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EXHIBIT 10.2
ASSET PURCHASE AND SALE AGREEMENT
AMONG
ST. ▇▇▇▇▇▇▇▇▇▇▇ PARTNERS, LTD. AND
▇▇▇▇▇ ENERGY COMPANY, COLLECTIVELY AS SELLER, AND
HARKEN ENERGY CORPORATION AND
HARKEN EXPLORATION COMPANY, COLLECTIVELY AS BUYER
DATED MAY 19, 1998
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ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is entered into
this 19th day of May, 1998, among St. ▇▇▇▇▇▇▇▇▇▇▇ Partners, Ltd., a Texas
limited partnership ("SMPL"), and ▇▇▇▇▇ Energy Company, a Texas general
partnership ("▇▇▇▇▇"), and Harken Energy Corporation, a Delaware corporation
("Harken Energy") and Harken Exploration Company, a Delaware corporation
("Exploration"). SMPL and ▇▇▇▇▇ are called herein collectively "Seller". Harken
Energy and Exploration are called herein collectively "Buyer". Buyer and Seller
are called herein collectively the "Parties."
WITNESSETH:
WHEREAS, Seller desires to sell to Buyer certain producing,
nonproducing and undeveloped oil and gas properties and other related assets and
Buyer desires to purchase such properties and assets upon and subject to the
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement have the meanings given such
terms in this Article 1 or elsewhere in this Agreement.
"Additional Shares" has the meaning set forth in Article 13.02.
"Affiliate"means (i) with respect to the Seller, any corporation,
limited liability company, association, partnership or person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
under common control with, the Seller, and (ii) any Seller's officers, directors
and shareholders.
"Assets" means Seller's right, title and interest in and to the
following (except to the extent constituting Excluded Assets):
(i) All of the stated working interests in the ▇▇▇▇▇ described on
Exhibit "A" hereto, an equal undivided interest in the
Equipment used in producing, operating and maintaining each
Well respectively, and an equal undivided interest in the
Units described or referred to on Exhibit "A";
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(ii) 75% of Seller's interests in the Mineral Interests described
on Exhibit "▇-▇" (▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇) hereto and
the Lands covered thereby from the surface down to the base of
the Discorbis 4 Sand and an equal undivided interest in the
Equipment located thereon and used in connection therewith to
the extent such Equipment is not described in (i) above;
(iii) 75% of Seller's interests in all of the Mineral Interests
described on Exhibit "A-2" (S. Bayou Boeuf Prospect Area)
hereto and the Lands covered thereby and an equal undivided
interest in the Equipment located thereon and used in
connection therewith to the extent such Equipment is not
described in (i) above;
(iv) 50% of Seller's interests in all of the Mineral Interests
described on Exhibit "▇-▇" (▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇) hereto and
the lands covered thereby and an equal undivided interest in
the Equipment located thereon and used in connection therewith
to the extent such Equipment is not described in (i) above;
(v) To the extent the following relate to any of the property
described in (i), (ii), (iii) or (iv), the same undivided
interest as specified for the related property above: All of
the licenses, permits, contracts, agreements and other
instruments owned by Seller (other than bonds posted by
Seller) which concern and relate to any of the ▇▇▇▇▇, Mineral
Interests, Lands, and/or Equipment insofar as same concern or
relate to the ▇▇▇▇▇, Mineral Interests, Lands, and/or
Equipment, or the operation thereof, including, without
limitation, oil, gas and condensate purchase and sale
contracts; permits; rights-of-way; easements; licenses;
servitudes; estates; surface leases; farmin and farmout
agreements; division orders and transfer orders; bottomhole
agreements; dry hole agreements; area-of-mutual interest
agreements; salt water disposal agreements; geologic and
geophysical agreements; acreage contribution agreements;
operating agreements; balancing agreements; and unit
agreements; pooling agreements; pooling orders;
communitization agreements; processing, gathering, compression
and transportation agreements; facilities or equipment leases
relating thereto or used or held for use in connection with
the ownership or operation thereof or with the production,
treatment, sale or disposal of Hydrocarbons; and all other
contracts and agreements related to the ▇▇▇▇▇, Mineral
Interests, Lands, and/or Equipment;
(vi) To the extent the following relate to any of the property
described in (i), (ii), (iii) or (iv), an undivided interest
that corresponds to the interest in such property to be
conveyed hereunder: All Records and, to the extent
transferable, all other contract rights, intangible rights
(excluding Seller's trademarks and service marks), inchoate
rights, choses in action, rights under warranties made by
prior owners, manufacturers, vendors or other third parties,
and rights accruing under applicable statutes of limitation or
prescription; and
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(vii) To the extent the following relate to any of the property
described in (i), (ii), (iii) or (iv), an undivided interest
that corresponds to the interest in such property to be
conveyed hereunder: All payments, and all rights to receive
payments, with respect to the ownership of the production of
Hydrocarbons from, or the conduct of operations on, the Assets
and the interests to be conveyed to Buyer hereunder accruing
after the Effective Date.
"Bol Mex Prospect Area" shall mean the area described on Exhibit "A-3".
"Buyer" has the meaning set forth in the preface to this Agreement.
"Buyer Indemnified Party" has the meaning provided in Article 7.03.
"Closing" has the meaning set forth in Article 3.04 hereof.
"Closing Date" has the meaning set forth in Article 3.04 hereof.
"Closing Shares" has the meaning set forth in Article 3.01(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission (or any
successor body thereto).
"Conveyance Documents" means the Assignment, ▇▇▇▇ of Sale and
Conveyance in the form attached hereto as Exhibit "B", together with those other
forms of assignments, bills of sale, deeds and other instruments the Parties
agree are necessary or appropriate to convey title to the Assets or Option
Assets from Seller to Buyer.
"Easement Agreement" has the meaning set forth in Article 8.04.
"Effective Date" means 7:00 a.m. local time with respect to each of the
Assets on January 1, 1998.
"Equipment" means all the tangible personal property, tools, machinery,
materials, pipelines, gas plants, gathering systems, equipment, fixtures and
improvements, which are incident or attributable to the ▇▇▇▇▇, Mineral
Interests, Lands and/or Units or with the production, treatment, sale or
disposal of Hydrocarbons or water produced therefrom or attributable thereto, on
the Effective Date, including the personal property, materials and equipment
listed on Exhibit "C" hereto.
"Examination Period" has the meaning set forth in Article 6.02.
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"Excluded Assets" has the meaning set forth in Article 2.01(b) hereof.
"Expiring Leases" has the meaning set forth in Article 8.03(b).
"Fee Tract" has the meaning set forth in Article 2.01(b).
"Final Settlement Date" has the meaning set forth in Article 9(h).
"Final Settlement Statement" has the meaning set forth in Article 9(h).
"Governmental Approvals" has the meaning set forth in Article 14.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, coalbed
methane, condensate, helium, sulphur, S02, C02, natural gas liquids and other
gaseous and liquid hydrocarbons or any combination thereof.
"Imbalances" has the meaning set forth in Article 9(f).
"Indemnifying Party" has the meaning set forth in Article 7.04(a)
hereof.
"Lands" means the lands covered by the Mineral Interests.
"Leases" means the oil and gas leases or oil, gas, and mineral leases
shown in ▇▇▇▇▇▇▇▇ "▇- ▇", "▇-▇" and "A-3" hereto or that cover any portion of
the area described in such Exhibits.
"Loss" or "Losses" means all damages, payments, penalties, fines,
assessments, costs, amounts paid in settlement, obligations, taxes, losses
(including reductions in the value of Assets), liabilities, expenses and fees
incurred, including court costs and attorneys' fees and expenses and costs of
investigating, preparing or defending any action or proceeding, provided,
however, that Buyer shall be deemed to have incurred a Loss or Losses only if,
and only to the extent that, the cumulative aggregate of all such Loss or Losses
attributable to or arising in connection with the portion of the Assets acquired
from SMPL exceeds $74,000 or the cumulative aggregate of all such Loss or Losses
attributable to or arising in connection with the portion of the Assets acquired
from ▇▇▇▇▇ exceeds $126,000.
"Mineral Interests" means the Leases and any mineral interest owned by
Seller in and to the lands described on Exhibits "A-1", "A-2" and "A-3".
"NRI" means a fractional or percentage interest in and to all
Hydrocarbons produced from or allocated to a Well or Unit described on Exhibit
"A" after deduction of all lessors' royalties, overriding royalties, and other
burdens and payments out of production that burden such fractional or percentage
interest in such Well or Unit.
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"Operating Agreement" has the meaning set forth in Article 2.01(b).
"Option Assets" has the meaning set forth in Article 13.01.
"Option Closing" has the meaning set forth in Article 13.02.
"Parties" has the meaning set forth in the preface above.
"Permitted Encumbrances" means, with respect to the Assets, the
following:
(i) liens for taxes not yet due or, if due, being challenged in
good faith by appropriate proceedings;
(ii) materialmen's, mechanics' and other similar liens or charges
arising in the ordinary course of business for obligations
that are not delinquent and that will be paid or discharged in
the ordinary course of business or, if delinquent, that are
being contested in good faith in the ordinary course of
business;
(iii) easements, rights-of-way, servitudes, permits, surface leases,
and other rights granted to or reserved for third parties in
respect of surface operations (including without limitation
those rights set forth in Exhibit "D" attached hereto and made
a part hereof for all purposes) that do not materially
interfere with the operation of the portion of the Assets
burdened thereby;
(iv) rights reserved to or vested in any governmental authority to
control or regulate any of the ▇▇▇▇▇ or Units and all
applicable laws, rules, regulations and orders of such
authorities so long as the same:
(a) do not decrease Seller's NRI below the NRI shown in
Exhibit "A" or increase Seller's WI above the WI
shown in Exhibit "A" without at least a proportion
ate increase in Seller's NRI, or
(b) do not create any liens in respect of such ▇▇▇▇▇ or
Units;
(v) liens arising under operating agreements, unitization and
pooling agreements, orders and statutes and production sales
contracts securing amounts not yet due or, if due, being
contested in good faith in the ordinary course of business as
set forth in Exhibit "E" attached hereto and made a part
hereof for all purposes;
(vi) the terms and conditions of all contracts and agreements
relating to the Leases and ▇▇▇▇▇, including, without
limitation, exploration agreements, gas sales contracts,
processing agreements, farmins, farmouts, operating
agreements, and right-of-way agreements, to the extent such
terms and conditions:
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(a) do not decrease Seller's NRI below the NRI shown in
Exhibit "A" or increase Seller's WI above the WI
shown in Exhibit "A" without at least a proportion
ate increase in Seller's NRI,
(b) are normal and customary in the oil and gas industry
in the area in which the affected Assets are located,
and
(c) would not conflict with any other portion of this
definition of Permitted Encumbrances;
(vii) royalties, overriding royalties, net profits interests,
production payments, reversionary interests, and similar
interests that do not decrease Seller's NRI below the NRI
shown in Exhibit "A" or increase Seller's WI above the WI
shown in Exhibit "A" without at least a proportionate increase
in Seller's NRI;
(viii) conventional rights of reassignment requiring notice to the
holders of the rights prior to surrendering or releasing a
leasehold interest; and
(ix) calls on production exercisable only at prices substantially
equivalent to then current fair market value.
