EXHIBIT 2.1
DEFINITIVE ASSET PURCHASE AGREEMENT
THIS DEFINITIVE ASSET PURCHASE AGREEMENT (the "Agreement") is made and
entered into on the _____ day of ___________, 2004, by and between ▇▇▇▇▇▇
Production, Inc., a Louisiana corporation, and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (together "Sellers"), and NGS Sub. Corp., a foreign
corporation domiciled in the State of Delaware, ("Buyer").
Sellers are the owners of oil, gas and mineral interests and ▇▇▇▇▇;
equipment; and improvements located in the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Field, LaSalle Parish,
Louisiana (the "Facility"). Sellers desire to sell to Buyer, and Buyer desires
to purchase from Sellers, all property and assets of Sellers situated at the
Facility.
Accordingly, in consideration of the foregoing and of the mutual
promises, covenants, and subject to the terms and conditions set forth below,
the parties agree as follows:
SECTION 1. ASSETS TO BE CONVEYED. On the Closing Date (as defined in
Section 9.1), Sellers shall sell, assign, transfer and deliver to Buyer, or its
designee, and Buyer or its designee shall purchase from Sellers, all of Sellers'
right, title and interest in and to the following (collectively, the "Assets"):
1.1 Leases. The interests in the oil, gas and mineral leases, leasehold
interests, operating interests, servitudes, working interests, royalty
interests, overriding royalty interests, operating rights and/or mineral rights
in oil, natural gas, petroleum, hydrocarbons, and other minerals as described in
EXHIBIT "A" attached hereto and made a part hereof as to all depths (the
"MINERAL INTERESTS"). Said Mineral Interests include all oil, gas and mineral
interests owned by Sellers in the Facility except as provided in paragraph 1.10
below.
1.2 ▇▇▇▇▇. Subject to the provisions of subparts 1.2.1 and 1.2.2, below,
all oil and gas ▇▇▇▇▇ described on EXHIBITS "B-1" , "B-2" and "B-3" attached
hereto and made a part hereof (the "▇▇▇▇▇"). Sellers hereby warrant that they
are conveying to Buyer at not less than the net revenue interest set out for
each well on EXHIBITS "B-1", "B-2" and "B-3".
1.2.1 The records of the Louisiana Office of Conservation reflect
breaks in production from the ▇▇▇▇▇ described on EXHIBIT "B-2" which
would result in the expiration of the leases on which said ▇▇▇▇▇ were
drilled in the absence of any other production or development activity
on those Leases or on any units of which said leased lands formed a
part. Sellers represent and warrant to Buyer that those ▇▇▇▇▇ described
on EXHIBIT "B-2" or other lease and/or unit ▇▇▇▇▇ have produced in
sufficient quantities and with sufficient regularity to maintain the
Leases in force and effect in accordance with their terms insofar as
Sellers' right to produce the ▇▇▇▇▇ described on EXHIBIT "B-2" and
retain said production. Sellers covenant and
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agree that, prior to closing, at their sole cost they will furnish to
Buyer information satisfactory to Buyer, in its sole and uncontrolled
discretion, establishing the maintenance of the Leases to the extent
necessary to entitle the owner of Sellers' net reserve interest in the
▇▇▇▇▇ described on EXHIBIT "B-2" to retain the oil and gas produced from
said ▇▇▇▇▇ (the "Lease Maintenance Information"). As to each Well
described on EXHIBIT "B-2" for which Sellers are unable to provide Buyer
with satisfactory Lease Maintenance Information, Buyer may, in its sole
discretion a) waive any objection to the validity of Sellers' net
reserve interest and purchase the Sellers' interest in the well; or b)
exclude the well from the sale, in which case the purchase price as set
out in paragraph 3.1 shall be reduced pro rata.
1.2.2 The records of the Louisiana Office of Conservation
indicate that those ▇▇▇▇▇ listed on EXHIBIT "B-3" are not producing, are
not in compliance with state regulations, or do not have valid leases.
Prior to closing, Sellers shall plug and abandon certain of the ▇▇▇▇▇ as
described on EXHIBIT "B-3" assist Buyer in curing title to each of the
remaining ▇▇▇▇▇ by, in Buyer's sole and uncontrolled discretion,
obtaining a valid new lease or top lease from the record mineral owner
on such terms and conditions as Buyer in its sole and uncontrolled
discretion deems appropriate and/or restoring production from the
subject well and/or obtaining a statement of compliance from the
Louisiana Office of Conservation. As to each well on EXHIBIT "B-3" for
which title is not satisfactorily cured for Buyer, Buyer may, in its
sole and uncontrolled discretion, a) waive any objection to the title to
the well and purchase Sellers' interest in accordance with the terms of
this agreement; or b) exclude the well from the sale, in which case the
purchase price as set out in paragraph 3.1 shall be reduced pro rata.
