PURCHASE AND SALE AGREEMENT
Among
A PRIVATE COMPANY, as Seller
And
AMERICAN EXPLORATION COMPANY
And
DOMINION RESERVES, INC.
collectively, as Purchaser
TABLE OF CONTENTS
PAGE NO.
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ARTICLE I PURCHASE AND SALE
Section 1.1 Effective Date and Assets.........................1
Section 1.2 Closing.......................................... 4
Section 1.3 Assumption of Obligations.........................4
Section 1.4 Transfer of Ownership of Assets...................4
ARTICLE II PURCHASE PRICE
Section 2.1 Purchase Price....................................4
Section 2.2 Allocation of the Value...........................5
Section 2.3 [Intentionally Omitted]..........................5
Section 2.4 Adjusted Purchase Price...........................5
Section 2.5 Payment of Adjusted Purchase Price................7
ARTICLE III TITLE EXAMINATION
Section 3.1 Access to Title Information.......................7
Section 3.2 Title Defects.....................................8
Section 3.3 Permitted Encumbrances............................8
Section 3.4 Notice of Title Defects...........................9
Section 3.5 Remedies for Title Defects.......................10
Section 3.6 Preferential Purchase Rights.....................11
Section 3.7 Consents to Assignment...........................12
ARTICLE IV PHYSICAL CONDITION
Section 4.1 Physical Condition of the Assets.................12
Section 4.2 Environmental Assessment During
Examination Period.......................13
Section 4.3 Withdrawal by Purchaser..........................14
Section 4.4 Conditional Access to Assets.....................14
Section 4.5 [Intentionally Omitted].........................15
Section 4.6 Assumption and Indemnification of
Environmental Risk.......................15
ARTICLE V OPERATIONS AND CASUALTY LOSS
Section 5.1 Operations.......................................17
Section 5.2 Casualty Loss....................................20
Section 5.3 [Intentionally Omitted]..........................20
Section 5.4 Successor Operator...............................20
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Section 5.5 Notice of Certain Events.........................20
Section 5.6 [Intentionally Omitted]..........................21
ARTICLE VI REPRESENTATIONS AND WARRANTIES
Section 6.1 Existence........................................21
Section 6.2 Authorization....................................21
Section 6.3 Brokers..........................................21
Section 6.4 Binding Obligations..............................21
Section 6.5 No Conflict......................................22
Section 6.6 No Breach or Default.............................22
Section 6.7 Bankruptcy.......................................23
Section 6.8 Further Distribution.............................23
Section 6.9 Business Matters.................................23
Section 6.10 Leases, Wells, Production & Marketing............23
Section 6.11 [Intentionally Omitted]..........................24
Section 6.12 Preferential Purchase Rights and Consents
to Assignment............................24
Section 6.13 Litigation.......................................24
Section 6.14 Taxes .........................................25
Section 6.15 [Intentionally Omitted]..........................25
Section 6.16 Plugging and Abandonment; Status of Wells........25
Section 6.17 Operating, etc. Agreements.......................25
Section 6.18 Certain Agreements; Payouts......................25
Section 6.19 Environmental Matters............................26
Section 6.20 Information......................................27
Section 6.21 Employment Liability.............................27
Section 6.22 Absence of Undisclosed Liabilities...............27
ARTICLE VII CONDITIONS OF CLOSING
Section 7.1 a. Representations..........................27
b. Performance..............................27
c. Pending Matters..........................27
d. Consents and Waivers.....................27
e. Material Changes in Condition............28
f. HSR Act..................................28
g. Preferential Purchase Right..............28
h. Certain Title Defects....................28
Section 7.2 a. Representations..........................28
b. Performance..............................28
c. Pending Matters..........................29
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d. Governmental Bonds.......................29
e. HSR Act..................................29
f. Preferential Purchase Right..............29
g. Certain Title Defects....................29
ARTICLE VIII CLOSING 29
ARTICLE IX CONTINUING OBLIGATIONS
Section 9.1 Settlement Statement.............................31
Section 9.2 Indemnities......................................32
Section 9.3 Further Assurances...............................33
Section 9.4 Recording........................................33
Section 9.5 Further Assurances Regarding
West Cameron 254.........................33
Section 9.6 Accounting for Proceeds from Sale of
Production...............................34
ARTICLE X INDEPENDENT INVESTIGATION AND 34
DISCLAIMER
ARTICLE XI TERMINATION 35
ARTICLE XII MISCELLANEOUS
Section 12.1 Governing Law....................................35
Section 12.2 Entire Agreement.................................35
Section 12.3 Waiver...........................................36
Section 12.4 Captions.........................................36
Section 12.5 Assignment.......................................36
Section 12.6 Notices..........................................36
Section 12.7 UTPCPL and DTPA Waiver...........................37
Section 12.8 Waiver of Jury Trial.............................37
Section 12.9 [Intentionally Omitted]..........................37
Section 12.10 Limitation of Liability..........................37
Section 12.11 No Admissions....................................38
Section 12.12 Third Party Beneficiaries........................38
Section 12.13 Expenses.........................................38
Section 12.14 Severability.....................................38
Section 12.15 Publicity........................................38
Section 12.16 Use of Seller's Name.............................38
Section 12.17 Waiver of Compliance with Bulk
Transfer Laws............................38
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Section 12.18 Survival.........................................39
Section 12.19 Listing of Exhibits and Schedules................39
Section 12.20 Counterparts.....................................39
Section 12.21 Notices After Closing............................40
Section 12.22 Concerning Purchaser.............................40
EXHIBIT A Description of Assets
EXHIBIT B Allocation of Value
EXHIBIT C Form of Assignment
EXHIBIT D Form of Opinion of Seller's Counsel
SCHEDULE 1.3 Assumed Contracts and Agreements
SCHEDULE 3.3(h) Liens to be Released at Closing
SCHEDULE 3.6 Preferential Purchase Rights and Consents
SCHEDULE 6.10(a) Material Defaults, Unpaid Royalties and Other
Conditions Affecting Leases
SCHEDULE 6.10(b) Drilling and Production
SCHEDULE 6.10(c) Depth Restrictions
SCHEDULE 6.10(d) Sales Contracts, "Take-or-Pay" Clauses, Gas
Balancing, Deferred Production or
Similar Arrangements
SCHEDULE 6.13 Litigation
SCHEDULE 6.14 Taxes
SCHEDULE 6.16 Wells Not Included in Information Brochure
SCHEDULE 6.17 AFEs, Plans and Proposals; Non-Consents
SCHEDULE 6.18 Areas of Mutual Interest; Payouts; Tax Partnership
Agreements
SCHEDULE 6.19 Environmental Matters
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement, (the "Agreement") is made this 4th day of
March, 1996, between a private company ("Seller") and AMERICAN EXPLORATION
COMPANY, a Delaware corporation, whose address is 1331 Lamar, Suite 900,
Houston, Texas 77010-3088 and DOMINION RESERVES, INC., a Virginia corporation,
whose address is P. O. Box 26532, Richmond, Virginia 23261 (collectively,
"Purchaser").
PRELIMINARY STATEMENTS:
Seller owns interests in certain oil and gas properties and related
assets. Seller desires to sell to Purchaser and Purchaser desires to purchase
from Seller on the terms and conditions set forth in this Agreement certain oil
and gas interests, properties and related rights.
For good and valuable consideration and the covenants and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
Seller and Purchaser hereby agree as follows:
I.
PURCHASE AND SALE
1.1 EFFECTIVE DATE AND ASSETS:Subject to the terms and conditions
of this Agreement, Seller shall sell and deliver and Purchaser shall purchase,
accept and pay for at Closing (as defined in Section 1.2), effective as of 7:00
a.m. on March 1, 1996 (the "Effective Date"), WITHOUT ANY WARRANTY OF FITNESS OR
MERCHANTABILITY OR FREEDOM FROM HIDDEN VICES OR DEFECTS OF THE MATERIAL,
EQUIPMENT OR FACILITIES CONVEYED, AND WITHOUT WARRANTY OF ANY KIND OR NATURE
WHATSOEVER EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, the following:
All of Seller's right, title and interest in and to:
(a) The oil and gas leasehold estates, royalties, overriding
royalties and other mineral interests as set forth in EXHIBIT
A attached hereto and made a part hereof (collectively, the
"Leasehold Property"); and
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(b) Without limitation of the foregoing, all other right,
title and interest of Seller of whatever kind or character,
whether legal or equitable, vested or contingent, in and to
the oil, gas and other minerals in and under or that may be
produced from or attributable to the Leasehold Property
described in EXHIBIT A, including, without limitation,
interests in the oil, gas and/or mineral leases
covering all or any part of such Leasehold Property,
production payments and net profits interests in all or any
part of such lands or such leases (whether such property is
described in EXHIBIT A or is described by reference to another
instrument set forth in EXHIBIT A, even though
Seller's interest in such oil, gas and other interests may be
incorrectly described in or omitted from such
EXHIBIT A); and all right, title and interest of
Seller in and to or otherwise derived from all presently
existing and valid oil, gas and/or mineral unitization,
pooling, and/or communitization agreements, declarations
and/or orders and in and to the Leasehold Property covered and
the units created thereby, including, without limitation, all
units formed under orders, rules, regulations, or other
official acts of any federal, state, or other authority having
jurisdiction, voluntary unitization agreements, designations
and/or declarations, and so-called "working interest units"
created under operating agreements or otherwise relating to
the Leasehold Property;
(c) All wells, surface or subsurface machinery, equipment,
platforms, facilities, supplies or other property of
whatsoever kind or nature which are located on, appurtenant
to, or used directly in connection with the production,
treatment, storage or transportation of oil and gas from the
Leasehold Property, including, without limitation, all oil
wells, gas wells, water wells, salt water disposal wells,
injection wells, wellhead equipment, casing, tubing, engines,
christmas trees, separators, compressors, dehydration units,
heater-treaters, boilers, valves, gauges, meters, pumps,
generators, motors, flow lines, tanks, water lines, gas lines,
gathering lines, laterals and trunklines, gas systems (for
gathering, treating and compression), chemicals, solutions,
water systems (for treating, disposal and injection), starters
and controllers, telephone and other communication systems,
offshore platforms, equipment and facilities, and any and all
additions, accessions to, substitutions and replacements of
any of the foregoing, together with all attachments,
components, parts, equipment and accessories installed thereon
or affixed thereto, specifically excluding property owned by
contract operators, vehicles, boats, tools, pulling machines,
warehouse stock, equipment or material temporarily located on
the Leasehold Property, and any equipment, pipelines, fixtures
or interests in and owned by any purchaser and/or transporter
of oil or gas. The Assets shall not include any
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buildings other than those located on platforms included in
the Assets of any kind unless the parties hereto specifically
agree otherwise; and
(d) Any easements, rights of way, permits, licenses, surface
leases, use agreements and servitudes to the extent assignable
and to the extent now being used in connection with the
Leasehold Property, together with all of Seller's rights and
interests in and to all pooling and unitization agreements,
operating agreements, gas balancing agreements, gas sales
contracts, gathering, treatment, compression, and
transportation agreements, farm-out and farm-in agreements,
dry hole, bottom hole, acreage contribution, purchase and
acquisition agreements, area of mutual interest agreements,
salt water disposal agreements, servicing contracts, easement
and/or right-of-way agreements, unitization, communitization
or pooling agreements and other agreements and instruments to
the extent that they directly relate to the Leasehold Property
except (i) any insurance contracts or bonds held by Seller or
its subsidiary or affiliated corporations for Seller's benefit
and (ii) any employment, consulting, office lease, accounting
or other service contracts or agreements; and
(e) All claims of Seller against gas purchasers for "take or pay"
obligations with respect to the Leasehold Property to the
extent such claims have not been paid to or settled by Seller
as of the Closing Date, and all obligations and benefits with
respect to gas production or processing imbalances that are to
be assumed or received by Purchaser pursuant to this
Agreement;
(f) All lease files, unit files, lease contract files, well
files relating to the Leasehold Property, and geological data
(including engineering and geophysical data (other than
interpretive information and then to the extent permitted by
applicable licensing agreements) in printed and, to the extent
possible, machine readable form relating to the Leasehold
Property) and complete platform construction documentation and
plans (including as-built drawings) but excluding all other
records, including, but not limited to, corporate records,
legal files, computer programs, general tax records, samples,
test data or any other data, information or documents
unrelated to the Leasehold Property. This Agreement by Seller
to convey the aforementioned records is granted by Seller to
the extent that Seller has authority to do so without
violating any confidentiality or license obligations to a
third party, all of which are disclosed on SCHEDULE 1.3, and
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is without warranty as to the accuracy or completeness of the
information delivered. Notwithstanding any other provisions of
this Agreement to the contrary, Seller shall not provide
Purchaser with any records or data which Seller considers to
be interpretive, proprietary or confidential to it or which
Seller cannot legally provide to Purchaser because of third
party restrictions on Seller.
