1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
DATED AS OF MAY 7, 1997
BY AND BETWEEN
XXXXXX ENERGY, INC.,
SOUTH CENTRAL PETROLEUM, INC.,
ENERCO EXPLORATION AND MANAGEMENT CO.,
XXXXX XXXXXXXX,
XXXXXXX X. XXXXXXXX,
XXXXX X. XXXXX,
XXXXX X. XXXXX, TRUSTEE OF THE XXXXX X. XXXXX TRUST,
XXXXXXX XXXXXXX XXXXX,
XXXXX X. XXXXXX,
XXXX XXXXXXX XXXXX XXXXXX,
XXXXXX X. XXXXXX, AND
XXXXXX XXXXXX XXXX,
AS SELLERS,
AND
CRYSTAL GAS, L.L.C.
AS BUYER
2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS ................................... 1
Section 1.1 Certain Defined Terms ................................. 1
Section 1.2 References, Gender, Number ............................ 1
ARTICLE II SALE AND PURCHASE ..................................... 2
ARTICLE III CONSIDERATION AND PAYMENT ............................. 2
Section 3.1 Consideration ......................................... 2
Section 3.2 Payment ............................................... 2
Section 3.3 Adjustment Period Cash Flow ........................... 2
Section 3.4 Post Closing Review ................................... 3
Section 3.5 Gas Imbalance Credits ................................. 3
Section 3.6 Ad Valorem Taxes ...................................... 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES ........................ 4
Section 4.1 Representations and Warranties of Sellers ............. 4
(a) Organization and Qualification ........................ 4
(b) Authority ............................................. 4
(c) Enforceability ........................................ 4
(d) No Conflict or Violation .............................. 5
(e) Consents .............................................. 5
(f) Preference Rights and Transfer Requirements ........... 5
(g) Actions; Orders ....................................... 5
(h) Compliance With Laws .................................. 5
(i) Permits; Filings ...................................... 6
(j) Contracts and Leases .................................. 6
(k) Compliance With Contracts and Leases .................. 6
(l) Brokerage Fees and Commissions ........................ 6
(m) Taxes ................................................. 6
(n) Adequacy of Assets .................................... 6
(o) Reserve Report ........................................ 6
(p) Environmental Matters ................................. 7
(q) Insurance ............................................. 8
(r) Well Status ........................................... 8
(s) Status of Sellers ..................................... 8
(t) Condition of Assets ................................... 8
(u) Bankruptcy ............................................ 8
3
Page
(v) Proposed Operations or Expenditures ................... 8
Section 4.2 Representations and Warranties of Buyer ............... 8
(a) Organization and Qualification ........................ 8
(b) Corporate Authority ................................... 8
(c) Enforceability ........................................ 9
(d) No Conflict or Violation .............................. 9
(e) Consents .............................................. 9
(f) Actions; Orders ....................................... 9
(g) Brokerage Fees and Commissions ........................ 9
ARTICLE V INVESTIGATION OF ASSETS; CONFIDENTIALITY .............. 9
Section 5.1 Investigation of Assets ............................... 10
(a) Access to Information ................................. 10
(b) Access to Property .................................... 10
Section 5.2 Confidential Information .............................. 10
ARTICLE VI TITLE ADJUSTMENTS ..................................... 11
Section 6.1 Buyer's Title Review .................................. 11
(a) Buyer's Assertion of Title Defects .................... 11
(b) Purchase Price Allocations ............................ 11
(c) Sellers' Opportunity to Cure .......................... 11
(d) Buyer's Title Adjustments ............................. 11
Section 6.2 Determination of Title Defects ........................ 11
ARTICLE VII COVENANTS OF SELLERS AND BUYER ........................ 13
Section 7.1 Conduct of Business Pending Closing ................... 13
(a) Sales ................................................. 13
(b) Encumbrances .......................................... 13
(c) Operation of Assets ................................... 13
(d) Contracts and Agreements .............................. 13
(e) Notice of Defaults .................................... 14
Section 7.2 Related Agreements .................................... 14
Section 7.3 Public Announcements .................................. 14
Section 7.4 Further Assurances .................................... 14
Section 7.5 Financial Statements .................................. 14
Section 7.6 Site Remediation ...................................... 15
ARTICLE VIII CLOSING CONDITIONS .................................... 15
Section 8.1 Sellers' Closing Conditions ........................... 15
(a) Representations, Warranties and Covenants ............. 15
-ii-
4
Page
(b) Officer's Certificate ................................. 15
(c) Related Agreements .................................... 15
(d) No Action ............................................. 15
(e) Opinion of Counsel .................................... 16
Section 8.2 Buyer's Closing Conditions ............................ 16
(a) Representations, Warranties and Covenants ............. 16
(b) Certificates .......................................... 16
(c) Related Agreements .................................... 16
(d) No Action ............................................. 16
(e) Opinion of Counsel .................................... 16
(f) Title Adjustments ..................................... 16
(g) Affidavits of Non-foreign Status ...................... 17
(h) Casualty or Condemnation .............................. 17
(i) No Material Adverse Change ............................ 17
(j) Environmental Assessment .............................. 17
(k) Change of Operator .................................... 17
ARTICLE IX CLOSING ............................................... 17
Section 9.1 Closing ............................................... 17
Section 9.2 Sellers' Closing Obligations .......................... 17
Section 9.3 Buyer's Closing Obligations ........................... 18
ARTICLE X EFFECT OF CLOSING ..................................... 18
Section 10.1 Revenues .............................................. 18
Section 10.2 Expenses .............................................. 18
Section 10.3 Payments and Obligations .............................. 18
ARTICLE XI CASUALTY AND CONDEMNATION ............................. 19
Section 11.1 Effect of Casualty or Condemnation ................... 19
Section 11.2 Proceeds and Awards ................................... 19
ARTICLE XII ASSUMPTION AND INDEMNIFICATION ........................ 19
Section 12.1 Indemnification By Buyer .............................. 19
Section 12.2 Indemnification By Sellers ............................ 20
Section 12.3 Third Party Claims .................................... 20
ARTICLE XIII TERMINATION; REMEDIES ................................. 21
Section 13.1 Termination ........................................... 21
Section 13.2 Effect of Termination ................................. 21
Section 13.3 Remedies .............................................. 21
-iii-
5
Page
(a) Sellers' Remedies .................................... 21
(b) Buyer's Remedies ..................................... 21
Section 13.4 Limitations .......................................... 22
(a) Independent Investigation and Disclaimer of Warranties 22
(b) Damages .............................................. 22
(c) Several Liability of Sellers ......................... 23
ARTICLE XIV MISCELLANEOUS ........................................ 23
Section 14.1 Counterparts ......................................... 23
Section 14.2 Governing Law ........................................ 23
Section 14.3 Entire Agreement ..................................... 23
Section 14.4 Expenses ............................................. 24
Section 14.5 Notices .............................................. 24
Section 14.6 Successors and Assigns ............................... 25
Section 14.7 Headings ............................................. 25
Section 14.8 Amendments and Waivers ............................... 25
Section 14.9 Schedules and Exhibits ............................... 25
Section 14.10 Purchase Price Allocation for Tax Purposes ........... 25
Section 14.11 Interpretation ....................................... 26
Section 14.12 Agreement for the Parties' Benefit Only .............. 26
Section 14.13 Severability ......................................... 26
Section 14.14 Arbitration .......................................... 26
Section 14.15 Recovery of Costs and Attorneys' Fees ................ 26
Section 14.16 Consent to Jurisdiction and Service of Process ....... 27
-iv-
6
EXHIBITS
Exhibit 7.2(a) -- Conveyance
Exhibit 7.2(b) -- Deed
Exhibit 8.2(g) -- Affidavit of Non-foreign Status
Exhibit A-1 -- Arbitration Procedures
Exhibit A-2 -- Property Schedule
SCHEDULES
Schedule 4.1(h) -- Non-Compliance with Laws
Schedule 4.1(i) -- Permits and Filings
Schedule 4.1(j) -- Contracts and Leases
Schedule 4.1(k) -- Non-Compliance with Contracts and Leases
Schedule 4.1(p) -- Environmental Exceptions
Schedule 4.1(q) -- Insurance
Schedule 4.1(t) -- Condition of Assets
Schedule 7.6 -- Site Remediation Work
Schedule 13.4(c) -- Several Liability of Sellers
Schedule 14.10 -- Purchase Price Allocation for Tax Purposes
Schedule A-1 -- Certain Excluded Assets
Schedule A-2 -- Certain Permitted Encumbrances
Schedule A-3 -- Royalty Accounts
Schedule A-4 -- Existing Imbalances
-v-
7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 7, 1997,
is by and between XXXXXX ENERGY, INC., a Louisiana corporation ("SEI"), SOUTH
CENTRAL PETROLEUM, INC., a Texas corporation ("SCPI"), ENERCO EXPLORATION AND
MANAGEMENT CO., a Texas corporation ("Enerco"), XXXXX XXXXXXXX and husband,
XXXXXXX X. XXXXXXXX, residents of Tarrant County, Texas, XXXXX X. XXXXX and
wife, XXXXXXX XXXXXXX XXXXX, residents of Dallas County, Texas, XXXXX X. XXXXX,
TRUSTEE OF THE XXXXX X. XXXXX TRUST, a trust established under Trust Agreement
dated August 21, 1995, XXXXX X. XXXXXX and wife, XXXX XXXXXXX XXXXX XXXXXX,
residents of Caddo Parish, Louisiana, XXXXXX X. XXXXXX, a resident of Caddo
Parish, Louisiana, and XXXXXX XXXXXX XXXX, a resident of Shelby County,
Tennessee (collectively referred to herein as "Sellers" and individually as
"Seller"), and CRYSTAL GAS, L.L.C., a Louisiana limited liability company
("Buyer").
WHEREAS, Sellers own certain oil and gas properties and related assets;
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, such oil and gas properties and related assets upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Defined Terms. Unless the context otherwise
requires, the respective terms defined in APPENDIX A attached hereto and
incorporated herein shall, when used herein, have the respective meanings
therein specified, with each such definition to be equally applicable both to
the singular and the plural forms of the term so defined.
Section 1.2 References, Gender, Number. All references in this Agreement
to an "Article," "Section," or "subsection" shall be to an Article, Section, or
subsection of this Agreement, unless the context requires otherwise. Unless
the context otherwise requires, the words "this Agreement," "hereof,"
"hereunder," "herein," "hereby," or words of similar import shall refer to this
Agreement as a whole and not to a particular Article, Section, subsection,
clause or other subdivision hereof. Whenever the context requires, the words
used herein shall include the masculine, feminine and neuter gender, and the
singular and the plural.
8
ARTICLE II
SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, Sellers agree to
sell and convey to Buyer, and Buyer agrees to purchase from Sellers, the
Assets.
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1 Consideration. The consideration for the sale and conveyance
of the Assets to Buyer is $12,000,000.00 (the "Purchase Price"), as adjusted in
accordance with the terms of this Agreement. The "Adjusted Purchase Price"
shall be the Purchase Price (i) as adjusted by the Initial Adjustment Amount
determined pursuant to Section 3.3, (ii) as adjusted for Title Defects, if any,
in accordance with Section 6.1, (iii) as may be adjusted for Unscheduled
Imbalances pursuant to Section 3.5 and (iv) as adjusted for ad valorem taxes
pursuant to Section 3.6.
Section 3.2 Payment. At the Closing, Buyer shall wire transfer the
Adjusted Purchase Price in immediately available funds to Deposit Guaranty
National Bank in Jackson, Mississippi, ABA Routing No. 0000-0000-0 for the
account of SEI, Account No. 610-0000000, Commercial National Bank in
Shreveport, Shreveport, Louisiana, or such other account specified by SEI to
Buyer on or prior to the second business day immediately preceding the Closing
Date.
Section 3.3 Adjustment Period Cash Flow.
(a) The Purchase Price shall be increased or decreased, as the case may
be, by an amount equal to the Net Cash Flow with respect to the Assets for the
time period (the "Adjustment Period") beginning at the Effective Time and
ending at 7:00 a.m. (local time) on the Closing Date. Sellers shall
deliver to Buyer on or prior to the fifth business day immediately preceding
the Closing Date a statement (the "Adjustment Statement") setting forth
Sellers' preliminary determination (the "Initial Adjustment Amount") of the Net
Cash Flow. If the Initial Adjustment Amount shown on the Adjustment Statement
is a positive number, then the Purchase Price shall be increased by such
amount. If the Initial Adjustment Amount shown on the Adjustment Statement is
a negative number, then the Purchase Price shall be decreased by such amount.
