<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DECEMBER 31, 1999
(DATE OF REPORT) (DATE OF EARLIEST EVENT REPORTED)
VENUS EXPLORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-14334 13-3299127
(COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
1250 N.E. 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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<PAGE> 2
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On December 31, 1999, Venus Exploration, Inc., (the "Company") sold its
entire 50% share of properties owned by EXUS Energy, LLC ("EXUS"). The Company
acquired its interest in EXUS on June 30, 1999, and information related to the
acquisition is provided in the Company's Current Report on Form 8-K, as amended,
dated June 30, 1999. EXUS owned an interest in certain oil and natural gas
properties located in Jackson Parish, Louisiana (the "Jackson Parish
Properties"). The Jackson Parish Properties included 17 gross (14.25 net to
EXUS) producing wells and one well in process of being drilled, and also
included 6,410 gross (5,672 net to EXUS) developed acres and 1,530 gross (1,148
net to EXUS) undeveloped acres. The buyer was Anadarko Petroleum Corporation. To
effect the sale, EXUS distributed the Jackson Parish Properties to Venus and
EXCO Resources, Inc. ("EXCO"), the two 50% owners of EXUS, and Venus and EXCO
then sold their undivided interest on December 31, 1999. The instruments of
conveyance were executed and delivered into escrow on and dated as of December
31, 1999. The Cash consideration was paid to the escrow agent on January 6,
2000. The conveyance documents were delivered by the escrow agent to Anadarko on
January 6, 2000. The payment of cash value was delayed due to the anticipation
of the potential for a Y2K disruption to the banking system. EXUS is currently
in the process of winding up its affairs and liquidating. The purchase price,
before closing adjustment, was $18.7 million and Venus expects to report a gain
on sale of approximately $4.3 million. The Company used $7.1 million of the net
proceeds to repay the Company's share of EXUS bank debt; $7 million to repay a
convertible note plus accrued interest of $369,444 owed to EXCO; $3.7 million
was applied to reduce the Company's outstanding bank debt, and the Company paid
a $250,000 prepayment penalty related to the prepayment of the EXCO convertible
note. The purchase price was determined through arms-length negotiation between
the parties.
ITEM 5. OTHER EVENTS
As previously reported in a news release dated November 17, 1999
(Exhibit 99.1), the Company's common stock has remained quoted on the Nasdaq
SmallCap Market pursuant to an exception from the net tangible asset requirement
granted by the Nasdaq SmallCap Market. The Company's net tangible assets have
been below the $2 million minimum required by the Nasdaq SmallCap Market rules
since December 31, 1998. Under the exception, the Company was required to file
by December 31, 1999, with the Securities and Exchange Commission and Nasdaq a
pro forma balance sheet as of November 30, 1999, reflecting net tangible assets
of at least $3.6 million. The November 30, 1999, balance sheet is required by
Nasdaq to contain pro forma adjustments for any significant events or
transactions occurring on or before the filing date of this Form 8-K. Nasdaq
subsequently extended the due date of the pro forma balance sheet to January 18,
2000.
In accordance with Nasdaq's request, the Company has prepared a balance
sheet as of November 30, 1999 (attached), including pro forma adjustments for
any significant events or transactions occurring on or before the filing date of
this Form 8-K. The pro forma adjustments relate to the Company's sale of its
interest in the Jackson Parish Properties discussed above under "Item 2.
Acquisition and Disposition of Assets". The information presented on the
attached November 30, 1999, pro forma balance sheet has not been audited by
independent accountants, but includes all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the November 30, 1999, balance sheet. This information is
provided solely for the purpose of complying with the requirements delineated by
Nasdaq pursuant to the exception granted to the Company on November 12, 1999.
The pro forma balance sheet as of November 30, 1999, reflects tangible
net assets of $3.3 million, which is $1.3 million above the $2 million minimum
required under Nasdaq listing requirements; however, it is $300,000 less than
the amount stipulated by Nasdaq in their exception letter as described above.
The Nasdaq Listing Qualifications Panel set the $3.6 million requirement to
ensure that the Company remained in compliance for some period into the future
and it was based on the panel's consideration of the Company's loss history.
2
<PAGE> 3
Concurrently with the filing of this Current Report on Form 8-K, the Company is
submitting to the Nasdaq Listing Qualifications Panel documentation as to why
the Company believes it can stay in compliance with Nasdaq listing requirements
with tangible net assets of $3.3 million as of November 30, 1999, on a pro forma
basis. It is uncertain whether the Panel will agree to allow the Company to
continue its Nasdaq SmallCap Market listing. As previously mentioned in the
Company's November 17, 1999, news release, if the Company's common stock should
cease to be listed on the Nasdaq SmallCap Market, the Company believes the
common stock will be eligible to be quoted on the OTC-Bulletin Board.
The documentation that the Company will be submitting to the Panel to
support the Company's belief that the Company can stay in compliance with the
Nasdaq listing requirements will include information related to the Company's
successful recompletion of the #1 Westbury Farms well discussed in a press
release dated November 17, 1999 (Exhibit 99.2). As discussed in the press
release, this well is located in the Constitution Field, Jefferson County,
Texas, a field in which the Company plans to drill several development wells in
2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
(1) Pro Forma Combined Financial Statements of Venus
Exploration, Inc. as of and for the nine months ended
September 30, 1999.
(2) Pro Forma Combined Balance Sheet of Venus
Exploration, Inc. as of November 30, 1999 (See
Item 5 for explanation).
(c) Exhibits.
Number Document
10.1 Purchase and Sale Agreement between Venus
Exploration, Inc. as seller, and Anadarko
Petroleum Corporation, buyer, dated
December 17, 1999.
99.1 News release dated November 17, 1999,
regarding Nasdaq SmallCap Listing.
99.2 News release dated November 17, 1999,
regarding results of recent drilling and
workover operations.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, 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
----------------------------------
Patrick A. Garcia
Chief Financial Officer
Dated: January 18, 2000
4
<PAGE> 5
Item 7(b)(1)
VENUS EXPLORATION, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
As discussed in Item 2. Other Events, on December 31, 1999, Venus
Exploration, Inc., (the "Company") sold its entire 50% share of properties owned
by EXUS Energy, LLC ("EXUS"). The Company acquired its interest in EXUS on June
30, 1999, and information related to the acquisition is provided in the
Company's Current Report on Form 8-K, as amended, dated June 30, 1999. EXUS
owned an interest in certain oil and natural gas properties located in Jackson
Parish, Louisiana (the "Jackson Parish Properties"). The Jackson Parish
Properties included 17 gross (14.25 net to EXUS) producing wells and one well in
process of being drilled, and also included 6,410 gross (5,672 net to EXUS)
developed acres and 1,530 gross (1,148 net to EXUS) undeveloped acres. The buyer
was Anadarko Petroleum Corporation. To effect the sale, EXUS distributed the
Jackson Parish Properties to Venus and EXCO Resources, Inc. ("EXCO"), the two
50% owners of EXUS, and Venus and EXCO then sold their undivided interest on
December 31, 1999. The instruments of conveyance were executed and delivered
into escrow on and dated as of December 31, 1999. The Cash consideration was
paid to the escrow agent on January 6, 2000. The conveyance documents were
delivered by the escrow agent to Anadarko on January 6, 2000. The payment of
cash value was delayed due to the anticipation of the potential for a Y2K
disruption to the banking system. EXUS is currently in the process of winding up
its affairs and liquidating. The purchase price, before closing adjustment, was
$18.7 million and Venus expects to report a gain on sale of approximately $4.3
million. The Company used $7.1 million of the net proceeds to repay the
Company's share of EXUS bank debt; $7 million to repay a convertible note plus
accrued interest of $369,444 owed to EXCO; $3.7 million was applied to reduce
the Company's outstanding bank debt, and the Company paid a $250,000 prepayment
penalty related to the prepayment of the EXCO convertible note. The purchase
price was determined through arms-length negotiation between the parties.
The accompanying pro forma combined balance sheet has been adjusted to
reflect the sale of the Company's interest in EXUS and the use of the net sales
proceeds to repay debt as if the sale had occurred on September 30, 1999. The
accompanying pro forma combined statement of operations for the nine months
ended September 30, 1999, has been adjusted to reflect the sale as of the
beginning of the period. Since the Jackson Parish Properties were acquired in
1999, pro forma statement of operations for the year ended December 31, 1998,
has been omitted.
The pro forma adjustments are based upon available information and
assumptions that management of the Company believes are reasonable. The pro
forma combined financial statements do not purport to represent the financial
position of the Company which would have occurred had the sale of its investment
in EXUS been consummated on September 30, 1999, or the Company's financial
position for any future date or period.
5
<PAGE> 6
VENUS EXPLORATION, INC
PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
IN THOUSANDS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current Assets
Cash and equivalents $ 187 $ $ 187
Accounts receivable 822 848 (1) 2,099
18,547 (2)
(18,118)(3)
Oil and gas properties, net 5,048 13,863 (1) 5,048
(13,863)(2)
Investment in EXUS Energy, LLP 7,224 (7,224)(1)
Other assets, net 271 40 (1) 271
(40)(3)
-------- -------- --------
Total Assets $ 13,552 $ (5,947) $ 7,605
======== ======== ========
Current Liabilities 5,949 665 (1) 2,733
125 (2)
(4,006)(3)
Note payable 6,862 (1)
(6,862)(3)
Convertible Notes 8,035 (7,035)(3) 1,000
Other long term obligations 20 20
-------- -------- --------
Total Liabilities 14,004 (10,251) 3,753
Stockholders' equity (452) (255)(3) 3,852
4,559 (2)
-------- -------- --------
Total Liabilities and Stockholders' Equity $ 13,552 $ (5,947) $ 7,605
======== ======== ========
</TABLE>
6
<PAGE> 7
VENUS EXPLORATION, INC.
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
IN THOUSANDS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
OIL AND GAS REVENUES $ 1,463 $ 1,463
EXPENSES
Production expense 710 710
Exploration expense 458 458
Depreciation, depletion and amortization 426 426
General and administration 1,602 1,602
-------- -------- --------
Total expenses 3,196 -- 3,196
-------- -------- --------
Operating profit (loss) (1,733) (1,733)
OTHER INCOME AND (EXPENSE)
Interest expense (551) 212 (4) (339)
Equity in net earnings from EXUS Energy, 278 (278)(5) --
LLC
Gain (loss) on sale of assets 496 496
Interest and other income, net 10 10
-------- -------- --------
233 (66) 167
-------- -------- --------
Net earnings (loss) $ (1,500) (66) $ (1,566)
======== ======== ========
Earnings (loss) per share $ (0.14) $ (0.14)
======== ======== ========
Common shares and equivalents outstanding,
basic and diluted 10,997 10,997
======== ========
</TABLE>
7
<PAGE> 8
VENUS EXPLORATION, INC.
NOTES TO UNAUDITED PRO FORMA
BALANCE SHEET AND STATEMENT OF OPERATIONS
IN THOUSANDS
(1) To record Venus 50% share of EXUS' assets and liabilities distributed
prior to the sale of the Jackson Parish Properties.
<TABLE>
<S> <C>
Accounts receivable $ 848
Oil and gas properties, net 13,863
Other assets 40
Interest Payable (114)
Other payables (551)
Note payable (6,862)
-------
Investment in EXUS $ 7,224
=======
</TABLE>
(2) To record sale of Jackson Parish Properties received as a distribution
from EXUS.
<TABLE>
<S> <C>
Net sales price $ 18,547
Cost basis in oil and gas properties, net (13,863)
Federal and state taxes (125)
--------
Gain on sale * $ 4,559
========
</TABLE>
* The gain on sale reflected in the November 30, 1999, pro forma
balance sheet under Item 7(b)(2) below is $214,000 less than the
pro forma gain on sale calculated above. This difference is due to
a higher cost basis in the oil and gas properties sold as a result
of additional costs incurred in October and November 1999.
(3) To record receipt of net sales price, repayment of debt and early
extinguishment of debt
<TABLE>
<S> <C>
Repayment of note received in distribution from EXUS $ 6,862
Repayment of EXCO convertible note 7,250
Amount applied to Venus' bank debt 3,716
Payment of accrued interest 290
-------
$18,118
=======
EXCO note prepayment penalty $ 250
Deferred interest (35)
Deferred financing cost 40
-------
Loss on early extinguishment of debt $ 255
=======
</TABLE>
(4) To remove $211,000 interest expense recorded related to the EXCO note
for the period June 30, 1999 (date of the note) through September 30,
1999.
(5) To remove equity in earnings from EXUS Energy, LLC of $278,000 recorded
for the period July 1, 1999 through September 30, 1999.
8
<PAGE> 9
Item 7(b)(2)
VENUS EXPLORATION, INC.
PRO FORMA COMBINED BALANCE SHEET AS OF NOVEMBER 30, 1999
(UNAUDITED)
As discussed in Item 2. Other Events, on December 31, 1999, Venus
Exploration, Inc., (the "Company") sold its entire 50% share of properties owned
by EXUS Energy, LLC ("EXUS"). The Company acquired its interest in EXUS on June
30, 1999, and information related to the acquisition is provided in the
Company's Current Report on Form 8-K, as amended, dated June 30, 1999. EXUS
owned an interest in certain oil and natural gas properties located in Jackson
Parish, Louisiana (the "Jackson Parish Properties"). The Jackson Parish
Properties included 17 gross (14.25 net to EXUS) producing wells and one well in
process of being drilled, and also included 6,410 gross (5,672 net to EXUS)
developed acres and 1,530 gross (1,148 net to EXUS) undeveloped acres. The buyer
was Anadarko Petroleum Corporation. To effect the sale, EXUS distributed the
Jackson Parish Properties to Venus and EXCO Resources, Inc. ("EXCO"), the two
50% owners of EXUS, and Venus and EXCO then sold their undivided interest on
December 31, 1999. The instruments of conveyance were executed and delivered
into escrow on and dated as of December 31, 1999. The Cash consideration was
paid to the escrow agent on January 6, 2000. The conveyance documents were
delivered by the escrow agent to Anadarko on January 6, 2000. The payment of
cash value was delayed due to the anticipation of the potential for a Y2K
disruption to the banking system. EXUS is currently in the process of winding up
its affairs and liquidating. The purchase price, before closing adjustment, was
$18.7 million and Venus expects to report a gain on sale of approximately $4.3
million. The Company used $7.1 million of the net proceeds to repay the
Company's share of EXUS bank debt; $7 million to repay a convertible note plus
accrued interest of $369,444 owed to EXCO; $3.7 million was applied to reduce
the Company's outstanding bank debt, and the Company paid a $250,000 prepayment
penalty related to the prepayment of the EXCO convertible note. The purchase
price was determined through arms-length negotiation between the parties.
The accompanying pro forma combined balance sheet has been adjusted to
reflect the sale, subsequent to November 30, 1999, of the Company's interest in
EXUS and the use of the net sales proceeds to repay debt.
The pro forma adjustments are based upon available information and
assumptions that management of the Company believes are reasonable. The pro
forma combined condensed balance sheet does not purport to represent the
financial position of the Company which would have occurred had the sale of its
investment in EXUS been consummated on November 30, 1999, or the Company's
financial position for any future date or period.
