EXHIBIT 2.4
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is made and entered into on this the
20th day of May, 2003, by and between ▇▇▇▇▇▇ Oil Corporation, a Michigan
corporation (hereinafter referred to as "Seller"), whose mailing address is ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and
Savannah Oil and Gas, L.L.C. a Delaware limited liability company ("Buyer"),
whose address is ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
Seller and Buyer may sometimes be referred to herein individually as "Party" and
collectively as "Parties".
ARTICLE I.
SALE AND PURCHASE OF THE PROPERTIES
Subject to the terms and conditions herein set forth, Seller agrees to
sell, assign, convey and deliver to Buyer, and Buyer agrees to purchase and
acquire from Seller, at the Closing (as hereinafter defined), but effective as
of 12:01 A.M. on January 1, 2003 (the "Effective Date"), all of the interest of
Seller (which represents 100% of Seller's working interest, net revenue
interest, and overriding royalty interest, if applicable, in each property) set
forth on Exhibits "A" ("▇▇▇▇▇" and "units") and "B" ("leases") attached hereto
and made a part hereof, and all other interest, if any, owned by Seller, in, to
and under such ▇▇▇▇▇, units and leases, all equipment and facilities appurtenant
thereto, and all information, "Data" (as defined in Section 19.3 hereof) and
contracts relating thereto (all of the above being hereinafter referred to
collectively as the "Properties").
ARTICLE II.
PURCHASE PRICE
2.1 Purchase Price. The total purchase price for 100% of the
Seller's Working Interest and Net Revenue Interest in all of the Properties
being conveyed to Buyer shall be Two Million Five Hundred Forty Thousand and
No/100 Dollars (US $2,540,000), hereinafter referred to as the "Purchase Price".
The terms Working Interest and Net Revenue Interest are defined respectively in
Sections 19.11 and 19.8 hereof, and Seller, for purposes of making the Title
Adjustments pursuant to Section 8.5 hereof, represents that such interests owned
by it as of the Effective Date in each of the ▇▇▇▇▇ and/or units which comprise
the Properties is accurately stated on Exhibit "A" hereto. The Purchase Price,
which shall be subject to any applicable adjustments, as hereinafter provided,
shall be apportioned amongst the various ▇▇▇▇▇ and/or units which comprise the
Properties in the manner described in Exhibit "A".
2.2 Deposit/Default. Contemporaneous with the execution of this
Agreement and in no event later than Twelve noon on the day of execution of this
Agreement, Buyer shall pay (by wire transfer) to Seller, in immediately
available funds, an amount equal to Five Hundred Thousand Dollars (US
$500,000.00), which amount shall hereinafter be referred to as the
1
"Deposit". If the transaction contemplated hereby is consummated, the Deposit,
without interest, if any, shall be applied against the Purchase Price to be paid
by Buyer at Closing. Except for circumstances involving Buyer's breach of this
Agreement, in the event Buyer or Seller terminates this Agreement as expressly
provided for herein under Articles III(d), Article VIII, Section 8.5, Article
XII, or Section 13.2, or the Parties terminate this Agreement by mutual written
consent, the Deposit, without interest, if any, shall be returned to the Buyer.
Subject to the foregoing, in the event (i) Buyer defaults under this Agreement
or (ii) the transaction contemplated by this Agreement does not close on or
before the Closing Date, as defined herein, for any reason whatsoever (including
the fault of the Buyer), the Deposit, plus interest, if any, shall be forfeited
by Buyer and permanently retained by Seller as liquidated damages, as Seller's
sole and exclusive remedy (except as specifically described in this paragraph)
for such failure to close, all other remedies for such failure to close being
expressly waived by Seller. THE PARTIES HEREBY ACKNOWLEDGE THAT THE EXTENT OF
DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THIS TRANSACTION TO BE
CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE
AMOUNT OF THE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER
THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY. The restriction of Seller's
damages hereunder to the amount of the Deposit shall apply only to damages
arising solely from the failure to close the transaction contemplated hereby and
shall not apply to damages arising from any act or failure to act by Buyer (such
as, for example, breach of confidentiality agreements between seller and Buyer).
If Seller defaults in Seller's obligations under this Agreement so that the
transaction contemplated by this Agreement is not closed, then as Buyer's only
remedy, Buyer may terminate this Agreement by notice to Seller, in which case
the Deposit (without interest) shall be returned to Buyer, and Buyer may claim
against Seller for Buyer's actual damages in an amount not to exceed an amount
equal to the Deposit.
ARTICLE III.
ADJUSTMENTS TO PURCHASE PRICE; FINAL PURCHASE PRICE
Subject to the provisions of subsection (d) of this Article III, the
Purchase Price shall be adjusted as follows and the resulting amount shall be
referred to herein as the "Final Purchase Price":
(a) The Purchase Price shall be increased by an amount equal to the
sum of the following amounts:
(1) The amount of all expenditures, including (subject to
the provisions of Section 6.1) capital expenditures,
operating expenses and overhead charges (whether
provided for under an operating agreement or
customarily charged by Seller to itself or any
affiliate operating the Properties on behalf of
Seller), including, without limitation, expenses
associated with drilling of new ▇▇▇▇▇ on the
Properties and expenses proposed by a majority of the
other working interest owners, which are
2
incurred and paid by Seller in the ordinary course of
Seller's business and related to the Properties from
the Effective Date to the Closing Date (as defined in
Section 10.1 hereof), excluding, however, any such
expenditures related to periods prior to the
Effective Date which shall remain the responsibility
of Seller;
(2) The amount of all prepaid ad valorem, property and
similar taxes and assessments based upon or measured
by ownership of the Properties and attributable to
periods of time after the Effective Date (taxes shall
be prorated to the Effective Date in a manner
consistent with local custom in the area in which the
Properties are located);
(3) Any amounts due to Seller as of the Effective Date
with respect to any Imbalances (as defined in Section
19.7 hereof) existing at the Effective Date;
(4) An amount equal to the proportionate increase in the
Net Revenue Interest in each of the Properties set
forth in Exhibit "A", to the extent that same is
greater than the percentage shown in such Exhibit, as
set forth in Section 8.5 hereof;
(5) An amount equal to the proportionate decrease in the
Working Interest in each of the Properties set forth
in Exhibit "A", to the extent that same is less than
the percentage shown in such Exhibit, as set forth in
Section 8.5 hereof; and
(6) The value of all oil and other products in sales
tanks above the pipeline connection and in the
pipeline (as reasonably estimated by Seller) at the
Effective Date that is credited to the Properties,
such value to be the market or contract price in
effect as of the Effective Date, less any applicable
severance taxes and royalties.