All of the foregoing rights, interests and properties are
hereinafter collectively referred to as the "Assets."
1.2 CLOSING: "Closing", as used herein, shall mean the
consummation of the transactions contemplated hereby, including payment of the
Purchase Price (as hereinafter defined) to Seller and delivery of the
Assignments (as defined in Article VIII(a)) to Purchaser. Closing shall occur at
10:00 a.m. on March 14, 1996 (the "Closing Date"), at Seller's office or at such
other place, date and time as may be mutually agreed upon by Seller and
Purchaser.
1.3 ASSUMPTION OF OBLIGATIONS: From and after the Closing Date,
Purchaser shall assume, pay for, discharge, be responsible for, perform and
comply with all duties, liabilities and obligations relating to the Assets that
accrue or arise from and after the Effective Date, including, but not limited
to, those arising from or by virtue of any lease, agreement, contract or
instrument disclosed on SCHEDULE 1.3 hereto and those arising from or by virtue
of any permit, statute, rule, regulation or order of any governmental authority.
1.4 TRANSFER OF OWNERSHIP OF ASSETS: On the Closing Date,
ownership of all the Assets and production produced from and after the Effective
Date attributable to the Leasehold Property conveyed to Purchaser shall pass to
Purchaser as of the Effective Date.
II.
PURCHASE PRICE
2.1 PURCHASE PRICE: Subject to the terms and conditions of this
Agreement, Purchaser shall purchase the Assets at Closing for $56,084,900 (the
"Purchase Price"), in cash, subject to the adjustments provided in Section 2.4
below.
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2.2 ALLOCATION OF THE VALUE: The Purchaser shall allocate the
Purchase Price to the Assets in the manner set forth on EXHIBIT B hereto (the
"Allocation of Value") and, if necessary, shall be adjusted separately as to
each Asset pursuant to Section 2.4.
2.3 [Intentionally omitted.]
2.4 ADJUSTED PURCHASE PRICE: The net price which Purchaser
shall pay for the Assets (the "Adjusted Purchase Price") shall be:
(a) The Purchase Price as set forth in Section 2.1 above;
(b) Plus the amount of all expenditures requested by Purchaser
by express written consent and direct costs and ordinary
expenditures made by Seller, including, without limitation,
insurance, rentals, producing and construction overhead, and
similar charges and expenses, including those billed under
applicable operating agreements, and all prepaid expenses
attributable to the Assets conveyed to Purchaser at Closing
and paid by or on behalf of Seller prior to the Closing Date
to the extent that such expenses are (i) not prohibited by the
terms of this Agreement and (ii) attributable to the period
after the Effective Date, in accordance with generally
accepted accounting principles (not to include income taxes);
(c) Plus the value of all oil produced but not sold at 7:00
a.m. on the Effective Date that is credited to the Assets
(value to be the market or contract price in effect as of
Effective Date less royalties, other lease burdens and taxes
on production);
(d) Plus the amount of underproduced volumes of gas attributable
to Seller as of the Effective Date for each property in excess
of such volumes disclosed on SCHEDULE 6.10(D) at the dates
indicated therein, multiplied by a price to be agreed upon by
Purchaser and Seller for such production (net of royalties and
taxes) in each case;
(e) Less the amount of the proceeds received by Seller that are
attributable to the Assets after the Effective Date, net of
any royalties, other lease burdens and any production,
severance or sales taxes not reimbursed to Seller by the
purchaser of such production;
(f) Less the amount equal to all unpaid ad valorem, property,
production, windfall profit, severance and similar taxes and
assessments based upon or measured by the ownership of the
Assets that are conveyed to Purchaser at
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Closing or the production of oil and gas or the receipt of
proceeds therefrom accruing to the Leasehold Property that are
conveyed to Purchaser at Closing to the extent such taxes and
assessments are, in accordance with generally accepted
accounting principles, attributable to the period prior to the
Effective Date;
(g) Less any amounts received by Seller (whether prior to or
subsequent to the Effective Date) with respect to the Assets
conveyed to Purchaser at Closing pursuant to take-or-pay,
advance payment or similar provisions of any production sales
contract to the extent any purchaser has the right to apply
any such amounts to production to be delivered after the
Effective Date;
(h) Less or plus, as applicable, any amount determined to be a
Purchase Price adjustment pursuant to Article III hereof;
(i) Less an amount equal to the value of the Assets, determined
pursuant to Article III hereof, with respect to which
Preferential Purchase Rights have been exercised;
(j) Less the amount of overproduced volumes of gas attributable to
Seller as of the Effective Date for each property in excess of
such volumes disclosed on SCHEDULE 6.10(D) at the dates
indicated therein, multiplied by a price to be agreed upon by
Purchaser and Seller for such production (net of royalties and
taxes) in each case;
(k) Less or plus any other amounts mutually agreed upon by the
parties hereto; and
(l) Plus an amount equal to the product of (i) interest at a
rate per annum equal to the prime rate of interest as
announced from time to time by Morgan Guaranty Trust Company
of New York multiplied by (ii) the Adjusted Purchase Price,
for the period from and after the later of (w) March 22, 1996,
(x) the date that the waiting periods provided for under the
HSR Act (as defined in Section 5.6) shall have expired or been
terminated, (y) the later of (A) the date that Santa Fe Energy
Resources, Inc. elects not to exercise its preferential
purchase right with respect to High Island Block 45 and (B)
the date that Hardy Oil & Gas USA Inc. elects not to exercise
its preferential purchase right with respect to High Island
Block 45 and (z) the date that the Title Defects, if any, with
respect to High Island Block 45 and South Marsh Island Block
133 have been resolved in accordance with Section 3.5 hereof,
until such time as the Closing shall occur.
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2.5 PAYMENT OF ADJUSTED PURCHASE PRICE: Seller shall prepare and
furnish to Purchaser at least three (3) business days prior to
Closing a preliminary closing statement setting forth the
adjustments to the Purchase Price and the Adjusted Purchase
Price to be paid by Purchaser at Closing. Such closing
statement shall reflect each adjustment and the calculation
used to determine such amount. At Closing, Purchaser shall pay
to Seller the Adjusted Purchase Price by wire transfer of cash
in United States currency in a manner specified by Seller to
Purchaser at least two (2) business days prior to Closing.
III.
TITLE EXAMINATION
3.1 ACCESS TO TITLE INFORMATION: After the date of this Agreement
and until Closing, at Purchaser's request, Seller shall make the records
described in Section 1.1(f) available to Purchaser at Seller's offices,
during normal business hours for examination by Purchaser. Seller shall
provide Purchaser's authorized representatives with office space as
reasonably necessary for due diligence purposes. Subject to the consent and
cooperation of operators and other third parties, Seller will cooperate
with Purchaser in Purchaser's efforts to obtain, at Purchaser's sole
expense, such additional information relating to the Assets as Purchaser
may reasonably desire, to the extent in each case that Seller may do so
without violating any confidentiality or license obligations or other
contractual commitments to a third party. Seller shall cause its personnel
to assist Purchaser in obtaining such additional information (other than
interpretative information) and shall use reasonable commercial efforts to
cause the counsel, accountants, independent petroleum consultants and
engineers, employees and other representatives of Seller to be available to
Purchaser for such purposes. During such investigation, except as
prohibited by confidentiality or license obligations or other contractual
commitments to a third party (with respect to which Seller shall use
reasonable commercial efforts to obtain a waiver thereof for the benefit of
Purchaser), Purchaser shall have the right to make copies of such records,
files and other materials as Purchaser may reasonably deem advisable.
Seller shall not be obligated to perform any additional title work, and any
additional abstracts and title opinions will not be made current by Seller.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, NO WARRANTY OF ANY KIND
IS MADE BY SELLER AS TO THE INFORMATION SO SUPPLIED, AND PURCHASER AGREES
THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN
INDEPENDENT REVIEW AND JUDGMENT.
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3.2 TITLE DEFECTS: For the purpose of this Agreement, a
"Title Defect" shall mean one or more of the following:
(a) Seller's title at the Effective Date, as to one or more of the
Assets, is not of record, or is subject to an outstanding
mortgage, deed of trust, lien or encumbrance that is neither
specifically listed or referenced in this Agreement or on an
exhibit attached hereto, nor considered a Permitted
Encumbrance (as hereinafter defined);
(b) Seller's interest in any of the Assets is more or less
(but not by way of any Permitted Encumbrances) than
represented on EXHIBIT A hereto;
(c) Seller's rights and interests in any of the Assets are subject
to (i) any contract or agreement not listed on SCHEDULE 1.3 or
(ii) being reduced by virtue of the exercise by a third party
of a reversionary, back-in or similar right not specifically
listed or referenced in this Agreement or on an exhibit
attached hereto, nor considered a Permitted Encumbrance;
(d) Seller is in default under some material provision of a lease,
farmout agreement, joint operating agreement, gas balancing
agreement, gas sales contract or other material contract or
agreement affecting the Assets; or
(e) Any of Seller's representations set forth in Sections 6.9
through 6.21, insofar as it relates to any particular Asset,
is untrue in any material respect.