9
<PAGE> 10
VENUS EXPLORATION, INC
PRO FORMA COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1998
(UNAUDITED)
IN THOUSANDS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current Assets $ 1,219 $ (44)(1) $ 2,505
1,229 (2)
18,547 (3)
(18,446)(6)
Oil and gas properties, net 4,945 14,077 (2) 4,945
(14,077)(3)
Investment in EXUS Energy, LLP 7,378 44 (1)
(42)(5)
(7,505)(2)
125 (8)
Other assets, net 264 (38)(2) 264
38 (7)
-------- -------- --------
Total Assets $ 13,806 $ (6,092) $ 7,714
======== ======== ========
Current Liabilities 5,788 72 (4) 2,639
76 (2)
11 (5)
(380)(6)
(3,716)(6)
663 (2)
125 (3)
Notes Payable 7,100 (2)
(7,100)(6)
Convertible notes 8,059 15 (4) 1,000
176 (7)
(7,250)(6)
Debenture 750 750
Other long term obligations 19 19
-------- -------- --------
Total Liabilities 14,616 (10,208) 4,408
Stockholders' equity (deficit) (810) (87)(4) 3,306
(53)(5)
4,345 (3)
(214)(7)
125 (8)
-------- -------- --------
Total Liabilities and Stockholders' Equity $ 13,806 $ (6,092) $ 7,714
======== ======== ========
</TABLE>
10
<PAGE> 11
VENUS EXPLORATION, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
IN THOUSANDS
(1) To record estimated costs incurred subsequent to November 30, 1999,
related to the sale of the Company's interest in the Jackson Parish
Properties and liquidation of EXUS of $44,000.
(2) To record Venus 50% share of EXUS' assets and liabilities distributed
prior to the sale of the Jackson Parish Properties.
<TABLE>
<S> <C>
Accounts receivable $ 1,229
Oil and gas properties, net 14,077
Other assets 38
Interest Payable (76)
Other payable (663)
Note payable (7,100)
--------
Investment in EXUS $ 7,505
========
</TABLE>
(3) To record sale of Jackson Parish Properties received as a distribution
from EXUS.
<TABLE>
<S> <C>
Net sales price $ 18,547
Cost basis in oil and gas properties, net (14,077)
Federal and state taxes (125)
--------
Gain on sale $ 4,345
========
</TABLE>
(4) To record interest accrued for the EXCO convertible note from November
30, 1999, through the date the debt was repaid. The interest was
calculated based on an average outstanding balance of $7 million over
37 days at 12% interest rate.
(5) To record interest accrued for EXUS debt from November 30, 1999,
through the date the debt was repaid. The interest was calculated based
on average outstanding balance of $6.5 million over 37 days at an
average interest rate of 7.8%.
(6) To record receipt of net sales price and repayment of debt.
<TABLE>
<S> <C>
Repayment of note received in distribution from EXUS $ 7,100
Repayment of EXCO convertible note 7,250
Amount applied to Venus' bank debt 3,716
Payment of accrued interest 380
-------
$18,446
=======
</TABLE>
(7) To record loss on early extinguishment of debt.
<TABLE>
<S> <C>
EXCO note prepayment penalty $ 250
Deferred interest (74)
Deferred financing cost 38
------
Loss on early extinguishment of debt $ 214
======
</TABLE>
(8) To record estimated December 1999 equity in net earnings related to the
Company's interest in EXUS.
11
<PAGE> 12
EXHIBIT INDEX
Number Document
10.1 Purchase and Sale Agreement between Venus
Exploration, Inc. as seller, and Anadarko
Petroleum Corporation, buyer, dated
December 17, 1999.
99.1 News release dated November 17, 1999,
regarding Nasdaq SmallCap Listing.
99.2 News release dated November 17, 1999,
regarding results of recent drilling and
workover operations.
<PAGE> 1
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
VENUS EXPLORATION, INC.
AS SELLER
AND
ANADARKO PETROLEUM CORPORATION
AS BUYER
EFFECTIVE ON DECEMBER 17, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE NO.
- ------- -------
<S> <C>
1. Purchase and Sale.....................................................1
1.1 Assets.......................................................1
1.2 Excluded Assets..............................................3
1.3 Effective Time: Proration of Costs and Revenues.............4
1.4 Delivery and Maintenance of Records..........................5
2. Purchase Price........................................................5
2.1 Purchase Price...............................................5
2.2 Adjustments to Purchase Price................................5
2.3 Allocation of Purchase Price.................................7
3. Title and Environmental Matters.......................................7
3.1 Seller's Title...............................................7
3.2 Definition of Defensible Title...............................7
3.3 Definition of Permitted Encumbrances.........................8
3.4 Notice of Title Defects: Defect Adjustment.................10
3.5 Consents to Assignment and Preferential Rights to Purchase..11
3.6 Casualty or Condemnation or Expropriation Loss..............12
3.7 Environmental Audit.........................................13
4. Representations and Warranties of Seller.............................14
4.1 Disclaimers.................................................14
4.2 Representations and Warranties..............................14
4.3 Existence and Qualification.................................15
4.4 Power.......................................................15
4.5 Authorization and Enforceability............................15
4.6 No Conflicts................................................15
4.7 Liability for Brokers' Fees.................................16
4.8 Litigation..................................................16
4.9 Taxes and Assessments.......................................17
4.10 Environmental Laws..........................................17
4.11 Safety and Health...........................................18
4.12 Outstanding Capital Commitments and Property Costs..........18
4.13 Compliance with Laws........................................18
4.14 Contracts...................................................18
4.15 Payments for Production.....................................18
4.16 Gas Imbalances..............................................19
4.17 Consents....................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.18 Plugging Status.............................................20
4.19 Equipment...................................................20
4.20 Current Commitments.........................................20
4.21 Condemnation or Expropriation...............................20
4.22 Bankruptcy..................................................21
4.23 Historical Information......................................21
4.24 Government Authorizations...................................21
5. Representations and Warranties of Buyer..............................21
5.1 Existence and Qualification.................................21
5.2 Power.......................................................22
5.3 Authorization and Enforceability............................22
5.4 No Conflicts................................................22
5.5 Liability for Brokers' Fees.................................22
5.6 Litigation..................................................22
6. Covenants of the Parties.............................................23
6.1 Access......................................................23
6.2 Government Reviews..........................................23
6.3 Notification of Breaches....................................23
6.4 Letters-in-Lieu: Assignments: Operatorship................24
6.5 Public Announcements........................................24
6.6 Operation of Assets.........................................24
6.7 Indemnity Regarding Access..................................25
6.8 Gas Imbalances..............................................26
6.9 Consents and Preferential Rights............................26
6.10 Release of Liens............................................26
6.11 Tax Matters.................................................27
6.12 Seller's Post Agreement Acquisitions; Non-Compete
Obligation..................................................27
6.13 Further Assurances..........................................28
7. Conditions to Closing................................................28
7.1 Conditions of Seller to Closing.............................28
7.2 Conditions of Buyer to Closing..............................29
8. Closing 30
8.1 Time and Place of Closing...................................30
8.2 Obligations of Seller at Closing............................30
8.3 Obligations of Buyer at Closing.............................30
8.4 Closing Payment and Post-Closing Purchase Price
Adjustments...............................................31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
9. Termination and Amendment............................................32
9.1 Termination.................................................32
9.2 Effect of Termination.......................................32
10. Post-Closing Obligations; Indemnification; Limitations...............32
10.1 Receipts....................................................32
10.2 Expenses....................................................33
10.3 Assumption and Indemnification..............................33
10.4 Indemnification Actions.....................................35
10.5 Limitation on Actions.......................................36
11. Miscellaneous........................................................37
11.1 Counterparts................................................37
11.2 Exhibits....................................................37
11.3 Expenses....................................................37
11.4 Notices.....................................................37
11.5 Wire Transfer Instructions..................................38
11.6 Amendments..................................................38
11.7 Assignment..................................................38
11.8 Conditions..................................................38
11.9 Counterparts................................................38
11.10 Governing Law...............................................38
11.11 Entire Agreement............................................39
11.12 Parties in Interest.........................................39
11.13 Survival....................................................39
11.14 Construction................................................39
11.15 Limitation on Damages.......................................39
11.16 Arbitration.................................................39
11.17 Severability................................................40
12. Definitions..........................................................40
</TABLE>
iii
<PAGE> 5
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), is effective on
December 17, 1999 by and between Venus Exploration, Inc., a Delaware corporation
whose address is 1250 N.E. Loop 410, Ste. 1000, San Antonio, TX 78209 ("Seller")
and Anadarko Petroleum Corporation, a Delaware corporation whose address is
17001 Northchase Drive, Houston, TX 77060 ("Buyer").
RECITALS:
A. Seller owns various oil and gas properties, either of record or
beneficially.
B. Seller desires to sell to Buyer and Buyer desires to purchase from
Seller the properties and rights of Seller hereafter described, in the manner
and upon the terms and conditions hereafter set forth.
C. Capitalized terms used herein shall have the meanings ascribed to
them in this Agreement as such terms are identified and/or defined in Article 12
hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations, warranties, covenants, conditions and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound by the terms hereof, agree as follows:
ARTICLE 1. PURCHASE AND SALE
SECTION 1.1 ASSETS.
At the Closing, and upon the terms and subject to the conditions of
this Agreement, Seller agrees to sell and convey to Buyer, or such subsidiary or
affiliate of Buyer as may be designated by Buyer within five (5) days prior to
Closing (sometimes hereinafter referred to as "Buyer's Affiliate") and Buyer
agrees to purchase, accept and pay for the Assets as defined below.
As used herein, the term "Assets" means, subject to the terms and
conditions of this Agreement, all of Seller's right, title, interest and estate,
real or personal, recorded or unrecorded, movable or immovable, tangible or
intangible, in and to the following:
(a) The oil, gas and mineral leases, and the other leases, licenses,
permits, rights of way and other agreements described in Exhibit A (the
"Leases") which cover and relate to the lands described in Exhibit A, lands
pooled or unitized therewith or the Units (the "Lands") together with the
leasehold and all other estates created thereby, including all mineral
interests,
<PAGE> 6
royalty interests, overriding royalty interests, production payments, other
payments out of or measured by the value of oil and gas production, net profits
interests, carried interests, farmout rights, options, subleases, and all other
interests that Seller has in and to the Leases, whether owned now, as of the
Effective Time, or acquired on or prior to Closing, but subject to Section 6.12;
(b) The oil and gas wells described in Exhibit A-1 hereto (the
"Wells");
(c) All oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined therefrom, together
with all minerals produced in association with these substances (collectively
called the "Hydrocarbons") in and under and which may be produced and saved from
or attributable to the Leases, Units, Lands or Wells from and after the
Effective Time, and all rents, issues, profits, proceeds, products, revenues and
other income from or attributable thereto from and after the Effective Time;
(d) All right, title and interest of Seller in or to any pools or units
which include any Lands or all or a part of any Leases or include any Wells,
including those pools or units shown on Exhibit A-2 (the "Units"; the Units,
together with the Leases, Lands and Wells, being hereinafter referred to as the
"Properties"), and including all right, title and interest of Seller in
production from any such pool or unit, whether such unit production comes from
wells located on or off of a Lease, and all tenements, hereditaments and
appurtenances belonging to the Leases and Units;
(e) All of the equipment, machinery, fixtures and other tangible
personal property and improvements on the Lands or appurtenant to the Wells,
Units, Leases or Lands, or used or obtained in connection with the operation of
the Wells, Units or the Leases or with the production, treatment, sale or
disposal of hydrocarbons or water produced therefrom or attributable thereto,
including without limitation, pipelines, disposal systems, water wells,
gathering systems, injection facilities, saltwater disposal facilities, pumping
units and engines, buildings, flow lines and compression facilities appurtenant
to or located upon the Lands (the "Equipment"); and including without limitation
the equipment specifically listed on Exhibit D.
(f) All right, title and interest of Seller in, to and under or derived
from all contracts, agreements and instruments by which the Properties are
bound, or that relate to or otherwise affect the Properties, including but not
limited to the Permitted Encumbrances as identified in Section 3.3(j), below,
operating agreements, unitization, pooling and communitization agreements,
declarations and orders, joint venture agreements, farmin and farmout
agreements, water rights agreements, exploration agreements, participation
agreements, joint venture agreements, exchange agreements, transportation or
gathering agreements, agreements for the sale and purchase of oil, gas, or
casinghead gas, and processing agreements to the extent applicable to the
Properties or the production of oil and gas and other minerals and products
produced in association therewith from the Properties (all of which are
hereinafter collectively
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referred to as "Contracts" and provided that "Contracts" shall not include the
instruments constituting the Leases);
(g) All right, title and interest of Seller in or to all easements,
permits, licenses, servitudes, rights-of-way, surface leases and other surface
rights ("Surface Contracts") appurtenant to, and used or held for use in
connection with, the Properties and not otherwise described in Exhibit A;
(h) All right, title, and interest of Seller in and to all lease files,
land files, well files, gas and oil sales contract files, gas processing files,
division order files, abstracts, title opinions, land surveys, geologic and
geophysical data (including interpretations thereof), logs, maps, engineering
data and reports, reserve studies and evaluations, and files and all other
books, records, data, files, maps and accounting records related to Assets, or
used or held for use in connection with the maintenance or operation thereof,
but excluding (i) computer software, (ii) work product of Seller's legal counsel
(other than title opinions), (iii) data held confidentially pursuant to
contractual obligations, and (iv) records relating to the negotiation and
consummation of the sale of the Assets (subject to such exclusions, the
"Records"); provided, however, that Seller may retain the copies of such files
and other records as Seller has determined may be required for litigation, tax,
accounting, and auditing purposes; and
(i) All right, title and interest of EXUS in and to the items described
in Section 1.2(a)-1.2(h), above, to the extent such interests are attributable
to Venus's ownership in EXUS (see Section 4.2(b), below).
excluding, however, the Excluded Assets (as defined in Section 1.2).
SECTION 1.2 EXCLUDED ASSETS.
Notwithstanding the foregoing, the Assets shall not include, and there
is excepted, reserved and excluded from the purchase and sale contemplated
hereby (collectively, the "Excluded Assets"):
(a) All corporate, financial, income and franchise tax and legal
records of Seller that relate to Seller's business generally (whether or not
relating to the Properties), and all books, records and files that relate to the
Excluded Assets and those records retained by Seller pursuant to Section 1.1(h);
(b) All rights to any refund of Taxes or other costs or expenses borne
by Seller or Seller's predecessors in interest and title attributable to periods
prior to the Effective Time;
(c) All rights relating to the existing claims and causes of action;
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<PAGE> 8
(d) Seller's (and EXUS') area-wide bonds, permits and licenses or other
permits, licenses or authorizations used in the conduct of Seller's business
generally; and
(e) All trade credits, account receivables, note receivables, and other
receivables attributable to the Properties with respect to any period of time
prior to the Effective Time.
SECTION 1.3 EFFECTIVE TIME: PRORATION OF COSTS AND REVENUES.
(a) Possession of the Assets shall be transferred from Seller to Buyer
at the Closing, but certain financial benefits and burdens of the Assets shall
be transferred effective as of 7:00 a.m., local time, where the respective
Assets are located, on October 1, 1999 (the "Effective Time"), as described
below.