1.2.3 In the event that Buyer is not furnished with satisfactory
Lease Maintenance Information and/or title is not satisfactorily cured
on thirty (30) or more of the ▇▇▇▇▇ set out on EXHIBITS "B-2" and "B-3"
prior to Closing, Buyer may, in its sole and uncontrolled discretion,
give Sellers written notice of the termination of this agreement in
which event the parties shall have no obligations one to the other and
this Agreement shall terminate.
1.3 Real Property. All real property/immovables owned, used or held for
use in the Facility (the "REAL PROPERTY), including, but not limited to, that
tract of land described on EXHIBIT "C" attached hereto and made a part hereof,
all rights-of-way described on EXHIBIT "D" attached hereto and made a part
hereof, and all surface leases, all easements and all servitudes described on
EXHIBIT "E" attached hereto and made a part hereof.
1.4 Personal Property. All tangible personal property, accessories,
fixtures, appurtenances, and equipment located on, used in connection with or
attached to the Mineral Interests and ▇▇▇▇▇ described in Paragraphs 1 and 2
above and having to do with production of oil, gas or other minerals in the
▇▇▇▇▇▇ ▇▇▇▇▇▇ Field, including, but not limited to, fixtures, tanks, jacks,
pumps, equipment, pipe, tubing, equipment in repair, pipelines, attached
gathering systems, (whether on location or off site in storage or in repair)
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depending upon or used in connection with the Mineral Interests and ▇▇▇▇▇
described in Paragraphs 1 and 2 above described on EXHIBIT "F" attached hereto
and made a part hereof (the "EQUIPMENT"); all oil, gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, products
refined and manufactured therefrom, other minerals, and the accounts and
proceeds from the sale of all of the foregoing; (the "HYDROCARBONS") (the
"SEVERED HYDROCARBONS"); all contracts and agreements that benefit or burden the
Leasehold Interests and production therefrom described in the foregoing
paragraph and located in or having to do with the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Field,
including, but not limited to, operating agreements, unitization agreements,
pooling agreements, declarations of pooling or unitization, farmout agreements,
rights-of-way, easements, surface agreements, assignments, and oil, gas,
liquids, condensate, casinghead gas and gas sales, purchase, exchange,
gathering, transportation and processing contracts (the "CONTRACTS"); and the
pipelines and all equipment associated therewith (collectively the "PERSONAL
PROPERTY").
1.5 Miscellaneous Interests. All permits, licenses, escrow accounts,
presently valid pooling, unitization and communitization agreements and all
other contracts relating to the Facility including, but not by way of
limitation, those matters described on EXHIBIT "G" attached hereto and made a
part hereof.
1.6 Any causes of action against others that are assignable and not
specifically dealt with herein, but that are attributable to the rights and
properties described in Paragraphs 1.1, 1.2, 1.3, 1.4 and 1.5, above.
1.7 All records, files, engineering data, accounting records, production
records, geologic and geophysical data (including all licenses and ownership
rights, tapes, interpretations, and maps), well files and all other documentary
information owned and maintained by Sellers pertaining to the Assets, and any
other documents pertaining to or in any way dealing with the Leases, ▇▇▇▇▇,
Equipment, Hydrocarbons, Severed Hydrocarbons, Surface Leases, Contracts and
Gathering System as described hereinabove.
1.8 It is understood that Sellers shall continue to operate ▇▇▇▇▇▇
Production, Inc. and/or ▇▇▇▇▇▇ Well Service as contract operators and well
service providers in the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Field and, as such, shall retain and own
trucks, vehicles, workover equipment, spare parts, pipe, tubing, pumps, jacks,
downhole equipment and other miscellaneous equipment normal to that operation
and not included in the Personal Property (for example, a pump or ▇▇▇▇ removed
from a shut-in well included in the Leasehold Interests shall be included in the
Personal Property, whereas a pump or ▇▇▇▇ in inventory of ▇▇▇▇▇▇ Production,
Inc. or ▇▇▇▇▇▇ Well Service for general use of its customers shall not be
included in the Personal Property). It is the intention of this Agreement that
Buyer shall acquire all accessories, fixtures, equipment and appurtenances to
any and all Assets, but shall not acquire any spare parts, pipe, tubing, pumps,
jacks, downhole equipment and other personal property not derived from the
Assets and used in the business of ▇▇▇▇▇▇ Production, Inc. or ▇▇▇▇▇▇ Well
Service in their contract operations business.
