1
EXHIBIT 2.1
[THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH "[TEXT OMITTED - CONFIDENTIAL TREATMENT
REQUESTED]."
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
TEXACO EXPLORATION AND PRODUCTION INC.
AND
BARGO PETROLEUM CORPORATION
DATED FEBRUARY 22, 2000
EFFECTIVE DATE: JANUARY 1, 2000
2
TABLE OF CONTENTS
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION.........................................................1
1.1 Subject Matter .....................................................................................1
1.2 Defined Terms ......................................................................................1
Affiliate................................................................................................1
Agreed Rate..............................................................................................1
Agreement................................................................................................1
Applicable Law...........................................................................................2
Assets...................................................................................................2
Assumed Obligations......................................................................................2
Beneficial Interests.....................................................................................2
Burdens..................................................................................................2
Business Day.............................................................................................2
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Closing..................................................................................................2
Closing Date.............................................................................................2
Code.....................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Contemplated Transactions................................................................................3
Contracts................................................................................................3
Corporate Documents......................................................................................3
Easements................................................................................................3
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Excluded Assets..........................................................................................4
Excluded Obligations.....................................................................................6
Fee Interests............................................................................................6
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Governmental Body........................................................................................6
HSR Act..................................................................................................6
Hydrocarbons.............................................................................................7
Knowledge................................................................................................7
Leases...................................................................................................7
Losses...................................................................................................7
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Other Property...........................................................................................8
Permitted Encumbrances...................................................................................8
Person..................................................................................................10
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Properties..............................................................................................10
Taxes...................................................................................................10
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
1.3 Other Definitions in the Agreement ................................................................11
1.4 Rules of Construction .............................................................................12
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PART TWO
SALE AND PURCHASE.............................................................................................13
2.1 Purchase and Sale ...................................................................................13
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
2.5 Closing and Payment of Purchase Price ..............................................................14
2.6 Method of Payment ..................................................................................14
PART THREE
REPRESENTATIONS AND WARRANTIES............................................................................... 15
3.1 Seller .............................................................................................15
3.2 Buyer ..............................................................................................18
3.3 Disclaimer and Notifications .......................................................................19
PART FOUR
COVENANTS.....................................................................................................22
4.1 Covenants of Seller ................................................................................22
4.2 Covenants of Buyer .................................................................................23
4.3 Covenants of Seller and Buyer ......................................................................25
PART FIVE
CONDITIONS TO CLOSING.........................................................................................35
5.1 Seller's Closing Conditions ........................................................................35
5.2 Buyer's Closing Conditions .........................................................................37
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES.........................................................................................................40
7.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes .......................40
7.2 Other Taxes ........................................................................................40
7.3 Sales Taxes ........................................................................................40
7.4 Cooperation ........................................................................................41
7.5 Tax Proceedings ....................................................................................41
7.6 Purchase Price Allocation ..........................................................................41
7.7 Reservation of Section 29 Credits ..................................................................41
7.8 Reservation of Section 43 Credits ..................................................................41
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART NINE
MISCELLANEOUS.................................................................................................45
9.1 Successors and Assigns .............................................................................45
9.2 Waivers and Amendments .............................................................................45
9.3 Notices ............................................................................................46
9.4 Counterparts .......................................................................................47
9.5 Entire Agreement ...................................................................................47
9.6 Seller's Option to Elect a Tax Deferred Exchange ...................................................47
9.7 Severability .......................................................................................47
9.8 Applicable Law .....................................................................................48
9.9 Expenses ...........................................................................................48
9.10 Laws and Regulations ...............................................................................48
9.11 Public Announcements ...............................................................................48
9.12 Assignability ......................................................................................48
9.13 Provisions Survive Closing .........................................................................48
9.14 Dispute Resolution .................................................................................48
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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SCHEDULES AND EXHIBITS
Schedules
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A Contracts
A-1 Mid-Continent
A-2 East Texas
A-3 Permian
B Easements
C Included Equipment
D Excluded Assets
E Leases
E-1 Mid-Continent
E-2 East Texas
E-3 Permian
F Fee Interests
F-1 Mid-Continent
F-2 East Texas
F-3 Permian
G Properties and Imbalances
G-1 Mid-Continent
G-2 East Texas
G-3 Permian
H Geophysical Data
2.4 Purchase Price Allocation
3.1(g) Litigation
3.1(h) Consents and Preferential Rights
3.1(j) Permits
3.1(k) Notices on Leases and Contract
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
3.1(n) AFE's
4.3(d) Gas Purchase Agreements to be Executed
4.3(v) Joint Use Agreements
4.3(w) Centrilift Equipment
4.3(x) Wells Requiring Mechanical Integrity Tests
9.14 Dispute Resolution
Exhibits
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A Assignments
B-1 through B-2 Deeds
C Oil and Gas Leases
D Officer's Certificate - Buyer
E Officer's Certificate - Seller
F [intentionally left blank]
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G [intentionally left blank]
H-1 through H-2 Gas Purchase Agreements
I Transition Agreement
J Geophysical License Agreement (3D)
K Versado Gas Purchase Agreement
L Geophysical License Agreement (2D)
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PURCHASE AND SALE AGREEMENT
This agreement is made and entered into this 22nd day of February, 2000, by
and between Texaco Exploration and Production Inc., a Delaware corporation
(hereinafter "Seller"), and Bargo Petroleum Corporation, a Texas corporation,
(hereinafter "Buyer"). Seller and Buyer are sometimes separately referred to
herein as a "Party" and collectively as "Parties."
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.1 SUBJECT MATTER. The subject matter of this Agreement is the sale by
Seller to Buyer of the Assets, the purchase of the Assets and the assumption of
the Assumed Obligations by Buyer, and the terms and conditions upon which all of
the foregoing shall take place.
1.2 DEFINED TERMS. For purposes of this Agreement, including the Exhibits
and Schedules hereto, except as otherwise expressly provided or unless the
context otherwise requires, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common
control with, such Person. For purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management of such Person, whether through
ownership of voting securities, by contract or otherwise, and specifically
with respect to a corporation or partnership, means direct or indirect
ownership of fifty percent (50%) or more of the voting stock in such
corporation or of the voting interest as a partner in such partnership. In
addition, Seller's Affiliates shall include Equilon Enterprises LLC, Motiva
Enterprises LLC, Equiva Services LLC and Equiva Trading Company LLC.
"AGREED RATE" means a rate per annum calculated on a 360-day basis
which is equal to the lesser of (a) a rate which is one percent (1%) above
the prime rate of interest of Chase Manhattan Bank, New York, New York, as
announced or published by such bank from time to time (adjusted from time
to time to reflect any changes in such rate determined hereunder), or (b)
the maximum rate from time to time permitted by Applicable Law.
"AGREEMENT" means this Purchase and Sale Agreement, including the
Exhibits and Schedules.
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"APPLICABLE LAW" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, certificates, orders, interpretations, licenses
and permits of any Governmental Body, including the common or civil law,
(including, without limitation, those pertaining to occupational health and
safety, consumer product safety, employee benefits, the environment,
securities or zoning) and all judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other Governmental Body
of competent jurisdiction.
"ASSETS" means collectively the Contracts, the Easements, the Leases,
the Fee Interests, the Beneficial Interests and the Other Property, except
to the extent constituting Excluded Assets.
"ASSUMED OBLIGATIONS" means, except as constitutes Excluded
Obligations (i) all liabilities, duties, and obligations that arise from
the ownership or operation of the Assets after the Effective Date; (ii) all
liabilities and obligations with respect to Plugging and Abandonment; (iii)
all duties, liabilities and obligations under the Contracts, the Leases and
the Easements arising after and in existence as of the Effective Date; (iv)
the Environmental Obligations and (v) all other duties, liabilities, and
obligations assumed by Buyer under this Agreement.
"BENEFICIAL INTERESTS" means any and all rights, titles and interests
owned by Seller in, under or derived from all of the presently existing
pooling, unitization and communitization agreements or other operating
agreements and the units created thereby (including without limitation, all
units formed under orders, regulations, rules or other official acts of any
Governmental Body having jurisdiction) not evidenced by Seller's ownership
of lease or fee interests, including all of Seller's rights, titles and
interests to such Contracts as set forth on Schedules A-1 through A-3.
"BURDENS" means royalties (including both lessors' royalties and
nonparticipating royalty interests), overriding royalties, net profits
interests, production payments, and other similar obligations and burdens
payable out of production.
"BUSINESS DAY" means a day on which commercial banks are generally
open for regular business in Houston, Texas.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CLOSING" means the closing of the Contemplated Transactions at 10:00
a.m. local time at Seller's offices at 1111 Bagby, Houston, Texas, on the
Closing Date or at such other time or place as the Parties may mutually
agree upon in writing.
"CLOSING DATE" means March 30, 2000, or such other date as the Parties
may agree in writing.
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"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations or rules issued under any of the foregoing.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CONTEMPLATED TRANSACTIONS" means each and all of the transactions
contemplated by the Agreement.
