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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
dated
May 13, 1999
between
APACHE CORPORATION
as
Seller
and
VENUS EXPLORATION, INC.
Buyer
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TABLE OF CONTENTS
1. PURCHASE AND SALE. .............................................................. 1
1.1 PURCHASE AND SALE. .............................................................. 1
1.2 INTERESTS. ...................................................................... 1
1.3 RESERVED INTERESTS. ............................................................. 2
1.4 EFFECTIVE TIME. ................................................................. 3
1.5 LIKE KIND EXCHANGE. ............................................................. 3
2. PURCHASE PRICE. ................................................................. 3
2.1 PURCHASE PRICE. ................................................................. 3
2.2 ADJUSTMENTS TO PURCHASE PRICE. .................................................. 4
3. REPRESENTATIONS AND WARRANTIES. ................................................. 5
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. ....................................... 5
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. ........................................ 6
4. COVENANTS AND AGREEMENTS. ....................................................... 7
4.1 COVENANTS AND AGREEMENTS OF SELLER. ............................................. 7
4.2 COVENANTS AND AGREEMENTS OF BUYER. .............................................. 8
5. TITLE MATTERS. ...................................................................... 10
5.1 DEFENSIBLE TITLE. ............................................................... 10
5.2 TITLE DEFECT ADJUSTMENTS. ....................................................... 11
5.3 PREFERENTIAL RIGHTS AND CONSENTS. ............................................... 12
5.4 CASUALTY LOSS. .................................................................. 12
6. ENVIRONMENTAL MATTERS. .......................................................... 13
6.1 ENVIRONMENTAL OBLIGATIONS. ...................................................... 13
6.2 DEFINITION OF ENVIRONMENTAL CLAIM, ENVIRONMENTAL CONDITION AND
ENVIRONMENTAL LAW. .............................................................. 14
6.3 WAIVER. ......................................................................... 15
6.4 REMEDIES FOR VIOLATION OF ENVIRONMENTAL LAW. .................................... 15
6.5 LIMITATIONS. .................................................................... 15
7. CONDITIONS TO CLOSING. .......................................................... 16
7.1 SELLER'S CONDITIONS. ............................................................ 16
7.2 BUYER'S CONDITIONS. ............................................................. 16
8. CLOSING. ........................................................................ 17
8.1 DATE OF CLOSING. ................................................................ 17
8.2 PLACE OF CLOSING. ............................................................... 17
8.3 CLOSING OBLIGATIONS. ............................................................ 17
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9. OBLIGATIONS AFTER CLOSING. ...................................................... 18
9.1 POST-CLOSING ADJUSTMENT PROCEDURE. .............................................. 18
9.2 FILES AND RECORDS. .............................................................. 19
9.3 POST-CLOSING ADMINISTRATIVE ACCOUNTING RESPONSIBILITIES. ........................ 19
9.4 FURTHER ASSURANCES. ............................................................. 20
9.5 ASSUMPTION OF OBLIGATIONS. ...................................................... 20
9.6 INDEMNIFICATION. ................................................................ 22
10. TERMINATION OF AGREEMENT. ....................................................... 22
10.1 TERMINATION. .................................................................... 22
10.2 LIABILITIES UPON TERMINATION OR BREACH. ......................................... 23
11. MISCELLANEOUS. ..................................................................... 23
11.1 EXHIBITS. ....................................................................... 23
11.2 EXPENSES. ....................................................................... 23
11.3 NOTICES. ........................................................................ 23
11.4 WIRE TRANSFER INSTRUCTIONS. ..................................................... 24
11.5 AMENDMENTS. ..................................................................... 24
11.6 ASSIGNMENT. ..................................................................... 24
11.7 CONDITIONS. ..................................................................... 25
11.8 COUNTERPARTS. ................................................................... 25
11.9 GOVERNING LAW. .................................................................. 25
11.10 ENTIRE AGREEMENT. ............................................................... 25
11.11 PARTIES IN INTEREST. ............................................................ 25
11.12 SURVIVAL. ....................................................................... 25
11.13 ARBITRATION. .................................................................... 26
11.14 TAX MATTERS. .................................................................... 26
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), dated the 13th day of May,
1999, is between APACHE CORPORATION ("Seller"), a Delaware corporation and VENUS
EXPLORATION, INC. ("Buyer").
In consideration of the mutual promises contained herein, the benefits to be
derived by each party hereunder and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree
as follows:
1. PURCHASE AND SALE.
1.1 PURCHASE AND SALE.
Seller agrees to sell and convey and Buyer agrees to purchase and pay for the
Interests (as defined in Section 1.2), subject to the terms and conditions of
this Agreement.
1.2 INTERESTS.
Subject to the reservations set forth in Section 1.3, all of Seller's, right,
title and interest in and to the following shall herein be called the
"Interests":
(a) The oil and gas wells described in EXHIBIT "A-I" hereto (the "Wells"),
together with all oil, gas and mineral production from the Wells;
(b) The leasehold estates created by the leases, licenses, permits and other
agreements described in EXHIBIT "A-II", INSOFAR BUT ONLY INSOFAR as they cover
and relate to the lands (the "Lands") described in EXHIBIT "A-II" (the leasehold
estates insofar as they cover the Lands are called the "Leases"); together with
all overriding royalty interests, production payments and other payments out of
or measured by the value of oil and gas production;
(c) All oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all products refined therefrom, together with all
minerals produced in association with these substances (collectively called the
"Hydrocarbons") in and under and which may be produced and saved from or
attributable to the Leases or Wells, and all rents, issues, profits, proceeds,
products, revenues and other income from or attributable thereto;
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(d) All of the personal property, fixtures and improvements appurtenant to the
Wells, or the Leases or used or obtained in connection with the operation of the
Wells, or the Leases or with the production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, including
without limitation, pipelines, disposal systems, gathering systems and
compression facilities appurtenant to or located upon the Leases; and
(e) All the property, rights, privileges, benefits and appurtenances in any way
belonging, incidental to, or pertaining to the property, interests and rights
described in Sections 1.2(a) through 1.2(d) including the Wells, the Lands and
the Leases, including, to the extent transferable, all agreements, product
purchase and sale contracts, surface leases, gas gathering contracts, salt water
disposal leases and wells, processing agreements, compression agreements,
equipment leases, permits, gathering lines, rights-of-way, easements, licenses,
farmouts and farmins, options, orders, pooling, spacing or consolidation
agreements and operating agreements and all other agreements relating thereto
(the "Contracts"); and
(f) All of the files, records, data, and other documentary information
maintained in the normal course of business by Seller pertaining to the Leases,
Equipment, Hydrocarbons and the Contracts (collectively, the "Data") in the
format maintained by Seller. The Data shall not, however, include any
information, which, if disclosed, would cause Seller to breach any contract or
agreement. Seller will use reasonable efforts to obtain any required consent to
disclose such information.
1.3 RESERVED INTERESTS.
Seller shall reserve and except from the sale and conveyance of the Interests in
favor of itself, its successors and assigns the following:
(a) All accounts receivable attributable to the Interests that are, in
accordance with generally accepted accounting principles, attributable to the
period prior to the Effective Time;
(b) All claims and rights relating to overpayments of costs and expenses
attributable to periods prior to the Effective Time, including, without
limitation, the right to initiate, prosecute or participate, at Seller's sole
cost and expense, in all audits, audit claims and tax claims or proceedings
relating to or including periods prior to the Effective Time, regardless of when
commenced, arising under applicable law, operating or product sale agreements or
otherwise, and to recover all costs and expenses claimed or shown by such audits
or proceedings as owing to the owner of the Interests for periods prior to the
Effective Time; and
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(c) All rights, if any, to recover additional production or proceeds or
requirements to refund monies attributable to such production or proceeds
therefrom attributable to the Interests for any production month prior to the
Effective Time, resulting from any adjustment to the net revenue interest
attributable to the Interests in the applicable division orders.
