CONFIDENTIAL TREATMENT
PURCHASE AND SALE AGREEMENT
by and between
Xxxx-Xxxxxxx Oil Company
Xxxx-Xxxxxxx Oil Company
Employee Royalty Trust
Xxxx-Xxxxxxx
1996 Exploration and
Development Facility
Overriding Royalty Trust
Hall Family Trust
Gulf Royalty
Interests, Inc.
("Sellers")
and
Basin Exploration, Inc.
("Buyer")
Xxxxxx Island Blocks 64 and 65 and Xxxx Xxxxxxx Xxxxx 000
Xxxxxxxx Xxxxxxxxx
February 13, 1997
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS...................................... 1
1.1 "Agreement"........................................... 1
1.2 "Assets".............................................. 1
1.3 "Assumed Obligations"................................. 2
1.4 "Closing"............................................. 2
1.5 "Closing Date"........................................ 2
1.6 "Effective Time"...................................... 2
1.7 "Excluded Assets"..................................... 2
1.8 "Exploration Rights".................................. 3
1.9 "First Closing"....................................... 3
1.10 "Hydrocarbons"........................................ 3
1.11 "Interests"........................................... 3
1.12 "Leases".............................................. 3
1.13 "Personal Property and Incidental Rights"............. 3
1.14 "Purchase Price"...................................... 4
1.15 "Reserve Report"...................................... 4
1.16 "Second Closing"...................................... 4
1.17 "Termination Amount".................................. 4
1.18 "Threshold for Adjustment"............................ 4
ARTICLE II PURCHASE AND SALE AND OPTIONS.................... 5
2.1 Sale and Purchase..................................... 5
2.2 Reservations.......................................... 5
2.3 Exploration Rights.................................... 5
2.4 Right of First Offer.................................. 5
2.5 Approval of AFE....................................... 5
ARTICLE III PURCHASE PRICE AND PAYMENT....................... 6
3.1 Purchase Price........................................ 6
3.2 Adjustments to Purchase Price......................... 6
ARTICLE IV SELLERS' REPRESENTATIONS AND WARRANTIES.......... 7
4.1 Sellers' Representations and Warranties............... 7
4.2 HHOC's Representations and Warranties................. 9
4.3 Assurance of Accuracy................................. 11
ARTICLE V BUYER'S REPRESENTATIONS AND WARRANTIES........... 11
-i-
5.1 Buyer's Representations and Warranties................ 11
ARTICLE VI ACCESS TO INFORMATION AND INSPECTION............. 12
6.1 Records............................................... 12
6.2 Confidentiality Agreement............................. 12
6.3 Inspections........................................... 12
ARTICLE VII TITLE AND OTHER ADJUSTMENT MATTERS.......... 13
7.1 Limitation of Warranties and Representations.......... 13
7.2 Buyer's Title Review.................................. 13
(a) Notice........................................... 13
(b) Buyer's Remedies...................................... 13
(c) Arbitration........................................... 14
7.3 Casualty Loss......................................... 15
7.4 Adjustment of Cash Consideration for Other Breaches... 15
7.5 Limitation on Recoveries for Casualty Losses and
Other Breaches........................................ 15
7.6 East Cameron Block 378 Termination.................... 16
ARTICLE VIII PREFERENTIAL PURCHASE RIGHTS AND CONSENTS... 16
8.1 Preferential Purchase Rights and Consents............. 16
8.2 Consents.............................................. 16
8.3 Required Actions...................................... 16
ARTICLE IX COVENANTS OF HHOC........................... 17
9.1 HHOC's Covenants...................................... 17
(a) Maintenance of Interests.............................. 17
(b) Xxxxxx Island Blocks 64 and 65 Operations............. 17
(c) Restrictions.......................................... 17
(d) Notification of Claims........................... 17
(e) Maintenance of Confidentiality........................ 18
(f) Compliance with Law................................... 18
(g) Obligation To Inform.................................. 18
(h) Exclusivity........................................... 18
(i) Operations in Progress................................ 18
ARTICLE X CLOSINGS......................................... 19
10.1 Closings.............................................. 19
10.2 Sellers' Closing Obligations.......................... 19
10.3 Buyer's Closing Obligations........................... 19
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ARTICLE XI EFFECT OF CLOSING................................ 20
11.1 Assumed Obligations; Pre-Closing Liabilities.......... 20
11.2 Revenues and Expenses................................. 20
11.3 HHOC Operated Properties.............................. 20
11.4 AMI................................................... 20
ARTICLE XII LIMITATIONS OF WARRANTIES AND REMEDIES........... 21
12.1 Limitations........................................... 21
12.2 Survival.............................................. 21
ARTICLE XIII DEFAULT AND REMEDIES............................. 21
13.1 Liabilities Upon Termination or Breach................ 21
13.2 Attorneys Fees........................................ 22
ARTICLE XIV INDEMNITY........................................ 22
14.1 Buyer's Indemnification............................... 22
14.2 Xxxxxx Island Block 65 Well No. 2 Indemnification..... 22
14.3 HHOC's Indemnification................................ 22
14.4 Scope and Procedure for Indemnification............... 23
ARTICLE XV TERMINATION...................................... 24
15.1 Termination Pursuant to Section 7.6................... 24
15.2 Expiration of Rights Under Sections 2.3 and 2.4....... 24
15.3 Effect of Termination................................. 24
ARTICLE XVI MISCELLANEOUS.................................... 24
16.1 Certain Governmental Approvals...................... 24
16.2 Record Title in Seller.............................. 24
16.3 Public Announcements................................ 25
16.4 Filing and Recording of Assignments................. 25
16.5 Further Assurances and Records...................... 25
16.6 Notices............................................. 26
16.7 Incidental Expenses................................. 26
16.8 Entire Agreement.................................... 27
16.9 Governing Law....................................... 27
16.10 Exhibits............................................ 27
16.11 Audits.............................................. 27
16.12 Counterparts........................................ 27
16.13 Waiver.............................................. 27
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16.14 Binding Effect; Assignment.......................... 27
16.15 Taxes............................................... 28
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CONFIDENTIAL
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("Agreement") dated as of the
---------
13th day of February, 1997, is made by and among Xxxx-Xxxxxxx Oil
Company, a Texas corporation ("HHOC"), Xxxx-Xxxxxxx Oil Company
Employee Royalty Trust ("HHERT"), Xxxx-Xxxxxxx 1996 Exploration and
-----
Development Facility Overriding Royalty Trust ("HHEDFORT"), Hall
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Family Trust ("Hall Trust"), Gulf Royalty Interests, Inc., a Texas
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corporation ("Gulf Royalty" and HHERT, HHEDFORT, Hall Trust and Gulf
------------
Royalty, collectively, "Sellers") and Basin Exploration, Inc., a
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Delaware corporation, doing business in Louisiana under the name Basin
Exploration, Inc. (Delaware) ("Buyer"). Sellers and Buyer are
-----
sometimes together referred to herein as "Parties," and individually
as a "Party".
W I T N E S S E T H:
A. Sellers own or have the right to acquire oil and gas
leasehold and other interests in Xxxxxx Island Blocks 64, 65 and East
Cameron Block 378 (the "Blocks"), such Blocks being situated in
------
federal waters in the Gulf of Mexico, Offshore of Louisiana, and
described in Exhibit "A" attached hereto.
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X. Xxxxxxx desire to sell portions of their right, title and
interest in the Blocks to Buyer under the terms of this Agreement.
C. HHOC desires to grant, and Buyer desires to acquire options
relating to CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and subject to the terms and
conditions of this Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
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In addition to any terms defined elsewhere in this Agreement, the
following terms, as used herein, shall have the following meanings:
1.1 "Agreement" shall mean this Purchase and Sale Agreement
---------
among HHOC, the other Sellers and Buyer, including the Exhibits
annexed or referred to herein, as the same may be amended,
supplemented, restated or otherwise modified from time to time in
accordance with applicable provisions hereof.
1.2 "Assets" shall mean all of Seller's right, title and
------
interest in and to the following (except to the extent constituting
Excluded Assets):
(a) the Interests; and
(b) the Personal Property and Incidental Rights.
1.3 "Assumed Obligations" shall mean (i) all liabilities, duties
-------------------
and obligations that arise from and after the Effective Time from
ownership or operation of the Assets; (ii) all liabilities and
obligations of HHOC prior to the Effective Time and of Buyer on and
after the Effective Time, with respect to the installation of
platforms or subsea facilities (including, but not limited to,
pipeline pipe and umbilical ordered by HHOC), plugging, replugging and
abandoning any xxxxx, the restoration of any well sites, the proper
removal, disposal and abandonment of any platforms or other fixtures
and the proper capping and burying of all flow lines, which are
included in the Assets; (iii) all duties, liabilities and obligations
arising on or after the Effective Time under any contracts or
agreements affecting the Assets in existence at the Effective Time and
listed on Exhibit "B" attached hereto or to which Buyer is a party,
-----------
(iv) all duties, liabilities and obligations that arise under the
Leases after the Effective Time, and (v) all other duties, liabilities
and obligations expressly assumed by Buyer under this Agreement.
1.4 "Closing" shall mean either the First Closing or the Second
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Closing, as the case may be.
1.5 "Closing Date" shall mean either the date of the First
------------
Closing or the date of the Second Closing, as the case may be.
1.6 "Effective Time" shall mean 12:01 a.m. Central Standard Time
--------------
on February 13, 1997.
1.7 "Excluded Assets" shall mean the following:
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1.7.1 All cash, trade credits, accounts receivable, notes
receivable and other receivables attributable to Sellers' interest in
the Assets with respect to any period of time prior to the Effective
Time, including payments received by any Seller after the Effective
Time and which are attributable to the period prior to the Effective
Time under generally accepted accounting principles.
