1
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
NATIONAL ENERGY GROUP, INC.
PURCHASER
and
ARAXAS ENERGY CORPORATION, ARAXAS SPV-1, INC.
AND ARAXAS EXPLORATION, INC.
and
X'XXXXXXXX OIL AND GAS COMPANY, INC.
SELLERS
DATED SEPTEMBER 30, 1996
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TABLE OF CONTENTS
1. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Acquired Assets... . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. PURCHASE PRICE: PURCHASE PRICE ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . 4
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Purchase Price Adjustments.. . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 The NEG Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Allocation of the Purchase Price For Tax Purposes . . . . . . . . . . . . 6
2.8 Post-Closing Accounting; Payment of Net Adjustment . . . . . . . . . . . . 6
2.9 Due Diligence; Title Defects; Cure . . . . . . . . . . . . . . . . . . . . 7
2.10 Escrow.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. ASSUMPTION OF CERTAIN OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Transactions at Closing . . . . . . . . . . . . . . . . . . . . . . . . . 8
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5. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . 10
5.1 Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Non-Contravention.. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Governmental Consents; Transferability of Licenses, Etc . . . . . . . . 11
5.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Litigation, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Conformity to Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Title to Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Transferred Leaseholds: Safety, Zoning and Environmental Matters . . . . 13
5.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Oil and/or Gas Contracts . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.14 Transferred Leaseholds . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Trademarks, Patents, Etc . . . . . . . . . . . . . . . . . . . . . . . . 14
5.16 Brokerage Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . 15
5.19 Completeness Of Information . . . . . . . . . . . . . . . . . . . . . . 15
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . 16
6.1 Organization and Standing of Purchaser . . . . . . . . . . . . . . . . . 16
6.2 Corporate Approval; Binding Effect . . . . . . . . . . . . . . . . . . . 16
6.3 Non-Contravention; Approvals . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Litigation, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Brokerage Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Due Diligence Investigation . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 Completeness of Information . . . . . . . . . . . . . . . . . . . . . . 17
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7. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . 18
7,3 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Relationship of Sellers and Purchaser following Closing . . . . . . . . 20
7.5 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 Sales Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.9 Araxas Seismic Agreement . . . . . . . . . . . . . . . . . . . . . . . . 22
7.10 Araxas Reacquisition Agreement . . . . . . . . . . . . . . . . . . . . . 22
7.11 Future Assignees of the Araxas Assets . . . . . . . . . . . . . . . . . 22
8. INDEMNIFICATION FOR PRE-CLOSING AND POST-CLOSING OPERATIONS
AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Indemnity by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 Purchaser Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.5 Method and Manner of Paying Losses . . . . . . . . . . . . . . . . . . . 25
8.6 Indemnity by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 26
9. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE . . . . . . . . . . . . . . . . . 26
9.1 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Fulfillment of Obligations . . . . . . . . . . . . . . . . . . . . . . . 26
9.3 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 26
9.4 Approvals, Notices and Opinions . . . . . . . . . . . . . . . . . . . . 26
9.5 No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.6 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7 Assignment of Gas Contracts . . . . . . . . . . . . . . . . . . . . . . 27
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10. CONDITIONS TO SELLERS' OBLIGATIONS TO CLOSE . . . . . . . . . . . . . . . . . . . 27
10.1 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.2 Fulfillment of Obligations . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 27
10.4 Approvals, Notices and Opinions . . . . . . . . . . . . . . . . . . . . 27
10.5 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . 27
11.2 Termination by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Termination by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . 28
12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Sections and Section Headings . . . . . . . . . . . . . . . . . . . . . 29
12.6 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.8 No Implied Rights or Remedies . . . . . . . . . . . . . . . . . . . . . 30
12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.10 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.11 Jurisdiction, Arbitration . . . . . . . . . . . . . . . . . . . . . . . 30
12.12 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.14 Xxxx-Xxxxx-Xxxxxx Provisions . . . . . . . . . . . . . . . . . . . . . . 31
12.15 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibits 2.10 Escrow Agreement
Exhibit 4.2(a) Form of Xxxx of Sale
Exhibit 4.2(b)(i)(a) Form of Opinion of Counsel of Araxas
Exhibit 4.2(b)(i)(b) Form of Opinion of Counsel of OSOG
Exhibit 4.2(c)(i) Form of Opinion of Counsel of Purchaser
Exhibit 4.2(c)(ii)(a) NEG Stock Certificate for Araxas
Exhibit 4.2(c)(ii)(b) NEG Stock Certificate for OSOG
Exhibit 4.2(c)(iii)(a) Form of Stock Registration Agreement for Araxas
Exhibit 4.2(c)(iii)(b) Form of Stock Registration Agreement for OSOG
SCHEDULES
Schedule 1.1(a) Personal Property
Schedule 1.1(b) Transferred Leaseholds
Schedule 1.1(c) Oil and/or Gas Contracts
Schedule 1.1(d)(i) Permits
Schedule 1.1(d)(ii) Intellectual Property
Schedule 1.1(e) Prepaid Assets
Schedule 1.2 Excluded Assets
Schedule 2.3(a) Araxas Partners
Schedule 2.3(b) OSOG Partners
Schedule 4.2(b)(iv) Secured Creditors Releases
Schedule 5.4 Governmental Consents
Schedule 5.5 Financial Statements
Schedule 5.6 Litigation, Etc.
Schedule 5.7 Conformity to Law
Schedule 5.9(a) Conformity to Environmental Laws
Schedule 5.9(b) Site Assessments
Schedule 5.10 Condition of Personal Property
Schedule 5.11 Insurance
Schedule 5.12 Breaches Under or Disputes Regarding Oil and/or
Gas Contracts
Schedule 5.13 Problems with Validity or Transferability of
Permits
Schedule 5.15 Intellectual Property Infringement; Claims
Schedule 5.17(a) Failure to File Correct Tax Returns or Pay Taxes
Schedule 5.17(b) Tax Liens; Failure to Withhold Taxes
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INDEX OF DEFINED TERMS
DEFINED TERM PAGE
------------ ----
"Acquired Assets" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Araxas" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Araxas Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Araxas Asset Loss" . . . . . . . . . . . . . . . . . . . . . . . . .
"Araxas Partners" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Assumed Liabilities" . . . . . . . . . . . . . . . . . . . . . . . .
"Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Confidential Information" . . . . . . . . . . . . . . . . . . . . .
"Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . .
"Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . . .
"Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Excluded Liabilities" . . . . . . . . . . . . . . . . . . . . . . .
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . . .
"Gas Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . .
"Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"NEG" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"NEG Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Oil Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"OSOG" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"OSOG Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"OSOG Asset Loss" . . . . . . . . . . . . . . . . . . . . . . . . . .
"OSOG Partners" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"OSOG Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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"Permits" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Permitted Encumbrances" . . . . . . . . . . . . . . . . . . . . . .
"Personal Property" . . . . . . . . . . . . . . . . . . . . . . . . .
"Post Closing Adjustment Date" . . . . . . . . . . . . . . . . . . .
"Prepaid Assets" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Purchaser" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Purchaser Claims" . . . . . . . . . . . . . . . . . . . . . . . . .
"SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Sellers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Survival Period" . . . . . . . . . . . . . . . . . . . . . . . . . .
"Third Party Claim" . . . . . . . . . . . . . . . . . . . . . . . . .
"Title Defects" . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Transferred Leaseholds" . . . . . . . . . . . . . . . . . . . . . .
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is dated as
of September 30, 1996, by and between NATIONAL ENERGY GROUP, INC., a Delaware
corporation (hereinafter referred to as "Purchaser" or "NEG"), and ARAXAS
ENERGY CORPORATION, an Oklahoma corporation, ARAXAS SPV-1, INC., an Oklahoma
corporation and ARAXAS EXPLORATION, INC., an Oklahoma corporation, (hereinafter
collectively referred to as "Araxas") and X'XXXXXXXX OIL AND GAS COMPANY, INC.,
a Texas corporation (hereinafter referred to as "OSOG"). Araxas and OSOG are
sometimes hereinafter collectively referred to as "Sellers".
RECITALS
WHEREAS, Purchaser and Sellers are in the business of the exploration
and production of oil and gas; and
WHEREAS, certain of Araxas wholly-owned subsidiaries and certain of
its joint venture partners (hereinafter the "Araxas Partners") own the
undeveloped leasehold interests and option to acquire oil and gas lease
described in this Agreement (hereinafter the "Araxas Assets"); and
WHEREAS, OSOG and certain of its joint venture partners (hereinafter
the "OSOG Partners") own the leaseholds, personal property and other property
rights and contracts described in this Agreement (hereinafter the "OSOG
Assets").
NOW, THEREFORE, in consideration of the above recitals, which
constitute a part of this Agreement, the Mutual promises and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Sellers intending
to be legally bound, agree as follows:
1. PURCHASE AND SALE.
1.1 Acquired Assets. Subject to the terms and conditions set forth
in this Agreement, Sellers hereby agree to sell, assign, transfer,
convey and deliver to Purchaser free and clear of all "Encumbrances"
(as hereinafter defined), except the "Permitted Encumbrances" (as
hereinafter defined) and Purchaser hereby agrees to purchase, acquire
and receive an assignment, a conveyance and the delivery of the
following assets of Sellers arising from, used in, relating to, or
necessary for, the exploration, production and operation of those
producing properties and or production units located in the South Lake
Boeuf Field in La Fourche Parish, Louisiana as more fully described
herein, but not including any Excluded Assets (all of such assets
included in this Section 1.1 are hereinafter collectively referred to
as the "Acquired Assets"):
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(a) all of the machinery, tools, goods, equipment,
furniture, fixtures, seismic reports logs, geological maps,
geophysical data completion records and all other personal
property owned by Araxas and OSOG, related to, on or at the
Araxas Assets or the OSOG Assets, respectively, including
without limitation the personal property set forth in Schedule
1.1(a) (collectively, the "Personal Property");
(b) all rights of Sellers as to all depths and formations
owned by Sellers and conveyed hereunder, in, under or to the
real property leases including oil, gas and mineral leases,
options and permits, together with any identical or concurrent
rights and interests in and to all property and rights
incident thereto, including without limitation xxxxx, lands,
formations, wellbore rights, royalties, production payments,
options, operating or other agreements, easements in
connection therewith, set forth in Schedule 1.1(b), together
with all rights of Sellers in improvements, appurtenances,
easements, licenses, unitization and pooling agreements (if
any) and other rights and interests thereon and therein (the
"Transferred Leaseholds").
