............................40
Section 10.4 Adjustments to Purchase Price at Closing........................41
Section 10.5 Statement.......................................................42
Section 10.6 Post-Closing Adjustments to Purchase Price......................43
Section 10.7 Transfer Taxes..................................................44
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Section 10.8 Ad Valorem and Similar Taxes....................................44
Section 10.9 Actions of Sellers at Closing...................................44
Section 10.10 Actions of Buyer at Closing.....................................44
Section 10.11 Further Cooperation.............................................44
Section 10.12 Confidentiality Agreement.......................................45
Section 10.13 Letter of Intent................................................45
ARTICLE XI
Termination
Section 11.1 Right of Termination............................................45
Section 11.2 Effect of Termination...........................................46
Section 11.3 Attorney's Fees, Etc............................................46
ARTICLE XII
Assumption and Indemnification
Section 12.1 Assumption......................................................47
Section 12.2 Indemnification.................................................47
ARTICLE XIII
Limitations on Representations and Warranties
Section 13.1 Disclaimers of Representations and Warranties...................54
Section 13.2 Waiver of Texas DTPA............................................55
Section 13.3 Casualty Loss...................................................55
Section 13.4 Exclusive Remedies..............................................56
ARTICLE XIV
Miscellaneous
Section 14.1 HSR Act.........................................................56
Section 14.2 Expenses........................................................57
Section 14.3 Independent Investigation.......................................57
Section 14.4 Document Retention..............................................57
Section 14.5 Entire Agreement................................................57
Section 14.6 Waiver..........................................................58
Section 14.7 No Solicitation.................................................58
Section 14.8 Publicity.......................................................58
Section 14.9 Captions........................................................58
Section 14.10 No Third Party Beneficiaries....................................58
Section 14.11 Assignment......................................................58
Section 14.12 Governing Law...................................................58
Section 14.13 Notices.........................................................59
Section 14.14 Severability....................................................59
Section 14.15 Counterpart Execution...........................................59
Section 14.16 Authority of BSHP...............................................60
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Section 14.17 W.T. Carter & Bro...............................................60
Section 14.18 Champion C-2....................................................60
Section 14.19 Guaranty Agreement..............................................61
Section 14.20 Joint Operating Agreement/AMI...................................61
Schedule I -- Working Interest Owners
Schedule II -- Selling Stockholders
Exhibit "A" -- Producing Leases
Exhibit "B" -- Camden Tram Leases
Exhibit "C" -- Center Grove Leases
Exhibit "D" -- North Double A Portion/Camden Tram Leases
Exhibit "E" -- Double A Leases
Exhibit "F" -- Assignment, Bill of Sale and Conveyance
Exhibit "G" -- Guaranty
Exhibit "H" -- Plat
Exhibit "I" -- Form of Locke Purnell Opinion
Exhibit "J" -- Form of Vinson & Elkins L.L.P. Opinion
Schedule 2.3 -- Net Revenue and Working Interests; Allocated Values; Sellers'
Interests Schedule 5.1(l) -- Laws and Regulations Schedule 5.1(p) -- Consents
Schedule 5.3(d) -- Financial Statements Schedule 5.3(n) -- Insurance
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AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale (the "Agreement") is made and
entered into as of the 31st day of January, 1996, by and among those parties
identified on Schedule I attached hereto (individually, a "Working Interest
Owner" and collectively, the "Working Interest Owners"), those parties
identified on Schedule II attached hereto (individually, a "Selling Stockholder"
and collectively, the "Selling Stockholders"), Black Stone Oil Company, a Texas
corporation ("Operator") and Comstock Oil & Gas, Inc., a Nevada corporation
("Buyer") and a wholly owned subsidiary of Comstock Resources, Inc., a Nevada
corporation ("Guarantor").
W I T N E S S E T H:
WHEREAS, the Working Interest Owners own the Purchased Subject Assets
(as hereinafter defined) and the Selling Stockholders own the Purchased Shares
(as hereinafter defined);
WHEREAS, the Working Interest Owners are willing to sell to Buyer, and
Buyer is willing to purchase from the Working Interest Owners, the Purchased
Subject Assets, and the Selling Stockholders are willing to sell to Buyer, and
Buyer is willing to purchase from the Selling Stockholders, the Purchased
Shares, all upon the terms and subject to the conditions hereinafter set forth;
and
WHEREAS, Buyer is a wholly owned subsidiary of Guarantor and the
execution, delivery and performance by Buyer of its obligations hereunder will
benefit Guarantor, directly or indirectly, and the guarantee by Guarantor of the
obligations of Buyer hereunder is in the best interest of Guarantor.
NOW, THEREFORE, in consideration of the mutual benefits derived and to
be derived from this Agreement, and upon the representations, warranties,
covenants and agreements contained herein, the Parties hereby agree as follows:
ARTICLE I
Construction and Definitions
Section 1.1 Separate Agreement With Each Seller. This Agreement shall
be construed as a separate agreement between Buyer and each Seller with respect
to each Seller's interest in the Purchased Subject Assets and Purchased Shares
as set forth in
Schedule 2.3. Except as provided in the last sentence of Section 12.2(f), the
obligations of each Seller hereunder and under each instrument executed and
delivered in connection herewith shall be several and not joint or collective.
This Agreement shall be binding upon each Seller that executes this Agreement
regardless of whether this Agreement is executed by all of the parties named as
Seller herein. In the event that any of the parties named as a Seller herein
owning interests in the Purchased Subject Assets or Purchased Shares fail to
execute this Agreement on or before 5:00 p.m. (central standard time) on January
30, 1996, Buyer, without any liability to Sellers whatsoever, may terminate this
Agreement by notice in writing to Seller given not later than 5:00 p.m. (central
standard time) on January 31, 1996.
Section 1.2 Defined Terms. Capitalized terms used in this Agreement and
not otherwise defined herein or in the recitals to this Agreement shall have the
meanings ascribed to them in this Section 1.2.
"Additional Contracts" is defined in Section 5.3(g).
"Adjusted Purchase Price" shall mean the Purchase Price as adjusted
pursuant to the provisions of Article X.
"Agencies" is defined in Section 5.3(i).
"Aggregate Environmental Defect Value" means the Aggregate
Environmental Defect Values for all Disqualifying Environmental Conditions
established pursuant to Section 4.8 in a manner consistent with a reasonably
prudent operator and in compliance with Environmental Laws.
"Allocated Values" is defined in Section 2.3.
"Arbitrator" is defined in Section 10.6(b).
"Assessment Period" is defined in Section 4.7(a).
"Assignment" is defined in Section 4.5.
"BSHP" shall mean Black Stone Holdings Partnership, a Texas general
partnership.
"BTU" is defined in Section 10.4(c).
"Buyer Indemnitees" is defined in Section 12.2(b).
"C-2 Notice Period" is defined in Section 14.18(a).
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"C Year" is defined in Section 7.7.
"Camden Tram JOA" shall mean that certain joint operating agreement
described in Exhibit "B".
"Camden Tram Leases" shall mean the oil, gas and mineral leases
described in Exhibit "B", insofar as such Leases cover the lands described in
Exhibit "B".
"Camden Tram Interest" shall mean an undivided 30% of the Working
Interest Owners' and Operator's right, title and interest as of the Effective
Time in and to the Camden Tram Leases, together with a like interest in all
contracts and other agreements applicable to said Leases insofar as they cover
such lands.
"Casualty Loss" is defined in Section 13.3(b).
"Center Grove JOA" shall mean a joint operating agreement to be
executed by Working Interest Owners, Buyer and Operator, as operator, covering
the Center Grove Area outlined on Exhibit H and in the substantially the form of
the Camden Tram JOA.
"Center Grove Leases" shall mean the oil, gas and mineral leases
described in Exhibit "C", insofar as such Leases cover the lands described in
Exhibit "C".
"Center Grove Interest" shall mean an undivided 30% of the Working
Interest Owners' and Operator's right, title and interest as of the Effective
Time in and to the Center Grove Leases, together with a like interest in all
contracts and other agreements applicable to said Leases insofar as they cover
such lands.
"Claim Notice" is defined in Section 12.2(f)(i)(A).
"Closing" shall mean the consummation of the purchase and sale of the
Purchased Subject Assets and Purchased Shares pursuant to this Agreement as
provided in Article X.
"Closing Date" shall mean May 1, 1996, unless another date for Closing
is mutually agreed to in writing by the Parties.
"Closing Working Capital" shall mean an amount of Working Capital equal
to the following determined in accordance with GAAP:
(i) all revenues from the Operator Subject Assets attributable to
the period from the Effective Time until the Closing Date, less
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(ii) all costs and expenses (including rentals, royalties,
production and severance taxes, capital expenditures (other than the
Excluded Capital Costs), lease operating expenses authorized under
joint operating agreements applicable to the Operator Subject Assets)
that are attributable to the Operator Subject Assets and attributable
to the period of time from the Effective Time until the Closing Date,
less
(iii) an amount equal to all operating fees which would be
authorized under the joint operating agreements applicable to the
Operator Subject Assets if Operator were not the operator thereunder
attributable to the period from the Effective Time to the Closing
Date, plus
(iv) the amount of any suspense accounts held by Operator as of
the Closing Date.
In determining Closing Working Capital there shall not be included in revenues
any operating fees and drilling fees earned by Operator under any operating
agreement or drilling contract or any interest earned by Operator on any
accounts.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" is defined in Section 10.12.
"Contracts" shall mean all contracts, agreements, leases and other
arrangements used or useful in connection with the Producing Leases, insofar and
only insofar as they apply to the Producing Leases.
"Defensible Title" is defined in Section 4.2.
"Disqualifying Environmental Condition" shall mean the presence, as
determined by the Environmental Assessment, of (i) a material violation of
Environmental Laws in connection with the operation of the Subject Assets or
(ii) a material amount of Regulated Substances in the soil, groundwater, or
surface water in, on, at, or under a Subject Asset in a manner or quantity: (A)
which is required by Environmental Laws or by any applicable action or guidance
levels or other standards published by any Governmental Authority to be
remediated; or (B) for which a permit or closure plan that is required under
Environmental Laws has not been obtained. Well plugging and abandonment and
drill site restoration obligations customarily taken at the time of well
plugging and abandonment, shall not constitute a "Disqualifying Environmental
Condition for wells on Exhibit A.
"Documents" is defined in Section 14.4.
"DTPA" is defined in Section 13.2(a).
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"Double A Interest" shall mean all of the Working Interest Owners' and
Operator's right, title and interest in and to the Double A Leases, together
with a like interest in all contracts and other agreements applicable to said
Leases insofar as they cover such lands.
"Double A Leases" shall mean the oil, gas and mineral leases described
in Exhibit "E", insofar as such Leases cover the lands described in Exhibit "E".
"Easements" shall mean all easements, rights-of-way, servitudes,
permits, licenses, franchises and other estates or similar rights and privileges
to the extent related to or used in connection with the Producing Leases.
"Escobeda Title Matter" shall mean the alleged overlapping of the
Bartolo Escobeda League, A-30 with the Thomas Colville League, A-16, the Andrew
Wyllie One-Quarter League, A-84 and the Cyrus Thompson One-Quarter League,
A-563, Polk County, Texas.
"Effective Time" shall mean 7:00 a.m. Central Standard Time on January 1,
1996.
"Environmental Assessment" is defined in Section 4.7(a).
"Environmental Consultant" is defined in Section 4.7(a).
"Environmental Deductible Balance" shall mean the amount, if any, by
which $250,000 exceeds the Aggregate Environmental Defect Value of all
Disqualifying Environmental Conditions on Producing Properties not treated as
Excluded Assets pursuant to Section 4.9(a)(i).
"Environmental Defect Notice" is defined in Section 4.8(a).
"Environmental Defect Value" means the net present value (determined
based on a 10% discount rate compounded annually) of the cost to correct in the
most cost effective manner reasonably available any Disqualifying Environmental
Condition established pursuant to Section 4.8.
"Environmental Laws" shall mean all laws, ordinances, statutes, codes,
rules, regulations, agreements, judgments, orders, and decrees, now in effect,
promulgated, or amended, of any Governmental Authority, relating to pollution,
the protection or regulation of human health, natural resources, or the
environment, or the emission, discharge, release or threatened release of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or waste or Regulated Substances into the environment (including,
without limitation, ambient air, surface water, ground water or land or soil).
"Environmental Matters" is defined in Section 12.2(a).
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"Equipment" shall mean all personal property, wells, equipment,
materials, fixtures and improvements located on and used in connection with the
Producing Leases or the production, treatment, sale, or disposal of hydrocarbons
or waste produced therefrom or attributable thereto.
"ERISA" is defined in Section 5.3(m).
"Excluded Assets" shall mean the following: (a) any and all corporate,
financial, tax, interpretative geological, interpretative geophysical and legal
records of Seller, (b) any and all financial, tax, interpretative geological,
interpretative geophysical and legal records of Operator, except those that
relate to the Subject Assets, (c) any and all geophysical data of Seller or of
Operator, except for Operator's interest in certain geophysical data described
in Section 7.4, (d) any and all refunds of costs, taxes or expenses borne by
Seller or Operator attributable to the period prior to the Effective Time, (e)
any and all proceeds from the settlements of contract disputes with purchasers
of oil, gas or other hydrocarbons from the Producing Leases, including without
limitation settlements of take-or-pay disputes, insofar as said proceeds are
attributable to periods of time prior to the Effective Time, (f) any and all
fee, mineral, royalty, overriding royalty, and other similar interests owned by
Seller or Operator; (g) any and all interests in the Livingston gas processing
plant, (h) any and all interests in the Camp Ruby gas gathering system including
all pipelines, rights of way, easements and road use agreements used in
connection with gathering gas from the Subject Assets, (i) an undivided 50% of
Seller's and Operator's right, title and interest in and to the Black Stone
Champion International C No. 1, Black Stone - Carter E No. 11, and Black Stone -
Alabama Coushatta No. 6 Lease Units (as designated on Exhibit A), insofar as
such right, title and interest are attributable to depths above 4,000 feet, (j)
subject to the provisions of Section 14.18, the Champion C-2 Assets, (k) any
interest in the Subject Assets which becomes an Excluded Asset pursuant to
Sections 4.9 or 13.3, and (l) any and all assets (real or personal) related to
the foregoing items (a) through (k) including any and all rights to use the
Easements insofar as they are useful in connection therewith or with the leases
described in Exhibits B, C and D.
"Excluded Capital Costs" shall mean all capital costs incurred to drill,
complete, and equip to the point of delivery the Champion International C No. 1,
Carter E No. 11, Alabama Coushatta No. 5 and Alabama Coushatta No. 6 wells.
"Existing Encumbrances" is defined in Section 4.5.
"Final Settlement Date" is defined in Section 10.6(a).
"Final Statement" is defined in Section 10.6(b).
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"Financial Statements" is defined in Section 5.3(d).
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Governmental Authority" shall mean the United States, the states, the
counties, the cities, or any other political subdivisions in which the Subject
Assets are located, and any other political subdivision, agency or
instrumentality (including the Texas Natural Resource Conservation Commission
and the Texas Railroad Commission) exercising jurisdiction over Seller,
Operator, the Subject Assets, or the operation of the Subject Assets.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hydrocarbons" is defined in Section 4.5(b).
"Indemnified Party" is defined in Section 12.2(g).
"Indemnifying Party" is defined in Section 12.2(g).
"Information" is defined in Section 4.7(d).
"Intellectual Property" is defined in Section 5.3(k).
"Losses" is defined in Section 12.2(d).
"Lease Unit" shall mean, for each well comprising the Subject Assets, the
corresponding lease unit described in Exhibit A; provided, that the Lease Unit
for the Alabama Coushatta No. 7 well shall be the same as for the Alabama
Coushatta No. 4 well, and the Lease Unit for the Alabama Coushatta No. 8 well
shall be the same as for the Alabama Coushatta No. 6 well.
"Net Revenue Interest" is defined in Section 4.2(a).
"North Double A Portion/Camden Tram Interest" shall mean an undivided
30% of the Working Interest Owners' and Operator's right, title and interest as
of the Effective Time in and to the North Double A Portion/Camden Tram Leases,
insofar as such Leases cover the lands described in Exhibit "D", together with a
like interest in all contracts and other agreements applicable to said Leases
insofar as they cover such lands.
"North Double A JOA" shall mean a joint operating agreement to be
executed by Working Interest Owners, Buyer and Operator, as operator, covering
the North Double A Area outlined on Exhibit H and in the substantially the form
of the Camden Tram JOA.
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"North Double A Portion/Camden Tram Leases" shall mean the oil, gas and
mineral leases described in Exhibit "D".
"Notice of Disagreement" is defined in Section 10.6(a).
"Notice Period" is defined in Section 12.2(g).
"Operator" shall mean Black Stone Oil Company, a Texas corporation.
"Operator Subject Assets" shall mean those Subject Assets owned by
Operator only.
"Producing Leases" shall mean the oil, gas and mineral leases described
in Exhibit "A", insofar and only insofar as such leases cover the lands
described in Exhibit "A".
"Producing Properties" shall mean all of the right title and interest
of the Sellers and Operator in and to the Producing Leases, Easements,
Equipment, Contracts and Records.
"Purchase Price" shall mean $71,500,000.
"Purchase Price Adjustments" is defined in Section 10.4(e).
"Purchased Subject Assets" shall mean the Subject Assets, other than
the Operator Subject Assets.