(x) the absence of Governmental Approvals other than Governmental
Approvals that were applicable to a previous transaction
involving the transfer of all or any portion of the Assets but
were not complied with at the time of the consummation of such
transaction.
"Phase I Environmental Audit" means an assessment of Seller's
compliance with Environmental Laws relative to the Assets consisting of
examination of Seller's files and public documents, interviews of personnel of
Seller and of other appropriate persons and visual inspection of the Assets.
"Preference Right" means any preemptive right, option or preferential
right to purchase any portion of the Assets held by any person or entity other
than Buyer.
"Product Contracts" has the meaning given set forth in Article 4.01(m).
"Purchase Price" has the meaning given set forth in Article 3.01.
"Records" means all originals, copies, computer tapes and discs, files,
records, information or data relating to the Assets in the possession of Seller,
or in the possession of any agent for the Seller, including, without limitation,
title records (including abstracts of title, title opinions, certificates of
title and title curative documents), accounting records and files, contracts,
correspondence, production records, electric logs, core data, pressure data,
decline curves, graphical
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production curves, geologic and geophysical information, drilling reports, well
completion reports, drill stem test charts and reports, engineering reports,
regulatory reports, and all related materials, insofar as the foregoing items
constitute materials that may be lawfully conveyed to Buyer (i.e. the materials
are not subject to a proprietary agreement precluding their transfer to Buyer).
"Records Delivery Date" has the meaning given set forth in Article
13.03(a).
"Registration Rights Agreement" has the meaning set forth in Article
11.01(c).
"Related Agreements" means the Conveyance Documents, the Easement
Agreement and the Registration Rights Agreement.
"Remaining Purchase Price" means $4,000,000, subject to adjustment in
accordance with Article 8.03(b) and Article 6.02.
"Reserve Shares" has the meaning set forth in Article 3.01(b).
"S. Bayou Boeuf Prospect Area" shall mean the area described on Exhibit
"A-2".
"Seller" has the meaning set forth in the preface to this Agreement.
"Seller Indemnified Party" has the meaning given to it in Article 7.02.
"Shares" means shares of the common stock, $0.01 par value per share,
of Harken Energy.
"St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area" shall mean the area described on
Exhibit "A-1".
"Survival Period" has the meaning set forth in Article 7.01 hereof.
"Taxes" has the meaning set forth in Article 9.
"Third Party Claim" has the meaning set forth in Article 7.04(a)
hereof.
"Transfer Requirements" means all consents, approvals, authorizations
or permits of, or filings with or notifications to, any third party which must
be obtained, made or complied with for or in connection with the transactions
contemplated by this Agreement in order (a) for such transactions to be
effective, (b) to prevent any termination, cancellation, default, acceleration
or change in terms (or any right arising therefrom) under any terms, conditions
or provisions of any Asset (or of any agreement, instrument or obligation
relating to or burdening any Asset or any interest therein or portion thereof)
as a result of such transactions, or (c) to prevent the creation or imposition
of any lien, charge, penalty, restriction, security interest or encumbrance on
or with respect to any Asset or any interest therein or portion thereof (or any
right arising therefrom) as a result of such transactions.
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"Units" means all unitization, communitization, pooling agreements,
working interest units created by operating agreements, and orders covering the
lands subject to the Leases, or any portion thereof, and the units and pooled or
communitized areas created thereby.
"▇▇▇▇▇" means ▇▇▇▇▇ for the production of Hydrocarbons which are listed
in Exhibit "A" or which are located on the Lands.
"WI" means a fraction or percentage of the costs and expenses
associated with the maintenance, exploration, development, operation and
abandonment of a Well or Unit described on Exhibit "A".
ARTICLE 2
SALE AND PURCHASE; OPTION TO PURCHASE
2.01 Sale and Purchase.
(a) INCLUDED ASSETS. Subject to the terms and conditions of this
Agreement and in consideration of Buyer's payment to Seller of
the Purchase Price as provided in this Agreement, the Buyer
agrees to purchase from the Seller, and the Seller agrees to
sell and convey to Buyer, the Assets.
(b) EXCLUDED ASSETS. Notwithstanding anything herein provided to
the contrary, the term "Assets" as used in this Agreement
shall not include, and there is excepted, reserved and
excluded from the sale contemplated hereby the following
("Excluded Assets"): (i) all cash, deposits, checks, funds,
accounts receivable, notes receivable, or similar items
attributable to the Assets with respect to any period of time
prior to the Effective Date, except for those funds in
suspense accounts to be delivered to Buyer pursuant to Article
8.01(b) hereof and (ii) all Hydrocarbon production from or
attributable to the Assets with respect to all periods prior
to the Effective Date and all proceeds attributable thereto,
and all Hydrocarbons that, at the Effective Date, are owned by
Seller and are in storage or otherwise held in inventory and
all proceeds attributable thereto, and those listed in Exhibit
"H" and the following:
(i) the surface estate in and to the tract in
the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area described
under Lease No. R133-000 on Exhibit "A-1"
(the "Fee Tract");
(ii) 25% of the Seller's interest in the St.
▇▇▇▇▇▇▇▇▇▇▇ Prospect Area, and the right to
act as operator for the St. ▇▇▇▇▇▇▇▇▇▇▇
Prospect Area;
(iii) 25% of the Seller's interest in the S. Bayou
Boeuf Prospect Area, and the right to act as
operator for the S. Bayou Boeuf Prospect
Area;
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(iv) 50% of the Seller's interest in the Bol Mex
Prospect Area, and the right to act as
operator for the Bol Mex Prospect Area.
Subsequent to the Effective Date, the form of Operating Agreement
attached hereto as Exhibit "K" (the "Operating Agreement") will govern
operations on the the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area and the Bol Mex Prospect
Area. At the Closing, the Parties will execute separate Operating Agreements
covering each of those prospect areas.
(c) OPTION TO PURCHASE. The Buyer will have, and the Seller hereby
grants to Buyer, a continuing option, on the terms set forth
in Article 13.01 below, for a period of one (1) year following
the Closing Date to purchase from Seller all of Seller's
remaining interest in the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area and in
the S. Bayou Boeuf Prospect Area (including the right to
operate both areas).
ARTICLE 3
PURCHASE PRICE
3.01 Purchase Price. In consideration for the sale and conveyance to
Buyer of the Assets, subject to the terms and conditions hereof, the Buyer
agrees to tender and deliver to the Seller in the manner hereinafter provided
shares of its capital stock as consideration (the "Purchase Price"), that is of
an aggregate value, which the Parties agree is equal to Twenty Million Two
Hundred Fifty Thousand Dollars ($20,250,000):
(a) Harken Energy will issue and deliver to the Seller following
Closing, at the time, in the amount, and in the manner
described in Article 8.03(a), the number of Shares equal in
value to Sixteen Million Two Hundred Fifty Thousand Dollars
($16,250,000) which the parties hereto have calculated to be
2,716,483 (the "Closing Shares").
(b) Harken Energy will withhold from the Purchase Price that
number of shares (the "Reserve Shares") which are equal in
value to $4 million as a contingency against Seller obtaining
new or renewal leases under St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area as
described in Article 8.03(b) and the need for environmental
compliance operations under Article 6.02.
3.02 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of the Buyer, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, simultaneously with the
execution of this Agreement on May 19, 1998, or at such other place, date and
time as the Buyer and the Seller may mutually determine (the "Closing Date").
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3.03 Allocation of Purchase Price. The Closing Shares and the Reserve
Shares shall be allocated and deliverable in the proportion of thirty-seven
percent (37%) to SMPL and sixty-three percent (63%) to ▇▇▇▇▇.
3.04 Deliveries at the Closing. At the Closing or as otherwise set
forth in Article 11, (i) the Seller will deliver to the Buyer the documents
referred to in Article 11.01 below, and (ii) the Buyer will deliver to the
Seller the documents referred to in Article 11.02 below.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Article 4.01 are true
and correct as of the Closing Date:
(a) SMPL is a limited partnership and ▇▇▇▇▇ is a general
partnership, each of which is duly organized, validly existing
and in good standing under the laws of the State of Texas, and
is qualified to do business and in good standing under the
laws of the State of Louisiana.
(b) Each Seller has all requisite power and authority, limited
partnership or corporate and otherwise, to carry on its
business as presently conducted, to enter into this Agreement
and the Related Agreements, to perform its obligations under
this Agreement and the Related Agreements.
(c) The execution and delivery of this Agreement and the Related
Agreements have been, and the execution and delivery of all
certificates, documents and instruments required to be
executed and delivered by the Seller at Closing, and the
consummation of the transactions contemplated hereby and
thereby as of the Closing Date shall have been duly authorized
by all necessary limited partnership action on the part of the
Seller. No further authorization is required by any law,
statute, regulation, court order or judgment applicable to the
Seller. This Agreement and the Related Agreements constitute
the legal, valid and binding obligations the Seller
enforceable in accordance with their respective terms, subject
however, to the effects of bankruptcy, insolvency,
reorganization, moratorium and similar laws, as well as to
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). After Closing, the Seller will have the ability to
continue in its same business without a fundamental change in
the nature or scope of its business.
(d) The execution and delivery of the Agreement and the Related
Agreements and the consummation of the transactions
contemplated hereby and thereby will not (i) violate, or be in
conflict with, any provisions of the Seller's agreement of
limited
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partnership or other governing documents, (ii) constitute a
breach of, or any event of default under, any contract or
agreement to which the Seller is a party or by which it or its
assets are bound, or constitute the happening of an event or
condition upon which any other party to such a contract or
agreement may exercise any right or option which will
materially adversely affect any of the Assets, (iii) violate
any judgment, decree, order, statute, rule or regulation
applicable to Seller, or (iv) result in any material liability
to Buyer under the terms of any contracts or agreements.
