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EXHIBIT 2.2
AGREEMENT REGARDING DISSOLUTION OF PARTNERSHIPS
This Agreement Regarding Dissolution of Partnerships (this
"AGREEMENT") dated August 30, 1996, by and between SOUTHERN MINERAL
CORPORATION, a Nevada corporation ("SMC") and DIASU OIL & GAS CO., INC., a
Texas corporation ("DIASU").
W I T N E S S E T H:
WHEREAS, SMC and Diasu are the sole partners of the SMC/Diasu
Partnership (the "SMC/DIASU PARTNERSHIP"), a Texas general partnership, which
was formed and is governed under the terms and provisions of that certain
SMC/Diasu Partnership Agreement (the "PARTNERSHIP AGREEMENT") dated January 5,
1996, by and between SMC and Diasu; and
WHEREAS, SMC, acting for itself and as nominee for Diasu in accordance
with the terms of the SMC/Diasu Partnership Agreement, entered into that
certain Agreement of Limited Partnership with Torch Energy Finance Fund Limited
Partnership I ("TORCH") also dated January 5, 1996, whereby SMC Development,
L.P., a Texas limited partnership (the "SMC/TORCH PARTNERSHIP"), was created
with SMC being the sole general partner and Torch being the sole limited
partner; and
WHEREAS, pursuant to that certain Purchase and Sale Agreement dated
January 5, 1996, the SMC/Torch Partnership acquired from Diasu various oil and
gas properties, more particularly described therein; and
WHEREAS, pursuant to the terms of the certain Purchase and Sale
Agreement (the "TORCH AGREEMENT") dated of even dated herewith, SMC has
acquired the limited partnership interest of Torch in and to the SMC/Torch
Partnership; and
WHEREAS, SMC and Diasu desire that the SMC/Torch Partnership and the
SMC/Diasu Partnership be wound up and dissolved and that all of the assets of
the SMC/Diasu Partnership and the SMC/Diasu Partnership be distributed in
accordance with the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of SMC having advanced and paid the
sum of THREE MILLION DOLLARS ($3,000,000) to purchase the limited partnership
interest of Torch in the SMC/Torch Partnership, the premises contained herein,
the considerations enumerated herein and the respective representations,
warranties and mutual covenants and agreements contained herein, the parties
hereto hereby agree as follows:
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ARTICLE 1
AGREEMENT OF DISSOLUTION
1.1 Agreement of Dissolution. SMC and Diasu agree that the
SMC/Torch Partnership and the SMC/Diasu Partnership are hereby dissolved. SMC
will cause the appropriate documents to be filed with the Texas Secretary of
State evidencing the dissolution of the SMC/Torch Partnership.
1.2 Wind-Up and Allocation of Liabilities. SMC and Diasu agree
that the business of the SMC/Torch Partnership and the SMC/Diasu Partnership
shall be wound up as soon as possible. Any outstanding debts and obligations
of such partnerships, including but not limited to those relating to the Oil
and Gas Properties (as defined below), shall be paid by 7% by Diasu and 93% by
SMC.
1.3 Distribution of Oil and Gas Properties. SMC and Diasu agree
that assets of the SMC/Torch Partnership and the SMC/Diasu Partnership shall be
distributed to SMC and Diasu as follows:
1.3.1 To Diasu, there shall be distributed, simultaneously
with the execution of this Agreement pursuant to the Conveyance, the
undivided interests in and to the Oil and Gas Properties prescribed to
be assigned to Diasu pursuant to the Conveyance (the "DIASU OIL AND
GAS PROPERTIES"). As used herein, the term "CONVEYANCE" shall mean a
conveyance in the form attached hereto as ANNEX 1 fully executed and
acknowledged with all blanks appropriately completed. Notwithstanding
the foregoing, the Conveyance may be comprised of various counterparts
to facilitate ease of execution and recordation. As used herein, the
term "OIL AND GAS PROPERTIES" shall mean those oil and gas leases and
wells more particularly described in EXHIBIT A to the form of
Conveyance which is attached; and
1.3.2 To SMC, there shall be distributed, simultaneously
with the execution of this Agreement pursuant to the Conveyance, the
undivided interests in and to the Oil and Gas Properties prescribed to
be assigned to SMC pursuant to the Conveyance (the "SMC OIL AND GAS
PROPERTIES").