3.3 PERMITTED ENCUMBRANCES: "Permitted Encumbrances," as that
term is used in this Agreement, means:
(a) Liens for taxes not yet delinquent;
(b) Lessors' royalties, overriding royalties, reversionary
interests and other lease burdens that do not operate to
reduce the net revenue interest of Seller in any of the Assets
to less than the amount set forth therefor on EXHIBIT A;
(c) Contracts and agreements that (i) are disclosed on SCHEDULE
1.3 and (ii) do not operate to increase the working interest
or decrease the net revenue interest of Seller in any of the
Assets from that set forth on EXHIBIT A;
(d) Rights of way, surface leases and other agreements of a
similar nature relating to or restricting surface use on, over
or in respect of the Assets that
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do not have a material adverse effect on the ownership, use,
operation or value of such Assets;
(e) Preferential rights to purchase which, prior to Closing, have
either expired or have been waived by the holders thereof to
the extent such rights affect the Assets;
(f) All necessary consents, permissions and approvals by third
parties in connection with the sales and transfer of the
Assets which have been obtained unconditionally prior to
Closing and those governmental consents customarily generated
and received in the ordinary course of business at a
post-Closing date;
(g) Such Title Defects or other deficiencies or irregularities
waived by Purchaser in writing;
(h) Liens or encumbrances released at or prior to Closing as
disclosed on SCHEDULE 3.3(H) attached hereto, provided that
valid releases are obtained and presented to Purchaser at
Closing pursuant to clause (f) of Article VIII herein; and
(i) Rights reserved to or vested in any governmental subdivision,
political entity or public authority to control or regulate
the Assets in any manner, and all applicable laws, rules and
orders of such subdivisions, entities and authorities,
provided that such governmental rights, laws, rules and orders
do not have a material adverse effect on the ownership, use,
operation or value of such Assets.
3.4 NOTICE OF TITLE DEFECT: Upon discovery of a Title Defect, the
discovering party shall immediately notify the other party in writing of
the nature of the Title Defect and the proposed adjustment in the Purchase
Price attributable to such Title Defect. Any Title Defect which might serve
as the basis of a reduction in the Purchase Price that is not disclosed to
Seller at least five (5) business days prior to Closing shall conclusively
be deemed waived by Purchaser, but only for purposes of Section 3.5 below.
Purchaser's failure to give notice of Title Defects pursuant to this
Section 3.4 shall not prejudice or diminish in any respect Purchaser's
rights under Section 9.2(b) herein and the Assignments to be delivered by
Seller on the Closing Date.
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3.5 REMEDIES FOR TITLE DEFECT:
(a) Upon timely delivery of notice of a Title Defect either by
Purchaser or by Seller, Purchaser and Seller shall meet and
use their best efforts to agree on the validity of the claim
and the amount of any required Purchase Price adjustment.
Purchase Price adjustments, shall be determined in accordance
with the following guidelines:
(i) If it is determined that Seller owns a different
interest than that shown on EXHIBIT A, then the
Purchase Price shall be reduced or increased, as
appropriate.
(ii) In the event a third party or parties elect to
exercise an applicable preferential right of
purchase, the Purchase Price shall be reduced by the
amount allocated to the affected property as
indicated on the Allocation of Value (EXHIBIT B
hereto), and Closing shall occur as to the remainder
of the properties, if any.
(iii) If a Title Defect is a lien, encumbrance or
other charge which is liquidated in amount, then the
adjustment shall be the sum necessary to be paid to
the obligee to remove the Title Defect from the
affected property and Seller shall pay such sum to
obligee at or before Closing. Purchaser agrees to
cooperate with Seller in such efforts at no risk or
expense to Purchaser. If a Title Defect represents an
obligation or burden upon the affected property for
which the economic detriment to Purchaser can be
estimated with reasonable certainty, the adjustment
shall be the sum necessary to compensate Purchaser at
Closing for the adverse economic effect which such
Title Defect will have on the affected property.
(iv) If the parties cannot agree on the amount of a
Purchase Price adjustment attributable to a Title
Defect asserted by Purchaser, notwithstanding the
foregoing guidelines, or as to the existence of a
Title Defect asserted by Purchaser, the affected
property will be eliminated from the purchase and
sale transaction contemplated by this Agreement and
the Adjusted Purchase Price shall reflect a reduction
by the amount allocated to the affected property as
indicated on the Allocation of Value (EXHIBIT B
hereto), and Closing shall occur as to the remainder
of the properties, subject to Section 3.5(b).
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(b) In the event the net amount of all adjustments to the Purchase
Price pursuant to Section 3.5(a) (other than an adjustment
under Section 3.5(a)(ii) necessitated by the exercise by Santa
Fe Energy Resources, Inc. or Hardy Oil & Gas USA Inc., as the
case may be, of a preferential purchase right with respect to
High Island Block 45) exceeds twenty percent (20%) of the
total Purchase Price, then Seller or Purchaser may, upon
written notice to the other party, terminate this Agreement,
and the same shall be of no further force and effect.
(c) If Purchaser is entitled to receive an adjustment for a
Title Defect, as provided in this Agreement, Seller shall have
the right, but not the obligation, to attempt to cure the
Title Defect and cancel the reduction in the Purchase Price.
If Seller chooses to cure the Title Defect, but has not done
so by Closing, Seller shall have the right to postpone Closing
with respect to the affected property for a period not to
exceed twenty (20) business days from the original Closing
Date (the "Cure Period"). During the Cure Period, Seller shall
remain the record and beneficial owner thereof and shall
continue to conduct operations of the affected property in a
good and workmanlike manner, subject to the provisions of
Article V hereof. On or before the last day of the Cure
Period, Seller may submit to Purchaser such curative materials
as Seller has obtained with respect to any uncured and
unwaived Title Defect existing as of the Closing Date, and
Purchaser will have twenty (20) business days to review and
approve or reject the same. If Purchaser approves, Purchaser
will accept, pay for in accordance with the Allocation of
Value (EXHIBIT B hereto), as adjusted if necessary under the
guidelines stated in Section 3.5(a) hereof, and receive an
assignment of the property as to which Seller has cured a
Title Defect. If at the end of the Cure Period, Seller shall
not have removed any applicable Title Defect, Purchaser shall
have the right to elect (i) to waive such Title Defect and
accept, pay for and receive an assignment of the affected
property or (ii) to eliminate the affected property from the
purchase and sale transaction contemplated by this Agreement,
in which case the Adjusted Purchase Price shall reflect a
reduction by the amount allocated to the affected property as
indicated on the Allocation of Value (EXHIBIT B hereto).
3.6 PREFERENTIAL PURCHASE RIGHTS: Except as disclosed on SCHEDULE
3.6 attached hereto, none of the Leasehold Property is subject to
preferential purchase rights or consents to assignment in favor of third
parties. With respect to each preferential purchase right covering the
Leasehold Property, Seller shall send to the holder of such right a notice
offering to sell to such holder, in accordance with the contractual
provisions applicable to such right, those Assets covered by such right on
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substantially the same terms hereof and for the portion of the Purchase
Price attributable to such Leasehold Property on the Allocation of the
Value (EXHIBIT B attached hereto), subject to adjustments in the same
manner as the Purchase Price may be adjusted pursuant to Section 3.5 of
this Agreement.
If, prior to Closing, any holder of a preferential purchase right
notifies Seller that it intends to consummate the purchase of the Assets to
which its preferential purchase right applies, then those Assets shall be
excluded from the Assets to be conveyed to Purchaser, and the Purchase
Price shall be reduced as set forth in Section 3.5(a)(ii); provided,
however, that if the holder of such preferential purchase right fails to
consummate the purchase of the Assets covered by such right in accordance
with and within the time provided in the applicable agreement, then Seller
shall so notify Purchaser, and at Closing, Seller shall sell to Purchaser,
and Purchaser shall purchase from Seller, the Assets to which the
preferential purchase right is applicable for a price equal to that portion
on the Allocation of Value and upon the other terms of this Agreement.
3.7 CONSENTS TO ASSIGNMENT: Seller shall use reasonable commercial
efforts to obtain all consents to assignment of the Assets prior to
Closing. If a lessor or other third party who has the right to consent to
assignment of an Asset or part thereof refuses such consent or refuses to
grant a consent on an unconditional basis, or if such party fails to
respond to Seller's efforts to obtain consent to assignment, Seller will
promptly notify Purchaser, such notice to be provided at least five (5)
business days prior to Closing. Any Asset or part thereof so affected on
the Closing Date will be deemed to be subject to an uncured Title Defect.
IV.
PHYSICAL CONDITION
4.1 PHYSICAL CONDITION OF THE ASSETS: Purchaser acknowledges that some
oil field production equipment may contain asbestos and/or
naturally-occurring radioactive material ("NORM"). In this regard,
Purchaser expressly understands that NORM may affix or attach itself to the
inside of wells, materials and equipment as scale or in other forms, and
that wells, materials and equipment located on the Assets described herein
may contain NORM and that NORM-containing materials may be buried or have
been otherwise disposed of on or under the Assets. Purchaser also expressly
understands that special procedures may be required for the removal and
disposal of asbestos and NORM from the Assets where it may be found, and
that
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Purchaser assumes all liability and responsibility for such activities when
and if performed but without prejudice to Purchaser's rights under Sections
4.6, 9.2 and 12.18 hereof.
4.2 ENVIRONMENTAL ASSESSMENT DURING EXAMINATION PERIOD:
(a) Upon Purchaser's execution of this Agreement, Seller
will make available to Purchaser environmental reports or
surveys, if any, in Seller's possession pertaining to any of
the Assets, and Purchaser shall have the right to make any
environmental assessment of the Assets during the period (the
"Examination Period") beginning on the date of this Agreement
and ending five (5) days prior to Closing. Purchaser and its
Agents (as such term is defined in Section 4.6) shall have the
right to enter upon the Assets and all buildings and
improvements thereon, inspect the same, conduct soil and water
tests and borings, and generally conduct such tests,
examinations, investigations and studies as may be necessary
or appropriate for the preparation of appropriate engineering
and other reports, and evaluations relating to the Assets,
their condition, and the presence of waste or contaminants.