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1.9 It is Sellers' intent to convey to Buyer all of Sellers' interest of
every nature and kind as to all depths in and to the Assets whether or not same
are described with particularity in this Agreement. Sellers will execute such
additional documents as Buyer may reasonably require to confirm title in Buyer
to all Assets.
1.10 It is acknowledged that there is a pending dispute between Sellers
and the State of Louisiana regarding expropriation of all or a portion of the
Urania LBR B lease and the ▇▇▇▇▇ located thereon, a dispute that is expected to
result in litigation in the 28th Judicial District Court for the Parish of
LaSalle, State of Louisiana. It is agreed that Sellers will retain title in and
to said lease and ▇▇▇▇▇ located thereon to fully and completely prosecute that
action. Upon termination of said lawsuit Sellers will convey to Buyer all of
Sellers' interest in said lease and ▇▇▇▇▇, together with one-third (1/3) of the
net compensation received therein after payment of related direct costs of
litigation including attorney's fees.
1.11 Sellers shall convey to Buyer all of Sellers' interest in and to
the tangible personal property, accessories, fixtures, appurtenances and
equipment located on, used in connection with or attached to those ▇▇▇▇▇
described on EXHIBIT "H" attached hereto and made a part hereof, including but
not limited to, fixtures, tanks, jacks, pumps, equipment, pipe, tubing,
equipment in repair, pipelines, and attached gathering systems depending upon or
used in connection with the ▇▇▇▇▇ described on EXHIBIT "H". The price and
consideration for this conveyance is Buyer's agreement to plug the ▇▇▇▇▇
described on EXHIBIT "H" at Buyer's sole cost and expense; provided, the
obligation of Buyer to plug each of the ▇▇▇▇▇ shall be contingent on Buyer's
ability, without objection or opposition from the landowner, mineral owner, or
any other third party with an alleged interest therein, to salvage and remove
the tangible personal property associated with each such ▇▇▇▇▇ as described
hereinabove.
SECTION 2. ASSUMPTION OF LIABILITIES. Buyer shall assume any and all
obligations of Sellers under the Leases and Contracts being acquired herein and
which are specifically and individually described on Exhibits "A" through "F"
attached hereto and made a part hereof, but Sellers shall remain obligated for
the liability, cost of defense, and other expenses related to any breach of said
obligations or violations of any laws, rules or regulations of any governmental
entity which occur or relate to periods occurring (i) prior to closing or (ii)
post-closing but prior to Buyer's being advised in writing of the existence of
any leases and contracts which are not, but should have been, specifically and
individually described on Exhibits "A" through "F" attached hereto and made a
part hereof and Sellers shall, indemnify, defend and hold Buyer harmless from
any claims or losses incurred by Buyer as a result thereof, including reasonable
attorney's fees, reasonable costs of investigation and other reasonable costs
incurred by Buyer in litigating same.
SECTION 3. PURCHASE.
3.1 Price and Allocation. The total purchase price for the Assets is
SEVEN HUNDRED TWENTY-FIVE THOUSAND AND NO/100 ($725,000.00) DOLLARS (the
"PURCHASE PRICE") payable at closing. Within ninety (90) days following the
Closing, Buyer
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and Sellers shall mutually agree upon an allocation of the Purchase Price among
the Assets, and each party shall prepare and file with their respective income
tax returns for the tax year in which the Closing occurs, IRS Form 8594
allocating the Purchase Price (including any adjustments pursuant to Section 4
or elsewhere in this Agreement) in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended and in accordance with the Asset Allocation.
Notwithstanding anything to the contrary in this Agreement, this Section 3 shall
survive the Closing without limitation.
3.2 Operation. Sellers agree to provide temporary contract field
operations of, and ongoing well services for, the Assets subsequent to the
Closing date until such time as Buyer can enter into an acceptable contract with
an operator. The terms and conditions upon which Sellers shall provide temporary
operations of and well services for the Assets shall be mutually agreed between
the parties in accordance with standard industry and local practices and shall
be reduced to writing and signed by both Sellers and Buyer or Buyer's designee.
SECTION 4. INSPECTION
4.1 Inspection Period. At the sole expense of Buyer, Buyer shall have
until the Closing Date, hereinafter referred to as the "INSPECTION PERIOD" to
inspect the Facility in an effort to determine the acceptability of the title
and condition of the Assets as well as other due diligence deemed necessary by
Buyer in Buyer's sole discretion. If Buyer is not satisfied with the results of
such inspections, in Buyer's sole discretion, then Buyer reserves the right to
unilaterally cancel this Agreement during the Inspection Period by providing
Sellers with written notice of such cancellation before the expiration of the
Inspection Period. In the event that Buyer is not satisfied with the title or
the condition of the Assets, Sellers and Buyer may agree (a) to extend the
Inspection Period to a mutually acceptable date, or, as to those Mineral
Interests the title to which Buyer finds unacceptable, those Mineral Interests
may, in Buyer's sole and uncontrolled discretion, be excluded from the
transaction and the purchase price reduced pro rata, or (b) Buyer may, in its
sole discretion (i) accept the Assets and Sellers' title subject to the
objections, or (ii) terminate this Agreement in which event Buyer and Sellers
shall have no further obligations to each other under this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly
and severally, make the following representations and warranties, all of which
have been relied upon by Buyer in entering into this Agreement, all of which are
true and correct as of the date hereof, and, except as otherwise provided, all
of which shall be true and correct at the Closing Date.