1.7.2 All corporate, financial and tax records of Sellers;
however, Buyer shall be entitled to receive copies of any financial
and tax records which directly relate to the Assets or any Assumed
Obligations, or which are necessary for Buyer's ownership,
administration or operation of the Assets;
1.7.3 Except as provided in Section 7.3, all claims and causes
of action of any Seller () arising from acts, omissions or events, or
damage to or destruction of property, occurring prior to the Effective
Time, or () with respect to any of the Excluded Assets;
1.7.4 Except as otherwise provided in Section 7.3, all rights,
title, claims and interests of any Seller arising prior to the
Effective Time () under any policy or agreement xx.xxxxxxxxx or
indemnity, () under any bond, or () to any insurance or condemnation
proceeds or awards; and
1.7.5 All Hydrocarbons produced from or attributable to the
Assets with respect to all periods prior to the Effective Time,
together with all proceeds from or of such Hydrocarbons, if any;
2
CONFIDENTIAL
1.8 "Exploration Rights" shall mean the following:
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CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
1.9 "First Closing" shall mean the closing of the purchase and
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sale of the Assets relating to Xxxxxx Island Blocks 64 and 65.
1.10 "Hydrocarbons" shall mean crude oil, natural gas, casinghead
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gas, condensate, sulphur, natural gas liquids and other liquid or
gaseous hydrocarbons (including C02), and shall also refer to all
other minerals of every kind and character which may be covered by or
included in the Leases and Assets.
1.11 "Interests" shall mean the working interests (and the net
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revenue interest attributable thereto) and overriding royalty
interests owned by Sellers or which Seller has the right to acquire in
the Leases in Xxxxxx Island Blocks 64 and 65 and East Cameron Block
378 as described in Exhibit A.
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1.12 "Leases" shall mean the leases described in Exhibit A, as
------ ---------
therein limited by acreage and/or depth.
1.13 "Personal Property and Incidental Rights" shall mean all
---------------------------------------
right, title and interest of Sellers in and to or derived from the
following, insofar as the same do not constitute Excluded Assets and
are assignable and attributable to, appurtenant to, incidental to, or
used for the operation of the Leases:
3
(a) all easements, rights-of-way, permits, licenses,
servitudes or other interests;
(b) all contracts, agreements and title instruments to the
extent attributable to and affecting the Assets in existence at
the Effective Time or otherwise entered into as permitted in this
Agreement, including, but not limited to, all Hydrocarbon sales,
purchase, gathering, transportation, treating, marketing,
exchange, processing and fractionating contracts, farmout
agreements, participation agreements and joint operating
agreements, including, without limitation, the Material
Agreements listed on Exhibit B attached hereto; and
---------
(c) all xxxxx, equipment and other personal property,
inventory, spare parts, tools, fixtures, pipelines, platforms,
tank batteries, appurtenances and improvements situated upon the
Leases and used or held for use in connection with the
development or operation of the Leases or the production,
treatment, storage, compression, processing or transportation of
Hydrocarbons from or in the Leases, including, without
limitation, those xxxxx and facilities listed on Exhibit C
---------
attached hereto;
(d) all of the files, records, and data of Sellers relating
to the items described in subsections (a), (b), and (c) above
(the "Records"), including, without limitation, lease records,
well records, and division order records; well files and prospect
files; title records (including abstracts of title, title
opinions and memoranda, and title curative documents related to
the Leases); contracts and contract files; correspondence;
computer software and data files; micro-fiche data files;
geological, geophysical and seismic records (to the extent
transfer is not prohibited by existing contractual restriction
previously disclosed to Buyer), interpretations, data, maps and
information; production records, electric logs, core data,
pressure data, decline curves and graphical production curves;
reserve reports; and accounting records.
1.14 "Purchase Price" shall have the meaning provided in Section
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3.1.
1.15 "Reserve Report" shall mean the cashflows (including
--------------
projected capital costs) dated as of January 1, 1997 by Xxxxx Xxxxx
Company relating to East Cameron Block 378, a copy of which Seller has
delivered to Buyer prior to the execution of this Agreement.
1.16 "Second Closing" shall mean the date of the closing of the
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purchase and sale of the Assets relating to East Cameron Block 378.
1.17 "Termination Amount" shall mean an aggregate amount of
------------------
adjustments to the Purchase Price allocated to the Assets relating to
East Cameron Block 378 proposed by Buyer pursuant to Section 7.2,
Section 7.3 and Section 7.4 equalling $1,300,000.
1.18 "Threshold for Adjustment" shall mean an aggregate amount of
------------------------
adjustments to the Purchase Price proposed by Buyer pursuant to
Section 7.2(b)(3), Section 7.3 and Section 7.4 equalling $100,000.
4
CONFIDENTIAL
ARTICLE
PURCHASE AND SALE AND OPTIONS
-----------------------------
2.1 Sale and Purchase. Subject to the terms and conditions of
-----------------
this Agreement, and subject to the reservations described in Section
2.2, Sellers agree to sell and convey to Buyer and Buyer agrees to
purchase and pay for the Assets and to assume the Assumed Obligations.
2.2 Reservations. HHOC shall reserve from the assignments of
------------
the Interests an undivided 50% of its working interest and the
remaining Sellers shall reserve all of their overriding royalty
interests in (a) the South Half (S/2) North Half (N/2) South Half
(S/2) and the South Half (S/2) South Half (S/2) East Cameron Block 378
as to those depths below 100' below the stratigraphic equivalent of
3,743 feet true vertical depth as seen in the electric log for the
Anadarko Petroleum Corporation OCS-G 6660 No. 1 well located in East
Cameron Block 378 and (b) the balance of East Cameron Block 378 as to
all depths. The interests reserved by Sellers under this Section
shall be deemed Excluded Assets.
2.3 Exploration Rights. Should Buyer elect to exercise its
------------------
option to acquire any Exploration Rights as provided in Exhibit G,
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HHOC and Buyer shall schedule a closing, to occur no later than 5 days
following the exercise of such option, but subject to extension for up
to an additional 30-day period as may be required to obtain necessary
waivers of (or the expiration of the exercise period with respect to)
preferential purchase rights, releases and consents to assignment and
to negotiate mutually acceptable processing agreements. At such
closing, Seller shall convey to Buyer its proportionate interest in
the applicable Exploration Rights acquired, with special warranty of
title against claims arising by, through or under Seller, and Buyer
will deliver to Seller the amount of the consideration allocated to
the Exploration Rights conveyed as shown on Exhibit G.
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CONFIDENTIAL PORTION APPEARS IN BOLD
2.4 Right of First Offer. After the Second Closing, with
--------------------
respect to the interests to be retained by HHOC in East Cameron Block
378 and, should Buyer exercise its option granted in Section 2.3 as to
Exploration Rights
CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION ,
HHOC agrees that, should HHOC intend to dispose of any such retained
interests, it will advise Buyer in writing, no less than 10 days prior
to contacting any other person or entity regarding such retained
interests, of HHOC's intention to make any such disposition. For a
period of 10 days following any such notice by HHOC to Buyer, Buyer
shall have an exclusive right to offer to acquire the interests which
HHOC proposes to dispose of. HHOC shall be under no obligation to
accept any such offer made by Buyer and, upon expiration of such 10
day exclusivity period, HHOC may negotiate a disposition of the
relevant interests with others, whether on terms less or more
favorable to HHOC than any offered by Buyer, and shall be under no
further obligation to Buyer as to the relevant interests.
2.5 Approval of AFE. As a material part of the consideration to
---------------
Buyer for the transactions contemplated herein and in consideration of
the indemnification by Buyer provided in Section 14.2, HHOC hereby
agrees to approve the drilling of a second well on Xxxxxx Island Block
65 when a proposal for such well is generated by Buyer under the joint
operating agreement covering such Block 65 and agrees to deliver prior
to the First Closing an executed authority for expenditure
5
("AFE") for the drilling of such well (the "Xxxxxx Island Block 65
Well No. 2 AFE"), if such AFE is issued by Buyer prior to such
Closing. If a competing proposal is generated for such well under
such joint operating agreement, HHOC agrees to support Buyer's
proposal.
ARTICLE III
PURCHASE PRICE AND PAYMENT
--------------------------
3.1 Purchase Price. The Purchase Price payable to Sellers for
--------------
the Assets shall be Fourteen Million Four Hundred Twenty Five Thousand
and No/100 ($14,425,000.00) Dollars, subject to adjustment as set
forth below and allocated to the Assets as set forth in Exhibit D
---------
attached hereto.
3.2 Adjustments to Purchase Price. The Purchase Price
-----------------------------
attributable to the Assets to be acquired from HHOC shall be adjusted
by an amount equal to the difference between Buyer's Credits (as
hereinafter defined) and Sellers' Credits (as hereinafter defined).
(a) "Sellers' Credits" shall equal Sellers' share of
----------------
the amount of all direct production and operating expenses
(including overhead paid to third-party operators) and capital
expenditures incurred by Seller attributable to the operation of
the Assets after the Effective Time and prior to the Closing in
accordance with generally accepted accounting principles and
applicable provisions of relevant joint operating agreements.
Such expenses and expenditures shall include, without limitation,
royalties, rentals and other similar charges, ad valorem,
property, production, excise, severance, and any other taxes
(except income or franchise taxes) based upon or measured by the
ownership of property or the production of Hydrocarbons or the
receipt of proceeds therefrom.
(b) "Buyer's Credits" shall equal the sum of the following:
---------------
(1) Sellers' share of the amount of all unpaid ad
valorem, property, production, severance and similar
taxes and assessments (but not including income or
franchise taxes) based upon or measured by the ownership
of property or the production of Hydrocarbons or the
receipt of proceeds therefrom which taxes and assessments
become due and payable or accrue to the Assets prior to
the Effective Time, which amount shall, where possible,
be computed based upon the tax rate and values applicable
to the tax period in question; and
(2) Sellers' unpaid joint interest xxxxxxxx
invoiced or accrued to the Effective Time with respect to
operations on Xxxxxx Island Blocks 64 and 65.