(b) The Adjustment Statement shall be based upon actual information
available to Sellers at the time of its preparation and upon Sellers' good
faith estimates and assumptions. There shall be attached to the Adjustment
Statement such supporting documentation and other data as is reasonably
necessary to provide a basis for the Net Cash Flow shown therein.
-2-
9
(c) The "Net Cash Flow" shall be the algebraic sum of (i) subject in all
cases to compliance with the requirements and limitations contained in Article
VIII, a positive amount equal to the aggregate amount paid by Sellers as
Sellers' share of the direct costs or expenses of maintenance, development and
operation of the Assets (including severance taxes and gathering and marketing
expenses and insurance costs) incurred with respect to the Adjustment Period
(including prepayments of not more than sixty (60) days in advance of any such
costs or expenses), (ii) a positive amount equal to the aggregate amount paid
by Sellers as Sellers' share of overhead charges paid under existing operating
agreements listed on SCHEDULE 4.1(J) covering the Assets, (iii) a negative
amount equal to the aggregate gross proceeds received from or attributable to
the sale or disposition of Hydrocarbons produced from the Assets during the
Adjustment Period or from or attributable to the rental, sale, salvage or other
disposition of any other Assets during the Adjustment Period, and (iv) a
negative amount equal to the aggregate amount of any costs or expenses incurred
under clause (i) above and reimbursed to Sellers by any third party; provided,
however, the amounts held by Sellers for the account or benefit of any third
party joint interest owners, including the Royalty Accounts, shall not be
included in the calculation of Net Cash Flow, and therefore, shall not have an
effect on the Purchase Price.
Section 3.4 Post Closing Review. After the Closing, Sellers shall review
the Adjustment Statement and determine the actual Net Cash Flow. On or prior
to the sixtieth day after the Closing Date, Sellers shall present Buyer with a
statement of the actual Net Cash Flow and such supporting documentation as is
reasonably necessary to support the Net Cash Flow shown therein (the "Final
Adjustment Statement"). Buyer will give representatives of Sellers reasonable
access to its premises and to its books and records for purposes of preparing
the Final Adjustment Statement and will cause appropriate personnel of Buyer to
assist Sellers and Sellers' representatives, at no cost to Sellers, in the
preparation of the Final Adjustment Statement. Sellers will give
representatives of Buyer reasonable access to their premises and to their books
and records for purposes of reviewing the calculation of Net Cash Flow and will
cause appropriate personnel of Sellers to assist Buyer and its representatives,
at no cost to Buyer, in verification of such calculation. The Final Adjustment
Statement shall become final and binding on Sellers and Buyer as to the Net
Cash Flow ninety (90) days following the date the Final Adjustment Statement is
received by Buyer, except to the extent that prior to the expiration of such
ninety (90) day period Buyer shall deliver to Sellers notice of its
disagreement with the contents of the Final Adjustment Statement. If Buyer has
timely delivered a notice of disagreement to Sellers, then, upon written
agreement between Buyer and Sellers resolving all disagreements of Buyer set
forth in such notice, the Final Adjustment Statement will become final and
binding upon Buyer and Sellers as to the Net Cash Flow. If the Final
Adjustment Statement has not become final and binding by the one-hundred
twentieth (120th) day following its receipt by Buyer, then Buyer or Sellers may
submit any unresolved disagreements of Buyer set forth in such notice to final
and binding arbitration in accordance with the Arbitration Procedures. Upon
resolution of such unresolved
-3-
10
disagreements of Buyer, the Final Adjustment Statement shall be final and
binding upon Buyer and Sellers as to the Net Cash Flow. Within three (3)
business days after the Final Adjustment Statement becomes final and binding,
Sellers or Buyer, as appropriate, shall pay to the other party the amount, if
any, by which the Net Cash Flow as shown in the Final Adjustment Statement is
less than or exceeds the Initial Adjustment Amount, together with interest
thereon from the Closing Date until paid at the Agreed Rate.
Section 3.5 Gas Imbalance Credits. The Purchase Price shall be reduced
by an amount equal to (i) the aggregate of Unscheduled Imbalances multiplied by
(ii) $2.00 per Mcf; provided, however, if any such imbalance consists of a cash
obligation owing on account of a pipeline or processing plant
imbalance or over-delivery, the value of such imbalance shall be the amount of
such cash obligation.
Section 3.6 Ad Valorem Taxes. The Purchase Price shall be reduced by an
amount equal to unpaid ad valorem, excise, property, production, severance and
similar taxes and assessments based upon or measured by the ownership of the
Assets that are attributable to periods of time prior to the Effective Time,
which amounts shall, to the extent not actually assessed, be computed based on
such taxes and assessments for the preceding year (such amounts to be prorated
for the period of Sellers' and Buyer's ownership before and after the Effective
Time).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Sellers. Sellers represent
and warrant to Buyer as of the date hereof and the Closing Date as follows:
(a) Organization and Qualification. Company Sellers are corporations duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation and have the requisite corporate power to
carry on their respective businesses as they are now being conducted. Company
Sellers are duly qualified to do business, and are in good standing, in each
jurisdiction in which the Assets owned, leased or operated by them makes such
qualification necessary. The Xxxxx X. Xxxxx Trust is duly organized and
validly existing under the laws of the State of Arizona, has the requisite
power to carry on its business as it is now being conducted, and is duly
qualified under the laws of the State of Louisiana to own and to transfer
immovable property located in the State of Louisiana.
(b) Authority. Company Sellers have all requisite corporate power and
authority to execute and deliver this Agreement and each of the Related
Agreements to which they are parties and to perform their obligations under
this Agreement and each of the Related Agreements to which they are parties.
The execution, delivery and performance of this Agreement and each of the
Related Agreements to which Company
-4-
11
Sellers are parties and the transactions contemplated hereby or thereby
have been duly and validly authorized by all requisite corporate action on the
part of Company Sellers. Xxxxx X. Xxxxx, Trustee of the Xxxxx X. Xxxxx Trust,
has all requisite power and authority to execute and deliver this Agreement and
each of the Related Agreements to which he is a party and to perform his
obligations under this Agreement and each of the Related Agreements to which he
is a party.
(c) Enforceability. This Agreement constitutes, and upon execution and
delivery by each Seller of each of the Related Agreements to which it is a
party, each of such Related Agreements will constitute, a valid and binding
agreement of Sellers enforceable against Sellers in accordance with its terms
to the extent that each is a party thereto, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application with respect to creditors, (ii) general principles of
equity and (iii) the power of a court to deny enforcement of remedies generally
based upon public policy.
(d) No Conflict or Violation. Neither the execution and delivery of this
Agreement or the Related Agreements to which any Seller is a party nor the
consummation of the transactions and performance of the terms and conditions
contemplated hereby or thereby by any Seller will (i) conflict with or result
in any breach of any provision of the certificate of incorporation or bylaws
(or other similar governing documents) of any Company Seller; (ii) be rendered
void or ineffective by or under the terms, conditions or provisions of any
agreement, instrument or obligation to which any Seller is a party or is
subject or by which any of its properties or assets are bound; (iii) result in
or give rise to (or with notice or the passage of time or both could result in
or give rise to) a default, the creation or imposition of any lien, charge,
penalty, restriction, security interest or encumbrance or any change in terms,
termination, cancellation or acceleration under the terms, conditions or
provisions of any Asset (or of any agreement, instrument or obligation relating
to or burdening any Asset); or (iv) subject to the limitations contained in
Section 4.1(c), violate or be rendered void or ineffective under any Law or
result in or give rise to (or with notice or the passage of time or both could
result in or give rise to) the creation or imposition of any lien, charge,
penalty, restriction, security interest or encumbrance on or with respect to
any Asset under any Law.
(e) Consents. No consent, approval, authorization or permit of, or filing
with or notification to, any Person is required (1) for or in connection with
the execution and delivery of this Agreement or any Related Agreement by any
Seller or for or in connection with the consummation of the transactions and
performance of the terms and conditions contemplated hereby or thereby by any
Seller, (2) in order to prevent any change in terms, termination, cancellation,
default or acceleration (or any right thereof from arising) under the terms,
conditions or provisions of any Asset (or of any agreement, instrument or
obligation relating to or burdening any Asset) as a result of such execution,
delivery, consummation or performance, or (3) in order to
-5-
12
prevent the creation or imposition of any lien, charge, penalty, restriction,
security interest or encumbrance on or with respect to any Asset (or any right
thereof from arising) as a result of such execution, delivery, consummation or
performance.
(f) Preference Rights and Transfer Requirements. The Assets are not
subject to and neither Sellers nor any Affiliate of Sellers is bound by any
valid and enforceable Preference Rights or Transfer Requirements.
(g) Actions; Orders. (i) There are no Actions pending or, to the
knowledge of any Seller, threatened which relate to the Assets or the Business
or the transactions contemplated by this Agreement or the Related Agreements
and (ii) there is no judgment or outstanding order, injunction, decree or award
rendered by any Governmental Authority (1) by which any Asset is bound or (2)
by which any Seller or any Affiliate of any Seller is bound and which relates
to the Assets or the Business or the transactions contemplated by this
Agreement or the Related Agreements.
(h) Compliance With Laws. Except as set forth on SCHEDULE 4.1(h), (i) to
the knowledge of Sellers, the Assets and the Business comply with all Laws,
(ii) no Seller has received any notice of any violation or alleged violation
(or of any fact or circumstance which with notice or the passage of time or
both would constitute a violation) of any Law applicable to the Business or the
Assets, and (iii) none of the Sellers nor any operator of the Assets has
entered into any compliance or remediation agreements with any Governmental
Authority or filed any compliance or remediation plans with any Governmental
Authority which in any way relate to the Business or the Assets.
(i) Permits; Filings. SCHEDULE 4.1(i) describes all Permits. Sellers
have all Permits and all of the Permits are in full force and effect and all
fees and charges relating thereto have been paid.
(j) Contracts and Leases. Set forth on SCHEDULE 4.1(j) is a true and
correct description of each contract, agreement, lease or similar arrangement
which is included in the Assets or by which any of the Assets is bound.
(k) Compliance With Contracts and Leases. Except as set forth on SCHEDULE
4.1(k), with respect to all contracts, agreements, leases and arrangements
which are included in the Assets or by which any of the Assets is bound (1)
such contracts, agreements, leases and arrangements are in full force and
effect; (2) there are no violations or breaches thereof or existing facts or
circumstances which upon notice or the passage of time or both will constitute
a violation or breach thereof; (3) no notice of the exercise or attempted
exercise of premature termination, price reduction, market-out or curtailment
has been received by any Seller or any Affiliate of any Seller with respect
thereto; (4) no notice has been received by any Seller or any Affiliate of any
Seller that any party thereto intends not to honor its obligations thereunder;
and
-6-
13
(5) no Seller is participating in any discussions or negotiations regarding
modification thereof or entry into any contract, agreement, lease or
arrangement which, if it existed now, should be listed in any Schedule to this
Agreement.
(l) Brokerage Fees and Commissions. No Seller nor any Affiliate of any
Seller has incurred any obligation or entered into any agreement for any
investment banking, brokerage or finder's fee or commission in respect of the
transactions contemplated by this Agreement or the Related Agreements for which
Buyer shall incur any liability.
(m) Taxes. Sellers have paid all Taxes on or relating to the Assets, or
any production or revenues attributable thereto, which are currently due and
payable as required by Law prior to delinquency.
(n) Adequacy of Assets. All Hydrocarbon Interests and all xxxxx, well
locations, well completions, multiple well completions and other properties,
rights and interests covered by or included in the Reserve Report are
accurately described and included in the Property Schedule. The Assets include
all assets and rights that are necessary for the continued operation of the
Assets.
(o) Reserve Report. Sellers make no warranty or representation as to
quantity, quality or recoverability of the Hydrocarbon reserves attributable to
the Subject Interests, except that Sellers warrant and represent that (i) to
the knowledge of Sellers, the estimates of recoverable reserves which are set
forth in the Reserve Report have been prepared in accordance with generally
accepted engineering methods, (ii) the production history data, data on
operating history and well logs (excluding any opinion, interpretation,
analysis, evaluation or other similar work product) that Sellers provided to
Xxxxxxxx & Associates, Inc. to prepare the Reserve Report are true and correct
in all material respects, (iii) since the date of the Reserve Report there have
been no changes to the Assets, except for production in the ordinary course of
business, (iv) all xxxxx which are identified in the Reserve Report as being
producing, shut-in or behind pipe were in fact and continue to be producing,
shut-in or behind pipe, and (v) there are no plugging and abandonment, site
restoration or clean up obligations or liabilities associated with the Subject
Interests other than those indicated in the Reserve Report or as disclosed
herein.