(b) Subject to the provisions of subsection (d) of this Article III,
the Purchase Price shall be decreased by an amount equal to the
sum of the following amounts:
(1) The amount of all proceeds received by Seller, net of
all applicable taxes and royalties actually paid,
attributable to the Properties for periods of time
after the Effective Date, excluding, however,
proceeds from all production prior to the Effective
Date, which proceeds shall be for the account of
Seller;
(2) Any amounts received by Seller (whether prior or
subsequent to the Effective Date) pursuant to
take-or-pay, prepayment or similar provisions of any
contract to the extent any purchaser of production
has the right to
3
apply any such amounts to production delivered on or
after the Effective Date;
(3) Any amounts due from Seller to other parties as of
the Effective Date with respect to any Imbalances
existing at the Effective Date;
(4) An amount equal to all ad valorem, property, and
similar taxes and assessments based upon or measured
by the ownership of the Properties that are unpaid as
of the Closing Date and attributable to periods of
time prior to the Effective Date, which amounts shall
be computed based upon such taxes and assessments for
the calendar year in which the Effective Date occurs;
provided that if such taxes have not been actually
assessed for such calendar year as of the Closing
Date, such amounts will be initially computed based
on such taxes and assessments for the preceding tax
year, and will be subsequently adjusted based upon
the actual taxes for the current calendar year once
those amounts are assessed (taxes shall be prorated
to the Effective Date in a manner consistent with
local custom in the area in which the Properties are
located);
(5) An amount equal to the proportionate reduction in the
Net Revenue Interest in each of the Properties set
forth in Exhibit "A", to the extent that same is less
than the percentage shown in such Exhibit,
(including, but not limited to, any reduction
occasioned by the timely exercise by any third party
of a preferential right to purchase), as set forth is
Section 8.5 hereof;
(6) An amount equal to the proportionate increase in the
Working Interest in each of the Properties set forth
in Exhibit "A", to the extent that same is greater
than the percentage shown in such Exhibit; and
(7) An amount equal to the cost to cure Adverse
Environmental Conditions (as defined in Section 19.1
hereof), if any, pursuant to and in accordance with
Section 13.2 hereof.
(c) Subject to the provisions of subsection (d) of this Article III,
the Purchase Price shall also be decreased by an amount
attributable to any discrepancy or inaccuracy of a material or
substantive nature in the information provided by Seller to
Buyer upon which Buyer based its determination of the Purchase
Price, in whole or in part.
(d) Notwithstanding anything contained in this Agreement to the
contrary, except for adjustments under Article III (a) (1), (a)
(2), (a) (6), (b) (1), (b) (2), and (b) (4) under no
circumstances shall the Purchase Price be adjusted (either up or
down) unless the net adjustment (i.e. the adjustment after
taking into account all potential increases and decreases to the
Purchase Price) shall, in aggregate, exceed three percent (3%)
of the unadjusted Purchase Price. In the event such net
adjustment
4
exceeds three percent (3%) of the unadjusted Purchase Price,
then only the portion of such net adjustment exceeding three
percent (3%) of the unadjusted Purchase Price shall be
considered for the purposes of calculating the Final Purchase
Price. Also, notwithstanding anything contained in this
Agreement to the contrary, except for adjustments under Article
III (a) (1), (a) (2), (a) (6), (b) (1), (b) (2), and (b) (4), in
the event Buyer asserts defects or adjustments to the Purchase
Price under this Agreement that, in the aggregate, exceed ten
percent (10%) of the unadjusted Purchase Price (after
considering the three percent (3%) basket limitation described
in this paragraph), then Seller or Buyer shall have the option
to terminate this Agreement and in the event of such termination
Buyer shall receive a full refund of the Deposit.
(e) Except as provided in Articles VIII, XII and XIII of this
Agreement, the results of any well (i.e., its ability to produce
oil and/or gas, whether or not in producing quantities)
currently drilling on the Properties, or any well drilled or
drilling on the Properties subsequent to the date hereof, shall
not be asserted by Buyer as an adjustment to the Purchase Price.
Nothing contained in this Article III (e) shall, however, be
construed as a limitation on or restriction upon the adjustments
to the Purchase Price provided for in Article III (a) and (b)
above with respect to any such well.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization. Seller is duly organized, validly existing and in
good standing under the laws of the State of its organization and is qualified
to do business in, and is in good standing under, the laws of the State(s) where
the Properties are located.
4.2 Authority. Seller has full power and authority and has taken all
requisite action, corporate or otherwise, to authorize it to carry on its
business as presently conducted, to own the Properties, to enter into this
Agreement and to perform its obligations under this Agreement. Seller is
qualified to own all federal and state leases included in the Properties in
accordance with all applicable laws, rules and regulations. Seller is not aware
of any fact relating to Seller or the Properties that could reasonably be
expected to cause the Minerals Management Service, Bureau of Land Management, or
other governmental authority to refuse approval of the assignment of the
Properties to Buyer.
4.3 Enforceability. This Agreement has been duly executed and
delivered on behalf of Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms. At the Closing,
all documents required hereunder to be executed and delivered by Seller shall be
duly authorized, executed and delivered and shall constitute legal, valid and
binding obligations of Seller, enforceable in accordance with their respective
terms.
5
4.4 Contracts. To Seller's actual knowledge, without further
investigation, Exhibits "C-l" through "C-4", attached hereto and made a part
hereof, contain a complete list of all material contracts, agreements,
undertakings (whether written or oral) and instruments that constitute a part of
the Properties or by which the Properties are bound or subject (the "Material
Contracts"). With respect to all of the Material Contracts that relate to the
Properties and will survive Closing, to the best of Seller's knowledge, (i) each
has been duly authorized, executed and delivered by Seller, (ii) each is in full
force and effect, (iii) neither Seller nor, to the knowledge of Seller, any
other party to such Material Contracts (a) is, or as a result of the transaction
contemplated herein will be, in breach of or default, or with the lapse of time
or the giving of notice, or both, would be in breach or default with respect to
any of its material obligations thereunder or (b) has given or threatened to
give notice of any default under or inquiry into any possible default under, or
action to alter, terminate, rescind or procure a judicial reformation of any
such Material Contracts, and (iv) Seller does not anticipate that any other
party to any such Material Contracts will be in breach of or default under or
repudiate any of its material obligations thereunder.
4.5 Preferential Purchase Rights/Consents. To Seller's actual
knowledge, without further investigation, Exhibit "C-5" sets forth all
preferential purchase rights, consents and approvals required to be obtained for
the assignment of the Properties to Buyer.
4.6 Litigation and Claims. Except as is set forth on Exhibit "C-6",
attached hereto and made a part hereof, to Seller's actual knowledge, without
further investigation, no claim, demand, filing, cause of action, administrative
proceeding, lawsuit or other litigation is pending or threatened that could now
or hereafter materially affect the ownership, operation or value of any of the
Properties.
4.7 Compliance with Laws and Permits. To Seller's actual knowledge,
without further investigation, during the period of time that Seller has owned
and operated the Properties, the Properties have been operated in compliance
with all laws, orders, regulations, rules and ordinances issued or promulgated
by all governmental authorities having jurisdiction with respect to the
Properties, and laws, regulations and ordinances relating to environmental
protection, health and safety; and further to the actual knowledge of Seller,
during such period of time all necessary governmental certificates, consents,
permits, licenses or other authorizations with regard to the ownership or
operation of the Properties have been obtained or maintained and Seller has
received no notices of violations in respect of such licenses, permits or
authorizations.
4.8 Production Burdens, Taxes, Expenses and Revenues. During the
period of ▇▇▇▇ ▇▇▇▇▇▇ has owned the Properties, all rentals, royalties,
overriding royalty interests, taxes, expenses and other payments due under or
with respect to any Property which has been operated by Seller have, to the
actual knowledge of Seller, been properly and timely paid, and, to the actual
knowledge of Seller, all leases are in full force and effect. To the actual
knowledge of Seller, all of the proceeds from the sale of production are being
properly and timely paid to Seller
6
by the purchasers of production or other party responsible for making such
payments without suspense.