1.4 Distribution of Other Assets. In the event that the SMC/Torch
Partnership or the SMC/Diasu Partnership own any assets other than the Oil and
Gas Properties, SMC shall cause the applicable partnership to distribute such
assets in the proportions of 93% to SMC and 7% to Diasu.
1.5 Consents to Assign. In the event that any consents of any oil
and gas lessors or sublessors or any other persons (including governmental
authorities) are required to be obtained prior to the distribution of any of
the Oil and Gas Properties by the SMC/Torch Partnership to SMC and Diasu and
such consents have not yet been obtained, the Conveyance shall not be effective
with respect to such properties and counterparts of the Conveyance describing
such properties shall not be placed of record, until the applicable consents
have been obtained. In the event that consents are
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not obtained within 30 days of the date hereof, representatives of Diasu and
SMC shall meet to determine what course of action to pursue with respect to the
applicable properties.
1.6 Subsequent Operations of Oil and Gas Properties. From and
after the effective time of the Conveyance, the relationship of the parties in
respect to the Oil and Gas Properties shall be that of tenants-in-common and
operations thereon shall be governed by the terms and conditions of the
Conveyance and the various operating agreements presently governing such
properties, including but not limited to those operating agreements listed on
ANNEX 2. In the event that any of the Oil and Gas Properties are not presently
covered by an operating agreement, the relationship of Diasu and SMC shall be
that of tenants-in-common and subject to the terms of any operating agreement
which such parties may execute and enter into subsequently. Notwithstanding
any provisions of any of the operating agreements presently in existence or
hereinafter executed by the parties with respect to the Oil and Gas Properties,
Diasu agrees that, if Diasu is the operator under any such agreement, it will,
upon 30 days written notice from SMC, resign as operator and vote its interest
for SMC's designee as successor operator.
1.7 Effect on Other Agreements of the Parties. The parties agree
that this Agreement shall have no effect with respect to their relationship,
rights and obligations arising under that certain Option Agreement dated
January 5, 1996, by and between Diasu and SMC, which agreement shall remain in
force and effect, except that the exercisability of the Second Warrant (as
defined in such Option Agreement) shall be accelerated to even date herewith
pursuant to the terms of that certain First Amendment to Option Agreement which
has been executed of even date herewith such that such Second Warrant is 100%
vested and exercisable during the remainder of its term.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SMC
SMC hereby represents and warrants to Diasu that as of the date hereof:
2.1 Organization and Good Standing. SMC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and has all requisite corporate power and authority to execute and
enter into this Agreement and to consummate the transactions contemplated
hereby and to perform all the terms and conditions hereof to be performed by
it. The execution and delivery of this Agreement by SMC, the performance by SMC
of all the terms and conditions herein to be performed by it and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of SMC. This Agreement has been duly
executed and delivered by SMC and constitutes the valid and binding obligation
of SMC, enforceable against SMC in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
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2.2 No Violations. This Agreement and the execution and delivery
hereof by SMC does not, and the fulfillment and compliance with the terms and
conditions hereof and the consummation of the transactions contemplated hereby
will not:
(i) conflict with or require the consent of any person
under the terms of the certificate of incorporation or bylaws of SMC
or any material agreement or other written obligation by which SMC is
bound or to which any material portion of its assets is subject, or
(ii) result in the creation or imposition of any
Encumbrance upon the Diasu Oil and Gas Properties. As used herein,
the term "ENCUMBRANCE" shall mean any mortgage, lien, security
interest, pledge, charge, encumbrance, claim, limitation, preferential
right to purchase, consent to assignment, or other burden or defect.
