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EXHIBIT 10.69
PURCHASE AND SALE AGREEMENT
PANACO, INC., AS SELLER
AND
NATIONAL ENERGY GROUP, INC., AS PURCHASER
BAYOU SORREL FIELD
IBERVILLE PARISH, LOUISIANA
NOVEMBER 11, 1996
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PURCHASE AND SALE AGREEMENT
PANACO, INC., a Delaware corporation, herein referred to as "PANACO",
and NATIONAL ENERGY GROUP, INC., a Delaware corporation, herein referred to as
"PURCHASER," enter into this Purchase and Sale Agreement, herein called the
"AGREEMENT," in consideration of PANACO's agreement to sell, and PURCHASER's
agreement to buy, property described in this AGREEMENT, all pursuant to the
terms and conditions of this AGREEMENT. PANACO and PURCHASER may also be
referred to herein individually as a "Party" or, collectively, as the
"Parties."
1. PROPERTY BEING SOLD. Subject to the terms and conditions set
forth hereinafter, PANACO agrees to convey to PURCHASER the PROPERTY (as
defined below) and PURCHASER agrees to accept the PROPERTY, and tender
consideration therefor, in the manner and of the type and amount as hereinafter
required. For purposes of this AGREEMENT, PROPERTY shall mean all of PANACO's
right, title and interest in and to (i) the property and property interests
described in EXHIBIT "A' hereto and (ii) all property and property interests
listed in subsections (a) through (h) of this section 1, to the extent such
property or property interests are a part to grant rights in or with respect
to, or are located on the property and property interests described in EXHIBIT
"A"; but excluding the property in subsection (i).
(a) Leases. Leasehold interests in oil, gas or other
minerals, including working interests, carried working interests, rights of
assignment and reassignment, and other interests under or in oil, gas or
mineral leases, and interests in rights to explore for and produce oil, gas and
other minerals.
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(b) Rights In Production. Royalties, overriding royalties,
production payments, rights to take royalties in kind, or other interests in
production of oil, gas or other minerals.
(c) Rights, Working Interests. Rights and interests in or
derived from unit agreements, orders or decisions of state and federal
regulatory, authorities establishing units, joint operating agreements,
enhanced recovery and injection agreements, farmout agreements and farmin
agreements, options, drilling agreements:, exploration agreements, assignments
of operating rights, working interests, subleases and rights above or below
certain footage depths, horizons or interests described in paragraphs (a)-(c)
above except those contracts or agreements described in subsection (i) below.
(d) Easements. To the extent transferable, rights-of-way,
surface or ground leases, easements, servitudes and franchises located on or
granting rights to the property or property interests described in EXHIBIT "A"
hereto and acquired or used in connection with operations for the exploration,
production, processing and transportation of oil, gas or other minerals with
respect to the properties and interests described in subsections (a)-(c) above,
and such other rights-of-way, surface or ground leases, easements and
servitudes which are not located on or grant rights to such property or
property interests, but which were acquired or used in such operations with
respect to such property or property interests.
(e) Permits. To the extent transferable, permits and licenses
of any nature owned, held or operated in connection with operations for the
exploration, production, processing and transportation of oil, gas or other
minerals.
(f) ▇▇▇▇▇. Producing, non-producing, shut-in and abandoned
oil and gas ▇▇▇▇▇, salt water disposal ▇▇▇▇▇, injection ▇▇▇▇▇ and water ▇▇▇▇▇
located on the property or property interests
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described in EXHIBIT "A" hereto and used in connection with the properties or
interests described in subsections (a)-(e) above.
(g) Facilities. All facilities buildings, improvements,
gathering lines, flow lines, injection lines and pipelines and appurtenances
located on the real property and on lands included in the property and property
interests described on EXHIBIT "A"; provided that the PROPERTY shall also
include the existing oil transportation pipeline commencing at a location on
the PROPERTY and terminating at the inlet flange of the first LACT unit at
White Castle Field, Iberville Parish, Louisiana; provided, however, that at no
time shall PANACO's predecessor in title, Shell Western E&P, Inc., ("SWEPI"),
or its Affiliates, pay a transportation charge or tariff to PURCHASER, or its
Affiliates, for the transportation of oil (i) bought from PURCHASER by SWEPI or
its Affiliates, or (ii) transported by PURCHASER or its Affiliates for SWEPI or
its Affiliates from White Castle Field to the Grand River Terminal.
(h) Equipment. All surface and down-hole equipment, fixtures,
inventory and personal property located on the property and property interests
described in EXHIBIT "A" hereto, and used in connection with the properties or
interests described in subsections (a)-(g) above.
(i) Exclusions. The PROPERTY shall not include any rights-of-
way, surface or ground leases, easements, franchises, permits, licenses, or
other contracts or agreements which by their own terms are not transferable;
all vehicles, and other transportation equipment, rental equipment,
communications equipment (subject to leasing of adequate space thereon to
PURCHASER), televisions, VCR, copy machines and store stock left on consignment
and belonging to PANACO or third parties; provided, however, that the PROPERTY
shall include, and PANACO agrees to assign to PURCHASER that certain option to
license proprietary seismic data from SWEPI
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for a price of $43,000.00, which option continues for a period of three (3)
years from October 1, 1995, which option is described in Section 1 (i) of that
certain Purchase and Sale Agreement dated November 30, 1995, by and between
SWEPI and PANACO covering the Property (the "SWEPI Agreement"), the terms and
provisions of which are incorporated herein by reference.
2. PURCHASE PRICE. As consideration for the sale of the PROPERTY by
PANACO to PURCHASER, PURCHASER shall pay and give to PANACO, at Closing, the
total purchase price of ELEVEN MILLION TWO HUNDRED TWENTY-SEVEN THOUSAND EIGHT
HUNDRED NINETY-SEVEN AND 60/100 DOLLARS ($11,227,897.60), plus the Overriding
Royalty (defined below), subject to adjustments as set forth herein, which
shall consist of the following: (a) the sum of NINE MILLION, TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($9,025,000.00), in cash by wire transfer into an
account designated by PANACO, plus (b) the sum of TWO HUNDRED TWO THOUSAND
EIGHT HUNDRED NINETY-SEVEN AND 60/100 DOLLARS ($202,897.60) (being the total
amount currently held in escrow pursuant to that certain Pledge of Production
Proceeds and Trust Agreement dated December 28, 1995, by and among SWEPI,
PANACO and First National Bank of Commerce, New Orleans, Louisiana, as
Trustee), in cash by wire transfer into an account designated by PANACO, plus
(c) the sum of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) in the form of
unregistered common stock of PURCHASER, the number of shares to be derived by
averaging the closing price per share of PURCHASER's common stock for the ten
(10) trading days prior to the Closing ("Consideration Shares"), plus (d), the
conveyance to PANACO of a three percent (3%) overriding royalty interest in and
to the PROPERTY insofar only as to depths below eleven thousand (11,000) feet
(the "Overriding Royalty") plus (e) the assumption by PURCHASER of all of the
rights and obligations
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of PANACO under that certain Pledge of Production Proceeds and Trust Agreement
dated December 28, 1995, (the "Pledge and Trust Agreement"), by and among
SWEPI, PANACO and First National Bank of Commerce, New Orleans, Louisiana,
(collectively, the "Purchase Price"). PANACO acknowledges and agrees that the
Consideration Shares are restricted securities within the meaning of the
Securities Act of 1933, as amended (the "Act") and the rules and regulations of
the Securities and Exchange Commission ("SEC") promulgated thereunder, and may
not be offered or sold absent an effective registration statement covering such
shares or an opinion of PANACO's counsel, acceptable to PURCHASER, that such
registration is not required. PANACO further acknowledges and agrees that with
respect to the Consideration Shares PANACO will acquire hereunder that (i) the
Consideration Shares are not registered under the Act and are being so acquired
for investment and not with a view to the distribution thereof, (ii) it is an
"accredited investor" within the meaning of Regulation D of the General Rules
and Regulations under the Act and has knowledge and experience in financial and
business matters to enable it to evaluate the merits and risks of consummating
the Agreement and acquiring shares of PURCHASER's common stock, and that it is
able to bear the economic risks of this investment, including the risk of
complete loss; (iii) it agrees to not dispose of any such shares of PURCHASED
common stock acquired in connection herewith in violation of the Act and all
applicable governmental rules thereunder and (iv) the certificates representing
the Consideration Shares of PURCHASED common stock issued pursuant to this
Agreement shall bear the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
STATE
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SECURITIES LAWS. SUCH SHARES OF COMMON STOCK MAY NOT BE SOLD, ASSIGNED,
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID SECURITIES ACT COVERING THE TRANSFER
OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION
UNDER SAID SECURITIES ACT IS NOT REQUIRED.
Consistent herewith, PANACO and PURCHASER agree at Closing (as hereinafter
defined) to execute the registration rights agreement (the Stock Registration
Agreement") referenced in Section 4 hereinbelow, and PANACO's right to dispose
of the Consideration Shares shall be controlled by the Stock Registration
Agreement.
