PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered
into on this 25th day of August, 1999, among TEXSTAR PETROLEUM, INC., a Texas
corporation ("Texstar"), BENZ ENERGY INC., a Delaware corporation ("Benz"),
whose addresses are 1000 Louisiana, 15th Floor, Houston, Texas 77002 (Texstar
and Benz shall be referred to herein collectively as "Seller"), and PRIME
NATURAL RESOURCES, INC., a Texas corporation, whose address is 5151 San
Felipe, Suite 1200, Houston, Texas 77056 ("Buyer").
RECITALS
WHEREAS, Seller owns interests in and to (i) the Leases (hereinafter
defined) more fully described in EXHIBIT A attached hereto, (ii) the Options
(as hereinafter defined) more fully described in EXHIBIT B attached hereto,
(iii) the Contracts (as hereinafter defined) more fully described in EXHIBIT
C and (iv) assets related to such Leases, Options and Contracts; and
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller an undivided thirty seven and one-half percent (37 1/2%) of all
of Seller's rights, titles and interests including, without limitation, an
undivided thirty seven and one-half percent (37 1/2%) of all of the rights,
titles and interests which Seller acquired pursuant to the assignments and
agreements described in EXHIBIT A-1 attached hereto (such assignments and
agreements being hereinafter collectively referred to as the "Acquisition
Documents"), in and to the Leases, Options, Contracts and related assets upon
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, in accordance with the Contracts, (as hereinafter defined),
Seller is subject to that certain Area of Mutual Interest ("AMI") as shown on
the Plat attached hereto as EXHIBIT D, covering the lands (the "Lands")
affected by the Leases, Options, Contracts and related assets; and
WHEREAS, Benz joins as Seller for the sole purpose of selling,
assigning, conveying and delivering to Buyer 37.5% of Benz's rights, titles
and interests in and to the Seismic Data (as hereinafter defined) and the
Option Interest (as hereinafter defined) relating thereto to which Benz,
rather than Texstar, is the owner.
WHEREAS, the parties hereto acknowledge that Buyer has asserted that
it intends to vote to begin drilling activities on the Subject Interests, (as
hereinafter defined), as soon as possible after Closing, as hereinafter
defined.
NOW, THEREFORE, in consideration of the premises, the considerations
enumerated herein and the respective representations, warranties, covenants,
agreements and conditions contained herein, the parties hereto hereby agree
as follows. Unless defined elsewhere in this Agreement, all capitalized
terms used herein shall have the respective meanings given them in APPENDIX A
hereto, which is incorporated herein by reference and shall be deemed to be a
part of this Agreement for all purposes.
ARTICLE 1.
AGREEMENT TO PURCHASE AND SALE
1.1 SALE AND PURCHASE OF THE SUBJECT INTERESTS. Seller and Buyer
hereby agree that, simultaneously with the execution of this Agreement, upon
the terms and subject to the conditions herein set forth, Seller shall sell,
assign, convey and deliver to Buyer, and Buyer shall purchase and acquire
from Seller, an undivided thirty seven and one-half percent (37 1/2%) of all
of Seller's rights, titles and interests, including without limitation, an
undivided thirty seven and one-half percent (37 1/2%) of all of the rights,
titles and interests which Seller acquired pursuant to the Acquisition
Documents, in and to the following:
(a) The oil, gas and/or mineral leases and the leasehold
estates created thereby described in the attached EXHIBIT A (the
"Leases");
(b) All geophysical options described in the attached EXHIBIT B
(the "Options");
(c) All contracts and agreements appertaining to the Leases,
Options and Lands, including, but not limited to, those described in the
attached EXHIBIT C (the "Contracts");
(d) All mineral interests, royalty interests, mineral
servitudes, production payments, overriding royalty interests, net
profits interests and interests of any kind or type whatsoever in and to
the Lands, together with corresponding interests in and to the Lands and
rights incident thereto, including all rights in any pooled or unitized
acreage by virtue of the Lands being a part thereof, all production from
the pool or unit allocated to any such Lands, and all interests in any
wells within the pool or unit associated with the Lands;
(e) 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 "Hydrocarbons") on and under and which
may be produced and saved from or attributable to the Leases, Options,
Contracts or Lands, and all rents, issues, profits, proceeds, products,
revenues and other income from or attributable thereto;
(f) All easements, rights-of-way, licenses, authorizations,
permits, and similar rights and interests to the extent that they are
appurtenant to or affect any of the properties and interests referred to
in (a) through (e) above or are used or held for use in connection with
the ownership or operation of such properties and interests applicable
to, or used or useful in connection with, any or all of such properties
and interests; and
(g) The Seismic Data.
The properties and interests described in Sections 1.1(a) through (g)
above are hereinafter called the "Properties", and such undivided thirty
seven and one-half percent (37 1/2%) of Seller's rights, titles and interests
in and to the Properties are hereinafter called the "Subject Interests."
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1.2 OVERRIDING ROYALTY INTERESTS. The Subject Interests to be
conveyed to Buyer shall be subject to those certain Assignments of Overriding
Royalty Interests described in SCHEDULE 1.2. The Subject Interests to be
conveyed to Buyer shall not be subject to and shall be free and clear of
those certain Assignments of Overriding Royalty Interests described in
SCHEDULE 1.2A.
1.3 SELLER'S RESERVED OVERRIDING ROYALTY INTEREST: It is further
understood and agreed that any additional oil and gas interests acquired by
Buyer or Seller within the AMI will be subject to overriding royalty
interests reserved or assigned in favor of Seller or its designee as set
forth on SCHEDULE 1.3 hereto.
ARTICLE 2.
PURCHASE PRICE; PAYMENT; OPTION
2.1 PURCHASE PRICE. The total purchase price for the Subject
Interests shall be $5,478,098.00 (the "Purchase Price") payable in accordance
with the following terms:
(a) An initial payment shall be due and payable to Seller at
Closing in an amount equal to $3,500,000.00 to be remitted as follows:
(i) $133,862.00 to Seller; (ii) $3,366,138.00 for the account of Seller
to Western Geophysical Company, each by wire transfer of immediately
available funds.
