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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement"), dated as of November
10th, 2000, is by and among FUTURE CAL-TEX CORPORATION, a Texas corporation,
whose address is 000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("Seller"), and
MERIT PARTNERS, L.P., and MERIT ENERGY PARTNERS III, L.P., all Delaware limited
partnerships, whose address is 00000 Xxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000 (collectively, "Buyer").
WITNESSETH:
WHEREAS, Seller owns certain oil and gas leasehold interests and
related assets more fully described on the exhibits hereto; and
WHEREAS, Seller desires to sell and Buyer desires to acquire these
interests and related assets on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller and Buyer hereby agree as follows:
ARTICLE 1. - DEFINITIONS
1.1. "AGREEMENT" shall mean this Purchase and Sale Agreement between
Seller and Buyer.
1.2. "ALLOCATED VALUE" shall mean the respective value assigned to
separate components of the Assets as set forth on Exhibit B.
1.3. "ASSETS" shall mean the following described assets and properties
(except to the extent constituting Excluded Assets):
(a) the Leases;
(b) the Personal Property and Incidental Rights; and
(c) the Inventory Hydrocarbons
1.4. "ASSUMED OBLIGATIONS" shall mean:
(a) all Environmental Obligations or Liabilities; and
(b) all liabilities, duties, and obligations that arise prior to or
after the Effective Time with respect to ownership or operation of the Assets,
including, but not limited to: (i) all duties, liabilities and obligations
arising under any contract or agreement affecting the Assets, and all
obligations and benefits with respect to gas production, sales or processing
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imbalances with third parties; (ii) all duties, liabilities, and obligations
that arise under the Leases, assignments in the chain of title of the Leases,
and burdens on production; and (iii) all other duties, liabilities, and
obligations assumed by Buyer under this Agreement. Notwithstanding the
foregoing, Buyer assumes all liabilities and obligations that arise prior to or
after the Effective Time with respect to compliance with all applicable rules,
regulations, statutes, permits and orders, including, but not limited to,
plugging, replugging and abandoning any xxxxx, the restoration of any well
sites, tank battery sites and gas plant sites, the proper removal, disposal and
abandonment of any wastes or fixtures, and the proper capping and burying of all
flow lines, if required, which are included in the Assets.
1.5. "CLOSING" shall be as defined in Section 12.1.
1.6. "CLOSING DATE" shall be as defined in Section 12.1.
1.7. "EFFECTIVE TIME" shall mean 7:00 a.m., Pacific Standard Time, on
December 1, 2000.
1.8. "ENVIRONMENTAL OBLIGATIONS OR LIABILITIES" shall mean all
liabilities, obligations, expenses (including, without limitation, all
attorneys' fees), fines, penalties, costs, claims, suits or damages (including
natural resource damages) associated with the Assets, whether arising before or
after the Effective Date, and attributable to or resulting from: (i) pollution
or contamination of soil, groundwater or air, on the Assets and any other
contamination of or adverse effect upon the environment, (ii) underground
injection activities and waste disposal, (iii) clean-up responses, remedial,
control or compliance costs, including the required cleanup or remediation of
spills, pits, ponds, or lagoons, including any subsurface or surface pollution
caused by such spills, pits, ponds, or lagoons, (iv) noncompliance with
applicable land use, permitting, surface disturbance, licensing or notification
requirements, and (v) violation of any federal, state or local environmental or
land use law; provided, however, that nothing in this Section 1.8 will be
construed to include in the definition of Environmental Obligations or
Liabilities any liabilities, obligations, expenses (including, without
limitation, all attorneys' fees), fines, penalties, costs, claims, suits or
damages (including natural resource damages) of any nature, whether arising
before or after the Effective Date, and attributable to or resulting from any of
the causes noted above if a finder of fact ultimately determines that such
causes resulted from the gross negligence or willful misconduct of the Seller.
1.9. "EXCLUDED ASSETS" shall mean the following:
(a) (i) all trade credits, accounts receivable, notes receivable and
other receivables attributable to Seller's interest in the Assets with respect
to any period of time prior to the Effective Time; (ii) all deposits, cash,
checks in process of collection, cash equivalents and funds attributable to
Seller's interest in the assets with respect to any period of time prior to the
Effective Time; and (iii) all proceeds, benefits, income or revenues accruing
(and any security or other deposits made) with respect to the Assets prior to
the Effective Time;
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(b) all corporate, financial, and tax records of Seller; however, Buyer
shall be entitled to receive copies of any tax records which directly relate to
any Assumed Obligations, or which are necessary for Buyer's ownership,
administration, or operation of the Assets;
(c) all claims and causes of action of Seller arising from acts,
omissions or events, or damage to or destruction of the Assets, occurring prior
to the Effective Time;
(d) except as otherwise provided in Article 14, all rights, titles,
claims and interests of Seller relating to the Assets prior to the Effective
Time (i) under any policy or agreement of insurance or indemnity; (ii) under any
bond; or (iii) to any insurance or condemnation proceeds or awards;
(e) all Hydrocarbons produced from or attributable to the Assets with
respect to all periods prior to the Effective Time, together with all proceeds
from or of such Hydrocarbons, except the Inventory Hydrocarbons;
(f) claims of Seller for refund of or loss carry forwards with respect
to production, windfall profit, severance, ad valorem or any other taxes
attributable to any period prior to the Effective Time, or income or franchise
taxes;
(g) all amounts due or payable to Seller as adjustments or refunds
under any contracts or agreements (including take-or-pay claims) affecting the
Assets, respecting periods prior to the Effective Time;
(h) all amounts due or payable to Seller as adjustments to insurance
premiums related to the assets with respect to any period prior to the Effective
Time;
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to the Assets, and all accounts
receivable attributable to the Assets, prior to the Effective Time;
(j) all of Seller's intellectual property, including, but not limited
to, proprietary computer software, patents, trade secrets, copyrights, names,
marks and logos;
1.10. "EXISTING LIENS" shall mean all of those certain liens,
encumbrances, security interests and other rights and interests created by or
granted or referenced in a certain Mortgage, Line of Credit Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement
dated March 30, 2000, but effective as of March 31, 2000, from Seller, as
mortgagor, to Xxxxxxx X. Xxxx, as trustee, and for the benefit of Chase Bank of
Texas, National Association, as administrative agent for itself and the other
lenders referenced therein.
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1.11. "HYDROCARBONS" shall mean crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids and other liquid or gaseous
hydrocarbons (including CO(2)), and shall also refer to all other minerals of
every kind and character which may be covered by or included in the Leases and
Assets.
1.12. "INVENTORY HYDROCARBONS" shall mean all merchantable oil and
condensate produced from or attributable to the Leases prior to the Effective
Time which have not been sold by Seller and are in storage at the Effective
Time.
1.13. "LEASES" shall mean, except to the extent constituting Excluded
Assets, any and all interests owned by Seller and set forth on Exhibit A, or
which Seller is entitled to receive by reason of any participation, joint
venture, farm-in, farm-out, joint operating agreement or other agreement, in and
to the oil, gas and/or mineral leases, permits, licenses, concessions, leasehold
estates, royalty interests, overriding royalty interests, net revenue interests,
executory interests, net profit interests, working interests, reversionary
interests, fee and term mineral interests, and any other interests of Seller in
Hydrocarbons, it being the intent hereof that the legal descriptions and depth
limitations set forth on Exhibit A are for information only and the term
"Leases" includes all of Seller's right, title and interest in the interests
described on Exhibit A even though such interests may be incorrectly described.
1.14. "NEW OIL AND GAS LEASE" shall mean that certain Oil and Gas Lease
dated July 31, 2000, by and between Aera Energy LLC, as Lessor, and Future
Cal-Tex Corporation, as Lessee.
1.15. "PERFORMANCE DEPOSIT" shall be as defined in Section 3.2.
1.16. "PERSONAL PROPERTY AND INCIDENTAL RIGHTS" shall mean all right,
title and interest of Seller in and to or derived from the following insofar as
the same do not constitute Excluded Assets and are assignable and are
attributable to, appurtenant to, incidental to, or used for the operation of the
Leases:
(a) all easements, rights-of-way, permits, licenses, servitudes or
other interests;
(b) all equipment and other personal property, inventory, spare parts,
tools, fixtures, pipelines, platforms, tank batteries, appurtenances, and
improvements situated upon the Leases and used of held for use in connection
with the development or operation of the Leases or the production, treatment,
storage, compression, processing or transportation of Hydrocarbons from or in
the Leases;
(c) all automobiles, trucks and trailers used on the Leases;
(d) all contracts, agreements, and title instruments to the extent
attributable to and affecting the Assets in existence at Closing, including all
Hydrocarbon sales, purchase,
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gathering, transportation, treating, marketing, exchange, processing, and
fractionating contracts, and joint operating agreements; and
(e) originals of all lease files, land files, well files, production
records, division order files, abstracts, title opinions, and contract files,
insofar as the same are directly related to the Leases; including, without
limitation, all seismic, geological, geochemical, and geophysical information
and data, to the extent that such data is not subject to any third party
restrictions, but excluding Seller's proprietary interpretations of same.
1.17. "PURCHASE PRICE" shall be as defined in Section 3.1.
1.18. "SINKING FUND TRUST AGREEMENT" shall mean that certain Sinking
Fund Trust Agreement dated July 31, 2000, among Xxxxx Energy Company, Future
Cal-Tex Corporation and Aera Energy LLC.
ARTICLE 2. - AGREEMENT TO PURCHASE AND SELL
Subject to the terms and conditions of this Agreement, Seller agrees to
sell and convey to Buyer and Buyer agrees to purchase and pay for the Assets and
to assume the Assumed Obligations.
ARTICLE 3. - PURCHASE PRICE AND PAYMENT
3.1. PURCHASE PRICE. Subject to adjustment as set forth below, the
Purchase Price for the assets shall be THIRTY NINE MILLION FOUR HUNDRED FIFTY
THOUSAND DOLLARS ($ 39,450,000.00), allocated among the Assets as provided in
Exhibit B.