(e) Except as set forth on Exhibit "J" hereto, no suit, action or
other proceeding is pending before any court or any
governmental agency as of the date of this Agreement to which
the Seller is a party or which involves the Assets and which
might result in a material impairment or loss of the Seller's
title to the Assets or that might materially hinder or impede
the operation of the Assets or the ability of the Seller to
perform its obligations under this Agreement or under the
Related Agreements. Seller will promptly give the Buyer notice
of any such proceeding arising prior to or after the Closing
with respect to which it has notice. The Seller has received
no notice of any pending or threatened action, suit,
proceeding, inquiry or investigation, at law or in equity,
before or by any court, governmental agency, public board or
body against or affecting the Seller or the Assets that
questions the powers and authority of the Seller to enter into
or perform its obligations under this Agreement or the Related
Documents or to carry out the transactions on its part
described in this Agreement or the Related Documents or the
power of the Borrower to own and dispose of the Assets.
(f) Seller has no knowledge of material defects or breakage in the
Equipment to be conveyed in whole or in part to Buyer pursuant
to the terms hereof, and to the best of Sellers knowledge, all
the Equipment is in working order as of the Closing Date. As
used in this Article 4.01(f), a material defect or breakage
means any defect that requires repair or replacement of any
personal property or fixtures conveyed herein to Buyer
requiring an expenditure by Buyer in excess of $50,000 per
defect, or $100,000 in the aggregate for all defects and
breakage.
(g) All royalties, rentals and other payments due with respect to
the Mineral Interests have been properly and timely paid as
prescribed by the Leases governing them. All conditions
necessary to keep the Leases in force have been fully
performed no notices have been received by Seller of any claim
to the contrary and all of the Leases are in full force and
effect.
(h) Prior to the Closing Date, (i) Seller is not obligated by
virtue of any prepayment arrangement under any contract for
the sale of hydrocarbons and containing a "take or pay" or
similar provision to deliver Hydrocarbons produced from the
Assets at some future time without then or thereafter
receiving full payment therefor, and (ii) Seller has not
produced a share of gas materially greater than its ownership
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percentage and Seller is under no obligation to reduce its
share of production under any gas balancing agreement or
similar contract to allow under-produced parties to come back
into balance.
(i) All ad valorem, property, production, severance and similar
taxes and assessments based an or measured by the ownership of
property or the production of Hydrocarbons or the receipt of
proceeds therefrom on the Assets have been properly paid and
all such taxes and assessments which become due and payable
prior to the Closing Date shall have been properly paid by
Seller.
(j) All laws, regulations and orders of all governmental agencies
having jurisdiction over the Assets or operations conducted
thereon have, to Seller's knowledge, been and shall continue
to be complied with in all material respects until the Closing
Date. Seller has obtained all material necessary permits from
governmental agencies having jurisdiction in connection with
the Assets, including, without limitation, the injection and
disposal of salt water, or operations conducted thereon and
have timely, properly and accurately made and will continue to
timely, properly and accurately make all filings required by
all governmental agencies with respect to the Assets or
operations conducted thereon.
(k) Seller has not incurred liability, contingent or otherwise,
for brokers' or finders' fees relating to the transactions
contemplated by this Agreement or the Related Agreements for
which Buyer shall have any responsibility whatsoever.
(l) With respect to the Basic Documents (defined below), in all
material respects (i) the Basic Documents all are in full
force and effect and are the valid and legally binding
obligations of the parties thereto and are enforceable in
accordance with their respective terms; (ii) Seller is not in
breach or default with respect to any of its material
obligations pursuant to any such Basic Document or any
regulations incorporated therein or governing same; (iii) all
material payments (including, without limitation, royalties,
delay rentals, shut-in royalties, or payments, fees for salt
water disposal or injection, and joint interest or other
▇▇▇▇▇▇▇▇ under unit or operating agreements) due from Seller
thereunder have been made by Seller; (iv) to Seller's
knowledge no other party to any Basic Document (or any
successor in interest thereto) is in breach or default with
respect to any of their material obligations thereunder; (v)
neither the Seller nor, to Seller's knowledge, any other party
to any Basic Document has given or threatened to give notice
of any action to terminate, cancel, rescind or procure a
judicial determination of any Basic Document or any provision
thereof; and (vi) the execution and delivery of this Agreement
and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby will not result
in a breach of, constitute a default under, or result in a
violation of the material provisions of any Basic Document and
none of the Basic Documents will require, after the Effective
Date, that any advance payments be made
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to any party other than those required under operating
agreements. As used herein the term "Basic Documents" shall
mean the Leases, the Product Contracts (defined below),
partnership, joint venture, limited partnership, farmout, dry
hole, bottom hole, operating agreements, acreage contribution,
purchase and acquisition agreements, area of mutual interest
agreements and salt water disposal and/or injection
agreements, servicing contracts, casement and/or right-of-way
agreements, surface leases, surface use agreements,
unitization or pooling agreements and all other material
executory contracts and agreements relating to the Assets,
including, without limitation, those contracts and agreements
described in Article 4.01(m) hereto.
(m) Other than agreements which are cancellable on 90 days notice
or less without material penalty or detriment, all product
purchase agreements and all agreements relating to or
affecting the purchase, sale, gathering, delivery,
compressing, transporting, processing, marketing or any other
disposition of the gas and condensate produced from or
attributable to the Assets are described on Exhibit "F"
attached hereto and made a part hereof under the heading
"Product Contracts," and are herein referred to as the
"Product Contracts".
(n) Seller has good and valid title to the Assets subject to
Permitted Encumbrances. Exhibit "A-1", "A-2" and "A-3"
contains a list of all Mineral Interests and other mineral
estates and interests within the Lands owned by Seller and is
true and correct, except as otherwise noted therein; provided,
however, that title to the Leases shall be assigned to Buyer
with warranties of title by, through and under Seller and its
Affiliates who are predecessors to Seller's title, but not
otherwise.
(o) The Mineral Interests entitle Seller to receive not less than
the undivided interest set forth in Exhibit "A" as NRI of all
indicated hydrocarbons produced, saved and marketed from or
attributable to the ▇▇▇▇▇, including any non-producing, behind
the pipe, or proved undeveloped reserves, through plugging,
abandonment and salvage of such ▇▇▇▇▇. Seller's obligation to
bear costs and expenses relating to the development of and
operations on the ▇▇▇▇▇ is not, and, through the plugging,
abandonment and salvage of such ▇▇▇▇▇, shall not be greater
than the WI set forth in Exhibit "A."
(p) Seller is currently receiving from all purchasers of
production from the Mineral Interests at least the NRI set
forth in Exhibit "A" without suspense or any indemnity other
than standard division order warranties. Seller is currently
bearing, as Operator, or paying to operators of the Leases,
for the development and operation thereof no more than the WI
set forth in "Exhibit A," and the Seller is current for all
costs and expenses pertinent to the development and operation
of the Leases.
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(q) No portion of the Mineral Interests (1) has been contributed
to and is currently held by a tax partnership; (2) is subject
to any form of agreement (whether formal or informal, written
or oral) deemed by any state or federal tax statute, rule or
regulation to be or have created a tax partnership; or (3)
otherwise constitutes "partnership property" (as that term is
used in Subchapter K of Chapter 1 of Subtitle A of the Code)
of a tax partnership. For the purpose of this Article 4.01(s)
a "tax partnership" is an entity deemed to be a partnership
within the meaning of Section 761 of the Internal Revenue Code
or any similar state or federal statute, rule or regulation,
by reason of elections made not to be excluded from the
application of such partnership provisions.
(r) The Seller represents that it has been furnished with such
information as Seller may have requested from the Buyer
concerning the Buyer, Harken Energy's common stock and the
Shares being delivered hereunder. The Seller further
represents that (A) it is an "accredited investor," as defined
in Rule 501(a) of the Securities Act of 1933, as amended (the
"Securities Act"), and (B) it has had the opportunity to ask
questions of and receive satisfactory answers from management
of Harken Energy concerning Harken Energy, its operations, the
matters set forth in the Harken SEC Documents and an other
matters. The Seller acknowledges and agrees that the Shares
may not be sold or transferred following the Closing unless
either (a) such Shares have been registered under the
Securities Act and applicable state securities laws, or (b)
the transfer is exempt from the registration requirements of
the Securities Act and applicable state securities laws and
Harken Energy shall have been furnished with a written opinion
of legal counsel reasonably satisfactory to Harken Energy to
the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act and applicable
state securities laws; provided, however, that ▇▇▇▇▇ may
freely sell or transfer all or any number of Shares to SMPL
and SMPL may freely sell or transfer a portion of its Shares
to EnCap Equity 1996 Limited Partnership or Energy Capital
Investment Company PLC (limited partners of SMPL), so long as
all such sale or transfers are accomplished in a manner
consistent with the Securities Act and applicable state
securities laws; provided, however, no legal opinion shall be
required in connection with sales or transfers of Shares to
SMPL or to limited partners of SMPL as provided above. The
Seller agrees that the certificates representing the Shares
issued pursuant to this Agreement will contain the following
restrictive legend: THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT AND CANNOT BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER SUCH ACTS OR EXEMPTIONS FROM REGISTRATION ARE AVAILABLE.
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED UNDER THE PURCHASE AND SALE AGREEMENT DATED AS OF
MAY 19, 1998, AMONG HARKEN ENERGY CORPORATION, HARKEN
EXPLORATION COMPANY,
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ST. ▇▇▇▇▇▇▇▇▇▇▇ PARTNERS, LTD. AND ▇▇▇▇▇ ENERGY COMPANY. A
COPY OF THE PURCHASE AND SALE AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE RECORD HOLDER OF
THE CERTIFICATE TO HARKEN ENERGY CORPORATION.
(s) Seller has provided Buyer with complete and accurate
information relating to the Leases and Assets, including
without limitation, all applicable agreements relating,
appertaining or incidental to the Leases, production history
and characteristics. Seller has also provided Buyer with
copies of all land and well files heretofore maintained and
belonging to Seller.
(t) Prior to Closing, Seller shall have made available to Buyer
for examination at Seller's office in Houston, Texas, all
title and other information relating to the Assets insofar as
the same are in Seller's possession and after Closing will
cooperate with Buyer in Buyer's efforts to obtain such
additional information relating to the Assets as Buyer may
reasonably require, to the extent in each case that Seller may
do so without violating legal constraints or any obligation of
confidence or other contractual commitment of Seller to a
third party. After Closing, Seller shall cooperate with Buyer
in Buyer's efforts to obtain, at Buyers' expense, such
additional title information as Buyer may reasonably deem
prudent.