(b) The second payment shall be due and payable to Seller on
September 15, 1999, in an amount equal to $1,978,098.00 (the "Deferred
Portion") to be remitted to Seller by wire transfer of immediately
available funds; provided, however, in the event Buyer has not received
on or before September 15, 1999, a fully executed Subordination Agreement
in recordable form (the "Subordination Agreement"), the form of which is
attached hereto as EXHIBIT F, Buyer shall pay only one-half of the
Deferred Portion to Seller. Subsequent to September 15, 1999, at the
time Buyer receives the Subordination Agreement, Buyer shall use its best
efforts as are reasonably practical under the circumstances to pay Seller
as soon as possible the remaining one-half of the Deferred Portion, plus
interest on said one half of the Deferred Portion at the prime rate, per
annum in effect from time to time, which interest shall begin to accrue
after September 15, 1999, but in all events such payment shall be made by
Buyer to Seller within seven business days of Buyer's receipt of the
Subordination Agreement. Notwithstanding anything herein to the
contrary, including the terms and provisions of Article 12, after Seller
delivers to Buyer the Subordination Agreement and thereafter Buyer does
not pay the Deferred Portion of the Purchase Price to Seller in the
amount and within the time set forth herein, Seller, at its sole option,
may elect to either (i) enforce its rights to receive the Deferred
Portion of the Purchase Price or (ii) receive from Buyer an assignment of
the Subject Interests, including the Seismic Data, (in the same form as
the Assignment attached hereto as EXHIBIT E) conveyed to Buyer at
Closing, such reconveyance to Seller to be free and clear of all liens
and burdens placed thereon after Closing, for and in consideration of
return from Seller to Buyer of the portion of the Purchase Price actually
paid by Buyer for the Subject Interests, without interest, and (iii)
pursue any other available legal or equitable remedies insofar as same
relate to the elections Seller makes in either (i) or (ii) above. In
such event, Buyer agrees to pay all costs of pursuing such remedies
incurred by Seller including reasonable attorneys fees, expenses and
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interest. In addition, Buyer agrees to return the Seismic Data, destroy
any notes or interpretations arising out of such data, and, from and
after the reconveyance to Seller, maintain the data as a proprietary and
confidential trade secret of Seller.
2.2 OPTION. The parties hereto recognize that Buyer is acquiring
37 1/2% of all of Seller's rights, titles and interests in the Properties.
In addition to the purchase of the Subject Interests and for the
consideration described below, Buyer also is acquiring and Seller hereby
grants to Buyer an option, at Buyer's sole election, to purchase an
additional 12.5% interest (the "Option Interest") of all of Seller's rights,
titles and interests in the Properties, including, without limitation, an
undivided twelve and one-half percent (12 1/2%) of all of the rights, titles
and interests which Seller acquired pursuant to the Acquisition Documents,
such percentage being calculated prior to the initial conveyance of the
Subject Interests, which means that after the purchase of the Subject
Interests hereunder and the Option Interest (if Buyer elects to purchase the
Option Interest), Buyer will have fifty percent (50%) of Seller's rights,
titles and interests in the Properties. This option may be exercised by
payment by Buyer to Seller on or before February 25, 2000, of an amount of
$1,826,033.00 plus an additional amount of $214,276.00 payable in a manner
mutually agreed to by Seller and Buyer. In the event that the parties cannot
mutually agree as to a manner of payment, Buyer shall pay Seller by wire
transfer in immediately available funds. During the period from the Closing
hereof until February 25, 2000, Buyer shall make any payments for drilling,
completion, re-working, logging, testing, lease operating, oil and gas lease
acquisition, geophysical option acquisition, independent landman fees, and
title examination and opinion fees that are required of Seller and relate to
the Option Interest; provided, however, in the event Buyer notifies Seller
that Buyer is relinquishing the Option Interest, Buyer's obligation to make
said payments shall cease on the fifth day following Seller's receipt of said
notice. Upon exercise by Buyer of the Option Interest and payment therefore
to Seller, Seller will execute and deliver to Buyer an Assignment of the
Properties covered by the Option Interest using a form substantially similar
to the one attached hereto as EXHIBIT E. All of Seller's representations,
warranties and covenants contained in this Agreement shall apply to the
Option Interest. The Option Interest may not be transferred or assigned by
Buyer without the express written consent of Seller, which consent may be
withheld, except that Seller does hereby consent to such a transfer or
assignment by Buyer to an entity in which the general partner of Elliot
Associates, L.P. has an interest.
ARTICLE 3.
SELLER'S REPRESENTATIONS AND WARRANTIES
All enumerated schedules referred to in this Article 3 shall be
referred to collectively as the "Disclosure Schedule." All references in
this Article 3 to the Subject Interests shall be deemed to also include
reference to the Option Interest. Seller represents and warrants to Buyer as
follows, as of Closing:
3.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified to carry on its business in the State of
Texas.
3.2 AUTHORITY. Seller has full power and authority and has taken
all requisite action, corporate or otherwise, to authorize each Seller to
carry on Seller's business as presently conducted,
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to own the Subject Interests, to enter into this Agreement and to perform
Seller's obligations under this Agreement.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered on behalf of Seller and constitutes the legal, valid and binding
obligation of Seller enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered by
Seller shall be duly authorized, executed and delivered and shall constitute
legal, valid and binding obligations of Seller enforceable in accordance with
their respective terms.
3.4 NON-CONTRAVENTION. Except for approvals required to be
obtained from governmental entities who are lessors under leases forming a
part of the Subject Interests (or who administer such leases on behalf of
such lessors) which are customarily obtained post-closing, neither the
execution, delivery, and performance by Seller of this Agreement and each
other agreement, instrument, or document executed or to be executed by Seller
in connection with the transactions contemplated hereby to which it is a
party nor the consummation by it of the transactions contemplated hereby and
thereby do or will (a) conflict with or result in a violation of any
provision of the charter or bylaws or other governing instruments of Seller,
(b) conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a
default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which Seller is a
party or by which Seller or any of its properties may be bound, (c) result in
the creation or imposition of any lien or other encumbrance upon the
properties of Seller, or (d) violate any applicable law, rule or regulation
binding upon Seller.
3.5 APPROVALS. Except for approvals required to be obtained from
governmental entities who are lessors under leases forming a part of the
Subject Interests (or who administer such leases on behalf of such lessors)
which are customarily obtained post-closing, no consent, approval, order, or
authorization of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or made
by Seller in connection with the execution, delivery, or performance by
Seller of this Agreement and each other agreement, instrument, or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby to which it is a party or the consummation by it of the
transactions contemplated hereby and thereby.