"CONTRACTS" means, to the extent they are assignable, all of Seller's
right, title and interest in and to all valid and existing, farmout
agreements, unitization agreements, pooling agreements, unit declarations,
gas sales or purchase contracts, operating agreements and other contracts
attributable to the Assets, or other agreements and instruments (including
all amendments thereto and any agreements settling claims asserted
thereunder) to the extent and only to the extent that the same relate,
pertain or are incidental to the Easements, the Leases, the Fee Interests,
the Beneficial Interests or the Other Property, including, without
limitation, those listed on Schedules A-1 through A-3 hereto, but
specifically excluding the Easements and Leases.
"CORPORATE DOCUMENTS" means with respect to a Delaware corporation the
Certificate of Incorporation and By-Laws or the equivalent documents of a
corporation organized under the laws of another jurisdiction.
"EASEMENTS" means Seller's non-exclusive or exclusive, as the case may
be, rights to the use and occupancy of the surface, including, without
limitation, tenements, authorizations, variances, appurtenances, surface
leases, easements, permits, licenses, servitudes, rights-of-way and similar
rights and interests in any way appertaining, belonging, affixed or
incidental to or used in connection with the ownership or operation of the
Leases, Fee Interests, Beneficial Interests or Other Property, including,
without limitation, those listed on Schedule B hereto, except to the extent
constituting Excluded Assets.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"EXCLUDED ASSETS" means the following:
(a) all (i) trade credits, accounts receivable (other than those
specifically included in the definition of Other Property), notes
receivable and other receivables attributable to Seller's interest in
the Assets with respect to any period of time prior to the Effective
Date, (ii) deposits, cash, checks in process of collection, cash
equivalents and funds attributable to Seller's interest in the Assets
with respect to any period of time prior to the Effective Date, and
(iii) funds attributable to third Persons for production prior to the
Effective Date but suspended or impounded by Seller;
(b) all corporate, financial, and tax records of Seller;
(c) all claims and causes of action of Seller (i) arising from
acts, omissions or events, or damage to or destruction of property
occurring prior to the Effective Date, and (ii) affecting any of the
excluded assets set forth in (a) through (s) of this definition;
(d) all rights, titles, claims and interests of Seller accruing
prior to the Effective Date (i) under any policy or agreement of
insurance or indemnity, (ii) under any bond, or (iii) to any insurance
or condemnation proceeds or awards;
(e) all Hydrocarbons produced from or attributable to the Assets
with respect to all periods prior to the Effective Date including all
merchantable liquids in stock or sales tanks or associated flowlines,
together with all proceeds from or of such Hydrocarbons;
(f) claims of Seller for refund of, or loss carry forwards with
respect to income or franchise taxes or any other Taxes attributable
to: (i) any period prior to the Effective Date, or (ii) any of the
excluded assets set forth in (a) through (s) of this definition;
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(g) all amounts due or payable to Seller as adjustments or
refunds under any contracts or agreements affecting the Assets, with
respect to periods prior to the Effective Date, specifically
including, without limitation, amounts recoverable from audits under
operating agreements;
(h) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any period
prior to the Effective Date;
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to (i) the Assets prior
to the Effective Date; and (ii) any of the excluded assets set forth
in (a) through (s) of this definition;
(j) all legal files; attorney-client communications or attorney
work product; records and documents subject to confidentiality
provisions, claims of privilege or other restrictions (including,
without limitation, contractual obligations to third Persons) on
access; and auditor's reports;
(k) reserve information and reports; seismic, geochemical, and
geophysical information and data, or other proprietary information
relating thereto, whether owned or licensed by Seller, and any
interpretive data except for certain 3D seismic data as specifically
set forth in Schedule H and certain 2D seismic data licensed to Buyer
pursuant to the Geophysical License Agreement attached hereto as
Exhibit L;
(l) all other bids received by Seller for the Assets or any
portion thereof;
(m) all of Seller's or Seller's Affiliates' intellectual
property, including but not limited to proprietary computer software,
patents, trade secrets, copyrights, names, marks, and logos;
(n) all of Seller's vehicles, trucks (including associated
tools), boats, house trailers, tools, pulling machines, warehouse
stocks, microwave equipment, office computer equipment, remote
terminal units, equipment or material temporarily located on the
Assets, except those listed on Schedule C;
(o) any pipelines, easements, fixtures, tanks, LACT units or
equipment located on the Assets which belong to third Persons,
including lessors and Affiliates of Seller;
(p) all of Seller's interest in the equipment, facilities and
other assets as more fully described on Schedule D hereto;
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(q) all of Seller's interest in any oil, gas or mineral leases,
mineral or surface fee or lands which (i) are not set forth on
Schedules E-1 through E-3 and Schedules F-1 through F-3 or (ii) cover
or pertain to lands or depths other than the particular lands or
depths described in the Leases and Fee Interests specifically
referenced on Schedules E-1 through E-3 and Schedules F-1 through F-3
or such depths which are specifically excepted or reserved on
Schedules E-1 through E-3 and Schedules F-1 through F-3;
(r) all of Seller's interest in any Assets which are not conveyed
to Buyer pursuant to the terms of this Agreement due to a Title
Defect, Material Environmental Condition or other condition; and
(s) all real or personal property held or owned by Seller's
Affiliates or any third Persons.
"EXCLUDED OBLIGATIONS" means, with respect to any Asset, except as
constitutes Environmental Obligations, any liabilities and obligations of
Seller (i) due, accrued or owed prior to the Effective Date; (ii) due,
accrued or owed prior to the Effective Date with respect to the payment of
Burdens and Taxes; (iii) to third Persons arising from property damage or
personal injury sustained prior to the Effective Date; (iv) arising from
any existing litigation or demands made as of the Effective Date; (v)
arising from or attributable to any Excluded Asset, and (vi) to be retained
by Seller as expressly provided in this Agreement.
"FEE INTERESTS" means all rights, titles and interests of Seller owned
as of the Effective Date and the Closing Date, or acquired pursuant to
Seller's rights as of the Effective Date and Closing Date under the terms
of an existing Contract, in all the fee and mineral fee interests described
on Schedules F-1 through F-3, insofar and only insofar as such Fee
Interests cover the lands and depths set forth in Schedules F-1 through
F-3. The Fee Interests shall include all of Seller's right, title and
interest to all depths unless specifically limited on Schedules F-1 through
F-3.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"GOVERNMENTAL BODY" means any Federal, state, tribal, county, parish,
municipal, or other federal, state or local governmental authority or
judicial or regulatory agency, board, body, department, bureau, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, and all regulations thereunder.
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"HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other liquid
or gaseous hydrocarbons (including without limitation, coalbed gas and
CO(2)) and shall also refer to all other minerals of every kind and
character which may be covered by or included in the Assets.
"KNOWLEDGE" means the actual knowledge of a Party's current corporate
officers and business unit managers.
"LEASES" means, except to the extent constituting Excluded Assets, any
and all rights, titles and interests of Seller owned as of the Effective
Date and the Closing Date, or acquired pursuant to Seller's rights as of
the Effective Date and the Closing Date under the terms of an existing
Contract, in all of the oil, gas or mineral leases, fees, and other
interests described on Schedules E-1 through E-3 to the Agreement, insofar
and only insofar as such Leases pertain to the lands and interests
described in said Schedules. The Leases shall include all of Seller's
right, title and interest to all depths unless specifically limited on
Schedules E-1 through E-3.
"LOSSES" means any and all losses, liabilities, claims, demands,
penalties, fines, settlements, damages, actions, or suits of whatsoever
kind and nature (but expressly excluding consequential damages), whether or
not subject to litigation, including, without limitation (i) claims or
penalties arising from products liability, negligence, statutory liability
or violation of any Applicable Law or in tort (strict, absolute or
otherwise) and (ii) loss of or damage to any property, and all reasonable
out-of-pocket costs, disbursements and expenses (including, without
limitation, legal, accounting, consulting and investigation expenses and
litigation costs).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"OTHER PROPERTY" means, except to the extent constituting Excluded
Assets,
(a) all of Seller's interest in all wells (including, without
limitation, all oil, gas, injection, disposal and other wells, whether
active or inactive, productive or non-productive, plugged and
abandoned or temporarily abandoned), platforms, equipment, facilities
and personal property of any kind including but not limited to tubing,
casing, wellheads, pumping units, production units, compressors,
valves, meters, flowlines, pipelines, gathering systems, tanks,
heaters, separators, dehydrators, pumps and injection units which are
located on or connected with the Leases, Fee Interests, the Beneficial
Interests or Easements and which are used solely and exclusively in
connection with the production, treatment, gathering or transportation
of Hydrocarbons from the Leases, Properties or Easements;
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(d) subject to Section 4.3(b), all rights, obligations, interests
and benefits to gas imbalances with respect to the Assets;
(e) all licenses, authorizations, permits, variances and similar
rights and interests related to the Leases, Fee Interests, Beneficial
Interests, Easements and Contracts and personal property to be
conveyed hereunder; and
(f) [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PERMITTED ENCUMBRANCES" means:
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(a) all Leases, operating agreements, operator liens and working
interest owner liens for obligations incurred after the Effective
Date, unit, communitization and pooling agreements, farmout
agreements, subleases and farmin agreements and other Contracts
described on Schedules A-1 through A-3 insofar as same do not operate
to increase the working interest of the Seller set forth on Schedules
G-1 through G-3 without a corresponding increase in the net revenue
interest and that do not operate to decrease the Seller's net revenue
interest set forth on Schedules G-1 through G-3;
(b) all Applicable Laws, and all rights reserved or vested in any
Governmental Body to control or regulate the Assets in any manner
including, without limitation, any adjustment to Seller's net revenue
interest or gross working interest in a particular Property, caused
by, or as the result of, any action of a Governmental Body which is
not the result of any claims for under-payment of royalties owed to
such Governmental Body nor the negligent act or omission of Seller;
(c) liens for Taxes or assessments arising after the Effective
Date not yet due and payable or not yet delinquent, or if delinquent,
that are being contested in good faith by appropriate action brought
in the normal course of business and to the extent covered by Seller's
indemnity under Sections 8.1 and 8.5 hereof;
(d) reversionary interests arising under farmout and farmin
agreements, subleases, and the non-consent provisions of applicable
operating agreements insofar as same do not operate to increase the
working interest of the Seller set forth on Schedules G-1 through G-3
without a corresponding increase in the net revenue interest and that
do not operate to decrease the Seller's net revenue interest set forth
on Schedules G-1 through G-3;
(e) liens imposed by Applicable Law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business which secure payment of obligations
arising after the Effective Date or that are not more than sixty (60)
days past due or which are being contested in good faith to the extent
covered by Seller's indemnity under Sections 8.1 and 8.5 hereof;
(f) defects that have been cured by possession under applicable
statutes of limitation, and
(g) other minor defects or irregularities generally waived by
prudent purchasers of oil and gas properties which (i) do not
materially interfere with the operation, value or use of any of the
Assets, (ii) do not prevent Buyer from receiving the proceeds of
production from any of the Assets, (iii) do not operate to increase
the working interest of the Seller set forth on Schedules G-1 through
G-3 without a
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corresponding increase in the net revenue interest and (iv) do not
operate to decrease the Seller's net revenue interest set forth on
Schedules G-1 through G-3.