2.3 No Default. SMC is not in default under any material agreement
or other written obligation by which it is bound or to which any material
portion of its assets is subject.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DIASU
Diasu hereby represents and warrants to SMC that as of the date hereof:
3.1 Organization, Good Standing, Authority and Authorization.
Diasu is a corporation duly organized, validly existing and in good standing
under the laws of Texas and has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereto to be
performed by it. The execution and delivery of this Agreement by Diasu, the
performance by Diasu of all the terms and conditions herein to be performed by
it and the consummation of the transactions contemplated hereby have been duly
authorized and approved by the Board of Directors of Diasu. This Agreement has
been duly executed and delivered by Diasu and constitutes the valid and binding
obligation of Diasu, enforceable against Diasu in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
laws relating to or affecting the enforcement of creditors' rights generally
and general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.2 No Violations. This Agreement and the execution and delivery
hereof by Diasu does not, and the fulfillment and compliance with the terms and
conditions hereof and the consummation of the transactions contemplated hereby
will not:
(i) conflict with or require the consent of any person
under the terms of the certificate of incorporation or bylaws of Diasu
or any material agreement by which Diasu is bound or to which any
material portion of its assets is subject.
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(ii) result in the creation or imposition of any
Encumbrance upon the SMC Oil and Gas Properties. As used herein, the
term "ENCUMBRANCE" shall mean any mortgage, lien, security interest,
pledge, charge, encumbrance, claim, limitation, preferential right to
purchase, consent to assignment, or other burden or defect.
3.3 No Default. Diasu is not in default under any material
agreement or other written obligation by which it is bound or to which any
material portion of its assets is subject.
ARTICLE 4
MISCELLANEOUS
4.1 Survival. This Agreement and the representations, warranties
and covenants contained herein shall survive consummation of the transactions
contemplated hereby.
4.2 Exclusive Agreement. This Agreement supersedes all prior
written or oral agreements between the parties with respect to the transactions
contemplated herein, and is intended as a complete and exclusive statement of
the terms of the agreement between SMC and Diasu with respect to the
transactions contemplated herein.
4.3 Choice of Law; Choice of Forum; Amendments; Headings. This
Agreement shall be governed by the internal laws of the State of Texas, without
giving effect to principles of conflicts of laws. This Agreement may not be
changed or terminated orally. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Terms such as "herein," "hereby," "hereto,"
and "hereof" refer to this Agreement as a whole. The term "include" and
derivatives thereof are used in an illustrative sense and not a limitative
sense.
4.4 Assignments and Third Parties. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No such assignment shall release any party
of any of its obligations under this Agreement. Nothing in this Agreement
shall entitle any person other than the parties hereto or their respective
permitted successors and assigns to any claim, cause of action, remedy or right
of any kind.
4.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon any binding determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely possible in an acceptable
and legally enforceable manner, to the end that the transactions contemplated
hereby may be completed to the extent possible.
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4.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same agreement.
4.7 Further Assurances. Each party shall, and shall cause its
affiliates to, execute, acknowledge and deliver all such further conveyances,
transfer orders, division orders, notices, assumptions, releases and
acquittances, and such other instruments, and shall take such further actions
as may be necessary or appropriate to assure fully to the other party, its
successors or assigns, all of the assets intended to be conveyed to such other
party by this Agreement and the Conveyance.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
SOUTHERN MINERAL CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
DIASU OIL & GAS CO., INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
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The following Annexes are attached to this Agreement Regarding
Dissolution of Partnerships:
ANNEX 1: containing a form of Assignment, Bill of Sale and
Conveyance distributing the subject oil and gas
properties of SMC Development, L.P. to Southern
Mineral Corporation and Diasu Oil & Gas Co., Inc. in
proportion to the agreed percentages. This form of
contains the following Exhibits:
EXHIBIT A: containing descriptions of leases
and wells in Lafourche, Terrebone,
Calcasieu and Jefferson Davis
Parishes, Louisiana and Jefferson
Davis and Marion Counties,
Mississippi and Billings County,
North Dakota and Garfield and Love
Counties, Oklahoma and Aransas,
Refugio, Fayette, Ochiltree and
Panola Counties, Texas and Campbell
County, Wyoming; and
EXHIBIT B: containing a description of certain
agreements affecting the subject oil
and gas leases.
ANNEX 2: containing a list of the Joint Operating Agreements
affecting the subject oil and gas leases and wells.
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