3.6 PENDING CLAIMS AND LITIGATION. Except as otherwise set forth
in SCHEDULE 3.6, there are no pending claims, demands, suits, actions, or
other proceedings in which Seller is a party or to the best of Seller's
knowledge, its predecessors in interest are or may be made a party, which
affect the Subject Interests in any material respect, or affect the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby or that would, if determined adversely to Seller, or any
of the Subject Interests (i) result in the impairment or loss, in whole or in
material part, of Seller's title to the Subject Interests, (ii) hinder or
impede the operation of all or any portion of any Subject Interests or (iii)
restrain, prohibit or impose damage on Buyer or Seller with respect to the
transactions contemplated herein.
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3.7 FINDER'S FEES. Seller has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees in respect to this
transaction for which Buyer shall have any responsibility whatsoever. Seller
shall indemnify and hold Buyer harmless from and against all claims, demands,
suits, actions or causes of action whatsoever arising from any allegation by
a broker, finder or other intermediary that it is entitled to a commission,
finder's fee or other compensation as a result of having dealt with Seller.
3.8 TITLE. Seller makes no representation or warranty as to title
to the Subject Interests except for claims arising by, through or under
Seller, but not otherwise.
3.9 MATERIAL CONTRACTS. Except as set forth on SCHEDULE 3.9, at
Closing, the Subject Interests are not subject to (i) any instrument or
agreement evidencing or related to indebtedness for borrowed money, whether
directly or indirectly; or (ii) any agreement not entered into in the
ordinary course of business in which the amount involved is in excess of One
Hundred Thousand Dollars ($100,000.00). With respect to the Subject
Interests, (A) to the best of Seller's knowledge, all Material Contracts are
in full force and effect and are the valid and legally binding obligations of
the parties thereto and are enforceable in accordance with their respective
terms; (B) Seller is not in material breach or default with respect to any of
its obligations pursuant to any such Material Contract; (C) all payment
(including, without limitation, valid calls for advance payment under unit or
operating agreements) due by Seller thereunder have been made by Seller; and
(D) neither Seller nor any other party to any Material Contract has given
notice of any action to terminate, cancel, rescind, or procure a judicial
reformation of a Material Contract or any provision thereof. Except as set
forth on SCHEDULE 3.9, no contracts contain any provision that prevents Buyer
from owning, managing and operating the Subject Interests in accordance with
historical practices.
3.10 NO OPERATIONS OR CURRENTLY DUE PAYMENTS. Except as set forth
on SCHEDULE 3.10, with respect to the Subject Interests, (i) there are no
outstanding calls for payments which are due or which Seller has committed to
make with respect to the Subject Interests which have not been made; (ii)
there are no material operations with respect to which Seller has become a
party; (iii) there are no commitments for the expenditure of funds for
drilling or other capital projects; and (iv) there are no existing contracts
solely between Seller and any of its Affiliates, affecting or providing
services or support to any of the Subject Interests or operations on the
Subject Interests.
3.11 EQUIPMENT. There is no Equipment owned by Seller appertaining
to the Subject Interests.
3.12 CONSENTS AND PREFERENTIAL RIGHTS. Except as set forth on
SCHEDULE 3.12, no consents required from governmental agencies or entities as
part of an ordinary course transfer, no preferential purchase rights,
consents, approvals or other action by, or filing with any person or
governmental agency or entity is required in connection with the execution,
delivery and performance by Seller of this Agreement.
3.13 PARTNERSHIP TREATMENT. The Subject Interests are not subject
to any tax partnership agreement or provisions requiring a partnership income
tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended, or any similar state statute.
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3.14 CANCELLATION OF LEASES OR OPTIONS. Seller has not received
notice of any pending claims for cancellation from any lessors or other third
parties with respect to the Leases or Options.
3.15 FUTURE DELIVERY. Except as set forth in SCHEDULE 3.15, Seller
is not obligated by virtue of any prepayment arrangement under any contract
for the sale of Hydrocarbons, including take-or-pay obligation, imbalance of
production or similar provisions or a production payment or any other
arrangement to deliver Hydrocarbons from the Subject Interests at some future
time without then or otherwise receiving full payment therefor. There are no
gas balancing obligations or makeup rights relating to the Subject Interests,
and there are no calls on production, forward sales, or price hedging
arrangements in place and affecting the Subject Interests.
3.16 [THIS SECTION INTENTIONALLY LEFT BLANK]
3.17 BANKRUPTCY. There are no bankruptcy proceedings pending which
have been initiated by Seller. Seller has initiated a reorganization of a
portion of its debt with certain creditors. Seller has made available for
review to Buyer true and correct copies of all documents and instruments
related to such reorganization.
3.18 TAXES. All ad valorem, property, production, severance and
similar taxes and assessments, if any, based on or measured by the ownership
of property with respect to the Subject Interests for all periods prior to
the Closing Date shall be paid prior to the Closing Date by Seller.
3.19 RESTRICTIONS ON VOTING. Except as set forth in SCHEDULE 3.19,
to the best of Seller's knowledge, no restrictions exist with regard to the
Subject Interests, which would diminish Buyer's right or ability to vote to
begin drilling activities with respect to any of the Subject Interests at any
time.
ARTICLE 4.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows, as of Closing:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and is qualified to do business and is in good standing under
the laws of the State of Texas.
4.2 AUTHORITY. Buyer has full power and authority to carry on its
business as presently conducted, to enter into this Agreement, to purchase
the Subject Interests on the terms described in this Agreement and to perform
its obligations under this Agreement. Neither the execution and delivery of
this Agreement nor the performance of Buyer's obligations hereunder will (i)
violate its articles of incorporation or bylaws; or (ii) violate or
constitute a default under any law, regulation, contract, agreement, consent,
decree or judicial order by which Buyer or any of its officers, directors,
stockholders are bound.
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4.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered on behalf of Buyer and constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered by
Buyer shall be duly authorized, executed and delivered and shall constitute
legal, valid and binding obligations of Buyer enforceable in accordance with
their respective terms.
4.4 NON-CONTRAVENTION. The execution, delivery, and performance by
Buyer of this Agreement and each other agreement, instrument, or document
executed or to be executed by Buyer in connection with the transactions
contemplated hereby to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby do not and will not (a) conflict
with or result in a violation of any provision of the charter or bylaws or
other governing instruments of Buyer, (b) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage, indenture, lease, contract, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its
properties may be bound, (c) result in the creation or imposition of any lien
or other encumbrance upon the properties of Buyer, or (d) violate any
applicable law, rule or regulation binding upon Buyer.