3.2. PERFORMANCE DEPOSIT. Immediately upon the execution hereof, Buyer
shall deliver to Seller by bank wire transfer, evidencing a Performance Deposit
equal to 5% of the Purchase Price.
3.3. FINAL SETTLEMENT/PURCHASE PRICE ADJUSTMENTS.
Within 120 days after Closing, Seller shall provide to Buyer, for
Buyer's concurrence, an accounting (the "Final Settlement Statement") of the
actual amounts of Seller's and Buyer's Credits for the adjustment set out in
this Section 3.3. Buyer shall have the right for 30 days after receipt of the
Final Settlement Statement to audit and take exceptions to such adjustments. Any
disagreements shall be resolved on a best efforts basis by Seller and Buyer.
Those credits agreed upon by Buyer and Seller shall be netted and the final
settlement shall be paid as directed in writing by the receiving party, on final
adjustment by the party owing it (the "Final Settlement").
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The Purchase Price shall be adjusted as follows:
(a) The Purchase Price shall be adjusted upward by the following
("Seller's Credits"):
(1) the value of (i) all Inventory Hydrocarbons, such value to
be based upon the prevailing market value for crude oil in effect as of
the Effective Time adjusted for grade and gravity, less taxes and
transportation fees deducted by the purchaser of such oil, such oil to
be measured at the Effective Time by the operators of the Assets; and
(ii) the value of all of Seller's unsold inventory of gas plant
products, if any, attributable to the Leases at the Effective Time
valued in the same manner as if such products had been sold under the
contract then in existence between Seller and the purchaser of such
products or, if there is no such contract, valued in the same manner as
if said products had been sold at the posted price for said products;
(2) the amount of all production expenses, direct operating
expenses (expressly excluding Seller's administrative overhead and
indirect charges but with the understanding that Seller may retain for
its own account all overhead charges paid by third party
non-operators), the fees, expenses and other amounts due to Torch
Operating Company, and capital expenditures (including, without
limitation, royalties, overriding royalties, rentals and other charges,
ad valorem, property, production, excise, severance, and other similar
taxes and assessments) attributable to the operation of the Assets
after the Effective Time and accrued prior to the Closing Date or
assumption of operation, whichever is later, in accordance with
generally accepted accounting principles;
(3) an amount equal to the sum of any upward adjustments
provided elsewhere in this Agreement; and
(4) any other amount agreed upon by Seller and Buyer in
writing prior to Closing.
(b) The Purchase Price shall be adjusted downward by the following
("Buyer's Credits"):
(1) the total sales value of all Hydrocarbons sold by the
Seller after the Effective Time, all of which are attributable to the
Assets, and any other monies collected by the Seller with respect to
the ownership or operation of the Assets after the Effective Time, but
excepting interest income.
(2) the amount of all unpaid ad valorem, property, production,
excise, severance and similar taxes and assessments (but not including
income taxes), which taxes and assessments become due and payable or
accrue to the Assets prior to the Effective Time, which amount shall,
where possible, be computed based
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upon the tax rate and values applicable to the tax period in question;
otherwise, the amount of the adjustment under this paragraph shall be
computed based upon such taxes assessed against the applicable portion
of the Assets for the immediately preceding tax period just ended;
(3) an amount equal to the sum of any downward adjustments
provided elsewhere in this Agreement;
(4) any other amount agreed upon by Seller and Buyer in
writing prior to Closing.
(c) Seller shall prepare and deliver to Buyer, at least three (3) days
prior to Closing, Seller's estimate of the adjusted Purchase Price to be paid at
Closing, together with a preliminary statement setting forth Seller's estimate
of the amount of each adjustment to the Purchase Price to be made pursuant to
this Section 3.3. The Parties shall negotiate in good faith and attempt to agree
on such estimated adjustments prior to Closing. In the event any estimated
adjustment amounts are not agreed upon prior to Closing, the estimate of the
adjusted Purchase Price for purposes of Closing shall be calculated based on
Seller's and Buyer's agreed upon estimated adjustments.
ARTICLE 4. - SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as of the date hereof, and the
Closing Date that:
(a) Subject to the provisions of Article 10(d), Seller is a Texas
corporation duly organized, validly existing, and in good standing under the
laws of the state of Texas, and is duly qualified to carry on its business in
those states where it is required to do so;
(b) Seller has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and the other
documents and agreements contemplated hereby, and to perform it obligations
under this Agreement and the other documents and agreements contemplated hereby.
The consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of its governing documents or
any agreement or instrument to which it is a party or by which it is bound
(except any provision contained in agreements customary in the oil and gas
industry relating to (1) the preferential right to purchase all or any portion
of the Assets; (2) required consents to transfer and related provisions; (3)
maintenance of uniform interest provisions; and (4) any other third-party
approvals or consents contemplated herein), or any judgment, decree, order,
statute, rule, or regulation applicable to Seller;
(c) This Agreement, and all documents and instruments required
hereunder to be executed and delivered by Seller at Closing, constitute legal,
valid and binding
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obligations of Seller in accordance with its respective terms, subject to
applicable bankruptcy and other similar laws of general application with respect
to creditors;
(d) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated
by, or to the actual knowledge of Seller threatened against Seller;
(e) The execution, delivery and performance of this Agreement and the
transaction contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, partnership or otherwise, on the part
of Seller;
(f) Seller has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees in connection with this Agreement and
the transaction provided herein for which Buyer shall have any obligation;
(g) Except as set forth in Schedule 4(g), there are no claims, demands,
actions, suits, proceedings (including condemnation, expropriation, or
forfeiture Proceedings) or governmental investigations or inquiries pending, or
to the knowledge of Seller threatened, against Seller, or any Asset (i) seeking
to prevent the consummation of the transactions contemplated hereby, or (ii)
which, singly or in the aggregate, would materially adversely affect the Assets;
(h) With respect to Assets operated by Seller, (i) Seller has
materially complied with all laws, rules, regulations, ordinances and orders of
all local, state and federal governmental bodies, authorities, agencies and
tribunals having jurisdiction over the Assets, including, but not limited to,
registration, bonding, plugging and restoration requirements, unitization
requirements, drilling requirements, well permitting requirements, spacing
requirements and production requirements, (ii) all material necessary permits
from governmental authorities having jurisdiction of the Assets have been
obtained, and all notices and reports required to be made to any governmental
authority have been timely and properly made and will continue to be timely and
properly made through Closing, and (iii) all plugged xxxxx located on the Assets
have been properly plugged, except to the extent noncompliance with any of the
foregoing would not have a material adverse effect on Buyer's ownership or
operation of the Assets after Closing; and
ARTICLE 5. - BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as of the date hereof, and the
Closing Date that:
(a) Buyer is a Delaware limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly qualified to carry on its business in those states where it is required to
do so;
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(b) Buyer has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and the other
documents and agreements contemplated hereby, and to perform it obligations
under this Agreement and the other documents and agreements contemplated hereby.
The consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of Buyer's articles of
incorporation, partnership agreement(s), by-laws or governing documents or any
material agreement or instrument to which it is a party or by which it is bound,
or any judgment, decree, order, statute, rule, or regulation applicable to
Buyer;
(c) the execution, delivery and performance of this Agreement and the
transactions contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, partnership or otherwise, on the part
of Buyer;
(d) this Agreement, and all documents and instruments required
hereunder to be executed and delivered by Buyer at Closing, constitute legal,
valid and binding obligations of Buyer in accordance with their respective
terms, subject to applicable bankruptcy and other similar laws of general
application with respect to creditors;
(e) there are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to the actual knowledge of Buyer threatened
against Buyer;
(f) Buyer has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees in connection with this Agreement and
the transaction provided herein;
(g) Buyer is an experienced and knowledgeable investor and operator in
the oil and gas business. Prior to entering into this Agreement, Buyer was
advised by and has relied solely on its own expertise and legal, tax, reservoir
engineering, and other professional counsel concerning this Agreement, the
Assets and the value thereof; and
(h) Buyer has arranged to comply with all applicable laws, ordinances,
rules and regulations, and Buyer shall promptly obtain prior to Closing, and
maintain in force thereafter, all permits, licenses, authorizations, bonds and
other matters required by public authorities in connection with the ownership
and operation of the Assets after Closing.
ARTICLE 6. - ACCESS TO INFORMATION AND INSPECTIONS
6.1. TITLE FILES. Promptly after the execution of this Agreement and
until the Closing Date, Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine, in Seller's offices at
their actual location, and, at Buyer's expense, make such copies of, all
abstracts of title, title opinions, title files, ownership maps, lease files,
assignments, division orders, payout statements and agreements pertaining to the
Assets as requested by Buyer, insofar as the same may now
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be in existence and in the possession of Seller. No warranty of any kind is made
by Seller as to the information so supplied, and Buyer agrees that any
conclusions drawn therefrom are the result of its own independent review and
judgment.
6.2. OTHER FILES. Promptly after the execution of this Agreement and
until the Closing Date, Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine, in Seller's offices at
their actual location, and, at Buyer's expense, make such copies of, all
production, well, regulatory, environmental, engineering, seismic, geological,
geophysical and geochemical information, and other information, files, books,
records, and data pertaining to the Assets as requested by Buyer, insofar as the
same may now be in existence and in the possession of Seller, excepting economic
evaluations, reserve reports and any such information that is subject to the
attorney/client and work product privileges. No warranty of any kind is made by
Seller as to the information so supplied, and Buyer agrees that any conclusions
drawn therefrom are the result of its own independent review and judgment.