(c) Prior to each Closing, Buyer and HHOC shall agree upon
a good-faith estimated accounting (the "Preliminary Settlement
----------------------
Statement") showing the estimated amount of Sellers' Credits and
---------
the estimated amount of Buyer's Credits, subject to being finally
adjusted within 90 days after the Closing as hereinafter
provided, but subject in any event to audit rights under
applicable agreements. Within 90 days after the Closing, Buyer
and HHOC shall attempt to agree upon an accounting (the "Final
-----
Settlement Statement") of the actual
--------------------
6
amounts of Sellers' Credits and Buyer's Credits for the
adjustment set out in this Section 3.2. If Buyer and HHOC cannot
reach mutual agreement as to either Final Settlement Statement
then the matter shall be resolved by submittal to Xxxxxx Xxxxxxxx
LLP or other comparable independent public accounting firm,
which decision shall be binding on the Parties. Those credits
agreed upon by Buyer and HHOC shall be netted and the final
settlement shall be paid in cash as directed in writing by the
receiving Party.
ARTICLE IV
SELLERS' REPRESENTATIONS AND WARRANTIES
---------------------------------------
4.1 Sellers' Representations and Warranties. Sellers, severally
---------------------------------------
as to each Seller or the Assets owned by such Seller, as the case may
be, and not jointly (except that HHOC makes such representations and
warranties as to itself and all other Sellers), represent and warrant
to Buyer, as of the date hereof and as of each Closing Date, that:
(a) If such Seller is a corporation, it is duly organized,
validly existing, and in good standing under the laws of its
state of incorporation, and is duly qualified to carry on its
business in Louisiana, and in the Outer Continental Shelf, Gulf
of Mexico, or if such Seller is another form of entity, it is
duly formed and validly existing;
(b) Such Seller has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement and the other documents and agreements contemplated
hereby, and to perform its obligations under this Agreement and
the other documents and agreements contemplated hereby. The
consummation of the transactions contemplated by this Agreement
will not violate, nor be in conflict with, any provision of its
governing documents or, other than as provided in any Material
Agreement to which Buyer is a party, any agreement or instrument
to which it is a party or by which it is bound or any judgment,
decree, order, statute, rule or regulation applicable to such
Seller;
(c) The execution, delivery, and performance of this
Agreement and the consummation of the transaction contemplated
hereby have been duly and validly authorized by all requisite
action on the part of such Seller. This Agreement constitutes,
and all documents and instruments required hereunder to be
executed and delivered by such Seller at Closing constitute,
legal, valid and binding obligations of such Seller enforceable
in accordance with their respective terms, subject to applicable
bankruptcy and other similar laws of general application with
respect to creditors;
(d) There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or to the actual
knowledge of Seller threatened against Seller;
(e) Such Seller has Good and Marketable Title to the Assets
owned by it, which for purposes of this Agreement shall mean, for
the Interests in East Cameron Block 378, title deducible of
record in the Cameron Parish clerk's office and from the records
of the Minerals Management Service, and for all of the Interests
title (i) which is free and clear of all
7
(x) operating agreements, farmout agreements, participation
agreements, exploration agreements, unit agreements, production
purchase agreements, marketing agreements, pipeline or other
transportation agreements, processing agreements, and other agreements
material to the ownership, development, operation and marketing of
production except for those described in Exhibit B attached hereto or
---------
to which Buyer is a party), and (y) all defects, claims, liens,
encumbrances and burdens except for those which could not reasonably
be expected to have an adverse effect on the ownership, operation,
value, mortgageability or use of any of the Assets and (ii) which at
and after the Effective Time entitles Buyer to receive not less than
the undivided interests set forth in Exhibit A as "Net Revenue
---------
Interests" or "Overriding Royalty Interests" of all Hydrocarbons
produced, saved and marketed from the respective Leases and all xxxxx
located thereon or on land pooled or unitized therewith at all times
through the plugging, abandonment and salvage thereof, and at and
after the Effective Time obligates Buyer to bear costs and expenses
relating to the development of and operations on the Leases and all
xxxxx located thereon or on land pooled or unitized therewith at all
times through the plugging, abandonment and salvage of such xxxxx not
greater than the "Working Interests" set forth in Exhibit A.
---------
(f) Such Seller has not incurred liability, contingent or
otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Buyer shall
have any responsibility whatsoever.
(g) No suit, action, claim, investigation, or other
proceeding is pending or, to the best of such Seller's knowledge
after due inquiry, threatened before any court or governmental
agency and to the best of such Seller's knowledge after due
inquiry no cause of action exists that relates to the Assets or
that might result in impairment or loss of such Seller's title to
any portion of the Assets or the value thereof or that might
hinder or impede the operation of any of the Assets or xxxxx
thereon or such Seller's ability to consummate the transactions
contemplated by this Agreement.
(h) With respect to those Assets in which Buyer does not
currently own an interest, all consents required to be obtained
by such Seller for the assignment of the relevant Assets to Buyer
have been obtained and are in full force, and, except for those
existing under any Material Agreement to which Buyer is a party,
there are no preferential purchase rights with respect to the
Assets that have not been waived or have not expired.
(i) Such Seller is not aware of any material adverse change
in the Assets which could reasonably be expected to affect their
value, use or operation that is not known to Buyer.
(j) No Seller is obligated, by virtue of any prepayment
arrangement, "take or pay" arrangement, production payment,
crediting agreement, or any other arrangement, to deliver
Hydrocarbons produced from or attributable to the Assets at some
future time without then or thereafter receiving full payment
therefor.
8
(k) Except pursuant to a Material Agreement to which Buyer
is a party, no Hydrocarbons produced from Seller's interest in
the Assets are subject to a sales contract (other than division
orders or spot sales agreements terminable on no more than 30
days notice) and no person has any call upon, option to purchase
or similar rights with respect to the production from Sellers'
interest in the Assets.
4.2 HHOC's Representations and Warranties. HHOC represents and
-------------------------------------
warrants to Buyer, as of the date hereof and the Closing Date, that:
(a) All information heretofore provided by HHOC with
respect to the Assets, including, but not limited to, the
information set forth in the Exhibits hereto, was true and
accurate as of the date of delivery. Without limiting the
foregoing, the factual data on which the Reserve Report was based
has been provided to Buyer and HHOC makes no representation with
respect thereto other than that the projected capital
expenditures included in the Reserve Report represent those
reasonably anticipated by HHOC to be required to place the East
Cameron Block 378 No. 2 Well on production. Seller has no
knowledge of any matter which materially and adversely affects
the operations, prospects or condition of any of the Leases in
which Buyer does not currently own an interest or xxxxx located
thereon which has not been set forth in this Agreement or the
Exhibits attached hereto.
(b) There exist no contracts or agreements material to the
ownership, operation, value, or use of the Assets, including the
marketing, transportation, or processing of production therefrom,
other than those agreements listed in Exhibit B (the "Material
--------- --------
Agreements"). With respect to the Material Agreements in all
----------
respects: (i) neither HHOC nor, to HHOC's knowledge, any other
party thereto is in default thereunder; (ii) all payments
(including, without limitation, joint interest or other xxxxxxxx
under unit or operating agreements) due by HHOC thereunder have
been made by HHOC; and (iii) none of the Material Agreements
creates a material financial commitment or imposes an obligation
or otherwise has a financial impact on HHOC that has not been
reflected in the Reserve Report or disclosed to Buyer.
(c) With respect to those Leases to which Buyer is not
currently a party: the Leases are in full force and effect and
are valid and subsisting; no other party to any Lease is in
material breach or default with respect to any of its obligations
thereunder; and Seller does not know of any present default
existing under any Lease.
(d) With respect to the joint operating agreements relating
to the Assets to which Buyer is not a party: (i) there are no
outstanding calls or payments due by HHOC under AFE's; (ii) HHOC
has informed Buyer of the status of all material operations by
less than all parties known to HHOC; and (iii) there are no
operations under such operating agreements with respect to which
HHOC has become a non-consenting party;
(e) With respect to those xxxxx on the Leases which were
not drilled by Buyer as operator or which Buyer does not
currently operate: Every such well has been drilled and completed
within the Leases or within the limits otherwise permitted by
contract, pooling or
9
unit agreement and by law; the drilling, completing, equipping
and operating of all xxxxx, the construction, installation and
operation of all production facilities, pipelines and other
equipment, and the conduct of all other operations on or
affecting the Leases have been performed in accordance with all
necessary permits and authorizations, in compliance with all
applicable lease and contract provisions and laws, ordinances,
rules, regulations and permits of any court or governmental body
or agency and in accordance with prudent and generally recognized
industry practices and standards; and all such xxxxx have been
drilled, completed, equipped and operated and all related
fixtures and equipment have been maintained in a state of repair
so as to be adequate for normal operations and are in good
working order.
(f) With respect to those Assets not currently operated by
Buyer and as to operations previously conducted or presently
being conducted: All necessary plans for development,
applications, inspection reports, certificates and other
instruments pertaining to environmental matters have been filed
with the appropriate authorities and all permits necessary for
the legal operation of the Assets in full compliance, in all
material respects, with all Environmental Laws (as hereafter
defined) have been obtained; HHOC and the operator of such Assets
are in compliance, in all material respects, with all
Environmental Laws; HHOC has not received nor, to the knowledge
of HHOC, has any other past or present operator of any of such
Assets received, notice of any past, present or future events,
conditions, circumstances, activities, practices, incidents,
actions or plans which are reasonably likely to interfere with or
prevent continued compliance, in all material respects, or which
are reasonably likely to give rise to any material liability
under, any Environmental Laws; the Assets have been used solely
for oil and gas operations and related operations; at no time
have the Assets been used for the generation, storage or disposal
of a Hazardous Substance (as defined below) or as a landfill or
other waste disposal site, and there are no Hazardous Substances
currently on the Leases that would subject Buyer to a material
liability. "Hazardous Substance" means any hazardous substance,
pollutant, contaminant, solid or hazardous waste, hazardous
waster constituents, hazardous material or toxic substance,
including, without limitation, asbestos, radioactive substances,
petroleum or petroleum-derived substances, or any other substance
or material that would constitute or cause a health, safety or
environmental hazard on or at the Assets under Environmental
Laws. "Environmental Laws" shall mean the Clean Air Act, Clean
Water Act, Coastal Zone Management Act, Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA"), Emergency Planning and Community Right-to-Know Act,
Endangered Species Act, Hazardous Materials Transportation Act,
Occupational Safety and Health Act, Oil Pollution Act of 1990,
Resource Conservation and Recovery Act, Safe Drinking Water Act
and Toxic Substances and Control Act; any regulations promulgated
under the foregoing federal statutes; any state law counterparts;
any similar state or local statutes, rules, regulations or
ordinances; any judicial or administrative order or judgment, or
any permit, license or other authorization, under any of the
foregoing; any federal, state or local law or regulation, and
administrative actions thereunder, relating to occupational
health or safety; and common law relating to such matters, as to
all of the foregoing as such are in effect as of the date hereof
or during ownership of the Assets by HHOC.
