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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
Date of Report (Date of earliest event reported) July 22, 1996
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Seagull Energy Corporation
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(Exact name of registrant as specified in charter)
Texas
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(State or other jurisdiction of incorporation)
1-8094 74-1764876
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(Commission File Number) (IRS Employer Identification No.)
1001 Fannin, Suite 1700, Houston, Texas 77002 -6714
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(Address of principal executive offices) (Zip Code)
(713) 951-4700
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(Registrant's telephone number including area code)
Not Applicable
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(Former name or former address, if change since last report)
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Item 5. Other Events
On July 22, 1996, Seagull Energy Corporation, a Texas corporation
("Seagull" or the "Company"), executed a definitive stock purchase agreement
(the "ESI Purchase Agreement") providing for the purchase by Seagull of all of
the outstanding common stock of Esso Suez Inc. ("ESI") from Exxon Corporation.
Also, on July 22, 1996, Seagull executed a definitive purchase agreement (the
"EEL Purchase Agreement") providing for the purchase of certain assets of Esso
Egypt Limited (the "EEL Assets") from Exxon Corporation. The gross purchase
price, including cash and receivables, of ESI and the EEL Assets is
approximately $168 million, including $4.5 million allocated to the EEL Assets.
The prompt collectibility of certain receivables will preclude any necessity
for financing beyond a $68 million net cash payment, funded through additional
borrowings under Seagull's existing revolving credit facilities (the "Credit
Facilities"). The effective date for the acquisition is January 1, 1996.
ESI's assets consist of a 100% interest in the East Zeit oil producing
concession in the offshore Gulf of Suez, and the EEL Assets consist of the
entire working interest in the South Hurghada exploration concession located
onshore on the coast of the Gulf of Suez approximately 250 miles south of
Cairo. As of December 31, 1995, net proved reserves attributable to the ESI
concession were estimated at 18.9 million barrels ("MMbbls") of crude oil.
After accounting for the production during 1996 through the anticipated closing
date, Seagull estimates that the ESI concession area will contain approximately
17.4 MMbbls of net proved oil reserves. The ESI concession area has current
gross production averaging approximately 16,000 barrels of crude oil per day.
The 63,000-acre South Hurghada concession contains a number of currently
drillable exploratory prospects, plus two existing oil discoveries.
The consummation of the purchase of ESI and the purchase of the EEL
Assets are required to occur simultaneously and are subject to certain other
conditions, including obtaining governmental approvals and other conditions
outside the control of the parties.
Seagull currently estimates that it will initially borrow $68 million
under the Credit Facilities to fund the purchase of ESI and the EEL Assets.
Under provisions included in the Credit Facilities, the amount of senior
indebtedness available to Seagull is subject to a borrowing base (the
"Borrowing Base") based upon the proved reserves of Seagull's exploration and
production operations and the financial performance of its other operations.
The Borrowing Base is generally determined annually, but may be redetermined,
at the option of either Seagull or the banks, one additional time each year.
Prior to the purchase of ESI and the EEL Assets, the Borrowing Base was $500
million and as of August 19, 1996, borrowings outstanding under the Credit
Facilities were $175 million, leaving immediately available unused commitments
of approximately $204 million, net of outstanding letters of credit of $3
million, $100 million of borrowings outstanding under the Company's senior
notes and $18 million of borrowings outstanding under Seagull's money market
facilities. Subsequent to the purchase of ESI and the EEL Assets, Seagull
anticipates requesting a redetermination of the Borrowing Base to increase the
Borrowing Base to $535 million, leaving immediately available unused
commitments of approximately $171 million.
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The descriptions of the ESI Purchase Agreement and the EEL Purchase
Agreement set forth above are qualified by reference to the ESI Purchase
Agreement and the EEL Purchase Agreement which are filed herewith as Exhibit
2.1 and 2.2, respectively, and are incorporated herein by reference.
Item 7. Statements and Exhibits
(a) Financial statements of businesses acquired.
The financial statements of Esso Suez Inc. for the years ended December
31, 1995, 1994 and 1993 and the six months ended June 30, 1996 and 1995 are
filed herewith as Exhibit 99.1.
(c) Exhibits.
2.1 Stock Purchase Agreement Between Seagull Energy Corporation and
Exxon Corporation relating to all of the Outstanding Capital Stock of Esso Suez
Inc. as executed in Houston, Texas on July 22, 1996.
2.2 Purchase and Sale Agreement Between Esso Egypt Limited and
Seagull Energy Corporation dated July 22, 1996.
23.1 Consent of Price Waterhouse LLP.
99.1 The financial statements of Esso Suez Inc. - Years ended
December 31, 1995, 1994 and 1993 and the six months ended June 30, 1996 and
1995.
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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 thereunto duly authorized.
Date: August 28, 1996
SEAGULL ENERGY CORPORATION
By: /s/ RODNEY W. BRIDGES
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Rodney W. Bridges
Vice President and Controller
(Principal Accounting Officer)
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Exhibit Index
2.1 Stock Purchase Agreement Between Seagull Energy
Corporation and Exxon Corporation relating to all
of the Outstanding Capital Stock of Esso Suez Inc.
as executed in Houston, Texas on July 22, 1996
2.2 Purchase and Sale Agreement Between Esso Egypt
Limited and Seagull Energy Corporation dated
July 22, 1996
23.1 Consent of Price Waterhouse LLP
99.1 The financial statements of Esso Suez Inc. - Years
ended December 31, 1995, 1994 and 1993 and the six
months ended June 30, 1996 and 1995
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EXHIBIT 2.1
CONFIDENTIAL
STOCK PURCHASE AGREEMENT
BETWEEN
SEAGULL ENERGY CORPORATION
AND
EXXON CORPORATION
RELATING TO ALL OF THE
OUTSTANDING CAPITAL STOCK OF
ESSO SUEZ INC.
AS EXECUTED IN HOUSTON, TEXAS
ON
JULY 22, 1996
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TABLE OF CONTENTS
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RECITALS 1
ARTICLE I
SALE AND PURCHASE OF SHARES 1
1.1 Sale of Shares 1
1.2 Purchase Price and Payment 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER 2
2.1 Organization and Good Standing 2
2.2 Capitalization 3
2.3 Ownership of Shares 3
2.4 Authorization of Agreement 3
2.5 No Conflicts 4
2.6 Consents 4
2.7 Financial Statements 4
2.8 No Undisclosed Liabilities 5
2.9 Taxes 6
2.10 Patents 7
2.11 Permits 7
2.12 Contracts 7
2.13 Litigation / Audit / Investigation 8
2.14 Title to Properties; Absence of Encumbrances 9
2.15 Employees and Employee Benefit Plans 9
2.16 Environmental Matters 10
2.17 Regulatory Compliance 10
2.18 Material, Adverse Change 11
2.19 East Zeit Concession Agreement 11
2.20 Sufficiency of Assets 11
2.21 Measured Data 11
2.22 Equipment 12
2.23 Wells 12
2.24 Recoverable Costs 12
2.25 Brokerages; Payments 12
2.26 Period of Validity 12
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS
OF PURCHASER 13
3.1 Organization and Good Standing 13
3.2 Authorization of Agreement 13
3.3 No Conflicts 13
3.4 Brokerages/Payments 13
3.5 Consents 14
3.6 No Lawsuits 14
3.7 Investment Representation 14
3.8 Financing; Restriction on Funds 14
3.9 Acknowledgments 14
3.10 Material Factor 17
3.11 Continuing Validity 17
3.12 Use of ESI Name 17
ARTICLE IV
COVENANTS OF SELLER 17
4.1 Access to Documents; Opportunity to Ask Questions 17
4.2 Insurance 18
4.3 Conduct of Business 19
4.4 Hart-Scott-Rodino Filings 21
4.5 Conditions Precedent 21
4.6 Environmental Audit 21
4.7 Special Employee Payment 22
ARTICLE V
COVENANTS OF PURCHASER 22
5.1 Hart-Scott-Rodino Filings 22
5.2 Conditions Precedent 22
5.3 Confidentiality 22
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING 23
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6.1 Conditions Precedent to Purchaser's Obligation 23
6.2 Conditions Precedent to Seller's Obligation 25
6.3 Expedited Arbitration for Claim of Pre-Closing
Material Breach 26
ARTICLE VII
THE CLOSING; TERMINATION OF AGREEMENT 28
7.1 Closing Date; Closing 28
7.2 Termination 29
7.3 Funding Date; Funding 29
ARTICLE VIII
DELIVERIES AT CLOSING AND ACTIONS
TO BE TAKEN AT OR SUBSEQUENT TO CLOSING 30
8.1 Deliveries by Seller 30
8.2 Deliveries by Purchaser 30
8.3 Housing 31
8.4 Change of ESI Name and Removal of ESI Name 31
8.5 Return of Seller's Proprietary Materials 32
8.6 License of Data to Seller 32
8.7 Confidential Information 32
8.8 Intercompany Accounts 35
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS 35
9.1 Indemnification 35
9.2 Seller Deductible 36
9.3 Survival of Indemnity Obligations 36
9.4 Notice of Indemnification 36
9.5 Indemnification Procedure for Third-Party Claims 37
9.6 Definitions 37
9.7 No Brokers 38
9.8 Inducement to Seller 38
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ARTICLE X
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GENERAL 38
10.1 Specific Performance 38
10.2 Notices 39
10.3 Amendments 40
10.4 Entire Agreement 40
10.5 Successors and Assigns 40
10.6 Headings 41
10.7 Applicable Law; Arbitration; Submission to
Jurisdiction; Consent to Service of Process 41
10.8 Expenses 42
10.9 Severability 42
10.10 Public Announcements 42
10.11 Counterparts 42
10.12 Books and Records; Personnel 43
10.13 No Admission 43
10.14 No Third-Party Beneficiaries 44
10.15 Schedules 44
10.16 "Includes" 44
10.17 Not to be Construed Against Draftor 44
10.18 Execution by the Parties 44
ARTICLE XI
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CERTAIN TAX MATTERS 44
11.1 Certain Tax Matters 44
11.2 IRC Sec. 338(h)(10)Election 45
11.3 Liability for Taxes and Related Matters 45
11.4 Assistance and Cooperation 48
ANNEXES
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A Adjustments to Purchase Price at Closing 50-51
B Irrevocable Letter of Credit 52-56
C Purchaser Note 57
D Seller Notes 58-59
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SCHEDULES
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SCHEDULE 2.6 Consents 60
SCHEDULE 2.9 Taxes 61
SCHEDULE 2.10 Patents, Trademarks, Copyrights 62
SCHEDULE 2.12(a) ESI Contracts Summary Sheet 63-67
SCHEDULE 2.12(b) ESI Contract and Agreement Assignability
and Termination 68-77
SCHEDULE 2.13 Litigation, Claims, and Other Matters 78
SCHEDULE 2.14 Title to Properties 79
SCHEDULE 2.15 ESI National Benefit Plans and Other
Benefit Arrangements 80-81
SCHEDULE 2.18 Items Potentially Impacting Esso Suez
after January 1, 1996 82
SCHEDULE 8.5 Seller's Proprietary Material 83
SCHEDULE 8.6 License of Data to Seller 84
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement made on the date on which the last of the
Parties executes this Agreement (the "Effective Date") is between Seagull
Energy Corporation, a Texas corporation (hereinafter referred to, together with
its successors and assigns, as "Purchaser"), and Exxon Corporation (hereinafter
referred to as "Seller"). (Purchaser and Seller are sometimes referred to
herein individually as "Party" and collectively as "Parties.")
W I T N E S S E T H:
WHEREAS, Esso Suez Inc., a Delaware corporation (hereinafter referred
to as "ESI"), has authorized and issued one thousand (1,000) fully paid and
non-assessable shares of common stock, no par value (the "Shares"),
constituting all of the issued and outstanding capital stock of ESI;
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, ESI whose interests relate primarily to the East Zeit
Offshore Concession Agreement dated 23rd March, 1981, and issued by Egyptian
Law No. 8 of 1981, as such agreement may have been amended (hereinafter
referred to as the "East Zeit Concession Agreement"); and
WHEREAS, at Closing (as defined in Section 7.1(a) hereof), Seller shall
sell to Purchaser, and Purchaser shall purchase from Seller, the Shares for the
Purchase Price (as defined in Section 1.1 hereof) plus the Adjustment (which
may be a positive or negative number; defined in Annex A) and upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the benefits to be derived by each Party, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows.
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale of Shares. On the terms and subject to the conditions
set forth in this Agreement (including Article VIII), Seller hereby agrees to
sell, assign, and transfer to Purchaser
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(pursuant to the terms of an irrevocable letter of credit (the "Letter of
Credit") in the form of Annex B hereto), and Purchaser hereby agrees to
purchase and accept from Seller, the Shares, for the total Purchase Price of
One Hundred Sixty-three million, four hundred forty-eight thousand, three
hundred and three United States Dollars (U.S.$163,448,303.00) plus the
Adjustment all payable as set forth in Section 1.2, Article VIII, and Annex B.
Seller and Purchaser acknowledge that the Purchase Price has been agreed based
upon the financial status of ESI, on the Valuation Date (as defined in this
Section 1.1). Subject to the ordinary and necessary business requirements of
ESI (and the Adjustment), the net proceeds, receipts, credits, income, and all
costs, expenses, disbursements, and obligations of ESI from and after the
Valuation Date will be retained by ESI, as specified in this Agreement. For
purposes of this Agreement "Valuation Date" shall mean December 31, 1995.
1.2 Purchase Price and Payment. Subject to Section 6.1 and
Article VIII, Purchaser shall pay the Purchase Price pursuant to Section 8.2.
The payment of the Purchase Price shall consist of: (a) the amount payable
under a promissory note payable to Seller (the "Purchaser Note") in the form of
Annex C with a principal amount equal to the sum of the principal amounts of
Seller Note 1 and Seller Note 2 (each as defined in Section 6.1(i)), plus (b)
the amount payable under the Letter of Credit payable to Seller in the form of
Annex B in an amount equal to the difference between the Purchase Price (plus
the Adjustment, which may be a positive or negative number) and the Purchaser
Note. The amount of the Purchaser Note and the Letter of Credit will be
determined on or about September 15, 1996.
1.3 Esso Egypt Limited Assets. Seller agrees that its affiliate
Esso Egypt Limited ("EEL") and Purchaser have reached an agreement on principle
terms regarding the sale of the assets of EEL. Such terms are set forth in
that certain draft (of July 20, 1996) of a "Purchase and Sale Agreement"
negotiated between EEL and Purchaser, as modified in subsequent negotiations
between EEL and Purchaser, and intended by such parties and Seller to be
parallel and in harmony with the provisions of this Agreement. Purchaser
agrees, and Seller will encourage EEL, to continue to negotiate in good faith
towards a definitive Purchase and Sale Agreement between EEL and Purchaser and
to finalize such Purchase and Sale Agreement as soon as reasonably practicable.
Notwithstanding the foregoing provisions of this Section 1.3, Purchaser agrees
and Seller intends that no binding agreement between EEL and Purchaser shall
arise until EEL and Purchaser have executed and delivered a final Purchase and
Sale Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.1 Organization and Good Standing.
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New Jersey,
U.S.A. Seller has full corporate power and authority to hold interests and
carry on its business as it is now being conducted.
(b) ESI is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, U.S.A. and is
duly qualified and in good standing in all
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other jurisdictions in which the conduct of its business or the ownership of
its assets requires such qualification. The copies of ESI's Certificates of
Incorporation and By-Laws (in each case, together with all amendments, if any,
thereto) that have been previously delivered to Purchaser are accurate and
complete. ESI has full corporate power and authority to hold interests and
carry on its business as it has been and is now being conducted. Except to the
extent Suez Esso Petroleum Company ("SUESSO") may constitute a subsidiary, ESI
has no subsidiaries.
(c) SUESSO was created under the East Zeit Concession
Agreement and is in good standing under the laws of Egypt. SUESSO has no
compensated employees and no material assets or material liabilities
(contingent or otherwise). The copies of SUESSO's organizational documents (in
each case, together with all amendments, if any, thereto) that have been
previously delivered to Purchaser are accurate and complete.
2.2 Capitalization.
The Shares constitute all of ESI's authorized capital stock.
All of the Shares are validly issued and outstanding and are fully paid and
non-assessable. No shares of common stock are held by ESI as treasury stock.
There is no existing option, warrant, call, commitment, or other agreement or
arrangement to which ESI is a party requiring, and there are no convertible
securities of ESI outstanding which upon conversion would require, the issuance
of any additional shares of common stock of ESI or other securities convertible
into shares of common stock or other equity security of ESI. Except as may
otherwise be provided for under this Agreement, ESI has not, since the
Valuation Date, paid any dividend or similar distribution with respect to any
shares of its capital stock or repurchased, redeemed, or otherwise acquired any
outstanding shares of capital stock or other securities of, or ownership
interests in, ESI.
2.3 Ownership of Shares. Seller is the legal and beneficial
owner of the Shares, free and clear of any ownership claims by third parties
and any liens or pledges. Seller has the corporate power and authority to
enter into and perform this Agreement, and its sale, assignment, and transfer
of the Shares will convey to Purchaser (or its assignee, per Section 10.5) good
and marketable title to the Shares, free and clear of any and all liens,
pledges, encumbrances, charges, or third party ownership claims.
2.4 Authorization of Agreement. The execution and delivery of
this Agreement and the consummation of the transaction contemplated hereby have
been duly authorized by the
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necessary corporate action of Seller. This Agreement has been duly executed
and delivered by Seller and constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
2.5 No Conflicts. The execution, delivery and performance by
Seller of this Agreement and the consummation of the transaction contemplated
hereby do not and will not (with the giving of notice or the passage of time or
both) (a) conflict with any Certificate of Incorporation or By-Laws of Seller
or ESI, or organizational documents of SUESSO, (b) subject to the receipt of
those consents, approvals, and authorizations and the making of any
designation, declaration, or filing referred to in Schedule 2.6, and any
filings required and the expiration of the waiting period (including any
extensions) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"), violate any provision of any law, rule,
or regulation applicable to Seller, ESI, or SUESSO, (c) violate any order,
judgment, or decree applicable to Seller, ESI, or SUESSO, (d) except as may
otherwise be provided for under this Agreement, result in the creation of any
lien, charge, or encumbrance upon the assets or properties of Seller, ESI, or
SUESSO; or (e) give rise to any preferential purchase rights; except, in the
case of clauses (b), (c), (d), and (e) of this Section 2.5, violations that in
the aggregate would not materially hinder or impair the transaction
contemplated hereby and would not have a material, adverse effect on the
business, assets, or financial condition of ESI.
2.6 Consents. No consent, approval, or authorization of, or
designation, declaration, or filing with, any governmental authority or other
third party is required on the part of Seller, ESI, or SUESSO in connection
with Seller's execution, delivery, and performance of this Agreement, except
for (a) any required filings with the Federal Trade Commission and the U.S.
Department of Justice - Antitrust Division pursuant to the Hart-Scott-Rodino
Act and due expiration of the waiting period (including any extensions)
thereunder and (b) those consents, approvals, or authorizations that are listed
in Schedule 2.6 hereto, except to the extent that failure to have such
consents, approvals, or authorizations would not materially hinder or impair
the transaction contemplated hereby and would not have a material adverse
effect on the business, assets, or financial condition of ESI.
2.7 Financial Statements.
(a) Seller has delivered to Purchaser copies of the
audited concession basis financial statements of ESI Branch Office as of
December 31, 1995, certified by Price
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Waterhouse, independent certified public accountants ("Auditors"). These
statements have been prepared in accordance with the East Zeit Concession
Agreement.
In addition, Seller has delivered to Purchaser the unaudited Consolidated
Balance Sheet of ESI as of December 31, 1995, and March 31, 1996, and the
related unaudited Consolidated Statements of Income for the year ended December
31, 1995, and for the first three (3) months of 1996. Each of these unaudited
statements so delivered is in accordance with the books and records of ESI as
of the dates and for the periods indicated, has been prepared in accordance
with United States generally accepted accounting principles (GAAP),
consistently applied, except that the financial statements are not accompanied
by notes, and, subject to normal year-end audit adjustments with respect to the
unaudited interim financial statements, presents fairly the financial position,
results of operations, and cash flow of ESI as at the date and for the periods
indicated.
(b) Seller has also delivered to Purchaser copies of the
consolidated balance sheets and statements of income referred to in
subparagraph (a) above. For the purposes hereof, December 31, 1995, is
referred to as the "Balance Sheet Date. "Affiliate" of Seller as used in this
Agreement shall mean any company of which fifty percent (50%) or more of the
shares entitled to vote for directors are directly or indirectly owned by Exxon
Corporation. "Affiliate" of Purchaser as used in this Agreement shall mean any
company of which fifty percent (50%) or more of the shares entitled to vote for
directors are directly or indirectly owned by Seagull Energy Corporation.
2.8 No Undisclosed Liabilities. As of the Balance Sheet Date,
neither ESI nor SUESSO had any material indebtedness or liability (whether
accrued, absolute, contingent, or otherwise, and whether due or to become due)
required to be shown on a balance sheet prepared in accordance with GAAP which
is not shown on the Pro Forma Balance Sheet or any notes thereto or disclosed
herein or in a schedule hereto. Neither ESI nor SUESSO has incurred since
the Balance Sheet Date any material indebtedness or liability which is
outstanding on the date that is required to be shown on a balance sheet in
accordance with GAAP, other than those incurred in the ordinary course of
business or disclosed herein or in a schedule hereto.
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2.9 Taxes.
(a) For taxable years ended on or before December 31,
1995, Seller has filed (or will file for the 1995 tax year) when due all
consolidated federal and consolidated, combined or unitary federal, state,
local, foreign and other tax returns and reports ("Combined Returns") that are
required to be filed by it, and ESI has filed (or will file for the 1995 tax
year) when due all federal, state, local, foreign and other tax returns and
reports that are required to be filed by it, which returns and reports are (or
will be for 1995) in all material respects complete and accurate. Seller and
ESI will cause to be duly filed any tax returns or reports required to be filed
by Seller or ESI for that part of the taxable period up to and including the
Date of Funding. All federal, state, local and foreign taxes, including,
without limitation, income, remittance, property, sales, use, franchise,
withholding, capital stock, excise, value added, employees' income withholding,
social security and unemployment taxes, and all federal, state, local or
foreign levies, royalties, imposts, duties, licenses and registration fees and
charges of any nature whatsoever, including with respect to all of the
foregoing, any interest and penalties thereon (all of the foregoing, including
interest and penalties, being referred to collectively as "Taxes"), for which
Seller or ESI may be liable with respect to the operations of ESI, have in all
material respects been paid when due and payable or, with respect to taxes for
which ESI may be liable due after the Balance Sheet Date, have in all material
respects been adequately accrued. True and complete copies of all Egyptian tax
returns of Seller and ESI relating to taxable periods since December 31, 1988,
have been delivered or made available to Purchaser, the Taxes as shown due on
such returns have been paid and there are no Taxes, assessments or deficiencies
claimed to be due in respect of such tax returns or claimed in writing to be
due by any taxing authority or otherwise which are not fully reserved for on
the Pro Forma Balance Sheet or disclosed in the notes thereto.
Purchaser shall be responsible for the preparation and filing
of all other returns or reports which relate to the taxes of ESI after the Date
of Funding. Except as set forth on Schedule 2.9 hereto, there is no action,
suit, proceeding, audit, investigation or claim pending or threatened in
respect of any Taxes for which ESI may be liable which would have a material
adverse effect on the business, assets or financial condition of ESI. All
Taxes for which ESI may be liable and which are required to be withheld under
all applicable federal, state, local and foreign tax regulations have been
withheld in all material respects, and such withholdings have either been paid
to the respective governmental agencies or authorities or set aside in accounts
for such purpose or accrued, reserved against and entered upon the books of
the withholding corporation, as the case may be.
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(b) Neither Seller nor ESI has filed a consent pursuant to
Section 341(f) of the United States Internal Revenue Code of 1986, as amended
(the "Code"), or agreed to have Section 341(f)(2) of the Code applied to any
dispositions of subsection (f) assets (as such term is defined in Section
341(f)(4) of the Code). No property of Seller or ESI is or will be tax-exempt
use property within the meaning of Section 168(h) of the Code. Neither Seller
nor ESI has agreed or is required to make any adjustment under Section 481(a)
of the Code by reason of a change in accounting method or otherwise.
(c) Neither Seller nor ESI is a party to or is bound by or
has any obligation under any tax sharing or similar agreement.
(d) Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Code.
2.10 Patents
Schedule 2.10 hereto contains a complete and correct list of
each material patent and copyright owned or used primarily by ESI as well as of
each license or other agreement relating thereto. Each of the foregoing is
owned, by the party shown on such Schedule as owning the same, free and clear
of all claims, liens, charges, and encumbrances, except as set forth on
Schedule 2.10 hereto and except for Permitted Liens (as defined in Section 2.14
hereof).
2.11 Permits. Each of ESI and SUESSO has all necessary permits,
licenses, and governmental authorizations required for holding its assets and
the carrying on of its business activities, where the failure to have any such
permit, license, or governmental authorization would have a material, adverse
effect upon the business, assets, or financial condition of ESI.
2.12 Contracts.
(a) Except as listed in Schedule 2.12(a) hereto, ESI will
not, at time of Closing, be a party to any (i) contract or agreement relating
to the exploration for, or production, transportation, or sale of oil or gas
reserves or the creation of any joint venture, for such purpose; (ii) contract
for the employment of any officer or employee; (iii) agreement for the sale or
lease of any of the assets of ESI outside of the ordinary course of business
and involving annual payments
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in excess of U.S.$50,000.00; (iv) contract or commitment with a value in excess
of U.S.$50,000.00; (v) lease of machinery or equipment involving annual
payments in excess of U.S.$50,000.00; (vi) agreement with a labor union or
labor association; or (vii) loan agreement, promissory note issued by it,
guarantee, subordination or similar type of agreement involving an amount in
excess of U.S.$50,000.00. A complete and correct copy of each such agreement
has been furnished or made available to Purchaser. It is understood that
contracts for amounts less than that specified herein (or not otherwise meeting
the criteria of (i) through (vii), above) may be listed in Schedule 2.12(a)
hereto for information. Contracts or commitments outside of the ordinary
course of business with a value of less than or equal to $50,000.00 annually do
not in the aggregate exceed $200,000.00 annually. Except as disclosed herein
or in Schedule 2.12 (a) hereto, ESI is not a party to any non-compete or
similar agreement which in any way hinders or restricts the operation of ESI.
(b) Except as disclosed in Schedule 2.12(b): any
contracts meeting the criteria of (a)(i) through (a)(vii), above, will not be
terminated by ESI; such contracts are transferable; no third party consents or
approvals are required for transfer as a result of the transaction contemplated
hereunder; no other restrictions are imposed in order for a transferee to
assume (or ESI to retain after consummation of the transaction contemplated
hereunder) the rights and obligations under any such contracts; such contracts
constitute valid and legally binding obligations of the parties thereto and are
enforceable against the parties thereto in accordance with their terms; all
obligations required to be performed to date under the terms of such contracts
by the parties thereto have been performed; no act or omission has occurred or
failed to occur which, with the giving of notice, the lapse of time or both
would constitute a default under any of such contracts by any of the parties
thereto; and each of such contracts is now and will be upon the Closing Date in
full force and effect without default on the part of the parties thereto;
EXCEPT to the extent that the failure of any such representation within this
Section 2.12(b) would not have a material, adverse effect on the business,
assets, or financial condition of ESI.
2.13 Litigation / Audit / Investigation.
Except as disclosed in Schedule 2.13, there is no filed claim,
action, lawsuit, proceeding, or investigation pending or, to the knowledge of
Seller, claim, action, lawsuit, proceeding, or investigation threatened in
writing which might bring into question the validity or propriety of this
Agreement or the consummation of the transaction contemplated hereby. Schedule
2.13 contains a complete and correct list of all filed claims, actions,
lawsuits,
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<PAGE> 15
proceedings, or investigations pending or, to the knowledge of Seller, claim,
action, lawsuit, proceeding, or investigation threatened in writing against ESI
or relating to its properties, business, or assets that could reasonably be
expected to have a material, adverse effect on the business, assets, or
financial condition of ESI. It is understood that some or all of the
litigation or matters listed in Schedule 2.13 will not have a material, adverse
effect on the business, assets, or financial condition of ESI, and such
litigation is being listed for information. There is no outstanding order,
injunction, or decree of any court or governmental agency against or naming ESI
and materially affecting ESI, except as disclosed in Schedule 2.13. Neither
Seller nor ESI has received notice of any pending or threatened (in writing)
condemnation, taking, or similar proceeding affecting any material assets owned
or used by ESI.
2.14 Title to Properties; Absence of Encumbrances. ESI has good
and defensible title to the material assets reflected on the Pro Forma Balance
Sheet and on the Interim Pro Forma Balance Sheet (except for assets disposed of
in the ordinary and usual course of its business since the Balance Sheet Date)
or reflected on any schedule delivered pursuant hereto, free and clear of any
and all claims, liens, pledges, mortgages, security interests, and encumbrances
except (i) as set forth in Schedule 2.14 hereto, (ii) minor imperfections of
title, if any, as are not substantial in character, amount, or extent, and do
not materially detract from the value or interfere with the use of the
properties for the purposes for which they are presently used or otherwise
materially impair business operations, (iii) liens for Taxes and general and
special assessments not in default and payable without penalty or interest,
(iv) liens created by or arising under contracts for the sale, purchase,
exchange, or processing of hydrocarbons, (v) liens created by or arising under
any operating, pipeline, gathering, transportation, or other, similar agreement
pursuant to which ESI is subject, (vi) easements, rights-of-way, servitudes,
permits, surface leases, and other conditions, covenants, restrictions, or
rights in respect of surface operations, timber leases, pipelines, roads,
highways, railways, power lines, grazing, logging, canals, ditches, and the
like on, over, or in respect of any of the lands covered by the East Zeit
Concession Agreement that do not materially detract from the value or interfere
with the use of the properties for the purposes for which they are presently
used or otherwise materially impair business operations,, and (vii) rights
reserved to or vested in any municipality, governmental, tribal, statutory, or
public authority in Egypt to control or regulate ESI in any manner and all
applicable laws, rules, and orders of any such authority (collectively,
"Permitted Liens").
2.15 Employees and Employee Benefit Plans. Schedule 2.15 hereto
sets forth all employee benefit plans and all material benefit arrangements
which cover or provide benefits to
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<PAGE> 16
employees of ESI (the "Plans"). Except as set forth on Schedule 2.15 hereto,
(i) the Plans have been maintained, in all material respects, in accordance
with their terms and with all applicable law and (ii) none of the persons
employed by ESI is a party to or is covered by any labor or employment
agreement. ESI does not sponsor, maintain, or contribute to or have an
obligation to contribute to, and has not at any time within six years prior to
Closing sponsored, maintained or contributed to or had an obligation to
contribute to, any "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including a multiemployer plan within the meaning of Section 3(37)
of ERISA), which is subject to the provisions of ERISA. Further, with respect
to any employee benefit plan, within the meaning of Section 3(3) of ERISA,
which is subject to the provisions of ERISA and which is sponsored, maintained
or contributed to, or has been sponsored, maintained or contributed to within
six years prior to Closing, by any corporation, trade, business or entity under
common control with ESI, within the meaning of Section 414(b), (c) or (m) of
the Code or Section 4001 of ERISA ("Commonly Controlled Entity"), (1) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has been
incurred, which withdrawal liability has not been satisfied, (2) no liability
to the Pension Benefit Guaranty Corporation has been incurred by any Commonly
Controlled Entity, which liability has not been satisfied, (3) no accumulated
funding deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Section 412 of the Code has been incurred, and (4) all contributions
(including installments) to such plan required by Section 302 of ERISA and
Section 412 of the Code have been timely made.
2.16 Environmental Matters.
(a) To Seller's knowledge, ESI has all material permits,
licenses, and other authorizations required under applicable Egyptian laws and
regulations relating to pollution control or protection of the environment for
the operation of the business of ESI (collectively, "Authorizations").
(b) ESI is not in violation of (i) any of the terms or
conditions of any such Authorizations or (ii) any Egyptian laws or regulations
relating to pollution control or the protection of the environment that would
result in a material, adverse effect on the business, assets, or financial
condition of ESI.
2.17 Regulatory Compliance. ESI is in compliance with all
applicable permits, licenses, authorizations, laws, rules, regulations,
ordinances, orders and requirements of all governmental
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<PAGE> 17
units or political subdivisions or any agency, authority, body, board,
commission, court, instrumentality, legislature or office thereof or created
thereby having jurisdiction over ESI or its business, operations or assets,
except for such failures to comply which could not reasonably be expected to
have a material, adverse effect on the business, assets or financial condition
of ESI.
2.18 Material, Adverse Change. Except as disclosed in Schedule
2.18, since the Balance Sheet Date there has not been (a) any material, adverse
change in the financial position, results of operations, business or prospects
of ESI, or (b) any material damage, destruction or loss (whether or not covered
by insurance) affecting ESI or its assets, it being understood that no
representation or warranty is made in this Section 2.18 concerning general
economic conditions, the condition of the local or international oil and gas
industry generally, the potential impact on the East Zeit Concession Agreement
of actions that have been or may be taken by competitors or governmental
agencies (other than actions related solely to the East Zeit Concession
Agreement and ESI) or any other condition, occurrence, or other state of
affairs not directly relating to the assets and liabilities of ESI. It is
understood that some or all of the matters listed in Schedule 2.18 may not be
material or cause a material, adverse change, and such matters are being listed
for information.
2.19 East Zeit Concession Agreement. All obligations required to
be performed to date by ESI under the terms of the East Zeit Concession
Agreement have been performed; no act or omission has occurred or failed to
occur which, with the giving of notice, the lapse of time or both would
constitute a default under the East Zeit Concession Agreement; and the East
Zeit Concession Agreement is now and will be upon the Closing Date in full
force and effect; EXCEPT to the extent that the failure of any representation
within this Section 2.19 would not have a material, adverse effect on the
business, prospects, or financial condition of ESI.
2.20 Sufficiency of Assets. Subject to the East Zeit Concession
Agreement, (a) ESI possesses all of the rights, properties and assets that are
required or necessary to operate its business substantially as it is currently
operated, and (b) all such rights, properties and assets are suitable to meet
all present requirements of the business of ESI in the manner and to the extent
currently conducted.
2.21 Measured Data. Subject to Section 3.9(a), Seller has no
present knowledge of any material errors in any raw, measured data provided by
Seller to Purchaser prior to the Effective Date.
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2.22 Equipment. All equipment and machinery currently in use and
material to the operation of the oil and gas interests of ESI are in reasonable
working condition, except for: (i) conditions that would not reasonably be
expected to have a material, adverse effect on the business, assets, or
financial condition of ESI, or (ii) ordinary wear and tear and serviceable
defects incurred within the ordinary course of business.
