<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 27, 1999
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
VENUS EXPLORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE 0-14334 13-3299127
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
1250 NE LOOP 410
SUITE 1000
SAN ANTONIO, TEXAS 78209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (210) 930-4900
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
As previously disclosed in its Current Reports on Form 8-K dated January 27,
1999 and February 12, 1999, respectively, on January 27, 1999 Venus Exploration,
Inc. completed the sale of its oil and gas properties in the State of West
Virginia and on February 12, 1999, Venus Exploration, Inc., completed the sale
of its interest in the H.E. White Unit in Freestone County, Texas. The
properties included interests in 61 existing wells, one well in process of being
completed, and a pipeline system that serviced many of the wells in West
Virginia. Venus Exploration, Inc. also sold its interest in a limited
partnership that owned property rights in oil and gas wells in West Virginia.
(a) Financial statements of businesses acquired
Not applicable.
(b) Pro forma financial information (Unaudited)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DISPOSITION OF WEST VIRGINIA AND H.E. WHITE PROPERTIES
VENUS EXPLORATION, INC
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
Disposition of Properties
-------------------------
Historical West H.E. White
Venus Virginia Unit Pro Forma
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Oil and gas sales................................... $ 2,804,749 $ (365,381) $ (65,901) $ 2,373,467
Costs of Operations:
Production expense............................. 1,609,733 (184,009) (33,489) 1,392,235
Exploration expenses, including dry holes...... 1,261,557 1,261,557
Impairment of oil and gas properties........... 3,543,152 (373,652) 3,169,500
Depreciation, depletion and amortization....... 1,774,999 (140,308) (24,011) 1,610,680
General and administrative..................... 3,174,156 3,174,156
----------- ---------- --------- -----------
Total expenses................................. 11,363,597 (697,969) (57,500) 10,608,128
----------- ---------- --------- -----------
Operating profit (loss)........................ (8,558,848) 332,588 (8,401) (8,234,661)
Other income (expense):
Interest expense............................... (568,085) (568,085)
Gain on sale of assets......................... 30,007 30,007
Interest and other income...................... 32,502 32,502
----------- -----------
(505,576) (505,576)
----------- -----------
Net loss before extraordinary item............. (9,064,424) 332,588 (8,401) (8,740,237)
----------- -----------
Loss on early extinguishment of debt................ (345,905) (345,905)
----------- ---------- --------- -----------
Net loss....................................... $(9,410,329) $ 332,588 $ (8,401) $(9,086,142)
=========== ========== ========= ===========
Average shares outstanding.......................... 9,022,180 9,022,180
Earnings (loss) per share:
Basic before extraordinary item................ $ (1.04) $ (1.01)
Basic.......................................... $ (1.04) $ (1.01)
Diluted........................................ $ (1.04) $ (1.01)
</TABLE>
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DISPOSITION OF WEST VIRGINIA AND H.E. WHITE PROPERTIES
VENUS EXPLORATION, INC
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments
Disposition of Properties
-------------------------
West H.E. White
Venus Virginia Unit Pro Forma
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents.................................. $ 125,832 $ (25,184) $ 324,391 $ 425,039
Trade accounts receivable and other................... 491,994 491,994
TOTAL CURRENT ASSETS.................................. 617,826 (25,184) 324,391 917,033
OIL AND GAS PROPERTIES AND EQUIPMENT,
net (successful efforts method), at cost............ 6,398,690 (1,134,445) (570,109) 4,694,136
OTHER PROPERTY AND EQUIPMENT, net, at cost............ 238,598 238,598
DEFERRED FINANCING COSTS, at cost less
accumulated amortization............................ 19,226 19,226
OTHER ASSETS, at cost less accumulated amortization... 121,574 121,574
------------ ------------ ---------- -----------
TOTAL ASSETS.......................................... $ 7,395,914 $ (1,159,629) $ (245,718) $ 5,990,567
============ ============ ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable................................ $ 1,268,743 $ (159,629) $ (175,609) $ 933,505
Other liabilities..................................... 433,555 433,555
Current maturities of long-term debt, including
long-term debt reclassified as current.............. 5,540,000 (1,000,000) (650,000) 3,890,000
------------ ------------ ---------- -----------
TOTAL CURRENT LIABILITIES............................. 7,242,298 (1,159,629) (825,609) 5,257,060
LONG-TERM DEBT........................................ -- --
OTHER LONG-TERM LIABILITIES........................... 22,591 22,591
------------ ------------ ---------- -----------
TOTAL LIABILITIES..................................... 7,264,889 (1,159,629) (825,609) 5,279,651
STOCKHOLDERS' EQUITY
Common stock.......................................... 109,713 109,713
Additional paid-in capital............................ 17,209,042 17,209,042
Retained earnings (deficit)........................... (16,943,980) 579,891 (16,364,089)
Unearned compensation -- restricted stock............. (243,750) (243,750)
------------ ---------- -----------
TOTAL STOCKHOLDERS' EQUITY............................ 131,025 579,891 710,916
------------ ------------ ---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $ 7,395,914 $ (1,159,629) $ (245,718) $ 5,990,567
============ ============ ========== ===========
</TABLE>
VENUS EXPLORATION, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended December 31, 1998
1. BASIS OF PRESENTATION
The Unaudited Pro Forma December 31, 1998 Consolidated Balance Sheet is
presented assuming the sale of the properties occurred on December 31, 1998. The
Unaudited Pro Forma Consolidated Statements of Operations for the year-ended
December 31, 1998 is presented as if the sale of the properties occurred in the
prior period. The Unaudited Pro Forma Consolidated Financial Statements
3
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may not necessarily be indicative of the results which would actually have
occurred if the sale of the properties had been in effect of the date or for
the periods indicated.
2. PRO FORMA ADJUSTMENTS - STATEMENTS OF OPERATIONS
The pro forma adjustments to the Unaudited Pro Forma Consolidated
Statements of Operations reflect the following:
(a) DEPRECIATION, DEPLETION AND AMORTIZATION - The adjustment reflects
the pro forma depreciation, depletion and amortization expense based on the use
of adjusted capitalized costs and proved reserves.
(b) INCOME TAXES - No adjustments to income tax expense or benefit has
been reflected in the unaudited pro forma statements of operations due to the
net operating losses and the uncertainty of realizing deferred tax benefits.
(c) EARNINGS (LOSS) PER SHARE - The weighted average number of shares
of Common Stock outstanding is based on the number of shares outstanding.
Options and warrants outstanding are not reflected in the pro forma earnings
(loss) per share calculations because they would be anti-dilutive.
3. PRO FORMA ADJUSTMENTS - BALANCE SHEET
The pro forma adjustments to the Unaudited Pro Forma Consolidated
Balance Sheet reflect the following:
(a) NET OIL AND GAS PROPERTIES - The adjustment to Net Oil and Gas
Properties reflects the net book value of the properties sold.