4.9 Production Balances. Except as set forth on Exhibit "C-7", to
the actual knowledge of Seller, without further investigation, none of the
purchasers under any production sales contract or transporters are entitled to
"make-up" or otherwise receive deliveries of production attributable to Seller's
interest in the Properties at any time after the Effective Date without paying
at such time the full contract price therefor and there are no "Imbalances" (as
defined in Section 19.7 hereof) which allow any other party to "make-up"
production at any time after the Effective Date under any operating agreement,
gas balancing and storage agreement, gas transportation or exchange agreement,
gas processing or dehydration agreement, or other similar agreements relating to
the Properties.
4.10 Well Status. Except as set forth on Exhibit "A" hereof, to
Seller's actual knowledge, without further investigation, there are no ▇▇▇▇▇
located on the Properties that, based on their current productive status, (i)
were required to be plugged and abandoned on the Effective Date; (ii) are
subject to exceptions to a requirement to plug and abandon issued by a
regulatory authority having jurisdiction over the Properties; or (iii) have been
plugged and abandoned but have not been plugged in accordance with all
applicable requirements of each regulatory authority having jurisdiction over
the Properties.
4.11 Equipment. The equipment relating to the Properties described on
Exhibit "A" is sold "AS IS, WHERE IS AND WITH ALL FAULTS." Seller does not
warrant the equipment or facilities as to their physical condition or
suitability for the use for the purposes for which same were originally
constructed or are intended by Buyer.
4.12 No Tax Partnership. Except as set forth on Exhibit "C-8" hereto,
to Seller's actual knowledge, without further investigation, none of the
Properties are subject to any tax partnership or to any obligation requiring a
partnership income tax return to be filed under the Internal Revenue Code of
1986, as amended, or any similar State statute.
4.13 Records Furnished. All Data in Seller's possession relating to,
or in any way affecting, the Properties has been (or will have been prior to
Closing) made available to Buyer for inspection and/or copying unless such Data
is subject to a license or similar agreement which would prohibit such transfer.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
5.1 Organization. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business, and is in good standing under, the
laws of the State(s) where the Properties are located.
7
5.2 Authority. Buyer has full partnership power and authority to
carry on its business as presently conducted, to enter into this Agreement, to
purchase the Properties on the terms described in this Agreement and to perform
its obligations under this Agreement. Buyer is qualified to own (and to the
extent applicable operate) all federal and state leases included in the
Properties in accordance with all applicable laws, rules and regulations. Buyer
is not aware of any fact relating to Buyer or the Properties that could
reasonably be expected to cause the Minerals Management Service, the Bureau of
Land Management, or other governmental authority to refuse approval of the
assignment of the Properties to Buyer. Buyer has met all applicable bonding
requirements as called for by the Minerals Management Service, the Bureau of
Land Management and any other governmental authority having jurisdiction over
the Properties, and will not, upon closing of the transaction contemplated
hereby, become disqualified to own (or operate to the extent applicable) any of
the Properties or exceed any acreage limitation imposed by law, statute, rule or
regulation applicable to any of the Properties. Buyer
5.3 Authorization. The execution and delivery of this Agreement have
been, and the performance of this Agreement and the transaction contemplated
hereby shall be at the time required to be performed hereunder, duly and validly
authorized by all requisite partnership action on the part of Buyer.
5.4 Enforceability. This Agreement has been duly executed and
delivered on behalf of Buyer, and constitutes the legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms. At the Closing,
all documents required hereunder to be executed and delivered by Buyer shall be
duly authorized, executed and delivered and shall constitute legal, valid and
binding obligations of Buyer, enforceable in accordance with their respective
terms.
ARTICLE VI.
COVENANTS OF SELLER
6.1 Conduct of Business Pending Closing. Seller covenants that from
the date hereof to the Closing Date, except (i) as provided herein, (ii) as
required by any obligation, agreement, lease, contract, or instrument referred
to on any Exhibit hereof, or (iii) as otherwise consented to in writing by
Buyer, Seller will:
(a) Not (i) act in any manner with respect to the Properties other
than in the normal, usual and customary manner, consistent with
prior practice; (ii) dispose of, encumber or relinquish any of
the Properties (other than relinquishments resulting from the
expiration of leases that Seller has no right or option to
renew); (iii) waive, compromise or settle any material right or
claim with respect to any of the Properties and which has or
could have a material adverse effect on the ownership or
operation thereof after the Effective Date; or (iv) make capital
or workover expenditures with respect to the Properties and
which has or could have a material adverse effect on the
ownership or operation thereof after the Effective Date,
8
except when required by an emergency when there shall have been
insufficient time to obtain advance consent. Notwithstanding the
foregoing, Seller may, however, participate in the drilling of
additional ▇▇▇▇▇ on the Properties and other capital or workover
expenditures as proposed by a majority of other working interest
owners without obtaining the consent of Buyer, provided,
however, Seller shall give Buyer prompt notice of such
expenditures and all relevant particulars thereto;
(b) Use its commercially reasonable efforts to preserve
relationships with all third parties having business dealings
with respect to the Properties;
(c) Maintain, or have maintained on its behalf, the same insurance
coverage for the benefit of the Seller and the Properties as is
in effect on the date hereof;
(d) Notify, as reasonably requested by Buyer, all governmental
regulatory authorities of the transactions contemplated hereby
and cooperate with Buyer in obtaining the issuance by each such
authority of such permits, licenses and authorizations as may be
necessary for Buyer to own and/or operate the Properties
following the consummation of the transactions contemplated by
this Agreement; and
(e) Notify Buyer of the discovery by Seller that any Representation
or Warranty of Seller contained in this Agreement is or becomes
untrue or will be untrue on the Closing Date.
6.2 Access. Seller shall afford to Buyer, and/or its designated
representatives, reasonable access, during Seller's normal business hours from
the date hereof until the Closing Date, to Seller's financial, accounting, tax
(except State and Federal income tax information), title, contract, corporate
and legal materials (excluding attorney/client privilege documents) and
information relating to the Properties. Seller makes no warranty or
representation, express or implied, statutory or otherwise, as to the accuracy
or completeness of any description or pricing assumptions, or quality or
quantity of the hydrocarbon reserves, if any, attributable to the Properties or
the ability or potential of the Properties to produce hydrocarbons, or geologic
and/or geophysical data and any interpretations thereof. Any and all such
information furnished by Seller or otherwise made available to Buyer is provided
Buyer as a convenience and shall not create or give rise to any liability of or
against Seller. Any reliance or use of the same shall be at Buyer's sole risk,
cost and expense, and any conclusions drawn thereon shall be the result of
Buyer's own independent judgment and review.
6.3 Agreement. During the period beginning on the date hereof and
ending on the earlier of Closing or the termination of this Agreement, neither
Seller nor its affiliates shall enter into any oral or written agreement that
would prevent Seller from entering into and completing the transaction
contemplated in this Agreement.