4.5 APPROVALS. No consent, approval, order, or authorization of,
or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by Buyer in
connection with the execution, delivery, or performance by Buyer of this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby.
4.6 PENDING LITIGATION. There are no pending suits, actions, or
other proceedings in which Buyer is a party which affect the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.7 DUE DILIGENCE. Buyer represents that it has performed
sufficient review and due diligence with respect to the Subject Interests,
which includes reviewing files and performing necessary evaluations,
assessments and other tasks relating to the Subject Interests to enable it to
acquire the Subject Interests under the terms of this Agreement. The
provisions of this Section 4.7 in no way modify or waive any rights of Buyer
resulting from a breach of any representation or warranty of Seller contained
in Article 3.
4.8 KNOWLEDGEABLE PURCHASER. Buyer represents that by reason of
its knowledge and experience in the evaluation, acquisition, and operation of
oil and gas properties, Buyer has evaluated the merits and risks of
purchasing the Subject Interests from Seller and has formed an opinion based
solely on Buyer's knowledge and experience and not on any representations or
warranties by Seller. The provisions of this Section 4.8 in no way modify or
waive any rights of Buyer resulting from a breach of any representation or
warranty of Seller contained in Article 3.
4.9 SECURITIES ACT; DECEPTIVE TRADE PRACTICES ACT. Buyer is
acquiring the Subject Interests for its own account and without a view to the
distribution thereof within the meaning of the
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Securities Act of 1933, (and the rules and regulations pertaining thereto) as
amended. Buyer can and does expressly waive the provisions of the Texas
Deceptive Trade Practices Act.
4.10 FINDER'S FEES. Buyer has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees in respect to this
transaction for which Seller shall have any responsibility whatsoever. Buyer
shall indemnify and hold Seller harmless from and against all claims,
demands, suits, actions or causes of action whatsoever arising from any
allegation by a broker, finder or other intermediary that it is entitled to a
commission, finder's fee or other compensation as a result of having dealt
with Buyer.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller to be performed at the Closing are subject to the
fulfillment (or waiver by Seller in its sole discretion), before or at the
Closing, of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties by Buyer set forth in this agreement shall be true and correct in
all material respects at and as of the Closing as though made at and as of
the Closing; and Buyer shall have performed and complied with in all material
respects all agreements required to be performed and satisfied by it at or
prior to Closing.
5.2 NO LITIGATION. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the
transactions contemplated by this Agreement or seeking substantial damages
against Seller in connection therewith.
5.3 CONSENTS. All consents and approvals required to be obtained
for the assignment of the Subject Interests to Buyer shall have been obtained
or waived or shall have expired without being exercised, except for those
consents and approvals which are customarily obtained after closing.
ARTICLE 6.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to be performed at the Closing are subject to the
fulfillment (or waiver by Buyer in its sole discretion), before or at the
Closing, of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties by Seller set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing as though made at and as of
the Closing; and Seller shall have performed and complied with in all
material respects all agreements required to be performed and satisfied by it
at or prior to Closing.
6.2 NO CLAIMS OR LITIGATION. There shall be no claims or demands,
and no suits, actions or other proceedings pending or threatened to enjoin
the consummation of the transactions contemplated by this Agreement or
seeking substantial damages against Buyer in connection therewith.
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6.3 CONSENTS. All consents and approvals required to be obtained
for the assignment of the Subject Interests to Buyer shall have been obtained
or waived or shall have expired without being exercised, except for those
consents and approvals which are customarily obtained after closing.
6.4 CONFIRMATION OF ASSIGNMENT. Buyer shall have received from
Seller a confirmation dated and signed by Western Geophysical Company
("Western"), which states that upon receipt of $3,366,138.00 from Seller by
Western, Western shall convey all rights, title and interest in the Seismic
Data to Seller and shall consent to any subsequent assignment of the Seismic
Data.
ARTICLE 7.
CLOSING
7.1 THE CLOSING. The closing ("Closing") of the transactions
contemplated hereby shall take place at the offices of Thompson Knight Brown
Parker & Leahy L.L.P., 1200 Smith Street, Suite 3600, Houston, Texas, at
10:00 a.m. Central Standard Time on or before August 30, 1999, or at such
other date and time as the Buyer and Seller may mutually agree upon ("Closing
Date").
7.2 CLOSING OBLIGATIONS. At the Closing the following events shall
occur, each event under the control of one Party hereto being a condition
precedent to the events under the control of the other Party, and each event
being deemed to have occurred simultaneously with the other events:
(a) Seller shall execute and deliver to Buyer and Buyer shall
execute and receive:
(1) this Agreement
(2) an Assignment and Bill of Sale (the "Assignment")
in substantially the form annexed hereto as EXHIBIT E, with the
blanks and exhibit(s) appropriately completed, conveying the
Subject Interests; and
(3) such other documents and instruments as are
contemplated by this Agreement.
(b) Buyer shall, by wire transfer, deliver the initial portion
of the Purchase Price as set forth in Section 2.1 hereof.
(c) Except for the Seismic Data, Seller shall deliver to Buyer
possession of the Subject Interests at the Closing. The Seismic Data
will be delivered to Buyer within twenty-four hours of Closing.
ARTICLE 8.
ASSUMPTION OF CERTAIN OBLIGATIONS
Upon and after Closing, Buyer shall own the Subject Interests, together with
all the rights, duties, obligations and liabilities accruing after Closing,
including the Assumed Obligations. Buyer agrees to assume and pay, perform,
fulfill and discharge all Assumed Obligations arising from and after the
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Closing Date; including, but not limited to, the obligations to make payments
on behalf of Seller in accordance with Section 2.2.
ARTICLE 9.