6.3. CONFIDENTIALITY AGREEMENT. All such information made available to
Buyer shall be maintained confidential by Buyer until Closing. Any
confidentiality agreements Buyer has previously executed with Seller with
respect to the Assets shall continue in force until Closing, at which time such
agreement shall terminate. Buyer shall further take whatever reasonable steps
which may be necessary to ensure that Buyer's employees, consultants and agents
comply with the provisions of this Section 6.3.
6.4. INSPECTIONS. Promptly after the execution of this Agreement and
until Closing, Seller, subject to any necessary third-party operator approval,
shall permit Buyer and its representatives at reasonable times and at their sole
risk, cost and expense, to conduct reasonable inspections of the Assets. Buyer
acknowledges that (i) the Assets (including, but not limited to, any oil, gas or
other mineral reserves underlying the Assets) have been, or will be prior to
Closing, carefully inspected by Buyer; (ii) Buyer is, or will be prior to
Closing, familiar with their condition and value, and the improvements and
appurtenances (including electric wiring and machinery installed thereon)
located on the Assets, inclusive of any Hydrocarbons, naturally occurring
radioactive material, other soil contaminants or waste substances, whether
similar or dissimilar, that may or could be present in the soil, water and
groundwater; (iii) Buyer has engaged, or has had the opportunity to engage prior
to Closing, such contractors or consultants as Buyer deems prudent for the
purpose of assessment, testing and survey of the air, soil, water, groundwater,
Personal Property and Incidental Rights, and other improvements and properties
located on, in the vicinity of or appurtenant to the Assets; and (iv) upon
Closing, Buyer assumes any and all obligations, risks and liabilities associated
with any of the foregoing. Buyer acknowledges that the Assets have been or may
have been used in connection with oil, gas and other mineral exploration,
development and operations, as well as with respect to processing and refining
operations, and, as such, equipment, appurtenances, processing and other
facilities, plants, buildings, structures, improvements, abandoned and other
tanks and piping (including above ground and underground tanks and piping),
storage facilities, gathering and distribution lines, xxxxx and other petroleum
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production facilities and appurtenances may be located thereon. Further, Buyer
acknowledges that the Assets may also contain unplugged xxxxx, wellbores, pits
or buried pipelines or other equipment and conditions, whether or not of a
similar nature, the locations of which may not now be known by Seller or be
readily apparent through a physical inspection of the Assets.
6.5. NO WARRANTY OR REPRESENTATION ON SELLER'S INFORMATION. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, WITH RESPECT TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF THE
INFORMATION, RECORDS, AND DATA NOW, HERETOFORE, OR HEREAFTER MADE AVAILABLE TO
BUYER IN CONNECTION WITH THE ASSETS OR THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, ANY DESCRIPTION OF THE ASSETS, QUALITY OR QUANTITY OF HYDROCARBON
RESERVES, IF ANY, PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES,
GAS BALANCING INFORMATION, ALLOWABLES OR OTHER REGULATORY MATTERS, POTENTIAL FOR
PRODUCTION OF HYDROCARBONS FROM THE ASSETS, OR ANY OTHER MATTERS CONTAINED IN OR
OMITTED FROM ANY OTHER MATERIAL FURNISHED TO BUYER BY SELLER. ANY AND ALL SUCH
DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED AS A CONVENIENCE
ONLY AND ANY RELIANCE ON OR USE OF SAME IS AT BUYER'S SOLE RISK.
ARTICLE 7. - ENVIRONMENTAL MATTERS AND ADJUSTMENTS
7.1. Upon execution of and pursuant to the terms of this Agreement,
Buyer shall have the right, at reasonable times during normal business hours, to
conduct its investigation into the status of the physical and environmental
condition of the Assets. If, in the course of conducting such investigation,
Buyer discovers that any Asset is subject to any material Environmental
Obligations or Liabilities, Buyer may raise such violation as an Environmental
Defect in the manner and to the extent set forth hereafter. For purposes of this
Agreement, the term "Environmental Defect" shall mean one or more conditions
constituting an actual violation of applicable environmental laws in effect on
the date of this Agreement for which the aggregate cost of required remediation
in order to bring such conditions into compliance with such laws exceeds $50,000
per individual Environmental Defect (which amount is a deductible as opposed to
a threshold). If the aggregate value of all Environmental Defects exceeds
$250,000 (such amount being a deductible as opposed to a threshold), then no
later than 10:00 a.m., C.S.T., on November 17, 2000 (the "Environmental Defect
Notice Date"), Buyer may provide Seller written notice specifying such
Environmental Defects, if any, the Assets affected thereby, Buyer's good faith
estimate of the net reduction in value of the Assets affected by each defect
(the "Environmental Defect Value") and the particular legal requirement which
Buyer believes is not being satisfied with respect to each defect, together with
all supporting documentation and authorities.
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7.2. If Buyer fails to notify Seller prior to or on the Environmental
Defect Notice Date, of any Environmental Defects, all Environmental Obligations
or Liabilities will be deemed waived by Buyer, Seller shall be released from any
liability therefor, the Parties shall proceed with Closing, Seller shall be
under no obligation to correct the defects, and Buyer shall assume the risks,
liability and obligations associated with such Environmental Obligations or
Liabilities. Seller may, but shall be under no obligation to, correct at its own
cost and expense such defects on or before the Closing Date.
7.3. In the event that Buyer provides Seller with a timely
Environmental Defect Notice, Seller may, at its sole option, (i) cure or
remediate any Environmental Defect, (ii) agree to reduce the Purchase Price by
the amount of the Environmental Defect Value, or (iii) exclude the affected
Asset(s) from the purchase and sale contemplated by this Agreement in which
event the Purchase Price shall be reduced by the Allocated Value of the Asset(s)
so excluded.
ARTICLE 8. - TITLE DEFECTS, DUE DILIGENCE DEFECTS, TERMINATION AND ADJUSTMENTS
8.1. DEFINITIONS. For purposes hereof, the terms set forth below shall
have the meanings assigned thereto.
(a) "Defensible Title", subject to and except for the Permitted
Encumbrances (as hereinafter defined), means:
(i) As to the Leases, such title held by Seller and reflected
by appropriate documentation properly filed in the official records of
the jurisdiction in which the Lease or Leases are located and in the
office of any applicable governmental authority that (a) entitles
Seller and will entitle Buyer, from and after the Effective Time, to
own and receive and retain, without suspension, reduction or
termination, payment of revenues for not less than the net revenue
interest shown on Exhibit B of all oil and gas produced, saved and
marketed from or attributable to the well, unit or proved undeveloped
location indicated through the plugging, abandonment and salvage of
such xxxxx or the termination of such unit; (b) obligates Seller, and
will obligate Buyer after Closing, to bear the costs and expenses
relating to the maintenance, development and operation of such well,
unit or proved undeveloped location through the plugging, abandonment
and salvage of such xxxxx or the termination of such unit in an amount
not greater than the expense interest of Seller set forth in Exhibit B
(unless Seller's net revenue interest therein is proportionately
increased); and (c) the Assets are free and clear of any liens, burdens
or encumbrances of any kind or character.
(b) "Due Diligence Defect" shall mean a material breach of the
representations set forth in Article 8.2 below, the effect of which would cause
a reduction in value of the
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affected Asset(s) in excess of $10,000 per individual item, such amount being a
deductible amount as opposed to a threshold.
(c) "Title Defect" shall mean any matter which causes Seller to have
less than Defensible Title to any of the Assets as of the Closing Date, the
effect of which would cause a reduction in value of the affected Asset(s) in
excess of $10,000 per individual item, such amount being a deductible amount as
opposed to a threshold.
(d) "Title Defect Property" shall mean any Lease or portion thereof
burdened by a Title Defect.
(e) "Permitted Encumbrances" shall mean any of the following matters:
(i) tax liens and mechanic's liens for amounts not yet due and
payable, or those that are being contested in good faith by Seller in
the ordinary course of business;
(ii) valid, subsisting and applicable laws, rules and orders
of governmental authority applicable to the Assets generally;
(iii) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, pipelines,
grazing, hunting, fishing, logging, canals, ditches, reservoirs or the
like, easements for streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other similar rights-of-way, on, over
or in respect of property owned or leased by Seller or over which
Seller owns rights of way, easements, permits or licenses;
(iv) all lessors' royalties, overriding royalties, net profits
interests, carried interest, production payments, reversionary
interests and other burdens on or deductions from the proceeds of
production if the net cumulative effect of such burdens or deductions
does not reduce the net revenue interest of Seller as reflected in
Exhibit B or impair the right to receive revenues attributable thereto;
(v) all production sales or purchase contracts; division
orders; unitization and pooling designations, declarations, orders and
agreements; operating agreements; area of mutual interest agreements;
gas balancing agreements; processing agreements; injection,
repressuring and recycling agreements; salt water disposal agreements;
farmout and farmin agreements; exploration agreements; sinking fund
agreements; gas storage agreements; ecosystem agreements; operations
services agreements; and any and all other contracts and agreements
which are applicable to the ownership or operation of the Assets or the
production of Hydrocarbons therefrom;
(vi) preferential rights to purchase and required third party
consents to assignments with respect to which waivers or consents are
obtained from the
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appropriate parties, or the appropriate time period for asserting the
rights has expired without an exercise of the rights prior to the
Closing Date;
(vii) all rights to consent by, required notices to, filings
with, or other actions by governmental entities and tribal authorities
in connection with the sale or conveyance of oil and gas leases or
interests if they are customarily obtained subsequent to the sale or
conveyance and Seller has no reason to believe they cannot be obtained
in the ordinary course;
(viii) defects or irregularities of title which have been
cured by possession or prescription or otherwise barred by limitations;
(ix) any encumbrance or other matter (whether or not
constituting a "Title Defect") waived in writing by Buyer;
(x) other minor defects or irregularities generally waived by
prudent purchasers of oil and gas properties which (1) do not
materially interfere with the operation, value or use of any of the
Assets, (2) do not prevent Buyer from receiving the proceeds of
production from any of the Assets, (3) do not operate to increase the
working interest of the Seller set forth on Exhibit B without a
corresponding increase in the net revenue interest, and (4) do not
operate to decrease the Seller's net revenue interest set forth on
Exhibit B.