1.4 EFFECTIVE TIME.
The purchase and sale of the Interests shall be effective as of March 1, 1999,
at 7:00 a.m., at the location of the Interests (the "Effective Time").
1.5 LIKE KIND EXCHANGE.
Seller and Buyer each shall have the right at their respective sole options, to
dispose of the Interests, or any portion thereof, through a transaction that is
structured to qualify as a like-kind exchange of property within the meaning of
Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code").
Seller and Buyer agree to cooperate with the other in effecting a qualifying
like-kind exchange through a trust, escrow or other means as mutually determined
by the Parties; provided, however, that the party electing to utilize a
like-kind exchange (the "Electing Party") shall hold the other party (the
"Non-Electing Party") harmless from any expense, obligation or liability,
without limitation, which the Non-Electing Party may suffer in connection with
or arising out of the Non-Electing Party's cooperation with the Electing Party's
treatment of the Interests as part of a like-kind exchange. The Electing Party
shall have the right to assign its rights, but not its obligations, under this
Agreement, in whole or in part, to a "qualified intermediary" [as defined in
Treasury Regulations Section 1.1031(k)-l(g)(4)] or as otherwise necessary or
appropriate to effectuate a like-kind exchange and the Non-Electing Party agrees
to recognize said qualified intermediary. The Electing Party shall be solely
responsible for assuring the effectiveness for the exchange for its tax purposes
and the Non-Electing Party does not represent to the Electing Party any
particular tax treatment will result to the Electing Party as a result thereof.
In no event shall any like-kind exchange contemplated by this provision cause an
extension of the Closing Date set forth herein.
2. PURCHASE PRICE.
2.1 PURCHASE PRICE.
The purchase price for the Interests shall be TWENTY EIGHT MILLION FIVE HUNDRED
THOUSAND DOLLARS AND NO/100 ($28,500,000.00) (the "Purchase
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Price"), subject to adjustment as set forth in Section 2.2, and payable at
closing, subject to any post closing adjustments as provided herein.
2.2 ADJUSTMENTS TO PURCHASE PRICE.
The Purchase Price shall be adjusted as follows:
(a) The Purchase Price shall be adjusted upward by the following:
(1) the value of all oil in storage above the pipeline connection as of
the Effective Time and not previously sold by Seller that is
attributable to the Interests, such value to be the actual price in
effect as of the Effective Time less applicable taxes and gravity
adjustments.
(2) the amount of all expenditures; rentals and other charges; ad
valorem, property, production, excise, severance and similar taxes
based upon or measured by the ownership of property or the production
of hydrocarbons or the receipt of proceeds therefrom; expenses billed
under applicable operating agreements and, in the absence of an
operating agreement, expenses of the sort customarily billed under such
agreements (COPAS overhead charges on Apache operated wells is
specifically included), paid by or on behalf of Seller in connection
with the operation of the Interests, in accordance with generally
accepted accounting principles, to the extent not provided for in
Section 2.2 (a) (3), attributable to the period after the Effective
Time;
(3) an amount equal to all prepaid expenses attributable to the
Interests that are paid by or on behalf of Seller that are, in
accordance with generally accepted accounting principles, attributable
to the period after the Effective Time, including without limitation
prepaid utility charges and prepaid ad valorem, property, production,
severance and similar taxes based upon or measured by the ownership of
property or the production of hydrocarbons or the receipt of proceeds
therefrom;
(4) the value of the underproduction of gas attributable to the
Interests as of the Effective Time, such value to be $1.50 MCF, less
applicable royalties and taxes, the volume of such underproduction
estimated for purposes of Closing to be as set forth on a Well-by-Well
basis on EXHIBIT "E" hereto, subject to final adjustment as set forth
in Section 9.1;
(5) any other amount agreed upon by Seller and Buyer; and
(b) The Purchase Price shall be adjusted downward by the following:
(1) proceeds received by Seller attributable to the Interests that are,
in accordance with generally accepted accounting principles,
attributable to the period of time from and after the Effective Time;
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(2) an amount equal to unpaid ad valorem, property, production,
severance and similar taxes and assessments based upon or measured by
the ownership of the Interests that are attributable to periods of time
prior to the Effective Time, which amounts shall, to the extent not
actually assessed, be computed based on such taxes and assessments for
the preceding tax year (such amount to be prorated for the period of
Seller's and Buyer's ownership before and after the Effective Time);
(3) an amount equal to the sum of all Title Defect and Environmental
Defect adjustments;
(4) the value of the overproduction of gas attributable to the
Interests as of the Effective Time, such value to be $1.50 MCF, less
applicable royalties and taxes, and the volume of such overproduction
estimated for Closing purposes to be as set forth on a Well-by-Well
basis on EXHIBIT "E" hereto, subject to final adjustment as set forth
in Section 9.1;
(5) any other amount agreed upon by Seller and Buyer.
3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants as of the date hereof and as of the Closing Date
to Buyer as follows:
(a) The consummation of the transactions contemplated by this Agreement will not
violate, or be in conflict with any provision of any agreement or instrument to
which Seller is a party or by which it is bound.
(b) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly qualified to carry
on its business in each state where the Interests are located.
(c) Seller has all requisite corporate power and authority to carry on its
business as presently conducted, to enter into this Agreement, and to perform
its obligations under this Agreement. The consummation of the transactions
contemplated by this Agreement will not violate, or be in conflict with, (i) any
provision of its articles of incorporation or bylaws; (ii) any provision of any
agreement or instrument to which it is a party or by which it is bound,
noncompliance with which would have a material adverse effect upon Buyer's
ownership or operation of the Interests, or upon any of the transactions
contemplated by this Agreement, and (iii) to its knowledge, any judgment,
decree, order, statute, rule or regulation applicable to Seller.
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(d) This Agreement has been duly authorized, executed and delivered on behalf of
Seller and constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, subject, however, to the effects of
bankruptcy, insolvency, reorganization and other laws for the protection of
creditors.
(e) Seller has incurred no liability, contingent or otherwise, for brokers or
finders fees relating to the transactions contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever.
(f) There are no bankruptcy, reorganization or arrangement proceedings pending,
being contemplated by or, to the knowledge of Seller, threatened against Seller.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants as of the date hereof and as of the Closing Date
to Seller as follows:
(a) The consummation of the transactions contemplated by this Agreement will not
violate, or be in conflict with any provision of any agreement or instrument to
which Buyer is a party or by which it is bound.
(b) This Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject, however, to the effects of
bankruptcy, insolvency, reorganization and other laws for the protection of
creditors.
(c) Buyer has incurred no liability, contingent or otherwise, for brokers or
finders fees relating to the transactions contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.
(d) The Interests to be acquired by Buyer pursuant to this Agreement are being
acquired by it for its own account for investment purposes and not for
distribution within the meaning of any securities law. In acquiring the
Interests, it is acting in the conduct of its own business and not under any
specific contractual commitment to any third party, or any specific nominee
agreement with any third party, to transfer to, or to hold title on behalf of,
such third party, with respect to all or any part of the Interests.
(e) There are no bankruptcy, reorganization or arrangement proceedings pending,
being contemplated by or, to the knowledge of Buyer, threatened against Buyer.
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4. COVENANTS AND AGREEMENTS.
4.1 COVENANTS AND AGREEMENTS OF SELLER.
Seller covenants and agrees with Buyer as follows:
(a) Upon execution of this Agreement, Seller will make available to Buyer for
examination at a location designated by Seller, all of Seller's title
information, production information and other information relating to the
Interests, including without limitation, accounting files, production files,
land files, lease files, well files, division order files, contract files and
marketing files, and, subject to the consent and cooperation of operators and
other third parties, will cooperate with Buyer in Buyer's efforts to obtain, at
Buyer's expense, such additional information relating to the Interests as Buyer
may reasonably desire, to the extent in each case that Seller may do so without
violating legal constraints or any obligation of confidence or other contractual
commitment of Seller to a third party.