OPERATIONS; NO REDUCTION OF BUYER'S INTEREST
9.1 OPERATOR. It is understood and agreed that, unless otherwise
required by the Unitization Agreement or any other agreement to which the
Subject Interests are subject (the Unitization Agreement and each such other
agreement being hereinafter in this Section 9.1 referred to individually as a
"Third Party Agreement"), Buyer shall be the Operator for the drilling and
operation of all wells hereafter drilled on the Properties. In the event a
Third Party Agreement provides for the selection of an Operator, Seller shall
vote and take all such other necessary actions as are reasonably practical
under the circumstances under such Third Party Agreement to select Buyer as
the Operator under such Third Party Agreement. With respect to any portion
of the Properties in which the oil, gas and mineral leasehold estate therein
is owned solely by Seller and Buyer, operations on such portion of the
Properties shall be conducted pursuant to the Operating Agreement, with Buyer
as the Operator. Notwithstanding anything to the contrary contained in this
Purchase and Sale Agreement, Seller shall not be required to vote or take any
action to approve or maintain Buyer as Operator in the event Buyer does not
adequately fulfill its obligations as a reasonably prudent Operator under the
same or similar circumstances as more particularly set forth in the Operating
Agreement; or if Seller or another party to the Operating Agreement initiates
an action to remove Buyer as Operator for good cause as more particularly set
forth in the Operating Agreement. Additionally, the parties agree that this
Article 9.1 shall be stated in the Operating Agreement.
9.2 AVOIDANCE OF REDUCTION OF BUYER'S INTEREST. The Mobil Term
Assignment provides that upon the occurrence of certain events that the
Assignee under said Assignment may be required to reassign to the Assignor
under said Agreement portions of the assigned premises not producing in
paying quantities (all as more particularly set forth and defined in the
Mobil Term Assignment). Seller hereby covenants and agrees to and with Buyer,
that in the event Buyer's interest in the production of oil, gas and/or other
minerals in lands which Buyer retained pursuant to the Mobil Term Assignment
is to be reduced for any reason as a result of the Unitization Agreement,
Seller shall execute an additional assignment or assignments to Buyer
covering a sufficient amount of Seller's interest in the Properties to
prevent such interests of Buyer from being reduced.
9.3 NOTICE OF CONTRACTUAL RIGHTS. Seller hereby covenants and
agrees to and with Buyer that at Closing Seller will execute and deliver to
Buyer a "Notice of Contractual Rights", in recordable form, which reflects
that Seller's interest in the Properties is burdened by the agreements and
covenants set forth in this Article 9. In the event Seller obtains and
delivers to Buyer an amendment to the Mobil Term Assignment which renders the
reason for Article 9.2 unnecessary, Buyer shall execute and deliver to Seller
a release of said Notice of Contractual Rights.
11
ARTICLE 10.
INDEMNIFICATION
10.1 SELLER'S INDEMNIFICATION OF BUYER. Seller agrees to indemnify
and hold harmless Buyer and its shareholders, directors, officers, partners,
employees, and their agents and assigns, from and against any loss or damage
(including, without limitation, reasonable attorneys' fees and costs)
reasonably incurred (excluding any consequential damage or loss) (a "Loss")
by Buyer resulting from, based upon, or arising from, directly or indirectly:
(i) Any inaccuracy in or breach of Seller's representations and
warranties set forth herein.
(ii) Any other matter as to which Seller in other provisions of this
Agreement has expressly agreed to indemnify Buyer;
(iii) Any lawsuits, liens, judgments, costs, reasonable attorneys'
fees, claims or proceedings of any nature relating to the ownership or
operations of the Subject Interests and arising out of any act, transaction
or circumstance involving Buyer, whether based on negligence or otherwise,
and occurring prior to the Closing Date; and
(iv) Any claims, losses, damages, lawsuits, liens, judgments, costs,
reasonable attorneys' fees, claims or proceedings of any nature made by third
parties, including any and all governmental agencies or entities, relating to
the ownership and operation of the Subject Interests occurring before the
Closing Date.
10.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer agrees to indemnify
and hold harmless Seller and its shareholders, directors, officers, partners,
employees, and their agents and assigns, from and against any Loss of Seller
resulting from, based upon, or arising from, directly or indirectly:
(i) Any inaccuracy in, or breach any of the representations or
warranties of Buyer set forth in this Agreement;
(ii) Any other matter as to which Buyer in other provisions of this
Agreement has expressly agreed to indemnify Seller;
(iii) Any lawsuits, liens, judgments, costs, reasonable attorneys'
fees, claims or proceedings of any nature relating to the ownership or
operations of the Subject Interests and arising out of any act, transaction
or circumstance involving Seller, whether based on negligence or otherwise,
and occurring after the Closing Date; and
(iv) Any claims, losses, damages, lawsuits, liens, judgments, costs,
reasonable attorneys' fees, claims or proceedings of any nature made by third
parties, including any and all governmental agencies or entities, relating to
the ownership and operation of the Subject Interests occurring after the
Closing Date.
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10.3 NOTICE AND OPPORTUNITY TO DEFEND. After receipt by any party
thereto (the "Indemnified Party") of notice of any demand, claim, or
circumstances that, with the lapse of time, could give rise to a claim, or
the commencement (or threatened commencement) of any action, proceeding, or
investigation, that in either case could give rise to a right to
indemnification pursuant to this Article 10 (an "Asserted Liability"), the
Indemnified Party will give the party that may become obligated to provide
indemnification under this Article 10 (the "Indemnifying Party") written
notice describing the Asserted Liability in reasonable detail and indicating
the amount (estimated, if necessary) of the Loss that has been or may be
suffered by the Indemnified Party. After accepting in writing an obligation
to indemnify the Indemnified Party against the assumed liability, the
Indemnifying Party may defend, at its own expenses and by its own counsel,
any Asserted Liability, and the Indemnified Party will cooperate in such
defense against such Asserted Liability. If the Indemnified Party fails to
defend the Asserted Liability with thirty (30) calendar days after notice
thereof (or sooner if the nature of the Asserted Liability so requires) or
contests its obligation to indemnify under this Agreement, the Indemnified
Party may pay, compromise, or defend such Asserted Liability for the account,
and at the expense of, the Indemnifying Party. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise will not be unreasonably withheld. In
connection with the defense of any claim, the Indemnified Party will make
available to the Indemnifying Party any books, records, or other documents
within its control that are necessary or appropriate for such defense. In
addition, any Indemnifying Party will be subrogated to the rights of the
Indemnified Party with respect to the respective Loss.
10.4 RECOVERABLE AMOUNT. Neither Buyer nor Seller shall be entitled
to recover from Seller or Buyer, respectively, for any losses, costs,
expenses, or damages arising under this Agreement or in connection with or
with respect to the transactions contemplated in this Agreement any amount in
excess of the actual compensatory damages, court costs and reasonable
attorney fees, suffered by such party. Buyer and Seller shall have no right
to recover punitive, special, exemplary and consequential damage arising in
connection with or with respect to the transactions contemplated in this
Agreement.