3. CLOSING AND PERFORMANCE DEPOSIT.
(a) Closing. Closing shall occur on or before November 22,
1996, or at such later date as may be agreed by the Parties, (the "Closing
Date"), at a mutually agreeable time and place. "Closing" shall mean the
consummation of the sale by execution of an act of assignment of PANACO's
ownership in the PROPERTY, payment of the Purchase Price, execution of the
other assignments and agreements specified in Section 4 below of this Agreement
and the transfer of the operation and possession of the PROPERTY from PANACO to
PURCHASER.
(b) Performance Deposit. Immediately upon the execution of
this Agreement, PURCHASER will deposit by wire transfer into an account
designated by PANACO the sum of $1,000,000.00 as a good faith deposit, which
sum so deposited by PURCHASER (exclusive of any
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interest or income earned thereon) shall be a performance deposit (the
"Performance Deposit"), and shall be held, administered, and disbursed in the
manner specified in this AGREEMENT.
4. CLOSING. At Closing, the following shall occur:
(a) Payment. PURCHASER shall make payment of the cash portion
of Purchase Price above, less the sum of $1,000,000.00 referred to in Section
3(b) hereof, by wire transfer to an account to be designated by PANACO.
(b) Stock. PURCHASER shall deliver to PANACO one or more
stock certificates representing the Consideration Shares issued in the name of
PANACO.
(c) Conveyance. PANACO will convey the PROPERTY to PURCHASER
by executing and delivering (i) an Assignment and Conveyance and (ii) a ▇▇▇▇ of
Sale in substantially the form attached hereto as EXHIBITS "B" and T,"
respectively.
(d) Overriding Royalty. PURCHASER shall convey to PANACO the
Overriding Royalty by executing and delivering an Assignment of Overriding
Royalty substantially in the form attached hereto as EXHIBIT "D".
(e) Pledge and Trust Agreement. PURCHASER shall assume, be
substituted in the place and stead of PANACO and agree to be bound by the
Pledge and Trust Agreement attached hereto as EXHIBIT "E" by executing and
delivering the Assignment and Assumption of Pledge of Production Proceeds and
Trust Agreement substantially in the form attached hereto as EXHIBIT "F."
(f) Registration Rights Agreement. PURCHASER and PANACO agree
to be bound by the Stock Registration Agreement to be executed and delivered,
substantially in the form of EXHIBIT "G" attached hereto.
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5. FURTHER ASSURANCES. PANACO and PURCHASER each agree to execute
and deliver to the other Party all division orders, transfer orders and all
other documents necessary to fully vest in PURCHASER the rights, obligations
and benefits acquired pursuant to this AGREEMENT.
6. EFFECTIVE DATE. The conveyance from PANACO to PURCHASER of the
Property, the conveyance by PURCHASER to PANACO of the Overriding Royalty and
the assignment to and assumption by PURCHASER of the Pledge and Trust Agreement
shall be effective as of September 1, 1996, at 7:00 a.m. local time where the
PROPERTY is located, herein called the "Effective Date."
7. DUE DILIGENCE.
(a) PURCHASER may conduct, to the extent it deems appropriate
and at its sole cost and expense, a due diligence investigation and title
examination of the PROPERTY ("Due Diligence"). PANACO agrees that for the
period from and including November 11, 1996, through November 15, 1996,
PURCHASER, its agents, contractors, and designees shall have the right to
conduct a Due Diligence investigation of the PROPERTY (the "Review Period"),
and PANACO shall cooperate and assist PURCHASER in such investigation in making
all relevant documents available to PURCHASER as follows:
(1) To the extent PANACO has the right to grant such
rights to PURCHASER, and only after notice to any operator of the PROPERTY, to
enter all or any part of the PROPERTY at any reasonable time and from time to
time, during the REVIEW PERIOD, and to inspect, inventory, investigate
(including environmental assessments and evaluations), study and examine the
same and the operations conducted thereon; and
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(2) To inspect and review at PANACO's offices located
in Houston, Texas and Kansas City, Missouri, (or any other location where Due
Diligence materials may be located) at reasonable times and upon reasonable
notice, all non-privileged files, records, documents and data related to the
above matters, including, but not limited to, any of the following which PANACO
may have: Original Well Record Files on all ▇▇▇▇▇ (i.e., all existing ▇▇▇▇▇
situated on the PROPERTY regardless of whether previously plugged and
abandoned), Regulatory, Accounting, Environmental, Pipeline, Maintenance,
Transportation, Processing, Production and Engineering files and records.
(3) To inspect and review all complaints, pleadings,
filings or other court documents with respect to the Litigation defined in
Section 8(b)(1) hereof which are in the possession of PANACO.
PURCHASER shall maintain the results of its investigation, testing and
evaluation and review of files and records, including title examination review,
confidential until Closing has occurred; provided, however that if this
Agreement is terminated for any reason, then PURCHASER shall return to PANACO
all information, including without limitation, title, engineering, geological
and geophysical data, reports and maps, and maintain all such information
confidential. Upon request by PANACO, PURCHASER shall provide PANACO a copy of
any assessment reports of or about the PROPERTY, including without limitations,
any reports, data and conclusions developed during the REVIEW PERIOD, and
PANACO shall be permitted to discuss the contents of any such assessment
reports with the party who prepared such reports.
(b) In the event PURCHASER determines in its sole judgment
that as to any portion of the PROPERTY: (i) the environmental condition thereof
is unacceptable for PURCHASER's purposes; (ii) there has been such a
substantial deterioration in the physical
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condition of the PROPERTY as it existed on the Effective Date that PURCHASER
will be unable to continue to possess, operate, use or maintain the PROPERTY in
the same manner and to the same extent possessed, operated, used or maintained
by PANACO prior the Effective Date (provided, however, a lack of equipment on
the PROPERTY shall not be considered a substantial deterioration in the
physical condition of the PROPERTY for purposes of this subsection unless the
equipment was removed by PANACO from the PROPERTY after the Effective Date
without PURCHASER's consent and the lack of such removed equipment will
materially adversely affect PURCHASER's ability to use, operate or maintain the
PROPERTY after Closing), or (iii) the extent of existing, potential or
contingent liabilities pose or create an unacceptable risk; the, PURCHASER may
give written notice to PANACO on or before two (2) days prior to the Closing
Date of such condition (the "Notice"). Such Notice shall include PURCHASER's
estimated cost to cure or remedy the listed conditions. Failure to give any
such notice within the REVIEW PERIOD shall foreclose PURCHASER from securing
the benefits of Section 7(c) below and shall not excuse PURCHASER from failing
to close because of matters arising out of such REVIEW PERIOD.
(c) Upon receipt of such Notice by PANACO, if the aggregate of
the conditions set forth in the Notice are Material (as defined below),
PURCHASER may terminate this AGREEMENT by giving written notice of such
termination to PANACO on or before one (1) day prior to the Closing Date. Upon
the giving of such termination notice, neither Party shall have any further
rights or obligations hereunder except for PURCHASER's obligations to return
and to maintain information confidential as set forth in Section 7(a) above and
PURCHASER shall be
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entitled to a return of the Performance Deposit with interest at the "prime
rate" of interest established by Bank One, N.A., Dallas, Texas.
(d) If the aggregate of the conditions set forth in the Notice
are not Material, or if PURCHASER elects not to terminate this AGREEMENT as
provided herein, PURCHASER shall acquire the PROPERTY "where-is" and " as-is"
with no right to recover from PANACO for any liabilities, costs or expenses
related to the condition of the PROPERTY (including, without limitation,
environmental conditions and damages to natural resources). Acquisition of the
PROPERTY by PURCHASER "where-is" and "as-is" shall constitute PURCHASER's
general release and agreement to defend, indemnify and hold SWEPI and/or
PANACO, their Affiliates, directors, officers, employees, agents and
representatives harmless from all liabilities, costs or expenses related to the
conditions of the PROPERTY (including, without limitation, non-material
environmental conditions and damages to natural resources) as otherwise
provided herein. For purposes of this Section 7, "Material" shall be defined
as a cost to cure in excess of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($750,000.00).
8. DISCLAIMERS/ACKNOWLEDGMENTS.
(a) No Warranty Express or Implied. CONVEYANCE OF THE
PROPERTY BY PANACO TO PURCHASER SHALL BE WITHOUT WARRANTY WHATSOEVER, EXPRESS,
STATUTORY, OR IMPLIED (EVEN FOR RETURN OF THE PURCHASE PRICE) AS TO TITLE,
DESCRIPTION, PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION,
THE ENVIRONMENTAL CONDITION OF THE PROPERTY) QUALITY, VALUE, FITNESS FOR
PURPOSE, MERCHANTABILITY, OR OTHERWISE. PURCHASER shall satisfy itself, prior
to the Closing, as to the type, condition, quality and extent
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of the property and property interests which comprise the PROPERTY it is
receiving pursuant to this AGREEMENT and under this sale. PURCHASER shall have
the right of full substitution and subrogation to any and all rights and
actions of which PANACO has or may have against any and all preceding owners or
vendors of the PROPERTY.