9
6.4 Closing Conditions. Seller shall make commercially reasonable
efforts to cause all the Representations and Warranties of Seller contained in
this Agreement to be true and correct on and as of the Closing Date. Seller
shall make commercially reasonable efforts to cause conditions precedent to the
obligations of the Buyer to be satisfied on or prior to the Closing Date.
ARTICLE VII.
COVENANTS OF BUYER
7.1 Closing Conditions. Buyer shall make commercially reasonable
efforts to cause all the Representations and Warranties of Buyer contained in
this Agreement to be true and correct on and as of the Closing Date. Buyer shall
make commercially reasonable efforts to cause the conditions precedent to the
obligations of the Seller to be satisfied on or prior to the Closing Date.
7.2 Change in Circumstance. Buyer shall notify Seller of the
discovery by Buyer that any Representation or Warranty of Buyer contained in
this Agreement is or becomes or will be untrue on the Closing Date.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to be performed at the Closing are subject to
the fulfillment (or waiver by the Buyer in its sole discretion), before or at
the Closing, of each of the following conditions:
8.1 Representations and Warranties. The Representations and
Warranties of Seller as set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing, as though made at and as of the
Closing; and Seller shall have performed and complied with in all material
respects all covenants and agreements required to be performed and satisfied by
it at or prior to the Closing.
8.2 Consents. All consents and approvals required to be obtained for
the assignment of the Properties to Buyer, except for those consents and/or
approvals in connection with the sale or conveyance of oil and gas leases or
▇▇▇▇▇, or interests therein, that are customarily obtained subsequent to such
assignment or conveyance, shall have been obtained, and all preferential
purchase rights arising in connection with the assignment of the Properties to
Buyer shall have been waived, shall have expired without being timely exercised,
or shall have been timely exercised such that the affected Properties will be
excluded from the Properties to be conveyed by Seller to Buyer, together with an
appropriate downward adjustment of the Purchase Price in accordance with the
provisions of Section 3(b)(5) hereof.
10
8.3 Interest Conveyed. The Seller shall convey to Buyer at the
Closing interests in each Property representing Defensible Title (as defined in
Section 19.4 hereof).
8.4 No Litigation. Except as may be set forth on Exhibit "C-6"
hereto, there shall be no suits, actions or other proceedings pending or
threatened to enjoin the consummation of the transactions contemplated by this
Agreement or seeking substantial damages against Seller in connection therewith.
8.5 Title Adjustment. There shall not exist at the Closing any
uncured Title Defects (as defined in Section 19.10 hereof), unless adjustments
therefor have been made pursuant to the further terms hereof. Buyer shall notify
Seller in writing of any Title Defects not less than fifteen (15) days prior to
Closing. Seller shall have seven (7) days after receipt of notice to either (i)
cure or remove such Title Defect, (ii) adjust the Purchase Price by reason of
such defect(s) in the manner provided for in Section 3(b)(5) above, or (iii)
remove that portion of the Property affected by the Title Defect(s) from the
effects of this Agreement and subtract the allocated value for that portion of
such Property from the Final Purchase Price. Should Seller elect to cure or
remove a Title Defect but Seller is unwilling or unable to cure or remove the
same within said seven (7) day period, then no later than three (3) days prior
to Closing, Seller may notify Buyer in writing of Seller's election to accept
(ii) or (iii) above.
Failure of Buyer to give Seller timely notice of the existence of any
Title Defects on or before the date that is fifteen (15) days before the Closing
shall constitute a waiver by Buyer of any such unasserted Title Defects, and
preclude Buyer from later asserting any claims for adjustment to the Final
Purchase Price, and Buyer shall be deemed to have accepted the affected
Properties subject thereto.
If Buyer asserts claims with regard to Title Defects which would result
in an adjustment and/or reduction to the Purchase Price such claims shall be
subject to subsection (d) of Article III of this Agreement.
ARTICLE IX.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller to be performed at the Closing are subject to
the fulfillment, before or at the Closing, of each of the following conditions:
9.1 Representations and Warranties. The Representations and
Warranties of Buyer as set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing, as though made at and as of the
Closing; and Buyer shall have performed and complied in all material respects
with all covenants and agreements required to be performed and satisfied by it
at or prior to the Closing.
11
9.2 No Litigation. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the transactions
contemplated by this Agreement or seeking substantial damages against Buyer in
connection therewith.
ARTICLE X.
CLOSING
10.1 The Closing. The purchase and sale of the Properties pursuant to
this Agreement shall be consummated in Buyer's offices, at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, on or before 5:00 P.M. (Central Standard
Time) on June 16, 2003 (the "Closing Date"). Notwithstanding the foregoing,
Buyer may delay the Closing Date to a time and date no later than 5 P.M.
(Central Standard Time) on June 23, 2003, by providing Seller written notice of
such delay on or before 5 P.M. (Central Standard Time) on June 14, 2003.
10.2 Closing Obligations. At the Closing the following events shall
occur, each event under the control of one Party hereto being a condition
precedent to the events under the control of the other Party, and each event
being deemed to have occurred simultaneously with the other events:
(a) Seller shall execute and deliver to Buyer, and Buyer shall
execute and receive, one or more instruments of assignment, in
substantially the form of the Assignment with Special Warranty
set forth as Exhibit "D" hereto;
(b) Buyer shall deliver to Seller in immediately available funds by
wire transfer the "Preliminary Amount" (less the Deposit,
without interest, if any) which shall be that amount mutually
agreed upon by Buyer and Seller at least three (3) days prior to
the Closing Date as an estimate of the final computation of the
Final Purchase Price;
(c) Seller shall deliver to Buyer possession of the Properties (to
the extent Seller has possession) at the Closing;
(d) Seller and Buyer shall execute, acknowledge and deliver division
orders, transfer orders or letters in lieu thereof directing all
purchasers of production from the Properties to make payment of
proceeds attributable to such production to Buyer;
(e) Seller shall convey and deliver to Buyer all suspense funds held
by Seller as of the Effective Date for the benefit of royalty,
overriding royalty and working interest owners attributable to
the Properties, as such funds have been, or may be, adjusted
between the Effective Date and the Closing Date as a result of
the receipt or disbursement by Seller of additional suspense
funds during such period of time. Buyer shall assume all past,
present and future liability associated with such suspense
funds, but only as to such suspense funds actually transferred
(together with any liability arising after the Closing Date),
and not any liability resulting
12
from Seller's failure to pay or retain any amounts prior to the
Effective Date in addition to the suspense funds so transferred;
(f) Seller shall execute and deliver to Buyer any and all regulatory
forms necessary to allow Buyer to assume the ownership of the
Properties; and
(g) Buyer shall deliver to Seller copies of any and all bonds,
insurance certificates, organizational statements and other
evidence of qualification or compliance with governmental laws,
rules and regulations as Seller may reasonably request of Buyer
at least three (3) days prior to Closing.
ARTICLE XI.