10.5 NO SETTLEMENT IF ADVERSE IMPACT. No person entitled to
indemnification hereunder or otherwise to damages in connection with or with
respect to the transactions contemplated in this Agreement shall settle,
compromise or take any other action with respect to any claim, demand,
assertion of liability or legal proceeding that could prejudice or otherwise
adversely impact the ability of the person providing such indemnification or
potentially liable for such damages to defend or otherwise settle or
compromise with respect to such claim, demand, assertion of liability or
legal proceeding.
10.6 WAIVER OF BREACH. Neither Seller nor Buyer shall have any
obligation or liability under this Agreement or in connection with or with
respect to the transactions contemplated in this Agreement for any breach,
misrepresentation or noncompliance with respect to any representation,
warranty, covenant or obligation if such breach, misrepresentation or
noncompliance shall have been expressly waived by the other party.
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ARTICLE 11.
LIMITATION OF WARRANTIES
11.1 LIMITATION OF WARRANTIES. Anything in this Agreement to the
contrary notwithstanding, the Subject Interests are being sold by Seller to
Buyer without recourse, covenant, or warranty of any kind, express, implied,
or statutory, with the sole exception that each Seller will warrant title to
its respective ownership of the Subject Interests, subject to the Permitted
Encumbrances, against every person whomsoever lawfully claiming or to claim
the same or any part thereof by, through, or under each Seller, but not
otherwise. WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING
SENTENCE, SELLER CONVEYS ALL PERSONAL PROPERTY, EQUIPMENT, IMPROVEMENTS, AND
FIXTURES COMPRISING THE PROPERTIES AS-IS, WHERE-IS AND WITH ALL FAULTS AND
EXPRESSLY DISCLAIMS AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, AND (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS. SELLER ALSO EXPRESSLY DISCLAIMS AND NEGATES
ANY IMPLIED OR EXPRESS WARRANTY AT COMMON LAW, BY STATUTE OR OTHERWISE
RELATING TO THE ACCURACY OF ANY OF THE INFORMATION FURNISHED WITH RESPECT TO
THE EXISTENCE OR EXTENT OF RESERVES OR THE VALUE OF THE PROPERTIES BASED
THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY OF THE PROPERTIES; THIS
DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO THE EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY AS TO THE PRICES BUYER AND SELLER ARE OR WILL BE
ENTITLED TO RECEIVE FROM PRODUCTION OF OIL, GAS OR OTHER SUBSTANCES FROM THE
PROPERTIES, IT BEING UNDERSTOOD THAT ALL RESERVE, PRICE AND VALUE ESTIMATES
UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY THE INDIVIDUAL
EVALUATION OF BUYER.
ARTICLE 12.
MISCELLANEOUS
12.1 FURTHER ASSURANCES. After the Closing, Seller and Buyer shall
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document, certificate or other instrument delivered pursuant hereto.
12.2 DELIVERY OF RECORDS TO BUYER. Within thirty (30) days after
Closing, Seller shall deliver to Buyer, at Seller's address, or at such other
place as any of same may be kept, duplicate copies of all items which Buyer
requested to be delivered at Closing.
12.3 NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be delivered personally or by
certified mail, postage prepaid and return receipt requested or by telecopier
as follows:
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Seller: Texstar Petroleum, Inc.
1000 Louisiana, 15th Floor
Houston, Texas 77002
Telephone: (713) 739-0351
Telecopier: (713) 739-8402
Attention: Thomas E. Hardisty
Hand Delivery: Land Department
Buyer: Prime Natural Resources, Inc.
5151 San Felipe, Suite 1200
Houston, Texas 77056
Telephone: (713) 513-3979
Telecopier: (713) 513-3870
Attention: Land Manager, Kenny Tidwell
Hand Delivery: Land Department
or to such other place within the United States of America as either party
may designate as to itself by written notice to the other. All notices given
by personal delivery or mail shall be effective on the date of actual receipt
at the appropriate address. Notices given by telecopier shall be effective
upon actual receipt if received during recipient's normal business hours or
at the beginning of the next business day after receipt if received after the
recipient's normal business hours. All notices by telecopier shall be
confirmed in writing on the day of transmission by either mailing by postage
prepaid certified mail with return receipt requested, or by personal delivery.
12.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
12.5 ASSIGNMENT. 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.
12.6 ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement
constitutes the entire Agreement between the parties hereto with respect to
the subject matter hereof, superseding all prior negotiations, discussions,
agreements and understandings, whether oral or written, relating to such
subject matter. This Agreement may not be amended and no rights hereunder
may be waived except by a written document signed by the party to be charged
with such amendment or waiver. No waiver of any of the provisions of the
Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
12.7 SEVERABILITY. If a court of competent jurisdiction determines
that any clause or provision of this Agreement is void, illegal, or
unenforceable, the other clauses and provisions of the Agreement shall remain
in full force and effect and the clauses and provisions which are determined
15
to be void, illegal, or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
12.8 HEADINGS. The headings of the Articles and Sections of this
Agreement are for guidance and convenience of reference only and shall not
limit or otherwise affect any of the terms or provisions of this Agreement.
12.9 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.
12.10 EXPENSES, FEES AND TAXES. Each of the parties hereto shall pay
its own fees and expenses incident to the negotiation and preparation of this
Agreement and consummation of the transactions contemplated hereby, including
broker fees. Buyer shall be responsible for the cost of all fees for the
recording of transfer documents. All other costs shall be borne by the party
incurring them. Notwithstanding anything to the contrary herein, it is
acknowledged and agreed by and between Seller and Buyer that the Purchase
Price excludes any sales taxes or other taxes in connection with the sale of
property pursuant to this Agreement. If a determination is ever made that a
sales tax or other transfer tax applies, Buyer shall be liable for such tax
as well as any applicable conveyance, transfer and recording fees, and real
estate transfer stamps or taxes imposed on any transfer of property pursuant
to this Agreement. Buyer shall indemnify and hold Seller harmless with
respect to the payment of any of such taxes, including any interest or
penalties assessed thereon.
