1
EXHIBIT 2.2
[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
FOUR STAR OIL & GAS COMPANY
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.................................................................................................2
Applicable Law............................................................................................2
Assets....................................................................................................2
Assumed Obligations.......................................................................................2
Beneficial Interests......................................................................................2
Burdens...................................................................................................2
Business Day..............................................................................................2
Closing...................................................................................................2
Closing Date..............................................................................................2
Code......................................................................................................3
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Contemplated Transactions.................................................................................3
Contracts.................................................................................................3
Corporate Documents.......................................................................................3
Easements.................................................................................................3
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Excluded Assets...........................................................................................4
Excluded Obligations......................................................................................6
Fee Interests.............................................................................................6
Governmental Body.........................................................................................6
HSR Act...................................................................................................6
Hydrocarbons..............................................................................................6
Knowledge.................................................................................................6
Leases....................................................................................................6
Losses....................................................................................................7
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Other Property............................................................................................7
Permitted Encumbrances....................................................................................8
Person....................................................................................................9
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Properties...............................................................................................10
Taxes....................................................................................................10
TEPI.....................................................................................................10
TEPI PSA.................................................................................................10
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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
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2.5 Closing and Payment of Purchase Price ..............................................................14
2.6 Method of Payment ..................................................................................14
PART THREE
REPRESENTATIONS AND WARRANTIES................................................................................14
3.1 Seller .............................................................................................14
3.2 Buyer ..............................................................................................17
3.3 Disclaimer and Notifications .......................................................................18
PART FOUR
COVENANTS.....................................................................................................21
4.1 Covenants of Seller ................................................................................21
4.2 Covenants of Buyer .................................................................................22
4.3 Covenants of Seller and Buyer ......................................................................24
PART FIVE
CONDITIONS TO CLOSING.........................................................................................33
5.1 Seller's Closing Conditions ........................................................................33
5.2 Buyer's Closing Conditions .........................................................................35
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PART SIX
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PART SEVEN
TAXES.........................................................................................................38
7.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes .......................38
7.2 Other Taxes ........................................................................................39
7.3 Sales Taxes ........................................................................................39
7.4 Cooperation ........................................................................................39
7.5 Tax Proceedings ....................................................................................39
7.6 Purchase Price Allocation ..........................................................................39
7.7 Reservation of Section 29 Credits ..................................................................39
7.8 Reservation of Section 43 Credits ..................................................................40
PART EIGHT
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PART NINE
MISCELLANEOUS.................................................................................................43
9.1 Successors and Assigns .............................................................................43
9.2 Waivers and Amendments .............................................................................43
9.3 Notices ............................................................................................44
9.4 Counterparts .......................................................................................44
9.5 Entire Agreement ...................................................................................44
9.6 Seller's Option to Elect a Tax Deferred Exchange ...................................................45
9.7 Severability .......................................................................................45
9.8 Applicable Law .....................................................................................45
9.9 Expenses ...........................................................................................45
9.10 Laws and Regulations ...............................................................................45
9.11 Public Announcements ...............................................................................45
9.12 Assignability ......................................................................................45
9.13 Provisions Survive Closing .........................................................................46
9.14 Dispute Resolution .................................................................................46
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SCHEDULES AND EXHIBITS
SCHEDULES
A Contracts
B Easements
C Included Equipment
D Excluded Assets
E Leases
F Fee Interests
G Properties and Imbalances
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
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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
9.14 Dispute Resolution
EXHIBITS
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]
G [intentionally left blank]
H [intentionally left blank]
I [intentionally left blank]
J [intentionally left blank]
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 Four Star Oil & Gas Company, 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.
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"AGREEMENT" means this Purchase and Sale Agreement, including the
Exhibits and Schedules.
"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 Schedule A.
"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.
"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.
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"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 Schedule A, 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.
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"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;
(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;
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(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 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;
(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
Schedule E and Schedule F 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 Schedule E and Schedule F or
such depths which are specifically excepted or reserved on Schedule E
and Schedule F;
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(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 Schedule F, insofar and only insofar as such Fee Interests cover the
lands and depths set forth in Schedule F. The Fee Interests shall include
all of Seller's right, title and interest to all depths unless specifically
limited on Schedule F.
"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.
"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 CO2)
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
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described on Schedule E to the Agreement, insofar and only insofar as such
Leases pertain to the lands and interests described in said Schedule. The
Leases shall include all of Seller's right, title and interest to all
depths unless specifically limited on Schedule E.
"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).
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"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
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solely and exclusively in connection with the production, treatment,
gathering or transportation of Hydrocarbons from the Leases,
Properties or Easements;
(b) [intentionally left blank]
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(e) subject to Section 4.3(b), all rights, obligations, interests
and benefits to gas imbalances with respect to the Assets; and
(f) 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.
"PERMITTED ENCUMBRANCES" means:
(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 Schedule A insofar as same do not operate to increase the
working interest of the Seller set forth on Schedule G 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
Schedule G;
(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
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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 Schedule G 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
Schedule G;
(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 Schedule G without a
corresponding increase in the net revenue interest and (iv) do not
operate to decrease the Seller's net revenue interest set forth on
Schedule G.
"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.
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"PROPERTIES" means an accounting unit described on Schedule G 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.
"TEPI" shall mean Texaco Exploration and Production Inc.
"TEPI PSA" shall mean that certain Purchase and Sale Agreement of even
date herewith by and between Buyer and TEPI.
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"TRANSITION AGREEMENT" means the transition agreement between TEPI and
Buyer.
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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Deeds................................................2.5
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Employees............................................4.3(s)
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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)
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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 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
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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 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
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[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 9102548782 (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.
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
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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]
(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.
(i) [this section intentionally left blank].
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(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 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 and there are no (i) gas imbalances except as set forth on
Schedule G (which may be supplemented from time to time before the Closing)
and as of the date shown on Schedule G 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
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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 Schedule A 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
Schedule A 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 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.
(r) 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,
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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.
(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.
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(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, 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
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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.
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
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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.
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
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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 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
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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.
(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 or TEPI 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]
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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
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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 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 Schedule G. 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
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Schedule G 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 Schedule G. 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, 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 Schedule G 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 K or such other form as to which Buyer
and Versado Processors, L.L.C shall have mutually agreed.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(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
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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.
(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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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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
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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).
(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
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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 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.
(t) [this section intentionally left blank].
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(u) [this section intentionally left blank].
(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) [this section intentionally left blank].
(y) HSR FILINGS. Buyer and Seller shall promptly make all filings
required under the HSR Act.
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.
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(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 TEPI 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.
(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) [this section intentionally left blank].
(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).
(l) [this section intentionally left blank].
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(p) [this section intentionally left blank].
(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 TEPI shall have executed and
delivered the Transition Agreement.
(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 TEPI shall have
performed and complied with all agreements, covenants and conditions
required by the TEPI PSA and the McFarland PSA.
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(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 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) [This section intentionally left blank].
(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).
(k) [This section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(m) [This section intentionally left blank].
(n) TRANSITION AGREEMENT. Buyer and TEPI shall have executed and
delivered the Transition Agreement.
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(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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SIX
[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]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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.
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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 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
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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.
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 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
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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):
(i) if to Seller:
Four Star Oil & Gas Company
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
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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.
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.
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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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[CONTINUED ON THE NEXT PAGE]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
SELLER:
FOUR STAR OIL & GAS COMPANY
----------------------------------------
NAME: J.K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 51-0078813
BUYER:
BARGO PETROLEUM CORPORATION
----------------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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