(p) Environmental Matters.
(1) Except as set forth on SCHEDULE 4.1(p):
(i) The Assets have been used by Sellers solely for oil
and gas operations and related operations. The Assets have not been
used by Sellers, or to the knowledge of Sellers, by anyone else, for
the treatment, storage, disposal, processing, remediation, transportation
or transmission of any
-7-
14
Hazardous Materials or as a landfill or other waste disposal site, other
than for salt water disposal in compliance with Environmental Laws.
(ii) To the knowledge of Sellers, there are no Hazardous Substances
currently in, on or under the Assets. "Hazardous Substance" means any
substance defined as "hazardous substance" under Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.A. Section 9601(14).
(iii) No investigation, inquiry, administrative or other proceeding,
order, notice, consent, agreement, litigation, claim, action, remedial
obligation or settlement with respect to Hazardous Materials,
Environmental Laws or Environmental Conditions is existing, proposed,
threatened, anticipated or pending with respect to the Assets or the
Business, and this representation and warranty would continue to be true
and correct following disclosure to applicable Governmental Authorities
of all relevant facts, conditions and circumstances, if any, pertaining
to the Assets or the Business.
(iv) There are no Covered Liabilities, whether under Environmental
Laws or common law, to any Governmental Authority or to any private
person in connection with any release, discharge, spill, disposal,
storage, treatment, processing, remediation, transportation, transmission
or other handling of Hazardous Materials which would adversely affect the
Business or the value of the Assets.
(2) To the knowledge of Sellers, the Assets comply in all respects
with all applicable Environmental Laws. Except as described in detail on
SCHEDULE 4.1(p), none of the Sellers nor any Affiliate of any Seller (or
third party operator of the Assets) has filed or given any notice or
report under any Law indicating or reporting any past or present
treatment, storage, disposal, processing, remediation, transportation,
transmission or other handling, or any spill, discharge or release, of
any Hazardous Materials with respect to the Assets or in connection with
the Business.
(q) Insurance. SCHEDULE 4.1(q) contains a true and complete list of all
policies of insurance (other than officer's and director's liability policies)
which cover or relate to any of the Assets or the Business for any period from
and after the Effective Time.
(r) Well Status. To the knowledge of Sellers, there are no underground
storage tanks or unlined pits in, on or underlying any of the Assets.
(s) Status of Sellers. No Seller is a non-resident alien or foreign
corporation (as those terms are defined in the Code). No Seller is a
"public-utility
-8-
15
company" or a "holding company," or a "Subsidiary Company" of a
"holding company," or an "affiliate" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended, nor is
any Seller otherwise subject to regulation under or the restrictions of such
act. No Seller is any "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, nor is any Seller otherwise subject to regulation under or the
restrictions of such act.
(t) Condition of Assets. Except as set forth in SCHEDULE 4.1(t) and
except for casualty losses after the date hereof, the machinery, equipment,
tangible personal property, fixtures and improvements included in the Assets
meet industry standards concerning reasonably good working order and repair.
(u) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending against, being contemplated by, or, to the knowledge of any
Seller, threatened against any Seller.
(v) Proposed Operations or Expenditures. No Seller has consented to,
non-consented to, issued or received (i) any notice of a proposed drilling,
completion, recompletion, deepening, reworking, plugging back, plugging and
abandonment or other operation with respect to the Assets, (ii) any notice of a
proposed or required delay rental or other lease payment with respect to the
Assets, or (iii) any authorization for expenditure with respect to the Assets
for the period from the Effective Time to the date hereof, except for delay
rentals or other lease payments which such Sellers elected to pay and have paid
in the ordinary course of business.
Section 4.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers as follows:
(a) Organization and Qualification. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Louisiana and has the requisite power to carry on its business as it
is now being conducted. Buyer is, or prior to Closing will be, duly qualified
to do business and is in good standing in each jurisdiction in which the Assets
to be acquired by it makes such qualification necessary.
(b) Corporate Authority. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and each of the Related
Agreements to which it is a party and to perform its obligations under this
Agreement and each of the Related Agreements to which it is a party. The
execution, delivery and performance of this Agreement and each of the Related
Agreements to which Buyer is a party and the transactions contemplated hereby
or thereby have been duly and validly authorized by all requisite corporate
action on the part of Buyer.
-9-
16
(c) Enforceability. This Agreement constitutes, and upon execution and
delivery by Buyer of each of the Related Agreements to which it is a party,
each of such Related Agreements will constitute, a valid and binding agreement
of Buyer enforceable against Buyer in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application with respect to creditors, (ii) general principles
of equity and (iii) the power of a court to deny enforcement of remedies
generally based upon public policy.
(d) No Conflict or Violation. Neither the execution and delivery of this
Agreement or the Related Agreements to which Buyer is a party nor the
consummation of the transactions and performance of the terms and conditions
contemplated hereby or thereby by Buyer will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or bylaws (or other
similar governing documents) of Buyer; (ii) be rendered void or ineffective by
or under the terms, conditions or provisions of any agreement, instrument or
obligation to which Buyer is a party or is subject; or (iii) subject to the
limitations contained in Section 4.2(c), violate or be rendered void or
ineffective under any Law.
(e) Consents. No consent, approval, authorization or permit of, or filing
with or notification to, any Person is required for or in connection with the
execution and delivery of this Agreement or any Related Agreement by Buyer or
for or in connection with the consummation of the transactions and performance
of the terms and conditions contemplated hereby or thereby by Buyer.
(f) Actions; Orders. (i) There are no Actions pending or, to the
knowledge of Buyer, threatened which relate to the transactions contemplated by
this Agreement or the Related Agreements and (ii) there is no judgment or
outstanding order, injunction, decree or award rendered by any Governmental
Authority by which Buyer or any Affiliate of Buyer is bound and which relates
to the transactions contemplated by this Agreement or the Related Agreements.
(g) Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of
Buyer has incurred any obligation or entered into any agreement for any
investment banking, brokerage or finder's fee or commission in respect of the
transactions contemplated by this Agreement or the Related Agreements for which
any Seller shall incur any liability.
-10-
17
ARTICLE V
INVESTIGATION OF ASSETS; CONFIDENTIALITY
Section 5.1 Investigation of Assets.
(a) Access to Information. Immediately following the execution of this
Agreement and until the Closing Date, Sellers shall permit Buyer and all of its
representatives to examine and copy (at Buyer's expense) Sellers' records with
respect to the Assets, including, but not limited to, all lease files, gas
contracts, gas marketing agreements, operating agreements, abstracts of title,
title opinions, title files, ownership maps, lease files, division orders,
deeds and documents of title, records pertaining to environmental issues,
production reports, and all other property or operational records, all
financial, accounting, tax, engineering, geological, geophysical and other
records, and all other contracts, agreements and documents relating to the
Assets or the gathering, treating, processing or marketing of production
therefrom, insofar as the same are in any Seller's possession or control, or
insofar as any Seller has access to the same, and to the extent in each case
that such Seller may do so without violating legal constraints or any legal
obligation. Each Seller agrees to fully disclose to Buyer all knowledge in
such Seller's possession regarding any and all matters affecting the Assets
which a reasonably prudent purchaser of the Assets would want to know.
(b) Access to Property. Immediately following the execution of this
Agreement, and subject to any required consent of any third Person, Sellers
shall grant Buyer and all of its representatives access to the Lands and the
right to observe all operations thereon, to inspect any and all equipment,
improvements and fixtures located on or included within the Lands, and the
right to conduct environmental audits, inspections and investigations thereon.
If Buyer reasonably determines, based upon such audits, inspections and
investigations, that the environmental condition of the Assets is not
satisfactory to Buyer, Buyer shall deliver written notice thereof to Sellers
describing in reasonable detail the environmental condition or conditions that
are not satisfactory to Buyer. If Sellers agree to remediate such
environmental conditions, such remediation shall be performed at Sellers' sole
cost and expense. If such environmental conditions are not remediated by
Sellers, at their sole cost and expense, to Buyer's reasonable satisfaction
prior to the second business day immediately preceding the Closing Date, Buyer
shall have the right to elect to terminate this Agreement on or before the
Closing Date.
Section 5.2 Confidential Information. Unless and until Closing occurs,
Buyer agrees to maintain all proprietary or confidential information obtained
by it pursuant to Section 5.1 confidential prior to the Closing. Each Seller
and each Affiliate of any Seller will, and will cause its officers, employees,
representatives, consultants and advisors to, hold in confidence all
proprietary or confidential information in the possession of any Seller or its
Affiliates concerning the Business and the Assets.
-11-
18
ARTICLE VI
TITLE ADJUSTMENTS
Section 6.1 Buyer's Title Review.
(a) Buyer's Assertion of Title Defects. Prior to 5:00 p.m., Shreveport
time, on May 23, 1997 (the "Title Examination Period"), Buyer shall notify
Sellers in writing of any matters which, in Buyer's opinion, constitute Title
Defects and which Buyer intends to assert as a Title Defect with respect to any
portion of a Property Subdivision pursuant to this Article VI. Buyer may not
assert any matter as a Title Defect pursuant to this Article VI if Buyer fails
to assert such matter as a Title Defect by written notice given to Sellers on
or before expiration of the Title Examination Period.
(b) Purchase Price Allocations. A portion of the Purchase Price has been
allocated to the various Subject Interests in Property Subdivisions in the
manner and in accordance with the respective values set forth in the Property
Schedule. If any adjustment is made to the Purchase Price pursuant to this
Section 6.1, a corresponding adjustment shall be made to the portion of the
Purchase Price allocated to the affected Property Subdivision in the Property
Schedule.
(c) Sellers' Opportunity to Cure. Sellers shall have until 5:00 p.m.,
Shreveport time, on May 27, 1997, at their cost and expense, to cure all or a
portion of such asserted Title Defects. If Sellers within such time fail to
cure any Title Defect of which Buyer has given timely written notice as
required above and Buyer does not execute a written waiver of the same on or
before two (2) days prior to the Closing Date, the Property Subdivision
affected by such uncured and unwaived Title Defect shall be a "Title Defect
Property".
(d) Buyer's Title Adjustments. Buyer shall be entitled to reduce the
Purchase Price by the aggregate amount of Title Defect Amounts with respect to
all Title Defect Properties. "Title Defect Amount" shall mean, with respect to
a Title Defect Property, the amount by which the value of such Title Defect
Property is impaired as a result of the existence of one or more Title Defects,
which amount shall be determined mutually by SEI and Buyer.
Section 6.2 Determination of Title Defects. A portion of a Property
Subdivision shall be deemed to have a "Title Defect" if any one or more of the
following statements is untrue with respect to such portion of a Property
Subdivision as of the Effective Time and as of the Closing Date:
(a) Sellers have Defensible Title thereto.
-12-
19
(b) All royalties, rentals, Xxxx clause payments, shut-in gas payments and
other payments due with respect to such portion of a Property Subdivision have
been properly and timely paid, except for payments held in suspense for title
or other reasons which are customary in the industry and which will not result
in grounds for cancellation of Sellers' rights in such portion of a Property
Subdivision.
(c) Sellers are not in default (and there exists no event or
circumstance which with notice or the passage of time or both could constitute
a default by Sellers) under the terms of any leases, farm-out agreements or
other contracts or agreements respecting such portion of a Property Subdivision
which could (1) interfere in any material respect with the operation or use
thereof, (2) prevent Sellers from receiving the proceeds of production
attributable to Sellers' interest therein, (3) result in cancellation of
Sellers' interest therein, or (4) impair the value of Sellers' interest therein
or cause Buyer to incur any liability as a result of the transactions
contemplated hereby.
(d) All consents to assignment or notices of assignment, if any, which are
applicable to or must be complied with in connection with the sale, assignment
or transfer contemplated by this Agreement, or any prior sale, assignment or
the transfer, of such portion of a Property Subdivision or any Subject
Interests attributable thereto have been obtained and complied with to the
extent the failure to obtain or comply with the same could render any such
sale, assignment or transfer (or any right or interest affected thereby) void
or voidable or could result in Buyer incurring any liability as a result of the
transactions contemplated hereby.
(e) No provision or obligation exists under any contract or agreement
affecting such portion of a Property Subdivision or any Subject Interests
attributable thereto which is both (i) not customary to currently accepted oil
and gas industry standards and (ii) could interfere materially or have a
material adverse economic effect on the exploration, development, operation or
use of such portion of a Property Subdivision or any such Subject Interests or
impair the value thereof to Buyer in any material respect.