(u) Seller has caused the Assets to be produced, operated and
maintained in a good and workmanlike manner consistent with
good oilfield practices, has maintained insurance now in force
with respect to the Assets, has paid or caused to be paid all
costs and expenses in connection therewith, has kept the
Leases in full force and effect and has performed and, to the
best knowledge of Seller, complied with all the covenants and
conditions contained in the Leases and all agreements relating
to the Assets.
(v) During the period between the Effective Date and the Closing,
Seller has not entered into any agreements or commitments with
respect to the Assets, has not modified or terminated any of
the agreements relating to the Assets, including, without
limitation, the Basic Documents and the Product Contracts, has
not encumbered, sold or otherwise disposed of any of the
Assets other than personal property which has been replaced by
equivalent property or consumed in the operation of the
Assets, and has not voluntarily compromised any amounts
payable to the Seller due to casualty loss or any pending or
threatened taking related to the Assets.
(w) Seller has exercised reasonable efforts in safeguarding and
maintaining all engineering, geological and geophysical data,
reports and maps, contract rights and like information
relating to the Assets.
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(x) In the event that as of the Closing Date the Assets are
subject to outstanding Governmental Approvals, Seller agrees
to indemnify the Buyer Indemnified Party against any Loss or
Losses arising by reason of the failure to obtain such
Governmental Approvals. Seller represents that it will
exercise reasonable efforts to obtain such Governmental
Approvals. The indemnity herein provided shall survive the
Closing until the required Governmental Approvals have been
obtained.
(y) Seller has permitted Buyers' authorized representatives to (i)
consult with Seller's and/or any third-party contract
operator's agents and employees during reasonable business
hours and to conduct on-site inspections, reasonable tests and
inventories with respect to the Assets and inspect and examine
all production and related data, well logs and geological and
geophysical data relating to the Assets, and (ii) inspect and
make copies of all orders, proceedings and evidence with
respect to the Assets of the Louisiana Conservation
Commission.
(z) Prior to the Closing Date, Seller has used reasonable efforts
to maintain its relationships with all suppliers, customers
and others having business relationships with Seller with
respect to the Assets so that such relationships will be
preserved for Buyer on and after the Closing Date.
(aa) All ▇▇▇▇▇, whether producing or not, located on the Lands,
other than ▇▇▇▇▇ which have been previously plugged and
abandoned in compliance with applicable rules and regulations,
are set forth in Exhibit "A" hereto.
(bb) There are no underground storage tanks located on any of
Lands.
(cc) Since the Effective Date, Seller has purchased new Leases for
the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area, S. Bayou Boeuf Prospect
Area and Bol Mex Prospect Area as set forth on Exhibits "A-1",
"A-2" and "A-3", respectively, under the heading "Post
Effective Date Leases." Seller paid the bonus amount set forth
in the description of such Post Effective Date leases on such
Exhibits.
(dd) Exhibit "I" sets forth each "authority for expenditure" issued
or received by Seller since the Effective Date along with an
indication of the Prospect Area which the authorization
relates to, the amount of the authorization and specifically
states whether Seller has approved that authorization.
4.02 Representations and Warranties of Buyer. Each of Harken Energy and
Exploration jointly and severally represents and warrants to Seller that the
statements contained in this Article 4.02 are true and correct as of the Closing
Date:
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(a) Each of Harken Energy and Exploration is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware, and is duly qualified to do
business and in good standing in the State of Texas.
(b) Each Buyer has all requisite power and authority, corporate
and otherwise, to carry on its business as presently
conducted, to enter into this Agreement and Related Agreements
to which it is a party, and to perform its obligations under
this Agreement and such Related Agreements.
(c) The execution and delivery of this Agreement and the Related
Agreements have been, and the execution and delivery of all
certificates, documents and instruments required to be
executed and delivered by each Buyer at Closing, and the
consummation of the transactions contemplated hereby as of
the Closing Date shall have been duly authorized by all
necessary corporate action on the part of each Buyer and no
further authorization is required by any law, statute,
regulation, court order or judgment applicable to either
Buyer. This Agreement constitutes a legal, valid and binding
obligation of each Buyer enforceable in accordance with its
terms, subject however, to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws, as
well as to principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
(d) The execution and delivery of the Agreement and the
consummation of the transactions contemplated hereby will not
(i) violate, or be in conflict with any provisions of either
Buyer's certificate of incorporation, bylaws or governing
documents, (ii) constitute a material breach of, or any event
of default under, any contract or agreement to which either
Buyer is a party or by which it or its assets are bound, or
constitute the happening of an event or condition upon which
any other party to such a contract or agreement may exercise
any right or option which will materially adversely affect the
ability of either Buyer to perform its obligations hereunder,
or (iii) violate any judgment, decree, order, statute, rule or
regulation applicable to either Buyer.
(e) No suit, action or other proceeding is pending before any
court or governmental agency as of the date of this Agreement
to which either Buyer is a party and which might materially
hinder or impede the ability of either Buyer to perform its
obligations hereunder. Harken Energy shall promptly notify
Seller of any such proceeding arising prior to the Closing
with respect to which its receives actual notice.
(f) Neither Buyer has incurred any liability, contingent or
otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Seller
shall have any responsibility whatsoever.
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(g) Harken Energy is current with respect to all required reports,
schedules, forms, statements and other documents with the
Commission. The consolidated financial statements of Harken
Energy filed with the Commission for the year ended December
31, 1997, comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated
financial position of Harken Energy and its consolidated
subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and other adjustments
described therein).
(h) The Closing Shares to be received by Seller (i) have been duly
authorized, and (ii) at the time of their issuance, will be
validly issued, fully paid, nonassessable, and not issued in
violation of any preemptive rights or any applicable laws,
rules or regulations. Such Shares will, upon delivery thereof,
be free and clear of all liens, charges, pledges,
encumbrances, equities and claims whatsoever other than those
created by Seller.
(i) The Reserve Shares and Additional Shares which may be received
by Seller will when so issued and received (i) have been duly
authorized, and (ii) at the time of their issuance, will be
validly issued, fully paid, nonassessable, and not issued in
violation of any preemptive rights or any applicable laws,
rules or regulations. Such shares will, upon delivery thereof,
be free and clear of all liens, charges, pledges,
encumbrances, equities and claims whatsoever other than those
created by Seller.
(j) Set forth on Exhibit "4.02(j)" attached hereto and made a part
hereof for all purposes is the authorized capitalization of
Harken Energy and Exploration and the number of shares of
their respective capital stock (or other equity interests)
issued and outstanding as of the date hereof.
ARTICLE 5
ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
5.01 Definitions. As used in this Article 5.01:
(a) "Contaminated Site List" means any list, registry, or
other compilation established by any Governmental
Entity of sites that require or potentially require
investigation, removal actions, remedial actions, or
any other response under any Environmental Laws or
treaty covering environmental
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matters, as the result of the Release or threatened
Release of any Hazardous
Materials.
(b) "Environmental Laws" means all laws, rules,
regulations, statutes, ordinances or orders of any
Governmental Entity relating to (A) the control of
any potential pollutant or protection of the air,
water or land, (B) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or
transportation, and (C) exposure to hazardous, toxic
or other substances alleged to be harmful, and
includes without limitation, the terms and conditions
of any license, permit, approval, or other
authorization by any Governmental Entity, and
judicial, administrative, or other regulatory
decrees, judgments, and orders of any Governmental
Entity. The term "Environmental Laws" shall include,
but not be limited to, the Clean Air Act, 42
U.S.C.ss.7401 et seq., the Clean Water Act, 33
U.S.C.ss.1251 et seq., the Resource Conservation
Recovery Act ("RCRA"), 42 U.S.C.ss.6901 et seq., the
Superfund Amendments and Reauthorization Act, 42
U.S.C.ss.11011 et seq., the Toxic Substances Control
Act, 15 U.S.C.ss.2601 et seq., the Water Pollution
Control Act, 33 U.S.C.ss.1251, et seq., the Safe
Drinking Water Act, 42 U.S.C.ss.300f et seq., the
Comprehensive Environment Response, Compensation, and
Liability Act ("CERCLA"), 42 U.S.C.ss.9601 et seq.,
the Oil Pollution Act of 1990, 33 U.S.C.A.ss.2701 et
seq.; the Louisiana Environmental Quality Act, La.
R.S. 30:2001 et seq.; the Louisiana Conservation Act,
La. R.S. 30:1 et seq.; the Louisiana Oilfield Site
Restoration Law, La. R.S. 30:80 et seq.; the
Louisiana Coastal Zone Management Program, La. R.S.
49:214.21 et seq.; the Louisiana-Coastal Wetlands
Conservation and Restoration Act, La. R.S. 49:214.1
et seq.
(c) "Environmental Liabilities" shall mean any and all
liabilities, responsibilities, claims, suits, losses,
costs (including remediation, removal, response,
abatement, cleanup, investigative, and/or monitoring
costs and any other related costs and expenses),
damages, settlements, expenses, charges, assessments,
liens, penalties, fines, prejudgment and postjudgment
interest, attorney fees and other legal fees (A)
pursuant to any agreement, order, notice, or
responsibility, (including directives embodied in
Environmental Laws), injunction, judgment, or similar
documents (including settlements), or (B) pursuant to
any claim by a Governmental Entity or other person
for personal injury, property damage, damage to
natural resources, remediation, or similar costs or
expenses incurred by such Governmental Entity or
person pursuant to common law, statute, rule or
regulation.
(d) "Environmental Remediation Costs" means all costs and
expenses of actions or activities to (A) cleanup or
remove Hazardous Materials from the environment, (B)
to prevent or minimize the further movement, leaching
or
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migration of Hazardous Materials in the environment,
(C) prevent, minimize or mitigate the Release or
threatened Release of Hazardous Materials into the
environment, or injury or damage from such Release,
and (D) comply with the requirements of any
Environmental Laws. Environmental Remediation Costs
include, without limitation, costs and expenses
payable in connection with the foregoing for legal,
engineering or other consultant services, for
investigation, testing, sampling, and monitoring, for
boring, excavation, and construction, for removal,
modification or replacement of equipment or
facilities, for labor and material, and for proper
storage, treatment, and disposal of Hazardous
Materials.
(e) "Governmental Entity" means any court, administrative
agency or commission or other governmental authority
or agency, domestic or foreign, including local
authorities.
(f) "Hazardous Materials" means any toxic or hazardous
materials or substances, or solid wastes, including
asbestos, buried contaminants, chemicals, flammable
or explosive. materials, radioactive, materials,
petroleum and petroleum products, and any other
chemical, pollutant, contaminants substance or waste
that is regulated by any Governmental Entity under
any Environmental Law.