(c) all rights of Sellers in, under or to (i) any oil
and/or gas purchase and sales contracts, gas transportation
contracts and other similar agreements listed on Schedule
1.1(c), and (ii) any other contract of Sellers designated by
Purchaser in writing prior to the closing (singularly, an "Oil
and/or Gas Contract," and collectively, tile "Oil and/or Gas
Contracts");
(d) all rights of Sellers in, under or to any written
permits, licenses, or other similar authorizations or
understandings listed on Schedule 1.1(d)(i) (collectively, the
"Permits") and any and all patents, copyrights, trademarks,
inventions, service marks (whether registered or unregistered)
owned or licensed by Sellers listed on Schedule 1.1(d)(ii)
together with all rights associated therewith (collectively,
the "Intellectual Property").
(e) all rights of Sellers with respect to storage gas,
oil and other products derived therefrom, listed on Schedule
1.1(e) (the "Prepaid Assets");
(f) copies of all originals of Sellers' accounting books,
records and ledgers relating to the Acquired Assets; all
documents and records relating to the activities conducted by
Sellers with respect to the Acquired Assets; and all originals
of the Permits, Transferred Leaseholds, Oil and/or Gas
Contracts, and any agreements or licenses relating to the
Intellectual Property, it being understood and agreed that
Sellers shall, at its sole cost and expense, have reasonable
access to the above described records during normal working
hours for a period of three (3) years after the Closing or
such longer period as is reasonably necessary for pursuance of
any litigation in existence at the Closing or is necessary due
to extensions of tax audits by taxing authorities, but in no
event for a period longer than four (4) years after the
Closing;
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1.2 Excluded Assets. Notwithstanding the provisions of Section
1.1, Purchaser is not purchasing and Sellers are not selling pursuant
to this Agreement, and the term "Acquired Assets" shall not include,
any of the assets listed on Schedule 1.2 hereof (collectively, the
"Excluded Assets").
1.3 Permitted Encumbrances. The Permitted Encumbrances include:
(a) the terms, conditions, restrictions, exceptions,
reservations, limitations and other matters contained in the
agreements, instruments and documents which create or reserve
to Sellers its interests in any of the Acquired Assets, to the
extent they do not prevent Purchaser from receiving the
proceeds of production from the xxxxx or units attributable to
the net revenue interest as reflected in Schedules or do not
increase the working interest in the xxxxx or units as
reflected in Schedules (unless the net revenue interest
therein is proportionately increased); provided that any such
agreements, instruments and documents have been given to
Purchaser pursuant to Section 1 hereof;
(b) any liens for taxes and assessments not yet
delinquent as of the Closing Date;
(c) any liens or security interests created by law or
reserved in oil and gas leases for royalty, bonus or rental,
or created to secure compliance with the terms of the Acquired
Assets;
(d) any obligations or duties affecting the Acquired
Assets to any municipality or public authority with respect to
any franchise, grant, license or permit, and all applicable
laws, rules and orders of governmental authority; provided
that such items do not materially interfere with the ownership
or operation of the Acquired Assets;
(e) (i) easements, rights-of-way, servitudes, permits,
surface leases and other fights in respect of surface
operations, pipelines, grazing, hunting, fishing, lodging,
canals, ditches, reservoirs or the like, and (ii) easements
for streets, alleys, highways, pipelines, telephone lines,
power lines, railways and other similar rights-of-way;
provided that such items do not materially interfere with the
ownership or operation of the Acquired Assets;
(f) all lessors' royalties, overriding royalties, net
profits interests, carried interests, production payments,
reversionary interests and other burdens on or deductions from
the proceeds of production if the net cumulative effect of
such burdens or deductions does not reduce the net revenue
interest of Sellers in the Acquired Assets below the net
revenue interest for the xxxxx or units as implicit in the
Schedules attached hereto;
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(g) 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 to the extent same are customarily
obtained after such sale or conveyance and relate to the
transactions contemplated by this Agreement.
(h) production sales contracts; division orders;
contracts for sale, purchase, exchange, refining, or
processing of Hydrocarbons; unitization and pooling
designations, declarations, orders and agreements; operating
agreements; agreements of development; area of mutual interest
agreements; gas balancing or deferred production agreements;
processing agreements; plant agreements; pipeline, gathering
and transportation agreements; salt water or other disposal
agreements; seismic or geophysical permits or agreements; and
any and all other agreements which are ordinary and customary
in the oil, gas and other mineral exploration, development or
extraction business, to the extent such declarations, order
and agreements described in the Schedules of OSOG attached
hereto (i) do not reduce the net revenue interest in any well
or unit as reflected in such Schedules of OSOG and do not
increase the working interest in any well as reflected in such
Schedules (unless the net revenue interest is proportionately
increased), (ii) do not materially interfere with or have a
material adverse effect on, the exploration, development or
operation of the Acquired Assets or (iii) do not impair
Purchaser's right to receive the proceeds of production
attributable to the Acquired Assets;
(i) any other encumbrance, title defect or other matter
(whether or not constituting a Title Defect) waived in writing
by Purchaser; and
(j) the overriding royalties in favor of (i) Xxxx
Xxxxxxxx, and (ii) STRATUM GROUP, L.L.P. and Araxas Employee
Royalty Pool which burdens the Acquired Assets conveyed or to
be conveyed by OSOG and Araxas respectively, which overriding
royalties has been reflected in and does not further reduce
the net revenue interest attributable to such assets as shown
in the Schedules attached hereto.
2. PURCHASE PRICE; PURCHASE PRICE ADJUSTMENT.
2.1 Purchase Price. The purchase price (hereinafter referred to as
the "Purchase Price") for the Acquired Assets shall be an amount equal
to Seven Million Two Hundred Fifteen Thousand Dollars ($7,215,000),
adjusted as further provided herein, payable in cash at the Closing in
the amount of One Million Five Hundred Thousand Dollars ($1,500,000)
in the respective amount as set forth on Schedule 2.3 hereof and the
balance payable at the Closing or otherwise escrowed as described
herein in the form of Common Stock of NEG, the number of shares to be
derived by averaging the closing price per share of the NEG stock for
the ten (10) trading days prior to the Closing; provided that such
average price shall not exceed the amount of Three Dollars and
Twenty-Five Cents ($3.25) per share (hereinafter the "NEG Shares").
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(a) Araxas and the Araxas Partners shall be entitled to
receive an aggregate amount equal to Four Million One Hundred
Twenty-Five Thousand Dollars ($4,125,000) of the Purchase
Price, less adjustments to the Purchase Price as provided
herein, attributable to Title Defects in the Araxas Assets
conveyed and delivered by Araxas, payable in the form of cash
in the amount of One Million Five Hundred Thousand Dollars
($1,500,000) and the balance in the form of NEG Shares as
provided herein;
(b) OSOG and the OSOG Partners shall be entitled to
receive an aggregate amount equal to Three Million Ninety
Thousand ($3,090,000) of the Purchase Price, less adjustments
to the Purchase Price attributable to the Title Defects in the
OSOG Assets conveyed and delivered by OSOG, solely in the form
of NEG Shares as provided herein.
2.2 Purchase Price Adjustments. If notice of a "Title Defect" (as
hereinafter defined) is given to Sellers as provided herein which
shall not have been cured as of the "Post-Closing Adjustment Date" (as
hereinafter defined) and Purchaser is unwilling to accept an indemnity
as provided in Section 8.2 hereof, Purchaser and the Seller whose
Acquired Assets are affected by the claimed Title Defect shall use
their best efforts to agree on an adjustment to the Purchase Price to
reflect the Title Defect. Purchase Price adjustments as described
herein shall be made solely with respect to the NEG Shares issued to
Sellers. In the event the parties cannot agree on an adjustment to the
Purchase Price, the provisions of Section 12.11 hereof shall apply;
provided that in the event the Purchase Price adjustments as provided
herein in the aggregate exceed twenty percent (20%) of the total
Purchase Price, then in such event, either Purchaser or Seller (or
either of them) may terminate this Agreement as provided in Section 11
hereof.
2.3 The NEG Shares. At the Closing, Purchaser shall tender to each
of Araxas and OSOG one or more certificates of unregistered NEG Common
Stock as set forth on Exhibit 4.2(c)(ii)(a) and Exhibit 4.2(c)(ii)(b).
No certificate to be issued in connection herewith shall be in a name
other than Araxas and the Araxas Partners set forth on Schedule 2.3(a)
or OSOG and the OSOG Partners set forth on Schedule 2.3(b); provided,
that each such Araxas Partner and OSOG Partner who shall receive such
certificates shall have executed and delivered at the Closing an
"Investment Letter" pursuant to Regulation D of the Securities Act of
1933, as amended (the "Act") and neither certificate nor scrip for
fractional shares relating thereto shall be issued at the Closing or
thereafter.
2.4 The Restricted Securities. Each of Araxas and OSOG acknowledge
with respect to the NEG Shares each such party will acquire hereunder
that (i) the NEG Shares which it will acquire hereunder are not
registered under the Act and are being so acquired for investment and
not with a view to the distribution thereof, (ii) it is an "accredited
investor" within the meaning of Regulation D of the General Rules and
Regulations under the Act and has knowledge and experience in
financial and business matters to enable it to evaluate the merits and
risks of consummating the Agreement and acquiring shares of
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NEG Common Stock, and that it is able to bear the economic risks of
this investment, including the risk of complete loss; and (iii) it
agrees to not dispose of any such shares of NEG Common Stock acquired
in connection herewith in violation of the Act and all applicable
Governmental Rules thereunder.
