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EXHIBIT 2.4
OPTION AGREEMENT
This Option Agreement (this "Agreement") is made and entered into as
of the 30th day of November, 1995, by and between KCS Energy Marketing, Inc., a
New Jersey corporation ("KCS"), and Xxxxxxx Oil of Michigan, Inc., a Delaware
corporation ("HOMI");
WHEREAS, KCS and HOMI are parties to a Purchase and Sale Agreement
dated as of November 30, 1995 (the "Purchase Agreement"), which concerns HOMI's
sale and KCS' purchase of a Production Payment out of certain oil and gas
interests owned by HOMI in the state of Michigan, such Production Payment being
evidenced by the Conveyance of Production Payment attached to the Purchase
Agreement as Exhibit B (the "Conveyance"); and
WHEREAS, HOMI desires to acquire the right and option to purchase an
undivided percentage interest in and to the outstanding amount of the
Production Payment, in accordance with the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, for a sufficient consideration received by each, KCS
and HOMI hereby agree as follows:
1. For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Adjustment Payment" means a sum of money equal to the "Adjustment
Amount" (as such term is defined and calculated in the Conveyance)
outstanding on the Purchase Date.
"Payment Interest" means the undivided percentage interest in and to
the outstanding amount of the Production Payment to be acquired by
HOMI as of the Purchase Date, determined in accordance with the table
attached hereto as Exhibit A; provided, however, the table attached
hereto as Exhibit A shall be subject to revision as provided in
paragraph 4 of this Agreement.
"Positions" means gas and oil financial positions and contracts
(including, but not limited to, NYMEX options, xxxxxx, swaps and
similar economic arrangements).
"Purchase Date" means the date of the closing of the purchase and sale
transaction contemplated by this Agreement.
"Purchase Price" means the sum of money HOMI commits to deliver at the
closing for the purchase of the Payment Interest.
"Transaction Costs" means the out-of-pocket costs incurred or to be
incurred by KCS in liquidating or otherwise satisfying a proportionate
share of KCS' then-existing Positions corresponding to the quantity of
Production Payment Hydrocarbons affected by the proposed conveyance of
the Payment Interest to HOMI, and all fees or penalties incurred by
KCS under gas or oil marketing or transportation agreements as a
result of KCS'
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inability to take delivery of the entire quantities of oil and gas
attributable to the Payment Interest.
2. Subject to the further terms and provisions of this Agreement, KCS
grants to HOMI the right and option to purchase in a single
transaction an undivided percentage interest in and to the Conveyance
and the Production Payment as the same shall exist on the Purchase
Date; provided, however, HOMI's right to purchase the Payment Interest
shall be subject to and conditioned upon (a) to the extent HOMI and
KCS have not otherwise reached agreement concerning HOMI's assumption
of a proportionate share of KCS' Positions as of the Purchase Date,
HOMI's prior payment in full of the Transaction Costs, if any, and (b)
to the extent the Adjustment Amount as of the Purchase Date is not
equal to zero dollars ($0.00), HOMI's prior payment in full of the
Adjustment Payment. HOMI may exercise its option by giving a written
notice addressed to KCS which specifies (a) a Purchase Price resulting
in a Payment Interest not to exceed a 33 1/3% undivided interest of
the entire then-existing Production Payment, and (b) a Purchase Date
occurring on the first day of a month during the period from September
1, 1996 until August 31, 1998 only, which is not less than forty-five
(45) and not more than seventy (70) days from the date of HOMI's
notice. HOMI's option shall automatically terminate and be of no
further force or effect in the event HOMI fails to timely provide a
conforming written notice of exercise within the time limitations
described in this paragraph. Purchase and sale of the Payment
Interest shall be accomplished in accordance with the terms and
conditions set forth in paragraphs 3 and 4 below.
