1
EXHIBIT 2.3
[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
MCFARLAND ENERGY, INC.
AND
BARGO PETROLEUM CORPORATION
DATED FEBRUARY 22, 2000
EFFECTIVE DATE: JANUARY 1, 2000
2
TABLE OF CONTENTS
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION..........................................................1
1.1 Subject Matter 1
1.2 Defined Terms 1
Affiliate.................................................................................................1
Agreed Rate...............................................................................................1
Agreement.................................................................................................2
Applicable Law............................................................................................2
Assets....................................................................................................2
Assumed Obligations.......................................................................................2
Beneficial Interests......................................................................................2
Burdens...................................................................................................2
Business Day..............................................................................................2
Closing...................................................................................................2
Closing Date..............................................................................................3
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
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Governmental Body.........................................................................................6
HSR Act...................................................................................................6
Hydrocarbons..............................................................................................6
Knowledge.................................................................................................7
Leases....................................................................................................7
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
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 38
7.3 Sales Taxes 38
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 39
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
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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(v) Joint Use Agreements
9.14 Dispute Resolution
EXHIBITS
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A Assignments
B-1 through B-2 Deeds
C Oil and Gas Leases
D Officer's Certificate - Buyer
E Officer's Certificate - Seller
F [intentionally left blank]
G [intentionally left blank]
H [intentionally left blank]
I [intentionally left blank]
J [intentionally left blank]
K [intentionally left blank]
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 McFarland Energy, Inc., a Delaware corporation (hereinafter
"Seller"), and Bargo Petroleum Corporation, a Texas corporation, (hereinafter
"Buyer"). Seller and Buyer are sometimes separately referred to herein as a
"Party" and collectively as "Parties."
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.1 SUBJECT MATTER. The subject matter of this Agreement is the sale by
Seller to Buyer of the Assets, the purchase of the Assets and the assumption of
the Assumed Obligations by Buyer, and the terms and conditions upon which all of
the foregoing shall take place.
1.2 DEFINED TERMS. For purposes of this Agreement, including the
Exhibits and Schedules hereto, except as otherwise expressly provided or unless
the context otherwise requires, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling or controlled by, or under
common control with, such Person. For purposes of this definition, the
term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management of such
Person, whether through ownership of voting securities, by contract or
otherwise, and specifically with respect to a corporation or
partnership, means direct or indirect ownership of fifty percent (50%)
or more of the voting stock in such corporation or of the voting
interest as a partner in such partnership. In addition, Seller's
Affiliates shall include Equilon Enterprises LLC, Motiva Enterprises
LLC, Equiva Services LLC and Equiva Trading Company LLC.
"AGREED RATE" means a rate per annum calculated on a 360-day
basis which is equal to the lesser of (a) a rate which is one percent
(1%) above the prime rate of interest of Chase Manhattan Bank, New
York, New York, as announced or published by such bank from time to
time (adjusted from time to time to reflect any changes in such rate
determined hereunder), or (b) the maximum rate from time to time
permitted by Applicable Law.
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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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"CONTEMPLATED TRANSACTIONS" means each and all of the
transactions contemplated by the Agreement.
"CONTRACTS" means, to the extent they are assignable, all of
Seller's right, title and interest in and to all valid and existing,
farmout agreements, unitization agreements, pooling agreements, unit
declarations, gas sales or purchase contracts, operating agreements and
other contracts attributable to the Assets, or other agreements and
instruments (including all amendments thereto and any agreements
settling claims asserted thereunder) to the extent and only to the
extent that the same relate, pertain or are incidental to the
Easements, the Leases, the Fee Interests, the Beneficial Interests or
the Other Property, including, without limitation, those listed on
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.
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
"GOVERNMENTAL BODY" means any Federal, state, tribal, county,
parish, municipal, or other federal, state or local governmental
authority or judicial or regulatory agency, board, body, department,
bureau, commission, instrumentality, court, tribunal or
quasi-governmental authority in any jurisdiction (domestic or foreign).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, and all regulations thereunder.
"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.
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"KNOWLEDGE" means the actual knowledge of a Party's current
corporate officers and business unit managers.