12.11 LAWS AND REGULATIONS. From and after the Closing, (a) Buyer
shall comply with all applicable laws, ordinances, rules and regulations and
shall properly obtain and maintain all permits required by public authorities
with regard to the Subject Interests, and shall provide and maintain with the
applicable regulatory agency(ies) all required bonds and permits.
12.12 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES
AND AGREEMENTS. All of the representations, warranties, covenants,
indemnities and agreements contained in this Agreement shall survive the
Closing and execution and delivery of all of the documents contemplated
hereby for a period ending August 25, 2000; provided, however, the
representations, warranties, covenants, indemnities and agreements contained
in Sections 1.3, 2.1, 3.8, 9.1, 9.2, 9.3 and 11.1 shall survive the Closing
and execution and delivery of all of the documents contemplated hereby
indefinitely.
12.13 TIME LIMITATIONS FOR NOTICE OF CLAIM BY BUYER. After the
Closing, any assertion by Buyer that Seller is liable (a) for the inaccuracy
of any representation or warranty, (b) for the breach of any covenant, (c)
for indemnity under the terms of this Agreement or (d) otherwise in
connection with the transactions contemplated in this Agreement, must be made
by Buyer in writing and must be given to Seller on or prior to August 25,
2000. It is the intent of the parties that this time limitation will be in
lieu of the applicable statutes of limitations. However, this Article 12.13
shall not apply to Sections 1.3, 2.1, 3.8, 9.1, 9.2, 9.3 and 11.1 of this
Agreement.
12.14 TIME LIMITATIONS FOR NOTICE OF CLAIM BY SELLER. After the
Closing, any assertion by Seller that Buyer is liable (a) for the inaccuracy
of any representation or warranty, (b) for the
16
breach of any covenant, (c) for indemnity under the terms of this Agreement
or (d) otherwise in connection with the transactions contemplated in this
Agreement, must be made by Seller in writing and must be given to Buyer on or
prior to August 25, 2000. It is the intent of the parties that this time
limitation will be in lieu of the applicable statutes of limitations.
However, this Article 12.14 shall not apply to Sections 1.3, 2.1, 3.8, 9.1,
9.2, 9.3 and 11.1 of this Agreement.
12.15 SELLER'S LIABILITY THRESHOLD. Buyer shall not be entitled to
assert any right to indemnification hereunder or to otherwise seek any
damages or other remedies for or in connection with (a) the inaccuracy of any
representations of Seller contained in this Agreement or any other agreement
or instrument, executed or delivered in connection with this Agreement; (b)
the breach of, or failure to perform or satisfy any of the covenants of
Seller set forth in this Agreement or in any other agreement or instrument,
executed or delivered in connection with this Agreement; or (c) any
liabilities otherwise arising in connection with or with respect to the
transactions contemplated in this Agreement until the amount of the
Liabilities for such misrepresentations and breaches actually suffered by
Buyer exceeds $150,000.00, and then only to the extent of such excess.
12.16 BUYER'S LIABILITY THRESHOLD. Seller shall not be entitled to
assert any right to indemnification hereunder or to otherwise seek any
damages or other remedies for or in connection with (a) the inaccuracy of any
representations of Buyer contained in this Agreement or any other agreement
or instrument, executed or delivered in connection with this Agreement; (b)
the breach of, or failure to perform or satisfy any of the covenants of Buyer
set forth in this Agreement or in any other agreement or instrument, executed
or delivered in connection with this Agreement; or (c) any liabilities
otherwise arising in connection with or with respect to the transactions
contemplated in this Agreement until the aggregate amount of the Liabilities
for such misrepresentations and breaches actually suffered by Seller exceeds
$150,000.00, and then only to the extent of such excess.
12.17 MAXIMUM LIABILITY OF SELLER. Seller shall not be required to
indemnify Buyer or pay any other amount in connection with or with respect to
the transactions contemplated in this Agreement in any amount exceeding one
half of the aggregate of the Purchase Price, or, in the event Buyer acquires
the Option Interest, one half of the sum of the aggregate of the Purchase
Price, plus the amount pertaining to the Option Interest set forth in Article
2.2, including the $1,826,033.00 payment, the $214,276.00 payment, and any
payments required of Buyer as set forth in Article 2.2 concerning expenses
and fees.
12.18 MAXIMUM LIABILITY OF BUYER. Buyer shall not be required to
indemnify Seller or pay any other amount in connection with or with respect
to the transactions contemplated in this Agreement in any amount exceeding
one half of the aggregate of the Purchase Price, or, in the event Buyer
acquires the Option Interest, one half of the sum of the aggregate of the
Purchase Price, plus the amount of the $1,826,033.00 payment and the
$214,276.00 payment as set forth in Article 2.2 concerning payment for the
Option Interest.
12.19 SOLE REMEDY. If the Closing occurs, the sole and exclusive
remedy of Buyer and Seller with respect to the purchase and sale of the
Subject Interests shall be pursuant to the express provisions of this
Agreement. Any and all (a) claims relating to the representations,
warranties, covenants and agreements contained in this Agreement, (b) other
claims pursuant to or in connection with this Agreement or (c) other claims
relating to the Subject Interests and the purchase and sale
17
thereof shall be subject to the provisions set forth in this SECTION 12. If
the Closing occurs, Buyer and Seller shall be deemed to have waived, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it may have against Seller or Buyer, respectively, arising
under or based on any federal, state or local statute, law, ordinance, rule
or regulation or common law or otherwise.
18
12.17 EXHIBITS AND SCHEDULES. The following Appendix, enumerated
Exhibits, and Disclosure Schedule are incorporated herein and are a part
hereof.
APPENDIX A Definitions
EXHIBIT A Description of Leases
EXHIBIT A-1 Description of Acquisition Documents
EXHIBIT B Description of Options
EXHIBIT C Description of Contracts
EXHIBIT D Area of Mutual Interest
EXHIBIT E Form of Assignment and Bill of Sale
EXHIBIT F Subordination Agreement
SCHEDULE 1.2 Overriding Royalty Conveyances Burdening Buyer
SCHEDULE 1.2A Overriding Royalty Conveyances Not Burdening Buyer
SCHEDULE 1.3 Overriding Royalty Interests on AMI Acquisitions
SCHEDULE 3.6 Pending Claims and Litigation
SCHEDULE 3.9 Material Contracts
SCHEDULE 3.10 Pending AFEs
SCHEDULE 3.12 Consents and Preferential Rights
SCHEDULE 3.15 Prepayments
SCHEDULE 3.19 Restrictions
19
Executed as of the date set forth above.