(b) TRADE ACCOUNTS PAYABLE - The adjustments to Trade Accounts
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Payable reflect payments of accrued revenue payables and trade payables
attributable to the properties sold.
(c) CURRENT MATURITIES OF LONG-TERM DEBT, INCLUDING LONG-TERM DEBT
RECLASSIFIED AS CURRENT - The adjustments to current maturities of long-term
debt, including long-term debt reclassified as current reflect the paydown of
the debt that actually occurred when the properties were sold.
(d) RETAINED EARNINGS (DEFICIT) - The adjustment to Retained Earnings
(Deficit) reflects the effect on the accumulated deficit of the sale of the
properties.
(c) Exhibits.
2.1 Asset Purchase Agreement among Venus Exploration,
Inc., Allegheny Interests, Inc. and Meridian
Exploration Corporation, dated January 26, 1999.
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<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
VENUS EXPLORATION, INC.
By: /s/ PATRICK A. GARCIA
--------------------------------------
Name: Patrick A. Garcia
Title: Chief Financial Officer
Dated: April 12, 1999
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<PAGE> 7
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT
<S> <C>
2.1 Asset Purchase Agreement among Venus Exploration, Inc., Allegheny Interests,
Inc. and Meridian Exploration, Inc., dated January 26, 1999.
</TABLE>
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ASSET PURCHASE AGREEMENT
AMONG
VENUS EXPLORATION, INC.,
A DELAWARE CORPORATION
AND
ALLEGHENY INTERESTS, INC.,
AND
MERIDIAN EXPLORATION CORPORATION
DELAWARE CORPORATIONS
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into this
26th day of January, 1999 by and between VENUS EXPLORATION, INC., a
Delaware corporation ("Seller") and ALLEGHENY INTERESTS, INC. and MERIDIAN
EXPLORATION CORPORATION, Delaware corporations (collectively "Purchaser").
BACKGROUND
Seller is the owner of certain assets which Seller desires to
sell and transfer to Purchaser and Purchaser desires to purchase and receive
from Seller for the consideration and upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, for and in consideration of the promises and
of the mutual agreements hereinafter set forth, the parties hereto agree as
follows:
SECTION 1. TRANSFER OF ASSETS. Upon and subject to the terms
and conditions set forth in this Agreement, Seller hereby agrees to transfer,
convey and assign to Purchaser on the date provided in Section 2 hereof, free
and clear of all liens, pledges, and encumbrances of every kind, character, and
description created by Seller, and Purchaser agrees to purchase and acquire
from Seller on the said date, the Interests (as "Interests" are defined in
Section 1.1 of this Agreement).
1.1 INTERESTS DEFINED. As used herein, the term
"Interests" means the aggregate of all right, title and interest owned by
Seller in, to and under the following:
A. The oil, gas and mineral leases and the operating
rights, mineral interests, royalty interests, overriding royalty interests,
payments out of production and interests in or under unit agreements described
in Exhibit A (the "Leases"), insofar as the Leases cover and relate to the
lands and depths also described in Exhibit A (the "Land");
B. All other contracts, (including but not limited
to operating agreements, gas purchase contracts and crude oil purchase
contracts) agreements, leases, licenses, permits, easements and orders directly
related to the Leases or the Land, the operations conducted or to be conducted
thereon, or the production, treatment, sale or disposal of hydrocarbons or
water produced therefrom or attributable thereto;
C. All wells (including, without limitation,
disposal, supply or injection wells), personal property, fixtures (including,
without limitation, plants, gathering systems, pipelines, compressors and
dehydration and other treatment facilities), equipment (including, without
limitation, inventory and supplies) and improvements as of the date of
execution of this Agreement and as of the Closing Date located on the Leases or
the Land, or upon lands pooled or unitized therewith, or upon lands covered by
said agreements, licenses or
<PAGE> 3
easements, or used or obtained in connection therewith or with the operation or
maintenance thereof or with the production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, and all
original books, files, seismic records and tapes (to the extent Seller may
convey ownership or rights concerning the use of same), other records and
information of Seller (including without limitation all land, geological,
geophysical and accounting files and records) pertaining in any way to the
Interests.
D. All of Seller's right, title and interest in the
XC 1990 Special Credit Drilling Partnership, Ltd., a limited partnership
organized and existing under the laws of the State of Colorado (the
"Partnership"), including, but not limited to Seller's ownership of partnership
units therein, and, to the extent Seller can convey such rights, the right to
serve in the capacity of the Managing General Partner of the Partnership, and
the right to serve as operator of the Partnership properties.
Meridian Exploration Corporation shall be the Purchaser of Seller's interests
in the Partnership. Allegheny Interests, Inc. shall be the Purchaser of all
other property, real, personal or mixed, included within the Interests.
1.2 LIMITED ASSUMPTION OF LIABILITIES. Purchaser
shall assume and discharge as they become due, the liabilities and obligations
accruing from and subsequent to the Closing Date pursuant to the Leases, the
contracts, agreements, licenses, permits, easements and orders, and the wells,
all as more fully defined at Section 1.1 as to the Interests, and no others,
excluding any such liability arising due to the malfeasance of Seller, or due
to a breach of such instruments by Seller prior to Closing.
SECTION 2. THE CLOSING. The sale and purchase provided in
this Agreement shall be closed on the 27th day of January, 1999. The law
firm of Sherrard, German & Kelly, P.C. shall serve as the settlement firm
("Closing Escrow Agent"). All documents required by both Seller and Purchaser
for Closing shall be deposited with the Closing Escrow Agent on or before the
Closing Date. At such time as Seller notifies the Closing Escrow Agent that the
consideration has been received by wire transfer at Seller's depository bank,
the Closing Escrow Agent shall be authorized to release to Purchaser the
transfer instruments and related documents transferring title to the Interests
to Purchaser. The date and event of the sale and purchase are, respectively,
hereinafter referred to as the "Closing Date" and the "Closing."
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SECTION 3. PAYMENT OF CONSIDERATION.
3.1 BASIC AMOUNT. The purchase price for the
Interests, subject to adjustment as provided in this section, shall be One
Million One Hundred Seventy Thousand Dollars (U.S.) ($1,170,000.) (the
"Purchase Price"), which shall be paid by Purchaser on the Closing Date in
immediately available funds.
3.2 ADJUSTMENTS IN PURCHASE PRICE. The Purchase
Price shall be decreased by an amount equal to the proceeds received by the
Seller for the sale of hydrocarbons produced and sold from the Leases since the
chart changing, which occurred on or about 8:00 o'clock a.m. prevailing time,
December 1, 1998 (the "Effective Time"). The Purchase Price shall be increased
by the value of the oil in the tanks at the Effective Time, which value shall
be determined by the actual proceeds received by the Seller via its sale of
such oil following Closing, net of landowner royalty and any other burdens on
production, and the Seller's reasonable expenses required to market said oil
following Closing, including transportation.