Purchaser agrees to immediately provide to Seller a copy of
the environmental assessment, including any reports, data and
conclusions upon which it is based. Except as may be required
by law, subpoena or other legal process, Purchaser agrees to
keep all data and information acquired by virtue of such
examinations, and the results of all testing and analyses
thereof, strictly confidential and not to disclose same to any
person or agency, without the prior written approval of
Seller, other than (i) Purchaser's Agents and (ii) firms or
entities proposing to provide financial accommodations to
Purchaser.
(b) ON-SITE TESTS AND INSPECTIONS: Seller shall permit, or in case
of any third-party operated wells, use reasonable commercial
efforts to cause the operator thereof to permit, Purchaser's
authorized representatives to consult with Seller's and/or
such third-party operator's agents and employees during
reasonable business hours and to conduct on-site inspections
and inventories of the Leasehold Property and inspect and
examine all well logs and geological and geophysical data
(other than interpretive information) directly relating to
such Leasehold Property.
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4.3 WITHDRAWAL BY PURCHASER:
(a) If, during the Examination Period, Purchaser, in its sole
discretion determines that (i) an Environmental Defect or
Defects exists, or (ii) that the physical inspections
contemplated by Section 4.2(b) indicate (x) that any Asset may
not be in compliance in any material respect with any
applicable laws, rules or regulations or (y) that any well
included in the Assets has suffered a material adverse change
since November 30, 1995 in its ability to produce hydrocarbons
then, by so notifying Seller within the Examination Period,
Purchaser may eliminate any Asset affected by an Environmental
Defect, material non-compliance or material adverse change
from the purchase and sale transaction and the Purchase Price
shall be reduced by the amount allocated to the affected
property as indicated on the Allocation of Value (EXHIBIT B
hereto), and Closing shall occur as to the remainder of the
properties, subject to Section 3.5(b).
(b) An "Environmental Defect" shall mean, with respect to any
Asset:
(i) Any matter that causes a breach of Seller's
representation set forth in Section 6.19; or
(ii) With respect to an environmental assessment conducted
pursuant to Section 4.2(a) hereof, the presence or
evidence of the past presence of any Hazardous
Substance on the Leasehold Property. A "Hazardous
Substance" is any substance, chemical or waste that
is listed or included as hazardous, toxic or
dangerous under any applicable Environmental Laws (as
such term is defined in Section 6.19 hereof).
4.4 CONDITIONAL ACCESS TO ASSETS: Purchaser is hereby granted
access to the Assets to conduct its environmental assessment and physical
inspections and tests upon the following conditions:
(a) The environmental assessment and physical inspections and
tests shall be conducted at Purchaser's sole risk and expense,
and Purchaser waives and releases all claims against Seller
and its Agents for injury to, or death of, persons or damage
to property arising in any way from the exercise of rights
granted to Purchaser hereby or the activities of Purchaser or
its employees, Agents or contractors on the Assets.
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(b) Purchaser shall indemnify Seller, and its Agents
against and hold each and all of said indemnitees harmless
from any and all loss, cost, damage, expense or liability,
including attorneys' fees, whatsoever arising out of (i) any
and all liens or other encumbrances for labor or materials
furnished in connection with such tests, samplings, studies or
surveys as Purchaser may conduct with respect to the Assets
and (ii) any injury to or death of persons or damage to
property occurring in, on or about the Assets as a result of
such exercise or activities whether or not Seller or its
Agents were negligent or otherwise at fault (except for any
such injuries or damages caused solely by the gross negligence
or willful misconduct of said indemnitees).
4.5 [Intentionally omitted.]
4.6 ASSUMPTION AND INDEMNIFICATION OF ENVIRONMENTAL RISK:
(a) On and after the Closing Date, Purchaser shall assume full
responsibility for, and agrees to comply with and perform all
environmentally related duties and obligations of the owner of
the Assets arising from the ownership or operation thereof
after the Closing Date, and to indemnify, defend and hold
harmless Seller, its directors, officers, employees, agents,
representatives and affiliated companies (which additional
parties are hereinafter collectively referred to as "Agents"),
from and against all losses, liabilities, causes of action,
damages, liens, penalties, fines, settlement, judgments,
expenses, attorneys' fees, court costs and claims (hereinafter
referred to collectively as "Claims") caused by or arising out
of Purchaser's (or Purchaser's successors or assigns) failure
to observe or comply with any rule, order, permit, statute or
regulation of a governmental authority applicable to any waste
material, contaminant or Hazardous Substance on or included
with the Assets as a result of operations on or after the
Closing Date or the disposal, release or threatened release on
or after the Closing Date of any waste material, contaminant
or Hazardous Substance from the Assets into the atmosphere or
into or upon land or any water course or body of water,
including ground water.
(b) Seller shall indemnify, defend and hold harmless Purchaser and
its Agents from and against Claims made within two (2) years
of the Closing Date caused by or arising out of (i) the
performance prior to the Closing Date of environmentally
related duties and obligations of the owner of the Assets,
(ii) Seller's failure to have observed or complied with any
rule, order,
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permit, statute, or regulation of a governmental authority
applicable to any waste material, contaminant or Hazardous
Substance on or included with the Assets as a result of
operations prior to the Closing Date or (iii) the disposal,
release or threatened release prior to the Closing Date of any
waste material, contaminant or Hazardous Substance from the
Assets into the atmosphere or into or upon land or any water
course or body of water, including ground water; provided,
however, in no event shall Seller have any obligation to
indemnify, defend or hold harmless Purchaser against such
Claims attributable to Purchaser's negligence in remediating
any environmental condition existing prior to the Closing
Date.
(c) Purchaser shall indemnify, defend and hold harmless Seller
and its Agents from and against all Claims made after two (2)
years from the Closing Date caused by or arising out of (i)
the performance prior to the Closing Date of environmentally
related duties and obligations of the owner of the Assets,
(ii) the failure, prior to the Closing Date, of the owner or
operator of the Assets to have observed or complied with any
rule, order, permit, statute or regulation of a governmental
authority applicable to any waste material, contaminant or
Hazardous Substance on or included with the Assets or (iii)
the disposal, release or threatened release prior to the
Closing Date of any waste material, contaminant or Hazardous
Substance from the Assets into the atmosphere or into or upon
land or any water course or body of water, including ground
water; provided, however, in no event shall Purchaser have any
obligation to indemnify, defend or hold harmless Seller
against (i) such Claims attributable to matters of which
Seller had actual knowledge at the Closing Date and failed to
disclose to Purchaser, including without limitation such
matters as would cause a breach of Seller's representations
set forth in Section 6.19, or (ii) such Claims attributable to
or caused by Seller's own actions or omissions whenever they
occurred.
(d) Notwithstanding Section 4.6(c), Seller shall indemnify,
defend and hold harmless Purchaser and its Agents from and
against all Claims made after two (2) years from the Closing
Date caused by or arising out of (i) the performance prior to
the Closing Date of environmentally related duties and
obligations of the owner of the Assets, (ii) the failure,
prior to the Closing Date, of the owner or the operator of the
Assets to have observed or complied with any rule, order,
permit, statute, or regulation of a governmental authority
applicable to any waste material, contaminant or Hazardous
Substance on or included with the Assets, or (iii) the
disposal, release, or threatened release prior to the Closing
Date of any waste material, contaminant, or Hazardous
Substance from the Assets into the
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atmosphere or into or upon any land or water course or body of
water, including ground water, to the extent but only to the
extent that such Claims are attributable to matters of which
Seller had actual knowledge at the Closing Date and failed to
disclose to Purchaser.
(e) This indemnification and assumption of responsibility
shall apply to liability for voluntary environmental response
actions undertaken pursuant to the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") or any
other federal, state or local law, regulation or order. A
Claim shall be deemed asserted against Seller at the time an
inquiry or investigation of which Seller has actual knowledge
is initiated by any regulatory agency or judicial body having
jurisdiction thereover relating to environmental cleanup or
remediation activities or upon Seller's receipt of written
demand for environmental cleanup or remediation activities
from an affected lessor.
V.
OPERATIONS AND CASUALTY LOSS
5.1 OPERATIONS:
(a) Seller, as to the portion of the Assets to be conveyed
which it now operates, agrees to continue to operate the same
in a good and workmanlike manner until Closing, when such
operations shall be turned over to Purchaser unless contrary
to applicable unit, pooling, communitization or operating
agreements or applicable laws and/or regulations or unless
Seller and Purchaser otherwise agree. Subject to the
provisions of Section 5.2(b), Seller shall pay or cause to be
paid all costs and expenses incurred in connection therewith
until the Closing Date. Except as provided for elsewhere in
this Agreement, Seller shall not directly or indirectly convey
to a third party, or reserve or retain, any recorded or
unrecorded interest in any of the Leases, and Seller shall not
convey to a third party, or reserve or retain, any recorded or
unrecorded executory rights. During the period, if any, from
and after the Closing Date until Seller is replaced as
operator, Seller as operator of the Assets shall have no
liability to Purchaser for losses or damages sustained or
liabilities incurred, except as may result directly from
Seller's gross negligence or willful misconduct. In no event
shall Seller be replaced as operator of the Assets at any time
prior to
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Closing. In the absence of any applicable operating agreement
for any such services, if any, as operator of the Assets (or
portions thereof) performed by Seller from and after the
Closing Date, Purchaser shall pay to Seller all reasonable and
customary expenses incurred by Seller in such operation,
protection or maintenance of the Assets and, in addition, for
active wells located on the applicable portion of the Assets
operated by Seller after the Closing Date, Purchaser shall pay
Seller the Council of Petroleum Accountants Society overhead
charge for each active well per month. Any such charges and
expenses shall be recovered by Seller as part of the Final
Settlement Statement .