2.23 Wells. All wells drilled by or on behalf of ESI pursuant to
the East Zeit Concession Agreement have been (a) drilled, (b) if completed,
completed, (c) if operated, operated, and (d) if not completed, or completed
and later abandoned, plugged and abandoned or temporarily abandoned in
accordance with good oil and gas field practices and in compliance in all
respects with the East Zeit Concession Agreement and applicable Egyptian laws,
rules, and regulations, except where any failure or violation would not have a
material, adverse effect on the business, assets or financial condition of ESI.
2.24 Recoverable Costs. At March 31, 1996, ESI had incurred an
aggregate of U.S.$79.7 million of unrecovered costs. Of such costs, U.S.$59.4
million had been approved, U.S.$14.1 million were awaiting audit, and U.S.$6.3
million were pending resolution after initial audit (amounts are rounded to
nearest U.S.$0.1 million).
2.25 Brokerages; Payments. Neither Seller nor ESI has made, or
committed to make, in connection with the transaction contemplated by this
Agreement, any payments in the form of (a) consulting or other fees in
violation of any statute, regulation or policy applicable to Seller or ESI, as
applicable; (b) commissions; or (c) brokers' or finders' fees.
2.26. Period of Validity. The representations, warranties, and
acknowledgments in favor of Purchaser contained in this Article II shall be
valid up to and at Closing after which all of Seller's warranties,
acknowledgments, and representations shall expire and be merged into the
Closing and Purchaser shall not be entitled to commence any action or
proceeding for breach of this Article II. Notwithstanding the foregoing
sentence, however, Seller's representations and warranties set forth in
Sections 2.2, 2.3, 2.4, 2.15, and 2.19 shall survive the Closing (solely for
the purposes of Section 9.1(b)) for the same period set forth in Section
9.3(b), without regard to any investigation by Purchaser with respect thereto.
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<PAGE> 19
ARTICLE III
REPRESENTATIONS, WARRANTIES, AND
ACKNOWLEDGMENTS OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas and has full corporate power and authority to own its assets and
carry on its business as it is now being conducted.
3.2. Authorization of Agreement. Purchaser has the corporate
power and authority to enter into, execute, deliver, and perform this
Agreement. The execution and delivery of this Agreement and the consummation
of the transaction contemplated hereby have been duly authorized by the
necessary corporate action of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes the legal, valid, and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
3.3. No Conflicts. The execution, delivery, and performance by
Purchaser of this Agreement and the consummation of the transaction
contemplated hereby do not and will not (with the giving of notice or the
passage of time or both) (a) conflict with the Certificate of Incorporation or
By-Laws of Purchaser, (b) subject to the receipt of those consents, approvals,
and authorizations and the making of any designation, declaration, or filing
referred to in Schedule 2.6 and any filings required and the expiration of the
waiting period (including any extensions) under the Hart-Scott-Rodino Act,
violate any provision of any law, rule, or regulation applicable to Purchaser,
(c) violate any order, judgment, or decree applicable to Purchaser, or (d)
conflict with, or result in a breach or default under, any agreement or other
instrument to which Purchaser is a party or by which it may be bound; except,
in the case of clauses (b), (c), and (d) of this Section 3.3, violations that
in the aggregate would not materially hinder or impair the transaction
contemplated hereby.
3.4 Brokerages / Payments. Purchaser has not made, or committed
to make, in connection with the transaction contemplated by this Agreement, any
payments in the form of (a) consulting or other fees in violation of any
statute, regulation, or policy applicable to Purchaser; (b) commissions; or
(c) brokers' or finders' fees.
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3.5 Consents. No consent, approval, or authorization of, or
designation, declaration, or filing with, any governmental authority or other
third party is required on the part of Purchaser in connection with Purchaser's
execution, delivery, and performance of this Agreement except for (a) any
required filings with the Federal Trade Commission and the U.S. Department of
Justice - Antitrust Division pursuant to the Hart-Scott-Rodino Act and due
expiration of the waiting period (including any extensions) thereunder, and (b)
those consents, approvals, or authorizations that are listed in Schedule 2.6
hereto, except to the extent that failure to have such consents, approvals, or
authorizations would not materially hinder or impair the transaction
contemplated hereunder.
3.6 No Lawsuits. There is no lawsuit, proceeding, adverse claim
or investigation pending or, to the knowledge of Purchaser, threatened against
Purchaser which might bring into question the validity or propriety of this
Agreement or the consummation of the transaction contemplated hereby.
3.7 Investment Representation. The Shares purchased by Purchaser
pursuant to this Agreement are being acquired for investment only and not with
a view to any public distribution thereof, and Purchaser will not offer to sell
or otherwise dispose of the Shares so acquired by it in violation of any of the
registration requirements of the United States Securities Act of 1933, as
amended, or any foreign, state, or local securities laws. Purchaser
represents that at no time has it been presented with or solicited by or
through any public promotion or other form of advertising in connection with
this transaction other than the data provided via the March 27, 1996,
Management Summary ("Offering Summaries," whether one or more).
3.8 Financing; Restriction on Funds. Purchaser now has and, at
Closing, will have sufficient funds available to pay the Purchase Price. Such
funds are not reserved for any other use or purpose, are not otherwise
restricted or encumbered in a manner that would interfere with the consummation
of the transaction contemplated hereby by any agreement or other instrument to
which Purchaser is a party or by which it may be bound, or subject to any lien,
attachment, or other judicial process, whether final or interim.
3.9 ACKNOWLEDGMENTS.
(a) EXCEPT AS AND TO THE EXTENT SET FORTH IN ARTICLE IV
HEREOF, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER MAKES NO
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REPRESENTATIONS OR WARRANTIES WHATSOEVER, AND THAT, EXCEPT AS AND TO THE EXTENT
SET FORTH IN ARTICLES II, IX, AND XI, SELLER DISCLAIMS ALL LIABILITY AND
RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE
OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR TO ANY STOCKHOLDER,
AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF
PURCHASER [INCLUDING, BUT NOT LIMITED TO, ANY OPINION, INFORMATION, OR ADVICE
WHICH MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY STOCKHOLDER, AFFILIATE,
DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT (INCLUDING, BUT NOT LIMITED TO,
EXXON PRODUCTION RESEARCH COMPANY), OR REPRESENTATIVE OF SELLER, ESI, OR ANY OF
ITS SUBSIDIARIES] INCLUDING, WITHOUT LIMITATION, ALL OF THE INFORMATION
CONTAINED IN THE OFFERING SUMMARIES DELIVERED TO PURCHASER. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, AND NOTWITHSTANDING ANY OTHER PROVISION WITHIN
THIS AGREEMENT TO THE CONTRARY, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER
AND THE STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, CONSULTANTS
(INCLUDING, BUT NOT LIMITED TO, EXXON PRODUCTION RESEARCH COMPANY), AFFILIATES,
AND REPRESENTATIVES OF SELLER, ESI, AND ITS SUBSIDIARIES MAKE NO
REPRESENTATIONS OR WARRANTIES AS TO (I) THE AMOUNT OF PETROLEUM, GAS,
CONDENSATE, OR OTHER RESERVES ATTRIBUTABLE TO ANY PROPERTIES THAT ESI OR ITS
SUBSIDIARIES HAVE AN INTEREST IN, OR (II) ANY GEOLOGICAL, GEOPHYSICAL,
ENGINEERING, ECONOMIC, OR OTHER INTERPRETATIONS, FORECASTS, OR EVALUATIONS, OR
(III) THE CONDITION OR PRODUCIBILITY OF RESERVOIRS.
(b) Purchaser acknowledges and agrees that: (i) it has
the experience and knowledge to evaluate the business, assets, liabilities,
financial condition, results of operations, and prospects of ESI and the
inherent risks associated therewith; (ii) it has had access to the rooms
established in Florham Park, New Jersey, U.S.A., in which certain materials
relating to ESI have been placed and made available to prospective purchasers
of ESI (the "Data Rooms") and the information contained in, or made available
or provided with respect to materials contained in the Offering Summaries and
has had access to such of the information and documents referred to in Article
II hereof; and (iii) based thereon Purchaser has formed an independent
judgment concerning ESI and its business, operations, assets (including
Purchaser's own estimate and appraisal of the extent and value of ESI's
interests in petroleum and gas reserves), liabilities,
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financial condition, results of operations, and prospects, and the inherent
risks associated therewith.
(c) PURCHASER EXPRESSLY UNDERSTANDS AND AGREES THAT,
EXCEPT AS OTHERWISE PROVIDED IN ARTICLES II, IX, AND XI, PURCHASER ACCEPTS THE
CONDITION OF ESI, INCLUDING ANY AND ALL MATTERS AND ASSETS WHATSOEVER RELATED
TO ESI, "AS IS, WHERE IS" AND WITHOUT ANY REPRESENTATION, WARRANTY, OR
GUARANTEE, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR OTHERWISE, AS TO THE CONDITION, SIZE, EXTENT, QUANTITY, TYPE, OR
VALUE OF THE BUSINESS OR ASSETS OF ESI. EXCEPT AS OTHERWISE PROVIDED IN
ARTICLES IX AND XI, PURCHASER RELEASES SELLER, ITS AFFILIATES, AND ITS
SUBSIDIARIES FROM ALL COSTS, CLAIMS, LOSSES, LIABILITIES, AND DAMAGES WITH
RESPECT TO ESI WHETHER CAUSED BY OR ATTRIBUTABLE TO THE NEGLIGENCE OF SELLER
AND WHETHER ARISING FROM SELLER'S OWNERSHIP OF THE SHARES OR OTHERWISE. WITHOUT
LIMITING THE PRECEDING SENTENCE, AND EXCEPT AS OTHERWISE PROVIDED IN ARTICLES
IX AND XI, PURCHASER WAIVES ITS RIGHT TO RECOVER FROM SELLER AND WILL HOLD
SELLER, ITS AFFILIATES, AND ITS SUBSIDIARIES HARMLESS FROM ALL CLAIMS AND
LIABILITIES, WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR
UNFORESEEN, THAT MAY ARISE ON ACCOUNT OF OR BE CONNECTED WITH THE PHYSICAL
CONDITION OF ESI OR ITS ASSETS.
(d) SELLER MAKES NO WARRANTY AND EXPRESSLY DISCLAIMS ALL
WARRANTIES AS TO THE ACCURACY AND COMPLETENESS OF THE FILES AND OTHER
INFORMATION (EXCEPT FOR STATEMENTS MADE IN ARTICLE II) THAT IT MAY PROVIDE
PURCHASER. If Purchaser determines during its review that any files or data
may be incomplete or inaccurate, it will either notify Seller of its
conclusions specifically and in writing not later than ten (10) days before the
Closing or be deemed to have waived all complaints as to the incompleteness or
inaccuracy of the files or data. For five (5) years following Closing,
however, to the extent that Seller possesses information or data that was
missing from the files of ESI (but would properly have been included in such
files in the ordinary course of ESI's business) at Closing, Seller shall
provide such information or data to Purchaser if such information or data can
be so provided at minimal cost and burden to Seller, such information or data
is not
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"Confidential Seller Information" (as defined in Section 8.7), and Purchaser
reimburses Seller for the cost of providing such information or data to
Purchaser.
(e) Purchaser acknowledges and agrees that it will, at and
subsequent to Closing, comply and cause ESI to comply in all material respects
with all policies, rules, regulations, and laws, including but not limited to
those issued by or on behalf of EGPC.
3.10 Material Factor. Purchaser acknowledges that its
representations, warranties, and acknowledgments in this Agreement are a
material inducement to Seller to enter into this Agreement and close the sale
to Purchaser.
3.11 Continuing Validity. The representations and warranties in
favor of Seller contained in this Article III shall survive Closing.
3.12 Use of ESI Name Except as provided for in Section 8.4 hereof
or as is otherwise necessary for the completion of the transaction contemplated
by this Agreement or to comply with the terms of the East Zeit Concession
Agreement (in either of which cases Purchaser will use all reasonable efforts
to remove such necessity), Purchaser agrees that, after Closing, neither it nor
ESI nor any of their Affiliates will use or operate under the trade names "Esso
Suez Inc.," "ESI," "Exxon," "Esso," or "Suesso," or use any trademarks or
service marks associated with or confusingly similar to "Esso Suez Inc.,"
"ESI," "Exxon," "Esso," or "Suesso."
ARTICLE IV
COVENANTS OF SELLER
From and after the Effective Date and until Funding (as defined in
Article 7.3, "Funding"), Seller hereby covenants and agrees that:
4.1 Access to Documents; Opportunity to Ask Questions. Seller
shall cause ESI to make available for inspection by Purchaser or its
representatives, during normal business hours and upon reasonable prior written
request, ESI's corporate records, books of account, contracts, and all other
documents reasonably requested by Purchaser, its headquarters and operations
managers and supervisors, counsel, and auditors in order to permit Purchaser
and such representatives to make reasonable inspection and examination of the
assets and affairs of ESI. Seller shall, or shall cause ESI to, promptly
furnish to Purchaser copies of: (a) interim and audited financial statements
of ESI prepared within the ordinary course of business as of a date, or for a
period
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ending, after the date of the Interim Pro Forma Balance Sheet, and (b)
Egyptian tax returns (whether initial or amended) filed by ESI after the date
of this Agreement. Seller shall further cause the headquarters and operations
managers and supervisors, counsel, and regular independent certified public
accountants of ESI to be available upon reasonable notice to answer questions
of Purchaser's representatives concerning the assets and affairs of ESI, and
shall further cause them to make available all relevant books and records in
connection with such inspection and examination.
4.2 Insurance.
(a) Seller and Purchaser acknowledge that Exxon
Corporation maintains a worldwide program of property and liability insurance
coverage for itself and its Affiliates. This program has been designed to
achieve a coordinated risk-management package for the entire Exxon corporate
group. The program consists principally of three types of policies:
(i) Policies issued to Exxon Corporation;
(ii) Policies issued directly to Affiliates by
Exxon's wholly-owned captive insurer, Ancon
Insurance Company, Inc. ("Ancon"), a Vermont
corporation; and
(iii) Policies issued to Affiliates by a locally
admitted insurer which are reinsured by
Ancon. All of the insurance policies through
which the worldwide program of coverage is
presently or has previously been provided are
herein called the "Exxon/Ancon Policies."
(b) It is understood and agreed by Purchaser that:
(i) From and after August 1, 1996, no insurance
coverage shall be provided under the
Exxon/Ancon Policies to ESI; and
(ii) From and after August 1, 1998, any and all
policies previously insured or reinsured by
Ancon or its predecessor companies insuring
ESI shall be deemed terminated, commuted and
canceled ab initio;
(iii) From and after August 1, 1998, no claims
regarding any matter whatsoever, whether or
not arising from events occurring prior to
August 1, 1996, shall be made by or for ESI
against or with respect to any of the
Exxon/Ancon Policies regardless of their date
of issuance.
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(c) Purchaser shall indemnify and defend Seller and Exxon
Corporation and its Affiliates including Ancon against, and shall hold them
harmless from, any claim made after August 1, 1998, against any of the
Exxon/Ancon Policies by or through ESI or any person subrogated to ESI's
rights, and all costs and expenses (including without limitation attorneys'
fees) related thereto. Such indemnity shall cover, without limitation, any
claim by an insurer for reinsurance or retrospective premium payments or any
prospective premium increases attributable to any such claim.
(d) Seller shall cause ESI to keep in full force and
effect, without interruption, all insurance policies in effect as of the
Effective Date with MISR Insurance Company and to maintain the amount and scope
of coverage provided by such policies. Costs of maintaining such insurance
shall continue to be borne by ESI, except to the extent that such costs may
increase relative to the premium(s) in effect prior to August 1, 1996, as a
result of changes in re-insurer(s) following June 1, 1996.
4.3 Conduct of Business. Except as expressly contemplated by this
Agreement or otherwise consented to in writing by Purchaser, from and after the
Effective Date and until the Funding Seller hereby covenants and agrees that:
(a) Seller shall cause the business of ESI to be
conducted in the ordinary course and will use reasonable efforts to maintain,
preserve, and protect the assets and goodwill of ESI;
(b) Seller shall not permit ESI to adopt or propose any
material change to its Certificate of Incorporation or By-Laws;
(c) Except as may otherwise be provided for under this
Agreement, Seller shall not permit ESI to: (i) declare, set aside or pay any
dividend or other distribution to a shareholder with respect to any shares of
ESI's capital stock or otherwise, or (ii) repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other securities of, or
other ownership interests in, ESI;
(d) Seller shall not permit ESI to merge or consolidate
with any other person or acquire a material amount of assets from any person
outside of the ordinary course of business;
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(e) Seller shall not permit ESI to sell, lease, license or
otherwise surrender, relinquish or dispose of any assets or properties with an
aggregate fair market value exceeding U.S.$100,000 outside of the ordinary
course of business;
(f) Seller shall not and shall cause ESI to not settle any
material audit with respect to Egyptian taxes, make or change any material
Egyptian tax election, or file any material amended return with respect to
Egyptian taxes;
(g) Except as otherwise permitted by this Agreement,
Seller shall not permit ESI to: (i) issue any securities; (ii) enter into any
amendment of any term of any outstanding security of ESI; (iii) incur any
indebtedness for borrowed money except pursuant to vendor or service
relationships or existing credit facilities or arrangements; (iv) fail to
make any required contribution to any Plans; (v) adopt any new Plans or amend
any existing Plans outside the ordinary course of business; (vi) enter into
any agreement for additional employment or consulting services; (vii)
increase compensation, bonus or other benefits payable to any employee or
former employee outside the ordinary course of business, or (viii) enter into
any settlement or consent with respect to any pending litigation.
(h) Seller shall not permit ESI to change any method of
accounting or accounting practice, except for any such change required by GAAP;
(i) Seller shall not permit ESI to expend in the aggregate
in excess of U.S.$100,000 for any non-budgeted capital expenditures;
(j) Seller shall not permit ESI to enter into any futures,
hedge, swap, put, call, floor, cap, option or other contracts whose primary
purpose is to benefit from or reduce or eliminate the risk of fluctuations in
the price of commodities, including hydrocarbons, or securities;
(k) Seller shall not permit ESI to incur any costs or
commit to incur any costs that Seller knows are not potentially recoverable
pursuant to the East Zeit Concession Agreement, except for such costs that will
result in a reduction in the Purchase Price pursuant to the Adjustment;
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(l) Seller shall not, and shall not permit ESI to, agree
or commit to do any of the actions prohibited under Sections 4.3(b) through (k)
(subject to the exceptions and qualifications expressed therein); and
(m) Seller shall not, and shall not permit ESI to: (i)
take, or agree or commit to take, any action that would make any representation
or warranty of Seller under Article II inaccurate in any material respect at,
or as of any time prior to, the Closing, or (ii) omit, or agree or commit to
omit, to take any action necessary to prevent any such representation or
warranty from being inaccurate in any material respect at any such time.
4.4 Hart-Scott-Rodino Filings. Seller shall, and shall cause ESI
to, make any required filings as promptly as possible with the Federal Trade
Commission and the U.S. Department of Justice - Antitrust Division pursuant to
the Hard-Scott-Rodino Act, and it shall, and shall cause ESI to, cooperate with
Purchaser in connection with Purchaser's obligation to make such filings or
responses to requests for additional information, if any.
4.5 Conditions Precedent. Seller shall use reasonable efforts to
cause the conditions precedent to the consummation of the transaction
contemplated hereby and set forth in Article VI hereof, for which Seller is
responsible, to be satisfied. Seller shall also use all reasonable efforts to
assist Purchaser in obtaining all necessary governmental approvals for the
transaction contemplated by this Agreement.
4.6 Environmental Audit. Seller agrees (to the extent permitted
under the East Zeit Concession Agreement) to promptly have a "Phase I" and/or
"Phase II" environmental audit, of a reasonable scope, conducted by a firm
chosen by Purchaser and approved by Seller (which approval shall not be
unreasonably withheld) with respect to the land and facilities covered by the
East Zeit Concession Agreement or otherwise used or operated by ESI or SUESSO.
Such environmental audit shall be conducted at the direction and in accordance
with the instructions of Purchaser, and Seller will make all results of such
audit promptly available to Purchaser. Seller agrees to pay all fees and
expenses reasonably incurred in connection with such environmental audit and
the environmental audit contemplated by Section 4.5 of that certain Purchase
and Sale Agreement executed between Purchaser and Esso Egypt Limited on July
22, 1996 ("Purchase and Sale Agreement"), up to an aggregated maximum (total)
with respect to this Agreement and the Purchase and Sale Agreement of
U.S.$150,000. If this Agreement is terminated, Purchaser agrees to treat all
audit-related information, data, and documents as confidential and never use or
disclose
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them to any other parties, to provide to Seller all originals of such data and
documents, and to provide to Seller or destroy all copies of such data and
documents.
4.7 Special Employee Payment. Seller will cause ESI to
make a special employee payment as described in the plan presented to Purchaser
on July 21, 1996. The cost of such payment shall be for Seller's account.
ARTICLE V
COVENANTS OF PURCHASER
5.1 Hart-Scott-Rodino Filings. Purchaser shall make any required
filings as promptly as possible with the Federal Trade Commission and the U.S.
Department of Justice - Antitrust Division pursuant to the Hart-Scott-Rodino
Act, and it shall cooperate with Seller and ESI in connection with such filings
or responses to requests for additional information, if any. Purchaser shall
use its best efforts to resolve all such objections, if any, as the Antitrust
Division of the Department of Justice, the Federal Trade Commission, state
antitrust enforcement authorities, or competition authorities of any other
jurisdiction may assert under any applicable and/or enforceable antitrust or
competition laws with respect to the transaction contemplated hereby. In
connection therewith, Purchaser shall commit to and/or effect the sale or other
disposition of such of its assets owned or acquired by it prior hereto to the
extent necessary or required to comply with, to avoid the entry of, or to
effect the dissolution of, any order in any suit brought by a governmental body
or private party challenging the transaction contemplated hereby as violative
of antitrust or competition laws which would otherwise have the effect of
preventing the consummation of the transaction contemplated hereby; provided,
however, that Purchaser shall not be required to sell or dispose of assets
which, in its reasonable judgment, constitute a material portion of Purchaser's
total business.
5.2 Conditions Precedent. From and after the Effective Date
and until the Closing, Purchaser hereby covenants and agrees that it shall use
all reasonable efforts to cause the conditions precedent to the consummation of
the transaction contemplated hereby and set forth in Article VI hereof, for
which Purchaser is responsible, to be satisfied.
5.3 Confidentiality. Purchaser will treat, and will cause its
employees, representatives, consultants and advisors to treat, such documents
and information concerning Seller and/or ESI furnished to Purchaser and its
representatives and agents in connection with this Agreement
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confidentially in accordance with the terms and provisions of that certain
Confidentiality Agreement, dated April 3, 1996, between Purchaser and ESI or
its designated representatives and in accordance with the specific
confidentiality provisions which are included in any of the agreements to which
ESI or Seller is a party.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent to Purchaser's Obligation. The
obligation of Purchaser to consummate the purchase of the Shares at the Closing
is subject to the satisfaction (or waiver by Purchaser where permitted by
applicable law) of the following conditions:
(a) Representations and Warranties of Seller. Each of
the representations and warranties of Seller contained in Article II hereof
shall be true and correct in all material respects as of the Closing with the
same force and effect as though the same had been made on and as of the
Closing, except (i) for changes therein permitted or contemplated hereby and
(ii) to the extent such representations and warranties were made as of a prior,
specified date, in which case each such representation and warranty shall be
true and correct in all material respects as of the date specified.
(b) Compliance. Seller shall have performed and complied
in all material respects with the covenants and provisions in this Agreement
required herein to be performed or complied with by Seller between the
Effective Date and the Closing.
(c) Certificates. Purchaser shall have received a
certificate to the effect set forth in Sections 6.1(a) and (b) hereof, dated
the date of Closing, signed by duly authorized officers of Seller.
(d) No Prohibition. No action or proceeding shall have
been instituted or threatened or claim or demand made against Purchaser,
Seller, or ESI before any court or other governmental body, seeking to
restrain, delay, or prohibit or to obtain substantial damages with respect to
the consummation of the transaction contemplated hereby, which in the
reasonable opinion of Purchaser makes it inadvisable to consummate such
transaction.
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(e) Seller's Resolution. Purchaser shall have received a
certificate of a duly authorized officer of Seller, dated the date of Closing,
setting forth the resolution of the Board of Directors of Seller authorizing
the execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby and certifying that such resolution was duly
adopted and has not been rescinded or amended as of the date of Closing.
(f) Hart-Scott-Rodino. Any relevant waiting periods under
the Hart-Scott-Rodino Act shall have expired or been earlier terminated.
(g) South Hurghada Concession. The closing with respect
to the Purchase and Sale Agreement shall occur simultaneously with the Closing
hereunder..
(h) Director and Officer Resignations. Purchaser shall
have received the resignations of all directors and officers of ESI and all
directors of SUESSO appointed by ESI, to be effective as of the Funding.
(i) Seller Notes. Seller shall have duly and validly
executed (i) a promissory note payable to ESI in the form of Annex D with a
principal amount of U.S.$78,348,303 ("Seller Note 1") and (ii) a second
promissory note ("Seller Note 2") payable to ESI in the form of Annex D with a
principal amount equal to the amount by which ESI's net intercompany receivable
from Seller and its Affiliates (other than ESI) at September 15, 1996, exceeds
U.S.$78,348,303.
(j) East Zeit Concession. Seller and Purchaser shall have
(i) fulfilled all requirements imposed by any Egyptian governmental authority,
not unreasonably burdensome to Purchaser, necessary to effect the stock sale
contemplated under this Agreement and have the newly-held ESI retain its rights
under the East Zeit Concession Agreement (other than any requirement that would
result in the transfer of the East Zeit Concession Agreement to or by a person
other than ESI or any requirement which could not be reasonably met without
Seller's first conditionally conveying the Shares subject to a subsequent
approval, ratification, waiver, or similar authorization or permission); (ii)
all appropriate Egyptian governmental authorities shall have confirmed in
writing that no such requirements are imposed with respect to the transaction
contemplated by this Agreement; or (iii) if, after expending all reasonable
efforts, confirmation of the matter set forth in clause (ii) above cannot be
obtained in writing, then receipt of reliable oral or other confirmation of the
matter set forth in clause (ii) above.
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6.2 Conditions Precedent to Seller's Obligation. The obligation
of Seller to consummate the sale, transfer, and assignment to Purchaser of the
Shares at Closing is subject to the satisfaction (or waiver by Seller where
permitted by applicable law) as of the date of Closing or other prior date
mutually agreed by the Parties in writing of the following conditions:
(a) Representations and Warranties of Purchaser. Each of
the representations and warranties of Purchaser contained in Article III hereof
shall be true and correct in all material respects as of the Closing with the
same force and effect as though the same had been made on and as of the date of
Closing , except for changes permitted or contemplated hereby.
(b) Compliance. Purchaser shall have performed and
complied in all material respects with the covenants and provisions in this
Agreement required herein to be performed or complied with by Purchaser between
the Effective Date and the Closing.
(c) Certificates. Seller shall have received a
certificate to the effect set forth in Sections 6.2 (a) and (b) hereof, dated
the date of Closing, signed by a duly authorized officer of Purchaser.
(d) No Prohibition. No action or proceeding shall have
been instituted or threatened or claim or demand made against Purchaser,
Seller, or ESI before any court or other governmental body, seeking to
restrain, delay, or prohibit, or to obtain substantial damages with respect to
the consummation of the transaction contemplated hereby, which in the
reasonable opinion of Seller makes it inadvisable to consummate such
transaction.
(e) Resolution. Seller shall have received a certificate
of a duly authorized officer of Purchaser, dated the date of Closing, setting
forth the resolution of the Board of Directors of Purchaser authorizing the
execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby, and certifying that such resolution was duly
adopted and has not been rescinded or amended as of the Closing.
(f) Hart-Scott-Rodino. Any relevant waiting periods under
the Hart-Scott-Rodino Act shall have expired or been earlier terminated.
(g) South Hurghada Concession. The closing with respect
to the Purchase and Sale Agreement shall occur simultaneously with the Closing.
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(h) East Zeit Concession. Seller and Purchaser shall
have (i) fulfilled all requirements imposed by any Egyptian governmental
authority, not unreasonably burdensome to Seller, necessary to effect the stock
sale contemplated under this Agreement and have the newly-held ESI retain its
rights under the East Zeit Concession Agreement (other than any requirement
that would result in the transfer of the East Zeit Concession Agreement to or
by a person other than ESI or any requirement which could not be reasonably met
without Seller's first conditionally conveying the Shares subject to a
subsequent approval, ratification, waiver, or similar authorization or
permission); (ii) all appropriate Egyptian governmental authorities shall have
confirmed in writing that no such requirements are imposed with respect to the
transaction contemplated by this Agreement; or (iii) if, after expending all
reasonable efforts, confirmation of the matter set forth in clause (ii) above
cannot be obtained in writing, then receipt of reliable oral or other
confirmation of the matter set forth in clause (ii) above.
(i) License Agreement. The Parties shall have executed a
license agreement to govern any unavoidable, post-Funding use by ESI or
Purchaser of the names referred to in Sections 3.12 and/or 8.4. Neither
Purchaser nor ESI shall owe any fee under such agreement, and such agreement
will be negotiated by the Parties in good faith.
6.3 Expedited Arbitration for Claim of Pre-Closing Material Breach
(a) If, prior to Closing, one party ("Claimor") has served
a notice on the other party ("Claimee") stating that it considers that Claimee
is in material breach of a representation or warranty as contained in Article
II or Article III of this Agreement or any provision of any Schedule or another
provision of this Agreement entitling Claimor to terminate this Agreement and
Claimee disputes that Claimor is so entitled, the Parties shall immediately
negotiate in good faith to resolve the dispute. If no such agreement is
reached within seven (7) days of the notice served upon Claimee (or such longer
period as the Parties shall agree), the matter shall be referred immediately to
a single commercial arbitrator in New York, who shall be appointed within
forty-eight (48) hours but otherwise in accordance with the provisions of
Section 10.7 hereof. The arbitrator shall be instructed to determine within
twenty-one (21) days of his appointment whether or not the Claimee is in
material breach of the Agreement entitling Claimor to terminate this Agreement.
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(b) Each Party shall submit to the arbitrator within seven
(7) Business Days (as defined in Section 7.1(a) hereof) of the appointment of
the arbitrator:
(i) a description of the dispute;
(ii) the grounds on which each Party relies in
seeking to have the dispute determined in its
favor; and
(iii) all written material which the Party proposes
to submit to the arbitrator.
(c) On receipt by the arbitrator of the submissions
referred to above or seven (7) Business Days from his appointment, whichever is
the earlier, the arbitrator shall designate a time and place for a hearing of
the Parties on their dispute, which time shall not be more than fifteen (15)
days after the arbitrator's appointment. The arbitrator shall be instructed to
reach his decision within five (5) Business Days from the date of commencement
of the hearing. The determination of the arbitrator shall be final and binding
on the Parties upon delivery to them of the arbitrator's written determination,
save in the event of (i) prejudicial corruption, fraud, or misconduct, or (ii)
an arbitrator's partiality.
All costs arising out of or in connection with the arbitrator shall be borne by
Claimor on the one hand and Claimee on the other in equal shares or in such
other proportions as the arbitrator may determine to be fair and reasonable.
(d) If the arbitrator does not render a decision
(resolving the dispute, finding good cause for a Party's delay, or sanctioning
a Party for delay) within a period of twenty-one (21) days from his
appointment, for whatever reason, or such shorter or longer period as the
Parties may agree in writing, either Claimor or Claimee may, upon giving notice
to the other, terminate the appointment of the arbitrator, and a new arbitrator
shall be appointed who shall resolve the dispute in accordance with this
Section 6.3.
(e) If the arbitrator determines that Claimor is entitled
to terminate this Agreement, such termination shall be without liability to
Claimor, and Claimee shall indemnify Claimor for all its reasonable costs and
expenses relating to the negotiation, preparation, and execution of this
Agreement, excluding all costs of the arbitration conducted pursuant to this
Section 6.3.
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(f) In the event that Claimor serves a notice as aforesaid
on Claimee, Closing shall be postponed until after the dispute has been
resolved by the arbitrator and any time periods
referred to in Article VII of this Agreement relating to the timing of Closing
shall be frozen until receipt of the arbitrator's written determination.
(g) If the arbitrator shall determine that Claimee is in
breach of the Agreement but that the breach is not sufficiently material to
entitle Claimor to terminate this Agreement, Claimor shall, after receipt of
the arbitrator's written determination, proceed to Closing in accordance with
the terms of this Agreement, without prejudice to any rights Claimor may have
to seek damages from Claimee for breach of the provisions of this Agreement.
ARTICLE VII
CLOSING; TERMINATION OF AGREEMENT
7.1 Closing Date; Closing.
(a) The closing hereunder (herein called the "Closing")
shall take place at the offices of Vinson and Elkins L.L.P. located at 2300
First City Tower, 1001 Fannin, Houston, Texas 77002 (the "Closing Site") at
10:00 A.M. (Houston time) on October 2, 1996. Notwithstanding the foregoing
sentence, but subject to satisfaction at Closing (unless appropriately waived)
of all of the conditions set forth in Sections 6.1 and 6.2 hereunder, if the
Closing shall not have occurred by October 2, 1996, the Closing shall take
place at 10:00 A.M. (Houston time) at the Closing Site on the third business
day following the first date on which all of the conditions precedent (other
than any conditions precedent that have been appropriately waived on or prior
to such date) set forth in (i) Sections 6.1(d), 6.1(f), 6.1(j), 6.2(d), 6.2(f)
and 6.2(h) hereunder and Sections 6.1(d), 6.1(f), 6.2(d) and 6.2(f) of the
Purchase and Sale Agreement shall have been satisfied and (ii) Sections 6.1(a),
6.1(b), 6.2(a) and 6.2(b) hereunder and Sections 6.1(a), 6.1(b), 6.2(a) and
6.2(b) of the Purchase and Sale Agreement could have been satisfied if Closing
were to occur on such date. In lieu of the foregoing provisions of this
Section 7.1(a), the Closing may take place at such other place or at such other
time and date as may be mutually agreed upon in writing by Purchaser and Seller
pursuant to this Section 7.1.
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(b) All proceedings to be taken and all documents to be
executed and delivered by the Parties at Closing shall be deemed to have been
taken and executed simultaneously, and no proceedings shall be deemed taken nor
any documents executed or delivered until all have been taken, executed, and
delivered.
7.2 Termination.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement and the transaction contemplated hereby may be
terminated in any of the following ways at any time prior to Closing:
(i) By mutual written consent of Purchaser and
Seller; or
(ii) By Seller in writing pursuant to Section 3 of
Annex A hereto; or
(iii) By either Purchaser or Seller in writing
(provided that such terminating Party is not
otherwise in material breach ofany
obligation under this Agreement) if the
Closing has not occurred for any reason
(including, without limitation, failure of a
condition to Closing) on or before December
20,1996 after the Delayed Closing Date.