(b) SWEPI's Disclaimer and Indemnity Re: Litigation.
(1) Pursuant to Section 9(b) of the SWEPI Agreement,
PANACO acknowledged the existence of the Litigation (as hereinafter defined),
and certain matters related thereto, and SWEPI agreed to defend, indemnify and
hold PANACO harmless with respect to certain matters related to the Litigation.
Further, pursuant to Section 23 of the SWEPI Agreement, PANACO and SWEPI agreed
that the terms and provisions of the SWEPI Agreement shall inure to the benefit
of and be binding upon PANACO and SWEPI and their respective successors and
assigns. Accordingly, from and after the Effective Date, PANACO and PURCHASER
shall be entitled to the rights and benefits afforded by Section 9(b) of the
SWEPI Agreement. Further, PURCHASER acknowledges (i) that it is aware and
knowledgeable of the litigation entitled "▇▇▇▇▇ ▇▇▇▇▇▇ et al. v. Shell Western
E&P Inc.", No. 42,197 on the docket of the 18th Judicial District Court for the
Parish of Iberville, State of Louisiana (the "Litigation"), the various issues
therein, and that the Litigation pertains directly to the Property being
purchased hereunder, (ii) that it has been provided with and reviewed all
pleadings filed in the Litigation which are in the possession of PANACO and has
had full opportunity to discuss the status thereof, and (iii) that the
Litigation may affect operations on the Property depending upon the outcome
thereof, including operations pertaining to the burial of existing and future
flowlines, release of non-producing acreage, pre-depletion abandonment of non-
producing facilities, site restoration, environment remediation, and salt water
injection. In addition,
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PURCHASER acknowledges the existence of the injunction regarding document
retention issued in the Litigation, and agrees that no documents transferred
hereunder shall be altered or destroyed until PANACO or SWEPI notifies
PURCHASER of the conclusion of the Litigation.
(2) Pursuant to Section 9(b) and Section 23 of the
SWEPI Agreement, SWEPI has agreed to defend, indemnify, and hold harmless
PANACO, its successors and assigns, (including PURCHASER), from any final
unappealable judgment or settlement entered in the Litigation as follows:
(i) For all money damages, costs, and expenses,
if any, awarded;
(ii) For all reasonable and direct costs, if any,
of the one-time burial of pipelines ordered to be buried below plow depth
(SWEPI shall have the option to conduct such burial operations itself and
remove unused or abandoned lines or portions thereof);
(iii) For all costs, if any, required to be paid
to the Litigation plaintiffs for disposal or injection of salt water produced
from the Property prior to the date of such judgment;
(iv) For all reasonable costs, if any, of
environmental remediation of conditions existing as of October 1, 1995, but not
including any costs attributable to site restoration, plug and abandonment, and
removal of facilities required as a matter of law absent the Litigation;
(v) For the fair market value of any lease or
portion thereof cancelled.
(3) Further pursuant to Section 9(b) of the SWEPI
Agreement, SWEPI's indemnity is restricted solely to the Litigation as limited
in such Section 9(b) (and set forth in Section
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7(b) of this Agreement) and does not extend to future lawsuits, claims, or
liability except as otherwise expressly provided for in Section 20 of the SWEPI
Agreement (and referenced in Section 19 of this Agreement).
(4) Further, pursuant to Section 9(b) and Section 23 of
the SWEPI Agreement, in the event PANACO and/or PURCHASER (as PANACO's
successor and assign) is added as a defendant in the Litigation as to
indemnified claims, PANACO and/or PURCHASER shall be defended by SWEPI's
attorney of record, at SWEPI's cost, and all decisions respecting any
indemnified claims shall be made by SWEPI.
(c) Acknowledgements of PURCHASER at Closing. By closing on the
transaction provided for in this AGREEMENT, PURCHASER shall be deemed to have
acknowledged and does acknowledge and admit that: (i) PURCHASER has been given
the opportunity to adequately inspect the PROPERTY for all purposes prior to
Closing; (ii) PURCHASER is aware that the PROPERTY has been used for the
exploration, development, production, treating and transporting of oil and gas
and that physical changes may have occurred as a result of such use and that
PANACO has disclosed, and PURCHASER is further aware, that there exists the
possibility that there could have occurred from such use one or more releases
of hazardous substances or releases of Chemical Substances (as defined in
subsection 19(f)(3) below) into, or other pollution or contamination of or
into, the ambient air, surface water, ground water, or land surface and
subsurface strata of any real property included in the PROPERTY and of
contiguous, or a series of contiguous, real properties not associated with the
PROPERTY, (iii) PURCHASER has entered into this AGREEMENT on the basis of its
own investigation of the physical condition of the PROPERTY and the land
related thereto (including the environmental condition of the PROPERTY); and
(iv) PURCHASER with the
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full knowledge of the foregoing and after conducting the above described
investigation and evaluation IS ACQUIRING THE PROPERTY ON A "WHERE IS" AND "AS
IS" BASIS; and, except with respect to the indemnification obligations
specified in section 19(b) below, PURCHASER, by acquiring the PROPERTY on a
"where is" and "as is" basis waives any other rights of indemnification,
contribution or recourse it may have against or from PANACO or SWEPI with
respect to the condition of the PROPERTY, including, without limitation, the
environmental condition of the PROPERTY and damage to natural resources
associated with the PROPERTY, and (v) PURCHASER shall further acknowledge that
it has had the full opportunity to review and is aware of the matters with
respect to the PROPERTY which are disclosed in the files provided by PANACO.
9. INDEPENDENT EVALUATION. PURCHASER has made an independent
evaluation of the PROPERTY and acknowledges that PANACO has made no statements
or representations concerning the present or future value of the anticipated
income, costs, or profits, if any, to be derived from the PROPERTY or the
quantity and quality of any oil and gas or other minerals that may be produced
from the PROPERTY and THAT PANACO DOES NOT IMPLIEDLY OR EXPRESSLY (EVEN FOR
RETURN OF THE PURCHASE PRICE) WARRANT DESCRIPTION, TITLE, VALUE, QUALITY,
PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, THE
ENVIRONMENTAL CONDITION OF THE PROPERTY), MERCHANTABILITY, OR FITNESS FOR
PURPOSE OF ANY OF THE PROPERTIES OR THE ▇▇▇▇▇, EQUIPMENT, PIPELINES,
FACILITIES, OR OTHER PROPERTY LOCATED THEREON OR USED IN CONNECTION THEREWITH.
PURCHASER further acknowledges that, in entering into this AGREEMENT, it has
relied solely upon its
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independent examination of the PROPERTY and public records relating to the
PROPERTY and its independent estimates, computations, evaluations, reports and
studies based thereon.
10. CONSENTS. In the event the conveyance or transfer to PURCHASER
of any interests in the PROPERTY requires the consent of a third party, then
the conveyance or transfer of the interest subject to such consent shall be
conditioned upon the necessary waiver or consent being obtained; provided
however, that, notwithstanding whether any such third party consent has been
obtained or waived, PURCHASER shall be obligated to consummate the sale and
purchase of the Property as contemplated by this Agreement on the Closing Date,
subject to PURCHASER's right to terminate the AGREEMENT as set forth herein
below. PANACO shall not be liable to PURCHASER by reason of any inability or
failure to obtain any such waiver of consent to assignment.
If PANACO is unable to obtain a required waiver or consent and PANACO
determines that such consent has been withheld on reasonable grounds, such
failure to obtain the waiver or consent shall be considered a "Significant
Title Defect" (as defined below) unless waived in writing by PURCHASER;
provided, however, that the prior termination or lapse of or a requirement that
any license, permit, right-of-way, pipeline franchise or easement affecting any
interests in or other portions of the PROPERTY which is non-transferable, must
be renegotiated or is subject to consent upon a transfer of ownership shall not
constitute a significant title defect under this AGREEMENT. As used in this
AGREEMENT, the term "Significant Title Defect" shall include (i) any defect
which results in a loss of title in PANACO such that PANACO's net revenue
interest with respect to an interest which is part of the PROPERTY is
substantially reduced or PANACO's right to use such interest as an owner,
lessee, license or permittee is extinguished or severely restricted, or (ii)
the
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inability of PANACO to obtain the waiver of a preferential right to an interest
included in the PROPERTY or a consent to assignment of an interest included in
the PROPERTY which consent PANACO believes is being withheld on reasonable
grounds. PURCHASER shall give PANACO written notice of such Significant Title
Defect on or before two (2) days prior to the Closing Date, together with full
particulars relating thereto. PURCHASER shall be deemed to have waived all
Significant Title Defects and any other defect of which PANACO has not been
given written notice as provided in this AGREEMENT. Upon receipt of such
notice of Significant Title Defects by PANACO, PURCHASER may terminate this
AGREEMENT by giving written notice of termination to PANACO on or before one
(1) day prior to the Closing Date, and upon the giving of such notice, neither
Party shall have any further rights or obligations hereunder; provided that
PURCHASER shall be obligated to return and to maintain information confidential
as set forth in Section 7(a) above and PURCHASER shall be entitled to a return
of any Performance Deposit with interest as provided in Section 7(c) above.