3. Upon the giving of HOMI's notice, each party shall take such steps as
are necessary to consummate the purchase and sale of the Payment
Interest. Upon KCS' receipt of HOMI's notice, KCS shall promptly
estimate the amount of the Transaction Costs, if any, and provide
documentation of such costs to HOMI. In addition, KCS shall provide
HOMI with a written estimate of the Adjustment Payment that KCS
reasonably believes will be due and payable on the Purchase Date. On
or before the fifteenth (15th) day prior to the Purchase Date, KCS
shall complete its recalculation of entries shown on Exhibit A (in
accordance with paragraph 4 below), confirm the Purchase Interest to
be acquired by HOMI and prepare and circulate to HOMI a form of
partial assignment of the Payment Interest HOMI has elected to
purchase and acquire from KCS, such form of assignment to contain a
special warranty of title by KCS (its successors and assigns) only,
without any other representations or warranties whatsoever by KCS
(except as to authority, due execution and delivery). On the Purchase
Date and at the offices of KCS, HOMI shall deliver to KCS (a) the
estimated amount of the Transaction Costs, the estimated amount of the
Adjustment Payment and the Purchase Price and (b) KCS shall execute
and deliver the aforesaid partial assignment in favor of HOMI. Within
thirty (30) days of the Purchase Date, HOMI and KCS shall determine
the final amounts of the Transaction Costs and the Adjustment Payment
and enter into an accounting for the differences, if any, between the
estimated and final amounts.
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4. In the event HOMI is required to pay the Adjustment Payment in
connection with the purchase of the Payment Interest, such payment
shall be deemed to satisfy the Adjustment Amount existing pursuant to
the Conveyance and KCS shall revise its records accordingly.
Additionally, in the event there are delivered under the Conveyance
prior to the Purchase Date any Accelerated Quantities, the table of
Purchase Prices attached hereto as Exhibit A shall be revised and
recalculated by KCS solely to account for the delivery of the
Accelerated Quantities and the resulting adjustment of the Stated
Time; provided, however, recalculation of the entries shown on such
Exhibit A shall be accomplished in a manner consistent with KCS'
original calculation of Exhibit A. Should the value of the Positions
be positive, HOMI shall receive its proportionate share of such
benefit on the Purchase Date.
5. Following the Purchase Date and subject to HOMI's further assignment
or transfer of the Payment Interest, if any, KCS shall reasonably
consider the preparation and execution of such other instruments or
agreements as are deemed necessary or useful by KCS during the
remaining term of the Conveyance, including, but not limited to,
instruments restating or amending the Conveyance; provided, however,
KCS shall not under any circumstances be obligated or compelled to
enter into any agreement or arrangement which KCS in its sole
discretion deems unadvisable under the circumstances.
6. Any notice required or permitted under this Agreement shall be in
writing; shall be sent to the recipient's address as set forth below;
shall reference this Agreement; and shall be deemed given (a) when
delivered personally, (b) when sent by confirmed telex or facsimile,
(c) three days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after
deposit with a commercial overnight carrier, with verification of
receipt:
HOMI: Xxxxxxx Oil of Michigan, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: C.E. ("Xxxxx") Xxxxx
KCS: KCS Energy Marketing, Inc.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxx Xxxxx, President
Either party may change its address for the purpose of receiving
notices hereunder by giving notice of such change of address to the
other parties hereto in the manner provided above in this paragraph.
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7. This Agreement constitutes a contract entered into under, and shall be
governed by and construed and enforced in accordance with, the laws of
the State of Texas, without giving effect to principles of such laws
as to conflicts of law.
8. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided,
however, HOMI shall not transfer or assign its rights hereunder to a
non-affiliate without the prior written consent of KCS, such consent
not to be unreasonably withheld.
9. Subject to the provisions of the preceding paragraph of this
Agreement, nothing in this Agreement is intended to confer any rights
or remedies under or by reason of this Agreement on any person or
entity other than the parties hereto.
10. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject hereof and supersedes and cancels
all prior oral and written communications, understandings and
agreements between the parties hereto concerning the subject hereof.
No modification or amendment of this Agreement shall be of any force
or effect unless in writing and signed by an authorized representative
of each party hereto.
11. Time is of the essence for this Agreement and the performance of all
of the terms, provisions, covenants and conditions hereof.
EXECUTED as of the date first written above.
KCS ENERGY MARKETING, INC.
By:
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Xxxxx Xxx Xxxxx, President
XXXXXXX OIL OF MICHIGAN, INC.
By:
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X.X. Xxxxx, President
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