(b) Termination of this Agreement pursuant to this Section
7.2 shall terminate all obligations of the Parties hereunder, except for the
obligations set forth in Sections 4.6, 5.3 and 10.8 hereof, provided, however,
that (i) termination pursuant to Section 7.2(a)(iii) hereof shall not relieve a
defaulting or breaching Party from any liability to the other Party and (ii) if
Seller has deliberately caused maters to arise to enable it to terminate this
Agreement under Section 7.2(a)(ii), termination under 7.2(a)(ii) shall not
relieve a defaulting or breaching Party from any liability to the other Party.
7.3 Funding Date; Funding. The funding hereunder (herein called
the "Funding") shall take place after Closing upon receipt by the Seller of the
funds pursuant to the Letter of Credit referred to in Annex B.
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ARTICLE VIII
DELIVERIES AT CLOSING AND ACTIONS TO BE TAKEN AT
OR SUBSEQUENT TO CLOSING
8.1 Deliveries by Seller.
(a) At Closing, Seller shall deliver, or shall cause to be
delivered, to Chase Manhattan Bank, N. A. (the "Bank"), to be held by the Bank
in escrow, pursuant to the terms of the Letter of Credit in the form attached
as Annex B, the following:
(i) Certificates representing the Shares, which
certificates shall be duly endorsed in blank or, in
lieu thereof, shall have affixed thereto stock powers
executed in blank, and in proper form for transfer.
In addition, there shall be affixed to such
certificates all requisite stock transfer tax stamps,
if any, or, in lieu thereof, a check from Seller to
the order of Purchaser to defray the cost of all such
stock transfer taxes, if any.
(ii) Seller Note 1 and Seller Note 2.
(iii) Each of the letters described in Section 3 of
Annex B.
(b) At Closing, Seller shall deliver, or shall cause to be
delivered, to Purchaser the following:
(i) The certificate signed by Seller as referred
to in Section 6.1 (c) hereof.
(ii) The certified resolution of the Board of
Directors of Seller referred to in Section 6.1 (e)
hereof.
(iii) The resignations referred to in Section
6.1(h).
8.2 Deliveries by Purchaser.
(a) At Closing, the Purchaser shall deliver to Seller the
following:
(i) the Letter of Credit.
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(ii) The certificate signed by a duly authorized
officer of Purchaser referred to in Section 6.2 (c)
hereof.
(iii) The certified resolution of the Board of
Directors of Purchaser referred to in Section 6.2 (e)
hereof.
(b) At Closing, Purchaser shall deliver, or shall cause to
be delivered, to the Bank, to be held by the Bank in escrow
pursuant to the terms of the Letter of Credit in the form
attached as Annex B, the following:
(i) The Purchaser Note, duly and validly executed
by Purchaser.
(ii) Each of the letters described in Section 3
of Annex B.
8.3 Housing. Purchaser agrees to have ESI continue to make
available to Seller's or any Seller's Affiliate's expatriate personnel, during
the period that any such personnel participate in any mutually agreed
post-Funding transition assistance program for the benefit of ESI or
Purchaser, such personnel's current residences, to the extent that such
residences are leased by ESI on the Effective Date, until the earlier of (i)
termination of such transition program or (ii) expiration of the applicable
residential lease if not renewed or extended by ESI or Purchaser.
8.4 Change of ESI Name and Removal of ESI Name.
(a) As soon as practicable but in any event not later than
ninety (90) days from Funding unless prohibited by the terms of the East Zeit
Concession Agreement (in which case Purchaser shall use all reasonable efforts
to remove or overcome such prohibition), the names of ESI and every ESI
subsidiary shall be changed to ones which do not use the words "Exxon" or
"Esso" or "Suesso" or any name which might be confused with or similar to such
names. Seller shall provide all necessary assistance required to complete such
name change. Seller reserves the right to participate in the fulfillment of
such requirements, and Seller and Purchaser shall cooperate with each other to
expedite such name changes. All expenses and costs related to such name
changes shall be for account of Purchaser.
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(b) Seller shall have the right, but not the
responsibility, and Purchaser shall have the responsibility, to remove ESI's
names from ESI-owned or operated properties and facilities. Purchaser hereby
agrees to cause ESI to grant Seller a right of access after Funding to
ESI-owned or operated properties and facilities to remove ESI's names therefrom
(at Purchaser's expense) or to confirm that Purchaser has done so. To the
extent Seller has not done so, Purchaser shall, within ninety (90) days from
Funding, remove all signs and references to ESI and shall erect or install all
signs complying with any applicable governmental rules and regulations. At the
conclusion of the ninety (90) day term, or such earlier period as Purchaser
advises Seller that ESI's name has been removed from all properties and
facilities, Seller may inspect to confirm removal. If removal has not been
completed Seller shall thereafter have the right to inspect each subsequent
time Purchaser advises that all signs have been removed.
(c) To the extent within Purchaser's control and ability,
the provisions of Section 8.4(b) shall apply mutatis mutandis to Suesso's names,
properties, and facilities.
8.5 Return of Seller's Proprietary Materials. Purchaser
acknowledges and agrees that those materials set forth on Schedule 8.5 hereto
provided by Seller and/or its Affiliates for use by ESI during the period when
Seller was a stockholder of ESI will be removed by Seller prior to Closing.
8.6 License of Data to Seller. Purchaser hereby acknowledges
that ESI has or will license the information described in Schedule 8.5 hereto
to Seller and its Affiliates before Closing, at no cost, on the terms
stipulated in licenses with provisions to be negotiated in good faith and
mutually agreed by the Parties within ten (10) business days of the Effective
Date, and Purchaser further agrees that it shall not cause ESI to take any
actions which may in any manner invalidate or call into question the validity
of said licenses. Such licenses will not be transferrable by Seller or its
Affiliates to any party other than Seller or an Affiliate of Seller, and Seller
and its Affiliates must treat information as Confidential ESI Information
8.7 Confidential Information
(a) For purposes of this Section 8.7:
(i) "Confidential ESI Information" means that
information prepared by ESI or bearing ESI's
name or mark which is or has been marked (at
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time of origin) "Confidential" or
"Proprietary" or "Company Use" by ESI, except
for that set forth in Schedule 8.5 hereto;
(ii) "Confidential Seller Information" means that
information prepared by Seller or its
Affiliate (other than ESI) or bearing Seller's
or its Affiliate's (other than ESI's) name or
mark and which is or has been marked (at time
of origin) "Confidential" or "Proprietary" or
"Company Use" by Seller or its Affiliate
(other than ESI); and
(iii) Seller and Purchaser intend that, after
Funding, neither Purchaser nor ESI will
knowingly possess any Confidential Seller
Information.
(b) For ten (10) years commencing on the Effective Date,
Purchaser and ESI:
(i) may not use or disclose Confidential Seller
Information;
(ii) shall make every effort to prevent the use or
disclosure of Confidential Seller
Information;
(iii) shall, immediately upon discovery, disclose to
the proper proprietor of Confidential Seller
Information that Purchaser and/or ESI is in
possession of Confidential Seller Information
and comply with the proprietor's request to
either destroy Confidential Seller Information
or return Confidential Seller Information to
the proprietor.
(c) For ten (10) years commencing on the Effective Date,
Seller:
(i) may not use or disclose Confidential ESI
Information to any persons or entities other
than itself or its Affiliates; and
(ii) shall make every effort to prevent the use or
disclosure of Confidential ESI Information
otherwise than as provided for in Section 8.7
(c) (i) hereof.
(d) The provisions of this Section 8.7 do not apply:
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(i) if the receiving party or anyone to whom the
receiving party directly or indirectly
transmits the Confidential ESI Information
or Confidential Seller Information pursuant
to this Section 8.7 is requested or becomes
legally compelled (by oral questions,
interrogatories, requests for information or
documents, subpoena, civil investigative
demands or similar process) to disclose the
Confidential ESI Information or Confidential
Seller Information as the case may be; in such
circumstances, the receiving party, will
provide the proprietor with prompt written
notice so that the proprietor may inter alia
seek a protective order or other appropriate
remedy and/or waive compliance with the
provisions of this Section 8.7. In the event
that such protective order or other remedy is
not obtained, or that proprietor, in its sole
discretion, expressly in writing waives
compliance with any provision of this Section
8.7, the disclosing party will furnish only
that portion of the Confidential ESI
Information or Confidential Seller Information
(as the case may be) which it is advised by
opinion of counsel is legally required and
will exercise its best efforts to obtain
reliable assurance that confidential treatment
will be accorded the Confidential ESI
Information or Confidential Seller
Information (as the case may be).
(ii) to any Confidential ESI Information or
Confidential Seller Information which becomes
public knowledge subsequently without breach
of this Section 8.7 by the receiving party,
which is known to the receiving party on a
non-confidential basis before receipt of such
information from the proprietor, or which is
received subsequently from a third party in
circumstances not involving the breach of a
confidentiality obligation.
(e) Documents which proprietor considers to be subject to
any attorney-client or work product privilege as to that document or any other
document are intended to remain privileged notwithstanding any inadvertent or
unintentional disclosure.
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8.8 Intercompany Accounts. To the extent ESI intercompany
payables or receivables are identified after September 15, 1996, the net amount
will be credited to Seller or Purchaser, at Funding, as appropriate.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
9.1 Indemnification
(a) Indemnification by Purchaser. Subject to the provisions of Section
4.2(c), this Article IX, and Article XI, Purchaser agrees to discharge and
release and shall indemnify and hold Seller, its Affiliates (including but not
limited to Ancon Insurance Company, Inc., its predecessor companies, and Exxon
Production Research Company), and Seller's and all Affiliates' stockholders,
directors, officers, employees, agents, and consultants harmless from and
against:
(i) Any and all Claims, Liabilities, and
obligations resulting from the failure of any of the representations and
warranties contained in Article III of this Agreement to have been true in all
material respects when made and as of the Closing, and (without limitation of
the foregoing), for such representations and warranties as were made as of a
specified date, any and all Claims, Liabilities, and obligations resulting from
the failure of such representations and warranties to have been true in all
material respects as of such specified date;
(ii) Any and all Claims, Liabilities, and
obligations resulting from the failure of Purchaser to acknowledge or comply in
all material respects with any of the covenants and acknowledgments contained
in this Agreement which are required to be performed or acknowledged by
Purchaser; and
(iii) Except to the extent provided otherwise in
Section 4.2(c), 9.2(b), and Article XI, any and all Claims, Liabilities, and
obligations based upon, attributable to, or resulting from the business or
operations of ESI, its successor(s), or any ESI Subsidiary or its successor(s),
whether arising from conditions or events which exist or occur prior to
Closing, at Closing, or after Closing, in each instance including Claims,
Liabilities, and obligations resulting from the negligence or strict liability
of Seller, whether the negligence or strict liability is active, passive,
joint, concurrent, or sole.
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(b) Indemnification by Seller. Subject to the
provisions of this Article IX, Seller agrees to discharge and release and shall
indemnify and hold Purchaser, Purchaser's Affiliates, and Purchaser's and
Purchaser's Affiliates' stockholders, directors, officers, employees, agents,
and consultants (collectively, the "Purchaser Indemnitees") harmless from and
against any and all Claims, Liabilities, and obligations resulting from the
failure or breach, as of the Closing, of (i) any of the representations,
warranties, covenants, or agreements contained in Sections 2.2, 2.3, 2.4, 2.15,
2.19, 4.3(i), and 4.3(j), and 4.3(l) (to the extent 4.3(l) relates to Sections
4.3(i) and 4.3(j)) (collectively, "Purchaser Basket Losses"); and (ii) the
covenants or agreements contained in Section 4.3(c) and 4.3(l) (to the extent
4.3(l) relates to Section 4.3(c)).
9.2 Seller Deductible.
Seller shall not be required to indemnify the Purchaser
Indemnitees pursuant to Section 9.1(b)(i) until the aggregate of (i) Purchaser
Basket Losses pursuant to Section 9.1(b)(i) hereunder and (ii) Basket Losses
pursuant to Section 9.2(b)(i) of the Purchase and Sale Agreement exceeds
U.S.$500,000.00 (the "Deductible"), and then only to the extent that the sum of
Purchaser Basket Losses and Basket Losses exceeds the Deductible.
9.3 Survival of Indemnity Obligations.
(a) Indemnity obligations of Purchaser under this Article
IX shall not be limited as to time.
(b) Indemnity obligations of Seller pursuant to Section
9.1(b) shall be limited to matters with respect to which a notice has been
delivered to Seller by Purchaser pursuant to Section 9.4 on or before two (2)
years following Funding.
(c) Indemnity obligations of Seller pursuant to Section
9.7(b) shall not be limited as to time.
(d) The Parties further agree that in order to assert a
claim for indemnification pursuant to this Agreement for a breach of any
representation, warranty, covenant, or other agreement, the Party seeking
indemnification must provide the other Party written notice of such claim
pursuant to Section 9.4 hereof.
9.4 Notice of Indemnification.
In the event any legal proceeding shall be initiated or any
Claim shall be asserted against a Protected Party (either Party, as the case
may be, potentially having indemnification rights under this Article IX) by any
person in respect of which payment may be sought by the
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Protected Party from the other Party under the provisions of this Article IX,
the Protected Party shall promptly cause written notice of the assertion of any
such Claim of which it has knowledge, to be forwarded to the other Party.
9.5 Indemnification Procedure for Third-Party Claims.
(a) In the event of the initiation of any legal proceeding
against a Protected Party by a third party, for which indemnification is sought
pursuant to this Article IX, the other Party shall have the right after its
receipt of the related notice, at its sole option and expense, to defend
against, negotiate, settle, or otherwise deal with such proceeding, and any
Claim relating thereto or arising therefrom, and for these purposes to retain
and be represented by counsel of its choice ("Right of Defense"). The
exercise of this Right of Defense shall, however, be without prejudice to the
Protected Party's own right to participate in any such proceeding with counsel
of its choice and at its expense. The Parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation, appeal, or
settlement of any such legal proceeding, claim, or demand.
(b) Purchaser shall give prior written notice to Seller of
its intention to exercise said Right of Defense. In the event that Purchaser
elects not to exercise such Right of Defense, Seller shall defend against or
otherwise deal with any such proceeding, claim, or demand, and for these
purposes shall have the right to retain counsel, at the expense of the
Purchaser, and control the defense of such proceeding.
9.6 Definitions. For purposes of this Article IX:
(a) "Claim" or "Claims" shall mean collectively all
claims, demands, causes of action, and lawsuits asserted or filed by any
person, including an artificial or natural person, any governmental entity, or
a third party.
(b) "Liability" or "Liabilities" shall mean collectively
all damages (including consequential and punitive damages), including those for
personal injury, death, or damage to personal or real property (both surface
and subsurface) and costs for remediation, restoration, or cleanup of
contamination; expenses; losses; fines; penalties; attorneys' fees; and court
and other legal costs incurred in defending any Claim, liens, or judgments,
whether these damages or other costs are known or unknown, foreseeable or
unforeseeable, on the Effective Date.
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9.7 No Brokers.
(a) Purchaser represents to Seller that it has had no
dealings with any broker or finder in connection with the transaction
contemplated by this Agreement. Purchaser agrees to indemnify and hold Seller
and its Affiliates harmless from and against any and all liability to which
Seller or its Affiliates may be subjected by reason of any broker's, finder's,
or similar fee or commission with respect to the transaction contemplated by
this Agreement to the extent such fee or commission is attributable to any
action taken by or on behalf of Purchaser or its Affiliate(s).
(b) Seller represents to Purchaser that neither it nor ESI
has had any dealings with any broker or finder in connection with the
transaction contemplated by this Agreement. Seller agrees to indemnify and
hold Purchaser and its Affiliates harmless from and against any and all
liability to which Purchaser or its Affiliatesmay be subjected by reason of any
broker's, finder's, or similar fee or commission with respect to the
transaction contemplated by this Agreement to the extent such fee or commission
is attributable to any action taken by or on behalf of Seller or its
Affiliate(s).
9.8 Inducement to Seller. Purchaser acknowledges that it
evaluated the obligations under this Article IX before it determined and
submitted its bid for the Shares and that its assumption of these obligations
is a material inducement to Seller to enter into this Agreement and close the
sale to Purchaser.
ARTICLE X
GENERAL
10.1 Specific Performance. The Parties hereto acknowledge and
agree that irreparable damage would result if this Agreement were not
specifically enforced. Therefore, the rights and obligations of the Parties
under this Agreement, including, without limitation, their respective rights
and obligations to sell and to purchase the Shares, shall be enforceable by a
decree of specific performance issued by any court of competent jurisdiction,
and appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any Party may have under this
Agreement or otherwise.
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10.2 Notices.
(a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally or transmitted by telecopier; telex; or
documented overnight delivery service or registered or certified airmail,
return receipt requested, postage prepaid, on the date shown on the receipt
therefor:
(i) if to Purchaser:
John W. Elias
Executive Vice President and Chief
Operating Officer Seagull Energy
Corporation 1001 Fannin, Suite 1700
Houston, TX 77002-6794 Faccimile:
(713) 951-4733
with a copy to:
James H. Wilson
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, TX 77002-6760
Facsimile: (713) 615-5926
(ii) if to Seller: Exxon Company, International
200 Park Avenue, Bldg. 224
Florham Park, N.J. 07932-1002
Attn: Upstream Planning &
Business Analysis Manager
Facsimile (201) 765-4988
(b) In the absence of evidence of earlier receipt, a
notice or other communication under this Agreement is deemed to be given:
(i) if delivered personally, when left at the
address referred to above;
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(ii) if sent by overnight delivery service, the
next Business Day;
(iii) if sent by registered or certified airmail,
six (6) Business Days after posting;
(iv) if sent by telecopier, on completion of the
transmission if transmitted on a Business
Day, and if not, on the next Business Day;
(v) if sent by telex, on receipt of the correct
answer back.
10.3 Amendments. This Agreement may be amended, modified,
superseded, or canceled, and any of the terms, covenants, representations,
warranties, or conditions hereof may be waived, only by an instrument in
writing signed by each of the Parties or, in the case of a waiver, by or on
behalf of the waiving Party.
10.4 Entire Agreement. This Agreement, including the schedules
hereto, any written amendments satisfying the requirements of Section 10.3
hereof, and the Confidentiality Agreement referred to in Section 5.3 hereof,
constitute the entire agreement between the Parties with respect to the subject
matter hereof and thereof and supersede any previous agreements and
understandings between the Parties with respect to such matters.
10.5 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
rights or obligations hereunder may be assigned or transferred without the
prior written consent of Seller, except that Purchaser may assign its rights
and obligations under this Agreement to any direct or indirect wholly-owned
subsidiary designated by Purchaser, but no such assignment shall in any way
operate to enlarge any obligation of or due Seller or relieve Purchaser of its
obligations hereunder, and provided, however, that (1) the proposed assignee
agrees in writing, for Seller's benefit, to be bound by all the terms and
conditions of this Agreement, (2) Purchaser provides prior written notice to
Seller of the proposed assignment and makes such assignment prior to Closing,
and (3) Purchaser provides Seller a copy of the assignment and the proposed
assignee's agreement in writing to be bound by all the terms and conditions of
this Agreement. .In the event EGPC or the Government of Egypt fails to approve
of the transfer of Seller's interest in ESI to such assignee, Purchaser agrees
to create or utilize another direct direct or indirect wholly-owned subsidary
who would be acceptable to EGPC
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and the Government of Egypt and assign (without relieving Purchaser of its
obligations hereunder) its rights and obligations hereunder to such subsidiary.
10.6 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.7. Applicable Law; Arbitration; Submission to Jurisdiction;
Consent to Service of Process.
(a) This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York without regard to
the conflict of law rules therein.
(b) Except as provided under Section 10.1 hereof, any
dispute arising out of or relating to this Agreement, or the breach thereof,
shall be finally settled by arbitration in accordance with the Rules of
Arbitration of the International Chamber of Commerce, by three arbitrators
(except where a single arbitrator is specified herein) appointed in accordance
with said Rules. The place of such arbitration shall be in the City of New
York, New York, USA, or such other place as mutually agreed by the Parties, and
shall be conducted in the English language. The award rendered by the
arbitrators shall be final and binding upon the Parties. Purchaser and Seller
waive to the extent permitted by law any rights to appeal or to review of such
award by any court or tribunal. Purchaser and Seller agree that the arbitral
award may be enforced against them or their assets wherever they may be found
and that a judgment upon the arbitral award may be entered in any court having
jurisdiction thereof.
(c) In the event that an action is brought for an
injunction or other equitable remedy in accordance with Section 10.1 hereof or
for specific performance or other equitable remedy, such action may be brought
and prosecuted in the United States District Court for the Southern District of
the State of New York (or, failing subject matter jurisdiction in such federal
court, the/an appropriate New York State court located in Manhattan, New York
City). For this purpose each Party irrevocably: (i) submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
the State of New York (or, failing subject matter jurisdiction in such federal
court, the/an appropriate New York State court located in Manhattan,
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New York City) and (ii) waives any objection which it may have at any time to
the laying of venue of any suit, action, or proceeding ("Proceedings") brought
in any such court, waives any claim that such Proceedings have been brought in
an inconvenient forum, and further waives the right to object, with respect to
such Proceedings, that such court does not have jurisdiction over such Party.
Each Party not resident in the State of New York irrevocably appoints each of
its Affiliates resident in the State of New York to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason such
Affiliates are unable to act as its agent for service of process, or the Party
does not have an Affiliate resident in the State of New York, such Party will
promptly notify the other Party and, within thirty (30) days following the
Effective Date, appoint a substitute process agent acceptable to the other
Party. The Parties irrevocably consent to service of process given in the
manner provided for notices in Section 10.2 hereof. Nothing in this Agreement
will affect the right of any party to serve process in any other manner
permitted by law.
10.8 Expenses. Whether or not the transaction contemplated hereby
is consummated, the Parties hereto shall pay their own respective expenses,
except as otherwise provided in this Agreement.
10.9 Severability. If at any time subsequent to the Effective
Date, any provision of this Agreement shall be held by any court of competent
jurisdiction or any validly constituted arbitral body to be illegal, void, or
unenforceable, such provision shall cease to be of any force and effect, but
the illegality or unenforceability of such provision shall have no effect upon
and shall not impair the enforceability of any other provision of this
Agreement.
10.10 Public Announcements. Neither Seller (nor any of its
Affiliates) nor Purchaser (nor any of its Affiliates) shall make any public
statements including, without limitation, any press releases, with respect to
this Agreement and the transaction contemplated hereby without the prior
written consent of the other Party (which consent may not be unreasonably
withheld or delayed), except as may be required by law or regulations of
national securities exchanges or commissions and then only after prior
consultation with the other Party.
10.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
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10.12 Books and Records; Personnel. For a period of seven (7)
years after Closing (or such longer period as may be required by any
appropriate governmental body or ongoing legal proceeding):
(a) Purchaser shall cause ESI not to dispose of or destroy
any of its business records or files in existence at Closing. If Purchaser
wishes to cause ESI to dispose of or destroy such records or files after that
time, it shall first give thirty (30) days' prior written notice to Seller, and
Seller shall have the right, at its option and expense, upon prior written
notice to Purchaser within such thirty (30) day period, to take possession of
the records and files within sixty (60) days after the date of Seller's notice
to Purchaser.
(b) Purchaser shall cause ESI to allow Seller and its
representatives access to all business records and files relating to ESI which
are in existence at Closing, during regular business hours and upon reasonable
notice at ESI's principal place of business or at any location where such
records are stored, and Seller shall have the right, at its own expense, to
make copies of any such records and files; provided, however, that any such
access or copying shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of ESI's business or
operations, and Purchaser may condition such access or copying upon the
execution by Seller of one or more agreements that deem the information
obtained to be "Confidential ESI Information" subject to Section 8.7.
(c) Purchaser shall cause ESI to make available to Seller,
upon written request and at Seller's expense, (i) ESI's personnel to assist
Seller in locating and obtaining records and files maintained by ESI and (ii)
any of ESI's personnel whose assistance or participation is reasonably required
by Seller in anticipation of, or preparation for, any existing or future
litigation, arbitration, administrative proceeding, tax return preparation, or
other matter in which Seller or any of its Affiliates are involved.
10.13 No Admission. Neither this Agreement, nor any part of it,
nor any performance under this Agreement, nor any payment of any amount under
this Agreement, will constitute or may be construed as a finding, evidence of,
or an admission or acknowledgment of any liability, fault, past or present
wrongdoing, or violation of law, rule, regulation, or policy, by either Seller
or Purchaser.
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10.14 No Third-Party Beneficiaries. There are no third-party
beneficiaries of this Agreement, except for parties indemnified and held
harmless under Article IX.
10.15 Schedules. All schedules referred to in this Agreement are
incorporated by reference.
10.16 "Includes". The word "includes" and its syntactical variants
mean "includes, but is not limited to" and corresponding syntactical variants.
The rule ejusdem generis may not be invoked to restrict or limit the scope of a
general term or phrase followed or preceded by an enumeration of particular
examples.
10.17 Not to be Construed Against Draftor. Purchaser acknowledges
that it has read this Agreement, has had opportunity to review it with an
attorney of its choice, and has agreed to all of its terms. Under these
circumstances, the Parties agree that any rule of construction that a contract
be construed against the draftor shall not be applied in interpreting this
Agreement.
10.18 Execution by the Parties. Neither the submission of this
instrument or any information concerning the Shares for Purchaser's
examination, nor any discussions or negotiations between the Parties, shall
constitute an offer to sell a reservation of or an option for the Shares, and
this instrument and the underlying transaction will become enforceable and
binding between the Parties only upon its execution and delivery by both of
them.
ARTICLE XI
CERTAIN TAX MATTERS
11.1 Certain Tax Matters. Seller and Purchaser hereby
agree as follows:
(a) The income of ESI (including any deferred
income triggered into income by Reg. Sections 1.1502-13, and any excess loss
accounts taken into income under Reg. Section 1.1502-19) shall be included on
the Seller's consolidated U.S. federal income tax returns for all periods
through the date of Funding and Seller shall pay any U.S. federal income taxes
attributable to such income. ESI will furnish tax information to Seller for
inclusion in Seller's U.S. federal consolidated income tax return for the
period which includes the date of Funding in accordance with ESI's past custom
and practice. Purchaser will be responsible for any taxes attributable to the
period after the date of Funding.
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(b) ESI will not elect to be excluded from the
Seller consolidated group under Reg. Section 1.1502-76(b)(5)(ii) for the
Seller group taxable year that includes the date of Funding.
(c) At Seller's request, Purchaser will cause ESI
to make or join with Seller in making any election after the date of Funding if
the making of such election is deemed necessary by Seller for pre-Funding tax
purposes and does not have a material adverse impact on Purchaser or ESI for
any post-Funding tax period.
(d) Purchaser and ESI will cause ESI's Egyptian
tax return or report for the taxable period that begins before and ends after
the date of Funding to be audited by an independent tax professional before
such return or report is filed, and shall provide copies of such return or
report and the audit report to Seller, as soon as practicable, but no later
than April 30, 1997.
11.2 IRC Sec. 338(h)(10) Election. Purchaser agrees to
make and Seller agrees to join Purchaser in making an election under Sections
338(g) and 338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign tax law) (collectively a "Section 338(h)(10) Election") with
respect to the purchase and sale of the Shares hereunder. If Purchaser's
assignee does not file U.S. income tax returns, Seller agrees to file Internal
Revenue Service Form 8023-A, entitled "Corporate Qualified Stock Purchases," on
behalf of Purchaser's assignee with the Office of the Assistant Commissioner
(International), Attention: Chief of Examination, 950 L'Enfant Plaza South,
S.W., Washington, D.C. 20024. Seller agrees to file Internal Revenue Service
Form 8023-A on behalf of Purchaser or its assignee with the District Director
(Attention: Chief of Examination) for the U.S. Internal Revenue district where
the U.S. principal place of business or the U.S. principal office or agency of
Purchaser (or its assignee) is located.
11.3 Liability for Taxes and Related Matters.
(a) Seller will pay any Tax attributable to the
making of the Section 338(h)(10) Election.
Seller also will pay any state, local or
foreign tax (and indemnify Purchaser and ESI
against any adverse consequences arising out
of any failure to pay such tax) attributable
to an election under state, local or foreign
law similar to the election
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available under Section 338(g) of the Code (or
which results from the making of an election
under Section 338(g) of the Code) with respect
to the purchase and sale of the Shares
hereunder where the state, local or foreign
tax jurisdiction (y) does not provide for or
recognize an election under Section 338(h)(10)
of the Code or (z) does not apply its
provisions corresponding to Section 338(h)(10)
of the Code to the purchase and sale of the
Shares.
(b) Seller agrees to pay and shall be liable for
all stock transfer Taxes levied or payable
with respect to the transfer of the Shares to
Purchaser.
(c) Seller shall be liable for (i) all Taxes which
are imposed on or incurred by ESI for any
taxable period ending on or before Funding,
(ii) a portion, determined as described in
subsection (e) of this Section 11.3, of any
Taxes which are imposed on or incurred by ESI
for any taxable period which begins before and
ends after Funding for that part of the
taxable period up to and including the date of
Funding, (iii) all Taxes that are imposed on
ESI because ESI ceases on the date of Funding
to be a member of a group filing consolidated,
combined or unitary returns; and (iv) all
Taxes of Seller and its Affiliates that are
imposed on ESI solely on the basis of its
joint and several liability for such Taxes
(including, without limitation, any liability
imposed on ESI pursuant to Reg. Section
1.1502-6 for federal income taxes incurred by
any member of the Seller Group other than
ESI).
(d) Purchaser shall be liable for all other Taxes,
other than those Taxes described in
subsections (a), (b), and (c) of this Section
11.3, which are imposed on or incurred by ESI.
(e) Whenever it is necessary for purposes of this
Section 11.3 to determine the Taxes of ESI for
a taxable period that begins before and ends
after the Funding, the determination shall be
made by assuming that ESI had a taxable period
which ended at the close of
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the date of Funding, except that exemptions,
allowances and/or deductions that are
calculated on an annual basis, such as the
deduction for depreciation, shall be
apportioned on a time basis and in accordance
with ESI's audited Egyptian tax return
provided for in Subsection (d) of Section 11.1
hereof. Purchaser and Seller agree that any
tax apportionments will be based upon the laws
and regulations applicable to the filing of
any tax returns for the apportioned taxable
period and will not be based solely upon the
laws and regulations in effect at the time of
Funding. In the case of any property
(including ad valorem) Tax, the liability for
such Tax shall be allocated between Seller and
Purchaser by prorating such Tax (x) to Seller
in the ratio that the number of days in the
taxable period prior to and including the date
of Funding bears to the total number of days
in the taxable period and (y) to Purchaser in
the ratio that the number of days in the
taxable period after the date of Funding bears
to the total number of days in the taxable
period. Final settlement of any apportioned
Taxes between Seller and Purchaser shall occur
as soon as practicable after the returns for
such Taxes are filed, but no later than 30
days thereafter.
(f) If Purchaser or ESI receives a refund of any
Taxes described in subsections (a), (b), or
(c) of this Section 11.3, Purchaser shall,
within thirty (30) days after receipt of such
refund, remit it to Seller. If Seller
receives a refund of any Taxes described in
subsection (d) of this Section 11.3, Seller
shall, within thirty (30) days after receipt
of such refund, remit it to Purchaser.
(g) Seller shall have responsibility for all
audits and other proceedings involving the
liability of ESI for Taxes for any taxable
period for which Seller is solely liable under
subsections (a), (b), or (c) of this Section
11.3, and Purchaser shall have responsibility
for all other audits and proceedings involving
the liability of ESI for Taxes. Purchaser
shall give Seller notice of any proposed audit
or other proceeding with respect to the
liability of ESI for taxes for any taxable
period that begins before and ends after the
Funding which is
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likely to result in an additional tax
liability to Seller under subsection (c) of
this Section 11.3, and shall, to the extent
practicable, permit Seller to participate, at
Seller's own expense, in such audit or other
proceeding.
11.4 Assistance and Cooperation. After the
Funding, Seller and Purchaser each shall:
(a) Assist (and cause their respective Affiliates
to assist) the other Party in preparing any returns or reports which such other
Party is responsible for preparing and filing in accordance with Section 2.9
hereof.
(b) Cooperate fully in preparing for any audits
of, or disputes with governmental tax authorities regarding, any liability of
ESI for Taxes.
(c) Make available to the other Party and to any
governmental tax authority as reasonably requested all information, records and
documents relating to the liability of ESI for Taxes.
(d) Preserve all such information, records and
documents until the expiration of any applicable statutory period of limitation
or extensions thereof and as otherwise required by federal, state, local and
foreign law.
(e) Make available to the other Party as
reasonably requested personnel responsible for preparing or maintaining
information, records and documents in connection with Tax matters.
(f) Provide timely notice to the other Party in
writing of any pending or threatened audits or assessments of taxes of ESI for
any taxable period for which the other Party may have a liability under Section
11.3 hereof; and
(g) Furnish the other Party with copies of all
correspondence received from any governmental tax authority in connection with
any Tax audit or information request with respect to any taxable period for
which the other Party may have a liability under Section 11.3 hereof.
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement, as
of the date below their signatures, to be enforceable and binding as of the
Effective Date.
T.P. McCONN
-----------------------------------------
Seagull Energy Corporation
[ILLEGIBLE] By:
- ------------------------- Name: T. P. McConn
Witness Title: Senior Vice President
Date: July 22, 1996
-----------------------------------------
EXXON CORPORATION
[ILLEGIBLE] By: /s/ BERT B. WILLIAMS
- ------------------------- Name: Bert B. Williams
Witness Title: Middle East Manager
Date: July 22, 1996
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ANNEX A
ADJUSTMENT TO PURCHASE PRICE AT FUNDING
As stated in Section 1.2, the Purchase Price consists of the Letter of Credit
plus the Purchaser Note. For purposes of determining the amount of the Letter
of Credit, recognizing the timing delay between the Valuation Date and Funding,
in conjunction with ESI's operation in a "business as usual" mode during such
delay, which could involve costs to be incurred by ESI not recoverable under
the East Zeit Concession Agreement, Seller will make several price adjustments
as follows:
1) Reduce for costs incurred by ESI, including such costs charged to
ESI by Seller or any of its Affiliates, in connection with the
marketing and sale of ESI.