8.2. Due Diligence Representations. Seller represents to Buyer as
follows:
(a) All material expenses (including all bills for labor, materials and
supplies used or furnished for use in connection with the Assets, and all
severance, production, ad valorem and other similar taxes) relating to the
ownership or operation of the Assets, have been, and are being, paid (timely,
and before the same become delinquent) by Seller, except such expenses and taxes
as are disputed in good faith by Seller and for which an adequate accounting
reserve has been established by Seller.
(b) Seller is not obligated by virtue of any prepayment arrangement to
deliver Hydrocarbons produced from the Assets at some future time without then
receiving full payment therefor.
(c) Except as set forth on Schedule 8.2(c), Seller has not incurred any
expenses, made any commitments to incur any expenditures or entered into any
agreements that would obligate Buyer to make expenditures in connection with the
ownership or operation of the Assets after the Effective Time and no other
obligations or liabilities have been incurred that would adversely affect the
Assets, except for the routine expenses incurred in the normal operation of
existing xxxxx.
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(d) Except as set forth on Schedule 8.2(d), there are no agreements for
the sale of production from the Assets (including without limitation calls on,
options to purchase or other rights to purchase production whether or not the
same are currently being exercised) having a term longer than 30 days. Seller is
receiving the price provided for in all agreements covering the sale of
production from the Assets. Seller is presently receiving a price for all
production from or attributable to each Lease in accordance with the terms of
the applicable sales contract and is not having deliveries of gas from any Lease
curtailed below such property's delivery capacity. Seller is currently being
paid, without bond or indemnity (except the ordinary warranty found in division
orders and Hydrocarbon sales contracts customarily used in the industry), for
Seller's interest in the proceeds from the sale of production from the Assets.
(e) Except as set forth on Schedule 8.2(e), no lease is subject to any
farmout or farm-in agreement under which any party thereto is entitled to
receive assignments not yet made or could earn additional assignments after the
Effective Time.
(f) To Seller's knowledge, no other party is in material breach or
default (and no situation exists that with the passage of time or giving of
notice would create a breach or default) of such party's obligations under the
Leases. To Seller's knowledge, all material royalties, shut-in royalties,
rentals and other payments due thereunder have been properly and timely paid,
except funds held in suspense in accordance with customary industry practices.
(g) To the best of Seller's knowledge none of the Assets is subject to
a tax partnership.
8.3. NOTICE OF TITLE AND DUE DILIGENCE DEFECTS. If the aggregate value
of all Title Defects and Due Diligence Defects exceeds $100,000 (such amount
being a threshold as opposed to a deductible), then no later than 10:00 a.m.,
C.S.T., on November 17, 2000 (the "Defect Notice Date"), Buyer may provide
Seller written notice of any Title or Due Diligence Defects along with a
description of those matters which, in Buyer's reasonable opinion, constitute
Defects, setting forth in detail Buyer's calculation of the value for each
Defect and the legal reasoning why Buyer believes such matter to constitute a
defect, together with all supporting documentation and authorities. Under no
circumstances shall the value of any Defect exceed the Allocated Value of the
portion of the Assets to which such Defect relates. If the assertion of one or
more Defects by Buyer causes the value of the affected Assets to be reduced to
zero, Seller shall have the option of removing such Assets from the purchase and
sale contemplated by this Agreement. Seller may elect, at its sole cost and
expense, but without obligation, to cure all or any portion of such Defects.
Buyer's failure to deliver to Seller such written notice on or before the Defect
Notice Date shall be deemed a waiver by Buyer of all Title Defects and Due
Diligence Defects. If Seller does not cure or elects not to cure such Defects,
the affected Asset(s) shall be excluded from the purchase and sale contemplated
by this Agreement and the Purchase Price shall be reduced by the Allocated Value
of the affected Assets; provided however, as to any Title Defect, Seller may
elect no later than 4:00 p.m., C.S.T.,
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on November 29, 2000, to cure any such uncured Title Defect pursuant to Section
8.5 and in such case the parties will proceed as provided in Section 8.5.
8.4. OPTION TO TERMINATE. If the aggregate adjustments to the Purchase
Price as a result of all Title Defects and Due Diligence Defects determined
pursuant to the preceding subsection and all Environmental Defects determined
pursuant to Article 7 exceeds $1,000,000 (regardless of whether the affected
Assets are to be sold or excluded from the sale), either Buyer or Seller may, at
its sole option, terminate this Agreement without any further obligation by
giving written notice of termination. Notice of termination must be submitted
prior to 4:00 p.m., C.S.T., on November 29, 2000. In the event of such
termination, Seller shall return to Buyer the Performance Deposit to Buyer,
without interest, within five (5) days of receipt of the notice of termination
and neither party shall have any further obligation or liability hereunder.
8.5. OPTIONAL POST-CLOSING TITLE DEFECT CURE PERIOD. Seller shall have
the opportunity to cure, until sixty (60) days after Closing ("Cure Period"),
any Title Defect that is curable. If Seller elects to attempt to cure such a
Title Defect after Closing, Closing with respect to the portion of the Assets
affected by such Title Defect will be deferred (the "Closing Deferred
Property"). Closing with respect to all other Assets will proceed as provided in
this Agreement, but the Purchase Price delivered to Sellers at such initial
Closing will be reduced by the allocated value of all Closing Deferred
Properties. If Seller cures any such Title Defect within the Cure Period, then
the Closing with respect to the Closing Deferred Property for which such Title
Defect has been cured will proceed and will be finalized within seven (7) days
following the end of the Cure Period. If Seller fails or refuses to cure any
Title Defect prior to the expiration of the Cure Period, Buyer shall separately
elect, by notice to Seller delivered within seven (7) days after receipt by
Buyer of notice from Seller of such failure or refusal to cure any such Title
Defect, to waive all of the Title Defects applicable to any Closing Deferred
Property (which waived Title Defects shall be deemed Permitted Encumbrances) and
proceed to Closing on such Closing Deferred Property. If Buyer does not elect to
waive an existing Title Defect, Seller shall retain the Closing Deferred
Property and the parties shall have no further obligation with respect thereto.
In the event that any such property is retained by Seller and such property has
been receiving revenue, without complaint, for a period in excess of two years,
then Buyer agrees (i) not to take any action to interfere with such revenue
stream, and (ii) to the extent that Buyer becomes payor of such revenue, to pay
Seller such revenue.
8.6. TITLE DEFECT VALUES. In determining the value of a Title Defect,
it is the intent of the Parties to include, to the extent possible, only that
portion of the lands, leases and xxxxx, whether an undivided interest, separate
interest or otherwise, affected by the defect. The Title Defect value shall be
determined by the parties in good faith taking into account all relevant
factors, including, but not limited to, the following:
(i) the Allocated Value of the leases, lands and well affected by the
Title Defect;
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(ii) the potential or actual reduction in the net revenue interest
shown on Exhibit B or the amount by which the expense interest is greater than
the expense interest set forth on Exhibit B.
(iii) the productive or prospective status of the Title Defect Property
(i.e., proved developed producing, etc.) and the present value of the future
income expected to be produced therefrom;
(iv) if the Title Defect represents only a possibility of title
failure, the probability that such failure will occur;
(v) the legal effect of the Title Defect;
(vi) if the Title Defect is a lien or encumbrance on the leases, lands
or xxxxx, the cost of removing such lien or encumbrance.
Notwithstanding anything to the contrary that may be contained in this
Article 8, Buyer understands and agrees that the Allocated Values set forth on
Exhibit B are only for (i) currently producing zones and that any loss of depth
rights or acreage will not have a Title Defect Value unless such loss causes a
change in expense or net revenue interest in the currently producing zone and
(ii) the proven undeveloped locations and the behind pipe zones specifically set
forth on Exhibit B.
ARTICLE 9 - PREFERENTIAL PURCHASE RIGHTS AND CONSENTS
9.1. GENERAL. Seller shall use reasonable efforts to notify all holders
of the following, to the extent Seller is aware of the existence of any such
rights: (i) preferential rights, (ii) rights of consent to the assignment, or
(iii) rights of approval to the assignment of the Assets, and of such terms and
conditions of this Agreement to which the holders of such rights are entitled.
Seller shall promptly notify Buyer if any preferential rights are exercised, any
consents or approvals denied, or if the requisite period has elapsed without
said rights having been exercised or consents or approvals having been received.
If prior to Closing, any such preferential rights are timely and properly
exercised, or Seller is unable to obtain a necessary consent or approval prior
to Closing, the interest or part thereof so affected shall be eliminated from
the Assets and the Purchase Price reduced by the portion of the Purchase Price
allocated to such interest or part thereof as provided in Exhibit B. If any
additional third party preferential purchase rights are discovered after
Closing, or if a third party preferential rights holder alleges improper notice,
then Buyer agrees to cooperate with Seller in giving effect to any such valid
third party preferential purchase rights. In the event any such valid third
party preferential purchase rights are validly exercised after Closing, Buyer
agrees to offer the preferential purchase rights to the holders of such rights
in accordance with the agreements creating such rights, and Buyer shall have no
recourse or remedy against Seller as a result thereof.
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9.2. AERA CONSENT. Seller and Buyer recognize that Section 22 of the
New Oil and Gas Lease requires that Aera Energy LLC consent to assignment of
such Lease. Seller and Buyer shall use their best efforts to obtain such consent
by Closing. In the event that such consent cannot be obtained by Closing Buyer
shall have the option to terminate this Agreement. In the event of such
termination Seller shall return the Performance Deposit to Buyer, without
interest, within five business days of receipt of notice of termination. Upon
such termination neither Buyer or Seller shall have any liability hereunder.