Buyer shall be entitled to all production from or attributable to the
Leases, Units and Wells at and after the Effective Time (and all products and
proceeds attributable thereto), and to all other income, proceeds, receipts and
credits earned with respect to the Assets at or after the Effective Time, and
shall be responsible for (and entitled to any refunds with respect to) all
Property Costs incurred at and after the Effective Time except as noted in
Section 1.3(b), below. Seller shall be entitled to all production from or
attributable to Leases, Units and Wells prior to the Effective Time (and all
products and proceeds attributable thereto), and to all other income, proceeds,
receipts and credits earned with respect to the Assets prior to the Effective
Time, and shall be responsible for (and entitled to any refunds with respect to)
all Property Costs incurred prior to the Effective Time except as noted in
Section 1.3(b), below. "Earned" and "incurred", as used in this Agreement, shall
be interpreted in accordance with generally accepted accounting principles and
Council of Petroleum Accountants Society (COPAS) standards. "Property Costs"
means all operating expenses (including without limitation costs of insurance
and ad valorem, property, severance, production and similar Taxes based upon or
measured by the ownership or operation of the Assets or the production of
Hydrocarbons therefrom, but excluding any other Taxes) and capital expenditures
incurred in the ownership and operation of the Assets under the applicable
operating or unit agreement, and overhead costs charged to the Assets under the
applicable operating or unit agreement. For purposes of allocating production
(and accounts receivable with respect thereto), under this Section 1.3, (i)
liquid hydrocarbons shall be deemed to be "from or attributable to" the Leases,
Units and Wells when they pass through the pipeline connecting into the storage
facilities into which they are run and (ii) gaseous hydrocarbons shall be deemed
to be "from or attributable to" the Leases, Units and Wells when they pass
through the delivery point sales meters on the pipelines through which they are
gathered or transported, as applicable. Seller shall utilize reasonable
interpolative procedures to arrive at an allocation of production when exact
meter readings or gauging and strapping data is not available. Seller shall
provide to Buyer, no later than ten (10) Business Days prior to Closing,
evidence of all meter readings and all gauging and strapping procedures
conducted on or about the Effective Time in connection with the Assets, together
with all data necessary to support any estimated allocation, for purposes of
establishing the adjustment to the Purchase Price pursuant to Section 2.2 hereof
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that will be used to determine the Closing Payment (as defined in Section
8.4(a)). Taxes, right-of-way fees, insurance premiums and other Property Costs
that are paid periodically shall be prorated based on the number of days in the
applicable period falling before and the number of days in the applicable period
falling at or after the Effective Time, except that production, severance and
similar Taxes shall be prorated based on the number of units actually produced,
purchased or sold, as applicable, before, and at or after, the Effective Time.
In each case, Buyer shall be responsible for the portion allocated to the period
at and after the Effective Time and Seller shall be responsible for the portion
allocated to the period before the Effective Time.
(b) Notwithstanding the provisions of Section 1.3(a), above, the
Parties agree that Buyer shall be responsible for certain Property Costs
incurred prior to the Effective Time which are attributable to drilling the
Louisiana Minerals 15-1 Alternate Well, those costs being reasonable costs for
title opinions and surface damages for such well even though incurred prior to
the Effective Time.
SECTION 1.4 DELIVERY AND MAINTENANCE OF RECORDS.
Seller, at Seller's cost, shall deliver the Records to Buyer within ten
(10) days following Closing. Seller may retain copies of any Records delivered
to Buyer.
ARTICLE 2. PURCHASE PRICE
SECTION 2.1 PURCHASE PRICE.
The Purchase Price for the Assets shall be Eighteen Million Eight
Hundred Eighty Thousand Dollars ($18,880,000.00) (the "Purchase Price"), subject
to adjustment as provided in Section 2.2, and payable to Texas Escrow Company,
Inc. ("Texas Escrow") at Closing subject to any post-closing adjustments as
provided herein.
SECTION 2.2. ADJUSTMENTS TO PURCHASE PRICE.
The Purchase Price for the Assets shall be adjusted as follows with all
such amounts being determined in accordance with generally accepted accounting
principles and Council of Petroleum Accountants Society (COPAS) standards:
(a) Reduced by the aggregate amount of the following proceeds received
by Seller between the Effective Time and the Closing Date (with the period
between the Effective Time and the Closing Date referred to as the "Adjustment
Period"): (i) proceeds from the sale of Hydrocarbons (net of any royalties,
overriding royalties or other burdens on or payable out of production,
gathering, processing and transportation costs and any production, severance,
sales or excise Taxes not reimbursed to Seller by the Buyer of production)
produced from or
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<PAGE> 10
attributable to the Properties during the Adjustment Period, and (ii) other
proceeds earned with respect to the Assets during the Adjustment Period;
(b) Reduced in accordance with Section 3.5, by an amount equal to the
Allocated Value of those Properties (i) with respect to which preferential
purchase rights have been exercised prior to Closing or (ii) that cannot be
transferred at Closing due to unwaived requirements for consent to the
assignments contemplated hereby;
(c) Reduced (i) as a result of Title Defects by the Title Defect
Amount; and (ii) as a result of Environmental Defects under Section 3.7;
(d) Reduced by the aggregate amounts payable to third-party owners of
working interests, royalties and overriding royalties and other interests in the
Properties held in suspense (plus interest to be paid with such suspense funds)
by Seller as of the Closing Date and which Buyer assumes all liability for
disbursement;
(e) Reduced by an amount equal to unpaid ad valorem, property,
production, severance and similar taxes and assessments based upon or measured
by the ownership or operation of the Assets that are attributable to periods of
time prior to the Effective Time, which amounts shall, to the extent not
actually assessed, be computed based on such taxes and assessments for the
preceding tax year (such amount to be prorated for the period of Seller's and
Buyer's ownership before and after the Effective Time);
(f) Increased by the amount of all Property Costs and other costs
attributable to the ownership and operation of the Assets which are paid by
Seller and incurred at or after the Effective Time, except any Property Costs
and other such costs already deducted in the determination of proceeds in
Section 2.2(a);
(g) Increased by the amount of the reasonable title opinion costs and
surface costs for the Louisiana Minerals 15-1 Alternate Well which have been
incurred by Seller prior to the Effective Time; and
(h) Increased or decreased, as appropriate, pursuant to the provisions
of Section 6.8 for Gas Imbalances.
The adjustment described in Section 2.2(a) shall serve to satisfy, up
to the amount of the adjustment, Buyer's entitlement under Section 1.3 to
Hydrocarbon production from or attributable to the Properties during the
Adjustment Period, and to the value of other income, proceeds, receipts and
credits earned with respect to the Assets during the Adjustment Period, and
Buyer shall not have any separate rights to receive any production or income,
proceeds, receipts and credits with respect to which an adjustment has been
made. Similarly, the adjustment described in Section 2.2(f) shall serve to
satisfy, up to the amount of the adjustment,
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<PAGE> 11
Buyer's obligation under Section 1.3 to pay Property Costs and other costs
attributable to the ownership and operation of the Assets which are incurred
during the Adjustment Period, and Buyer shall not be separately obligated to pay
for any Property Costs or other such costs respect to which an adjustment has
been made.
SECTION 2.3 ALLOCATION OF PURCHASE PRICE.
Schedule 2.3 sets forth the agreed allocation of the unadjusted
Purchase Price among each of the Assets, which has been made in compliance with
the principles of Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Treasury regulations thereunder. The "Allocated Value" for
any Asset equals the portion of the unadjusted Purchase Price allocated to such
Asset on Schedule 2.3, increased or decreased as described in this Section. Any
adjustments to the Purchase Price other than the adjustments provided for in
Sections 2.2(b), 2.2(c) and 2.2(h) shall be applied on a pro rata basis to the
amounts set forth on Schedule 2.3 for all Assets. After all such adjustments are
made, any adjustments to the Purchase Price pursuant to Sections 2.2(b), 2.2(c)
and 2.2(h) shall be applied to the amounts set forth in Schedule 2.3 for the
particular affected Assets. Buyer and Seller further agree that, on or before
the Closing Date, they will mutually agree as to the further allocation of the
Allocated Values included in Schedule 2.3 as to the relative portions of those
values attributable to leasehold costs and depreciable equipment.
ARTICLE 3. TITLE AND ENVIRONMENTAL MATTERS
SECTION 3.1 SELLER'S TITLE.
(a) Seller represents and warrants to Buyer that EXUS's title to the
Leases, Wells, Units and Lands shown on Exhibits A, A-1 and A-2, as applicable,
as of the Effective Time is (and as of the Closing Date Venus's title shall be)
Defensible Title as defined in Section 3.2.
(b) The conveyance to be delivered by Seller to Buyer shall be
substantially in the form of Exhibit B hereto (the "Conveyance") and contain a
special warranty of title by, through and under Seller to the Leases, Wells and
Units shown on Exhibits A, A-1 and A-2, subject to the Permitted Encumbrances,
but shall otherwise be without warranty of title, express, implied or statutory,
except that such conveyances shall transfer to Buyer all rights or actions on
title warranties given or made by Seller's predecessors, to the extent Seller
may legally transfer such rights.
(c) Buyer shall not be entitled to protection under Seller's special
warranty of title in the Conveyance against any Title Defect reported under this
Article 3.
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SECTION 3.2 DEFINITION OF DEFENSIBLE TITLE.
As used in this Agreement, the term "Defensible Title" means that title
of Seller and EXUS which, subject to Permitted Encumbrances:
(a) Entitles Seller to receive throughout the duration of the
productive life of any Units, Wells or Leases (after satisfaction of all
royalties, overriding royalties, non-participating royalties, net profits
interests or other similar burdens on or measured by production of oil and gas),
not less than the "net revenue interest" share plus the "payout balance" shown
in Exhibit A-1 or A-2 of all oil, gas and other minerals produced, saved and
marketed from such Wells or Units, as applicable;
(b) Obligates Seller to bear a percentage of the costs and expenses for
the maintenance and development of, and operations relating to any Lease, Unit
or Well not greater than the "working interest" shown in Exhibits A-1 and A-2
without increase throughout the productive life of such Lease, Unit or Well,
except as stated in Exhibits A-1 or A-2 and except increases resulting from
contribution requirements with respect to defaulting co-owners under applicable
operating agreements and increases that are accompanied by at least a
proportionate increase in Seller's net revenue interest;
(c) Entitles Seller to payout balances not less than the "payout
balances" as provided in Exhibit A-1; and
(d) Is free and clear of liens, encumbrances, obligations, security
interests, restrictions, pledges, claims or other defects.
As used in this Agreement, the term "Title Defect" means any lien,
charge, encumbrance, obligation (including contract obligation), defect, or
other matter (including without limitation a discrepancy in net revenue interest
or working interest) that renders Seller's title to the Asset less than
Defensible Title.
SECTION 3.3 DEFINITION OF PERMITTED ENCUMBRANCES.
As used herein, the term "Permitted Encumbrances" means any or all of
the following:
(a) Lessors' royalties and any overriding royalties, reversionary
interests and other burdens to the extent that they do not, individually or in
the aggregate, impair Seller's rights to receive proceeds of production from the
affected Property, reduce Seller's net revenue interests below that shown in
Exhibit A-1 or A-2 or increase Seller's working interest above that shown in
Exhibit A-1 or A-2 without a corresponding increase in the net revenue interest;
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(b) All leases, unit agreements, pooling agreements, operating
agreements, production sales contracts, division orders and other contracts,
agreements and instruments applicable to the Assets, to the extent that they do
not, individually or in the aggregate, reduce Seller's net revenue interests
below that shown in Exhibit A-1 or A-2 or increase Seller's working interest
above that shown in Exhibit A-1 or A-2 without a corresponding increase in the
net revenue interest;
(c) Preferential rights to purchase the Assets with respect to which
waivers or consents are obtained by Seller from the appropriate parties prior to
the Closing Date or the appropriate time period for asserting the right has
expired or which need not be satisfied prior to a transfer;
(d) Third-party consent requirements and similar restrictions with
respect to which waivers or consents are obtained by Seller from the appropriate
parties prior to the Closing Date or the appropriate time period for asserting
the right has expired or which need not be satisfied prior to a transfer;
(e) Liens for current Taxes or assessments not yet delinquent or, if
delinquent, being contested in good faith by appropriate actions;
(f) Materialman's, mechanic's, repairman's, employee's, contractor's,
operator's and other similar liens or charges arising in the ordinary course of
business for amounts not yet delinquent (including any amounts being withheld as
provided by law), or if delinquent, being contested in good faith by appropriate
actions;
(g) All rights to consent, by required notices to, filings with, or
other actions by Governmental Bodies in connection with the sale or conveyance
of oil and gas leases or interests therein if they are not required prior to the
sale or conveyance;
(h) Easements, rights-of-way, servitudes, permits, surface leases and
other rights in respect of surface operations to the extent that they do not,
individually or in the aggregate, impair Seller's right to receive proceeds of
production from the affected Property, reduce Seller's net revenue interests
below that shown in Exhibits A-1 or A-2 or increase Seller's working interest
above that shown in Exhibits A-1 or A-2 without a corresponding increase in the
net revenue interest;
(i) Any other liens, charges, encumbrances, defects or irregularities
which do not, individually or in the aggregate, detract from the value of or
interfere with the use or ownership of the Assets subject thereto or affected
thereby (as currently used or owned), which would be accepted by a reasonably
prudent Buyer engaged in the business of owning and operating oil and gas
properties, and which do not impair Seller's right to receive proceeds of
production from the affected Property, reduce Seller's net revenue interest
below that shown in Exhibits A-1 or A-2,
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or increase Seller's working interest above that shown in Exhibits A-1 or A-2
without a corresponding increase in the net revenue interest, or otherwise; and
(j) All those contracts, and other matters described on Exhibit C.
SECTION 3.4 NOTICE OF TITLE DEFECTS: DEFECT ADJUSTMENTS.
(a) To assert a claim arising out of a breach of Section 3.1(a), Buyer
may from time to time deliver claim notices to Seller (each a "Title Defect
Notice") on or before the date which is six (6) days prior to the Closing Date
(the "Title Claim Date"). Each Title Defect Notice shall be in writing and shall
include (i) a description of the alleged Title Defect(s), (ii) the Units, Wells,
or Lands affected by the Title Defect (each a "Title Defect Property"), (iii)
the Allocated Values of the Title Defect Property, (iv) supporting documents
reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of the alleged Title Defect(s) and (v) the
amount by which Buyer reasonably believes the Allocated Values of the Title
Defect Property are reduced by the alleged Title Defect(s) and the computations
and information upon which Buyer's belief is based. Buyer shall be deemed to
have waived all Title Defects, excluding Seller's special warranty of title
contained in the Conveyance, that do not meet the threshold for an adjustment as
set forth in Section 3.4(g).
(b) Seller shall have the right, but not the obligation, to attempt, at
its sole cost, to cure or remove any Title Defects of which it has been advised
by Buyer during the five (5) day period following the date of a Title Defect
Notice (the "Cure Period").
(c) With respect to any Title Defect Property not cured during the Cure
Period, Buyer shall be entitled to receive an amount (the "Title Defect Amount")
equal to the reduction in the Allocated Value for such Title Defect Property
caused by such Title Defects, as determined pursuant to Section 3.4(e). If the
Title Defect Amount has been determined for any such Title Defect Property prior
to Closing then the Purchase Price shall be reduced by that Title Defect Amount.
For any other such Title Defect Property, the Purchase Price in the final
statement prepared under Section 8.4(b) shall be reduced by the Title Defect
Amount determined for such Title Defect Property.
(d) If Seller timely pays all Title Defect Amounts, Section 3.4(c)
shall, to the fullest extent permitted by applicable law, be the exclusive right
and remedy of Buyer with respect to Seller's breach of its warranty and
representation in Section 3.1(a). Notwithstanding the foregoing, Seller's
special warranty under Section 3.1(b) shall extend beyond the Closing Date and
the Title Claim Date.
(e) The Title Defect Amount resulting from a Title Defect shall be
determined as follows:
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(i) If Buyer and Seller agree on the Title Defect Amount, that
amount shall be the Title Defect Amount;
(ii) If the Title Defect is a lien, encumbrance or other
charge which is undisputed and liquidated in amount, then the Title
Defect Amount shall be the amount necessary to be paid to remove the
Title Defect from the Title Defect Property;
(iii) If the Title Defect represents a discrepancy between (A)
the net revenue interest for any Title Defect Property and (B) the net
revenue interest or percentage stated on Exhibits A-1 or A-2, then the
Title Defect Amount shall be the product of the Allocated Value of such
Title Defect Property multiplied by a fraction, the numerator of which
is the net revenue interest or percentage ownership decrease and the
denominator of which is the net revenue interest or percentage
ownership stated on such Exhibits;
(iv) If the Title Defect represents an obligation,
encumbrance, burden, charge or condition upon or other defect in title
to the Title Defect Property of a type not described in subsections
(i), (ii) or (iii) above, the Title Defect Amount shall be determined
by taking into account the Allocated Value of the Title Defect
Property, the portion of the Title Defect Property, the legal effect of
the Title Defect, the potential economic effect of the Title Defect
over the life of the Title Defect Property, the values placed upon the
Title Defect by Buyer and Seller and such other factors as are
necessary to make a proper evaluation; and
(v) Notwithstanding anything to the contrary in this Article
3, the aggregate Title Defect Amounts attributable to the effects of
all Title Defects upon any Title Defect Property shall not exceed the
Allocated Value of the Title Defect Property.