2) Reduce by an amount which reflects the cumulative after-tax
interest which could be attributable to the use of the money
accumulated in the net intercompany receivable account (i.e.,
Seller Note 2) by Seller during the period between 1/1/96 and
September 15, 1996. The applicable interest rate for each
calendar month or portion thereof will be sixty-five percent (65%)
of the one-month Euro Currency Interest Bid Rate for U.S. Dollar
deposits, as published in the Financial Times (New York edition)
on the New York business day immediately preceding the first day
of such month; this rate will be applied from the first day of
such month to (but excluding) the first day of the following
month. Interest will be calculated on a daily basis by
multiplying the end of day account balance by the applicable
interest rate for the relevant month divided by 360.
If one-month Euro Currency Interest Bid Rate is not published in
the Financial Times (New York edition) on the New York business
day required, the Parties shall attempt in good faith to agree on
an applicable interest rate.
In regard to items #1 and 2 above, Seller agrees to pay to Purchaser or
Purchaser agrees to pay to Seller within 5 business days after Funding, in
immediately available funds, an amount equal to the difference between the
estimated Adjustment and the final Adjustment.
3) If within sixty ( 60 ) days after the Effective Date Purchaser
discovers that
a) (i) ESI or SUESSO does not possess all Authorizations or
is in violation of the terms of any Authorizations or any Egyptian laws or
regulations relating to pollution control or the protection of the environment,
or
(ii) there is any liability of ESI or SUESSO to any
non-governmental third party in tort or otherwise in connection with any
release of any hazardous substances, solid wastes, petroleum, petroleum
products, and oil and gas exploration and production wastes into the
environment as a result of or with respect to the operations of ESI or SUESSO;
or
(b) there exists any pending or threatened (in writing) claim,
action, lawsuit, proceeding, or investigation against ESI or SUESSO that is not
disclosed in Schedule 2.13 or
50
<PAGE> 57
otherwise disclosed or known to Purchaser prior to the Effective Date, or there
exists any material, adverse change in the matters disclosed in Schedule 2.13;
then, to the extent that any such matter does not breach a representation or
warranty of Seller set forth in Article II and Purchaser provides Seller (i) a
preliminary, summary notice as soon as practicable and (ii) a complete,
follow-up notice within ten (10) days of its discovery, the Purchase Price will
be reduced by an amount representing the reduction in value of the Shares
attributable to the matter as mutually agreed by Purchaser and Seller for each
matter that satisfies the foregoing conditions. Purchaser's follow-up notice
must specifically identify and provide specific descriptions and evidence of
the matter and its effect on the value of the Shares.
If the parties cannot agree, after negotiating in good faith for a period of
ten (10) days, (i) that a particular matter satisfies the foregoing conditions
or (ii) on the amount by which the Purchase Price will be reduced for a
particular matter, then such dispute shall be referred to a single commercial
arbitrator in New York, who shall be appointed within five (5) business days
but otherwise in accordance with (and such arbitration shall be conducted in
accordance with) the provisions of Section 10.7.
Notwithstanding the foregoing provisions of this Section 3 of Annex A, there
shall be no purchase price reduction under this Section 3 for any matter for
which the attributable reduction in value of the Shares, as mutually agreed or
determined by arbitration, is less than U.S.$50,000.00; and, furthermore, in
lieu of any Purchase Price reduction, Seller may elect to promptly and
reasonably remedy the relevant matter before Closing, or, if the aggregate
resulting reduction for all matters under this Section 3 and the corresponding
provision in Section 1.2 of the Purchase and Sale Agreement would exceed
$7,500,000.00, Seller may elect to terminate this Agreement.
The sum of adjustments under Sections 1, 2 and 3 above as described in this
Annex A is referred to within this Agreement as the "Adjustment."
All amounts to be determined under this Annex A shall be determined in
accordance with United States Generally Accepted Accounting Principles.
51
<PAGE> 58
ANNEX B
IRREVOCABLE LETTER OF CREDIT
Issued By
The Chase Manhattan Bank, N.A.
Letter of Credit No. [ _________ ] ______________, 1996
Exxon Corporation
200 Park Avenue
Florham Park, New Jersey 07932-1002
Ladies and Gentlemen:
1. The undersigned (the "Bank") hereby establishes, at the
request and for the account of Seagull Energy Corporation (the "Company") and
its indirect wholly owned subsidiary ______________________ (the "Company
Subsidiary"), this Irrevocable Letter of Credit in the amount of U.S.$
[____________] (_________________) (the "Total Credit"), effective immediately
and expiring on December 20, 1996 (the "Expiry Date").
2. The Bank irrevocably authorizes Exxon Corporation (the
"Beneficiary") to draw on it under a draft in the form of Exhibit 1 in one
drawing made in accordance with the terms and conditions hereinafter set forth,
by the Beneficiary's demand delivered to the Bank at the address on the
signature page hereof and upon satisfaction of the conditions set forth in
Paragraph 3 below, the total amount of the Total Credit.
3. The following conditions must be satisfied before the
Beneficiary may draw on the Total Credit:
(a) all of the conditions of Paragraph 3 (other than clause (a))
of that certain Irrevocable Letter of Credit number [____] dated the date
hereof and issued by the Bank in favor of Esso Egypt Limited have been
satisfied;
(b) delivery to the Bank of a letter executed by the Beneficiary
and a letter executed by the Company in the form of Exhibit 2; and
(c) delivery to the Bank of a letter executed by the Beneficiary
and a letter executed by the Company in the form of Exhibit 3.
4. Upon receipt by the Bank of the Beneficiary's demand and draft
at the address herein specified and satisfaction of the conditions set forth in
Paragraph 3 above, all in substantial compliance with the terms hereof, the
Bank agrees promptly to honor the same in an amount equal to the Total Credit
by direct payment as instructed by the Beneficiary. If such demand is received
by the Bank on or prior to 10:00 a.m., Houston, Texas time, on a business day,
payment shall be made to the Beneficiary directly by the Bank in the amount
demanded, in immediately available funds, not later than 3:00 p.m., Houston,
Texas time, on the same business day. If such demand is received after 10:00
a.m., Houston, Texas time, on a business day, such payment shall be made as
aforesaid not later than 3:00 p.m., Houston, Texas time, on the next succeeding
business day.
52
<PAGE> 59
5. The Bank shall retain the certificates referred to in 3(b)
(Exhibit 2), the notes referred to in 3(c) (Exhibit 3), and the Purchaser Note
(as defined in the Stock Purchase Agreement dated July 22, 1996 by and between
the Company and the Beneficiary (the "Stock Purchase Agreement")) in escrow
until the Beneficiary provides written notice that it has received the funds
payable under this Letter of Credit. Upon receipt of such notice from the
Beneficiary, the Bank will deliver the certificates referred to in 3(b)
(Exhibit 2) and the notes referred to in 3(c) (Exhibit 3) to the Company
Subsidary and the Purchaser Note (as defined in the Stock Purchase Agreement)
to the Beneficiary.
6. Upon the earlier of (a) the Expiry Date and/or (b) payment of
the Total Credit available hereunder, the payment obligation under this Letter
of Credit shall expire and, if the Bank is not in default hereunder, the
Beneficiary will promptly return this Letter of Credit to the Bank. Promptly
after the Expiry Date, the Bank will deliver the documents referred to in
clauses (b) and (c) of Paragraph 3 to the Beneficiary and the Purchaser Note to
the Company.
7. The Bank's payment obligation hereunder shall remain valid
notwithstanding any invalidity, illegality or unenforceability of the said
Stock Purchase Agreement and payment shall be made hereunder irrespective or
whether there is any dispute between the Purchaser and Seller in relation to
said Stock Purchase Agreement on the amounts due and payable thereunder.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
53
<PAGE> 60
EXHIBIT 1
The Chase Manhattan Bank, N.A.
[ address ]
Re: Letter of Credit No. [ ]
The signatory below here demands from you the payment of $_______ ( )
under the Irrevocable Letter of Credit number [ ] dated [ ], 1996
(attached hereto) and certifies that the conditions to drawing under said
Irrevocable Letter of Credit have been satisfied.
FOR AND ON BEHALF OF
EXXON CORPORATION
54
<PAGE> 61
EXHIBIT 2
The Chase Manhattan Bank, N.A.
[ address ]
Re: Letter of Credit No. [ ]
Exxon Corporation has delivered to The Chase Manhattan Bank N.A. (the "Bank"),
to be held by the Bank in escrow, certificates representing all of the
outstanding capital stock of Esso Suez Inc. Said certificates have been duly
endorsed in blank or, in lieu thereof, have affixed thereto stock powers
executed in blank, and in proper form for transfer to [name of Company
Subsidiary].
55
<PAGE> 62
EXHIBIT 3
The Chase Manhattan Bank, N.A.
[ address ]
Re: Letter of Credit No. [ ]
Exxon Corporation has delivered to The Chase Manhattan Bank, N.A. (the "Bank"),
to be held by the Bank in escrow, Seller Note 1 and Seller Note 2, as defined
in the Stock Purchase Agreement dated July 22, 1996, by and between Seagull
Energy Corporation and Exxon Corporation.
56
<PAGE> 63
ANNEX C
PROMISSORY NOTE
$__________________ [ ] , 1996
FOR VALUE RECEIVED, the undersigned, Seagull Energy Corporation, hereby
promises to pay to Exxon Corporation, the total principal sum of
$_______(_____________ dollars), without interest, payable on demand in lawful
money of the United States of America at the undersigned's principal place of
business, upon the following conditions:
This promissory note ("Seagull Note") shall be null and void, no
earlier than the first business day after Funding, if:
(a) after demand by Esso Suez Inc. or its successor in
interest, Exxon Corporation has refused, threatened to refuse, or
otherwise failed to honor the Exxon Notes (copies attached); or
(b) Esso Suez Inc. or its successor in interest has
canceled the Exxon Notes or the Exxon Notes have otherwise become
null and void.
All past due principal of this Note shall bear no interest.
The undersigned waives all formal requirements for collection of this
Note, with or without notice, before or after maturity.
The Note shall be governed by and construed in accordance with the
internal laws of the State of New York.
The term "Funding," as used in this Note, shall have the same definition
as used in that certain Stock Purchase Agreement executed between Exxon
Corporation and Seagull Energy Corporation on July 22, 1996.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first above written, intending to be so bound.
--------------------------------
By
------------------------------
Title:
Seagull Energy Corporation
57
<PAGE> 64
ANNEX D
PROMISSORY NOTE
(Form of both Seller Note 1 and Seller Note 2)
$__________________ [ ] , 1996
FOR VALUE RECEIVED, the undersigned, Exxon Corporation, hereby promises
to pay to Esso Suez Inc., the total principal sum of $____________(____________
dollars), without interest, payable on demand in lawful money of the United
States of America at the undersigned's principal place of business, upon the
following conditions:
1. Should Exxon Corporation sell its shares in Esso Suez Inc. to any
party not an affiliate of Seagull Energy Corporation, this note shall not
be payable to the extent that Esso Suez Inc., any parent, subsidiary, or
other Affiliate of Esso Suez Inc., or any person or company owning any
interest in Esso Suez Inc. shall owe any debt whatsoever to Exxon
Corporation or any of its Affiliates.
2. This promissory note ("Exxon Note") shall be null and void if:
(a) any party, including, without limitation, any
involuntary successor to Esso Suez Inc. but not including Seagull
Energy Corporation or any of its Affiliates, succeeds or attempts
to succeed to any of the rights and/or obligations of Esso Suez
Inc. under this Exxon Note;
(b) Esso Suez Inc., or any successor, assigns or attempts
to assign, to a party not Seagull Energy Corporation or any of its
Affiliates, any of the rights and/or obligations of Esso Suez Inc.
under this Exxon Note;
(c) any party, including, without limitation, an
involuntary successor to Seagull Energy Corporation or any of its
Affiliates, succeeds or attempts to succceed to any of the rights
and/or obligations of Seagull Energy corporation under that
certain promissory note dated ____________________, 1996 given by
Seagull Energy Corporation to Exxon Corporation ("Seagull Note";
copy attached);
(d) Seagull Energy Corporation or any of its Afiliates is
the subject of any voluntary or involuntary bankruptcy
proceedings, reorganizations, or liquidations, or has defaulted or
threatened to default on payments to any of its creditors.
(e) after demand by Exxon Corporation, Seagull Energy
Corporation refuses, threatens to refuse, or otherwise fails to
honor the Seagull Note; or
58
<PAGE> 65
(f) Exxon Corporation cancels the Seagull Note.
All past due principal of this Note shall bear no interest.
The undersigned waives all formal requirements for collection of this
Note, with or without notice, before or after maturity.
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York.
The term "Affiliate" (or "Affiliates"), as used in this Note, shall have
the same definition as used in that certain Stock Purchase Agreement executed
between Exxon Corporation and Seagull Energy Corporation on July 22, 1996.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first above written, intending to be so bound.
--------------------------------------
By
------------------------------------
Title:
Exxon Company, International (a
division of Exxon Corporation)
59
<PAGE> 66
SCHEDULE 2.6 - CONSENTS
o Any necessary Egyptian Governmental approval for the transaction
contemplated by this Agreement
o Filing of U.S. Internal Revenue Service Form 8023-A - requiring signature
by the Seller and Purchaser
60
<PAGE> 67
SCHEDULE 2.9 - TAXES
There are two salary tax disputes involving Esso Suez Inc.
- - The Egyptian Tax Department claims that Esso Suez Inc. did not withhold
the correct amount of Salary taxes during the years 1986-1990. Esso
Suez Inc. believes that its withholding practices were correct and has
filed a court case to challenge the Tax Department's claim, which
totals $878k. Based upon review of the case and advice from outside
counsel, in January 1996, $88K was deposited with the Tax Department as
a deposit against any future liability related to that claim. A
Litigation hearing is scheduled for July 30, 1996.
- - The Egyptian Tax Department claims that Esso Suez Inc. did not withhold
the correct amount of Salary taxes during the years 1991-1994. Esso
Suez Inc. believes that its withholding practices were correct and is
negotiating with the Tax Department in an attempt to resolve the claim
without court action. The Tax Department's original claim totalled
$1206K but has subsequently been reduced to $454K through negotiations
with the Tax Department. Negotiations are continuing.
A reserve of $500k has been established on the books in connection with the
potential liability associated with these disputes. This reserve amount may be
adjusted from time to time as new information becomes available.
61
<PAGE> 68
SCHEDULE 2.10 - PATENTS, TRADEMARKS, COPYRIGHTS
o Patents
- Flexsorb gas sweetening process licensed from Exxon Research and
Engineering to ESI for use in gas plant
o Trademarks
- Esso
- Esso Suez Inc.
- Suesso
62
<PAGE> 69
SCHEDULE 2.12(A)
ESI Contracts Summary Sheet - Page 1
<TABLE>
<CAPTION>
Contract Effective Expiration Termination
Number Contractor Contract Description Date Date Clause
- -------- ----------------------- ------------------------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
10-104 SUCO Suco Airstrip and Access Road 03/10/85 12/31/99 None Stated
10-129 GUPCO Mutual Interest Pipeline
Agreement 06/25/85 12/31/99 None Stated
10-411 SUCO ESI-Suco Facilities Sharing 04/16/87 12/31/99 90 Days Notice
25-1290 SUCO ESI-Suco Oil Spill Cooperation
Agreement 12/31/99 60 Days Notice
20-879 AGIBA ESI-Agiba Sharing Agreement 10/10/91 10/10/99 30 Days Notice
23-950 EISUM ESI-Geisum Sharing Agreement 02/10/92 12/31/99 60 Days Notice
25-497 Exxon Research &
Engineering Gas Treat. Process Licensing
Agree 07/20/87 12/31/99 30 Days Notice
33-1291 EGPC ESI/EGPC Gas Plant Operating 12/31/99 Mutual Agreement
Agreement
21-546 Halliburton Overseas Wireline Services 11/25/88 08/31/96 For Cause
21-1093 Maridive Work Boat Charter 01/18/96 01/18/97 For Cause
21-1099 Halliburton Overseas Cementing Services/Coiled Tubing 03/01/94 12/18/96 For Cause
22-623 ECL Software Licensing Agreement 04/20/89 12/31/99 30 Days Notice
22-938 Egyptian Bureau of
Engineering Maint & Repair of Signaling
Equip 09/22/95 09/21/96 Upon Written
Notice
22-1001 Systel Radio Maintenance & Repair 12/01/92 11/30/96 Upon Written
Notice
</TABLE>
63
<PAGE> 70
SCHEDULE 2.12(A) - CONTINUED
ESI Contracts Summary Sheet - Page 2
<TABLE>
<CAPTION>
Contract Effective Expiration Termination
Number Contractor Contract Description Date Date Clause
- -------- ---------------------------- ------------------------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
22-1141 Systems Engineering of Egypt ESI Data Transmission Equip
Maint 05/01/94 04/30/96 Upon Written
Notice
22-1217 Atomic Energy Agency Radiation Monitoring & Testing 01/01/95 12/31/96 Upon Written
Notice
22-1222 Corrichem Review Proposals for Scale 06/21/95 06/20/96 Upon Written
Inhibition Notice
22-1251 Devco International Load Test/Certify EZ Lifting Equip 09/15/95 12/31/97 Upon Written
Notice
22-1252 First Egyptian Engineering Engineering and other services 10/01/95 09/30/96 Upon Written
(Five contracts) Notice
22-1253 Frank's International HP Injection Pump 06/16/96 12/31/96 Upon Written Notice
22-1280 Globoil Oilfield Refurbish/operate 2RO units 11/20/95 06/30/99 Upon Written
Notice
22-1283 Baker Oil Tools Mud Motor for Coiled Tubing 02/12/96 03/12/97 Upon Written Notice
22-1284 Noble Denton Engineering Services 02/25/96 10/30/96 Upon Written Notice
22-1285 Eastern Electronics Maintenance on East Zeit Radar 07/01/96 07/31/98 Upon Written Notice
22-1287 Halliburton Overseas Coiled Tubing Work 05/13/96 05/13/97 For Cause
22-1289 PICO Platform Crane Inspection 07/01/96 08/31/96 Upon Written Notice
23-222 Timsah Shipbuilding CALM/Pipeline Maintenance 02/06/86 12/31/96 60 Days Notice
23-649 Xerox Long Term Lease Contract 10/01/89 12/31/99 90 Days Notice
23-650 Xerox Long Term Lease Contract 10/01/89 12/31/99 90 Days Notice
23-903 Said Oil Services EZT Catering & Janitorial 30 Days
Service 01/01/92 12/31/96 Notice
23-907 Care Services Safety, Security, Fire Protection 01/01/92 12/31/96 Upon Written
Notice
23-957 Petroleum Air Services Helicopter Services 07/01/92 06/30/96 Upon Written
Notice
23-975 Hassan Ebeid Supplementary Support Services 11/01/92 12/31/96 30 Days Notice
23-1230 Hassan Ebeid Provide Driver at EZT 01/01/96 06/30/96 Upon Written
Notice
23-1243 Hassan Ebeid Repairs & Maint at EZ Terminal 01/01/96 06/30/96 Upon Written
Notice
</TABLE>
64
<PAGE> 71
SCHEDULE 2.12(A) - CONTINUED
ESI Contracts Summary Sheet - Page 3
<TABLE>
<CAPTION>
Contract Effective Expiration Termination
Number Contractor Contract Description Date Date Clause
- -------- -------------------------------- ------------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
23-1260 Hassan Ebeid Supply Radio/Telex Operator 01/01/96 06/30/96 Upon Written
Notice
23-1261 Hassan Ebeid Provide Draftsman 01/01/96 12/31/96 Upon Written Notice
23-1266 Hassan Ebeid Provide Radar Operators 02/01/96 12/31/96 Upon Written Notice
23-1267 Energy Develop. Co. Provide Personnel at East Zeit 04/01/96 03/31/97 Upon Written Notice
23-1269 Gulf Co. Fabricate and Install Cooler 04/15/96 07/15/96 Upon Written Notice
23-1156 First Egyptian Engineering Produce Four Drawings 09/21/94 12/31/96 Upon Written
Notice
30-543 Said Denmarkar Lease of General Manager 03/31/95 02/28/98 90 Days Written Notice
Residence if after 2/28/97 or if
occupant transferred
from Egypt
32-1220 Nosco Customs Clear & Handling - Sea 04/01/95 03/30/96 Upon Written
Notice
32-1221 El Gindy Co. Customs Clear & Handling - Air 06/01/95 05/31/96 Upon Written
Notice
32-1256 Shilbaya Marine Supply Fresh Water at EZT 11/15/95 11/14/96 Upon Written
Notice
32-1257 El Karnak Supply Fresh Water at EZT 12/01/95 11/30/96 Upon Written
Notice
32-1282 Esso Standard Near East Supply of Diesel, Jet Fuel 01/01/96 12/31/96 30 Days Notice
and Gasoline
32-1286 Morgan International Customs Clearance 05/01/96 04/30/97 For Cause
33-1292 Misr Insurance Co. All risk insurance 1/1/96 12/31/96 60 Days Notice
34-313 Xerox Rental of Copy Machine 06/10/86 12/31/99 90 Days Notice
34-472 Misr Real Estate Abul Feda Office Building Lease 01/01/88 12/31/96 90 Days Notice
34-637 Xerox Service Agreement for 5 Copiers 07/31/89 12/31/99 90 Days Notice
34-770 Hassan Mohamed Supply Newspapers & Magazines 10/10/90 12/31/96 Upon Written
Notice
34-786 El Shaymaa Center Typewriter Maintenance 12/15/91 08/13/96 Upon Written
Notice
34-898 Flamenco Hotel Accommodations for Esso 12/01/91 09/30/96 Upon Written
Personnel Notice
</TABLE>
65
<PAGE> 72
SCHEDULE 2.12(A) - CONTINUED
ESI Contracts Summary Sheet - Page 4
<TABLE>
<CAPTION>
Contract Effective Expiration Termination
Number Contractor Contract Description Date Date Clause
- -------- ------------------------------ ------------------------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
34-948 Xerox Maintenance for Fax 05/05/92 12/31/99 90 Days Notice
Machines
34-1060 Property Management Company Janitorial Services 12/01/94 11/30/96 Upon Written
Notice
34-1115 Adel Helmy Fuel & Service for Cars 04/21/94 04/21/96 Upon Written
Notice
34-1140 Al-Ahram Newspaper Help Wanted Advertisements 04/21/94 04/21/96 Upon Written
Notice
34-1148 TNT Skypack International Courier Services 07/24/96 07/26/96 Upon Written
Notice
34-1244 Property Management Company Repair & Maint Service for 07/01/95 12/31/96 Upon Written
Offices Notice
35-825 Al-Salam Hospital Medical Services Agreement 11/01/90 12/31/96 45 Days Notice
35-826 As Salam International Medical Services 01/01/90 12/31/96 45 Days Notice
35-829 Nile Badrawi Hospital Medical Services 11/01/90 12/31/96 45 Days Notice
35-962 Cairo Medical Tower Lab Medical Services Agreement 06/01/92 12/31/96 Upon Written
Notice
35-963 Cleopatra Hospital Medical Services Agreement 06/01/92 06/30/96 Upon Written
Notice
Dennis Gidney* Consulting Services-OIMS 6/1/95 11/30/96 30 Days Written
and operations training Notice
Varied National Employees Regular Varied** None As specified in contract
Varied National Employees Limited Varied** 2 years As specified in contract
from signing
Varied National Employees Training Varied** 2 years As specified in contract
from signing
</TABLE>
* In order to facilitate payments to Contractor, Contract is actually between
Dennis Gidney and Esso Exploration and Production U.K. (EEPUK). EEPUK bills
ESI for Mr. Gidney's services based upon timesheets approved by ESI.
** By individual
66
<PAGE> 73
SCHEDULE 2.12(A) - CONTINUED
ESI Contracts Summary Sheet - Page 5
<TABLE>
<CAPTION>
Contract Effective Expiration Termination
Number Contractor Contract Description Date Date Clause
- -------- ------------------------------- ------------------------------ ---------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Note: The above list excludes contracts that expired in the first quarter of 1996 and inactive contracts that,
although not terminated, have not been used in several years. Copies of most of the major contracts and
agreements listed above were included in Florham Park Data Room files 5.2.02 through 5.2.04, 5.2.06 through
5.2.08, 5.2.11 through 5.2.12, and 5.3.02 through 5.3.25.
The contracts listed below have been executed by Esso Egypt Ltd. or expatriate employees but cover services that are regularly used
by Esso Suez Inc. in conducting its operations.
EEL 12/91 Hussein Helmy Consultant for Cost Recovery 01/01/91 12/31/96 Upon Written Notice
EEL 31/91 Kamal Wahby Company Medical Advisor 09/01/91 08/31/96 60 Days Written Notice
EEL 01/96 Helmy Amer Company Security Manage 01/01/96 12/31/96 60 Days Written Notice
EEL 20/95 Safwat Montassir Consulting Services 12/31/95 11/30/96 60 Days Written Notice
EEL 1/90 Emeco Travel Travel Agency Services 11/01/90 10/31/96 Upon Written Notice
EEL 14/91 Executive Business Serv Provide "Temporary" Employees 01/01/91 12/31/96 Upon Written Notice
EEL 2/90 United Engineering Expat House Repairs/Maintenance 11/01/90 12/31/96 Upon Written Notice
EEL 6/93 IBA Expatriate Mail Service 10/01/93 09/30/96 Upon Written Notice
EEL Gramal Abul Azm Rental of Warehouse Space 1984 09/30/96 At End of Lease Period With
60 Days Written Notice
Various 6 Different Lessors Residence leases for 6
expatriates Various Various Typically 60-90 days notice
if occupant transferred from
Egypt
</TABLE>
67
<PAGE> 74
SCHEDULE 2.12(B)
ESI Contract and Agreement Assignability and Termination
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ----------------------------- ------------------------------ --------------------- ---------------------
<S> <C> <C> <C> <C>
10-104 SUCO Suco Airstrip and Access Road Not Specified None Stated
10-129 GUPCO Mutual Interest Pipeline
Agreement Not Specified None Stated
10-411 SUCO ESI-Suco Facilities Sharing Not Specified 90 days written notice
25-1290 SUCO ESI-Suco Oil Spill Cooperation
Agreement Not Specified 60 days written notice
20-879 AGIBA ESI-Agiba Sharing Agreement Not Specified 30 days written notice
23-950 GEISUM ESI-Geisum Sharing Agreement Not Specified 60 days written notice
25-497 Exxon Research & Engineering Gas Treat. Process Licensing No, but ER&E may be willing 30 days written notice
Agreement to negotiate new agreement after tenth year
33-1291 EEL ESI/EEL Services Agreement Not Specified 30 days written notice
</TABLE>
68
<PAGE> 75
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 2)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ---------------------------- ------------------------------ -------------------------- ------------------------
<S> <C> <C> <C> <C>
EGPC ESI/EGPC Gas Plant Oper ESI Operation of EGPC Gas Yes, with prior written By mutual agreement;
Agree Plant consent of the other party when ESI has no
further rights under the
development lease; or
if ESI is liquidated.
21-546 Halliburton Overseas Wireline Services Overseas Contractor can't assign Termination for cause
w/o Esso consent. Assignment provided for
to affiliate permitted, to
nonaffiliate w/contractor consent.
21-1093 Maridive Work Boat Charter Contractor can't assign w/o Termination for cause
Esso consent; Assignment included; other
by company is permitted. termination not
specified.
21-1099 Halliburton Overseas Cementing Services/Coiled Contractor can't assign w/o Termination for cause
Tubing Esso consent; Assignment included; other
to affiliate permitted; to termination not
nonaffiliate w/contractor specified.
consent.
22-623 ECL Software Licensing Agreement Not specified 30 days written notice
</TABLE>
69
<PAGE> 76
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 3)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ------------------------------ ------------------------------ ---------------------------- ------------------------
<S> <C> <C> <C> <C>
22-938 Egyptian Bureau of Engineering Maint & Repair of Signaling Contractor can't assign w/o Immediately upon
Equip Esso consent; Assignment written request
by Esso not specified.
22-1001 Systel Radio Maintenance & Repair Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
22-1141 Systems Engineering of Egypt ESI Data Transmission Equip Contractor can't assign w/o Immediately upon
Maint Esso consent; Assignment written notice
by Esso not specified.
22-1217 Atomic Energy Agency Radiation Monitoring & Contractor can't assign w/o Immediately upon
Testing Esso consent; Assignment written notice
by Esso not specified.
22-1222 Corrichem Review Proposals for Scale Contractor can't assign w/o Immediately upon
Inhibition Esso consent; Assignment written notice
by Esso not specified.
22-1251 Devco International Load Test/Certify EZ Lifting Contractor can't assign w/o After 10 days notice
Equip Esso consent; Assignment if performance un-
by Esso not specified. satisfactory;
immediately upon in-
solvency of either
party.
22-1252 First Egyptian Engineering Provide Electrical & Contractor can't assign w/o Immediately upon
Instrumentation Eng Esso consent; Assignment written notice
by Esso not specified.
</TABLE>
70
<PAGE> 77
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 4)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ----------------------------- ------------------------------ -------------------------- -----------------------
<S> <C> <C> <C> <C>
22-1253 Frank's International HP Injection Pump Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
22-1280 Global Oilfield Services Refurbish/Operate 2 RO units Contractor can't assign w/o After 10 days notice if
Esso consent; Assignment performance un-
by Esso not specified. satisfactory;
immediately upon in-
solvency of either party
22-1283 Baker Oil Tools Mud Motor for Coiled Tubing Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
22-1284 Noble Denton Engineering Services Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
22-1285 Eastern Electronics Maintenance on East Zeit Radar Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
22-1287 Halliburton Overseas Coiled Tubing Work Contractor can't assign w/o Termination for cause
Esso consent. Assignment provided for
to affiliate permitted, to non-
affiliate w/contractor consent.
22-1289 PICO Platform Crane Inspection Contractor can't assign w/o Immedaitely upon
Esso consent; Assignment written notice
by Esso not specified.
23-222 Timsah Shipbuilding Co. CALM Maintenance Contractor can't assign w/o 60 days written notice
Esso consent; Assignment by
Esso not specified.
</TABLE>
71
<PAGE> 78
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 5)
<TABLE>
<S> <C> <C>
23-649 Xerox Long Term Lease Contract Not specified 90 Days Notice
23-650 Xerox Long Term Lease Contract Not specified 90 days written notice
23-903 Said Oil Services EZT Catering & Janitoria Contractor can't assign w/o 30 days written notice
Service Esso consent; Assignment by
Esso not specified.
23-907 Care Services Safety, Security, Fire Contractor can't assign w/o Immediately upon
Protection Esso consent; Assignment written request
by Esso not specified.
23-957 Petroleum Air Services Helicopter Services Esso may freely assign; 30 days written notice
however, contractor may
decline by notifying Esso in
writing.
23-975 Hassan Ebeid Supplementary Support Services Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1230 Hassan Ebeid Provide Driver at EZT Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1243 Hassan Ebeid Repairs & Maint at EZ Contractor can't assign w/o Immediately upon
Terminal Esso consent; Assignment written notice
by Esso not specified.
</TABLE>
72
<PAGE> 79
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 6)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ----------------------------- ------------------------------ --------------------------- ----------------------
<S> <C> <C> <C> <C>
23-1260 Hassan Ebeid Supply Radio/Telex Operator Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1261 Hassan Ebeid Provide Draftsman Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1266 Hassan Ebeid Provide Radar Operators Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1267 Energy Develop Co. Provide Personnel at East Zeit Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1269 Gulf Co. Fabricate and Install Cooler Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
23-1156 First Egyptian Engineering Produce Four Drawings Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
</TABLE>
73
<PAGE> 80
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 7)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ----------------------------- ------------------------------ --------------------------- ------------------------
<S> <C> <C> <C> <C>
30-543 Said Denmarker Lease of General Manager Assignment not 90 days written notice
residence specified if after 2/28/97 or if
occupant transferred
from Egypt
32-1220 Nosco Customs Clear & Handling-Sea Contractor can't assign w/o After 10 days notice if
Esso consent; Assignment performance un-
by Esso not specified. satisfactory;
immediately upon in-
solvency of either party.
32-1221 El Gindy Co. Customs Clear & Handling-Air Contractor can't assign w/o After 10 days notice if
Esso consent; Assignment performance un-
by Esso not specified. satisfactory;
immediately upon in-
solvency of either
party.
32-1256 Shilbaya Marine Supply Fresh Water at EZT Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
32-1257 El Karnak Supply Fresh Water at EZT Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
32-1282 Esso Standard Near East Supply of Diesel, Jet Fuel and Not specified 30 days written
Gasoline notice
32-1286 Morgan International Customs Clearance Contractor can't assign w/o After 10 days notice
Esso consent; Assignment if performance un-
by Esso not specified. satisfactory; immed-
iately upon insolvency
of either party.
</TABLE>
74
<PAGE> 81
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 8)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- --------------------------- ------------------------------ ----------------------------- ------------------
<S> <C> <C> <C> <C>
33-1292 Misr Insurance Co. All Risk Insurance Reinsurers are not willing to 60 days written notice
accept assignment of
existing policy
34-313 Xerox Rental of Copy Machine Not specified 90 days written
notice
34-472 Misr Real Estate Abul Feda Office Building Company can assign and/or 90 days written
Lease sublet with written consent notice, but forfeit
of landlord any advance
rental payment
34-637 Xerox Service Agreement for 5 Not specified 90 days written
Copiers notice
34-770 Hassan Mohamed Supply Newspapers and Contractor can't assign w/o Immediately upon
Magazines Esso consent; Assignment written notice
by Esso not specified.
34-786 El Shaymaa Center Typewriter Maintenance Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
34-898 Flemenco Hotel Accommodations for Esso Contractor can't assign w/o Immediately upon
Personnel Esso consent; Assignment written notice
by Esso not specified.
34-948 Xerox Maintenance for Fax Machines Not specified 90 days written
notice
</TABLE>
75
<PAGE> 82
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 9)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ----------------------------- ------------------------------ --------------------------- ----------------------
<S> <C> <C> <C> <C>
34-1060 Property Management Janitorial Services Contractor can't assign w/o After 10 days notice
Company Esso consent; Assignment if performance un-
by Esso not specified. satisfactory;
immediately upon
insolvency of either
party.
34-1115 Adel Helmy Fuel & Service for Cars Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
34-1140 Al-Ahram Newspaper Help Wanted Advertisements Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
34-1148 TNT Skypack International Courier Services Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
34-1244 Property Management Repair & Maint Service Contractor can't assign w/o Immediately upon
Company for Offices Esso consent; Assignment written notice
by Esso not specified.
35-825 Al-Salam Hospital Medical Services Agreement Contractor can't assign w/o 45 days written
Esso consent; Assignment by notice
Esso not specified.
</TABLE>
76
<PAGE> 83
SCHEDULE 2.12(B) - CONTINUED
ESI Contract and Agreement Assignability and Termination (Page 10)
<TABLE>
<CAPTION>
Contract
Number Contractor Contract Description Assignment/Transfer Termination Clause
- -------- ---------------------------- ---------------------------- --------------------------- ------------------
<S> <C> <C> <C> <C>
35-826 As Salam International Medical Services Contractor can't assign w/o 45 days written
Esso consent; Assignment notice
by Esso not specified.