(b) From the date hereof until the Closing Date, Seller shall
(or, with respect to non-operated wells, shall use reasonable
commercial efforts to cause the operator of such wells to):
(i) not abandon any well on any lease listed on EXHIBIT A
hereto (the "Leases") capable of commercial production, or
release any such Lease; (ii) not develop, maintain or operate
the Assets in a manner materially inconsistent with prior
operations; (iii) not commence any operation on any Leasehold
Property anticipated to cost in excess of $25,000 per
operation net to Seller's interest (except emergency
operations and operations required under presently existing
contractual obligations and the on-going commitments under the
authorization for expenditures ("AFEs") described on SCHEDULE
6.17 attached hereto); (iv) not create or suffer to exist any
lien, security interest or other encumbrance with respect to
any Asset (except for Permitted Encumbrances); (v) not enter
into any agreement for the sale, disposition or encumbrance of
any Asset; (vi) not dedicate, sell, encumber or dispose of any
oil and gas production attributable to the Assets except in
the ordinary course of business; (vii) not agree to any
material alterations in the Leases or other contractual
agreements governing any Leasehold Property and not enter into
any new contracts relating to the Assets (except for contracts
terminable without penalty by Seller on not more than 30 days
notice); (viii) maintain in force all insurance policies
covering the Assets that are presently in force; (ix) maintain
the Leases in full force and effect and comply with all
express covenants contained therein; (x) pay or cause to be
paid all costs and expenses incurred in connection with the
Assets before they become delinquent (unless same is not
material in amount and is being contested in good faith); (xi)
maintain in all material respects the Assets in a manner
consistent with prior operations; (xii) exercise due diligence
in safeguarding and maintaining secure and confidential all
geological and geophysical maps, confidential reports and data
and all other confidential data included
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in the Assets or relating in any way to the Leasehold
Property, provided, however, Purchaser is aware that Seller
has provided prospective purchasers of the Assets with
confidential data and Purchaser agrees that the retention of
such data by the recipients thereof shall not cause Seller to
be in breach of this covenant; (xiii) furnish Purchaser with
copies of all AFEs on material operations commenced, but not
completed, prior to the Effective Date; (xiv) not voluntarily
relinquish its position as operator with respect to any of the
Leasehold Properties; and (xv) not allow any emission,
discharge, or release into the environment of any pollutant,
contaminant or Hazardous Substance from or attributable to any
Asset.
(c) From and after the date of this Agreement until Closing,
Seller shall: (i) identify and use reasonable commercial
efforts to obtain any and all necessary consents, waivers
(including waivers of preferential purchase rights),
permissions and approvals of third parties or governmental
authorities in connection with the sale and transfer of the
Assets to Purchaser; (ii) afford Purchaser the right to
approve in advance all letters and other documents sent to any
third party concerning consents and preferential rights of
such third party to purchase any portion of the Assets or
prohibit the sale thereof to Purchaser; (iii) file or cause to
be filed all reports required to be filed with governmental
authorities relating to the Assets; (iv) consult with
Purchaser from time to time, upon Purchaser's request,
concerning the operation and development of the Assets and
Seller's compliance with its covenants and agreements
hereunder; (v) maintain its organizational status as a
corporation and assure that as of the Closing Date it will not
be under any legal or contractual restriction that would
prohibit or delay the Closing; (vi) obtain or cause to be
obtained all permits, licenses and other authorizations
required under applicable federal, state and local laws,
including Environmental Laws; (vii) remain and cause the
Assets to remain in compliance in all material respects with
all Environmental Laws and all terms and conditions of such
permits, licenses and authorizations; and (viii) immediately
inform Purchaser upon receipt of notice, or otherwise upon
becoming aware, of any past, present or future events,
conditions, activities, incidents or plans that are reasonably
likely to interfere with continued compliance, or that are
reasonably likely to give rise to any liability, claim,
investigation or proceeding based on or related to the
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, or Hazardous Substance from or attributable to
any of the Assets.
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5.2 CASUALTY LOSS:
(a) The risk of casualty loss relating to the Assets shall pass
from Seller to Purchaser as of the Closing Date, and Purchaser
shall assume all risk of any change in condition of the Assets
from and after the Closing Date.
(b) If, prior to the Closing, any of the Leasehold Property is
destroyed by fire, casing collapse, blowout or other casualty,
Purchaser may elect to treat each Leasehold Property affected
by such casualty as if it suffered from a Title Defect.
5.3 [Intentionally omitted.]
5.4 SUCCESSOR OPERATOR: While Purchaser may represent that it
desires to succeed Seller as operator of the Assets or portions thereof
which Seller may presently operate, Purchaser acknowledges and agrees that
Seller cannot and does not covenant or warrant that Purchaser shall become
successor operator of same since the Assets or portions thereof may be
subject to unit, pooling, communitization or operating agreements or other
agreements or applicable laws and/or regulations which control the
appointment of a successor operator. Seller agrees, however, that as to the
Assets it operates, where it can facilitate the appointment of a successor
operator, Seller will, in a prudent manner at or immediately prior to
Closing, resign as operator.
5.5 NOTICE OF CERTAIN EVENTS: It being the intention of Seller and
Purchaser that Seller shall engage in a continuous disclosure process from
the date hereof through the Closing Date, Seller shall promptly notify
Purchaser if Seller learns at any time on or before the Closing Date of the
occurrence or non-occurrence, as applicable, of: (i) any dispute or
proceeding between Seller, or any third party operator of any Leasehold
Property, with a governmental agency or any other person or entity that, if
adversely determined, could have a material adverse effect on the ownership
or operation of the Assets; (ii) any material default or noncompliance of
any party to any of the Leases or other agreements, orders and other
instruments related to the Leasehold Property with any of the terms and
conditions thereof, or any notice of termination or other material
proceedings or actions that might reasonably be expected to materially and
adversely affect any of the Leases or Leasehold Property, together with a
detailed statement of the steps being taken to cure such default,
noncompliance or termination; (iii) any amendment (unless such amendment is
not material or is permitted by this Agreement or by any consent of
Purchaser to a deviation from the terms of this Agreement) of any of the
Leases or other agreements, orders and other instruments related to
theLeasehold Property, together with a copy of such amendment; (iv) the
intended sale, encumbrance or other disposition of any Asset; (v) the
emission, discharge,
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release or threatened release into the environment of any pollutant,
contaminant or Hazardous Substance from or attributable to any of the
Assets; or (vi) any other event or condition that would make any
representation or warranty (including the information set forth in the
Schedules attached hereto) made by Seller to Purchaser not true and correct
in all material respects, or any agreement or covenant required to be
performed herein unable to be performed as provided herein.
5.6 [Intentionally omitted.]
VI.
REPRESENTATIONS AND WARRANTIES
6.1 EXISTENCE: Each of Purchaser and Seller represents as to
itself that it is duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation and is duly
qualified to carry on business as a foreign corporation in every state of
the United States in which its ownership or lease of property or conduct of
its business and operations makes such qualification necessary.
6.2 AUTHORIZATION: Each of Purchaser and Seller represents as to
itself that it has the requisite corporate power to enter into and perform
this Agreement and the transactions contemplated hereby and that 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 each of Purchaser and Seller, including
shareholder approval where required, as the case may be. Each of Purchaser
and Seller represents as to itself that this Agreement has been duly
executed and delivered on behalf of Purchaser and Seller, respectively, and
that at Closing all documents and instruments required hereunder to be
executed and delivered by Purchaser and Seller, respectively, shall have
been duly executed and delivered.
6.3 BROKERS: Each of Purchaser and Seller represents as to itself
that it has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees with respect to the matters
provided for in this Agreement which will be the responsibility of the
other party and that any such obligation or liability that may exist shall
be the sole obligation of the creating party. The creating party hereby
agrees to defend, indemnify and hold harmless the other parties from any
claims for any such brokers' or finders' fees.
6.4 BINDING OBLIGATION: Each of Purchaser and Seller represents as
to itself that this Agreement constitutes the valid, legal and binding
obligation of each of Purchaser and Seller and is enforceable against it in
accordance with its terms, except to the
-21-
extent that such enforcement may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and by
general equitable principles. Each of Purchaser and Seller represents as to
itself that all instruments required hereunder to be executed and delivered
by each of Purchaser and Seller at the Closing will, when executed and
delivered, constitute valid, legal and binding obligations of Purchaser and
Seller, respectively, enforceable against each of Purchaser and Seller in
accordance with their terms, except to the extent that such enforcement may
be limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and by general equitable principles.
6.5 NO CONFLICT.
(a) Seller's execution, delivery and performance of this
Agreement do not and will not conflict with or violate any
material agreement governing Seller's management,
administration, organization, business or affairs, including
its certificate of incorporation or by-laws or, in any
material respect, any other agreements or instruments to which
Seller may be a party or by which Seller or any of its
properties are bound, or any material law, administrative
regulation or rule or court order, judgment or decree
applicable to Seller or to the Assets, non-compliance with
which could reasonably be expected to have a material adverse
effect on Purchaser or its ownership or operation of the
Assets on and after the Closing Date.
(b) Each Purchaser's execution, delivery and performance of this
Agreement do not and will not conflict with or violate any
material agreement governing such Purchaser's management,
administration, organization, business or affairs, including
its articles or certificate of incorporation or by-laws or, in
any material respect, any other agreements or instruments to
which such Purchaser may be a party or by which such Purchaser
or any of its properties are bound, or any material law,
administrative regulation or rule or court order, judgment or
decree applicable to such Purchaser.
6.6 NO BREACH OR DEFAULT: Each of Purchaser and Seller represents
as to itself that neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby does or will
constitute a breach of, or an event of default under, any contract or
agreement to which Purchaser or Seller is a party. Seller represents that
neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby result or will result in any
liability to Purchaser under the terms of any contracts or agreements of
employment or consultancy to which Seller is a party.
-22-
6.7 BANKRUPTCY: Each Purchaser represents as to itself that there
are no bankruptcy, reorganization, or arrangement proceedings pending,
being contemplated by or, to the best knowledge of Purchaser, threatened
against Purchaser. Seller represents that there are no such proceedings
pending, being contemplated by or, to the best knowledge of Seller,
threatened against Seller.
6.8 FURTHER DISTRIBUTION: Each Purchaser as to itself represents
to Seller that it is acquiring the Assets for its own account and not with
the intent of making a distribution thereof within the meaning of the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder or a distribution thereof in violation of any
applicable securities laws.
6.9 BUSINESS MATTERS: Each Purchaser as to itself represents to
Seller that (i) it has assets of $5,000,000 or more according to the most
recent financial statement of such Purchaser prepared in accordance with
generally accepted accounting principles, (ii) it has knowledge and
experience in financial and business matters that enable it to evaluate the
merits and risks of a transaction of this type and (iii) it is not in a
significantly disparate bargaining position.
6.10 LEASES, WELLS, PRODUCTION AND MARKETING: Seller represents
and warrants to Purchaser that:
(a) Except as disclosed on SCHEDULE 6.10(A) attached hereto,
(i) all Leases are in full force and effect, (ii) Seller is
not in default under any of the terms and provisions of any of
the Leases or under any material agreement to which the same
are subject and Seller has no actual knowledge of a default by
the other party to any of such Leases or material agreements,
(iii) all royalties (except for suspense funds attributable to
royalties withheld in the ordinary course), rentals and other
payments due thereunder by Seller and, to the best of Seller's
knowledge, by others, have been timely and properly paid in
full on or before the due dates thereof and (iv) all
conditions necessary to keep the Leases in full force and
effect have been fully and punctually performed by Seller and,
to the best of Seller's knowledge, by others.