Notwithstanding the foregoing, PURCHASER acknowledges that (a) certain
third party consents to transfers of interests in the Property were not
obtained in connection with the transfer and conveyance by SWEPI to PANACO of
certain interests in the Property, which required but not obtained third party
consents are more fully set forth on EXHIBIT "H" hereto (the "Unobtained
Consents", and the interests in the Property subject to the Unobtained Consents
being herein referred to as the "Unobtained Consents Property"); (b) the
assignment and conveyance to PANACO by SWEPI of interests in the Property
subject to the Unobtained Consents specifically provided that the assignment of
such interests in the Property "shall not be construed as an assignment of such
[Property] until all consents to assignment have been obtained;" and (c) in
light of the existence of
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the Litigation and SWEPI's inability to obtain the Unobtained Consents, or a
waiver thereof, that consents (or waivers thereof) to the conveyance and
transfer by PANACO to PURCHASER of the Unobtained Consents Property will not be
forthcoming prior to Closing. PURCHASER agrees to purchase the Unobtained
Consents Property (without regard to whether the Unobtained Consents are
obtained) upon the same terms and conditions as such Property was acquired by
PANACO from SWEPI, and further agrees that PANACO shall have no liability with
respect to the Unobtained Consents Property by reason of any past, present or
future inability or failure to obtain the Unobtained Consents or a waiver
thereof.
11. TITLE.
(a) Title Examination. PURCHASER assumes the risk of
description and title to the PROPERTY and agrees to satisfy itself with respect
thereto. PANACO has made available to PURCHASER for examination by PURCHASER
such title information and abstract coverage as may have been available in
PANACO's land and contract files located in the offices of PANACO in Kansas
City, Missouri, or Houston, Texas.
12. REPRESENTATIONS BY PANACO. PANACO represents to PURCHASER,each
of which representations shall survive Closing, that as of the date of the
AGREEMENT and as of Closing:
(a) Due Organization. PANACO is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
(b) Corporate Power. PANACO has all requisite corporate power
and authority to carry on its business as presently conducted, to enter into
the AGREEMENT, and, to perform its
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obligations under the AGREEMENT. The consummation of the transactions
contemplated by the AGREEMENT will not violate nor be in conflict with (i) any
provision of its charter or bylaws or (ii) any agreement or instrument to which
it is a party or is bound (except for preferential rights to purchase and
required third party consents to assignment, if any).
(c) Duly Executed. The AGREEMENT has been duly executed and
delivered on behalf of PANACO, and at Closing, all documents and instruments
required hereunder to be executed and delivered by it shall have been duly
executed and delivered.
(d) No Litigation. There are no pending or, to the best of
PANACO's knowledge, threatened claims, lawsuits, administrative proceedings, or
governmental investigations or inquiries involving the Property (other than the
Litigation as described in Section 7(b) above) or PANACO's right to consummate
the sale contemplated hereunder except those claims, lawsuits, administrative
proceedings, and government investigations and inquiries that PANACO has
disclosed to PURCHASER in writing, if any.
(e) Absence of Certain Changes. Since the Effective Date,
there has been no material damage to, or destruction of, or other material
adverse change in the physical condition or operation of the PROPERTY.
(f) Litigation, Etc. Except as defined herein as the
Litigation, no action, suit, proceeding or investigation is pending or, to the
knowledge of PANACO, threatened, against, it or any of it's directors or
officers relating to or affecting the PROPERTY, or which questions the validity
of this AGREEMENT or challenges any of the transactions contemplated hereby.
(g) Brokerage Agreements. PANACO has incurred no liability
contingent or otherwise to any broker, finder, consultant or other intermediary
in connection with the transactions
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contemplated by this AGREEMENT who would be entitled to any commission or
broker's or finder's fee payable by PURCHASER in connection with the
transactions contemplated herein; provided, however, that PANACO shall be
solely responsible for payment of the $25,000.00 commission to ▇▇▇▇▇ Energy
Associates, Inc. upon the sale of the PROPERTY at Closing.
(h) Availability of Information. To the best of its
knowledge, PANACO has made available to PURCHASER for review and examination by
PURCHASER the files and records of PANACO related to the PROPERTY as
contemplated by this AGREEMENT.
13. REPRESENTATIONS OF PURCHASER. PURCHASER represents to PANACO,
each of which representations shall survive Closing, that as of the date of the
AGREEMENT and as of Closing:
(a) Due Organization. PURCHASER is a corporation duly
organized, validly existing, and in good standing under the laws of the state
of its incorporation and is duly qualified to do business in Louisiana.
(b) Corporate Power. PURCHASER has all requisite corporate
power and authority to carry on its business as presently conducted, to enter
into the AGREEMENT, to purchase the PROPERTY on the terms described in the
AGREEMENT and to perform its other obligations under the AGREEMENT. The
consummation of the transactions contemplated by the AGREEMENT will not
violate, nor be in conflict with, (i) any provision of its charter or bylaws or
(ii) any agreement or instrument to which it is a party or is bound.
(c) Duly Executed. The AGREEMENT has been duly executed and
delivered on behalf of PURCHASER, and at Closing, all documents and instruments
required hereunder to be
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executed and delivered by it shall have been duly executed and delivered and
the transactions contemplated hereby shall have been duly and validly
authorized by all requisite corporate action.
(d) No Litigation. There are no pending or, to the best of
PURCHASE knowledge, threatened claims, lawsuits, Administrative proceedings, or
governmental investigations or inquiries involving PURCHASER's right to
consummate the sale contemplated hereunder except those claims, lawsuits,
administrative proceedings, and Governmental investigations and inquiries that
PURCHASER has disclosed to PANACO in writing, if any.
(e) Brokerage Agreements. PURCHASER has incurred no liability
contingent or otherwise to any broker, finder, consultant or other intermediary
in connection with the transactions contemplated by this AGREEMENT who would be
entitled to any commission or broker's or finder's fee payable by PANACO in
connection with the transactions contemplated herein; provided, however, that
PANACO shall be solely responsible for payment of the $25,000.00 commission to
▇▇▇▇▇ Energy Associates, Inc. upon the sale of the PROPERTY at Closing.
14. PANACO'S CONDITIONS. The obligations of PANACO to be performed
at Closing are subject to the satisfaction at or prior to Closing of the
following conditions, any of which may be waived by PANACO:
(a) Representations True. All representations of PURCHASER
contained in this AGREEMENT shall be true in all material respects at and as of
Closing as if such representations were made at and as of Closing, and
PURCHASER shall have performed and satisfied in all material respects all
obligations required by this AGREEMENT to be performed and satisfied by it at
or prior to Closing.
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(b) No Pending Suits. No suit or other proceeding shall be
pending or threatened before any court or governmental agency seeking to
restrain, prohibit or declare illegal, or seeking substantial damages as a
result or its expectation of the contemplated purchase.
(c) No Act of Termination. This Agreement shall not have been
terminated as provided herein.
15. PURCHASER'S CONDITIONS. The obligations of PURCHASER to be
performed at Closing are subject to the satisfaction at or prior to Closing of
the following conditions, any of which may be waived by PURCHASER:
(a) Representations True. All representations of PANACO
contained in this AGREEMENT shall be true in all material respects at and as of
Closing as if such representations were made at and as of Closing, and PANACO
shall have performed and satisfied in all material respects all agreements
required by this AGREEMENT to be performed and satisfied by it at or prior to
the Closing.
(b) No Pending Suits. No suit or other proceeding shall be
pending or threatened before any court or governmental agency seeking to
restrain, prohibit or declare illegal, or seeking substantial damages as a
result or in expectation of the contemplated purchase.
(c) No Act of Termination. This Agreement shall not have been
terminated as provided herein.
16. OPERATIONS AND PRODUCTION AFTER THE EFFECTIVE DATE
(a) Operations Between the Effective Date and Closing. As
Closing will occur subsequent to the Effective Date, PANACO will continue to
operate the PROPERTY, or cause the PROPERTY to be operated, as appropriate, at
PURCHASER's sole risk and for the account of
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PURCHASER from the Effective Date until Closing. Upon Closing, PURCHASER shall
assume the risk of any change in the condition of the PROPERTY from the
Effective Date to the Closing Date, except to the extent any change in the
condition is attributable to the gross negligence or wilful misconduct of
PANACO and, notwithstanding the foregoing, except as may be otherwise provided
in Section 19.