(b) Seller shall, or in the case of any third-party operated wells, use
reasonable efforts to cause the operator thereof, to permit Buyer's authorized
representative to conduct, at Buyer's sole risk and expense, on-site inspections
of the Interests. All such inspections shall be conducted at the sole risk, cost
and expense of Buyer, and Buyer shall indemnify and defend Seller from and
against any and all losses arising from such inspections.
(c) During the period from the date of this Agreement to the Closing Date,
Seller agrees, unless specifically waived by Buyer in writing, as follows:
(1) Subject to the provisions of applicable operating and other
agreements, Seller shall continue to operate and administer the
Interests in a good and workmanlike manner consistent with its past
practices, and shall carry on its business with respect to the
Interests in substantially the same manner as before execution of this
Agreement.
(2) Seller shall, except for emergency action taken in the face of risk
to life, property or the environment, submit to Buyer for prior written
approval, all requests for operating or capital expenditures and all
proposed contracts and agreements relating to the Interests that
involve individual commitments of more than $20,000.00 net to Seller's
interest, or a cumulative total of $75,000 net to Seller's interest.
(3) Buyer acknowledges that Seller owns an undivided interest in
certain of the Interests, and Buyer agrees that the acts or omissions
of the other working interest owners who are not affiliated with Seller
shall not constitute a violation of the provisions of this Agreement,
nor shall any action required by a vote of working interest owners
constitute such a violation so long as Seller has voted its interest in
a manner that complies with the provisions of this Section. To the
extent that
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Seller is not the operator of any of the Interests, the
obligations of Seller in this Agreement shall be construed to require
that Seller use reasonable efforts (without being obligated to incur
any expense or institute any cause of action) to cause the operator of
such Interests to take such actions or render such performance within
the constraints of the applicable operating agreements and other
applicable agreements.
(4) Notwithstanding anything to the contrary in this Agreement, Seller
shall have no liability to Buyer for the incorrect payment of delay
rentals, royalties, shut-in royalties or similar payments or for any
failure to make any such payments through mistake or oversight
(including Seller's negligence), unless caused by Seller's gross
negligence or willful misconduct provided, however, Seller shall advise
Buyer of any such mistakes or oversights upon Seller becoming aware of
same.
4.2 COVENANTS AND AGREEMENTS OF BUYER.
Buyer covenants and agrees with Seller that:
(a) Buyer shall use its best efforts to ensure that as of the Closing Date it
will not be under any material legal or contractual restriction that would
prohibit or delay the timely consummation of such transaction.
(b) Buyer shall, subject to the applicable terms of existing operating
agreements, take over operations as of 7:00 a.m. local time at the wellsites on
the Closing Date, with respect to Seller-operated Wells included in the
Interests assigned to Buyer at the Closing. Upon taking over operations, Buyer
will post all necessary state, federal and local bonds and shall assist Seller
in having Seller's existing bonds released, or in the alternative, having the
wells operated by Buyer released from Seller's existing bond.
(c) Certain of the Leases are burdened or encumbered by and subject to that
certain Member Gas Purchase Agreement dated effective January 1, 1996, ("Member
Agreement") among Apache Corporation and MW Petroleum Corporation, as Sellers,
and Producers Energy Marketing, LLC, as Buyer, as described on EXHIBIT "C"
hereto. Before Closing, Seller will make good faith, commercially reasonable
efforts to obtain releases of certain requirements insofar as they affect such
Leases. If such releases are not obtained, such Leases shall remain subject to
the terms and conditions of the Member Agreement, and as of the Effective Time,
Seller shall assume all duties and obligations of Buyer thereunder insofar as
they affect such Leases.
(d) Purchaser acknowledges and confirms that it has been advised by Apache of
and has received information concerning the following:
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(1) Apache and The Municipal Gas Authority of Georgia ("MGAG"), entered
into an agreement dated December 20, 1994, wherein Apache, in exchange
for the advance payment of certain consideration, agreed to sell MGAG
certain volumes of natural gas with the incremental delivery of same to
occur annually for a period of years set forth therein ("MGAG-2
Transactions"). To ensure the delivery of the pre-purchased natural gas
volumes by Apache to MGAG, MGAG received from Apache a security
interest in Apache's interest in certain wells and/or properties more
specifically described in exhibits to the MGAG-2 Transactions
documents.
(2) Apache and MGAG entered into an agreement dated effective September
1, 1997, wherein Apache, in exchange for the advance payment of certain
consideration, agreed to sell MGAG certain volumes of natural gas with
the incremental delivery of same to occur annually for a period of
years set forth therein ("MGAG-3 Transactions"). To ensure the delivery
of the pre-purchased natural gas volumes by Apache to MGAG, MGAG
received from Apache a security interest in Apache's interests in
certain wells and/or Interests more specifically described in exhibits
to the MGAG-3 Transactions documents.
(3) The MGAG-2 Transactions and MGAG-3 Transactions, and Seller's
interests in the wells and Interests which are the subject matter
thereof, are subject to the terms and conditions contained in the
applicable documents and agreements attendant thereto, in their
entirety. No party to the MGAG-2 Transactions or MGAG-3 Transactions
can assign its respective rights under the documents and agreements
thereto without the express written consent of the other parties.
Seller and MGAG are required to maintain the contents of all documents
and agreements related to the aforedescribed transactions and matters
in the strictest confidence, and to obtain the prior written consent of
the other parties before disclosing any portion of same to any third
party.
(4) All or a portion of Seller's interests in one or more of the Wells
and/or Interests which are the subject matter of the transactions
contemplated in this Agreement, shall, unless fully released by MGAG
prior to the assignment thereof to Buyer, be subject to and burdened
by, and Buyer shall assume, all of the rights enjoyed by, and
obligations in favor of, MGAG as fully set forth in each of the
documents and agreements that govern and concern the particular MGAG
transaction and/or matter affecting Seller's interests in said Well
and/or Interests.
(5) Certain of the Leases are burdened or encumbered by and subject to
that certain Amended and Restated Gas Purchase Agreement dated
effective July 1, 1998, ("Gas Purchase Agreement") among Apache
Corporation and MW Petroleum Corporation, as Sellers, and Producers
Energy Marketing, LLC, as Buyer, as described on Exhibit "C" hereto.
Before Closing, Seller will make good faith, commercially reasonable
efforts to obtain releases of certain requirements insofar as they
affect such Leases. If such releases are not obtained, such Leases
shall become subject to a Restricted Gas Purchase Agreement, and as of
the
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Effective Time, Buyer shall assume all duties and obligations of Seller
thereunder insofar as they affect such Leases.
5. TITLE MATTERS.
5.1 DEFENSIBLE TITLE.
(a) The term "Defensible Title" shall mean, as to the Interests, such title,
whether held by Seller, that, except for and subject to the Permitted
Encumbrances (as defined in Section 5.1(b)): (i) entitles Seller to receive as
to each Interest set forth in EXHIBIT "A-I", not less than the "Net Revenue
Interest" set forth in EXHIBIT "A-I" as to such Lease in the oil, gas and
associated liquid and gaseous hydrocarbons produced, saved and marketed from any
Well located on such Interests as to its presently producing formations; (ii)
obligates Seller to bear costs and expenses relating to the maintenance,
development and operation of any Well located on such Lease in an amount not
greater than the "Working Interest" set forth in EXHIBIT "A-I" without a
proportionate increase in the Net Revenue Interest, and (iii) is free and clear
of liens and material encumbrances and defects.