(f) Seller and Buyer shall attempt to agree on all Title Defect Amounts
within five (5) days after the end of the Cure Period for any Title Defect
Property. If Seller and Buyer are unable to agree by that date, Title Defect
Amounts in dispute shall be resolved by arbitration pursuant to the provisions
of Section 11.16. Buyer may withhold from the Closing Payment the amount, if
any, which Buyer claims is the Title Defect Amount for any Title Defect Amount
which is in dispute on the Closing Date until such Title Defect Amount is
determined.
(g) Notwithstanding anything to the contrary contained in this Article
3, no adjustment to the Purchase Price for Title Defects shall be made unless
and until, and only to the extent that the Title Defect Amount as to a specific
Well or Unit, as applicable, exceeds Five Thousand Dollars ($5,000) and the
aggregate value of all Title Defect Amounts exceeds One Hundred Fifty Thousand
Dollars ($150,000).
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SECTION 3.5 CONSENTS TO ASSIGNMENT AND PREFERENTIAL RIGHTS TO PURCHASE.
(a) Seller shall notify Buyer at least ten (10) Business Days prior to
Closing of all required third-party consents to the assignment of the Assets to
Buyer which have not been obtained and preferential rights to purchase which
have not been waived and the Assets to which they pertain, as well as advise
Buyer if the assignment of any Contract or other Asset without obtaining a
consent would result in termination or material impairment of Seller's rights in
such Contract or other Asset. In no event shall there be included in the
Conveyances at Closing any Asset subject to a consent requirement that provides
that transfer of the Asset without consent will result in a termination or other
material impairment of any rights in relation to such Asset. In cases where the
Asset subject to such a requirement is a Contract and Buyer is assigned the
Properties to which the Contract relates, but the Contract is not transferred to
Buyer due to the unwaived consent requirement, Seller shall continue after
Closing to use commercially reasonable efforts to obtain such consent so that
such Contract can be transferred to Buyer upon receipt of such consent. In cases
where the Asset subject to such a requirement is a Property and the third-party
consent to the sale and transfer of the Property is not obtained, or the
preferential right to purchase has not been waived, prior to the Closing Date,
Buyer may elect to treat the unsatisfied consent requirement or unwaived
preferential right to purchase as a Title Defect and receive the appropriate
purchase price adjustment under Section 2.3(b) by giving Seller notice thereof
in accordance with Section 3.4(a), except that such notice may be given up to
one (1) Business Day prior to the Closing Date. If an unsatisfied consent or
preferential right to purchase requirement with respect to which a Purchase
Price adjustment is made under Section 3.4 is subsequently satisfied prior to
the date of the final adjustment to the Purchase Price under Section 8.4(b),
conveyance of the Asset shall be promptly made to Buyer and Seller shall be paid
the amount of the previous reduction in the Purchase Price and the provisions of
this Section 3.5 shall no longer apply.
(b) If any preferential rights to purchase any Properties are exercised
prior to Closing, those Properties transferred to a third party as a result of
the exercise of such preferential rights shall be treated as if subject to a
Title Defect resulting in the complete loss of title and the Purchase Price
shall be reduced under Section 2.2(b) by the Allocated Value for such Property.
Seller shall retain the consideration paid by the third party.
SECTION 3.6 CASUALTY OR CONDEMNATION OR EXPROPRIATION LOSS.
If, after the date of this Agreement but prior to the Closing Date, any
portion or portions of the Assets is destroyed or damaged (either totally or
partially) by fire or other casualty (including well blowout, either surface or
subsurface) or is taken in condemnation or expropriation or under right of
eminent domain, and the loss of any one or more casualty or taking equals or
exceeds Two Hundred Thousand Dollars ($200,000.00), Buyer may terminate this
Agreement.
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If, after the date of this Agreement but prior to the Closing Date, any
portion of the Assets is destroyed or damaged by fire or other casualty
(including well blowout, either surface or subsurface) or is taken in
condemnation or expropriation or under right of eminent domain, and the loss as
a result of such individual casualty or taking is less than Two Hundred Thousand
Dollars ($200,000.00), Buyer shall elect by written notice to Seller to either
(i) treat such casualty or taking as a Title Defect with respect to the affected
Property or Properties under Section 3.4 and Seller shall retain all rights to
insurance and other claims against third parties with respect to the casualty or
taking except to the extent the parties otherwise agree in writing; or (ii)
Buyer shall accept the Assets affected by any casualty and Seller shall, at
Closing, pay to Buyer all sums paid to Seller or EXUS by third parties by reason
of such casualty or taking and shall assign, transfer and set over to Buyer or
subrogate Buyer to all of Seller's right, title and interest (if any) in
insurance claims, unpaid awards, and other rights against third parties (other
than Affiliates of Seller and its directors, officers, employees and agents)
arising out of the casualty or taking. Seller shall promptly notify Buyer of any
destruction of Assets (either partial or total) by fire or other casualty or of
commencement of condemnation or expropriation or eminent domain proceedings.
SECTION 3.7 ENVIRONMENTAL AUDIT.
(a) Buyer may perform an environmental audit of some or all of the
Properties (the "Environmental Audit") prior to the Closing Date. The scope of
the Environmental Audit (including any testing, coring, or sampling) to be made
on or with respect to the Properties shall be determined by Buyer, and shall be
performed upon prior notice and in a manner that will not unreasonably interfere
with Seller's operations. Seller hereby grants to Buyer and its agents,
employees and representatives any and all rights of access that are necessary to
complete the Environmental Audit.
Buyer's access shall be at Buyer's sole risk, cost and expense, and
Buyer shall release Seller from and shall fully protect, indemnify and defend
Seller and its respective officers, agents, employees and Affiliates and hold
them harmless from and against any and all claims relating to, arising out of,
or connected, directly or indirectly, with Buyer's exercise of its rights under
this Article 3.7, including without limitation, claims relating to (a) injury or
death of any person or persons whomsoever caused by Buyer or its agents, (b)
damage to or loss of any property or resource caused by Buyer or its agents, (c)
pollution, environmental damage or violation of Environmental Laws caused by
Buyer or its agents, (d) common law causes of action such as negligence, gross
negligence, strict liability, nuisance or trespass, or (e) fault imposed by
statute, rule, regulation or otherwise; it being understood that Buyer shall not
be responsible hereunder for any pre-existing condition of the Assets discovered
by such inspection. Buyer additionally agrees to comply with Seller's safety
rules and procedures while upon the Properties.
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(b) With respect to any single Property identified in the Audit Report
for which the Estimated Remedial Cost exceeds Twenty Thousand Dollars
($20,000.00), Buyer may notify Seller in writing that it will either:
(i) accept the Property affected by such Environmental Defect
with a Purchase Price adjustment based on an agreed upon remedial cost
amount;
(ii) allow Seller the option to remediate to Buyer's
satisfaction at Seller's cost prior to closing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 4.1 DISCLAIMERS.
EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 3 OR THIS ARTICLE
4 OR IN THE CONVEYANCE TO BE DELIVERED TO BUYER HEREUNDER, SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (i) ANY OF
THE ASSETS, (ii) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE
MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS, (iii) THE
QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE
ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES
GENERATED BY THE ASSETS, (v) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE
ASSETS, OR (vi) ANY OTHER MATERIAL OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO BUYER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES,
AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION
RELATING THERETO, AND FURTHER DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY
UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT BUYER SHALL BE DEEMED TO BE
OBTAINING EQUIPMENT IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, "AS
IS" AND "WHERE IS" WITH ALL FAULTS.
SECTION 4.2. REPRESENTATIONS AND WARRANTIES.
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(a) Seller represents and warrants to Buyer the matters set out in
Sections 4.2(b) through 4.24. Such representations and warranties shall, unless
expressly specified to the contrary therein, be applicable both as of the date
hereof and also as of the Closing Date.
(b) Notwithstanding 4.2(a), the Parties acknowledge that as of the
Effective Time, title to the Properties is in EXUS. Seller represents that
Seller and EXCO Resources, Inc. ("EXCO") are each fifty percent (50%) owners in
EXUS. On or prior to the Closing Date, EXUS will duly execute conveyances of the
Assets and other documents and certificates of title to Seller and EXCO, all in
form satisfactory to Buyer, to allow Seller to make the transfer and perform all
other obligations contemplated herein. To the extent this Agreement sets forth
warranties by and/or representations or obligations upon Seller to operate,
administer or perform certain acts in connection with the Assets or to refrain
from participating in certain transactions or activities with respect thereto,
including but not limited to the provisions contained in this Article 4 and
Article 6, Seller will cause EXUS to act or refrain from acting as so required.
Likewise, where this Agreement refers to proceeds received or earned by Seller,
expenses or costs paid by Seller, or similar provisions (including without
limitation the provisions in Sections 1.3, 2.2, 10.1 and 10.2), the Parties
agree that the term Seller shall also mean EXUS, to the extent such proceeds,
costs or expenses are attributable to Venus's ownership in EXUS.
SECTION 4.3 EXISTENCE AND QUALIFICATION.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation in each jurisdiction where the Assets are
located, except where the failure to so qualify would not have a Material
Adverse Effect.
SECTION 4.4 POWER.
Seller has the corporate power to enter into and perform this Agreement
and consummate the transactions contemplated by this Agreement.
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SECTION 4.5 AUTHORIZATION AND ENFORCEABILITY.
The execution, delivery and performance of this Agreement, and the
performance of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller (and all documents
required hereunder to be executed and delivered by Seller at Closing will be
duly executed and delivered by Seller) and this Agreement constitutes, and at
the Closing such documents will constitute, the valid and binding obligations of
Seller, enforceable in accordance with their terms except as such enforceability
may be limited by applicable bankruptcy or other similar laws affecting the
rights and remedies of creditors generally as well as to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 4.6 NO CONFLICTS.
Seller's execution, delivery and performance of this Agreement will not
conflict with or violate any agreement or instrument to which Seller is a party
or any law, rule, regulation, ordinance, judgment, decree or order to which
Seller or EXUS is subject.
SECTION 4.7 LIABILITY FOR BROKERS' FEES.
Buyer shall not directly or indirectly have any responsibility,
liability or expense, as a result of undertakings or agreements of Seller, for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or any agreement or transaction
contemplated hereby.
SECTION 4.8 LITIGATION.
Except as set forth in Schedule 4.8, (a) no claim, demand, filing
(including lis pendens filings and abstracts of judgment), investigation,
proceeding, action, suit, or other legal proceeding of any kind or nature
(including any claims that Seller or EXUS is in breach of any Contract and/or
any Lease) is pending or, to Seller's knowledge, is or has been threatened with
respect to the Properties, the Assets, or Seller or EXUS (with respect to any of
the Properties or the Assets), or the ownership, operation, development,
maintenance, or use of any thereof, (b) Seller is not aware of any facts,
conditions or circumstances in connection with, related to, or associated with
the Properties (or the ownership, operation, development, maintenance, or use of
any thereof), the Assets, the Contracts, the Leases or Seller or EXUS (with
respect to any of the Properties or the Assets), that could reasonably be
expected to give rise to any such claim, demand, filing, investigation,
proceeding, action, suit, or other legal proceeding, and (c) no notice from any
Governmental Body or any other Person has been received by Seller or EXUS (i)
claiming any violation, repudiation, or termination, in whole or in part, of any
of the
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Properties or any violation of any Law with respect to the Properties (including
any such Law concerning the conservation of natural resources) or (ii)
requiring, or calling attention to the need for, any work, repairs,
construction, alterations, installations, remediation, response, removal or
abatement actions, restoration, investigation or monitoring of, on, in, under,
in connection with, or related to the Properties or the ownership, operation,
development, maintenance, or use of any thereof, which matters, all or in part,
remain outstanding and unresolved to the satisfaction of the sender of such
notice.
SECTION 4.9 TAXES AND ASSESSMENTS.
Seller warrants and represents (a) all reports, returns, statements
(including estimated reports, returns, or statements), and other similar filings
required to be filed on or before the Closing Date by Seller or EXUS with
respect to any Taxes (the "Tax Returns") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed; (b) the Tax Returns are true and correct in all
material respects, and all Taxes reported on such returns have been paid; (c)
Seller or EXUS has not extended or waived the application of any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Tax; (d) there are no administrative proceedings or lawsuits pending or, to the
knowledge of Seller, there are no claims, assessments, levies, administrative
proceedings, or lawsuits threatened against the Assets or Seller or EXUS by any
taxing authority; and (e) there are no Tax liens on any of the Assets.
SECTION 4.10 ENVIRONMENTAL LAWS.
Except as set forth on Schedule 4.10, (a) all environmental and health
and safety permits and plans, licenses, approvals, consents, certificates and
other authorizations of any kind or nature ("Environmental Permits") necessary
for the ownership, operation, development, maintenance, or use of any of the
Properties have been obtained and maintained in effect and will be transferred
to Buyer at Closing, (b) Seller, EXUS and the Properties, and the ownership,
operation, development, maintenance, and use thereof, are in compliance with all
Environmental Laws and with all terms and conditions of all Environmental
Permits, and all prior instances of non-compliance have been fully and finally
resolved to the satisfaction of all Governmental Bodies with jurisdiction over
such matters, (c) neither the Seller, EXUS nor the Properties, or the ownership,
operation, development, maintenance, or use thereof, is subject to any
Environmental Claim or Environmental Liabilities arising from, based upon,
associated with or related in any way to the Properties or the ownership,
operation, or use of any thereof, (d) neither Seller nor EXUS has received any
notice of any Environmental Claim, Environmental Liabilities or any violation or
non-compliance with any Environmental Law or the terms or conditions of any
Environmental Permit, arising from, based upon, associated with or related in
any way to the Properties or the ownership, operation, development, maintenance,
or use of any thereof, (e) no Hazardous Materials or hazardous substances are
present, or have been disposed of (onsite or offsite), released, migrated or
transported to or from, or have escaped on, in, from, under or in
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connection with the Properties, or the ownership, operation, development,
maintenance, or use of any thereof, such as to cause a condition or
circumstances that could reasonably be expected to result in a violation of or
liability pursuant to any Environmental Law, and (f) Seller and EXUS are not
aware of any facts, conditions, or circumstances in connection with, related to,
or associated with the Properties, or any of them, or the ownership, operation,
development, maintenance, or use of any thereof, that could reasonably be
expected to give rise to an assertion that Seller, EXUS or the Properties, or
the ownership, operation, or use thereof are not in substantial compliance with
Environmental Laws or the terms or conditions of any Environmental Permit, or
have any liability pursuant to any Environmental Law.
SECTION 4.11 SAFETY AND HEALTH.
The Seller/EXUS operated Leases and to Seller's knowledge, all other
Properties, have been operated in compliance with all Laws addressing the safety
and/or health of employees, including but not limited to the Occupational Safety
and Health Act, 29 U.S.C.A. Section 651, et seq., and the regulations
promulgated pursuant thereto, except where a failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.12 OUTSTANDING CAPITAL COMMITMENTS AND PROPERTY COSTS.