2.5 Stock Legend. The certificates representing the NEG Shares of
NEG Common Stock issued pursuant to this Agreement shall bear the
following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER STATE SECURITIES LAWS. SUCH SHARES OF COMMON STOCK
MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE, REGISTRATION STATEMENT UNDER
SAID SECURITIES ACT COVERING THE TRANSFER OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER
SAID SECURITIES ACT IS NOT REQUIRED.
2.6 Registration Rights. NEG agrees that if at any time or from
time to time it shall determine to register any of its securities, for
its own account or the account of any of its shareholders, other than
registration relating solely to employee stock options or purchase
plans, a registration relating solely to an SEC Rule 145 transaction,
or a registration on any registration form that does not permit
secondary sales, each of Araxas the Araxas Partners, OSOG and the OSOG
Partners shall have the right to "piggyback" or "demand" a
registration of the NEG Shares in accordance with the terms and
conditions of the Stock Registration Agreements attached hereto and
incorporated herein as Exhibit 4.2(c)(iii)(a) and Exhibit
4.2(c)(iii)(b); provided, however, that each of Araxas and OSOG agree
as a condition precedent to the registration rights described herein,
the Araxas Partners and the OSOG Partners shall have no rights with
respect to the registration rights described herein, other than as
participant nominees in a registration for the benefit of Araxas
and/or OSOG respectively, in which case the Araxas Partners and/or the
OSOG Partners shall have the same rights under the Stock Registration
Agreement as Araxas and/or OSOG, respectively.
2.7 Allocation of the Purchase Price For Tax Purposes. Purchaser
and Sellers agree to confer as to the allocation of the Purchase
Price for tax purposes. However, in the event that Purchaser and
Sellers do not reach an agreement as to any such allocation as set
forth on Schedule 2.7 hereto, then Purchaser and Sellers agree that
the provisions of Section 12.11 hereof shall apply.
2.8 Post-Closing Accounting; Payment of Net Adjustment.
(a) As promptly as practicable after the Closing Date,
Purchaser and Sellers will jointly cause an accounting to be
made for all oil and/or gas imbalances, prepaid oil and/or
gas, prepaid transportation costs, other Prepaid Assets and
any other costs paid by Sellers prior to the Effective Date
(as hereinafter defined) but benefiting Purchaser after the
Effective Date or owing by Sellers to Purchaser as relating to
expenses or obligations incurred by Purchaser for Sellers'
benefit prior to the Effective Date. The net adjustment shall
be paid in cash by Purchaser to
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such Seller who incurred such cost or obligation as a
Post-Closing adjustment to the Purchase Price on the
Post-Closing Adjustment Date.
(b) To the extent oil and/or gas imbalances are settled
after the Effective Date by an in-kind exchange of oil and/or
gas, the value of the oil and/or gas exchanged will be the
average cost of the oil or gas during the month incurred, plus
penalties, interest and other charges up to and including the
month of settlement applicable to transactions between
Purchaser and the party with whom settlement is made.
2.9 Due Diligence; Title Defects
2.9.1 Due Diligence. Purchaser may conduct, to the extent it deems
appropriate, and at its sole cost and expense, such due diligence
investigation and title examination of the Acquired Assets. In the
event matters should come to Purchaser's attention which would
constitute a "Title Defect" (as hereinafter defined), Purchaser shall
notify Sellers in writing of such Title Defect or Title Defects within
five (5) working days following the Closing. In the event Purchaser
notifies Sellers of a Title Defect as provided herein, the Seller
whose Acquired Assets are affected by the claimed Title Defect shall
have the right to cure the Title Defect as provided herein.
2.9.2 Title Defects. For purposes of this Agreement, a "Title
Defect" or "Title Defects" shall mean a material deficiency in one or
more of the following respects:
(a) Sellers' ownership of the Acquired Assets is less
than described on Schedules 1.1(a)(b)(c)(d) and or (e); or
(b) Sellers' ownership or title to any of the Acquired
Assets are subject to reduction by virtue of the exercise by a
third party of reversionary, back-in, preferential or other
similar right not described in Schedules 1.1(a)(b)(c)(d)(e) or
Schedule 1.2; or
(c) Sellers are in default of any material provision
under any agreement, governmental order, federal, state and/or
local law, rules, orders or regulations which material default
would give rise to Third Party Claim (as hereinafter defined)
against the Acquired Assets.
2.9.3 Cure. In the event Sellers are given timely notice of a Title
Defect, the Seller (or Sellers) whose Acquired Assets are affected by
the claimed Title Defect shall have a period of twenty-eight (28) days
following such notice in which to cure the claimed Title Defect, and
unless cured or otherwise waived by Purchaser, such claimed Title
Defect shall result in a Purchase Price adjustment as provided in
Section 2.2 hereof.
2.10 Escrow. Sellers agree that an amount equal to twenty percent
(20%) of the NEG Shares to be delivered hereunder shall be placed in
escrow in the form of Exhibit 2.10, attached hereto, (hereinafter the
"Escrow Agreement") in the event there are any Purchase Price
adjustments as described in Section 2.2, which have not otherwise
been cured as provided in Section 2.9.3.
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3. ASSUMPTION OF CERTAIN OBLIGATIONS.
At and after the Closing, the only obligations of Sellers that
Purchaser shall assume are those obligations that have accrued with
respect to the Acquired Assets and for which each and every condition
or event giving rise to such obligation has occurred after the
Effective Date except as otherwise provided in this Agreement, (the
"Assumed Liabilities")* Notwithstanding anything in this Agreement to
the contrary, Purchaser shall not assume, and shall not be deemed to
have assumed for any purpose, any liability, debt or obligation of any
nature, fixed or contingent, known or unknown, of Sellers, except for
the Assumed Liabilities (with all such unassumed liabilities and
obligations referred to herein as the "Excluded Liabilities"). Without
limiting the generality of the foregoing, the Excluded Liabilities
shall include all litigation and claims disclosed on Schedule 5.7 and
all other litigation against either Araxas or OSOG or any of their
Affiliates (whether for personal injury, property damage or otherwise)
arising out of the operation of the Acquired Assets prior to the
Effective Date or the use of the Acquired Assets in the operation
thereof or any business carried on by either Araxas or OSOG or any of
their Affiliates prior to the Effective Date. As used in this
Agreement, "Affiliate" shall mean, with respect to any company, (i)
each entity or person that, directly or indirectly, owns or controls,
whether beneficially, or as a trustee, guardian or other fiduciary,
20% or more of the stock having ordinary voting power in the election
of directors of such company, (ii) each entity that controls, is
controlled by or is under common control with such company or any
Affiliate of such company, and (iii) each of such company's officers,
directors, joint venturers and partners. For the purpose of this
definition, "control" of an entity shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
4. CLOSING.
4.1 Time and Place. The closing of the transfer of the Acquired
Assets and delivery of all documents and instruments necessary to
consummate the transactions contemplated by this Agreement (the
"Closing") shall be held on September 30, 1996 or the earliest
possible date thereafter as the parties shall agree, at the offices of
OSOG, located at 000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, 00000. The
date on which the Closing is held is hereinafter referred to as the
"Closing Date." The Closing will be deemed to be effective for
purposes of this Agreement as of 7:00 A.M. in Houston, Texas on June
1, 1996 or as otherwise agreed in writing by the Purchaser and Sellers
(the "Effective Date").
4.2 Transactions at Closing. At the Closing:
(a) Sellers shall have executed and delivered to
Purchaser or its nominee(s) such deeds, bills of sale,
certificates of title, lease assignments, intellectual
property assignments, and other instruments of assignment or
transfer with respect to the Acquired Assets as is reasonably
necessary to vest in Purchaser or its nominee(s) title to all
of the Acquired Assets, subject to the provisions of Section
2.9 hereof in each case subject to no Encumbrances, except the
Permitted Encumbrances, and including a Xxxx of Sale in the
form of Exhibit 4.2(a).
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2.9 hereof in each case subject to no Encumbrances, except the
Permitted Encumbrances, and including a Xxxx of Sale in the
form of Exhibit 4.2(a).
(b) Each of Araxas and OSOG shall have delivered to
Purchaser the following:
(i) An Opinion of Counsel in form and substance
substantially as set forth in Exhibit 4.2(b)(i)(a)
and Exhibit 4.2(b)(i)(b);
(ii) An incumbency certificate dated the Closing
Date, together with copies, certified by its
Corporate Secretary or its Assistant Corporate
Secretary, of resolutions of its Board of Directors
authorizing the execution, delivery and performance
by it of this Agreement and the documents,
instruments, certificates and other agreements being
executed and delivered by it pursuant to the terms
hereof;
(iii) Good standing certificates, dated not more
than ninety (90) days with respect to Araxas and
thirty (30) days with respect to OSOG prior to the
Closing Date, issued by the Secretary of State of its
state of incorporation and each other jurisdiction in
which it is authorized or licensed to conduct
business, stating that it is validly existing and in
good standing under the laws of such jurisdiction;
(iv) Releases and Uniform Commercial Code
termination statements, executed by each secured
creditor identified on Schedule 4.2(b)(iv) hereto and
Sellers, and any other appropriate secured parties in
a form appropriate for recording and filing, that are
sufficient to release any and all Encumbrances except
the Permitted Encumbrances against or relating to the
Acquired Assets;
(v) A certificate of an officer that the
representations and warranties described in Section 5
and conditions to Closing described in Section 9
hereof have been fulfilled;
(vi) All other documents, instruments and
writings, satisfactory in form and substance to
Purchaser and its counsel, as may be required, in
Purchaser's reasonable opinion, to effect or evidence
the assignment, conveyance, transfer and delivery to
Purchaser of the Acquired Assets or to enable
Purchaser to operate the Acquired Assets from and
after the Closing Date (including any such form
required by the State of Louisiana.
(vii) The Investment Letters of the Araxas Partners
and the OSOG Partners described in Section 2.3.
(viii) The Escrow Agreement set forth in Exhibit
2.10, executed as provided therein.
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(ix) Any and all geological and geophysical data
pertaining to the Acquired Assets, including by not
limited to maps, logs, records and other data
described on Schedule 1.1(a) hereof.
(x) An executed copy of Form MD-10-R-A as
required by the State of Louisiana Office of
Conservation to operate the Acquired Assets.