(b) The term "Permitted Encumbrances," as used herein, shall mean, as follows:
(1) lessors' royalties, overriding royalties, unitization and pooling
designations and agreements, reversionary interests and similar
burdens;
(2) required third party consents to assignments and similar agreements
with respect to which (i) waivers or consents have been or will be
obtained from the appropriate parties prior to the closing date, or
(ii) the appropriate time period for asserting such rights has expired
without an exercise of such rights;
(3) all rights to consent by, required notices to, filings with, or
other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein if the same are
customarily obtained subsequent to such sale or conveyance;
(4) easements, rights-of-way, servitudes, permits, surface leases and
other rights with respect to surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like; conditions, covenants
or other restrictions; and easements for streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements
and rights-of-way, on, over or in respect of any of the Interests;
(5) materialmen's, mechanics', repairmen's, employees', contractors',
operators', tax and other similar liens or charges arising in the
ordinary course of business incidental to construction, maintenance or
operation of any of the Interests
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(i) if they have not been filed pursuant to law, (ii) if filed, they
have not yet become due and payable or payment is being withheld as
provided by law, or (iii) if their validity is being contested in good
faith in the ordinary course of business by appropriate action;
(6) any other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects or irregularities of any kind
whatsoever affecting the Interests that individually or in the
aggregate are not such as to have a materially adverse effect, do not
prevent Seller from receiving the proceeds of production and that do
not operate to (i) reduce the net revenue interest of Seller below that
set forth on EXHIBIT "A-I", or (ii) increase the working interest of
Seller above that set forth on EXHIBIT "A-I" without a proportionate
increase in the Net Revenue Interest of Seller; and
(7) all those contracts, agreements and other matters described on
EXHIBIT "D".
(c) The term "Title Defect" as used herein shall mean any material encumbrance
or defect in Seller's title to the Interests (expressly excluding Permitted
Encumbrances), that renders Seller's title to the Interests less than Defensible
Title. The term "Allocated Value" as used herein means the value allocated to
the Well as set forth in EXHIBIT "A-I" hereto, as adjusted for overproduction or
underproduction in the manner set forth in Section 2.2.
5.2 TITLE DEFECT ADJUSTMENTS.
(a) No adjustment to the Purchase Price for Title Defects shall be made unless
and until, and only to the extent that the individual value of each Title Defect
exceeds $25,000.00 or the aggregate value of all Title Defects exceeds one
percent (1%) of the Purchase Price.
(b) Buyer shall give Seller written notice of Title Defects ten (10) days prior
to the Closing Date. Such notice shall be in writing and shall include (i) a
description of the Title Defect, (ii) the Allocated Value of the Well affected
by the Title Defect and (iii) the amount by which Buyer believes the Allocated
Value of such Well has been reduced because of such Title Defect. Buyer shall be
deemed to have waived all Title Defects of which Seller has not been given
timely notice by Buyer and all Title Defects that do not meet the thresholds for
an adjustment to the Purchase Price set forth in Section 5.2(a).
(c) Subject to the limitation contained in Section 5.2(a), a Well affected by a
Title Defect and the Leases comprising the production unit or proration unit for
the Well shall be excluded from the Interests to be purchased by Buyer hereunder
and the Purchase Price shall be reduced in accordance with Section 2.2 by an
amount equal to the Allocated Value of such Well unless prior to closing, (i)
the Title Defect has been removed, (ii) Buyer
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agrees to waive the relevant Title Defect and purchase the affected Interests
notwithstanding the defect, (iii) Seller agrees to indemnify Buyer against all
losses, costs, expenses and liabilities with respect to such Title Defect, or
(iv) Buyer and Seller agree to an amount by which the Allocated Value of the
Well has been reduced and the Purchase Price is reduced by such amount in
accordance with Section 2.2.
5.3 PREFERENTIAL RIGHTS AND CONSENTS.
(a) Some of the Leases may be subject to preferential rights to purchase in
favor of third parties or third party consents to assignment and notices of
sale. The form and content of all solicitations for the waivers and consents
affecting the Interests, shall be determined by Seller but shall not be
inconsistent with any of the terms of this Agreement.
(b) In the event a third party exercises an applicable preferential right to
purchase any of the Interests prior to the Closing Date, the affected Interests
shall be removed from this Agreement and the Purchase Price shall be adjusted by
the Allocated Value of the Interests. In the event such third party fails or
refuses to close on such preferential right within sixty (60) days of the date
of such third party's exercise of its preferential right, then Buyer shall
purchase such affected Interests covered by the preferential right for its
Allocated Value as of the Effective Time and the closing for such transaction
shall take place on a mutually acceptable date not more than thirty (30) days
following such failure or refusal. If any preferential right to purchase any
portion of the Interests is exercised after the Closing Date, such affected
portion of the Interests shall not be treated as a Title Defect, and no
adjustment shall be made on account of such exercise. All Interests that are
subject to preferential rights to purchase that have not been exercised as of
such date and time shall be conveyed to Buyer at the Closing. If any such
preferential right is exercised after such date and time, Buyer agrees to convey
such affected Interests to the party exercising such right on the same terms and
conditions under which Seller conveyed such Interests to Buyer. Buyer shall
retain all amounts paid by the party exercising such preferential right to
purchase. In the event of such exercise, Buyer shall prepare a form of
conveyance of such interests from Buyer to such exercising party, such
conveyance to be in form and substance as provided in this Agreement, except
that such conveyance shall be made free and clear of all liens, encumbrances,
royalty interests, production payments and other charges or defects created by,
through or under Buyer. Buyer agrees to hold harmless and indemnify Seller
regarding any claims made by third parties claiming preferential rights
subsequent to Closing.
5.4 CASUALTY LOSS.
If subsequent to the date of this Agreement and, prior to the Closing, all or
any material portion of the Interests to be conveyed to Buyer at the Closing is
destroyed by fire or other casualty, is taken in condemnation or under the right
of eminent domain or proceedings
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for such purposes are pending or threatened, subject to the limitations set
forth in Sections 5.2 and 6.4, Buyer shall purchase such Interests
notwithstanding any such destruction, taking or pending or threatened taking and
the Purchase Price shall be adjusted in accordance with the diminution in value.
Seller shall, at the Closing, pay to Buyer all sums paid to Seller by third
parties by reason of the destruction or taking of such Interests to be assigned
to Buyer, and shall assign, transfer and set over unto Buyer all of the right,
title and interest of Seller in and to any unpaid awards or other payments from
third parties arising out of the destruction, taking or pending or threatened
taking as to such Interests to be conveyed to Buyer. Seller shall not
voluntarily compromise, settle or adjust any material amounts payable by reason
of any material destruction, taking or pending or threatened taking as to the
Interests to be conveyed to Buyer without first obtaining the written consent of
Buyer.