35-829 Nile Badrawi Hospital Medical Services Contractor can't assign w/o 45 days written
Esso consent; Assignment notice
by Esso not specified.
35-962 Cairo Medical Tower Lab Medical Services Agreement Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
35-963 Cleopatra Hospital Medical Services Agreement Contractor can't assign w/o Immediately upon
Esso consent; Assignment written notice
by Esso not specified.
Dennis Gidney* Consulting Services Assignment not covered 30 days written notice
in contract
Varied** National Employees Regular Remain with ESI As specified in contract
Varied** National Employees Limited Remain with ESI As specified in contract
Varied** National Employees Training Remain with ESI As specified in contract
</TABLE>
* In order to facilitate payments to Contractor, Contract is actually between
Dennis Gidney and Esso Exploration and Production U.K. (EEPUK). EEPUK bills
ESI for Mr. Gidney's services based upon timesheets approved by ESI.
**By individual
Note: The above list excludes one-off type contracts that expired in
the first quarter of 1996 and inactive contracts that,
although not terminated, have not been used in several years.
77
<PAGE> 84
June 27, 1996 Update
SCHEDULE 2.13 - LITIGATION, CLAIMS, OTHER MATTERS
<TABLE>
<CAPTION>
Claimant Subject U.S. $K Status
- -------- ------- ---- -- ------
<S> <C> <C> <C>
Minister of Finance Custom Duties 5 Litigation Awaiting Court
on Imported Cars. of Appeals review of earlier
judgment in favor of ESI.
Hearing scheduled for
November 23, 1996.
Minister of Finance Tax on Salaries from 790** Litigation Hearing
1986 - 1990 scheduled for July 30, 1996
already deposited $K 88 last
January 1996.
Minister of Finance Tax on Salaries from 454** Being negotiated with the Tax
(Tax Dept.) 1991 - 1994 Dept. (Appeal Committee)
Hassan El-Ardi Compensation for * Litigation Hearing
(Former Employee) unjustified termination scheduled for November 3, 1996.
Ehab El-Sherbiny Compensation for 31 Litigation Hearing
(Former Employee) unjustified termination scheduled for October 26, 1996.
</TABLE>
* Financial claim amount not yet specified.
** A $ 500.000 reserve was on the books as of December 31, 1995, to cover
potential liabilities associated with these litigations.
Other matters
Employee syndicate proposal dated 18 April 1996
78
<PAGE> 85
SCHEDULE 2.14 - TITLE TO PROPERTIES
Actual title to assets related to the East Zeit Offshore Concession is
determined in accordance with and governed by the terms and conditions as
specifically set forth in the East Zeit Concession Agreement.
79
<PAGE> 86
SCHEDULE 2.15
ESI National Benefit Plans and Other Benefit Arrangements
1. EGPC Personnel Policy Manual (September 1992, in Arabic)
2. ESI Personnel Policies and Practices:
Consistent with those of the EGPC Personnel Policy Manual (see above)
together with any revisions or updates which EGPC has subsequently issued:
Esso Suez Inc. Policy Manual
Volume l
a) Employment, Salary, Working Hours
b) Leaves and Absences
c) Training
d) Investigation and Discipline
Volume 2
a) Allowances
b) Saving Fund (40 months)
c) End of Service, Retirement, Death (15 months)
d) Collective Life Insurance (70-90 months)
3. ESI Benefits Manual Dated September, 1995
a) Car Mileage Allowance (Section 1-A)
b) Transportation for Designated Positions (Section 1-B)
c) Meal Allowances (Section 1-C)
d) Parking and Laundry Allowances (Section 1-D)
e) Ex-Gratia Payment (Section 1-E)
f) Briefcases (Section 2)
g) Clothing (Section 3)
h) Appliance Loans (Section 4-A)
i) Emergency Loans (Section 4-B)
j) Medical Plan - Employees (Section 5-A)
k) Medical Plan - Families (Section 5-B)
l) Medical Plan - Retirees (Section 5-C)
m) Club Membership (Section 6-A)
n) SPE Membership (Section 6-B)
o) Recognition Awards - Children (Section 7-A)
p) Recognition Awards - Employees (Section 7-B)
q) Eyeglass Policy (Section 8)
r) Policy/Guidelines for Social Obligations (Section 9)
s) Policy/Guidelines for Appraisals and PDR (Section 10)
80
<PAGE> 87
4. ESI Office Procedures
5. Other Bonuses
ESI has paid other special bonuses in recent years. These bonuses are
not covered by ESI "policies". The amount and timing of such bonuses is
discretionary.
a) Perfect Day Bonus - A program was initiated in 1993 to reward
field personnel whenever they achieve a cumulative total of 10
"perfect" days, which are defined as days in which the field
achieves 9 key operating parameters. The bonus is LE 5,000 per
each 10 perfect days, split equally among all field personnel.
b) Safety Bonuses and Gifts - A safety bonus has been paid to all
employees in recognition of achieving a one year period without
any Lost Time Incidents (LTI). The bonus amount is higher for
employees in higher-risk jobs (drivers and field personnel) and
the individual bonus payments have ranged between $75 - $200. In
addition, the company has provided from time to time safety gifts
to all employees in recognition of achieving a full calendar year
without an LTI.
c) Dollar Bonus - From time to time a special bonus payable in US
dollars has been approved to reward employees that have critical
skills or that are high performers. The last dollar bonus was
paid in September of 1995 and totaled $197k.
81
<PAGE> 88
SCHEDULE 2.18
ITEMS POTENTIALLY IMPACTING ESSO SUEZ AFTER JANUARY 1, 1996
o Memo dated May 10, 1996 from Exxon Company, International to potential
bidders for the shares of ESI, including Seagull Energy Corporation,
which provided 1995 financial information on ESI in addition to 1Q96
production data.
o Memo dated May 30, 1996 from ECI to potential bidders for the shares of
ESI, including Seagull Energy Corporation, which provided April 1996
production figures and a report summarizing recent workover activities
and early results.
o Memo dated June 3, 1996 from ECI to potential bidders for the shares of
ESI, including Seagull Energy Corporation, regarding initial well test
results from A-13 following a workover.
o Information as provided in Schedules 2.9 and 2.13 of this Stock
Purchase Agreement.
o Operational activities related to the conduct of business, including:
- Sharing in cost of re-paving of major access road to East Zeit
(potential exposure estimated at ~ $50K for ESI). Esso has
been asked by SUCO, who will organize and do the work, to
participate with other users to repair the East Zeit major
access road. The road, which is private, was damaged heavily
in several areas due to torrential rains in 1995. Esso is
expecting to receive a proposed cost sharing agreement and it
is reported that all of the other companies involved have
already agreed to proceed. The sharing basis is 1994/95
actual production. Costs will be recoverable.
- Repair of East Zeit platform damage. On September 24, 1995, a
workboat named the Baraka II damaged the northwest boat
fender. The workboat owned by the Suez Canal Authority was
under charter by Esso Suez at the time. An independent
surveyor appointed to investigate concluded that the incident
was the result of "an error in judgment by the vessel's
master." ESI has advised the Suez Canal Authority that they
will be expected to cover the actual cost of repairs to the
platform. The current estimate of repair costs is $163k, and a
claim is being prepared to submit to the Suez Canal Authority.
At this point we have no indication that the Suez Canal
Authority will fail to pay the amount claimed.
82
<PAGE> 89
SCHEDULE 8.5 - SELLER'S PROPRIETARY MATERIAL
All proprietary material of Seller (and/or its other Affiliates)
including but not limited to classified manuals, textbooks, studies, and
documents; PC programs/software guides; procedure letters, guidelines,
policy, operation system, U.S. Export and Administration Regulations,
Management Control Basic Standards, Accounting Code, Authority Code,
Authority Tables, Video Tapes, Performance Appraisal forms, Financial
data, Financial system, proprietary software used in exploration and
production, financial, planning and reporting procedures documentation,
Exxon Business Control Analysis Process, Procedure on
Confidentiality/Securities Trade, Exxon Emergency Response Plan.
83
<PAGE> 90
SCHEDULE 8.6 - LICENSE OF DATA TO SELLER
o All data, interpretations, reports, or other documents acquired or
generated for the account of Seller or its Affiliates during the course
of operations under applicable contracts, and transferred to Seller or
any of its Affiliates including but not limited to paper seismic sections
and interpretations, geological and geophysical maps and reports and
engineering data and reports.
84
<PAGE> 1
EXHIBIT 2.2
PURCHASE AND SALE AGREEMENT
BETWEEN
ESSO EGYPT LIMITED
AND
SEAGULL ENERGY CORPORATION
DATED July 22, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Subject Page
- ------- ------- ----
<S> <C> <C>
I The Purchase and Sale 1
1.1 Purchase and Sale of Assets 1
1.2 Purchase Price and Payment 2
1.3 Purchase Price Reduction 2
1.4 Payment of Taxes and Other Charges 3
1.5 Assumption of Obligations 3
1.6 Second Extension to the Exploration Period 3
II Representation and Warranties of Seller 3
2.1 Concession in Good Standing 4
2.2 Authorization of Agreement 4
2.3 No Conflicts 4
2.4 Consents 4
2.5 Schedule of Assets to be Sold 5
2.6 No Material Adverse Change 5
2.7 Patents, Trademarks and Copyrights 5
2.8 Permits 5
2.9 Commitments 5
2.10 Litigation/Audit/Investigation 6
2.11 Title to Properties, Absence of Encumbrances 6
2.12 Employees 6
2.13 Environmental Matters 7
2.14 Regulatory Compliance 7
2.15 Recoverable Costs 7
2.16 Brokerage; Payments 7
2.17 Inventory 8
2.18 Wells 8
2.19 Concession-Basis Financial Statements 8
2.20 Organization and Good Standing 8
2.21 Period of Validity 8
III Representations, Warranties and Acknowledgments of
Purchaser 9
3.1 Organization and Good Standing 9
3.2 Authorization of Agreement 9
3.3 No Conflicts 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.4 Brokerages/Payments 9
3.5 Consents 9
3.6 No Lawsuits 10
3.7 Investment Representation 10
3.8 Financing 10
3.9 Acknowledgments 10
3.10 Material Factor 12
3.11 Continuing Validity 12
3.12 Use of Seller's Name 12
IV Covenants of Seller 12
4.1 Access to Documents; Opportunity to Ask Questions 13
4.2 Maintain the Assets 13
4.3 Conduct of Seller Prior to Closing 13
4.4 Conditions Precedent 13
4.5 Environmental Audit 14
V Covenants of Purchaser 14
5.1 Conditions Precedent 14
5.2 Confidentiality 14
VI Conditions Precedent to Closing 15
6.1 Conditions Precedent to Purchaser's Obligation 15
6.2 Conditions Precedent to Seller's Obligation 16
6.3 Expedited Arbitration for Claim of Pre-Closing
Material Breach 18
VII Closing; Termination of Agreement 19
7.1 Closing 19
7.2 Termination 20
VIII Deliveries at Closing and Actions to be Taken at or
Subsequent to Closing 20
8.1 Deliveries at Closing 20
8.2 Actions to be Taken at or Subsequent to Closing 21
8.3 Removal of Seller's Name 21
8.4 Return of Seller's Proprietary Materials 22
8.5 Confidential Information 22
8.6 Certain Litigation and Claims 23
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
IX Insurance, Indemnification and Related Matters 24
9.1 Insurance 24
9.2 Indemnification 25
9.3 Seller Deductible 26
9.4 Survival of Indemnity Obligations 26
9.5 Notice of Indemnification 26
9.6 Indemnification Procedure for Third-Party Claims 26
9.7 Definitions 27
9.8 No Brokers 27
9.9 Inducement to Seller 28
X General 28
10.1 Specific Performance 28
10.2 Notices 28
10.3 Amendments 29
10.4 Entire Agreement 29
10.5 Successors and Assigns 30
10.6 Headings 30
10.7 Applicable Law; Arbitration; Submission to Jurisdiction;
Consent to Service of Process 30
10.8 Expenses 31
10.9 Severability 31
10.10 Public Announcements 31
10.11 Counterparts 32
10.12 Books and Records; Personnel 32
10.13 No Admission 32
10.14 Interaffiliate Agreements 33
10.15 No Third-Party Beneficiaries 33
10.16 Schedules 33
10.17 Includes 33
10.18 Not to be Construed Against Draftor 33
10.19 Execution by the Parties 33
XI Definitions 34
11.1 Affiliate 34
11.2 Assets 34
11.3 Authorizations 34
11.4 Basket Losses 34
11.5 Business Day 34
11.6 Claims 34
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
11.7 Closing 34
11.8 Closing Date 34
11.9 Closing Site 34
11.10 Concession 34
11.11 Confidential EEL Information/Confidential Affiliate Information 34
11.12 Disclosure Schedule 34
11.13 EEL 34
11.14 Effective Date 34
11.15 EGPC 34
11.16 EOIC 34
11.17 EOIC Letter 34
11.18 Inventory 35
11.19 Letter of Credit 35
11.20 Liabilities 35
11.21 Purchaser 35
11.22 Schedule of Assets to be Sold 35
11.23 Seller 35
11.24 Right of Defense 35
11.25 U. S. $ 35
</TABLE>
Attachments -
Disclosure Schedule
Attachment A - Schedule of Assets to be Sold
Attachment B - Data Inventory and Other Information
Attachment C - Deed of Assignment
Attachment D - EOIC Letter
Attachment E - Irrevocable Letter of Credit
<PAGE> 6
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is entered into by and between ESSO
EGYPT LIMITED, a Bahamian corporation ("Seller"), and SEAGULL ENERGY
CORPORATION, a Texas corporation ("Purchaser"), and is effective on the
Effective Date.
W I T N E S S E T H:
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser wishes to
purchase from Seller Seller's assets and assume certain obligations related to
the "Concession Agreement for Petroleum Exploration and Exploitation between
The Arab Republic of Egypt and The Egyptian General Petroleum Corporation and
Esso Egypt Limited in South Hurghada Onshore Area" dated July 27, 1991 and
issued by Egyptian Law No. 208.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements hereinafter contained, the parties hereto
agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 PURCHASE AND SALE OF ASSETS
Subject to the terms and conditions set forth in this Agreement,
Seller hereby agrees to sell, assign and transfer to Purchaser, and Purchaser
hereby agrees to purchase and accept assignment and transfer from Seller, on
the Closing Date, the following assets:
(a) the Concession, including recovery of all past costs
recoverable as described in Articles IV(f) and VII and the Accounting Procedure
of the Concession ("Recoverable Costs");
(b) various machinery, equipment, tubulars, and other tangible
property referred to in the Schedule of Assets to be Sold contained in the
Disclosure Schedule ("Inventory");
(c) permits and licenses related to the Concession; and
(d) the Contracts (as defined in Section 2.9 below).
Specifically excluded from the Assets are cash, cash deposits (other
than leasehold deposits), other cash equivalent investments, insurance policies
and security bonds.
If within two (2) years after the Closing Date Purchaser shall be
advised by an applicable governmental authority or reasonably consider that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in Purchaser (or its assignee), its right, title or interest in, to
or
1
<PAGE> 7
under any of the Assets, Seller or its successor (as appropriate) shall execute
and deliver all such deeds, bills of sale, assignments and assurances and do
all such other acts and things reasonably necessary, desirable or proper to
vest, perfect or confirm Purchaser's (or its assignee's) right, title or
interest in, to or under any of the Assets.
1.2 PURCHASE PRICE AND PAYMENT
(a) Purchaser shall pay to Seller a total aggregate price of Four
Million Five Hundred Thousand United States Dollars (U.S. $4,500,000.00), less
any purchase price reduction in accordance with Section 1.3 below, on the
Closing Date. Purchaser's payment shall be effected by providing to Seller an
irrevocable letter of credit ("Letter of Credit") in the form of Attachment E
hereto.
1.3 PURCHASE PRICE REDUCTION
(a) If within sixty (60) days after the Effective Date Purchaser
discovers that:
(i) Seller does not possess all Authorizations (as
defined in Section 2.13(a)) or is in violation of the terms of any
Authorizations or any Egyptian laws or regulations relating to pollution
control or the protection of the environment or (ii) there is any liability of
Seller to any non-governmental third party in tort or otherwise in connection
with any release of any hazardous substances, solid wastes, petroleum,
petroleum products, or oil and gas exploration and production wastes into the
environment as a result of or with respect to Seller's operation of the
Concession;
then, to the extent that any such matter does not breach a representation or
warranty of Seller set forth in Article II and Purchaser provides Seller (A) a
preliminary, summary notice as soon as practicable and (B) a complete,
follow-up notice within ten (10) days of its discovery, the purchase price will
be reduced by an amount representing the reduction in the value of the
Concession attributable to the matter as mutually agreed by Purchaser and
Seller for each matter that satisfies the foregoing conditions. Purchaser's
follow-up notice must specifically identify and provide specific descriptions
and evidence of the matter and its associated reduction in value.
(b) If the parties cannot agree, after negotiating in good faith
for a period of ten (10) days, (i) that a particular matter satisfies the
conditions of Paragraph (a) above or (ii) on the amount by which the purchase
price will be reduced for a particular matter, then such dispute shall be
referred to a single commercial arbitrator in Houston, Texas, who shall be
appointed within five (5) business days but otherwise in accordance with (and
such arbitration shall be conducted in accordance with) the provisions of
Section 10.7.
(c) Notwithstanding the foregoing provisions of this Section 1.3,
there shall be no purchase price reduction for any matter for which the
associated reduction in the value of the Concession, as mutually agreed or
determined by arbitration, is less than U. S. $50,000.00 and furthermore, in
lieu of any purchase price reduction, Seller may elect to promptly and
reasonably remedy the relevant matter before Closing, or, if the aggregate
resulting reduction for all matters
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under this provision and the similar provision contained in Section 4 of Annex
A of that certain Stock Purchase Agreement by and between Exxon Corporation and
Purchaser dated July 22, 1996 (the "Stock Purchase Agreement") would exceed U.
S. $7,500,000.00, Seller may elect to terminate this Agreement.
1.4 PAYMENT OF TAXES AND OTHER CHARGES
Purchaser shall pay, on the Closing Date or, if due thereafter
promptly when due, all transfer taxes, sales taxes, stamp taxes, and any other
taxes (other than income taxes payable by Seller) payable in connection with
the transactions contemplated hereby up to a maximum of U. S. $50,000. Seller
and Purchaser shall mutually agree to the appropriate allocation between the
parties of any such taxes in excess of U. S. $50,000; provided that in no event
shall Purchaser be required to pay any such taxes in an amount in excess of U.
S. $100,000.
1.5 ASSUMPTION OF OBLIGATIONS
Effective the Closing Date, Purchaser shall assume and thereafter pay,
perform or discharge, all of the obligations and liabilities relating to the
Assets, including but not limited to those described in the Disclosure Schedule
and the obligation described in Section 1.6 below. Notwithstanding the
foregoing sentence, Purchaser shall have no obligation to assume, pay, perform
or discharge the matters set forth in Section 2.10 (i) and (ii)of the
Disclosure Schedule and in Sections 2.12, 2.16, 8.6, 9.2(b) and 9.8 of this
Agreement.
1.6 SECOND EXTENSION TO THE EXPLORATION PERIOD
Purchaser has requested Seller to enter into the second extension to
the exploration period. In accordance with Article III(b) of the Concession,
Seller submitted such notice of intent to enter the second extension period to
EGPC on June 26, 1996. When Seller further advises EGPC of the
corner-coordinates and map identifying the areas to be retained and the areas
to be relinquished in accordance with Article V(a) of the Concession, Seller
will use the corner- coordinates and map as provided by Purchaser with its bid
transmittal letter dated June 6, 1996. If Closing does occur, Purchaser
assumes responsibility for the costs of entering into the second extension
period, including but not limited to the cost associated with and obligation
to drill an additional qualifying exploration well under the Concession.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
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2.1 CONCESSION IN GOOD STANDING
The Concession was duly executed by each of the parties thereto and
constitutes a legal, valid and binding Agreement. Seller has provided a true
and complete copy of the Concession to Purchaser. To Seller's knowledge, the
Concession is enforceable against the parties thereto in accordance with its
terms. Except as set forth in Section 1.6 above and in the Disclosure
Schedule: all obligations required to be performed to date by Seller under the
terms of the Concession have been performed, and no act or omission has
occurred or failed to occur which, with the giving of notice, the lapse of time
or both would constitute a default by Seller under the Concession; except to
the extent that the failure of any representation within this Section 2.1 would
not have a material adverse effect on the Concession or Assets.
2.2 AUTHORIZATION OF AGREEMENT
The execution and delivery of this Agreement and the consummation of
the transaction contemplated hereby have been duly authorized by the necessary
corporate action of Seller. This Agreement has been duly executed and
delivered by Seller and constitutes the legal, valid, and binding obligation of
Seller, enforceable against it in accordance with its terms.
2.3 NO CONFLICTS
Subject to the terms and conditions of this Agreement, and except as
set forth in Section 2.4 below, the execution, delivery and performance by
Seller of this Agreement and the consummation of the transaction contemplated
hereby do not and will not (a) conflict with the Memorandum and Articles of
Association of Seller, (b) violate any provision of any law, rule or regulation
applicable to Seller, (c) violate any order, judgment or decree applicable to
Seller, (d) except as may otherwise be provided for under this Agreement,
result in the creation of any lien, charge or encumbrance upon the Assets;
except, in the case of clauses (b), (c), and (d), violations that in the
aggregate would not materially hinder or impair the transaction contemplated
hereby and would not have a material adverse effect on the Concession or the
Assets.
2.4 CONSENTS
Pursuant to Article XX of the Concession Seller may not assign its
rights in the Concession without the written consent of the Government of the
Arab Republic of Egypt. Such approval may require Purchaser to post a bond or
letter of credit satisfactory to the Government. No other consent, approval,
or authorization of, or designation, declaration, or filing with, any
governmental authority or other third party is required on the part of Seller
in connection with Seller's execution, delivery, and performance of this
Agreement, except to the extent failure to obtain such consents, approvals, or
authorizations would not materially hinder or impair the transaction
contemplated hereby and would not have a material adverse effect on the
Concession, Assets, or financial condition of the Concession.
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2.5 SCHEDULE OF ASSETS TO BE SOLD
Seller has delivered to Purchaser an unaudited Schedule of Assets to
be Sold of the Concession, a copy of which is included in Sections 1.1(b) and
2.5 of the Disclosure Schedule. The amounts shown in the Schedule of Assets to
be Sold have been determined by generally accepted accounting principles
consistently applied, except as noted on the Schedule of Assets to be Sold.
2.6 NO MATERIAL ADVERSE CHANGE
Except as set forth in Section 2.6 of the Disclosure Schedule, there
has been no material adverse change in the Concession or the Assets (including
any liabilities associated therewith) since March 1, 1996, it being understood
that no representation or warranty is made hereby concerning general economic
conditions, the condition of the local or international oil and gas industry
generally, the potential impact on the Concession of actions that have been or
may be taken by competitors or governmental agencies (other than actions
related solely to the Concession or the Assets), or any other condition,
occurrence or other state of affairs not directly relating to the Assets, the
Concession or any liabilities associated therewith.
2.7 PATENTS, TRADEMARKS AND COPYRIGHTS
Technical assistance necessary to conduct the Concession has been
provided by Affiliates of Seller. After Closing no such assistance will be
provided. No patents, trademarks, trade names and/or copyrights will be
transferred to Purchaser.
2.8 PERMITS
Seller has all necessary permits, licenses, and governmental
authorizations required for holding the Assets and the carrying on of the
Concession, except where the failure to have any such permit, license or
governmental authorization would not have a material, adverse effect upon the
Concession, Assets or financial condition of the Concession. Those permits,
licenses and authorizations are described in the Disclosure Schedule.
2.9 COMMITMENTS
The Disclosure Schedule contains a complete listing of every contract
or agreement relating to the exploration for, or production or transportation
of oil or gas reserves or the creation of any joint venture for such purpose
and all other contracts that will be transferred to Purchaser at Closing (the
"Contracts"). A complete and correct copy of each of the Contracts has been
furnished or made available to Purchaser. Except as disclosed herein or in the
Disclosure Schedule hereto, Seller is not a party to any non-compete or similar
agreement which in any way restricts the operation of the Concession.
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2.10 LITIGATION/AUDIT/INVESTIGATION
Except as set forth in Section 2.10 of the Disclosure Schedule there
is no filed claim, action, lawsuit, proceeding or investigation pending or, to
the knowledge of Seller, claim, action, lawsuit, proceeding, or investigation
threatened in writing which might question the validity or propriety of this
Agreement or the consummation of the transaction contemplated hereby or have a
material, adverse effect on the Concession or the Assets. It is understood
that some or all of the litigation listed in the Disclosure Schedule will not
have a material, adverse effect on the Concession or the Assets and such
litigation is being listed for information and for purposes of Section 8.6
below. There is no outstanding order, injunction or decree of any court or
governmental agency against or naming Seller materially affecting the
Concession or the Assets, except as disclosed in Section 2.10 of the Disclosure
Schedule. Seller has not received notice of any pending or threatened (in
writing) condemnation, taking or similar proceeding affecting any material
assets owned or used by Seller.
2.11 TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES
Subject to the provisions of Article VIII of the Concession, Seller
has good and defensible title to the material properties (real and personal)
and assets reflected on the Schedule of Assets to be Sold or reflected on the
Disclosure Schedule, free and clear of any and all liens, mortgages, pledges,
security interests, restrictions, prior assignments, claims and encumbrances of
any kind whatsoever, except (i) as set forth in Section 2.11 of the Disclosure
Schedule, (ii) for minor imperfections of title, if any, as are not substantial
in character, amount or extent, and do not materially detract from the value or
interfere with the use of the properties for the purposes for which they are
presently used or otherwise materially impair business operations, (iii) liens
for Taxes and general and special assessments not in default and payable
without penalty or interest, (iv) liens created by or arising under contracts
for the sale, purchase, exchange or processing of hydrocarbons, (v) liens
created by or arising under any operating agreement, pipeline, gathering or
transportation agreement or other agreement pursuant to which the Seller are
otherwise subject, (vi) easements, rights-of-way, servitudes, permits, surface
leases and other conditions, covenants, restrictions or rights in respect of
surface operations, timber leases, pipelines, roads, highways, railways, power
lines, grazing, logging, canals, ditches, and the like on, over, or in respect
of any of the lands covered by the Concession, and (vii) rights reserved to or
vested in any municipality, governmental, tribal, statutory or public authority
to control or regulate the Seller in any manner and all applicable laws, rules
and orders of any such authority (collectively, "Permitted Liens").
2.12 EMPLOYEES
Section 2.12 of the Disclosure Schedule provides the name and position
of all current Seller employees. Each such employee is employed under separate
contract. Seller intends to terminate its employees and encourages Buyer to
employ as many of them as possible. Seller shall retain responsibility for and
pay expenses resulting from Seller's termination of its employees.
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2.13 ENVIRONMENTAL MATTERS
(a) To Seller's knowledge, except as set forth in Section 2.13 of
the Disclosure Schedule, Seller has all material permits, licenses and other
authorizations required under applicable Egyptian laws and regulations relating
to pollution control or protection of the environment necessary for the
operation of the Concession (collectively, "Authorizations").
(b) Seller is not in violation of (i) any of the terms or
conditions of any such Authorizations or (ii) any Egyptian laws or regulations
relating to pollution control or the protection of the environment that would
result in a material, adverse effect on the Concession or the Assets.
2.14 REGULATORY COMPLIANCE
Seller is in compliance with all applicable permits, licenses,
authorizations, laws, rules, regulations, ordinances, orders and requirements
of all governmental units or political subdivisions or any agency, authority,
body, board, commission, court, instrumentality, legislature or office thereof
or created thereby having jurisdiction over Seller, the Assets, or the
Concession, except for such failures to comply which could not reasonably be
expected to have a material, adverse effect on the Concession or the Assets.
2.15 RECOVERABLE COSTS
As of March 31, 1996, EEL had incurred cost recovery balances in the
following categories (amounts are provided in U.S. $1,000 rounded to the
nearest U. S. $1,000):
(a) Total Claimed U.S. $18,406
(b) Approved U.S. $14,101
(c) Reclassified as Nonrecoverable U.S. $207
(d) Awaiting Audit U.S. $949
(e) Pending Resolution After Initial Audit U.S. $3,149
2.16 BROKERAGES; PAYMENTS
Seller has not made, or committed to make, any payments in the form of
(a) consulting or other fees in violation of any statute, regulation or policy
applicable to Seller; (b) commissions; or (c) brokers' or finders' fees.
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2.17 INVENTORY
The Inventory is in reasonable working condition, except for: (i)
conditions that would not reasonably be expected to have a material, adverse
effect on the Concession or the Assets, or (ii) ordinary wear and tear and
serviceable defects incurred within the ordinary course of business.
2.18 WELLS
All wells drilled by or on behalf of Seller pursuant to the Concession
have been (a) drilled, (b) if completed, completed, (c) if operated, operated,
and (d) if not completed, or completed and later abandoned, plugged and
abandoned or temporarily abandoned in accordance with good oil and gas field
practices and in compliance in all respects with the Concession Agreement and
applicable Egyptian laws, rules, and regulations, except where any failure or
violation would not have a material, adverse effect on the Concession, the
Assets, or the financial condition of the Concession.
2.19 CONCESSION-BASIS FINANCIAL STATEMENTS
Seller has delivered to Purchaser a copy of the audited
Concession-basis Financial Statements and Tax Return of EEL branch office as of
December 31, 1995, certified by Afifi H. Shahani (affiliated with Price
Waterhouse), independent certified accountants. These statements have been
prepared in accordance with the provisions of the Concession.
2.20 ORGANIZATION AND GOOD STANDING
Seller is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has full
corporate power and authority to own its assets and carry on its business as it
is now being conducted.
2.21 PERIOD OF VALIDITY
The representations, warranties, and acknowledgments in favor of
Purchaser contained in this Article II shall be valid up to and at the Closing
Date after which all of Seller's warranties, acknowledgments, and
representations shall expire and be merged into the Closing and Purchaser shall
not be entitled to commence any action or proceeding for breach of this Article
II. Notwithstanding the immediately foregoing sentence, however, Seller's
representations and warranties set forth in Sections 2.1, 2.2 and 2.10, and
shall survive the Closing solely for the purposes of Section 9.2(b)(i) for the
same period set forth in Section 9.4(b), without regard to any investigation by
the Purchaser with respect thereto.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION AND GOOD STANDING
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and has full corporate
power and authority to own its assets and carry on its business as it is now
being conducted.
3.2. AUTHORIZATION OF AGREEMENT
Purchaser has the corporate power and authority to enter into this
Agreement. The execution and delivery of this Agreement and the consummation
of the transaction contemplated hereby have been duly authorized by the
necessary corporate action of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms.
3.3. NO CONFLICTS
The execution, delivery, and performance by Purchaser of this
Agreement and the consummation of the transaction contemplated hereby do not
and will not (with the giving of notice or the passage of time or both) (a)
conflict with the Certificate of Incorporation or By-Laws of Purchaser, (b)
subject to the consent described in Section 2.4, violate any provision of any
law, rule or regulation applicable to Purchaser, (c) violate any order,
judgment or decree applicable to Purchaser, or (d) conflict with, or result in
a breach or default under, any agreement or other instrument to which Purchaser
is a party or by which it may be bound; except, in the case of clauses (b), (c)
and (d) of this Section 3.3, violations that in the aggregate would not
materially hinder or impair the transaction contemplated hereby.
3.4 BROKERAGES/PAYMENTS
Purchaser has not made, or committed to make, in connection with the
transaction contemplated by this Agreement, any payments in the form of (a)
consulting or other fees in violation of any statute, regulation or policy
applicable to Purchaser; (b) commissions; or (c) brokers' or finders' fees.
3.5 CONSENTS
Except for the consent described in Section 2.4, no consent, approval
or authorization of, or designation, declaration or filing with, any
governmental authority or other third party is required on the part of
Purchaser in connection with Purchaser's execution, delivery and
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performance of this Agreement, except to the extent failure to have such
consents, approvals, or authorizations would not materially hinder or impair
the transaction contemplated hereby.
3.6 NO LAWSUITS
There is no lawsuit, proceeding or investigation pending or, to the
knowledge of Purchaser, threatened against Purchaser which might question the
validity or propriety of this Agreement or the consummation of the transaction
contemplated hereby.
3.7 INVESTMENT REPRESENTATION
Purchaser possesses such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment hereunder.
3.8 FINANCING
Purchaser now has and, on Closing, will have sufficient funds
available to pay the Purchase Price.
3.9 ACKNOWLEDGMENTS
(a) EXCEPT AS AND TO THE EXTENT SET FORTH IN ARTICLE II HEREOF,
PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, AND EXCEPT AS AND TO THE EXTENT SET FORTH IN ARTICLES II
AND IX HEREOF SELLER DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE OR COMMUNICATED
(ORALLY OR IN WRITING) TO PURCHASER OR TO ANY STOCKHOLDER, DIRECTOR, OFFICER,
EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF PURCHASER (INCLUDING, BUT NOT
LIMITED TO, ANY OPINION, INFORMATION, OR ADVICE WHICH MAY HAVE BEEN PROVIDED TO
PURCHASER BY ANY STOCKHOLDER, DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT
(INCLUDING, BUT NOT LIMITED TO, EXXON EXPLORATION COMPANY A DIVISION OF EXXON
CORPORATION AND ITS AFFILIATES) OR REPRESENTATIVE OF SELLER, INCLUDING, WITHOUT
LIMITATION, ALL OF THE INFORMATION CONTAINED IN THE OFFERING SUMMARY DELIVERED
TO PURCHASER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER, ITS STOCKHOLDERS, DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, CONSULTANTS (INCLUDING, BUT NOT LIMITED TO, EXXON
EXPLORATION COMPANY A DIVISION OF EXXON CORPORATION, AND ITS AFFILIATES) OR
OTHER REPRESENTATIVES OF SELLER MAKE NO REPRESENTATIONS OR WARRANTIES AS TO (I)
THE AMOUNT OF PETROLEUM, GAS, CONDENSATE, OR OTHER RESERVES ATTRIBUTABLE TO ANY
PROPERTIES THAT THE SELLER HAVE AN INTEREST IN, OR (II) ANY GEOLOGICAL,
GEOPHYSICAL, ENGINEERING, ECONOMIC, OR OTHER INTERPRETATIONS,
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FORECASTS, OR EVALUATIONS, OR (III) THE CONDITION OR PRODUCIBILITY OF
RESERVOIRS.