(g) "Material" or "Material Adverse Effect" for purposes
of this Article 5.01 means any matter, response,
action, remediation, or other item calling for the
payment or expenditure by any Seller or Buyer after
the Closing of funds in excess of $50,000 per
occurrence, or $500,000 in the aggregate.
(h) "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing into the
environment of any Hazardous Materials.
5.02 Representations and Warranties. With respect to the Assets, the
Seller represents and warrants to Buyer that, to the best of its knowledge:
(a) With respect to permits and licenses relating to the Assets,
(A) all Material licenses, permits, consents, or other
approvals required under Environmental Laws that are necessary
to the operations the Assets have been obtained and are in
full force and effect, and Seller is unaware of any basis for
revocation or suspension of any such licenses, permits,
consents or other approvals, (B) no declaration, environmental
impact statement, or other filing or notice to any
Governmental Entity is required under Environmental Laws as a
condition or in connection with the transactions contemplated
by this Agreement, and (C) no Environmental Laws impose any
obligation upon any Seller, as a result of any transaction
contemplated hereby,
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requiring prior notification to any Governmental Entity of the
transfer of any permit, license, consent, or other approval
which materially is necessary to the operations of the Assets.
(b) No Governmental Entity has given notice to the Seller of any
claim or investigation under or violation of any Environmental
Law with respect to the Assets or of any intent to encumber or
place a lien under any Environmental Laws upon the Assets. No
Material notice or Material restriction has been, or is
required to be placed in any deed or other public real
property record pursuant to any Environmental Laws with
respect to the Assets.
(c) Except as would not have a Material Adverse Effect and with
respect to the Assets or any of the Lands, (A) no oral or
written notification of any Release of any Hazardous Materials
has been given to any Governmental Entity by or on behalf of
Seller, (B) none of the Assets is on (nor has any Seller
received any notice from any Governmental Entity that any of
the Assets is being considered or proposed for listing on) any
Contaminated Site List, (C) none of the Assets is the subject
of any judgment, decree or order of any Governmental Entity
requiring any investigation, removal, remediation or similar
action, or other response under any Environmental Laws, (D)
the Seller has not received any notice from any Governmental
Entity that it is liable or responsible, or potentially liable
or responsible, in any material respect for any removal,
remedial, or other similar type action under any Environmental
Laws as the result of the Release or threatened Release of
Hazardous Materials with respect to the Assets and (E) there
is no claim, complaint, investigation, litigation, or
administrative proceeding threatened before any Governmental
Entity (and to the best of its information and belief, Seller
knows of no threatened claim, complaint, investigation,
litigation, or administrative proceeding) in which it is
asserted by any Governmental Entity or any other person that
Seller (x) has violated or is not in compliance with any
Environmental Laws with respect to the Assets, (y) is liable
for or should be ordered or compelled to undertake any
removal, remediation, or other response action as the result
of the Release or threatened Release of any Hazardous
Materials with respect to the Assets or (z) is liable for
damages (including without limitation, damages to natural
resources), fines, penalties, or other relief as the result of
the violation or noncompliance of any Environmental Laws or as
the result of the Release or threatened Release of any
Hazardous Materials with respect to the Assets.
(d) Except where the failure to have such permits and
authorizations would not have a Material Adverse Effect, all
Hazardous Materials, garbage, refuse, and similar waste
materials with respect to the Assets have been transported by
Seller only to sites which have proper permits or other
authorization from Governmental Entities for the disposal of
such materials. To the best knowledge of Seller, no such site
to which
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Hazardous Materials, garbage, refuse, or similar waste
materials have been transported for disposal Seller are on any
Contaminated Site List.
(e) Except as would not have a Material Adverse Effect, all
operations of Seller with respect to the Assets are in
compliance with all Environmental Laws.
(f) Except as would not have a Material Adverse Effect, no facts
or circumstances exist which could reasonably be expected to
result in any Environmental Liabilities to Seller or the Buyer
following the Closing with respect to the Assets.
(g) Seller does not now own, lease or otherwise operate any
disposal sites on the Assets, other than the saltwater
disposal ▇▇▇▇▇ which are listed on Exhibit "A", for which the
Seller has obtained necessary permits from any Governmental
Entity and which ▇▇▇▇▇ are in material compliance with all
Environmental Laws and other applicable laws and regulations.
ARTICLE 6
ENVIRONMENTAL COVENANT
6.01 Availability of Data to Buyer; Phase I Environmental Audit. Prior
to the date hereof, Seller has made available to Buyer information which is in
the possession or control of Seller or to which Seller has access (other than
publicly available information to which Buyer has equal access) and which
relates to the environmental condition of the Assets, which information
includes, without limitation, information regarding crude oil and produced water
that may have been spilled or disposed of on-site and the locations thereof;
onsite pits and pit closures; on-site burial; land farming; land spreading;
underground injection; and on-site solid waste disposal sites. Seller has
further delivered to Buyer true and correct copies of its Phase 1 Environmental
Report for the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area dated February 10, 1997 and its
Phase 1 Environmental Report for the S. Bayou Boeuf Prospect Area dated
December, 1997. No material environmental events have occurred since the dates
of these reports.
6.02 Environmental Assessment. Buyer shall have the right to make an
environmental assessment of the Assets during the period beginning on the date
of execution of this Agreement and ending ninety (90) days after the Closing
Date ("Examination Period"). If during the Examination Period, Buyer determines
that operations of Seller or its affiliates with respect to the Assets are not
in compliance with all Environmental Laws, without regard to whether Seller has
been previously notified of such matter by an applicable authority, then Buyer
shall give Seller notice thereof together with an explanation of the
environmental problem. Seller shall have five (5) days following such notice to
notify Buyer whether Seller elects to (x) remediate, dispose of, restore, or
otherwise resolve such environmental problem or lack of compliance in accordance
with all applicable laws, rules, and regulations, and to Buyer's reasonable
satisfaction, or (y) reduce the consideration to be paid under
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Article 8.03 (b) by $750,000.00. Buyer and Seller agree to cooperate with each
other in connection with all activities to be conducted hereunder.
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
7.01 Survival of Representations and Warranties. The representations
and warranties of (i) the Seller contained in Article 4.01 and Article 5 hereof
shall survive the Closing for a period of one year from the Closing Date and
(ii) the representations and warranties of the Buyer contained in Article 4.02
hereof shall survive the Closing for one year from the Closing Date (the
"Survival Period").
7.02 Indemnification Provision for the Benefit of the Seller. In the
event the Buyer breaches any of its representations and warranties contained in
Article 4.02 hereof, then the Buyer agrees to indemnify and hold harmless the
Seller, any current, former, and future director, officer, manager, member,
partner, shareholder, employee and agent of Seller, and any successor, assign,
heir, and executor of any of the foregoing (the "Seller Indemnified Party"),
from and against the entirety of any Losses resulting from or related or
attributable to the breach which the Seller, or any such Affiliate (or any such
other indemnified person in such person's capacity set forth above) shall
suffer, provided such claim for indemnification is brought within the Survival
Period; and further provided that "Losses", as used in this sentence, shall not
include, and Buyer shall not be responsible or liable for, any death, personal
injury, or consequential damages in respect of such breach. Further, subject to
the limitations of the immediately preceding sentence, the Buyer indemnifies,
defends and holds the Seller Indemnified Parties harmless from and against any
and all Losses directly or indirectly arising out of or resulting from any
Hazardous Materials being present or released in, on or around any part of the
surface of the Fee Tract, or in the soil, groundwater or soil vapor on or under
the surface of the Fee Tract subsequent to the Closing Date that is caused by
the Buyer or its agents and employees.
7.03 Indemnification Provision for the Benefit of the Buyer In the
event the Seller breaches any of its representations and warranties contained in
Article 4.01 and Article 5 hereof, then the Seller agrees to indemnify and hold
harmless the Buyer, any current, former, and future director, officer, manager,
member, partner, shareholder, employee and agent of Buyer, and any successor,
assign, heir, and executor of any of the foregoing (the "Buyer Indemnified
Party"), from and against the entirety of any Losses resulting from or related
or attributable to the breach which the Buyer, or any such Affiliate (or any
such other indemnified person in such person's capacity set forth above) shall
suffer, provided such claim for indemnification is brought within the Survival
Period; and further provided that "Losses", as used in this sentence, shall not
include, and Seller shall not be responsible or liable for, any death, personal
injury, or consequential damages in respect of such breach. Further, subject to
the limitations of the immediately preceding sentence, the Seller
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indemnifies, defends and holds the Buyer Indemnified Parties harmless from and
against any and all Losses directly or indirectly arising out of or resulting
from any Hazardous Materials being present or released in, on or around any part
of the surface of the Fee Tract, or in the soil, groundwater or soil vapor on or
under the surface of the Fee Tract prior to the Closing date and thereafter,
except for the presence of such Hazardous Materials that is caused by the Buyer
or its agents and employees.
7.04 Matters Involving Third Parties.
(a) If any third party shall notify a Seller Indemnified or Buyer
Indemnified Party with respect to any matter which may give
rise to a claim for indemnification against Seller or Buyer,
as the case may be (the "Indemnifying Party") under this
Article 7 or otherwise pursuant to this Agreement, then the
Indemnified Party shall promptly (and in any event within ten
(10) business days after receiving service of process in a
lawsuit, administrative proceeding or arbitration proceeding
with respect to the Third Party Claim) notify each
Indemnifying Party thereof in writing. Each of the matters
described in this Article 7.04(a) shall be referred to in this
Agreement as a "Third Party Claim".
(b) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with
counsel of its choice reasonably satisfactory to the
Indemnified Party; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably) unless the judgment or
proposed settlement involves only the payment of money damages
and does not impose an injunction or other equitable relief
upon (or constitute an admission of guilt, liability, fault or
responsibility for) the Indemnified Party. The Indemnified
Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless (i) the employment thereof has
been specifically authorized in writing by the Indemnifying
Party or (ii) the Indemnifying Party failed to assume the
defense and employ counsel.
(c) Unless and until an Indemnifying Party assumes the defense of
the Third Party Claim as provided in Article 7.04(b) above,
however, the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate
with such reasonable costs and expenses associated therewith
to be borne for the account of the Indemnifying Party.
(d) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), unless
the
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Indemnified Party waives indemnification with respect to the
Third Party Claim so settled and adjudicated.
(e) The indemnification obligations of Seller and Buyer,
respectively under this Agreement shall include court costs
and attorney's fees and expenses and costs of investigating,
preparing or defending any action or proceeding with respect
to any Third Party Claim.