6. ENVIRONMENTAL MATTERS.
6.1 ENVIRONMENTAL OBLIGATIONS.
ASSUMING THE OCCURRENCE OF CLOSING AND EXCEPT AS PROVIDED IN THIS SECTION 6.1
BELOW, BUYER SHALL (i) ASSUME ALL LIABILITY AND COSTS WITH REGARD TO THE LEASES,
EQUIPMENT AND PRODUCTION CONTAINING HAZARDOUS MATERIALS, INCLUDING BUT NOT
LIMITED TO NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM), NOT BEING IN
COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS OR PERMITS AND THE EXISTENCE OR
PRESENCE OF ADVERSE PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO UNKNOWN OR
ABANDONED OIL AND GAS WELLS, WATER WELLS, SUMPS AND PIPELINES THAT MAY NOT HAVE
BEEN REVEALED BY BUYER'S INVESTIGATION; (ii) COMPLY WITH ALL LAWS, INCLUDING
ENVIRONMENTAL LAWS, WITH RESPECT TO ALL OPERATIONS ON THE LEASES, INCLUDING
ABANDONMENT OF WELLS AND REGARDING INACTIVE OR UNPLUGGED WELLS, INCLUDING
BONDING REQUIREMENTS, AND SURFACE WORK AS SPECIFIED IN THE LEASES OR APPLICABLE
LAW OR REGULATION; AND (iii) HEREBY EXPRESSLY AGREES TO PROTECT, RELEASE,
DEFEND, INDEMNIFY AND HOLD SELLER, ITS OFFICERS, DIRECTORS, REPRESENTATIVES,
AGENTS AND ITS EMPLOYEES FREE AND HARMLESS FROM AND AGAINST ANY AND ALL COSTS,
EXPENSES, CLAIMS, DEMANDS, LITIGATION COSTS, ATTORNEYS FEES, AND CAUSES OF
ACTION OF EVERY KIND AND CHARACTER, INCLUDING BUT NOT LIMITED TO INJURIES OR
DEATH TO PERSONS, DAMAGES TO OR LOSS OF PROPERTY, ENVIRONMENTAL CLAIMS OR
ENVIRONMENTAL CONDITIONS, ARISING OUT OF OR IN CONNECTION WITH THE USE,
OPERATION, OCCUPANCY, OCCUPATION, RESALE OR ABANDONMENT OF THE INTERESTS
ASSIGNED TO BUYER HEREUNDER REGARDLESS OF WHETHER THE CLAIM IS A RESULT OF AN
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ACT OR OMISSION OCCURRING OR CONDITION EXISTING PRIOR TO OR AFTER THE CLOSING
DATE. THE PARTIES ACKNOWLEDGE AND AGREE THAT THE INDEMNITY PROVIDED FOR IN THIS
SECTION COMPLIES WITH THE EXPRESS NEGLIGENCE RULE.
IF ANY TERM OR OTHER PROVISION OF THIS INDEMNIFICATION IS INVALID, ILLEGAL, OR
INCAPABLE OF BEING ENFORCED BY ANY RULE OF LAW OR PUBLIC POLICY, ALL OTHER
CONDITIONS AND PROVISIONS OF THIS INDEMNIFICATION SHALL NEVERTHELESS REMAIN IN
FULL FORCE AND EFFECT SO LONG AS THE ECONOMIC OR LEGAL SUBSTANCE OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT REMAIN IN EFFECT. BUYER REPRESENTS
THAT IT HAS HAD AN ADEQUATE OPPORTUNITY TO REVIEW THE INDEMNITY PROVISION
CONTAINED IN THIS SECTION 6.1, INCLUDING THE OPPORTUNITY TO SUBMIT THE SAME TO
LEGAL COUNSEL FOR REVIEW AND COMMENT, AND UNDERSTANDS THE INDEMNITY OBLIGATIONS
CONTAINED HEREIN.
6.2 DEFINITION OF ENVIRONMENTAL CLAIM, ENVIRONMENTAL CONDITION AND ENVIRONMENTAL
LAW.
For purposes of this Agreement, (i) "Environmental Claim" shall mean any action,
suit, investigation, proceeding, demand, claim or written notice by any person
alleging or inquiring as to potential liability arising out of, based on or
resulting from any violation, or alleged violation, of any Environmental Law
with respect to the Interests, (ii) "Environmental Condition" shall mean any
existing condition with respect to the soil, subsurface, surface waters,
groundwater, atmosphere or any environmental medium, whether or not yet
discovered which could result in any damage, loss, cost, expense or claim
against Seller with respect to the Interests, (iii) "Environmental Laws" shall
mean all laws, statutes, ordinances, permits, orders, judgments, rules or
regulations which are promulgated, issued or enacted by a governmental entity or
tribal authority as of the Effective Time having appropriate jurisdiction
relating to the protection of the public health, welfare, and the environment,
including, without limitation, those that, (a) relate to the prevention of
pollution or environmental damage, (b) the remediation of pollution or
environmental damage, or (c) the protection of the environment generally;
including without limitation, the Clean Air Act, as amended, the Clean Water
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Federal Water Pollution Control Act, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substance and Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous and the Solid Waste Amendments Act of 1984, as amended, and the
Oil Pollution Act of 1990, as amended, and (d) are in effect as of the Effective
Time, and (iv) "Violation of Environmental Laws"
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shall mean the violation of or failure to meet specific objective requirements
or standards that are clearly applicable to the Interests under Environmental
Laws where such requirements or standards are in effect as of the Effective
Time, and which are the subject of governmental action as of the Effective Time
and the term does not include good or desirable operating practices or standards
that may be employed or adopted by other oil or gas well operators or
recommended by a governmental authority.
6.3 WAIVER.
BUYER SHALL HAVE NO RIGHT TO SEEK AN ADJUSTMENT, MAKE A CLAIM AGAINST SELLER OR
SEEK INDEMNIFICATION FROM SELLER ASSOCIATED WITH THE ENVIRONMENTAL OR PHYSICAL
CONDITION OF THE INTERESTS ACQUIRED BY BUYER, EXCEPT IN ACCORDANCE WITH ARTICLE
6.4 BELOW. BUYER REPRESENTS THAT IT HAS HAD AN ADEQUATE OPPORTUNITY TO REVIEW
THE WAIVER PROVISION CONTAINED IN THIS SECTION 6.3, INCLUDING THE OPPORTUNITY TO
SUBMIT THE SAME TO LEGAL COUNSEL FOR REVIEW AND COMMENT, AND UNDERSTANDS THE
RIGHTS BEING WAIVED HEREIN.
6.4 REMEDIES FOR VIOLATION OF ENVIRONMENTAL LAW.
Before Closing, with respect to each Violation of Environmental Laws, Seller and
Buyer shall (i) agree on an adjustment to the Purchase Price which adjustment
shall reflect the cost to remedy such Violation of Environmental Law, (ii)
remediate the condition at Seller's cost or (iii) remove that portion of the
Interests from the Interests being conveyed and adjust the Purchase Price
accordingly. If the parties cannot agree on a course of action, option (iii)
above shall apply. If Seller and Buyer agree to an adjustment to the Purchase
Price pursuant to (i) above, said adjustment shall not reflect any costs to
remediate beyond remediation required by Environmental Laws. No adjustment to
the Purchase Price for Violation of Environmental Law shall be made unless and
until and only to the extent that each Violation of Environmental Law exceeds
the $25,000.00 or aggregate value of all Violations of Environmental Laws
exceeds two percent (2%) of the Purchase Price.
6.5 LIMITATIONS.
NOTWITHSTANDING ANYTHING TO THE CONTRARY AND EXCEPT AS PROVIDED IN SECTION 6.1
ABOVE, THIS ARTICLE 6 IS INTENDED TO BE THE SOLE AND EXCLUSIVE REMEDY THAT BUYER
SHALL HAVE AGAINST SELLER WITH RESPECT TO ANY MATTER OR CIRCUMSTANCE RELATING TO
ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION
OF THE ENVIRONMENT OR HEALTH. BUYER HEREBY RELEASES AND DISCHARGES ANY AND ALL
CLAIMS AT LAW OR IN EQUITY, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL CLAIMS
AND ENVIRONMENTAL CONDITIONS, KNOWN
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OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR
OTHERWISE, AGAINST SELLER WITH RESPECT TO ANY MATTER OR CIRCUMSTANCE RELATING TO
ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION
OF THE ENVIRONMENT OR HEALTH. BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE AND
WILL MAKE NO REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE
RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL CONDITIONS OR ENVIRONMENTAL
CLAIMS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE
ENVIRONMENT OR HEALTH. BUYER HEREBY AGREES TO ASSUME THE RISK THAT THE INTERESTS
MAY CONTAIN WASTE MATERIALS, INCLUDING NATURALLY OCCURRING RADIOACTIVE
MATERIALS, OR HAZARDOUS SUBSTANCES, THAT ADVERSE PHYSICAL CONDITIONS, INCLUDING
THE PRESENCE OF UNKNOWN ABANDONED OIL AND GAS WELLS, WATER WELLS, SUMPS AND
PIPELINES MAY NOT HAVE BEEN REVEALED BY BUYER'S INVESTIGATION.