(f) No provision or obligation is contained in any contract or agreement
affecting such portion of a Property Subdivision or any Subject Interests
attributable thereto which grants a valid and enforceable preferential right or
option to purchase the same.
(g) There exists no adverse claim asserted or threatened (or which with
notice or the passage of time or both could be asserted or threatened) with
respect to any of the matters set forth in items (a) through (f) above which is
of such significance that a reasonable and prudent operator would be unwilling
to accept and pay for such portion of a Property Subdivision or the Subject
Interests attributable thereto without a reduction in the Purchase Price.
-13-
20
It is understood and agreed by and between Sellers and Buyer that the
examination and evaluation of title to the Assets and the determination of
whether there exists a Title Defect as to all or any of the Assets is the sole
responsibility of Buyer prior to Closing. From and after the Closing Date,
Seller shall have no liability, obligation, or responsibility whatsoever to
Buyer with respect to title to the Assets, or insofar as Title Defects as to
all or any of the Assets are concerned, except to the extent of the limited
warranty of title set forth in the Conveyance and the Deed.
ARTICLE VII
COVENANTS OF SELLERS AND BUYER
Section 7.1 Conduct of Business Pending Closing. Subject to the
constraints of applicable existing operating agreements listed in SCHEDULE
4.1(j), from the date hereof through the Closing, except as otherwise consented
to or approved by Buyer in writing, Sellers covenant and agree that:
(a) Sales. Sellers shall not sell, transfer, assign, convey, farmout,
release, abandon or otherwise dispose of any Assets, or enter into any
transaction the effect of which would be to cause Sellers' ownership interest
in any of the Assets to be altered from their ownership interest as of the date
of this Agreement, other than (i) Hydrocarbons produced, saved and sold in the
ordinary course of business, and (ii) personal property and equipment which is
replaced with personal property and equipment of comparable or better value and
utility in the ordinary and routine maintenance and operation of the Assets.
(b) Encumbrances. Sellers shall not create or permit the creation of any
lien, security interest or encumbrance on any Assets, except to the extent
required or permitted incident to the operation of the Assets pursuant to this
Section 8.1.
(c) Operation of Assets. Sellers agree to:
(1) cause the Assets to be maintained and operated in a prudent, good
and workmanlike manner, maintain insurance now in force with respect to the
Assets, and pay or cause to be paid all costs and expenses in connection
therewith promptly when due;
(2) maintain and keep the Assets in full force and effect;
(3) not enter into or assume any contract, agreement or commitment
which is not in the ordinary course of business as theretofore conducted
with respect to the Assets, except in the case of an emergency in which
event Buyer will be promptly notified of such emergency and Sellers, to the
extent reasonably possible, will discuss with Buyer a solution for handling
such emergency;
-14-
21
(d) Contracts and Agreements. Sellers will not voluntarily relinquish any
Seller's position as operator with respect to the Assets. Sellers will use
Sellers' best efforts to obtain in writing sufficient votes of the parties to
the operating agreement covering the Young Unit described in SCHEDULE 4.1(j) to
cause Buyer to be selected to succeed SEI as operator under such operating
agreement subject only to the conveyance of the Assets by Sellers to Buyer at
Closing.
(e) Notice of Defaults. Sellers shall give prompt written notice to Buyer
of any notice of default (or threat of default, whether disputed or denied)
received or given by any Seller under any instrument or agreement affecting the
Assets to which any Seller is a party or by which any Seller or any of the
Assets are bound.
Section 7.2 Related Agreements. Upon the terms and subject to the
conditions of this Agreement, at or prior to the Closing, the appropriate
parties shall execute and deliver or cause the execution and delivery of the
following instruments or agreements (collectively, the "Related Agreements"):
(a) The General Conveyance, in substantially the form attached hereto as
EXHIBIT 7.2(a) (the "Conveyance"); and
(b) A Deed, in substantially the form attached hereto as EXHIBIT 7.2(b)
(the "Deed") conveying the interests described therein.
Section 7.3 Public Announcements. Without the prior written approval
of SEI, in the case of a public statement proposed by Buyer, or Buyer, in the
case of any public statement proposed by any Seller, which approval shall not
be unreasonably withheld, no party hereto will issue, or permit any agent or
Affiliate to issue, any press releases or otherwise make, or
cause any agent or Affiliate to make, any public statements with respect to
this Agreement, the Related Agreements and the transactions contemplated hereby
and thereby, except where such release or statement is deemed in good faith by
the releasing party to be required by Law or any national securities exchange,
in which case the party or parties will use its or their, as the case may be,
best efforts to provide a copy to the other party prior to any release or
statement. Sellers acknowledge that Buyer intends to issue a press release in
connection with the transactions contemplated by this Agreement.
Section 7.4 Further Assurances. Sellers and Buyer each agrees that,
from time to time, whether before, at or after the Closing Date, each of them
will execute and deliver or cause their respective Affiliates to execute and
deliver such further instruments of conveyance and transfer and take such other
action as may be necessary to carry out the purposes and intents of this
Agreement and the Related Agreements. Any separate or additional assignment of
the Assets or any portion thereof required pursuant to this Section 7.4 (i)
shall evidence the conveyance and assignment of the Assets made or intended to
be made in the Conveyance and the
-15-
22
Deed, (ii) shall not modify or be deemed to modify any of the terms,
covenants and conditions set forth in the Conveyance or the Deed, and (iii)
shall be deemed to contain all of the terms and provisions of the Conveyance,
as fully as though the same were set forth at length in such separate or
additional assignment.
Section 7.5 Financial Statements. If Buyer is required under applicable
United States federal securities laws to include historical accounting
information for periods prior to the Closing relating to the Business in any of
Buyer's filings with the Securities and Exchange Commission, then Sellers shall
cooperate with and provide Buyer reasonable access, during regular business
hours and upon reasonable advance notice, to Sellers' accounting records
relating to the Business prior to the Closing and shall cause their outside
auditors to cooperate, at Buyer's expense, with Buyer in the preparation of
such historical financial statements relating to the Business prior to the
Closing as may be required under such securities laws to be included in such
filings.
Section 7.6 Site Remediation. In the event the site remediation work
described on SCHEDULE 7.6 is not completed by Sellers prior to Closing, Sellers
shall use their best efforts to cause such work to be completed within one
hundred twenty (120) days following the Closing Date, at Sellers' sole cost and
expense. In the event such site remediation work is not so completed within
such one hundred twenty (120) day period, Buyer may cause such work to be
performed and Sellers shall be obligated to reimburse Buyer for all reasonable
cost and expense incurred by Buyer in connection with the performance of such
work within thirty (30) days following receipt by Sellers of Buyer's invoice
therefor together with reasonable supporting documentation. Notwithstanding
anything to the contrary contained in this Agreement, any and all cost and
expense incurred by Sellers in connection with any such site remediation work
performed by or on behalf of Sellers prior to or after Closing or by Buyer
after Closing shall be borne by Sellers and shall not be included in the
calculation of Net Cash Flow.
ARTICLE VIII
CLOSING CONDITIONS
Section 8.1 Sellers' Closing Conditions. The obligation of Sellers to
consummate the transactions contemplated hereby is subject, at the option of
Sellers, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(a) Representations, Warranties and Covenants. The (1) representations
and warranties of Buyer contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, and (2) covenants and
agreements of Buyer to be performed on or before the Closing Date in accordance
with this Agreement or the Related Agreements shall have been duly performed in
all material respects.
-16-
23
(b) Officer's Certificate. Sellers shall have received a certificate
dated as of the Closing Date, executed by a duly authorized officer of Buyer,
to the effect that to such officer's knowledge the conditions set forth in
paragraph (a) of this Section 8.1 have been satisfied.
(c) Related Agreements. Buyer shall have executed and delivered the
Related Agreements to which it is a party prior to or on the Closing Date.
(d) No Action. On the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Sellers or any of their Affiliates)
shall be pending or threatened before any court or governmental agency or body
of competent jurisdiction seeking to enjoin or restrain the consummation of
this Agreement or recover damages from Sellers resulting therefrom.
(e) Opinion of Counsel. Buyer shall have delivered to Sellers the written
opinion, dated the Closing Date, of Liskow & Xxxxx, counsel to Buyer, covering
the items set forth in Sections 4.2(a) and (b), in a form reasonably acceptable
to SEI.
Section 8.2 Buyer's Closing Conditions. The obligation of Buyer to
consummate the transactions contemplated hereby is subject, at the option of
Buyer, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(a) Representations, Warranties and Covenants. The (1) representations
and warranties of Sellers contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, and (2) covenants and
agreements of Sellers to be performed on or before the Closing Date in
accordance with this Agreement or the Related Agreements shall have been duly
performed in all material respects.
(b) Certificates. Buyer shall have received certificates dated as of the
Closing Date, respectively executed by a duly authorized officer of each
Company Seller and by each other Seller to the effect that to such officer's or
other person's knowledge the conditions set forth in paragraph (a) of this
Section 8.2 have been satisfied.
(c) Related Agreements. Each Seller shall have executed and delivered or
caused the execution and delivery of the Related Agreements to which it or any
of its Affiliates is a party prior to or on the Closing Date.
(d) No Action. On the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Buyer or any of its Affiliates) shall
be pending or threatened before any court or governmental agency or body of
competent jurisdiction seeking to enjoin or restrain the consummation of this
Agreement or recover damages from Buyer resulting therefrom.
-17-
24
(e) Opinion of Counsel. SEI shall have delivered to Buyer the written
opinion, dated the Closing Date, of Cook, Yancey, King & Xxxxxxxx of
Shreveport, Louisiana, counsel to SEI, covering, in respect of SEI, the items
set forth in Sections 4.1(a) and (b), in a form reasonably acceptable to Buyer;
SCPI shall have delivered to Buyer the written opinion, dated the Closing Date,
of Xxxxx & Xxxxxx of Dallas, Texas, counsel to SCPI, covering, in respect of
SCPI, the items set forth in Sections 4.1(a) and (b), in a form reasonably
acceptable to Buyer; Enerco shall have delivered to Buyer the written opinion,
dated the Closing Date, of Xxxxx & Xxxxxx of Dallas, Texas, counsel to Enerco,
covering, in respect of Enerco, the items set forth in Sections 4.1(a) and (b),
in a form reasonably acceptable to Buyer; and Xxxxx X. Xxxxx, Trustee of the
Xxxxx X. Xxxxx Trust, shall have delivered to Buyer the written opinion, dated
the Closing Date, of Xxxxxx & Xxxxxxxxx, PLLC of Scottsdale, Arizona, counsel
to the Trust, covering, in respect of the Trust, the items set forth in
Sections 4.1(a) and (b), in a form reasonably acceptable to Buyer.
(f) Title Adjustments. The Title Defect Amounts for all Title Defect
Properties, if any, shall have been mutually determined by SEI and Buyer.
(g) Affidavits of Non-foreign Status. Buyer shall have received an
Affidavit of Non-foreign Status, substantially in the form attached as EXHIBIT
8.2(g) hereto, which has been properly executed by or on behalf of each Seller.
(h) Casualty or Condemnation. Buyer shall not have elected to terminate
this Agreement pursuant to Section 11.1.
(i) No Material Adverse Change. From the date of this Agreement to the
Closing Date, there shall not have been any material adverse change in the
Assets, taken as a whole.
(j) Environmental Assessment. Buyer shall not have elected to terminate
this Agreement pursuant to Section 5.1(b).
(k) Change of Operator. Sellers shall have provided to Buyer written
confirmation that all Sellers who own working interests in oil and gas leases
subject to the operating agreements described in SCHEDULE 4.1(j) will support
the selection of Buyer to succeed SEI as operator under said operating
agreements.
ARTICLE IX
CLOSING
Section 9.1 Closing. The Closing shall be held on the Closing Date at
10:00 a.m., Shreveport time, at the offices of Crystal Oil Company, 229 Xxxxx,
Shreveport, Louisiana, or at such other time or place as SEI and Buyer may
otherwise agree in writing.
-18-
25
Section 9.2 Sellers' Closing Obligations. At Closing, Sellers shall
execute and deliver, or cause to be executed and delivered, to Buyer the
following:
(a) To the extent not delivered to Buyer prior to the Closing Date, the
Related Agreements to which any Seller or any Affiliate of any Seller is a
party;
(b) The certificates referred to in Section 8.2(b);
(c) The legal opinions referred to in Section 8.2(e);
(d) The Affidavits of Non-foreign Status referred to in Section 8.2(g);
(e) Letters in lieu of division and transfer orders executed by Sellers
relating to the Subject Interests in form reasonably necessary to reflect the
conveyances contemplated hereby;
(f) The Records; and
(g) Such other documents as may be reasonably necessary to convey all of
Sellers' interests in the Assets to Buyer in accordance with the terms and
provisions of this Agreement.