"PERSON" means any natural person, corporation, division of a
corporation, association, company, estate, trust, partnership, joint
venture, unincorporated organization, Governmental Body, or any other
entity.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"PROPERTIES" means an accounting unit described on Schedules G-1
through G-3 which is utilized by Seller for an allocation of revenue and
expenses from the Assets.
"PROPERTY PACKAGES" means the East Texas Properties, the Mid-Continent
Properties and the Permian Basin Properties as identified in Schedule 2.4.
"TAXES" shall mean any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), taxes
(including without limitation, production, gross receipts, ad valorem,
value added, windfall profit tax, environmental tax, turnover, sales, use,
personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, franchise, transfer, heating value, fuel, excess
profits, occupational, interest equalization, lifting, oil, gas, or mineral
production or severance, and other taxes), levies, imposts, duties, charges
or withholdings of any nature whatsoever, imposed by any Governmental Body
or taxing authority thereof, domestic or foreign, together with any and all
penalties, fines, additions to tax and interest thereon, whether or not
such tax shall be existing or hereafter adopted.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"TRANSITION AGREEMENT" means the transition agreement between Seller
and Buyer attached hereto as Exhibit I.
1.3 OTHER DEFINITIONS IN THE AGREEMENT. The following terms shall have the
respective meanings ascribed to them in the Sections of the Agreement set forth
below opposite such terms:
AFEs.................................................3.1(n)
Allocated Value......................................2.4
Assignments..........................................2.5
Buyer................................................Preamble
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Deeds..................................2.5
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Employees..............................4.3(s)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Millennium Compliant ................................3.3(d)
Oil and Gas Leases...................................2.5
Party................................................Preamble
Performance Deposit..................................2.3
Permits..............................................3.1(j)
Purchase Price.......................................2.2
Real and Personal Property Taxes.....................7.1(a)
Records..............................................1.2
Rejection Notice.....................................4.3(m)(iii)
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
Reserve Report.......................................3.1(o)
Seller...............................................Preamble
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
1.4 RULES OF CONSTRUCTION. For purposes of this Agreement:
(a) GENERAL. Unless the context otherwise requires, (i) "or" is not
exclusive; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with accounting principles that are generally
accepted in the United States of America; (iii) words in the singular
include the plural and words in the plural include the singular; (iv) words
in the masculine include the feminine and words in the feminine include the
masculine; (v) any date specified for any action that is not a Business Day
shall be deemed to mean the first Business Day after such date; (vi) a
reference to a Person includes its successors and assigns; and (vii) the
use of the word "include" or "including" when following any general
statement, term or matter, shall not be construed to limit such statement,
term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation" or "but not limited to"
or words of similar import) is used with
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reference thereto, but rather shall be deemed to refer to all other items
or matters that could reasonably fall within the broadest possible scope of
such general statement, term or matter.
(b) PARTS AND SECTIONS. References to Parts and Sections are, unless
otherwise specified, to Parts and Sections of the Agreement. Neither the
captions to Parts or Sections hereof nor the Table of Contents shall be
deemed to be a part of the Agreement.
(c) EXHIBITS AND SCHEDULES. The Exhibits and Schedules form part of
this Agreement and shall have the same force and effect as if set out in
the body of this Agreement.
(d) OTHER AGREEMENTS. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to that agreement or
instrument as it may from time to time be changed, amended or extended.
PART TWO
SALE AND PURCHASE
2.1 PURCHASE AND SALE. At the Closing, Seller shall sell, assign and convey
to the Buyer and Buyer shall purchase and pay for the Assets and assume the
Assumed Obligations as provided in 4.2(a) and the Material Environmental
Conditions as set forth in Section 4.2(b).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
EXCEPT AS PROVIDED UNDER SECTION 9.15, IF BUYER FAILS TO COMPLETE THE
TRANSACTION SET FORTH IN THIS AGREEMENT, THE PARTIES AGREE THAT SELLER
SHALL RETAIN, AS SELLER'S SOLE REMEDY, THE PERFORMANCE DEPOSIT AS
LIQUIDATED DAMAGES, WHICH THE PARTIES AGREE IS A REASONABLE SUM
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS
AGREEMENT, INCLUDING THE RELATIONSHIP OF THE SUM OF THE RANGE OF HARM
TO SELLER THAT REASONABLY
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COULD BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES
WOULD BE COSTLY OR INCONVENIENT. IN PLACING THEIR INITIALS BELOW, EACH
PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE
AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED
THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS
AGREEMENT WAS MADE.
Seller Buyer
Initial___________ Initial_____________
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
2.5 CLOSING AND PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions contained herein, this sale and purchase shall close on the Closing
Date. At Closing, Buyer will pay Seller the remaining unpaid portion of the
Purchase Price, adjusted pursuant to the terms of this Agreement, by wire
transfer of collected funds payable to Seller as set forth below. At Closing,
Seller shall deliver to Buyer assignments and bills of sale in the form attached
hereto as Exhibit A (the "Assignments"), deeds in the forms attached hereto as
Exhibits B-1 and B-2 (the "Deeds"), oil and gas leases in the form attached
hereto as Exhibit C (the "Oil and Gas Leases") as well as such certificates or
other documents as are required to effect the transfer of the Assets, or the
subsequent operation thereof.
2.6 METHOD OF PAYMENT. Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to Seller's account at Chase Manhattan Bank, 1 Chase Plaza, New York,
New York, ABA #021000021, account number 9102582567 (with immediate telephone
notice to Luci Romano, (914) 253-6071), or to such other account number as
Seller may by written notice direct, or if to Buyer, to Buyer's account as may
be designated by Buyer.
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PART THREE
REPRESENTATIONS AND WARRANTIES
3.1 SELLER. Seller represents and warrants to Buyer that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Seller has been duly organized and is
validly existing in good standing under the laws of the State of Delaware,
and is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Seller has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (a)
has been duly authorized by all requisite corporate or shareholder action
and (b) does not conflict with or result in a violation or breach of the
Corporate Documents of the Seller or of any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to which the Seller or
its property is directly or indirectly a party or is directly or indirectly
subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar Applicable Laws
affecting the enforcement of creditor's rights generally. The
enforceability of Seller's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Seller, threatened against Seller.
(e) BROKERS' FEES. Seller has not incurred any liability, contingent
or otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Buyer shall be liable.
(f) STATUS. Seller is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are
defined in the Code and in the regulations promulgated pursuant thereto.
(g) LITIGATION. Except as set forth on Schedule 3.1(g), with respect
to those Assets operated by Seller, there are no actions, suits, or
proceedings pending [TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(h) NO CONSENTS REQUIRED. Except as set forth in Section 4.3(n) and on
Schedule 3.1(h) or consents required from Governmental Bodies as part of an
ordinary course transfer, no preferential purchase rights, consents,
approvals or other action by, or filing with any Person or Governmental
Body is required in connection with the execution, delivery and performance
by Seller of the Agreement.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(j) PERMITS. Except as set forth on Schedule 3.1(j), as to those
Assets operated by Seller, Seller has obtained all material permits,
licenses, and certificates required by Applicable Law in connection with
the ownership and operation of Assets (the "Permits") and such Permits are
in full force and effect. Except as set forth on Schedule 3.1(j), to
Seller's Knowledge as to those Assets not operated by Seller, all Permits
in connection with the ownership and operation of such Assets have been
obtained and are in full force and effect. Except as set forth on Schedule
3.1(j), to Seller's Knowledge there are no outstanding violations with
respect to such Permits and no judicial, administrative or arbitral
proceeding is pending or threatened with respect to such Permits
(k) LEASES. To Seller's Knowledge, (i) all material Leases, unit
agreements, pooling agreements, communization agreements and other
Contracts creating interests comprising the Properties are in full force
and effect, (ii) except as set forth on Schedule 3.1(k) or 3.1(g), since
January 1, 1996, Seller has not received any written notice from any third
Person which is still pending claiming any material violation or
repudiation of the material Leases, unit agreements, pooling agreements,
communization agreements and other Contracts creating interests comprising
the Properties, and (iii) Seller is entitled to be paid, and is being paid,
its interests in the Properties without indemnity or guarantee
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other than those customarily found in division orders and other similar
agreements and documents.