"Purchased Shares" shall mean all of the issued and outstanding shares
of common stock, $.10 par value, of Operator owned by Selling Stockholders.
"Records" shall mean all books, records, files, muniments of title,
reports and similar documents and materials that relate to Operator or the
Producing Properties, Easements, Equipment or Contracts except those that relate
to the Excluded Assets.
"Regulated Substances" shall mean: (i) any hazardous substance defined
as such under Section 9601(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss.9601, et. seq.; and (ii)
any oil and gas exploration and production waste, hydrocarbon-contaminated soil
or groundwater, or naturally occurring radioactive material ("NORM") in soil or
equipment that is required to be remediated under applicable Environmental Laws
at the time of discovery.
"S Year" is defined in Section 7.7.
"Seller" shall mean an individual Selling Stockholder or Working
Interest Owner.
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"Sellers" shall mean all Selling Stockholders and Working Interest
Owners.
"Seller's Response" is defined in Section 4.4(a).
"Selling Stockholder" shall mean an individual party identified on
Schedule II attached hereto.
"Selling Stockholder Indemnitees" is defined in Section 12.2(a).
"Statement" is defined in Section 10.5.
"Stockholder Indemnitors" is defined in Section 12.2(c).
"Subject Assets" shall mean the following: (i) the Producing
Properties, (ii) the Camden Tram Interest, the (iii) the Center Grove Interest,
(iv) the North Double A Portion/Camden Tram Interest, and (v) the Double A
Interest, but shall not include any of the Excluded Assets.
"Tax Losses" means any Losses arising from the breach of the
representations, warranties and covenants contained in Sections 5.2(f), 5.3(j)
and 7.7 or Taxes of Operator resulting from the creation and distribution of the
stock of any subsidiary of Operator pursuant to Section 7.4(b).
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, excise, severance, property,
withholding, sales and franchise taxes, imposed by the United States, or any
state, county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions attributable thereto.
"Title Benefit" shall mean that a Working Interest Owner or Operator
owns a Net Revenue Interest in any Producing Property in excess of the interest
shown in Schedule 2.3 for such Producing Property.
"Title Consultant" is defined in Section 4.4(a).
"Title Defect" is defined in Section 4.2.
"Title Defect Notice" is defined in Section 4.3.
"Title Examination Period" is defined in Section 4.1.
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"Total Defect Adjustment" shall mean the aggregate of (i) the Aggregate
Environmental Defect Value, (ii) the value of all Title Defects asserted in
accordance with Article IV and (iii) the Allocated Value of all Producing
Properties that have become Excluded Assets pursuant to Sections 4.9 or 13.3.
"TRPA" is defined in Section 13.5.
"Working Capital" shall mean all cash, accounts receivable, accounts
payable and other items of working capital as determined pursuant to GAAP.
"Working Interest" is defined in Section 4.2(a).
"Working Interest Owner" shall mean an individual party identified on
Schedule I attached hereto.
"Working Interest Owner Indemnitees" is defined in Section 12.2(a).
ARTICLE II
Purchase and Sale
Section 2.1 Agreement to Sell and Purchase. Subject to and in
accordance with the terms and conditions of this Agreement, Buyer agrees to
purchase from (i) the Selling Stockholders the Purchased Shares and (ii) the
Working Interest Owners the Purchased Subject Assets, for the total Purchase
Price as adjusted pursuant to the provisions of Article X, and (x) each Selling
Stockholder, severally and not jointly, agrees to sell to Buyer the number of
Purchased Shares indicated on Schedule II, and (y) each Working Interest Owner,
severally and not jointly, agrees to sell to Buyer the Purchased Subject Assets
owned by such Working Interest Owner as indicated on Schedule I, all for the
aggregate payment to the Sellers equal to the Purchase Price as adjusted as
provided in Article X.
Section 2.2 Purchase Price. The total consideration for the sale and
transfer of the Purchased Subject Assets and the Purchased Shares to Buyer shall
be Buyer's payment to Sellers of the Purchase Price, as adjusted pursuant to the
provisions of Article X. The Adjusted Purchase Price shall be paid by Buyer to
Sellers at Closing by means of a completed Federal Funds transfer to the account
of BSHP designated by BSHP to Buyer in writing at least two days prior to the
Closing Date for the further account of Sellers.
Section 2.3 Allocated Values. Attached hereto as Schedule 2.3 is a
schedule which shows the following items (the "Allocated Values"): (i) the
portion of the Purchase Price allocated to the Purchased Shares and the
Purchased Subject Assets, (ii) an allocation of the portion of the Purchase
Price for the Purchased Subject Assets among the properties
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which comprise the Purchased Subject Assets and each Working Interest Owner's
interests therein and (iii) an allocation of the Purchase Price for the
Purchased Shares among the properties which comprise the Operator Subject
Assets. Each Seller and Buyer agree that the Allocated Values shall be used to
compute any adjustments to the Purchase Price pursuant to the provisions of this
Agreement, but shall not be required to use such Allocated Values for any other
purpose.
ARTICLE III
Effective Time
Section 3.1 Revenues and Expenses.
(a) If the transactions contemplated hereby are consummated in
accordance with the terms and provisions hereof, the ownership of the Purchased
Subject Assets shall be transferred from each Working Interest Owner to Buyer at
the Closing Date but effective as of the Effective Time. Subject to the other
provisions of this Agreement, each Working Interest Owner shall (i) be entitled
to all revenues (and related accounts receivable) attributable to the Purchased
Subject Assets owned by such Working Interest Owner (including, without
limitation, the right to all production, proceeds of production and other
proceeds), and (ii) responsible for the payment of all expenses (and related
accounts payable) attributable to the Purchased Subject Assets owned by such
Working Interest Owner in each case to the extent the same relate to the period
of time prior to the Effective Time. Subject to the other provisions of this
Agreement, Buyer shall be entitled to all revenues (and related accounts
receivable) attributable to the Purchased Subject Assets (including, without
limitation, the right to all production, proceeds of production and other
proceeds), and shall be responsible for the payment of all expenses (and related
accounts payable) attributable to the Purchased Subject Assets, in each case to
the extent the same relate to the period of time from and after the Effective
Time.
(b) If the transactions contemplated hereby are consummated in
accordance with the terms and provisions hereof, the ownership of the Purchased
Shares shall be transferred from the Selling Stockholders to Buyer as of the
Closing Date, but the Purchase Price of the Purchased Shares shall be adjusted
as provided in Article X.
ARTICLE IV
Title and Environmental Matters
Section 4.1 Title Examination Period. Following the execution date of
this Agreement until 5:00 p.m., local time in Houston, Texas on April 12, 1996
(the "Title Examination Period"), each Working Interest Owner and Operator shall
permit Buyer and
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its representatives and agents to examine, at all reasonable times in Operator's
offices, all abstracts of title, title opinions, title files, ownership maps,
lease files, assignments, division orders, operating records and agreements
pertaining to the Subject Assets insofar as same may now be in existence and in
the possession of Working Interest Owner or Operator.
Section 4.2 Title Defects. The term "Title Defect", as used in this
Agreement, shall mean (i) any encumbrance, reversion, encroachment,
irregularity, defect in or objection to the title of any Working Interest Owner
to the interest in any Producing Property set forth opposite such Working
Interest Owner's name on Schedule 2.3 or to the title of Operator to the
interest in any Producing Property set forth opposite its name on Schedule 2.3
which causes such title, as of the Closing Date, to be less than Defensible
Title, and (ii) any failure of any Selling Stockholder to own as of the Closing
Date the Purchased Shares set forth opposite such Selling Stockholder's name on
Schedule II free and clear of all liens, pledges, security interests and other
similar encumbrances. For purposes of this Agreement, the term "Defensible
Title" means that, subject to and except for the Existing Encumbrances:
(a) Each Working Interest Owner and Operator by virtue of its interest
in the Producing Properties is (i) entitled to receive not less than the
percentage set forth in Schedule 2.3 hereto as the "Net Revenue Interest" of all
Hydrocarbons produced, saved and marketed from the Lease Unit for each well
listed on Schedule 2.3 without reduction, suspension or termination of such
interest throughout the productive life of such well, except as specifically set
forth in Schedule 2.3, and (ii) obligated to bear the percentage of the costs
and expenses relating to the maintenance, development and operation of the Lease
Unit for each well not greater than the "Working Interest" shown in Schedule
2.3, without increase throughout the productive life of such well, except as
specifically set forth in Schedule 2.3; and
(b) The title of each Working Interest Owner and Operator is free and
clear of all liens, pledges, security interests, and other similar encumbrances.
Section 4.3 Notice of Title Defects. If Buyer discovers any Title
Defect, Buyer shall notify BSHP of such alleged Title Defect setting forth a
summary of the alleged Title Defect, the asserted value thereof determined by
Buyer in accordance with the terms of this Agreement, and including copies of
relevant portions of any title opinions or other title information on which the
alleged Title Defect is based (a "Title Defect Notice"). Each Title Defect
Notice shall be delivered by Buyer to BSHP as soon as practicable after the
alleged Title Defect is discovered, but in no event later than 12:00 noon on
April 12, 1996 ; provided that Buyer shall notify BSHP on or before 12:00 noon
on March 1, 1996 of any alleged Title Defect directly related to the Escobeda
Title Matter. Any matters that may otherwise constitute Title Defects but that
are not specifically raised in a Title Defect Notice delivered prior to 12:00
noon on April 12, 1996 shall be deemed to have been waived by Buyer, except to
the extent that any Title Defect constitutes a breach of the special warranty of
title contained
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in the Assignment delivered by Working Interest Owners at Closing and the
warranty of title made by Operator pursuant to Section 5.3(e)(vii).
Notwithstanding the foregoing, any title defect or irregularity directly related
to the Escobeda Title Matter that is not specifically raised in a Title Defect
Notice delivered by Buyer to BSHP on or before 12:00 noon on March 1, 1996 shall
be deemed waived by Buyer. Operator or any Working Interest Owner shall have the
option, but not the obligation, to attempt to cure any Title Defect.
Section 4.4 Determination of and Remedies for Title Defects.
(a) Determination of Title Defects and Defect Values. Not later than
12:00 noon on April 26, 1996, BSHP shall notify Buyer whether it agrees with
Buyer's claimed Title Defects and/or the proposed defect values therefor
("Seller's Response"). If BSHP does not agree with any claimed Title Defect
and/or proposed defect value therefor, then the parties shall enter into good
faith negotiations and shall attempt to agree on such matters. The parties
hereby agree that there is no defect value with respect to Title Defects on
Subject Assets other than the Producing Properties. If the parties cannot reach
agreement concerning either the existence of a Title Defect or a defect value
within ten (10) days after Buyer's receipt of Seller's Response, upon either
party's request, the parties shall mutually agree on and employ an attorney
experienced in title examination ("Title Consultant") to resolve all points of
disagreement relating to Title Defects and defect values; provided, however,
that if at any time any Title Consultant so chosen fails or refuses to perform
hereunder, a new Title Consultant shall be chosen by the parties. The cost of
any such Title Consultant shall be borne 50% by Sellers and 50% by Buyer. Each
party shall present a written statement of its position on the Title Defect
and/or defect value in question to the Title Consultant within five (5) days
after the Title Consultant is selected, and the Title Consultant shall make a
determination of all points of disagreement in accordance with the terms and
conditions of this Agreement within ten (10) business days of receipt of such
position statements. The determination by the Title Consultant shall be
conclusive and binding on the parties, and shall be enforceable against any
party in any court of competent jurisdiction. If necessary, the Closing Date
shall be deferred until the Title Consultant has made a determination of the
disputed issues, and all subsequent dates and required activities having
reference to the Closing Date shall be correspondingly deferred; provided,
however, that, unless each Seller and Buyer mutually agree to the contrary, the
Closing Date shall not be deferred in any event for more than thirty (30) days
beyond the original Closing Date.
(b) Remedies for Title Defect. With respect to any Title Defect that a
Seller elects not to cure or that a Seller fails to cure at or prior to the
Closing, such Seller and Buyer shall reduce the Purchase Price by the agreed
upon defect value of such Title Defect, taking into consideration the Allocated
Value of the Producing Property subject to such Title Defect, the portion of
such Producing Property subject to such Title Defect and the legal effect of
such Title Defect on the Producing Property affected thereby; provided, however,
that if such Title Defect is the result of a discovery by Buyer that Working
Interest Owner
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or Operator owned, as of the Effective Time, a Net Revenue Interest in a
Producing Property that is less than the Net Revenue Interest set forth on
Schedule 2.3, then Buyer and Seller agree that the proportion of reduction to
the Purchase Price shall be equal to the product of the Allocated Value of such
Producing Property and the percentage reduction in such Net Revenue Interest as
a result of such Title Defect, and provided, further, that if the defect value
has been determined in accordance with Section 4.4(a), the Title Consultant's
determination will control. Notwithstanding anything to the contrary contained
herein, there shall be no reduction to the Purchase Price for Title Defects with
respect to any well on a Lease Unit pursuant to the terms of Section 4.4(b)
unless and until, and then only to the extent that, the aggregate value of all
adjustments for Title Defects with respect to such well on a Lease Unit, on
well-by-well basis, exceeds one-half of one percent (1/2%) of the Allocated
Value of such well on such Lease Unit.
Section 4.5 Special Warranty of Title. The documents to be executed and
delivered by each Working Interest Owner to Buyer, transferring title to the
Purchased Subject Assets as required hereby, including the Assignment and Bill
of Sale attached hereto as Exhibit "E" (the "Assignment"), shall be subject to
the Existing Encumbrances and without warranty of title of any kind whatsoever,
express, implied or statutory, except for matters arising by, through or under
Working Interest Owner. The term "Existing Encumbrances" shall mean any of the
following matters to the extent the same are valid and subsisting and affect the
Subject Assets:
(a) the contracts, agreements, instruments and other matters set forth
in Exhibit A;
(b) any (i) undetermined or inchoate liens or charges constituting or
securing the payment of expenses that were incurred incidental to maintenance,
development, production or operation of the Subject Assets or for the purpose of
developing, producing or processing oil, gas or other hydrocarbons
(collectively, "Hydrocarbons") therefrom or therein, and (ii) materialman's,
mechanics', repairman's, employees', contractors', operators' or other similar
liens or charges for liquidated amounts arising in the ordinary course of
business (x) that are not delinquent or that will be paid and discharged by a
Seller at or before Closing, (y) which Buyer has agreed to assume or pay
pursuant to the terms hereof, or (z) if delinquent, that are being contested in
good faith by appropriate action, of which Buyer will be notified in writing
before Closing;
(c) any liens for taxes and assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the ordinary course of
business and for which a Seller has agreed to pay pursuant to the terms hereof
or which have been prorated pursuant to the terms hereof;
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(d) any liens or security interests created by law or reserved in oil
and gas leases for royalty, bonus or rental, or created to secure compliance
with the terms of the agreements, instruments and documents of record or
contained in the Records that create or reserve to Working Interest Owner or
Operator its interests in the Subject Assets;
(e) any obligations or duties affecting the Subject Assets to any
municipality or public authority with respect to any franchise, grant, license
or permit of record or contained in the Records, and all applicable laws, rules,
regulations and orders of any Governmental Authority;
(f) any (i) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, pipelines, grazing,
hunting, lodging, canals, ditches, reservoirs or the like of record or contained
in the Records, and (ii) easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other similar rights-of-way of record
or contained in the Records, on, over or in respect of property owned or leased
by Working Interest Owner or Operator or over which Working Interest Owner or
Operator owns rights-of-way, easements, permits or licenses which do not operate
to interfere materially with operations as currently conducted on the Subject
Assets;
(g) all lessors' royalties, overriding royalties, net profits
interests, carried interests, production payments, reversionary interests and
other burdens on or deductions from the proceeds of production created or in
existence as of the Effective Time that do not operate to reduce the Net Revenue
Interests of Working Interest Owner or Operator or increase the Working
Interests of Working Interest Owner or Operator without a corresponding increase
in the Net Revenue Interests;
(h) preferential rights to purchase or similar agreements with respect
to which (i) waivers or consents are obtained from the appropriate parties for
the transaction contemplated hereby, or (ii) required notices have been given
for the transaction contemplated hereby to the holders of such rights and the
appropriate period for asserting such rights has expired without an exercise of
such rights;
(i) required third party consents to assignments or similar agreements
with respect to which (i) waivers or consents are obtained from the appropriate
parties for the transaction contemplated hereby, or (ii) required notices have
been given for the transaction contemplated hereby to the holders of such rights
and the appropriate period for asserting such rights has expired without an
exercise of such rights;
(j) all rights to consent by, required notices to, filings with, or
other actions by Governmental Authorities in connection with the sale or
conveyance of oil and gas leases or interests therein that are customarily
obtained subsequent to such sale or conveyance;
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(k) production sales contracts; division orders; contracts for sale,
purchase, exchange, refining or processing of hydrocarbons; unitization and
pooling designations, declarations, orders and agreements; operating agreements;
agreements of development; area of mutual interest agreements; gas balancing or
deferred production agreements; processing agreements; plant agreements;
pipeline, gathering and transportation agreements; injection, repressuring and
recycling agreements; carbon dioxide purchase or sale agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements to the
extent the same are ordinary and customary to the oil, gas, sulphur and other
mineral exploration, development, processing or extraction business which are of
record or contained in the Records;
(l) record title to Purchased Subject Assets of any Working Interest
Owner being held in the name of Operator; or
(m) defects or irregularities affecting the Subject Assets that
individually or in the aggregate do not materially interfere with the ownership
or operation of the Subject Assets or impair the value of the Subject Assets.