(c) Purchaser shall have delivered to Sellers the
following:
(i) The opinion of counsel for Purchaser in form
and substance substantially as set forth in Exhibit
4.2(c)(i);
(ii) The NEG Common Stock Certificates in the
amount of the Purchase Price (as adjusted) in form
and substance substantially as set forth in Exhibit
4.2(c)(ii);
(iii) An executed copy of the Stock Registration
Agreements in form and substance as set forth in
Exhibit 4.2(c)(iii)(a) and Exhibit 4.2(c)(iii)(b);
(iv) A certificate of an officer of Purchaser that
the representations and warranties described in
Section 6 and the conditions to Closing described in
Section 10 hereof have been fulfilled.
(v) The Escrow Agreement set forth in Exhibit
2.10, executed as provided therein.
4.3 The Post-Closing Adjustment. As provided in Section 2.9.3,
Sellers shall have a period of twenty-eight (28) days following
Purchaser's timely notice of a Title Defect in which to affect a cure
of any such deficiency. Accordingly, Purchaser and Sellers agree that
all such Title Defects for which timely notice is given shall have
been cured on or before 12:01 A.M. in Dallas, Texas on November 5,
1996 (the "Post-Closing Adjustment Date").
5. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each of Araxas and OSOG, for itself and not for the other, represents
and warrants to Purchaser as follows:
5.1 Organization; Authority. It is a corporation duly organized,
validly existing and in good standing under the laws of the State of
its incorporation with corporate power and authority to enter into
this Agreement and to perform its obligations hereunder. It has
sufficient corporate power and authority to own or lease its interest
in the Acquired Assets and to carry on its operations of the Acquired
Assets as now conducted.
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5.2 Binding Effect. This Agreement has at the Closing been duly
authorized by all necessary corporate action of its Board of
Directors, this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of it,
enforceable against it.
5.3 Non-Contravention.
(a) Neither the execution and delivery of this Agreement
by it, nor the consummation by it of the transactions
contemplated hereby will constitute a violation of, or be in
conflict with or constitute or create a default under, or
result in the creation or imposition of any Encumbrance upon
any of the Acquired Assets that it is conveying pursuant to
(i) any agreement or commitment to which it is a party, or by
which, any Acquired Asset that it is conveying is bound or
subject to, or (ii) its Articles or Certificate of
Incorporation, By-laws, or other organizational document.
(b) Neither the execution and delivery of this Agreement
by it, nor the consummation by it of the transactions
contemplated hereby will constitute a violation of, or be in
conflict with, or constitute or create a default under, or
result in the creation or imposition of any Encumbrance upon
any of the Acquired Assets pursuant to any statute,
regulation, rule, judgment, order, decree or injunction of any
government, governmental agency or court or other tribunal to
which it or any of the Acquired Assets are subject that it is
conveying.
5.4 Governmental Consents; Transferability of Licenses, Etc.
Except as set forth on Schedule 5.4, to the best of its knowledge, no
consent, approval or authorization of, or registration, qualification
or filing with, any governmental agency or authority is required for
the execution and delivery of this Agreement by it, or for the
consummation by it of the transactions contemplated hereby. It has and
maintains all material licenses, permits and other authorizations from
all governmental authorities required to be maintained by it in
connection with the conduct of its operation or in connection with its
ownership of the Acquired Assets.
5.5 Financial Statements. Set forth on Schedule 5.5 are OSOG's
documents, records and ledgers relating to the operation of the
Acquired Assets (collectively, the "Financial Statements"). To the
best of its knowledge, the Financial Statements, present fairly the
results of operations and cash flows relating to the Acquired Assets.
5.6 Litigation, Etc. Except as set forth on Schedule 5.6, to the
best of its knowledge, no action, suit, proceeding or investigation is
pending or, to the knowledge of it, threatened, against it or any of
its directors or officers relating to or affecting the Acquired Assets
that it is conveying, or which questions the validity of this
Agreement or challenges any of the transactions contemplated hereby.
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5.7 Conformity to Law. Except as set forth on Schedule 5.7 and
except to the extent any such noncompliance would not have a material
adverse effect on the Acquired Assets that it is conveying, it has no
knowledge of a failure to comply with (a) all laws, statutes and
governmental regulations and all judicial or administrative or
tribunal orders, judgments, writs, injunctions, decrees or similar
commands applicable to any of the Acquired Assets (including, without
limitation, any labor, environmental, occupational health, zoning or
other law, regulation or ordinance) and (b) all unwaived terms and
provisions of all contracts, agreements and indentures to which it is
a party, or to which it or any of the Acquired Assets that it is
conveying is subject. Except as set forth in Schedule 5.7, to the best
of its knowledge, it has not committed, been charged with, or been
under investigation with respect to, nor is it aware of any violation
of any national, state or local law or administrative regulation that
would have a material adverse effect on the Acquired Assets.
5.8 Title to Acquired Assets.
(a) At the Closing, each of Araxas and OSOG shall have
the full right to sell, convey, transfer, assign and deliver
substantially all of each such Seller's right, title and
interest in and to all of the Acquired Assets as to all depths
and formations owned by Sellers and conveyed hereunder.
(b) At or prior to the Post-Closing Adjustment Date, each
of Araxas and OSOG shall have the full right to sell, convey,
transfer, assign and deliver each such Seller's right title
and interest in and to all of the Acquired Assets as to all
depths and formations which shall have been subject to cure
for any Title Defects and which was not delivered at the
Closing.
(c) Substantially all of the Acquired Assets will be at
the Closing Date free and clear of any security interests,
liens, claims, charges, options, mortgages, debts, leases (or
subleases), conditional sales agreements, title retention
agreements, encumbrances of any kind, except the Permitted
Encumbrances (singularly "Encumbrance" or collectively
"Encumbrances").
(d) At the conclusion of the Post-Closing Adjustment
Date, it shall have conveyed to Purchaser all of its rights to
all of the Acquired Assets free and clear of any Encumbrances,
except for the Assumed Liabilities and the Permitted
Encumbrances.
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5.9 Transferred Leaseholds; Safety, Zoning and Environmental
Matters.
a) Except as set forth on Schedule 5.9(a), OSOG has no
knowledge of a violation, nor has it received notice of any
alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, the Superfund Amendments and Reauthorization
Act of 1986, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, as amended, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any analogous state or local statute, regulation,
ordinance, order or decree relating to the environment, in
each case as in effect as of the date of this Agreement (such
laws, as in effect from time to time, are referred to herein
as "Environmental Laws") with respect to the Transferred
Leaseholds;
(b) Except as set forth on Schedule 5.9(b), it has now
knowledge of any site assessments by third parties or formal
reports to regulatory authorities in its possession or of
which it has knowledge regarding potential environmental
liabilities associated with the Transferred Leaseholds and
relating to compliance with applicable Environmental Laws or
contamination by any toxic substance, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws of the Transferred Leaseholds.
5.10 Personal Property. Except as set forth in Schedule 5.10, the
Personal Property is utilized by OSOG in the ordinary course of
business.
5.11 Insurance. Schedule 5.11 sets forth a complete and correct
list of all material insurance policies and fidelity bonds covering
the Acquired Assets. To the best of OSOG's knowledge, there is no
claim by it pending under any of such policies or bonds as to which
the carrier has questioned, denied or disputed coverage by the
underwriters under such policies or bonds. All premiums payable under
all such policies and bonds have been paid currently and it is
otherwise in compliance with the terms and conditions of all such
policies and bonds in all material respects. Such insurance is
adequate in all material respects in terms of breadth and amount of
coverage relative to the risks insured and the risks insured are
adequate and reasonable in light of the activities of it with respect
to the Acquired Assets.
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5.12 Oil and/or Gas Contracts. OSOG has delivered or made available
to Purchaser correct and complete copies of the Oil and/or Gas
Contracts. To the best of OSOG's knowledge, Schedule 1.1(c) sets forth
a correct and complete list of the Oil and/or Gas Contracts required
to be set forth therein. Except as specifically identified in Schedule
5.12, as of the date of this Agreement OSOG has not received notice of
any default or debarment from any governmental entity with respect to
any Oil and/or Gas Contract. Except as specifically identified in
Schedule 5.12, no claim or dispute known to it as a claim between OSOG
and any of its suppliers, or between OSOG and any of its customers,
relating to any Oil and/or Gas Contract is pending as of the date of
this Agreement. Except as otherwise set forth in Schedule 5.12, OSOG
knows of no present facts or events out of the ordinary course of
business that could have an effect on the revenues and profits from
the Acquired Assets.
5.13 Permits. To the best of its knowledge, Schedule 1.1(d)(i) sets
forth the correct and complete list of each Permit, together with the
name of the government agency or entity issuing the same except: (i)
normal routine items (such as, without limitation, local business
permits, building permits, etc., which normally relate to the Acquired
Assets; or (ii) for Permits as to which the failure to have them would
not have a material adverse effect on the Acquired Assets. To the best
of its knowledge, except as set forth on Schedule 5.13, such Permits
are valid, in good standing, and in full force and effect and,
assuming the required consents can be obtained prior to Closing, are
transferrable by it to Purchaser, and to the best of its knowledge,
none of the Permits will, assuming the required consents have been
obtained prior to the Closing or are not required hereunder, be
terminated or impaired or become terminable as a result of the
transactions contemplated hereby.
5.14 Transferred Leaseholds. It has delivered or made available to
Purchaser correct and complete copies of the Transferred Leaseholds.
To the best of its knowledge, it has not entered into any material
agreement which might result in any of the Transferred Leaseholds
being subject to or assessed for any taxes, rates, levies,
assessments, local improvement rates or charges of a similar nature
other than is currently assessed. To the best of its knowledge, it has
delivered to Purchaser accurate, correct and complete copies of all
environmental audits, title insurance policies, surveys, or other
reports/studies regarding the Transferred Leaseholds, to which it has
access.