POST-CLOSING ADJUSTMENTS
Seller shall, within eighty (80) days after the Closing Date, prepare
and submit for Buyer's review, in accordance with this Agreement and with
generally accepted accounting principles consistently applied, a statement
(herein called the "Final Settlement Statement") setting forth each adjustment
to the Purchase Price necessary to determine the Final Purchase Price and
showing the calculation of such adjustments. The Parties shall undertake to
agree on the Final Settlement Statement and the Final Purchase Price no later
than ninety (90) days after the Closing Date with respect to all of the
Properties. If the Final Purchase Price is more than the Preliminary Amount,
Buyer shall pay such difference to Seller in immediately available funds in the
same manner as described in Section 10.2(b) within five (5) days after the
Parties have agreed upon the Final Settlement Statement. If the Final Purchase
Price is less than the Preliminary Amount, Seller shall pay the amount of such
difference to Buyer in immediately available funds within five (5) days after
the Parties have agreed upon the Final Settlement Statement. If Seller and Buyer
cannot agree upon the Final Settlement Statement, Ernst and Young shall act as
an arbitrator and decide all points of disagreement with respect to the Final
Settlement Statement, whose decisions shall be binding upon the parties. The
costs and expenses of Ernst and Young shall be borne 50% by Seller and 50% by
Buyer.
ARTICLE XII.
CASUALTY LOSS
Prior to Closing, Seller shall promptly notify Buyer of any Casualty
Loss (as defined in Section 19.2 hereof) of which Seller becomes aware. If any
Casualty Loss occurs, Buyer may elect to (a) cause Seller to retain the
Properties affected by the Casualty Loss, and to reduce the Purchase Price by
the allocated value of the Property in question, as shown on Exhibit "A" hereto,
in which case Seller shall retain all insurance proceeds relating to the
Casualty Loss, or (b) require Seller to (i) transfer to Buyer such Property
notwithstanding such Casualty Loss and (ii) transfer to Buyer such Property
insurance proceeds, claims, awards and other payments arising out of such
Casualty Loss. In the event that Buyer selects (b) above 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. If Buyer
selects (a) above and such
13
selection results in a reduction to the Purchase Price such reduction shall be
made subject to subsection (d) of Article III of this Agreement.
ARTICLE XIII.
ENVIRONMENTAL CONSIDERATIONS
13.1 Inspection of Properties. Buyer acknowledges that it has, or
will have prior to Closing, carefully inspected the Properties; that Buyer is
familiar with the condition and the value thereof, and the improvements and
appurtenances (including electric wiring, equipment and machinery installed
thereon) located on the Properties; that Buyer has engaged such contractors or
consultants as Buyer deems prudent to conduct and has conducted such tests and
surveys of the soil, water, groundwater, ▇▇▇▇▇, equipment, machinery and
improvements on the Properties as Buyer deems necessary; and, subject to the
following Sections of this Article XIII., Buyer assumes any and all risks and
liabilities associated therewith. Buyer acknowledges that the Properties 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/or refining operations, and, as such, equipment, 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, ▇▇▇▇▇ and other petroleum
production facilities and appurtenances which have not been excepted and
excluded from this transaction may be located thereon.
13.2 Notice of Adverse Environmental Conditions. As soon as possible,
but in no event later than fifteen (15) days before Closing, Buyer shall advise
Seller in writing of any Adverse Environmental Conditions (as same is defined in
Section 19.1 hereof) discovered as a result of the inspections referred to in
the immediately preceding Section, and the estimated costs for remediating such
conditions, which are located on the Properties.
Failure of Buyer to give Seller timely notice of the existence of any
Adverse Environmental Condition shall constitute a waiver by Buyer of any such
unasserted Adverse Environmental Condition, and preclude Buyer from later
asserting any liability or claims for indemnification or holding harmless
against Seller for any such Adverse Environmental Condition, and Buyer shall be
deemed to have accepted the environmental condition of the Properties.
If written notice of the existence of any Adverse Environmental
Condition is timely given by Buyer to Seller, Seller may, but shall not be
obligated to, make a reasonable effort to cure or remedy any, or all, of the
Adverse Environmental Conditions at Seller's expense.
If Seller elects to attempt to cure or remedy any such Adverse
Environmental Conditions, Seller agrees that it will furnish Buyer written
notice of its intent to do so as provided below, and shall thereafter exercise
all reasonable efforts and diligence to complete any environmental cleanup and
remediation of any such Adverse Environmental Condition within six (6) months
from the date of Closing.
14
If Seller has not committed in writing at least seven (7) days prior to
Closing to attempt to cure or remedy any such Adverse Environmental Condition,
Buyer shall at its sole option require Seller to (i) remove the portion of the
Property affected by the Adverse Environmental Condition and adjust the Purchase
Price downward by an amount equal to the allocated value of that portion of the
Property, or (ii) indemnify and hold Buyer harmless from such Adverse
Environmental Condition for an amount not to exceed the allocated value of that
portion of the Property affected thereby.
If Buyer asserts claims for adjustments and/or reductions to the
Purchase Price for Adverse Environmental Conditions such reduction shall be made
subject to subsection (d) of Article III of this Agreement.
13.3 Access For Remediation. Buyer shall grant Seller and its
representative such access to the Properties post Closing as Seller may
reasonably require in order to conduct and complete any remediation activities
that it has elected to undertake pursuant to the immediately preceding Section,
provided that such access does not unreasonably interfere with Buyer's
operations.
ARTICLE XIV.
TERMINATION
14.1 CLOSING. Unless this Agreement is terminated as provided herein,
the Parties shall close the transaction contemplated herein on or before 5:00
P.M. (Central Standard Time), on the Closing Date.
14.2 DUE DILIGENCE. Notwithstanding anything contained in the this
Agreement to the contrary, Buyer shall have the right to terminate this
Agreement in the course of Buyer's due diligence as provided in (i) Article III
(d) (Adjustments to Purchase Price; Final Purchase Price) of this Agreement;
(ii) Article VIII (Conditions Precedent to the Obligations of Buyer) of this
Agreement; (iii) Section 8.5 (Title Adjustment) of this Agreement; (iv) Article
XII (Casualty Loss); and (v) Section 13.2. (Notice of Adverse Environmental
Conditions).
14.3 CONFIDENTIALITY. In the event of the termination of this
Agreement by either Party, all Data made available to Buyer pursuant hereto
shall be considered confidential in nature (except for that portion thereof
which (a) is a part of the public records, (b) is currently accessible to Buyer
from third parties, (c) is information that Buyer is otherwise entitled to, or
(d) becomes available in the future to Buyer on a nonconfidential basis, whether
directly or indirectly, from a source other than Seller, which source to the
best of Buyer's knowledge, did not acquire the Data on a confidential basis) and
shall be returned in its entirety to Seller. In addition, such confidential
information shall not be (i) disclosed to another company, entity or third party
by Buyer or its assigns, successors or legal representatives, or (ii) utilized
by Buyer as a basis for the acquisition of an interest in any property (this
provision shall not apply as to any of the Data which, for any of the reasons
set forth above, is no longer classified as confidential
15
information). Nothing herein contained shall affect in any way the right of
Buyer and Seller to independently develop any property. In the event of the
termination of this Agreement by either Party, all Data made available to Buyer
shall promptly be returned to Seller and in no event later than thirty (30) days
after such termination. The parties' obligations under this paragraph shall
survive the termination of this Agreement.
ARTICLE XV.