Section 4.6 Remedies for Title Benefits. The Purchase Price shall be
increased pursuant to Sections 10.4(a)(iii) and 10.4(d) with respect to all
Title Benefits, in an amount equal to the value of any Title Benefit. Buyer and
Working Interest Owners agree that the value of any Title Benefit shall be equal
to the product of the Allocated Value of the affected Lease Unit and the
percentage increase in such Net Revenue Interest as a result of such Title
Benefit; provided, however, that Buyer shall have no duty or obligation to
advise a Seller of any higher Net Revenue Interest discovered in Buyer's due
diligence or otherwise coming to Buyer's attention, except where Buyer is
claiming a Title Defect based upon an increase in Working Interest, and in such
case Buyer shall disclose the existence of any corresponding increase in Net
Revenue Interest.
Section 4.7 Environmental Procedure.
(a) Each Working Interest Owner and Operator consent to the performance
of, and Buyer shall cause to be performed on or before April 12, 1996, an
environmental assessment ("Environmental Assessment") on all or a part of the
Producing Properties and agree to allow Buyer or Sound Environmental, Inc. or
other environmental consultant or technical representatives that have been
approved by BSHP (which approval shall not be unreasonably withheld) (the
"Environmental Consultant") to have access to the Producing Properties for this
purpose at any reasonable time or times prior to April 12, 1996 (the "Assessment
Period").
(b) The scope of work for the Environmental Assessment shall be
mutually agreed upon by Buyer and BSHP and the agreement of BSHP will not be
unreasonably withheld.
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(c) Buyer shall bear all costs associated with the Environmental
Assessment. Working Interest Owner and Operator understand and acknowledge that
the Environmental Assessment may involve subsurface testing of soil,
groundwater, and any surface water at the Producing Properties and may involve
soil borings and the collection of groundwater samples by hydropunch, geoprobe,
or similar means, but Buyer shall not install groundwater monitoring wells
without the prior consent of BSHP, which consent shall not be unreasonably
withheld. Buyer shall be responsible for disposing of any soil cuttings or other
waste generated by this testing and shall restore the Producing Properties at
the end of the Assessment Period to its condition prior to the performance of
the Environmental Assessment. Buyer agrees to indemnify and hold each Working
Interest Owner and Operator harmless from any liability arising from the acts or
omissions of Buyer, its representatives or the Environmental Consultant during
the performance of the Environmental Assessment WITHOUT REGARD TO THE SOLE,
PARTIAL OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY
WORKING INTEREST OWNER INDEMNITEE OR OPERATOR, but in no event for the gross
negligence or willful misconduct of any Working Interest Owner Indemnitee or
Operator. No invasive testing or excavation other than soil borings, the
installation of groundwater wells, and grab samples of surface soil, surface
water, or sediment approved by BSHP pursuant to Section 4.7(b) shall be
undertaken without the prior consent of BSHP.
(d) Unless otherwise required by law, Buyer agrees to treat
confidentially all reports prepared for Buyer by its Environmental Consultant in
connection with the performance of the Environmental Assessment, and the
information contained in such reports (collectively, referred to herein as the
"Information"). The Information may only be used by Buyer or Sellers in
connection with the transactions contemplated by this Agreement. In the event
that Buyer or its representatives become legally compelled to disclose any of
the Information, Buyer shall provide Working Interest Owner and Operator with
prompt notice prior to any such disclosure so that Working Interest Owner or
Operator, if it disagrees with this obligation to disclose, may seek a
protective order or other appropriate remedy and/or waive compliance with any
applicable provisions of this Section 4.7(d).
(e) Buyer shall make the Information available to Working Interest
Owner and Operator and provide Working Interest Owner and Operator copies of the
Information without charge.
(f) Working Interest Owner and Operator shall have the right to have a
representative or representatives accompany the Environmental Consultant at all
times during the Environmental Assessment and Buyer agrees to give Working
Interest Owner and Operator verbal notice not more than 72 hours and not less
than 48 hours before any visits by the Environmental Consultant to the Producing
Properties. Buyer agrees to take and provide to Operator identical split samples
of all sampling done on the Producing Properties.
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Section 4.8 Determination of Disqualifying Environmental Condition.
(a) Notice of Environmental Defects. To establish the existence of a
Disqualifying Environmental Condition on a Subject Asset, Buyer shall deliver to
BSHP a notice (an "Environmental Defect Notice") as soon as practicable after
discovery of such Disqualifying Environmental Condition and in any event prior
to 12:00 noon on April 12, 1996 asserting the existence of a Disqualifying
Environmental Condition and including (i) the Environmental Assessment which
must contain a conclusion that a Disqualifying Environmental Condition exists,
and which conclusion must be reasonably substantiated by the results of the
investigation conducted by the Environmental Consultant and (ii) a bid from the
Environmental Consultant and another qualified environmental consulting firm for
the correction of the Disqualifying Environmental Condition in the most cost
effective manner reasonably available. As a minimum standard for acceptance by
Working Interest Owner and Operator, such Environmental Assessment must reflect
that the Environmental Consultant performed sufficient invasive testing and
analytical work to delineate reasonably the nature and extent of the
Disqualifying Environmental Condition and is further required to contain a site
plan showing the location of all sampling events, boring logs and other field
notes describing the sampling methods utilized and the field conditions
observed, chain-of- custody documentation, laboratory reports, and copies of two
bids for corrective work.
(b) Seller's Reply to Defect Notice. On or before 12:00 noon on April
26, 1996, the affected Working Interest Owner and/or Operator shall provide
Buyer with written notice as to whether it acknowledges the existence of each
Disqualifying Environmental Condition asserted by Buyer in an Environmental
Defect Notice delivered pursuant to the terms hereof. If such Working Interest
Owner or Operator does not provide Buyer on or before said time with a written
notice that Working Interest Owner or Operator rejects the conclusion in the
Environmental Assessment as to the existence of a Disqualifying Environmental
Condition, such Working Interest Owner or Operator shall be deemed to have
acknowledged the existence of a Disqualifying Environmental Condition.
(c) Buyer's Rights of Acceptance or Appeal. If a Working Interest Owner
or Operator timely rejects the conclusions in the Environmental Assessment, then
Buyer shall have five (5) days after the receipt of this rejection to appeal the
rejection by providing such Working Interest Owner or Operator within this five
day period with a written notice of its appeal. If Buyer does not timely and
properly appeal within this time period, Buyer shall be deemed to have
acknowledged that no Disqualifying Environmental Condition exists. If Buyer
accepts or is deemed to accept that no Disqualifying Environmental Condition
exists, then the parties will proceed to Closing. If Buyer timely appeals, then,
at the sole cost of the unsuccessful party in the appeal process, Buyer and such
Working Interest Owner or Operator shall each select a consulting firm and then
the two consulting firms shall mutually agree upon a third firm. The third firm
shall make a determination whether the conclusion in the Environmental
Assessment that a Disqualifying Environmental Condition exists is
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correct and is supported by an investigation conducted in accordance with
industry-accepted standards. The determination of the third consulting firm
shall be final and binding upon Buyer and a Working Interest Owner or Operator
as to the existence of a Disqualifying Environmental Condition. The third
consulting firm shall also estimate the cost of correcting the Disqualifying
Environmental Condition in the most cost effective manner reasonably available.
Buyer and the applicable Working Interest Owner or Operator shall reasonably
cooperate in the appeal process which shall be completed within thirty (30) days
after Buyer gives Working Interest Owner or Operator written notice of its
appeal. If any party fails to cooperate in the appeal process or the two
appointed consultants cannot agree upon a third consultant, then either party
may petition the United States District Judge for the Southern District of Texas
then senior in service to designate a qualified and experienced consulting firm.
Section 4.9 Remedies for a Disqualifying Environmental Condition.
(a) With respect to all Disqualifying Environmental Conditions
established pursuant to Section 4.8, the following provisions shall apply.
(i) If the Environmental Defect Value of all Disqualifying
Environmental Conditions associated with a Producing Property exceeds the
Allocated Value of such Producing Property, Buyer may elect to exclude such
Producing Property from this transaction and treat such Producing Property as an
Excluded Asset in which event the Purchase Price shall be adjusted downward by
the Allocated Value of such Producing Property.
(ii) If the Environmental Defect Value of all Disqualifying
Environmental Conditions associated with a Producing Property exceeds 30% of the
Allocated Value of such Producing Property, Working Interest Owner or Operator
may elect to exclude such Producing Property from this transaction and treat
such Producing Property as an Excluded Asset in which event the Purchase Price
shall be adjusted downward by the Allocated Value of such Producing Property.
(iii) If the Aggregate Environmental Defect Value of all
Disqualifying Environmental Conditions on Producing Properties not treated as
Excluded Assets pursuant to Section 4.9(a)(i) and (ii) does not exceed $250,000,
Buyer alone shall pay and be responsible for the costs of correcting such
Disqualifying Environmental Conditions.
(iv) If the Aggregate Environmental Defect Value of all
Disqualifying Environmental Conditions on Producing Properties not treated as
Excluded Assets pursuant to Section 4.9(a)(i) and (ii) exceeds $250,000, Buyer
shall pay and be responsible for the first $250,000 of the Aggregate
Environmental Defect Value and Working Interest Owner and
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Operator shall pay and be responsible for the balance of such amount (but such
payments shall not be included as a part of the Closing Working Capital).
(b) Operator shall have the right, but not the obligation, on behalf
of itself and any affected Working Interest Owner to cure any Disqualifying
Environmental Condition prior to Closing. The Environmental Defect Value of any
Disqualifying Environmental Condition cured by Operator in accordance with
Section 4.10 prior to Closing shall be applied against the amount for which
Working Interest Owner and Operator are responsible under Section 4.9(a)(iv).
(c) If the Operator does not correct any Disqualifying Environmental
Defect prior to the Closing, then Buyer shall proceed with due diligence in
accordance with industry accepted practices after the Closing to correct any
Disqualifying Environmental Conditions in accordance with Section 4.10 for which
it is responsible under Sections 4.9(a)(iii) and (iv). At the Closing, the
Purchase Price shall be adjusted downward by the amount of the Environmental
Defect Value for which Working Interest Owner and Operator are responsible under
Section 4.9(a)(iii), less any credit to which they are entitled under 4.9(b).
Section 4.10 Correction of a Disqualifying Environmental Condition. To
correct a Disqualifying Environmental Condition involving a violation of
Environmental Laws, the party responsible for correcting the Disqualifying
Environmental Condition under the provisions of Sections 4.9(b) and (c) shall
cure the violation and provide reasonable evidence to the other party
substantiating that the violation has been cured. To correct a Disqualifying
Environmental Condition involving Regulated Substances, the responsible party
shall perform the type of remediation that a prudent operator would perform and
shall provide the other party with written assurance from the appropriate
Governmental Authority that no further action is required in connection with the
Regulated Substances, or if no such written assurance is customarily obtained
under normal procedures observed by prudent operators, a certification from a
qualified consultant that the appropriate remediation has been performed and
that no further response is required under applicable Environmental Laws.
ARTICLE V
Representations and Warranties of Sellers and Operator
Section 5.1 Representations and Warranties of Working Interest Owners.
Each Working Interest Owner (severally and not jointly) represents and warrants
with respect to itself only and its interest in the Purchased Subject Assets on
the date hereof and on the Closing Date as follows:
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(a) Existence. If Working Interest Owner is a corporation, it is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. If Working Interest Owner is a partnership, it is duly
organized and validly existing under the laws of the state of its formation.
Working Interest Owner has full legal power, right and authority to own, lease
and operate its properties and to carry on its business as such is now being
conducted and as contemplated to be conducted.
(b) Legal Power. Working Interest Owner has the legal power and right
to enter into and perform this Agreement and the transactions contemplated
hereby and, in the case of any Working Interest Owner who is an individual, no
joinder by or consent of Working Interest Owner's spouse is required hereunder.
The execution and delivery of this Agreement and the documents contemplated
hereby, and the consummation of the transactions contemplated by this Agreement
will not violate, nor be in conflict with:
(i) any provision of Working Interest Owner's articles or certificate
of incorporation, by-laws or partnership agreement, as applicable; or
(ii) any judgment, order, ruling or decree applicable to Working
Interest Owner or the Purchased Subject Assets or any law, rule or regulation
applicable to Working Interest Owner or the Purchased Subject Assets.
(c) Execution. The execution and delivery of this Agreement and the
other documents contemplated hereby and the performance by Working Interest
Owner of the transactions contemplated hereby and thereby have been duly and
validly authorized by all requisite corporate or partnership action, as
applicable, on the part of each Working Interest Owner that is a corporation or
partnership. This Agreement constitutes the legal, valid and binding obligation
of Working Interest Owner, enforceable in accordance with its terms, except that
(i) enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) the remedies of specific performance and injunctive relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceedings may be brought, and (iii) rights to indemnification
hereunder may be limited under applicable securities laws.
(d) Brokers. No broker or finder has acted for or on behalf of Working
Interest Owner in connection with this Agreement or the transactions
contemplated by this Agreement. No broker or finder is entitled to any brokerage
or finder's fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Working Interest Owner
for which Buyer has or will have any liabilities or obligations (contingent or
otherwise).
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(e) Bankruptcy. There are no bankruptcy, reorganization, arrangement
or similar proceedings pending, or, to the knowledge of Working Interest Owner,
threatened against Working Interest Owner.
(f) Suits. Except for Black Stone Oil Company v. C.C. Lilley, Inc.,
there is no suit, action, claim, investigation or inquiry by any person or
entity or by any administrative agency or governmental body and no legal,
administrative or arbitration proceeding pending or, to the knowledge of Working
Interest Owner, threatened against Working Interest Owner or the Purchased
Subject Assets which, if decided adversely to the interest of Working Interest
Owner, would reasonably be expected to have a material adverse affect on the use
or value of the Purchased Subject Assets.
(g) No Defaults. Working Interest Owner has no knowledge of any
default with respect to the Producing Properties that has not been remedied or
waived and that would have a material adverse effect, and to the best of BSHP's
knowledge, the Producing Properties are being held, developed, operated and
produced substantially in compliance with the terms and conditions of the
Contracts and all other applicable agreements.
(h) Royalties. All rentals, royalties and other payments due with
respect to the Producing Properties have been properly and timely paid, except
those amounts in suspense, and, to the best of Working Interest Owner's
knowledge, all conditions necessary to keep the Producing Properties in effect
have been duly performed.
(i) Taxes. All ad valorem, property, production, severance, excise and
similar taxes and assessments based on or measured by the ownership of the
Purchased Subject Assets or the production of Hydrocarbons or the receipt of
proceeds therefrom on the Purchased Subject Assets that have become due and
payable have been properly and timely paid.
(j) Non-Resident Status. Working Interest Owner is not a nonresident
alien of the United States.
(k) Investment. Prior to entering into this Agreement, Working
Interest Owner was advised by and relied on its own legal, tax and other
professional counsel concerning this Agreement, the Purchased Subject Assets and
the value thereof. Working Interest Owner acknowledges that Buyer is entering
into other purchase agreements with other owners of interests in certain of the
properties which are covered by this Agreement, and that the terms and
conditions of such agreements may differ from those contained herein and from
those contained among the various other agreements.
(l) Laws and Regulations. Except as set forth on Schedule 5.1(l), to
the best of Working Interest Owner's knowledge, the Producing Properties have
been and currently are
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being operated in compliance, with all laws, regulations and orders of all
Governmental Authorities, except where the failure to so comply would not have a
material adverse affect on the business operations, financial condition, or
results of operations of Working Interest Owner or of the Producing Properties.
(m) Prepayments and Gas Balancing. To the best of Working Interest
Owner's knowledge, it is receiving on a current basis the payments required
under gas contracts or other contractual arrangements for the delivery,
transportation or sale of natural gas from the Producing Properties. Working
Interest Owner is not obligated under any prepayment arrangement, "take-or-pay"
contract, production payment agreement, well head or plant balancing agreement
or other arrangement to deliver Hydrocarbons at some future time without then or
thereafter receiving full payment therefor, and as of the Effective Time there
are no material "pipeline" or other imbalances with respect to any contract or
agreement which would require settlement by cash from Working Interest Owner
sometime in the future.
(n) Calls on Production. Except as provided in the Contracts listed in
Exhibit A and lessors' rights to take production in kind, no person has any call
upon, option to purchase, right of refusal or similar unexecuted right with
respect to the purchase of Working Interest Owner's portion of Hydrocarbon
production from the Producing Properties.
(o) Wells and Units. To the best of Working Interest Owner's
knowledge, every well comprising a part of the Producing Properties has been
drilled and completed within the applicable lease or within the limits otherwise
permitted by contract, pooling or unit agreement and by law. To the best of
Working Interest Owner's knowledge, no well comprising a part of the Producing
Properties is subject to penalties on allowables because of any overproduction
permitted by applicable laws, rules, regulations or permits, orders or decrees
of any Governmental Authority, which would prevent such well from being entitled
to its full, legal and regular allowable, from and after the Effective Time.
(p) Consents. Except as provided in the instruments described on
Schedule 5.1(p), no consent, authorization or approval of any third party is
required under any material agreement to which Working Interest Owner is a party
or to which its interest in the Subject Assets is bound for the execution and
delivery of this Agreement by Working Interest Owner or the performance of its
obligations hereunder.