ARTICLE 10 - COVENANTS
(a) OPERATIONS PRIOR TO CLOSING. From and after the date of execution
of this Agreement and until the Closing, and subject to the constraints of
applicable operating and other agreements, Seller shall operate, manage, and
administer the Assets in a good and workmanlike manner consistent with its past
practices, and shall carry on its business with respect to the Assets in
substantially the same manner as before execution of this Agreement. Seller
shall use all reasonable efforts to preserve in full force and effect all oil
and gas leases, operating agreements, easements, rights-of-way, permits,
licenses, and agreements which relate to the Assets in which Seller owns an
interest, and shall perform all obligations of Seller in or under all such
agreements relating to the Assets; provided, however, Buyer's sole remedy for
Seller's breach of its obligations under this Article 10(a) shall be limited to
the amount of that portion of the Purchase Price allocated in Exhibit B to that
portion of the Assets affected by such breach. Except for emergency action taken
in the face of serious risk to life, property or the environment, or actions
reasonably necessary to avoid loss of any acreage, rights or interests
appurtenant to or comprising a part of the Assets, or actions taken pursuant to
the order or requirement of any governmental authority, Seller shall (1) submit
to Buyer, for prior written approval, all requests for operating or capital
expenditures and all proposed contracts and agreements relating to the Assets
which involve individual commitments of more than Twenty Thousand Dollars
($20,000.00); (2) consult with, inform, and advise Buyer regarding all material
matters concerning the operation, management, and administration of the Assets;
(3) obtain Buyer's written approval prior to voting under any operating, unit,
joint venture, partnership or similar agreement; and (4) not approve or elect to
go nonconsent as to any proposed well or plug and abandon or agree to plug and
abandon any well without Buyer's prior written approval. On any matter requiring
Buyer's approval under this Article 10(a), Buyer shall respond within five (5)
days to Seller's request for approval and failure of Buyer to respond to
Seller's request for approval within such time shall release Seller from the
obligation to obtain Buyer's approval before proceeding on such matter.
(b) NEW LITIGATION AND CLOSING. Seller shall promptly notify Buyer of
any suit, lessor demand action, or other proceeding before any court,
arbitrator, or governmental agency and any cause of action which relates to the
Assets or which might result in
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impairment or loss of Seller's interest in any portion of the Assets or which
might hinder or impede the operation of the Assets.
(c) NON-OPERATED PROPERTIES. To the extent Seller is not the operator of
any of the Assets, the obligations of Seller in Article 10 concerning operations
or activities which normally or pursuant to existing contracts are carried out
or performed by the operator, shall be construed to require only that Seller use
all reasonable efforts (without being obligated to incur any expense or
institute any cause of action) to cause the operator of such Assets to take such
actions or render such performance within the constraints of the applicable
operating agreements and other applicable agreements.
(d) CORPORATE MATTERS. Notwithstanding any other provisions of this
Agreement to the contrary, from the date of this Agreement until Closing,
Seller, at Seller's sole option, shall have the right to (i) enter into a
reorganization transaction whereby Seller is converted from a corporation into a
limited liability company or other form of business entity, or (ii) transfer all
of the Assets and Seller's rights under this Agreement to a parent corporation
or wholly owned subsidiary corporation. In the event Seller is so converted into
a limited liability company, the surviving entity shall be entitled to all of
the rights and benefits, and subject to all of the duties and obligations, as
are applicable to Seller under the terms of this Agreement. If all of the Assets
and Seller's rights under this Agreement are transferred to a parent corporation
or wholly owned subsidiary corporation, the successor owner shall be entitled to
all of the rights and benefits, and subject to all of the duties and
obligations, as are applicable to Seller under the terms of this Agreement.
(e) SINKING FUND TRUST AGREEMENT. At Closing Buyer shall assume
responsibility for the Fund established by the Sinking Fund Trust Agreement and
shall administer the Fund in accord with the term of the Trust Agreement. Seller
agrees to transfer control of such Fund to Buyer at Closing.
(f) COMMODITY SWAP CONTRACT. Seller shall have the option of entering
into a standard commodity swap agreement on or before the close of business on
November 28 , 2000 with respect to crude oil and natural gas production from the
Assets (the "Swap Contract"). The terms and conditions of the "Swap Contract"
shall be subject to Buyer's express consent and approval and shall include,
without limitation, a two year term and a provision expressly allowing the
transfer of the Swap Contract to Buyer at Closing.
ARTICLE 11 - CLOSING CONDITIONS
11.1. SELLER'S CLOSING CONDITIONS. The obligations of Seller under this
Agreement are subject, at the option of Seller, to the satisfaction, at or prior
to the Closing, of the following conditions:
(a) all representations and warranties of Buyer contained in this
Agreement shall
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be true in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing, and Buyer
shall have performed and satisfied all agreements required by this Agreement to
be performed and satisfied by Buyer at or prior to the Closing;
(b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Buyer;
(c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing; and
(d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Seller) shall be pending or threatened
before any court or governmental agency seeking to restrain Seller or prohibit
the Closing or seeking damages against Seller as a result of the consummation of
this Agreement.
11.2. BUYER'S CLOSING CONDITIONS. The obligations of Buyer under this
Agreement are subject, at the option of Buyer, to the satisfaction, at or prior
to the Closing, of the following conditions:
(a) all representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Seller shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Seller at or prior to the Closing;
(b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Seller;
(c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing; and
(d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Buyer) shall be pending or threatened
before any court or governmental agency seeking to restrain Buyer or prohibit
the Closing or seeking damages against Buyer as a result of the consummation of
this Agreement.
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ARTICLE 12 - CLOSING
12.1. CLOSING. The closing of this transaction (the "Closing") shall be
held at the offices of Seller, 000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
at 10:00 a.m. on November 30, 2000; or at such earlier date or place as the
Parties may agree in writing (herein called "Closing Date"). Notwithstanding the
foregoing, in the event that Seller enters into the Swap Contract described in
Section 10(f), then Seller shall have the right, at Seller's sole option, to
extend the Closing Date to a date no later than January 15, 2001, by delivery to
Buyer of written notice of Seller's election to so extend the Closing Date on or
before 5:00 p.m., C.S.T., on November 29, 2000. Time is of the essence and,
except as provided in the immediately preceding sentence, the Closing Date shall
not be extended unless by written agreement of the Parties. On or before two (2)
business days prior to Closing, Buyer and Seller shall use their best efforts to
provide each other copies of all closing documents.
12.2. SELLER'S CLOSING OBLIGATIONS. At Closing, except to the extent
comprising the Excluded Assets, Seller shall deliver to Buyer the following:
(a) the Assignment and Conveyance substantially in the form
attached hereto as Exhibit C and such other documents as may be
reasonably necessary to convey all of Seller's interest in the Assets
to Buyer in accordance with the provisions hereof;
(b) a nonforeign affidavit executed by Seller in the form
attached as Exhibit D;
(c) appropriate regulatory forms appointing Buyer Operator for
those Assets which Seller operates;
(d) copies of all third-party waivers, consents, approvals,
permits and actions obtained;
(i) exclusive possession of the Assets; and
(j) Letters-in-lieu of transfer orders in form acceptable to
Seller and Buyer.
(k) releases of the Existing Liens, such releases to be in
recordable form.
(l) appropriate documents evidencing assignment of the Swap
Contract to Buyer;
(m) appropriate documents evidencing transfer of the Sinking
Fund Trust account to Buyer.
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12.3. BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall deliver to
Seller the following:
(a) the Purchase Price (less the Performance Deposit) as
adjusted by Section 3.3, payable by wire transfer in immediately
available funds to an account designated by Seller; and
(b) evidence of Buyer's qualification as an operator in the
jurisdiction where the Assets are located, together with the compliance
with any related bonding or other financial security requirements
sufficient to relieve Seller from further obligation as the operator of
record of the Assets from and after the Closing Date.
12.4. JOINT CLOSING OBLIGATIONS. Both Parties at Closing shall execute
a Settlement Statement evidencing the amount actually wire transferred and all
adjustments to the Purchase Price taken into account at Closing. All events of
Closing shall each be deemed to have occurred simultaneously with the other,
regardless of when actually occurring, and each shall be a condition precedent
to the other.
ARTICLE 13 - LIMITATIONS ON WARRANTIES AND REMEDIES
EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF
ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES, OR THE
ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL PROPERTY,
EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE
ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS, AND WITH ALL FAULTS" AND NO
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONDITION, ARE GIVEN BY OR ON BEHALF OF SELLER. IT IS UNDERSTOOD AND
AGREED THAT PRIOR TO CLOSING BUYER SHALL HAVE INSPECTED THE ASSETS FOR ALL
PURPOSES AND HAS SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
CONDITION, BOTH SURFACE AND SUBSURFACE, AND THAT BUYER ACCEPTS SAME IN ITS "AS
IS, WHERE IS AND WITH ALL FAULTS" CONDITION. THE WARRANTIES OF SELLER CONTAINED
IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, AND BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR CONDITION, OR CONFORMITY TO SAMPLES.
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ARTICLE 14 - CASUALTY LOSS AND CONDEMNATION
If, prior to the Closing, all or any portion of the Assets is destroyed by fire
or other casualty or if any portion of the Assets shall be taken by condemnation
or under the right of eminent domain (all of which are herein called "Casualty
Loss" and limited to property damage or taking only), Buyer and Seller must
agree prior to Closing either (i) to delete that portion of the Assets which is
subject to the Casualty Loss from the Assets, and the Purchase Price shall be
reduced by the Allocated Value thereof, or (ii) for Buyer to proceed with the
purchase of such Assets, notwithstanding any such destruction or taking (without
reduction of the Purchase Price) in which case Seller shall pay, at the Closing,
to Buyer all sums paid to Seller by third parties by reason of the destruction
or taking of such Assets and shall assign, transfer and set over unto Buyer all
of the right, title and interest of Seller in and to any claims, causes of
action, unpaid proceeds or other payments from third parties arising out of such
destruction or taking; provided, however, if the value of that portion of the
Assets affected by the casualty Loss, not to exceed that allocated in Exhibit B,
exceeds $1,000,000.00, Buyer and Seller shall each have the right to terminate
this Agreement upon written notification to the other, the transaction shall not
close and thereafter neither Buyer nor Seller shall have any liability or
further obligations to the other hereunder. Prior to Closing, Seller shall not
voluntarily compromise, settle or adjust any amounts payable by reason of any
Casualty Loss without first obtaining the written consent of Buyer.