(b) Expenses. Subject to the provisions of Section 19, PANACO
shall be responsible for payment of all Expenses (as defined below) related to
the PROPERTY prior to the Effective Date. From and after the Effective Date,
PURCHASER shall be responsible for the payment of all Expenses related to the
PROPERTY, and for the costs and expenses resulting from the assumption of the
obligations and implied covenants as specified in Section 18 hereof incurred or
accrued from and after the Effective Date and for royalty payments made by or
on behalf of PANACO prior to the Effective Date to the extent recouped or
recoupable from production after the Effective Date. "Expenses" as used in
this section shall mean any expenses incurred or accrued in connection with the
operation, use, protection maintenance or ownership of the PROPERTY including,
without limitation, expenses for or related to all lease rentals, shut-in
royalties, minimum royalties, payments in lieu of production royalties
(including royalties paid in kind), overriding royalties, production payments,
net profits payments, contractual payments, operating costs, expenses, fees,
vendor and contractor invoices, ▇▇▇▇▇▇▇▇, taxes, charges (including, without
limitation, any charges for overhead provider for in any operating agreements
related to the PROPERTY at the rates specified in such agreements), rental
payments, franchise fees, permits and license fees, assessments and other
indebtedness and obligations due, payable, incurred, accrued or attributable to
the ownership, operation, use, protection or maintenance of or otherwise
relating to or associated
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with the PROPERTY, together with an overhead charge of 15% of all costs and
expenses associated with the operation of the PROPERTY.
(c) Allocation of Production and Proceeds. All production
from oil and/or gas ▇▇▇▇▇, and all proceeds from the sale thereof including,
without limitation, proceeds from any imbalance and oil in storage above the
pipeline connection, and take-or-pay collections fights and accounts receivable
attributable to production prior to the Effective Date and all other monetary
payments (including, without limitation, proceeds from the sale of mineral
production, credits, tax refunds, insurance proceeds, salvage payments and
reimbursement of joint operating costs and expenses) attributable to the
ownership, use or operation of the PROPERTY prior to the Effective Date shall
be the property of PANACO. All such production proceeds, and other monetary
payments, attributable to production on and after the Effective Date shall be
the property of PURCHASER.
(d) Interim Accounting, Payment and Collection Services. From
the Effective Date until the end of the month in which Closing occurs, PANACO
shall, for the account of and at the sole cost to PURCHASER, provide or have
provided all necessary and appropriate financial accounting services for the
PROPERTY and all related operations and administration of the PROPERTY in the
same manner and to the same extent provided by or on behalf of PANACO prior to
the Effective Date, taking into account and acting consistent with the
provisions of Sections 16(b) and 16(c) above. PANACO shall, for the account of
and at the sole cost to PURCHASER, pay all Expenses (as provided in Section
16(b)) which are the obligation of PURCHASER and collect all proceeds and Other
monetary payments which are allocated to PURCHASER (as provided in Section
16(c)).
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(e) Post Closing Settlement. Within ninety (90) days after
Closing, PANACO and PURCHASER shall make a final post-Closing settlement to
account for all production proceeds and other monetary payments collected for
PURCHASER's account by PANACO and all other costs and expenses and taxes paid
for PURCHASER account by PANACO pursuant to this Section 16. In addition,
PANACO and PURCHASER shall account for and settle any royalty payments made by
or on behalf of PANACO prior to the Effective Date which are recouped or
recoupable from production after the Effective Date. PANACO and PURCHASER
agree to promptly remit any sum determined from such post-closing settlement to
be owed to the other.
(f) Audit. Within one (1) year of the Closing, either Party
may at its own expense audit the other Party's books, accounts and records
relating to production proceeds, other monetary payments, Expenses, other costs
and expenses and taxes (other than income taxes) paid or received which may
have been adjusted on account of this transaction. Such audit shall be
conducted so as to cause a minimum of inconvenience to the audited Party.
(g) No Application to Income Taxes. All references to taxes
and tax refunds shall not apply to income taxes and income tax refunds.
17. TAXES COSTS AND FEES.
(a) Taxes. PURCHASER shall be responsible for the economic
burden and payment of all taxes relating to the PROPERTY from and after the
Effective Date, regardless of when they are actually assessed. PANACO shall be
responsible for the economic burden and payment of all taxes relating to the
PROPERTY prior to the Effective Date, regardless of when they are actually
assessed. PURCHASER shall pay to PANACO at Closing, in addition to and
separate from the Purchase Price, an amount equal to all state and local taxes
payable by PANACO on the
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transfer of ownership of are tangible personal property calculated at the then-
current rates. PURCHASER shall indemnify PANACO and hold PANACO harmless from
any liability, including without limitation, penalties, interest and attorney's
fees, arising out of PURCHASER's failure to pay to PANACO at Closing, in
addition to and separate from the Purchase Price, the amount equal to all state
and local taxes payable by PANACO on the transfer of ownership of any tangible
personal property. PURCHASER shall pay all costs associated with documentary
transfer taxes, other transfer taxes and any recording costs assessed by any
federal, state, county or other governmental offices or other transfer fees and
shall indemnify and hold PANACO harmless for such transfer taxes, costs and
fees.
(b) No Brokers. Each Party shall pay and indemnify and hold
the other Party harmless from any commission or brokerage fee it has incurred
in connection with this transaction; except that PANACO shall be solely
responsible for payment of the $25,000.00 commission to ▇▇▇▇▇ Energy
Associates, Inc. upon the sale of the Property at Closing.
18. OPERATIONS BY PURCHASER
(a) Compliance with Laws. PURCHASER shall comply with all
applicable laws, ordinances, rules and regulations, orders, terms of permits
and authorizations of any governmental body which may have jurisdiction with
respect to the PROPERTY to be transferred hereunder (including, without
limitation, the filing with such governmental bodies of any and all compliance
reports, notices, or other compliance documents which are due after the Closing
Date regardless of the period covered by such reports, notices or documents)
and shall promptly obtain and maintain all permits and bonds required by public
authorities in connection with the PROPERTY.
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(b) Assumption of Obligations. Upon Closing, PURCHASER shall
assume, as of the Effective Date, and agree to perform, at PURCHASER's sole
cost and expense, (i) all obligations and implied covenants of PANACO relating
to the PROPERTY (whether such obligations and covenants are to a lessor, a
governmental body or any other person or entity), including, but not limited to
(1) any obligations arising in respect to the plugging, replugging, and
abandonment of a existing ▇▇▇▇▇ (whether or not such ▇▇▇▇▇ are active,
inactive, idle, or have been previously abandoned as of the Effective Date),
(2) any obligations to file or submit compliance reports, notices and documents
required by governmental bodies, (3) the removal of related oil and gas
equipment including, without limitation, pipelines, sumps, foundations, and
other facilities, whether the existence of same is known or unknown to the
Parties at Closing, and (4) the complete and lawful restoration and reclamation
of the lands used in connection with such ▇▇▇▇▇ and related equipment,
pipelines, sumps and other facilities in compliance with all federal, state and
local laws, rules and regulations, with respect to such plugging and
abandonment, removal and restoration and reclamation of associated lands, and
(ii) all obligations under licenses, permits, franchises, easements, and
rights-of-way associated with or included in the PROPERTY, and (iii) any
obligations with respect to the reabandonment of previously abandoned ▇▇▇▇▇ on
lands included in the PROPERTY, and (iv) remediation and clean-up with respect
to the PROPERTY. As set forth in Section 19(a)(1), PURCHASER shall defend,
indemnify and hold PANACO harmless with respect to the performance or failure
to perform of PURCHASER's obligations under this Section 18.
19. INDEMNIFICATION. Capitalized terms used in this Section 19 which
are not defined elsewhere in this AGREEMENT are defined in subsection 19(f)
below.
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(a) General Indemnity by PURCHASER. To the fullest extent
permitted by law, but no further, PURCHASER shall indemnify and hold harmless
SWEPI, PANACO, their Affiliates and their officers, directors, employees and
agents, from any and all Claims for which a Claim Notice is delivered to
PURCHASER and which such Claims directly or indirectly arise or result from or
are caused by the use, operation, maintenance, occupation, ownership or
abandonment of the PROPERTY after the Effective Date even though such Claims
may have been contributed to or caused by the sole, joint, or concurrent fault
or negligence of PANACO or SWEPI occurring prior to Closing (except for (i)
Environmental Claims or Environmental Cleanup Liability which are separately
provided for in Section 19(b) below, and (ii) any such Claims caused by the
willful misconduct or gross negligence of PANACO or SWEPI during the time it
owned the Property). PURCHASER further covenants and agrees to defend any
suits brought against SWEPI, PANACO, their Affiliates or their respective
officers, directors, employees and agents, on account of any such Claims
indemnified hereunder and to pay or discharge the full amount or obligation of
such Claims incurred by, accruing to or imposed on SWEPI, PANACO, their
Affiliates or their respective officers, directors, employees or agents
resulting from any such suit or suits. In addition, PURCHASER shall pay to
SWEPI, PANACO, their Affiliates or their respective officers, directors,
employees or agents, as applicable, all reasonable attorneys fees incurred by
SWEPI, PANACO, their Affiliates or their respective officers, directors,
employees or agents, as applicable, in enforcing PURCHASER indemnity in this
Subsection 19(a).