(q) Governmental Approvals. Neither the execution and delivery of this
Agreement by Working Interest Owner nor the performance by Working Interest
Owner of its obligations hereunder will require any consent, authorization or
approval of, or waiver or exemption by, or filing with or notice to, any
governmental agency, instrumentality or authority under any provision of law
applicable to Working Interest Owner, except for (i)
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applicable filings under the HSR Act, (ii) those required under the instruments
described in Schedule 5.1(p) and (iii) those that are customarily obtained after
the Closing.
(r) Accuracy of Information Furnished. To the best of Working Interest
Owner's knowledge, all Contracts with respect to the Producing Properties can be
found either of record in Polk County, Texas or in, or referenced in, Operator's
or BSHP's files. To the best of Working Interest Owner's knowledge, all
Contracts located in Operator's or BSHP's files are true, accurate and complete
copies.
Section 5.2 Representations and Warranties of Selling Stockholders.
Each Selling Stockholder represents and warrants with respect to itself and its
Purchased Shares on the date hereof and on the Closing Date as follows:
(a) Legal Power. Selling Stockholder has the legal power and right to
enter into and perform this Agreement and the transactions contemplated hereby
and, to the extent such Selling Stockholder's spouse does not execute this
Agreement, no joinder by or consent of Selling Stockholder's spouse is required
hereunder.
(b) Valid and Binding Agreement. This Agreement constitutes the valid
and binding agreement of Selling Stockholder, enforceable in accordance with its
terms except that (i) such enforcement may be subject to bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, (ii) the
remedy of specific performance and injunctive relief and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceedings therefor may be brought, and (iii)
rights to indemnification hereunder may be limited under applicable securities
laws.
(c) Title to Purchased Shares. Selling Stockholder (i) owns of record
and beneficially, and has good and marketable title to the number of Purchased
Shares set forth opposite his name on Schedule II, free and clear of any and all
liens, security interests, encumbrances, charges, adverse claims, options,
rights, contracts, calls or commitments of any character whatsoever, and (ii)
has the right to vote such shares on any matters as to which any shares of
common stock of Operator are entitled to vote under the laws of the State of
Texas and Operator's articles of incorporation and bylaws, free of any right in
any other person.
(d) No Conflicts. To the best of Selling Stockholder's knowledge, the
execution and delivery of this Agreement by Selling Stockholder does not, and
the performance of its obligations hereunder will not, constitute a violation
of, conflict with, or result in a default under, any agreement or instrument to
which Selling Stockholder is a party or by which Selling Stockholder is bound,
or any judgment, decree or order applicable to Selling Stockholder which would
have a material adverse effect on Selling Stockholder or its Purchased Shares.
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(e) Approvals. To the best of Selling Stockholder's knowledge, except
for filings under the HSR Act, neither the execution and delivery of this
Agreement by Selling Stockholder nor the performance by Selling Stockholder of
its obligations hereunder will require any consent, authorization or approval
of, or waiver or exemption by, or filing with or notice to, any governmental
agency, instrumentality or authority under any provision of law applicable to
Selling Stockholder or other third party.
(f) S Corporation Status. Selling Stockholder is not a nonresident
alien of the United States and Selling Stockholder is either an individual or a
"qualified subchapter S trust" within the meaning of sections 1361(c)(2) and
1361(d) of the Code.
(g) Brokers. No broker or finder has acted for or on behalf of Selling
Stockholder in connection with this Agreement or the transactions contemplated
by this Agreement. No broker or finder is entitled to any brokerage or finder's
fee, or to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Selling Stockholder for which Buyer has
or will have any liabilities or obligations (contingent or otherwise).
(h) Investment. Prior to entering into this Agreement, Selling
Stockholder was advised by and relied on its own legal, tax and other
professional counsel concerning this Agreement, the Subject Assets and the value
thereof. Selling Stockholder acknowledges that Buyer is entering into other
purchase agreements with other owners of interests in certain of the properties
which are covered by this Agreement, and that the terms and conditions of such
agreements may differ from those contained herein and from those contained among
the various other agreements.
Section 5.3 Representations and Warranties of Operator. Operator
represents and warrants on the date hereof and (except as expressly provided
herein) on the Closing Date as follows:
(a) Existence and Good Standing; Power and Authority. Operator is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, with all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Operator does not have any subsidiaries. Operator is duly qualified or licensed
as a foreign corporation and in good standing in each jurisdiction in which the
character or location of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so duly qualified or licensed would not have a
material adverse effect on its business, prospects, financial condition or
results of operations. Operator is qualified or licensed to transact business as
a foreign corporation in Texas and Louisiana.
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(b) Due Authorization; Enforceability. Operator has full corporate
power, capacity and authority to execute this Agreement and all other agreements
and documents contemplated hereby. The execution and delivery of this Agreement
and such other agreements and documents by Operator and the consummation by
Operator of the transactions contemplated hereby have been duly authorized by
Operator and no other corporate action on the part of Operator is necessary to
authorize the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Operator and constitutes the legal, valid and binding
obligation of Operator, enforceable in accordance with its terms, except that
(i) enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) the remedies of specific performance and injunctive relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceedings may be brought, and (iii) rights to indemnification
hereunder may be limited under applicable securities laws.
(c) Capital Stock. Operator's authorized capital stock consists of
1,000,000 shares of common stock, $.10 par value, of which 68,440 shares are
issued and outstanding. All of the Purchased Shares, which constitute all of the
issued and outstanding shares of capital stock of Operator, have been validly
issued and fully paid and are nonassessable and no holder thereof is entitled to
any preemptive rights. There are no outstanding conversion or exchange rights,
subscriptions, options, warrants, or other arrangements or commitments
obligating Operator to issue any shares of capital stock or any other
securities. Other than the articles of incorporation and bylaws, there are no
agreements or instruments among, or otherwise governing the relations of, the
shareholders of Operator.
(d) Financial Statements. Set forth on Schedule 5.3(d) is a true and
complete copy of the compiled balance sheet of Operator at December 31, 1994 and
the related income statement and statement of retained earnings for the period
then ended and the unaudited balance sheet at October 31, 1995 and the related
income statement and statement of retained earnings for the period then ended
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with GAAP, and present fairly the financial condition of
Operator at and as of such dates.
(e) Operator Subject Assets.
(i) No Defaults. Operator has no knowledge of any default with
respect to any Producing Properties, the Contracts or any other material
agreement, which has not been remedied or waived and which would have a material
adverse effect on such Producing Properties, and to the best of Operator's
knowledge, the Producing Properties are being held, developed, operated and
produced substantially in compliance with the terms and conditions of the
Contracts and all other applicable agreements.
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(ii) Royalties. To the best of Operator's knowledge, all
rentals, royalties and other payments due with respect to the Producing
Properties have been properly and timely paid, except those amounts in suspense,
and, all conditions necessary to keep the Producing Properties in effect have
been duly performed.
(iii) Prepayments and Gas Balancing. Operator is receiving on
a current basis the payments required under gas contracts or other contractual
arrangements for the delivery, transportation or sale of natural gas from its
interest in the Producing Properties. There are no "take-or-pay" prepayments for
which an obligation exists to deliver gas after the Effective Time. Operator is
not obligated under any material prepayment arrangement, "take-or-pay" contract,
production payment agreement, well head or plant balancing agreement or other
arrangement to deliver Hydrocarbons at some future time without then or
thereafter receiving full payment therefor, and as of the Effective Time there
are no material "pipeline" or other imbalances with respect to any contract or
agreement which would require settlement by cash from Operator at sometime in
the future.
(iv) Calls on Production. Except as provided in the Contracts
listed in Exhibit A and lessors' rights to take production in kind, no person
has any call upon, option to purchase, right of refusal or similar unexecuted
right with respect to the purchase of Hydrocarbon production from the Producing
Properties.
(v) Wells and Units. To the best of Operator's knowledge,
every well comprising a part of the Producing Properties has been drilled and
completed within the applicable lease or within the limits otherwise permitted
by contract, pooling or unit agreement and by law. To the best of Operator's
knowledge, no well comprising a part of the Producing Properties is subject to
penalties on allowables after the date hereof because of any overproduction
permitted by applicable laws, rules, regulations or permits, orders or decrees
of any governmental body or agency, which would prevent such well from being
entitled to its full, legal and regular allowable, from and after the date
hereof, as prescribed by any court or governmental body or agency.
(vi) Taxes. All ad valorem, property, production, severance,
excise and similar taxes and assessments based on or measured by the ownership
of the Operator Subject Assets or the production of Hydrocarbons or the receipt
of proceeds therefrom on the Operator Subject Assets that have become due and
payable have been properly and timely paid.
(vii) Title. At the Closing, Operator's interest in the
Operator Subject Assets is free and clear of all claims, liens and encumbrances
created by, through or under Operator, except for the Existing Encumbrances.
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(f) Non-Resident Status. Operator is not a nonresident alien of the
United States.
(g) Additional Contracts. Except with respect to the Excluded Assets,
the Contracts listed on Exhibit A and those having a term of 90 days or less (or
terminable on notice of 90 days or less), there are no material contracts,
arrangements and commitments (whether oral or written) to which Operator is a
party or by which any of Operator's assets or business are bound including,
without limitation, contracts, arrangements or commitments which relate to (1)
the sale, lease or other disposition by Operator of all or any substantial part
of the business or assets of Operator (otherwise than in the ordinary course of
business), (2) the purchase or lease by Operator of a substantial amount of
assets (otherwise than in the ordinary course of business), (3) the supply by
Operator of any customer's requirements for any oil, gas or other goods or
services or the purchase by Operator of its requirements for any item or of a
vendor's output of any item, in each case in which the aggregate annual payments
to Operator by such customers or by Operator to such vendor exceed $25,000, (4)
lending or advancing funds by Operator, (5) borrowing of funds or guarantying
the borrowing of funds by any other person, whether under an indenture, note,
loan agreement or otherwise, (6) any transaction or matter with any affiliate of
Operator, (7) noncompetition or employment, or (8) any other matter which is
material to the business, assets or operations of Operator (other than any
Contracts) ("Additional Contracts").
(h) No Violations. The execution and delivery of this Agreement by
Operator and the consummation of the transactions contemplated hereby will not
(a) violate any provision of its articles of incorporation or bylaws or (b)
violate any statute, rule, regulation, judgment, order or decree of any public
body or authority by which Operator or its properties or assets are bound.
(i) Litigation and Related Matters. Except for Black Stone Oil Company
v. C.C. Lilley, Inc., there are no actions, suits, proceedings or investigations
pending against Operator or, to the knowledge of Operator, threatened against
Operator, Operator's business or any property or rights of Operator, at law or
in equity, before or by any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign ("Agencies"). Operator is not subject to any continuing
court or Agency order, writ, injunction or decree applicable specifically to the
business, operations or assets of Operator or employees of Operator, nor in
default with respect to any order, writ, injunction or decree of any court or
Agency with respect to its assets, business, operations or employees. There are
no worker's compensation claims outstanding against Operator as of the date
hereof.
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(j) Taxes.
(i) Operator and the Selling Stockholders have made a valid
election for Operator to be taxed under subchapter S of the Code, effective as
of January 1, 1992. Such election has been and will continue to be in effect for
Operator for all taxable years of Operator ending on or before the Closing Date.
(ii) Operator has filed all income tax returns or tax
information returns required to be filed by it and all returns of other Taxes
required to be filed by it and has paid or provided for all Taxes shown to be
due by Operator on such returns except where the failure to file such returns or
pay such Taxes would not have a material adverse effect on the Operator or its
business. No action or proceeding for the assessment or collection of any Taxes
is pending against Operator, no deficiency, assessment or other formal claim for
any Taxes has been asserted or made against Operator that has not been fully
paid or finally settled, and no issue, including the status of Operator as an S
Corporation, has been formally raised by any taxing authority in connection with
an audit or examination of any return of Taxes. No federal or state income tax
or tax information returns of Operator have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitation for such Taxes for any period. All Taxes which Operator has been
required to collect or withhold have been duly withheld or collected and, to the
extent required, have been paid to the proper taxing authority except where the
failure to file such returns or pay such Taxes would not have a material adverse
effect on the Operator or its business. No federal income Taxes will be assessed
on or after the Closing Date against Operator for any tax period ending on or
prior to the Closing Date.
(k) Patents, Trademarks. Except for geophysical and software licences,
Operator does not own or use in the operation of its business any patents,
patent licenses, software licenses, trade names, trademarks, service marks or
copyrights (collectively, "Intellectual Property").
(l) Compliance with Laws. Except as set forth on Schedule 5.1(l), to
the best of Operator's knowledge, Operator (a) is in compliance with all
applicable laws, regulations (including federal, state and local procurement
regulations), orders, judgments and decrees except where the failure to so
comply would not have a material adverse effect on the business, operations,
financial condition, results of operations of Operator or the Subject Assets,
and (b) possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business in the manner in which and in the
jurisdictions and places where such business is now conducted, except where the
failure to possess the same would not have a material adverse effect on the
business, operations, financial condition, results of operations of Operator or
the Subject Assets.
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(m) Employee Benefit Plans. Operator does not maintain, nor has it ever
maintained any employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Operator
has not incurred any liability or taken any action, nor has any knowledge of any
action or event, that could cause it to incur any liability (i) under Section
412 of the Code or Title IV of ERISA with respect to any "single employer plan"
(within the meaning of Section 4001(a)(15) of ERISA), (ii) on account of a
partial or complete withdrawal (within the meaning of Section 4205 and 4203 of
ERISA, respectively) with respect to any "multiemployer plan" (within the
meaning of Section 3(37) of ERISA), (ii) on account of unpaid contributions to
any such multiemployer plan, or (iv) to provide health benefits or other
non-pension benefits to retired or former employees, except as specifically
required by Section 4980B(f) of the Code. Neither the execution and delivery of
this Agreement by Operator nor the consummation of the transactions contemplated
thereby will (i) entitle any current or former employee of Operator to severance
pay, unemployment compensation or any similar payment, (ii) accelerate the time
of payment or vesting, or increase the amount of, any compensation due to any
such employee or former employee, or (iii) directly or indirectly result in any
payment made or to be made to or on behalf of any person to constitute a
"parachute payment" (within the meaning of Section 280G of the Code).
(n) Insurance. Schedule 5.3(n) contains a list of the policies and
contracts for fire, casualty, liability, well control and other forms of
insurance maintained by Operator. All such policies are in full force and effect
and are adequate for the business in which Operator engages. Operator has not
received any notice of cancellation or non-renewal or of significant premium
increases with respect to any such policy. Except as disclosed on Schedule
5.3(n), no pending claims made by or on behalf of Operator under such policies
have been denied or are being defended against third parties under a reservation
of rights by an insurer of Operator. All premiums due prior to the date hereof
for periods prior to the date hereof with respect to such policies have been
timely paid, and all premiums due before the Closing Date for periods between
the date hereof and the Closing Date will be timely paid.
(o) Consents. To the best of Operator's knowledge and except as set
forth on Schedule 5.1(p) or as required pursuant to the HSR Act, no consent,
approval or other authorization of any governmental authority or under any
Contract, Additional Contract or other material license, franchise, permit of
Operator to which Operator is a party or by which its assets are bound is
required as a result of or in connection with the execution or delivery of this
Agreement by Operator or the consummation by Operator of the transactions
contemplated thereby, other than those that the failure to obtain would not have
a material adverse effect on Operator.
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(p) Employees. As of Closing:
(i) All employees of Operator shall have been transferred to
BSHP or an entity designated by BSHP and Operator shall have no employees.
(ii)There shall be no outstanding loans or advances owed to
Operator by any director, officer or employee.
(iii) Operator shall not be a party to, nor bound by, the
terms of any collective bargaining agreement, and Operator has not experienced
any material labor difficulties. There shall be no labor disputes existing, or
to the best knowledge of Operator, threatened involving, by way of example,
strikes, work stoppages, slowdowns, picketing, or any other interference with
work or production, or any other concerted action by employees. No grievance or
other legal action arising out of any collective bargaining agreement or
relationship exists, or to the best knowledge of Operator, is threatened. No
charges or proceedings before the National Labor Relations Board, or similar
agency, exist, or to the best knowledge of Operator, are threatened.
(iv) Except for arrangements with field personnel which Buyer
has agreed to retain by notice delivered in writing to Operator at least 30 days
prior to the Closing Date, Operator shall not be a party to any employment
contract with any individual or employee, either express or implied. No legal
proceedings, charges, complaints, or similar actions exist under any federal,
state or local laws affecting the employment relationship; and no proceedings,
charges, or complaints are threatened under any such laws or regulations and no
facts or circumstances exist which would give rise to any such proceedings,
charges, complaints, or claims. Operator shall not be subject to any settlement
or consent decree with any present or former employee, employee representative
or any government or Agency relating to claims of discrimination or other claims
in respect to employment practices and policies; no government or Agency has
issued a judgment, order, decree or finding with respect to the labor and
employment practices (including practices relating to discrimination) of
Operator.
(q) Brokers. No broker or finder has acted for or on behalf of Operator
in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of Operator for which Buyer has or will have
any liabilities or obligations (contingent or otherwise).
(r) Accuracy of Information Furnished. To the best of Operator's
knowledge, all Contracts with respect to the Producing Properties can be found
either of record in Polk County, Texas or in, or referenced in, Operator's
files. To the best of Operator's knowledge, all Contracts located in Operator's
files are true, accurate and complete copies.