"LEASES" means, except to the extent constituting Excluded
Assets, any and all rights, titles and interests of Seller owned as of
the Effective Date and the Closing Date, or acquired pursuant to
Seller's rights as of the Effective Date and the Closing Date under the
terms of an existing Contract, in all of the oil, gas or mineral
leases, fees, and other interests described on 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,
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equipment, facilities and personal property of any kind
including but not limited to tubing, casing, wellheads,
pumping units, production units, compressors, valves, meters,
flowlines, pipelines, gathering systems, tanks, heaters,
separators, dehydrators, pumps and injection units which are
located on or connected with the Leases, Fee Interests, the
Beneficial Interests or Easements and which are used solely
and exclusively in connection with the production, treatment,
gathering or transportation of Hydrocarbons from the Leases,
Properties or Easements;
(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;
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(b) all Applicable Laws, and all rights reserved or
vested in any Governmental Body to control or regulate the
Assets in any manner including, without limitation, any
adjustment to Seller's net revenue interest or gross working
interest in a particular Property, caused by, or as the result
of, any action of a Governmental Body which is not the result
of any claims for under-payment of royalties owed to such
Governmental Body nor the negligent act or omission of Seller;
(c) liens for Taxes or assessments arising after the
Effective Date not yet due and payable or not yet delinquent,
or if delinquent, that are being contested in good faith by
appropriate action brought in the normal course of business
and to the extent covered by Seller's indemnity under Sections
8.1 and 8.5 hereof;
(d) reversionary interests arising under farmout and
farmin agreements, subleases, and the non-consent provisions
of applicable operating agreements insofar as same do not
operate to increase the working interest of the Seller set
forth on 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]
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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 the care of Texaco Exploration and Production Inc. at TEPI's account
at Chase Manhattan Bank, 1 Chase Plaza, New York, New York, ABA #021000021,
account number 9102582567 (with immediate telephone notice to Luci Romano, (914)
253-6071), or to such other account number as Seller may by written notice
direct, or if to Buyer, to Buyer's account as may be designated by Buyer.
PART THREE
REPRESENTATIONS AND WARRANTIES
3.1 SELLER. Seller represents and warrants to Buyer that, as of the
Effective Date:
(a) ORGANIZATION AND STANDING. Seller has been duly organized
and is validly existing in good standing under the laws of the State of
Delaware, and is duly qualified to do business and is in good standing
as a foreign corporation in all jurisdictions where the nature of its
properties or business requires it.
(b) AUTHORITY AND NO VIOLATION. The Seller has the corporate
power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement (a) has been duly authorized by all requisite corporate or
shareholder action and (b) does not conflict with or result in a
violation or breach of the Corporate Documents of the Seller or of any
agreement,
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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, 1998, 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]
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(c) BUYER'S RESPONSIBILITIES. Except as otherwise provided for
in Section 4.3(x) and the Transition Agreement, Buyer shall be
responsible for the payment of all necessary and reasonable capital
costs, Taxes, expenses and Burdens incurred against or applicable to
the operation and use of the Assets from and after the Effective Date,
whether invoiced or not. All production of Hydrocarbons from the Assets
occurring from and after the Effective Date and all proceeds from or
attributable thereto shall be the property of and belong to Buyer as of
the Effective Date.
(d) PAYMENT OF BURDENS. Except as otherwise provided in the
Transition Agreement, Buyer shall commence the payment of Burdens for
all Hydrocarbons produced beginning the first day of the month
following the month in which Seller has delivered to Buyer
substantially all of the Records including without limitations Records
relating to accounting, accounts payables, division orders and joint
interest billings necessary to administer such payments.
(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]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(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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30
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) [this section intentionally left blank].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(i) BUYER'S RESPONSIBILITY. In the event Seller is required to
continue to operate any of the Assets after the Closing Date pursuant
to an applicable operating agreement or the Transition Agreement, Buyer
shall be responsible for the payment of all necessary and reasonable
capital costs, Taxes, expenses and Burdens incurred against or
applicable to the operation and use of the Assets from and after the
Effective Date, whether invoiced or not.
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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 with the Texas Railroad Commission, Oklahoma
Corporation Commission, or such other state agency having jurisdiction
over the Assets.
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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
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
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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].
(u) [this section intentionally left blank].
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(v) JOINT USE AGREEMENTS. Buyer and Seller shall, from and
after the date of this Agreement, use their reasonable best efforts to
negotiate and execute on or before the Closing in the case of items
identified five (5) days prior to Closing or as soon thereafter as
reasonably practical, mutually agreeable joint use agreements for the
use and management of (i) the facilities and other equipment identified
in Schedule 4.3(v) and incorporating, among others, the terms and
conditions set forth in Schedule 4.3(v) and (ii) any other facilities
and equipment used immediately prior to the Effective Date to operate
or produce both (A) assets and properties being retained by Seller and
(B) the Assets operated by Seller and which are identified in writing
by the Buyer within ninety (90) days after Buyer assumes operations of
the affected Asset.
(w) [this section intentionally left blank]
(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.
(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 Four Star 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
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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].
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
(n) [this section intentionally left blank]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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(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. Four Star Oil & Gas
Company and TEPI shall have performed and complied with all agreements,
covenants and conditions required by the TEPI PSA and the Four Star
PSA.
(c) INJUNCTION. As of the Closing Date, no suit, action or
other proceeding (excluding any such matter initiated by Buyer) shall
be pending or threatened before any court or governmental agency
seeking to restrain Buyer or prohibit the Closing or seeking damages
against Buyer as a result of the consummation of this Agreement or the
Contemplated Transactions.