(l) IMBALANCES. To Seller's Knowledge and except for Lease obligations
for the delivery of gas for residential use, the only Contracts pursuant to
which Hydrocarbons produced from the Assets are being sold are described on
Schedule A-1, A-2 and A-3 and there are no (i) gas imbalances except as set
forth on Schedules G-1, G-2 and G-3 (which may be supplemented from time to
time before the Closing) and as of the date shown on Schedules G-1, G-2 and
G-3 which date shall not be more than 120 days prior to Closing, or (ii)
take-or-pay or other prepayments, failure of purchasers to pay on a current
basis or refund obligations for which Buyer would be liable that would have
a material, adverse affect on Buyer's right to market production.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) CURRENT COMMITMENTS. With respect to the Assets operated by
Seller, Schedule 3.1(n) contains a complete and accurate list as of the
date of this Agreement of (i) all authorities for expenditures ("AFEs") in
excess of $50,000 to drill or rework wells or for capital expenditures
pursuant to any of the Contracts that have been proposed by Seller or any
third Person on or after the Effective Date, whether or not accepted by
Seller or any other third Person, and (ii) all AFEs and commitments, other
than those which have been terminated or expired, in excess of $50,000 to
drill or rework wells or for other capital expenditures pursuant to any of
the Contacts for which all of the activities anticipated in such AFEs or
commitments have not been completed by the date of this Agreement.
[TEXT OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
(p) CONTRACTS. As to those Assets operated by Seller, there are no
Contracts, other than those Contracts set forth on Schedules A-1 through
A-3 that as of the Closing Date inhibit or preclude Buyer from realizing
the material benefits of the Assets or under which Seller or any other
party thereto is in default. To Seller's Knowledge, other than those
Contracts set forth on Schedules A-1 through A-3 as to those Assets which
are not operated by Seller, there are no material Contracts under which
Seller or any other party thereto is in default.
(q) TAXES. All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of the Properties or the
production of Hydrocarbons
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from the Properties have been properly and timely paid except those
disputed in ordinary course of business if any, for which Seller has
indemnified Buyer under Section 8.1 and 8.5 below.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(s) LIMITATION. The foregoing representations and warranties are given
by Seller to Buyer and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.2 Buyer. Buyer represents and warrants to Seller that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Buyer has been duly organized and is
validly existing in good standing under the laws of the State of Texas, and
is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature of its properties or
business requires it.
(b) AUTHORITY AND NO VIOLATION. The Buyer has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement (i)
has been duly authorized by all requisite corporate or shareholder action
and (ii) does not conflict with or result in a violation or breach of the
Corporate Documents of the Buyer or of any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to which the Buyer or its
property is directly or indirectly a party or is directly or indirectly
subject.
(c) VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar Applicable Laws
affecting the enforcement of creditor's rights generally. The
enforceability of Buyer's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) NO BANKRUPTCY. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to the actual
Knowledge of Buyer, threatened against Buyer.
(e) BROKERS' FEES. Buyer has not incurred any liability, contingent or
otherwise, for brokers' or finders' fees relating to the Contemplated
Transactions for which Seller shall be liable.
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(f) KNOWLEDGEABLE INVESTOR. Buyer is an experienced and knowledgeable
investor and operator in the oil and gas business. In making its decision
to participate in this Agreement and the Contemplated Transactions, Buyer
has relied solely on its own independent investigation, analysis and
evaluation of the Assets.
(g) SECURITIES REPRESENTATION. Buyer is acquiring the Assets for its
own account and not with a view to, or for offer of resale in connection
with, a distribution thereof, within the meaning of the Securities Act of
1933, 15 U.S.C. Section 77a et seq., or any other Applicable Laws
pertaining to the distribution of securities.
(h) FUNDING. Buyer has arranged to have available by the Closing Date
sufficient funds, to enable the Buyer to pay in full the Purchase Price as
herein provided and otherwise to perform its obligations under this
Agreement.
(i) OPERATOR STATUS. Buyer is, or will be as of the Closing, a
qualified operator in good standing with all Governmental Bodies having
jurisdiction over the Assets.
(j) GOVERNMENTAL BODY APPROVAL. To Buyer's Knowledge, there are no
facts or conditions with respect to the Assets that may cause any
Governmental Body to withhold its unconditional approval of the Assignments
or Deeds.
(k) LIMITATION. The foregoing representations and warranties are given
by Buyer to Seller and are not intended to be given or used by any other
Person not a Party to this Agreement.
3.3 DISCLAIMER AND NOTIFICATIONS. THERE ARE NO WARRANTIES, REPRESENTATIONS
OR IMPLIED COVENANTS BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT. THE PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR
REPRESENTATIONS INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AND
REPRESENTATIONS IMPLIED UNDER APPLICABLE LAW.
(a) NO IMPLIED REPRESENTATIONS. IT IS EXPRESSLY UNDERSTOOD BY THE
PARTIES HERETO THAT SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO TITLE (EVEN FOR THE RETURN OF THE PURCHASE PRICE
PAID) OR THE CONDITION OR STATE OF REPAIR OF THE ASSETS, THEIR VALUE,
QUALITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY USES OR PURPOSES,
NOR AS TO THE CURRENT VOLUME, NATURE, QUALITY, CLASSIFICATION, OR VALUE OF
THE OIL, GAS OR OTHER MINERAL RESERVES THEREUNDER OR COVERED THEREBY, NOR
WITH RESPECT TO ANY APPURTENANCES THERETO BELONGING OR IN ANY WISE
APPERTAINING TO SAID ASSETS, OR OTHERWISE. Seller has advised Buyer and
Buyer has acknowledged that certain spills of Hydrocarbons, produced water
and chemicals from oil and gas exploration, development,
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production or processing have occurred, or may have occurred, upon the
Assets, which could have resulted in contamination of the soil, water,
ground water, or improvements on the Assets. Furthermore, Seller has
cautioned Buyer to thoroughly examine and inspect the Assets for any such
conditions or violations and generally as to the condition of the Assets
and its improvements, including a recommendation by Seller to Buyer that
Buyer engage an environmental consulting firm to make an environmental
survey of the Assets, and Buyer hereby acknowledges such obligations and
assumes all liabilities associated therewith.
(b) BUYER'S INSPECTION OF THE ASSETS. Further, Buyer certifies that
the Assets (including, but not limited to, any oil, gas or other mineral
reserves underlying the Assets) have been, or will be prior to Closing,
carefully inspected by Buyer; that Buyer is, or will be prior to Closing,
familiar with their condition and value thereof, and the improvements and
appurtenances (including electric wiring and machinery installed thereon)
located on the Assets, inclusive of any Hydrocarbons, other soil
contaminants or waste substances, whether similar or dissimilar, that may
be present in the soil, water and groundwater; that Buyer has engaged, or
has had the opportunity to engage prior to Closing, such contractors or
consultants as Buyer deems prudent for tests and surveys of the soil,
water, groundwater, Other Property, and improvements on the Assets; and
that Buyer assumes any and all obligations, risks and liabilities
associated therewith. Buyer acknowledges that the Assets have been or may
have been used in connection with oil, gas and other mineral exploration,
development and operations, as well as with respect to processing and
refining operations, and, as such, equipment, appurtenances, processing and
other facilities, plants, buildings, structures, improvements, abandoned
and other tanks and piping (including above ground and underground tanks
and piping), storage facilities, gathering and distribution lines, wells
and other petroleum production facilities and appurtenances which have not
been excepted and excluded from this conveyance may be located thereon.
Further, Buyer acknowledges that the Assets may also contain unplugged
wells, wellbores or buried pipelines or other equipment, whether or not of
a similar nature, the locations of which may not now be known by Seller or
be readily apparent through a physical inspection of the Assets. Buyer
further accepts the Assets (including, but not limited to, any oil, gas or
other minerals and/or mineral reserves underlying said Assets) AS IS, WHERE
IS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR, AND WITHOUT ANY
REPRESENTATIONS, GUARANTIES, OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THEIR
TITLE (EVEN FOR THE RETURN OF THE PURCHASE PRICE PAID), VALUE, QUALITY,
MERCHANTABILITY, OR THEIR SUITABILITY OR FITNESS FOR BUYER'S INTENDED USE,
OR FOR ANY USES OR PURPOSES WHATSOEVER, OR THAT THE ASSETS HAVE BEEN
RENDERED FREE FROM ANY DEFECTS, HAZARDS, OR DANGEROUS CONDITIONS.