(b) Environmental Indemnity by PURCHASER. To the fullest
extent permitted by law, but no further, PURCHASER shall indemnify and hold
harmless SWEPI, PANACO, their Affiliates and their respective officers,
employees, and agents, from and against any and all
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Environmental Claims or Environmental Cleanup Liability which arises directly
or indirectly from the use, operation, maintenance, occupation, ownership or
abandonment of the PROPERTY (i) after the Effective Date, and (ii) before
December 28, 1995, with respect to any Environmental Claim or Environmental
Cleanup Liability initially made against or sought to be imposed upon SWEPI,
PANACO, their Affiliates or their respective officers, directors, employees and
agents, two (2) years or more after December 28, 1995, even though caused, or
contributed to, by the negligence or fault of SWEPI or PANACO. Solely with
respect to Section 19(b)(ii), to the best of PANACO's knowledge, there are no
pending or threatened Environmental Claims or Environmental Cleanup Liabilities
made against or sought to be imposed upon SWEPI, PANACO, their Affiliates or
their respective officers, directors, employees and agents. PURCHASER further
covenants and agrees to defend any suits or administrative proceedings brought
against SWEPI, PANACO, their Affiliates and their respective officers,
directors, employees and agents, on account of any such Environmental Claims or
Environmental Cleanup Liability and to pay or discharge the full amount or
obligation of such Environmental Claims or Environmental Cleanup Liability
incurred by, accruing to or imposed on SWEPI, PANACO, their Affiliates, or
their respective officers, directors, employees or agents, as applicable,
resulting from any such suit or suits or any amounts resulting from the
settlement or resolution of such suit or suits or administrative proceedings;
provided that PURCHASER shall have agreed in writing to any nonjudicial
settlement or resolution. In addition, PURCHASER shall pay to SWEPI, PANACO,
their Affiliates, or their respective officers, directors, employees or agents,
as applicable, all reasonable attorney fees incurred by SWEPI, PANACO, their
Affiliates, or their respective officers, directors, employees or agents, as
applicable, in enforcing PURCHASER's indemnity in this subsection 19(b).
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(c) General Indemnity by SWEPI. Pursuant to Section 20(c) and
Section 23 of the SWEPI Agreement, SWEPI agreed to indemnify and hold harmless
PANACO and its successors and assigns with respect to the matters more fully
set forth in such Section 20(c). Accordingly, from and after the Effective
Date, PANACO and PURCHASER shall be entitled to the rights and benefits
afforded by Section 20(c) of the SWEPI Agreement. Pursuant to Section 20(c)
and Section 23 of the SWEPI Agreement, and to the fullest extent permitted by
law but no further and subject to the limitations set forth in subsection 19(e)
below, SWEPI has agreed to indemnify and hold harmless PANACO, its successors
and assigns including PURCHASER, their officers, directors, employees and
agents, from any and all claims (except for (i) Environmental Claims or
Environmental Cleanup Liability which are provided for in Section 19(d) below;
and (ii) any such claims to the extent caused by the willful misconduct or
gross negligence of PANACO or its successors or assigns, including PURCHASER,
as the case may be) for which a Claim Notice is delivered to SWEPI within one
(1) year after December 28, 1995, and (I) which directly arise, result from or
are caused by the use, operation, maintenance, occupation and ownership of the
PROPERTY by SWEPI prior to October 1, 1995, and (II) are based on law
(including statutory, regulatory and case law) existing as of October 1, 1995.
SWEPI has further covenanted and agreed to defend any suits brought against
PANACO and/or its successors and assigns including PURCHASER on account of any
such claims so indemnified and to pay or discharge the full amount or
obligation of any such claims incurred by, accruing to or imposed on PANACO
and/or its successors and assigns including PURCHASER resulting from any such
suit or suits.
(d) Environmental Indemnity by SWEPI. Pursuant to Section
20(d) and Section 23 of the SWEPI Agreement, SWEPI agreed to indemnify and hold
harmless PANACO and its
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successors and assigns with respect to the matters more fully set forth in such
Section 20(d) of the SWEPI Agreement. Accordingly, from and after the
Effective Date, PANACO and PURCHASER shall be entitled to the rights and
benefits afforded by Section 20(d) of the SWEPI Agreement. Pursuant to Section
20(d) and Section 23 of the SWEPI Agreement, and to the fullest extent
permitted by law but no further and subject to the limitations set forth in
subsection 19(e) below, SWEPI has agreed to indemnify and defend PANACO, its
successors and assigns, including PURCHASER, their officers, directors,
employees and agents, from and against any and all Environmental Claims and
Environmental Cleanup Liability for which a Claim Notice is delivered to SWEPI
within one (1) year after December 28, 1995, and (i) which arises wholly out of
the use, operation, maintenance, occupation or ownership of the PROPERTY by
SWEPI prior to October 1, 1995, and (ii) which are based on Environmental Law
in effect as of October 1, 1995, except for any such Environmental Claims or
Environmental Cleanup Liability in any degree caused by PANACO or its
successors and assigns including PURCHASER, as the case may be, or which is not
Material (within the meaning of and in accordance with Subsections 9(c)(e) and
(4) of the SWEPI Agreement).
(e) Limitations. The indemnification obligations of SWEPI
contained in Sections 19(c) and (d) are subject to the following limitations
and conditions:
(1) Such indemnification obligations do not and shall
not limit the disclaimers of warranties and the acknowledgments of PURCHASER
with respect to the PROPERTY as specified in Sections 8 and 9 above, and such
indemnities shall have no application to matters of description, title,
(including, without limitation, the existence or nonexistence of easements,
licenses, rights-of-way, permits, franchises, liens, leases or other
encumbrances or other agreements or the
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failure to procure governmental or necessary third party consents or approvals
of assignment of the PROPERTY), quality, value, fitness for purpose or
merchantability of the PROPERTY;
(2) Such indemnification obligations do not and shall
not limit PURCHASER's obligations (including indemnification obligations) under
this Agreement with respect to removal and abandonment of facilities and ▇▇▇▇▇
located on the PROPERTY including, without limitations the plugging and
abandoning of ▇▇▇▇▇, removal of concrete foundations, sumps, pipelines,
vessels, tanks and similar items of oil field equipment and facilities, and
restoration of the PROPERTY and such indemnities by SWEPI shall have no
application to any costs, losses or liabilities incurred by PURCHASER in
connection with fulfilling such removal, abandonment and restoration
obligations;
(f) Definitions. For purposes of this Agreement:
(1) "Affiliate" shall mean a Party's "Parent Company"
and "Affiliated Companies." "Parent Company," "Affiliated Companies" and
"Controlling Interest" shall have the following meanings:
(i) A Party's "Parent Company" shall
mean an entity having a "Controlling Interest" in such Party;
(ii) A Party's "Affiliated Companies"
shall mean any and all entities in which the Party or the Parent Company of
such Party has a direct or indirect "Controlling Interest," and
(iii) "Controlling Interest" shall mean a
legal or beneficial ownership of fifty percent (50%) or more of the voting
stock or other voting rights in an entity.
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(2) "Arises." An Environmental Claim or Environmental
Cleanup Liability shall be deemed to Arise upon (i) each discrete,
operationally-related Release of Chemical Substance, as measured on a day
basis, or (ii) each discrete, operationally-related occurrence of pollution,
contamination or migration, as measured on a daily basis.
(3) "Chemical Substances" shall mean any chemical
substance, including, but not limited to, any sort of pollutants, contaminants,
chemicals, raw materials, intermediates, products, industrial, solid, toxic or
hazardous substances, materials, wastes, or petroleum products, including crude
oil or any component thereof.
(4) "Claims" shall mean any and all claims, demands,
loss, liability, liens, demands, judgments, settlements, suits, causes of
action, fines, penalties, compliances, costs, and any costs, expenses and fees
associated with the investigation, defense and resolution of the foregoing,
including, without limitation, reasonable attorney's fees. Claims may be based
on any theory of tort, contract, strict liability, statutory liability
(including, without limitation, penalties, obligations or requirements) or any
other basis for liability and shall include, without limitation, any Claims
arising, occurring or resulting from, related to or based on the injury,
disease, or death of any persons (including, without limitation, the
Indemnifying Party's employees, agents and representatives) or damage to, loss
or destruction of any property, real or personal (including, without
limitation, the Indemnifying Party's property).
(5) "Claim Notice" shall mean a notice delivered to
either Party, in writing, that the other Party has received a claim or demand
from a Third Party or been served with process by or on behalf of a Third Party
asserting Claims, Environmental Claims or Environmental Cleanup Liability
indemnified hereunder.