ASSUMPTION BY BUYER AND RETAINED OBLIGATIONS OF SELLER
15.1 ASSUMPTION BY BUYER. At Closing, Buyer shall assume, as of the
Effective Date, all of the costs, obligations and liabilities of Seller with
regard to the Properties under (i) the Agreements described on ▇▇▇▇▇▇▇▇ "▇-▇, ▇,
▇, ▇, ▇ ▇▇▇ ▇", (▇▇) all other agreements or leases expressly described or
referred to in this Agreement or in an agreement which is identified in an
Exhibit to this Agreement, (iii) all agreements contained in Seller's files and
records actually furnished to Buyer that relate to the Properties and arise from
or relate to events occurring on or after the Effective Date, (iv) as to those
funds in suspense payable to third parties which are to be conveyed to Buyer
pursuant to the provisions of Section 10.2 (e) hereof, and (v) all Title Defects
and Adverse Environmental Conditions not asserted, or asserted but subsequently
waived, by Buyer.
15.2 RETAINED OBLIGATIONS OF SELLER. Seller expressly retains, and
Buyer shall not assume, any obligation and liability of Seller or any other
person (i) under any Litigation disclosed in Exhibit "C-6", (ii) to pay and
discharge any funds, including interest and penalties, if any, that may be
imposed by any governmental agency arising from the sale of the production prior
to the Effective Date, and (iii) as to those funds in suspense payable to third
parties which are to be retained by Seller pursuant to the provisions of Section
10.2 (e) hereof.
ARTICLE XVI.
SURVIVAL
All representations, warranties, covenants, agreements and indemnities
of or by the Parties under this Agreement shall survive the Closing.
ARTICLE XVII.
CROSS-INDEMNIFICATION
Buyer agrees to indemnify and hold Seller harmless from and against any
and all liability, loss, cost and expense (including, without limitation, court
costs and reasonable attorneys' fees) that are attributable to the Properties
conveyed to Buyer and are attributable to periods of time after the Effective
Date (including, but not limited to, any liability resulting from the condition
of the Properties arising after the Effective Date under any Environmental Law,
or under any Federal, State or local statute, regulation, rule, ordinance or
order relating to the public health or safety) or that are attributable to a
breach by Buyer of any of its surviving representations,
16
covenants or and warranties hereunder. Buyer's obligations under this paragraph
shall survive the Closing.
Subject to the provisions of this Agreement, Seller agrees to indemnify
and hold Buyer harmless from and against any and all liability, loss, cost and
expense (including, without limitation, court costs and reasonable attorneys'
fees) that are attributable to the Properties conveyed to Buyer and are
attributable to periods of time before the Effective Date (including, but not
limited to, any liability resulting from the condition of the Properties as of
the Effective Date under any Environmental Law, or under any Federal, State, or
local statute, regulation, rule, ordinance or order relating to the public
health or safety) or that are attributable to a breach by Seller of any of its
surviving representations, warranties or covenants hereunder. Seller's
obligations under the paragraph shall survive the Closing.
It is expressly provided, however, that the respective indemnity and
hold harmless obligations of the parties hereto shall not apply to:
(a) any amount that was taken into account as an upward or downward
adjustment (regardless of whether said amount is greater or less
than any applicable threshold amount provided for herein) to the
Preliminary Purchase Price pursuant to the provisions hereof,
but only to the extent of such adjustments;
(b) any matter that was expressly waived by a Party hereto, or
tacitly waived by the failure of a Party to furnish timely
notice to the other Party;
(c) any liability of one Party hereto to any other Party under the
provisions of this Agreement; or
(d) each Party's costs and expenses with respect to the negotiation
and consummation of this Agreement and the purchase and sale of
the Properties.
Neither Party assumes, and each Party hereby disclaims any liability or
obligation in respect of, any matter against which such Party is entitled to be
indemnified by the other Party under the terms of this Agreement.
ARTICLE XVIII.
MISCELLANEOUS PROVISIONS
18.1 Further Assurances. After the Closing, Seller and Buyer shall
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document, certificate or other instrument delivered pursuant hereto.
Seller shall use its best efforts to assist Buyer in obtaining all approvals and
consents required by or necessary for the transactions contemplated by this
Agreement that are customarily obtained after Closing.
17
18.2 Access to Records by Seller. Subject to restrictions in any
applicable licensing agreements, within ten (10) business days following the
Closing Date, Seller shall deliver to Buyer, at Buyer's Houston, Texas address,
originals of all non-confidential books, records and other documents in its
possession relating to the Properties which comprise the Data, except for
accounting records, copies only of which will be furnished to Buyer upon
request. For a period of seven (7) years from and after the Closing Date, Seller
and its authorized representatives shall have reasonable access (including
copying privileges at Seller's sole cost and expense) during Buyer's normal
business hours to all books and records of Buyer pertaining to the Properties
for periods prior to the Closing Date.
18.3 Notices. All notices required or permitted under this Agreement
shall be in writing and shall be delivered personally or by certified mail,
postage prepaid and return receipt requested, or by telecopier as follows:
Seller: ▇▇▇▇▇▇ Exploration Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: Savannah Oil and Gas, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place within the United States of America as either Party may
designate as to itself by written notice to the other. All notices given by
personal delivery or mail shall be effective on the date of actual receipt at
the appropriate address. Notice given by telecopier shall be effective upon
actual receipt if received during recipient's normal business hours, or at the
beginning of the next business day after receipt if received after the
recipient's normal business hours. All notices by telecopier shall be confirmed
promptly after transmission by certified mail or personal delivery.
18.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State. This Agreement and the parties hereto shall,
however, be subject to all applicable State and Federal laws, rules and
regulations of public bodies having jurisdiction over the Properties
18
and the lands covered thereby, and the parties shall abide by same in carrying
out any activities conducted hereunder or in connection herewith.
18.5 Arbitration. Except as provided in Article XI. (Post-Closing
Adjustments) of this Agreement, the Parties shall endeavor in good faith to
resolve all disputes and controversies between them promptly and on a reasonable
basis. Should the Parties be unable to do so, all disputes or controversies
relating to, or arising from, this Agreement shall be referred to binding
arbitration and shall be administered by the American Arbitration Association in
Houston, Texas under the Commercial Arbitration Rules of said Association. Any
Party hereto may apply to any court having jurisdiction for an order to compel
arbitration of any dispute or controversy, or to enforce the award of the
arbitration panel. The arbitration panel shall consist of three (3) arbitrators,
each of whom is to be a practicing attorney duly licensed to practice law in the
State of Texas and shall be knowledgeable with the oil and gas industry
generally, and with the particular area or nature of the dispute or controversy
specifically. Each of the Parties shall appoint an arbitrator within seven (7)
days of either party giving written notice to the other that it has elected to
invoke the arbitration provisions of this Section 18.5. The two (2) arbitrators
so selected shall appoint the third arbitrator within seven (7) days of the
appointment of the latter of them. The arbitration panel shall attempt to
resolve any dispute or controversy between the Parties which is brought before
it within thirty (30) days after appointment of the third arbitrator. The
arbitration panel may engage engineers, accountants and such other consultants
as it deems necessary to assist with the arbitration. At the conclusion of the
arbitration, the panel shall make specific written findings of fact and
conclusions of law. The award of the arbitration panel shall, to the extent
applicable, comply with the terms and provisions of this Agreement, and shall
not grant to either Party any punitive, consequential or incidental damages of
any kind. The arbitration panel shall have the power and authority to award
recovery of all costs and fees to the prevailing party. All fees and costs
incurred by the arbitrators and any consultants hired by them shall be borne
equally by the Parties unless the award specifies otherwise.