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ARTICLE VI
Representations and Warranties of Buyer and Guarantor
Section 6.1 Representations and Warranties of Buyer. Buyer represents
and warrants to Sellers as follows:
(a) Existence. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada. Buyer has full legal
power, right and authority to carry on its business as such is now being
conducted and as contemplated to be conducted. Buyer's headquarters and
principal offices are all located in the State of Texas.
(b) Legal Power. Buyer has the legal power and right to enter into and
perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with:
(i) any provision of Buyer's articles of incorporation or
by-laws;
(ii) any material agreement or instrument to which Buyer is a
party or by which Buyer is bound; or
(iii) any judgment, order, ruling or decree applicable to Buyer
as a party in interest or any law, rule or regulation applicable to Buyer.
(c) Execution. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on the part of Buyer. This
Agreement constitutes the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, except that (i) enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally, (ii) the
remedies of specific performance and injunctive relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceedings may be brought, and (iii) rights to indemnification hereunder may be
limited under applicable securities laws.
(d) Brokers. No broker or finder has acted for or on behalf of Buyer or
any affiliate of Buyer in connection with this Agreement or the transactions
contemplated by this Agreement. No broker or finder is entitled to any brokerage
or finder's fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any affiliate of
Buyer for which Sellers have or will have any liabilities or obligations
(contingent or otherwise).
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(e) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending, or to the knowledge of Buyer, threatened against Buyer.
(f) Suits. There is no suit, action, claim, investigation or inquiry
by any person or entity or by any administrative agency or governmental body and
no legal, administrative or arbitration proceeding pending or, to Buyer's
knowledge, threatened against Buyer or any affiliate of Buyer which has or will
materially affect Buyer's ability to consummate the transactions contemplated
herein.
(g) Qualifications. Buyer is now, and at Closing shall continue to be,
qualified with all applicable governmental entities to own the Purchased Subject
Assets.
(h) Investment. Prior to entering into this Agreement, Buyer was
advised by and has relied solely on its own legal, tax and other professional
counsel concerning this Agreement, the Purchased Subject Assets, Purchased
Shares and the value thereof. Buyer is acquiring the Purchased Subject Assets
and Purchased Shares for its own account and not for distribution or resale in
any manner that would violate any state or federal securities law, rule,
regulation or order.
(i) Funds. Buyer has arranged to have available by the Closing
Date sufficient funds to enable Buyer to pay in full the Adjusted Purchase Price
as herein provided and otherwise to perform its obligations under this
Agreement.
Section 6.2 Representations and Warranties of Guarantor. Guarantor
represents and warrants to Sellers as follows:
(a) Existence. Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. Guarantor
has full legal power, right and authority to carry on its business as such is
now being conducted and as contemplated to be conducted. Guarantor's
headquarters and principal offices are all located in the State of Texas.
(b) Legal Power. Guarantor has the legal power and right to enter into
and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with:
(i) any provision of Guarantor's articles of incorporation or
by-laws;
(ii) any material agreement or instrument to which Guarantor is a
party or by which Guarantor is bound; or
(iii)any judgment, order, ruling or decree applicable to
Guarantor as a party in interest or any law, rule or regulation applicable to
Guarantor.
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(c) Execution. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on the part of Guarantor. This
Agreement constitutes the legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms, except that (i) enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally, (ii) the
remedies of specific performance and injunctive relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceedings may be brought, and (iii) rights to indemnification hereunder may be
limited under applicable securities laws.
(d) Brokers. No broker or finder has acted for or on behalf of
Guarantor or any affiliate of Guarantor in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Guarantor or
any affiliate of Guarantor for which Sellers have or will have any liabilities
or obligations (contingent or otherwise).
(e) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending, or to the knowledge of Guarantor, threatened against
Guarantor.
(f) Suits. There is no suit, action, claim, investigation or inquiry by
any person or entity or by any administrative agency or governmental body and no
legal, administrative or arbitration proceeding pending or, to Guarantor's
knowledge, threatened against Guarantor or any affiliate of Guarantor which has
or will materially affect Guarantor's ability to consummate the transactions
contemplated herein.
(g) Investment. Prior to entering into this Agreement, Guarantor was
advised by and has relied solely on its own legal, tax and other professional
counsel concerning this Agreement, the Purchased Subject Assets, Purchased
Shares and the value thereof. Guarantor is acquiring the Purchased Subject
Assets and Purchased Shares for its own account and not for distribution or
resale in any manner that would violate any state or federal securities law,
rule, regulation or order.
ARTICLE VII
Operation of the Subject Assets and Other Covenants
Section 7.1 Operation of the Subject Assets Prior to Closing.
(a) From and after the date of execution of this Agreement, and subject
to the provisions of applicable operating and other agreements, Operator shall
operate and administer the Subject Assets in a good and workmanlike manner
consistent with its past
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practices, and Operator and Working Interest Owners shall carry on their
businesses with respect to the Producing Properties in substantially the same
manner as before execution of this Agreement. Operator and Working Interest
Owners shall use their reasonable efforts to preserve in full force and effect
all oil and gas leases, operating agreements, easements, rights-of-way, permits,
licenses and agreements that relate to the Producing Properties. Without the
prior written consent of Buyer (which shall not be unreasonably withheld),
Operator and Working Interest Owner shall not modify, terminate or settle any
dispute arising out of any of the agreements relating to the Producing
Properties and will not encumber, sell, transfer, assign, convey, farmout or
otherwise dispose of any of the Producing Properties other than personal
property which is replaced by equivalent property or consumed in the operation
of the Producing Properties.
(b) Except for (i) emergency action taken in the face of risk to life,
property or the environment, (ii) capital costs in connection with drilling,
completing or equipping operations with respect to the Champion International C
No. 1, Champion International C No. 2, Carter E No. 11, Alabama Coushatta No. 5,
Alabama Coushatta No. 6 or Alabama Coushatta No. 7 wells and (iii) the Camden
Tram Leases, the North Double A Leases and the Center Grove Leases (for which
Operator shall notify Buyer of any proposed expenditures), Operator and Working
Interest Owner shall submit to Buyer for prior written approval, all requests
for operating or capital expenditures and all proposed contracts and agreements
relating to the Producing Properties that involve individual commitments of more
than $50,000. If Buyer does not respond to any such request in writing within
forty-eight (48) hours of the time the request is submitted, such matter will be
deemed approved. Buyer acknowledges that Operator and Working Interest Owners
own undivided interests in the Subject Assets, and Buyer agrees that the acts or
omissions of the other working interests owners shall not constitute a violation
of the provisions of this Article VII, nor shall any action required by a vote
of working interest owners constitute such a violation so long as Operator and
Working Interest Owners have voted their interests in a manner that complies
with the provisions of this Article VII. The obligations of Working Interest
Owners and Operator under this Article VII with respect to any portion of the
Subject Assets not operated by either the Working Interest Owners or Operator
shall be construed to require that Working Interest Owners and Operator use
reasonable efforts (without being obligated to incur any expense or institute
any cause of action) to cause the operator of the Subject Assets to take such
actions or render such performance within the constraints of the applicable
operating agreements and other applicable agreements.
Section 7.2 Operation of Certain Areas After the Closing. Operator is
the operator of the Subject Assets under the terms of existing operating
agreements which have been furnished to Buyer. The parties hereby agree that
BSHP or its designee may, at any time before or after the Closing elect to
become the operator under the operating agreements covering the lands covered by
the Camden Tram Leases, Center Grove Leases, or North Double A Portion/Camden
Tram Leases, or any of them, and at the request of
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BSHP, Buyer shall (i) cause Operator to resign as operator of any such lands and
(ii) vote its interests, including the interests of Operator, to support BSHP or
its designee as operator of such areas; provided, however, that any such
resignation shall not result in the Operator's right to continue to operate any
of the Producing Properties. If Operator does not resign at BSHP's request,
Buyer shall cause Operator to fully cooperate with BSHP to implement a mutually
acceptable plan to permit BSHP or its designee to become Operator of such Leases
and will cause Operator to conduct such operations in such areas as BSHP may
direct. Each Working Interest Seller agrees to vote its interest under the
operating agreement for such Leases to support BSHP or its designee as operator
of any such Leases that BSHP elects to operate.
Section 7.3 Operator's Geophysical Data. Operator owns interests in all
geophysical data now held by Operator and/or BSHP. Operator shall have access to
and the right to use all tapes and records thereof for all purposes, subject
only to BSHP's continuing right, as custodian, to hold, access and protect such
data and the terms of any licenses or other agreements applicable thereto. BSHP
shall calculate the Operator's actual level of ownership of such data and inform
Buyer thereof on or before Closing.
Section 7.4 Course of Conduct by Operator. From the date hereof through
and until the Closing Date, Operator shall comply with the following covenants:
(a) Articles of Incorporation; Bylaws. Operator shall not make any
change to its articles of incorporation or bylaws.
(b) Stock Issuance; Redemptions; Reorganizations. Operator shall not
(i) issue, grant, or dispose of, or make any agreement, arrangement, or
commitment obligating Operator to issue, grant, or dispose of any capital shares
or other securities of Operator, (ii) redeem or acquire, or make any agreement,
arrangement, or commitment obligating Operator to redeem or acquire, any shares
of capital stock or other securities of Operator, or (iii) authorize or effect
or make any agreement, arrangement or commitment obligating Operator to effect,
any reorganization, recapitalization, or split-up of such capital stock of
Operator; provided, that Operator may create one or more subsidiaries to hold
the Excluded Assets and other properties and interests described in Section
10.3, and distribute the stock of such subsidiaries to the Selling Stockholders
prior to Closing. Operator shall advise Buyer of any plans to create and
distribute the stock of any subsidiaries pursuant hereto.
(c) Employee Matters. Operator shall not make, amend, or enter into any
employment contract or any bonus, incentive, stock option, profit sharing,
pension, retirement, stock purchase, hospitalization, medical reimbursement,
insurance, severance benefit, or other similar plan or arrangement or make any
voluntary contribution to any such plan or arrangement.
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(d) Insurance Coverage. Operator shall maintain, or have maintained on
its behalf, insurance coverage for the benefit of Operator and the Subject
Assets on the same basis as, or on a substantially equivalent basis to, the
current insurance coverage described in Schedule 5.3(n). Effective as of the
Closing Date Operator shall transfer the insurance policies maintained pursuant
to Schedule 5.3(n) with the assets distributed pursuant to Section 10.3.
Operator shall be allowed to maintain copies of said policies.
(e) Business Organization. Operator shall use reasonable efforts to
preserve intact its business organization and to keep available until the
Closing the services of its present officers and employees.
(f) Incurrence of Debt. Except as otherwise provided herein, Operator
shall not voluntarily incur or assume, whether directly or by way of guaranty or
otherwise, any material obligation or liability, except obligations and
liabilities incurred in the ordinary course of business, consistent with past
practice.
(g) Liens. Operator will not mortgage, pledge, encumber, create or
allow any Liens not existing on the date hereof upon any properties or assets,
tangible or intangible, except Liens created in the ordinary course of business,
consistent with past practice or, Liens constituting Existing Encumbrances.
(h) Accounting Practices. Operator will not make any material changes
in its accounting methods, principles or practices, except as required by GAAP.
(i) Changes in Business Practice. Operator will not take any action,
the purpose or effect of which is to shift income from post-closing periods to
the pre-closing period or to defer expenses from the pre-closing period to
post-closing periods which action is not in the ordinary course of business,
consistent with past practice.
Section 7.5 Approvals and Consents. Each Working Interest Owner and
Operator shall use their respective reasonable efforts (i) to cause all
conditions to the obligations of Buyer under this Agreement over which each is
able to exercise influence or control to be satisfied prior to the Closing Date
and (ii) to obtain promptly and to comply with all requisite statutory,
regulatory or court approvals, third party releases and consents, and other
requirements necessary for the valid and legal consummation of the transactions
contemplated hereby.
Section 7.6 Investigations. Subject to Buyer's obligations under the
Confidentiality Agreement, each Working Interest Owner and Operator shall
provide Buyer and its representatives and agents (including, without limitation,
any financing sources) such access to the books and records of Operator,
including without limitation the articles of incorporation, bylaws, corporate
minute books and stock records, and those relating to the
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Subject Assets and furnish to Buyer and such representatives and agents such
financial and operating data and other information with respect to the
businesses and property of Operator and the Subject Assets as they may
reasonably request from time to time and as may be in the Working Interest
Owner's or Operator's possession, and permit Buyer and its representatives and
agents to make such inspections of the Subject Assets as they may reasonably
request.
Section 7.7 Final S Corporation Federal Income Tax Return. Buyer and
the Selling Stockholders agree that Operator's books will be closed as of the
end of the Closing Date and that the Selling Stockholders will assign Operator's
items of income, loss, deduction and credit for the 1996 taxable year between
the Operator's short taxable year ending on the Closing Date (the "S Year") and
Operator's short taxable year beginning on the day after Closing Date and ending
on December 31, 1996 (the "C Year") on the basis of Operator's normal method of
accounting. Buyer shall fully cooperate with the Selling Stockholders and will
make available to them at reasonable times and places Operator's business and
tax records and any appropriate employees to enable the Selling Stockholders to
make the assignment of income, loss, deduction and credit between Operator's S
Year and C Year and to prepare Operator's federal income tax return for the S
Year within ninety (90) days after the Closing Date.
Section 7.8 Compiled Financials. On or before April 1, 1996, Operator
shall have delivered to Buyer compiled financial statements of Operator for the
fiscal year ended December 31, 1995.
Section 7.9 Distributions. Except for the transactions described in
Sections 7.4(b) and 10.3, Operator shall not make any dividend or distribution
to the Selling Stockholders prior to the Closing.
ARTICLE VIII
Conditions to Obligations of Sellers
The obligations of each Seller to consummate the transactions provided
for herein are subject, at the option of Sellers, to the fulfillment on or prior
to the Closing Date of each of the following conditions:
Section 8.1 Representations. The representations and warranties of
Buyer herein contained shall have been true and correct when made and shall be
true and correct in all material respects on the Closing Date as though made on
and as of such date.
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Section 8.2 Performance. Buyer shall have performed in all material
respects all obligations, covenants and agreements contained in this Agreement
to be performed or complied with by it at or prior to the Closing.
Section 8.3 Pending Matters. No suit, action or other proceeding shall
be pending or threatened that seeks to restrain, enjoin or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
Section 8.4 Hart-Scott-Rodino. Any applicable waiting period under the
HSR Act relating to the transactions contemplated hereby shall have expired or
been terminated.
Section 8.5 Adjusted Purchase Price. Buyer shall have delivered to
Sellers the Adjusted Purchase Price as estimated pursuant to the terms hereof.
Section 8.6 Execution and Delivery of Closing Documents. Buyer shall
have executed, acknowledged and delivered, as appropriate, to Sellers all
closing documents described in Section 10.10.
Section 8.7 Certificates. Buyer shall have delivered to Sellers (i)
certificates of the appropriate governmental authorities, dated as of a date not
more than ten (10) days prior to the Closing Date, attesting to the existence
and good standing of Buyer in the States of Nevada and Texas; (ii) a copy,
certified by the Secretary of State of Nevada as of a date not more than ten
(10) days prior to the Closing Date, of the articles of incorporation and all
amendments thereto of Buyer; (iii) a copy certified by the Secretary of Buyer,
dated the Closing Date, of the bylaws of Buyer; and (iv) a certificate, dated
the Closing Date, of the Secretary of Buyer relating to the incumbency and
corporate proceedings in connection with the consummation of the transactions
contemplated hereby.
Section 8.8 Opinion. Locke Purnell Rain Harrell shall have delivered
to Sellers an opinion in the form of Exhibit I.
ARTICLE IX
Conditions to Obligations of Buyer
The obligations of Buyer to consummate the transactions provided for
herein are subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of each of the following conditions:
Section 9.1 Representations. The representations and warranties of each
Seller and Operator herein contained and in any Schedule hereto shall be true
and correct in all material respects on the Closing Date as though made on and
as of such date.
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Section 9.2 Performance. Operator and each Seller shall have performed
in all material respects all obligations, covenants and agreements contained in
this Agreement to be performed or complied with by it at or prior to the
Closing.
Section 9.3 Pending Matters. No suit, action or other proceeding shall
be pending or threatened that seeks to restrain, enjoin, or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
Section 9.4 Hart-Scott-Rodino. Any applicable waiting period under the
HSR Act relating to the transactions as contemplated hereby shall have expired
or been terminated.
Section 9.5 Execution and Delivery of Closing Documents. Each Seller
shall have executed, acknowledged and delivered, as appropriate, to Buyer all
closing documents described in Section 10.9.
Section 9.6 Certificates. Operator shall have delivered to Buyer (i)
certificates of the appropriate governmental authorities, dated as of a date not
more than ten (10) days prior to the Closing Date, attesting to the existence
and good standing of Operator in the States of Texas and Louisiana; (ii) a copy,
certified by the Secretary of State of Texas as of a date not more than ten (10)
days prior to the Closing Date, of the articles of incorporation and all
amendments thereto of Operator; (iii) a copy certified by the Secretary of
Operator, dated the Closing Date, of the bylaws of Operator; and (iv) a
certificate, dated the Closing Date, of the Secretary of Operator relating to
the incumbency and corporate proceedings in connection with the consummation of
the transactions contemplated hereby.