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(6) "Environmental Claim" shall mean any claim, demand,
action, suit or proceeding for the injury, disease or death of any person
(including, without limitation, the Indemnifying Party's employees, agents and
representatives), property damage, damage to the environment or damage to
natural resources made, asserted or prosecuted by or on behalf of any Third
Party (whether based on negligent acts or omissions, statutory liability, or
strict liability without fault or otherwise) arising or alleged to arise under
any Environmental Law. Environmental Claim includes any damages, settlement
amounts, fines and penalties assessed or costs of complying with any orders or
decrees of courts, administrative tribunals or other governmental entities
(other than such compliance costs related to Environmental Cleanup Liability)
associated with resolving such claims, demands, actions, suits or proceedings
and any costs, expenses and fees, including, without limitation, reasonable
attorneys fees incurred in the investigation, defense and resolution of such
claims, demands, actions, suits and proceedings.
(7) "Environmental Cleanup Liability" shall mean any
cost or expense of any nature whatsoever incurred (in order to comply with the
provisions of any Environmental Law or the provisions of any order or decree of
any court or Administrative or regulatory tribunal or agency enforcing any
Environmental Law) to contain, remove, remedy, respond to, clean up, or ▇▇▇▇▇
any Release of Chemical Substances or other contamination or pollution of the
air, surface water, groundwater, land surface or subsurface strata related to
the operation, use, maintenance and ownership of the PROPERTY, whether such
Release, contamination or pollution is located on, within, under or above real
property included in the PROPERTY ("on site") or is located off site,
including, but not limited to, any Release of Chemical Substances or other
contamination or pollution arising out of or resulting from the manufacture,
generation, formulation, processing, labeling,
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distribution, introduction into commerce, or on site or off site use,
treatment, handling, storage, disposal or transportation of any Chemical
Substances. Environmental Cleanup Liability includes, without limitation, any
judgments, damages, settlements, costs or expenses (including, without
limitation, attorneys', consultants' and experts' fees and expenses) incurred
with respect to (i) any investigation, study, assessment, legal representation,
cost recovery by a governmental agency or Third Party, or monitoring or testing
in connection therewith, (ii) the PROPERTY as a result of actions or measures
necessary to implement or effectuate any such containment, removal,
remediation, response, cleanup or abatement and (iii) the resolution of such
liabilities.
(8) "Environmental Law" means any statutes, rules,
regulations, controlling judicial decisions or legal requirements relating to
or regulating the pollution protection or cleanup of the environment or damage
to of remediation of damage to real property and natural resources (including,
but not limited to, ambient air, surface water, groundwater, and land surface
or subsurface strata) including, without limitation, legal requirements
contained in the Comprehensive Environmental Response, Compensation and
Liability Act of 1990, 42 U.S.C. Section 9601 et seq., as amended (CERCLA); the
Resources Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et
seq., as amended (RCRA), the Superfund Amendments and Reauthorization Act of
1986, Pub. L.99-499, as amended (▇▇▇▇); the Clean Air Act, 42 U.S.C. Section
7401, et seq., as amended; Federal Water Pollution Control Act, 33 U.S.C.
Section 2601 et seq., as amended; National Environmental Policy Act, 42 U.S.C.
Section 4321, et seq., as amended (NEPA); and the Safe Drinking Water Act, 42
U.S.C., Section 300 ▇-▇ et seq., as amended; and/or any other federal, state or
local laws, statutes, ordinances, rules, regulations or orders (including
decisions of any court or administrative body) relating to the pollution,
protection or cleanup of the environment as specified above. Environmental Law
shall
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also mean the Toxic Substance Control Act, 25 U.S.C. Section 1502, et seq., as
amended (TOSCA) and/or any other federal, state (including, without limitation,
laws with respect to trespass, nuisance and other torts or similar legal
theories which may be applied to establish liability or responsibility for
Environmental Cleanup or Environmental Claims) or local laws, statutes,
ordinances, rules, regulations or orders (including decisions of any court or
Administrative body) relating to (i) release, containment removal, remediation,
response, cleanup or abatement of any sort of Chemical Substance, (ii) the
manufacture, generation, formulation, processing, labeling, distribution
introduction into commerce, use, treatment, handling, storage, disposal or
transportation of any Chemical Substance, (iii) exposure of persons, including
employees of SWEPI, PANACO or PURCHASER, to any Chemical Substance and other
occupational safety or health matters, or (iv) the physical structure or
condition of a building, facility, fixture or other structure, including,
without limitation, those relating to the management use, storage, disposal,
cleanup or removal of asbestos, asbestos-containing materials, polychlorinated
biphenyls or any other Chemical Substance.
(9) "Release" shall mean any spilling, leaking,
pumping, pouring emitting, emptying, discharging, escaping, leaching, dumping
or disposing of any Chemical Substance into the environment (including, but not
limited to, the ambient air, surface water, groundwater and land surface or
subsurface strata) of any kind whatsoever (including also the abandonment or
discarding of barrels, containers, tanks or other receptacles containing or
previously containing any Chemical Substance).
(10) "Third Party" shall mean any person (other than a
Party or its Affiliates) including, without limitation, any such natural
person, business entity (corporation, partnership, trust, sole proprietorship
or other business entity), any federal, state or local
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governmental entity, agency or administrative body, employee of PURCHASER or of
PANACO or of SWEPI, former employee of PURCHASER or of PANACO or of SWEPI or
their respective legal representatives, heirs, beneficiaries or estates.
(g) Indemnified Party's Participation. Any indemnified Party
shall have the right at all times, if it so elects and without relieving the
indemnifying Party of its obligations to defend hereunder, to participate in
the preparation for and conducting of any hearing or trial related to these
indemnification provisions, as well as the right to appear on its own behalf at
any such hearing or trial. Any such participation or appearance by an
indemnified Party shall be at its sole cost and expense.
An indemnified Party shall not execute a consent order nor accept any
settlement regarding an indemnified matter without the indemnifying Party's
prior written approval. The indemnified Party shall cooperate fully with the
indemnifying Party in the defense of any matter hereunder by the indemnifying
Party and shall take those actions reasonably, within its power to take which
are reasonably necessary to preserve any legal defenses to indemnified matters
hereunder until the indemnifying Party has assumed the defense of the matter.
20. EXISTING CONTRACTS.
(a) Assumption of Contracts. The sale contemplated hereunder
shall be made subject to any and all existing operating agreements, unit
agreements, and gas processing agreements, as well as any and all other
agreements, permits, franchises, leases, licenses, easements and rights-of-way
to which the PROPERTY is subject, including without limitation the SWEPI
Agreement, and PURCHASER shall assume and be responsible for all obligations of
PANACO accruing under such agreements. Notwithstanding the foregoing,
PURCHASER acknowledges that certain of the
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agreements to which the sale contemplated hereunder shall be made subject were
not assignable or delegable by SWEPI to PANACO and, therefore, are not subject
to being assigned by PANACO to PURCHASER and assumed by PURCHASER. However,
PURCHASER further acknowledges that, under the SWEPI Agreement, SWEPI retained
the right, but not the obligation, with respect to such non-assignable or non-
delegable agreements, to perform, at its sole discretion, such agreements on
behalf of PANACO, and PANACO agreed in such instances to reimburse promptly,
upon notice, SWEPI for SWEPI's costs, expenses and obligations incurred in
performing such agreements. Accordingly, PURCHASER agrees that the conveyance
of the Property contemplated by this Agreement shall be made subject to all of
the agreements referenced hereinabove, whether or not assignable or delegable,
and further agrees to reimburse SWEPI promptly, upon notice, for SWEPI's costs,
expenses and obligations incurred in performing such non-assignable or non-
delegable agreements if SWEPI, in its sole discretion, elects to perform such
agreements on behalf of PURCHASER.
21. NOTICES. All notices and communications required or permitted
under this AGREEMENT shall be in writing, delivered to or sent by U.S. Mail or
nationally recognized commercial courier service, postage or delivery charges
prepaid, or by telecopy, addressed as follows (or such other address as may be
specified by ten (10) days prior written notice to the other Party):
PURCHASER
National Energy Group, Inc.
ATTN: Miles ▇▇▇▇▇▇
1400 One Energy Square
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇
▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇, Inc.
ATTN: H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Notice shall be deemed to have been duly given when delivered to or sent to the
other Party in the manner prescribed herein and actually received by the Party
to whom the notice is given.
22. PARTIES IN INTEREST. Subject to subsection 25(d) below, this
AGREEMENT shall inure to the benefit of and be binding upon PANACO and
PURCHASER and their respective successors and assigns. However, no assignment
by any Party shall relieve any Party of any duties or obligations under this
AGREEMENT.
23. COMPLETE AGREEMENT. When executed by the authorized
representatives of PANACO and PURCHASER, this AGREEMENT, together with the
executed copies of the exhibits hereto and documents referred to herein, shall
supersede all prior written or oral and all contemporaneous oral agreements and
understandings between the Parties, including without limitation, all and any
bid solicitation, bid offer, bid acceptance letters, and other letter
agreements, and shall constitute the complete agreement between the Parties
regarding the purchase and sale of the PROPERTY.