5.15 Trademarks, Patents, Etc. To the best of its knowledge,
Schedule 1.1(d)(ii) hereto sets forth a complete and accurate list of
(a) all Intellectual Property, and (b) all material written agreements
relating to technology, trade secrets, know-how and processes to which
OSOG is licensed or authorized to use by others or which it has
licensed or authorized for use by others with respect to the Acquired
Assets that it is conveying. Except to the extent set forth in
Schedule 5.15, to the best of its knowledge, OSOG owns or possesses
adequate and enforceable licenses or other rights to use the
Intellectual Property in the jurisdictions in which they are shown as
registered and the consummation of the transactions contemplated
hereby will not alter or impair any such right. To the best of
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OSOG's knowledge, no claims have been threatened or asserted by any
person regarding the use of any trade secrets, patents, trade marks,
trade names, copyrights, technology, know-how, customer lists or
processes, or challenging or questioning the validity or effectiveness
of any license or agreement. To the best of OSOG's knowledge, the use
of the trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how, customer lists or processes used by it in the
ordinary course of operating the Acquired Assets that it is conveying
does not infringe on the rights of any person or entity.
5.16 Brokerage Agreements. It shall hold Purchaser harmless against
any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this Agreement who would be
entitled to any commission or broker's or finder's fee in connection
with the transactions contemplated herein as a result of any agreement
or understanding caused by it.
5.17 Tax Matters.
(a) Except as set forth in Schedule 5.17(a), to the best
of its knowledge, it has filed all tax returns which are
required to be filed with respect to the Acquired Assets with
any foreign, federal, state or local governmental authority or
agency (other than returns covered by a timely request for
extension of the due date), all such tax returns are true,
correct and complete in all material respects, and such Seller
has paid, or made adequate provision for the payment of, all
taxes shown thereof as being due and all other assessments
received to date.
(b) Except as set forth in Schedule 5.17(b), to the best
of its knowledge, there are no liens, charges or encumbrances
for taxes (other than current taxes not yet due and payable)
on any of the Acquired Assets and it represents that it is
unable to secure, prior to Closing, all clearances or other
confirmations by the state taxing authorities required to
establish that all taxes have been paid.
5.18 Public Utility Holding Company Act. It is not subject to
regulation under the Public Utility Holding Company Act of 1935 and
the rules and regulations thereunder.
5.19 Completeness of Information. To the best of its knowledge, all
information relating to the transactions contemplated hereby furnished
by it in this Agreement and the schedules, attachments and exhibits
hereto are accurate and complete in all material respects and no
material information required to be stated or necessary to make such
information not misleading has been omitted herefrom.
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6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Sellers as follows:
6.1 Organization and Standing of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation with full corporate
power and authority under its Articles of Incorporation and By-laws
and applicable laws to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated hereby.
6.2 Corporate Approval; Binding Effect. Purchaser has obtained all
necessary corporate authorizations and approvals required for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser and constitutes the legal, valid
and binding obligation of Purchaser, enforceable against Purchaser.
6.3 Non-Contravention; Approvals. Neither the execution and
delivery of this Agreement by Purchaser nor the consummation by
Purchaser of the transactions contemplated hereby will constitute a
violation of, or be in conflict with, constitute or create a default
under, or result in the creation or imposition of any liens upon any
property of Purchaser which shall act to render this Agreement
unenforceable pursuant to (i) the Articles of Incorporation or By-laws
of Purchaser, (ii) any agreement or commitment to which Purchaser is a
party, or by which any of Purchaser's properties are bound or subject
to, or (iii) any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any
government, governmental agency or court or other tribunal to which
Purchaser or any of its properties is subject. No consent, approval or
authorization of, or registration, qualification or filing by
Purchaser with any governmental agency or authority is required for
the execution and delivery of this Agreement by Purchaser or for the
consummation by Purchaser of the transactions contemplated hereby.
6.4 Litigation, Etc. No action, suit, proceeding or investigation
is pending or, to the knowledge of Purchaser, threatened, against
Purchaser relating to or affecting any of the Acquired Assets, which
questions the validity of this Agreement or challenges any of the
transactions contemplated hereby.
6.5 Brokerage Agreements. Purchaser shall hold Sellers harmless
against any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who
would be entitled to any commission or broker's or finder's fee in
connection with the transactions contemplated herein as a result of
any agreement or understanding caused by Purchaser.
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6.6 Due Diligence Investigation. Purchaser represents that it is a
knowledgeable purchaser, owner and operator of oil and gas properties;
has made its own investigation of the Acquired Assets; and except for
Sellers representations and warranties contained herein, has not
relied on any information regarding the Acquired Assets provided by or
on behalf of Sellers in deciding to execute this Agreement. Purchaser
is acquiring the Acquired Assets for its own account and not for
distribution or resale in any manner which would violate any state or
federal law.
6.7 Capitalization. Purchaser has duly authorized the issuance of
the NEG Shares and, when issued in accordance with this Agreement, the
NEG Shares will be fully paid, validly issued, outstanding and non-
assessable. Purchaser's authorized capitalization at the date of this
Agreement consists of 100,000,000 shares of common stock (par value
$.01 per share), and 1,000,000 shares of preferred stock (par value
$1.00 per share), of which 33,636,358 shares of common stock, and
52,500 shares of Series B, 10% cumulative convertible preferred stock;
40,000 shares of Series C, 10 1/2% cumulative, convertible preferred
stock; 100,000 shares of Series D preferred stock; and 50,000 shares
of Series E preferred stock), are issued and outstanding. All of such
issued and outstanding shares of capital stock of Purchaser have been
duly authorized, and are validly issued, fully paid, nonassessable and
free of preemptive rights. Purchaser has filed in a timely manner
periodic reports and proxy statements with the SEC (as hereinafter
defined) required to be filed under the Act and applicable rules and
regulations promulgated thereunder.
6.8 Disclosures. Purchaser's Annual Report on Form 10-KSB for the
year ended December 31, 1995 (the "SEC Document"), including the
financial statements included therein, does not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Since December 31, 1995, there have been no material
developments, transactions or events affecting Purchaser (other than
developments or events affecting the oil and gas exploration and
production industry generally) which are required to be disclosed to
the Securities and Exchange Commission of the United States
(hereinafter the "SEC") other than as have been disclosed by Purchaser
to the SEC or to Seller in writing. There are no material liabilities
of Purchaser (contingent or otherwise) which are required to be
disclosed, other than as disclosed to the SEC or Sellers.
6.9 Completeness of Information. To the best of its knowledge, all
information relating to the transactions contemplated hereby furnished
by it in this Agreement and the Schedules, attachments and exhibits
hereto or in connection herewith are accurate and complete in all
material respects and no material information required to be stated or
necessary to make such information not misleading has been omitted
herefrom.
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7. ADDITIONAL COVENANTS.
Sellers and Purchaser covenant and agree as follows:
7.1 Access. From the date hereof to the Post-Closing Adjustment
Date:
(a) Sellers agree to provide Purchaser, its attorneys,
accountants and agents with such reasonable access at its sole
expense to the books and records of Sellers relating to the
Acquired Assets, wherever located, and to representatives of
Sellers, as Purchaser shall deem necessary to complete the
transactions contemplated herein. Purchaser's access to such
information and representatives shall be in accordance with
the confidentiality provisions of Section 7.5. In addition,
from and after the Closing, Sellers further agree to provide
Purchaser, its attorneys, accountants and agents with
continued access to the books and records of Sellers relating
to the Acquired Assets that were not delivered to Purchaser
pursuant to this Agreement that relate to events occurring
both prior to and subsequent to the Closing.
(b) OSOG further agrees that it shall effect the transfer
of operations of the Acquired Assets to Purchaser as soon as
possible following the Closing and shall take all actions,
execute all documents and do all things as reasonably
requested by Purchaser to effect such transfer.
7.2 Conduct of the Business
(a) Preservation of Business and Relationships. From the
date hereof through the Closing Date, OSOG shall continue to
operate the Acquired Assets in the ordinary course of
business. Subject to the limitations in, and without limiting
the generality of the foregoing, Sellers shall not:
(i) enter into any agreements or take any action
that would result in a breach of any of their
covenants, representations or warranties set forth
herein;
(ii) without Purchaser's prior written consent,
cause to create or assume on the Acquired Assets any
mortgage, deed of trust, lien, pledge, lease
encumbrance, or charge of any kind whatsoever;
(iii) fail in any material respect to comply with
any laws, ordinances, regulations or other
governmental restrictions applicable to it or fail in
any material respect to attain or maintain all
licenses and permits required to operate the Acquired
Assets as is presently being operated or to utilize
any of the Acquired Assets;
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(iv) incur any material liability or obligation
(absolute, accrued, contingent or otherwise) or issue
any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for,
the obligations of any other individual or entity, or
change any assumption underlying, or methods of
calculating, any bad debt, contingency or other
reserve, any of which result in a lien or encumbrance
on the Acquired Assets;
(v) grant any powers of attorney which may have
the effect of giving rise to a right or claim of
power of attorney over the Acquired Assets;
(vi) waive any claims or rights of substantial
value or sell, transfer, or otherwise dispose of any
of the Acquired Assets;
(vii) engage in or enter into any material
transaction of any nature not expressly provided for
herein involving the Acquired Assets;
(viii) agree or commit, whether in writing or
otherwise, to do any of the foregoing;
(b) Notification of Material Events. Sellers, on the one
hand, and Purchaser, on the other hand, will each give prompt
notice to the other of material events or matters, as follows:
(i) the occurrence, or failure to occur, of any
event the occurrence or failure of which would, or
would be likely to, cause any of their respective
representations or warranties contained in this
Agreement to be untrue or incorrect at any time from
the date hereof to the Closing Date;
(ii) any failure on their respective parts or on
the part of any of their officers, directors,
employees, representatives or agents, if any, to
comply with or satisfy any covenant, condition or
agreement to be complied with or satisfy any
covenant, condition or agreement to be complied with
or satisfied by each of them under this Agreement;
(iii) any notice or communication from any
governmental or regulatory agency or authority in
connection with the transactions contemplated by this
Agreement; and
(iv) any actions, suits, claims, investigations or
proceedings commenced or, threatened, against,
relating to or involving or otherwise affecting
Sellers or the Acquired Assets that, if pending on
the date of this Agreement, would have been required
to have been disclosed hereunder or that relate to
the consummation of the transactions contemplated by
this Agreement.