(b) Except as disclosed on SCHEDULE 6.10(B) attached hereto, (i)
all of the wells included in the Assets have been drilled,
completed and operated within the boundaries of the Leases or
within the limits otherwise permitted by contract, pooling or
unit agreement, and by law and in compliance in all material
respects with all applicable rules, regulations, permits,
judgments, orders and decrees of any court or the federal and
state regulatory
-23-
authorities having jurisdiction thereof and (ii) the
production of oil and gas therefrom has not been in excess of
the allowable production allocated to such well.
(c) Except for depth restrictions to which Seller's interests in
the Leases presently are subject, as disclosed on SCHEDULE
6.10(C) attached hereto, Seller represents and warrants that,
with respect to the Leases, Purchaser will acquire from Seller
at the Closing valid and existing leasehold or operating
rights in and to all depths and horizons below the surface of
the land area described in the Leases.
(d) Except as disclosed on SCHEDULE 6.10(D) attached hereto, no
amounts of oil or gas produced from the Leasehold Property are
subject to a sales contract (except for contracts terminable
without penalty by Seller on not more than 30 days notice),
and no person has any call upon, option to purchase, right to
refund or similar rights under any agreement with respect to
the Leasehold Property or to the production therefrom. Except
as disclosed on SCHEDULE 6.10(D), Seller has not been nor will
Seller be obligated by virtue of any prepayment made under any
production sales contract or any other contract containing a
"take or pay" clause, or under any gas balancing, deferred
production or similar arrangement to deliver oil, gas or other
minerals produced from or allocated to any of the Leasehold
Property at some future time without receiving full payment
therefor at the time of delivery. Except as disclosed on
SCHEDULE 6.10(D), there are no material gas imbalances as
between Seller and any third party with respect to operations
relating to the Leasehold Property.
6.11 [Intentionally omitted].
6.12 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGNMENT:
Except as disclosed on SCHEDULE 3.6 attached hereto, and except such
agreements with respect to which all necessary waivers of preferential
purchase rights or unconditional consents to assignment have already been
obtained by Seller, the Assets are not subject to any agreements containing
preferential purchase rights or consent to assignment provisions that must
be complied with prior to the assignment of the Assets to Purchaser.
6.13 LITIGATION: Except as disclosed on SCHEDULE 6.13 attached
hereto, there is neither any claim, dispute, suit, action, investigation or
other proceeding pending before any court or governmental agency nor, to
the best knowledge of Seller, threatened against Seller or any affiliate of
Seller or any of the Assets which has
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resulted or might result in an impairment or loss of Seller's title to any
Asset or diminish the value thereof or impede the operation of any such
Asset, or which challenges or pertains to the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
6.14 TAXES: Except as disclosed on SCHEDULE 6.14 attached hereto,
all ad valorem, property, transfer, production, excise, severance, windfall
profit and similar taxes and assessments payable with respect to the Assets
and based on or measured by the ownership of property or the production or
removal of oil and gas or the receipt of proceeds therefrom previously due
and owing have been timely paid in all respects.
6.15 [INTENTIONALLY OMITTED].
6.16 PLUGGING AND ABANDONMENT; STATUS OF WELLS: The Assets include all
of the wells described in the "private company's 1996 Sale Package"
information brochure furnished to Purchaser by Randall & Dewey, Inc. (the
"Information Brochure"), exclusive of the Galveston A50 Field and the
Galveston 350 Field and do not include any wells not reflected in the
Information Brochure that as of the date hereof required, in accordance
with sound oilfield practice or pursuant to orders of a governmental
authority, or that had been subject to calls or payments under AFEs for
permanent plugging and abandonment. No well identified on EXHIBIT A and
associated with an Allocated Value of greater than zero on EXHIBIT B was
non-producing or shut-in as of the date hereof, except as disclosed on
SCHEDULE 6.16 attached hereto and for any such wells that were shut-in on a
temporary basis as part of normal oilfield operations.
6.17 OPERATING, ETC. AGREEMENTS: With respect to joint, unit or
other operating agreements relating to the Assets: (i) except as disclosed
on SCHEDULE 6.17 attached hereto, there are no AFEs presently outstanding,
and, to the best of Seller's knowledge, there are no plans or proposals to
conduct drilling or other material operations; (ii) Seller has listed on
SCHEDULE 6.17 the status of all material operations by less than all
parties to the extent that such has an effect upon Seller's interests in
the Assets; and (iii) except as disclosed on SCHEDULE 6.17, there are no
operations under the operating agreements with respect to which Seller has
become a non-consenting party.
6.18 CERTAIN AGREEMENTS; PAYOUTS: Except as set forth in SCHEDULE
6.18 attached hereto, no Asset is subject to any area of mutual interest
agreement, or any farm-out or farm-in agreement pursuant to which Seller
was obligated and has not made assignments prior to the Closing Date, or
pursuant to which Purchaser may be obligated to make assignments after the
Effective Date. Except as set forth on SCHEDULE 6.18, no Asset is subject
to any tax partnership, and none of the Assets
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constitute either an interest in or a property of an unincorporated
organization that is subject to taxation under the provisions of subchapter
K of chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as
amended (the "Code"). Where SCHEDULE 6.18 shows an Asset described therein
to be subject to change at "Payout", or similar designations, such change
will occur upon the recovery from the proceeds or production from such
Asset a sum of money set forth in SCHEDULE 6.18 as the "Payout Amount".
6.19 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 6.19:
(i) Seller has obtained or caused to have been obtained all permits,
licenses and other authorizations that are required under federal, state
and local laws with respect to pollution or protection of the environment
relating to the Assets, including laws relating to actual or threatened
emissions, discharges, or releases of pollutants, contaminants, or
Hazardous Substances or other toxic materials or wastes into ambient air,
surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances
or other toxic materials or wastes, including without limitation, the Oil
Pollution Act of 1990 ("Environmental Laws"), and all such permits,
licenses, and other authorizations are currently in full force and effect;
(ii) Seller and the Assets are in compliance in all material respects with
all applicable Environmental Laws and all terms and conditions of such
permits, licenses and authorizations; and (iii) there has been no Release,
and no threat of a Release, of any Hazardous Substances arising from, based
upon, associated with, or related to Seller's use, ownership, or operation
of the Assets, except for matters that have been remedied and have had no,
and have no continuing, material adverse effect upon Seller or the Assets;
and (iv) to Seller's best knowledge, there has been no Release, and no
threat of a Release of any Hazardous Substances arising from, based upon,
associated with, or related to the use, ownership, or operation of the
Assets by Seller's predecessors in title, except for matters that have been
remedied and have had no, and have no continuing, material adverse effect
upon Seller or the Assets.
Except as disclosed on SCHEDULE 6.19, Seller has not received a written
notice of a claim that: (i) such Seller has violated, or is about to
violate, any Environmental Law; (ii) there has been a Release, or there is
a threat of a Release, of Hazardous Substances on, to, or from the Assets
for which such Seller is or may be liable to any third party for injury to
or death of any person, persons, or other living things, or damage to or
loss or destruction of property; (iii) Seller may be or is liable, in whole
or in part, for the costs of cleaning up, remediating, removing, or
responding to a Release or a threat of a Release of Hazardous Substances;
or (iv) the Assets are subject to a lien in favor of any governmental
entity for any liability, costs, or damages under any Environmental Laws
arising from, or any costs incurred by such governmental entity
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in response to, a Release of Hazardous Substances.
6.20 INFORMATION. The production history, working interests, net
revenue interests and prices received for hydrocarbon production set forth
in the Information Brochure are accurate in all material respects.
6.21 EMPLOYMENT LIABILITY. Purchaser will not incur any
liability to any or all of Seller's employees as a result of
transactions contemplated by this Agreement.
6.22 ABSENCE OF UNDISCLOSED LIABILITIES. Except for Permitted
Encumbrances, the liabilities set forth on the Schedules hereto and
liabilities specifically assumed by Purchaser pursuant to Sections 1.3,
4.6(a), 4.6(c) and 9.2(a), there are no liabilities or non-executory
obligations of any nature, whether accrued, absolute, contingent or
otherwise, adversely affecting the Assets or the execution, delivery or
performance of this Agreement by Seller.
VII.
CONDITIONS OF CLOSING
7.1 Purchaser's obligation to consummate the transactions provided
for herein is subject to the satisfaction by Seller (or waiver by
Purchaser) of the following conditions:
(a) REPRESENTATIONS: The representations of Seller contained
in Article VI hereof shall be true and correct in all material
respects on the date of Closing as though made on and as of
that date;
(b) PERFORMANCE: Seller shall have performed the obligations,
covenants and agreements hereunder required to be performed by
Seller at or prior to Closing;
(c) PENDING MATTERS: No suit, action or other proceeding by
a third party or a governmental authority shall be pending or
threatened which seeks to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by
this Agreement;
(d) CONSENTS AND WAIVERS: All necessary consents, permissions and
approvals by third parties in connection with the sale and
transfer of the Assets shall have been received by Seller
prior to Closing, except those
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governmental consents customarily generated and received in
the ordinary course of business at a post-Closing date;
(e) MATERIAL CHANGE IN CONDITION: There shall not have
occurred (i) any circumstance or event relating to the Assets
that does or reasonably could be expected to materially and
adversely affect the value of any portion of the Assets (other
than changes affecting the oil and gas industry generally,
including, without limitation, fluctuations in the price of
oil and/or natural gas), or (ii) any material adverse change
in the production of any of the Leasehold Property from
November 30, 1995 to the Closing Date (other than declines
which are due to actual depletion or are of a temporary nature
due to mechanical problems). No material portion of the
Leasehold Property shall have been destroyed or damaged by
fire, casing collapse, blowout or other casualty, nor shall
there have been any material adverse change in the condition
of any of the Leasehold Property other than as a result of
depletion occurring at normal rates and depreciation of
equipment through normal wear and tear;
(f) HSR ACT. The waiting periods provided for under the HSR
Act shall have expired or been terminated;
(g) PREFERENTIAL PURCHASE RIGHT: The preferential purchase
right with respect to High Island Block 45 in favor of Santa
Fe Energy Resources, Inc. and Hardy Oil & Gas USA Inc. shall
have expired, been waived or exercised; and
(h) CERTAIN TITLE DEFECTS: The Title Defects, if any, with respect
to High Island Block 45 and South Marsh Island Block 133 shall
have been resolved in accordance with Section 3.5 hereof.