24. APPLICABLE LAW. THIS AGREEMENT, THE OTHER DOCUMENTS EXECUTED AND
DELIVERED PURSUANT HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH
RESPECT TO THIS AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF LOUISIANA
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WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAWS; PROVIDED, THAT THE
VALIDITY OF THE VARIOUS CONVEYANCES TRANSFERRING TITLE TO REAL OR IMMOVABLE
PROPERTY AND REAL OR IMMOVABLE PROPERTY INTERESTS UNDER THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN
WHICH SUCH REAL OR IMMOVABLE PROPERTY OR REAL OR IMMOVABLE PROPERTY INTERESTS
ARE LOCATED.
25. MISCELLANEOUS PROVISIONS.
(a) Captions. Captions have been inserted for reference
purposes only and shall not define or limit the terms of this AGREEMENT.
(b) Partial Invalid. If any provision of this AGREEMENT is
held invalid, such invalidity shall not affect the remaining provisions.
(c) Modification. This AGREEMENT cannot be modified or
amended except by a written instrument duly executed by PANACO and PURCHASER.
(d) Assignment. Neither PANACO nor PURCHASER, without the
prior written consent of the other Party, shall assign any right or obligation
under this AGREEMENT prior to Closing, or attempt to delegate any duty to be
performed under this AGREEMENT, except that PANACO may make such an assignment
and/or delegation to an Affiliate without the consent of PURCHASER. Consent to
assign shall not be unreasonably withheld by either Party. Any attempted
assignment or delegation without such consent shall be void and of no effect.
(e) Counterparts. This AGREEMENT may be executed in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute but one and the same instrument.
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(f) Expenses. Except as otherwise expressly provided herein,
all expenses incurred by each Party in connection with the transaction
contemplated herein, including, without limitation, attorneys fees, are for the
account of the Party incurring the same and the Party incurring such expenses
shall defend, indemnify and hold harmless the other Party from and against such
expenses.
(g) Signs. PURCHASER shall, promptly after Closing, remove
all signs, placards, notices or other posted documents or information and any
other like property which refers to PANACO's or SWEPI's ownership of the
Property or responsibility for the operation conducted thereon.
Notwithstanding the foregoing, PANACO and SWEPI shall have the right but not
the obligation to remove all of their respective signs, placards, notices, or
other posted documents or information and any other liked property, if any,
which refers to their respective ownership of the PROPERTY or responsibility
for the operations conducted thereon.
(h) Press Releases. No information in connection with this
sale or exchange shall be released to the public, including, without
limitation, through press releases, without the express written permission of
PANACO and PURCHASER, which permission will not be unreasonably withheld.
(i) SWEPI and SOC Call on Production. PURCHASER acknowledges
that SWEPI and Shell Oil Company ("SOC") have, pursuant to Section 27(i) of the
SWEPI Agreement, a right of first refusal to purchase, crude oil and other
liquid hydrocarbons produced from the Property, and PURCHASER expressly agrees
that PURCHASER shall be bound by and the sale of the Property contemplated by
this Agreement shall be subject to such right of first refusal in favor of
SWEPI and SOC. Pursuant to Section 27(i) of the SWEPI Agreement, SWEPI's and
SOC's right
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of first refusal to purchase crude oil and other liquid hydrocarbons produced
from the Property is exercisable at any time and from time to time by the
giving of thirty (30) days written notice to PURCHASER from either SWEPI or SOC
and is on the basis of the highest legal price posted by a major purchaser
during the month applicable to production from the field for oil of like grade
and gravity or similar liquid hydrocarbons at the time and place of delivery.
It is further provided in Section 27(i) of the SWEPI Agreement that the
foregoing price may be reduced by pipeline or truck transportation costs, if
applicable; provided, however, that in the event PURCHASER receives a bona fide
third party offer to purchase the crude in excess of the foregoing price, then
PURCHASER may sell such crude subject to SWEPI or SOC having the right within
four (4) business days of the receipt of notice thereof to match the offer and
purchase the crude for itself. In no event shall SWEPI's or SOC's failure to
assert its right of first refusal preclude it from exercising such right in
connection with any subsequent offer.
(j) No Recording. This AGREEMENT shall not be recorded or
filed by any Party or their successors or assigns, in or with any public or
governmental office, officer, agency or records repository without the prior
written consent of the other Party; provided that each Party shall have the
right (without any other Party's prior consent) to make any and all filings,
recordings or disclosures it deems appropriate and necessary in the opinion of
its counsel in order to comply with the Securities and Exchange Commission, any
rules or regulations promulgated thereby, or any requirements of the NASDAQ or
other exchange upon which a Party may secure a listing.
(k) Survival. All representations, indemnifications,
covenants, obligations and promises of the Parties or SWEPI set forth in this
AGREEMENT shall survive Closing. All
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documents conveying, transferring or assigning the PROPERTY shall incorporate
by reference the terms and conditions of this AGREEMENT.
(1) Exhibits. The Exhibits listed below are attached to
this AGREEMENT:
EXHIBIT "A" Property and Property Interests Subject to
this AGREEMENT
EXHIBIT "B" Assignment and Conveyance
EXHIBIT "C" ▇▇▇▇ of Sale
EXHIBIT "D" Assignment of Overriding Royalty
EXHIBIT "E" Pledge of Production Proceeds and Trust
Agreement
EXHIBIT "F" Assignment and Assumption of Pledge of
Production Proceeds and Trust Agreement
EXHIBIT "G" Stock Registration Agreement
EXHIBIT "H" Unobtained Consents
(m) Time of Essence. Time is of the essence in the
performance of this AGREEMENT.
(n) No Partnership. Nothing contained in this AGREEMENT shall
be deemed to create a joint venture, partnership, tax partners),mip or agency
relationship between the Parties.
(o) File Transfers. Within a reasonable time after Closing,
PANACO will transfer to PURCHASER, subject to SWEPI's and PANACO's continuing
fight of access as hereinafter set forth, the following original PANACO files,
records, documents and data relating to the PROPERTY, or such similar files,
records, documents and data to the extent held or maintained by PANACO: Oil,
Gas and Mineral Lease, Fee, Easement and Right of Way, Surface Lease, Operating
Agreement Farmout, Unitization and Pooling and Land Abstract files and records
as well
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as original Well Record Files on all ▇▇▇▇▇ (i.e., all existing ▇▇▇▇▇ situated
on the PROPERTY regardless of whether previously plugged and abandoned as of
the Closing Date).
PANACO and SWEPI retain the continuing right of complete access to the
above files and records, which right of access may be exercised by PANACO and
SWEPI at reasonable times, upon giving PURCHASER reasonable notice and which
shall include, at the sole cost and expense of PANACO or SWEPI, as the case may
be, the right to copy or duplicate any and all contents therein. Should PANACO
or SWEPI be required by a governmental or court rule or order to produce the
original of any document described in this subsection, PURCHASER will, to the
best of its ability, make such document available to enable PANACO or SATEPI to
comply with said rule or order upon receiving proper assurance that such
document will be promptly returned to PURCHASER.
Pursuant to Section 27(o) of the SWEPI Agreement, SWEPI granted to
PANACO certain rights of access to SWEPI files, records, documents and data
relating to the Property. Accordingly, and pursuant to Section 23 of the SWEPI
Agreement, PURCHASER, as successor in interest to PANACO, shall also have the
fight of access, after the Closing Date, to the following SWEPI files, records,
documents and data relating to the Property: Division Order, Transfer Order,
Letters-in-lieu, Regulatory, Accounting, Environmental, Pipeline, Maintenance,
Transportation, Processing, Production and Engineering files and records not
conveyed and transferred by SWEPI to PANACO. The right of access of PANACO and
its successors and assigns including PURCHASER may be exercised at reasonable
times, upon giving SWEPI reasonable notice and shall include, at the sole cost
and expense of PANACO, or its successors or assigns including PURCHASER, as the
case may be, the right to copy any and all contents therein not otherwise
excluded subject to the following: (1) only division of interest sheets,
division orders, transfer orders, letters-in-lieu, title opinions and
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title curative material may be copied from Division Order files and (2) only
gas contracts and amendments or agreements relating thereto and pertinent
outside correspondence may be copied from gas files. Should PANACO or its
successors or assigns including PURCHASER be required by a governmental rule or
order to produce the original of any document to which the right of access has
been granted by this subsection, SWEPI has agreed, to the best of its ability,
to make such documents available to enable PANACO or its successors or assigns
including PURCHASER, as the case may be, to comply with said rule or order upon
receiving proper assurance that such document will be promptly returned to
SWEPI.
EXECUTED by the Parties hereto as indicated below by the signatures of
their respective representatives; however, for identification purposes, this
AGREEMENT shall be deemed dated as of the date the last Party hereto signs this
AGREEMENT.
NATIONAL ENERGY GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President and C.F.O.
Date: November 11, 1996
PANACO, INC.
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name: H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title:
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Date:
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