5.1 Organization. ▇▇▇▇▇▇ Production, Inc. is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Louisiana, and has full power and authority to enter into and perform this
Agreement.
5.2 Authorization; Binding Agreement. The execution and delivery of this
Agreement by Sellers has been duly authorized by ▇▇▇▇▇▇ Production, Inc.'s Board
of
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Directors, and, if necessary, its shareholders, and this Agreement constitutes a
valid and binding agreement of ▇▇▇▇▇▇ Production, Inc., enforceable in
accordance with its terms. At closing the execution and delivery of the Warranty
Deed and any other documents requiring ▇▇▇▇▇▇ Production, Inc.'s signature will
have been duly authorized by all necessary corporate and shareholder action and
shall constitute the legal, valid and binding obligations of ▇▇▇▇▇▇ Production,
Inc.
5.3 No Breach. The execution, delivery and performance of this Agreement
by Sellers will not result in the breach of, or constitute a default under, the
provisions of any agreement or other instrument to which Sellers are parties or
by which they or their property is bound or affected including any of the Assets
being transferred hereunder.
5.4 Title to Assets. Sellers shall convey to Buyer at Closing Date, by
Warranty Deed, title to the Assets, in each case free and clear of all liens,
security interests, mortgages, deeds of trust, pledges, judgments, leases,
rights of refusal or other encumbrances whatever ("LIENS").
5.5 Litigation and Governmental Regulation. There is no judgment
outstanding and no litigation, proceeding, claim or investigation of any nature
pending or threatened against Sellers or the Assets that might adversely affect
the conveyance of the Facility or materially impair the value of the Assets.
Sellers are not parties to or subject to the provisions of any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority that could adversely affect the Facility
or any of the Assets.
5.6 Payment of Taxes. Sellers have duly and timely filed all returns for
personal property, severance, ad valorem and other taxes and charges due as of
the Effective Date of this Agreement and have paid all applicable taxes and
charges. All severance, ad valorem, and other taxes and charges based on
production attributable to the Assets shall be the obligation of the party
entitled to the production on which such tax or charge is based. All other taxes
against the Assets shall be prorated between Sellers and Buyer as of the
Effective Date in accordance with generally accepted accounting practices.
5.7 Insolvency Proceedings. No insolvency proceedings of any character,
affecting Sellers or the Assets are pending or threatened. Sellers have not made
an assignment for the benefit of creditors or taken any action with a view to or
that would constitute a valid basis for the institution of any such insolvency
proceedings or which transfer would constitute a fraudulent conveyance or
preference.
5.8 Compliance with Law. Sellers have complied with each, and are not in
violation of any, law, rule or regulation, and has not failed to obtain or to
adhere to the requirements of any license, permit or authorization necessary to
the ownership of the Assets and Facility or to the utilization of same in the
ordinary course of business, which noncompliance, violation or failure to obtain
or adhere might reasonably be expected to have a material adverse effect on any
of the Assets or the Facility, including the timely and proper preparation and
filing of all state, local and federal reports.
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5.9 Validity of Contemplated Transactions; etc. (a) The execution,
delivery and performance of this Agreement and the Warranty Deed by Sellers will
not contravene or violate (i) any law, rule or regulation to which Sellers are
subject, (ii) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to Sellers, or (iii) the Articles of Incorporation, or
By-laws of ▇▇▇▇▇▇ Production, Inc.
(b) Such execution, delivery or performance will not violate, be in
conflict with or result in the breach (with or without giving notice or lapse of
time, or both) of any term, condition, or provision of, or require the consent
of any other party to any indenture, agreement, contract, commitment, lease,
plan, license, permit, authorization or other instrument or document to which
Sellers are parties, by which the Sellers have rights or by which any of the
Assets or Facility may be bound or affected, other than those consents obtained
prior to the Closing, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of Sellers.
5.10 No Third Party Options. There are no existing agreements, options,
commitments, Liens or rights with, to or in any person to acquire any of the
Assets or Facility.