ARTICLE 15 - DEFAULT AND REMEDIES
15.1. SELLER'S REMEDIES. Upon failure of Buyer to comply herewith by
the Closing Date, as it may be extended in accordance herewith, Seller, at its
sole option, may (i) enforce specific performance, or (ii) terminate this
Agreement and retain the Performance Deposit as liquidated damages and not as a
penalty due to the difficulty, uncertainty and inconvenience of proving actual
damages incurred by Seller as a result of Buyer's default, as Seller's sole and
exclusive remedies for such default, all other remedies being expressly waived
by Seller. Notwithstanding any provision hereof to the contrary Seller may
retain the Performance Deposit as a liquidated damage only in the event the
transaction contemplated by this Agreement is terminated due solely to the
breach hereof by Buyer in the absence of any breach hereof by Seller. If the
transaction contemplated by this Agreement fails to close or is terminated for
any other reason Seller shall return the Performance Deposit to Buyer, without
interest, within five (5) days of receipt of notice of termination and neither
party shall have any further obligation or liability hereunder.
15.2. BUYER'S REMEDIES. In the event of a breach hereof by Seller in the
absence of any breach hereof by Buyer, Buyer, at its sole option, may (i)
terminate this Agreement and receive a refund of the Performance Deposit, or
(ii) enforce specific performance, as Buyer's sole and exclusive remedies for
such a default, all other remedies being expressly waived by Buyer. In the event
Buyer elects to terminate pursuant to this Article 15.2, Seller
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shall release to Buyer the Performance Deposit, without interest, and within
five (5) days of receipt of notice of termination and neither party shall have
any further obligation or liability hereunder.
15.3. OTHER REMEDIES. Notwithstanding the foregoing, termination of
this Agreement shall not prejudice or impair Buyer's obligations under Section
6.3 (and the confidentiality agreements referenced therein) and such other
portions of this Agreement as are necessary to the enforcement and construction
of Section 6.3. 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 non-prevailing party.
15.4. EFFECT OF TERMINATION. In the event of termination of this
Agreement under this Article 15, the transaction shall not close and neither
Buyer nor Seller shall have any further obligations, remedies, liabilities,
rights or duties to the other hereunder, except as expressly provided herein.
ARTICLE 16 - ASSUMPTION AND INDEMNITY
16.1. BUYER'S ASSUMED OBLIGATIONS. Buyer shall assume all risk and loss
with respect to and any change in the condition of the Assets from the date of
this Agreement until Closing for production of Hydrocarbons through normal
depletion (including the watering-out or sand infiltration of any well) and the
depreciation of personal property through ordinary wear and tear. Upon and after
Closing Buyer shall own the Assets, together with all the rights, duties,
obligations, and liabilities, including the Assumed Obligations, related
thereto, whether attributable to the period before or after the Effective Time,
and Buyer's indemnity obligations hereunder. Upon Closing, Buyer agrees to
assume and pay, perform, fulfill and discharge all Assumed Obligations.
16.2 SELLERS ASSUMED OBLIGATIONS. Notwithstanding anything to the
contrary set forth in this Agreement , Buyer's assumed obligations under this
Agreement shall not include claims or liabilities arising out of the following:
(i) improper payment of royalties or other revenues by Seller; (ii) improper
payment of severance or ad valorem taxes by Seller; (iii) personal injury,
illness, disease, and/or wrongful death which relate to the period of time prior
to the Closing Date; (iv) third-party audits, any of which arise or are asserted
prior to the Effective Time or are asserted after the Effective Time and are
attributable to the ownership and operation of the Assets by Seller prior to the
Effective Time; and (v) the disposal by Seller off of the Assets of waste and
other substances, whether such waste or other substances are hazardous or not.
All liability on loss associated with items (i) though (v) in the preceding
sentence are expressly assumed by Seller.
16.3. NEGLIGENCE. THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS
PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES,
COSTS, EXPENSES AND DAMAGES IN QUESTION
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AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE, COMPARATIVE, OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE PARTIES HERETO.
16.4. BROKER OR FINDER'S FEE. Each party hereby agrees to indemnify and
hold the other harmless from and against any claim for a brokerage or finder's
fee or commission in connection with this Agreement or the transactions
contemplated by this Agreement to the extent such claim arises from or is
attributable to the actions of such indemnifying party, including, without
limitation, any and all losses, damages, punitive damages, attorneys' fees,
costs and expenses of any kind or character arising out of or incurred in
connection with any such claim or defending against the same.
16.5. MISCELLANEOUS. There shall be no upward or downward adjustment to
the Purchase Price as a result of any matter for which Seller is indemnified
under this Agreement. With respect to any claim for which an indemnifying party
may be required to provide partial or full indemnity, such party shall have the
right, but not the obligation, to participate fully in the defense of any such
claim. Reasonable attorneys' fees, court costs, interest, penalties, and other
expenses incurred in connection with the defense of such claims shall be
included in Buyer's indemnities herein. All indemnities of Buyer herein shall
extend to and cover the parent, subsidiary and affiliated companies and the
officers, directors, employees, partners, and agents of Seller and its parent,
subsidiary, and affiliated companies.
ARTICLE 17 - GAS IMBALANCES
Seller represents that, to Seller's knowledge, all gas imbalances associated
with the Assets as of the Effective Date are set forth on Exhibit E. If, prior
to Closing, either party hereto notifies the other party hereto that the volumes
set forth in Exhibit E are incorrect, then Buyer and Seller shall meet and in
good faith negotiate an appropriate purchase price adjustment. At Closing Buyer
agrees to assume any liability and obligation for gas production imbalances
(whether over or under) attributable to the Assets. In assuming this liability
at Closing, Buyer shall not be obligated to make any additional payment over the
Purchase Price to Seller and Seller shall not be obligated to refund any of said
price to reimburse Buyer for any over-balances existing at the time of sale.
Buyer and Seller agree that the economic effect of the imbalances set forth on
Exhibit E are included in the Purchase Price set forth in Section 3.1.
ARTICLE 18 - MISCELLANEOUS
18.1. PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior to
Closing, prior to making any public announcement or statement with respect to
the transaction contemplated by this Agreement, the party desiring to make such
public announcement or statement shall consult with the other party hereto and
exercise its best efforts to (iii) agree upon the text of a joint public
announcement or statement to be made by both of
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such parties; or (iv) obtain written approval of the other party hereto to the
text of a public announcement or statement to be made solely by Seller or Buyer,
as the case may be. Nothing contained in this paragraph shall be construed to
require either party to obtain approval of the other party hereto to disclose
information with respect to the transaction contemplated by this Agreement to
any state or federal governmental authority or agency to the extent (i) required
by applicable law or by any applicable rules, regulations or orders of any
governmental authority or agency having jurisdiction; or (ii) necessary to
comply with disclosure requirements of the New York Stock Exchange or other
recognized exchange or over the counter, and applicable securities laws.
18.2. FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be solely
responsible for all filings and recording of assignments and other documents
related to the Assets and for all fees connected therewith, and upon request
Buyer shall advise Seller of the pertinent recording data. Seller shall not be
responsible for any loss to Buyer because of Buyer's failure to file or record
documents correctly or promptly. Buyer shall promptly file all appropriate
forms, declarations or bonds with federal and state agencies relative to its
assumption of operations and Seller shall cooperate with Buyer in connection
with such filings.
18.3. FURTHER ASSURANCES AND RECORDS.
(a) After the Closing each of the parties will execute, acknowledge and
deliver to the other such further instruments, and take such other action, as
may be reasonably requested in order to more effectively assure to said party
all of the respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the benefit of such
party in consummation of the transactions contemplated hereby.
(b) Buyer agrees to maintain the files and records of Seller that are
acquired pursuant to this Agreement for three (3) years after Closing. Buyer
shall provide Seller and its representatives reasonable access to and the right
to copy such files and records for the purposes of (v) preparing and delivering
any accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement; (vi) complying
with any law, rule or regulation affecting Seller's interest in the Assets prior
to the Closing Date; (vii) preparing any audit of the books and records of any
third party relating to Seller's interest in the Assets prior to the Closing
Date, or responding to any audit prepared by such third parties; (viii)
preparing tax returns; (ix) responding to or disputing any tax audit; or (x)
asserting, defending or otherwise dealing with any claim or dispute under this
Agreement.
(c) Buyer agrees that within thirty (30) days after Closing or within
thirty (30) days after operations are actually transferred, whichever is later,
it will remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the Assets
and will not thereafter make any use whatsoever of such names, marks and logos.
(d) To the extent not obtained or satisfied as of Closing, Seller
agrees to continue to use all reasonable efforts, but without any obligation to
incur any cost or
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expense in connection therewith, and to cooperate with Buyer's efforts to obtain
for Buyer (xi) access to files, records and data relating to the Assets in the
possession of third parties; and (xii) access to xxxxx constituting a part of
the Assets operated by third parties for purposes of inspecting same.
(e) Buyer shall comply with all current and subsequently amended
applicable laws, ordinances, rules, and regulations applicable to the Assets and
shall promptly obtain and maintain all permits required by governmental
authorities in connection with the Assets.