(b) PURCHASER ACKNOWLEDGES AND AGREES THAT IT:
(1) HAS THE EXPERIENCE AND KNOWLEDGE TO EVALUATE THE
BUSINESS, ASSETS, LIABILITIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND
PROSPECTS OF THE SELLER AND THE INHERENT RISKS ASSOCIATED THEREWITH;
(2) HAS HAD ACCESS TO THE ROOMS ESTABLISHED IN FLORHAM
PARK, NEW JERSEY IN WHICH CERTAIN MATERIALS RELATING TO THE ASSETS, ASSUMED
LIABILITIES AND THE CONCESSION HAVE BEEN PLACED AND MADE AVAILABLE TO
PROSPECTIVE PURCHASERS OF THE ASSETS (THE "DATA ROOMS") AND THE INFORMATION
CONTAINED IN, OR MADE AVAILABLE OR PROVIDED WITH RESPECT TO MATERIALS CONTAINED
IN, THE OFFERING SUMMARY AND HAS HAD ACCESS TO SUCH OF THE INFORMATION AND
DOCUMENTS REFERRED TO IN ARTICLE II;
(3) IN DETERMINING TO ENTER INTO THIS AGREEMENT,
PURCHASER HAS MADE ITS OWN INVESTIGATION, ANALYSIS, AND EVALUATION OF, AND
BASED THEREON PURCHASER HAS FORMED AN INDEPENDENT JUDGMENT CONCERNING SELLER,
AND THE ASSETS AND ASSUMED LIABILITIES (INCLUDING ITS OWN ESTIMATE AND
APPRAISAL OF THE EXTENT AND VALUE OF THEIR INTERESTS IN THE PETROLEUM AND GAS
RESERVES), LIABILITIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND
PROSPECTS AND THE INHERENT RISKS ASSOCIATED THEREWITH.
(c) PURCHASER EXPRESSLY UNDERSTANDS AND AGREES THAT, EXCEPT AS
OTHERWISE PROVIDED IN ARTICLE II AND IX OF THIS AGREEMENT, PURCHASER ACCEPTS
THE CONDITION OF THE ASSETS "AS IS, WHERE IS" AND WITHOUT ANY REPRESENTATION,
WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED , AS TO MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR OTHERWISE, AS TO THE CONDITION, SIZE, EXTENT, QUANTITY,
TYPE OR VALUE OF THE CONCESSION OR THE ASSETS. EXCEPT AS OTHERWISE PROVIDED IN
ARTICLE IX, PURCHASER RELEASES SELLER, AND ITS AFFILIATES FROM ALL COSTS,
CLAIMS, LOSSES, LIABILITIES, AND DAMAGES WITH RESPECT TO THE ASSETS WHETHER
CAUSED BY OR ATTRIBUTABLE TO THE NEGLIGENCE OF SELLER AND WHETHER ARISING FROM
SELLER'S OWNERSHIP OR OPERATION OF THE ASSETS OR OTHERWISE. WITHOUT LIMITING
THE PRECEDING SENTENCE, AND EXCEPT AS OTHERWISE PROVIDED IN ARTICLE IX,
PURCHASER WAIVES ITS RIGHT TO RECOVER FROM SELLER AND WILL HOLD SELLER AND ITS
AFFILIATES HARMLESS FROM ALL CLAIMS AND LIABILITIES, WHETHER DIRECT OR
INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THAT MAY ARISE
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ON ACCOUNT OF OR BE CONNECTED WITH THE PHYSICAL CONDITION OF THE ASSETS.
(d) SELLER MAKES NO WARRANTY AND EXPRESSLY DISCLAIMS ALL
WARRANTIES AS TO THE ACCURACY AND COMPLETENESS OF THE FILES AND OTHER
INFORMATION THAT IT MAY PROVIDE PURCHASER, (EXCEPT FOR STATEMENTS MADE IN
ARTICLE II). If Purchaser determines during its review that any files or data
may be incomplete or inaccurate, it will either notify Seller of its
conclusions specifically and in writing not later than ten (10) days before the
Closing or be deemed to have waived all complaints as to the incompleteness or
inaccuracy of the files or data. For two (2) years following Closing, however,
to the extent that Seller possesses information or data that was missing from
the files of EEL to be transferred to Purchaser as listed in Attachment B of
the Disclosure Schedule (but would properly have been included in such files in
the ordinary course of EEL's business) at Closing, Seller shall provide such
information or data to Purchaser if such information or data can be so provided
at minimal cost and burden to Seller, such information or data is not
"Confidential Affiliate Information" (as defined in Section 8.5 below), and
Purchaser reimburses Seller for the cost of providing such information or data
to Purchaser.
3.10 MATERIAL FACTOR
Purchaser acknowledges that its representations, warranties, and
acknowledgments in this Agreement are a material inducement to Seller to enter
into this Agreement and close the sale to Purchaser.
3.11 CONTINUING VALIDITY
The representations and warranties in favor of Seller contained in
this Article III shall survive Closing.
3.12 USE OF SELLER'S NAME
Except as provided for in Section 8.3 hereof or as is otherwise
necessary for the completion of the transaction contemplated by this Agreement
or to comply with the terms of the Concession (in either of which cases
Purchaser will use all reasonable efforts to remove such necessity) Purchaser
agrees that it will not use or operate under the trade names "Esso Egypt
Limited," "EEL," "Exxon," or "Esso," or use any trademarks or service marks
associated with or confusingly similar to "Esso Egypt Limited," "EEL," "Exxon,"
or "Esso."
ARTICLE IV
COVENANTS OF SELLER
From and after the date hereof and until Closing, Seller hereby covenants and
agrees that:
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4.1 ACCESS TO DOCUMENTS; OPPORTUNITY TO ASK QUESTIONS
Seller shall make available for inspection by Purchaser or its
representatives, during normal business hours and upon reasonable prior written
request, Seller's corporate records, books of account, contracts, and all other
documents reasonably requested by Purchaser, its managerial, geological and
geophysical employees, counsel, and auditors in order to permit Purchaser and
such representatives to make reasonable inspection and examination of the
Assets of Seller. Seller shall further cause its managerial, geological and
geophysical employees, counsel and regular independent certified public
accountants to be available upon reasonable notice to answer questions of
Purchaser's representatives concerning the Assets of Seller, and shall further
cause them to make available all relevant books and records in connection with
such inspection and examination.
4.2 MAINTAIN THE ASSETS
Subject to Section 1.6 Seller shall maintain the Assets up to the
Closing Date, but shall in any event inform Purchaser of any losses or
additions.
4.3 CONDUCT OF SELLER PRIOR TO CLOSING
Except as expressly contemplated by this Agreement or otherwise
consented to in writing by Purchaser, from and after the Effective Date and
until the Closing Seller hereby covenants and agrees that:
(a) Seller shall conduct its operations with respect to the
Concession in the ordinary course of business and shall use reasonable efforts
to maintain, preserve and protect the Concession and the Assets;
(b) Seller shall not sell, lease, license or otherwise surrender,
relinquish or dispose of any of the Assets;
(c) Seller shall not agree or commit to do any of the actions
prohibited under Section 4.3(b) above (subject to the exceptions and
qualifications expressed therein); and
(d) Seller shall not (i) take, or agree or commit to take, any
action that would make any representation or warranty of Seller under Article
II hereof inaccurate in any material respect at, or as of any time prior to,
the Closing or (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time.
4.4 CONDITIONS PRECEDENT
Seller shall use reasonable efforts to cause the conditions precedent
to the consummation of the transaction contemplated hereby and set forth in
Article VI hereof, for which Seller is responsible, to be satisfied. Seller
shall also use all reasonable efforts to assist Purchaser in
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obtaining all necessary Egyptian governmental approvals for the transfer of the
Concession to Purchaser.
4.5 ENVIRONMENTAL AUDIT
Seller agrees (to the extent permitted under the Concession) to
promptly have a "Phase I" and/or "Phase II" environmental audit, of a
reasonable scope, conducted by a firm chosen by Purchaser and approved by
Seller (which approval shall not be unreasonably withheld) with respect to the
land and facilities covered by the Concession. Such environmental audit shall
be conducted at the direction and in accordance with the reasonable
instructions of Purchaser, and Seller will make all results of such audit
promptly available to Purchaser. Seller (or the Seller under the Stock
Purchase Agreement) agrees to pay all fees and expenses reasonably incurred in
connection with such environmental audit and the environmental audit
contemplated by Section 4.6 of the Stock Purchase Agreement, up to an
aggregated maximum (total) with respect to this Agreement and the Stock
Purchase Agreement of U. S. $150,000, and Purchaser shall be responsible for
all costs of such environmental audits above such amount. If this Agreement is
terminated, Purchaser agrees to treat all audit-related information, data, and
documents as confidential and never use or disclose them to any other parties,
to provide to Seller all originals of such data and documents, and to provide
to Seller or destroy all copies of such data and documents.
ARTICLE V
COVENANTS OF PURCHASER
From and after the date hereof and until Closing, Purchaser hereby covenants
and agrees that:
5.1 CONDITIONS PRECEDENT
Purchaser shall use its reasonable efforts to cause the conditions
precedent to the consummation of the transaction contemplated hereby to be
satisfied. Purchaser shall also use all reasonable efforts to obtain all
necessary Egyptian governmental approvals for the transfer of the Concession to
Purchaser.
5.2 CONFIDENTIALITY
Purchaser will treat, and will cause its employees, representatives,
consultants and advisors to treat, such documents and information concerning
Seller, furnished to Purchaser and its representatives and agents in connection
with this Agreement confidentially in accordance with the terms and provisions
of that certain Confidentiality Agreement, dated April 3, 1996, between
Purchaser and Seller and in accordance with the specific confidentiality
provisions which are included in any of the agreements to which Seller is a
party and under which Purchaser will assume the rights and obligations of such
agreements.
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ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION
The obligation of Purchaser to consummate the purchase of the Assets
at Closing is subject to the satisfaction (or waiver by Purchaser where
permitted by applicable law) as of the Closing Date or other date mutually
agreed by the parties in writing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the representations and warranties of Seller contained
in Article II hereof shall be true and correct in all material respects as of
the Closing Date with the same force and effect as though the same had been
made on and as of the Closing Date, except (1) for changes therein permitted or
contemplated hereby and (2) to the extent such representations and warranties
were made as of a specified date, in which case each such representation and
warranty shall be true and correct in all material respects as of the date
specified.
(b) COMPLIANCE
Seller shall have performed and complied in all material
respects with the covenants and provisions in this Agreement required herein to
be performed or complied with by Seller between the Effective Date and the
Closing Date.
(c) CERTIFICATES
Purchaser shall have received a certificate to the effect set
forth in Sections 6.1 (a) and (b) hereof, dated the Closing Date, signed by a
duly authorized officer of Seller.
(d) NO PROHIBITION
No action or proceeding shall have been instituted or
threatened or claim or demand made against Purchaser or Seller before any court
or other governmental body, seeking to restrain, delay, or prohibit or to
obtain substantial damages with respect to the consummation of the transaction
contemplated hereby, which in the reasonable opinion of Purchaser makes it
inadvisable to consummate such transaction.
(e) SELLER'S RESOLUTION
Purchaser shall have received a certificate of a duly
authorized officer of Seller, dated the Closing Date, setting forth the
resolutions of the Board of Directors and shareholders of Seller authorizing
the execution and delivery of this Agreement and the consummation of the
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transaction contemplated hereby and certifying that such resolutions were duly
adopted and have not been rescinded or amended as of the Closing Date.
(f) APPROVAL OF TRANSFER OF THE CONCESSION
Seller and Purchaser shall have (i) received written
confirmation from all appropriate Egyptian governmental authorities that such
authorities intend to approve the transfer of the Concession to Purchaser (or
its assignee) and that such approval will not be subject to any conditions
unreasonably burdensome to Seller, or (ii) if, after expending all reasonable
efforts, confirmation of the matter set forth in clause (i) above cannot be
obtained in writing, then receipt of reliable oral or other confirmation of the
matter set forth in clause (i) above.
(g) ACQUISITION OF ESSO SUEZ INC.
All of the conditions to the closing of the transaction
contemplated by the Stock Purchase Agreement shall have been satisfied or
waived and such closing shall occur simultaneously with the Closing.
(h) EIOC LETTER
Purchaser shall have received a letter from Exxon Overseas
Investment Corporation ("EOIC") in the form set forth in Attachment D hereto
("EOIC Letter") signed by a duly authorized officer of EOIC.
6.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION
The obligation of Seller to consummate the sale, transfer and
assignment to Purchaser of the Assets at the Closing Date is subject to the
satisfaction (or waiver by Seller where permitted by applicable law) as of the
Closing Date or other prior date mutually agreed by the parties in writing of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each of the representations and warranties of Purchaser
contained in Article III hereof shall be true and correct in all material
respects as of the Closing Date with the same force and effect as though the
same had been made on and as of the Closing Date, except for changes permitted
or contemplated hereby.
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(b) COMPLIANCE
Purchaser shall have performed and complied in all material
respects with the covenants and provisions in this Agreement required herein to
be performed or complied with by Purchaser between the Effective Date and the
Closing Date.
(c) CERTIFICATES
Seller shall have received a certificate to the effect set
forth in Sections 6.2 (a) and (b) hereof, dated the Closing Date, signed by a
duly authorized officer of Purchaser.
(d) NO PROHIBITION
No action or proceeding shall have been instituted or
threatened or claim or demand made against Purchaser or Seller before any court
or other governmental body, seeking to restrain, prohibit, or enjoin, or to
obtain substantial damages with respect to the consummation of the transaction
contemplated hereby, which in the reasonable opinion of Seller makes it
inadvisable to consummate such transaction.
(e) RESOLUTION
Seller shall have received a certificate of a duly authorized
officer of Purchaser, dated the Closing Date, setting forth the resolution of
the Board of Directors of Purchaser authorizing the execution and delivery of
this Agreement and the consummation of the transaction contemplated hereby, and
certifying that such resolution was duly adopted and has not been rescinded or
amended as of the Closing Date.
(f) APPROVAL OF TRANSFER OF THE CONCESSION
Seller and Purchaser shall have (i) received written
confirmation from all appropriate Egyptian governmental authorities that such
authorities intend to approve the transfer of the Concession to Purchaser (or
its assignee) and that such approval will not be subject to any conditions
unreasonably burdensome to Seller, or (ii) if, after expending all reasonable
efforts, confirmation of the matter set forth in clause (i) above cannot be
obtained in writing, then receipt of reliable oral or other confirmation of the
matter set forth in clause (i) above.
(g) ACQUISITION OF ESSO SUEZ INC.
All of the conditions to the closing of the transaction
contemplated by the Stock Purchase Agreement shall have been satisfied or
waived and such closing shall occur simultaneously with the Closing.
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(h) LICENSE AGREEMENT
The parties shall have executed a license agreement to govern
any unavoidable use by Purchaser of the names referred to in Sections 3.12
and/or 8.3 after the distribution of funds to Seller under the Letter of
Credit. Purchaser shall not owe any fee under such agreement, and such
agreement will be negotiated by the parties in good fath.
6.3 EXPEDITED ARBITRATION FOR CLAIM OF PRE-CLOSING MATERIAL
BREACH
(a) If, prior to the Closing Date, one party ("Claimor") has
served a notice on the other party ("Claimee") stating that it considers that
Claimee is in material breach of a representation or warranty as contained in
Article II or Article III of this Agreement or any provision of any Schedule or
another provision of this Agreement entitling Claimor to terminate this
Agreement and Claimee disputes that Claimor is so entitled, the Parties shall
immediately negotiate in good faith to resolve the dispute. If no such
agreement is reached within seven (7) days of the notice served upon Claimee
(or such longer period as the Parties shall agree), the matter shall be
referred immediately to a single commercial arbitrator in Houston, Texas, who
shall be appointed within forty-eight (48) hours but otherwise in accordance
with the provisions of Section 10.7 hereof. The arbitrator shall be instructed
to determine within twenty-one (21) days of his appointment whether or not the
Claimee is in material breach of the Agreement entitling Claimor to terminate
this Agreement.
(b) Each party shall submit to the arbitrator within seven (7)
Business Days of the appointment of the arbitrator:
(i) a description of the dispute;
(ii) the grounds on which each Party relies in seeking to
have the dispute determined in its favor; and
(iii) all written material which the party proposes to
submit to the arbitrator.
(c) On receipt by the arbitrator of the submissions referred to
above or seven (7) Business Days from his appointment, whichever is the
earlier, the arbitrator shall designate a time and place for a hearing of the
Parties on their dispute, which time shall not be more than fifteen (15) days
after the arbitrator's appointment. The arbitrator shall be instructed to
reach his decision within five (5) Business Days from the date of commencement
of the hearing. The determination of the arbitrator shall be final and binding
on the Parties upon delivery to them of the arbitrator's written determination,
save in the event of fraud or manifest error. All costs arising out of or in
connection with the arbitrator shall be borne by Claimor on the one hand and
Claimee on the other in equal shares or in such other proportions as the
arbitrator may determine to be fair and reasonable.
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(d) If the arbitrator does not render a decision within a period
of twenty-one (21) days from his appointment, for whatever reason, or such
shorter or longer period as the Parties may agree in writing, either Claimor or
Claimee may, upon giving notice to the other, terminate the appointment of the
arbitrator and a new arbitrator shall be appointed who shall resolve the
dispute in accordance with this Section 6.3.
(e) If the arbitrator determines that Claimor is entitled to
terminate this Agreement, such termination shall be without liability to
Claimor, and Claimee shall indemnify Claimor for all its reasonable costs and
expenses relating to the negotiation, preparation, and execution of this
Agreement, excluding all costs of the arbitration conducted pursuant to this
Section 6.3.
(f) In the event that Claimor serves a notice as aforesaid on
Claimee, Closing shall be postponed until after the dispute has been resolved
by the arbitrator and any time periods referred to in Article VII of this
Agreement relating to the timing of Closing shall be frozen until receipt of
the arbitrator's written determination.
(g) If the arbitrator shall determine that Claimee is in breach of
the Agreement but that the breach is not sufficiently material to entitle
Claimor to terminate this Agreement, Claimor shall, after receipt of the
arbitrator's written determination, proceed to Closing in accordance with the
terms of this Agreement, without prejudice to any rights Claimor may have to
seek damages from Claimee for breach of the provisions of this Agreement.
ARTICLE VII
CLOSING; TERMINATION OF AGREEMENT
7.1 CLOSING
(a) The closing hereunder (herein called "Closing") shall take
place at the offices of Purchaser located at Vinson & Elkins L. L. P., 2300
First City Tower, 1001 Fannin, Houston, Texas 77002-6760 ("Closing Site") at
10:00 A.M. (Houston time) on October 2, 1996. Notwithstanding the foregoing
sentence but subject to satisfaction at Closing (unless appropriately waived)
of all of the conditions set forth in Sections 6.1 and 6.2 hereunder, if the
Closing shall not have occurred by October 2, 1996, the Closing shall take
place at 10:00 a.m. (Houston time) at the Closing Site on the third business
day following the first date on which all of the conditions precedent (other
than any conditions precedent that have been appropriately waived on or prior
to such date) set forth in (i) Sections 6.1(d), 6.1(f), 6.2(d) and 6.2(f)
hereunder and Sections 6.1(d), 6.1(f), 6.1(j), 6.2(d), 6.2(f) and 6.2(h) of the
Stock Purchase Agreement shall have been satisfied, and (ii) Sections 6.1(a),
6.1(b), 6.2(a) and 6.2(b) hereunder and Sections 6.1(a), 6.1(b), 6.2(a) and
6.2(b) of the Stock Purchase Agreement could have been satisfied if Closing
were to occur on such date. In lieu of the foregoing provisions of this
Section 7.1(a), the Closing may take place at such other place or at such other
time and date as may be mutually agreed upon in writing by Purchaser and Seller
pursuant to this Section 7.1.
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(b) All proceedings to be taken and all documents to be executed
and delivered by all Parties at Closing shall be deemed to have been taken and
executed simultaneously and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
7.2 TERMINATION
(a) Anything in this Agreement to the contrary notwithstanding,
this Agreement and the transaction contemplated hereby may be terminated in any
of the following ways at any time prior to Closing:
(i) By mutual written consent of Purchaser and Seller; or
(ii) By Seller in writing pursuant to Section 1.3; or
(iii) By either Purchaser or Seller in writing (provided
that such terminating party is not otherwise in material breach of any
obligation under this Agreement) if the Closing has not occurred for any reason
(including, without limitation, failure of a condition to Closing) on or before
December 20, 1996.
(b) Termination of this Agreement pursuant to this Section 7.2
shall terminate all obligations of the Parties hereunder, except for the
obligations set forth in Sections 5.2, 4.5 and 10.8 hereof, provided, however,
that (i) termination pursuant to Section 7.2 (a) (iii) hereof shall not relieve
a defaulting or breaching party from any liability to the other party and (ii)
if Seller has deliberately caused matters to arise to enable it to terminate
this Agreement under Section 7.2(a)(ii), termination under Section 7.2(a)(ii)
shall not relieve a defaulting or breaching party from any liability to the
other party
ARTICLE VIII
DELIVERIES AT CLOSING AND ACTIONS TO BE TAKEN AT OR SUBSEQUENT TO CLOSING
8.1 DELIVERIES AT CLOSING
(a) BY SELLER
At Closing, Seller shall deliver, or shall cause to be
delivered, to Purchaser the following:
(i) The certificate signed by Seller as referred to in
Section 6.1 (c) hereof.
(ii) The certified resolutions of the Board of Directors
and shareholders of Seller referred to in Section 6.1 (e) hereof.
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(iii) The EOIC Letter.
(b) BY PURCHASER
At Closing, Purchaser shall deliver to Seller the following:
(i) The Letter of Credit.
(ii) The certificate signed by a duly authorized officer
of Purchaser referred to in Section 6.2 (c) hereof.
(iii) The certified resolution of the Board of Directors of
Purchaser referred to in Section 6.2 (e) hereof.
8.2 ACTIONS TO BE TAKEN AT OR SUBSEQUENT TO CLOSING
(a) At Closing, Seller and Purchaser shall execute the Deed of
Assignment in the form of Attachment C hereto and thereafter promptly submit
such deed to EGPC and the Government of the Arab Republic of Egypt for their
approvals.
(b) After EGPC and the Government of the Arab Republic of Egypt
approve and return the fully executed Deed of Assignment to Seller or Buyer,
the recipient party shall promptly notify the other party of the receipt of
such deed. Seller shall then submit to the Chase Manhattan Bank, N. A. in
accordance with the terms of the Letter of Credit such fully executed Deed of
Assignment along with all instruments necessary to effectively transfer the
Assets (other than the Concession) to Purchaser (or its assignee), which
instruments shall have been submitted to Purchaser and shall be in form and
substance reasonably satisfactory to the Parties hereto.
8.3 REMOVAL OF SELLER'S NAME
Seller shall have the right, but not the responsibility, and Purchaser
shall have the responsibility, to remove Seller's name from the properties,
facilities, and equipment it is acquiring from Seller. Purchaser hereby agrees
to grant Seller right of access after the Closing Date to such properties,
facilities, and equipment to confirm that Purchaser has done so. Seller's right
shall be exercised in such a manner so as not to unreasonably interfere with
the normal conduct of Purchaser's business or operations. To the extent Seller
has not done so, Purchaser shall, within ninety (90) days from Closing, remove
all signs and references to Seller and shall erect or install all signs
complying with any applicable governmental rules and regulations. At the
conclusion of the ninety (90) day term, or such earlier period as Purchaser
advises Seller that Seller's name has been removed from all properties,
facilities, and equipment Seller may inspect to confirm removal. If removal
has not been completed Seller shall thereafter have the right to inspect each
subsequent time Purchaser advises that all signs have been removed. Upon
removal of all signs to Seller's satisfaction, Seller shall provide Purchaser
with written advice that Purchaser's obligations under this Section 8.3 have
been fulfilled.
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8.4 RETURN OF SELLER'S PROPRIETARY MATERIALS
Purchaser acknowledges and agrees that those materials set forth in
Section 8.4 of the Disclosure Schedule will be removed by Seller prior to the
Closing Date. If any such materials are inadvertently delivered to Purchaser,
Purchaser agrees to promptly return them to Seller. Seller shall allow
Purchaser prior to the Closing Date, access to prepare a comprehensive list of
all software, owned, licensed or used by Seller.
8.5 CONFIDENTIAL INFORMATION
(a) For purposes of this Section 8.5:
(i) "Confidential EEL Information" means that information
related to the Concession or the Assets bearing EEL's name or mark which is or
has been marked (at the time of origin) "Confidential" or "Proprietary" or
"Company Use" by Seller except for that set forth in Section 8.4 of the
Disclosure Schedule hereto;
(ii) "Confidential Affiliate Information" means that
information bearing a name or mark of Exxon Corporation or an Affiliate (other
than EEL) of Exxon Corporation and which is or has been marked (at the time of
origin) "Confidential" or "Proprietary" or "Company Use" by Exxon Corporation
or an Affiliate (other than EEL) of Exxon Corporation; and
(iii) Seller and Purchaser intend that, after Closing,
Purchaser will not knowingly possess any Confidential Affiliate Information.
(b) For ten (10) years commencing on the Effective Date,
Purchaser:
(i) may not use or disclose Confidential Affiliate
Information, except as required by the Concession;
(ii) shall make every effort to prevent the use or
disclosure of Confidential Affiliate Information; and
(iii) shall, immediately upon discovery, disclose to the
proper proprietor of Confidential Affiliate Information that it is in
possession of Confidential Affiliate Information and comply with the
proprietor's request to either destroy Confidential Affiliate Information or
return Confidential Affiliate Information to the proprietor.
(c) For ten (10) years commencing on the Effective Date, Seller:
(i) may not use or disclose Confidential EEL Information
to any persons or entities other than itself, Exxon Corporation, or Affiliates
of Exxon Corporation; and
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(ii) shall make every effort to prevent the use or
disclosure of Confidential EEL Information otherwise than as provided for in
Section 8.5 (c) (i) hereof.
(d) The provisions of this Section 8.5 do not apply:
(i) if the receiving party or anyone to whom the
receiving party directly or indirectly transmits the Confidential EEL
Information or Confidential Affiliate Information pursuant to this Section is
requested or becomes legally compelled (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demands or
similar process) to disclose the Confidential EEL Information or Confidential
Affiliate Information as the case may be; in such circumstances, the receiving
party, will provide the proprietor with prompt written notice so that the
proprietor may inter alia seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Section 8.5. In the event
that such protective order or other remedy is not obtained, or that proprietor,
in its sole discretion, expressly in writing waives compliance with any
provision of this Section 8.5, the disclosing party will furnish only that
portion of the Confidential EEL Information or Confidential Affiliate
Information (as the case may be) which it is advised by opinion of counsel is
legally required and will exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded the Confidential EEL
Information or Confidential Affiliate Information.
(ii) to any Confidential EEL Information which becomes
public knowledge subsequently without breach of this Section 8.5 by the
receiving party, which is known to the receiving party on a non-confidential
basis before receipt of such information from the proprietor, or which is
received subsequently from a third party in circumstances not involving the
breach of a confidentiality obligation.
(e) Documents which proprietor considers to be subject to any
attorney-client or work product privilege as to that document or any other
document are intended to remain privileged notwithstanding any inadvertent or
unintentional disclosure.
8.6 CERTAIN LITIGATION AND CLAIMS
With respect to the salary taxes litigation and salary tax claims set
forth in Section 2.10 (i) and (ii) of the Disclosure Schedule, Seller shall
retain responsibility for these matters and pay all expenses related thereto.
Seller shall have complete control over the manner in which such litigation and
claims are managed, settled, or otherwise resolved. Purchaser agrees to
provide Seller reasonable assistance to manage, settle, or otherwise resolve
such litigation and claims. Seller agrees to reimburse Purchaser for all
reasonable out of pocket costs incurred by Purchaser in connection with such
assistance. Seller shall retain any amounts of money it recovers from such
litigation and claims.
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ARTICLE IX
INSURANCE, INDEMNIFICATION AND RELATED MATTERS
9.1 INSURANCE
(a) Seller and Purchaser acknowledge that Exxon Corporation
maintains a worldwide program of property and liability insurance coverage for
itself and its Affiliates, including Seller. This program has been designed to
achieve a coordinated risk-management package for the entire Exxon corporate
group. The program consists principally of three types of policies: (i)
policies issued to Exxon Corporation; (ii) policies issued directly to
Affiliates by Exxon's wholly-owned captive insurer, Ancon Insurance Company,
Inc. ("Ancon"), a Vermont corporation; and (iii) policies issued to Affiliates
by locally admitted insurer which are reinsured by Ancon. All of the insurance
polices through which the worldwide program of coverage is presently or has
previously been provided are herein called the "Exxon/Ancon Policies."
(b) It is understood and agreed by Purchaser that from and after
the Closing Date:
(i) No insurance coverage shall be provided under the
Exxon/Ancon Policies to Purchaser;
(ii) Any and all policies insured or reinsured by Ancon or
its predecessor companies insuring the transferred asset shall be deemed
terminated, commuted and canceled ab initio; and
(iii) No claims regarding any matter whatsoever, whether or
not arising from events occurring prior to the Closing Date, shall be made by
Purchaser against or with respect to any of the Exxon/Ancon Policies regardless
of their date of issuance.
(c) Purchaser shall indemnify and defend Seller, Exxon Corporation
and its Affiliates including Ancon against, and shall hold them harmless from,
any claim made after the Closing against any of the Exxon/Ancon Policies by or
through Purchaser or any person subrogated to Purchaser's rights, and all costs
and expenses (including without limitation attorneys' fees) related thereto.
Such indemnity shall cover, without limitation, any claim by an insurer for
reinsurance, retrospective premium payments or prospective premium increases
attributable to any such claim.
(d) Purchaser shall be responsible to secure replacement insurance
coverage as of Closing Date.
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9.2 INDEMNIFICATION
(a) Indemnification by Purchaser. Subject to the provisions of
this Article IX, Purchaser agrees to discharge and release and shall indemnify
and hold Seller, its Affiliates (including but not limited to Ancon Insurance
Company, Inc., its predecessor companies, and Exxon Corporation), and Seller's
and all Affiliates' stockholders, directors, officers, employees, agents, and
consultants harmless from and against:
(i) Any and all Claims, Liabilities and obligations
resulting from the failure of any of the representations and warranties
contained in Article III of this Agreement to have been true in all material
respects when made and as of the Closing, and (without limitation of the
foregoing), for such representations and warranties as were made as of a
specified date, any and all Claims, Liabilities and obligations resulting from
the failure of such representations and warranties to have been true in all
material respects as of such specified date;
(ii) Any and all Claims, Liabilities and obligations
resulting from the failure of Purchaser to acknowledge or comply in all
material respects with any of the covenants and acknowledgments contained in
this Agreement which are required to be performed or acknowledged by Purchaser;
and
(iii) Except to the extent provided otherwise in Sections
8.6, 9.2(b) and 10.14, any and all Claims, Liabilities and obligations based
upon, attributable to, or resulting from the conduct of operations related to
the Concession, whether arising from conditions or events which exist or occur
prior to Closing, at Closing, or after Closing, in each instance including
Claims, Liabilities, and obligations resulting from the negligence or strict
liability of Seller, whether the negligence or strict liability is active,
passive, joint, concurrent, or sole.
(b) Indemnification by Seller. Subject to the provisions of this
Article IX, Seller agrees to discharge and release and shall indemnify and hold
Purchaser, Purchaser's Affiliates, and Purchaser's and Purchaser's Affiliates'
stockholders, directors, officers, employees, agents, and consultants
(collectively, the "Purchaser Indemnitees") harmless from and against:
(i) Any and all Claims, Liabilities, and obligations
resulting from the failure of any of the representations or warranties
contained in Sections 2.1, 2.2, and 2.10 (excluding Section 2.10(iii) of the
Disclosure Schedule) to have been true in all material respects as of the
Closing (collectively, "Basket Losses");
(ii) Any and all Claims, Liabilities, and obligations
resulting from the termination of Seller's employees as described in Section
2.12; and
(iii) Any and all Claims, Liabilities, and obligations
resulting from the salary taxes litigation and salary tax claims as described
in Section 8.6.
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9.3 SELLER DEDUCTIBLE
Seller shall not be required to indemnify the Purchaser Indemnitees
pursuant to Section 9.2(b)(i) until the aggregate of (i) Basket Losses pursuant
to Section 9.2(b)(i) hereunder and (ii) Purchaser Basket Losses pursuant to
Section 9.1(b)(i) of the Stock Purchase Agreement exceeds U. S. $500,000.00
(the "Deductible"), and then only to the extent that the sum of Basket Losses
and Purchaser Basket Losses exceeds the Deductible.
9.4 SURVIVAL OF INDEMNITY OBLIGATIONS
(a) Indemnity obligations of Purchaser under this Article IX shall
not be limited as to time.
(b) Indemnity obligations of Seller pursuant to Section 9.2(b)(i)
and 9.2(b)(ii) shall be limited to matters with respect to which a notice has
been delivered to Seller by Purchaser pursuant to Section 9.5 on or before two
(2) years following Closing.
(c) Indemnity obligations of Seller pursuant to Section
9.2(b)(iii) shall not be limited as to time.
(d) The Parties further agree that in order to assert a claim for
indemnification pursuant to this Agreement for a breach of any representation,
warranty, covenant, or other agreement, the Party seeking indemnification must
provide the other Party written notice of such claim pursuant to Section 9.5
hereof.
9.5 NOTICE OF INDEMNIFICATION
In the event any legal proceeding shall be initiated or any Claim
shall be asserted against a Protected Party (either Party, as the case may be,
potentially having indemnification rights under this Article IX) by any person
in respect of which payment may be sought by the Protected Party from the other
Party under the provisions of this Article IX, the Protected Party shall
promptly cause written notice of the assertion of any such Claim of which it
has knowledge, to be forwarded to the other Party.
9.6 INDEMNIFICATION PROCEDURE FOR THIRD-PARTY CLAIMS
(a) In the event of the initiation of any legal proceeding against
a Protected Party by a third party, for which indemnification is sought
pursuant to this Article IX, the other Party shall have the right after its
receipt of the related notice, at its sole option and expense, to defend
against, negotiate, settle, or otherwise deal with such proceeding, and any
Claim relating thereto or arising therefrom, and for these purposes to retain
and be represented by counsel of its choice ("Right of Defense"). The exercise
of this Right of Defense shall, however, be without prejudice to the Protected
Party's own right to participate in any such proceeding with counsel of its
choice
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and at its expense. The Parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation, appeal, or settlement of
any such legal proceeding, claim, or demand.
(b) The other Party shall give prior written notice to the
Protected Party of its intention to exercise said Right of Defense. In the
event that the other Party elects not to exercise such Right of Defense, the
Protected Party shall defend against or otherwise deal with any such
proceeding, claim, or demand, and for these purposes shall have the right to
retain counsel (the other Party being responsible for reasonable costs related
thereto) and control the defense of such proceeding without any unrequested
intervention of the other Party.