3.3 INTENTIONALLY LEFT BLANK.
3.4 CLOSING STATEMENT. Seller shall deliver to
Purchaser on or before the Closing Date a statement in the form attached hereto
as Exhibit 3.4 (the "Closing Statement") setting forth the adjustments to the
Purchase Price provided in Section 3.2. The Closing Statement shall be prepared
in accordance with customary accounting principles used in the oil and gas
industry.
SECTION 4. CLOSING DOCUMENTS.
4.1 DOCUMENTS TO BE DELIVERED BY THE SELLER. Seller
agrees to deliver to the Purchaser at the Closing the following, which shall be
in form and substance satisfactory to Purchaser and its counsel:
A. Such bills of sale, deeds, assignments, and
executed counterparts of assignment and assumption agreements, as shall be
reasonably necessary, in the opinion of counsel for Purchaser, to transfer to
Purchaser all of the Interests with covenant of special warranty of title only,
together with written consents of all parties whose consent to such assignment
is required. The assignment of Interests by Seller and the assignment of
Seller's interest in the Partnership shall be substantially in the forms
attached hereto as Exhibit 4.1.A. Other than the special warranty of title, the
Interests will be sold "AS IS," with all faults, and without warranties of
merchantability or fitness for a particular purpose.
B. Any documents needed to be filed with state
authorities to record the change of operator of the Wells.
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<PAGE> 5
C. A copy of all of the Seller's books and records
and other data relating to the Interests:
D. A copy, certified as of the date of the Closing
by the Secretary of the Seller, of the resolutions of the Seller's Board of
Directors, authorizing the execution, delivery and performance of this
Agreement and the related documents; and
E. Incumbency certificates, dated the date of
Closing, executed by the Secretary of the Seller, which shall certify by name
and title and bear the signature of the officers of the Seller, respectively,
authorized to sign this Agreement and the related documents.
4.2 DOCUMENTS TO BE DELIVERED BY PURCHASER.
Purchaser agrees to deliver to Seller at the Closing the following documents
which shall be in form and substance satisfactory to the Seller, and its
counsel:
A. The Purchase Price;
B. A copy, certified as of the date of Closing by
the Secretary of Purchaser, of the resolutions of the Purchaser's Board of
Directors, authorizing the execution, delivery and performance of this
Agreement and the related documents; and
C. An incumbency certificate, dated the date of the
Closing, executed by the Secretary of Purchaser, which shall certify by name
and title and bear the signature of the officers of Purchaser authorized to
sign this Agreement and the related documents.
SECTION 5. ACCESS TO PROPERTIES AND RECORDS. From and after
the date of this Agreement, Seller shall afford to the officers, attorneys,
accountants, and other authorized representatives of Purchaser free and full
access to the wells, equipment, properties, books and records of the Seller
relating to the Interests in order that Purchaser may have full opportunity to
make whatever investigation it shall desire of the Interests, provided that the
investigation shall not unreasonably interfere with the operations of the
Seller.
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<PAGE> 6
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants unto Purchaser that as of the date hereof:
6.1 DUE ORGANIZATION.
A. Seller is a corporation duly organized and in
good standing under the laws of the State of Delaware. Seller has the power to
own its properties and assets and to carry on its business as now conducted,
and is duly qualified to do business and is in good standing in every
jurisdiction in which the nature of its business makes proper qualification
necessary.
B. To the actual knowledge, information and belief
of Seller, the Partnership is a limited partnership duly organized and in good
standing under the laws of the State of Colorado, and the Partnership has the
power to own its properties and assets and to carry on its business as now
conducted, and is duly qualified to do business and is in good standing in
every jurisdiction in which the nature of its business makes proper
qualification necessary.
6.2 AUTHORITY. Seller has full power and authority
to execute and deliver this Agreement and to perform all of its obligations
hereunder in accordance with the terms hereof; all necessary corporate action
to authorize this Agreement and the consummation of the transactions
contemplated hereby on the part of Seller has been duly and effectively taken,
including without limitation, the approval thereof by the Board of Directors of
Seller; and this Agreement constitutes the valid and binding obligation of
Seller enforceable in accordance with its terms.
6.3 INTENTIONALLY LEFT BLANK.
6.4 OIL AND GAS LEASES, REAL ESTATE LEASES AND
RELATED RIGHTS. To the actual knowledge, information and belief of Seller, the
Seller is, to the extent described in Exhibit A, lessee or holder under the
real estate leases, oil and gas leases, including but not limited to leases
included within all drilling pools and units, rights-of-way and easements which
are included among the Interests, all of which real estate leases, oil and gas
leases, rights-of-way and easements are described on Exhibit A. To the actual
knowledge, information and belief of Seller, the Seller and/or the Partnership,
as applicable, now enjoys and on the Closing Date will enjoy quiet and
undisturbed possession under each of said leases, rights-of-way and easements
to the extent described in Exhibit A. To the actual knowledge, information and
belief of Seller, the Seller and/or the Partnership, as applicable, is vested
with good and marketable title to each of said real estate leases, oil and gas
leases, rights-of-way and easements. To the actual knowledge, information and
belief of Seller, all landowner royalties, overriding royalties, net profit
interests, oil payments and any and all other burdens on production, which
burdens are reflected in the percentage interests set forth on Schedule 6.5,
are in full force and effect, and all payments due thereon will be fully and
timely paid at or prior to Closing.
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<PAGE> 7
6.5 WELLS. To the actual knowledge, information and
belief of Seller, Schedule 6.5 contains a true, correct and complete list of
all oil and gas wells in which the Seller and/or the Partnership, as
applicable, has an interest which are among the Interests, including the
percentage and type of interest therein, provided, however, Seller makes no
warranties regarding such interest, other than the special warranty provided
for elsewhere herein.
6.6 OWNED AND LEASED TANGIBLE PERSONAL PROPERTY.
Attached hereto as Schedule 6.6 is an inventory of all items of tangible,
personal property and equipment included within the Interests. To the actual
knowledge, information and belief of Seller, title to all of such owned
equipment and fixtures and other items of tangible personal property is held by
the Seller and/or the Partnership, as applicable, free and clear of any claim,
lease, mortgage, security interest, conditional sale agreement or other title
retention agreement, restriction or lien or encumbrance of any kind or nature
whatsoever, except as set forth on Schedule 6.6.
6.7 INTENTIONALLY LEFT BLANK.
6.8 TAXES. To the actual knowledge, information and
belief of Seller, Seller and/or the Partnership, as applicable, has timely and
properly filed all tax returns and reports and forms which it is or has been
required to file, either on its own behalf or on behalf of the Partnership or
other persons or entities related to the ownership and/or operation of the
Interests, including but not limited to sales, use, occupation, property,
excise, ad valorem and severance taxes, all such returns and reports and forms
being true and correct and complete in all respects, and has paid or will pay
at or prior to Closing or when such taxes become due, all taxes, including
penalties and interest, if any, which have or will become due pursuant to such
returns or reports or forms or pursuant to assessments relating to the
ownership and/or operation of the Interests by Seller and/or the Partnership.