Other than with respect to: (a) the Louisiana Minerals 15-1 Alternate
Well; and (b) the Davis Bros. "J" No. 4 Well; as of the Effective Time; there
were no outstanding AFEs or other commitments to make capital expenditures which
are binding on the Assets and which Seller reasonably anticipates will
individually require expenditures by the owner of the Assets after the Effective
Time in excess of $20,000 other than those shown on Schedule 4.12 hereto. All
Property Costs relating to periods of time prior to the Effective Time have been
timely and properly paid in full.
SECTION 4.13 COMPLIANCE WITH LAWS.
Except as disclosed on Schedule 4.13, (a) the Properties have been and
currently are operated, and the Seller, EXUS and the Properties are, in
substantial compliance with the provisions and requirements of all Laws of all
Governmental Bodies having jurisdiction with respect to such parties, the
Properties, or the ownership, operation, development, maintenance, or use of any
thereof.
SECTION 4.14 CONTRACTS.
Seller and EXUS have paid their share of all costs payable by them
under the Leases, Surface Contracts, Contracts, and Permitted Encumbrances.
Neither Seller nor EXUS, nor, to the knowledge of Seller, any other party is in
default under or in breach of any Lease, Surface Contract, Contract or Permitted
Encumbrance. To the best of Seller's knowledge, the Leases are
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valid and subsisting oil and gas leases and are currently in force. Exhibit C
sets forth all Contracts and Surface Contracts to which the Properties are
subject. Seller has furnished or made available to Buyer true and correct copies
of all Leases and the portion of the Permitted Encumbrances identified in
Exhibit C, as amended and in effect as of the Closing Date.
SECTION 4.15 PAYMENTS FOR PRODUCTION.
Except as set forth on Schedule 4.15, (a) all rentals, royalties,
excess royalty, overriding royalty interests, production payments, and other
payments due and/or payable on or prior to the Effective Time under or with
respect to the Wells, Units and Leases, and the Hydrocarbons produced therefrom
or attributable thereto, have been properly and timely paid, (b) all rentals,
payments, and obligations due and payable or performable on or prior to the
Effective Time under or on account of any of the Properties have been duly paid,
performed, or provided for prior to the Effective Time, (c) all ad valorem,
property, production, transportation, sales, gross receipts, excise, use,
severance, employee, income, franchise and other taxes, including taxes based on
or measured by the ownership or operation of the Properties or the production of
Hydrocarbons from the Wells and Leases, as well as all assessments and other
governmental charges, penalties, interest and fines, which have become due and
payable on or prior to the Effective Time with respect to the Properties, or
Seller's or EXUS' ownership or operation thereof, or which have been collected
by Seller or EXUS in connection with the Properties on behalf of some
governmental entity, have been properly paid prior to becoming delinquent, and
all returns and reports with respect to such matters have been duly and timely
filed, (d) all costs, expenses, and liabilities payable on or prior to the
Effective Time under the terms of the Contracts and any other agreement to which
any of the Properties or the Seller or EXUS is bound have been properly and
timely paid, except for such expenses as are being currently paid prior to
delinquency in the ordinary course of business, and (e) Seller and EXUS are not
obligated under any contract or agreement for the sale of gas containing a
take-or-pay, advance payment, prepayment, or similar provision, or under any
gathering, transmission, or any other contract or agreement with respect to any
of the Properties (i) to pay for and take any gas if the purchase of such gas
becomes unprofitable or (ii) to gather, deliver, process, or transport any gas
without then receiving full payment therefor.
SECTION 4.16 GAS IMBALANCES.
(a) Schedule 4.16 accurately sets forth all pipeline and production
imbalances and penalties as of the Effective Time arising with respect to the
Properties.
(b) Except as disclosed in Schedule 4.16, (i) no Buyer is entitled to
"make-up" or otherwise take or receive deliveries of Hydrocarbons attributable
to Seller's or EXUS's interest in the Wells, Units and Leases without paying at
the time of such deliveries the full contract price therefor, (ii) no Person is
entitled to receive any portion of Seller's or EXUS's Hydrocarbons or to receive
cash or other payments to "balance" any disproportionate allocation of
Hydrocarbons
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produced from the Units, Wells and Leases under any operating agreement, gas
balancing or storage agreement, gas processing or dehydration agreement, gas
transportation agreement, gas purchase agreement, or other agreements, whether
similar or dissimilar, (iii) neither Seller nor EXUS is obligated to deliver any
quantities of gas, or to pay any penalties or other amounts, in connection with
the violation of any of the terms of any gas transportation contract or other
agreement with shippers, (iv) no claim, notice, or order from any Governmental
Body has been received by Seller or EXUS due to Hydrocarbon production from the
Properties being in excess of allowables or similar violations which could
result in curtailment of Hydrocarbon production from the Properties after
Closing, and (v) neither Seller nor EXUS is obligated to pay any penalties or
other payments under any gas transportation or other agreement as a result of
the delivery of quantities of gas from the Wells in excess of the contract
requirements.
SECTION 4.17 CONSENTS.
Seller, on or before Closing, shall have used its reasonable efforts to
obtain consents, except those which by their nature cannot be requested or
obtained until after Closing, or which Buyer and Seller shall have mutually
waived or which have resulted in an adjustment to the Purchase Price.
SECTION 4.18 PLUGGING STATUS.
Except as shown on Schedule 4.18, as of the date of this Agreement,
there are no Wells located on the Properties that (i) Seller or EXUS is
currently obligated by law or contract to presently plug and abandon; (ii)
Seller or EXUS will be obligated by law or contract to plug and abandon with the
lapse of time or notice or both because the Well is not currently capable of
producing Hydrocarbons in commercial quantities or otherwise currently being
used in normal operations; (iii) are subject to exceptions to a requirement to
plug and abandon issued by a regulatory authority having jurisdiction over the
Properties; or (iv) to the best knowledge of Seller, have been plugged and
abandoned but have not been plugged in accordance in all material respects with
all applicable requirements of each regulatory authority having jurisdiction
over the Properties.
SECTION 4.19 EQUIPMENT.
The Equipment has been maintained in good repair, working order and
operating condition and is adequate for normal operation of the Properties.
Neither Seller nor EXUS have removed Equipment from the Properties since the
Effective Time, and they shall not remove any Equipment from the Properties
without the consent of Buyer, including rental compressors and any other rental
equipment utilized for or in connection with operation of the Properties.
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SECTION 4.20 CURRENT COMMITMENTS.
Schedule 4.12 contains a true and complete list as of the date of this
Agreement of all oral or written commitments for capital expenditures of more
than $20,000 with respect to any of the Properties for which all of the
activities anticipated in such commitments have not been completed by the
Effective Time.
SECTION 4.21 CONDEMNATION OR EXPROPRIATION.
Seller has no knowledge or notice of any actual or threatened taking
(whether permanent, temporary, whole or partial) of any part of the Properties
by reason of condemnation or expropriation or the threat of condemnation or
expropriation.
SECTION 4.22 BANKRUPTCY.
There are no bankruptcy, reorganization, or arrangement proceedings
pending, being contemplated by or, to Seller's knowledge, threatened against
Seller, EXUS or any Affiliate of Seller.
SECTION 4.23 HISTORICAL INFORMATION.
The historical factual information furnished by Seller to Buyer
regarding lease operating expenses, Hydrocarbon pricing, and rates of production
with respect to the Properties was accurate and complete in all material
respects.
SECTION 4.24 GOVERNMENT AUTHORIZATIONS.
Except as disclosed on Schedule 4.13, Seller or EXUS has obtained and
is maintaining all federal, state and local governmental licenses, permits,
franchises, orders, exemptions, variances, waivers, authorizations,
certificates, consents, rights, privileges and applications therefor (the
"Governmental Authorizations") that are presently necessary or required for the
ownership and operation of the Seller's/EXUS's operated Assets as currently
owned and operated (including, but not limited to, those required under
Environmental Laws), the loss of which would, individually or in the aggregate,
have a Material Adverse Effect. Except as disclosed in Schedule 4.8 or Schedule
4.13 and except as would not, individually or in the aggregate, have a Material
Adverse Effect, (i) Seller has caused to be operated the Seller/EXUS operated
Assets in accordance with the conditions and provisions of such Government
Authorizations, and (ii) no notices of violation have been received by Seller or
EXUS, and no proceedings are pending or, to Seller's knowledge, threatened in
writing that might result in any modification, revocation, termination or
suspension of any such Governmental Authorizations or which would require any
corrective or remediation action by Seller or EXUS.
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
SECTION 5.1 EXISTENCE AND QUALIFICATION.
Buyer is a corporation organized, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified to do
business as a foreign corporation in every jurisdiction in which it is required
to qualify in order to conduct its business except where the failure to so
qualify would not have a material adverse effect on Buyer or its properties; and
Buyer is duly qualified to do business as a foreign corporation in the
respective jurisdictions where the Assets to be transferred to it are located.
SECTION 5.2 POWER.
Buyer has the corporate power to enter into and perform this Agreement
and consummate the transactions contemplated by this Agreement.
SECTION 5.3 AUTHORIZATION AND ENFORCEABILITY.
The execution, delivery and performance of this Agreement, and the
performance of the transaction contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer (and all documents
required hereunder to be executed and delivered by Buyer at Closing will be duly
executed and delivered by Buyer) and this Agreement constitutes, and at the
Closing such documents will constitute, the valid and binding obligations of
Buyer, enforceable in accordance with their terms except as such enforceability
may be limited by applicable bankruptcy or other similar laws affecting the
rights and remedies of creditors generally as well as to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 5.4 NO CONFLICTS.
Buyer's execution, delivery and performance of this Agreement will not
conflict with or violate any agreement, instrument to which Buyer is a party or
any law, rule, regulation, ordinance, judgment, decree or order to which Buyer
is subject.
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SECTION 5.5 LIABILITY FOR BROKERS' FEES.
Seller shall not directly or indirectly have any responsibility,
liability or expense, as a result of undertakings or agreements of Buyer, for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or any agreement or transaction
contemplated hereby.
SECTION 5.6 LITIGATION.
There are no actions, suits or proceedings pending, or to Buyer's
knowledge, threatened in writing before any Governmental Body against Buyer or
any subsidiary or Buyer which are reasonably likely to impair materially Buyer's
ability to perform its obligations under this Agreement.
ARTICLE 6. COVENANTS OF THE PARTIES
SECTION 6.1 ACCESS.
(a) Between the date of execution of this Agreement and the Closing
Date, Seller will give Buyer and its representatives access to the Assets and
access to and the right to copy, at Buyer's expense, the Records in Seller's
possession, for the purpose of conducting an investigation of the Assets, but
only to the extent that Seller may do so without violating any obligations to
any third party and to the extent that Seller has authority to grant such access
without breaching any restriction binding on Seller. Such access by Buyer shall
be limited to Seller's normal business hours and any weekends and after hours
requested by Buyer that can be reasonably accommodated by Seller, and Buyer's
investigation shall be conducted in a manner that minimizes interference with
the operation of the Assets. All information obtained by Buyer and its
representatives under this Section shall be subject to the terms of Section 6.6.
SECTION 6.2 GOVERNMENT REVIEWS.
Seller and Buyer shall in a timely manner (a) make all required
filings, if any, with and prepare applications to and conduct negotiations with,
each governmental agency as to which such filings, applications or negotiations
are necessary or appropriate in the consummation of the transactions
contemplated hereby, and (b) provide such information as each may reasonably
request to make such filings, prepare such applications and conduct such
negotiations. The Parties shall cooperate with and use all reasonable efforts to
assist the other with respect to such filings, applications and negotiations.
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SECTION 6.3 NOTIFICATION OF BREACHES.
Until the Closing,
(a) Buyer shall notify Seller promptly after Buyer obtains actual
knowledge that any representation or warranty of Seller contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Seller prior to or on the Closing Date has not been so performed
or observed in any material respect.
(b) Seller shall notify Buyer promptly after Seller obtains actual
knowledge that any representation or warranty of Buyer contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Buyer prior to or on the Closing Date has not been so performed
or observed in a material respect.
(c) If any of Buyer's or Seller's representations or warranties are
untrue or shall become untrue in any material respect between the date of
execution of this Agreement and the Closing Date, or if any of Buyer's or
Seller's covenants or agreements to be performed or observed prior to on or the
Closing Date shall not have been so performed or observed in any material
respect, but if such breach of representation ,warranty, covenant or agreement
shall (if curable) be cured by the Closing (or if the Closing does not occur, by
the date set forth in Section 8.1(a)), then such breach shall be considered not
to have occurred for all purposes of this Agreement.
SECTION 6.4 LETTERS-IN-LIEU: ASSIGNMENTS: OPERATORSHIP.
(a) Seller will execute on the Closing Date Letters in Lieu of Division
and Transfer Orders relating to the Assets on forms prepared by Buyer and
reasonably satisfactory to Seller to reflect the transactions contemplated
hereby.
(b) Seller will prepare and Seller and Buyer will execute on the
Closing Date all assignments necessary to convey to Buyer, or Buyer's Affiliate,
all federal or state leases in the form as prescribed by the applicable
governmental body and otherwise acceptable to Buyer and Seller.
(c) Seller will use its reasonable efforts to cause Buyer or Buyer's
Affiliate, effective as of the Closing Date, to be appointed Operator of the
Seller/EXUS operated Leases.
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SECTION 6.5 PUBLIC ANNOUNCEMENTS.
Until thirty (30) days after the Closing, no Party shall make any press
release or other public announcement regarding the existence of this Agreement,
the contents hereof or the transactions contemplated hereby without the prior
written consent of the Other; provided, however, the foregoing shall not
restrict disclosures by Buyer or Seller which are required by applicable
securities or other laws or regulations or the applicable rules of any stock
exchange having jurisdiction over the disclosing party or its Affiliates.
SECTION 6.6 OPERATION OF ASSETS.
(a) Except as set in Section 6.6(b), below, until the Closing, Seller
or EXUS (i) will continue to operate and administer the Assets in a good and
workmanlike manner, (ii) will not, without the prior written consent of Buyer,
commit to any operation, or services of related operations, reasonably
anticipated by Seller or EXUS to require future capital expenditures by the
owner of the Assets in excess of $20,000, or make any capital expenditures in
excess of $20,000 except for matters set forth on Schedule 4.12, or terminate,
materially amend, execute or extend any material agreements affecting the
Assets, (iii) will maintain generally insurance coverage on the Assets presently
furnished by nonaffiliated third parties in the amounts and of the types
presently in force, (iv) will use commercially reasonable efforts to maintain in
full force and effect all Leases, (v) will maintain all material governmental
permits and approvals affecting the Assets, (vi) will not transfer, farmout,
sell, hypothecate, encumber or otherwise dispose of any Assets except for sales
and dispositions of oil and gas production made in the ordinary course of
business consistent with past practices, and (vii) will not enter into, assign,
terminate or amend, in any material respect, any Contract or any other contract
or agreement by which the Properties are bound. Buyer's approval of any action
restricted by this Section 6.6 shall be considered granted within 10 days
(unless a shorter time is reasonably required by the circumstances and such
shorter time is specified in Seller's written notice) of Seller's notice to
Buyer requesting such consent unless Buyer notifies Seller to the contrary
during that period. In the event of an emergency, Seller may take such action as
a prudent operator would take and shall notify Buyer of such action promptly
thereafter.
(b) The Louisiana Minerals 15-1 Alternate Well is currently drilling.
Seller agrees to cause to be operated the Louisiana Minerals 15-1 Alternate Well
in a good and workmanlike manner, consistent with industry standards. Seller or
EXUS shall allow Buyer and Buyer's representatives and contractors reasonable
access to this Well, at Buyer's sole cost and risk, and agrees to provide Buyer
all information regarding such Well in the possession of Seller or EXUS. Seller
also agrees to cause consultation with Buyer concerning all aspects regarding
the drilling and/or completion of the Well including without limitation, casing
size and completion procedures, in a timely manner so that Buyer's
recommendations concerning drilling and completion operations may be fully
evaluated and considered with respect to such Well.
