CLOSING AGREEMENT
This Closing Agreement (the "Agreement"), is dated May 28, 2004, but
effective as of the Effective Date (defined below), and is between Penroc Oil
Corporation, Seller, whose address is 0000 Xxxxx Xxx, Xxxxx, XX 00000 and Dune
Energy, Inc., Buyer, whose address is 0000 Xxxxxxx Xxx, Xxxxxxx, Xxxxx 00000.
Buyer and Seller are sometimes individually referred to as a "Party" or
collectively as the "Parties." This Settlement Agreement sets forth certain
rights and defines certain obligations and duties of the Parties with respect to
the Interests (defined below).
By Assignment, Conveyance and Xxxx of Sale (the "Assignment"), dated
effective as of April 1, 2003, a true and correct copy of which is attached
hereto as Exhibit "A," Seller shall convey and assign to Buyer certain oil and
gas interests and rights (the "Interests"), all as more specifically described
in the Assignment, which Assignment is incorporated into this Agreement by
reference. The effective date for the purposes of this Agreement is April 1,
2003, at 12:01 a.m., CDT, with respect to revenue and lease operating expenses
and as of February 1, 2003, at 12:01 a.m., CDT, with respect to capital
expenditures (the "Effective Date", as applicable).
In consideration of the covenants and promises contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Parties agree as follows:
1. Purchase Price. The purchase price for the Interests is Eight Hundred
Seventy-four Thousand Five Hundred Dollars ($874,500.00) (the "Purchase Price"),
subject to the adjustments to the Purchase Price as set forth in this Agreement.
2. Performance Deposit. On June 3, 2003, Buyer tendered to Seller and
Seller acknowledges receiving a performance deposit of One Hundred Seventy Four
Thousand Eight Hundred Dollars ($174,800.00) (the "Performance Deposit") to
assure Buyer's performance. If Seller and Buyer close the transaction
contemplated by this Agreement, the Performance Deposit will be applied to the
Purchase Price and the amount due from Buyer at Closing will be reduced by the
amount of the Performance Deposit.
In the event that Buyer has not delivered the adjusted Purchase Price, as
provided in this Agreement, for the Interests on or before June 30, 2004, then
in such event (i) Buyer shall immediately forfeit all of its right, title and
interest in and to the Interests and (ii) Seller shall immediately refund to
Buyer, the Performance Deposit, adjusted for accrued negative cash flow, if any,
and less 9.0% interest per annum on the outstanding balance of the Purchase
Price, as adjusted, accrued from April 1, 2003.
3. Interests on Purchase Price. Buyer shall pay Seller interest at the
rate of 9.0% per annum on the Purchase Price accrued from April 1, 2003, to June
3, 2003. The remaining balance of the Purchase Price less the Performance
Deposit plus AFEs for the months of April and May, 2003, Seven Hundred
Twenty-Three Thousand Three Hundred Eighty-Nine Dollars and Eighty-Six Cents
($723,389.86), as adjusted, shall bear interest at the rate of 9.0% per annum
from June 3, 2003, through the Closing Date (defined below).
4. Adjustments to Purchase Price. The Purchase Price shall be adjusted as
provided in this Section 4 and the resulting amount shall be referred to as the
"Adjusted Purchase Price". Seller has delivered to Buyer a closing statement
containing these adjustments to the Purchase Price as of March 31, 2004, using
the best information then available and prepared in accordance with customary
accounting principles used in the oil and gas industry (the "Closing
Statement"), a copy of which is attached to this Agreement as Exhibit "B."
(a) The Purchase Price shall be increased by the following:
(1) an amount equal to the quantity of merchantable oil produced
from the Interests in storage at the Effective Date, and not
sold or disposed of prior to Closing, multiplied by the posted
price for such oil at the Effective Date, net of all taxes and
gravity adjustments and transportation expenses necessary to
market such production;
(2) the amount of all operating and capital expenditures, together
with any lease operating expenses charged under the applicable
operating agreement and general and administrative costs
charged as overhead charges under applicable operating
agreement, that are (i) attributable to the Interests during
the period between the period between the Effective Date, as
applicable, and Closing, and (ii) incurred by Seller;
(3) taxes paid by Seller for assessments based on ownership of the
Interests after the Effective Date, the production of
hydrocarbons therefrom, or the receipt of proceeds
attributable thereto (excluding income taxes) after the
Effective Date;
(4) all accrued interest on the Purchase Price as provided in
Section 3 of this Agreement; and
(5) an amount equal to all prepaid expenses attributable to the
Interests paid by Seller and attributable to the period from
and after the Effective Date, including without limitation
prepaid ad valorem, property, production and other taxes and
payments for insurance coverage accruing to the benefit of
Buyer subsequent to the Effective Date.
(6) the amount of the proceeds attributable to the overriding
royalty interest reserved or to be reserved to Seller in the
Assignment from and after the Effective Date.