6.9 OPERATING AGREEMENTS. To the actual knowledge,
information and belief of Seller, attached hereto, made part hereof and marked
Schedule 6.9 is a true and correct schedule listing all of the operating
agreements to which the Seller or the Partnership is a party, which are
included among the Interests (the "Operating Agreements"). To the actual
knowledge, information and belief of Seller, neither the Seller nor the
Partnership is in default under any of the Operating Agreements, no claim of
default thereunder has been asserted against the Seller or the Partnership and
no party to any of the Operating Agreements has, through the date of execution
of this Agreement by Seller, advised Seller or the Partnership in writing of
any proposed amendment to, or requested in writing any change in the operating
fees payable under the Operating Agreements. Except as disclosed herein, to the
actual knowledge, information and belief of Seller, no condition or state of
facts exists which, with notice or the passage of time or both, would
constitute a default under any of said Operating Agreements, as to time or
manner of performance, or as to warranties thereunder, or otherwise, except as
indicated on Schedule 6.9. To the actual knowledge, information and belief of
Seller, all preferential rights to purchase provided for in the Operating
Agreements and which are made effective by the transactions contemplated
hereunder are indicated on Schedule 6.9.
-7-
<PAGE> 8
6.10 PROCESSING, SALE AND TRANSPORTATION OF
PRODUCTION. Except as described in Schedule 6.10, to the actual knowledge,
information and belief of Seller, neither the Seller nor the Partnership has
produced or sold gas subject to balancing rights of third parties (including
without limitation other owners of interests in the Land and purchaser of
production therefrom) or subject to balancing duties under governmental
requirements, and neither the Seller nor the Partnership is obligated by virtue
of any prepayment made under any production sales contract or any other
contract containing a take-or-pay clause, or under any similar arrangement, to
deliver oil, gas or other minerals produced from or allocated to any of the
Interests at any time after the Effective Time without receiving full payment
therefor at the time of delivery. Except as described in Schedule 6.10, to the
actual knowledge, information and belief of Seller, neither the Seller nor the
Partnership has collected any proceeds from the sale of hydrocarbons produced
from the Interests which are subject to refund. Except as set forth in Schedule
6.10, to the actual knowledge, information and belief of Seller, proceeds from
the sale of oil, gas and natural gas liquids from the Interests are being
received by the Seller and the Partnership in a timely manner and are not being
held in suspense for any reason. To the actual knowledge, information and
belief of Seller, Seller has described in Schedule 6.10 and made available to
Purchaser for examination all contracts and agreements pursuant to which
hydrocarbons produced from the Interests are treated, compressed, sold,
transported, processed or otherwise disposed of or marketed. Except as
disclosed in Schedule 6.10, to the actual knowledge, information and belief of
Seller, no person has any call upon, option to purchase or similar rights with
respect to the Interests or to the production therefrom.
6.11 ENVIRONMENTAL MATTERS. Except as disclosed in
Schedule 6.11, to the actual knowledge, information and belief of Seller (i)
neither the Seller nor the Partnership, with respect to its respective
ownership or operation of the Interests has placed or caused to be placed any
Hazardous Substance or Hazardous Waste upon or within the properties included
within the Interests and as such the Seller and the Partnership are currently
in compliance with all applicable environmental laws and (ii) neither the
Seller nor the Partnership have materially violated any applicable
environmental law in effect prior to the date hereof. As used in this
Agreement, the terms (i) "Environmental Laws" include but are not limited to
any federal, state or local law, statute, charter or ordinance, and any rule,
regulation, binding interpretation, binding policy, permit, order, court order
or consent decree issued pursuant to any of the foregoing, which pertains to,
governs or otherwise regulates any of the following activities, including
without limitation (a) the emission, discharge, release or spilling of any
substance into the air, surface water, groundwater, soil or substrata; (b) the
manufacturing, processing, sale, generation, treatment, storage, disposal,
labeling or other management of any waste, hazardous substance or hazardous
waste, and (ii) "Hazardous Substance" and "Hazardous Waste," include any
substance defined as such by an applicable environmental law. To the actual
knowledge, information and belief of Seller, there is currently no
environmental liability in connection with the Interests arising under
Environmental Laws. To the actual knowledge, information and belief of Seller,
there are currently no underground storage tanks whatsoever, including, but not
limited to underground gasoline tanks, brine tanks or any other storage tank
that would hold any and all liquid or gaseous products.
-8-
<PAGE> 9
6.12 REGULATORY JURISDICTION. To the actual
knowledge, information and belief of Seller, neither the ownership nor the
operation of the Interests by the Seller is currently subject to certificate
authority or rate regulation under the Natural Gas Act or the Natural Gas
Policy Act as an interstate pipeline, natural gas company, marketing affiliate
or other federally jurisdictional entity, nor subject to certificate authority
or rate regulation under the applicable law of the State of West Virginia as a
public utility.
6.13 NO ADVERSE CHANGES. Except as set forth on
Schedule 6.13 hereto, since the Effective Time, there has not been:
A. any mortgage or pledge of, or creation of any
lien, pledge, charge, security interest or encumbrance respecting, the
Interests, except for liens of current property taxes not yet due and payable;
B. any damage, theft, destruction or casualty loss,
whether or not covered by insurance, adversely affecting the interests;
C. any sale, lease, transfer or assignment of the
Interests;
D. any loss, waiver or release of any material
rights of the Seller with respect to the Interests, whether or not in the
ordinary course of business or consistent with past practice;
E. the negotiation or execution of any arrangement,
agreement or understanding with respect to the Interests to which the Seller is
a party which cannot be terminated on notice of thirty days or less without
cost or penalty;
F. any work performed or materials furnished to the
Seller or the Partnership which could result in the creation of a mechanic's,
materialmen's or other lien against all or any portion of the Interests; or
G. any other transaction, contract or commitment
entered into by the Seller with respect to the Interests otherwise than in the
ordinary course of business.
6.14 CLAIMS OR LITIGATION. Except as disclosed in
Schedule 6.14, to the actual knowledge, information and belief of Seller, there
is neither any suit, action, claim, investigation or other proceeding pending
or threatened before any court or governmental agency, board, department,
commission, bureau, or instrumentality (including but not limited to any
federal, state, local or foreign governmental agency or body concerned with the
control of foreign exchange, energy, environmental protection or pollution
control, franchising or other distribution arrangements, antitrust or trade
regulation, civil rights, labor or discrimination, safety
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or health, zoning or land use), against the Seller or the Partnership or, to
the actual knowledge and belief of Seller, any state of facts existing which
could give rise to any such proceedings; and neither Seller nor the Partnership
is in violation of any order, decree or judgment of any court or arbitration
tribunal or governmental board, department, commission, bureau, instrumentality
or agency which would adversely affect the Interests.
6.15 COMPLIANCE WITH LAWS. To the actual knowledge,
information and belief of Seller, Seller and the Partnership have complied in
all material respects with all applicable laws, statutes, rules and
regulations, orders and engineering standards of federal, state, local and
foreign governments and governmental agencies applicable to the Interests and
no claim of violation (or basis therefor) of any such laws or regulations
exists on the date hereof.