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Buyer's access shall be at Buyer's sole risk, cost and expense, and
Buyer shall release Seller from and shall fully protect, indemnify and defend
Seller and its respective officers, agents, employees and Affiliates and hold
them harmless from and against any and all claims relating to, arising out of,
or connected, directly or indirectly, with Buyer's exercise of its rights under
this Article 6.6(b), including without limitation, claims relating to (a) injury
or death of any person or persons whomsoever caused by Buyer or its agents, (b)
damage to or loss of any property or resource caused by Buyer or its agents, (c)
common law causes of action such as negligence, gross negligence, strict
liability, nuisance or trespass, or (d) fault imposed by statute, rule,
regulation or otherwise. Buyer additionally agrees to comply with Seller's
safety rules and procedures while upon the Properties.
SECTION 6.7 INDEMNITY REGARDING ACCESS.
Buyer agrees to indemnify, defend and hold harmless Seller, its
Affiliates, the other owners of interests in the Properties, and all such
Persons' directors, officers, employees, agents and representatives from and
against any and all claims, liabilities, losses, costs and expenses (including
court costs and reasonable attorneys' fees), including claims, liabilities,
losses, costs and expenses attributable to personal injuries, death, or property
damage, caused by or resulting from the exercise of access rights to the Assets
and to the Records and other related information prior to the Closing by Buyer,
its Affiliates, or its or their directors, officers, employees, agents or
representatives.
SECTION 6.8 GAS IMBALANCES.
Buyer expressly assumes any and all obligations attributable to gas
production imbalances with co-owners of the Properties. Should Buyer discover
any inaccuracy in Schedule 4.16 prior to the submission of Buyer's written
report pursuant to Section 8.4(b), Buyer may assert a claim for an adjustment
under this Section by delivering a claim notice to Seller. If it is determined
that there is an inaccuracy in the imbalances set forth on Schedule 4.16, then
an adjustment to the Purchase Price, at the rate of $2.00 per Mcf will be made.
SECTION 6.9 CONSENTS AND PREFERENTIAL RIGHTS.
Seller shall promptly prepare and send (i) notices to the holders of
any required consents to assignment of any Property requesting such consents and
(ii) notices to the holders of any applicable preferential rights to purchase
any Asset requesting waivers of such preferential rights to purchase. The
consideration payable under this Agreement for any particular Well, Unit or
other Property for purposes of preferential purchase right notices shall be the
Allocated Value for such Well, Unit or other Property. The allocated value for a
Lease shall be the product of a fraction, the numerator of which shall be the
surface acreage covered by a Lease which is included within a Unit and the
denominator of which shall be the total surface acres within such Unit
multiplied by the allocated value of such Unit as shown on Schedule 2.3. Seller
shall use
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commercially reasonable efforts to cause such consents and waivers of
preferential rights to purchase (or the exercise thereof) to be obtained and
delivered prior to Closing. Buyer shall cooperate with Seller in seeking to
obtain such consents and waivers of preferential rights. Should a third party
fail to exercise its preferential right to purchase as to any portion of the
Assets prior to Closing and the time for exercise or waiver has not yet expired,
such preferential purchase right shall be treated in accordance with Section
3.5(a).
SECTION 6.10 RELEASE OF LIENS.
(a) The Assets are encumbered by a first and prior lien and security
interest created in that certain Security Agreement dated June 30, 1999 and
executed by EXUS, as Debtor, in favor of NationsBank, N.A., as Administrative
Agent for certain financial institutions ("Banks"), and also evidenced by
certain mortgages, deeds of trust, financing statements and assignments of
production (collectively the "Lien"), all pursuant to that certain Credit
Agreement dated June 30, 1999 by and between the same parties (the "Credit
Agreement"). As provided in the Credit Agreement, and pursuant to separate
agreements among NationsBank, Banc of America Securities, LLC ("Banc of
America") and EXUS, Banc of America is the Sole Lead Arranger and Book Manager
for the credit facility provided in the Credit Agreement. On or prior to
Closing, Seller shall obtain a release of the Lien from Banc of America as well
as statements from Banc of America and NationsBank that Banc of America is
authorized to execute such release on behalf of all parties to the Credit
Agreement and any other instrument evidencing or granting a security interest in
the Assets, the intention being that the Assets shall be free and clear of all
Liens or security interests related to the Credit Agreement. Said release shall
be duly executed in recordable form.
(b) Seller, on or prior to Closing shall obtain a disclaimer from Wells
Fargo Bank, N.A., or its successor in interest ("Wells Fargo"), in a form
acceptable to Buyer and signed by an officer of Wells Fargo, such disclaimer to
provide that Wells Fargo at the time of Closing shall have no interest in,
security interest, or lien against the Assets, production from the Assets, or
proceeds attributable to production from the Assets.
(c) To the extent the Assets are encumbered by any other lien or
security interest, excluding those defined as Permitted Encumbrances under
Section 3.3, Seller shall, on or prior to Closing, obtain releases of such liens
or security interests, duly executed and in recordable form.
SECTION 6.11 TAX MATTERS.
(a) Subject to the provisions of Section 10.3, Seller shall be
responsible for all Taxes (other than ad valorem, property, severance,
production and similar Taxes based upon or measured by the ownership or
operation of the Assets or the production of Hydrocarbons therefrom, which are
addressed in Section 1.3) attributable to any period of time at or prior to
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Closing, including without limitation income Taxes arising as a result of the
gain recognized on the transfer of the Assets, and Buyer shall be responsible
for all such Taxes attributable to any period of time after Closing. Regardless
of which party is responsible, Seller or EXUS shall handle payment to the
appropriate Governmental Body of all Taxes with respect to the Assets which are
required to be paid prior to Closing (and shall file all returns with respect to
such Taxes).
(b) With respect to the 1999 ad valorem taxes on the Properties, Seller
or EXUS shall pay in full such taxes on or before December 31, 1999. Seller
shall provide Buyer with copies of paid tax receipts. Buyer shall be responsible
for its pro rata share of such taxes based on the Effective Date of October 1,
1999. Buyer's pro rata share shall be calculated by taking the gross taxes
levied on the total working interest in the Properties times Seller's percentage
ownership in the total working interest times the proration factor (91/365).
SECTION 6.12 SELLER'S POST AGREEMENT ACQUISITIONS; NON-COMPETE
OBLIGATION.
Seller agrees that it shall not acquire any right, title or interest in
any mineral properties (including but not limited to mineral, leasehold, royalty
or overriding royalty interests) in the Area of Exclusion on or after execution
of this Agreement and prior to January 1, 2001. In the event that Seller does
inadvertently acquire any such interest, Seller shall, within fifteen (15) days
thereafter, notify Buyer in writing of such acquisition and the particulars
thereof and provide Seller with a copy of the Purchase and Sale Agreement or
other agreement evidencing such particulars including the nature, amount and
proportion of the interest involved and the costs, terms and conditions upon
which the interest was acquired. Within fifteen (15) days after Buyer's receipt
of the aforesaid notice and information, Buyer shall have an opportunity to
elect to purchase all of the interest acquired by Seller for the price paid by
Seller and without prejudice to Buyer's other legal remedies. Failure by Buyer
to respond within said fifteen (15) day period shall be deemed an election not
to purchase the interest. Within fifteen (15) days after an election by Buyer to
acquire such interest, it shall pay to Seller the aforesaid amount, and Seller
shall promptly assign such interest to Buyer, the form of assignment to be
agreed upon by the parties and to contain a special warranty of title by,
through and under Seller, but not otherwise.
SECTION 6.13 FURTHER ASSURANCES.
After Closing, Seller and Buyer agree to take such further actions and
to execute, acknowledge and deliver all such further documents as are reasonably
requested by the other Party for carrying out the purposes of this Agreement or
of any document delivered pursuant to this Agreement.
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ARTICLE 7. CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS OF SELLER TO CLOSING.
The obligations of Seller to consummate the transactions contemplated
by this Agreement are subject, at the option of Seller, to the satisfaction on
or prior to Closing of each of the following conditions:
(a) Representations. The representations and warranties of Buyer set
forth in Article 5 shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date;
(b) Performance. Buyer shall have performed and observed, in all
material respects, all covenants and agreements to be performed or observed by
it under this Agreement prior to or on the Closing Date;
(c) Pending Litigation. No suit, action or other proceeding by a third
party (including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement
shall be pending before any Governmental Body;
(d) Deliveries. Buyer shall have for delivery to Seller duly executed
counterparts of the Conveyances and the other documents and certificates to be
delivered by Buyer under Section 8.3; and
(e) Title Defects. The sum of all Title Defect Amounts for Title
Defects determined under Section 3.4(a) prior to Closing (except Title Defect
Amounts pursuant to Sections 3.5 and 6.9) plus Estimated Environmental Remedial
Costs associated with Environmental Defects under Section 3.7, and gas
imbalances shall be less than $400,000.
SECTION 7.2 CONDITIONS OF BUYER TO CLOSING.
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject, at the option of Buyer, to the satisfaction on or
prior to Closing of each of the following conditions:
(a) Representations. The representations and warranties of Seller set
forth in Article 4 shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (other
than representations and warranties that refer to a
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specified date which need only be true and correct on and as of such specified
date), except for such breaches, if any, as would not have a Material Adverse
Effect;
(b) Performance. Seller shall have performed and observed, in all
material respects, all covenants and agreements to be performed or observed by
it under this Agreement prior to or on the Closing Date;
(c) Simultaneous Closing. Both the transaction contemplated under this
Agreement and the transaction contemplated under that certain Purchase, Sale and
Exchange Agreement dated December 17, 1999 by and between EXCO Resources, Inc.
and Buyer (the "EXCO Agreement") shall be consummated simultaneously at Closing.
Should Seller or EXCO fail to close, Buyer, at its option, shall have the right
to terminate this Agreement pursuant to Article 9;
(d) Pending Litigation. No suit, action or other proceeding by a third
party (including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement
shall be threatened or pending before any Governmental Body;
(e) Deliveries. Seller shall have delivered to Buyer duly executed
counterparts of the Conveyances and the other documents and certificates to be
delivered by Seller under Section 8.2;
(f) Title Defects. The sum of all Title Defect Amounts for Title
Defects determined under Section 3.4(a) prior to the Closing, including Title
Defect Amounts pursuant to Sections 3.6 and 6.9, and Estimated Environmental
Remedial Costs associated with Environmental Defects shall be less than six
percent (6%) of the unadjusted Purchase Price; and
ARTICLE 8. CLOSING
SECTION 8.1 TIME AND PLACE OF CLOSING.
(a) Consummation of the purchase and sale transaction contemplated by
this Agreement (the "Closing"), shall, unless otherwise agreed to in writing by
Buyer and Seller, take place at the offices of Texas Escrow, 300 Crescent Court,
Ste. 100, Dallas, TX, at 10:00 a.m., local time, on or before December 31, 1999,
or if all conditions in Article 7 to be satisfied prior to Closing have not yet
been satisfied or waived, as soon thereafter as such conditions have been
satisfied or waived, subject to the rights of the parties under Article 9.
(b) The date on which the Closing occurs is herein referred to as the
"Closing Date."
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SECTION 8.2 OBLIGATIONS OF SELLER AT CLOSING.
At the Closing, upon the terms and subject to the conditions of this
Agreement, Seller shall deliver or cause to be delivered to Buyer, among other
things, the following:
(a) Conveyances of the Assets, subject to the provisions of Section
3.5(a), in sufficient duplicate originals to allow recording in all appropriate
jurisdictions and offices, duly executed by Seller;
(b) Physical possession of all the Assets and Environmental Permits and
health and safety plans to Buyer, unless another time for delivery of a portion
of the Assets is elsewhere specified herein.
(c) Assignments, on appropriate forms, of state and of federal leases
comprising portions of the Assets, duly executed by Seller;
(d) Letters-in-lieu of transfer orders covering the Assets, duly
executed by Seller;
(e) An executed statement described in Treasury Regulation Section
1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning
of the Code; and
(f) Release of Liens, as described in Section 6.10, duly executed and
in sufficient duplicate originals to allow recording in all appropriate
jurisdictions and offices.
SECTION 8.3 OBLIGATIONS OF BUYER AT CLOSING.
At the Closing, upon the terms and subject to the conditions of this
Agreement, Buyer shall deliver or cause to be delivered, among other things, the
following:
(a) A wire transfer to Texas Escrow of the Closing Payment (as defined
in Section 8.4(a), below) in same-day funds;
(b) Conveyances of the Assets, duly executed by Buyer;
(c) Letters-in-lieu of transfer orders covering the Assets, duly
executed by Buyer.
SECTION 8.4 CLOSING PAYMENT AND POST-CLOSING PURCHASE PRICE
ADJUSTMENTS.
(a) Not later than ten (10) business days prior to the Closing Date,
Seller shall prepare and deliver to Buyer, using and based upon the best
information available to Seller, a preliminary settlement statement estimating
the Adjusted Purchase Price after giving effect to all Purchase Price
adjustments set forth in Section 2.2. The estimate delivered in accordance with
this Section
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8.4(a) shall, after any reduction for a Title Defect Amount which is in dispute,
constitute the dollar amount to be paid by Buyer to Seller at the Closing (the
"Closing Payment").
(b) As soon as reasonably practicable after the Closing but not later
than the 60th day following the Closing Date, Seller shall prepare and deliver
to Buyer a statement setting forth the final calculation of the Adjusted
Purchase Price and showing the calculation of each adjustment, based, to the
extent possible, on actual credits, charges, receipts and other items before and
after the Effective Time and taking into account all Title Defect adjustments
under Section 3.4. Seller shall at Buyer's request supply reasonable
documentation available to support any credit, charge, receipt or other item. As
soon as reasonably practicable but not later than the 60th day following receipt
of Seller's statement hereunder, Buyer shall deliver to Seller a written report
containing any changes that Buyer proposes be made to such Statement. The
parties shall undertake to agree on the final statement of the Adjusted Purchase
Price no later than 150 days after the Closing Date. In the event that the
parties cannot reach agreement within such period of time, the remaining matters
may be determined pursuant to Section 11.16. Within ten (10) days after the
earlier of (i) the expiration of Buyers 60-day review period without delivery of
any written report, or (ii) the date on which the parties finally determine the
disputed matters, (x) Buyer shall pay to Seller the amount by which the Adjusted
Purchase Price exceeds the Closing Payment or (y) Seller shall pay to Buyer the
amount by which the Closing Payment exceeds the Adjusted Purchase Price, as
applicable. Any post-closing payment pursuant to this Section 8.4 shall bear
interest from the Closing Date to the date of payment at the Agreed Interest
Rate.
(c) All payments made or to be made hereunder to Seller shall be by
electronic transfer of immediately available funds to Republic Title for the
credit of Seller. All payments made or to be made hereunder to Buyer shall be by
electronic transfer of immediately available funds to a bank and account
specified by Buyer in writing to Seller.
ARTICLE 9. TERMINATION AND AMENDMENT
SECTION 9.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing: (i) by
the mutual prior written consent of Seller and Buyer; or (ii) by either Buyer or
Seller, if Closing has not occurred on or before December 31, 1999; provided,
however, that no party shall be entitled to terminate this Agreement under this
Section 9.1 (ii) if the Closing has failed to occur because such party failed to
perform or observe in any material respect its covenants and agreements
hereunder.