10
(g) With respect to those Assets in which Buyer does not
currently own an interest, all consents required to be obtained
by HHOC for the assignment of the Assets to Buyer have been
obtained and are in full force, and, except for those existing
under any Material Agreement to which Buyer is a party, there are
no preferential purchase rights with respect to the Assets that
have not been waived or have not expired.
(h) HHOC is unaware of any fact or circumstance which would
preclude or inhibit unconditional approval of Seller's assignment
to Buyer of the Assets relating to Xxxx Xxxxxxx Xxxxx 000 xx xxx
Xxxxxx Xxxxxx Minerals Management Service or any governmental
entity with jurisdiction over same.
4.3 Assurance of Accuracy. Each Seller shall use all reasonable
---------------------
efforts to assure that the warranties and representations made by it
herein with respect to it are true and correct as of each Closing and
will give prompt written notice to Buyer after execution of this
Agreement of any matter which affects any warranty or representation
herein contained or which renders such warranty or representation
untrue.
ARTICLE V
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
5.1 Buyer's Representations and Warranties. Buyer represents
--------------------------------------
and warrants to each Seller that as of the date hereof and the Closing
Date:
(a) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware and is duly qualified to carry on its business in
Louisiana and in the Outer Continental Shelf, Gulf of Mexico;
(b) Buyer has all requisite power and authority to carry on
its business as presently conducted, to enter this Agreement and
the other documents and agreements contemplated hereby, to
purchase the Assets on the terms described in this Agreement, and
to perform the obligations under this Agreement and the other
documents and agreements contemplated hereby;
(c) The consummation of the transactions contemplated by
this Agreement will not violate, nor be in conflict with, any
provision of Buyer's charter, by-laws or governing documents, or
any material agreement or instrument to which Buyer is a party or
by which it is bound, or any judgment, decree, order, statute,
rule or regulation applicable to Buyer, and the execution,
delivery and performance of this Agreement and the transactions
contemplated hereunder have been duly and validly authorized by
all requisite corporate action on the part of Buyer;
(d) This Agreement constitutes, and all documents and
instruments required hereunder to be executed and delivered by
Buyer at Closing will constitute, legal, valid and
11
binding obligations of Buyer in accordance with their respective
terms, subject to bankruptcy and other similar laws of general
application with respect to creditors;
(e) There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or to its actual
knowledge, threatened against Buyer;
(f) Buyer has funds available with which to acquire the
Assets; and
(g) Buyer has no knowledge, as of the relevant Closing
Date, of any adjustments to the Purchase Price pursuant to
Article VII or any breach by any Seller with respect to the
relevant Assets not communicated to Sellers.
Buyer shall use all reasonable efforts to assure that the warranties
and representations herein contained are true and correct as of each
Closing and will give prompt written notice to Seller after the
execution of this Agreement of any matter which affects any warranty
or representation herein contained or which renders such warranty or
representation untrue.
ARTICLE VI
ACCESS TO INFORMATION AND INSPECTION
------------------------------------
6.1 Records. Upon execution of this Agreement, Sellers shall
-------
permit Buyer to review and copy at HHOC's offices, but at Buyer's
expense, all Records. To the extent any of the Records or any files,
records, or data otherwise related to the Assets are not in HHOC's
possession, HHOC shall exercise all reasonable efforts to () obtain
such materials from third-party operators of the Assets or other
parties having custody thereof or () if such materials cannot be
obtained, obtain access for Buyer to the records of third-party
operators or other third parties in the offices of such third-party
operators or other third parties. Buyer shall also have the right to
consult with Seller's officers, employees, attorneys and agents
(including, but not limited to, Sellers' reservoir engineers or
consulting petroleum engineers, if any), third-party operators,
production purchasers or other parties with respect to all Records or
any other matter or information affecting the Assets.
6.2 Confidentiality Agreement. All such information made
-------------------------
available to Buyer shall be maintained confidential by Buyer until the
earlier of Closing as to the Assets which are the subject of such
Closing or termination of this Agreement without there being a
Closing. Any confidentiality agreements Buyer has previously executed
with Seller to the extent applicable to the Assets shall continue in
force until Closing, at which time such agreement shall terminate as
to the Assets which are the subject of such Closing. Buyer shall
further take whatever reasonable steps which may be necessary to
ensure that Buyer's employees, consultants and agents comply with the
provisions of this Section 6.2. Notwithstanding anything to the
contrary, any seismic or geophysical data made available to Buyer
shall be maintained confidential by Buyer in accordance with existing
data license agreements.
6.3 Inspections. At all times prior to the Closing, Buyer and
-----------
the employees, agents and representatives of Buyer shall have access
to the Assets not operated by Buyer and shall have the
12
right to witness well tests thereon and to conduct environmental,
operational and production audits thereof, including the right to
consult with third-party operators or regulatory authority in
connection therewith. To the extent Seller is not the operator of any
such properties, HHOC shall exercise all reasonable efforts to secure
access to such properties for Buyer for such purposes.
ARTICLE VII
TITLE AND OTHER ADJUSTMENT MATTERS
----------------------------------
7.1 Limitation of Warranties and Representations. SELLER SHALL
--------------------------------------------
CONVEY SELLER'S INTERESTS IN AND TO THE ASSETS TO BUYER WITHOUT ANY
WARRANTY OF TITLE, EXPRESS OR IMPLIED, EXCEPT SEPARATELY AS TO TITLE
CLAIMS ARISING BY, THROUGH AND UNDER SELLER (BUT NOT OTHERWISE), AS
PROVIDED IN THE FORMS OF ASSIGNMENT, XXXX OF SALE AND CONVEYANCE OF
LEASES ATTACHED AS EXHIBIT "E" HERETO. EXCEPT AS EXPRESSLY STATED IN
----------
THIS AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE ACCURACY, COMPLETENESS OR MATERIALITY OF
THE INFORMATION, RECORDS AND DATA NOW, HERETOFORE, OR HEREAFTER MADE
AVAILABLE TO BUYER IN CONNECTION WITH THE ASSETS OR THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, QUALITY OR QUANTITY OF HYDROCARBON
RESERVES, IF ANY, RECOMPLETION OPPORTUNITIES, DECLINE RATES, POTENTIAL
FOR PRODUCTION OF HYDROCARBONS FROM THE LEASES, OR ANY OTHER MATTERS
RELATING TO THE VALUATION OR CONDITION OF THE ASSETS.
7.2 Buyer's Title Review.
--------------------
(a) Notice. If any information or records reviewed by Buyer
------
reflect the existence of any encumbrance, encroachment, defect in or
objection to title that renders any Seller's warranties under Section
4.1(e) untrue or incorrect ("Title Defects"), Buyer may deliver
written notice of the Title Defects to HHOC on behalf of the relevant
Seller no later than the Closing Date with respect to the relevant
Assets. If Title Defects shall be so specified, HHOC, on behalf of
the relevant Seller, shall make all reasonable efforts to cure or
remove the Title Defects at the expense of such Seller, and to the
extent they are not cured by the relevant Closing, the value allocated
to such Title Defects by Buyer in its notices shall be withheld from
the Purchase Price payable at such Closing.
(b) Buyer's Remedies. If the Title Defects so notified to any
----------------
Seller are not cured or removed to the reasonable satisfaction of
Buyer within 90 days of Buyer's delivery of notice to such Seller of
such Title Defects or 90 days after the Closing, whichever is later,
Buyer shall elect as follows:
(1) Buyer may elect to grant a further period or periods of
time, not to exceed 90 days after the end of such 90-day
period, within which the relevant Seller shall attempt to
cure or remove such Title Defects. If such Title Defects
are cured within such 90-day period, Buyer shall pay the
amount of the withheld Purchase Price to HHOC for the
account of the relevant Seller within three days of receipt
of evidence
13
of such cure. If such Title Defects are not cured by the
end of such 90-day period, the Purchase Price for the
affected Assets shall be adjusted as provided in Section
7.1(b)(3) below.
(2) In the event the Net Revenue Interest to be conveyed to
Buyer in the affected Lease or well is less than the Net
Revenue Interest for such Lease or well shown on Exhibit A,
---------
or in the event the Working Interest in the affected Lease
or well to be conveyed to Buyer is greater than the Working
Interest for such Lease or well shown on Exhibit A, the
---------
Purchase Price shall be reduced by an amount equal to the
decrease caused by such variance in the Allocated Value for
the affected Lease or well contained in Exhibit D hereto.
---------
Such decrease or increase shall be calculated by multiplying
such Allocated Value by whichever of the following is
applicable: (A) a fraction, the numerator of which is the
actual Net Revenue Interest in the affected Lease or well to
be conveyed to Buyer and the denominator of which is Buyer's
share of the Net Revenue Interest shown for such Lease or
well on Exhibit A, or (B) a fraction, the numerator of which
---------
is Buyer's share of the Working Interest for such Lease or
well as shown on Exhibit A, and the denominator of which is
---------
the actual Working Interest in such Lease or well to be
conveyed to Buyer.