Section 9.3 Buyer's Closing Obligations. At Closing, Buyer shall (i)
deliver, or cause to be delivered, the Adjusted Purchase Price in immediately
available funds to the bank account as provided in Section 3.2 and (ii) execute
and deliver, or cause to be executed and delivered, to Sellers the following:
(a) To the extent not delivered to Sellers prior to the Closing Date, the
Related Agreements to which Buyer is a party;
(b) The officer's certificate of Buyer referred to in Section 8.1(b); and
(c) The legal opinion referred to in Section 8.1(e).
ARTICLE X
EFFECT OF CLOSING
Section 10.1 Revenues. After Closing, all proceeds, accounts receivable,
notes receivable, income, revenues, monies and other items included in or
attributable to the Excluded Assets and all other Excluded Assets shall belong
to and be paid over to Sellers and all other proceeds, accounts receivable,
notes receivable, income, revenues, monies and other items included in or
attributable to the Assets shall belong to and be paid over to Buyer.
-19-
26
Section 10.2 Expenses. After Closing, all accounts payable and other
costs and expenses with respect to the Assets for which Sellers are given
credit in the determination of Net Cash Flow pursuant to Section 3.3, as
adjusted pursuant to Section 3.4, shall be the obligation of and be paid by
Sellers. After Closing, Sellers shall immediately upon their receipt remit or
cause to be remitted to Buyer all amounts received by any of them as
reimbursements from third parties for costs and expenses incurred under Section
3.3(c)(i) to the extent such amounts have not been credited to Buyer in the Net
Cash Flow pursuant to Section 3.3(c)(iv), in each case taking into account any
adjustments pursuant to Section 3.4.
Section 10.3 Payments and Obligations. If monies are received by any
party hereto which, under the terms of this Article X, belong to another party,
the same shall immediately be paid over to the proper party. If an invoice or
other evidence of an obligation is received which under the terms of this
Article X is partially the obligation of Sellers and partially the obligation
of Buyer, then the parties shall consult each other and each shall promptly pay
its portion of such obligation to the obligee. The representations,
warranties, covenants and agreements made herein, in any Related Agreement or
in any other certificate or document delivered in connection herewith shall be
and remain in full force and effect notwithstanding any investigation made by
or disclosure made to any party hereto, whether before or after the date
hereof, and shall survive the execution and delivery of this Agreement and the
Closing.
ARTICLE XI
CASUALTY AND CONDEMNATION
Section 11.1 Effect of Casualty or Condemnation. If after the Effective
Time and prior to the Closing any part of the Assets shall be destroyed by fire
or other casualty or if any part 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, this Agreement shall remain in full force and effect
notwithstanding any such destruction, taking or proceeding or the threat
thereof, except as provided in this Section 11.1. Buyer shall have the right
to elect to terminate this Agreement on or before the Closing Date if the value
of all Assets affected by any one or more casualties, takings or proceedings or
threats thereof exceeds $500,000.00, in the aggregate.
Section 11.2 Proceeds and Awards. To the extent the same are not used or
applied by Sellers prior to the Closing Date to repair, restore or replace a
damaged or taken Asset, Sellers shall at the Closing pay to Buyer all sums paid
to Sellers by reason of such destruction or taking less any reasonable costs
and expenses incurred by Sellers in collecting same. In addition, Sellers
shall assign, transfer and set over unto Buyer, at Closing, all of the right,
title and interest of Sellers in and to any unpaid insurance proceeds,
condemnation awards or other payments arising out of such destruction or
taking, less any reasonable costs and expenses incurred by Sellers in
collecting same.
-20-
27
ARTICLE XII
ASSUMPTION AND INDEMNIFICATION
Section 12.1 Indemnification By Buyer. FROM AND AFTER THE CLOSING DATE,
BUYER SHALL INDEMNIFY AND HOLD HARMLESS SELLERS, EACH OF THEIR RESPECTIVE
PRESENT AND FORMER DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, AND EACH OF THE
HEIRS, EXECUTORS, SUCCESSORS AND ASSIGNS OF ANY OF THE FOREGOING (COLLECTIVELY,
THE "SELLER INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL (I)
ASSUMED LIABILITIES INCURRED BY OR ASSERTED AGAINST ANY OF THE SELLER
INDEMNIFIED PARTIES, INCLUDING, WITHOUT LIMITATION, ANY ASSUMED LIABILITY BASED
ON NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY OF THE SELLER INDEMNIFIED
PARTY OR ANY OTHER THEORY OF LIABILITY, WHETHER IN LAW (WHETHER COMMON OR
STATUTORY) OR EQUITY; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL NOT COVER
ANY OBLIGATIONS OF ANY OF THE SELLER INDEMNIFIED PARTIES WHICH FROM TIME TO
TIME EXIST UNDER OR PURSUANT TO ANY OF THE RELATED AGREEMENTS AND (II) ANY
COVERED LIABILITY RESULTING FROM ANY MISREPRESENTATION, BREACH OF WARRANTY OR
NONFULFILLMENT OF ANY COVENANT OR AGREEMENT ON THE PART OF BUYER HEREUNDER.
Section 12.2 Indemnification By Sellers. FROM AND AFTER THE CLOSING
DATE, SELLERS SHALL INDEMNIFY AND HOLD HARMLESS THE BUYER, ITS PRESENT AND
FORMER DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, AND EACH OF THE HEIRS,
EXECUTORS, SUCCESSORS AND ASSIGNS OF ANY OF THE FOREGOING (COLLECTIVELY, THE
"BUYER INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL (I) EXCLUDED
LIABILITIES INCURRED BY OR ASSERTED AGAINST ANY OF THE BUYER INDEMNIFIED
PARTIES, INCLUDING, WITHOUT LIMITATION, ANY EXCLUDED LIABILITY BASED ON
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY OF THE BUYER INDEMNIFIED PARTY
OR ANY OTHER THEORY OF LIABILITY, WHETHER IN LAW (WHETHER COMMON OR STATUTORY)
OR EQUITY AND (II) ANY COVERED LIABILITY RESULTING FROM ANY MISREPRESENTATION,
BREACH OF WARRANTY OR NONFULFILLMENT OF ANY COVENANT OR AGREEMENT ON THE PART
OF SELLERS HEREUNDER.
Section 12.3 Third Party Claims. If a claim by a third party is made
against a Seller Indemnified Party or a Buyer Indemnified Party (an
"Indemnified Party"), and if such party intends to seek indemnity with respect
thereto
-21-
28
under this Article XII, such Indemnified Party shall promptly notify
Buyer or Seller, as the case may be (the "Indemnitor"), of such claims. The
Indemnitor shall have thirty (30) days after receipt of such notice to
undertake, conduct and control, through counsel of its own choosing and at its
own expense, the settlement or defense thereof, and the Indemnified Party shall
cooperate with it in connection therewith; provided that the Indemnitor shall
permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by such Indemnified Party, however, the fees and
expenses of such counsel shall be borne by such Indemnified Party. So long as
the Indemnitor, at Indemnitor's cost and expense, (1) has undertaken the
defense of, and assumed full responsibility for all Covered Liabilities with
respect to, such claim, (2) is reasonably contesting such claim in good faith,
by appropriate proceedings, and (3) has taken such action (including the
posting of a bond, deposit or other security) as may be necessary to prevent
any action to foreclose a lien against or attachment of the property of the
Indemnified Party for payment of such claim, the Indemnified Party shall not
pay or settle any such claim. Notwithstanding compliance by the Indemnitor
with the preceding sentence, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the Indemnitor for such claim. If, within thirty (30)
days after the receipt of the Indemnified Party's notice of a claim of
indemnity hereunder, the Indemnitor does not notify the Indemnified Party that
it elects, at Indemnitor's cost and expense, to undertake the defense thereof
and assume full responsibility for all Covered Liabilities with respect
thereto, or gives such notice and thereafter fails to contest such claim in
good faith or to prevent action to foreclose a lien against or attachment of
the Indemnified Party's property as contemplated above, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.
ARTICLE XIII
TERMINATION; REMEDIES
Section 13.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) By the mutual consent of SEI and Buyer; or
(b) If the Closing has not occurred by the close of business on the
Closing Date, then (i) by Seller if any condition specified in Section 8.1 has
not been satisfied on or before such close of business, and shall not
theretofore have been waived by Seller, or (ii) by Buyer if any condition
specified in Section 8.2 has not been satisfied on or before such close of
business, and shall not theretofore have been waived by Buyer; provided, in
each case, that the failure to consummate the transactions contemplated hereby
on or before such date did not result from the failure by the party or parties
seeking termination of this Agreement to fulfill any undertaking or commitment
provided for herein on the part of such party
-22-
29
or parties seeking termination of this Agreement to fulfill any undertaking or
commitment provided for herein on the part of such party or parties that is
required to be fulfilled on or prior to Closing; or
(c) By Buyer pursuant to Sections 5.1(b) or 11.1.
Section 13.2 Effect of Termination. In the event of termination of this
Agreement by Seller, on the one hand, or Buyer, on the other hand, pursuant to
Section 13.1, written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Agreement shall thereupon terminate; provided, however, that in any such event,
no such termination shall relieve any party hereto of any liability for any
breach of this Agreement.
Section 13.3 Remedies.
(a) Sellers' Remedies. Notwithstanding anything herein provided to the
contrary, upon the failure by Buyer to fulfill any undertaking or commitment
provided for herein on the part of Buyer that is required to be fulfilled on or
prior to the Closing Date, Sellers, at their sole option, may (i) enforce
specific performance of this Agreement or (ii) terminate this Agreement
whereupon Buyer shall pay to Sellers the amount of $500,000.00 (the "Amount")
as liquidated damages, as Sellers' sole and exclusive remedies for such
default, all other remedies being expressly waived by Sellers. Sellers and
Buyer agree upon the Amount as liquidated damages due to the difficulty and
inconvenience of measuring actual damages and the uncertainty thereof, and
Sellers and Buyer agree that the Amount is a reasonable estimate of Sellers'
loss in the event of any such default by Buyer.
(b) Buyer's Remedies. Notwithstanding anything herein provided to the
contrary, upon failure of any Seller to fulfill any undertaking or commitment
provided for herein on the part of Sellers that is required to be fulfilled on
or prior to the Closing Date, Buyer, at its sole option, may (i) enforce
specific performance of this Agreement or (ii) terminate this Agreement
whereupon Sellers shall pay to Buyer a sum of money equal to the Amount as
liquidated damages, as Buyer's sole and exclusive remedies for such default,
all other remedies being expressly waived by Buyer. Sellers and Buyer agree
upon the Amount as liquidated damages due to the difficulty and inconvenience
of measuring actual damages and the uncertainty thereof, and Sellers and Buyer
agree that the Amount is a reasonable estimate of Buyer's loss in the event of
any such default by any Seller.
Section 13.4 Limitations.
(a) Independent Investigation and Disclaimer of Warranties. Buyer
acknowledges that (i) it has had and pursuant to this Agreement will have prior
to the Closing access to the Assets and the employees of Sellers and (ii) in
making the
-23-
30
decision to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer has relied solely on the basis of its own
independent investigation of the Assets and upon the representations,
warranties, covenants and agreements set forth in this Agreement. Accordingly,
Buyer acknowledges that, except as expressly set forth herein, Sellers have not
made, AND SELLERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, ANY REPRESENTATION OR
WARRANTY, EXPRESSED, IMPLIED, BY STATUTE OR OTHERWISE RELATING TO (a) THE
CONDITION OF THE ASSETS (INCLUDING WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS, OR ENVIRONMENTAL CONDITION), (b) ANY
INFRINGEMENT BY SELLERS OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY,
AND (c) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO
BUYER BY OR ON BEHALF OF SELLERS, THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER
MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH
RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE
ABILITY TO SELL OIL OR GAS PRODUCTION AFTER CLOSING AND THE ABILITY OF BUYER TO
BECOME OPERATOR OF THE ASSETS UNDER THE APPLICABLE OPERATING AGREEMENT); AND
BUYER WILL HAVE SOLE RESPONSIBILITY FOR ANY ACTION TAKEN BY BUYER, OR BY OTHERS
RELYING ON BUYER'S ADVICE, BASED ON THE GEOLOGICAL MAPS, RECORDS, LOGS AND
OTHER DATA, IF ANY, TRANSFERRED UNDER THIS AGREEMENT; provided, however, that
the foregoing disclaimer and negation of representation and warranties shall
not affect or impair the representations, warranties, covenants and agreements
of Sellers set forth elsewhere in this Agreement.