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Prior to the Closing, Sellers shall have the right to deliver to
Purchaser and Purchaser shall have the right to deliver to Sellers, a
written disclosure schedule as to any material matter of which it
becomes aware following execution of this Agreement that would
constitute a breach of any representation, warranty or covenant of
this Agreement by such party, identifying on such disclosure schedule
the representation, warranty or covenant that would be so breached.
Each such disclosure schedule shall be delivered as soon as
practicable after such party becomes aware of the matter disclosed
therein. The nondisclosing party shall have until Closing to notify
the disclosing party that: (i) it will close notwithstanding the new
disclosure; or (ii) it will not close based upon such new disclosure.
(c) Insurance. Sellers shall maintain all insurance
coverage insuring the Acquired Assets through the Closing
Date.
(d) Best Efforts and Cooperation. Each of Sellers and
Purchaser shall use its best efforts to consummate the
transactions contemplated hereby and to cooperate with each
other in any reasonable arrangement to achieve that end.
7.3 Risk of loss. Each of Sellers shall assume all risk of
destruction, loss or damage due to fire or other cause to its Acquired
Assets through the Closing Date. If a destruction, theft, loss or
damage occurs prior to the Closing Date which materially affects the
Acquired Assets, Purchaser shall have the right to terminate this
Agreement and the transactions contemplated hereby. Purchaser assumes
all such risk following the Closing Date.
7.4 Relationship of Sellers and Purchaser following Closing.
(a) Cooperation in Litigation. Although not contemplated
or known as of the date of this Agreement, Purchaser and
Sellers recognize that in the future, litigation may arise
relating to the Acquired Assets, that may relate directly or
indirectly to the period prior to the Closing or the period
subsequent to the Closing, or both. Purchaser and Sellers
agree therefore, for themselves and on behalf of their
successors and assigns, that to the extent reasonable under
the circumstances, they will assist and provide information,
records, and documents to each other with respect to any such
litigation or potential litigation in which they are or may be
involved.
(b) Further Assurances. Sellers and Purchaser agree, for
themselves and on behalf of their successors and assigns:
(i) to cooperate in any reasonable arrangement designed to
provide for Purchaser the benefits of the Acquired Assets; and
(ii) that from time to time after the Effective Date, each of
them will, upon the request of the other, do, execute,
acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and
assurances as may be required for the better carrying out and
performance of all the terms of this Agreement.
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7.5 Confidential Information. Each of Araxas and OSOG, their
affiliates, any corporation, partnership or trust controlled directly
or indirectly by them, their officers, employees, agents and
representatives shall maintain the confidentiality of, and shall not
disclose or use for the benefit of themselves or others, any
confidential information concerning the operation of the Acquired
Assets or the terms and conditions of this Agreement (the
"Confidential Information"); provided that this Section 7.5 shall not
restrict (i) disclosure by either of any Confidential Information
required by applicable statute, rule or regulation or any court of
competent jurisdiction, provided that Purchaser is given notice and an
adequate opportunity to contest such disclosure and (ii) any
disclosure of information which is available publicly as of the date
of this Agreement or which, after the date of this Agreement, becomes
available publicly through no fault or action on the part of Araxas
and/or OSOG other than as provided herein.
7.6 Sales Taxes. OSOG shall be solely responsible for the cost of
sales tax and transfer duties, if any, properly payable upon and in
connection with the sale, assignment and transfer of the Acquired
Assets from Sellers to Purchaser hereunder. Purchaser and Sellers each
agree to deliver to the other party (or to such governmental or taxing
authority as the other party reasonably directs) any form of document
that may be required or reasonably requested in order to obtain an
exemption with respect to any federal, state, municipal or other
transfer taxes that may otherwise be required to be paid on the
transfer of the Acquired Assets or that may otherwise be due with
respect to such transfer, promptly upon the earlier of: (i)
reasonable demand by the other party, or (ii) discovery that such form
or document is required.
7.7 Expenses. Except as otherwise expressly provided herein, each
of the Sellers and Purchaser shall pay its own expenses incidental to
the preparation of this Agreement and incurred by it or them in
connection with the transactions contemplated hereby. Each of the
Sellers and Purchaser covenants and agrees to indemnify and hold each
other harmless from and against any loss, cost, damage, expense
(including reasonable attorneys' fees and expenses) and liability
resulting from any claims that may be made against the other, by any
broker or other party claiming a fee or other compensation in
connection with the transactions contemplated by this Agreement,
arising from the acts of the indemnifying party.
7.8 Notices. Each of the Sellers and Purchaser shall: (i) give all
of the other notices to governmental authorities and other third
parties, including lessors and licensees, which are required to be
given by them in connection with this Agreement and the transactions
contemplated hereby; and (ii) obtain all consents or waivers required
to be obtained under any law, rule, regulation, order, permit,
license, license agreement, authorization, lease, note, mortgage,
indenture, agreement, or other instrument or otherwise in connection
with this Agreement and the transactions contemplated hereby.
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7.9 Araxas Seismic Agreement. Araxas is conducting a 3-D seismic
survey over and across the Acquired Assets subject to certain permits
acquired by Araxas et. al. (pursuant to a Basic Agreement For
Geophysical Services dated March 19, 1996 by and between Universal
Seismic Acquisition, Inc. and UNEXCO, Inc., together with supplements
thereto, hereinafter the "Basic Agreement"). Upon completion of all
operations related to acquisition of such seismic data as it relates
to the Acquired Assets, Purchaser agrees to pay Araxas its pro rata
share of Araxas' cost of such data as it relates to the Acquired
Assets; provided, Purchaser's obligations hereunder shall be limited as
follows:
(a) Purchaser shall be subject to the same terms and
conditions as Araxas with respect to the Basic Agreement as it
relates to the Acquired Assets; and
(b) Purchaser shall be obligated to costs of not more
than $75,000 per square mile; and
(c) The area of the Acquired Assets up which any such
seismic survey shall be completed shall not be less than two
(2) square miles, nor greater than three (3) square miles with
respect to Purchaser's obligations for payment hereunder; and
(d) Purchaser's obligations for payment hereunder shall
not arise until such time that Araxas has delivered to
Purchaser all such seismic data to be delivered as
contemplated in the Basic Agreement and payment for such data
shall be made by Purchaser within ten (10) days of invoice
thereafter.
7.10 Araxas Reacquisition Agreement. Purchaser agrees to notify
Araxas in writing on or before sixty (60) days prior to the date on
which payment by Purchaser is (delay rental or other payment), or
other affirmative action of Purchaser, is due under any lease or
option included in the Acquired Assets, if Purchaser intends not to
make the payment or take such action and, as a result, to forfeit any
right under such lease or option. Araxas shall have the right to make
any payment or take such action that Purchaser could have taken
pursuant to the lease or option, and in such event, Purchaser shall
assign to Araxas all of Purchaser's interest in the lease, option or
right therein preserved by Araxas' action or payment, free and clear
of subsequently created burdens.
7.11 Future Assignees of the Araxas Assets. NEG agrees to cause any
assignee(s) of NEG of the Araxas Assets conveyed hereunder to
indemnify Araxas for any loss incurred by Araxas attributable to the
ownership or operation by such assignee(s) Araxas Assets.
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8. INDEMNIFICATION FOR PRE-CLOSING AND POST-CLOSING OPERATIONS AND
RELATED MATTERS.
8.1 Survival. The obligation of indemnification set out in Section
8.2, which shall be the sole recourse for any breach of the
representations and warranties contained in Section 5 hereof and all
other items set forth in Section 8.2, shall survive for a period of
ninety (90) days following the Closing Date; provided that the
indemnification with respect to the representations and warranties
contained in Section 5.6 and Section 5.9 shall survive for a period of
one (1) year following the Closing (the "Survival Period"). Any claim
for Losses must be asserted in writing prior to the end of the
Survival Period, and if asserted in writing during the Survival
Period, such claims shall survive until resolved, and if not so
asserted, then Purchaser shall be forever estopped and prohibited from
asserting any such claim hereunder.
8.2 Indemnity by Seller. Each of Araxas and OSOG, for themselves
and on behalf of their successors and assigns but not for each other,
agree to indemnify and hold Purchaser harmless from and with respect
to any and all losses, damages, costs, expenses, obligations,
liabilities, deficiencies, taxes, interest on taxes or penalties,
including without limitation the reasonable fees and disbursements of
counsel and the costs of responding to any governmental audit, inquiry
or investigation and including without limitation all claims,
liabilities or obligations arising from the Excluded Liabilities,
including (without limiting the generality of the foregoing), third
party claims arising out of the performance or non-performance of the
Oil and/or Gas Contracts prior to the Closing and third party claims
for patent infringement or infringement of other Intellectual Property
rights prior to the Closing, related to or arising directly or
indirectly out of any of the following (any of which shall be referred
to herein singularly as a "Loss" and collectively as the "Losses"):
(a) Any and all claims, counterclaims, liabilities, and
obligations arising out of OSOG's operation of the Acquired
Assets prior to the Effective Date or the use of the Acquired
Assets in the operation thereof prior to the Effective Date or
any business carried on by Sellers, prior to the Closing
(whether asserted before or after the Closing), including,
without limitation, the following:
(i) any violation prior to the Closing by
Sellers, of any law, statute, governmental regulation
or judicial administrative tribunal order, judgment,
writ, injunction, decree or similar command;
(ii) any actual or alleged liability for taxes
relating to any period prior to the Closing;
(iii) any of the litigation or claims referred to
or listed on Schedule 5.6;
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(b) any claim, liability or obligation to any employee of
either Araxas or OSOG in connection with his, her or its
employment or termination of employment or engagement by it
before, on or after the Closing Date;
(c) any claim, liability or obligation relating to any
broker or finder retained or utilized by it or representing it
in connection with the transactions contemplated by this
Agreement;
(d) any claim, liability or obligation related to or
arising directly or indirectly out of any breach of any
representation or warranty made by it in this Agreement;
8.3 Third Party Claims.
(a) Purchaser shall notify Sellers of any Loss, or other
action, suit, proceeding, demand, breach or governmental audit
or investigation (a "Claim") with respect to which Purchaser
claims indemnification hereunder. With respect to any Third
Party Claim (as hereinafter defined), Purchaser shall set
forth in writing (i) the specific Loss giving rise to such
Third Party Claim (ii) the specific facts or events upon which
the Claim is based, and (iii) the amount and method of
calculation of damages asserted by Purchaser with respect to
such Claim. Such written notice shall be delivered within the
Survival Period to the Sellers. If such Claim relates to any
action, suit, proceeding or demand instituted against
Purchaser by a third party (a "Third Party Claim"), upon
receipt of such notice from Purchaser, Purchaser at its own
expense shall be entitled to participate jointly with Sellers
in the defense of such Third Party Claim. If Sellers assume
the defense of such Third Party Claim Sellers shall have the
sole authority to negotiate, compromise and settle such Third
Party Claim provided:
(x) Sellers confirm in writing that it is
willing to assume the defense of Purchaser with
respect to such Third Party Claim;
(y) Purchaser elects not to participate in its
own defense by hiring separate counsel; and
(z) Sellers establish to the reasonable
satisfaction of Purchaser that it has (and will
continue to have) adequate financial resources to
satisfy and discharge such action or claim.