9.7 DEFINITIONS
For purposes of this Article IX:
(a) "Claim" or "Claims" shall mean collectively all claims,
demands, causes of action, and lawsuits asserted or filed by any person,
including an artificial or natural person, any governmental entity, or a third
party.
(b) "Liability" or "Liabilities" shall mean collectively all
damages (including consequential and punitive damages), including those for
personal injury, death, or damage to personal or real property (both surface
and subsurface) and costs for remediation, restoration, or cleanup of
contamination; expenses; losses; fines; penalties; attorneys' fees; and court
and other legal costs incurred in defending any Claim, liens, or judgments
arising therefrom, whether these damages or other costs are known or unknown,
foreseeable or unforeseeable, on the Effective Date.
9.8 NO BROKERS
Purchaser represents to Seller that it has had no dealings with any
broker or finder in connection with the transaction contemplated by this
Agreement. Purchaser agrees to indemnify and hold Seller and its Affiliates
harmless from and against any and all liability to which they may be subjected
by reason of any broker's, finder's, or similar fee or commission with respect
to the transaction contemplated by this Agreement to the extent such fee or
commission has been incurred by or on behalf of Purchaser or its Affiliate(s).
Seller represents to Purchaser that it has had no dealings with any
broker or finder in connection with the transaction contemplated by this
Agreement. Seller agrees to indemnify and hold Purchaser and its Affiliates
harmless from and against any and all liability to which they may be subjected
by reason of any broker's, finder's or similar fee or commission with respect
to the transaction contemplated by this Agreement to the extent such fee or
commission has been incurred by or on behalf of Seller or its Affiliate(s).
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9.9 INDUCEMENT TO SELLER
Purchaser acknowledges that it evaluated the obligations under this
Article IX before it determined and submitted its bid for the Assets and that
its assumption of these obligations is a material inducement to Seller to enter
into this Agreement and close the sale to Purchaser.
ARTICLE X
GENERAL
10.1 SPECIFIC PERFORMANCE
The Parties hereto acknowledge and agree that irreparable damage would
result if this Agreement were not specifically enforced. Therefore, the rights
and obligations of the Parties under this Agreement, including, without
limitation, their respective rights and obligations to sell and to purchase the
Assets, shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any Party may have under this Agreement or otherwise.
10.2 NOTICES
(a) Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered personally or transmitted by telecopier; telex; or documented
overnight delivery service or registered or certified airmail, return receipt
requested, postage prepaid, on the date shown on the receipt therefor:
(i) if to Purchaser:
John W. Elias
Executive Vice President and Chief Operating Officer
Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002-6794
Facsimile: (713) 951-4733
with a copy to:
James H. Wilson
Vinson & Elkins L. L. P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile: (713) 615-5926
28
<PAGE> 34
(ii) if to Seller:
Barry L. Sauve
Exploration Manager
Esso Egypt Limited
233 Benmar
Houston, Texas 77060
Facsimile: (713) 423-5970
with a copy to:
Joseph G. Stiles
Law Department
Exxon Exploration Company
233 Benmar
Houston, Texas 77060
Facsimile: (713) 423-7730
(b) In the absence of evidence of earlier receipt, a notice or
other communication under this Agreement is deemed to be given:
(i) if delivered personally, when left at the address
referred to above;
(ii) if sent by overnight delivery service, the next
Business Day;
(iii) if sent by registered or certified airmail, six (6)
Business Days after posting;
(iv) if sent by telecopier, on completion of the
transmission if transmitted on a Business Day, and if not, on the next Business
Day;
(v) if sent by telex, on receipt of the correct answer
back.
10.3 AMENDMENTS
This Agreement may be amended, modified, superseded, or canceled, and
any of the terms, covenants, representations, warranties, or conditions hereof
may be waived, only by an instrument in writing signed by each of the Parties
hereto or, in the case of a waiver, by or on behalf of the waiving Party.
10.4 ENTIRE AGREEMENT
This Agreement, including the schedules hereto, and any written
amendments satisfying the requirements of Section 10.3 hereof, constitute the
entire agreement between the Parties with respect to the subject matter hereof
and thereof and supersede any previous agreements and understandings between
the Parties with respect to such matters.
29
<PAGE> 35
10.5 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of
the Parties hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any rights or obligations hereunder
may be assigned or transferred without the prior written consent of Seller,
except that Purchaser may assign its rights and obligations under this
Agreement to any direct or indirect wholly-owned subsidiary designated by
Purchaser, but no such assignment shall in any way operate to enlarge any
obligation of or due Seller or relieve Purchaser of its obligations hereunder,
and provided, however, that (1) the proposed assignee agrees in writing to be
bound by all the terms and conditions of this Agreement, (2) the Purchaser
provides written notice to Seller of the proposed assignment and makes such
assignment prior to the date the Deed of Assignment in the form set forth in
Attachment C hereto is submitted to EGPC and the Government of the Arab
Republic of Egypt for their approvals, (3) the assignment being conditioned on
the assignee's agreement to assign the rights and obligations under this
Agreement back to Purchaser in the event EGPC or the Government of the Arab
Republic of Egypt fails to approve the assignment of the Concession to such
assignee, (4) the Purchaser provides the Seller with a copy of the assignment
and the proposed assignee's agreement in writing to be bound by all the terms
and conditions of this Agreement. In the event EGPC or the Government of the
Arab Republic of Egypt fails to approve the assignment of the Concession to
such assignee, Purchaser agrees to create or utilize another direct or indirect
wholly-owned subsidiary who would be acceptable to EGPC and the Government of
the Arab Republic of Egypt as an assignee of the Concession. and assign
(without relieving Purchaser of its obligations hereunder) its rights and
obligations hereunder to such subsidiary.
10.6 HEADINGS
The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 APPLICABLE LAW; ARBITRATION; SUBMISSION TO JURISDICTION;
CONSENT TO SERVICE OF PROCESS
(a) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of New York without regard to the
conflict of law rules therein.
(b) Subject to the provisions of Section 10.1 hereof, any dispute
arising in connection with or relating solely to this Agreement, or the breach
thereof, shall be finally settled by arbitration in accordance with the Rules
of Conciliation and Arbitration of the International Chamber of Commerce by one
arbitrator appointed in accordance with said Rules. The place of such
arbitration shall be in Houston, Texas, or such other place as mutually agreed
by the Parties, and shall be conducted in the English language. The award
rendered by the arbitrator shall be final and binding upon the Parties.
Purchaser and Seller waive to the extent permitted by law any rights to appeal
or to review of such award by any court or tribunal. Purchaser and Seller
agree that the arbitral award may be enforced against them or their assets
wherever they may be found
30
<PAGE> 36
and that a judgment upon the arbitral award may be entered in any court having
jurisdiction thereof.
(c) In the event that an action is brought for an injunction or
other equitable remedy in accordance with Section 10.1 hereof or for specific
performance or other equitable remedy, such action may be brought and
prosecuted in any Federal court located within the State of Texas. For this
purpose each Party irrevocably: (i) submits to the exclusive jurisdiction of
any United States District Court located in the State of Texas and (ii) waives
any objection which it may have at any time to the laying of venue of any suit,
action or proceeding ("Proceedings") brought in any such court, waives any
claim that such Proceedings have been brought in an inconvenient forum, and
further waives the right to object, with respect to such Proceedings, that such
court does not have jurisdiction over such Party. Each Party not resident in
the State of Texas irrevocably appoints each of its Affiliates resident in the
State of Texas to receive, for it and on its behalf, service of process in any
Proceedings. If for any reason such Affiliates are unable to act as its agent
for service of process, or the Party does not have an Affiliate resident in the
State of Texas, such Party will promptly notify the other Party and, within
thirty (30) days following the Effective Date, appoint a substitute process
agent acceptable to the other Party. The Parties irrevocably consent to
service of process given in the manner provided for notices in Section 10.2
hereof. Nothing in this Agreement will affect the right of any party to serve
process in any other manner permitted by law.
10.8 EXPENSES
Whether or not the transaction contemplated hereby is consummated, the
Parties hereto shall pay their own respective expenses, except as otherwise
provided in this Agreement.
10.9 SEVERABILITY
If at any time subsequent to the Effective Date, any provision of this
Agreement shall be held by any court of competent jurisdiction or any validly
constituted arbitral body to be illegal, void or unenforceable, such provision
shall cease to be of any force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.
10.10 PUBLIC ANNOUNCEMENTS
Neither Seller (nor any of its Affiliates) nor Purchaser (nor any of
its Affiliates) shall make any public statements including, without limitation,
any press releases, with respect to this Agreement and the transaction
contemplated hereby without the prior written consent of the other Party (which
consent may not be unreasonably withheld or delayed), except as may be required
by law or regulations of national securities exchanges or commissions and then
only after prior consultation with the other Party.
31
<PAGE> 37
10.11 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
10.12 BOOKS AND RECORDS; PERSONNEL
For a period of seven (7) years after Closing (or such longer period
as may be required by any appropriate governmental body or ongoing legal
proceeding):
(a) Purchaser shall not knowingly dispose of or destroy any
business records or files in existence at Closing that are transferred to
Purchaser. If Purchaser wishes to dispose of or destroy such records or files
after that time, it shall first give thirty (30) days' prior written notice to
Seller, and Seller shall have the right, at its option and expense, upon prior
written notice to Purchaser within such thirty (30) day period, to take
possession of the records and files within sixty (60) days after the date of
Seller's notice to Purchaser.
(b) Purchaser shall allow Seller and its representatives access to
all business records and files relating to the Concession which are in
existence at Closing, during regular business hours and upon reasonable notice
at the Purchaser's principal place of business in Egypt or at any location
where such records are stored, and Seller shall have the right, at its own
expense, to make copies of any such records and files; provided, however, that
any such access or copying shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of Purchaser's business or
operations.
(c) Purchaser shall make available to Seller, upon written request
and at Seller's expense, (i) personnel to assist Seller in locating and
obtaining records and files and (ii) any personnel whose assistance or
participation is reasonably required by Seller in anticipation of, or
preparation for, any existing or future litigation, arbitration, administrative
proceeding, tax return preparation, or other matter in which Seller or any of
its Affiliates are involved; provided, however, that any such access,
assistance, or participation shall be had or given in such a manner so as not
to unreasonably interfere with the normal conduct of Purchaser's business or
operations, and Purchaser may condition such access or copying upon the
execution by Seller of one or more agreements that deem the information
obtained to be "Confidential EEL Information" subject to Section 8.5.
10.13 NO ADMISSION
Neither this Agreement, nor any part of it, nor any performance under
this Agreement, nor any payment of any amount under this Agreement, will
constitute or may be construed as a finding, evidence of, or an admission or
acknowledgment of any liability, fault, past or present wrongdoing, or
violation of law, rule, regulation, or policy, by either Seller or Purchaser.
32
<PAGE> 38
10.14 INTERAFFILIATE AGREEMENTS
It is the parties hereto intent that Seller retain responsibility for
paying any charges by its Affiliates for services rendered by the Affiliates to
Seller under services agreements prior to Closing (excluding charges for
services rendered for the benefit of Purchaser at Purchaser's request).
10.15 NO THIRD-PARTY BENEFICIARIES
There are no third-party beneficiaries of this Agreement, except for
parties indemnified and held harmless under Article IX.
10.16 SCHEDULES
All schedules referred to in this Agreement are incorporated by
reference.
10.17 INCLUDES
The word "includes" and its syntactical variants mean "includes, but
is not limited to" and corresponding syntactical variants. The rule ejusdem
generis may not be invoked to restrict or limit the scope of a general term or
phrase followed or preceded by an enumeration of particular examples.
10.18 NOT TO BE CONSTRUED AGAINST DRAFTOR
Purchaser acknowledges that it has read this Agreement, has had
opportunity to review it with an attorney of its choice, and has agreed to all
of its terms. Under these circumstances, the Parties agree that any rule of
construction that a contract be construed against the draftor shall not be
applied in interpreting this Agreement.
10.19 EXECUTION BY THE PARTIES
Neither the submission of this instrument or any information
concerning the Assets for Purchaser's examination, nor any discussions or
negotiations between the Parties, shall constitute an offer to sell a
reservation of or an option for the Assets, and this instrument and the
underlying transaction will become enforceable and binding between the Parties
only upon its execution and delivery by both of them.
33
<PAGE> 39
ARTICLE XI
DEFINITIONS
11.1 "Affiliate" of Seller as used in this Agreement shall mean Exxon
Corporation and any company of which fifty percent (50%) or more of the shares
entitled to vote for directors are directly or indirectly owned by Exxon
Corporation. "Affiliate" of Purchaser as used in this Agreement shall mean any
company of which fifty percent (50%) or more of the shares entitled to vote for
directors are directly or indirectly owned by Seagull Energy Corporation.
11.2 "Assets" are those matters described in Section 1.1 (a), (b), (c), and
(d).
11.3 "Authorizations" is as described in Section 2.13(a).
11.4 "Basket Losses" is as described in Section 9.2(b).
11.5 "Business Day" means any day that is a business day in both Cairo and
New York.
11.6 "Claims" is as described in Section 9.7(a).
11.7 "Closing" is the process described in Sections 7.1, 8.1 and 8.2.
11.8 "Closing Date" is the date at which Closing occurs.
11.9 "Closing Site" is as described in Section 7.1(a).
11.10 "Concession" is the South Hurghada Concession Agreement described in
the recital on page 1.
11.11 "Confidential EEL Information/Confidential Affiliate Information" is
as described in Section 8.5.
11.12 "Disclosure Schedule" is the Schedule attached to and incorporated
into this Agreement.
11.13 "EEL" is Esso Egypt Limited.
11.14 "Effective Date" is July 22, 1996.
11.15 "EGPC" is the Egyptian General Petroleum Company, party to the
Concession.
11.16 "EOIC is Exxon Overseas Investment Corporation.
11.17 "EOIC Letter" is as described in Section 6.1.
34
<PAGE> 40
11.18 "Inventory" is as described in Section 2.17.
11.19 "Letter of Credit" is as described in Section 1.2.
11.20 "Liabilities" is as described in Section 9.7(b).
11.21 "Purchaser" is Seagull Energy Corporation.
11.22 "Schedule of Assets to be Sold" is part of the Disclosure Schedule.
11.23 "Seller" is Esso Egypt Limited, a Bahamian corporation.
11.24 "Right of Defense" is as described in Section 9.6(a).
11.25 "U. S. $" means United States Dollars.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date below their signatures, to be enforceable and binding
as of the Effective Date.
ESSO EGYPT LIMITED SEAGULL ENERGY CORPORATION
By /s/ B.L. SAUVE By /s/ T.P. MCCONN
------------------------------- --------------------------
B. L. Sauve T. P. McConn
Exploration Manager Senior Vice President
Date 23 JULY 1996 Date July 23, 1996
----------------------------- ------------------------
35
<PAGE> 41
DISCLOSURE SCHEDULE
Purchase and Sale Agreement
Between ESSO EGYPT LIMITED
and
SEAGULL ENERGY CORPORATION
Information disclosed under any disclosure schedule will be deemed to be
disclosed for the purpose of any other disclosure schedule.
Sections 1.1(b) & 2.5 Schedule of Assets to be Sold
a. Inventories of materials (primarily tubulars and wellheads),
property, plant and equipment (suspended wells Wadi el Sahl-1
and -2) vehicles, communications equipment and miscellaneous
other personal computers and office equipment with a total
book value of approximately $7,500,000.00 as detailed on
Attachment A.
b. Geological and Geophysical data on South Hurghada Concession
specified on Attachment B.
NET BOOK VALUE
Notes to Schedule of Assets to be Sold
1. Most of the assets on this Schedule of Assets to be Sold were imported
duty free. Use and transfer of these assets is subject to the terms
of the South Hurghada Concession and Egyptian custom laws and
regulations (Article XII of the Concession). Purchaser assumes full
responsibility for any future custom duties for those items on the
Schedule of Assets to be Sold.
2. Certain items on the South Hurghada Concession's custom exemption are
not being transferred to the Purchaser unless the items are specified
in this Schedule of Assets to be Sold. Seller will assist Purchaser
in completing customs liquidation for items imported under this
exemption but not transferred.
3. Purchaser will take custody of all assets at Purchaser's expense
within ten (10) days of Closing.
4. None of Seller's moveable fixed assets (automobiles, communication
equipment, office furniture, office machines) have been claimed for
cost recovery and all are the sole property of Seller. Seller retains
the right to separately dispose of any of these assets that are not
specifically included in the Schedule of Assets to be Sold.
<PAGE> 42
Section 2.6 Description of Current Status of Concession
Esso Egypt Limited (EEL) received a preliminary award of the South Hurghada
Concession in November of 1989. By letter dated November 30, 1989, EGPC
allowed costs incurred pending final approval to be subject to cost recovery.
On June 14, 1990, the Ministry of Petroleum and Mineral Resources issued
Decision No. 98 of 1990. The Decision prohibited the granting of concessions
for exploration of petroleum and gas within specified areas of the Red Sea and
South Sinai. Portions of what would eventually become the South Hurghada
Concession were covered by the decision.
The South Hurghada Concession Agreement was executed on July 24, 1991. After
final approval of The People's Assembly on June 10, 1991, the concession was
issued as Law No. 208 of 1991. Before final approval, EEL discussed its
exploration plans with the Petroleum Ministry, EGPC and the Egyptian Cabinet
Ministers to assure the compatibility of EEL's plans with environmental and
tourism interests. By letter dated July 16, 1991, EEL advised EGPC that while
conducting petroleum operations, Esso undertakes that (a) no petroleum
structures will be erected and (b) there will be no drilling operations nearby
tourist installations within the three kilometer area, unless previously agreed
with EGPC. By letter dated July 16, 1991, Esso Suez Inc. undertakes that, if
EEL spends during the initial three years exploration period of said agreement
less than the minimum amount for such a period (U.S. $8 million), Esso Suez
Inc. shall transfer to EGPC a quantity of crude oil sufficient in value to
cover EEL's shortfall.
In March 1992, the Ministry of Tourism and the Ministry of Petroleum entered
into a Joint Cooperation Agreement to determine the conditions in which the
land along the Red Sea Coast between the City of Suez and the Sudan Borders
would be used for touristic and petroleum activity. Paragraph 6 recognizes the
South Hurghada Concession and provides that the agreement does not apply to
lands assigned for petroleum activities of previous concessions issued before
the approval of this Cooperation Agreement, which are lands interfering with
the areas assigned for tourism under the Cooperation Agreement. Paragraph 7 of
the agreement does refer to possible mutual activity between Tourism and
Petroleum in the Sahl Hashish area of the South Hurghada Concession. The Sahl
Hashish area of the concession has been relinquished.
By letter dated June 22, 1994, EEL advised EGPC of EEL's intent to extend the
initial exploration period for the South Hurghada Concession and its intent to
relinquish, effective July 27, 1994, twenty-five (25) percent of the original
concession area. By its June 29, 1994 letter, EGPC concurred with EEL's
requested extension.
EEL has met all of the obligations of the first exploration period (3 wells,
U.S. $8 million) and the first extension period (1 well, U.S. $3 million)
having acquired over 400 km of 2-D seismic data, drilled four exploration
wells, and spent over U.S. $18 million.
EGPC has approved over U.S. $14 million of the U.S. $18 million spent as
creditable towards the spending obligations and eligible for cost recovery in
accordance with the concession.
Disclosure Schedule - EEL & Seagull -2-
<PAGE> 43
A notice of intent to extend the exploration period for the second two year
extension period is permitted in accordance with Article III (b) of the South
Hurghada Concession. Such notice needed to be provided by June 27, 1996. EEL
has met all of the work and expenditure obligations of the first exploration
period and first extension period. EEL would be required to relinquish,
effective July 27, 1996, an additional twenty-five (25) percent of the original
concession and commit to drill an additional exploration well.
On June 26, 1996, EEL submitted to EGPC a notice to enter the second two year
extension period for the South Hurghada Concession. EEL requested EGPC's
concurrence to identify at a later date the twenty-five percent (25%) of the
original concession to be relinquished. On July 2, 1996, EGPC advised EEL that
it has no objection to EEL entering the second two year extension period and
required EEL to identify the twenty-five percent (25%) relinquishment area
before July 27, 1996. It also advised EEL that if any financial deficiency is
discovered during the audit for the second exploration phase, EEL will need to
settle it in cash with EGPC.
Section 2.7 Patents, Trademarks and Copyrights
EEL does not have any patents or copyrights.
Section 2.8 Permits
o Approval No. 967/95 from the Ministry of Defense authorizing
EEL to drill two exploration wells in the South Hurghada
Concession during the period from September 12, 1995 to
September 12, 1996.
o Immarsat Portable Satellite Communication Permits (renewed
annually).
o Radio Permits for the two portable radios used in the EEL
Toyotas (renewed annually).
o Work Permits for national employees (renewed annually).
o Customs Permits for automobiles (renewed annually).
Section 2.9 Commitments
Exploration and production contracts
South Hurghada Concession Agreement issued as Law No. 208 of
1991. The Purchaser will assume all rights and obligations.
No other contracts.
Section 2.10 Litigation/Audit/Investigations
(i) Litigation for Salary Taxes for Years 1980-1987.
Responsibility for this litigation will be retained by EEL.
(ii) Salary Tax Claims (Responsibility for all retained by EEL):
Disclosure Schedule - EEL & Seagull -3-
<PAGE> 44
(a) 1988-1989 (claim against Esso Egypt Exploration and
Productions S.A.)
(b) 1990-1991 (claim against Esso Egypt Inc.)
(c) 1992-1994 (claim against Esso Egypt Ltd.)
(iii) Cost Recovery Audits (Responsibility for all transfer to
Purchaser)
Section 2.11 Title to Properties; Absence of Encumbrances
EEL has clear and defensible title to all properties, although title
to properties claimed for cost recovery will pass to EGPC through the
normal cost recovery mechanism as specified in the South Hurghada
Concession Agreement.
Section 2.12 Employees
<TABLE>
<CAPTION>
Employees Position
--------- --------
<S> <C> <C>
1) S.H. Samy Administration Mgr.
2) G. Demerdash Material Specialist
3) G. Atta Driver
4) R. Nounou Secretary
5) K.A. Khalifa Driver
6) N.A Bakr Deputy Finance Mgr.
7) Moh. Hussein Driver
8) S.M. Kamal Secretary
9) H. Molokhia Geophysicist
10) A. Douban Geologist
11) A.T. Minaissy Human Resources Mgr.
12) A.F. Mohamed Materials Mgr.
13) S.M. Amin Secretary
14) F. Attia Senior Accountant
15) A.H. Soliman Driver
16) D.M. Soliman Secretary
</TABLE>
Section 2.13 Environmental Matters
None that are specific to EEL.
Disclosure Schedule - EEL & Seagull -4-
<PAGE> 45
Section 8.4 Return of Seller's Proprietary Materials
Excluding the Assets:
No software or any of the following items will be transferred to Purchaser. If
Purchaser discovers that any of the following items were inadvertently
transferred, Purchaser will immediately return these items to Seller.
All proprietary material of Seller (and/or its other Affiliates) including but
not limited to classified manuals, textbooks, studies, and documents; PC
programs/software guides; procedure letters, guidelines, policy, operation
system, U.S. Export and Administration Regulations, Management Control Basic
Standards, Accounting Code, Authority Code, Authority Tables, Video Tapes,
Performance Appraisal forms, Financial data, Financial system, proprietary
software used in exploration and production, financial, planning and reporting
procedures and documentation, Exxon Business Control Analysis Process Procedure
on Confidentiality/Securities Trade, Exxon Emergency Response Plan, economic
analyses and crude oil price forecasts. Any geological, geophysical,
engineering data, reports or general correspondence unless specifically and
solely concerning the Concession or the East Zeit Offshore Concession Agreement
dated 23rd March 1981, and issued by Egyptian Law No. 8 of 1981, as such
agreement may have been amended.
Disclosure Schedule - EEL & Seagull -5-
<PAGE> 46
ATTACHMENT A
SCHEDULE OF ASSETS TO BE SOLD
ASSETS
I. Inventories, Materials and Supplies
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quantity Description Cost
-------- ----------- ----
- --------------------------------------------------------------------------------
<S> <C> <C>
29 Joints 13-3/8" Casing $36,507.00
- --------------------------------------------------------------------------------
78 Joints 9-5/8" Casing $70,497.00
- --------------------------------------------------------------------------------
74 Joints 7" Casing $46,488.00
- --------------------------------------------------------------------------------
392 Joints 3-1/2" Casing $126,701.00
- --------------------------------------------------------------------------------
1 FMC Wellhead (Tree section with $48,837.00
Valves and Accessories)
- --------------------------------------------------------------------------------
</TABLE>
II. Property, Plant and Equipment
<TABLE>
<CAPTION>
Quantity. Automobiles Original Cost Book Value
--------- ----------- ------------- ----------
<S> <C> <C> <C>
1 1990 Toyota Land Cruiser $19,800 -0-
#5735, CH#116903,
Eng. #246565
1 1990 Volvo 240 GL $18,125 -0-
#4021, CH#1393470,
Eng. #1516
1 1991 Toyota 4-Runner $18,500 -0-
#2554, CH#1027
Eng. #2554
1 1989 Volvo 240 GL $17,717 -0-
#4021, CH#1373582
Eng. #1132
2 120-Channel Mobile Radios for off- $16,318 $8,703
road vehicles plus 12 meter guyed
mast for base station
</TABLE>
Disclosure Schedule - EEL & Seagull -6-
<PAGE> 47
<TABLE>
<S> <C> <C> <C>
1 Magnavox MX2020P Portable $39,497 $32,987
Satellite Communication System
(Purchased New)
1 Magnavox MX2020P Portable $16,602 $15,987
Satellite Communication System
(Purchased Refurbished)
2 Compaq 386s PCs/Monitors/Keyboards $12,420 $2,732
7 Compaq Deskpro 386/20E $63,954 $24,350
PCs/Monitors/Keyboards
6 Epson FX 850 Printers $2,224 $721
4 Hewlitt Packard Laser Jet III $9,925 $3,302
Printers
1 Toshiba T2130CT, DX4, 75 Mhz, 12 $4,280 $4,152
MB 250 RAM HD, Color LCD, 144
Drive Notebook PC + Carrying Case
2 Excel Telex + Printers & Interface $8,378 $3,938
1 UDOFile Vertical Plan File $762 -0-
</TABLE>
(Note: The two suspended wells have no outstanding customs issues, but their
costs have been claimed for cost recovery and they would be transferred with
the concession.
<TABLE>
<CAPTION>
Suspended Wells Book Value
--------------- ----------
<S> <C>
Wadi El Sahl Well #1 $3,663,429
Wadi El Sahl Well #2 $3,380,000
</TABLE>
Disclosure Schedule - EEL & Seagull -7-
<PAGE> 48
ATTACHMENT B
DATA INVENTORY AND OTHER INFORMATION
I. Data Inventory
Geological and Geophysical data on South Hurghada Concession.
A. ESSO WELL DATA
--------------
1. Wadi el Sahl-1; (Fb 88-1); TD 8273' (Basement)
a. Logs (Film Copies)
(1) Rt/GR (HRI/DLL)
(2) Sonic (BHC/LSS)
(3) SDL/DSN
(4) FMI/Dip
(5) RFT
(6) Mudlog
b. Seismic
(1) Checkshot
(2) Walkaway VSP
c. SWC (113)
d. Core (150', 1/2 SLAB)
e. Cased Hole Production Test Report
f. Geochemistry
g. Paleo Report
h. Fluids Analysis (oil & water) Report
i. Cuttings, wet and dry, 10' intervals
j. Core Analysis Report
k. Geologic Completion Report/Log
l. Drilling Completion Report
2. Gebel Oman-1 (Fa 87-1); TD 7050' (Miocene)
a. Logs (Film Copies)
(1) Rt/GR (HRI)
(2) LSS
(3) SDL/DSN
(4) Mudlog
b. Seismic
(1) Checkshot Survey Report
c. Cuttings, wet and dry, 10' intervals
d. Geologic Completion Report/Log
e. Drilling Completion Report
Disclosure Schedule - EEL & Seagull -8-
<PAGE> 49
3 E. Gebel Umm Are-1 (Fa 89-1); TD 3750'
(Basement)
a. Logs (Film Copies)
(1) Rt/GR (HRI/DLL)
(2) LSS
(3) SDL/DSN
(4) Dip (SED)
(5) Mudlog
b. Seismic
(1) Checkshot Survey Report
c. Paleo Report
d. Cuttings, wet and dry, 10' intervals
e. Geologic Completion Report/Log
f. Drilling Completion Report
4 Wadi el Sahl-2; (Fb 88-2); TD 7675' (Basement)
a. Logs (Film Copies)
(1) Rt/GR (DLL/MSF)
(2) Sonic (BHC/LSS)
(3) LDL/CNL
(4) Dipmeter (SHDT)
(5) NGS
(6) RFT
(7) Mudlog
b. Seismic
(1) Checkshot Survey Report
c. SWC (26)
d. Core (4 cores, 218', 1/2 SLAB)
e. Cased Hole Production Test Report
f. Paleo Report
g. Fluids Analysis Report
h. Crude Assay Reports (2)
i. Core Analysis Report
j. Cuttings, wet and dry, 10' intervals
k. Geologic Completion Report/Log
l. Drilling Completion Report
B. PREVIOUS OPERATOR WELL DATA
---------------------------
1. AEO Dishet El Daba-1; TD 1473' (Miocene)
a. Logs
(1) Completion
2. Socony Dishet El Daba-2; TD 1995' (Basement)
a. Logs
(1) Rt
(2) Completion
b. Paleo Report
3. Socony Dishet El Daba-3; TD 3800' (Miocene)
Disclosure Schedule - EEL & Seagull -9-
<PAGE> 50
a. Logs
(1) Completion
4. AEO Dishet El Daba-4; TD 3756' (Miocene)
a. Logs
(1) Lithology
5. Socony Dishet El Daba-5; TD 3216' (Basement)
a. Logs
(1) Completion
6. Canadian Superior Dishet El Daba-1; TD 1326'
(Miocene)
a. Logs
(1) Mud
(2) Lithology
b. Geological Completion Report
c. Drilling Completion Report
7. Canadian Superior Dishet El Daba-W1; TD 2855'
(Basement)
a. Logs
(1) Rt/GR
(2) Sonic
(3) LDL/CNT
(4) Dip
(5) Mudlog
b. Seismic
(1) Checkshot Survey
c. Geologic Completion Log
d. Drilling Completion Report
C. SEISMIC DATA
1. Regional 2-D Data: Films, Field Tapes, Stack
Tapes, Observers' Notes, Surveyors Reports
a. Esso 1990 (9008); Tensor Geophysical
processing, vibroseis, 80 fold,
stack and migration data
b. Canadian Superior (CSH) 1977; G.S.I.
vibroseis, 24 fold, stack data ,
400 km (field and stack tapes and
reports not available for all lines)
2. Reprocessed 2-D Data: Films, Stack Tapes
a. Tensor 1988; CSH data, stack and
migration, 260 km
b. Exxon 1992-1995; Esso 9008 data,
pre-stack time and depth migration
c. EPIC 1994; Esso 9008-115, stack and
migration; 20 km
d. Exxon 1994-1995; Esso 9008 data, pre-
stack time and depth migration, 65 km
e. Exxon 1995; CSH data, stack and
migration, 35 km
3. Occidental 1994 3-D Data: tape of final
processed 3-D data, 20 square km. portion
recorded on South Hurghada Block.
4. Seismic Location Data: digital positioning
data, x-y coordinates for 2-D and 3-D data on
South Hurghada Block
Disclosure Schedule - EEL & Seagull -10-
<PAGE> 51
D. GRAVITY DATA
1. Seisline; Esso 1990, 425 line km
2. Seisline; Canadian Superior 1977
3. Gravity survey; Canadian Superior, 1976
4. Canadian Superior Bouguer Gravity Map,
1:50000 (GX, consultant)
E. MAGNETIC DATA
1. 1983 Aero Service Eastern Desert IB
Aeromagnetic Survey; S. Hurghada Concession
area coverage
2. 1977 CGG/Canadian Superior Hurghada
Aeromagnetic Survey
3. Canadian Superior TI, RTP, Maps, 1:50000 (GX,
consultant)
F. GRAVITY/MAGNETIC DATA REPROCESSING/INTERPRETATION
1. Final Report Integrated Gravity/Magnetic
Interpretation
2. Digital Bouguer Gravity Data, Merged Surveys
3. Digital Total Intensity Magnetic Data,
Merged Surveys
G. SURFACE GEOLOGY
1. Canadian Superior Reports/Sections/Maps, 1977
(V. Zay Smith, consultant)
2. Esso Field Geologic Study
a. Final Report - Surface Geology Field
Study, September 1993
b. Revised Surface Geologic Map, 1:50000
c. Measured Sections (Miocene)
3. LANDSAT Image and Interpretation
4. Seeps Analysis
a. Geochemical
H. REPORTS, MAPS, SECTIONS
1. Final Report: First Exploration Period G&G
Work Program Results: 9 Volume Compilation,
Including Seismic Acquisition and Processing
Reports
2. Second Exploration Period Seismic
Reprocessing Report
3. Pre-Location Reports/Montages
a. Abu Marwa Prospect
b. Far West Hurghada Prospect
c. Wadi el Sahl-2
d. South Hurghada Prospects and Leads
Brochure
4. Regional Cross-Sections
a. Regional Cross-Section Montage
b. N-S Stratigraphic Well Cross Section
W. Hurghada-1 to E. Gebel Umm Are-1
c. Stratigraphic Correlation Panel, W.
Hurghada-1 to Ras Abu Soma-1
5. South Hurghada Concession Maps 1:50,000 Scale
a. Time Structure Lead Map, Near Top
Taref
Disclosure Schedule - EEL & Seagull -11-
<PAGE> 52
b. Time Structure Map, Near Top
Cretaceous
c. Time Structure Map, Top Evaporite
Sequence
d. Time Structure Map, Base Evaporite
Sequence
e. Time Structure Map, Intra-Rudeis
f. Isochron Map Evaporite Sequence
6. Wadi el Sahl Montages
a. Wadi el Sahl Field Montage
b. Seismic Montage, 2D/3D Dip Lines
c. Seismic Montage, 2D/3D Strike Lines
II. Other Information
A. Esso Egypt Limited's correspondence pertaining to the
Concession with the Egyptian General Petroleum Company, party
to the Concession
B. Exploration Advisory Committee (EAC) Budgets, Work Programs,
and Minutes pertaining to the Concession.