6.16 LICENSES AND PERMITS. To the actual knowledge,
information and belief of Seller, Seller has provided to Purchaser all material
licenses, franchises, permits and other authorizations from federal, state,
local and other governmental or administrative authorities (an "Authority")
within Seller's possession, custody or control applicable to its assets,
properties, business and operations or necessary for the conduct of its
business (the "Permits"). To the actual knowledge, information and belief of
Seller, Schedule 6.16 hereto sets forth a true, complete and correct list of
all such Permits held or used, and true and complete copies thereof have
heretofore been made available to the Purchaser. Except as set forth in
Schedule 6.16, Seller has received no outstanding violations, notices of
noncompliance therewith, judgments, consent decrees, orders or judicial or
administrative actions(s) or proceeding(s) affecting any of said Permits, and,
to the actual knowledge, information and belief of Seller, no condition exists
and no event has occurred which (whether with or without notice, lapse of time
or the occurrence of any other event) would permit the suspension or revocation
of any of said Permits other than by expiration of the term set forth therein.
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6.17 CONSENTS AND APPROVALS. Except as set forth on
Schedule 6.17 hereto, to the actual knowledge, information and belief of
Seller, there are no authorizations, consents, approvals or notices required to
be obtained or given by the Seller or the Partnership or waiting periods
required to expire, in order that the Interests be transferred to Purchaser and
otherwise that this Agreement and the transactions provided for herein may be
consummated by either Seller or the Purchaser.
6.18 DISCLOSURE. To the actual knowledge,
information and belief of Seller, neither this Agreement nor any other
document, certificate, exhibit, statement, or schedule furnished or to be
furnished by or on behalf of the Seller to Purchaser in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the factual statements contained therein, in light of the circumstances
under which made, not misleading.
6.19 CONFLICTS. The execution and delivery of this
Agreement by Seller does not, and the consummation of the transactions
contemplated by this Agreement shall not, (a) violate or be in conflict with,
or require the consent of any person or entity under any provision of the
governing documents of the Seller, (b) conflict with, result in a breach of, or
constitute a default (or an event that with the lapse of time or notice, or
both would constitute a default) under any agreement or instrument to which
Seller is a party, (c) violate any provision of or require any consent,
authorization or approval under any judgment, decree, judicial or
administrative order, award, writ, injunction, statute, rule or regulation
applicable to Seller, or (d) result in the creation of any lien, charge or
encumbrance on any of the Interests.
6.20 ENFORCEABILITY. This Agreement has been duly
executed and delivered by Seller and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, reorganization or moratorium statutes,
or other similar laws affecting the rights of creditors generally or equitable
principles (collectively, "Equitable Limitations"). At the Closing all
documents and instruments required hereunder to be executed and delivered by
Seller shall be duly executed and delivered and shall constitute its legal,
valid and binding obligations enforceable in accordance with their terms,
except as enforceability may be limited by Equitable Limitations.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants unto Seller that:
7.1 DUE ORGANIZATION. Each of Meridian Exploration
Corporation and Allegheny Interests, Inc. is a corporation duly organized and
existing and in good standing under the laws of the State of Delaware.
7.2 AUTHORIZATION. Each of Meridian Exploration
Corporation and Allegheny Interests, Inc. has full power, in accordance with
law, to execute and perform this
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Agreement, and such execution and performance does not conflict with any
charter or bylaw provision of either Purchaser or with any contract to which
either Purchaser is a party, or to which it is subject. The Board of Directors
of each Purchaser has authorized, or before the Closing shall have authorized,
this Agreement, the transactions contemplated herein, and their execution by
each Purchaser.
7.3 ENFORCEABILITY. This Agreement has been duly
executed and delivered on behalf of each Purchaser, and constitutes a legal,
valid and binding obligation of it enforceable in accordance with its terms,
except as enforceability may be limited by Equitable Limitations. At the
Closing all documents required hereunder to be executed and delivered by each
Purchaser shall be duly executed and delivered and shall constitute legal,
valid and binding obligations of each Purchaser enforceable in accordance with
their terms, except as enforceability may be limited by Equitable Limitations.
7.4 CONFLICTS. The execution and delivery of this
Agreement by each Purchaser does not, and the consummation of the transactions
contemplated by this Agreement shall not, (a) violate or be in conflict with,
or require the consent of any person or entity under any provision of either
Purchaser's Certificate of Incorporation, bylaws or other governing documents,
(b) conflict with, result in a breach of, constitute a default (or an event
that with the lapse of time or notice, or both, would constitute a default)
under any agreement or instrument to which either Purchaser is a party or is
bound, or (c) violate any provision of or require any consent, authorization or
approval under any judgment, decree, judicial or administrative order, award,
writ, injunction, statute, rule or regulation applicable to either Purchaser.
SECTION 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
liability of Seller and Purchaser under each of their respective
representations and warranties contained in this Agreement shall survive the
Closing and execution and delivery of the assignments contemplated hereunder,
but only for a period of one (1) year from the Closing Date, subject to the
limitations contained in Section 6.20; provided, however, that notwithstanding
any other provisions of this Agreement, representations and warranties made
with respect to taxes shall survive throughout the applicable statute of
limitations period(s) for such taxes.
SECTION 9. ADDITIONAL AGREEMENTS OF THE PARTIES.
9.1 EXAMINATION OF TITLE; TITLE DEFECTS.
From the date hereof to the Closing Date, Seller
shall provide Purchaser full opportunity to examine the Interests, including
but not limited to all records, files, reports and documents in Seller's
possession, custody or control pertaining to the Interests as Purchaser
reasonably may request.
Purchaser's examination of title shall be completed on or before
December 31, 1998.
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A "Title Defect" shall be deemed to include any lien, claim, defect,
encumbrance or deficiency such that the Seller or the Partnership does not have
good and marketable title to a particular item of the Interests, or such that
the net revenue interests of the Seller or the Partnership are otherwise less
than, or the working or cost bearing interests of the Seller or the Partnership
are otherwise more than those set forth in Exhibit A, provided, no Permitted
Encumbrance shall constitute a Title Defect. "Permitted Encumbrances" are,
except as otherwise provided herein, comprised of (i) royalties, overriding
royalties, production payments and other burdens on production which do not
reduce the net revenue interest of an item of the Interests to less than the
interests set forth in Exhibit A and matters of public record, (ii) liens for
taxes, labor and materials where payment is not due, (iii) regulatory authority
of governmental agencies not presently or previously violated, easements,
surface leases and rights, plat restrictions, contractual burdens and similar
encumbrances, provided that they do not materially detract from the value or
increase the cost of operation of any item of the Interests, and (iv)
regulatory filings with and consents by regulatory authority if they are
customarily obtained subsequent to the sale or conveyance.