Section 9.7 Consents and Approvals. All material authorizations,
consents, approvals, waivers and releases, if any, necessary for Operator to
consummate the transactions contemplated hereby shall have been obtained and
copies thereof shall be delivered to Buyer.
Section 9.8 All Sellers to Close. Each Selling Stockholder shall have
tendered its certificate(s) representing its Purchased Shares and each Working
Interest Owner shall have delivered an Assignment assigning its interest in the
Purchased Subject Assets.
Section 9.9 Nonforeign Affidavit. Each Selling Stockholder and Working
Interest Owner shall have furnished Buyer an affidavit stating under penalties
of perjury the United States taxpayer identification number of such Selling
Stockholder or Working Interest Owner and that such Selling Stockholder or
Working Interest Owner, as applicable, is not a foreign person, pursuant to
Section 1445(b)(2) of the Code.
Section 9.10 Operator. Operator shall be the Operator of the Producing
Properties and not of any other oil and gas properties.
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Section 9.11 Opinion. Vinson & Elkins L.L.P. shall have delivered to
Buyer an opinion in the form of Exhibit J.
ARTICLE X
Closing
Section 10.1 Time and Place of Closing. If the conditions referred to
in Articles VIII and IX of this Agreement have been satisfied or waived in
writing, the Closing shall take place at the offices of Operator at 1001 Fannin,
Suite 4750, Houston, Texas 77002, at 10:00 a.m. on the Closing Date.
Section 10.2 Extension. The Closing Date may be extended by mutual
written agreement of the parties.
Section 10.3 Actions to be Taken Prior to Closing. Prior to the
Closing, Operator shall dividend to its shareholders or, spin off to its
shareholders in a reorganization or otherwise dispose of for nominal
consideration the following: (a) Operator's interest in the Excluded Assets; (b)
an undivided 70% of Operator's interest as of the Effective Time in the Camden
Tram Leases, the Center Grove Leases, and the North Double A Portion/Camden Tram
Leases; (c) all Working Capital of Operator, in excess of the Closing Working
Capital; and (d) all other assets of the Operator, except for its interest in
the Subject Assets.
Section 10.4 Adjustments to Purchase Price at Closing.
(a) At Closing, the Purchase Price of the Purchased Subject Assets
shall be increased by the following amounts:
(i) the amount as of the Effective Time of all prepaid ad
valorem, property or similar taxes and assessments based upon or measured by
ownership of the Purchased Subject Assets, insofar as such prepaid taxes relate
to periods of time after the Effective Time;
(ii) all costs and expenses (including rentals, royalties,
production and severance taxes, capital expenditures (other than the Excluded
Capital Costs), lease operating expenses authorized under joint operating
agreements applicable to the Purchased Subject Assets) paid by Working Interest
Owners or Operator that are attributable to the Purchased Subject Assets and
attributable to the period of time from and after the Effective Time;
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(iii) any amount required pursuant to Section 4.6 as the value of
any Title Benefit; and
(iv) any other amount provided for in this Agreement or agreed
upon by Buyer and Working Interest Owners.
(b) At Closing, the Purchase Price of the Purchased Subject Assets
shall be decreased by the following amounts:
(i) an amount equal to all unpaid ad valorem, property,
production, severance and similar taxes and assessments based upon or measured
by the ownership of the Purchased Subject Assets that are attributable to
periods of time prior to the Effective Time, which amounts shall, to the extent
not actually assessed, be computed based on such taxes and assessments for the
preceding tax year (such amount to be prorated for the period of Working
Interest Owners' and Buyer's ownership before and after the Effective Time);
(ii) an amount equal to all revenues collected by Working
Interest Owners with respect to the Purchased Subject Assets and attributable to
the period of time after the Effective Time;
(iii) any amount required pursuant to Section 4.4 in connection
with Title Defects;
(iv) any amount required pursuant to Section 4.9 in connection
with Disqualifying Environmental Conditions;
(v) any amount required pursuant to Section 13.3 in connection
with casualty losses;
(vi) any other amount provided for in this Agreement or agreed
upon by Buyer and Working Interest Owners.
(c) If an aggregate net gas imbalance relative to Working Interest
Owners' interests in the Producing Properties exists as of the Effective Time,
the Purchase Price shall be increased, if such interests in the Producing
Properties are underproduced, or decreased, if such interests in the Producing
Properties are overproduced, by the product of (i) the amount (measured in
British thermal units ("BTU") of such aggregate net gas imbalance, and (ii)
$1.75 per million BTU.
(d) The Purchase Price of the Purchased Shares shall be increased by
the value of any Title Benefit determined in accordance with Section 4.6
attributable to the Operator
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Subject Assets. The Purchase Price of the Purchased Shares shall be decreased by
the sum of the following: (i) the value of any Title Defect adjustment
determined in accordance with Section 4.4 attributable to the Operator Subject
Assets, (ii) any amount determined pursuant to Section 4.9(a)(iv) attributable
to the Operator Subject Assets, (iii) any amount determined pursuant to Section
13.3 attributable to the Operator Subject Assets, and (iv) any amount by which
the Working Capital of Operator as of the Closing Date is less than the Closing
Working Capital.
(e) The adjustments described in Section 10.4(a), (b), (c) and (d) are
hereinafter referred to as the "Purchase Price Adjustments".
Section 10.5 Statement. Not later than three business days prior to
the Closing Date, Seller shall prepare and deliver to Buyer a statement of the
estimated Purchase Price Adjustments (the "Statement"). At Closing, Buyer shall
pay the Purchase Price, as adjusted by the estimated amounts reflected on the
Statement.
Section 10.6 Post-Closing Adjustments to Purchase Price.
(a) On or before 90 days after the Closing Date, BSHP shall prepare a
revised Statement setting forth the actual Purchase Price Adjustments. The
parties shall provide each other such data and information as any party may
reasonably request supporting the amounts reflected on the revised Statement in
order to permit such party to perform or cause to be performed an audit. The
revised Statement shall become final and binding upon the parties on the 60th
day following receipt thereof by Buyer (the "Final Settlement Date") unless
Buyer gives written notice of its disagreement (a "Notice of Disagreement") to
Seller prior to such date. Any Notice of Disagreement shall specify in detail
the dollar amount, nature and basis of any disagreement so asserted. If a Notice
of Disagreement is received by Seller in a timely manner, then the Statement (as
revised in accordance with clause (i) or (ii) below) shall become final and
binding on the Parties and the Final Settlement Date shall be the earlier of (i)
the date Seller and Buyer agree in writing with respect to all matters specified
in the Notice of Disagreement or (ii) the date on which the Final Statement (as
hereinafter defined) is issued by the Arbitrator (as hereinafter defined).
(b) During the 30 days following the date of receipt by Seller of the
Notice of Disagreement, Seller and Buyer shall attempt to resolve in writing any
differences that they may have with respect to all matters specified in the
Notice of Disagreement. If, at the end of such 30 day period, Buyer and Seller
have not reached agreement on such matters, the matters that remain in dispute
shall be submitted to an arbitrator (the "Arbitrator") for review and
resolution. The Arbitrator shall be Arthur Andersen & Co., or if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Buyer and Seller in writing. The
Arbitrator shall render a decision resolving the matters in dispute within 60
days following their submission to the
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Arbitrator. The cost of any arbitration (including the fees and expenses of the
Arbitrator) pursuant to this Section 10.6 shall be borne equally by Buyer and
Seller. The fees and disbursements of Seller's independent auditors incurred in
connection with the procedures performed with respect to the Statement, as
requested by Seller shall be borne by Seller, and the fees and disbursements of
Buyer's independent auditors incurred in connection with their preparation of
the Notice of Disagreement shall be borne by Buyer. As used in this Agreement
the term "Final Statement" shall mean the revised Statement described in Section
10.6(a), as prepared by Seller and as may be subsequently adjusted to reflect
any subsequent written agreement between the parties with respect thereto, or if
submitted to the Arbitrator, the revised Statement issued by the Arbitrator.
(c) If the amount of the Adjusted Purchase Price as set forth on the
Final Statement exceeds the amount of the estimated Adjusted Purchase Price paid
at Closing, then Buyer shall pay to Seller the amount by which the Adjusted
Purchase Price as set forth on the Final Statement exceeds the amount of the
estimated Adjusted Purchase Price paid at Closing within five business days
after the Final Settlement Date. If the amount of the Adjusted Purchase Price as
set forth on the Final Statement is less than the amount of the estimated
Adjusted Purchase Price paid at Closing, then Seller shall pay to Buyer the
amount by which the Adjusted Purchase Price as set forth on the Final Statement
is less than the amount of the estimated Adjusted Purchase Price paid at Closing
within five business days after the Final Settlement Date.
Section 10.7 Transfer Taxes. All sales, use or other taxes (other than
taxes on gross income, net income or gross receipts) and duties, levies or other
governmental charges incurred by or imposed with respect to the property
transfers undertaken pursuant to this Agreement shall be the responsibility of,
and shall be paid by, Buyer.
Section 10.8 Ad Valorem and Similar Taxes. Ad valorem, property and
similar taxes and assessments based upon or measured by the value of the Subject
Assets shall be divided or prorated between Seller and Buyer as of the Effective
Time. Seller shall assume responsibility for such taxes attributable to the
period of time prior to the Effective Time and Buyer shall assume responsibility
for the periods of time from the Effective Time and thereafter.
Section 10.9 Actions of Sellers at Closing. At the Closing, Seller
shall:
(a) Execute, acknowledge and deliver to Buyer the Assignment and/or
such other conveyances, assignments, transfers, bills of sale, stock powers,
stock certificates and other instruments (in form and substance mutually agreed
upon by Buyer and Seller) as may be necessary or desirable for Seller to
transfer its interest in the Purchased Subject Assets and Purchased Shares to
Buyer; and
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(b) Execute, acknowledge and deliver any other agreements provided for
herein or necessary or desirable to effectuate the transactions contemplated
hereby.
Section 10.10 Actions of Buyer at Closing. At the Closing, Buyer
shall:
(a) Deliver to Seller the Adjusted Purchase Price, as estimated
pursuant to the provisions hereof by wire transfer as set forth in Section 2.2;
and
(b) Execute, acknowledge and deliver any other agreements provided for
herein or necessary or desirable to effectuate the transactions contemplated
hereby.
Section 10.11 Further Cooperation.
(a) At Closing, the Records shall be delivered to Buyer at the offices
of Operator. Seller shall have the right to copy, at Seller's expense, each of
the Records, but Buyer shall retain the originals thereof. For a period of six
(6) years after Closing, Buyer will retain or cause Operator to retain the
Records delivered to it pursuant hereto and will make such Records available to
BSHP upon reasonable notice at Buyer's headquarters at reasonable times and
during office hours. Notwithstanding the foregoing, (i) BSHP shall retain the
original Records relating to the Camden Tram Interest and the Center Grove
Interest and (ii) Seller shall retain all Records of Operator that pertain to
the Excluded Assets for a period of 6 years after Closing and Buyer shall have
access thereto and the right to make copies thereof.
(b) After the Closing Date, each party at the request of the other and
without additional consideration, shall execute and deliver, or shall cause to
be executed and delivered from time to time such further instruments of
conveyance and transfer and shall take such other action as the other party may
reasonably request to convey and deliver the Purchased Subject Assets and
Purchased Shares to Buyer. After the Closing, the Parties will cooperate to have
all proceeds received attributable to the Subject Assets to be paid to the
proper party hereunder and to have all expenditures to be made with respect to
the Subject Assets to be made by the proper party hereunder.
Section 10.12 Confidentiality Agreement. If the Closing occurs, the
confidentiality agreement dated November 16, 1995 between Black Stone Oil
Company and Black Stone Holdings Partnership and Guarantor (the "Confidentiality
Agreement") shall terminate and be of no further force or effect.
Section 10.13 Letter of Intent. This Agreement shall supersede in its
entirety, and there is hereby terminated, that certain letter agreement dated
January 9, 1996 between Buyer and BSHP.
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ARTICLE XI
Termination
Section 11.1 Right of Termination.
This Agreement may be terminated at any time at or prior to the
Closing:
(a) by mutual written consent of the Parties;
(b) by Seller on the Closing Date if the conditions set forth in
Article VIII have not been satisfied in all respects by Buyer or waived by
Seller in writing by the Closing Date;
(c) by Buyer on the Closing Date if the conditions set forth in
Article IX have not been satisfied in all respects by Seller or waived by Buyer
in writing by the Closing Date;
(d) by any party if the Closing shall not have occurred on or before
May 8, 1996; provided, however, that no party hereto can so terminate this
Agreement if such party is at such time in material breach of any provision of
this Agreement;
(e) by any party if any Governmental Authority shall have issued an
order, judgment or decree or taken any other action challenging, delaying,
restraining, enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein;
(f) by Seller if (i) the Total Defect Adjustment exceeds 14% of the
Purchase Price; or (ii) the aggregate amount of Title Defects asserted by Buyer
pursuant to Section 4.3 exceeds 5.6% of the Purchase Price, (iii) the Aggregate
Environmental Defect Value and the aggregate Allocated Value of Excluded Assets
pursuant to Section 4.9(a)(i) exceeds 5.6% of the Purchase Price; or (iv) the
total adjustments to the Purchase Price under Section 13.3 (Casualty Losses)
exceeds 10% of the Purchase Price;
(g) by Buyer if (i) the Total Defect Adjustment exceeds 14% of the
Purchase Price, (ii) the aggregate amount of all adjustments to the Purchase
Price for Title Defects exceeds 5.6% of the Purchase Price; (iii) the Aggregate
Environmental Defect Value of Disqualifying Environmental Conditions not cured
prior to Closing and the aggregate Allocated Value of Excluded Assets pursuant
to Section 4.9(a)(ii) exceeds 5.6% of the Purchase Price; (iv) the total
adjustments to the Purchase Price under Section 13.3 (Casualty Losses) exceeds
10% of the Purchase Price;
(h) by Seller if Buyer submits a Title Defect Notice directly related
to the Escobeda Title Matter; or
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(i) as otherwise provided in the Agreement.
Section 11.2 Effect of Termination. In the event that Closing does not
occur as a result of any party exercising its right to terminate pursuant to
Section 11.1, then this Agreement shall be null and void and no party shall have
any rights or obligations under this Agreement, except that nothing herein shall
relieve any party from any liability for any breach hereof.
Section 11.3 Attorney's Fees, Etc. If any party to this Agreement
resorts to legal proceedings to enforce this Agreement, the prevailing party in
such proceedings shall be entitled to recover all costs incurred by such party
including reasonable attorney's fees, in addition to any other relief to which
such party may be entitled; provided, however, and notwithstanding anything to
the contrary in this Agreement, in no event shall any party be entitled to
receive any punitive, indirect or consequential damages.
ARTICLE XII
Assumption and Indemnification
Section 12.1 Assumption. By the consummation of the transactions
contemplated hereby and subject to each Working Interest Owner's indemnification
obligation set forth in Section 12.2, Buyer shall assume all duties and
obligations of every kind whatsoever of each Working Interest Owner relative to
its ownership or operation of the Producing Properties to be performed after the
Effective Time, including, without limitation, (a) all gas imbalances to the
extent that appropriate adjustments have been made pursuant to Section 10.4(c)
above, (b) all obligations relative to all suspense accounts of Working Interest
Owner relative to the Producing Properties, to the extent that such suspense
accounts are held by Operator, (c) all obligations relative to all ad valorem,
property or similar taxes or assessments based upon or measured by ownership of
the Producing Properties due and payable after the Effective Time; (d) all
obligations to plug and abandon all wells and facilities located on or used in
connection with the Producing Properties in accordance with the requirements of
all applicable Governmental Authorities and the terms of all applicable leases
and agreements; and (e) all obligations under all Environmental Laws applicable
to the Producing Properties; provided, however, that Buyer shall not assume any
duties or obligations and shall have no liability (contingent or otherwise)
whatsoever with respect to the Excluded Assets.
Section 12.2 Indemnification.
(a) Buyer shall indemnify, defend and hold harmless each Working
Interest Owner and its respective officers, directors, partners, spouse,
employees, agents, representatives and successors (collectively, the "Working
Interest Owner Indemnitees") from and against any
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and all claims, liabilities, losses, causes of actions, costs and expenses
(including, without limitation, involving theories of negligence or strict
liability and including court costs and reasonable attorneys' fees) ("Losses")
asserted against, imposed upon or incurred by any Working Interest Owner
Indemnitee which result from, or arise out of (i) the material breach of any of
the representations, warranties, covenants or agreements of Buyer contained in
this Agreement, the Assignment or any other instrument executed in connection
herewith, (ii) events, conditions or matters (other than Environmental Matters
(as defined below)) occurring from and after the Closing Date in connection with
the ownership or operation of Working Interest Owner's interest in the Producing
Properties; (iii) events, conditions or matters (other than Environmental
Matters) occurring prior to the Closing Date in connection with the ownership or
operation of Working Interest Owner's interest in the Producing Properties, to
the extent a claim is asserted on or after the third anniversary of the Closing
Date; (iv) any event, condition or matter relating to Environmental Laws or the
release of materials into the environment or protection of the environment or
health ("Environmental Matters") occurring in connection with Working Interest
Owner's interest in the Producing Properties and arising for the first time
after the Closing Date, (v) any Environmental Matters occurring prior to the
Closing Date, with respect to Working Interest Owner's interest in the Producing
Properties, to the extent the claim is asserted on or after January 1, 1997, or
(vi) any matter which Buyer is responsible for correcting under Section 4.9(c),
regardless in each case whether known or unknown, and WITHOUT REGARD TO THE
SOLE, PARTIAL OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY WORKING
INTEREST OWNER INDEMNITEE, but in no event shall Buyer indemnify any Working
Interest Owner Indemnitee for Losses resulting from such Working Interest Owner
Indemnitee's own gross negligence or willful misconduct. Buyer shall indemnify,
defend and hold harmless each Selling Stockholder and its respective officers,
directors, spouse, employees, agents, representatives and successors
(collectively, the "Selling Stockholder Indemnitees") from and against any and
all Losses asserted against, imposed upon or incurred by any Selling Stockholder
Indemnitee which result from, or arising out of, material breach of any of the
representations, warranties, covenants or agreements of Buyer contained in this
Agreement or any other instrument executed by Buyer in connection herewith;
regardless in each case whether known or unknown, and WITHOUT REGARD TO THE
SOLE, PARTIAL OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY SELLING
STOCKHOLDER INDEMNITEE; but in no event shall Buyer indemnify any Selling
Stockholder Indemnitee for Losses resulting from such Selling Stockholder
Indemnitee's own gross negligence or willful misconduct.