SECTION 9.2 EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 9.1, this Agreement
shall become void and of no further force or effect (except for the provisions
of Sections 4.6, 5.5, 6.6(b), 6.7,
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11.4 and 11.16 which shall continue in full force and effect) and Seller shall
be free immediately to enjoy all rights of ownership of the Assets and to sell,
transfer, encumber or otherwise dispose of the Assets to any party without any
restriction under this Agreement. In the event this Agreement terminates under
Section 9.1 (ii) because a party has failed to perform or observe in any
material respect any of its agreements or covenants contained herein which are
to be performed at or prior to Closing, then the other party shall be entitled
to all remedies available at law or in equity and shall be entitled to recover
attorneys' fees in addition to any other relief to which such party maybe
entitled.
ARTICLE 10. POST-CLOSING OBLIGATIONS;
INDEMNIFICATION; LIMITATIONS
SECTION 10.1 RECEIPTS.
Except as otherwise provided in this Agreement, any production from or
attributable to the Assets (and all products and proceeds attributable thereto)
and any other income, proceeds, receipts and credits attributable to the Assets
which are not reflected in the adjustments to the Purchase Price following the
final adjustment pursuant to Section 8.4(b) shall be treated as follows: (a) all
production from or attributable to the Assets (and all products and proceeds
attributable thereto) and all other income, proceeds, receipts and credits
earned with respect to the Assets to which Buyer is entitled under Section 1.4
shall be the sole property and entitlement of Buyer, and, to the extent received
by Seller, Seller shall fully disclose, account for and remit the same promptly
to Buyer, and (b) all production from or attributable to the Assets (and all
products and proceeds attributable thereto) and all other income, proceeds,
receipts and credits earned with respect to the Assets to which Seller is
entitled under Section 1.4 shall be the sole property and entitlement of Seller
and, to the extent received by Buyer, Buyer shall fully disclose, account for
and remit the same promptly to Seller.
SECTION 10.2 EXPENSES.
Except as otherwise provided in this Agreement, any Property Costs
which are not reflected in the adjustments to the Purchase Price following the
final adjustment pursuant to Section 8.4(b) shall be treated as follows: (a) all
Property Costs for which Seller is responsible under Section 1.4 shall be the
sole obligation of Seller and Seller shall promptly pay, or if paid by Buyer,
promptly reimburse Buyer for and hold Buyer harmless from and against same; and
(b) all Property Costs for which Buyer is responsible under Section 1.4 shall be
the sole obligation of Buyer and Buyer shall promptly pay, or if paid by Seller,
promptly reimburse Seller for and hold Seller harmless from and against same.
Seller is entitled to resolve all joint interest audits and other audits of
Property Costs covering periods for which Seller is in whole or in part
responsible, provided that Seller shall not agree to any adjustments to
previously assessed costs for which Buyer is liable without the prior written
consent of Buyer, such consent not to be
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unreasonably withheld. Seller shall provide Buyer with a copy of all applicable
audit reports and written audit agreements received by Seller and relating to
periods for which Buyer is partially responsible.
SECTION 10.3 ASSUMPTION AND INDEMNIFICATION.
(a) AT CLOSING, BUYER SHALL ASSUME ALL COSTS, OBLIGATIONS AND
LIABILITIES OF SELLER THAT (I) RELATE TO THE ASSETS, (II) ARISE FROM OR RELATE
TO EVENTS OCCURRING ON OR AFTER BUT NOT BEFORE THE EFFECTIVE TIME AND (III) DO
NOT ARISE FROM OR RELATE TO THE INACCURACY OF ANY REPRESENTATION OR WARRANTY OF
SELLER, OR THE BREACH OF, OR FAILURE TO PERFORM OR SATISFY, ANY COVENANT OF
SELLER, SET FORTH IN THIS AGREEMENT OR IN ANY OTHER AGREEMENT, INSTRUMENT,
DOCUMENT OR CERTIFICATE EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT
("ASSUMED OBLIGATIONS"); PROVIDED; HOWEVER, BUYER SHALL HAVE NO OBLIGATIONS WITH
RESPECT TO LIABILITIES ARISING FROM INJURIES OR DEATH WITH RESPECT TO CONTINUED
OPERATION BY SELLER OF THE ASSETS AFTER THE EFFECTIVE TIME AND PRIOR TO THE
CLOSING DATE.
(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, SELLER SHALL BE RESPONSIBLE FOR, SHALL PAY ON A CURRENT BASIS, AND
SHALL DEFEND, INDEMNIFY, SAVE, HOLD HARMLESS, DISCHARGE AND RELEASE BUYER FROM
AND AGAINST ANY AND ALL LIABILITIES, ARISING FROM, BASED UPON, RELATED TO OR
ASSOCIATED WITH: (1) ANY LIABILITIES OF SELLER OTHER THAN THE ASSUMED
OBLIGATIONS; (2) ANY ACT, OMISSION, EVENT, CONDITION OR CIRCUMSTANCE INVOLVING
OR RELATING TO THE ASSETS OCCURRING OR EXISTING BEFORE THE EFFECTIVE TIME; (3)
THE OWNERSHIP OR OPERATION OF THE ASSETS BEFORE THE EFFECTIVE TIME; (4) ANY
BROKERS' OR FINDERS' FEES OR COMMISSIONS ARISING WITH RESPECT TO BROKERS OR
FINDERS RETAINED OR ENGAGED BY ANY PERSON OTHER THAN BUYER AND RESULTING FROM OR
RELATING TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT; (5) THE INACCURACY
OF ANY REPRESENTATION OR WARRANTY OF SELLER SET FORTH IN THIS AGREEMENT OR IN
ANY OTHER AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE EXECUTED OR DELIVERED
IN CONNECTION WITH THIS AGREEMENT; (6) THE BREACH OF, OR FAILURE TO PERFORM OR
SATISFY, ANY OF THE COVENANTS OF SELLER SET FORTH IN THIS AGREEMENT OR IN ANY
OTHER AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE EXECUTED OR DELIVERED IN
CONNECTION WITH THIS AGREEMENT; AND/OR (7) CAUSED BY OR ARISING OUT OF OR
RESULTING FROM INJURY OR DEATH WHICH IS ATTRIBUTABLE TO
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OPERATIONS BY SELLER BETWEEN THE EFFECTIVE TIME AND THE CLOSING DATE.
(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, BUYER SHALL BE RESPONSIBLE FOR, SHALL PAY ON A CURRENT BASIS, AND
SHALL DEFEND, INDEMNIFY, SAVE, HOLD HARMLESS, DISCHARGE AND RELEASE SELLER FROM
AND AGAINST ANY AND ALL LIABILITIES ARISING FROM, BASED UPON, RELATED TO OR
ASSOCIATED WITH: (1) THE ASSUMED OBLIGATIONS; (2) ANY ACT, OMISSION OR EVENT
INVOLVING OR RELATING TO THE ASSETS OCCURRING AFTER THE EFFECTIVE TIME EXCEPT AS
SET FORTH IN SECTION 10.3(B), ABOVE; (3) THE OWNERSHIP OR OPERATIONS OF THE
ASSETS AFTER THE EFFECTIVE TIME EXCEPT AS SET FORTH IN SECTION 10.3(B), ABOVE;
(4) ANY BROKERS' OR FINDERS' FEES OR COMMISSIONS ARISING WITH RESPECT TO BROKERS
OR FINDERS RETAINED OR ENGAGED BY BUYER AND RESULTING FROM OR RELATING TO THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT; (5) THE INACCURACY OF ANY
REPRESENTATION OR WARRANTY OF BUYER SET FORTH IN THIS AGREEMENT OR IN ANY OTHER
AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE EXECUTED OR DELIVERED IN
CONNECTION WITH THIS AGREEMENT; AND/OR (6) THE BREACH OF, OR FAILURE TO PERFORM
OR SATISFY ANY OF THE COVENANTS OF BUYER SET FORTH IN THIS AGREEMENT OR IN ANY
OTHER AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE EXECUTED OR DELIVERED IN
CONNECTION WITH THIS AGREEMENT.
(d) "Liabilities", for purposes of this Article 10, shall mean any
actual liability, loss, cost, diminution in value, expense, claim, demand,
notice of violation, investigation, administrative proceeding, payment, charge,
obligation, fine, penalty, deficiency, award or judgment, including reasonable
fees and expenses of attorneys, consultants, accountants or other agents and
experts reasonably incident to matters indemnified against, and the costs of
investigation and/or monitoring of such matters, and the costs of enforcement of
the indemnity; provided, however, that Buyer and Seller shall not be entitled to
indemnification under this Section 10.3 for, and "Liabilities" shall not
include, loss of profits or other consequential damages suffered by the party
claiming indemnification, or any punitive damages.
(e) The indemnity of each party provided in this Section 10.3 shall be
for the benefit of and extend to each Party's present, former and future
Affiliates, successors and permitted assigns, and its and their directors,
officers, employees, agents, and representatives.
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SECTION 10.4 INDEMNIFICATION ACTIONS.
All claims for indemnification under Section 10.3 shall be asserted and
resolved as follows:
(a) For purposes of this Article 10, the term "Indemnifying Party" when
used in connection with particular Liabilities shall mean the Party or Parties
having an obligation to indemnify another Party or Parties with respect to such
Liabilities pursuant to this Article 10, and the term "Indemnified Party" when
used in connection with particular Liabilities shall mean the Party or Parties
having the right to be indemnified with respect to such Liabilities by another
Party or Parties pursuant to this Article 10.
(b) To make claim for indemnification under Section 10.3, an
Indemnified Party shall notify the Indemnifying Party of its claim under this
Section 10.4, including the specific details of and specific basis under this
Agreement for its claim (the "Claim Notice"). In the event that the claim for
indemnification is based upon a claim by a third party against the Indemnified
Party (a "Claim"), the Indemnified Party shall provide its Claim Notice promptly
after the Indemnified Party has actual knowledge of the Claim and shall enclose
a copy of all papers (if any) served with respect to the Claim; provided that
the failure of any Indemnified Party to give notice of a Claim as provided in
this Section 10.4 shall not relieve the Indemnifying Party of its obligations
under Section 10.3 except to the extent such failure results in insufficient
time being available to permit the Indemnifying Party to effectively defend
against the Claim or otherwise prejudices the Indemnifying Party's ability to
defend against the Claim. In the event that the claim for indemnification is
based upon an inaccuracy or breach of a representation, warranty, covenant or
agreement, the Claim Notice shall specify the representation, warranty, covenant
or agreement which was inaccurate or breached.
(c) In the case of a claim for indemnification based upon a Claim, the
Indemnifying Party shall have 30 days from its receipt of the Claim Notice to
notify the Indemnified Party whether it admits or denies its liability to defend
the Indemnified Party against such Claim at the sole cost and expense of the
Indemnifying Party. The Indemnified Party is authorized, prior to and during
such 30-day period, to file any motion, answer or other pleading that it shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and that is not prejudicial to the Indemnifying Party.
(d) If the Indemnifying Party admits its liability, it shall have the
right and obligation to diligently defend, at its sole cost and expense, the
Claim. The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof if requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate in contesting any
Claim which the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Claim
controlled by the Indemnifying Party pursuant to this Section 10.4(d). An
Indemnifying Party shall not, without the written consent of
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<PAGE> 41
the Indemnified Party, (i) settle any Claim or consent to the entry of any
judgment with respect thereto which does not include an unconditional written
release of the Indemnified Party from all liability in respect of such Claim or
(ii) settle any Claim or consent to the entry of any judgment with respect
thereto in any manner that may materially and adversely affect the Indemnified
Party (other than as a result of money damages covered by the indemnity).
(e) If the Indemnifying Party admits its liability but fails to
diligently prosecute or settle the Claim, then the Indemnified Party shall have
the right to defend against the Claim at the sole cost and expense of the
Indemnifying Party, with counsel of the Indemnified Party's choosing, subject to
the right of the Indemnifying Party to admit its liability and assume the
defense of the Claim at any time prior to settlement or final determination
thereof. If the Indemnifying Party in good faith does not admit its liability,
then the Indemnifying Party shall have the right to defend against the Claim
with counsel of the Indemnified Party's choosing. The Indemnified Party will be
entitled to its costs and expenses if the Indemnifying Party is unable to
establish it was not required to indemnify the Indemnified Party. If the
Indemnifying Party has not yet admitted its liability for a Claim, the
Indemnified Party shall send written notice to the Indemnifying Party of any
proposed settlement and the Indemnifying Party shall have the option for 10 days
following receipt of such notice to (i) admit in writing its liability for the
Claim and (ii) if liability is so admitted, reject, in its reasonable judgment,
the proposed settlement.
(f) In the case of a claim for indemnification not based upon a Claim,
the Indemnifying Party shall have 30 days from its receipt of the Claim Notice
to (i) cure the Liabilities complained of, (ii) admit its liability for such
Liabilities or (iii) dispute the claim for such Liabilities. If the Indemnifying
Party does not notify the Indemnified Party within such 30 day period that it
has cured the Liabilities or that it disputes the claim for such Liabilities,
the amount of such Liabilities shall conclusively be deemed a liability of the
Indemnifying Party hereunder.
SECTION 10.5 LIMITATION ON ACTIONS.
After Closing, any assertion by Buyer that Seller is liable for
indemnity under Section 10.3(b) for an Environmental Claim or Environmental
Liabilities must be made by Buyer in writing and given to Seller on or before
the Final Environmental Claim Date (or not at all).
ARTICLE 11. MISCELLANEOUS
SECTION 11.1 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original instrument, but all such counterparts together shall
constitute but one agreement.
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SECTION 11.2 EXHIBITS.
The Exhibits and Schedules referred to in this Agreement are hereby
incorporated in this Agreement by reference and constitute a part of this
Agreement.
SECTION 11.3 EXPENSES.
Except as otherwise specifically provided, all fees, costs and expenses
incurred by Buyer or Seller in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the Party incurring
the same, including, without limitation, legal and accounting fees, costs and
expenses.
SECTION 11.4 NOTICES.
All notices and communications required or permitted under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly made when personally delivered to the individual
indicated below, or if mailed, when received by the Party charged with such
notice and addressed as follows:
If to Seller: Venus Exploration, Inc.
1250 N.E. Loop 410, Ste. 1000
San Antonio, Texas 78209
Attn: John Y. Ames
Telephone: 210-930-4900
Telecopy: 210-930-4901
If to Buyer: Anadarko Petroleum Corporation
17001 Northchase Drive
P. O. Box 1330
Houston, Texas 77251-1330
Attn: Randy Junior
Telephone: 281-874-3513
Telecopy: 281-873-1390
Any Party may, by written notice so delivered to the other Party,
change the address or individual to which delivery shall thereafter be made.
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SECTION 11.5 WIRE TRANSFER INSTRUCTIONS.
Funds payable to Seller shall be wired to:
Texas Escrow Company, Inc.
300 Crescent Court, Ste. 100
Dallas, TX 75201
SECTION 11.6 AMENDMENTS.
This Agreement may not be amended nor any rights hereunder waived
except by an instrument in writing signed by the Party to be charged with such
amendment or waiver and delivered by such Party to the Party claiming benefit of
such amendment or waiver.
SECTION 11.7 ASSIGNMENT.
No Party may assign all or any portion of its rights or delegate all or
any portion of its duties hereunder unless it continues to remain liable for the
performance of its obligations hereunder and obtains the prior written consent
of the other Party; provided, however, this Section 11.7 shall not require
Seller's consent to any transfer of rights hereunder by Buyer to Buyer's
Affiliate.
SECTION 11.8 CONDITIONS.
The inclusion in this Agreement of conditions to Seller's and Buyer's
obligations at the Closing shall not, in and of itself, constitute a covenant of
either Seller or Buyer to satisfy the conditions to the other Party's
obligations at the Closing.
SECTION 11.9 COUNTERPARTS.
This Agreement may be executed by Buyer and Seller 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.
SECTION 11.10 GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be
construed and enforced in accordance with the laws of the State of Texas, but
without regard to laws or principles of conflicts of laws that would cause
application of the laws of another jurisdiction.