ARTICLE 8
POST CLOSING COVENANTS
8.01 Certain Obligations of Seller. Seller agrees that, with respect to
the period following the Closing:
(a) RECORDS. On or before five (5) business days after Closing,
Seller shall, at Seller's cost, deliver to Buyer, at Buyer's
offices in Irving, Texas, copies of all Records.
(b) SUSPENSE FUNDS. As soon as practicable after Closing, Seller
shall provide Buyer with a list showing all proceeds from
production attributable to the Assets which are currently held
in suspense. Seller shall remain responsible for distribution
of such proceeds to the parties lawfully entitled thereto, and
agrees to indemnify, defend and hold harmless Buyer from and
against any and all Losses arising out of or relating to such
proceeds.
(c) RETAINED LIABILITIES. Seller retains and shall remain liable
and responsible for, and Buyer specifically does not assume,
any liabilities and obligations of Seller not related to or
arising out of the ownership, use, maintenance and operation
of the Assets, whether known or unknown, accrued or contingent
and not otherwise specifically set forth in this Agreement.
(d) BOL MEX PROSPECT. The Seller will continue its best efforts to
bring partners in on a promoted basis to drill the Bol Mex
Prospect Area and the depths below the base of the Discorbis 4
Sand in the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area. Buyer will have the
right to participate in any well drilled to the Discorbis 4
Sand or below for its interest or to participate with Seller
in the promote, including cash, carried interest on other
value, consideration or interest to be received in any such
transaction by Seller.
8.02 Certain Obligations of Buyer. Each Buyer agrees that within (30)
days following Closing, Buyer shall record those Conveyance Documents necessary
to evidence in the public record that Buyer has acquired the Assets and within a
reasonable time thereafter, Buyer shall supply Seller with a true and accurate
photocopy of the recorded and filed Conveyance Documents. In the event Buyer
fails to record any such Conveyance Document within such time period, Seller
may, but shall
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not be obligated to, record such Conveyance Document on Buyer's behalf and at
Buyer's cost (for which Buyer will promptly reimburse Seller upon demand).
8.03 Agreements Regarding the Issuance of Closing Shares or Cash
(a) CLOSING SHARES. Harken will issue and deliver to the Seller,
within thirty (30) days of the Closing Date, the Closing
Shares equal in value to Sixteen Million Two Hundred Fifty
Thousand Dollars ($16,250,000), which number of Closing Shares
will be determined by dividing such value by the Average
Closing Price of the Shares for the thirty (30) consecutive
calendar days immediately preceding the Closing Date.
(b) RESERVE SHARES. Exhibit 8.03(b) attached hereto contains a
list of Leases (the "Expiring Leases") covering depths above
the base of the Discorbis 4 Sand in the St. ▇▇▇▇▇▇▇▇▇▇▇
Prospect Area, the primary terms of which have or will expire
on or before December 31, 1998. At any time, and from time to
time, from and after forty- five (45) days following the
Closing Date until the close of business one hundred twenty
(120) days following the Closing Date (or if such day is not
a business day, the next following business day) Seller may
notify Buyer that Seller has acquired new or renewal leases
covering all or portions of the lands and depths covered by
the Expiring Leases, providing for at least a three-year
primary term and landowners' royalty interests comparable to
those contained in the Expiring Leases. Such notice shall
include (i) Seller's proposed form of assignment of such new
or renewal leases to Harken Exploration, such assignment to
be substantially in the form attached as ▇▇▇▇▇▇▇ "▇" ▇▇▇▇▇▇,
(▇▇) a statement of how many net mineral acres are covered by
each lease, and (iii) the abstracts, title opinions or
whatever other title information Seller used in determining
what interests are leased and the net mineral acres covered
by each lease. Buyer shall have a period of not more than
forty-five (45) days following notice and tender in which to
notify Seller of Buyer's approval of title to the new or
renewal leases or to make objections to title with regard to
all or any part of the renewal leases included in the subject
notice (the date of such notice or, if no notice is given,
the date of the expiration of such forty-five-day period, is
herein called the "Approval Date"). In the absence of timely
notice, Buyer will be deemed to have approved title to all of
the new or renewal leases. Those leases subject to Buyer's
good faith title objections shall be excluded from the
assignment. Upon tender of the assignment by Seller at any
time subsequent to the Approval Date, Harken Energy will, at
its option, either: (i) tender cash to Seller in the amount
of the Remaining Purchase Price, subject to adjustment as set
forth below; or (ii) deliver to Seller Reserve Shares equal
in value to the Remaining Purchase Price, subject to
adjustment as set forth below. The number of Reserve Shares
to be delivered will be determined by dividing the Remaining
Purchase Price, as adjusted, by the Average
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Closing Price. In the event the new or renewal leases to be
assigned by Seller cover less than the number of net mineral
acres set forth on Exhibit 8.03(b) attached hereto, the
Remaining Purchase Price payable after the deduction, if any,
required for environmental compliance under Article 6.02,
shall be reduced in the proportion that the number of net
mineral acres covered by the new or renewal leases bears to
the number of net mineral acres set forth on Exhibit 8.03(b).
(c) As used in this Agreement:
"Approval Date" has the meaning set forth in Article 8.03(b).
"Average Closing Price" means, when used in Article 8.03(a),
the average of the last reported Sales Price for the Shares
for the 30 consecutive calendar days immediately preceding the
Closing Date, when used in Article 8.03(b) means the average
of the last reported Sales Price for the Shares for the 30
consecutive calendar days immediately preceding the Approval
Date.
"Sales Price" means, when used with respect to a calendar day,
(i) the last reported sales price of the Shares on such day on
the exchange where the Shares are primarily traded, (ii) if
the Shares are not traded on an exchange, the last reported
sale price of the Shares on such day on the NASDAQ National
Market System, or (iii) if the Shares are not reported on the
NASDAQ National Market System, the closing bid price for the
Shares last quoted on such day as reported by an established
quotation service for over-the-counter securities.
8.04 Agreement In Regard to an Easement. The Seller is not selling the
surface with respect to the Assets in the St. ▇▇▇▇▇▇▇▇▇▇▇ Area. However, the
Seller and the Buyer agree to enter into an Easement Agreement substantially in
the form of Exhibit "G" attached hereto in regard to the use by the Buyer of
such surface for its operations. Such Agreement shall comply with Louisiana law
and will include the granting of the following rights: (i) the right of ingress
and egress to and from the Assets over and across all present, future and
designated roads and highways situated on the Lands, this right of ingress and
egress being for persons, vehicles, and equipment necessary or convenient for
use in the Buyers' exercise of their rights to explore for, produce, maintain ,
sell, and transport oil and gas in the Assets; the right to install, maintain,
and use gates in any fences, which now or will cross any easement tracts; the
right to ▇▇▇▇ the location of any easement tracts by suitable markers set in the
ground, provided, however, these markers may be placed in fences or other
locations that will not interfere with any reasonable use of the Seller may make
of the easements; and the right to cut and trim trees and shrubbery that may
encroach on any easement area.
8.05 Agreement Concerning Prescriptive Rights. Sellers agree to execute
the form of Act of Acknowledgment of Mineral Servitude for Purpose of
Interruption of Liberative Prescription attached hereto as Exhibit "L" upon the
request of Buyer, or Buyer's successors, not more frequently than annually,
acknowledging the interruption of liberative prescription on the Fee Tract. Any
sale
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or other disposition of Seller's interest in such surface rights shall be made
expressly subject to the covenant to execute future acts on the form attached
as Exhibit "L". In the event that any portion of the mineral servitude estate
under the Fee Tract shall revert to ownership of the surface holder, then
Seller covenants for itself, its heirs and assigns forever to reconvey all such
minerals that may have so reverted to Harken Energy or its nominee. If the
preceding provisions of this Article 8.05 are not effective or are held to be
invalid or unenforceable as against public policy, then Seller shall be deemed
to have leased all of the minerals under the Fee Tract to Buyer for a term of
99 years without any royalties, or rental or other consideration deemed payable
other than the Purchase Price.
ARTICLE 9
EFFECT OF CLOSING
The following terms, provisions and prorations shall be effective at
the Closing:
(a) REVENUES. All proceeds from production, accounts receivables,
notes receivable, income, revenues, monies and other items
attributable to the Assets with respect to any period of time
prior to the Effective Date shall belong to and be retained by
or paid over to Seller and all necessary reports with respect
to such proceeds shall be filed by Seller. All proceeds from
production, accounts receivables, notes receivables, income,
revenues, monies and other items attributable to the Assets
with respect to any period of time from and after the
Effective Date shall belong to and be retained by or paid over
to Buyer, except for Hydrocarbons that, at the Effective Date,
are attributable to the Assets and are in storage or are
otherwise held in inventory and all proceeds attributable
thereto.
(b) EXPENSES. All accounts payable and accrued liabilities for
costs and expenses attributable to the Assets with respect to
any period of time prior to the Effective Date, including
excise, severance, and similar taxes based on production or
royalties, shall be the obligation of and paid by the Seller,
and all necessary reports with respect to such costs and
expenses shall be filed by Seller. All accounts payable and
accrued liabilities for direct costs and expenses attributable
to the Assets (but not including Seller's overhead costs) with
respect to any period of time from and after the Effective
Date shall be the obligation of and be paid by the Buyer.
(c) AD VALOREM AND PROPERTY TAXES. All ad valorem taxes, real
property taxes, personal property taxes and similar
obligations (the "Taxes") shall be apportioned as of the
Effective Date between Buyer and Seller. All such Taxes
allocable to periods prior to the Effective Date shall be paid
by Seller, and all such Taxes allocable to the Effective Date
and after shall be paid by Buyer. Any refunds of Taxes
allocable to periods prior to the Effective Date shall be the
property of Seller. Any refunds of Taxes allocable to periods
after the Effective Date shall be the property of Buyer. Buyer
shall file or cause to be filed all required reports and
returns incident to such
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Taxes which are due on or after the Effective Date, and shall
pay or cause to be paid to the taxing authorities all such
Taxes reflected on such reports and returns; provided,
however, Seller shall promptly reimburse Buyer for any
amounts owing by Seller with respect thereto pursuant to this
paragraph.
(d) SALES TAXES, FILING FEES, ETC. Buyer shall be liable for any
sales taxes or other transfer taxes, as well as any applicable
conveyance, transfer and recording fees, and real estate,
transfer, stamp or other taxes imposed upon the sale of the
Assets. Seller agrees to use its reasonable best efforts to
assist Buyer in obtaining any applicable exemptions to any
applicable state sales tax. If Seller is required by
applicable state law to report and pay these taxes or fees,
Buyer shall promptly deliver a check to Seller in full
payment, and Seller shall deliver said check to the
appropriate taxing authorities and shall bear any and all
penalties, costs and expenses associated with the failure of
Seller to deliver said check.