5.11 Conditions Affecting Assets. There are no conditions existing with
respect to Sellers' markets, products, clients, customers, facilities, personnel
or suppliers which could reasonably be expected to have a material adverse
effect on the Assets and Facilities other than conditions that may affect the
industry in which Sellers operate as a whole.
5.12 Environmental Matters.
(a) Definitions. For the purposes of this Section 5.12, the following
terms shall have the meanings indicated:
(i) "ENVIRONMENT" shall mean soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwater, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
(ii) "ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" shall mean
any cost, damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and Health Law
and consisting of or relating to:
(A) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(B) fines, penalties, judgments, awards, settlements, legal or
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administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(C) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such cleanup has been required or
requested by any governmental body or any other person or entity) and for any
natural resource damages; or
(D) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
(iii) "Environmental Law" shall mean the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C.Section 6901 et seq., the Clean Water Act,
33 U.S.C.Section 1251 et, the Clean Air Act, 42 U.S.C.Section 7401 et seq., the
Toxic Substances Control Act, 15 U.S.C.Section 2601 et seq., the Oil Pollution
Act of 1990, 33 U.S.C.Section 2701 et seq., the Occupational Safety and Health
Act, 29 U.S.C.Section 651 et seq, the Universal Waste Rule (40 CFR Part 273) and
all other legal requirements that relate --- to:
(A) advising appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the environment;
(B) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the environment;
(C) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(D) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health or the
environment when used or disposed of;
(E) protecting resources, species, or ecological amenities;
(F) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
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(G) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention; or
(H) making responsible parties pay private parties, or groups of
them, for damages done to their health or the environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
(iv) "Hazardous Materials" shall mean any waste or other
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, corrosive, ignitable, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any Environmental Law, including
any admixture or solution thereof, and specifically including, but in no way
limited to, petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
(v) "Occupational Safety and Health Law" shall mean any legal
requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards.
(b) Environmental Compliance.
(i) With the exception of those matters set out on EXHIBIT "I"
attached hereto and made a part hereof, insofar as the Mineral Interests, ▇▇▇▇▇
and Facility in general, Sellers are not now and will not be at Closing in
violation of any Environmental Law.
(ii) Sellers have no basis to expect, nor have Sellers, or, any
other person or entity for whose conduct they are or may be held responsible,
received any citation, directive, inquiry, notice, order, summons, warning, or
other communication that relates to any alleged, actual, or potential violation
or failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Assets of Facility.
(iii) Except for normal use of the Assets and Facility and normal
operations in conformance with customary industry standards and not in violation
of any Environmental Law, there are no Hazardous Materials present on or in the
Assets or the Facility, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, land, water,
dumps, equipment (whether moveable or fixed) or other containers, either
temporary or permanent or incorporated into any structure therein or thereon,
except for minerals that are naturally present in their original geological
formation.
(iv) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers pertaining to Hazardous Materials in, on, or under the
Facilities and the Assets, or concerning compliance by Sellers or any other
person or entity for whose conduct they are
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or may be held responsible, with Environmental Laws.
5.13 Quality of Assets. The Assets were acquired and have been
maintained in accordance with regular business practices of Sellers. The Assets
are substantially all of the inventory, equipment, mineral interests, ▇▇▇▇▇,
contracts and real property used by Sellers in conducting their business in the
Facility during the twelve-month period immediately preceding the Closing
contemplated by this Agreement.
5.14 Completeness of Disclosure. No representation or warranty made in
this agreement by or on behalf of Sellers and in any list, certificate, Exhibit,
Schedule or other instrument, document, agreement or writing made a part hereof
or delivered hereunder or in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state any fact necessary to make any statement herein or therein
not materially misleading.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer makes the
following representations and warranties, all of which have been relied upon by
Sellers in entering into this Agreement, all of which are true and correct as of
the date hereof, and, except as otherwise provided, all of which shall be true
and correct as of the Effective Date and the Closing Date.
6.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, is qualified to do business in and is in good standing under the
laws of the State of Louisiana, and has full power and authority to enter into
and perform this Agreement.
6.2 Authorization. The Board of Directors of Buyer has duly authorized
the execution and delivery of this Agreement and this Agreement constitutes a
valid and binding agreement of Buyer, enforceable in accordance with its terms.
6.3 No Breach. The execution, delivery and performance of this Agreement
by Buyer will not result in the breach of, or constitute default under, the
provisions of any agreement or other instrument to which Buyer is a party or by
which Buyer is bound.
6.4 Litigation. There is no action, suit, investigation or other
proceedings pending or threatened which may adversely affect Buyer's ability to
perform this Agreement in accordance with its terms, and Buyer is not aware of
any facts which could reasonably result in any such proceeding.