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SECTION 11.11 ENTIRE AGREEMENT.
This Agreement (including the Exhibits and Schedules hereto)
constitutes the entire understanding among the Parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter.
SECTION 11.12 PARTIES IN INTEREST.
This Agreement shall be binding upon, and shall inure to the benefit
of, the Parties hereto, and their respective successors and assigns, and nothing
contained in this Agreement, express or implied, is intended to confer upon any
other person or entity any benefits, rights or remedies.
SECTION 11.13 SURVIVAL.
The representations, warranties, covenants, agreements and indemnities
provided for in this Agreement shall survive the Closing and shall not be
extinguished by the doctrine of merger by deed, confusion or any similar
doctrine and no waiver, release or forbearance of the application of the
provisions of those paragraphs in any given circumstance shall operate as a
waiver, release or forbearance of the provisions of the paragraphs as to any
other circumstance.
SECTION 11.14 CONSTRUCTION.
Seller and Buyer have had substantial input into the drafting and
preparation of this Agreement and have had the opportunity to exercise business
discretion in relation to the negotiation of the details of the transaction
contemplated hereby. This Agreement is the result of arm's-length negotiations
from equal bargaining positions.
SECTION 11.15 LIMITATION ON DAMAGES.
Notwithstanding anything to the contrary contained herein, none of
Buyer, Seller or any of their respective Affiliates shall be entitled to
punitive damages in connection with this Agreement and the transactions
contemplated hereby and each of Buyer and Seller, for itself and on behalf of
its Affiliates, hereby expressly waives any right to punitive damages in
connection with this Agreement and the transactions contemplated hereby.
SECTION 11.16 ARBITRATION.
Any dispute arising out of or relating to this Agreement or the breach,
termination or validity thereof, shall be finally settled by arbitration
conducted expeditiously in accordance with the Center for Public Resources
("CPR") Rules for Non-Administered Arbitration of Business
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<PAGE> 45
Disputes by three independent and impartial arbitrators selected by CPR in
accordance with Rule 6 of the CPR Rules. The arbitration shall be governed by
the Uniform Arbitration Act, V.T.C.A., Civil Practice and Remedies Code,
Sections 171.001 to 171.020, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The place
of arbitration shall be Houston, Texas, unless otherwise agreed to by the
parties hereto. The arbitrators are not empowered to award consequential,
indirect, special, punitive, or exemplary damages, and each Party hereby
irrevocably waives any damages in excess of actual damages.
SECTION 11.17 SEVERABILITY.
If any term or other provision of this Agreement is held invalid,
illegal or incapable of being enforced under any rule of law, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in a materially adverse manner with respect
to either Party.
ARTICLE 12. DEFINITIONS
"Adjustment Period" has the meaning set forth in Section 2.2(a).
"Adjusted Purchase Price" has the meaning set forth in Section 2.2.
"Affiliate" with respect to any Person, means any person that directly
or indirectly controls, is controlled by or is under common control with such
Person, including a limited liability corporation.
"Agreed Interest Rate" shall mean six percent (6%) per annum simple
interest.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Allocated Value" has the meaning set forth in Section 2.3.
"Area of Exclusion" has the meaning set forth in Exhibit E.
"Assets" has the meaning set forth in Section 1.1.
"Assumed Obligations" has the meaning set forth in Section 10.3(a).
"Business Day" means each calendar day except Saturdays, Sundays, and
Federal holidays.
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"Buyer's Affiliate" has the meaning set forth in Section 1.1.
"Claim" has the meaning set forth in Section 10.4.
"Claim Notice" has the meaning set forth in Section 10.4.
"Closing" has the meaning set forth in Section 8.1(a).
"Closing Date" has the meaning set forth in Section 8.l(b).
"Closing Payment" has the meaning set forth in Section 8.4(a).
"Code" has the meaning set forth in Section 2.3.
"Contracts" has the meaning set forth in Section 1.1(f).
"Conveyance" has the meaning set forth in Section 3.1(b).
"Defensible Title" has the meaning set forth in Section 3.2.
"Effective Time" has the meaning set forth in Section 1.3.
"Environmental Audit" has the meaning set forth in Section 3.7(a).
"Environmental Claim" shall mean any action, claim or written notice by
any Person alleging potential liability of the Seller or its Affiliates arising
out of or resulting from any actual or alleged violation of, or any remedial
obligation under, any Environmental Law with respect to the Properties.
"Environmental Defect" has the meaning set forth in Section 3.7.
"Environmental Laws" means, as the same have been amended to the date
hereof, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.;
the Clean Water Act; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601
through 2629; the Oil Pollution Act, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et
seq.; and the Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j; and
all similar Laws as of the date hereof of any Governmental Body having
jurisdiction over the property in question addressing pollution or protection of
the environment and all regulations implementing the foregoing.
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"Environmental Liabilities" shall mean any and all costs (including
costs of remediation), damages, natural resource damages, settlements,
consulting fees, expenses, penalties, fines, taxes, orphan share, prejudgment
and postjudgment interest, court costs, attorneys' fees, and other Liabilities
incurred or imposed (i) pursuant to any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Body to the
extent arising out of or under Environmental Laws or (ii) pursuant to any claim
or cause of action by a Governmental Body or other Person for personal injury,
property damage, damage to natural resources, remediation or response costs to
the extent arising out of or attributable to any violation of, or any
remediation obligation under, any Environmental Law.
"Environmental Permits" has the meaning set forth in Section 4.9.
"Equipment" has the meaning set forth in Section 1.1(e).
"Excluded Assets" has the meaning set forth in Section 1.2.
"EXCO Agreement" has the meaning set forth in Section 7.2(c).
"EXUS" means EXUS Energy, LLC, a Delaware Limited Liability Company,
formed by Venus and EXCO Resources, Inc. ("EXCO").
"Final Environmental Claim Date" means the date that is one (1) year
after the Closing Date.
"Governmental Authorization" has the meaning set forth in Section 4.23.
"Governmental Body" means any federal, state, local, municipal, or
other governments; any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; and any court or governmental tribunal.
"Hazardous Materials" shall mean any explosives, radioactive materials,
asbestos material, urea formaldehyde, hydrocarbon contaminants, underground
tanks, pollutants, contaminants, hazardous, corrosive or toxic substances,
special waste or waste of any kind, including compounds known as
chlorobiophenyls and any material or substance the storage, manufacture,
disposal, treatment, generation, use, transport, migration, or release into the
environment of which is prohibited, controlled, regulated or licensed under
Environmental Laws, including, but not limited to, (i) all "hazardous
substances" as that term is defined in Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and (ii)
petroleum and petroleum products.
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"Hydrocarbons" has the meaning set forth in Section 1.1(c).
"Indemnified Party" has the meaning set forth in Section 10.4.
"Indemnifying Party" has the meaning set forth in Section 10.4.
"Lands" has the meaning set forth in Section 1.1(a).
"Laws" means all statutes, rules, regulations, ordinances, orders, and
codes of Governmental Bodies.
"Leases" has the meaning set forth in Section 1.1(a).
"Liabilities" has the meaning set forth in Section 10.3(d).
"Material Adverse Effect" means any material adverse effect on the
ownership, operation or value of the Assets, as currently operated, taken as a
whole, provided, however, that "Material Adverse Effect" shall not include
general changes in industry or economic conditions or changes in laws or in
regulatory policies.
"Party" or "Parties" means one or all of signatory Parties to this
Agreement, respectively, unless otherwise indicated.
"Permitted Encumbrances" has the meaning set forth in Section 3.3.
"Person" means any individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, government or agency or subdivision thereof or any other entity.
"Properties" has the meaning set forth in Section 1.1(d).
"Property Costs" has the meaning set forth in Section 1.3.
"Purchase Price" has the meaning set forth in Section 2.1.
"Buyer" has the meaning set forth in the first paragraph of this
Agreement.
"Records" has the meaning set forth in Section 1.1(h).
"Seller" has the meaning set forth in the first paragraph of this
Agreement and in Section 4.2(b).
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"Surface Contracts" has the meaning set forth in Section 1.1(g).
"Taxes" means all federal, state, local, and foreign income, profits,
franchise, sales, use, ad valorem, property, severance, production, excise,
stamp, documentary, real property transfer or gain, gross receipts, goods and
services, registration, capital, transfer, or withholding Taxes or other
governmental fees or charges imposed by any taxing authority, including any
interest, penalties or additional amounts which may be imposed with respect
thereto.
"Tax Returns" has the meaning set forth in Section 4.8.
"Title Claim Date" has the meaning set forth in Section 3.4(a).
"Title Defect" has the meaning set forth in Section 3.2.
"Title Defect Amount" has the meaning set forth in Section 3.4(c).
"Title Defect Notice" has the meaning set forth in Section 3.4(a).
"Title Defect Property" has the meaning set forth in Section 3.4(a).
"Units" has the meaning set forth in Section 1.1(d).
"Wells" has the meaning set forth in Section 1.1(b).
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IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto on the date first above written.
ATTEST: SELLER:
VENUS EXPLORATION, INC.
By: /s/ JOHN Y. AMES By: /s/ EUGENE L. AMES, JR.
------------------------------ ---------------------------------------
Name: John Y. Ames Name: Eugene L. Ames, Jr.
----------------------------- ---------------------------------------
Title: President Title: Chairman & Chief Executive Officer
---------------------------- --------------------------------------
Date: 12/17/99 Date: 12/17/99
---------------------------- --------------------------------------
ATTEST: BUYER:
ANADARKO PETROLEUM CORPORATION
By: /s/ SUZANNE SUTER By: /s/ BRUCE H. STOVER
------------------------------ ----------------------------------------
Name: Suzanne Suter Name: Bruce H. Stover
----------------------------- ---------------------------------------
Title: Corporate Secretary Title: Vice-President-Worldwide Business
Development
---------------------------- --------------------------------------
Date: 12/30/99 Date: 12/30/99
---------------------------- --------------------------------------
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Purchase And Sale Agreement Exhibits And Schedules
The exhibits and schedules described below are not being filed herewith. These
exhibits and schedules will be filed upon request of the Securities and Exchange
Commission.
<TABLE>
<S> <C>
Exhibit A Property Description
Exhibit A-1 Well Summary
Exhibit A-2 Unit Summary
Exhibit B Assignment And Bill of Sale
Exhibit C Permitted Encumbrances
Exhibit D Equipment Inventory
Exhibit E Area of Exclusion
Schedule 2.3 Allocation of Purchase Price
Schedule 4.8 Litigation And Claims
Schedule 4.10 Environmental Law/Permit Deficiencies
Schedule 4.12 Outstanding Capital Commitments And Property Costs
Schedule 4.12A Authority For Expenditures
Schedule 4.13 Non-Compliance With Laws/Governmental Authorizations
Schedule 4.15 Outstanding Payments for Production
Schedule 4.16 Gas Imbalances as of the Effective Time
Schedule 4.18 Unplugged/Improperly Plugged Wells
</TABLE>
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
================================================================================
FOR RELEASE @ 3:30 P.M., C.S.T., NOVEMBER 17, 1999
CONTACT: JOHN Y. AMES
PRESIDENT & COO
VENUS EXPLORATION, INC.
210-930-4900 EXT. 1104
WWW.VENUSEXPLORATION.COM
San Antonio, Texas - November 17, 1999 - Venus Exploration, Inc.'s
(Nasdaq Small CapTM VENX) common stock will continue to be listed on The Nasdaq
SmallCap Market via an exception from the Net Tangible Asset requirement.
While Venus Exploration, Inc. failed to meet this requirement as of
August 30, 1999, the Company was granted a temporary exception from this
standard subject to Venus Exploration, Inc.'s meeting certain conditions. The
exception will expire on December 31, 1999. In the event the Company is deemed
to have met the terms of the exception, it shall continue to be listed on The
Nasdaq SmallCap Market. The Company believes it can meet these conditions
through the gain which it expects to record in the fourth quarter of 1999 if a
pending transaction to sell properties in Louisiana, previously announced by the
company, is consummated, although there can be no assurances that it will do so.
The Company announced on November 5, 1999 that it had entered into a Letter of
Intent to sell certain properties for $19,500,000. This sale is subject to
normal and customary conditions of closing and the negotiation and execution of
a definitive Purchase and Sale Agreement.
For the duration of the exception, the Company's Nasdaq symbol will be
VENXC. If at some future date the Company's securities should cease to be listed
on The Nasdaq SmallCap Market, they may continue to be listed in the
OTC-Bulletin Board.
This News Release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Those forward- looking statements address such
matters as completion of a transaction that is subject to change. Although these
statements are based on the data available at the time this material was
prepared and although Venus believes that its expectations are based on
reasonable assumptions, it can give no assurance that its goals will be
achieved, or that its conclusions will be supported by actual future events.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include federal and state regulatory
developments, the timing and extent of changes in commodity prices, the timing
and extent of success in acquiring leasehold interests, the success in
developing and producing oil and gas reserves, geological uncertainties and
conditions of the capital and equity markets during the periods covered by the
forward-looking statements contained in the company's public filings with the
Securities and Exchange Commission.
###
<PAGE> 1
EXHIBIT 99.2
NEWS RELEASE
================================================================================
FOR RELEASE @ 3:30 P.M., C.S.T., NOVEMBER 17, 1999
CONTACT: JOHN Y. AMES, PRESIDENT & COO
VENUS EXPLORATION, INC.
210-930-4900 EXT. 1104
WWW.VENUSEXPLORATION.COM
San Antonio, Texas - November 17, 1999 - The Company announced the
results of recent drilling and workover operations in two fields. The first is a
workover to restimulate a well in the Constitution Field, Jefferson County,
Texas. The #1 Westbury Farms, which was completed as a gas condensate well in
March 1998 through perforations in the Middle Yegua Formation between 13,910 and
13,940 foot depths, was restimulated on November 15, 1999 using a total of
108,140 pounds of bauxite sand and 2,065 barrels of gelled water. After 22
hours, the well was producing at a rate of 3.5 million cubic feet of gas and 554
barrels of condensate plus 420 barrels of frac load water per day into the
pipeline through a 14/64" choke with 6,310 pounds per square inch tubing
pressure. Venus is the operator of the well and owns 10.5% working interest in
the producing zone in this well. The Company holds approximately 3,000 acres in
this field and owns 15% working interest in zones other than the producing zone
in the #1 Westbury Farms well and in the acreage block. With the results of this
restimulation, the company expects to drill additional development wells in the
Constitution Field if future production history supports the magnitude of proved
reserves that the Company anticipates will be assigned to this producing zone.
The second project is in the East World Field in Crockett County,
Texas, where Venus owns a 7.4% working interest in a 486 acre lease. The Pogo
Producing Company No. 1 Ranch Hand 55 had an initial daily flow rate of 101
barrels of oil and 948 thousand cubic feet (Mcf) from the Strawn Limestone
between 8,074 and 8,124 feet on April 5, 1999. The No. 2 Ranch Hand 55 was
subsequently drilled and completed on October 5, 1999, from the same zone, for a
flow rate of 209 barrels of oil, 1.7 million cubic feet (MMcf) of gas and 200
barrels of water per day.
This News Release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Those forward-looking statements address such
matters as future drilling plans that is subject to change. Although these
statements are based on the data available at the time this material was
prepared and although Venus believes that its expectations are based on
reasonable assumptions, it can give no assurance that its goals will be
achieved, or that its conclusions will be supported by actual future events.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include federal and state regulatory
developments, the timing and extent of changes in commodity prices, the timing
and extent of success in acquiring leasehold interests, the success in
establishing, developing and producing oil and gas reserves, geological
uncertainties and conditions of the capital and equity markets during the
periods covered by the forward-looking statements contained in the company's
public filings with the Securities and Exchange Commission.
###