SELLER:
TEXSTAR PETROLEUM, INC.
By: /s/ Prentis B. Tomlinson, Jr.
-----------------------------------------
Prentis B. Tomlinson, Jr.
Chairman and Chief Executive Officer
BENZ ENERGY INC.
By: /s/ Prentis B. Tomlinson, Jr.
------------------------------------------
Prentis B. Tomlinson, Jr.
Chairman and Chief Executive Officer
BUYER:
PRIME NATURAL RESOURCES, INC.
By: /s/ W. Richard Anderson
------------------------------------------
W. Richard Anderson
Executive Vice President and
Chief Financial Officer
THIS IS A SIGNATURE PAGE TO THE PURCHASE AND SALE AGREEMENT
APPENDIX A
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings
ascribed to them in this Appendix A unless such terms are defined elsewhere
in this Agreement:
"AFFILIATES" shall mean any person or entity, directly or indirectly
controlling or controlled by or under direct or indirect control with such
person or entity as defined in the Securities Act of 1933, as amended.
"AGREEMENT" shall mean this Purchase and Sale Agreement.
"AMI" shall have the meaning ascribed to such term in the third
recital to this Agreement.
"AMI ACQUISITIONS" shall have the meaning ascribed to such term in
SECTION 1.3.
"ASSIGNMENT" shall have the meaning ascribed to such term in SECTION
7.2(a).
"ASSUMED OBLIGATIONS" shall mean all pro rata liabilities, duties and
obligations that arise on or after the Closing from ownership or operations
of the Subject Interests, including, but not limited to, (A) all duties,
liabilities and obligations arising on or after the Closing under any
Contract or other agreement affecting the Subject Interests, including, but
not limited to, (i) the Options, (ii) the Mobil Term Assignment, (iii) the
Exploration Agreement, (iv) the Unitization Agreement, (v) the Operating
Agreement and (B) all duties, liabilities and obligations that arise under
the Leases, assignments in the chain of title of the Leases, and burdens on
production; and (C) the Option Interest and (D) all other duties, liabilities
and obligation assumed by Buyer under this Agreement.
"CLOSING" shall have the meaning ascribed to such term in SECTION 7.1.
"CLOSING DATE" shall have the meaning ascribed to such term in
SECTION 7.1.
"CONTRACTS" shall have the meaning ascribed to such term in
SECTION 1.1(c).
"EQUIPMENT" shall mean all personal property, movables, equipment,
fixtures, gathering lines, pipelines, and improvements located on and
appurtenant to the Leases and Lands insofar as they are used or held in
connection with the operation of the Leases insofar as they cover the Lands
or relate to the production, treatment, sale, or disposal of hydrocarbons or
water produced therefrom or attributable thereto.
"EXPLORATION AGREEMENT" shall mean that certain Agreement dated
effective October 15, 1997, by and between Amoco Production Company, Mobil
Producing Texas and New Mexico Inc. and Cheyenne Petroleum Company, as
amended.
"HYDROCARBONS" shall have the meaning ascribed to such term in Section
1.1(e).
Appendix A, Page 1
"LANDS" shall have the meaning ascribed to such term in the third
paragraph of the Recitals.
"LEASES" shall have the meaning ascribed to such term in SECTION 1.1(a).
"MATERIAL CONTRACT" shall mean a contract to which Seller is a party
and involves payments of over $100,000.00 in any twelve month period.
"MOBIL TERM ASSIGNMENT" shall mean that certain Term Assignment of Oil
and Gas Lease dated effective December 31, 1998, from Mobil Producing Texas
and New Mexico Inc. to Texstar Petroleum, Inc., as amended.
"OPERATING AGREEMENT" shall mean the Operating Agreement Seller and Buyer
intend to enter into in accordance with the Exploration Agreement and in the
form annexed thereto.
"OPTIONS" shall have the meaning ascribed to such term in SECTION 1.1(B).
"PERMITTED ENCUMBRANCES" shall mean any or all of the following:
(i) encumbrances that arise under operating agreements to
secure payment of amounts not yet delinquent and are of a type and
nature customary in the oil and gas industry;
(ii) encumbrances that arise as a result of pooling and
unitization agreements, declarations, orders or laws to secure payment
of amounts not yet delinquent;
(iii) encumbrances securing payments to mechanics and
materialmen and encumbrances securing payment of taxes or assessments
that are, in either case, not yet delinquent;
(iv) consents to assignment by governmental authorities that
are customarily obtained after the consummation of transactions of the
nature contemplated by this Agreement;
(v) easements, rights-of-way, servitudes, permits, surface
leases, surface use restrictions and other surface uses and impediments
on, over or in respect of any of the Subject Interests that are not such
as to interfere materially with the operation, value or use of any of the
Subject Interests;
(vi) such title defects as Buyer has expressly waived in
writing;
(vii) rights reserved to or vested in any municipality or
governmental, tribal, statutory or public authority to control or
regulate any of the Subject Interests in any manner, and all applicable
laws, rules and orders of any municipality or governmental or tribal
authority; and
(viii) the terms and conditions of (A) the Leases, (B) the
Options, (C) the Mobil Term Assignment, (D) the Exploration Agreement,
(E) the Unitization Agreement, (F) the
Appendix A, Page 2
Operating Agreement, and (G) all other agreements required to be
executed under the terms and conditions of items (A) through (G) above.
"PURCHASE PRICE" shall have the meaning ascribed to such term in
SECTION 2.1.
"SEISMIC DATA" shall mean all of the three dimensional seismic data
acquired over the Lands and processed by Western Geophysical Company in
accordance with that certain General Agreement for Acquisition of Geophysical
Data dated October 5, 1998, the Supplemental Agreement No. 1 dated October 5,
1998, as amended, and the Letter Agreement dated January 6, 1999 (Bid
#010598G1) between Benz Energy LTD (now Benz Energy Inc.) and Western
Geophysical Company.
"SUBJECT INTERESTS" shall have the meaning ascribed to such term in
SECTION 1.1.
"UNITIZATION AGREEMENT" shall mean that certain Old Ocean Field
Unitization Agreement dated January 30, 1947, recorded in Vol. 412, Pg. 1, of
the Deed Records of Brazoria County, Texas, and in Vol. 176, Pg. 55 of the
Deed Records of Matagorda County, Texas.
Appendix A, Page 3