9.2 ENVIRONMENTAL AUDIT; ENVIRONMENTAL DEFECTS.
Purchaser may in its sole cost and discretion perform, or may have a third
party perform prior to Closing, an environmental audit of the Interests to
determine if there exist any conditions attributable to the Interests which
violate any Environmental Laws ("Environmental Defects"). The results of any
environmental audit will be issued on or before December 31, 1998.
9.3 NOTIFICATION OF DEFECTS. Seller and Purchaser
agree that the Purchase Price stated in Section 3.1 hereinabove reflects the
mutually agreed adjustment to the Purchase Price resulting from Purchaser's
report of Title Defects and Environmental Defects of which Purchaser has become
aware as of the date of execution of this Agreement.
9.4 DELIVERY OF BOOKS AND RECORDS. Seller shall
deliver to Purchaser, as soon as practicable after the Closing Date (but in no
event more than thirty (30) days after the Closing Date), all original,
unrestricted books, files, records and other information in the possession,
custody or control of Seller and Seller's disbursement agents (including,
without limitation, all land, geological, geophysical and applicable accounting
files, records and other material) relating to the Interests, or copies thereof
at Purchaser's expense. For a period of five (5) years after the Closing Date,
Purchaser shall permit Seller reasonable access to such files and records.
9.5 TRANSFER OF OPERATIONS. Seller shall use all
reasonable efforts to cause Meridian Exploration Corporation, its successors
and assigns, to be the Managing General Partner under the Partnership and to be
the designated operator under applicable contracts and regulatory orders of all
Wells, units and properties included in the Interests.
9.6 INSURANCE AND BONDS. Seller will, at its
expense, maintain in full force and effect until the Closing Date, all policies
of insurance and all surety and other bonds to which the Seller or the
Partnership is a party with respect to the Interests.
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9.7 FURTHER ASSURANCES. From time to time (whether
at or after Closing), as and when requested by the other, Seller and Purchaser
or their successors or assigns will execute, acknowledge and deliver all such
instruments and documents and take such other action as such parties may
reasonably deem necessary or desirable in order to more effectively consummate
the transactions contemplated hereby and to transfer to Purchaser the
Interests.
9.8 CONDEMNATION, CASUALTY LOSS OR CLAIMS. If, after
the execution of this Agreement, and prior to the Closing Date, any item of the
Interests is damaged or destroyed by fire or other casualty, is taken under the
right of eminent domain, or proceedings for such purposes are pending or
threatened, or if any item of the Interests is made the subject of any pending
or threatened suit, action or other proceeding before any court or governmental
agency, then the existence of such a circumstance shall be treated as if the
item of the Interests affected thereby were subject to a Title Defect;
provided, if Purchaser shall elect to waive such defects affected by damage,
destruction or other casualty, or taken under eminent domain, then all sums
paid to Seller or the Partnership by reason of the damage, destruction or
taking of such item of the Interests, and all of the right, title and interest
of the Seller or the Partnership in and to any unpaid awards or other payments
from third parties, and any claims, causes of action or demands against third
parties, arising out of such damage, destruction, taking or pending or
threatened taking, shall be assets of the Seller to which Purchaser shall be
entitled. Prior to the Closing Date, Seller shall not voluntarily compromise,
settle or adjust any such rights to awards or other payments, or any such
claims, causes of action or demands without the prior written consent of
Purchaser, provided, however, Seller may execute such instruments or documents
as may be required pursuant to the letter agreement dated September 17, 1998
between Seller and Mr. and Mrs. Ralph Auvil.
9.9 CONSENTS, PREFERENTIAL RIGHTS TO PURCHASE.
Promptly after execution hereof the Seller will proceed diligently to solicit
any consents to the transfers contemplated hereby which are required to be
obtained from third parties and will give all notices required by existing
contracts with respect to preferential rights to purchase on the part of third
parties and to obtain waivers of such preferential rights. Properties subject
to Preferential Rights are listed on Schedule 9.9. Any item of the Interests
which requires the consent of a third party for transfer where such consent
cannot be obtained prior to the Closing Date (other than routine consents
required in connection with federal and state leases), or which is subject to a
preferential right to purchase which has not expired and has not been waived
prior to the Closing Date, may, at Purchaser's option, be treated as an
excluded interest, and the Purchase Price shall be adjusted downward by the
agreed values of each such items of the Interests. Promptly upon receipt of any
written communication from a preferential rights holder in response to the
Seller's said notices, Seller shall give notice thereof by forwarding such
responses by facsimile transmission to Purchaser at Allegheny Interests, Inc.,
attention: Roland P. Keddie, fax number (412) 201-3087 and to Sherrard, German
& Kelly, P.C., fax number (412) 261-6221, attention: Joseph L. Robinson.
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<PAGE> 15
9.10 FINANCING CONTINGENCY. Purchaser's obligation
to purchase the Interests is contingent upon Purchaser securing financing
arrangements upon terms and conditions suitable to Purchaser. In the event that
such financing is not so secured on or before the Closing Date, Purchaser may
elect to close the transaction contemplated hereby, or may notify Seller of
Purchaser's election to terminate this Agreement. In the event of such
termination, all rights and liabilities of the parties hereunder shall cease
and determine with no liability on the part of either party to the other.
9.11 DISTRIBUTIONS. Seller will continue to perform
as operator, where applicable, (and as such is entitled to retain any operating
fees and expenses incurred) until Closing, and in such capacity, will make all
distributions to owners of the Interests and partners in the Partnership
applicable to production through the close of business on December 31, 1998. In
connection with such distributions, Seller will prepare and issue all necessary
and appropriate (a) Forms 1065, U.S. Partnership Return of Income, including
Schedules K-1, Partner's Share of Income, Credits, Deductions, and providing
each partner with his/her respective Schedule K-1, together with any required
state partnership income tax returns, and (b) all appropriate required Forms
1099, Information Returns, and Forms 1096, Annual Summary and Transmittal of
U.S. Information Returns. In the event that Seller is required to advance its
own funds in order to make distributions to the partners of the Partnership
applicable to production through the close of business on December 31, 1998,
then Purchaser shall reimburse Seller for the amount of any such advances.
9.12 TAX ESCROW. Seller and Purchaser recognize that
the assessments of the Interests which will be utilized for property taxes
assessed by the State of West Virginia were established in 1998 at such time as
Seller and the Partnership owned the Interests; that such taxes assessed prior
to the Effective Date are the liability of and will be paid by Seller and the
Partnership; that such taxes have not yet been invoiced and will be first
invoiced in 1999 after Purchaser has become the owner of the Interests; and
that as such owner, the State of West Virginia will invoice such taxes to
Purchaser. In order that the parties may provide for the payment of such taxes
by Purchaser for the account of Seller during 1999, Purchaser shall establish
an escrow account at Closing. The amount of funds to be deducted from the
consideration due hereunder and retained by Purchaser shall be based upon prior
years' assessments. The amount of $ 12,924. reflected in the Closing Statement,
Exhibit 3.4 attached hereto, is intended to reflect 11/12ths of the property
taxes assessed as of July 1, 1998. It is the parties' intention that Seller is
liable for 11/12ths of said taxes and Purchaser is liable for 1/12th of said
taxes. Purchaser shall pay said taxes when invoiced, at the greatest discount
available. In the event that Purchaser has retained in escrow an amount in
excess of the amount invoiced and paid, Purchaser shall refund any such excess
to Seller immediately after payment. In the event that the actual amount of
such taxes due exceeds the amount retained in escrow by Purchaser, Purchaser
shall so notify Seller and Seller shall immediately remit any such deficiency
to Purchaser.