FURTHERMORE, BUYER WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES ACT - CONSUMER PROTECTION ACT, SECTION 17.41, ET SEQ., BUSINESS
AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION,
BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
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BUYER'S SIGNATURE
By: _________________________
Its: _________________________
(c) DISCLAIMER. Without limiting the generality of the foregoing, but
in furtherance of same, SELLER DISCLAIMS ANY AND ALL LIABILITY ARISING IN
CONNECTION WITH ANY ENVIRONMENTAL MATTERS INCLUDING, WITHOUT LIMITATION,
ANY PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM) ON THE
ASSETS. IN ADDITION, THERE ARE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION OR
MATERIALS HERETOFORE OR HEREAFTER FURNISHED IN CONNECTION WITH THE ASSETS
OR AS TO THE QUALITY OR QUANTITY OF THE HYDROCARBONS AND ANY OTHER MINERAL
RESERVES, IF ANY, ATTRIBUTABLE TO THE INTEREST CONVEYED HEREIN OR THE
ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS OR ANY OTHER MINERALS, AND
ANY AND ALL DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED
AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE OF THE SAME IS AT BUYER'S
SOLE RISK.
(d) YEAR 2000 DISCLAIMER. THE CONTEMPLATED TRANSACTION SHALL BE
WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION THAT ANY ASSETS
EXCHANGED HEREUNDER SHALL IN ANY WAY WHATSOEVER BE MILLENNIUM COMPLIANT.
FOR PURPOSES OF THIS AGREEMENT, "MILLENNIUM COMPLIANT" MEANS THAT THE
ASSETS WILL ACCURATELY: (A) HANDLE DATA BEFORE, DURING, AND AFTER JANUARY
1, 2000, INCLUDING, BUT NOT LIMITED TO, ACCEPTING DATE INPUT, PROVIDING
DATE OUTPUT, AND PERFORMING CALCULATIONS ON DATES OR PORTIONS OF DATES; (B)
FUNCTION WITHOUT INTERRUPTION BEFORE, DURING, AND AFTER JANUARY 1, 2000,
WITHOUT ANY CHANGE IN OPERATIONS ASSOCIATED WITH THE ADVENT OF THE NEW
CENTURY (INCLUDING THE FACT THAT THE YEAR 2000 IS A LEAP YEAR); (C)
ACCOMMODATE FOUR-DIGIT YEAR INPUT OR RESPOND TO TWO-DIGIT YEAR-DATE INPUT
IN A WAY THAT RESOLVES THE AMBIGUITY AS TO CENTURY IN A DISCLOSED, DEFINED,
AND PREDETERMINED MANNER; AND (D) STORE AND PROVIDE OUTPUT OF DATE
INFORMATION IN WAYS THAT ARE UNAMBIGUOUS AS TO CENTURY.
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PART FOUR
COVENANTS
4.1 COVENANTS OF SELLER. Seller covenants with the Buyer as follows:
(a) ACCESS. From the date of execution of this Agreement until Closing
except for such of the Assets not operated by Seller, Seller shall afford
Buyer and Buyer's representatives full and reasonable access to the Assets
in the possession of Seller during normal working hours.
(b) FILES. From the date of execution of this Agreement until Closing,
Seller shall permit Buyer and its representatives at reasonable times
during normal business hours to examine, in Sellers' offices at their
actual location, all abstracts of title, title opinions, title files,
ownership maps, lease files, accounting files, assignments, division
orders, payout statements, agreements and other Contracts pertaining to the
Assets insofar as the same may now be in existence and in the possession of
Seller, except those which constitute Excluded Assets. From the date of
execution of this Agreement until Closing, Seller shall make available to
Buyer for inspection by Buyer at reasonable times during normal business
hours at their actual location, all production and engineering books,
records and data in possession of Seller which are directly related to the
Assets, and all other files, records, and data pertaining to the Assets,
except those which may constitute Excluded Assets.
(c) CONSENTS. Subject to Section 4.3(n), Seller shall use reasonable
efforts to obtain all necessary waivers, consents, approvals, permits and
authorizations and actions of third Persons to complete the Contemplated
Transactions prior to Closing.
(d) CONDUCT OF BUSINESS. From the date of execution of this Agreement
and until the Closing, Seller shall (i) operate the Assets, to the extent
Seller is the operator thereof, in substantially the same manner as
heretofore operated; (ii) maintain books of account and records with regard
to the Assets in accordance with Seller's past practices; and (iii) pay its
share of all costs and expenses attributable to the Assets in accordance
with past practices subject to its rights under the Final Recap set forth
in Section 4.3(g). Without limitation of the foregoing but subject to the
limitation set forth below, after the execution of the Agreement and prior
to Closing, Seller shall have the right to make any changes, repairs or
modifications, or incur any expenditures necessary or desirable in Seller's
reasonable opinion for the protection of the Assets, required under the
Contracts, or to comply with any Applicable Law or other legal requirement
relative to the premises or to prevent or react to an emergency or
environmental incident. Seller shall have the right to effect such
expenditure or action with or without the approval of Buyer, acting as
would any prudent operator under similar circumstances. Notwithstanding the
foregoing, Seller shall not undertake or authorize any project, activity or
expenditure in excess of $25,000 with respect to any one project without
Buyer's prior written approval except as may be
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required (i) to respond to an emergency, (ii) by any Governmental Body or
(iii) by the terms of any applicable Contract or Lease. Unless Buyer and
Seller otherwise agree, Seller shall not sell, dispose or materially alter
the Assets (other than the use of supplies and consumables) or remove any
improvements, equipment or property which comprise the Assets (other than
the use of supplies and consumables).
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
4.2 COVENANTS OF BUYER. Buyer covenants with Seller as follows:
(a) ASSUMED OBLIGATIONS. At Closing, Buyer shall assume the Assumed
Obligations.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(c) BUYER'S RESPONSIBILITIES. Except as otherwise provided for in
Section 4.3(x) and the Transition Agreement, Buyer shall be responsible for
the payment of all necessary and reasonable capital costs, Taxes, expenses
and Burdens incurred against or applicable to the operation and use of the
Assets from and after the Effective Date, whether invoiced or not. All
production of Hydrocarbons from the Assets occurring from and after the
Effective Date and all proceeds from or attributable thereto shall be the
property of and belong to Buyer as of the Effective Date.
(d) PAYMENT OF BURDENS. Except as otherwise provided in the Transition
Agreement, Buyer shall commence the payment of Burdens for all Hydrocarbons
produced beginning the first day of the month following the month in which
Seller has delivered to Buyer substantially all of the Records including
without limitations Records relating to accounting, accounts payables,
division orders and joint interest billings necessary to administer such
payments.
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(e) CONFIDENTIALITY. In the event that this Agreement is terminated
or, if not terminated, until the Closing, all information made available to
Buyer under Section 4.1 shall be maintained confidential by Buyer pursuant
to the terms of the Confidentiality Agreement. The Confidentiality
Agreement shall continue in force until Closing, or, in case of
termination, in accordance with its terms. Buyer shall take whatever
reasonable steps as may be necessary to ensure that Buyer's employees,
consultants and agents comply with the provisions of this Section 4.2(e)
and the provisions of the Confidentiality Agreement.
(f) SIGNAGE. Buyer agrees that, within thirty (30) days after the
Closing, it will remove or cause to be removed the names and marks used by
Seller and all variations and derivatives thereof and logos relating
thereto from the Assets and will not thereafter make any use whatsoever of
such names, marks and logos.
(g) COMPLIANCE WITH LAWS. Buyer hereby covenants that it will comply
with all Applicable Laws in its ownership and operation of the Assets.
Buyer specifically covenants that it will comply with all Applicable Laws
with respect to (i) all exploration, drilling, production, Plugging and
Abandonment, and (ii) the control, regulation and prevention of pollution,
including, but not limited to, saltwater discharge and contamination.
(h) RECOUPMENT OF OVERPAYMENTS. Buyer expressly agrees, at Seller's
cost and expense, to reasonably assist Seller in recouping any monies from
third Persons due to overpayments of royalties made prior to the Effective
Date.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(j) INSURANCE. Buyer covenants that all insurance obtained by
Buyer during its term of ownership of the Assets covering
environmental damage, third Person property damage, personal injury or
death shall name Seller as an additional insured to the extent of
Buyer's liability and indemnification obligations assumed herein, and
shall contain a waiver of subrogation against Seller.
(k) ACCESS. Buyer shall afford Seller the right to enter onto and
use the Assets and such other resources, including but not limited to
water and power, as are reasonably necessary for Seller to remedy any
Material Environmental Condition pursuant to Section 6.1(a).
(l) RADIO FREQUENCY. Buyer shall undertake as soon as is
reasonably practical following the Closing to obtain a new pump-off
controller radio frequencies.
4.3 COVENANTS OF SELLER AND BUYER. Buyer and Seller agree as follows:
(a) PREFERENTIAL PURCHASE RIGHTS. With respect to preferential
purchase rights:
(i) Within five (5) Business Days of Seller's receipt from Buyer
of Schedule 2.4, Seller shall send notice to the holders of
preferential purchase rights on the Assets. Seller shall keep Buyer
informed as receipt of responses from said holders are received or the
applicable exercise periods expire without exercise or response from
the holders.