Purchaser shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of
which has been assumed by Sellers pursuant hereto, but Purchaser shall
bear and shall be solely responsible for its own costs and expenses in
connection with such participation. In addition, Purchaser shall meet
with Sellers from time to time to discuss the Third Party Claim and
otherwise provide reasonable cooperation to Sellers in connection with
the defense of such Third Party Claim.
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(b) Notwithstanding the foregoing provisions of this
Section 8.3, (i) Sellers shall not be entitled to settle any
Third Party Claim without Purchaser's prior written consent
unless as part of such settlement Purchaser is released in
writing from all liability with respect to such Third Party
Claim and (ii) the Purchaser shall not be entitled to settle
any Third Party Claim without the Sellers prior written
consent, unless as part of such settlement Sellers are
released in writing from all liability with respect to Such
Third Party Claim.
8.4 Purchaser Claims. Any claim by Purchaser related to or arising
directly or indirectly from any Losses other than Third Party Claims
("Purchaser Claims") shall be made in the manner provided herein. Any
Purchaser Claims must be asserted within the Survival Period. With
respect to any Purchaser Claim, Purchaser shall set forth in writing
(i) the specific Loss giving rise to such Purchaser Claim, (ii) the
specific facts or events upon which the Claim is based, and (iii) the
amount and method of calculation of damages asserted by Purchaser with
respect to such Claim. Such written notice shall be delivered within
the Survival Period to Sellers. Sellers shall have thirty (30) days
in which to respond in writing to such Purchaser Claims. If the
Purchaser Claim is disputed and the parties are unable to resolve such
dispute, such dispute shall be resolved in accordance with Section
12.11 hereof.
8.5 Method and Manner of Paying Losses. Subject to Sellers rights
pursuant to Section 8.3 to defend, negotiate, compromise and settle
Third Party Claims, the amount of any Loss under Section 8.2, monetary
judgments, awards, or settlements in lieu thereof shall be payable to
Purchaser upon resolution of a disputed Claim for the payment of
Losses in the manner set forth in this Agreement. Sellers and
Purchaser shall cooperate with each other to ensure the Losses or any
other claims for which Sellers have agreed to indemnify Purchaser
hereunder are promptly paid. The unpaid balance of any Loss shall bear
interest at the rate of interest established by Bank One N.A., Dallas,
Texas, from time to time as its "prime rate" plus one and one-half
percent (1.5%) from the date notice thereof is given by Purchaser to
Sellers or such later date as Purchaser becomes liable for such Loss;
provided that Sellers shall only be obligated to pay interest on that
portion of such Loss ultimately determined to be owed to Purchaser.
Notwithstanding any provision in this Article 8 to the contrary, the
indemnity obligation of Araxas shall apply only with respect to a Loss
attributable to the Araxas Assets ("Araxas Asset Loss") and the
indemnity obligation of OSOG shall apply only with respect to a Loss
attributable to the OSOG Assets ("OSOG Asset Loss"). In addition,
neither of the Sellers shall be liable to Purchaser if the aggregate
amount of Araxas Asset Loss or OSOG Asset Loss, as the case may be, is
less than 2% of the amount of the Purchase Price payable to such Seller
or if the aggregate amount of the Loss exceeds the amount of the
Purchase Price paid to Seller, Such Seller shall not be liable for such
excess Loss. If a Seller is determined to be liable for any Loss, and
such Seller owns any NEG Shares, such liability shall be settled, at
the election of such Seller: first by assignment of such number of NEG
Shares (based on a price equal to Three Dollars and Twenty-Five Cents
($3.25) per share as established in Section 2.1 hereof) as may be
necessary to settle such Loss; and second the
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remainder of any such Loss (if any), not otherwise settled by the
assignment of such NEG Shares shall be paid in cash. Any dispute
between Sellers and Purchaser concerning the amount of any Loss or
other claim to be paid shall be resolved in accordance with Section
12.11 hereof.
8.6 Indemnity by Purchaser. Purchaser shall indemnify Araxas and
OSOG against any and all damages, costs, expenses, obligations or
liabilities, including without limitation the reasonable fees and
expenses of counsel arising out of any breach by Purchaser of the
representations and warranties in Section 6 hereof. Purchaser further
agrees to indemnify and hold harmless Sellers from, against and in
respect to all claims, Third Party Claims and Losses arising out of or
relating to any breach of any covenant or agreement by Purchaser
contained herein or in any Schedule or Exhibit hereto; and for all
claims, Third Party Claims and Losses arising out of and relating to
the ownership or operation of the Acquired Assets from and after the
Effective Date.
9. CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE.
Unless otherwise waived in writing, the obligation of Purchaser to
complete the Closing is subject to fulfillment prior to or at the
Closing, unless Purchaser so elects to waive in writing any or all, of
each of the following conditions:
9.1 No Legal Proceedings. At the Closing, no judicial or
administrative proceeding shall be pending or threatened seeking to
enjoin or prevent, nor shall any order or injunction have been issued
prohibiting, consummation of the transactions contemplated hereby
(each of Purchaser and Sellers agree that it shall advise the other
immediately of any information regarding any such action).
9.2 Fulfillment of Obligations. Sellers shall have duly performed
or complied with all of the obligations and covenants to be performed
or complied with by them under the terms of this Agreement at or prior
to the Closing Date.
9.3 Accuracy of Representations and Warranties. The
representations and warranties of Sellers set forth in Section 5
hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date.
9.4 Approvals, Notices and Opinions. All approvals, notices and
opinions required with respect to the transactions contemplated by
this Agreement shall have been obtained or met.
9.5 No Material Changes. No events shall have occurred which
result in a material adverse change in the Acquired Assets, which
event was previously unknown and not included or reflected in any of
the disclosures in this Agreement or the Schedules attached hereto.
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9.6 Closing Deliveries. Sellers shall have delivered all of the
items listed in Section 4.2(a).
9.7 Assignment of Gas Contracts. Purchaser shall be reasonably
satisfied that the Oil and/or Gas Contracts listed in Schedule 1.1(c)
will be properly assigned or transferred to it at Closing.
10. CONDITIONS TO SELLERS' OBLIGATIONS TO CLOSE.
Unless otherwise waived in writing, the obligations of Sellers to
complete the Closing are subject to fulfillment prior to or at the
Closing of each of the following conditions:
10.1 No Legal Proceedings. At the Closing, no judicial or
administrative proceeding shall be pending or threatened seeking to
enjoin or prevent, nor shall any order or injunction have been issued
prohibiting, consummation of the transactions contemplated hereby
(each of Purchaser and Sellers agree that it shall advise the other
immediately of any information regarding any such action).
10.2 Fulfillment of Obligations. Purchaser shall have duly performed
or complied with all of the material obligations to be performed or
complied with by and under the terms of this Agreement at or prior to
the Closing Date.
10.3 Accuracy of Representations and Warranties. The
representations and warranties of Purchaser set forth in Section 6
hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date.
10.4 Approvals, Notices and Opinions. All approvals, notices and
opinions required with respect to the transactions contemplated by
this Agreement shall have been obtained or met.
10.5 Closing Deliveries. Purchaser shall have delivered all items
listed in Section 4.2(c).
11. TERMINATION.
11.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written
consent of Purchaser and Sellers.
11.2 Termination by Purchaser. Purchaser may terminate this
Agreement by written notice to Sellers at any time prior to the
Closing, if:
(a) a condition to the performance of Purchaser set forth
herein shall not be fulfilled on or before the date specified
for the fulfillment thereof; or
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(b) a default under, a breach of this Agreement or a
misrepresentation or a breach of any representation, warranty
or covenant of Sellers set forth in this Agreement or in any
instrument delivered by Sellers pursuant hereto shall have
occurred and be continuing; or
(c) a Purchase Price adjustment in excess of twenty
percent (20%) of the Purchase Price occurs as described in
Section 2.2 hereof.
11.3 Termination by Sellers. Sellers may terminate this Agreement,
by written notice to Purchaser at any time prior to Closing if:
(a) a condition to the performance of Sellers set forth
herein shall not be fulfilled on or before the date specified
for the fulfillment thereof; or
(b) a default under, a breach of this Agreement or a
misrepresentation or a breach of any representation, warranty
or covenant of Purchaser set forth in this Agreement or in any
instrument delivered by Purchaser pursuant hereto shall have
occurred and be continuing; or
(c) A Purchase Price adjustment in excess of twenty
percent (20%) of the Purchase Price occurs as described in
Section 2.2 hereof.