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SECTION 10. CONDITIONS TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser under this Agreement are, at the option of Purchaser,
subject to the conditions that, at or prior to the Closing Date:
10.1 EXECUTION OF AGREEMENT. This Agreement shall
have been signed by Seller obligating and committing Seller to sell to
Purchaser all of the Interests, and Seller shall at the Closing on the Closing
Date deliver to Purchaser all of the items in Section 4.1 of this Agreement and
Seller shall in addition fully comply with the terms and provisions hereof, it
being understood and agreed that the obligation of Purchaser to purchase the
Interests is conditioned upon performance hereunder by Seller.
10.2 COMPLIANCE. All of the terms, covenants, and
conditions of this Agreement to be complied with or performed by Seller at or
before the Closing Date shall have been duly complied with and performed.
10.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller set forth in Section 6 hereof shall be
true on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date. The
provisions of this paragraph shall be self executing, and Seller, by having
closed the sale of the Interests hereunder, shall be deemed conclusively to
have certified at Closing that all such representations and warranties were
true on and as of the Closing Date.
10.4 FINANCING. Purchaser shall have secured the
necessary financing of the Purchase Price as more fully addressed at Section
9.10 hereinabove.
10.5 NO ADVERSE EFFECT. The Interests shall not have
been materially adversely affected as a result of any fire, accident, or other
casualty or any act of God or the public enemy, unless they shall have been
protected and fully covered by insurance.
10.6 NO ADVERSE CHANGE. There shall have been no
changes in the Interests since the execution of this Agreement, other than
changes in the ordinary course of business that do not have a materially
adverse effect on the value of the Interests.
10.7 INTENTIONALLY LEFT BLANK.
10.8 AUTHORIZATIONS. All material authorizations,
approvals, and consents of any governmental authority or agency necessary in
connection with the sale and transfer of the Interests to Purchaser or for the
continued operation of the Interests in the manner in which the Interests are
now conducted after such transfer, shall have been secured.
10.9 CONSENTS. Seller shall have received all
material consents, permissions, novations and approvals by third parties
necessary for the sale and transfer of the Interests.
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10.10 LITIGATION. No action or proceeding shall have
been instituted or threatened to set aside the transactions provided for herein
or to enjoin or prevent the consummation thereof.
10.11 PREFERENTIAL RIGHTS. With respect to all
Interests which are subject to a preferential purchase right, either (a) such
preferential purchase rights shall have been waived or terminated by the
holders thereof or lapsed in accordance with their terms, or (b) the Seller
shall have received notice that the holder of such preferential purchase rights
intends to exercise such preferential purchase rights.
10.12 AMENDMENT OF PARTNERSHIP AGREEMENT/MANAGING
GENERAL PARTNER. Seller shall have provided Purchaser with (a) a true and
correct list of the names and addresses of all partners of the Partnership
according to Seller's internal records, (b) true and correct copies of all
notices forwarded to partners of the Partnership by which Seller sought to
amend the agreement of limited partnership of the Partnership, and (c) a true
and correct copy of all responses received by Seller in response to Seller's
said notices.
SECTION 11. CONDITIONS TO OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement are, at the option of Seller,
subject to the condition that, at or before the Closing Date, all the terms,
conditions, and covenants of this Agreement to be complied with and performed
by Purchaser at or before the Closing Date shall have been duly complied with
and performed.
SECTION 12. LIMITED LIABILITY OF SELLER. Notwithstanding
anything to the contrary contained in this Agreement, Seller shall have no
liability for any misrepresentation or breach of warranty under this Agreement
to the extent that the breach of warranty or the falsity of the representation
upon which such liability would be based is disclosed in any of the schedules
attached hereto, or for the Environmental Defects which were reported to Seller
by Purchaser's letter dated December 31, 1998, and as to which the parties have
agreed to an adjustment in the Purchase Price.
SECTION 13. INDEMNIFICATION BY PURCHASER. Purchaser shall
defend, indemnify and save Seller harmless from and against (a) any and all
claims, liabilities, damages, losses and expenses, including reasonable
attorneys' fees and expenses and costs of suit (collectively, "Losses"),
arising out of any and all inaccurate representations and out of any and all
breaches of covenants and warranties and stipulations and agreements and
certifications made by or on behalf of Purchaser in this Agreement or in any
document delivered hereunder, (b) any Losses suffered or incurred by Seller
arising from the ownership or operation of the Interests after the Closing by
Purchaser or any of its affiliates, including, without limitation, losses
attributable to Purchaser's noncompliance with any Environmental Laws, and (c)
any Losses
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suffered or incurred by Seller arising from the Environmental Defects as to
which Seller and Purchaser have agreed to an adjustment in the Purchase Price.
SECTION 14. ARBITRATION.
14.1 BINDING ARBITRATION. On the request of any
party hereto, whether made before or after the institution of any legal
proceeding, any action, dispute, claim or controversy of any kind now existing
or hereafter arising between any of the parties hereto in any way arising out
of, pertaining to or in connection with this Agreement (a "Dispute") shall be
resolved by binding arbitration in accordance with the terms hereof. Any party
may, by summary proceedings, bring an action in court to compel arbitration of
any Dispute.
14.2 GOVERNING RULES. Any arbitration shall be
administered in accordance with the terms of this Section and the Federal
Arbitration Act, 9 U.S.C. Sections 1 et seq. Judgment on any award rendered by
an arbitrator may be entered in any court having jurisdiction.
14.3 ARBITRATORS. Any arbitration shall be conducted
before one arbitrator. The arbitrator shall be a practicing attorney licensed
to practice in the State of West Virginia who is knowledgeable in the subject
matter of the Dispute selected by agreement between the parties hereto. If the
parties cannot agree on an arbitrator within 30 days after the request for an
arbitration, then any party may request the federal district court to select an
arbitrator. The arbitrator may engage engineers, accountants or other
consultants that the arbitrator deems necessary to render a conclusion in the
arbitration proceeding.
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14.4 CONDUCT OF ARBITRATION. To the maximum extent
practicable, an arbitration proceeding hereunder shall be concluded within 180
days of the filing of the Dispute. Arbitration proceedings shall be conducted
in Clarksburg, West Virginia. The arbitrator shall be empowered to impose
sanctions and to take such other actions as the arbitrator deems necessary to
the same extent a judge could impose sanctions or take such other actions
pursuant to the Federal Rules of Civil Procedure and applicable law. At the
conclusion of any arbitration proceeding, the arbitrator shall make specific
written findings of fact and conclusions of law. The arbitrator shall have the
power to award recovery of all costs and fees but not punitive damages to the
prevailing party. Each party agrees to keep all Disputes and arbitration
proceedings strictly confidential except for disclosure of information required
by applicable law.