(ii) To the extent any preferential purchase rights are exercised
to Seller's and Buyer's reasonable satisfaction, then the Assets
subject to such preferential purchase rights shall not be sold to
Buyer and shall be excluded from the Agreement. The Purchase Price
shall be adjusted by the portion of the Allocated Value representing
the portion of the Assets subject to such exercised preferential
right. In the event any holder of a preferential right initially
elects to exercise a particular preferential right, but subsequently
refuses or elects not to consummate the purchase under the
preferential right and such refusal occurs prior to sixty (60) days
following the Closing Date, Buyer shall purchase such interests
covered by the
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preferential rights for its Allocated Value as of the Effective Date
and the closing of such transaction shall take place on a date
mutually acceptable to Seller and Buyer not more than thirty (30) days
following Seller's notification to Buyer of such failure or refusal.
(iii) If a preferential purchase right has not been waived or the
time for exercise expired prior to Closing, the Assets subject to such
right shall be excluded from the Assets conveyed at Closing and the
Purchase Price reduced by the Allocated Value of the affected Asset.
If the time for exercise expires or a waiver is obtained by the Seller
within 60 days following the Closing, Buyer shall purchase the
affected Asset from Seller as of the Effective Date and the closing of
such transaction shall take place on a date mutually acceptable to
Seller and Buyer not more than thirty (30) days following Seller's
notification to Buyer for the Allocated Value allocated to the
affected Asset.
(iv) If the Seller has failed to offer a preferential right to
purchase and the holder of such right makes a timely and enforceable
demand upon Seller or Buyer to offer such right, Buyer shall offer the
preferential right to purchase to such holder in accordance with the
Contract creating such preferential right to purchase.
(b) PRODUCT IMBALANCES. With respect to product imbalances from the
Assets, the Parties agree as follows:
(i) UNDERPRODUCTION. The Purchase Price reflects Seller's
underproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedules G-1 through G-3. As of
the Effective Date, Buyer shall assume all of Seller's rights,
obligations, liabilities and responsibilities associated with Seller's
underproduced gas position, including any Taxes and royalties due or
payable on the value of Seller's underproduction and Seller shall have
no further rights or claims whatsoever with respect to the
underproduced gas. Seller and Buyer agree that the Purchase Price
shall be adjusted upward at the rate of $1.00 per mcf at Closing to
reflect the estimated value of any additional underproduction not
reflected on Schedules G-1 through G-3 or any reduction in
overproduction described in Section 4.3(b)(ii). Any additional
underproduced volumes or reduction in overproduction accrued prior to
the Effective Date and identified after Closing shall be accounted for
as provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(ii) OVERPRODUCTION. The Purchase Price reflects Seller's
overproduced gas position (if any) under any Contracts or wells
included in the Assets as shown on Schedules G-1 through G-3. As of
the Effective Date, Buyer hereby agrees to and shall assume all rights
to Seller's overproduced gas position (but not including the gas
actually overproduced) including the right to recoup Taxes and
royalties associated with such overproduction, as well as all of
Seller's liabilities,
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responsibilities and obligations to third Persons associated with such
overproduced gas position and Seller shall have no further rights,
liabilities, obligations or responsibilities whatsoever with respect
to the overproduced gas. Seller and Buyer agree that the Purchase
Price shall be adjusted downward at the rate of $1.00 per mcf at
Closing to reflect the estimated value of any additional
overproduction not reflected on Schedules G-1 through G-3 or reduction
in underproduction described in 4.3(b)(i). Any additional overproduced
volumes or reductions in underproduction accrued prior to the
Effective Date and identified after Closing shall be accounted for as
provided in Section 4.3(g) at the same rate of $1.00 per mcf.
(c) OPERATORSHIP. Unless otherwise provided in the Transition
Agreement, Buyer shall assume Seller's obligations for operatorship of any
Seller-operated Assets conveyed herein at 7:00 a.m. local time on April 1,
2000, and shall perform all duties required in the course of business,
including, but not by the way of limitation, paying Burdens and Taxes,
pumping and gauging wells, working over wells, drilling new wells, filing
all necessary reports required by Applicable Law or otherwise, and
performing maintenance and/or repair work on the Assets. To the extent
required under any Contract that affects any Asset and only after Buyer has
used its commercially reasonable efforts to assume operatorship of such
Asset, Seller will continue to operate said Asset pursuant to the
Transition Agreement until the new operator can be properly selected.
Seller does not warrant or represent that Buyer shall succeed Seller as
operator of any Asset; however, Seller shall recommend to its working
interest owners that Buyer succeed as operator of such Properties operated
by Seller.
(d) PROCESSING. At Closing, Buyer shall enter into gas processing
agreements for the Properties listed on Schedule 4.3(d) in substantially
the form attached hereto as Exhibit H-1 through H-2, or Exhibit K or such
other form as to which Buyer and Versado Processors, L.L.C. shall have
mutually agreed.
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(i) BUYER'S RESPONSIBILITY. In the event Seller is required to
continue to operate any of the Assets after the Closing Date pursuant
to an applicable operating agreement or the Transition Agreement,
Buyer shall be responsible for the payment of all necessary and
reasonable capital costs, Taxes, expenses and Burdens incurred against
or applicable to the operation and use of the Assets from and after
the Effective Date, whether invoiced or not. Buyer shall be
responsible for prorated estimates of ad valorem taxes in the absence
of actuals. Further, all production from the wells located on or
attributable to the Assets and all proceeds from or attributable to
production from the Assets and sale thereof shall be the property of
and belong to Buyer from and after the Effective Date.
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(j) ACCESS TO DOCUMENTS. Each Party shall provide reasonable access to
all relevant documents, data and other information which may be required by
the other Party for the purpose of preparing tax returns and responding to
any audit by any Governmental Body. Each Party shall cooperate with all
reasonable requests of the other Party made in connection with contesting
the imposition of Taxes. Notwithstanding anything to the contrary in this
Agreement, neither Party shall be required at any time to disclose to the
other Party any tax returns or other confidential tax information.
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(l) FURTHER ASSURANCES. After Closing, Seller and Buyer agree to take
such further actions and to execute, acknowledge and deliver all such
further documents necessary or useful in carrying out the purposes of this
Agreement or of any document delivered pursuant hereto.
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(n) CERTAIN FILINGS, CONSENTS AND PERMITS. With respect to certain
filings and consents required by any Governmental Body, the Parties agree
that Buyer and Seller shall cooperate with one another to make all filings
necessary and to obtain any necessary consents, permits, authorizations,
approvals or waivers, including but not limited to filings with the Texas
Railroad Commission, Oklahoma Corporation Commission, or such other state
agency having jurisdiction over the Assets.
Without limitation of the foregoing, Seller shall endeavor to obtain,
and Buyer shall cooperate in connection with such endeavors, each consent
set forth on Schedule 3.1(h).
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(o) CONSENTS.
(i) If the holder of the right to consent or party to a
maintenance of uniform interest provision affirmatively refuses to
consent or waive prior to Closing, such refusal shall be automatically
considered a Title Defect without the necessity of Buyer sending a
Defect Notice to Seller as required under Section 4.3(m)(i) .
(ii) Except for approvals from Governmental Bodies normally
received subsequent to assignment, if Seller believes a consent or
waiver may be obtained subsequent to Closing, the Property shall be
excluded from the Assets conveyed at Closing and the Purchase Price
reduced by the Allocated Value (or portion thereof) and held by Seller
for the benefit of Buyer after Closing and Seller shall provide Buyer
with the economic benefits thereof until such consent or waiver is
received or until sixty (60) days following Closing, if later. If
Seller obtains the consent or waiver on or before sixty (60) days
following Closing, then Seller shall deliver conveyances of the
Property to Buyer and Buyer shall pay to Seller the Allocated Value
(or portion thereof). If the consent or waiver is not obtained or is
affirmatively refused on or before sixty (60) days following Closing,
Buyer shall refund to Seller any net revenues (revenues net of costs
and Burdens) received by Buyer in connection with such affected
portion of the Property and Seller's holding for the benefit of Buyer
shall terminate, unless Buyer waives the requirement for obtaining the
consent and agrees to accept the Asset and pay the value allocated to
the Asset pursuant to Schedule 2.4 in exchange for Seller's conveyance
of the Asset.
(p) RISK OF LOSS. If, prior to the Closing Date, all or any material
portion of an Asset is damaged or destroyed by fire or other casualty, is
taken in condemnation or under the right of eminent domain or proceedings
for such purposes are pending or threatened, Buyer shall purchase such
portion of the Assets, notwithstanding any such damage, destruction, taking
or pending or threatened taking. Seller shall pay to Buyer (as an
adjustment to the Purchase Price) all sums paid to Seller by third Persons
by reason of the damage, destruction or taking of such portion of the
Assets to be assigned to Buyer or to the extent Seller is self-insured an
amount equal to the value of the damage or destruction, and shall assign,
transfer and set over to Buyer all of the right, title and interest of
Seller in and to any unpaid awards or other payments from third Persons
arising out of the damage, destruction, taking or pending or threatened
taking as to such interest. If prior to the Closing Date, the applicable
Assets are damaged or destroyed by fire or other casualty and the sums
transferred to Buyer pursuant to the foregoing sentence do not equal the
amount necessary to replace or restore the pertinent Assets to the
condition they were in prior to such fire or casualty (including, without
limitation, those circumstances in which Seller is self-insured), Seller
shall pay to Buyer, or the Purchase Price shall be reduced by the
additional amount necessary to repair or replace all damaged or destroyed
Assets or restore the Assets to their condition prior to the fire or
casualty loss. If the sums that Seller would be responsible for pursuant to
the foregoing sentence exceed fifty percent (50%) of the
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Allocated Value of the pertinent Asset, Seller may elect to remove the
Asset from the sale and reduce the Purchase Price by the allocated value of
the pertinent Asset. Seller shall not voluntarily compromise, settle or
adjust any material amounts payable by reason of any material damage,
destruction, taking or pending or threatened taking as to any Asset without
first obtaining the written consent of Buyer, which shall not be
unreasonably withheld.