(3) For Title Defects other than the variances described in
subsection (2) above, Buyer shall be entitled to reduce the
Purchase Price to the extent the Title Defect causes a
decrease in the value of the affected Lease or well. For
purposes of this paragraph, the amount of decrease in value
of the affected Lease or well shall be determined by taking
into account the Allocated Value assigned to the Lease or
well on Exhibit D, the method of arriving at such value, the
---------
legal and practical effect of the Title Defect, and the
potential economic effect of the Title Defect over the life
of the property involved. In the event the value of such
decrease cannot mutually be agreed, any affected Party may
submit the question of value or existence of the defect to
arbitration in accordance with Section 7.2(c) below, in
which event the amount of the value allocated to the defect
by Buyer in its defect notices shall be retained by Buyer
pending final resolution of the arbitration proceeding.
Completion of any Closing shall not operate as a waiver by Buyer of
any Title Defects for which the Purchase Price has not been adjusted
or which Buyer has otherwise not specifically waived and Buyer shall
be entitled to enforce the warranties and representations and
indemnifications hereunder to the extent applicable to such Title
Defect. Following each Closing, Sellers shall cooperate with Buyer in
performing title curative work with respect to any of the Assets.
(c) Arbitration. In the event any Seller and Buyer cannot agree
-----------
on the amount of a Title Defect adjustment or on whether a Title
Defect exists, then such issue shall be submitted to binding
arbitration in accordance with the following procedures. No later
than 5 days following the end of the 90-day period following the
relevant Closing, or following the end of any extended 90-day period
granted by Buyer to Seller to cure Title Defects after such Closing,
either affected Party may deliver to the other an election to
arbitrate such dispute. Within 15 days following delivery of such
notice, the Parties will each designate an arbitrator, and the two
arbitrators will, within 10 days after their
14
designation, select a third arbitrator; provided, however, that if the
two arbitrators are not able to agree on a third arbitrator, the third
arbitrator shall be selected as soon as possible by the Chief United
States District Judge for the Southern District of Texas or by any
party designated by him or her. The three arbitrators so selected
shall conduct a hearing in Houston, Texas no later than 30 days
following their selection, at which the relevant Seller or Sellers and
Buyer shall present such evidence and witnesses as they may choose,
with or without counsel. Adherence to formal rules of evidence shall
not be required, but the arbitrators shall consider any evidence and
testimony that they determine to be relevant, in accordance with
procedures that they determine to be appropriate. The arbitrators
shall render their decision within 30 days following conclusion of the
hearing; decision by a majority of the arbitration panel shall be
final and binding. Such decision may be filed in any court of
competent jurisdiction and may be enforced by any party as a final
judgment of such court. In determining the amount of a Title Defect
adjustment or the existence of a contested Title Defect, the
arbitrators shall consider the same factors listed in Section 7.2(b).
The costs and fees of the arbitrators shall be borne equally by Buyer
and the relevant Seller or Sellers, and each party shall bear its own
attorneys' fees and other expenses of the arbitration.
7.3 Casualty Loss. If, prior to the Closing, any portion of the
-------------
Assets shall be destroyed by fire or other casualty, or if any portion
of the Assets shall be taken in condemnation or under the right of
eminent domain or if proceedings for such purposes shall be pending or
threatened, Buyer may elect, subject to the provisions of Section 7.5,
to reduce the Purchase Price for the affected Asset to reflect the
estimated cost to repair or replace with property of equivalent value.
If Buyer does not elect such option, this Agreement shall remain in
full force and effect, notwithstanding any such destruction or taking,
and Seller shall at the relevant Closing or thereafter upon receipt
pay to Buyer all sums paid to the relevant Seller and attributable to
the affected Assets by reason of such destruction or taking and, at
the relevant Closing, shall assign, transfer and set over unto Buyer
all of the right, title and interest of the relevant Seller in and to
any unpaid insurance proceeds, awards or other payments arising out of
such destruction or taking. No Seller shall voluntarily compromise,
settle or adjust any amounts payable by reason of such destruction or
taking without first obtaining the written consent of Buyer.
7.4 Adjustment of Cash Consideration for Other Breaches.
---------------------------------------------------
Subject to the provisions of Section 7.5 and the right of any affected
Seller to submit to arbitration, in the manner set forth in Section
7.2(c), any such reduction proposed by Buyer in the event it is
discovered prior to a Closing that any Seller has breached any of the
representations, warranties or covenants contained in this Agreement
and applicable to the Assets to be conveyed by such Seller at such
Closing, other than the title warranties for which an adjustment
procedure is provided in Section 7.2, and if Buyer does not elect to
terminate its obligations hereunder for such breach as may be
permitted by this Agreement or applicable law, then for each such
breach the Purchase Price shall be adjusted at the relevant Closing to
the extent of such expected loss or cost. Consummation of any Closing
shall not operate as a waiver of any breach by any Seller of a
provision of this Agreement unless the Purchase Price has been
adjusted to account for such breach.
7.5 Limitation on Recoveries for Casualty Losses and Other
------------------------------------------------------
Breaches. Notwithstanding any provision of Section 7.2(b)(3), Section
--------
7.3 or Section 7.4 to the contrary, Buyer shall not be entitled to any
recovery (including, but not limited to, under the indemnification
provided in Section
15
14.3) or reduction of the Purchase Price unless the aggregate amount
of losses and costs asserted by Buyer pursuant to Section 7.2(b)(3),
Section 7.3 or Section 7.4, whether prior to or after any Closing,
equals the Threshold for Adjustment; provided, however, once the
Threshold for Adjustment is reached, Buyer shall be entitled to
recovery or Purchase Price reductions for all such losses and costs,
including those aggregating the Threshold for Adjustment.
7.6 East Cameron Block 378 Termination. Notwithstanding any
----------------------------------
provision of this Agreement to the contrary, should Buyer propose
adjustments to the Purchase Price with respect to the Assets relating
to East Cameron Block 378 and such adjustments equal or exceed, in the
aggregate, the Termination Amount, then either Sellers or Buyer may
terminate this Agreement as to such Assets.
ARTICLE VIII
PREFERENTIAL PURCHASE RIGHTS AND CONSENTS
-----------------------------------------
8.1 Preferential Purchase Rights and Consents. All Material
-----------------------------------------
Agreements containing consent to assignment obligations and
preferential right to purchase provisions that must be complied with
prior to the assignment of the Assets to Buyer and to which Buyer is
not otherwise a party are so identified in Exhibit B hereto (except
---------
such agreements with respect to which all necessary consents to
assignment or waivers of preferential purchase rights have already
been obtained by Sellers). Sellers shall send prior to Closing such
notices and other documents as may be required in order to trigger
preferential purchase rights which have been identified or Sellers
shall obtain prior to Closing a waiver of the exercise of any
preferential purchase rights; provided, however, the Closing shall not
be delayed pending the running of the period during which any such
right may be exercised or as a result of inability to obtain waivers
of such rights and Buyer shall acquire the Assets subject to any such
preferential rights. If a third party who has been offered an
interest in an Asset pursuant to a preferential right to purchase
elects prior to Closing to purchase all or part of such Asset pursuant
to the aforesaid offer and Seller receives written notice of such
election prior to the Closing Date, the interest or part thereof so
affected will be eliminated from the Assets and the Purchase Price
reduced by the portion of the Purchase Price allocated to such
interest or part thereof. Should any such right be exercised
subsequent to the Closing, Buyer shall convey the relevant assets to
the exercising party and shall be entitled to the consideration to be
paid therefor.
8.2 Consents. Seller shall use all reasonable efforts to obtain
--------
all consents to assignment prior to the Closing. If a lessor or other
third party who has the right to consent to the assignment of an Asset
(or portion thereof) or a Material Agreement refuses such consent
prior to Closing, Buyer may elect to eliminate the Block so affected
from the Assets and the Purchase Price shall be reduced by the portion
of the Purchase Price allocated to such Block. Absent such election
by Buyer, the absence of any required consent shall not constitute a
Title Defect or breach of any warranty or representation of the
Sellers and Buyer shall accept the risk associated with its inability
to obtain any such required consent prior to or after the Closing.
8.3 Required Actions. The Parties each agree to use their
----------------
respective reasonable efforts to take or cause to be taken all such
action as may be necessary to consummate and make effective
16
the purchase and sale as set forth by this Agreement and to assure
that each will not be under any material corporate, legal or
contractual restriction that would prohibit or delay the timely
consummation of such purchase and sale.
ARTICLE IX
COVENANTS OF HHOC
-----------------
9.1 HHOC's Covenants. HHOC covenants as follows:
----------------
(a) Maintenance of Interests. Prior to the Closing, HHOC shall
------------------------
cause those Assets not operated by Buyer to be maintained and operated
in a prudent and workmanlike manner, in good condition and working
order, shall maintain insurance now in force with respect to the
Assets, shall timely pay or cause to be paid all costs and expenses
incurred in connection therewith, shall keep the Leases and Material
Agreements in full force and effect and shall perform and shall comply
with the covenants and conditions contained therein; provided,
however, that, except as authorized pursuant to subsection (b) below,
HHOC shall not commence or participate in the commencement of
operations for the drilling of any new well or the redrilling or
completion of an existing well included within the Assets after the
date of this Agreement and prior to the Closing without the prior
written consent of Buyer.
(b) Xxxxxx Island Blocks 64 and 65 Operations. Prior to the
-----------------------------------------
Closing, if Buyer so directs, HHOC will execute AFE's circulated by
Buyer for operations on existing xxxxx, including installation of
production facilities on Xxxxxx Island Blocks 64 and 65, and the
drilling of a second well on Xxxxxx Island Block 65 as contemplated in
the Xxxxxx Island Block 65 Well No. 2 AFE.
(c) Restrictions. HHOC will promptly inform Buyer of all
------------
requests for commitments to expend funds with respect to the Assets.