7. CONDITIONS TO CLOSING.
7.1 SELLER'S CONDITIONS.
The obligations of Seller at the Closing are subject, to the satisfaction at or
prior to the Closing of the following conditions:
(a) All representations and warranties of Buyer contained in this Agreement
shall be true in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing, and Buyer
shall have performed and satisfied all material agreements in all material
respects required by this Agreement to be performed and satisfied by Buyer at or
prior to the Closing;
(b) No order shall have been entered by any court or governmental agency having
jurisdiction over the parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale contemplated by this Agreement and
which remains in effect at the time of such Closing; and
(c) The aggregate sum of Title Defect adjustments and adjustments for Violation
of Environmental Laws not exceed fifteen percent (15%) of the Purchase Price.
7.2 BUYER'S CONDITIONS.
The obligations of Buyer at the Closing are subject to the satisfaction at or
prior to the Closing of the following conditions:
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(a) All representations of Seller contained in this Agreement shall be true in
all material respects at and as of the Closing as if such representations were
made at and as of the Closing, and Seller shall have performed and satisfied all
material agreements in all material respects required by this Agreement to be
performed and satisfied by Seller at or prior to the Closing;
(b) No order shall have been entered by any court or governmental agency having
jurisdiction over the parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale contemplated by this Agreement and
which remains in effect at the time of such Closing; and
(c) The aggregate sum of Title Defect adjustments and adjustments for Violation
of Environmental Laws not exceed fifteen percent (15%) of the Purchase Price.
8. CLOSING.
8.1 DATE OF CLOSING.
Unless the parties agree otherwise in writing and subject to the conditions
stated in this Agreement, the consummation of the transactions contemplated
hereby (the "Closing") shall be held on or before June 30, 1999. The date the
Closing actually occurs is called the "Closing Date."
8.2 PLACE OF CLOSING.
The Closing shall be held at the offices of Seller in Houston, Texas.
8.3 CLOSING OBLIGATIONS.
At the Closing the following events shall occur, each being a condition
precedent to the others and each being deemed to have occurred simultaneously
with the others:
(a) Seller and Buyer shall execute, acknowledge and deliver: an assignment, bill
of sale and conveyance (in sufficient counterparts to facilitate recording) in
substantially the form of EXHIBIT "B" hereto conveying to Buyer the Interests;
and
(b) Seller and Buyer shall execute and deliver a settlement statement, prepared
in accordance with this Agreement and generally accepted accounting principles
(the "Preliminary Settlement Statement") prepared by Seller that shall set forth
the Preliminary Purchase Price and each adjustment and the calculation of such
adjustments used to determine such amount. Seller shall provide Buyer with the
Preliminary Settlement Statement three business days prior to Closing for
Buyer's review and approval. The term "Preliminary Purchase Price" shall mean
the Purchase Price, adjusted as provided in Section 2.2, using for such
adjustments the best information then available.
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(c) Buyer shall deliver to Seller the Preliminary Purchase Price by direct bank
or wire transfer in immediately available federal funds.
(d) Seller and Buyer shall execute, acknowledge and deliver transfer orders or
letters in lieu thereof directing all purchasers of production to make payment
to Buyer of proceeds attributable to production from the Interests assigned to
Buyer.
(e) Seller shall prepare such notices to third-party operators of the change in
ownership of the Interests from Seller to Buyer and such notices of change in
operatorship for those Seller-operated Wells for which Buyer has taken over
operations as are reasonable and customary in the industry. Further, Seller
shall deliver to Buyer executed copies of Change of Operator forms for signature
and Seller shall promptly file the same as soon as practical after closing but
in no event later than 5 days from closing.
9. OBLIGATIONS AFTER CLOSING.
9.1 POST-CLOSING ADJUSTMENT PROCEDURE.
(a) As soon as practicable after the Closing Date, but no later than 90 days
after the Closing Date, Seller shall prepare and deliver to Buyer, in accordance
with this Agreement and generally accepted accounting principles, a statement
(the "Final Settlement Statement") setting forth each adjustment or payment that
was not finally determined as of the Closing Date and showing the calculation of
such adjustments. Within fifteen days after receipt of the Final Settlement
Statement, Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes be made to the Final Settlement Statement. The parties shall
undertake to agree with respect to the amounts due pursuant to such post-closing
adjustment no later than fifteen days after Seller has received Buyer's proposed
changes. The date upon which such agreement is reached or upon which the "Final
Purchase Price" is established, shall be called the "Final Settlement Date." If
(i) the Final Purchase Price is more than the Preliminary Purchase Price, Buyer
shall pay in immediately available federal funds the amount of such difference
to Seller or to Seller's account (as designated by Seller), or (ii) the Final
Purchase Price is less than the Preliminary Purchase Price, Seller shall pay in
immediately available federal funds the amount of such difference to Buyer or to
Buyer's account (as designated by Buyer). Payment by Buyer or Seller shall be
made within five days after the Final Settlement Date.
(b) The parties will use their best efforts to update (to the Effective Time)
the volume amounts listed on EXHIBIT "E" within sixty (60) days from the Closing
Date. If the gas imbalance of a Well indicated on EXHIBIT "E" changes or
additional Wells are added as a result of this update, the parties will make the
appropriate payments to one another on the final Settlement Date based on a
value of $1.50 per MCF less applicable royalties and taxes to reflect the
updated imbalance volume and the resulting balancing value for the Well. If
Seller and a third party operator disagree as to the amount of any imbalance,
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Buyer and Seller shall mutually agree to an amount. If a Well is deleted from
the transaction pursuant to some other provision of this Agreement, the Well
shall also be deleted from any adjustments pursuant to this paragraph. After the
Final Settlement Date, there shall be no further adjustment made as to gas
imbalance on any of the Wells listed on EXHIBIT "E".
9.2 FILES AND RECORDS.
Within thirty days after the Closing Date, Seller shall make available to Buyer
originals of all of Seller's files and records relating to the Interests in the
format maintained by Seller, but excluding any records or data that cannot be
transferred because of prior contractual restrictions. Buyer shall retain and
make available to Seller for seven full calendar years following the Closing
Date, in Buyer's office during normal business hours, files and records relating
to the Interests. Seller shall retain division order files until the last day of
the month in which Seller retains disbursement responsibilities.
9.3 POST-CLOSING ADMINISTRATIVE ACCOUNTING RESPONSIBILITIES.
To the extent Seller is presently involved in the administration of the
Interests, Seller shall retain the obligation and responsibility for the
administration of the Interests for the period ending on the Closing Date.
However, Seller and Buyer recognize that Buyer's obligation to immediately
assume administrative accounting responsibilities for the Interests upon Closing
may be impractical and will present certain difficulties for both Seller and
Buyer in regards to transfer of such administrative responsibilities, timely and
proper revenue distributions, payment of expenses, joint interest billings and
the rendition of post-closing settlement statements.
Therefore, to facilitate a convenient and proper transfer of the administrative
accounting responsibilities relating to the Interests, Seller and Buyer agree
the administrative duties will be transferred from the Seller to the Buyer in
the following manner:
(a) Revenue Distributions:
(1) Seller shall retain the responsibility for distribution of revenues
attributable to production prior to Closing. Such distribution shall be
conducted by Seller through Seller's sales cutoff during the second
month following the month of Closing.