(q) POST-CLOSING ACCESS. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall reasonably
cooperate and afford each other or cause to be afforded to their respective
officers, employees, accountants and other representatives access, upon
reasonable notice, during business hours with respect to the facility to
which access has been requested, to review and copy the books, documents,
databases or other records relating to the Assets not including the
Excluded Assets (which books, documents, databases, records, or employees
files or other information the Parties shall cooperate and assist one
another in identifying and locating), interview, depose or seek testimony
of employees with knowledge of the Assets, provide assistance in
proceedings with employees with knowledge of the Assets as witnesses or
advisors, investigate the physical premises, take photographs or
videotapes, identify employees and contractors with knowledge of any matter
which is the subject of a claim for which a Party has responsibility and
make such employees available to such Party and provide reasonable office
space to do any of the foregoing in connection with any matter affecting or
alleged to affect the Party requesting such access.
(r) FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be solely
responsible for recording of the Deeds, Assignments and Oil and Gas Leases
and any other documents related to the Assets and shall promptly provide
Seller with recorded copies of same. Further, Buyer shall be responsible
for any recording or filing fees and documentary or transfer Taxes
resulting from the Contemplated Transactions.
(s) EMPLOYEE MATTERS. Buyer shall have no obligation, but shall have
the right to solicit the field employees of Seller (and any other employees
of Seller that Seller identifies in writing) who work directly on or in
connection with the Assets ("Employees"), and shall have no obligation but
shall have the right to offer employment to and hire any such Employees. If
Buyer hires any Employee, the terms of employment shall be at Buyer's
discretion. Seller is and shall be responsible for any and all employees
not hired by Buyer to the extent any of Seller's employees are affected by
the Contemplated Transactions.
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(v) JOINT USE AGREEMENTS. Buyer and Seller shall, from and after the
date of this Agreement, use their reasonable best efforts to negotiate and
execute on or before the Closing in the case of items identified five (5)
days prior to Closing or as soon thereafter as reasonably practical,
mutually agreeable joint use agreements for the use and management of (i)
the facilities and other equipment identified in Schedule 4.3(v) and
incorporating, among others, the terms and conditions set forth in Schedule
4.3(v) and (ii) any other facilities and equipment used immediately prior
to the Effective Date to operate or produce both (A) assets and properties
being retained by Seller and (B) the Assets operated by Seller and which
are identified in writing by the Buyer within ninety (90) days after Buyer
assumes operations of the affected Asset.
(w) CENTRILIFT EQUIPMENT. Seller leases certain equipment, as more
particularly described on Schedule 4.3(w) in certain wells from Centrilift.
Within ten (10) days prior to the Closing, Seller shall deliver to Buyer
the payoff amounts by well for such equipment. Within five (5) days before
Closing, Buyer shall notify Seller if Buyer elects to purchase such leased
equipment. If Buyer elects to purchase such leased equipment, such
equipment shall be included in the definition of Assets and Seller will
make reasonable efforts to arrange for such sale to be consummated within
sixty days after Closing. Buyer shall reimburse Seller for any costs
incurred by Seller in furtherance of such purchase. If Buyer elects not to
purchase the leased equipment, Seller will arrange for the removal of such
leased equipment at Seller's expense as soon as is reasonably practical
following the Closing.
(x) MECHANICAL INTEGRITY TESTS. Seller shall, on or before May 1, 2000
and as required by Applicable Law, perform mechanical integrity tests on
the wells set forth on Schedule 4.3(x). Seller shall sufficiently notify
Buyer and permit Buyer's representative to observe such test and review
such data obtained in connection with such tests. In the event of any of
the wells set forth on Schedule 4.3(x) fail such test, Seller shall within
five (5) days of its receipt of such test results, recommend to Buyer
whether each such well should be repaired or plugged and abandoned. Buyer
shall have five (5) days in which to notify Seller of its desire to (i)
have Seller plug and abandon such well at Seller's costs and expense; (ii)
have Seller repair such well at Buyer's costs and expense, or (iii) take
over such well. All cost and expense of such tests associated with wells
that are repaired by Seller or taken over by Buyer shall be borne by Buyer.
All cost and expense of such tests associated with wells that are plugged
and abandoned by Seller shall be borne by Seller. Nothing contained herein
shall preclude Seller from taking such actions as may be immediately
necessary to comply with Applicable Law or to protect the environment.
(y) HSR FILINGS. Buyer and Seller shall promptly make all filings
required under the HSR Act.
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PART FIVE
CONDITIONS TO CLOSING
5.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller to consummate
the Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement, the McFarland PSA and the Four Star
PSA to be performed and complied with prior to or on the Closing Date.
(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Seller) shall be pending
or threatened before any court or governmental agency seeking to restrain
Seller or prohibit the Closing or seeking damages against Seller as a
result of the consummation of this Agreement or the Contemplated
Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Buyer shall have
delivered to Seller (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Buyer with respect to the action of
the Buyer's Board of Directors authorizing the transactions contemplated by
the Agreement, and (ii) a certificate, dated the Closing Date and signed by
the President or a Vice President of Buyer certifying in such detail as
Seller may reasonably request to the fulfillment of the conditions
specified in subparagraphs (a) and (b) of this Section 5.1, in the form
attached as Exhibit D.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Buyer to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Nanette J. Crawford, Esq., as counsel for Seller, which approval shall not
be unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Buyer shall execute, acknowledge and deliver to Seller
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2 and C as well as change of operator forms required by
Applicable Laws and such other documents as may be necessary to carry out
the purposes of the Agreement.
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(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) SECURITY. Any security required by Seller of Buyer contemplated in
Section 4.2(i)(ii) shall have been obtained.
(j) GAS PROCESSING AGREEMENTS. Buyer and Seller (in its capacity as
operator of the affected gas plant) shall execute, acknowledge and deliver
all gas processing agreements as set forth in Section 4.3(d).
(k) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
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(q) BARGO GUARANTY. Buyer shall have delivered to Seller, in a form
mutually agreeable to both Buyer and Seller, the guaranty of Bargo Energy
Company guaranteeing the performance of the Buyer under this Agreement.
(r) TRANSITION AGREEMENT. Buyer and Seller shall have executed and
delivered the Transition Agreement.
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(s) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
5.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer to consummate the
Contemplated Transactions are subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller contained in the Agreement or in
connection with the Contemplated Transactions were true and correct when
made, and shall be true and correct on and as of the Closing Date as though
such representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
(b) COMPLIANCE WITH AGREEMENTS. On and as of the Closing Date, Seller
shall have performed and complied with all agreements, covenants, and
conditions required by the Agreement to be performed and complied with
prior to or on the Closing Date. McFarland Energy, Inc. and Four Star Oil &
Gas Company shall have performed and complied with all agreements,
covenants and conditions required by the Four Star PSA and the McFarland
PSA.
(c) INJUNCTION. As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Buyer) shall be pending
or threatened before any court or governmental agency seeking to restrain
Buyer or prohibit the Closing or seeking damages against Buyer as a result
of the consummation of this Agreement or the Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller shall have
delivered to Buyer (i) a certificate dated the Closing Date signed by the
Secretary or an Assistant Secretary of Seller with respect to the action of
the Seller's Board of Directors authorizing the transactions contemplated
by the Agreement, and (ii) a certificate, dated the Closing Date and signed
by the President or a Vice President of Seller certifying in such detail as
Buyer may reasonably request to the fulfillment of the conditions specified
in subparagraphs (a) and (b) of this Section 5.2 in the form attached as
Exhibit E.
(e) APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments and
documents required of Seller to carry out the Agreement, or incidental
thereto, and all other related legal matters shall have been approved by
Haynes and Boone, L.L.P., as counsel for Buyer, which approval shall not be
unreasonably withheld.
(f) [This section intentionally left blank].
(g) CONVEYANCE. Seller shall execute, acknowledge and deliver to Buyer
the Assignments, Deeds and Oil and Gas Leases substantially in the form of
Exhibits A, B-1, B-2
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and C, as well as change of operator forms required by Applicable Laws and
such other documents as may be necessary to carry out the purposes of the
Agreement.
(h) LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all letters in lieu as set forth in Section 4.3(f).
(i) GAS PROCESSING AGREEMENTS. Buyer and Seller (in its capacity as
operator of the affected gas plant) shall execute, acknowledge and deliver
all gas processing agreements as set forth in Section 4.3(d).