(b) Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY
OTHER PROVISION OF THIS AGREEMENT, SELLERS AND BUYER AGREE THAT, EXCEPT FOR THE
LIQUIDATED DAMAGES SPECIFICALLY PROVIDED FOR IN SECTION 13.3, THE RECOVERY BY
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF
ANY BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES
SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY
THE BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER
AND IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY
FOR ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR
INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING
PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER,
EXCEPT TO THE EXTENT CONSTITUTING
-24-
31
PART OF A THIRD PARTY CLAIM PURSUANT TO ARTICLE XII, SUFFERED OR
INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING
PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER.
(c) Several Liability of Sellers. The liabilities and obligations of
Sellers to Buyer under this Agreement shall be individual except where a
liability or obligation binds more than one Seller to Buyer, in which case such
liability or obligation shall be several, not joint or solidary, and each
Seller shall be liable to Buyer under this Agreement only for its proportionate
share of such liabilities and obligations determined as hereinafter set forth.
Sellers' proportionate shares of liability under Sections 3.4 and 13.3(b) shall
be as set forth in SCHEDULE 13.4(C)(I). Sellers' proportionate shares of
liability under Section 12.2 shall be as set forth in SCHEDULE 13.4(C)(II) for
the particular Property Subdivision that is the subject of the asserted
liability in question; provided, however, if Buyer determines in good faith
that the asserted liability in question is not clearly attributable to any one
or more particular Property Subdivisions, then Sellers' proportionate shares of
such liability shall be a set forth in SCHEDULE 13.4(C)(I).
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party. In addition, this Agreement
may contain more than one counterpart of the signature pages and this Agreement
may be executed by the affixing of the signatures of each of the parties to one
or more of such counterpart signature pages; all of such counterpart signature
pages shall be read as though one, and they shall have the same force and
effect as though all of the signers had signed a single set of signature pages.
Section 14.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA WITHOUT
REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 14.3 Entire Agreement. This Agreement (including the Related
Agreements and other agreements expressly incorporated herein) and the
Schedules and Exhibits hereto contain the entire agreement between the parties
with respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein.
-25-
32
Section 14.4 Expenses. Buyer shall be responsible for (i) any sales Taxes
which may become due and owing by reason of the sale of the Assets hereunder,
(ii) all transfer, stamp, documentary and similar Taxes imposed on the parties
hereto with respect to the property transfer contemplated pursuant to this
Agreement and (iii) all recording fees relating to the filing of instruments
transferring title to Buyer from Sellers. Sellers shall be responsible for (i)
all recording and other fees relating to title curative documents and (ii) all
income and other Taxes incurred by or imposed on Sellers with respect to the
transactions contemplated hereby. All other costs and expenses incurred by
each party hereto in connection with all things required to be done by it
hereunder, including attorney's fees, accountant fees and the expense of title
examination, shall be borne by the party incurring same.
Section 14.5 Notices. All notices hereunder shall be sufficiently given
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
by United States Mail, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to
Sellers shall be addressed as follows:
Xxxxxx Energy, Inc.
000 Xxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx, President
Telecopy No: (000) 000-0000
South Central Petroleum, Inc.
6550 Cliffbrook (75240)
P. O. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxx Xxxxx, President
Telecopy No. (000) 000-0000
with copies to:
J. Xxxxxxx Xxxxxxx
Cook, Yancey, King & Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000 (71101)
P. O. Xxx 00000
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
or at such other address and to the attention of such other Person as SEI may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
-26-
33
Crystal Gas, L.L.C.
000 Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xx. Xxx X. Xxxxxxx, Xx., President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxx
Xxxxxxxxx & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopy No. (000) 000-0000
or at such other address and to the attention of such other Person as Buyer may
designate by written notice to Sellers.
Section 14.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that no
assignment or other transfer by any party shall release such party from any of
its obligations under this Agreement. Each Company Seller agrees that in
connection with any sale or other disposition or series of sales or
dispositions of all or substantially all of such party's assets to any third
Person or Persons or any merger or liquidation of such Company Seller, the
acquiring Person or other recipient of all or substantially all of such Company
Seller's assets, as the case may be, shall assume the obligations of such
Company Seller under this Agreement.
Section 14.7 Headings. The headings to Articles, Sections and other
subdivisions of this Agreement are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Agreement.
Section 14.8 Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the
party against whom enforcement of any such modification or amendment is sought.
Any party hereto may, only by an instrument in writing, waive compliance by
another party hereto with any term or provision of this Agreement on the part
of such other party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not
be construed as a waiver of any subsequent breach.
Section 14.9 Schedules and Exhibits. All Schedules and Exhibits hereto
which are referred to herein are hereby made a part hereof and incorporated
herein by such reference.
-27-
34
Section 14.10 Purchase Price Allocation for Tax Purposes. Sellers and
Buyer agree that the Purchase Price shall be allocated to the various Assets
for federal and state income tax purposes only in the manner set forth in
SCHEDULE 14.10. The parties agree not to take a federal or state income tax
reporting position inconsistent with the allocations set forth on SCHEDULE
14.10. The parties further agree that the allocations set forth on SCHEDULE
14.10 represent reasonable estimates of the fair market values of the Assets
described therein.
Section 14.11 Interpretation. In construing this Agreement:
(a) Examples shall not be construed to limit, expressly or by implication,
the matter they illustrate;
(b) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions;
(c) A defined term has its defined meaning throughout this Agreement and
each exhibit, attachment, and schedule to this Agreement, regardless of whether
it appears before or after the place where it is defined;
(d) Each Exhibit and Schedule to this Agreement is a part of this
Agreement, but if there is any conflict or inconsistency between the main body
of this Agreement and any Exhibit or Schedule, the provisions of the main body
of this Agreement shall prevail; and
(e) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
Section 14.12 Agreement for the Parties' Benefit Only. Except as
specified in Article XII, which is also intended to benefit and to be
enforceable by any of the Indemnified Parties, this Agreement is not intended
to confer upon any Person not a party hereto any rights or remedies hereunder,
and no Person, other than the parties hereto or the Indemnified Parties, is
entitled to rely on any representation, warranty, covenant or agreement
contained herein. In each case, the third party beneficiary may only bring
suit against the defaulting party or parties.
Section 14.13 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
adverse manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
-28-
35
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
Section 14.14 Arbitration. In the event of any dispute, controversy or
claim arising out of or relating to this Agreement or the scope,
breach, termination or validity of this Agreement, such dispute, controversy or
claim shall be submitted to binding arbitration in accordance with the
Arbitration Procedures.
Section 14.15 Recovery of Costs and 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 attorneys' fees
from the nonprevailing party.
Section 14.16 Consent to Jurisdiction and Service of Process. Any legal
action, suit or proceeding arising out of or relating to this Agreement or the
Related Agreements and transactions contemplated hereby and thereby may be
instituted in any state or federal court in Shreveport, Caddo Parish,
Louisiana, and each party agrees not to assert, by way of motion, as a defense,
or otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement, the Related Agreements
or the subject matter hereof or thereof may not be enforced in or by such
court. Each party further irrevocably submits to the jurisdiction of any such
court in any such action, suit or proceeding. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against any party if given by registered or certified mail, return receipt
requested or by any other means of mail which requires a signed receipt,
postage prepaid, mailed to such party at the address(es) listed in Section
14.5. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any jurisdiction
other than Louisiana.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties as of the day first above written.
BUYER:
CRYSTAL GAS, L.L.C.
By: Crystal Oil Company, Member
By: _________________________
Name: _______________________
Title: ______________________
-29-
36
By: Crystal Program, Ltd., Member
By: _____________________________
Name: ___________________________
Title: __________________________
[Signatures continued on Page 28]
-30-
37
SELLERS:
XXXXXX ENERGY, INC.
By:
-------------------------------------
Xxxxx X. Xxxxxx, President
SOUTH CENTRAL PETROLEUM, INC.
By:
-------------------------------------
Xxxxx X. Xxxxx, President
ENERCO EXPLORATION AND MANAGEMENT CO.
By:
-------------------------------------
Xxxxx X. Xxxxx, President
-----------------------------------------
XXXXX XXXXXXXX
-----------------------------------------
XXXXXXX X. XXXXXXXX
-----------------------------------------
XXXXX X. XXXXX
-----------------------------------------
XXXXXXX XXXXXXX XXXXX
-----------------------------------------
XXXXX X. XXXXX, TRUSTEE OF THE XXXXX X.
XXXXX TRUST
-31-
38
[Signatures continued on Page 29]
------------------------------------
XXXXX X. XXXXXX
------------------------------------
XXXX XXXXXXX XXXXX XXXXXX
------------------------------------
XXXXXX X. XXXXXX
------------------------------------
XXXXXX XXXXXX XXXX
-32-
39
GUARANTY
The undersigned, CRYSTAL OIL COMPANY, a Louisiana corporation
("Guarantor"), as of the date of execution of the foregoing Asset Purchase
Agreement (the "Agreement"), for value received and as an inducement to Sellers
(as defined in the Agreement), and Sellers' heirs, successors and assigns, to
enter into and execute such Agreement, does hereby unconditionally guarantee to
Sellers, and Sellers' heirs, successors and assigns, the full and complete
performance by Buyer (as defined in the Agreement) of all the covenants,
agreements and obligations made or undertaken by or imposed upon Buyer in said
Agreement or in any amendments, changes or modifications thereof, including,
without limitation, the payment of the Adjusted Purchase Price and all other
payments required of Buyer under the terms and provisions of the Agreement.
Notice of acceptance of this Guaranty, notice of non-payment or
non-performance, notice of amounts owed but unpaid at any particular time,
protests, demands and prosecution of remedies are hereby expressly waived by
Guarantor, and the obligations of Guarantor hereunder shall in no wise be
terminated, affected or impaired by reason of the assertion by Sellers against
Buyer of any of the rights or remedies reserved to Sellers pursuant to the
provisions of the Agreement. Sellers may grant extensions of time and other
indulgences and may modify, amend and waive any of the terms, covenants,
conditions, provisions or agreements of the Agreement, and discharge or release
any party or parties thereto, all without notice to Guarantor and without in
any way impairing, releasing or affecting the liability or obligation of
Guarantor hereunder. Guarantor agrees that Sellers may proceed directly
against Guarantor without taking any action under the Agreement and without
exhausting Sellers' remedies against Buyer; and no discharge of Buyer in
bankruptcy or in any other insolvency proceedings shall in any way or to any
extent discharge or release Guarantor from any liability or obligation
hereunder. Guarantor further covenants and agrees that this Guaranty shall
remain and continue in full force and effect as to any amendment or
modification of the Agreement. The terms and provisions of this Guaranty shall
be binding upon Guarantor and its successors, assigns and legal
representatives, and shall inure to the benefit of Sellers and Sellers' heirs,
successors and assigns.
Any dispute, controversy or claim arising out of or relating to this
Guaranty or the scope, breach, termination or validity of this Guaranty shall
be submitted to binding arbitration in accordance with the Arbitration
Procedures (as defined in the Agreement), which are made a part of and
incorporated into this Guaranty as fully as if the same were set forth herein
in full, provided that, for purposes of this Guaranty, the term "Buyer" as used
in the Arbitration Procedures shall be deemed to read "Guarantor."
IN WITNESS WHEREOF, the undersigned has signed this Guaranty as of the
date of the Agreement.
CRYSTAL OIL COMPANY
By: ________________________________
Name: ______________________________
Title: _____________________________
"GUARANTOR"
-33-
40
EXHIBIT A-1
ARBITRATION PROCEDURES
The Arbitration Procedures referred to in the Asset Purchase Agreement
(the "Agreement") to which this Exhibit A-1 is attached shall be as follows:
1. Capitalized terms used herein, and not otherwise herein defined, shall
have the meaning ascribed to such terms in the Agreement.