(b) The Purchase Price shall be decreased by the following:
(1) the amount of net proceeds or other value received by Seller
for the sale or disposition of oil, gas and condensate,
related hydrocarbons and other minerals produced from the
Interests ("Hydrocarbons"), including net proceeds from the
sale of liquids and other constituents removed in gas plants
or other processing facilities for production occurring after
the Effective Date;
(2) the amount of proceeds or other value received by Seller for
the sale or disposition after the Effective Date of any
portion of the Interests; and
(3) the amount of all unpaid taxes and assessments based on the
ownership of property, the production of Hydrocarbons or the
receipt of proceeds, excluding income taxes, accruing to the
Interests prior to the Effective Date and for the payment of
which Buyer assumes liability subsequent to Closing. If
possible, this adjustment shall be computed using the tax rate
and values for the tax period in question. If this is not
possible, the adjustment shall be based on the taxes assessed
for the immediately preceding tax period. If taxes assessed
for the preceding tax period are determined to be more or less
than the actual taxes, the difference shall be a Post-Closing
Adjustment or Subsequent Adjustment (defined below) under this
Agreement.
5. Closing.
5.1 Closing Date. Subject to the terms of this Agreement, the consummation
of the transactions contemplated by this Agreement ("Closing"), shall occur at
Seller's office listed above on or before June 30, 2004, at 10:00 a.m., CDT, or
at such other place and time as the Parties may agree. The date on which Closing
actually occurs is referred to herein as the "Closing Date".
5.2 Closing Obligations. At Closing, the following shall occur, each being
a condition precedent to the others and each being deemed to have occurred
simultaneously:
(a) Seller shall execute and deliver to Buyer the Assignment conveying
the Interests to Buyer in the form attached to this Agreement as
Exhibit A;
(b) Seller and Buyer shall execute and deliver to each other the Closing
Statement, reflecting the Adjusted Purchase Price as of March 31,
2004, and the adjustments thereto, subject to the Final Settlement
Statement (defined below);
(c) Buyer shall deliver the Adjusted Purchase Price as of March 31, 2004
to Seller by direct bank or wire transfer, as directed by Seller;
and
(d) Seller shall deliver to Buyer possession of the Interests.
5.3 Further Assurances. After Closing, Seller and Buyer agree to execute
and deliver such instruments and take other action as may be necessary or
advisable to carry out their obligations under this Agreement.
6. Post-Closing Adjustments. Seller and Buyer acknowledge that the amount
of all adjustments under Section 4 will not be available prior to Closing and
that the final Adjusted Purchase Price will not be determined as of the Closing
Date. As soon as practicable after Closing, but not later than every thirty (30)
days after the Closing Date and each successive thirty (30) days thereafter,
Seller shall prepare and submit to Buyer a post-Closing statement for each
successive month following Closing containing adjustments contemplated by
Section 4 of this Agreement that were not finally determined as of Closing but
that are determined during the successive thirty (30) day periods noted above.
The Parties shall promptly notify each other of any monthly adjustments each
proposes, which are not in dispute in good faith, and the parties shall
negotiate in good faith to agree on these monthly adjustments within five (5)
business days after the receipt of each successive monthly statement. Payment to
the appropriate party shall be made by wire transfer within seven (7) business
days after the receipt of each monthly statement as to all amounts that are not
disputed in good faith ("Successive Settlement Date").
No later than ninety (90) days after the Closing Date ("Final Settlement
Date"), the Parties shall agree in writing on the final settlement amount, which
incorporates all adjustments to the Purchase Price as provided in Section 4 of
this Agreement from the Effective Date through the Final Settlement Date ("Final
Settlement Statement") and payment to the appropriate Party of any sums owed
shall be made by wire transfer within five (5) business days after the Final
Settlement Date.
7. Covenants.
(a) Seller agrees to indemnify, save, and hold Buyer harmless against
all claims, costs, expenses, and liabilities with respect to
Seller's ownership of the Interests which relate to times between
the Effective Date of April 1, 2003 and the Closing Date.
(b) Buyer agrees to indemnify, save, and hold Seller harmless against
all claims, costs, expenses, and liabilities with respect to Buyer's
ownership of the Interests which relate to times after the Closing
Date.
(c) Seller agrees Buyer shall be entitled to receive all proceeds,
including proceeds from production of Hydrocarbons, attributable to
the Interests after the Effective Date of April 1, 2003, exclusive
of proceeds attributable to Hydrocarbons for the production months
of April 2003 and May 2003.
(d) Buyer agrees Seller shall be entitled to receive all proceeds,
including proceeds from production of Hydrocarbons, attributable to
the Interests before the Effective Date of April 1, 2003 plus
proceeds attributable to Hydrocarbons for the production months of
April 2003 and May 2003.
8. Files and Records. Upon Closing, Seller shall permit Buyer, at Buyer's
expense, to make copies, of all files, records and data in Seller's possession
relating to the Interests.
9. Survival of Agreement. All of the covenants, agreements and indemnities
of or by Seller and Buyer shall survive the Closing unless the same are included
in the Assignment or other documents and instruments to be delivered at Closing.
The use of facsimile transmitted signatures shall be deemed to be original
signatures for all purposes of this Agreement. In addition, the use of multiple
original Agreements (including any facsimile transmitted Agreement) shall
constitute, when read together, one original Agreement for all purposes
hereunder.
Balance of Page Intentionally Left Blank
This Agreement shall be binding on and inure to the benefit of the Parties
and there respective successors and assigns.
Penroc Oil Corporation
By: /s/ M.Y. Merchant
--------------------------------
M. Y. Merchant
Its President
Dune Energy, Inc.
By: /s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
Its Chairman and Chief Executive
Officer