(e) OTHER TAXES. All production, severance or excise taxes,
conservation fees and other similar such taxes or fees (other
than income taxes) relating to production attributable to the
Assets prior to the Effective Date shall be paid by Seller and
all such taxes and fees relating to such production
attributable to the Assets on and after the Effective Date
shall be paid by Buyer.
(f) GAS IMBALANCES. Buyer has not included in its engineering
pertaining to the Assets the effect of any Imbalances (as
hereinafter defined) with respect to shares of production
taken or marketed from or attributable to working interests
comprising the Assets. Attached hereto as Exhibit 9(f) and
made a part hereof for all purposes is a listing of all
Imbalances (including working interest imbalances and pipeline
imbalances) affecting the Assets as of the Effective Date. For
purposes of this Agreement, "Imbalances" means any situation
in which any party entitled, including Seller, to produce gas
from a Well in which Seller owns a working interest has
produced such gas in excess of its pro rata share and thereby
has incurred a future liability or makeup obligation.
(g) PAYMENTS; SHARED OBLIGATIONS. If amounts are received by
either Party hereto which, under the terms of this Article 9
belong to the other Party, such amount shall immediately be
paid over to the proper Party. If an invoice or other evidence
of an obligation is received which under the terms of this
Article 9 is partially the obligation of Seller and partially
the obligation of Buyer, then the Parties shall consult each
other and each shall promptly pay its portion of such
obligation to the obligee.
(h) POST-CLOSING ADJUSTMENTS. Within ninety (90) days after
Closing, each Seller shall prepare and deliver to Buyer, in
accordance with this Agreement and generally accepted
accounting principles, a statement (herein called the "Final
Settlement
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Statement"), setting forth each adjustment or payment that
was not finally determined as of the Closing or in accordance
with Articles 9(a)-(e) and 9(g), above, and showing the
calculation of such adjustments. As soon as practicable after
receipt of the Final Settlement Statement, Buyer shall
deliver to each Seller a written report containing any
changes that Buyer proposes be made to the Final Settlement
Statement. The Parties shall undertake to agree with respect
to the amounts due pursuant to such post-Closing adjustment
no later than thirty (30) days after Buyer's receipt of the
Final Settlement Statement. The date upon which such
agreement is reached shall be herein called the "Final
Settlement Date." In the event, as a result of the Final
Settlement Statement (I) Buyer owes either Seller additional
monies, Buyer shall pay such Seller or to such Seller's
account (as designated by such Seller) in immediately
available federal funds such amount; or (ii) either Seller
owes Buyer monies, such Seller shall pay Buyer or to Buyer's
account (as designated by Buyer) in immediately available
federal funds such amount. Payment by Buyer or either Seller
shall be made within five (5) days after the Final Settlement
Date.
ARTICLE 10
CONFIDENTIALITY AGREEMENT
Each Party, its Affiliates and its and their directors, officers,
employees, agents, representatives, consultants, investors and lenders, agree to
keep the terms and conditions of this Agreement and all proprietary and
confidential information exchanged between Buyer and Seller in connection with
this Agreement, confidential, and to not disclose the existence of this
Agreement without the prior written consent of the other Party, which consent
may be withheld at either Party's sole discretion, for a period not to exceed
one year from the Closing Date. The foregoing restriction shall not apply to
disclosures and information which (i) are required to comply with applicable
statutes and regulations; (ii) are required to enforce this Agreement; (iii) are
required to obtain financing related to the transactions contemplated hereby;
(iv) enter the public domain through a third party who does not thereby breach
an obligation of confidentiality; or (v) are made in association with press
releases issued in accordance with Article 14.01 hereof.
ARTICLE 11
CLOSING
11.01 Seller's Closing Obligations. At Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) CONVEYANCE DOCUMENTS. The Conveyance Documents;
(b) OPINION OF COUNSEL. An opinion of counsel to the Seller
substantially in the form of Exhibit "11.01(b)" attached
hereto and made a part hereof for all purposes; and
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(c) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement dated the Closing Date, substantially in the form of
Exhibit 11.01(c) .
11.02 Buyer's Closing Obligations. Buyer shall deliver to Seller at
Closing with respect to items (a) and (c) listed below and within thirty (30)
days after Closing with respect to item (b) hereinbelow the following:
(a) OPINION OF COUNSEL. The opinion of counsel to the Buyer
substantially in the form of Exhibit "11.02(a)" attached
hereto and made a part hereof for all purposes;
(b) SHARES. A certificate or certificates in definitive form
representing the Shares to be issued pursuant to Article
3.01(b); and
(c) REGISTRATION RIGHTS AGREEMENT AND OTHER RELATED AGREEMENTS.
The Registration Rights Agreement substantially in the form of
Exhibit 11.01(c) ( and the other Related Agreements in
substantially in the forms of Exhibits G and H.
ARTICLE 12
CASUALTY LOSS AND CONDEMNATION
If, prior to the Closing Date, all or any portion of the Assets are
destroyed by fire or other casualty or are taken in condemnation or under right
of eminent domain or proceedings for such purpose are pending or threatened in
writing, Buyer may elect to purchase such Assets or portions thereof
notwithstanding any such destruction, taking or pending or threatened taking
(without reduction in the Purchase Price with respect thereto), in which case
Seller shall, at the Closing, pay to Buyer all sums paid to Seller by third
parties (including insurers) by reason of the destruction or taking of such
Assets, and shall assign, transfer and set over unto Buyer all of Seller's
right, title and interest in and to any unpaid awards or other amounts due from
third parties (including insurers) arising out of the destruction, taking or
pending or threatened taking of such Assets or portions thereof. Prior to
Closing, Seller shall not voluntarily compromise, settle or adjust any amounts
payable by reason of any destruction, taking or pending or threatened taking as
to the Assets or portions thereof without first obtaining the written consent of
Buyer.
ARTICLE 13
BUYER'S OPTION
13.01 Grant of Option. As stated in Article 2.01(c) above, Buyer shall
have an ongoing option for one year from and after the Closing Date to purchase
all of Seller's remaining 25% interest in the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area and
the S. Bayou Boeuf Prospect Area, and a like undivided interest in all ▇▇▇▇▇ and
Equipment located thereon (the "Option Assets"). Seller shall not sell or
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dispose of any portion of the Option Assets during this option period and any
encumbrances created by, through or under Seller shall be made expressly subject
to Buyer's option.
13.02 Option Closing. In order to exercise the option, Buyer will give
Seller written notice of its exercise. The closing ("Option Closing") of the
purchase under the option shall occur 10 business days thereafter, and at the
Option Closing Seller shall deliver Conveyance Documents, with only the changes
that may be necessary, including the naming of Buyer's nominee or assignee, if
applicable, as the grantee in such instruments conveying and transferring the
Option Assets to Buyer. The price payable at the Option Closing shall be
$5,750,000, less an amount equal to 25% of the value of any of the Reserve
Shares that Seller was not entitled to receive for acquiring renewal leases
under Article 8.03(b). The fact that the Reserve Shares due under Article
8.03(b) constitute a component of the amount due under the option purchase price
shall not diminish the amount that may be due under Article 8.03(b). Buyer may
pay for the interests purchased through the exercise of this option by
delivering Shares ("Additional Shares") or by cash, at Buyer's option. If the
Additional Shares are delivered, the number shall be determined by dividing the
appropriate value by the average of the last reported Sales Price for the Shares
for the thirty (30) consecutive calendar days immediately preceding the Option
Closing. Buyer shall give two (2) business day's notice of whether Buyer will
pay with cash or Additional Shares. Any Additional Shares delivered under this
Article 13.02 shall be registered under the same procedures as contained in the
Registration Rights Agreement. At the Option Closing, Buyer and Seller will
execute and deliver certificates through which Seller makes the representations
and warranties contained in Article 4.01 and Article 5, and Buyer makes the
representations and warranties contained in Article 4.02, with any references in
such provisions to the Assets being modified to refer to the Option Assets;
references to Effective Date being the date of Buyer's exercise of the Option;
references to the Closing being the Option Closing; and references to Shares
being the Additional Shares. Further, the Parties agree that, if Buyer exercises
the option, the provisions of Article 7, Article 8 and Article 9 shall also
pertain to the Option Closing and the Option Assets, with the appropriate
changes noted in the preceding sentence being effectuated for the proper
construction of these provisions with regard to the Option Closing; provided,
however, with regard to the Option closing and Option Assets, the
representations and warranties contained in Article 4.01, Article 4.02 and
Article 5 and the indemnities contained in Article 7 shall only survive for six
(6) months following the Option Closing.
13.03 Obligations of Seller at Option Closing. Seller agrees that, with
respect to the period following the Option Closing:
(a) RECORDS. On or before five (5) business days after Option
Closing (the "Records Delivery Date"), Seller shall deliver to
Buyer, at Buyer's offices in Irving, Texas, the originals of
all Records. Seller shall be entitled to retain, or to obtain
from Buyer at Seller's cost, one copy of all such information
for its records as may be reasonably necessary for Seller to
address matters relative to its ownership and operation of the
Assets, including, without limitation, the preparation of
accounting and financial information, the filing of tax
returns and the pursuing or defending of litigation.
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(b) SUSPENSE FUNDS. As soon as practicable after Closing, Seller
shall provide Buyer with a list showing all proceeds from
production attributable to the Option Assets which are
currently held in suspense and, except as to funds in suspense
for the account of ▇▇▇▇▇ Production Company, transfer to Buyer
all such proceeds. Buyer shall be responsible for distribution
of such proceeds to the parties lawfully entitled thereto, and
agrees to indemnify, defend and hold harmless Seller from and
against any and all Losses arising out of or relating to the
proceeds so transferred, except for any Losses caused by
Seller's negligence or willful misconduct.
(c) RETAINED LIABILITIES. Seller retains and shall remain liable
and responsible for, and Buyer specifically does not assume,
any liabilities and obligations of Seller not related to or
arising out of the ownership, use, maintenance and operation
of the Option Assets, whether known or unknown, accrued or
contingent and not otherwise specifically set forth in this
Agreement.