2. In the event of any dispute, controversy or claim arising out of or
relating to the Agreement or the scope, breach, termination or
validity of this Agreement, the parties agree to jointly select a board of
arbitrators who are generally knowledgeable about the oil and gas industry
and the nature of the issues to be arbitrated, which board shall be the
sole arbitrator to hear and decide all matters that are subject to
arbitration under the Agreement. Either SEI, on behalf of Sellers, or
Buyer (each a "Party" for purposes of these Arbitration Procedures) may
notify the other that a dispute is to be resolved pursuant to these
Arbitration Procedures. Within five (5) days after the receipt by a Party
of notice from the other, SEI, on behalf of Sellers, shall by written
notice name one arbitrator and Buyer shall by written notice name one
arbitrator. The two arbitrators so appointed shall name the third
arbitrator within ten (10) days after the selection of the second
arbitrator. If they fail to do so, then either Party may ask the American
Arbitration Association ("AAA") to appoint an arbitrator or arbitrators in
accordance with the Commercial Arbitration Rules (the "Rules") of the AAA.
The arbitrators selected to act under these Arbitration Procedures shall
be qualified by education, experience or training to render a decision
upon the issues in dispute.
3. Any arbitration hearing shall be held in Shreveport, Louisiana unless
another place is determined to be mutually acceptable to the arbitrators,
SEI and Buyer.
4. The arbitrators shall settle all disputes concerning matters for which
the Agreement requires the use of arbitration in accordance with the
Rules to the extent such Rules do not conflict with the terms of the
Agreement.
5. The arbitrators promptly shall hear and determine (after giving the
Parties due notice of hearing and reasonable opportunity to be
heard) the questions submitted and shall render a decision within sixty
(60) days after notifying the Parties that the arbitration hearings have
been closed or, if oral hearings have been waived, from the date of the
AAA's transmittal of the Parties' final statements and proofs to the
arbitrators. If the arbitrators fail to (i) commence
41
the arbitration within thirty (30) days after their selection or (ii)
render a decision within the sixty (60) day period described in the
preceding sentence, then either Party may, by notice to the other Party
and to the AAA, demand that the arbitrators be dismissed. Upon receiving
that demand, the AAA shall dismiss the arbitrators and shall appoint
another board of arbitrators who shall be selected and who shall conduct
the arbitration pursuant to these Arbitration Procedures.
6. The arbitrators shall not have jurisdiction or authority to add to,
detract from or alter in any way the provisions of the Agreement.
Pending the final decision of the arbitrators of any dispute, the Parties
will proceed diligently with performance of all contract obligations,
including the payment of all sums not in dispute, required by the
Agreement. Notwithstanding the foregoing, the Parties reserve the right
to apply to any court of competent jurisdiction for the purpose of
obtaining security or other provisional relief to satisfy or effectuate an
eventual arbitration award, including without limitation, attachment and
injunctive relief. The commencement of any action for such relief in aid
of arbitration shall not constitute a waiver of the right to arbitration
nor shall it prejudice in any way the right to proceed to arbitration.
7. If an arbitrator dies, resigns or is otherwise unable to perform his
duties as an arbitrator, another arbitrator shall be selected in
accordance with these Arbitration Procedures. The arbitrators may in all
matters act through a majority of its members on each matter if unanimity
is not attained. It shall not be necessary that the same majority agree
on each and every item. The arbitrators shall not have any authority to
award punitive damages.
8. The written decision or award of the arbitrators shall be final and
binding upon the Parties and the Parties shall abide by and comply with
such decision and a judgment may be rendered upon such decision or award
in a court of competent jurisdiction. The expenses of arbitration,
including reasonable compensation to the third arbitrator, shall be borne
equally by the Parties. Each Party shall bear the compensation and
expenses of its own counsel, witnesses and employees and of any arbitrator
it has appointed. If the testimony of a witness is obtained by both
parties, the costs associated with obtaining such testimony shall be borne
equally between the Parties.
Exhibit A-1 - Page 2
42
APPENDIX A
TO
ASSET PURCHASE AGREEMENT
DEFINITIONS
"Action" shall mean any action, claim, suit, arbitration, inquiry,
proceeding, investigation, condemnation or audit by or before any court or
other Governmental Authority.
"Adjustment Period" shall be as defined in Section 3.3(a).
"Adjusted Purchase Price" shall be as defined in Section 3.1.
"Adjustment Statement" shall be as defined in Section 3.3(a).
"Affiliate" shall mean, as to the Person specified, any Person (a)
controlling, controlled by or under common control with such specified Person,
(b) which beneficially owns or holds 10% or more of any class of stock or other
equity interest of such specified Person, or (c) 10% or more of any class of
whose stock or equity interest is beneficially owned or held by such specified
Person and its Affiliates. The concept of control, controlling or controlled
as used in the aforesaid context means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise. The transactions contemplated hereby shall not be considered or
taken into account in determining if any Person is an Affiliate of any other
Person and no Person shall be deemed an Affiliate of any Person by reason of
any rights, interests or remedies of either Person under this Agreement.
"Agreed Rate" shall mean an annual rate of interest equal to the lesser of
(i) eight percent (8%) and (ii) the maximum rate of interest allowed by Law.
"Arbitration Procedures" shall mean the arbitration procedures set forth
in EXHIBIT A-1.
"Assets" shall mean the following described assets and properties (except
to the extent constituting Excluded Assets): (b) the Subject Interests; (c)
the Lands; (d) the Incidental Rights; (e) the Claims; (f) the Royalty Accounts;
and (g) all (i) Hydrocarbons produced from or attributable to the Subject
Interests with respect to all periods subsequent to the Effective Time and (ii)
proceeds from or of such Hydrocarbons.
43
"Assumed Liabilities" shall mean (i) all Covered Liabilities of Sellers
with respect to the Royalty Accounts, (ii) all Covered Liabilities arising out
of or attributable to the ownership, use, construction, maintenance or
operation of the Assets subsequent to Closing, but excluding therefrom any
Excluded Liabilities, and (iii) all Covered Liabilities arising out of or
attributable to Environmental Conditions existing at or before the Closing but
only with respect to claims made by third Persons after (and not before) the
expiration of two (2) years following the Closing Date and excluding all
Covered Liabilities whatsoever arising out of or attributable to any pollution,
contamination, degradation, damage or injury to any lands or properties other
than the Lands that resulted from disposal of Hazardous Materials generated or
removed from the Lands or Assets, regardless of whether such liabilities are
asserted before, during or after such two (2) year period.
"Business" shall mean the ownership of the Assets and all exploration,
development, improvement, operational, production, disposal, repair,
replacement, maintenance, abandonment, marketing, transportation, storage,
treatment, refining, processing, management and other activities or operations
conducted by, through or under any Seller or any of its Affiliates with respect
to or in connection with the Assets or any Hydrocarbons produced from or
attributable to the Assets, including the use, disposal, storage, treatment,
transportation or other handling or disposition of any materials, water, wastes
or other substances in, on, from or attributable to any of the Assets.
"Buyer Indemnified Party" shall be as defined in Section 12.2.
"Claims" shall mean all right, title and interest of Sellers to any claims
to the extent attributable to the Assets or the Business subsequent to the
Effective Time, including, without limitation, past, present or future
claims, whether or not previously asserted by any Seller.
"Closing" shall be the consummation of the transaction contemplated by
Article IX.
"Closing Date" shall mean (a) May 30, 1997 or (b) such other date as may
be mutually agreed to by SEI and Buyer.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto, together with all regulations promulgated thereunder.
"Company Sellers" shall mean SEI, SCPI and Enerco.
Appendix A - Page 2
44
"Conveyance" shall be as defined in Section 7.2.
"Covered Liabilities" shall mean any and all debts, losses, liabilities,
duties, claims, damages, obligations, payments (including, without limitation,
those arising out of any demand, assessment, settlement, judgment or compromise
relating to any actual or threatened Action), Taxes, costs and expenses
(including, without limitation, any attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending any Action),
matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, known or unknown, including, without limitation, any of the
foregoing arising under, out of or in connection with any Action, any order or
consent decree of any Governmental Authority, any award of any arbitrator, or
any Law, contract, commitment or undertaking.
"Deed" shall be as defined in Section 7.2.
"Defensible Title" shall mean, respectively as to the Subject Interest or
Subject Interests related to a particular Property Subdivision, record title to
such Property Subdivision and the Subject Interest or Subject Interests related
to such Property Subdivision that: (i) entitles Sellers to receive and retain,
without suspension, reduction or termination, not less than the applicable Net
Revenue Interest or Net Revenue Interests specified for such Property
Subdivision in the Property Schedule through plugging, abandonment and salvage
of all xxxxx comprising or included in such Property Subdivision and all xxxxx
now or hereafter producing from or attributable to such Property Subdivision;
(ii) obligates Sellers to bear the costs and expenses attributable to the
maintenance, development, and operation of such Property Subdivision through
plugging, abandonment and salvage of all xxxxx comprising or included in such
Property Subdivision and all xxxxx now or hereafter producing from or
attributable to such Property Subdivision in an amount not greater than the
applicable Working Interest or Working Interests specified for such Property
Subdivision in the Property Schedule; and (iii), except for Permitted
Encumbrances, is free and clear of all liens, security interests, pledges,
collateral assignments, charges, oil, gas or other hydrocarbon sales or
processing contracts or options, options or calls on production, valid and
enforceable preferential purchase rights or options, restrictions,
reservations, encumbrances, encroachments and defaults.
"Effective Time" shall mean 7:00 a.m., Central Standard Time, on March 1,
1997.
"Enerco" shall mean Enerco Exploration and Management Co., a Texas
corporation.
Appendix A - Page 3
45
"Environmental Conditions" shall mean any pollution, contamination,
degradation, damage or injury caused by, related to or arising from or in
connection with the generation, use, handling, treatment, remediation, storage,
transportation, disposal, discharge, release or emission of any Hazardous
Materials by, in, on or underlying the Assets.
"Environmental Laws" shall mean all Laws relating to (a) the control of
any pollutant or potential pollutant or protection of the air, water, land or
the environment, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, (c) exposure to hazardous,
toxic, explosive, corrosive or other substances alleged to be harmful, or (d)
wetlands, the Louisiana Coastal Zone, pinelands, or other protected lands or
wildlife species. "Environmental Laws" shall include, but not be limited to,
the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq., the Resource Conservation Recovery Act ("RCRA"),
42 U.S.C. Section 6901 et seq., the Superfund Amendments and Reauthorization
Act, 42 U.S.C. Section 11001 et seq., the Water Pollution Control Act, 33
U.S.C. Section 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the Louisiana
Environmental Quality Act, La. R.S. 30:2001, et seq., as amended from time to
time, and regulations promulgated thereunder, and any non-hazardous oilfield
wastes ("NOW") defined and regulated by the Louisiana Commissioner of
Conservation pursuant to La. R.S. 30:1 et seq., as amended from time to time,
and regulations promulgated thereunder.
"Excluded Assets" shall mean the following:
(a) all rights, interests, assets and properties described in
SCHEDULE A-1;
(b) except to the extent constituting the Royalty Accounts, all
deposits, cash, checks, funds and accounts receivable attributable
to Sellers' interest in the Assets with respect to any period of
time prior to the Effective Time;
(c) all (i) Hydrocarbons produced from or attributable to the
Subject Interests with respect to all periods prior to the Effective
Time, (ii) Hydrocarbons attributable to the Subject Interests which,
at the Effective Time, are in storage, within processing plants, in
pipelines or otherwise held in inventory, and (iii) proceeds from or
of such Hydrocarbons;
Appendix A - Page 4
46
(d) all receivables and cash proceeds which were expressly
taken into account and for which credit was given in the
determination of Net Cash Flow pursuant to Section 3.3, as adjusted
pursuant to Section 3.4; and
(e) claims of Sellers for refund of or loss carry
forwards with respect to (i) Taxes attributable to any period prior
to the Effective Time or (ii) any Taxes attributable to the Excluded
Assets.
"Excluded Liabilities" shall mean, except to the extent constituting an
Assumed Liability, any Covered Liabilities arising out of or attributable to
the ownership, use, construction, maintenance or operation of the Assets prior
to Closing, including, without limitation, any claims made or Covered
Liabilities incurred before or after Closing which arise out of or are
attributable to (i) any Environmental Condition or any spill, discharge,
release, disposal, storage, treatment, processing, remediation, transportation,
transmission or other handling of any Hazardous Materials occurring or
commencing prior to Closing or (ii) any injury, death, casualty, tortious
action or inaction, violation of any Law, existence or incurrence of any defect
in the Assets, breach of contract or duty or other similar or dissimilar event
or occurrence prior to Closing. Excluded Liabilities shall also include all
Covered Liabilities to the extent related to or arising out of the Excluded
Assets.
"Final Adjustment Statement" shall be as defined in Section 3.4.