(b) Subject to Section 12.2(e) and (f), each Working Interest Owner
severally and not jointly shall indemnify, defend and hold harmless Buyer and
its officers, directors, employees, agents, representatives and successors
(collectively, the "Buyer Indemnitees") from and against any and all Losses
asserted against, imposed upon or incurred by any Buyer Indemnitee which result
from or arise out of (i) the material breach of any of the representations,
warranties, covenants or agreements of such Working Interest Owner
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contained in this Agreement, the Assignment or any other instrument executed by
such Working Interest Owner in connection herewith; (ii) events, conditions or
matters (other than Environmental Matters and title matters, title matters being
solely covered by the indemnity in Section 12.2(b)(i)) occurring or in existence
prior to the Closing Date in connection with the ownership or operation of
Working Interest Owner's interest in the Producing Properties, to the extent a
claim is asserted prior to the third anniversary of the Closing Date; or (iii)
any Environmental Matters occurring or in existence prior to the Closing Date
(except those matters which Buyer is responsible for correcting under Section
4.9(c)) with respect to Working Interest Owner's interest in the Producing
Properties, to the extent a claim is asserted on or prior to December 31, 1996,
regardless in each case whether known or unknown, and WITHOUT REGARD TO THE
SOLE, PARTIAL OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY BUYER
INDEMNITEE, but in no event shall Working Interest Owners indemnify any Buyer
Indemnitees for Losses resulting from such Buyer Indemnitee's own gross
negligence or willful misconduct.
(c) Subject to Sections 12.2 (e) and (f), Thomas L. Carter, Jr. and
Alexander D. Stuart (the "Stockholder Indemnitors") shall severally and not
jointly, in proportion to their respective interests in the Purchased Shares,
indemnify, defend and hold harmless Buyer Indemnitees from and against any and
all Losses asserted against, imposed upon or incurred by any Buyer Indemnitee
which result from or arise out of (i) the material breach of any of the
representations and warranties of Operator contained in this Agreement or any
other instrument executed by Operator in connection herewith; (ii) the material
breach by Operator of any of the covenants and agreements of Operator contained
in this Agreement or any other instrument executed by Operator in connection
herewith which covenant or agreement was to be performed by Operator prior to
the Closing, (iii) any obligations, liabilities or duties of Operator not
relating to the Subject Assets; (iv) any Environmental Matters occurring or in
existence prior to the Closing Date with respect to Operator's interest in the
Producing Properties to the extent the claim is asserted on or prior to December
31, 1996 (except those matters which Buyer is responsible for correcting under
Section 4.9(c)); (v) Operator's ownership or operation of the Producing
Properties prior to the Closing Date (other than Environmental Matters and title
matters, title matters being solely covered by the indemnity in Section
12.2(c)(i)), to the extent the Claim is asserted prior to the third anniversary
of the Closing Date; (vi) Black Stone Oil Company v. C.C. Lilley, Inc.; or (vii)
Tax Losses; regardless in each case whether known or unknown, and WITHOUT REGARD
TO THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY BUYER
INDEMNITEE, but in no event shall Stockholder Indemnitors indemnify any Buyer
Indemnitee for Losses resulting from such Buyer Indemnitee's own gross
negligence or willful misconduct.
(d) Subject to Sections 12.2(e) and (f), each Selling Stockholder
severally and not jointly shall indemnify, defend and hold harmless Buyer
Indemnitees from and against any and all Losses asserted against, imposed upon
or incurred by any Buyer Indemnitee which
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result from or arise out of the material breach of any of the representations,
warranties, covenants or agreements of such Selling Stockholder contained in
this Agreement, or any other instrument executed by such Selling Stockholder in
connection herewith; regardless in each case whether known or unknown, and
WITHOUT REGARD TO THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY
OF ANY BUYER INDEMNITEE, but in no event shall Selling Stockholders indemnify
any Buyer Indemnitees for losses resulting from such Buyer Indemnitee's own
gross negligence or willful misconduct.
(e) Notwithstanding anything to the contrary in this Agreement, in no
event shall Buyer or any Seller be liable hereunder for any exemplary, punitive,
special, indirect, consequential, remote or speculative damages.
(f) Notwithstanding anything to the contrary in this Agreement, the
liability of the Sellers and the Stockholder Indemnitors under this Agreement
and any documents delivered in connection herewith or contemplated hereby shall
be several and not joint or collective, and further limited as follows:
(i) In no event shall any amounts be recovered from a Working
Interest Owner
(A) under Sections 12.2(b)(i) and (ii) for any
matter for which a written notice of claim
specifying in reasonable detail the specific nature
of and specific basis of the Losses and the
estimated amount of such Losses ("Claim Notice") is
not delivered to the indemnifying party prior to
the close of business on the day three years
following the Closing Date, and the indemnities
granted by the Working Interest Owners in Sections
12.2(b)(i) and (ii) shall terminate on such date;
(B) under Section 12.2(b)(iii) for any matter for
which a Claim Notice is not delivered to the
indemnifying party prior to the close of business
on December 31, 1996, and the indemnities granted
by the Working Interest Owners in Sections
12.2(b)(iii) shall terminate on such date;
(C) for any Losses (other than matters described in
Section 12.2(b)(iii)) until the Buyer Indemnitees
have suffered Losses attributable to such Working
Interest Owner in the aggregate amount in excess of
a deductible of 0.6% of the Adjusted Purchase Price
attributable to such Working Interest Owner, after
which point such Working Interest Owner will be
obligated only to indemnify the Buyer
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Indemnitees from and against further such Losses
in excess of such deductible;
(D) for any Losses described in Section
12.2(b)(iii), until the Buyer Indemnitees have
suffered Losses attributable to such Working
Interest Owner in the aggregate amount in excess of
a deductible equal to the sum of (x) 0.6% of the
Adjusted Purchase Price, plus (y) the Environmental
Deductible Balance, in each case attributable to
such Working Interest Owner, after which point such
Working Interest Owner will be obligated only to
indemnify the Buyer Indemnitees from and against
further Losses in excess of such deductible; or
(E) for any Losses suffered by Buyer Indemnitees in
an aggregate amount in excess of 50% of the
Adjusted Purchase Price attributable to such
Working Interest Owner.
(ii) In no event shall any amounts be recovered from a
Stockholder Indemnitor
(A) under Sections 12.2(c)(i), (ii) or (v) for any
matter for which a Claim Notice is not delivered to
the indemnifying party prior to the close of
business on the date three years following the
Closing Date, and the indemnities granted by the
Stockholder Indemnitors in Sections 12.2(c)(i),
(ii) and (v) shall terminate on such date;
(B) under Section 12.2(c)(iii), (vi) or (vii) for
any matter for which a Claim Notice is not
delivered to the indemnifying party prior to the
expiration of the applicable statute of
limitations;
(C) under Section 12.2(c)(iv) for any matter for
which a Claim Notice is not delivered to the
indemnifying party prior to the close of business
on the December 31, 1996, and the indemnities
granted by the Stockholder Indemnitors in Section
12.2(c)(iv) shall terminate on such date;
(D) for any Losses (other than matters described in
Section 12.2(c)(iv), (vi) and (vii)) until the
Buyer Indemnitees have suffered Losses attributable
to such Stockholder Indemnitor in the aggregate
amount in excess of a deductible of .6% of the
Adjusted Purchase Price attributable to the
Purchased Shares of such Stockholder Indemnitor,
after which point the Stockholder Indemnitor will
be
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obligated only to indemnify the Buyer Indemnitees
from and against further Losses in excess of such
deductible;
(E) for any Losses for matters under Section
12.2(c)(iv) until the Buyer Indemnitees have
suffered Losses attributable to such Stockholder
Indemnitor in the aggregate amount in excess of a
deductible equal to the sum of (x) .6% of the
Adjusted Purchase Price, and (y) the Environmental
Deductible Balance, in each case as attributable to
the Purchased Shares of such Stockholder
Indemnitor, after which point the Stockholder
Indemnitor will be obligated only to indemnify the
Buyer Indemnitees from and against further Losses
in excess of such deductible; or
(F) for any Losses resulting from matters described
in Sections 12.2(c)(i), (ii), (iii), (iv) or (v) or
12.2(d) after Buyer Indemnitees have suffered
Losses in the aggregate amount in excess of 50% of
the Adjusted Purchase Price attributable to the
Purchased Shares of such Stockholder Indemnitor.
(iii) In no event shall any amounts be recovered from a Selling
Stockholder (other than pursuant to Section 12.2(f)(ii))
(A) under this Agreement for any matter for which a
Claim Notice is not delivered to the indemnifying
party prior to the close of business on the date
three years following the Closing Date, and the
indemnities granted by the Selling Stockholders in
this Agreement shall terminate on such date;
(B) for any Losses until the Buyer Indemnitees have
suffered Losses resulting from matters described in
Section 12.2(d) for any Selling Stockholder in the
aggregate amount in excess of a deductible of .6%
of the Adjusted Purchase Price attributable to the
Purchased Shares of such Selling Stockholder, after
which point such Selling Stockholder will be
obligated only to indemnify the Buyer Indemnitees
from and against further Losses in excess of such
deductible; or
(C) for any Losses after Buyer Indemnitees have
suffered Losses resulting from matters described in
Section 12.2(d) in the aggregate amount in excess
of 50% of the Adjusted Purchase Price attributable
to the Purchased Shares of such Selling
Shareholder.
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provided, however, that such indemnities shall survive (subject to any
applicable deductible or cap) with respect only to the specific matter that is
the subject of any Claim Notice delivered in good faith in compliance with the
requirements of this Section 12.2(f) until the earlier to occur of (x) the date
on which a final nonappealable resolution of the matter described in such Claim
Notice has been reached or (y) the date on which the matter described in such
Claim Notice has otherwise reached final resolution. Notwithstanding the
foregoing, the Stockholder Indemnitors shall be jointly and severally liable for
the indemnity granted in Section 12.2(c)(vii) with respect to Tax Losses and
Section 12.2(c)(vi) with regard to Black Stone Oil Company v. C.C. Lilley, Inc.
(g) All claims for indemnification under this Section 12.2 shall be
asserted and resolved pursuant to this Section 12.2(g). Any person claiming
indemnification hereunder is hereinafter referred to as the "Indemnified Party"
and any person against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Losses are
asserted against or sought to be collected from an Indemnified Party by a third
party, said Indemnified Party shall with reasonable promptness provide to the
Indemnifying Party a Claim Notice. Notwithstanding the preceding sentence,
failure of the Indemnified Party to give notice hereunder shall not release the
Indemnifying Party from its obligations under this Article XII, except to the
extent the Indemnifying Party is actually prejudiced by such failure to give
notice. The Indemnifying Party shall have 30 days from the personal delivery or
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not it disputes the liability of the Indemnifying Party to
the Indemnified Party hereunder with respect to such Losses and/or (ii) whether
or not it desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against such Losses; provided, however, that any
Indemnified Party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party (and of
which it shall have given notice and opportunity to comment to the Indemnifying
Party) and not prejudicial to the Indemnifying Party. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
it desires to defend the Indemnified Party against such Losses, the Indemnifying
Party shall have the right to defend all appropriate proceedings, and with
counsel of its own choosing, which proceedings shall be promptly settled or
prosecuted by them to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Losses that the Indemnifying Party elects to contest
or, if appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third party Losses, or any
cross-complaint against any person. No claim may be settled or otherwise
compromised without the prior written consent of the Indemnifying Party.
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(h) Notwithstanding anything to the contrary contained herein, the
amount of any Losses for which indemnification is provided under this Section
12.2 shall be net of any amounts actually recovered by the Indemnified Party
under insurance policies in effect at or prior to the Closing Date. The
Indemnified Party shall use its reasonable efforts to enforce any such insurance
policies and shall give such notices under such policies as the Indemnifying
Party reasonably may request by notice in writing. The Indemnified Party and the
Indemnifying Party shall cooperate in connection with any claim under any such
insurance policies covered by this Section 12.2(h).
(i) THE TERM "LOSSES" SHALL SPECIFICALLY INCLUDE STRICT LIABILITY
IMPOSED ON AN INDEMNIFIED PARTY WHETHER UNDER ENVIRONMENTAL LAWS OR OTHERWISE
AND IT IS THE INTENT OF THE PARTIES THAT THE INDEMNIFICATION OBLIGATIONS SET
FORTH IN THIS ARTICLE XII SHALL INCLUDE AN OBLIGATION ON THE PART OF THE
INDEMNIFYING PARTY TO INDEMNIFY THE INDEMNIFIED PARTY AGAINST STRICT LIABILITY
ARISING IN CONNECTION WITH A MATTER FOR WHICH SUCH PARTY IS ENTITLED TO
INDEMNIFICATION UNDER THIS ARTICLE.
ARTICLE XIII
Limitations on Representations and Warranties
Section 13.1 Disclaimers of Representations and Warranties.
The express representations and warranties of Seller contained in this
Agreement are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory. BUYER ACKNOWLEDGES THAT SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY
EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES
OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE SUBJECT ASSETS, (b) EXCEPT AS
OTHERWISE PROVIDED HEREIN, THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR
HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF SELLER, AND (c) THE
ENVIRONMENTAL CONDITION OF THE SUBJECT ASSETS. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER
HEREBY WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND
FIXTURES CONSTI-
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TUTING A PART OF THE SUBJECT ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE,
(v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM VICES OR DEFECTS, WHETHER
KNOWN OR UNKNOWN, (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE
LAW, AND (vii) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE
RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE ENVIRONMENT OR
HEALTH, IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT (EXCEPT TO THE
EXTENT EXPRESSLY PROVIDED IN HEREIN) THE REAL AND PERSONAL PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY, AND FIXTURES CONSTITUTING PART OF THE ASSETS SHALL BE
CONVEYED TO BUYER AS IS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND
BUYER REPRESENTS TO SELLER THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH
INSPECTIONS WITH RESPECT TO THE REAL AND PERSONAL PROPERTY, EQUIPMENT,
MACHINERY, INVENTORY AND FIXTURES AS BUYER DEEMS APPROPRIATE AND BUYER WILL
ACCEPT SAME AS IS, WHERE IS, WITH ALL FAULTS, IN THEIR PRESENT CONDITION AND
STATE OF REPAIR. Seller and Buyer agree that, to the extent required by
applicable law to be effective, the disclaimers of certain warranties contained
in this section are "conspicuous" disclaimers for the purposes of any applicable
law, rule or order.
Section 13.2 Waiver of Texas DTPA.
(a) It is the intent of the Parties that Buyer's rights and remedies
with respect to this Agreement and the transactions contemplated hereby and with
respect to all acts or practices of Seller, past, present or future, in
connection with this Agreement and the transactions contemplated hereby shall be
governed by legal principles other than the Texas Deceptive Trade Practices
Consumer Protection Act, Tex. Bus. & Com. Code Ann. ss. 17.41 et seq. (Vernon
1987 and Supp. 1994) (the "DTPA"). As such, Buyer hereby waives the
applicability of the DTPA to this Agreement and the transactions contemplated
hereby and any and all duties, rights or remedies that might be imposed by the
DTPA, whether such duties, rights or remedies are applied directly by the DTPA
itself or indirectly in connection with other statutes; provided, however, Buyer
does not waive Section 17.555 of the DTPA. Buyer acknowledges, represents and
warrants that it is purchasing the Purchased Subject Assets and Purchased Shares
for commercial or business use; that Buyer has assets of Five Million Dollars
($5,000,000) or more according to its most recent financial statement prepared
in accordance with generally accepted accounting principles; that Buyer has
knowledge and experience in financial and business matters that enable it to
evaluate the
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merits and risks of a transaction such as this; and that it is not in a
significantly disparate bargaining position with Seller.
(b) Buyer expressly recognizes that the price for which Seller has
agreed to perform its obligations under this Agreement has been predicated upon
the inapplicability of the DTPA and this waiver of the DTPA. Buyer further
recognizes that Seller, in determining to proceed with the entering into of this
Agreement, has expressly relied on this waiver and the inapplicability of the
DTPA.
Section 13.3 Casualty Loss.