18.4. NOTICES.
Except as otherwise expressly provided herein, all communications
required or permitted under this Agreement shall be in writing and any
communication or delivery hereunder shall be deemed to have been duly given and
received when actually delivered to the address of the parties to be notified as
set forth below and addressed as follows:
If to Buyer, as follows:
Merit Energy Company
00000 Xxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Seller:
Future Cal-Tex Corporation
c/x Xxxxx Energy Company
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxx and Xxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Provided, however, that any notice required or permitted under this Agreement
will be effective if given verbally within the time provided, so long as such
verbal notice is followed by written notice thereof in the manner provided
herein within twenty-four (24) hours following the end of such time period. Any
party may, by written notice so delivered to the other, change the address to
which delivery shall thereafter be made.
18.5. NO GUARANTEE OF OPERATIONS. Buyer understands that operation of
all or part of the Assets may be subject to operating agreements or other
contracts governing the election or appointment of an Operator. Seller does not
warrant or represent that
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Buyer will become Operator of any of the Assets. Seller agrees to use its best
efforts to assist Buyer in its efforts to succeed Seller as Operator as to those
Assets for which Seller currently serves as Operator.
18.6. INCIDENTAL EXPENSES. Buyer shall bear and pay (xiii) all state or
local government sales, transfer, gross proceeds, or similar taxes incident to
or caused by the transfer of the Assets to Buyer, (xiv) all documentary,
transfer and other state and local government taxes incident to the transfer of
the Assets to Buyer; and (xv) all filing, recording or registration fees for any
assignment or conveyance delivered hereunder. Each party shall bear its own
respective expenses incurred in connection with the negotiation and Closing of
this transaction, including it own consultants' fees, attorneys' fees,
accountants' fees, and other similar costs and expenses.
18.7. ANTITRUST LAWS. If the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx") is applicable to this transaction, then each party
shall have the responsibility for filing with the Federal Trade Commission and
the Department of Justice their respective notifications and reports and any
supplemental information which may be reasonably requested in connection with
the HSR Act, which reports and notifications and supplemental information will
comply in all material respects with the requirements of the HSR Act.
18.8. WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
to enforce the same. No waiver by any party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty.
18.9. BINDING EFFECT; ASSIGNMENT. All the terms, provisions, covenants,
obligations, indemnities, representations, warranties and conditions of this
Agreement shall be enforceable by the parties hereto and their respective
successors and assigns. Except as provided in Article 10(d), the rights of each
party under this Agreement are personal to that party and may not be assigned or
transferred to any other party, firm, corporation or other entity, without the
prior, express and written consent of the other party, and such consent may be
withheld for any reason, including convenience. Any attempt to assign this
Agreement over the objection or without the express written consent of the other
party shall be absolutely void. Seller may condition its consent to assign this
Agreement on Buyer providing Seller with an appropriate guarantee of its
assignee's performance. In the event Buyer sells or assigns all or a portion of
the Assets, this Agreement shall remain in effect between Buyer and Seller as to
all the Assets regardless of such assignment.
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18.10 TAXES.
(a) Seller and Buyer agree that this transaction is not subject to the
reporting requirement of Section 1060 of the Internal Revenue Code of 1986, as
amended, and that, therefore, IRS Form 8594, Asset Acquisition Statement, is not
required to be and will not be filed for this transaction. In the event the
parties mutually agree that a filing of Form 8594 is required, the parties will
confer and cooperate in the preparation and filing of their respective forms to
reflect a consistent reporting of the agreed upon allocation.
(b) Seller shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the Assets prior
to the Effective Time. Buyer shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the Assets after
the Effective Time. Any party which pays such taxes for the other party shall be
entitled to prompt reimbursement upon evidence of such payment. Each party shall
be responsible for its own federal income taxes, if any, as may result from this
transaction.
(c) If this transaction is determined to result in state sales or
transfer taxes, Buyer shall be solely responsible for any and all such taxes due
on the Assets acquired by Buyer by virtue of this transaction. If Buyer is
assessed such taxes, Buyer shall promptly remit same to the taxing authority. If
Seller is assessed such taxes, Buyer shall reimburse Seller for any such taxes
paid by Seller to the taxing authority.
18.11. CONFIDENTIALITY OF AGREEMENT. This Agreement and the terms and
provisions thereof, including the Purchase Price, shall be maintained
confidential by Buyer and Seller until Closing; provided, however, that this
Agreement and the terms and provisions thereof may be disclosed to either
party's lenders, if any, and their consultants, who shall be required to keep
such information confidential.
18.12. AUDITS. It is expressly understood and agreed that Seller
retains its right to receive its proportionate share of the proceeds from any
audits relating to activities prior to the Effective Time.
18.13. LIKE-KIND EXCHANGES. Each party consents to the other party's
assignment of its rights and obligations under this Agreement to its Qualified
Intermediary (as that term is defined in Section 1.1031(k)-l(g)(4)(v) of the
Treasury Regulations) in connection with effectuation of a like-kind exchange.
However, Seller and Buyer acknowledge and agree that any assignment of this
Agreement to a Qualified Intermediary does not release either party from any of
their respective liabilities and obligations to each other under this Agreement.
Each party agrees to cooperate with the other to attempt to structure the
transaction as a like-kind exchange.
18.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
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18.15. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the Parties and replaces and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof, whether
written or oral. No other agreement, statement, or promise made by any party, or
to any employee, officer or agent of any party, which is not contained in this
Agreement shall be binding or valid. This Agreement may be supplemented,
altered, amended, modified or revoked by writing only, signed by the Parties
hereto. The headings herein are for convenience only and shall have no
significance in the interpretation hereof. The Parties stipulate and agree that
this Agreement shall be deemed and considered for all purposes, as prepared
through the joint efforts of the Parties, and shall not be construed against one
party or the other as a result of the preparation, submittal or other event of
negotiation, drafting or execution thereof. It is understood and agreed that
there shall be no third-party beneficiary of this Agreement, and that the
provisions hereof do not impart enforceable rights in anyone who is not a party
or a successor or assignee of a party hereto.
18.16. EXHIBITS. All Exhibits and Schedules attached to this Agreement,
and the terms of those Exhibits and Schedules which are referred to in this
Agreement, are made a part hereof and incorporated herein by reference.
18.17. DELIVERY OF FILES AFTER CLOSING. The Assets set out in Section
1.16 shall be provided by Seller to Buyer as soon as reasonably possible after
the Closing Date at a location to be specified by Seller, but in any event not
later than thirty (30) days after the Closing has occurred. Any transportation,
postage, or delivery costs from Seller's offices shall be at Buyer's sole cost,
risk and expense.
18.18. SURVIVAL. All representations and warranties by Seller contained
in this Agreement shall terminate upon the occurrence of Closing. Except as
otherwise provided in this Agreement, the covenants, indemnities and agreements
made hereunder or pursuant hereto shall survive Closing and be and remain
enforceable and continue in full force and effect as to their terms and
conditions following Closing and shall not be deemed to have been merged into
the Closing or into the assignments or other closing documents.
18.19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one (1) agreement.
18.20 WAIVER OF CONSUMER RIGHTS. TO THE EXTENT APPLICABLE TO THE ASSETS
OR ANY PORTION THEREOF, BUYER HEREBY WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS
AND COMMERCE CODE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), A LAW THAT
GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
BUYER:
MERIT PARTNERS, L.P.
MERIT ENERGY PARTNERS III, L.P.
By: MERIT ENERGY COMPANY, General Partner
By:
------------------------------------------
Xxxx X. Xxxx, Vice President
SELLER:
FUTURE CAL-TEX CORPORATION
By:
------------------------------------------
Xxxxxxxx X. Xxxxxxxx, President
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NON-FOREIGN AFFIDAVIT
Exemption from Withholding of Tax For
Dispositions of U.S. Real Property Interests
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property interest must withhold tax if the transferor is a foreign person.
To inform Merit Partners, L.P. and Merit Energy Partners III, L.P. ("Merit")
that withholding of tax is not required upon the disposition of U.S. real
property interests by Merit Partners, L.P. , Merit Energy Partners, L.P., Future
Cal-Tex Corporation, the undersigned hereby certifies the following:
1. The undersigned are not foreign corporations, foreign partnerships, foreign
trusts, or foreign estates for purposes of U.S. income taxation;
2. The undersigned's taxpayer identification number is:
3. The home or office address of the undersigned is 000 Xxxxxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000.
The undersigned understands that this certification may be disclosed to the
Internal Revenue Service by Merit and that any false statement contained herein
could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this certificate and,
to the best of my knowledge and belief, it is true, correct, and complete, and I
further declare that I have authority to sign this document.
DATED this ______ day of ________________, 2000.
FUTURE CAL-TEX CORPORATION
By:
---------------------------------------------
Xxxxxxxx X. Xxxxxxxx, President
33
EXHIBIT E
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER, AND
MERIT PARTNERS, L.P., ET AL., AS BUYER
GAS IMBALANCES
NONE.
34
SCHEDULE 4(g)
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER, AND
MERIT PARTNERS, L.P., ET AL., AS BUYER
NOV 16854: Facility violated conditions of Title V permits in that they failed
to test fuel gas sulfur content, did not keep vapor pressure or temperature
records for certain tanks, did not keep flare records, and operated with
potential venting from lines and heater regulator.
NOV 16855: Facility violated conditions of Title V permits in that it operated a
tank without required vapor recovery, utilized emergency flare for routine well
work and exceeded alcohol throughput limit.
NOV 16040: Operating engine with excess emissions of CO.
Consent Order dated March 30, 2000 between the California Department of
Conservation, Aera Energy, LLC and Future Cal-Tex Corporation
35
SCHEDULE 8.2(c)
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER, AND
MERIT PARTNERS, L.P., ET AL., AS BUYER
Agreement between Torch Operating Company and Xxxxx Energy Company, dated
September 15,2000, with regard to contract operations services in the North and
South Coles Levee Fields.