18.6 Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the Parties hereto and their respective permitted successors
and assigns. Neither Buyer nor Seller shall assign any of its rights or
obligations under this Agreement, either prior to or after the Closing, without
the prior written consent of the other Party hereto, which consent shall not be
unreasonably withheld. Notwithstanding the terms of the preceding sentence to
the contrary, Buyer may freely assign any of its rights or obligations under
this Agreement to any entity that it owns an interest without the prior written
consent of the Seller.
18.7 Entire Agreement; Amendments; Waivers. This Agreement
constitutes the entire agreement between the Parties hereto with respect to the
subject matter hereof, superseding all prior negotiations, discussions,
agreements and understandings, whether oral or written, relating to such subject
matter. This Agreement may not be amended and no rights hereunder may be waived
except by a written document signed by the Party to be charged with such
amendment or waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
19
18.8 Headings. The headings of the Articles and Sections of this
Agreement are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions hereof (whether or not
similar).
18.9 Counterparts. This Agreement may be executed by Buyer and Seller
in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute but one and the same
instrument.
18.10 Expenses and Fees. Each of the Parties hereto shall pay their
own fees and expenses incident to the negotiation and preparation of this
Agreement and consummation of the transactions contemplated hereby, including
broker fees. Buyer shall be responsible for the cost of all fees for the
recording of transfer documents. Seller shall be responsible for any sales,
transfer, stamp or other excise taxes resulting from the transfer of the
Properties to Buyer. All other costs shall be borne by the Party incurring such
costs.
18.11 Press Release. The Parties shall consult with each other about
all press releases and other public announcements regarding this transaction,
and no Party shall issue any press release, or otherwise disclose the existence,
or any of the terms and provisions, of this Agreement, without the prior written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed. In the event that any such press release, or other disclosure, is
required in order to comply with any governmental law, rule, regulation or
order, the non-disclosing Party shall be given prior written notification, but
shall have no right to withhold its consent. The non-disclosing Party shall,
however, always have the right to cause its name and identity to be excluded
from any such press release, or other disclosure.
ARTICLE XIX.
DEFINITIONS
19.1 Adverse Environmental Condition. "Adverse Environmental
Condition" shall mean any of the following items which were in existence on or
before the Effective Date of this Agreement: (a) any event or condition with
respect to air, land, soil, surface, subsurface strata, surface water, ground
water, or sediments which caused, or may cause, a Property to become subject to
remediation under, or not be in compliance with, any Environmental Law (as
defined in Section 19.6 hereof) or environmental permit; (b) any material
spilling, leaking, pouring, emitting, emptying, discharging, injection,
escaping, transmission, leaching, or dumping ("Release"), or threat of a
Release, of Environmental Contaminants (as defined in Section 19.5 hereof) on,
to, or from any of the ▇▇▇▇▇ or Properties that results, or may result, in
liability to any third party for injury to, or death of, any person, persons, or
other living thing, or damage, loss, or destruction of property; and/or (c) any
written notice, citation, claim, demand, action, suit, administrative
proceeding, order, judgment, liability, or obligation of any kind or character,
whether putative, threatened, or actual, asserted or assertable by, issued by,
or running in favor of
20
any third party or governmental body caused by, arising out of, resulting from,
or related in any way to any event or condition described in the preceding
clauses (a) and (b) of this definition.
19.2 Casualty Loss. "Casualty Loss" shall mean, with respect to all
or any material portion of a Property, any destruction by fire or blowout (above
or below the ground) or any taking, or pending or threatened taking, in
condemnation or under the right to eminent domain of any Property or portion
thereof.
19.3 Data. "Data" shall mean all files, records and documentation
including, but not limited to, computer tapes, disks or information on other
electronic media of Seller pertaining to or evidencing Seller's ownership or
rights in the Properties (or the exploration or maintenance thereof), including,
without limitation, lease files, land files, accounting files, legal records
(excluding attorney/client privilege documents), production records, marketing
records, and the non-interpretive geological and/or geophysical data including
but not limited to all field notes and tapes and tapes of all final processing
in SEG Y format for the N. Monroeville 3-D Data Set which Seller has the right
to convey under any applicable licensing agreements.
19.4 Defensible Title. "Defensible Title" shall mean, (i) with
respect to the Properties consisting of personal property, good and merchantable
title to each such asset free and clear of all liens, mortgages, pledges,
claims, charges, options, material defects, preferential purchase rights,
requirements for consents to assignment which would apply to the transaction
contemplated hereby and other encumbrances, and (ii) with respect to each of the
Properties that is an oil and gas property or interest, good and merchantable
title to the Property entitling the owner thereof to receive, as of the
Effective Date, a percentage of all proceeds of production therefrom not less
than the Net Revenue Interest of Seller set forth on Exhibit "A" for such
Property, and obligating the owner thereof to bear, as of the Effective Date, a
percentage of all costs and expenses with respect to each Property not greater
than the Working Interest of Seller set forth for such Property on Exhibit "A",
unless such increase in Working Interest is accompanied by a correlative
increase in the Net Revenue Interest for such Property. In this regard, it is
understood and agreed that Seller's title need not be free from every technical
defect, omission, irregularity or uncertainty, but is to be free from reasonable
and substantial doubt as to all material matters of law and fact such that a
reasonably prudent person, engaged in the ownership, development and operation
of oil and gas properties or assets, with knowledge of all the facts and
appreciation of their legal significance (including, but not limited to, the
passage of time since the creation or commencement of an alleged defect, the
current payment status of the affected Property, and whether any adverse claims
have been asserted or threatened), would be willing to accept title to such
Properties without a reduction in the Purchase Price.
19.5 Environmental Contaminant. "Environmental Contaminant" means
"hazardous substances", "pollutants or contaminants", and "petroleum, including
any fraction thereof, and natural gas, liquid natural gas, or synthetic gas of
pipeline quality" as those terms are defined or used in Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act. The term
also includes, but is not limited to, naturally
21
occurring radioactive material ("NORM") concentrated or disposed of in
association with oil and/or gas activities.
19.6 Environmental Laws. "Environmental Laws" shall mean all
applicable laws relating to the protection of the public health, welfare, and
the environment, including, without limitation, those laws of the United States,
and/or those of any State (or any political subdivision thereof) where the
Properties are located, relating to the storage, handling, and use of chemicals
and other hazardous materials, those relating to the generation, processing,
treatment, storage, transportation, disposal, or other management of waste
materials of any kind, and those relating to the protection of environmentally
sensitive areas. Such Environmental Laws include, but are not limited to, the
Clean Air Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Water Pollution Control Act, the Safe
Drinking Water Act, the Toxic Substances Control Act, the Hazardous and Solid
Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization Act
of 1986, the Hazardous Materials Transportation Act, the Clean Water Act, the
National Environmental Policy Act, the Endangered Species Act, the Fish and
Wildlife Coordination Act, the National Historic Preservation Act and the Oil
Pollution Act of 1990.