(a) Buyer shall assume all risk of loss with respect to, and any
change in the condition of, the Subject Assets from the Effective Time until
Closing for production of oil, gas and/or other hydrocarbons through depletion
(including the watering-out of any well, collapsed casing or sand infiltration
of any well) or otherwise.
(b) If after the Effective Time and prior to the Closing any part of
the Subject Assets shall be damaged or destroyed by fire or other casualty or if
any part of the Subject Assets shall be taken in condemnation or under the right
of eminent domain or if proceedings for such purposes shall be pending or
threatened ("Casualty Loss"), Buyer may elect to (i) cause the Subject Assets
affected by the Casualty Loss to be treated as Excluded Assets and reduce the
Purchase Price by the Allocated Value of the Subject Asset affected, in which
case Seller shall retain all insurance proceeds, condemnation proceeds, claims,
awards and other payments arising out of such Casualty Loss, or (ii) require
Working Interest Owner to (y) transfer to Buyer the Purchased Subject Asset
affected notwithstanding such Casualty Loss and (z) transfer to Buyer Working
Interest Owner's share of any insurance proceeds and condemnation proceeds,
claims, awards and other payments arising out of such Casualty Loss and require
Operator to retain and not distribute to the Selling Stockholders Operator's
share of any such insurance proceeds, condemnation proceeds, claims, awards or
payments. Working Interest Owner and Operator shall not voluntarily compromise,
settle or adjust any amounts payable by reason of a Casualty Loss without first
obtaining the consent of Buyer. Notwithstanding the foregoing, if following any
Casualty Loss, Working Interest Owner or Operator repairs or replaces the
damaged or destroyed property to substantially its original condition, Buyer
shall be required to purchase the Subject Assets affected without any reduction
in the Purchase Price and Seller shall retain all insurance proceeds and other
amounts arising out of such Casualty Loss.
Section 13.4 Exclusive Remedies. THE PARTIES ACKNOWLEDGE AND AGREE
THAT THE REMEDIES SET FORTH IN THIS AGREEMENT, INCLUDING THE DEDUCTIBLES,
LIABILITY LIMITS, SURVIVAL PERIODS, DISCLAIMERS AND LIMITATIONS ON REMEDIES, ARE
INTENDED TO BE, AND SHALL BE, THE EXCLUSIVE REMEDIES WITH RESPECT TO ANY ASPECT
OF THE TRANSACTIONS
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CONTEMPLATED BY THIS AGREEMENT. EACH PARTY HEREBY RELEASES, WAIVES AND
DISCHARGES, AND COVENANTS NOT TO SUE WITH RESPECT TO, ANY CAUSE OF ACTION OR
CLAIM NOT EXPRESSLY PROVIDED FOR IN THIS AGREEMENT INCLUDING, WITHOUT
LIMITATION, CLAIMS UNDER STATE OR FEDERAL SECURITIES LAWS, AVAILABLE AT COMMON
LAW OR BY STATUTE (INCLUDING FRAUD CLAIMS UNDER CHAPTER 27 OF THE TEXAS BUSINESS
AND COMMERCE CODE).
Section 13.5 Texas Revised Partnership Act. Buyer agrees that if any
Seller which is a Texas general partnership adopts the Texas Revised Partnership
Act ("TRPA") prior to the Closing Date, TRPA shall have the same effect on any
claim of Buyer arising under this Agreement against such partnership and the
partners thereof as if TRPA had been adopted by such partnership prior to the
date of execution of this Agreement.
ARTICLE XIV
Miscellaneous
Section 14.1 HSR Act. Within 10 days after the execution hereof, each
party will file or cause its ultimate parent entity (within the meaning of the
HSR Act) to file all materials required to be filed by it under the HSR Act and
will promptly file any supplemental materials required and will comply in all
material respects with the requirements of the HSR Act. Each of the parties
shall request early termination of the HSR Act waiting period and any filings to
be made. None of the parties shall take any action that is reasonably likely to
have the effect of delaying, impairing or impeding the receipt of any required
approvals and will use their commercially reasonable efforts to secure such
approvals as promptly as possible.
Section 14.2 Expenses. Each party shall be solely responsible for all
expenses, including due diligence expenses, incurred by it in connection with
this transaction, and no party shall be entitled to any reimbursement for such
expenses from the other party hereto.
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Section 14.3 Independent Investigation. Buyer represents and
acknowledges that (i) it is knowledgeable of the oil and gas business and of the
usual and customary practices of producers such as Seller, (ii) it has had
access to the Subject Assets, the officers and employees of Seller and Operator,
and the books, records and files of Seller and Operator relating to the
Purchased Subject Assets and Operator, and (iii) in making the decision to enter
into this Agreement, Buyer has relied solely on the basis of its own independent
due diligence investigation and upon the representations and warranties made
herein. Accordingly, Buyer acknowledges that Sellers have not made, and Sellers
hereby expressly disclaim and negate, any representation or warranty (other than
those express representations and warranties contained herein), express,
implied, at common law, by statute or otherwise, relating to the Purchased
Subject Assets or the Purchased Shares.
Section 14.4 Document Retention. As used in this Section 14.4, the term
"Documents" shall mean all files, documents, books, records and other data of
Operator (other than those that Seller has retained a copy of), including, but
not limited to: financial and tax accounting records; land, title and division
of interest files; contracts; engineering and well files; and books and records
related to the business of Operator or the operation of the Subject Assets prior
to the Closing Date. Buyer agrees that, to the extent the Documents are in
Buyer's or Operator's possession, the Documents shall be open for inspection by
representatives of Seller at reasonable times and upon reasonable notice during
regular business hours for a period of 6 years following the Closing Date (or
for such longer period as may be required by law or governmental regulation),
and that Seller may during such period at its expense make such copies thereof
as it may reasonably request.
Section 14.5 Entire Agreement. This Agreement, the documents to be
executed hereunder, and the exhibits attached hereto constitute the entire
agreement between the Parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties pertaining to the subject matter hereof.
No supplement, amendment, alteration, modification or waiver of this Agreement
shall be binding unless executed in writing by the Parties hereto and expressly
referencing this Agreement.
Section 14.6 Waiver. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
Section 14.7 No Solicitation. Sellers shall, prior to the Closing Date,
neither solicit bids for the Subject Assets or Purchased Shares nor negotiate
the sale of the Subject Assets or Purchased Shares with any party other than
Buyer or Guarantor.
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Section 14.8 Publicity. Sellers and Buyer shall consult with each
other with regard to all publicity and other releases concerning this Agreement
and the transactions contemplated hereby and, except as required by applicable
law or the applicable rules or regulations of any governmental body or stock
exchange, no party shall issue any such publicity or other release without the
prior written consent of the other party hereto.
Section 14.9 Captions. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
Section 14.10 No Third Party Beneficiaries. Nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract.
Section 14.11 Assignment. Except as provided in the following sentence,
no party may assign or delegate any of its rights or duties hereunder, without
the prior written consent of the other parties, and any assignment or delegation
made without such consent shall be void. Buyer shall have the right to assign
its rights hereunder to an affiliate and may effect the acquisition of the
Purchased Shares pursuant to a merger of Operator with and into an affiliate of
Buyer, provided in each instance that Guarantor guarantees all of such
assignee's obligations hereunder pursuant to a form of guaranty agreement
substantially the same as that attached as Exhibit G to be executed and
delivered by Guarantor to Seller prior to such assignment or merger. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors, assigns
and legal representatives.
Section 14.12 Governing Law. This Agreement, other documents delivered
pursuant hereto and the legal relations between the Parties shall be governed
and construed in accordance with the laws of the State of Texas, without giving
effect to principles of conflicts of laws that would result in the selection of
an alternate jurisdiction.
Section 14.13 Notices. Any notice, communication, request, instruction
or other document required or permitted hereunder shall be given in writing and
delivered in person or sent by U.S. Mail postage prepaid, return receipt
requested, or by telex, facsimile or telecopy to the addresses of Seller and
Buyer set forth below. Any such notice shall be effective only upon receipt.
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Seller: Black Stone Holdings Partnership
1001 Fannin, Suite 4750
Houston, Texas 77002
Attention: Mr. Thomas L. Carter, Jr.
Telecopy No.: (713) 658-0943
Buyer: Comstock Oil & Gas, Inc.
5005 LBJ Freeway, Suite 1000
Dallas, Texas 75244
Attention: Mr. M. Jay Allison
Telecopy No.: (214) 701-2111
with copies to: Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention: Guy Kerr, Esq.
Telecopy No.: (214) 740-8800
Either party may, by written notice so delivered, change its address for notice
purposes hereunder.
Section 14.14 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to either party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 14.15 Counterpart Execution. This Agreement may be executed in
any number of counterparts, and each counterpart hereof shall be effective as to
each party which executes the same whether or not all of the Parties execute the
same counterpart. If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one Agreement,
but each counterpart shall be considered an original.
Section 14.16 Authority of BSHP. Each Seller hereby authorizes BSHP to
make and receive payments hereunder on behalf of such Seller, to give and
receive notices on behalf of such Seller hereunder (and promptly send copies of
any notices to each affected
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Seller), to agree upon any adjustments to the Purchase Price hereunder
consistent with the terms of this Agreement on behalf of such Seller, to agree
on any extensions to the Closing Date on behalf of such Seller and to select
title and environmental consultants on behalf of such Seller. BSHP's authority
does not include the ability to modify or amend this Agreement in any manner
without each Seller's consent. Buyer may rely upon any instrument executed or
other action taken by BSHP on behalf of Seller pursuant to this Section 14.16 to
the same extent as if such instrument had been executed or action had been taken
by each Seller.
Section 14.17 W.T. Carter & Bro. Buyer acknowledges that W.T. Carter &
Bro. is the lessor with respect to certain of the Properties. Buyer hereby
acknowledges and agrees that the terms of the relevant leases permit W.T. Carter
& Bro. to take in kind and separately dispose of its royalty share of the
production therefrom or attributable thereto free and clear of any costs and
expenses of gathering, handling, treating or transporting such production to the
final point of sale by lessee and/or lessee's assigns, and that W.T. Carter &
Bro. will have the right, but not the obligation, to market its royalty share of
production on the same terms as Buyer's production from such leases is marketed
free and clear of said costs and expenses of gathering, handling, treating and
transportation.
Section 14.18 Champion C-2.
(a) Operator has commenced the drilling of the Champion International
C No. 2 well. Promptly after such well reaches its total depth (as defined in
the existing drilling contract for such well), the current operator of such well
(Operator, BSHP or its designee, as applicable) shall run or cause to be run in
such well an induction log and porosity log as a reasonably prudent operator
(provided that conditions permit such logs to be run) and promptly deliver
copies of such logs to Buyer. Buyer shall have forty-eight hours after receipt
of such logs (the "C-2 Notice Period") to notify Sellers whether it elects to
reject the Champion C-2 Assets.
(b) If Buyer elects to reject the Champion C-2 Assets, and such notice
of rejection is received by Sellers prior to Closing, the Purchase Price shall
not be adjusted upward by the costs and expenses thereof. If Buyer elects to
reject the Champion C-2 Assets, and such notice of rejection is received by
Sellers after Closing, Sellers shall pay Buyer an amount equal to the actual
costs and expenses incurred by Sellers after the Effective Time to drill such
well to total depth.
(c) BSHP or its designee shall have the sole right to operate the well
after Closing until the end of the C-2 Notice Period. If Buyer elects to reject
the Champion C-2 Assets, BSHP or its designee shall have the sole right to
continue to operate said well.
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(d) In the event that Sellers receive notice, within the C-2 Notice
Period, of Buyer's election to reject the Champion C-2 Assets, and Sellers
complete the Champion International C No. 2 well as a producer, then (i) if such
completion occurs prior to Closing, the Champion C-2 Assets shall be treated as
Excluded Assets, and (ii) if such completion occurs after Closing, Buyer shall
convey to Sellers, the Champion C-2 Assets promptly after such completion.
Section 14.19 Guaranty Agreement. Pursuant to the terms of the
Guaranty Agreement of even date herewith executed by Guarantor, Guarantor has
guaranteed all of the obligations of Buyer hereunder.
Section 14.20 Joint Operating Agreement/AMI. Buyer, Operator and
Working Interest Owners shall execute the Center Grove JOA and the North Double
A JOA. Buyer's interest under the Center Grove JOA shall be 30% (being 30% of
Operator's and Working Interest Owner's interests in said area as of the
Effective Time). Buyer's interest under the North Double A JOA shall be 12.825%
(being 30% of Working Interest Owners' and Operator's interests in said area as
of the Effective Time). Buyer's interest in the Camden Tram JOA shall be 18.6%
(being 30% of Working Interest Owners' and Operator's interest thereunder as of
the Effective Time). The area of mutual interest with respect to each of the
foregoing joint operating agreements shall be as shown on Exhibit "H". Operator
shall be designated as operator thereunder, subject to the provisions of Section
7.2 hereof.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Sellers, Buyer and Guarantor have executed and
delivered this Agreement as of the date first set forth above.
WORKING INTEREST OWNERS:
BLACK STONE HOLDINGS PARTNERSHIP
By C & S Holdings, Managing Partner
By: /s/THOMAS L. CARTER, JR.
------------------------
Thomas L. Carter, Jr.
Managing Partner
By North Star Oil & Gas, General Partner
By: /s/ALEXANDER D. STUART
-----------------------
Alexander D. Stuart
Managing General Partner
C & S HOLDINGS
By: /s/THOMAS L. CARTER, JR.
------------------------
Name: Thomas L. Carter, Jr.
Title: Managing Partner
By North Star Oil & Gas, General Partner
By: /s/ALEXANDER D. STUART
------------------------
Alexander D. Stuart
Managing General Partner
C. D. LANGHORNE, JR., INC.
By: /s/C. D. LANGHORNE, JR.
------------------------
Name: C. D. Langhorne, Jr.
Title: President
/s/ALAN DALBY
------------------------
Alan Dalby
/s/PAMELA BURNEY
------------------------
Pamela Burney
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ETOCO, INC.
By: /s/JAMES E. THORP
------------------------
James E. Thorp
President
HENNIG PRODUCTION COMPANY
By: /s/Don E. Hennig
------------------------
Don E. Hennig
President
/s/Hugh J. Idstein
------------------------
HUGH J. IDSTEIN
/s/MARGARET A. S. IDSTEIN
------------------------
Margaret A. S. Idstein
KERRCO INC.
By: /s/J. ROBINSON KERR
------------------------
J. Robinson Kerr
President
WOOLLY BUGGER PARTNERS, LTD.
By CASTLETON ENERGY CORPORATION, GENERAL PARTNER
By: /s/ROBERT SINCLAIR
------------------------
Robert Sinclair
President
W. T. CARTER & BRO.
By: /s/THOMAS L. CARTER
------------------------
Thomas L. Carter
Managing Partner
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SELLING STOCKHOLDERS:
/s/THOMAS L. CARTER, JR.
------------------------
Thomas L. Carter
/s/ALEXANDER D. STUART
------------------------
Alexander D. Stuart
/s/ROBERT D. STUART, JR.
------------------------
Robert D. Stuart, Jr.
/s/DONALDSON C. PILLSBURY
------------------------
Donaldson C. Pillsbury
/s/JAMES M. STUART
------------------------
James M. Stuart
/s/PHIL BROXSON
------------------------
Phil Broxson
/s/JOHN MARTIN
------------------------
John Martin
/s/NENETTE G. CARTER
------------------------
Nenette G. Carter
/s/AUBREY CARTER
------------------------
Aubrey Carter
/s/SARA C. WALNE
------------------------
Sara C. Walne
/s/GEORGIA C. HERZOG
------------------------
Georgia C. Herzog
/s/MAUDE C. TRIONE
------------------------
Maude C. Trione
/s/MARJORIE C. CAIN
------------------------
Marjorie C. Cain
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OPERATOR:
BLACK STONE OIL COMPANY
By: /s/THOMAS L. CARTER, JR.
------------------------
Thomas L. Carter, Jr.
President
BUYER:
COMSTOCK OIL & GAS, INC.
By: /s/M. JAY ALLISON
------------------------
M. Jay Allison
President
GUARANTOR:
COMSTOCK RESOURCES, INC.
By: /s/M. JAY ALLISON
------------------------
M. Jay Allison
President
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E:\CORP\21512\52110\DOCS\PSA.009
SCHEDULE I
WORKING INTEREST OWNERS
Black Stone Holdings Partnership, a Texas general partnership C&S Holdings, a
Texas general partnership C. D. Langhorne, Jr., Inc., a Texas corporation Alan
Dalby and wife Pamela Burney ETOCO, Inc., a Texas corporation Hennig Production
Company, a sole proprietorship Hugh J. Idstein and wife Margaret A.S. Idstein
Kerrco, Inc., a Delaware corporation Woolly Bugger Partners, Ltd., a Texas
limited partnership W.T. Carter & Bro., a Texas general partnership
SCHEDULE II
SELLING STOCKHOLDERS
Stockholder Number of Shares
Thomas L. Carter, Jr. 34,534
Robert D. Stuart, Jr. 6,063
Alexander D. Stuart 18,313
Donaldson C. Pillsbury 1,637
James M. Stuart 1,275
Phil Broxson 1,190
John Martin 1,190
Nenette G. Carter 707
Aubrey Carter 707
Sara C. Walne 706
Georgia C. Herzog 706
Maude C. Trione 706
Marjorie C. Cain 706
68,440