Sinking Fund Trust Agreement between Xxxxx Energy Company and its affiliate,
Future Cal-Tex Corporation, both Texas corporations ("Purchaser") and Aera
Energy C LLC, a California limited liability company ("Aera")
Conservation Easement Agreement dated October 2, 1992 between Atlantic Richfield
Company and California Department of Fish and Game.
Exploration Agreement, dated May 1, 1988 by and between Aera Energy LLC and
Diatom Petroleum, Incorporated and the amendments thereto.
Underground Storage Lease and Agreement between Aera Energy LLC and Western Hub
Properties, LLC.
Consent Order dated March 30, 2000 between the California Department of
Conservation, Aera Energy, LLC and Future Cal-Tex Corporation
36
SCHEDULE 8.2(e)
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER, AND
MERIT PARTNERS, L.P., ET AL., AS BUYER
FARMOUT AGREEMENTS
Exploration Agreement, dated May 1, 1988 by and between Aera Energy LLC and
Diatom Petroleum, Incorporated and the amendments thereto.
Underground Storage Lease and Agreement between Aera Energy LLC and Western Hub
Properties, LLC.
37
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ASSIGNMENT DATED JANUARY 12, 2001,
EFFECTIVE DECEMBER 1, 2001 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS
SELLER, AND MERIT PARTNERS, L.P., ET AL., AS BUYER
PROPERTY AND PROPERTY INTERESTS SUBJECT TO THIS AGREEMENT
All descriptions are limited in depth from the surface down to, and including,
the stratigraphic equivalent of the base of the entire Miocene Xxxxxxx Sands as
shown at 12,531 feet measured depth subsurface on the Schlumberger
Induction-Electrical log dated September 29, 1961, run in the Mobil Signal KCL
#35-12 well, located in Section 00, Xxxxxxxx 00 Xxxxx, Xxxxx 25 East, MDB&M,
Xxxx County, California.
Aera Lease No. Property Type Field Agreement Date Lessor Lessee
-------------- ------------- ----- -------------- ------ ------
CA078785 LSE-BLM COL-S 07/15/93 U.S. Department of Interior Atlantic Richfield Company
USA CACA 31817 Bureau of Land
Management
ARO66619 Pipeline COL-S&N 11/22/83 Tenneco West Inc. Atlantic Richfield Company
AR101956 Pipeline COL-S&N 09/21/92 Atlantic Richfield Company Marathon Oil Company
MC71064 Exploration COL-S&N 05/01/98 Aera Energy LLC Diatom Petroleum, Inc.
Agreement
Agreement for 09/04/00 Xxxxx Energy Company Aera Energy LLC
Compensation Rights
Coles Levee Ecosystem
Preserve
Aera Lease No. Description
-------------- -----------
CA078785 Township 31 South, Range 25E, MDBM
USA CACA 31817 Section 6: E/2
Section 8: NW/4, N/2 SW/4, SW/4 SW/4
Section 18: N/2 NE/4
ARO66619 Township 30 South, Range 25 East, MDBM
Section 28: NE/4 N/2
AR101956 Township 31 South, Range 25 East, MDBM
Parts of Sections: 3 & 4
Township 30 South, Range 25 East, MDBM
Parts of Section 32 & Section 33
MC71064 Interests covered by the (1) legal
land description contained in Exhibit "A"
to New Oil and Gas Lease, and
(2) the BLM Lease designated as Aera
Xxxxx Xx. XX 000000, limited in depths from the
base of the Miocene Upper Xxxxxxx Xxxxx to all
depths
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EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER,
AND MERIT PARTNERS, L.P., ET AL., AS BUYERS
OIL AND GAS LEASES
(1) (OG 106) The Ohio Oil Company Northern Buena Vista Lake
Oil and Gas Lease "B." This Agreement and Lease, made and entered into the 8th
day of June, 1938, by and between Xxxx County Land Company, a corporation
organized and existing under and by virtue of the laws of the State of
California, as first party, hereinafter called the Lessor, and The Ohio Oil
Company, a corporation organized and existing under and by virtue of the laws of
the State of Ohio, as second party, hereinafter called Lessee, a memorandum of
which dated June 8, 1938, was recorded on July 1, 1938, at page 288 of Book 786
of Official Records of Xxxx County, California, as amended.
(2) (OG 110) Standard Oil Company of California Buena Vista
Oil and Gas Lease "B" No. 20. This Agreement and Lease, made and entered into
the 20th day of July, 1938, by and between Xxxx County Land Company, a
corporation organized and existing under and by virtue of the laws of the State
of California, as first party, hereinafter called the Lessor, and Standard Oil
Company of California, a corporation organized and existing under and by virtue
of the laws of the State of Delaware, as second party, hereinafter called
Lessee, a memorandum of which dated July 20, 1938, was recorded on July 27,
1938, at page 382 of Book 805 of Official Records of Xxxx County, California, as
amended.
(3) (OG 112) Union Oil Company of California Northern Buena
Vista Lake Oil and Gas Lease "B." This Agreement and Lease, made and entered
into the 19th day of January, 1939, by and between Xxxx County Land Company, a
corporation organized and existing under and by virtue of the laws of the State
of California, as first party, hereinafter called the Lessor, and Union Oil
Company of California, a corporation organized and existing under and by virtue
of the laws of the State of California, as second party, hereinafter called the
Lessee, a memorandum of which dated January 19, 1939, was recorded on February
3, 1939, at page 297 of Book 849 of Official Records of Xxxx County, California,
as amended.
(4) (OG 113) Tide Water Associated Oil Company Northern Buena
Vista Lake Oil and Gas Lease "B." This Agreement and Lease, made and entered
into the 1st day of February, 1939, by and between Xxxx County Land Company, a
corporation organized and existing under and by virtue of the laws of the State
of California, as first party, hereinafter called Lessor, and Tide Water
Associated Oil Company, a corporation organized and existing under and by virtue
of the laws of the State of Delaware, as second party, hereinafter called
Lessee, a memorandum of which dated February 1, 1939, was recorded on March 13,
1939, at page 186 of Book 863 of Official Records of Xxxx County, California, as
amended.
(5) (OG 115) Richfield Oil Corporation Western Second Oil and
Gas Lease "B." This Agreement and Lease, made and entered into the 14th day of
February, 1939, by and between Xxxx County Land Company, a corporation organized
and existing under and by virtue of the laws of the State of California, as
first party, hereinafter called Lessor, and Richfield Oil Corporation, a
corporation organized and existing under and by virtue of the laws of the State
of Delaware, as second party, hereinafter called Lessee, a memorandum of which
dated February 14, 1939, was recorded on March 10, 1939, at page 53 in Book 870
of Official Records of Xxxx County, California, as amended.
(6) (AR 29494) Unit Plan for South Coles Levee Field, dated
February 1, 1944, by and between The Ohio Oil Company, Standard Oil Company of
California, Richfield Oil Corporation, Union Oil Company of California, and Tide
Water Associated Oil Company, as amended and modified.
2
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EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER,
AND MERIT PARTNERS, L.P., ET AL., AS BUYER
(7) NEW OIL AND GAS LEASE dated July 31, 2000 with an
effective date of March 1, 2000 by and between Aera Energy LLC, as Lessor and
Future Cal-Tex Corporation as Lessee, recorded as instrument number 200141445 in
the Official Records of Xxxx County, California.
3
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EXHIBIT B
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER, AND
MERIT PARTNERS, L.P., ET AL., AS BUYER
Expense * Net Revenue * Allocated
Lease Interest Interest Value
----- --------- ------------- ---------
X. Xxxxx Levee Unit $26,800,000
------------------------------------- ------------------------- -------------------------- -------------------------
X. Xxxxx Levee Unit $7,320,000
------------------------------------- ------------------------- -------------------------- -------------------------
PUD No. 1 (NE/NE-11) $534,300
------------------------------------- ------------------------- -------------------------- -------------------------
PUD No. 2 (NE/NW-11) $512,077
------------------------------------- ------------------------- -------------------------- -------------------------
PUD No. 3 (SW/SW-12) $353,624
------------------------------------- ------------------------- -------------------------- -------------------------
PUD No. 4 (NW/NW-14) $490,821
------------------------------------- ------------------------- -------------------------- -------------------------
PUD No. 5 (SE/SW-2) $309,179
------------------------------------- ------------------------- -------------------------- -------------------------
12-4 Deepening $449,039
------------------------------------- ------------------------- -------------------------- -------------------------
34-4 Deepening $434,585
------------------------------------- ------------------------- -------------------------- -------------------------
47-4 Deepening $421,095
------------------------------------- ------------------------- -------------------------- -------------------------
52-4 Deepening $407,604
------------------------------------- ------------------------- -------------------------- -------------------------
76-4 Deepening $395,077
------------------------------------- ------------------------- -------------------------- -------------------------
56-10 Deepening $380,623
------------------------------------- ------------------------- -------------------------- -------------------------
72-10 Deepening $310,280
------------------------------------- ------------------------- -------------------------- -------------------------
15-4 Deepening $302,571
------------------------------------- ------------------------- -------------------------- -------------------------
35-10 Deepening $293,899
------------------------------------- ------------------------- -------------------------- -------------------------
55X-4 Deepening $285,226
------------------------------------- ------------------------- -------------------------- -------------------------
Total $40,000,000
------------------------------------- ------------------------- -------------------------- -------------------------
* See Exhibit "B", page 2
Exhibit B - Page 1
41
EXHIBIT B
ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS
OF NOVEMBER 10, 2000 BY AND BETWEEN FUTURE CAL-TEX CORPORATION, AS SELLER,
AND MERIT PARTNERS, L.P., ET AL., AS BUYER
The NEW OIL AND GAS LEASE: The working interest from the surface to the base of
the Middle Xxxxxxx is 100%. The lease burden is as follows:
Price Royalty
Oil $12-$20 23.5%
Below $12 20.0%
Over $20 26%
Gas $1.50-$3.00 20%
Below $1.50 17%
Over $3.00 23%
Liquids 25%
Exhibit B - Page 2