Without the prior written consent of Buyer, and except as provided in
Section 9.1(b), Seller shall not enter into any new agreements or
commitments with respect to the Assets which extend beyond the
Closing, shall not commit to or incur any expenditures in excess of
$25,000 (net to HHOC's interest) with respect to any part of the
Assets, shall not make any nonconsent elections with respect to
operations affecting the Assets, shall not abandon or consent to the
abandonment of any well or release or consent to the release of all or
any portion of any of the Leases, shall not modify or terminate any of
the Material Agreements or waive or relinquish any right thereunder,
shall not agree to any renegotiated price, take or other terms under
existing gas purchase agreements, shall not agree to any credit or
prepayment arrangement that would reduce the share of gas deliverable
with respect to the Assets following the Effective Time, shall not
enter into any agreement or instrument for the sale, treatment, or
transportation of production from the Assets (except for sales
agreements terminable on no more than 30 days' notice), and shall not
encumber, sell or otherwise dispose of any of the Assets, other than
personal property that is replaced by equivalent property or consumed
in the normal operation of the Assets.
(d) Notification of Claims. HHOC shall promptly notify Buyer of
----------------------
any suit, action or other proceeding before any court or governmental
agency and any cause of action that relates to the Interests or that
might result in impairment or loss of any Seller's title to any
portion of the Assets
17
or the value thereof or that might hinder or impede the operation of
the Leases arising or threatened prior to the Closing.
(e) Maintenance of Confidentiality. HHOC shall exercise all due
------------------------------
diligence in safeguarding and maintaining secure all engineering,
geological and geophysical data, reports and maps, and all other
confidential data in the possession of HHOC relating to the Assets.
(f) Compliance with Law. HHOC will comply, and will use its
-------------------
reasonable efforts to cause all third-party operators of the Leases to
comply, with all laws, rules, regulations, permits, ordinances and
orders of all local, state and federal governmental bodies,
authorities and agencies having jurisdiction over the Assets at all
times until the Closing.
(g) Obligation To Inform. HHOC shall keep Buyer currently and
--------------------
completely informed as to all material developments affecting or
potentially affecting the Assets not operated by Buyer. Without
limiting the foregoing, if at or prior to the Closing HHOC becomes
aware of any material change or inaccuracy in any information
furnished to Buyer by or on behalf of any Seller or any material
adverse change in the operation or condition of any of the Assets not
operated by Buyer, HHOC shall promptly notify Buyer of such change or
inaccuracy.
(h) Exclusivity. Until the Closing or the earlier termination
-----------
of this Agreement, neither HHOC nor any other Seller will (1) solicit,
discuss, or otherwise entertain, directly or indirectly, any offer to
acquire any of the Assets, (2) provide information to others
concerning the Assets (except in the ordinary course of operation of
the Assets) or (3) enter into any negotiations with, or enter into any
agreement that provides for acquisition of the Assets or any portion
thereof by, a person other than Buyer.
(i) Operations in Progress. Exhibit F is a complete and correct
---------------------- ---------
list and description of all operations on the Leases, other than those
conducted by Buyer, as to which it is anticipated that on and after
the date of this Agreement HHOC will be participating, including, but
not limited to, drilling, completion, installation of production or
pipeline facilities (the "Operations in Progress"). Seller shall
notify Buyer of any such activities prior to the implementation
thereof and shall consult with Buyer regarding all such matters and
operations. HHOC shall not make any election with respect thereto
under any operating agreement or other agreement or abandon or permit
the abandonment of any Operations in Progress without the prior
written consent of Buyer. HHOC shall promptly notify Buyer in writing
if the costs and expenses relating to any Operation in Progress are
likely to exceed the AFE estimates by more than fifteen percent (15%)
as to the costs incurred by HHOC under each AFE estimate. Buyer shall
not be liable for any costs or expenses in excess of such fifteen
(15%) margin, unless HHOC notifies Buyer as provided herein and Buyer
expressly approves in writing the continuation of the operation giving
rise to such excess expense or unless the excess expense cannot
reasonably be avoided by reason of legal obligations or prudent
operating practices, including, but not limited to, the necessity of
plugging and abandoning a well in compliance with regulatory or
contractual requirements.
18
ARTICLE X
CLOSINGS
--------
10.1 Closings. The closings of the transactions contemplated by
--------
this Agreement shall be held beginning at 10:00 a.m. Local Time at the
offices of HHOC, 000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, as
follows: on February 14, 1997 as to the Assets relating to Xxxxxx
Island Blocks 64 and 65 and on February 20, 1997 as to the Assets
relating to East Cameron Block 378. All events of each Closing shall
each be deemed to have occurred simultaneously with the other,
regardless of when actually occurring, and each shall be a condition
precedent to the other; provided, however, HHOC's delivery of the
executed Xxxxxx Island Block 65 Well No. 2 AFE shall be a condition to
the occurrence of the First Closing.
10.2 Sellers' Closing Obligations. At each Closing, except to
----------------------------
the extent comprising the Excluded Assets, Sellers shall deliver to
Buyer the following:
(a) Duly executed and acknowledged assignments
substantially in the form attached hereto as Exhibit "E," and
----------
such other documents as may be reasonably necessary in the
opinion of counsel for Buyer to convey Sellers' interest in the
Assets to Buyer in accordance with the provisions hereof;
(b) Possession of the relevant Assets, including copies of
the relevant Records;
(c) A non-foreign person affidavit executed by each Seller
pursuant to Section 1445 of the Internal Revenue Code;
(d) An opinion of Xxxx X. Xxxxx, Esq., General Counsel of
HHOC, counsel to Seller, in form reasonably satisfactory to
Buyer, with respect to the matters stated in Sections 4.1(a),
(b), (c) and (g), but as to HHOC only and only as to the First
Closing; and
(e) The Preliminary Settlement Statement.
10.3 Buyer's Closing Obligations. At each Closing, Buyer shall
---------------------------
deliver to HHOC (for its account and the account of all other Sellers,
such other Sellers hereby expressly consenting to such disbursement of
the Purchase Price by Buyer):
(a) The Purchase Price, adjusted pursuant to the provisions
hereof, by wire transfer of immediately available funds;
(b) The Preliminary Settlement Statement; and
(c) An opinion of Xxxxxx X. Xxxxxx, Esq., General Counsel
to Buyer, in form reasonably satisfactory to Sellers, with
respect to the matters stated in Sections 5.1(a), (b), (c) and
(d).
19
ARTICLE XI
EFFECT OF CLOSING
-----------------
11.1 Assumed Obligations; Pre-Closing Liabilities. Subject to
--------------------------------------------
the provisions of Section 16.1, upon and after Closing, Buyer shall
own the Assets, together with all the rights, duties, obligations and
liabilities accruing after Closing, and Buyer shall be obligated to
assume and pay, perform, fulfill and discharge all Assumed
Obligations. To the extent not included in Assumed Obligations or in
those matters for which Seller is indemnified by Buyer hereunder,
Seller agrees to pay, perform, fulfill and discharge all costs,
expenses and liabilities attributable to the ownership or operation of
the Assets and accruing prior to the Effective Time.
11.2 Revenues and Expenses.
---------------------
(a) To the extent not accounted for in Buyer's and Seller's
Credits and adjustments under Section 3.2 hereto, all proceeds,
accounts receivable, income, revenues and other items included in or
attributable to the Excluded Assets (as described in Section 1.7) and
the Assets prior to the Effective Time shall belong to and be retained
or paid to Sellers, and all other proceeds, accounts receivable,
income, revenues and other items included on or attributable to the
Assets after the Effective Time shall belong to and be paid over to
Buyer.
(b) Post-Closing Obligations. If any funds are received by a
------------------------
Party which belong to any other Party, the Party receiving such funds
shall immediately pay the funds over to such other Party entitled
thereto. If an invoice or other obligation to be discharged is under
the terms of this Agreement partially the obligation of any Seller and
partially the obligation of Buyer, the Party receiving such invoice or
request to discharge the obligation shall promptly notify the other
Party which shall promptly pay over its share thereof after receipt of
such notice.
11.3 HHOC Operated Properties. After Closing and until a
------------------------
successor operator has been approved by the Minerals Management
Service, HHOC shall continue to operate those Assets which it is
currently operating. Such continued operations by HHOC shall be for
the account of Buyer and other owners of the relevant Assets and shall
be conducted in accordance with the covenants in Article IX of this
Agreement, subject, however, to provisions of applicable joint
operating agreements. In connection with any such continued operation
of the Assets by HHOC, HHOC shall be reimbursed by Buyer for all costs
and expenses incurred by HHOC with respect thereto, including a charge
for overhead, in the same manner as provided in the applicable joint
operating agreement. All costs and expenses incurred by HHOC in
conjunction with such continued operation of the Assets shall be
considered and handled as "Sellers' Credits" pursuant to Section
3.2(a) to the extent such credits offset same. To the extent Sellers'
Credits are not sufficient to offset the costs and expenses incurred,
Buyer shall remain responsible therefor.
11.4 AMI. Should HHOC (or any affiliate of HHOC), within 18
---
months of the date hereof, acquire any interest within Xxxxxx Island
Block 64 or 65, Buyer shall be entitled to acquire 75% of the interest
so acquired by HHOC (or an affiliate of HHOC) in exchange for its
payment of 75% of the out-of-pocket cost of acquisition.
20
ARTICLE XII
LIMITATIONS OF WARRANTIES AND REMEDIES
--------------------------------------
12.1 Limitations. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF
-----------
SELLERS CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF
ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE
RESERVES, IF ANY, OF HYDROCARBONS IN OR UNDER THE LEASES, OR THE
ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL
PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES,AND APPURTENANCES CONVEYED
AS PART OF THE ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS" AND "WITH
ALL FAULTS" AND NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION, ARE
GIVEN BY OR ON BEHALF OF SELLER, EXCEPT THOSE EXPRESSLY STATED HEREIN.
12.2 Survival. Except as otherwise provided therein, all
--------
representations, warranties, covenants, indemnities and agreements
made herein shall survive the Closings and remain in effect for a
period of one year following the Second Closing or the date on which
it was to occur; provided, however, Article XI, Section 13.2, Section
14.1, Section 14.2, Section 14.3(i), Section 14.4 and Article XVI
shall survive indefinitely, as shall the representations and
warranties of the Sellers provided in Sections 4.1(a), (b) and (c) and
those of Buyer provided in Sections 5.1(a), (b), (c) and (d).