12. GENERAL.
12.1 Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and
shall be deemed to have been duly given if delivered personally or if
mailed by certified mail, return receipt requested, postage prepaid,
or if sent by overnight courier, or sent by written telecommunication,
as follows:
IF TO PURCHASER: IF TO SELLERS:
National Energy Group, Inc. Araxas Energy Corporation, et. al.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000 00000 Xxxxxxx Xxxx Xxxx
Xxxxxx, XX 00000-0000 Suite 500
Facsimile: (000) 000-0000 Xxx Xxxxxxxxx, XX 00000
Attn: Mr. Miles X. Xxxxxx, President Facsimile: (000) 000-0000
Attn: Xx. Xxxxxxx X. Xxxxxxx, VP Land
X'Xxxxxxxx Oil and Gas Company, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xx. Xxxxx X. X'Xxxxxxxx
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(or such other address as may be specified by notice hereunder) and
shall be deemed effective when received, provided, that any notice
given other than in writing by registered or certified mail shall be
confirmed in writing by registered or certified mail.
12.2 Successors and Assigns. All provisions of this Agreement,
whether or not such provisions shall specifically so provide, shall be
binding upon and inure to the benefit of Sellers and Purchaser and
their respective successors and assigns, but, except as otherwise
provided herein, shall not be assigned, transferred, pledged or
hypothecated by any party without the prior written consent of the
other parties, except that Purchaser may assign its rights and
obligations to one or more wholly owned direct or indirect
subsidiaries of Purchaser or to any Affiliate that is a wholly owned
direct or indirect subsidiary of the entity that is the ultimate
parent of Purchaser.
12.3 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, constitutes the entire agreement of Sellers and
Purchaser with respect to the matters governed herein and supersedes
all prior agreements, arrangements, statements, promises, information,
understandings, representations and warranties, whether oral or
written, express or implied, with respect to the subject matter
hereof. Neither Sellers nor Purchaser shall be bound by or charged
with any oral or written agreements, statements, promises,
information, arrangements, understandings, representations or
warranties not specifically set forth in this Agreement, the Schedules
hereto or in the documents and instruments to be delivered on or
before the Closing Date pursuant to this Agreement. Each of Sellers
and Purchaser further acknowledges and agrees that, in entering into
this Agreement and delivering the Schedules hereto and the documents
and instruments to be delivered on or before the Closing Date, it has
not in any way relied, and will not rely, upon any oral or written
agreements, statements, promises, information, arrangements,
representations or warranties, express or implied, not specifically
set forth in this Agreement, the Schedules hereto or in such documents
or instruments.
12.4 GOVERNING LAW. THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS (AND NOT THE CHOICE-OF-LAW
RULES) OF THE STATE OF LOUISIANA, EXCEPT AS OTHERWISE PROVIDED IN THE
EXHIBITS ATTACHED HERETO.
12.5 Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the
meaning thereof.
12.6 Defined Terms. Capitalized terms defined in this Agreement
shall have the meanings given to them in such definition when used
elsewhere in this Agreement.
12.7 Further Assurances. From time to time, at the request of
Purchaser and without further consideration, Sellers shall execute and
deliver such further instruments of conveyance and transfer as
Purchaser may reasonably require to more effectively convey and
transfer any of the Acquired Assets to Purchaser. Sellers and
Purchaser shall also
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execute and deliver to the appropriate other party such other
instruments as may be reasonably required in connection with the
performance of this Agreement, and each shall take all further actions
as may be reasonably required to carry out the transactions
contemplated by this Agreement.
12.8 No Implied Rights or Remedies. Except as otherwise expressly
provided herein or in the Schedules and Exhibits attached hereto,
nothing herein expressed or implied is intended or shall be construed
to confer upon or to give any person, firm or corporation, except
Sellers and Purchaser, any rights or remedies under or by reason of
this Agreement.
12.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.10 Construction. The language used in this Agreement will be
deemed to be the language chose by Sellers and Purchaser to express
their mutual intent, and no rule of strict construction will be
applied against any party.
12.11 Jurisdiction; Arbitration. All disputes with respect to this
Agreement, the Exhibits and Schedules hereto, including without
limitation, those arising out of or related to Section 8 of this
Agreement, shall be resolved by arbitration in the following manner:
The aggrieved party shall notify the other party in writing,
describing its claim, the amount of claim damages, and other relief
sought in reasonable detail. The responding party shall within fifteen
(15) calendar days after receipt of the aggrieved party's notice to
provide the aggrieved party a written response. The parties shall for
the next succeeding twenty (20) calendar days use good faith efforts
to discuss and negotiate a mutually agreed upon resolution of the
dispute. If no resolution is reached within the foregoing time
periods, then either party may initiate fast track private arbitration
in accordance with the following provisions of this paragraph. The
initiating party shall provide written notice of commencement of
arbitration to the defending party which shall also specify the
appointment of an individual to serve as a private arbitrator in the
arbitration proceedings. Within twenty (20) days after receipt of the
initial arbitration notice, the defending party shall give the
initiating party written notice specifying the appointment of a second
individual to serve as a private arbitrator. If two individuals are
timely appointed, they shall, within twenty (20) days after the second
appointment, appoint a third individual to serve as a private
arbitrator (or if they do not timely do so, either of them or any
party may seek appointment of the third individual pursuant to the
commercial rules of the American Arbitration Association from the
senior officer thereof in Dallas, Texas). The third individual shall
have at least five (5) years of experience in and complete knowledge
of the Louisiana system of forced and fieldwide unitization as
governed by the Louisiana Office of Conservation. Within ten (10) days
after the arbitrators have been appointed as described above, they
shall notify the parties of a hearing to be held in Dallas, Texas not
later than five (5) nor more than fifteen (15) days after notice of
the hearing is given. The arbitrators shall have the power to grant or
limit discovery and to implement or disregard the Rules of Evidence as
they may determine (but shall not have the power to vary the
provisions of this Agreement), and shall hold such number of hearings
as they may determine, but shall render a decision based on the
written submissions of the parties, hearings that may have been held,
and other information they deem appropriate, within forty-five (45)
days after the notice of the first hearing is given. A decision
concurred in by a majority of the arbitrators shall be final and
binding; provided that if the decision concerns the payment of a sum
of money on which a majority cannot timely agree, then the sum which
is neither the highest nor lowest specified among the arbitrators
shall be the final and binding decision on that issue. The arbitration
decision shall be nonappealable, and judgment on the award of the
arbitrators may be entered in any court having competent jurisdiction.
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12.12 Attorneys' Fees. Reasonable attorneys' fees and costs may be
awarded to the prevailing party in connection with any action taken to
enforce its rights under this Agreement, including, but not limited to
any arbitration proceedings pursuant to Section 12.11 hereof.
12.13 Survival. Except with respect to an indemnification obligation
of a party which shall survive the Closing as provided in Section 8.1
and Section 8.6 hereof, all representations and warranties made herein
by Purchaser and Sellers shall not survive the Closing. All covenants
and agreements of the parties to be executed, performed or effective
in whole or in part after the Closing shall survive the Closing.
12.14 Xxxx-Xxxxx-Xxxxxx Provisions. The parties have determined that
the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976 does not
apply to this Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Purchaser and Sellers have caused this Agreement to be duly executed
and delivered as a sealed instrument as of the date and year first
above written.
"PURCHASER" "SELLERS"
NATIONAL ENERGY GROUP, INC. ARAXAS ENERGY CORPORATION
By: /s/ MILES X. XXXXXX By: /s/ XXXXXXX X. XXXXXXX
-------------------------------- ------------------------------
Name: Mr. Miles X. Xxxxxx Name: Xx. Xxxxxxx X. Xxxxxxx,
Title: President and Chief Title: VP Land
Executive Officer
"SELLERS"
X'XXXXXXXX OIL AND GAS COMPANY, INC. ARAXAS SPV-1, INC.
By: /s/ XXXXX X. X'XXXXXXXX By: /s/ XXXXXXX X. XXXXXXX
-------------------------------- ------------------------------
Name: Xx. Xxxxx X. X'Xxxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: President Title: Vice President
ARAXAS EXPLORATION, INC.
By: /s/ XXXXXXX X. XXXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
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STATE OF TEXAS )
COUNTY OF XXXXXX )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Miles X. Xxxxxx, the President and Chief Executive Officer of
National Energy Group, Inc., a Delaware corporation, on behalf of said
corporation.
/s/ L. XXXX XXXXXXXX
----------------------------------------
Notary Public in and for
the State of Texas
My commission expires: 00-00-00
XXXXX XX XXXXX )
COUNTY OF XXXXXX )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Xxxxxxx X. Xxxxxxx, VP Land of Araxas Energy Corporation, an
Oklahoma corporation, on behalf of said corporation.
/s/ L. XXXX XXXXXXXX
----------------------------------------
Notary Public in and for
the State of Texas
My commission expires: 00-00-00
XXXXX XX XXXXX )
COUNTY OF XXXXXX )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Xxxxx X. X'Xxxxxxxx, the President of X'Xxxxxxxx Oil and Gas
Company, Inc., a Texas corporation, on behalf of said corporation.
/s/ L. XXXX XXXXXXXX
----------------------------------------
Notary Public in and for
the State of Texas
(L. Xxxx Xxxxxxxx)
My commission expires: 04-26-98
41
STATE OF TEXAS )
COUNTY OF XXXXXXXXXX )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Xxxxxxx X. Xxxxxxx, the Vice-President of Araxas SPV-1,
Inc., an Oklahoma corporation, on behalf of said corporation.
[NOTARY SEAL] /s/ XXXXXX XXXXXXXXXX
XXXXXX XXXXXXXXXX ---------------------------------------
Notary Public State of Texas Notary Public in and for
My Commission Expires the State of Texas
AUGUST 19, 2000
My commission expires: 8/19/2000
STATE OF TEXAS )
COUNTY OF XXXXXXXXXX )
This instrument was acknowledged before me on the 30th day of
September, 1996 by Xxxxxxx X. Xxxxxxx, the Vice-President of Araxas
Exploration, Inc., an Oklahoma corporation, on behalf of said corporation.
[NOTARY SEAL] /s/ XXXXXX XXXXXXXXXX
XXXXXX XXXXXXXXXX ---------------------------------------
Notary Public State of Texas Notary Public in and for
My Commission Expires the State of Texas
AUGUST 19, 2000
My commission expires: 8/19/2000