7.2 Seller's obligation to consummate the transactions provided
for herein is subject to the satisfaction by Purchaser (or waiver by
Seller) of the following conditions:
(a) REPRESENTATIONS: The representations of Purchaser
contained in Article VI hereof shall be true and correct in
all material respects on the date of Closing as though made on
and as of that date;
(b) PERFORMANCE: Purchaser shall have performed the
obligations, covenants and agreements hereunder required to be
performed by Purchaser at or prior to Closing;
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(c) PENDING MATTERS: No suit, action or other proceeding
by a third party or a governmental authority shall be pending
or threatened which seeks to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by
this Agreement;
(d) GOVERNMENTAL BONDS: Purchaser shall have delivered
to Seller (i) copies of any bonds covering the Assets required
under any laws, rules or regulations of any federal, state or
local governmental agency having jurisdiction over the Assets
or (ii) a commitment by a surety company to issue such bonds
upon Closing;
(e) HSR ACT: The waiting period provided for under the HSR Act
shall have expired or been terminated;
(f) PREFERENTIAL PURCHASE RIGHT: The preferential purchase
right with respect to High Island Block 45 in favor of Santa
Fe Energy Resources, Inc. and Hardy Oil & Gas USA Inc. shall
have expired, been waived or exercised; and
(g) CERTAIN TITLE DEFECTS: The Title Defects, if any, with respect
to High Island Block 45 and South Marsh Island Block 133 shall
have been resolved in accordance with Section 3.5 hereof.
VIII.
CLOSING
At Closing, the following shall occur:
(a) Seller and Purchaser shall execute, acknowledge and deliver an
Assignment of Oil and Gas Leases for each Lease included in
the Assets warranting title against all claims by, through or
under Seller but not otherwise substantially in the form of
EXHIBIT C attached hereto (collectively, the "Assignments"),
covering all of the Assets to be sold pursuant hereto.
(b) Purchaser shall deliver to Seller by wire transfer of cash as
specified by Seller the total Adjusted Purchase Price.
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(c) Purchaser shall provide Seller with executed change of
operator forms on all Leasehold Property operated by Seller,
as required by the United States Department of the Interior,
Minerals Management Service to effect a change of operator for
the properties being sold. Seller shall execute same at
Closing, and promptly thereafter, file said forms with the
applicable governmental agency.
(d) Seller shall (subject to the terms of applicable operating
agreements, laws and regulations and other provisions hereof)
deliver to Purchaser exclusive possession of the Assets,
effective as of the Effective Date.
(e) Seller shall, at or as promptly as reasonably possible after
Closing, provide Purchaser, at Purchaser's sole expense, with
originals of the Leases, contracts, amendments and
correspondence that are found in Seller's lease files (copies
where Seller is not the operator), but Seller shall not be
obligated to purchase additional abstracts or perform any
title curative work. Seller shall retain and shall have no
obligation to furnish to Purchaser any original files or any
data or information which files, data or information Seller
considers proprietary or confidential to it or which Seller
cannot provide Purchaser because of third-party restrictions
on Seller. All information and data shall be furnished as a
matter of convenience only to Purchaser and Purchaser's
reliance on same shall be at Purchaser's sole risk.
(f) Seller shall deliver to Purchaser fully executed and
acknowledged releases and/or termination statements (in
sufficient counterparts to facilitate recording), in form and
substance reasonably satisfactory to Purchaser and its
counsel, of all production payments, leasehold burdens,
mortgages, liens and security interests to be released at the
Closing and covering any of the Assets which are to be
conveyed at Closing, including, without limitation, such
production payments, leasehold burdens, mortgages, liens
and/or security interests disclosed in SCHEDULE 3.3(H)
attached hereto;
(g) Each of Purchaser and Seller shall deliver an officer's
certificate to the effect that, in the case of Seller, the
conditions to Purchaser's obligations to close set forth in
Section 7.1(a), (b), (d) and (e) have been satisfied, and in
the case of Purchaser, the conditions to Seller's obligations
to close set forth in Section 7.2(a), (b) and (d) have been
satisfied. The officer's certificate of Seller shall also
contain Seller's U.S. Taxpayer Identification Number, Seller's
business address and a statement that Seller is not a foreign
person within the meaning of Sections 1445 and 7701 of the
Code.
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(h) Seller shall cause Seller's counsel to deliver such counsel's
opinion to Purchaser, in substantially the form attached
hereto as EXHIBIT D.
Immediately after Closing, Purchaser and Seller shall execute,
acknowledge and deliver notification to all pertinent operators,
non-operators, oil or gas purchasers, governmental agencies and royalty
owners that Purchaser has purchased the Assets, and in particular,
directing all oil and gas purchasers, effective as of the Effective
Date, to make payment to Purchaser of proceeds attributable to
production from the Leasehold Property.
IX.
CONTINUING OBLIGATIONS
9.1 SETTLEMENT STATEMENT. On or before ninety (90) days after
Closing, a final accounting statement shall be prepared by Seller, subject
to verification by Purchaser, based on actual income and expenses and
adjustments contemplated in Section 2.4 hereof (the "Final Settlement
Statement"). The Final Settlement Statement shall set forth the actual
Purchase Price adjustments required by this Agreement. If Seller and
Purchaser cannot agree upon the Final Settlement Statement within one
hundred twenty (120) days after the Closing Date, the determination of the
amount of the Final Settlement Statement shall be submitted to Arthur
Andersen, L.L.P. The determination of Arthur Andersen, L.L.P. shall be
conclusive and binding on the parties hereto and shall be enforceable
against any party hereto in any court of competent jurisdiction. Any costs
and expenses incurred by Arthur Andersen, L.L.P. pursuant to this Section
9.1 shall be borne by Seller and Purchaser equally. On or before thirty
(30) days following receipt of the Final Settlement Statement, Purchaser or
Seller, as the case may be, shall pay to the other party such sums as may
be found to be due in the Final Settlement Statement. All amounts paid
pursuant to the Final Settlement Statement shall be delivered by wire
transfer of immediately available funds to the account specified in writing
by the respective party entitled to such payment, but amounts less than
$25,000 may be made by corporate check.
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9.2 INDEMNITIES:
(a) Purchaser agrees to indemnify, defend and hold harmless
Seller and its Agents from and against any Claims in any way
connected with, attributable to, or arising or resulting from
Purchaser's ownership or operation of, or activities on the
Assets, including, but not limited to, claims for damage to
property or injury or death to persons, claims for breach of
duties and obligations arising under or by virtue of any
lease, contract, agreement, permit, applicable statute or
rule. In addition, Purchaser shall, but without prejudice to
Purchaser's rights under Sections 4.6, 9.2 and 12.18, be
solely liable and responsible for the proper plugging and
abandonment of all wells now located on or hereafter drilled
on the Assets, and any environmental clean-up associated
therewith, and shall indemnify, defend and hold harmless
Seller and its agents from and against all claims relating to
same.
(b) Except with respect to Claims for which Purchaser has agreed
to indemnify and hold harmless Seller pursuant to Section
4.6(a), 4.6(c) and Section 9.2(a), Seller agrees to indemnify,
defend and hold harmless Purchaser and its Agents from and
against any and all Claims in any way connected with,
attributable to, or arising or resulting from Seller's
ownership or operation of, activities on the Assets,
including, but not limited to, claims for damage to property
or injury or death to persons, claims for breach of duties and
obligations arising under or by virtue of any lease, contract,
agreement, permit, applicable statute.
(c) Any claim for indemnity under any provision of this
Agreement, including Sections 4.6 and 9.2, shall be made by
written notice from the party seeking indemnification (the
"Indemnified Party") to the party required to provide such
indemnification (the "Indemnified Party"), together with a
written description of any third party claim against the
Indemnified Party. The Indemnifying Party shall have a period
of thirty (30) days after receipt of such notice within which
to respond thereto or, in the case of a third party claim
which requires a shorter time for response, then within such
shorter period as specified by the Indemnified Party in such
notice (the "Notice Period"). If the Indemnifying Party denies
liability or fails to respond to the notice within the Notice
Period, the Indemnified Party may defend or compromise the
claim as it deems appropriate without prejudice to any of the
Indemnified Party's rights hereunder, with no further
obligation to inform the Indemnifying Party of the status of
the claim and no right of the Indemnifying Party to approve or
disapprove any action, taken in
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connection therewith by the Indemnified Party. If the
Indemnifying Party accepts the obligation to respond, it shall
so notify the Indemnified Party within the Notice Period and
elect either: (i) to undertake the defense or compromise of
such third party claim with counsel selected by the
Indemnifying Party and reasonably approved by the Indemnified
Party or (ii) to instruct the Indemnified Party to defend or
compromise such claim. If the Indemnifying Party undertakes
the defense or compromise of such third party claim, the
Indemnified Party shall be entitled, at its own expense, to
participate in such defense. No compromise or settlement of
any third party claim shall be made without reasonable notice
to the Indemnified Party and, unless such compromise or
settlement includes a general release of the Indemnified Party
in respect of the matter with no admission of liability on the
part of the Indemnified Party and no constraints on the future
conduct of its business, without the prior written approval of
the Indemnified Party.
9.3 FURTHER ASSURANCES: After Closing, Seller and Purchaser agree
to take such further actions and to execute, acknowledge and deliver all
such further documents that are reasonably necessary to carry out the
purposes of this Agreement or of any document delivered pursuant hereto.
9.4 RECORDING: Purchaser shall, at its own cost, immediately
record the Assignments in the appropriate offices of the counties and
parishes adjacent to that portion of the subsoil and seabed of the Outer
Continental Shelf being the subject of the Assignments that would fall
within such county's or parish's boundaries if extended seaward. Purchaser
shall immediately file for all requisite approvals of any federal
governmental agencies to the Assignments. The Assignments shall be filed in
the appropriate governmental offices on a form required and in compliance
with the applicable rules of such governmental agencies. Purchaser shall
supply Seller with a true and accurate photocopy of the recorded and filed
Assignments, together with evidence of approval of the Assignments by
applicable governmental authorities, within a reasonable period of time
after their recording and filing.
9.5 FURTHER ASSURANCES REGARDING WEST CAMERON 254
(a) Seller shall use its reasonable commercial efforts to cause an
assignment from Vastar Resources Inc. in favor of Walter Oil &
Gas Corporation ("Walter") of 100% record title interest in
OCS-G 7608 to be properly executed and approved by the
Minerals Management Service (the "MMS").
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(b) Before Closing, Seller shall use its reasonable commercial
efforts to obtain and file for approval with the MMS a
properly executed assignment from Walter in favor of Seller of
22.75% record title interest in OCS-G 7608, and shall take all
action reasonably necessary to cause such assignment to be
approved by the MMS, including, without limitation, the
posting of any bonds or securities in such amount as may be
required by the MMS as a condition to the issuance of such
approval.