ARTICLE XIII
DEFAULT AND REMEDIES
--------------------
13.1 Liabilities Upon Termination or Breach. In addition to the
--------------------------------------
remedies provided under applicable law, each Party shall have the
right to recover damages for the breach by the other Party or Parties
of any warranty, covenant or agreement contained herein or for the
failure of a representation of the other Party or Parties contained in
this Agreement to be true. In the event any Party wrongfully fails to
consummate a Closing, the other Party or Parties shall have the
following remedies in addition to any remedies provided under
applicable law: If Buyer is the Party wrongfully failing to close,
Sellers shall have the right to terminate Buyer's right to acquire any
Assets not yet acquired by Buyer hereunder and the options provided
for in Section 2.3 and Section 2.4 and Sellers shall have the right to
recover all damages suffered by Sellers as a result of such failure
and, if such failure occurs with respect to Xxxxxx Island Blocks 64
and 65, Sellers shall in addition have the right to recover any
amounts expended with respect to all AFEs approved as required under
Section 2.5 or Section 9.1(b). If Sellers wrongfully fail to close,
Sellers acknowledge that the remedies provided at law would be
inadequate and that, as a result, Buyer shall be entitled to, and
Sellers shall not object to, the remedy of specific performance to
compel such performance.
21
13.2 Attorneys Fees. The prevailing Party in any legal
--------------
proceeding brought under or to enforce this Agreement shall be
additionally entitled to recover court costs and reasonable attorney's
fees from the non-prevailing Party.
ARTICLE XIV
INDEMNITY
---------
14.1 Buyer's Indemnification. After the Closing, Buyer agrees to
-----------------------
indemnify, defend and hold Sellers and their respective directors,
officers, shareholders, employees, trustees, partners, agents and
attorneys (collectively, the "Seller Indemnified Parties") harmless
from and against any and all Losses (as defined below) with respect to
any liabilities and obligations, or alleged or threatened liabilities
or obligations, including, but not limited to, claims for personal
injury, illness, disease, wrongful death, damages to property,
liability based on strict liability or condition of the Assets, and
fines, penalties and other regulatory sanctions relating to or arising
out of () Buyer's ownership or operation of the Assets for the period
from and after the Effective Time; () the Assumed Obligations; and ()
the failure of any representation of Buyer in this Agreement to be
true or the breach of any warranty, covenant or agreement of Buyer in
this Agreement BUT EXCLUDING from Buyer's indemnity obligation
hereunder any Loss resulting from or attributable to the negligence or
willful misconduct of any Seller Indemnified Party, its officers,
employees or agents with respect to the operation and maintenance of
the Assets prior to the Effective Time or the failure of any
representation of any Seller in this Agreement to be true or the
breach of any warranty, covenant or agreement of any Seller in this
Agreement.
14.2 Xxxxxx Island Block 65 Well No. 2 Indemnification. Further
-------------------------------------------------
to the provisions of Section 14.1, Buyer agrees to indemnify, defend
and hold the Seller Indemnified Parties harmless from and against (a)
any amounts expended by any Seller with respect to the Xxxxxx Island
Block 65 Well No. 2 AFE should Buyer wrongfully fail or refuse to
close hereunder with respect to the Assets relating to Xxxxxx Island
Blocks 64 and 65 and (b) regardless of whether the First Closing
occurs, any and all Losses with respect to claims of other owners of
the Leases covering Xxxxxx Island Blocks 64 and 65 based on approval
by HHOC of the proposal with respect to the Xxxxxx Island Block 65
Well No. 2 or the Xxxxxx Island Block 65 Well No. 2 AFE or any other
AFE approved by HHOC as required pursuant to Section 9.1(b).
14.3 HHOC's Indemnification. After the Closing, HHOC agrees to
----------------------
indemnify, defend and hold Buyer and its directors, officers,
shareholders, employees, agents and attorneys (collectively, the
"Buyer Indemnified Parties") harmless from and against any and all
Losses with respect to all liabilities and obligations or alleged or
threatened liabilities and obligations, including, but not limited to,
claims for personal injury, illness, disease, wrongful death, damage
to property, liability based on strict liability or condition of the
Assets, and fines, penalties and other regulatory sanctions resulting
from or arising out of (i) ownership or operation of the Assets prior
to the Effective Time; and (ii) the failure of any representation of
Seller in this Agreement to be true or the breach of any warranty or
covenant or agreement of Seller in this Agreement BUT EXCLUDING from
HHOC's indemnity obligation hereunder any Loss resulting from or
attributable to the negligence or willful misconduct of any Buyer
Indemnified Party with respect to the operation and maintenance of the
Assets after the
22
Effective Time or the failure of any representation of Buyer in this
Agreement to be true or the breach of any warranty, covenant or
agreement of Buyer in this Agreement.
14.4 Scope and Procedure for Indemnification.
---------------------------------------
(a) The indemnity provided for by each of Sections 14.1 and 14.2
shall extend to any loss, cost, expense, liability or damage ("Loss")
incurred or suffered by the Seller Indemnified Party or Buyer
Indemnified Party, as the case may be, including reasonable fees and
expenses of attorneys, technical experts and expert witnesses
reasonably incident to matters indemnified against. The amount of
each payment claimed by a Seller Indemnified Party or Buyer
Indemnified Party, as the case may be, to be owing as described in
each of such Sections, together with a list identifying, to the extent
reasonably possible, each separate item of Loss for which payment is
so claimed, shall be set forth by such claiming party in a statement
delivered to the indemnifying Party setting forth the basis of such
claim and shall be paid by such indemnifying Party as and to the
extent required herein within thirty (30) days after receipt of such
statement. Within sixty (60) days after notification to a Seller
Indemnified Party or Buyer Indemnified Party, as the case may be, with
respect to any claim or legal action or other matter that could result
in a Loss for which indemnification may be sought under this Article
XIV, but in any event in time sufficient for the indemnifying Party to
contest any action, claim or proceeding that has become the subject of
proceedings before any court or tribunal, such Seller Indemnified
Party or Buyer Indemnified Party, as the case may be, shall give
written notice of such claim, legal action or other matter to the
indemnifying Party and, at the request of such indemnifying Party,
shall furnish the indemnifying Party or its counsel with copies of all
pleadings and other information with respect to such claim, legal
action or other matter and shall, at the election of the indemnifying
Party made within sixty (60) days after receipt of such notice, permit
the indemnifying Party to assume control of such claim, legal action
or other matter (to the extent only that such claim, legal action or
other matter relates to a Loss for which the indemnifying Party is
liable), including the determination of all appropriate actions, the
negotiation of settlements on behalf of the Seller Indemnified Party
or Buyer Indemnified Party, as the case may be, and the conduct of
litigation through attorneys of the indemnifying Party's choice. In
the event of such an election by the indemnifying Party, (i) any
expense incurred by the Seller Indemnified Party or Buyer Indemnified
Party, as the case may be thereafter for investigation or defense of
the matter shall be borne by the Seller Indemnified Party or Buyer
Indemnified Party, as the case may be, and (ii) the Seller Indemnified
Party or Buyer Indemnified Party, as the case may be, shall give all
reasonable information and assistance, other than pecuniary, that the
indemnifying Party shall deem reasonably necessary to the proper
defense of such claim, legal action, or other matter, subject to
reimbursement for its out-of-pocket expenses incurred in rendering
such assistance.
(b) In the absence of such an election, the Seller Indemnified
Party or Buyer Indemnified Party, as the case may be, will use its
best efforts to defend any claim, legal action or other matter to
which such indemnifying Party's indemnification under this Article XIV
applies. Failure to provide timely notice pursuant to this Section
14.3 shall not deprive the party seeking indemnification of its right
to indemnification pursuant to this Article XIV, although such party
shall be liable for any damages occasioned by its delay in affording
the party entitled to notice with such notice and shall not be
entitled to indemnification for any costs incurred during the period
of such delay that could reasonably have been avoided by the
indemnifying Party if timely notice had been given.
23
(c) In the event Buyer makes a claim for indemnification for
breach of any Environmental Laws, upon Buyer's request HHOC shall,
without limitation of Buyer's remedies hereunder, assign to Buyer any
right of HHOC for indemnification for such matter from HHOC's
predecessors in title.
ARTICLE XV
TERMINATION
-----------
15.1 Termination Pursuant to Section 7.6. Should Buyer or
-----------------------------------
Sellers elect, pursuant to the provisions of Section 7.6, to terminate
this Agreement as to the Assets relating to East Cameron Block 378,
then, as part of such termination, the then unexercised rights of
Buyer under Sections 2.3 and 2.4 shall terminate also.
15.2 Expiration of Rights Under Sections 2.3 and 2.4. Rights of
-----------------------------------------------
Buyer under Sections 2.3 and 2.4 unexercised as of December 31, 1997,
shall expire on such date; provided, however, that if HHOC has not yet
offered Buyer a right with respect to the Exploration Rights
associated with a particular offshore block, but has acquired certain
(although less than all required) rights with respect to such block,
HHOC shall then be obligated to offer to Buyer the right to acquire a
portion of such rights acquired by HHOC as provided in Section 2.3,
but paying therefor the consideration set forth in Exhibit G as to
---------
such block.
15.3 Effect of Termination. Any termination of this Agreement,
---------------------
whether in whole or in part, shall not impact any previous performance
of portions of this Agreement or impair any rights or obligations
accrued or vested prior to such termination. Furthermore, all
indemnifications provided in this Agreement shall survive any such
termination of this Agreement and the Closings.