"Governmental Authority" shall mean (i) the United States of America,
(ii) any state, county, municipality or other governmental subdivision within
the United States of America, and (iii) any court or any governmental
department, commission, board, bureau, agency or other instrumentality of the
United States of America or of any state, county, municipality or other
governmental subdivision within the United States of America.
"Hazardous Materials" shall mean any explosives, radioactive materials,
asbestos material, urea formaldehyde, hydrocarbon contaminants, underground
tanks, pollutants, contaminants, hazardous, corrosive or toxic substances,
special waste or waste of any kind, including compounds known as
chlorobiophenyls and any material or substance the storage, manufacture,
disposal, treatment, generation, use, transport, mediation or release into the
environment of which is prohibited, controlled, regulated or licensed under
Environmental Laws.
"Hazardous Substance" shall be as defined in Section 4.1(p).
Appencix A - Page 5
47
"Hydrocarbons" shall mean (a) crude oil, natural gas, casinghead gas,
distillate, condensate, natural gas liquids and other liquid or gaseous
hydrocarbons and carbon dioxide, (b) all other minerals (whether similar or
dissimilar to the minerals listed in (a) above) of every kind and character,
including helium, which may be covered by or included in the leases,
conveyances, agreements and other instruments creating, granting, reserving or
otherwise establishing any Subject Interest described in the Property Schedule,
but only as to the lands covered or affected by such Subject Interests or
pooled, unitized or combined therewith, and (c) all minerals, products and
substances produced with or extracted, separated, processed or produced from
hydrocarbons or other minerals or substances included in (a) or (b) of this
definition.
"Hydrocarbon Interests" means (a) leases affecting, relating to or
covering any Hydrocarbons and the leasehold interests and estates in the nature
of working or operating interests under such leases, as well as overriding
royalties, net profits interests, production payments, carried interests,
rights of recoupment and other interests in, under or relating to such leases,
(b) fee interests in Hydrocarbons, (c) royalty interests in Hydrocarbons, (d)
any other interest in Hydrocarbons in place, (e) any economic or contractual
rights, options or interests in and to any of the foregoing, including, without
limitation, any farmout or farmin agreement or production payment affecting any
interest or estate in Hydrocarbons, and (f) any and all rights and interests
attributable or allocable thereto by virtue of any pooling, unitization,
communitization, production sharing or similar agreement, order or declaration.
"Incidental Rights" shall mean all right, title and interest of
Sellers in and to or derived from the following insofar as the same are
attributable to the Assets or the Business:
(a) all unitization, communitization and pooling designations,
declarations, agreements and orders, and any production sharing
agreements, covering Hydrocarbons in or under the Lands or any portion
thereof and the units and pooled or communitized areas created thereby;
(b) all easements, rights-of-way, leases, permits, licenses,
franchises, certificates of public convenience and necessity, servitudes
or other rights and privileges which (i) relate or are appurtenant to any
Subject Interest or other Assets or (ii) are used or held for use in
connection with the Business;
(c) all machinery, equipment and other tangible personal property
(including inventories of tubular goods, supplies and tools) and all
fixtures and
Appendix A - Page 6
48
improvements (i) situated upon or attached to any part of the Subject
Interests or other Assets or (ii) used or held for use in connection with the
Business;
(d) all purchase, sale or exchange agreements, farm-out or farm-in
agreements, operating agreements, joint venture agreements, partnership
agreements, division and transfer orders, advance payment agreements,
processing contracts, plant agreements, gas balancing or deferred
production agreements, pipeline, gathering or transportation agreements,
drilling contracts, seismic or geophysical permits or agreements,
injection or repressuring agreements, cycling agreements, construction
agreements, indemnity agreements, guaranty agreements, salt water or other
disposal agreements, equipment or space leases or rental agreements and
any and all other contracts or agreements covering, arising out of, used
or useful in connection with or otherwise pertaining to the Subject
Interests or other Assets or the Business;
(e) all lease files, land files, prospect files, well files, drilling
reports, production records, gas and oil sales contract files, gas processing
files, division order files, abstracts, title opinions, seismic, geophysical,
geological and engineering data (to the extent the transfer of such data is not
prohibited by existing bona fide contractual obligations with third parties),
litigation files, intellectual property, computer software, including tapes,
discs, data and program documentation (to the extent the transfer of such
computer software is not prohibited by existing bona fide restrictions with
third parties) and all other files, maps, logs, data, discs, tapes,
documentation, books and records arising out of or relating to the Subject
Interests or other Assets or the Business (such files, maps, logs, data, discs,
tapes, documentation, books and records being herein called the "Records"); and
(f) all proceeds of and other rights relating to insurance or
condemnation payable or accruing by reason of the loss of, damage to,
diminution in the value of or income or revenues from, or taking of all or
any part of the Subject Interests or other Assets or the Business occurring
after the Effective Time or relating or attributable to the period subsequent
to the Effective Time.
"Indemnified Party" shall be as defined in Section 12.3.
"Indemnitor" shall be as defined in Section 12.3.
"Initial Adjustment Amount" shall be as defined in Section 3.3(a).
Appendix A - Page 7
49
"Lands" shall mean each and every kind and character of right, title,
claim or interest which any Seller has in and to the lands covered by or
subject to the Subject Interests.
"Law" shall mean any applicable statute, law, ordinance, regulation,
rule, ruling, order, restriction, requirement, writ, injunction, decree or other
official act of or by any Governmental Authority.
"Net Cash Flow" shall be as defined in Section 3.3(c).
"Net Revenue Interest" shall mean an interest (expressed as a
percentage or decimal fraction) in and to all Hydrocarbons produced and saved
from or attributable to a Property Subdivision.
"Permits" shall mean all licenses, permits, certificates, orders,
approvals and authorizations of Governmental Authority necessary to own the
Assets and conduct the Business.
"Permitted Encumbrances" shall mean any of the following matters:
(a) all agreements, instruments, documents, liens,
encumbrances, and other matters which are expressly identified and
set forth in SCHEDULE A-2;
(b) any (i) inchoate liens or charges constituting or securing
the payment of expenses which were incurred incidental to
maintenance, production or operation of the Assets or for the
purpose of producing or processing Hydrocarbons therefrom or therein
in the ordinary course of business and (ii) materialman's,
mechanics', repairman's, employees', contractors', operators' or
other similar liens, security interests or charges for liquidated
amounts arising in the ordinary course of business incidental to
maintenance, production or operation of the Assets or the production
or processing of Hydrocarbons therefrom, but only to the extent the
matters in (i) and (ii) are matters (x) which Sellers pay and
release at or prior to Closing or (y) for which Buyer has expressly
agreed to assume or pay pursuant to the terms hereof;
(c) any liens for Taxes not yet delinquent;
Appendix A - Page 8
50
(d) any liens or security interests created by Law or reserved
in oil, gas and/or mineral leases for royalty, bonus or rental or
for compliance with the terms of the Subject Interests;
(e) any easements, rights-of-way, servitudes, permits or
licenses to the extent such matters, individually or in the
aggregate, do not (i) interfere in any material respect with Buyer's
operation of the portion of the Assets burdened thereby or (ii)
require Buyer to incur any liability with respect thereto; and
(f) any agreement, contract, lease, instrument, encumbrance,
permit, amendment, extension or other matter entered into by Sellers
in accordance with Section 7.1.
"Person" shall mean any Governmental Authority or any individual,
firm, partnership, corporation, joint venture, trust, unincorporated
organization or other entity or organization.
"Preference Right" shall mean any right or agreement that enables or
may enable any Person to purchase or acquire any Asset or any interest therein
or portion thereof as a result of or in connection with (i) the sale,
assignment, encumbrance or other transfer of any Asset or any interest therein
or portion thereof or (ii) the execution or delivery of this Agreement or any
Related Agreement or the consummation or performance of the terms and conditions
contemplated by this Agreement or any Related Agreement.
"Property Schedule" means EXHIBIT A-2 attached to and made a part of
this Agreement.
"Property Subdivision" means each well location, well, well
completion, multiple well completion, unit, lease, or other subdivision of
property described or referenced in the Property Schedule, including any well
or unit projected in the Reserve Report. The Property Subdivision with
respect to any well, well location, well completion, or multiple well
completion referenced in the Property Schedule shall include the spacing unit
for such well, well location, well completion, or multiple well completion.
"Purchase Price" shall be as defined in Section 3.1.
Appendix A - Page 9
51
"Records" shall be as defined in the definition of Incidental Rights
contained in this Appendix A.
"Related Agreements" shall be as defined in Section 7.2.
"Reserve Report" shall mean that certain reserve report dated February 3,
1997, prepared by Xxxxxxxx & Associates, Inc. with respect to the Subject
Interests.
"Royalty Accounts" shall mean those separately identifiable accounts which
are expressly identified and set forth in SCHEDULE A-3 in which any Seller or
any third party operator is holding as of the Effective Time monies which (i)
are owing to third party owners of royalty, overriding royalty, working or
other interests in respect of past production of Hydrocarbons attributable to
the Assets or (ii) may be subject to refund by royalty owners or other third
parties to purchasers of past production of Hydrocarbons attributable to the
Assets, subject to Seller's release or transfer thereof in compliance with
Section 8.1.
"SCPI" shall mean South Central Petroleum, Inc. a Texas corporation.
"SEI" shall mean Xxxxxx Energy, Inc., a Louisiana corporation.
"Seller Indemnified Parties" shall be as defined in Section 12.1.
"Subject Interests" shall mean and include (i) the undivided interests
specified in the Property Schedule in, to or under the Hydrocarbon Interests
specifically described in the Property Schedule, (ii) except to the extent
constituting Excluded Assets, all other interests of any Seller in, to or under
any Hydrocarbon Interests in, to or under or derived from any lands covered by
or subject to any of the Hydrocarbon Interests described in the Property
Schedule, even though such interests of Sellers may be incorrectly described or
referred to in, or a description thereof may be omitted from, the Property
Schedule, and (iii) each renewal or extension of any interest covered by (i) or
(ii) above and all interests of any Seller in a new Hydrocarbon Interest taken
or acquired in replacement, in whole or in part, of any interest covered by (i)
or (ii) above insofar as such renewal, extension or new Hydrocarbon Interest
covers the Hydrocarbons which are or were covered by any interest covered by
(i) or (ii) above and such new Hydrocarbon Interest is taken or acquired prior
to Closing.
"Taxes" shall mean all federal, state and local taxes or similar
assessments or fees, together with all interest, fines, penalties and additions
thereto.
"Title Defect" shall be as defined in Section 6.2.
Appendix A - Page 10
52
"Title Defect Amount" shall be as defined in Section 6.1(d).
"Title Defect Property" shall be as defined in Section 6.1(c).
"Title Examination Period" shall be as defined in Section 6.1(a).
"Transfer Requirement" shall mean any consent, approval, authorization or
permit of, or filing with or notification to, any Person which must be
obtained, made or complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Asset or any interest therein in order (a) for
such sale, assignment, transfer or encumbrance to be effective, (b) to prevent
any termination, cancellation, default, acceleration or change in terms (or any
right thereof from arising) under any terms, conditions or provisions of any
Asset (or of any agreement, instrument or obligation relating to or burdening
any Asset) as a result of such sale, assignment, transfer or encumbrance, or
(c) to prevent the creation or imposition of any lien, charge, penalty,
restriction, security interest or encumbrance on or with respect to any Asset
(or any right thereof from arising) as a result of such sale, assignment,
transfer or encumbrance.
"Unscheduled Imbalance" means, respectively as to each Property
Subdivision to which the Subject Interests are attributable and without
duplication, the sum (expressed in Mcfs) of (i) the aggregate make-up, prepaid
or other volumes of Hydrocarbons, not described on SCHEDULE A-4, that any
Seller was obligated as of the Effective Time, on account of prepayment,
advance payment, take-or-pay, gas balancing or similar obligations, to deliver
from the Subject Interests attributable to such Property Subdivision after the
Effective Time without then or thereafter being entitled to receive full
payment therefor and (ii), to the extent such obligations burden the Assets or
Buyer could incur any liability therefor as a result of the transaction
contemplated hereby and the same are not described on SCHEDULE A-4 or covered
by clause (i) above, the aggregate pipeline or processing plant imbalances or
overdeliveries for which any Seller is obligated to pay or deliver Hydrocarbons
or cash to any pipeline, gatherer, transporter, processor, co-owner or
purchaser in connection with any Hydrocarbons attributable to the Subject
Interests.
"Working Interest" means the percentage of costs and expenses attributable
to the maintenance, development and operation of a Property Subdivision.
Appendix A - Page 11