(j) JOINT USE AGREEMENTS. Buyer and Seller shall have executed,
acknowledge and delivered, on or before the Closing, certain joint use
agreements as described in Section 4.3(v).
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(n) TRANSITION AGREEMENT. Buyer and Seller shall have executed and
delivered the Transition Agreement.
(o) HSR ACT. All necessary filings and notifications under the HSR Act
shall have been made, including any required additional information or
documents, and the waiting period referred to in such Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
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PART SEVEN
TAXES
Section 7.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL
PROPERTY TAXES. With respect to Taxes:
(a) Real and Personal Property Taxes. Real property taxes and personal
property taxes ("Real and Personal Property Taxes") for the year in which
the Effective Date occurs shall be apportioned as of the Effective Date
between Seller and Buyer. Seller shall be liable for the portion of such
Real and Personal Property Taxes based upon the number of days in the year
occurring prior to the Effective Date, and Buyer shall be liable for the
portion of such taxes based upon the number of days in the year occurring
on and after the Effective Date. For any year in which an apportionment is
required, Buyer shall file all required reports and returns incident to
these taxes and shall remit to the appropriate taxing authorities all such
taxes assessed for the year in which the Effective Date occurs. Seller may
pay to Buyer, at the time of Buyer's remittance, Seller's share of such
taxes.
(b) Liability and Right to Pursue Claims. Seller shall retain
liability for all adjustments, examinations or claims relating to Taxes
that are paid by Seller and that are allocated to Seller pursuant to this
Section 7.1. Seller shall administer and defend any examination, claim or
adjustments arising in connection with Taxes to be paid by Buyer but which
are allocated to Seller pursuant to this Section 7.1.
Section 7.2 OTHER TAXES. All excise, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.
Section 7.3 SALES TAXES. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall pay any sales Tax
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or other transfer Tax, as well as any applicable conveyance, transfer and
recording fee, and real estate transfer stamps or taxes imposed on the transfer
of the Assets pursuant to the Agreement. If Buyer is of the opinion that it is
exempt from the payment of such sales Tax or other transfer Tax, Buyer shall
furnish to Seller the appropriate tax exemption certificate.
Section 7.4 COOPERATION. Each Party to the Agreement shall provide the
other Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing Tax returns, establishing or defending a Tax position and responding
to any audit by any taxing jurisdiction. Each Party to the Agreement shall
cooperate with all reasonable requests of the other Party made in connection
with contesting the imposition of Taxes. Notwithstanding anything to the
contrary in the Agreement, neither Party to the Agreement shall be required at
any time to disclose to the other Party any Tax returns or other confidential or
privileged Tax information.
Section 7.5 TAX PROCEEDINGS. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each in the negotiations and settlement of any proceeding
described in this Section 7.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Part 7.
Section 7.6 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price
provided for in this Agreement is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder. Buyer and Seller agree that each will not take for income Tax
purposes, or permit any Affiliate to take, any position inconsistent with the
allocation of Purchase Price prescribed in this Agreement.
Section 7.7 RESERVATION OF SECTION 29 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 29 of the Code, if any,
applicable to any production operations occurring prior to the Closing Date.
Buyer agrees to reasonably cooperate at Seller's cost and afford Seller and its
representatives, upon reasonable notice, during business hours, time to review
and copy any files, documents, databases, records, or other information,
necessary to establish or defend a claim for such Tax credits.
Section 7.8 RESERVATION OF SECTION 43 CREDITS. Seller retains the right, at
its option, to pursue Tax credits authorized by Section 43 of the Code, if any,
applicable to any qualified projects occurring prior to the Closing Date. Buyer
agrees to reasonably cooperate at Seller's
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cost and afford Seller and its representatives, upon reasonable notice, during
business hours, time to review and copy any files, documents, databases,
records, or other information necessary to establish or defend a claim for such
Tax credits.
PART EIGHT
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PART NINE
MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the respective Parties.
9.2 WAIVERS AND AMENDMENTS. All amendments and other modifications hereof
shall be in writing and signed by each of the Parties. Any Party may by written
instrument (i) waive compliance by the other Party with, or modify any of, the
covenants or agreements made by the
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other Party in this Agreement or (ii) waive or modify performance of any of the
obligations or other acts of the other Party. The delay or failure on the part
of any Party to insist, in any one instance or more, upon strict performance of
any of the terms or conditions of this Agreement, or to exercise any right or
privilege herein conferred shall not be construed as a waiver of any such terms,
conditions, rights or privileges but the same shall continue and remain in full
force and effect. All rights and remedies are cumulative.
9.3 NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when sent by telecopier (with receipt confirmed),
provided that a copy is promptly thereafter mailed in the USA by first class
postage prepaid mail, (c) when received by the addressee, if sent by Express
Mail, Federal Express, other express delivery service (receipt requested) or by
such other means as the Parties may agree from time to time or (d) five (5)
Business Days after being mailed in the USA, by first class postage prepaid
registered or certified mail, return receipt requested; in each case to the
appropriate address and telecopier number set forth below (or to such other
address and telecopier number as a Party may designate as to itself by notice to
the other Party):
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(i) if to Seller:
Texaco Exploration and Production Inc.
Attn: Paula Gatens
1111 Bagby
Houston, Texas 77002
Phone: 713-752-4619
Fax: 713-752-7998
(ii) if to the Buyer:
Bargo Petroleum Corporation
Attn: Mr. Jon Clarkson
700 Louisiana, Suite 3700
Houston, Texas 77002
Phone: 713-236-9792
Fax: 713-236-9799
Each Party shall have the right upon giving ten (10) Business Days prior written
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.
9.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
hereto, contains the entire agreement between the Parties hereto with respect to
the subject matter hereof and supersedes all prior discussions, understandings,
agreements and undertakings between the Parties hereto relating to the subject
matter hereof. There are no additional terms, whether consistent or
inconsistent, oral or written which are intended to be part of the Parties'
understanding which have not been incorporated into this Agreement, including
the Exhibits and Schedules.
9.6 SELLER'S OPTION TO ELECT A TAX DEFERRED EXCHANGE. Seller retains the
right to sell its interest in the Assets to Buyer as a non-simultaneous
like-kind property exchange for cash pursuant to Section 1031 of the Internal
Revenue Code of 1986. Seller shall have the right to elect this tax-deferred
exchange at any time prior to the date of Closing. Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no material additional costs,
expenses, fees or liabilities as a result of or in connection with the exchange.
9.7 SEVERABILITY. Every provision in this Agreement is intended to be
severable. If any term or provision hereof is held to be illegal or invalid for
any reason whatsoever, 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 Contemplated Transactions is not affected in a materially
adverse manner with respect to either Party.
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9.8 APPLICABLE LAW. This Agreement shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas, except
to the extent mandatorily governed by the laws of the state in which the Assets
are located
9.9 Expenses. Except as specified herein and as the Parties may otherwise
agree, each Party shall be solely responsible for all expenses incurred by it in
connection with any and all Contemplated Transactions.
9.10 LAWS AND REGULATIONS. This Agreement is subject to all Applicable
Laws.
9.11 PUBLIC ANNOUNCEMENTS. The Parties hereto agree that prior to making
any public announcement or statement with respect to the Contemplated
Transaction, the Party desiring to make such public announcement or statement
shall provide the other Party with a copy of the proposed announcement or
statement at least seven (7) Business Days prior to the intended release date of
such announcement. The other Party shall thereafter consult with the Party
desiring to make the release, and the Parties shall exercise their reasonable
best efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both such Parties or (ii) in the case of a statement to
be made solely by one Party, obtain approval of the other Party hereto to the
text of a public announcement or statement. Nothing contained in this paragraph
shall be construed to require either Party to obtain approval of the other Party
hereto to disclose information with respect to the Contemplated Transaction to
any Governmental Body to the extent required by Applicable Law or necessary to
comply with disclosure requirements of the New York Stock Exchange or any other
regulated stock exchange.
9.12 ASSIGNABILITY. The rights and obligations created or assumed hereunder
shall not be assignable or delegable by either Party and any assignment thereof
shall be void ab initio.
9.13 PROVISIONS SURVIVE CLOSING. All representations and warranties
contained in the Agreement shall survive the Closing and continue with respect
to claims made on or before twelve months following the Closing Date. Except as
otherwise provided herein, the covenants, indemnities and agreements made
hereunder or pursuant hereto shall survive Closing and be and remain enforceable
and continue in full force and effect as to their terms and conditions following
Closing and shall not be deemed to have been merged into the Closing or into the
assignments or other closing documents.
9.14 DISPUTE RESOLUTION. Any and all disputes, controversies or claims
relating to or arising out of the Contemplated Transactions shall be resolved in
accordance with the dispute resolution procedures outlined in Schedule 9.14
attached hereto and made a part hereof for all intents and purposes. The Parties
further agree that neither Party will institute litigation against the other
Party, their Affiliates and each of their respective officers, directors,
shareholders, agents and representatives relating to or arising out of the
Contemplated Transactions, except as provided in the attached Schedule 9.14 and
that the terms and provisions of this Section 9.14 shall survive the termination
of this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
SELLER:
TEXACO EXPLORATION AND
PRODUCTION INC.
-----------------------------------
NAME: J. K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 51-0265713
BUYER:
BARGO PETROLEUM CORPORATION
-----------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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