(d) CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller
shall have delivered to Buyer (i) a certificate dated the Closing Date
signed by the Secretary or an Assistant Secretary of Seller with respect
to the action of the Seller's Board of Directors authorizing the
transactions contemplated by the Agreement, and (ii) a certificate,
dated the Closing Date and signed by the President or a Vice President
of Seller certifying in such detail as Buyer may reasonably request to
the fulfillment of the conditions specified in subparagraphs (a) and (b)
of this Section 5.2 in the form attached as Exhibit E.
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(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.
(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]
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PART SIX
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
PART SEVEN
TAXES
Section 7.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND
PERSONAL PROPERTY TAXES. With respect to Taxes:
(a) Real and Personal Property Taxes. Real property taxes and personal
property taxes ("Real and Personal Property Taxes") for the year in which the
Effective Date occurs shall be apportioned as of the Effective Date between
Seller and Buyer. Seller shall be liable for the portion of such Real and
Personal Property Taxes based upon the number of days in the year occurring
prior to the Effective Date, and Buyer shall be liable for the portion of such
taxes based upon the number of days in the year occurring on and after the
Effective Date. For any year in which an apportionment is required, Buyer shall
file all required reports and returns incident to these taxes and shall remit to
the appropriate taxing authorities all such taxes assessed for the year in which
the Effective Date occurs. Seller may pay to Buyer, at the time of Buyer's
remittance, Seller's share of such taxes.
(b) Liability and Right to Pursue Claims. Seller shall retain liability
for all adjustments, examinations or claims relating to Taxes that are paid by
Seller and that are allocated to Seller pursuant to this Section 7.1. Seller
shall administer and defend any examination, claim or adjustments arising in
connection with Taxes to be paid by Buyer but which are allocated to Seller
pursuant to this Section 7.1.
Section 7.2 OTHER TAXES. All excise, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer.
Section 7.3 SALES TAXES. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall pay any sales Tax
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or other transfer Tax, as well as any applicable conveyance, transfer and
recording fee, and real estate transfer stamps or taxes imposed on the transfer
of the Assets pursuant to the Agreement. If Buyer is of the opinion that it is
exempt from the payment of such sales Tax or other transfer Tax, Buyer shall
furnish to Seller the appropriate tax exemption certificate.
Section 7.4 COOPERATION. Each Party to the Agreement shall provide the
other Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing Tax returns, establishing or defending a Tax position and responding
to any audit by any taxing jurisdiction. Each Party to the Agreement shall
cooperate with all reasonable requests of the other Party made in connection
with contesting the imposition of Taxes. Notwithstanding anything to the
contrary in the Agreement, neither Party to the Agreement shall be required at
any time to disclose to the other Party any Tax returns or other confidential or
privileged Tax information.
Section 7.5 TAX PROCEEDINGS. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each in the negotiations and settlement of any proceeding
described in this Section 7.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Part 7.
Section 7.6 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price
provided for in this Agreement is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder. Buyer and Seller agree that each will not take for income Tax
purposes, or permit any Affiliate to take, any position inconsistent with the
allocation of Purchase Price prescribed in this Agreement.
Section 7.7 RESERVATION OF SECTION 29 CREDITS. Seller retains the
right, at its option, to pursue Tax credits authorized by Section 29 of the
Code, if any, applicable to any production operations occurring prior to the
Closing Date. Buyer agrees to reasonably cooperate at Seller's cost and afford
Seller and its representatives, upon reasonable notice, during business hours,
time to review and copy any files, documents, databases, records, or other
information, necessary to establish or defend a claim for such Tax credits.
Section 7.8 RESERVATION OF SECTION 43 CREDITS. Seller retains the
right, at its option, to pursue Tax credits authorized by Section 43 of the
Code, if any, applicable to any qualified projects occurring prior to the
Closing Date. Buyer agrees to reasonably cooperate at Seller's
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cost and afford Seller and its representatives, upon reasonable notice, during
business hours, time to review and copy any files, documents, databases,
records, or other information necessary to establish or defend a claim for such
Tax credits.
PART EIGHT
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[TEXT OMITTED - CONFIDENTIAL TREATMENT REQUESTED]
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[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:
McFarland Energy, Inc.
Attn: Paula Gatens
1111 Bagby
Houston, Texas 77002
Phone: 713-752-4619
Fax: 713-752-7998
(ii) if to the Buyer:
Bargo Petroleum Corporation
Attn: Mr. Jon Clarkson
700 Louisiana, Suite 3700
Houston, Texas 77002
Phone: 713-236-9792
Fax: 713-236-9799
Each Party shall have the right upon giving ten (10) Business Days prior written
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same document.
9.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, contains the entire agreement between the Parties hereto with
respect to the subject matter hereof and supersedes all prior discussions,
understandings, agreements and undertakings between the Parties hereto relating
to the subject matter hereof. There are no additional terms, whether
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50
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 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:
McFARLAND ENERGY, INC.
-----------------------------------
NAME: J. K. Hendrickson
TITLE: Attorney-in-Fact
Tax ID: 95-2756635
BUYER:
BARGO PETROLEUM CORPORATION
-----------------------------------
NAME:
TITLE:
Tax ID: 75-2526762
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