14.5 COSTS OF ARBITRATION. All fees of the
arbitrator and any engineer, accountant or other consultant engaged by the
arbitrator, shall be paid by Purchaser and Seller equally unless otherwise
awarded by the arbitrator.
SECTION 15. EXPENSES. Seller shall pay its own expenses and
costs, including, without limitation, all counsel fees and transfer taxes, and
Purchaser shall pay its expenses and costs in connection with this Agreement
and the transactions contemplated hereby, including any counsel fees, and
recording costs.
SECTION 16. NOTICE. "Notice" means any notice, demand,
request, or other communication or document to be provided under this Agreement
to a party to this Agreement. The Notice shall be in writing and shall be given
to the party at its address or telecopy number set forth below or such other
address or telecopy number as the party may later specify for that purpose by
notice to the other party. Each Notice shall, for all purposes, be deemed given
and received:
A. If given by telecopy, when the telecopy is
transmitted to the party's telecopy number specified below and confirmation of
complete receipt is received by that transmitting party during normal business
hours or on the next business day if not confirmed during normal business
hours;
B. If hand delivered to a party against receipted
copy, when the copy of the notice is receipted;
C. If given by a nationally recognized and reputable
overnight delivery service, the day on which the notice is actually received by
the party; or
D. If given by any other means or if given by
certified mail, return receipt requested, postage prepaid, three (3) business
days after it is posted with the United States Postal Service, at the address
of the party specified below:
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If to Seller: Venus Exploration, Inc.
1250 N.E. Loop 410-Suite 1000
San Antonio, TX 78209
Telephone: 210-930-4900
Fax: 210-930-4901
Attention: John Y. Ames and John Sowell
If to Purchaser Meridian Exploration Corporation and
Allegheny Interests, Inc.
100 First Avenue, Suite 1100
Pittsburgh, PA 15222
Telephone: 412-201-3080
Fax" 412-201-3087
Attention: Michael C. Linn and Roland P. Keddie
If any Notice is sent by telecopy, the transmitting party may
as a courtesy send a duplicate copy of the Notice to the other party by regular
mail. In all events, however, any Notice sent by telecopy transmission shall
govern all matters dealing with delivery of the Notice, including the date on
which the Notice is deemed to have been received by the other party.
The provisions above governing the date on which a Notice is
deemed to have been received by a party to this Agreement shall mean and refer
to the date on which a party to this Agreement, and not its counsel or other
recipient to which a copy of the Notice may be sent, is deemed to have received
the Notice.
If Notice is tendered under the provisions of this Agreement
and is refused by the intended recipient of the Notice, the Notice shall
nonetheless be considered to have been given and shall be effective as of the
date provided in this Agreement.
SECTION 17. MISCELLANEOUS
17.1. BROKER'S FEES - SELLER'S INDEMNIFICATION.
Seller shall indemnify Purchaser against, and hold it harmless from, any and
all liabilities, including, without limitation, counsel fees and other costs of
defending against liabilities for a brokerage commission, to any person, firm,
or corporation for any brokerage commission or finder's fee in connection with
any of the transactions contemplated by this Agreement, arising out of acts by
the Seller.
17.2. BROKER'S FEES - PURCHASER'S INDEMNIFICATION.
Purchaser shall indemnify the Seller against, and hold it harmless from, any
and all liabilities, including, without limitation, counsel fees and other
costs of defending against liabilities for a brokerage commission, to any
person, firm, or corporation for any brokerage commission or finder's fee in
connection with any of the transactions contemplated by this Agreement, arising
out of acts by Purchaser.
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17.3 INTEGRATION. This instrument contains the
entire agreement between the parties hereto with respect to the transaction
contemplated hereby and shall not be changed or terminated except by written
amendment signed by the parties hereto. Neither party has made any
representations to the other except as set forth in this Agreement or in the
schedules hereto.
17.4 EXHIBITS AND SCHEDULES. All exhibits and
schedules referred to herein are attached hereto and by this reference made a
part hereof.
17.5 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, and all counterparts executed by Purchaser and
Seller together shall constitute one and the same agreement, and it shall not
be necessary for Purchaser and Seller to execute the same counterpart hereof.
17.6 BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, no permitted assignment by any party shall
relieve such party of any of its obligations hereunder.
17.7 SECTION HEADINGS. The section headings
contained in this Agreement are for convenient reference only and shall not in
any way affect the meaning or interpretation of this Agreement.
17.8 SUPERSEDING EFFECT. This Agreement supersedes
any prior agreement and understanding between the parties with respect to the
subject matter of this Agreement.
17.9 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of West Virginia
applicable to contracts made and performed entirely therein.
17.10 WAIVERS. No party's rights hereunder will be
deemed waived except by a writing signed by such party. Without limitation, the
occurrence of the Closing shall not be deemed a waiver of any party's rights
except its right to refuse to close.
17.11 TIME. Time shall be of the essence with
respect to all rights and obligations of Seller and Purchaser regarding due
diligence hereunder.
17.12 CONSTRUCTION. This Agreement shall not be
construed against the party preparing it, but shall be construed as if both
parties prepared this Agreement. This Agreement is not intended to confer any
rights or remedies upon any other persons who or which are not parties hereto.
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<PAGE> 22
17.13 ASSIGNMENT. Neither Seller nor Purchaser may
assign its rights or delegate its duties or obligations arising under this
Agreement, in whole or in part, by operation of law or otherwise, before
Closing, without the prior written consent of Purchaser; with the following
exception: Allegheny Interests, Inc. desires to exchange other property of like
kind and qualifying use within the meaning of Section 1031 of the Internal
Revenue Code of 1986, as amended, and the Regulations promulgated thereunder,
for title in the Interests which are the subject of this Agreement which will
be acquired by Allegheny Interests, Inc. Allegheny Interests, Inc. expressly
reserves the right to assign its rights, but not its obligations, hereunder to
a Qualified Intermediary as provided in IRC Reg. 1.1031(k)-1(g)(4) on or before
the Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
ATTEST: SELLER:
VENUS EXPLORATION, INC.
By: /s/ John H. Sowell III By: /s/ John Y. Ames
------------------------------- -------------------------------------
Secretary President
ATTEST: PURCHASER:
ALLEGHENY INTERESTS, INC.
By: /s/ Melanie Mochan By: /s/ Roland P. Keddie
------------------------------- -------------------------------------
VP Finance Vice President
MERIDIAN EXPLORATION
CORPORATION
By: /s/ Melanie Mochan By: /s/ Roland P. Keddie
------------------------------- -------------------------------------
VP Finance Vice President
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