9.6 ACCOUNTING FOR PROCEEDS FROM THE SALE OF PRODUCTION. If after
the Closing Seller receives any proceeds from the sale of production that
are attributable to production from the Leasehold Property after the
Effective Date, or attributable to the merchantable oil or condensate in
the tanks on the Effective Date, Seller shall remit such proceeds to
Purchaser within fifteen (15) days after receipt of such proceeds by
Seller. In the event that after the Closing Purchaser receives any proceeds
from the sale of production that are attributable to production from the
Assets prior to the Effective Date, except for proceeds attributable to the
merchantable oil or condensate in the tanks on the Effective Date,
Purchaser shall remit such proceeds to Seller within fifteen (15) days
after receipt of such proceeds by Purchaser.
X.
INDEPENDENT INVESTIGATION AND DISCLAIMER
Purchaser acknowledges that it has had access to the Assets, the
officers and employees and agents of Seller, and the books, records and
files of Seller relating to the Assets, and in making the transactions
contemplated hereby, Purchaser has relied solely on the basis of its own
independent investigation of the Assets and upon the representations and
covenants in this Agreement. EXCEPT AS SPECIFICALLY PROVIDED IN THIS
AGREEMENT, SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO: (i) THE CONDITION OF THE ASSETS,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS AND ANY WARRANTY AGAINST HIDDEN VICES OR
DEFECTS, (ii) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR PROPRIETARY RIGHT
OF ANY THIRD PARTY AND (iii) ANY INFORMATION, DATA OR OTHER MATERIALS
(WRITTEN OR ORAL) FURNISHED TO PURCHASER BY OR ON BEHALF OF SELLER,
INCLUDING, WITHOUT LIMITATION, THAT RELATE TO OR THAT MAY HAVE A BEARING ON
THE EXISTENCE OR EXTENT OF
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OIL, GAS OR OTHER MINERAL RESERVES OR ON THE RECOVERABILITY OF OR THE COST
OF RECOVERING ANY SUCH RESERVES OR ON THE ABILITY TO SELL OIL OR GAS
PRODUCTION AFTER CLOSING.
XI.
TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
only in the following instances:
(a) By Purchaser if the conditions set forth in Section 7.1
are not satisfied or waived as of Closing;
(b) By Seller if the conditions set forth in Section 7.2 are not
satisfied or waived as of Closing;
(c) By way of Section 3.5(b); or
(d) At any time by mutual written agreement of Seller and
Purchaser and in accordance with any other express provisions
of this Agreement.
If this Agreement is terminated pursuant to this Article XI, no party shall
have any liability to the other; provided, however, no party shall be
relieved of any liability for any willful breach of this Agreement.
XII.
MISCELLANEOUS
12.1 GOVERNING LAW: This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Texas. Assignments
executed in accordance with this Agreement shall be governed by and
interpreted in accordance with the laws of the respective state adjacent to
that portion of the subsoil and seabed of the Outer Continental Shelf being
the subject of such Assignment that would fall within such state's
boundaries if extended seaward.
12.2 ENTIRE AGREEMENT: This Agreement, together with any
confidentiality agreements relating to the Assets previously executed by
Purchaser, constitute the entire agreement among the parties and supersede
all prior agreements,
-35-
understandings, negotiations and discussions, whether oral or written, of
the parties. No supplement, amendment, alteration, modification, waiver or
termination of this Agreement shall be binding unless executed in writing
by the parties hereto.
12.3 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.
12.4 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.
12.5 ASSIGNMENT: No party hereto shall assign this Agreement or any
of its rights or obligations hereunder without the prior written consent of
the other parties, and any assignment made without such consent shall be
void. 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 and assigns.
12.6 NOTICES: Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by personal delivery
or by depositing same in the United States mail, addressed to the party to
be notified, postage prepaid, and registered or certified with a return
receipt requested, or by telecopy. Notices deposited in the mail in the
manner hereinabove described shall be deemed to have been given and
received upon the date of delivery as shown on the return receipt. Notice
served in any other manner shall be deemed to have been given and received
only if and when actually received by the addressee and, in the case of
telecopies, when receipt is confirmed. For purposes of notice, until
receipt of written notice changing same, the addresses of the parties shall
be as follows:
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PURCHASER'S ADDRESS:
American Exploration Company
1331 Lamar Street, Suite 900
Houston, Texas 77010-3088
Attention: Harry C. Harper
Telecopy No.: (713) 756-6002
Dominion Reserves, Inc.
P. O. Box 26532
Richmond, Virginia 23261
Attention: G. E. Lake, Jr.
Telecopy No.: (804) 775-5720
12.7 UTPCPL AND DTPA WAIVER: TO THE EXTENT APPLICABLE TO THE
ASSETS OR ANY PORTION THEREOF, PURCHASER HEREBY WAIVES THE PROVISIONS OF
THE LOUISIANA UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW (LA. R. S.
51:1402, ET SEQ.). PURCHASER EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER
XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS CODE ANNOTATED,
BUSINESS AND COMMERCE CODE.
12.8 WAIVER OF JURY TRIAL: EACH OF SELLER AND PURCHASER AS TO
ITSELF DOES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
LEGAL PROCEEDING BASED UPON, ARISING OUT OF, OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEM-PLATED HEREBY.
12.9 [Intentionally omitted.]
12.10 LIMITATION OF LIABILITY: Notwithstanding anything herein
provided to the contrary, Seller and Purchaser do hereby covenant and agree
that the recovery by either party hereto of any damages suffered or
incurred by it as a result of any breach by the other party of any of its
covenants, agreements, representations, disclaimers, waivers or continuing
obligations under this Agreement shall be limited to the actual damages
suffered or incurred by the non-breaching party as a result of such breach,
and in no event shall such recovery include any indirect, consequential,
exemplary or punitive damages.
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12.11 NO ADMISSIONS: Purchaser and Seller agree that neither this
Agreement, nor any part hereof, nor any performance under this Agreement,
nor any payment of any amount pursuant to any provision of this Agreement
shall constitute or be construed as a finding, evidence of, or an admission
or acknowledgment of any liability, fault or past or present wrongdoing, or
violation of any law, rule, regulation, or policy, by either Seller or
Purchaser or by their respective officers, directors, employees or agents.
12.12 THIRD PARTY BENEFICIARIES:Except as otherwise specifically
provided in this Agreement, neither this Agreement nor any performance
hereunder by Seller or Purchaser shall be deemed or interpreted to create
any right, claim, cause of action or remedy on behalf of any person not a
party hereto.
12.13 EXPENSES: Except as otherwise provided herein, each party
shall be solely responsible for all expenses incurred by it in connection
with this transaction, including without limitations, fees and expenses of
its own legal counsel and accountants.
12.14 SEVERABILITY: If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any applicable
rule or law, 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 transaction contemplated hereby is not affected in a
materially adverse manner with respect to either party.
12.15 PUBLICITY: Seller and Purchaser 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, neither party shall issue any publicity or other
release concerning the transactions contemplated by this Agreement without
the prior written consent of the other party.
12.16 USE OF SELLER'S NAME: As soon as practicable after Closing,
Purchaser shall remove or cause to be removed the names and marks, if any,
used by Seller and all variations and derivations thereof and logos, if
any, relating thereto from the Assets and shall not thereafter make any use
whatsoever of those names, marks and logos, if any.
12.17 WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS: Purchaser waives
compliance with any applicable bulk transfer law relating to the
transactions contemplated by this Agreement, and agrees to assume all risk
and liability in connection with the failure to so comply.
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12.18 SURVIVAL: All representations, warranties, covenants and
agreements made herein by Purchaser and Sellers (other than the indemnities
contained in Sections 4.6 and 9.2 which shall survive indefinitely) shall
survive Closing and the delivery of the Assignment be delivered pursuant
hereto until the date which is six (6) months following the Closing Date,
and no party shall have liability with respect to any breach thereof
unless, within such time period, notice of a claim based upon such breach
shall have been given by the party asserting the claim, with specificity
reasonable under the circumstances, including without limitation, the
amount required to satisfy such claim estimated in good faith if necessary.
12.19 LISTING OF EXHIBITS AND SCHEDULES: The Exhibits listed below
are attached to this Agreement and by this reference are fully incorporated
herein:
Exhibit A -- Description of Assets
Exhibit B -- Allocation of Value
Exhibit C -- Form of Assignment
Exhibit D -- Form of Opinion of Seller's Counsel
Schedule 1.3 -- Assumed Contracts and Agreements
Schedule 3.3(h) -- Liens to be Released at Closing
Schedule 3.6 -- Preferential Purchase Rights and Consents
Schedule 6.10(a) -- Material Defaults, Unpaid Royalties and Other
Conditions Affecting Leases
Schedule 6.10(b) -- Drilling and Production
Schedule 6.10(c) -- Depth Restrictions
Schedule 6.10(d) -- Sales Contracts, "Take-or-Pay" Clauses, Gas
Balancing, Deferred Production or
Similar Arrangements
Schedule 6.13 -- Litigation
Schedule 6.14 -- Taxes
Schedule 6.16 -- Wells Not Included in Information Brochure
Schedule 6.17 -- AFEs, Plans and Proposals; Non-Consents
Schedule 6.18 -- Areas of Mutual Interest; Payouts; Tax
Partnership Agreements
Schedule 6.19 -- Environmental Matters
12.20 COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which,
taken together, shall constitute one and the same instrument.
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12.21 NOTICES AFTER CLOSING: Purchaser and Seller hereby agree that
each party shall notify the other of its receipt, after the Closing Date,
of any instrument, notification or other document affecting the Assets
while owned by such other party.
12.22 CONCERNING PURCHASER. Notwithstanding anything herein to the
apparent contrary, the obligations of American Exploration Company ("AX")
and Dominion Reserves, Inc. ("Dominion") as "Purchaser" are several, not
joint or joint and several, and neither AX nor Dominion will have any
liability to Seller for the performance by the other of any covenant,
agreement, representation or warranty hereunder. It is understood and
acknowledged by Seller that AX and Dominion are acquiring the Assets in the
respective undivided percentage interests of 25% and 75% (provided,
however, if the High Island Block 45 Field is deleted or withdrawn from
this transaction pursuant to this Agreement, such percentage interests will
be adjusted to 50% each), and following Closing that each will be
responsible with respect to the Assets and under this Agreement (including
without limitation Sections 4.6 and 9.2(a)) only to the extent of its
undivided interest therein. It is understood and agreed by Purchaser that
Seller has no obligation to sell any interest in the Assets other than the
entirety of Seller's right, title and interest therein, subject to the
provisions of Section 3.5, 4.3 and 5.2 hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first set forth above.
SELLER:
PURCHASER:
AMERICAN EXPLORATION COMPANY
By: /s/ ROBERT R. MCBRIDE, JR
Robert R. McBride, Jr.
Vice President - Production/Operations
DOMINION RESERVES, INC.
By: /s/ THOMAS N. CHEWNING
Thomas N. Chewning
President
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