6.5 Employees. Buyer reserves the right to interview any employees
currently working at the Facility for the purposes of continued employment with
Buyer. If an offer of employment is tendered and accepted, Buyer assumes no
prior obligation regarding said employees, including but not limited to
employment contracts, accrued and unpaid leave, ▇▇▇▇▇▇▇ compensation claims, or
any claims regarding employment benefits.
SECTION 7. PRE-CLOSING OBLIGATIONS. The parties covenant and agree as
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follows with respect to the period prior to the Closing Date:
7.1 Confidentiality. Each party agrees that any and all information
learned or obtained by it from the other shall be confidential and agrees not to
disclose any such information to any person other than such party's attorneys,
agents, representatives, lenders, or existing or potential investors who have
executed a Confidentiality Agreement materially in the same form and term as to
that between the parties hereto, as is necessary for the purpose of effecting
the transactions contemplated by this Agreement. This Confidentiality Provision
shall remain in force and be binding on all parties for a period of two years
after the Closing Date.
7.2 Access. Prior to the Closing Date, Sellers shall give Buyer or
representatives of Buyer reasonable access to the Facility for purposes of
inspection, appraisal, testing, surveying, and other activities that may be
necessary in the course of the Inspection Period. The Buyer shall be given, or
has been given, sufficient time to perform a Due Diligence Examination on the
Facility, including, but not limited to, a thorough inventory of the land,
buildings, and equipment to be purchased; verification of historical production,
revenues, operating expenses and historical capital expenditures; satisfactory
completion of a third party Phase I Environmental audit; and verification of
current production, flowing pressures, remaining reserves, product prices,
gathering and processing agreements and costs and applicable product sales
agreements. Buyer hereby agrees to indemnify and hold Sellers harmless from any
loss, claim or liability arising out of or related to Buyer performing its Due
Diligence Examination at the Facility or activities associated therewith.
7.3 Additional Covenant. Buyer and Sellers shall take all commercially
reasonable efforts to cause the consummation of the transaction contemplated by
this Agreement and shall not take any action that is inconsistent with their
obligations under this Agreement in any material respect.
SECTION 8. CONDITIONS PRECEDENT.
8.1 Conditions to Buyer's Obligation. The obligation of Buyer to
consummate the transaction contemplated by this Agreement is subject to the
satisfaction of each of the following conditions (unless otherwise waived by
Buyer):
8.1.1 Representations and Warranties. The representations and
warranties of Sellers shall be true, complete, and correct in all
material respects as of the Closing Date with the same force and effect
as if then made.
8.1.2 Compliance with Conditions. All of the terms, conditions
and covenants to be complied with or performed by Sellers on or before
the Closing Date shall have been duly complied with and performed in all
material respects.
8.1.3 Title to Assets. On the Closing Date, the Assets will be
delivered to Buyer free and clear of all Liens.
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8.1.4 Closing Documents. Sellers shall deliver to Buyer all of
the closing documents specified in Section 9.2.1, all of which documents
shall be dated as of the Closing Date, duly executed, and in a form
reasonably acceptable to Buyer.
8.2 Conditions to Sellers' Obligation. The obligation of Sellers to
consummate the transaction contemplated by this Agreement is subject to
satisfaction of each of the following conditions (unless otherwise waived by
Sellers):
8.2.1 Representations and Warranties. The representations and
warranties of Buyer to Sellers shall be true, complete and correct in
all material respects as of the Closing Date with the same force and
effect as if then made.
8.2.2 Compliance with Conditions. All of the terms, conditions
and covenants to be complied with or performed by Buyer on or before the
Closing Date shall have been duly complied with and performed in all
material respects.
8.2.3 Payment. Buyer shall pay Sellers the Purchase Price as
provided in Section 3 of this Agreement.
8.2.4 Closing Documents. Buyer shall deliver to Sellers all the
closing documents specified in Section 9.2.2, all of which documents
shall be dated as of the Closing Date, as applicable, duly executed, and
in a form reasonably satisfactory to Sellers.
SECTION 9. CLOSING. With regard to all dates and time periods set forth
or referred to in this Agreement, it is understood and agreed that time is of
the essence.
9.1 Closing Date. The Closing shall occur as soon as commercially
possible, but no later than August 15, 2004. However, it shall have an effective
date of July 1, 2004, at 12:01 a.m. (the "Effective Date"). The Closing shall
occur at a place and time mutually agreed upon by the parties.