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 Certain Governmental Approvals. Buyer agrees that promptly
------------------------------
after Closing it shall actively pursue unconditional approval by the
Minerals Management Service of the assignment of the Assets, and
operatorship of those Assets HHOC is currently operating. Buyer
obligates itself to take any and all action required by the Minerals
Management Service or any other regulatory agency in order to obtain
such unconditional approval, including, but not limited to, posting
any and all bonds or other securities which may be required of it or
its Operating Agent, in excess of such parties' existing lease,
pipeline or area-wide bond.
16.2 Record Title in Seller. Until the governmental approvals
----------------------
provided for in Section 16.1 are obtained, however, HHOC shall
continue to hold record title to the Assets as nominee for Buyer,
during which time (i) subject to Article XIV, Buyer shall indemnify
and hold HHOC harmless from any and all claims, expenses of any kind
or character relating to such Assets accruing after Closing and (ii)
HHOC shall act as Buyer's nominee but shall be authorized to act only
upon and in accordance with Buyer's specific written instructions and
HHOC shall have no authority, responsibility or discretion to perform
any tasks or functions with respect to the Assets other than
24
those which are purely administrative or ministerial in nature, unless
otherwise specifically requested and authorized by Buyer in writing.
16.3 Public Announcements. Prior to making any public
--------------------
announcement or statement with respect to the transactions
contemplated by this Agreement, the Party desiring to make such public
announcement or statement shall consult with the other Parties and
exercise its best efforts to (i) agree upon the text of a joint public
announcement or statement to be made by all of such Parties or (ii)
obtain approval of the other Party or Parties to the text of a public
announcement or statement to be made solely by Sellers or Buyer, as
the case may be, such approval not to be unreasonably withheld.
Nothing contained in this paragraph shall be construed to require any
Party to obtain approval of the other Party or Parties to disclose
information with respect to the transactions contemplated by this
Agreement to any state or federal governmental authority or agency to
the extent required by applicable law or by any applicable rules,
regulations or orders of any governmental authority or agency having
jurisdiction or necessary to comply with disclosure requirements of
any stock exchange and applicable securities laws.
16.4 Filing and Recording of Assignments. Buyer shall be solely
-----------------------------------
responsible for all filings and recording of assignments and other
documents related to the Assets and for all fees connected therewith,
except as otherwise provided in this Agreement. Buyer shall furnish
Sellers with copies of all filings made by it pursuant to this
Agreement and of the pertinent recording data pertaining to same.
Sellers shall not be responsible for any loss to Buyer because of
Buyer's failure to file or record documents correctly or promptly.
Buyer shall promptly file all appropriate forms or declarations with
the Minerals Management Service relative to this Agreement and its
assumption of the Leases and operation to the extent provided
hereunder, and Sellers shall cooperate with Buyer in connection with
such filings.
16.5 Further Assurances and Records.
------------------------------
(a) Each of the Parties will execute, acknowledge and deliver to
the other Party or Parties such further instruments and take such
other action as may be reasonably requested in order to more
effectively assure to such Party all of the respective properties,
rights, titles, interests, estates and privileges intended to be
assigned, delivered or inuring to the benefit of such Party in
consummation of the transactions contemplated hereby.
(b) Buyer agrees to maintain the files and records of Sellers
that are acquired pursuant to this Agreement for seven (7) years after
Closing. Buyer shall provide Sellers and their representatives
reasonable access to and the right to copy such files and records for
the purposes of (i) preparing and delivering any accounting provided
for under this Agreement and adjusting, prorating and settling the
charges and credits provided for in this Agreement, (ii) complying
with any law, rule or regulation affecting Sellers' interest in the
relevant Assets prior to the relevant Closing Date, (iii) preparing
any audit of the books and records of any third party relating to
Sellers' interest in the relevant Assets prior to the relevant Closing
Date, or responding to any audit prepared by such third parties, (iv)
preparing tax returns, (v) responding to or disputing any tax audit or
(vi) asserting, defending or otherwise dealing with any claim or
dispute under this Agreement.
25
(c) Buyer agrees that, as soon as practicable after each
Closing, it will remove or cause to be removed the names and marks
used by Seller and all variations and derivatives thereof and logos
relating thereto from the relevant Assets and will not thereafter make
any use whatsoever of such names, marks and logos.
(d) To the extent not obtained or satisfied as of the relevant
Closing, Sellers agree to continue to use all reasonable efforts,but
without any obligation to incur any cost or expense in connection
therewith, and to cooperate with Buyer's efforts to obtain for Buyer
access to files, records and data relating to the relevant Assets in
the possession of either Sellers or third parties. In the event Buyer
shall obtain such files, records and data for the account of Sellers
or in the name of Sellers, Sellers shall maintain files, records, and
data pursuant to Section 16.6(b) of this Agreement.
16.6 Notices. Except as otherwise expressly provided herein, all
-------
communications required or permitted under this Agreement shall be in
writing and any communication or delivery hereunder shall be deemed to
have been duly given and received when actually delivered to the
address set forth below of the party to be notified, addressed as
follows, or when a legible facsimile copy is received by the party's
facsimile equipment at the number shown below (and the Sellers other
than HHOC expressly agree that notice given or received by HHOC in
such manner shall be binding on them):
If to any of Sellers:
Xxxx-Xxxxxxx Oil Company
Attn: Xxxx X. Xxxxx
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Buyer:
Basin Exploration, Inc.
Attn: Xxx X. Xxxxxxxx
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Provided, however, that any notice required or permitted under this
Agreement will be effective if given verbally within the time
provided, so long as such verbal notice is followed by written notice
thereof in the manner provided herein within twenty-four (24) hours
following the end of such time period. Any party may, by written
notice so delivered to the other, change the address or facsimile
number to which delivery shall thereafter be made.
16.7 Incidental Expenses. Buyer shall bear and pay (i) all state
-------------------
or local government sales, transfer, gross proceeds or similar taxes
incident to or caused by the transfer of any Assets to Buyer,
26
(ii) all documentary, transfer and other state and local government
taxes incident to the transfer of any Assets to Buyer, (iii) all
filing, recording or registration fees for any assignment or
conveyance delivered hereunder, and (v) all normal costs or fees
required to obtain consent to assign any Assets. Each party shall
bear its own respective expenses incurred in connection with each
Closing, including its own consultants' fees, attorneys' fees,
accountants' fees, and other similar costs and expenses.
16.8 Entire Agreement. This Agreement (including all Exhibits to
----------------
this Agreement) embodies the entire agreement among the parties
(superseding all prior agreements, arrangements and understandings
related to the subject matter hereof), and may be supplemented,
altered, amended, modified or revoked by writing only, signed by the
parties hereto. The headings herein are for convenience only and
shall have no significance in the interpretation hereof.
16.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
16.10 Exhibits. All Exhibits hereto, and the terms thereof,
--------
which are referred to herein are hereby made a part hereof and
incorporated herein by reference.
16.11 Audits. Buyer shall have the right, during reasonable
------
business hours, to audit all records of Sellers pertaining to the
Assets for the period from the relevant Closing in which such Assets
were conveyed until two (2) years from the end of the calendar year in
which such Closing occurs.
16.12 Counterparts. This Agreement may be executed in any
------------
number of counterparts, and each and every counterpart shall be deemed
for all purposes one agreement.
16.13 Waiver. Any of the terms, provisions, covenants,
------
representations, warranties or conditions hereof may be waived only by
a written instrument executed by the Party waiving compliance. Except
as otherwise expressly provided in this Agreement, the failure of any
Party at any time or times to require performance of any provision
hereof shall in no manner affect such Party's right to enforce the
same. No waiver by any Party of any condition, or of the breach of
any term, provision, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or waiver of any
other term, provision, covenant, representation or warranty.
16.14 Binding Effect; Assignment. It is understood and agreed
--------------------------
that Buyer may designate or make any party other than Buyer the
operator of the Assets acquired by Buyer with the Minerals Management
Service without the consent of Sellers. All the terms, provisions,
covenants, obligations, indemnities, representations, warranties and
conditions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the Parties hereto and their
respective successors and assigns.
27
16.15 Taxes. Seller and Buyer agree that this transaction may
-----
be subject to the reporting requirement of Section 1060 of the
Internal Revenue Code of 1986, as amended, and that, therefore, IRS
Form 8594, Asset Acquisition Statement, may be required to be filed
for this transaction. In the event the parties mutually agree that a
filing of Form 8594 is required, the parties will confer and cooperate
in the preparation and filing of their respective forms to reflect a
consistent reporting of the agreed-upon allocation. Seller shall be
responsible for and shall pay all taxes attributable to or arising
from the ownership or operation of the Assets prior to the Effective
Time. Buyer shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the
Assets after the Effective Time.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
28
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above
written.
SELLERS:
Xxxx-Xxxxxxx Oil Company
By:________________________________
Xxxxx X. Xxxx
President
Xxxx-Xxxxxxx Oil Company Employee
Royalty Trust
By:________________________________
Xxxx X. Xxxx
Trustee
By:________________________________
Xxxxx X. Xxxx
Trustee
Xxxx-Xxxxxxx 1996 Exploration and
Development Facility Overriding
Royalty Trust
By:________________________________
Xxxx X. Xxxx
Trustee
By:________________________________
Xxxxx X. Xxxx
Trustee
Hall Family Trust
By:________________________________
Xxxx X. Xxxx
Trustee
Gulf Royalty Interests, Inc.
By:________________________________
Xxxx X. Xxxx
President
BUYER:
Basin Exploration, Inc., a Delaware
corporation, doing business in
Louisiana as Basin Exploration,
Inc. (Delaware)
By:________________________________
Xxx X. Xxxxxxxx
Vice President of
Corporate Development
EXHIBITS
EXHIBIT A: LEASES AND INTERESTS
EXHIBIT B: MATERIAL AGREEMENTS
EXHIBIT C: INVENTORY OF XXXXX, FACILITIES AND EQUIPMENT
EXHIBIT D: ALLOCATED VALUES
EXHIBIT E: FORMS OF ASSIGNMENT
EXHIBIT F: EXISTING OPERATIONS
EXHIBIT G: EXPLORATION RIGHTS AND CONSIDERATION THEREFOR