19.7 Imbalance. "Imbalance" means any gas or other hydrocarbon
production, pipeline, transportation or processing imbalance existing as of the
Effective Date with respect to any of the Properties, together with any related
rights or obligations as to future cash and/or gas or product balancing, as a
result of (i) in the case of production imbalances, Seller having taken and sold
for Seller's account cumulative production which is greater or less than
Seller's working interest share in cumulative production or (ii) in the case of
a pipeline, transportation or processing imbalance, Seller having delivered
production which is greater or less than the production volume Seller contracted
to deliver.
19.8 Net Revenue Interest. "Net Revenue Interest" shall mean:
(a) with respect to an oil or gas well, the interest in and
to all oil, gas or other minerals produced, saved or
sold from, under or by virtue of such well after giving
effect to all valid lessor's royalties, overriding
royalties, production payments, carried interests, liens
and other encumbrances or charges against production
therefrom; and
(b) with respect to a unit, the interest in and to all
production of oil, gas or other minerals saved,
produced, and sold from the lands included within such
unit after giving effect to all valid lessor's
royalties, overriding royalties, production payments,
carried interests, liens and other encumbrances or
charges against production therefrom.
19.9 Permitted Encumbrances. "Permitted Encumbrances" shall mean (a)
terms, conditions, restrictions, exceptions, reservations, limitations and other
matters contained in the contracts, agreements, instruments and other documents
which create or reserve to Seller
22
its interest in the Properties, or to which Seller's interest therein are
subject, provided that the same do not (i) reduce the Net Revenue Interest in a
well or unit below that set forth in Exhibit "A" for such well or unit, or (ii)
increase the Working Interest in a well or unit above that set forth in Exhibit
"A" for such well or unit without a proportionate increase in the Net Revenue
Interest for such well or unit; (b) changes in the Working Interest or Net
Revenue Interest associated with the Properties or any of them, occurring after
the Effective Date from any cause at least insofar as said changes are either
reflected on the Exhibits attached hereto, are described in the Contracts listed
on an Exhibit attached hereto, or were reflected in the cash flows contained
within the ▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd. Reserve Report which was furnished to Buyer
and used by it in the computation of the Purchase Price; (c) statutory and
conventional liens securing payments to operators, mechanics and materialmen or
others, payments of taxes or other claims or payment obligations that are, in
each case, not yet delinquent or, if delinquent, are being contested in good
faith in the normal course of business and which, if contested, have been
disclosed to Buyer; (d) any obligations or duties to any municipality or public
authority with respect to any franchise, grant, certificate, license or permit,
and all applicable laws; (e) Title Defects and Adverse Environmental Conditions
that Buyer fails to assert timely in accordance with the provisions of this
Agreement; (f) consents to assignment by a third party or governmental authority
that are obtained by the Closing Date or that are customarily obtained after the
consummation of transactions of the nature contemplated in this Agreement; (g)
any easements, rights-of-way, servitudes, permits and other rights in respect of
surface operations, pipelines or the like, and easements for pipelines, power
lines and other similar rights-of-way, and encroachments, on, over or in respect
of any of the Leases that do not unreasonably or materially interfere with the
operation of the Leases for the exploration and production of hydrocarbons or
related operations; (h) all royalties, overriding royalties, net profit
interests, production payments, carried interests, reversionary interests, calls
on production and other burdens on or deductions from the proceeds of production
that do not operate to (i) reduce the Net Revenue Interest in a well or unit
below that set forth in Exhibit "A" for such well or unit, or (ii) increase the
Working Interest in a well or unit above that set forth in Exhibit "A" for such
well or unit without a proportionate increase in the Net Revenue Interest for
such well or unit; (i) the terms and conditions of all production sales
contracts, transportation agreements, pooling agreements, unitization
agreements, operating agreements, processing agreements, and all other
contracts, agreements, and instruments related to or utilized in connection with
the Leases, or the production, storage, treatment, transportation, sale or
disposal of oil, gas or other hydrocarbons, minerals or substances therefrom
that do not operate to (i) reduce the Net Revenue Interest in a well or unit
below that set forth in Exhibit "A" for such well or unit or (ii) increase the
Working Exhibit in a well or unit above that set forth in Exhibit "A" for such
well or unit without a proportionate increase in the Net Revenue Interest for
such well or unit (j) conventional rights of reassignment prior to release of
Leases or abandonment; (k) any preferential purchase rights in favor of third
parties and any required third party consents to assignment and similar
agreements and obligations with respect to which prior to Closing (i) waivers or
consents have been obtained from the appropriate person, (ii) the applicable
period of time for asserting such rights has expired without any exercise of
such rights or (iii) arrangements have been made by the Parties to allow Buyer
to receive substantially the same economic benefits as if all such waivers and
consents had been obtained; and (1) any other liens, charges, encumbrances,
contracts, agreements, instruments, obligations, defects or irregularities of
any kind whatsoever affecting
23
the Properties that individually or in the aggregate are not such as would
materially adversely affect the ownership, operation, value or use of the
Properties.
19.10 Title Defect. "Title Defect" shall mean any lien, mortgage,
production payment, pledge, claim, charge, call on production, material defect,
error, omission, preferential purchase right, requirement for consent to
assignment, or other encumbrance (other than Permitted Encumbrances) that
results in such Seller not having Defensible Title to any of the Properties.
19.11 Working Interest. "Working Interest" shall mean:
(a) with respect to an oil or gas well, the interest in and
to such well and all rights and obligations of every
kind and character appurtenant thereto or arising
therefrom, without regard to any valid lessor's royalty,
overriding royalties, production payments, carried
interests, liens, or other encumbrances or charges
against production therefrom, insofar as such interest
in said well is burdened with the obligation to bear and
pay costs of operations; and
(b) with respect to a unit, the interest in and to such
unit, limited to the lands and depths included within
such unit after giving effect to applicable pooling or
unitization, and all rights and obligations of every
kind and character appurtenant thereto or arising
therefrom, without regard to any valid lessor's
royalties, overriding royalties, production payments,
carried interests, liens and other encumbrances or
charges against production therefrom, insofar as such
interest in said unit is burdened with the obligation to
bear and pay costs of operations in respect of such
lands and depths.
ARTICLE XX.
EXHIBITS
The following enumerated Exhibits are incorporated herein and are a
part hereof:
Exhibit "A" - ▇▇▇▇▇, Units, Working Interests and Net Revenue Interests
of Seller and Allocation of Purchase Price
Exhibit "B" - Leases
Exhibit "C" - Disclosure Statement
1. Product Sales Contracts
2. Operating Agreements
3. Other Agreements Affecting Operations
4. Commitments to Expend Monies
5. Preferential Rights/Consents
6. Suits or Claims
24
7. Gas Balance (Imbalances)
8. Tax Partnerships
Exhibit "D" - Assignment with Special Warranty
Executed as of the date set forth above.
SELLER:
ATTEST:
▇▇▇▇▇▇ OIL CORPORATION
/s/ ▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- ----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President & CEO
-----------------------------------
BUYER:
ATTEST: SAVANNAH OIL AND GAS, L.L.C.
/s/ ▇▇▇▇▇ Key By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------- ----------------------------------
▇▇▇▇▇ Key ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
------------------------------------
25