(2) In the event Seller should receive revenues subsequent to the
Seller's cutoff for its last revenue distribution, as described above,
unless such revenues are for production prior to the Effective Time,
then Seller shall promptly remit such revenues to Buyer as soon as is
practical, and Buyer shall be responsible for distributing all such
amounts, including distributions to royalty owners.
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(3) In the event Buyer should receive revenues for production from the
Interests for the production period prior to Effective Time, then Buyer
shall promptly remit such revenues, net of severance taxes and
royalties, to Seller within five (5) business days.
(4) It is understood that Seller will not undertake to change its
distribution master files for purposes of the above discussed revenue
distributions until after the Closing Date, and any information on the
Interests received by Seller related to master file changes subsequent
to the Closing Date will be remitted to the Buyer as soon as is
practical.
(b) Payment of Expenses and Joint Interest Billings:
(1) Seller shall retain, subject to the terms hereof, the
responsibility for the payment of all invoices, expenses and joint
interest billings for such expenses, including COPAS overhead charges
for invoices received and vouchered through Closing after which Buyer
shall assume all responsibility.
(2) All invoices, expenses and joint interest billings for such
expenses received subsequent to Closing Date and attributable to the
period after the Effective Date will be forwarded to the Buyer as
received by the Seller.
9.4 FURTHER ASSURANCES.
After Closing, Seller and Buyer shall execute, acknowledge and deliver or cause
to be executed, acknowledged and delivered such instruments, and shall take such
other action as may be necessary or advisable to carry out their obligations
under this Agreement and under any document, certificate or other instrument
delivered pursuant hereto.
9.5 ASSUMPTION OF OBLIGATIONS.
(a) EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, ASSIGNMENT OF THE INTERESTS TO
BUYER SHALL CONSTITUTE AN EXPRESS ASSUMPTION BY BUYER OF, AND BUYER EXPRESSLY
AGREES TO PAY, PERFORM, FULFILL AND DISCHARGE ALL CLAIMS, COSTS, EXPENSES,
LIABILITIES AND OBLIGATIONS (INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL CLAIMS
AND ENVIRONMENTAL CONDITIONS) ACCRUING OR RELATING TO THE OWNING, DEVELOPING,
EXPLORING, OPERATING AND MAINTAINING OF THE INTERESTS CONVEYED TO BUYER AT THE
CLOSING, INCLUDING WITHOUT LIMITATION, ALL VIOLATIONS OF ENVIRONMENTAL LAW AND
ALL OBLIGATIONS ARISING UNDER OPERATING AGREEMENTS, PRODUCT SALES AGREEMENTS AND
THE OTHER AGREEMENTS COVERING OR RELATING TO THE INTERESTS, REGARDLESS OF THE
NEGLIGENCE OF SELLER.
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(b) BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY
DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
RELATING TO THE CONDITION OF ANY REAL OR IMMOVABLE PROPERTY, PERSONAL OR MOVABLE
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING PART OF THE
INTERESTS INCLUDING, WITHOUT LIMITATION, (i) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF BUYER UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE,
(v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT, (vi) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS,
THE RELEASE OF MATERIALS INTO THE ENVIRONMENT INCLUDING NATURALLY OCCURRING
RADIOACTIVE MATERIAL, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE
EXPRESS INTENTION OF BUYER AND SELLER THAT THE REAL OR IMMOVABLE PROPERTY,
PERSONAL OR MOVABLE PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES SHALL
BE CONVEYED TO BUYER AS IS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR.
BUYER REPRESENTS TO SELLER THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH
INSPECTIONS WITH RESPECT TO THE REAL OR IMMOVABLE PROPERTY, PERSONAL OR MOVABLE
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS BUYER DEEMS
APPROPRIATE AND BUYER WILL ACCEPT THE REAL OR IMMOVABLE PROPERTY, PERSONAL OR
MOVABLE PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS IS, IN THEIR
PRESENT CONDITION AND STATE OF REPAIR.
(c) SELLER HEREBY EXPRESSLY NEGATES AND DISCLAIMS, AND BUYER HEREBY WAIVES AND
ACKNOWLEDGES THAT SELLER HAS NOT MADE, ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, RELATING TO (i) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR
ON BEHALF OF SELLER OR (ii) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES,
DECLINE RATES, GEOLOGICAL OR GEOPHYSICAL DATA OR INTERPRETATIONS, THE QUALITY,
QUANTITY, RECOVERABILITY OR COST OF RECOVERY OF ANY HYDROCARBON RESERVES, ANY
PRODUCT PRICING ASSUMPTIONS, OR THE ABILITY TO SELL OR MARKET ANY HYDROCARBONS
AFTER CLOSING.
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(d) BUYER SHALL ALSO INDEMNIFY SELLER FOR ALL LIABILITIES WHICH ARE ASSESSED
AGAINST SELLER FOR FEDERAL, STATE, OR LOCAL TAXES, (NOT INCLUDING INCOME TAXES)
TOGETHER WITH PENALTIES OR INTEREST THEREON (PROVIDED THE PENALTIES AND INTEREST
DO NOT RESULT FROM THE NEGLIGENCE, LATE FILING, FRAUD OR OTHER ACTS OF
MALFEASANCE OF SELLER), WHICH RELATE TO ALL OPERATIONS OF THE PROPERTY
TRANSFERRED HEREUNDER AFTER THE EFFECTIVE TIME.
9.6 INDEMNIFICATION.
FROM AND AFTER THE CLOSING DATE, BUYER AND SELLER SHALL INDEMNIFY EACH OTHER AS
FOLLOWS:
(a) SELLER SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS BUYER, ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, AGAINST ALL LOSSES, DAMAGES, CLAIMS,
DEMANDS, SUITS, COSTS, EXPENSES, LIABILITIES AND SANCTIONS OF EVERY KIND AND
CHARACTER, INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES, COURT COSTS
AND COSTS OF INVESTIGATION, WHICH ARISE FROM OR IN CONNECTION WITH ANY BREACH BY
SELLER OF THIS AGREEMENT.
(b) BUYER SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS SELLER, ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS AGAINST ALL LOSSES, DAMAGES, CLAIMS,
DEMANDS, SUITS, COSTS, EXPENSES, LIABILITIES AND SANCTIONS OF EVERY KIND AND
CHARACTER, INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES, COURT COSTS
AND COSTS OF INVESTIGATION, WHICH ARISE FROM OR IN CONNECTION WITH (i) ANY OF
THE CLAIMS, COSTS, EXPENSES, LIABILITIES AND OBLIGATIONS ASSUMED BY BUYER
PURSUANT TO SECTIONS 6 AND 9.5, OR (ii) ANY BREACH BY BUYER OF THIS AGREEMENT.
10. TERMINATION OF AGREEMENT.
10.1 TERMINATION.
This Agreement and the transactions contemplated hereby may be terminated in the
following instances:
(a) By Seller if any of the conditions set forth in Section 7.1 are not
satisfied in all material respects or waived as of the Closing Date.
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(b) By Buyer if any of the conditions set forth in Section 7.2 are not satisfied
in all material respects or waived as of the Closing Date.
(c) At any time by the mutual written agreement of Buyer and Seller.
10.2 LIABILITIES UPON TERMINATION OR BREACH.
(a) In the event of the termination of this Agreement by Seller in accordance
with Section 10.1(a), Seller shall have no liability hereunder of any nature
whatsoever to Buyer, including any liability for damages. If Buyer terminates
this Agreement in accordance with Section 10.1(b) above, it shall have no
liability hereunder of any nature whatsoever to the Seller including any
liability for damages.
(b) Except as provided above in this Section 10.2, nothing contained herein
shall be construed to limit Seller's or Buyer's legal or equitable remedies in
the event of breach of this Agreement.
11. MISCELLANEOUS.
11.1 EXHIBITS.
The Exhibits referred to in this Agreement are hereby incorporated in this
Agreement by reference and constitute a part of this Agreement.