9.2 Performance at Closing. The following documents shall be executed
and delivered at Closing:
9.2.1 By Sellers. Sellers shall deliver to Buyer (i) Warranty
Deed conveying to Buyer title to the Assets with full warranty and with
full substitution and subrogation to any and all rights of warranty
against Sellers' predecessors in title; (ii) certificate of good
standing of ▇▇▇▇▇▇ Production, Inc., issued as of a recent date by
Secretary of State of the State of Louisiana; (iii) an officer's
certificate attesting to ▇▇▇▇▇▇ Production, Inc.'s compliance with the
matters set forth in Sections 8.1 and certifying the resolutions of
Sellers' board of directors and shareholders (if applicable) authorizing
the execution and delivery of this Agreement and the transactions
contemplated hereby; (iv) a certificate of non-foreign status on ▇▇▇▇▇▇
Production Company Inc.; and (v) originals or copies, as applicable of
all documents and records which Sellers are obligated to provide Buyer
under the terms of this Agreement.
Page 12 of 18
9.2.2 By Buyer. Buyer shall deliver to Sellers (i) a copy of the
articles of incorporation of Buyer, certified as of a recent date by the
Secretary of State of the state of Buyer's formation; (ii) certificate
of good standing of Buyer, issued as of a recent date by the Secretary
of State of the State of Texas; (iii) certificate of good standing of
Buyer, issued as of a recent date, by the Secretary of State of the
State of Louisiana showing Buyer is authorized to do business in the
State of Louisiana; (iv) certificates of Buyer which show Buyer is
qualified to own and operate the assets being conveyed herein, issued as
of a recent date by the Louisiana Department of Conservation and any and
all other Louisiana governmental agencies which may require said
qualification; (v) an officer's certificate attesting to Buyer's
compliance with the matters set forth in Sections 8.2.1 and 8.2.2, and
certifying the resolutions of the board of directors of Buyer
authorizing the execution and delivery of this Agreement and the
transactions contemplated hereby, and (vi) the Purchase Price.
9.2.3 Other Documents and Acts. The parties will also execute
such other documents, and perform such other acts, before and after
Closing, as may be necessary for the complete implementation and
consummation of this Agreement, including the execution by Sellers of
any documents reasonably required by any purchaser of production to
effectuate payment of proceeds attributable to production from the
Facility to Buyer.
SECTION 10. POST-CLOSING OBLIGATIONS. The parties covenant and agree as
follows with respect to the period subsequent to Closing:
10.1 Indemnification. Sellers, jointly and severally, undertake and
agree to indemnify and hold Buyer harmless against any and all losses, costs,
liabilities, claims, obligations, assessments, damages, fines and expenses,
including reasonable attorney's fees and investigation costs (together,
"Claims"), incurred or suffered by Buyer arising from (i) the ownership and
operation of the Facility or ownership of the Assets during Sellers' period of
ownership prior to the Closing Date, and (ii) a breach, misrepresentation, or
other violation of any of Sellers' covenants, warranties or representations
contained in this Agreement specifically, but not limited to Sections 5.2, 5.3,
5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, and 10.2. Buyer
undertakes and agrees to indemnify and hold Sellers harmless against any and all
Claims incurred or suffered by Sellers arising from (a) the ownership and
operation of the Facility or ownership of the Assets after the Closing Date; (b)
a breach, misrepresentation, or other violation of any of Buyer's covenants,
warranties and representations contained in this Agreement specifically, but not
limited to, Sections 6.2 and 6.4. The foregoing indemnities are intended by
Sellers and Buyer, respectively, to cover all acts, suits, proceedings, claims,
demands, assessments, adjustments, costs, and expenses with respect to any and
all of the specific matters in these indemnities, respectively, set forth and
shall be without limitation as to amount.
10.2 Agreement Not to Compete. Neither Seller shall acquire any interest
in any
Page 13 of 18
of the property intended to be included in the Assets, including, but not
by way of limitation, by mineral deed, mineral lease, assignment, farmout,
operating agreement or servitude, whether directly or through subsidiaries or
parties interposed, so long as Buyer claims any ownership in or right to said
Assets.
10.3 Agreement by Seller to Remediate Certain Areas. Seller shall,
within thirty (30) days after the Closing Date, complete the remediation to full
compliance with state regulations of the sites listed on EXHIBIT "I", as
generally described on such Exhibit.
10.4 Change of Operator. With sixty (60) days of the Closing Date Buyer
shall make all necessary filings with the Louisiana Office of Conservation to
change the operator on all ▇▇▇▇▇ acquired by Buyer to Buyer or Buyer's
designated contract operator.
SECTION 11. GENERAL PROVISIONS.
11.1 Risk of Loss. The risk of loss or damage to the Assets shall be
upon Sellers at all times prior to Closing and Sellers shall keep all of the
Assets fully insured through the date of Closing in accordance with Sellers'
usual business practice during the twelve (12) months preceding the Closing
Date. In the event of loss or damage, Sellers shall promptly notify Buyer
thereof and may, at their option, attempt to repair, replace or restore the lost
or damaged property to its former condition. If such repair, replacement, or
restoration has not been completed prior to the scheduled Closing Date, Buyer
may terminate this Agreement or, in Buyer's sole and uncontrolled discretion,
accept assignment of all insurance proceeds attributable to the loss and proceed
with Closing in accordance with the terms and provisions of this Agreement.