13.04 Certain Obligations of Buyer. Each Buyer agrees that, with
respect to the period following the Option Closing:
(a) RECORDING. Within (30) days following Option Closing, Buyer
shall record those Conveyance Documents necessary to evidence
in the public record that Buyer has acquired the Option Assets
and within a reasonable time thereafter, Buyer shall supply
Seller with a true and accurate photocopy of the recorded and
filed Conveyance Documents covering the Option Assets. In the
event Buyer fails to record any such Conveyance Document
within such time period, Seller may, but shall not be
obligated to, record such Conveyance Document on Buyer's
behalf and at Buyer's cost (for which Buyer will promptly
reimburse Seller upon demand).
(b) REMOVAL OF NAMES. As soon as reasonably practicable after
Option Closing, Buyer shall cause to be removed the names and
marks of Seller and any variations and derivations thereof and
logos relating thereto from any of the Assets, and will not
thereafter make any use whatsoever of such names, marks, and
logos; provided, however, that the Buyer shall have no
obligation to remove such names or marks from any lease site
or well until such time as such names or marks are removed in
the ordinary course of the Buyer's business. Buyer shall
indemnify Seller for any Losses it suffers as a result of the
Buyer's non-removal of such names or marks after the Option
Closing.
ARTICLE 14
GOVERNMENTAL CONSENTS
At the Closing and Option Closing, if any, Seller shall execute and
deliver to Buyer such assignments of federal, state and Indian leases as require
consent to assignment, on the forms
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required by the governmental or tribal agency having jurisdiction thereof. Buyer
shall promptly file for and obtain the necessary approvals for such assignments.
Until such approvals (the "Govern mental Approvals") are obtained, Seller shall
continue to hold governmental title to such leases as nominee for Buyer.
ARTICLE 15
MISCELLANEOUS
15.01 Press Releases and Public Announcements. Neither Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing or Option Closing, if any, without
the prior approval of the other Party, which approval shall not be unreasonably
withheld; provided, however, that either Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
15.02 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior agreements, or representations by or between the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
15.03 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. Neither Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, which approval shall not be unreasonably withheld.
15.04 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
15.05 Headings. The section or Article headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.06 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas.
15.07 Legal Fees. The prevailing party in any legal proceeding brought
under or to enforce this Agreement shall be additionally entitled to recover
court costs and reasonable attorney's fees from the nonprevailing party. Each
Party shall pay their respective legal costs associated with the negotiation and
drafting of this Agreement.
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15.08 Exhibits. All exhibits and schedules hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such reference.
15.09 Waiver. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by written instrument
executed by the Party waiving the compliance. The failure of either Party at any
time or times to require performance of any provisions hereof shall in no manner
affect such Party's right to enforce the same. No waiver by either Party of any
condition or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such condition or breach, or a waiver of any other
condition or of the breach of any other term, provision, covenant,
representation or warranty.
15.10 Further Assurances. After the Closing and Option Closing, if any,
each of the Parties will execute, acknowledge, and deliver to the other such
further instruments, and take such other actions, as may be reasonably requested
in order to more effectively assure to said Party all of the respective
properties, rights, titles, interests, estates, and privileges intended to be
assigned, delivered, or inuring to the benefit of such Party in consummation of
the transactions contemplated hereby.
15.11 Resignation as Operator, etc. At the Option Closing, Seller shall
execute and deliver to Buyer appropriate letters resigning as the Operator of
any of the Assets or Option Assets that Seller is operating and other
appropriate documents concerning transfer of operations. Buyer acknowledges and
agrees that Seller cannot and does not covenant or warrant that Buyer shall
become successor operator of all or any portion of the Assets or Option Assets,
since the Assets or Option Assets or portions thereof may be subject to unit,
pooling, communitization, operating or other agreements which control the
appointment of a successor operator; provided, however, that Seller agrees to
use its reasonable best efforts to assist Buyer in becoming successor operator.
15.12 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO SELLER:
▇▇▇▇▇ Energy Company
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇ ▇. ▇▇▇▇, President
Telephone: (713) ▇▇▇- ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
EnCap Investments L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. D. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO BUYER:
Harken Energy Corporation
Harken Exploration Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President and Secretary
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
15.13 Disclaimer of Representations and Warranties. Except as expressly
set forth in this Agreement and in Conveyance Documents delivered pursuant to
Article 11.01(a) and Article 13.02, the Parties hereto make no, and disclaim
any, representation or warranty whatsoever, whether express or implied. Each
Party hereto disclaims all liability and responsibility for any other
representation, warranty, statement, or communication (orally or in writing) to
the other Party (including, but not limited to, any information contained in any
opinion, information, or advice that may have been provided to any such Party by
any officer, stockholder, director, partner, member, manager, employee, agent,
consultant, representative, or contractor of such disclaiming Party or its
Affiliates or any engineer or engineering firm, or other agent, consultant, or
representative) wherever and however made. Without limiting the generality of
the foregoing, Seller makes no representation or warranty as to (a) the amount,
value, quality, or deliverability of petroleum, natural gas, or other reserves
attributable to the Assets or any portion thereof, or (b) any geological,
engineering, or other interpretations or economic evaluations. EXCEPT AS
EXPRESSLY PROVIDED IN ARTICLE 4.01(F), ALL TANGIBLE PERSONAL PROPERTY,
EQUIPMENT, FIXTURES AND APPURTENANCES CONSTITUTING A PART OF THE ASSETS ARE SOLD
"AS IS, WHERE IS," AND SELLER MAKES NO, AND DISCLAIMS ANY, REPRESENTATION
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OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR
OTHERWISE, AS TO (I) MERCHANTABILITY, (II) FITNESS FOR ANY PARTICULAR PURPOSE,
(III) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, AND/OR (IV) CONDITION. The
Parties agree that the preceding disclaimers of warranty are "conspicuous"
disclaimers for purposes of any applicable law, rule, or order.
15.14 Seller's Liabilities Several and Not Joint. Notwithstanding
anything herein contained to the contrary, it is understood and agreed that the
obligations and liabilities of Seller hereunder are several, and not joint or
joint and several, with respect to that portion of the Assets owned by SMPL and
▇▇▇▇▇, respectively. More specifically, it is understood and agreed that:
(a) The representations and warranties set forth in Article
4.01, the environmental representations and warranties set forth in
Article 5.01, the environmental covenant set forth in Article 6.01, the
indemnification provision for the benefit of Buyer set forth in Article
7.03 and the post-closing covenants set forth in Article 8.01 shall
bind SMPL insofar and only insofar as the same pertain to the St.
▇▇▇▇▇▇▇▇▇▇▇ Prospect Area, the Bol Mex Prospect Area and that part or
portion of the Assets included therein, and SMPL shall have no
liability or obligation whatsoever under the above-referenced or any
other provisions hereof with respect to the S. Bayou Boeuf Prospect
Area or that part or portion of the Assets included therein; and
(b) The representations and warranties set forth in Article
4.01, the environmental representations and warranties set forth in
Article 5.01, the environmental covenant set forth in Article 6.01, the
indemnification provision for the benefit of Buyer set forth in Article
7.03 and the post-closing covenants set forth in Article 8.01 shall
bind ▇▇▇▇▇ insofar and only insofar as the same pertain to the S. Bayou
Boeuf Prospect Area and that part or portion of the Assets included
therein, and ▇▇▇▇▇ shall have no liability or obligation whatsoever
under the above-referenced or any other provisions hereof with respect
to the St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area, the Bol Mex Prospect Area or that
part or portion of the Assets included therein.
Furthermore, no default by one Seller under this Agreement shall affect in any
way the right of a non-defaulting Seller to enforce this Agreement by
appropriate proceedings at law or in equity.
15.15 Severability. Any term or provision of this Agreement that is
invalid or unenforce able in any situation and 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.
15.16 Texas Deceptive Trade Practices Act Waiver. Buyer (a) represents
and warrants to Seller that it (i) is acquiring the Assets for commercial or
business use, (ii) has assets in excess of $25,000,000 and (iii) has knowledge
and experience in financial and business matters such that enable it to evaluate
the merits and risks of the transactions contemplated by this Agreement and is
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not in a significantly disparate bargaining position with respect to Seller; and
(b) hereby unconditionally and irrevocably waives any and all rights or remedies
it may have under the Deceptive Trade Practices - Consumer Protection Act of the
State of Texas, Tex. Bus. & Com. Code ss. 17.41 et seq., other than any of the
provisions of ss. 17.555 of such Act, if such Act would for any reason be deemed
applicable to the transactions contemplated hereby.
15.17 No Third Party Beneficiaries. Except as provided for in Article 7
hereof with respect to the rights of an Indemnified Party, this Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns, and other persons given
rights of indemnification hereunder.
15.18 Construction. The Parties have participated jointly in the
negotiating and drafting of this Agreement. In the event ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law should be deemed also to refer to all rules and
regulations promulgated thereunder, unless the contexts requires otherwise. The
word "including" shall mean including, without limitation. If the date specified
in this Agreement for giving any notice or taking any action is not a business
day (or if the period during which any notices required to be given or any
action taken expires on a date which is not a business day) then the date for
giving such notice or taking such action (and the expiration date for such
period during which notice is required to be given or action taken) shall be the
next day which is a business day.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written, but effective for all purposes as of the
Effective Date.
SELLER:
ST. ▇▇▇▇▇▇▇▇▇▇▇ PARTNERS, LTD.
By: ▇▇▇▇▇ Energy Partners, Ltd., General
Partner
By: ▇▇▇▇▇ Energy Corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇ ▇. ▇▇▇▇, President
▇▇▇▇▇ ENERGY COMPANY
By: /s/ ▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇ ▇. ▇▇▇▇, Manager
BUYER:
HARKEN ENERGY CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
HARKEN EXPLORATION COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
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LIST OF EXHIBITS
Exhibit A Well List with Working Interest and Net Revenue Decimals
Exhibit A-1 St. ▇▇▇▇▇▇▇▇▇▇▇ Prospect Area
Exhibit A-2 S. Bayou Beouf Prospect Area
Exhibit A-3 Bol Mex Prospect Area
Exhibit B Assignment, ▇▇▇▇ of Sale and Conveyance
Exhibit C Equipment
Exhibit D Easements
Exhibit E Contests of Liens
Exhibit F Product Contracts
Exhibit G Easement Agreement
Exhibit H Excluded Assets
Exhibit I Authorization for Expenditures
Exhibit J Disclosure under Article 4.01
Exhibit K Operating Agreement
Exhibit L Act of Acknowledgment of Mineral Servitude
Exhibit 4.02(j) Capitalization Schedule
Exhibit 9(f) Gas Imbalances
Exhibit 8.03(b) Expiring Leases
Exhibit 11.01(b) Opinion of Seller's Counsel
Exhibit 11.01(c) Registration Rights Agreement
Exhibit 11.02(a) Opinion of Buyers' Counsel
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