11.2 EXPENSES.
Except as otherwise specifically provided, all fees, costs and expenses incurred
by Buyer or Seller in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the party incurring
the same, including, without limitation, legal and accounting fees, costs and
expenses.
11.3 NOTICES.
All notices and communications required or permitted under this Agreement shall
be in writing and any communication or delivery hereunder shall be deemed to
have been duly made when personally delivered to the individual indicated below,
or if mailed, when received by the party charged with such notice and addressed
as follows:
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IF TO SELLER:
APACHE CORPORATION
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Attention: Lisa Floyd
Vice President-Business Development
With a copy to: Z.S. Kobiashvili
Vice President and General Counsel
IF TO BUYER:
VENUS EXPLORATION, INC.
1250 N. E. Loop 410, Suite 1000
San Antonio, Texas 78209
Attention: John Y. Ames
President
Any party may, by written notice so delivered to the other parties, change the
address or individual to which delivery shall thereafter be made.
11.4 WIRE TRANSFER INSTRUCTIONS.
Funds payable to Seller shall be wired to:
First National Bank of Chicago
Chicago, IL
ABA #071-000-013
Account Name: Apache Corporation Master
Account No. 55-77446
11.5 AMENDMENTS.
This Agreement may not be amended nor any rights hereunder waived except by an
instrument in writing signed by the party to be charged with such amendment or
waiver and delivered by such party to the party claiming the benefit of such
amendment or waiver.
11.6 ASSIGNMENT.
Neither party may assign all or any portion of its rights or delegate all or any
portion of its duties hereunder unless it continues to remain liable for the
performance of its obligations hereunder and obtains the prior written consent
of the other party, which consent shall not be unreasonably withheld.
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11.7 CONDITIONS.
The inclusion in this Agreement of conditions to Seller's and Buyer's
obligations at the Closing shall not, in and of itself, constitute a covenant of
either Seller or Buyer to satisfy the conditions to the other party's
obligations at the Closing.
11.8 COUNTERPARTS.
This Agreement may be executed by Buyer and Seller in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
11.9 GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be construed and
enforced in accordance with the laws of the State of Texas, but without regard
to laws or principles of conflicts of laws that would cause application of the
laws of another jurisdiction. The parties hereby consent to the exclusive venue
of the proper state or federal court located in Harris County, Texas, and hereby
waive all other venues.
11.10 ENTIRE AGREEMENT.
This Agreement (including the Exhibits hereto) constitutes the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.
11.11 PARTIES IN INTEREST.
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto, and their respective successors and assigns, and nothing
contained in this Agreement, express or implied, is intended to confer upon any
other person or entity any benefits, rights or remedies.
11.12 SURVIVAL.
The representations, warranties, covenants, agreements and indemnities provided
for in this Agreement shall survive the Closing and shall not be extinguished by
the doctrine of merger by deed or any similar doctrine and no waiver, release,
or forbearance of the application of the provisions of those paragraphs in any
given circumstance shall operate as a waiver, release, or forbearance of the
provisions of the paragraphs as to any other circumstance.
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11.13 ARBITRATION.
All disputes arising out of or in connection with this agreement, or any
determination required to be made by the parties as to which the parties are
unable to agree (including, without limitation, the determination of Defects),
shall be settled by arbitration in Houston, Texas. Any matter to be submitted to
arbitration hereunder may be submitted to arbitration by either party. Any
matter submitted to arbitration shall be conducted in accordance with the rules
of the American Arbitration Association. Any award by the arbitrator(s) shall be
final, binding and not appealable, and judgment may be entered thereon in any
court of competent jurisdiction. Notwithstanding the above, neither Seller or
Buyer shall be required to resolve any disputes relating to this Agreement
through arbitration if an unrelated third party files suit against both Buyer
and Seller relating to the interests conveyed pursuant to this Agreement, in
such event, it being understood and agreed that Buyer and Seller may assert any
claims and/or defenses arising out of this Agreement against each other in the
lawsuit.
11.14 TAX MATTERS.
(a) PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL PROPERTY
TAXES. With respect to Taxes:
(1) REAL AND PERSONAL PROPERTY TAXES. All ad valorem taxes, real
property taxes and personal property taxes ("Real and Personal Property
Taxes") for the year in which the Effective Time occurs shall be
apportioned as of the Effective Time 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 Time, 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 Time. 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 Time occurs that are
not paid by Seller as of the closing Date. Seller shall pay to Buyer,
at the time of buyer's remittance, Seller's share of such taxes to the
extent such amounts were not credited to Buyer in calculating
adjustments in the Purchase Price in Sections 2.1 or 2.2 (the "Adjusted
Price").
(2) LIABILITY AND RIGHT TO PURCHASE 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 11.14. Buyer shall retain liability for all adjustments,
examinations or claims relating to taxes that are paid by Buyer and
that are allocated to Buyer pursuant to this Section 11.14. 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 11.14.
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(b) OTHER TAXES. All excise, production, severance, gross receipts,
conservation, oil and gas severance and other similar taxes relating to
production of hydrocarbons attributable to the Interests prior to the Effective
Time shall be allocated to Seller, and all such taxes relating to Buyer's
Production on or after the Effective Time shall be allocated to Buyer. Buyer
shall file any reports or returns not filed as of the Closing, and shall remit
to the proper taxing authorities any such taxes allocated to Seller, but not
paid as of the Closing. Seller shall pay Seller's share of such taxes at the
time Buyer remits such taxes to the extent such amounts were not credited to
Buyer in the Purchase Price as adjusted pursuant to Section 2.2.
(c) SALES TAXES. The Purchase Price does not include any sales taxes or other
transfer taxes imposed in connection with the sale of the Interests. Buyer shall
pay any sales tax or other transfer tax, as well as any applicable conveyance,
transfer and recording fee, and real estate transfer stamps or taxes imposed on
the transfer of the Interests pursuant to the Agreement. If Buyer is of the
opinion that it is exempt from the payment of any such sales tax or other
transfer tax, Buyer shall furnish to Seller the appropriate tax exemption
certificate.
(d) TAX PROCEEDINGS. In the event Buyer or any of Buyer's affiliates 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 Section 11.14(a)(2), Buyer shall notify Seller in writing within
thirty (30) days of receiving notice thereof. As to any such taxes for which
Seller is or may be liable under Section 11.14(a)(2), Seller shall, at Seller's
expense, control or settle the contest of such examination, claim adjustment or
other proceeding, and shall indemnify Buyer against all losses, damages, costs,
expenses, liabilities, claims, demands, penalties, fines, assessments,
settlements, and any related expenses in connection therewith. In the event
adjustment, or other proceeding relating to the liability for taxes of or with
respect to Buyer for any period Buyer is or may be liable under Section
11.14(a)(2), Seller shall notify Buyer in writing within thirty (30) days of
receiving notice thereof. As to any such taxes for which Buyer is or may be
liable under Section 11.14(a)(2), Buyer shall, at Buyer's expense, control or
settle the contest of such examination, claim, adjustment, or other proceeding,
and shall indemnify Seller against all losses, damages, costs, expenses,
liabilities, claims, demands, penalties, fines, assessments, settlements, and
any related expenses in connection therewith. The parties shall cooperate with
each other and with their respective affiliates in the negotiations and
settlement of any proceeding described in this Section 11.14. Each party shall
provide, or cause to be provided, to the other party necessary authorizations,
including powers of attorney, to control any proceeding, which such party is
entitled to control.
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Executed as of the date first above mentioned.
SELLER:
APACHE CORPORATION
/s/ LISA A. FLOYD
------------------------------
By: Lisa A. Floyd
Its: Vice President - Business Development
BUYER:
VENUS EXPLORATION, INC.
/s/ JOHN Y. AMES
------------------------------
John Y. Ames
President
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