11.2 Expenses; Legal Fees. Except as otherwise provided herein, all
expenses involved in the preparation and consummation of this Agreement shall be
borne by the party incurring the same whether or not the transaction
contemplated herein is consummated. If legal action is necessary to enforce any
of the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs incurred thereby.
11.3 Survival of Representations and Warranties. The several
representations, warranties, and covenants of the parties contained herein shall
survive for a period of four (4) years from the Closing Date.
11.4 Exclusive Dealings. For so long as this Agreement remains in
effect, neither Sellers nor any person acting on Sellers' behalf shall, directly
or indirectly, solicit or initiate any offer or negotiations with any person
concerning the acquisition of the Facility and Assets by any party other than
Buyer.
11.5 Brokerage. Any commission or broker's or finder's fee due any
broker or agent shall be paid by the party who retained said broker or agent in
connection with the transaction contemplated by this Agreement and the party
incurring such fee shall indemnify and hold harmless the other party from any
such fee.
Page 14 of 18
11.6 Control. In the event a conflict occurs between the provisions of
this Agreement and the provisions of the Act of Sale and Assignment to be
executed in connection with this transaction, the terms and provisions of the
Act of Sale and Assignment shall control except in case of a conflict with
respect to Sellers' representations and warranties to Buyer in this Agreement,
which, in such event, shall be governed by the representations and warranties
contained in this Agreement.
11.7 Notices. All notices and other communications pertaining to this
Agreement shall be in writing and shall be deemed duly given when delivered
personally (which shall include delivery by facsimile that issues a receipt or
other confirmation of delivery) to the party for whom such communication is
intended, or three (3) business days after the date mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Sellers, to: With a mandatory copy to:
▇▇▇▇▇▇ Production, Inc. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Gaharan & ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer, to: With a mandatory copy to:
Natural Gas Systems, Inc. ▇▇▇▇▇▇ ▇. ▇▇▇▇
Two Memorial City Plaza The ▇▇▇▇▇ Law Firm
820 Gessner, Suite 1340 P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 713-935-0199
Either party may change its address for notices by written notice to the other.
11.8 Waiver. Unless otherwise specifically agreed in writing to the
contrary: (i) the failure of either party at any time to require performance by
the other of any provision of this Agreement shall not affect such party's right
thereafter to enforce the same; (ii) no waiver by either party of any default by
the other shall be taken or held to be a waiver by such party of any other
preceding or subsequent default; and (iii) no extension of time granted by
either party for the performance of any obligation or act by the other party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11.9 Miscellaneous. This Agreement and the agreements referenced herein
supersede and terminate any prior agreements between the parties and contain all
of the terms agreed upon with respect to the subject matter hereof. This
Agreement may not be altered or amended except by an instrument in writing
signed by Sellers and Buyer. This
Page 15 of 18
Agreement may be signed in any number of counterparts with the same effect as if
the signatures on each such counterpart were on the same instrument. The
headings of the paragraphs of this Agreement are for convenience only and in no
way modify, interpret or construe the meaning of specific provisions of the
Agreement. In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. This Agreement may not be
assigned without the prior written consent of Sellers and Buyer except that
Buyer may designate a third party to take title to the Assets. This Agreement
shall be binding upon and shall inure to the benefit of and be enforceable to
the parties' successors and assigns.
11.10 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Louisiana, without regard to conflicts-of-laws
principles that would require the application of any other law.
11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof, or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties to this Agreement hereby acknowledge and agree that
the court making the determination of invalidity or unenforceability shall have
the power (i) to reduce the scope, duration, and/or area of the term or
provision, (ii) to delete specific words or phrases, or (iii) to amend and
replace any invalid or unenforceable term or provision, so that the provision as
amended by said court is valid and enforceable and comes as close as is legally
possible to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment of said court may be appealed.
11.12 Construction. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Sections" and "Parts" refer to the
corresponding Sections and Parts of this Agreement.
11.13 Time Is Of The Essence. Both Parties understand and agree that
time is of the essence and, as such, will work diligently to consummate this
transaction as quickly as is reasonably possible.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed individually or by their respective duly authorized officer as of the
date first written above.
▇▇▇▇▇▇ PRODUCTION, INC.
By:
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Page 16 of 18
Title: President
By:
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Individually
By:
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Page 17 of 18
NATURAL GAS SYSTEMS, INC.
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: President
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