Disclosure Schedule - EEL & Seagull -12-
<PAGE> 53
ATTACHMENT C
DEED OF ASSIGNMENT
This Deed of Assignment is made and entered into on this ______day of
______1996 by and between Esso Egypt Limited, a corporation organized and
existing under the laws of the Bahamas ("Esso") as Assignor, and
______________________, a corporation organized and existing under the laws of
____________________ ("______") as Assignee.
WHEREAS, Esso has certain rights, privileges, duties, and obligations,
under the Concession Agreement dated 27 July 1991 issued by Law No. 208 of
1991, (hereafter referred to as the "Concession Agreement") entered into by
Esso, the Government of the Arab Republic of Egypt ("Government"), the Egyptian
General Petroleum Corporation ("EGPC"), and in the area as described in Annex
(A) and outlined in Annex (B) of the above-mentioned Concession Agreement.
WHEREAS, Esso wishes to assign all its rights, privileges and
obligations in the Concession Agreement to __________________________.
WHEREAS, _________________________ accepts such Assignment.
WHEREAS, pursuant to Article XX of the aforementioned Concession
Agreement, EGPC must review and approve the text of this Assignment.
WHEREAS, such Assignment is subject to the approval of the Government
of the Arab Republic of Egypt.
NOW, THEREFORE, the Assignor and the Assignee agree as follows:
1. This Assignment is made in accordance with the provisions of
Article XX of the aforementioned Concession Agreement.
2. Esso assigns all of its rights, interest, benefits,
liabilities and obligations in the aforementioned Concession Agreement to
_____________________.
3. This Assignment shall be binding upon, and inure to the
benefit of the parties hereto, their successors and assigns.
4. Esso states that it has duly fulfilled its obligations under
the aforementioned Concession Agreement as of the date of this Assignment.
5. ___________ hereby expressly states that it is bound by all
the covenants contained in the aforementioned Concession Agreement and any
modification or additions in writing that may have been made up to the date of
this Assignment.
Disclosure Schedule - EEL & Seagull -13-
<PAGE> 54
6. Esso and __________ state that the rights and privileges of
both the Government and EGPC contained in the Concession Agreement subject of
this Assignment shall not be prejudiced by the provisions of this Deed of
Assignment.
7. ____________ shall further be (through its office in the
A.R.E.), the entity to which, from which and in whose name all notifications
related to or in connection with the aforementioned Concession Agreement shall
be made.
8. This Assignment shall be effective as of the date of approval
of the Minister of Petroleum thereof.
IN WITNESS WHEREOF the Assignment's parties have fully executed this
Deed of Assignment on this ___ day of July, 1996.
"Assignor"
ESSO EGYPT INC.
By:
----------------------------------------
Title:
-------------------------------------
"Assignee"
- -------------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
Disclosure Schedule - EEL & Seagull -14-
<PAGE> 55
The aforementioned Deed of Assignment dated ____________________,
1996, between Esso Eqypt Limited and __________________________ of Concession
Agreement covering the South Hurghada Area dated 27th July, 1991, and issued by
Law No. 208 of 1991, is accepted and approved.
EGYPTIAN GENERAL PETROLEUM CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
ARAB REPUBLIC OF EGYPT GOVERNMENT
By:
----------------------------------------
Title:
-------------------------------------
Disclosure Schedule - EEL & Seagull -15-
<PAGE> 56
ATTACHMENT D
EOIC LETTER
Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002-6794
Ladies and Gentlemen:
Exxon Overseas Investment Corporation, a Delaware Corporation, having its
principal place of business at 25 Ferry Road, St. George's GE 01, Bermuda
hereby irrevocably guarantees the performance by its subsidiary Esso Egypt
Limited ("EEL") of its obligations under Article IX of the Purchase and Sale
Agreement dated July 22, 1996 between EEL and Seagull Energy Corporation
("Agreement"), provided that the maximum aggregate amount payable hereunder
shall in no event exceed U.S. $4.5 million. This guaranty shall terminate on
the earlier of (1) the satisfaction or expiration of the aforesaid obligations
or (2) the tenth anniversary of the date of the Agreement. This guaranty shall
be governed by and construed in accordance with the laws of the State of New
York.
EXXON OVERSEAS INVESTMENT CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 57
ATTACHMENT E
IRREVOCABLE LETTER OF CREDIT
Issued By
The Chase Manhattan Bank, N.A.
Letter of Credit No. (____________) _________________, 1996
Esso Egypt Limited
233 Benmar
Houston, Texas 77060
Ladies and Gentlemen:
1. The undersigned (the "Bank") hereby establishes, at the
request and for the account of Seagull Energy Corporation (the "Company") and
its indirect wholly owned subsidiary _________________________ (the "Company
Subsidiary"), this Irrevocable Letter of Credit in the amount of U.S.$
(___________) (___________) (the "Total Credit"), effective immediately and
expiring on December 20, 1996 (the "Expiry Date").
2. The Bank irrevocably authorizes Esso Egypt Limited (the
"Beneficiary") to draw on it under a draft in the form of Exhibit 1 in one
drawing made in accordance with the terms and conditions hereinafter set
forth, by the Beneficiary's demand delivered to the Bank at the address on the
signature page hereof and upon satisfaction of the conditions set forth in
Paragraph 3 below, the total amount of the Total Credit.
3. The following conditions must be satisfied before the
Beneficiary may draw on the Total Credit:
(a) all of the conditions of Paragraph 3 (other than
clause (a)) of that certain Irrevocable Letter of Credit number (____) dated
the date hereof and issued by the Bank in favor of Exxon Corporation have been
satisfied;
(b) delivery to the Bank of a letter executed by the
Beneficiary in the form of Exhibit 2; and
(c) delivery to the Bank of letter executed by the
Beneficiary in the form of Exhibit 3.
4. Upon receipt by the Bank of the Beneficiary's demand
and draft at the address herein specified and satisfaction of the conditions
set forth in Paragraph 3 above, all in
<PAGE> 58
substantial compliance with the terms hereof, the Bank agrees promptly to honor
the same in an amount equal to the Total Credit by direct payment as instructed
by the Beneficiary. If such demand is received by the Bank on or prior to
10:00 a.m., Houston, Texas time, on a business day, payment shall be made to
the Beneficiary directly by the Bank in the amount demanded in immediately
available funds, not later than 3:00 p.m., Houston, Texas time, on the same
business day. If such demand is received after 10:00 a.m., Houston, Texas
time, such payment shall be made as aforesaid not later than 3:00 p.m.,
Houston, Texas time, on the next succeeding business day.
5. The Bank shall retain the Deed of Assignment referred to in
clause (b) - Exhibit 2 and the instruments referred to in clause (c) - Exhibit
3 of Paragraph 3 in escrow until the Beneficiary provides written notice that
it has received the funds payable under this Letter of Credit. Upon receipt of
such notice from the Beneficiary, the Bank will deliver the documents referred
to in clause (b) - Exhibit 2 and clause (c) - Exhibit 3 of Paragraph 3 to the
Company Subsidiary.
6. Upon the earlier of (a) the Expiry Date and/or (b) payment of
the Total Credit available hereunder, the payment obligation under this Letter
of Credit shall expire and, if the Bank is not in default hereunder, the
Beneficiary will promptly return this Letter of Credit to the Bank. Promptly
after the Expiry Date, the Bank will deliver the documents referred to in
clauses (b) and (c) of Paragraph 3 to the Beneficiary.
7. The Bank's payment obligation hereunder shall remain valid
notwithstanding any invalidity, illegality or unenforceability of the Purchase
and Sale Agreement dated July 22, 1996, by and between the Beneficiary and the
Company (the "Purchase and Sale Agreement") and payment shall be made hereunder
irrespective or whether there is any dispute between the Purchaser and Seller
in relation to the Purchase and Sale Agreement or the amounts due and payable
thereunder.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-------------------------------------
<PAGE> 59
EXHIBIT 1
The Chase Manhattan Bank, N.A.
[address]
Re: Letter of Credit No. [_____]
The signatory below here demands from you the payment of $___________
(__________) under the Irrevocable Letter of Credit number [__________] date
[_________], 1996 (attached hereto) and certifies that the conditions to
drawing under said Irrevocable Letter of Credit have been satisfied.
<PAGE> 60
EXHIBIT 2
The Chase Manhattan Bank, N.A.
[address]
Re: Letter of Credit No. [_____]
Esso Egypt Limited has delivered to The Chase Manhattan Bank N.A. (the "Bank"),
to be held by the Bank in escrow, a duly and validly executed Deed of
Assignment substantially in the form of Attachment C to the Purchase and Sale
Agreement dated July 22, 1996 by and between Esso Egypt Limited and Seagull
Energy Corporation assigning the Concession Agreement (as defined therein) to
[name of Company Subsidiary].
<PAGE> 61
EXHIBIT 3
The Chase Manhattan Bank, N.A.
[address]
Re: Letter of Credit No. [_____]
Esso Egypt Limited has delivered to The Chase Manhattan Bank N.A. (the "Bank"),
to be held by the Bank in escrow, all instruments necessary to effectively
transfer the Assets (as defined in the Purchase and Sale Agreement dated July
22, 1996 by and between Esso Egypt Limited and Seagull Energy Corporation) to
[name of Company Subsidiary].
<PAGE> 62
[SEAGULL ENERGY E&P INC. LETTERHEAD]
VIA COURIER
July 23, 1996
Mr. Barry L. Sauve'
Africa/Middle East Ventures Manager
Exxon Exploration Company
P.O. Box 4778
Houston, Texas 77210-4778
Dear Barry:
I have executed the Purchase and Sale Agreement between Esso Egypt Limited and
Seagull Energy Corporation for the purchase by Seagull of certain of Esso Egypt
Limited's assets with the understanding that it reflects all the changes that
you, Joe Stiles and Jim Wilson have discussed and that there are no additions
or deletions. Two copies are forwarded herewith.
We sincerely appreciate your and Joe Stiles cooperation during these
negotiations.
Yours very truly,
SEAGULL ENERGY E&P INC.
/s/ T.P. MCCONN
T.P. McConn
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Seagull Energy Corporation:
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on Forms S-3
(Nos. 2-93087, 33-22475, 33-53729, 33-65118 and 33-64051) and in the
Registration Statements on Forms S-8 (Nos. 2-72014, 2-80834, 33-14463, 33-22475,
33-43483, 33-50643, 33-50645, 33-64041 and 2-93087) of Seagull Energy
Corporation, of our report dated August 15, 1996, relating to the consolidated
financial statements of Esso Suez Inc., which appears in the Current Report on
Form 8-K of Seagull Energy Corporation filed August 28, 1996.
/s/ Price Waterhouse
Price Waterhouse
Cairo, Egypt
August 28, 1996
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
ESSO SUEZ INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
August 15, 1996
To the Board of Directors and
Shareholder of Esso Suez Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Esso Suez
Inc. and its subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE
<PAGE> 4
ESSO SUEZ INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 608 $ 847
Accounts receivable, less allowance for doubtful accounts
of $0 and $352, respectively 8,600 7,280
Inventories 6,565 6,790
Prepaid expenses, deferred intercompany charges, and other 1,818 602
----------- ------------
Total current assets 17,591 15,519
----------- ------------
Property, plant and equipment at cost, less accumulated
depreciation, depletion and amortization 67,326 74,785
Due from affiliated companies 76,711 61,958
Other assets 103 103
----------- ------------
Total assets $ 161,731 $ 152,365
=========== ============
LIABILITIES
Current liabilities
Trade accounts payable and accrued liabilities $ 6,805 $ 6,716
----------- ------------
Total current liabilities 6,805 6,716
----------- ------------
Due to affiliated companies 117 -
----------- ------------
Total liabilities 6,922 6,716
----------- ------------
SHAREHOLDER'S EQUITY
Common stock 100 100
Donated capital 133,223 133,223
Retained earnings 21,486 12,326
----------- ------------
Total shareholder's equity 154,809 145,649
----------- ------------
Total liabilities and shareholder's equity $ 161,731 $ 152,365
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
ESSO SUEZ INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
REVENUE
Crude oil sales and other $ 53,046 $ 27,166 $ 22,445
Crude oil sales to affiliates - 6,189 9,856
Income tax reimbursement 22,843 12,876 9,225
--------- --------- ---------
Total revenue 75,889 46,231 41,526
--------- --------- ---------
COSTS OF OPERATIONS
Operating expenses 8,300 5,406 4,194
Depreciation, depletion and amortization 32,154 20,760 18,400
--------- --------- ---------
Total costs of operations 40,454 26,166 22,594
--------- --------- ---------
OPERATING PROFIT 35,435 20,065 18,932
--------- --------- ---------
OTHER EXPENSES AND INCOME
General and administrative expenses 3,466 3,013 4,402
Interest income (34) (14) (11)
--------- --------- ---------
Total other expenses and income 3,432 2,999 4,391
--------- --------- ---------
INCOME BEFORE INCOME TAXES 32,003 17,066 14,541
Income taxes 22,843 12,876 9,225
--------- --------- ---------
NET INCOME $ 9,160 $ 4,190 $ 5,316
========= ========= =========
Net income per common share $ 9,160 $ 4,190 $ 5,316
========= ========= =========
Weighted average number of common shares outstanding 1,000 1,000 1,000
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
ESSO SUEZ INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON DONATED RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
January 1, 1993 $ 100 $ 133,223 $ 2,820 $ 136,143
Net income - - 5,316 5,316
----- --------- -------- ---------
December 31, 1993 100 133,223 8,136 141,459
Net income - - 4,190 4,190
----- --------- -------- ---------
December 31, 1994 100 133,223 12,326 145,649
Net income - - 9,160 9,160
----- --------- -------- ---------
December 31, 1995 $ 100 $ 133,223 $ 21,486 $ 154,809
===== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
ESSO SUEZ INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,160 $ 4,190 $ 5,316
Adjustments for non-cash transactions
Depreciation, depletion and amortization 32,154 20,760 18,400
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (1,320) (2,215) 2,070
Decrease (increase) in inventories 225 (846) (457)
Decrease (increase) in prepaid expenses and other 8 (24) 54
Increase (decrease) in payables and accrued liabilities 89 2,534 (757)
---------- ---------- ----------
Net cash provided by operating activities 40,316 24,399 24,626
---------- ---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (24,695) (20,919) (755)
---------- ---------- ----------
Net cash used in investing activities (24,695) (20,919) (755)
---------- ---------- ----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Increase in receivables from affiliated companies (15,860) (2,689) (24,149)
---------- ---------- ----------
Net cash used in financing activities (15,860) (2,689) (24,149)
---------- ---------- ----------
(Decrease) increase in cash (239) 791 (278)
Cash at beginning of year 847 56 334
---------- ---------- ----------
Cash at end of year $ 608 $ 847 $ 56
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 8
ESSO SUEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND ACTIVITIES
Esso Suez Inc. (the "Company"), a Delaware corporation, is a wholly owned
subsidiary of Exxon Corporation. The Company established an Egyptian Branch,
Esso Suez Inc. (Egypt Branch) (The "Branch") in 1981 for the purpose of
exploration and production of petroleum and hydrocarbons in the East Zeit
offshore concession area (the "Concession") in accordance with the terms of the
concession agreement dated March 23, 1981 between the Government of the Arab
Republic of Egypt, the Egyptian General Petroleum Corporation ("EGPC"), and the
Branch. An Esso Suez Inc. home office was established in 1989. The home
office has no employees, and is used solely for recording various
non-recoverable intercompany charges. A commercial discovery was declared in
the concession in 1984. Crude oil production began on December 22, 1985. As
of December 31, 1995, seventeen development wells have been drilled in the
concession area.
NOTE 2 - ACCOUNTING POLICIES
CONSOLIDATION. The accompanying consolidated financial statements include the
accounts of the Company's home office, whose books are maintained in Houston,
Texas, and the Branch. All significant intercompany transactions have been
eliminated.
INVENTORIES. Inventories are carried at the lower of current market value or
cost. The cost of crude oil inventory is determined under the last-in,
first-out ("LIFO") method. The cost of remaining inventories are determined
under the weighted average cost method.
PROPERTY, PLANT AND EQUIPMENT. Depreciation, depletion and amortization, based
on cost, are primarily determined under either the unit of production or
straight-line method. Unit of production rates are based on oil to be
recoverable from proven developed reserves. The straight-line method of
depreciation is based on estimated asset service life. Maintenance and repairs
are expensed as incurred. Major renewals and improvements are capitalized.
The Company's exploration and production activities are accounted for under the
"successful efforts" method. Under this method, costs of productive wells and
development dry holes, both tangible and intangible, as well as productive
acreage are capitalized and amortized using the unit of production method.
Costs of that portion of undeveloped acreage likely to be unproductive, based
largely on historical experience, are amortized over the period of exploration.
Other exploratory expenditures, including geophysical costs and other dry hole
costs, are expensed as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement had no impact on the Company's
results of operations or financial position upon adoption in January 1996.
ENVIRONMENTAL LIABILITIES. The Company is not aware of any environmental
liabilities at this time. The Egyptian Peoples Assembly passed environmental
legislation in 1993 that effectively codifies international environmental
conventions. During 1995, certain of the executive regulations relating to
this legislation were published and are scheduled to go into effect in 1998.
The regulations that have been issued are very preliminary, and it is uncertain
at this time whether these regulations will have any effect on the Company's
operations.
- 1 -
<PAGE> 9
ESSO SUEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent
liabilities. Actual results could differ from these estimates.
NET INCOME PER SHARE. Net income per share of common stock is based on the
monthly weighted average number of common shares outstanding during the year.
NOTE 3 - CASH FLOW INFORMATION
No cash payments were made by the Company for interest expense and income taxes
for the three year period ended December 31, 1995. Income taxes are paid on
the Company's behalf by EGPC, in accordance with the terms of the concession
agreement.
NOTE 4 - FINANCIAL INSTRUMENTS AND CREDIT RISK
The carrying value of accounts receivable, accounts payable, and short-term
obligations approximate their fair value. Crude oil sales to EGPC during 1995,
1994 and 1993 amount to $53,036,000, $27,161,000 and $22,448,000, respectively.
Accounts receivable from EGPC as of December 31, 1995, 1994 and 1993 total
$7,893,000, $6,979,000 and $4,532,000, respectively. Although collection of
these receivables could be influenced by economic factors affecting this
organization, the risk of significant loss is considered remote.
NOTE 5 - INVENTORIES
Inventories include the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
(DOLLARS IN THOUSANDS) 1995 1994
- ---------------------- ---------- -----------
<S> <C> <C>
Crude oil $ 449 $ 880
Materials and supplies 6,116 5,910
-------- --------
$ 6,565 $ 6,790
======== ========
</TABLE>
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
The major classes of the Company's property, plant and equipment are shown
below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
(DOLLARS IN THOUSANDS) 1995 1994
- ---------------------- ---------- -----------
<S> <C> <C>
Crude oil properties $ 248,808 $ 224,292
Equipment and other 6,114 6,149
---------- -----------
254,922 230,441
Less: Accumulated depreciation, depletion and amortization (187,596) (155,656)
---------- -----------
$ 67,326 $ 74,785
========== ===========
</TABLE>
Depreciation, depletion and amortization charges related to property, plant and
equipment amounted to approximately $32,154,000, $20,760,000 and $18,400,000 in
1995, 1994 and 1993, respectively.
- 2 -
<PAGE> 10
ESSO SUEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company sold crude oil to its affiliates at market prices. The net
receivable from affiliates includes amounts remitted by EGPC to Exxon as
payment for crude sales less amounts paid on behalf of the Company.
Receivables and payables due from and due to affiliates do not bear interest.
The following table summarizes the Company's related party transactions with
its affiliates.
<TABLE>
<CAPTION>
December 31,
------------------------------------------
(DOLLARS IN THOUSANDS) 1995 1994 1993
- ---------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Net sales to affiliates during the year ended $ - $ 6,189 $ 9,856
Due from affiliates as of $ 76,594 61,958 59,398
Deferred intercompany items as of 1,754 530 401
--------- --------- ---------
Net receivable from affiliates as of $ 78,348 $ 62,488 $ 59,799
========= ========= =========
</TABLE>
NOTE 8 - INCOME TAXES
In accordance with the terms of the concession agreement, EGPC pays Egyptian
corporate income taxes and development duties on the Company's behalf.
Accordingly, no liability is recorded on the books of the Company as of
December 31, 1995 and 1994 for such taxes and duties. The petroleum sector
corporate tax rate of 40.55 percent and the development duty tax of two percent
have remained unchanged during the years 1995, 1994 and 1993. Deferred income
tax accounts are not utilized in Egypt given the nature of Egyptian Petroleum
Sector taxation.
A reconciliation of net income computed in accordance with generally accepted
accounting principles ("GAAP") to statutory income and the related statutory
income tax expense follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1995 1994 1993
- ---------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Net income $ 9,160 $ 4,190 $ 5,316
ADD:
- ---
GAAP depreciation, depletion and amortization 32,154 20,760 18,400
Other GAAP costs not deductible for statutory purposes 1,924 1,269 1,892
DEDUCT:
- ------
Current year amortization of exploration and development costs (11,322) (8,229) (10,238)
Carry forward of costs deductible for statutory purposes - - (2,482)
-------- --------- ---------
Provisional income 31,916 17,990 12,888
Gross-up for taxation1 21,769 12,271 8,792
-------- --------- ---------
Taxable income $ 53,685 $ 30,261 $ 21,680
======== ========= =========
Corporate income tax (40.55%) $ 21,769 $ 12,271 $ 8,792
Development duty tax (2%) 1,074 605 433
-------- --------- ---------
Current year tax expense $ 22,843 $ 12,876 $ 9,225
======== ========= =========
</TABLE>
- -------------------------------------------------------------
(1) Gross-up for taxation is calculated as Provisional income x Tax Rate
--------
(1 - Tax Rate)
- 3 -
<PAGE> 11
ESSO SUEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SHAREHOLDER'S EQUITY
COMMON STOCK. The Company was incorporated by authorizing and issuing 1,000
shares of common stock with a par value of $100 per share. No additional
shares were authorized and issued thereafter.
DONATED CAPITAL. Prior to 1993, the shareholder of the Company made capital
contributions by converting, in installments, receivables due from the Company
totalling $133,223,000.
NOTE 10 - COMMITMENT AND CONTINGENCIES
LEASE COMMITMENTS: The Company leases certain office space and equipment under
operating lease agreements which contain renewal options and escalation
clauses. Future minimum rental payments under these leases range between
$100,000 and $500,000 in each of the years 1996-2000. No future minimum lease
rental payments are due for years beyond. All operating leases contain
provisions allowing the Company to cancel the leases before the end of the
lease term.
Total rental expense under operating leases for 1995, 1994 and 1993 was
approximately $538,000, $494,000 and $453,000, respectively.
CONCENTRATIONS OF RISK: The future of the exploration and production segment
will be affected by the market prices of crude oil. The availability of a
ready market for crude oil in the future will depend on numerous factors beyond
the control of the Company, including weather, production of other crude oil
imports, marketing of competitive fuels, proximity and capacity of crude oil
pipelines and other transportation facilities, any oversupply or undersupply of
crude oil, the regulatory environment, and other regional and political events,
none of which can be predicted with certainty.
LITIGATION: The Company is a party to ongoing litigation in the normal course
of business. Management regularly analyzes current information and, as
necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. While the out-come of lawsuits or other
proceedings against the Company cannot be predicted with certainty, management
believes that the effect on its financial condition or results of operations,
if any, will not be material.
NOTE 11 - SUBSEQUENT EVENT:
Seagull Energy Corporation on July 22, 1996 signed a definitive stock purchase
agreement with Exxon Corporation to acquire all of the outstanding capital
stock of the Company. The stock sale is expected to close on or about
September 10, 1996, and Exxon and Seagull are currently working together to
design and implement a transition plan intended to minimize the impact of the
sale on the Company's operations. The terms of the stock purchase agreement
are such that there is no effect on the Company's national staff and that
essential Company agreements and contracts will either continue in force after
the stock sale or will be replaced by equivalent agreements or contracts.
- 4 -
<PAGE> 12
SUPPLEMENTAL OIL PRODUCING ACTIVITIES (UNAUDITED)
CAPITALIZED COSTS RELATING TO OIL PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
AS OF DECEMBER 31, 1995
Proved properties $ 246,922
Unproved properties -
------------
246,922
Less: Accumulated depreciation, depletion and amortization (180,601)
------------
$ 66,321
============
AS OF DECEMBER 31, 1994
Proved properties $ 222,441
Unproved properties -
------------
222,441
Less: Accumulated depreciation, depletion and amortization (149,144)
------------
$ 73,297
============
</TABLE>
COSTS INCURRED IN OIL PROPERTY ACQUISITION, EXPLORATION
AND DEVELOPMENT ACTIVITIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Acquisition of properties:
Proved $ -
Unproved -
Exploration costs -
Development costs 24,695
------------
$ 24,695
============
FOR THE YEAR ENDED DECEMBER 31, 1994
Acquisition of properties:
Proved $ -
Unproved -
Exploration costs -
Development costs 20,930
------------
$ 20,930
============
FOR THE YEAR ENDED DECEMBER 31, 1993
Acquisition of properties:
Proved $ -
Unproved -
Exploration costs -
Development costs 755
------------
$ 755
============
</TABLE>
<PAGE> 13
SUPPLEMENTAL OIL PRODUCING ACTIVITIES (UNAUDITED)
RESULTS OF OPERATIONS FOR OIL PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
YEAR ENDED DECEMBER 31, 1995
Revenues
Sales to third parties $ 53,036
Sales to affiliates -
------------
53,036
------------
Lifting costs
Lease operating expense 5,216
Workover expense 2,900
Transportation expense 184
Depreciation, depletion and amortization 32,154
------------
Results of operations from producing activities $ 12,582
============
YEAR ENDED DECEMBER 31, 1994
Revenues
Sales to third parties $ 27,161
Sales to affiliates 6,189
------------
33,350
------------
Lifting costs
Lease operating expense 3,424
Workover expense 1,693
Transportation expense 289
Depreciation, depletion and amortization 20,760
------------
Results of operations from producing activities $ 7,184
============
YEAR ENDED DECEMBER 31, 1993
Revenues
Sales to third parties $ 22,448
Sales to affiliates 9,856
------------
32,304
------------
Lifting costs
Lease operating expense 4,570
Workover expense (577)
Transportation expense 201
Depreciation, depletion and amortization 18,400
------------
Results of operations from producing activities $ 9,710
============
</TABLE>
<PAGE> 14
SUPPLEMENTAL OIL PRODUCING ACTIVITIES (UNAUDITED)
RESERVE QUANTITY INFORMATION
<TABLE>
<CAPTION>
OIL (MBBL)(2)
-------------
<S> <C>
YEAR ENDED DECEMBER 31, 1993
Proved developed and undeveloped reserves:
Beginning of year 14,856
Purchases of reserves in place -
Sales of reserves in place -
Revisions of previous estimates (3,704)
Extensions and discoveries -
Production (2,061)
------------
End of year 9,091
============
YEAR ENDED DECEMBER 31, 1994
Proved developed and undeveloped reserves:
Beginning of year 9,091
Purchases of reserves in place -
Sales of reserves in place -
Revisions of previous estimates 282
Extensions and discoveries -
Production (2,127)
------------
End of year 7,246
============
YEAR ENDED DECEMBER 31, 1995
Proved developed and undeveloped reserves:
Beginning of year 7,246
Purchases of reserves in place -
Sales of reserves in place -
Revisions of previous estimates 858
Extensions and discoveries 1,631
Production (3,159)
------------
End of year 6,576
============
PROVED, DEVELOPED RESERVES
At December 31, 1993 4,940
At December 31, 1994 5,946
At December 31, 1995 6,576
</TABLE>
The reserve volumes are estimates only and should not be construed as being
exact quantities. These reserves may or may not be recovered and may increase
or decrease as a result of future operations of the Company and changes in
market conditions. The Company's standardized measure of discounted future net
cash flows and changes therein as of December 31, 1995, 1994 and 1993 are based
substantially on the present value of future net revenues from proved crude oil
reserves estimated by qualified petroleum engineers in accordance with
guidelines established by the United States Securities and Exchange
Commission. These estimates were computed by applying appropriate year end
prices for crude oil to estimated future production of proved crude oil
reserves over the economic lives of the reserves and assuming continuation of
existing economic conditions. Year end 1995 calculations were made utilizing
average prices for East Zeit crude oil as of December 31, 1995 of $18.66 per
barrel ("Bbl").
- -----------------------------------------------------------
(2) Oil stated in thousand of barrels ("Mbbl").
<PAGE> 15
SUPPLEMENTAL OIL PRODUCING ACTIVITIES (UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
DECEMBER 31, 1995
Future cash inflows $ 131
Future development costs (2)
Future production costs (41)
------
Future net cash flows before income taxes 88
10% annual discount (19)
------
Discounted future net cash flows before income taxes 69
Discounted income taxes -
-------
Standardized measure of discounted future net cash flows $ 69
=======
DECEMBER 31, 1994
Future cash inflows $ 110
Future development costs (9)
Future production costs (29)
-------
Future net cash flows before income taxes 72
10% annual discount (13)
-------
Discounted future net cash flows before income taxes 59
Discounted income taxes -
-------
Standardized measure of discounted future net cash flows $ 59
=======
DECEMBER 31, 1993
Future cash inflows $ 113
Future development costs (31)
Future production costs (44)
-------
Future net cash flows before income taxes 38
10% annual discount (12)
-------
Discounted future net cash flows before income taxes 26
Discounted income taxes -
-------
Standardized measure of discounted future net cash flows $ 26
=======
</TABLE>
<PAGE> 16
SUPPLEMENTAL OIL PRODUCING ACTIVITIES (UNAUDITED)
PRINCIPAL SOURCES OF CHANGES IN THE STANDARDIZED MEASURE OF
DISCOUNTED FUTURE NET CASH FLOWS
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
--------- ---------- --------
<S> <C> <C> <C>
Standard measure of discounted future net cash flows,
beginning of year: $ 59 $ 26 $ 86
Extensions, discoveries, IR and purchases 33 - -
Sales of produced oil, net of costs (41) (24) (23)
Development costs during year 25 21 1
Net changes in prices, lifting and development (17) 33 (46)
Revisions of previous estimates 5 - -
Accretion of discount 5 3 8
------- ------- -------
Total change in reserve valuation 10 33 (60)
------- ------- -------
Standard measure of discounted future net cash flows,
end of year: $ 69 $ 59 $ 26
======= ======= =======
</TABLE>
<PAGE> 17
ESSO SUEZ INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
<PAGE> 18
ESSO SUEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue................................ $ 26,903 $ 41,018
Costs of Operations:
Operating expenses................... 2,931 2,238
Depreciation, depletion
and amortization................... 11,021 12,794
---------- ----------
Total costs of operations.......... 13,952 15,032
---------- ----------
Operating Profit....................... 12,951 25,986
Other expenses and income:
General and administrative expenses.. 2,183 1,659
Interest income...................... (50) (28)
---------- ----------
Total other expenses and income.... 2,133 1,631
---------- ----------
Income Before Income Taxes............. 10,818 24,355
Income Taxes........................... 6,566 14,040
---------- ----------
Net Income............................. $ 4,252 $ 10,315
========== ==========
Net Income per Common Share............ $ 4,252 $ 10,315
========== ==========
Weighted Average Number of
Common Shares Outstanding............ 1,000 1,000
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
2
<PAGE> 19
ESSO SUEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash................................ $ 632 $ 608
Accounts receivable, net............ 7,280 8,600
Inventories......................... 7,157 6,565
Prepaid expenses, intercompany
and other......................... 739 1,818
---------- ----------
Total Current Assets.............. 15,808 17,591
---------- ----------
Property, plant and equipment - at
cost, less accumulated depreciation,
depletion and amortization.......... 56,496 67,326
Due from Affiliated Companies......... 88,911 76,711
Other Assets.......................... 103 103
---------- ----------
Total Assets.......................... $ 161,318 $ 161,731
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Trade accounts payable and
accrued liabilities............... $ 2,257 $ 6,805
---------- ----------
Total Current Liabilities......... 2,257 6,805
---------- ----------
Due to Affiliated Companies........... - 117
---------- ----------
Total liabilities................. 2,257 6,922
Shareholder's Equity.................. 159,061 154,809
---------- ----------
Total Liabilities and
Shareholder's Equity.............. $ 161,318 $ 161,731
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
3
<PAGE> 20
ESSO SUEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------------
1996 1995
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income..........................................$ 4,252 $ 10,315
Adjustments for non-cash transactions:
Depreciation, depletion and amortization......... 11,021 12,794
Changes in operating assets and liabilities:
Increase in accounts receivable................ 1,320 3,470
Increase in inventories, prepaid
expenses and other............................ (1,016) (984)
Increase (Decrease) in accounts payable........
Increase (Decrease) in payables and accrued
liabilities................................... (4,548) 823
---------- ---------
Net Cash Provided By Operating Activities.. 11,029 26,418
Cash Flows from Investing Activities:
Capital expenditures................................ (192) (15,538)
---------- ---------
Net Cash Used In Investing Activities...... (192) (15,538)
Cash Flows from Financing Activities:
Increase in receivables from affiliated companies... (10,813) (11,391)
---------- ---------
Net Cash Used In Financing Activities...... (10,813) (11,391)
---------- ---------
Increase (Decrease) in Cash.......................... 24 (511)
Cash at Beginning of Year............................ 608 847
---------- ---------
Cash At End of Period................................$ 632 $ 336
========== =========
</TABLE>
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
4
<PAGE> 21
ESSO SUEZ INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of financial information
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Esso Suez Inc. (the "Company" or "ESI"), a wholly-owned
subsidiary of Exxon Corporation ("Exxon"), as of June 30, 1996, and the results
of its operations and cash flows for the six months ended June 30, 1996 and
1995. All adjustments made are of a normal, recurring nature. The results of
operations for the six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
The financial information presented herein should be read in
conjunction with ESI's financial statements and notes for the year ended
December 31, 1995.
Cash Flow Information
No cash payments were made by the Company for interest expense and
income taxes for the six months ended June 30, 1996 and 1995. Income taxes are
paid on the Company's behalf by the Egyptian General Petroleum Corporation, in
accordance with the terms of the concession agreement.
Net Income Per Share
Net income per share of common stock is based on the monthly weighted
average number of common shares outstanding during the year.
NOTE 2. COMMITMENTS AND CONTINGENCIES
The Company is a party to ongoing litigation in the normal course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. While the out-come of lawsuits or other proceedings against the
Company cannot be predicted with certainty, management believes that the effect
on its financial condition or results of operations, if any, will not be
material.
5
<PAGE> 22
ESSO SUEZ INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. SUBSEQUENT EVENT
Seagull Energy Corporation on July 22, 1996 signed a definitive stock
purchase agreement with Exxon to acquire all of the outstanding capital stock
of the Company. The stock sale is expected to close on or about September 10,
1996, and Exxon and Seagull are currently working together to design and
implement a transition plan intended to minimize the impact of the sale on the
Company's operations. The terms of the stock purchase agreement are such that
there is no effect on the Company's national staff and that essential Company
agreements and contracts will either continue in force after the sale or will
be replaced by equivalent agreements or contracts.
6
